Mirion Technologies, Inc. (MIR) Q3 2026 Earnings Report, Transcript and Summary

Good day, everyone. My name is Megan, and I will be your conference operator today. At this time, I would like to welcome you to the Mirion Third Quarter 26 Earnings Call All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time and you have joined via the webinar, please use the raise hand icon which can be found at the bottom of your webinar application. At this time, I would like to turn the call over to Eric Linn, Head of Investor Relations and Treasurer.

Thank you, and good morning. Welcome to Mirion's third quarter 26 Earnings Conference Call. Joining me this morning are Mirion's founder, chairman, and CEO, Tomo Logan, and Mirion's CFO and medical group president, Brian Schopfer. Before we begin today's prepared remarks, allow me to remind you that comments made during this call 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 reports on Form 10 k, quarterly reports on Form 10 Q, and in Mirion's other SEC filings, under the caption Risk Factors. Quarterly references within today's discussion are related to the third quarter ended 09/30/2026, unless otherwise noted. 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 the presentation accompanying today's call. All earnings materials can be found in the Investor Relations section of our website at www.mirion.com. With that, let me now turn the call over to Tomo, who will begin on Panel 3.

Eric, thank you, and good morning, everyone. Yesterday after market close, we issued our third quarter results and I am pleased to report a quarter that reflects the continued positive momentum in our markets. Strong orders including $140 million of large opportunity wins revenue growth that demonstrates backlog conversion, and full year guidance that has us expecting mid- to high-teens organic revenue growth in Q4. Let's start with orders, which remain the key bellwether for our business. Here, we delivered yet another strong quarter, up 62% year over year excluding M and A to $340 million The nuclear power end market led the way. With an impressive 105% increase also excluding M&A. On the revenue performance, you will recall that in July I told you we were gearing up for a strong second half acceleration. Third quarter, organic revenue grew 6.5%, and we are tracking towards mid- to high-teens organic revenue growth in the fourth quarter. Our expanding backlog is doing what is expected: converting into accelerated revenue. That momentum together with the visibility we now have through 9 months informs our revised full-year 2026 guidance, which Brian will walk through. I would also note that we expect net leverage to improve to approximately 2.6x by year end, which reflects both the earnings growth and the cash generation that is expected in our fourth quarter. Let me emphasize that our debt structure is very low cost. With an average coupon of <3% or less than half of what it would be if it were in the form of straight debt. Thus, our effective leverage exposure is arguably substantially lower. Than many people believe when looking at screens. On the subject of guidance and before we go to Panel 4, I would like to address our previously announced 2028-margin target which we now believe is too aggressive. Our medical organic growth has been tempered over the last few years due to external factors and we believe that margin expansion at Paragon will be behind initial expectations. Additionally, I am prioritizing significant investments in AI and cybersecurity to capture the full potential from accelerating demand in our end markets. We have a long history of driving margin growth. However, we are in the midst of an opportunity. It would be shortsighted on our part to prioritize a near term margin target to the detriment of an opportunity that we believe will drive long term shareholder value. Instead, we are committed to annual margin expansion driven by operating leverage, software, procurement, and self help initiatives. Now let's turn to Panel 4 which illustrates our Q3 order book details versus Q3 of last year. Before M and A core orders grew 62%. Total orders including a $46 million contribution from Paragon and Certrec grew 85% to $386 million despite the Chinese debooking previously discussed on our Q2 call. Nuclear and safety orders excluding the Chinese debooking and M&A increased $130 million driven by a doubling of orders in the nuclear power end market. Labs and research orders nearly doubled held by 2 large Department of Energy orders. Defense and diversified orders grew double digits and medical orders increased $19 million versus last year due to strong intake in the RTQA end market. Overall, the medical segment demonstrated order growth across all 3 end markets. Panel 5 puts the broader order trajectory in context. This chart shows trailing 12-month orders excluding M&A. And I think the picture speaks for itself. You can see the step up beginning in the fourth quarter of last year, which further accelerates into Q3. On a trailing 12-month basis, orders have grown 37% excluding M&A. This growth primarily reflects nuclear power end market growth and importantly the installed base was the largest year over year contributor. Recall that we have a presence in more than 98% of the world's nuclear reactors. Approximately 80% of our nuclear power revenue comes from today's operating fleet. This is not growth built on unpredictable newbuild timelines. It is growth built on reactors that are running today. it is also reflective of what I described last quarter shown on Panel 6 as the waves of installed base customer demand. The catch up capital spending after decades of profound capital rationing the life extensions and power uprates that represent near term capacity increases, and the digital transformation that is beginning to take root. What I would highlight today is that all 3 waves are now beginning to materialize. The first wave is catch up capital spending. For the August [inaudible] report, US fleet capital spending dollars per megawatt hour reached $9.70 in 2025. that is up from $7.80 in 2024 and 6 point 4 in 21. The second wave is life extensions and power upgrades. In recent weeks, we saw upgrade announcements totaling approximately 1.59 thousand megawatts across Constellation's units, in Illinois, Pennsylvania, and New Jersey. 433 MW across Vistra's fleet in Pennsylvania and Ohio, and 190 MW Calvert Cliffs in Maryland. Alongside those operates, 96% of U.S. reactors have now been approved for 20 year life extensions and the required downstream investment work is already underway. And there may be even more runway. In July, the NRC proposed a rule that would allow license renewals of up to 40 years. Double today's 20 year limit. If finalized, operators could plan for decades of additional operation and every added year of operation means continued demand for the instrumentation, software, and services that we provide. The final wave is digital transformation. We were previously awarded an order to digitally upgrade part of the reactor protection at the first operating unit of a large installed nuclear power plant. That equipment has now shipped with installation beginning in November and we expect to see additional opportunity with follow on units. This is a clear example of digital transformation moving from concept to commitment across our installed base. And we are still very early in this wave. Importantly, these 3 waves are not contingent upon future events. Most specifically data center growth. Fleet operators have already made long term commitments based upon a pro profound change in market dynamics, which are almost certainly likely to continue. Given the significant deficit in global electrical generating capacity. What will likely follow is a multi year, possibly multi decade capital growth cycle that will affect every category of instrumentation software and services that we provide to nuclear power plant operators. Let me pivot now to our backlog on Panel 7 which illustrates the positive trend in revenue recognition. Total backlog now stands at $1.25 billion up from $816 million a year ago. That growth includes Paragon and Certrec, but even excluding M&A, we are seeing a sizable increase in expected backlog conversion in each of these subsequent. Current year backlog recognition is projected to be $292 million versus $212 million last year. 2027 backlog is $443 million versus $285 million. Put those together and we have approximately $735 million of backlog to be recognized in Q4 26 and full year 2027. >$200 million greater than this time last year. This is the heart of the story Total backlog growth driving an increase in near term revenue recognition. I will conclude my prepared remarks on Panel 8 which shows the improving revenue visibility that backlog is providing. At the midpoint of our revised guidance, we now have 95% revenue-coverage for the full year. That compares to 94% at this point in each of the last 3 years. Here's the math. Year to date revenue through September is $802 million. We have $292 million of backlog expected to convert in the fourth quarter And together, that is approximately $1.09 billion against the midpoint of our full year revenue guidance of $1.15 billion. The remaining go get is on the order of $60 million and most of that reflects intra quarter medical business which is the kind of revenue we have historically delivered. And Paragon's peaks business that does not appear in backlog. The combination of year to date performance, and the fourth quarter backlog meaningfully derisks the full year. To summarize, we are delivering impressive orders performance converting expanding backlog into revenue, and remain on track for mid- to high-teens organic revenue growth in Q4. We believe the generational tailwinds in nuclear power, are only beginning to show up in our results and will set us up for strength in 2027. With that, let me turn it over to Brian to walk through the financials, and the details of our revised guide.

Brian? Thank you, Tomo and good morning, everyone. Continue the prepared remarks on Slide 9 outlining our financial performance. Third quarter total revenue was $278 million, an increase of 24.5% versus last year's third quarter. Organic revenue growth was 6.5%, with both segments inflecting higher from what we saw in the first half of the year. Third quarter adjusted EBITDA was $65 million or 23.7% higher than last year. Margins were 23.3% compared to 23.5% last year and below the modest year over year expansion we guided in July. A contraction in nuclear and safety margins was driven primarily by onetime adjustments to legacy projects within Paragon, and headwinds in our sensing and North America businesses. This was more than offset by a 200-basis-point expansion in medical margins. Margins would have expanded approximately 150-basis-points if you exclude a 50-basis-point headwind from M&A, 50-basis-points from certain onetime items, almost 70 basis points from AI-related initiatives this quarter. On that last point, we have spent almost $4 million in year to date operating expenses on AI initiatives that we expect to drive significant value in the coming years. Note, through 3 quarters, we have already actioned AI investments in excess of our initial full year budget. We opportunistically repurchased $56 million worth of shares in the third quarter. Which equated to 3.6 million shares. We completed our initial $100 million share repurchase program, announced in December 2024. And in August, our board approved a new $250 million program. Of which $235 million remains. We generated $47 million of adjusted free cash flow bringing our year to date total to $107 million or double the prior year. This equates to a 58% conversion of adjusted EBITDA through 9 months. Lastly, as Tomo outlined, we experienced excellent Q3 order growth across both segments. Slide 10 details the continued progress against our large opportunity pipeline. In the third quarter, we were awarded $140 million of large opportunities, or $122 million net of the Chinese newbuild debooking we discussed in July. Previously highlighted awards in July included the European installed base order, the US Department of Energy order. In terms of new awards, we received a Paragon order with the US Department of Energy and an Egyptian large scale newbuild order. This brings our year to date awards to $244 million, which is $234 million higher than the same period last year. Importantly, we have not lost any of the large opportunities in our pipeline this year. We are targeting approximately $125 million of additional awards in the fourth quarter. Included in this $125 million are 2 orders totaling >$80 million that were actually awarded in September, that are not currently in our backlog as the project is awaiting EU funding approval. These are related to newbuilds in France and are part of our strategic alliance with EDF. Before digging into the quarterly financial results, first, an update on nuclear power on the nuclear power end market on Slide 11. Nuclear power orders, excluding M&A, grew 105% in the third quarter. Or 108% excluding FX. Excluding the Chinese debooking we discussed last quarter, orders were actually up 134%. We booked $16 million of SMR orders in the quarter, roughly in line with $17 million in last year's third quarter. Bringing year to date SMR orders to $54 million which came from 11 different SMR designers. Nuclear power organic revenue grew 14%, driven by growth in the installed base and SMRs. This is a meaningful inflection from the flat organic growth we reported in the first half. As the backlog we have been building has begun converting into revenue. We remain confident that nuclear power will see double digit organic revenue growth for the full year, which implies further acceleration in the fourth quarter. Let's get into the quarterly financials beginning on Slide 12. Consolidated third quarter revenue grew 24.5% to $277.8 million. Approximately, 18.6% of growth came from acquisitions, mainly Paragon, partially offset by a 60-basis-point headwind from FX. Organic revenue growth was 6.5%, slightly below the high single digit guide we gave in July. As a reminder, we closed the Certrec acquisition on 07/31/2025. Third quarter adjusted EBITDA was $64.8 million. Or 23.7% better than last year's third quarter. Adjusted EBITDA margins were 23.3% compared to 23.5% last year. As margin expansion in medical was more than offset by expected contraction in nuclear and safety. Excluding Paragon, margins would have been 23.9% or up for the quarter. Adjusted EPS totaled $0.12 per share in the quarter, flat versus the 12¢ we reported last year, and up from $0.11 on a comparable basis that includes stock based compensation. As a reminder, beginning in 2026, we are including stock based compensation our adjusted EPS calculation. We have an adjusted EPS reconciliation slide in the appendix. That has the details for your modeling. Turning to the nuclear and safety segment on Slide 13. Third quarter revenue was $194 million, up 34%. Organic revenue was 6.3%, in line with our July guidance. As previously mentioned, nuclear power end market revenue grew 14% organic driven by the installed base at SMRs. Labs and research declined, which was partially offset by an increase in defense and We continue to see strong performance out of Paragon, with revenue growth of 12% for the quarter and 22% year to date. We continue to be on track to achieve at least 25% year-over-year growth for Paragon. Adjusted EBITDA grew 23% to $49.8 million. Margins contracted to 25.7% from 28.1% last year. As we indicated in July, this reflects dilution from Paragon inclusive of margin pressure from those legacy contracts, mix, and the lapping of a reduction in incentive compensation in 2025. Excluding Paragon and the impact incentive compensation adjustments in the prior year, margins would have been 28.3% or up for the quarter. Onto the medical segment on Slide 14. Third quarter revenue was $84 million, up 6.7%. Organic revenue also grew 6.7%, modestly below the high single digit growth we would expected in July. While we did have a very robust order growth in the quarter, order timing heavily favored the back end of September. All 3 end markets contributed to organic growth. RTQA was the largest driver, reflecting continued strength in the OEM sector. Encouragingly, nuclear medicine and dosimetry services both of which declined in the second quarter, grew organically in the third quarter. Medical segment Q3 adjusted EBITDA was $31.7 million or 12.4% better than last year. Margins expanded 200-basis-points to 37.8%, driven by RTQA performance and operating leverage from higher revenue growth. Although medical margins expanded, the size of the increase was below our internal expectations. Partially driven by a specific product 1 time quality cost impact within our nuclear medicine end market. Turning to adjusted free cash flow on Slide 15. We generated 47 million in the third quarter, to end the first 9 months of 26 with 107 million. Or 58% conversion of adjusted EBITDA. Versus 53 million and 35% respectively last year. Net working capital was a source of cash in the quarter, a trend that we expect to continue into Q4. We also continue to benefit from lower cash taxes which are expected to be better than our initial guidance, and from our capital structure, a blended cost of debt expected to be approximately 2.8% for the full year. We ended the quarter with net leverage of 3.1x, or 2.8x excluding our opportunistic share repurchases we did in the quarter. We expect net leverage to improve to approximately 2.6x by year end at the midpoint. Assuming no fourth quarter share repurchases or M&A. Turning to Slide 16, we are revising our full-year 2026 guidance, which reflects better visibility with only a quarter to go. We are raising our total revenue growth guidance to 24% to 25%, up from 22% to 24%. Which includes acquisition related tailwinds and a slight full year tailwind on FX. Driven by the euro. We are also raising our organic revenue growth guidance to 7% to 8%, up from 5% to 7%. Reflecting the inflection with the second half performance in the conversion of our growing backlog. On our fourth quarter organic revenue growth, consolidated organic revenue growth is expected to be in the mid- to high-teens. Medical is expected to grow mid single digits plus. While nuclear and safety including Paragon's December results, is expected to grow high teens plus driven by nuclear power. We now expect adjusted EBITDA of $285 million to $292 million, margins of approximately 24.7% to 25.2%. We are holding the low end of our prior adjusted EBITDA dollar range and lowering the high end. Reflecting our third quarter margin headwinds in nuclear and safety and lower than expected medical margin expansion. Even so, this range implies adjusted EBITDA margin expansion in the fourth quarter last year for the total company. We expect to see slight margin pressure in medical due to prior year comps, mainly around incentive comp and other 1 time items. And in nuclear and safety, we expect the best margin expansion quarter of the year. Moving to adjusted free cash flow. We are raising our guidance to $170 million to $185 million from $155 million to $175 million. Which represents 60 to 60. Which represents 60% to 63% conversion of adjusted EBITDA. Up from 54% to 58%. We are tightening our adjusted EPS range to between $0.50 to $0.54 per share, versus $0.48 to $0.55 per share previously. Lastly, we have also updated our guidance to reflect a fourth €0.25 to dollar rate of 1.12. With that, we are happy to take your questions.

We will now move to our question and answer session. If you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. If you are called on, please unmute your line and ask your question. We kindly ask that you limit yourself to 1 question and 1 follow-up. We will now pause a moment to assemble the queue. Our first question will come from Tomo Sano with JPMorgan. Your line is open. Please ask your question.

Hi, good morning everyone.

Hello, Tomo.

Hello, Tomo.

Thank you. Maybe just on nuclear margins. I understand some of the pressure reflects the legacy Paragon mix as well as investment you are making in areas like AI. If you look through those headwinds, how should we think about the underlying margin trajectory of the nuclear business? And then as we move into 2027, should we expect those headwinds to begin to moderate and see more of the underlying operating leverage come through? Thank you.

Yeah. Tomo, why do not I start?

And you know, my view here continues to be very, very constructive. That we see enormous potential to drive margin expansion overall. And as I indicated, are really 3 broad themes that are causing us to know, kind of step away from this 30% near-term EBITDA margin target Clearly, you know, 1 of them is AI and cyber where we look at where we are today, what our outlook is, on the promise, the potential, but also on the cyber side, the risk. We are spending far more on AI and are likely to continue to do that than we anticipated 3 years ago when we set those targets overall. Secondly, it is on Paragon. And on Paragon, just to flush out the picture here a little bit, If you look at the margins on their core business, they are very strong. They are net accretive to overall Mirion margins. But where we are, I would not say upside down, but where we are gaining better insight really relates to a large scale product development initiative. That is flushing out our positioning in instrumentation and control and nuclear power plants. And here, you know, the spend is a little higher than anticipated and I think the overall timeline to driving margin accretion in this category is going to be a bit longer. All of which is to say we are thrilled with Paragon, we are doing very well on the integration campaign overall. But as we have gained more insights about how this component of their business is likely to evolve over time, We are just simply taking a more conservative viewpoint on it. The final piece of the puzzle is on medical and as noted, really due to the macro, we have seen a 2-year flat spot in medical sector growth overall. And to be clear, this is a sector wide issue. We have outperformed our competitors. In this space. We are seeing a recovery But again, in the context of where we were 3 years ago, we have just re-rated our expectations overall. But everything that we have talked about historically in terms of the continued potential to drive improved absorption dynamics, improved procurement initiatives, to harness the internal productivity of AI to drive greater product volume through AI enabled service and all the other self help measures continue to be there. Again, we have a long history of margin expansion and our targets internally are very aggressive. We simply remove that 30% near-term target because we felt it was becoming a distraction and creating a bit of overhang.

Thank you, Tomo. And maybe 1 on capital allocation? With free cash flow improving and leverage coming down, how are you thinking about priorities among M&A, further deleveraging and share repurchase as we move into 2027.

Yeah. I think what we have been talking about, Tomo, externally is a bit of a kind of 40 model. About 20% ish of our cash flow going towards, like, towards CapEx and organic initiatives, about 40% We have been thinking about through the m and a lens, and that is all going to be kind of bolt-on type deals. And then the last 40%, deploying really back to the shareholder. Right? And we do not have a dividend today, that is pretty much entirely in the form of, share repurchases. And, you know, I think we will continue to evaluate that, but I would note we are exceedingly happy with the cash flow performance of the company. We expect to continue, to have momentum in that space. And I think we are we are very well positioned for, for that to continue.

Great, Brian. that is very helpful. I will leave it there. Thank you.

Thanks, Tomo.

Your next question will come from Quinn Fredrickson with Baird. Your line is open. Please go ahead.

Hey, good morning, guys. Thanks for taking the questions. I wanted to start off just on the AI investment spending. Could you maybe discuss why now is the right time to lean further? And where would you expect your AI investments to translate into returns in the P and L? Would it be primarily better growth or margin expansion?

Yeah. So when the. There are really many dimensions to this overall as we think about our AI spend and I am going to lump cyber in there because as we have seen with yeah, most recently with this PHP exploit you know, cyber risk is absolutely exploding, you know, really driven by the enhanced derived from Anthropic and the other frontier models overall. As we think about AI spending right now, there are really 3 broad components to it. 1 is the data infrastructure. That is really kind of creating the frictionless flow of data with a proper ontology. Within the enterprise overall. A second area is in internal productivity. You know, equipping from executive suite down to shop floor. All of our colleagues with AI capabilities, training them on them, and going through the process really optimizing token spend as people come up that curve where we are being very careful about managing that dynamic putting people on the appropriate model for their needs, and again, to monitor that as people develop a more mature relationship with this technology. The third element is on customer facing product development. And here we have many dozens of identified initiatives where our view is that AI can meaningfully enhance the utility of some existing solution whether it is instrumentation, software, or services. That we are providing to the customer. And we have taken a very disciplined approach to creating a hierarchy of priorities and making sure that our spend is aligned with those initiatives overall. But to be clear, you know, here as everywhere, there is there is front end loading. On AI expenses. Again, as we develop the infrastructure as we train our team members and as we do the development work on customer facing solutions that are to be launched commercially. We have not yet guided on terms of when we expect we will achieve a breakeven on this and we will probably provide some more insight around that as we approach our Investor Day next year. But to be clear, we are very committed to We want to be a leader in AI. We believe we are based upon the feedback of Anthropic and others. In comparison broadly speaking with the industrial technology peer set. And we think ultimately this is going to create enormous value for the enterprise. But you know, again, recognizing that front end loading and recognizing the call on both OpEx and CapEx. Certainly, this has been a factor and just kind of pulling back a little bit on that margin target.

Good. Thanks, Tomo. Second question would just be on Paragon. You discussed the margins there. Is there any change in the revenue expectations? I think you are talking about 25% pro forma growth and just given where you are year-to-date, should we be thinking about a pretty big 4Q for Paragon? And just if you could discuss what drives that?

Yeah. I think I think I said at least 25%. I think we continue to be super happy with where we sit in that cycle. From, from them. The third quarter, Quinn was their hardest comp. Right? it is the quarter that they transacted in. And I would say the fourth quarter is set up nicely for success here. With very good coverage and very good momentum in the space. You know, I think the other thing that is interesting under the covers maybe of Paragon is there is definitely a mix of nuclear power revenue coming through, but also increased opportunity set and revenue within the DOE space. That we continue to be very excited about. So we are. We feel good about where we sit there. We have a great team. And we are we are super happy with where we are at from an execution standpoint, and we are very confident in the fourth quarter.

Thanks, Brian.

Your next question will come from Joe Ritchie with Goldman Sachs. Your line is unmuted. Please ask your question.

Hey, this is Andy on for Joe. Good morning.

Good morning.

Hi. Yeah. Thanks. I just wanted to spend a minute on the order growth that you are seeing and how that relates to the organic growth guide as well. The third quarter organic growth was up 62%, substantially ahead of your revenue growth in the quarter as well as your full year guide. Can you talk to the mix that you are seeing within the orders today? How much of it reflects small multi year projects versus shorter cycle orders? Just expected conversion profile over the near term as well as medium term. First off, just a broad comment. I think we are seeing a broad mix. Actually across the order base. Right? We talked about a newbuild order in the third quarter. For what it is worth, I also mentioned, some orders we actually got from EDF that are not in our backlog. So those are not. Do not run through our order rates. They are not sitting in the backlog today. We are waiting on those projects more broadly to get funded via the. At the EU level. But, you know, those would be incremental newbuilds. On top of what we saw even in the third quarter. You know, the SMR number actually was not the biggest dynamic in this quarter. From a, from a growth perspective. Actually, we had we had negative technically order growth. Right? it is flat. Is probably the better way. So the installed base, the DOE momentum from an order perspective, perspective, all were very, very encouraging. And then as you think about it, because we have been getting a lot of questions about, hey. Is your backlog just growing? And gonna convert kind of, you know, way later down the line? You know, we put in this page, I think page 7 of the presentation, that kinda begin with an outline you know, just how this backlog kind of rolls off. And, you know, we separate. We segregated that page between kind of the legacy business so you could compare backwards in Paragon, so we did not distort things. I think what you see here is, you know, just within the current year, the legacy Myriam business taking Paragon to the side for a second, we have 18% more dollars in backlog to convert this year. Next year, that number is up 26% after the third quarter. Right? And then it goes on from there. I think, you know, 2 years out, so that would be 2028 is up 46%. Much smaller numbers, obviously. The point is you know, we are seeing. We are not just seeing backlog build that converts later. We are seeing backlog build that converts nearer term. Both in year this year, but also even in the 2027. And I think that is encouraging and is something, we continue to, to believe will be something that we continue to see kind of into the fourth quarter. So we think we are super encouraged about the order momentum and the backlog growth, but also how that will and is translating into revenue. Got it. that is helpful. And just for my second question, I wanted to touch upon, you know, the medical segment. it is not come up much yet, but some puts and takes around the guide for this year. I recognize you have an easy comp as well in the fourth quarter. So if you can talk to the implied mid single digit growth and what you are seeing on the ground within RTQA? That would be helpful. Yeah. Look. I think I think we were very pleased with the order dynamic in medical in Q4—or Q3. Sorry. I think the challenge we had in Q3 specifically is it came very late in the quarter. Which, you know, is not surprising Hospital year end activity is actually a big September thing. And I think in the medical business, that is not a abnormal dynamic. I think that also helps set us up for Q4 a bit. I think on RTQA, it is really interesting. We Continue To See Very Good Software Growth. On The Order Side. Product I Would Say, Has Been Okay This Year. Better In The US than in Europe. Again, we continue to see some signs of life in China, which we continue to be cautious about. I think Japan continues to be a bit tempered. From a from a bounce back standpoint. But I would say the team is doing a nice job in what is been a difficult medical environment. I think if you went and looked more broadly, you would see that But we are, you know, we got we got some great new products you know, we have we have added some leadership to that team. Which we are excited about. And, you know, I think, you know, we are. We continue to be cautious but optimistic on medical going forward. So I think that is how we are we are thinking about and approaching the fourth quarter. I think we are it was good. You know? Look. We had talked about kind of the second quarter being slightly down, but that was really about China. And if you took out China in the prior year, you saw mid single digit kinda plus growth there. You see it again this quarter, a little bit less than our high single digit number. I recognize that. Kinda guiding to mid single digit plus. I think I think that is a that is a good rhythm we are in, and, you know, we will see how we exit the year. And then, you know, how that implies to our guide on 2027 when we get there.

Thanks. Appreciate that color.

Your next question will come from Andy Kaplowitz with Citigroup. Your line is open. Please go ahead.

Hey, good morning, everyone.

Good morning, Andy. Tomo or Brian, you it is nice to see the backlog boost in Q3.

I know you talked about $125 million of new large bookings for Q4. Mentioned the $80 million you already booked in Q4. But how would you compare the large project award environment coming into 2027 versus the large project award environment for 2026. And there obviously, as you know, are some big opportunities in Europe outside of France and in The US, potentially in 2027. So can you tell us about Mirion's positioning to win them.

So from a macro picture, Andy, you know, what we see again is if we if we begin with nuclear and then we can we can talk about medical a little bit, but most of this is about nuclear. The. On the utility scale newbuild, opportunities, we continue to see an improving pipeline, some of which is still not yet kind of in the zone of what we would put in that high engagement pipeline. But definitely, as we look at the core dynamics impacting each of the major players, which would include Westinghouse, EDF, Rosatom, KEPCO, and others. We see very encouraging signs there that I think we will support continued growth. You know, we have not reflected that in the. Again, in the close and large order pipeline. But to be clear, that dynamic continues to improve. The second element would be the small modular reactor players. Now I know this is a sector that people are nervous about or have some degree of caution as they as they think about it overall. But our point of view is simpler. You know, while we do, you know, share the view that over some period of time, maybe it is 5 years, maybe it is longer, maybe it is shorter, there will be a consolidation in this sector from the, you know, arguably over a 100 discrete projects worldwide down to a handful of players that really make this market and develop it into something powerful and sustainable overall. But our point of view is far simpler. And we take the view that there is an existential race here. That the developers of the small modular technology all have the dream of being SpaceX. And they recognize that they are competing in a very dynamic field and there is an incredible urgency to move ahead quickly to do things in a in a really bold fashion, and that was best demonstrated in the 4 new reactors that went critical in and around July 4, which was just an extraordinary achievement overall. But we look at the grouping of the people who actually have capital, the people who actually have strong balance sheets, we take the view that they are going to spend that money because they need to. They need to do that to be first past the post overall. And what I would say here is that we are incredibly proud of our positioning here. Where if you look at the categories of instrumentation, and services and software that we are selling into the sector overall, and you handicap it by, you know, kind of life phase. In terms of what you know, what has traded what is yet to trade, we have developed an incredibly dominant position in this sector, again, with respect to our overall capability set. And we expect to see continued growth here. And we see it as perhaps a bit more tangible, you know, than the casual market observer may be. Again, because we are taking a capital approach to a capital approach rather than a high-level macro approach. Final piece of the puzzle relates to major system upgrade work. And the operating fleet overall, and we continue to see again swelling activity there triggered by the, the life extension decisions and the uprate decisions that ultimately drive instrumentation package upgrades. So as it relates to the general dynamic there, we are very bullish about how the current dynamic will translate into 2027 and beyond. But it is not just nuclear power. You know, we also have, I think most notably, the Department of Energy where when we look at the you know, kind of the in queue project opportunities relating to environmental remediation, modernizing our nuclear arsenal, and continuing to support the development of advanced reactor technology, again, we see a very favorable dynamic there. So you know, I am I am approaching your question at a higher level, but I just want to make clear that as we look at the dynamics that feed that large order pipeline, which ultimately feeds backlog, the dynamic is great.

it is helpful color, Tomo. Maybe just to level set us. I mean, I understand the 30% margin target is off the table. But if we think about what you can do in margin then over the next couple years, I think the old dynamic was that Miriam could do, you know, 50% plus incrementals Is that what we should level set toward? Is there any puts and takes that you talk about over the next couple of years that we need to think about? In terms of incremental margin targets?

Yeah. I. You know, I am gonna speak first, and Brian's gonna cringe. He can correct me after I speak. But again, I am incredibly bullish on the margin expansion story here. The. You know, our decision to base withdraw that 30% near-term target is really driven by the fact that this has become a bit of a distraction and dynamics have changed particularly as it relates to AI and cyber spending. And the requisite front end loading associated with that overall. But my view, given the powerful operating leverage of the business, and again, all of these self help opportunities and the integration pathway of Paragon, etcetera, is that as we look ahead, there is a very strong opportunity for us to drive 1 to 2 points of margin expansion annually. But I think we will provide mature, more mature guidance in and around that as we as we talk about our updated long range plan.

Brian, how do you want to correct? No. I think everything you said is spot on and yeah, I do not. We are not pulling back from expanding margins. I think we just we want to not have people worry about we are gonna stretch to hit a target, and we wanna make sure that we continue to operate effectively but be responsible.

Helpful, guys. Thank you.

Your next question will come from Nick Amicucci with Evercore ISI. Your line is open. Please go ahead.

Hey, good morning, guys. I did want to just kind of drill in a little bit on the capital allocation question that was asked prior, Brian, if we can? So just kind of thinking through 4Q and kind of the opportunity set there. I understand the 40 kind of structure, but I mean, I guess, how should we view kind of any potential acceleration of kind of share repurchases as we kind of think through just keeping with stocks trading and kind of that opportunity set there?

Yeah. I think we wanna play our hand on what we will do there. I think the thing we do have to be mindful of in the fourth quarter is we need to get the leverage, you know, printed down for sure under 3. And I think that is that is an absolute and has to happen in the in the fourth quarter. So I think, you know, that is. You know, no matter what we do or either share repurchase or, on the inorganic side, like, that 3 number, you know, has to have a 2 in front of it. When we print at year end, and we are very cognizant of that.

Got it. And then, I. You touched upon it a couple times here, Brian, but I just wanted to clarify too. Of the so the $125 million of incremental opportunity of the large opportunity pipeline still available in 2026. 80 million is associated with the. With those European projects with EDF that you had that you had referenced. So, like, we are talking about 45 million incremental on top of that.

Yeah. that is that is correct. And, again, like, we actually have an order for those, but we did not put it in. We cannot put it in our backlog. Until, there is formal funding, from the EU for those for those 6 reactors. Those are all newbuild for what it is worth, and this is all part of the strategic deal that we cut with EDF back 2 years ago. So we are super proud of the team for getting this done. But that will come into backlog and through orders. Once, once the funding happens. But, yeah, there is about another 40 million ish of, of other, you know, larger opportunities, which that would be quite a haul for the year. I would also remind you just why I am on. Why we are on the orders topic 1 more time. You know, the fourth quarter last year was our largest ever orders quarter. FX was also. The euro was you know, well above a dollar 15. But also, you know, we won a ton of orders. So that is just a dynamic to keep in mind here on the fourth quarter. Even with that potential to win a 125 or a 140 million of orders.

Got it. Thanks, guys.

Your next question will come from Jeff Grampp with Northland Capital Markets. Your line is open. Please ask your question.

Great. Good morning, guys. Morning. Morning. The AI spend front, on the AI spend front, Tomo was curious to get maybe a little more clarification. Like you guys are ahead of budget, obviously. No surprise there, but can you quantify that a bit more in terms of, like, where does AI spending ultimately shake out this year? And is. Should our expectations be that grows into 2027? Or how are you guys thinking about scaling those investments?

Yeah. Maybe I will answer the, the P&L questions. Look. I think you know, I said we have we have almost done 4 million year to date, so through 3 quarters. That will obviously grow in the in the fourth quarter. You know, my guess is it will be a 5 or above you know, total for the end of the year. I do think it will grow some next year for sure. And you know, most of that today is sitting at corporate. So the corporate number is where a lot of that sits for what it is worth. But the benefits begin. Are sitting in the business. Right? Tomo talked about a lot of those. I will tell you, you know, on the medical side, we are definitely seeing faster releases of products because of the spend. So the timelines are getting faster We had some new releases, at 1 of the most recent shows. Etcetera. So there is there is quite a bit of you know, good dynamic happening underneath, but that is about where we are gonna from a P&L perspective. And then on the CapEx side, you can add a couple million dollars to that in this year. It will be less than what is through. what is been expense through. And that probably grows a bit next year as well as we continue to build out the infrastructure.

Got it. Okay. Appreciate those details. And with respect to kind of the larger opportunities, obviously, you guys highlight, you know, some of the uprate, life extension announcements we have recently seen. Is any of that in backlog at the end of Q3? Is any of that in the large order pipeline? Or how material could some of these announcements be for, Mirion?

The, you know, as we look at, the life extension related activity, yes, that does inform some of the some of the backlog, not only in The US, but also in Europe. You know, as it relates to uprate activity, you know, there is a there is a bit more of a lag. So that is something that is yet to come in terms of how that may translate into opportunities for us.

Understood for the time, guys. Thanks, Jeff.

Your next question comes from Your next question comes from Christopher Moore with CJS Securities. Your line is open. Please go ahead. [Operator Instructions] Christopher Moore, it looks like your line is still muted. If you could unmute and ask your question. Thank you so much. I believe Christopher is having some technical difficulties. We will return to him. Next question will come from [Analyst] with Morgan Stanley. Your line is open. Please go ahead.

Hi, good morning, guys, and thanks for taking my question. To start, backlog growth has been very strong. Then some of the backlog here is be deliverable over multiple years. As we are seeing broad input cost inflation, what are you all seeing in terms of inflation? And then how does pricing work in the backlog? Are you priced for that? Going forward?

Yeah. I mean, look, we are definitely seeing inflation just like everybody else. I think our procurement programs that we put in place couple years ago have actually very much helped us, be out in front of this. Yeah. I think price cost was on a dollars basis. This quarter was flattish. On. So on a rate basis, it hurts us a little bit. And, you know, we are. Our ability to get price in the market is something we continue to, to drive the teams on. it is a little easier near term on the medical side because of the book and bill dynamic. Little bit harder. On the nuclear and safety time, not necessarily to get price, but for it to come through the p and l. On the larger contracts, everything new that we have signed has escalation clauses in it that are tied to you know, some appropriate index depending on where that contract is. So our ability to kinda keep up with inflation from a large contract standpoint, we feel like we have a very good handle on. And I think, you know, as we continue to, you know, to see kind of the supply demand dynamics working, you know, that works in our favor from a pricing perspective. But you know, price is a hard 1 to talk about publicly just because we do not wanna play. Overplay our hand too much. But we are definitely seeing cost inputs come up. I think our margin profile also helps us. Right? Where even on the. You know, where we are seeing it, our ability to pass it on is been good. So, that is how we are kinda thinking about it at this point.

Great. Thank you. And then a quick 1 on SMRs. Like you said that the orders this quarter represent 11 different SMR providers, which shows good relationships across the many providers that are out there. Also imagine this gives you good visibility into how the projects are moving along. So have you seen any slowdown in terms of. Or maybe any. Just a slowdown in terms of them being able to deliver on time or any delays there.

No, I think we are seeing the opposite. I think we are seeing an acceleration a strengthening of the sector overall You know, it is not universally true, but it is broadly true. And I think it is a robust dynamic. That timelines continue to move to the left. And again, it is all about who has capital and who has a mature technological readiness level. But as a sector overall, you know, we are we are seeing things move a bit faster and a bit more tangibly. there is a real competition in that space. there is a real competition in that space for who wins, right, or the few. The couple that wins. So you are seeing that definitely play out for sure.

Your next question will come from James West with Melius Research. Line is open. Please go ahead.

Hey, guys. Good morning. Hey, James. Tomo or Brian, curious, you guys a couple of years ago gave $1-per-megawatt assumption for newbuilds. And I think at the time, you were trying to describe how much larger it was with the SMRs versus you know, a gigawatt. But, have you updated that number since the Paragon transaction? And I am assuming it is considerably higher if you have a magnitude or an official estimate, I would love to hear. We have not, James.

We will do that again prior to the, the investor event next year, but directionally, you are correct. I mean, it is a combination both of enhanced organic capabilities as well as the inorganic principally through Paragon and Certrec that augment our wallet share but also, you know, other factors that will go into this are the fact that when we gave that guidance a few years ago, we were still using a default operating lifespan of 60 years for a nuclear reactor. Whereas now, I think arguably that number would be 100. And it will drive a bit of a different dynamic Our mix will be different. Our footprint will be broader. And so that number will go up for utility scale. As it relates to the SMR dynamic, we obviously have gained an enormous amount of knowledge about the different players, the different technologies and ultimately you know, where that center of gravity is evolving toward. And so it is premature to really toss out a number there, but I would just continue to hold to the, you know, the directional guidance we have given before that on a per megawatt basis, the opportunity set is considerably higher than it is for utility scale.

Okay. I got it. that is fair enough. And then maybe just a follow-up on the SMRs and the competitive environment there? And Brian alluded to it, I think, in the answer to 1 of the last questions. Urgency effect, from these SMR companies, how is that having an impact on your ability to price into these projects?

You know, I think, it is the old saying, good, fast, cheap, choose 2. And we are we are really good. We can be really fast. But we are a premium priced player in the marketplace. And obviously, if you look at our track record of performance to date in the SMR sector, Again, you know, we are very proud of the team for what they have done and really forged just amazing partnerships with you know, the majority of these players. You know, they are trying to do great things. And we wanna walk hand in hand with them as do these things. Again, I would cite the July 4 criticality events, which is, I mean, amazing. At how quickly that came together and what it took to make it happen. And we are proud to be a part of that. So, you know, we are really focused on being a great partner to the sector overall. And with that, I think we will be fairly paid for it. But, you know, the dynamics so far are quite good. Got it. Thanks, Tomo.

This concludes the question and answer session. I would now like to turn the call over to Tomo Logan, Chairman and CEO of Mirion.

Well, folks, we really appreciate the, the time and attention today again. Very proud of the performance of, of the enterprise, and a big thanks to the, all of my Myrion colleagues worldwide. For delivering a strong quarter. But I think more importantly, setting us up for success in Q4 and into 2027. So thank you for your time again, we will look forward to our next call a few months down the road.