STERIS Q3 2025 Earnings Report

STERIS EPS Results

• Actual EPS: $2.32
• Consensus EPS: $2.33
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

STERIS Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $1.38 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

STERIS Announcement Details

• Quarter: Q3 2025
• Date: 2/5/2025
• Time: After Market Closes
• Conference Call Date: Thursday, February 6, 2025
• Conference Call Time: 9:00AM ET

STERIS (NYSE:STE) provides infection prevention products and services worldwide. It operates through four segments: Healthcare, Applied Sterilization Technologies, Life Sciences, and Dental. The Healthcare segment offers cleaning chemistries and sterility assurance products; automated endoscope reprocessing system and tracking products; endoscopy accessories, washers, sterilizers, and other pieces of capital equipment for the operation of a sterile processing department; and equipment used directly in the operating room, including surgical tables, lights, and connectivity solutions, as well as equipment management services. It also provides capital equipment installation, maintenance, upgradation, repair, and troubleshooting services; preventive maintenance programs and repair services; instrument and endoscope repair and maintenance services; and custom process improvement consulting and outsourced instrument sterile processing services. The Applied Sterilization Technologies segment provides contract sterilization and testing services for medical device and pharmaceutical manufacturers through a network of approximately 50 contract sterilization and laboratory facilities. The Life Sciences segment designs, manufactures and sells consumable products, such as formulated cleaning chemistries, barrier, sterility assurance products, steam and vaporized hydrogen peroxide sterilizers, and washer disinfectors. This segment also offers equipment installation, maintenance, upgradation, repair, and troubleshooting services; and preventive maintenance programs and repair services. The Dental segment provides hand and electric-powered dental instruments, infection control products, conscious sedation, personal protective equipment, and water quality products for dental suite. The company serves its products and services to hospitals, other healthcare providers, and pharmaceutical manufacturers. The company was founded in 1985 and is based in Dublin, Ireland.

STERIS Q3 2025 Earnings Call Transcript

Presentation

[Operator]

Good day, and welcome to the STIRIS PLC Third Quarter twenty twenty five Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ms.

[Operator]

Julie Winter. Please go ahead.

[Julie Winter, Vice President of Investor Relations & Corporate Communications at STERIS]

Thank you, Chuck, and good morning, everyone. As usual, speaking on today's call will be Mike Tokich, our Senior Vice President and CFO and Dan Crescio, our President and CEO. I do have a few words of caution before we open for comments. This webcast contains time sensitive information and is accurate only as of today. Any redistribution, retransmission or rebroadcast of this call without the expressed written consent of STERIS is strictly prohibited.

[Julie Winter, Vice President of Investor Relations & Corporate Communications at STERIS]

Some of the statements made during this review are or may be considered forward looking statements. Many important factors could cause actual results to differ materially from those in the forward looking statements, including without limitation, those risk factors in STERIS' securities filings. The company does not undertake to update or revise any forward looking statements as a result of new information or future events or developments. STERIS' SEC filings are available through the company and on our website. In addition on today's call, non GAAP financial measures, including adjusted earnings per diluted share, adjusted operating income, constant currency organic revenue growth and free cash flow will be used.

[Julie Winter, Vice President of Investor Relations & Corporate Communications at STERIS]

Additional information regarding these measures, including definitions, is available in our release as well as reconciliations between GAAP and non GAAP financial measures. Non GAAP financial measures are presented during this call with the intent of providing greater transparency to supplemental financial information used by management and the Board of Directors in their financial analysis and operational decision making. With those cautions, I will hand the call over to Mike.

[Michael Tokich, Senior VP & CFO at STERIS]

Thank you, Julie, and good morning, everyone. It is once again my pleasure to be with you this morning to review the highlights of our third quarter performance from continuing operations. For the third quarter, total revenue reported as reported grew 6% with constant currency organic revenue also growing 6% for the quarter, driven by volume as well as two forty basis points of price. Gross margin for the quarter increased 90 basis points compared with the prior year to 44.6%. Positive price and productivity offset labor inflation.

[Michael Tokich, Senior VP & CFO at STERIS]

EBIT margin decreased 10 basis points to 23.3 of revenue compared with last year's third quarter. Litigation expense associated with our ethylene oxide trial, which began in December, as well as increased healthcare benefit costs from higher utilization by employees of our healthcare benefits program accounted for over $10,000,000 of additional expense year over year in the third quarter. The adjusted effective tax rate in the quarter was 24.5%. The year over year increase is attributable to unfavorable discrete items. Net income from continuing operations in the quarter was $229,000,000 Adjusted earnings per diluted share from continuing operations was $2.32 an 11% increase over last year.

[Michael Tokich, Senior VP & CFO at STERIS]

We are pleased with our ability to grow earnings double digits all year with the help of lower interest expense following the divestiture of the Dental segment. Capital expenditures for the first nine months of fiscal twenty twenty five totaled $299,000,000 and depreciation and amortization totaled $354,000,000 Capital expenditures were higher year over year mainly due to timing. We continue to pay down debt during the quarter ending with $2,200,000,000 in total debt. Total debt to EBITDA at quarter end was approximately 1.5 times gross leverage. Free cash flow for the first nine months of fiscal twenty twenty five was $588,000,000 well on track to achieve our full year guidance of approximately $700,000,000 With that, I'll turn the call over to Dan for his remarks.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Thanks, Mike, and good morning, everyone. Thank you for joining us to hear more about our third quarter performance and our outlook for the fiscal year. As you heard from Mike, we had another strong quarter. Looking at our segments, Healthcare constant currency organic revenue grew 7% in the quarter, led once again by strong recurring revenue streams. Our outperformance in Consumables and services continues to be driven by procedure volumes in The U.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

S. As well as price and market share gains. Healthcare capital equipment revenue declined five percent in the quarter due primarily to the timing of shipments. Orders grew over 10% in the third quarter, which is reflected in the $435,000,000 healthcare backlog. While order growth remains robust, shipments were delayed by customer project delays.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Margins improved nicely in Healthcare with volume, pricing and positive productivity offsetting labor inflation. Turning to AST, constant currency organic revenue grew 10% with 10% growth in services and a small decline in capital equipment shipments. Supporting growth in services, global medtech customers were stable and we saw growth in bioprocessing demand above our expectations. EBIT margins for AST were flat year over year and increased nicely sequentially. While the additional volume was helpful, we continue to be impacted by higher labor and energy costs.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Constant currency organic revenue declined 1% for the Life Sciences group in the quarter, driven once again by strong growth in Consumables and Services offset by a decline in capital equipment revenue. As expected, the divestiture of the CECS business on April 1 impacted our as reported revenue. Margins increased to 42.6%, a three ninety basis point improvement, benefiting from favorable mix, pricing and the divestiture of CECS. Turning to our outlook for 2025. With three quarters under our belt, we are tightening our ranges for revenue and earnings.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

As mentioned in the press release, the biggest change since last quarter is the unfavorable impact of currency rate changes impacting both revenue and profit. In addition, we were shy of our revenue expectations in the third quarter for Healthcare Capital Equipment. As a result, our outlook for as reported revenue from continuing operations is now approximately 6%. Constant currency organic revenue growth is also expected to be approximately 6%. Reflecting approximately $0.1 of impact from negative currency, adjusted earnings per diluted share are now expected to be in the range of $9.05 to $9.15 Our expectations for free cash flow are unchanged at about $700,000,000 with approximately $360,000,000 in capital spending.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Before I conclude, I would like to comment on the first ethylene oxide case to be tried against IsoMedics, which ended in a mistrial last month. As you heard from Mike, we have incurred significant expenses defending IsoMedics. But we believe that when the evidence of IsoMedics' safety practices and the scientific data related to ethylene oxide exposure is fairly presented at trial, reasonable people will conclude that there is no connection between the unfortunate medical conditions of the claimants and IsoMedics operations. We believe the evidence presented during the four weeks of trial demonstrated that during the forty four months of IsoMedics ownership, his conduct complied with applicable law and was reasonable, transparent and protective of our people, our neighbors and the environment. After the court granted the plaintiff's request for mistrial, we learned that the majority of the remaining jurors supported a verdict in IsoMedix's favor at the time that deliberations were terminated.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

The Court has scheduled this first trial for the first case for retrial in May of this year, and we will continue to vigorously defend isometics in these cases. We have continued to invest in these facilities. We have created processes and procedures that meet or exceed the applicable environmental and regulatory standards. That concludes our prepared remarks for the call. Julie, would you please give the instructions so we can begin the Q and A?

[Julie Winter, Vice President of Investor Relations & Corporate Communications at STERIS]

Thank you, Mike and Dan for your comments. Chuck, can you please give the instructions for Q and A and we'll get started.

[Operator]

Yes, ma'am. We will now begin the question and answer session. And our first question of today will come from Jacob Johnson with Stephens. Please go ahead.

[Jacob Johnson, Managing Director at Stephens Inc]

Hey, good morning. Thanks for taking the questions. I guess I'll start with the inevitable healthcare capital equipment question. Dan, you mentioned timing of orders in 3Q and you talked about the updated guidance. You also talked about strong order growth.

[Jacob Johnson, Managing Director at Stephens Inc]

Do you think this is what you're seeing in Healthcare Capital Equipment is just related to timing of orders and is it kind of specific to 3Q or are you seeing any hesitancy from hospitals on kind of CapEx spend right now?

[Daniel Carestio, President and Chief Executive Officer at STERIS]

The spending is still great because we're seeing the new orders come in. What we're seeing is just delays. The customers are just not ready from what they prescribed to us as the original want date when they make the order. And then we're contacting customers a month or weeks in advance and they're saying, guys, we're not going to be ready to take it at the end of the month. I can't say definitively at this point that that's a trend because there's a couple of big orders that have moved the needle in the last quarter or two.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

But generally speaking, it's something that we're seeing that's occurring with our customers in terms of pushing out some of the timing of us shipping.

[Jacob Johnson, Managing Director at Stephens Inc]

Okay. That's helpful. And then maybe on the Goodguys side of things, you mentioned bioprocessing outpacing expectation at AST. I think we've seen that for some of the bioprocessing reports thus far this quarter. Just curious kind of what if you could unpack kind of the trends you're seeing in that bioprocessing

[Jacob Johnson, Managing Director at Stephens Inc]

end market and what that could mean

[Jacob Johnson, Managing Director at Stephens Inc]

as we look out over the next year. Processing end market and what that could mean as we look out over next year for AST?

[Daniel Carestio, President and Chief Executive Officer at STERIS]

I think in a general statement, last year Q2, Q3 was kind of the trough that we saw in terms of demand through our facilities, which doesn't always necessarily correlate directly with the customers because it depends on where inventory is in the supply chain and how much inventory sits at the end customer, right, their customer. But what you've seen as they've reported their earnings and the comments we've heard is that there seems to be some optimism and some positive trend of intake. And obviously, we're seeing that flow through our AST facilities.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

I'm optimistic

[Daniel Carestio, President and Chief Executive Officer at STERIS]

to think that we've sort of worked through the inventory challenges and we've been consistent in our messaging saying this has been a relatively small but high growth business for us for some time that we believe was taking a reset. And I believe that we've we're through that reset period and hope to have more normalized growth going forward.

[Jacob Johnson, Managing Director at Stephens Inc]

I'm hopeful you're right on that as well. I'll jump back in queue.

[Jacob Johnson, Managing Director at Stephens Inc]

Thanks for taking the questions.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Sure thing.

[Operator]

The next question will come from Brett Fishburne with KeyBanc. Please go ahead.

[Brett Fishbin, Vice President & Equity Research Analyst at KeyBanc Capital Markets]

Hey, thanks very much for taking the questions. Just one on the guidance. I noticed in the press release that there was an indication that you're assuming no tariffs for the remainder of the fiscal year, which I think makes sense at this point based on what we know. Just thinking ahead to FY 2026, could you help frame how you're viewing the potential risk in the scenario that tariffs are in fact reintroduced in regions such as Canada and Mexico? Thank you.

[Michael Tokich, Senior VP & CFO at STERIS]

Yes, Brett. We like others, we've done thorough analysis, looked at it many different ways. And the situation is so fluid at this point in time. We're not going to comment directionally as to what the impact could be. We're going to take more of a wait and see approach.

[Michael Tokich, Senior VP & CFO at STERIS]

But believe us, we are working hard behind the scenes to understand what the impact is and what our options are in order to help alleviate some of that impact. And if you remember, we do have a facility in Quebec, Canada and one facility in Monterrey, Mexico. And in total, they're about just under 10% of our cost of goods sold, just to give you some frame of reference.

[Brett Fishbin, Vice President & Equity Research Analyst at KeyBanc Capital Markets]

All right. That's a helpful metric to keep in mind. Thank you. And then just a follow-up question on cost. I think you mentioned a step up in legal expense as one of the drivers of the elevated or increased OpEx this quarter.

[Brett Fishbin, Vice President & Equity Research Analyst at KeyBanc Capital Markets]

So just wondering if you could touch on how we should be thinking about legal expense on a go forward basis? And maybe also just the decision or accounting reason to not adjust if they're abnormal type of expenses? Thank you.

[Michael Tokich, Senior VP & CFO at STERIS]

Yes. They are all recorded in our corporate expenses. They are not in the segment themselves. So this quarter, we incurred about just under $6,000,000 in year over year increase in expenses and year to date we are about just over $10,000,000 We anticipate probably another couple million dollars 5 ish million in the fourth quarter from an expense standpoint as a headwind that we've included in our forecast.

[Operator]

The next question will come from Michael Pollark with Wolfe Research. Please go ahead.

[Michael Polark, Senior Equity Research Analyst at Wolfe Research LLC]

Good morning. Question on AST, seeing the services accelerate to 10%, heard the bioprocess comments, also heard MedTech customers stable. What does stable mean just like revenue flat? Can you give us an update on where you think inventory management headwinds are with that cohort? Yes.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

This is Dan. Sorry, that was probably vague. Not flat, but back to what we would expect is more normalized growth ranges in the low single digits in terms of volume.

[Michael Polark, Senior Equity Research Analyst at Wolfe Research LLC]

So just on AST kind

[Michael Polark, Senior Equity Research Analyst at Wolfe Research LLC]

of putting it all together, obviously 10 plus is the target growth rate here. We're seeing it in the quarter. When we saw the seven a few quarters ago, okay, maybe that was the sign of the turn. We kind of faded a little bit. Can you just comment on your level of confidence that this this feels like a solid kind of step up?

[Michael Polark, Senior Equity Research Analyst at Wolfe Research LLC]

Or is it still that you're working to better understand what the situations really are and we could have a chop around here on growth in AST for the next few quarters still?

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Yes. I don't think it's that far out. I think what I would say is we're cautiously optimistic in the trend that we've seen in the last couple of quarters. I would caution you in that we have seen sort of a manufacturing bullwhip effect from customers from time to time. So I'm not ready to declare victory and move on quite yet as it relates to '1 quarter of 10% growth, but we're enthusiastic to see the trend back in the direction where we'd like it to be.

[Michael Polark, Senior Equity Research Analyst at Wolfe Research LLC]

And if I could ask one follow-up on Healthcare Capital. I heard the comments timing of large shipment delays, timing of large projects get it. Is there any part of this that STERIS is just kind of managing after a three year period of ebbs and flows with the supply chain stuff, kind of managing the revenue level in that line down to a place where you can expect to grow it again in fiscal twenty twenty six. Is there any element of that in the update today?

[Daniel Carestio, President and Chief Executive Officer at STERIS]

I think it's too early to say. We're in our planning process now for next fiscal year and I know we're off cycle from a lot of companies. But we're just working hard to get through the fourth quarter to deliver for the customers and we'll update you obviously at the next earnings call.

[Michael Polark, Senior Equity Research Analyst at Wolfe Research LLC]

Thank you. Yes.

[Operator]

The next question will come from Jason Bittner with Piper Sandler. Please go ahead.

[Jason Bednar, Senior Research Analyst at Piper Sandler Companies]

Hey, good morning. Thanks for taking the questions.

[Jason Bednar, Senior Research Analyst at Piper Sandler Companies]

Maybe first one just to start, margin performance was really strong in each of healthcare and life sci. I think a record for healthcare at least the highest we've seen in our model. So congrats on all of that. I did want to ask just can you talk about maybe sustainability of these margins, especially in healthcare, as we think through some of the moving parts of possible mix shifts, restructuring, savings, different dynamics that could impact here over the next several quarters?

[Michael Tokich, Senior VP & CFO at STERIS]

Yes. Jason, this is Mike. Yes, I mean, if you look at Healthcare and Life Sciences both, they're both being impacted by favorable volume and mix and price. And health care actually for the first time all year, we actually started seeing productivity improvements, which is great because we've been looking forward to seeing that. I would say for the rest of this year, we probably are on track.

[Michael Tokich, Senior VP & CFO at STERIS]

We're not going to comment as to FY 2026 at this point in time, but we are definitely happy that we're seeing the leverage in healthcare. And don't forget on that life sciences side, next next year is going to be a lot harder because of that mix favorable mix. Capital equipment should come back. It's down 30 some percent year over year. So we're definitely getting a big benefit out of the higher consumables and service mix.

[Michael Tokich, Senior VP & CFO at STERIS]

But all in all, we're very pleased with the margin improvement across the board for our segments.

[Jason Bednar, Senior Research Analyst at Piper Sandler Companies]

All right. Congrats, yes. If I could shift over to the EO update, I know probably limited in what all we can talk about here, but we have the retrial affect other cases that were in line to be tried? I think there was another one that had been set for the spring. I just don't know if that ends up getting pushed out because of this retrial, they have to be tried in a certain order.

[Jason Bednar, Senior Research Analyst at Piper Sandler Companies]

And then secondarily, can you comment on whether any additional cases have been added for you beyond what was disclosed last quarter?

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Yes, sure. So you have it exactly right. The judge elected on the mistrial to push out what was originally scheduled as the second case group, to be pushed later into this summer sometime to be, I don't remember the exact tentative date. But and pull the first case back to the retrying, which is the May case. So and no, we do not have any additional cases at this point.

[Jason Bednar, Senior Research Analyst at Piper Sandler Companies]

All right. Thanks so much.

[Operator]

The next question will come from Patrick Wood with Morgan Stanley. Please go ahead.

[Patrick Wood, Analyst at Morgan Stanley]

Hey guys, thank you so much and apologies for the crackly voice on my end. I guess two from me. One would be obviously under a slightly different political environment. Do you think there's any opportunity for the intensity of the legislative change around EO to loosen up a little bit or any change in how that might be implemented? How do you feel about the new administration and how that might change EO's use?

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Well, I mean the rule is already out there both in the ID and in the knee shaft. And we've been working hard to make sure that we will comply with that within the deadline. And I think we're incredibly well positioned to do that. Clearly, there's a shakeup going on at the EPA. But it's unlikely they're going to retract a rule that's already in place at this point in my view.

[Patrick Wood, Analyst at Morgan Stanley]

Yes, I figured as much. And then the second one, bit random on the endoscopy side of the business. Just curious what you're seeing both in the demand for your scopes on the volume side, but then also on the reprocessing side, how things are going there? Thanks.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Yes. In a general sense, I mean, we've done we continue to do really well, especially on the reprocessing side. We placed a lot of capital and we have a lot of chemistry flowing through that capital that's sort of a, the pull through that we've got over the last, I don't know, good year now of high capital shipments relative to Metivator's products, you know, the AERs. In terms of the endoscopy products, we're doing fine. We could be doing better frankly.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

I think we're growing about at market in that space.

[Patrick Wood, Analyst at Morgan Stanley]

One final one, if you had to guess how much of your, like say, consumables business was accounted for on the reprocessing side just as a proportion. Do you have a rough idea of where that sits?

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Well, I don't know, Patrick.

[Julie Winter, Vice President of Investor Relations & Corporate Communications at STERIS]

No.

[Julie Winter, Vice President of Investor Relations & Corporate Communications at STERIS]

The only data point we give is that endoscopy in total is about $1,000,000,000 business

[Patrick Wood, Analyst at Morgan Stanley]

for Syrah.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

That includes our capital though.

[Julie Winter, Vice President of Investor Relations & Corporate Communications at STERIS]

Includes everything.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Everything, yes. Sorry.

[Patrick Wood, Analyst at Morgan Stanley]

Totally, totally got it. Awesome. Thank you so much.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Sure. Thanks.

[Operator]

Our next question will come from Mike Matson with Needham and Company. Please go ahead.

[Mike Matson, Senior Equity Research Analyst at Needham & Company]

Yes. Thanks for taking my questions. Just want to ask one, in terms of your conversations with your customers in both the hospitals and the life science area, are you hearing any concerns about potential policy changes in the new administration? Maybe they're putting spending on hold until they kind of wait and see what happens with potential changes there?

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Yes. No, we haven't seen it. In fact, we had a really good orders quarter both in Healthcare and in Life Science capital. After an abysmal year in terms of orders in Life Sciences, we are cautiously optimistic that pharma is doing what they typically do in their normal cyclical buying patterns and getting back towards investment. In terms of our large healthcare system customers, we haven't seen any change in their direction.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

I know there's a lot of uncertainty about how they're going to get paid and, you know, all those different things from a patient and from a government perspective. But we haven't seen it, impact us at all at this point. You got to keep in mind, we talk about this frequently. Our product, the majority of our products, especially the equipment side is really a utility, and it's really procedure driven. It's not a most of what we sell is not reimbursed product, you know, from a government perspective.

[Michael Tokich, Senior VP & CFO at STERIS]

And Mike just to give you two numbers around that fact, we are up about 14% order growth in healthcare year over year, which is very strong for us. And if you look at our backlog, right, our backlog is roughly almost $80,000,000 80 5 million dollars higher than what we anticipated in that $350,000,000 range. So there's no concern there from our part on the order structure from the healthcare customers.

[Mike Matson, Senior Equity Research Analyst at Needham & Company]

Okay, got it. And then just wanted to get an update on ambulatory surgery centers. I think you've talked about that being sort of a growth driver in the past. Is that still the case? And do you have any products or anything you've launched to kind of target that call point?

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Yes. No, we still see it that way. There's clearly migration going on at a large acute care into satellite smaller facilities. And that's a trend that's been going on for quite some time. We do have a portfolio that is specifically geared for that on the equipment side both in in our surgical products as well as our SPD, sterile processing equipment.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

And we do have dedicated channel in that space as well. So we're putting resources and people and R and D investment into it. And I'm confident that we're going to be well positioned in that space.

[Mike Matson, Senior Equity Research Analyst at Needham & Company]

Okay, got it. Thank you.

[Operator]

The next question is a follow-up from Michael Pollark with Wolfe Research. Please go ahead.

[Michael Polark, Senior Equity Research Analyst at Wolfe Research LLC]

Appreciate it. Two more if I May. On Healthcare Services, I have a suspicion about how you're going to answer this, but can you just unpack, I mean, the growth drivers there, really good performance, teens, again, I believe it's all organic, has been so for a while. Is this sustainable? What's a good base case here on growth profile as we roll into next year?

[Daniel Carestio, President and Chief Executive Officer at STERIS]

It's complicated is what I would say, but in a good way. I think, look, we a lot of that is a significant portion of our services business is our traditional equipment services, right? And we've placed a lot of equipment over the last couple of years. And as the equipment comes off a warranty, we have a very high contract rate in terms of making sure that we get those folks under our contracts. And where they don't get under contracts, we have a great partnership program with the BioMeds and the healthcare facilities to ensure that they're buying our parts and using us for consultation on service repair.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

In terms of our general repair business for scopes and things like that, that's been a really strong piece of business for us. Maybe it even gets stronger. People delay capital purchases on scopes and need more repair. Not sure, hard to say. But generally speaking, we don't see those trends reverting.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

The only thing I would say is that as inflation continues to come down, our ability to get the level of price to cover our cost that we've seen over the last year and a half or so in the services business will probably come down a bit as well.

[Michael Polark, Senior Equity Research Analyst at Wolfe Research LLC]

Helpful. Life sciences, maybe tying in the bioprocess take from AST, I know they're typically different kind of customer cohorts. But how do you assess the prospects for life sciences to return to organic growth over the next year or so? What are you seeing from those customers?

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Well, what I would say

[Daniel Carestio, President and Chief Executive Officer at STERIS]

is life sciences as a whole this year is not that impressive, but it's because of the capital slowdown that we've seen there. The engine of that business is really our consumables business and we're seeing significant growth in that space. And actually a few quarters ahead of what we've seen in the biopressessing customers of AST where there's a lot more destocking going on. So we're optimistic on the growth trends that we're seeing there and in our position in the aseptic manufacturing environment of pharma.

[Michael Polark, Senior Equity Research Analyst at Wolfe Research LLC]

Thanks for taking the follow ups.

[Daniel Carestio, President and Chief Executive Officer at STERIS]

Sure thing.

[Operator]

The next question will come from Dave Turkaly with Citizens. Please go ahead.

[David Turkaly, Research Analyst at Citizen JMP]

Hey, good morning. Sorry I've been jumping around a little. I know you don't want to give guidance, so this may not fly, but I'll give it a shot. So Mike, you mentioned 14% order growth, you mentioned the backlog, the level, and just looking at the trends and obviously realizing that healthcare has gotten a lot bigger. But in the overall business, it seems like there's a shift kind of towards that even towards the mid to higher single digit.

[David Turkaly, Research Analyst at Citizen JMP]

I'm just thinking out loud here that that seems like something we've seen for a while now and maybe that's in the normal. I don't know if you have any comment on that.

[Michael Tokich, Senior VP & CFO at STERIS]

No, we're very happy, Dave, where we are and where we

[Michael Tokich, Senior VP & CFO at STERIS]

have been with

[Michael Tokich, Senior VP & CFO at STERIS]

healthcare. Obviously, a nice try on trying to get us to talk about '26, but we will wait to talk about '26 until May. But again, we're very pleased where we're at. The only thing we're a little displeased with is just the timing of the shipments, right, because we're taking the orders. It's taking us a little bit longer as Dan talked about to get those orders out the door.

[Michael Tokich, Senior VP & CFO at STERIS]

But at the end of the day, as long as it is in backlog, our cancellation rate is nil and has been nil. So we are confident that those orders get out and we'll talk more about the timing of when those shipments happen in next quarter.

[David Turkaly, Research Analyst at Citizen JMP]

Great. Thank you.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to Ms. Julie Winter for any closing remarks. Please go ahead.

[Julie Winter, Vice President of Investor Relations & Corporate Communications at STERIS]

Thanks everybody for taking the time to join us. We will be on the road a bit, in both virtual and in person conferences over the next few months and look forward to catching up with everyone.

Participants

Executives

• Julie Winter, Vice President of Investor Relations & Corporate Communications
• Michael Tokich, Senior VP & CFO
• Daniel Carestio, President and Chief Executive Officer

Analysts

• Jacob Johnson, Managing Director at Stephens Inc
• Brett Fishbin, Vice President & Equity Research Analyst at KeyBanc Capital Markets
• Michael Polark, Senior Equity Research Analyst at Wolfe Research LLC
• Jason Bednar, Senior Research Analyst at Piper Sandler Companies
• Patrick Wood, Analyst at Morgan Stanley
• Mike Matson, Senior Equity Research Analyst at Needham & Company
• David Turkaly, Research Analyst at Citizen JMP