10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on May 1, 2024
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended March 31, 2024
OR
For the transition period from __________ to __________
Commission File Number: 001-39352
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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(Address of Principal Executive Office)
(770 ) 432-2744
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated Filer | ☐ | |||||||||
| Non-accelerated Filer | ☐ | Smaller Reporting Company | |||||||||
| Emerging Growth Company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒
As of April 26, 2024, there were 220,159,325 shares of Class A common stock, $0.0001 par value per share, and 7,209,706 shares of Class B common stock, $0.0001 par value per share, issued and outstanding.
INTRODUCTORY NOTE
On October 20, 2021 (the "Closing" or the “Closing Date”), Mirion Technologies, Inc. (formerly known as GS Acquisition Holdings Corp II or "GSAH") consummated its business combination with GSAH (the "Business Combination") pursuant to the Business Combination Agreement dated June 17, 2021 (as amended, the “Business Combination Agreement”). On the Closing Date, GSAH was renamed Mirion Technologies, Inc.
Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to “Mirion,” the “Company,” “we,” “us” or “our” refer to Mirion Technologies, Inc. following the Business Combination, other than certain historical information which refers to the business of Mirion Technologies (TopCo), Ltd. (“Mirion TopCo”) prior to the consummation of the Business Combination.
As a result of the Business Combination, Mirion’s financial statement presentation distinguishes Mirion TopCo as the “Predecessor” for periods prior to the closing of the Business Combination and Mirion Technologies, Inc. as the “Successor” for periods after the closing of the Business Combination. As a result of the application of the acquisition method of accounting in the Successor Period, the financial statements for the Successor Period are presented on a full step-up basis as a result of the Business Combination, and are therefore not comparable to the financial statements of the Predecessor Period that are not presented on the same full step-up basis due to the Business Combination.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995 that reflect future plans, estimates, beliefs, and expected performance. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, our objectives for future operations, macroeconomic trends, and our competitive positioning are forward-looking statements. This includes, without limitation, statements under Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations regarding our financial position, capitalization and capital structure, any exercise, exchange, redemption or other settlement of our outstanding warrants and other securities, indebtedness, business strategy, and the plans and objectives of management for future operations, market share and products sales, future market opportunities, future manufacturing capabilities and facilities, future sales channels and strategies, goodwill impairment, backlog, our supply chain challenges, matters affecting Russia, relations between the United States and China, conflict in the Middle East, foreign exchange, interest rate and inflation trends, any merger, acquisition,divestiture or investment activity, including integration of previously completed mergers and acquisitions, or other strategic transactions and investments, legal claims, litigation, arbitration or similar proceedings, including with respect to customer disputes, and the future or expected impact on us of any epidemic, pandemic or other crises. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. When used in this Quarterly Report on Form 10-Q, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “seeks,” “plans,” “scheduled,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. When we discuss our strategies or plans we are making projections, forecasts or forward-looking statements. Such statements are based on the beliefs of, as well as assumptions made by and information currently available to, our management.
The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following risks, uncertainties and other factors:
•changes in domestic and foreign business, market, economic, financial, political and legal conditions, including related to matters affecting Russia, the relationship between the United States and China, and conflict in the Middle East and risks of slowing economic growth or economic recession in the United States and globally;
•developments in the government budgets (defense and non-defense) in the United States and other countries, including budget reductions, sequestration, implementation of spending limits or changes in budgeting priorities, delays in the government budget process, a U.S. government shutdown or the U.S. government's failure to raise the debt ceiling;
•risks related to the public's perception of nuclear radiation and nuclear technologies;
2
•risks related to the continued growth of our end markets;
•our ability to win new customers and retain existing customers;
•our ability to realize sales expected from our backlog of orders and contracts;
•risks related to governmental contracts;
•our ability to mitigate risks associated with long-term fixed price contracts, including risks related to inflation;
•risks related to information technology disruption or security;
•risks related to the implementation and system failures or other disruptions or cybersecurity, data or other security threats;
•our ability to manage our supply chain or difficulties with third-party manufacturers;
•risks related to competition;
•our ability to manage disruptions of, or changes in, our independent sales representatives, distributors and original equipment manufacturers;
•our ability to realize the expected benefit from strategic transactions, such as acquisitions, divestitures and investments, including any synergies or internal restructuring and improvement efforts;
•our ability to issue debt, equity or equity-linked securities in the future;
•risks related to changes in tax law and ongoing tax audits;
•risks related to future legislation and regulation both in the United States and abroad;
•risks related to the costs or liabilities associated with product liability claims;
•risks related to the uncertainty of legal claims, litigation, arbitration and similar proceedings;
•our ability to attract, train, and retain key members of our leadership team and other qualified personnel;
•risks related to the adequacy of our insurance coverage;
•risks related to the global scope of our operations, including operations in international and emerging markets;
•risks related to our exposure to fluctuations in foreign currency exchange rates, interest rates and inflation, including the impact on our debt service costs;
•our ability to comply with various laws and regulations and the costs associated with legal compliance;
•risks related to the outcome of any litigation, government and regulatory proceedings, investigations and inquiries;
•risks related to our ability to protect or enforce our proprietary rights on which our business depends or third-party intellectual property infringement claims;
•liabilities associated with environmental, health, and safety matters;
•our ability to predict our future operational results;
•the effects of health epidemics, pandemics and similar outbreaks may have on our business, results of operations or financial condition; and
•other risks and uncertainties indicated in our Annual Report on Form 10-K for the year ended December 31, 2023 and this Quarterly Report on Form 10-Q, including those under the heading “Risk Factors,” and other documents filed or to be filed with the U.S. Securities and Exchange Commission ("SEC") by us.
There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.
Forward-looking statements included in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q or any earlier date specified for such statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
We intend to announce material information to the public through the Mirion Investor Relations website, available at ir.mirion.com, SEC filings, press releases, public conference calls, and public webcasts. We use these channels, as well as social media, to communicate with our investors, customers and the public about our company, our offerings and other issues. It is possible that the information we post on our website or social media could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above, including the social media channels listed on our investor relations website, and to review the information disclosed through such channels. Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations website.
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TABLE OF CONTENTS
4
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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as of March 31, 2024 and December 31, 2023
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for the three months ended March 31, 2024 and March 31, 2023
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for the three months ended March 31, 2024 and March 31, 2023
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for the three months ended March 31, 2024 and March 31, 2023
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for the three months ended March 31, 2024 and March 31, 2023
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5
Mirion Technologies, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In millions, except share data)
| March 31, 2024 | December 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Accounts receivable, net of allowance for doubtful accounts | |||||||||||
| Costs in excess of billings on uncompleted contracts | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant, and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Restricted cash | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Deferred contract revenue | |||||||||||
| Third-party debt, current | |||||||||||
| Operating lease liability, current | |||||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Third-party debt, non-current | |||||||||||
| Warrant liabilities | |||||||||||
| Operating lease liability, non-current | |||||||||||
| Deferred income taxes, non-current | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 10) | |||||||||||
| Stockholders’ equity (deficit): | |||||||||||
Class A common stock; $ |
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Class B common stock; $ |
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Treasury stock, at cost; |
( |
( |
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| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( |
( |
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| Accumulated other comprehensive loss | ( |
( |
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| Mirion Technologies, Inc. stockholders’ equity | |||||||||||
| Noncontrolling interests | |||||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Mirion Technologies, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In millions, except per share data)
| Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | ||||||||||
| Revenues: | |||||||||||
| Product | $ | $ | |||||||||
| Service | |||||||||||
| Total revenues | |||||||||||
| Cost of revenues: | |||||||||||
| Product | |||||||||||
| Service | |||||||||||
| Total cost of revenues | |||||||||||
| Gross profit | |||||||||||
| Operating expenses: | |||||||||||
| Selling, general and administrative | |||||||||||
| Research and development | |||||||||||
| Total operating expenses | |||||||||||
| Loss from operations | ( |
( |
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| Other expense (income): | |||||||||||
| Interest expense | |||||||||||
| Interest income | ( |
( |
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| Loss on debt extinguishment | |||||||||||
| Foreign currency loss (gain), net | ( |
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| Increase in fair value of warrant liabilities | |||||||||||
| Other expense (income), net | ( |
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| Loss before income taxes | ( |
( |
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| Loss (benefit) from income taxes | ( |
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| Net loss | ( |
( |
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| Loss attributable to noncontrolling interests | ( |
( |
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| Net loss attributable to Mirion Technologies, Inc. | $ | ( |
$ | ( |
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| Net loss per common share attributable to Mirion Technologies, Inc. — basic and diluted | $ | ( |
$ | ( |
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| Weighted average common shares outstanding — basic and diluted | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
Mirion Technologies, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
(In millions)
| Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | ||||||||||
| Net loss | $ | ( |
$ | ( |
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| Other comprehensive (loss) income, net of tax: | |||||||||||
| Foreign currency translation (loss) gain, net of tax | ( |
||||||||||
| Unrealized gain (loss) on net investment hedges, net of tax | ( |
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| Unrealized gain on cash flow hedge, net of tax | |||||||||||
| Other comprehensive (loss) income, net of tax | ( |
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| Comprehensive loss | ( |
( |
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| Less: Comprehensive loss attributable to noncontrolling interest | ( |
( |
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| Comprehensive loss attributable to Mirion Technologies, Inc. | $ | ( |
$ | ( |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
8
Mirion Technologies, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In millions, except share amounts)
| Class A Common Stock | Class B Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive (Loss) Income | Noncontrolling Interests | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2022 |
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$ |
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|
$ |
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|
$ |
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$ |
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$ | ( |
$ | ( |
$ |
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$ |
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||||||||||||||||||||||||||||||||||||||||||||||
| Warrant redemptions | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for vested restricted stock units | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation to directors in lieu of cash compensation | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of shares of class B common stock to class A common stock | — | ( |
— | — | — | — | — | ( |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares of class A common stock, net of offering costs | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | ( |
— | ( |
( |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance March 31, 2023 |
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$ |
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$ |
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|
$ |
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$ |
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$ | ( |
$ | ( |
$ |
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$ |
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| Class A Common Stock | Class B Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive (Loss) Income | Noncontrolling Interests | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance December 31, 2023 |
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$ |
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$ |
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$ | ( |
$ |
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$ | ( |
$ | ( |
$ |
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$ |
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| Stock issued for vested restricted stock units | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock compensation to directors in lieu of cash compensation | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of shares of class B common stock to class A common stock | — | ( |
— | — | — | — | — | ( |
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| Stock-based compensation expense | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | ( |
— | ( |
( |
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| Other comprehensive loss | — | — | — | — | — | — | — | — | ( |
( |
( |
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| Balance March 31, 2024 |
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$ |
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$ |
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$ | ( |
$ |
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$ | ( |
$ | ( |
$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
9
Mirion Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In millions)
| Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | ||||||||||
| OPERATING ACTIVITIES: | |||||||||||
| Net loss | $ | ( |
$ | ( |
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| Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization expense | |||||||||||
| Stock-based compensation expense | |||||||||||
| Amortization of debt issuance costs | |||||||||||
| Provision for doubtful accounts | |||||||||||
| Inventory obsolescence write down | |||||||||||
| Change in deferred income taxes | ( |
( |
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| Loss on disposal of property, plant and equipment | |||||||||||
| Loss (gain) on foreign currency transactions | ( |
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| Increase in fair values of warrant liabilities | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | |||||||||||
| Costs in excess of billings on uncompleted contracts | ( |
( |
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| Inventories | ( |
( |
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| Prepaid expenses and other current assets | ( |
||||||||||
| Accounts payable | ( |
( |
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| Accrued expenses and other current liabilities | ( |
( |
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| Deferred contract revenue and liabilities | ( |
( |
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| Other assets | ( |
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| Other liabilities | ( |
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| Net cash provided by (used in) operating activities |
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( |
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| INVESTING ACTIVITIES: | |||||||||||
| Acquisitions of businesses, net of cash and cash equivalents acquired | ( |
||||||||||
| Purchases of property, plant, and equipment and badges | ( |
( |
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| Proceeds from net investment hedge derivative contracts | |||||||||||
| Net cash used in investing activities | ( |
( |
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| FINANCING ACTIVITIES: | |||||||||||
| Issuances of common stock | |||||||||||
| Common stock issuance costs | ( |
||||||||||
| Principal repayments | ( |
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| Proceeds from net cash flow hedge derivative contracts | |||||||||||
| Other financing | ( |
( |
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| Net cash provided by financing activities |
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| Effect of exchange rate changes on cash, cash equivalents, and restricted cash | ( |
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| Net (decrease) increase in cash, cash equivalents, and restricted cash | ( |
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| Cash, cash equivalents, and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ |
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$ |
|
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The accompanying notes are an integral part of these condensed consolidated financial statements.
10
Mirion Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Nature of Business and Summary of Significant Accounting Policies
Nature of Business
Mirion Technologies, Inc. (“Mirion,” the “Company," "we," "our," or "us" and formerly GS Acquisition Holdings Corp II ("GSAH")) is a global provider of radiation detection, measurement, analysis, and monitoring products and services to the medical, nuclear, and defense end markets. On October 20, 2021, Mirion Technologies, Inc. was formed (formerly known as GS Acquisition Holdings Corp II or "GSAH") when it consummated its business combination with GSAH (the "Business Combination") pursuant to the Business Combination Agreement dated June 17, 2021.
We provide products and services through our two
Basis of Presentation and Principles of Consolidation
The accompanying unaudited Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for financial statements and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (the "SEC") for interim financial information. The interim unaudited Condensed Consolidated Financial Statements reflect all adjustments that are of a normal recurring nature and that are considered necessary for a fair representation of the results for the periods presented and should be read in conjunction with the audited Consolidated Financial Statements and notes thereto for the period ended December 31, 2023, which include a complete set of footnote disclosures, including our significant accounting policies included in our Annual Report on Form 10-K. The results for interim periods are not necessarily indicative of the results that may be expected for a full fiscal year or for any other future period. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned or controlled subsidiaries. For consolidated subsidiaries where our ownership is less than 100%, the portion of the net income or loss allocated to noncontrolling interests is reported as “Income (Loss) attributable to noncontrolling interests” in the unaudited Condensed Consolidated Statements of Operations. All intercompany accounts and transactions have been eliminated in consolidation.
Segments
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Use of Estimates
Significant Accounting Policies
There have been no material changes in our significant accounting policies during the three months ended March 31, 2024, as compared to the significant accounting policies described in Note 1 to the audited consolidated financial statements on Form 10-K for the period ended December 31, 2023.
Accounts Receivable and Allowance for Doubtful Accounts
Prepaid Expenses and Other Current Assets
The components of prepaid expenses and other current assets consist of the following (in millions):
| March 31, 2024 | December 31, 2023 | ||||||||||
| Prepaid insurance | $ | $ | |||||||||
| Prepaid vendor deposits | |||||||||||
| Prepaid software licenses | |||||||||||
| Short-term marketable securities | |||||||||||
| Income tax receivable and prepaid income taxes | |||||||||||
| Other tax receivables | |||||||||||
| Other current assets | |||||||||||
| $ | $ | ||||||||||
Facility and Equipment Decommissioning Liabilities
12
Revenue Recognition
The Company recognizes revenue from arrangements that include performance obligations to design, engineer, manufacture, deliver, and install products. If a performance obligation does not qualify for over-time revenue recognition, revenue is then recognized at the point-in-time in which control of the distinct good or service is transferred to the customer, typically based upon the terms of delivery.
Revenue derived from passive dosimetry and analytical services is of a subscription nature and is provided to customers on an agreed-upon recurring monthly, quarterly or annual basis. Revenue is recognized ratably over the service period as the service is continuous, and no other discernible pattern of recognition is evident.
Contract Balances
The timing of the Company's revenue recognition, invoicing, and cash collections results in accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts, and deferred contract revenue. Refer to Note 4, Contracts in Progress for further details.
Remaining Performance Obligations
Disaggregation of Revenues
A disaggregation of the Company’s revenues by segment, geographic region, timing of revenue recognition and product category is provided in Note 15, Segment Information.
Warrant Liability
Treasury Stock
We account for treasury stock under the cost method pursuant to the provisions of ASC 505-30, Treasury Stock. Under the cost method, the gross cost of the shares reacquired is charged to a contra equity account, treasury stock. The equity accounts that were originally credited for the original share issuance, Common Stock and additional paid-in capital, remain intact.
13
If the treasury shares are ever reissued in the future at a price higher than its cost, the difference is recorded as a component of additional paid-in-capital in the unaudited Condensed Consolidated Balance Sheets. When treasury stock is re-issued at a price lower than its cost, the difference is recorded as a component of additional paid-in-capital to the extent that there are previously recorded gains to offset the losses. If there are no treasury stock gains in additional paid-in-capital, the losses upon re-issuance of treasury stock are recorded as a reduction of retained earnings in the unaudited Condensed Consolidated Balance Sheets. If treasury stock is reissued in the future, a cost flow assumption (e.g., FIFO, LIFO or specific identification) will be adopted to compute excesses and deficiencies upon subsequent share reissuance.
Concentrations of Risk
Financial instruments that are potentially subject to concentration of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains cash in bank deposit accounts that, at times, may exceed the insured limits of the local country. The Company has not experienced any losses in such accounts.
Recent Accounting Pronouncements
Accounting Guidance Issued But Not Yet Adopted
In October 2023, the FASB issued ASU 2023-06 “Disclosure Improvements”. ASU 2023-06 clarifies or improves
disclosure and presentation requirements of a variety of topics. For entities subject to the SEC’s existing disclosure requirements, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all entities, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the codification and will not become effective for any entity. The Company is currently evaluating the impact of this ASU.
In November 2023, the FASB issued ASU 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures". ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. For all entities, the amendments will be effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments will be applied retrospectively to all prior periods presented in the financial statements. The Company is evaluating the impact of this new standard and believes that the adoption will result in additional disclosures, but will not have any other impact on its consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures". ASU 2023-09 enhances the existing income tax disclosures primarily related to the rate reconciliation and income taxes paid information. For public business entities, the amendments are effective for annual periods beginning after December 15, 2024, with early adoption permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments will be applied on a prospective basis, with retrospective application permitted. The Company is currently evaluating the impact of this ASU.
In March 2024, the FASB issued ASU 2024-01 "Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards". ASU 2024-01 improves GAAP by demonstrating how an entity should apply the scope guidance to determine whether profits interest and similar awards should be accounted for in accordance with Topic 718. For public business entities, the amendments are effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods. Early adoption is permitted for both interim and annual financial
statements that have not yet been issued or made available for issuance. The amendments should be applied either (1) retrospectively to all prior periods presented in the financial statements or (2) prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the amendments. The Company is currently evaluating the impact of this ASU.
14
Other Guidance Issued But Not Yet Adopted
In March 2024, the SEC issued its final climate disclosure rules, which require the disclosure of climate-related information in annual reports and registration statements. The rules require disclosure in the audited financial statements of certain effects of severe weather events and other natural conditions above certain financial thresholds, as well as amounts related to carbon offsets and renewable energy credits or certificates, if material. Disclosure requirements will begin phasing in for fiscal years beginning on or after January 1, 2025. On April 4, 2024, the SEC determined to voluntarily stay the final rules pending certain legal challenges. We are currently evaluating the impact of the new rules and considering the potential outcome of the legal challenges.
2. Business Combinations and Acquisitions
The Company continually evaluates potential acquisitions that strategically fit with the Company’s existing portfolio. On November 1, 2023, Mirion closed the acquisition of ec2 Software Solutions, LLC and NUMA LLC (collectively "ec2") with a purchase price of $31.4 million in a taxable transaction pursuant to an asset purchase agreement dated November 1, 2023 between Mirion and ec2. As part of the Mirion Medical segment, ec2 will complement the Nuclear Medicine and Molecular Imaging portfolio of Capintec. The total business enterprise value acquired for the ec2 acquisition was comprised of $14.5 million of intangible assets related to technology, trade name, and customer list, $17.4 million of goodwill and $0.5 million of liabilities mainly related to deferred revenue.
Measurement period adjustments to the previously disclosed preliminary fair value of net assets related to ec2 were recorded in 2024, resulting in a $0.6 million net increase in goodwill, primarily due to additional consideration of $1.0 million (final net working capital adjustment) and a $0.3 million net increase in intangible assets during the three months ended March 31, 2024. The estimated fair values of all assets acquired and liabilities assumed in the acquisition are provisional and may be revised as a result of additional information obtained during the measurement period of up to one year from the acquisition date, including but not limited to deferred revenue balances and the valuation of tax accounts.
Transaction costs related to ec2 were not material for the three months ended March 31, 2024.
All acquisitions are accounted for under the acquisition method of accounting, and the related assets acquired and liabilities assumed are recorded at fair value. The Company makes an initial allocation of the purchase price at the date of acquisition based upon its understanding of the fair value of the acquired assets and assumed liabilities. The Company obtains the information used for the purchase price allocation during due diligence and through other sources. In the months after closing, as the Company obtains additional information about the acquired assets and liabilities, including through tangible and intangible asset appraisals, and learns more about the newly acquired business, it is able to refine the estimates of fair value and more accurately allocate the purchase price. The fair values of acquired intangibles are determined based on estimates and assumptions that are deemed reasonable by the Company. Significant assumptions include the discount rates and certain assumptions that form the basis of the forecasted results of the acquired business including revenue, earnings before interest, taxes, depreciation and amortization (“EBITDA”), and growth rates. These assumptions are forward looking and could be affected by future economic and market conditions. Only facts and circumstances that existed as of the acquisition date are considered for subsequent adjustment. The Company will make appropriate adjustments to the purchase price allocation prior to completion of the measurement period, as required.
Purchases of acquired businesses resulted in the recognition of goodwill in the Company’s Consolidated Financial Statements, which is calculated as the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized. The goodwill is not amortized but some portion may be deductible for income tax purposes. This goodwill recorded includes the following:
• The expected synergies and other benefits that we believe will result from combining the operations of the acquired business with the operations of Mirion;
• Any intangible assets that did not qualify for separate recognition, as well as future, yet unidentified projects and products;
• The value of the existing business as an assembled collection of net assets versus if the Company had acquired all of the net assets separately.
15
3. Contracts in Progress
Costs and billings on uncompleted construction-type contracts consist of the following (in millions):
| March 31, 2024 | December 31, 2023 | ||||||||||
| Costs incurred on contracts (from inception to completion) | $ | $ | |||||||||
| Estimated earnings | |||||||||||
| Contracts in progress | |||||||||||
| Less: billings to date | ( |
( |
|||||||||
| $ | $ | ||||||||||
The carrying amounts related to uncompleted construction-type contracts are included in the accompanying unaudited Condensed Consolidated Balance Sheets under the following captions (in millions):
| March 31, 2024 | December 31, 2023 | ||||||||||
| Costs and estimated earnings in excess of billings on uncompleted contracts – current | $ | $ | |||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts – non-current (1)
|
|||||||||||
Billings in excess of costs and estimated earnings on uncompleted contracts – current (2)
|
( |
( |
|||||||||
Billings in excess of costs and estimated earnings on uncompleted contracts – non-current (3)
|
( |
( |
|||||||||
| $ | $ | ||||||||||
(1)Included in other assets within the Condensed Consolidated Balance Sheets.
(2)Included in deferred contract revenue – current within the Condensed Consolidated Balance Sheets.
For the three months ended March 31, 2024 the Company has recognized revenue of $17.6 million related to the contract liabilities balance as of December 31, 2023.
4. Inventories
The components of inventories consist of the following (in millions):
| March 31, 2024 | December 31, 2023 | ||||||||||
| Raw materials | $ | $ | |||||||||
| Work in progress | |||||||||||
| Finished goods | |||||||||||
| $ | $ | ||||||||||
16
5. Property, Plant and Equipment, Net
Property, plant and equipment, net consist of the following (in millions):
| Depreciable Lives |
March 31, 2024 | December 31, 2023 | |||||||||||||||
| Land, buildings, and leasehold improvements | $ | $ | |||||||||||||||
| Machinery and equipment | |||||||||||||||||
| Badges | |||||||||||||||||
| Furniture, fixtures, computer equipment and other | |||||||||||||||||
| Software development costs | |||||||||||||||||
Construction in progress (1)
|
— | ||||||||||||||||
| Less: accumulated depreciation and amortization | ( |
( |
|||||||||||||||
| $ | $ | ||||||||||||||||
(1) Includes $5.6 million and $4.2 million of Construction in progress for internally developed software as of March 31, 2024, and December 31, 2023, respectively.
Total depreciation expense included in costs of revenues and operating expenses was as follows (in millions):
| Three Months Ended | Three Months Ended | ||||||||||
| March 31, 2024 | March 31, 2023 | ||||||||||
| Depreciation expense in: | |||||||||||
| Cost of revenues | $ | $ | |||||||||
| Operating expenses | $ | $ | |||||||||
6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in millions):
| March 31, 2024 | December 31, 2023 | ||||||||||
| Compensation and related benefit costs | $ | $ | |||||||||
| Customer deposits | |||||||||||
| Accrued commissions | |||||||||||
| Accrued warranty costs | |||||||||||
| Non-income taxes payable | |||||||||||
| Pension and other post-retirement obligations | |||||||||||
| Income taxes payable | |||||||||||
| Derivative liability | |||||||||||
| Other accrued expenses | |||||||||||
| Total | $ | $ | |||||||||
17
7. Goodwill and Intangible Assets
Goodwill
Goodwill is calculated as the excess of consideration transferred over the net assets recognized for acquired businesses and represents future economic benefits arising from the other assets acquired that could not be individually identified and separately recognized. Goodwill is assigned to reporting units at the date the goodwill is initially recorded and is reallocated as necessary based on the composition of reporting units over time.
The Company assesses goodwill for impairment at the reporting unit level annually on the first day of the fourth quarter and upon the occurrence of a triggering event or change in circumstance that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
A quantitative test performed upon the occurrence of a triggering event compares the fair value of a reporting unit with its carrying amount. The Company determines fair values for each of the reporting units, as applicable, using the market approach, when available and appropriate, or the income approach, or a combination of both. The Company assesses the valuation methodology based upon the relevance and availability of the data at the time the Company performs the valuation. If multiple valuation methodologies are used, the results are weighted appropriately.
Valuations using the market approach are derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses is based on the markets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity of products and services. A market approach is limited to reporting units for which there are publicly traded companies that have characteristics similar to the Company's businesses.
Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The Company uses its internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business. Actual results may differ from those assumed in the forecasts. The Company derives its discount rates using a capital asset pricing model and by analyzing published rates for industries relevant to its reporting units to estimate the cost of equity financing. The Company uses discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in internally developed forecasts.
The following table shows changes in the carrying amount of goodwill by reportable segment as of March 31, 2024 and December 31, 2023 (in millions):
| Medical | Technologies | Consolidated | |||||||||||||||
| Balance—December 31, 2023 | $ |
|
$ |
|
$ |
|
|||||||||||
| Measurement period adjustment | |||||||||||||||||
| Translation adjustment | ( |
( |
|||||||||||||||
| Balance—March 31, 2024 | $ |
|
$ |
|
$ |
|
|||||||||||
A portion of goodwill is deductible for income tax purposes.
Gross carrying amounts and cumulative goodwill impairment losses are as follows (in millions):
| March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Gross Carrying Amount | Cumulative Impairment | Gross Carrying Amount | Cumulative Impairment | ||||||||||||||||||||
| Goodwill | $ | $ | ( |
$ | $ | ( |
|||||||||||||||||
Intangible Assets
Intangible assets consist of our developed technology, customer relationships, backlog, trade names, and non-compete agreements at the time of acquisition through business combinations. The customer relationships definite lived intangible assets are amortized using the double declining balance method while all other definite lived intangible assets are amortized on a straight-line basis over their estimated useful lives.
18
Many of our intangible assets are not deductible for income tax purposes. A summary of intangible assets useful lives, gross carrying value and related accumulated amortization is below (in millions):
| March 31, 2024 | |||||||||||||||||||||||
| Original Average Life in Years |
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
||||||||||||||||||||
| Customer relationships | $ | $ | ( |
$ | |||||||||||||||||||
| Distributor relationships | ( |
||||||||||||||||||||||
| Developed technology | ( |
||||||||||||||||||||||
| Trade names | ( |
||||||||||||||||||||||
| Backlog and other | ( |
||||||||||||||||||||||
| Total | $ | $ | ( |
$ | |||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| Original Average Life in Years |
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
||||||||||||||||||||
| Customer relationships | $ | $ | ( |
$ | |||||||||||||||||||
| Distributor relationships | ( |
||||||||||||||||||||||
| Developed technology | ( |
||||||||||||||||||||||
| Trade names | ( |
||||||||||||||||||||||
| Backlog and other | ( |
||||||||||||||||||||||
| Total | $ | $ | ( |
$ | |||||||||||||||||||
Aggregate amortization expense for intangible assets included in cost of revenues and operating expenses was as follows (in millions):
| Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| Amortization expense for intangible assets in: | |||||||||||
| Cost of revenues | $ | $ | |||||||||
| Operating expenses | $ | $ | |||||||||
8. Borrowings
Third-party debt consist of the following (in millions):
| March 31, 2024 | December 31, 2023 | ||||||||||
| 2021 Credit Agreement | $ | $ | |||||||||
| Canadian Financial Institution | |||||||||||
| Other | |||||||||||
| Total third-party debt | |||||||||||
| Less: third-party debt, current | ( |
( |
|||||||||
| Less: deferred financing costs | ( |
( |
|||||||||
| Third-party debt, non-current | $ | $ | |||||||||
As of March 31, 2024 and December 31, 2023, the fair market value of the Company's 2021 Credit Agreement (defined below) was $695.5
19
2021 Credit Agreement
In connection with the Business Combination, certain subsidiaries of the Company entered into the 2021 Credit Agreement with the lending institutions party thereto (as amended, restated, supplemented, or otherwise modified from time to time, the "2021 Credit Agreement").
The 2021 Credit Agreement refinanced and replaced the credit agreement from March 2019, by and between, among others, Mirion Technologies (HoldingRep), Ltd., its subsidiaries and Morgan Stanley Senior Funding Inc., as administrative agent, certain other revolving lenders and a syndicate of institutional lenders (the “2019 Credit Facility”).
The 2021 Credit Agreement provides for an $830.0 million senior secured first lien term loan facility and a $90.0 million senior secured revolving facility (collectively, the “Credit Facilities”). Funds from the Credit Facilities are permitted to be used in connection with the Business Combination and related transactions to refinance the 2019 Credit Facility referred to above and for general corporate purposes. The term loan facility is scheduled to mature on October 20, 2028 and the revolving facility is scheduled to expire and mature on October 20, 2026. The agreement requires the payment of a commitment fee of 0.50 % per annum for unused revolving commitments, subject to stepdowns to 0.375 % per annum and 0.25 % per annum upon the achievement of specified leverage ratios. Any outstanding letters of credit issued under the 2021 Credit Agreement reduce the availability under the revolving line of credit.
The 2021 Credit Agreement is secured by a first priority lien on the equity interests of the Parent Borrower owned by Holdings and substantially all of the assets (subject to customary exceptions) of the borrowers and the other guarantors thereunder. Interest with respect to the facilities is based on, at the option of the borrowers, (i) a customary base rate formula for borrowings in U.S. dollars or (ii) a floating rate formula based on LIBOR (with customary fallback provisions) for borrowings in U.S. dollars, a floating rate formula based on Euro Interbank Offered Rate ("EURIBOR") for borrowings in Euro or a floating rate formula based on SONIA for borrowings in Pounds Sterling, each as described in the 2021 Credit Agreement with respect to the applicable type of borrowing. The 2021 Credit Agreement includes fallback language that seeks to either facilitate an agreement with the Company's lenders on a replacement rate for LIBOR in the event of its discontinuance or that automatically replaces LIBOR with benchmark rates based upon the Secured Overnight Financing Rate ("SOFR") or other benchmark replacement rates upon certain triggering events.
On June 23, 2023, the 2021 Credit Agreement was amended to replace the interest rate based on the London interbank offered rate (“LIBOR”) and related LIBOR-based mechanics applicable to U.S. Dollar borrowings under the Existing Credit Agreement with an interest rate based on SOFR and related SOFR-based mechanics. On December 30, 2023, certain subsidiaries of Mirion Technologies, Inc. and Citibank, N.A., as administrative agent and collateral agent, entered into a Holdings Assumption Agreement (the “Holdings Assumption Agreement”) and related collateral and guarantee joinder documents that supplemented and modified the 2021 Credit Agreement. Pursuant to the terms of the Holdings Assumption Agreement, Mirion Technologies (HoldingSub2), Ltd., a limited liability company incorporated in England and Wales (“HoldingSub2”), assigned to Mirion IntermediateCo, Inc., a Delaware corporation (“IntermediateCo”) and a subsidiary of the Company, all of its rights, obligations and liabilities in and under the 2021 Credit Agreement, including its obligations to guarantee certain obligations of the borrowers under the 2021 Credit Agreement and to pledge certain assets. After giving effect to the Holdings Assumption Agreement, HoldingSub2 was released from all of its obligations and liabilities as “Holdings” under the Existing Credit Agreement and the other credit documents, and IntermediateCo became party as “Holdings” to the Existing Credit Agreement and the other credit documents to which HoldingSub2 was a party as “Holdings” for all purposes.
The 2021 Credit Agreement contains customary representations and warranties as well as customary affirmative and negative covenants and events of default. The negative covenants include, among others and in each case subject to certain thresholds and exceptions, limitations on incurrence of liens, limitations on incurrence of indebtedness, limitations on making dividends and other distributions, limitations on engaging in asset sales, limitations on making investments, and a financial covenant that the “First Lien Net Leverage Ratio” (as defined in the 2021 Credit Agreement) as of the end of any fiscal quarter is not greater than 7.00 to 1.00 if on the last day of such fiscal quarter certain borrowings outstanding under the revolving credit facility exceed 40 % of the total revolving credit commitments at such time. The covenants also contain limitations on the activities of Mirion IntermediateCo, Inc. as the “passive” holding company. If any of the events of default occur and are not cured or waived, any unpaid amounts under the 2021 Credit Agreement may be declared immediately due and payable, the revolving credit commitments may be terminated and remedies against the collateral may be exercised. Mirion IntermediateCo, Inc. were in compliance with all debt covenants on March 31, 2024 and December 31, 2023.
20
Term Loan - The term loan has a seven-year term (expiring October 2028) and bears interest at the greater of LIBOR (through June 30, 2023) / SOFR (subsequent to June 30, 2023) or 0.50 %, plus 2.75 %. No further principal payments are due until the expiration of the term. The interest rate was 8.36 % and 8.40 % (including spread rate based upon rate term) as of March 31, 2024 and December 31, 2023, respectively. The Company paid no principal payments and $127.1 million for the three months ended March 31, 2024 and for year ended December 31, 2023, respectively, yielding an outstanding balance of approximately $694.6
During the three months ended March 31, 2023, the Company used $125.0 million of proceeds received from a direct registered equity offering to pay down early outstanding amounts on the term loan. This payment satisfied the quarterly principal repayment requirement (0.25 % of the original principal balance) such that no additional principal repayments are necessary until the expiration of the term loan.
Revolving Line of Credit - The revolving line of credit arrangement has a five year term and bears interest at the greater of LIBOR (through June 30, 2023) / SOFR (subsequent to June 30, 2023) or 0 %, plus 2.75 %. The agreement requires the payment of a commitment fee of 0.25 % per annum for unused commitments. The revolving line of credit matures in October 2026, at which time all outstanding revolving facility loans and accrued and unpaid interest are due. Any outstanding letters of credit reduce the availability of the revolving line of credit. There was no 16.4 73.6
Deferred Financing Costs
In connection with the issuance of the 2021 Credit Agreement term loan, we incurred debt issuance costs of $21.7 million on date of issuance. In accordance with accounting for debt issuance costs, we recognize and present deferred finance costs associated with non-revolving debt and financing obligations as a reduction from the face amount of related indebtedness in the unaudited Condensed Consolidated Balance Sheets.
In connection with the issuance of the 2021 Credit Agreement revolving line of credit, we incurred debt issuance costs of $1.8 million. We recognize and present debt issuance costs associated with revolving debt arrangements as an asset and include the deferred finance costs within other assets in the unaudited Condensed Consolidated Balance Sheets. We amortize all debt issuance costs over the life of the related indebtedness.
For the three months ended March 31, 2024 and March 31, 2023, we incurred approximately $0.7 million and $3.5 million (including a $2.6 million loss on debt extinguishment for the $125.0 million early debt repayment) of amortization expense of the deferred financing costs, respectively.
Canadian Financial Institution - In May 2019, the Company entered into a credit agreement for C$1.7 million ($1.3 million) with a Canadian financial institution that matures in April 2039. The note bears annual interest at 4.69 %. The credit agreement is secured by the facility acquired using the funds obtained.
Overdraft Facilities
The Company has overdraft facilities with certain German and French financial institutions. As of March 31, 2024 and December 31, 2023, there were no
Accounts Receivable Sales Agreement
We are party to agreements to sell short-term receivables from certain qualified customer trade accounts to an unaffiliated French financial institution and an unaffiliated Finnish financial institution without recourse. Under these agreements, the Company can sell up to €7.6 million ($8.2 million) and €12.3 million ($13.6 million) as of March 31, 2024 and December 31, 2023, respectively, of eligible accounts receivables. The accounts receivable under these agreements are sold at face value and are excluded from the consolidated balance if revenue has been recognized on the related receivable. When the related revenue has not been recognized on the receivable the Company considers the accounts receivable to be collateral for short-term borrowings. As of March 31, 2024 and December 31, 2023, there was no amount and approximately $1.0 million, respectively, outstanding under these arrangements included as Other in the Borrowings table above.
Total costs associated with this arrangement were immaterial for all periods presented and are included in selling, general and administrative expense in the Condensed Consolidated Statements of Operations.
21
Performance Bonds and Other Credit Facilities
The Company has entered into various line of credit arrangements with local banks in France and Germany. These arrangements provide for the issuance of documentary and standby letters of credit of up to €77.1 million ($83.2 million) and €71.8 million ($79.3 million), as of March 31, 2024 and December 31, 2023, respectively, subject to certain local restrictions. As of March 31, 2024 and December 31, 2023, there were €54.9 million ($59.3 million) and €54.7 million ($60.4 million), respectively, of the lines that had been utilized to guarantee documentary and standby letters of credit, with interest rates ranging from 0.5 % to 2.0 %. In addition, the Company posts performance bonds with irrevocable letters of credit to support certain contractual obligations to customers for equipment delivery. These letters of credit are supported by restricted cash accounts, which totaled $1.5 million and $1.7 million as of March 31, 2024 and December 31, 2023, respectively.
At March 31, 2024, contractual principal payments of total third-party borrowings are as follows (in millions):
| Remainder of 2024 | $ | ||||
| Fiscal year ending December 31: | |||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| Thereafter | |||||
| Gross Payments | |||||
| Unamortized debt issuance costs | ( |
||||
| Total third-party borrowings, net of debt issuance costs | $ | ||||
9. Leased Assets
The Company primarily leases certain logistics, office, and manufacturing facilities, as well as vehicles, copiers and other equipment. These operating leases generally have remaining lease terms between 1 month and 30 years, and some include options to extend (generally 1 to 10 years). The exercise of lease renewal options is at the Company’s discretion. The Company evaluates renewal options at lease inception and on an ongoing basis, and includes renewal options that it is reasonably certain to exercise in its expected lease terms when classifying leases and measuring lease liabilities. Lease agreements generally do not require material variable lease payments, residual value guarantees or restrictive covenants.
The table below presents the locations of the operating lease assets and liabilities in the unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023, respectively (in millions):
| Balance Sheet Line Item | March 31, 2024 | December 31, 2023 | |||||||||||||||
| Operating lease assets | Operating lease right-of-use assets | $ | $ | ||||||||||||||
| Financing lease assets | $ | $ | |||||||||||||||
| Operating lease liabilities: | |||||||||||||||||
| Current operating lease liabilities | Current operating lease liabilities | $ | $ | ||||||||||||||
| Non-current operating lease liabilities | Operating lease liability, non-current | ||||||||||||||||
| Total operating lease liabilities: | $ | $ | |||||||||||||||
| Financing lease liabilities: | |||||||||||||||||
| Current financing lease liabilities | $ | $ | |||||||||||||||
| Non-current financing lease liabilities | |||||||||||||||||
| Total financing lease liabilities: | $ | $ | |||||||||||||||
22
The depreciable lives are limited by the expected lease term for operating lease assets and by shorter of either the expected lease term or economic useful life for financing lease assets.
The Company’s leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring the lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease within a particular currency environment. The Company used incremental borrowing rates as of July 1, 2021 for leases that commenced prior to that date.
The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of March 31, 2024 and December 31, 2023, respectively, are:
| March 31, 2024 | December 31, 2023 | |||||||||||||
| Operating leases | ||||||||||||||
| Weighted average remaining lease term (in years) | ||||||||||||||
| Weighted average discount rate | % | % | ||||||||||||
The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under non-cancelable operating leases with terms of more than one year to the total lease liabilities recognized in the unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 (in millions):
| Fiscal year ending December 31: | |||||
| 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 and thereafter | |||||
| Total undiscounted future minimum lease payments | |||||
| Less: Imputed interest | ( |
||||
| Total operating lease liabilities | $ | ||||
For the three months ended March 31, 2024 and three months ended March 31, 2023, operating lease costs (as defined under ASU 2016-02) were $2.7
10. Commitments and Contingencies
Unconditional Purchase Obligations
The Company has entered into certain long-term unconditional purchase obligations with suppliers. These agreements are non-cancellable and specify terms, including fixed or minimum quantities to be purchased, fixed or variable price provisions, and the approximate timing of payment. As of March 31, 2024, unconditional purchase obligations were as follows (in millions):
23
| Fiscal year ending December 31: | |||||
| 2024 | $ | ||||
| 2025 | |||||
| 2026 | |||||
| 2027 | |||||
| 2028 and thereafter | |||||
| Total | $ | ||||
Litigation
The Company is subject to various legal proceedings, claims, litigation, investigations and contingencies arising out of the ordinary course of business. While the ultimate results of such suits or other proceedings against the Company cannot be predicted with certainty, we believe the resolution of these matters will not have a material effect on our results of operations, financial condition, or cash flows. If we believe the likelihood of an adverse legal outcome is probable and the amount is reasonably estimable, we accrue a liability in accordance with accounting guidance for contingencies. We consult with legal counsel on matters related to litigation and seek input both within and outside the Company.
In April 2023, one of our Russian customers made a claim against the Company, including liquidated damages for certain delays under the terms of an active project, in the amount of $19.3 million, and sent an updated claim statement in October 2023 totaling $21 million ($18 million of which accrue daily penalties), subject to a $14 million contractual cap (all amounts converted from Euros to U.S. Dollars). In June 2023, the same customer made a demand against the Company for the return of all payments received by the Company ($10.2 million) related to a Finland nuclear power plant project cancelled in May 2022. No legal actions have been taken to date by the customer on any of these matters, and management disputes these claims, believes that the Company has substantial defenses and expects to vigorously defend against these claims. However, uncertainty exists as to the resolutions of these matters, including any impact from potential modifications of the underlying active contract and/or settlement of claims for the cancelled Finland project.
As previously disclosed in our 2023 annual report, a lawsuit was filed against the Company in the fourth quarter of 2023 by a vendor alleging copyright infringement and breach of contract involving use of certain software licenses. On March 30, 2024 a settlement agreement was reached with the counterparty with no material impact to our March 31, 2024 financial statements.
11. Income Taxes
The effective income tax rate was (4.7 )% for the three months ended March 31, 2024, and 2.5 % for the three months ended March 31, 2023. The difference in effective tax rate between the periods was primarily attributable to mix of earnings and the impact of valuation allowances.
The effective income tax rate differs from the U.S. statutory rate of 21% due primarily to U.S. federal permanent differences and the impact of valuation allowances.
24
12. Supplemental Disclosures to Condensed Consolidated Statements of Cash Flows
Supplemental cash flow information and schedules of non-cash investing and financing activities (in millions):
| Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| Cash Paid For: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes | $ | $ | |||||||||
| Non-Cash Investing and Financing Activities: | |||||||||||
Property, plant, and equipment purchases in accrued expense and other liabilities |
$ | $ | |||||||||
| Property, plant, and equipment purchases in accounts payable | $ | $ | |||||||||
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited Condensed Consolidated Balances Sheets that sum to the total of the same such amounts shown in the unaudited Condensed Consolidated Statements of Cash Flows (in millions).
| March 31, | December 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash—current | |||||||||||
| Restricted cash—non-current | |||||||||||
| Total cash, cash equivalents, and restricted cash | $ | $ | |||||||||
Amounts included in restricted cash represent funds with various financial institutions to support performance bonds with irrevocable letters of credit for contractual obligations to certain customers.
13. Stock-Based Compensation
Stock-based compensation is awarded to employees and directors of the Company and accounted for in accordance with ASC 718, "Compensation—Stock Compensation". Stock-based compensation expense is recognized for equity awards over the vesting period based on their grant-date fair value. Stock-based compensation expense is included within the same financial statement caption where the recipient’s other compensation is reported. The Company accounts for forfeitures as they occur. The Company uses various forms of long-term incentives including, but not limited to restricted stock units ("RSUs") and performance-based restricted units ("PSUs"), provided that the granting of such equity awards is in accordance with the Company's 2021 Omnibus Incentive Plan (the "2021 Plan") as filed on Form S-8 with the SEC on December 27, 2021.
2021 Omnibus Incentive Plan
We adopted and obtained stockholder approval at the special meeting of the stockholders on October 19, 2021 of the 2021 Plan. We initially reserved 19,952,329 shares of our Class A common stock for issuance pursuant to awards under the 2021 Plan. The total number of shares of our Class A common stock available for issuance under the 2021 Plan will be increased on the first day of each fiscal year following the date on which the 2021 Plan was adopted in an amount equal to the least of (i) three percent (3 %) of the outstanding shares of Class A common stock on the last day of the immediately preceding fiscal year, (ii) 9,976,164 shares of Class A common stock and (iii) such number of shares of Class A common stock as determined by the Committee (as defined and designated under the 2021 Plan) in its discretion. Pursuant to these automatic increase provisions, the number of shares of our Class A common stock reserved for issuance pursuant to awards under the 2021 Plan increased to 38,492,328 shares at January 1, 2024. Any employee, director or consultant of the Company or any of its subsidiaries or affiliates is eligible to receive an award under the 2021 Plan, to the extent that an offer of such award is permitted by applicable law, stock market or exchange rules, and regulations or accounting or tax rules and regulations. The 2021 Plan provides for the grant of stock options (including incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, RSUs, PSUs, other stock-based awards, or any combination thereof. Each award will be set forth in a separate grant notice or agreement and will indicate the type and terms and conditions of the award.
25
The purpose of the 2021 Plan is to motivate and reward employees and other individuals to perform at their highest level and contribute significantly to the success of the Company. During the three months ended March 31, 2024, the Company granted 548,939 RSUs and 453,560 PSUs to certain employees. The RSUs granted to employees are subject to service vesting conditions such that all awards are fully vested after three (3 ) years with equal annual installments vesting on the anniversary of the grant date. The expense will be recognized on a straight-line basis over the related service period for each tranche of awards. The PSUs are subject to service, performance, and market vesting conditions and allow a maximum issuance of shares of our Class A common stock of up to 200 % of the granted PSUs based on the Company meeting certain established thresholds. The recipient will generally forfeit all of the awards if the recipient is no longer providing services to the Company before the end of the performance measurement period on December 31, 2026. Fifty percent (50 %) of the PSU awards shall vest based on performance condition determined by the Company's adjusted EBITDA as measured from January 1, 2026 to December 31, 2026 with interpolated achievement levels of (i) 0 % if the adjusted EBITDA is less than $250.0 million, (ii) between 50 % and 100 % if the adjusted EBITDA is at least $250.0 million and up to $265.0 million and (iii) between 100 % and 200 % if the adjusted EBITDA is at least $265.0 million and up to $280.0 million. The remaining fifty percent (50 %) of the PSU awards shall vest based on performance condition determined by the Company's cumulative Management adjusted free cash flow ("adjusted cash flow") as measured from January 1, 2024 to December 31, 2026 with interpolated achievement levels of (i) 0 % if the adjusted cash flow is less than $525.0 million, (ii) between 50 % and 100 % if the adjusted cash flow is at least $525.0 million and up to $575.0 million and (iii) between 100 % and 200 % if the adjusted cash flow is at least $575.0 million and up to $625.0 million. The overall payout result per the performance conditions shall be adjusted based on a market condition modifier determined by the Company's relative total shareholder return (TSR) during the performance period of January 1, 2024 to December 31, 2026, measured as a comparative percentile to the Company’s peers in the Russell 2000 Industrials index with achievement levels of: (i) -10 % if the TSR percentile is below the 30 th percentile level, (ii) 0 % if the TSR percentile is at least at the 30 th percentile level and up to the 55 th percentile level and (iii) 10 % if the TSR percentile is at least at the 56 th percentile level and up to the 80 th percentile level (or above the 80 th percentile level with 10 % being the maximum). The total payout is capped at 200 % of the granted PSUs.
During the three months ended March 31, 2023, the Company granted 695,351 RSUs and 233,165 PSUs to certain members of the Company's employees. The RSUs are subject to service vesting conditions with one-third of each award vesting on the anniversary of the grant date such that all awards are fully vested after three (3 ) years. The expense will be recognized on a straight-line basis over the related service period for each tranche of awards. . The PSUs are subject to service and performance/market vesting conditions and allow a maximum issuance of shares of our Class A common stock of up to 200 % of the granted PSUs based on the Company meeting certain established thresholds. The recipient will generally forfeit all of the awards if the recipient is no longer providing services to the Company before the end of the performance measurement period on December 31, 2025. Fifty percent (50 %) of the PSU awards shall vest based on a market condition determined by the Company’s relative total shareholder return (TSR) during the performance period of January 1, 2023 to December 31, 2025, measured as a comparative percentile to the Company’s peers in the Russell 2000 Industrials index with interpolated achievement levels of: (i) 0 % if the TSR percentile is below the 30 th percentile level, (ii) between 50 % and 100 % if the TSR percentile is at least at the 30 th percentile level and up to the 55 th percentile level and (iii) between 100 % and 200 % if the TSR percentile is at least at the 56 th percentile level and up to the 80 th percentile level (or above the 80 th percentile level with 200 % being the maximum). The remaining fifty percent (50 %) of the PSU awards shall vest based on performance condition determined by the Company’s organic revenue growth percentage as measured from January 1, 2025 to December 31, 2025 as compared with January 1, 2023 to December 31, 2023 with interpolated achievement levels of (i) 0 % if the organic growth revenue percentage is less than 3.0 %, (ii) between 50 % and 100 % if the organic revenue growth percentage is at least 3.0 % and up to 5.0 % and (iii) between 100 % and 200 % if the organic revenue growth percentage is at least 5.0 % and up to 7.0 % (or above 7.0 % but with 200 % being the maximum).
During the three months ended March 31, 2024, $2.6 million of stock-based compensation expense was recorded, of which $0.2 million was related to non-employee directors. During the three months ended March 31, 2023, $1.6 million of stock-based compensation expense was recorded, of which $0.2 million, respectively was related to non-employee directors.
In addition, during the three months ended March 31, 2024, certain members of the Company's Directors elected to receive their quarterly retainer fees in the form of shares of Class A common stock. As such, the Company recorded related stock-based compensation expense for $0.1 million in the same periods. During the three months ended March 31, 2023, the Company recorded related stock-based compensation expense for $0.1 million, for the director payments in lieu of cash.
26
Profits Interests
In conjunction with entering into the Business Combination Agreement, on June 17, 2021 the Sponsor issued 4,200,000 Profits Interests to Lawrence Kingsley, the current Chairman of the Board of Directors of the Company, 3,200,000 Profits Interests to Thomas Logan, the Chief Executive Officer of Mirion, and 700,000 Profits Interests to Brian Schopfer, the Chief Financial Officer of Mirion. The Profits Interests are intended to be treated as profits interests for U.S. income tax purposes, pursuant to which Messrs. Logan, Schopfer and Kingsley will have an indirect interest in the founder shares held by the Sponsor.
The Profits Interests are subject to service vesting conditions and market vesting conditions. Fifty percent (50%) of the Profits Interests granted to each of Messrs. Logan and Schopfer service-vest on each of the second and third anniversaries of the Closing, and fifty percent (50 %) of the Profits Interests granted to Mr. Kingsley service-vest on each of the first and second anniversaries of the Closing, subject in each case to the continuous service of the grantee on such date. The market vesting conditions require that the price per share of Mirion's Class A common stock must meet or exceed certain established thresholds for 20 out of 30 trading days before the fifth anniversary of the Closing Date. The expense will be recognized on a straight-line basis over the related service period for each tranche of awards.
Of the Profits Interests, 3.2 million have a market vesting threshold price of $12 per share of Mirion Class A common stock, 2.0 million have a threshold price of $14 per share of Mirion Class A common stock, and 3.0 million have a threshold price of $16 per share of Mirion Class A common stock.
During the three months ended March 31, 2024, $0.9 million of stock-based compensation expense was recorded and no new Profit Interests were issued. During the three months ended March 31, 2023, $4.0 million of stock-based compensation expense was recorded and no new Profit Interests were issued.
14. Related-Party Transactions
Founder Shares
As of the closing of the Business Combination, the Sponsor owned 18,750,000 shares of Class B common stock the ("Founder Shares") which automatically converted into 18,750,000 shares of Class A common stock at the closing of the Business Combination. The Founder Shares, are subject to certain vesting and forfeiture conditions and transfer restrictions, including performance vesting conditions under which the price per share of Mirion's Class A common stock must meet or exceed certain established thresholds of $12 , $14 , or $16 per share for 20 out of 30 trading days before the fifth anniversary of the Closing Date of the Business Combination. The Founder Shares will be forfeited to the Company for no consideration if they fail to vest before October 20, 2026.
Private Placement Warrants
The Sponsor purchased an aggregate of 8,500,000 private placement warrants (the "Private Placement Warrants") at a price of $2.00 per whole warrant ($17.0 million in the aggregate) in a private placement (the “Private Placement”) that closed concurrently with the closing of GSAH's initial public offering (the "IPO"). Each Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share, subject to adjustment in certain circumstances, including upon the occurrence of certain reorganization events. The Private Placement Warrants are non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees.
The Private Placement Warrants are accounted for as liabilities as they contain terms and features that do not qualify for equity classification under ASC 815. See Note 16, Fair Value Measurements, for the fair value of the Private Placement Warrants at March 31, 2024.
Profits Interests
In connection with the Business Combination Agreement, the Sponsor issued 8,100,000 Profits Interests to certain individuals affiliated with or expected to be affiliated with Mirion after the Business Combination. The holders of the Profits Interests will have an indirect interest in the Founder Shares held by the Sponsor. The Profits Interests are subject to service and performance vesting conditions, including the occurrence of the Closing, and do not fully vest until all of the applicable conditions are satisfied. In addition, the Profits Interests are subject to certain forfeiture conditions. See Note 13, Stock-Based Compensation, for further detail regarding the Profits Interests.
27
Registration Rights
The holders of the Founder Shares and Private Placement Warrants are entitled to registration rights to require the Company to register the resale of any the Founder Shares and the shares underlying the Private Placement Warrants upon exercise pursuant to the Amended and Restated Registration Rights Agreement dated October 20, 2021 (the "RRA"). These holders are also entitled to certain piggyback registration rights. The RRA also includes customary indemnification and confidentiality provisions. The Company will bear the expenses incurred in connection with the filing of any registration statements filed pursuant to the terms of the RRA, including those expenses incurred in connection with the shelf-registration statement on Form S-1 filed on October 27, 2021 and declared effective on November 2, 2021.
Charterhouse Capital Partners LLP
The Company had entered into agreements with its primary pre-Business Combination investor, Charterhouse Capital Partners LLP ("CCP"), which obligated the Company to pay certain expenses in support of any secondary market offerings of its remaining shares owned after the Business Combination. During the three months ended March 31, 2024 and March 31, 2023, no expenses and $0.6 million of expenses were recorded, respectively. As of July 2023, CCP no longer owns shares in the Company.
15. Segment Information
During the three months ended June 30, 2023, the Company renamed its Industrial segment as "Technologies."
The following table summarizes select operating results for each reportable segment (in millions).
| Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| Revenues | |||||||||||
| Medical | $ | $ | |||||||||
| Technologies | |||||||||||
| Consolidated revenues | $ | $ | |||||||||
| Segment Income (Loss) from Operations | |||||||||||
| Medical | $ | $ | |||||||||
| Technologies | |||||||||||
| Total segment income from operations | |||||||||||
| Corporate and other | ( |
( |
|||||||||
| Consolidated loss from operations | $ | ( |
$ | ( |
|||||||
The Company’s assets by reportable segment were not included, as this information is not reviewed by, nor otherwise provided to, the chief operating decision maker to make operating decisions or allocate resources.
28
The following details revenues by geographic region. Revenues generated from external customers are attributed to geographic regions through sales from site locations (i.e., point of origin) (in millions).
| Revenues | |||||||||||
| Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| North America | |||||||||||
| Medical | $ | $ | |||||||||
| Technologies | |||||||||||
| Total North America | |||||||||||
| Europe | |||||||||||
| Medical | |||||||||||
| Technologies | |||||||||||
| Total Europe | |||||||||||
| Asia Pacific | |||||||||||
| Medical | |||||||||||
| Technologies | |||||||||||
| Total Asia Pacific | |||||||||||
| Total revenues | $ | $ | |||||||||
The following details revenues by timing of recognition (in millions):
| Revenues | |||||||||||
| Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| Point in time | $ | $ | |||||||||
| Over time | |||||||||||
| Total revenues | $ | $ | |||||||||
The following details revenues by product category (in millions):
| Revenues | |||||||||||
| Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| Medical segment: | |||||||||||
| Medical | $ | $ | |||||||||
| Technologies segment: | |||||||||||
| Reactor Safety and Control Systems | |||||||||||
| Radiological Search, Measurement, and Analysis Systems | |||||||||||
| Total revenues | $ | $ | |||||||||
16. Fair Value Measurements
The Company applies fair value accounting to all financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. The fair value of the Company’s cash and cash equivalents, restricted cash, accounts receivable, and other current assets and liabilities approximates their carrying amounts due to the relatively short maturity of these items. The fair value of third-party debt approximates the carrying value because the interest rates are variable and reflect market rates.
29
Fair Value of Financial Instruments
The Company categorizes assets and liabilities recorded at fair value in the unaudited Condensed Consolidated Balance Sheets based upon the level of judgment associated with inputs used to measure their fair value. It is not practicable due to cost and effort for the Company to estimate the fair value of notes issued to related parties primarily due to the nature of their terms relative to the entity’s capital structure.
Assets and liabilities carried at fair value are valued and disclosed in one of the following three levels of the valuation hierarchy:
Level 1 – Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs are quoted prices in active markets for similar assets or liabilities or inputs that can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Inputs are unobservable and require significant management judgment or estimation.
The following table summarizes the financial assets and liabilities of the Company that are measured at fair value on a recurring basis (in millions):
| Fair Value Measurements at March 31, 2024 | |||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| Assets | |||||||||||||||||
| Cash, cash equivalents, and restricted cash | $ | $ | $ | ||||||||||||||
| Discretionary retirement plan | $ | $ | $ | ||||||||||||||
| Accrued interest receivable on cross currency swaps | $ | $ | $ | ||||||||||||||
| Interest rate swap (Note 17) | $ | $ | $ | ||||||||||||||
| Liabilities | |||||||||||||||||
| Discretionary retirement plan | $ | $ | $ | ||||||||||||||
| Public warrants | $ | $ | $ | ||||||||||||||
| Private placement warrants | $ | $ | $ | ||||||||||||||
| Cross-currency rate swaps (Note 17) | $ | $ | $ | ||||||||||||||
| Fair Value Measurements at December 31, 2023 | |||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||
| Assets | |||||||||||||||||
| Cash, cash equivalents, and restricted cash | $ | $ | $ | ||||||||||||||
| Discretionary retirement plan | $ | $ | $ | ||||||||||||||
| Accrued interest receivable on cross currency swaps | $ | $ | $ | ||||||||||||||
| Interest rate swap (Note 17) | $ | $ | $ | ||||||||||||||
| Liabilities | |||||||||||||||||
| Discretionary retirement plan | $ | $ | $ | ||||||||||||||
| Public warrants | $ | $ | $ | ||||||||||||||
| Private placement warrants | $ | $ | $ | ||||||||||||||
| Cross-currency rate swaps (Note 17) | $ | $ | $ | ||||||||||||||
As of March 31, 2024 and December 31, 2023, the fair value of Public Warrants issued in connection with GSAH's IPO have been measured based on the listed market price of such Public Warrants, a Level 1 measurement.
As the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, we determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
30
For the three months ended March 31, 2024, the Company recognized an unrealized loss resulting from an increase in the fair value of the warrant liabilities of $5.7 million, which is presented in the unaudited Condensed Consolidated Statements of Operations as change in fair value of warrant liabilities.
17. Derivatives and Hedging
The Company's policy requires derivatives to be used solely for managing risks and not for speculative purposes. As a result of the Company’s European operations, the Company is exposed to fluctuations in exchange rates between euro and USD. As such, the Company entered into cross-currency rate swaps to manage currency risks related to our investments in foreign operations. The Company is also subject to interest rate risk related to the Credit Facilities. The Company manages its risk to interest rate fluctuations through the use of derivative financial instruments. As such, the Company entered into an interest rate swap (notional amount of $75.0 million) to mitigate the risk of adverse changes in benchmark interest rates on the Company's future interest payments.
All derivative instruments are carried at fair value in the unaudited Condensed Consolidated Balance Sheets. The following table presents the fair values of the Company’s derivative instruments that were designated and qualified as part of a hedging relationship (in millions):
Fair Value (1)
|
||||||||||||||||||||
| Derivatives Designated as Hedging Instruments | Balance Sheet Location | March 31, 2024 | December 31, 2023 | |||||||||||||||||
| Assets: | ||||||||||||||||||||
| Accrued Interest Receivable on Cross-Currency Rate Swaps | Prepaid expenses and other currents assets | $ | $ | |||||||||||||||||
| Interest Rate Swap | Other non-current assets | |||||||||||||||||||
| Total assets | $ |
|
$ |
|
||||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Cross-Currency Rate Swaps | Accrued expenses and other current liabilities | $ | $ | |||||||||||||||||
| Cross-Currency Rate Swaps | Other non-current liabilities | $ | $ | |||||||||||||||||
| Total liabilities | $ |
|
$ |
|
||||||||||||||||
(1) Refer to Note 16, Fair Value Measurements, for additional information related to the estimated fair value.
| ||||||||||||||||||||
Counterparty Credit Risk
Outstanding financial derivative instruments expose the Company to credit loss in the event of nonperformance by the counterparties to the derivative agreements. The Company's credit exposure related to these financial instruments is represented by the notional amount of the hedging instruments. The Company manages its exposure to counterparty credit risk through minimum credit standards, diversification of counterparties, and procedures to monitor concentrations of credit risk. The Company's derivative instruments are with financial institutions of investment grade or better. Counterparty credit risk will be monitored through periodic review of counterparty bank’s credit ratings and public financial filings. Based on these factors, the Company considers the risk of counterparty default to be minimal.
Cash Flow Hedging Strategy
The Company uses cash flow hedges to minimize the variability in cash flows of assets or liabilities or forecasted transactions caused by fluctuations in interest rates. The changes in the fair values of derivatives designated as cash flow hedges are recorded in accumulated other comprehensive loss (“AOCL”) and are reclassified into the line item in the unaudited Condensed Consolidated Statements of Operations in which the hedged items are recorded in the same period the hedged items affect earnings. The changes in the fair values of hedges that are determined to be ineffective are immediately reclassified from AOCL into earnings. The maximum length of time for which the Company hedges its exposure to the variability in future cash flows is three years .
The interest rate swap was entered into by the Company during the third quarter of 2023. During the three months ended March 31, 2024, the interest rate swap resulted in gains of $0.8 million recognized in other comprehensive income ("OCI"). Gains of $0.3 million in income through interest expense and reclassified from OCI during the same period. The cash inflows and outflows associated with the Company’s derivative contracts designated as cash flow hedges are classified as financing activities in the unaudited Condensed Consolidated Statements of Cash Flows. In addition, the Company did not have any ineffectiveness related to the interest rate swap during the three months ended March 31, 2024.
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Hedges of Net Investments in Foreign Operations Strategy
The Company uses fixed-to-fixed cross-currency rate swaps ("CCRS") to protect the net investment on pre-tax basis in the Company’s EUR-denominated operations against changes in spot exchange rates. For derivative financial instruments that are designated and qualify as hedges of net investments in foreign operations, the changes in the fair values of the derivative financial instruments are recognized in net investment hedges adjustments, a component of AOCL, to offset the changes in the values of the net investments being hedged. Any ineffective portions of net investment hedges are reclassified from AOCL into earnings during the period of change.
The following table summarizes the notional values and pretax impact of changes in the fair values of instruments designated as net investment hedges (in millions):
| Notional Amount | Gain (Loss) Recognized in AOCL | ||||||||||||||||||||||
| As of | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||||||||||||||||
| March 31, 2024 | December 31, 2023 | ||||||||||||||||||||||
| Cross-currency rate swaps | € | € | $ | $ | ( |
||||||||||||||||||
| Total | € | € | $ | $ | ( |
||||||||||||||||||
The Company did not reclassify any gains or losses related to net investment hedges from AOCL into earnings during the three months ended March 31, 2024 and March 31, 2023, respectively. In addition, the Company did not have any ineffectiveness related to net investment hedges during the three months ended March 31, 2024 and 2023. The cash inflows and outflows associated with the Company’s derivative contracts designated as net investment hedges are classified as investing activities in the unaudited Condensed Consolidated Statements of Cash Flows.
18. Loss Per Share
A reconciliation of the numerator and denominator used in the calculation of basic and diluted loss per common share is as follows (in millions, except per share amounts):
| Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||
| 2024 | 2023 | ||||||||||
| Net loss attributable to Mirion Technologies, Inc. shareholders | $ | ( |
$ | ( |
|||||||
| Weighted average common shares outstanding – basic and diluted | |||||||||||
| Net loss per common share attributable to Mirion Technologies, Inc. — basic and diluted | $ | ( |
$ | ( |
|||||||
Net loss per share of common stock is computed using the two-class method required for multiple classes of common stock and participating securities based upon their respective rights to receive dividends as if all income for the period has been distributed. Basic loss per share is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding, adjusted for the outstanding non-vested shares. Diluted loss per share is computed by giving effect to all potentially dilutive securities outstanding for the period using the treasury stock method or the if-converted method based on the nature of such securities. For periods in which the Company reports net losses, diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, because potentially dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company incurred a net loss for the three months ended March 31, 2024 and 2023, respectively; therefore, none of the potentially dilutive common shares were included in the diluted share calculations for those periods as they would have been anti-dilutive. The weighted average number of potentially dilutive common shares related to employee stock-based awards excluded as anti-dilutive for the three months ended March 31, 2024 and 2023 were 2.577 million and 0.687 million, respectively.
Upon the closing of the Business Combination, the following classes of common stock were considered in the loss per share calculation.
32
Class A Common Stock
Holders of shares of our Class A common stock are entitled to one vote for each share held of record on all matters on which stockholders are entitled to vote generally, including the election or removal of directors. The holders of our Class A common stock do not have cumulative voting rights in the election of directors. Holders of shares of our Class A common stock are entitled to receive dividends when and if declared by the Company's Board of Directors out of funds legally available therefor, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock. Upon our liquidation, dissolution or winding up and after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of shares of our Class A common stock will be entitled to receive pro rata our remaining assets available for distribution. Class A common stock issued and outstanding is included in the Company’s basic loss per share calculation, with the exception of Founder Shares discussed below.
Class B Common Stock
Holders of shares of our Class B common stock are entitled to one vote for each share held of record on all matters on which stockholders are entitled to vote generally, including the election or removal of directors. If at any time the ratio at which shares of IntermediateCo Class B common stock are redeemable or exchangeable for shares of our Class A common stock changes from one-for-one as the number of votes to which our Class B common stockholders are entitled will be adjusted accordingly. The holders of our Class B common stock do not have cumulative voting rights in the election of directors. Except for transfers to us or to certain permitted transferees set forth in the IntermediateCo certificate of incorporation, paired interests may not be sold, transferred or otherwise disposed of.
Holders of shares of our Class B common stock are not entitled to economic interests in us or to receive dividends or to receive a distribution upon our liquidation or winding up. However, if IntermediateCo makes distributions to us other than solely with respect to our Class A common stock, the holders of paired interests will be entitled to receive distributions pro rata in accordance with the percentages of their respective shares of IntermediateCo Class B common stock.
Our Class B common stock has voting rights but no economic interest in the Company and therefore are excluded from the calculation of basic and diluted earnings per share.
Warrants
As described above, the Company has outstanding warrants to purchase up to 27,249,779 shares of Class A common stock (including 18,749,779 Public Warrants and 8,500,000 Private Placement Warrants). One whole warrant entitles the holder thereof to purchase one share of Mirion Class A common stock at a price of $11.50 per share. The Company’s warrants are not included in the Company’s calculation of basic loss per share and are excluded from the calculation of diluted loss per share because their inclusion would be anti-dilutive.
Founder Shares
Founder shares are subject to certain vesting events and forfeit if a required vesting event does not occur within five years of the closing of the Business Combination. The founder shares are subject to vesting in three equal tranches, based on the volume-weighted average price of our Class A common stock being greater than or equal to $12.00 , $14.00 and $16.00 per share for any 20 trading days in any 30 consecutive trading day period. Holders of the founder shares are entitled to vote such founder shares and receive dividends and other distributions with respect to such founder shares prior to vesting, but such dividends and other distributions with respect to unvested founder shares will be set aside by the Company and shall only be paid to the holders of the founder shares upon the vesting of such founder shares.
As the holders of the founder shares are not entitled to participate in earnings unless the vesting conditions are met, the 18,750,000 founders shares have been excluded from the calculation of basic earnings per share. The founders shares are also excluded from the calculation of diluted earnings per share because their inclusion would be anti-dilutive.
Stock-Based Awards
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19. Restructuring
The Company incurs costs associated with restructuring initiatives intended to improve operating performance, profitability, and working capital levels. Actions associated with these initiatives may include improving productivity, workforce reductions, and the consolidation of facilities.
As of March 31, 2024, the Company does not expect a significant impact of additional charges from restructuring actions in the next 12 months.
The Company’s restructuring expenses are comprised of the following (in millions):
| Three Months Ended March 31, 2024 | |||||||||||||||||
| Cost of revenue | Selling, general and administrative |
Total | |||||||||||||||
| Severance and employee costs | $ | $ | $ | ||||||||||||||
Other(1)
|
|||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| Three Months Ended March 31, 2023 | |||||||||||||||||
| Cost of revenue | Selling, general and administrative |
Total | |||||||||||||||
| Severance and employee costs | $ | $ | $ | ||||||||||||||
Other(1)
|
|||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
The following table summarizes restructuring expenses for each reportable segment (in millions):
| Three Months Ended | |||||||||||
| March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Restructuring expenses: | |||||||||||
| Medical | $ | $ | |||||||||
| Technologies | |||||||||||
| Corporate and other | |||||||||||
| Total | $ |
|
$ |
|
|||||||
20. Noncontrolling Interests
On October 20, 2021, Mirion Technologies, Inc. consummated its previously announced Business Combination pursuant to the Business Combination Agreement.
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Before the Closing of the Business Combination, the Sellers had the option to elect to have their equity consideration issued as either shares of Class A common stock or Paired Interests. The Sellers receiving shares of Class B common stock also received one share of IntermediateCo Class B common stock per share of Class B common stock as a Paired Interest. Each of the shares of Class A common stock and each Paired Interest were valued at $10.00 per share for purposes of determining the aggregate number of shares issued to the Sellers. Holders of shares of our Class B common stock are entitled to one vote for each share held of record on all matters on which stockholders are entitled to vote generally, including the election or removal of directors. If at any time the ratio at which shares of IntermediateCo Class B common stock are redeemable or exchangeable for shares of the Company’s our Class A common stock changes from one -for-one, as the number of votes to which our Class B common stockholders are entitled will be adjusted accordingly. The holders of our the Company’s Class B common stock do not have cumulative voting rights in the election of directors. Except for transfers to us or to certain permitted transferees set forth in the IntermediateCo certificate of incorporation, paired interests may not be sold, transferred or otherwise disposed of.
The holders of IntermediateCo Class B common stock have the right to require IntermediateCo to redeem all or a portion of their IntermediateCo Class B common stock for, at the Company’s election, (1) newly issued shares of the Company’s Class A common stock on a one -for-one basis or (2) a cash payment equal to the product of the number of shares of IntermediateCo Class B common stock subject to redemption and the arithmetic average of the closing stock prices for a share of the Company’s Class A common stock for each of three (3 ) consecutive full trading days ending on and including the last full trading day immediately prior to the date of redemption (subject to customary adjustments, including for stock splits, stock dividends and reclassifications). This redemption right became available upon the expiration of certain lockup restrictions on April 18, 2022.
At the Closing Date, the Company owned 100 % of the voting shares (Class A) of IntermediateCo and approximately 96 % of the non-voting Class B shares of IntermediateCo. The Company recognized noncontrolling interests for the 8,560,540 shares, representing approximately 4 % of the non-voting Class B shares, of IntermediateCo that are not attributable to the Company. After the conversion in the current quarter, the Company recognized noncontrolling interests for the 7,326,423 shares, representing the 3.2 % of the non-voting Class B shares of IntermediateCo, that are not attributable to the Company.
21. Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss, net of tax, consist of the following (in millions):
| March 31, 2024 | December 31, 2023 | ||||||||||
| Cumulative foreign currency translation adjustment, net of tax | $ | ( |
$ | ( |
|||||||
| Unrealized gain on pension and postretirement benefit plans, net of tax | |||||||||||
| Unrealized loss on net investment hedges, net of tax | ( |
( |
|||||||||
| Unrealized gain on cash flow hedges, net of tax | |||||||||||
| Less: cumulative loss attributable to noncontrolling interests | ( |
( |
|||||||||
| Accumulated other comprehensive loss | $ | ( |
$ | ( |
|||||||
22. Subsequent Events
On April 18, 2024, Mirion announced a redemption of all Public Warrants. Public Warrant holders may continue to exercise their Public Warrants until immediately before 5:00 p.m. New York City time on May 20, 2024 (the "Redemption Date") and receive shares of Class A Common Stock (i) in exchange for a $11.50 cash payment per warrant, or (ii) on a “cashless” basis, in which case the exercising holder will receive 0.220 of a share of Class A Common Stock for each Public Warrant (rounded down to the nearest whole number of shares across all warrants exercised at one time). Public Warrants not exercised by 5:00 p.m. New York City time on the Redemption Date will be redeemed for $0.10 per Public Warrant.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of Mirion’s financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes of Mirion Technologies, Inc. that are included elsewhere in this Quarterly Report on Form 10-Q as well as our audited consolidated financial statements and the notes related thereto for the year ended December 31, 2023 that are included in our Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section entitled “Risk Factors” included in this Quarterly Report on Form 10-Q as well as our Annual Report on Form 10-K. Unless the context otherwise requires, references in this section to “we,” “us,” “our,” “Mirion” and “the Company” refer to the business and operations of Mirion Technologies, Inc. and its consolidated subsidiaries. Unless the context otherwise requires or unless otherwise specified, all dollar amounts in this section are in millions.
Overview
We are a global provider of products, services, and software that allow our customers to safely leverage the power of ionizing radiation for the greater good of humanity through critical applications in the medical, nuclear and defense markets, as well as laboratories, scientific research, analysis, and exploration.
We provide dosimetry solutions for monitoring the total amount of radiation medical staff members are exposed to over time, radiation therapy quality assurance solutions for calibrating and verifying imaging and treatment accuracy, and radionuclide therapy products for nuclear medicine applications such as shielding, product handling, medical imaging furniture, and rehabilitation products. We provide robust, field-ready personal radiation detection and identification equipment for defense applications and radiation detection and analysis tools for power plants, labs, and research applications. Nuclear power plant product offerings are used for the full nuclear power plant lifecycle including core detectors, essential measurement devices for new build, maintenance, decontamination and decommission, and equipment for monitoring and control during fuel dismantling and remote environmental monitoring.
We manage and report results of operations in two business segments: Medical and Technologies.
•Our revenues were $192.6 million for the three months ended March 31, 2024 and $182.1 million for the three months ended March 31, 2023, of which 34.7% and 36.5% were generated in the Medical segment for the three months ended March 31, 2024 and 2023, respectively, and 65.3% and 63.5% were generated in the Technologies segment for the three months ended March 31, 2024 and 2023, respectively.
•Backlog (representing committed but undelivered contracts and purchase orders, including funded and unfunded government contracts) was $840.5 million and $857.1 million as of March 31, 2024, and December 31, 2023, respectively.
Key Factors Affecting Our Performance
We believe that our business and results of operations and financial condition may be impacted in the future by various trends and conditions, including the following:
•International Conflict such as the Russia-Ukraine conflict and conflict in the Middle East—International conflict such as the Russia-Ukraine conflict has impacted and may continue to impact us, and conflict in the Middle East may impact us in the future, including through increased inflation, limited availability of certain commodities, supply chain disruption, disruptions to our global technology infrastructure, including cyberattacks, increased terrorist activities, volatility or disruption in the capital markets, and delays or cancellations of customer projects.
•Inflation and Interest Rates—We continue to actively monitor, evaluate and respond to developments relating to operational challenges in the current inflationary environment. Global supply chain disruptions and the higher inflationary environment remain unpredictable and our past results may not be indicative of future performance. In addition, the increase in interest rates has in turn led to increases in the interest rates applicable to our indebtedness and increased our debt service costs.
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•Tariffs or Sanctions—The United States imposes tariffs on imports from China and other countries, which has resulted in retaliatory tariffs and restrictions implemented by China and other countries. There are, at any given time, a multitude of ongoing or threatened armed conflicts around the world. As one example, sanctions by the United States, the European Union, and other countries against Russian entities or individuals related to the Russia-Ukraine conflict, along with any Russian retaliatory measures could increase our costs, adversely affect our operations, or impact our ability to meet existing contractual obligations.
•Medical end market trends—Growth and operating results in our Medical segment are impacted by:
•Changes to global regulatory standards, including new or expanded standards;
•Increased focus on healthcare safety;
•Changes to healthcare reimbursement;
•Potential budget constraints in hospitals and other healthcare providers;
•Medical/lab dosimetry growth supported by growing and aging demographics, increased number of healthcare professionals, and penetration of radiation therapy/diagnostics; and
•Medical radiation therapy quality assurance (“RT QA”) growth driven by growing and aging population demographics, low penetration of RT QA technology in emerging markets, and increased adoption of advanced software and hardware solutions for improved outcomes and administrative and labor efficiencies.
•Strategic transactions—A large driver of our historical growth has been the acquisition and integration of related businesses. Our ability to integrate, restructure, and leverage synergies of these businesses will impact our operating results over time. From time to time we also divest businesses, which could also impact our operating results.
•Environmental objectives of governments—Growth and operating results in our Technologies segment are impacted by environmental policy decisions made by governments in the countries where we operate. Our nuclear power customers may benefit from decarbonization efforts given the relatively low carbon footprint of nuclear power to other existing energy sources. In addition, decisions by governments to build new power plants or decommission existing plants can positively and negatively impact our customer base.
•Government budgets—While we believe that we are poised for growth from governmental customers in both of our segments, our revenues and cash flows from government customers are influenced, particularly in the short-term, by budgetary cycles. This impact can be either positive or negative.
•Nuclear new build projects—A portion of our backlog is driven by contracts associated with the construction of new nuclear power plants. These contracts can be long-term in nature and provide us with a strong pipeline for the recognition of future revenues in our Technologies segment. We perform our services and provide our products at a fixed price for certain contracts. Fixed-price contracts carry inherent risks, including risks of losses from underestimating costs, operational difficulties and other changes that may occur over the contract period. If our cost estimates for a contract are inaccurate or if we do not execute the contract within our cost estimates, we may incur losses or the contract may not be as profitable as we expected. In addition, even though some of our longer-term contracts contain price escalation provisions, such provisions may not fully provide for cost increases, whether from inflation, the cost of goods and services to be delivered under such contracts or otherwise.
•Research and development—A portion of our operating expenses is associated with research and development activities associated with the design of new products. Given the specific design and application of certain of these products, there is some risk that these costs will not result in successful products in the market. Further, the timing of these products can move and be challenging to predict.
•Financial risks—Our business and financial statements can be adversely affected by foreign currency exchange rates, changes in our tax rates (including as a result of changes in tax laws) or income tax liabilities/assessments, changes in interest rates, recognition of impairment charges for our goodwill or other intangible assets and fluctuations in the cost and availability of commodities.
•Global risk—Our business depends in part on operations and sales outside the United States. Risks related to those international operations and sales include new foreign investment laws, new export/import regulations, and additional trade restrictions (such as sanctions and embargoes). New laws that favor local competitors could prevent our ability to compete outside the United States. Additional potential issues are associated with the impact of these same risks on our suppliers and customers. If our customers or suppliers are impacted by these risk factors, we may see the reduction or cancellation of customer orders, or interruptions in raw materials and components.
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Non-GAAP Financial Measures
We report our financial results in accordance with generally accepted accounting principles in the United States. (“GAAP”). However, management believes certain non-GAAP financial measures provide investors and other users with additional meaningful information that should be considered when assessing our ongoing performance. Management also uses these non-GAAP financial measures in making financial, operating, and planning decisions, and in evaluating our performance. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our GAAP results. The non-GAAP financial measures we present may differ from similarly captioned measures presented by other companies. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
In particular, we use the non-GAAP financial measures “EBITA,” “EBITDA,” and “Adjusted EBITDA." "Adjusted EBITDA" is used in the calculation of the First Lien Net Leverage Ratio in the 2021 Credit Agreement described in Note 8, Borrowings, to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Tax impacts for the non-GAAP financial measures are calculated based on the appropriate tax rate for each individual item presented.
The following tables present a reconciliation of certain non-GAAP financial measures for the three months ended March 31, 2024 and for the three months ended March 31, 2023.
| (In millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||||
| Net loss | $ | (26.5) | $ | (42.9) | |||||||
| Interest expense, net | 13.8 | 14.9 | |||||||||
| Income tax loss (benefit) | 1.2 | (1.1) | |||||||||
| Amortization | 31.5 | 33.6 | |||||||||
| EBITA | $ | 20.0 | $ | 4.5 | |||||||
| Depreciation - Mirion Business Combination step up | 1.6 | 1.6 | |||||||||
| Depreciation - all other | 5.7 | 6.2 | |||||||||
| EBITDA | $ | 27.3 | $ | 12.3 | |||||||
| Stock-based compensation expense | 3.6 | 5.6 | |||||||||
| Increase in fair value of warrant liabilities | 5.7 | 13.4 | |||||||||
| Debt extinguishment | — | 2.6 | |||||||||
| Foreign currency loss (gain), net | 0.8 | (0.3) | |||||||||
Non-operating expenses(1)(2)
|
2.1 | 3.0 | |||||||||
| Adjusted EBITDA | $ | 39.5 | $ | 36.6 | |||||||
(1)Pre-tax non-operating expenses of $2.1 million for the three months ended March 31, 2024 include $1.0 million of costs to achieve integration and operational synergies; $0.6 million of mergers and acquisition expenses; and $0.5 million of costs to achieve information technology system integration and efficiency.
(2)Pre-tax non-operating expenses of $3.0 million for the three months ended March 31, 2023 include $1.4 million of restructuring costs; $0.6 million of fees incurred in connection with a secondary offering made by affiliates of Charterhouse Capital Partners, our former majority stockholder; $0.5 million of costs to achieve information technology system integration and efficiency; $0.2 million in costs to achieve integration and operational synergies; $0.2 million related to the Business Combination and incremental one-time costs associated with becoming a public company; and $0.1 million of mergers and acquisition expenses.
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The following tables present a reconciliation of GAAP income from operations to non-GAAP Adjusted EBITDA by segment for the three months ended March 31, 2024 and the three months ended March 31, 2023:
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||
| (In millions) | Medical | Technologies | Corporate & Other | Consolidated | |||||||||||||||||||
| Income from operations | $ | 1.4 | $ | 12.6 | $ | (18.9) | $ | (4.9) | |||||||||||||||
| Amortization | 13.7 | 17.8 | — | 31.5 | |||||||||||||||||||
| Depreciation - core | 3.6 | 2.1 | — | 5.7 | |||||||||||||||||||
| Depreciation - Mirion Business Combination step up | 1.2 | 0.3 | 0.1 | 1.6 | |||||||||||||||||||
| Stock-based compensation | 0.2 | 0.4 | 3.0 | 3.6 | |||||||||||||||||||
| Non-operating expenses | 0.4 | — | 1.7 | 2.1 | |||||||||||||||||||
| Other expense / (income) | — | (0.1) | — | (0.1) | |||||||||||||||||||
| Adjusted EBITDA | $ | 20.5 | $ | 33.1 | $ | (14.1) | $ | 39.5 | |||||||||||||||
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||
| (In millions) | Medical | Technologies | Corporate & Other | Consolidated | |||||||||||||||||||
| Income from operations | $ | 0.7 | $ | 5.5 | $ | (19.8) | $ | (13.6) | |||||||||||||||
| Amortization | 13.9 | 19.7 | — | 33.6 | |||||||||||||||||||
| Depreciation - core | 3.9 | 2.2 | 0.1 | 6.2 | |||||||||||||||||||
| Depreciation - Mirion Business Combination step up | 1.2 | 0.3 | 0.1 | 1.6 | |||||||||||||||||||
| Stock-based compensation | 0.1 | 0.2 | 5.3 | 5.6 | |||||||||||||||||||
| Non-operating expenses | 0.6 | 0.6 | 1.9 | 3.1 | |||||||||||||||||||
| Other expense / (income) | — | — | 0.1 | 0.1 | |||||||||||||||||||
| Adjusted EBITDA | $ | 20.4 | $ | 28.5 | $ | (12.3) | $ | 36.6 | |||||||||||||||
Our Business Segments
We manage and report our business in two business segments: Medical and Technologies.
Medical includes products and services for radiation therapy and personal dosimetry. This segment’s principal offerings include solutions for calibrating and/or verifying imaging, treatment machine, patient treatment plan, and patient treatment accuracy; solutions for monitoring the total amount of radiation medical staff members are exposed to over time; and products for nuclear medicine in radiation measurement, shielding, product handling, medical imaging furniture and rehabilitation.
Technologies includes products and services for defense, nuclear energy, laboratories and research and other industrial markets. This segment’s principal offerings are:
•Reactor Safety and Control Systems, which includes radiation monitoring systems and reactor instrumentation and control systems that ensure the safe operation of nuclear reactors and other nuclear fuel cycle facilities; and
•Radiological Search, Measurement and Analysis Systems, which includes solutions to locate, measure and perform in-depth scientific analysis of radioactive sources for radiation safety, security, and scientific applications.
Recent Developments
Russia and Ukraine
The United States, the European Union, the United Kingdom and other governments have implemented major trade and financial sanctions against Russia and related parties in response to Russia's invasion of Ukraine. We do business with Russian customers both within and outside of Russia and with customers who have contracts with Russian counterparties. The conflict’s impact on the Company is predominantly in our Technologies segment. As of March 31, 2024, the Company has approximately $0.7 million in net contract assets and accounts receivable, net of related reserves of approximately $0.8 million for Russian customers and channel partners. The Company maintains $13.9 million in advance payment guarantees and $14.1 million in performance guarantees in support of these projects. As of March 31, 2024, we continue to experience delays in recognizing project revenue due to the trade and financial sanctions made to date. The remaining performance obligations in our backlog for Russian-related projects was approximately $153.7 million at March 31, 2024.
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In April 2023, one of our Russian customers made a claim against the Company, including liquidated damages for certain delays under the terms of an active project, in the amount of $19.3 million, and sent an updated claim statement in October 2023 totaling $21 million ($18 million of which accrue daily penalties), subject to a $14 million contractual cap (all amounts converted from Euros to U.S. Dollars). In June 2023, the same customer made a demand against the Company for the return of all payments received by the Company ($10.2 million) related to a Finland nuclear power plant project cancelled in May. No legal actions have been taken to date by the customer on these matters, and management disputes these claims, believes that the Company has substantial defenses and expects to vigorously defend against these claims. However, uncertainty exists as to the resolutions of these matters, including any impact from potential modifications of the underlying active contract and/or settlement of claims for the cancelled Finland project.
The Company will continue to monitor the social, political, regulatory and economic environment in Ukraine and Russia, and will consider actions as appropriate.
Interest Rates
In connection with the Business Combination, certain of our subsidiaries of the Company entered into the 2021 Credit Agreement to refinance and replace the credit agreement from March 2019. The 2021 Credit Agreement provides for an $830.0 million senior secured first lien term loan facility and a $90.0 million senior secured revolving facility (collectively, the “Credit Facilities”). The term loan has a seven-year term (expiring October 2028), bears interest at the greater of the Secured Overnight Financing Rate ("SOFR") or 0.50%, plus 2.75% and has quarterly principal repayments of 0.25% of the original principal balance. Interest rates have been increasing during the year ended December 31, 2023 and three months ended March 31, 2024 as central banks, specifically the Federal Reserve, have been steadily raising their interest rates to reduce inflation. As a result, the interest rate for the term loan was 8.36% (including spread based upon rate term) and 7.48% as of March 31, 2024 and March 31, 2023, respectively. If the Federal Reserve and other central banks continue to raise the interest rates, the interest rate for the term loan will continue to increase. We will continue to monitor the interest rate, and will consider actions as appropriate.
Biodex Rehab Sale
On April 3, 2023, the Company closed the sale of the Biodex Rehabilitation ("Rehab") business to Salona Global Medical Device Corporation ("Salona"). As a result, Rehab operating results are included in Mirion's operating results for the three months ended March 31, 2023 but excluded from the three months ended March 31, 2024.
ec2 Software Solutions LLC and NUMA LLC Acquisition
On November 1, 2023, the Company acquired ec2 Software Solutions LLC and NUMA LLC (collectively “ec2”) for $33 million of cash consideration. Headquartered in Somerset, NJ, ec2 is a medical software company that designs, implements, and supports comprehensive software solutions servicing the nuclear medicine industry. The ec2 team and portfolio of solutions will be integrated into the Company's Medical segment, and ec2’s portfolio of solutions will play a key role in expanding the Company’s software offerings to Medical customers.
Public Warrants Redemption
As of March 31, 2024, we had a liability of $42.0 million related to 18,749,779 outstanding Public Warrants. On April 18, 2024, Mirion announced a redemption of all Public Warrants. Public Warrant holders may continue to exercise their Public Warrants until immediately before 5:00 p.m. New York City time on May 20, 2024 and receive shares of Class A Common Stock (i) in exchange for a $11.50 cash payment per warrant, or (ii) on a “cashless” basis, in which case the exercising holder will receive 0.220 of a share of Class A Common Stock for each Public Warrant (rounded down to the nearest whole number of shares across all warrants exercised at one time). Public Warrants not exercised by 5:00 p.m. New York City time on May 20, 2024, will be redeemed for $0.10 per Public Warrant.
Basis of Presentation
Financial information presented was derived from our historical consolidated financial statements and accounting records, and they reflect the historical financial position, results of operations and cash flows of the business in conformity with U.S. GAAP for financial statements and pursuant to the accounting and disclosure rules and regulations of the SEC. The consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned or controlled subsidiaries. For consolidated subsidiaries where our ownership is less than 100%, the portion of the net income or loss allocable to noncontrolling interests is reported as “Income (Loss) attributable to noncontrolling interests” in the unaudited Condensed Consolidated Statements of Operations. All intercompany accounts and transactions have been eliminated in consolidation.
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Results of Operations
For the Three Months Ended March 31, 2024 and the Three Months Ended March 31, 2023
The following table summarizes our results of operations for the periods presented below (in millions):
| Unaudited | |||||||||||
| Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | ||||||||||
| Revenues | $ | 192.6 | $ | 182.1 | |||||||
| Cost of revenues | 105.5 | 103.0 | |||||||||
| Gross profit | 87.1 | 79.1 | |||||||||
| Selling, general and administrative expenses | 84.1 | 85.1 | |||||||||
| Research and development | 7.9 | 7.6 | |||||||||
| Loss from operations | (4.9) | (13.6) | |||||||||
| Interest expense, net | 13.8 | 14.9 | |||||||||
| Loss on debt extinguishment | — | 2.6 | |||||||||
| Foreign currency loss (gain), net | 0.8 | (0.3) | |||||||||
| Increase in fair value of warrant liabilities | 5.7 | 13.4 | |||||||||
| Other expense (income), net | 0.1 | (0.2) | |||||||||
| Loss before benefit from income taxes | (25.3) | (44.0) | |||||||||
| Loss (benefit) from income taxes | 1.2 | (1.1) | |||||||||
| Net loss | (26.5) | (42.9) | |||||||||
| Loss attributable to noncontrolling interests | (0.7) | (1.0) | |||||||||
| Net loss attributable to stockholders | $ | (25.8) | $ | (41.9) | |||||||
Overview
Revenues were $192.6 million for the three months ended March 31, 2024 and $182.1 million for the three months ended March 31, 2023. Our Medical segment contributed $66.8 million and $66.4 million of revenues for the three months ended March 31, 2024 and 2023, respectively. Our Technologies segment contributed $125.8 million and $115.7 million of revenues for the three months ended March 31, 2024 and 2023, respectively. Gross profit was $87.1 million and $79.1 million for the three months ended March 31, 2024 and 2023, respectively, resulting in an $8.0 million increase from the three months ended March 31, 2023.
Net loss was $26.5 million and $42.9 million for the three months ended March 31, 2024 and 2023, respectively. Our Medical segment contributed $1.4 million of income from operations and $0.7 million of income from operations for the three months ended March 31, 2024 and 2023, respectively. Our Technologies segment contributed $12.6 million of income from operations and $5.5 million of income from operations for the three months ended March 31, 2024 and 2023, respectively. The overall decrease in net loss is primarily driven by increased revenues in the Technologies segment, a decrease in net interest expense in the current year, decreased amortization expense in the current year due to fully amortized intangibles, lower selling, general and administrative costs associated with stock-based compensation expense, and a $7.7 million change in the loss from fair value of warrant liabilities. Offsetting these items was higher provision for/lower benefit from income taxes in the current year.
Revenues
Revenues were $192.6 million for the three months ended March 31, 2024 and $182.1 million for the three months ended March 31, 2023. Revenues increased $10.5 million from the three months ended March 31, 2023.
Medical segment revenues remained consistent for the three months ended March 31, 2024 compared with the three months ended March 31, 2023 primarily due to price increases, organic volume growth, the current year impact of the ec2 acquisition, and a favorable foreign currency impact. Offsetting the increases in Medical segment revenues period over period was a negative impact from delayed operations in the NucMed division in February caused by the focus on a new ERP system implementation, and reduced revenues from disposal of Rehab in the prior year.
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Technologies segment revenues increased for the three months ended March 31, 2024 compared with the three months ended March 31, 2023 primarily due to price increases, organic volume growth, a better product mix in the contracts, and a favorable foreign currency impact for the euro period over period, partially offset by execution delays in certain projects.
Cost of revenues
Cost of revenues was $105.5 million for the three months ended March 31, 2024 and $103.0 million for the three months ended March 31, 2023. Cost of revenues increased $2.5 million for the three months ended March 31, 2024 as compared with the three months ended March 31, 2023.
Cost of revenues related to the Medical segment decreased $0.1 million period over period due to a reduction of cost of revenues from the disposal of Rehab, the impact of delayed operations in the NucMed division in February caused by the focus on the new ERP system implementation, and a negative product mix. The decrease was partly offset by an increase in cost of revenues due to higher operations from organic growth over the same period, increased costs from the ec2 acquisition, and inflation.
Cost of revenues related to the Technologies segment increased $2.6 million period over period. The increase was primarily driven by increased revenues over the same period and inflation, partially offset by a positive product mix from higher margin projects and products in the current year, primarily from our operations in France and other parts of Europe, reduced costs of revenues due to the negative impact from operational execution delays in the NucMed division, and cost saving initiatives.
Selling, general and administrative expenses
Selling, general and administrative (“SG&A”) expenses were $84.1 million for the three months ended March 31, 2024 and $85.1 million for the three months ended March 31, 2023, resulting in a decrease of $1.0 million period over period.
Our Medical segment incurred higher SG&A expenses of $0.6 million for the three months ended March 31, 2024 compared with the three months ended March 31, 2023. The increase was primarily due to inflation and higher SG&A associated with the ec2 acquisition. Partially offsetting the increase were the disposal of Rehab and the impact of prior year restructuring.
Our Technologies segment incurred higher SG&A expenses of $0.5 million for the three months ended March 31, 2024. The increase was primarily driven by higher SG&A expenses associated with increased compensation, supplies and facility costs, partially offset by decreased amortization expense resulting from fully amortized intangible assets.
Corporate SG&A expenses were $17.1 million for the three months ended March 31, 2024 and $19.2 million for the three months ended March 31, 2023. The decrease in SG&A expenses of $2.1 million was driven by a net decrease in stock-based compensation expense under the 2021 Omnibus Incentive Plan and Profit Interests (see Note 13, Stock-Based Compensation, to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q), partially offset by an increase in compensation costs.
Research and development
Research and development (“R&D”) expenses were $7.9 million for the three months ended March 31, 2024 and $7.6 million for the three months ended March 31, 2023, resulting in an increase of $0.3 million period over period. The increase in R&D expense was primarily due to increased compensation costs for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.
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Loss from operations
Loss from operations was $4.9 million for the three months ended March 31, 2024 compared with $13.6 million for the three months ended March 31, 2023. On a segment basis, income from operations in the Medical segment for the three months ended March 31, 2024 and 2023 was $1.4 million and $0.7 million, respectively, representing an increase of $0.7 million period over period. Income from operations in the Technologies segment for the three months ended March 31, 2024 and three months ended March 31, 2023 was $12.6 million and $5.5 million, respectively, representing an increase of $7.1 million period over period. Corporate expenses were $18.9 million and $19.8 million for the three months ended March 31, 2024 and 2023, respectively, representing an increase in income from operations of $0.9 million as discussed in "Selling, general and administrative expenses" above. See “Business segments” and “Corporate and other” below for further details.
Interest expense, net
Interest expense, net, was $13.8 million for the three months ended March 31, 2024 and $14.9 million for the three months ended March 31, 2023. The decrease in interest expense was due to the $125.0 million early debt repayment using proceeds from the $150.0 million T. Rowe Price direct investment and interest from derivatives in the current year, partially offset by higher interest rates associated with the 2021 Credit Agreement during the three months ended March 31, 2024 compared to the interest rates during the three months ended March 31, 2023. For more information, see Note 8, Borrowings, and Note 17, Derivatives and Hedging, to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Foreign currency loss (gain), net
We recorded a $0.8 million loss for the three months ended March 31, 2024 and a $0.3 million gain for the three months ended March 31, 2023 from foreign currency exchange. The change in net foreign currency loss (gain) is due to appreciation in European local currencies in relation to the U.S. dollar.
Change in fair value of warrant liabilities
We recognized an unrealized loss of $5.7 million and $13.4 million for the three months ended March 31, 2024 and 2023, respectively, a $7.7 million reduction in loss during the period. This change is due to a smaller increase in the fair value mark-to-market of the Public Warrant and Private Placement Warrant liabilities during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. See Note 16, Fair Value Measurements, to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Income taxes
The effective income tax rate was (4.7)% and 2.5% for the three months ended March 31, 2024 and 2023, respectively. The difference in effective tax rate between the periods was primarily attributable to mix of earnings and the impact of valuation allowances.
The effective income tax rate differs from the U.S. statutory rate of 21% due primarily to U.S. federal permanent differences and the impact of valuation allowances.
Business segments
The following provides detail for business segment results for the three months ended March 31, 2024 and 2023. Segment (loss) income from operations includes revenues of the segment less expenses that are directly related to those revenues but excludes certain charges to cost of revenues and SG&A expenses predominantly related to corporate costs, which are included in Corporate and Other in the table below. Interest expense, loss on debt extinguishment, foreign currency loss (gain), net, and other expense (income), net, are not allocated to segments.
For reconciliations of segment revenues and operating (loss) income to our consolidated results, see Note 15, Segment Information, to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
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Medical
| Unaudited | |||||||||||
| (In millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||||
| Revenues | $ | 66.8 | $ | 66.4 | |||||||
| Income from operations | $ | 1.4 | $ | 0.7 | |||||||
| Income from operations as a % of revenues | 2.1 | % | 1.1 | % | |||||||
Medical segment revenues were $66.8 million for the three months ended March 31, 2024 and $66.4 million for the three months ended March 31, 2023, representing a $0.4 million increase period over period. Revenues increased $4.7 million due to price increases and organic growth, $3.4 million due to the acquisition of the ec2 business, and $0.4 million due to impacts from contract execution timing. Offsetting the increase in the Medical segment revenues period over period were reduced revenues from the disposal of Rehab by $3.8 million and a negative impact from delayed operations due to the focus on a new ERP system implementation at NucMed of approximately $4.3 million.
Income from operations was $1.4 million and $0.7 million for the three months ended March 31, 2024 and 2023, respectively, representing an increase in income from operations of $0.7 million. The increase in income from operations period over period was largely due to a net income increase of $3.6 million from price increases and organic growth and a net impact from the ec2 business of $0.7 million. Offsetting the increase in income were the net decrease from the ERP system implementation impact by $2.5 million and the remainder primarily due to inflation.
Technologies
| Unaudited | |||||||||||
| (In millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||||
| Revenues | $ | 125.8 | $ | 115.7 | |||||||
| Income from operations | $ | 12.6 | $ | 5.5 | |||||||
| Income from operations as a % of revenues | 10.0 | % | 4.8 | % | |||||||
Technologies segment revenues were $125.8 million for three months ended March 31, 2024 and $115.7 million for the three months ended March 31, 2023, representing an increase of $10.1 million period over period. The increase is primarily driven by increased revenue of $10.1 million due to price increases and organic growth, $0.8 million from better product mix, and $0.3 million favorable foreign currency impact, partially offset by a $1.1 million decrease due to delays in certain projects.
Income from operations was $12.6 million and $5.5 million for the three months ended March 31, 2024 and 2023, respectively. Income from operations increased $7.1 million period over period driven primarily by the changes in revenues described above, $2.0 million in lower amortization expenses due to fully amortized intangible assets, and $0.9 million from cost saving initiatives. Partially offsetting the increases in income from operations were increased cost of revenues of $4.6 million due to higher volume, with the remainder primarily due to negative impacts of inflation.
Corporate and other
Corporate and other costs include costs associated with our corporate headquarters located in Georgia, as well as centralized global functions including Executive, Finance, Legal and Compliance, Human Resources, Technology, Strategy, and Marketing and other costs related to company-wide initiatives (e.g., Business Combination transaction expenses, merger and acquisition activities, restructuring and other initiatives).
Corporate and other costs were $18.9 million for the three months ended March 31, 2024 and $19.8 million for the three months ended March 31, 2023, which represents a decrease of $0.9 million period over period. The decrease versus the comparable period was predominantly driven by a net decrease in stock-based compensation expense of $2.1 million (see Note 13, Stock-Based Compensation, to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q), partially offset by a $1.7 million increase in compensation costs. For reconciliations of segment operating income and corporate and other costs to our consolidated results, see Note 15, Segment Information, to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
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Liquidity and Capital Resources
Overview of Liquidity
Our primary future cash needs relate to working capital, operating activities, capital spending, strategic investments, and debt service.
Mirion management believes that net cash provided by operating activities, augmented by long-term debt arrangements, will provide adequate liquidity for the next 12 months of independent operations, as well as the resources necessary to invest for growth in existing businesses and manage its capital structure on a short- and long-term basis. Access to capital and availability of financing on acceptable terms in the future will be affected by many factors, including our credit rating, economic conditions, and the overall liquidity of capital markets. There can be no assurance of continued access to financing from the capital markets on acceptable terms or at all.
At March 31, 2024 and December 31, 2023 we had $120.2 million and $128.8 million, respectively, in cash and cash equivalents, which include amounts held by entities outside of the United States of approximately $95.4 million and $105.4 million, respectively, primarily in Europe and Canada. Non-U.S. cash is generally available for repatriation without legal restrictions, subject to certain taxes, mainly withholding taxes. We are asserting indefinite reinvestment of cash for certain non-U.S. subsidiaries. The Company has alternative repatriation options other than dividends should the need arise. The 2021 Credit Agreement provides for up to $90.0 million of revolving borrowings.
There is a discussion in Note 8, Borrowings, of the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q of the long-term debt arrangements issued by Mirion. For more information on our lease commitments, See Note 9, Leased Assets, of the unaudited condensed consolidated financial statements and for other commitments and contingencies, see Note 10, Commitments and Contingencies, of the unaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q.
Debt Profile
2021 Credit Agreement
On the Closing Date, certain subsidiaries of the Company entered into a credit agreement (as it may be amended, restated, supplemented, or otherwise modified from time to time, the “2021 Credit Agreement”) with the lending institutions party thereto. The 2021 Credit Agreement refinanced and replaced an earlier credit facility (the "2019 Credit Facility").
The 2021 Credit Agreement provides for an $830.0 million senior secured first lien term loan facility and a $90.0 million senior secured revolving facility (collectively, the “Credit Facilities”). Funds from the Credit Facilities are permitted to be used in connection with the Business Combination and related transactions, to refinance the 2019 Credit Facility referred to above and for general corporate purposes. The term loan facility is scheduled to mature on October 20, 2028 and the revolving facility is scheduled to expire and mature on October 20, 2026. The agreement requires the payment of a commitment fee of 0.50% per annum for unused revolving commitments, subject to stepdowns to 0.375% per annum and 0.25% per annum upon the achievement of specified leverage ratios. Any outstanding letters of credit issued under the 2021 Credit Agreement reduce the availability under the revolving line of credit.
The 2021 Credit Agreement is secured by a first priority lien on the equity interests of the Parent Borrower owned by Holdings and substantially all of the assets (subject to customary exceptions) of the borrowers and the other guarantors thereunder. Interest with respect to the facilities is based on, at the option of the borrowers, (i) a customary base rate formula for borrowings in U.S. dollars or (ii) a floating rate formula based on LIBOR (with customary fallback provisions described below) for borrowings in U.S. dollars, a floating rate formula based on EURIBOR for borrowings in Euro or a floating rate formula based on SONIA for borrowings in Pounds Sterling, each as described in the 2021 Credit Agreement with respect to the applicable type of borrowing. The 2021 Credit Agreement includes fallback language that seeks to either facilitate an agreement with our lenders on a replacement rate for LIBOR in the event of its discontinuance or that automatically replaces LIBOR with benchmark rates based on the Secured Overnight Financing Rate ("SOFR") or other benchmark replacement rates upon triggering events.
On June 23, 2023, the 2021 Credit Agreement was amended to replace the interest rate based on the London interbank offered rate (“LIBOR”) and related LIBOR-based mechanics applicable to U.S. Dollar borrowings under the Existing Credit Agreement with an interest rate based on SOFR and related SOFR-based mechanics. The interest rate under the 2021 Credit Agreement was 8.36% and 8.40% as of March 31, 2024 and December 31, 2023, respectively.
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The 2021 Credit Agreement contains customary representations and warranties as well as customary affirmative and negative covenants and events of default. The negative covenants include, among others and in each case subject to certain thresholds and exceptions, limitations on incurrence of liens, limitations on incurrence of indebtedness, limitations on making dividends and other distributions, limitations on engaging in asset sales, limitations on making investments, and a financial covenant that the “First Lien Net Leverage Ratio” (as defined in the 2021 Credit Agreement) as of the end of any fiscal quarter is not greater than 7.00 to 1.00 if on the last day of such fiscal quarter certain borrowings outstanding under the revolving credit facility exceed 40% of the total revolving credit commitments at such time. The covenants also contain limitations on the activities of Mirion IntermediateCo, Inc. as the “passive” holding company. If any of the events of default occur and are not cured or waived, any unpaid amounts under the 2021 Credit Agreement may be declared immediately due and payable, the revolving credit commitments may be terminated and remedies against the collateral may be exercised.
Cash flows
For the Three Months Ended March 31, 2024 and for the Three Months Ended March 31, 2023
| Unaudited | |||||||||||
| (In millions) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||||
| Net cash provided by (used in) operating activities | $ | 6.0 | $ | (2.7) | |||||||
| Net cash used in investing activities | $ | (12.9) | $ | (7.5) | |||||||
| Net cash provided by financing activities | $ | 0.2 | $ | 24.6 | |||||||
Net Cash Provided by (Used in) Operating Activities
Net cash provided by operating activities was $6.0 million for the three months ended March 31, 2024 as compared to net cash used of $2.7 million for the three months ended March 31, 2023, representing an increase of $8.7 million. The increase is primarily due to increases from changes in operating assets and liabilities of $6.8 million as the Company continues to focus on reducing net working capital.
Net Cash Used in Investing Activities
Net cash used in investing activities was $12.9 million for the three months ended March 31, 2024 versus $7.5 million for the three months ended March 31, 2023. The increase in net cash used was driven primarily by a $5.3 million increase in purchases of property, plant, equipment and badges.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $0.2 million during the three months ended March 31, 2024 versus $24.6 million during the three months ended March 31, 2023. The decrease of $24.4 million period over period primarily relates to the $150.0 million of gross proceeds received from the T. Rowe direct investment in the prior year partially offset by debt repayments of approximately $125.0 million in the prior year.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. Such estimates are based on historical experience and on various other factors that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material.
During the three months ended March 31, 2024, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K.
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Recent Accounting Pronouncements
See Note 1, Nature of Business and Summary of Significant Accounting Policies, to our unaudited condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures about Market Risk
We have no material changes to the disclosures on this matter for the three months ended March 31, 2024 than from the disclosures made in our Annual Report on Form 10-K for the year ended December 31, 2023.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that material information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
As required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2024. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2024, our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d-15(e) under the Exchange Act) were effective.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgement in evaluating the cost-benefit relationship of possible controls and procedures.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Due to the nature of our activities, we are at times subject to pending and threatened legal actions that arise out of the ordinary course of business. For information regarding legal proceedings and other claims in which we are involved, see Note 10, Commitments and Contingencies, to the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. The disposition of any such currently pending or threatened matters is not expected to have a material effect on our business, results of operations or financial condition. However, the results of legal actions cannot be predicted with certainty. Therefore, it is possible that our business, results of operations and financial condition could be materially adversely affected in any particular period by the unfavorable resolution of one or more legal actions. Regardless of the outcome, litigation can have an adverse impact on our business because of defense and settlement costs, diversion of management resources and other factors. In addition, the expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change and could adversely affect our consolidated financial statements.
ITEM 1A. RISK FACTORS
The risk factors that affect our business and financial results are discussed in Part I, Item 1A, of the 2023 Annual report. There are no material changes to the risk factors previously disclosed, nor have we identified any previously undisclosed risks that could materially adversely affect our business and financial results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
(a) None.
(b) None.
(c) During the three months ended March 31, 2024, no director or officer (as defined in Rule 16a-1(f) of the Exchange Act) of the Company adopted or terminated
| Name and Title | Action | Applicable | Duration of Trading Arrangement |
Rule 10b5-1 Trading Arrangement?
(Y/N)(1)
|
Aggregate Number of Securities Subject to Trading Arrangement | ||||||||||||
| May 25, 2024 - April 30, 2025 | Y | ||||||||||||||||
| June 11, 2024 - June 11, 2025 | Y | ||||||||||||||||
| June 6, 2024 - February 28, 2025 | Y | ||||||||||||||||
(1) Denotes whether the trading plan is intended, when adopted, to satisfy the affirmative defense of Rule 10b5-1(c).
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(2) Reflects shares of Class B common stock of the Company held of record by Aere Perennius, LLC., a limited liability company established for the benefit of Mr. Logan's adult children, to be sold in twelve (12) monthly installments of 7,500 shares each for the duration of the trading arrangement, subject to a limit price. The shares of Class B common stock will be exchanged for shares of Class A common stock of the Company if sales are triggered under the trading arrangement.
(3) Reflects shares of Class B common stock of the Company held of record by Mr. Schopfer to be sold in two (2) installments of up to 95,238 and 86,957 shares each for the duration of the trading arrangement, subject to two different limit prices. The shares of Class B common stock will be exchanged for shares of Class A common stock of the Company if sales are triggered under the trading arrangement. Mr. Schopfer intends to terminate this Rule 10b5-1 trading plan when the Company trading window opens during the second quarter of 2024.
(4) Reflects shares of Class B common stock of the Company held of record by the Lee Revocable Living Trust for the benefit of Ms. Lee, her spouse and beneficiaries to be sold in ten (10) monthly installments of 5,000 shares each for the duration of the trading arrangement, subject to a limit price. The shares of Class B common stock will be exchanged for shares of Class A common stock of the Company if sales are triggered under the trading arrangement.
ITEM 6. EXHIBITS
The exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this Quarterly Report.
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EXHIBIT INDEX
|
Exhibit
Number
|
Exhibit Title |
||||
10.1*
|
|||||
| 101.INS* | XBRL Instance Document. | ||||
| 101.SCH* | XBRL Taxonomy Extension Schema Document. | ||||
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document. | ||||
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document. | ||||
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document. | ||||
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document. | ||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | ||||
| * | Filed herewith. |
||||
| ** | The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, irrespective of any general incorporation language contained in such filing. | ||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Mirion Technologies, Inc.
| Name | Title | Date | ||||||
|
/s/ Thomas D. Logan
Thomas D. Logan
|
Chief Executive Officer and Director
(principal executive officer)
|
May 1, 2024 |
||||||
|
/s/ Brian Schopfer
Brian Schopfer
|
Chief Financial Officer
(principal financial officer)
|
May 1, 2024 |
||||||
|
/s/ Christopher Moore
Christopher Moore
|
Chief Accounting Officer
(principal accounting officer)
|
May 1, 2024 |
||||||
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