# Steris (STE) Financial Model Free Excel 3-statement financial model and company analysis for Steris. - Canonical: https://finamodel.com/companies/steris - Industry: Medical Devices - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/STE.xlsx ## Model Purpose This model forecasts STERIS plc's (STE) revenue, profitability, and free cash flow generation to determine its equity valuation and assess its capital allocation capacity following the strategic divestiture of its Dental segment. ## Company Overview - STERIS is a leading global provider of infection prevention and other procedural products and services, primarily serving the healthcare, pharmaceutical, and medical device industries. - **Business segments:** Healthcare (~68% of revenue), Applied Sterilization Technologies or AST (~19%), and Life Sciences (~13%). - **Key geographies:** United States (approx. 70% of revenue), with the remainder spread across Europe, Asia-Pacific, and other international markets. - **Business model type:** A hybrid model featuring high recurring revenue (consumables and services account for over 70% of total revenue) combined with capital equipment sales that drive future recurring streams. The AST segment is highly asset-intensive, requiring significant capital for sterilization facilities. - **Competitive position:** A dominant market leader in hospital sterilization and operating room equipment, as well as contract medical device sterilization, competing with companies like Getinge, Sotera Health, and Ecolab. - **Recent major events:** In April 2024 (Q1 FY2025), STERIS divested its Dental segment (HuFriedyGroup, acquired via the 2021 Cantel Medical acquisition) to Peak Rock Capital for $787.5 million. The Dental segment is now treated as discontinued operations. ## Revenue Deep Dive ### Healthcare - **Segment name:** Healthcare - **Revenue driver formula:** (Installed Base of Capital Equipment x Service Attachment Rate x Pricing) + (Surgical Procedure Volume x Consumable Usage per Procedure) - **Historical growth rate:** 6-9% constant currency organic growth. - **Key growth levers and headwinds:** Driven by global surgical procedure volumes, hospital capital expenditure budgets, and market share gains in sterile processing departments. Hospital budget constraints act as the primary headwind. - **Pricing dynamics:** Contractual for services and consumables; competitive bidding for large capital equipment installations. - **Revenue recognition notes:** Capital equipment recognized upon installation/acceptance; service revenue recognized over the contract term; consumables recognized upon shipment. - **Seasonality:** Fiscal Q4 (ending March 31) is typically the strongest quarter due to hospital year-end capital budget flushes. ### Applied Sterilization Technologies (AST) - **Segment name:** Applied Sterilization Technologies (AST) - **Revenue driver formula:** Medical Device Manufacturing Volume x Sterilization Price per Pallet/Unit - **Historical growth rate:** 8-10% constant currency organic growth. - **Key growth levers and headwinds:** Driven by the underlying growth of single-use medical device manufacturing and the outsourcing trend of sterilization. Headwinds include regulatory scrutiny over ethylene oxide (EtO) emissions. - **Pricing dynamics:** Long-term contracts with embedded price escalators; highly regulated and sticky customer base. - **Revenue recognition notes:** Recognized as sterilization services are performed and products are returned to the customer. - **Seasonality:** Generally stable throughout the year, tracking broader medical device manufacturing output. ### Life Sciences - **Segment name:** Life Sciences - **Revenue driver formula:** Biopharma Production Volume x Consumable/Service Price + Capital Equipment Sales - **Historical growth rate:** 3-5% constant currency organic growth. - **Key growth levers and headwinds:** Driven by pharmaceutical and biotechnology manufacturing activity, particularly sterile manufacturing and vaccine production. Headwinds include post-pandemic normalization in bioprocessing demand. - **Pricing dynamics:** Premium pricing due to the highly regulated nature of pharmaceutical manufacturing (FDA/EMA compliance). - **Revenue recognition notes:** Similar to Healthcare, split between point-in-time (consumables/equipment) and over-time (services). - **Seasonality:** Mild seasonality, often tied to pharmaceutical facility maintenance schedules. ## Cost Structure ### Variable Costs / COGS - **Line-by-line breakdown:** Manufacturing labour, raw materials (chemicals, steel, plastics), field service technician labour, freight, and overhead for AST sterilization facilities. - **Gross margin range:** 43.5% to 44.6% over the last 5 years. - **Key input costs and commodity exposures:** Stainless steel (for capital equipment), specialty chemicals (for consumables), and energy/utilities (for AST facilities). - **How COGS scales with revenue:** Consumables and services have high incremental margins. Capital equipment has lower gross margins. AST has high fixed costs (facility depreciation) but massive operating leverage once utilization crosses breakeven. ### Operating Expenses - **R&D:** Typically 2.0% to 2.5% of revenue; covers new product development in infection prevention and surgical equipment. - **SG&A:** Typically 23% to 25% of revenue; includes a large direct sales force, marketing, and corporate administrative functions. - **Depreciation & Amortisation:** Significant due to the asset-heavy AST segment and acquisition-related intangibles (Cantel Medical). D&A runs at approx. 8-9% of revenue. - **Stock-Based Compensation:** Approximately 0.5% to 1.0% of revenue. - **Restructuring / one-time charges:** Frequent adjustments for acquisition integration, facility consolidations, and litigation expenses (e.g., EtO-related legal costs). ### Margin Profile - **Gross margin:** 43.5% - 44.6% - **EBITDA margin:** 22.0% - 24.0% (Adjusted) - **Operating margin:** 16.0% - 18.5% (GAAP); Adjusted EBIT margin typically 23.0% - 23.5%. - **Net margin:** 11.0% - 13.0% (Adjusted) - **Margin trend:** Expanding slightly due to a favorable mix shift toward higher-margin AST and Healthcare services, offset occasionally by inflation and legal expenses. ## Balance Sheet Structure - **Total assets:** Approximately $10.4 billion. - **Key asset categories:** Intangible assets, goodwill, property, plant & equipment (PP&E), and inventory. - **Goodwill & intangibles as % of total assets:** Very high (approx. 50-55%), primarily due to the $4.6 billion acquisition of Cantel Medical in 2021. - **Working capital profile:** - **Days Sales Outstanding (DSO):** 55 - 65 days. - **Days Inventory Outstanding (DIO):** 85 - 95 days (high due to the need to hold capital equipment and spare parts). - **Days Payable Outstanding (DPO):** 45 - 55 days. - **Net working capital as % of revenue:** Typically 15% - 18%. - **Is working capital positive or negative?** Positive. The company consumes some cash for working capital as it grows. - **PP&E:** Approximately $1.5 billion, heavily weighted toward AST sterilization facilities (gamma irradiation, EtO, e-beam) and manufacturing plants. - **Right-of-use assets / operating leases:** Approximately $160 million, material but manageable. ## Capital Expenditure & Investment - **Capex as % of revenue:** 6.0% - 7.0% ($300M - $360M annually). - **Maintenance capex vs. growth capex:** Roughly 40% maintenance, 60% growth. - **Major capex programmes underway or planned:** Significant ongoing investments in expanding the global network of AST sterilization facilities to meet medical device outsourcing demand. - **Capitalised software / development costs:** Minimal relative to physical infrastructure. - **M&A pattern:** Historically a serial acquirer (Cantel Medical, Synergy Health, Key Surgical), but currently focused on debt paydown and organic growth following the Dental divestiture. - **Typical acquisition multiple paid:** 12x - 15x EV/EBITDA for high-quality medtech assets. ## Debt & Capital Structure - **Total debt:** Approximately $2.2 billion. - **Debt/EBITDA ratio:** Current leverage is approx. 1.5x, down from post-Cantel peaks. - **Credit rating:** Investment grade (Baa2/BBB). - **Key debt instruments:** Senior unsecured notes (e.g., 2.700% Notes due 2031, 3.750% Notes due 2051) and a revolving credit facility. - **Maturity profile:** Well-laddered with long-dated senior notes. - **Interest rate profile:** Predominantly fixed-rate bonds; weighted average cost of debt is approx. 3.5% - 4.0%. - **Covenants:** Standard investment-grade covenants; highly compliant. - **Share repurchase programme:** Active but opportunistic; historically offsets dilution from stock-based compensation. - **Dividend policy:** Consistent dividend grower (13+ consecutive years); payout ratio is typically 20% - 25% of adjusted net income. ## Cash Flow Characteristics - **Operating cash flow conversion:** OCF / Net Income is typically 1.2x - 1.4x due to high non-cash D&A. - **Free cash flow margin:** FCF / Revenue is typically 12% - 15% (targeting $700M - $850M annually). - **Major non-cash items that bridge net income to OCF:** Depreciation, amortization of acquired intangibles, and stock-based compensation. - **Working capital cash flow impact:** Modest use of cash as the business scales, primarily driven by inventory builds for capital equipment. - **Capex intensity:** Moderate to high (6-7% of revenue), acting as a partial drag on FCF conversion, though it drives high-margin AST growth. - **Cash tax rate vs. GAAP effective tax rate:** Cash taxes are generally aligned with the GAAP effective tax rate of 23.0% - 24.5%. The company is domiciled in Ireland for tax efficiency. ## Sheet Structure 1. **Assumptions:** Hardcoded inputs for macroeconomic drivers, segment growth rates, margin profiles, working capital days, capex, and tax rates. 2. **Revenue_Build:** Segment-level revenue forecasting (Healthcare, AST, Life Sciences) split by Consumables, Service, and Capital Equipment where applicable. 3. **Income_Statement:** Consolidated P&L from Revenue down to Net Income, including GAAP and Adjusted EPS calculations. 4. **Balance_Sheet:** Assets, Liabilities, and Shareholders' Equity. Must balance in all periods. 5. **Cash_Flow_Statement:** Indirect method, bridging Net Income to Cash from Operations, Investing, and Financing. 6. **Debt_Schedule:** Tranches of senior notes, revolving credit facility, interest expense calculation, and mandatory repayments. 7. **Working_Capital:** Schedules for Accounts Receivable, Inventory, Accounts Payable, and Deferred Revenue based on days assumptions. 8. **Depreciation_Amortisation:** Waterfall schedules for existing PP&E, new capex, and acquired intangibles. 9. **DCF_Valuation:** Unlevered free cash flow calculation, WACC build, terminal value, and implied share price. 10. **Discontinued_Ops_Bridge:** Historical reconciliation showing the removal of the Dental segment to ensure clean go-forward modeling. ## Key Financial Relationships 1. `Healthcare Revenue = Prior Year Healthcare Revenue x (1 + Healthcare Constant Currency Growth Rate)` 2. `AST Revenue = Prior Year AST Revenue x (1 + AST Constant Currency Growth Rate)` 3. `Life Sciences Revenue = Prior Year Life Sciences Revenue x (1 + Life Sciences Constant Currency Growth Rate)` 4. `Total Revenue = Healthcare Revenue + AST Revenue + Life Sciences Revenue` 5. `Consolidated Gross Profit = Total Revenue x Gross Margin % (Targeting ~44.5%)` 6. `SG&A Expense = Total Revenue x SG&A % of Revenue` 7. `Adjusted EBIT = Total Revenue - COGS - SG&A - R&D (excluding restructuring and acquisition-related amortization)` 8. `Accounts Receivable = (DSO / 365) x Total Revenue` 9. `Inventory = (DIO / 365) x COGS` 10. `Accounts Payable = (DPO / 365) x COGS` 11. `Capital Expenditures = Total Revenue x Capex % of Revenue (Targeting ~6.5%)` 12. `Interest Expense = (Beginning Total Debt + Ending Total Debt) / 2 x Weighted Average Interest Rate` 13. `Free Cash Flow = Cash from Operations - Capital Expenditures` 14. `Dividends Paid = Prior Year Adjusted Net Income x Target Payout Ratio` ## Cross-Sheet Dependencies - **Assumptions** feeds all other sheets (Revenue_Build, Income_Statement, Working_Capital, Capex). - **Revenue_Build** feeds the top line of the **Income_Statement** and drives the activity levels in **Working_Capital**. - **Income_Statement** generates Net Income, which is the starting point for the **Cash_Flow_Statement**. - **Working_Capital** calculates the change in NWC, which feeds the operating section of the **Cash_Flow_Statement**. - **Depreciation_Amortisation** feeds operating expenses on the **Income_Statement** and the non-cash add-backs on the **Cash_Flow_Statement**. - **Debt_Schedule** calculates interest expense for the **Income_Statement** and debt balances for the **Balance_Sheet**. *Circularity risk:* Interest expense reduces Net Income, which reduces Cash, which dictates debt paydown/drawdown, which changes Interest Expense. Use a circularity breaker (toggle). - **Cash_Flow_Statement** generates the ending cash balance, which links to the **Balance_Sheet**. ## Sign Convention - **Revenues and Assets:** Positive. - **Expenses and Liabilities:** Positive on their specific schedules, but subtracted in aggregation formulas (e.g., Gross Profit = Revenue - COGS). - **Cash Flow Statement:** Cash inflows are positive; cash outflows (e.g., Capex, Dividends, Debt Repayment) are negative. - **Contra-accounts:** Accumulated Depreciation is negative on the Balance Sheet. ## Things Most Likely to Go Wrong 1. **Discontinued Operations Distortion:** The Dental segment was divested in Q1 FY25. Historical consolidated financials include Dental. The model must use continuing operations baselines for FY24 and FY25 to forecast FY26 accurately. 2. **Currency Translation:** STERIS generates ~30% of revenue outside the US. Fluctuations in the EUR and GBP can swing reported revenue. Model should forecast on a constant-currency basis and apply an FX overlay if necessary. 3. **Amortization of Intangibles:** STERIS has massive non-cash amortization from the Cantel acquisition. Failing to add this back will severely understate Adjusted Net Income and Free Cash Flow. 4. **AST Capex Intensity:** The AST segment requires heavy upfront capex for sterilization facilities. Do not under-forecast capex; it must remain around 6-7% of revenue to support AST's 8-10% growth. 5. **Litigation Expenses:** STERIS frequently incurs legal costs related to ethylene oxide (EtO) emissions. These are usually excluded from Adjusted EBIT but represent real cash outflows. 6. **Circularity in Debt Paydown:** STERIS is actively using FCF to pay down debt post-divestiture. Ensure the debt sweep logic correctly applies excess cash to the revolving credit facility without causing Excel circular reference errors. 7. **Tax Domicile:** STERIS is domiciled in Ireland. Do not use the US statutory corporate tax rate (21%); use the company's blended effective tax rate of ~23.5%. 8. **Capital Equipment vs. Consumables Mix:** A shift toward capital equipment lowers gross margins but drives future high-margin consumable sales. Ensure margin assumptions reflect the forecasted revenue mix. ## Validation Checks 1. "Gross margin should be in the 43.5% - 45.0% range; flag if outside this band." 2. "Adjusted EBIT margin should be between 22.0% and 24.0%." 3. "Capex as % of revenue must be between 6.0% and 7.5% to support AST facility expansion." 4. "OCF/Net Income conversion should be >1.2x due to heavy D&A add-backs." 5. "Debt/EBITDA should remain below 2.5x per rating agency guidance (currently ~1.5x)." 6. "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period." 7. "Effective tax rate should be 23.0% - 24.5%." 8. "Free Cash Flow should be in the $700M - $850M range for FY25/FY26." ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Healthcare Revenue Growth | 6.5 | % | Blended rate of strong service growth and moderate capital equipment growth | | AST Revenue Growth | 9.0 | % | Continued strong demand for medical device sterilization outsourcing | | Life Sciences Revenue Growth | 4.0 | % | Normalized biopharma production demand | | Gross Margin | 44.5 | % | Recent historical average, benefiting from favorable mix shift | | SG&A as % of Revenue | 24.0 | % | Historical average, reflecting direct sales force costs | | R&D as % of Revenue | 2.2 | % | Consistent historical investment rate | | Effective Tax Rate | 23.5 | % | Management guidance for FY25/FY26 | | Days Sales Outstanding (DSO) | 60 | Days | Based on historical Accounts Receivable / Revenue | | Days Inventory Outstanding (DIO) | 90 | Days | Based on historical Inventory / COGS | | Days Payable Outstanding (DPO) | 50 | Days | Based on historical Accounts Payable / COGS | | Capex as % of Revenue | 6.5 | % | Management guidance to support AST capacity expansion | | Weighted Average Interest Rate | 3.8 | % | Blended rate of existing senior notes and credit facility | | Dividend Payout Ratio | 22.0 | % | Historical average of Adjusted Net Income | | WACC | 7.5 | % | Standard discount rate for investment-grade medtech | | Terminal Growth Rate | 2.5 | % | Long-term GDP and healthcare inflation proxy | ## Data Sources & Benchmarks - **Filings:** SEC EDGAR (Form 10-K for FY ended March 31, Form 10-Q, Form 8-K for Dental divestiture). - **Investor Relations:** steris-ir.com (Earnings presentations, supplemental financial schedules for discontinued operations). - **Key Peers for Benchmarking:** Getinge AB (GETI B), Sotera Health (SHC), Ecolab (ECL), Stryker (SYK). - **Industry Data Sources:** FDA MedWatch (for sterilization regulatory updates), IQVIA (for biopharma production trends). - **Consensus Estimates:** Bloomberg or FactSet for forward-looking EPS and revenue estimates. ## Sources - STERIS plc Form 10-K for the fiscal year ended March 31, 2025 (filed May 2025). - STERIS plc Form 10-Q for the fiscal quarters ended June 30, 2025, and September 30, 2025. - STERIS plc Press Release: "STERIS to Sell Dental Segment to an affiliate of Peak Rock Capital" (April 11, 2024). - STERIS plc Q2 FY2026 Earnings Release and Guidance Update (November 2025). - Macrotrends and Investing.com historical margin and revenue data for STERIS plc. --- ## Frequently asked questions ### What does Steris (STE) do? Steris is a leading global provider of infection prevention and other procedural products and services, primarily serving the healthcare, pharmaceutical, and medical device industries. Its main business segments include Healthcare, Applied Sterilization Technologies (AST), and Life Sciences. ### How does Steris generate its revenue? Steris utilizes a hybrid business model where over 70% of its total revenue comes from recurring sources like consumables and services. Additionally, capital equipment sales contribute significantly, as they often drive subsequent recurring revenue streams. ### What is Steris's capital expenditure strategy? Steris typically allocates 6.0% - 7.0% of its revenue to capital expenditures annually, with roughly 60% directed towards growth initiatives. The company is making significant ongoing investments to expand its global network of AST sterilization facilities. ### What are the key revenue growth assumptions for the Steris financial model? The financial model for Steris assumes a revenue growth rate of approximately 13%. This projection is based on the company's strong market position and its substantial recurring revenue base. ### What is the primary purpose of the Steris financial model? The Steris financial model is designed to forecast the company's revenue, profitability, and free cash flow generation. Its main goal is to determine STE's equity valuation and assess its capacity for capital allocation following the recent divestiture of its Dental segment. ### Can I download an Excel financial model for Steris (STE)? Yes, an Excel financial model for Steris (STE) is available for download. This comprehensive model provides financial forecasts for the company spanning from fiscal year 2026 through fiscal year 2030. [Interactive forecast calculator](https://finamodel.com/companies/steris/forecast)