Mirion Technologies, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• First-quarter organic revenue grew 6% versus the same period last year, aided by double-digit revenue growth from the nuclear power end market.
• Adjusted EBITDA totaled $47 million, 18.2% higher than last year's first quarter, with margins increasing 260 basis points to 23.1%.
• Acquired Oncospace, a cloud-native data analytics platform for radiation oncology, which is a good addition to the cancer care portfolio and expected to enhance go-to-market strategy.
• Repurchased 1.2 million shares in the quarter for $18.6 million as part of capital deployment strategy.
• First quarter orders grew 11.5%, driven largely by nuclear power orders, with 79% of year-over-year nuclear power order growth coming from the existing nuclear fleet.
• Nuclear and safety segment saw nuclear power grow 17.6%, including from existing installed base and new builds; medical segment's RTQA business delivered strong order growth of approximately 12%.

Segment Performance

• Nuclear and Safety Segment: First quarter revenue totaled $133.4 million, $7.6 million (6%) better than first quarter 2024. Organic revenue increased 7.6%. Nuclear power grew 17.6%, with the nuclear power end market accounting for approximately 60% of the segment's revenue, while labs and research and defensive diversifieds are 20% each. Adjusted EBITDA was $39.2 million, $6.1 million (18.4%) better than first quarter 2024, with margins improving 310 basis points to 29.4%.
• Medical Segment: First quarter revenue totaled $68.6 million, $1.8 million (2.7%) better than first quarter 2024. Organic revenue was 3%. The nuclear medicine end market was the primary contributing factor. Adjusted EBITDA was $23.2 million, $2.7 million (13.2%) better than first quarter 2024, with margins improving 310 basis points to 33.8%.

Guidance

• Maintaining organic revenue growth, adjusted EBITDA, adjusted EPS, and adjusted free cash flow guidance.
• Revising total revenue higher to 5%-7% from initial 4%-6% due to FX tailwind.
• Adjusted EBITDA still expected to land between $215 million and $230 million, with low end of margin guidance tweaked for tariff impacts.
• Adjusted EPS guidance of between $0.45 and $0.50 remains intact, assuming effective tax rate between 25% and 27%.
• Second quarter expected to be lightest cash flow quarter due to timing of cash tax payments and seasonal working capital use; medical margins expected up year over year but less than first quarter, nuclear and safety margins flatish with mix and tariff mitigation timing.

Risks

• Uncertain market dynamics clouding valuations and executability of M&A deals.
• Global government budget dynamics likely lengthening bidding cycles for large one-time opportunities.
• Tariff impacts, with China accounting for largest exposure between $7 million to $9 million headwind in 2025, and outside China minimal exposure but evaluating ways to reduce it.
• Potential anti-American backlash in markets like China and other trading blocks, though long-term planning includes actions to defuse risk.

Question and Answer

Q: What you're seeing on the ground there in China around the tariffs, potential reprieve around that, can you elaborate a little more on just what would be driving that when you might think you would have some more clarity on it?

A: Most of our exposure today comes from medical equipment produced in the U.S. shipped to China. There are three or four classification codes under which our products are shipped, where there's an emerging body of thought and evidence that they'll be exempt from the retaliatory tariffs with a likelihood of still a 20% baseline tariff. If validated, it would change our view on net tariff exposure.

Q: The order numbers look really strong. Absent, any influence from the $300 to $400 million that we're referencing frequently? Just, you did mention some potential exposure there to government procurement process in that envelope. Any way that you can quantify that and what you're -- what you were actually seeing, what percent is exposed and where that's coming from, what you're seeing?

A: This pipeline is a combination of government and commercial projects scattered globally. We're not seeing influence absent some theoretical relation to DOGE in labs, and it continues to be a relatively constructive environment for us but we're actively monitoring.

Q: You talked about almost weekly occurrence of news flow around nuclear power. Japan recently, talked about restarting a reactor. You just updated us on what your Japan exposure might be?

A: Japanese exposure is relatively minimal, just under 2% of total revenue, relating to scientific instruments, medical market exposure, etc. as historically within Japan there's a tightly bound Keiretsu network supporting nuclear infrastructure.

Q: Maybe first, just on China medical, the potential tariff clarification that you mentioned is encouraging, but could you just step back and talk about underlying demand trends in China medical broadly? And as a follow-up to that, how you're thinking about the risks of any potential anti-American backlash in that market, or whether you've seen any evidence of that developing?

A: Slowdown in Chinese component of growth driven by anti-corruption programs in medtech exports. We took cautious view toward China due to this tail. Hopeful for constructive deal and clarity, with long-term planning to defuse risk of anti-American backlash in other trading blocks through local-for-local construct.

Q: I heard you say that 79% of the 1Q nuclear order growth came from the existing fleet, as opposed to new build, which is quite encouraging. Maybe, could you just characterize how you're thinking about where customers are in terms of their current upgrade cycle, and how you're thinking about potential longevity of this capital investment into the existing fleet?

A: Install base is most important element of nuclear business, with growing supply-demand imbalance in global electrical generating capacity driving operators to run plants at higher capacity factor, extend life, etc., driving healthy CapEx from global fleet for many years to come. We expect high single-digit growth in nuclear power end market this year as per long-range guidance.

Q: Maybe just a bigger picture pricing power question. If there are surprises after this 90-day hiatus is over, are there certain areas, products, services where you consider Mirion to have kind of stronger pricing power and maybe there might be a little less uncertainty there?

A: In general, we feel our competitive advantage will be strengthened based on likely sustained tariff scenarios, giving us pricing power and ability to optimize between incremental share gains and margin expansion.