STERIS : 2024 STERIS Annual Report

2024

Annual Report

Annual Report on Form 10-K

Dear Fellow Shareholders,

Fiscal 2024 turned out to be a strong year for STERIS. For the full year, we exceeded our expectations with 13% total revenue growth from continuing operations and constant currency organic revenue growth from continuing operations of 10%. The last few fiscal years have demonstrated the strength of our diversified businesses. We have had macro challenges impacting our Company, and yet have grown revenue high-single digits or better for the past three fiscal years.

Our largest segment, Healthcare, consistently outperformed in fiscal 2024, ending the year with 13% constant currency organic revenue growth - the third consecutive year of double-digit growth for the segment. The single biggest driver was the work done by our operations teams to reduce lead times and as a result, return backlog to normal levels. I am pleased to report that as of the fourth quarter, our lead times are back to pre-pandemic levels for the first time in two years. Service and consumables each had strong organic revenue growth for the fiscal year, as we continue to benefit from the breadth of our offering and the size and quality of our service teams.

AST grew revenue 3% on a constant currency organic basis for the year, which is unusually low, but ended the fiscal year with improving service revenue growth. In the fourth quarter, service revenue grew 7%, which was a mixture of double-digit revenue growth in the U.S. and low-single-digit revenue growth in EMEA. While it is early days, bioprocessing demand seems to have stabilized, and did not unfavorably impact our performance in the fourth quarter. This is a positive step forward. We do not expect a return to meaningful bioprocessing growth until the second half of fiscal 2025, aligned with the comments from our public company Customers.

Life Sciences ended fiscal 2024 in line with our long-term expectations at 6% constant currency organic revenue growth. In particular, double-digit revenue growth in service for the year is an impressive achievement as we continue to win new contracts and experience improved parts sales. Considering the macro challenges facing the pharmaceutical sector, we are pleased with the segment's results.

From a profit perspective, we are through the majority of the headwinds we faced over the past few years which limited our bottom-line growth. Supply chain costs and availability have stabilized, as has inflation. We saw the benefit of that in fiscal 2024, contributing to 9% growth in adjusted earnings per diluted share from continuing operations of $8.20.

During fiscal 2024, we completed a strategic review of our portfolio and made several key decisions. As a result, we announced the divesture of two businesses during the year, most notably the Dental segment, which closed in the first quarter of fiscal 2025. As a result, the segment is being treated as discontinued operations in our financial statements. In addition, we announced a targeted restructuring plan, which includes restructuring of the Healthcare surgical capital equipment business in Europe, as well as other actions including impairment of an internally developed high-capacityX-ray accelerator, product rationalizations and facility consolidations.

The goal of these announcements is to allow us to improve our focus on our core Customers in Healthcare, Pharma and Medtech as well as areas where we can achieve sustainable and profitable growth. With these changes, we believe we have the right portfolio, sales channels and network of facilities to serve our Customers.

Our plans suggest that fiscal 2025 will be another strong year for STERIS. I am confident in our ability to deliver on our long-term commitments of mid-to-highsingle-digit revenue growth and double-digit earnings growth over the years to come. We strive to achieve this while generating solid free cash flow, maintaining conservative debt levels and growing our dividend.

In closing, I would like to thank the 18,000 Associates of STERIS for their support of our Customers and their dedication to our mission. I would also like to thank our Board of Directors for their counsel, and of course our shareholders, for your ongoing support.

Until next year,

Dan Carestio

President and Chief Executive Officer

June 12, 2024

Non-GAAP financials have been included in this document. Please refer to the reconciliation of Non-GAAP results to GAAP results contained at the end of this annual report under "Non-GAAP Financial Measures."

United States Securities and Exchange Commission

Washington, D. C. 20549

________________________________________________

FORM 10-K

(Mark One)

☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2024

OR

• TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-38848

STERIS plc

(Exact name of registrant as specified in its charter)

Ireland	98-1455064
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)
70 Sir John Rogerson's Quay, Dublin 2, Ireland	D02 R296
(Address of principal executive offices)	(Zip code)

353 1 232 2000

(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

Title of each class	Trading symbol(s)	Name of Exchange on Which Registered
Ordinary Shares, $0.001 par value	STE	New York Stock Exchange
2.700% Senior Notes due 2031	STE/31	New York Stock Exchange
3.750% Senior Notes due 2051	STE/51	New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	o	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based

compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No x

The aggregate market value of Ordinary Shares held by non-affiliates of the registrant as of September 30, 2023 was $21,614.0 million. The number of Ordinary Shares outstanding as of May 24, 2024: 98,900,010

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2024 Annual Meeting - Part III

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Table of Contents

		Page
	Part I
Item 1	Business	3
	Introduction	3
	Information Related to Business Segments	3
	Information with Respect to Our Business in General	5
Item 1A	Risk Factors	14
Item 1B	Unresolved Staff Comments	25
Item 1C	Cybersecurity	25
Item 2	Properties	26
Item 3	Legal Proceedings	27
Item 4	Mine Safety Disclosures	27
	Part II
Item 5	Market for Registrant's Ordinary Equity, Related Shareholder Matters and Issuer Purchases of Equity	28
	Securities
Item 6	Reserved	29
Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operation	30
	Introduction	30
	Financial Measures	30
	Revenues-Defined	31
	General Overview and Executive Summary	31
	Non-GAAP Financial Measures	33
	Results of Operations	33
	Liquidity and Capital Resources	38
	Capital Expenditures	42
	Material Future Cash Obligations and Commercial Commitments	43
	Supplemental Guarantor Financial Information	43
	Critical Accounting Estimates and Assumptions	45
	Forward-Looking Statements	50
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	52
	Interest Rate Risk	52
	Foreign Currency Risk	52
	Commodity Risk	52
Item 8	Financial Statements and Supplementary Data	53
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	107
Item 9A	Controls and Procedures	107
Item 9B	Other Information	109
Item 9C	Disclosure Regarding Foreign Jurisdictions That Prevent Inspections	109
	Part III
Item 10	Directors, Executive Officers and Corporate Governance	110
Item 11	Executive Compensation	110
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	110
Item 13	Certain Relationships and Related Transactions, and Director Independence	110
Item 14	Principal Accountant Fees and Services	110
	Part IV
Item 15	Exhibits and Financial Statement Schedule	111
Item 16	Form 10-K Summary	115
	Signatures	116

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PART I

Throughout this Annual Report, STERIS plc and its subsidiaries together are called "STERIS," "the Company," "we," "us," or "our," unless otherwise noted. References in this Annual Report to a particular "year," "fiscal," "fiscal year," or "year-end" mean our fiscal year, which ends on March 31. For example, fiscal year 2024 ended on March 31, 2024.

ITEM 1. BUSINESS

INTRODUCTION

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 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; and services, including equipment installation and maintenance, microbial reduction of medical devices, instrument and scope repair, laboratory testing, outsourced reprocessing; and capital equipment, such as sterilizers, surgical tables, and automated endoscope reprocessors, and connectivity solutions such as operating room ("OR") integration.

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 agreement to divest our Dental segment, Dental is presented as discontinued operations. Historical information has been retrospectively adjusted to reflect these changes 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 the section that follows, titled "Information Related to Business Segments" and Note 13 to our consolidated financial statements titled, "Business Segment Information."

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.

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 which are driving increased demand for many of our products and services.

INFORMATION RELATED TO BUSINESS SEGMENTS

Our chief operating decision maker is our President and Chief Executive Officer ("CEO"). The CEO is responsible for performance assessment and resource allocation. The CEO regularly receives discrete financial information about each reportable segment and uses this information to assess performance and allocate resources. The accounting policies of the reportable segments are the same as those described in Note 1 to our consolidated financial statements titled, "Nature of Operations and Summary of Significant Accounting Policies," of this Annual Report.

HEALTHCARE SEGMENT

Description of Business. 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. Our products and services range from infection prevention consumables and capital equipment, as well as services to maintain that equipment; to the repair of re-usable procedural instruments; to outsourced instrument reprocessing services. 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.

Products Offered. Our products include cleaning chemistries and sterility assurance products, automated endoscope reprocessing systems and tracking products, endoscopy accessories, instruments, washers, sterilizers and other pieces of capital equipment essential to the operations of a sterile processing department and equipment used directly in the procedure rooms, including surgical tables, lights, equipment management services, and connectivity solutions.

Services Offered. Our Healthcare segment service employees install, maintain, upgrade, repair, and troubleshoot capital equipment throughout the world. We offer various preventive maintenance programs and repair services to support the effective operation of capital equipment over its lifetime. Our Healthcare segment also provides comprehensive instrument, devices, and endoscope repair and maintenance services (on-site or at one of our dedicated facilities), custom process improvement consulting and outsourced instrument sterile processing (on-site at the hospital and in off-site reprocessing centers).

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Customer Concentration. Our Healthcare segment sells consumables, services and capital equipment, to Customers in many countries throughout the world. For the year ended March 31, 2024, no Customer represented more than 10% of the Healthcare segment's total revenues.

Competition. We compete with a number of large companies that have significant product portfolios and global reach, as well as a number of small companies with very limited product offerings and operations in one or a limited number of countries. On a product basis, competitors include 3M, Baxter, Boston Scientific, Belimed, Fortive, Getinge, Karl Storz, Olympus, Ruhof, SteelCo, Stryker, Skytron and Wassenburg. On a service line basis, competitors include Agiliti, BBraun, Crothall, Olympus and Pentax.

AST SEGMENT

Description of Business. 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.

Services Offered. We offer a wide range of sterilization modalities and an array of testing services that complement the manufacturing of single use, sterile products. Our facilities are located in regions with a concentration of medical device manufacturing throughout the Americas, Europe, and Asia. Our technical professionals support Customers in all phases of product development, materials testing, and process validation. In addition, we manufacture and supply integrated sterilization equipment and control systems to medical device manufacturers and research institutions.

Products Offered. We support Customers with process controls and monitoring systems, and integrated sterilization equipment, including accelerators, product handling, and automation.

Customer Concentration. Our AST segment's services are offered to Customers throughout the world. For the year ended March 31, 2024, no Customer represented more than 10% of the segment's revenues.

Competition. AST operates in a highly regulated industry and competes with Sterigenics International, Inc., other smaller contract sterilization companies, other manufacturers of sterilization equipment and control systems, and manufacturers that sterilize products in-house.

LIFE SCIENCES SEGMENT

Description of Business. 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.

Products Offered. These products include pharmaceutical detergents, cleanroom disinfectants and sterilants, pharmaceutical grade and research sterilizers and washers, sterility assurance and maintenance products, vaporized hydrogen peroxide room decontamination systems and sterilizers, and high purity water and pure steam generators.

Services Offered. Our Life Sciences segment service employees install, maintain, upgrade, repair, and troubleshoot equipment throughout the world. We offer various preventive maintenance programs and repair services to support the effective operation of capital equipment over its lifetime.

Customer Concentration. Our Life Sciences segment sells consumables, services and capital equipment to Customers globally. For the year ended March 31, 2024, no Customer represented more than 10% of the Life Sciences segment's total revenues.

Competition. Our Life Sciences segment operates in highly regulated environments where the most intense competition results from technological innovations, product performance, convenience and ease of use, and overall cost-effectiveness. We compete for pharmaceutical Customers with a number of large companies that have significant product portfolios and global reach, as well as a number of small companies with very limited product offerings and operations in one or a limited number of countries. Competitors include Belimed, Contec, Ecolab, Fedegari, Getinge, and Stilmas.

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INFORMATION WITH RESPECT TO OUR BUSINESS IN GENERAL

Sources and Availability of Raw Materials. We purchase raw materials, sub-assemblies, components, and other supplies needed in our operations from numerous suppliers in the United States and internationally. The principal raw materials and supplies used in our operations include stainless and carbon steel, organic and inorganic chemicals, fuel, and plastic components. These raw materials and supplies are generally available from several suppliers and in sufficient quantities. However, in fiscal 2023 and 2024 we experienced delays in receiving materials and significant cost increases. Our supply chain challenges eased during the second half of fiscal 2024 and we do not currently expect significant disruption to our operations due to sourcing delays in fiscal 2025. We anticipate continued inflation pressures in fiscal 2025 but not at the significant level experienced in fiscal 2024 and 2023.We have long-term supply contracts for certain materials for which there are few suppliers, or those that are single-sourced in certain regions of the world, such as ethylene oxide ("EO") and cobalt-60, which are necessary to our AST operations. In addition, we continue to expand our irradiation processing capacity with accelerator-based technologies, in order to help mitigate the potential cobalt-60 supply risk.

In response to the active conflict between Russian and Ukraine, we stopped purchasing cobalt-60 from our Russian supplier in fiscal 2023. A long-term disruption in cobalt-60 sourced from Russia may negatively impact gamma processing capacity or increase costs in certain portions of our AST operations but these impacts are not expected to be material to our AST segment and its results of operations. For additional information about the risks we face concerning the conflict between Russia and Ukraine, see Part I, Item 1A of this Annual Report titled, "Risk Factors."

Inflation. Historically, our business has not been significantly impacted by the overall effects of inflation. However, during fiscal 2023 and 2024, we experienced a rise in supply chain and labor costs and anticipate continued inflationary pressure in fiscal 2025 but not at the significant level experienced in fiscal 2024 and 2023. We monitor the prices we charge for our products and services on an ongoing basis and plan to adjust those prices to take into account future changes in the rate of inflation.

Intellectual Property. We protect our technology and products by, among other means, obtaining United States and foreign patents. There can be no assurance, however, that any patent will provide adequate protection for the technology, system, product, service, or process it covers. In addition, the process of obtaining and protecting patents can be long and expensive. We also rely upon trade secrets, technical know-how, and continuing technological innovation to develop and maintain our competitive position.

As of March 31, 2024, we held 630 United States patents and 2,531 patents in other jurisdictions and had 147 United States patent applications and 334 patent applications pending in other jurisdictions. Patents for individual products extend for varying periods according to the date of filing or grant and legal term of patents in various countries where a patent is obtained. The actual protection a patent provides varies from country to country and depends in part upon the type of patent, the scope of its coverage, and the availability of legal remedies in each country.

Our products are sold around the world under various brand names and trademarks. We consider our brand names and trademarks to be valuable in the marketing of our products. As of March 31, 2024, we had a total of approximately 2,550 trademark registrations worldwide.

Quality Assurance. We manufacture, assemble, and package products in several countries. Each of our production facilities are dedicated to particular processes and products. Our success depends upon Customer confidence in the quality of our production process and the integrity of the data that supports our product safety and effectiveness. We have implemented quality assurance procedures to support the quality and integrity of scientific information and production processes.

Government Regulation. Our business is subject to various degrees of governmental regulation in the countries in which we operate. In the United States, the Food and Drug Administration ("FDA"), the Environmental Protection Agency ("EPA"), the Occupational Safety and Health Administration ("OSHA"), the Nuclear Regulatory Commission, and other governmental authorities regulate the development, manufacture, sale, and distribution of our products and services. Our international operations also are subject to a significant amount of government regulation, including country-specific rules and regulations and U.S. regulations applicable to our international operations. Government regulations require detailed inspection of, and controls over, research and development, clinical investigations, product approvals and manufacturing, marketing and promotion, sampling, distribution, record-keeping, storage, and disposal practices.

Compliance with applicable regulations is a significant expense for us. Past, current or future regulations, their interpretation, or their application could have a material adverse impact on our operations. Also, additional governmental regulation may be passed that could prevent, delay, revoke, or result in the rejection of regulatory clearance of our products. We cannot predict the effect on our operations resulting from current or future governmental regulation or the interpretation or application of these regulations.

If we fail to comply with any applicable regulatory requirements, penalties could be imposed on us. For more information about the risks we face regarding regulatory requirements, see Part I, Item 1A of this Annual Report titled, "Risk Factors." We

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are subject to extensive regulatory requirements and must receive and maintain regulatory clearance or approval for many products and operations. Failure to receive or maintain, or delays in receiving, clearance or approvals may hurt our revenues, profitability, financial condition, or value.

In the past, we have received warning letters, paid civil penalties, conducted product recalls and field corrections, and been subject to other regulatory penalties. We believe that we are currently compliant in all material respects with applicable regulatory requirements. However, there can be no assurance that future or current regulatory, governmental, or private action will not have a material adverse effect on us or on our performance, results, or financial condition.

Environmental Matters. We are subject to various laws and governmental regulations concerning environmental matters and employee safety and health in Ireland, the United States and other countries. We have made, and continue to make, significant investments to comply with these laws and regulations. We cannot predict the future capital expenditures or operating costs required to comply with environmental laws and regulations. We believe that we are currently compliant with applicable environmental, health, and safety requirements in all material respects. However, there can be no assurance that future or current regulatory, governmental, or private action will not have a material adverse effect on our performance, results, or financial condition. Please refer to Note 12 to our consolidated financial statements titled, "Commitments and Contingencies" for further information.

In the future, if a loss contingency related to environmental matters, employee safety, health or conditional asset retirement obligations which is estimable and probable is significantly greater than the current recorded amount, we would record an additional liability for the obligation and it may result in a material impact on net income for the annual or interim period during which the liability is recorded. The investigation and remediation of environmental obligations generally occur over an extended period of time, and therefore we do not know if these events would have a material adverse effect on our financial condition, liquidity, or cash flow, nor can there be any assurance that such liabilities would not have a material adverse effect on our performance, results, or financial condition.

Competition. The markets in which we operate are highly competitive and generally highly regulated. Competition is intense in all of our business segments and includes many large and small competitors. Brand, design, quality, safety, ease of use, serviceability, price, product features, warranty, delivery, service, and technical support are important competitive factors to us. We expect to face continued competition in the future as new infection prevention, sterile processing, contamination control, gastrointestinal and surgical support products and services enter the market. We believe many organizations are working with a variety of technologies and sterilizing agents.

We believe that our long-term competitive position depends on our success in discovering, developing, and marketing innovative, cost-effective products and services. We devote significant resources to research and development efforts, and we believe STERIS is positioned as a global competitor in the search for technological innovations. In addition to research and development, we invest in quality control, Customer training programs, distribution systems, technical services, and other information services.

There can be no assurance that we will develop significant new products or services, or that the new products or services we provide or develop in the future will be more commercially successful than those provided or developed by our competitors. In addition, some of our existing or potential competitors may have greater resources than us. Therefore, a competitor may succeed in developing and commercializing products more rapidly than we do. Competition, as it relates to our business segments and product categories, is discussed in more detail in the section above titled, "Information Related to Business Segments."

Methods of Distribution. Sales and service activities are supported by a staff of regionally based clinical specialists, system planners, corporate account managers, and in-house Customer service and field support departments. We also contract with distributors and dealers.

Customer training is important to our business. We provide a variety of courses at Customer locations, at our training and education centers, and over the internet. Our training programs help Customers understand the science, technology, and operation of our products and services. Many of our operator training programs are approved by professional certifying organizations and offer continuing education credits to eligible course participants.

Seasonality. Our financial results have been, from time to time, subject to seasonal patterns. We cannot assure you that these patterns will not continue.

Backlog. We define backlog as the amount of unfilled capital equipment purchase orders at a point in time. At March 31, 2024, we had a backlog of $425.2 million. Of this amount, $353.8 million and $71.4 million related to our Healthcare and Life Sciences segments, respectively. At March 31, 2023, we had backlog orders of $599.6 million. Of this amount, $494.7 million and $104.9 million related to our Healthcare and Life Sciences segments, respectively. Backlog declined in fiscal 2024 as supply chain delays eased allowing us to reduce lead times and backlog.

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