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 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 and Divestitures. 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 August 2, 2023 we purchased the surgical instrumentation, laparoscopic instrumentation and sterilization container assets from Becton, Dickinson and Company (NYSE: BDX) ("BD"). The acquired assets from BD were integrated into our Healthcare segment.

The purchase price of the assets acquired from BD 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.

In addition to the acquisition of assets from BD, we completed two tuck-in acquisitions during fiscal 2024, which expanded our product andservice offerings in the AST and Healthcare segments. Total aggregate consideration was approximately $6.5 million, net of cash acquired.

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 revenue during fiscal 2024.

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

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 have classified our 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 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."

Highlights. Revenues increased $320.8 million, or 6.2%, to $5,459.5 million for the year ended March 31, 2025, as compared to $5,138.7 million for the year ended March 31, 2024. These increases reflect higher volume and pricing.

Our gross profit percentage increased to 44.0% for fiscal 2025 as compared to 43.2% for fiscal 2024. Favorable impacts from pricing, mix, productivity, and material costs were partially offset by unfavorable impacts from labor and overhead costs.

Fiscal 2025 income from operations increased 3.7% to $866.6 million over fiscal 2024 income from operations of $836.1 million. This increase was primarily due to increased volume and pricing, which was partially offset by legal costs and a settlement associated with our EO litigation, increased labor costs and higher restructuring expenses.

Cash flows provided by operating activities were $1,148.1 million and free cash flow was $787.2 million in fiscal 2025 compared to cash flows provided by operating activities of $973.3 million and free cash flow of $620.3 million in fiscal 2024 (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 fiscal 2025 increase in cash flows from operations and free cash flow resulted from the increase in cash provided by working capital, primarily driven by higher collections on accounts receivable and improved inventory management when compared to the prior year.

Our debt-to-total capital ratio was 23.6% at March 31, 2025. We have paid quarterly dividends each year since 2005 and have increased the dividend each consecutive year, including an increase during fiscal 2025 to $0.57 per share.

Outlook. In fiscal 2026 and beyond, we expect to manage our costs, grow our business with internal product and service development, invest in greater capacity, 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.