All right. Ready for the next fireside chat. We're excited to have Mirion here with us today. We have both Tom Logan, who is the founder and CEO, as well as Brian Schopfer, CFO. Guys, great to see you. Just saw you a couple days ago at the Investor Day. And, clearly, there's been a lot of positive momentum with the shares. But maybe before we get into the specifics about your company, Tom, I'm gonna turn it over to you. Everybody in the audience might not fully be aware of what Mirion does, so just.
Sure.
Why don't you level set for us?
Yeah. So, we describe Mirion as being really the only pure play in the detection, measurement, and analysis of ionizing radiation, which, you know, you should think of as being X-ray, gamma, neutron, alpha type radiation. You know, really kind of a unique position on the electromagnetic spectrum. Sounds very esoteric, very dry. We think it's an unbelievable market. And, we're the only pure player in that category. We are the category leader in 17 of 19 of our product categories globally. We are substantially larger than any of our competitors. And, to be clear, our head-to-head competitors in this space that would be familiar to you would be companies like Thermo Fisher, Ametek, Fortive, and a variety of regional players. We have a considerable investment into R&D and development that manifests itself into cutting-edge applications and space exploration, deep science, etc.
But the most important thing to understand, because we'll get into the segmentation of our business between medical and nuclear and safety, is the technological leverage that we possess, Joe. In other words, you know, given the fungibility of this technology across vertical market boundaries and across segments, the discovery that we do anywhere in our network becomes relevant broadly across that network. And, the great thing is that given the scale of our total addressable market, this gives us the ability to continue to scale up both organically and inorganically to a substantially larger size without ever having to conglomerate, without ever really losing the benefits of that technological leverage.
Yes. Let's double-click on the different segments, just again, helping everybody to level set. Two-thirds of your business coming in from your nuclear segment, another third of your business coming from medical. Let's just focus on the what used to be now, I guess, the technology segment.
Sure.
Change from the technology segment, but just talk about the technology segment holistically, and then obviously, you know, today there's a lot of optimism around what the trajectory of the nuclear business could be over the next.
Yeah.
Several years. So maybe just touch on that as well.
What we refer to now as our nuclear and safety segment, as Joe noted, is about two-thirds of our business. Within that, there are three principal segments that I would call out. Nuclear power is the largest at 60%. And, importantly, this makes us one of the better play, better plays, as a public company to really participate in the nuclear renaissance that's taking place, given the exposure that we have and given the character of that exposure, which, you know, we can do a deeper dive on, later in the conversation. But in addition to that, we have defense, which is both military and civil defense. Today we equip 22 of the NATO armed forces with green gear. Those are essentially ruggedized versions of the scientific instrumentation that we do elsewhere.
We also have a very healthy kind of life sciences and laboratory business in that segment overall. The dominant theme here, though, of course, is commercial nuclear power, which is a fascinating and very exciting dynamic right now.
So let's dig in a little deeper on commercial nuclear, right? So maybe just kind of walk through, and you went through this at the Investor Day, the opportunity over the life cycle of a nuclear plant, that's the long-term opportunity. But then even in, like, the near to medium term, where do you expect to see the biggest momentum in your business over the course of the next 12 months-24 months?
So just to frame the response, today we have a foothold, a presence of some type in more than 95% of the operating nuclear reactors worldwide, which number about 440 reactors in total. Somewhat uniquely, we participate cradle to grave in the life cycle of a nuclear power plant, which today surpasses 100 years. We can think in general of about 5 years- 10 years of front-end planning and construction. We can think in terms of an operating life cycle, typically of about 80 years now, even though there will be a number of plants that operate for more than a century. And then finally on the back end, there's about 5 years- 10 years of decommissioning. And so as a company, we participate throughout that life cycle. But what's important is that 80% of our revenue in nuclear power comes from the installed base.
So think of it as kind of a highly engineered razor blade model where when we become the incumbent in a nuclear power plant, that position tends to be highly defensible for many, many different reasons. But that competitive moat is deep and it's broad. And the downstream tail of recurring revenue and/or repeat revenue is visible. It is predictable, particularly when you apply that against a large base overall and one of the more attractive dynamics or components of our business.
Now, in the near to intermediate term, that recurring revenue from the installed base, again, 80% of our nuclear revenue overall, is the most critical component because you have to put, again, contextualize this and understand that, for more than a generation, more than 20 years, the global nuclear industry has had economic headwinds driven by supply factors, driven by demand factors, driven by regulatory factors, and other factors. Today, there seems to be a broad resolution of all of those elements supporting, for different reasons, that in some cases is decarbonization. In some cases, it is energy security and energy independence. But what is emerging as maybe the most dominant factor is really the recognition the world simply doesn't have enough generating capacity to support the AI revolution and the emerging electric economy.
But what has happened as a consequence is that it has radically changed the profitability dynamics of that global installed base. And so as operators are shifting from kind of a defensive, hyper-aggressive capital rationing mode on both CapEx and OpEx to a more expansionary mode where their motivation now is to operate power plants at higher capacity factors to uprate the capacity of their nuclear assets and to life extend those assets, that creates a fundamentally different dynamic for us within that recurring revenue stream. It drives faster replacement cycles, to the degree that there is more of a discretionary envelope for certain categories, classes of instrumentation. It benefits us in kind of narrowing that envelope overall.
This is what we're likely to see, you know, playing out as we really go through this inflection point in the good fortunes of the industry. Beyond that, you know, we have a robust and growing utility scale new build pipeline. But beyond that, we have this very exciting SMR movement, small modular reactor movement, that is really gaining in momentum, gaining in scope overall, that becomes, you know, kind of just at the tail end of our planning horizon, really, we believe will begin to kick in meaningfully.
So, one of the things we spoke about offline at your Investor Day was I was trying to make the corollary to, like, the heavy-duty gas turbine market and the fact that you can plan these, you can see these outages planned over a several-year period. I think to your point, you know, nuclear, we haven't talked about nuclear in a favorable way for the better part of the last, you know, since Fukushima, right? So, but clearly, like, this recurring revenue stream has continued for your business. I guess as you think about the next, you know, couple years and the way that you plan out at least the service component to your business and ultimately what these life extensions could mean.
Mm-hmm.
For that going forward, like, is there a way to kind of contextualize that for the broader audience?
You know, broadly, obviously, the opportunity gets bigger to provide a higher degree of value-added services. But there's some additional themes too, Joe, that I would call out that you know, I think are going to be important endemic factors within the industry. One is just kind of the workforce population demographics within the industry where today the industry is still kind of dominated by Baby Boomers and to some degree Gen Xers. And we are seeing a generational change in the employment base at these power plants that will drive a different skill set, the need for a higher degree of digitization and digital tools overall that typically tend to correlate very, very closely with service offerings.
You know, the two tend to be very integrated in terms of how you go to market, how you deploy, how you land and expand in these areas, and I think that may be the most interesting and maybe a bit of an overlooked dynamic that we expect to see emerging over the next few years, certainly within our planning horizons. An area we're investing in very heavily, because we think we can bring some important value-added solutions to the market here.
You mentioned the two other areas who we've been really focused on, on the kind of near-term, the maybe longer-term opportunities with both SMRs and utility-scale new nuke.
Mm-hmm.
I guess let's start with utility scale new nuke. You mentioned that you're in 95% of the facilities worldwide.
Right.
Historically, you know, China has been like a big new build market. Just talk to us about your position in that specific market and where you see the biggest opportunity across your portfolio on the new build side.
So in the Chinese market, we've been in that market since its inception, so for roughly 30 years. We're in the vast majority of operating Chinese nuclear reactors continue to be very, very active in new build activity there. As the Chinese nuclear infrastructure and capabilities have built up, we've seen a diminishing wallet share in that market, which is, you know, I think that function is slowing down to a degree, but that continues to be a very important, very attractive market for us overall. Where we see greater activity though today in terms of the immediacy of new build activity right now is principally in Europe where there's a significant amount of activity. I think you may have seen in our Investor Day that we really highlighted current reactors under construction in Europe and planned, which number over 100 in aggregate.
It's very tangible in terms of what activity is happening where, in a scenario where, not only are we very well positioned, but we're hyper-focused on the development in that region. It's not just Europe. You know, beyond that, there's interesting activity in North Africa, in the Arab Gulf region, elsewhere in Asia, most notably right now in the Korean market, and importantly in India. We announced, again this week at our Investor Day, the inking of a strategic deal with ECIL, the Electronics Corporation of India, which is one of the leading instrumentation players in the legacy Indian nuclear industry, but also a key participant as we're looking at future build activity there, which we think will be substantial.
Different waves in different regions, but fundamentally, you know, we see an expansionary, utility scale, new build pipeline and it's very tangible.
That's awesome to hear. Look, you had already highlighted the EDF partnership before.
Mm-hmm.
So those two partnerships. They're the way I've thought about it is basically an expansion of your existing relationship. But, like, what does it ultimately mean from a commercial standpoint for your business?
Yeah, from a commercial standpoint, this, you know, this is reflective of the fact that, you know, all major companies, including Mirion, by the way, are very focused on trying to consolidate their supply chain, shrink it down to fewer more strategic suppliers, where, you know, more nuanced supply agreements can be struck. You know, Brian mentioned this, that we've been very actively involved in consolidating our supply base. You know, we see 150 basis points-300 basis points of margin expansion driven by that. And that's certainly the motivation for our customers. They want to do the same thing. We are one of only 25 suppliers that EDF has named or has struck similar strategic deals with. We've not disclosed the nature of, you know, the products that are being sold under this or any of the specifics in and around this.
But at its core, you know, what this essentially represents is a sole source supply agreement for certain types of solutions that we are selling where we have pre-prenegotiated terms and conditions, the economic dynamics associated with that. And what that allows for is just a much more streamlined, compacted planning horizon when you're building a new power plant and taking it to market. So we're thrilled to have that relationship with EDF. It's a great honor.
It's just worth noting too, Joe, that what we're talking about here is they've committed to build 6- 14 new nuclear reactors in the next 20 years- 30 years, right? So this isn't hypothetical. I mean, this is stuff that they're very actively working on.
Brian, I'm gonna bring you in in a minute, but one last thing that I wanted to, touch on. You mentioned SMRs, a lot of buzz around SMRs.
Mm-hmm.
We just had a company here basically said the opportunity for them is probably 10 years out.
Mm-hmm.
Right on SMRs. I thought it was interesting that you guys mentioned at your Investor Day that your content for SMR is actually gonna be, or content for Megawatt is gonna be higher.
Yep.
And can you just kind of explain that? And then also in terms of how you're seeing this market develop, this is more of kind of like 20-30+ for you guys. Is that the right way to think about it?
Yeah, so, two things. Firstly, in terms of market development, you know, right now the action is in and around first of a kind instances. And we've disclosed previously on earnings calls that in the last 18 months or so, I think we've booked about $12 million of backlog on various SMR projects. So the point there is that, you know, the activity is tangible. It may not be material at this point, but it continues to accelerate and grow overall on this, in this particular space. In terms of the revenue opportunity for us, again, at our Investor Day earlier this week, we threw out two key metrics that are meant to really just show kind of order of magnitude, understanding that when you're looking at the SMR market, you have vast differences.
In some cases, SMRs are simply derated or miniaturized variants of Gen 3 light reactor or light water reactors that are just being made smaller. But in other cases, it is fourth generation advanced technology that would include things like pebble bed technology, sodium moderated or sodium cooled high temperature gas cooled reactors and the like. So there are vast differences between those. And so what we've done is to just kind of look at a fairly heterogeneous mix of both utility scale and SMR players and evaluated, you know, what's the dynamic for us? What is the revenue opportunity for us overall? And the calculation is that for SMRs on a dollar per megawatt of capacity, it's about 60% greater. For utility scale, right now our opportunity is about $25,000 per megawatt of capacity. It's about $40 for an SMR.
And that reflects the fact that for certain types of instrumentation, there are some scale diseconomies associated with a smaller output reactor overall. And that more than anything else is the driving factor, as it relates to that specific market.
Yeah, helpful. Brian, let's bring you in. So you guys gave basically a path for 2025 and long-term targets.
Yep.
at your Investor Day earlier this week. Maybe just kind of discuss some of the key tenets to the framework and then also.
Sure.
Your confidence in delivering against those targets.
Yeah, I mean, so I guess we put two sets of guidance out earlier this week. So we put long-term guidance out of 6%-8% organic growth. We think, you know, from a kind of a tenet standpoint, we think nuclear power grows high single digits over the next four years. We think nuclear medicine, which is one of the other businesses we haven't talked about, but we're very excited about, a bit smaller of the portfolio today. We think that grows at high single digits plus. We also talked about a 2% pricing annual number in those numbers. So I think we continue to believe we can get price in this market as well, for a lot of the reasons Tom said.
I think as you move down the chain, the other thing I think that's important for people to realize and think about, you know, 'cause nuclear is a longer cycle business. You, Joe, you and I talk about this all the time. Like, unfortunately, you don't read it in the paper today and, you know, we book an order tomorrow. These things tend to take time to develop, so one of the other core pieces of the long-term guidance we put out there was a 30% EBITDA margin target, and we went into detail about, you know, how do we get there? We think, you know, 200 basis points-300 basis points is operating leverage. We think 150 basis points-300 basis points is procurement. And then we think, you know, the remainder piece is really driven by our Mirion Business System.
I would tell you that that business system really encompasses all three of those components. But in that last bucket, you're talking about site closures. We've done about four of those over the last four or five years. We have one going on right now. We've exited some unprofitable business lines that we had acquired as part of, you know, some of the medical acquisitions we've done. Right answer for us, bit of a headwind on revenue for us, but still absolutely the right answer. Pricing, some of the centralization we're doing in the digital space to leverage our spend, you know, that is a big deal. And then I think the last one, and I, I'll hit on it 'cause you're gonna ask me about it anyways, is cash flow, right?
We've, you know, put out that by 2026, we think we can flow through 50% of EBITDA in free cash flow. And we put out our 2028 number as 60%, right? So that margin expansion is a big piece of that. Continue to get more productive on the working capital side, huge piece of that. That doesn't mean we actually have to generate working capital in any given year if you do the math. But what we're seeing, and we talked about this in the third quarter is, just third quarter to third quarter last year, just to prove that we are making progress. We saw a 10-day reduction, right? So we are making progress there. I think we continue to have optionality on the interest expense line. Even, you know, without rate cuts, our debt continues to trade above par.
You know, there's some other things we can probably do out there from a, from an interest rate standpoint. We've committed to getting rid of the non-ops, right, over the next four years. You know, that number has come down dramatically since we've gone public. We are committed to making that go away or absorbing it up into the EBITDA numbers, and then we're doing a lot on taxes. You know, how we became public didn't give us a lot of ability upfront to structure. I think we're spending a lot of time right now on how do we optimize and what are the right, right things to do, so we're a little bit early in that journey. So long-winded answer, but I think those are the, as you think about the long-term targets. Just quickly on 2025, 'cause we did initiate 2025 guidance.
We're a quarter earlier than we normally would. We're trying to make your life easier, Joe.
Thank you.
Yeah. You know, it's pretty similar, candidly. We gave 5.5%-7.5% organic growth guidance. We did give 4%-6% total revenue growth guidance, right? That assumes, no, we're not gonna close any more M&A this year. So, you know, that has M&A, you know, anything M&A-wise would be incremental to that. But we are seeing a headwind on the euro, on the FX side. And it's not, you know, it's not inconsequential. It's 150 basis points on the top line. And we gave some rough figures so you could size that as we go forward. We talked about margin expansion next year, both at the low and the high end of the range, right? So this is something that isn't back-end loaded, right?
We're committing to targets next year that kind of go in line with the targets we've given long-term.
Yeah, makes sense. And yes, I was gonna ask you about free cash flow.
I know.
And just to contextualize it for everybody, you guys are gonna do roughly, call it $60 million-$70 million or so in free cash flow this year. And the 2028 targets imply something close to $200 million.
Right.
Right? So pretty substantial increase over that timeframe.
Absolutely.
You said it's not back-end loaded. You've given us our 2025 numbers. I mean, so is, you know, beyond 2025 the right way to kind of think about the margin progression? Is sort of linear 2026, 2027, or just any thoughts around that would be?
Yeah, I think it's more linear than it is anything else. You know, again, operating leverage is our biggest friend. You know, as we grow, being disciplined on our cost base, growing on top of that fixed cost base is very important to us. It's something that Tom and I are super committed to doing.
Can we just talk about what we're gonna get to the medical segment too, because there is some exciting stuff happening in that segment. But can we just talk about the order trajectory from here?
Yeah.
Fully recognizing that, you know, the fourth quarter of this year, you've got a super tough comp. You know, think your orders roughly 30% last year, if I recall correctly. But let's, how do you guys see the orders maybe over the next 12 months, right? And then specifically, you know, there was a one-off with the debookings this past quarter. If you guys can just address that, that'd be helpful as well.
Yeah, so let's do them reverse quickly. I mean, look, we last year in the third quarter we booked a $40 million order in Turkey. It was for four nuclear power plants. And you know what's come to our attention is you know they may have double awarded two of those to another competitor and you know are basically making us try to compete this. And you know we're just you know if there's two people with the same order that's not an order. And you know we're working on that situation with the client. We also are very confident because of our you know just because of our product portfolio and our history with this customer that we'll be able to get a lot of that back. But we did take it out of backlog in the
Prudent.
In the third quarter.
Yeah, yeah, yeah.
It was the right thing to do. I think on the order book side, look, I'm not gonna commit to order numbers here. What I would tell you is a couple things, Joe, that are maybe happening underneath. First, you know, we introduced this in the third quarter. We gave a bit more color this week on, you know, today, as we sit here, we see about a $300 million-$400 million pipeline of larger opportunities. And I would tell you most of these opportunities are $15 million and above type opportunities. We've also disclosed that about a third of that opportunity is new builds, right? And it's mainly, you know, it's outside of China and North America. So it's mainly kind of Europe, maybe North Africa, etc.
And then the other two-thirds is actually with existing customer base. And I think what's also relevant for people newer to the story is we do have a bit of a razor-blade model. But the good news for our razor is we make money on the razor. We don't lose money. And we make good money, right? We make better than 30% EBITDA margins on that razor. And but that existing customer base obviously comes with you know with higher margins. I think the other thing we're seeing you know on the order front is it's really on a cycle time front. We're able to process more orders faster now. So our order to delivery times are starting to shrink with all the factory work we're doing specifically in the nuclear and safety business.
The medical business has always been a little bit of a faster churn. You know, I think we like the order dynamics we're seeing. You know, they're not always even, right? You know, Europe can be better in some quarters than North America and vice versa, but we like what we're seeing from a pipeline standpoint, and maybe lastly, just to comment on that, you know, one of the things Tom did. In the second quarter, third quarter, we put in a new chief revenue officer, right? This is, I think, gonna be more important than maybe people realize. I think we're already starting to see it.
Just the amount of structure that's now being put into the sales team, re-looking at compensation plans, rethinking how we're doing things, I think is gonna be immensely important, especially for that flow business, which is the engine of the company.
Makes a ton of sense. Tom, I wanna come back to you. You did a great job of just explaining your, the nuclear business. Maybe just touch on the medical business as well.
Sure. Yeah, so medical business, again, about a third of our total revenue. Three primary segments within this. The largest today is quality assurance solutions in the radiation therapy market. So here, think external beam therapy today in a Western market, a newly diagnosed cancer patient has a greater than 50% probability of being prescribed external beam therapy or radiation therapy as a component of their overall treatment protocol. Interesting market in that it's, you know, the growth here is really driven by a combination of an aging population demographic in Western markets. But also the fact that today, if Western standards of care are applied globally, the world today only has about half of the radiation therapy clinics that it needs. We have the leading workflow software platform in this market.
We are the number one player in independent capital equipment used to calibrate and facilitate the delivery of this treatment to patients, noting that clinicians dramatically prefer independent QA solutions to make sure that these machines are delivering a dose of beam, if you will, that is on spec in terms of geometry and energy. I'd also note here that we announced a strategic deal that we struck earlier this year with Siemens Healthineers. Siemens Healthineers is the dominant player by a wide margin in the LINAC market, the linear accelerator market, which is the primary delivery mechanism for this. I feel similar dynamics to those that we talked about with Westinghouse. Secondly, we have nuclear medicine, which is one of the most exciting markets that we play in today. Today, nuclear medicine is undergoing a revolution from its historical roots.
It's kind of a sleepy diagnostic market to one today where drug makers have figured out how to combine therapeutic radioisotopes, so much higher energy than diagnostic tracers, to combine those with linkers, typically referred to as ligands that will bind to a specific antigen or a specific protein on a cancer cell and allow that radioactive packet to be delivered intracellularly to essentially destroy that cancer cell DNA from within. It is an incredibly exciting market right now. Today, if you were to look at the FDA approval pipeline, there are more than 100 so-called theranostic drugs, both diagnostic and therapeutic, focused on this market in all major classes of cancer.
Today, this, while it's a relatively young market, the two leading drugs in this market would include PYLARIFY, a Lantheus diagnostic drug, and PLUVICTO, which is a Novartis therapeutic drug, both of which are focused on the prostate cancer market. In their first two years, each of these became billion-dollar drugs. And so this is a market where people expect to see significant revenue growth. I think GE, when they bought a small software company called MIM, you know, expressed the view that it grows from a $5 billion market to a $40 billion market, you know, within a four-year period overall. Many would share that view.
But our play here is that, again, we have a leading software position where we have the leading software data management software platform in North America that really connects all of the major players in this space, the drug makers, the isotope producers, the contract manufacturers, the pharmacies, and the clinicians. But we're also the global leader in instruments like dose calibration instruments, other clinical instruments like thyroid uptake systems, but also kind of balance of clinic things, that would be common form factors to what we make in the nuclear power industry. We expect to continue to broaden our position in this value chain. Very, very exciting market for us overall. We expect it to revolutionize cancer care. Lastly, we are a significant player in the occupational dosimetry market.
Think of that really as a market where we're providing an outsourced service to the employers of radiation workers, most of whom are medical, to really monitor the cumulative dose incurred by their workers, which is required by regulation. Here, we're excited by the fact that we are the leader in digitizing this industry globally, which historically has been very analog in nature.
That's super helpful. You know, radiopharma is a market that, honestly, I'm still getting to know well, but from what I gathered, like, there's a lot of opportunity, particularly on the therapeutic side of the equation. As you think about you being maybe a little bit more front-footed from an M&A perspective, like, are there, what are some adjacencies or ways that you can create additional share of wallet in this market?
Yeah, I mean, conceptually, think about our ecosystem as being centered on our software platform. Again, this data management software platform, which we believe we can take internationally today. It's principally a U.S. marketed platform. We obviously have incredible distribution, commercial distribution capabilities in Mirion Medical, in Europe, in Asia, in other markets overall. But secondly, we hope to augment it in ways that make it clinically higher value added, but also in terms of things like Radionuclidic purity, which is important for isotope producers overall. So we think we can improve not only the footprint, but the capabilities of the software platform, improve the UX, and do a number of other things that make it stickier and more compelling, and ultimately give us kind of a land and expand dynamic in that place.
This, in turn, will give us the ability to evolve our business model as it relates to capital equipment sales, perhaps opening the door to a bit more power by the hour, a bit more flow revenue, for the capital equipment, both in terms of nuclear medicine instrumentation as well as kind of balance of clinic radiation monitoring solutions overall. So this is how we build out that position in the value chain. Ultimately, as we continue to drive the evolution of our software platform, we believe we'll have some unique insights in terms of clinical efficacy, yield, and a whole host of other important metrics relating to the drugs that flow through this network that we may be able to anonymize and monetize down the road. And we view that as really, you know, kind of the ultimate prize here in this market.
So exciting times for the company. Tom, any closing remarks that you'd like to leave us with?
I guess the biggest closing remark would be, you know, just noting that we've been a public company now for about three years. We've worked very, very hard to build name recognition, get our name out there, and really begin to earn a multiple that I think is reflective of where our peers trade. And given again the underpinning dynamics in our business, the fact that, you know, I've been doing this for 21 years, never had anything but headwinds. We have tailwinds today. We're really excited about where we can take the company and how we can really kind of prove out again that we are a category one. And it's really an interesting space, and we'd love to spend more time with, you know, many of the investors here today to really tell that story.
Excited for you guys. Thanks for spending some time with us today.
Joe, thank you.
Thank you.