Business context and reporting period
Mirion Technologies, Inc. filed this unaudited Form 10-Q for the quarter and nine months ended September 30, 2021. The results reported here are primarily for GS Acquisition Holdings Corp. II (GSAH), a SPAC, before its October 20, 2021 business combination with Mirion Technologies (TopCo). They do not represent the operating results of the combined Mirion business.
Key financial metrics
| Metric | Three months ended September 30, 2021 | Nine months ended September 30, 2021 | Comparison |
|---|---|---|---|
| Revenue | No operating revenue | No operating revenue | GSAH was a blank-check company |
| Net income (loss) | $(1.0) million | $(10,341) | 2020 restated losses were $(32.1) million and $(32.2) million, respectively |
| General and administrative expense | $2.9 million | $11.6 million | Nine-month 2020 restated expense was $1.5 million; 2021 costs related primarily to the proposed combination |
| Warrant fair-value change | $1.7 million gain | $10.9 million gain | 2020 restated periods included $30.8 million losses |
| Net cash used in operations | Not separately provided for the quarter | $1.8 million | 2020 restated nine-month outflow was $0.8 million |
| Cash and trust investments | $750.3 million at September 30, including $750.1 million in the trust account | Trust funds were restricted pending the business combination or other specified events | |
| Current liabilities | $99.5 million at September 30 | Included $60.7 million warrant liability, $26.3 million deferred underwriting discount, and $2.0 million working capital note |
GSAH had no operating margins to report. Its $195,542 of cash outside the trust account was limited; reported current assets also included trust assets. The balance sheet classified $750 million of redeemable Class A shares outside permanent equity and showed a $98.0 million stockholders’ deficit. GSAH reported no long-term debt at September 30 and no material market or interest-rate risk.
Material changes and subsequent events
- Compared with 2020, the much smaller 2021 nine-month loss mainly reflects the swing in the non-cash fair-value change in warrant liabilities; G&A expense increased substantially.
- Prior 2020 financial statements were restated after warrants were reclassified as derivative liabilities and Class A shares as temporary equity. The restatement materially affected reported liabilities, equity, expenses and loss per share.
- On October 20, 2021, the business combination closed. Public shareholders redeemed 14.6 million shares, about 19.5% of pre-combination public Class A shares. The backstop was not used.
- At closing, the Sellers received $1.3 billion cash, 30.4 million newly issued Class A shares and 8.6 million Class B shares with paired IntermediateCo interests. The $900 million PIPE investment also closed. The Sponsor waived the $2.0 million working capital note.
- A subsequent credit agreement provided an $830 million senior secured term facility and a $90 million revolving facility. The filing describes facility commitments, but does not clearly state how much was drawn at closing.
Outlook, commentary and risks
No formal operating guidance is provided in this filing. Management’s reported financial discussion concerns the SPAC’s pre-combination activities; the filing’s risk disclosures address the combined operating business and are not a quantified forecast.
- Mirion identifies historical and expected future operating losses, uncertain demand and long sales cycles, acquisition and integration execution, fixed-price contract cost overruns, and reliance on government-funded customers as risks.
- COVID-19 had affected demand, customer orders and payments, employee availability, facilities and supply chains; the duration and financial impact were described as uncertain.
- Supply constraints, including semiconductor shortages and limited-source components, could disrupt production. The filing cites a component end-of-life notice and qualification/redesign work, with anticipated supply coverage through at least April 2022, depending on demand.
- Cybersecurity is a disclosed concern: Mirion reported a February 2021 ransomware attack involving unauthorized access and publication of certain personal and proprietary information.
- Medical-device regulatory and product risks include an August 2021 voluntary recall affecting 1,256 AtomLab 500/500 Plus units due to a software error in custom isotope lists; the filing says corrected software had been released in June 2021. A prior Captus recall was reported completed in 2020.
- GSAH’s disclosure controls were assessed as ineffective at September 30 because of a material weakness in accounting for complex warrant and Class A share features. The weakness led to restatements and could result in untimely detection of material misstatements; no material control change occurred during the quarter.
- Post-combination debt creates interest, refinancing, covenant and liquidity risks. The credit agreement includes restrictions on additional debt, distributions, investments and asset sales, among other matters.
Important facts for investors to verify
- Use the combined company’s post-closing financial statements—not this SPAC’s pre-combination results—to assess Mirion’s revenue, margins, cash flows and operating performance.
- Confirm actual borrowings, cash balances, interest costs and covenant headroom under the $830 million term facility and $90 million revolver.
- Review the final purchase accounting, transaction costs, redemption impact, PIPE proceeds and post-closing share count, including potential dilution from warrants and equity awards.
- Track remediation of the material weakness and any subsequent restatements or control deficiencies.
- Assess the financial and operational effects of the disclosed ransomware incident, product recall, COVID-19 impacts, supply constraints and fixed-price contracts.