Q4 2024 Sotera Health Co Earnings Call
[music].
Yes.
Speaker Change: Good morning, and welcome to the Superior Health fourth quarter and full year 2024 conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question you May press Star then one on your Touchtone phone and to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to Vice President of Investor Relations and Treasurer, Mr. Jason Peterson, Jason. Please go ahead.
Speaker Change: Good morning, and thank you welcome to <unk> fourth quarter and full year 'twenty 'twenty four earnings call. You can find today's press release and accompanying supplemental slides on the investors section of our website, that's a telehealth dot com.
Speaker Change: The webcast is being recorded and a replay will be available in the investors section also showed her health website on the call with me today are chairman and Chief Executive Officer, and Michael features and Chief Financial Officer, John lines. During the calls some of her comments may be considered forward looking statements. The matters addressed in these statements are subject to risks and uncertainties that could cause.
Speaker Change: Actual results to differ materially from those projected or implied.
Speaker Change: Please refer to <unk> 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.
Speaker Change: Please note that during the discussion today the company will present, both GAAP and non-GAAP financial measures, including adjusted EBITDA Adjusted EBITDA margin segment income margin tax rate applicable to net income.
Speaker Change: Adjusted net income adjusted EPS and that leverage ratio and free cash flow as well as constant currency comparisons.
Speaker Change: A reconciliation of GAAP to non-GAAP measures for all relevant periods may be found in the schedules attached to the Companys press release and in the supplemental slides for this presentation.
Speaker Change: The operator will be assisting with the Q&A portion of the call. Please limit yourself to one question and one follow up so that everyone has 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 I'll now turn the call over to <unk>, Chairman and CEO Michael Peters.
Michael Peters: Good morning, and welcome today's call. This morning, we reported both top and bottom line growth for the full year 2024, while delivering $1 $1 billion of revenue and approximately 50% five Oaks adjusted EBITA margins 'twenty 'twenty four marks the 19th consecutive year of annual revenue growth further.
Michael Peters: Evidence of the resiliency of our business model and the critical role we play in health care.
Michael Peters: In addition to the growth we delivered we continued to make progress in 2024 on our strategic priorities.
Michael Peters: Throughout the year, our customer satisfaction rates continued to be over 80 per share, which reflects our focus on serving our customers with excellence. We also strengthened our balance sheet by successfully refinancing our capital structure extending maturities to 'twenty 31, we finished the year with strong liquidity.
Michael Peters: Sure James business, we completed the capacity expansion and continue to make significant progress on our U S E O facility enhancements.
Michael Peters: Nelson Labs achieved sequential margin improvement as the year progressed embedded labs expert advisory services, both realized double digit revenue growth versus 2023, the performance and embedded labs demonstrates the cross business unit synergies, we discussed at our Investor Day. This past November.
Michael Peters: Nordea and grew revenue to upper single digits for the year, well continue to make progress on our cobalt development projects.
Michael Peters: The first installation of cobalt was placed into a Darlington reactor with unexpected cobalt 60 harvest in 2028.
Michael Peters: I want to highlight a few items from our fourth quarter and full year 'twenty 'twenty four financial results I'll begin with the fourth quarter as.
Michael Peters: As expected total company revenue declined six 5% and adjusted EBITDA declined eight 3% compared to the fourth quarter 2023.
Michael Peters: Constant currency basis revenue declined five 2% and adjusted EBITDA declined six 7%.
Michael Peters: As we communicated during our last earnings call Northern revenue in the fourth quarter was expected to be down significantly versus the prior years, 50% FIFO.
Michael Peters: <unk> full year 2023 revenue occurred in the fourth quarter as a reminder, nordion revenue can be lumpy from quarter to quarter due the timing of cobalt 60 harvest schedules over the long term northern revenue is very consistent.
Michael Peters: Transitioning to a full year 2024 as compared to 2023 total company revenues increased four 9% or five 4% on a constant currency basis and adjusted EBITDA grew by three 9%.
Michael Peters: Or four 6% on a constant currency basis.
Michael Peters: John will take us through the business results in more details later.
Michael Peters: I also wanted to take a moment to highlight progress made on our corporate responsibility initiatives. We welcome President she or he May next Corporation, Chris Simon is that our board in August of last year, Chris brings extensive experience in the medical device industry, which we believe will serve us and our stakeholders well.
Michael Peters: In January we named dense patrol lead independent director Vince has been on our board since 2020 and brings a wealth of experience and deep understanding so Terry helped strategic vision and operations.
Michael Peters: Additionally, we published our third annual corporate responsibility report.
Michael Peters: Overall 2024 was a good year for Setara health and we continue to stay focused on serving our customers with excellence and we look forward to delivering growth once again in 2025.
Michael Peters: Yeah.
Michael Peters: Earlier today, we provided our initial 2025 outlook for the full year 2025, we expect to deliver another year of top and bottom line growth with total company revenue growth to be in the range of 4% to 6% on a constant currency basis, when compared to 2024 with the midpoint being within our long term five to seven.
Michael Peters: Percent guidance range adjusted EBITDA growth is expected to be in the range of four 5% to six 5% on a constant currency basis now.
Michael Peters: Now John will take us through our fourth quarter and full year 2020 for financials, and our 2025 outlook in more depth.
Michael Peters: Thank you Michael I will first cover fourth quarter and full year 2024 results on a consolidated basis and then provide some details on each of the business segments, along with updates on capital deployment and leverage I will then conclude with additional details on the 2025 outlook.
Michael Peters: Consolidated total company basis fourth quarter revenues declined by six 5% to $290 million or five 2% on a constant currency basis versus the same period in the prior year as.
Michael Peters: As Michael mentioned previously this was driven by the year over year comparison in Oregon, where we had 50% of 2023 revenue in the fourth quarter due the timing of reactor harvest schedule.
Michael Peters: Fourth quarter, adjusted EBITDA declined by eight 3% to $153 million or six 7% on a constant currency basis compared to Q4 2023.
Michael Peters: Adjusted EBITDA margins were 52, 7% in the quarter.
Michael Peters: Our reported interest expense for the fourth quarter was $41 million down from $43 million for the same period last year.
Michael Peters: Reported net income for fourth quarter, 2024 was $12 million or four cents per diluted share. Adjusted EPS was 21 cents for the quarter a decrease of two cents from Q4 2023.
Michael Peters: Now, let's take a closer look at our segment performance for the fourth quarter.
Michael Peters: In the fourth quarter <unk> delivered four 2% revenue growth to $179 million or five 3% on a constant currency basis versus Q4 2023.
Michael Peters: Revenue growth drivers for the quarter included favorable pricing of four 2% as well as favorable volume and mix of 1%, partially offset by changes in foreign currency exchange rates of approximately 1%.
Michael Peters: Compared to the prior year quarter segment income grew five 1% to $100 million or six 4% on a constant currency basis.
Michael Peters: Drivers for growth were favorable pricing as well as volume and mix, partially offset by inflation and changes in foreign currency exchange rates.
Michael Peters: While segment margins increased by approximately 50 basis points.
Michael Peters: As expected Northern's fourth quarter revenue decreased by 29% to 50, not $57 million driven by unfavorable volume mix of 31% and changes in foreign currency exchange rates of two 9% parse.
Michael Peters: Partially offset by Aero pricing of five 3% compared to the same quarter in the prior year.
Michael Peters: <unk> segment income decreased by 34% $35 million in segment income margins contracted by approximately 470 basis points to 62%, primarily driven by unfavorable volume mix as well as changes in foreign currency exchange rates.
Michael Peters: In the fourth quarter Nelson Labs revenue declined seven 3% to $54 million or 7% on a constant currency basis compared to the same quarter last year the.
Michael Peters: The decline was driven by unfavorable volume mix of nine 8%, primarily due to unexpected change of expert advisory services revenue as we communicated during our Q3 earnings call.
Michael Peters: In addition, we consolidated a lab, which supported our margin improvement for the quarter.
Michael Peters: Volume and mix was partially offset by favorable pricing of two 9%.
Michael Peters: Segment income decreased three 3% to $18 million or two 5% on a constant currency basis, driven by unfavorable volume and mix and higher employee compensation costs, partially offset by favorable pricing and labor productivity.
Michael Peters: Segment income margin improved year over year by approximately 140 basis points to 33%.
Michael Peters: Due to the lower expert advisory services revenue favorable pricing and improved labor productivity.
Michael Peters: Now, let's turn to the full year results on a consolidated basis, we delivered $1 $1 billion in revenue up four 9% or five 4% on a constant currency basis versus 2023.
Michael Peters: We grew adjusted EBITDA, three 9% to $548 6 million or four 6% on a constant currency basis, resulting in an adjusted EBITDA margins of approximately 50%.
Michael Peters: Reported interest expense for the full year was $165 million reported net income for 2024 was $44 million or <unk> 16 per diluted share adjusted.
Michael Peters: Adjusted EPS for the year was 70 cents per weighted average diluted share a decrease of two <unk> versus 2023, primarily driven by higher interest expense.
Michael Peters: I will now turn to the balance sheet cash generation and capital deployment.
Michael Peters: The company continues to be in a strong liquidity position that has no borrowings under the revolving line of credit.
Michael Peters: Our capital expenditures for 2024 finished at $179 million as Michael mentioned <unk> completed one capacity expansion during the year and we continue to make significant progress on the EOG silly enhancements and Nordion cobalt development projects.
Michael Peters: We generated nearly $225 million of operating cash flow in 2024, and free cash flow generation was positive for the year.
Michael Peters: Lastly, our net leverage ratio improved slightly versus 2023 finished the year at three seven times.
Michael Peters: Now I would like to discuss our 2025 outlook for the full year, we expect total revenues to grow in the range of 4% to 6% on a constant currency basis with the midpoint being within the three year target that we provided at our November 2020 for Investor Day.
Michael Peters: We expect to generate operating leverage resulting in margin improvement and adjusted EBITDA growth in the range of four 5% to six 5% on a constant currency basis.
Michael Peters: Based on January average currency rates, we expect foreign exchange to be a headwind of approximately $2 two 5% on revenue and approximately two 5% on adjusted EBITDA with the first three quarters of the year, having the most pronounced impact.
Michael Peters: We continue to monitor the potential impact of tariffs tariffs, but at this time, we have not corporate any impact into our guidance.
Michael Peters: We expect total company price to be around the midpoint of our long term stated range of three 4%.
Michael Peters: From a revenue cadence perspective, Q1, typically is the lightest quarter of the year for the company and we expect that to be the case again in 2025.
Michael Peters: <unk> Q1, 2025 constant currency revenue growth is expected to be in the low to mid single digits versus Q1 2024.
Michael Peters: And we expect gradual improvement throughout the remainder of the year.
Michael Peters: The proportion of <unk> revenues for the first and second half of 2025 will be similar to what they were in 2024 with constant currency full year revenue growth expected to be in the mid single digits versus 2024.
Michael Peters: We expect Q1 2025 revenue to be up slightly versus Q1 2024.
Michael Peters: Over the past few years, we've provided visibility to the revenue risk associated with Russia, cobalt supply as of today and similar to prior years or approximate risk of between zero and 3% of total company 2025 revenue.
Michael Peters: And Nelson, we expect revenue to be back half weighted due to the difficult comparisons related to expert advisory services.
Michael Peters: We haven't discussed.
Michael Peters: From a Q1 perspective, we expect Nelson labs revenue to be down low double digits and margins to be better versus Q1, 2024 with sequential improvement over the course of the year.
Michael Peters: For 2024, we expect interest expense between $155 million and $165 million based on the current forward rate curve.
Michael Peters: We are projecting an effective tax rate applicable to adjusted net income in the range of 33% to 35%.
Michael Peters: Adjusted EPS is expected to be in the range of 70 to 76.
Michael Peters: We expect our fully diluted share count in the range of $286 million to 287 million shares on a weighted average basis.
Michael Peters: From a capital deployment standpoint, we will continue to prioritize organic growth and deleveraging as well as opportunistic M&A.
Michael Peters: We expect capital expenditures in a range of $190 million to $210 million in 2025 as.
Michael Peters: As we have previously talked about we have been in a multiyear period of elevated Capex investment. The peak of that spend is now behind us and we continue to expect capital expenditures to decrease over the next few years to approximately $110 million in 2027. This decrease in Capex, along with revenue growth will help us achieve our goal of generating between 500 to 600 million.
Michael Peters: A free cash flow over the next three years.
Michael Peters: Our guidance does not assume any M&A finally, we anticipate slight improvement in net leverage in 2025.
Michael Peters: I will now turn the call back over to Michael for closing remarks. Thank.
Michael Peters: Thank you John as we look forward to 2025, we will continue to focus on our priorities as we highlighted during our Investor day. This past November our prayers are excellence in serving our customers with and then solutions weighting in growth markets drive operational excellence to enhance free cash flow and continue to be disciplined with respect to our capital deployment.
Speaker Change: Shifts at this point operator, let's open the call up for Q&A.
Michael Peters: Thank you we will now begin the question and answer session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Michael Peters: Using a speakerphone please pick up your handset before pressing the keys.
Michael Peters: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Michael Peters: And at this time, we'll pause momentarily to assemble our roster.
Michael Peters: Yeah.
Michael Peters: Okay.
Speaker Change: And the first question will come from Patrick Donnelly with Citi. Please go ahead.
Patrick Donnelly: Hey, guys. Thanks for taking the questions Michael.
Speaker Change: Michael maybe one just on the overall volume backdrop, both that you saw in the quarter.
Speaker Change: And then also as you think about the guidance for the year you know helpful to hear some of that <unk> commentary, particularly on <unk> and Nelson, but just how are you mapping out the volume recovery, obviously things like Destocking. How are you thinking about that piece as you work your way through 'twenty, five and what's the underlying assumptions there.
Speaker Change: Yes, good morning, Patrick I would say overall when you reflect on 2020 for the year played out pretty much like we thought it would be with gradual improvement throughout the year as we stated on the last earnings call. We would've liked to seen a little bit more volume growth in stereo Nelson, but as we look forward into 2025, we continue to see gradual improvement with <unk>.
Speaker Change: Not hearing a lot of noise around Destocking, we've got a couple of customers that had some challenges in the fourth quarter that made hanging over little bit in the <unk> going into the first quarter, but by and large that is the vast majority I'm sorry, the vast minority we're not hearing a lot of comments around that and we think we'll see continued volume improvement as the year progresses.
Speaker Change: Like we did in 2024.
Speaker Change: Okay. That's helpful.
Patrick Donnelly: And then John maybe just on the margins as we think about the progression through the year can you just talk about the moving pieces, you're always curious to hear about the pricing.
Patrick Donnelly: Assumptions in the guide and just how we should think about margins as we work our way through 25 I appreciate it guys.
Patrick Donnelly: Yeah, No. We're excited for this year, we definitely see some progress in margins as we look forward on a constant currency basis to some solid improvement in margins as you get from the guide of topline.
Patrick Donnelly: With EBITDA growing a little bit further than the top line.
Patrick Donnelly: As we look I'd just remind you that Q1 is typically the lowest quarter I think that's both on the revenue side and on the on the margin perspective, as well and that's probably the biggest piece I'd point you to at this point Patrick the only other thing I'd call out Patrick is just the performance you saw it Nelson where they continue to improve their margins and we would expect sequential.
Patrick Donnelly: Movement as the year progresses.
Patrick Donnelly: That side of the business as well Joe and the team are executing along the lines we communicated previously.
Patrick Donnelly: Understood. Thank you guys.
Speaker Change: The next question will come from Sean Dodge with RBC capital markets. Please go ahead.
Sean Dodge: Yeah. Thanks, good morning.
Speaker Change: Maybe Michael just kind of following on what you just talked about there Nelson and the margin improvement it sounds like.
Speaker Change: John mentioned some work you all did.
Speaker Change: Recently that should create some kind of durable longer term benefits and Nelson margins, maybe could you just give us a little bit more detail on what you've done there and in what what you kind of.
Speaker Change: The work you've done there to kind of just drive the confidence and the sequential improvement in.
Speaker Change: Margins do you expect over the year.
Speaker Change: Okay, Sean I would just recall back if you think back to early last year. The latter part of 'twenty three one of the challenges we had.
Speaker Change: We didn't really manage the labor productivity as well as we would have liked because we are expecting volume to recover faster than they did and Joe and the team reacted to that in 'twenty. Four you saw the improvements in the margin. So I think that sets us up in a pretty good spot for 2025. So I think the biggest thing is the labor productivity and just making sure we have alignment.
Speaker Change: With the labor needs are relative to the order patterns and our service has been outstanding there.
Speaker Change: The highest numbers of wheat.
Speaker Change: Hold January even just a record number of performance on service that ended last year and a very strong place. So I'd say that's the biggest thing John offer also referenced that we had a smaller lab that we did some consolidation around in and brought some of that volume back in into the core business operations. So those would be the biggest thing, but I'd say the biggest impact is just.
Speaker Change: Balancing the labor productivity, what the order patterns.
Speaker Change: Okay, and then within Nelson the three divisions, there I think before you've talked about having expert advisory routine and validation I think before you mentioned expert advisor, who is kind of low double digits as a proportion of revenue.
Speaker Change: What's the rough mix of the other two and is there a big margin differential between all of those so as mix changes amongst the kind of the different Nelson.
Speaker Change: Divisions or functions.
Speaker Change: Having a big impact on overall segment margins too.
Speaker Change: I would not see so much it's 50 50 between routine and validation I think of it in those terms roughly it can vary from quarter to quarter, depending on where the validation goes.
Speaker Change: And trends, but you clearly the expert advisory is is the lowest margin business of that of those three categories. If you look at it and like you mentioned, it's a net.
Speaker Change: Low double digits as a percent of total the key is really driving that core lab volume.
Speaker Change: Because that is more favorable mix and expert advisory services, but the key part with expert advisory services, our ability to generate leads that help go cross business use for <unk> and Nelson, it's another big value opportunity, but you know as that volume is a little lumpier.
Speaker Change: Expert advisory services side.
Speaker Change: It's why we wanted to call that I'll, let you know as we did in the fourth quarter as well as what we look forward on the first quarter.
Speaker Change: Okay. That's great. Thanks again.
Speaker Change: Thanks, Sean John.
Speaker Change: The next question will come from Luke <unk> with Barclays. Please go ahead.
Speaker Change: Great. Thanks, I'm, just kind of want to follow up again on what channel is getting into there with the Nelson lab and the lab closure I mean I thought that.
Speaker Change: Fear here is basically as volumes starting to come back in like the demands coming on like are you guys going to have.
You know enough enough capacity within Nelson.
Speaker Change: To meet that demand and get back to normal.
Speaker Change: Youre closing it because thats kind of what the current demand environment is like Theres something.
Speaker Change: Structurally or more long term within the Nelson demand in those volumes that are just causing you to rightsize that.
Speaker Change: And your capacity to I could go for where the lower demand level.
Michael Peters: So look this is Michael we're in a good filing capacity in that in that business. We had we had a lab that was generated revenue was not a lot of EBITDA, we were able to consolidate that and gets more operating leverage in the business. That's the biggest thing. So we're good on capacity wise.
Speaker Change: Okay.
Speaker Change: And then I guess, just a clean up here as you guys think about the for the full year in the guide you guys break out.
Speaker Change: Dumped in here a little bit late but did you break out anything on by segment and how Youre looking at it.
Speaker Change: Yes.
Speaker Change: I would just tell you the first quarter, we gave some visibility in the first quarter right on a constant currency revenue basis, we expect low to mid single digits for <unk>.
Speaker Change: And we think as the year goes on we should see total year mid single digits revenue growth in constant currency, an annuity on site I think of that the comments that we made was first half second half.
Speaker Change: From a percent of total can be similar to 2024 and again in this business. We expect mid single digits in constant currency revenue growth and a little growth in Q1, Yes, and then on the.
Speaker Change: Nelson lab side.
Speaker Change: We will have low <expletive>.
Speaker Change: A decline of low double digits in the first quarter versus last year, but margins are expected to be better than last year first quarter and the revenue growth is expected to be backend loaded because of the expert advisory comparisons and we'd just say for the total year there'll be thinking about low single digits mid single digits and revenue growth in constant currency.
Speaker Change: And then I'd say also the other thing to keep in mind is the point I made is we will see.
Speaker Change: Sequential margin improvement over the course of the year with the Nelson side. So that's kind of how I think about the segments John anything else out there no I think that covers it.
Speaker Change: Great. Thank you.
Speaker Change: Okay.
Sean Dodge: The next question will come from Matthew sites with Goldman Sachs. Please go ahead.
Ethan: Hi, This is Ethan on for Matt. Thanks for taking my questions. So the first one could you.
Ethan: You provided an update on how the cross selling initiatives going on between <unk> and Nelson Labs, and then is this benefit included within the 25 guide.
Speaker Change: Yes, good morning, yes. It is.
Speaker Change: Well the <unk> activity is going well, we referenced in our prepared remarks about the embedded labs and continued growth that we're seeing there within the the Nelson labs, which really benefits from stair Gen X volume uplift as well. So it is included in the 25 guidance.
Speaker Change: Okay, Great and then understand tariffs are not baked in if there is a negative impact you had the capabilities to shift things around a little bit and then is there also a risk that there'll be a pause in demand as customers need to shift their manufacturing around data tariffs yes.
Speaker Change: Yeah, I don't think.
Speaker Change: We haven't contemplated a positive demand aspect, but I don't I'm, just I've seen through my answer I don't see that scenario playing out I just keep in mind, we don't have clarity yet on exactly what tariffs could look like we'll be prepared for that think about the context of Canada would be the largest place that we would feel the impact of that.
Speaker Change: And we feel pretty good about our ability to have customers be able to absorb that tariff. It would be on cobalt for example, coming into United States. So we think that's something that can be managed.
And then I.
Speaker Change: See that would be the biggest thing on tariffs I would be thinking about right now.
Speaker Change: Great. Thank you.
Speaker Change: The next question will come from Casey Woodring with J P. Morgan. Please go ahead.
Casey Woodring: Great. Thank you for taking my questions can you maybe just talk about how you expect the different end markets you serve and started get extra perform at 25, I know you probably should have an easier comp coming up in bio processing, albeit at the lower proportion of revenue. There. So maybe just walk us through the different end markets and how you expect those to trend and then I have one follow up thanks.
Speaker Change: Okay, Great I would say.
Speaker Change: Pharma, which is a smaller piece of our business. We think that will continue to improve as the year goes on med device as well I think all of them. Casey overall, we think will improve generally speaking on the <unk> side med device pharma commercial will be a little bit choppy.
Speaker Change: We see some dynamics here on the commercial side it might make it a little chop here and.
Speaker Change: And then a bio processing, we did see growth.
Speaker Change: <unk> as the year progressed and in the fourth quarter again on a volume basis. So we'd expect that to continue in 2025 as well.
Speaker Change: Okay.
Speaker Change: That's helpful and then my.
Speaker Change: Follow up here is just how should we think about the pacing of capex over the course of the year given the Greenfields do you expect to come online and can you maybe just talk as how you talk about how you expect those Greenfield addition to impact margins in the near term to bed as volume ramps over the medium to long term that those facilities. Thank you.
Speaker Change: Yes, yes.
Speaker Change: Yes, Casey So we mentioned we've got one greenfield coming online this year, we're getting that wrapped up here in the next few months.
Speaker Change: From a pacing perspective, I, probably won't get into the details of quarter by quarter. We feel good about the guide for the year, we definitely feel good about their direction for Capex as we continue to work this down to our objectives in 2007, and our overall free cash flow.
Speaker Change: Objective, bringing this greenfield online doesn't have a huge margin impact there are some startup related cost, but it's nothing significant that I would call out.
Speaker Change: And then we continue to work on the last Greenfield for sterile <unk>.
Speaker Change: Where we would expect that to come online probably in the 27 at this point as we continue to make sure. We got the good good process in place and getting the returns that we need out of that project.
Speaker Change: Yes.
Speaker Change: Got it thank you.
Brett Fishman: The next question will come from Brett Fishman with Keybanc. Please go ahead.
Speaker Change: Hey, guys.
Speaker Change: Excuse me. Thank you very much for taking the questions just wanted to start off with one on the guidance just more broadly thinking about the 4% to 6% constant currency growth range curious on what you would call out as some of the biggest swing factors that you're thinking maybe could enable growth towards the higher end of that range or maybe a little bit better versus the low.
Speaker Change: And.
Brett Fishman: Yes, Brett.
Michael Peters: This is Michael I would say, it's all about volume.
Michael Peters: <unk> comes into the in the med device side will be very well positioned and bolt on <unk> that would be able to give us outperformance.
Speaker Change: All right excellent and then just a follow up here on pricing I think you indicated youre expecting kind of total company pricing around the midpoint of that 3% to 4% long term range.
If you could just break that down a little bit by segment, Amit, where youre expecting to see more pricing growth in context of some of the moving pieces you've discussed thank you very much.
Speaker Change: Okay, great just on the pricing side, 3% to 4% I would see steri would be on the high end of that.
Speaker Change: Nelson would be on the low end of that and then nobody I would be on the low end of that I would be thinking about it which is a little bit different than we've historically had within oriented as you know we talked about that investor day, but as we look out for the short term you can expect that nordea would be on the low end up versus being on the high in the past, but that's how I'd think about Steri high end Nelson in Oregon on the low end of that range.
Speaker Change: Alright, great. Thank you.
Speaker Change: The next question will come from Dave Windley with Jefferies. Please go ahead.
Dave Windley: Hi, Good morning, Thanks for taking my questions I wanted to follow up on Capex first your.
Speaker Change: Comments in.
Speaker Change: Your guidance for 25, and then I think your comments.
Speaker Change: For the longer term are both lower than you've talked about at the Investor day, which seems positive relative to your free cash flow generation goals wondering if that was just efficiency and some of your projects or timing related just wanted to make sure I understood why those were different from November. Thanks.
Speaker Change: David I would just just Michael good morning, I would just say we continue to scrutinize our capex. It's the largest portion of our free cash flow as EBITDA right. So we're going to we're going to continue to scrutinize that and as John mentioned one of the programs. We're looking at out to 2027, and where we're going to make sure that we get the returns on these programs and commitments from the customers before we fully deploy all that capital.
Speaker Change: So thats had a little impact and we'd be able to get some efficiencies we've gone through and.
Speaker Change: As we look at Capex, if the programs don't come in to the returns we expect we're not going to deploy the capital.
Speaker Change: So we feel good about where we're at in 2007 guide and we're going to continue to work towards that.
Speaker Change: Okay, and so on that I appreciate the return discipline.
Speaker Change: Is it right to think that.
Speaker Change: A how should I ask so is it right to think that any lack of deployment of capital against certain projects would not impact your your <unk> thought process or could it adjust what you think you could achieve from a growth standpoint.
Speaker Change: I think we feel good about our capacity as you know we've got capacity in place volumes have been a little softer. So we're continuing to make sure that we have a good understanding of what capacity is our customers need. There is a couple of spots that are are challenging, but we're going to work through that overall, but we don't see that we don't see the change in capital deployment impacting <unk>.
Speaker Change: The new guidance, we put out there okay on the cobalt.
Speaker Change: Program or project, you mentioned I think first harvest from Darlington in 2028, maybe.
Speaker Change: Is that a.
Speaker Change: I'm I'm curious about the process is that a test case as in Youll harvested and then need to test to see whether it produce the product that that the.
Speaker Change: <unk> that you need or has that already been validated in which case you know that that 28 harvest is good to go.
Speaker Change: It's more of the latter we feel very good about our ability to harvest that music cobalt in 2028 that program is going very very well its timing is on track capital deployment, a little lighter than we had expected which is another positive to your earlier comment and <unk> has been a long standing partner with US we get a lot of cobalt from them today.
Speaker Change: Darlington as just another reactor, but we feel pretty darn good about where we sit today and the yields that will come out in 2028, Theres always things that can happen on that but I'd tell you, where we sit today and all the testing of the work that's been done the team feels really good about it great.
Speaker Change: Great and last question for me slightly more nuanced to a prior question, but the the growth for 'twenty five constant currency about a point below your ERP you mentioned to an earlier question. You know, it's primarily volume is the swing factor.
Speaker Change: It looks to us that maybe Nelson is the segment at least that would be performing under its its target to get to your <unk> is that the right thought process and therefore, you need volume and Nelson or is your volume comment really occur.
Speaker Change: Across the segments, just just trying to pinpoint the area that could drive you into the L. R. P. Yes.
Speaker Change: So.
Speaker Change: I want to make sure to LLP, we gave a revenue guide of 5% to seven our aspirational long term is to get this thing back to where we were high single digits low double digits, but we're not there yet to date, which is why we gave the RFP, but it's really around Nelson <unk>. That's the key right as those volumes come in we'll be able to execute on that and outperform that's what our goals and that's what our team set up to.
Speaker Change: Do.
Speaker Change: The oriented in a pretty good spot to where we're at we have a really good view on that and the demand has been pretty wholesome throughout its really around the Nelson and stair Jack site. It's.
Speaker Change: It's helpful. Thank you I appreciate the answers.
Speaker Change: Thanks Barry.
Michael Poulark: The next question will come from Michael pull arc with Wolfe Research. Please go ahead.
Michael Poulark: Good morning follow up on tariffs. So cobalt was the thing I had identified as cobalt historically.
Michael Poulark: Then exempted when stuff like this happens and then is there tariff risk elsewhere, I mean, Sarah Jennings and Nelson our service businesses. So.
Michael Poulark: What's the nature of the tariff risk for those two if any.
Speaker Change: Yeah, So Mike to answer your question, yes, it's been exempt in the past that's why we don't want to get too far out in front and given comments exactly the impact of the company because we don't know exactly what these tariffs if they do come what theyre going to look like they have been exempt in the past we feel confident in the way the contracts are structured that the customers will bore the cost of that is it.
Speaker Change: It comes in the case of Starer <unk> still there customer annuity lines that would be a capex impact, but we feel thats very manageable within the guide that we're giving you here today, we'll look at that as we understand more about tariffs the only other spots. There's some materials that come in from from China in particular around some of the supply side with Nelson labs that we know that that could be.
Speaker Change: Impact as well, but we don't think these are really big material numbers, but we don't have clarity on exactly how this will play out that's why we have not incorporated in our guide so as we get more visibility, we'll give clarity that any capex impact as well as any operating cost impact, but overall, we feel pretty good about it although it's a challenge right.
Speaker Change: I appreciate that.
Speaker Change: <unk> the competitor stair has sped up notably Q over Q.
Speaker Change: You have kind of have the solid mid single digit growth profile again guiding low to mid singles for <unk>. So what's the disconnect. There, we're seeing 10% growth from them.
The numbers from from your competitor in stair Genex haven't always lined up perfectly quarter to quarter, the trend seems to be friend, but I'm curious for how you assess maybe the disconnect in the quarter and short term outlook there. Thank you.
Speaker Change: Thanks, Mike I would say as we've talked about in the past if you look over multiple quarters.
Speaker Change: Balance out when you look at the revenue performance in both businesses, they kind of balance out that doesn't mean, it one quarter wouldnt be up versus the versus us or vice versa. When we look at kind of where we're at today and if I look at the first quarter to get a couple of factors go into it a bio processing would be one of them and maybe some other.
Speaker Change: Geographies, where they've got some positions that we don't that we think are growing a little bit better and then the other one I would just say as I referenced in my earlier comments, we've got a couple of customers I think have a little challenges again thats. The minority it's not the majority were not seeing that from a stock destocking perspective, but I feel very good about where we're at when we look forward in.
Speaker Change: Our competitive position and listed our competitors have put out comments about growth rates that unfortunately didn't materialize for them in this.
Speaker Change: This current quarter, they've got something that they came out we will see how it plays out over periods of time, but I feel good about our position we've got to continue to execute commercially operationally and that's what we're focused on take care of our customers.
Michael: Thank you Michael.
Michael: This concludes our question and answer session I would like to turn the conference back over to Mr. Michael <unk> for any closing remarks. Please go ahead Sir.
Speaker Change: Thank you everybody for your support and appreciate your time and your questions. Today, you know obviously, we finished out in 2024 pretty darn consistent with what we told you a year ago with 2020 forward is going to look like right. We said, we'd see continued gradual improvement throughout the year, we're consistent within our guide we continue to generate free cash flow in this business and are very disciplined in our capital allocation we.
Speaker Change: Look forward to 2025, we feel we're well positioned as the markets continue to improve we're going to capitalize on those opportunities, but we thank you for your continued support and we look forward to even more positive conversation to you in 2025. So thanks for your time today and have a good day bye bye.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: Okay.