MIRION TECHNOLOGIES, INC. You should read the following discussion and analysis ofMirion's financial condition and results of operations together with the consolidated financial statements and related notes ofMirion Technologies, Inc. that are included elsewhere in this Quarterly Report on From 10-Q as well as our audited statements and the notes related thereto for the year endedDecember 31, 2021 that are included in our Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section entitled "Risk Factors" included in this Quarterly Report on Form 10-Q as well as Annual Report on Form 10-K. Unless the context otherwise requires, references in this section to "we," "us," "our," "Mirion" and "the Company" refer to the business and operations ofMirion Technologies TopCo, Ltd. and its consolidated subsidiaries prior to the Business Combination and toMirion and its consolidated subsidiaries, following the consummation of the Business Combination. Unless the context otherwise requires or unless otherwise specified, all dollar amounts in this section are in millions.
Overview
We are a global provider of products, services, and software that allow our customers to safely leverage the power of ionizing radiation for the greater good of humanity through critical applications in the medical, nuclear and defense markets, as well as laboratories, scientific research, analysis, and exploration. We provide dosimetry solutions for monitoring the total amount of radiation medical staff members are exposed to over time, radiation therapy quality assurance solutions for calibrating and verifying imaging and treatment accuracy, and radionuclide therapy products for nuclear medicine applications such as shielding, product handling, medical imaging furniture, and rehabilitation products. We provide robust, field-ready personal radiation detection and identification equipment for defense applications and radiation detection and analysis tools for power plants, labs, and research applications. Nuclear power plant product offerings are used for the full nuclear power plant lifecycle including core detectors, essential measurement devices for new build, maintenance, decontamination and decommission, and equipment for monitoring and control during fuel dismantling and remote environmental monitoring.
We manage and report results of operations in two business segments: Medical and Industrial.
•Our revenues were$163.2 million for the three months endedMarch 31, 2022 and$166.2 million for the three months endedMarch 31, 2021 , of which 36.8% and 31.0% was generated in the Medical segment for the three months endedMarch 31, 2022 and March, 31, 2021, respectively, and 63.2% and 69.0% was generated in the Industrial segment for the three months endedMarch 31, 2022 andMarch 31, 2021 , respectively.
•Backlog (representing committed but undelivered contracts and purchase orders,
including funded and unfunded government contracts) was
The Mirion Business Combination
The Business Combination closed onOctober 20, 2021 (the "Closing Date"), andGS Acquisition Holdings Corp II ("GSAH") was renamedMirion Technologies, Inc. Our Class A common stock is listed on the NYSE under the ticker symbol "MIR." The Business Combination has been accounted for under ASC 805, Business Combinations. GSAH has been determined to be the accounting acquirer.Mirion constitutes a business in accordance with ASC 805 and the Business Combination constitutes a change in control. Accordingly, the Business Combination has been accounted for using the acquisition method. Under this method of accounting,Mirion is treated as the "acquired" company for financial reporting purposes and our net assets are stated at fair value, with goodwill or other intangible assets recorded. As a result of the Business Combination,Mirion's financial statement presentation distinguishes Mirion TopCo as the "Predecessor" for periods prior to the closing of theBusiness Combination andMirion Technologies, Inc. as the "Successor" for periods after the closing of the Business Combination. As a result of the application of the acquisition method of accounting in the Successor Period, the financial statements for the Successor Period are presented on a full step-up basis as a result of the Business Combination, and are therefore not comparable to the financial statements of the Predecessor Period that are not presented on the same full step-up basis due to the Business Combination. 33 --------------------------------------------------------------------------------
Key Factors Affecting Our Performance
We believe that our business and results of operations and financial condition may be impacted in the future by various trends and conditions, including the following: •Global risk-Our business depends in part on operations and sales outsidethe United States . Risks related to those international operations and sales include new foreign investment laws, new export/import regulations, and additional trade restrictions (such as sanctions and embargoes). New laws that favor local competitors could prevent our ability to compete outsidethe United States . Additional potential issues are associated with the impact of these same risks on our suppliers and customers. If our customers or suppliers are impacted by these risk factors, we may see the reduction or cancellation of customer orders, or interruptions in raw materials and components. •Tariffs or Sanctions-The United States imposes tariffs on imports fromChina and other countries, which has resulted in retaliatory tariffs and restrictions implemented byChina and other countries. There are, at any given time, a multitude of ongoing or threatened armed conflicts around the world. As one example, sanctions bythe United States , theEuropean Union , and other countries against Russian entities or individuals related to theRussia -Ukraine conflict, along with any Russian retaliatory measures could increase our costs, adversely affect our operations, or impact our ability to meet existing contractual obligations.
•Medical end market trends-Growth and operating results in our Medical segment are impacted by:
•Changes to global regulatory standards, including new or expanded standards;
•Increased focus on healthcare safety;
•Changes to healthcare reimbursement;
•Potential budget constraints in hospitals and other healthcare providers;
•Medical/lab dosimetry growth supported by growing and aging demographics, increased number of healthcare professionals, and penetration of radiation therapy/diagnostics; and
•Medical radiation therapy quality assurance ("RT QA") growth driven by growing and aging population demographics, low penetration of RT QA technology in emerging markets, and increased adoption of advanced software and hardware solutions for improved outcomes and administrative and labor efficiencies.
•Business combinations-A large driver of our historical growth has been the acquisition and integration of related businesses. Our ability to integrate, restructure, and leverage synergies of these businesses will impact our operating results over time. •Environmental objectives of governments-Growth and operating results in our Industrial segment are impacted by environmental policy decisions made by governments in the countries where we operate. Our nuclear power customers may benefit from decarbonization efforts given the relatively low carbon footprint of nuclear power to other existing energy sources. In addition, decisions by governments to build new power plants or decommission existing plants can positively and negatively impact our customer base.
•Government budgets-While we believe that we are poised for growth from governmental customers in both of our segments, our revenues and cash flows from government customers are influenced, particularly in the short-term, by budgetary cycles. This impact can be either positive or negative.
•Nuclear new build projects-A portion of our backlog is driven by contracts
associated with the construction of new nuclear power plants. These contracts
can be long-term in nature and provide us with a strong pipeline for the
recognition of future revenues in our Industrial segment. We perform our
services and provide our products at a fixed price for certain contracts.
Fixed-price contracts carry inherent risks, including risks of losses from
underestimating costs, operational difficulties and other changes that may occur
over the contract period. If our cost estimates for a contract are inaccurate or
if we do not execute the contract within our cost estimates, we may incur losses
or the contract may not be as profitable as we expected. In addition, even
though some of our longer-term contracts contain price escalation provisions,
such provisions may not fully provide for cost increases, whether from
inflation, the cost of goods and services to be delivered under such contracts
or otherwise.
•Research and development-A portion of our operating expenses is associated with
research and development activities associated with the design of new products.
Given the specific design and application of certain of these products, there is
some risk that these costs will not result in successful products in the market.
Further, the timing of these products can move and be challenging to predict.
•COVID-19-COVID-19 may affect revenue growth in certain of our businesses,
primarily those serving our medical end markets, and it is uncertain how
materially COVID-19 will affect our global operations generally if these impacts
were to persist or worsen over an extended period of time. The extent and
duration of the impacts are uncertain and dependent in part on customers
returning to work and economic activity ramping up. The impact
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of COVID-19 on our customers has affected our sales operations in certain ways,
including increased customer disputes regarding orders, delayed customer notices
to proceed with production, delayed payment from customers and, on rare
occasions, customers have refused to pay for their orders entirely. Further,
access to customer sites for sales was limited in some cases.
Non-GAAP Financial Measures
We report our financial results in accordance with generally accepted accounting
principles in the United States . ("GAAP"). However, management believes certain
non-GAAP financial measures provide investors and other users with additional
meaningful information that should be considered when assessing our ongoing
performance. Management also uses these non-GAAP financial measures in making
financial, operating, and planning decisions, and in evaluating our performance.
Non-GAAP financial measures should be viewed in addition to, and not as an
alternative for, our GAAP results. The non-GAAP financial measures we present
may differ from similarly captioned measures presented by other companies.
Investors are encouraged to review the related GAAP financial measures and the
reconciliation of these non-GAAP financial measures to their most directly
comparable GAAP financial measures, and not to rely on any single financial
measure to evaluate our business.
We use the non-GAAP financial measures "Adjusted revenues," "Adjusted net (loss)
income," "Adjusted EPS," "EBITDA," "EBITA," "Adjusted EBITDA, "Free Cash Flow,"
and "Adjusted Free Cash Flow." See the "Quarterly Results of Operations" and
"Cash flows" sections below for definitions of our non-GAAP financial measures
and reconciliation to their most directly comparable GAAP measures.
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See the "Basis of Presentation" section below regarding the Successor and
Predecessor periods. The following tables present a reconciliation of certain
non-GAAP financial measures for the three months ended
Successor Predecessor
Three Months Ended Three Months Ended
March 31, 2022 March 31, 2021
Net Income Net Income
(In millions, except per share amounts) Revenues (Loss) Revenues (Loss)
Total GAAP$ 163.2 $ (19.0) $ 166.2 $ (40.7) Revenue reduction from purchase accounting - - 4.3 4.3
Cost of revenues impact from inventory valuation purchase accounting
6.3 4.7
Foreign currency (gain) loss, net 1.5 (4.0)
Amortization of acquired intangibles 38.8 18.6
Stock-based compensation expense 7.8 (0.1)
Change in fair value of warrant liabilities (19.9) -
Non-operating expenses 9.4 16.1
Tax impact of adjustments above (7.4) (9.0)
Adjusted $ 163.2 $ 17.5 $ 170.5 $ (10.1)
Weighted average common shares outstanding - basic and diluted 180.774 n.m.(1)
Dilutive Potential Common Shares - RSU's -
Adjusted weighted average common shares - diluted 180.774 n.m
Net loss per common share attributable to
$ (0.10) n.m Loss attributable to noncontrolling interests (0.01) Revenue reduction from purchase accounting -
Cost of revenues impact from inventory valuation purchase accounting
0.04
Foreign currency (gain) loss, net 0.01
Amortization of acquired intangibles 0.22
Stock-based compensation expense 0.04
Change in fair value of warrant liabilities (0.11)
Debt extinguishment -
Non-operating expenses(1)(2)(3)(4)(5) 0.05
Tax impact of adjustments above (0.04)
Adjusted EPS $ 0.10 n.m
(1) Note that n.m. stands for not meaningful.
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Successor Predecessor
Three Months Ended Three Months Ended
(In millions) March 31, 2022 March 31, 2021
Net loss $ (19.0) $ (40.7)
Interest expense, net 7.9 43.1
Income tax (benefit) provision (4.1) (7.1)
Amortization 38.8 18.6
EBITA $ 23.6 $ 13.9
Depreciation - Mirion Business Combination step-up 1.6 -
Depreciation - all other 4.6 5.0
EBITDA $ 29.8 $ 18.9
Stock-based compensation expense 7.8 (0.1)
Change in fair value of warrant liabilities (19.9) -
Foreign currency (gain) loss, net 1.5 (4.0)
Revenue reduction from purchase accounting - 4.3
Cost of revenues impact from inventory valuation purchase
accounting 6.3 4.7
Non-operating expenses(1)(2) 9.4 16.1
Adjusted EBITDA $ 34.9 $ 39.9
(1)Pre-tax non-operating expenses of $9.4 million for the three months ended
March 31, 2022 include $3.6 million in costs to achieve integration and
operational synergies, $2.8 million related to the Business Combination and
incremental one-time costs associated with becoming public, $2.0 million of
restructuring costs, and $1.0 million of costs to achieve information technology
system integration and efficiency.
(2)Pre-tax non-operating expenses of $16.1 million for the three months ended
March 31, 2021 include $5.6 million related to the Business Combination and
incremental public company costs, $5.0 million in costs to achieve integration
and operational synergies, $2.3 million of restructuring costs, $1.6 million of
mergers and acquisition expenses, and $1.5 million of costs to achieve
information technology system integration and efficiency.
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The following tables present a reconciliation of non-GAAP Adjusted Revenue and Adjusted EBITDA by segment for the three months endedMarch 31, 2022 (Successor) and the three months endedMarch 31, 2021 (Predecessor):
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