Morning, everybody. Welcome to day two of the healthcare conference. I'm Tycho Peterson from the life science team. It's my pleasure to introduce our first company this morning, Sotera Health. Just a quick reminder, if you do have questions, to submit them through the feature on the website. With that, I'll turn it over to Michael.
Hey, good morning, Tycho, and thank you to you and your team for inviting us to participate in this healthcare conference. Before we begin, some of the statements I make today may be considered forward-looking statements. Please refer to our SEC filings and this slide for a description of the risks and uncertainties that could cause our actual results to differ materially from those projected or implied. The company assumes no obligation to update forward-looking statements. In this presentation, we'll discuss certain non-GAAP financial measures, including adjusted EBITDA. A reconciliation of these measures can be found in the appendix of these slides. A copy of this presentation will be posted on our IR section of our website. I think we're having a little issue getting the slides progressing here, so let's take a minute here.
Let me just tell you before we pull the slides back up here. I hope to give the investors during this conversation a better understanding of Sotera Health. I'll do an overview, a business overview and help demonstrate how Sotera Health really helps across the healthcare landscape. We'll also give you a little bit more definition around the markets that we participate in. We'll give you a view towards our long-term organic growth. We'll talk briefly about M&A and what we've accomplished to date and how we look at M&A. We'll talk about our ESG approach, and then briefly talk about the financials. As you know, we'll be re-releasing earnings later in the quarter for the fourth quarter and total year 2021, and give guidance for 2022.
Scott and I will come on and answer questions. It appears we're having some challenges with the presentation, so why don't I jump right in and just start on page four. I'll speak a little bit towards it to help everybody understand where we are in the presentation so you can track along. Safeguarding global health through our sterilization services, lab testing advisory services. That's the page I'm on. First what I'll take you through is what we do, then how we do it, and the results that it leads to as a company. When we look at it, we're a leader in sterilization services, and we do that via two businesses, Sterigenics and Nordion. In Sterigenics, we have three modalities that we really use to help sterilize products for our customers.
It's ethylene oxide, E-Beam, X-ray or Cobalt-60 gamma radiation. We're the only globally vertically integrated player in the world for gamma radiation. We, you know, we've got, you know, when you think about this business, it's a service business. What happens here is the customers ship the products to us, and then we put it through our facilities and do the terminal sterilization. Okay. These businesses are highly regulated. We sterilize right through the boxes. We don't, you know, we don't take the products out, break them down or anything of that nature. We'll maybe break the pallets down, or we'll take the pallets themselves and put them into the chambers in total.
In this business, again, it's a service business where we do the terminal sterilization either via ethylene oxide, E-Beam, X-ray, or Cobalt-60, gamma radiation. Our second business is our Nordion business within our sterilization services. This is what makes us the only globally vertically integrated gamma radiation business in the world. In this business, we supply Cobalt-60 to not only ourselves at Sterigenics, but also more broadly around the world. Nordion ships the Cobalt. This is the only one of our three businesses that's a product business. The other two businesses are service businesses. Again, what we do here is we procure the Cobalt, process into a usable form for sterilizers, and ship it around the world. Our third business is in our lab testing advisory services business. This is our Nelson Labs business.
In this business, we test the products to make sure they're safe and they meet the regulatory requirements. In many cases, these services are government, FDA mandated. Across all three of these businesses, we're dealing with a lot of blue-chip customers that you maybe know about in this highly regulated industry. How we do this, we do it through these blue-chip customer relationships. We do business with 40 of the top 50 med device companies, eight out of the top 10 pharma companies, global pharma companies in the world. We do multiyear contracts. Typically, the contracts are three to five years in nature. We leverage our global network. We have 65 facilities around the world. In our sterilization services, we have 50 facilities, and then our lab testing advisory, we have 15 facilities.
As I mentioned, these are highly regulated businesses, so our deep expertise and technical knowledge is really something that's very important to us. We leverage for significant organic and inorganic growth. You know, we've mentioned many times to investors about our desire and intent to grow high single digits. We're able to do that both via organic and inorganic growth. Our culture is really the foundation for this, our heavy focus on values. If you move to the right side of the page, you see that this business has had very strong results. We've grown every single year, the top line since 2005. That includes 2008 and 2009, the financial crisis. Includes 2020, during the global pandemic.
As you saw this morning, we put a release out that we're gonna end up at the high end of our previously communicated range of $920-$930. We're gonna end up at the high end of that range. Therefore, it translates to 14% top line growth approximately in 2021. Another strong year of top line growth. We have over 50% adjusted EBITDA margins. We have a $33 billion TAM. I'll talk to you a little bit more about that later in the presentation. This business has had a significant cash flow generation year in and year out, and we're very well-positioned to be playing in the global healthcare space. I'm hopeful that when you walk away from this presentation, you'll understand why Sotera Health is such a unique asset.
What we're gonna do now is play a brief video, and I'd like you to get a feel for all the places that Sotera Health plays across the healthcare supply chain in really helping patients and practitioners have safe medical devices. Look for the Sotera Health shield throughout this video here.
At Sotera Health, we are over 3,000 employees united each and every day by our singular mission of safeguarding global health. The integrity, safety, and excellence of our sterilization and lab testing services are often hidden in plain sight, but are at the heart of countless healthcare experiences and touch the lives of millions across the globe. You'll find us at the start of something new. Our products and services have been protecting the most vulnerable among us since their first breath. You'll find us as you work to overcome obstacles and run another mile. Our sterilization technology and lab testing protect against infection and contaminants as you dream of what's next. You'll find us where testing is done and discoveries are made. When all is well, we help to ensure it stays that way. When things are uncertain, we bolster trust and confidence.
From providing radiation to attack brain and breast cancer, to ensuring cancer-fighting drugs are delivered safely. Simply put, many things on you, in you, and around you in a healthcare setting have been sterilized or tested by Sotera Health to ensure that healthcare is consistently and reliably safe every day. That's how we are safeguarding global health. Today, safety is more important than ever. As we continue to play a crucial role in helping the world battle COVID-19, we are sterilizing and testing the equipment that contains the vaccine, assessing the efficacy of masks, and ensuring that hard surface disinfectants and hand sanitizers kill the virus and its variants. Together, we shield millions around the world when life is often most vulnerable, as we remain committed to our mission. Sotera Health, safeguarding global health.
Hopefully, you can see on this page here many of the products and capabilities we have across the company and what our employees do day in and day out in fulfilling our mission of safeguarding global health. Many of these were shown in the previous video. If I turn to the next page, talk a little bit about our total and serviceable addressable markets. Here, you know, we have very high-quality relationships with our customers. As I mentioned earlier, we deal with 40 of the top 50 med device companies, eight of the top 10 pharma companies in the world in multi-year contracts. We play in a $33 billion total addressable market. When you walk that down to our serviceable addressable markets, about $11 billion.
$3.5 billion or $3.4 billion of that serviceable addressable market is terminal sterilization. That's really the insource and outsource terminal sterilization market that Sterigenics and Nordion play on. Really, as we look over time, we hope there'll be more of a shift from in-house to outsourcing and really leveraging the strengths of our company. On the testing side, we've got $4.4 billion in serviceable addressable market in the pharma outsource market. Primarily, it's microbiological and analytical testing, stability testing, and extractables and leachables testing. In the med device testing side, it's about a $3.2 billion serviceable addressable market here. The largest portions of that are routine quality lot release testing, as well as the new product validation testing.
This gives you a little bit better feel of how we play in the $33 billion total addressable market, broken down in $11 billion markets that we serve. Going to the next page. To give you some insight, we've talked about this many times, but we thought we'd be able to lay it out here for your organization. How do we get to that high single digit organic growth? We've got mid to high single digit volume and mix growth across the company, and then we get about 3.5%-5% price growth per year, which then translates into high single digit organic growth across Sotera Health.
If you look at each of the three businesses down in the lower bubbles of this page, you'll see on the volume and mix side, Sterigenics grows in the mid- to high-single-digit , Nordion is in the low- to mid-single-digit , and Nelson Labs is in the mid- to high-single-digit . Now, this is over time, a long-term perspective of how we see these three businesses playing out on the volume and mix side. On the price side, you see as a company total, we grow 3.5%-5% per year. Sterigenics is in the middle of that range, Nordion's on the high end of that range, and Nelson's on the low end of that range. Again, really significant to help us deliver our long-term high-single-digit % organic growth. On the right-hand side of the page, we talk about our margin expansion.
How do we grow margin? Really there's three key elements of driving margin expansion. Operating leverage, operational excellence, and all the great work that our teams do in the organization to continue to do process improvement. Then lastly, price that I just discussed on the left side of the page. If we transition into M&A for a brief moment. You know, I wanna kinda reflect on what we've accomplished as an organization over the last several years. First, I'd like to talk about the process. For us, we have a healthy list of M&A targets throughout the organization, that we have a dedicated team that focuses on this day in and day out. Really, for us, it's making sure, first of all, it's a strategic fit.
We really look at, on the front end, how we would integrate these businesses, how we generate synergies in these businesses. We also make sure there's a cultural fit, that it lines up with our values, which is really important for us before we deploy cash. For us, as an organization, we've had two transformational M&A transactions. We had the Nordion business in 2014 and the Nelson Labs in 2016. We've done several bolt-on acquisitions since then, starting in 2013, and several of the acquisitions we did in the Sterigenics side all the way through in 2020 when we bought the E-Beam business, Iotron. In 2021, we've made two acquisitions. One is BioScience Labs.
That helped us in antimicrobial and disinfectant and virology space, and then also Regulatory Compliance Associates, which really helps build out our Expert Advisory Services. You can see here we have a pretty healthy appetite for M&A. We're very thoughtful about this. It has to be on strategy, and we're really careful on how we deploy capital to make sure we can get the returns that are necessary. I'd like to now transition briefly and talk to you about ESG. Our values and our business really drive and guide our ESG strategy. If you followed the company over the last year and a half since we've been public, you'll know that we really have a strong focus on our core values, safety, customer focus, people, integrity, and excellence. Really, this is the foundation of the organization. It really helps us evolve the culture.
If you then transition over to our ESG strategy, which naturally follows from our values and our mission. Just to give you a little brief view, and you know, we'll have a lot more of this in our proxy as we get into this year. We really launched this ESG journey in 2021, formally as an ESG journey, if you will. We've been doing a lot of this work over the last several years. High visibility across our board, and this is part of the charter for the nominating and corporate governance committee, where they have oversight for the ESG efforts. Our chair has deep expertise in ESG. You know, we have created an internal ESG team that's led by two of our senior executives that have direct reporting responsibility into me, leading the ESG efforts in the company.
This is a multi-year strategy that we will continue to inform you and the investment community around all the activities that were taking place, as well as any new initiatives. Some of the recent accomplishments, you know, several of the investors have given us feedback. They wanted more visibility into the ethylene oxide. We put a microsite dedicated to our investors on our Sotera Health website to provide more transparency and education. You know, we launched the DE&I council, which is chaired by myself. We've had every employee in the company do unconscious bias training. We've got a diverse board of directors, and we plan to include a diversity matrix in our 2022 proxy. As I mentioned earlier, you know, we have oversight of these efforts. I'd also talk to you about the compliance aspects.
Our global code of conduct, which actually I happened to complete my annual assessment over the holidays. Our supplier code of business ethics and conduct as well. Lots of efforts going on this way and look forward to sharing more of that with you in the future around this. I'd like to now talk about finances. If you go to the next page, you can see here our revenue performance. You know, as I mentioned, we have a blue chip array of customers. Over 90% of our sterilization services sales are under multi-year contracts, which means over $500 million of our $900 million+ in business is tied to multi-year contracts.
Many of these contracts, a lot of people are asking these days with inflation, many of these contracts do include annual price escalators to help us offset the pressures. As I mentioned in the opening this morning, we put a release out that we're gonna be on the high end of our range, which was $920-$930, and we should have about 14% top line growth in 2021. On an EBITDA basis, you see our margins through September was over 51%, nearly 52%. You know, this is really a differentiated service offering that we have in highly regulated industries that'll enable us to generate these margins. We continue to work on our margin profiles. As I mentioned earlier, the three key things that we're really driving is operational excellence, operating leverage, and our price.
We've done a consistent job of delivering margin expansion across these businesses. I talked to you a little bit about cash on the next page. On capital expenditures, you know, we continue to invest in this business for long-term growth. You'll see our investments were slightly down in 2020 due to the pandemic. 2021, we increased our spending rates, not all the way to the levels that we would like, because of the fact that we just had some challenges with the pandemic, with labor crews, construction materials. Make no mistake here, we're continuing to invest in this business for long-term growth. If it's facility expansions, if it's ethylene oxide enhancements or from a long-term cobalt supply that we had mentioned to you many times. Since we went public, we've taken our net leverage down.
We were 7.5x leverage when we went public, and we are now down through the third quarter, down to 3.6x leverage. Our long-term commitment is in the 2x-4x. Also recognize that our annual run rate of interest expense is $70 million after we did the debt paydown in the third quarter. I think the team's done a really nice job in delivering cash. I'll wrap up on the last page. This talks about why we believe this is such a unique asset. I wanna reflect here briefly, and we'll get more into this when we do the earnings later in the quarter. You know, the team's done an outstanding job in delivering what we said we were gonna do when we went public as a company.
We've grown in both revenue and EBITDA, and seeing high single digits growth, as you heard me earlier talking about the 14%. We've done strategic M&A with two deals in 2021. We've de-leveraged, and we've invested for long-term growth. You could see the aspects of this business that make it so unique, the financial profile, the barriers to entry, the large addressable, and growing market, the strong industry dynamics, our trusted relationships with our customers, operational excellence, our M&A, and experienced and established management team. Thank you for taking the time this morning to talk to us and, Tycho, I'd like to open it up to any questions that you or others may have.
Great. Thanks, Michael. Good presentation. Maybe we'll just start out with the, you know, guidance adjustment coming in behind the previously communicated range. Anything you wanna say on what that implies for kinda underlying volumes, you know, trends in 4Q?
Yeah. I would just say, you know, the team did a really nice job executing here in the fourth quarter. As many know, in this industry, there's a lot of moving parts with this pandemic, but the team did a nice job. We came in at the high end of the range and look forward to sharing more details as we button up the financials for 2021. Overall, Tycho, I think most people would agree a 14% growth was a strong year for us.
You mentioned or at least alluded to in your comments, you know, some of the kind of wage inflation challenges, the hiring challenges. Can you maybe just touch on those two dynamics in this climate?
Yeah. I would tell you it's. We're seeing it across the business, predominantly the U.S., not exclusively the U.S. Like many others, we've had to make wage adjustments, no surprise. You know, we've increased our recruiting efforts and, you know, we see that across the businesses here in the United States. In most geographies outside the U.S., it's been okay, but not entirely. We feel very good about our ability to pass through these increases in cost with the way our pricing mechanisms are set up in our contract. I think that's one of the things you'll see that's really unique about this business is our ability to sustain these margins and to recover cost pressures that we may see.
Maybe we could touch on capacity expansion. You know, you've been pretty vocal about some of the ongoing plans, and you said, you know, these are not necessarily in reaction to immediate near-term demand, but, you know, planning for the long-term trajectory of the business. Maybe from a high level, you know, what gives you confidence that the demand will be there for this new capacity? Any color on, you know, what portion of this is committed at this point, or do you not necessarily book it out ahead of time?
Yeah. Thanks, Tycho. You know, we've got a healthy appetite for expansions, and as we've said in the past with others, investments, we really are focused on making sure we have customer commitments. We try not to build these facilities or put the expansions in without some level of customer commitments. A large portion of these investments, we have a significant portion, sometimes up to 40% of the capacity already committed and contracted in multiyear contracts. We work very closely with our customers to have visibility of what kind of capacity they want, if it's ethylene oxide, if it's EO, if it's cobalt, and where they want it. We wanna make sure we have the right capacity in the right location at the right time. We feel pretty good about it.
You know, we are having some challenges, like others, in getting materials and, we're seeing some increases in cost on construction and just getting people on job sites. Overall, the team's progressing on that and, you know, we'll have a lot of activity in 2022. I met with the teams late in the fourth quarter and really just to make sure we're grounded and focused on our activities for 2022. We brought up some nice capacity in late 2021 as we committed, and we're off and running here in 2022.
Can you maybe just talk a little bit more on the type of capacity being added, you know, EO versus gamma versus E-Beam, U.S. versus international? It might be helpful just to understand, you know, where the incremental capacity is being added.
Yeah. I would tell you most of that capacity expansion is in North America as well as in Europe, and it's across all three modalities.
Got it. You've often talked about the fact that, you know, it's the FDA and then the customers that decide what modality, but is there any underlying trend in, you know, EO versus gamma versus E-beam in terms of, you know, one being used more? I mean, EO's, I guess, been dominant. You're number one there, but any nuances there?
Yeah. I would tell you the demands are strong across all of them. Gamma radiation, particularly with bioprocessing right now, there's been a lot of demand and interest in bioprocessing, which goes cobalt, predominantly, but not exclusively. I would tell you there's been a lot of demand in that area, but ethylene oxide still, you know, we still have significant demand. Just yesterday, I was made aware of some new customer commitments coming in. So I would tell you overall, you know, we're seeing strong demand across all modalities. Remember, Tycho, as you stated, we don't choose the modality. That's ultimately determined by the customer and the FDA. One thing that's really important to understand, this is many times part of the FDA file, okay?
It's not really easy for customers to switch from one modality to another or even from one location to another because this is part of the FDA file, which really makes it challenging for customers to switch. If the customers wanna switch, we'll work with them to enable a different facility if their supply chain dictates that need. Again, we don't choose that modality. It's ultimately determined by the customer and the FDA.
How about recent trends around Nelson Labs? I know that was a little bit choppy, you know, in and out of 3Q around some testing delays. You know, has that come back?
Yeah, I mean, Nelson is a strong business. It's performed very well. You know, the key in that business is turnaround time and really high quality. We've seen, as you know, we've mentioned in the past that we did heavy protective barrier testing. We always did that. But during the heart of the pandemic in 2020, we saw significant growth in that area, and that has continued to come down as we expected. It came down a little faster in 2020 than we thought it would. You know, it's hard to handicap exactly how that would play out. But the team's seeing nice backlogs starting to build there. It's not a huge backlog business though, but we're seeing that and that's one of the businesses in particular, you know, the labor portion of it's very important.
Getting the right amount of people in place so we can continue to grow is something that's very important for us. Overall, you know, we expect 2022 to be a good year for the Nelson Labs business, just like we do all three of the businesses.
I know you've talked about, you know, the overlap, I think it's around 70%, maybe a bit higher between Nelson Labs and Sterigenics, and you're kinda in the early innings of realizing, you know, synergies between the two. Can you maybe talk on some of those efforts?
Yeah. I would say, you know, this is something culturally. You know, I worked at General Electric for 18 years, and I ran the cross business selling there. If it was the GE Olympic efforts or, you know, trying to get all those different businesses to coordinate. This is a cultural aspect of this that takes that. Just because I say I want to happen or customers, it takes time to get that going. I think the team's done a really nice job. We've made a lot of improvements. We've built into some of our contracting. We've got an integrated CRM system. We've done a lot of training. The other aspect that's really been exciting for us that we announced late last year was EAS, which is our Expert Advisory Services.
This is where our people are brought in as the front-end experts to help solve problems, and that's starting to show some nice fruits and being able to deliver opportunities for downstream testing or sterilization. This is all part of the strategy to leverage, you know, if you will, Sotera Health across the customer base and making sure customers understand the value that comes from Sotera Health.
Has that EAS been kinda magnified, you know, because of COVID? I mean, has that increased kind of the need for some of these services? Obviously, you kinda rolled it out in the middle of the pandemic, but I'm just curious if that's kind of magnified the need relative to your expectations.
I don't know that so much has been magnified, but I know the sterilization services and testing, sterilization, in particular with PPE. Not all PPE requires testing, but the ones that do, you've seen a pickup and increase in that area. If it's swabs for testing or if it's gloves and caps, you know, or gowns, we've seen some increase in that area. I would tell you, Expert Advisory Services is something we've been doing for years. We've just organized ourselves in a better way, in our opinion, in the eyes of the customers to help give them a full one-stop shop across that product development cycle and really how Sotera Health can help them.
I got a question over email just asking for an update on New Mexico, Georgia, Illinois, you know, litigations. Can you maybe just kinda walk through latest timelines for each and what we should be thinking about?
Yeah. Great. Thanks, Tycho. Always good to have an ethylene oxide conversation first thing in the morning.
Right.
Some good things going on here that I wanna make sure you're aware of. Let's start with New Mexico. If you saw on our investor portal, we put a communication out there just before the holidays. The courts ruled, in our opinion, in our favor. They took our order. What happened is both parties, us and the AG, submitted to the courts a monitoring protocol. Both parties submitted proposals, and proposed orders, and the courts accepted our order as the path forward. We continue to operate in that facility, and millions of products are sterilized there. Also, if you remember or recall, we've got the permit for the construction as well as the environmental permit. Both of those are approved in New Mexico.
We're moving forward in 2022 in aggressive fashion now to get the facility enhancements in place, the negative pressure, the double scrub, and the centralized discharge. You know, we continue to work through it. We do have some litigation there with the Attorney General. Not exactly sure where that's going to play out, but what I can tell you is this facility is operating, and the courts agreed with our approach on the protocols. On Illinois, you know, things are progressing on discovery and depositions, and we will have our first trial in July, then the second trial in September and the third trial in November. Those are progressing as planned. We'll see what happens. We don't control that timeline. We're hopeful that those trials go forward in that timeline.
With COVID, some of the state courts are starting to get backed up, as some of you may see in your local markets. We're hopeful that the trials take place as planned. In Georgia, not sure if many people saw it. Last week, the Georgia EPD went ahead and approved our air permit. That facility is the first one that we put these facility enhancements in place. They're working very, very well. In our view, it's industry-leading and in many instances, probably the best control technology in the world. The Georgia EPD acknowledged that by issuing a permit to us last week to continue to operate that facility. We still have some other things we're working through with litigation in that market, particularly around the occupancy permit.
As far as the regulators who regulate the emissions and the operations of that facility, we're well-positioned, and we have the approval from the regulatory to keep operating. I'll pause there. I'm sorry, Tycho. I said a lot, but obviously, it's something I wanna make sure our investors are informed around.
Yeah. No, that's super helpful. You know, obviously in Illinois, you're not accruing for, you know, settlements or legal, you know, payouts, right? Which is encouraging, I think so. In terms of upgrading other facilities, can you just, you know, lay out a roadmap for, you know, this coming year, you know, which facilities will be upgraded?
Yeah. We won't get into particulars. I mentioned Santa Teresa because that one's been in there, and we've told the courts that we're gonna do that, so it's public information. We continue to move forward with improvements across our U.S. EO facilities. They're at various stages. Tycho, one thing to keep in mind is we don't control that timeline necessarily. If you only knew how many months ago we've been working with many of these regulators, and it's when it's a priority for them. Although this is very important to our stakeholders, it's not always the most important, urgent matter within each of these states or local authorities. We've got in process many of these facilities in anywhere from design or waiting on approvals of permits, or, we've got the permits, and we're ramping up construction and renovation efforts.
I could just tell you, this will continue at least through 2022 and 2023 and possibly into 2024. It's just depending on the timing of when our regulators want to final approve all these things. It's not that they're not approving them. It's just they have other more pressing things that they may be attending to in their local markets. We feel good about how this is progressing, and we feel really good about the solution we've put in in Atlanta and some of these other facilities that they're working really well.
What's the latest on EPA? I mean, I think there was a little bit of a rumor we could have gotten something at the end of last year, but, you know, they've been kicking the can down the road there for a while. What's your best guess at this point on the new regulations?
Yeah. You know, the one thing I could tell you, besides predicting the Browns wouldn't make the playoffs, I can't predict much else, Tycho. I can tell you that. On this EPA side, you know, we would've hoped for new regs in 2018, 2019, 2020 and 2021. The latest is that we'll see something here in the second half of 2022, and it'll probably be approved by late 2022 or early 2023. We feel pretty confident the solutions we're putting in place are gonna be industry-leading, and it'll be very closely in line with the new regs, in our opinion. There's always a chance it won't. You know, we don't control that, and that timeline. I think what people are realizing, this is a complex issue.
No matter if you're Republican or Democrat saying, "Oh, you know, why aren't they getting it done?" At the end of the day, this is a pretty complex. You got, you know, the med device community that's requiring this, the people who live in the communities, the regulators, the politicians, and then you got the patients at the end of the day that are getting sterilized products that need EO. I think all the people in the administration have realized this is a complex issue, and there's no easy solution. What I'm telling you from our perspective, we're gonna lead here as fast as we can.
We're putting negative pressure, double scrub, central discharge, and it's. In our view, this is gonna be something that the competitors are gonna probably have to step up to once the regs come out.
Yep. Presumably, that will drive more outsourcing in your view? Just-
There's a potential for that.
Yeah.
It all depends on how our competition reacts to it. I think many of the competitors will have to respond just like we did or similar fashion, but I think there'll be some that probably potentially can't do it for a host of reasons. We feel good about where we're at, though, I would tell you that.
Can you maybe just spend a minute on the model and margin drivers? You know, I mean, I think people are always, you know, amazed when they look at our model that we've got, you know, continued margin expansion. Obviously, you're getting, you know, good pricing every year, you know, 3.5%-5%. You know, maybe just talk on some of the other initiatives to drive EBITDA margins beyond pricing.
Yeah. You got pricing, as you mentioned, but then, I would tell you operating leverage, right? You've got these assets, and we're driving more scale, more volume across these 65 assets. That really helps you drive nice operating leverage across the business. I would tell you operational excellence and all the work the team's doing with Kaizens across facilities, how to reduce downtime, how to have better preventive maintenance, how to really make sure that we streamline our processes to drive overall process improvement. We're also making investments. You take something like the Nelson Labs business. We're putting a laboratory information management system there to standardize some of the processes. You know, we've done a lot of work in that business and across the company.
You know, if you look at what the Nordion team did this past year, you know, there was a lot of cobalt that was backend loaded and some record numbers of performance that they had to put in to get cobalt in and out. The process improvements that team put in place to be able to turn that and simplify their operations and get that product out to the customers in the market was really phenomenal. I would tell you, there's a whole set of levers that the team is pulling day in and day out to drive operational excellence.
You know, coming from an industrial side, background, if you will, for myself, you know, I think there's a lot of aspects in healthcare that really haven't optimized their processes, and I think our team's doing a nice job in that area.
Would it be fair to say the opportunity around Nelson Labs is greater, just given where you're starting, you know, relative to Sterigenics and Nordion from a margin perspective?
You know, I would just tell you all three businesses have growth opportunities and margin expansion opportunities. You know, we've got to continue to take care of our customers. You know, that Nelson Labs business, to me, it's all about the turnaround times, high quality, and service. We see significant opportunities for growth in that business.
Maybe we can touch on capital deployment in the last couple minutes. You know, you've done some interesting bolt-ons. Can you just talk a little bit about the M&A funnel and, you know, where you see gaps in what you're prioritizing?
Yeah. When we talk about cash, you know, hopefully, Tycho, you and the investment community can see that we said we were gonna do some things, and we did it coming out. We de-leveraged the business. We continue to grow EBITDA. We continue to focus on working capital, and that gives us the opportunity to continue to invest back in the business. We're always gonna invest for organic growth or M&A, strategic M&A. We're gonna continue to invest for long-term growth in this company. That's really our first priority. We'll then continue to look at M&A. You know, we've done two bolt-on. They were small tuck-in acquisitions around Expert Advisory Services and then antimicrobial and virology, which from an end market perspective, that was really strategic for us.
We had capabilities in that area already. The question is, do we build it or do we buy it to go faster? In this case, we were able to buy it and get nice synergies on that. I would tell you then, lastly, we'll continue to de-lever. I feel confident about our cash position coming out of 2021 and the prospects for 2022. This is a business that'll continue to have strong cash flow generation.
Is it fair to say Nelson Labs will continue to be kind of a hunting ground for M&A? It seems like there's a little more greenfield there versus the other businesses.
You know, that's a highly fragmented business, Tycho, and there's a lot of small players out there. We see opportunities for M&A in that business, I would say quite a bit, but I would also tell you all three businesses have opportunity. You know, we did Iotron in late 2020 on the Sterigenics side. We did Expert Advisory Services that really is a platform across Sotera Health, you know, when you look at both the Sterigenics and Nelson in it. I would tell you Nordion has some opportunities as well. Nelson's probably got the richest pipeline, if I think back to the pipeline, but I would say all three businesses have opportunity for M&A. We're gonna be disciplined on how we think about that and making sure we're deploying capital in an efficient manner.
On you know, CapEx and you know, capacity expansion, you know, how often do you look at asset transfers versus greenfield on you know, your end?
When you say asset transfers, I'm sorry, can you?
You know, yeah, buying customer facilities, right, you know, and upgrade.
Yeah. We've done that a couple times where we've worked with customers that wanna outsource. They maybe don't wanna send their asset to us, but they wanna repurpose their asset and make it more of a manufacturing site and outsource sterilization. We've done that several times with our customers, helping them switch from in-house to outsourcing. I can't think of anything recently where we've bought a facility of our customers. There's conversations that take place periodically on that area, but for us, our expansions are really, you know, how do we get more cobalt into our business, you know, and that drives more growth for us, but also how do we go ahead and put more chambers in or more radiation space, or just greenfield. Okay, you know, obviously, one of the expansions we had is the Iotron business.
We were able to get another beam in Indiana, which has been very helpful for us as we ramp that volume up. I would tell you overall, we see several opportunities for expansion, provided our customers continue to support the demand that's out there.
How does the math, you know, between new build versus capacity expansion generally work for you guys? You know, enhancing existing facilities versus, you know, greenfield.
You know, on that, it really comes down to what kind of. You know, when you look at what the customers are, what kind of technology do they need, modality, where it is and the timing of that. That'll really dictate, you know, if it's organic or inorganic. If in the organic is an expansion or is it a greenfield. You know, obviously, we did the U.K. Markham Vale gamma site back in 2018, I think it was. You know, that was just driven by customer demand. They've been asking us for years to help them in that marketplace.
Great. I know we're bumping into time. Maybe just one last one. We talked about how 2021 ended up. I guess, given what you know around Omicron, as we think about kind of the first quarter here, do you think we're kind of through the woods on, you know, surgical volumes? You know, do you think things are kind of, you know, stabilizing?
You know, I'm involved with one large health system, involved as the vice chair on their board, and I can just tell you, it's really a mixed bag. We're seeing different geographies having different approaches on elective procedures. It feels like portions of the Midwest and the Northeast have really gotten hit hard here in this latest round. Not that that's gonna be exclusively where it settles, but we're seeing a mixed bag, if you will, on what's happening with elective procedures. Some of them are just doing outpatient, some of them are really coordinating the COVID patients in certain locations and keeping inpatient free for a couple other locations. It's really a mixed bag. We're not seeing the dramatic shutdown that we saw in 2020, though.
Great. Michael, I appreciate you taking the time. We gotta wrap it up there. I enjoyed it.
Great. Thanks, Tycho. Good to see you, and thanks for all your support. Bye-bye.