# Mirion Technologies, Inc. (MIR) FY 2022 MD&A Verbatim Item 7 Management's Discussion and Analysis from Mirion Technologies, Inc.'s 10-K for fiscal year 2022. SEC filing source: https://www.sec.gov/Archives/edgar/data/1809987/000162828023005646/mir-20221231.htm Accession: 0001628280-23-005646 Filing date: 2023-02-28 Report date: 2022-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high Company profile: /company/MIR/ All MD&A years: /company/MIR/mda/ Previous year: /company/MIR/mda/fy2021/ (FY 2021) Next year: /company/MIR/mda/fy2023/ (FY 2023) ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of Mirion’s financial condition and results of operations together with the consolidated financial statements and related notes of Mirion Technologies, Inc. that are included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section entitled “Part I, Item 1A. Risk Factors” or in other parts of this Annual Report on Form 10-K. Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements.” Unless the context otherwise requires, references in this section to “we,” “us,” “our,” “Mirion” and “the Company” refer to the business and operations of Mirion Technologies TopCo, Ltd. and its consolidated subsidiaries prior to the Business Combination and to Mirion and its consolidated subsidiaries, following the consummation of the Business Combination. Unless the context otherwise requires or unless otherwise specified, all dollar amounts in this section are in millions. Overview We are a global provider of products, services, and software that allow our customers to safely leverage the power of ionizing radiation for the greater good of humanity through critical applications in the medical, nuclear and defense markets, as well as laboratories, scientific research, analysis, and exploration. We provide dosimetry solutions for monitoring the total amount of radiation medical staff members are exposed to over time, radiation therapy quality assurance solutions for calibrating and verifying imaging and treatment accuracy, and radionuclide therapy products for nuclear medicine applications such as shielding, product handling, medical imaging furniture, and rehabilitation products. We provide robust, field-ready personal radiation detection and identification equipment for defense applications and radiation detection and analysis tools for power plants, labs, and research applications. Nuclear power plant product offerings are used for the full nuclear power plant lifecycle including core detectors, essential measurement devices for new build, maintenance, decontamination and decommission, and equipment for monitoring and control during fuel dismantling and remote environmental monitoring. We manage and report results of operations in two business segments: Medical and Industrial. •Our revenues were $717.8 million for the year ended December 31, 2022, of which 37.9% and 62.1% were generated in the Medical segment and the Industrial segment, respectively. Revenues were $154.1 million for the Successor Period from October 20, 2021 through December 31, 2021, $168.0 million for the Predecessor Period from July 1, 2021 through October 19, 2021, and $346.2 million for the unaudited six months ended June 30, 2021, of which 31.9%, 35.9% and 29.9% were generated in the Medical segment for the Successor Period, Predecessor Period, and unaudited six months ended June 30, 2021, respectively, and 68.1%, 64.1% and 70.1% were generated in the Industrial segment for the Successor Period, Predecessor Period, and unaudited six months ended June 30, 2021, respectively. •Backlog (representing committed but undelivered contracts and purchase orders, including funded and unfunded government contracts) was $737.4 million and $747.5 million as of December 31, 2022, and December 31, 2021, respectively. The Mirion Business Combination The Business Combination closed on October 20, 2021 (the “Closing Date”), and GS Acquisition Holdings Corp II ("GSAH") was renamed Mirion Technologies, Inc. Our Class A common stock is listed on the New York Stock Exchange (the "NYSE") under the ticker symbol “MIR.” The Business Combination has been accounted for under ASC 805, Business Combinations. GSAH has been determined to be the accounting acquirer. Mirion constitutes a business in accordance with ASC 805 and the Business Combination constitutes a change in control. Accordingly, the Business Combination has been accounted for using the acquisition method. Under this method of accounting, Mirion is treated as the “acquired” company for financial reporting purposes and our net assets are stated at fair value, with goodwill or other intangible assets recorded. On October 20, 2021, the Board of Directors determined to change Mirion TopCo's fiscal year end from June 30 of each year to December 31 of each year. The determination was made to align Mirion’s fiscal year end with GSAH’s fiscal year end. See the "Basis of Presentation" section below for further details regarding the impact of the Business Combination and the change in fiscal year-end on the presentation of our financial statements. 66 As a result of the Business Combination, Mirion’s financial statement presentation distinguishes Mirion TopCo as the “Predecessor” for periods prior to the closing of the Business Combination and Mirion Technologies, Inc. as the “Successor” for periods after the closing of the Business Combination. As a result of the application of the acquisition method of accounting in the Successor Period, the financial statements for the Successor Period are presented on a full step-up basis as a result of the Business Combination, and are therefore not comparable to the financial statements of the Predecessor Period that are not presented on the same full step-up basis due to the Business Combination. Key Factors Affecting Our Performance We believe that our business and results of operations and financial condition may be impacted in the future by various trends and conditions, including the following: •The Russia-Ukraine conflict—The Russia-Ukraine conflict has impacted and may continue to impact us, including through increased inflation, limited availability of certain commodities, supply chain disruption, disruptions to our global technology infrastructure, including cyberattacks, increased terrorist activities, volatility or disruption in the capital markets, and delays or cancellations of customer projects. •Foreign Currency—The U.S. dollar has been volatile during the year ended December 31, 2022, as it had appreciated sharply against most other major currencies since the second quarter of 2022, particularly in Europe, for both economic and geopolitical reasons. A strengthened U.S. dollar has had a negative impact on our revenue in our European operations. •Inflation and Interest Rates—We continue to actively monitor, evaluate and respond to developments relating to operational challenges in the current inflationary environment. Global supply chain disruptions and the higher inflationary environment remain unpredictable and our past results may not be indicative of future performance. In addition, the increase in interest rates, which we expect to continue, has in turn led to increases in the interest rates applicable to our indebtedness and increased our debt service costs. •Tariffs or Sanctions—The United States imposes tariffs on imports from China and other countries, which has resulted in retaliatory tariffs and restrictions implemented by China and other countries. There are, at any given time, a multitude of ongoing or threatened armed conflicts around the world. As one example, sanctions by the United States, the European Union, and other countries against Russian entities or individuals related to the Russia-Ukraine conflict, along with any Russian retaliatory measures could increase our costs, adversely affect our operations, or impact our ability to meet existing contractual obligations. •Medical end market trends—Growth and operating results in our Medical segment are impacted by: •Changes to global regulatory standards, including new or expanded standards; •Increased focus on healthcare safety; •Changes to healthcare reimbursement; •Potential budget constraints in hospitals and other healthcare providers; •Medical/lab dosimetry growth supported by growing and aging demographics, increased number of healthcare professionals, and penetration of radiation therapy/diagnostics; and •Medical radiation therapy quality assurance (“RT QA”) growth driven by growing and aging population demographics, low penetration of RT QA technology in emerging markets, and increased adoption of advanced software and hardware solutions for improved outcomes and administrative and labor efficiencies. •Strategic transactions—A large driver of our historical growth has been the acquisition and integration of related businesses. Our ability to integrate, restructure, and leverage synergies of these businesses will impact our operating results over time. From time to time we also divest businesses which could also impact our operating results. •Environmental objectives of governments—Growth and operating results in our Industrial segment are impacted by environmental policy decisions made by governments in the countries where we operate. Our nuclear power customers may benefit from decarbonization efforts given the relatively low carbon footprint of nuclear power to other existing energy sources. In addition, decisions by governments to build new power plants or decommission existing plants can positively and negatively impact our customer base. •Government budgets—While we believe that we are poised for growth from governmental customers in both of our segments, our revenues and cash flows from government customers are influenced, particularly in the short-term, by budgetary cycles. This impact can be either positive or negative. •Nuclear new build projects—A portion of our backlog is driven by contracts associated with the construction of new nuclear power plants. These contracts can be long-term in nature and provide us with a strong pipeline for the 67 recognition of future revenues in our Industrial segment. We perform our services and provide our products at a fixed price for certain contracts. Fixed-price contracts carry inherent risks, including risks of losses from underestimating costs, operational difficulties and other changes that may occur over the contract period. If our cost estimates for a contract are inaccurate or if we do not execute the contract within our cost estimates, we may incur losses or the contract may not be as profitable as we expected. In addition, even though some of our longer-term contracts contain price escalation provisions, such provisions may not fully provide for cost increases, whether from inflation, the cost of goods and services to be delivered under such contracts or otherwise. •Research and development—A portion of our operating expenses is associated with research and development activities associated with the design of new products. Given the specific design and application of certain of these products, there is some risk that these costs will not result in successful products in the market. Further, the timing of these products can move and be challenging to predict. •Financial risks—Our business and financial statements can be adversely affected by foreign currency exchange rates, changes in our tax rates (including as a result of changes in tax laws) or income tax liabilities/assessments, changes in interest rates, recognition of impairment charges for our goodwill or other intangible assets and fluctuations in the cost and availability of commodities. •Global risk—Our business depends in part on operations and sales outside the United States. Risks related to those international operations and sales include new foreign investment laws, new export/import regulations, and additional trade restrictions (such as sanctions and embargoes). New laws that favor local competitors could prevent our ability to compete outside the United States. Additional potential issues are associated with the impact of these same risks on our suppliers and customers. If our customers or suppliers are impacted by these risk factors, we may see the reduction or cancellation of customer orders, or interruptions in raw materials and components. •COVID-19—COVID-19 may affect revenue growth in certain of our businesses, primarily those serving our medical end markets, and it is uncertain how materially COVID-19 will affect our global operations generally if these impacts were to persist or worsen over an extended period of time. The extent and duration of the impacts are uncertain and dependent in part on customers returning to work and economic activity ramping up. The impact of COVID-19 on our customers has affected our sales operations in certain ways, including increased customer disputes regarding orders, delayed customer notices to proceed with production, delayed payment from customers and, on rare occasions, customers have refused to pay for their orders entirely. Further, access to customer sites for sales was limited in some cases. Non-GAAP Financial Measures We report our financial results in accordance with generally accepted accounting principles in the United States. (“GAAP”). However, management believes certain non-GAAP financial measures provide investors and other users with additional meaningful information that should be considered when assessing our ongoing performance. Management also uses these non-GAAP financial measures in making financial, operating, and planning decisions, and in evaluating our performance. These non-GAAP measures include adjustments in recent periods to increase period-to-period comparability following the Mirion business combination and becoming a public company in the fourth quarter of 2021. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, our GAAP results. The non-GAAP financial measures we present may differ from similarly captioned measures presented by other companies. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business. We use the non-GAAP financial measures “Adjusted revenues", “EBITDA,” “EBITA,” and “Adjusted EBITDA". "Adjusted EBITDA" is used in the calculation of the First Lien Net Leverage Ratio in the 2021 Credit Agreement described in Note 9 Borrowings. See the “Quarterly Results of Operations” sections below for definitions of our non-GAAP financial measures and reconciliation to their most directly comparable GAAP measures. Tax impacts for the non-GAAP financial measures are calculated based on the appropriate tax rate for each individual item presented. See the "Basis of Presentation" section below regarding the Successor and Predecessor periods. The following tables present a reconciliation of certain non-GAAP financial measures for the year ended December 31, 2022, Successor Period from October 20, 2021 through December 31, 2021, the Predecessor Periods from July 1, 2021 through October 19, 2021, and for the Predecessor fiscal year ended June 30, 2021. 68 [[GREPCENT_TABLE]] [["","Successor","","Successor","","","Predecessor","","Predecessor"],["(In millions)","Year Ended December 31, 2022","","From October 20, 2021 through December 31, 2021","","","From July 1, 2021 through October 19, 2021","","Year Ended June 30, 2021"],["Net loss","$","(288.4)","","","$","(23.0)","","","","$","(105.7)","","","$","(158.4)"],["Interest expense, net","41.9","","","6.2","","","","52.8","","","163.2"],["Income tax (benefit) provision","(18.2)","","","(6.8)","","","","(5.6)","","","(5.9)"],["Amortization","145.8","","","32.0","","","","19.7","","","62.8"],["EBITA","$","(118.9)","","","$","8.4","","","","$","(38.8)","","","$","61.7"],["Depreciation - Mirion Business Combination step-up","6.4","","","1.3","","","","\u2014","","","\u2014"],["Depreciation - all other","22.3","","","4.0","","","","6.2","","","20.8"],["EBITDA","$","(90.2)","","","$","13.7","","","","$","(32.6)","","","$","82.5"],["Stock-based compensation expense","31.8","","","5.3","","","","9.3","","","\u2014"],["Decrease in fair value of warrant liabilities","(37.6)","","","(1.2)","","","","\u2014","","","\u2014"],["Goodwill impairment","211.8","","","\u2014","","","","\u2014","","","\u2014"],["Other impairments(1)","7.0","","","\u2014","","","","\u2014","","","\u2014"],["Debt extinguishment","\u2014","","","\u2014","","","","15.9","","","\u2014"],["Foreign currency loss (gain), net","4.9","","","1.6","","","","(0.6)","","","13.4"],["Revenue reduction from purchase accounting","\u2014","","","2.3","","","","4.5","","","8.0"],["Cost of revenues impact from inventory valuation purchase accounting","6.3","","","15.8","","","","\u2014","","","5.2"],["Non-operating expenses(2)(3)(4)(5)(6)","30.7","","","7.0","","","","34.7","","","43.1"],["Adjusted EBITDA","$","164.7","","","$","44.5","","","","$","31.2","","","$","152.2"]] [[/GREPCENT_TABLE]] (1)Other impairments consist of $7.0 million of impairment charges primarily related to a business held for sale and an equity investment. (2)Non-operating expenses relate to costs that are nonrecurring in nature in our operations and are further described below. (3)Pre-tax non-operating expenses of $30.7 million for the year ended December 31, 2022 include $9.9 million in costs for one time set-up and integration for operational initiatives, $8.0 million related to the Business Combination and incremental one-time costs associated with becoming a public company, $6.0 million of restructuring costs, $3.8 million related to mergers and acquisition expenses, and $3.0 million of one-time information technology system costs to support the new public company. (4)Pre-tax non-operating expenses of $7.0 million for the Successor Period from October 20, 2021 through December 31, 2021 includes $1.9 million in costs for one-time set-up and integration initiatives, $2.2 million related to the Business Combination and costs to prepare for becoming a public company, $1.4 million of restructuring costs, $0.5 million of Merger and Acquisition Expense, and $1.0 million of one-time information technology system costs to support the new public company. (5)Pre-tax non-operating expenses of $34.7 million for the Predecessor Stub Period from July 1, 2021 through October 19, 2021 includes $26.2 million related to the Business Combination and costs to prepare for becoming a public company, $4.1 million in costs to achieve integration and operational synergies, $1.5 million of restructuring costs, $0.2 million of Merger and Acquisition Expense, and $1.5 million of costs to achieve information technology system integration and efficiency. (6)Pre-tax non-operating expenses of $43.1 million for the Predecessor Period fiscal year ended June 30, 2021 includes $14.2 million of legal and professional fees related to the Business Combination and costs to prepare for becoming a public company, $13.1 million in costs to achieve integration and operational synergies, $5.9 million of mergers and acquisition expenses, $5.5 million of restructuring costs, and $4.5 million of costs to achieve information technology system integration and efficiency. The following tables present a reconciliation of non-GAAP Adjusted Revenue and Adjusted EBITDA by segment for the year ended December 31, 2022, Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021. 69 [[GREPCENT_TABLE]] [["","Year Ended December 31, 2022 (Successor)"],["(In millions)","Medical","","Industrial","","Corporate & Other","","Consolidated"],["Revenues","$","271.7","","","$","446.1","","","$","\u2014","","","$","717.8"],["Revenue reduction from purchase accounting","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Adjusted Revenues","$","271.7","","","$","446.1","","","$","\u2014","","","$","717.8"],["Income from operations","$","(84.4)","","","$","(98.0)","","","$","(115.4)","","","$","(297.8)"],["Amortization","64.3","","","81.5","","","\u2014","","","145.8"],["Depreciation - core","13.3","","","8.2","","","0.8","","","22.3"],["Depreciation - Mirion Business Combination step-up","4.8","","","1.4","","","0.2","","","6.4"],["Cost of revenues impact from inventory valuation purchase accounting","0.9","","","5.4","","","\u2014","","","6.3"],["Stock-based compensation","0.6","","","1.0","","","30.2","","","31.8"],["Goodwill impairment","87.3","","","124.5","","","\u2014","","","211.8"],["Other impairments","\u2014","","","\u2014","","","7.0","","","7.0"],["Non-operating expenses","\u2014","","","\u2014","","","30.7","","","30.7"],["Other Income / Expense","\u2014","","","\u2014","","","0.4","","","0.4"],["Adjusted EBITDA","$","86.8","","","$","124.0","","","$","(46.1)","","","$","164.7"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","From October 20, 2021 through December 31, 2021 (Successor)"],["(in millions)","Medical","","Industrial","","Corporate & Other","","Consolidated"],["Revenues","$","49.2","","","$","104.9","","","$","\u2014","","","$","154.1"],["Revenue reduction from purchase accounting","2.3","","","\u2014","","","\u2014","","","2.3"],["Adjusted Revenues","$","51.5","","","$","104.9","","","$","\u2014","","","$","156.4"],["Income from operations","$","(4.3)","","","$","1.1","","","$","(19.7)","","","$","(22.9)"],["Amortization","13.8","","","18.2","","","\u2014","","","32.0"],["Depreciation - core","2.3","","","1.5","","","0.2","","","4.0"],["Depreciation - Mirion Business Combination step-up","0.9","","","0.4","","","\u2014","","","1.3"],["Revenue reduction from purchase accounting","2.3","","","\u2014","","","\u2014","","","2.3"],["Cost of revenues impact from inventory valuation purchase accounting","3.3","","","12.5","","","\u2014","","","15.8"],["Stock based compensation","\u2014","","","\u2014","","","5.3","","","5.3"],["Non-operating expenses","\u2014","","","\u2014","","","6.6","","","6.6"],["Other Income / Expense","\u2014","","","\u2014","","","0.1","","","0.1"],["Adjusted EBITDA","$","18.3","","","$","33.7","","","$","(7.5)","","","$","44.5"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","From July 1, 2021 through October 19, 2021 (Predecessor)"],["(in millions)","Medical","","Industrial","","Corporate & Other","","Consolidated"],["Revenues","$","60.3","","","$","107.7","","","$","\u2014","","","$","168.0"],["Revenue reduction from purchase accounting","4.5","","","\u2014","","","\u2014","","","4.5"],["Adjusted Revenues","$","64.8","","","$","107.7","","","$","\u2014","","","$","172.5"],["Income from operations","$","0.7","","","$","11.7","","","$","(54.0)","","","$","(41.6)"],["Amortization","9.8","","","9.9","","","\u2014","","","19.7"],["Depreciation - core","3.5","","","2.5","","","0.2","","","6.2"],["Depreciation - Mirion Business Combination step-up","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Revenue reduction from purchase accounting","4.5","","","\u2014","","","\u2014","","","4.5"],["Stock based compensation","\u2014","","","\u2014","","","9.3","","","9.3"],["Non-operating expenses","\u2014","","","\u2014","","","33.5","","","33.5"],["Other Income / Expense","\u2014","","","\u2014","","","(0.4)","","","(0.4)"],["Adjusted EBITDA","$","18.5","","","$","24.1","","","$","(11.4)","","","$","31.2"]] [[/GREPCENT_TABLE]] 70 [[GREPCENT_TABLE]] [["","Unaudited"],["","Six Months Ended June 30, 2021 (Predecessor)"],["(in millions)","Medical","","Industrial","","Corporate & Other","","Consolidated"],["Revenues","$","103.6","","","$","242.6","","","$","\u2014","","","$","346.2"],["Revenue reduction from purchase accounting","8.0","","","\u2014","","","\u2014","","","8.0"],["Adjusted Revenues","$","111.6","","","$","242.6","","","$","\u2014","","","$","354.2"],["Income from operations","$","(2.7)","","","47.7","","","(49.2)","","","$","(4.2)"],["Amortization","17.2","","","20.0","","","\u2014","","","37.2"],["Depreciation - core","6.4","","","5.1","","","0.4","","","11.9"],["Revenue reduction from purchase accounting","8.0","","","\u2014","","","\u2014","","","8.0"],["Cost of revenues impact from inventory valuation purchase accounting","4.7","","","\u2014","","","\u2014","","","4.7"],["Stock based compensation","\u2014","","","\u2014","","","(0.1)","","","(0.1)"],["Non-operating expenses","\u2014","","","\u2014","","","32.1","","","32.1"],["Other Income / Expense","\u2014","","","\u2014","","","0.3","","","0.3"],["Adjusted EBITDA","$","33.6","","","$","72.8","","","$","(16.5)","","","$","89.9"]] [[/GREPCENT_TABLE]] Our Business Segments We manage and report our business in two business segments: Medical and Industrial. Medical includes products and services for radiation therapy and personal dosimetry. This segment’s principal offerings include solutions for calibrating and/or verifying imaging, treatment machine, patient treatment plan, and patient treatment accuracy; solutions for monitoring the total amount of radiation medical staff members are exposed to over time; and products for nuclear medicine in radiation measurement, shielding, product handling, medical imaging furniture and rehabilitation. Industrial includes products and services for defense, nuclear energy, laboratories and research and other industrial markets. This segment’s principal offerings are: •Reactor Safety and Control Systems, which includes radiation monitoring systems and reactor instrumentation and control systems that ensure the safe operation of nuclear reactors and other nuclear fuel cycle facilities; and •Radiological Search, Measurement and Analysis Systems, which includes solutions to locate, measure and perform in-depth scientific analysis of radioactive sources for radiation safety, security, and scientific applications Recent Developments Russia and Ukraine The United States, the European Union, the United Kingdom and other governments have implemented major trade and financial sanctions against Russia and related parties in response to Russia's invasion of Ukraine. We do business with Russian customers both within and outside of Russia and with customers who have contracts with Russian counterparties. The conflict’s impact on us is predominantly in our Industrial segment where we have certain projects involving Russian customers or other Russian counterparties. On May 2, 2022, one of our customers announced that it had terminated a contract with a Russian state-owned entity to build a nuclear power plant in Finland. Our own contract for this project was also terminated, and represented a remaining performance obligation in our backlog of approximately $67 million, of which approximately 80% was scheduled to be recognized as revenue over the next five years. Due to the impact on our planned revenues from the cancellation, we performed an interim quantitative test of goodwill impairment as of May 1, 2022 for the RMS reporting unit and recorded a goodwill impairment charge of $55.2 million. As of December 31, 2022, while we had not received any other cancellation notices for any other Russian based projects, we experienced delays in recognizing project revenue during the year ended December 31, 2022 due to the trade and financial sanctions made to date, which negatively impacted our actual results compared to management expectations. The remaining performance obligations in our backlog for Russian related projects was $100.0 million at December 31, 2022. See further discussion in the "Results of Operations" section below. In addition, while we have not returned any advanced payment refunds, one customer has sought to recover approximately $6M in advance payments, which would also reduce outstanding performance bonds the Company maintains for related contracts. The imposition of export controls and economic sanctions directed at Russia continue to evolve as the war in Ukraine continues. For example, we expect that the 71 United States and the EU could issue a new round of sanctions. New sanctions imposed by the U.S., the UK or the EU could adversely affect (or prohibit) our ability to sell medical products in Russia and/or to provide services for the medical products previously supplied to Russian customers. We will continue to monitor the social, political, regulatory and economic environment in Ukraine and Russia, and will consider actions as appropriate. Supply Chain The global supply chain continued to be stressed by increased demand, along with pandemic-related and other global events that caused increased disruptions to us during the year ended December 31, 2022. The most notable impacts to us were delays in sourcing key devices and components needed for our products, resulting in delays in revenue recognition, and increased costs in materials and freight. We mitigated a portion of these cost impacts with price increases on certain products. While we experienced some improvements in shipping delivery and associated labor availability during the three month period ended December 31, 2022, the supply chain disruption continues to be a challenge and a risk of negatively impacting our future operating margins. Currency Exchange Rates On a year-over-year basis, currency exchange rates negatively impacted reported sales by approximately 4.5% for the year ended December 31, 2022 compared to the comparable period in 2021, primarily due to the strengthening of the U.S. dollar against most major currencies for most of the year ended December 31, 2022. Any further strengthening of the U.S. dollar against major currencies would adversely impact our sales and results of operations next year, and any weakening of the U.S. dollar against major currencies (e.g., euro, pound sterling) would positively impact our sales and results of operations for the next year. To hedge the currency translation risk related to net investments in euro-denominated foreign subsidiaries, we entered into cross-currency swaps with effective dates of October 31, 2022 and November 15, 2022, respectively. SIS Acquisition We continually evaluate potential acquisitions that strategically fit with the Company’s existing portfolio. As a result, on August 1, 2022, we acquired the Critical Infrastructure ("CI") business of Collins Aerospace (renamed Secure Integrated Solutions "SIS") via an Asset Purchase Agreement in an all-cash transaction valued at $6.6 million. The SIS business specializes in command-and-control software solutions for nuclear power plants and government facilities to protect systems against cybersecurity threats or compromises. The business is reported as part of the Industrial segment. Goodwill Impairment In the second quarter of the year ended December 31, 2022, we concluded that a triggering event had occurred in the RMS reporting unit of the Industrial segment as a result of the Russia-Ukraine conflict during the year. After the quantitative test, we recorded a goodwill impairment loss of $55.2 million for the Industrial segment. In the fourth quarter of the year ended December 31, 2022, the Company reorganized its reporting unit structure and performed its annual impairment test for all reporting units both before and after the reorganization. The results of the analysis for its pre reorganization reporting units indicated that carrying values of certain reporting units were in excess of their respective fair values. Therefore, we recorded non-cash impairment losses in the amount of $69.3 million and $87.3 million within the Industrial and Medical segments, respectively. The impairments were primarily due to decreases in current year market valuations and the impacts of higher market discount rates used in our discounted cash flow analysis when compared to the same measures at the Business Combination date. The Industrial North America and Industrial Europe reporting units carried less than 10% in excess of fair value over carrying value in the post reorganization impairment test. Due to declines in market valuations since the Business Combination date, these reporting units tests resulted in smaller cushions of fair value in excess of carrying value. As of December 31, 2022, we believe that the goodwill is recoverable for all five of our reporting units, however there can be no assurances that the goodwill will not be impaired in future periods. Interest Rates In connection with the Business Combination, certain of our subsidiaries of the Company entered into the 2021 Credit Agreement to refinance and replace the credit agreement from March 2019. The 2021 Credit Agreement provides for an $830.0 million senior secured first lien term loan facility and a $90.0 million senior secured revolving facility (collectively, the “Credit Facilities”). The term loan has a seven-year term (expiring October 2028), bears interest at the greater of Adjusted London Interbank Offered Rate ("LIBOR") or 0.50%, plus 2.75% and has quarterly principal repayments of 72 0.25% of the original principal balance. LIBOR has been increasing during the year ended December 31, 2022 as central banks, specifically the Federal Reserve, have been steadily raising their interest rates to reduce inflation. As a result, the interest rate for the term loan was 7.48% and 3.25% as of December 31, 2022 and December 31, 2021, respectively. If the Federal Reserve and other central banks continue to raise the interest rates, the interest rate for the term loan will continue to increase. We will continue to monitor the interest rate, and will consider actions as appropriate. Basis of Presentation Financial information presented was derived from our historical consolidated financial statements and accounting records, and they reflect the historical financial position, results of operations and cash flows of the business in conformity with U.S. GAAP for financial statements and pursuant to the accounting and disclosure rules and regulations of the SEC. The consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned or controlled subsidiaries. For consolidated subsidiaries where our ownership is less than 100%, the portion of the net income or loss allocable to noncontrolling interests is reported as “Income (Loss) attributable to noncontrolling interests” in the consolidated statements of operations. All intercompany accounts and transactions have been eliminated in consolidation. As a result of the Business Combination, the Company’s financial statement presentation distinguishes Mirion TopCo as the “Predecessor” through the Closing Date. The Company, which includes the combination of GSAH and Mirion subsequent to the Business Combination, is the “Successor” for periods after the Closing Date. As a result of the application of the acquisition method of accounting in the Successor Period, the financial statements for the Successor Period are presented on a full step-up basis as a result of the Business Combination, and are therefore not comparable to the financial statements of the Predecessor Periods that are not presented on the same full step-up basis due to the Business Combination. Certain Factors Affecting Comparability to Prior Period Financial Results Prior to the Business Combination, GSAH operated as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or assets. As a result, operations were minimal before the Business Combination and are not presented in the Predecessor Periods presented prior to the Business Combination. After the Business Combination our results of operations are not directly comparable to historical results of the operations for the periods presented, primarily because, in connection with the Business Combination, certain assets and liabilities had fair value adjustments applied to the Predecessor’s consolidated financial statements on the Closing Date, most notably: •Inventory; •Property, plant, and equipment; •Goodwill; •Intangible assets; and •Taxes. As a result, historical results of operations and other financial data, as well as period-to-period comparisons of these results, may not be comparable or indicative of future operating results or future financial condition. 73 Results of Operations For the Year Ended December 31, 2022 (Successor) Compared to the Successor Stub Period from October 20, 2021 through December 31, 2021, Predecessor Stub Period from July 1, 2021 through October 19, 2021, and unaudited Six Months Ended June 30, 2021 The following tables summarizes our results of operations for the periods presented below (in millions): [[GREPCENT_TABLE]] [["","","","","","","","","Unaudited"],["","Successor","","","Predecessor"],["(Dollars in millions)","Year Ended December 31, 2022","","From October 20, 2021 through December 31, 2021","","","From July 1, 2021 through October 19, 2021","","Six months ended June 30, 2021"],["Revenues","$","717.8","","","$","154.1","","","","$","168.0","","","$","346.2"],["Cost of revenues","407.7","","","100.2","","","","97.7","","","204.1"],["Gross profit","310.1","","","53.9","","","","70.3","","","142.1"],["Selling, general and administrative expenses","362.3","","","70.1","","","","101.6","","","127.1"],["Research and development","30.3","","","6.7","","","","10.3","","","19.2"],["Goodwill impairment","211.8","","","\u2014","","","","\u2014","","","\u2014"],["Impairment loss on business held for sale","3.5","","","\u2014","","","","\u2014","","","\u2014"],["Loss from operations","(297.8)","","","(22.9)","","","","(41.6)","","","(4.2)"],["Interest expense, net","41.9","","","6.2","","","","52.8","","","86.8"],["Foreign currency loss (gain), net","4.9","","","1.6","","","","(0.6)","","","(2.9)"],["Change in fair value of warrant liabilities - (gain)/loss","(37.6)","","","(1.2)","","","","\u2014","","","\u2014"],["Other expense (income), net","(0.4)","","","0.3","","","","1.6","","","(0.7)"],["Loss on debt extinguishment","\u2014","","","\u2014","","","","15.9","","","\u2014"],["Loss before benefit from income taxes","(306.6)","","","(29.8)","","","","(111.3)","","","(87.4)"],["Benefit from income taxes","(18.2)","","","(6.8)","","","","(5.6)","","","7.3"],["Net loss","(288.4)","","","(23.0)","","","","(105.7)","","","(94.7)"],["Loss attributable to noncontrolling interests","(11.5)","","","(0.8)","","","","\u2014","","","(0.1)"],["Net loss attributable to stockholders","$","(276.9)","","","$","(22.2)","","","","$","(105.7)","","","$","(94.6)"]] [[/GREPCENT_TABLE]] For purposes of management's discussion and analysis below, period over period comparisons represent full year 2022 results compared to the accumulation of the Successor Stub Period, Predecessor Stub Period, and the unaudited six months ended June 20, 2021. Overview Revenues were $717.8 million for the year ended December 31, 2022 and $154.1 million, $168.0 million and $346.2 million for the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively. Our Medical segment contributed $271.7 million, $49.2 million, $60.3 million, and $103.6 million of revenues for the year ended December 31, 2022, Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively. Our Industrial segment contributed $446.1 million, $104.9 million, $107.7 million, and $242.6 million of revenues for the year ended December 31, 2022, Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively. Gross profit was $310.1 million, $53.9 million, $70.3 million, and $142.1 million for December 31, 2022, Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively. Net loss was $288.4 million $23.0 million, $105.7 million, and $94.7 million for the year ended December 31, 2022, Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021. Our Medical segment contributed $84.4 million and $4.3 million losses from operations for the year ended December 31, 2022 and Successor Stub Period, respectively, and contributed $0.7 million income from operations and $2.7 million loss from operations for the Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively. Our Industrial segment was 74 responsible for $98.0 million loss from operations for the year ended December 31, 2022, and $1.1 million, $11.7 million, and $47.7 million income from operations for the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively. The overall increase in net loss is primarily driven by reduced revenues in the Industrial segment, a $211.8 million goodwill impairment charge in the Medical ($87.3 million) and Industrial segments ($124.5 million), increased amortization and depreciation expense due to the impact of purchase accounting related to the fair values of intangible assets and property, plant, and equipment for the Business Combination, and higher selling, general and administrative costs associated with stock-based compensation expense and costs associated with becoming a public company. Offsetting these items were increased revenues in the Medical segment; reductions in research and development expenses, interest expense, and loss on debt extinguishment; and a $36.4 million gain from change in fair value of warrant liabilities. Revenues Revenues were $717.8 million for the year ended December 31, 2022 and $154.1 million, $168.0 million, and $346.2 million for the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively. Revenues increased $49.5 million in the year ended December 31, 2022. Medical segment revenues increased for the year ended December 31, 2022 compared with the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, primarily due to the results of acquisitions in the Medical segment (CIRS acquisition), price increases, and organic growth. Also driving the increase was the impact of the deferred revenue fair value adjustment for the SNC acquisition, which reduced revenues for the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021. Offsetting the increase in Medical segment revenues period over period was a negative impact from foreign currency exchange. Industrial segment revenues decreased primarily due to project execution delays (driven by supply chain issues and the Russia-Ukraine conflict) and foreign exchange rate fluctuations, offset by the price increases and the impact of the SIS acquisition in 2022. Cost of revenues Cost of revenues was $407.7 million for the year ended December 31, 2022 and $100.2 million, $97.7 million, and $204.1 million for the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively, representing an increase of $5.7 million in the year ended December 31, 2022. Cost of revenues related to the Medical segment increased $19.2 million period over period due to an increase in compensation costs in conjunction with increased headcount over the same period, as well as inflation in the current year. In addition, cost of revenues for the year ended December 31, 2022 includes purchase accounting related to the fair value of inventory from the Business Combination and increased amortization and depreciation expenses resulting from increased intangible assets and increased fair values of property, plant, and equipment, respectively, from the Business Combination. Finally, cost of revenues for the Predecessor Stub Period and unaudited six months ended June 30, 2021 includes costs from purchase accounting related to the fair value of inventory from previous acquisitions that no longer impact the year ended December 31, 2022. Cost of revenues related to the Industrial segment decreased $9.6 million period over period. The decrease was primarily driven by a decrease in manufacturing supplies and materials costs due to delays in contract execution related to the overall revenue decrease in the Industrial segment, as well as lower costs from foreign exchange impacts in Europe. Offsetting the decrease in Cost of revenues were increased costs due to inflation, inventory write-offs due to defective circuit boards, the increased amortization and depreciation expenses from the Business Combination, additional costs for the purchase accounting related to the fair value of inventory from the Business Combination, and an incremental cost of revenues related to the SIS acquisition made in the year ended December 31, 2022. Finally, cost of revenues for the Predecessor Stub Period and unaudited six months ended June 30, 2021 includes costs from purchase accounting related to the fair value of inventory from previous acquisitions that no longer impact the year ended December 31, 2022. Selling, general and administrative expenses Selling, general and administrative (“SG&A”) expenses were $362.3 million for the year ended December 31, 2022 and $70.1 million, $101.6 million, and $127.1 million for the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively, resulting in an increase of $63.5 million. 75 Our Medical segment incurred higher SG&A expenses of $33.0 million for the year ended December 31, 2022. The increase was primarily due to the impact of the increased amortization expense resulting from intangible assets acquired in the Business Combination, the CIRS acquisition in the Medical segment and increased compensation expenses and increased receivable reserves related to switching distributors in China. Our Industrial segment incurred higher SG&A expenses of $37.4 million for the year ended December 31, 2022. The increase was primarily driven by the increased amortization expense resulting from intangible assets acquired in the Business Combination, as well as increased receivable reserves related to a Russian based customer. Corporate SG&A expenses were $105.8 million for the year ended December 31, 2022, resulting in a decrease in SG&A expenses of $6.9 million. The decrease was primarily driven by the decrease in other costs related to company-wide initiatives including legal and professional fees related to the Business Combination and reduced restructuring cost in the current year. The decrease was offset by an increase in stock-based compensation expense under the 2021 Omnibus Incentive Plan and Profit Interests (see Note 15, Stock-Based Compensation, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K), impairment charges related to a business held for sale and an equity investment, an increase in compensation expense, an increase in Corporate insurance, and higher professional services mostly due to becoming a public company. Research and development Research and development (“R&D”) expenses were $30.3 million for the year ended December 31, 2022 and $6.7 million, $10.3 million, and $19.2 million for the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively, resulting in a decrease of $5.9 million. The decrease in R&D expense was primarily a result of a reduction in R&D program spend of $2.8 million in the Medical segment and $2.9 million in the Industrial segment for the year ended December 31, 2022. Goodwill impairment Goodwill impairment charges were $211.8 million for the year ended December 31, 2022. In the second quarter of the year ended December 31, 2022, the Company concluded that a triggering event had occurred in the RMS reporting unit of the Industrial segment as a result of the Russia-Ukraine conflict during the year. Based on the quantitative test for the RMS reporting unit, the Company determined that the carrying value exceeded the fair value. As such, the Industrial segment recognized its best estimate of a non-cash impairment loss in the amount of $55.2 million (see Note 8, Goodwill and intangible assets, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K). In the fourth quarter of the year ended December 31, 2022, the Company performed its annual impairment test for all reporting units. The results of the analysis indicated that carrying values of the DMD EA (Industrial segment) and DSD (Medical segment) reporting units were in excess of their respective fair values. Therefore, the Company recorded non-cash impairment losses of $69.3 million and $87.3 million for the DMD EA and DSD reporting units, respectively, in the caption Goodwill impairment in our consolidated statements of operations (see Note 8, Goodwill and intangible assets, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K). (Loss) income from operations Loss from operations were $297.8 million for the year ended December 31, 2022 and $22.9 million, $41.6 million, $4.2 million for the Successor Stub Period, Predecessor Stub Period, and unaudited six months Ended June 30, 2021, which resulted in an increased loss of $229.1 million. On a segment basis, loss from operations in the Medical segment for the twelve months ended December 31, 2022 and the comparison periods was $84.4 million and $6.3 million, respectively, representing an increase of $78.1 million. Loss from operations in the Industrial segment for the year ended December 31, 2022 was $98.0 million and income from operations for the comparison periods was $1.1 million, $11.7 million and $47.7 million, respectively, representing an increase of $158.5 million. Corporate expenses were $115.4 million for the year ended December 31, 2022 and $19.7 million, $54.0 million and $49.2 million for the Successor Stub Period, Predecessor Stub Period, and unaudited six months Ended June 30, 2021, respectively, representing a decrease in loss from operations of $7.5 million. See “Business segments” and “Corporate and other” below for further details. Interest expense, net Interest expense, net, was $41.9 million for the year ended December 31, 2022 and $6.2 million, $52.8 million and $86.8 million for the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively, representing a $103.9 million decrease on a period over period basis. $105.2 million of the decrease is a non-cash decrease in interest related to the Shareholder Notes which were paid in full in connection with the closing of the 76 Business Combination. $1.3 million is an increase in interest due to a higher interest rate associated with 2021 Credit Agreement as of December 31, 2022 (7.48%) compared to the interest rate for the 2021 Credit Agreement as of December 31, 2021 (3.25%) or that of 2019 Credit Facility as of December 31, 2021 (4.25%) which was paid in full in connection with the closing of the Business Combination. For more information, see Note 9, Borrowings, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Foreign currency loss, net We recorded a loss of $4.9 million for the twelve months ended December 31, 2022 and a gain of $1.9 million for the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021 from foreign currency exchange. The change in net foreign currency losses is primarily due to depreciation of European local currencies in relation to the U.S. dollar and its impact on certain intercompany loans between Company subsidiaries. Change in fair value of warrant liabilities We recognized an unrealized gain of $37.6 million resulting from a decrease in the fair value of the Public Warrant and Private Placement Warrant liabilities during the year ended December 31, 2022. See Note 18, Fair Value Measurements, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Income taxes The effective income tax rate was 6% for the year ended December 31, 2022 and 23%, 5%, and (8)% for the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively. The difference in the effective income tax rate for the year ended December 31, 2022 and the Successor Stub Period was primarily due to an impairment on our goodwill during the year ended December 31, 2022. The difference in the effective income tax rate between the Successor Stub Period and the prior periods was primarily attributable to the mix of earnings and certain adjustments for the Successor Stub Period as a result of the Business Combination. The effective income tax rate for the Successor Period differs from the U.S. statutory rate of 21% due primarily to an impairment on our goodwill during the year ended December 31, 2022 and U.S. federal permanent differences. The effective income tax rate for the Predecessor Periods differs from the U.K. statutory rate of 19% due primarily to valuation allowances on certain U.K. losses and nondeductible interest expense. On August 16, 2022, the U.S. enacted the Inflation Reduction Act that includes a new alternative minimum tax based upon financial statement income (book minimum tax), an excise tax on stock buybacks and tax incentives for energy and climate initiatives, among other provisions. The Inflation Reduction Act is not expected to have a material impact on our consolidated financial statements. Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective January 1, 2022. The mandatory capitalization requirement increased our deferred tax assets and cash taxes. Business segments The following provides detail for business segment results for the year ended December 31, 2022, Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively. Segment (loss) income from operations includes revenues of the segment less expenses that are directly related to those revenues but excludes certain charges to cost of revenues and SG&A expenses predominantly related to corporate costs, shared overhead and other costs related to restructuring activities and costs to achieve operational initiatives, which are included in Corporate and Other in the table below. Interest expense, loss on debt extinguishment, foreign currency loss (gain), net, and other expense (income), net, are not allocated to segments. For reconciliations of segment revenues and operating (loss) income to our consolidated results, see Note 17, Segment Information, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 77 Medical [[GREPCENT_TABLE]] [["","","","","","","","","Unaudited"],["","Successor","","","Predecessor"],["(Dollars in millions)","Year Ended December 31, 2022","","From October 20, 2021 through December 31, 2021","","","From July 1, 2021 through October 19, 2021","","Six months ended June 30, 2021"],["Revenues","$","271.7","","","$","49.2","","","","$","60.3","","","$","103.6"],["(Loss) income from operations","$","(84.4)","","","$","(4.3)","","","","$","0.7","","","$","(2.7)"],["(Loss) income from operations as a % of revenues","(31.1)","%","","(8.7)","%","","","1.2","%","","(2.6)","%"]] [[/GREPCENT_TABLE]] Medical segment revenues were $271.7 million for the year ended December 31, 2022 and $49.2 million, $60.3 million, and $103.6 million for the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively, which represents an increase of $58.6 million. Revenues increased primarily due to the impact of the CIRS acquisition contributing $14.6 million, the impact of prior year purchase accounting adjustment related to the SNC acquisition which resulted in a revenue reduction in the prior year of $14.8 million, and an increased revenue of $32.8 million due to price increases and organic growth. Offsetting the increase in the Medical segment revenues period over period was a negative foreign currency exchange impact by approximately $2.4 million. Loss from operations, which excludes non-operational costs, was $84.4 million for the year ended December 31, 2022 and $4.3 million for the Successor Stub Period, respectively. Income from operations was $0.7 million and loss from operations was $2.7 million for the Predecessor Stub Period and the unaudited six months ended June 30, 2021, respectively, representing an increase in loss from operations of $78.1 million. The increase in loss from operations period over period was largely due to the goodwill impairment charge of $87.3 million recognized during the year ended December 31, 2022 in the DSD reporting unit, an increase in amortization expenses of $23.3 million and depreciation expenses of $4.8 million, resulting from increased intangible assets and increased fair value of property, plant, and equipment, respectively, from the Business Combination, costs related to CIRS business of $10.0 million, higher compensation costs of $5.9 million, higher bad debt reserves related to switching distributors in China of $1.5 million, and the inflation impact offset by the negative foreign currency exchange impact. Offsetting the increase in loss from operation further were the increase in revenues described above and the prior period inventory step-up of $3.3 million that no longer impact the year ended December 31, 2022. Industrial [[GREPCENT_TABLE]] [["","","","","","","","","Unaudited"],["","Successor","","","Predecessor"],["(Dollars in millions)","Year Ended December 31, 2022","","From October 20, 2021 through December 31, 2021","","","From July 1, 2021 through October 19, 2021","","Six months ended June 30, 2021"],["Revenues","$","446.1","","","$","104.9","","","","$","107.7","","","$","242.6"],["(Loss) Income from operations","$","(98.0)","","","$","1.1","","","","$","11.7","","","$","47.7"],["(Loss) Income from operations as a % of revenues","(22.0)","%","","1.0","%","","","10.9","%","","19.7","%"]] [[/GREPCENT_TABLE]] Industrial segment revenues were $446.1 million for year ended December 31, 2022 and $104.9 million, $107.7 million, and $242.6 million for the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively, representing a decrease of $9.1 million. The decrease is primarily driven by volume decreases due to both the delays caused by project execution timing from supply chain issues and impacts from the Russia-Ukraine conflict of $7.0 million and foreign exchange rate fluctuations of $28.6 million, offset by the price increase of $13.6 million and the impact of the SIS acquisition in $15.4 million in 2022. Loss from operations, which excludes non-operational costs, was $98.0 million for the year ended December 31, 2022 and Income from operations was $1.1 million, $11.7 million, and $47.7 million for the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively. Loss from operations, which excludes non-operational costs, increased $158.5 million period over period driven primarily by the decrease in revenues described above, the goodwill impairment charge of $124.5 million recognized during the year ended December 31, 2022 in the RMS and DMD EA reporting units, costs related to SIS business of $13.2 million, higher cost of revenues including $5.4 million of inventory step-up, higher amortization of $33.5 million, both related to the Business Combination purchase accounting, a 78 bad debt reserve with a Russian customer, inventory write-offs of defective circuit boards, and the inflation impact offset by the negative foreign currency exchange impact. Offsetting the increase further was the prior period inventory step-up of $12.6 million that no longer impact the year ended December 31, 2022. Corporate and other Corporate and other costs include costs associated with our corporate headquarters located in Georgia, as well as centralized global functions including Executive, Finance, Legal and Compliance, Human Resources, Technology, Strategy, and Marketing and other costs related to company-wide initiatives (e.g., Business Combination transaction expenses, merger and acquisition activities, restructuring and other initiatives). Corporate and other costs were $115.4 million for the year ended December 31, 2022 and $19.7 million, $54.0 million, and $49.2 million for the Successor Stub Period, Predecessor Stub Period, and unaudited six months ended June 30, 2021, respectively, which represents a decrease of $7.5 million. The decrease in the year ended December 31, 2022 was predominantly driven by a $34.6 million decrease in other costs related to company-wide initiatives including legal and professional fees related to the Business Combination that occurred during the Successor Stub Period and a $7.2 million reduction in operations and information technology integration costs. The decrease was offset by an increase in stock-based compensation expense of $15.6 million (see Note 15, Stock-Based Compensation, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K), an increase in impairment charges of $7.0 million related to a business held for sale and an equity investment, and an increase in compensation expense, facility costs (including Corporate insurance) and professional services in the amount of $10.8 million mostly due to becoming a public company. For reconciliations of segment operating income and corporate and other costs to our consolidated results, see Note 17, Segment Information, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 79 Periods from October 20, 2021 through December 31, 2021 (Successor) and July 1, 2021 through October 19, 2021 (Predecessor Stub Period) Compared to unaudited Six Months Ended December 31, 2020 (Predecessor) [[GREPCENT_TABLE]] [["","Successor","","","Predecessor","","Predecessor"],["(Dollars in millions)","From October 20, 2021 through December 31, 2021","","","From July 1, 2021 through October 19, 2021","","Six Months Ended December 31, 2020 (unaudited)"],["Revenues","$","154.1","","","","$","168.0","","","$","265.4"],["Cost of revenues","100.2","","","","97.7","","","155.8"],["Gross profit","53.9","","","","70.3","","","109.6"],["Selling, general and administrative expenses","70.1","","","","101.6","","","84.0"],["Research and development","6.7","","","","10.3","","","10.3"],["Income (loss) from operations","(22.9)","","","","(41.6)","","","15.3"],["Interest expense, net","6.2","","","","52.8","","","76.4"],["Foreign currency loss (gain), net","1.6","","","","(0.6)","","","16.3"],["Change in fair value of warrant liabilities","(1.2)","","","","\u2014","","","\u2014"],["Other expense (income), net","0.3","","","","1.6","","","(0.3)"],["Loss on debt extinguishment","\u2014","","","","15.9","","","\u2014"],["Loss before benefit from income taxes","(29.8)","","","","(111.3)","","","(77.1)"],["Benefit from income taxes","(6.8)","","","","(5.6)","","","(17.4)"],["Net loss","(23.0)","","","","(105.7)","","","(59.7)"],["Loss attributable to noncontrolling interests","(0.8)","","","","\u2014","","","\u2014"],["Net loss attributable to stockholders","$","(22.2)","","","","$","(105.7)","","","$","(59.7)"]] [[/GREPCENT_TABLE]] Overview Revenues were $154.1 million for the Successor Period from October 20, 2021 through December 31, 2021 and $168.0 million for the Predecessor Stub Period from July 1, 2021 through October 19, 2021. The increase of $56.7 million from the six months ended December 31, 2020 was primarily driven by acquisitions in the Medical segment and organic growth in the Medical segment. Cost of revenues was $100.2 million for the Successor Period and $97.7 million in the Predecessor Stub Period which increased 27.0% compared to the unaudited six months ended December 31, 2020, reflecting the increase in revenues. Gross profit increased by $14.6 million from the unaudited six months ended December 31, 2020. There was a net loss attributable to stockholders of $22.2 million for the Successor Period and $105.7 million for the Predecessor Stub Period. Net loss for the unaudited six months ended December 31, 2020 was $59.7 million. There was a $68.2 million increase in net loss as a result of the increase in gross profit, more than offset by higher SG&A expenses of $87.7 million, primarily driven by the impact of acquisitions in the Medical segment, increased non-operational legal and professional fees incurred to prepare for being a public company, and stock-based compensation expense. Offsetting the increase in net loss period over period was decreased net interest expense of $17.4 million, the positive impact of foreign currency exchange of $15.3 million, a gain recognized on the change in fair value of warrant liabilities of $1.2 million, offset by a net increase in income tax benefit of $5.0 million and a net increase in other expense (income), net of $2.3 million. The impact of purchase accounting related to the fair value adjustment of deferred revenue for the SNC acquisition reduced revenue for the Successor and Predecessor Stub Periods by $6.8 million. The impact of purchase accounting related to the fair value of inventory increased cost of revenues by $15.8 million for the Successor Period and $0.5 million for the unaudited six months ended December 31, 2020. The impact of purchase accounting related to the fair values of intangible assets and property, plant, and equipment for the Business Combination resulted in increased amortization and depreciation expense and increased net loss by $18.7 million and $1.3 million, respectively. Revenues Revenues were $154.1 million for the Successor Period and $168.0 million for the Predecessor Stub Period. Revenues increased $56.7 million from the unaudited six months ended December 31, 2020. The majority of the increase was a result of the acquisitions in the Medical segment contributing $61.3 million (of which $53.9 million was generated by SNC, $5.1 million by Biodex, $1.5 million by CIRS, and $0.8 million by other acquisitions) and a $3.2 million increase due to organic growth. Industrial segment revenues decreased $0.7 million, primarily driven by foreign exchange rate fluctuations of $2.5 million offset by a $1.8 million increase due to organic growth. The impact of purchase accounting related to the fair value 80 adjustment of deferred revenue for the SNC acquisition reduced Medical segment revenues for the Successor and Predecessor Stub Periods by $2.3 million and $4.5 million, respectively. By segment, revenues for the Successor and Predecessor Period were $49.2 million and $60.3 million in the Medical segment, respectively, and $104.9 million and $107.7 million in the Industrial segment for the Successor and Predecessor Periods, respectively. Movements in revenues by segment are detailed in the “Business Segments” section below. Cost of revenues Cost of revenues was $100.2 million for the Successor Period and $97.7 million for the Predecessor Stub Period. Cost of Revenues for the unaudited six months ended December 31, 2020 were $155.8 million. Cost of revenues as a percentage of revenues was 65.0% for the Successor Period, 58.2% for the Predecessor Stub Period, and 58.7% for the six months ended December 31, 2020. The increase in the Successor Period was driven by purchase accounting related to the fair value of inventory from the Business Combination. In addition, cost of revenues increased over the unaudited six months ended December 31, 2020 due to acquisitions in our Medical segment ($25.9 million combined from SNC, Biodex, CIRS, and other acquisitions) and an increase in our Industrial segment cost of revenues of $0.7 million offset by a decrease due to the impacts from foreign currency exchange rate fluctuations of $1.9 million. Cost of revenues for the Successor Period includes $15.8 million due to purchase accounting related to the fair value of inventory from the Business Combination, $0.9 million of increased amortization expense resulting from increased intangible assets from the Business Combination, and $1.1 million of increased depreciation expense resulting from increased fair values of property, plant, and equipment from the Business Combination. Cost of revenues for the unaudited six months ended December 31, 2020 includes $0.5 million due to purchase accounting related to the fair value of inventory from previous acquisitions. Selling, general and administrative expenses Selling, general and administrative (“SG&A”) expenses were $70.1 million for the Successor Period and $101.6 million for the Predecessor Stub Period. SG&A expenses were $84.0 million for the unaudited six months ended December 31, 2020, resulting in an increase of $87.7 million. The primary drivers behind the increase in SG&A expenses were the impact of acquisitions in the Medical segment ($20.8 million combined from SNC, Biodex, and CIRS), a $28.4 million increase related to the Business Combination and costs to prepare for becoming a public company, and a $14.6 million increase in stock based compensation expense related to the Profits Interests (see Note 14, Stock-based compensation). SG&A for the Successor Period includes $17.8 million of increased amortization expense resulting from increased intangible assets from the Business Combination and $0.2 million of increased depreciation expense resulting from increased fair values of property, plant, and equipment from the Business Combination. Research and development Research and development (“R&D”) expenses were $6.7 million for the Successor Period and $10.3 million for the Predecessor Stub Period. R&D expenses were $10.3 million for the unaudited six months ended December 3, 2020, resulting in an increase of $6.7 million. The increase in R&D expense was primarily a result of the prior period acquisitions in our Medical segment ($9.7 million combined from SNC, Biodex, and CIRS), partially offset by a decrease in R&D activity expensed in our Industrial segment of $2.2 million. Income (loss) from operations Loss from operations was $22.9 million for the Successor Period and $41.6 million for the Predecessor Stub Period. Income from operation was $15.3 million during the unaudited six months ended December 31, 2020 which resulted in an increased loss of $79.8 million. On a segment basis, income (loss) from operations in the Medical segment for the Successor Period and Predecessor Stub Period was $(4.3) million and $0.7 million, respectively, which includes $16.2 million and $4.5 million, respectively, in purchase accounting impacts described in revenues, cost of revenues, and SG&A above. Income from operations in the Industrial segment for the Successor Period and Predecessor Stub Period was $1.1 million and $11.7 million, respectively, which includes $21.4 million in purchase accounting impacts described in cost of revenues and SG&A above in the Successor Period. Corporate expenses were $19.7 million and $54.0 million for the Successor Period and Predecessor Stub Period, respectively. See “Business segments” and “Corporate and other” below for further details. Interest expense, net Interest expense, net, was $6.2 million for the Successor Period and $52.8 million for the Predecessor Stub Period. Interest expense, net, was $76.4 million for the unaudited six months ended December 31, 2020. The $17.4 million change is a 81 non-cash decrease in interest related to the Shareholder Notes which were paid in full in connection with the closing of the Business Combination. See Note 8, Borrowings, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Loss on debt extinguishment Loss on debt extinguishment in the Predecessor Stub Period of $15.9 million is the result of the write-off of previously deferred financing costs related to the 2019 Credit Facility that was extinguished in connection with the Business Combination. See Note 8, Borrowings, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Foreign currency (gain) loss, net The Company recorded a loss of $1.6 million for the Successor Period and a gain of $0.6 million for the Predecessor Stub Period from foreign currency exchange. The Company recorded a loss of $16.3 million for the unaudited six months ended December 31, 2020, from foreign currency exchange. The change in net foreign currency losses is due to appreciation in European and Canadian local currencies in relation to the U.S. dollar and primarily related to our Euro debt in the prior year comparable period. Change in fair value of warrant liabilities The Company recognized an unrealized gain of $1.2 million resulting from an increase in the fair value of the Public Warrant and Private Placement Warrant liabilities during the Successor Period. See Note 17, Fair Value Measurements, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Income taxes Income tax benefit was $6.8 million for the Successor Period and $5.6 million for the Predecessor Stub Period. Income tax benefit was $17.4 million for the unaudited six months ended December 31, 2020. Income tax benefit in the Successor Period differed from income tax benefit in the Predecessor Stub Period and the unaudited six months ended December 31, 2020, primarily due to changes in valuation allowances. Business segments The following provides detail for business segment results for the Successor Period, the Predecessor Stub Period, and the unaudited six months ended December 31, 2020. Segment income from operations includes revenues of the segment less expenses that are directly related to those revenues but excludes certain charges to cost of revenues and SG&A expenses predominantly related to corporate costs, shared overhead and other costs related to restructuring activities and costs to achieve operational initiatives, which are included in Corporate and Other in the table below. Interest expense, loss on debt extinguishment, foreign currency loss (gain), net, and other expense (income), net, are not allocated to segments. For reconciliations of segment revenues and operating income to our consolidated results, see Note 16, Segment Information, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Medical [[GREPCENT_TABLE]] [["","Successor","","","Predecessor","","","Predecessor"],["(Dollars in millions)","From October 20, 2021 through December 31, 2021","","","From July 1, 2021 through October 19, 2021","","","Six Months Ended December 31, 2020 (unaudited)"],["Revenues","$","49.2","","","","$","60.3","","","","$","52.1"],["Income (loss) from operations","$","(4.3)","","","","$","0.7","","","","$","8.7"],["Income (loss) from operations as a % of revenues","(8.7)","%","","","1.2","%","","","16.7","%"]] [[/GREPCENT_TABLE]] Medical segment revenues were $49.2 million for the Successor Period and $60.3 million for the Predecessor Stub Period, which is an increase of $57.4 million from Medical segment revenues of $52.1 million for the unaudited six months ended December 31, 2020. Revenues increased primarily due to the impact of acquisitions contributing $61.3 million (of which $53.9 million was generated by SNC, $5.1 million by Biodex, $1.5 million by CIRS, and $0.8 million by other acquisitions) and an increase of $3.2 million in our legacy business due to organic growth. Additionally, foreign currency 82 exchange rates positively impacted Medical revenues by approximately $0.3 million. The impact of purchase accounting related to the fair value adjustment of deferred revenue for the SNC acquisition reduced Medical segment revenues for the Successor and Predecessor Stub Periods by $2.3 million and $4.5 million, respectively. Loss from operations, which excludes non-operational costs, was $4.3 million for the Successor Period and income from operations was $0.7 million for the Predecessor Stub Period. Income from operations, which excludes non-operational costs, was $8.7 million for the unaudited six months ended December 31, 2020, representing a decrease in income from operations of $12.3 million. Income from operations as a percentage of revenues decreased approximately 20.0% largely due to the lower margins and higher operating expenses of acquisitions, driven in large part by amortization expense (reducing margins by $1.6 million and increasing operating expenses by $5.8 million). Additionally, income from operations as a percentage of revenues was impacted in the Successor Period by a $2.3 million reduction in revenue resulting from purchase accounting related to the SNC acquisition; increases in cost of revenues resulting from the purchase accounting impacts on inventory, amortization, and depreciation in connection with the Business Combination of $3.2 million, $2.0 million, and $0.8 million, respectively; and increases in SG&A expenses resulting from the purchase accounting impacts on amortization and depreciation in connection with the Business Combination of $8.3 million and $0.1 million, respectively. Income from operations as a percentage of revenues was impacted in the Predecessor Stub Period by a $4.5 million reduction in revenue resulting from purchase accounting related to the SNC acquisition, and in the unaudited six months ended December 31, 2020 by a $0.5 million due to purchase accounting related to the fair value of inventory from previous acquisitions. Industrial [[GREPCENT_TABLE]] [["","Successor","","","Predecessor","","","Predecessor"],["(Dollars in millions)","From October 20, 2021 through December 31, 2021","","","From July 1, 2021 through October 19, 2021","","","Six Months Ended December 31, 2020 (unaudited)"],["Revenues","$","104.9","","","","$","107.7","","","","$","213.3"],["Income from operations","$","1.1","","","","$","11.7","","","","$","33.8"],["Income from operations as a % of revenues","1.0","%","","","10.9","%","","","15.8","%"]] [[/GREPCENT_TABLE]] Industrial segment revenues were $104.9 million for the Successor Period and $107.7 million for the Predecessor Stub Period, which was a slight decrease of $0.7 million from revenues of $213.3 million for the unaudited six months ended December 31, 2020. The slight decrease is primarily driven by foreign exchange rate fluctuations of $2.5 million offset by a $1.8 million increase due to organic growth. Income from operations, which excludes non-operational costs, was $1.1 million for the Successor Period and $11.7 million for the Predecessor Stub Period. Income from operations, which excludes non-operational costs, was $33.8 million for the period ending December 31, 2020, representing a decrease of $21.0 million driven primarily by higher cost of revenues including $12.6 million of inventory step-up and higher amortization of $8.4 million, both related to the Business Combination purchase accounting. Corporate and other Corporate and other costs include costs associated with our corporate headquarters located in Georgia, as well as centralized global functions including Executive, Finance, Legal and Compliance, Human Resources, Technology, Strategy, and Marketing and other costs related to company-wide initiatives (e.g., Business Combination transaction expenses, merger and acquisition activities, restructuring and other initiatives). Corporate and other costs were $19.7 million for the Successor period and $54.0 million for the Predecessor Stub Period which is an increase of $46.7 million when compared to the unaudited six months ended December 31, 2020. The increase versus the comparable period was predominantly driven by $28.4 million of fees related to the Business Combination and costs to prepare for becoming a public company, an increase in stock-based compensation expense of $14.6 million related to the Profits Interests (see Note 14, Stock based compensation), $2.0 million increase in other costs related to company-wide initiatives ($4.2 million in operations and information technology integrations, $1.6 million in restructuring costs, partially offset by $3.6 million in lower merger and acquisition costs), an increase of $1.8 million in compensation expense, $0.9 million increase in facility costs and $0.9 million increase in corporate insurance mostly due to becoming a public company. For reconciliations of segment operating income and corporate and other costs to our consolidated results, see Note 16, Segment Information, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 83 Year ended June 30, 2021 (Predecessor) compared to year ended June 30, 2020 (Predecessor) [[GREPCENT_TABLE]] [["(Dollars in millions)","2021","","2020","","$Change","","%Change"],["Revenues","$","611.6","","","$","478.2","","","$","133.4","","","27.9","%"],["Cost of revenues","359.8","","","281.2","","","78.6","","","28.0","%"],["Gross profit","251.8","","","197.0","","","54.8","","","27.8","%"],["Selling, general and administrative expenses","211.2","","","158.1","","","53.1","","","33.6","%"],["Research and development","29.4","","","15.9","","","13.5","","","84.9","%"],["Income from operations","11.2","","","23.0","","","(11.8)","","","(51.3)","%"],["Interest expense, net","163.2","","","149.2","","","14.0","","","9.4","%"],["Foreign currency loss (gain), net","13.4","","","(0.6)","","","14.0","","","N/A"],["Other (income) expense, net","(1.1)","","","(1.0)","","","(0.1)","","","10.0","%"],["Loss before benefit from income taxes","(164.3)","","","(124.6)","","","(39.7)","","","31.9","%"],["Benefit from income taxes","(5.9)","","","(5.5)","","","(0.4)","","","7.3","%"],["Net loss","(158.4)","","","(119.1)","","","(39.3)","","","33.0","%"],["Income (loss) attributable to noncontrolling interests","(0.1)","","","\u2014","","","(0.1)","","","N/A"],["Net loss attributable to stockholders","(158.3)","","","(119.1)","","","$","(39.2)","","","32.9","%"]] [[/GREPCENT_TABLE]] Overview Revenues for the year ended June 30, 2021 (“FY 2021” or “fiscal 2021”) were $611.6 million, resulting in an increase of $133.4 million, or 27.9%, from the same period in the prior year primarily driven by acquisitions in the Medical segment and organic growth in the Industrial segment. Cost of revenues of $359.8 million also increased 28.0% compared to the same period in the prior year reflecting the increase in revenues, a $3.1 million increase in restructuring costs, and a $3.4 million increase in costs to achieve operational synergies. Gross profit increased by $54.8 million and as a percentage of revenue was consistent period over period for the Company, including a decrease in percentage of revenue in our Medical segment of 8.5%, offset by an increase in percentage of revenue in our Industrial segment of 1.4%. There was a net loss of $158.4 million for the year ended June 30, 2021 compared to a net loss of $119.1 million during the year ended June 30, 2020. The $39.3 million, or 33.0%, increase is the result of the increase in gross profit, offset by higher SG&A expenses of $53.1 million, primarily driven by acquisitions in the Medical segment and a $17.6 million increase in non-operational legal and professional fees incurred to prepare for being a public company and costs related to restructuring, mergers and acquisitions and costs to achieve synergies. Also contributing to the increase in net loss period over period was increased net interest expense of $14.0 million and the negative impact of foreign currency exchange of $14.0 million offset by a net increase in income tax benefit of $0.4 million. The impact of purchase accounting related to the fair value adjustment of deferred revenue reduced revenue in the year ended June 30, 2021 by $8.0 million. The impact of purchase accounting related to the fair value of inventory increased cost of revenues by $5.2 million for the year ended June 30, 2021. Revenues Revenues were $611.6 million for the year ended June 30, 2021, an increase of $133.4 million, or 27.9%, compared with $478.2 million for the year ended June 30, 2020. The majority of the increase was a result of the acquisitions in the Medical segment contributing $91.7 million (of which $48.9 million was generated by SNC, $32.6 million by Biodex, $9.2 million from AWST and $1.0 million from Dosimetrics). The Industrial segment revenues also increased $39.7 million of which $11.4 million was driven by Reactor Safety and Control Systems products and $28.3 million was driven by Radiological Search, Measurement, and Analysis Systems products resulting from increased product orders and release of new products and the positive impact from foreign currency exchange rate fluctuations of $18.4 million. The impact of purchase accounting related to the fair value adjustment of deferred revenue reduced revenue in the year ended June 30, 2021 by $8.0 million. By segment, revenues for the year ended June 30, 2021 were $155.7 million in the Medical segment and $455.9 million in the Industrial segment. Movements in revenues by segment are detailed in the Business Segments section below. 84 Cost of revenues Cost of revenues was $359.8 million for the year ended June 30, 2021, an increase of $78.6 million, or 28.0% compared to the year ended June 30, 2020. Cost of revenues as a percentage of revenues was flat year over year. The increase in cost of revenues was primarily due to acquisitions in our Medical segment ($53.6 million combined from SNC, Biodex, AWST, and Dosimetrics), an increase in our Industrial segment cost of revenues of $17.5 million related to the increase in revenues, including the impacts from foreign currency exchange rate fluctuations of $10.9 million, and $6.5 million of restructuring costs and costs to achieve operational synergies. Cost of revenues includes a $5.2 million increase from purchase accounting related to the fair value of inventory for the year ended June 30, 2021. Selling, general and administrative expenses Selling, general and administrative (“SG&A”) expenses were $211.2 million for the year ended June 30, 2021, an increase of $53.1 million, or 33.6%, compared to the year ended June 30, 2020. SG&A expenses as a percentage of revenues were 34.5% for the twelve months ended June 30, 2021, a 1.5 percentage point increase compared with 33.1% for the twelve months ended June 30, 2020. The primary drivers behind the increase in SG&A expenses were the impact of acquisitions in the Medical Segment ($34.5 million combined from SNC, Biodex, AWST and Dosimetrics), $17.6 million increase in non-operational legal and professional fees incurred to prepare for being a public company and costs related to restructuring, mergers and acquisitions and costs to achieve synergies, $6.4 million increase in compensation-related expenses and the impact from foreign currency exchange rate fluctuations of $5.5 million, partially offset by a decrease in amortization of $3.7 million and a decrease in travel and entertainment expenses of $3.7 million. Research and development Research and development (“R&D”) expenses were $29.4 million for the year ended June 30, 2021, an increase of $13.5 million, or 84.9%, compared to the year ended June 30, 2020. The increase in R&D expense was primarily due to business combinations ($10.4 million combined from SNC, Biodex, AWST, and Dosimetrics), increased R&D activity of $2.5 million to develop new products in the Industrial segment and the impact from foreign currency exchange rate fluctuations of $0.6 million. Income from operations Income from operations for the year ended June 30, 2021 was $11.2 million, a decrease of $11.8 million, or 51.3%, when compared to income from operations of $23.0 million for the year ended June 30, 2020. On a segment basis, income from operations was $6.0 million in the Medical segment, which includes $13.2 million in purchase accounting impacts described in revenues and cost of revenues above, and $81.5 million in Industrial segment. Corporate expenses were $76.3 million for the year ended June 30, 2021. See “Business segments” and “Corporate and other” below for further details. Interest expense Interest expense, net, was $163.2 million for the year ended June 30, 2021 compared to $149.2 million for the year ended June 30, 2020. The $14.0 million, or 9.4%, change is a non-cash increase in interest related to the Stockholder Notes which are described in Note 8 to the consolidated financial statements. Foreign currency (gain) loss, net The Company recorded a loss of $13.4 million for the year ended June 30, 2021, compared to a gain of $0.6 million for the year ended June 30, 2020, from foreign currency exchange. The change in net foreign currency losses is due to appreciation in European and Canadian local currencies in relation to the U.S. dollar. Income taxes Income tax benefit was $5.9 million for the year ended June 30, 2021 versus a benefit of $5.5 million for the year ended June 30, 2020. The $0.4 million change is primarily due to the mix of earnings and jurisdictions during each respective period. Business segments The following provides detail for business segment results for the years ended June 30, 2021 and June 30, 2020. Segment income from operations includes revenues of the segment less expenses that are directly related to those revenues but 85 excludes certain charges to cost of revenues and selling, general and administrative expenses predominantly related to corporate costs, shared overhead and other costs related to restructuring activities and costs to achieve operational initiatives, which are included in Corporate and Other in the table below. Interest expense, loss on debt extinguishment, foreign currency loss (gain), net, and other expense (income), net, are not allocated to segments. For reconciliations of segment revenues and operating income to our consolidated results, see Note 16, Segment Information, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Medical [[GREPCENT_TABLE]] [["(Dollars in millions)","June 30, 2021","","June 30, 2020","","$Change","","%Change"],["Revenues","$","155.7","","","$","62.6","","","$","93.1","","","148.7","%"],["Income from operations","$","6.0","","","$","13.9","","","$","(7.9)","","","(56.8)","%"],["Income from operations as a % of revenues","3.9","%","","22.2","%"]] [[/GREPCENT_TABLE]] Medical segment revenues were $155.7 million, for the year ended June 30, 2021, which is an increase of $93.1 million, or 148.7%, from the year ended June 30, 2020. Revenues increased primarily due to the impact of acquisitions contributing $91.7 million (of which $48.9 million was generated by SNC, $32.6 million by Biodex, $9.2 million from AWST and $1.0 million from Dosimetrics) and an increase of $1.2 million in our legacy business. Additionally, foreign currency exchange rates positively impacted Medical revenues by approximately $0.2 million. The impact of purchase accounting related to the fair value adjustment of deferred revenue reduced revenue for the year ended June 30, 2021 by $8.0 million. Income from operations, which excludes non-operational costs, for the year ended June 30, 2021 was $6.0 million, a decrease of $7.9 million compared with the year ended June 30, 2020. Income from operations as a percentage of revenues decreased approximately 18.3% primarily due to the lower margins and higher operating expenses of the acquisitions in the year ended June 30, 2021, driven in large part by amortization expense (reducing margins by $3.3 million and increasing operating expenses by $12.3 million). Bad debt expense in our legacy business also increased (partially driven by COVID 19) by $1.3 million. Additionally, income from operations as a percentage of revenues was impacted by the $8.0 million reduction in revenue and $5.2 million increase in cost of revenues resulting from purchase accounting. Industrial [[GREPCENT_TABLE]] [["Dollars in millions)","June 30, 2021","","June 30, 2020","","$Change","","%Change"],["Revenues","$","455.9","","","$","415.6","","","$","40.3","","","9.7","%"],["Income from operations","$","81.5","","","$","59.6","","","$","21.9","","","36.7","%"],["Income from operations as a % of revenues","17.9","%","","14.3","%"]] [[/GREPCENT_TABLE]] Industrial segment revenues were $455.9 million for the year ended June 30, 2021, an increase of $40.3 million, or 9.7% from the year ended June 30, 2020. Revenues increased in both product and service revenues, primarily due to new product offerings in the Radiological Search, Measurement and Analysis Systems product group such as the MBD-2 dosimeter and Aegis spectrometer. Foreign currency positively impacted revenues by approximately $18.4 million. Additionally, revenues increased due to the impact of the acquisition of Selmic in fiscal 2020, which contributed approximately $3.6 million of additional revenue in fiscal 2021 compared with fiscal 2020. Income from operations, which excludes non-operational costs, was $81.5 million for the year ended June 30, 2021, an increase of $21.9 million compared with the year ended June 30, 2020 driven primarily by higher revenues. Income from operations as a percentage of revenues increased 3.6% primarily due to operating expense savings driven primarily by COVID-19 restrictions on employee travel and fixed overhead absorption. Corporate and other Corporate and other costs include costs associated with our headquarters located in Georgia, as well as centralized global functions including Executive, Finance, Legal and Compliance, Human Resources, Technology, Strategy, and Marketing and other costs related to company-wide initiatives (e.g., merger and acquisition activities, restructuring and other initiatives). Corporate and other costs were $76.3 million and $50.5 million for the years ended June 30, 2021 and June 30, 2020, respectively. The $25.8 million increase in corporate and other expenses during the year ended June 30, 2021 versus the comparable period was predominantly driven by $14.2 million of legal and professional fees related to the Business 86 Combination and costs to prepare for becoming a public company, an increase in compensation and related costs of $4.2 million, restructuring costs of $5.5 million, an increase in mergers and acquisition, integration and operational efficiency costs of $4.0 million, an increase in professional fees of $2.4 million, and an increase in costs to achieve information technology system integration and efficiency of $1.1 million, partially offset by a decrease in debt issuance costs of $1.6 million, a decrease in travel and entertainment expenses of $1.1 million, and a decrease in facilities costs of $1.0 million. For reconciliations of segment operating income and corporate and other costs to our consolidated results, see Note 16–Segment Information to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Quarterly Results of Operations The following table sets forth selected unaudited quarterly financial data for the Successor quarters during the current fiscal year, for the periods from October 20, 2021 through December 31, 2021 (Successor Stub Period) and from July 1, 2021 through October 19, 2021 (Predecessor Stub Period), and for the three Predecessor fiscal quarters immediately preceding the Predecessor Stub Period. The information for each of these periods reflects all adjustments that are of a normal, recurring nature and that we consider necessary for a fair presentation of our operating results for such periods. The results of operations presented should be read in conjunction with our audited consolidated financial statements and notes thereto appearing elsewhere in this document and are not necessarily indicative of our operating results for any future period. Revenues for certain quarters/periods are impacted by the capital spending patterns of government customers, which are influenced by budgetary considerations and driven by timing of fiscal year-ends. [[GREPCENT_TABLE]] [["","Successor","","","Predecessor"],["(In millions)","December 31, 2022","","September 30, 2022","","June 30, 2022","","March 31, 2022","","From October 20, 2021 through December 31, 2021","","","From July 1, 2021 through October 19, 2021","","September 30, 2021","","June 30, 2021","","March 31, 2021"],["Net loss","$","(159.7)","","","$","(50.4)","","","$","(59.3)","","","$","(19.0)","","","$","(23.0)","","","","$","(105.7)","","","$","(46.7)","","","$","(54.0)","","","$","(40.7)"],["EBITA(1)(2)","$","(114.6)","","","$","(7.1)","","","$","(20.8)","","","$","23.6","","","$","8.4","","","","$","(38.8)","","","$","8.5","","","$","22.7","","","$","13.8"],["EBITDA(1)(2)","$","(106.8)","","","$","0.3","","","$","(13.5)","","","$","29.8","","","$","13.7","","","","$","(32.6)","","","$","13.6","","","$","29.5","","","$","18.8"],["Adjusted EBITDA(1)(2)","$","56.4","","","$","30.8","","","$","42.6","","","$","34.9","","","$","44.5","","","","$","31.2","","","$","30.9","","","$","49.9","","","$","39.8"]] [[/GREPCENT_TABLE]] (1)EBITA is a non-GAAP measure defined as U.S. GAAP net income (loss) before net interest expenses (including loss on debt extinguishment), income tax (benefit) provision, and amortization. EBITDA is a non-GAAP measure defined as income before net interest expense (including loss on debt extinguishment), income tax (benefit) provision, and depreciation (including finance lease amortization) and amortization. EBITA and EBITDA are not terms defined under U.S. GAAP and do not purport to be alternatives to net income as measures of operating performance or to cash flows from operating activities as measures of liquidity. Additionally, EBITA and EBITDA are not intended to be measures of free cash flow available for management’s discretionary use as they do not consider certain cash requirements such as interest payments, tax payments and debt service requirements. Adjusted EBITDA is a non-GAAP measure defined as EBITDA excluding the items described in our previous non-GAAP table above. Adjusted EBITDA is used by management as a measure of operating performance. We believe that the inclusion of supplementary adjustments to EBITDA applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors about our results of operations that management utilizes on an ongoing basis to assess our core operating performance. EBITA, EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures used by other companies. You should not consider our EBITA, EBITDA and Adjusted EBITDA as alternatives to operating income (loss) or net income (loss), determined in accordance with U.S. GAAP. 87 (2)The following table reconciles non-GAAP measures EBITA, EBITDA and Adjusted EBITDA to the most directly comparable U.S. GAAP financial performance measure, which is net loss: [[GREPCENT_TABLE]] [["","Successor","","","Predecessor"],["(In millions)","December 31, 2022","","September 30, 2022","","June 30, 2022","","March 31, 2022","","From October 20, 2021 through December 31, 2021","","","From July 1, 2021 through October 19, 2021","","September 30, 2021","","June 30, 2021","","March 31, 2021"],["Net loss","$","(159.7)","","","$","(50.4)","","","$","(59.3)","","","$","(19.0)","","","$","(23.0)","","","","$","(105.7)","","","$","(46.7)","","","$","(54.0)","","","$","(40.7)"],["Interest expense, net","12.5","","","13.1","","","8.4","","","7.9","","","6.2","","","","52.8","","","43.8","","","43.7","","","43.0"],["Income tax (benefit) provision","(1.7)","","","(5.0)","","","(7.4)","","","(4.1)","","","(6.8)","","","","(5.6)","","","(4.7)","","","14.4","","","(7.1)"],["Amortization","34.3","","","35.2","","","37.5","","","38.8","","","32.0","","","","19.7","","","16.1","","","18.5","","","18.6"],["EBITA","$","(114.6)","","","$","(7.1)","","","$","(20.8)","","","$","23.6","","","$","8.4","","","","$","(38.8)","","","$","8.5","","","$","22.6","","","$","13.8"],["Depreciation","7.8","","","7.4","","","7.3","","","6.2","","","5.3","","","","6.2","","","5.1","","","6.9","","","5.0"],["EBITDA","$","(106.8)","","","$","0.3","","","$","(13.5)","","","$","29.8","","","$","13.7","","","","$","(32.6)","","","$","13.6","","","$","29.5","","","$","18.8"],["Stock/share-based compensation expense","7.0","","","8.5","","","8.5","","","7.8","","","5.3","","","","9.3","","","\u2014","","","\u2014","","","(0.1)"],["(Decrease) increase in fair value of warrant liabilities","(10.1)","","","12.0","","","(19.6)","","","(19.9)","","","(1.2)","","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Goodwill impairment","156.6","","","\u2014","","","55.2","","","\u2014","","","\u2014","","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Other impairments","4.5","","","2.5","","","\u2014","","","\u2014","","","\u2014","","","","\u2014","","","\u2014","","","\u2014","","","\u2014"],["Debt extinguishment","\u2014","","","\u2014","","","\u2014","","","\u2014","","","\u2014","","","","15.9","","","\u2014","","","\u2014","","","\u2014"],["Foreign currency loss (gain), net","(3.0)","","","3.1","","","3.3","","","1.5","","","1.6","","","","(0.6)","","","(1.4)","","","1.1","","","(4.0)"],["Revenue reduction from purchase accounting","\u2014","","","\u2014","","","\u2014","","","\u2014","","","2.3","","","","4.5","","","3.7","","","3.7","","","4.3"],["Cost of revenues impact from inventory valuation purchase accounting","\u2014","","","\u2014","","","\u2014","","","6.3","","","15.8","","","","\u2014","","","\u2014","","","\u2014","","","4.7"],["Non-operating expenses","8.2","","","4.4","","","8.7","","","9.4","","","7.0","","","","34.7","","","15.0","","","15.6","","","16.1"],["Adjusted EBITDA","$","56.4","","","$","30.8","","","$","42.6","","","$","34.9","","","$","44.5","","","","$","31.2","","","$","30.9","","","$","49.9","","","$","39.8"]] [[/GREPCENT_TABLE]] 88 Liquidity and Capital Resources Overview of Liquidity Our primary future cash needs relate to working capital, operating activities, capital spending, strategic investments, and debt service. Mirion management believes that net cash provided by operating activities, augmented by long-term debt arrangements, will provide adequate liquidity for the next 12 months of independent operations, as well as the resources necessary to invest for growth in existing businesses and manage its capital structure on a short- and long-term basis. Access to capital and availability of financing on acceptable terms in the future will be affected by many factors, including our credit rating, economic conditions, and the overall liquidity of capital markets. There can be no assurance of continued access to financing from the capital markets on acceptable terms or at all. At December 31, 2022, December 31, 2021, and June 30, 2021, we had $73.5 million, $84.0 million, and $101.1 million, respectively, in cash and cash equivalents, which include amounts held by entities outside of the United States of approximately $66.4 million, $69.5 million, and $67.3 million, respectively, primarily in Europe and Canada. Non-U.S. cash is generally available for repatriation without legal restrictions, subject to certain taxes, mainly withholding taxes. We are asserting indefinite reinvestment of cash for certain non-U.S. subsidiaries. The Company has alternative repatriation options other than dividends should the need arise. The 2021 Credit Agreement provides for up to $90.0 million of revolving borrowings. There is a discussion in Note 9, Borrowings, of the consolidated financial statements included elsewhere in this Form 10-K of the long-term debt arrangements issued by Mirion. For more information on our lease commitments, see Note 10, Leased Assets, of the consolidated financial statements and for other commitments and contingencies, see Note 11, Commitments and Contingencies to the consolidated financial statements, included elsewhere in this Annual Report on Form 10-K. Debt Profile 2021 Credit Agreement On the Closing Date, certain subsidiaries of the Company entered into a credit agreement (the “2021 Credit Agreement”) among Mirion Technologies (HoldingSub2), Ltd., a limited liability company incorporated in England and Wales, as Holdings, Mirion Technologies (US Holdings), Inc., as the Parent Borrower, Mirion Technologies (US), Inc., as the Subsidiary Borrower, the lending institutions party thereto, Citibank, N.A., as the Administrative Agent and Collateral Agent and Goldman Sachs Lending Partners, Citigroup Global Markets Inc., Jefferies Finance LLC and JPMorgan Chase Bank, N.A., as the Joint Lead Arrangers and Bookrunners. The 2021 Credit Agreement refinanced and replaced an earlier credit facility (the "2019 Credit Facility"). The 2021 Credit Agreement provides for an $830.0 million senior secured first lien term loan facility and a $90.0 million senior secured revolving facility (collectively, the “Credit Facilities”). Funds from the Credit Facilities are permitted to be used in connection with the Business Combination and related transactions, to refinance the 2019 Credit Facility referred to above and for general corporate purposes. The term loan facility is scheduled to mature on October 20, 2028 and the revolving facility is scheduled to expire and mature on October 20, 2026. The agreement requires the payment of a commitment fee of 0.50% per annum for unused revolving commitments, subject to stepdowns to 0.375% per annum and 0.25% per annum upon the achievement of specified leverage ratios. Any outstanding letters of credit issued under the 2021 Credit Agreement reduce the availability under the revolving line of credit. The 2021 Credit Agreement is secured by a first priority lien on the equity interests of the Parent Borrower owned by Holdings and substantially all of the assets (subject to customary exceptions) of the borrowers and the other guarantors thereunder. Interest with respect to the facilities is based on, at the option of the borrowers, (i) a customary base rate formula for borrowings in U.S. dollars or (ii) a floating rate formula based on LIBOR (with customary fallback provisions described below) for borrowings in U.S. dollars, a floating rate formula based on EURIBOR for borrowings in Euro or a floating rate formula based on SONIA for borrowings in Pounds Sterling, each as described in the 2021 Credit Agreement with respect to the applicable type of borrowing. The 2021 Credit Agreement includes fallback language that seeks to either facilitate an agreement with our lenders on a replacement rate for LIBOR in the event of its discontinuance or that automatically replaces LIBOR with benchmark rates based on the Secured Overnight Financing Rate ("SOFR") or other benchmark replacement rates upon triggering events. We anticipate transitioning from LIBOR to SOFR or other 89 benchmark replacement rate during second quarter of 2023. Beginning December 31, 2022, the interest rate under the 2021 Credit Agreement increased to 7.48%, compared to previous rates of 5.63% (beginning July 1, 2022) and 3.25% (beginning January 1, 2022), due to recent increases in LIBOR and will remain at this rate through March 31, 2023. The 2021 Credit Agreement contains customary representations and warranties as well as customary affirmative and negative covenants and events of default. The negative covenants include, among others and in each case subject to certain thresholds and exceptions, limitations on incurrence of liens, limitations on incurrence of indebtedness, limitations on making dividends and other distributions, limitations on engaging in asset sales, limitations on making investments, and a financial covenant that the “First Lien Net Leverage Ratio” (as defined in the 2021 Credit Agreement) as of the end of any fiscal quarter is not greater than 7.00 to 1.00 if on the last day of such fiscal quarter certain borrowings outstanding under the revolving credit facility exceed 40% of the total revolving credit commitments at such time. The covenants also contain limitations on the activities of Mirion Technologies (HoldingSub2), Ltd. as the “passive” holding company. If any of the events of default occur and are not cured or waived, any unpaid amounts under the 2021 Credit Agreement may be declared immediately due and payable, the revolving credit commitments may be terminated and remedies against the collateral may be exercised. Hedges As a result of the Company’s European operations, we are exposed to fluctuations in exchange rates between the Euro and U.S. dollar (our functional currency). As such, we entered into cross-currency rate swaps during the year ended December 31, 2022 to manage currency risks related to foreign exchange in foreign operations. These cross-currency rate swaps are derivative financial instruments that have been designated and qualify as hedges of net investments in our foreign operations. Accordingly, the changes in the fair values of the swaps are recognized in net investment hedges adjustments, a component of accumulated other comprehensive loss ("AOCL"), to offset the changes in the values of the net investments being hedged. Any ineffective portions of net investment hedges are reclassified from AOCL into earnings during the period of change. The following table summarizes the notional values and pretax impact of changes in the fair values of instruments designated as net investment hedges (in millions): [[GREPCENT_TABLE]] [["","Notional Amount","","Gain (Loss) Recognized in AOCL"],["","Successor","","Successor"],["","As of","","Year Ended December 31, 2022","","From October 20, 2021 through December 31, 2021"],["","December 31, 2022","","December 31, 2021"],["Cross-currency rate swaps","$","238.8","","","$","\u2014","","","$","(12.9)","","","$","\u2014"],["Total","$","238.8","","","$","\u2014","","","$","(12.9)","","","$","\u2014"]] [[/GREPCENT_TABLE]] For more discussion of the hedges of net investments, see Note 18, Fair Value Measurement, and Note 19, Derivatives and Hedging, to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Cash flows For the Year Ended December 31, 2022 (Successor) Compared to the Successor Stub Period from October 20, 2021 through December 31, 2021, Predecessor Stub Period from July 1, 2021 through October 19, 2021, and unaudited Six Months Ended June 30, 2021 [[GREPCENT_TABLE]] [["","","","","","","","","Unaudited"],["","Successor","","","Predecessor"],["(In millions)","Fiscal Year Ended December 31, 2022","","From October 20, 2021 through December 31, 2021","","","From July 1, 2021 through October 19, 2021","","Six Months Ended June 30, 2021"],["Net cash provided by (used in) operating activities","$","39.4","","","$","(12.2)","","","","$","13.1","","","$","33.7"],["Net cash used in investing activities","$","(39.5)","","","$","(2,189.4)","","","","$","(12.5)","","","$","(28.9)"],["Net cash (used in) provided by financing activities","$","(7.0)","","","$","1,537.7","","","","$","1.0","","","$","(9.9)"]] [[/GREPCENT_TABLE]] 90 Net Cash Provided by (Used in) Operating Activities Operating activities provided net cash of $39.4 million for the year ended December 31, 2022 (Successor), used net cash of $12.2 million for the Successor Stub Period, provided net cash of $13.1 million for the Predecessor Stub Period, and provided net cash of $33.7 million for the six months ended June 30, 2021 (Predecessor), representing an increase of $4.8 million. The increase is partially due to our net loss, adjusted for non-cash items, improving by $27.9 million; net loss increased by $65.0 million but was offset by a net increase of non-cash add-backs of $92.9 million. Non-cash add-backs to net income increased primarily due to a $211.8 million increase related to goodwill impairment expense, $62.3 million due to increased depreciation and amortization expense, and $17.3 million due to increased stock-based compensation expense, partially offset by a decrease of accrual of in-kind interest on notes payable to related parties by $104.2 million, a decline in the fair value of warrant liabilities of $36.4 million, a net decline in deferred income taxes of $22.4 million, a decline in loss on debt extinguishment of $15.9 million, and a $14.8 million decrease in amortization of deferred revenue step-down due to acquisitions. Cash provided by working capital decreased by $23.1 million period over period primarily due to a decline in changes in inventories of $32.2 million, a decline in changes in other liabilities of $23.0 million, a decline in changes in accounts payable of $12.1 million, and a decline in changes in deferred contract revenue of $7.0 million, partially offset by an increase in changes in accounts receivable of $21.3 million and an increase in changes in other assets of $16.6 million. Net Cash Used in Investing Activities Net cash used in investing activities was $39.5 million for the year ended December 31, 2022 (Successor), $2,189.4 million in the Successor Stub Period, $12.5 million in the Predecessor Stub Period, and $28.9 million for the six months ended June 30, 2021 (Predecessor). The $2,191.3 million decline in cash used in investing activities is primarily attributable to decline in acquisition activity of $2,192.7 million ($6.6 million of cash consideration paid for the purchase of the Critical Infrastructure business of Collins Aerospace during the year ended December 31, 2022 versus $2,124.8 million paid for the Business Combination in the Successor Stub Period, $54.1 million paid for the acquisition of CIRS in the Successor Stub Period, and $15.0 million paid during the six months ended June 30, 2021 for deferred consideration related to the SNC acquisition). Net Cash (Used in) Provided by Financing Activities Net cash used in financing activities was $7.0 million during the year ended December 31, 2022 (Successor), net cash provided by financing activities was $1,537.7 million in the Successor Stub Period and $1.0 million during the Predecessor Stub Period, and net cash used in financing activities was $9.9 million for the six months ended June 30, 2021 (Predecessor). Cash outflows during the year ended December 31, 2022 (Successor) were primarily driven by $6.6 million of principal repayments of term loan debt. Net cash inflows during the Successor and Predecessor periods in the year ended December 31, 2021 primarily relate to financing activities associated with the Business Combination including $807.3 million of borrowings from third-parties, net of discount and issuance costs, $753.7 million provided by issuances of common stock, net of redemptions, and $18.7 million of transaction fees reimbursed by the Sellers, partially offset by payments of $26.3 million in deferred underwriting fees and $13.3 million of stock issuance costs. From October 20, 2021 through December 31, 2021 (Successor) and July 1, 2021 through October 19, 2021 (Predecessor Stub Period) Compared to Six Months Ended December 31, 2020 (Predecessor) [[GREPCENT_TABLE]] [["","","","","","","Unaudited"],["","Successor","","","Predecessor","","Predecessor"],["","From October 20, 2021 through December 31, 2021","","","From July 1, 2021 through October 19, 2021","","Six Months Ended December 31, 2020"],["Net cash (used in) provided by operating activities","$","(12.2)","","","","$","13.1","","","$","19.4"],["Net cash used in investing activities","$","(2,189.4)","","","","$","(12.5)","","","$","(284.5)"],["Net cash provided by financing activities","$","1,537.7","","","","$","1.0","","","$","249.3"]] [[/GREPCENT_TABLE]] 91 Net Cash Provided by Operating Activities Net cash (used in) or provided by operating activities was $(12.2) million for the Successor period and $13.1 million for the Predecessor Stub Period which was a decrease of $18.5 million over the net cash provided by operating activities of $19.4 million for the unaudited six months ended December 31, 2020. The decrease compared to the prior year unaudited comparable period is primarily due to a decrease in cash inflows of $15.9 million resulting from net loss adjusted for non-cash items, which was predominantly driven by Business Combination transaction fees recorded in the Predecessor Stub Period. Cash from working capital was flat, comparing the Successor and Predecessor Stub Period with the unaudited six months ended December 31, 2020. Within working capital, accounts receivable increased by $31.9 million as a result of higher billings, accrued expense decreased $1.9 million and net other assets and liabilities increased $2.9 million. These working capital cash outflows were mostly offset by an increase in accounts payable of $14.0 million, a decrease in inventory of $1.2 million from higher sales and an increase in net, deferred contract revenue and associated deferred costs of $15.2 million. Net Cash Used in Investing Activities Net cash used in investing activities was $2.2 billion in the Successor period and $12.5 million in the Predecessor Stub Period. The periods reflected the Business Combination of $2.1 billion, acquisitions of $59.5 million, primarily related to CIRS of $54 million, and capital expenditures of $6.0 million and $11.6 million related to property, plant, and equipment and badges in the Successor Period and the Predecessor Stub Period, respectively. Net Cash Provided by Financing Activities Net cash provided by financing activities was $1.5 billion in the Successor period and was immaterial in the Predecessor Stub Period. Cash inflow in the Successor Period related to the Business Combination including $807.3 million of new borrowings, $753.7 million from issuance of stock, net of redemptions, $18.7 million of transaction fees reimbursed by the Sellers. These cash inflows were partially offset by $26.3 million in deferred underwriting fees and $13.3 million of stock issuance costs. Fiscal year ended June 30, 2021 (Predecessor) compared to fiscal year ended June 30, 2020 (Predecessor) [[GREPCENT_TABLE]] [["","Predecessor"],["(Dollars in millions)","2021","","2020","","$Change","","%Change"],["Net cash provided by operating activities","$","53.6","","","$","39.5","","","$","14.1","","","35.7","%"],["Net cash used in investing activities","$","(313.3)","","","$","(75.6)","","","$","(237.7)","","","314.4","%"],["Net cash provided by financing activities","$","239.0","","","$","118.9","","","$","120.1","","","101.0","%"]] [[/GREPCENT_TABLE]] Net Cash Provided by Operating Activities Net cash provided by operating activities was $53.6 million during the year ended June 30, 2021, a $14.1 million, or 35.7%, increase compared to the year ended June 30, 2020 primarily due to cash inflow resulting from a decrease in net loss adjusted for non-cash items of approximately $5.9 million and cash inflow of $8.2 million from improved working capital (cash inflows of $5.1 million in accounts payable and $23.9 million from other operating assets and liabilities, offset by cash outflows of $8.0 million in accounts receivable, $3.3 million in inventories, and $9.5 million in accrued expenses and other current liabilities). Net Cash Used in Investing Activities Net cash used in investing activities was $313.3 million during the year ended June 30, 2021 compared to net cash used in investing activities of $75.6 million in the year ended June 30, 2020. The $237.7 million, or 314.4%, increase is primarily the result of greater acquisition activity (an increase of $234.4 million) in addition to purchases of property, plant and equipment and badges. Capital expenditures were $23.2 million and $19.9 million in the year ended June 30, 2021 and the year ended June 30, 2020, respectively, related to property, plant, and equipment and badges. Net Cash Provided by Financing Activities 92 Net cash provided by financing activities was $239.0 million in the year ended June 30, 2021 compared to $118.9 million of cash provided in the year ended June 30, 2020. During the year ended June 30, 2021, we borrowed a net $218.8 million of notes payable under the 2019 Credit Facility and a net $70.0 million of borrowings from related parties, offset by $35.0 million of repayments of borrowings on the revolver term loan and $14.8 million of repayments of principal ($8.8 million under the 2019 Credit Facility and $6.0 million of the NRG loan). During the year ended June 30, 2020, we borrowed a net $98.8 million of notes payable under the 2019 Credit Facility and $80.0 million of borrowings under the revolver, offset by $13.4 million principal repayments of notes payable, $45.0 million repayments of borrowings on the revolver term loan, $2.0 million of contingent consideration payments, and $0.4 million of distributions to noncontrolling interests. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. Such estimates are based on historical experience and on various other factors that management believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material. We believe that the accounting policies discussed below are critical to understanding historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates. Business combinations We account for business acquisitions in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, "Business Combinations". This standard requires the acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed in the transaction and establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of this standard prescribe, among other things, the determination of acquisition date fair value of consideration paid in a business combination (including contingent consideration) and the exclusion of transaction and acquisition-related restructuring costs from acquisition accounting. The determination of the fair value of assets acquired and liabilities assumed involves assessments of factors such as the expected future cash flows associated with individual assets and liabilities and appropriate discount rates at the closing date of the acquisition. For non-observable market values, the Company determines fair value using acceptable valuation principles (e.g., multiple excess earnings, relief from royalty and cost methods). Goodwill Goodwill represents the excess of the purchase price paid over the estimated fair value of the net assets acquired and liabilities assumed in the acquisition of a business. Goodwill has an indefinite useful life, and is not amortized, but instead tested for impairment annually during the fiscal year fourth quarter or more often if events or changes in circumstances indicate that the carrying amount may exceed fair value as set forth in ASC 350, "Intangibles—Goodwill and Other". The Company tests for goodwill impairment at the reporting unit level, which is an operating segment or one level below an operating segment. The amount of goodwill acquired in a business combination that is assigned to one or more reporting units as of the acquisition date is the excess of the purchase price of the acquired businesses (or portion thereof) included in the reporting unit, over the fair value assigned to the individual assets acquired or liabilities assumed from a market participant perspective. Goodwill is assigned to the reporting unit(s) expected to benefit from the synergies of the combination even though other assets or liabilities of the acquired entity may not be assigned to that reporting unit. ASC 350 allows an optional qualitative assessment as part of annual impairment testing, prior to a quantitative assessment test, to determine whether it is more likely than not that the fair value of a reporting unit exceeds its carrying amount. If a qualitative assessment determines an impairment is more likely than not, the Company is required to perform a quantitative impairment test. Otherwise, no further analysis is required. Alternatively, the Company may elect to proceed directly to the quantitative impairment test. In conducting a qualitative assessment, the Company analyzes actual and projected growth trends for net sales and margin for each reporting unit, as well as historical performance versus plan and the results of prior quantitative tests performed. Additionally, the Company assesses factors that may impact its business, including macroeconomic conditions and the 93 related impact, market-related exposures, plans to market for sale all or a portion of the business, competitive changes, new or discontinued product lines, changes in key personnel, and any potential risks to projected financial results. If performed, the quantitative test compares the fair value of a reporting unit with its carrying amount. We determine the fair value of each reporting unit by estimating the present value of expected future cash flows, discounted by the applicable discount rate, and peer company multiples. If the carrying value exceeds the fair value, the Company recognizes an impairment loss in the amount equal to the excess, not to exceed the total amount of goodwill allocated to that reporting unit. Based upon our review and analysis, we recorded $211.8 million goodwill impairment losses in the year ended December 31, 2022. Intangible Assets Intangible assets relate to the value associated with our developed technology, customer relationships, backlog, trade names and non-compete agreements at the time of acquisition through business combinations. Definite lived intangible assets are amortized over their estimated useful lives, ranging from 1 to 16 years. Revenue Recognition The Company recognizes revenue from arrangements that include performance obligations to design, engineer, manufacture, deliver, and install products. The Company identifies a performance obligation for each promise in a contract to transfer a distinct good or service to the customer. As part of its assessment, the Company considers all goods and/or services promised in the contract, regardless of whether they are explicitly stated or implied by customary business practices. The Company’s contracts may contain either a single performance obligation, including the promise to transfer individual goods or services that are not separately distinct within the context of the respective contracts, or multiple performance obligations. For contracts that contain multiple performance obligations, the Company allocates the consideration to which it expects to be entitled to each performance obligation based on relative standalone selling prices and recognizes the related revenue when or as control of each individual performance obligation is transferred to customers. Service revenues (warranty contracts, post contract support, and subscription-based services) are recognized over time as the customers receive and consume benefits of such services simultaneously. The Company exercises judgment in determining the timing of revenue by analyzing the point in time or the period over which the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of the performance obligation. Typically, over-time revenue recognition is based on the utilization of an input measure used to measure progress, such as costs incurred to date relative to total estimated costs. Changes in total estimated costs are recognized using the cumulative catch-up method of accounting which recognize the cumulative effect of the changes on current and prior periods in the current period. Accordingly, the effect of the changes on future periods of contract performance is recognized as if the revised estimate had been the original estimate. A significant change in an estimate on one or more contracts could have a material effect on the Company’s consolidated financial position, results from operations, or cash flows. However, there were no significant changes in estimated contract costs for the fiscal year ended December 31, 2022, Successor Period of October 20, 2021 through December 31, 2021, the Predecessor Stub Period of July 1, 2021 through October 19, 2021, and the fiscal year ended June 30, 2021. If a performance obligation does not qualify for over-time revenue recognition, revenue is then recognized at the point-in-time in which control of the distinct good or service is transferred to the customer, typically based upon the terms of delivery. Certain of the Company’s products are sold through distributors and third-party sales representatives under standard agreements whereby distributors purchase products from the Company and resell them to customers. These agreements give distributors the right to sell the Company’s products within certain territories and establish minimum order requirements. These arrangements do not provide stock rotation or price protection rights and do not contain extended payment terms. Rights of return are limited to repair or replacement of delivered products that are defective or fail to meet the Company’s published specifications. Provisions for these warranty costs are recognized in the same period that the related revenue is recorded. The remaining performance obligation for open contracts as of December 31, 2021 include assembly, delivery, installation and training. Payment terms for shipments to end-users are generally net 30 days. Payment terms for distributor shipments may range from 30 to 90 days. Service arrangements can call for payments in advance of performing the work (e.g., 94 extended warranty and service contracts), upon completion of contract milestones (e.g., custom development manufacturing), or a combination of each. Accounting for Income Taxes The Company accounts for income taxes and the related accounts under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. The Company classifies all deferred tax assets and liabilities, and any related valuation allowance, as non-current in the consolidated balance sheets. The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current in the balance sheet, to the extent that the Company anticipates payment or receipt of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes. Derivative Warrant Liabilities We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging”. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. In accordance with ASC Topic 825-10 “Financial Instruments”, offering costs attributable to the issuance of the derivative warrant liabilities have been allocated based on their relative fair value of total proceeds and are recognized in the statement of operations as incurred. The Public Warrants and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The fair value of the Public Warrants as of December 31, 2022 is based on observable listed prices for such warrants. As the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Warrants having substantially the same terms as the Public Warrants, we determined that the fair value of each Private Warrant is equivalent to that of each Public Warrant. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities. Derivative warrant liabilities were $30.5 million and $68.1 million as of December 31, 2022 and December 31, 2021, respectively, as the fair value of the Public and Private Placement Warrants decreased from $2.50 per warrant to $1.12 per warrant in the year ended December 31, 2022. Derivatives and Hedging Predecessor Period The Company uses certain derivative financial instruments to help manage its risk or exposure to changes in interest rates in relation to variable rate debt and foreign currency exchange rate fluctuations. The Company records these derivatives at fair value in the balance sheet as either an asset or a liability and any changes in fair value are recognized in earnings as incurred. Successor Period The Company uses derivatives to manage underlying commercial risks, including risks related to foreign exchange. Accounting for derivatives as hedges requires that, at inception and over the term of the arrangement, the hedged item and related derivative meet the requirements for hedge accounting. In evaluating whether a particular relationship qualifies for hedge accounting, the Company tests effectiveness at inception and each reporting period thereafter by determining whether changes in the fair value of the derivative offset, within a specified range, changes in the fair value of the hedged item. If fair value changes fail this test, the Company discontinues applying hedge accounting to that relationship prospectively. Fair values of both the derivative instrument and the hedged item are calculated using internal valuation models incorporating market-based assumptions, subject to third-party confirmation, as applicable. The changes in the fair 95 values of derivatives that have been designated and qualify as hedges of net investments in foreign operations are recorded in accumulated other comprehensive loss ("AOCL") and are reclassified into the line item in our consolidated statement of income in which the hedged items are recorded in the same period the hedged items affect earnings. The changes in the fair values of derivatives that were not designated and/or did not qualify as hedging instruments are immediately recognized in earnings. The Cross-Currency Rate Swaps the Company entered into are not exchange traded instruments and their fair value is determined using the cash flows of the swap contracts, discount rates to account for the passage of time, current foreign exchange market data and credit risk, which are all based on inputs readily available in public markets and categorized as Level 2 fair value hierarchy measurements. As such, the Company recognized a loss of $12.9 million in AOCL for the year ended December 31, 2022 for the swaps that qualified as net investment hedges. New Accounting Standards See “Note 1. Nature of Business and Summary of Significant Accounting Policies” included elsewhere in this Annual Report on Form 10-K for a full description of any recent accounting pronouncements, including the respective expected dates of adoption and expected effects on our results of operations and financial condition.