Mirion Technologies Inc
NYSE:MIR
Earnings Call Analysis
Q4-2023 Analysis
Mirion Technologies Inc
The company concluded 2023 on a high note, generating a record backlog driven by a remarkable 30% organic growth in orders for the fourth quarter and expanding the backlog by 15% over the year. This marks the sixth consecutive quarter of increasing orders, signifying strong market conditions and solidifying confidence in future revenue. The company's Medical segment shined with organic growth just shy of 10%, contributing to an impressive $801 million total revenue for the year and setting a record full-year adjusted EBITDA at $181 million.
With eyes set on the future, the company has provided guidance for 2024, projecting organic revenue growth between 4% to 6%. The expected adjusted EBITDA is slated to be between $193 million and $203 million, while adjusted free cash flow projections land between $65 million and $85 million. These estimations reinforce the company's intention to maintain momentum and continue its growth trajectory.
The Medical segment showcases significant growth and margin enhancement. With both substantial organic growth and strategic acquisitions like ec2, the Medical segment now encompasses 38% of company revenue and 44% of company EBITDA. Strong performance in this segment, driven by demand in nuclear medicine and digitization efforts, is essential to the company’s prosperity. Medical adjusted EBITDA margin expanded impressively by 500 basis points to 38.5% in Q4, which is reassuring for pushing forward into 2024.
The company’s Technologies segment continues to harness the growth in nuclear power with robust orders, particularly from large contracts reported in Q3. Positive global sentiment and political support for nuclear as a green energy source, along with commitments from international governments, suggest a bolstered market space. There is potential in defense orders and the military markets globally as well. Margin expansion within Technologies is a primary focus, especially in European operations and through the integration of SIS.
Innovation is at the forefront with over 40 new product launches scheduled, which is a significant increase from 10 in the previous year. The company remains committed to margin expansion and increased free cash flow conversion as part of its five-year goal for 30% adjusted EBITDA margins. Their capital allocation strategy, along with reduced leverage from 4.4x to 3.0x by year-end, emphasizes prudent financial management and strategic mergers and acquisitions.
Throughout the fourth quarter, revenue and adjusted EBITDA saw uplifts of 5.7% and 8.2% respectively, indicating sustained growth. On an annual scale, revenue and EBITDA swelled by 11.6% and 9.7%, indicating a company in forward thrust. Margins expanded by 60 basis points in Q4, further bolstering the company's profitability profile.
Looking at the organic growth rates of the last two years (9% for 2023 and 6% for 2022), the company's guidance of 5% to 7% for 2024 appears measured but promising. Backed by tailwinds in both the Medical and Technologies segments as well as solid order growth, the company's leadership expresses confidence in achieving the guidance and executing the strategic plan for the upcoming year.
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Greetings, and welcome to Mirion Technologies Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Alex Gaddy, Senior Vice President, Strategy and Investor Relations.
Thank you. Mr. Gaddy, you may begin.
Good morning, everyone, and thank you for joining Mirion's Fourth Quarter and Full Year 2023 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 ended December 31, 2023. 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 Tom Logan, Chief Executive Officer; and Brian Schopfer, Chief Financial Officer. Now I will turn it over to our CEO, Tom Logan. Tom?
Thank you, Alex, and good morning, everyone. Thank you all for dialing in today, and for your continued support of Mirion. To kick off my commentary today, first, I'd like to congratulate and thank my Mirion colleagues for helping to put together a great 2023. We delivered a record year for the company, and I'm proud of the progress we've made as a team, while continuing to build a great business. Looking at the fourth quarter and the full year, there are few things I'd like to start with. First, we closed out 2023 with record backlog generated by fourth quarter organic order growth of 30%. This is our sixth consecutive quarter of backlog expansion, reflecting growth of 15% compared to year-end 2022. Our vertical markets are healthy, and I'm encouraged by our top line coverage heading into 2024.
Second, we delivered organic revenue growth of 5% in Q4, yielding $801 million of total company revenue for the year. The Medical segment led the way with organic growth just under 10%. Adjusted EBITDA in the quarter was a record $61 million, contributing to a full year result of a record $181 million.
Third, we generated [ $61 ] million of adjusted free cash flow in the fourth quarter, resulting in net leverage, finishing the year at 3.0x EBITDA, beating expectations. I'm extremely proud of the team's execution against the cash and leverage targets we laid out early in 2023. And this performance bolsters our confidence in sustained momentum in this area in 2024. Finally, we have initiated financial guidance for 2024. For the full year, we are expecting organic revenue growth of 4% to 6%, adjusted EBITDA of $193 million to $203 million and adjusted free cash flow of $65 million to $85 million. Moving on to Panel 4. I'd like to address 2023 orders performance, and our end market conditions in greater detail. Beginning with the Medical segment, specifically our radiation therapy business, we remain encouraged by the positive momentum we've generated in the European market by bolstering our sales and support capabilities in the region. In the U.S., our sales reps have reported some nominal improvements in overall market conditions, reversing some of the negative trends we saw through much of '22 and '23, triggered by widespread post-pandemic financial pressures in the U.S. health care system. Our digital and new product portfolios remain key areas of focus for growth, and we expect a strong 2024 in radiation therapy. Within occupational dosimetry, the business remains well positioned as we commercialize the next generation of Instadose technology this year. Core services and hardware demand remain well supported heading into the new year.
Lastly, recent trends in the nuclear medicine market continue to support our belief that this segment will be a strong growth engine for us. Early results from the ec2 acquisition are encouraging and the integration is proceeding on pace. Our early experience confirms the view that ec2 will meaningfully improve Mirion's position to meet the growing demand stemming from theranostic applications for cancer care. This revolution in nuclear medicine is enhancing the ability for physicians to more accurately image, diagnose and treat cancer, yielding improved patient outcomes and reduce treatment costs. ec2 accelerates our commitment to digitizing the medical portfolio supporting higher levels of recurring revenue and expansion into adjacent niches within the nuclear medicine value chain. As a final note, our medical exposure, inclusive of technologies products being sold into medical channels, now constitutes 38% of total company revenue and 44% of total company EBITDA.
Moving on to the Technologies segment and beginning with nuclear power. 2023 order growth was extremely robust, supported by the large orders we reported in Q3. The installed base remains a strong driver and an important focal point of sustained and defensible growth for Mirion going forward. We are encouraged by the global pipeline of new build opportunities expect to take advantage of the growing and accelerated commitment to utility-scaled nuclear power. Popular and political support continues to improve, and we've seen governments across the globe declare nuclear power as a green energy source, something we strongly believe them and support. This is perhaps best exemplified by the commitment made at the UN COP28 Climate Change Conference to triple net nuclear operating capacity by the year 2050. Notwithstanding the extraordinary magnitude of this goal, this commitment underscores the positive overall momentum we are seeing across the globe.
Moving on to the labs and research end markets, the dynamics are constructive. More than 60% of our business in this segment is driven by DOE funding where we anticipate continued support. Workforce retention dynamics are tight within the national lab system, creating an opportunity for us to sell more value-added services. We are seeing favorable growth in Asia, new big science projects and an increased opportunity in crossover radiopharmaceutical capital equipment. In defense, momentum is supported by the booking of approximately $20 million in nontraditional defense orders in Europe in 2023. And in addition, we see a strong pipeline for the global military and defense markets in 2024. Before I pass the mic over to Brian, there are a few areas of focus that I'd like to highlight for 2024. First, we expect to release more than 40 new product introductions and enhancements this year. That represents a substantial increase of the 10 new product launches we saw in 2023. This reflects our commitment to be the innovation leader in our space, with an increasingly digital flavor. Second, as we exit a year of solid financial performance, we're keeping the pedal down, focusing on margin expansion and enhanced free cash flow conversion. As we've said in the past, our 5-year goal is for 30% adjusted EBITDA margins for the enterprise. We're increasingly confident in our ability to deliver upon that goal within our planning horizon and expect to take a meaningful step forward in 2024. Finally, we are committed to capital efficiency, coupled with smart opportunistic M&A. The M&A pipeline is robust, and we will continue to evaluate opportunities on a highly selective basis. 2023 was a big step forward, where we continue to be active in M&A, while reducing leverage from 4.4x at the start of the year to 3.0x at the end of 2023.
With that, I'll now pass the call over to our Chief Financial Officer, Brian Schopfer. Brian?
Thanks, Tom, and good morning, everyone. In my comments started, please turn your focus to Slide 5 for a deeper look at our fourth quarter and full year results. For the fourth quarter, total company revenue grew by 5.7%, and adjusted EBITDA was up 8.2% compared to the same period last year. Fourth quarter revenue was $230.4 million and organic growth was 5.3%. Adjusted EBITDA for the fourth quarter was $61 million, and adjusted EBITDA margins expanded by 60 basis points. It is worth noting that we were comping a 19% organic growth quarter from Q4 2022. For the full year, total company revenue was up 11.6%, and adjusted EBITDA grew 9.7%. 2023 revenue was $800.9 million, and organic growth was 9.3%. We delivered $180.7 million of adjusted EBITDA for 2023, with margins of 22.6%. As we've talked about all year, the net impact of acquiring SIS and divesting Biodex impacted margins by approximately 70 basis points.
Moving along to take a closer look at segment performance, starting with Medical on Slide 6. Beginning with fourth quarter results, Medical revenue grew 6.8%, with organic growth of 9.6% and a net inorganic revenue impact of 3.2% from the Biodex divestiture. This was slightly offset by the ec2 acquisition that closed in November. The RTQA business led the segment in Q4 on the back of continued strong international sales momentum through our European sales and service center. This business was comping 24% organic growth from Q4 2022. Medical adjusted EBITDA margin performance was excellent in the fourth quarter, expanding by over 500 basis points to 38.5%. Performance was supported by strong operating leverage, product mix and solid execution across the segment in addition to positive benefits from the Biodex divestiture and the ec2 acquisition, which were both accretive to margins. As a reminder, Q1 2024 will be the last quarter of a benefit from exiting the Biodex rehabilitation business. For the full year, Medical revenue was up 4.7%, with organic growth of 8.1%, being partially offset by the Biodex divestiture. Our RTQA and Phantom's businesses were the strongest performers in the year. This brings our 2-year stacked organic growth in the segment to over 23% in the Medical, 23%. Medical adjusted EBITDA margins expanded 220 basis points to 34.2%. The Biodex divestiture was a positive tailwind for margins, delivering approximately 150 basis points of support for the full year. The Medical team executed well across the board, and we certainly look forward to carrying this momentum into 2024.
Now moving along to the Technologies segment on Slide 7. For the fourth quarter, Technologies revenue grew by 5.1%, with organic growth of 3% for the quarter. Our international business in France and Asia, mainly Korea, led the way. This is a strong result after an outstanding fourth quarter last year where the team had delivered approximately 17% organic growth. Technologies adjusted EBITDA margin contracted by 70 basis points versus the fourth quarter last year to 29.5%. Margin degradation was driven again by our French business, which experienced a number of challenges in the fourth quarter, including product mix headwinds and a broader operational challenges. I will get into more detail here shortly on the corrective actions we've put in place. For the full year, Technologies revenue grew by 15.8%. Organic growth contributed 10.1%, with inorganic growth adding 4.6%. Growth was supported by broad-based top line strength across the segment. As Tom noted, we continue to see robust order activities within our Technology end markets. Our full year adjusted EBITDA margin in Technologies contracted by 160 basis points to 26.2%. The SIS acquisition negatively impacted adjusted EBITDA margins by approximately 120 basis points.
As we turn the page to 2024, Technologies margin expansion is a central area of focus for us, with the largest areas of opportunity being in our French business and advancing the integration of the SIS acquisition. Tom and I have been working with the team in Europe, and diving deeply into how we are going to significantly improve operational execution in the region in 2024. We've already taken corrective actions and believe we have the right people and plans in place to deliver targeted improvements. However, I recognize this is a journey that will take time, but I do expect to see improvement in the first half of the year. Tom and I will be spending more time with the team to ensure execution and monitor progress. Now let's turn the page to Slide 8 for cash flow and leverage. Fourth quarter adjusted free cash flow was $61.5 million, brining full year adjusted free cash flow to $73.8 million. Net working capital generated approximately $27 million of cash in the quarter and resulted in a positive contribution to cash flow for the full year. This result is another great step in the journey, and supports our momentum heading into 2024. Net working capital management, specifically inventory, will continue to be an area of focus for us as we aim to improve inventory efficiency, management of payables and accelerated collections. Looking at our progression against our leverage commitment, we executed well and brought our net leverage ratio down to 3.0x as of December 31, beating our target for the year. As Tom mentioned, we will continue to take a very measured approach to capital allocation and prioritize driving margin expansion and cash flow conversion in 2024. Absent M&A, and at the midpoint of guidance, would result in ending net leverage of approximately 2.5x by the end of 2024. As usual, our M&A strategy will reflect a highly selective filtering and evaluation process with clear investment criteria aligned to our strategy and vision. Finally, let's turn over to Slide 9 to look at our financial guidance for 2024. We are projecting organic growth of 4% to 6%, supported by mid-single organic growth from both segments. Revenue growth is expected to be 5% to 7%, with FX expected to have minimal impact in the ec2 acquisition projected to provide 1 point of inorganic top line growth. I am anticipating a more balanced quarterly phasing for the year from an organic growth standpoint.
Our adjusted EBITDA range for 2024 is targeted between $193 million and $203 million, with margins between 23% and 24%. Price cost initiatives, inclusive of a heavier focus on material and indirect spend, higher volumes and product mix are all anticipated to be positive drivers for adjusted EBITDA margin expansion. It is worth noting that our guidance also includes an increased investment to improve our effective tax rate. We expect these investments will provide some benefit in 2024, with continued investment and progress also expected in 2025. We will update you in the coming quarters as progress is made, and we have more color to provide on impact and timing expectations. Adjusted EPS is expected between $0.37 and $0.42, while we project adjusted free cash flow in the range of $65 million to $85 million. From a cash flow perspective, 2024 will likely mirror 2023's cadence, with more contribution in the second half. However, unlike 2023, we are expecting to be cash flow positive in the first half of the year. Other modeling considerations for 2024 include approximately 200 million Class A shares outstanding, an effective tax rate between 26% and 28%, non-ops cash expense of approximately $9 million, mainly made up of IT initiatives around ERP, and a U.S. dollar to euro exchange rate of $1.08. In closing, we had a really solid year in 2023 and certainly a strong finish in the fourth quarter. For '24, we will be highly focused on delivering margin expansion, leveraging positive momentum in cash flow conversion and continuing to be good stewards of capital.
With that, I'll pass things back to Tom for his closing remarks.
Brian, thanks. Before we open up the floor for your questions, a couple of key themes are worth repeating as we think about 2024. First, our top line growth is visible, supported by robust order growth, healthy markets and a record backlog. Second, the team is aligned and focused on our top strategic priorities, which include driving margin expansion, improving cash flow conversion, accelerating digitization efforts and enhancing our diverse portfolio of products, services and software. Finally, we have confidence in our 2024 guidance initiated today. 2023 was a good year, and we are building on that momentum in every corner of the enterprise.
I'll now pass it over to Alex Gaddy to open things up for Q&A.
Thank you, Tom. That concludes our formal comments this morning. Operator, let's please go ahead and start the Q&A session.
[Operator Instructions] The first question comes from the line of Joe Ritchie with Goldman Sachs Asset Management.
Nice end to the year. Tom, I think I'd like to start on the new product introductions. That's really interesting, increasing that fourfold in the coming year. I'd love to hear your thoughts on how you think about payback associated with those new products and, ultimately, how that translates into better revenue growth for the company going forward?
Sure. Great question, Joe. The starting point is that a comment that we've made with some frequency historically is that we pride ourselves on being -- what we believe to be the innovation leader in our space. In aggregate, our view is that we spend more money on engineering, broadly speaking, R&D specifically than the people we compete against. And ultimately, the measure of that is the cadence of new product offerings that we're putting out into the marketplace overall. The screening process that we follow as it relates to innovation is really a foundational component of our business system and effectively follows a broader capital allocation process, where we do deep dives annually on market segments that are of great interest to us. That, in turn, drives the relative R&D commitment allocated to various corners of the business. And that ultimately is what results in new product offerings. Our expectation, generally speaking, when you look at the flavor of what is being introduced, the nature of our focus is that we're in the midst of a gradual, but systematic digital conversion within our business. And of course, the hope for result there is that we see a concurrent change in revenue composition that's driving us more toward a higher degree or a higher component of predictable, visible recurring revenue versus one-off capital equipment sales overall. So that is the biggest impact overall. But to be clear, innovation is one of the major factors that historically, over the last 2 decades has allowed us to outgrow our markets.
Got it. That's super helpful. And maybe the follow-up to that is, is it concentrated than more in like the medical or technology segment or the that's pretty well spread throughout?
No. It is actually remarkably symmetrical across the operating groups. And again, just kind of reflective of the key priorities that you've heard us articulate over the years.
Okay. Makes a lot of sense. Can you guys maybe elaborate on what's happening in France and within SIS? And you reference that you feel confident about being able to get the margins back. You mentioned that it impacted your margins by about 120 basis points for the entire year. So just any color around -- like the margin expansion opportunity within technologies, particularly associated with the issues that you're currently dealing with?
Sure. Yes, Joe, I don't think we want to go too deeply down that hole, but what I will say is that it's a combination of factors. One is there's a bit of mix in there and understand that in the French market, in particular, as the dominant customer in country, EDF, has gone through struggles, that has had some attendant impact on some of our execution capabilities and just predictability of that business. But we do see that improving, and we see it improving, I think, measurably in the year ahead. In addition, there have been a series of kind of one-off events that are nonrecurring in nature that we don't expect to have any bearing on our corrective action pathway as we move ahead.
But maybe the most important point, and I think Brian articulated this well, we've been very actively and directly involved in the region. We have made some organizational changes, supporting our near-term objectives and a number of process changes. We believe we have the right people and the right approach to get this thing back on the rails, very, very confident that we're going to do that in 2024.
I think on SIS, a couple of things, right? One, that margin contraction on our end was planned, right, because we comped 7 months without having it. And when we bought this business, we knew it was a little bit of a fixer upper that we needed to do. I think we've made tremendous quarter-on-quarter progress all year in that business. And I think you'll continue to see that be a little bit of a tailwind for us in '24 on the margin expansion side.
Great. One more question before I pass it on to somebody else. I have to ask about orders. It was a great year for you guys, over 20% growth in orders, another really robust quarter. Last quarter, you guys gave us some good color just around the 2 big orders that you booked. I'm curious, 2 things. #1, just more color around what you saw in your business in the fourth quarter? And then ultimately, how does that ultimately translate into revenue growth, right? Because you put up over 20% order growth, but expectation for mid-single-digit growth this year organically. So just any color around either the longer cycle nature of some of the orders that you're booking?
Sure. A couple of things, right? First off, we did book another larger nuclear power order, about $20 million in the quarter in the Asia, mainly Korea. So there's that. I think the thing to think about here is this year was a, specifically at nuclear power, candidly, just a very good year. And I think we've commented that, that isn't -- we don't think this is a completely onetime event. We think we'll continue to see good momentum in this business. But if you look at our nuclear power orders this year, right, about 1/3 of those orders traded in '23, about 1/3 of them trade in '24 and about 1/3 of them trade kind of '24 and beyond. And those are a little bit round numbers.
But the point is, it is longer cycle in nature. And I think it just continues to secure kind of the longer-term visibility of our revenue out beyond -- just the next couple of quarters.
Next question comes from the line of Chris Moore with CJS Securities.
Maybe I'll just follow up on one of Tom's prepared comments. So you talked about the commitments at the COP28 Climate Conference. So I guess the question is, what would it take to achieve tripling in net nuclear power output? And what does this mean for Mirion over the longer term?
Yes. So firstly, as it relates to what it would take, I mean, it really is an extraordinary statement of intent coming out of this Climate Change Conference. Firstly, I think it's notable because, traditionally, this constituency overall has not really embraced nuclear power to the extent that we feel they should have. And it's great to see such a clear official policy statement coming out of this group overall.
But in terms of the magnitude of what's being called for truly is extraordinary. Today, the -- if you look at total installed nuclear capacity globally, it's roughly 400 gigawatts or so of total nuclear power. A tripling of that capacity between 2050, if you're just to do the mental math, firstly, it takes you up to a level of 1.2 terawatts of total power. And that's in the phase of a decommissioning profile that we'll be accelerating. So of the existing 400 gigawatts of installed capacity, probably close to half of that is scheduled for decommissioning between now and in 2050, notwithstanding life extensions.
So the number in aggregate is enormous. And effectively, what it would take for the world to do that if the solution came purely through utility scale nuclear power and not through the more likely balance or a combination of utility scale and small modular reactors. But just to answer it more easily, if it came purely through utility-scale nuclear power, that essentially would imply a build-out rate or annual commencement rate of new nuclear projects of about 40 per year, beginning in 2030, recognizing that between now and the end of the decade, essentially everything that will happen is already in the pipeline. And so the acceleration of activity in the nuclear markets would be extraordinary, and that's essentially a quadrupling of the cadence that we've seen over a sustained period of time.
The implications for us if this were to happen or even if it's only an approximation of what might happen, obviously, are very positive given the fact that we participate broadly with all of the major nuclear sponsors in the world. And we -- notwithstanding the fact that the installed base is the largest revenue source for us coming out of nuclear power, the front-end leverage, the front-end kicker that we enjoy from new build activity is significant. So overall, again, very positive statement, and I think is simply reflective of just -- how robust the political and popular support is for nuclear power today and how that's likely to have stay in power.
Well, very interesting. Maybe staying with nuclear, but switching over to medicine. So you talked about theranostic developments within cancer care. Can you talk maybe what the momentum in that space means to Mirion going forward?
Yes. It's an area that we're hyper focused on, Chris. The general view is that the nuclear medicine market overall, and specifically the so-called theranostic market will grow at a tremendous clip. I think GE announced a week or so ago that they expected about a 4.5x increase in the overall market opportunity. And this was in a specific discussion about a recent acquisition they had done. Our view is that, again, just given the remarkable dynamics that we're seeing in this market, and the clinical efficacy and cost dynamics associated with theranostic applications that we certainly believe this will be inarguably the fastest-growing market segment that we play in overall. We've been very focused on building out our capabilities in this market, firstly, through the acquisition of Capintec, following that, the acquisition of Biodex, and now most recently with the acquisition of ec2. And the -- perhaps the biggest benefit of ec2 is that we're beginning to pivot the business from an almost entirely a capital equipment business, where the biggest demand driver was new clinic growth rather than procedural volumetric growth.
And with the acquisition of ec2, it gives us the opportunity, firstly, to benefit more richly from, again, volumetric growth and procedures, but secondly, it gives us the opportunity to really kind of change the nature of our go-to-market strategy with our capital equipment by buying the largest player domestically and the nuclear medicine workflow software market, again, it gives us the ability to effectively drive this business towards more of a software business supported by capital equipment rather than the converse. And so we continue to be focused on that, and that broad-based shift again towards kind of floating our boat on the tide of volumetric growth rather than clinic growth.
Got it. Very helpful. Maybe just last one from me on free cash flow guidance. Midpoint looks about $75 million. That's roughly 40% conversion EBITDA. Longer term, are you guys -- is that 50% target, so what you're looking at?
I mean, look, that is definitely where we need to get to. As EBITDA grows, and we continue to -- we continue to work hard on net working capital, our interest rate kind of as a percentage goes down over time as well, et cetera. So yes, I think 50% is where we need to get to. I think we're very pleased with the 41%, 42% conversion this year. We like the 40% next year at the midpoint. And then I think the only other comment -- I made some comments in my prepared remarks. I mean, one of the things we're working on in '24 part -- and '25, candidly, it will go into '25 is taxes. And how do we bring our cash tax number kind of more in line to the peer set. So there's a lot of moving pieces here that, that we're looking at. And then obviously, on the tax, same thing on the tax. We're watching the legislation in Congress as well, that would be helpful to us.
So I guess, summary, a lot of moving pieces. We like leveraging our scale on the conversion side, for one; and two, we got improvement projects on both the net working capital side continuing in '24, and we're kicking off a lot of work on tax as well. So look, I like that 50% number. It's obviously, we're not guiding to that in '24. But I think as you look out, you can see us increasingly get -- you can get confident increasingly that we'll get there.
Next question comes from the line of Vlad Bystricky with Citi Group.
So maybe just to start off, following up on Chris' question there on cash. Obviously, we know cash has been a big focus for Mirion. So can you just talk about a little what's changed over the course of '23 to support improving cash flow? And then how you're thinking about your level of visibility to working capital as a source of cash for '24?
Look, I think what's changed is, first off, I think the macro coming out of '22 is improved. I think as you heard us talk, I think it was in 2Q or on the 1Q call, but it was in 2Q, so May, about the heavy focus we are putting on this in the back end of '23. So our discipline, for sure, has changed. The amount of resources we've specifically dedicated to this, right? We talked about our Performance Excellence Group coming in and helping in many of the areas. And just fundamentally, a big focus on our kind of sales and planning processes across the company. So it's really about operational improvements and doubling down on making sure that happens. But look, I mean, I've said this all along. This isn't something that changes overnight. It takes quarters and many quarters. I think you'll see us continue this journey in '24. We're very focused on it. We're very, very focused on it. We've said we like net working capital as a source of cash this year. So that's a big commitment from us. And this is something we're going to continue to double down on both from a resource standpoint, but also a priority standpoint.
That's helpful color, and it's nice to see the results. And then maybe just shifting to Medical. Organic growth actually picked up on a tougher comp sequentially. So can you just talk a little bit more about what accelerated in Medical in the quarter, and whether there was anything unusual or -- on one timing in the shipments in 4Q?
I mean, look, in the back half of the year, I think it was late August, early September. We had a -- with a new products come into market, I think, in Europe specifically, that had some heavier volumes kind of in the fourth quarter for us. But look, the team is just -- they have delivered for us all year, and candidly, even if you go back to '22, too. So I think there was one specific new product that was a bit heavier than maybe usual, but that phasing for us isn't abnormal with the fourth quarter being a really strong quarter for us. And -- but it's just great execution across the board, honestly. By the way, I'll take this moment. I mean I think that's why we like mid-single digits in Medical, again, this year. I mean we continue to kind of -- this was a -- it was a good year in Medical, kind of 8%, so high single-digit growth, comping on 15% organic number the year before. So I think we're just -- we want to make sure we set the right expectations, and we'll continue to evaluate kind of what the Medical growth rate looks like as we go this year.
Got it. That's helpful. And then just one last one for me, and sorry if I missed it, but can you talk about your expectations for pricing in '24? And how you're thinking about price versus cost playing out for the year?
Yes. So we didn't put out a specific number this year. I'd like to candidly get away from signaling our pricing expectations through our customer base. But I think the thing I'll say here is; a, we're very focused on rate in '24, right? So making sure price cost is rate positive, not just dollar positive. But I think more importantly, we're doubling down on the cost side of the equation in '24. Look, we've spent a lot of time with the team on pricing over the last 24 months. And I think that's now becoming, and has become more ingrained into the business. And we've always been a cost-conscious organization. But I think with all the inflation that's kind of been put in, the fact that we haven't been able to get rate on price cost, Tom and I are -- we've been working with the broader team about how do we double down our focus on cost, mainly around material and indirect spend. And we've kicked off a bunch of work streams across the company in this.
And I think that's probably flows through kind of more in the back half of the year, right? One, that's why we're so focused on inventory turns as well. So how do we turn that inventory out faster to get the benefit of some of this stuff? But two, this stuff takes a little bit of time to kind of getting grained into the business. So can't give a number, so you didn't miss anything, Vlad. But I would say, again, just in summary, price, I think we feel good about it being -- and grained culturally into the company, and we'll continue to do everything we can there and more. But I think we're doubling down this year on cost.
Next question comes from the line of Yuan Zhi with B. Riley Securities.
Congrats on a good quarter and the 2024 guidance. I have 3, if I may. First, on the Medical side. Can you maybe talk about some of the headwinds we are facing in the health care industry? As the Medicare physician fee schedule decreases, do you see any impact to the radiation therapy quality assurance part of the business? You touched some on the new clinic versus volume increase.
Yes. Firstly, Yuan, welcome. It's a pleasure to have you on the call today. As it relates to Medical -- and your specific question about headwinds coming from CMS and Medicare reimbursement as it relates to RTQA, in the broader context, when we think about the RTQA or radiation therapy quality assurance business, which is about -- today, about half of our total medical revenue. What we have seen over the last couple of years is that much of our growth or the overweighting of our growth has been in global markets. And we've called out the fact that in large measure, this is driven by enhanced capabilities that we have developed in region in terms of service support and broad-based promotion and commercial activities in the region. But when we step back and kind of look at market demand drivers overall in this market, there are really 2 main factors. #1 is the fact that today, the world has only about half of the radiation therapy clinics that it should have, if we were to apply Western standards throughout the developing world. That typically is in the form of linear accelerators, but it really can be extended to all forms of external beam therapy in the market. But bridging that gap or narrowing that gap is an important overall factor in global demand for radiation therapy capital equipment and the RTQA solutions that we provide in general. And so that certainly is a factor in the disproportionate international growth that we're seeing in the sector that has offset domestic conditions that have been a little bit softer in part because of margin compression or inversion on the part of the U.S. health care providers in this post-pandemic era, but part of it may factor into CMS reimbursement rates. The second major factor in market growth overall is simply an aging population demographic in the developed West. As people get older, they are more likely to get cancer. And certainly, in much of the G20 footprint, if you will, there are aging population demographics overall. And so, in general, it is our view, and it has been our experience that even though the specific CMS net reduction in reimbursements to the RadOnc, or radiation oncology community is about 2% this year. Our view is that the other factors, in particular, in the American market, the aging population demographic, the cancer incidence rate offsets that and is further supported by reversion back to positive operating margins on the part of U.S. health care providers, all of which is to say that we've considered that in our guidance, but we continue to feel constructive about our ability to grow this market.
Got it. Thank you so much for the thorough response there. Then on the radiopharma side, you have talked some in the prior question. So based that on what we have observed in 2023, the successful product launch of [ Pluvicto ] and expansion of clinical pipeline in clinical trials. Do you anticipate a similar trend in 2024? In other words, what factors do you think will move the performance of this segment higher or lower? Is there anything that is special that we should be looking for in 2024?
Yes, we certainly, again, are very bullish on the radiopharmaceutical market in general, but most specifically, this revolution that we've talked about that's taking place in therapeutic radiopharmaceutical applications overall. You mentioned that [ Pluvicto ], which, in its first year, I think, was better than $800 million drug. This is -- for those who don't follow the industry specifically, this is a therapeutic or a radiotherapeutic application for prostate cancers. If you look in the approval pipeline for other theranostic applications, as you might imagine, it's a very rich pipeline. There are additional PSMA, or prostate-focused solutions, breast, lung, endocrine system.
Our view is that, again, as others have stated, this is a market that really is undergoing a revolution that will change the nature of cancer care. Not that this will become the single kind of magic bullet that will cure cancer, but rather it will be an important component of broad-based cancer care solutions and will lead to a different dynamic mix between surgical oncology, conventional chemotherapy, external beam therapy and this theranostic application. So we do expect that we're going to continue to see ratable growth in the market. And as noted before, our focus really is on how do we continue to grow and evolve our position in the value chain for radiopharmaceutical solutions. And we're very, very excited about the ec2 deal, and how that will enable us to evolve our position in the marketplace, but there's much more work for us to do here.
Got it. Thanks for the helpful color there. And my last question here is, I just want to better understand the 2024 guidance for 5% to 7% of growth in the context of the past 2 years' performance. There was a strong recovery in 2022 after a weak performance during COVID, with the continued recovery into 2023, which was 12%. Should we anticipate a more stable growth rate of 5% to 7% going forward? Of course, there's long-term tailwinds on the technology side as well the radiopharma or medical side?
Look, if you look back over the last 2 years, our organic growth rate this year is about 9% at the total company level. Last year was about 6%. And so you got 2-year stack numbers, '23 and '22, 15% and 9% for '22 and '21. So look, 5% to 7% is not that different of a number from what we've seen. And I think, candidly, there's a lot of tailwinds. But look, we'll take 1 quarter and 1 year at a time here, and we'll see how things evolve. And if we think, longer term, we can update the numbers that we've kind of guided more longer term, then we'll do so. But I think these are reasonable numbers to be putting up with the history we've had, the order growth we've seen.
I think the biggest thing to recognize is the order growth gives us confidence in being able to deliver. And I think that's kind of the most important thing as we exit '23 and begin our '24 journey here. So yes, we like those numbers. And we like how we're set up for '24. I think that's really the focus right now.
Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to turn the floor over to Thomas Logan for closing comments.
Thank you. And thanks to all who dialed in today. 2023 was a good year for Mirion. Again, I think we continued our evolution in terms of operational performance. We feel very good coming into 2024 about overall market dynamics, the top line support that will accrue from that. So for us, it's down to execution. And we're very, very focused, as we've noted, on operating margins, cash flow conversion, our digital conversion as a business and the exceptional new product launch focus that we have in the year ahead. These are things that are well within our wheelhouse. We are very proud of our long-term history of being strong operators and have a high degree of confidence as we come into 2024.
So we'll look forward to sharing the journey with you as we move through it. But let's end by again thanking all for participating today, and we look forward to our next call.
Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.