Billion dollar currently served market, which in turn lies within a total addressable market that's more in the range of $18 billion-$20 billion. It's a vast market. We are the leader in our chosen field. Our three largest competitors would include Thermo Fisher, AMETEK, and Fortive. Three great companies, great industrial technology names overall. In each instance, we are substantially larger on a like-for-like basis. Extending even further, if you were to look at our category leadership position, today we are the global leader in 15 of our 18 product categories, meaning we are the global number one. The history of our company is one of effectively being a compounder. We've been private equity-owned for the vast majority of our history.
Again, I've been in role since founding the company, beginning in late 2003. We took the company public via a SPAC in October of 2021. Throughout that private equity history, we generated substantial returns for our shareholders and enjoyed a spirited top line growth CAGR of about 12 points, four organic, eight inorganic, in a period of time where that was, you know, compares very favorably to best in breed industrial tech companies. Our view is that there's an opportunity for us to continue our journey, continue to scale the business substantially within our chosen markets.
While doing so, to drive margin expansion, improve velocity of capital employed, and ultimately, you know, create a company of substantially larger scale, but doing so in a fashion that is strategically coherent. Final thing that I will note is that, you know, touching on that strategic coherence point, the unifying theme that cuts across our reporting segments and really drives our business, technologically, commercially, and administratively, again, is this domain focus on ionizing radiation. Today, we are the global leader in scientific applications, noting that our products have been deployed on a majority of interplanetary space probes. Even just two weeks ago, we launched detectors on the European Space Agency JUICE mission, where our detectors will be surveying the magnetosphere of Jupiter and its key moons.
More broadly, our detectors confirm the presence of water on Mars. We're on the International Space Station. We were on the Artemis launch a few months ago, et cetera, et cetera. Our products have been used broadly in the deep science community, involved in the discovery of the last nine elements on the periodic table, very involved in the quest for deeper understanding of dark matter and fundamentally the origins of the universe. Those are fun talking points, but importantly, the learnings that we developed in terms of material science, signal chain management, and other factors in those leading-edge applications has immediate relevance to the work that we do in our two reporting segments and in the key product categories that we have.
This is what feeds the ecosystem, and ultimately, as we continue to gain scale, will generate more and more of a flywheel effect. That's a high-level view of who we are, how we think about our company, and why we're excited about the future.
Yeah, no, thank you for that. That's really helpful. I mean, there's a lot of jumping off points, but I guess just I wanna first start off with, 2022 was a really tough year. A lot of different idiosyncratic events that no one could have predicted. Just, in your view, like what are the sort of the key takeaways, key lessons that you've learned recognizing you're still very early stages in being a public company?
Yeah. 2022 was our first year as a public company. Again, we became public in October of 2021. It was a tough year. It was a combination of factors, Khanh, as you noted. Firstly, you know, simply being a new public company, absorbing the, you know, the significance of the incremental public company costs, which for us, you know, created a margin hit of about 170 basis points overall, as we scaled up to, you know, deal with all of the related compliance issues. Becoming comfortable with the cadence of managing the tyranny of quarterly earnings and all that goes with it in terms of investor outreach.
Essentially just, you know, kind of completing that rookie lap as a public company. Obviously, substantial learnings there in terms of how we position our company, how we guide our views in the marketplace overall. The arguably the more significant challenges, not just for us, but for many industrial players last year were the macro factors that everybody in the world had to deal with supply chain issues, tight labor markets, a spike in inflation, the devolution of global trading relationships. Two things in particular created headwinds for us last year. One was the impact of the conflict in Ukraine. Historically we have been involved in Russian nuclear power projects outside of Russia.
Last year, we had a significant project in Finland called the Hanhikivi project that was canceled as a result of the conflict in Ukraine. That was a significant hit to us in terms of just the ratable growth profile of the business. This was a business that essentially was in backlog that we had anticipated metering at throughout the course of the year. It was attractive in terms of margin profile, run rate, et cetera. That went away. Then on top of that, with the significant break in foreign exchange trading rates, you know, noting that we are fairly naturally hedged as a company, but at the margin, we do favor a stronger euro.
Given the fact that dollar-euro broke through parity at its lowest point last year, that hit us in a disproportionate fashion overall. Between the two of those factors, between Russia and FX, we lost about 8%-9% of top-line growth that, you know, just went away and went away fairly abruptly.
We remained confident for much of the year that given the very significant defense business that we have, where we have a proud history of being a supplier to 18 or 19 of the NATO armed forces, we are arguably one of the most capable of suppliers to the civil defense community in the wake of a nuclear incident, where if we were to pro forma back our current construct to Fukushima, as an example, over a two-year period, we saw an episodic spike of about $150 million in extraordinary revenue associated with our activities in that specific incident, to shore up the sanctity of the food supply, provide environmental protection, monitor the safety and health of impacted individuals through in vivo applications, et cetera.
The point of all of that is that you can imagine that we've had very high level of engagement, both as it relates to military and civil defense applications because of the acute nature of the situation in Ukraine. I felt that for much of the year that this would translate into overperformance in our defense segment, which ultimately, you know, we continue to have very bullish outlook on. We didn't quite see the, you know, the pickup there that we expected last year. All of these things kind of conspired to make it a challenging first year as a public company. To be clear, you know, we learned a lot about it. We came out of the year stronger.
Obviously, we saw a substantial change, not only in performance, but share price performance over Q4. That's the momentum that we hope to carry into the future.
Yeah. No, that's great to hear. Just taking that as a jumping off point, I know we've discussed a few times just the value creation framework for Mirion. You just got a significant equity investment as well. You have a stated target of deleveraging to 3.1, even perhaps even better than that.
Correct.
Could you help frame what that opportunity looks like, and then what the, sort of reenergizing that value creation?
Yeah. Yeah. For us, the historic value creation of our business has been a combination of strong organic performance and, but also acquisitive growth. You know, again, at the time of the PIPE raise when we were preparing to go public, you know, we were talking about a 15-year growth rate of about 12 points for organic, eight inorganic in a period of time where that was best in breed in terms of industrial technology peers. Very difficult macro environment for much of that, much of that history, much of that period of time. On top of that, we've been a very acquisitive firm. Over the last six years, I believe we've done 16 acquisitions.
I think they've been well struck, both in terms of point of entry, but also in terms of how we have been very quick to monetize synergies overall with those newly acquired businesses. This is an important part of our story. It always has been candidly. One of the big adjustments to becoming a public company is the impact of leverage. For most of our history, we've operated with 6x leverage, which because of our high free cash flow conversion, has always been very comfortable for us.
We understand well that ultimately the public markets would like us to be, you know, somewhere in the two - three times leverage range, and anything above that starts to become increasingly uncomfortable. This obviously was a significant motivation in taking the direct primary investment from T. Rowe Price, which brought our leverage down to where it is today at 3.6 times. We understand that we need to demonstrate the deleveraging capability of the company, and we're very focused on doing that. As you noted, getting leverage down to 3.1 or below by the end of the year.
Longer term, our view is that there's a very comfortable pocket for us to operate within in the near to intermediate term to, you know, through a combination of organic growth with a focus on margin expansion and again, higher capital velocity in general. A focus on what's likely to be, you know, smaller bolt-on deals that are generally lower risk, generally lower cost, and faster to integrate overall. Our view is that there is a, you know, very attractive opportunity for us to focus there and to really demonstrate our capabilities as a compounder, and that as we do that over a sustained period of time, I think we will earn the right to, you know, over time, do larger deals.
For the near term, that's certainly our principal area of focus.
Yeah. That makes sense. Then just sort of on that path.
Oh, here we go. Yeah.
Yeah. Just on that, I know, in the most recent quarter, within the technology segment that you had discussed about the SIS acquisition.
Mm-hmm.
Could you sort of elaborate what the expectation is on the integration for that?
Sure.
-business and what the synergies are?
Yeah. SIS is the deal that we acquired about a year ago. Very attractive deal for us, where we acquired the critical infrastructure business from Collins Aerospace. What that represents for us is an opportunity to essentially take the position of this business, which is, they are the leading provider of security software, security software platform for nuclear power installations in the U.S. That technological backbone gives us the ability to essentially use that as a foundation, a platform to replace about 12 different supervisory software applications that we have supporting different product elements today, to integrate those into a more unified ecosystem, if you will.
It also gives us the ability to take that platform internationally, where we have great strength, and to take it more deeply into other relevant market segments like the Department of Energy, potentially the DOD, where they don't exist today. This was an asset that was, you know, I would characterize it as a bit of an orphan asset. You know, kind of an island of misfit toys asset within the mix of a larger business that was tremendously attractive to us overall and gives us the opportunity to unleash value.
The integration story is one of firstly, you know, integrating the infrastructure of the two businesses, focusing on the margin profile and just kind of the core operating cadence of the business. Our view is that we're making significant progress there overall. While we are doing that, to be really mapping out the strategic vision that will drive, you know, the evolution of this digital platform within our business. It's not unusual when we are buying an asset that is a bit of a turnaround or a redirect to see margin compression in the wake of the immediate integration campaign. As an example, we bought a company a few years ago, called Biodex, that $40 million business in the nuclear medicine space operating at break even.
In a period of about two years from a run rate standpoint, we got that business up to being neutral to positive in terms of run rate impact on overall EBITDA margins. It is a journey, and it's not something that happens with the flick of a switch in year one. This year we're seeing a little bit of that, you know, the margin, the dilutive margin impact in the technology segment because of SIS, we expect that over time that will abate and abate probably fairly quickly.
I would also say on that deal, we're holding on to a bit more cost because of the software and technology aspect that we think has broader appeal to us in the rest of our industrial business. I think some of this is intentional where, you know, we're making an investment that we think in the medium term or long term, candidly, will pay off.
Yeah. No, that's great. I know, we haven't talked as much about this yet, but 2023 guidance. Just in your, in your framework, I mean, it, it seems very reasonable. How are you thinking about what needs to be done and sort of what needs to happen in order for you to hit the higher end of that range?
Yeah, I mean, listen, I'll refer you back to a couple weeks ago, right. Where we reaffirmed guidance at that point. You know, 2023 for us is about execution. That's, you know, candidly, what we're focused on. You know, that's what matters. It's all about operational execution, orders, revenue, and then driving EBITDA. The cash flow. We're very focused on the cash flow piece of this, and we're very focused on the execution for the year.
Yeah, just kind of if I can add to that a little bit. You know, I think many people who have been following the company understand that last year to, you know, add even an additional level of stress to the company overall, but my life specifically. For much of last year, I ran our medical group and I ran one of the key businesses inside that medical group, which was our Radiation Therapy QA business. Over the... I did this in addition to my primary job as CEO of the company. That resulted in a massive change to the operating model, a wholesale rebranding of our medical group.
With that, you know, as you have seen in the numbers, significant momentum last year and carrying into this year. Now that that is behind me, we brought in an incredible executive to run the medical group, Michael Rossi. You know, with that first year of being public behind us, it gives me the ability to spend a considerable amount of incremental time on our industrial segment. Many of you may have seen that we announced a rebranding of our industrial group and Mirion overall, last week, accompanied with the unveiling of Gen 4, myRad 4.0 on our website, which is not merely a veneer, a Potemkin village.
It is a substantial upgrade to the infrastructure of our web capabilities, which will have real, and we believe, immediate impacts on customer engagement and ultimately conversion of lead generation that's coming in through this platform and other digital gateways overall. When we talk about execution, part of the story is that again, we have more time now to focus on running the business. And there's a direct relationship between that and the ultimate performance that we see. You know, to Brian's point, we reaffirmed guidance in our earnings call last week. We, you know, we feel good about where we sit and, you know, again, the focus is clear. We know what we need to do.
Great. I'll open it up to the audience after this asking this one. You're one of the few companies who continues to see positive orders growth.
Mm-hmm.
Would love to just sort of hear a little bit more about where you're seeing that, across both the technologies and the medical business.
Yeah. What's interesting is that if you look at our history, and again, this is a long-term history, this is a two-decade history. We've proven to be a fairly as cyclical company. In fact, historically, some of our strongest periods of organic growth came during, you know, contractionary periods, most notably the so-called Great Recession, beginning in 2007 and lasting for a number of years. The reason behind that is that if you look at the demand drivers in our vertical markets, they tend to be as cyclical demand drivers. Just to provide some specifics, if you're to look at our two largest vertical markets, nuclear power and healthcare.
In the case of nuclear power, what really drives the health of the nuclear power industry is the price of natural gas and political support. If those are both favorable for the industry in general, it will perform. If you look at where those factors lie today, they're arguably in the most favorable zone that certainly I've seen in the last 20 years. Probably, if you look at the profitability of the operators in nuclear power plants, you know, they're doing better than they have probably since the 1980s overall. That's likely to continue even though we, you know, we have seen a downtrend in natural gas pricing.
You know, our view is that if you take any kind of rational longer-term view and look at the supply and demand characteristics, that ultimately power prices across the globe in all major relevant markets will be well supported. The reason that's important is because more than three-quarters of our nuclear power-related revenue comes from the installed base. It's like any other business where if people are doing well, then budgets get fatter, both operating budgets and capital budgets. Ultimately, even though much of what we sell is not discretionary, there always is a discretionary envelope at the margin that governs things.
When the industry is doing well, then the people have a natural incentive to run plants hotter at higher capacity factors, to run them longer, minimizing downtime, extending the permitted lifespan of the power plant, and to potentially upgrade the overall output or capacity of the plant. All of those things favor us, and I think we are really looking at a super cycle where that's likely to continue, and this will be disconnected from any short-term recessionary pressures we see here in Europe or other markets in the world. That is augmented with new build activity, which is robust decommissioning activity, which is simultaneously strong. Behind that, the whole wave of small modular reactors, which is another big theme that is beginning to emerge in a material way.
Within that, hopefully, you can see that again, the demand drivers in that market again are not really that much driven by the general level of economic activity in any specific economy. On the healthcare side, it tends to be driven mostly by demographics. That right now for, certainly for cancer care, but also for our nuclear medicine business, the main driver is an aging population demographic in the developed West, which is the core of our revenue pie, if you will. As people get older, they require more diagnostic procedures, many of which involve nuclear medical applications. They are also more likely to get cancer.
To provide an example, in this country, a newly diagnosed cancer patient has about a 65% chance of being prescribed radiation therapy as a component of their overall treatment protocol. You know, I think it's axiomatic that as we see an aging population demographic, kind of within the G20 envelope, that that drives a greater book of business overall and for healthcare. That is further augmented by a significant expansion into China and to other markets overall. This is why it gives us confidence not only in terms of our view for the current year, recognizing I think many people see a significant recessionary risk in the back half of the year.
Again, we have been blessed as a company to demonstrate over a very long period of time that the impact of recession, of contraction has tended to be fairly minimal on our business.
Any questions in the audience? I'll keep going. Yeah. You, Tom, you mentioned, and you've talked extensively about the acyclical nature of the business, recognizing the Silicon Valley happened just about two months ago or so. Is there any risk that you're seeing in any of your end markets from a tightening credit environment?
I mean, candidly, the biggest impact that, you know, the credit markets overall have had on us is simply the interest expense that we've been carrying. You know, that we have been, we came out with slightly higher leverage than we anticipated as we de-SPAC, and for a variety of reasons. We were in a position where most of that was floating rate debt. I'll let Brian talk about what he's done to kind of lay off that risk. Just to note that, you know, as Powell has been, you know, fairly aggressive about tightening, you know, certainly that's had an impact on our level of interest expense in the near term, and that's probably the biggest factor overall.
When you look beyond that, at the impact on the industries that we play in, you know, the impact is minimal. Simply because, again, if you look at the major players in our vertical markets, they tend to either be well-capitalized or oftentimes state-owned enterprises or funded by some level of government funding that, you know, tends to be impacted very little by that type of environment.
Yeah, I mean, I think we've continued to offload the risk on the interest rate side. We put some cross-currency swaps in place. We've put a SOFR swap in place. We continue to look at opportunities here to hedge where it makes sense. I'd like to see us kind of in the 50/50 range floating to floating to fixed. We'll continue to step into that over time.
Great. Yeah, I want to revisit your point earlier on, specifically with the technology segment. SMRs are becoming much more meaningful. We're hearing a lot more about it. I think you'd mentioned that you got about a $2 million booking, if I'm right.
Correct
in the backlog.
In the quarter, yeah.
Yeah. How are you seeing that evolve? Like, where are you seeing the demand?
Sure.
Are SMRs the nuclear future for North America?
Yeah. The SMR movement is very exciting. For those in the audience who may not be familiar with them, these are smaller nuclear reactors that in some instances use the same type of technology that's used for utility scale reactors. In some circumstances, they're using more advanced technologies. Generally, it's fair to say that they are intrinsically safe. They are much, much more automated and, you know, essentially fault tolerant than a large scale utility place. The promise of the SMR market is firstly that at scale, that these are small reactors that can be largely prefabricated, assembled on site, either in single installations or in grids. The target market is retiring coal plants.
If you have a coal-fired power plant that's generating 500 or 600 megawatts of power, you cannot simply drop in a 1.4 gigawatt utility scale nuclear reactor there, because you don't have an adequate exclusionary zone around that power plant. You would be required to upgrade the entire grid infrastructure to support it. This is the appeal of the SMRs, that they can be dropped into a site like that and, in a, what should be, over time, as leaders emerge with scale economies, you know, should be a far more attractive economic play in terms of the impact of capital cost and the rapidity of getting these reactors installed and commissioned overall.
We see this as a market that adds to the existing utility scale nuclear power market rather than replacing it. We don't see it as a cannibalistic market. We see it as additive. Because the application here is largely replacing retiring coal plants. There are many, many players that are competing right now to emerge with leading technologies. As you might imagine, we're spending a lot of time trying to work with all of the leading players here to really offer our comprehensive suite of products, which we believe is unmatched in the space, in our chosen field. We think that this is gonna be an important source of revenue for the business.
Not in the near term, you know, probably in a period of time that begins five-10 years from now. In the interim, we do continue to book backlog. As you noted, Khan, we booked about $2 million in backlog on various SMR projects in this quarter, and we expect, you know, we expect that trend to continue over time.
Great. Just moving over to the medical side. You've talked about the RTQA opportunity. Like, where are the additional adjacent opportunities you're looking at? Where do you wanna expand further into?
Yeah. Within, within medical in general, the trends that are appealing to us, and, you know, again, understanding the, you know, kind of measured approach that we expect to take toward acquisitive growth over the next few years. Again, coming back to the whole leverage story and trying to be fairly conservative there. We see opportunity for bolt-on transactions in and around our existing ecosystems, Well, in all of our medical segments: RTQA, nuclear medicine, and occupational dosimetry, and we expect that those things will continue.
Thematically, if we were to look at what excites us the most, it's probably the nuclear medicine business because, you know, what we're seeing right now is the advent of therapeutic drugs that contain radioactive isotopes focused on cancer care that will be a revolution in our view. We've seen these in the form of endocrine system cancers and more recently with prostate cancer applications. There is likely to be just massive growth in this field overall and generally speaking, when a new therapy is introduced, it has a combination of a diagnostic component and a therapeutic component, all of which at the end of the day is likely to grow the nuclear medical space at a substantial rate.
A rate we believe ultimately over a long period of time will be higher than RTQA or the other elements within our medical business. Right now, we've got a strong position in the nuclear medical value chain, but we're very interested in continuing to improve our footing there and really try and evolve our business away from one today that's largely focused on capital equipment to one that where we're enjoying higher recurring revenues in the form of software, consumable services and other elements that feed that overall ecosystem.
Great. Thank you. I think we're just about out of time. Tom, Rob, would you like any closing remarks?
Yeah, just to wrap up, firstly, thank you for your time and attention. You know, we're very excited about our journey and hopefully, you know, we are able to share a little bit of who we are and how we think about our business over time. We'd encourage you to look at all the various materials that are available online that I think provide richer content about the specific elements of where we play. Again, we welcome your interest, love to have you as shareholders, and hope to speak with many of you over the course of the conference. Thank you for hosting, guys.
Thanks, Colin. Thank you so much. Appreciate it.