STERIS plc
For the period ended Jun 30, 2024. Filed Aug 8, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 8, 2024
STE$252.30-0.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-08.
0001757898-24-000002
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-08.
0001757898-24-000016
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 157 previous paragraphs and 153 current paragraphs.
66 unchanged; 63 reworded; 23 added; 27 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 17 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
On April 1, 2024, we completed the sale of the Controlled Environment Certification Services business. We recorded net proceeds of$41.5 million and recognized a pre-tax gain on the sale of$18.8 million in the first quarter of fiscal 2025. The business generated approximately$35.0 million in revenues in fiscal 2024.
Current report
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 should the Dental business achieve certain revenue targets in fiscal 2025. 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 were reclassified to income (loss) from discontinued operations in the Consolidated Statements of Income for all periods presented, and we classified the Dental segment's assets and liabilities as held for sale as of March 31, 2024 in the accompanying Consolidated Balance Sheets. Due to the transaction closing in the first quarter of fiscal 2025, the held for sale assets and liabilities were classified as current as of March 31, 2024. Our Consolidated Statements of Cash Flows include the financial results of the Dental segment for all periods presented. A majority of the proceeds received from the sale were utilized to pay off existing debt.
Current report
For more information, see Note 4 to our consolidated financial statements titled, "Discontinued Operations."
Current report
Highlights. Revenues increased 8.1% to $1,279.5 million for the three months ended June 30, 2024, as compared to $1,183.4 million for the same period in the prior year. The increases reflect higher volume, including the added volume from the acquisition of assets from BD in the Healthcare segment, and pricing.
Current report
Gross profit percentage was 44.7% for both of the first three months of fiscal 2025 and fiscal 2024. Favorable impacts from pricing and material costs were offset by unfavorable impacts from labor costs and adjustments and other charges.
Current report
Income from operations for the first three months of fiscal 2025 was $185.5 million, compared to income from operations of $197.8 million for the first three months of fiscal 2024. The decrease in income from operations for the three month periods is primarily due to restructuring expenses associated with the restructuring plan adopted in May 2024, as well as other compensation related expenses, which was partially offset by the benefits of higher volume and pricing as well as added volume from the acquisition of assets from BD.
Current report
Revenues increased 8.1% to $1,279.5 million for the three months ended June 30, 2024, as compared to $1,183.4 million for the same period in the prior year. The increases reflect higher volume, including the added volume from the acquisition of assets from BD in the Healthcare segment, and pricing.
Current report
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. Fewer than 300 positions are being eliminated. These restructuring actions are designed to enhance profitability and improve efficiency, and we expect to be substantially complete with the actions by the end of fiscal 2025. We anticipate improvements in income from operations of approximately $25.0 million per year, with the majority of the benefit being in fiscal 2026 and beyond due to timing of actions.
Current report
The following tables summarize our total pre-tax restructuring expenses recorded in fiscal 2025 related to the Restructuring Plan:
Current report
(1) Recorded in Cost of revenues on the Consolidated Statements of Income.
Current report
The Restructuring Plan expenses incurred during the three months ended June 30, 2024 primarily related to actions taken within our Healthcare segment. Total pre-tax restructuring expense of $72.5 million has been recorded relating to the Restructuring Plan since inception, of which $20.7 million has been recorded in Cost of revenues. We expect to incur additional costs through the remainder of fiscal 2025 for severance and other compensation related costs and lease and other contract termination and other costs, of approximately $28.0 million.
Current report
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:
Current report
Interest and miscellaneous income decreased$0.1 million during the first three months of fiscal 2025 as compared to the prior year period.
Current report
Gain on sale of business during the first three months of fiscal 2025 was $18.8 million and relates to the sale of our CECS business. For more information, refer to Note 3 to our consolidated financial statements titled, "Business Acquisitions and Divestitures."
Current report
The effective income tax rates from continuing operations for the three month periods ended June 30, 2024 and 2023 were 20.1% and 21.7%, respectively. The fiscal 2025 effective tax rate decreased when compared to fiscal 2024, primarily due to changes in geographic mix of projected profits and an increase in favorable discrete items.
Current report
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 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.
Current report
Note: 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.
Current report
Healthcare revenues increased 10.1% to $901.2 million for the three months ended June 30, 2024, as compared to $818.9 million for the same prior year period. This increase reflects growth in consumable and service revenues of 22.5% and 14.2%, respectively, which was partially offset by a decline in capital equipment revenues of 9.9%. The constant currency organic growth of 5.2% is primarily due to increased volume, impacting revenues by a low single digit percentage, as well as increased pricing.
Current report
AST revenues increased 7.2% to $249.8 million for the three months ended June 30, 2024, as compared to $233.1 million for the same prior year period. The constant currency organic growth of 7.7% is primarily due to increased pricing, impacting revenues by a mid-single digit percentage, as well as increased volume.
Current report
Life Sciences revenues decreased 2.2% to $128.5 million for the three months ended June 30, 2024, as compared to $131.4 million for the same prior year period. This decrease is partially due to the sale of the CECS business during the first quarter of fiscal 2025, which impacted service revenue, resulting in a decline of 16.9%. This decrease also reflects declines in capital equipment revenues of 14.6% and was partially offset by an increase in consumable revenues of 13.2%. The constant currency organic growth of 4.3% is primarily due to increased pricing, impacting revenues by a low single digit percentage.
Current report
The AST segment's operating income increased 7.4% to $117.7 million for the three months ended June 30, 2024, as compared to $109.6 million during the same prior year period. The segment's operating margins were 47.1% and 47.0% for the first three months of fiscal 2025 and 2024, respectively. The increase in operating income and operating margin for the three months ended June 30, 2024 is primarily due to favorable pricing, which was partially offset by increased labor costs.
Current report
The Life Sciences segment’s operating income increased 5.5% to $52.6 million for the three months ended June 30, 2024, as compared to $49.8 million for the same prior year period. The segment's operating margins were 40.9% and 37.9% for the first three months of fiscal 2025 and 2024, respectively. The increase in operating income and operating marginfor the three months ended June 30, 2024 is primarily due to favorable pricing and mix following the divestiture of CECS.
Current report
•Proceeds from the sale of businesses – During the first three months of fiscal 2025, we received proceeds of $809.6 million from the sale of our Dental segment and the sale of our CECS business. For more information, refer to Note 3 to our consolidated financial statements titled "Business Acquisitions and Divestitures" and Note 4 to our consolidated financial statements titled "Discontinued Operations."
Removed paragraphs (27)
Previous report
During the second quarter of fiscal 2023, in connection with the preparation of our quarterly consolidated financial statements, we identified and recognized a goodwill impairment loss of $490.6 million related to goodwill that arose with respect to our Dental segment acquired in the Cantel acquisition. For more information on the impairment loss, see Note 17 to our consolidated financial statements titled, "Goodwill and Intangible Assets."
Previous report
Highlights. Revenues increased 14.8% to $1,395.6 million for the three months ended December 31, 2023, as compared to $1,216.0 million for the same period in the prior year. Revenues increased 12.6% to $4,022.5 million for the nine months ended December 31, 2023, as compared to $3,573.0 million for the same period in the prior year. The increases reflect higher volume, including the added volume from the acquisition of assets from BD in the Healthcare segment, and pricing.
Previous report
Gross profit percentage for the third quarter of fiscal 2024 was 43.2% compared to the gross profit percentage for the third quarter of fiscal 2023 of 42.9%. The increase in gross profit percentage for the third quarter of fiscal 2024 is primarily due to the benefits of pricing, which was partially offset by unfavorable impacts from inflationary cost increases for materials and labor. Gross profit percentage was 44.0% for both the first nine months of fiscal 2024 and fiscal 2023. Favorable impacts from pricing and mix were offset by unfavorable impacts from productivity and inflationary cost increases for materials and labor.
Previous report
Operating income for the third quarter of fiscal 2024 was $216.2 million, compared to operating income of $190.8 million for the third quarter of fiscal 2023. Operating income for the first nine months of fiscal 2024 was $590.9 million, compared to operating income of $42.8 million for the first nine months of fiscal 2023. The increase in operating income for the three month period is primarily attributable to the benefit of higher volume and pricing during fiscal 2024. The increase in operating income for the nine month period is primarily due to the absence of the one time goodwill impairment charge of $490.6 million recorded in the second quarter of fiscal 2023, as well as the benefit of higher volume and pricing.
Previous report
Revenues increased 14.8% to $1,395.6 million for the three months ended December 31, 2023, as compared to $1,216.0 million for the same period in the prior year. The increases reflect higher volume, including the added volume from the acquisition of assets from BD in the Healthcare segment, and pricing.
Previous report
Revenues from other foreign locations increased 11.4% to $350.5 million for the three months ended December 31, 2023, as compared to $314.6 million for the same period in the prior year, reflecting growth in the Europe, Middle East & Africa ("EMEA"), Canada, Asia Pacific, and Latin American regions.
Previous report
Revenues increased 12.6% to $4,022.5 million for the nine months ended December 31, 2023, as compared to $3,573.0 million for the same period in the prior year. The increases reflect higher volume, including the added volume from the acquisition of assets from BD in the Healthcare segment, and pricing.
Previous report
Service revenues increased 9.5% for the nine months ended December 31, 2023, as compared to the same period in the prior year, reflecting growth in the Healthcare, AST, and Life Sciences segments. Consumable revenues increased by 12.2% for the nine months ended December 31, 2023, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments, which were partially offset by a decline in the Dental segment. Capital equipment revenues increased 20.0% for the nine months ended December 31, 2023, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments, which were partially offset by a decline in AST.
Previous report
Ireland revenues increased 13.3% to $60.2 million for the nine months ended December 31, 2023, as compared to $53.1 million for the same period in the prior year, reflecting growth in service, consumable, and capital equipment revenues.
Previous report
United States revenues increased 13.9% to $2,948.9 million for the nine months ended December 31, 2023, as compared to $2,589.5 million for the same period in the prior year, reflecting growth in service, consumable, and capital equipment revenues.
Previous report
Gross profit percentage for thethird quarter of fiscal 2024 was 43.2% compared to the gross profit percentage for thethird quarter of fiscal 2023 of 42.9%. Gross profit increased as favorable impacts from pricing (150 basis points), mix and other adjustments (30 basis points), and acquisitions (10 basis points) exceeded unfavorable impacts from material and labor inflation (100 basis points) and fluctuations in currency, adjustments, and other charges (60 basis points).
Previous report
Goodwill Impairment Loss. A Goodwill impairment loss of $490.6 million was recorded during the second quarter of fiscal 2023 as the result of an interim assessment of the fair value of the Dental segment. For more information regarding our goodwill impairment loss, see Note 17 to our consolidated financial statements titled, "Goodwill and Intangible Assets."
Previous report
The fluctuation in interest and miscellaneous (income) expense during thethird quarter and first nine months of fiscal 2024, as compared to the same prior year period in fiscal 2023, is primarily attributable to the negative impact of losses on our equity investments recognized during fiscal 2023 compared to gains recognized during fiscal 2024. For more information, refer to Note 15 to our consolidated financial statements titled, "Fair Value Measurements."
Previous report
The effective income tax rates for the three month periods ended December 31, 2023 and 2022 were 21.4% and 23.1%, respectively. The fiscal 2024 effective tax rate for the three months ended December 31, 2023 decreased when compared to the prior year period, primarily due to favorable discrete items recognized during fiscal 2024. The effective income tax rates for the nine month periods ended December 31, 2023 and 2022 were 21.8% and (114.8)%, respectively. The fiscal 2024 effective tax rate increased when compared to fiscal 2023, primarily due to the tax impact of the goodwill impairment loss recognized on the Dental segment during the second quarter of fiscal 2023.
Previous report
Our Dental segment provides a comprehensive offering for dental practitioners and dental schools, offering instruments, infection prevention consumables and instrument management systems.
Previous report
Healthcare revenues increased 19.1% to $916.2 million for the three months ended December 31, 2023, as compared to $769.1 million for the same prior year period. This increase reflects growth in consumable, capital equipment, and service revenues of 26.8%, 17.4%, and 13.4%, respectively. Healthcare revenues increased 18.4% to $2,605.2 million for the nine months ended December 31, 2023, as compared to $2,200.5 million for the same prior year period. This increase reflects growth in capital equipment, consumable, and service revenues of 22.8%, 20.8%, and 12.8%, respectively. The increase in revenue for the three and nine month periods ended December 31, 2023 is primarily due to the benefits of higher volume, including added volume from the acquisition of assets from BD, and pricing.
Previous report
AST revenues increased 5.8% to $234.9 million for the three months ended December 31, 2023, as compared to $222.0 million for the same prior year period. AST revenues increased 4.1% to $703.1 million for the nine months ended December 31, 2023, as compared to $675.3 million for the same prior year period. Revenue was negatively impacted by medical device Customer inventory management and the continued reduction in demand from bioprocessing Customers. Revenue was favorably impacted by pricing and fluctuation in currencies.
Previous report
Life Sciences revenues increased 20.9% to $146.6 million for the three months ended December 31, 2023, as compared to $121.3 million for the same prior year period. This increase reflects growth in capital equipment, service, and consumable revenues of 56.9%, 12.3% and 8.0%, respectively. Life Sciences revenues increased 8.4% to $411.1 million for the nine months ended December 31, 2023, as compared to $379.2 million for the same prior year period. This increase reflects growth in capital equipment, service, and consumable revenues of 12.3%, 10.3%, and 5.0%, respectively. Revenue was favorably impacted by higher volume and pricing.
Previous report
Dental revenues decreased 5.4% to $97.9 million for the three months ended December 31, 2023, as compared to $103.6 million for the same prior year period. Dental revenues decreased 4.6% to $303.2 million for the nine months ended December 31, 2023, as compared to $318.0 million for the same prior year period. The decline for the three and nine month periods ended December 31, 2023 was a result of lower volume, primarily due to Customer inventory destocking and reduced orders from a large Customer due to a temporary disruption of their operations as a result of a cybersecurity incident the Customer experienced during the third quarter, which exceeded the benefit of higher pricing in the fiscal 2024 periods.
Previous report
(5) For more information regarding our goodwill impairment loss, see Note 17 to our consolidated financial statements titled, "Goodwill and Intangible Assets."
Previous report
The AST segment's operating income increased 1.6% to $105.2 million for the three months ended December 31, 2023, as compared to $103.5 million during the same prior year period. The AST segment's operating income increased 0.7% to $325.5 million for the nine months ended December 31, 2023, as compared to $323.2 million during the same prior year period. The segment's operating margins were 44.8% and 46.6% for the third quarter of fiscal 2024 and 2023, respectively. The segment's operating margins were 46.3% and 47.9% for the first nine months of fiscal 2024 and 2023, respectively. The decrease in operating margin percentage is primarily due to higher labor and energy costs and decreased productivity, which exceeded the benefit of favorable pricing and fluctuation in currencies.
Previous report
The Life Sciences segment’s operating income increased 25.4% to $56.7 million for the three months ended December 31, 2023, as compared to $45.2 million for the same prior year period. The segment's operating margins were 38.7% and 37.3% for the third quarter of fiscal 2024 and 2023, respectively. The increases in operating income and operating margin are primarily due to favorable pricing and volume, which were partially offset by increased costs caused by inflation. The Life Sciences segment’s operating income increased 5.2% to $156.9 million for the nine months ended December 31, 2023, as compared to $149.2 million for the same prior year period. The segment's operating margins were 38.2% and 39.3% for the first nine months of fiscal 2024 and 2023, respectively. The increase in operating income is primarily due to favorable pricing and volume. The decrease in operating margin is primarily due to increased costs due to inflation, which exceeded the benefits of pricing.
Previous report
The Dental segment's operating income decreased 10.1% to $18.3 million for the three months ended December 31, 2023, as compared to $20.3 million for the same prior year period. The segment's operating margins were 18.7% and 19.6% for the third quarter of fiscal 2024 and 2023, respectively. The decline in operating income and operating margin is primarily due to a reduction in volume and increased costs from inflation, which exceeded the benefits of higher pricing. The Dental segment's operating income decreased 4.6% to $64.8 million for the nine months ended December 31, 2023, as compared to $68.0 million, for the same prior year period. The segment's operating margins were 21.4% for both the nine months ended December 31, 2023 and 2022. The decrease in operating income was primarily due to the reduction in volume and increased costs from inflation, which exceeded the benefits of higher pricing. The favorable impact of higher pricing to operating margin was partially offset by the decrease in volume and increased costs from inflation.
Previous report
•Proceeds from the sale of property, plant, and equipment- During the first nine months of fiscal 2024 and 2023, we received proceeds from the sale of property, plant, and equipment totaling $7.4 million and $12.2 million, respectively. The fiscal 2024 proceeds primarily relate to the sale of a facility previously used by the AST segment. The fiscal 2023 proceeds were primarily from the sale of a facility previously used by the Dental segment.
Previous report
•Proceeds from the sale of businesses – During the first nine months of fiscal 2024, we received proceeds of $9.5 million from the release of funds held in escrow related to the sale of the Renal Care business during fiscal 2022. During the first nine months of fiscal 2023, we sold the remaining component of the Animal Healthcare business for $6.6 million.
Previous report
•Payments on Private Placement Senior Notes – During the first nine months of fiscal 2023, we repaid $91.0 million of private placement debt. For more information on our Private Placement Senior Notes, refer to Note 5 to our consolidated financial statements titled, "Debt" and to our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.
Previous report
•Acquisition related deferred or contingent consideration – During the first nine months of fiscal 2024 and 2023, we paid $6.2 million and $0.3 million in deferred and contingent consideration, respectively. The fiscal 2024 increase is primarily related to the payout of contingent consideration from a prior acquisition totaling $5.0 million.
Reworded paragraphs (63)
Previous wording
As you read the MD&A, it may be helpful to refer to information in our consolidated financial statements contained herein, which present the results of our operations for the third quarter and first nine months of fiscal 2024 and fiscal 2023. It may also be helpful to refer to our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the Securities and Exchange Commission ("SEC") on May 26, 2023, including information in Item 1, "Business," Part I, Item 1A, "Risk Factors," and Note 10 to our consolidated financial statements titled, "Commitments and Contingencies," and Part II, Item 1A, "Risk Factors" of this Quarterly Report, for a discussion of some of the matters that can adversely affect our business and results of operations.
Current wording
As you read the MD&A, it may be helpful to refer to information in our consolidated financial statements contained herein, which present the results of our operations for the first quarter of fiscal 2025 and fiscal 2024. It may also be helpful to refer to our Annual Report on Form 10-K for the year ended March 31, 2024, which was filed with the Securities and Exchange Commission ("SEC") on May 29, 2024, including information in Item 1, "Business," Part I, Item 1A, "Risk Factors," and Note 12 to our consolidated financial statements titled, "Commitments and Contingencies," and Part II, Item 1A, "Risk Factors" of this Quarterly Report, for a discussion of some of the matters that can adversely affect our business and results of operations.
Previous wording
In the MD&A, we analyze and explain the period-over-period changes in the specific line items in the Consolidated Statements of Income (Loss). This information, discussion, and analysis may be important to you in making decisions about your investments in STERIS.
Current wording
In the MD&A, we analyze and explain the period-over-period changes in the specific line items in the Consolidated Statements of Income. This information, discussion, and analysis may be important to you in making decisions about your investments in STERIS.
Previous wording
As required by Regulation S-X, we separately present revenues generated as either product revenues or service revenues on our Consolidated Statements of Income (Loss) for each period presented. When we discuss revenues, we may, at times, refer to revenues summarized differently than the Regulation S-X requirements. The terminology, definitions, and applications of terms that we use to describe revenues may be different from terms used by other companies. We use the following terms to describe revenues:
Current wording
As required by Regulation S-X, we separately present revenues generated as either product revenues or service revenues on our Consolidated Statements of Income for each period presented. When we discuss revenues, we may, at times, refer to revenues summarized differently than the Regulation S-X requirements. The terminology, definitions, and applications of terms that we use to describe revenues may be different from terms used by other companies. We use the following terms to describe revenues:
Previous wording
•Service Revenues – We define service revenues as revenues generated from parts and labor associated with the maintenance, repair, and installation of our capital equipment. Service revenues also include outsourced reprocessing services, instrument and scope repairs, as well as revenues generated from contract sterilization and laboratory services offered through our Applied Sterilization Technologies ("AST") segment.
Current wording
•Service Revenues – We define service revenues as revenues generated from parts and labor associated with the maintenance, repair, and installation of our capital equipment. Service revenues also include outsourced reprocessing services and instrument and scope repairs, as well as revenues generated from contract sterilization and laboratory services offered through our Applied Sterilization Technologies ("AST") segment.
Previous wording
•Consumable Revenues – We define consumable revenues as revenues generated from sales of the consumable family of products, which includes dedicated consumables including V-PRO, SYSTEM 1 and 1E consumables, gastrointestinal endoscopy accessories, sterility assurance products, barrier protection solutions, cleaning consumables, and surgical instruments.
Current wording
•Consumable Revenues– We define consumable revenues as revenues generated from sales of the consumable family of products, which includes dedicated consumables used in our V-PRO sterilizers and automated endoscope reprocessors, SYSTEM 1 and 1E consumables, gastrointestinal endoscopy accessories, instruments and tools, sterility assurance products, barrier protection solutions, and cleaning consumables.
Previous wording
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, life sciences and dental products and services. We offer our Customers a unique mix of innovative consumable products, such as detergents, endoscopy accessories, barrier products, and other products and services, including: equipment installation and maintenance, microbial reduction of medical devices, dental instruments and tools, instrument and scope repair, laboratory testing services, outsourced reprocessing, and capital equipment products, such as sterilizers and surgical tables, automated endoscope reprocessors, and connectivity solutions such as OR integration.
Current wording
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.
Previous wording
We operate and report our financial information in four reportable business segments: Healthcare, AST, Life Sciences and Dental. 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 9 to our consolidated financial statements titled, "Business Segment Information."
Current wording
We operate and report our financial information in three reportable business segments: Healthcare, Applied Sterilization Technologies ("AST"), and Life Sciences. Previously, we had four reportable business segments; however, as a result of the 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 11 to our consolidated financial statements titled, "Business Segment Information."
Previous wording
The bulk of our revenues are derived from the healthcare and pharmaceutical industries. 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. The pharmaceutical industry has been impacted by increased regulatory scrutiny of cleaning and validation processes, mandating that manufacturers improve their processes. Within healthcare, there is increased concern regarding the level of hospital acquired infections around the world; 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.
Current wording
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.
Previous wording
During the first nine months of fiscal 2023, we completed several tuck-in acquisitions, which continued to expand our product and service offerings in the AST and Healthcare segment. Total aggregate consideration was approximately $40.7 million, including contingent deferred consideration of $6.7 million.
Current wording
Acquisitions and Divestitures. During the first three months of 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$13.7 million.
Previous wording
Acquisitions. On August 2, 2023, we purchased the surgical instrumentation, laparoscopic instrumentation and sterilization container assets from BD (Becton, Dickinson and Company) (NYSE: BDX). The acquired assets from BD are being integrated into our Healthcare segment.
Current wording
On June 20, 2023, we entered into a definitive agreement to purchase the surgical instrumentation, laparoscopic instrumentation and sterilization container assets from Becton, Dickinson and Company (NYSE: BDX) ("BD"). The transaction was completed on August 2, 2023, and the acquired assets from BD were integrated into our Healthcare segment.
Previous wording
The purchase price of the acquisition was $539.8 million. The acquisition also qualified for a tax benefit related to tax deductible goodwill, with a present value of approximately$60.0 million. The purchase price of the acquisition was financed with borrowings from our existing credit facility. For more information, refer to Note 5 to our consolidated financial statements titled, "Debt."
Current wording
The purchase price of the BD acquisition was $539.8 million. The acquisition also qualified for a tax benefit related to tax deductible goodwill, with a present value of approximately$60.0 million. The purchase price of the acquisition was financed with borrowings from our existing Revolving Credit Facility. For more information, refer to Note 7 titled, "Debt."
Previous wording
Acquisition and integration expenses totaled$5.7 million and $24.4 million for thethree and nine months ended December 31, 2023, respectively. Acquisition and integration expenses totaled$4.8 million and$18.5 million for the three and nine months ended December 31, 2022, respectively. The increase in acquisition and integration expenses for the three and nine months ended December 31, 2023 is primarily due to charges related to the acquisition of assets from BD and a fair value adjustment in the second quarter of fiscal 2024 related to a building held for sale from a previous acquisition. Acquisition and integration expenses are reported in the Selling, general and administrative expenses line of our Consolidated Statements of Income (Loss).
Current wording
Acquisition and integration expenses totaled$2.3 million and$2.2 millionfor the three months ended June 30, 2024 and 2023, respectively. Acquisition and integration expenses are reported in the Selling, general and administrative expenses line of our Consolidated Statements of Income and include, but are not limited to, investment banker, advisory, legal and other professional fees, and certain employee-related expenses.
Previous wording
For more information regarding our recent acquisitions, see Note 2 to our consolidated financial statements titled, "Business Acquisitions."
Current wording
For more information regarding our recent acquisitions, see Note 3 to our consolidated financial statements titled, "Business Acquisitions and Divestitures."
Previous wording
Cash flows from operations were $718.5 million and free cash flow was $457.0 million for the first nine months of fiscal 2024 compared to cash flows from operations of $541.1 million and free cash flow of $262.8 million for the first nine months of fiscal 2023 (see the subsection below titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow). The fiscal 2024 increase in cash flows from operations and free cash flows was driven by the increase in earnings and declines in cash used for tax and compensation related payments as well as a reduction in capital spending that was primarily due to timing.
Current wording
Cash flows from operations were $303.7 million and free cash flow was $195.7 million for the first three months of fiscal 2025 compared to cash flows from operations of $281.1 million and free cash flow of $214.5 million for the first three months of fiscal 2024 (see the subsection below titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow). The fiscal 2025 increase in cash flows from operations resulted from the increase in cash provided by working capital, primarily driven by higher collection on accounts receivable and improved inventory level management when compared to the same prior year period. The fiscal 2025 decrease in free cash flow is primarily due to the timing of capital spending.
Previous wording
Our debt-to-total capital ratio was 34.0% at December 31, 2023 and 33.6% at March 31, 2023. During the first nine months of fiscal 2024, we declared and paid cash dividends totaling $1.51 per ordinary share.
Current wording
Our debt-to-total capital ratio was 26.7% at June 30, 2024 and 33.7% at March 31, 2024. During the first three months of fiscal 2025, we declared and paid cash dividends totaling $0.52 per ordinary share.
Previous wording
Additional information regarding our financial performance during the third quarter of fiscal 2024 is included in the subsection below titled “Results of Operations.”
Current wording
Additional information regarding our financial performance during the first quarter of fiscal 2025 is included in the subsection below titled “Results of Operations.”
Previous wording
We, at times, refer to financial measures which are considered to be “non-GAAP financial measures” under SEC rules. We, at times, also refer to our results of operations excluding certain transactions or amounts that are non-recurring or are not indicative of future results, in order to provide meaningful comparisons between the periods presented.
Current wording
We, at times, refer to financial measures which are considered to be “non-GAAP financial measures” under the Securities and Exchange Commission rules. We, at times, also refer to our results of operations excluding certain transactions or amounts that are non-recurring or are not indicative of future results, in order to provide meaningful comparisons between the periods presented.
Previous wording
The following table summarizes the calculation of our free cash flow for the nine months ended December 31, 2023 and 2022:
Current wording
The following table summarizes the calculation of our free cash flow for the three months ended June 30, 2024 and 2023:
Previous wording
In the following subsections, we discuss our earnings and the factors affecting them for the third quarter and first nine months of fiscal 2024 compared to the same fiscal 2023 periods. We begin with a general overview of our operating results and then separately discuss earnings for our operating segments.
Current wording
In the following subsections, we discuss our earnings and the factors affecting them for the first three months of fiscal 2025 compared to the same fiscal 2024 period. We begin with a general overview of our operating results and then separately discuss earnings for our operating segments.
Previous wording
Revenues. The following tables compare our revenues for the three and nine months ended December 31, 2023 to the revenues for the three and nine months ended December 31, 2022:
Current wording
Revenues. The following table compares our revenues for the three months ended June 30, 2024 to the revenues for the three months ended June 30, 2023:
Previous wording
Service revenues increased 10.0% for the three months ended December 31, 2023, as compared to the same period in the prior year, reflecting growth in the Healthcare, AST, and Life Sciences segments. Consumable revenues increased by 16.3% for the three months ended December 31, 2023, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments, which were partially offset by a decline in the Dental segment. Capital equipment revenues increased 22.1% for the three months ended December 31, 2023, as compared to the same period in the prior year, reflecting growth in the Healthcare, Life Sciences, and AST segments.
Current wording
Service revenues increased 9.2% for the three months ended June 30, 2024, as compared to the same period in the prior year, reflecting growth in the Healthcare and AST segments, which was partially offset by a decline in the Life Sciences segment caused by the divestiture of the Controlled Environment Certification Services ("CECS") business. Consumable revenues increased by 20.8% for the three months ended June 30, 2024, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments. Capital equipment revenues decreased 10.3% for the three months ended June 30, 2024, as compared to the same period in the prior year, reflecting declines in the Healthcare and Life Sciences segments.
Previous wording
Ireland revenues increased 9.4% to $19.7 million for the three months ended December 31, 2023, as compared to $18.0 million for the same period in the prior year, reflecting growth in service and consumable revenues, partially offset by a decline in capital equipment revenues.
Current wording
Ireland revenues increased 10.8% to $22.2 million for the three months ended June 30, 2024, as compared to $20.0 million for the same period in the prior year, reflecting growth in consumable and service revenues, partially offset by a decline in capital equipment revenues.
Previous wording
United States revenues increased 16.1% to $1,025.5 million for the three months ended December 31, 2023, as compared to $883.4 million for the same period in the prior year, reflecting growth in service, consumable, and capital equipment revenues.
Current wording
United States revenues increased 10.6% to $946.9 million for the three months ended June 30, 2024, as compared to $855.8 million for the same period in the prior year, reflecting growth in consumable and service revenues, partially offset by a decline in capital equipment revenues.
Previous wording
Revenues from other foreign locations increased 8.9% to $1,013.5 million for the nine months ended December 31, 2023, as compared to $930.4 million for the same period in the prior year. The increase reflects growth within the EMEA, Canada, Asia Pacific and Latin American regions.
Current wording
Revenues from other foreign locations increased 0.9% to $310.4 million for the three months ended June 30, 2024, as compared to $307.6 million for the same period in the prior year. The increase reflects growth within the EMEA region, which was partially offset by declines primarily in the Asia Pacific region.
Previous wording
Gross Profit. 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. The following tables compare our gross profit for the three and nine months ended December 31, 2023 to the three and nine months ended December 31, 2022:
Current wording
Gross Profit. 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. The following tables compare our gross profit for the three months ended June 30, 2024 to the three months ended June 30, 2023:
Previous wording
Gross profit percentage was 44.0% for both the first nine months of fiscal 2024 and fiscal 2023. Favorable impacts from pricing (160 basis points), mix and other adjustments (60 basis points), and acquisitions (10 basis points) were offset by unfavorable impacts from material and labor inflation (120 basis points), fluctuations in currency, adjustments, and other charges (60 basis points), and productivity (50 basis points).
Current wording
Gross profit percentage was 44.7% for both of the first three months of fiscal 2025 and fiscal 2024. Favorable impacts from pricing (140 basis points), material costs (70 basis points), and divestitures (20 basis points) were offset by unfavorable impacts from labor costs (130 basis points), adjustments and other charges (70 basis points), productivity (20 basis points), and acquisitions (10 basis points).
Previous wording
Operating Expenses. The following table compares our operating expenses for the three and nine months ended December 31, 2023 to the three and nine months ended December 31, 2022:
Current wording
Operating Expenses. The following table compares our operating expenses for the three months ended June 30, 2024 to the three months ended June 30, 2023:
Previous wording
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, facilities costs, and other general and administrative expenses. SG&A increased 18.1% and 14.3% in the third quarter and first nine months of fiscal 2024, respectively, over the same prior year periods. The fiscal 2024 increase is primarily attributable to increased compensation, including incentive compensation and benefit costs, as well as increases in dealer incentives, professional fees, bad debt expense, and travel and entertainment.
Current wording
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, gains or losses from divestitures, and other general and administrative expenses. SG&A increased 9.5% in the first three months of fiscal 2025 over the same prior year period. The fiscal 2025 increase is primarily attributable to increased compensation, including incentive compensation and benefit costs, as well as increases in professional fees.
Previous wording
Research and Development. Research and development expenses increased 1.6% and 4.3% in the third quarter and first nine months of fiscal 2024, respectively, over the same prior year periods. 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 new product development, product improvements, and the development of new technological platform innovations. During fiscal 2024, our investments in research and development have continued to be focused on, but were not limited to, enhancing capabilities of sterile processing combination technologies, procedural products and accessories, and devices and support accessories used in gastrointestinal endoscopy procedures.
Current wording
Research and Development. Research and development expenses increased 3.6% in the first three months of fiscal 2025 over the same prior year period. 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 new product development, product improvements, and the development of new technological platform innovations. During fiscal 2025, our investments in research and development have continued to be focused on, but were not limited to, enhancing capabilities of sterile processing combination technologies, procedural products and accessories, and devices and support accessories used in gastrointestinal endoscopy procedures.
Previous wording
Non-Operating Expenses, Net. The following tables compare our net non-operating expenses for the three and nine months ended December 31, 2023 and 2022:
Current wording
Non-Operating Expenses, Net. The following tables compare our net non-operating expenses for the three months ended June 30, 2024 and 2023:
Previous wording
Non-operating expenses, net, consists of interest expense on debt, offset by interest earned on cash, cash equivalents, and short-term investment balances, and other miscellaneous income.
Current wording
Non-operating expenses, net consists of interest expense on debt, offset by interest earned on cash, cash equivalents, short-term investment balances, and other miscellaneous (income) expense.
Previous wording
Interest expense increased $10.4 million and $30.9 million during the third quarter and first nine months of fiscal 2024, respectively, as compared to the prior year periods, primarily due to higher interest rates on floating rate debt as well as higher principal amount of floating rate debt outstanding. For more information, refer to Note 5 to our consolidated financial statements titled, "Debt."
Current wording
Interest expense decreased $2.0 million during the first three months of fiscal 2025 as compared to the prior year period, primarily due to the lower principal amount of debt outstanding. For more information, refer to Note 7 to our consolidated financial statements titled, "Debt."
Previous wording
Income Taxes. The following tables compare our tax expense and effective income tax rates for the three and nine months ended December 31, 2023 and December 31, 2022:
Current wording
Income Taxes. The following tables compare our tax expense and effective income tax rates for the three months ended June 30, 2024 and June 30, 2023:
Previous wording
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.
Current wording
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 solutions also include endoscopy accessories, instruments, and capital equipment infrastructure used primarily in operating rooms, ambulatory surgery centers, endoscopy suites, and other procedural areas.
Previous wording
Our AST segment is a third-party service provider for contract sterilization, as well as testing services needed to validate sterility services for medical device and pharmaceutical manufacturers. Our technology-neutral offering supports Customers every step of the way, from testing through sterilization.
Current wording
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.
Previous wording
Our Life Sciences segment provides a comprehensive offering of products and services that support pharmaceutical manufacturing, primarily for vaccine and other biopharma Customers focused on aseptic manufacturing. These solutions include a full suite of consumable products, equipment maintenance and specialty services, and capital equipment.
Current wording
Our Life Sciences segment provides a comprehensive offering of products and services designed to support biopharmaceutical and medical device research and manufacturing facilities, in particular those focused on aseptic manufacturing. Our portfolio includes a full suite of consumable products, equipment maintenance, specialty services, and capital equipment.
Previous wording
For the three and nine months ended December 31, 2023 and 2022, revenues from a single Customer did not represent ten percent or more of the Healthcare, AST or Life Sciences segment revenues. Three Customers collectively and consistently account for more than 40.0% of our Dental segment revenue. The percentage associated with these three Customers collectively in any one period may vary due to the buying patterns of these three Customers as well as other Dental Customers. These three Customers collectively accounted for approxi mately 47.5% and 44.5% of our Dental segment revenues for thethree andnine months ended December 31, 2023, respectively. These three Customers collectively accounted for approximately 47.2% and 43.8% of our Dental segment revenues for the three and nine months ended December 31, 2022, respectively.
Current wording
For the three months ended June 30, 2024 and 2023, revenues from a single Customer did not represent ten percent or more of the Healthcare, AST or Life Sciences segment revenues.
Previous wording
The following tables compare business segment revenues as well as impacts from acquisitions, divestitures, and foreign currency movements for the three and nine months ended December 31, 2023 and 2022.
Current wording
The following tables compare business segment revenues as well as impacts from acquisitions, divestitures, and foreign currency movements for the three and three months ended June 30, 2024 and 2023.
Previous wording
The Healthcare segment's backlog at December 31, 2023 was $449.4 million. The Healthcare segment's backlog at December 31, 2022 was $540.4 million. The decrease is due to increased shipments in the first nine months of the year, as compared to the same period in the prior year, which was due to shortened lead times and easing of supply chain constraints.
Current wording
The Healthcare segment's backlog at June 30, 2024 was $362.0 million. The Healthcare segment's backlog at June 30, 2023 was $491.7 million. The decrease is due to shortened lead times in fiscal 2024 due to improving supply chains, which drove strong shipments throughout fiscal 2024.
Previous wording
The Life Sciences backlog at December 31, 2023 was $85.0 million. The Life Sciences backlog at December 31, 2022 was $110.6 million. The decrease is primarily due to the timing of shipments and a decrease in orders as compared to the same period in the prior year.
Current wording
The Life Sciences backlog at June 30, 2024 was $72.2 million. The Life Sciences backlog at June 30, 2023 was $104.9 million. The decrease is primarily due to softening demand, as anticipated.
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Current report — wording carried from elsewhere
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.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
We operate and report our financial information in four reportable business segments: Healthcare, AST, Life Sciences and Dental. Non-allocated operating costs that support the entire Company and items not indicative of operating trends are excluded from segment operating income.