Q2 2024 Sotera Health Co Earnings Call
Operator: Good morning, and welcome to the Sotera Health second quarter 2024 conference call. All participants will be in listen-only mode. Should you need assistance, please signal 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 star then one on your touchtone phone. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Vice President and Treasurer Jason Peterson. Please go ahead.
Good morning, and welcome to this Altera health second quarter 'twenty 'twenty four conference call all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation there will.
An opportunity to ask questions to ask a question you May Press Star then one on your Touchtone phone to withdraw from the question queue. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Vice President and Treasurer, Jason Peterson. Please go ahead.
Ed.
Jason Peterson: Good morning and thank you. Welcome to Sotera Health's second quarter 2024 results call. You can find today's press release and accompanying supplemental slides on the investor section of our website at SoteraHealth.com. This webcast is being recorded, and a replay will be available on the investor section of Sotera Health's website. On the call with me today are Chairman and Chief Executive Officer Michael Petras and Chief Financial Officer John Lyons
Speaker Change: Good morning, and thank you welcome to so Terra health second quarter 2024 results call you can find today's press release and accompanying supplemental slides on the investors section of our website at <unk> Dot Com. This webcast is being recorded and a replay will be available in the investors section help us apparel health website on the call with me today are chairman and.
Speaker Change: Executive Officer, Michael Peterson, Chief Financial Officer, John lines during the call. Some of our comments may be considered forward looking statements. The matters addressing these statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied please.
Jason Peterson: 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 in the forward-looking statement 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 statement.
Speaker Change: These refer to telehealth 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.
Jason Peterson: Please note that during the discussion today, the company will present both GAAP and non-GAAP financial measures, including adjusted net income, adjusted EBITDA, adjusted EPS, adjusted EBITDA margin, segmented income margin, and net leverage ratio, in addition to constant currency comparisons. A reconciliation of certain non-GAAP measures to the most directly comparable GAAP financial measures for all relevant periods may be found in the schedules attached to the company's press release and in the supplemental slides of this presentation.
Speaker Change: Adjusted net income adjusted EBITDA adjusted EPS adjusted EBITDA margin segment income margin of net leverage ratio.
Speaker Change: The constant currency comparisons a reconciliation of certain non-GAAP measures to the most directly comparable GAAP financial measures for all relevant periods may be found in the schedules attached to the company's press release.
Speaker Change: And in the supplemental slides for this presentation.
Jason Peterson: 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 give everyone an opportunity to ask questions. As always, if you have any questions after the call, please feel free to reach out to me and the investor relations team. I'll now turn the call over to Sotera Health Chairman and CEO, Michael Petras.
Speaker Change: The operator will be assisting with the Q&A portion of the call today. Please.
Speaker Change: Please limit yourself to one question and one follow up so that we can give everyone an opportunity to ask questions.
Speaker Change: As always if you have any questions. After the call. Please feel free to reach out to me in the Investor Relations team.
Speaker Change: I'll now turn the call over to <unk>, Chairman and CEO Michael Peterson.
Michael Petras: Good morning, everyone, and thank you for joining Sotera Health's second quarter 2024 earnings call. Today, we announce both revenue and adjusted EBITDA growth compared to the second quarter 2023, driven by volume growth in each of our three business segments. Compared to the second quarter of 2023, total company revenues increased 8.3% or 8.8% on a constant currency basis, and adjusted EBITDA increased 6.9%. We delivered adjusted EPS of $0.19 for the quarter, which is slightly down versus the second quarter of 2023, driven by higher interest expense.
Michael Peterson: Good morning, everyone and thank you for joining sutera Health's second quarter 2024 earnings call today, we announced both revenue and adjusted EBITDA growth compared to the second quarter of 2023, driven by volume growth in each of our three business segments.
Michael Peterson: Turning to the second quarter of 2023 total company revenues increased eight 3% or eight 8% on a constant currency basis and adjusted EBITDA increased six 9%. We delivered adjusted EPS of <unk> 19 cents for the quarter, which is slightly down versus the second quarter of 2020 three.
Michael Peterson: Given by higher interest expense.
Michael Petras: Sterigenics, our large reporting segment, grew the top line by 5.9% versus the same period in the prior year, delivering positive volume growth for the first time in several quarters. We continue to expect slight volume and mixed growth in the second half of 2024 compared to 2023. Nordian, our other reporting segment within the sterilization services business, increased revenues by 29% versus the second quarter of 2023. The timing of reactor harvest schedules resulted in a favorable volume and mix increase, which was the primary driver for the growth.
Stir Jennings our largest reporting segment grew the top line by five 9% versus the same period in the prior year delivering positive volume growth for the first time in several quarters.
Michael Peterson: We continue to expect slight volume and mix growth in the second half of 2024 versus 2023.
Michael Peterson: Nordion, our other reporting segment within the sterilization services business increased revenues by 29% versus the second quarter of 2023, the timing of reactor harvest schedules resulted in a favorable volume and mix increased which was the primary driver for the growth.
Michael Petras: Nelson Labs, our lab testing advisory service business, delivered its third consecutive quarter of top line growth as second quarter revenue increased 4% compared to the second quarter of 2023. We are pleased to see volume improvement within our core validation testing area, while core routine lot release testing remains soft versus the second quarter of 2023. Our expert advisory services business continued its strong performance in the quarter. With the first half of the year completed, we are reaffirming our full year 2024 outlook. As a reminder, our 2024 outlook calls for both revenue and adjusted EBITDA growth in the range of four to 6% versus 2023.
Michael Peterson: Nelson Labs, our lab testing advisory service business delivered its third consecutive quarter of topline growth as second quarter revenues increased 4% compared to the second quarter of 2023, we are pleased to see volume improvement within our core validation testing area, while core routine lot release testing remains soft versus.
Michael Peterson: Second quarter 2023, our expert advisory services business continued its strong performance in the quarter.
Michael Peterson: With the first half of the year completed we are reaffirming our full year 2024 outlook as a reminder, our 'twenty 'twenty four outlook calls for both revenue and adjusted EBITDA growth in the range of 4% to 6% versus 2023.
Michael Petras: John will go through our 2024 outlook in more detail in a few minutes, but first, I'd like to highlight an example of how Sotera Health plays a crucial role in safeguarding global health. Our Nelson Labs business plays a critical role in testing medical devices to ensure the safety of these devices for use in patients. Recently, the team at Nelson Labs performed lab testing on the Audis valve, which is the first ever expandable pediatric heart valve, and is highlighting it in the second quarter earnings presentation posted to the investors section of our website.
Michael Peterson: John will go through our 2024 outlook in more detail in a few minutes, but first I'd like to highlight an example of how so terra helps plays a crucial role in safeguarding global health.
Michael Peterson: Our Nelson Labs business plays a critical role in testing medical devices to ensure the safety of leased devices for use in patients recently the team at Nelson Labs performed a lab testing them in Addis South which is the first ever expandable pediatric heart valves and as highlighted in our second quarter earnings presentation posted to the investor.
Michael Peterson: Section of our website.
Michael Petras: Children with pulmonary valve disease experience valve replacement surgery at least five to six times throughout their young lives. This innovative heart valve can be implanted into pediatric patients and expands with the child's growth, which is expected to reduce the number of heart surgeries needed during their childhood. Nelson Labs worked with both the customer and the FDA to perform biocompatibility testing and evaluations to help ensure safe interaction between the medical device and the body systems of the child for the duration of its intended use.
Michael Peterson: Children with pulmonary valve disease experienced valve replacement surgery at least five to six times throughout their young lives.
Michael Peterson: This innovative heart valves can be implanted into pediatric patients and expands with the child's growth, which is expected to reduce the number of heart surgeries needed during their childhood.
Michael Peterson: Nelson Labs work with both the customer and in the F. D. A to perform biocompatibility testing and evaluations to help ensure sheep interaction between the medical device and body systems as a child for the duration of its intended use these tests and evaluations where the last critical step for approval into a clinical trial. This is Jim.
Michael Petras: These tests and evaluations were the last critical step for approval into a clinical trial. This is just another great example of how we play a critical role in safeguarding global health at Sotera Health. Now, John will walk us through the financials.
Speaker Change: Another Great example of how we play a critical role in safeguarding global health and sit there now.
Speaker Change: Now John will walk us through the financials.
John Lyons: Thank you, Michael. I will begin by covering the second quarter 2024 highlights on a consolidated basis and then provide some details on each of the business segments, along with updates on capital deployment and leverage. I will then finish up with some additional details on our 2024 outlook. On a consolidated total company basis, second quarter revenues increased by 8.3% as compared to the same period last year to $277 million. This equates to an 8.8% increase on a constant currency basis, as foreign exchange was a headwind in the quarter.
John: Thank you Michael I'll begin by covering our second quarter 2020 for highlights on a consolidated basis and then provide some details on each of the business segments, along with updates on capital deployment and leverage I will then finish up with some additional details on our 2024 outlook.
John: Our consolidated total company basis second quarter revenues increased by eight 3% as compared to the same period last year to $277 million.
John: This equates to an eight 8% increase on a constant currency basis as foreign exchange was a headwind in the quarter.
John Lyons: Adjusted EBITDA increased by 6.9% compared to the second quarter of 2023 to $137.99. Adjusted EBITDA margins were 49.7%, representing a 68 basis point decline from the second quarter of 2023, driven by a decline in Nelson Labs segment margin. Adjusted EPS was 19 cents for the second quarter of 2024, a decrease of one cent from the second quarter of 2023 driven by higher interest. Net income for Q2 of 2024 was $9 million, or $0.03 per diluted share, compared to net income of $24 million, or $0.08 per diluted share, in Q2 of 2023.
John: Adjusted EBITDA increased by six 9% compared to the second quarter of 2000 $23 million to $137 million.
John: Adjusted EBITDA margins were 49, 7%, representing a 68 basis point decline from second quarter of 2023, driven by a decline in Nelson lab segment margin.
Adjusted EPS was <unk> 19 cents for the second quarter of 2024, a decrease of one times from the second quarter of 2023, driven by higher interest expense.
John: Net income for Q2 of 2024 was $9 million or three cents per diluted share compared to net income of $24 million or eight cents per diluted share in Q2 of 2023.
John Lyons: The reduction in net income was driven by customary charges related to the recent successful refinancing of our debt structure. Our interest expense for the second quarter of 2024 was $40 million, an increase of almost $10 million versus the same period last year. The increase was driven by reduced interest income and a reduced benefit from favorable interest rate hedges that matured. Now let's take a closer look at the segment performance.
John: The reduction in net income was driven by customary charges related to the recent successful refinancing of our debt structure.
Speaker Change: Our interest expense for the second quarter 2024 was $40 million, an increase of almost $10 million versus the same period last year. The increase was driven by reduced interest income and a reduced benefit from favorable interest rate hedges that mature.
Speaker Change: Now, let's take a closer look at the segment performances.
John Lyons: For the quarter, Sterigenics delivered 5.9% revenue growth to $176 million as compared to the second quarter of last year. Revenue growth was driven by a pricing benefit of 4.9% as well as favorable volume and mix of 1.4%. These were partially offset by an unfavorable impact from foreign currency exchange rates of 40 basis points.
Speaker Change: For the quarter Stared Phoenix delivered five 9% revenue growth to $176 million as compared to the second quarter of last year.
Speaker Change: Revenue growth was driven by a pricing benefit of four 9% as well as favorable volume and mix of one 4%.
Speaker Change: These were partially offset by an unfavorable impact from foreign currency exchange rates of 40 basis points.
John Lyons: Segment income increased 5.8% to $97 million, while segment income margins of 54.9% remain flat compared to Q2 of 2023. Segment income growth was driven by favorable pricing, as well as volume and mix, partially offset by inflation. Norteon's second quarter revenue increased by 29% to $41 million compared to the same period in the prior year, based on the timing of Cobalt-60 harvest schedules, as we expected. Nordeon's revenue increase was primarily driven by the favorable impact from buying a mix of 26.5% as well as a 3.8% pricing benefit. The revenue increase was partially offset by negative changes in foreign currency exchange rates of 130 basis points.
Speaker Change: Segment income increased five 8% to $97 million, while segment income margins of 54, 9% remained flat compared to Q2 of 2023.
Speaker Change: Segment income growth was driven by favorable pricing as well as volume and mix, partially offset by inflation.
Speaker Change: Nordion in second quarter revenue increased by 29% to $41 million compared to the same period in the prior year based on the timing of cobalt 60 harvest schedules as we expected.
Speaker Change: <unk> revenue increase was primarily driven by the favorable impact from volume and mix of 26, 5% as well as a three 8% pricing benefit.
Speaker Change: The revenue increase was partially offset by negative changes in foreign currency exchange rates of 130 basis points.
Speaker Change: Nordion segment income increased 31, 7% to $23 million, while segment income margin increased 120 basis points to 56, 8% compared to Q2 of 2023.
John Lyons: Nordeon's segment income increased 31.7% to $23 million, while segment income margin increased 120 basis points to 56.8% compared to Q2 of 2023. Segment income and segment income margin improvement were driven by favorable volume and mix, as well as favorable prices. For Nelson Labs, second quarter 2024 revenue increased by 4% to $59 million compared to the second quarter of 2020. The growth in revenue was driven by a pricing benefit of 3% as well as favorable volume and mix of 1.4%.
Speaker Change: Segment income in segment income margin improvement were driven by the favorable volume and mix as well as favorable pricing.
Speaker Change: For Nelson Labs second quarter, 2024 revenue increased by 4% to $59 million compared to the second quarter of 2023.
Speaker Change: Both in revenue was driven by a pricing benefit of 3% as well as favorable volume and mix of one 4%.
John Lyons: These were partially offset by foreign currency headwinds of 40 bases. Nelson Lab's second quarter 2024 segment income decreased by 11% to $17 million compared to the second quarter of 2023. This decline was driven by the impact of volume and mix, as well as higher labor costs, partially offset by favorable prices.
Speaker Change: These were partially offset by foreign currency headwinds of 40 basis points.
Speaker Change: Nelson Labs second quarter 2020 for segment income decreased by 11% to $17 million compared to the second quarter of 2023.
Speaker Change: This decline was driven by the impact of volume and mix as well as higher labor costs, partially offset by favorable pricing.
John Lyons: Segment income margins contracted by 489 basis points to 29% compared to the prior year quarter, but improved by 240 basis points sequentially, which is consistent with the expectation we laid out during our first quarter 2024 earnings call. I will now turn to the balance sheet, cash generation, and capital deployment. During the quarter, we closed on a $2.3 billion refinancing of our total debt structure. By completing this transaction, we have reduced our 2024 expected interest expense by approximately $5 million and strengthened our company's balance sheet by extending maturities from 2026 to 2031. We are very pleased with the strong market reception for this financing, which we believe speaks to the strength of our business. Furthermore, Sotera Health's liquidity position remains healthy.
Speaker Change: Segment income margins contracted by 489 basis points to 29% compared to the prior year quarter, but improved by 240 basis points sequentially.
Speaker Change: It is consistent with the expectations, we laid out during our first quarter 2024 earnings call.
Speaker Change: I will now turn to the balance sheet cash generation and capital deployment.
Speaker Change: During the quarter, we closed on a $2 3 billion refinancing of our total debt structure.
Speaker Change: By completing this transaction, we have reduced 'twenty 'twenty four expected interest expense by approximately $5 million and strengthened our company's balance sheet by extending maturities from 2026 to 2031.
Speaker Change: We're very pleased with the strong market reception for this financing, which we believe speaks to the strength of our businesses.
Speaker Change: So terra house liquidity position remains healthy.
John Lyons: As of the end of Q2 of 2024, we had $646 million of available liquidity, which included $246 million of unrestricted cash and $400 million of available capacity on a revolving line of credit. Capital expenditures for the first half of the year totaled $77 million, as we continue to focus on completing our three stereogenics capacity expansions, the USEO facility enhancements, as well as Nordion's cobal Free cash flow was positive in the quarter, and as we've stated previously, we expect to generate positive free cash flow for the full year.
Speaker Change: As of the end of Q2 of 'twenty 'twenty four we had $646 million of available liquidity, which included $246 million of unrestricted cash and $400 million of available capacity on our revolving line of credit.
Speaker Change: Capital expenditures for the first half of the year totaled $77 million as we continued to focus on completing our <unk> capacity expansions. The U S E O facility enhancements as well as Nordion cobalt development programs.
Speaker Change: Free cash flow was positive in the quarter and as we've stated previously we expect to generate positive free cash flow for the full year.
John Lyons: We finished the quarter with a net leverage ratio of 3.8 times, which is within our long-term target range of 2 to 4 times. As Michael mentioned, we are reaffirming our 2024 outlook. To recap, for full year 2024, we expect total revenues and adjusted EBITDA to grow in the range of 4 to 6 percent. We expect total company-adjusted EBITDA margins to sequentially improve throughout the year, with full-year margins approaching 50%. In Sterogenics, we anticipate slight volume and mixed growth versus 2023 for the remainder of the year.
Speaker Change: We finished the quarter with a net leverage ratio of three eight times, which is within our long term target range of two to four times.
Speaker Change: As Michael mentioned, we are reaffirming our 2024 outlook.
Michael Peterson: To recap for full year 2024, we expect total revenues and adjusted EBITDA to grow in the range of 46%.
Michael Peterson: We expect total company adjusted EBITDA margins to sequentially improve throughout the year with full year margins approaching 50%.
Speaker Change: Instead of <unk>, we anticipate slight volume and mix growth versus 2023 for the remainder of the year.
John Lyons: For Nordeon, we expect slightly more than 60% of full-year revenue to occur in the second half of the year, with higher single-digit year-over-year revenue growth in the third quarter. For Nelson Labs, we expect second-half revenue to be similar to the first half. We also expect segment income margins to improve versus the second quarter of this year as we complete some large projects in expert advisory services. We continue to expect full-year margin rates to approach 30 percent.
Speaker Change: Minority on we expect slightly more than 60% of full year revenue to occur in the second half of the year with upper single digit year over year revenue growth in the third quarter.
Speaker Change: For Nelson Labs, we expect second half revenue to be so much in the first half. We also expect segment income margins to improve versus the second quarter of this year as we complete some large projects and expert advisory services. We continue to expect full year margin rates to approach 30%.
John Lyons: As we communicated after our debt refinancing, we expect interest expense between $165 million and $175 million. Our effective tax rate on our adjusted net income continues to be in the range of 31.5% to 34.5%. Adjusted EPS continues 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.
Speaker Change: As we communicated after our debt refinancing, we expect interest expense between $165 million and $175 million.
Speaker Change: Our effective tax rate on our adjusted net income continues to be in the range of 31, 5% to 34, 5%.
Speaker Change: Adjusted EPS continues to be in the range of 67 to 75 cents.
Speaker Change: We expect our fully diluted share count in the range of 283 million to 285 million shares on a weighted average basis.
John Lyons: We now expect capital expenditures to finish at the lower end of the $205 million to $225 million range. As previously communicated, we continue to expect CapEx to step down in 2025 and 2026, resulting in acceleration of free cash flow generation. This is a high priority for the company.
Speaker Change: We now expect capital expenditures to finish at the lower end of the $205 million to $225 million range. As previously communicated we continue to expect Capex to step down in 2025, and 2026, resulting in an acceleration of free cash flow generation. This is a high priority for the company.
Michael Petras: Our guidance assumes foreign exchange rates at the end of the second quarter will remain constant for the remainder of the year. As such, we expect FX to continue to be a headwind on a year-over-year basis. This headwind is expected to be more pronounced in the third quarter. Lastly, our guidance does not incorporate any M&A activity, and we still anticipate our net leverage ratio to improve during the year. I'll now turn the call back over to Michael.
Speaker Change: Our guidance assumes foreign exchange rates at the end of the second quarter remain constant for the remainder of the year.
Speaker Change: As such we expect FX to continue to be a headwind on a year over year basis.
Speaker Change: This headwind is expected to be more pronounced.
Speaker Change: In the third quarter.
Speaker Change: Lastly, our guidance does not incorporate any M&A activity and we still anticipate our net leverage ratio to improve during the year.
Speaker Change: I'll now turn the call back over to Michael.
Michael Petras: Thank you, John. Overall, we're pleased with our performance in the second quarter, and we're looking forward to the second half of 2024. Prior to moving to Q&A, I would like to take a moment to say that we are very excited to welcome Christopher Simon, President and Chief Executive Officer of Hemionetics Corporation, to the Sotera Health Board of Directors. Chris brings extensive commercial and strategic experience in the medical device industry, which we believe will serve us and our stakeholders well. At this point, Operator, let's open the call for questions and answers.
Michael Peterson: Thank you John overall, we are pleased with our performance in the second quarter and we're looking forward to the second half of 'twenty 'twenty four prior to moving to Q&A I would like to take a moment to see that we are very excited to welcome Christopher assignment, President and Chief Executive Officer of Human <unk> Corporation to <unk> Board of directors, Chris brings extensive commercial.
Speaker Change: Strategic experience in medical device industry, which we believe will serve us and our stakeholders well at this point operator, let's open the call up for questions and answers.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Dave Windley with Jeffries. Please go ahead.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad, if you're using a speaker phone. Please pick up your handset before pressing the keys.
Speaker Change: At any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Dave Windley: The first question comes from Dave Windley with Jefferies. Please go ahead, hi, Thanks, Good morning, and thank you for taking my questions. Michael You you commented on and we noticed that volume growth.
Dave Windley: Hi, thanks. Good morning.
Michael Petras: Thank you for taking my questions. Michael, you commented on, and we noticed that volume growth seemed to return in serogenics. It sounds like you're expecting modest amounts of that to continue through the year. Perhaps you could... elaborate on what you're seeing in the end markets and how that supports the continued volume growth. Thanks. Yes. Good morning, David.
Dave Windley: Growth seem to return and stare genex it sounds like you're you're expecting modest amounts of that to continue through the year, perhaps you could.
Speaker Change: Elaborate on what you're seeing in the end markets and how that supports the continued volume growth.
Speaker Change: Yeah. Good morning, David. Thanks for your question is yes, as you noted stair genetics had nice volume improvement in the quarters. The first quarter in several quarters that they've had positive volume and mix.
Michael Petras: Thanks for your question. Yes. As you noted, Sterigenics had nice volume improvement in the quarters, the first quarter and several quarters that they had positive volume and mix. For the first half of the year, it came in flat, which was consistent with our expectations, and we see that slightly improving in the second half of the year. And we're seeing, you know, as we mentioned in our last call, we continue to see stabilization of inventory levels with our customer base.
Speaker Change: For the first half of the year. It came in flat, which was consistent with our expectations and we see that slightly improving in the second half of the year and we're seeing you know as we had mentioned on our last call. We continue to see stabilization of inventory levels with our customer base, although it's not a straight line with all customers in all categories overall.
Michael Petras: Although it's not a straight line with all customers in all categories, overall, we continue to be encouraged, and it's in line with our expectations that we'll continue to see improvement in volumes with Sterigenics. So we're happy with their performance in the quarter. Could you add on the difference in observed trends between, say, the general hospital market versus the bio-life sciences market?
Speaker Change: We continue to be encouraged and it's in line with our expectations that will continue to see improvement in that.
Speaker Change: And the volumes would stare genic, so we're happy with their performance in the quarter.
Speaker Change: Thank you for that could you could you add on kind of the difference in.
Speaker Change: Ops or observe trends between say general hospital market versus bio bio life Sciences market.
Michael Petras: Yeah, I would generally say on the general hospital front, it continues to stabilize bioprocessing, although not a large category for us, as we've mentioned in the past. We did see sequential improvement with the exception of one big customer that is an outlier. I think if you follow some of their comments, they're seeing a little bit slower recovery in the marketplace as well, but overall, you know, we feel good about the expectations going forward in those categories.
Speaker Change: Yeah, I would generally say the general hospital continues to stabilize our bio processing, although not a large category for us as we mentioned in the past we did see sequential improvement with the exception of one one big customers an outlier that I think if you followed some of their comments are seen a little bit slower recovery in the marketplace as well but.
Speaker Change: Overall, we feel good about the the expectations going forward in those categories. Okay. And then my last question on you you called out a labor cost as an offset I was just wondering if you could give us a little more color on the on the inflation environment for an instability of your labor force. Thanks.
Michael Petras: Okay, and then my last question. You called out labor costs as an offset. I just wondered if you could give us a little more color on the inflation environment and the instability of your labor force. Thanks.
Michael Petras: Yeah, in particular, we called out upstairs at the Nelson site, and that's just, you know, merit increases, predominantly merit increases. John, anything else to add to that? No, I think it's pretty stable.
Speaker Change: Yeah, and particularly we called out stared.
Allison: Allison side and that's just you know merit increases predominantly merit increases John anything else no I think it's pretty stable I'd been doing great work to get the workforce in the right place and.
Michael Petras: I've been doing great work to get the workforce in the right place.
Michael Petras: Joe and the team have done a nice job; as you saw, Nelson had another good quarter in terms of top line growth. The mix isn't ideal yet, but we continue to see improvement there. The labor force is stabilizing, turnover is stabilizing, and actually down significantly. The promoter score has been strong, and employee survey results are good. So we're encouraged by what we're seeing on the Nelson side and hopeful that it continues. We're seeing validation volume continue to move forward, so that's great.
Allison: Yeah, John the team has done a nice job.
Joe: Joe and the team have done a nice job as you saw Nelson had another good quarter topline growth to mixes and ideal yet, but we continue to see improvement. There are the labor force is stabilizing turnover is stabilizing and actually down significantly.
Joe: Net promoter score has been strong in our employee survey results are good. So we're we're encouraged by what we're seeing on the Nelson side and hopeful that continues we're seeing validation volume continue to move forward. So that's great Alright, that's all for me. Thank you all right. Thanks, David.
Dave Windley: Great. That's all for me.
Brett Fishbin: The next question comes from Brett Fishbin with KeyBank. Please go ahead.
Joe: The next question comes from Brett Fishman with Keybanc. Please go ahead.
Brett Fishbin: Hey guys, thank you so much for taking the questions. Just wanted to follow up on Nelson Labs saying on topic here, you know, you mentioned the third consecutive quarter of growth, which was encouraging to see, so really just curious about what areas you're seeing the most upside from from a volume perspective.
Brett Fishman: Hey, guys. Thank you so much for taking the questions.
Brett Fishman: Wanted to follow up on Nelson labs, staying on topic here you know.
Brett Fishman: You mentioned, the third consecutive quarter of growth, which was encouraging to see so really just curious like what areas you're seeing the most upside from the from a volume perspective.
Michael Petras: Yeah, Brett, thanks. As we've mentioned a couple of times throughout these calls, the expert advisory services business continues to do well, with nice growth, although it's slowing down. As we mentioned, we expect that growth will slow as you go into the back half of the year on a year over year basis because they had some big growth towards the end of last year. Where we are seeing nice growth and activity is in validation, the more complex testing. Routine testing has been a little sluggish, but we're optimistic that we'll see improvements as the year progresses.
Brett Fishman: Yeah right.
Speaker Change: Thanks, as we've mentioned a couple of times dropped these calls the expert advisory services business continues to do well, having nice growth. Although it is slowing down as we had mentioned new we expect that the slow as you go into the back half of the year on a year over year basis, because they had some big growth towards the end of last year.
Speaker Change: Well, we are seeing nice growth in activity is on the validation and the more complex testing a routine testing has been a little sluggish, but we're optimistic that we'll see improvements as the year progresses there.
Michael Petras: All right, thank you. And then just one follow-up, you know, maybe taking a little bit of a step back. At least for us, it felt like QQ was broadly ahead of expectations really across the board, but guidance was generally left intact. So, with that in mind, maybe you could just touch on some of the primary reasons why you left the full year outlook unchanged and whether there's a level of conservatism that's baked into the rest of the year. Thanks very much for taking the questions. Yeah, Brett, I would just say the second quarter was better.
Speaker Change: Alright. Thank you and then just one follow up you know, maybe taking a little bit of a step back.
Speaker Change: At least for US it felt like QQ was broadly ahead of expectations really across the board, but guidance was generally left intact. So just you know with with that framing maybe if you could just touch on some of the primary reasons why you left the full year outlook unchanged and whether there's a level of conservatism that's baked into the rest of the year.
Speaker Change: Very much for taking the questions.
Michael Petras: Yeah, Brett, I would just say the second quarter was in line with our expectations, and we're still hopeful that we'll see gradual improvements in volumes in the back half of the year, which is reaffirming our guidance as well as that four to six percent top line growth.
Speaker Change: Yeah, Brian I would just say the second quarter was in line with our expectations and we're still hopeful that we will see the gradual improvements in volumes in the back half of the year, which is reaffirming our guidance as well of that 4% to 6% top line growth.
Speaker Change: Okay. Thank you.
Speaker Change: Yeah.
Patrick Donnelly: The next question comes from Patrick Donnelly with Citi. Please go ahead.
Speaker Change: The next question comes from Patrick Donnelly with Citi. Please go ahead.
John Lyons: Hey guys, thanks for taking the questions. There's maybe one for you, John, just on the margin side, it sounds like the labor environment is reasonable here in terms of backdrop volumes, showing early signs of recovery. Can you just talk about the margin ramp as we think about the second half of the different moving pieces in the businesses? It feels like things are trending in the right direction. I just want to talk through the right way to think about it; then, you know, maybe just the launching point for 25 just at a high level would be helpful.
Patrick Donnelly: Hey, guys. Thanks for taking the questions. There's maybe one for you John just on the on the margin side. It sounds like the labor environment is is reasonable here in terms of a backdrop volumes showing the early signs of recovery can you just talk about the margin ramp as we think about the second half of the different moving pieces in the businesses.
John: Feels like things are trending the right direction. There. So just wanted to talk through talked through the right way to think about it and then maybe just a launching point for 25, just at a high level would be helpful.
John Lyons: Yeah, thanks for the question. Yeah, I mean, margins continue to be really healthy. You know, in the business, in large part, the biggest thing is you heard us on the call today about the Nelson margins. Very happy with the improvement that we're seeing sequentially. But the mix right now has those, you know, a little lower than we would target. Um, as we said, we see we see that margin improving. In Nelson, we see kind of a normal evolution of margin in the other businesses with volume, and we'd expect those margins to approach 50% on a full year basis for the entire company, which would be, you know, your launching point for next year.
John: Yes. Thanks for the question, Yeah, I mean margins continue to be really healthy.
John: In the business in large part the biggest thing is you heard us on the call today is the Nelson margins.
John: Happy the improvement that we're seeing sequentially, but the mix right now has those.
John: A little lower than we would target.
John: We see we see that margin improving and Nelson, we see kind of normal evolution of margin in.
John: In the other businesses with with volume I mean, we'd expect those margins to approach, 50% on a full year basis for the entire company, which would be youre launching point for next year.
John Lyons: Okay, that's helpful. And then maybe staying just on kind of the financials, nice to see the leverage continue to come down. Can you just remind us where we are going to be at the end of this year? And then again, I guess with the capex shifting down, maybe just the magnitude, how much that comes down, and what the cash flow could look like in the next years would be helpful. Thank you, guys.
Nelson: Okay. That's helpful. And then maybe staying just on kind of financials nice to see the leverage continue to come down so can you.
Speaker Change: Just remind us where we're gonna be at the end of this year and then again I guess with the Capex shifting down maybe just the magnitude how much of that comes down and what the cash flow could look like in the out years would be helpful. Thank you guys.
John Lyons: Yeah, thanks Patrick. I mean, you know, I guess I would say first, overall, on the leverage, we continue to expect modest improvement versus the prior year as we finish out this year. And, you know, as we sit here on the CapEx and on the balance sheet and leverage overall, you know, we're very focused on driving free cash flow performance. You know, we've got a pretty disciplined process. Michael and I operate here, and so, you know, we're pleased that we're able to push the CapEx number to the lower end of the range.
Speaker Change: Yeah, Thanks, Patrick I mean I.
Speaker Change: Yes, I would say our first overall on the on the leverage.
Speaker Change: We continue to expect modest improvement versus prior year as we as we finish out this year and as we sit here on the Capex and overall on the balance sheet and leverage overall you know, we're very focused on driving free cash flow performance. Yeah, We've got a pretty disciplined process, Mike when I operate here.
Speaker Change: So we're pleased that we're able to push the capex number to the lower end of the range. We continue to expect positive free cash flow for the year and we expect that to accelerate as we come into the next couple of years as we as we drive Capex complete some of these programs and drive Capex lower.
John Lyons: We continue to expect positive free cash flow for the year, and we expect that to accelerate as we come into the next couple of years as we drive CapEx, complete some of these programs, and drive CapEx lower.
Michael Petras: Remember, Patrick, this is Michael. Remember that the big outliers are really driving the outsized CapEx right now because we're in an investment cycle on the stereogenics for some capacity expansions. We got the NESHAP, EO, General Facility Enhancements, and then we have this Nordian CapEx for cobalt development, which, again, we haven't done something like that since around 2002 or 2003. So we're just at an elevated level, as we've mentioned in the past, 24 and 23.
Patrick Donnelly: Remember Patrick I, just if I can remember the big outliers are really driving the outsized capex right. Now is we're in an investment cycle on the stair genetics for some capacity expansions, we got the niche App Oh general fulfilling happens and then we have this nordion capex.
Patrick Donnelly: For cobalt development, which again, we havent done something like that since around 2002 or three and so we're just had an elevated level as we've mentioned in the past 'twenty four and 'twenty three we see that stepping down in 'twenty, five and 26 as John just referenced.
Speaker Change: That's helpful. Thank you guys.
Patrick Donnelly: It's helpful. Thank you, guys.
Casey Woodring: The next question comes from Casey Woodring with J.P. Morgan. Please go ahead. Okay.
Speaker Change: Our next question comes from Casey Woodring with J P. Morgan. Please go ahead.
Casey Woodring: Great. Thank you guys for taking my questions.
Casey Woodring: Great. Thank you guys for taking my questions I guess, maybe the first can you just walk through where the outperformance in the quarter and what looks to be a bit of a pull forward. There I think you had previously expected 65% of segment revenue in the back half about 60%.
Michael Petras: Yeah, I guess maybe the first question is, can you just walk through Nordeon's performance in the quarter and what looks to be a bit of a pull forward there? I think you had previously expected 65% of segment revenue in the back half; now it's 60%. And then just curious about visibility for that second half growth rate and maybe, you know, if you could give us a sense of the split between 3Q and 4Q for Nordeon.
Speaker Change: And then just curious on your visibility for that second half growth rate, maybe if you could give us a sense of the split between <unk> and <unk> from Nordea.
Michael Petras: Yeah, I would just say this, Michael. I would say they came in relatively as expected. We do expect just slightly greater than 60% of the total year revenue to come in the second half.
Speaker Change: Yeah I would just say this is Michael I would say they came in relatively as expected we do expect.
Speaker Change: A slightly greater than 60% of the total year revenue to come in the second half Warner pointed we didn't call out all of the Russia cobalt we have in house that we need for 2024, so we feel pretty good about the visibility as well on that on that side as well.
Michael Petras: One of our points is that we didn't call out all the Russian cobalt we have in house that we need for 2024. So we feel pretty good about the visibility as well. And that's on that site as well. When we look at it, Casey, but overall, we feel good about where we sit with the Nordium piece. And you, Michael, may
Speaker Change: When we look at it Casey, but overall, we feel good about where we sit with the northern piece.
Michael Petras: And you, Michael, may have addressed it already. I didn't catch the second part of your question.
Casey Woodring: You may have addressed it I didn't catch your second part of your question.
Michael Petras: Just the split between 3Q and 4Q in that back half, you know, 60% of the full year in Nordium. Yeah, in Q3, we referenced that we expect upper single-digit revenue growth in Q3 and, you know, the balance being Q4. Got it. Okay.
Casey Woodring: Just the split between <unk> and <unk> in that back half.
Speaker Change: 60% of full year and Nordion yeah, Yeah in Q3 weeks, we referenced that we expect upper single digits revenue growth in Q3, and the balance would be in Q4.
Michael Petras: And then, you know, just on Sterogenics, curious about the de-stocking timing. You know, do you expect that by the end of the year, you'll fully work through the noise there and enter kind of a normalized market environment in 25? Or just kind of curious about how you're thinking about the forward outlook there.
Speaker Change: Got it Okay, and then just I'm, sorry, Genex curious on the Destocking timing.
Speaker Change: Do you expect that by the end of the year, you'll fully worked through the noise, there and that kind of a normalized market environment twenty-five or I'm, just kind of curious on how youre thinking about the forward outlook there.
Michael Petras: Yeah, we would be hopeful that it's stabilized. We continue to see the inventory level stabilizing, and volumes in the end markets continue to perform. We think we'll be pretty well situated going into the 25, Casey.
Speaker Change: We would be hopeful that it stabilized we continue to see the inventory levels stabilize and unit volumes in the end markets continue to perform we think would be pretty well situated going into 'twenty five KC.
Michael Petras: Okay, and maybe just last one quickly for me, and then I'll hop back in the queue. Just now that you've had a little bit more time to digest the new litigation in California, I was just curious if you have any sort of sense of what a timeline to resolution will look like there. Thank you.
Speaker Change: Okay, and maybe just last one quickly for me and then I'll hop back in the queue. Just now that you've had a little bit more time to digest, the new litigation in California. Just curious you got any sort of sense of what the timeline to read that we shouldn't look like there. Thank you.
Michael Petras: Yeah, Casey, no, I would just say there's nothing new really on the litigation front. I would only just tell you in California the number of cases is consistent with where it was last time we spoke. We're working through case management activities, but we don't see anything in the near term as far as trial activity in California is concerned. OK, thank you.
Speaker Change: Yeah, Casey no I wouldn't there's nothing new really on the litigation front I won't I'll just tell you in California. The number of case count is consistent with where it was last time we spoke.
Speaker Change: Working through case management activities, but we don't see anything in the near term as far out as far as trial activity in California.
Casey Woodring: Okay. Thank you.
Luke Sergott: The next question comes from Luke Sergott with Barclays, please go ahead.
Speaker Change: The next question comes from Luke circa out with.
Speaker Change: Barclays. Please go ahead.
Luke Sergott: This is Salem speaking on behalf of Luke. Thanks for taking our questions. I know you just touched on the LA litigation. Any updates on Atlanta on relevant trial dates?
Speaker Change: This is Sam on for Louise Thanks for taking our questions. I know you just touched on the L. A litigation any updates on in Atlanta.
Sam: On on relevant trial dates.
Michael Petras: On the litigation front for Georgia, I would just say there's nothing maturely changing there. We expect phase one activity; remember, it's going to go to two stages of causation, phase one and phase two. We don't expect either of those phases to start until, we don't expect any of those to start before September of 2024, with rulings on that, you know, early into 2025. We've had a little bit of an increase in the number of case counts there in Illinois, but there's nothing materially significant changes in litigation since our last update.
Speaker Change:
Speaker Change: The litigation front for Georgia, I would just say, there's nothing materially changing there we expect to stay.
Luke Sergott: Got you. Thanks for that.
Speaker Change: <unk> one activity you remember this is going to go to two stages of causation in phase one and phase two are we don't expect either of those spaces to start until Oh, we don't expect any of those to start before September of 2025 24 with a rulings on that you know early into 2025, we've had a little bit of increase the number of case comes in.
Speaker Change: They're in Illinois, but theres nothing materially significant changes on litigation since our last update.
Michael Petras: And it might be early to be asking about this, but you know, there are some increasing fears of a hard landing or recession. Could you just remind us how the various businesses kind of typically respond in that type of environment? And, you know, you've previously mentioned headwinds and Nelson coming from macro pressures on some SMID customers, for example. So thanks. Yeah.
Speaker Change: Gotcha.
Speaker Change: Thanks for that and it might be early to be asking about this but there are some increasing fears of a hard landing or a recession.
Speaker Change: Could you just remind us how the various businesses kind of typically respond in that type of environment and you've previously mentioned headwinds in and Nelson coming from macro pressures on some Smith company.
Speaker Change: Smid customers for example.
Thanks.
Speaker Change: Yeah.
Speaker Change: Thanks for the question I would just say that these businesses have performed every single year as we've talked about since 2005, we've had revenue growth every single year, a strong margins strong cash flow generation that doesn't mean, we won't get impacted by broader macro, but we are really confident in our ability to weather through and the stability of the business model is really.
Michael Petras: year, as we've talked about since 2005. We've had revenue growth every single year, you know, strong margins, strong cash flow generation. That doesn't mean we won't get impacted by broader macro, but we are really confident in our ability to weather through and the stability of the business model is really a unique business, especially with Sotera Health Care. So and remember, we did see on the Nelson side, we had a surge in demand with COVID, and coming down, we had the great resignation activities that kind of created some unstable environment there.
Speaker Change: Our unique business, especially throughout health care, So and remember we did see in the Nelson side. We had we had a surge up in demand with Covid, then coming down we integrate resignation activities that kind of creates an unstable environment there, but overall that business is a strong performer.
Speaker Change: We continue to expect that going forward, but when you look at the Terra health in total.
Michael Petras: But overall, that business is a strong performer, and we will continue to expect that going forward. But we look at Sotera Health as a whole. This is a great business that will weather through many storms and continue to deliver growth and strong cash flow.
Speaker Change: It's a great business that have weathered through many storms and continue to deliver growth and strong cash flow.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Luke Sergott: okay
Luke: Okay was there a follow up Luke.
Jason Bednar: No, no follow-up. Thank you. Thank you. The next question comes from Jason Bednar with Piper Sandler. Please go ahead.
Luke: Yeah No no. Thank you. Thank you. The next question comes from Jason Bednar with Piper Sandler. Please go ahead.
Luke: Yeah.
Jason Bednar: Good morning, everyone. I wanted to start on the pricing side. I think you previously referenced last quarter an expectation of being at the lower end of your outlook, closer to maybe something like three and a half percent. I'm sorry if I missed it, but is that still the assumption today?
Jason Bednar: Hey, good morning, everyone.
Jason Bednar: Wanted to start on the pricing side. Thank.
Speaker Change: Thank you previously referenced last quarter and expectation would be at the lower end of your outlook closer to something like three 5%.
Jason Bednar: Okay.
Speaker Change: Sorry, if I missed it is that still the assumption today and then would also just be.
Michael Petras: And then it would also just be good to get your bigger picture perspective on the pricing outlook for your businesses. Inflationary pressures have receded meaningfully across the market. Maybe talk about your ability to continue to push through pricing while above inflation. We've seen a lot of players have their pricing You kind of move back to where we were pre-pandemic, but you're obviously still sitting on your historical reign, which is still good to see.
Speaker Change: Good to get your bigger picture perspective on the pricing outlook for your businesses inflationary pressures have receded meaningfully across the market maybe talk about your ability to continue to push through pricing well above inflation and we've seen a lot of players.
Speaker Change: You had their pricing.
Speaker Change: Yep.
Speaker Change: A move back to where we were pre pandemic, but your stock is still sit in your historical range, which is still good to see.
Michael Petras: Yeah, this is Michael. I would just say that our call out in the past was around the Nordeon business. You know, across the company, we get 3.5 to 5 percent of the price. Nelson's on the low end of that. Nordeon's typically on the high end of that. I think what we called out earlier in the year was the timing, because last year, Nordeon outperformed. We expected to be on the lower end of the range this year for Nordeon. Overall, in the quarter, we were up 4 percent in the total company. We expect the business to continue to form into the traditional 3.5 to 5 percent for the remainder of the year.
Speaker Change: Yeah.
Speaker Change: This is Michael I would just say that are call. It in the past I believe was around the nordion business across the company, we get three and half to 5% price.
Nelson: Nelson's on the low end of that northern <unk> typically in the high end of that I think what we called out earlier in the year is the timing because last year northern outperformed we expect it to be in the lower end of the range. This year for an Oregon.
Nelson: Overall in the quarter were up 4% price and the total company, we expect the business to continue to form to the traditional 3.5% to 5% for the remainder of the year.
Nelson: Yeah.
Jason Bednar: Okay, that's helpful. Thanks. And then just wanted to follow up on Sterigenics and the margin comps there. They get a little bit tougher in the back half of the year.
Speaker Change: Okay. That's helpful. Thanks, and then.
Speaker Change: Wanted to follow up on and <unk> and the margin comps there they'd get a little bit tougher here in the back half of the year, you're committed to seeing some improvement and Nelson and in the second half, which I know you talked about it.
John Lyons: You committed to seeing some improvement in Nelson in the second half, which I know you talked about. You have some projects that are coming up that will be good, but can you comment more directly on Sterigenics? How much of that margin performance in that segment do you see being dependent upon top line growth improving from what we saw here in the second quarter?
Speaker Change: Getting projects that are coming up that that'll be good but can you comment more directly on <unk>, how much of that margin performance in that segment do you see being dependent upon the top line growth.
Speaker Change: Proving from what we saw here in the second quarter.
John Lyons: Yeah, thanks for the question. As I said earlier in the call, the margins continue to be really healthy in stereogenics. Traditionally, we've seen the back half, you know, that margin has some good leverage to it. So we've, you know, we've seen the back half with stronger revenues and some stronger margins. You know, assuming we see some stronger revenues, we could see a little bit stronger margin. But again, the margins today are really, really healthy. Yeah, and I would just say the
Speaker Change: Yes, thanks for the question.
Speaker Change: I think I said earlier on the call the margins continue to be really healthy and stare at Genex.
Speaker Change: Traditionally we've seen the back half.
Speaker Change: That margin has some good leverage to it so.
Speaker Change: We've seen the back half with stronger revenues and some stronger margins.
Speaker Change: Assuming we see some stronger revenues, we could see a little bit stronger margin.
Speaker Change: Again, the margins today are really really healthy yeah, and I would just say the one point as a backdrop for the year to date numbers just keep in mind. Our first quarter is typically the lowest quarter, there where you have.
Jason Bednar: Yeah, and I would just say the one point, the backdrop for the year-to-date numbers. Just keep in mind our first quarter is typically the lowest quarter there, where you have less margin leverage coming through, so that's typically what we've seen in this business. But overall, we look at it, we call out Nelson Labs, but if you look at the other two businesses, we have very strong, healthy margins and a great position in the market.
Speaker Change: Less margin leverage coming through so that's typically what we've seen in this business, but overall you know.
Speaker Change: We look at it we called out Nelson laughs, but when you look at the other two businesses, we have very strong healthy margins in a great position in the marketplace.
Jason Bednar: Thanks. Just to clarify, when you say stronger margins in the second half, is that sequentially versus the first half or stronger year over year? First half. Okay, perfect. Thank you.
Speaker Change: Thanks, and just to clarify when you say stronger margins in the second half is that sequentially versus the first half were stronger year over year.
Speaker Change: First half.
Okay perfect. Thank you.
Speaker Change: Great. Thank you.
Michael Polark: The next question comes from Michael Polark with Wolf Research. Please go ahead.
Speaker Change: The next question comes from Michael Polar <unk> with Wolfe Research. Please go ahead.
Michael Polark: Hi, good morning. Thank you for taking the questions. First one on sterigenics. I had in my notes that one of your capacity expansions, it was a brownfield, I believe, was going to start filling in the second quarter. I'm curious, did that start, did that happen as expected? And to what extent is that capacity expansion driving a change in trend? Volume and mix and sterigenics going from, you know, the last four quarters down one or 2%; now we're up one or 2%, I guess reframed, like new store versus same store kind of volume trends and sterigenics. How do you see them in light of, you know, your commitment to expanding capacity? Yeah. It's my thing.
Michael Polar: Hi, Good morning, Thank you for taking the questions first one on steroid Genex I had in my notes that one of your capacity expansions of the brownfield I believe it was going to start filling in the second quarter.
Speaker Change: I'm curious did that start.
Speaker Change: Did that happen as expected and to what extent.
Speaker Change: Is that capacity expansion driving kind of the change in trend on.
Speaker Change: Volume and mix and stir janet's going from you know the last four quarters down one or 2% and our app.
Speaker Change: One or 2% I guess reframed like new store.
Mike: Versus same store kind of volume trends in <unk>, how do you see them in light of your younger commitment to expanding capacity yeah, Mike. Thanks for the question so that expansion.
Michael Petras: Yeah, Mike, thanks for the question. So that expansion has not impacted the second quarter. We are actually slightly delayed on that. We expect that to come up by the end of the year, a normal construction type delay. So we did not have any good guys from that in the second quarter.
Speaker Change: He has not impacted the quarters, where we actually are slightly delayed on that we expect that to come up by the end of the year a normal construction type delays. So we did not have any good guide from that in the second quarter.
Michael Petras: Helpful. Thank you, Michael.
Speaker Change: Helpful. Thank you Michael and then the follow up is on the routine.
Michael Polark: And then the follow-up is on the routine testing volumes. And Nelson, sounds like that's still weak. To what extent does the recovery in sterigenics foreshadow a recovery in the routine testing volumes at Nelson, if at all? We would hope that those two are linked in a strong correlation as the year progresses.
Speaker Change: Testing volumes and Nelson it sounds like that's still weak to what extent is the recovery in stereo Genex foreshadow a recovery in the routine testing volume as Nelson said, we would.
Speaker Change: We would hope that those two are linked in a strong correlation as the year progresses.
Speaker Change: My question.
Speaker Change: Thank you.
Michael Polark: OK, thank you.
Speaker Change: Okay. Thank you. This concludes our question and answer session I would like to turn the conference back over to Michael Pietrus for any closing remarks.
Michael Petras: This concludes our question and answer session. I would like to turn the conference back over to Michael Petras for any closing remarks.
Michael Petras: Okay, good morning, and thank you everybody for your time today. As you can see, we had a solid second quarter, as expected.
Michael Pietrus: Okay. Good morning, and thank you everybody for your time today as you could see we had a solid second quarter as expected we're confident in our outlook going forward and the company is very well positioned so I want to thank you for all for your continued support and your questions and attention. This morning and have a great day. Thank you bye bye.
Michael Petras: We're confident in our outlook going forward, and the company's very well positioned. So I want to thank you all for your continued support and your questions and attention this morning, and have a great day. Thank you. Bye-bye.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: ?? ?? ??
Michael Pietrus: Yeah.
Michael Pietrus: [music].