All right, I'd like to welcome everyone to the 6th Annual KeyBanc Healthcare Forum. My name is Brett Fishbin, Senior MedTech Analyst and I'm pleased to be joined today by Sotera Health, who's represented by Jon Lyons, the CFO.
I'll start us off with questions, but it'll be a 100% Q&A session, and questions can be submitted directly to me by typing in the box below the video screen and if we have time, I can relay them to Jon. So, Jon, just to kick things off, you know, starting at a high level, it's been a bit over five years since the original IPO, and it's been an eventful journey for the company so far.
I was hoping we could maybe just, you know, take a step back and just get your high level thoughts on, you know, where the company sits today relative to a few years ago for investors who may be, you know, revisiting or new to the story.
Thanks, Brett, and thanks for having us again here. It's always great to be with you and your investors that you serve. You know, before we get started, I do have to remind everybody I will likely make some forward-looking statements. Please take a look at our SEC filings for details on those and the like, y ou know, just getting into it's been an interesting journey, right, since the IPO back in 2020.
I think the short answer really, like this is the same great business that we IPO'd. Certainly we've been through a few things, there have been some complications in the industry but e verything we said about the company remains intact, w e're a global industry leader operating in highly regulated markets.
We've got a growing market with an $18 billion SAM. We've got a global footprint with 62 facilities around the world that, you know, puts us in the right spot for our customers to support their needs, with our end-to-end solutions and sterilization and lab services. You know, we think we're well positioned for above market growth moving forward, and the financial profile continues to be incredible.
You know, we just hit in 2025 our 20th consecutive year of revenue growth. You know, every year in, year out, through a couple of different challenging cycles, we continue to have over 50% EBITDA margins. The free cash flow performance is accelerating, and we're disciplined allocators of capital. We think there's a lot to love about this business, and we're excited to talk about it.
Awesome. So l et's talk a little bit about Q4 in 2026. You know, you guys recently hosted the Q4 25 earnings call.
Mm-hmm.
You know, really concluded last year on a solid note, you know, 5.2% organic revenue for the year, 40 basis points of op margin expansion, and a really healthy step up in earnings per share. I was hoping we could, you know, first look at last year and unpack the results a little bit and I was hoping you could also just maybe touch on any dynamics or moving pieces that, you know, trended better or worse as compared to originally contemplated coming into the year.
Yeah, y ou know, when you start a year, right, the year always plays out a little different than you'd expect. If you look at, you know, where we started the year, we had a 4%-6% organic revenue guide, and we came in at 5.2%, y ou know, so large part, you know, some puts and takes, right? The expert advisory business wasn't as good as we thought it would be.
It turned into a pretty significant more of a headwind than we had thought but w e did have some upsides that covered that, particularly on the Sterigenics side, where our continued volume performance improved a little quicker than we expected. Overall, it was a good year.
It was the first year of our 3-year plan that we laid out and, you know, we're on track for all the goals that we set in that plan, y ou know, you mentioned the 5%, revenue growth. We had nearly 8% constant currency EBITDA growth. We actually grew margins 118 basis points for the year.
That was headlined by more than 300 basis points of margin improvement in Nelson. Sterigenics grew nearly 8% on the top line, nearly 9% on the bottom line. Nelson Labs saw growth in core lab testing, which we were pleased with, right? It's higher margin in the business and helped support that expansion. Nordion had another great year with, you know, upper single digits growth in revenue and EBITDA.
You know, we're looking at the total picture here, right? Interest expense improved by $9 million year-over-year. The tax rate was significantly lower and a ll that performance led to a $0.16 improvement in adjusted EPS in 2025. We're really proud of what we accomplished in 2025 and we feel great about the fact that we're on track for the objectives that we laid out at our November 24 investor day.
Just, you know, looking ahead, you recently gave 2026 guidance and, you know, it included constant currency organic growth of 5%-6.5%. Maybe just remind investors how you're thinking about this year, if there's any puts and takes compared to 2025 -+ and then how you think about, you know, some of the bigger key variables that could drive results, you know, at 6.5%-7% versus, you know, 5%.
Sterigenics, we've called for another year of mid- to high-single-digit revenue growth on a constant currency basis and w e're looking for another solid year in demand in med device and pharma. On Nordion, we're in the low to mid-single digits for the full year.
We've got a little more weighting to the first half than we had in the last couple years so 40%-45% of Nordion revenue we expect to occur in the first half, with Q2 being a little heavier than Q1. You know, Nelson Labs, we're expecting to grow in the low single digits for 2026, y ou know, and I'd just call out on the pricing side, we expect another good year of pricing performance.
You know, we've called for about the midpoint of our 3%-4% long-term guide, and so we're feeling good about the trajectory we have on the pricing and continued demonstration of the strength and value of the services we provide and, y ou know, going into every year, the biggest variable, Brett, as usual, is gonna be, you know, what are volumes ultimately gonna be?
Maybe on that note, you talked about a couple moving pieces early in the year, but maybe just like higher level, how you're viewing the overall demand environment in, you know, your 2 large segments, med device and also thinking about some of the other categories and just overall level of visibility into that volume backdrop as we move into the year?
Yeah, so, y ou know, as I mentioned in Sterigenics, we're looking for another solid year on the med device and pharma side, w e exited 2025 with good momentum. You know, we're having really good dialogues with our customers. We're in a great spot relative to, you know, where we're positioned to support the industry.
You know, we feel like we're gonna have a good year of growth there supporting that mid- to high single digits, y ou know, in Nelson Labs, we've got a part of the business that is really closely connected with Sterigenics in that core routine sterilization-related testing that we do. We expect continued growth in that. We expect the consulting business will no longer be a headwind, which is an important step for the business.
The one thing I'd call out is the validation testing. You know, that's related to new regulations and new product development and so it can be a little choppy and, you know, I'd expect that to be a little choppy. As we look at how the year plays out, you know, that'll be one of the things we continue to watch.
All right. Helpful. You know, also just thinking about the earnings call, you know, investors are always paying attention to cadence and you had a couple comments about the Q1 related to weather and the government shutdown. So, maybe curious if you could just touch on the cadence again and if you've, you know, started to see things normalize at this point after some of those big events earlier in the year.
Yeah. Good call. One point of clarification, w e definitely said shutdown, and a lot of investors have thought we meant government shutdown and f or obvious reasons, I understand why they would think that. When we say shutdown, we're actually referring to our maintenance downtime.
We shut down our facilities for, I'll call it 3 reasons. Just, you know, normal maintenance. The EO facilities are getting shut down for the improvements in our emissions controls and then, y ou know, we shut down for cobalt loading in the gamma sites. That's what we refer to. Certainly when we came into the year, it was a little slow start to the year. Weather had a definite impact on us.
We also, as we mentioned, that maintenance downtime is higher than it was in the Q1 of last year, which is a year-over-year headwind for us, leading us to the mid-single digits outlook for Sterigenics in Q1. You know, on that facility maintenance point, though, you know, we'll see that headwind in Q1 and Q2, and that headwind should turn into a tailwind in the second half. The year did start off a little bit slow, you know, but we definitely have seen it start to pick up. You know, nothing that would change the outlook that we laid out for Q1.
All right. Perfect. Super, super helpful, and I think that makes a lot more sense. You know, turning to the EBITDA guidance, 5.5%-7% constant currency was the starting point, very squarely in line with your investor day targets. Just kind of a two-part question. You know, first, outside of volume leverage and price, is there anything else that you think is impacting the margin setup for this year?
Just thinking, you know, more recently, obviously a lot going on in the world, and we've seen fluctuation in some commodity and oil prices. I'm just curious if that, like, has an impact on your business and how you think about that.
Yeah, so a lot there, Brett. First, I would say, you know, we laid out a target of improving 50-150 basis points of margin over our long-range plan from November 24, which was the 25-27 period. We did 118 basis points last year.
I think when you go to the midpoint of our guide, you get something like 23 basis points improvement implied, which puts us nearly to the top end of our range of EBITDA margin in year 2 . You hit on it, you know, pricing, y ou know, pricing can actually be margin dilutive. When you have over 50% pricing, you have to more than double inflation in dollar terms to have margin accretive pricing.
You know, that's not necessarily something that's very intuitive to people all the time. I like to just point out, like, you know, you know, why isn't your margin expanding faster? It's like, well, I've got to more than double my pricing, you know, my inflation with pricing. We hit great operating leverage t hat supports it, t hose are the big moving pieces.
The energy costs, certainly we have energy costs. We have exposure to natural gas. We have exposure to electricity. Those are very small factors of production, when you look at our facilities and t hen we have long-term contracts for EO. That's got an annual pricing reset in it. They're, you know, from a short-term risk, we're pretty insulated at this stage.
A lot of our energy, deregulated markets, our energy and gas contracts are fixed, for the most part. You know, I'm not losing any sleep over energy costs certainly, but I obviously think about the geopolitical impact, of the business more than I think about that.
Even then, you know, we've got a pretty small revenue base, you know, small, very immaterial revenue amount that goes into the Middle East, y ou know, the demand for the healthcare products are continuing to be strong. You know, we feel good about where we're headed on the margin front, and that we don't have a material exposure from energy.
All right. Awesome. You know, just to conclude the 2026 guidance conversation, you know, the last piece is free cash flow and I think there's a couple sources of elevated CapEx this year. So was hoping you could just, you know, remind investors why that's gonna be higher in 2026 than how you look at it long term. And then also, like, how you think about normalized CapEx for the business, you know, like next 3-5 years.
Yeah. When you step back from it, I mean, what we're really focused on is free cash flow generation, and obviously CapEx is a big component of that. You know, back at our investor day, we set a three-year target of $500-600 million of free cash flow and t hat goal, you know, we did $200 plus million last year, w e're well on track to achieve that goal.
Our assumptions on CapEx are really unchanged relative to what went into that objective. You know, our CapEx was $138 million in 2025. We came in quite a bit lower than our initial guidance, which I think the midpoint was around $200 million for 2025. It's really timing, predominantly. Two things of timing.
One, you know, the second one of our greenfields we delayed a little bit. You know, Michael and I run a very disciplined capital allocation process, and we wanted to make sure we were very confident as we continued with that program that we were gonna get the returns that we expected to get out of it.
You know, we got in a position where we felt comfortable to move forward, and so we moved forward, but that kind of shifted a big chunk of 2025 spending into 26. The other thing with the 2-year delay that we received in the NESHAP regulations, we were able to go back and have a little bit better negotiation with suppliers, some suppliers that were kinda holding us hostage a little bit.
You know, that allowed us to save a little bit of money on the NESHAP related spending program, but also shifted a good bit of CapEx from 25-2 6. You know, as we look forward, you know, assuming we hit the plans we have for 26, CapEx in 27 is gonna drop significantly. We'll be largely complete with our NESHAP related spending.
There might be a little bit of immaterial amount that trickles into 27, you know, from a timing of payables perspective. We'll have a significant amount of the spending on the growth investments that'll step down and even the cobalt development steps down a bit from 26- 27. So we're in great shape.
You know, CapEx is gonna drop. Cash flow, free cash flow continues to accelerate. We're gonna achieve that goal. You know, we fully expect to achieve the goal we laid out at the investor day for free cash flow.
Awesome. Then I'm gonna shift the conversation a little bit to the individual business segments and we can go in order with, you know, starting with the largest, which is Sterigenics. You touched on this a little bit about some of the improvement you saw in the back half of last year.
It was a nice year for the business overall, I think 7-8% organic growth, coming off of 2 years closer to mid-single digits. Maybe just a little bit more on kind of like what you saw improve in the back half of last year that drove some of, like, the step up in growth. We already talked a little bit about 26, so maybe just your thoughts on.
Mm-hmm.
Once we get past some of the Q1 items, if you think we can kinda get back into a similar cadence in the back half of 26.
Yeah, no, Brett, I mean, when we look at. We're really pleased with the business performance in 25 and, y ou know, it really, you know, the volume performance, we started seeing it, and I think we started talking about it in the second half of 24. You know, obviously you didn't see the volume performance come through really until starting in Q2 of 25.
You know, but we've seen, as I mentioned earlier, really solid demand in med device and our pharma customers. We've seen our XBU customers overall for the business grow at a faster clip. So we're pleased about our efforts there, y ou know, we're a critical part of the supply chain and, you know, we continue to expect that good, solid demand from those customers.
You know, we got some noise, as I said in the first half, not in the first half, but the Q1 , relative to the weather and the downtime and, y ou know, we fully expect to accelerate, particularly in the second half, relative to that downtime abatement. We've got new customers coming on. We've got, including the Haw River X-ray facility that'll start coming online and start contributing.
I wanna also ask, you know, there were some dynamics I feel like over the past couple of years with stocking, and it, like, wasn't a huge topic as we got to the second part of last year. I think, like, some people maybe think, was there some level of, you know, pull forward of demand ahead of tariffs or, like, anything like that? Just curious, like, if you think the whole stocking topic, especially in med device, has normalized at this point and if you think that's, like, a big factor for the cadence this year.
Yeah. I mean, we in our view, it's normalized. This is where when I say second half of 24, we saw it kinda normalizing then. You know, this business always, you know, with 2,000 customers, there's always something going on with some customers s o we're dealing with somebody building inventory or taking inventory out.
You know, I would say the industry is stable. You know, we don't see a big. By the way, this is not a pull forward business. You know, it's not like a distribution channel where you can give a quarter-end incentive and you're trying to push some volume out the door. Our customers are delivering us, you know, a couple of days.
We don't have big warehouses to bring product in, to hold product, and wait for them to pick it up. I mean, you know, it's in and out in a handful of days, you know, with our customers. And so, this is just not one of those industries where, you know, you can stuff the channel or you can accelerate volumes to any degree. I mean, we got limited capacity, limited warehouse space, so it just doesn't work like that.
That makes sense. I think it's a good segue to my next question or two on capacity 'cause You know, you bring up a good point about limited capacity in the industry and you guys have been kind of on the forefront of bringing more capacity to the table for customers. I think, like, maybe in 24 you were talking about 8 different projects that were either completed or underway. Maybe just, you know, thinking about that overall, like how you think about the capacity additions and how that positioned you for growth over the long term.
Yeah. Brett, you know, there was several projects that we've completed over the last few years, and they vary, right? We're kind of at the tail end of this with 2 projects left. There's two greenfields left. But, you know, these come in different shapes and sizes. One expansion might be adding incremental cobalt to an existing facility, or adding a chamber to existing facility.
We've had some of that over the last few years when we think about expansion projects. We could add a new irradiator to an existing facility. We've had those adds over the years that have been contributing, actually positive to the business. You know, all the investments we've made, we've seen pretty good returns on those, you know, over the last few years.
As I mentioned, there's 2 greenfields left. You know, we target a 20% IRR. Expansion facility, you can imagine, is gonna have a higher IRR than a greenfield, right? Where you've got to put, you know, a lot more infrastructure in place upfront. You know, so, you know, these two greenfields will return a little lower than the 20%, but still good returns, still above cost of capital.
We feel good, w e've got the X-ray facility that'll come online later this year a nd then the second greenfield will come online late 27, early 28. We're kind of at the end of this, as I mentioned on the CapEx outlook, we're at the end of this kind of growth investment cycle for Sterigenics.
I have to ask, I feel like you've answered this question a couple times, but maybe just any more thoughts. I think, you know, it was notable that one of the two most recent projects was focused on X-ray, just given, I think it's been a modality that Sotera in the past hasn't focused on as much.
Mm-hmm.
Maybe we can just kind of revisit the decision to start investing in that modality, and if you have maybe like a directional view long term of like where that could potentially go in terms of like mix or future projects.
Yeah. No, great. You know, X-ray has obviously become a little bit more prevalent in the industry. I would remind you, we're the global leader in cobalt. I think it kind of makes sense. You know, cobalt's a great modality. The great thing is it's always available, it's always on.
You don't have to worry about electricity. You don't have to worry about the cost of electricity. The cobalt's ready to sterilize products when you need it. You know, X-ray can be a little bit more. I mean, it's machine generated, right? It can be a little bit different on the reliability, but it's still a reliable source of sterilization.
We do have an X-ray, existing X-ray in our network, but it was small, and the board made a strategic decision to make sure, you know, that we had X-ray available for our customers who might want it. You know, we actually debated a few years ago, should it be two or should it be one?
The board decided ultimately to go with one that's coming online here. You know, we're excited to bring it online. We're excited to have that option for our customers. It's co-located with a gamma site. You know, we can kind of be the best of both worlds for our customer, depending on what they desire, y ou know, it's something we'll continue to evaluate more, but we have no plans currently in place for any incremental X-rays, but we could over time.
Got it. All right. We'll you know monitor that, you know, like looking ahead. I know you're not gonna get too much into the strategy long term. Maybe shifting gears a little bit, like, on this topic, you know, we had some news last week with the EPA, you know, announcing some proposed amendments to the 2024 NESHAP final rule.
We're going back into a period of change after we thought we had some clarity, like, after a long time. Maybe just I understand it's very early, but just maybe like any initial thoughts on some of the changes, and your initial impressions on that announcement.
Yeah. It is very early and it's actually changing. I got a message today, right, that the comment period, the regulation was or the proposed regulation was posted and the comment period started t hat ends May first, t here'll be a hearing April first. That was hot off the press this morning w e knew it was coming.
Obviously from what was, I think, published on Friday. You know, we're gonna continue doing the work that we've been doing on our programs, y ou know, we've got a leading program in place. We're gonna be there to support whatever regulations might be final and required. A couple things I'd call out, y ou know, one, we also have a state-by-state consideration.
You know, too, you also could get you know, it could change over time no matter where they end. Last, I'd call out that even with the updated regulation, it's still significantly more stringent than it was before the 24 regulation came into place. Even if they roll it back some, like they've proposed, it's still considerably more stringent than it had been before.
I think one thing that makes sure people caught in there was they're also revisiting the 2026 IRIS risk assessment. You know, we believe that, you know, there's certainly some issues with that assessment. I think there's, you know, better understanding of the science and the methodologies that might be used. They're inviting input on that.
You know, we think that's an important development depending on how it goes because it's something that is referenced, you know, significantly by plaintiffs' attorneys inside our litigation. You know, if that is rectified, it should be helpful for us as we move forward dealing with litigation issues.
Jon, was that in reference to the IRIS assessment that took place already, like kind of years back? Was that something that.
Yeah.
I know, I know. I think I know.
They're inviting input on revisiting the output of the 2016 assessment.
2016. Okay. Got it.
Yeah.
Got it. Okay.
Yep.
Perfect. All right. Let's, we have 15 minutes or so let's shift gears again to like Nordion. I think like one thing that stood out to me as I was just, you know, looking at the last few years and, you know, our model going ahead is growth in Nordion has been stronger the past couple of years, I think averaging like 9% the last 2 years.
I wanted to just ask about that because it's a little bit different than, like, how you talk about the LRP and like, or like normalized growth for Nordion. What kind of drove that, like, high single digit, almost double-digit growth in Nordion the past two years? Was it, like, timing and just like 2 years in a row or like anything else?
Yeah, I would say, you know, over the last few years, there's been a couple of things going on, you know, with Nordion. You know, one is, you know, we were coming off some old contracts, and the industry was in a different position, and so there was some significant pricing resets in those contracts, which supported obviously the revenue growth.
The other thing that was going on is, you know, Cobalt was actually in a tight supply, you know, several years ago. You know, I think there was some pent-up demand for Cobalt-60 that came through over the last couple of years. You know, we expect that moving forward, we're gonna normalize, you know, to that, to the guide that we had provided of the low-to-mid single digits revenue growth.
All right. Got it. Then just thinking about also like the outlook. I think if we put together the 2025 results and the 2026 guidance, you know, you're kind of in that mid-single digit plus range. I'm just wondering, you know, kind of with that starting point in mind, thinking about 27, like is it reasonable or possible to think that you can end up above the original 25-27 LRP, just looking at the 3 years as a whole?
Yeah. You know, Brett, I understand the math you're doing. I'm excited about the, you know, the performance they put up last year. I feel good about the guide that we've given for this year. 14 months into the LRP, I'm not ready to call a victory and raise the number just yet. You know, we feel really good about the business, great about their performance last year. You know, we feel really good about the team and how they're managing a very complex supply chain. You know, we'll continue to deliver for our customers there.
Totally, f air enough. Another point that came up on Nordion, I think during this most recent earnings call, was some of the milestones around obtaining new operating leases from the Canadian Nuclear Safety Commission.
Yeah.
I think Michael mentioned on the call that, like, this new contract or agreement was the longest ever granted so I was hoping you could just like unpack that a little bit.
Yeah.
You know, what this means practically for the continuity of Cobalt-60 supply over the long term. Then just to throw in like a part two, if that changes at all, like how you approach contracts with customers given that like longevity of supply locked in.
Yeah. I would say a few things here, right? You know, we operate our one of a kind Class 1B nuclear licensed facility in Ottawa, Canada. We got a 25-year license renewal, which is the longest of its kind. You know, I think what that means is a couple of things. One, it's the recognition of our team. We have a phenomenal team, you know, up there that operates in this highly regulated, highly complex industry.
You know, the willingness of the regulator to issue that kind of license, I think is a reflection of the business itself and the people who run it more than it's a testament about the, you know, anything else. That said, it does alleviate one thing, right? We fully expect to get that license renewed.
You know, if it was a 10-year, we'd fully expect to get it renewed the following 10 years. I don't think it has a dramatic impact. I just think it's more of a measure of kind of our leadership in the industry and what kind of operation that we truly have up there that we're, you know, they're willing to grant a 25-year license.
All right. Makes sense. Let's conclude this segment conversation with Nelson Labs. You know, an area of the business where you've seen some headwinds over the past couple of years.
Mm-hmm.
I think you mentioned at kind of the top of this call that you think the expert advisory services is no longer, like, a material headwind. Maybe just as you sit here today, like what are kind of those signs of stabilization and improvement, specifically in the expert advisory part of that business?
I mean, just specifically in the expert advisory part of the business, it's effectively reset. It had its best year in its history last year. The expert advisory business or I'm sorry, 24. Last year is still 24 to me, I guess. In 2024, $34 million of revenue in the expert advisory services business.
It then followed it up with about its worst year in its history, which was driven by the fact that we had these big remediation projects that were ending and they hadn't been replaced, and we don't have line of sight to see replacement w e're effectively restabilizing it at a pretty low base.
When you look at the history of that business, you know, it might be the worst year in its history, but you know, it's in a range of what looks like a base of that business, so we don't expect it to be a headwind any longer. It is a headwind in Q1 as we do lap a pretty elevated Q1 of last year.
I think important in the business, if you look back at the overall, we saw really nice growth in our core lab testing business last year, particularly in the piece connected to Sterigenics and the sterilization-related testing. We also saw some good developments in some of the regulations on the validation side, but the validation side, as I mentioned earlier, is still a little choppy.
You know, we're really pleased to see that good, solid base of the sterilization and the XBU connection with Sterigenics, you know, and then we'll maximize the opportunity when it's there on validation testing related to new regulations and new product development.
All right, perfect. Maybe just one more follow-up on this segment and then we'll conclude on the balance sheet and maybe one on litigation in our last couple of minutes. Yeah, you've talked more about the XBU strategy t hat came up a lot on the Investor Day and has been discussed in depth through last year.
I think the number was like 9% overall growth from that customer cohort. Maybe just like a little bit more about what's driving like the better performance when you have customers are doing business in both segments and kinda how you derive that excess growth compared to the rest of the business.
Yeah, great. Just stepping back, you know 70% of our revenue in Sterigenics and Nelson comes from shared customers. You know, and over 50% of the Nelson Labs testing is routine sterilization-related testing. Again, that's closely connected to Sterigenics. If you pull it apart, we've got 12 facilities in Nelson Labs. 9 of them are either co-located or closely in close proximity to Sterigenics facilities.
Yeah, so, you know, so we're able to provide, you know, more effective solutions to our customer base when they're using both sides. We can be a little bit more streamlined opportunity for them. We've seen higher customer satisfaction rates when we're seeing both. We're in the early innings of really maximizing opportunity. We have opportunity for better attachment both ways.
You know, sterilization that we do that then is tested either in-house or by somebody else and further penetrating that for Nelson or validation testing that we do for Nelson and further penetrating that back into the routine sterilization activity so w e see a good opportunity to continue to move this in the right direction and increase that number. You know, it's a very important focus for us.
Awesome. Well, I think this has been a really good discussion on, you know, the growth and margin expansion and some of the segment drivers. I think we have a couple minutes left, so maybe just concluding, kind of bringing it together, w e talked a little bit about free cash flow, but net leverage has continued to creep lower, pretty close to your target range of two to three times.
So maybe just in the last minute or so, you could touch on just any, you know, potential changes we could see in capital allocation once you're comfortably within that target leverage range. Just if you had any other thoughts you wanted to leave investors with as we sign off here.
Yeah. No, great. Thanks, Brett and again, thanks for having us here. Glad to kick off the conference with you. You know, we're really pleased, w e've improved net leverage nearly a turn in just about two years, which just it demonstrates the ability for this business, the growth rate of this business, to actually grow into some of the elevated leverage that we had.
Nothing's really changing from a capital allocation perspective. Clearly, as we move into this range and we expect another year where we'll improve from the 3.2 times, it gives us more flexibility to pursue on the strategic end, but it doesn't change the discipline that we operate from a capital perspective so f rom a balance sheet perspective, continue to focus on maintaining a strong balance sheet.
We're gonna prioritize organic growth, and then we're gonna be opportunistic about debt paydown, M&A, and even consider some buybacks over time. We feel good around the flexibility we have, the balance sheet strength, and the trajectory that we have. You know, when I think about just leaving the group with a couple of messages, it's a little bit of what I said earlier to be a little bit redundant.
You know, we've gotten good momentum in the business. We just mentioned we got a strengthened balance sheet. We're on track for the commitments that we made at our Investor Day. We're confident in our ability to drive growth, to generate strong free cash flow, and ultimately to drive shareholder value, right? That's what the people on this call care about, and that's what we're focused on doing.
We remain focused on our priorities that we laid out in Investor Day. Number one is excellence in serving our customers with end-to-end solutions. Number two is, you know, winning in growth markets. Number three is driving operational excellence to enhance free cash flow. Number four is disciplined capital allocation, y ou know, we're very focused on those things, and we're looking forward to having a great 26 and generating shareholder value to this group.
All right. Jon, with that, thank you so much for joining us for today's session. Thanks to everyone in the audience for listening, h ave a great rest of the conference.
Thanks for having .