The conference call for STERIS plc's fourth quarter of 2024 has begun, with the operator introducing the participants and the cautionary statements being read by Julie Winter. The call may contain forward-looking statements and non-GAAP financial measures, which can be found in STERIS' SEC filings and on their website. The purpose of using non-GAAP financial measures is to provide transparency for management and the Board of Directors in their financial analysis and decision-making.

Mike Tokich, in his presentation, discussed the company's strong performance in the fourth quarter with a 10% total revenue growth and 6% constant currency organic revenue growth. Adjusted earnings per diluted share were $2.58 for the quarter and $8.83 for the full year, exceeding expectations. The company's Healthcare segment performed well, with record shipments of $332 million in capital equipment. However, gross margin declined by 80 basis points due to negative segment mix and increased materials and labor costs. The adjusted effective tax rate was lower than expected at 21.4%.

In the fourth quarter, the company's net income from continuing operations was $240.5 million and adjusted earnings per share were $2.41. Capital expenditures for fiscal 2024 were $360 million and total debt was $3.2 billion with a debt-to-EBITDA ratio of 2.1. Free cash flow for the year was $620 million. The Healthcare segment had a strong year with 13% organic revenue growth, driven by reduced lead times and a return to pre-pandemic backlog levels. Service and consumables also had strong growth, while AST saw 3% organic growth for the year.

The company has seen stabilized demand in bioprocessing, but does not anticipate significant growth until the second half of fiscal 2025. Overall, the Life Sciences segment had a solid year, with double-digit growth in service and 6% organic revenue growth. The company expects another strong year in fiscal 2025, with 6.5% to 7.5% revenue growth and improved EBIT margins. The AST segment is expected to have high single-digit growth, while Healthcare and Life Sciences are expected to have mid and low single-digit growth, respectively. EBIT margins are expected to improve as headwinds from fiscal 2024 lessen.

The company expects adjusted earnings per diluted share to increase by 10% to 13% from continuing operations, with a split of 45% in the first half and 55% in the second half. The company also announced a targeted restructuring plan, including divesting two businesses and restructuring the Healthcare Surgical Capital business in Europe. The company is confident that these changes will allow them to focus on their core business and deliver on long-term commitments to investors. The call then opened for Q&A with an analyst from Morgan Stanley asking about guidance.

In the healthcare sector, the company expects mid-single-digit growth, with a focus on maintaining growth in capital equipment and increasing momentum in services and consumables. The strong order books and recovery in procedural rates are driving this growth. There have been changes in the industry, such as the FDA sterilization town hall and EO regulations, but the company has not seen a significant impact on the competitive environment.

Dan Carestio from STERIS discusses the potential changes in the industry, particularly in terms of in-sourcing versus outsourcing. He believes that the company is well-positioned to support customers in both scenarios, whether they purchase equipment or use STERIS for contract services. The company has also worked to address regulatory barriers and improve their offerings. In terms of the AST service line, there has been some progress in growth, and the company is working to address inventory overhang in Europe.

In the second half of the year, the U.S. market for medical devices saw strong growth, with double-digit growth for most products. Europe is taking longer to recover, possibly due to procedural backlog. The company does not expect any impact on margins or EPS from a recent divestiture in Life Sciences. For fiscal years 2024 and 2025, the company expects favorable pricing of 270 and 200 basis points, respectively.

The company has the financial and human resources to pursue M&A opportunities, but they will only do so when the right opportunities present themselves. They expect growth to ramp up in the second half of the year and are expanding their X-ray capacity to meet the demand in the bioprocessing industry.

The company believes it is well positioned to take advantage of the gap between short-term supply and demand for radiation processing. The first half of the year is expected to be lighter in terms of revenue and margins, but the second half is expected to be stronger. The backlog is back to normal levels, but the demand for the company's products remains high and annual order intake has increased significantly.

The speaker believes that their company is well positioned for success, especially in terms of capital projects in the healthcare industry. They expect to continue winning projects and see growth, although at a slower pace than last year. The lead times for their products have returned to normal levels, but this does not necessarily mean a decrease in growth. The call has ended and the conference participants can now disconnect.

This summary was generated with AI and may contain some inaccuracies.