Q4 2024 Mirion Technologies Inc Earnings Call
Greetings and welcome to Maryann technologies fourth quarter and full year 'twenty 'twenty four earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. Please press star zero on your telephone keypad.
Speaker Change: As a reminder, this conference is being recorded it is now my pleasure to introduce Eric Glynn Vice President Investor Relations. Thank you you may begin.
Hey, thanks good.
Speaker Change: Good morning, welcome Mary on fourth quarter, and full year 2024 earnings conference call.
Speaker Change: Joining me this morning are myriad CEO, Tom Logan and Marion CFO, Brian Shopper.
Speaker Change: Before we begin todays prepared remarks allow me to remind you that comments made during this call will include forward looking statements and actual results may differ materially from those projected in the forward looking statements.
Speaker Change: The factors that could cause actual results to differ are discussed in our annual report on Form 10-K quarterly reports on Form 10-Q and in myriad other SEC filings under the caption risk factors.
Speaker Change: Quarterly references within todays discussion are related to the fourth quarter ended December 31st 124, unless otherwise noted.
Speaker Change: The comments made during this call will also include certain financial measures that were not prepared in accordance with generally accepted accounting principles.
Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the appendix of the presentation accompanying today's call.
Speaker Change: All earnings materials can be found in the Investor Relations section of our website at Www Dot mirror on Dot com.
Speaker Change: With that let me I'll turn the call over to Tom Who'll begin on slide two.
Tom: Alright, Thank you and good morning, everyone. Tony 24 was an historic year at Marriott I'm pleased to report record fourth quarter and record 'twenty 'twenty four performance as revenue adjusted EBITDA and adjusted earnings per share all topped previous highs. Let me offer a big thank you to the myriad team for delivering outstanding.
Speaker Change: Oh, yes.
Speaker Change: Not only did earnings growth, but also the quality of earnings grew as we expanded the adjusted EBITA margin by 110 basis points for the full year and drove adjusted EPS from 34 cents to 41 cents per share for the year all through planned operational and commercial actions importantly, we also delivered.
Speaker Change: On our guidance for the second year in a row, despite sizable foreign exchange headwinds our results were in line with or better than our 'twenty to 'twenty four guidance. We also took significant steps in 'twenty 'twenty four and to improve our capital structure in May we completed the redemption of outstanding public warrants and repriced our term credit facility.
Speaker Change: In the fourth quarter, all three tranches of our founder shares fully vested as a result, we enter 2025 with a much cleaner and simpler capital structure. The progress we made in 'twenty 'twenty four is supporting momentum carrying into 2025 firstly.
Speaker Change: And our current backlog, we were beginning 2025 with a healthy pipeline of new activity.
Speaker Change: Eczema like 49% of our expected 2025 revenue is already in backlog, which compares favorably with a 46% coverage, we had coming into 2020 four.
Speaker Change: Beyond the backlog or book and build slow business is reflecting the positive momentum in both nuclear power and nuclear medicine that you've heard us detail over the past several quarters, our business generates a high degree of recurring revenue supported by a strong installed base, we're seeing positive developments on the $3 million to $400 million of new order off.
Speaker Change: <unk> that we introduced on our October earnings call and I reiterated during our Investor day in December it's still early days on these opportunities, but we like where we stand today.
Speaker Change: Importantly, we've lost none of these projects to date and are seeing additional bidding opportunities materialize conversations are maturing as the year gets underway and we hope to have more details to share as the year progresses.
Speaker Change: We are poised for growth in 2020 five our business model is built for scale and we expect to take a meaningful step forward in 'twenty to 'twenty five towards the long range 2028 plan introduced at our Investor Day.
Speaker Change: Also much of the heavy lifting done in 'twenty 'twenty four on self help particularly in procurement will be better reflected in our go forward results.
Speaker Change: We are laser focused on capital allocation. We made this clear at our December Investor Day, and I continue to be encouraged by the robust pipeline of both M&A and organic opportunities that lay ahead.
Speaker Change: Speaking of our Investor day, we continue to receive positive feedback on both the strategy and the opportunities available to Maryann one of the topics that comes up frequently in follow up discussions is the category of one position that maryann occupies shown on panel for for investors. We are a strong play for nuclear exposure.
Speaker Change: Just a scarcity in the nuclear instrumentation space.
Speaker Change: <unk> 37 per cent of Maryanne 'twenty 'twenty four revenue was derived from the commercial nuclear power landscape significantly more than any of our closest competitors.
Speaker Change: Rian offers investors cradle to grave exposure to the 100 year nuclear power lifecycle, whether it's today's installed base or new builds or decommissioning events around solutions are critical to the nuclear infrastructure.
Speaker Change: And this isn't just hyperbole, we believe fervently that we have a unique angle on the nuclear power market, we're seeing strong global demand today from our install base representing more than 95% of all operating and commercial reactors worldwide operators are eager to invest in their existing reactors to extend their useful useful life.
Speaker Change: Increased capacity. Moreover, new construction is active around the world. This profitability dynamics are improved and the need for clean reliable energy continues to grow.
This nuclear power Super trend remain strongly intact. Despite initial concerns around deep seek a few weeks ago hyperscale or are investing heavily in 'twenty 'twenty fives to continue building out capabilities and capacity, there's estimated that they will increase capital spending by about 44% and 2025 to more than 300.
Speaker Change: Third and $20 billion and they continue to spend on both utility scale and small modular reactors to secure their future needs beyond the hyperscale or the newest reflects continued support and growing momentum for nuclear power.
Speaker Change: Some recent examples would include in the U K, where the government is expected to give developers more freedom over where they can build new reactors in support of growing clean energy demand in France, as we've been speculating EDF plans to prepare six sites for new data centers is a high demand is expected to drive interest.
Speaker Change: Our investment in fact ahead of the recent AI summit, French President Emmanuel Macron indicated more than 100 billion Euro and AI projects in country here in the U S. President Trump is prioritizing domestic energy sources, including nuclear and South Carolina's Governor recently advocated for reviving their nuke.
Speaker Change: Energy sector, including the previously abandon V C summer nuclear expansion the hardware software and service solutions. We provide are mission critical to customers we serve.
We are the global leader in 17 of the 19 product categories. We provide thanks to a combination of superior quality and service and a global reach that is unmatched by our competitors stated simply we provide compulsory products to customers in highly regulated industries with high cost of failure or customers.
Speaker Change: Now recognize our role in their success, we've increasingly formalized strategic alliances across both of our operating segments. For example in our medical group, we signed a strategic alliance agreement with Siemens helping years last year in nuclear power, we signed an Mou with Electronics Corporation of India, a leader in the Indian market to support the rapid growth.
Speaker Change: [noise] of India's nuclear sector. We also signed a strategic partnership agreement with EDF and 'twenty 'twenty four EDF as the largest operator of nuclear power plants in the world and we're now in exclusive supplier for all of their nuclear Newbuild projects for the next 20 years Maryann isn't a category of one for a sphere pure focus on the detect.
Speaker Change: <unk> measurement and analysis of ionizing radiation.
Speaker Change: This isn't just a tagline, it's what we are to the customers, who we partner with to the investors we represent in the markets. We serve turning now to the quarter's performance on panel five fourth quarter revenue was $254 3 million a new quarterly record.
Speaker Change: Our performance reflects the the demand we continue to see from today's operating nuclear power plants, approximately 80% of our nuclear revenue. Historically comes from this installed base nuclear reactor operators are investing in their facilities whether to extend the operating lifetime or expand their capacity in their fleets. Each of these ambitions creates revenue.
Speaker Change: Opportunities for Maryann fourth quarter performance also reflects the attractive radiopharmaceutical demand. We continue to grow this part of the business as therapeutic nuclear medicine is revolutionizing cancer care all.
Speaker Change: Also we are increasingly finding new ways to market nuclear safety products store nuclear medicine customers last year alone, we sold more than $15 million of traditionally industrial equipment to medical customers, representing a 38% increase.
Fourth quarter, adjusted EBITDA was nearly $70 million adjusted EBITDA increased 14% compared to the same period last year and margins expanded 90 basis points, driven by procurement initiatives and operating leverage.
Speaker Change: This showcases strong operating performance driven by our business system. The foundation of our operating activities for more than 15 years fourth quarter. Adjusted EPS was <unk> 17 cents a share a two set an improvement over fourth quarter last year, but the fourth quarter and full year 2024 represent continued solid performance where X.
Speaker Change: <unk> on the strategy laid out at our Investor day to capitalize upon our unique position, we see significant market opportunities, both organic and inorganic in our growth drivers remain well on track now let me turn it over to Brian to discuss the quarterly and full year was.
Brian: Thank you Tom and thank you all for joining our call.
Brian: I'll review the detailed financial results beginning on slide six fourth quarter Enterprise revenue grew 10, 4% to $254 3 million compared to the prior year's fourth quarter of $234 million fourth quarter organic growth was similar at 10, 3% as FX headwinds largely offset.
Brian: 0.5% of the inorganic growth.
Brian: The strong fourth quarter organic revenue performance continues to be driven primarily by growth in nuclear power of approximately 7% nuclear medicine up an impressive 21% and 14% of Dissymmetry graph. It is worth noting that in the fourth quarter of 2023, we had double digit growth in nuclear power, giving.
Brian: It's a very tough comp that we grew on top of.
Brian: Full year enterprise revenue grew seven 5% to $860 8 million versus 2023 <unk>.
Brian: Organic growth was six 6% in 2024, this was better than our guidance of between five and 6%, which we had tightened back in October as a reminder, we grew over 9% organically in 2023.
Brian: In the nuclear and safety group nuclear power activity was up eight 5% in the year, primarily due to strength out of Europe and safety critical products to Korea.
Brian: And the medical group nuclear Madison was the biggest organic contributor growing seven 5% for the year, we had double digit growth in all quarters for nuclear medicine. After the first quarter ERP implementation and are expecting double digit growth in 2025 in this end market.
Brian: Enterprise inorganic growth was 1%, reflecting the easy to acquisition completed in late 2023, offset by the divestiture of the rehab business Q4, and full year adjusted EBITDA was $69 6 million and $203 6 million, respectively. We ended the year with six.
Brian: Second of quarters of margin expansion compared to the same periods in the prior year.
Brian: As mentioned 2024 adjusted EBITDA was at the high end of our December guidance of between $195 million and $205 million and above the original guidance. We gave at the beginning of the year.
Brian: 2024, adjusted EBITDA margin was 23, 7%. This represents approximately 110 basis points of margin improvement for the year.
Brian: We're making steady progress towards the 2028, 30% adjusted EBITDA margin target outlined at our December Investor Day.
Brian: Fourth quarter adjusted earnings per share was <unk> 17 cents contributing to a full year adjusted EPS of 41 cents the warrant take out in the second quarter and the founders share vesting during the fourth quarter impacted EPS by only one set for the full year.
Turning to the nuclear and safety group on Slide seven fourth quarter segment revenue grew 13, 2% to $168 8 million fourth quarter organic growth was 13, 9%.
Brian: Organic growth demonstrated continued strength from our nuclear power business, mainly out of the French and safety critical products businesses. This was coupled with good growth across all other end markets we play in.
Brian: Full year nuclear and safety group revenue totaled $561 1 million and eight 7% increase compared to 2023.
Brian: Nuclear nuclear related activity from Europe, and Korea was a key driver to annual growth.
Full year organic revenue grew eight 8%, beating our expectations of mid single digit plus growth.
Brian: The two year organic growth stack is an impressive 18, 9% in the sector.
Brian: Fourth quarter adjusted EBITDA for our nuclear and safety Division grew 20% to $52 8 million adjusted EBITDA margin also expanded by approximately 180 basis points to 31, 3%.
Operating leverage the beginning signs of or procurement initiatives and better mix are showing through in the results.
Brian: Recall this time last year, we were discussing some challenges in our French business I'm happy to say that these are largely behind us as the organization and process changes put in place in 2024 by the team delivered the intended results in this region is back to a more normalized performance.
Brian: A special thanks to our French colleagues for all their hard work in 2024 to deliver a solid performance for.
Brian: Full year nuclear and safety adjusted EBITDA was $159 8 million or 18% better than last year.
Brian: Margins were 28, 5% and approximately 230 basis point increase versus the prior year.
Brian: Half of the margin improvement was operating leverage with the rest coming from management actions on procurement processes started mid year and our increased focus on factory for initiatives that.
Brian: This helped to offset an increased bonus accrual in the fourth quarter in this segment.
Brian: Slide eight provides additional details on our medical segment.
Brian: Fourth quarter Medical segment revenue was $85 5 million, a $4 2 million or four or five 2% increase versus the fourth quarter 2023.
Brian: Organic revenue grew three 7% in the quarter driven by our nuclear medicine, and dosimetry businesses and offset by a radiation therapy quality assurance or RT QA business.
Brian: As a reminder, we delivered nearly 10% organic growth in this segment in the fourth quarter last year, So comps were tough, particularly in the RT QA business.
Brian: There were three headwinds in the quarter for medical radiation therapy was a headwind to organic growth, primarily driven by China, which impacted total medical revenue by approximately 210 basis points. The purposeful exit of our lasers business was a 110 basis point headwind.
Brian: And we saw an additional headwind for emerging our Wisconsin, Virginia businesses during the quarter of approximately 60 basis points.
Brian: It is also worth noting that we have implemented a new ERP into this combined business in Q1 2025.
Brian: Inorganic fourth quarter revenue grew one 5%, reflecting a partial quarter impact of the EC squared acquisition.
Brian: Call, we closed on maybe square acquisition in November 2023.
Brian: Full year medical side segment revenue was $299 7 million or five 3% higher compared to 2023.
Brian: The $15 2 million increase versus full year 2023, largely reflects the full year impact of our E C squared acquisition and growth in our nuclear medicine into cemetery businesses.
Brian: Total growth was split roughly evenly between organic and inorganic growth at two six and 2.7% percent respectively.
Brian: 2024 was a year of resilience for our medical business we.
Brian: We saw our China, RT QA business and the year down approximately 40% without this headwind our medical group would have grown approximately 5% organically.
Brian: Combining this with the closure of the lasers business you would have seen the medical business grow approximately five 5% organically for the year.
Brian: Some of you are still new to the story the lasers business was a money losing product line. It will be an addition by subtraction as easy as it is exited.
Brian: Turning to EBITDA.
Brian: Medical group adjusted EBITDA was $33 2 million in the quarter, a six 1% increase compared to the prior year.
Brian: Adjusted EBITDA margins expanded 30 basis points to 38, 8%.
Brian: Full year, adjusted EBITDA was $104 6 million with margins improving by 50 basis points to 34, 8%.
Brian: In medical in the fourth quarter, we saw a large bonus accrual release.
Brian: Which partially offset operating inefficiencies for Wisconsin, and Virginia move coupled with some mix headwinds.
Brian: Now turning to the order book and backlog starting on slide nine before we jump into the full year view on orders, let's make sure we touch on how we did in the fourth quarter with a reminder, that we were comping, a 30% order growth number from the fourth quarter 2023.
Brian: Orders were up 6% in the quarter over the fourth quarter last year.
Brian: That number when adjusted for currency and M&A is actually up approximately six 8%.
Brian: If you normalize for the noise on the new builds in the quarter and last year's fourth quarter Q4 orders were up roughly 5%.
Brian: I realize that there's a lot of moving parts, but regardless it was a good quarter. Recognizing we saw also saw some things slip out of the year that we would expect it to close.
Brian: As you know large orders tend to be a bit lumpy in our business that is what we attempted to illustrated on the slide to provide insight into the underlying orders dynamics.
Brian: On an annual basis after adjusting for large orders and a onetime de booking as already mentioned in the third quarter. The underlying 2024 adjusted order book grew by approximately 3%. This reflects the strength of the book and Bill business.
Brian: Slide 10 summarizes our backlog trend fourth quarter backlog was $812 million.
Brian: After adjusting for the strengths in the U S dollar in the quarter and the previously mentioned, Turkey deep linking our adjusted backlog was approximately flat compared to the same period last year.
Brian: As Tom mentioned, the current backlog gives us visibility to approximately 49% of the midpoint of 2025 revenue guidance. It was ahead of where we were at this time last year.
Tom: Next on the balance sheet and free cash flow on slide 11.
Tom: As a reminder, 2024 it was a busy year for us we improve that leverage by another half turn remove the warrants from our capital structure fully vested all three tranches of founder shares and refinance the debt.
Tom: We ended 2025 of two five times debt to trailing 12 months adjusted EBITDA.
Better than our anticipated two six leverage guide on our third quarter earnings call.
Tom: This represents almost a full two turns of deleveraging over the past two years.
Tom: As we detailed at our Investor day aggressive deleveraging has bolstered our financial strength and sets the stage for further M&A in 2025 M&A is in our DNA and we're in the process of evaluating several compelling opportunities but.
Tom: Adjusted free cash flow for the quarter was 53 million and $65 million for the full year.
Tom: Full year adjusted free cash flow was in line with guidance, our adjusted free cash flow conversion for the year was 32% of adjusted EBITDA.
Tom: We are not satisfied and continue to see opportunities to accelerate and bring forward our free cash flow conversion in 2025 and are committing to a 50% increase to adjusted free cash free cash flow in 2025 at the midpoint of our guide.
Tom: There are a few moving pieces to adjusted free cash flow, so let's spend a few seconds on each.
Tom: First adjusted free cash flow was negatively impacted by higher capex.
Tom: Based on the high end of the range at the beginning of the year, we spent a bit more on capex than we anticipated. This was primarily due to our dosimetry badge launch and continued investments in our e-commerce and software platforms.
Tom: These investments are meant to speed up adoption and growth.
Tom: Although software is still a small piece of the total business, we're expecting to see double digit revenue growth next year, and our medical business, specifically and look forward to updating you on our progress during the June quarter.
Tom: Additionally, we are committing to approximately 18% reduction in Capex in 2025 from 'twenty to 'twenty four.
Tom: Second net working capital was a use of cash versus a source of cash expected now working capital operating days did reduce by about nine days and our inventory reduced by approximately $7 million on an FX adjusted basis.
Conversely, cash taxes were better by $14 million versus initial guidance of $37 million.
Tom: But there is some timing impact of cash taxes, and 24 versus 25, equaling about $6 million that will we will end up seeing in 2025.
Tom: We did make headway, but not as much as we'd hoped opportunities lie ahead.
Tom: To summarize 2024, we delivered on both our initial guidance and the latest guidance and posted another year of record performance.
Tom: This momentum into 2025, I feel increasingly confident in the 2025 guidance, we unveiled at our December Investor Day.
Tom: Slide 12, reconfirmed our 2025 guidance. It also includes adjusted EPS guidance of between 45, and <unk> 50 per share.
Tom: Our adjusted EPS guidance assumes an effective tax rate of between 25, and 27% materially down for 2024, we're modeling cash taxes of approximately $40 million and an average share count of approximately 227 million shares.
Tom: 2025 share count increased versus 2024, mainly due to the founder shares vesting in the fourth quarter and the taking out of the warrants in the second quarter.
Tom: This is a five cent per share headwind to our adjusted EPS Guide in 2025 due to these two factors.
Tom: As a reminder, adjusted EBITDA margin guidance is between 215 and $230 million and $24 five and 25, 5% respectively.
Tom: We expect to see adjusted EBITDA margin expansion in every quarter during 2025.
Tom: Total revenue growth for 2025 is expected to be between four and 6%. It includes an approximately 190 basis point foreign exchange headwind organic revenue growth is expected to total between $5 five and seven 5%.
Tom: In 2025, we expect the organic growth rate to build as the year goes on peaking in the third quarter and normalizing in the fourth quarter.
Tom: Lastly, adjusted free cash flow is expected to be between 85 and $110 million.
Tom: Adjusted free cash flow conversion is expected to be between 39% and 48% of adjusted EBITDA and we will continue to see a better quarterly cadence with that I'll ask the operator to open the line for questions.
Tom: Thank you.
Tom: Ask a question. Please press star one on your telephone keypad.
Speaker Change: From Asia.
Tom: I understand the question.
Speaker Change: You May press star two if he would like.
Speaker Change: A question for the Q and fair practice.
Speaker Change: Speaker equipment.
Speaker Change: Sorry to pick up your handset before pressing the star one moment, while we poll for questions.
Speaker Change: Our first question is from Chris Tomorrow with TTS Securities.
Speaker Change: Please proceed.
Chris Tomorrow: Hey, good morning, guys. Thanks for taking a couple good morning, Craig.
Brian: Just good morning, just to start with where Brian.
Chris Tomorrow: The EBITDA margin improvement each quarter so.
Chris Tomorrow: Normally the third quarter, you know last few years has not been it's been down a little bit. So we're saying that Q3 is better than Q2. This year. So I just want make sure I had that correctly.
Chris Tomorrow: Yeah, what I'm actually talking about his quarter.
Chris Tomorrow: Each quarter over the prior year quarter got it Okay fair enough that makes more sense got it.
Chris Tomorrow: Awesome, given the changing dynamics in the whole nuclear power space. How are you going about nuclear as a percentage of myriad total revenue overtime.
Speaker Change: Yeah, Chris I'll take that.
Speaker Change: Yeah. The interesting thing is though we noted that in 'twenty 'twenty four nuclear represented about 37% of our total revenue.
Speaker Change: If you take the midpoint of our guidance and kind of look forward in 'twenty to 'twenty five that number that number grows but.
Speaker Change: In the face of what is clearly a very very durable trend as it relates to the growth in nuclear power or not.
Speaker Change: Spurred on not only by the discussions about hyper scaler, but a number of other key themes.
Speaker Change: I think theres, an increasing sense of scarcity value in and around exposure to nuclear.
Speaker Change: Because it's not a space, where there are a lot of highly investable opportunities and so within that given that factor and also given the fact that candidly valuation multiples are really broadly equilibrated between med tech and in nuclear power.
Speaker Change: You know for us that are that really just encourages us to continue to take a very balanced approach as we look at both organic growth opportunities and inorganic growth opportunities, but I think the net effect of all of that is that our exposure to nuclear continues to increase at its core because of the.
Speaker Change: You know as we've guided nuclear power is growing it up upper single digits. It's outgrowing the company as a whole but beyond that if you were to look through again, our pipeline of both organic and M&A opportunities.
Speaker Change: As rich with with nuclear power related stuff. So I think at the end of the day, there's a an opportunity for us to drive up that percentage.
Speaker Change: Got it very helpful. Maybe just last one from me lots of talk on the nuclear side.
Speaker Change: What are the biggest wildcards and twenty-five for medical.
Speaker Change: I think there are there are a couple are right now.
Speaker Change: <unk> articulated very clearly we've been talking about this for a while the biggest headwind that we faced in medical last year. It wasn't in the Chinese market, where because of the the you know the continued tale of the anti corruption activities. That's had a fairly significant impact on med tech in general, but certainly the build outs of new radiation.
Speaker Change: Therapy clinics, you know many of the leading Oems in this space at a projected that that would reverse last year. It did not but to be clear you know our guidance is or what's embedded in our guidance for the year is no improvement in.
Speaker Change: In the Chinese market, so that would be wild card number one is that if we do see a reversion back to what had been the mean in terms of gross in our teach you a in China that could be upsides I think another significant a wildcard.
Speaker Change: Would relate to the conflict in your front that if we see a a and accelerate a settlement in and to be clear.
Speaker Change: I think talks are are absolutely going on right now are in a in a variety of dimensions, but if we were to see settlement of that conflict earlier in the year and by that I mean cause summertime than there is an enormous need for effectively a you know a marshall.
Speaker Change: Plan like approach to rebuilding Ukraine, and some of that will will involved the than many nuclear power plants in our in the region. So.
Speaker Change: Someone that conflict settles, we think there will be an opportunity for us to be part of the solution in terms of helping to rebuild our Ukraine and then beyond that are you know.
Speaker Change: Presumably with conflict resolution there are some pathway to normalization of trade between Russia, and the U S. Under any circumstances, we don't really see that happening this year.
Speaker Change: But as a dynamic and pros that are that might open things up a bit more I guess the final thing I would say it would relate to you know just kind of the macro picture overall and that would include a combination of of.
Speaker Change: Yield curve dynamics foreign exchange dynamics tariff dynamics et cetera, which can go either way, but I think we've taken a a neutral the conservative approach on all of those things to the extent, we see any any favorable movement. There obviously that could help us.
Speaker Change: Very helpful jump back in line thanks, guys.
Speaker Change: Our next question is from Joe Ritchie with Goldman Sachs. Please proceed.
Joe Ritchie: Hey, good morning, guys.
Speaker Change: And.
Speaker Change: Thanks for the clarification on the four key organic orders plus that in on a plus 30 comp that's that's pretty pretty good congrats on the end of the year I guess, maybe my first question is just on this this book and Bill a flow business that is growing.
Speaker Change: Growing fairly steadily Tom can you just maybe just just kind of talk to us a little bit about that near term opportunity and what youre hearing more specifically around that business.
Speaker Change: Yeah I'll talk a.
Speaker Change: Qualitatively and then invite Brian to kind of fill in the gas.
Speaker Change: Gas show overall, but fundamentally this is a this is what we've been talking about it for the better part of the last two years, but that given the fact that our the core nuclear power related exposure, we have relates to the installed base. So that's about 80% of our nuclear power revenue, which in turn is just under 40% of our total revenue.
Speaker Change: No.
Speaker Change: There's a significant dynamic there, whereas the base continues to become more profitable it drives fatter capital spending budgets advise sat or operating budgets and that also particularly as we get into outage related season or out of season in spring and fall drives some very short order some.
Speaker Change: Called business and so I think what we saw last year was the continued improvement in that core dynamic where you know we saw an increase in our in that general flow business much of which was driven by the core health and in nuclear but it's not just there. We also saw a pickup in certain elements of our.
Speaker Change: Our medical business, most strikingly in in nuclear medicine, where the very nature of what we saw there.
Speaker Change: It is characterized by shorter order cycle times and so there again, we saw a favorable dynamic that helped drive the cadence there.
Speaker Change: Yeah.
Speaker Change: Yeah, I think that's all right.
Speaker Change: I think what was encouraging to us specifically in the fourth quarter as we kind of solid loss.
Speaker Change: The market in Europe, and also in North America, and I think in.
Speaker Change: The North American business had been a bit slower on the nuclear side.
Speaker Change: In the first half of the year and you know I think I think that's encouraging to us Joe.
Speaker Change: Got it that's that's helpful guys and then I wanted to touch on that that that the EDF announcement that $100 billion end in tendering for new AI driven data centers.
Speaker Change: I'm just I'm just curious you know I know obviously this is a longer term opportunity just given the strategic partnership that you guys have.
Speaker Change: Ultimately like what what what what does this mean for you guys like and then you know is there any way to kind of think about you know a timeline on when you start to start to start to see some orders associated with us.
Speaker Change: Yeah, I think it really builds off the.
Speaker Change: Just the incredible dynamics are we then.
Speaker Change: We have in that market overall on a very important long standing relationship with Etfs you know the the the most important factor Joe is the again. This is a strategic deal that we signed last year, where we effectively are the sole source supplier for certain content for.
Joe Ritchie: The next one to two dozen EPR reactors built both inside of France, as well as on an export basis. Yeah. That's important obviously from a from an overall long term growth standpoint, but as with the the you know the broader dynamic can we talk about what the installed base.
Joe Ritchie: E D F. A year ago had a very tough time because of widespread outages related to a variety of operational issues that they had as a firm they've recovered from that are they continue to move through that that recovery and I think what this this a ideal.
Presages overall is the notion that.
Joe Ritchie: You know you're going to see continued strength in capital spending into their installed base of more than 50 reactors in France.
Joe Ritchie: That all the time will be ever more critical the capacity factors will be ever more critical.
Joe Ritchie: Is that the potential upgrades will be ever more critical and I think all of those things will inure to our benefit again, just given the strength of the the relationship that we are we have and and cherish with with EDF.
Joe Ritchie: Great. If I can maybe sneak one more Tom you gave you gave kind of thing you know some color on you know potential swing factors as we progress through the year.
Speaker Change: I'm curious I didn't hear you talk about you know what's going on you know in the U S windows and ultimately what that potentially could mean for your defense business. If there's any color around that and how you guys are thinking about the range of outcomes there.
Speaker Change: Yeah, they're they're they're too big Wildcards there that you know, we obviously expected a question one would relate to tariffs. So we can come back to that and the other is just relating to our two overall budgetary dynamics and our view is that if you look at really the government sources of of funding and revenue.
Speaker Change: For us it's principally in two channels. So it's D. O you related which is largely focused on laboratory equipment and remediation services and capital equipment at Big sites like Oak Ridge in Savannah River and in other places and then secondly it.
Speaker Change: Is oh and I should note as well the the S M. Our developments sponsored by the deal as well.
Speaker Change: And then secondly, it's the department of Defense. So it is the military spending on a variety of programs that we support and some that we hope to support in the future, but right. Now every indication is that as we look at the the new head of the new Energy Secretary.
Speaker Change: But also the changes within the D O D. Our our view is that notwithstanding the doge efforts to root out waste and fraud and inefficiency overall, we don't expect that to in any way kind of jeopardize the core relations the core dynamics that we saw.
Speaker Change: See in that realm, so right now.
Speaker Change: You know were cautiously optimistic that the you know not only do we continue to again to service the contracts that we have today, but we hope there are some some upside in the air.
Speaker Change: The other thing to note too on the tariff dynamics.
Speaker Change: Is that.
Speaker Change: Taken a hard look at what our aggregate exposure is from you know a general trade flow standpoint understand that as a company about 50% of our commercial sales are outside of the U S. But if you look at the matching effectively the organic hedging between our production activities and our.
Speaker Change: Shall activities, it's very strong it was a very strong natural balance there and so if you look at the areas, where we expect to see the greatest tariff exposure bilaterally, It would be Canada, Mexico, China, and the EU overall, and if you aggregate all of those again bilaterally going both ways. So the girl.
Speaker Change: Number not a net number that total represents about 13% of our revenue overall, so it's a considerably smaller exposure than you might assume just given the international footprint of the company and in the international flows.
But there when you think about it more deeply you know, we're obviously trying to get ahead of any potential tariff activities and do everything we can do understand the basis. The dynamics are the timing all of those factors, but were also take trying to take a much more comprehensive view that it's not just about tariffs.
Speaker Change: It's also about FX its about a tax differentials.
Speaker Change: Particularly in corporate income tax.
Speaker Change: That that May widen it's about terms of afraid and ultimately you know longer term our ability to continue to you know kind of defeats the threat of tariffs by shifting our supply chain to narrow that oh that differential even more so right now huge huge array of unknowns in and around.
Speaker Change: What the tariff impact could be.
Speaker Change: I I would put forth, though that our view is that our exposure is probably less than many might infer given the international footprint of the business.
Speaker Change: Super helpful. Thanks, Tom.
Brad: Our next question is from Brad.
Speaker Change: <unk> with Citigroup. Please proceed.
Brad: Good morning, guys. Thanks, Thanks for taking my call here.
Brad: So maybe I'll start off with just fine.
Brad: Follow up.
Brian: Hey, Brian maybe.
Speaker Change: Maybe just a follow up on Joe's question around Dol.
Speaker Change: And government expect expenditures and potential impacts there obviously you talked about it on the on the nuclear side, but is there.
Speaker Change: On the nuclear medicine side any risk of <unk>.
Speaker Change: Reimbursements impacting providers willingness or ability to invest in.
Speaker Change: Your product suite.
Speaker Change: Yeah, we didn't we don't think so glad you're on the.
Speaker Change: The nuclear medicine side last year, we talked about how certain CMS reimbursement codes relating to very expensive diagnostic agents that are that are part of this overall thorough gnostic movement had been had been approved which effectively creates a strong.
Speaker Change: Or a degree of incentives and momentum in that area of the business overall, the other important and so we expect that dynamic to continue we don't expect the new administration to come in and have any kind of immediate and material impact on how CMS thinks about reimbursement codes in the end.
Speaker Change: Claire Madison and the same would be true for radiation therapy, where you know there's an ongoing dynamic relating to you know the the entire tableau of reimbursement codes are that there's just kind of endemic within the business again, we're not anticipating any material changes there in the year ahead that would be.
Speaker Change: Driven by the new administration and overdose specifically.
Speaker Change: Great. That's helpful. Tom appreciate it and then maybe just circling back to the.
Speaker Change: Three to 400 million pipeline of.
Speaker Change: Larger one time Warner's.
Speaker Change: Just any color you can give on how you're thinking about the timing of those starting to come through whether we could see you know a good portion or all of those spooked by year end.
Speaker Change: 25, and then just what are some of the gating factors for those owners to go forward as you talk to your customers.
Speaker Change: And really not a lot of change there other than you know what we noted.
Speaker Change: Last quarter, when we announced this and provided those contexts as are we.
Speaker Change: We indicated that are these opportunities would likely trade in the main over the subsequent five quarters you know that.
Speaker Change: Continues to be the case, so we're just a quarter down on it overall.
Speaker Change: The changes that we've seen are that I think the opportunity set has broaden as it relates to these large in some cases quite large projects.
Speaker Change: Yeah, we're working very hard on all fronts, we haven't lost a deal yet we like where we sit but the inherent nature of our large projects, particularly large nuclear projects is that the the timing.
Speaker Change: Is hard to pin down in terms of trying to bucket things in a particular quarter.
Speaker Change: And so you know we continue to hold to that guidance. So we expect that the are the core of these opportunities will trade over the balance of 2025.
Yeah, we hope to get our share or better of.
Speaker Change: This this at like where we sit today.
Speaker Change: I appreciate that Oh cutback.
Speaker Change: Hop back in queue.
Speaker Change: Our next question is from U N T with B Riley.
Speaker Change: Please proceed.
Speaker Change: I've got Tom Brian Congrats on the record to call at her.
Speaker Change: No more questions.
Lauren: Thanks, Lauren Yeah.
Speaker Change: I have two questions. If I may 1st I'm curious about the timeline for you to restart than they've seen in Russia, and Ukraine was the PC.
Speaker Change: Roz backed with Iraq, the timeline for both nuclear side as well as the nuclear power plant.
Speaker Change: Yeah. So the our view there are you on is that Oh, you know the timeline will be obviously dictated by a settlement terms overall.
Speaker Change: And our view is that there's a real need, particularly as it relates to nuclear power related instrumentation.
Speaker Change: In both markets in both Ukraine, and and Russia, We would assume again you know this is a hypothetical and we're all speculating, but we would assume that Ukraine opens a prior to normalization of trade with Russia.
And you know, we're ready willing and able to do whatever we can do whatever is required.
Speaker Change: To you know not only help shore up the existing nuclear infrastructure, but we also expect that our when you know pending conflict resolution that there'll be significant newbuild activity, you know really characterized by western reactors in Ukraine and of course, we hope to participate in.
Speaker Change: On that as well.
Speaker Change: Yeah got it.
Speaker Change: Second question is around regulation updates in the U S. I'm curious what are you hearing from your customers. For example, we have a new deal you're saturating the office the how states.
Speaker Change: That has the Texas and Arizona who've outcomes.
Speaker Change: However, there are some states lateral legislation.
Speaker Change: Kessel uncle here.
Speaker Change: You are hearing from customers.
Speaker Change: Yeah, I mean, what we're hearing is there's excitement that that again.
Speaker Change: The you know if you look at just the blizzard of announcements. So we just touched on a few reminders today, but there are you know they the.
Speaker Change: The favorable announcements as it relates to the nuclear power and in this instance, you know specifically just in the U S.
Speaker Change: Has been incredible over the over the course of the last year or really the new news is discussion.
Speaker Change: The the potential resuscitation of the V C summer plant.
Speaker Change: We mentioned in our in our prepared remarks, which was a two reactor Westinghouse AP 1000.
Speaker Change: That would be a that would be great obviously very pro nuclear.
Speaker Change: Governor Abbott and and Texas has been very clear that he wants to Texas to be the epicenter of a an American nuclear Renaissance is characterized by.
Speaker Change: Creating a really favorable environment for the development the growth of S. M. Our applications.
Speaker Change: But beyond that utility scale as well.
Speaker Change: And our view is that there will be you know a number of other favorable movements. We expect the Duane Arnold power plant in Iowa will will be brought back to life at some point similar to a three mile Island, and we expect the regulatory environment to be you know to be very prone to acquire it.
Speaker Change: Accordingly, you know the impending energy stuck with area as a as an energy guy overall in oil and gas you know.
Speaker Change: Strong oil and gas background, but he also happens to sit on the board of Oklahoma, which is the the Sam all done a S. M. Our play and so obviously knows a great deal about nuclear power and I think one can infer that as as pro nuclear and so at both the federal level as well as the state level.
Speaker Change: We see continued support I think really the key issue here.
Speaker Change: Is has the posture of the NRC and the other regulators in terms of you know to what degree do we see a greater move toward streamlining regulation, particularly as it relates to new designs and new builds so we can potentially cut years off the timeline and really.
Speaker Change: Kind of accelerate.
Speaker Change: For this year.
Speaker Change: Kind of hoped for by the administration and by Us.
Speaker Change: American nuclear Renaissance.
Speaker Change: Yeah got it that's very helpful.
Speaker Change: As a reminder, the star one on your telephone keypad.
Speaker Change: That's a good question. Our next question is from Sheila on here.
Speaker Change: That's right.
Speaker Change: W. Baird. Please proceed.
Speaker Change: Hey, good morning, guys Shaban on for Rob.
Speaker Change: Uh huh.
Speaker Change: Just kind of wondering here on your 2025 guide you kind of outlined.
Speaker Change: 80 to 200 bps of adjusted EBITDA margin expansion.
Speaker Change: Just provide some color on where that growth is coming from is it gross margin opex leverage or and just in either case you know is there.
Speaker Change: In other parts of the business that would be driving that growth.
Speaker Change: Yeah, I mean look we are I think it's consistent with what we talked about on our Investor day operating leverage continues to be our best friend.
Speaker Change: We believe all the work we've done on the procurement side will absolutely continue.
Speaker Change: Continuing to come through and show through the Wisconsin, Virginia move will begin to show up in the P&L results for sure.
Speaker Change: So I think it's a good mix off of operating leverage a procurement and a number of self help things, including the work we're seeing on the factory floor look I think from a modeling perspective.
Speaker Change: I think we're modeling a bit more margin expansion in medical and attack that in the nuclear safety business.
Speaker Change: But I think we're you know as we did this year were pretty optimistic about what we think the artist the possible is in India or safety.
So I think it's broad based.
Speaker Change: And it's consistent with our without discussions in December.
Speaker Change: Yes.
Speaker Change: Got it got it okay, and if I can get another one in.
Speaker Change: If you guys could speak to any early traction to hear Siemens health in years relationship and kind of how that's factored into your outlook that would be helpful.
Speaker Change: Yeah, I mean, it's a we we obviously are in the early days of the Shaban with.
Just as a reminder to the the listeners of the call. The the deal we've entered into basically carries more of our products, particularly our industry, leading workflow and data management software product called Sunshine and the RT QA space radiation therapy quality assurance space.
Speaker Change: Essentially curious out into the end of the price book of Siemens health and errors and what that means as a practical matter is that their global sales force is featuring that as there are their core RT.
Speaker Change: T QA software platform of choice.
Speaker Change: It's a brand new you know effectively a brand new deal.
Speaker Change: And we've been working very very closely with openers to to train their sales team and and really kind of helped generate momentum but to be clear we've assumed almost nothing in terms of incremental traction coming out of us this year.
Speaker Change: To the extent that we see a meaningful amount of commercial traction occurring from from this.
Speaker Change: Relationship the strategic alliance that we would view that as upside.
Speaker Change: Just remind you in my comments, we talked about double digit growth on the software side medical and specific way so.
Speaker Change: Yeah, that's a that's a good kind of underlying base case for the business and anything Tom just talked about would grow on top of that.
Gotcha Gotcha, Okay. That's helpful.
Speaker Change: It back.
Speaker Change: Okay.
Speaker Change: With no further questions in queue.
Marianne: I would like to turn the conference back over to Marianne.
Speaker Change: Okay.
Speaker Change: Well I'd like to and today by thanking again, the myriad team for delivering a record year of performance just super Super proud of the the achievements this year and the momentum that my many colleagues have agenda to carry us into 2025, and a and b.
Speaker Change: These collective efforts really are the are the heartbeat of of this business. That's all on the call today appreciate your participation.
Speaker Change: I view that we're well set up for success our foundation of strong market dynamics continue to be a compelling.
Speaker Change: We think 20 to 25 is shaping up to be another year of growth and a continued performance evolution and are in the business and I do believe the market is is increasingly understanding the.
Speaker Change: The unique attributes of our company again, the fact that we are the only pure play on the detection measurement and analysis of ionizing radiation a category of one as we like to say.
Speaker Change: And that coupled with the the vertical market exposure we have.
And and really kind of the attractive diversification benefits inherent in that I think make us a really interesting company to watch.
Speaker Change: The color we provided at our Investor day in December really shaping the narrative and I am exciting to assign them to continue the dialogue with them with with many of you as the year progresses. So I appreciate your attention today and we'll look forward to speaking to you and are in the next quarter.
Speaker Change: Thank you. This does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Speaker Change: Okay.
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