Michael Petras: Yes. So on the biopharma side, we do business in biopharma. We probably aren’t to the scale that we’d like to be in that segment. But we have performed very well there. Obviously, this year has been a headwind. Our customers and some that you referenced, they’ve had significant challenges on their volumes and inventory takedown, which has impacted the Sterigenics volume in a meaningful way. We are bullish on that segment long term. When you look at the testing opportunities as well, we’ve also felt the impact of that to some degree, although pharma, again, is a smaller percent of total Nelson Labs. But when you look at that segment, it’s strategic to us longer term. On the GLP-1, there will be some volumes that are impacted longer term, but it’s too — it’s for the surgical procedures.
But there’s a really mixed bag. Obviously, you’re seeing some communication recently with the diabetes companies and how well they’re performing and we see the benefit of that in our business, too. So we think long term, there’s opportunities for us, particularly when you start to look at prefilled syringe and some of the things that come from that, that creates opportunities across Sotera Health. So we think it actually could be a net positive as prefilled syringes and these injectables take on a bigger portion of the marketplace long term.
Unidentified Analyst: Got you. Thank you.
Operator: The next question comes from Michael Polark with Wolfe Research. Please go ahead.
Michael Polark: Hey, good morning. Thank you taking the questions. I want to go back to the question about the high-single-digit growth goal. I mean, look, Michael, I appreciate the mid to long haul, that’s the North Star. But as I look at ’24 being so close, it just — unless I’m missing something, unless you anticipate market recovery, this destock cycle being over, maybe the Sterigenics capacity coming online is more impactful than we’re appreciating. It just looks like high single’s maybe a stretch place to start for ’24 for now. And so I’ll ask the question again, knowing you’re not giving guidance today, like what are the puts and takes as we sit here today to frame up growth opportunity in 2024?
Michael Petras: Yes. Mike, as you stated, we’re not in a position to talk about 2024 guidance. We’ll do that in the first quarter when we wrap up 2023, and we’re going through that process right now with our teams. Mid to long-term, we expect the high-single-digit organic growth, as we’ve mentioned, and I referenced earlier, we’re working through inventories with our customers. They’ve destocked, and that had an impact on both Sterigenics and Nelson as well as some of the development efforts that had an impact. As that starts to burn off, we expect some volumes to return. But obviously, we’re talking about the lower end of our range today because of the fact that we’re still seeing some of the challenges around that inventory side.
So as we look into ’24, we’re going to have to make some assumptions based on where we think our customers’ inventories are going to go. I don’t want to get into that level of detail today because we’re not prepared to do it. But you see what’s happening with the customer base and what they’re communicating and inventories and the destocking challenges. So that’s something that we’ll be focused on as we communicate our guidance for ’24 as well.
Michael Polark: The follow-up on Nordion, just — the fourth quarter all year, you’ve been consistent that it’d be a very 4Q-heavy year. A month into the quarter, have some of these very large shipments and deliveries already happened? Or are they yet to happen? I guess, I’m just curious for what level of visibility and/or confidence you have into making this large sequential step up? And then I will extend the Nordion question and ask just — this year was especially lumpy. We know this business is lumpy and hard to predict quarter-to-quarter, but very predictable over the mid-run. Best guess for seasonal pattern in 2024, lumpy, like the lumpiness of ’23 or maybe a little smoother?
Michael Petras: Yes. Thanks, Mike, for all the lumpiness there. When we look at the fourth quarter, we’ve been very clear and consistent all year that 75% of the revenue would come in the second half, 50% would be in the fourth quarter. We’re re-communicating that again to you today. Riaz and the team have done a phenomenal job in executing against that and given visibility to that throughout the year. There’s always operational things that can happen, but we feel confident, and we’ve reiterated that on our call this morning that we expect the Nordion team to deliver approximately 50% of their revenue in the fourth quarter. As far as next year, again, I know you really want me to tell you what ’24 looks like. I won’t get into great specifics on it.
It will not be as lumpy and it’s back-end loaded as you’re seeing right now in 2023. This was a very — as we stated many times, this is really driven by harvest schedules from the utilities. Our customers want cobalt and they want it as fast as they can get it. And that’s what we’re doing to turn it as quickly as we can get it. So that is — I just want to make sure one knows that demand is there for Nordion. It’s all driven by when the supply with the nuclear reactors. This year was extremely lumpy with 75% in the back half of the year. We do not anticipate it being as lumpy next year.
Michael Polark: Thank you.
Operator: The next question comes from Casey Woodring with JPMorgan. Please go ahead.
Casey Woodring: Great. Thank you for taking my questions. The first one is just around Nelson Labs. So margins declined more than 250 basis points sequentially. Wondering if you can expand on that. It looks like revenues seem to be in line with expectations, but the margins had been anticipated to improve quarter-over-quarter. Was that all just the RCA dynamic that, Michael, you mentioned earlier, or was something else going on there? And then maybe just touch on what’s assumed in 4Q for Nelson. I think last quarter, you said 4Q would look more like 2Q in that business. So has that expectation changed at all?
Jonathan Lyons: Hey, Casey, it’s Jon Lyons. Thanks for the question. Really, you called it out, the RCA piece had an impact sequentially, not the biggest impact. I think really when you look at it, we dropped revenue a couple of million dollars sequentially. And there’s — that’s just primarily the volume and loss leverage in the business that’s really the biggest driver of the margin decline. And as you look at the overall story in Q4, yes, we had been calling, I think, on the last call, that Q4 might be up a little bit. As we look at Q4 today and how we’ve seen things overall transpire across the businesses, we’re calling for Sterigenics and Nelson in total to be flat to Q3 and having gotten specific as to how that might shake out between the two of them.
Casey Woodring: Got you. And then maybe just if I could fit one more in. Last quarter, you gave some color around bioprocessing as being the key driver or one of the key drivers for the full year guidance reduction. Just curious if the continued softness there is a contributing factor for why you’re pointing to the low end of the full year guidance range here today? Or if the market softness you referred to when talking about the guidance is more generalized than that? Thank you.
