Mistras Group Inc

Thank you for joining Mistress Group conference call for its second quarter ended June 30, 2020. My name is Tequila, and I will be your event manager today. We'll be accepting questions after management's prepared remarks. Participating on the call for Mistress will be Dennis Bertolotti, the company's president and chief executive officer, Ed Prajzner, executive vice president, chief financial officer and treasurer, and John Walk, Senior Executive Vice President and Chief Operating Officer. I want to remind everyone that remarks made during this conference call will include forward-looking statements. The company's actual results could differ materially from those projected. Some of those factors that can cause actual results to differ are discussed in the company's most recent annual report on Form 10-K and other reports filed with SEC. The discussion in this conference call will also include certain financial measures that were not prepared in ordinance 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 table contained in yesterday's press release and in the company's related current report on Form 8-K. These reports are available at the company's website, in the Investors section, and on the SEC's website. I will now turn the conference over to Dennis Bertolotti.

Thank you, Jaquilla. Good morning, everyone. As anticipated, second quarter revenue was down 38% as compared to the year-over-year quarter. But thanks to our ability to quickly flex our organization in the face of rapidly deteriorating business conditions, and by flex, I mean make extremely fast changes to our cost structure, we were able to maintain year-to-date gross profit margin and actually improve it in the second quarter. We also delivered significant improvements across a variety of additional key financial metrics. Cash from operations was more than double the year-ago quarter, and free cash flow was up nearly 300% compared to the same period last year, which enabled us to reduce debt at a record pace. Gross margin was 33.1%, the best quarterly level in over five years despite the lower revenue. and over the first half of this year, our gross margin was approximately the same as in the first half of last year despite a 25% revenue decline. We also drove overhead down by over 10% in the quarter. The success achieved this quarter demonstrates MISRA's strong ability to adjust and pivot to sustain positive cash flow during challenging economic circumstances while maintaining the high level of service on which our franchise is built. Having succeeded one of the worst quarters in recent history, we are preparing for recovery in our end markets. We are also preparing to capitalize on the opportunities being created by the sweeping changes in the way we all work, which has been accelerated by the global pandemic. A bright spot in these difficult times is the pressure being put on our customers to condense their supply chain, to get more value from their integrated partners. Essentially, doing more with fewer, and we are quickly adapting to this change. which we have anticipated for some time. We believe the current pandemic will serve to accelerate the adoption of this strategy. The market is definitely evolving from its traditional commodity service orientation to a value-added orientation. That is why we have been actively enhancing our service offering and diversifying into new markets. In our traditional oil and gas market, we have added new capabilities that are adjacent and complementary to our traditional NDT work. such as Mechanical Services and Rope Access. We are also introducing time and cost-saving technologies such as ruggedized tablets. And we are bringing more intelligence to our customers under Mistrust's digital umbrella. Already these capabilities are contributing to our success both tangibly and intangibly. For instance, anecdotally, we have heard that some of our customers believe they get better information using Mistrust Digital at home than they did when they were on their own job site. We are also very involved in the emerging industrial in and out of things market. For instance, we have been having success with various departments of transportation where our sensors are being embedded in bridges. We are seeing this in the renewable power space as well. This represents growth opportunities where we can leverage our unique technology into market, which have tremendous potential. In aerospace, we are seeing the same trend of compression and supply chains. We are gaining valuable experience with our Airbus and similar contracts where we are consolidating the number of tasks the owners used to have to have done individually by separate vendors, greatly reducing the time it takes to move a part through the supply chain in addition to offering substantial cost savings. Again, we believe there will be a growing demand for this ability to add value to the aerospace supply chain. Our efforts to enhance our service offerings and broaden our product portfolio is one area the global pandemic has not impacted. As budgets loosen and the transition to value-added services accelerates, we believe we are ideally positioned to help customers consolidate their supply chain, reducing costs while generating their better business intelligence. Because we tracked headcount, technician hours worked, and billable hours, we saw conditions gradually improve as we went through the second quarter, and this continued into July. Reports from the field complement these trends as activity levels are improving and bidding opportunities are increasing. For example, we were just awarded a large new contract in the North American oil and gas market, which is scheduled to start soon and ramp up over the balance of the year. We entered the second half of the year in a strong position, having successfully managed through what many believe will prove to be the most challenging quarter of 2020. With our strong cash flow and reduced capex spending, we have the liquidity needed to fund our operations and remain well within the terms of our bank agreement. We are headed into the second half of the year with good momentum. Based on the activity level we have seen, the steady improvement in technician hours, and some recent new contract wins, we expect a high team up to 20% sequential improvement in revenue during the third quarter over the second quarter of 2020. This should leave the second half revenue that will be higher than the first half. We also believe this level of revenue will support an increase in adjusted EBITDA in the second half compared to the first half, as well as positive operating cash flow in the second half of 2020. This is why we believe we can further reduce total debt this year. The second quarter of 2020 was a challenging period for MISRAS, and I am extremely proud of our team and how they continue to perform in these challenging conditions. By putting the safety of our associates, clients, and partners first, while continuing to deliver outstanding services, they are strengthening the Mistrust franchise and our relationships with our customers. We are committed to continually improving the value we deliver to customers, and we are equally committed to improving the value we deliver to shareholders. I would now like to turn the call over to Ed to give you more detail on our financial results for the second quarter and the first half of 2020.

Thank you, Dennis.