Q4 2022 Mirion Technologies Inc Earnings Call
Speaker 1: And.
Speaker 2: Greetings and welcome to a million technologies. For quarter of 2022, our names conference hall. At this time, all participants are in a recent only route. A brief question and a recession will follow the formal presentation.
Speaker 2: If anyone should require an operator assistance, mind the compliance, please grab the power unit on your health phone and keep that.
Speaker 2: As a reminder, this conference is being recorded. It is a pleasure to introduce your host Alex Gladys. Thank you, Mr. Gladys. You may begin.
Speaker 3: Good morning everyone and thank you for joining Miriam's fourth quarter and full year 2022 earnings call. A 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. Factors that could cause actual results to differ are discussed in our annual report.
Speaker 3: on Form 10K and quarterly reports on Form 10Q that we file from time to time with the SEC under the caption Risk Factors and in Mirians Other Filing with the SEC.
Speaker 3: Correly references within today's discussion are related to the fourth quarter and full year-end in December 31st, 2022. The comments made during this call will also include certain financial measures that were not prepared in accordance with generally accepted accounting principles.
Speaker 3: reconciliation of those non- GAAP financial measures to the most directly comparable GAAP financial measures can be found in the appendix of this presentation accompanying the call today.
Speaker 3: All earnings materials can be found on Mirians IR website at ir.mirian.com.
Speaker 3: Joining me on the call today are Larry Kingsley, Chairman of the Board, Tom Logan, Chief Executive Officer, and Brian Schaufer, Chief Financial Officer. Now I will turn it over to our Chairman of the Board, Larry Kingsley. Larry? So how do you they want to know we're the fan or the
Speaker 4: Thank you, Alex, and good morning, everyone. I'd like to get today's call started by thanking you all for your continued support of Merion throughout our first full year as a public company.
Speaker 4: 2022 was a dynamic year for Marion, from navigating a challenging supply chain environment,
Speaker 4: to responding to record inflation and the Russia Ukraine conflict. There was no shortage of hurdles to overcome.
Speaker 4: I'm incredibly proud, though, of the Meridian team's resolve in the face of adversity.
Speaker 4: and believe the solid-rear results we reported this morning are a direct testament.
Speaker 4: Our medical business accelerated upon recent growth trends.
Speaker 4: while industrial took a meaningful step forward during the quarter.
Speaker 4: Overall, the team was able to deliver on expectations laid out on our last call and has built positive momentum heading into 2023.
Speaker 4: Marion has positioned itself well to deliver growth this year.
Speaker 4: I believe the guidance published this morning showcases the cycle-resistant nature of our strategic positioning in the market.
Speaker 4: Merriens diverse portfolio products and services, an experienced management team have a long track record of proven results.
Speaker 4: The team has the right roadmap in place to capitalize on what we expect will continue to be a robust demand environment.
Speaker 4: We are entering 23 with strong momentum across our end markets and a growing backlog.
Speaker 4: I'm also very encouraged by the execution-focused mentality we built through the course of 22.
Speaker 4: And the team has clear focus on the key strategic initiatives.
Speaker 4: required for growth, profitability, and cash flow generation.
Speaker 4: The future for Mirion is bright.
Speaker 4: Customer engagement and demand are strong.
Speaker 4: and our teams remain committed to executing.
Speaker 4: I'm now going to turn the call over to Tom Logan, Marion's CEO . Tom?
Speaker 4: Tom, I think you're muted.
Speaker 5: Diving into our results, there are a few key areas I'd like to highlight today. First, we finished the year with 8% year-over-year order growth for the full year, which in turn resulted in backlog growth of 10%.
Speaker 5: This excludes the impact of the Honeykevy Project cancellation as previously discussed.
Speaker 5: Second, we delivered total company organic adjusted revenue growth of over 19% for the quarter and nearly 6% for the full year. While these numbers could have been higher without the negative impacts from the Russia Ukraine conflict and foreign exchange pressures, I'm incredibly proud of the effort and commitment displayed by our team.
Speaker 5: Third, net leverage reduced to 4.4 times EBITDA as of December 31st, driven by better free cash flow performance in line with our expectations.
Speaker 5: Note that my goal is to reduce leverage below four times by the end of 2023. Finally, we initiated 2023 financial guidance this morning. Looking ahead to the full year, we're expecting or you're...
Speaker 5: Organic growth of 4 to 7% with adjusted EBITDA $172 to $182 million. Now let's get into more detail on our order performance and market outlook for 2023.
Speaker 5: Beginning with slide four, our end market demand dynamics remain strong heading into 2023, showcased by 8% year-over-year order growth in 2022. On a constant currency basis, order growth was 13% for the full year. We continue to see broad-based demand across business segments and are encouraging to see a growth in the future.
Speaker 5: I'm next last year and expect to see these positive friends continue. I'll be at a more moderated rate.
Speaker 5: Year-over-year medical order growth was 14% or 15% on a constant currency basis.
Speaker 5: A few things to note here. First, we launched our one-mere on medical strategic initiative, which has begun delivering positive results to the business.
Speaker 5: I expect to see additional momentum take shape both internally and externally as 2023 progresses.
Speaker 5: In Dov Symmetry, we are excited about the official launch of our next generation of Instados technology. As a reminder, we expect Instados to provide growth to the business through licensing opportunities, organic share gains, and conversion of existing customers to the platform. Next.
Speaker 5: in radiation therapy quality assurance. We remain encouraged by both international and domestic demand dynamics. We're expecting high single-digit top-line growth from RTQA in 23, supported by the investments in our European's Fales Center and national account marketing strategy to drive positive growth for the business.
Speaker 5: Finally, 2022 was a great year for our nuclear medicine business, showcasing how strong the combined Biodex and Cap-and-Tech assets are for Miriam. We are anticipating a more normalized growth rate in 2023, with organic revenue growth expected in the mid-single digits.
Speaker 5: Moving on to industrial, the segment generated approximately 5% order growth on an as reported basis in 2022, a roughly 14% on a constant currency basis supported by strong customer engagement across our end markets.
Speaker 5: In nuclear power, we are seeing encouraging activities in all areas of the nuclear power life cycle, particularly from new builds in the installed base. Government sponsors across the globe continue to view nuclear powers in attractive energy source, particularly in Europe and Asia. The macro-environment remains favorable, and we are encouraged by the long-term trends in the space.
Speaker 5: for Mirian, which could dwarf utility-scale reactors. And we look forward to playing an integral role in enabling the safe development and operation of these potentially game-changing power solutions.
Speaker 5: Moving on to our defense and diversified industrial businesses, we lapped a number of large orders in Q4 2021, which made 22 comparisons tough. We continue to see elevated engagement from our NATO customers in the defense space and expect this trend to continue for the foreseeable future. Note, however, that order cycle times are lengthier than historical norms.
Speaker 5: Finally, in labs and research, we booked a large order providing germanium detectors, decimeters, and handheld devices to a new oncology isotope production facility in Germany. This is an exciting order for us in the industrial segment, as it was made possible by the strengthening Mirion Medical Brand.
Speaker 5: as we continue to mature in our two segments structure, we expect similar cross-selling momentum to pick up.
Speaker 5: Looking at the businesses as a whole, the outlook for 2023 is strong. We expect elevated customer engagement across our end markets and are maintaining robust growth projections for the future. Let's turn out a slide five to discuss our fourth quarter and full year results in more detail.
Speaker 5: At the total company level, we delivered 19.1% organic revenue growth in the fourth quarter and 5.7% organic revenue growth for the full year. We enjoyed continued exceptional performance from our medical business in the fourth quarter in full year, delivering organic growth of 24% and 15% respectively.
Speaker 5: Strength in medical was broad base to cross all three of our end markets with nuclear medicine leading the way.
Speaker 5: In the industrial segment, the fourth quarter was a step in the right direction, as we delivered nearly 17% organic growth. Fourth quarter growth was supported by improvements in our operating environment, as well as strong execution by our team. We saw some signs of supply chain pressure easing.
Speaker 5: and we experienced generally more favorable order timing dynamics compared to prior quarters. Before I pass the call over to Brian , I wanted to touch briefly on our business development initiatives and M&A strategy.
Speaker 5: We remain committed to our discipline capital allocation policy with highly selective screening criteria for M&A that supports our De-leveraging commitments
Speaker 5: The pipeline remains robust and our criteria for investment continues to focus on building category leadership within our chosen end markets with the possible products, services, and software offerings. But to be clear, I intend to reduce leverage below four times by year end.
Speaker 5: With that, let me pass the call over to our chief financial officer Brian Chopper. Thanks Tom, and good morning everyone.
Speaker 6: To kick off my commentary, I'll ask you to please turn to slide six to take a deeper dive into our fourth quarter and four-year revolve.
Speaker 6: Looking at the fourth quarter, total company adjusted revenue was up 20.5% and adjusted EBITDA was up 25.9%.
Speaker 6: Total revenue in the quarter was $217.9 million and organic growth was 19.1%.
Speaker 6: Adjusted EBITDA totaled $56.4 million in the quarter, with margin expanding 110 basis points to 25.9%.
Speaker 6: During the fourth quarter, we realized approximately 5% growth from price, offset by inflation and one-time costs associated with accounts receivable reserves, as well as a one-time supply chain reserve relating to circuit boards.
Speaker 6: Looking at the full year, total company adjusted revenue was $717.8 million, featuring 5.1% reported growth with organic growth of 5.7%.
Speaker 6: Adjusted EBITDA was down slightly compared to 2021, finishing at 164.7 million with adjusted EBITDA margin contracting 130 basis points compared to 2021 to 22.9%.
Speaker 6: As a reminder, year-over-year adjusted EBITDA performance, margin performance, was negatively impacted by approximately 12 million of public company costs in 2022, or approximately 170 basis points.
Speaker 6: This was our last time copying against a period without public company costs.
Speaker 6: Fourth quarter adjusted free cash flow was $19.5 million, much more representative of the go-forward expectation for the company.
Speaker 6: Higher interest rates and networking capital requirements continue to be a challenge, but I am encouraged by the progress exiting the year. As a result, we saw leverage reduced to 4.4 times as of December 31, slightly ahead of what we guided on our third quarter call.
Speaker 6: Looking forward, our operating teams are very focused on achieving Tom's leverage target of four times or lower by the end of 23. I'd also like to note, the foreign currency exchange dynamics continue to be an important area of focus for Mereont.
Speaker 6: While we've recently seen positive trends in the Euro to US dollar exchange rate.
Speaker 6: F-AX headwind impacted adjusted revenue performance by 5% in the fourth quarter, and 4.5% for 2022. As we disclose in our third quarter call, we have been actively hedging our interest rate exposure through fixed price cross currency hedges on our third party debt.
Speaker 6: We've executed two hedges bringing our total fixed debt to approximately 30% which we expect to offset approximately 4 million of cash interest on an annualized basis. Before getting into the segment details, I'd like to take a minute on slide 7 to reflect on the key variables impacting our top line in 2022.
Speaker 6: There was no shortage of headwinds in 2022. We had to overcome challenges stemming from the Russia-Ukraine conflict for the exchange pressure and record inflation.
Speaker 6: Our top line was affected by approximately $50 million of headwinds from lost Russian-related revenue and negative foreign exchange impacts, totaling approximately 8% of reported revenue growth. We were able to replace 12 million of the lost Russian-related volume.
Speaker 6: Supplemented with 6 million of incremental pricing actions while successfully acquiring and integrating the Collins acquisition.
Speaker 6: Let's now take a deeper dive into segment performance. Please turn to slide 8 for a medical segment.
Speaker 6: Starting with fourth quarter performance, adjusted revenue grew 25.4%, with organic growth of 23.6%, driven by double-digit organic growth from all three end markets.
Speaker 6: Nucleus Medicine led the way again this quarter. As integration efforts continued to deliver good results, and the team converted more of our backlog into revenue.
Speaker 6: Medical Justity Bada Margin was 33.4%.
Speaker 6: percent in the quarter. A 90 basis point expansion compared to the same period last year.
Speaker 6: For the full year, medical adjusted revenue grew 19.2 percent with organic growth of 15.2 percent. Adjusted EBITDA was up 23.3 percent to 86.8 million.
Speaker 6: Margin improved by 110 basis points supported by strong price realization in the integration of cap and tech and viadx
Speaker 6: These growth numbers are outstanding and I'd like to commend our medical team on their great work throughout the year.
Speaker 6: As we look forward, medical's first half of 2023 will see a more normalized growth trend in line with our long-term algorithm with tougher cops in the back half of the year.
Speaker 6: Let's now turn over to slide 9 for the industrial segment. Adjusted revenue grew by 17.9% for the quarter, with organic growth of 16.8%.
Speaker 6: We said strong but achievable expectations for industrial in the fourth quarter and I am proud of the effort our teams put in to deliver Performance was principally driven by strong execution Adjusted evadoc for the industrial segment was up almost 22% in the quarter
Speaker 6: and margin expanded 100 basis points to 30.2%. While employees to report margin expansion, performance was limited by the occurrence of one-off transitory costs related to increased accounts receivable provisions and one-time supply chain expenses, as I noted earlier.
Speaker 6: Looking at industrial full year performance.
Speaker 6: Adjusted revenue was down 2% with organic growth of 0.9%.
Speaker 6: Ravano performance was principally hindered by foreign exchange headwinds and lost Russian-related revenue. A revenue impact of roughly 11% for the year on the industrial segment.
Speaker 6: The adjusted EBITDA was down 5% in margin compressed by 90 basis points from 2021.
Speaker 6: Margin performance was impacted by volume absorption, product mix, and inflation.
Speaker 6: Additionally, dilution from the Collins acquisition negatively impacted industrial adjusted EBITDA margin by nearly 40 basis points on its own.
Speaker 6: Finally, I'd like to walk through the guidance we have issued today, turning over to slide 10.
Speaker 6: We are projecting organic growth of 4-7 percent supported by mid-single digit organic growth from both medical and industrial.
Speaker 6: I'd like to note that medical is comping a very strong year. As a result, we are moderating our growth expectations versus what we saw in 2022.
Speaker 6: Given recent trends in the US dollar to your own exchange rate, we are anticipating effects, the positively impact top-line growth by about half a percent.
Speaker 6: Net in Organic Revenue Impact
Speaker 6: The net inorganic revenue impact from college and biodex is expected to be 1.5%.
Speaker 6: to provide a quick update on the physical medicine divestiture from our biodex business.
Speaker 6: originally announced in November . We expected deal to close during the first quarter of 2023. As a reminder, we purchased Biodex and Capinzec for a combined $41 million, representing approximately $60 million of revenue and less than $2 million of adjusted EBITDA at deal closure.
Speaker 6: Today, the combined business post-synergy multiple is below two times. It is accretive to Mirian's consolidated adjusted EBITDA margin.
Speaker 6: The physical medicine component of Biodex is non-cord or category leadership in the segment.
Speaker 6: For 2023, we are expecting adjusted EBITDA between $172 and $182 million, with margin, with margins likely remaining unchanged to 2022 at the midpoint of guidance.
Speaker 6: Price and cost inflation are estimated to be neutral for the year.
Speaker 6: Thinking through the sequence of the year, we expect more modest performance in the first staff as we work through product and customer mix headwinds, mainly stemming from our sensing business within the industrial segment.
Speaker 6: We anticipate these mixed pressures to ease as we get into the second half of the year, with adjusted EBADAM margin improving sequence.
Speaker 6: We'd also like to note the dynamics coming from our inorganic contributions.
Speaker 6: We expect the biodext Investiture to be accretive to margins with the Collins acquisition more than offsetting these benefits. As a result, we project net inorganic impact to our just an EBITDA margin of approximately negative 50 basis points in 2023. Saying this differently.
Speaker 6: We would expect 50 basis points of better margin rates than what the midpoint suggests. Had we not done both of these deals?
Speaker 6: We are anticipating adjusted EPS of 28 to 34 cents and adjusted free cash flow of 50 to 70 million dollars, with an expectation of positive contribution from networking capital for the year.
Speaker 6: To help with modeling considerations, we are utilizing our share count as of December 31, 2022 to calculate EPS.
Speaker 6: We expect our effective tax rate to be between 25 to 27 percent and are assuming a US dollar to your own exchange rate of 1.07.
Speaker 6: Note that there is an additional guidance slide in the appendix of our presentation laying these out as well as a bridge around our revenue assumptions.
Speaker 5: With that, I'll pass the call back to Tom to close things up. Ryan, thanks. Before we open things up for questions, I'd like to recap 2022 and the highlight of a few queries that focused for us, we prepare for 2023. First, we finish 2022 with positive momentum built off our strong fourth quarter results.
Speaker 5: Our team's commitment to execution enabled us to deliver on the expectations we set back in November .
Speaker 5: Second, we're entering 2023 with robust backlog and NTM revenue coverage of approximately 55%.
Speaker 5: Third, we've taken a balanced approach to setting guidance and believe we have adequately considered the risks and opportunities we see for the year.
Speaker 5: Fourth, we remain committed to de-leveraging our balance sheet through discipline capital allocation. Any acquisitions will be highly selective and supportive of my goal to reduce leverage below four times by the end of the year. Next, operational execution remains front and center. I spend most of 2022 running both the medical group and our RTQA business.
Speaker 5: Finally, we have the best team in the industry and I am relentlessly focused on employee engagement and organizational health.
Speaker 5: I'm confident that we are well positioned to have a great 2023 and look forward to updating you on our progress in May. Thanks again for your time and continued support and I'll now pass things back to Alex to open up Q&A.
Speaker 3: Thank you Tom. That concludes our formal comments for today. I'll turn it back over to the operator for a question and answer session.
Speaker 2: Thank you. We will now be conducting question and answer sessions.
Speaker 2: If you would like to ask a question, please press the sign one on your telephone keypad. A confirmation phone will indicate your line isn't a question kill. You may press hard-check if you would like to remove your question from the kill. Our first issue is using sticker equipment. It may be necessary to pick up your handbag before pressing star keys.
Speaker 2: One moment please while we pull for questions.
Speaker 2: Our first fession comes from Andy rubits W cityig ROP, Please glad.
Speaker 7: Good morning everyone.
Speaker 7: one. Hey, Eddie. Hey, Eddie.
Speaker 8: So your medical related growth continued to accelerate over the last few quarters of 22. I know you talked about strength in all of your major medical businesses and I know you're forecasting mid-single digit growth in 23. You talked about the man normalization and tough comps. Of two of the three medical businesses project to be up high single digits.
Speaker 8: I mean, dose symmetry is up mid-signal. So you're just being conservative on the overall segment, especially given the new into dose rollout, or you see any slowing in any of your medical businesses, and that's why you've got lower growth model.
Speaker 5: Yeah, two things, Andy. Firstly, on the Dostometry Business, historically, that is a slow-growing market. With the advent of Instados, we believe that over the last number of years we've been able to grow at a nominally higher rate than the market overall. But the growth rate there is inherently more conservative.
Speaker 5: favorable and our look as positive, I think we're just being measured in terms of our forecasting growth.
Speaker 8: That's very helpful, Tom. And I think we understand that you, lots of significant order growth in Q4 and nuclear defense, but you mentioned a clear pipeline of incremental new bill and nuclear orders. So you think you're nuclear business in terms of orders re-accelerates from here, and then we know you're expecting more defense-related orders. You mentioned the elongated order cycle for these types of orders. Do you see them getting a little bit more?
Speaker 5: noting the very high degree of government and popular support for nuclear power as an important solution to a variety of energy problems. And secondly, the elevated price of electrical pricing, which is principally driven by gas pricing overall.
Speaker 5: Our view is that that strength continues. We do generally believe there is a lag effect between secular market changes within the nuclear industry and the downstream impact on our business. And so we are hopeful that as the industry overall continues to gain momentum and gain health, that we will see that continue.
Speaker 5: It's important to note that our installed base is about three-quarters of our nuclear power related revenue, which is, as you've seen in the presentation, constituted about 35% of our total revenue last year. So looking at the installed base is far and away the most important lens through which to evaluate the overall...
Speaker 5: nuclear market and as noted those trends are favorable. But on the new build side we continue to see significant activity in terms of the pipeline of projects that we're engaged with and we expect to see a broad-based acceleration in utility scale developments continuing over the next decade or more.
Speaker 5: and government departments. We have noted that in general with government contracted business that post-COVID order cycle times have lengthened. We continue to remain bullish about our prospects to see significant order and take care.
Speaker 6: But to be clear, we've been very measured, very conservative about how we have projected that for the year. Yeah, the other thing, Andy, just to give you some context on nuclear power. If you take out some of our larger orders, so let's say above $5 million, we're on an AS reported basis, you're kind of mid teens.
Speaker 6: on the order growth. So if you adjust that for XX, FX, FX, FX, sorry. You know, we're kind of more in the 20% range. So I think the point is the underlying bit. There's some noise with some of the bigger orders throughout the year, but the underlying business is clearly continues to be healthy.
Speaker 8: Tellful guys, and then lastly, could you go over the, again, the margin headwinds in 23 for industrial and medical? Obviously, you're forecasting lower than averaging incrementals for 23. How much impact are the mixed issues in industrial expect to have on your business? And I think even if we exclude the interagantic headwinds, you aren't forecasting that sort of normalized 50 plus increment.
Speaker 6: like price cost, so price versus inflation to be neutral. So, you know, I think, you know, we're going to work super hard to to make sure that, you know, we get we do get some benefit there. But right now where we're sitting, we're saying price cost neutral.
Speaker 6: The other thing we're seeing in the first half is we have a bit of one of our businesses that will improve throughout the year. It's more about volume and just the product mix and it's really timing related. We have very good visibility into this business. It's just a little bit weaker in the first half than what we would.
Speaker 6: have liked and it's just about how the factors are going to be loaded through the year. So I think we have good confidence. And the other thing I would say Andy is, you know, we're almost 10% higher in back wall coverage this year versus where we said at this time last year. I think that gives us just a lot of confidence in the visibility we have.
Speaker 5: Yeah, and by that one brain says 10% higher means 10 points.
Speaker 5: essentially taking us up from mid 40s coverage into mid 50s. So it is a significant increase.
Speaker 5: essentially taking us up from mid 40s coverage in the mid 50s so it is a significant increase. Appreciate it, guys.
Speaker 2: Once again, to ask a question, please press star 1 on your turn of sound e-pad.
Speaker 2: All right, next question comes from Joe Ritchie, Lee Feldman, sex, please go ahead.
Speaker 9: Great, thank you. Good morning, everyone.
Speaker 10: Thank you.
Speaker 9: So maybe just tackling the visibility question for the guidance, the organic growth guide for the year. So typically like that block covers a 55% how does that compare to normal? And then if you kind of think about the swing factors then for for 2023 Tom.
Speaker 9: What do you think is kind of like the key swingback here to see like whether organic growth could maybe exceed the guidance that you've given for this year?
Speaker 5: Yes, so a couple of things, Joe. Firstly, as noted, I think our backlog coverage coming into 20-22 was about 10 points lower than we're sitting now. So an 8% increase standpoint that is a substantial increase overall in the NTM coverage.
Speaker 5: And a good news too is that if you look at the average order size, it's smaller and so the quality of the coverage generally is better. If you look at the guidance sensitivity, I think we have a page in the deck, I think it's page 11 that just kind of highlights some of the key issues and opportunities that we see out there and some upside potential drags.
Speaker 5: civil defense and military orders that are not currently reflected in the guide. You know, we've I think been very clear that our top focus is on operational execution this year, and we think we see some potential, you know, blue sky as it relates to cost reduction.
Speaker 5: efforts and improvements in our overall pricing here at 6th. And then finally, as Brian noted, the overall currency environment is a little bit more favorable for a CISU. On the downside, you know, the world continues to be a little bit of a volatile place. And so one of the key risks, obviously.
Speaker 5: is devolution and geopolitical dynamics. Secondly, the scent to which inflation worsens. You know, we saw a CPI print this morning that was a little bit worse than consensus, but on the other hand, reflecting a continued decline overall in inflation trends.
Speaker 5: If we do see any kind of unanticipated tightness in supply chain, changes to the macro picture, or further degradation in currency or interest rate, obviously all of those things could be game changers. But as noted and I think emphasized, we try to be very balanced.
Speaker 5: and measured in our forecast approach this year in order to accommodate these and do so with confidence.
Speaker 9: Yeah, that's super helpful. And I guess, you know, just thinking about the cadence for the year as well, maybe maybe this is a question for Brian . You know, I know that you guys are trying to be thoughtful about the guys. I just want to make sure that we get to seasonality as well. It seems like you've got some really nice visibility into the first half of the year.
Speaker 9: And so is the expectation then that the first half of the year you can see, you know, EBITDA growth, at least at the big point maybe towards the higher end of the range, the growth range to the year. So any commentary around that would be helpful.
Speaker 6: Yeah, I think Joe, what I said during my prepare remarks is we have a bit of a headwind on the margin and doctoral side in the first half because of some of the mixed issues that I noted. And then, you know, but we have good visibility and expect those, well, they will clear up.
Speaker 6: going into the third and fourth quarter. So I think, you know, the first quarter obviously is the easier couple on the medical side. So I expect, you know, I expect that to come to fruition. Yeah, I think the, the not sure I said at a great fourth quarter. So I expect kind of, you know, that to be, you know,
Speaker 6: pretty decent in the first half and pick up into the back half. I think margins, the margin cadence will be a little lighter than we would hope in the first half, but better, much better in the second half. And I think the visibility to both some of the cost out programs, some of the pricing.
Speaker 6: continuing to flow through the P&L our ability to get after the supply chain etc. Give us confidence there. And like I said, our back on coverage continues to be very, very good. But we have a bit of a mix headwind kind of in the first half that we just need to overcome.
Speaker 9: Got it. Brian , just to be clear on pricing. Are you guys expecting to be price cost positive this year?
Speaker 6: Neutral is what's in the guide. So that's upside if we can do a batter and we continue to be very aggressive in the market on pricing. But as we saw this year, it takes a bit of time to kind of flow into the P&L. I will just know one more time, Joe, for you.
Speaker 6: We did end the fourth quarter at 5%, which is what we had expected going back a couple quarters. So the team's executing well on the pricing. It's just take some time to flow through the P&L.
Speaker 9: Yeah, that makes sense. Last one for me, Tom, you mentioned an improving operating environment in industrial. He's elaborate on what you're seeing and how it's impacting your business. Sounds like supply chain has gotten at least modestly better. I just want to get some thoughts there.
Speaker 5: Yeah, so a few things, Sijou, firstly to your point, yes. Supply chain dynamics in our view are never going to be what they were pre-pandemic, but they certainly seem to be improving. And the number of, you know, kind of episodic issues that we have seems to be on the decline overall.
Speaker 5: But more broadly, if we look at the drivers of performance there, again, a lot of it is driven by the kind of order intake experience that we had last year in the health of the market segments that we're selling into. Our business model hasn't changed and if you look at the fall through at the
Speaker 5: about factory overhead costs in OPEX, then volumetric increases are going to be reflected in strong performance overall. So, really, it's a function of more than anything else, just executing well.
Speaker 5: I kind of refer to the fact that it's important to remember last year was our public debut and so it was very consuming to become a public company to deal with all of the related issues that we do. Again, in our debut year, but on top of that, given the fact,
Speaker 5: across the President of the Medical Group, it gives me a more normalized bandwidth to be able to support and assist and focus on execution across the entire enterprise. And I expect that that will have some beneficial impact on our operating performance for the year.
Speaker 10: Great to hear it.
Speaker 2: Our next question comes from pretty more of the CDS Securities. Please go ahead.
Speaker 4: Good morning guys, thanks for taking a couple questions. So maybe just back to price for a second. So price cost basically neutral. You're looking at 4% to 7% organic growth. So from our price volume standpoint.
Speaker 4: most of that growth is in price, is that fair?
Speaker 6: Yeah, it's just because of Alice.
Speaker 6: ramps in it's actually pretty balanced when you do the math out on price volume. So I think that's I think that's That's how we're thinking thinking about it
Speaker 1: Mo.
Speaker 10: Got it. Got it.
Speaker 4: Tom, you called out SMR here.
Speaker 6: Go ahead. Press it. There's a slide, I think it's 16, that actually shows you the range between, and how we split it between volume and price, you can see it's pretty balanced. We'll more volume on the high end of the range, balanced at the low end.
Speaker 4: Perfect, thank you.
Speaker 4: Call that SMR as a potential big opportunity. Just curious, from a sales cycle and development cycle perspective, is that meaningfully different than what you see on the traditional utility?
Speaker 5: It is in the sense that there are a lot of new players and there is a substantial amount of government funding that is coming into the space. And just to put it into context, why we are specifically excited about the SMR market, understand that firstly if you look at total installed nuclear capacity globally, today they are rough.
Speaker 5: mitan rationing profile for cold plants.
Speaker 5: There you have about 450 gigawatts of scheduled decommissionings over the next 15 years or so. That is the core target market for the SMR space. And candidly, I think as we've noted on prior calls, this is a market that's moving faster than previously.
Speaker 5: It had. There seems to be an acceleration of efforts, more tangible efforts, and as noted in the prepared remarks, we have book backlog on several of these projects. But the key right now, again, is the strategic engagement with the major sponsors here to work hard and try and get our industry-leading solutions.
Speaker 4: Spectre into these power plants. Got it. Very helpful. Mostly those stuff was covered. I will leave it there. I appreciate it guys.
Speaker 5: First, thank you.
Speaker 2: There are no further questions at this time.
Speaker 2: This concludes today's teleconference. You may disconnect your lines at the site. Thank you for your participation and have a nice day. Bye.
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