Sotera Health CoSHC
Sotera Health Co Stock Compensation Disclosure
Share-Based Compensation
Pre-IPO Awards
Prior to our IPO, the Company’s equity-based awards issued to service providers (including directors and employees) included partnership interests in our predecessor, Topco Parent (Class B-1 or B-2 Units), which vested based on either time or the achievement of certain performance and market conditions.
Restricted stock distributed in respect of pre-IPO Class B-1 time vesting units vested on a daily basis pro rata over a five-year vesting period (20% per year) beginning on the original vesting commencement date of the corresponding Class B-1 time vesting units, subject to the grantee’s continued services through each vesting date. All pre-IPO Class B-1 time vesting units were fully vested as of August 2025.
Restricted stock distributed in respect of pre-IPO Class B-2 Units were considered performance vesting units. The performance thresholds were satisfied on March 4, 2024 and, as a result, all outstanding B-2 Units were fully vested as of that date.
We recognized $0.5 million, $1.6 million and $2.0 million of share-based compensation expense related to the pre-IPO Class B-1 awards for the years ended December 31, 2025, 2024, and 2023, respectively.
A summary of the activity for the years ended December 31, 2025, 2024 and 2023 related to the restricted stock distributed in respect of the pre-IPO awards (Class B-1 and B-2) is presented below:
Restricted Stock - Pre-IPO B-1 | Restricted Stock - Pre-IPO B-2 | ||||||||||
| At January 1, 2023 | 716,091 | 1,098,415 | |||||||||
| Forfeited | (16,243) | (111,304) | |||||||||
| Vested | (347,401) | — | |||||||||
| At December 31, 2023 | 352,447 | 987,111 | |||||||||
| Forfeited | (2,651) | — | |||||||||
| Vested | (278,345) | (987,111) | |||||||||
| At December 31, 2024 | 71,451 | — | |||||||||
| Vested | (71,451) | — | |||||||||
| At December 31, 2025 | — | — | |||||||||
2020 Omnibus Incentive Plan
We maintain the 2020 Plan that allows for grants of incentive stock options to employees (including employees of any of our subsidiaries), nonstatutory stock options, restricted stock awards (“RSAs”), RSUs, PSUs and other cash-based, equity-based or equity-related awards to employees, directors, and consultants, including employees or consultants of our subsidiaries. A maximum of 27.9 million shares of common stock were originally available for awards under the 2020 Plan. At December 31, 2025, 13.8 million shares were available for future awards. The Company plans to issue authorized but unissued shares under the 2020 Plan or shares from treasury to satisfy requirements of awards paid with shares.
In March 2025, we awarded PSUs to certain members of the Company’s senior executive team. PSUs are designed to vest based on a combination of financial performance factors and continued service through the end of a three-year performance period. The PSUs’ financial performance factors have a threshold, target and maximum level of achievement and vest according to the performance level achieved by the Company during the performance period. Upon issuance of PSUs, we assume the financial performance target will be reached for the measurement period when determining the amount of compensation expense. If information becomes available to indicate that achievement above the target level is probable, compensation expense is adjusted accordingly.
In addition, in March 2025, we awarded RSUs to certain members of the Company’s senior executive team with a performance modifier based on the achievement of growth targets for the market value of the Company’s common stock price. The amount of awards that vest at the end of a service period may exceed the target number of RSUs awarded based on the stock price growth achieved.
In March 2025, our CEO was awarded PSUs (also referred to as share appreciation units or “SAUs”) that vest according to the achievement of stock price increases over their three-year performance period.
We recognize share-based compensation expense at grant date fair value over the requisite service period on a straight-line basis in our Consolidated Statements of Operations and Comprehensive Income (Loss), in “Selling, general and administrative expenses.” We recognized $30.5 million ($7.3 million for stock options, $20.4 million for RSUs and $2.8 million for PSUs and SAUs), $35.2 million ($16.4 million for stock options and $18.8 million for RSUs) and $30.4 million ($14.4 million for stock options and $16.0 million for RSUs) of share-based compensation expense for these awards for the years ended December 31, 2025, 2024 and 2023, respectively.
Stock Options
We use a Black-Scholes option pricing model to estimate the fair value of stock options. The expected volatility is based on the volatility of similar publicly traded businesses within the same or similar industry as the Company in combination with our own volatility. We used the simplified method to estimate the expected term due to the limited quantity of historical stock option exercises. The risk-free rate is based on the U.S. Treasury yield in effect at the time of the grant.
Weighted-average grant-date fair values of stock options and the assumptions used in estimating the fair values are as follows. No stock options were granted during the year ended December 31, 2025.
| For the year ended December 31, | 2024 | 2023 | ||||||
Weighted average grant date fair value per option | $ | 7.35 | $ | 7.13 | ||||
| Expected term (years) | 6 years | 6 years | ||||||
| Risk-free interest rate | 4.2 | % | 4.2 | % | ||||
| Expected volatility | 46.8 | % | 50.0 | % | ||||
Stock options generally vest ratably over a period of to four years. They have an exercise price equal to the fair market value of a share of common stock on the date of grant, and a contractual term of 10 years. The following table summarizes our stock option activity for the year ended December 31, 2025:
Number of Shares | Weighted-average Exercise Price | Remaining Contractual Life | Aggregate Intrinsic Value (millions of U.S. dollars) | ||||||||||||||||||||
| Outstanding at the beginning of the year | 8,328,051 | $ | 14.94 | ||||||||||||||||||||
| Forfeited | (113,221) | 18.92 | |||||||||||||||||||||
| Exercised | (30,949) | 14.59 | |||||||||||||||||||||
| Outstanding at the end of the year | 8,183,881 | $ | 14.89 | 6.6 years | $ | 35.3 | |||||||||||||||||
| Exercisable at the end of the year | 6,841,193 | $ | 14.80 | 6.3 years | $ | 32.2 | |||||||||||||||||
| Unvested at the end of the year | 1,342,688 | $ | 15.32 | 7.9 years | $ | 3.1 | |||||||||||||||||
At December 31, 2025, the total unrecognized compensation expense related to stock options expected to be recognized over the weighted-average period of approximately 1.1 years is $4.9 million. The total fair value of stock options vested during the years ended December 31, 2025, 2024 and 2023 was $9.8 million, $16.3 million and $10.6 million, respectively.
RSUs
RSUs generally vest ratably over a period of to four years and are valued based on the market price on the date of grant. For RSUs with performance modifiers, management estimated the fair value using a Monte Carlo simulation valuation model, as
these awards are subject to a market condition. The following table summarizes our unvested RSUs activity for the year ended December 31, 2025:
Number of Shares | Weighted-average Grant Date Fair Value | ||||||||||
| Unvested at the beginning of the year | 2,278,537 | $ | 13.73 | ||||||||
| Granted | 1,583,130 | 13.48 | |||||||||
| Forfeited | (89,892) | 12.87 | |||||||||
| Vested | (1,365,684) | 12.74 | |||||||||
| Unvested at the end of the year | 2,406,091 | $ | 14.16 | ||||||||
As of December 31, 2025, total unrecognized compensation expense related to RSUs expected to be recognized over the weighted-average period of approximately 1.7 years is $18.6 million. The total fair value of RSUs vested during the years ended December 31, 2025, 2024 and 2023 was $17.3 million, $15.4 million and $14.1 million, respectively. The weighted average grant date fair value of RSUs awarded during the years ended December 31, 2024 and 2023 was $14.05 and $16.95, respectively.
PSUs
PSUs vest at the end of a three-year service period and are valued based on our market price on the date of grant. PSUs awarded to our CEO with vesting conditions dependent upon the achievement of stock price increases were valued using a Monte Carlo simulation valuation model. The following table summarizes our unvested PSUs for the year ended December 31, 2025:
Number of Shares | Weighted-average Grant Date Fair Value | ||||||||||
| Unvested at December 31, 2024 | — | — | |||||||||
| Granted | 865,256 | 10.86 | |||||||||
| Forfeited | (5,604) | $ | 11.68 | ||||||||
| Unvested at December 31, 2025 | 859,652 | $ | 10.86 | ||||||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.