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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-02-08 · 216 added, 286 removed, 229 unchanged (69% of the section changed)

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• where cash will come from to fund future debt principal repayments, growth outside of core operations, repurchases of shares, cash dividends and future working capital needs.

As you read the MD&A, it may be helpful to refer to information in our consolidated financial statements contained herein, which present the results of our operations for the third quarter and first nine months of fiscal 2024 and fiscal 2023.

As you read the MD&A, it may be helpful to refer to information in our consolidated financial statements contained herein, which present the results of our operations for the first quarter of fiscal 2025 and fiscal 2024.

It may also be helpful to refer to our Annual Report on Form 10-K for the year ended March 31, 2024, which was filed with the Securities and Exchange Commission ("SEC") on May 29, 2024, including information in Item 1, "Business," Part I, Item 1A, "Risk Factors," and Note 12 to our consolidated financial statements titled, "Commitments and Contingencies," and Part II, Item 1A, "Risk Factors" of this Quarterly Report, for a discussion of some of the matters that can adversely affect our business and results of operations.

In the MD&A, we analyze and explain the period-over-period changes in the specific line items in the Consolidated Statements of Income (Loss).

In the MD&A, we analyze and explain the period-over-period changes in the specific line items in the Consolidated Statements of Income.

This information, discussion, and analysis may be important to you in making decisions about your investments in STERIS.

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Revenues – Defined

As required by Regulation S-X, we separately present revenues generated as either product revenues or service revenues on our Consolidated Statements of Income (Loss) for each period presented.

As required by Regulation S-X, we separately present revenues generated as either product revenues or service revenues on our Consolidated Statements of Income for each period presented.

When we discuss revenues, we may, at times, refer to revenues summarized differently than the Regulation S-X requirements.

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• Service Revenues – We define service revenues as revenues generated from parts and labor associated with the maintenance, repair, and installation of our capital equipment.

Service revenues also include outsourced reprocessing services, instrument and scope repairs, as well as revenues generated from contract sterilization and laboratory services offered through our Applied Sterilization Technologies ("AST") segment.

Service revenues also include outsourced reprocessing services and instrument and scope repairs, as well as revenues generated from contract sterilization and laboratory services offered through our Applied Sterilization Technologies ("AST") segment.

• Capital Equipment Revenues – We define capital equipment revenues as revenues generated from sales of capital equipment, which includes steam and gas sterilizers, low temperature liquid chemical sterilant processing systems, pure steam/water systems, surgical lights and tables, and integrated operating rooms ("OR").

• Consumable Revenues – We define consumable revenues as revenues generated from sales of the consumable family of products, which includes dedicated consumables including V-PRO, SYSTEM 1 and 1E consumables, gastrointestinal endoscopy accessories, sterility assurance products, barrier protection solutions, cleaning consumables, and surgical instruments.

• Consumable Revenues – We define consumable revenues as revenues generated from sales of the consumable family of products, which includes dedicated consumables used in our V-PRO sterilizers and automated endoscope reprocessors, SYSTEM 1 and 1E consumables, gastrointestinal endoscopy accessories, instruments and tools, sterility assurance products, barrier protection solutions, and cleaning consumables.

• Recurring Revenues – We define recurring revenues as revenues generated from sales of consumable products and service revenues.

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STERIS is a leading global provider of products and services that support patient care with an emphasis on infection prevention.

WE HELP OUR CUSTOMERS CREATE A HEALTHIER AND SAFER WORLD by providing innovative healthcare, life sciences and dental products and services.

We offer our Customers a unique mix of innovative consumable products, such as detergents, endoscopy accessories, barrier products, and other products and services, including:

equipment installation and maintenance, microbial reduction of medical devices, dental instruments and tools, instrument and scope repair, laboratory testing services, outsourced reprocessing, and capital equipment products, such as sterilizers and surgical tables, automated endoscope reprocessors, and connectivity solutions such as OR integrati on.

We operate and report our financial information in four reportable business segments:

Healthcare, AST, Life Sciences and Dental.

Non-allocated operating costs that support the entire Company and items not indicative of operating trends are excluded from segment operating income.

WE HELP OUR CUSTOMERS CREATE A HEALTHIER AND SAFER WORLD by providing innovative healthcare and life science products and services around the globe.

We offer our Customers a unique mix of innovative products and services.

These include:

consumable products, such as detergents, endoscopy accessories, barrier products, instruments and tools;

services, including equipment installation and maintenance, microbial reduction of medical devices, instrument and scope repair, laboratory testing, and outsourced reprocessing;

capital equipment, such as sterilizers, surgical tables, and automated endoscope reprocessors;

and connectivity solutions such as OR integrati on.

We operate and report our financial information in three reportable business segments:

Healthcare, Applied Sterilization Technologies ("AST"), and Life Sciences.

Previously, we had four reportable business segments;

however, as a result of the divestiture of our Dental segment, Dental is presented as discontinued operations.

Historical information has been retrospectively adjusted to exclude discontinued operations for comparability, as required.

For more information, refer to Note 4 to our consolidated financial statements titled, "Discontinued Operations." Non-allocated operating costs that support the entire Company and items not indicative of operating trends are excluded from segment operating income.

We describe our business segments in Note 11 to our consolidated financial statements titled, "Business Segment Information."

The bulk of our revenues are derived from the healthcare and pharmaceutical industries.

The bulk of our revenues are derived from healthcare, medical device and pharmaceutical Customers.

Much of the growth in these industries is driven by the aging of the population throughout the world, as an increasing number of individuals are entering their prime healthcare consumption years, and is dependent upon advancement in healthcare delivery, acceptance of new technologies, government policies, and general economic conditions.

The pharmaceutical industry has been impacted by increased regulatory scrutiny of cleaning and validation processes, mandating that manufacturers improve their processes.

Within healthcare, there is increased concern regarding the level of hospital acquired infections around the world;

increased demand for medical procedures, including preventive screenings such as endoscopies and colonoscopies;

In addition, there is increased demand for medical procedures, including preventive screenings such as endoscopies and colonoscopies;

and a desire by our Customers to operate more efficiently, all of which are driving increased demand for many of our products and services.

Acquisitions .

On August 2, 2023, we purchased the surgical instrumentation, laparoscopic instrumentation and sterilization container assets from BD (Becton, Dickinson and Company) (NYSE:

The acquired assets from BD are being integrated into our Healthcare segment.

The purchase price of the acquisition was $539.8 million.

Acquisitions and Divestitures .

During the first three months of fiscal 2025, we completed several tuck-in acquisitions, which continued to expand our product and service offerings in the Healthcare and AST segments.

Total aggregate consideration was approximately $13.7 million .

On June 20, 2023, we entered into a definitive agreement to purchase the surgical instrumentation, laparoscopic instrumentation and sterilization container assets from Becton, Dickinson and Company (NYSE:

The transaction was completed on August 2, 2023, and t he acquired assets from BD were integrated into our Healthcare segment.

The purchase price of the BD acquisition was $539.8 million.

The acquisition also qualified for a tax benefit related to tax deductible goodwill, with a present value of approximately $60.0 million .

The purchase price of the acquisition was financed with borrowings from our existing credit facility.

For more information, refer to Note 5 to our consolidated financial statements titled, " Debt."

During the first nine months of fiscal 2023, we completed several tuck-in acquisitions, which continued to expand our product and service offerings in the AST and Healthcare segment.

Total aggregate consideration was approximately $40.7 million, including contingent deferred consideration of $6.7 million.

Acquisition and integration expenses totaled $5.7 million and $24.4 million for the three and nine months ended December 31, 2023, respectively.

Acquisition and integration expenses totaled $4.8 million and $18.5 million for the three and nine months ended December 31, 2022, respectively.

The increase in acquisition and integration expenses for the three and nine months ended December 31, 2023 is primarily due to charges related to the acquisition of assets from BD and a fair value adjustment in the second quarter of fiscal 2024 related to a building held for sale from a previous acquisition.

Acquisition and integration expenses are reported in the Selling, general and administrative expenses line of our Consolidated Statements of Income (Loss).

During the second quarter of fiscal 2023, in connection with the preparation of our quarterly consolidated financial statements, we identified and recognized a goodwill impairment loss of $490.6 million related to goodwill that arose with respect to our Dental segment acquired in the Cantel acquisition.

For more information on the impairment loss, see Note 17 to our consolidated financial statements titled, "Goodwill and Intangible Assets."

For more information regarding our recent acquisitions, see Note 2 to our consolidated financial statements titled, " Business Acquisitions ."

Revenues increased 14.8% to $1,395.6 million for the three months ended December 31, 2023, as compared to $1,216.0 million for the same period in the prior year.

Revenues increased 12.6% to $4,022.5 million for the nine months ended December 31, 2023, as compared to $3,573.0 million for the same period in the prior year.

The purchase price of the acquisition was financed with borrowings from our existing Revolving Credit Facility.

For more information, refer to Note 7 titled, " Debt."

Acquisition and integration expenses totaled $2.3 million and $2.2 million for the three months ended June 30, 2024 and 2023, respectively.

Acquisition and integration expenses are reported in the Selling, general and administrative expenses line of our Consolidated Statements of Income and include, but are not limited to, investment banker, advisory, legal and other professional fees, and certain employee-related expenses.

On April 1, 2024, we completed the sale of the Controlled Environment Certification Services business.

We recorded net proceeds of $41.5 million and recognized a pre-tax gain on the sale of $18.8 million in the first quarter of fiscal 2025.

The business generated approximately $35.0 million in revenues in fiscal 2024.

For more information regarding our recent acquisitions, see Note 3 to our consolidated financial statements titled, " Business Acquisitions and Divestitures ."

Discontinued Operations .

On April 11, 2024, the Company announced its plan to sell substantially all of the net assets of its Dental segment for total cash consideration of $787.5 million , subject to customary adjustments, and up to an additional $12.5 million in contingent payment should the Dental business achieve certain revenue targets in fiscal 2025.

The transaction was structured as an equity sale and closed on May 31, 2024.

A component of an entity is reported in discontinued operations after meeting the criteria for held for sale classification if the disposition represents a strategic shift that has (or will have) a major effect on the entity's operations and financial results.

We analyzed the quantitative and qualitative factors relevant to the divestiture of our Dental segment and determined that those conditions for discontinued operations presentation had been met prior to March 31, 2024.

The Dental segment results of operations were reclassified to income (loss) from discontinued operations in the Consolidated Statements of Income for all periods presented, and we classified the Dental segment's assets and liabilities as held for sale as of March 31, 2024 in the accompanying Consolidated Balance Sheets.

Due to the transaction closing in the first quarter of fiscal 2025, the held for sale assets and liabilities were classified as current as of March 31, 2024.

Our Consolidated Statements of Cash Flows include the financial results of the Dental segment for all periods presented.

A majority of the proceeds received from the sale were utilized to pay off existing debt.

For more information, see Note 4 to our consolidated financial statements titled, " Discontinued Operations ."

Revenues increased 8.1% to $1,279.5 million for the three months ended June 30, 2024, as compared to $1,183.4 million for the same period in the prior year.

The increases reflect higher volume, including the added volume from the acquisition of assets from BD in the Healthcare segment, and pricing.

Gross profit percentage for the third quarter of fiscal 2024 was 43.2% compared to the gross profit percentage for the third quarter of fiscal 2023 of 42.9%.

The increase in gross profit percentage for the third quarter of fiscal 2024 is primarily due to the benefits of pricing, which was partially offset by unfavorable impacts from inflationary cost increases for materials and labor.

Gross profit percentage was 44.0% for both the first nine months of fiscal 2024 and fiscal 2023.

Favorable impacts from pricing and mix were offset by unfavorable impacts from productivity and inflationary cost increases for materials and labor.

Operating income for the third quarter of fiscal 2024 was $216.2 million, compared to operating income of $190.8 million for the third quarter of fiscal 2023.

Operating income for the first nine months of fiscal 2024 was $590.9 million, compared to operating income of $42.8 million for the first nine months of fiscal 2023.

The increase in operating income for the three month period is primarily attributable to the benefit of higher volume and pricing during fiscal 2024.

The increase in operating income for the nine month period is primarily due to the absence of the one time goodwill impairment charge of $490.6 million recorded in the second quarter of fiscal 2023, as well as the benefit of higher volume and pricing.

Cash flows from operations were $718.5 million and free cash flow was $457.0 million for the first nine months of fiscal 2024 compared to cash flows from operations of $541.1 million and free cash flow of $262.8 million for the first nine months of fiscal 2023 (see the subsection below titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow).

The fiscal 2024 increase in cash flows from operations and free cash flows was driven by the increase in earnings and declines in cash used for tax and compensation related payments as well as a reduction in capital spending that was primarily due to timing.

Our debt-to-total capital ratio was 34.0% at December 31, 2023 and 33.6% at March 31, 2023.

During the first nine months of fiscal 2024, we declared and paid cash dividends totaling $1.51 per ordinary share.

Additional information regarding our financial performance during the third quarter of fiscal 2024 is included in the subsection below titled “Results of Operations.”

Gross profit percentage was 44.7% for both of the first three months of fiscal 2025 and fiscal 2024.

Favorable impacts from pricing and material costs were offset by unfavorable impacts from labor costs and adjustments and other charges.

Income from operations for the first three months of fiscal 2025 was $185.5 million, compared to income from operations of $197.8 million for the first three months of fiscal 2024.

The decrease in income from operations for the three month periods is primarily due to restructuring expenses associated with the restructuring plan adopted in May 2024, as well as other compensation related expenses, which was partially offset by the benefits of higher volume and pricing as well as added volume from the acquisition of assets from BD.

Cash flows from operations were $303.7 million and free cash flow was $195.7 million for the first three months of fiscal 2025 compared to cash flows from operations of $281.1 million and free cash flow of $214.5 million for the first three months of fiscal 2024 (see the subsection below titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow).

The fiscal 2025 increase in cash flows from operations resulted from the increase in cash provided by working capital, primarily driven by higher collection on accounts receivable and improved inventory level management when compared to the same prior year period.

The fiscal 2025 decrease in free cash flow is primarily due to the timing of capital spending.

Our debt-to-total capital ratio was 26.7% at June 30, 2024 and 33.7% at March 31, 2024.

During the first three months of fiscal 2025, we declared and paid cash dividends totaling $0.52 per ordinary share.

Additional information regarding our financial performance during the first quarter of fiscal 2025 is included in the subsection below titled “Results of Operations.”

NON-GAAP FINANCIAL MEASURES

We, at times, refer to financial measures which are considered to be “non-GAAP financial measures” under SEC rules.

We, at times, refer to financial measures which are considered to be “non-GAAP financial measures” under the Securities and Exchange Commission rules.

We, at times, also refer to our results of operations excluding certain transactions or amounts that are non-recurring or are not indicative of future results, in order to provide meaningful comparisons between the periods presented.

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We use this as a measure to gauge our ability to pay cash dividends, fund growth outside of core operations, fund future debt principal repayments, and repurchase shares.

The following table summarizes the calculation of our free cash flow for the nine months ended December 31, 2023 and 2022:

Nine Months Ended December 31,

The following table summarizes the calculation of our free cash flow for the three months ended June 30, 2024 and 2023:

Three Months Ended June 30,

(dollars in thousands) 2024 2023

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Results of Operations

In the following subsections, we discuss our earnings and the factors affecting them for the third quarter and first nine months of fiscal 2024 compared to the same fiscal 2023 periods.

In the following subsections, we discuss our earnings and the factors affecting them for the first three months of fiscal 2025 compared to the same fiscal 2024 period.

We begin with a general overview of our operating results and then separately discuss earnings for our operating segments.

The following tables compare our revenues for the three and nine months ended December 31, 2023 to the revenues for the three and nine months ended December 31, 2022:

Three Months Ended December 31,

(dollars in thousands) 2023 2022 Change Percent Change

Total revenues $ 1,395,645 $ 1,215,994 $ 179,651 14.8 %

Revenues by type:

Service revenues 590,889 536,952 53,937 10.0 %

Consumable revenues 487,841 419,555 68,286 16.3 %

Capital equipment revenues 316,915 259,487 57,428 22.1 %

Revenues by geography:

Ireland revenues 19,651 17,959 1,692 9.4 %

United States revenues 1,025,458 883,390 142,068 16.1 %

Other foreign revenues 350,536 314,645 35,891 11.4 %

Revenues increased 14.8% to $1,395.6 million for the three months ended December 31, 2023, as compared to $1,216.0 million for the same period in the prior year.

The increases reflect higher volume, including the added volume from the acquisition of assets from BD in the Healthcare segment, and pricing.

Service revenues increased 10.0% for the three months ended December 31, 2023, as compared to the same period in the prior year, reflecting growth in the Healthcare, AST, and Life Sciences segments.

Consumable revenues increased by 16.3% for the three months ended December 31, 2023, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments, which were partially offset by a decline in the Dental segment.

Capital equipment revenues increased 22.1% for the three months ended December 31, 2023, as compared to the same period in the prior year, reflecting growth in the Healthcare, Life Sciences, and AST segments.

Ireland revenues increased 9.4% to $19.7 million for the three months ended December 31, 2023, as compared to $18.0 million for the same period in the prior year, reflecting growth in service and consumable revenues, partially offset by a decline in capital equipment revenues.

United States revenues increased 16.1% to $1,025.5 million for the three months ended December 31, 2023, as compared to $883.4 million for the same period in the prior year, reflecting growth in service, consumable, and capital equipment revenues.

Revenues from other foreign locations increased 11.4% to $350.5 million for the three months ended December 31, 2023, as compared to $314.6 million for the same period in the prior year, reflecting growth in the Europe, Middle East & Africa ("EMEA"), Canada, Asia Pacific, and Latin American regions.

Nine Months Ended December 31,

The following table compares our revenues for the three months ended June 30, 2024 to the revenues for the three months ended June 30, 2023:

Three Months Ended June 30,

(dollars in thousands) 2024 2023 Change Percent Change

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Other foreign revenues 310,418 307,562 2,856 0.9 %

Revenues increased 12.6% to $4,022.5 million for the nine months ended December 31, 2023, as compared to $3,573.0 million for the same period in the prior year.

Revenues increased 8.1% to $1,279.5 million for the three months ended June 30, 2024, as compared to $1,183.4 million for the same period in the prior year.

The increases reflect higher volume, including the added volume from the acquisition of assets from BD in the Healthcare segment, and pricing.

Service revenues increased 9.5% for the nine months ended December 31, 2023, as compared to the same period in the prior year, reflecting growth in the Healthcare, AST, and Life Sciences segments.

Consumable revenues increased by 12.2% for the nine months ended December 31, 2023, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments, which were partially offset by a decline in the Dental segment.

Capital equipment revenues increased 20.0% for the nine months ended December 31, 2023, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments, which were partially offset by a decline in AST.

Ireland revenues increased 13.3% to $60.2 million for the nine months ended December 31, 2023, as compared to $53.1 million for the same period in the prior year, reflecting growth in service, consumable, and capital equipment revenues.

United States revenues increased 13.9% to $2,948.9 million for the nine months ended December 31, 2023, as compared to $2,589.5 million for the same period in the prior year, reflecting growth in service, consumable, and capital equipment revenues.

Revenues from other foreign locations increased 8.9% to $1,013.5 million for the nine months ended December 31, 2023, as compared to $930.4 million for the same period in the prior year.

The increase reflects growth within the EMEA, Canada, Asia Pacific and Latin American regions.

Service revenues increased 9.2% for the three months ended June 30, 2024, as compared to the same period in the prior year, reflecting growth in the Healthcare and AST segments, which was partially offset by a decline in the Life Sciences segment caused by the divestiture of the Controlled Environment Certification Services ("CECS") business.

Consumable revenues increased by 20.8% for the three months ended June 30, 2024, as compared to the same period in the prior year, reflecting growth in the Healthcare and Life Sciences segments.

Capital equipment revenues decreased 10.3% for the three months ended June 30, 2024, as compared to the same period in the prior year, reflecting declines in the Healthcare and Life Sciences segments.

Ireland revenues increased 10.8% to $22.2 million for the three months ended June 30, 2024, as compared to $20.0 million for the same period in the prior year, reflecting growth in consumable and service revenues, partially offset by a decline in capital equipment revenues.

United States revenues increased 10.6% to $946.9 million for the three months ended June 30, 2024, as compared to $855.8 million for the same period in the prior year, reflecting growth in consumable and service revenues, partially offset by a decline in capital equipment revenues.

Revenues from other foreign locations increased 0.9% to $310.4 million for the three months ended June 30, 2024, as compared to $307.6 million for the same period in the prior year.

The increase reflects growth within the EMEA region, which was partially offset by declines primarily in the Asia Pacific region.

Gross Profit.

Our gross profit is affected by the volume, pricing, and mix of sales of our products and services, as well as the costs associated with the products and services that are sold.

The following tables compare our gross profit for the three and nine months ended December 31, 2023 to the three and nine months ended December 31, 2022:

Three Months Ended December 31, Change Percent

(dollars in thousands) 2023 2022

Gross profit:

Product $ 365,751 $ 304,313 $ 61,438 20.2 %

Service 236,842 217,184 19,658 9.1 %

Total gross profit $ 602,593 $ 521,497 $ 81,096 15.6 %

Gross profit percentage:

Product 45.4 % 44.8 %

Service 40.1 % 40.4 %

Total gross profit percentage 43.2 % 42.9 %

Gross profit percentage for the third quarter of fiscal 2024 was 43.2% compared to the gross profit percentage for the third quarter of fiscal 2023 of 42.9%.

Gross profit increased as favorable impacts from pricing (150 basis points), mix and other adjustments (30 basis points), and acquisitions (10 basis points) exceeded unfavorable impacts from material and labor inflation (100 basis points) and fluctuations in currency, adjustments, and other charges (60 basis points).

Nine Months Ended December 31, Change Percent

The following tables compare our gross profit for the three months ended June 30, 2024 to the three months ended June 30, 2023:

Three Months Ended June 30, Change Percent

(dollars in thousands) 2024 2023

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Total gross profit percentage 44.7 % 44.7 %

Gross profit percentage was 44.0% for both the first nine months of fiscal 2024 and fiscal 2023.

Favorable impacts from pricing (160 basis points), mix and other adjustments (60 basis points), and acquisitions (10 basis points) were offset by unfavorable impacts from material and labor inflation (120 basis points), fluctuations in currency, adjustments, and other charges (60 basis points), and productivity (50 basis points).

Operating Expenses.

The following table compares our operating expenses for the three and nine months ended December 31, 2023 to the three and nine months ended December 31, 2022:

Three Months Ended December 31, Change Percent

(dollars in thousands) 2023 2022

Gross profit percentage was 44.7% for both of the first three months of fiscal 2025 and fiscal 2024.

Favorable impacts from pricing (140 basis points), material costs (70 basis points), and divestitures (20 basis points) were offset by unfavorable impacts from labor costs (130 basis points), adjustments and other charges (70 basis points), productivity (20 basis points), and acquisitions (10 basis points).

Operating Expenses.

Selling, general, and administrative $ 360,518 $ 305,141 $ 55,377 18.1 %

Research and development 25,913 25,514 399 1.6 %

Restructuring expenses 6 39 (33) (84.6) %

Total operating expenses $ 386,437 $ 330,694 $ 55,743 16.9 %

Nine Months Ended December 31, Change Percent

The following table compares our operating expenses for the three months ended June 30, 2024 to the three months ended June 30, 2023:

Three Months Ended June 30, Change Percent

(dollars in thousands) 2024 2023

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Selling, general, and administrative $ 335,626 $ 306,530 $ 29,096 9.5 %

Goodwill impairment loss — 490,565 (490,565) NM

Research and development 25,573 24,694 879 3.6 %

Restructuring expenses 2 127 (125) (98.4) %

Restructuring expenses 25,700 19 25,681 nm

Total operating expenses $ 386,899 $ 331,243 $ 55,656 16.8 %

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Selling, General, and Administrative Expenses.

Significant components of total selling, general, and administrative expenses (“SG&A”) are compensation and benefit costs, fees for professional services, travel and entertainment expenses, facilities costs, and other general and administrative expenses.

SG&A increased 18.1% and 14.3% in the third quarter and first nine months of fiscal 2024, respectively, over the same prior year periods.

The fiscal 2024 increase is primarily attributable to increased compensation, including incentive compensation and benefit costs, as well as increases in dealer incentives, professional fees, bad debt expense, and travel and entertainment.

Goodwill Impairment Loss.

A Goodwill impairment loss of $490.6 million was recorded during the second quarter of fiscal 2023 as the result of an interim assessment of the fair value of the Dental segment.

For more information regarding our goodwill impairment loss, see Note 17 to our consolidated financial statements titled, "Goodwill and Intangible Assets."

Significant components of total selling, general, and administrative expenses (“SG&A”) are compensation and benefit costs, fees for professional services, travel and entertainment expenses, facility costs, gains or losses from divestitures, and other general and administrative expenses.

SG&A increased 9.5% in the first three months of fiscal 2025 over the same prior year period.

The fiscal 2025 increase is primarily attributable to increased compensation, including incentive compensation and benefit costs, as well as increases in professional fees.

Research and Development.

Research and development expenses increased 1.6% and 4.3% in the third quarter and first nine months of fiscal 2024, respectively, over the same prior year periods.

Research and development expenses increased 3.6% in the first three months of fiscal 2025 over the same prior year period.

Research and development expenses are influenced by the number and timing of in-process projects and labor hours and other costs associated with these projects.

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During fiscal 2025, our investments in research and development have continued to be focused on, but were not limited to, enhancing capabilities of sterile processing combination technologies, procedural products and accessories, and devices and support accessories used in gastrointestinal endoscopy procedures.

Non-Operating Expenses, Net.

The following tables compare our net non-operating expenses for the three and nine months ended December 31, 2023 and 2022:

Three Months Ended December 31,

(dollars in thousands) 2023 2022 Change

Non-operating expenses, net:

Interest expense $ 38,947 $ 28,559 $ 10,388

Interest and miscellaneous (income) expense (2,080) 1,906 (3,986)

Restructuring Expenses.

In May 2024, we adopted and announced a targeted restructuring plan (the "Restructuring Plan").

This plan includes a strategic shift in our approach to the Healthcare surgical business in Europe, as well as other actions including the impairment of an internally developed X-ray accelerator, product rationalizations and facility consolidations.

Fewer than 300 positions are being eliminated.

These restructuring actions are designed to enhance profitability and improve efficiency, and we expect to be substantially complete with the actions by the end of fiscal 2025.

We anticipate improvements in income from operations of approximately $25.0 million per year, with the majority of the benefit being in fiscal 2026 and beyond due to timing of actions.

The following tables summarize our total pre-tax restructuring expenses recorded in fiscal 2025 related to the Restructuring Plan:

Three Months Ended June 30, 2024 Restructuring Plan

Severance and other compensation related costs

Lease and other contract termination costs 2,970

Product rationalization (1)

Accelerated depreciation and amortization 1,250

Total Restructuring Expense

(1) Recorded in Cost of revenues on the Consolidated Statements of Income.

The Restructuring Plan expenses incurred during the three months ended June 30, 2024 primarily related to actions taken within our Healthcare segment.

Total pre-tax restructuring expense of $72.5 million has been recorded relating to the Restructuring Plan since inception, of which $20.7 million has been recorded in Cost of revenues.

We expect to incur additional costs through the remainder of fiscal 2025 for severance and other compensation related costs and lease and other contract termination and other costs, of approximately $28.0 million.

Liabilities related to restructuring activities are recorded as current liabilities in the accompanying Consolidated Balance Sheets within "Accrued payroll and other related liabilities" and "Accrued expenses and other." The following table summarizes our restructuring liability balances:

Restructuring Plan

Balance at March 31, 2024 $ 678

Fiscal 2025 Charges 24,450

Balance at June 30, 2024 $ 21,375

Non-Operating Expenses, Net.

Nine Months Ended December 31,

The following tables compare our net non-operating expenses for the three months ended June 30, 2024 and 2023:

Three Months Ended June 30,

(dollars in thousands) 2024 2023 Change

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Interest expense $ 30,384 $ 32,357 $ (1,973)

Interest and miscellaneous (income) expense (4,710) 3,200 (7,910)

Interest and miscellaneous income

(1,309) (1,377) 68

Gain on sale of business (18,803) $ — (18,803)

Non-operating expenses, net $ 10,272 $ 30,980 $ (20,708)

Non-operating expenses, net, consists of interest expense on debt, offset by interest earned on cash, cash equivalents, and short-term investment balances, and other miscellaneous income.

Interest expense increased $10.4 million and $30.9 million during the third quarter and first nine months of fiscal 2024, respectively, as compared to the prior year periods, primarily due to higher interest rates on floating rate debt as well as higher principal amount of floating rate debt outstanding.

Non-operating expenses, net consists of interest expense on debt, offset by interest earned on cash, cash equivalents, short-term investment balances, and other miscellaneous (income) expense.

Interest expense decreased $2.0 million during the first three months of fiscal 2025 as compared to the prior year period, primarily due to the lower principal amount of debt outstanding.

For more information, refer to Note 7 to our consolidated financial statements titled, "Debt."

The fluctuation in interest and miscellaneous (income) expense during the third quarter and first nine months of fiscal 2024, as compared to the same prior year period in fiscal 2023 , is primarily attributable to the negative impact of losses on our equity investments recognized during fiscal 2023 compared to gains recognized during fiscal 2024.

For more information, refer to Note 15 to our consolidated financial statements titled, " Fair Value Measurements ."

Interest and miscellaneous income decreased $0.1 million during the first three months of fiscal 2025 as compared to the prior year period.

Gain on sale of business during the first three months of fiscal 2025 was $18.8 million and relates to the sale of our CECS business.

For more information, refer to Note 3 to our consolidated financial statements titled, "Business Acquisitions and Divestitures."

Income Taxes.

The following tables compare our tax expense and effective income tax rates for the three and nine months ended December 31, 2023 and December 31, 2022:

Three Months Ended December 31, Change Percent

(dollars in thousands) 2023 2022

Income tax expense $ 38,344 $ 37,013 $ 1,331 3.6%

Effective income tax rate 21.4 % 23.1 %

Nine Months Ended December 31, Change Percent

The following tables compare our tax expense and effective income tax rates for the three months ended June 30, 2024 and June 30, 2023:

Three Months Ended June 30, Change Percent

(dollars in thousands) 2024 2023

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We analyze various factors to determine the estimated annual effective income tax rate, including projections of our annual earnings and taxing jurisdictions in which the earnings will be generated, the impact of state and local income taxes, our ability to use tax credits and net operating loss carryforwards, and available tax planning alternatives.

The effective income tax rates for the three month periods ended December 31, 2023 and 2022 were 21.4% and 23.1%, respective ly.

The fiscal 2024 effective tax rate for the three months ended December 31, 2023 decreased when compared to the prior year period, primarily due to favorable discrete items recognized during fiscal 2024.

The effective income tax rates for the nine month periods ended December 31, 2023 and 2022 were 21.8% and (114.8)%, respectively.

The fiscal 2024 effective tax rate increased when compared to fiscal 2023, primarily due to the tax impact of the goodwill impairment loss recognized on the Dental segment during the second quarter of fiscal 2023.

The effective income tax rates from continuing operations for the three month periods ended June 30, 2024 and 2023 were 20.1% and 21.7%, respectively.

The fiscal 2025 effective tax rate decreased when compared to fiscal 2024, primarily due to changes in geographic mix of projected profits and an increase in favorable discrete items.

Business Segment Results of Operations.

We operate and report our financial information in four reportable business segments:

Healthcare, AST, Life Sciences and Dental.

Non-allocated operating costs that support the entire Company and items not indicative of operating trends are excluded from segment operating income.

We operate and report our financial information in three reportable business segments:

Healthcare, AST, and Life Sciences.

Previously, we had four reportable business segments;

however, as a result of the divestiture of our Dental segment, Dental is presented as discontinued operations.

Historical information has been retrospectively adjusted to reflect these changes for comparability, as required.

Our Healthcare segment provides a comprehensive offering for healthcare providers worldwide, focused on sterile processing departments and procedural centers, such as operating rooms and endoscopy suites.

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to outsourced instrument reprocessing services.

In addition, our procedural products also include endoscopy accessories, instruments, and capital equipment infrastructure used primarily in operating rooms, ambulatory surgery centers, endoscopy suites, and other procedural areas.

Our AST segment is a third-party service provider for contract sterilization, as well as testing services needed to validate sterility services for medical device and pharmaceutical manufacturers.

In addition, our procedural solutions also include endoscopy accessories, instruments, and capital equipment infrastructure used primarily in operating rooms, ambulatory surgery centers, endoscopy suites, and other procedural areas.

Our AST segment supports medical device and pharmaceutical manufacturers through a global network of contract sterilization and laboratory testing facilities, and integrated sterilization equipment and control systems.

Our technology-neutral offering supports Customers every step of the way, from testing through sterilization.

Our Life Sciences segment provides a comprehensive offering of products and services that support pharmaceutical manufacturing, primarily for vaccine and other biopharma Customers focused on aseptic manufacturing.

These solutions include a full suite of consumable products, equipment maintenance and specialty services, and capital equipment.

Our Dental segment provides a comprehensive offering for dental practitioners and dental schools, offering instruments, infection prevention consumables and instrument management systems.

We d isclose a measure of segment income that is consistent with the way management operates and views the business.

The accounting policies for reportable segments are the same as those for the consolidated C ompany.

For the three and nine months e nded December 31, 2023 and 2022 , revenues from a single Customer did not represent ten percent or more of the Healthcare, AST or Life Sciences segment revenues.

Three Customers collectively and consistently account for more than 40.0% of our Dental segment revenue.

The percentage associated with these three Customers collectively in any one period may vary due to the buying patterns of these three Customers as well as other Dental Customers.

These three Customers collectively accounted for appr oxi mately 47.5% and 44.5% o f our Dental segment revenues for the three and nine months ended December 31, 2023, respectively.

These three Customers collectively accounted for approximately 47.2% and 43.8% of our Dental segment revenues for the three and nine months ended December 31, 2022, respectively.

Our Life Sciences segment provides a comprehensive offering of products and services designed to support biopharmaceutical and medical device research and manufacturing facilities, in particular those focused on aseptic manufacturing.

Our portfolio includes a full suite of consumable products, equipment maintenance, specialty services, and capital equipment.

We disclose a measure of segment income that is consistent with the way management operates and views the business.

The accounting policies for reportable segments are the same as those for the consolidated Company.

For the three months e nded June 30, 2024 and 2023 , revenues from a single Customer did not represent ten percent or more of the Healthcare, AST or Life Sciences segment revenues.

A dditional information regarding our segments is included in our consolidated financial statements included in our Annual Report on Form 10-K for the year ended March 31, 2024, which was filed with the SEC on May 29, 2024.

The following tables compare business segment revenues as well as impacts from acquisitions, divestitures, and foreign currency movements for the three and nine months ended December 31, 2023 and 2022.

Three Months Ended December 31, (unaudited)

As reported, U.S.

Impact of Acquisitions Impact of Divestitures Impact of Foreign Currency Movements U.S.

Organic Growth Constant Currency Organic Growth

2023 2022 2023 2022 2023 2023 2023 2023

Segment revenues:

Healthcare $ 916,227 $ 769,144 $ 45,342 $ — $ 6,255 19.1 % 13.2 % 12.4 %

AST 234,931 222,014 — — 3,977 5.8 % 5.8 % 4.0 %

Life Sciences 146,566 121,273 — — 1,414 20.9 % 20.9 % 19.7 %

Dental 97,921 103,563 — — 750 (5.4) % (5.4) % (6.2) %

Total $ 1,395,645 $ 1,215,994 $ 45,342 $ — $ 12,396 14.8 % 11.0 % 10.0 %

Nine Months Ended December 31, (unaudited)

The following tables compare business segment revenues as well as impacts from acquisitions, divestitures, and foreign currency movements for the three and three months ended June 30, 2024 and 2023.

Three Months Ended June 30, (unaudited)

As reported, U.S.

Impact of Acquisitions Impact of Divestitures Impact of Foreign Currency Movements U.S.

Organic Growth Constant Currency Organic Growth

GAAP Impact of Acquisitions Impact of Divestitures Impact of Foreign Currency Movements U.S.

GAAP Growth Organic Growth Constant Currency Organic Growth

2024 2023 2024 2023 2024 2024 2024 2024

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Life Sciences 128,478 131,413 — (7,881) (366) (2.2) % 4.0 % 4.3 %

Dental 303,233 317,988 — — 1,727 (4.6) % (4.6) % (5.2) %

Total $ 1,279,502 $ 1,183,386 $ 40,976 $ (7,881) $ (2,876) 8.1 % 5.4 % 5.6 %

Healthcare revenues increased 19.1% to $916.2 million for the three months ended December 31, 2023, as compared to $769.1 million for the same prior year period.

This increase reflects growth in consumable, capital equipment, and service revenues of 26.8%, 17.4%, and 13.4%, respectively.

Healthcare revenues increased 18.4% to $2,605.2 million for the nine months ended December 31, 2023, as compared to $2,200.5 million for the same prior year period.

This increase reflects growth in capital equipment, consumable, and service revenues of 22.8%, 20.8%, and 12.8%, respectively.

The increase in revenue for the three and nine month periods ended December 31, 2023 is primarily due to the benefits of higher volume, including added volume from the acquisition of assets from BD, and pricing.

The Healthcare segment's backlog at December 31, 2023 was $449.4 million.

The Healthcare segment's backlog at December 31, 2022 was $540.4 million.

The decrease is due to increased shipments in the first nine months of the year, as compared to the same period in the prior year, which was due to shortened lead times and easing of supply chain constraints.

AST revenues increased 5.8% to $234.9 million for the three months ended December 31, 2023, as compared to $222.0 million for the same prior year period.

AST revenues increased 4.1% to $703.1 million for the nine months ended December 31, 2023, as compared to $675.3 million for the same prior year period.

Revenue was negatively impacted by medical device Customer inventory management and the continued reduction in demand from bioprocessing Customers.

Revenue was favorably impacted by pricing and fluctuation in currencies.

Life Sciences revenues increased 20.9% to $146.6 million for the three months ended December 31, 2023, as compared to $121.3 million for the same prior year period.

This increase reflects growth in capital equipment, service, and consumable revenues of 56.9%, 12.3% and 8.0%, respectively.

Life Sciences revenues increased 8.4% to $411.1 million for the nine months ended December 31, 2023, as compared to $379.2 million for the same prior year period.

This increase reflects growth in capital equipment, service, and consumable revenues of 12.3%, 10.3%, and 5.0%, respectively.

Revenue was favorably impacted by higher volume and pricing.

The Life Sciences backlog at December 31, 2023 was $85.0 million.

The Life Sciences backlog at December 31, 2022 was $110.6 million.

The decrease is primarily due to the timing of shipments and a decrease in orders as compared to the same period in the prior year.

Dental revenues decreased 5.4% to $97.9 million for the three months ended December 31, 2023, as compared to $103.6 million for the same prior year period.

Dental revenues decreased 4.6% to $303.2 million for the nine months ended December 31, 2023, as compared to $318.0 million for the same prior year period.

The decline for the three and nine month periods ended December 31, 2023 was a result of lower volume, primarily due to Customer inventory destocking and reduced orders from a large Customer due to a temporary disruption of their operations as a result of a cybersecurity incident the Customer experienced during the third quarter, which exceeded the benefit of higher pricing in the fiscal 2024 periods.

The following table compares business segment and Corporate operating income for the three and nine months ended December 31, 2023 and 2022.

Three Months Ended December 31, Nine Months Ended December 31,

2023 2022 2023 2022

Organic revenue growth and constant currency organic revenue growth are non-GAAP financial measures of revenue performance.

Organic revenue growth is calculated by removing the impact of acquisitions and divestitures for one year following the respective transaction from the GAAP revenue growth.

Constant currency organic revenue growth is subject to a further adjustment to eliminate the impact of foreign currency movements.

Healthcare revenues increased 10.1% to $901.2 million for the three months ended June 30, 2024, as compared to $818.9 million for the same prior year period.

This increase reflects growth in consumable and service revenues of 22.5% and 14.2%, respectively, which was partially offset by a decline in capital equipment revenues of 9.9%.

The constant currency organic growth of 5.2% is primarily due to increased volume, impacting revenues by a low single digit percentage, as well as increased pricing.

The Healthcare segment's backlog at June 30, 2024 was $362.0 million.

The Healthcare segment's backlog at June 30, 2023 was $491.7 million.

The decrease is due to shortened lead times in fiscal 2024 due to improving supply chains, which drove strong shipments throughout fiscal 2024.

AST revenues increased 7.2% to $249.8 million for the three months ended June 30, 2024, as compared to $233.1 million for the same prior year period.

The constant currency organic growth of 7.7% is primarily due to increased pricing, impacting revenues by a mid-single digit percentage, as well as increased volume.

Life Sciences revenues decreased 2.2% to $128.5 million for the three months ended June 30, 2024, as compared to $131.4 million for the same prior year period.

This decrease is partially due to the sale of the CECS business during the first quarter of fiscal 2025, which impacted service revenue, resulting in a decline of 16.9%.

This decrease also reflects declines in capital equipment revenues of 14.6% and was partially offset by an increase in consumable revenues of 13.2%.

The constant currency organic growth of 4.3% is primarily due to increased pricing, impacting revenues by a low single digit percentage.

The Life Sciences backlog at June 30, 2024 was $72.2 million.

The Life Sciences backlog at June 30, 2023 was $104.9 million.

The decrease is primarily due to softening demand, as anticipated.

The following table compares business segment and Corporate operating income for the three months ended June 30, 2024 and 2023.

Three Months Ended June 30,

Segment operating income (loss):

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Life Sciences 52,584 49,841

Dental 18,292 20,337 64,847 67,992

Corporate (101,748) (91,873)

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Acquisition and integration related charges (2)

5,722 4,817 24,444 18,493

Tax restructuring costs (3)

643 282 652 533

Gain on fair value adjustment of acquisition related contingent consideration (1)

— — — (3,100)

Net (gain) loss on divestiture of businesses (1)

— (838) — 3,939

Amortization of inventory and property "step up" to fair value (1)

6,348 1,608 9,329 5,697

Restructuring charges (4)

Goodwill impairment loss (5)

— — — 490,565

Total income from operations $ 216,156 $ 190,803 $ 590,895 $ 42,783

(1) For more information regarding our recent acquisitions and divestitures, refer to Note 2 titled, "Business Acquisitions and Divestitures" included in our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.

Total income (loss) from operations $ 185,531 $ 197,761

(1) For more information regarding our recent acquisitions and divestitures, refer to Note 3 titled, "Business Acquisitions and Divestitures."

(2) Acquisition and integration related charges include transaction costs and integration expenses associated with acquisitions.

(3) Costs incurred in tax restructuring.

(4) For more information regarding our restructuring efforts, refer to our Annual R eport on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.

(5) For more information regarding our goodwill impairment loss, see Note 17 to our consolidated financial statements titled, " Goodwill and Intangible Assets."

The Healthcare segment’s operating income increased 27.7% to $223.9 million for the three months ended December 31, 2023, as compared to $175.4 million in the same prior year period.

The segment's operating margins were 24.4% and 22.8% for the third quarter of fiscal 2024 and 2023, respectively.

The Healthcare segment’s operating income increased 25.9% to $626.1 million for the nine months ended December 31, 2023, as compared to $497.2 million in the same prior year period.

The segment's operating margins were 24.0% and 22.6% for the first nine months of fiscal 2024 and 2023, respectively.

The increase in operating income and margin for the three and nine month periods ended December 31, 2023 is primarily due to the benefits of higher volume, including added volume from the acquisition of assets from BD, and pricing, which were partially offset by increased costs caused by inflation.

The AST segment's operating income increased 1.6% to $105.2 million for the three months ended December 31, 2023, as compared to $103.5 million during the same prior year period.

The AST segment's operating income increased 0.7% to $325.5 million for the nine months ended December 31, 2023, as compared to $323.2 million during the same prior year period.

The segment's operating margins were 44.8% and 46.6% for the third quarter of fiscal 2024 and 2023, respectively.

The segment's operating margins were 46.3% and 47.9% for the first nine months of fiscal 2024 and 2023, respectively.

The decrease in operating margin percentage is primarily due to higher labor and energy costs and decreased productivity, which exceeded the benefit of favorable pricing and fluctuation in currencies.

The Life Sciences segment’s operating income increased 25.4% to $56.7 million for the three months ended December 31, 2023, as compared to $45.2 million for the same prior year period.

The segment's operating margins were 38.7% and 37.3% for the third quarter of fiscal 2024 and 2023, respectively.

The increases in operating income and operating margin are primarily due to favorable pricing and volume, which were partially offset by increased costs caused by inflation.

The Life Sciences segment’s operating income increased 5.2% to $156.9 million for the nine months ended December 31, 2023, as compared to $149.2 million for the same prior year period.

The segment's operating margins were 38.2% and 39.3% for the first nine months of fiscal 2024 and 2023, respectively.

The increase in operating income is primarily due to favorable pricing and volume.

The decrease in operating margin is primarily due to increased costs due to inflation, which exceeded the benefits of pricing.

The Dental segment's operating income decreased 10.1% to $18.3 million for the three months ended December 31, 2023, as compared to $20.3 million for the same prior year period.

The segment's operating margins were 18.7% and 19.6% for the third quarter of fiscal 2024 and 2023, respectively.

The decline in operating income and operating margin is primarily due to a reduction in volume and increased costs from inflation, which exceeded the benefits of higher pricing.

The Dental segment's operating income decreased 4.6% to $64.8 million for the nine months ended December 31, 2023, as compared to $68.0 million, for the same prior year period.

The segment's operating margins were 21.4% for both the nine months ended December 31, 2023 and 2022.

The decrease in operating income was primarily due to the reduction in volume and increased costs from inflation, which exceeded the benefits of higher pricing.

The favorable impact of higher pricing to operating margin was partially offset by the decrease in volume and increased costs from inflation.

(4) For more information regarding our restructuring efforts, refer to Note 2 titled, "Restructuring ."

The Healthcare segment’s operating income increased 9.4% to $216.9 million for the three months ended June 30, 2024, as compared to $198.2 million in the same prior year period.

The segment's operating margins were 24.1% and 24.2% for the first three months of fiscal 2025 and 2024, respectively.

The increase in operating income for the three months ended June 30, 2024 is primarily due to the benefits of higher volume, including added volume from the acquisition of assets from BD, and pricing, which were partially offset by increased compensation costs.

The decrease in operating margin for the three months ended June 30, 2024 is primarily due to increased compensation costs, primarily due to increased headcount.

The AST segment's operating income increased 7.4% to $117.7 million for the three months ended June 30, 2024, as compared to $109.6 million during the same prior year period.

The segment's operating margins were 47.1% and 47.0% for the first three months of fiscal 2025 and 2024, respectively.

The increase in operating income and operating margin for the three months ended June 30, 2024 is primarily due to favorable pricing, which was partially offset by increased labor costs.

The Life Sciences segment’s operating income increased 5.5% to $52.6 million for the three months ended June 30, 2024, as compared to $49.8 million for the same prior year period.

The segment's operating margins were 40.9% and 37.9% for the first three months of fiscal 2025 and 2024, respectively.

The increase in operating income and operating margin for the three months ended June 30, 2024 is primarily due to favorable pricing and mix following the divestiture of CECS.

Liquidity and Capital Resources

The following table summarizes significant components of our cash flows for the nine months ended December 31, 2023 and 2022:

Nine Months Ended December 31,

The following table summarizes significant components of our cash flows for the three months ended June 30, 2024 and 2023:

Three Months Ended June 30,

(dollars in thousands) 2024 2023

Net cash provided by operating activities $ 303,743 $ 281,129

Net cash used in investing activities $ (791,754) $ (305,752)

Net cash provided by (used in) financing activities

$ 58,583 $ (306,771)

Net cash provided by (used in) investing activities $ 687,829 $ (66,596)

Net cash used in financing activities $ (998,932) $ (213,637)

Debt-to-total capital ratio 26.7 % 32.2 %

Free cash flow $ 195,660 $ 214,533

Net Cash Provided by Operating Activities – The net cash provided by our operating activities was $718.5 million for the first nine months of fiscal 2024 and $541.1 million for the first nine months of fiscal 2023.

The fiscal 2024 increase was driven by the increase in earnings and declines in cash used for tax and compensation related payments.

Net Cash Used In Investing Activities – The net cash used in investing activities totaled $791.8 million for the first nine months of fiscal 2024 and $305.8 million for the first nine months of fiscal 2023.

The following discussion summarizes the significant changes in our investing cash flows for the first nine months of fiscal 2024 and fiscal 2023:

• Purchases of property, plant, equipment, and intangibles, net – Capital expenditures totaled $268.8 million for the first nine months of fiscal 2024 and $290.5 million during the same prior year period.

The fiscal 2024 reduction is primarily due to the timing of capital spending in our AST segment compared to the first nine months of fiscal 2023.

• Proceeds from the sale of property, plant, and equipment - During the first nine months of fiscal 2024 and 2023, we received proceeds from the sale of property, plant, and equipment totaling $7.4 million and $12.2 million, respectively.

The fiscal 2024 proceeds primarily relate to the sale of a facility previously used by the AST segment.

The fiscal 2023 proceeds were primarily from the sale of a facility previously used by the Dental segment.

• Proceeds from the sale of businesses – During the first nine months of fiscal 2024, we received proceeds of $9.5 million from the release of funds held in escrow related to the sale of the Renal Care business during fiscal 2022.

During the first nine months of fiscal 2023, we sold the remaining component of the Animal Healthcare business for $6.6 million.

• Acquisition of businesses, net of cash acquired – During the first nine months of fiscal 2024 and 2023, we used $539.8 million and $34.0 million to acquire businesses, respectively.

For more information, refer to Note 2 to our consolidated financial statements titled, "Business Acquisitions," and to our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.

Net Cash Provided By/Used In Financing Activities – The net cash provided by financing activities amounted to $58.6 million for the first nine months of fiscal 2024 compared to net cash used in financing activities of $306.8 million for the first nine months of fiscal 2023.

The following discussion summarizes the significant changes in our financing cash flows for the first nine months of fiscal 2024 and fiscal 2023:

• Payments on Private Placement Senior Notes – During the first nine months of fiscal 2023, we repaid $91.0 million of private placement debt.

For more information on our Private Placement Senior Notes, refer to Note 5 to our consolidated financial statements titled, "Debt" and to our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.

• Payments on term loans – During the first nine months of fiscal 2024 and 2023, we repaid $45.0 million and $141.9 million of our term loans, respectively.

Net Cash Provided by Operating Activities – The net cash provided by our operating activities was $303.7 million for the first three months of fiscal 2025 and $281.1 million for the first three months of fiscal 2024.

Net Cash Provided by/Used In Investing Activities – The net cash provided by investing activities totaled $687.8 million for the first three months of fiscal 2025 and net cash used in investing activities totaled $66.6 million for the first three months of fiscal 2024.

The following discussion summarizes the significant changes in our investing cash flows for the first three months of fiscal 2025 and fiscal 2024:

• Purchases of property, plant, equipment, and intangibles, net – Capital expenditures totaled $108.1 million for the first three months of fiscal 2025 and $66.6 million during the same prior year period.

The fiscal 2025 increase is due to the timing of capital spending.

• Proceeds from the sale of businesses – During the first three months of fiscal 2025, we received proceeds of $809.6 million from the sale of our Dental segment and the sale of our CECS business.

For more information, refer to Note 3 to our consolidated financial statements titled "Business Acquisitions and Divestitures" and Note 4 to our consolidated financial statements titled "Discontinued Operations."

• Acquisition of businesses, net of cash acquired – During the first three months of fiscal 2025, we used $13.7 million to acquire businesses.

For more information, refer to Note 3 to our consolidated financial statements titled, "Business Acquisitions and Divestitures."

Net Cash Used In Financing Activities – The net cash used in financing activities amounted to $998.9 million and $213.6 million for the first three months of fiscal 2025 and fiscal 2024, respectively.

The following discussion summarizes the significant changes in our financing cash flows for the first three months of fiscal 2025 and fiscal 2024:

• Payments on term loans – During the first three months of fiscal 2025 and 2024, we repaid $638.1 million and $15.0 million, respectively, of our term loans.

The fiscal 2025 increase was primarily due to the use of proceeds from the sale of the Dental segment to pay off our outstanding term loans.

For more information on our term loans, refer to Note 7 to our consolidated financial statements titled, "Debt" and to our Annual Report on Form 10-K for the year ended March 31, 2024, which was filed with the SEC on May 29, 2024.

• Proceeds under credit facilities, net – Net proceeds under credit facilities totaled $265.5 million and $216.6 million for the first nine months of fiscal 2024 and 2023, respectively.

The increase in fiscal 2024 is attributable to funding of the acquisition of assets from BD.

For more information regarding the sale of the Dental segment, refer to Note 4 to our consolidated financial statements titled "Discontinued Operations."

• Payments under credit facilities, net – Net payments under credit facilities totaled $253.2 million and $144.7 million for the first three months of fiscal 2025 and 2024, respectively.

The fiscal 2025 increase was primarily due to the use of proceeds from the sale of the Dental segment to pay down our outstanding Revolving Credit Facility balance.

For more information on our indebtedness, refer to Note 7 to our consolidated financial statements titled, "Debt" and to our Annual Report on Form 10-K for the year ended March 31, 2024, which was filed with the SEC on May 29, 2024.

• Acquisition related deferred or contingent consideration – During the first nine months of fiscal 2024 and 2023, we paid $6.2 million and $0.3 million in deferred and contingent consideration, respectively.

The fiscal 2024 increase is primarily related to the payout of contingent consideration from a prior acquisition totaling $5.0 million.

• Repurchases of ordinary shares – During the first nine months of fiscal 2024 and 2023 , we obtained 69,276 and 74,897, respectively, of our ordinary shares in connection with share-based compensation award programs in the aggregate amount of $11.4 million and $13.1 million, respectively .

During the first nine months of fiscal 2024, we did not purchase any ordinary shares through our share repurchase program.

During the first nine months of fiscal 2023, we purchased 735,320 of our shares in the aggregate amount of $140.9 million through our share repurchase program.

For more information on our share repurchases, refer to Note 11 to our consolidated financial statements titled, "Repurchases of Ordinary Shares" and to our Annual Report on Form 10-K for the year ended March 31, 2023, which was filed with the SEC on May 26, 2023.

• Cash dividends paid to ordinary shareholders – During the first nine months of fiscal 2024, we paid total cash dividends of $149.2 million, or $1.51 per outstanding share.

During the first nine months of fiscal 2023, we paid total cash dividends of $136.9 million, or $1.37 per outstanding share.

• Transactions with noncontrolling interest holders – During the first nine months of fiscal 2024, we paid $1.6 million in distributions to noncontrolling interest holders and received contributions of $2.9 million from noncontrolling interest holders.

During the first nine months of fiscal 2023, we paid $0.8 million in distributions to noncontrolling interest holders.

For more information regarding the sale of the Dental segment, refer to Note 4 to our consolidated financial statements titled "Discontinued Operations."

• Repurchases of ordinary shares – During the first three months of fiscal 2025 and 2024 , we obtained 69,780 and 51,494, respectively, of our ordinary shares in connection with share-based compensation award programs in the aggregate amount of $10.3 million and $8.7 million, respectively .

During the first three months of fiscal 2025, we purchased 241,507 of our ordinary shares for the aggregate amount of $53.9 million through our share repurchase program.

During the first three months of fiscal 2024, we did not purchase any ordinary shares through our share repurchase program.

For more information on our share repurchases, refer to Note 13 to our consolidated financial

statements titled, "Repurchases of Ordinary Shares" and to our Annual Report on Form 10-K for the year ended March 31, 2024, which was filed with the SEC on May 29, 2024.

• Cash dividends paid to ordinary shareholders – During the first three months of fiscal 2025, we paid total cash dividends of $51.4 million, or $0.52 per outstanding share.

During the first three months of fiscal 2024, we paid total cash dividends of $46.4 million, or $0.47 per outstanding share.

• Transactions with noncontrolling interest holders – During the first three months of fiscal 2025, we received $2.5 million in contributions from noncontrolling interest holders.

• Stock option and other equity transactions, net – We generally receive cash for issuing shares under our stock option programs.

During the first nine months of fiscal 2024 and fiscal 2023, we received cash proceeds totaling $3.5 million and $1.5 million, respectively, under these programs.

During the first three months of fiscal 2025 and fiscal 2024, we received cash proceeds totaling $5.6 million and $1.3 million, respectively, under these programs.

Cash Flow Measures.

The net cash provided by our operating activities was $718.5 million for the first nine months of fiscal 2024 and $541.1 million for the first nine months of fiscal 2023.

Free cash flow was $457.0 million in the first nine months of fiscal 2024 compared to $262.8 million in the first nine months of fiscal 2023 (see the subsection above titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow).

The fiscal 2024 increase in free cash flow was driven by the increase in earnings and declines in cash used for tax and compensation related payments as well as a reduction in capital spending that was primarily due to timing.

Our debt-to-total capital ratio was 34.0% at December 31, 2023 and 33.6% at December 31, 2022.

The net cash provided by our operating activities was $303.7 million for the first three months of fiscal 2025 and $281.1 million for the first three months of fiscal 2024.

Free cash flow was $195.7 million in the first three months of fiscal 2025 compared to $214.5 million in the first three months of fiscal 2024 (see the subsection above titled "Non-GAAP Financial Measures" for additional information and related reconciliation of cash flows from operations to free cash flow).

The fiscal 2025 decrease in free cash flow is primarily due to the timing of capital spending.

Our debt-to-total capital ratio was 26.7% at June 30, 2024 and 32.2% at June 30, 2023.

Material Future Cash Obligations and Commercial Commitments.

Information related to our material future cash obligations and commercial commitments is included in our Annual Report on Form 10-K for the year ended March 31, 2024, which was filed with the SEC on May 29, 2024.

Our commercial commitments were approximately $113.0 million at December 31, 2023, reflecting a net increase of $4.6 million in surety bonds and other commercial commitments from March 31, 2023.

Outstanding borrowings under our Credit Agreement as of December 31, 2023 were $570.0 million.

We had $11.6 million of lett ers of credit outstanding under the Credit Agreement at December 31, 2023.

Our commercial commitments were approximately $112.2 million at June 30, 2024, reflecting a net increase of $1.8 million in surety bonds and other commercial commitments from March 31, 2024.

Outstanding borrowings under our Revolving Credit Facility as of June 30, 2024 were $231.3 million.

We had $12.3 million of letters of credit outstanding under the Revolving Credit Facility at June 30, 2024.

Cash Requirements.

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Supplemental Guarantor Financial Information

STERIS plc ("Parent") and its wholly-owned subsid iaries, STERIS Limited and STERIS Corporation (collectively "Guarantors" and each a "Guarantor"), each have provided guarantees of the obligations of STERIS Irish FinCo Unlimited Company ("FinCo", "STERIS Irish FinCo", "Issuer"), a wholly-owned subsidiary issuer, under Senior Public Notes issued by STERIS Irish FinCo on April 1, 2021 and of certain other obligations relating to the Senior Public Notes.

STERIS plc ("Parent") and its wholly-owned subsidiaries, STERIS Limited and STERIS Corporation (collectively "Guarantors" and each a "Guarantor"), each have provided guarantees of the obligations of STERIS Irish FinCo Unlimited Company ("FinCo", "STERIS Irish FinCo", "Issuer") a wholly-owned subsidiary issuer, under Senior Public Notes issued by FinCo on April 1, 2021 and of certain other obligations relating to the Senior Public Notes.

The Senior Public Notes are guaranteed, jointly and severally, on a senior unsecured basis.

The Senior Public Notes and the related guarantees are senior unsecured obligations of STERIS Irish FinCo and the Guarantors, respectively, and are equal in priority with all other unsecured and unsubordinated indebtedness of the Issuer and the Guarantors, respectively, from time to time outstanding, including, as applicable, under the Private Placement Senior Notes, borrowings under the Revolving Credit Facility, the Term Loan and the Delayed Draw Term Loan.

The Senior Public Notes and the related guarantees are senior unsecured obligations of FinCo and the Guarantors, respectively, and are equal in priority with all other unsecured and unsubordinated indebtedness of the Issuer and the Guarantors, respectively, from time to time outstanding, including, as applicable, under the Private Placement Senior Notes and borrowings under the Revolving Credit Facility.

All of the liabilities of non-guarantor direct and indirect subsidiaries of STERIS, other than STERIS Irish FinCo, STERIS Limited and STERIS Corporation, including any claims of trade creditors, are effectively senior to the Senior Public Notes.

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The ability of our subsidiaries to pay dividends, interest and other fees to the Issuer and ability of the Issuer and Guarantors to service the Senior Public Notes may be restricted by, among other things, applicable corporate and other laws and regulations as well as agreements to which our subsidiaries are or may become a party.

The following is a summary of the Senior Public Notes guarantees:

The following is a summary of these guarantees:

Guarantees of Senior Notes

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Each Guarantor that makes a payment under its guarantee will be entitled upon payment in full of all guaranteed obligations under the indenture to a contribution from each Guarantor in an amount equal to such other Guarantor’s pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with U.S.

The following tables present summarized results of operations for the nine months ended December 31, 2023 and summarized balance sheet information at December 31, 2023 and March 31, 2023 for the obligor group of the Senior Public Notes.

The following tables present summarized results of operations for the three months ended June 30, 2024 and summarized balance sheet information at June 30, 2024 and March 31, 2024 for the obligor group of the Senior Public Notes.

The obligor group consists of the Parent Company Guarantor, Subsidiary Issuer, and Subsidiary Guarantors for the Senior Public Notes.

The summarized financial information is presented after elimination of (i) intercompany transactions and balances among the guarantors and issuer and (ii) equity in earnings from and investments in any subsidiary that is a non-guarantor or non-issuer.

Transactions with non-issuer and non-guarantor subsidiaries have been presented separately.

Summarized Results of Operations

(in thousands) Nine Months Ended

(in thousands) Three Months Ended

Revenues $ 717,088

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( in thousands)

December 31, March 31,

June 30, March 31,

Receivables due from non-issuers and non-guarantor subsidiaries $ 19,324,244 $ 19,120,843

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We are, and will likely continue to be, involved in a number of legal proceedings, government investigations, and claims, which we believe generally arise in the course of our business, given our size, history, complexity, and the nature of our business, products, Customers, regulatory environment, and industries in which we participate.

These legal proceedings, investigations and claims generally involve a variety of legal theories and allegations, including, without limitation, personal injury (e.g., slip and falls, burns, vehicle accidents), product liability or regulation (e.g., based on product operation or claimed malfunction, failure to warn, failure to meet specification, or failure to comply with regulatory requirements), product exposure (e.g., claimed exposure to chemicals, gases, asbestos, contaminants, radiation), property damage (e.g., claimed damage due to leaking equipment, fire, vehicles, chemicals), commercial claims (e.g., breach of contract, economic loss, warranty, misrepresentation), financial (e.g., taxes, reporting), employment (e.g., wrongful termination, discrimination, benefits matters), and other claims for damage and relief.

These legal proceedings,

investigations and claims generally involve a variety of legal theories and allegations, including, without limitation, personal injury (e.g., slip and falls, burns, vehicle accidents), product liability or regulation (e.g., based on product operation or claimed malfunction, failure to warn, failure to meet specification, or failure to comply with regulatory requirements), product exposure (e.g., claimed exposure to chemicals, gases, asbestos, contaminants, radiation), property damage (e.g., claimed damage due to leaking equipment, fire, vehicles, chemicals), commercial claims (e.g., breach of contract, economic loss, warranty, misrepresentation), financial (e.g., taxes, reporting), employment (e.g., wrongful termination, discrimination, benefits matters), and other claims for damage and relief.

We record a liability for such contingencies to the extent we conclude that their occurrence is both probable and estimable.

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Forward-looking statements speak only as to the date the statement is made and may be identified by the use of forward-looking terms such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “projects,” “targets,” “forecasts,” “outlook,” “impact,” “potential,” “confidence,” “improve,” “optimistic,” “deliver,” “orders,” “backlog,” “comfortable,” “trend,” and “seeks,” or the negative of such terms or other variations on such terms or comparable terminology.

Many important factors could cause actual results to differ materially from those in the forward-looking statements including, without limitation, disruption of production or supplies, changes in market conditions, political events, pending or future claims or litigation, competitive factors, technology advances, actions of regulatory agencies, and changes in laws, government regulations, labeling or product approvals or the application or interpretation thereof.

Other risk factors are described in STERIS's other securities filings, including Item 1A of our Annual Report on Form 10-K for the year ended March 31, 2023.

Many important factors could cause actual results to differ materially from those in the forward-looking statements including, without limitation, statements related to the expected benefits of and timing of completion of the Restructuring Plan, disruption of production or supplies, changes in market conditions, political events, pending or future claims or litigation, competitive factors, technology advances, actions of regulatory agencies, and changes in laws, government regulations, labeling or product approvals or the application or interpretation thereof.

Many of these important factors are outside of STERIS’s control.

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Unless legally required, STERIS does not undertake to update or revise any forward-looking statements even if events make clear that any projected results, express or implied, will not be realized.

integration costs or difficulties in connection with the integration of Cantel Medical, (e) uncertainties related to tax treatments under the TCJA and the IRA, (f) the possibility that Pillar Two Model Rules could increase tax uncertainty and adversely impact STERIS's provision for income taxes and effective tax rate and subject STERIS to additional income tax in jurisdictions who adopt Pillar Two Model Rules, (g) STERIS's ability to continue to qualify for benefits under certain income tax treaties in light of ratification of more strict income tax treaty rules (through the MLI) in many jurisdictions where STERIS has operations, (h) changes in tax laws or interpretations that could increase our consolidated tax liabilities, including changes in tax laws that would result in STERIS being treated as a domestic corporation for United States federal tax purposes, (i) the potential for increased pressure on pricing or costs that leads to erosion of profit margins, including as a result of inflation, (j) the possibility that market demand will not develop for new technologies, products or applications or services, or business initiatives will take longer, cost more or produce lower benefits than anticipated, (k) the possibility that application of or compliance with laws, court rulings, certifications, regulations, or regulatory actions, including without limitation any of the same relating to FDA, EPA or other regulatory authorities, government investigations, the outcome of any pending or threatened FDA, EPA or other regulatory warning notices, actions, requests, inspections or submissions, the outcome of any pending or threatened litigation brought by private parties, or other requirements or standards may delay, limit or prevent new product or service introductions, affect the production, supply and/or marketing of existing products or services, result in costs to STERIS that may not be covered by insurance, or otherwise affect STERIS’s performance, results, prospects or value, (l) the potential of international unrest, including the Russia-Ukraine or Israel-Hamas military conflicts, economic downturn or effects of currencies, tax assessments, tariffs and/or other trade barriers, adjustments or anticipated rates, raw material costs or availability, benefit or retirement plan costs, or other regulatory compliance costs, (m) the possibility of reduced demand, or reductions in the rate of growth in demand, for STERIS’s products and services, (n) the possibility of delays in receipt of orders, order cancellations, or delays in the manufacture or shipment of ordered products, due to supply chain issues or otherwise , or in the provision of services, (o) the possibility that anticipated growth, cost savings, new product acceptance, performance or approvals, or other results may not be achieved, or that transition, labor, competition, timing, execution, impairments, regulatory, governmental, or other issues or risks associated with STERIS’s businesses, industry or initiatives including, without limitation, those matters described in STERIS's various securities filings, may adversely impact STERIS’s performance, results, prospects or value, (p) the impact on STERIS and its operations, or tax liabilities, of Brexit or the exit of other member countries from the EU, and the Company’s ability to respond to such impacts, (q) the impact on STERIS and its operations of any legislation, regulations or orders, including but not limited to any new trade or tax legislation (including CAMT and excise tax on stock buybacks), regulations or orders, that may be implemented by the U.S.

administration or Congress, or of any responses thereto, (r) the possibility that anticipated financial results or benefits of recent acquisitions, including the acquisition of Cantel Medical and Key Surgical and the acquisition of certain BD assets, or of STERIS’s restructuring efforts, or of recent divestitures, including anticipated revenue, productivity improvement, cost savings, growth synergies and other anticipated benefits, will not be realized or will be other than anticipated, (s) the increased level of STERIS’s indebtedness incurred in connection with the acquisition of Cantel Medical limiting financial flexibility or increasing future borrowing costs, (t) rating agency actions or other occurrences that could affect STERIS’s existing debt or future ability to borrow funds at rates favorable to STERIS or at all, (u) the effects of changes in credit availability and pricing, as well as the ability of STERIS’s Customers and suppliers to adequately access the credit markets, on favorable terms or at all, when needed, and (v) STERIS's ability to complete any announced transactions, including the fulfillment of related closing conditions.

Other potential risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements include, without limitation, (a) the impact of public health crises on STERIS’s operations, supply chain, material and labor costs, performance, results, prospects, or value, (b) STERIS's ability to achieve the expected benefits regarding the accounting and tax treatments of the redomiciliation to Ireland, (c) operating costs, Customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, Customers, clients or suppliers) being greater than expected, (d) STERIS’s ability to successfully integrate acquired businesses into its existing businesses, including unknown or inestimable liabilities, impairments, or increases in expected integration costs or difficulties in connection with the integration of such businesses, (e) uncertainties related to tax treatments under the TCJA and the IRA, (f) the possibility that Pillar Two Model Rules could increase tax uncertainty and adversely impact STERIS's provision for income taxes and effective tax rate and subject STERIS to additional income tax in jurisdictions who adopt Pillar Two Model Rules, (g) STERIS's ability to continue to qualify for benefits under certain income tax treaties in light of ratification of more strict income tax treaty rules (through the MLI) in many jurisdictions where STERIS has operations, (h) changes in tax laws or interpretations that could increase our consolidated tax liabilities, including changes in tax laws that would result in STERIS being treated as a domestic corporation for United States federal tax purposes, (i) the potential for increased pressure on pricing or costs that leads to erosion of profit margins, including as a result of inflation, (j) the possibility that market demand will not develop for new technologies, products or applications or services, or business initiatives will take longer, cost more or produce lower benefits than anticipated, (k) the possibility that application of or compliance with laws, court rulings, certifications, regulations, or regulatory actions, including without limitation any of the same relating to FDA, EPA or other regulatory authorities, government investigations, the outcome of any pending or

threatened FDA, EPA or other regulatory warning notices, actions, requests, inspections or submissions, the outcome of any pending or threatened litigation brought by private parties, or other requirements or standards may delay, limit or prevent new product or service introductions, affect the production, supply and/or marketing of existing products or services, result in costs to STERIS that may not be covered by insurance, or otherwise affect STERIS’s performance, results, prospects or value, (l) the potential of international unrest, including the Russia-Ukraine or Israel-Hamas military conflicts, economic downturn or effects of currencies, tax assessments, tariffs and/or other trade barriers, adjustments or anticipated rates, raw material costs or availability, benefit or retirement plan costs, or other regulatory compliance costs, (m) the possibility of reduced demand, or reductions in the rate of growth in demand, for STERIS’s products and services, (n) the possibility of delays in receipt of orders, order cancellations, or delays in the manufacture or shipment of ordered products, due to supply chain issues or otherwise, or in the provision of services, (o) the possibility that anticipated growth, cost savings, new product acceptance, performance or approvals, or other results may not be achieved, or that transition, labor, competition, timing, execution, impairments, regulatory, governmental, or other issues or risks associated with STERIS’s businesses, industry or initiatives including, without limitation, those matters described in STERIS's various securities filings, may adversely impact STERIS’s performance, results, prospects or value, (p) the impact on STERIS and its operations, or tax liabilities, of Brexit or the exit of other member countries from the EU, and the Company’s ability to respond to such impacts, (q) the impact on STERIS and its operations of any legislation, regulations or orders, including but not limited to any new trade or tax legislation (including CAMT and excise tax on stock buybacks), regulations or orders, that may be implemented by the U.S.

administration or Congress, or of any responses thereto, (r) the possibility that anticipated financial results or benefits of recent acquisitions, of STERIS’s restructuring efforts, or of recent divestitures, including anticipated revenue, productivity improvement, cost savings, growth synergies and other anticipated benefits, will not be realized or will be other than anticipated, (s) the level of STERIS’s indebtedness limiting financial flexibility or increasing future borrowing costs, (t) rating agency actions or other occurrences that could affect STERIS’s existing debt or future ability to borrow funds at rates favorable to STERIS or at all, (u) the effects of changes in credit availability and pricing, as well as the ability of STERIS’s Customers and suppliers to adequately access the credit markets, on favorable terms or at all, when needed, and (v) the possibility that our expectations about the pre-tax savings resulting from the Restructuring Plan, the number of positions eliminated pursuant to the Restructuring Plan and the costs, charges and cash expenditures associated with the announced restructuring plan may not be realized on the timeline or timelines we expect, or at all.

Availability of Securities and Exchange Commission Filings

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What changed 10-Q

Item 2. Management’s Discussion and Analysis