Third Quarter 2026 Earnings Call - MIRION TECHNOLOGIES INC

Explicit Guidance:

• Revenue: Full-year 2026 organic revenue growth revised to 7–8% (up from 5–7%); total revenue guidance raised to 24–25% (up from 22–24%). Q4 2026 organic revenue growth expected to be mid-to-high teens.
• Segment Growth: Medical segment expected to grow mid-single digits plus in Q4; Nuclear and Safety segment (including Paragon December results) expected to grow high-teens plus in Q4, driven by nuclear power.
• Profitability: Adjusted EBITDA full-year 2026 guidance set at $285–$292 million; Adjusted EBITDA margins expected at 24.7–25.2%.
• Cash Flow: Adjusted free cash flow full-year 2026 raised to $170–$185 million (representing 60–63% conversion of adjusted EBITDA); Q4 net capital is expected to remain a source of cash.
• EPS: Adjusted EPS range tightened to $0.50–$0.54 per share (down from $0.48–$0.55), inclusive of stock-based compensation.
• FX Guidance: Fourth quarter EUR/USD exchange rate guided at 1.12.
• Leverage: Net leverage expected to improve to approximately 2.6x by year-end (down from 3.1x at quarter-end); leverage to print under 3.0x in Q4.

Business-Segment Outlook:

• Nuclear & Safety: Nuclear power organic revenue grew 14% in Q3 and is on track for double-digit growth for the full year, implying further acceleration in Q4. Backlog conversion for legacy business is up 18% in the current year and 26% in 2027. SMR orders for 2026 totaled $54 million across 11 designers; SMR order flow is accelerating with an "existential race" among developers leading to increased urgency and spending.
• Medical: Organic revenue growth of 6.6% in Q3; full-year 2026 growth expected mid-single digits plus. RTQA end market driving growth via OEM sector strength; Nuclear medicine and dosimetry services grew organically in Q3 after declines in Q2. Order timing heavily favored late Q3 and Q4.
• Backlog: Total backlog stands at $1.25 billion (up from $816 million YoY). Current year backlog recognition projected at $292 million (vs. $212 million prior year); 2027 backlog projected at $443 million (vs. $285 million prior year), totaling ~$735 million for Q4 2026 and full year 2027.
• Order Pipeline: $140 million in large opportunity wins in Q3. Targeting $125 million in additional awards for Q4 2026, including $80 million in two orders awaiting EU funding approval for new builds in France (strategic alliance with EDF).
• Paragon Integration: On track to achieve at least 25% year-over-year growth for Paragon. Margins expected to contract in the near term due to legacy project adjustments and product development initiatives, but core business remains net accretive.

Market and Competitive Outlook:

• Nuclear Market Dynamics: Management identifies three materializing waves: (1) Catch-up capital spending (U.S. fleet spending per MWh reached $9.7 in 2025); (2) Life extensions and uprates (96% of U.S. reactors approved for 20-year extensions; NRC proposed 40-year renewals); (3) Digital transformation (first reactor protection system upgrade shipped, installation began November).
• Demand Drivers: Installed base constitutes the largest growth driver (80% of nuclear revenue). Multi-year, possibly multi-decade capital growth cycle anticipated due to global electrical capacity deficits.
• SMR Sector: Sector expected to consolidate from >100 projects to a handful of players. Competitors are competing for "first past the post," leading to accelerated timelines and increased capital deployment.
• SMR Wallet Share: Management expects the per-megawatt opportunity set to be considerably higher for SMRs than utility-scale reactors, citing expanded organic capabilities and inorganic additions from Paragon and Certrek.
• Pricing & Inflation: Procurement programs have mitigated inflation impacts; price/cost ratio remains flattish on a dollar basis. New large contracts include escalation clauses tied to indices.

Macro / Industry Outlook:

• Economic View: Nuclear power market driven by profound changes in market dynamics and a significant deficit in global electrical generating capacity.
• Regulatory: NRC proposal to allow license renewals up to 40 years (double current limit) could drive decades of additional operation and demand for instrumentation/software.
• FX Impact: A slight full-year tailwind from FX (Euro) was factored into revised revenue guidance.
• Inflation: Cost inputs are rising globally, but management feels they have a "very good handle" on passing costs to customers through escalation clauses and strong margin profiles.

Strategic Initiatives:

• AI & Cybersecurity: Prioritizing significant investments in AI and cybersecurity to capture long-term shareholder value. Year-to-date AI OPEX spent ~$4 million; full-year spend expected to exceed $5 million. YTD actioned AI investments exceed the initial four-year budget. Capital expenditure for AI infrastructure expected to add a few million dollars for the year.
• Target Withdrawal: Management has withdrawn the previously announced 30-point near-term EBITDA margin target (2028), citing it as a distraction and short-sighted given the need for heavy front-end AI/Cyber investments and Paragon's product development ramp-up.
• Capital Allocation: Adhering to a 20/40/40 model for cash flow: ~20% to Capex/organic growth, ~40% to M&A (bolt-on deals), ~40% to shareholders (share repurchases, no dividend).
• Share Repurchases: Completed $100 million program; new $250 million program authorized with $235 million remaining. Opportunistic repurchases of $56 million in Q3.
• M&A: Focusing on bolt-on deals. No specific M&A timing or value guidance provided beyond the capital allocation percentage.

Risks and Headwinds to Outlook:

• Margin Pressure: Nuclear & Safety margins face contraction due to Paragon legacy mix, one-time project adjustments, and heavy AI/Cyber spending. Medical margins face headwinds from prior-year incentive comp comps and specific one-time quality costs.
• Investment Front-loading: AI and cybersecurity investments involve significant front-end OPEX and CAPEX with no defined breakeven timeline yet; returns expected to materialize in future years via growth and margin expansion.
• Order Timing: Medical orders timing is historically back-end loaded (e.g., September hospital year-end activity), which can impact quarterly recognition visibility.
• External Factors: China de-booking impact discussed previously; cautious optimism regarding China's recovery.
• SMR Delays: While sector is accelerating, individual project timelines depend on capital availability and technological readiness.
• EU Funding: $80 million of Q4 expected awards remain off-balance sheet pending formal EU funding approval.

Management Tone on the Future:

• Confidence Level: Highly constructive and bullish regarding nuclear power tailwinds, describing them as "generational" and "only beginning to show up."
• Strategic Shift: Firm commitment to prioritizing long-term value creation (AI, digital, capacity) over short-term margin targets, explicitly stating that hitting the 30-point target would be "short-sighted."
• Execution: Confidence in backlog conversion providing high revenue visibility (95% coverage for full year 2026).
• Hedges: Avoided specific numerical guidance for margin expansion per annum, stating expectations for 1–2 points of annual expansion will be refined with the updated long-range plan at Investor Day next year.

Miscellaneous:

• Cost of Capital: Average debt coupon below 3% (approx. 2.8% blended cost for full year 2026); effective leverage exposure considered lower than standard screens suggest.
• Productivity: Internal AI initiatives are already resulting in faster product release timelines, particularly in the medical segment.