Greetings. Welcome to Mirion Technologies Incorporated Fiscal Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I would now like to turn the conference over to Alex Gaddy, Vice President of Finance and Investor Relations. Thank you. You may begin.

Good morning everyone, and thank you for joining Mirion's second quarter 2022 earnings call. A reminder that comments made during this presentation 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 report on Form 10-K and quarterly reports on Form 10-Q that we file from time to time with the SEC under the caption Risk Factors and in Mirion's other filings with the SEC. Quarterly references within today's discussion are related to the second quarter ended June 30, 2022. 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 non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the appendix of this presentation accompanying the call today. All earnings materials can be found on Mirion's IR website at ir.mirion.com. Joining me on the call today are Larry Kingsley, Chairman of the Board; Tom Logan, Chief Executive Officer; and Brian Schopfer, Chief Financial Officer. Now I will turn it over to our Chairman of the Board, Larry Kingsley. Larry?

Thank you, Alex. Good morning everyone. We're grateful for your continued support of Mirion and look forward to discussing our results and outlook with you this morning. Earlier today we published our earnings results for the second quarter of 2022 and reaffirmed our guidance for the full year. To get started, I'd like to commend the Mirion team on delivering another quarter of solid results in what continues to be a dynamic operating environment. As we previewed a few months ago, the supply chain remained a focal point in the second quarter. Overall, the condition of our supply chain has shown signs of improvement but continues to be a very dynamic situation. That situation has been further aggravated by a short-term revenue mix shift, as a result of canceled Russian and Eastern European content. Tom and Brian will update you on the specifics, but again, the team is managing well given the situation. The order inflow during the quarter was very robust across most of the business and indicative of strong market positions in both of our operating segments. That strong order performance paired with the overall supportive macro trends across our end markets, bolsters both our near and medium-term revenue projections. We remain confident that we will deliver on our second half expectations. While the macroeconomic environment may provide many with significant headwinds for the back half of this year and for fiscal 2023, Tom and I remain resolute in our belief that looking forward we have the best market environment for our combination of products of any recent period. And that, coupled with the team's ability to deliver the results, ensures our confidence in a very healthy growth outlook. I'll now turn the call over to Mirion's CEO, Tom Logan. Tom?

Larry, thank you and good morning to everyone. To get things started, I want to say thank you to all of my Mirion colleagues for your continued hard work and determination during the quarter. Your dedication and tenacity in overcoming the challenges our business has faced over the last few quarters is commendable. And you should all be proud of the role you've played in delivering the results we reported this morning. There are a few key areas of focus that I'd like to highlight coming out of the second quarter. First, we delivered outstanding order growth in the first half, notching a 25% increase from the same period last year with both Medical and Industrial contributing strong increases. Second, supply chain and unfavorable order timing dynamics concentrated in the Industrial segment had a meaningful impact on the quarter overall. We were encouraged by Medical's performance in the quarter, noting that this segment was not immune to those noted supply chain challenges. Third, we are confident in our ability to achieve our reaffirmed 2022 guidance. Even with headwinds in inflation, supply chain, and foreign exchange, our strong order momentum gives us a high degree of support for our second half expectations. Before we get into financial performance, I want to spend some time on what we are seeing in our end markets and why we are encouraged heading into the second half. Turning to slide four, you'll see year-to-date order performance across our end markets. It is clear the trends we've consistently discussed are manifesting in stronger order intake. Beginning with Medical, we've seen positive momentum as COVID-related healthcare system impacts have moderated, especially in the US. Clinic growth and robust capital budgets have supported the growth in our radiation therapy and nuclear medicine businesses, while our strong technology advantage has bolstered organic performance in occupational dosimetry. Regarding industrial and nuclear power, our sentiment remains optimistic. We have seen strong government and popular support in tandem with elevated natural gas prices, all of which have improved the economics of the global nuclear power fleet. This has fundamentally changed the focus of our operators from managing deteriorating marginal economics to one of life extensions and capacity upgrades. Moreover, in countries that have been on the fence regarding the future of nuclear power, we have seen pro-nuclear shifts in places like South Korea, Japan, Belgium, Switzerland, Sweden, and potentially even Germany. New build planning has become far more active, given instability within the global energy supply and acute price increases faced in all major markets. Moreover, the EU recently classified nuclear power as a green energy source in their new environmental taxonomy, paving the way for additional economic incentives for nuclear as a green energy alternative within the European Union. Our defense and diversified industrial end markets have experienced great progress, with key wins in the quarter. European militaries are ramping up commitments and funding to programs, reflecting the dynamic shift in the threat matrix. Mirion's defensible incumbent position, long-standing relationships, and differentiated product portfolio are supporting continued market leadership in these categories. Order growth has also been supported by new product launches and continued demand for our digital offerings. As a company, we are focused on digitizing our portfolio and offering smarter and more connected products. We continue to see elevated engagement with our Instadose technology within occupational dosimetry and are encouraged by recent engagement around the platform. Additionally, the launch of the Lynx II during the quarter is yet another prime example of our team's innovative capabilities. Lynx II is a digital signal analyzer, which is the world's most advanced full-featured multichannel analyzer ever offered. I want to congratulate our teams on bringing this innovative product to market. Our new product pipeline and development remains robust, and I look forward to sharing more on our innovations in the future. I'm also excited to announce that Mirion is providing CIRS Phantom technology for the upcoming Orion spacecraft test flight to the moon. This unmanned mission is set for late August or early September, with the purpose of ensuring that the spacecraft can safely carry Artemis mission astronauts to the moon, and we're thrilled to be involved. Lastly, before I turn to results for the quarter, I want to keep you updated on the impact of the Russia-Ukraine conflict on our business. We've not seen any additional project cancellations or sanctions placed on committed commercial agreements other than the Hanhikivi cancellation in Finland previously reported. Our relationships with customers remain strong, and we stand ready to satisfy outstanding commitments. Turning now to slide five to discuss our company-wide second quarter results. While we saw positive momentum on the Medical side, we experienced order timing and continued supply chain challenges in Industrial during the quarter. We've responded by tightening communication with key supply chain partners and are continuing to build a defensive inventory buffer with key book and ship product categories. In addition, we have worked hard to compensate for lost Russian-related revenue, not only within the quarter but for the balance of the year, as evidenced by the very strong order inflow and backlog we reported this morning. Getting into the details, organic revenue declined by 1.7% compared to the same period in 2021, with Medical growing by 15.1% and Industrial declining by 9%. Brian will give you more color later in the call, but our pricing initiatives provided a meaningful contribution to results in the quarter, delivering nearly 3.5% support to the top line. We expect our net price-cost relationship to be a positive contributor throughout the second half, along with incremental benefits from our strategic cost initiatives. Lastly, I want to note that we remain committed to executing on our inorganic growth target of 5 to 10 points of top line growth each year. Our demonstrated ability to source and integrate accretive acquisition opportunities is core to our DNA. To be clear, I'm confident we have a path of achieving our targets while simultaneously working towards our medium-term goal of reducing leverage to three times adjusted EBITDA. Before I hand things over to Brian, I want to thank our investors for their continued support. Our order momentum and the continuation of positive end-market trends gives me confidence in the second half of this year and in the future growth of our business. With that, I will pass the call over to our Chief Financial Officer, Brian Schopfer. Brian?

Thanks, Tom. Good morning everyone. To begin my comments today, please turn your attention to slide 6, as we dive deeper into our second quarter financial results. As Tom stated earlier, order growth in the first half has been outstanding. We are seeing the health of our end markets show up in the order book, and I am proud of our sales team for executing against our growth goals. While order momentum has been positive, we continue to experience a number of operational challenges in the quarter related to supply chain effects and order timing. Let's now get into the details. For the quarter, total company adjusted revenue was down 4.3%, and adjusted EBITDA declined 14.6% compared to the same period in 2021. On an organic basis, our revenue was down 1.7% year-over-year. Total revenue in the quarter was $175.8 million, with adjusted EBITDA totaling $42.6 million. Adjusted gross margin expanded by 30 basis points compared to the second calendar quarter of 2021, finishing at 51.6%. Overall, I am quite pleased with gross margin performance despite volume absorption challenges. We are seeing pricing initiatives, strategic cost actions, and better mix offset the noted headwinds. It is also important to note that approximately $3.3 million of public company costs are included in this quarter's adjusted EBITDA results, which accounts for 190 basis points of margin compression. Adjusted EBITDA margin contracted 300 basis points to 24.2%, and adjusted earnings per share was $0.13 for the second quarter. Turning now to slide 7 to look at the Medical segment, adjusted revenue was up 19.7% and organic revenue grew 15.1%. Organic growth was strong across all three Medical verticals. I was especially proud of our nuclear medicine team in realizing the benefits of the integration work and seeing the cost actions now paying dividends. Medical adjusted EBITDA margin in the quarter was 33.2%, a 430-basis point expansion from the same period last year. Adjusted EBITDA performance was principally driven by higher volumes, cost synergies from integration efforts, and improved pricing. Moving along to the Industrial segment on slide 8, there are two elements I would like to highlight in this quarter's performance analysis. First, we saw a greater concentration of order volume in the last month of the quarter. While this gave us visibility into the second half, it limited the team's ability to convert those opportunities in the current quarter, particularly given the challenging supply chain environment. Second, we transitioned our year-end from June to December this year and have seen some natural flattening of the quarterly earnings mix as a result. As we have previously discussed, we experienced a 14.8% decline in reported revenue year-over-year, with organic revenue declining 9%. Our Industrial team is working hard to transition to the new revenue mix dynamics in the business. Despite the year-over-year declines, we are encouraged by the progress our teams have made. Ongoing supply chain interruptions negatively impacted organic revenue performance by approximately 3% in the quarter. Adjusted EBITDA for the Industrial segment was down 22% compared to the same period last year. While the adjusted EBITDA margin dropped 280 basis points to 30.3%, primarily due to the impacts of lower volumes and related absorption challenges, as well as timing dynamics offset by better price. Turning now to Slide 9, let me take you through our cash position for the quarter. As of June 30, we had $91 million of cash on hand and $167 million of available liquidity. Additionally, we generated $13.3 million of adjusted free cash flow. This was despite investing in working capital as we ramped up our strategic inventory positions and continued to navigate the dynamic global supply chain environment. Year-to-date, we've invested approximately $18 million in inventory to promote internal supply chain stability and deliver on customer commitments. We remain committed to deleveraging the balance sheet through disciplined capital allocation. Assuming achievement of the midpoint of adjusted EBITDA guidance and meeting the bottom end of the inorganic target range for 2022, we expect leverage to finish the year at or below four times. At the end of the second quarter, leverage was 4.7 times, primarily driven by public company costs and lower second quarter industrial EBITDA impacting LTM EBITDA. Finally, we are reaffirming guidance for the full year. Most notably, our adjusted EBITDA range of $170 million to $180 million, 4% to 6% organic growth, and adjusted EPS range of $0.44 to $0.49 are unchanged. Due to the higher interest rate environment, we anticipate adjusted free cash flow to end the year at the lower end of our guidance range. We continue to explore alternatives for offsetting interest rate increases. Additionally, foreign exchange, primarily the euro, is expected to be a headwind year-over-year. That concludes my prepared remarks and we thank you for your continued support. I'll now turn things back to Tom for some closing comments.

Brian, thank you. I'd like to close with a few key takeaways before we take your questions. First, the order book performance reflects healthy vertical market development as we've discussed consistently over the last few quarters. Second, while this quarter showed challenges in a variety of categories, we have seen improvements and expect momentum to carry into the second half. And lastly, we remain committed to our full year guidance and delivering against these expectations with relentless execution. Thank you all for your time today. I'll now pass it back to Alex to lead our Q&A.

Thanks, Tom. That concludes our formal comments for today. I'll turn it over to the operator for Q&A.

Thank you. Our first question is from Andy Kaplowitz with Citigroup. Please proceed.

Tom or Brian, Medical up 15% in Q2 showed nice sequential acceleration. Are the supply chain issues now primarily behind you in that segment? And could you see a period of enhanced growth versus that sort of 5% to 7% that's your normal target? And then separately you also displayed strong incrementals in the segment over 50%. How much of those incrementals is a function of just enhanced growth versus the Mirion just can deliver on supply chain issues and that they're not impacting the business?

Yes. Andy, this is Tom. I'll take the first part. I'll let Brian address the second. But in terms of the supply chain environment for Medical, I'd say no, we're not out of the woods. This is an area where our engagement is at a very high level. I'm personally and directly and significantly involved with discussions not only internally but with our key suppliers, as is Brian and many other senior executives. Our view in general is that we are seeing a more constructive environment for certain types of commodities, particularly relatively high stakes for us, things like lead, cold-rolled steel, and the like. But we're simply not seeing any level of easing yet as it relates overall to discrete electronic components. So within the Medical business, there continue to be issues, where essentially what we've always characterized as firefighting, where we will find that there is some component that we source directly or indirectly through a contract manufacturing partner that suddenly with short notice or no notice is put on end of life or simply unavailable, and we have to scramble to find and qualify alternative componentry. That will continue. Even with the results we reported, again, as I alluded to in my comments, that was with a little bit of drag on the supply chain. Had the supply chain been operating at pre-pandemic levels, I think our performance arguably would have been higher for the quarter.

Yes, I think on the margin side, Andy, a couple of things, right? We've talked about buying Biodex and integrating with Capitec, and you're really seeing that integration come together this quarter for the first time. So I think we're super pleased with where we stand there, and we think that will definitely continue for the rest of the year. The other thing going on is we've always talked about a number of factory closures. One of them is in this side of the house, which was a move we made from Southern California to Tennessee. And again, that's coming together, it's behind us. There's still some bumps in the road, but you're seeing it in the numbers. And I think the third thing you're seeing here is price. I mean we got good price in the quarter on the Medical side. I think we're to Tom's point, there's still challenges, but this team is hitting on a lot of cylinders and a lot of things are coming together for us on the Medical side in a very robust way from a margin and top-line perspective.

That's helpful, guys. And then order strength is obviously encouraging to see in Industrial, but the organic revenue declines have accelerated a bit over the last couple of quarters even if we exclude supply chain. We know a lot of that is Russia, but maybe you could give us more color on exactly when better orders translate into better revenue for the segment and reach that mid-single-digit target you have for 2022. Because obviously you have to have a very significant swing in organic growth to make that target and is it more Q4 loaded?

Yes, it's clear that we need to see improvements in the third and fourth quarters, particularly in the latter part of the year. While we won't provide specific quarterly guidance, I believe the third quarter will reflect our previous performance. The fourth quarter will likely be busier than we typically prefer, but strong growth in the Industrial sector during both quarters is essential to meet our targets. It's primarily a numbers game, and I anticipate a heavier focus on the fourth quarter, but we need to ensure strong execution in both periods.

Let me just chime in or tag along here too, Andy. And just to remind the listeners that last quarter we took 4% of our full year revenue out of guidance because of the Russia-Ukraine situation. And the fact that we're sustaining guidance and have delivered the level of order intake that we have for the quarter reflects just how resilient our business model is and how scrappy our team is. I'm incredibly proud of what they've done. And when you look through our internals on the coverage to Brian's overarching point, yes, we've got to execute well in Q3 and Q4, but it's in our hands to do that. And we've got obviously a level of confidence that we can perform here.

One more big picture question then I'll get back in queue. Larry made the comment, but maybe Larry or Tom could address the comment about having a highly visible longer-term outlook into 2023. What's the probability that Mirion actually resumes more of the normalized growth you've targeted that mid-single-digits regardless of whether the global economy slows down? And obviously, Mirion does have a fair amount of exposure to Europe, but a lot of that exposure is nuclear. Maybe you can give us a little more color into your medium-term outlook focusing on 2023.

Yes. Honestly, Andy, I've never felt that. Please continue, Larry.

I was just going to say, Andy, just to give you a little bit more color on my comments versus things that I've seen otherwise, historically the nice thing about Mirion is it's a longer-cycle business. Generally speaking, you do have more visibility than most of what you see in industrial tech kinds of revenue profiles. And Mirion has certainly seen really strong order growth as we've now said three or four times already. The combination of the fact that we have pretty decent predictability, the macro trends for both segments look really strong and that the order book is so strong for sure lead to a really healthy outlook for 2023. But Tom can give you a lot more detail. Thanks.

Just building on what Larry said, I've been in role here for nearly 19 years. And as you and I have discussed, Andy, I literally have never seen better market conditions than what we have today. Historically the story of Mirion has been to Larry's point kind of non-cyclical long-cycle business where we've actually done very well throughout recessionary periods over the last two decades. And that is a function of those longer demand cycles. But when I look at our business overall on the Industrial side just to refresh some numbers, nuclear power is nearly 40% of our total enterprise level revenue. And within that, about three-quarters actually, a little more than three-quarters, comes from the installed base. Five years ago, the installed base was struggling. Marginal economics were poor for a whole host of reasons. And the focus was on how to manage through those. Do we need to shut down plants? Do we need to curtail operations? And the two things that have changed are number one the political support, which has been spawned by a complex combination of decarbonization desire, strategic energy supply issues, outright pure economics, again a variety of factors that vary region-by-region. But that popular support has translated into political support, which has provided a broad combination of subsidies and/or at least benign regulatory constraints for the industry overall. That's been tremendously helpful. But secondly, with the pricing of natural gas, which tends to really drive the marginal price of electricity in all major markets, we have seen a secular change. It is not going to go down anytime in the near term. And the consequences of all of these factors coupled with the obvious geopolitical issues in Europe are highly suggestive of an environment where nuclear power is going to be a very, very healthy organization or segment for an extended period of time. And that generally augurs well for capital budgets and operating budgets and efficiency operates and things that essentially correspond well with the solutions that we offer. Beyond that, obviously, on the military side maybe on a more short to intermediate term, clearly there's an elevated view of the threat matrix in Europe but not only in Europe. From a civil defense standpoint, I think the view is that risks are elevated on a more global basis. And we believe this is an area where again our solutions can be very helpful to the perceived needs responding to these threats overall. Beyond that not to filibuster here, but medical market health continues to be strong. We are performing at a higher standard. The bottom line is that when we look at the combination of vertical market conditions coupled with our evolving capability driven by the evolution of our operating model, which in turn gives us a superior ability to execute, we feel pretty good about the future.

Appreciate all the color, guys.

Our next question is from Joe Ritchie with Goldman Sachs. Please proceed.

Great. Thank you. Good morning, everyone.

Hi, Joe.

How are you?

All good. All good. It's Friday. So, my first question, maybe let's just touch on this. I know you don't want to give quarterly guidance, but you did make a comment around a lot of the orders coming through in the last month of the quarter. I just want to get a sense for like how short cycle are the orders that came through book and ship versus longer cycle, like, any color that you can give around that? Just to provide a little bit more confidence in the industrial growth ramp in the second half of the year?

Yeah. I think, I mean, in a normal operating environment, I think Tom and I would have expected to see a bit of those orders that came in June to be able to convert. That's not abnormal in certain parts of the business. It just depends on what the order and product mix look like. What I think I would say, Joe, is we have very good coverage on the next two quarters. Obviously that built in June from where we sat in say April and May. And we'll see how things look and come together here in the third quarter. But the reality is, we're holding our guidance. Our confidence is high, and we believe this is mainly about execution here in the back half of the year versus anything else.

Okay, good. That's great to hear. And I guess, you guys I remember I think the last time you reported you talked about kind of like a $10 billion or $10 million not billion sorry, EBITDA offset from defense and nuclear, on the lost Russian sales. Is that still kind of coming through as expected?

I want to direct your attention to our orders page. Our nuclear orders this quarter, or for the first half, are showing a 50% increase compared to last year. I've mentioned that I anticipated this growth would come mainly from Southeast Asia, and we are indeed seeing that reflected in our underlying installed base. On the military front, our defense orders, which include military and homeland security, have risen by over 20%. Additionally, these order growth figures are reported as is, and there is a negative impact from the euro compared to last year. From a volume perspective, we're very optimistic about our current position. I would also say that the insights shared during our first quarter are proving to be accurate, and this is clearly evident in our order rates.

The other thing, Joe, is that on the defense orders, the order cycle is longer than you might think. And just a note that there's a lot of activity in the pipeline, and we continue to be very enthusiastic about this segment.

When we receive those orders and get them right, we usually manage to process them quickly, depending on the products. They tend to convert well, but as Tom mentioned, they do take time to be officially recorded.

Got it. Okay. That's helpful. One last one. And Tom, I heard you say earlier that there were no cancellations on any of the Russian-related projects. I know that you took Russia out of the guide. I remember that if there weren't any cancellations that that could be potentially some upside in the second half of the year. I'm just curious, how is that kind of playing out relative to your expectations?

Yes, I believe there is still potential for growth. Honestly, it seems like it will be more noticeable in 2023. I do anticipate seeing some technology related to Russia, or even direct revenue from Russia, in the latter half of the year. I won’t provide a specific figure since things are still changing. Overall, I think we will see more of that reflected in 2023 rather than just in the second half of the year. Our order book looks strong, and I expect nothing but positive developments for the remainder of the year.

Okay, great. Thanks, guys.

Our next question is from Chris Moore with CJS Securities. Please proceed.

Good morning. Thanks for taking a few questions, guys. Maybe can you just provide a little more color around the types of orders you're seeing flow into backlog? Are these orders filling direct demand, or are customers placing kind of just-in-case orders?

No, I think if you look firstly on the Industrial sector, Chris, that what you would find is that the order pickup. And again, I think Brian referenced page four in the presentation just showing what our strong order growth has been sector by sector. But clearly in the nuclear sector, there's been a pickup of activity spanning both the installed fleet and more broadly new build activity. And we expect that candidly to be the new norm, again, as plants are making more money. OpEx budgets CapEx budgets increase. And again, there are certain tools, instruments, and solutions that we provide that allow plants to run more efficiently and run at greater capacity. And our expectation is that we're going to continue to see a pickup in these product categories for us as we get into the seasonal cycle this fall and then thereafter. So, what I would say on the Industrial side is that if you look at the demand, no it's not defensive in nature it is responsive to secular market changes, that's true in nuclear power. Clearly on the defense side, it is not a prospective, kind of prophylactic view. It is a direct response to immediately perceived threats. And the same could be said in general about the behavior that we're seeing in life sciences and in other elements of that business. On the Medical side, it's a combination of factors. Part of it is our improved operational execution in the nuclear medical business as we've really gotten our arms around supply chain management and been able to systematically work through a higher level of backlog than we normally would have carried. We still have further to go, but we've made great progress there. The team has performed brilliantly. And on the radiotherapy business, there we continue to see just very strong performance reflecting more macro trends, maybe a little bit of still COVID-related market recovery. But generally, the macro trends are what's supporting that business growth overall. So, I guess the summary of all that is that no, we think the demand pickup that we're seeing is organic. It is not defensive in nature, and in particular, we don't see it as being particularly sensitive to recessionary demand patterns in the broader economy.

I want to emphasize that this does not apply to the occupational dosimetry side, where we do have products that differ from this. However, much of our product portfolio ranges from $20,000 to $100,000, which is quite diverse. The key point is not the pricing range, but rather that these are items you typically keep five or ten on a shelf. When one of them breaks, there is a need for replacement, and we are addressing that need rather than simply stocking shelves.

Got it. Very helpful. And you just referenced Dosimetry. So just year-to-date order growth is down 10%. It looks like that's more of a reflection of kind of Q1. Can you just kind of talk to the trajectory there?

Yes, I think the Q2 order number is very solid, higher in the mid-single digits, which is strong compared to the growth of that end market. This ties back to the ERP conversion we did last year, well before we considered going public. In this business, we recognize orders when we bill, and we had some billings in the first quarter that we usually would have made in the fourth quarter of the previous year. So when you filter through all the noise at the halfway point, we still have mid-single-digit numbers in our order book, and we anticipate good growth in that business for the second half of the year. We are very excited about the opportunities surrounding Instadose that we are discussing with customers.

Got it. Helpful. And maybe just a little more detail on pricing initiatives, kind of how they will flow into the numbers in the second half?

Yes. I think we said, Tom said like, we saw 3.5% this quarter. Again, that's a touch higher than I think we would have anticipated. I think that's continuing to give us broad confidence in our pricing being sticky. I think that will continue to ramp in the back half of the year. And my comments that I said before hold true. I mean, we think it's 5% in the fourth quarter, or right around 5% in the fourth quarter. So, we're confident in what we're doing. We continue to be thoughtful about putting price into the market where we need to, but also doing it on a value-based standpoint. So we feel good. I mean price cost does expand in the back half of the year as we thought. Not a whole lot of changes versus what we've been expecting. I think we're executing well in this area for sure.

Got it. Thank you. And last one for me just maybe a little more detail of the goal of getting below four times leverage by the end of the year, kind of, what's embedded in there?

You are making me work hard on this call. At the midpoint of our EBITDA, an acquisition could bring us to the lower end of our range. We still anticipate being at or below four times leverage. This means our cash generation needs to accelerate in the latter half of the year, and we must meet our EBITDA targets, specifically the midpoint. With the right deal, everything should align to achieve this. If we don't proceed with a deal, that expectation will still hold for us. Overall, we feel confident about our ability to reach that target and demonstrating that we can take on deals and subsequently reduce leverage through effective operations.

Got it. I’ll leave it there. Appreciate guys.

Thanks, Chris.

We have reached the end of our question-and-answer session. So, this will conclude today's conference. You may disconnect your lines at this time, and thank you again for your participation.