MIR - NYSE
Mirion Technologies, Inc.
MIR·NYSE
$18.24
+0.94%IndustrialsIndustrial - Machinery
Mirion Technologies, Inc. provides radiation detection, measurement, analysis, and monitoring products and services in the United States, Canada, the United Kingdom, France, Germany, Finland, China, Belgium, Netherlands, Estonia, and Japan. It operates through two segments, Medical and Industrial. The medical segment offers radiation oncology quality assurance and dosimetry solutions; patient safety solutions for diagnostic imaging and radiation therapy centers; radiation therapy quality assurance solutions for calibrating and verifying imaging and treatment accuracy; and radionuclide therapy products for nuclear medicine applications, such as shielding, product handling, medical imaging furniture, and rehabilitation products. This segment supports applications in medical diagnostics, cancer treatment, practitioner safety, and rehabilitation. The Industrial segment focuses on addressing critical radiation safety, measurement, and analysis applications; and provides personal radiation detection, identification equipment, and analysis tools. The company's products and solutions also include nuclear medicines, dosimeters, contamination and clearance monitors, reactor instrumentation and control equipment and systems, medical and industrial imaging systems and related accessories, alpha spectroscopy instruments, alpha/beta counting instruments, and gamma spectroscopy detector systems; and electrical penetration, cancer diagnostics, software, and other services. It serves hospitals, clinics and urgent care facilities, dental and veterinary offices, radiation treatment facilities, OEMs for radiation therapy, laboratories, military organizations, government agencies, industrial companies, power and utility companies, reactor design firms, and NPPs. The company was formerly known as Global Monitoring Systems, Inc. and changed its name to Mirion Technologies, Inc. in January 2006. Mirion Technologies, Inc. was incorporated in 2005 and is headquartered in Atlanta, Georgia.
At a Glance
Live SnapshotMarket Cap$4.46B
EPS0.1300
P/E Ratio140.31
Earnings Date07/30/2026
Earnings Call Transcript
MIR • 2023 • Q3
Operator
Greetings, and welcome to the Mirion Third Quarter 2023 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Alex Gaddy, Senior Vice President of Strategy. Thank you, Alex, you may begin.
Alex Gaddy
Good afternoon, everyone, and thank you for joining Mirion's third quarter 2023 earnings call. Reminder that comments made during this presentation will include forward-looking statements, and actual results may differ materially from those projected in the forward-looking statements. The factors that could cause actual results to differ are discussed in our annual report on Form 10-K and quarterly reports on Form 10-Q that we file from time-to-time with the SEC under the caption Risk Factors and in Mirion's other filings with the SEC. Quarterly references within today's discussion are related to the third quarter ended September 30, 2023. The comments made during this call will also include certain financial measures that were not prepared in accordance with generally accepted accounting principles. Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the appendix of the presentation accompanying the call today. All earnings materials can be found on Mirion's IR website at ir.mirion.com. Joining me on the call today are Larry Kingsley, Chairman of the Board; Tom Logan, Chief Executive Officer; and Brian Schopfer, Chief Financial Officer. Now I will turn it over to our Chairman of the Board, Larry Kingsley. Larry?
Larry Kingsley
Thank you, Alex. Good afternoon, everyone. Thank you all for joining our third quarter earnings call. We published a solid set of third quarter numbers today, which sets us up well for fourth quarter and importantly our results demonstrate a progress on several of the key focus areas and initiatives we have been talking about all year. Order performance was outstanding. The team saw a strength across the portfolio and closed key orders on the nuclear power side of the business. Backlog grew sequentially for the fifth consecutive quarter. I am encouraged by the strong momentum we are building across the enterprise. The outlook for both the Medical and Technology segments looks quite positive in an otherwise mixed macro environment. The focus on net working capital has begun to pivot performance, as net working capital was a source of cash in the quarter. This is a step in the right direction, and just the beginning of what we expect should be stronger and consistent operating performance. The Board and I have confidence in team's approach in driving capital efficiency. And in the short-term, our deleveraging targets. Overall, Mirion is on solid footing heading into Q4. Quarter flow and backlog coverage are robust. The team is executing well, and leverage continues to tick down. Moreover, market fundamentals are constructive and that positions the company well for profitable future growth. I will now pass the call over to our CEO, Tom Logan. Tom?
Tom Logan
Thank you, Brian. Before we begin q and a, there are a few things I'd like to leave you with this afternoon. First, our backlog position and overall order momentum coming out of the third quarter was very strong, bolstered by large nuclear power orders. Engagement across the business remains positive and we're confident heading into the fourth quarter. Second, both of our reporting segments delivered quarterly results in line with expectations. Top line growth was robust and EBITDA margin expansion evidence across the board. Third, we saw notable improvement within our cash flow dynamics in Q2. There's still work to be done and this remains a key priority for me and the rest of the team. And finally, we've reiterated our 2023 guidance, including our 3.1 times leverage target for year up. I believe the business is well positioned to deliver on expectations heading into the fourth quarter. I'll now pass it over to Alex to open things up for Q&A. Alex?
Alex Gaddy
Thanks, Tom. That concludes our formal comments for this afternoon. Operator, let's go ahead and start the Q&A session.
Operator
[Operator Instructions] Our first question is from Joe Ritchie with Goldman Sachs.
Joe Ritchie
Can we start on the orders and specifically on the nuclear new build? So I saw that the orders increased by $85 million. How much of that was nuclear new builds? And then I guess the way to think about that is probably that's probably a little bit of a longer cycle business for you. So when would you kind of expect to see that come through the P&L?
Brian Schopfer
Yeah, so, look, if you think about the order growth, we saw in the quarter year over year, so up 85 million, we saw two orders approximately the same size about 40 million each one is the nuclear new bill project. One is a spare parts order out of Korea. If you think about this particular nuclear new build, we actually believe we'll see, or we know we'll see some revenue in the fourth quarter. And then we'll start to see it rateably trade over the next kind of two to three years, Joe. So it's pretty -- this one is impacts us near term, which is not always the case in this business but this order is good for us for next year from a RevX standpoint.
Joe Ritchie
I guess the reason I thought maybe it was a little bit longer cycle was just because there was no change to the expectations in the fourth quarter for technology. So was this something that you guys had already contemplated when you gave us the original guide, and then I guess, Tom, as you kind of think through, I think you made a -- go ahead you want to, you want to answer that, Brian?
Brian Schopfer
No, go ahead. Go ahead, and I'll answer.
Joe Ritchie
No. And then Tom, you made a mention of other potential new projects on the nuclear new build side and your pipeline. Just any more color around that would be helpful.
Tom Logan
Yes, maybe I'll let's take it in reverse order. I'll answer that, and then Brian can answer the first part of the question. So yes, if you look at the pipeline that we see for nuclear new build projects. Recognizing that we work with most of the major NSSS players, NSSS being the term of art for nuclear reactor designers. The pipeline is as good as I've seen it. And our view is that as we look at our specific planning horizon, that we expect that we will see continued growth in the sector. I will note that nuclear projects are notoriously difficult to predict in terms of quarterly timing, and so that's something that we'll shy away from. But I will tell you that our expectation is that this will be a continued theme including in 2024 for us.
Brian Schopfer
And then quickly, Joe, on we didn't move up guidance for the fourth quarter. I mean, look, the Loic and the team have been working on this for a while. And like Tom said, these are really hard to predict when they're going to land. The impact on the fourth quarter is pretty small. I mean, it's less than a couple million bucks.
Joe Ritchie
Okay. Alright, great. One other quick one, and I'll pass it on. Just on free cash flow. Congrats on the improvement this quarter. Still need more improvement in 4Q to hit the range for the year. So just talk about your confidence in getting to that 45 to 75 and what's within your control.
Brian Schopfer
Yes, I mean, look, I mean, there's a couple, there's definitely some payments on a few projects that matter for the fourth quarter. but we -- I mean, there's a reason we reiterated our range and our leverage target. The team is very aggressively attacking kind of both the structural issues and the near-term kind of things that will impact this. So I think there's a lot of this is in our control and we feel very good about the guidance we put out this morning.
Operator
[Operator Instructions] Our next question is from Andy Kaplowitz with Citi Group.
Andy Kaplowitz
So Tom and Brian, just maybe following up on Joe's question. In terms of like the bookings, and I know you don't want to give us too much on the ‘24 setup, but when I sort of look at the two segments and you talked in the past about Mirion's ability to grow, call it mid-single digits plus in the 5% to 7% range. Is the visibility higher than normal, normal, like, how would you say it as we sit here sort of in November, thinking about the ‘24 puts and takes?
Tom Logan
Yes, let me tee it up, and then I'll let Brian talk about it a little more. I would say that in general, Joe, what we've seen is an improving coverage dynamic where -- if you look at our backlog coverage relative to guidance and this has been the case for much of this year, that in general, sequentially, we are seeing an improvement in that coverage. And we are certainly encouraged and heartened by the record backlog that we are sitting on here at the end of Q3.
Andy Kaplowitz
It's helpful, Tom. And Brian, maybe again a follow-up on a question, like in Technologies, you mentioned sort of low single-digit growth in Q4, tough comp. But, we didn't model, 26% growth in Q3. Was there any sort of pull forward there or, like, you are being conservative? Like, how do we think about in the context of such strong growth in Q3?
Brian Schopfer
There is definitely some movement between kind of Q3 and in Q4 from what we kind of thought in June. Again, I think we feel pretty good about what we said. We are comping what, like, a 20% number from last year in the Technologies segment on the organic side, that was 17%, sorry, 17% last year. So that's a big number. I think we're very comfortable with the revenue range and we will see some EBITDA margin expansion in the fourth quarter as well.
Andy Kaplowitz
Got it. And let me leave my last question in maybe two parts. Like, on the margin side, like in Technologies, Brian, you talked about sort of one-time costs. Like, repeat, obviously, one-time. It means we shouldn't have more cost like that, but maybe give us a little more detail there. And then you made the -- you are still not a positive on a price versus cost rate basis. What does it take to get there? Because I would assume demand is pretty good as we see, and supply chain is getting better, commodities generally gone down. So what can you do to get there?
Tom Logan
So on the one timers, look, I mean, we saw some catch-up costs out of the French business, and it is mainly in the projects business. And we saw some higher cost on some of our civil products this quarter. I mean, we are burning through kind of inventory, which is good. And I think that kind of also goes to the second question, which is one of the -- we're focused on inventory reduction for two reasons. One is to generate more cash flow. But, two, exactly what you just said. As the supply chain does get better, that allows us to to pull through, better material costs through the P&L. So I think it is that, that gets us there from a a rate basis, on the price cost side.
Operator
Our next question is from Chris Moore with CJS Securities.
Chris Moore
Thanks for taking a couple questions. So maybe just and I know you are not getting into '24 too much at this point in time. But maybe just the puts and takes that fiscal '24 gross margins will be above '23.
Chris Moore
Backlog almost 800 million up five consecutive quarters. Obviously you talked about the new nuclear build order there. Is the balance between medical and technologies, is that much different than it was a year ago?
Tom Logan
No. Well, a little bit just because the backlog's grown and most of the growth is on the technology side. I mean, our medical backlog is less than 20% of the back. If you think about the backlog, less than 20% of it is medical.
Chris Moore
And maybe just the last one for me, I mean, you guys have been clear that you're not just gonna flip a switch on SID dose, see penetration ramp quickly and dramatically. That said, I mean, do you expect penetration at the end of ‘24 to be significantly different than end of ‘23? Or is this -- it really is a three-to-five-year kind of transition?
Brian Schopfer
Chris, there really is a three-to-five-year transition. We expect that we will fulfill orders on this in the first half of next year. But in terms of meaningfully impacting the current mix again, I think this is just a longer campaign and it will occur systematically, but not at the kind of accelerated rate that that might be important.
Operator
There are no further questions at this time. I would like to hand the floor back over to Tom Logan for closing comments.
Tom Logan
Well, ladies and gentlemen, we appreciate your participation today. Again, we're happy to report what we believe is a very solid quarter. And to be clear, I think we've noted this well throughout the call, we're very encouraged by the strength of our top line and the level of customer engagement and the favorable market dynamics that underpin that. These have always been key factors and the relative a cyclicality of Mirion as the company and we're happy to see that coming through and coming through so strongly at this point in the year. Further, as you know, that is the toughest part of any business to manage that if your top line is good, the rest of it is far more within your control. So all of that is to say that we feel good about the momentum of the business coming into Q4. We feel pleased with how we're sitting organizationally, the operational and commercial priorities that we're focused on. And we very much look forward to speaking to you again in three months time. So thanks again and we'll leave it there for the day.
Transcript from November 2, 2023
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