Mirion Technologies, Inc. (MIR) Earnings Call Transcript & Summary

Welcome back. We're going to get started again. We're very excited to have Mirion Technologies with us today. We've got Tom Logan and Brian Schopfer. Tom is the Founding Chairman and CEO of Mirion and Brian is the CFO and was named CFO in May 2020.

So what I want to do is turn it over to you, Tom. Maybe for those of you in the audience who don't know Mirion as well, maybe you could talk about some of the attributes that make Mirion what it is today, and maybe also talk about some of the news that came out today too, because I think that's quite interesting.

Okay. Well, that's quite an opening pitch, Andy. Thank you for that. So let me begin by describing our company. Mirion is a company that specializes in the field of ionizing radiation, which at first pass sounds very arcane, very narrow. But the reality is that it's a $20 billion market, of which the currently served component is about $4 billion. We pride ourselves in being the leader in radiation detection, measurement and analysis technologies. And we can back that up by the fact that we are the global leader in 14 of our 17 major product categories. Company today is about $800 million in revenue. We have a -- I've been the CEO and C for almost 20 years, and we've taken the company through quite a transformation. Today, if you were to look at our revenue composition, you'd find that nuclear power is about 35% of our total revenue. Medical is about a similar size, it's about 38% overall. And the balance is split between defense, both military and civil, the life sciences space and other industrial overall. Our goal fundamentally is to make the world a better place. And we do this by keeping people safe. We do it by improving human health outcomes in the medical realm. We do it by making the environment -- improving the environment through the production of carbon-free electricity. And so we're very proud of the nature of the work we do. And we're very excited about the arc of our business overall. As we look at the overall dynamic within our industry, the vertical market demand drivers that continue to be very strong, certainly in nuclear power, where there is a renewed sense of vitality. I hesitate to use the word renaissance because it's been used too many times in the past. But the nuclear industry is very vital right now. Similarly, our medical business is performing very, very well, driven by demographic and technological trends. And so across the board, we see demand drivers that are constructive. And importantly, our history, again, over a long period of time is to be relatively acyclical. We don't tend to be overly economically sensitive as a business. We became a public company just over a year ago in October of 2021. We became public through a SPAC. And this was just as the SPAC market was becoming a bit more challenging. We came out with a little bit higher leverage than we expected to. We came out with about 4.5x leverage at the time of the de-SPACing event. And as we've come into a -- or effectively birthed as a public company into a market that was transitioning to a risk-off mode overall, that became more and more of an issue. And the level of attention that the investment community has placed on the leverage on our balance sheet has been significant, I think, increasingly over the course of the last year. And the great news that we announced today is that T. Rowe Price is making a direct equity investment, primary equity investment into our company of $150 million, of which $125 million will immediately go towards debt paydown. The residual will be part of our opportunistic M&A war chest, if you will. But that will immediately take our leverage down to somewhere in the 3.5x to 3.6x range. And we've revised our guidance in our December earnings call a few weeks ago. We guided that we would finish the year at or below 4x leverage. We're now reducing that target number to 3.1x. So this is a, in our view, great news, and we're delighted to welcome, obviously, T. Rowe Price into our capital structure, and we think this helps us ultimately position the business for the balanced growth that we expect to deliver longer term as we have historically.

Tom, I appreciate that. So I'll get a little bit more into M&A later, but I should just ask you one follow-up. So now that you're down in the mid 3s, where do you go from here? Where is the comfortability level for Mirion?

Yes. And so the key here really is all about what do we do from an M&A standpoint, how ambitious do we get? And the history of the company is one where we've been funded by private equity, again, for nearly 2 decades. And over the majority of that time, as a company, we carry roughly 6x leverage. And so for us, the nature of our business, the nature of our free cash flow dynamics, et cetera, is such that, that was always a very comfortable level for us. We're taking the company now, again, down into the mid-3s immediately. And again, our goal is to continue to drive it. Right now, we're fixated on driving it below 3.1x. But I think in general, the market would like us to be under 3x, and that's something that we're acutely sensitive to and we're going to be very disciplined about. And to a degree, we think we can have it both ways. If you look at some of the recent M&A deals that we've done, the impact they've had on our leverage either has been nominal or, in some cases, it's actually been de-levering. In other words, the leverage impact has been favorable. And we see continued opportunities to do some interesting things in our M&A pipeline. And so to be clear, we're going to be very disciplined about continuing this deleveraging journey, but that doesn't mean we're going to go pencils down on M&A.

So related, Tom, like Mirion, I think when we -- when you went public, you talked about wanting to be an industrial compounder. And then sort of '22 happened where just a lot of external headwinds that you faced. So maybe talk about some of the lessons that you might have learned as a new public CEO. And how -- where do you go from here? What inning are you in terms of you think being viewed as an industrial compounder?

Yes. So clearly, we're still in our early innings. So I think that when people think about our company, they're intrigued by what we represent, what our history has been, the value, the significant value that we have created historically and the clarity of our vision as we look ahead. But addressing 2022, it was a rough year. It was a tough year for all industrial companies. It was disproportionately difficult on us for a couple of reasons. Number one, as our debut year as a public company, we incurred a lot of incremental public company costs that had a margin impact, a negative margin impact of about 170 basis points. And these were all kind of first-time events that we were building into, but that certainly had an impact, not only in terms of the margin profile of the business, but also the free cash flow dynamics. From a macro standpoint, similar to the rest of the world, we dealt with the challenges of a spike in inflation, tight labor markets, higher interest rates, continued supply chain difficulties, et cetera. But as a company, we were disproportionately impacted by the loss of Russia-related revenue, principally associated with a nuclear power plant in Finland that was canceled and also foreign exchange between the 2 of those. Those significant episodic, I would argue, black swan events that cost us about 9 points of organic growth last year. And so all of this came together, again, as a newly public company that was carrying a little bit more debt than it should. And it made for a very challenging year. And we certainly had our hands full. We learned a lot over the period of time as we went through the different chapters of the year. But fundamentally, when you look at our business and this whole notion of being a compounder, if anything, I think our views have strengthened. We talked a lot about this while we were in the PIPE raise and again in the de-SPACing process overall, given, again, the history of the company, the organic growth that we've enjoyed, the margin expansion that we've driven through our history, the high free cash flow dynamics overall. And I think some of that got lost in the mix a little bit last year as we struggled again with this confluence of issues that we've talked about. But what's different today is that the nuclear industry, again, the largest single vertical market that we play in is demonstrably stronger than it was 1.5 years ago. We have demonstrated the health of our medical business with an unbelievable year in terms of not only the revenue growth, but the order intake dynamics, the margin expansion that we've driven in that arena overall. And we've added to that with some smart M&A over the course of the year. So if anything, my conviction about us being a long-term compounder is elevated. It's not in any way diminished as a result of the challenging 2022. And I'm happy to tell you that as we come into 2023, we feel good that some of the headwinds that we faced last year have moderated. We feel good about the backlog coverage that we're carrying into the year. And we're very focused on execution this year and looking forward to the journey.

So maybe this could be for Brian too, like to that point, Tom. Brian, you gave a guidance this year. You don't have much of modest organic growth modeled, minimal margin expansion at the midpoint modeled if we exclude the inorganic activity in that. But you did mention the supply chain is improving, backlog coverage is better. So can you give us more color into what you're seeing? How much contingency did you put in the guidance given '22 was kind of a mess, exact numbers?

I'm not going to give away all of our secrets. I think we've thought deeply about what and how we guided our year this year, and we definitely didn't want to relive '22. And I think we put our guidance out, candidly, with that in mind. We've told the market, hey, please, we're assuming price/costs kind of neutral for the year. I think Tom and I would be disappointed, candidly, if that's where we end up for the year. But until we begin to see some of these things flow through the P&L, both on the price side and we're able to get after some more of the cost stuff, we want to be very thoughtful about what we've put out there. So I think that's how we're thinking about it. It's really about not reliving '22. And we have a little bit of a margin challenge in the front half of the year that we've said. And I think as we deliver, we'll continue to assess where we're at.

That's helpful. And then, Tom, maybe I'll ask you specifically about nuclear. You've been particularly bullish about nuclear. There's an added catalyst here in SMRs, which I think most of us think is a medium to long-term task, but maybe you can sort of talk about that. I think when you went public, you talked about nuclear. I think you talked about nuclear-related growth being a 2% to 4% growth market. Do you think ultimately that it's higher than that?

Yes. I think the short answer to that is it could be. Our view, or I should say my view, on what's happening within the nuclear power industry is that, firstly, the installed base is much healthier than it has been in many decades. So if you look across the globe, today, there are about 450 operating nuclear reactors scattered throughout North America, Europe, Asia. And the health of that installed base economically is a function of 2 things: the degree of government support in the form of regulation and/or in some cases, subsidies; and secondly, the price of electricity, which in the main is governed by the price of natural gas. And if we compare where we are today versus where we were 1.5 years ago, there is a market difference between the 2 in terms of, again, the level of support that we've seen, even the change of stance. So we've seen in some marginal state sponsors, countries like Germany and Belgium, which have essentially reversed prior decisions on plant shutdowns, even my home state of California, which has reversed its stance on the Diablo Canyon Nuclear Power Plant is a reflection of the kind of political support that we're seeing overall. And the importance of that is that it gives operators confidence that they can take a long-term view, that they're not going to have the regulatory rug pulled out from underneath them and they can make smart long-term decisions. But the shorter-term economics, again, are driven by the price of electricity, whether it's in regulated markets or deregulated markets. We have seen a substantial increase over the last few years. That has made the operators more profitable. And as a consequence, it creates an incentive for them to run hotter, run longer, potentially upgrade capacity overall. So coming back to your question in terms of how that makes us feel about nuclear power, recognize that typically about 3/4 of our revenue from the nuclear power segment comes from the installed base. And when that installed base is healthy, they're more likely to spend more money on capital equipment and software and services that we sell. And I think there's a reasonable expectation that we'll see that to an increasing degree over the planning horizon. Again, we're being, I think, measured in our outlook in the near term. But certainly, the indicators in terms of vertical market dynamics are very favorable. Now longer term. Andy raised the concept of small modular reactors. This is an exciting market. And candidly, our level of enthusiasm about this market is mounting. It seems to be increasing every year because, firstly, it's important to note that the target market for the small modular reactor movement, if you will, is not to replace utility-scale nuclear power plants. It's to replace coal plants and provide energy and other industrial applications where a 1.4 gigawatt power plant simply would be out of the question because the grid infrastructure could not support it. You don't have the physical ability to create a huge exclusionary zone, et cetera. So the SMR market in the main is focused on decommissioned or decommissioning coal plants. And if you run the numbers and look at the potential scale of the market, you very quickly come to the conclusion that this could eclipse the entirety of the utility scale nuclear power industry over time, and that period of time may be more rapid than we've contemplated. Our specific view is that, first, you should note that we have booked revenue on kind of proof-of-concept, SMR projects. We continue to work very, very hard to cultivate strategic relationships with major players in this space. Our specific view is that, that activity will build, but it's still not going to be a material kicker to our kind of intermediate term planning horizon in the next 4 to 5 years, if you will. But the view is that the subsequent 4- to 5-year period is where we're really likely to see this. And again, I think this is a kicker that from a long-term standpoint, may change the view on nuclear power.

Interesting. And then maybe just give us a little more detail on how recent U.S. legislation, whether it's the infrastructure bill, the Inflation Reduction Act, how it's helped your nuclear business, if at all. And then when we think about other regions of the world, it seems like a lot of the new build is coming from China. So do you expect to have a good market share in a place like China moving forward?

Yes. So in terms of government support we've seen, over the span of the last 8 years or so in the U.S., an increasing level of government support. Initially, that began at the state level. And within the States, it really began in New York where they introduced legislation a number of years ago to preserve the operation of plants operating in Upstate New York. That's spread to a variety of other states. And it's a reflection of the fact that there's a strong interest not only in the employment base power supply, but also in terms of decarbonizing the electrical generation capacity of those states. That was added to by the federal government, which to your point, more than $5 billion in the infrastructure bill, additional many billions of dollars in the inflation reduction bill. Most of that hasn't been allocated yet. So as of right now, it's been more of a signaling event or effect more than anything else, which is powerful in the sense that, again, it demonstrates to the world that the government on a bipartisan basis is solidly behind nuclear power, and that creates a lot of confidence overall. I think as the money starts flowing in a more material way, it obviously adds to the strength of the industry. And hopefully, we see a lot of reinvestment that ultimately flows through as a result. Now in terms of China, China has always been an important market to us. It's not a huge exposure. I think China is, what, 7% of our revenue or thereabouts with nuclear power being the largest component of it. We have a history of participating in the China nuclear industry that goes back more than 30 years that we're very proud of and have been very active. And China continues to be an important market for us overall. We expect that over time, our wallet share will decline as it has had historically in China. But having said that, just last year, we booked our largest nuclear order ever for componentry in China. And so we continue to be encouraged by the state of that market.

Maybe the other thing, Tom, is as you think about other countries, right, France is buying out the rest of EDF, right? That shows their support, both for the nuclear industry and what they -- I've already announced they'll continue to build new nuclear reactors. The U.K. is clearly putting money to work on more nuclear reactors in there. And both of them are also on the SMR trade, right? So both of them are putting money behind their respective counterparts, whether it's Rolls-Royce or EDF or SMR market. So I think you're seeing, in the U.S., that's close to the home, but in the other big Western market, France, you're seeing a lot of governments and even in the U.K., the same.

That's right.

Maybe I could ask Brian or Tom, like where do you think then the biggest opportunity is for new nuclear projects for you guys?

Well, in the near term, it's in a variety of regions. We see a continuation of activity. In China, we see an acceleration of growth. In Korea, where there has been, on the heels of their last presidential election, a market change in the pronuclear dynamic. We are seeing in a variety of NATO members like Turkey and Hungary, we are seeing significant nuclear development. But beyond that, if we look regionally, we expect that Poland, ultimately, Ukraine will build more nuclear reactors. In the Europe-Gulf region, we'll see a lot of activity. We'll see a continuation of the activity that's taken place in the U.K., in France and in other markets. And so we expect that the utility-scale new build activity will be robust and probably accelerate over the span of the next decade or longer.

That's helpful. And then within your industrial segment, you have other businesses. Nuclear labs, defense. So maybe you could talk about those other businesses. And you've mentioned that defense has sort of a longer gestation period these days in terms of orders. How does the debate in Washington impact that gestation period around your budget ceiling and such?

Yes. So firstly, just to note our capabilities in the defense arena, firstly, we equipped today 19 of the NATO armed forces with militarized radiation detection equipment, green gear, if you will. That's designed to protect both the war fighters as well as provide information in the battle arena. From a civil defense standpoint, we provide the instrumentation, expertise and services to support environmental remediation in the wake of any kind of nuclear incident. Most recently, in Fukushima in 2011, where we participated extensively in food safety, human health monitoring, in vivo and area monitoring and things like that. So it's an area where our capabilities are second to none. We're very, very proud of those capabilities. Now the defense arena for us is an area where last year, in particular, given the acute nature of the conflict in Ukraine, we had a high degree of expectation that we would see some episodic related defense revenue opportunities come in. The level of engagement that we've had with all relevant agencies has been very high. But one of the things that we've noted as many other companies have noted is that government procurement cycle seem to be longer and the decision-making process seems to be dragging out to a degree. We continue to have, I think, a very constructive outlook on our defense business overall. But the timing is difficult to predict, and this is a game that we've gotten out of. And so again, as we think about how we're guiding 2023, while we remain encouraged by the implicit optionality, if you will, of some incremental defense-related business, it's not something we're going to reflect in guidance until it happens.

Got it. That's helpful, Tom. And then maybe asking you about medical. It's accelerated nicely over the last few quarters of 2022. But you're guiding back to sort of normalized growth of mid-single digits in '23. So maybe you can just talk about what has driven your medical growth to the levels that it's been at for the last few quarters and why do you expect normalization?

So last year was an extraordinary year for our medical business if you look at it through any lens, whether it's order intake, delivered revenue, but maybe most importantly, the strategic positioning. I had the honor and the privilege and perhaps the burden of running our medical group for the majority of last year. And this was a time when we rebranded Mirion Medical to bring together our 3 different medical businesses in a coherent way. We did a sweeping reorganization that was really focused on creating more leverage for the commercial, operational and administrative synergy potential between the businesses. And we did all of this while delivering a barn burner of a year, part of which was driven by the fact that in our radiopharmaceutical business, we were lapping a year where we had, had some operational difficulty, some integration related -- I hate to say teething pains -- but just incidents overall that we were going through. But more importantly, our team just performed. They shot the lights out and they executed brilliantly in a very challenging environment. I guess the key point is that with the level of growth we delivered last year, it was a strong year. And if we think about a multiyear stack in revenue, to be clear, no, we're not raising our guidance to say that we're going to grow it strongly in the double digits forever in medical. And so we're being a little bit cautious about our views for this year notwithstanding the momentum we're carrying into the...

Let's be clear, we're lapping a 15% organic here.

Yes.

Pretty good year.

Tough comps.

Very.

I want to open it up to the audience in a little bit, but let me ask you one more related question on medical. So you talked about your nuclear dosimetry business within medical. It tends to grow a little bit lower, normalized low single digits versus your other medical businesses. But you are rolling out that new third generation Instadose technology. So could you update us on the rollout, what it could mean for the medical business for Mirion?

Yes. So Instadose is a technology that digitizes what is today an analog industry, and that is the field of occupational dosimetry, which is a fancy term that merely means monitoring the radiation, the cumulative radiation dose that radiation workers receive. This is principally a medical business and it's a global business. The way the industry works today again as it uses analog technology, which is tried and tested and is generally satisfactory to people. But we introduced a disruptive digital technology more than a decade ago called Instadose, which obviates the need to send badges back and forth, distribute them, provides more immediate feedback to users, changes behavior, improves compliance. It's a wonderful product. We are now in the process of commercializing the third generation of this technology, which we think will be a game changer. We are incredibly excited about it overall. Historically, we have used our technology platform to support our own services business. So think of us as being both Boeing and United Airlines. But as we think about not only the opportunity set, but we come back to our mission, which is fundamentally to make the world a better place, we've recognized that this is a technology that we should make available to the entire market and have been architecting an open platform strategy that will enable us to do that. Our views here and our outlook is very measured. We think that over time, this is the best technology platform in a global industry, and we think that over time, users will recognize that and gravitate toward it. But we're going to take a cautious approach to building that. And we hope to hit some key milestones this year, to begin with the commercial availability of this third generation toward the balance -- or toward the end of the year. And following that, we hope and expect to be able to make some announcements about early adopters that are taking advantage of this new open platform availability.

That's helpful. Any questions from the audience? Anybody want to ask a question? Anybody? All right, I will keep going. So just on the margins. So Tom or Brian, like you had some supply chain. We already talked about neutral price versus cost for this year. But can you talk about your opportunity to get your adjusted EBITDA margin incremental? I think you said long term, you think it can be a 50% incremental, which is pretty high for... But how do you get back there?

Well, I think some of this, we got to grow back into it. We're digesting almost 200 basis points of margin erosion this year just by being public. But listen, we get good operating leverage when we stay disciplined. We have too much, too many factors. We know that we need to consolidate our footprint. There's work we can do there. And price/cost over time should be in our favor. So obviously, we're not planning to see that this year. Like I said, I truly believe that if price/cost is neutral by the end of the year, we'll be disappointed in where we land. But I think getting through '23, digesting our wage inflation that's coming, -- wages are the biggest cost of the company -- letting price roll through the backlog into the P&L for another couple of quarters. I'm optimistic that as we get into '24 and beyond, we'll see incrementals closer to what we had originally discussed on the front end to going public.

Can you do more on the supply chain management side? Like I know you've had sort of industrial tubing issues or whatever. Like can you -- what are you guys doing to try to like improve resilience of supply chain for you guys? Because again, to your point, you want to be an industrial compounder. Compounders are usually pretty good at supply chain.

Yes. So this is an area where I think the world has been in battle stations mode now since the height of the pandemic, and we've certainly done all the conventional things that include trying to concentrate our contract manufacturing relationships to really lever up within those organizations and to make sure that the level of dialogue and the proactivity on both sides of the table has increased. But some of the longer burn things that we've done as we have bolstered our supply chain organization is to take a much more proactive look at the obsolescence potential of componentry. So rather than waiting to be surprised by a vendor that says, there is a certain capacitor, a certain microprocessor that has gone obsolete and they just increased the cost by a factor of 10, it's to be proactive about evaluating the bill of materials of every key product category to identify early on, what are the risk elements that may represent issues to be proactive about engineering design changes. And then beyond that, as we think about just generic supply dynamics, in our view, the world of just-in-time inventory as we knew it prior to the pandemic is over, at least for a while. And that we're in a mode now where it's much more of a traditional economic order quantity or EOQ model that we look at. And so as we look at different elements of our physical supply chain, we're trying to be prudent about how we think about economic order quantities. So we think about carrying load and a variety of other things. And so if I compare where we are today in terms of supply chain capabilities versus 2 years ago, the difference is enormous in terms of our internal capabilities. We've got a great team. We have been very resilient and scrappy for the last few years, but we think we'll get better and better.

Two things, right? One, we have a good starting place because we never went to the -- we were always -- better said, we are always in a more regionalized model, where most of our supply chain is in the same region where we manufacture, right? So we're not having to change that, which a lot of companies are. So we have a good footing. But the other thing is we've talked about medical kind of coming together as one business. That allows us to do a lot of things operationally as well, including on the supply chain side, right? So we're no longer thinking about these as individual small businesses, right? It allows our teams to reach across broader things. They got more things that they can use in their toolkit or to negotiate with suppliers, et cetera. So I think some of the organizational stuff that Tom has done over the last 12 months will also pay off in this area. But I think we're very focused in '23. You heard him say, it's about execution. That is deleveraging, but it's also on these operational things.

And I want to focus on one thing that you said you talked about you could sort of consolidate factors over time. Like it's not easy to do that. You know that. Is that sort of a 3-year plan? Like how do you think about that? And what could be the...

So interestingly, I mean, I've been with the company 6 years for the most part. I think I've closed, for Tom and the company, 5 or 6 factories in those 6 years. And by the way, half of those were in Europe. So we have a track record of doing this. We did 3 in the last 18 months. So I think it's for us, it's just -- it's about cost benefit. But one of the things the company is -- one of the reasons for our success is we have a local presence in a lot of places. And we don't ever want to lose that. And as we've always thought about do we need this many factories, that's something that weighs heavy on us, is making sure we have a local presence, especially in Europe. So I think as we think about the next 3 to 5 years, it's something we'll just continue to evaluate and where it makes sense, it's risk-reward, right?

Any questions? Okay. So I want to ask you about cash flow. So if I look at you guys again, just the fact that you're an aspiring compounder, I see compounders with 20% free cash flow as a percent of sales margins. And let's just say you're not there yet. So how do you bridge the gap to sort of get there? And how long does it take?

Well, I think this morning, we took a bit of a step, right, bringing the debt little down and the leverage is.

Raised the cash flow a little bit?

I did raise the cash flow number this morning. So I thought you'd be happy about that. But I think when you measure us, the leverage is the biggest thing that stands out, and then it's CapEx, right? And we have an elevated CapEx number this year. We've debated this internally quite a bit. There's a number of software and some, I would say, more one-time investments. We expect CapEx to come down as a percentage of revenue, '24, '25, '26 versus where we're sitting for '23. So I think it's those 2 pieces are the biggest gap. There's net working capital. Listen, last year, we built inventory, we weren't shy about that. A lot of companies build inventory last year. This year, net working capital will be a source of cash for us. That's in our guide. Now it's about the magnitude, right? And then the consistency of doing that. But at the end of the day, the interest rates and the CapEx are the biggest thing. And I think we're working on the interest rate stuff. That takes time. We've got to pay down debt. And the CapEx is just making sure we're getting the right ROI out of our investment.

And, Tom, just the scorecard of M&A -- because you always have to have a school card, right? It seems like you did all your M&A in medical over the last few years since like I kind of know you, most of it and growth in margin has actually been pretty good in medical. But how do you measure your sort of score card of M&A? And like you did take an impairment. I think it was on some legacy stuff. So maybe you can talk about that.

Just real quick on the impairment. I mean the impairment was more on the overall transaction of the company going public. That's not on a specific deal or set of deals. So it was more just the timing when we went public, where risk-free rates were, et cetera. That's what drove the impairment. Go ahead, Tom.

Yes. In terms of how we think about M&A, firstly, again, to just set the table, over the last 6 years, we've done 15 acquisitions. We've always been an acquisitive company. That's an important part of our story. And I think it's something that, candidly, I think we're good at. I think we're good at sourcing deals, closing them, and perhaps the best at integrating overall. And we have a very disciplined set of screening criteria when we look at a potential deal that includes a variety of different return measures. I'm not going to -- I'm not going to be specific about what we look at in terms of our threshold returns and how we risk handy, have those, et cetera. But suffice to say that if you look at our track record in terms of both our point of entry, but also where we get to on a post-synergy basis, I think we're very proud of that record and believe it's something that is embedded within our DNA and something we continue. I do want to give you the, let me be clear moment that I think you're looking for in terms of leverage. And that is that as we think about the current year -- as we demonstrated last year, where I think we were very measured about our M&A activity, where we principally we're integrating a deal that we had done just prior to the start of the year called, CIRS, and we purchased the Collins Critical Infrastructure business, which actually was an industrial deal for us overall. That was actually a deleveraging transaction for us if you ultimately look at what the impact on EBITDA was, what we paid for the asset as well. And so our view is that as we look ahead, we have, I think, a pretty clear idea as to where we want to grow from an M&A standpoint. We have a history, a 2-decade history of creating value through inorganic growth that will continue. But to be clear, we're going to be measured about our appetite here until we demonstrate our ability to de-lever the balance sheet.

So only have 30 seconds, Tom. So I'm going to ask you this question quickly because I'm asking this question of all companies, and you can give me a quick answer. So what are the top 2 or 3 innovations, megatrends or structural changes that have affected your company or will affect your company over the next 5 years? And are there any emerging industry trends that are perhaps being overlooked in the current discourse?

Yes. So the kind of the mega trend that will impact our product mix, service software, et cetera, really will be digitization. The ability to build on this critical infrastructure technology platform that's relevant in the industrial segment, principally in the nuclear power segment, and to use that as, again, a foundation for digitizing what is today largely an analog business for us overall. That will have a tremendous impact. But more broadly other trends that I think will impact us and others will be the nexus of some of the recent highly publicized breakthroughs in artificial intelligence, AI and robotics overall, which increasingly will find their way to our factory floor, our key business processes, our customer interactions, et cetera. And I think those things will be very, very powerful.

Awesome. Well, we really appreciate it, Tom and Brian. Thank you very much.

Andy, Thank you.

Thanks, Andy.