Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mirion Technologies Inc (MIR, Financial) signed a strategic partnership agreement with EDF, the largest operator of nuclear power plants in the world, which is expected to be the largest commercial deal in the company's history.
- The company reported solid organic revenue growth in Q2, with technologies leading the way with 4% growth and medical delivering 3% growth.
- Adjusted free cash flow was nearly $9 million in the quarter, meeting the commitment to being cash flow positive for the first half of the year.
- Mirion Technologies Inc (MIR) raised its adjusted EBITDA target to $195 to $205 million and reiterated its ranges for organic revenue growth of 4% to 6%, adjusted EPS of $0.37 to $0.42, and adjusted free cash flow of $65 to $85 million.
- The company saw better-than-expected adjusted EBITDA margins, driven by strong execution and positive results from procurement initiatives and operating leverage.
Negative Points
- Second quarter order growth was relatively flat compared to the same period last year, indicating potential challenges in maintaining momentum.
- Radiation Therapy QA saw negative order growth in the first half, driven by softer international orders due to the depreciation of the Japanese yen and market disruptions in China.
- The company will not be providing segment-by-segment order numbers going forward, which may reduce transparency for investors.
- Labs and research had negative order growth compared to last year, impacted by governmental budgetary dynamics and tough comparisons.
- Despite positive cash flow in the first half, the company expects free cash flow to come in towards the lower end of the $65 million to $85 million range for the year.
Q & A Highlights
Q: Can you provide some color on the health of the order pipeline into the second half of the year and expectations for backlog?
A: Brian Schopfer, CFO: We feel very good about where we sit today. The pipelines are very strong across both businesses. While order rates may not be positive year-over-year in the back half, we expect backlog to be up in Q3 compared to last year and potentially flat by year-end. The flow business, driven by our installed base, remains strong.
Q: How does the exclusive partnership with EDF expand on your existing relationship, and what are the expected impacts?
A: Thomas Logan, CEO: This partnership streamlines commercial terms, strengthens our competitive position, and impacts our cost structure positively. It gives us greater confidence in our investments and supports our commercial activities with EDF, enhancing our long-term relationship.
Q: What is the impact of the anti-corruption dynamics in China on your RTQA market, and when do you expect improvement?
A: Brian Schopfer, CFO: The impact on revenue was negligible in the first half, but orders were down and are expected to remain down in the second half. We anticipate improvement in late Q4 or into 2025 as the market stabilizes and pent-up demand flows through.
Q: Can you elaborate on the anticipated CMS changes on reimbursement and their potential impact?
A: Thomas Logan, CEO: CMS plans to correct reimbursement discrepancies for radio diagnostic drugs by 2025, which will reduce friction for prescribing these procedures. This is expected to drive higher demand for our dose calibration instruments and related equipment, positively impacting our business.
Q: Are there any further steps to improve your capital structure following the cleanup of public and private warrants?
A: Brian Schopfer, CFO: We've made significant progress on the balance sheet and will continue to evaluate opportunities for debt repricing and capital allocation. Our focus now is on executing our plan, growing margins, and generating free cash flow.
Q: How do you see the procurement initiative impacting margins, particularly in the technology segment?
A: Brian Schopfer, CFO: The initiative is expected to yield 150-300 basis points of EBITDA margin improvement over the next three years. Early benefits are already visible, and we expect continued margin expansion through 2025 and beyond as we reduce our supplier base and improve procurement processes.
Q: How significant is the growth potential of the nuclear medicine business, and can it offset slower RTQA growth?
A: Thomas Logan, CEO: Nuclear medicine is expected to grow significantly and is additive to RTQA, not cannibalistic. Both markets have strong growth drivers, and we remain bullish on their long-term potential.
Q: What is your visibility on achieving the free cash flow guidance for the year?
A: Brian Schopfer, CFO: We are ahead of last year and expect to generate significant cash in Q4, similar to previous years. We are confident in achieving the lower end of our guidance range.
Q: How would a potential recession impact your customers' spending and order backlog?
A: Thomas Logan, CEO: Historically, we have been very a-cyclical, with strong growth even during recessionary periods. We do not expect a significant impact on demand from macroeconomic cycles.
Q: What are your preparations for the anticipated CMS changes in reimbursement?
A: Brian Schopfer, CFO: We are well-positioned with our leading data management software and hardware in nuclear medicine. Favorable changes in reimbursement dynamics will likely drive higher demand for our products, and we are prepared to capitalize on this opportunity.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
