Sotera Health Company ($SHC)

All right. Great. Good morning, everyone. I'm Elizabeth Koslosky, the life science tools and diagnostics analyst here at Goldman Sachs. I'm joined here by Michael Petras, the CEO of Sotera Health. Thanks for joining us.

Thanks for having us. Good morning.

So you delivered a solid start to the year, 6.5% constant currency revenue growth, 20 basis points of EBITDA margin expansion. You've also announced the CEO transition. So I guess can you talk to the timing? And then anything in Alton's background that kind of stood out to you as you were deciding on the successor?

Yes. So what you're referencing is, I announced in the last couple of weeks that I'm going to transition from the CEO seat to the Executive Chair seat I've been with the company 10 years now, and I've been talking to the Board for the last couple of years about trying to do an orderly transition. And we decided -- I decided that it was going to be something that would happen here in '26. We found Alton. We put a pretty thorough process together. And Alton's got 20-plus years in the med tech space. He worked at Baxter. He worked at Hilton is well as recent job as [ Aviat ] Medical. And by the way, he'd be with us here today, but he's out at Salt Lake City. I just hung up the phone for him. He's at Salt Lake City visiting the Nelson team and having a business review out there, which is great. Yes. So Alton is outstanding, he's going to be great. We looked at and there's a couple of things we really liked. And when we did the search committee, we liked the fact that he's got a great value set that seems to be very compatible with the culture we have within the company. He's got a long established experience in the health care space. And also, we really like his commercial expertise in his experience base on the commercial side that we thought would really help us in this growth mindset. So those are the things that really stood out to us.

Great. Awesome. And then Sterigenics, mid-single-digit consequent growth in 1Q despite some weather-related headwinds I guess how should we think about the growth cadence as we move forward throughout the year, given the guide implies a slight kind of step-up, I guess, is this mostly coming from the volume side of the price side?

Yes. It's come from the volume. We'll have a little bit of pricing. I mean the price of that business has been pretty consistent, 4%, slightly above as we had in the first quarter. But overall, second quarter, we've guided to growth that's pretty similar to what you saw in the first quarter on a constant currency basis. And then we expect to see some step up as you get into the second half of the year. As I stated recently, we're pretty confident on where we sit today, looking at here we are sitting on June 8 and reaffirming our guide for the second quarter and the rest of the year across the whole company, not just Sterigenics. .

Awesome. And then another thing we've kind of observed in some of the public med tech companies is a bit of a concern around decelerating volume growth for them. I mean understanding this is only part of your Sterigenics business and outside of these few players, you have broader exposure. But again, how should we be thinking about the Sterigenics volume growth in the face of some of these med-tech-related headwinds?

Yes, there's been a lot of questions around the med tech. I mean there's winners and losers. We have filed with the customers in that segment. But overall, we feel pretty good about what the volume looks like. We think it should be slightly improved as we progress throughout the year. always could be better. But overall, we feel pretty confident about what we're seeing for the rest of the year in the guide we've provided.

Okay. And maybe talk to your ability to sort of drive pricing. I mean we've seen in the past instances like when we met text destocking, maybe talk through some of your competitive advantages and your ability to drive price in those types of environments?

Pricing is always a challenging conversations with customers, but we need to get rewarded for the value prop and the value that we bring to our customers. even in periods of decelerating stock, if you will, when they reduce the stock holds in '23, '24, we still achieve the price targets that we communicated. So we feel confident in our ability to get 4%. The other thing that we've been talking about over the last several quarters is a [indiscernible] is a new regulation that's coming out from the government. There's 1 that's been proposed and now that's being revised again, we'll talk about that a bit later. But we put in significant capital against getting those improvements. We put about $200 million in, and we're also starting to see some of the benefits of that in our price equation as we progress throughout 2026.

Great. And then some of the other kind of end markets that you sell into. I mean bioprocessing continues to be a high-growth area in pharma. I understand it's a smaller portion of your business today, but I guess, how are you thinking about potentially expanding into that market over time? And I guess, what levels of growth could you see from those more niche applications?

So as you stated, bioprocessing is a category for us. It's a smaller category relative to our competitors. I think we're under-indexed. We should be gaining more share in that business. Our teams have been focused on that for at least the past 18 months or so. We're seeing nice growth year-over-year in that business. And we're seeing in both Europe and the U.S., and we'd expect that to continue. But we have a lot of ways to be able to catch our competition as far as how well positioned they are there in bioprocessing.

Awesome. And then, I guess, how do you stand from a capacity perspective within Sterigenics. Were there any sterilization methods where you feel capacity is may be tighter on an industry-wide basis compared to others?

Yes. I'd say capacity on a global basis, we're pretty good at any given pocket you could have some more challenges. So like, for example, a lot of people talk about ethylene oxide. Ethylene oxide is challenged from a capacity perspective. But really, it's large pallet chambers where there's the most challenging capacity situation. I see a large pallet. I'm talking 14 pallet and above. That is really tight in the U.S. But around the world, we feel we're pretty well situated with capacity to be able to achieve our plans that we lay out for '26 as well as '27?

And I guess, as you think about like kind of the global capacity expansion, is there any particular regions that you would look to expand into? .

Yes. Today, we have presence in all areas around the world. I'd say we have lower presence in Europe is with Sterigenics I think there's opportunities for us to expand our presence in those 2 geographies. Although we do have a nice base in Europe, I still think we're unsized all to our competitors and clearly in Asia as well.

Okay. And I think you also talked about the decision to expand the extra capacity in the U.S. I guess, what goes into those decisions, what level of commitment you have from customers before deciding to go ahead and build?

Yes. So for us, we do a 3-year strategic planning process. We're in the midst of that right now. Alton and the team are working through that. we'll ultimately review that at the Board level in August. But this is something that we do every single year. And when we lay out, we look at supply and demand curves, we look at our capacity situation and try to figure out where we we should make the investment. So right now, we've got an x-ray facility coming up the latter part of this year. And then we have another facility coming up in late '27, '28. So we try to do a long-term capital plan and making sure that we're situated for the supply and demand. But we try to target 40% capacity having 40% commitment before we put it in, in particular with the X-ray, we decided to go on with less of a threshold there just because that was more of a strategic investment for us. But overall, we feel pretty good about where we sit in capacity today.

Okay. And then I guess, do you see any competition come in from other sterilization techniques that maybe Sotera does not have in their portfolio and maybe help us understand why EO and some of the other methods you have are insulated from newer tech needs in terms of the breadth of applications?

Yes. I mean there's new technologies that are being explored by many in the industry. But nothing of any scale. We've got R&D investments ourselves and a couple of smaller opportunities that we've been taking to market over the last couple of years. But nothing material that could have the impact of what you see with gamma sterilization nor ethylene oxide?

Okay. And you mentioned the pricing earlier. We talked a bit about that. But I guess Sotera's business model is very critical for customers. And I think there's a lot of moving pieces around rising input costs for your customers. Has the environment changed your philosophy at all? And are you hearing more pushback from customers as they kind of start to look at their margins and their input costs?

Always -- as I stated earlier, pricing is always a challenging conversation. We just got to make sure we don't outrun our value proposition. But we feel confident in our ability -- we guide across the company, 3% to 4% price, Sterigenics is on the high end of that and [indiscernible] on the lower end that. We've been able to deliver that consistently, and it's because we do a really good job with our customers, which our customer satisfaction scores continue to show, and we don't try to outrun our value proposition. We make sure we're getting paid appropriately. We cover our cost of inflation and other costs that we may incur. But we think we will continue to be rewarded for the value we bring.

Great. You mentioned the regulation front a bit earlier, but I guess there's been a lot of noise kind of around [indiscernible] regulations. It would help if you could put it into perspective kind of comparing the most recently updated rule versus kind of previous versions and then comparing that to the pre-2024 regulation. .

Yes, let me try to make this simple. So post it may not be as some [indiscernible] is the standard that is used for sterilizers that use the ethylene oxide in this case. So pre 2024, I'm going to use numbers just -- the numbers aren't represented by, but I'll just try to help context this -- if the 2024, the writings are it 2 and then post the '24 rule came out, it's a 10%, let's say, in the amount of regulation and controls, right? So there was a significant increase is the point I'm making in regulation and controls are put in. We've moved down that path, and we've spent nearly $200 million to put these controls in place. Now that '24 rule is being challenged and look to be more practical with the new proposed rules. That would be -- I'm making a number up, again, it would be more like a 7%, just to give you context, okay? So 2% went to 10% and now we're at 7%. So it's significantly above the controls and regs that were but it's below it appears whatever it's going to be approved may be lower than the '24 rules. Does that make sense?

Yes, absolutely.

Okay. So now let's talk about -- we don't know exactly when these new rules are going to come out. We're hopeful it will be over the next several months or some comment periods that just recently closed. We are building our facilities' ontrols to the level of the latest rule that was put out in 2024, okay? Now there's some modifications that we think were necessary, which have been incorporated in these new proposed rules, which we're hopeful to get out there to make it more realistic and practical. But overall, we're trying to put in the most stringent controls we can and make sure the environment continues to be safe and compliant with the requirements. I mean these facilities are safe. The amount of ethylene oxide that's used in and released how these facilities is very, very small.

Okay. And you mentioned the CapEx component, maybe slight changes, but you're still going forward with that. I guess talk about maybe the extension and how that's changed the cadence of CapEx and when we should expect that to kind of roll off?

Yes. So we intend to have the improvements completed by the end of this year with very little tail running into next year. So that -- I think this year, we're projecting $45 million to $50 million or something like that in the number for 2026 in our CapEx, and we expect to use most of that to complete our [indiscernible] compliance requirements.

Okay. And then I guess the other component of [indiscernible] was the potential reevaluation of the 2016 ETO Iris value. if that remains an appropriate way to assess the risk, I guess, what are the implications related to this metric? And why does this matter for Sotera .

That's a really good question. So thanks for asking. Not a lot of people ask that question, embedded within this new proposed rules to relook the 2016 [ Iris ] level. And that's a risk assessment that was put out, and it was a very, very, very conservative risk assessment. And that has actually been the basis for a lot of the litigation. This very conservative assessment was put out and [indiscernible] have rallied around that. And I would just tell you that apparently in this new rule is being relooked, I don't know exactly where that will stand and what the end result will be. . But if a correct value is assigned an appropriate context of that risk assessment is presented, that should be a meaningful impact on the litigation going forward. But that's still to be determined, right? And how then that will be absorbed and incorporated within a given jurisdiction still to be determined, but I'm hopeful that, that becomes more realistic than what the prior reg had.

Okay. Then I think in the past, kind of as it relates to some of this regulation, you've talked about increased regulation actually means probably more outsourcing and kind of a better market environment for you. I guess, do you think the kind of updated version of this rule still allows you to take some of the market share? And do you think there'll be additional outsourcing on the back of it?

Yes. I would just say this company, Sotera Health has regulations that impact this business all the time. If it's Nordion handling cobalt, Nelson labs and the tests that they do and making sure the customers products are compliant with regulatory requirements or Sterigenics and operating their facilities with all the different nuclear regulatory commission requirements or EHS requirements from the EPA, we're not afraid of regulation at all, right? And to your point, it actually helps us because we have scale, and we're pretty darn good at what we do. So we're not afraid of regulation. It's just clarity of what the rules are, tell us what the rules are, so we get to buy them and make sure they're realistic. And as long as that happens, we think we'll be able to continue to perform and excel and that will create long-term opportunities for us on all 3 businesses.

Great. And you mentioned the litigation front. I just wanted to kind of get a quick update there. I mean, I think in Georgia, you had a judge dismissed 5 of the remaining bellwether cases. I guess, how should we think about this outcome regarding the remaining cases? And then what are the next steps within kind of the Georgia piece? .

Yes. On Georgia, specifically, and I think in any of these courts -- no court nor has any plan layer been able to prove causation at this low level of ethylene oxide usage, okay, in emissions? I want to be very clear on that. There's been no causation proven anywhere in any of these courts. And Atlanta is just further support of that. The other side tried to come in on general causation specific causation, and prove that ethylene oxide, these very low miniscule levels caused the cancer these plaintiffs. Listen, we have empathy for anybody who have cancer, all of us have got that in their lives, right? I've got family and friends that have all gone through this, right? But definitely not [indiscernible] at these levels are not the cause of the cancer here. And so right now, we had a judge in Georgia that put science front center and show that causation doesn't exist. And we're hopeful that, that will apply to the rest of the cases in Georgia. And obviously, the other side is going to appeal this, and it's going to run a pellet process, which we probably won't have better visibility to the outcome of that in 2027. But at the end of the day, these facilities are safe, that we operate in a compliant manner. And most importantly, this is critical -- ethylene oxide is absolutely critical 50% or 20 billion devices a year according to FDA are sterilized with EO. This is what keeps patients safe and patients can have surgical procedures and get critical medical devices because we know that they've been sterilized properly with ethylene oxide, which could be the only source in a lot of these medical devices. So I think we just got to have the proper context here of what's really going on.

Okay. Great. And then any update on California? Next steps we should look for?

I'm not sure how current most people are. There were some recent motions filed in California. We motion for summary judgment, we wanted to pursue. We thought the probability of winning that would be low at this stage of the trial, but we thought any chance we can have to get in front of the judge and get the facts straight and clear. It's important for us, and we did that. . Listen, there's a lot of time left still here between January and April '27 trials. And we're hopeful that the courts continue to stay focused on science. And if the judge continues to be focused on science, we feel confident that we're going to prevail. But at the end of the day, we still have to go into a local court in L.A. County and it's left up to a judge and jury decided the outcome there, but we feel confident it sits front and center, we're going to be in a good spot.

Okay. I guess shifting to Nelson Labs declined in 1Q. I guess, can you talk through some of the moving pieces across expert advisory services testing and validation and then when you expect to lap some of the tougher comps in ES?

Yes, yes. So expert advisory services, we had a record year in 2024 and then probably the worst year in the company in 2025. So we had to tail both cities going on within a very short window of time. If you exclude that out, which I never like to do because I don't want my team excluding anything out because at the end of the day, we're accountable all of it. But if you exclude out the expert advisory services, the core lab business grew 5% last year, which is pretty darn good. . This business does 3% to 5% margin and lab space has been a little choppy in this business well. We'd like it to grow faster, obviously. As we look coming out of the first quarter, we said second quarter would have slight growth. We're very optimistic about our ability to deliver that. We're sitting here on June 8. We feel pretty darn confident we're going to be able to deliver that growth in the second quarter. And the outlook, we're optimistic. And the reason we're optimistic is routine testing continues to do well with validation testing, which is based on new regulations and new product spend and some other things. We're seeing some nice activity there. So we're very optimistic on what we see for the rest of the year on Nelson Labs as well. It's a good business. It's very synergistic to what we do in the Sterigenics side as well.

Yes. And I think you guided to margins low to mid-30s. 1Q is maybe a little bit lower than that. Is it really just a function of better revenue growth kind of getting the operating leverage on that?

Yes. In the volume. So in the first quarter, we're not surprised by the first quarter performance. We guided to that. We knew first quarter was going to be where it came [Audio Gap] so about 60-plus percent of the cost of that. You're coming out of fourth quarter where volumes are pretty good. There's a seasonality impact that comes down. The first quarter is always the slowest. And it's been 10 years I've been here. And you have a choice. Do you get rid of the labor and then bring them back in the second quarter, but that doesn't work, right? You've got to make sure you can give high-quality, reliable service. So we have to flow through the first quarter is always a challenge, and it was -- and that's what materialized in our numbers in the first quarter, but we expect that to be right on track the rest of the year and the total margins to be rating as 1 just referenced.

Great. And then earlier, you mentioned the synergy opportunities between Nelson Labs and Sterigenics. I guess maybe talk through some of the specific cross-selling initiatives that you have and any challenges that maybe you've run into as you start to build on your progress there?

Yes, yes. So as we look at that business, I'd say about 40% of the Nelson Lab business is to really Assurance, which is highly tied to a lot of the work that goes on within Sterigenics and approximately 20% of the revenue within Nelson Lab comes from embedded labs within Sterigenics facilities either embedded or real close proximity to it. . So there's a really unique value prop that we're able to give customers on lot release and then also more complicated validation testing. We've done a lot of work around this over the last couple of years. We've -- BJ Lehmann, who runs our strategy and business development effort has been leading. She's done a really nice job on it, and we're getting it more and more into the organization. We've got a couple of key priorities that we've been focusing around Guardian accounts, which are strategic accounts that are getting the benefit of the whole package of Sterigenics and Nelson. And then we've got a couple of other key segments that we're really focused on. that we talked about at our Investor Day that are growing a little bit faster in the marketplace, and we've got incremental resources and focus in that area. And then we're just measuring it and holding teams accountable in driving growth. So we're very hopeful what this looks like over the next couple of years as well.

Great. Maybe speak to some of the end market dynamics within Nelson Labs. And I think those are end markets maybe have been a little bit more challenged. So maybe talk how those are performing? And then how Nelson is doing specific to even some of the broader trends?

Yes. So Nelson Labs is a business that focused on microbiology and analytical chemistry testing. That area -- this business hasn't grown as much as we'd like over the last several years. But I just -- I think it's important to give context. I mean during COVID, we had a big opportunity around PP&E testing. The business had pretty significant growth and high margins. We weren't going to pass on that opportunity. And then the volumes settled back down and then you had the great resignation and then after this, you had a lot of activity by the FDA and our advisory services, I stated earlier, had a record year in '24 and then '25, a lot of that business went down. But that -- fundamentally, the Nelson Labs business is a darn good business. It's a 35% margin for a lab business that's not very capital intensive that we think should be growing mid-single digits over time. is a really darn good business. We're looking at assets that we looked at 3, 4 years ago that are down 40%, 50% in revenue or value. And we're anywhere near that. This business is pretty strong in the end markets. When customers spend on new products, venture capital money comes in, new regulations come in, sterility volume those up. Those are the big 4 volume drivers that impact this business.

Yes. And I guess shifting to Nordion. You've been investing more recently to ensure kind of future cobalt supply, including the Westinghouse partnership in the U.S., I guess what drove this decision to invest in more capacity in the U.S.? And then how should we think about the cadence of CapEx investments there going forward? .

Yes. So there's 2 big -- cobalt development, we haven't done a significant cobalt development program since early 2000s of that business, and we have 2 of them going on right now. And I think it would be helpful to give context on the 2. One is Darlington. It's a nuclear reactor site in -- it's part of OPG, Ontario Power Group. They are -- they've been a longtime partner of ours for years, and they had a facility at Pickering. That site was going down. So we worked with them to get Darlington to start making Cobalt to offset the Pickering. So that's basically why we did [indiscernible]. One reactor was going down and another 1 was going to be able to start to do cobalt. So that was -- just think of it as a replacement with a little incremental. The bigger one that you're referencing is Westinghouse. In West most of the cobalt we get today is can do reactor platforms. And the benefit with Westinghouse is between our technology and their capability, we're able to now go to utilities that have pressurized water reactor reactors, okay? That opens up a much larger base of nuclear reactors around the world, a lot of them here in the U.S. Just because you have this reactor, it doesn't mean you can make cobalt though. You've got to get the recipe in the know-how from us and Westinghouse to make that happen. So we are working with individual utilities to bring them up to speed. So we have the first utility we're working on right now. And we're working with them on bringing cobalt into that reactor platform. That's a long process. So we filed a license amendment of the utility by the license amendment request with the Nuclear Regulatory Commission. It will take about a year to get approved. So sometime late fall or early winter, we should get approved from [indiscernible]. We'll be able to start making the cobalt what then will get us cobalt in 2030. The reason we did this is that gives us more supply long term and also helps us with some of the geopolitical. So today, we buy cobalt from Canada, as I mentioned, we buy from China, India, Russia and Argentina. This will give us an opportunity if we needed to, to be able to scale other utilities over the next decade, if that's what we choose to do. It gives us a nice flexibility. So when we think about the CapEx, when we get on the other side of these programs, which is why we're confident on the CapEx we've been talking about coming down, we will -- on the other side of the programs, the CapEx for Nordion were down significantly because these co-op development programs will be behind us.

Okay.

Sorry, long answer.

It's really helpful. It's really helpful. And then usually, we think about Cobalt as kind of being an input for the sterilization process. But -- are there any other kind of areas where you're seeing an increased use of cobalt maybe like radiotherapy treatments in oncology or any other areas?

Yes. So obviously, the big use that we have today is for brain cancer treatment, and there's some other cancer treatments that are starting to explore the use of cobalt. We've been a very reliable supplier on the brain cancer side for many, many years. It's a good market for us. It's not a high -- the capital equipment, what happens is there's capital equipment in the market, and we supply the cobalt into that capital equipment. And then what happens is it deteriorates at 12% a year, just like cobalt does everywhere and then we replenish it. So we see opportunities potentially over time in new cancer treatments. But right now, brain cancer is the big one that we're focused on. We use a HSA, which is high-specific activity cobalt, a little higher radiation flux than which you get with sterilization cobalt.

Okay. Okay. And I guess turning to your guidance in 2026 guide, a 5% to 6.5% revenue growth range. I guess walk us through some of the moving pieces in this and then any potential like swing factors we should be aware of? .

Yes. Again, I go back to 5% to 6.5%. I go back to looking at your price is 3% to 4% in that area, and then volume and mix will make up the rest of that I think the opportunity to do better than that would be focused around volume and mix. If Sterigenics and Nelson Labs, those 2 businesses had more volume influx than that would help us. overdeliver there. Nordion is pretty -- we give -- learning is a little lumpy because it's depending on when the utilities harvest the cobalt, but we've given pretty clear visibility. It's been our most predictable business over the last several years. I think that's pretty well situated for '26 as well.

Okay. And I guess there's been a lot of macro uncertainty rising input costs, including freight, but maybe talk through how inflated your businesses from some of these dynamics. And then give us a sense for maintaining your guidance sort of an ever-changing macro environment?

Yes. On the cost side, particularly the fuel for transportation would be one that people talk about a lot, we pass that through. So we don't incur transportation charges. So customers drop off the product at Sterigenics and then they pick it up. Customers ship the product to us at Nelson Labs. We test it and we get to report to them. At Nordion, we ship Cobalt to them. We take it with all kinds of vessels, if you will, and it's pretty expensive to transport, but that's a pass-through. So we get -- we don't make margin on that. So if costs go up on that, we just pass that through to the customer. So we're insulated from that perspective and across all 3 businesses on transportation and energy costs. .

Okay. Okay. . The other thing that kind of comes up is EO gas costs. I mean you contracted out with those, maybe talk through some of the dynamics with sourcing that?

Yes, yes. So we're in multiyear contracts there, and we pretty much have a price agreement on what we're going to pay for that product. So we're pretty well protected on that. And just broadly on energy costs and operating our Sterigenics facility, it's not a huge material number in our business. .

Okay. Okay. And then you ended 1Q with 3.2 net leverage. Is the priority still to get between the range and then maybe are you becoming more aggressive on the M&A front as you get closer to this range and where in your portfolio would you focus on?

Okay. So our net leverage, as you see, is 3.2x net leverage. We've guided towards, over time, we think we can get this to 2 to 3x, and we're well on track to do that. Our free cash flow is going to continue to accelerate in the business as we go forward. As far as capital deployment and M&A, all 3 businesses have opportunity, but I would tell you the near-term and midterm opportunities seem to be focused more on the Sterigenics side based on opportunities that are out there. And obviously, I want to make sure that Nelson Labs is in a more stable operating environment before we deploy a bunch more capital for M&A there. But strategically, we still want to build out pharma services over time in that business as well.

Okay. Okay. That makes sense. And then I guess, as we think about some of the announcements that have been made from pharma on sort of reshoring in the U.S., have you seen any disruptions in terms of where your people are looking to build out capacity for sterilization on that front or any changes related to locations of your facilities? .

No. I mean, this isn't something you just go pop up at 10 and start sterilizers it's pretty well thought out. I would just tell you that overall, if there's a big [indiscernible] sterilization buying, we're very well situated for that because we're one of the largest sterilizers, if not the largest here in the U.S., and we're very well situated. That would be a good positive for us, if that was a meaningful impact. .

Okay. Great. And then maybe talk to some of the competitive dynamics, if any, I mean, you talked a little bit about the outsourcing earlier, but any other kind of external sterilization companies and in where you feel you are with the competitive side? .

We're very well situated. Obviously, in Asia, it's a much -- we don't have a significant presence as we do in the U.S. and Europe, but we're very well situated competitively. We've got one global player that competes with us that is a very good company that we have to compete with all the time. And then there's a bunch of smaller regional players that are out there in the marketplace as well. But I'd see in U.S. and Europe are very well situated. Even in Latin America, South America, we've got some pretty good presence in what we do in Brazil, what we do in Mexico. And I would tell you that in Asia is probably opportunity that we're not as big a force there outside of what we do in China and a little bit in Thailand.

Okay. And as you think to expand into that region, would it be more sort of organic build from the ground up greenfield type of capacity expansions? Or would you look to acquire some of maybe the smaller players in that?

Good question. A combination of both, and we'll look at the trade-offs speed to market is very critical for us and how quickly we have customers that want us in a given geography. We have to look at, is it better off the build? And can we get there in the time lines they want and get exactly what we want or do we buy something and then maybe have to adapt it to get to our standards. So we'll look at both options and look at the most efficient way to deploy capital and get the best returns in periods of time we can for our shareholders. .

Yes. Are there any other like regulation considerations as you look to expand into geographies, keep in mind relative to what you see in like the U.S. and Europe?

Oh, yes. I mean it's -- as I mentioned earlier, these businesses all have -- if it's a Nuclear Regulatory Commission, the FDA, the EDA. We look at these regulators around the world in the different places that we have to. So there's one geography right now that we just talk with the team in the last week ago, Alton I met with them and making sure we understood how the regulators thought about this 1 given modality going into their geography, that's absolutely something you got to be considering. .

Okay. Okay. And then, I guess, just to kind of -- we have about a minute left. So you recently paid down debt, private equity sponsors sold off some of their positions. And then you've had some positive news on the litigation front. So I guess what do you think is the most underappreciated part of the Sotera Health story and what are you most excited about as you kind of move through the next year?

Yes. To your point, I want to kind of double down on a couple of points. Our private equity ownership, they sold their last 31 million shares here in the last month. So they're completely out, which is an exciting time for the company. We're well positioned with the new shareholder base. So it's great. Our leverage has come down to 3.2 times. We just repriced our debt. Again, we've taken out probably 100 basis points out of our debt in the last year. That's about $14 million of incremental interest expense that we've been able to save. . So the company is very well positioned. I would tell you, if you're looking to be in health care, this is a great company. We've grown 20 consecutive years. We get price every single year. We've got big competitive barriers to entry. Our free cash flow is accelerating. If you want to be in a spot, this is a great place to be in health care with a lot of uncertainty. We're stable force, and we're kind of guys behind health care. And a lot of people know it's a great company, great cash flow and great employees that live Safeguard and Global Health every day. So thank you for having us here, and I appreciate your time.

Thank you so much.