Mirion Technologies, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. The company provides radiation detection, measurement, analysis and monitoring products and services through its Medical and Industrial segments.
Financial performance and liquidity
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $163.2 million | $166.2 million |
| Gross profit / gross margin | $64.4 million / 39.5% | $62.5 million / 37.6% |
| Operating loss | $33.6 million | $8.9 million |
| Net loss | $19.0 million; $17.7 million attributable to Mirion stockholders | $40.7 million |
| Basic and diluted loss per share | $0.10 | $6.18 |
| Net cash from operating activities | $11.4 million | $10.9 million |
- Q1 2022 adjusted EBITDA, a non-GAAP measure, was $34.9 million versus $39.9 million. Adjusted net income was $17.5 million and adjusted EPS was $0.10; the company reported a GAAP net loss.
- Cash and cash equivalents were $84.2 million at March 31, 2022; cash, cash equivalents and restricted cash totaled $87.2 million. Current assets were $436.5 million and current liabilities $213.4 million.
- Gross third-party borrowings were $831.0 million; the balance-sheet carrying amount, net of financing costs, was $810.7 million. The term loan matures in October 2028 and had a 3.25% interest rate. Approximately $82.0 million remained available under the revolver after letters of credit. The company reported compliance with debt covenants.
- Investing cash outflow was $7.9 million and financing cash outflow was $0.6 million. Non-GAAP free cash flow was $2.7 million; adjusted free cash flow was $10.0 million.
Changes versus the prior comparable quarter
- Revenue fell $3.0 million, or about 1.8%. Medical revenue rose $8.6 million to $60.1 million, while Industrial revenue fell $11.6 million to $103.1 million.
- Management attributed the overall revenue decline mainly to project timing, Russia-Ukraine-related delays, supply-chain constraints and foreign exchange. Medical growth reflected acquisitions, price increases and organic growth, partly offset by supply-chain impacts.
- Gross profit increased $1.9 million and gross margin improved. Operating loss widened by $24.7 million, primarily as SG&A increased $30.5 million, including higher purchase-accounting amortization and stock-based compensation. R&D expense decreased $3.9 million.
- Net loss narrowed, helped by lower interest expense following repayment of related-party notes at the 2021 business-combination closing and a $19.9 million non-cash gain from the reduction in warrant liabilities. The comparison is not fully like-for-like: Q1 2022 is the Successor period and Q1 2021 the Predecessor period, with acquisition accounting and a capital-structure change affecting reported results.
- Backlog / remaining performance obligations were $753.5 million at March 31, 2022, up from $747.5 million at December 31, 2021. Management expected to recognize approximately 41% in fiscal 2022, 23% in 2023, 16% in 2024 and 9% in 2025.
Outlook, risks and unusual items
- No specific revenue or earnings guidance was provided. Management said operating cash flow, together with long-term debt arrangements, was expected to provide adequate liquidity for the next 12 months.
- On May 2, 2022, a customer announced termination of a contract with a Russian state-owned entity for a nuclear power plant in Finland. Mirion reported approximately $67 million of related remaining performance obligations, with about 80% scheduled over the next five years; the associated deferred contract revenue liability was $6.4 million. No related receivables or costs in excess of billings were outstanding at March 31. The filing does not quantify the ultimate financial effect of the termination.
- Management said Russian customers and projects involving Russian counterparties were expected to represent approximately 5% of revenue for the 12 months ending December 31, 2022 and subsequent years. Sanctions had already delayed revenue recognition; further delays, cancellations or requests to refund advance payments were possible.
- Supply-chain disruption delayed sourcing and shipments and increased material and freight costs. Price increases offset some cost pressure, but management warned that disruptions could negatively affect future margins. Fixed-price contract execution and inflation were also identified as risks.
- The company reported ordinary-course legal matters that it did not expect to materially affect results, financial condition or cash flows. It recorded $2.0 million of restructuring costs in the quarter and identified approximately $1.5 million of additional restructuring charges, primarily expected within 12 months.
- Acquisition accounting substantially increased acquired-intangible amortization and included a $6.3 million inventory valuation charge in Q1 2022. The company also recorded $7.8 million of stock-based compensation, including $6.8 million related to profits interests.
Important facts for investors to verify
- How the terminated Russia-related project changes backlog conversion, revenue timing and any potential advance-payment exposure.
- Whether supply-chain, freight and inflation pressures persist, and whether price increases protect gross margins.
- Backlog quality, customer funding and timing of delivery, particularly for long-term and fixed-price contracts.
- Debt-service capacity, variable-rate exposure, covenant headroom and revolver availability as operating conditions change.
- The impact of purchase-accounting charges, stock-based compensation and warrant fair-value movements when assessing GAAP results alongside management’s non-GAAP measures.
- Potential dilution: 27.25 million warrants were outstanding, in addition to equity awards and performance-vesting founder shares.