STERIS plc

In the following subsections, we discuss our performance and the factors affecting it. We begin with a general overview of our operating results and then separately discuss earnings for our operating segments. 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 reflect these changes for comparability, as required. Therefore, the discussion within this Results of Operations section excludes discontinued operations and relates solely to our continuing operations.

The discussion of factors affecting our performance for the year ended March 31, 2025 compared to the fiscal year ended March 31, 2024 is included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in Part II of our Annual Report on Form 10-K for the year ended March 31, 2025.

FISCAL 2026 AS COMPARED TO FISCAL 2025

Revenues. The following table compares our revenues, in total and by type and geography, for the year ended March 31, 2026 to the year ended March 31, 2025:

(1) Allocation of revenues by geography is based on the location of delivery or distribution of products or location where services are performed.

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, primarily due to organic growth and increased pricing across all three segments, as well as the favorable impacts of foreign currency movements.

Service revenues for fiscal 2026 increased $287.9 million, or 11.1% over fiscal 2025, reflecting growth across all segments. Consumable revenues for fiscal 2026 increased $122.5 million, or 7.3%, over fiscal 2025, reflecting growth in the Healthcare and Life Sciences segments. Capital equipment revenues for fiscal 2026 increased by $66.0 million, or 5.6%, over fiscal 2025, reflecting growth in the Healthcare and Life Sciences segments, partially offset by a decline in the AST segment.

Ireland revenues for fiscal 2026 were $108.5 million, representing an increase of $1.1 million, or 1.0%, over fiscal 2025 revenues of $107.3 million, reflecting growth in service revenues, partially offset by a decline in capital equipment revenues.

United States revenues for fiscal 2026 were $4,333.8 million, representing an increase of $326.2 million, or 8.1%, over fiscal 2025 revenues of $4,007.6 million, reflecting growth in service, consumable, and capital equipment revenues.

Revenues from other foreign locations for fiscal 2026 were $1,493.7 million, representing an increase of $149.1 million, or 11.1%, over the fiscal 2025 revenues of $1,344.6 million. The increase reflects growth across all geographic regions.

Gross Profit. The following table compares our gross profit for the year ended March 31, 2026 to the year ended March 31, 2025:

Our gross profit is affected by the volume, pricing and mix of sales of our products and services, as well as the costs associated with the products and services that are sold. Our gross profit percentage increased to 44.2% for fiscal 2026 as compared to 44.0% for fiscal 2025. Favorable impacts from pricing (120 basis points), operational improvements and lower restructuring costs (70 basis points), and productivity (50 basis points) were partially offset by unfavorable impacts from tariffs (80 basis points), inflation (70 basis points), materials costs (30 basis points), mix (30 basis points), and currency (10 basis points).

Operating Expenses. The following table compares our operating expenses for the year ended March 31, 2026 to the year ended March 31, 2025:

NM - Not meaningful

Selling, General, and Administrative Expenses. Significant components of total selling, general, and administrative expenses (“SG&A”) are compensation and benefit costs, fees for professional services, travel and entertainment expenses, facility costs, and other general and administrative expenses. SG&A increased 5.5% in fiscal 2026 over fiscal 2025. The increase in SG&A during the fiscal year ended March 31, 2026, compared to the fiscal year ended March 31, 2025, is primarily attributable to increased compensation and benefit costs, dealer commissions, and bad debt expense, which were partially offset by lower costs associated with our EO litigation.

Research and Development. Research and development expenses increased $5.3 million in fiscal 2026 over fiscal 2025. Research and development expenses are influenced by the number and timing of in-process projects and labor hours and other costs associated with these projects. Our research and development initiatives continue to emphasize improving innovation governance processes and leveraging technology to accelerate development initiatives to launch critical capital and consumable products. During fiscal 2026, our investments in research and development have continued to be focused on, but were not limited to, enhancing capabilities of sterile processing technologies, procedural products and accessories, and devices and support accessories used in gastrointestinal endoscopy procedures.

Illinois EO Litigation Settlement. On March 3, 2025, the Company entered into binding confidential term sheets ("Term Sheets") with plaintiffs’ counsel, as well as settlement agreements with several plaintiffs in cases which were at the time scheduled for trial in fiscal 2026. On October 29, 2025, the Company entered into binding confidential settlement agreements ("Settlement Agreements") with plaintiffs' counsel, containing terms and provisions consistent with the Term Sheets. The Settlement Agreements are expected to lead to resolution of substantially all of the claims for personal injury related to EO that are currently pending in the Circuit Court of Cook County, Illinois. We recorded an expense of $48.2 million related to this settlement in fiscal 2025. For more information, refer to Note 12 to our consolidated financial statements titled, "Commitments and Contingencies."

Restructuring Expenses. In May 2024, we adopted and announced a targeted restructuring plan (the "Restructuring Plan"). This plan includes a strategic shift in our approach to the Healthcare surgical business in Europe, as well as other actions including the impairment of an internally developed X-ray accelerator, product rationalizations and facility consolidations. Approximately 300 positions have been eliminated. These restructuring actions were designed to enhance profitability and improve efficiency, which we realized beginning in fiscal 2025 and 2026. As of March 31, 2026, the execution of our Restructuring Plan is substantially complete.

The following table summarizes our total pre-tax restructuring expenses recorded in fiscal 2026 related to the Restructuring Plan:

(1)Recorded in Cost of revenues on the Consolidated Statements of Income.

The Restructuring Plan expenses incurred during fiscal 2026 and 2025 primarily related to actions taken in our Healthcare segment. Total pre-tax restructuring expense of $110.1 million has been recorded relating to the Restructuring Plan since inception, of which $33.9 million has been recorded in Cost of revenues.

Liabilities related to restructuring activities are recorded as current liabilities in the accompanying Consolidated Balance Sheets within "Accrued payroll and other related liabilities" and "Accrued expenses and other." The following table summarizes our restructuring liability balances:

Non-Operating Expenses, Net. Non-operating expenses, net consists of interest expense on debt, offset by interest earned on cash, cash equivalents, short-term investment balances, losses (gains) related to disposal activities, and other expense (income) related to our equity investments, including our equity earnings and amortization of basis differences arising from our investments. The following table compares our net non-operating expenses, net for the year ended March 31, 2026 to the year ended March 31, 2025:

Interest expense decreased $25.6 million during fiscal 2026 as compared to fiscal 2025, primarily due to the lower principal amount of debt outstanding. For more information, refer to Note 8 to our consolidated financial statements titled, "Debt."

Interest and miscellaneous income increased during fiscal 2026, as compared to fiscal 2025, by $1.4 million and is driven by higher interest income.

Other expense, net was $3.5 million during fiscal 2026, primarily reflecting a disposal-related fixed asset impairment, as well as amortization related to a noncontrolling equity investment, which were partially offset by a gain on the sale of a building. Other income, net during fiscal 2025 was $7.4 million and primarily related to the gain recorded from the sale of our CECS business, which was partially offset by a loss recorded on an equity investment. For more information on our fixed assets, refer to Note 7 to our consolidated financial statements, titled "Property, Plant, and Equipment." For more information on our equity investments, refer to Note 3 to our consolidated financial statements, titled "Business Acquisitions, Divestitures, and Investments."

Income Tax Expense. The following table compares our tax expense and effective income tax rates for the years ended March 31, 2026 and March 31, 2025:

The effective income tax rates from continuing operations for fiscal 2026 was 25.0% compared to 23.2% for fiscal 2025. The fiscal 2026 effective tax rate from continuing operations increased when compared to 2025, primarily due to changes in geographic mix of income and unfavorable discrete items, including withholding taxes. Additional information regarding our income tax expense and effective income tax rate is included in Note 10 to our consolidated financial statements titled, "Income Taxes."

Business Segment Results of Operations.

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 reflect these changes for comparability, as required.

Our Healthcare segment provides a comprehensive offering for healthcare providers worldwide, focused on sterile processing departments and procedural centers, such as operating rooms and endoscopy suites. Our products and services range from infection prevention consumables and capital equipment, as well as services to maintain that equipment; to the repair of re-usable procedural instruments; to outsourced instrument reprocessing services. In addition, our procedural products also include endoscopy accessories, instruments, and capital equipment infrastructure used primarily in operating rooms, ambulatory surgery centers, endoscopy suites, and other procedural areas.

Our AST segment supports medical device and pharmaceutical manufacturers through a global network of contract sterilization and laboratory testing facilities, and integrated sterilization equipment and control systems. Our technology-neutral offering supports Customers every step of the way, from testing through sterilization.

Our Life Sciences segment provides a comprehensive offering of products and services designed to support biopharmaceutical and medical device manufacturing facilities, in particular those focused on aseptic manufacturing. Our portfolio includes a full suite of capital equipment, consumable products, equipment maintenance and specialty services.

We disclose a measure of segment income that is consistent with the way management operates and views the business. The accounting policies for reportable segments are the same as those for the consolidated Company.

For more information regarding our segments please refer to Note 13 to our consolidated financial statements titled, "Business Segment Information," and Item 1, "Business."

The following table compares business segment revenues as well as impacts from acquisitions, divestitures, and foreign currency movements for the year ended March 31, 2026 to the year ended March 31, 2025.

Organic revenue growth and constant currency organic revenue growth are non-GAAP financial measures of revenue performance. Organic revenue growth is calculated by removing the impact of acquisitions and divestitures for one year following the respective transaction from the GAAP revenue growth. Constant currency organic revenue growth is subject to a further adjustment to eliminate the impact of foreign currency movements.

Healthcare revenues increased 8.5% in fiscal 2026, as compared to fiscal 2025, reflecting growth across service, consumable, and capital revenues of 11.8%, 7.2%, and 5.7%, respectively. The constant currency organic growth of 7.6% is primarily due to increased volume, impacting revenues by a mid-single digit percentage, as well as increased pricing, impacting revenues by a low-single digit percentage.

The Healthcare segment’s backlog at March 31, 2026 amounted to $392.1 million. The Healthcare segment's backlog at March 31, 2025 was $369.2 million. The increase is due to the timing of shipments and the benefit of acquisitions.

AST revenues increased 9.6% in fiscal 2026, as compared to fiscal 2025. The constant currency organic growth of 6.7% is primarily due to increased pricing, impacting revenues by a mid-single digit percentage, as well as increased volume, impacting revenues by a low-single digit percentage, with service growth partially offset by a decline in capital equipment.

Life Sciences revenues increased 8.6% in fiscal 2026, as compared to fiscal 2025 reflecting growth across capital, consumable, and service revenues of 15.5%, 7.6%, and 4.9% , respectively. The constant currency organic growth of 6.7% is primarily due to increased volume, impacting revenues by a mid-single digit percentage, as well as increased pricing, impacting revenues by a low-single digit percentage.

The Life Sciences backlog at March 31, 2026 and 2025 amounted to $98.7 million and $83.7 million, respectively. The increase is due to timing of shipments.

The following table compares business segment and Corporate operating income for the year ended March 31, 2026 to the year ended March 31, 2025:

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

(2) Acquisition and integration related charges include transaction costs and integration expenses associated with acquisitions.

(3) Costs incurred in tax restructuring.

(4)For more information regarding the restructurings, refer to Note 2 to our consolidated financial statements titled, "Restructuring."

(5) For more information regarding the Illinois EO litigation settlement, refer to Note 12 to our consolidating financial statements titled "Commitments and Contingencies."

The Healthcare segment’s operating income increased $64.8 million to $1,036.4 million in fiscal year 2026, as compared to $971.5 million in fiscal year 2025. The increase in operating income is primarily due to the benefits of higher volume, pricing, and productivity, which were partially offset by increased tariff costs and inflation. The segment's operating margins were 24.6% for fiscal year 2026 and 25.0% for fiscal year 2025. Operating margin declined as tariff costs and inflation more than offset the margin expansion otherwise driven by volume, pricing, and productivity.

The AST segment’s operating income increased $59.1 million to $524.7 million in fiscal year 2026, as compared to $465.6 million in fiscal year 2025. The AST segment's operating margins were 46.1% for fiscal year 2026 and 44.8% for fiscal year 2025. The increase in operating income and margin for the year is primarily due to higher pricing and volume, which were partially offset by increased labor inflation costs.

The Life Sciences segment’s operating income increased $21.5 million to $251.0 million in fiscal year 2026, as compared to $229.4 million in fiscal year 2025. The segment’s operating margins were 42.6% for fiscal year 2026 and 42.3% for fiscal year 2025. The increase in operating income and margin for the year is primarily due to the benefit of higher volume and pricing, which were partially offset by increased inflation and tariff costs.