STERIS plc

STERIS is a leading global provider of products and services that support patient care with an emphasis on infection prevention. WE HELP OUR CUSTOMERS CREATE A HEALTHIER AND SAFER WORLD by providing innovative healthcare and life science products and services around the globe. We offer our Customers a unique mix of innovative products and services. These include: consumable products, such as detergents, endoscopy accessories, barrier products, instruments and tools; services, including equipment installation and maintenance, microbial reduction of medical devices, instrument and scope repair, laboratory testing, and outsourced reprocessing; capital equipment, such as sterilizers, surgical tables, and automated endoscope reprocessors; and connectivity solutions such as OR integration.

We operate and report our financial information in three reportable business segments: Healthcare, AST, and Life Sciences. Previously, we had four reportable business segments; however, as a result of the fiscal 2025 divestiture of our Dental segment, Dental is presented as discontinued operations. Historical information has been retrospectively adjusted to exclude discontinued operations for comparability, as required. For more information, refer to Note 4 to our consolidated financial statements titled, "Discontinued Operations." Non-allocated operating costs that support the entire Company and items not indicative of operating trends are excluded from segment operating income. We describe our business segments in Note 13 to our consolidated financial statements titled, "Business Segment Information."

The bulk of our revenues are derived from healthcare, medical device and pharmaceutical Customers. Much of the growth in these industries is driven by the aging of the population throughout the world, as an increasing number of individuals are entering their prime healthcare consumption years, and is dependent upon advancement in healthcare delivery, acceptance of new technologies, government policies, and general economic conditions.

In addition, there is increased demand for medical procedures, including preventive screenings such as endoscopies and colonoscopies; and a desire by our Customers to operate more efficiently, all of which are driving increased demand for many of our products and services.

Acquisitions, Divestitures, and Investments. During fiscal 2026, we completed two tuck-in acquisitions which continued to expand our product and service offerings in the Healthcare segment. Total aggregate consideration was approximately $23.4 million, including fair value of contingent consideration. We also purchased investments totaling $134.0 million, predominantly related to a noncontrolling equity investment in a non-U.S.-based healthcare product manufacturer.

During fiscal 2025, we completed several tuck-in acquisitions which continued to expand our product and service offerings in the Healthcare and AST segments. Total aggregate consideration was approximately $54.1 million.

On April 1, 2024, we completed the sale of the Controlled Environment Certification Services ("CECS") business. We recorded net proceeds of $41.9 million and recognized a pre-tax gain on the sale of $19.3 million in fiscal 2025. The business generated approximately $35.0 million in revenues during fiscal 2024.

For more information regarding our recent acquisitions and divestitures, see Note 3 to our consolidated financial statements titled, "Business Acquisitions, Divestitures, and Investments."

Discontinued Operations. On April 11, 2024, the Company announced its plan to sell substantially all of the net assets of its Dental segment for total cash consideration of $787.5 million, subject to customary adjustments, and up to an additional $12.5 million in contingent payment had the Dental business achieved certain revenue targets in fiscal 2025. No amounts have been recorded or are expected to be recorded with respect to this contingent consideration. The transaction was structured as an equity sale and closed on May 31, 2024. A component of an entity is reported in discontinued operations after meeting the criteria for held for sale classification if the disposition represents a strategic shift that has (or will have) a major effect on the entity's operations and financial results. We analyzed the quantitative and qualitative factors relevant to the divestiture of our Dental segment and determined that those conditions for discontinued operations presentation had been met prior to March 31, 2024. The Dental segment results of operations have been reclassified as income (loss) from discontinued operations in the Consolidated Statements of Income for all periods presented. Our Consolidated Statements of Cash Flows include the financial results of the Dental segment through the date of sale on May 31, 2024. A majority of the proceeds received from the sale were utilized to pay off existing debt.

For more information, see Note 4 to our consolidated financial statements titled "Discontinued Operations."

U.S. Tax Reform. On July 4, 2025, the U.S. enacted the One Big Beautiful Bill Act ("OBBBA") which contains substantial changes to its tax policies. Business provisions in the OBBBA, some of which were extensions of those established in the Tax Cuts and Jobs Act, include favorable cost recovery allowances, changes to U.S. international tax rules, and changes to energy and environmental related incentives. The law has multiple effective dates, with certain provisions applicable to fiscal years beginning after fiscal 2026. The law did not have a material impact on our consolidated financial statements for fiscal 2026, and we do not expect it to have a material impact on our effective tax rate in the future.

Highlights. Revenues increased $476.4 million, or 8.7%, to $5,935.9 million for the year ended March 31, 2026, as compared to $5,459.5 million for the year ended March 31, 2025. These increases reflect higher volume and pricing, as well as favorable impacts from foreign currency movements.

Our gross profit percentage increased to 44.2% for fiscal 2026 as compared to 44.0% for fiscal 2025. Favorable impacts from pricing, operational improvements and lower restructuring costs, and productivity were partially offset by unfavorable impacts from tariffs and inflation.

Fiscal 2026 income from operations increased 27.1% to $1,101.8 million over fiscal 2025 income from operations of $866.6 million. This increase was primarily due to increased pricing, volume, and lower restructuring and litigation costs, which were partially offset by inflation and tariffs.

Cash flows provided by operating activities were $1,341.4 million and free cash flow was $982.9 million in fiscal 2026 compared to cash flows provided by operating activities of $1,148.1 million and free cash flow of $787.2 million in fiscal 2025 (see subsection of MD&A titled, "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow). The increase in cash flows from operations and free cash flow during the period was driven primarily by improvements in net income, which more than offset the significantly lower contribution from working capital when compared to the prior year.

Our debt-to-total capital ratio was 21.3% at March 31, 2026. We have paid quarterly dividends each year since 2005 and have increased the dividend each consecutive year, including an increase during fiscal 2026 to $0.63 per share.

Outlook. In fiscal 2027 and beyond, we expect to manage our costs, grow our business with internal product and service development, invest in greater capacity and efficiency, and augment these value creating methods with potential acquisitions of additional products and services. Please refer to "Information With Respect to Our Business In General" in Item 1."Business" to this Annual Report on Form 10-K.