STERIS (STE) investor relations material

Executive summary

• Q3 revenue grew 9.2% year-over-year to $1,496.2 million, with constant currency organic revenue up 8% driven by volume and price increases.

• Adjusted net income from continuing operations was $249.4 million, with adjusted EPS up 9% to $2.53 per diluted share; net income attributable to shareholders was $192.9 million for the quarter.

• Free cash flow for the first nine months reached $737.6 million, reflecting higher earnings and lower capital spending.

• Operating income increased to $273.2 million for the quarter, reflecting improved volume, pricing, and lower restructuring expenses.

• The Dental segment was divested in May 2024 for $787.5 million, with proceeds used primarily to pay down debt.

Financial highlights

• Gross margin declined 70 basis points to 43.9% due to tariffs and inflation, while gross profit for the quarter was $655.5 million.

• EBIT margin decreased 40 basis points to 22.9% of revenue, mitigated by operating expense discipline.

• Free cash flow reached $737.6 million for the nine months, up from $588.1 million in the prior year.

• Debt-to-total capital ratio improved to 21.1% from 23.6% at the start of the period; total debt at quarter end was $1.9 billion.

• Cash dividends paid totaled $1.83 per share for the nine months.

Outlook and guidance

• Fiscal 2026 outlook maintained: 8%-9% as-reported revenue growth, 7%-8% constant currency organic growth.

• Adjusted EPS guidance of $10.15-$10.30, with higher end less likely due to $10 million more in anticipated tariffs.

• Free cash flow expected at $850 million; CapEx guidance unchanged at $375 million.

• Q4 expected to see a slowdown due to tough prior-year comparisons, especially in AST capital equipment.

• Restructuring actions are anticipated to improve operating income by approximately $25 million annually.