Mirion Technologies, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023, compared with the three months ended March 31, 2022. Mirion supplies radiation detection, measurement, analysis and monitoring products and services through its Medical and Industrial segments.
Financial results
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $182.1 million | $163.2 million |
| Gross profit / margin | $79.1 million / 43.4% | $64.4 million / 39.5% |
| Operating loss | $13.6 million | $33.6 million |
| Net loss | $42.9 million | $19.0 million |
| Net loss attributable to Mirion / diluted EPS | $41.9 million / $(0.22) | $17.7 million / $(0.10) |
| Adjusted EBITDA (non-GAAP) | $36.6 million | $34.9 million |
| Operating cash flow | $(2.7) million | $11.4 million |
| Capital expenditures | $7.5 million | $8.7 million |
Revenue rose 11.6%. Medical revenue was $66.4 million (up $6.3 million); Industrial revenue was $115.7 million (up $12.6 million). Management cited pricing and organic growth in both segments, with Industrial also benefiting from the 2022 SIS acquisition. Gross margin improved, and both segments moved from operating losses to operating income: Medical $0.7 million and Industrial $5.5 million.
The larger net loss reflected a $13.4 million current-quarter warrant remeasurement loss, versus a $19.9 million gain in the prior-year quarter—a $33.3 million unfavorable year-over-year swing—along with $7.0 million higher net interest expense and a $2.6 million debt-extinguishment loss. Lower SG&A and improved segment performance partly offset these effects. Adjusted EBITDA is a non-GAAP measure and should be considered alongside GAAP results.
Balance sheet, debt and liquidity
- Cash and cash equivalents were $88.3 million at March 31, 2023, versus $73.5 million at December 31, 2022; including restricted cash, the total was $90.1 million.
- Third-party borrowings were $699.6 million gross and $685.1 million net of deferred financing costs. The term loan balance was $696.7 million; its stated interest rate was 7.48%. The company repaid $125.0 million of term-loan principal during the quarter.
- About $79.2 million remained available on the $90 million revolving facility. The company reported compliance with debt covenants at quarter-end.
- Current assets were $508.4 million and current liabilities were $233.3 million. Management said operating cash flow, supplemented by long-term debt arrangements, should provide adequate liquidity for the next 12 months.
- Operating cash flow declined to an outflow, with working-capital pressures including higher inventory, bonus payments and timing of project milestones. Financing cash flow included $150.0 million of equity proceeds and the $125.0 million debt repayment.
Material changes, outlook and notable items
- T. Rowe Price funds purchased 17,142,857 Class A shares at $8.75 per share in a direct registered offering. The company used proceeds to reduce debt; the early repayment generated the $2.6 million write-off of financing costs.
- Backlog and remaining performance obligations were approximately $740.8 million at March 31, 2023, compared with $737.4 million at year-end. Mirion expected to recognize approximately 50% in 2023, 25% in 2024, 8% in 2025 and 8% in 2026, with the balance thereafter. These are recognition expectations, not earnings guidance; the filing provides no specific full-year financial guidance.
- Supply-chain disruption continued to delay sourcing and revenue recognition and raise materials and freight costs. Price increases partly mitigated cost pressure; management warned that disruption could weigh on future margins.
- Russian-related project backlog was $98.4 million. The company reported approximately $3 million of net contract assets and receivables, about $1 million of related reserves, $11.8 million of advance-payment guarantees and $14.1 million of performance guarantees. A Russian customer made a claim in April 2023; the risk-factor disclosure describes a claim of approximately $18 million for penalties and sought return of advance payments. Management views the claim as without merit but said the outcome could affect cash flows and results.
- After quarter-end, on April 3, Mirion sold Biodex physical-medicine assets for $1.0 million cash, with up to $7.0 million of additional payments contingent on business performance.
- Disclosure controls were not effective at March 31 because of a material weakness in certain French division IT general controls over system changes and user access. Management reported no resulting misstatement for the quarter and was implementing remediation; it concluded the financial statements were fairly presented.
Key facts for investors to verify
- Progress and financial impact of the French IT-control remediation, and whether disclosure controls are subsequently deemed effective.
- Outcome of the Russian customer dispute, any guarantee calls or contract changes, and collection or recoverability of Russian-related balances.
- Conversion of backlog into revenue and cash, particularly given project timing, fixed-price contract exposure and continuing supply-chain constraints.
- Debt service exposure if benchmark rates remain elevated; the term-loan rate was 7.48% at quarter-end, compared with 3.25% a year earlier.
- Cash generation and working-capital trends, including inventory growth, and the terms and realization of the contingent Biodex sale proceeds.