Mirion Technologies(MIR) - 2023 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements (Unaudited) Mirion's total revenues increased by 11.9% to $379.3 million, with net loss narrowing to $71.3 million, primarily due to the absence of a goodwill impairment charge Condensed Consolidated Balance Sheets Total assets slightly decreased to $2.70 billion, while total liabilities decreased to $1.13 billion, and stockholders' equity increased to $1.56 billion Condensed Consolidated Balance Sheet Highlights | Account | June 30, 2023 (in millions) | December 31, 2022 (in millions) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $87.4 | $73.5 | | Goodwill | $1,425.2 | $1,418.0 | | Intangible assets, net | $586.7 | $650.4 | | Total assets | $2,696.3 | $2,738.7 | | Liabilities & Equity | | | | Notes payable to third-parties, non-current | $677.8 | $801.5 | | Warrant liabilities | $49.6 | $30.5 | | Total liabilities | $1,131.8 | $1,271.5 | | Total stockholders' equity | $1,564.5 | $1,467.2 | Condensed Consolidated Statements of Operations Q2 2023 revenues increased 12.2% to $197.2 million, with net loss significantly improving to $28.4 million due to the absence of goodwill impairment Key Operating Results | Metric | Q2 2023 (in millions) | Q2 2022 (in millions) | YTD 2023 (in millions) | YTD 2022 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $197.2 | $175.8 | $379.3 | $339.0 | | Gross profit | $88.0 | $79.0 | $167.1 | $143.4 | | Loss from operations | $(10.6) | $(74.6) | $(24.2) | $(108.2) | | Goodwill impairment | $0.0 | $55.2 | $0.0 | $55.2 | | Net loss | $(28.4) | $(59.3) | $(71.3) | $(78.3) | | Net loss per share | $(0.14) | $(0.32) | $(0.36) | $(0.42) | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $4.4 million, while financing activities provided $21.8 million, largely from a $150 million stock issuance used for debt repayment Cash Flow Summary | Activity | Six Months Ended June 30, 2023 (in millions) | Six Months Ended June 30, 2022 (in millions) | | :--- | :--- | :--- | | Net cash provided by operating activities | $4.4 | $28.0 | | Net cash used in investing activities | $(12.9) | $(14.5) | | Net cash provided by (used in) financing activities | $21.8 | $(2.4) | | Net increase in cash | $14.1 | $6.7 | Note 3: Disposal of Business The company sold its Biodex Rehabilitation business, recording a $6.2 million loss on sale due to uncollectible deferred payments - The company sold its Rehab business for $1.0 million in cash and $7.0 million in deferred payments[66] - A loss of $6.2 million was recorded on the sale in Q2 2023, as the collection of the $7.0 million deferred payment was deemed not probable due to the buyer's financial instability[66] Note 8: Goodwill and Intangible Assets No goodwill impairment was recognized in 2023, contrasting with a $55.2 million impairment in 2022 due to the Russia-Ukraine conflict - No goodwill impairment was recognized for the six months ended June 30, 2023[81] - In the prior year period (six months ended June 30, 2022), a $55.2 million non-cash goodwill impairment loss was recognized in the Technologies segment's RMS reporting unit[80] - The 2022 impairment was triggered by the Russia-Ukraine conflict and the resulting termination of a contract for a nuclear power plant in Finland, which had a remaining performance obligation of approximately $67 million[79] Note 16: Segment Information Technologies segment revenue grew 18.5% to $129.2 million, swinging to a $12.8 million operating income, while Medical segment revenue grew 1.8% to $68.0 million Segment Revenues | Segment | Q2 2023 (in millions) | Q2 2022 (in millions) | YTD 2023 (in millions) | YTD 2022 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Medical | $68.0 | $66.8 | $134.4 | $126.9 | | Technologies | $129.2 | $109.0 | $244.9 | $212.1 | | Total | $197.2 | $175.8 | $379.3 | $339.0 | Segment (Loss) Income from Operations | Segment | Q2 2023 (in millions) | Q2 2022 (in millions) | YTD 2023 (in millions) | YTD 2022 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Medical | $(3.1) | $(2.2) | $(2.4) | $(8.9) | | Technologies | $12.8 | $(46.5) | $18.3 | $(49.0) | | Total Segment | $9.7 | $(48.7) | $15.9 | $(57.9) | Management's Discussion and Analysis of Financial Condition and Results of Operations Q2 2023 revenues increased 12.2% to $197.2 million, with net loss improving to $28.4 million, and Adjusted EBITDA reaching $44.3 million Results of Operations Q2 2023 revenues grew 12.2% to $197.2 million, with operating loss significantly narrowing due to the absence of goodwill impairment and lower SG&A expenses - Q2 2023 vs Q2 2022: - Revenues: Increased by $21.4 million (12.2%) to $197.2 million[210] - Operating Loss: Improved to $(10.6) million from $(74.6) million, mainly due to the absence of a $55.2 million goodwill impairment in 2023[213] - SG&A: Decreased by $7.0 million to $84.0 million, driven by lower stock-based compensation and professional fees[220] - YTD 2023 vs YTD 2022: - Revenues: Increased by $40.3 million (11.9%) to $379.3 million[240] - Operating Loss: Improved to $(24.2) million from $(108.2) million[244] - SG&A: Decreased by $12.8 million to $169.1 million[250] Non-GAAP Financial Measures Adjusted EBITDA for Q2 2023 increased to $44.3 million, with YTD 2023 Adjusted EBITDA reaching $80.9 million, reflecting various non-GAAP adjustments Reconciliation of Net Loss to Adjusted EBITDA | Metric | Q2 2023 (in millions) | Q2 2022 (in millions) | YTD 2023 (in millions) | YTD 2022 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(28.4) | $(59.3) | $(71.3) | $(78.3) | | Adjustments (Interest, Tax, D&A, etc.) | $55.6 | $23.4 | $95.8 | $81.4 | | EBITDA | $24.8 | $(13.5) | $37.1 | $16.3 | | Further Adjustments (Stock Comp, Warrants, etc.) | $19.5 | $56.1 | $43.8 | $61.2 | | Adjusted EBITDA | $44.3 | $42.6 | $80.9 | $77.5 | Liquidity and Capital Resources Cash and cash equivalents were $87.4 million, with operating cash flow at $4.4 million, and financing activities providing $21.8 million from a $150 million equity issuance - Cash and cash equivalents stood at $87.4 million as of June 30, 2023[282] - Net cash provided by operating activities decreased to $4.4 million for YTD 2023 from $28.0 million for YTD 2022[289] - In Q1 2023, the company raised $150.0 million from a direct stock offering and used approximately $127 million to repay outstanding debt, resulting in a $2.6 million loss on debt extinguishment[204][291] Quantitative and Qualitative Disclosures about Market Risk No material changes were reported regarding the company's market risk disclosures, including interest rate, foreign currency, and commodity price risks - There were no material changes to the company's disclosures regarding market risk during the quarter[295] Controls and Procedures Disclosure controls and procedures were deemed ineffective due to a material weakness in general IT controls at the French division, with remediation efforts ongoing - The CEO and CFO concluded that disclosure controls and procedures were not effective as of June 30, 2023[297] - A material weakness persists related to general IT controls (GITCs) at the company's division in France, specifically concerning program change-management and user access[299] - Remediation plans are in progress, including educating IT control owners, enhancing controls, and adding manual business process controls to mitigate risks[302] PART II - OTHER INFORMATION Legal Proceedings The company faces legal proceedings, including a $19.3 million claim for liquidated damages and a $10.5 million demand from a Russian customer, which management deems without merit - In April 2023, a Russian customer made a claim for $19.3 million in liquidated damages for project delays[114] - In June 2023, the same customer demanded the return of $10.5 million in payments related to a cancelled nuclear power plant project in Finland[114] - Management views both the claim and the demand as without merit and intends to defend against them vigorously[114] Risk Factors The Russia-Ukraine conflict continues to pose significant risks, including a $10.5 million demand and a $19.3 million claim from a Russian entity, with uncertain resolution under Russian law - The Russia-Ukraine conflict continues to pose a significant risk, causing project delays, cancellations, and supply chain disruptions[308] - A Russian state-owned entity has demanded the return of approximately $10.5 million for a cancelled Finnish project and claimed $19.3 million in penalties for delays on an active Hungarian project[308] - The company views the claims as without merit but acknowledges uncertainty in their resolution, as the contract is governed by Russian law[308]