Sotera Health Company (SHC) Earnings Call Transcript & Summary

So thank you, everyone, for joining us. Good afternoon. My name is Matt Miksic from Credit Suisse. I cover medical devices. And we're very pleased to have with us Scott Leffler, CFO at Sotera Health. Thanks so much for joining us, Scott.

Well, thanks, Matt, very much for hosting us. So hopefully, you can see the screen that I just shared. Let me start out by thanking you Matt and Credit Suisse for hosting us for this event. And for all of you who are joining us for the event, I just want to thank you very much for your interest in the company. I was going to start out just with a quick intro on the company and then Matt, hand it back to you just for some active discussion. But I want to start out by saying some of the statements I make today may be considered forward-looking statements. You can refer to our SEC filings and this slide for a description of the risks and uncertainties that could cause our actual results to differ materially from those projected or implied. The company assumes no obligation to update forward-looking statements. In this presentation, I'll discuss certain non-GAAP financial measures, including adjusted EBITDA and adjusted EPS. A reconciliation of these measures can be found in the appendix of these slides. And a copy of this presentation will be posted on the IR section of our website at soterahealth.com. So with that, I'll jump into a quick overview of the company. I'm Scott Leffler, the company's financial -- Chief Financial Officer. At Sotera Health, our mission is safeguarding global health, and we do that through our sterilization services, lab testing and advisory services. We go to market through our 3 business segments: Sterigenics, Nordion and Nelson Labs. Sterigenics and Nordion fall under the sterilization services component of our business and Nelson Labs is a leader in lab testing and advisory services. Now Sterigenics is one of the global leaders in contract terminal sterilization. Terminal sterilization is one of the final steps in the manufacturing process, primarily for medical devices, and the aim of terminal sterilization is to kill 999,999 out of every 1 million harmful microorganisms that could be on a medical device. There are several modalities for sterilized contract terminal sterilization and Sterigenics is the leader in all of the -- or one of the leaders in all of the major modalities. One of those modalities is using radioactive cobalt-60 to irradiate a medical device to kill any harmful microorganisms. And there is 1 critical input for sterilization using gamma radiation and that critical input is a material called cobalt-60. Cobalt-60 is a radioactive material that is supplied by a company called Nordion. We acquired Nordion in 2014, which made us the only global vertically integrated global sterilizer for gamma irradiation modality. Our third business unit, Nelson Labs, is one of the global leaders in microbiological testing, providing services throughout the value chain for both pharmaceutical and medical devices with a primary focus on medical device with about 70% or more of their revenue on the medical device side and then a smaller but growing component on the pharmaceutical side. That's what we do, but equally important is how we do it. We're providing these mission-critical services to blue-chip customers. We're doing business with 40 out of the top 50 medical device OEMs, 8 out of the top 10 pharma companies. Much of the business that we do is under long-term contracts, especially for the Sterigenics and Nordion businesses where over 90% of their revenue is delivered to customers over long-term 3- to 5-year contracts. Importantly, many of these contracts are characterized by annual built-in price escalators, which include, in many cases, especially relevant in this inflationary environment that include, in many cases, cost pass-through provisions that would protect us from inflationary pressures in our cost structure. We have an unmatched network of global facilities around the world. We believe that our network would cost over $1.5 billion to replicate. That includes 48 sterilization facilities, 2 gamma or cobalt-60 processing facilities and a network of 14 labs around the world as well. We recently made comments around a new microbiological testing center of excellence that we opened in Germany. This is the latest in growth initiatives for Nelson Labs. We operate in an increasingly regulated space, and our ability to be a leader in understanding and complying with complex regulatory requirements is a tremendous part of the value proposition that we offer to our customers. We have extraordinary opportunities in terms of both organic and inorganic growth, and everything that we do is grounded in the company's values. We are a values-based culture and our values are safety, customer focus, people, integrity and excellence. That's how we do it, and it leads to very strong results. We have delivered revenue growth every single year on record, going back at least to 2005, and that includes, importantly, 2008 and 2009 during the worst of the financial crisis. And then last year, during even the low points of the pandemic when there were the worst of the economic shutdowns, we delivered revenue growth not just for 2020, but in every single quarter of 2020. And since becoming a public company, we have delivered double-digit revenue growth now for 4 consecutive quarters as a public company. We have industry-leading adjusted EBITDA margins of over 50%. And we operate in what we believe to be a $33 billion addressable market that provides plenty of runway for continued organic and inorganic growth. Consistent track record of converting our profitable bottom line into cash generation and well positioned in a macro -- with a heavy exposure to attractive end markets with long-term sustainable growth. Now I won't go into detail about all of the examples that are on this page. I wanted to give everyone a sense for the medical devices and pharmaceuticals that we touch. Now we have thousands and thousands of customers, and we are supporting them with respect to many, many thousands of product lines across the medical device and pharmaceutical supply chain or value chain. And these are just a small number of examples. On the left side, you can see some medical devices that we touch. And especially relevant in the COVID environment, you can see COVID collection swabs and personal protective equipment, which includes masks that are used to protect caregivers during the pandemic. On any given day, go through any of our facilities, and you may see any of these products being sterilized, being tested for efficacy and performance at Nelson Labs and benefiting from the gamma radiation services that are enabled by Nordion's products. All of those capabilities and the robustness of the underlying business model, as I mentioned a minute ago, translated to a very robust financial performance over time. Last year, as I said, we grew even during the pandemic, delivering 5% revenue growth as a company from 2019 to 2020. And then on a year-to-date basis, for the first 3 quarters of 2021, we delivered 15% revenue growth as a company compared to the same period for 2020. And again, as I mentioned a minute ago, we've delivered revenue growth every single year -- every single quarter last year during the lockdowns as well and double-digit growth every single quarter as a public company. Not just growing the top line, but growing the top line in an increasingly profitable manner. And you can see that on the right-hand side of this page, where our adjusted EBITDA margins, beginning from an already very strong industry-leading almost 49% back in 2019, we have expanded by almost 300 basis points through the most recent year-to-date period. Margin profile is sustainable and driven by attractive pricing elements in the space that we operate as we continue to ramp up capacity utilization in businesses that have a very high degree of operating leverage, then that benefits the bottom line and margin profile. And we are very aggressive in terms of rolling out new operational excellence initiatives across all 3 of our businesses that we believe give us a line of sight to continuous margin expansion for the foreseeable future. Finally, I'll just wrap up by saying, hopefully, you can get a sense of the fact that this is a very unique and attractive asset from an investment standpoint, tremendous runway for growth opportunity, we believe. Very proud of the track record of growth that we've delivered so far for so many years, but believe that we're really at the beginning of the story in terms of the runway for growth with a $33 billion TAM, and a successful track record of investing both organically and inorganically. And hopefully, with plenty of opportunity to take a bigger bite out of that TAM which is growing as well. So Matt, that was the quick intro on the company and I'll hand it back to you to cover other topics.

That was great. Thanks, Scott. So maybe, let's see, it might be best just to start with the most recent comments you made around the quarter. What did results look like on an underlying basis. I mean, again, as you mentioned, strong double-digit growth, strong organic double-digit growth. Maybe break down the top line growth and then some of the puts and takes that you've experienced in the quarter.

Sure, happy to do that, and for anyone that wasn't a participant yesterday. We did just have our Q3 earnings call yesterday and earnings release, and so all of this information is available now. And another quarter that we're very proud of, and at the risk of being redundant, just a reminder that another double-digit top line and bottom line quarter for us as a public company. In total, we delivered 13% revenue growth and our strongest performance on the sterilization side of the business where Sterigenics delivered 15% top line growth and Nordion delivered, for the quarter, 42% top line growth. So extraordinary performance on that side of the business, and we couldn't be more pleased with the overall momentum we have there. Overall, the performance was not quite so robust on the Nelson Labs side. Nelson Labs has been one of the stronger performing of our business units historically. They're going through a little bit of a COVID-related transition right now, and Nelson did report about a 2.6% revenue decline for the quarter versus the prior year. For those of you who have followed the company, you're aware of one of the storylines that's arisen since the pandemic, which is that Nelson really had an extraordinary part to play in the pandemic in terms of a surge in demand that related to personal protective equipment. And Nelson was critical to that part of the value chain in the fight against the pandemic because as you have this extraordinary need in the -- around the world for more protective -- personal protective equipment, there was a tremendous need for testing in order to validate the efficacy of new personal protective equipment that was being rolled out in the marketplace. That created a very nice COVID-related tailwind for Nelson Labs, which culminated really in the first quarter of this year, where we called out a 10% revenue tailwind for Nelson Labs. And certainly, we're pleased to have been part of the solution with respect to fighting the pandemic. And then, of course, the sales benefit that came with that. But we always knew that eventually, there would be a normalization in testing levels around personal protective equipment. We saw that begin in Q2 of this year where that -- what was a 10% tailwind in Q1, became a 5% headwind in Q2. And that 5% headwind in Q2 became almost a 9% headwind in Q3. Admittedly, we weren't sure exactly how -- given how quickly the demand environment appeared for that category of testing, we weren't sure exactly how quickly it was going to ratchet back down closer to pre-pandemic levels. And you saw it come down a lot faster, to be frank, than we had expected here in Q3, creating that 9% headwind. But overall, very pleased with a lot of the signs that we see overall in terms of the medium and longer term for Nelson Labs as the rest of their testing categories continue to normalize here in the recovery period. And we're hopeful that in the next few quarters, we're going to see more normalized results out of Nelson Labs. Overall, taking a step back, especially given the robustness of the performance of Sterigenics and in Nordion, we couldn't be prouder of the team overall and very pleased with the momentum that the company has going forward.

Great. That's helpful. And so in terms of the margins, there was a mix dynamic as well, which -- I mean, it's sort of the -- showed some of the sort of balance in the portfolio, outperformance and high margin in one side of the business, and underperformance in this PPE validation part of the business, which is also high-margin, but net-net, still up 180 basis points year-over-year. Can you talk about maybe stability? And maybe bridge that into an answer to the question which we get often, which is how does the business with this level of EBITDA margins aspire to continue to drive those higher? Maybe talk a little bit about that.

Sure. So you're right that Nelson Labs is a business that experienced some margin compression as a result of that mix shift. But overall, when you look at the attractive trends for the total company and especially focusing on Sterigenics and Nordion, very pleased with the trends on the margin side and especially given that here we are in our first year as a public company, and we have mentioned for most of this year that we were absorbing some of the incremental administrative costs this year that come with being a first-time public company. So overall, very proud not just to the margin profile we came in with, proud to have expanded that margin profile overall, and especially, given the incremental administrative costs associated with being a public company. But outside of the mix effect of PPE testing, which was obviously a good guy last year and a headwind for us this year. Really, we just feel very proud of the work that's been done to optimize the profitability of the business for many years. Some of the more attractive underlying elements of the space that we operate in that we talk about a lot is that we do have a tendency to get favorable pricing elements across all 3 of our businesses, but especially at Nordion and Sterigenics, where it's actually, in many cases, built into the long-term contracts with the customers. And obviously, that can be helpful in terms of margin profile over time. Nordion is [indiscernible] of a very high degree of operating leverage. And so as they continue to ramp up to peak utilization levels at their existing operations, and then as they bring new capacity online, then approaches -- ramps up capacity utilization. In many cases, you have incremental revenue that's coming on at contribution margins as high as $0.80 or $0.90 on the dollar, and that can be very margin-accretive over time as well. And then, finally, the margin driver that we're able to drive most proactively as a management team that we're very proud of is operational excellence. And this is a theme and a strategic priority that we brought to the business several years ago that we think has been a real difference maker. And we can point to numerous examples across all 3 of our business units of where we have executed operational excellence initiatives that not only have worked to improve just the overall robustness of the underlying business model, but also have contributed to continued margin accretion over time.

Fair enough. Another sort of key element or differentiating aspect of business that we've talked about, you've talked about and you mentioned a little bit was sort of the scale of the global network, the facilities, and the difficulty sort of match that competitively. Maybe talk a little bit about what competitive barriers to entry, moats, if you will, do you highlight and think about? And what are you doing to sort of -- what are you doing or what's happening that's potentially deepening and widening those moats?

Sure. Well, most important of all is the quality and comprehensiveness of the service offering. We are talking about mission-critical services that generally represent less than 5% of the total cost of bringing a product to market. But arguably, they unlock 100% of that product's value, because you can have the best medical device that money can build. And if you haven't gone through this often mandatory step of terminal sterilization, then that product is worth nothing to you and you're unable to bring it to market. And so the criticality of that service is very, very high. And given that fact, our customers tend to be less sensitive to price and more sensitive to the quality and comprehensiveness of the service offering and we absolutely are an industry leader in that. And part of it is the technical know-how in dealing with a very complex technology in order deliver at a high level of performance, but part of it also is that our services are in very, very highly regulated areas. And we have, we believe, a competitive advantage when it comes to understanding and complying with complex and burdensome regulations. Generally, our experience is that, over time, the regulatory environment in the spaces we operate have a tendency to become more complex and more burdensome. And over time, that continues to work to our advantage more and more. And then to the point that you made a second ago, the comprehensiveness of the global network when we're dealing with global customers that have a global manufacturing footprint and they are looking for services across different categories of testing across different modalities of sterilization. And we're able to go to our customer base and offer up our global network and our global capabilities and basically say to them, "We can service you wherever you need with whatever service or technology you need at the time that you need it." And it is the comprehensiveness of that offering that is so difficult for somebody to come in and offer on a competitive basis. And so I think that when you translate the totality of that service offering to our customers, especially in what is a very capital-intensive business, I mentioned earlier that it would cost, we believe, over $1.5 billion to replicate our network, then you can see that, that gives rise to an environment that often is capacity-constrained, which then also further encourages our customers to deepen the commercial relationship, often seeking out long-term commercial engagements with us in order to assure themselves of the availability of this critical service.

Fair enough. So one other aspect of the business that sort of that the tie into these growth end markets, being a device analyst, we're intrigued by, excited by, bullish about the sort of level of innovation and growth in the end markets that we cover across cardio, ortho and spine and interventional, et cetera. You, to a large extent, have exposure to many of those markets sort of a composite growth model. If you could talk about the -- how you look at the opportunity for sort of durable sort of end market growth from your perspective and where either by share gains or geographic expansion or some other means that you see opportunities to grow kind of at or above that number over time. And I have a follow up on that issue.

Sure. Well, so let me just start off by saying, I guess -- and I think many people probably already understand this, that there is a mix between a proportion of these services that are provided on an outsourced basis by contract service providers like us, and then a certain amount of it is performed on an in-house basis by some of the OEMs. For the sterilization side of the market, we estimate that it's about 57% outsourced and 43% in-sourced. The reason that's important is that we believe that there is a tendency, and has been for many years, a tendency towards more and more reliance on outsourced services, not necessarily moving in large chunks like it's going to flip to 100% tomorrow or anything like that. But there has been a slow and gradual migration. And so what that has translated to, practically speaking out there in the marketplace, is that whatever the growth that you see in terms of volume growth out there in the medical device space, the contract sterilizers of the world have a disproportionate amount of that growth that tends to fall to them. And so that gives us an opportunity to grow not just in line with the volume growth in the broader market space, but an opportunity to grow some amount above that. And so that in and of itself, we think creates a very attractive longer-term growth opportunity above and beyond what you'd normally expect of the space. But certainly, we look for other opportunities to penetrate into other markets. One of the areas that's been a particular strategic priority for us for a number of years is increasing exposure to pharma. The Nelson Labs side of the business is one that's benefited in particular from that. We talked about a $33 billion addressable market for the total company, $29 billion of that is on the Nelson lab side, and a significant proportion of that is on the pharma side. And so the tremendous pharma opportunity for a lab business that, historically, prior to the acquisition by Sotera Health, have been almost exclusively focused on the medical device side and the testing space. Based on a combination of organic investments as well as several tuck-in acquisitions, we've now shifted the mix of testing at Nelson Labs from being almost entirely probably 90% or more on the medical device side, to now being closer to 25% to 30% pharma. And that diversification of the end market exposure towards more pharma should help to increase the opportunities to then accelerate penetration of the pharma space as well. So that's just one example of where we're looking to accelerate growth in other areas beyond just the widget growth or broader market growth in the spaces that we're already operating.

That's super helpful. So I apologize if anyone can hear the blower or small airplane engine going off outside my window. But a follow up with a question on in-sourcing and outsourcing. You talked often about the trends there and the possibility not to push your customers in one direction or another, but the possibility that folks might tend to in-source less over time? When you see that, is that -- are you watching -- I'm sure you're watching it very closely -- volumes, or I'm also curious to have a level of investment. I mean you sit back some time with the regulations depending where they are and the difficulty in operating in some of these environments. Is there -- who is deciding to build, if anyone, additional capacity in this environment? Or is incrementally new growth in device companies leaning more and more in favor of leveraging outsourced partners like yourself?

Well, certainly, from a long-term macro trend standpoint, we continue to believe that it's absolutely shifting more towards outsourcing. Now that doesn't mean that there's no investment by OEMs and in-house capacity, and there are even -- there's at least 1 or maybe a couple of recent examples of that. But overall, I think if you look at the level of investment that's taking place and the amount of new capacity that's being added to the marketplace, a disproportionate amount of that is coming -- and it has for many years, I think, come from the outsourced service providers. And to be frank, I think it makes a lot more sense just purely from an economic standpoint. If you consider how expensive it is to put this capacity in the ground, the fact that we are able to open our doors up to a universe of literally thousands of customers, which then allows us to run our network at very, very high levels of capacity utilization. And I mentioned several times the extraordinary operating leverage that you have at these businesses, you can see how the ability to service so many customers then allows you to get the maximum return on your investment in these assets, whereas somebody who is an OEM who's building for only an in-house audience, you're limited to a customer of 1. You're often going to be chronically underutilizing these facilities. And sometimes, it's still the right decision for them. Sometimes, for strategic reasons, they'll still want to have that capability in-house or that capacity available to them. But we just believe that it's never going to be a more attractive economic decision. And over time, that's what gives rise, in part, to this trend towards more reliance on outsourcing. And the comment that I made as well about the increasingly complex and burdensome regulatory environment, that it's real. It's something that benefits us in different ways in different parts of the business. For Nelson Labs, it helps them in terms of the testing services they're providing to the customers. But for Sterigenics, it helps in terms of the fact that given that this is what we do, we have always been proud of our record of compliance and understanding the requirements of the regulatory regimes -- and we operate under and it is that expertise and comfort that allows us to continue to invest with confidence across our global network. And I think if somebody that doesn't have the same size of network and criticality of that capability, probably -- it's less suited for them.

Thanks for that, Scott. So we have maybe about 10 minutes left here. And I just wanted to -- I'd feel remiss that we did not at least touch on regulatory environment or the litigation environment because that -- certainly the first half of the year, I think, you spent, we spent, investors spent a fair amount of their time related to Sotera thinking about New Mexico and what that might mean. That plant appears -- look -- any update that you're willing to provide, it appears to be operating with the agreement that was struck. So we've not closed down, continues to operate I'm sure there's still open questions in downstream litigation that folks might worry about. But with anything that you'd share in terms of progress or expectations there. But more importantly, maybe map out the next couple of regulatory and litigation yield-related milestones that there are. We're waiting for some new regulations, potentially. We saw some letters go out recently. Maybe what those mean? What the next steps might be? And then in terms of litigation, I think the expectations are sort like of mid-year we'll start seeing some of the cases from Willowbrook. So just to kind of lay out some things on the calendar to help people understand, here's when things might -- we might get some updates in the next 6, 12 months?

Sure, Matt. And maybe I should start off by making a plug for our website, and we mentioned it yesterday on the earnings call. But we went live yesterday with a portal that you can access through the Investor Relations website at Sotera Health which is that, for the first time, we've tried to compile a bunch of information, including background and our views on the ethylene oxide situation in general and a number of links to third-party data sources and things like that, along with some history on how things have unfolded here. And so obviously, this is a question that we -- a topic that we get a lot of questions on from investors and other stakeholders, and we thought it would be a good idea to put some kind of a resource out there for people to look to get a more comprehensive view without having a wait to talk to us live about it. But now with respect to your questions, we had provided on our Q2 earnings call an updated downtime on Santa Teresa, which was that we were still waiting on a resolution on the monitoring requirements that the judge had ordered with respect to compliance with that facility. Certainly, we feel great about our historical compliance there, but also our ability to continue to comply with the requirements of the judge. But there is a monitoring element to that, that required some further discussion and resolution. And we are still waiting on an order from the court on the specifics of that. But as we said then, and we continue to feel today, that is something that we don't feel poses any operational risk to the facility. And again, we're very proud of the track regulatory compliance there and certainly have no concerns about our ability to comply with the other elements of the judge's order. So that's where we are today with respect to Santa Teresa. The other topic that you touched on, also no new information with respect to the timing and the way that the litigation in Illinois is expected to play out with respect to the personal injury cases. As you indicated, we've communicated that the first few of those cases now finally have an actual time line associated with them. Several of them were supposed to have gone to trial already based on the original time lines. But in the court system there, there was an extraordinary backlog, which was a result of a COVID-related backlog in the court system, nothing to do with us. And so the first cases are now going to trial beginning in the second half of next year with the first case trial beginning in July. And so obviously, there's going to be a lot of activity that goes on in terms of preparation for those cases, but we wouldn't necessarily expect to be providing any meaningful update on those until the trial actually begins. And then I think the last specific thing you were asking about a moment ago related to the letters that had gone out, which really are primarily relating to disclosure associated with emission levels. And this is something that, honestly, we are not especially sensitive to, in large part, because we have always just been so proud of our track record of complex going back many, many years across our facility network. But in many cases, we've gone above and beyond the emission disclosure requirements, and voluntarily disclosed emission information that wasn't even required under the regulatory regime. And so the fact that letters like this are going out there, as far as we're concerned, is fine as long as it's a level playing field, but in many ways, we think it's asking others in the industry to do something that we feel we have been doing, in many cases, on a voluntary basis already.

And then the last, I guess, you got the question on that conference call, and I'm not sure if you have a specific answer yet, but everyone is waiting for new rigs or new updated regulations or emission standards, and it seems like that time could be soon, could be early next year, but there's no certain timeline, it sounds like, as to when we're going to see that.

Yes, that's right. And so maybe the first thing to say is that as far as we're concerned, we want it to be yesterday because we're so comfortable with our ability to comply with any regulatory requirement regardless of what shape it ends up taking that, as far as we're concerned, we and the industry would benefit from clarity sooner rather than later. I think you hear some different dates and date ranges that are thrown out, whether it's early next year or later next year. One thing to just bear in mind is that there's a difference between the proposal coming out and the final regs being enacted, and there's going to be a significant number of steps, including a comment period that would be required before the initial proposal actually were enacted. And I think that's where maybe there's a little bit of a disconnect sometimes when people talking about different date ranges. But again, as far as we're concerned, I mean, obviously, it's not something that we can control. I think everybody has been very bad at guessing when it might happen. I really think everybody in the industry at least is looking for it to happen sooner rather than later for that clarity.

So one final detail on this is you were given a work permit to begin modifications in New Mexico. And I know you haven't, again, given time specific as to when those will be completed. But any kind of update or any -- by middle of next year, by end of next year sooner? What should we expect?

No. We -- certainly, we're pleased to have gotten that permit, and we think that given some of the headlines around what's going on in New Mexico, we think that that's a really -- the receipt of that permit is a great documentation, I think, of the continued constructive relationship that we've got with the regulators there. But we have been saying for years now that we're committed to rolling out this program of enhancements across the entire North America EO network, and that's what we're committed to in Santa Teresa as well as the rest of our facilities, but we're going to steer away from giving any specific facility level timeline and just continue to work towards conclusion across the whole network.

Fair enough. So back to -- and there's time to talk about here, but maybe 1 thing coming out of the results yesterday and just what seemed like -- I mean, I hate to see a lot of the stock reaction at Sotera when there -- I mean, the group, our entire universe, and there's plenty of stocks that are down for whatever reason. But I just want to make sure that we're all understanding what you think the third quarter shift and sort of performance that we talked about earlier means to kind of intermediate or long-term growth? How should we be thinking about, I don't know, a different trajectory or a similar trajectory given what we learned about PPE mix and the normalization of that.

Well, so maybe I'll start by just taking it back to the time period leading up to the IPO as we kind of crafted the -- or shaped the way that we were going to tell the story around Sotera Health in general and each of our business units. And when I think about all of the attributes that make each of our business units so special and that had contributed to each of their individual and combined successes. -- for so many years, the underlying business model for our company is every bit as strong, if not stronger than it was then. And I think that's true across all 3 of our business units, even though we did see a little bit of underperformance in one of them in the last quarter. So that's really, I think, the most important thing that I would say is that the prospects for growth and performance overall are every bit as strong as they have ever been. And I would say, arguably stronger given how well we've performed throughout the pandemic and here coming out of the pandemic. When you look at the performance on a year-to-date basis, the sterilization side of the business represents 3/4 of our sales and more than 3/4 of our earnings. And we're very, very pleased with the momentum there. Sterigenics, obviously, is continuing to deliver strong organic growth. They had a good inorganic contribution from the acquisition of Iotron back at or near peak utilization levels from pre-pandemic and continuing to invest on their growth thesis, which include significant investment inorganic growth, which is beginning to come online here already at this point in this year with more come next year. So very pleased with the momentum there. Nordion is a company that has got many years of visibility into their incoming supply of cobalt-60 given their long-term supply contracts, the largest of which goes out literally to 2064. And then in terms of the sales side of that business, you've got over 90% of their sales delivered under long-term contracts. And so it's a highly predictable business. They're doing every bit as well as we had expected and even better than that in terms of some ancillary products and service lines that they have been able to accelerate momentum on. So that part of the business is doing tremendous. As for Nelson Labs, obviously, as we talked about earlier, they have been experiencing some of the COVID-related headwinds that has impacted their PPE testing. But to be honest with you, at no point did we ever think that PPE testing at that level was part of the long term Nelson Labs story. What's important is that the things that are part of the long-term Nelson Labs story in terms of the value proposition that they offer throughout the product development chain for medical devices. It is every bit as strong as it was, even stronger now with the recently announced acquisition of RCA where we're providing more regulatory and compliance advisory services for our customers, which with deeper penetration throughout the value chain really, we think that just positions us to accelerate the storyline there. And that doesn't take away from what we mentioned yesterday, which was that Nelson Labs probably is going to take a few more quarters to unwind the rest of this PPE-related headwind and then normalize some of the other testing categories that were impacted by the pandemic. But again, you're talking about a few quarters in for a business that really has just a whole universe of growth opportunity over the longer term.

Very helpful and a good place to end here now that we're out of time. But thank you, Scott. I really appreciate you joining us. And thanks, everyone, for joining us as well.

Thanks to you, Matt. I really appreciate it.

Goodbye.