Sotera Health Company (NASDAQ:SHC) Q4 2022 Earnings Call Transcript

Luke Sergott: Okay. All right. That’s actually what I was looking for. Because then the other ones, it was basically a 1 case per month. And this case, it’s probably to assume a lot longer than that. All right. That’s fine.

Michael Petras: Yes. Thanks for asking that question. The reason, Luke, is you talked about 2 different jurisdictions, different counties involved here. There’s only 1 case in 1 county and then the other ones are in Cobb counting.

Luke Sergott: Okay. And one last one for me on the litigation side. So any other upcoming or outstanding court proceedings outside that are similar to the one that you guys just got ruled favorably on with the Atlanta facility, anything else across any of the other facilities there?

Michael Petras: No. So what you’re referencing there is a certificate of occupancy where the court ruled in our favor there that we can continue to operate that facility. So no, and all the facility enhancements are there, and we’ve been — we’re performing very well. And all the EO facilities are up and running. We don’t have anything else like that pending.

Operator: Our next question will come from Casey Woodring with JPMorgan.

Casey Woodring: Just one on CapEx. So you increased CapEx 80% in 2022 and now guiding to another roughly 10% increase in 2023. Can you just elaborate on how much of this year’s CapEx will go to EO enhancements versus capacity expansion? And cobalt development? And then do you have any sense of when those NESHAP guidelines will come out this year and how we should be thinking about those?

Michael Petras: Yes. Thanks, Casey. So at a high level, we put on the guide $185 million to $215 million on CapEx. Approximately 70% of our CapEx is directed towards growth CapEx. That’s consistent to what we saw last year. We have significant opportunities with our customers. As you know, we work with our customers on a large portion of that capacity, making sure we have commitments for 40%, 50% before we put the shovel in the ground. So we continue to move forward with that. On the EO enhancements, it will be approximately $32 million, $34 million, somewhere in that neighborhood in 2023.

Casey Woodring: Okay. Got you. And then one on Russia, too, just I think there was some noise over the weekend about several subsidiaries of Rosatom being added to the EU sanction list. Just overall, have your conversations been with your Russian suppliers and the U.S. government around the likelihood of sanctions this year? And as a follow-up, if the worst case plays out and there is a headwind in 2023, just how would that translate to 2024, if you’re running off your existing supply this year and can’t procure in Russia?

Michael Petras: So Casey, on the most current sanctions, our team has done a preliminary review of that. We do not see any impact on our ability to continue to supply cobalt. The team has done a phenomenal job working with that with those challenges as well as the regulators around the world maneuvering through that. So we see that continuing. If there was an impact, as I stated in my prepared remarks, it would be 0% to 3% of total Sotera Health revenue impact in 2023. At this point in time, we’re not giving any guidance sitting here on February 28 in ’23, we’re not giving any forward-looking guidance of 2024 at this point in time.

Operator: Our next question will come from Dave Windley with Jefferies.

David Windley: I noticed, Michael, in the deck that there’s some mention of a push in Nelson Labs on the pharma side of the customer base. And I wondered if you could comment on that around whether that’s part of the CapEx? And is it also a part of the staffing ahead? Or is the staffing just for more the normal mix of business that you’ve seen over prior years?