Third Quarter 2026 Earnings Call - MIRION TECHNOLOGIES INC

Explicit Guidance:

• Full-Year 2026 Revenue: Revised total revenue growth guidance raised to 24%–25% (up from 22%–24%); organic revenue growth guidance raised to 7%–8% (up from 5%–7%); adjusted EBITDA range set at $285–$292 million; adjusted EBITDA margins revised to 24.7%–25.2%; adjusted EPS guidance narrowed to $0.50–$0.54 per share (down from $0.48–$0.55); adjusted free cash flow (FCF) raised to $170–$185 million (60%–63% conversion of EBITDA).
• Q4 2026 Outlook: Expected consolidated organic revenue growth of mid-to-high teens; Medical segment growth expected at mid-single-digits plus; Nuclear and Safety segment (including Paragon's December results) expected to grow high teens plus driven by nuclear power; Q4 adjusted EBITDA margins expected to expand year-over-year despite Q3 headwinds.
• 2027 Outlook: Management expects double-digit organic revenue growth for the nuclear power segment; anticipates a multi-year to multi-decade capital growth cycle affecting all instrumentation, software, and services categories.
• Long-Term Margins: Removed the explicit 30% near-term EBITDA margin target; committed to 1–2 percentage points of annual margin expansion driven by operating leverage, software, procurement, and self-help initiatives; expects 25% year-over-year growth for the Paragon business (including 2026 full-year impact).
• Financial Metrics: Net leverage expected to improve to approximately 2.6x by year-end 2026 (down from 3.1x); blended cost of debt for FY2026 expected at 2.8%; effective leverage exposure significantly lower than reported screens due to low-cost debt structure (average coupon <3%); adjusted FCF conversion rate for 2026 expected to reach 60%–63%.
• Capital Allocation: Guidance for future capital deployment based on a 20% Capex/Organic Growth, 40% M&A, and 40% Shareholder Return (via buybacks) model; new $250 million share repurchase program approved in August with $235 million remaining; no dividend currently declared.

Business-Segment Outlook:

• Nuclear Power: Expecting double-digit organic revenue growth for the full year; Q4 expected to show acceleration; revenue driven by the "installed base" (98% global presence, 80% of revenue from operating fleet), life extensions (96% of US reactors approved for 20-year extensions), power uprates (recent 1.5 GW in announcements), and digital transformation; SMR orders are "materializing" with no signs of slowdown; nuclear power end market orders (ex-M&A) grew 105% in Q3.
• Medical: Growth tempered by external macro factors; Q3 organic growth of 6.6% (below high-single-digit expectation) due to timing and one-time quality costs; Q4 expected to see "mid-single-digits plus" growth; RTQA end market remains a key growth driver; nuclear medicine and dosimetry services expected to grow organically after Q2 declines.
• Paragon & Acquired Entities: Expected to deliver at least 25% year-over-year growth; margin dilution from legacy contracts and product development initiatives expected to moderate in Q4; Q4 set up for success with strong backlog visibility and DOE/NUclear power mix.
• Backlog: Total backlog stands at $1.25 billion (up from $816 million); current year backlog recognition projected at $292 million; 2027 backlog at $443 million; approximately $735 million of backlog to convert in Q4 2026 and full-year 2027; full-year revenue visibility at 95% (midpoint).
• Order Book: Q3 orders grew 62% organically to $340 million; large opportunity wins totaled $140 million in Q3; $125 million in additional large opportunities targeted for Q4 (including $80 million in European new build orders awaiting EU funding).

Market and Competitive Outlook:

• Nuclear Power Dynamics: Believes the "three waves" of demand are materializing: (1) Catch-up capital spending (U.S. fleet spending up to $9.7/MWh in 2025); (2) Life extensions and power uprates (96% US reactors approved for 20-year extensions; NRC proposed rule for 40-year renewals); (3) Digital transformation (reactor protection system upgrades shipping).
• SMR Market: Expects sector consolidation from 100+ discrete projects down to a handful of players; "existential race" among developers creating urgency and accelerating timelines; believes the sector is moving faster, not slower, with strong competition for capital.
• Pricing and Inflation: Inflationary pressure on input costs noted, but procurement programs and escalation clauses in new contracts help pass costs through; ability to price in the market remains strong, particularly in the medical "book and bill" dynamic.
• Competitive Positioning: Maintains dominant position in instrumentation, software, and services for nuclear installed base and SMRs; premium pricing strategy maintained for SMR projects; viewed as a leader in AI integration compared to industrial technology peers.
• New Builds: Strong pipeline for utility-scale new builds (Westinghouse, EDF, Framatome, etc.) and European new build projects (France, EU funding pending); US Department of Order opportunities in remediation and arsenal modernization expected to remain favorable.

Macro / Industry Outlook:

• Global Economy: Management views the current environment as a "generational opportunity" with profound shifts in market dynamics; cites a significant deficit in global electrical generating capacity as a structural tailwind.
• Regulatory/Policy: NRC proposed rule allowing license renewals up to 40 years (double current limit); Department of Energy orders driving growth in labs and research; EU funding approvals critical for European new build projects.
• FX Impact: Full-year guidance includes a slight tailwind from the Euro; Q4 guidance assumes a Euro-to-Dollar rate of 1.12; FX headwinds offset partially by acquisition growth.
• Rates/Capital Markets: Net leverage targeted to drop below 3.0x by year-end; debt structure characterized as "very low cost" with an average coupon below 3%; cash generation expected to be robust.

Strategic Initiatives:

• AI and Cybersecurity: Prioritizing significant investments in AI and cybersecurity to capture long-term value; $4 million spent year-to-date on AI initiatives (exceeding initial 4-year budget); focus areas include data infrastructure, internal productivity, and customer-facing product development; front-end loading expected to continue into 2027.
• Capacity & Upgrades: Digital upgrades to reactor protection systems at first operating unit of a large installed nuclear plant (installation beginning November); follow-on units expected.
• M&A Strategy: Focused on bolt-on deals (approx. 40% of cash flow); recent acquisitions (Paragon, Certrek) driving growth; no major new M&A anticipated for Q4.
• Shareholder Returns: Completed initial $100 million buyback; new $250 million program approved; $56 million in shares repurchased in Q3; capital allocation model prioritizes deleveraging and buybacks after Capex/organic growth.
• Product Launches: Expecting faster product release timelines in Medical due to AI spend; new products launched at recent shows.

Risks and Headwinds to Outlook:

• Margin Expansion: Near-term margin targets removed due to accelerated spending on AI, cybersecurity, and Paragon product development initiatives; expected to see slight margin pressure in Medical (incentive comp, one-time quality costs) in Q4, though Q4 expected to be the best margin quarter of the year overall.
• Execution Risks: Paragon margin dilution from legacy contracts and longer-than-anticipated timeline for product development accretion; medical growth tempered by macro factors and China exposure; one-time adjustments to legacy projects in Paragon.
• Funding & Regulatory: European new build orders ($80M of $125M target) contingent on EU funding approval; SMR sector consolidation could impact customer base (though Mirion views this positively for long-term dominance); 100% reliance on operating fleet revenue creates exposure to regulatory shutdowns.
• FX Volatility: Euro fluctuations could impact reported revenue and guidance.
• Inflation: Input cost inflation could pressure margins if pass-through capabilities are tested, though escalation clauses are in place for new contracts.
• SMR Delivery: While management sees acceleration, the sector remains high-risk; delays in SMR delivery could impact long-term order conversion.

Management Tone on the Future:

• Confidence Level: Highly constructive and bullish regarding nuclear power tailwinds and backlog conversion; describes the nuclear power opportunity as "generational."
• Hedges: Explicitly removed the 30% near-term margin target to avoid "distraction" and "overhang," citing the need for flexibility in AI and Paragon integration; cautious on medical growth due to macro headwinds and China; notes that AI investment returns are "front-loaded" with no immediate P&L breakeven guaranteed.
• Changes vs. Prior Guidance: Raised full-year revenue, organic revenue, FCF, and EPS guidance; lowered the high end of EBITDA margin guidance to reflect Q3 headwinds but maintained expectation of margin expansion in Q4; shifted from a rigid 30% margin target to a flexible "1-2 points annually" expectation.
• Strategic Pivot: Shift in capital allocation emphasis from aggressive near-term margin expansion to long-term value creation via AI/Cyber investments and infrastructure, while maintaining strong shareholder returns.

Miscellaneous:

• SMR Order Volume: Recorded $16 million in SMR orders in Q3 from 11 different SMR designers; year-to-date SMR orders at $54 million.
• Installed Base Dominance: Presence in 98% of world's nuclear reactors; 80% of nuclear power revenue comes from the operating fleet.
• Capital Efficiency: Net leverage improved from 3.1x to 2.8x (excluding buybacks) in Q3; free cash flow conversion reached 58% in first nine months of 2026.
• Q4 Specifics: Historically strong Q4 orders (largest ever last year); Q4 revenue recognition heavily driven by backlog conversion ($292M expected).