Mistras Group Inc

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 Misdrafts Group Inc. Q1 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's 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 Tobolsky, Treasurer.

Good morning, everyone, and welcome to MISDRAWS Group's first quarter 2025 earnings conference call. I'm joined today by Natalia Schumann, President and Chief Executive Officer, and Ed Preissner, 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, contain certain forward-looking statements and involve risks and uncertainties as described in Ms. Trost's 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-K 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 8K. These results are available on the company's website in the Investors section and on the SEC's website. I'll now turn the call over to Natalia Schumann.

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 matrix. 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 and 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 Mistrust, I have been focused on three key initiatives for our business, which are, first, leadership talent evaluation, second, recalibration of our core space 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 am very pleased to have onboarded 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 a collaborative manner with our customers to ensure that we are 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 and 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 Mistra's 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 2025 release of PCMS Mobile, our cloud-based application purpose-built to optimize real 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 a 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 on the one platform is what sets Mistrust 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 Mistra's data solution brand, which consolidates our data-centric services, software solutions, and technologies under one umbrella. Mistra'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 2024 was a tough comparison with a robust spring turnaround season in oil and gas and a strong airspace and defense demand in the first quarter of 2024. The largest revenue decline of $16.6 million was in oil and gas and markets 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 2025 turnarounds were down 6.5 million 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 6.5 million. We have seen a reduction of customer spending and project pushouts in upstream and midstream sub-industries as our customers are dealing with market uncertainties and budgetary reduction initiatives. We experienced a decline of 1.7 million in aerospace and defense and 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 slowed and 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, Mistra's in-lab testing and services support OEMs and T1 suppliers through a network of ISO 17025 accredited laboratories with NADCAP 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 insurgency 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 are 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 2025.