Earnings call transcript: Mistras Group misses Q1 2025 earnings expectations

Mistras Group Inc. (MG) reported its financial results for the first quarter of 2025, revealing a significant miss on earnings expectations. The company posted a net loss of $0.01 per share, falling short of the projected earnings of $0.125 per share. Revenue also came in below forecasts at $161.62 million compared to the anticipated $180.7 million. The stock reacted sharply, dropping 23.78% in after-hours trading, closing at $9.44, near its 52-week low of $7.45. According to InvestingPro data, the company maintains strong fundamentals with liquid assets exceeding short-term obligations and analysts projecting profitability for the full year 2025.

Key Takeaways

• Mistras Group reported a Q1 2025 net loss of $0.01 per share, missing the forecast of $0.125.
• Revenue fell 12% year-over-year to $161.62 million, below expectations.
• Stock declined by 23.78% in after-hours trading, reflecting investor disappointment.
• Adjusted EBITDA was strong at $12 million, the second-highest Q1 in five years.
• The company launched new products and focused on cost reductions.

Company Performance

Mistras Group faced a challenging start to 2025, with its financial performance hampered by a 12% year-over-year decline in revenue. Despite this, the company managed to achieve an adjusted EBITDA of $12 million, marking the second-highest first-quarter result in the past five years. The company emphasized its strategic focus on integrating software, services, and analytics, launching the PCMS Mobile application and a new Data Solutions brand. InvestingPro analysis indicates the company currently appears undervalued, with a solid financial health score of 2.7 out of 5, labeled as "GOOD." For deeper insights into Mistras Group’s valuation and growth potential, check out the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Financial Highlights

• Revenue: $161.62 million, down 12% year-over-year
• GAAP Net Loss: $3.2 million (-$0.10 per share)
• Non-GAAP Net Loss: $300,000 (-$0.01 per share)
• Adjusted EBITDA: $12 million
• Net Cash from Operating Activities: $5.6 million, up $5 million from the previous year

Earnings vs. Forecast

Mistras Group’s actual earnings per share of -$0.01 fell significantly short of the forecasted $0.125, resulting in a negative surprise. Revenue also missed expectations, coming in at $161.62 million against a forecast of $180.7 million. This marks a notable deviation from the company’s historical performance and reflects broader market uncertainties.

Market Reaction

Following the earnings release, Mistras Group’s stock experienced a sharp decline of 23.78% in after-hours trading, closing at $9.44. This drop positions the stock close to its 52-week low of $7.06, indicating strong investor disappointment. Despite the recent decline, analyst consensus remains bullish with price targets ranging from $15 to $16 per share, suggesting significant upside potential. The broader market conditions and sector performance should be monitored for further context. Get access to more detailed analysis and 12+ additional ProTips about Mistras Group with an InvestingPro subscription.

Outlook & Guidance

Mistras Group did not provide full-year guidance due to ongoing market uncertainties. However, the company remains optimistic about meeting or exceeding its 2024 adjusted EBITDA. The management anticipates a more robust performance in the fall turnaround season and is focused on organic growth and debt reduction. The projected effective tax rate for 2025 is 25%.

Executive Commentary

CEO Natalia Schumann expressed confidence in the company’s strategic direction, stating, "We are striving to become a credible provider in the larger Siek market." CFO Ed Preisner highlighted cost control efforts, stating, "We can control the bottom line much more, and we fully intend to do that." Schumann also noted the potential demand increase as advanced manufacturing moves to the U.S.

Risks and Challenges

• Market Uncertainty: Tariffs and economic conditions have led to project delays and reduced customer spending.
• Revenue Volatility: Q2 is expected to have less volatility, but uncertainties remain.
• Competitive Pressures: Maintaining a strong position in non-destructive testing and data analytics is crucial.
• Cost Management: Continued focus on reducing administrative and overhead costs is necessary.
• Global Economic Conditions: The international segment’s growth could be impacted by broader economic factors.

Q&A

During the earnings call, analysts questioned the impact of tariffs and economic uncertainty on customer projects. The company noted a slight improvement in April demand and expects to recover $6.5 million in turnaround revenue in the second half of 2025. The international segment showed 4% organic growth, indicating resilience amidst challenging conditions.

Full transcript - Mistras Group Inc (MG) Q1 2025:

Abigail, Conference Operator: Good day, everyone. My name is Abigail, and I will be your conference operator today. At this time, I would like to welcome you to Mistras Group Inc q one twenty twenty five earnings call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

If you would like to ask a question during this time and if you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. At this time, I would like to turn the call over to Thomas Tobolski, Treasurer.

Thomas Tobolski, Treasurer, Mistras Group: Good morning, everyone, and welcome to MISTRAS Group’s first quarter twenty twenty five earnings conference call. I’m joined today by Natalia Schumann, President and Chief Executive Officer and Ed Preisner, Senior Executive Vice President and Chief Financial Officer. Before we start, I want to remind everyone that remarks made during this conference call as well as supplemental information provided on our website contains certain forward looking statements and involve risks and uncertainties as described in Mistras’ SEC filings. The company’s actual factors that can cause actual results to differ are discussed in the company’s most recent annual report on Form 10 ks and other reports filed with the SEC. The discussion in this conference call will also include certain non GAAP financial measures that we believe are useful to investors evaluating the company’s performance, but that were not prepared in accordance with U.

S. GAAP. Reconciliation of these non U. S. GAAP financial measures to the most directly comparable U.

S. GAAP financial measures can be found in the tables contained in yesterday’s press release and the company’s related current report on Form eight ks. These results are available on the company’s website in the Investors section and on the SEC’s website. I will now turn the call over to Natalia Schumann.

Natalia Schumann, President and Chief Executive Officer, Mistras Group: Thank you. Good morning, everyone. Thank you for joining us today. It is my pleasure to be providing you with an update on our progress. Despite the larger than anticipated year over year decline in revenue driven by overall market uncertainty, we were nevertheless able to rapidly calibrate costs and expenses down during the first quarter to the revenue level in order to preserve our bottom line operational metrics.

Having said that, with our continued focus on cost and expense management, including a reduction in our administrative support functional costs and coupled with anticipated growth across all primary end markets, we are confident that these drivers will provide an improvement in key profitability measures over the remainder of the year. As shown on Slide three, during first quarter as a CEO of Mistras, I have been focused on three key initiatives for our business, which are first, leadership talent evaluation second, recalibration of our cost base to the current revenue levels and market conditions and third, developing growth strategies across all businesses and service delivery optimization. On the talent evaluation initiative, I’m very pleased to have on boarded various high caliber talent to our organization, including two senior executives focused on growth within our data solutions, a new leader for our aerospace and defense division, and new heads of our marketing, safety and compliance and IT functions. Each of these individuals have proven track records of success in their careers and bring strong industry expertise and critical thought leadership to continuously improve and enhance our organization. These individuals are quickly getting up to speed.

These positions plus several strategic hires to our operations team have the entire leadership team excited for the current and long term future of the company. On the service delivery model optimization initiative, we are continuing to review all operational aspects of our current services portfolio in collaborative manner with our customers to ensure that we’re achieving a fair and adequate ROI for the services we provide. We are adjusting our cost base according to current conditions, price pressures and other contract economics. On the growth strategies initiative, I am focused on accelerated expansion across core end markets like oil and gas and aerospace and defense with a particular emphasis on delivering integrated solutions that leverage the full depth of our offerings, including data analytics and monitoring technologies. As part of Mistras data solution strategy, we are accelerating growth by delivering tailored high value solutions that integrate our proprietary software, advanced analytics and trusted field services.

A prime example of this is our Q1 twenty twenty five release of PCMS Mobile, our cloud based application purpose built to optimize real data data capture, quality and analysis in mechanical integrity programs. Delivered within one suite ecosystem, PCMS Mobile connects inspection planning in PCMS, mobile field execution and post inspection analytics into unified workflow, improving asset performance while reducing rework and administrative burden. This latest release introduces a new web based portal for smarter work assignment and pre submission data review, giving customers expanded control over data quality and enabling faster, more confident decision making. This proprietary and vertically integrated approach combining software, services, analytics and engineering under one platform is what sets Mistras apart from competition. We are not just enabling digital transformation for our clients, we are leading it, helping our customers unlock value through connected intelligence, end to end integrity management and scalable innovation built for the future of asset protection.

Related to this initiative, we recently officially announced the launch of Mistras Data Solution brand, which consolidates our data centric services, software solutions and technologies under one umbrella. Mitra’s data solutions strengthen our commitment to delivering smarter operations for asset intensive end markets, including energy, aerospace and defense, infrastructure and manufacturing. Let me now share some of my thoughts on our performance this quarter before Ed goes in more details behind the financials. Although revenue was down over 12% year over year, this low level of revenue was somewhat anticipated, because our first quarter of twenty twenty four was a tough comparison with a robust spring turnaround season in oil and gas and a strong aerospace and defense demand in the first quarter of twenty twenty four. The largest revenue decline of $16,600,000 was in oil and gas end market and was mostly prominently noted in the downstream sector due to timing of turnarounds and other projects.

With regards to customer turnarounds, our first quarter twenty twenty five turnarounds were down $6,500,000 from the prior year as anticipated. But we expect to recover this gap and exceed the remaining 2025 total turnarounds revenue versus prior year by approximately $6,500,000 We have seen a reduction of customer spending and project push outs in upstream and midstream sub industries as our customers are dealing with market uncertainties and budgetary reduction initiatives. We experienced a decline of 1,700,000 in aerospace and defense end market, which was primarily due to macroeconomic uncertainty causing customer delays and deferrals. Delays in this market were also driven by supply chain disruption causing our large customers to temporarily slow down production, which in turn lead to less demand for non destructive testing and other lab services. Although we experienced a somewhat slower than anticipated start to 2025 in our two largest end markets, we did not experience any significant customer attrition or market share changes in the first quarter.

And therefore, we are cautiously optimistic for the balance of the year. Specifically, within the aerospace and defense industry, Mistras in lab testing and services support OEMs and Tier one suppliers through a network of ISO 17,025 accredited laboratories with NatCap and regulatory certification. These core offerings including non destructive testing, chemical and mechanical analysis, dimensional measurements, machining and finishing services. These integrated services accelerate time to market for our customers and streamline quality assurance across manufacturing supply chain, which we believe will help provide growth over the remainder of the year and beyond. That being said, we are closely monitoring potential industry headwinds caused by global market uncertainty driven by our customers’ reaction to tariffs and other market conditions and the potential impact that could have on our in lab services business.

Again, we are well positioned to maintain market share in the primary industries we serve by leveraging our proprietary advanced technologies and testing methods. We’re also focusing on our other existing end markets such as industrials, infrastructure and other industries where our testing and inspection services as well as our data analytics would enable us to drive growth in the near future. I’m pleased to highlight performance of PCMS offering within our Data Solutions Group, where we delivered revenue growth of 6% this quarter as compared to the prior year period. As I have already shared, data solutions, particularly PCMS, is a key area of focus for the company and one in which we are strategically investing time and capital to foster future growth via market share gains. Now, I’d like to turn the call over to Ed for an update on our actual financial results for the first quarter of twenty twenty five.

Ed Preisner, Senior Executive Vice President and Chief Financial Officer, Mistras Group: Thank you, Natalia, and good morning, everyone. As we noted on our Q4 earnings call, as Natalia mentioned earlier, the spring turnaround season in 2024 was robust and the fall turnaround season in ’twenty four was relatively weaker. We stated that we expect the inverse trend in 2025 with a weaker spring and more robust fall turnaround season, and this trend materialized in our first quarter results. This is reflected on Slide eight. Additionally, our first quarter ’twenty four results benefited from low double digit growth rates in our two largest end markets, that being oil and gas and aerospace and defense, which provides for a challenging prior year quarter to compare with the current period.

These trends, coupled with project delays and overall market uncertainty, caused first quarter revenue to lag our expectations. We have continued with our disciplined approach and commitment to only take on contracts that align with our profitability targets. Our International segment revenue was up for the first quarter, nearly 4% organic growth in local currency, which was offset by adverse FX translation. As noted in our press release and as shown on Slide nine, our results reflect certain overhead and personnel expenses, which have been reclassified in our consolidated statement of operations from SG and A to cost of revenue, as we determine this reclassification would be preferable as it provides greater transparency regarding the true cost of the company’s revenue and aligns with how our business is managed. These overhead and personnel costs, which were determined to be directly related to the company’s delivery of services, are generally variable to revenue being recognized and results in gross profit that fully encompasses all costs necessary to generate such revenue.

The reclassification recorded within our financials was $6,000,000 and $4,900,000 for the three months ended March 31 and March ’4, respectively. The impact of this reclassification for full year ’twenty four was approximately $20,900,000 from SG and A to cost of revenue. This redistribution of overhead and personnel expenses has no impact on operating income, net income or adjusted EBITDA comparability. Selling, general and administrative expenses were down $600,000 or 1.7% from the prior year comparable period despite adverse foreign exchange translation within our SG and A of 900,000.0 and strategic spending within our Data Solutions business. This overall decrease in SG and A reflects our continued cost discipline and focus on calibration of our overhead costs relative to revenue achieved.

For the first quarter of twenty twenty five, the company recorded $3,100,000 of reorganization and other costs related to the continued calibration of the company’s support overhead and other related costs. For the first quarter, we reported a GAAP net loss of $3,200,000 or $0.10 per share. Excluding special items, non GAAP net loss was $300,000 loss or $01 per share for the first quarter. Adjusted EBITDA was down $4,200,000 to $12,000,000 as compared to first quarter last year. Despite the tough comparable, our adjusted EBITDA for the first quarter of ’twenty five was the second highest first quarter adjusted EBITDA performance for the company over the last five years.

As shown on Slide 10, our net cash provided by operating activities was $5,600,000 for the first quarter of ’twenty five, an increase of $5,000,000 compared to the first quarter of last year. Our slightly less than breakeven free cash flow of 200,000 is not unusual for the first quarter of any given year given seasonality, but our free cash flow was improved by just over $5,000,000 for the first quarter of ’twenty five compared to the prior year quarter. The company remains intently focused on working capital management and meaningful cash flow generation in the second quarter and for the remainder of ’twenty five. Interest expense was $3,300,000 for the first quarter, decreasing by $1,100,000 or 25% from the prior year due to a decrease in the average debt balance outstanding and the lower interest rate environment. Our trailing twelve month bank defined leverage ratio was just under 2.5 times as of 03/31/2025, which is up slightly from year end, but still well within our allowable permitted ratio of 3.75 times.

We have articulated a strategy and continue to emphasize debt reduction as our priority use of free cash flow. However, based on current financial projections, we believe investments in capital expenditures and other resources that support our organic growth strategy, while providing solid returns, additionally represent an excellent use of our free cash flow. As our current leverage ratio is in line with our expectations, we do currently possess optionality as it relates to free cash flows. So we will be balancing these priorities to maximize shareholder value. Our effective tax rate, actually a tax benefit, was 26.9% for the first quarter, and we anticipate an effective tax rate of approximately 25% for the full year 2025.

We sincerely appreciate your continued support and expect to reward your patients with significantly improved results throughout 2025. At this time, I would like to turn the call back over to Natalia for closing remarks before we move on to take your questions.

Natalia Schumann, President and Chief Executive Officer, Mistras Group: Thank you, Ed. I have been intently focused on developing our five year group strategic plan and roadmap along our senior leadership team and Board of Directors. This roadmap is still in progress, but is expected to provide a meaningful path to build upon for continued profitable growth for the company. We are also working closely with our customers and focus on bringing our skilled workforce of technicians and advanced technologies to continue to create value add solutions, wherein we can expect higher margins with their ROI benefit generated for our customers. As a result of this assessment and strategic planning, I’m very optimistic about the future of the company and our plan for growing our business across our key end markets and geographies.

Our currently addressable market of approximately $25,000,000,000 is large and highly fragmented market that rewards innovative companies who can effectively and expeditiously help their customers keep their assets safe, compliant and efficiently operating. For forty years, Mistras has been a key industry leader in non destructive testing and data analytics that solve these increasingly complex challenges. As we look forward with our long term strategy, we are striving to become a credible provider in the larger Sikh market and we are committed and focused on creating value for our customers by combining our software, services and products to provide our customers with the knowledge and insight to operate their critical assets. We will not provide full year guidance for fiscal twenty twenty five due to unprecedented market uncertainty and while we are still reviewing our entire portfolio of businesses. We are also assessing the impact of recently enacted tariffs on our business and the results for fiscal twenty twenty five.

Having said that, as a result of our ongoing cost calibration discipline, we expect our 2025 adjusted EBITDA achievement at least meet or exceed the adjusted EBITDA level achieved in 2024. I’m very pleased to be leading Mistras into the future, and I’m extremely encouraged by the energy and enthusiasm of my nearly 5,000 dedicated colleagues who believe in our vision and are working tirelessly every day helping us achieve our goals by delivering on our mission for our customers. While we have made significant progress, we recognize that there’s still much more to be done. Thank you for being part of this journey. We truly appreciate your continued support.

And at this time, I would like to ask the operator to open the call for your questions.

Abigail, Conference Operator: We will now begin the Q and A. For today’s session, we’ll be utilizing the raise hand feature. If you’d like to ask a question, simply click on the raise hand button at the bottom of your screen. Once you’ve been called on, please unmute yourself and begin to ask your question. Thank you.

We will now pause a moment to assemble the queue. Your first question comes from the line of John Franzeb of Sidoti and Company. Please unmute and ask your question.

John Franzreb, Analyst, Sidoti and Company: Good morning, everyone, and thanks for taking the questions.

Mitch Pinheiro, Analyst, Sturdy, Vinton and Co.: Morning, John. Good morning, John.

John Franzreb, Analyst, Sidoti and Company: Okay.

Mitch Pinheiro, Analyst, Sturdy, Vinton and Co.: Just Yes.

John Franzreb, Analyst, Sidoti and Company: Just wanted say. Yes.

Natalia Schumann, President and Chief Executive Officer, Mistras Group: Yes. Good morning.

John Franzreb, Analyst, Sidoti and Company: I’m kinda curious. Today versus, you know, three months ago, can you talk a little bit about the operating environment and what’s changed either positively or negatively that wasn’t expected going in?

Natalia Schumann, President and Chief Executive Officer, Mistras Group: Sure, sure. I can address this question. So obviously, what we’ve seen and as we’re working with customers, as we are discussing the customers’ situation with the tariffs, and we see unprecedented uncertainty, right? So the project’s being delayed. The customers are still evaluating their impact on of tariffs on their business.

So and that’s what we see is different from what, you know, what it has been in three months ago. So the operating environment is quite challenging at this time. And again, we’re just, you know, using this time wisely, proactively talking to the customers proactively, working with them, and and, figuring out the ways, to help them.

John Franzreb, Analyst, Sidoti and Company: So, Natalia, are you actually seeing jobs being pushed to the right meaningfully? And it’s and I guess, especially, I’m kinda curious about data analytics. We’re seeing, any kind of projects being stalled or pushed pushed, you know, to into later in the year.

Natalia Schumann, President and Chief Executive Officer, Mistras Group: Actually, data analytics, specifically PCMS segment in our data solution, did quite well. As I mentioned in our prepared remarks, they grew the business 6% in this quarter. So the what we’ve seen is actually more interest from our customers as they very intently focused on the savings and budgetary reductions. There there’s more interest in our platform that provides more analytics for them to gain that insights to manage their businesses better. So we are very optimistic, John, on about our performance when it comes to data data, especially the PCMS platform.

John Franzreb, Analyst, Sidoti and Company: Okay. I just wanted to make sure nothing’s been pushed to the right in general. One I guess, other question, I’ll get back into queue. Can you talk a little bit about, your pricing initiatives? It sounded like in the prepared remarks that you’re going back to customers and trying to get value for your your offerings and and what you do.

How are those discussions working out right now? Can you kind of give us any kind of background?

Natalia Schumann, President and Chief Executive Officer, Mistras Group: Yes. Thank you, John. The commercial discipline that we have instituted a while ago still remains very much of a focus area of for the company. We are reviewing the economics behind our larger customer contracts, and we’re determining what levels, levers we can pull in addition to to ways to provide more, more services. And and basically, this includes working together with our customers to provide fair and adequate ROI for the services that we provide.

So that’s on pricing. We do see some price pressure at the moment as, again, there’s some pressure from the macroeconomic situation. So we’re working again with with the customers on that. But we believe that this commercial discipline that we have continue to serve us well.

John Franzreb, Analyst, Sidoti and Company: Okay. I’ll let somebody ask ask some questions. I’ll get back into queue. Thank you.

Abigail, Conference Operator: Our next question will come from Mitch Pinheiro with Sturdy, Vinton and Co. Please unmute and ask your question.

Mitch Pinheiro, Analyst, Sturdy, Vinton and Co.: Hello? Can you hear me? Yes, Mitch. Yes, Mitch. Good morning.

Hey. Good morning. So I’m curious specifically what you know, where you see tariffs affecting the business or the your customers’ decisions. You know, there is I mean, just everything’s on hold or and and what’s on hold? What kind of projects do you talk do you see being delayed?

Natalia Schumann, President and Chief Executive Officer, Mistras Group: Thank you, Mitch. Given that the our business that provides essential services to our customers that what we see is direct impact to Mistras on tariffs is not very significant. But rather, we the impact is coming from our customers, right? And the we’re experiencing that impact from tariffs, supply chain disruption, economic policies, those factors causing our customers to pause or delay their spending. And based upon our discussions with the customers, there is still robust demand for our services, but the current economic conditions are hard to predict with our customers to really convert that demand into the actual projects.

So that’s why we see that softer top line in Q1.

Mitch Pinheiro, Analyst, Sturdy, Vinton and Co.: So is this mostly energy market related? I mean, and I’m just sort of curious, you know, I mean, you know, global demand looks pretty good. I mean, it’s it’s it, you know, there’s some uncertainty, but I don’t really see, you know, a lot of things affected by the tariffs that probably, you know, will end up being for naught. And it makes it it it just doesn’t make sense that that to me, that energy, you know, markets would be affected by tariffs other than, you know, demand here or there for global oil output or something. It’s just a little

Natalia Schumann, President and Chief Executive Officer, Mistras Group: Yeah. That that’s right, Meg. And that that’s that’s what we see. Right? That this sort of overall demand is unchanged.

So it is temporarily paused as our customers calibrating on the new environment, right? And in fact, we’re thinking that tariffs in the long run will be beneficial to us, right? Because as the advanced manufacturing moves to The U. S, we believe that there will be a higher demand for our services overall. So we are quite optimistic about the long term prospects.

But, again, right now, it’s this is temporarily, temporary pause, that when our customers are evaluating their own situations.

Ed Preisner, Senior Executive Vice President and Chief Financial Officer, Mistras Group: It’s a short run uncertainty, Mitch. Our assets are largely North American based. They’re not subjected to tariffs, but the consumables, the raw materials that run through those assets that our customers operate are potentially subjected to supply chain stops and starts. There’s and energy is related. You know?

A crude oil can be cracked and refined into all different byproducts going into lots of different industries, not just as a fuel source. So it does cause a lot of little ebb and flowing there as the supply chain thinks through demand, supply and tariff impacts. So it it does have this indirect effect, as Natalia said, not as much directly on us. Our in lab testing might bring in a source outside of North America. They have to think through that as well.

So it’s a temporary thing. They’re thinking through how it affects them here and now, but longer term, could be a positive to us.

Mitch Pinheiro, Analyst, Sturdy, Vinton and Co.: What about the price of oil being just below $60 How does that affect your outlook?

Natalia Schumann, President and Chief Executive Officer, Mistras Group: Well, obviously, we are depending on oil prices and the impact of declining crude prices is primary contained to our downstream business. And this business, our business model is predicated upon our customers’ spending behaviors, which obviously, in turn, is potentially impacted by by future, you know, oil prices and the duration during of these prices changes. Right? So they’re actually, when we look at the customers, their their models are built to flex up and down with the future oil prices. So that’s that’s what we see.

You know, we we certainly have we we we see right now that the prices are more of a lower end of normal prices. Right? So where, you know, where it’s beneficial for us. So and again, that’s the impact of our to our downstream business.

John Franzreb, Analyst, Sidoti and Company: K.

Mitch Pinheiro, Analyst, Sturdy, Vinton and Co.: Yeah. And then the only thing that really caught my eye is, like, in midstream, you know, was weak again, and I kinda thought midstream was gonna be, you know, more of a steadier revenue picture. Can you talk a little bit about what’s happening in the midstream business?

Natalia Schumann, President and Chief Executive Officer, Mistras Group: Yes. Our midstream business, we had some some reduction in revenue. This is, again, mostly because there was some budget restrictions, and all the way, it’s regulatory driven. Most of our business in midstream is regulatory driven. So we believe that we will catch up on that on that demand later in the year.

It’s just the temporary pause and temporary delay.

Mitch Pinheiro, Analyst, Sturdy, Vinton and Co.: Okay. And then I I think I heard you say that, like, as far as your guidance, you’re not giving formal guidance, but you think that was it your adjusted EBITDA to be similar at a minimum to last year? Is that did I hear that correctly?

Natalia Schumann, President and Chief Executive Officer, Mistras Group: That’s right. That’s right. We believe that we at least will meet or exceed our prior year EBITDA levels.

Mitch Pinheiro, Analyst, Sturdy, Vinton and Co.: So, I mean, so does that imply at all that revenue will be, you know, not too far off from last year or you know, because your margins are have improved nicely, but I don’t know if they’ve you know, they could withstand a big revenue shock. So for a EBITDA to be, flattish to maybe up, would suggest that revenue is not going to be too far off from last year. Is that correct? Or is there other factors to consider?

Ed Preisner, Senior Executive Vice President and Chief Financial Officer, Mistras Group: No, Mitch. I think you’re interpreting that correctly. We can’t control that end market demand and our customers’ buying decisions and when. But we are definitely signaling a moderation there. However, with our disciplined cost calibrations focus, we can control the bottom line much more, and we fully intend to do that.

We have been doing that. We will continue to do that. So that’s why we have a lot more confidence in that EBITDA outlook for the full year.

Mitch Pinheiro, Analyst, Sturdy, Vinton and Co.: Okay. All right, great. Thank you. Thanks for taking the questions.

Ed Preisner, Senior Executive Vice President and Chief Financial Officer, Mistras Group: Thank you, Mitch.

Abigail, Conference Operator: Thank you, Mitch. Your next question will come from the line of Chris Sakai with Singular Research. Please unmute and ask your question.

Chris Sakai, Analyst, Singular Research: Yes. Hi. Good morning.

Mitch Pinheiro, Analyst, Sturdy, Vinton and Co.: Hi, Christian.

Chris Sakai, Analyst, Singular Research: Can you talk about what’s happening internationally? What what what growth is happening there, And and do you foresee more growth there?

Ed Preisner, Senior Executive Vice President and Chief Financial Officer, Mistras Group: Yes, Chris. International was up about 4% organically, and FX unfavorable FX translation to US dollars does flatten that out. But international has a fairly diversified business model. They’re a lot less oil and gas dependent than North America, much more diversified. They have some of the same macroeconomic challenges that we’re dealing with in North America.

But more diversified business model for them really probably reduces some of the variability going forward and that they had a really good year in ’twenty four on the top line and bottom line, and we see them having you know they’re they’re a little less volatile. It’s really a function of their much more diverse end markets than we would have in North America.

Chris Sakai, Analyst, Singular Research: Okay. Great. Thanks for that. And looking at midstream and downstream, what sort of things are are we to to expect to to see an uptick there on a macro level?

Natalia Schumann, President and Chief Executive Officer, Mistras Group: Well, on a macro level, demand we predict that demand will not change that much. So but again, because of the unknown situation currently and on a on a macro level, there is some uncertainty. So but this is for for oil and gas overall, whether it’s downstream or or midstream, upstream. So we’re seeing that softness currently. But, again, we believe that it will settle down as there’s more clarity around the the around the tariffs, around the rules.

Right?

Chris Sakai, Analyst, Singular Research: Okay. Great. Thanks for those the the answers.

Abigail, Conference Operator: Thank you, Chris. Your next your next question will come from John Franzreb with Sidoti and Company. Please unmute and ask your question.

John Franzreb, Analyst, Sidoti and Company: Yes. I actually got a question about the, how, April kind of played out. Can you kind of talk to the context of how that played out compared to the March? Is it down the same magnitude?

Natalia Schumann, President and Chief Executive Officer, Mistras Group: Right. In April, we still impacted a bit of the turnarounds. The number of turnarounds is not as robust, right, as that we saw in H1 of twenty twenty four, but we do see some improvement in demand. So it’s definitely we again, we’re very closely working with the customers to see how we can help and, create that greater insight for them using our, PCMS mobile application. So, but we see there’s a slight improvement in April already.

John Franzreb, Analyst, Sidoti and Company: So should we be thinking about the magnitude of the weakness in the second quarter being similar to down in what you saw in the first quarter at roughly 10%? How should we contextualize the relative weakness on a year over year basis?

Ed Preisner, Senior Executive Vice President and Chief Financial Officer, Mistras Group: Yes. Good question, John. Q2 will be a much easier comparison. Q1 to Q1. Q1 last year was so strong that and we did expect a drop off in the Downstream.

We had communicated that. Q2 does not have that variability built in there. It’s an easier comparison. So you’ll see less variability and we have in Q2 versus Q2. So different model.

Q1 was just extraordinarily high last year. That’s what’s causing much of that comparison to variance. We expect it to be down, as we said in the prepared remarks, we were down a little more than we had thought in Q1. But Q2, you’ll see a little less, actually a lot less volatility versus expectations. And, again, comparing to to last year, it’s it’s not as, you know, not as peaky.

John Franzreb, Analyst, Sidoti and Company: Got it. And did I hear it properly that you expect that $6,500,000 of revenue to be recovered in the balance of the year in the oil and gas sector. I don’t think you said that it was downstream dependent, but I think it sounded like to me that you’re gonna get it, you know, through all three end markets.

Natalia Schumann, President and Chief Executive Officer, Mistras Group: That’s correct, John. So what we expect is what I was talking about turnaround specifically. So as to we noticed several times the turnarounds were softer, so we didn’t have as many turnarounds as we had in 2024. However, if we look at the total backlog that we already have for turnarounds planned in H2, we believe that we at least exceeded overall total number in in in dollars as well, you know, exceed the level of ’24 by 6,500,000.0.

John Franzreb, Analyst, Sidoti and Company: Got it. Okay. Thank you for taking my follow ups. I appreciate it.

Mitch Pinheiro, Analyst, Sturdy, Vinton and Co.: Thank you. Thank you.

Abigail, Conference Operator: At this time, I see no callers in the queue, so I will hand the call back to Ms. Schumann for her closing remarks.

Natalia Schumann, President and Chief Executive Officer, Mistras Group: Well, thank you very much 20. Very confident in our prospects for the future.

And again, thank you to all my team members and my colleagues for their continuous efforts and hard work in the field. Thank you.

Abigail, Conference Operator: This ends today’s conference call. You may disconnect at this time.

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