Mirion Technologies, Inc. Q4 FY2022 Earnings Call

Greetings. And welcome to Mirion Technologies Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Alex Gaddy. Thank you. Mr. Gaddy, you may begin.

Good morning, everyone. And thank you for joining Mirion’s fourth quarter and full year 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 fourth quarter and full year ended December 31, 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 those 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 and good afternoon, everyone. I’d like to get today’s call started by thanking you all for your continued support of Mirion throughout our first full year as a public company. 2022 was a dynamic year for Mirion, from navigating a challenging supply chain environment, to responding to record inflation and the Russia-Ukraine conflict. There was no shortage of hurdles to overcome. I am incredibly proud though of the Mirion team’s resolve in the face of adversity; we believe the solid results we reported this morning are a direct testament. Our Medical business accelerated upon recent growth trends, while Industrial took a meaningful step forward during the quarter. Overall, the team was able to deliver on expectations laid out on our last call and has built positive momentum heading into 2023. Mirion has positioned itself well to deliver growth this year and I believe the guidance published this morning showcases the cycle-resistant nature of our strategic positioning in the market. Mirion’s diverse portfolio of products and services and experienced management team have a long track record of proven results. The team has the right roadmap in place to capitalize on what we expect will continue to be a robust demand environment. We are entering 2023 with strong momentum across our end markets and a growing backlog. I am also very encouraged by the execution-focused mentality we built through the course of 2022, and the team has a clear focus on the key strategic initiatives required for growth, profitability, and cash flow generation. The future for Mirion is bright; customer engagement and demand are strong, and our teams remain committed to executing. Now I am going to turn the call over to Tom Logan, Mirion’s CEO. Tom? Tom, I think you are muted.

Diving into our results, there are a few key areas I’d like to highlight today. First, we finished the year with 8% year-over-year order growth for the full year, which in turn resulted in backlog growth of 10%. This excludes the impact of the Honey Kevie project cancellation, as previously discussed. Second, we delivered total company organic adjusted revenue growth of over 19% for the quarter and nearly 6% for the full year. While these numbers could have been higher without the negative impacts from the Russia-Ukraine conflict and foreign exchange pressures, I am incredibly proud of the effort and commitment displayed by our team. Third, net leverage reduced to 4.4 times EBITDA as of December 31st, driven by better free cash flow performance in line with our expectations. Note that my goal is to reduce leverage below 4 times by the end of 2023. Finally, we initiated 2023 financial guidance this morning. Looking ahead to the full year, we are expecting organic growth of 4% to 7% with adjusted EBITDA of $172 million to $182 million. Now, let’s get into more detail on our order performance and market outlook for 2023. Beginning with slide four, our end market demand dynamics remain strong heading into 2023, showcased by 8% year-over-year order growth in 2022. On a constant currency basis, order growth was 13% for the full year. We continue to see broad-based demand across business segments and are encouraged by our robust backlog coverage. We expect conversion rates to increase materially in 2023, covering approximately 55% of our next 12-month revenue. On the Medical side of the business, we experienced incredible growth dynamics last year and expect to see these positive trends continue, albeit at a more moderated rate. Year-over-year medical order growth was 14% or 15% on a constant currency basis. A few things to note here: first, we launched our One Mirion Medical Strategic Initiative, which has begun delivering positive results to the business. I expect to see additional momentum take shape both internally and externally as 2023 progresses. In dosimetry, we are excited about the official launch of our next-generation of Instadose technology. As a reminder, we expect Instadose to provide growth to the business through licensing opportunities, organic share gains, and conversion of existing customers to the platform. Next, in radiation therapy quality assurance, we remain encouraged by both international and domestic demand dynamics. We are expecting high single-digit topline growth from RTQA in 2023, supported by investments in our European sales center and national account marketing strategy to drive positive growth for the business. Finally, 2022 was a great year for our nuclear medicine business, showcasing how strong the combined Biodex and Capitec assets are for Mirion. We are anticipating a more normalized growth rate in 2023, with organic revenue growth expected in the mid-single digits. Now, moving onto Industrial, this segment generated approximately 5% order growth on an as-reported basis in 2022, roughly 14% on a constant currency basis, supported by strong customer engagement across our end markets. In nuclear power, we are seeing encouraging activities in all areas of the nuclear power lifecycle, particularly from new builds and the installed base. Government sponsors across the globe continue to view nuclear power as an attractive energy source, particularly in Europe and Asia. The macro environment remains favorable, and we are encouraged by the long-term trends in the space. Relatedly, the small modular reactor movement has been building steam across the world. We are seeing SMR-related orders hit our books and are strategically engaged with prospective customers as they ramp up development work. This is a great long-term opportunity for Mirion, which could dwarf utility-scale reactors, and we look forward to playing an integral role in enabling the safe development and operation of these potentially game-changing power solutions. Moving onto our Defense and Diversified Industrial businesses, we lapped a number of large orders in Q4 2021, which made 2022 comparisons tough. We continue to see elevated engagement from our NATO customers in the Defense space and expect this trend to continue for the foreseeable future. Note, however, that order cycle times are lengthier than historical norms. Finally, in Labs and Research, we booked a large order providing germanium detectors, dosimeters, and handheld devices to a new oncology isotope production facility in Germany. This is an exciting order for us in the Industrial segment, as it was made possible by the strengthening Mirion Medical brand. As we continue to mature in our two-segment structure, we expect similar cross-selling momentum to pick up. Looking at the business as a whole, the outlook for 2023 is strong. We expect elevated customer engagement across our end markets and are maintaining robust growth projections for the future. Let’s turn now to slide five to discuss our fourth quarter and full year results in more detail. At the total company level, we delivered 19.1% organic revenue growth in the fourth quarter and 5.7% organic revenue growth for the full year. We enjoyed continued exceptional performance from our Medical business in the fourth quarter and full year, delivering organic growth of 24% and 15%, respectively. Strength in Medical was broad-based across all three of our end markets, with nuclear medicine leading the way. In the Industrial segment, the fourth quarter was a step in the right direction, as we delivered nearly 17% organic growth. Fourth quarter growth was supported by improvements in our operating environment, as well as strong execution by our team. We saw some signs of supply chain pressure easing, and we experienced generally more favorable order timing dynamics compared to prior quarters. Before I pass the call over to Brian, I wanted to touch briefly on our business development initiatives and M&A strategy. We remain committed to our disciplined capital allocation policy with highly selective screening criteria for M&A that supports our deleveraging commitments. The pipeline remains robust, and our criteria for investment continues to focus on building category leadership within our chosen end markets with defensible products, services, and software offerings. But to be clear, I intend to reduce leverage below 4 times by year-end. With that, let me pass the call over to our Chief Financial Officer, Brian Schopfer. Brian?

Thanks, Tom and good morning everyone. To kick off my commentary, I will ask you to please turn to slide six to take a deeper dive into our fourth quarter and full year results. Looking at the fourth quarter, total company adjusted revenue was up 20.5%, and adjusted EBITDA was up 25.9%. Total revenue in the quarter was $217.9 million, and organic growth was 19.1%. Adjusted EBITDA totaled $56.4 million in the quarter, with margin expanding 110 basis points to 25.9%. During the fourth quarter, we realized approximately 5% growth from price, offset by inflation and one-time costs associated with accounts receivable reserves, as well as a one-time supply chain reserve relating to circuit boards. Looking at the full year, total company adjusted revenue was $717.8 million, featuring 5.1% reported growth with organic growth of 5.7%. Adjusted EBITDA was down slightly compared to 2021, finishing at $164.7 million, with adjusted EBITDA margin contracting 130 basis points compared to 2021 to 22.9%. As a reminder, year-over-year adjusted EBITDA margin performance was negatively impacted by approximately $12 million of public company costs in 2022 or approximately 170 basis points. This was our last time comping against a period without public company costs. Fourth quarter adjusted free cash flow was $19.5 million, much more representative of the go-forward expectation for the company. Higher interest rates and net working capital requirements continue to be a challenge, but I am encouraged by the progress exiting the year. As a result, we saw leverage reduced to 4.4 times as of December 31st, slightly ahead of what we guided on our third quarter call. Looking forward, our operating teams are very focused on achieving Tom’s leverage target of 4 times or lower by the end of 2023. I’d also like to note that foreign currency exchange dynamics continue to be an important area of focus for Mirion. While we have recently seen positive trends in the euro to U.S. dollar exchange rate, FX headwinds impacted adjusted revenue performance by 5% in the fourth quarter and 4.5% for 2022. As we disclosed in our third quarter call, we have been actively hedging our interest rate exposure through fixed-price cross-currency hedges on our third-party debt. We have executed two hedges, bringing our total fixed debt to approximately 30%, which we expect to offset approximately $4 million of cash interest on an annualized basis. Before getting into the segment details, I’d like to take a minute on slide seven to reflect on the key variables impacting our topline in 2022. There was no shortage of headwinds in 2022. We had to overcome challenges stemming from the Russia-Ukraine conflict, foreign exchange pressure, and record inflation. Our topline was affected by approximately $50 million of headwinds from lost Russian-related revenue and negative foreign exchange impacts, totaling approximately 8% of reported revenue growth. We were able to replace $12 million of the lost Russian-related volume, supplemented with $6 million of incremental pricing actions, while successfully acquiring and integrating the Collins acquisition. Let’s now take a deeper dive into segment performance. Please turn to slide eight for our Medical segment. Starting with fourth quarter performance, adjusted revenue grew 25.4%, with organic growth of 23.6%, driven by double-digit organic growth from all three end markets. Nuclear medicine led the way again this quarter, as integration efforts continue to deliver good results, and the team converted more of our backlog into revenue. Medical adjusted EBITDA margin was 33.4% in the quarter, a 90-basis-point expansion compared to the same period last year. For the full year, Medical adjusted revenue grew 19.2%, with organic growth of 15.2%. Adjusted EBITDA was up 23.3% to $86.8 million. Margin improved by 110 basis points, supported by strong price realization in the integration of Capitec and Biodex. These growth numbers are outstanding, and I’d like to commend our medical team on their great work throughout the year. As we look forward, Medical’s first half of 2023 will see a more normalized growth trend in line with our long-term algorithm with tougher comps in the back half of the year. Let’s now turn over to slide nine for the Industrial Segment. Adjusted revenue grew by 17.9% for the quarter with organic growth of 16.8%. We set strong but achievable expectations for Industrial in the fourth quarter, and I am proud of the effort our team put in to deliver. Performance was principally driven by strong execution. Adjusted EBITDA for the Industrial segment was up almost 22% in the quarter, and margin expanded 100 basis points to 30.2%. While I am pleased to report margin expansion, performance was limited by the incurrence of one-off transitory costs related to increased accounts receivable provisions and one-time supply chain expenses, as I noted earlier. Looking at Industrial full-year performance, adjusted revenue was down 2%, with organic growth of 0.9%. Revenue performance was principally hindered by foreign exchange headwinds and lost Russian-related revenue, a revenue impact of roughly 11% for the year on the Industrial Segment. Adjusted EBITDA was down 5%, and margin compressed by 90 basis points from 2021. Margin performance was impacted by volume absorption, product mix, and inflation. Additionally, dilution from the Collins acquisition negatively impacted Industrial adjusted EBITDA margin by nearly 40 basis points on its own. Finally, I’d like to walk through the guidance we have issued today. Turning over to slide 10, we are projecting organic growth of 4% to 7%, supported by mid-single-digit organic growth from both Medical and Industrial. I’d like to note that Medical is comping a very strong year, and as a result, we are moderating our growth expectations versus what we saw in 2022. Given recent trends in the U.S. dollar to euro exchange rate, we are anticipating FX to positively impact topline growth by about 0.5%. Net inorganic revenue impact from Collins and Biodex is expected to be 1.5%. To provide a quick update on the physical medicine divestiture from our Biodex business, originally announced in November, we expect the deal to close during the first quarter of 2023. As a reminder, we purchased Biodex and Capitec for a combined $41 million, representing approximately $60 million of revenue and less than $2 million of adjusted EBITDA at deal closure. Today, the combined business post-synergy multiple is below 2 times. It is accretive to Mirion’s consolidated adjusted EBITDA margin. The physical medicine component of Biodex is non-core to our category leadership in this segment. For 2023, we are expecting adjusted EBITDA between $172 million and $182 million with margins likely remaining unchanged to 2022 at the mid-point of guidance. Pricing and cost inflation are estimated to be neutral for the year. Thinking through the sequence of the year, we expect more modest performance in the first half as we work through product and customer mix headwinds, mainly stemming from our sensing business within the Industrial Segment. We anticipate these mixed pressures to ease as we get into the second half of the year, with adjusted EBITDA margin improving sequentially. I’d also like to note the dynamics coming from our inorganic contributions. We expect the Biodex divestiture to be accretive to margins, but the Collins acquisition will more than offset these benefits. As a result, we project a net inorganic impact to our adjusted EBITDA margin of approximately negative 50 basis points in 2023. Saying this differently, we would expect 50 basis points of better margin rates than what the mid-point suggests had we not done both of these deals. We are anticipating adjusted EPS of $0.28 to $0.34 and adjusted free cash flow of $50 million to $70 million, with an expectation of positive contribution from net working capital for the year. To help with modeling considerations, we are utilizing our share count as of December 31, 2022 to calculate EPS. We expect our effective tax rate to be between 25% and 27% and are assuming a U.S. dollar to euro exchange rate of 1.07. Note that there is an additional guidance slide in the appendix of our presentation, laying these out, as well as a bridge around our revenue assumptions. With that, I will pass the call back to Tom to close things out.

Brian, thanks. Before we open things up for questions, I’d like to recap 2022 and highlight a few key areas of focus for us as we prepare for 2023. First, we finished 2022 with positive momentum built off our strong fourth quarter results. Our team’s commitment to execution enabled us to deliver on the expectations we set back in November. Second, we are entering 2023 with robust backlog and NTM revenue coverage for approximately 55%. Third, we have taken a balanced approach to setting guidance and believe we have adequately considered the risks and opportunities we see for the year. Fourth, we remain committed to deleveraging our balance sheet through disciplined capital allocation. Any acquisitions will be highly selective and supportive of my goal to reduce leverage below 4 times by the end of the year. Next, operational execution remains front and center. I spent most of 2022 running both the Medical Group and our RTQA businesses in addition to my day job. This culminated in a wholesale rebranding of Mirion Medical, a sweeping reorganization, and a significant improvement in our operational performance. With the onboarding of Mike Rossi, I now have the bandwidth to focus a greater degree of attention on our Industrial group. Finally, we have the best team in the industry and I am relentlessly focused on employee engagement and organizational health. I am confident that we are well positioned to have a great 2023 and look forward to updating you on our progress in May. Thanks again for your time and continued support, and I will now pass things back to Alex to open up Q&A.

Thank you, Tom. That concludes our formal comments for today. I will turn it back over to the Operator for the question-and-answer session.

Thank you. Our first question comes from Andy with Citigroup. Please go ahead.

Good morning, everyone.

Hey, Andy.

Hi, Andy.

So your Medical-related growth continued to accelerate over the last two quarters of 2022. I know you talked about strength in all of your major Medical businesses and I know you are forecasting mid-single-digit growth in 2023. You talked about demand normalization and tough comps. You have two of the three Medical businesses project to be up high-single digits, I think dosimetry is up mid-single-digit. So you are just being conservative on the overall segment, especially given the new Instadose rollout or are you seeing any slowing in any of your Medical businesses and that’s why you have got a lower growth model?

Yes, Andy. Firstly, regarding the dosimetry business, it has traditionally been a slow-growing market. However, with the introduction of Instadose, we believe we have been able to achieve a slightly higher growth rate compared to the overall market in recent years, although that growth is still more conservative than what we expect in either RTQA or nuclear medicine. Additionally, it's important to mention that we are coming off an extraordinary year this year in both the RTQA and nuclear medicine segments. While market conditions remain very favorable and our outlook is optimistic, we are taking a cautious approach in our growth projections.

Very helpful, Tom. And I think we understand that you will have significant order growth in Q4 in nuclear and defense, but you mentioned a clear pipeline of incremental new builds in nuclear orders. So you think your nuclear business in terms of orders re-accelerate from here and then I know you are expecting more defense-related orders; you mentioned the elongated order cycle for these types of orders, do you see them getting over the finish line in 2023?

Firstly, in the nuclear power market, we are witnessing an increase in demand this year, which aligns with the trends we've previously discussed. This demand is largely due to strong government and public support for nuclear power as a viable solution to various energy challenges, as well as the high electricity prices driven by gas costs. We expect this strength to persist, though we recognize a lag between broader market changes in the nuclear sector and their direct impact on our business. We are optimistic that as the industry continues to improve, we will benefit from this momentum. Our installed base constitutes about 75% of our nuclear power-related revenue, which accounted for around 35% of our total revenue last year. Therefore, assessing the installed base is crucial for evaluating the nuclear market, and the trends appear favorable. On the new build side, we see a robust pipeline of projects and anticipate substantial growth in utility-scale developments over the next decade and beyond. In the defense sector, our engagement with the 19 NATO militaries we support remains strong, as does our involvement with other international agencies and government entities. While we have observed that post-COVID order cycle times have increased for government contracts, we remain optimistic about securing significant orders. However, we are taking a cautious and measured approach in our projections for the year.

The other thing, Andy, to give you some context on Nuclear power, if you exclude some of our larger orders, specifically those above $5 million, we are seeing mid-teens growth in orders on an as-reported basis. When adjusting for exchange rates, we are more in the 20% range. The key takeaway is that while there is some noise from the larger orders throughout the year, the underlying business remains healthy.

That’s helpful, guys. Lastly, could you discuss again the margin challenges in 2023 for Industrial and Medical? You are forecasting lower than average incrementals for 2023. How much impact do you expect the mix issues in Industrial to have on your business? Even without the inorganic headwinds, you weren’t predicting normalized incrementals of over 50% from Medical. What else is hindering you there? Insights into your assumptions regarding price versus cost and supply chain would be appreciated.

Maybe I will take that. First off, we are assuming in the guidance that price and cost will be neutral, meaning price versus inflation will balance out. We are going to work hard to ensure we achieve some benefits from this. However, currently, we are stating that price and cost will be neutral. Additionally, in the first half, we have one of our businesses that is expected to improve over the year, which relates more to volume and product mix and is primarily timing-related. We have good visibility into this business. It's just a bit weaker in the first half than we would prefer, and it depends on how these factors will unfold throughout the year. We are confident about this. Another point, Andy, is that we have almost 10% higher backlog coverage this year compared to where we were at this time last year. This gives us a lot of confidence in our visibility regarding 2023.

When Brian refers to a 10% increase, he means a 10-point rise. Essentially, this brings us from mid-40s coverage to the mid-50s, which represents a significant increase.

Appreciate it guys.

Our very next question comes from Joe Ritchie with Goldman Sachs. Please go ahead.

Great. Thank you. Good morning, everyone.

Hey, Joe.

Hey, Joe.

Could you address the visibility aspect of the organic growth guidance for the year? Typically, there's a backlog coverage of 55%. How does that compare to what is considered normal? Additionally, what factors do you see influencing the organic growth for 2023? Do you believe it's possible for the growth to exceed the guidance you have provided for this year?

Certainly. As mentioned, our backlog coverage at the start of 2022 was about 10 points lower than where it stands now, indicating a significant overall increase in NTM coverage. Additionally, the average order size is smaller, which generally improves the quality of coverage. We have included a page in the presentation that outlines key issues and opportunities we see. Potential upsides include ongoing growth and momentum from the nuclear power market, enhancements in supply chain stability and labor market conditions, as well as potential larger civil defense and military orders not currently included in our guidance. Our main focus this year is operational execution, and we believe there is potential for cost reduction and improvements in our pricing strategies. Moreover, the current currency environment is slightly more advantageous for us this year. However, there are risks, including geopolitical instability and the possibility of worsening inflation, as seen in this morning's CPI numbers, which were slightly above expectations although they still indicate a general decline in inflation trends. Any unexpected tightness in supply chains, changes in the macroeconomic environment, or further deterioration in currency or interest rates could significantly impact us. Nonetheless, we've made an effort to be well-balanced and measured in our forecasts for this year to account for these uncertainties confidently.

That's very helpful, Tom. I have a question for Brian regarding the yearly cadence. I know you all have been careful with your guidance, and I want to ensure we understand the seasonality as well. It looks like you have good visibility into the first half of the year, so is the expectation that you can achieve EBITDA growth at least at the midpoint or possibly towards the higher end of the annual growth range in the first half? Any insights on that would be appreciated.

I think we are facing some challenges with margins in the Industrial segment during the first half due to certain mix issues. However, we have good visibility and expect these issues to resolve as we move into the third and fourth quarters. The first quarter is expected to be easier to compare on the Medical side, so I anticipate positive results there. The Industrial segment performed well in the fourth quarter, so I expect decent performance in the first half that will improve in the second half. The margin progression will be lighter than we had hoped for in the first half, but we expect it to improve significantly in the latter half, supported by our cost reduction efforts and ongoing pricing adjustments. Our strong supply chain management gives us confidence in these aspects, and our backlog remains solid. However, we need to address the mix challenges we are encountering in the first half.

Got it. And Brian, just to be clear on pricing, are you guys expecting to be price-cost positive this year?

Neutral is what’s in the guide. So that’s upside if we can do better, and we continue to be very aggressive in the market on pricing. But as we saw this year, it takes a bit of time to kind of flow into the P&L. I will just note one more time, Joe, for you, we did end the fourth quarter at 5%, which is what we had expected going back a couple of quarters. So the team is executing well on the pricing; it just takes some time to flow through the P&L.

Yeah. That makes sense. Last one for me. Tom, you mentioned on improving operating environment in Industrial. Can you just elaborate on what you are seeing and how it’s impacting your business? It sounds like supply chain has gotten at least modestly better, just wanted to get some thoughts there?

Certainly. There are a few things to address, Joe. To start, while we believe the supply chain dynamics will not return to pre-pandemic levels, we do see signs of improvement, and the number of sporadic issues is decreasing overall. More importantly, when we consider the factors driving our performance, much of it stems from the order intake we experienced last year and the health of the market segments we serve. Our business model remains consistent, and if we analyze the margin levels and their impact on the bottom line, that is clearly the critical factor for our overall operating performance. Therefore, being price-cost neutral or better, along with disciplined management of factory overhead and operating expenses, will ensure that any increase in volume translates to robust performance. Ultimately, it comes down to our execution. It's also worth noting that last year marked our public debut, which required significant focus on the associated challenges. Additionally, I dedicated a lot of my time to establishing coherence within our Medical group, especially regarding our radiation therapy business. With the appointment of Mike Rossi as President of the Medical Group, I now have more capacity to support and enhance execution across the entire organization, and I anticipate this will positively influence our operating performance this year.

Great to hear. Thank you.

Our next question comes from Chris Moore with CJS Securities. Please go ahead.

Good morning, everyone. I appreciate the opportunity to ask a couple of questions. I wanted to revisit the topic of pricing for a moment. It appears that the price and cost are generally balanced, especially considering the expected organic growth of 4% to 7%. Would it be accurate to say that most of this growth is driven by price?

It’s actually pretty balanced when you calculate price and volume. That’s our perspective on it.

Got it. Tom, you called out SMR here and…

But.

Go ahead.

Chris, there is a slide, I think it's 16, that shows the range and how we divide it between volume and price. You will see it is quite balanced, with a bit more volume at the high end of the range and balanced at the low end.

Perfect. Thank you. Called that SMR as potential big opportunity, just curious from a sales cycle and development cycle perspective is that meaningfully different than what you see on the traditional utility?

There are many new players and a significant amount of government funding entering the market. To give context on why we are particularly enthusiastic about the SMR market, consider that there are currently around 450 operational utility-scale nuclear power plants globally, with a total capacity of about 380 to 390 gigawatts. In North America, there are approximately 450 gigawatts of coal plants scheduled for decommissioning over the next 15 years, which represents a primary target market for SMRs. As we've mentioned in previous calls, this market is evolving at a faster pace than before, showing an increase in concrete efforts. Additionally, we have secured backlog on several projects. The main focus now is to strategically engage with major sponsors to integrate our industry-leading solutions into these power plants.

Okay. Got it. Very helpful. Mostly others have been covered. I will leave it there. I appreciate it guys.

Chris, thank you.

There are no further questions at this time. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a nice day.