Greetings. And welcome to Mirion Technologies Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Alex Gaddy. Thank you. Mr. Gaddy, you may begin.

Good morning, everyone. And thank you for joining Mirion’s fourth quarter and full year 2022 earnings call. A reminder that comments made during this presentation will include forward-looking statements and actual results may differ materially from those projected in the forward-looking statements. The factors that could cause actual results to differ are discussed in our annual report on Form 10-K and quarterly reports on Form 10-Q that we file from time-to-time with the SEC under the caption Risk Factors and in Mirion’s other filings with the SEC. Quarterly references within today’s discussion are related to the fourth quarter and full year ended December 31, 2022. The comments made during this call will also include certain financial measures that were not prepared in accordance with Generally Accepted Accounting Principles. Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the appendix of this presentation accompanying the call today. All earnings materials can be found on Mirion’s IR website at ir.mirion.com. Joining me on the call today are Larry Kingsley, Chairman of the Board; Tom Logan, Chief Executive Officer; and Brian Schopfer, Chief Financial Officer. Now I will turn over – turn it over to our Chairman of the Board, Larry Kingsley. Larry?

Thank you, Alex and good afternoon, everyone. I’d like to get today’s call started by thanking you all for your continued support of Mirion throughout our first full year as a public company. 2022 was a dynamic year for Mirion, from navigating a challenging supply chain environment, to responding to record inflation and the Russia-Ukraine conflict. There was no shortage of hurdles to overcome. I am incredibly proud though the Mirion team’s resolve in the face of adversity, we believe the solid results we reported this morning are a direct testament. Our Medical business accelerated upon recent growth trends, while Industrial took a meaningful step forward during the quarter. Overall, the team was able to deliver on expectations laid out on our last call and has built positive momentum heading into 2023. Mirion has positioned itself well to deliver growth this year and I believe the guidance published this morning showcases the cycle-resistant nature of our strategic positioning in the market. Mirion’s diverse portfolio of products and services, and experienced management team have a long track record of proven results. The team has the right roadmap in place to capitalize on what we expect will continue to be a robust demand environment. We are entering 2023 with strong momentum across our end markets and a growing backlog. I am also very encouraged by the execution focused mentality we built through the course of 2022 and the team has clear focus on the key strategic initiatives required for growth, profitability and cash flow generation. The future for Mirion is bright, customer engagement and demand are strong and our teams remain committed to executing. Now I am going to turn the call over to Tom Logan, Mirion’s CEO. Tom? Tom, I think, you are muted.

Diving into our results, there are few key areas I’d like to highlight today. First, we finished the year with 8% year-over-year order growth for the full year, which in turn resulted in backlog growth of 10%. This excludes the impact of the Honey Kevie project cancellation as previously discussed. Second, we delivered total company organic adjusted revenue growth of over 19% for the quarter and nearly 6% for the full year. While, these numbers could have been higher without the negative impacts from the Russia-Ukraine conflict and foreign exchange pressures, I am incredibly proud of the effort and commitment displayed by our team. Third, net leverage reduced to 4.4 times EBITDA as of December 31st, driven by better free cash flow performance in line with our expectations. Note that my goal is to reduce leverage below 4 times by the end of 2023. Finally, we initiated 2023 financial guidance this morning. Looking ahead to the full year, we are expecting organic growth of 4% to 7% with adjusted EBITDA of $172 million to $182 million. Now, let’s get into more detail on our order performance and market outlook for 2023. Beginning with slide four, our end market demand dynamics remains strong heading into 2023, showcased by 8% year-over-year order growth in 2022. On a constant currency basis order growth was 13% for the full year. We continue to see broad-based demand across business segments and are encouraged by our robust backlog coverage. We expect conversion rates to increase materially in 2023, covering approximately 55% of our next 12-month revenue. On the Medical side of the business, we experienced incredible growth dynamics last year and expect to see these positive trends continue, albeit at a more moderated rate. Year-over-year medical order growth was 14% or 15% on a constant currency…

Thanks, Tom, and good morning everyone. To kick off my commentary, I will ask you to please turn to slide six to take a deeper dive into our fourth quarter and full year results. Looking at the fourth quarter, total company adjusted revenue was up 20.5% and adjusted EBITDA was up 25.9%. Total revenue in the quarter was $217.9 million and organic growth was 19.1%. Adjusted EBITDA totaled $56.4 million in the quarter, with margin expanding 110 basis points to 25.9%. During the fourth quarter, we realized approximately 5% growth from price, offset by inflation and one-time costs associated with accounts receivable reserves, as well as a one-time supply chain reserve relating to circuit boards. Looking at the full year, total company adjusted revenue was $717.8 million, featuring 5.1% reported growth with organic growth of 5.7%. Adjusted EBITDA was down slightly compared to 2021 finishing at $164.7 million with adjusted EBITDA margin contracting 130 basis points compared to 2021 to 22.9%. As a reminder, year-over-year adjusted EBITDA perform -- margin performance was negatively impacted by approximately $12 million of public company costs in 2022 or approximately 170 basis points. This was our last time comping against a period without public company costs. Fourth quarter adjusted free cash flow was $19.5 million, much more representative of the go-forward expectation for the company. Higher interest rates and net working capital requirements continue to be a challenge, but I am encouraged by the progress exiting the year. As a result, we saw leverage reduced to 4.4 times as of December 31st, slightly ahead of what we guided on our third quarter call. Looking forward, our operating teams are very focused on achieving Tom’s leverage target of 4 times or lower by the end of 2023. I’d also like to note that foreign currency…

Brian, thanks. Before we open things up for questions, I’d like to recap 2022 and highlight a few key areas of focus for us we prepare for 2023. First, we finished 2022 with positive momentum built off our strong fourth quarter results. Our team’s commitment to execution enabled us to deliver on the expectations we set back in November. Second, we are entering 2023 with robust backlog and NTM revenue coverage for approximately 55%. Third, we have taken a balanced approach to setting guidance and believe we have adequately considered the risks and opportunities we see for the year. Fourth, we remain committed to deleveraging our balance sheet through disciplined capital allocation. Any acquisitions will be highly selective and supportive of my goal to reduce leverage below 4 times by the end of the year. Next, operational execution remains front and center. I spent most of 2022 running both the Medical Group and our RTQA businesses in addition to my day job. This culminated in a wholesale rebranding of Mirion Medical, a sweeping reorganization and a significant improvement in our operational performance. With the onboarding of Mike Rossi, I now have the bandwidth to focus a greater degree of attention on our Industrial group. Finally, we have the best team in the industry and I am relentlessly focused on employee engagement and organizational health. I am confident that we are well positioned to have a great 2023 and look forward to updating you on our progress in May. Thanks again for your time and continued support and I will now pass things back to, Alex, to open up Q&A.

Thank you, Tom. That concludes our formal comments for today. I will turn it back over to the Operator for question-and-answer session.

Thank you. [Operator Instructions] Our first question comes from Andy with Citigroup. Please go ahead.

Good morning, everyone.

Hey, Andy.

Hi, Andy.

So your Medical related growth continued to accelerate over the last two quarters of 2022. I know you talked about strength in all of your major Medical businesses and I know you are forecasting mid-single-digit growth in 2023, you talked about demand normalization and tough comps. You have two of the three Medical businesses project to be up high-single digits, I think dosimetry is up mid-single-digit. So you are just being conservative on the overall segment, especially given the new Instadose rollout or are you seeing any slowing in any of your Medical businesses and that’s why you have got lower growth model?

Yeah. Two things, Andy. Firstly, on the dosimetry business, historically that is a slow growing market. With the advent of Instadose, we believe that over the last number of years, we have been able to grow at a nominally higher rate than the market overall, but the growth rate there is inherently more conservative than what we will find in both -- in either RTQA or in nuclear medicine. The other important thing to note is that we just were lapping a barnburner of a year this year in both of the RTQA and nuclear medicine segments. And while market dynamics continue to be very favorable and our outlook is positive, I think, we are just being measured in terms of how we are forecasting growth.

Very helpful, Tom. And I think we understand that you will have significant order growth in Q4 in nuclear and defense, but you mentioned a clear pipeline of incremental newbuild in nuclear orders. So you think your nuclear business in terms of orders reaccelerate from here and then I know you are expecting more defense related orders, you mentioned the elongated order cycle for these types of orders, do you see them getting over the finish line in 2023?

Yeah. Firstly, on the Nuclear power market, if you look at our order intake for the year, clearly we are seeing an acceleration of demand overall and that’s broadly reflective of the trends that we have talked about on numerous occasions. Principally noting the very high degree of government and popular support for nuclear power as an important solution to a variety of energy problems. And second -- secondly the elevated price of electrical pricing, which is principally driven by gas pricing overall. Our view is that that strength continues, we do generally believe there is a lag effect between secular market changes within the Nuclear industry and in the downstream impact on our business and so we are hopeful that as the industry overall continues to gain momentum and gain health, that we will see that continue. It’s important to note that our installed base is about three quarters of our nuclear power-related revenue, which is -- as you have seen in the presentation constituted about 35% of our total revenue last year. So looking at the installed base is far and away the most important lens through which to evaluate the overall nuclear market and as noted those trends are favorable. But on the newbuild side, we continue to see significant activity in terms of the pipeline of projects that we are engaged with and we expect to see a broad based acceleration in utility scale developments continuing over the next decade or more. On the defense side, we continue to note that the degree of engagement, that we have with the 19 NATO militaries, NATO armed forces that we support, continues to be high, as it does with other supranational agencies and government departments. We have noted that in general with government contracted business, that post-COVID order cycle times have lengthened. We continue to remain bullish about our prospects to see significant order intake here. But to be clear, we have been very measured, very conservative about how we have projected that for the year.

Yeah. The other thing, Andy, just to give you some context on Nuclear power, if you take out some of our larger orders, so let’s say, above, call it, $5 million, we are on an as reported basis you are kind of mid-teens on the order growth, so if you adjust that for ex-FX, sorry, where we are kind of more in the 20% range. So the under -- I think the point is, the underlying -- there’s some noise with some of the bigger orders throughout the year, but the underlying business clearly continues to be healthy.

That’s helpful guys. And then, lastly, could you go over the -- again the margin headwinds in 2023 for Industrial and Medical. Obviously, you are forecasting lower than average incrementals for 2023. How much impact or the mix issues in Industrial expect to have on your business and I think even if we exclude the inorganic headwinds, you weren’t forecasting that sort of normalized 50% plus incrementals from Medical. So what else is holding you back there, maybe your assumptions around price versus cost and supply chain would be helpful?

Maybe I will take that. So, first off, I mean, we are assuming in the guide basically price cost, so price versus inflation to be neutral. So I think we are going to work super hard to make sure that we get -- we do get some benefit there. But right now where we are sitting, we are saying price cost neutral. The other thing we are seeing in the first half is, we have a bit of one of our businesses that will improve throughout the year and it’s more about volume and just the product mix and it’s really timing related. We have very good visibility into this business. It’s just a little bit weaker in the first half than what we would have liked and it’s just about how the factors are going to be loaded through the year. So I think we have good confidence, and the other thing, I would say, Andy is, we were almost 10% higher in backlog coverage this year versus where we sat at this time last year. I think that gives us just a lot of confidence in the visibility we have thinking about 2023.

Yeah. And by that, when Brian says 10% higher, it means 10 points. So it’s -- yeah, essentially taking us up from mid 40s coverage into the mid-50s. So it is a significant increase.

Appreciate it guys.

[Operator Instructions] Our very next question comes from Joe Ritchie with Goldman Sachs. Please go ahead.

Great. Thank you. Good morning, everyone.

Hey, Joe.

Hey, Joe.

So maybe just tackling the visibility question for the guidance -- the organic growth guide for the year. So typically like backlog coverage of 55%, how does that compare to normal and then as you kind of think about the swing factors then for 2023, Tom, what do you think is kind of like the key swing factors to see like, whether organic growth could maybe exceed the guidance that you have given for this year?

Yeah. So a couple of things, Joe. Firstly, as noted, I think, our backlog coverage coming into 2022 was about 10 points lower than we are sitting now. So on a percentage increase standpoint, that is a substantial increase overall in the NTM coverage. And the good news too is that, if you look at the average order size, it is smaller and so the quality of the coverage generally is better. If you look at the guidance sensitivity, I think, we have a page in the deck. I think it’s page 11, that just kind of highlight some of the key issues and opportunities that we see out there and some upside potential drivers would include continuing growth and momentum, essentially the flywheel effect within the nuclear power market, continued improvements and supply chain volatility and labor market tightness. The potential optionality associated with larger civil defense and military orders that are not currently reflected in the guide. We have -- I think we have been very clear that our top focus is on operational execution this year and we think we see some potential blue sky as it relates to cost reduction efforts and improvements in our overall pricing heuristics. And then, finally, as Brian noted, the overall currency environment is a little bit more favorable for us this year. On the downside, the world continues to be a little bit of a volatile place and so one of the key risks obviously is devolution in geopolitical dynamics. Secondly, the extent to which inflation worsens. We saw CPI print this morning, that was a little bit worse than consensus, but on the other hand reflecting a continued decline overall in inflation trends. If we do see any kind of unanticipated tightness in supply chain changes to the macro picture or further degradation in currency or interest rate, obviously, all of those things could be game changers. But as noted and I think emphasized, we have tried to be very balanced and measured and in our forecast approach to this year in order to accommodate these and do so with confidence.

Yeah. That’s super helpful, Tom. And I guess just thinking about the cadence for the year as well, maybe a question for Brian. I know that you guys have tried to be thoughtful about the guidance, just want to make sure that we get just seasonality as well. It seems like you have got some really nice visibility into the first half of the year and so is the expectation then that in the first half of the year, you can see EBITDA growth at least at the mid-point, maybe towards the higher end of the range -- the growth range for the year? So any commentary around that would be helpful?

Yeah. I think, Joe, what I said during my prepared remarks is, we have a bit of a headwind on the margin Industrial side in the first half, because of some of the mix issues that I noted. And then -- but we have good visibility and expect those will -- well, they will clear up going into the third quarter and fourth quarter. So I think the first quarter obviously is a -- the easier comp on the Medical side, so I expect that to come to fruition. I think the Industrial guys had a great fourth quarter. So I expect kind of that to be pretty decent in the first half and pick up into the back half. I think margins -- the margin cadence will be a little lighter than you -- then we would hope in the first half, but better -- much better in the second half and I think the visibility to both some of the cost out program, some of the pricing continuing to flow through the P&L. Our ability to get after the supply chain, et cetera give us confidence there. And like I said, our backlog coverage continues to be to be very good. But we are a little bit of a mix headwind kind of in the first half that we just need to overcome.

Got it. And Brian, just to be clear on pricing, are you guys expecting to be price cost positive this year?

Neutral is what’s in the guide. So that’s upside if we can do better and we continue to be very aggressive in the market on pricing. But as we saw this year, it takes a bit of time to kind of flow into the P&L. I will just note one more time, Joe, for you, we did end the fourth quarter at 5%, which is what we had expected going back a couple of quarters. So the team is executing well on the pricing. It just takes some time to flow through the P&L.

Yeah. That makes sense. Last one for me. Tom, you mentioned on improving operating environment in Industrial. Can you just elaborate on what you are seeing and how it’s impacting your business? It sounds like supply chain has gotten at least modestly better, just wanted to get some thoughts there?

Yeah. So few things, Joe. Firstly, to your point, yeah, supply chain dynamics in our view are never going to be what they were pre-pandemic, but they certainly seem to be improving and the number of kind of episodic issues that we have seems to be on the decline overall. But more broadly, if we look at the drivers of performance there, again a lot of it is driven by the kind of order intake experience we had last year and the health of the market segments that we are selling into. Our business model hasn’t changed and if you look at the fall through at the margin level to the bottomline, that is inarguably the most important dynamic in terms of overall operating performance for the business. So to the degree that we can be price cost neutral or better, to the degree that we can be disciplined about factory overhead costs and OpEx, then volumetric increases are going to be reflected in strong performance overall. So it really is a function of more than anything else just executing well. And I kind of referred to the fact that, it’s important to remember last year was our public debut and so it was very consuming to become a public company to deal with all of the related issues, as -- again in our debut year. But on top of that, given the fact that we were really creating coherence within our Medical group, it consumed an enormous amount of my time to focus on Medical and specifically on our radiation therapy business overall. With the hiring of Mike Rossi, President of the Medical Group, it gives me a more normalized bandwidth to be able to support and assist and focus on execution across the entire enterprise and I expect that will have some beneficial impact on our operating performance for the year.

Great to hear. Thank you.

Our next question comes from Chris Moore with CJS Securities. Please go ahead.

Hey. Good morning, guys. Thanks for taking a couple of questions. So maybe just back to price for a second, so price cost basically neutral, if you are looking at 4% to 7% organic growth. So from a price volume standpoint, most of the -- most of that growth is in price, is that fair?

Yeah. It’s -- I mean just because of our ramps and it’s actually pretty balanced when you do the math out on price volume. So I think that’s how we are thinking about it.

Got it. Tom, you called out SMR here and…

But.

Go ahead.

Chris, it’s -- there is a slide, I think, it’s 16, that actually shows you the range between and how we split it between volume and price, you would see it’s pretty balanced, little more volume on the high end of the range, balanced at the low end.

Perfect. Thank you. Called that SMR as potential big opportunity, just curious from a sales cycle and development cycle perspective is that meaningfully different than what you see on the traditional utility?

It is in the sense that there are lot of new players and there is a substantial amount of government funding that’s coming into the space. And just to put it into context, why we are specifically excited about the SMR market? Understand, that firstly, if you look at total installed nuclear capacity globally, today there are roughly 450 operating utility scale nuclear power plants with about 380 gigawatts or 390 gigawatts of total capacity. If you look at North America alone and look at the decommissioning coal -- profile for coal plants, there you have about 450 gigawatts of scheduled decommissioning over the next 15 years or so, that is the core target market for the SMR space. And candidly, I think, as we have noted on prior calls, this is a market that’s moving faster than previously it had. There seems to be an acceleration of efforts, more tangible efforts and as noted in the prepared remarks, we have booked backlog on several of these projects, but the key right now again as the strategic engagement with the major sponsors here to work hard and try and get our industry leading solutions specked into these power plants.

Okay. Got it. Very helpful. Mostly others have been covered. I will leave it there. I appreciate it guys.

Chris, thank you.

There are no further questions at this time. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a nice day.