Q4 2023 Mirion Technologies Inc Earnings Call

Operator: Greetings and welcome. 4th Quarter and Full Year 2023 Earnings Calculations. At this time, all participants are on the list. A brief question and answer session will follow the formal presentation. Anyone should require an operator to press star zero on your television.

Greetings and welcome to median technology fourth quarter and full year 2023 earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session.

Following the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being at a contract. It is now my pleasure to introduce your host Alex Kathy Senior Vice President strategy and Investor Relations. Thank you Mr.

Operator: As a reminder, this conference is being held, and it is now my pleasure. Alex Gaddy, Senior Vice President, Strategy and Investor Relations. Thank you, Mr. Kaplowitz.

Kathy you may begin.

Alex Gaddy: Good morning, everyone, and thank you for joining Mirion's fourth quarter in full year 2020. As a reminder, the 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 fourth quarter ended December 31st, 2023. The comments made during this call will also include certain financial measures that were not prepared in accordance with generally accepted accounting principles.

Good morning, everyone and thank you for joining <unk> fourth quarter and full year 'twenty one.

Q3 earnings call.

<unk> the 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 millions other filings with the SEC quarterly.

Quarterly references within todays discussion are related to the fourth quarter ended December 31 2023 the.

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 this presentation accompanying the call today.

Alex Gaddy: 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. All earnings materials can be found on Mirion's IR website at ir.mirion.com. Joining me on the call today are Tom Logan, Chief Executive Officer, and Brian Shopper, Chief Financial Officer. Now, I will turn it over to our CEO, Tom Logan.

All earnings materials can be found on Marion's IR website at IR Dot Marion Dot com joining.

Joining me on the call today are Tom Bogan, Chief Executive Officer, and Brian shop for Chief Financial Officer.

Now I will turn it over to our CEO, Tom Logan, Tom. Thank you Alex and good morning, everyone. Thank you all for dialing in today and for your continued support of <unk>.

Tom Logan: Thank you, Alex, and good morning, everyone. Thank you all for dialing in today and for your continued support of... Mirion. To kick off my commentary today, first, I'd like to congratulate and thank my Mirion colleagues for helping to put together a great 2023. We delivered a record year for the company, and I'm proud of the progress we've made as a team while continuing to build a great business. Looking at the fourth quarter and the full year, there are a few things I'd like to start with.

Maryann to kick off my commentary today first of all I'd like to congratulate and thank my Maryann colleagues for helping to put together a great 2023 we delivered a record year for the company and I'm proud of the progress we've made as a team.

Continuing to build a great business.

Looking at the fourth quarter and the full year. There are a few things I'd like to start with first we closed the 2023 with record backlog generated by <unk>.

Tom Logan: First, we closed out 2023 with record backlog generated by fourth quarter organic order growth of 30 percent. This is our sixth consecutive quarter of backlog expansion, reflecting growth of 15 percent compared to year-end 2022. Our vertical markets are healthy, and I'm encouraged by our top-line coverage heading into 2024. Second, we delivered organic revenue growth of 5% in Q4, yielding $801 million of total company revenue for the year. The medical segment led the way with organic growth just under 10%. Adjusted EBITDA on the quarter was a record $61 million, contributing to a full year result of a record $181 million.

Fourth quarter organic order growth up 30%. This is our sixth consecutive quarter of backlog expansion, reflecting growth of 15% compared to year end 2022 our vertical markets are healthy and I'm encouraged by our topline coverage heading into 2024.

Second we delivered organic revenue growth of 5% in Q4, yielding $801 million of total company revenue for the year. The medical segment led the way with organic growth just under 10% adjusted EBITDA in the quarter was a record $61 million contributing to a full year result of a record $181 million.

Tom Logan: Third, we generated $62 million of adjusted free cash flow in the fourth quarter, resulting in net leverage finishing the year at 3.0 times EBITDA, beating expectations. I'm extremely proud of the team's execution against the cash and leverage targets we laid out early in 2023, and this performance bolsters our confidence and sustained momentum in this area in 2024. Finally, we have initiated financial guidance for 2024. For the full year, we are expecting organic revenue growth of 4% to 6%, adjusted EBITDA of $193 million to $203 million, and adjusted free cash flow of $65 million to $85 million. Moving on to Panel 4, I'd like to address 2023 orders performance and our end market conditions in greater detail. Beginning with the medical segment and specifically our radiation therapy business, we remain encouraged by the positive momentum we've generated in the European market by bolstering our sales and support capabilities in the region.

Third we generated $62 million of adjusted free cash flow in the fourth quarter, resulting in net leverage finishing the year at 3.0 times EBITDA, beating expectations I'm extremely proud of the team's execution against the cash and leverage targets. We laid out early in 2023 and this perf.

Farmers bolsters, our confidence in sustained momentum in this area in 2024 finally, we have initiated financial guidance for 'twenty 'twenty four for the full year, we're expecting organic revenue growth of 4% to 6% adjusted EBITDA of $193 million to $203 million and adjusted free cash flow of <unk>.

$65 million to $85 million moving onto panel four I'd like to address 2023 orders performance in our end market conditions in greater detail.

Beginning with the medical segment and specifically our radiation therapy business. We remain encouraged by the positive momentum we've generated in the European market by bolstering our sales and support capabilities in the region.

Tom Logan: In the U.S., our sales reps have reported some nominal improvements in overall market conditions, reversing some of the negative trends we saw through much of 2022 and 2023, triggered by widespread post-pandemic financial pressures in the U.S. healthcare system. Our digital and new product portfolios remain key areas of focus for growth, and we expect a strong 2024 in radiation therapy. Within occupational dosimetry, the business remains well-positioned as we commercialize the next generation of insta-dose technology this year. Core services and hardware demand remain well supported heading into the new year.

In the U S. Our sales reps have reported some nominal improvements in overall market conditions reversing some of the negative trends we saw through much of 'twenty, two and 2023 triggered by widespread post pandemic financial pressures in the U S health care system, our digital and new product portfolios remain key areas of focus for growth.

We expect a strong 'twenty 'twenty four and radiation therapy.

Occupational dosimetry the business remains well positioned as we commercialize the next generation of events to dose.

Technology this year core services and hardware demand remain well supported heading into the new year.

Tom Logan: Lastly, recent trends in the nuclear medicine market continue to support our belief that this segment will be a strong growth engine for us. Early results from the EC2 acquisition are encouraging, and the integration is proceeding on schedule. Our early experience confirms the view that EC2 will meaningfully improve Mirion's position to meet the growing demand stemming from Theranostic applications for cancer care. This revolution in nuclear medicine is enhancing the ability for physicians to more accurately image, diagnose, and treat cancer, yielding improved patient outcomes and reduced treatment costs.

Lastly, recent trends in the nuclear medicine market continue to support our belief that this segment will be a strong growth engine for us early results from the EC squared acquisition are encouraging and the integration is proceeding on pace. Our early experience confirms our view that D. C squared will meaningfully improve marion's position to meet the growing demand.

<unk> stemming from Cerro Gnostic applications for cancer care. This revolution in nuclear medicine is enhancing the ability for physicians to more accurately image diagnose and treat cancer, yielding improved patient outcomes and reduce treatment costs.

Tom Logan: EC2 accelerates our commitment to digitizing the medical portfolio, supporting higher levels of recurring revenue and expansion into adjacent niches within the nuclear medicine value chain. As a final note, our medical exposure, inclusive of its products being sold into medical channels, now constitutes 38% of total company revenue and 44% of total company EBITDA. Moving on to the technology segment, beginning with nuclear power.

C squared accelerates our commitment to digitizing the medical portfolio supporting higher levels of recurring revenue and expansion into adjacent niches within the nuclear medicine value chain.

As a final note our medical exposure inclusive of technologies products being sold into medical channels now constitutes 38% of total company revenue and 44% of total company EBITDA.

Moving onto the technologies segment, and beginning with nuclear power 20, twenty-three order growth was extremely robust supported by large orders. We reported in Q3. The installed base remains a strong driver and an important focal point of sustained and defensible growth for maryann going forward.

Tom Logan: 2023 order growth was extremely robust, supported by the large orders we reported in Q3. The installed base remains a strong driver and an important focal point of sustained and defensible growth for Mirion going forward. We are encouraged by the global pipeline of new build opportunities and expect to take advantage of the growing and accelerated commitment to utility-scale nuclear power. Popular and political support continues to improve, and we've seen governments across the globe declare nuclear power a green energy source, something we strongly believe in and support.

We are encouraged by the global pipeline of Newbuild opportunities and expect to take advantage of the growing and accelerated commitment to utility scale nuclear power.

Popular and political support continues to improve and we've seen governments across the globe declared nuclear power as a green energy source something we strongly believe in and support this is perhaps best exemplified by the commitment made at the U N C. O P 28 climate change conference to Triple net nuclear operating capacity.

Tom Logan: This is perhaps best exemplified by the commitment made at the UN COP28 Climate Change Conference to triple net nuclear operating capacity by the year 2050. Notwithstanding the extraordinary magnitude of this goal, this commitment underscores the positive overall momentum we are seeing across the globe. Moving on to the labs and research end markets, the dynamics are constructive. More than 60% of our business in this segment is driven by DOE funding, where we anticipate continued support. Workforce retention dynamics is tight within the national lab system, creating an opportunity for us to sell more value-added services.

<unk> by the year 2050, notwithstanding the extraordinary magnitude of this goal. This commitment underscores the positive overall momentum we're seeing across the globe.

Moving on to the labs and research and markets the dynamics are constructive.

More than 60% of our business in this segment is driven by D. O E funding, where we anticipate continued support workforce retention dynamics are tight within the national lab system, creating an opportunity for us to sell more value added services, we're seeing favorable growth in Asia, New Big science projects and an increased opt.

Tom Logan: We are seeing favorable growth in Asia, new big science projects, and an increased opportunity for crossover radiopharmaceutical capital equipment. In defense, momentum is supported by the booking of approximately $20 million in non-traditional defense orders in Europe in 2023. And in addition, we see a strong pipeline for the global military and defense markets in 2024. Before I pass the mic over to Brian, there are a few areas of focus that I'd like to highlight for 2024. First, we expect to release more than 40 new product introductions and enhancements this year.

<unk> and crossover radiopharmaceutical capital equipment.

In defence momentum is supported by the booking of approximately $20 million in non traditional defense orders in Europe and 2023 and in addition, we see a strong pipeline for the global military and defense markets in 'twenty 'twenty four.

Okay before I pass the mic over to Brian There are a few areas of focus that I'd like to highlight for 'twenty 'twenty four.

First we expect to release more than 40, new product introductions and enhancements. This year that represents a substantial increase over the 10, new product launches, we saw in 2020 three.

Tom Logan: That represents a substantial increase over the 10 new product launches we saw in 2023. This reflects our commitment to be the innovation leader in our space with an increasingly digital flavor. Second, as we exit a year of solid financial performance, we're keeping the pedal down, focusing on margin expansion and enhanced free cash flow conversion.

This reflects our commitment to be the innovation leader in our space with an increasingly digital flavor.

Second as we exit the year of solid financial performance, we're keeping the pedal down focusing on margin expansion and enhanced free cash flow conversion.

Tom Logan: As we've said in the past, our five-year goal is for 30% adjusted EBITDA margins for the enterprise. We're increasingly confident in our ability to deliver upon that goal within our planning horizon and expect to take a meaningful step forward in 2024. Finally, we are committed to capital efficiency coupled with smart, opportunistic M&A. The M&A pipeline is robust, and we will continue to evaluate opportunities on a highly selective

As we said in the past our five year goal is for 30% adjusted EBITDA margins for the enterprise, we are increasingly confident in our ability to deliver upon that goal within our planning horizon and expect to take a meaningful step forward in 2024.

Finally, we are committed to capital efficiency, coupled with smart opportunistic M&A. The M&A pipeline is robust and we will continue to evaluate opportunities on a highly selective basis 2023 was a big step forward, where we continue to be active in M&A, while reducing leverage from four four times at the start of the.

Brian Schauffer: 2023 was a big step forward where we continue to be active in M&A while reducing leverage from 4.4 times at the start of the year to 3.0 times at the end of 2023. With that, I'll now pass the call over to our Chief Financial Officer, Brian Schauffer.

Year to 3.0 times at the end of 'twenty to 'twenty three with that I'll now pass the call over to our Chief Financial Officer, Brian Shopper, Brian Thanks, Tom and good morning, everyone.

Brian Schauffer: Thanks, Tom, and good morning, everyone. To get my comments started, please turn your focus to slide 5 for a deeper look at our fourth quarter and full year results. For the fourth quarter, total company revenue grew by 5.7%, and adjusted EBITDA was up 8.2% compared to the same period last year. Fourth quarter revenue was $230.4 million, and organic growth was 5.3%. Adjusted EBITDA for the fourth quarter was $61 million, and adjusted EBITDA margins expanded by 60 basis points.

My comments started please turn your focus to slide five for a deeper look at our fourth quarter and full year results.

For the fourth quarter total company revenue grew by five 7% and adjusted EBITDA was up eight 2% compared to the same period last year.

Fourth quarter revenue was $234 million and organic growth was five 3% adjusted.

Adjusted EBITDA for the fourth quarter was $61 million and adjusted EBITDA margins expanded by 60 basis points. It is worth noting that we were comping, a 19% organic growth quarter from Q4 and 2022.

For the full year total company revenue was up 11, 6% and adjusted EBITDA grew 9.7% 2023 revenue was $800 9 million and organic growth was nine 3%.

Brian Schauffer: It is worth noting that we are copying a 19% organic growth quarter from Q4 2022. For the full year, total company revenue was up 11.6%, and adjusted EBITDA grew 9.7%. In 2023, revenue was $800.9 million, and organic growth was 9.3%; we delivered $180.7 million of adjusted EBITDA for 2023, with margins of 22.6%. As we've talked about all year, the net impact of acquiring SIS and divesting Biodex impacted margins by approximately 70 basis points. Moving along to take a closer look at segment performance, starting with medical on slide six. Beginning with fourth-quarter results, medical revenue grew 6.8% with organic growth of 9.6% and a net inorganic revenue impact of 3.2% from the Biodex divestiture.

We delivered $187 million of adjusted EBITDA for 2023 with margins of 22, 6%.

As we've talked about all year, the net impact of acquiring <unk> and divesting biotechs impacted margins by approximately 70 basis points.

Moving along to take a closer look at segment performance, starting with medical on slide six.

Beginning with fourth quarter results medical revenue grew six 8% with organic growth of nine 6% and a net inorganic revenue impact of three 2% from the biotechs divestiture. This was slightly offset by the EC squared acquisition, we closed in November.

Our T QA business led the segment in Q4 on the back of continued strong interest.

National sales momentum through our European sales and service Center. This business was comping, 24% organic growth from Q4 2022.

Brian Schauffer: This was slightly offset by the EC squared acquisition it closed in November. The RTQA business led the segment in Q4 on the back of continued strong international sales momentum through our European sales and service center. This business was posting 24% organic growth from Q4 2022. Medical adjusted EVADOM margin performance was excellent in the fourth quarter, expanding by over 500 basis points to 38.5%.

Medical adjusted EBITDA margin performance was excellent in the fourth quarter expanding by over 500 basis points to 38, 5%.

Performance was supported by strong operating leverage product mix and solid execution across the segment. In addition to positive benefits from the biotech divestiture and the E C squared acquisition, which were both accretive to margins.

As a reminder, Q1 2024 will be the last quarter of a benefit from exiting the biotechs rehabilitation business.

Brian Schauffer: Performance was supported by strong operating leverage, product mix, and solid execution across the segment, in addition to positive benefits from the Biodex divestiture and the EC squared acquisition, which were both accretive to margin. As a reminder, Q1 2024 will be the last quarter of benefits from exiting the BionX Rehabilitation business. For the full year, medical revenue was up 4.7%, with organic growth of 8.1%, being partially offset by the divestiture of Biodex.

For the full year medical revenue was up four 7% with organic growth of eight 1% being partially offset by the biotech divestiture.

Our Archie QA and Phantoms businesses were the strongest performers in the year.

This brings our two year stacked organic growth in this segment to over 23% and nomadic 20.

23% medical adjusted EBITDA margins expanded 220 basis points to 34, 2%.

The biotech divestiture was a positive tailwind for margins delivering approximately 150 basis points of support for the full year the medical team executed well across the board and we certainly look forward to carrying this momentum into 2024.

Brian Schauffer: Our RTQA and Phantoms businesses were the strongest performers in the year. This brings our two-year stacked organic growth in the segment to over 23% in the meta.

Brian Schauffer: Medical-adjusted EBITDA margins expanded by 220 basis points to 34.2%. The Biodex divestiture was a positive tailwind for margins, delivering approximately 150 basis points of support for the full year. The medical team executed well across the board, and we certainly look forward to carrying this momentum into 2024. Now, moving along to the technology segment on slide seven. For the fourth quarter, technology's revenue grew by 5.1 percent, with organic growth of 3 percent for the quarter.

Now moving along to the technology segment on slide <unk>.

For the fourth quarter technologies revenue grew by five 1% with organic growth of 3% for the quarter, our international business in France in Asia, mainly Korea led the way. This is a strong result after an outstanding.

I think fourth quarter last year, where the team delivered approximately 17% organic growth technologies.

Technologies, adjusted EBITDA margin contracted by 70 basis points versus the fourth quarter last year to 29, 5% margin degradation was driven again by our French business, which experienced a number of challenges in the fourth quarter, including product mix headwinds and a broader operational challenges I will get into more detail here.

Brian Schauffer: Our international business in France and Asia, mainly Korea, led the way. This is a strong result after an outstanding fourth quarter last year, where the team delivered approximately 17% organic growth. However, the Technologies adjusted EBITDA margin contracted by 70 basis points versus the fourth quarter last year to 29.5%.

Shortly on the corrective actions, we've put in place for.

For the full year technologies revenue grew by 15, 8% organic growth contributed 10, 1% with inorganic growth, adding four 6%.

Growth was supported by broad based top line strength across the segment as Tom noted, we continue to see robust order activities within our technology end markets.

Brian Schauffer: Margin degradation was driven again by our French business, which experienced a number of challenges in the fourth quarter, including product mix headwinds and a broader operational challenge. I will get into more detail here shortly on the corrective actions we've put in place. For the full year, revenue grew by 15.8%. Organic growth contributed 10.1%, with inorganic growth adding 4.6%. Growth was supported by broad-based top-line strength across the segment. As Tom noted, we continue to see robust order activities within our technology and market. However, our four-year adjusted EBITDA margin in technologies contracted by 160 basis points to 26.2 percent. The SIS acquisition negatively impacted adjusted EBITDA margins by approximately 120 basis points.

Our full year adjusted EBITDA margin in technologies contracted by 160 basis points to 26, 2%.

SaaS acquisition negatively impacted adjusted EBITDA margins by approximately 120 basis points as.

As we turn the page to 2024 technologies margin expansion is a central area of focus for us with the largest areas of opportunity being in our French business and advancing the integration of the <unk> acquisition.

Tom and I have been working with the team in Europe and diving deeply into how we're going to significantly improve operational execution in the region. In 2024, we have already taken corrective actions and believe we have the right people and plans in place to deliver targeted improvements. However, I recognize this is a journey that will take time, but I do.

We expect to see improvement in the first half of the year, Tom and I will be spending more time with the team to ensure execution and monitor progress.

Brian Schauffer: As we turn the page to 2024, technology's margin expansion is a central area of focus for us, with the largest areas of opportunity being in our French business in advancing the integration of the SIS acquisition. Tom and I have been working with the team in Europe and diving deeply into how we're going to significantly improve operational execution in the region in 2024. We've already taken corrective actions and believe we have the right people and plans in place to deliver targeted improvement.

Now, let's turn the page to slide eight for cash flow and leverage.

Fourth quarter adjusted free cash flow was.

$61 5 million, bringing full year adjusted free cash flow to $73 8 million networking capital generated approximately $27 million of cash in the quarter and resulted in a positive contribution to cash flow for the full year.

This result is another great step in the journey and supports our momentum heading into 2024.

Working capital management, specifically inventory will continue to be an area of focus for us as we aim to improve inventory efficiency management of payables and accelerated collections.

Brian Schauffer: However, I recognize this is a journey that will take time, but I do expect to see improvement in the first half of the year. Tom and I will be spending more time with the team to ensure execution and monitor progress. Now let's turn the page to slide eight for cash flow and leverage. Fourth quarter adjusted free cash flow was $61.5 million, bringing full year adjusted free cash flow to $73.8 million. Networking capital generated approximately $27 million of cash in the quarter and resulted in a positive contribution to cash flow for the full year.

Looking at our progression against our leverage commitment, we executed well and brought our net leverage ratio down to 3.0 times as of December 31, beating.

Beating our target for the year.

As Tom mentioned, we will continue to take a very measured approach to capital allocation and prioritize driving margin expansion and cash flow conversion in 2024.

Absent M&A.

And at the midpoint of guidance.

Would result in ending net leverage of approximately two five times by the end of 2024.

As usual, our M&A strategy will reflect a highly selective filtering and evaluation process with clear investment criteria aligned to our strategy and vision.

Brian Schauffer: This result is another great step in the journey and supports our momentum heading into 2024. Networking capital management, specifically inventory, will continue to be an area of focus for us as we aim to improve inventory efficiency, management of payables, and accelerate collection. Looking at our progression against our leverage commitment, we executed well and brought our net leverage ratio down to 3.0 times as of December 31st, beating our target for the year. As Tom mentioned, we will continue to take a very measured approach to capital allocation and prioritize driving margin expansion and cash flow conversion in 2024, which absent M&A, and At The Midpoint of Guidance, would result in ending that leverage of approximately 2.5 times by the end of 2024. As usual, our M&A strategy will reflect a highly selective filtering and evaluation process with clear investment criteria aligned to our strategy and vision.

Finally, let's turn over to slide nine to look at our financial guidance for 2024.

We are projecting organic growth of 46% supported by mid single organic growth from both segments.

Revenue growth is expected to be 5% to 7% with FX expected to having to have minimal impact in the EC squared acquisition.

<unk> to provide one point of inorganic topline growth.

I am anticipating a more balanced quarterly phasing for the year from an organic growth standpoint.

Our adjusted EBITDA range for 2024 is targeted between 193 and $203 million with margins between 23 and 24%.

Okay.

Price cost initiatives inclusive of the heavier focus on material and indirect spend higher volumes and product mix are all anticipated to be positive drivers for adjusted EBITDA margin expansion.

It is worth noting that our guidance also includes an increased investment to improve our effective tax rate we.

Brian Schauffer: Finally, let's turn over to slide 9 to look at our financial guidance for 2024. We are projecting organic growth of 4-6%, supported by mid-single digit organic growth from both segments. Revenue growth is expected to be 5% to 7%, with FX expected to have a minimal impact, and the EC Squared acquisition projected to provide one point of inorganic top line growth. I am anticipating a more balanced quarterly phasing for the year from an organic growth standpoint. Our adjusted EBITDA range for 2024 is targeted between $193 and $203 million, with margins between 23 and 24%.

We expect these investments will provide some benefit in 2024 with continued investment and progress also expected in 2025.

We will update you in the coming quarters as progress is made and we have more color to provide on impact and timing expectations.

Adjusted EPS is expected between 37% and 42.

While we project adjusted free cash flow in the range of $65 million to $85 million from a cash flow perspective, 'twenty 'twenty four will likely mirror 2020, three's cadence with more contribution in the second half. However, unlike 2023, we are expecting to be cash flow positive in the first half of the year.

Other modeling considerations for 2024 include approximately 200 million class a shares outstanding and effective tax rate between 26 and 28%.

Brian Schauffer: Price-cost initiatives inclusive of a heavier focus on material and indirect spend, higher volumes of product mix, and higher rates of margin expansion are all anticipated to be positive drivers for adjusted EBIT. It is worth noting that our guidance also includes an increased investment to improve our effective tax rate. We expect these investments will provide some benefit in 2024, with continued investment and progress also expected in 2025. We will update you in the coming quarters as progress is made, and we have more color to provide on impact and timing expectations. Adjusted EPS is expected between $0.37 and $0.42, while we project adjusted free cash flow in the range of $65 to $85 million.

Non cash expense of approximately $9 million.

Mainly made up of initiatives around ERP.

And our U S dollar to Euro exchange rate of 1.08.

In closing, we had a really solid year in 2023, and certainly a strong finish in the fourth quarter for 24 will be highly focused on delivering margin expansion leveraging positive momentum in cash flow conversion and continuing to be good stewards of capital with that I'll pass things back to Tom for his closing remarks, Brian. Thanks, before we open up there.

The floor for your questions. A couple of key themes are worth repeating we think about 2024 first our topline growth is visible supported by robust order growth healthy markets and a record backlog second the team is aligned and focused on our top strategic priorities, which include driving margin expansion improving.

Brian Schauffer: From a cash flow perspective, 2024 will likely mirror 2023's cadence with more contribution in the second half. However, unlike 2023, we are expecting to be cash flow positive in the first half of the year. Other modeling considerations for 2024 include approximately 200 million Class A shares outstanding, an effective tax rate between 26 and 28 percent, non-ops cash expense of approximately $9 million, mainly made up of IT initiatives around ERP, and a U.S. dollar to euro exchange rate of 1.08.

Cash flow conversion accelerating digitization efforts and enhancing our diverse portfolio of products services and software. Finally, we have confidence in our 2024 guidance initiated today 2023 was a good year and we are building on that momentum in every corner of the enterprise I'll now pass it over to <unk>.

Alex getting to open things up for Q&A.

Thank you Tom that concludes our formal comments. This morning, operator, let's please go ahead and start the Q&A session.

Thank you.

Now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Information tone will indicate your line is in the question queue.

I stopped to if you would like to remove your questions from the queue for participants using speaker equipment. It may.

Brian Schauffer: In closing, we had a really solid year in 2023 and certainly a strong finish in the fourth quarter. For 2024, we will be highly focused on delivering margin expansion, leveraging positive momentum and cash flow conversion, and continuing to be good stewards of capital. With that, I'll pass things back to Tom for his closing remarks. Brian, thanks.

To be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

The first question comes from the line of Joe Ritchie with Goldman Sachs Asset management. Please go ahead.

Thanks, Good morning, guys and nice nice end to the year.

Thanks, Joe Good morning, Joe.

Hey, Tom I think I'd like to start on the new product introductions.

Tom Logan: Before we open up the floor for your questions, a couple of key themes are worth repeating as we think about 2024. First, our top line growth is visible, supported by robust order growth, healthy markets, and a record backlog. Second, the team is aligned and focused on our top strategic priorities, which include driving margin expansion, improving cash flow conversion, accelerating digitization efforts, and enhancing our diverse portfolio of products, services, and software. Finally, we have confidence in our 2024 guidance initiated today.

Interesting increasing that for all.

In the coming year I'd love to hear your thoughts on how you think about payback associated with those with those new products and ultimately how that translates into better revenue growth for the company going forward.

Sure Great question, Joe the starting point is that.

Comment that we've made with some frequency historically is that we pride ourselves on being a what we believe to be the innovation leader in our space in aggregate. Our view is that we spend more money on engineering.

Broadly speaking R&D, specifically other than the people we compete against and ultimately the measure of that is the cadence of new product offerings. So we're putting out into the end of the marketplace. Overall the screening process that we follow as it relates to innovation, there's really a foundational component.

Alex Gaddy: 2023 was a good year, and we're building on that momentum in every corner of the enterprise. I'll now pass it over to Alex Gaddy to open things up for Q&A. Thank you, Tom.

Operator: That concludes our formal comments this morning. Operators, let's please go ahead and start the Q&A session. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone number. A confirmation tone will indicate your line is in the queue. You may press start.

Of our business system effectively follows a broader capital allocation process, where we do deep dives annually on on market segments that are of great interest to us that in term.

Thrives the relative R&D commitment are allocated to various corners of the business and that ultimately is what results in and new product offerings.

Operator: We would like to remove your questions from the..., participants using speaker, may be necessary, handset before pressing the start button. One moment, please, while we poll for questions. The first question comes from the line of Joe Ritchie, Goldman Sachs Asset Management. Thanks, good morning guys, and nice end to the year. Thanks, Joe. Morning, Kip.

Our expectation generally speaking.

When you look at the flavor of a of what is being introduced the nature of our focus is we're in the midst of a you know.

A gradual but systematic digital conversion within our business and of course. The hoped for result, there is we see a concurrent change in revenue composition, that's driving us more towards a higher degree of higher component of predictable visible recurring revenue versus.

Joe Ritchie: Hey, Tom, I think I'd like to start with the new product introductions. That's really interesting, increasing that fourfold in the coming year. I'd love to hear your thoughts on how you think about payback associated with those new products, and ultimately, how that translates into better revenue growth for the company going forward. Sure. Great question, Joe.

One off capital equipment sales overall, so that is the biggest impact overall, but to be clear.

Tom Logan: The starting point is that, historically, a comment that we've made with some frequency is that we pride ourselves on being what we believe to be the innovation leader in our space. In aggregate, our view is that we spend more money on engineering, broadly speaking, and R&D specifically than the people we compete against. And ultimately, the measure of that is the cadence of new product offerings that we're putting out into the marketplace overall. The screening process that we follow as it relates to innovation is really a foundational component of our business system and effectively follows a broader capital allocation process where we do deep dives annually on market segments that are of great interest to us.

<unk> is one of the major factors that historically over over the last two decades has allowed us to outgrow our markets.

Got it that's super helpful and maybe maybe the follow up to that is is it concentrated than more in like the medical or technology segment or that that's pretty well spread throughout.

No. It is actually remarkably symmetrical across the the the operating groups and and again just kind of reflective of the key priorities. So you've heard us articulate over the years.

Okay. It makes a lot of things can you guys, maybe elaborate on what's happening in France.

Tom Logan: That, in turn, drives the relative R&D commitment allocated to various corners of the business, and that ultimately is what results in new product offerings. Our expectation, generally speaking, when you look at the flavor of what is being introduced, the nature of our focus is that we're in the midst of a gradual but systematic digital conversion within our business. And, of course, the hoped-for result there is that we see a concurrent change in revenue composition that's driving us more toward a higher degree, a higher component of predictable, visible recurring revenue versus one-off capital equipment sales overall. So that is the biggest impact overall. But to be clear, innovation is one of the major factors that, historically, over the last two decades, has allowed us to outgrow our market. Got it. That's super helpful.

And within S. I asked and you referenced that.

Feel confident about being able to get the margins back you mentioned that it impacted your margins by about 120 basis points.

For the entire year, so just any color around.

Like the margin expansion opportunity within technologies, particularly associated with the issues that you're currently dealing with sure yes.

Yeah, Joe So I don't think.

I want to go too deeply down that whole, but what I will say is that it's a combination of factors. One is there's a bit of mix in there.

And understand that in the French market in particular.

As the you know the dominant customer in in country EDF has gone through the struggles that has had some attendant impact on.

Joe Ritchie: And maybe maybe the follow-up to that is, is it concentrated more in the medical or technology segment? Or are the bets pretty well spread throughout? No, it is actually remarkably symmetrical across the operating groups and again, just kind of reflective of the key priorities that you've heard us articulate over the years. Okay, that makes a lot of sense. Can you guys maybe elaborate on what's happening in France and within SIS?

Some of our execution capabilities, and just predictability of that business, but.

But we do see that improving and we see it improving I think measurably in the year ahead. In addition, there have been a series of kind of one off events.

That are nonrecurring in nature that we don't expect to have any bearing on our corrective action pathway as we move ahead, but maybe the most important point.

Brian articulated us well you.

Joe Ritchie: And you mentioned that you feel confident about being able to get the margins back. So just any color around, you know, like the margin expansion opportunity within technologies, particularly associated with the issues that you're currently dealing with? Sure. I don't think we want to go too deeply down that hole, but what I will say is that it's a combination of factors.

We've been very actively indirectly involved in.

In the region are we've made some some organizational changes supporting our near term objectives and a number of process changes. We believe we have the right people and the right approach to to get this thing back on the rails very very confident that we're going to do that in 'twenty to 'twenty four.

Thank God.

A couple of things right why that margin contraction on our end was planned right because we comped seven months without having it and when we bought this business. We knew it was a little bit of a fixer upper that we needed to do.

Tom Logan: One is there's a bit of mix in there, and understand that in the French market, in particular, as the dominant customer in-country, EDF, has gone through struggles. That has had some attendant impact on some of our execution capabilities and just predictability of that business, but we do see that improving, and we see it improving, I think, measurably, in the year ahead. In addition, there have been a series of one-off events that are non-recurring in nature that we don't expect to have any bearing on our corrective action pathway as we move ahead.

We've made tremendous kind of quarter on quarter progress all year in that business and I think you'll continue to see.

You'll continue to see that be a little bit of a tailwind for us in 24 on the margin expansion side.

Great and one more question before I pass it onto somebody else I have to ask about orders.

It was a great year for you guys over 20% growth in orders another another really robust quarter last quarter, you guys gave us some good color just around the two big orders that you, but I'm curious.

Tom Logan: But maybe the most important point, and I think Brian articulated this well, we've been very actively and directly involved in the region. We've made some organizational changes supporting our near-term objectives, and a number of process changes. We believe we have the right people and the right approach to get this thing back on the rails. Very, very confident that we're going to do that in 2024.

Two things number one just just more color around what you saw in your business in the fourth quarter and then ultimately.

How does that ultimately translate into revenue growth right, because you put up over 20% order growth, but expectation for mid single digit growth this year organically.

Just any color around that either the longer cycle nature of some of the orders that you're booking.

Brian Schauffer: I think on SIS, a couple of things. One, that margin contraction on our end was planned because we competed for seven months without having it, and when we bought this business, we knew it was a little bit of a fixer-upper that we needed to do. I think we've made tremendous quarter-on-quarter progress all year in that business, and I think you'll continue to see that be a little bit of a tailwind for us in 2024 on the margin expansion side. Great One more question before I pass it on to somebody else. I have to ask you about the orders.

Sure a couple of things right first off we did book another larger nuclear power order about $20 $20 million.

In the corner into in Asia.

Mainly Korea.

Hum.

So there is that I think the thing to think about here is you know this year was a yes.

Specifically at nuclear power candidly, just a very good year and I think we've commented that that isn't we don't think this is a completely one time if that we think will continue to see good momentum in this business.

Joe Ritchie: It was a great year for you guys, over 20% growth in orders. Another really robust quarter. You know, last quarter, you guys gave us some good color just around the two big orders that you booked. I'm curious about two things.

But if you look at our nuclear power orders this year right about a third of those orders traded in 23 about a third of them trade in 'twenty four and about a third of them trade kind of 24 and beyond and those are those are a little bit round numbers, but the point is it is it is longer cycle in nature.

And I think it just continues to secure kind of the longer term visibility of our revenue.

Joe Ritchie: Number one, just more color around what you saw in your business in the fourth quarter. And then ultimately, you know, how does that ultimately translate into revenue growth, right? Because, you know, you put up over 20% order growth, but we're expecting mid-single-digit growth this year organically. So, any color around the, you know, the longer cycle nature of some of the orders that you're booking.

Al beyond just just the next couple of quarters.

Makes a lot of sense great guys. Thank you.

Thanks, Joe.

Thank you.

Next question comes from the line of Chris Moore with CJS Securities. Please go ahead.

Hey, good morning, guys. Thanks for taking a few moderate growth.

Brian Schauffer: Sure. A couple of things, right? First off, we did book another larger nuclear power order, about $20 million, in the quarter for Asia, mainly Korea. So there's that.

Good morning, maybe I'll just follow up on one of Tom's prepared comments he talked about the commitments at the C. O P 28 climate conference. So I guess the question is what would it take to achieve tripling in net nuclear power output and what does this mean for for Marriott and over the longer term.

Brian Schauffer: I think the thing to think about here is, you know, this year was a... specifically in nuclear power, candidly, just a very good year. And I think we've commented that, you know, that isn't, we don't think this is a completely one-time event. We think we'll continue to see good momentum in this business. But if you look at our nuclear power orders this year, right, about a third of those orders traded in 23, about a third of them traded in 24, and about a third of them traded kind of 24 and beyond. And those are, those are a little bit round numbers. But the point is it is a longer cycle in nature.

Yeah, so firstly as it relates to what it would take I mean, it really is an extraordinary.

Statement of intent coming out of this this climate change conference Firstly I think it's notable because traditionally.

Hum.

This constituency overall is not really embraced nuclear power to the extent that we feel they they should have.

It's great to see such a clear official policy statement coming out of this group overall, but in terms of the magnitude of what's being called for a truly is extraordinary today. The if you look at total installed nuclear capacity globally, it's roughly a 400 gigawatts or so of total <unk>.

Brian Schauffer: And, you know, I think it just continues to secure kind of the longer-term visibility of our revenue out beyond, you know, just the next couple of quarters. Makes a lot of sense. Great, guys. Thank you. Thanks, y'all.

Power a tripling of that capacity between 2050, if you were just to do the mental math firstly. It takes you up to a level of 1.2.

Joe Ritchie: Thank you. The next question comes from the line of Chris Moore with CJ Essek. Hey, good morning guys. Thanks for taking a few.

Chris Moore: Good morning. Maybe I'll just follow up on one of Tom's prepared comments. So I talked about the commitments at the COP28 Climate Conference. So I guess the question is, you know, what would it take to achieve tripling, you know, in net nuclear power output? And what does this mean for Mirion over the longer term? Yes, so firstly, as it relates to what it would take, I mean, it really is an extraordinary statement of intent coming out of this climate change conference. Firstly, I think it's notable because, traditionally, you know, this constituency overall has not really embraced nuclear power to the extent that, you know, we feel they should have.

Terawatts of of total power and that's in the face of a decommissioning profile.

That will be accelerating so of the existing 400 gigawatts of installed capacity.

Probably close to half of that is scheduled for decommissioning between now and.

In 2050, notwithstanding life extensions. So the number in aggregate is enormous and effectively what it would take for the world to do that if the solution came purely through utility scale nuclear power in and not through the more likely balance or a combination of utility scale on small mark.

Tom Logan: And it's great to see, you know, such a clear official policy statement coming out of this group overall. But in terms of the magnitude of what's being called for, it truly is extraordinary. Today, if you look at total installed nuclear capacity globally, it's roughly 400 gigawatts or so of total nuclear power, a tripling of that capacity by 2050. If you're just doing the mental math, firstly, it takes you up to a level of one point two terawatts of total power.

<unk> reactors, but just too.

Answer it more more easily if it came purely through utility scale nuclear power that essentially would imply a build out right or annual commencement rate of new nuclear projects of about 40 per year, beginning in 2030, recognizing that between now and the end of the <unk>.

Okay, and essentially everything that will happen is already in the pipeline and so the acceleration of activity in the nuclear markets would be extraordinary that's essentially a quadrupling of the of the cadence that we've seen over a sustained period of time are the implications for us. If this were to happen or even if it's oh.

Tom Logan: And that's in the face of a decommissioning profile that will be accelerating. So of the existing 400 gigawatts of installed capacity, you know, probably close to half of that is scheduled for decommissioning between now and 2050, notwithstanding life extensions. So the number in aggregate is enormous. And effectively, what it would take for the world to do that if the solution came purely through utility-scale nuclear power and not through the more likely balance or combination of utility-scale and small modular reactors.

Really an approximation of what might happen, obviously are very positive given the fact that our.

You know, we we participate broadly with all of the major nuclear sponsors in the world.

And we.

Notwithstanding the fact that the install base is is the largest revenue source for us coming out of nuclear power.

Tom Logan: But just to answer it more easily, if it came purely through utility-scale nuclear power, that essentially would imply a build-out rate or annual commencement rate of new nuclear projects of about 40 per year beginning in 2030, recognizing that between now and the end of the decade, essentially everything that will happen is already in the pipeline. And so the acceleration of activity in the nuclear markets would be extraordinary. That's essentially a quadrupling of the pace that we've seen over a sustained period of time. The implications for us if this were to happen, or even if it's only an approximation of what might happen, are obviously very positive given the fact that we participate broadly with all of the major nuclear sponsors in the world.

The front end leverage are the front end kicker that we we enjoy from Newbuild activity is significant so.

Overall again very positive statement and I think it's simply reflective of just how robust the political and popular support is for nuclear power today, and how that's likely to have staying power.

Wow.

Interesting, maybe staying with nuclear but switching over to medicine. So you talked about you know thorough gnostic developments within cancer care.

Can you talk maybe what the momentum in that space you know it means to maryann going forward.

Yeah, it's a it's a it's.

An area that we're hyper focused on Chris the.

You know the the general view is that the nuclear medicine market overall on specifically the so-called thorough gnostic.

Tom Logan: And notwithstanding the fact that the installed base is the largest revenue source for us coming out of nuclear power, the front-end leverage, the front-end kicker that we enjoy from new build activity, is significant. So, overall, again, a very positive statement. And I think it's simply reflective of just how robust the political and popular support is for nuclear power today and how that's likely to have staying power. Wow.

Market.

We will grow at a tremendous cleanup I think GE announced a week or so ago that are they expected.

A full.

Four and a half times increase in the overall market opportunity and this was.

And a specific discussion about our recent acquisition they had done our.

Chris Moore: Very interesting, maybe staying with nuclear but switching over to medicine. So you talked about, you know, theranostic developments within cancer care. Can you talk, maybe, about what the momentum in that space means for Mirion going forward?

Our view is that again, just given the remarkable dynamics that we're seeing in this market and the clinical efficacy and cost a cost dynamics associated with turn off stick applications, though we certainly believe this will be.

Tom Logan: Yeah, it's a it's an area that we're hyper focused on Chris, the general view is that the nuclear medicine market overall and specifically will grow at a tremendous clip, four and a half times the overall market opportunity. This was in a specific discussion about a recent acquisition they had done. Our view is that, again, just given the remarkable dynamics that we're seeing in this market and the clinical efficacy and cost dynamics associated with Theranostic applications, we certainly believe this will be, inarguably, the fastest growing market segment that we plan for overall. We've been very focused on building out our capabilities in this market, firstly through the acquisition of Capentech, followed by the acquisition of Biodex, and now, most recently, with the acquisition of EC2. And perhaps the biggest benefit of EC2 is that we're beginning to pivot the business, from an almost entirely capital equipment business where the biggest demand driver was new clinic growth rather than procedural volumetric growth. And with the acquisition of EC Squared, it gives us the opportunity, firstly, to benefit more richly from volumetric growth and procedures.

In arguably the fastest growing market segments that we are we plan overall, we've been very focused on building out our capabilities in this market firstly.

Through the acquisition of cap intact following that the acquisition of Biotechs and now most recently with the acquisition of EZ squared in the perhaps the biggest benefit of V. C. Squared is that we're beginning to pivot the business from a almost entirely a capital equipment business, where the biggest demand driver was new.

New clinic growth, rather than procedural volumetric growth and with the acquisition of E. C. Squared it gives us the opportunity firstly to benefit more rationally from from again volumetric growth in procedures, but secondly, it gives us the opportunity to really kind of changed the nature of our go to market strategy.

With our with our capital equipment by buying the are the are the largest player domestically and the nuclear medicine workflow software market again, it gives us the ability to effectively drive this business toward.

More of a software business supported by capital equipment.

Tom Logan: But secondly, it gives us the opportunity to really kind of change the nature of our go-to-market strategy with our capital equipment. By buying the largest player domestically in the nuclear medicine workflow software market, again, it gives us the ability to effectively drive this business toward more of a software business supported by capital equipment rather than the converse. And so, you know, we continue to be focused on that and that broad-based shift, again, toward kind of.., floating our boat on the tide of volumetric growth rather than clinic growth. Got it, very helpful. Maybe just last one from me on free cash flow guidance, to about 75 million. That's, you know, roughly 40% of the conversion EBITDA.

Other than the converse and and so we continue to be focused on that and that broad based shift again toward kind of floating our boat on the the tired of volumetric growth rather than clinic growth.

Got it very helpful. Maybe just last one for me on free cash flow guidance midpoint.

The midpoint is about $75 million.

That's roughly 40% conversion from EBITDA.

Longer term are you guys is that 50% target so what what you're looking at.

I mean look that is that is definitely where we need to get to.

As EBITDA grows and we continue to.

We continue to.

Work hard on networking capital.

Our interest rate kind of as a percentage goes down over time as well et cetera.

Brian Schauffer: Longer term, are you guys still looking at the 50% target? I mean, look, that is definitely where we need to get to, you know, as EBITDA grows and we continue to, you know, work hard on networking capital. Our interest rate, kind of, as a percentage, goes down over time as well, et cetera.

So yes, I think 50% is where we are where we need to get to I think we were very pleased with the 41, 42% conversion this year, we like the.

We like the 40%.

Next year at the midpoint and then I think the only other comment I made some comments in my in my prepared remarks, I mean, one of the things we're working on in 'twenty, four part and twenty-five candidly it won't.

Brian Schauffer: So yes, I think 50% is where we need to get to. I think we're very pleased with the 41, 42% conversion this year. We like the We like the 40% next year at the midpoint. And then I think the only other comment. I made some comments in my prepared remarks. I mean, one of the things we're working on in 24 PARs and in 25, candidly, it will go into 25, is taxes. And how do we bring our cash tax number kind of more in line with the peer set?

Go into 'twenty, five as taxes, and how do we bring our cash tax number kind of more in line to the peer set.

There's a lot of moving pieces here that.

That were.

That we're looking at and then obviously on the tax same theme on the tax we're watching the legislation in Congress as well that that would be helpful to us. So I guess summary lot of moving pieces, we like leveraging our scale on the conversion side for wine.

And two we got improvement projects on both the net working capital side, continuing in 'twenty, four and we're kicking off a lot of work on tax as well so.

Brian Schauffer: So there's, there are a lot of moving pieces here that we're looking at. And then obviously on the tax, same theme on the tax, we're watching the legislation in Congress as well. That would be helpful to us.

Look I like that 50% number.

Is it it's obviously, we're not guiding to that in 'twenty four but I think as you look out you can.

Chris Moore: So I guess the summary, a lot of moving pieces, you know, we like leveraging our scale on the conversion side for one and two, we've got improvement projects on both the network and capital sides continuing in 24 and we're kicking off a lot of work on tax as well. So look, I like that 50% number. It's obviously, we're not guiding to that in 24, but I think as you look out, you can see us, you know, increasingly getting, you can get increasingly confident that we'll get there. Terrific; I appreciate that. I will jump back in line.

You can see us increasingly get you can get confident.

Increasingly that we'll get there.

Terrific I appreciate that I'll jump back in line. Thanks, guys.

Thank you next question comes from the line of Black Bison Lipski with Citigroup. Please go ahead.

Hey, guys. Good morning, Thanks for taking my call.

Hey, good morning, Glenn.

Okay.

So maybe just to start off following up on Chris's question there on cash.

I mean, no cash has been a big focus for maryann.

So can you just talk about a little what's changed over the course of 'twenty three to support.

Chris Moore: Thank you. The next question comes from the line of Vlad Vysotsky. Hey guys, good morning for taking my call. Hey, Blunt. Morning, Blunt.

Moving to cash flow and then how youre thinking about.

Your level of visibility to working capital as a source of cash for 'twenty four.

Look I think what's changed is first off I think the macro.

Vlad Vysotsky: So maybe just to start off, you know, following up on Chris's question there on Cache, you know, obviously we know Cache has been a big focus for Mirion. So can you just talk about a little what's changed over the course of 23 to support, you know, improving cash flow, and then how you're thinking about your level of visibility to working capital as a source of cash for 24. Look, I think what's changed is first off, I think the macro, you know, coming out of 22, is improved.

Coming out of 'twenty two.

Is improved I think as you heard US talk I think it was in two Q, whereas on the <unk> call, but as into Q. So may.

<unk>.

Heavy focus we're putting on this.

And the back end of 'twenty three.

Our discipline.

For sure has changed the amount of resources, we've specifically dedicated to this right we talked about our performance excellence group coming in and helping.

Brian Schauffer: I think as you heard us talk, I think it was in 2Q, or it was on the 1Q call, but it was in 2Q, so May, you know, about the heavy focus we were putting on this in the back end of 23. So, you know, our discipline, for sure, has changed. The amount of resources we've specifically dedicated to this, right? We talked about our performance excellence group coming in and helping in many areas. And, you know, just fundamentally a big focus on our sales and planning processes across the company. So, you know, it's really about operational improvements and doubling down on making sure that happens. But look, I mean, I've said this all along. This isn't something that changes overnight. It takes quarters and many quarters.

And many of the areas.

And yes, just fundamentally.

Big focus on our kind of sales and planning processes across the company. So.

It's really about.

It's really about operational improvements.

And doubling down on making sure that happens.

Look I mean, I've said this all along this isn't something that changes overnight. It takes quarters and many quarters I think you'll see US continue this journey in 'twenty four we're very focused on it.

We're very very focused on it. We said we are we like net working capital as a source of cash this year. So that's a big commitment from us.

And this is something we're going to continue to double down on both from a resource standpoint, but also a priority standpoint.

Okay.

That's helpful color and it's nice to see the results and then maybe.

Just shifting it to medical.

Organic growth actually ticked up on a tougher comp sequentially. So can you just talk a little bit more about what accelerated in medical in the quarter and whether there was anything.

Brian Schauffer: I think you'll see us continue this journey in 24. We're very focused on it, very, very focused on it. You know we've said we like networking capital as a source of cash this year, so you know that's a big commitment from us, and you know this is something we're going to continue to double down on both from a resource standpoint but also from a priority standpoint. That's a helpful color, and it's nice to see the results.

Unusual or one time in the shipments in <unk>.

Yeah, I mean look in the back half of the year I think.

I think it was late August early September we had a with a new product come into market.

Vlad Vysotsky: And then maybe, you know, just shifting to medical. But organic growth actually kicked off on a tougher comp sequentially. So can you just talk a little bit more about what accelerated in medical in the quarter and whether there was anything unusual or one-timey in the shipments in 4Q. I mean, look, in the back half of the year, it's, I think, and I think it was late August, early September, we had a new product, you know, come into the market. I think in Europe, specifically, that that had some heavier volumes kind of in the fourth quarter for us. But look, that team is just as good. They have delivered for us all year.

I think in Europe, specifically that that had some some heavier volumes kind of in the fourth quarter for us.

But look the team is just they they have delivered for us all year.

And candidly, even if you go back to 22, two so yes.

I think there was one specific new product that was a bit heavier than maybe your usual but.

That's easier for us as an abnormal with fourth quarter being a being a really strong quarter for us and.

But it's just great execution across the board honestly.

By the way I'll take this morning, I mean, I think I.

I think that's why we like mid single digits and medical again this year as.

Brian Schauffer: And candidly, even if you go back to 2022. So, you know, I think there was one specific new product that, you know, was a bit heavier than usual. But, you know, that phasing for us isn't abnormal with the fourth quarter being a really strong quarter for us. And, But, you know, it's just great execution across the board, honestly. By the way, I'll take this moment. I mean, I think you know, I think that's why we like mid single digits in medical again this year. This was a good year in medical, kind of 8%, so high single-digit growth topping a 15% organic number the year before. So I think we're just, you know, We want to, we want to make sure we set the right expectations and we'll continue to evaluate That's helpful.

We continue to kind of.

This was a it was a good year in medical kind of 8% to a high single digit growth topping a 15%.

Number the year before.

So I think we're just we want to.

We want to make sure we set the right expectations and we'll continue to evaluate kind of what the medical growth rate looks like as we go on this year.

Yeah.

Got it that's helpful. And then just one last one for me and sorry, if I missed it but can you talk about your expectations for pricing in 'twenty, four and how youre thinking about price versus cost playing out for the year.

Yeah. So we didn't we didn't put out a specific number this year I would like to candidly get away from signal he got pricing expectations through our customer base, but I think the thing I'll say here is a.

Very focused on rate.

In 'twenty four right, so making sure our price cost is positive not just dollar positive.

I think more importantly, we're doubling down on the cost side of the equation. The twenty-four look we've spent a lot of time with the team.

Vlad Vysotsky: And then just one last one for me, and sorry if I missed it, but can you talk about your expectations for pricing in 24 and how you're thinking about price versus cost playing out for the year? Yeah, so we didn't we didn't put out a specific number this year. I'd like to candidly get away from signaling our pricing expectations to our customer base, but I think the thing I'll say here is that we're very, very focused on rate, in 24, right? So making sure price cost is rate positive, not just dollar positive.

On pricing over the last 24 months and I think that's now becoming it has become more ingrained into the business.

And we've always been a cost conscious organization.

But I think with all the inflation that's kind of been put in the fact that we haven't been able to get rate on price cost.

Tom and I are we've been working with the broader team about how do we double down our focus on cost mainly around material and indirect spend.

Brian Schauffer: But I think more importantly, we're doubling down on the cost side of the equation in 24. Look, we've spent a lot of time with the team on pricing over the last 24 months. And I think that's now becoming, it has become more ingrained into the business. And we've always been a cost-conscious organization.

And we've kicked off a bunch of work streams.

Across the company and that's what I think yes, I think that's probably flows through kind of more in the back half of the year right. One that's why we're so focused on inventory turns as well so how do we turn that inventory out faster to get the benefit of some of the stuff.

Brian Schauffer: But I think, you know, with all the inflation that's kind of been put in, the fact that we haven't been able to get a rate on price cost, Tom and I are, we've been working with the broader team about, you know, how do we double down our focus on cost, namely around material and indirect spend. And we've kicked off a bunch of work streams across the company to do this. And I think, you know, I think that probably flows through kind of more of the back half of the year, right? One, that's why we're so focused on inventory turns as well. So how do we turn that inventory out faster to get the benefit of some of this stuff? But two, you know, this stuff takes a little bit of time to kind of get ingrained into the business. So I didn't give you a number, so you didn't miss anything, Vlad.

But to this stuff takes a little bit of time to kind of getting drained into the business. So.

Can you give a number so you didn't miss anything flat, but I would say again just in summary.

I think we feel good about it being a green culturally into the company and we will continue to do everything we can there and more but I think we're doubling down to Huron cost.

Great. Thanks, Brian.

Thank you next question comes from the line of <unk> with B Riley. Please go ahead.

Yeah. Good morning, Congrats on a good quarter on the 20th century for guidance and thank you for taking our questions I have three.

If I may.

First on the medical side can you maybe talk about some of the how do we operate in.

The house are investing at the Medicare physician fee schedule.

I do see an impact to the radiation therapy quality assurance art House.

Brian Schauffer: But I would say, again, just a summary, price. I think we feel good about it being culturally ingrained in the company, and we'll continue to do everything we can there and more. But I think we're doubling down this year on cost. Great, thanks.

Among the new clinic versus volume increase.

Yeah, Firstly are you on.

Hello, welcome pleasure to have you on the call today as it relates to.

Vlad Vysotsky: Thank you. The next question comes from the line of Yuan Ji with Be Riley Securities. Good morning, congratulations on a good quarter and the 2024 guidance, and thank you for taking our questions. I have three, if I may.

Medical and specific your specific question about headwinds coming from CMS and Medicare reimbursement as it relates to our T QA and the broader context, when we think about the <unk> or radiation therapy quality assurance business, which is about today about half of our total medical revenue.

Yuan Ji: First, on the medical side, can you maybe talk about some of the headwinds we are facing in the healthcare industry? As the Medicare Physician Fee Schedule decreases, do you see an impact on the radiation therapy quality assurance part of the business? You touched on the new clinic versus volume. Yeah, firstly, you want to...

What we have seen over the last couple of years.

Is that much of our growth or the over weighting of our growth has been in global markets and we've called out. The fact that in large measure. This is driven by enhanced capabilities that are that we have we have developed in region in terms of service support.

Tom Logan: Welcome. It's a pleasure to have you on the call today. As it relates to medical and your specific question about headwinds coming from CMS and Medicare reimbursement as it relates to RTQA, in the broader context, when we think about the RTQA or radiation therapy quality assurance business, which is today about half of our total medical revenue, what we have seen over the last couple of years is that much of our growth or the over-weighting of our growth has been in global markets. And, you know, we've But when we step back and kind of look at market demand drivers overall in this market, there are really two main factors. Number one is the fact that today the world has only about half of the radiation therapy clinics that it should have if we were to apply Western standards throughout the developing world. That typically is in the form of linear accelerators, but it can really be extended to all forms of external beam therapy on the market.

And in broad based promotional and commercial activities in the region, but when we step back and kind of look it at market demand drivers overall in this market. There are really two main factors number one is the fact that today the world has only about half of the radiation therapy clinics.

It should have if we were to apply a western standards throughout the developing world that typically is in the form of linear accelerators.

But it really can be extended to all forms of external beam therapy in the market, but bridging that gap or narrowing that gap is an important overall factor in global demand.

For radiation therapy capital equipment, and the RT QA solutions that we provide in general. So that's certainly is a factor and the disproportionate international growth that we're seeing in the sector that is offset domestic conditions that have been a little bit softer in part because of of.

Tom Logan: But, you know, bridging that gap or narrowing that gap is an important overall factor in global demand for Radiation Therapy Capital Equipment and the RTQA solutions that we provide in general. So that certainly is a factor in the disproportionate international growth that we're seeing in this sector that has offset domestic conditions that have been a little bit softer, in part because of margin compression or inversion on the part of U.S. healthcare providers in this post-pandemic era, but part of it may factor into CMS reimbursement rates. The second major factor in market growth overall is simply an aging population demographic in the developed West. As people get older, they are more likely to get cancer, and certainly in much of the G20 footprint, if you will, there are aging population demographics overall.

You know margin compression or inversion on the part of the U S health care providers in this post pandemic era, but part of it may.

May factor into CMS reimbursement rates.

Second major factor and end market growth overall is simply an aging population demographic in the developed west as people get older. They are more likely to to get cancer and certainly in much of the G 20.

Footprint, if you will will.

There are aging population demographics overall.

So in general it is our view and it has been our experience that even though you know.

The specific CMS net reduction in reimbursements to the rat anchor a radiation oncology community is about 2% this year.

Tom Logan: And so in general, it is our view, and it has been our experience, that even though the specific CMS net reduction in reimbursements to the RADONC, or Radiation Oncology Community, is about 2% this year, our view is that the other factors, and in particular in the American market, the aging population demographic, and the cancer incidence rate, offset that and is further supported by a reversion back to positive operating margins on the part of All of which is to say that we've considered that in our guidance, but we continue to feel confident about our ability to grow this market. I got it.

Our view is that the other factors and in particular in the American market. The Adrian population demographic the cancer incidence rate offsets that and is further supported by.

A reversion back to positive operating margins on the part of U S health care providers, all of which is to say that we've considered that in our guidance, but we continue to feel constructive about our ability to grow this market.

Got it. Thank you so much for the thorough response there.

Oh, the redo from our site and you have some in the prior question. So if we saw what we have observed in 2023, the successful product launch of <unk> and the expansion of clinics.

Yuan Ji: Yes, thank you so much for the thorough response there. Then on the radiopharma side, as you touched on in the prior question, so based on what we observed in 2023, you know the successful product launch of fluvictol and expansion of clinical pipelines in clinical trials, do you anticipate a similar trend in 2024? In other words, what factors do you think would move the performance of this segment higher or lower?

Pipeline in clinical trials.

Dissipate a similar trend in plenty of time, therefore in other words, what factors do you think the move the performance of this segment higher or lower is there anything that especially that we should be looking for in 2024.

Yeah. We certainly are again are very bullish on therapy.

Our radiopharmaceutical market in general, but most specifically.

Tom Logan: Is there anything that is specific that we should be looking for in 2024? Yeah, we certainly are very bullish on the radiopharmaceutical market in general, but most specifically, you know, this revolution that we've talked about that's taking place in therapeutic radiopharmaceutical applications. Overall, you mentioned Pluvicto, which in its first year, I think, was a better than $800 million drug. This is for those who, you know, don't follow the industry specifically. This is a therapeutic or a radiotherapeutic application for prostate cancer. If you look in the approval pipeline for other theranostic applications, you know, as you might imagine, it's a very rich pipeline. There are additional PSMA or prostate-focused solutions, breast, lung, and endocrine system.

This revolution that we've talked about this taking place in therapeutic radiopharmaceutical applications.

Al you mentioned Blue Victa, which in this first year I think it was.

Better than 800 million dollar drug this is for those who.

You know don't follow the industry, specifically this is a therapeutic or a radio therapeutic applications for prostate cancers.

You look in the approval pipeline for for other <unk> applications, you know as you might imagine it's a very rich pipeline. There are additional P SMA or prostate focused solutions breast lung endocrine system.

Tom Logan: Our view is that, again, as others have stated, this is a market that is really undergoing a revolution that will change the nature of cancer care. Not that this will become the single, you know, kind of magic bullet that will cure cancer, but rather it will be an important component of, you know, broad-based cancer care solutions and will lead to a different dynamic mix between surgical oncology, conventional chemotherapy, external beam therapy, and this theranostic application. So, we do expect that we're going to continue to see rateable growth in the market. And as noted before, our focus really is on how we continue to grow and evolve our position in the value chain for radiopharmaceutical solutions. And we're very, very excited about the EC2 deal and how that will enable us to improve our position in the marketplace, but there's much more work for us to do here. I got it. Yes, thanks for the helpful cover there.

Our view is that again.

Others have stated this is a market that really is undergoing a revolution that will change the nature of cancer care not that this will become the single.

Magic bullet that will cure cancer, but rather it'll be an important component.

Of a broad based cancer care solutions and will lead to a different dynamic mix between surgical oncology.

Conventional chemotherapy external beam therapy and in the Sterne <unk> application.

So we do expect that we're going to continue to see ratable growth in the in the market.

And as noted before our focus really is on how do we.

Continue to grow and evolve our position in the value chain for radio pharmaceutical solutions and.

So we're very very excited about the EC squared deal and how that will enable us to evolve our position in the marketplace, but there's much more work for us to do here.

Got it thanks for the household color there and then my last question here is just one who back longer than the 2019 guidance for 5% to 7% topline growth in the context of the past few years performance.

Yuan Ji: And my last question here is, just want to better understand the 2024 guidance for 5% to 7% offline growth in the context of the past two years' performance. You know, there was a strong recovery in 2022 after a weak performance during COVID with a continued recovery into 2023, which was 12%. Should we anticipate a more stable growth rate of, you know, 5% to 7% going forward?

There was a strong recovery in 2022 after a weak performance driven colleagues with a continued recovery into 2023, which was 12%.

Yeah.

More stable growth rate now, 7% going forward of course.

Brian Schauffer: Of course, you know, there's long-term tailwinds on the technology side as well as the radiopharmaceuticals or medical devices. Look, look, um..., you know, if you look back over the last two years, you know, our organic growth rate this year is about 9% at the total company level, whereas last year it was about 6%. And so you got two-year stack numbers, you know, 23 to 22, 15% and 9% for 22 and 21. So look, five to 7% is not a, you know, it's not that different of a number from what we've seen.

Long term tailwind on the technology side as well on our medical side.

Yeah, well look.

Yeah, if you look back over the last two years, our organic growth rate. This year is about.

9% at the total company level last year is about 6%.

And so you got two year stack numbers.

23 of 22, 15% and 9% for 'twenty, two and 'twenty, one so look 5% to 7% is not a.

It's not.

A.

That different of a number from what we've seen.

Brian Schauffer: And I think, you know, candidly, there's a lot of tailwind, but, but look, we'll take one quarter and one year at a time here. And, um, and we'll see how things evolve. And if we think, you know, longer term, we can update the numbers that we've kind of guided more long term than we'll do so. But I think, you know, these are reasonable numbers to be putting up with, with the history we've had, the order growth we've seen. I think the biggest thing to recognize is, you know, the order growth gives us confidence and, uh, being able to deliver. And I think that's kind of the most important thing as we, uh, as we exit, uh, 23 and begin, uh, our 24 journey here. So yeah, we like, we like, we like those numbers. And we like, uh, you know, we like how we're set up for 24. I think that's, that's really the focus right now. I got it.

And I think candidly there is theres a lot of tailwind, but well look we'll take one quarter and one year at a time here.

And we'll see how things evolve and if we think.

Longer term, we can update the numbers that we've kind of guided more longer term then we will do so.

These are reasonable numbers to be putting up with with the history. We've had the order growth we've seen.

I think the biggest thing to recognize is the order growth gives us confidence.

And being able to deliver and I think that's kind of the most important thing as we are as we exit 'twenty three and begin our twenty-four journey here so yes.

Yes, we like we like we like those numbers.

And we like.

We like how we're set up for 24, I think that's really the focus right now.

Got it thanks, Brian Yeah, that's all from us.

Thank you Lee.

Ladies and gentlemen, we have reached the end of question and answer session I would now like to turn the floor over to Thomas Logan for closing comments.

Yuan Ji: Thanks, Brian. Yeah, that's all from us. Thank you. Ladies and gentlemen, we have reached the end of our question and answer session. I would now like to turn the floor over to Thomas Logan for closing.

Thank you and thanks to all who dialed in today 2023 years was a was a good year for Maryann again, I think we continued our evolution in terms of operational performance.

Thomas Logan: Thank you. And thanks to all who dialed in today. 2023 was a good year for Mirion.

We feel very good coming into 2024 about overall market dynamics the topline support.

That that will accrue from that so for us is down to execution.

Thomas Logan: Again, I think we continued our evolution in terms of operational performance. We feel very good coming into 2024 about overall market dynamics and the top line support that will accrue from that. So for us, it's down to execution. And we're very, very focused, as we've noted, on operating margins, cash flow conversion, our digital conversion as a business, and the exceptional new product launch focus that we have in the year ahead. These are things that are well within our wheelhouse.

And we're very very focused as we've noted on on operating margins cash flow conversion.

Our digital conversion as a business and and the exceptional new product launch focus that we have in the year ahead. These are are these are things that are well within our wheelhouse.

Proud of our long term history of being strong operators and and have a high degree of confidence as we come into 2024. So we will look forward to sharing the journey with you as we as we move through it but.

Thomas Logan: You know, we're very proud of our long-term history of being strong operators and have a high degree of confidence as we come into 2024. So we'll look forward to sharing the journey with you as we go through it. But let's end by again thanking everyone for participating today, and we'll look forward to our next call. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. BF-WATCH TV 2021, Outro Music BF-WATCH TV 2021

Well, let's end by again thanking all for participating today, and we'll look forward to our next call.

Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Okay.

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Sure.