STERIS plc (STE)

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

In Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), we explain the general financial condition and the results of operations for STERIS and its subsidiaries including:

•what factors affect our business;

•what our earnings and costs were in each period presented;

•why those earnings and costs were different from prior periods;

•where our earnings came from;

•how this affects our overall financial condition;

•what our expenditures for capital projects were; and

•where cash is expected to 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 first three months of fiscal 2027 and fiscal 2026. It may also be helpful to refer to our Annual Report on Form 10-K for the year ended March 31, 2026, which was filed with the Securities and Exchange Commission ("SEC") on May 29, 2026, 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. This information, discussion, and analysis may be important to you in making decisions about your investments in STERIS.

Financial Measures

In the following sections of the MD&A, we may, at times, refer to financial measures that are not required to be presented in the consolidated financial statements under accounting principles generally accepted in the United States ("U.S. GAAP"). We sometimes use the following financial measures in the context of this report: backlog and debt-to-total capital. We define these financial measures as follows:

•Backlog – We define backlog as the amount of unfilled capital equipment purchase orders (excluding freight) at a point in time. We use this figure as a measure to assist in the projection of short-term financial results and inventory requirements.

•Debt-to-total capital ratio – We define debt-to-total capital ratio as total debt divided by the sum of total debt and shareholders’ equity. We use this figure as a financial liquidity measure to gauge our ability to borrow and fund growth.

We, at times, may also refer to financial measures which are considered to be “non-GAAP financial measures” under SEC rules. We have presented these financial measures because we believe that meaningful analysis of our financial performance is enhanced by an understanding of certain additional factors underlying that performance. These financial measures should not be considered an alternative to measures required by accounting principles generally accepted in the United States. Our calculations of these measures may differ from calculations of similar measures used by other companies, and you should be careful when comparing these financial measures to those of other companies. Additional information regarding these financial measures, including reconciliations of each non-GAAP financial measure, is available in the subsection of MD&A titled, "Non-GAAP Financial Measures."

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 for each period presented. When we discuss revenues, we may, at times, refer to revenues summarized differently than the Regulation S-X requirements. The terminology, definitions, and applications of terms that we use to describe revenues may be different from terms used by other companies. We use the following terms to describe revenues:

•Revenues – Our revenues are presented net of sales returns and allowances.

•Product Revenues – We define Product revenues as revenues generated from sales of consumable and capital equipment products.

•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

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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, automated endoscope reprocessors, pure steam/water systems, surgical lights and tables, and integrated operating rooms.

•Consumable Revenues – We define consumable revenues as revenues generated from sales of the consumable family of products, which includes dedicated consumables used in our capital equipment, 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.

GENERAL COMPANY OVERVIEW AND EXECUTIVE SUMMARY

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; 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 integration.

We operate and report our financial information in three reportable business segments: Healthcare, AST, and Life Sciences. 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 10 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 of which are driving increased demand for many of our products and services.

Acquisitions. During the first three months of fiscal 2027, we completed three tuck-in acquisitions, recorded at fair value, which continued to expand our product and service offerings in the Healthcare segment. Total aggregate consideration was approximately $17.3 million, including deferred consideration and the fair value of potential contingent consideration.

During the first three months of fiscal 2026, we completed a tuck-in acquisition which continued to expand our product and service offerings in the Healthcare segment. Total aggregate consideration was approximately $15.0 million.

Acquisition and integration expenses totaled $1.5 million for the three months ended June 30, 2026. Acquisition and integration expenses totaled $0.5 million for the three months ended June 30, 2025. Acquisition and integration expenses reported in the Selling, general and administrative expenses and Cost of revenues lines of our Consolidated Statements of Income include, but are not limited to, investment banker, advisory, legal and other professional fees, and certain employee-related expenses.

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

Highlights. Revenues increased 7.3% to $1,492.7 million for the three months ended June 30, 2026, as compared to $1,391.1 million for the same period in the prior year. The increase during the three month period reflects the benefits of higher volume in the Healthcare and Life Sciences segments, and pricing across all three segments.

Gross profit percentage for the first three months of fiscal 2027 was 45.8% compared to the gross profit percentage for the first three months of fiscal 2026 of 45.1%. The increase in gross profit percentage for the three month period reflects favorable impacts from pricing, productivity and mix that were partially offset by unfavorable impacts from inflation.

Income from operations for the first three months of fiscal 2027 was $285.8 million, compared to income from operations of $246.0 million for the first three months of fiscal 2026. The increase in income from operations for the three month period is primarily due to increased pricing, volume, and productivity, which were partially offset by inflation and additional spending on operational investments and staffing.

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Cash flows from operations were $367.1 million and free cash flow was $279.6 million for the first three months of fiscal 2027, compared to cash flows from operations of $420.0 million and free cash flow of $326.5 million for the first three months of fiscal 2026 (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 2027 decrease in cash flows from operations and free cash flow resulted from a significantly lower contribution from working capital partially offset by higher net income compared with fiscal 2026.

Our debt-to-total capital ratio was 20.9% at June 30, 2026 and 21.3% at March 31, 2026. During the first three months of fiscal 2027, we declared and paid cash dividends totaling $0.63 per ordinary share.

Additional information regarding our financial performance during the first quarter of fiscal 2027 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 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.

These non-GAAP financial measures are not intended to be, and should not be, considered separately from or as an alternative to the most directly comparable U.S. GAAP financial measures.

These non-GAAP financial measures are presented with the intent of providing greater transparency to supplemental financial information used by management and the Board of Directors in their financial analysis and operational decision-making. These amounts are disclosed so that the reader has the same financial data that management uses with the belief that it will assist investors and other readers in making comparisons to our histo

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ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

In Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), we explain the general financial condition and the results of operations for STERIS and its subsidiaries including:

•what factors affect our business;

•what our earnings and costs were in each period presented;

•why those earnings and costs were different from the year before;

•where our earnings came from;

•how this affects our overall financial condition;

•what our expenditures for capital projects were; and

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

The MD&A also analyzes and explains the annual changes in the specific line items in the Consolidated Statements of Income. As you read the MD&A, it may be helpful to refer to information in Item 1, "Business," Part I, Item 1A, "Risk Factors," and Note 12 to our consolidated financial statements titled, "Commitments and Contingencies" for a discussion of some of the matters that can adversely affect our business and results of operations. This information, discussion, and disclosure may be important to you in making decisions about your investments in STERIS.

FINANCIAL MEASURES

In the following sections of the MD&A, we may, at times, refer to financial measures that are not required to be presented in the consolidated financial statements under accounting principles generally accepted in the United States ("U.S. GAAP"). We sometimes use the following financial measures in the context of this report: backlog and debt-to-total capital ratio. We define these financial measures as follows:

•Backlog – We define backlog as the amount of unfilled capital equipment purchase orders (excluding freight) at a point in time. We use this figure as a measure to assist in the projection of short-term financial results and inventory requirements.

•Debt-to-total capital ratio – We define debt-to-total capital ratio as total debt divided by the sum of total debt and shareholders’ equity. We use this figure as a financial liquidity measure to gauge our ability to borrow and fund growth.

We, at times, may also refer to financial measures which are considered to be “non-GAAP financial measures” under SEC rules. We have presented these financial measures because we believe that meaningful analysis of our financial performance is enhanced by an understanding of certain additional factors underlying that performance. These financial measures should not be considered an alternative to measures required by accounting principles generally accepted in the United States. Our calculations of these measures may differ from calculations of similar measures used by other companies, and you should be careful when comparing these financial measures to those of other companies. Additional information regarding these financial measures, including reconciliations of each non-GAAP financial measure, is available in the subsection of MD&A titled, "Non-GAAP Financial Measures."

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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 for each period presented. When we discuss revenues, we may, at times, refer to revenues summarized differently than the Regulation S-X requirements. The terminology, definitions, and applications of terms that we use to describe revenues may be different from terms used by other companies. We use the following terms to describe revenues:

•Revenues – Our revenues are presented net of sales returns and allowances.

•Product Revenues – We define Product revenues as revenues generated from sales of consumable and capital equipment products.

•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 and instrument and scope repairs, as well as revenues generated from contract sterilization and laboratory services offered through our 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, automated endoscope reprocessors, pure steam/water systems, surgical lights and tables, and integrated operating rooms.

•Consumable Revenues – We define consumable revenues as revenues generated from sales of the consumable family of products, which includes dedicated consumables used in our capital equipment, 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.

GENERAL OVERVIEW AND EXECUTIVE SUMMARY

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; 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 integration.

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 fiscal 2025 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 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 of which are driving increased demand for many of our products and services.

Acquisitions, Divestitures, and Investments. During fiscal 2026, we completed two tuck-in acquisitions which continued to expand our product and service offerings in the Healthcare segment. Total aggregate consideration was approximately $23.4 million, including fair value of contingent consideration. We also purchased investments totaling $134.0 million, predominantly related to a noncontrolling equity investment in a non-U.S.-based healthcare product manufacturer.

During 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 $54.1 million.

On April 1, 2024, we completed the sale of the Controlled Environment Certification Services ("CECS") business. We recorded net proceeds of $41.9 million and recognized a pre-tax gain on the sale of $19.3 million in fiscal 2025. The business generated approximately $35.0 million in revenues during fiscal 2024.

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

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 had the Dental business achieved certain revenue targets in fiscal 2025. No amounts have been recorded or are expected to be recorded with respect to this contingent consideration. 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 have been reclassified as income (loss) from discontinued operations in the Consolidated Statements of Income for all periods presented. Our Consolidated Statements of Cash Flows include the financial results of the Dental segment through the date of sale on May 31, 2024. 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."

U.S. Tax Reform. On July 4, 2025, the U.S. enacted the One Big Beautiful Bill Act ("OBBBA") which contains substantial changes to its tax policies. Business provisions in the OBBBA, some of which were extensions of those established in the Tax Cuts and Jobs Act, include favorable cost recovery allowances, changes to U.S. international tax rules, and changes to energy and environmental related incentives. The law has multiple effective dates, with certain provisions applicable to fiscal years beginning after fiscal 2026. The law did not have a material impact on our consolidated financial statements for fiscal 2026, and we do not expect it to have a material impact on our effective tax rate in the future.

Highlights.  Revenues increased $476.4 million, or 8.7%, to $5,935.9 million for the year ended March 31, 2026, as compared to $5,459.5 million for the year ended March 31, 2025. These increases reflect higher volume and pricing, as well as favorable impacts from foreign currency movements.

Our gross profit percentage increased to 44.2% for fiscal 2026 as compared to 44.0% for fiscal 2025. Favorable impacts from pricing, operational improvements and lower restructuring costs, and productivity were partially offset by unfavorable impacts from tariffs and inflation.

Fiscal 2026 income from operations increased 27.1% to $1,101.8 million over fiscal 2025 income from operations of $866.6 million. This increase was primarily due to increased pricing, volume, and lower restructuring and litigation costs, which were partially offset by inflation and tariffs.

Cash flows provided by operating activities were $1,341.4 million and free cash flow was $982.9 million in fiscal 2026 compared to cash flo

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