Mirion Technologies, Inc.: Form 10-Q for the period ended Sep 30, 2023

You should read the following discussion and analysis of Mirion’s financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes of Mirion Technologies, Inc. that are included elsewhere in this Quarterly Report on Form 10-Q as well as our audited consolidated financial statements and the notes related thereto for the year ended December 31, 2022 that are included in our Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section entitled “Risk Factors” included in this Quarterly Report on Form 10-Q as well as our Annual Report on Form 10-K. Unless the context otherwise requires, references in this section to “we,” “us,” “our,” “Mirion” and “the Company” refer to the business and operations of Mirion Technologies TopCo, Ltd. and its consolidated subsidiaries prior to the Business Combination and to Mirion and its consolidated subsidiaries, following the consummation of the Business Combination. Unless the context otherwise requires or unless otherwise specified, all dollar amounts in this section are in millions.

Overview

We are a global provider of products, services, and software that allow our customers to safely leverage the power of ionizing radiation for the greater good of humanity through critical applications in the medical, nuclear and defense markets, as well as laboratories, scientific research, analysis, and exploration.

We provide dosimetry solutions for monitoring the total amount of radiation medical staff members are exposed to over time, radiation therapy quality assurance solutions for calibrating and verifying imaging and treatment accuracy, and radionuclide therapy products for nuclear medicine applications such as shielding, product handling, medical imaging furniture, and rehabilitation products. We provide robust, field-ready personal radiation detection and identification equipment for defense applications and radiation detection and analysis tools for power plants, labs, and research applications. Nuclear power plant product offerings are used for the full nuclear power plant lifecycle including core detectors, essential measurement devices for new build, maintenance, decontamination and decommission, and equipment for monitoring and control during fuel dismantling and remote environmental monitoring.

We manage and report results of operations in two business segments: Medical and Technologies.

• Our revenues were $191.2 million for the three months ended September 30, 2023 and $160.9 million for the three months ended September 30, 2022, of which 36.0% and 42.7% were generated in the Medical segment for the three months ended September 30, 2023 and 2022, respectively, and 64.0% and 57.3% were generated in the Technologies segment for the three months ended September 30, 2023 and 2022, respectively.
• Our revenues were $570.5 million for the nine months ended September 30, 2023 and $499.9 million for the nine months ended September 30, 2022, of which 35.6% and 39.1% were generated in the Medical segment for the nine months ended September 30, 2023 and 2022, respectively, and 64.4% and 60.9% were generated in the Technologies segment for the nine months ended September 30, 2023 and 2022, respectively.
• Backlog (representing committed but undelivered contracts and purchase orders, including funded and unfunded government contracts) was $798.8 million and $737.4 million as of September 30, 2023, and December 31, 2022, respectively.

Key Factors Affecting Our Performance

We believe that our business and results of operations and financial condition may be impacted in the future by various trends and conditions, including the following:

• **The Russia-Ukraine conflict—**The Russia-Ukraine conflict has impacted and may continue to impact us, including through increased inflation, limited availability of certain commodities, supply chain disruption, disruptions to our global technology infrastructure, including cyberattacks, increased terrorist activities, volatility or disruption in the capital markets, and delays or cancellations of, or claims or disputes regarding, customer projects.
• **Inflation and interest rates—**We expect inflationary pressures to continue. We actively monitor, evaluate and respond to developments relating to operational challenges in an inflationary environment. Global supply chain disruptions and the higher inflationary environment remain unpredictable and our past results may not be indicative of future performance. In addition, the increase in interest rates, which we expect to continue, has in turn led to increases in the interest rates applicable to our indebtedness and increased our debt service costs.
• **Tariffs or sanctions—**The United States imposes tariffs on imports from China and other countries, which has resulted in retaliatory tariffs and restrictions implemented by China and other countries. There are, at any given time, a multitude of ongoing or threatened armed conflicts around the world, including the ongoing conflicts in Russia-Ukraine and the Middle East. As one example, sanctions by the United States, the European Union, and other countries against Russian entities or individuals related to the Russia-Ukraine conflict, along with any Russian retaliatory measures could increase our costs, adversely affect our operations, or impact our ability to meet existing contractual obligations.
• **Medical end market trends—**Growth and operating results in our Medical segment are impacted by:
• Changes to global regulatory standards, including new or expanded standards;
• Increased focus on healthcare safety;
• Changes to healthcare reimbursement;
• Potential budget constraints in hospitals and other healthcare providers;
• Medical/lab dosimetry growth supported by growing and aging demographics, increased number of healthcare professionals, and penetration of radiation therapy/diagnostics; and
• Medical radiation therapy quality assurance (“RT QA”) growth driven by growing and aging population demographics, low penetration of RT QA technology in emerging markets, and increased adoption of advanced software and hardware solutions for improved outcomes and administrative and labor efficiencies.
• **Strategic transactions—**A large driver of our historical growth has been the acquisition and integration of related businesses. Our ability to integrate, restructure, and leverage synergies of these businesses will impact our operating results over time. From time to time, we also divest businesses, such as the divestiture of the Biodex Rehabilitation business ("Rehab"), and make strategic investments, each of which has, and we expect to continue to, impact our operating results.
• **Environmental objectives of governments—**Growth and operating results in our Technologies segment are impacted by environmental policy decisions made by governments in the countries where we operate. Our nuclear power customers may benefit from decarbonization efforts given the relatively low carbon footprint of nuclear power to other existing energy sources. In addition, decisions by governments to build new power plants or decommission existing plants can positively and negatively impact our customer base.
• **Government budgets—**While we believe that we are poised for growth from governmental customers in both of our segments, our revenues and cash flows from government customers are influenced, particularly in the short-term, by budgetary cycles. This impact can be either positive or negative.
• **Nuclear new build projects—**A portion of our backlog is driven by contracts associated with the construction of new nuclear power plants. These contracts can be long-term in nature and provide us with a strong pipeline for the recognition of future revenues in our Technologies segment. We perform our services and provide our products at a fixed price for certain contracts. Fixed-price contracts carry inherent risks, including risks of losses from underestimating costs, operational difficulties and other changes that may occur over the contract period. If our cost estimates for a contract are inaccurate or if we do not execute the contract within our cost estimates, we may incur losses or the contract may not be as profitable as we expected. In addition, even though some of our longer-term contracts contain price escalation provisions, such provisions may not fully provide for cost increases, whether from inflation, the cost of goods and services to be delivered under such contracts or otherwise.
• **Research and development—**A portion of our operating expenses is associated with research and development activities associated with the design of new products. Given the specific design and application of certain of these products, there is some risk that these costs will not result in successful products in the market. Further, the timing of these products can move and be challenging to predict.
• **Financial risks—**Our business and financial statements can be adversely affected by foreign currency exchange rates, changes in our tax rates (including as a result of changes in tax laws) or income tax liabilities/assessments, changes in interest rates, recognition of impairment charges for our goodwill or other intangible assets and fluctuations in the cost and availability of commodities.
• **Global risk—**Our business depends in part on operations and sales outside the United States. Risks related to those international operations and sales include new foreign investment laws, new export/import regulations, and additional trade restrictions (such as sanctions and embargoes). New laws that favor local competitors could prevent our ability to compete outside the United States. Additional potential issues are associated with the impact of these same risks on our suppliers and customers. If our customers or suppliers are impacted by these risk factors, we may see the reduction or cancellation of customer orders, or interruptions in raw materials and components.

Non-GAAP Financial Measures

We report our financial results in accordance with generally accepted accounting principles in the United States. (“GAAP”). However, management believes certain non-GAAP financial measures provide investors and other users with additional meaningful information that should be considered when assessing our ongoing performance. Management also uses these non-GAAP financial measures in making financial, operating, and planning decisions, and in evaluating our performance. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our GAAP results. The non-GAAP financial measures we present may differ from similarly captioned measures presented by other companies. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.

In particular, we use the non-GAAP financial measures “EBITA,” “EBITDA,” and “Adjusted EBITDA." "Adjusted EBITDA" is used in the calculation of the First Lien Net Leverage Ratio in the 2021 Credit Agreement described in Note 9, Borrowings. See the “Quarterly Results of Operations” section below for definitions of our non-GAAP financial measures and reconciliation to their most directly comparable GAAP measures. Tax impacts for the non-GAAP financial measures are calculated based on the appropriate tax rate for each individual item presented.

The following tables present a reconciliation of certain non-GAAP financial measures for the three and nine months ended September 30, 2023 and for the three and nine months ended September 30, 2022.

(In millions)

(1) Pre-tax non-operating expenses of $2.9 million for the three months ended September 30, 2023 include $2.2 million of mergers and acquisition expenses; $0.4 million of costs to achieve information technology system integration and efficiency; $0.3 million loss on the disposal of the Rehab business; $0.1 million of fees incurred in connection with a secondary offering made by affiliates of Charterhouse Capital Partners, our former majority stockholders; and $(0.1) million of restructuring costs.

(2) Pre-tax non-operating expenses of $6.9 million for the three months ended September 30, 2022 include a $2.5 million of impairment of equity investment; $1.7 million related to the Business Combination and incremental one-time costs associated with becoming a public company; $1.4 million of mergers and acquisition expenses; $0.6 million of restructuring costs; $0.5 million of costs to achieve information technology system integration and efficiency; and $0.2 million in costs to achieve integration and operational synergies.

(In millions)

(1) Pre-tax non-operating expenses of $13.9 million for the nine months ended September 30, 2023 include a $5.9 million loss on the disposal of the Rehab business, net of gain on termination of a related lease; $1.6 million of restructuring costs; $1.0 million of fees incurred in connection with secondary offerings made by affiliates of Charterhouse Capital Partners, our former majority stockholder; $3.0 million related to mergers and acquisition expenses; $0.8 million related to the Business Combination and incremental one-time costs associated with becoming a public company; $1.2 million of costs to achieve information technology system integration and efficiency; and $0.4 million in costs to achieve integration and operational synergies.

(2) Pre-tax non-operating expenses of $25.0 million for the nine months ended September 30, 2022 include $6.7 million in costs to achieve integration and operational synergies; $5.9 million related to the Business Combination and incremental one-time costs associated with becoming a public company; $5.5 million of restructuring costs; $2.5 million of costs to achieve information technology system integration and efficiency; a $2.5 million impairment of an equity investment; and $1.9 million of mergers and acquisition expenses.

The following tables present a reconciliation of GAAP income from operations to non-GAAP Adjusted EBITDA by segment for the three months ended September 30, 2023 and the three months ended September 30, 2022:

(In millions)

(In millions)

The following tables present a reconciliation of GAAP income from operations to non-GAAP Adjusted EBITDA by segment for the nine months ended September 30, 2023 and the nine months ended September 30, 2022:

(In millions)

(In millions)

42

Our Business Segments

We manage and report our business in two business segments: Medical and Technologies.

Medical includes products and services for radiation therapy and personal dosimetry. This segment’s principal offerings include solutions for calibrating and/or verifying imaging, treatment machine, patient treatment plan, and patient treatment accuracy; solutions for monitoring the total amount of radiation medical staff members are exposed to over time; and products for nuclear medicine in radiation measurement, shielding, product handling, medical imaging furniture and rehabilitation.

Technologies includes products and services for defense, nuclear energy, laboratories and research and other industrial markets. This segment’s principal offerings are:

• Reactor Safety and Control Systems, which includes radiation monitoring systems and reactor instrumentation and control systems that ensure the safe operation of nuclear reactors and other nuclear fuel cycle facilities; and
• Radiological Search, Measurement and Analysis Systems, which includes solutions to locate, measure and perform in-depth scientific analysis of radioactive sources for radiation safety, security, and scientific applications.

Recent Developments

Russia and Ukraine

The United States, the European Union, the United Kingdom and other governments have implemented major trade and financial sanctions against Russia and related parties in response to Russia's invasion of Ukraine. We do business with Russian customers both within and outside of Russia and with customers who have contracts with Russian counterparties. The conflict’s impact on the Company is predominantly in our Technologies segment. As of September 30, 2023, the Company has approximately $0.7 million in net contract assets and accounts receivable, net of related reserves of approximately $0.3 million for Russian customers and channel partners. The Company maintains $13.6 million in advance payment guarantees and $13.8 million in performance guarantees in support of these projects. As of September 30, 2023, we continue to experience delays in recognizing project revenue due to the trade and financial sanctions made to date. The remaining performance obligations in our backlog for Russian-related projects was approximately $135.9 million at September 30, 2023.

In April 2023, one of our Russian customers made a claim against the Company, including liquidated damages for certain delays under the terms of an active project, in the amount of $19.3 million, and sent an updated claim statement in October 2023 totaling $21 million ($18 million of which accrue daily penalties), subject to a $14 million contractual cap (all amounts converted from Euros to U.S. Dollars). In June 2023, the same customer made a demand against the Company for the return of all payments received by the Company ($10.2 million) related to a Finland nuclear power plant project cancelled in May 2022. No legal actions have been taken to date by the customer on these matters, and management disputes these claims, believes that the Company has substantial defenses and expects to vigorously defend against these claims. However, uncertainty exists as to the resolutions of these matters, including any impact from potential modifications of the underlying active contract.

The Company will continue to monitor the social, political, regulatory and economic environment in Ukraine and Russia, and will consider actions as appropriate.

T. Rowe Price Direct Investment and Debt Repayment

T. Rowe Price funds acquired 17,142,857 registered shares of our Class A common stock at $8.75 per share, the closing price of the company’s Class A common stock on the New York Stock Exchange on February 17, 2023. The Company used $127 million of the proceeds to pay down outstanding debt and interest on its 2021 Credit Agreement. The early debt repayment resulted in a $2.6 million write-off of deferred financing costs during the three months ended March 31, 2023.

Supply Chain

The global supply chain continued to be stressed by increased demand, along with pandemic-related and other global events that caused increased disruptions to the Company during the three and nine months ended September 30, 2023. The most notable impacts to the Company were delays in sourcing key devices and components needed for our products, resulting in delays in revenue recognition, and increased costs in materials and freight. The Company mitigated a portion of these cost impacts with price increases on certain products. While we experienced some improvements in shipping delivery and associated labor availability during the three and nine months ended September 30, 2023, the supply chain disruption continues to be a challenge and a risk of negatively impacting our future operating margins.

Interest Rates

In connection with the Business Combination, certain of our subsidiaries of the Company entered into the 2021 Credit Agreement to refinance and replace the credit agreement from March 2019. The 2021 Credit Agreement provides for an $830.0 million senior secured first lien term loan facility and a $90.0 million senior secured revolving facility (collectively, the “Credit Facilities”). The term loan has a seven-year term (expiring October 2028), bears interest at the greater of the Secured Overnight Financing Rate ("SOFR") or 0.50%, plus 2.75% and has quarterly principal repayments of 0.25% of the original principal balance. Interest rates have been increasing during the year ended December 31, 2022 and nine months ended September 30, 2023 as central banks, specifically the Federal Reserve, have been steadily raising their interest rates to reduce inflation. As a result, the interest rate for the term loan was 8.25% and 5.63% as of September 30, 2023 and September 30, 2022, respectively. If the Federal Reserve and other central banks continue to raise the interest rates, the interest rate for the term loan will continue to increase. We will continue to monitor the interest rate, and will consider actions as appropriate.

Biodex Rehab Sale

On April 3, 2023, the Company closed the sale of Rehab to Salona Global Medical Device Corporation ("Salona") for $1.0 million in cash at closing and an additional $7.0 million in deferred cash payments through January 1, 2024. Subsequent to the closing and during the three months ended June 30, 2023, significant events occurred that may negatively impact the Company's ability to collect the remaining $7.0 million of cash payments, including disclosure by Salona that substantial doubt existed as to its ability to continue as a going concern. The Company applied ASC 450 Contingencies to determine the loss on the business disposal since remaining payments are contingent on Salona's financial situation. While management plans to continue to pursue and work with Salona on these payments, we determined it was probable that the $7.0 million of cash payments would not be received, and as a result a loss on sale of business of $6.5 million was recorded in the Condensed Consolidated Statement of Operations during the nine months ended September 30, 2023.

ec2 Software Solutions LLC and NUMA LLC Acquisition

On November 1, 2023, the Company acquired ec2 Software Solutions LLC and NUMA LLC (collectively “ec2”) for $33 million of cash consideration. Headquartered in Somerset, NJ, ec2 is a medical software company that designs, implements, and supports comprehensive software solutions servicing the nuclear medicine industry. The ec2 team and portfolio of solutions will be integrated into the Company's Medical segment, and ec2’s portfolio of solutions will play a key role in expanding the Company’s software offerings to Medical customers.

Basis of Presentation

Financial information presented was derived from our historical consolidated financial statements and accounting records, and they reflect the historical financial position, results of operations and cash flows of the business in conformity with U.S. GAAP for financial statements and pursuant to the accounting and disclosure rules and regulations of the SEC. The consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned or controlled subsidiaries. For consolidated subsidiaries where our ownership is less than 100%, the portion of the net income or loss allocable to noncontrolling interests is reported as “Income (Loss) attributable to noncontrolling interests” in the Condensed Consolidated Statements of Operations. All intercompany accounts and transactions have been eliminated in consolidation.

Results of Operations

For the Three Months Ended September 30, 2023 and the Three Months Ended September 30, 2022

The following table summarizes our results of operations for the periods presented below (in millions):

Unaudited

Overview

Revenues were $191.2 million for the three months ended September 30, 2023 and $160.9 million for the three months ended September 30, 2022. Our Medical segment contributed $68.8 million and $68.7 million of revenues for the three months ended September 30, 2023 and 2022, respectively. Our Technologies segment contributed $122.4 million and $92.2 million of revenues for the three months ended September 30, 2023 and 2022, respectively. Gross profit was $80.8 million and $69.8 million for the three months ended September 30, 2023 and 2022, respectively, resulting in a $11.0 million increase from the three months ended September 30, 2022.

Net loss was $12.9 million and $50.4 million for the three months ended September 30, 2023 and 2022, respectively. Our Medical segment contributed $4.0 million of income from operations and $3.5 million of loss from operations for the three months ended September 30, 2023 and 2022, respectively. Our Technologies segment contributed $5.4 million of income from operations and $3.3 million of loss from operations for the three months ended September 30, 2023 and 2022, respectively. The overall decrease in net loss is primarily driven by increased revenues in the Technologies segment, decreased amortization expense in the current year due to fully amortized intangibles, lower selling, general and administrative costs associated with stock-based compensation expense, a $24.8 million change in the gain from fair value of warrant liabilities, decreased public company administrative costs and and an impairment charge of equity investment in the Medical segment during the three months ended September 30, 2022. Offsetting these items were an increase in interest expense and lower benefit from income taxes in the current year.

Revenues were $191.2 million for the three months ended September 30, 2023 and $160.9 million for the three months ended September 30, 2022. Revenues increased $30.3 million from the three months ended September 30, 2022.

Medical segment revenues remained consistent for the three months ended September 30, 2023 compared with the three months ended September 30, 2022 primarily due to price increases, organic volume growth, and a favorable foreign currency impact. Offsetting the increase in Medical segment revenues period over period was a negative impact from supply chain issues and reduced revenues from disposal of Rehab (see Note 3, Disposal of a Business, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

Technologies segment revenues increased for the three months ended September 30, 2023 compared with the three months ended September 30, 2022 primarily due to price increases, organic volume growth, a favorable foreign currency impact, and the current year impact of the SIS acquisition that occurred in August 2022.

Cost of revenues

Cost of revenues was $110.4 million for the three months ended September 30, 2023 and $91.1 million for the three months ended September 30, 2022. Cost of revenues increased $19.3 million for the three months ended September 30, 2023 as compared with the three months ended September 30, 2022.

Cost of revenues related to the Medical segment decreased $2.0 million period over period due to a reduction of cost of revenues from the disposal of Rehab (see Note 3, Disposal of a Business, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q) and improved product margin mix. The decrease was partly offset by an increase in cost of revenues due to higher operations from organic growth over the same period and increased costs from inflation.

Cost of revenues related to the Technologies segment increased $21.3 million period over period. The increase was primarily driven by an increase in operations and revenues over the same period, a negative product mix from lower margin projects in the current year primarily in our France division, increased costs related to SIS business, and inflation.

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses were $83.7 million for the three months ended September 30, 2023 and $89.4 million for the three months ended September 30, 2022, resulting in a decrease of $5.7 million.

Our Medical segment incurred lower SG&A expenses of $5.2 million for the three months ended September 30, 2023 compared with the three months ended September 30, 2022. The decrease was primarily due to the disposal of Rehab (see Note 3, Disposal of a Business, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q), the impact of the decreased amortization expense resulting from customer relationships acquired in the Business Combination amortized using the double declining balance method and other intangible assets acquired in the Business Combination that were fully amortized by the fourth quarter of 2022, decreased SG&A from prior year acquisition costs, and an impairment charge of equity investment of Medical segment during the three months ended September 30, 2022. The decrease was partly offset by higher inventory reserve, bad debt expense, and inflation.

Our Technologies segment incurred higher SG&A expenses of $1.0 million for the three months ended September 30, 2023. The increase was primarily driven by inflation and higher SG&A associated with the newly acquired SIS business, offset by decreased amortization expense resulting from customer relationships acquired in the Business Combination amortized using the double declining balance method.

Corporate SG&A expenses were $18.8 million for the three months ended September 30, 2023 and $20.3 million for the three months ended September 30, 2022. The decrease in SG&A expenses of $1.5 million was driven by a decrease in stock-based compensation expense under the 2021 Omnibus Incentive Plan and Profit Interests (see Note 14, Stock-Based Compensation, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q), a decrease in professional fees supporting our public company infrastructure, and a reduction in insurance costs, partially offset by an increase in compensation costs and acquisition costs.

Research and development (“R&D”) expenses were $7.9 million for the three months ended September 30, 2023 and $8.0 million for the three months ended September 30, 2022, resulting in a decrease of $0.1 million period over period. The decrease in R&D expense was primarily due to a $1.2 million and $0.2 million decrease in R&D spend in the Technologies and Medical segments, respectively, for the three months ended September 30, 2023, partially offset by the impact of the SIS acquisition in the amount of $0.3 million and increased Corporate compensation costs of $0.8 million.

(Loss) income from operations

Loss from operations was $11.1 million for the three months ended September 30, 2023 compared with $27.6 million for the three months ended September 30, 2022. On a segment basis, income (loss) from operations in the Medical segment for the three months ended September 30, 2023 and 2022 was $4.0 million and $(3.5) million, respectively, representing an increase of $7.5 million period over period. Income (loss) from operations in the Technologies segment for the three months ended September 30, 2023 and three months ended September 30, 2022 was $5.4 million and $(3.3) million, respectively, representing an increase of $8.7 million period over period. Corporate expenses were $20.5 million and $20.8 million for the three months ended September 30, 2023 and 2022, respectively, representing an increase in income from operations of $0.3 million as discussed in "Selling, general and administrative expenses" above. See “Business segments” and “Corporate and other” below for further details.

Interest expense, net

Interest expense, net, was $14.2 million for the three months ended September 30, 2023 and $13.1 million for the three months ended September 30, 2022. The $1.1 million increase in interest expense was due to higher interest rates associated with the 2021 Credit Agreement during the three months ended September 30, 2023 compared to the interest rates during the three months ended September 30, 2022, partially offset by the early debt repayment from the T. Rowe Price direct investment and the settlement of derivatives in the current year. For more information, see Note 9, Borrowings, and Note 18, Derivatives and Hedging, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Foreign currency loss, net

We recorded a $1.5 million loss for the three months ended September 30, 2023 and a $3.1 million loss for the three months ended September 30, 2022 from foreign currency exchange. The change in net foreign currency losses is due to appreciation in European local currencies in relation to the U.S. dollar.

Change in fair value of warrant liabilities

We recognized an unrealized gain of $12.8 million for the three months ended September 30, 2023 and an unrealized loss of $12.0 million for the three months ended September 30, 2022, which resulted in a gain of $24.8 million during the period. This gain is due to a decrease in the fair value of the Public Warrant and Private Placement Warrant liabilities during the three months ended September 30, 2023 and an increase in the fair value during the three months ended September 30, 2022. See Note 17, Fair Value Measurements, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Income taxes

Our effective income tax rate was 5.8% and 9.0% for the three months ended September 30, 2023 and the three months ended September 30, 2022, respectively. The difference in effective tax rate between the periods was primarily attributable to mix of earnings and valuation allowances recorded during 2023.

The effective income tax rate differs from the U.S. statutory rate of 21% due primarily to U.S. federal permanent differences and the impact of valuation allowances.

Business segments

The following provides detail for business segment results for the three months ended September 30, 2023 and 2022. Segment (loss) income from operations includes revenues of the segment less expenses that are directly related to those revenues but excludes certain charges to cost of revenues and SG&A expenses predominantly related to corporate costs, which are included in Corporate and Other in the table below. Interest expense, loss on debt extinguishment, foreign currency loss (gain), net, and other expense (income), net, are not allocated to segments.

For reconciliations of segment revenues and operating (loss) income to our consolidated results, see Note 16, Segment Information, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Medical

Unaudited

(In millions)

Medical segment revenues were $68.8 million for the three months ended September 30, 2023 and $68.7 million for the three months ended September 30, 2022, representing a $0.1 million increase. Revenues increased $6.2 million due to price increases and organic growth and $0.5 million due to a favorable foreign currency impact. Offsetting the increase in the Medical segment revenues period over period were reduced revenues from the disposal of Rehab by $4.7 million and a negative supply chain issues impact of approximately $1.8 million.

Income (loss) from operations was $4.0 million and $(3.5) million for the three months ended September 30, 2023 and 2022, respectively, representing an increase in income from operations of $7.5 million. The increase in income from operations period over period was largely due to price increases and organic growth discussed above, $1.3 million from favorable product / service mix, a decrease in amortization expenses of $1.8 million resulting from fully amortized intangible assets from the Business Combination and other intangibles from the Business Combination using the double declining balance method, and costs that were not applicable in the three months ended September 30, 2023 including $1.2 million in acquisition costs and a $2.5 million impairment charge of equity investment in the Medical segment during the three months ended September 30, 2022. Offsetting the increase in income were the negative supply chain issues discussed above, inventory and bad debt reserve increase of $2.7 million, and remainder primarily due to inflation.

Technologies

Unaudited

(In millions)

Technologies segment revenues were $122.4 million for three months ended September 30, 2023 and $92.2 million for the three months ended September 30, 2022, representing an increase of $30.2 million. The increase is primarily driven by increased revenue of $26.5 million due to price increases and organic growth, $3.6 million favorable foreign currency impact, and the impact of the SIS acquisition by $2.4 million.

Income from operations was $5.4 million for the three months ended September 30, 2023 and loss from operations was $3.3 million for the three months ended September 30, 2022. Income from operations increased $8.7 million period over period driven primarily by the increase in revenues described above and $1.1 million in lower amortization expenses due to intangibles amortized using the double declining balance method. Partially offsetting the increases in income from operations were increased cost of revenues and operating expenses of $2.5 million driven by the SIS acquisition, increased cost of revenues of $11.5 million due to higher volume, a $2.9 million increase in cost of revenues due to product mix, and remainder primarily due to a negative inflation impact.

Corporate and other

Corporate and other costs include costs associated with our corporate headquarters located in Georgia, as well as centralized global functions including Executive, Finance, Legal and Compliance, Human Resources, Technology, Strategy, and Marketing and other costs related to company-wide initiatives (e.g., Business Combination transaction expenses, merger and acquisition activities, restructuring and other initiatives).

Corporate and other costs were $20.5 million for the three months ended September 30, 2023 and $20.8 million for the three months ended September 30, 2022, which represents a decrease of $0.3 million. The decrease versus the comparable period was predominantly driven by a decrease in stock-based compensation expense of $2.4 million (see Note 14, Stock-Based Compensation, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q), a $1.7 million decrease in professional fees supporting our public company infrastructure, and a $0.4 million reduction in insurance costs, partially offset by a $2.3 million increase in compensation costs and $2.2 million increase in acquisition costs. For reconciliations of segment operating income and corporate and other costs to our consolidated results, see Note 16, Segment Information, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

For the Nine Months Ended September 30, 2023 and the Nine Months Ended September 30, 2022

The following tables summarizes our results of operations for the periods presented below (in millions):

Unaudited

Overview

Revenues were $570.5 million for the nine months ended September 30, 2023 and $499.9 million for the nine months ended September 30, 2022. Our Medical segment contributed $203.2 million and $195.6 million of revenues for the nine months ended September 30, 2023 and 2022, respectively. Our Technologies segment contributed $367.3 million and $304.3 million of revenues for the nine months ended September 30, 2023 and 2022, respectively. Gross profit was $247.9 million and $213.1 million for the nine months ended September 30, 2023 and 2022, respectively, resulting in a $34.8 million increase from the nine months ended September 30, 2022.

Net loss was $84.2 million and $128.7 million for the nine months ended September 30, 2023 and 2022, respectively. Our Medical segment contributed $1.6 million income from operations and $12.4 million loss from operations for the nine months ended September 30, 2023 and 2022, respectively. Our Technologies segment was responsible for a $23.7 million income from operations and $52.3 million loss from operations for the nine months ended September 30, 2023 and 2022, respectively. The overall decrease in net loss is primarily driven by increased revenues in both Medical and Technologies segments, decreased amortization expense in the current year due to fully amortized intangibles and the intangibles amortizing using the double declining balance method, lower selling, general and administrative costs associated with reduced stock-based compensation expense, lower professional services fees associated with becoming a public company in the prior year and lower costs to achieve operational efficiencies, and a $55.2 million goodwill impairment charge in the

Technologies segment during the nine months ended September 30, 2022 that were not applicable during the nine months ended September 30, 2023. Partially offsetting these items were an increase in interest expense in the current year, a $33.8 million change in the loss from fair value of warrant liabilities, and a $2.6 million loss on debt extinguishment in the first quarter of 2023.

Revenues

Revenues were $570.5 million for the nine months ended September 30, 2023 and $499.9 million for the nine months ended September 30, 2022. Revenues increased $70.6 million from the nine months ended September 30, 2022.

Medical segment revenues increased for the nine months ended September 30, 2023 compared with the nine months ended September 30, 2022 primarily due to price increases and organic volume growth. Partially offsetting the increase in Medical segment revenues period over period was a negative impact from supply chain issues and reduced revenues from the disposal of Rehab (see Note 3, Disposal of a Business, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

Technologies segment revenues increased period over period primarily due to price increases, organic volume growth, and the impact of the SIS acquisition in 2022. Partially offsetting the increase in Technologies segment revenues period over period were delays caused by supply chain issues and impacts from the Russia-Ukraine conflict.

Cost of revenues

Cost of revenues was $322.6 million for the nine months ended September 30, 2023 and $286.8 million for the nine months ended September 30, 2022. which represents $35.8 million increase period over period.

Cost of revenues related to the Medical segment decreased $1.9 million period over period due to a reduction of cost of revenues from the disposal of Rehab (see Note 3, Disposal of a Business, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q). Additionally, cost of revenues for the nine months ended September 30, 2022 includes costs from purchase accounting related to the fair value of inventory from the Business Combination that were not applicable during the nine months ended September 30, 2023. The decreases were offset by increased cost of revenues due to an increase in operations and revenues over the same period.

Cost of revenues related to the Technologies segment increased $37.7 million period over period. The increase was primarily driven by an increase in operations and revenues over the same period, increased costs related to the SIS business acquired in August 2022, and inflation. Partially offsetting the increase in cost of revenues was a favorable foreign currency impact. In addition, cost of revenues for the nine months ended September 30, 2022 includes costs from purchase accounting related to the fair value of inventory from the Business Combination that were not applicable during the nine months ended September 30, 2023.

Selling, general and administrative expenses

Selling, general and administrative (“SG&A”) expenses were $252.8 million for the nine months ended September 30, 2023 and $271.3 million for the nine months ended September 30, 2022, resulting in a decrease of $18.5 million.

Our Medical segment incurred lower SG&A expenses of $10.1 million for the nine months ended September 30, 2023 compared to the previous period. The decreases were primarily due to the impact of the decreased amortization expense resulting from intangible assets acquired in the Business Combination that were fully amortized by the fourth quarter of 2022 and other intangibles from the Business Combination that were amortized using the double declining balance method and lower SG&A expenses related to the Rehab business that was disposed in the nine months ended September 30, 2023. Additionally, SG&A for the nine months ended September 30, 2022 includes impairment of an equity investment that were not applicable during the nine months ended September 30, 2023. Partially offsetting the decreases were increased depreciation expense of $1.0 million and the impact of inflation. Our Technologies segment incurred higher SG&A expenses of $3.9 million for the nine months ended September 30, 2023 compared to the previous period. The increase was primarily driven by inflation and higher SG&A associated with the acquired SIS business, offset by decreased amortization expense resulting from certain intangible assets acquired in the Business Combination that were amortized using the double declining balance method.

Corporate SG&A expenses were $57.0 million for the nine months ended September 30, 2023 and $69.3 million for the nine months ended September 30, 2022. The lower SG&A expenses of $12.3 million were driven by a decrease in stock-based compensation expense under the 2021 Omnibus Incentive Plan and Profit Interests (see Note 14, Stock-Based

Compensation, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q), a reduction in insurance costs, a decrease in public company expenses, and reduced costs to achieve information technology system integration and efficiency in the current year, partially offset by increased compensation costs.

Research and development

Research and development (“R&D”) expenses were $23.9 million for the nine months ended September 30, 2023 and $22.5 million for the nine months ended September 30, 2022, resulting in a increase of $1.4 million. The increase in R&D expense was primarily due to the impact of the SIS acquisition in the amount of $1.7 million in the Technologies segment for the nine months ended September 30, 2023, partly offset by R&D spend decreases in both the Medical and Technologies segments.

Goodwill impairment

Goodwill impairment charges were $55.2 million for the nine months ended September 30, 2022. The Company concluded that a triggering event had occurred in the RMS reporting unit of the Technologies segment as a result of the Russia-Ukraine conflict. Based on the quantitative test for the RMS reporting unit, the Company determined that the carrying value exceeded the fair value. As such, the Technologies segment recognized its best estimate of a non-cash impairment loss (see Note 8, Goodwill and intangible assets, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

Loss on disposal of business

Loss on disposal of business was $6.5 million for the nine months ended September 30, 2023. Subsequent to the closing of the sale of Rehab to Salona on April 3, 2023 and during the nine months ended September 30, 2023, significant negative events occurred which impacted the Company's ability to collect the remaining $7.0 million of cash payments from the sale to Salona. Management determined it was not probable that the $7.0 million of cash payments would be collected and recorded a loss on sale of business of $6.5 million in selling, general and administrative expenses in the Condensed Consolidated Statement of Operations during the nine months ended September 30, 2023 (see Note 3, Disposal of a Business, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q).

(Loss) income from operations

Loss from operations were $35.3 million and $135.9 million for the nine months ended September 30, 2023 and 2022, respectively, representing a decrease of $100.6 million. On a segment basis, income from operations in the Medical segment for the nine months ended September 30, 2023 was $1.6 million and loss from operations for the nine months ended September 30, 2022 was $12.4 million, representing an increase of $14.0 million. Income from operations in the Technologies segment for the nine months ended September 30, 2023 was $23.7 million and loss from operations for the nine months ended September 30, 2022 was $52.3 million, representing an increase of $76.0 million. Corporate expenses were $60.6 million and $71.2 million for the nine months ended September 30, 2023 and 2022, respectively, representing a decrease in loss from operations of $10.6 million. See “Business segments” and “Corporate and other” below for further details.

Interest expense, net

Interest expense, net, was $42.7 million for the nine months ended September 30, 2023 and $29.4 million for the nine months ended September 30, 2022. The $13.3 million increase in interest was due to higher interest rates associated with the 2021 Credit Agreement during the nine months ended September 30, 2023 compared to the interest rates during the nine months ended September 30, 2022, partially offset by the impact from early debt repayment achieved with the proceeds from the T. Rowe Price direct investment and the settlement of derivatives in the current year. For more information, see Note 9, Borrowings, and Note 18, Derivatives and Hedging, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Foreign currency loss, net

We recorded a loss of $1.0 million for the nine months ended September 30, 2023 and a loss of $7.9 million for the nine months ended September 30, 2022 from foreign currency exchange. The $6.9 million change in net foreign currency losses was due to appreciation in European local currencies in relation to the U.S. dollar.

Change in fair value of warrant liabilities

We recognized an unrealized loss of $6.3 million for the nine months ended September 30, 2023 and an unrealized gain of $27.5 million for the nine months ended September 30, 2022, which resulted in an increased loss of $33.8 million. The increased loss was due to an increase in the fair value of the Public Warrant and Private Placement Warrant liabilities during the nine months ended September 30, 2023. See Note 17, Fair Value Measurements, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Income taxes

The effective income tax rate was 3.6% and 11.4% for the nine months ended September 30, 2023 and 2022, respectively. The difference in effective tax rate between the periods was primarily attributable to mix of earnings and valuation allowances recorded during 2023.

The effective income tax rate differs from the U.S. statutory rate of 21% due primarily to U.S. federal permanent differences and the impact of valuation allowances.

Business segments

The following provides detail for business segment results for the nine months ended September 30, 2023 and 2022. Segment (loss) income from operations includes revenues of the segment less expenses that are directly related to those revenues but excludes certain charges to cost of revenues and SG&A expenses predominantly related to corporate costs, which are included in Corporate and Other in the table below. Interest expense, loss on debt extinguishment, foreign currency loss (gain), net, and other expense (income), net, are not allocated to segments.

For reconciliations of segment revenues and operating (loss) income to our consolidated results, see Note 16, Segment Information, to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Medical

Unaudited

(In millions)

Medical segment revenues were $203.2 million for the nine months ended September 30, 2023 and $195.6 million for the nine months ended September 30, 2022, which is an increase of $7.6 million. Revenues increased $18.6 million primarily due to price increases and organic growth. Offsetting the increase in the Medical segment revenues period over period were reduced revenues from the disposal of Rehab by $8.4 million and negative supply chain issues impact of approximately $2.5 million.

Income from operations was $1.6 million for the nine months ended September 30, 2023 and loss from operations was $12.4 million for the nine months ended September 30, 2022, respectively, representing an increase in income from operations of $14.0 million. The increase in income from operations period over period was largely due to the increase in revenues described above, a $8.6 million decrease in amortization expenses due to fully amortized intangibles and certain intangibles amortized using the double declining balance method, $2.2 million lower SG&A expenses related to Rehab that was disposed in the nine months ended September 30, 2023, and the prior period inventory step-up of $0.9 million and impairment charge of $2.5 million that were not applicable during the nine months ended September 30, 2023. Offsetting the increase in income from operations was a loss on disposal of Rehab business in the amount of $6.5 million (see Note 3, Disposal of a Business, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q), increased depreciation expense of $1.0 million, increased bad debt expense of $1.4 million, and negative impact from inflation.

Technologies

Unaudited

(In millions)

Technologies segment revenues were $367.3 million for nine months ended September 30, 2023 and $304.3 million for the nine months ended September 30, 2022, representing an increase of $63.0 million. The increase is primarily driven by $46.6 million from price increases and organic growth and the impact of the SIS acquisition by $20.7 million. Offsetting the increased revenues were delays caused by supply chain issues and the impact from the Russia-Ukraine conflict of $5.0 million.

Income from operations was $23.7 million for the nine months ended September 30, 2023 and loss from operations was $52.3 million for the nine months ended September 30, 2022. Income from operations increased $76.0 million period over period driven primarily by the increase in revenues described above, a $3.8 million decrease in amortization expenses due to certain intangibles being amortized using the double declining balance method, and the goodwill impairment charge and inventory step-up of $55.2 million and $5.4 million, respectively, recognized during nine months ended September 30, 2022 that no longer impacts the nine months ended September 30, 2023. Offsetting the increases in income from operations were increased cost of revenues and operating expenses of $21.1 million driven by the SIS acquisition and increased cost of revenues of $1.1 million due to supply chain issues, and a negative inflation impact.

Corporate and other

Corporate and other costs include costs associated with our corporate headquarters located in Georgia, as well as centralized global functions including Executive, Finance, Legal and Compliance, Human Resources, Technology, Strategy, and Marketing and other costs related to company-wide initiatives (e.g., Business Combination transaction expenses, merger and acquisition activities, restructuring and other initiatives).

Corporate and other costs were $60.6 million for the nine months ended September 30, 2023 and $71.2 million for the nine months ended September 30, 2022, which represents a decrease of $10.6 million. The decrease versus the comparable period was predominantly driven by a decrease in stock-based compensation expense of $7.3 million (see Note 14, Stock-Based Compensation, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q), a $1.2 million reduction in insurance costs, a decrease of $5.1 million in professional services mostly due to costs in the prior year related to becoming a public company, and a $1.3 million reduction in costs to achieve information technology system integration and efficiency, offset by an increase of $2.7 million in compensation expense, $1.1 million secondary offering fees incurred on behalf of primary pre-Business Combination investor, Charterhouse Capital Partners LLP ("CCP"), and a $2.6 million loss on debt extinguishment incurred during the current year. For reconciliations of segment operating income and corporate and other costs to our consolidated results, see Note 16, Segment Information, to the condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Quarterly Results of Operations

The following table sets forth selected unaudited quarterly financial data for the current Successor quarter, our last six completed fiscal quarters (Successor), the Successor period from October 20, 2021 through December 31, 2021, the period from July 1, 2021 through October 19, 2021 (Predecessor Stub Period), and the Predecessor quarter ended September 30, 2021. The information for each of these periods reflects all adjustments that are of a normal, recurring nature and that we consider necessary for a fair presentation of our operating results for such periods. The results of operations presented should be read in conjunction with our unaudited consolidated financial statements and notes thereto appearing elsewhere in this document and are not necessarily indicative of our operating results for any future period. Revenues for certain quarters/periods are impacted by the capital spending patterns of government customers, which are influenced by budgetary considerations and driven by timing of fiscal year-ends. Further, as a result of the Business Combination on October 20, 2021, Mirion’s financial statement presentation distinguishes Mirion TopCo as the “Predecessor” for periods prior to the closing of the Business Combination and Mirion Technologies, Inc. as the “Successor” for periods after the closing of the Business Combination. As a result of the application of the acquisition method of accounting in the Successor Period, the financial statements for the Successor Periods are presented on a full step-up basis as a result of the Business Combination, and are therefore not comparable to the financial statements of the Predecessor Periods that are not presented on the same full step-up basis due to the Business Combination.

(In millions)

(1) EBITA, EBITDA and Adjusted EBITDA are supplemental measures of our performance that are not required by, or presented in accordance with, U.S. GAAP. EBITA, EBITDA, and Adjusted EBITDA are included in this document because they are key metrics used by management to assess our financial performance. We believe that these measures are useful because they provide investors with information regarding our operating performance that is used by our management in its reporting and planning processes. These measures may not be comparable to similarly titled measures and disclosures reported by other companies.

EBITA is defined as income before net interest expenses (including loss on debt extinguishment), income tax (benefit) provision, and amortization. EBITDA is defined as income before net interest expense (including loss on debt extinguishment), income tax (benefit) provision, and depreciation (including finance lease amortization) and amortization. EBITA and EBITDA are not terms defined under U.S. GAAP and do not purport to be alternatives to net income as measures of operating performance or to cash flows from operating activities as measures of liquidity. Additionally, EBITA and EBITDA are not intended to be measures of free cash flow available for management’s discretionary use as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements.

Adjusted EBITDA is defined as EBITDA excluding the items described in the table below. Adjusted EBITDA is used by management as a measure of operating performance. We believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors about our results of operations that management utilizes on an ongoing basis to assess our core operating performance.

EBITA, EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. You should not consider our EBITA, EBITDA and Adjusted EBITDA as alternatives to operating income or net income, determined in accordance with U.S. GAAP.

(2) The following table reconciles EBITA, EBITDA and Adjusted EBITDA to the most directly comparable U.S. GAAP financial performance measure, which is net loss:

(In millions)

Liquidity and Capital Resources

Overview of Liquidity

Our primary future cash needs relate to working capital, operating activities, capital spending, strategic investments, and debt service.

Mirion management believes that net cash provided by operating activities, augmented by long-term debt arrangements, will provide adequate liquidity for the next 12 months of independent operations, as well as the resources necessary to invest for growth in existing businesses and manage its capital structure on a short- and long-term basis. Access to capital and availability of financing on acceptable terms in the future will be affected by many factors, including our credit rating, economic conditions, and the overall liquidity of capital markets. There can be no assurance of continued access to financing from the capital markets on acceptable terms or at all.

At September 30, 2023 and December 31, 2022 we had $100.5 million and $73.5 million, respectively, in cash and cash equivalents, which include amounts held by entities outside of the United States of approximately $62 million and $66.4 million, respectively, primarily in Europe and Canada. Non-U.S. cash is generally available for repatriation without legal restrictions, subject to certain taxes, mainly withholding taxes. We are asserting indefinite reinvestment of cash for certain non-U.S. subsidiaries. The Company has alternative repatriation options other than dividends should the need arise. The 2021 Credit Agreement provides for up to $90.0 million of revolving borrowings.

There is a discussion in Note 9, Borrowings, of the condensed consolidated financial statements included elsewhere in this Form 10-Q of the long-term debt arrangements issued by Mirion. For more information on our lease commitments, See Note 10, Leased Assets, of the condensed consolidated financial statements and for other commitments and contingencies, see Note 11, Commitments and Contingencies, of the condensed consolidated financial statements, included elsewhere in this Quarterly Report on Form 10-Q.

Debt Profile

2021 Credit Agreement

On the Closing Date, certain subsidiaries of the Company entered into a credit agreement (the “2021 Credit Agreement”) among Mirion Technologies (HoldingSub2), Ltd., a limited liability company incorporated in England and Wales, as Holdings, Mirion Technologies (US Holdings), Inc., as the Parent Borrower, Mirion Technologies (US), Inc., as the Subsidiary Borrower, the lending institutions party thereto, Citibank, N.A., as the Administrative Agent and Collateral Agent and Goldman Sachs Lending Partners, Citigroup Global Markets Inc., Jefferies Finance LLC and JPMorgan Chase Bank, N.A., as the Joint Lead Arrangers and Bookrunners. The 2021 Credit Agreement refinanced and replaced an earlier credit facility (the "2019 Credit Facility").

The 2021 Credit Agreement provides for an $830.0 million senior secured first lien term loan facility and a $90.0 million senior secured revolving facility (collectively, the “Credit Facilities”). Funds from the Credit Facilities are permitted to be used in connection with the Business Combination and related transactions, to refinance the 2019 Credit Facility referred to above and for general corporate purposes. The term loan facility is scheduled to mature on October 20, 2028 and the revolving facility is scheduled to expire and mature on October 20, 2026. The agreement requires the payment of a commitment fee of 0.50% per annum for unused revolving commitments, subject to stepdowns to 0.375% per annum and 0.25% per annum upon the achievement of specified leverage ratios. Any outstanding letters of credit issued under the 2021 Credit Agreement reduce the availability under the revolving line of credit.

The 2021 Credit Agreement is secured by a first priority lien on the equity interests of the Parent Borrower owned by Holdings and substantially all of the assets (subject to customary exceptions) of the borrowers and the other guarantors thereunder. Interest with respect to the facilities is based on, at the option of the borrowers, (i) a customary base rate formula for borrowings in U.S. dollars or (ii) a floating rate formula based on LIBOR (with customary fallback provisions described below) for borrowings in U.S. dollars, a floating rate formula based on EURIBOR for borrowings in Euro or a floating rate formula based on SONIA for borrowings in Pounds Sterling, each as described in the 2021 Credit Agreement with respect to the applicable type of borrowing. The 2021 Credit Agreement includes fallback language that seeks to either facilitate an agreement with our lenders on a replacement rate for LIBOR in the event of its discontinuance or that automatically replaces LIBOR with benchmark rates based on the Secured Overnight Financing Rate ("SOFR") or other benchmark replacement rates upon triggering events.

On June 23, 2023, the 2021 Credit Agreement was amended to replace the interest rate based on the London interbank offered rate (“LIBOR”) and related LIBOR-based mechanics applicable to U.S. Dollar borrowings under the Existing Credit Agreement with an interest rate based on SOFR and related SOFR-based mechanics. The interest rate under the 2021 Credit Agreement was 8.25% and 7.48% as of September 30, 2023 and December 31, 2022, respectively.

The 2021 Credit Agreement contains customary representations and warranties as well as customary affirmative and negative covenants and events of default. The negative covenants include, among others and in each case subject to certain thresholds and exceptions, limitations on incurrence of liens, limitations on incurrence of indebtedness, limitations on making dividends and other distributions, limitations on engaging in asset sales, limitations on making investments, and a financial covenant that the “First Lien Net Leverage Ratio” (as defined in the 2021 Credit Agreement) as of the end of any fiscal quarter is not greater than 7.00 to 1.00 if on the last day of such fiscal quarter certain borrowings outstanding under the revolving credit facility exceed 40% of the total revolving credit commitments at such time. The covenants also contain limitations on the activities of Mirion Technologies (HoldingSub2), Ltd. as the “passive” holding company. If any of the events of default occur and are not cured or waived, any unpaid amounts under the 2021 Credit Agreement may be declared immediately due and payable, the revolving credit commitments may be terminated and remedies against the collateral may be exercised.

Cash flows

For the Nine Months Ended September 30, 2023 and for the Nine Months Ended September 30, 2022

Unaudited

(In millions)

Net Cash Provided by Operating Activities

Net cash provided by operating activities was $28.2 million for the nine months ended September 30, 2023 and $14.2 million for the nine months ended September 30, 2022, representing an increase of $14.0 million. The increase is primarily due to a $6.3 million decrease in net loss and adjustments to reconcile net loss to net cash and an increase in cash of $21.1 million from inventories, partially offset by a decrease in cash of $13.4 million from accounts payable.

Net Cash Used in Investing Activities

Net cash used in investing activities was $22.3 million for the nine months ended September 30, 2023 and $28.5 million for the nine months ended September 30, 2022. The reduction in net cash used was driven primarily by the $1.0 million of proceeds from the Rehab sale, and an increase of $2.9 million in interest received on the cross currency swaps that were entered into during the fourth quarter of 2022 (see Note 18, Derivatives and Hedging).

Net Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities was $22.0 million during the nine months ended September 30, 2023 versus a cash usage of $5.0 million during the nine months ended September 30, 2022. The increase of $27.0 million primarily relates to the $150.0 million proceeds received on the T Rowe direct investment offset by debt repayments of approximately $127 million (see Recent Developments of the Management Discussion and Analysis).

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. Such estimates are based on historical experience and on various other factors that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material.

During the three months ended September 30, 2023, there were no material changes to our critical accounting policies and estimates from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K.

Recent Accounting Pronouncements

See Note 1, Nature of Business and Summary of Significant Accounting Policies, to our unaudited condensed financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information.

Quantitative and Qualitative Disclosures about Market Risk

We have no material changes to the disclosures on this matter for the three and nine months periods ended September 30, 2023 than from the disclosures made in our Annual Report on Form 10-K for the year ended December 31, 2022.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that material information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of September 30, 2023, because of a material weakness in internal control over financial reporting described below.

Notwithstanding the identified material weakness, management has concluded that the consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, the Company's financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. generally accepted accounting principles (U.S. GAAP)

Previously Reported Material Weakness in Internal Control Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022, we identified a material weakness due to the aggregation of deficiencies in certain general information technology controls (GITCs), at our division in France, related to program change-management and user access in information technology (IT) systems that support the Company’s financial reporting processes. Some of our business process controls (automated and manual) are dependent on the information and data produced by the systems affected by the deficiencies in GITCs and these business process controls were deemed ineffective because they could have been adversely impacted. We believe that these control deficiencies were the result of a lack of training for our IT personnel on the importance of GITCs, and in particular the importance of controls over program change-management and user access.

The material weakness did not result in any identified misstatements to the financial statements as of and for the quarter ended September 30, 2023. However, the material weakness created a reasonable possibility that a material misstatement to our consolidated financial statements will not be prevented or detected on a timely basis and, therefore, we

concluded that the deficiency represents a material weakness in our internal control over financial reporting.

Remediation Plan

Management is implementing a number of actions, as described below, to remediate the material weakness described in this Item 4. Company management is committed to ensuring that our internal controls over financial reporting are designed and operating effectively. We are making progress on remediation actions, focused on our division in France, including:

• Educating IT control owners concerning the importance of GITCs, with a focus on those related to program change management and user access,
• Developing enhanced controls and reviews related to program changes in IT systems and access to IT systems, and
• Adding additional manual business process controls to monitor information and data produced by the system to help mitigate the risks associated with ineffective GITCs.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgement in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Control Over Financial Reporting

We have undertaken strategic remediation actions, as discussed above, to address the material weaknesses in our internal controls over financial reporting. These remediation actions continued throughout the quarter ended September 30, 2023 but have not materially affected our internal control over financial reporting

There were no other changes to our internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2022, as further updated and supplemented below, which could materially affect our business, results of operations, and financial condition. These risks are not the only risks facing our Company. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, could also materially adversely affect our business, financial condition or future results.

The military conflict between Russia and Ukraine and the sanctions imposed as a result have adversely affected and may further adversely affect our business, results of operations, and financial condition

We do business with Russian customers both within and outside of Russia and with customers who have contracts with Russian counterparties. Russia’s invasion of Ukraine, the ensuing build-up of Russian sanctions and other impacts on this region have impacted the global economic environment and currencies resulting in fluctuating demand for our products and services, delays or cancellations of customer projects and difficulties in supplying and sourcing products from this and other geographic regions. In addition, it has become more difficult for certain of our customers and business partners to satisfy their obligations to us as a result of the conflict and we may experience further impacts as the conflict continues. In May 2022, Finland terminated a contract with a Russian state-owned entity to build a nuclear power plant in Finland, and as we were a subcontractor for this contract the termination had an impact on our goodwill and our backlog. To date, we have not reached final agreement on our compensation for the work that was performed on this Finnish contract and in June 2023, the Russian state-owned entity demanded the return of approximately $10.2 million of payments it had made to Company while the Finland project was active. In relation to a separate active contract for a project in Hungary, the same Russian state-owned entity attempted unsuccessfully to call on a demand guarantee securing an advance payment in March 2023, subsequently demanded the return of advance payments and claimed approximately $19.3 million including penalties for project delays in April 2023, and sent an updated claim statement in October 2023 totaling $21 million ($18 million of which accrue daily penalties) subject to a $14 million contractual cap (all amounts converted from Euros to U.S. Dollars) (see Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments—Russia and Ukraine ). While our management disputes these claims and believes that the Company has substantial defenses, negotiations are taking longer than anticipated, the contract is governed by Russian law, and there is uncertainty as to how its resolution, including any impact from potential modifications or termination of the underlying active contract, and the resolution of the Finnish contract, will impact our business, results of operations and financial condition. In addition, we have experienced and may continue to experience delays in revenue recognition, order booking and contract payments due to export controls and other sanctions instituted to date. The Russian-Ukraine conflict may also escalate or expand in scope, thereby exacerbating its impact. A number of nuclear power plants are being constructed, and/or are being operated, by or with the participation of Russian state-owned enterprises. As the situation evolves, there is a risk that those Russian state-owned enterprises could be sanctioned by the United States Government and/or the European

Union. The broader consequences of this conflict cannot be predicted, nor can we predict the conflict's ultimate impact on the global economy or our business, results of operations, and financial condition. We also are continuing to sell medical equipment and related products into Russia in compliance with applicable export control regulations, for medical/humanitarian applications, however this process has become more complicated, time-consuming and uncertain as most medical equipment exports now require export licenses and we may be subject to criticism for continuing to sell products to Russia which may damage our reputation, the consequences of which are difficult to predict. In addition, we could be prevented from selling our products or required to cease work on certain customer projects if additional sanctions related to the Russia-Ukraine conflict are imposed or due to changes in applicable export control regulations. The Russia-Ukraine conflict has heightened other risks disclosed herein, including through increased inflation, limited availability of certain commodities, supply chain disruption, disruptions to our global technology infrastructure, including cyber-attacks, increased terrorist activities, volatility or disruption in the capital markets, and delays or cancellations of customer projects, each of which could materially adversely affect our business, results of operations, and financial condition.