Q3 2024 STERIS PLC Earnings Call

Good morning, everyone and welcome to the terrorists plc third quarter 2024 conference call.

Operator: Good morning everyone, and welcome to the STERIS plc third quarter 2024 conference call. All participants will be in a listen-only mode.

All participants will be in a listen only mode should you need assistance. Please you know a conference specialist by pressing the star E followed by zero.

Operator: Should you need assistance, please contact a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key and then 1 on a touchtone telephone.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May press Star and then one using a touchtone telephone.

Operator: To withdraw your question, you may press the star and 2. Please note today's event is being recorded, and at this time, I'd like to turn the floor over to Julie Winter, Investor Relations. Ma'am, please go ahead. Thank you, Jamie, and good morning, everyone. As usual, speaking on today's call will be Mike Tokich, our Senior Vice President and CFO, and Dan Carustio, our President and CEO. And I do have a few words of caution before we open for camera.

What's your all your question you May press Star and two.

Please also note today's event is being recorded and at this time I'd like to turn the floor over to Julie Winter Investor Relations Ma'am. Please go ahead.

Julie Winter: Thank you, Jamie and good morning, everyone.

Julie Winter: As usual speaking on today's call will be Mike took us senior Vice President and CFO and Dan Crusty are our president and CEO and I do have a few words of caution before we open for comments.

Julie Winter: This webcast contains time-sensitive information that is accurate only as of today. Any redistribution, retransmission, or rebroadcast of this call without the express written consent of STERIS is prohibited. Some of the statements made during this review are or may be considered forward-looking statements. Many important factors could cause actual results, including, without limitation, those risk factors described in STERIS' securities filing. The company does not undertake to update or revise any forward-looking statements, www.sterelink.com. STERIS' SEC filings are available to the company and on our website. In addition, on today's call, non-GAAP financial measures including adjusted earnings per diluted share, adjusted operating income, constant currency organic revenue growth, and free cash flow will be used. Additional information regarding these measures, including definitions, is available in our release, as well as reconciliations between GAP and non-GAP financial institutions. Non-GAAP financial measures are presented during this call with the intent of providing greater transparency. Financial information used by management and the Board of Directors in their financial analysis and operations. With no further discussion, I will hand the call over to you. Thank you, Julie. And good morning, everyone.

Julie Winter: This webcast contains time sensitive information that is accurate only as of today any redistribution retransmission or rebroadcast of this call without the expressed written consent of stirrer is strictly prohibited.

Some of the statements made during this review are or maybe considered forward looking statements.

Important factors could cause actual results to differ materially from those in the forward looking statements, including without limitation those risk factors described in Sarasota Securities filings.

Julie Winter: The company does not undertake to update or revise any forward looking statements as a result of new information or future events or developments.

Julie Winter: There's just a SEC filings are available through the company and on our website.

Julie Winter: In addition on today's call non-GAAP financial measures, including adjusted earnings per diluted share adjusted operating income constant currency organic revenue growth and free cash flow will be used.

Julie Winter: Additional information regarding these measures, including definitions is available in our release as well as reconciliations between GAAP and non-GAAP financial measures.

Julie Winter: non-GAAP financial measures are presented during this call with the intent of providing greater transparency to supplemental financial information used by management and the board of directors in their financial analysis and operational decision, making.

Julie Winter: Cautions I will hand, the call over to Mike.

Michael Joseph Tokich: Thank you Julie and good morning, everyone is once again my pleasure to be with you. This morning to review the highlights of our third quarter performance for the quarter constant currency organic revenue increased 10% driven by volume as well as 270 basis points of price gross.

Michael Joseph Tokich: It is once again my pleasure to be with you this morning to review the highlights of our third quarter performance. For the quarter, Cots of Currency Organic Revenue increased 10%, driven by volume, as well as 270 basis points of price. Gross margin for the quarter increased 50 basis points compared with the prior year to 43.6%. Price more than offset continued material and labor inflation in addition to the negative impact from currency. EBIT margin decreased 80 basis points to 23.1% of revenue compared with the third quarter last year.

Michael Joseph Tokich: Gross margin for the quarter increased 50 basis points compared with the prior year to 43.6%.

Michael Joseph Tokich: Price more than offset continued material and labor inflation. In addition to the negative impact from currency.

Julie Winter: EBIT margin decreased 80 basis points to 23, 1% of revenue compared with the third quarter last year.

Michael Joseph Tokich: The anticipated increase in our year-over-year incentive compensation expense, along with the mixed shift in operating income from the AST segment to the healthcare segment, impacted EBIT margins. We anticipate that the mixed shift in operating income from AST to healthcare will continue in the fourth quarter. The adjusted effective tax rate in the quarter was 22.6 percent.

Julie Winter: We anticipate an increase in our year over year incentive compensation expense along with the mix shift in operating income from the a S. T segment to the health care segment impacted EBIT margins, we anticipate that the mix shift in operating income from a S. T. The health care will continue in the fourth quarter.

Julie Winter: The adjusted effective tax rate in the quarter was 22, 6%.

Michael Joseph Tokich: That revenue in the quarter was $220.9 million, and adjusted earnings were $2.22 per diluted share. Capital expenditures for the first nine months of fiscal 24 totaled $268.8 million, while depreciation and amortization totaled $430.8 million. Debt declined slightly to $3.3 billion in the third quarter.

Julie Winter: Net income in the quarter was $229 million and adjusted earnings were $2.22 per diluted share.

Julie Winter: Capital expenditures for the first nine months of fiscal 'twenty, four totaled $268 $8 million, while depreciation and amortization totaled $438 million.

Julie Winter: That declined slightly to $3 $3 billion in the third quarter total debt to EBITDA at quarter end was approximately 2.2 times gross leverage.

Dan Carustio: Total debt to EBITDA at quarter end was approximately 2.2 times gross leverage. Pre-cash flow for the first nine months of fiscal 2024 was $457 million compared with $262.8 million for the first nine months of fiscal 2023. The fiscal 2024 increase was driven by higher earnings and declines in cash used for tax and compensation-related payments, as well as a decline in capital expenditures. With that, I will turn the call over to Dan for his remarks. Thanks, Mike, and good morning, everyone. Thank you for taking the time to join us to hear more about our third quarter performance and our outlook for the rest of the fiscal year. As you heard from Mike, our third quarter continued the momentum we have experienced in our healthcare segment for the past few quarters, and we also saw a nice improvement in life sciences. Overall, we are pleased with our performance. We continue to expect that our healthcare segment will outperform our original expectations for the fiscal year, offsetting macro challenges impacting demand in our other segments. Looking at our segments, healthcare constant currency organic revenue grew 12% in the quarter.

Julie Winter: Free cash flow for the first nine months of fiscal 2024 was $457 million compared with $262.8 million for the first nine months of fiscal 2023.

Julie Winter: The fiscal 'twenty to 'twenty four increase was driven by higher earnings and declines in cash used for tax and compensation related payments as well as a decline in capital expenditures with that I will turn the call over to Dan for his remarks.

Dan Crusty: Thanks, Mike and good morning, everyone. Thank you for taking the time to join us to hear more about our third quarter performance and our outlook for the rest of the fiscal year.

Dan Crusty: As you heard from Mike our third quarter continued the momentum we have experienced in our health care segment. The past few quarters and we also saw a nice improvement in life Sciences. Overall, we are pleased with our performance.

Dan Crusty: We continue to expect that our health care segment will outperform our original expectations for the fiscal year offsetting macro challenges impacting demand in our other segments.

Dan Crusty: Looking at our segments health care constant currency organic revenue grew 12% in the quarter supporting that performance, we had double digit growth across capital equipment consumables and service again this quarter.

Dan Carustio: Supporting that performance, we had double-digit growth. This was driven primarily by procedure volume rebound in the U.S. as well as price and market share gains. As anticipated, backlog continues to normalize as we are shipping at a faster pace than new orders are coming in. Remember, our goal is to get back to historic production lead times and continue to meet customer demand. Speaking of demand, capital equipment orders in the healthcare segment grew double digits in the quarter. Turning to AST, constant currency organic revenue grew 4%, which was below our expectations. While we have continued to see more normalized volumes in the U.S. for MedTech, outside of the U.S., growth remains softer than anticipated. In addition, bioprocessing volumes continue to contract. Until we have more clarity, we are taking a more conservative approach to our expectations for the fourth quarter. Life Sciences grew 20% in the quarter on a constant currency organic base.

Dan Crusty: This is driven primarily by procedure volume rebound in the U S as well as price and market share gains.

Dan Crusty: As anticipated backlog continues to normalize as we are shipping at a faster pace than new orders are coming in and remember our goal is to get back to historic production lead times and continue to meet customer demand.

Dan Crusty: Speaking of demand capital equipment orders in the healthcare segment grew double digits in the quarter.

Dan Crusty: Turning to a S T constant currency organic revenue grew 4%, which was below our expectations. While we are continuing to see more normalized volumes in the U S for med tech outside of the U S remains softer than anticipated in.

Dan Crusty: In addition, bio processing volumes continued to contract.

Dan Crusty: Until we have more clarity we are taking a more conservative approach to our expectations for the fourth quarter.

Dan Crusty: Life Sciences grew 20% in the quarter on a constant currency organic basis, we had another strong quarter of capital shipments, which grew 57% against relatively easy comparisons remember.

Dan Carustio: We had another strong quarter of capital shipments, which grew 57% against relatively easy comparisons. However, remember, in fiscal 2023, revenue for both capital equipment and consumables was shifted from the third quarter to the fourth quarter due to some supply chain constraints. Consumables grew 8%, and service revenue increased 12%. As you're hearing from others in the space, short-term demand remains a bit murky, and we continue to be optimistic about the long-term growth opportunities for this segment. Our dental segment third-quarter revenue declined 6% on a constant currency organic basis.

Dan Crusty: I remember in fiscal 2023 revenue for both capital equipment and consumables was shifted from the third quarter to the fourth quarter due to some supply chain constraints.

Dan Crusty: Consumables grew 8% and service revenue increased 12%.

Dan Crusty: As you were hearing from others in the space short term demand remains a bit murky and we continue to be optimistic about the long term growth opportunities for this segment.

Dan Crusty: Our dental segment third quarter revenue declined 6% on a constant currency organic basis.

Dan Carustio: Revenue was limited by reduced orders from large customers due to a temporary disruption of their operations as a result of a cyber security incident they experienced during the quarter. Excluding that disruption, revenue would have been about flat in the quarter, which reflects the decline in patient volume. The lower volume, combined with the continued increases in material costs, led to a decline in EBIT margin.

Dan Crusty: Revenue was limited by reduced orders from a large customers due to a temporary disruption of their operations as a result of a cyber security incident, they experienced during the quarter.

Dan Crusty: Excluding that disruption revenue would have been about flat in the quarter, which reflects the decline in patient volumes.

Dan Crusty: The lower volume combined with the continued increases in material costs led to a client a decline in EBIT margin for the quarter.

Dan Crusty: Turning to our outlook physical.

Dan Carustio: Turning to our outlook, fiscal 2024 is shaping up to be another strong year for STERIS, albeit not exactly the way we had anticipated. In the last few years, if they've taught us anything, it's the value of our diversified portfolio.

Speaker Change: Fiscal 'twenty 'twenty four is shaping up to be another strong year for stairs, albeit not exactly the way we had anticipated.

Dan Crusty: In the last few years, if they've taught us anything it's the value of our diversified portfolio time and time again, we have benefited as one of our segments outperformance to compensate for challenges elsewhere.

Dan Carustio: Time and time again, we have benefited as one of our segments outperforms to compensate for challenges elsewhere. We are updating our outlook for the year to increase revenue to reflect the continued outperformance of our healthcare segment. For the year, we now expect total revenue to grow 10-11% on a constant currency organic basis.

Dan Crusty: We are updating our outlook for the year to increase revenue to reflect the continued outperformance of our health care segment.

Dan Crusty: For the year, we now expect total revenue to grow 10% to 11% on a constant currency organic basis.

Dan Carustio: And I'm sorry, in constant currency, organic revenue growth of seven to eight, each up 100 basis points from our prior range. This assumes low single-digit constant currency organic revenue growth in the fourth quarter caused by the record-setting shipments in last year. Even margins for the fiscal year will decline slightly from fiscal 2023, primarily reflecting the shift in operating income mix from AST to health. Adjusted earnings per diluted share are now anticipated to be in the range of $8.60 to $8.70 for fiscal 2024.

Dan Crusty: And I'm, sorry in constant currency organic revenue growth of 7% to 8%.

Dan Crusty: Each up 100 basis points from our prior ranges.

Dan Crusty: This assumes low single digit constant currency organic revenue growth in the fourth quarter caused by the record setting shipments in last year's fourth quarter.

Dan Crusty: EBIT margins for the fiscal year will decline slightly from fiscal 2023, primarily reflecting the shift in operating income mix from a S T to health care.

Dan Crusty: Adjusted earnings per diluted share are now anticipated to be in the range of $8.60 to $8 70 for fiscal 'twenty 'twenty four we recognize that this outlook includes some conservatism, but believe it is warranted until we see the a S T customer destocking a bit and have additional clarity on bio processing volumes that could.

Dan Carustio: We recognize that this outlook includes some conservatism but believe it is warranted until we see the AST customer destocking abate and have additional clarity on bioprocessing volume. That concludes our prepared remarks for the call. Julie, would you please give the instructions, and we can begin the Q&A.

Dan Crusty: <unk>, our prepared remarks for the call Julie would you. Please give the instructions and we can begin the Q&A.

Operator: Thank you, Mike and Dan, for your comments. Jamie, if you can give the instructions, we'll get started on Q&A. Ladies and gentlemen, at this time, we'll begin that question and answer session. To ask a question, you may press star and then one on a touch-tone telephone. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound

Julie Winter: Thank you, Mike and Dan for your comments, Jamie if you can give the instructions and we'll get started on Q&A.

Speaker Change: Ladies and gentlemen at this time, we'll begin the question and answer session to ask a question you May Press Star and then one using a touchtone telephone.

Jamie: We're using a speaker phone, we do ask that you. Please pick up the handset prior depressing the keys to ensure the best sound quality.

Jamie: So with your all your questions you May press star into again that is star and then wanted to join the question queue.

Operator: To withdraw your questions, you may press star and... Again, that is star and then one to join the question queue. Pause momentarily to assemble the roster. Our first question today comes from Patrick Wood from Morgan's family. Please go ahead with your question. Perfect. Thank you very much.

Speaker Change: Pause momentarily to assemble the roster.

Speaker Change: Yeah.

Speaker Change: Our first question today comes from Patrick Wood from Morgan Stanley. Please go ahead with your question.

Patrick Wood: Perfect. Thank you very much you know you guys still run one of the most efficient earnings calls of all time, it's a it's much appreciated.

Patrick Wood: You know, you guys still run one of the most efficient earnings calls of all time. It's much appreciated. I guess maybe starting with healthcare, you know, as you said, DoubleDigit grows across kind of all three of the main verticals. I'd love to unpack that a little bit.

Patrick Wood: I guess, maybe I'm, starting with health care, you know as you said double digit growth across kind of all three of the main verticals I'd love to unpack that a little bit I mean within the capital equipment side, I think last quarter was sort of 65%, let's call. It a is it a replacement style projects and then you know roughly a third kind of expansion.

Dan Carustio: I mean, on the capital equipment side, I think last quarter was sort of 65%, let's call it, sort of replacement style projects and then, you know, roughly a third kind of expansionary. Is that the same kind of thing you're seeing now? And, you know, should we expect consumables to remain pretty strong given the sheer amount of equipment you guys have been installing this year? Yeah, I'll take the consumables, Mike, if you want to take the capital.

Speaker Change: Larry is that the same kind of thing you're seeing now and you know should we expect that consumables mine to remain pretty strong given the sheer amount of equipment do you guys have been installing through this year, if we look forward.

Larry: Yeah, I'll take the consumables, Mike if you want to take the capital that Patrick what I would say as you know the consumables as a function of really two things. One is obviously patient demand in terms of procedures and obviously that in at least in the North American markets.

Dan Carustio: Patrick, what I would say is, you know, the consumables are a function of really two things. One is obviously patient demand in terms of procedures, and obviously, at least in North American markets, demand is up, you know, across the board in terms of volumes flowing through hospitals. And then the other factor is just the sheer number of placements that we put out there over the last year in terms of maybe a little bit of share gain. And then on the capital side, obviously, you see that we continue to reduce our backlog levels, which is getting us closer to our more normalized historic lead times and continuing to meet customer demand. But included in that, we did have double-digit order growth within healthcare in the third quarter. So strong shipments in the quarter, but also a good outlook with that double-digit growth in orders for the future. It is amazing.

Speaker Change: And as a you know.

Speaker Change: Across the board in terms of volumes flowing through hospitals.

Speaker Change: The other factor on that is just the sheer number of placements that we put out there over the last the last year in terms of maybe a little bit of share gain.

Speaker Change: And then on the capital side, obviously, you see that we continue to.

Speaker Change: Reduce our backlog levels are which is giving us more to our more normalized historic lead times and continuing to meet customer demand, but included in that we did have a double digit.

Speaker Change: Orders growth within health care in the in the third quarter. So a strong shipments in the quarter, but also good outlook with that double digit growth in orders for our future.

Speaker Change: Amazing and then maybe just quickly on a S. T. I guess you know we didn't buy a processing.

Dan Carustio: And then maybe just quickly on AST, I guess, within bioprocessing, you know, the companies there themselves struggle to forecast their own demand kind of famously, so I wouldn't want to necessarily put too much stock there, but the commentary seems generally more optimistic on the forward look, I would say, from some of the big players. You know, is that something that you think will resonate with you as you move through the next few quarters, that things on the bioprocessing side could get a little bit better? And then, equally within AST, how far through do you think we are on that inventory burndown, given the procedure volumes have been so strong? You know, I would have thought, you know, we don't have too much of that left. Is that fair?

Speaker Change: The companies that themselves have struggled to forecast their own demand.

Speaker Change: Kinda famously so I wouldn't want to necessarily put too much stock that but the commentary seems generally more optimistic on the forward look I would say from some of the big players you know.

Speaker Change: Is that something that you think resonates with you as you move through the next few quarters like things in the by producing so I could get a little bit a little bit better than equally be an S. T D.

Speaker Change: Fall through do you think we are in that inventory burn down given the procedure volumes have been so strong you know would have thought you know what we don't have too long of that left is that fair.

Dan Carustio: Yeah, we would have thought that too, Patrick. So, what I would say is, you know, we've seen the turn in the U.S. market, for the most part, in medtech destocking. And that's a function of the efficiency of the health care systems over here and procedure volumes being up significantly. They've been able, our customers have been able to burn down that inventory a little quicker. In Europe, where there's still, you know, a lot of fits and starts in terms of medical procedures, depending on the countries, we have not seen the burndown yet in inventory. But inevitably, this can't go on forever. I mean, eventually, those lines will cross.

Speaker Change: Yeah, we would have we would have thought that to Patrick yet so what I would say is that you know we've seen that the turn in the U S market for the most part and Med Tech Destocking and.

Speaker Change: And that's a function of the efficiency of the health care systems over here and procedure volumes up being up significantly they've been able or are customers able to been able to burn down that inventory a little quicker in Europe, where theres still you know a lot of fits and starts in terms of medical procedures, depending on the countries, we have not seen the burn.

Dan Carustio: Down yet in inventory and AR, but inevitably this can't go on forever I mean, eventually those lines will cross and then as it relates to the bioprocess and Destocking.

Dan Carustio: And then as it relates to the bioprocessing destocking, you know, if we look over the long term, you know, historically and going forward, with the exception of the blip that occurred for a couple years during the pandemic, more than a blip, the spike, you know, it has been a very solid, strong growth subset of products that we've sterilized. And inevitably, I do believe that it will return to those levels of growth off of the reset number. The question is, when will we get to that reset number?

Dan Carustio: If we look over the long term you know historically and going forward with the exception of the blip that occurred for a couple of years during the pandemic more than a blip. The spike you know it has been a very solid strong growth a subset of products that we that we sterilize.

Dan Carustio: And inevitably I do believe that it will return to those those levels of growth off of the reset number. The question is when do we get to that reset number and as you've heard from many of our customers in their earnings call and their outlook, they're taking a fairly conservative approach to the first half of the calendar year, but believe that many of them.

Dan Carustio: And as you've heard from many of our customers and their earnings and their outlook, they're taking a fairly conservative approach to the first half of the calendar year but believe that many of them will see meaningful growth in the high single digits in the second half. If that comes true, that will translate into volumes for RAS. I love it.

Dan Carustio: We'll see meaningful growth in the high single digits in the second half.

Dan Carustio: If that comes true that will translate to volumes for our ASP business.

Dan Carustio: Now that having been treated in both the U K and the U S. I'm glad I live here from a health care perspective.

Brett Fishbin: Having been treated in both the UK and the US, I'm glad I live here from a health care perspective. Thank you for watching. Our next question comes from Brett Fishbin from KeyBank. Please go ahead with your question. Hey guys, thanks so much for taking the questions.

Brett Fishbin: Questions.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Our next question comes from Brett Fishbein from Keybanc. Please go ahead with your question.

Brett Fishbin: Hey, guys. Thanks, so much for taking the questions just wanted to start off with a question on some of the margin dynamics understand the unfavorable revenue mix shift was the primary moving pieces. This quarter, but just wondering if you could give a bit more color on some of the previous key moving pieces around margins.

Michael Joseph Tokich: Just wanted to start off with a question on some of the margin dynamics. I understand the unfavorable revenue mix shift was the primary moving piece this quarter, but just wondering if you could give a bit more color on some of the previous key moving pieces around margins like productivity and cost inflation and how those have progressed into the back half. Yeah, Brett, the one thing we are missing that I did talk about, and we've been talking about all year is the incentive comp hole that we had to refill, which was about a $40 million headwind. The bulk of that, about $22 million of that was impacted in the third quarter. So that is a huge hole that we had to fill in Q3. On the more favorable, positive side, we have seen prices for the first time actually offset labor and inflation.

Michael Joseph Tokich: Productivity and cost inflation and how those have progressed into the back half.

Michael Joseph Tokich: Yeah breath, one thing we are missing that I did talk about we've been talking about all year as the incentives comp hold that we had to refill, our which was about a $40 million headwind the bulk of that about $22 million of that was are impacted in the third quarter. So that that is a huge a hole that we had.

Michael Joseph Tokich: Had to fill in Q3 on the more favorable positive side, we have seen price for the first time actually offset.

Michael Joseph Tokich: Labor inflation.

Michael Joseph Tokich: And we did see flat productivity. We had seen negative productivity as we were moving, as we talked about moving products, especially capital equipment, and touching those products several times in order to get them out the door in our manufacturing process. So we've actually seen an improvement, a significant improvement in productivity. I think productivity was right around negative 150, 200 basis points last quarter, and it's flat this quarter. So, very good movement there from a manufacturing standpoint. That just shows that from a supply chain standpoint, we are seeing our supply chain continuing to ease and doing a nice job of reducing our backlog and getting back to more normalized lead times. All right, great.

Michael Joseph Tokich: And we did see flat productivity, we had seen negative productivity as we were moving as we talked about moving products, especially the capital equipment and touching those products several times in order to get them out the door in our manufacturing process. So we've actually seen an improvement significant improvement in productivity I think productivity was right around negative 100.

Michael Joseph Tokich: 5200 basis points last quarter, and it's flat this quarter. So very good movement. There from a manufacturing standpoint that just shows that from a supply chain standpoint, we are seeing our supply chain continuing to ease and doing a nice job of reducing our backlog and getting back to more normalized lead times.

Speaker Change: Alright, Great and then just one other follow up a little bit of a longer term question around E. S. T. Just wondering if you could provide a bit of an update around your progress in adding more X ray sterilization capacity I, it's an alternative modality across your network. If I'm not mistaken you have a couple of locations already up and running and I think there are some additional ones that might come online.

Dan Carustio: And then just one other follow-up, a little bit of a longer-term question around AST. Just wondering if you could provide a bit of an update on your progress in adding more x-ray sterilization capacity as an alternative modality across your network. If I'm not mistaken, you have a couple of locations already up and running, and I think there are some additional ones that might come online in the next few years. So just any additional details would be great, and thank you for taking the time to answer my question. Yeah, sure. This is Dan.

Dan Carustio: And the next few years. So just any additional details would be it would be great and thank you for taking the questions.

Dan Carustio: Yeah sure this is Dan.

Dan Carustio: The two U.S. sites will come online this calendar year. That's in the Chicago area. That is in the testing phase now and should be running product in the next few months. And then the second one that will come online will be California, Ontario, California, and that will be in the fall. And then outside of the U.S., we have several projects underway. We do, yeah. I mean, we have the Asian site coming online now as well.

Dan Carustio: Two of the the U S sites will come online this calendar year, that's in Chicago, Libertyville, Illinois area.

Dan Carustio: That is in testing phase now and should be running product in the next few months.

Dan Carustio: And then the second one that will come online would be California, Ontario, California, and that will be in the fall.

Dan Carustio: And then outside of that you actually have to kind of a project underway to do yeah. I mean, we have that the Asian side coming online as well now and and then I I don't I can't remember off top of my head the pacing of the couple of other European sites, but Theres a few of those that will come online in the next 18 months as well.

Dan Carustio: And then I can't remember off the top of my head the pacing of a couple of the European sites, but there are a few of those that will come online in the next 18 months. Our next question comes from Jacob Johnson from Stevens. Please go ahead with your question. Hey, thanks. Good morning.

Dan Carustio: <unk>.

Dan Carustio: Our next question comes from Jacob Johnson from Stephens. Please go ahead with your question.

Dan Carustio: Hey.

Jacob Johnson: Maybe just one on margins to start. Just on AST margins, I think they declined sequentially on a similar revenue base. Was that mixed?

Jacob Johnson: Thanks, Good morning, maybe just one on margins to start just on a S. T margins I think they declined sequentially on a similar revenue base.

Jacob Johnson: Was that mix was that incentive comp just anything you'd call out there and any thoughts on how we should think about that into the fourth quarter.

Dan Carustio: Was that an incentive comp? Just anything you'd call out there, and any thoughts on how we should think about that into the fourth quarter? A general comment, Mike, I'll let you add to it. We typically see some decline in Q3, and that's because of the holidays, right? So we're not, there are not as many days of billing that go on because customers have shutdowns often over the Thanksgiving week and over the Christmas holiday week between Christmas and New Year's.

Dan Carustio: That's a general comment Mike I'll, let you add to it we typically see some decline in Q3 and that's because of the holidays right. So we're not there's not as many days of billing that goes on because customers have shut downs often over the Thanksgiving week and over the Christmas holiday week between Christmas and new year, so unless.

Dan Carustio: So unless we're sitting on backlog in the factories, we tend to lose some time there. So as a result, it has an impact on margin. But that's, that's a normal sequential trend that we see from Q2 to Q3. Unless there have been a few times in history where that hasn't happened, we've bucked that trend because bioprocessing volumes were through the roof or something, we had to run a burn-off back, budget-wise, that's probably a bit exaggerated by the fact that we saw much lower volume than anticipated in the I think we had six or eight cobalt loadings.

Dan Carustio: We're sitting on backlog in the factories, we tend to lose some time there. So as a result, it has an impact on margin, but that's that's a normal sequential trend that we see from Q2 to Q3.

Dan Carustio: Yes, there has been a few times in history, where that has not we bucked that trend because bio processing volumes were through the roof or something we had to run off burn off backlog.

Dan Carustio: But generally speaking that's a normal thing you would expect it's probably a bit exaggerated by the fact that we saw much lower volume than anticipated in the European plants.

Dan Carustio: We did expect some cobalt loadings, where we actually took our plants offline.

Dan Carustio: For the quarter I think we had six or eight cobalt loadings. So that also hurt from a productivity standpoint, which negatively impacted margins.

Michael Joseph Tokich: So that also hurt from a productivity standpoint, which negatively impacted margins. Yeah, thanks for that, Dan and Mike. And then maybe the follow up on the life sciences segment. Obviously, strong performance. Dan, it seems like from your comments, some of that was just easy comps.

Speaker Change: Got it thanks for that Dan and Mike and then just maybe as a follow up on the life Sciences segment, obviously strong performance Dan It seems like from your comments. Some of that was just easy comps, but are you also kind of start some some maybe positive turn around the longer term outlook. There I'm just curious kind of what you're seeing in terms of demand there as it relates to <unk>.

Dan Carustio: But you also kind of struck some maybe positive tone around the longer term outlook there. I'm just curious kind of what you're seeing in terms of demand there as it relates to aseptic manufacturing clients, because that's been in focus somewhat this week. Yeah, you know, it's funny, in the life science business, when we ship revenue product, that's really ancient history for us, because oftentimes those are orders booked a year in advance. And as you indicated, we had really fairly easy comparisons to our Q3 last year in terms of shipments, and then, if you recall, we had a really nice Q4. So, you know, I think it's those two things.

Dan Carustio: Manufacturing clients, because that's been in and focus somewhat this week.

Dan Carustio: Yeah, you know, it's funny in the life science business when when we ship and revenue product, that's really anxious history for us because oftentimes those are those orders booked a year in advance.

Dan Carustio: And and and we as you indicated we had really a fairly easy comparisons.

Dan Carustio: Our Q3 last year in terms of shipments and then if you recall, we had a really nice Q4.

Dan Carustio: So you know I think it's those two things I, we're not ready to raise a flag yet in terms of long term view of what's going on in aseptic manufacturing demand. We know that the long term is a great outlook, but short term there's still some destocking that's going on and there's still some pressure on big pharma right.

Dan Carustio: We're not ready to raise the flag yet in terms of the long-term view of what's going on in aseptic manufacturing demand. We know that the long-term is a great outlook, but in the short-term, there's still some, you know, destocking that's going on, and there's still some pressure on big pharma right now. But in general, long-term, you know, clearly aseptic drugs, injectable drugs, biologics, cell and gene therapy, all those types of things, all those markets we serve with sterilization-type products and services are going to be in high demand. Got it.

Dan Carustio: But but but in generally long term.

Dan Carustio: No.

Dan Carustio: Nearly a septic drugs injectable drugs biologics celgene therapy, all those type of things all of those markets. We serve are with sterilization type products and services are going to be in high demand.

Michael K. Polark: Thanks for taking the question. Our next question comes from Michael Polark from Wolf Research. Please go ahead with your question. Good morning.

Speaker Change: Got it thanks for taking the question.

Michael K. Polark: Our next question comes from Michael Pollard from Wolfe Research. Please go ahead with your question.

Michael K. Polark: Good morning, Thank you for taking the question.

Michael Joseph Tokich: Thank you for taking the question. It might be too early, but I'd be curious for puts and takes as we move into fiscal 25, you know, penciling out the model here last night, see a path to 6% organic revenue growth, maybe a touch better pending AST and, you know, the historical STERIS posture on EBIT margin, 30, 50 bits of expansion, you know, that feels fair for now. I just, you know, as you get ready to plan for next year. Do you feel like the environment allows for, I mean, knowing there are portfolio puts and takes, but at an overall STERIS level, does it set you up to shoot for that normal STERIS algorithm, or do you see it differently at this early stage? Mike, your opening comment It's a bit too early for us to comment at this point in time. You answered your own question there a little bit.

Michael Joseph Tokich: It might be too early but I'd be curious for puts and takes as we move into fiscal 'twenty five.

Mike: You know penciling out the model here last night.

Michael Joseph Tokich: See a path to 6% organic revenue growth maybe maybe.

Mike: A touch better pending a S T and you know the historical stairs posture on EBIT margin 30, or 50 bps of expansion and.

Michael Joseph Tokich: You know that that feels fair for now I. Just you know as you get ready to plan for next year do you feel like the environment allows for kind of I mean at Edison.

Michael Joseph Tokich: Knowing there's portfolio puts and takes but at an overall stairs levels do you feel like it sets you up to.

Mike: To shoot for that normal service algorithm or do you see it differently at this early stage.

Michael Joseph Tokich: Mike Your opening comment it's a bit too early for us to comment at this point in time you you answered your own question there a little bit obviously, we're in the middle of our planning process.

Michael Joseph Tokich: Obviously, we're in the middle of our planning process. We will, as we typically do, provide FY25 guidance in May on our full year, fourth quarter call. So that's where we stand right now.

Mike: We will as we typically do provide FY 'twenty five guidance in may on our.

Mike: Full year fourth quarter call. So that's that's where we stand right now.

Michael Joseph Tokich: Had to try E S T.

Michael Joseph Tokich: AST. I guess the AST question is, two-parter, obviously we see procedures are back, I mean medtech is probably behaving well, you're saying the U.S. is good OUS still a little iffy. OUS, is there any kind of COVID era product category that's still contributing to this? I'm thinking of PPE or, or is it just that the European kind of procedure recovery is more sober, and that's it?

Michael Joseph Tokich: Yeah.

Michael Joseph Tokich: I guess the S T a question as to.

Michael Joseph Tokich: Two parter, obviously, we see procedures are back I mean, my take probably behaving well youre, saying the U S is good.

Michael Joseph Tokich: Oh U S still a little iffy O U S is there any kind of Covid era product category that still contributing to this I'm thinking of P. P. E. R or is it just the European kind of procedure recovery is more sober and that's it that's it.

Dan Carustio: That's it. It's specific to Europe, too, because we've seen pretty decent recovery in our Asia Pacific plants. So this is a predominantly European demand issue that's just, Well, not necessarily demand, it's the ability to deliver health care issue that's taking longer to burn down inventories. But the second piece, I just like large interventional, you know, multinational med techs. I'm thinking hips, knees, dents, pacers, stuff like this.

Michael Joseph Tokich: It's specific to Europe, too because we've seen pretty decent recovery in our Asia Pacific plants. So this is a predominantly European demand issue, that's just oh, well not necessarily demand its ability to deliver health care issue, that's taking longer to burn down inventories.

Dan Carustio: The second piece I just like.

Dan Carustio: Large interventional.

Dan Carustio: No.

Dan Carustio: The national Med tax I'm thinking hips knees dense pacers stuff like this.

Dan Carustio: Are these customers... Telling you that they maybe have a little too much of a need to be slower on ordering, or are you just, You know, you're not hearing that, and you're just, yeah? That's the communication we get, and we've received from customers. We've had many say that they're burning down inventory as much as 40% from where they're currently. You know, that's a function of what happened during the pandemic and post-pandemic and inventory in the supply chains and manufacturing and raw materials and everything got got fairly bloated, you know, because of concerns around assurity supply. You know, that compounded with a reduction in, you know, procedure rates over in Europe has taken longer to... I appreciate the comments. And Mike, we won't hold it against you. Try it.

Dan Carustio: Are these customers.

Dan Carustio: Telling you that.

Dan Carustio: They maybe have a little too much and need to be slower on ordering or are you just.

Dan Carustio: You know you're not hearing that and you just know that that's the communication, where we get we've received from customers. We've had many say that they're burning down inventory as much as 40% from where their current levels where are.

Dan Carustio: You know that's that's a function of what happened during the pandemic and post pandemic in inventory in the supply chain and manufacturing and raw and everything got got fairly bloated.

Dan Carustio: You know because of concerns around the surety of supply and.

Dan Carustio: That compounded with a reduction in procedure rates over in Europe has taken longer to burn it down.

Speaker Change: I appreciate the comments.

Dan Carustio: Yes.

Dan Carustio: And like we weren't able to get to try it.

Dan Carustio: [laughter].

Dan Carustio: And our last question comes from... Jason Bednar from Piper Stanley. Please go ahead with your question. Hey, good morning, everyone.

Dan Carustio: And our frequency.

Dan Carustio: Jason Bednar from Piper Sandler. Please go ahead with your question.

Jason M. Bednar: Yeah, Hey, good morning, everyone I'll start first following up maybe on some of the prior questions on segment margins.

Jason M. Bednar: I'll start first, following up maybe on some of the prior questions on segment margins. I was going to take a stab at fiscal 25, but Mike already tried that, so I'll go a different route. It sounds on the margin side like you're not too worried about the AST profit level we saw, you know, in the third quarter, the seasonal low point. But is there anything structural keeping us from getting back to the upper 40% margin levels we saw in fiscal 22 in the first part of 23? Or are those just tough to match given the volume list you were seeing at the time?

Jason M. Bednar: I was going to take a stab at fiscal 'twenty five, but my mic already tried that so well.

Jason M. Bednar: I'll go go a different route it sounds on margin side like you're not too worried about the a S. T profit level. We saw third quarter is the seasonal low point, but is there anything structural keeping us from getting back to the upper 40% margin levels. We saw in fiscal 'twenty, two and the first part of 'twenty three.

Jason M. Bednar: Or are those just tough to match given the volume lets you were seeing at the time and then similar question, but on the other side in health care, how sustainable do you see segment margins in that segment I think it hit a new high this quarter is the strength there simply a function of the consumables and equipment volumes, you're seeing or is there any kind of uplift.

Michael Joseph Tokich: And then, similar question, but on the other side in health care, you know, how sustainable do you see segment margins in that segment? I think it hit a new high this quarter. Is the strength there simply a function of the consumables and equipment volumes you're seeing, or is there, you know, any kind of uplift that's coming from the assets you acquired from BD? On the AST side, it's all volume, Jason. This is a very high fixed cost base segment. The more volume we put through, the better opportunity we have to drive increased EBIT margins. So there's all volume.

Michael Joseph Tokich: Coming from the assets you acquired from BD.

Michael Joseph Tokich: Oh, the a S. T side, it's all volume Jason is this is a very high fixed cost base.

Michael Joseph Tokich: Segment, the more volume we put through are the better opportunity we have to drive increased our.

Michael Joseph Tokich: EBIT margin so they're there it's all volume Dan do you want to dress healthcare, yeah, No I don't see any fundamental changes really in the health care, it's that that once again as long as our delivery rates stay up I should should be fairly consistent plus or minus a bit.

Dan Carustio: Dan, you want to address health care? Yeah, no, I don't see any fundamental changes, really, in health care. That, once again, as long as our delivery rates stay up high, it should be fairly consistent, plus or minus, YouTube and BDM. I don't want..., slightly incremental. BD is slightly incremental in March.

Dan Carustio: Two one way or another from quarter to quarter.

Speaker Change: And I don't want.

Dan Carustio: Slightly income gradually.

Dan Carustio: BD is lately.

Speaker Change: Okay, I don't want to lead either of you, but it sounds like.

Dan Carustio: Okay, I don't want to lead either of you, but it sounds like Mike and Dan, you're saying nothing structural about getting from STERIS getting back to the upper 40s in AST, and Dan, you're saying nothing structural that would keep you from maintaining the margin level you're at right now in healthcare. Yeah, correct. Okay, all right, great. And then over on Dental, I'm sorry, I probably have asked this a few different times now on consecutive calls.

Dan Carustio: Mike, you're saying nothing structural from getting from tariffs.

Dan Carustio: Terrorists getting back to the upper Forty's and a S T and Dan you're saying nothing structural that would keep you from maintaining the margin level, you're at right now in health care.

Dan Carustio: Yeah correct.

Dan Carustio: Okay, Alright, great and then overrun dental I am sure I, probably have asked this a few different times now in consecutive calls.

Dan Carustio: You've been reviewing internally the future plans for the asset. This was a week quarter, you know, part of that out of your control yet Henry Schein cybersecurity attack. But I guess maybe two questions on those items. Can you say first whether near-term trends have normalized following that cybersecurity attack and the kind of resolution we've seen with that business and that issue? And then, can you talk about the conversations you're having regarding the future of this segment? Do you have a timeline on when you'll announce a formal decision here? Yeah, I guess on the first, we have seen things normalized in terms of the regular order of pay. The challenge is a lot of that revenue evaporates and gets shifted into Q4, at least that's what we anticipate to some degree. Or it found other venues to get to the customer, which we don't really have the ability to track or fully understand.

Dan Carustio: You have been reviewing internally the future plans for the asset and this was a weak quarter you know part of that out of your control yet Henry Schein cyber security attack, but I guess, maybe two questions on those items when you say first weather near.

Dan Carustio: Near term trends of normalized following that cyber security attack and the kind of a resolution we've seen with that business and that issue and then can you talk about the conversations you're having regarding the future for that segment do you have a timeline on when you will announce a formal decision here.

Dan Carustio: Yeah, I guess on the first we have we have seen things normalize in terms of regular order pace and in one of the challenges a lot of that revenue kind of evaporated and get shifted into Q4 at least that's what we anticipate to some degree or found other venues to get to the customer, which we don't really have the ability to track a fully understand so well, we'll see what the.

Dan Carustio: Outcome is of that more definitively this quarter and on the other question you know.

Dan Carustio: So we'll see what the outcome is of that more definitively this quarter. On the other hand, we continue to look at the portfolio in general, but no decisions have been made at this point. As soon as we have something to update you and everyone else on this matter, we will. Alright, thanks so much, guys. Once again, if you would like to ask a question, please press star and 1. To withdraw your questions, you may press star and 2.

Dan Carustio: We continue to look at the portfolio in general, but no decisions have been made at this point and as soon as we have something to update you and everyone else with the on the stub on this matter we will do so.

Dan Carustio: Alright, thanks, so much guys.

Dan Carustio: Once again, if he would like to ask a question. Please press star and one.

Dan Carustio: Withdraw your question you May press Star and two.

Michael Stephen Matson: Our next question comes from Mike Matson from Needham & Company. Please go ahead with your question. Yeah, thanks.

Dan Carustio: Our next question comes from Mike Matson from Needham and company. Please go ahead with your question.

Michael Stephen Matson: Yeah, I think so I just wanted to ask one on the use of cash. So you know I think you've got a fair bit of M&A I don't recall any recent share repurchases, but maybe I'm forgetting one but can you maybe just give us an update on your kind of priorities and whether.

Michael Stephen Matson: Just want to add to one on the use of cash. So, you know, I think you've got a fair bit of M&A. I don't recall any recent share purchases, but maybe I'm forgetting one.

Michael Joseph Tokich: But can you maybe just give us an update on your kind of priorities and, you know, whether or not you'd be willing to kind of come in and do some share purchases? Yeah, Mike, our capital allocation methodology or process has not really changed over the last decade plus. We did, if you remember last year in the fourth quarter, we were opportunistic in share repurchase; we bought about 225 million dollars worth of shares; we have not purchased any in FY 24.

Michael Joseph Tokich: Whether or not you'd be willing to kind of come in and do some share repurchases.

Michael Joseph Tokich: Yeah, Mike our capital allocation methodology and process has not really changed.

Michael Joseph Tokich: Over the last decade plus.

Michael Joseph Tokich: We did if you remember last year in the fourth quarter. We did we were opportunistic in share repurchases. We bought about 225 ish million dollars of shares we have not purchased any in FY 'twenty four to date, we've actually been focusing more on paying down debt since rates are higher we feel.

Michael Joseph Tokich: To date, we've actually been focusing more on paying down debt since rates are higher. We feel there is value in paying down debt. So all of our excess cash has been going towards debt repayment, which is driving our leverage ratio. Even with the BD acquisition, we're at 2.2 times gross leverage. So that's been our focus. Okay, got it. And then I believe you've been able to get a little more pricing, you know, in recent periods. But how sustainable do you think that rate of price increases is, you know, as we see inflation kind of slowing down here a bit? Yeah, I think that to some extent, you know, our ability to justify putting through price increases with customers has to be some basis of cost, you know, and you know as cost can normalize in certain areas, there will be a market trend towards less, less price grab. I guess. Okay, and then finally, I just want to ask one on that outlook for the tax rate with Pillar 2. I mean, your rate's kind of well above that 15% level, but do you expect any sort of impact on your tax rate there?

Michael Joseph Tokich: There's value in paying down debt. So all of our excess cash has been going towards debt repayment.

Michael Joseph Tokich: Which has driven our leverage ratio even with the BD acquisition. We're at two two times gross leverage so that's been our focus.

Michael Joseph Tokich: Okay got it and then.

Michael Joseph Tokich: I believe you have you been able to get a little more pricing you know in recent periods you.

Michael Joseph Tokich: How sustainable do you think that that rate of price increases.

Michael Joseph Tokich: We see inflation kind of slowing down here a bit.

Michael Joseph Tokich: Yes, I think that to some extent.

Michael Joseph Tokich: Our ability to.

Michael Joseph Tokich: Justify putting through price increases with customers has to be.

Michael Joseph Tokich: Some basis of costs, you know and as cost in a normalized in certain areas.

Michael Joseph Tokich: There will be a market trend towards towards the less less price grab I guess, what I would say.

Speaker Change: Okay, and then finally Oh.

Michael Joseph Tokich: Last one on the outlook for tax rate with pillar, two I mean, you're you're rates well above that 15% level, but do you expect any sort of impact there to your tax rate.

Michael Joseph Tokich: Mike, nothing material from Pillar 2, if and when it does get implemented. Okay, great. Thank you. You're welcome.

Speaker Change: Mike nothing material from pillar to if if and when it does get implemented.

Speaker Change: Okay, great. Thank you.

Michael Joseph Tokich: Welcome.

Michael Joseph Tokich: Our next question comes from Dave took Alley from J M. P. Citizens. Please go ahead with your question.

David Turkaly: Our next question comes from Dave Turkaly from JMP Citizens. Please go ahead with your question. Hey, good morning.

David Turkaly: Hey, good morning, sorry been bouncing around a bit you may have talked about this but.

Dan Carustio: Sorry, I've been bouncing around a bit. You may have talked about this, but I wanted to just ask quickly, you know, any update on that Radiation Stabilization Master File pilot program, like in terms of participation or anything we should assume, anything you've learned or anything you think we could look at in terms of how that might impact things moving forward. This is Dave. This is Dan.

Dave: I wanted to just ask quickly.

Dan Carustio: And any update on the radiation embolization Master file pilot program like in terms of participation or anything we should assume anything you've learned or anything you think we could look at in terms of how that might impact things moving forward.

Speaker Change: Yeah Yeah.

Dan Carustio: Dave This is Dan I, it's it's been very positively received by the customers and also by the regulators with with the agency F D. A.

Dan Carustio: It's been very positively received by the customers and also by the regulators with the agency, FDA, and we're excited about the program because it does sort of create a lower regulatory barrier switching barrier for our customers to have more supply chain flexibility uh... when changing different modes of sterilization so uh... you know this is something that we felt was important to offer up to the industry and work with the FDA to get that approved you know so that there was much more flexibility in a time you know a couple years ago when everybody was exposed and challenged uh... so no material impact in the short term here do we expect uh... uh... but i think that that longer term it's it's uh... it's a great program for us and bodes well for our customers. And just quickly, the thought that when you look at like EO, if they're transferring from that, like, is the margin profile much different via the different modes in AST that they might switch to?

Dan Carustio: And we're excited about the program because it does sort of created lower regulatory barrier switching barrier for our customers to have more supply chain flexibility.

Dan Carustio: When changing different modes of sterilization. So you.

Dan Carustio: You know this is something that we felt was important to to offer up to the industry and work with the FDA to get that approved.

Dan Carustio: So that there was much more flexibility at a time you know a couple of years ago, when everybody was exposed some challenged.

Dan Carustio: So no material impact in the short term here do we expect.

Dan Carustio: I think that the longer term. It's it's it's a it's a great program for us and bodes well for our customers.

Dan Carustio: And then just quickly the follow up is that when you look at like E O. The transferring from that like is the margin profile much different.

Dan Carustio: Via the different modes.

Dan Carustio: That they might switch to.

Dan Carustio: Not really, no. Okay. Thank you. Yep, sure. And our next question is a follow-up from Michael Polark from Wolfe Research. Please go ahead with your follow-up. Thank you. Healthcare Capital is I kind of run, review the numbers or a fresh set of numbers, and I know this is not how you manage it. You have customers waiting for product, and you want to ship this, uh... quickly as possible, but I can see the makings of a soft landing here for health care capital revenue in twenty five. There had been a fear that you know might likely be down as you kind of improve lead times and conversion rates. But again, I kind of kind of see this kind of Goldilocks scenario where growth growth decels for sure. But, you know, assuming orders continue at these current levels, you're still growing health care capital revenue. Fiscal 25. I know you don't have guidance out there, but I'm curious what you think of my theory. I love your theory, and I hope it plays out that way. Okay, one more follow up. Cobalt 60.

Speaker Change: Not really now for you okay. Thank.

Michael K. Polark: Thank you.

Michael K. Polark: Yes sure.

Michael K. Polark: And our next question is a follow up from Michael Polack from Wolfe Research. Please go ahead with your follow up.

Michael K. Polark: Thank you.

Dan Carustio: Health care capital as I kind of run review the numbers or the fresh set of numbers and I know this is not how you manage it you you have customers waiting for product then you Wanna shippers.

Michael K. Polark: Quickly as possible, but I kind of see the makings of a soft landing here for health care capital revenue and twenty-five there had been a fear that you know.

Michael K. Polark: It might likely be down as you kind of improve lead times and conversion rates, but.

Michael K. Polark: Again, I kind of see that as kind of a goldilocks scenario, where gross growth b cells for sure but.

Michael K. Polark: You know assuming orders continue.

Dan Carustio: These current levels, you're still growing health care capital revenue and physics.

Michael K. Polark: Physical twenty-five I know you don't have guidance out there, but I'm curious what do you think of my theory.

Michael K. Polark: I loved your theory, and I hope it plays out that way.

Dan Carustio: Yes.

Dan Carustio: Okay.

Michael K. Polark: Another follow up.

Michael K. Polark: I heard the comments on, you know, maybe a little bit of downtime from loading. And we obviously know that Nordeon was exceptionally calendar 4Q weighted in terms of deliveries and calendar 23. Is there some element that, you know, now that you're back to full strength at those plants?

Michael K. Polark: Cobalt 60, I heard the comments on you know, maybe a little bit of downtime from loading and we obviously know that nordion was exceptionally a calendar for key weighted in terms of deliveries in calendar 'twenty three.

Michael K. Polark: Is there some element that you know now that you're back to like full strength that those plants.

Michael Joseph Tokich: you know. The Gamma network speeds up in the short run. I'm just curious how that actually works. It does, but we have to have the volume is the issue.

Michael K. Polark: You know.

Michael K. Polark: Gamma network speeds up in the short run and I'm, just curious how that actually works.

Michael Joseph Tokich: It does but you know we have to have the volume is the issue. So we needed to take the cobalt because we've gotten into a deficit position in many of those plant because it's been for some of them over a year since I last loaded but.

Michael Joseph Tokich: So we needed to take the cobalt because we'd gotten to a deficit position in many of those plants because it's been, for some of them, over a year since they last loaded. It should not have a material effect unless we get more volume than we anticipate, and if we do, we'll be able to run it because we'll have more capacity. Thanks for taking the follow-up. And ladies and gentlemen, with that, we'll be ending today's question and answer session. I'd like to turn the floor back over to management for any closing remarks. Thanks, Amy, and thanks, everybody, for taking the time to join us this morning. We look forward to meeting up with many of you. And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your line.

Michael Joseph Tokich: It doesn't it should not have a material effect unless we get.

Michael Joseph Tokich: More volume than we anticipate and if we do we'll be able to run it because we'll have more capacity.

Michael Joseph Tokich: Thanks for taking the follow ups.

Michael Joseph Tokich: Thanks.

Michael Joseph Tokich: And ladies and gentlemen, with that we'll be ending today's question and answer session.

Speaker Change: I'd like to turn the floor back over to management for any closing remarks.

Michael Joseph Tokich: Thanks, Amy and thanks, everybody for taking the time to join US join US This morning, and look forward to catching up with many of you in the coming weeks.

Michael Joseph Tokich: And ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.