Mirion Technologies - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue rose 4.9% to $202.0M, adjusted EBITDA increased 18% to $46.7M with margin expansion to 23.1%, and adjusted EPS grew to $0.10; total orders rose 11.5% to $203M, driven by strong Nuclear Power demand.
• Versus S&P Global consensus, MIR delivered a modest beat on revenue ($202.0M vs $200.7M*) and a clear beat on Primary EPS ($0.10 vs $0.0785*); EBITDA was above consensus on an adjusted basis ($46.7M reported vs $44.4M*), aided by operating leverage and procurement savings.
• Guidance: MIR raised FY25 total revenue growth to 5–7% (from 4–6%), reaffirmed organic growth (5.5–7.5%), adjusted EBITDA ($215–$230M) and adjusted EPS ($0.45–$0.50), and trimmed the low end of the EBITDA margin range to 24.0–25.5% to reflect tariff impacts and FX assumptions.
• Stock-relevant narrative: strong nuclear installed base momentum and a clearly articulated tariff mitigation plan (net 2025 adjusted EBITDA impact range of +$3M tailwind to −$8M headwind) underscore confidence; order cadence and potential large awards ($300–$400M pipeline) are catalysts over 2025.

What Went Well and What Went Wrong

What Went Well

• Nuclear Power momentum: orders up 11.5% YoY to $203M; management highlighted double-digit nuclear end-market revenue growth and a robust large-order bid pipeline of $300–$400M expected to award by YE2025.
• Margin execution: adjusted EBITDA margin expanded 260 bps to 23.1% on operating leverage and procurement savings, consistent with long-term path to 30% margins by 2028.
• Segment performance quality: both segments grew revenue; Nuclear & Safety adjusted EBITDA margins increased 310 bps to 29.4%, Medical adjusted EBITDA margins rose 310 bps to 33.8%.

What Went Wrong

• Labs & Research softness: revenue down approximately 19% on tough comps and potential DOE timing/scrutiny; a noted headwind for segment mix.
• China medical headwind: Medical revenue down ~$2M vs prior year in China, with tariff uncertainty and ERP transitions creating a ~$1M segment revenue headwind; management remains cautious on China.
• FX headwind: ~110 bps FX headwind impacted Q1 organic revenue growth, though management expects attenuation in the remainder of 2025.

Transcript

Operator (participant)

Ladies and gentlemen, greetings and welcome to the Mirion Technologies First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference call, please signal the operator by pressing star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Eric Linn, VP of Investor Relations. Please go ahead.

Eric Linn (VP of Investor Relations)

Thank you, Ryan, and good morning and welcome to Mirion's First Quarter 2025 Earnings Conference Call. Joining me this morning are Mirion's Chairman and CEO, Tom Logan, and Mirion's CFO, Brian Schopfer. Before we begin today's prepared remarks, allow me to remind you that comments made during this call will include forward-looking statements, and actual results may differ materially from those projected in the forward-looking statements.

The factors that could cause actual results to differ are discussed in our annual reports on Form 10-K, quarterly reports on Form 10-Q, and in Mirion's other SEC filings under the captioned risk factors. Quarterly references within today's discussion are related to the first quarter ended March 31st, 2025, unless otherwise noted. The comments made during this call will also include certain financial measures that were not prepared in accordance with generally accepted accounting principles.

Reconciliation of those Non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the appendix of the presentation accompanying today's call. All earnings materials can be found in the Investor Relations section of our website at www.mirion.com. With that, let me turn the call to Tom, who will begin on slide three.

Thomas Logan (Chairman and CEO)

Eric, thank you, and thank you to everyone on today's call for joining us. Most importantly, thank you to my nearly 3,000 Mirion colleagues for delivering a big quarter. We are off to a great start in 2025. We are hitting our marks both financially and operationally. This is most clearly reflected in our first quarter adjusted free cash flow and order growth.

We delivered $29 million of adjusted free cash flow, a 62% conversion of adjusted EBITDA. In addition, first quarter orders grew 11.5%, driven largely by nuclear power orders. This is our best first quarter performance since going public, and I will share more details with you momentarily. As you may have seen in this morning's press release, we acquired a small software business called Oncospace.

Oncospace is a cloud-native data analytics platform that enables clinicians to confidently design an optimal patient plan for radiation oncology, consistently promote best practice behavior, and share peer-to-peer expertise. This software is a great addition to our cancer care portfolio and is expected to enhance our go-to-market strategy. This acquisition is small but significant. Small in initial revenue and adjusted EBITDA contribution, but significant in its potential to catalyze the growth in our radiation therapy software business.

I'm excited to welcome the Oncospace team to Mirion. Beyond this transaction, the M&A deal pipeline remains attractive, but as you'd expect, today's uncertain market dynamics have clouded valuations and executability. As a result, we are remaining disciplined with a patient view of likely activity by year-end. Let's get into the details now, beginning with first quarter performance on slide four.

First quarter organic revenue grew 6% versus the same period last year, aided by double-digit revenue growth from the nuclear power end market. First quarter adjusted EBITDA totaled $47 million, or 18.2% higher than last year's first quarter. Margins also increased 260 basis points to 23.1%. The improvement reflects strong operating leverage and procurement savings, key components of our pathway to 30-point adjusted EBITDA margins by 2028, as committed to at our December investor day.

We also repurchased 1.2 million shares in the quarter for $18.6 million as part of our capital deployment strategy outlined in December. Adjusted EPS in the quarter was $0.10 per share compared to $0.06 per share in the first quarter of 2024, a 67% increase. As mentioned in my opening comments, the two standout elements for the quarter were adjusted free cash flow and orders.

Q1 orders are particularly encouraging given that this is typically our lightest volume quarter. Importantly, this orders number does not account for any of the $300 million-$400 million of large one-time opportunities that are currently in the pipeline. While global government budget dynamics have likely lengthened bidding cycles, we remain optimistic about our prospects for these contracts. As mentioned last quarter, we think the $300 million-$400 million sizing may be conservative. It is worth noting we have not lost any of these projects.

The strong orders in nuclear power are just another proof point of the momentum building in this market. Seemingly on a weekly basis, we see and hear affirmation that nuclear is a critically important component of the solution to the growing supply-demand imbalance in the global electricity market. This view is increasingly reflected in the public consciousness.

The 2024 National Nuclear Energy Public Opinion Survey shows that more than 75% of Americans support the use of nuclear energy, a record level for the fourth consecutive year. I've personally seen growing bipartisan political support for nuclear energy in the U.S. Last month, I visited Washington, D.C. for a lobbying trip. During the trip, I spent time with legislators and regulators overseeing the nuclear industry. I can confidently say that support for nuclear power is the highest I've seen in my career, and my sense of optimism strongly correlates to that dynamic.

Now, zooming out a bit to talk about Mirion's resilient business model on slide five. Given today's uncertain economic backdrop, it's important to remind investors why we believe we are well-positioned to traverse the unpredictable road that lies ahead. First, it begins with the customer. Mirion is a trusted partner to a global customer base.

In most instances, our safety-critical solutions are compulsory for customers. We are a leader in 17 of the 19 major product categories we serve and define ourselves as a category of one, the leading player in the detection, measurement, and analysis of ionizing radiation. This is all that we do, and we're better at this than anybody in the world. We've also proven the resilience of our financial performance by consistently delivering organic growth and consistently outperforming our peer set on a through-cycle basis. More than 70% of our revenue is recurring or repeat in nature.

Also, approximately 80% of our nuclear power-based revenue is tied to the installed base. This was evident in our first quarter orders, where 79% of the year-over-year nuclear power order growth came from the existing nuclear fleet. Importantly, structural tailwinds from nuclear power and cancer care have us better positioned today versus previous cycles.

We are highly levered to two generational trends that should be robust. Beyond structural tailwinds, our path to future value creation is predicated on established self-help initiatives, including operating leverage, procurement savings, and our proven Mirion Business System. Our business system has been central to our operating activities for more than 15 years and informs everything we do, from the C-suite to the shop floor. One of the factors helping to mitigate potential tariff impacts is the regionalized supply chain we've established.

This is table stakes for us, and our local-for-local business model has us well-positioned in today's macroeconomic environment. The benefits of this regional supply chain are better illustrated on slide six, where we detail the expected tariff exposure based upon what we know today. As mentioned, we believe we are well-positioned to weather the tariff storm impact.

More broadly, we have a deep stack of mitigating actions to diffuse our modest net exposure. Not surprisingly, China accounts for the largest exposure, between a $7million-$9 million headwind for 2025. This is largely attributable to medical segment products that have historically been produced in the U.S. and sold into China. Note, the majority of nuclear and safety segment goods that we sell into China originate from Europe and therefore are not subject to today's retaliatory tariffs placed on U.S. goods. Outside of China, the 2025 exposure is minimal at a $3 million-$4 million headwind.

We are currently evaluating ways to reduce this exposure moving forward. Of note, we've learned in the last 24 hours that a plurality, potentially a majority of our product set may be exempt from the higher Chinese retaliatory tariffs.

If true, this would position us at the upper end of our mitigating strategy range. I caution here that the situation is extraordinarily dynamic and is likely to take some time to stabilize. Mitigating actions totaling $5 million-$8 million include alternative sourcing strategies, production shifts, price increases, and cost management. Lastly, prevailing foreign exchange represents an additional tailwind, upwards of $5 million at current rates, to help offset the potential impact from tariffs.

Taken together, our net impact to 2025 adjusted EBITDA from today's known tariff rates plus offsets from mitigating actions and FX is between a $3 million tailwind and an $8 million headwind, with the $8 million headwind representing the worst-case scenario, again, based upon what we know today.

As a result, you saw in yesterday's press release that we are reaffirming our full-year 2025 organic revenue growth target, adjusted EBITDA, adjusted EPS, and adjusted free cash flow guidance, while increasing our top-line revenue growth and revising the corresponding low-end of adjusted EBITDA margin guidance to account for the known tariff impacts. We remain confident in our value creation strategy and well-positioned to the evolving landscape. Brian will share additional details around our 2025 guidance, as well as share additional color on our first quarter performance. Brian?

Brian Schopfer (CFO)

Thanks, Tom. Good morning, everyone. Let's pivot to the first quarter financials now on slide seven. As Tom stated, first quarter orders grew 11.5% compared to the first quarter 2024, driven by disproportionate demands from the installed base at nuclear reactors. Additionally, we received a $5 million labs and research order reflecting continued engagement from the Department of Energy. Meanwhile, in our medical segment, orders declined in the quarter.

This was anticipated as a recurring dosimetry services order that usually appears in the first quarter was booked in the fourth quarter of 2024. Offsetting this, we saw our RTQA business deliver strong order growth in the quarter of approximately 12%. First quarter order performance is particularly encouraging because it highlights the continued demand from the nuclear power installed base.

Moving to the financial results on slide eight, first quarter enterprise revenue was $202 million, or 4.9% better than first quarter 2024. Organic revenue growth was 6%, with both reporting segments contributing to the year-over-year improvement. This was partially offset by approximately 110 basis points of FX Headwinds. We expect the foreign exchange rate headwind to improve for the remainder of 2025, driven by the weaker dollar.

Adjusted EBITDA in the first quarter was $46.7 million, $7.2 million, or 18% better than the first quarter 2024. This strong performance translated to 23.1% adjusted EBITDA margins, or a 260 basis point year-over-year improvement. The margin improvement reflects the high operating leverage in our business, as well as procurement and Mirion Business System initiatives underway. Adjusted EPS totaled $0.10 per share, an increase of $0.04 per share, or 67% versus first quarter 2024. Moving to the segments, beginning on slide nine.

Within our nuclear and safety segment, first quarter revenue totaled $133.4 million, $7.6 million, or 6% better than first quarter 2024. Organic revenue increased 7.6%, in line with the targeted full-year mid-single-digit plus organic revenue growth we unveiled in February. We saw continued strength across the segment, particularly from nuclear power, which grew 17.6%, both from the current installed base but also from new builds.

We continue to expect the full year to represent high single-digit growth in the nuclear power end market. Our sensing business, which incorporates in-core and ex-core radiation detectors and electrical penetrations, delivered strong revenue in the quarter within the nuclear power end market. Offsetting this strength was a reduction in our labs and research business, down approximately 19% in the quarter. Two drivers. First, we're capping 15% growth in 2024 in this quarter in this end market.

Second, this is where we may be seeing some limited impact from DOGE, either from timing or enhanced contractual scrutiny. Regardless, labs and research and defensive diversifieds tend to be lumpier and more varied on a quarter-to-quarter basis. As a reminder, within our nuclear and safety segment, the nuclear power end market accounts for approximately 60% of the segment's revenue, while labs and research and defensive diversifieds are 20% each. Nuclear and safety segment first quarter adjusted EBITDA was $39.2 million, $6.1 million, or 18.4% better than the first quarter 2024.

Adjusted EBITDA margins improved 310 basis points to 29.4%, driven by operating leverage and ongoing procurement and Mirion Business System initiatives. Recall, we are streamlining our procurement process to drive efficiencies and to leverage our scale to improve cost and working capital performance. These efforts are increasingly reflected in our results, with more to come over the coming quarters.

Moving to the medical segment on slide 10. Medical segment first quarter revenue totaled $68.6 million, or $1.8 million, or 2.7% better than the first quarter 2024. Organic revenue was 3%. The nuclear medicine end market was the primary contributing factor to first quarter revenue growth. Notably, even if we normalize for the ERP implementation in nuclear medicine during the first quarter of 2024, the business still would have grown double digits. Several extraordinary items resulted in a $1 million revenue headwind for the segment in the quarter.

These include the previously announced closure of our lasers business in 2024 that is still reflected in the first quarter 2024 results. China was down approximately $2 million in revenue versus the first quarter last year, and the net effect of two ERP system installations, one in the first quarter of 2024 and the other in the first quarter of 2025.

If you exclude this $1 million headwind or normalize for it, organic revenue would have been approximately 4.5% and approaching our targeted mid-single-digit full-year organic growth target. We are encouraged by the good order growth we saw in Q1 in our RTQA business. We continue to enjoy backlog in our nuclear medicine business.

Medical segment first quarter adjusted EBITDA was $23.2 million, $2.7 million, or 13.2% better than first quarter 2024. Medical segment adjusted EBITDA margins also improved by 310 basis points to 33.8%, half of which reflects the absence of the nuclear medicine ERP system implementation headwind from last year. Another highlight for the quarter was adjusted free cash flow, shown on slide 11. We delivered $29 million of adjusted free cash flow, or a 62% conversion of adjusted EBITDA.

This not only reflects our improved earnings profile, but also networking capital improvement from project cash timing and better DSO, better net cash interest expense, and a focus on more efficient CapEx. For example, CapEx improved by $4 million versus last year as we lapped a significant launch investment in our InstadoseVUE dosimetry badge. We remain committed to the 18% reduction in CapEx for the full year 2025 from 2024.

Although not on the slide, we also did repurchase 1.2 million shares as part of the $100 million share repurchase plan we put in place in December. The program is principally intended to mitigate the dilutive impact of shares issued under the company's 2021 Omnibus incentive plan and to provide management with capital structure flexibility. This leads nicely into our full-year guidance outlined on slide 12.

As mentioned, we're maintaining our organic revenue growth, adjusted EBITDA, adjusted EPS, and adjusted free cash flow guidance. Despite the puts and takes of potential tariff impacts, mitigating factors, and updated foreign exchange rates, our initial guidance here still holds. We're revising total revenue higher to account for the emerging tailwind from FX at quarter-end rates, recognizing that the dollar has fallen a bit further since quarter-end. You can see the potential impact of current trading ranges on our tariff analysis.

As a reminder, total revenue growth is now between 5% and 7%, better than our initial guidance of between 4% and 6%. This still includes an approximately 40 basis point foreign exchange headwind at the $1.08 EUR/USD, better than the 190 basis point headwind from our previous guidance. The biggest FX driver is our update from an assumed $1.04 EUR/USD rate to $1.08 at the end of March.

Adjusted EBITDA is still expected to land between $215 million and $230 million. However, the low end of adjusted EBITDA margin was slightly tweaked to incorporate the new revenue guidance and to recognize there may be some margin leakage due to tariffs. We are sticking to our adjusted free cash flow guide, recognizing that we got off to a strong start in Q1.

From where we sit today, the second quarter will be our lightest cash flow quarter of the year, mainly driven by timing of cash tax payments and networking capital being a seasonal use of cash. It is worth reminding everyone that the midpoint of full-year adjusted free cash flow guidance is a 50% increase year-over-year. Adjusted EPS guidance of between $0.45 and $0.50 remains intact and assumes an effective tax rate of between 25% and 27%, down from 2024.

Cash taxes of approximately $40 million and an average share count of approximately 227 million shares all are unchanged. Remember, the 2025 share count increase versus 2024 reflecting the founder's shares vesting in the fourth quarter and the taking out of the warrants in the second quarter. This is a $0.05 per share headwind to our adjusted EPS guide in 2025 due to these two factors. While we are confident in our full-year guide, let's set some margin expectations for Q2.

We expect medical margins to be up year-over-year, but slightly less than they were up in the first quarter. Any tariff impacts on the medical segment will be more back-end weighted in the year. On the nuclear and safety side, we expect flattish Q2 margins year-over-year due to mix and timing around tariff mitigation plans.

We're expecting to see some revenue move from Q2 to Q3 in this segment as we implement tariff mitigation strategies. Concurring with Tom's earlier comments, I remain enthusiastic for the financial and operating performance of the business. We're off to a strong start in 2025 and are making great progress towards our 2028 financial targets. With that, I'll turn it back to the operator to open the line for questions.

Operator (participant)

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from the line of Rob Mason from Baird. Please go ahead.

Yes, good morning. Tom, your commentary, I know this is a developing situation, but what you're seeing on the ground there in China around the tariffs, potential reprieve around that, can you elaborate a little more on just what would be driving that when you might think you would have some more clarity on it?

Thomas Logan (Chairman and CEO)

Yeah, Rob, good morning. Just to reiterate a couple of comments that I made. Firstly, that most of our exposure today comes from medical equipment produced in the U.S., predominantly radiation therapy equipment, but some nuclear medicine equipment that then is shipped to China. It's obviously a very dynamic situation, and the landscape is changing.

What we are learning is that there are three or four classification codes under which our products are shipped, where there's an emerging body of thought and evidence that they'll be exempt from the retaliatory tariffs, with a likelihood that there will still be a 20% baseline tariff. To the extent we can prove this out and it is, in fact, validated, obviously that would be of great benefit to us and change our view a bit on the aggregate range of that net tariff exposure.

Certainly. Sure. Just as a follow-up as well, again, the order number looked really strong. Absent any influence from the $300 million-$400 million that we're referencing frequently. You did mention some potential exposure there to government procurement process in that envelope. Any way that you can quantify that and what you're actually seeing, what percent is exposed and where that's coming from, what you're seeing?

Yeah, it's a bit challenging, Rob, recognizing that this pipeline that we've referenced is a combination of government and commercial projects overall and scattered around the globe. This is not all about DOGE or not all about U.S. Government Dynamics. We clearly have a confirmation bias where we are looking for evidence that DOGE-related activities are having some impact on these and/or other just kind of routine flow government business.

Today, we're really not seeing it. Absent the commentary that Brian made that there may be some evidence that some of the tepid order dynamics in labs may be theoretically related to DOGE. Beyond that, we're not seeing anything. We are actively looking for it. To be clear, we're not hearing any commentary from the program managers of these government-funded projects. It continues to be a relatively constructive environment for us. Obviously, we're being quite vigilant in monitoring any changes and any flow through.

Maybe just if I could sneak one quick one in. You talked about almost weekly occurrence of news flow around nuclear power. Japan recently talked about restarting a reactor. You just update us on what your Japan exposure might be?

Our Japanese exposure is relatively minimal as it relates to their nuclear industry. In aggregate, it's just under 2% of our total revenue. Much of that relates to scientific instruments, some medical exposure, medical market exposure, etc. This is because historically, within Japan, there's been a very tightly bound Keiretsu network supporting the nuclear fleet, really supporting the nuclear infrastructure. I will say that we've chipped away at this and increasingly are being what I would characterize as more assertive in that marketplace. It is a marketplace that represents upside opportunity for us.

The importance of what you stated really reflects not only the continued momentum in Japan to restart a significant tranche of their idle nuclear base, but also the desire to do more to take it further. Again, we see that more as upside than anything else.

Very good. Thank you.

Operator (participant)

Thank you. The next question comes from the line of Joe Ritchie from Goldman Sachs. Please go ahead.

Joe Ritchie (Managing Director)

Thank you. Good morning, everybody.

Thomas Logan (Chairman and CEO)

Hey, Joe.

Joe Ritchie (Managing Director)

Hey, guys. I'm just curious. Look, nice start to the year. Great to see the orders. Just on that $300 million-$400 million pipeline, I think kind of like the expectation was that you'd see the vast majority of those decisions being made sometime in 2025. Has the timeline on that shifted at all, just given the current backdrop? Also, is this just like a handful of projects or anything you can tell us about kind of the sizing on these projects that are out there?

Thomas Logan (Chairman and CEO)

Yeah. In aggregate, we hold to the view that a majority of these contracts will be awarded within calendar year 2025, obviously reserving for the possibility that there may be some spillage into the back end of the year. In aggregate, these are projects that we would define as being notably larger than what we would typically expect in our flow business. Typically, that would mean an eight-figure or higher handle on the deal overall. Again, as we've noted previously, it's a mix of nuclear and other projects, U.S. and international in scope. Brian, anything you want to add to that?

Brian Schopfer (CFO)

No, I would just say where we've seen maybe a few things move to the right, maybe out of 2025, I think we've seen candidly more stuff drop into the pipeline in 2025. I mean, our commentary in the last two quarters has been we hold the range, but we see kind of more in the funnel than that. We did not have any expectations to close anything in the first quarter. To date, I think I would tell you we're pretty on track.

Joe Ritchie (Managing Director)

Okay. Great. Helpful to get the Q2 color. Thank you for that. Curious, it seems like you're already starting to see some of the benefit from your procurement savings. The incremental margins this quarter were really good in both segments. Just maybe kind of help me understand. I know we have the color for the second quarter, but for the second half of the year, should we be expecting then incremental margins on your volume to be better than what you have historically said? In medical, that's 50%-60% range. In nuclear, that's 40%-50% range. How do we think about that into the second half of the year?

Thomas Logan (Chairman and CEO)

Yeah. I mean, look, we've tried to stick to keeping kind of our annual guidance. Joe, I did obviously give you some color on the second quarter. Look, I think the first quarter incrementals were very strong. Obviously, we do have a pay rate cycle that goes into effect kind of in the second quarter. What I would tell you is we still believe there is margin expansion every quarter. I would tell you that I think the third quarter is probably our best margin expansion quarter, and the others are kind of similar in size. I think the incrementals you'll see, they are a little bit lumpy by business by quarter.

You heard me talk about kind of my expectations in the second quarter on nuclear and safety are more for flattish margins, just as we move some stuff probably from Q2 to Q3 to help mitigate some of the tariffs. We also have some mixed dynamics in the second quarter. We talked about this a little bit last year as well. I mean, that's probably as much as I want to give at this point, but we do feel good about margin expansion company-wide each quarter of the rest of the year.

Joe Ritchie (Managing Director)

Okay. Great. One last one for you. Just free cash flow, nice start to the year, just all the work and capital benefits. Second quarter, it sounds like you're indicating because of a couple of cash taxes and a few other items that you might see, I guess, maybe negative free cash flow in the second quarter. I just want to make sure I understood that correctly. Yeah, how are you then thinking about working capital going forward?

Thomas Logan (Chairman and CEO)

I'm not sure I said it would be negative. I just said it'd be the lightest cash flow quarter of the year. I mean, I don't think it's if you look back at the second quarters over, let's say, the last two years, right, it's probably somewhere in those ranges, candidly, maybe on the lower end of those ranges versus the higher end of those ranges. I mean, we had a very good first quarter.

The teams across the company did absolutely fantastic. Collections were good. There's still tons of opportunity here for us, both on the collection side. As the procurement stuff comes, that should help on the payable side. We're very focused specifically in Europe on project cash flow timing. I like the third and fourth quarter to see continued pickup on networking capital. Seasonally, we're negative networking capital in the second quarter.

I think that holds true here. Our biggest, kind of one of our biggest cash tax quarters, is the second quarter, just with the U.S. taxes and etc. I think we feel good, but I do not think I said it would be negative.

Joe Ritchie (Managing Director)

Yeah. No, that was me projecting, but appreciate the.

Thomas Logan (Chairman and CEO)

You can put that in your model. You are.

Joe Ritchie (Managing Director)

All right. Thanks, guys.

Thomas Logan (Chairman and CEO)

Thanks, Joe.

Operator (participant)

Thank you. The next question comes from the line of Vlad Bystricky from Citigroup. Please go ahead.

Thomas Logan (Chairman and CEO)

Hey, Vlad.

Vladimir Bystricky (Analyst)

Hey, good morning, guys. Thanks for taking my question here. Maybe first, just on China medical, the potential tariff clarification that you mentioned is encouraging, but could you just step back and talk about underlying demand trends in China medical broadly? As a follow-up to that, how you're thinking about the risks of any potential anti-American backlash in that market or whether you've seen any evidence of that developing?

Thomas Logan (Chairman and CEO)

Yeah. Vlad, I mean, I'll start with a caveat that it's hard to say. Obviously, there's a lot of battle haze right now, and we're trying to be careful about our guidance, careful about describing how we see things. It's important to contextualize the answer as well that this is something we've been talking about for the last two years.

Last year, you may recall, we saw a slowdown in the Chinese component of our growth, particularly in radiation therapy. This was driven by a generalized slowdown in med tech overall exports into China because of their pronounced anti-corruption programs where it just induced incredible caution into the marketplace. This began not in 2024. It began the prior year.

It has had a long tail and had a big impact on things like the build-out of new radiation therapy clinics, which is really the key demand driver for our growth into that marketplace overall. In hindsight, it is a bit of a godsend, though, because of the cautionary stance that we took in terms of framing our operating plans for 2025 and guiding that view overall.

Again, we took a cautious view toward China in general because of this tail. I think that certainly helps in terms of the aggregate exposure that we are facing this year. At the end of the day, I think when it comes down to Chinese economic decisions, particularly today, we are all hopeful that some type of constructive deal is brokered, that clarity emerges, and that China and the U.S. work together as partners to reduce the trade imbalance overall.

Our interpretation of this whole trade code dynamic is that at the end of the day, there is a cold rationality that prevails. There are certain things that the U.S. has to source from China, and there are certain things that China has to source from the U.S. I think that is reflected in this instance by these trade code exemptions. This is very dynamic. We are still trying to prove this out, and we are being very careful about this overall.

If that is true, then that would suggest that we have reason to believe that the environment in China may be a little bit more constrained, going from 0% tariffs potentially to 20% tariffs. That is a reflection of national need as it relates to the products, software, and solutions that we are selling into that market overall.

Longer term, if there is some type of sentiment that builds up, not just in the China bloc, but in any other trading bloc, Europe, Latin America, etc., we have within our planning queue a number of actions that we think we can take to further defuse that risk and really kind of build on this local-for-local construct that's endemic in our structure today.

Vladimir Bystricky (Analyst)

That's helpful color, Tom. I guess we'll just have to watch the tweets going forward. I think, Tom, I heard you say that 79% of the 1Q nuclear order growth came from the existing fleet as opposed to new build, which is quite encouraging. Maybe could you just characterize how you're thinking about where customers are in terms of their current upgrade cycle and how you're thinking about potential longevity of this capital investment into the existing fleet?

Thomas Logan (Chairman and CEO)

Yeah. I think it's still early days, Vlad. The dynamic just for all listening is that the installed base really is the most important element of our nuclear business, and it typically represents 80% of our nuclear revenue overall. What is changing, just to walk people through the logic, is that there's a growing supply-demand or demand-supply imbalance in global electrical generating capacity. We are seeing an immediate spike in year-over-year demand for electricity.

It's more pronounced in the American market than in many. In general, we are seeing an acceleration of demand, which in aggregate was up about 4% last year versus the prior year. That's versus what had been for much of the decade between 2010 and 2020, a rate of about 1%-2% annual growth and an environment where most of the nuclear power plant operators were losing money.

What's happening today is that the demand for electricity is mounting, particularly clean baseload energy, which only nuclear power can supply. The most visible motive behind that is the AI-driven data center growth, but it goes well beyond that. It's the general electrification of the economy, the EV market as it emerges, etc., etc.

What is clear and what will be, I think, an extant trend for quite a while is this view that there is a very clear and compelling economic incentive for the operators of nuclear power plants to run them at a higher capacity factor, that being the term of art for capacity utilization within the industry, to extend the life of plants through permit extension. The majority of American power plants will be life extended to 80 years. Some will be life extended to 100 years.

It is bringing back previously shut down kind of pre-decommissioned reactors, including the Palisades Reactor, the Three Mile Island Reactor, and potentially now the Duane Arnold Reactor coming back online. It is resuscitating projects that had been terminated, like the VC Summer Project in South Carolina. It is upgrades. It is adding capacity to the existing fleet. While people tend to focus on new build activity as they are looking at the nuclear market, whether it is through small modular reactors or utility scale, for us, what matters more is the health of that installed base.

When they have the incentive that they do today to operate with greater uptime, extend life, upgrade capacity, etc., that obviously drives looser capital spending budgets. It greenlights projects that are supportive of those three overarching objectives, which would include many of the solutions that we sell.

Long answer, but the summary of all of that is we expect this; we think we're just in the beginning of this cycle, and we expect to see really healthy CapEx coming out of the global fleet for many, many years to come.

Brian Schopfer (CFO)

I would also just remind you, Vlad, that we had just committed to in December kind of high single-digit growth through our long-range guidance. We are expecting that this year, and that means we need to see that also for the next couple of years.

Vladimir Bystricky (Analyst)

That's encouraging and really helpful, guys. Maybe just one last one for me, and I'll get back into the queue. On the acquisition you announced, I know it's fairly small, but maybe could you just characterize how that came about? Was that proprietary? Just any color on.

Thomas Logan (Chairman and CEO)

Yeah. This was proprietary and, again, kind of consistent with that crowdsourcing approach that we take internally. Again, a small deal, but I think it'll prove to be very important strategically in terms of how it fleshes out some of the capabilities that we have in our flagship RTQA Workflow Software Platform called SunCHECK.

We are really excited about it, not only in terms of the capability that the acquisition brings to bear, but the team. It's a great team. I think we are going to see some good leverage down the road from this. A nice deal, nice pickup. It's not really going to move the needle meaningfully in the short term. The main point is that our pipeline continues to be good. Obviously, this is an environment where a lot of people are being very cautious. Sellers are being cautious.

I think sellers of private companies have not quite yet capitulated in terms of multiple reductions that we've seen driven by the public industrial tech sector. I think all that will sort out. We continue to actively work on it. To be clear, we're going to be very disciplined, and we're going to be patient, as always, in this room.

Brian Schopfer (CFO)

Maybe just two other comments. This is like a sub-million of revenue deal for us this year, so really small, probably break even. I think the other thing that this is one of the more creative deals we've done where there's almost no upfront cash, and it's kind of a earn-as-you-go stream. I think that is also just kind of proving that we are flexible in how we do deals, and we want to make sure that it's a win-win for everyone.

Vladimir Bystricky (Analyst)

Awesome. Thanks, guys.

Operator (participant)

Thank you. The next question comes from the line of Chris Moore from CJS Securities. Please go ahead.

Christopher Moore (Senior Analyst)

Hey, good morning, guys. Yeah, maybe just a bigger picture pricing power question. If there are surprises after this 90-day hiatus is over, are there certain areas, products, services where you consider Mirion to have kind of stronger pricing power and maybe there might be a little less uncertainty there?

Thomas Logan (Chairman and CEO)

Yeah, Chris, this is a super important question because when most people are talking about tariffs or DOGE, they're talking about it narrowly. The approach that we're trying to take is very expansive where, to begin with, the FX Dynamics, which are strongly correlated to this kind of global reset more broadly, are obviously an important and very visible economic element.

The other element that I think is less visible to people that we are hyper-hyper focused on right now is competitive advantage, recognizing that in some instances, based on anticipated future tariff constructs, we will gain economic advantage versus our competitors. In some instances, we will lose that economic or a degree of economic advantage relative to competitors.

What I would tell you is that in general, we like where we sit, meaning that in aggregate, we feel like our competitive advantage will be strengthened based upon likely kind of long-term sustained tariff scenarios overall. To the extent that does, in fact, happen, obviously, that gives us pricing power and the ability to really optimize between hoped-for incremental share gains plus margin expansion. It is something, again, that we're thinking about a lot, doing a lot of analytics on, and feel like there's probably an upside opportunity for us here down the road.

Christopher Moore (Senior Analyst)

Got it. That's very helpful. All the other ones I had were asked already. I will jump back in line. Thanks, guys.

Thomas Logan (Chairman and CEO)

Okay, Chris. Thanks.

Operator (participant)

Thank you. The next question comes from the line of Yuan J. from Citigroup. Please go ahead.

Thank you for taking our questions, Tom and Brian. We had that $21 million debooking from Turkey in 1Q 2024. Can we anticipate the backlog to grow in the near term?

Thomas Logan (Chairman and CEO)

Look, I don't like to comment on quarter-to-quarter orders and backlog. I think as it relates to that specific project, the team continues to work on winning some of that back. I think when we're ready, when we have more to say there, we'll talk about it. Look, we had a strong first quarter on the order side. Obviously, FX rates are beginning to kind of favor our backlog, which about half the backlog does sit in euros.

The strong move here in April with the euro to weaker dollar, I guess, should help us over time. Look, we've talked a lot about the $300 million-$400 million today. As that comes in, of course, we would expect backlog growth between now and the end of the year because there's some larger projects, obviously, in that queue. Look, we like where we sit.nWe like the dynamics. We think we had a very good first quarter commercially. We look forward to updating you in kind of Q2 and the back half of the year on how we're progressing.

Yeah. Got it. Maybe a quick follow-up to Joe's question earlier. What is the exact timing on those one-time orders in total of $300 million-$400 million? Should we anticipate more in the second half, or is it even out in the next two, three quarters?

Yeah. Look, again, we're not going to talk about precise timing, but I would tell you it's back half loaded.

Yeah. Yeah. Maybe one last question for me. For those in the backlog, how should we think about the push and the pull in terms of timing? What if some projects have been delayed? Is that a big risk in your assumptions?

Yeah. Look, we spent a lot of time in the backlog, and teams are looking at the project piece of this quite a bit. I think one of these bigger projects are longer cycle. They take years and years and years to kind of push through the revenue stream. I think we're always kind of looking and accounting for that as we put our forecast together. There's always risk. It's just kind of inherent in the new build nuclear game of maybe things moving to the right. I think a lot of the work currently going on from a project basis is actively happening. I think we feel very good about our forecast for the year.

Yuan, I'll have to say randomly too that I was convinced you would ask a question either about the Pluvicto broader approval or our Apex-Guard software release. I got that one wrong.

Yeah. Sorry. We just got more questions on the other part. Yeah, we can save the Pluvicto related question to the callback. Thank you for taking our questions.

Okay. Thanks, Yuan.

Operator (participant)

Thank you. Ladies and gentlemen, as there are no further questions, I now hand the conference over to Tom Logan, Chairman and CEO of Mirion, for his closing statement.

Thomas Logan (Chairman and CEO)

Thank you, Ryan. Ladies and gentlemen, thank you for listening in today. As always, thank you for your support. Just to close by reiterating, it was a strong quarter. Great start to the year. The team executed extremely well. We're in a remarkable environment. It's a fascinating time to be alive, very challenging from a business standpoint.

I would say that historically, these are the times where we've been at our best, where we have excelled. We have a battle-hardened team that has weathered a lot of macro variability and challenges, and their track record is second to none. I'm proud to take the field with them each and every day. We're going to continue to drive hard on execution in Q2. We look forward to speaking with you again in a quarter and seeing many of you in the various investor conferences and NDRs that we have scheduled for the quarter. Thanks again today, and we'll talk soon.

Operator (participant)

Thank you. Ladies and gentlemen, the conference of Mirion Technologies has now concluded. Thank you for your participation. You may now disconnect your lines.