MG earnings call analysis

NYSE:MG Q4 2025 Earnings Call Transcript Generated on 6/6/2026 Luke | Conference Operator: Good day, everyone. My name is Luke and I will be your conference operator today. At this time, I would like to welcome you to the Misgrast Group Incorporated Q4 2025 earnings conference 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 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, Senior Vice President, Finance and Treasurer. Thomas Tobolsky | Senior Vice President, Finance and Treasurer: Good morning, everyone, and welcome to Mistrass Group's fourth quarter 2025 earnings conference call. I'm joined today by Manny Stamatakis, Executive Chairman of the Board, 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 Mistrass' SEC filings. The major factors that can cause Ms. Strauss' 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 in the company's related current report on Form 8K. These reports are available at the company's website in the investor section and on the SEC's website. I will now turn the conference over to Natalia. Natalia Schumann | President and Chief Executive Officer: Good morning, everyone. Thank you for joining us today. It is my pleasure to report to you highlights of our fourth quarter and full year financial performance and provide an update on the progress made to date on our strategic plan and our outlook for 26. Let me first start with fourth quarter results. I am pleased to report that we delivered consolidated revenue growth of 5.1% in the fourth quarter versus the prior year. As we communicated earlier this year, we successfully executed on a number of critical initiatives to restart revenue growth in the second half of 2025. In particular, we generated double-digit revenue growth across several key areas of our business, namely within the airspace and defense, power generation, and infrastructure and markets. Our airspace and defense business, which is our long-term growth engine, led the way with 4.5 million of growth in the fourth quarter, increasing 21.9% over prior year quarter. Power generation was up 3.3 million, representing 33.2% growth over prior year quarter. The industrials and infrastructure verticals were also up 6.7% and 26.8% respectively over the same timeframe. This increases more than offset the anticipated decline in oil and gas revenue due to timing of projects and the closure of unprofitable labs. Our airspace and defense operations, as we have reported throughout the year, have made significant improvements in 2025, driven by new leadership supported by targeted capital investments. We have rebuilt the structure, introduced a hub-and-spoke operating model, and implemented dynamic pricing strategies. In addition to commercial aerospace strengths, demand within the private space and defense industries has also played a favorable role in expanding our growth in this market. These actions led to the record high performance in our laboratories business, which grew by 61% in our fourth quarter as compared to the prior year. Aerospace and defense expansion plus the double-digit growth in other key industries already mentioned has resulted in favorable business mix, which in turn was a major driver behind the 190 basis point improvement in gross profit margin of 28.4% on gross profit of nearly $51.5 million for the fourth quarter. This contributed to our GAAP net income of $3.9 million and EPS of $0.12 in the fourth quarter and non-GAAP net income and EPS of $7.9 million and $0.20, respectively. We achieved adjusted EBITDA of $24.8 million, which was up 18.2% over the prior year quarter, representing a 13.7% adjusted EBITDA margin, which was a 160 basis point improvement over the prior year comparable quarter. Our fourth quarter adjusted EBITDA and adjusted EBITDA margin represent the highest ever fourth quarter performance achieved in a company's history. Equally important, this performance reflects improved pricing discipline, mix and operating efficiency, and not only one-time actions such as restructuring and lab closures. Next, I would like to provide a few highlights of our full year 2025 results. On a full year basis, consolidated revenue was $724 million, which was slightly up year over year, excluding the impact of laboratory closures. Revenue was up for the full year in our airspace and defense, industrials, power generation, and infrastructure and markets. Our international segment delivered revenue growth of nearly 6% for the year, driven by a diversified platform, most notably solid performance within the industrials and aerospace and defense markets. We had anticipated our second half revenue performance to exceed that of the first half of the year. And this trend materialized, driven by significant improvements across key growth markets while improving margins. We expect to continue this trajectory of profitable growth in the future. Our overall efforts in 2025 resulted in the generation of adjusted EBITDA of $91.1 million for the year, with an EBITDA margin of 12.6%, which exceeded our previously issued outlook. Our intense focus throughout the year was to deliver EBITDA margin improvement. We, in fact, achieved these goals utilizing financial and operational discipline while establishing a strong foundation in 2025 and providing credibility to the market, which our results demonstrated. To summarize our 2025 results, I am very pleased with our performance, achieving adjusted EBITDA at all-time record. This is a testament to our proven business model and client-first mindset. In 2025, I was focused on building a new executive team, eliminated unprofitable business, and streamlined the organization, while focusing on the strategic direction and building new capabilities and developing a winning culture. We have already experienced early success, including recent wins, improved margins, the adoption of new pricing strategies, and an overall new sense of purpose, direction, and intensity, which position us very well for the future. Let me now shift to a brief overview of our most recent progress against our three key priorities in our strategic plan, Vision 2030, the first of which is expanding our share of wallets and transforming our current services into a more comprehensive, integrated, and innovative solutions for our customers. Our data solutions business plays a key role in executing on this priority. This business derives significant value from its more than 20 years of inspection data that we have collected, analyzed, and transformed. into actionable insights for our customers. Specifically, within this business, we achieved great success within our Plant Condition Management Software offering, which grew by 20.7% in the fourth quarter of 2025 and 25.2% for the full year versus the prior year comparable period. This growth was driven by market demand, new customer adoption, and increasing the number of in-house implementations. This offering is a specialized industrial software platform with a high level of recurring revenue. This platform is a part of broader OneSuite asset protection software ecosystem, a cloud-based integrated platform that brings together our various software tools, data services, and analytics into a single connected environment, which helps to keep complex infrastructure safe, compliant, and operating effectively. We expect to enlarge our market share related to our data analytical solutions business as we expand our platform from its original compliance focus to its current risk-based inspection, which will ultimately transition to a more sophisticated, predictive maintenance, and AI-centric platform, reflecting our commitment to continued innovation in data-driven inspection. We are monitoring and driving this data services revenue growth by measuring several interrelated metrics, including sustaining a high year-over-year renewal rate, expanding the percentage of available applications utilized by each customer, and increasing our customer retention. We intend to prospectively report upon the growth rate of this business, utilizing this and related metrics so that you can monitor our progress going forward. In addition to doing more for the existing customers in the oil and gas market, we're also winning projects with new customers, allowing us to diversify our business, which is the second priority within our strategic plan. Examples of successful and market diversification include two recent wins in bridge monitoring contracts in the U.S., where our innovative monitoring and data analytical capabilities set us apart. These projects helped to contribute to the growth in our infrastructure and market, which grew by 2.5 million or 26.8% in the quarter and 4.5 million. or 13.2% for the full year. This growth, coupled with recently announced strategic hires, including a vice president of building and infrastructure, further expands our capabilities and create new opportunities across an exciting end market. Another example of executing on this second priority in our recent announcement in December of 2025 of a win of a long-term construction project with Bechtel related to a new LNG terminal for Woodside, which is a multi-billion dollar LNG production and export facility under construction in South Louisiana. This project is one of the most significant energy infrastructure developments in the world and represents a major investment in the U.S. Gulf Coast energy capacity. Additionally, we continue to pursue data center business. Our services provide integrated support throughout the entire data center lifecycle, which is responding to high demand within this sector. Currently, we are performing projects with some of the largest data center owners with the ability to further scale our services throughout the entire lifecycle of the data center projects. This is illustrated in our previously announced partnership with Partula and Kimball to deliver our suite of specialized inspection services to B&K's data service center projects. Our overall diversification efforts including targeted capital expenditures as well as additional strategic sales hires, have bolstered our growth in power generation, industrials, and infrastructure in the second half of the year. This diversified revenue growth demonstrates the success of our differentiated solutions and ability to deliver on customer expectations. The third priority of our strategic plan is focused on building operational leverage by doing what we do today but better through efficiency and productivity gains. We have invested in innovative proprietary technology to assist with digitalization of timekeeping and scheduling to more efficiently monitor the utilization of equipment and productivity of our technicians. In addition, we continue to strengthen our sales and business development teams, all of whom bring industry experience and fresh perspective to our business. In summary, we have executed on several planned actions and initiatives throughout 2025, which have produced favorable outcomes. We believe that this growth reflects the strengths of our people, integrated offering, and continued focus on driving efficiencies across the business. I will share more thoughts on 2026 later, but let me now turn the call over to Ed for more details on fourth quarter results and the highlights of full year 2025. Ed Preissner | Senior Executive Vice President and Chief Financial Officer: Thank you, Natalia. Given some early successes of our strategic efforts, gross profit increased to nearly $205 million for the full year 2025, up 6.4% from $192 million for full year 2025, representing a gross profit margin of 28.4%, which was a 190 basis point improvement year over year, compared to 26.3% in the prior year. As noted in our press release yesterday, our results reflect certain overhead and personal expenses which have been reclassified from SG&A to cost of revenue. The effect of this for the fourth quarter of 2024 was $5.5 million, and for the full year of 2024 was $20.9 million reclassification from SG&A to cost of revenue. This redistribution of overhead and personal expenses had no impact on operating income, net income, or adjusted EBITDA comparability. Selling general and administrative expenses were up $3.6 million in the fourth quarter compared to the prior year comparable period, attributable to strategic investments to grow our business and unfavorable foreign translation conversion. SG&A for full year 2025 was $139.9 million as compared to $135.5 million in the prior year, an increase of $4.4 million. again, due primarily to unfavorable foreign translation conversion in addition to strategic investments to grow our business, the selling component of SG&A, whereas general and diminished rate of overhead spending has been and will continue to be tightly controlled. During the current fiscal year, we revised our presentation of foreign currency losses and gains, which are now included within other expense and income line net. Previously, such amounts were presented within selling general and administrative expenses. The prior year amounts have not been reclassified due to immateriality. This change in presentation had no effect on previously reported net income. Gap income from operations in the fourth quarter of 2025 was $10.4 million compared to $10.5 million in the prior year period. Gap income from operations for the full year improved to $40.6 million from $39.8 million in the prior year. Non-gap income from operations in the fourth quarter improved to $15.7 million from $14.3 million, an increase of nearly 10%. On a full-year basis, non-GAAP income from operations improved to $55 million from $46.2 million, which is an increase of nearly 19% or 130 basis points year over year. We recorded $12.6 million of reorganization and other costs for the full year 2025 and $4.8 million during the fourth quarter, related to our continuing initiatives to reduce and recalibrate overhead costs in addition to incremental costs of other related actions. Our effective income tax rate for the full year 2025 was 24.7% as compared to 22% for the prior year we anticipate our effective income tax rate for 2026 to be in the mid 25 range interest expense was 3.7 million for the fourth quarter down by 0.2 million from the prior year period for the full year 2025 interest expense was 14.6 million down 2.5 million from the prior year for the fourth quarter we reported gapman income of 3.9 million or 12 cents per diluted share On a non-GAAP basis, we reported non-GAAP net income of $8 million or $0.25 per diluted share for the fourth quarter. This resulted in GAAP net income of $16.8 million or $0.53 per diluted share for the full year 2025 and non-GAAP net income of $28.1 million or $0.88 per diluted share for the year end of December 31, 2025. This compares to gap in income of $19 million or $0.60 per diluted share and non-gap in income of $22.7 million or $0.72 per diluted share in the prior year period, due primarily to incremental reorganization and other costs incurred in 2025. As committed in the third quarter, we delivered positive free cash flow in the fourth quarter of 2025. and I am pleased to report that we generated $32.1 million of cash from operations and $24.6 million of free cash flow in the fourth quarter of 2025. This compares to $25.7 million of cash from operations and $20.8 million of free cash flow in the prior year comparable period. For the full year 2025, we generated $33 million of cash from operations and $3.8 million of free cash flow, as compared to $50.1 million of cash from operations and $27.1 million of free cash flow in the prior year period. While full year free cash flow declined versus last year, this was driven by three identifiable factors – elevated DSO during our ERP stabilization period, higher restructuring activity, and growth-related CapEx. Two of these three factors are already moderating, and we expect improved cash flow conversion as we move through 2026. We will build upon this cash improvement achieved in the fourth quarter and continue to prioritize improving our cash flow performance in 2026. specifically by leveraging a newly hired vice president of working capital management, as well as by improving back office structure, tools, and accountability to accelerate the order-to-cash cycle and lowering accounts receivable. Our total accounts receivable balance was $154.7 million as of December 31, 2025, up $27.4 million as compared to $127.3 million as of December 31, 2024. This was due to the timing of working capital throughout the year. We are intently focused on reducing our accounts receivable balance below fiscal 24 levels throughout 2026. In addition, increased restructuring charges of $7 million and incremental CapEx investments of $6.2 million year over year, which were anticipated as a part of our strategic plan, also adversely impacted our cash flow. Specifically, our CapEx in 2025 was $29.2 million as compared to $23 million in the prior year. This increased capital expenditure spending in 2025 was heavily focused on the selective expansion of lab capabilities and capacity in addition to strategic equipment purchases focused on improving the safety and efficiency of our field operations. We anticipate maintaining CapEx at this higher level into 2026 to approximately 4.5% of revenue, but maintaining spending thereafter at our prior depreciation level This will enable us to continue to expand and upgrade capacity, particularly at our in-lab aerospace and defense facilities, which have been partially constrained by capacity. These investments are targeted towards areas where demand already exists. The primary return mechanism is improved utilization and throughput, which allows us to convert existing demand into revenue more efficiently rather than relying on speculative growth. Gross debt was $178 million at December 31, 2025, compared to $169.7 million at December 31, 2024, an increase of $8.3 million. Net debt was $150 million at December 31, 2025, compared to $151.3 million at December 31, 2024, a decrease of $1.3 million. Our bank-defined leverage ratio was approximately 2.5 times at December 31, 2025, which is up versus approximately 2.3 times as of December 31, 2024, yet is well within the maximum allowable leverage ratio of 3.75 times. Our capital allocation strategy is to use residual free cash flow to pay down debt to a two-times leverage ratio while maintaining a temporarily elevated CapEx level. We will continue to emphasize debt reduction as our priority use of our residual free cash flow, and we are targeting a debt paydown of approximately $20 million in fiscal 26, in addition to the significant paydown we made in the fourth quarter of 2025. This would result in a defined bank leverage ratio of approximately two times by the end of fiscal 26. In summary, this significant financial improvement reflects our proactive cost management, operational efficiency leverage, and focus on higher margin businesses. And this success was attributable to a new and invigorated executive team reducing unprofitable business and being laser focused on our strategic direction, all while building new capabilities and developing the culture to win. Let me now turn the call back over to Natalia for her to give us her outlook on 26th. Natalia Schumann | President and Chief Executive Officer: Thank you, Ed. Given that we have established the foundation for future success in 2025, we view 2026 as an opportunistic time in the market to continue on a number of management imperatives towards executing on our strategic plan in order to position Mistrust to unlock its inherent value over the longer term. First, as Ed mentioned, we will be increasing capital expenditures from our historic five-year average of approximately 3% to 4.5% of revenue to expand and upgrade capacity and remove constraints for targeted growth. These investments will be a primary focus on our in-lab business, serving the fast-growing aerospace and defense market. Scale is a key for our customers within this market who demand integrated services in large capacities from their supply chain partners. Additionally, we will invest in CapEx related to innovative AI capabilities in our data solutions businesses. This will enable faster and more accurate analytics and insights for our customers. Our overall CapEx plan reflects confidence in our customer demand trends with compelling ROI expectations. Most importantly, these investments are targeted and sequenced. We do not view margin erosion, leverage creep, or negative free cash flow as acceptable tradeoffs. Our intent is to protect the earnings base while expanding long-term earnings power. Secondly, we will be focused on our go-to-market strategy and invest in our sales-related technological applications and other initiatives. This investment will focus on advancing our effort in marketing and selling our leading proprietary technology and innovative data-centric solutions, such as art crawlers and one-suite digital applications as a suite of data-centric services, providing predictive solutions and strategic insight. By undertaking the strategic initiatives and investing organically for long-term market-leading growth, we will leverage our competitive advantages and strengths to best position ourselves for success and future growth. Accordingly, for 2026, we anticipate full-year revenue growth. to between $730 to $750 million and adjusted EBITDA to be between $91 to $93 million. While we are addressing both CAPEX and targeted operating investments in 2026, we expect adjusted EBITDA margins to remain resilient as we plan to maintain operational discipline and cost control. We also expect net income and EPS to exceed 2025 performance. Importantly, our 2026 outlook does not assume a macro acceleration or strong rebound in oil and gas activity or any contribution from acquisitions. I would now like to our Executive Chairman of the Board, Manny Stamatakis, to offer his remarks. Manny Stamatakis | Executive Chairman of the Board: Thank you, Natalia, and good morning, everyone. I would like to offer you a brief board level perspective as we look ahead. 2025 was a very good year for the company, particularly in strengthening our position in data driven inspection, mission critical testing, and aerospace and defense programs. I am pleased with the operational progress and the platform the management has built across these end markets. Particularly, I want to commend the meaningful strides we've made this year in significantly improving our executive team under the direction of our CEO. We strengthen leadership and sharper execution have materially improved our performance and strategic focus. As we enter 2026, the board fully supports management's view that this will be an investment year focused on transforming and modernizing our platform. In our industry, long-term value is created by investing to meet demand within our end markets. In data integrity, digital inspection capabilities, specialized talent, and accreditation for higher complex complexity, aerospace, and defense work. Such investments take time to translate into revenue and margin expansion, but they are essential to sustaining durable growth. Most importantly, the board views 2026 as an acceleration of our strategy via increased investments and a deliberate step to deepen our technical differentiation and expand our relevance to customers operating in regulated mission-critical environments. We are confident in the execution plan, the capital allocation priorities, and the long-term ambitions, particularly as risk-based inspection and aerospace defense spending continue to evolve. I wanted investors to hear clearly that the board views 2026 as a targeted year, which will strengthen the foundation for future growth. I'll now turn it back to Natalia for her to give you her closing thoughts. Natalia Schumann | President and Chief Executive Officer: Thank you, Manny. I'll close by thanking all of our customers and partners who contributed to our superior results throughout 2025. And in particular, I would like to sincerely thank all of our mistrust team members from the front lines to the back office for their tireless efforts in executing on their day-to-day tasks. while embracing transformative change in the evolving strategy of our company. These efforts are creating value for our customers and in turn for our shareholders. We look forward to updating you on our performance as we progress further in 2026 towards our strategic goals. And with that, let me turn the call back to the operator for questions. Luke | Conference Operator: Thank you. We will now begin Q&A. For today's session, we will be utilising the raise hand feature. If you would like to ask a question, simply click on the raise hand button at the bottom of your screen. Once you've been called upon, please unmute yourself and begin to ask your question. Thank you. We will now pause for a moment to assemble the queue. Our first question comes from Mitchell Pinera with Sturdy Bantam Co. Please unmute your line and ask your question. Mitchell Pinera | Analyst at Sturdy Bantam Co.: Hi, can you hear me? Natalia Schumann | President and Chief Executive Officer: Yes, Mitch, hi. Mitchell Pinera | Analyst at Sturdy Bantam Co.: Good morning. Okay, great. Good morning. So, hey, so I, you know, a couple questions. So Aerospace and Defense, it's your, had a great quarter, and it's obviously a big part of, it's your longer-term growth engine, I think, as you said. So I'm curious about, And you also, in other remarks, you talked about good visibility. So I guess when you look at backlog of your customers, both in the space side and the aerospace side and then on the defense side, what kind of confidence do you have in that? Number two, from a capacity, you talked about expanding capacity, right? Is that at all revenue limiting in 2026, or you have plenty of capacity to do what you need to do? And then, you know, are you winning new business with these customers? And if so, how are you doing that in terms of capabilities, or is it, you know, just curious how you're doing it? Natalia Schumann | President and Chief Executive Officer: Yeah, thank you. Thanks for this question. I will start with customers. Indeed, we do have very good close relationships with our customers. We meet with them specifically in aerospace and defense I'm talking about. We meet with them monthly to evaluate their demands. We know what they expect. And as I mentioned before, for them, scale and capacity matters. We also have established the hub and spoke model that allows us to use that platform at large for our customers. So regardless of their location, we are able to assist that, but, again, by expanding the capacity. When talking specifically about capacity and your questions whether we do have constraints, Yes, we do have constraints, and that's exactly where we're going to invest to remove those constraints, to then increase the utilization, increase the throughput, increase the productivity, and then sort of unlock the demand into really into the revenue. So that's essentially what we're doing in aerospace and defense. We have great visibility in the demand, and These customers are, as you know, you know, in aerospace and defense, there is a strong demand for NDT, particularly NDT testing, and they don't have enough of in-house capabilities. So... They are certainly looking for other suppliers who can support them and who can be large enough to support them. And, yes, we're winning new business, so we're celebrating adding a few new customers this year, and this is all thanks to our team that's there on the ground, and they're doing a really good job. Mitchell Pinera | Analyst at Sturdy Bantam Co.: And just one more question on aerospace and defense. So in terms of capabilities, is this a target area for maybe a tuck-in acquisition? Do you have any plans for something like that, or are you looking at that, or do you think you can sort of do it just through your own CapEx, your own internal investments? Natalia Schumann | President and Chief Executive Officer: Look, you're absolutely right. The growth and depreciation comes from the capabilities depth in that business specifically. So we have commented before that we are enlarging our offering. In addition to NDT testing, we now do welding, machining, repairs, cleaning. and so on, so that is quite critical for our customers. In terms of acquisitions, as you can imagine, it's very pricey acquisitions at this moment. Of course, we are always looking at our capital allocation strategy, but at this time, we believe that the highest return on our capital is organic expansion. And we believe that we are capable of building these capabilities and organically expand our capacities. I can give you a good example in, you know, Q4 demonstrated that. To respond on demand, we, in one lab, we added 100% of headcount, basically in large headcount. We removed that constraint, and we were able to generate 100%. increase in revenue of 61%. Can we repeat it? Probably not to that extent, but we already see the ways how we can remove existing constraints to generate additional revenue. Mitchell Pinera | Analyst at Sturdy Bantam Co.: Okay, helpful. Thank you. And then, you know, I mean, with obviously the disruption in the Middle East, I'd love to hear your thoughts about how You know, it may be affecting operations or how you view the first quarter. Is there any insight you could provide there that would be helpful? Natalia Schumann | President and Chief Executive Officer: Yes, certainly. We have not seen a material direct impact. Our footprint in that region is very limited. But, of course, there's a lot of uncertainty, and we continue to monitor geopolitical developments. Our customers are still evaluating what it means to them. Obviously, as you well know, if the oil price, as a result of these events, if the oil price goes up, the upstream activities will be intensified within the U.S., and it will positively impact us, but at this time it's too premature to say. Mitchell Pinera | Analyst at Sturdy Bantam Co.: Okay. And then just one more question. So, you know, you – In terms of – obviously, oil and gas is the majority of your business at the moment, and the faster-growing segments, aerospace, energy, you know, your power generation, I guess I could say, infrastructure, they're going to be your focus or obviously, you know, your growth focus, let's say. Is – um could you talk about um new customer uh wins bid activity in those in those application in those segments um you know what do you think the growth is going to come from existing customers a balance between existing customers and new customers And also, if you could talk about sort of the margin profile of these growth businesses as compared to, say, your company average. Natalia Schumann | President and Chief Executive Officer: Yes, thank you for this question. It's a very good one. It actually touches on two of our strategic priorities that we intently focus on. One is oil and gas customers, where we are expanding our offerings and services, and that's where, again, we believe very strongly that we are we are able to participate in oil and gas customers' digitalization efforts. And by offering to them our data services and data analytics and AI tools, we're able to help them to be more efficient as they're looking at their performance. So there we're talking about expanding that existing client base, so expanding the share of their wallet, and we're talking expanding of the margins, right? We intently focus on margins profile in our core markets of oil and gas. The second priority is the diversification, and those industries, like you mentioned, is infrastructure, power generation. where we, again, we're winning new contracts. It's all about capabilities and all about building that go-to-market strategy. So while we're working on capabilities, while we're investing in that part, we're also looking at how best to competitively position ourselves. You know, again, a great example will be data centers. We have what it takes when it comes to data centers. It's the same services we already provide for our core client base like oil and gas, but here we're using a new use case. So it takes a little time to get this going, but we already had that win. And margin profile, to answer to your question, is higher because those services are in high demand at the moment, and the demand is very visible. So that allows us to, again, position us competitively well and still generate sufficient amount of margins. Mitchell Pinera | Analyst at Sturdy Bantam Co.: And just one more question. I'm sorry. Sure. When you look at the revenue guidance for this year, you know, the difference between the low end of the range and the high end of the range is what? What type of – why would we be at the low end versus why would we be at the high end? Natalia Schumann | President and Chief Executive Officer: Good question. So, basically, the reason is – There is a couple of scenarios that we're looking at, right, and our large share of our business is still in oil and gas. And so our customers, although they did already – present themselves as, I would describe it, less pessimistic, but they're still quite cautious. So it's a large portion of our business. So depending on how oil and gas customers do this year would largely impact our performance. So we're quite confident when it comes to, you know, airspace and defense, infrastructure, power generations, we will generate sufficient amount of growth there. But, again, it's a smaller share of our total revenue. and therefore we are dependent on the oil and gas market. We are making, again, all this strategic plan is about to diversify as much as possible, so we are less dependent, but at this time, this is our scenario, so it all depends how well we do in the oil and gas market. Luke | Conference Operator: Well, thank you. That's all for me. Thank you. Our next question comes from John Franzrad with Sedoti & Co. Please unmute your line and ask your question. John Franzrad | Analyst at Sedoti & Co.: Good morning, everyone, and thanks for taking the questions. I'd like to start with the fourth quarter results, especially the improvement in the gross margin profile. I was wondering if you could quantify, you know, how much of that is pricing versus mix versus maybe exiting some of the unprofitable businesses. Can you kind of Natalia Schumann | President and Chief Executive Officer: you know put a bandwidth around where the improvements came from absolutely i will start and qualitatively and then ed will add if anything um so so there's a three um three distinct factors that um that influence our performance in uh in q4 uh and you know it's a mix a favorable revenue mix Number one. Number two, it's improved pricing discipline. And number three is really the operating efficiency. So there's less impact of the unprofitable branches or laboratories closures, and we'll talk about it. But let me unpack it a little bit. So obviously, revenue mix comes with the expansion of the airspace and defense, right? It's our laboratory business, contributed really well. as well as our data services. So, again, we saw great growth in PCMS due to multiple implementations. So that's revenue mix that contributed to higher gross margins. If I have to quantify, so let me touch on the pricing first. So pricing discipline, so we, as we already mentioned in the presentation, in 2025 in the beginning, we had established very rigorous pricing programs, and now they are working really well. So the pricing discipline, and, again, in the Q1, in the Q4, when we had a surge in demand in aerospace and defense, we were able to apply that pricing discipline, and we had some expedited fees, and, in fact, it's, again, had a positive impact on our gross margins. So if I have to quantify it, it's probably think about it as 25% price and 75% volume, specifically in airspace and defense. And then on operating efficiencies, right, it's obviously there is some restructuring impact, but it's minimal. It's around 1.5%, but it's not big. So it's really the effect of price and the mix. John Franzrad | Analyst at Sedoti & Co.: Got it. And just maybe to reframe one of the previous questions, is there a way to call out how much of your aerospace and defense revenues are just in defense? Natalia Schumann | President and Chief Executive Officer: Just in defense, I probably would say, and we can follow up with you on that, I probably would say it's 70% airspace, commercial airspace and private space, and about 30% to 35% in defense. We have good presence in defense in international segments, and that's where we see that increase, again, as defense budgets are going up. So it clearly benefits and creates positive impact. John Franzrad | Analyst at Sedoti & Co.: Understood. And, Natalia, it seems to me like you're taking maybe a more cautious view to the oil and gas sector. in 2026 than you were, say, a few months ago. Does that extend into the current upcoming turnaround season, or are you just looking at 2026 as a whole? Natalia Schumann | President and Chief Executive Officer: A couple of comments here. Let me start with turnarounds, right? So we had exceptionally good turnaround season in 2025. So whenever turnarounds happens, it's usually not every year because customers have to extensively plan planned for turnarounds. So it's usually once in three years, once in two years. So this particular year, 2026, is not that robust when it comes to turnarounds. So that's number one. That certainly will have some impact. We still have quite good visibility into turnarounds already for Q1 and Q3, but certainly that's Apologies for Q2 and Q3, but certainly this is something that we are still working on. Secondly, you know, if you look at oil and gas, again, what we hear from our customers, they actually do not spend as much on CapEx. They're projecting to be flat or somewhat down. What it means for us is... they will maintain their maintenance budgets, right? So they want to get their life, more life out of their assets, basically. And so that means that it should favorably impact us. So I don't foresee some negative impact in oil and gas by any means. I do see that we have a very good opportunity, and especially with our data services. But we have to be a bit, you know, cautious. Again, to me, I think it largely depends on the spending of our oil and gas customers. John Franzrad | Analyst at Sedoti & Co.: Understood. And I got a bunch of more questions, but I'll ask this last one to get back into the queue. Regarding the CapEx increase to 4.5%, is that viewed as a one-time 2026 phenomenon, or do you expect to be spending at an elevated level for maybe a couple of years? Natalia Schumann | President and Chief Executive Officer: That's right. We anticipate CapEx to remain at elevated levels in 2026 and into 2027, but then we anticipate the intensity to moderate after that and kind of following the completion of our key initiatives that are driven by our strategic plan. So that's the outlook. And then we expect our COPEX to return to our historical depreciation levels after 2027 to about 3% of revenue. John Franzrad | Analyst at Sedoti & Co.: Got it. Thanks for taking the questions. I'll get back to you. Natalia Schumann | President and Chief Executive Officer: Thank you, John. Luke | Conference Operator: Our next question comes from Gaushi3 with Singular Research. Please unmute your line and ask your question. Gaushi3 | Analyst at Singular Research: Yeah, hi. Can you hear me? Yes, hi. Good morning. Yeah, just a few questions from my side. Firstly, on the international, the profitability seemed to have improved quite nicely there. So just was wondering, are those gains concentrated in just a couple of standout contracts or countries, or do you feel that you've made more systemic changes in pricing, cost, structure, or customer mix that should make that improvement more sustainable in 2026 as well? Natalia Schumann | President and Chief Executive Officer: It is structural improvement, just to answer to your questions directly. We did have – international had a good year, very good year. We had overall 6% increase in our revenues and improved margins profile. So there in international we have quite diversified platform. So, in fact, oil and gas was slightly down in international for the year, but we did have good increase in airspace and defense. We had good increase in infrastructure, good increase in power generation. So, the international segments and the teams in Europe and elsewhere did really, really well. From margins profile, you know, we will invest slightly in our international facilities as well. So we will see some capacity enlargement and capacity constraints removal. So we would anticipate margins to be sustainable in the long run. Gaushi3 | Analyst at Singular Research: Okay. And then, secondly, on your largest, let's say, strategic accounts, particularly in the oil and gas sector, how has your wallet share and contract duration trended over the last 12 to 18 months as you have shifted towards higher value, more integrated offerings? Are you seeing any change in competitive dynamics or insourcing there that would make the wallet share harder to hold in 2026? Natalia Schumann | President and Chief Executive Officer: I would not – and thank you for this question. I would not say it's harder to hold the wallet share. It's just we see that there is more appetite from our customers to consider the – digital platforms to consider data analytics, data insights. So, and we see this is a very good opportunity for us to introduce the higher value work to them, right, that benefits them as they continue to execute capital discipline. Having said that, they're also increasing their risk managing spending, right? So, again, to increase the efficiency, the operational excellence, the asset life extension. And so they have higher demands. All our strategic customers come to us to help them to create that digital data platforms now, right? So there's much more appetite to look at this type of solutions, the integrated offering. So that's what we see in particularly there. So it's not it's harder to keep and retain the volume, but we are shifting away from the commoditized kind of just entity services to more value-driven solutions where we are – expanding our offerings to include data analytics, to include digital data, to include the digital platform. And that's what we're essentially doing, expanding that services portfolio for our existing oil and gas customers. And, again, you know, from the bid activity, from the – From the, you know, our sales activity, we see that increased interest. And because, again, they're very much in tune with what they need to do in terms of the risk management when they expect more from their assets, right? Because, you know, there is a more low, right, the bigger probability of failure. So they have to manage their risks better. Gaushi3 | Analyst at Singular Research: Okay, understood. That's all from my side. Thank you. Thank you. Natalia Schumann | President and Chief Executive Officer: Thank you. Luke | Conference Operator: Our next question comes from Alex Ragil with Texas Capital Securities. Please unmute your line and ask your question. Alex Ragil | Analyst at Texas Capital Securities: Thank you very much. Very nice quarter. As it relates to the restructuring actions over the last 12 months or so, can you talk to or quantify the long-term cost savings and also address sort of any negative revenue headwinds that you could be facing in 2026 because of this? Ed Preissner | Senior Executive Vice President and Chief Financial Officer: Thanks, Alex. I'll address that question. So, yeah, the restructuring was elevated in 25 over 4. You saw that $12 million. That's a combination of severance in there from headcount reductions. There's lease breaks in there and other strategic actions we've taken to really drive, you know, efficiencies and productivities. So there is a good payback on much of that. I mean, the facilities, the lab closures that we talked about throughout the year, There is payback there. That's an uplift to the margins. There was no contraction of business. There's not a negative revenue implication from those restructurings. We really are streamlining and driving for efficiency, more throughput. Natalia mentioned earlier getting another shift of operational effectiveness out of an existing site by really de-bottlenecking. our own sort of self-induced capacity constraints, that's a big part of what restructuring is about, is really to have clean line of sight, de-layering the organization to speed up, you know, decision making. So there's a lot of soft benefits as well there, but most of that cost is out. Again, some of the heads got replaced. That's not a direct one-for-one savings, but facilities is definitely a savings. And there was some one-time expenses here, driving strategy and other things, and restructuring in 25. This number will moderate significantly in 26, so that number will come back down. It was also, you know, a drag on our free cash flow a little bit. But we look for returns on the, you know, the reward expense that we booked here, and, you know, you will see that kind of reflecting itself in 26. Alex Ragil | Analyst at Texas Capital Securities: And then as we look out longer term, can you help us or remind us what your sort of longer-term organic revenue growth and EBITDA margins could look like for this business that you're improving? Natalia Schumann | President and Chief Executive Officer: Yes, thanks, Alex. So when we look at our strategic plan, we're looking at a CAGR about 5% through 2030. And for margins, our aspirations are to reach 15% margins. Maybe that margin. That's the profile we're looking at. Alex Ragil | Analyst at Texas Capital Securities: Very helpful. Thank you very much. Luke | Conference Operator: Thank you. At this time, I see no callers in the queue, so I'll hand the call back to Ms. Schuman for her closing remarks. Natalia Schumann | President and Chief Executive Officer: Thank you, Luke, and thank you, everyone, for joining this call today and for your continued interest in Mistrust. I look forward to providing you with an update on our business, strategic plan, and progress achieved towards our ongoing initiatives on our next call. Thank you, everyone. Luke | Conference Operator: This ends today's conference call. You may disconnect at this time. jsPDF 3.0.3 D:20260606090243-00'00'

NYSE:MG Q3 2025 Earnings Call Transcript Generated on 6/6/2026 Layla | Conference Operator: Good day, everyone. My name is Layla, and I will be your conference operator today. At this time, I would like to welcome you to Mistress Group Q3 2025 Earnings Conference 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, Senior Vice President of Finance and Treasurer. Thomas Tobolsky | Senior Vice President of Finance and Treasurer: Good morning, everyone, and welcome to Mistrush Group's third 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 Mistras' SEC filings. The major factors that can cause Mistras' 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 in the company's related current report on Form 8K. These reports are available at the company's website in the investor section and on the SEC's website. I will now turn the conference over to Natalia Schuman. Natalia Schumann | President and Chief Executive Officer: Thank you, Tommy. Good morning, everyone. Thank you for joining us today. It is my pleasure to report on our Q3 results and update you on the progress made to date on our strategic initiatives. Let's start with our third quarter results. I am pleased to report that third quarter was highlighted by consolidated revenue growth of 7% versus the prior year. As we planned and communicated early in the year, our goal was to grow revenue in the second half of 2025 year-over-year, and we achieved this in the third quarter. With the improved revenue, we generated an expanded bottom-line result in the third quarter with net income of $13.1 million or earnings per diluted share of $0.41, and our record quarterly adjusted EBITDA of 30.2 million. With regards to the performance within our end market, we have delivered year-over-year revenue growth for Q3 in each of our five largest industry verticals. Energy market, consistent of our oil and gas and power generation industries, led the way, growing 8.1%. Oil and gas was up 6.2 million, or 6.2%, and power generation was up 2.8 million, representing 24.3% growth year-over-year. These results are attributable to strong turnaround activity, PCMS projects, and market conditions in power generations, driven by increased demand for rope access services within our renewable business. Aerospace and defense, our second largest market, was up 10.6% or 2.3 million due to a solid volume gain across the private space and defense industries and in addition to the successful price increase strategies. Our largest customers in this market continue to forecast future growth in their businesses over both the short and long term, as evidenced by their robust backlogs. With its higher-than-company-average margin profile, aerospace and defense is one of our top strategic priorities for both top-line revenue generation and margin improvements. Industrial and infrastructure markets were both up in the third quarter of a prior year. We achieved 15.8% growth, or an increase of 3.1 million in industrials, driven by the increased demand of manufacturing. And we achieved 21.1% growth, or a $1.8 million increase in infrastructure, driven by the increased activity in construction and capital projects. Overall, this diversified revenue growth across our five largest end markets and across geographies, including growth of 5.5% within our international segment, was driven by the broad market demand for our services and demonstrates the success of our differentiated solution and our ability to deliver on customer expectations. Turning to profitability, gross profit increased by $9.3 million, or 19%, with gross margin expanded by 300 basis points to 29.8% over the prior year quarter. The increase in gross margin was due to favorable business mix, closure of unprofitable labs early in the year, and operational efficiencies as a result of a streamlined operational structure and better focus and accountability. Consolidated adjusted EBITDA generated in the third quarter was $30.2 million, resulting in a 15.4% EBITDA margin. This represented an increase of $6.9 million, or 29.6% versus the prior year period, underscoring the improved operating leverage in our business model. Let's now shift to a brief overview of our progress against our three key priorities in our strategic plan, Vision 2030, the first of which is expanding and transforming our current services to a more comprehensive and integrated solutions for our existing and new customers. Our entire leadership team has continued to be keenly focused on meeting with as many customers as possible to hear their voice directly and better understand their perception of mistrust. Our integrated offerings and solutions are finding broader adoption and use cases, as indicated by the strengths of our recent results. And there is more to come as we continue to unlock mistrust value. For example, there is an opportunity for many of our field services customers to utilize our proven PCMS solution, which, as we demonstrated, would drive efficiency and improve their operational execution. This offering illustrates the value of bringing our whole integrated solution to our customers. Since only a very small percentage of our field services customers currently use our data analytics and software solutions, this is an exciting opportunity for us. And in addition to doing more of existing and new customers in our core markets, We are also winning projects with brand-new customers in new and adjacent markets. These efforts form the basis for the second key priority of our strategic plan, diversification, expanding our client base into new industries while protecting our core business. Our recent announcement of wins with Batchelor and Kimball related to data center projects and Bechtel on the Hanford Peat project for the United States Department of Energy are examples of recently awarded long-term construction projects outside of our core energy markets. The third strategic priority of Vision 2030 is focused on building operational leverage by doing what we do today, but better, through efficiency and productivity gains. Beyond these positive sales efforts and in reflection in our growth, I have continued to strengthen Mistrust capabilities and build a scalable leading asset integrity and testing platform as Manny Stamatakis, our executive chairman, started last year to ensure long-term sustainability of our results. During the third quarter, I added a new Chief Human Resources Officer and a new Chief Legal Officer. In addition, we have strengthened our sales and marketing team, continued with commercial discipline, and have further integrated our sales force. We have also reinforced our operational management team throughout 2025 with several new hires who all bring industry expertise and experience and a fresh perspective to our lab operations. These new managers are already demonstrating early wins and contributing to our operating results. Their early success highlights the intensity, urgency, and accountability at each of our locations across all our divisions. Mistrust has the foundation, technical know-how, proven expertise, and people to win. We are advancing our organizational systems, empowering our technicians with digital tools, and investing in the relationships with our customers to drive ROI and shareholders' value. I'm confident that we will execute with continuous improvement, and I plan to be very transparent in assessing and communicating our progress and reporting to you. I will share additional highlights of our Vision 2030 strategy later, but let me now turn the call over to Ed for more details on the financial results. Ed Preissner | Senior Executive Vice President and Chief Financial Officer: Thank you, Natalia. As shown on slide 6, revenue for the third quarter was $195.5 million, a 7% increase, which exceeded expectations. This growth in the quarter reflects increases across several key areas of our business, including our PCMS offering and the aerospace and defense, industrials, and power generation end markets. In particular, our PCMS offering within our data solutions business grew by nearly 25% in the quarter, representing the second consecutive quarter of achieving significant growth. This growth was attributed to several implementation projects of PCMS programs. As Natalia mentioned earlier, gross profit increased by $9.3 million in the third quarter, with gross profit margin expanding by 300 basis points. This improvement was attributable to favorable business mix and operating efficiencies. On a nine-month basis, our gross profit margin has expanded 180 basis points year over year from 26.3% to 28.2%. As a result of our gross profit expansion and SG&A cost control, we generated 20.4 million of income from operations, which is an increase of 8.5 million or nearly 72% growth versus the prior year comparable period. We improved adjusted EBITDA to 30.2 million, resulting in a 29.6% increase over the prior year quarter. This significant improvement reflects our proactive cost management, operational efficiency leverage, and a shift towards higher margin business. Our adjusted even margin increased to 15.4% from 12.7% for the third quarter, an expansion of 270 basis points. As noted in our press release yesterday, our results reflect certain overhead and personnel expenses which have been reclassified from SG&A to cost of revenue. This reclassification recorded within our financials was $5.7 million for the three months ended September 30, 2024. The impact of this reclassification for full year 2024 was approximately $20.9 million from SG&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 essentially flat in the third quarter as compared to the prior year comparable period, despite the higher revenue level achieved due to our ongoing cost control management while also making strategic investments in our business. For the third quarter of 2025, the company recorded $1.8 million of reorganization and other costs related to our continuing initiatives to reduce and recalibrate overhead costs, in addition to incremental costs of other related actions. Our effective income tax rate for the third quarter was approximately 22%, benefiting from discrete items in the quarter, whereas we expect the full year 2025 effective rate to be approximately 25%. Interest expense was $3.4 million for the third quarter, down by just under $1 million or 21.4% from the prior year period due to a lower cost of borrowing. For the third quarter, we reported gap in income of $13.1 million or $0.41 per diluted share compared to $6.4 million or $0.20 per diluted share in the prior year period. This improved result of doubling year over year for the quarter significantly exceeded expectations. Note that the buildup of accounts receivable, both billed and unbilled, on our balance sheet, as we discussed in the second quarter, has continued to cause a drag on our cash flow generation in the third quarter. As we have shared earlier, this is a working capital timing item due to implementation and adoption of an upgraded ERP system in April, which is taking us longer than anticipated to come up the learning curve. Note that unbilled accounts retrievable did decrease as of September 30 compared to June 30, 2025, whereas billed accounts retrievable increased over the same timeframe. Hence, we anticipate positive free cash flow generation in the fourth quarter of 2025. We will focus on improving our cash flow performance in the quarters to come. Specifically, improvements to our back office structure, focus tools, and accountability will contribute to reduce accounts receivable, both billed and unbilled. Although some improvement is projected in the fourth quarter, we anticipate to normalize our free cash flow generation in the first half of 2026 to more historical levels. In addition to the higher day sales outstanding experienced in 2025, we The increase for structuring charges and incremental CapEx investments year over year have also adversely impacted our free cash flow. Due to this buildup of net working capital as of September 30, 2025, bank borrowings increased year over year with net debt of $174.5 million as of September 30, 2025. On the positive side, we are continuing our investment in our business for the longer term while lowering maintaining a trailing 12-month leverage level of just below 2.7 times. We expect positive free cash flow and debt paydowns in the fourth quarter, and we continue to emphasize debt reduction as a priority use of our residual free cash flow. Although strong revenue growth was achieved in the third quarter, We expect full-year 2025 revenue to be between $716 to $720 million. This would represent essentially flat performance compared to the prior year after adjusting an approximate 1% reduction in revenue resulting from our ongoing efforts to voluntarily exit unprofitable business during 2025. whereas adjusted EBITDA has continued to improve and is expected to increase for full year 2025. Accordingly, we are raising our prior qualitative adjusted EBITDA guidance range of exceeding the 2024 adjusted EBITDA level of $82.5 million. Based on our strong third quarter 2025 adjusted EBITDA performance results and the current fourth quarter forecast, we expect our full year adjusted EBITDA to be between $86 to $88 million. Our focus for 2025 has been and remains margin improvement and adjusted EBIT expansion, such that we can generate profitable growth and invest further in our growth momentum heading into 2026. We appreciate your continued support, and at this time, I would like to turn the call back over to Natalia for her closing remarks before we volunteer to take your questions. Natalia Schumann | President and Chief Executive Officer: Thank you, Ed. I'll conclude by summarizing the market opportunity we see and preview why we believe Mistrust is well positioned to create and capture more value. Demand for our services is continuously driven by mission-critical projects, aging assets, and aging infrastructure across a diverse set of demanding and dynamic industries. That said, the Mistrust of today is not operating at the full potential of our capabilities. We have historically operated as a company in silos and on a project-by-project basis. Historically, it was more common to be commissioned by a customer to provide a single non-destructive testing at a specific plant versus an entire program on a more strategic enterprise-wide basis. In fact, it is the exception and not the rule that the customers of MISRAS utilized our services in a holistic way. This represents significant opportunities for future growth. Our overall strategic priority in the near term is to change this paradigm and drive more strategic value to our customers through the synergy and scale of our capabilities. The time is right because the challenges that our customers face today require an enterprise-level approach to risk mitigation and optimal return on their CapEx investments. We believe MISTROS has the technical know-how, proven expertise, data analytics, and advanced solutions portfolio to best serve as the new standard for 21st century testing and inspection industry. Our Vision 2030 strategic plan is built on the foundation that mistrust is significantly more valuable to our customers when we deliver the complete suite of services of our platform as an integrated solution. In the months and quarters ahead, we will be sharing more detail on the execution of our plan and how we are connecting with our customers. In the meanwhile, let me close with recapping the three priorities of our strategic plan. First, to continue to develop and deliver comprehensive and integrated solutions to our existing customers in our core markets. Our goal is to be more integrated with each client by providing holistic solutions instead of singular fixes. At the enterprise level, we drive value for customers, and in doing so, we expect to broaden the addressable revenue and profit opportunity. Secondly, diversify into new industries while protecting our core business. We expect our revenue mix and end markets to become increasingly diverse as we do more for new customers. Historically, our company has been subject to oil and gas secular cycles, and our objective is to diversify in order to mitigate the impact of cycles tied to commodity prices. Thirdly, to build upon operational efficiencies, do what we do today but better to improve our margins primarily in the field services business. We have an opportunity to drive increased profitability as we deliver solutions for clients on a holistic enterprise basis. We have had recent success in margin progression through operational efficiency, and we believe it will be a catalyst of our Vision 2030 strategy that will drive sustainable operating leverage, industry-leading performance, and scale. I'll close by thanking all of our customers and partners who have contributed to our superior results this quarter. In particular, I would like to sincerely thank all of our Mistrust employees from the front lines to back office for their tireless efforts in executing on their day-to-day tasks while embracing transformative change and evolving strategy of our company. These efforts are creating value for our customers and, in turn, our shareholders. We look forward to updating you on our performance as we progress further. With that, let me turn the call back to the operator for questions. Layla | Conference Operator: We will now begin Q&A. For today's session, we will be utilizing the raise hand feature. If you would like to ask a question, simply click on the raise hand button at the bottom of your screen. Once you have been called on, please unmute yourself and begin to ask your question. Thank you. We will now pause for a moment to assemble the queue. Your first question will come from Mitch Pinheiro with Sturt Event. Your line is now open. Please go ahead. Mitch Pinheiro | Analyst, Sturt Event: Hey, good morning. Can you hear me? Layla | Conference Operator: Good morning, Mitch. Mitch Pinheiro | Analyst, Sturt Event: Good morning, Mitch. Hey, so a couple things. First, I didn't see a breakdown of the oil and gas revenue by subcategory. And I didn't know if that was an omission or if you plan not to have that in your releases going forward. Natalia Schumann | President and Chief Executive Officer: Yeah, Mitch, I will explain. We did, in fact, remove that subcategory reporting. I reported before I have done a lot of analysis of, you know, how our customers buy and how we operate. And basically what we've learned that many clients of ours straddled between those two or three subcategories. So reporting on those subcategories is not very accurate. But I can tell you right now, you know, because of the strong quarter, especially, you know, attributed to the turnarounds, downstream was up about 14%, where we also saw the LNG sector is very strong, and midstream and upstream was low single-digit growth. So that kind of gives you an idea of where we are. But, again, several of our customers are in between those subcategories, so reporting doesn't make sense. Mitch Pinheiro | Analyst, Sturt Event: Okay, yeah, maybe you should figure out a way to recategorize it because it's obviously the lion's share, two-thirds of your business. it does have a fairly large impact when you have strong upstream, downstream, to at least have some visibility there. So enough of that. Then the other question I have, and this is sort of less to do with the quarter and more to do with reporting, is as I look at your business, it's hard to understand – what field services, shop, lab, you know, I understand data analytics. It's hard to really understand and how to model that, you know. So to look at your – and then on top of that, with all your subsegments, oil and gas, aerospace, industrials, power gen, it's a confusing way to present your story financially. And I was wondering if you're going to look at changing the way you present your financials to better reflect – how you're looking at the business. Natalia Schumann | President and Chief Executive Officer: Yeah, good comments. Thanks, Mitch. We can certainly follow up with you on that and see what would make sense, how you would like us to give you a better picture. And do you have any comments? Ed Preissner | Senior Executive Vice President and Chief Financial Officer: Yeah, I mean, Mitch, it's a good question. We struggle with this as well, the best ways to look at the business. But we try to give you as transparent a view as we can. We give you geography, meaning all investors, geography. We give the end markets being served. We're talking about our service types now, you know, between the field, you know, the in-lab and the data. So we are trying to pull it apart so you can better understand it. And we're trying to give you multiple views of it. But, you know, we will continue to – call out the high, the low, and give you a feel for what's, you know, growth rates, relative mix. It is all very important. Run and maintain versus call out is something we also talk about. That's another important way of looking at the business to get to the run rates. But, you know, all of that's important, and we like to give you different ways to view the business to understand the drivers of the activity. Natalia Schumann | President and Chief Executive Officer: Yeah. No, I appreciate that. We report separately the in-lab. services as well as the field services some of our labs i still are doing both so we are certainly now separating that so to give more transparency into the operations and the performance so that you will see some improvements there for sure as we're going forward in 26 So, and again, our strategic plan is built around the specific industries and market protocols that we serve. So you will see more there for sure as we're progressing with our threat plan. Mitch Pinheiro | Analyst, Sturt Event: Okay. I mean, like, for instance, so just taking a look at, so you had oil and gas, you know, good performance there. Thank you. And I would have thought field services would have been up then. I see field services down 1%. So why would field services be down 1% when you had such a nice quarter in the oil and gas segment? Natalia Schumann | President and Chief Executive Officer: But if you see the other category in the same table, excuse me. Yes. If you see the other category in the same table, that's the labs that do pulse. Those offices that do the field inspection and the in-lab testing. And that's where you see the increase, right, so substantial increase. And, again, to that point, you know, as we go forward in 26, we will separate those, and you will not see others any longer. So that will give you a much better idea of field services and in-lab and then data analytics as well. Ed Preissner | Senior Executive Vice President and Chief Financial Officer: And PCMS misses another piece of that answer. PCMS is oil and gas focused. They're in half the refineries in North America, but they're not field services. They're clearly data. So that's another example there where that industry is up because of PCMS, but they're not field services. They're in a different category, i.e., the data solutions category. Mitch Pinheiro | Analyst, Sturt Event: Okay. And then staying on this, you know, your aerospace and defense, very nice growth sort of accelerating out of like a, a slower first half. And I see that, you know, shop laboratories rose up 12%. I'm assuming the shop laboratories is mostly your aerospace and defense business? Natalia Schumann | President and Chief Executive Officer: That is correct. That is correct, yes. Okay. Aerospace, defense, and industrials are, as you know, the third largest end market is industrials. So most of our in-lab is testing for the industrials and aerospace and defense. Mitch Pinheiro | Analyst, Sturt Event: So what kind of capacity do you have? I mean, so, you know, you've consolidated some of that, but, you know, do you have the capacity to grow at this type of rate for a couple years, or is there a bottleneck there that you have to solve, or can you talk a little bit about how you can grow the aerospace and defense business within the labs? Absolutely. Natalia Schumann | President and Chief Executive Officer: Absolutely. A couple of things there. Yes, very proud of the team in lab. They've done a very good job. There was a volume increase as well as the price calibration. So we can see that certainly that customers are now much more willing to pay for the services and the value we provide to them. But to answer to your specific question on capacity, that is our strategic plan, right? So to expand further on the capacity, we are continuing to build out hub and spoke model where we have several large hubs in different parts of the country as well as Canada. where we have the most capabilities. And then we have smaller labs where we can take the orders and be closer to the customers. So we're expanding two things. We're expanding capacity by building out those hubs, as well as the expanding capabilities where we're adding new services. You know, we reported earlier in Q2 that we added welding equipment. cleaning, repairs, rework, cleaning, so basically optimizing the supply chain for our customers. So, you know, you've seen our CapEx is a little bit up. That all goes in the growth, growth investments. So that's CapEx, and we're advancing our UT capabilities, ultrasonic capabilities in our labs. So that's, again, will give us much better and bigger capacity to serve our clients. Because market is growing, right? Market is, you know, our customers are disclosing publicly. They have backlog. We're continuously talking to our customers. And they are expecting growth. They are cautiously optimistic, right, especially in a commercial airspace. sector, sub-sector, they're cautiously optimistic because there is some tightness in their own supply chain. Nevertheless, it's a growing business for us, and it's growing not only in the U.S., but also in Europe. And another thing, don't forget, is defense, right? Defense... Defense growth is obviously expected, whether it's in Europe or military spend or U.S., right? So it goes also well for us. Ed Preissner | Senior Executive Vice President and Chief Financial Officer: Some of these same projects, Mitch, are being funded jointly with the customer. They need us to grow. They need this capacity. They want us to expand. So they're actually jointly funding some of this CapEx to help expand the footprint to service them going forward, to help them catch up on their backlogs that they have. And we're very happy to support them, and we will expand capacity to do that. Mitch Pinheiro | Analyst, Sturt Event: Okay. Yeah, just one more question, and I'll get back in the queue. Okay. on the last call you were talking about new construction projects related to data centers the ai electrical infrastructure uh can you talk a little bit more about anything that's developed over the last three months Natalia Schumann | President and Chief Executive Officer: Yes. So we announced that new project with Bachelor and Kimball. So that's the good win for us. Again, as I mentioned last time, right, it's right now in the intersection where technology can no longer advance without the the energy, right? And we've been very prominent in the energy sector. So we're basically taking the same, you know, our testing methods and inspection methods and apply it to new use cases, right? So in data centers, it's the same. We're doing exactly the same. What we've been doing all these years, right, is You know, ultrasonic testing, it's thermal infrared imaging, right, to detect the heat issues. So there's a radiography, there's a visual inspection and testing. So all of those services we provide for the data center. you know it's it's more to come on that it's it's a big sector for us uh we certainly um already you know creating capabilities or or having these separate teams that working on on data centers you know i reported earlier that we have hired some sales executives that continuously looking into this sector and you know developing the relationship with the prospective customers with new customers so More to come on that. It's a good opportunity for us. We feel confident. It's a good market for us. It's, again, it's a part of our diversification strategy and our vision 2030. It's part of our strategic plan. Mitch Pinheiro | Analyst, Sturt Event: All right. Well, thanks for the questions. I'll get back in the queue. Natalia Schumann | President and Chief Executive Officer: Thank you, Mitch. Layla | Conference Operator: Your next question will come from John Franzrup with Sadatian Company. John, your line is now open. Feel free to unmute and ask your question. Hi, John. Your line is now enabled. You'll just need to mute on your side. Well, why don't we come back to John. We'll move on to with Singular Company. spk07 | Analyst, Singular Company: Good morning. Can you hear me? Yes, yes. Good morning. Good morning. Thank you for taking my calls. On the margin side, can you help me quantify how much of that margin improvement is coming from deliberate lab or business exit versus pure operational execution, and how much of that runway remains for further portfolio pruning? Natalia Schumann | President and Chief Executive Officer: Certainly, absolutely. Yes, certainly the larger part of the margin improvement is attributed to the favorable business mix. So that led to the improved gross profit. And then, obviously, operational efficiencies and the closure of unprofitable labs contributed to the improved EBITDA margin overall. But the majority of the improvement comes from that, the revenue improvement, gross profit improvement, mostly in oil and gas, right, attributed to our turnaround, very good traditional seasonality impact there, and then growth in all the other sectors or industries. But in terms of operational efficiencies, obviously it played a role there and closing of unprofitable ops as well. spk07 | Analyst, Singular Company: Okay, sounds good. Thanks for that, Colin. And I know you commented a little bit about the aerospace industry and the data analytics industry. Which end markets are you really showing some most forward visibility into 2026? And, you know, the kind of acceleration and spend from your key customers? Natalia Schumann | President and Chief Executive Officer: So what we are really seeing where we see – well, first of all, the markets, kind of all markets right now, and that's contributed to our Q3 results as well, are quite stable. And we see growth is in airspace and defense. in particular defense, right, where we see the increased opportunities there, as well as in infrastructure. Data centers are in our infrastructure segment. So that's where we see that there will be potential opportunities and growth, as well as in power generation as well. Because, again, you know, it's now infrastructure and energy and, you know, The energy demand is coming from, again, technology expansion and advancement and so on. So I would say those three sectors, right, airspace and defense, infrastructure and power generations, we believe that we will see growth in 2026. Having said that, obviously a large percentage of our business mix is in oil and gas, and so we're continuously working with our clients in that sector, in that market vertical, to offer integrated solutions. So that first pillar or first priority of our strategic plan is to increase the wallet share with existing customers, and we believe that with integrated solutions we certainly can achieve that. where we envision growth coming from customers using our oil and gas customers using more than just field services inspections, but we're adding, you know, additional services such as PCMS, such as other robotics, rope access, and so on. So we're quite confident about the – about the markets as we're looking for next year. But, of course, what I can tell you right now, we will start making growth investments in those sectors, right, to get this ability to grow and capitalize on opportunities. spk07 | Analyst, Singular Company: Gotcha. And that capex that you're mentioning that you'll have to make, that's dependent on the cash conversion that you will be able to accomplish by the end of this year. Is that correct? Are we trying to model increase in debt levels? Natalia Schumann | President and Chief Executive Officer: That's right. So obviously cash generation is one of our priorities internally. This is something that we can control, and that is something that absolutely will take priority as we're stepping in into the new year. spk07 | Analyst, Singular Company: Okay, sounds good. And just one more question. You mentioned that the pricing environment is quite stable. As you transform into a more integrated solutions provider, what's the competitive environment like? And what is your kind of your early win rates as you maybe, I don't know how early that is? As you present yourself as a more integrated solution, what's the competitive environment like and how are you gaining traction? Natalia Schumann | President and Chief Executive Officer: Thanks for this question. Yes, we're tracking, obviously, the competitors. It's a slightly different set of competitors as we, you know, reaching out to the other markets or looking at the other services and adding services, right? But this is not new to Mistrust. This is not new to the company. So, although, you know, we had problems. The bulk of the services, so to speak, right, in our portfolio is our foundation. So we know that environment. We're just integrating the solutions, and we believe that we will produce more value with integrated solutions. So in terms of the early wins, yes, I can tell you it's one of our KPIs for our strategic plan is to measure the cross-selling and how we're tracking on cross-selling. About $3 million to $3.5 million this quarter already attributed to the cross-selling results or cross-selling efforts. That, I can tell you, we will report as we're going forward, so how we're doing on the integrated, specifically on the integrated solutions and what progress we're making in that regard. spk07 | Analyst, Singular Company: Sounds good. Thank you so much. That's all I had. I'll jump back in the queue. Thank you. Layla | Conference Operator: For our next question, we'll return to John Franzer with Sedati & Company. You may now unmute and ask your question. John Franzrup | Analyst, Sadatian Company: Good morning, everyone, and congratulations on a good quarter. Thank you, John. I'm actually curious about the quarter itself. Was there any revenue that was pulled forward from the fourth quarter into the third quarter? Natalia Schumann | President and Chief Executive Officer: No. That was all third quarter generated revenue. John Franzrup | Analyst, Sadatian Company: Okay. And I'm also curious about the guide. It kind of suggests, at least at the midpoint, that there's more gross margin sensitivity than I was cognizant of, well, potentially SG&A goes up sequentially. Am I thinking about that properly, or am I missing one of the puts and takes here? Natalia Schumann | President and Chief Executive Officer: You're talking about Q4, is it correct, John? John Franzrup | Analyst, Sadatian Company: Correct. Natalia Schumann | President and Chief Executive Officer: Yes. So the way we're modeling Q4 is that we certainly – so we believe that we will be in line with our own expectations. We already seen good, again, good transitional seasonality for October. So our turnaround season was quite strong in October. We also know that, again, traditionally Q4 is – not as strong as Q3. So we're implying in our guidance some revenue growth versus prior year. We believe that will be a moderate growth in EBITDA. But we believe there's no surprises at this time that we can tell you about for Q4. Ed Preissner | Senior Executive Vice President and Chief Financial Officer: Yeah, definitely. Yeah, yeah. I'm sorry, do you want to say something? No, nothing else to add there, John. John Franzrup | Analyst, Sadatian Company: Okay. And I'm curious if you're starting to get orders for the upcoming spring season yet, and if that's the case, can you give us some kind of qualitative thoughts on it? Natalia Schumann | President and Chief Executive Officer: Yes. As we plan for 26, and now we're in the middle of the budgeting season, as you can imagine, so we believe it will be a strong spring turnaround season. You might recall last year was quite different, right, or this year, rather, was quite different. So spring was not as strong as the fall. So right now we see that we have won some of the turnaround awards and bids. So we anticipate a stronger turnaround season that was in 2025. John Franzrup | Analyst, Sadatian Company: That's good to hear. Just an odd question, I think. Do you have any impact in any of business from the government shutdowns, or is that a non-issue for you? Natalia Schumann | President and Chief Executive Officer: No, there is not an issue for us. John Franzrup | Analyst, Sadatian Company: Okay. I'm just curious. Okay. Thank you for taking my questions. Natalia Schumann | President and Chief Executive Officer: Of course. John Franzrup | Analyst, Sadatian Company: Thank you, John. Layla | Conference Operator: Thank you. At this time, I see no callers in the queue, so I will hand back to Ms. Schumann for her closing remarks. Natalia Schumann | President and Chief Executive Officer: All right. Thank you, Leila, and thank you, everyone, for joining this call today and for your continued interest in Mistrust. I look forward to providing you with an update on our business, Vision 2030 strategic plan, and progress achieved towards our ongoing initiatives on our next call. Thank you. Layla | Conference Operator: This ends today's conference call. You may disconnect at this time. jsPDF 3.0.3 D:20260606090245-00'00'

NYSE:MG Q2 2025 Earnings Call Transcript Generated on 6/6/2026 Layla | Conference Operator: Good day, everyone. My name is Layla and I will be your conference operator today. At this time, I would like to welcome you to Mistress Group, Inc. Q2 2025 earnings conference 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 Tableski, Senior Vice President of Finance and Treasurer. Thomas Tableski | Senior Vice President of Finance and Treasurer: Good morning, everyone, and welcome to Mistress Group's second quarter 2025 earnings conference call. I'm joined today by Natalia Schuman, 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, contain certain forward-looking statements and involve risks and uncertainties as described in Mistress' SEC filings. The major actual factors that can cause Mistress' 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 -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 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'll now turn the conference call over to Natalia Schuman. Natalia Schuman | President and Chief Executive Officer: Good morning, everyone. Thank you for joining us today. It is my pleasure to be providing you with an update on our progress to date and report on our second quarter and first half results. I'm very pleased to report on our second quarter performance, which resulted in a record-adjusted EBITDA of $24.1 million, up nearly 9% -over-year, reflecting significant improvements in our operating leverage as a result of effective execution of our strategic priorities, diversifying our business, building scale and efficiencies, and engaging with our customers, all while leading with technical innovation. In Q2, we strengthened our performance across several key areas as compared to the prior year, comparable quarter. Most notably, we demonstrated organic growth of over 14% in our international segment, primarily within our European operations, and growth of over 30% in our PCMS service offering within our data solutions business. Within our end markets, we delivered growth of .4% in aerospace and defense and .2% in industrials. These gains were offset by softness in our oil and gas end market, largely due to macroeconomic volatility in the beginning of the year and subsequent customer deferrals and project delays. We do expect a stronger second half in oil and gas, largely due to our strong fall turnaround season. The majority of this work has been awarded to us and is hands in our backlog. I'm also very bullish on the overall energy market. I had the honor to present at New York Energy Week 2025 back in June discussing the future of energy and the role we play in enabling this progress. From extending asset life and supporting the energy transition to rapidly growing demand for the new infrastructure assets, the way we inspect, monitor, analyze the grid has never been more important. And at MISTROS, we are proud to help customers do just that, with data-driven solutions that improve safety, performance, reliability, and uptime, which we believe will help us grow both top line and bottom line for the remainder of the year and into the future. Aerospace and Defense is our second largest end market, and we delivered .4% revenue growth in the second quarter, following a slow start to the year in Q1. The momentum we've seen in this market gives me confidence in our growth prospects within this end market going forward, as we continue to expand and leverage the capabilities in our Aerospace and Defense platform, supporting both Boeing and Airbus supply chains, as well as private spacecraft customers. Given the attractive margin profile in this segment, we believe this growth will produce a meaningful impact on our financial performance in the second half and beyond. As further evidence of the evolution of our platform is our recent National Aerospace and Defense Contractor Accreditation Program, NADCAP, certification for welding services, which adds to our Aerospace Quality System certifications previously achieved. NADCAP certifications ensure that companies meet specific industry standards and requirements, enhancing product quality and reliability, and safety standards are adhered to. This certification reflects our dedication to precision, consistency, innovation, and meeting the highest standards required by leading Aerospace manufacturers. Over the past quarter, as part of our efforts to restart our growth engine, I have established a key strategic initiative for myself, as well as the senior leadership team, both at corporate level and in the field, to improve customer engagement. The voices of the customer is crucial to us. We have been actively listening in order to better understand our customers' evolving needs, as well as their current assessment of our services level. My executive team and I have met with over 100 customers during the first half of 2025 alone, and the message being received is crystal clear. Our customers value our trusted relationships, and they are also asking for a more proactive partnership with integrated, agile, customizable solutions while maintaining cost efficiency. As an example, we've learned that our customers are going through their own management consolidation, restructuring, and reorganizations, specifically in the oil and gas industry. During these conversations, we continue to showcase our differentiation and value proposition to our customers, especially when it comes to our integrated digital offerings, predictive analytical tools, and breadth and depth of our global footprint and coverage, which we believe will greatly assist them in reducing their maintenance cost while improving their reliability. In certain cases, we also learned that we have not connected closely enough to our customers. This input we received is invaluable to us. And our recent actions will be internalized as we continuously and proactively seek feedback moving forward. This dialogue is shaping our capital investment and our R&D roadmap and reinforcing our role as a long-term strategic partner for our customers. With respect to our data solutions business, this business is a key pillar in our forward strategy where we deliver tailored, high-value solutions that integrate our proprietary software and advanced analytics. We recently held our PCMS users conference in Orlando, Florida in June. This conference was once again attended very well with over 110 participants representing over 40 customers. The content was focused on upcoming release of PCMS and recently launched mobile version. We also showcased case studies highlighting real-world customer successes through the use of 3D modeling and digital twins. These case studies were developed based on customer feedback gathered during last year's conference and refined over the intervening period. In a similar manner, our PCMS customers simultaneously expressed their current challenges and needs and shared within a network of industry peers while at the same time actively engaging in the development of the roadmap for future PCMS software updates and upgrades. Many of our customers also share that digital transformation is a top priority for their organization and that they have allocated budgetary spending in this area to improve asset performance and uptime which we are well positioned to capitalize on. Again, our primary objective is active engagement and seeking real-time input from customers in order to evolve our solutions for them collaboratively addressing their needs at the same time maximizing our ROI while maintaining leading edge innovation. As part of our end market diversification efforts, we have experienced increased level of overall commercial bid activity which has resulted in recent wins in other end markets beyond our core in oil and gas. This diversification helped contribute to our 30 basis point improvement in gross profit margin in Q1 of this year which greatly expanded to a 200 basis points increase in Q2 of this year which increased margins across all segments as compared to the prior year comparable periods. We are focusing on areas such as new construction projects related to data centers, AI, and other high margin infrastructure and power generation projects in addition to opportunities in the industrial and other process industries. We have already made good progress in power generation and transmission and market as evidenced by our quarterly revenue growth of over 30%. As we retool, reshape, and reinvigorate our business, we have taken many decisive steps to enhance profitability and sharpen our focus. This reflects the strengths of our operating model, disciplined cost management, and continued focus on driving efficiencies across the business. These results demonstrated our ability to deliver value despite market volatility positioning us well to restarting our growth engine. We have adjusted our company's organizational structure, delayed the organization, reinforced performance management at each lab, and implemented clear KPIs which are used to continuously manage performance and control our costs. These are not just short-term cost calibrations, they are structural improvements designed to improve and expand decision-making capacity, reinforce the field organization, and help ensure operating leverage through all business cycles. As a result of these efforts, in 2025 we decided to close and consolidate several underperforming offices and lab operations, effectively exiting several unprofitable businesses and eliminating operations that had negative income and unclear paths to sustainable returns. The revenue loss tied to these labs amounted to approximately $3 million in Q2 and $5 million in the first half, which drove a portion of our 2.3 -over-year reported revenue decline. Excluding those exited revenues, our overall revenue base was effectively flat in Q2 as compared to the prior year comparable period. At the same time, these actions have contributed to EBITDA improvements in the first half of the year and will positively reflect in our overall 2025 results and beyond. Ultimately, while these labs closures are short-term revenue drag, the strategy to reduce underperforming assets and projects will be an evergreen effort while focusing on profitable growth to drive margin expansion. We have remained focused on the development and retooling of our in-lab services business, a process that began with an appointment of a new senior vice president of in-lab services in April. Since then, we have integrated and standardized operating protocols across all of our lab facilities, hired a new divisional sales leader, secured additional accreditations, and expanded our portfolio of service offerings. Customer conversations have reinforced that the industry continues to face near-term inflationary pressures and supply chain constraints. Having said that, we believe our integrated approach, coupled with the most comprehensive suite of services in this market, positions as well, to create meaningful value for our customers via offering premium services and expanding our capacity. Looking ahead, we will continue to invest in this business through strategic and focused capital expenditures and a sharpened focus on growth over both the near and long term. Overall, despite this performer flat revenue in Q2, we significantly improved profitability. We have increased our adjusted EBITDA by 8.9%, driven in large part by a growth margin expansion by 200 basis points, with expansion across all segments due to diversification efforts and improved operational efficiencies. Our balance sheet also remains strong as we continue to manage our working capital and control discretionary spending while making continuing investment in our capabilities. Our leverage ratio still remains slightly below 2.75 and well below our permitted ratio of 3.75. Our goal is to finish 2025 with a leverage ratio of below 2.5. To conclude my opening remarks, I would like to say that we are not just managing quarter to quarter, we are building for the long term future. We have restarted the growth engine in our industrials and airspace and defense and markets and are keenly focused on improving our performance and capabilities in oil and gas and diversifying to other industries such as infrastructure and power generation and markets, all of which will drive long term growth. We are also reassessing our portfolios through the lens of return on invested capital and alignment with current and future market trends. Our strategic objective is to become an agile, client-focused, innovative asset integrity and testing market leader and ready to scale as demand expands. In short, we are staying close to our customers, changing what we no longer feed, improving our bottom line and investing in what is needed for our customers. As the market continues to evolve, we are focused on aligning our capabilities to meet increasing demand for more integrated and data-enabled solutions. By combining advanced technologies with deep operational expertise, we are positioning MISTROS to lead in high growth sectors and provide critical support where reliability, safety and performance matter the most. With that, I will turn the call over to Ed for more financial details on the second quarter and first half results. Ed Preisner | Senior Executive Vice President and Chief Financial Officer: Thank you, Natalia. As shown on slide eight, revenue for the second quarter was $185.4 million. In line with analyst consensus and consistent with the prior year comparable period, after adjusting for the business, we voluntarily exited related to lab closings and consolidations. While the reported decline in second quarter revenue was modest and not related to any market share loss, we are monitoring trends closely and remain focused on returning to growth in the second half year over year. In spite of the consolidated shortfall in the first half revenue, there was strong growth within certain businesses, such as within our PCMS offering, aerospace and defense, industrials and power generation and transmission end markets and our international segment. Gross profit increased by $2.6 million in the second quarter versus prior year, which represents a 200 basis point expansion year over year to 29.1%. This improvement was attributable to an improved business mix and operating efficiencies. We improved adjusted EBITDA to $24.1 million, an all-time high second quarter record resulting in an .9% increase from the prior year quarter. This reflects our proactive cost management, operational efficiencies and leverage and a shift towards higher margin offerings. Our adjusted EBITDA margin increased to .0% from 11.7%, an expansion of 130 basis points. As noted in our press release, our results reflect certain overhead and personnel expenses, which have been reclassified from SG&A to cost of revenue. As we determined, 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 cost, 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. This reclassification recorded within our financials was $4.8 million for the three months ended June 30, 2024. The impact of this reclassification for full year 2024 was approximately $20.9 million from SG&A to cost of revenue. This redistribution of overhead and personnel cost has no impact on operating income, net income or adjusted EBITDA comparability. Selling general and administrative expenses in the second quarter were up 3.6 million or 10% from the prior year comparable period due primarily to foreign exchange loss within our SG&A of 2.8 million. For the second quarter of 2025, the company recorded $3 million of reorganization and other costs related to our continuing initiatives to reduce and recalibrate overhead costs in addition to incremental costs of other related actions. Our effective income tax rate was a benefit for the first half of 2025, whereas we anticipate an effective income tax rate of approximately 25% for the full year 2025 as we experienced in the second quarter of 2025. Interest expense was $4.2 million for the second quarter, decreasing by $0.2 million or .5% from the prior year due to a lower interest rate environment. For the second quarter, we reported gap net income of $3 million or 10 cents per diluted share. Excluding special items, non-gap net income was $5.8 million or 19 cents per diluted share for the second quarter compared to $6.8 million or 21 cents per share in the prior year. Operating cash flow was negative $3.5 million in the first half of 2025, down from $5.1 million in the prior year, largely due to working capital timing. Specifically, in the second quarter, we had a buildup in unbilled receivables and a delay in invoicing related to our conversion to a new ERP effective April 1 of year. Although our unbilled and build receivable balances were up as of June 30, 2025, we expect a significant reduction over the remainder of the year. Free cash flow was negative $16.2 million in the first half of 2025 compared to negative $6.9 million in the prior year comparable period, attributable to the same factors impacting operating cash flow. On a trailing 12-month basis, which better normalizes -to-year differences, our free cash flow was $17.8 million, despite the first half 2025 -over-year lagging results compared to the prior year period. We expect normalization in the coming quarters and remain committed to strong free cash flow generation over the second half of 2025. Our trailing 12-month bank defined leverage ratio was just under 2.75 times as of June 30, 2025, which is up slightly from year end, but still well within allowable permitted ratio of 3.75 times. We expect to finish 2025 with a leverage ratio below 2.5 times. We continue to emphasize debt reduction as our priority use of free cash flow. However, we will also continue to invest in capital expenditures and other resources that support our organic growth strategy while providing solid returns. As our 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 two priorities to maximize shareholder value. We will not be providing full-year guidance for fiscal 2025 as our CEO and renewed senior management team are still reviewing our entire portfolio of business. We are also continuously assessing market volatility, including the impact of recently enacted tariffs on our business and results for fiscal 2025. Having said that, we nevertheless expect our 2025 adjusted EBITDA level to exceed the adjusted EBITDA level achieved in 2024, which had been the second highest annual level achieved all time. We appreciate your continued support, and at this time, I would like to turn the call back over to Natalia for her closing remarks before we move on to take questions. Natalia Schuman | President and Chief Executive Officer: Thank you, Ed. First, our senior leadership team and I, in coordination with our board, are highly engaged and increasingly excited as we continue to develop our five-year strategic roadmap, Vision 2030 for mistrust. We plan to share the details of this plan as we finalize our -to-market strategy to capitalize on significant opportunities to enhance growth and profitability in a more holistic way across the entire organization. Second, we believe demand in our key asset integrity and markets is accelerating and broadening. Secular trends in both energy and airspace and defense markets require deeper integration, high technology expertise, and meaningful data capabilities. Mistrust is uniquely positioned with our current portfolio of assets, technology, and services and is supposed to become a large asset integrity and testing market leader with increased coordination and synergy of these integrated offerings. Third, as we spoke to this quarter, mistrust is committed to profitability as key north star in our strategic decision-making. In both the short-term and long-term, each decision we make, whether it be operational or through the deployment of the capital and resources, will require improvements in our return. This will be critical on how we measure our people and hold our company to a higher level of accountability. And finally, I would like to extend my sincere thanks to our customers and our dedicated employees. Your continued dedication, collaboration, and focus on results have been instrumental in building the momentum that is driving us forward in a stronger and promising future. It is an exciting time at Mistrust, and I will end by thanking all of you again for your support. We'll now ask the operator to open the call to your questions. Layla | Conference Operator: We will now begin Q&A. For today's session, we will be utilizing the raise hand feature. If you would 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. Our first question will come from Mitchell Pinheiro with Sturdevent. Mitchell Pinheiro | Analyst, Sturdevent: Hey, good morning. Layla | Conference Operator: Good morning, Mitchell Pinheiro | Analyst, Sturdevent: yes. Yeah, good. So hey, a couple questions. First, just on guidance or the lack thereof. So EBITDA, I got that part. I'm curious about revenue. Is that also going to be above last year or are there puts and takes in that, you know, I see, you know, from foreign currency and things like that, will it be puts and takes that drive it lower than last year? Natalia Schuman | President and Chief Executive Officer: Right. Mitch, yes, EBITDA is clear. We exceed the last year results, but revenue, it's hard to tell. We are still continually reviewing our portfolio. As you've seen in the first half, you know, we are, we did exited a few operations, right, a few labs. So that's resulted in decline in revenues. So on top of that, there is a market volatility continues, right, tariffs again, you know, additional uncertainties. So that's hard for us to control on the revenue side. So we are laser focused on what we can control at this time and really focused on the EBITDA improvements. So, you know, oil and gas still volatile. It's very hard to predict what our customers will do. You know, first half was tough, right, with delays and deferrals of the projects and work. So we'll see how it's, we'll end up in second half. Mitchell Pinheiro | Analyst, Sturdevent: Okay. I mean, so, so within that, like you did say you expect a strong fall turnaround season, I guess you have good visibility into that. Is that, is that correct? Natalia Schuman | President and Chief Executive Officer: That's right. That's right, Mitch. Exactly. So that's what, you know, what gives us line of sight that we will be having a good second quarter. So it's really the turnaround. So we have a robust robust backlog of turnaround work. That's number one. Then obviously the large portion of our business is nested sort of embedded teams at our customers that do run and maintain work. So that we have a line of sight too. And then of course, incremental revenue, right? So as you can see, our data group is doing really well, especially, you know, in particular PCMS, right? So we're using this time to really connect with customers and look at the incremental opportunities as they looking at, you know, digital transformation, we're right there for them. So, and why not come from the services in particular, but we see that we have line of sight for other incremental revenues. Mitchell Pinheiro | Analyst, Sturdevent: Let me ask this, this thing on the, we'll on guess for just a second is midstream, which I thought would be more of a regular steady predictable revenue stream has been down for six quarters or so. You know, I think we're doing a hundred million back in 23 and we're run rating somewhere in the 70 million area. What's, what's happened with the midstream? Is that, I thought it was sort of temporary, you know, but it seems to be a little more than temporary. Natalia Schuman | President and Chief Executive Officer: Yes. We have some challenges. That's, that's, that's right. You, you correct in that. We have some challenges in the business that particularly service, midstream and market customers. That challenge is continued through beginning of this year. So most of it is increased competition, increased price and lower price. Sorry. And we have addressed that. So we changed the leader of that particular business. We're looking to turn around this business. So I believe that the prospects are there because midstream has great opportunities, especially with the demand for natural gas, the data centers, explosion and so on. So we believe that we're well positioned to capitalize on these opportunities in the future. So we continuously invest in this business. But again, that has been quite challenging in the last, in the last couple quarters. Mitchell Pinheiro | Analyst, Sturdevent: Okay. Thanks. That's helpful. And then I was, you know, sort of pleased to see and hear your comments about your customer engagement meeting with, you know, your customers. I'm curious, um, like, so, so as you guys get together for, I think you said, you know, like a more proactive relationship, I mean, what, what does that mean? It, you know, it, how's that different than your, you know, relationship now, or what was it all like a bid relationship and now it's more of a partnership? How, what does, can you give a little more color into what that meant? Natalia Schuman | President and Chief Executive Officer: Absolutely. It's been great to, to really engage with the customers on all kinds of levels. And, and what we are doing here, Mitch, is we're really shifting from transactional relationships to strategic partnerships, right? What does it mean? It's really three things. It's a strategic alignment. So as we're looking at building the roadmap for investments, for our innovation, for R and Z, right, we want to be very aligned with our customer needs. So, you know, again, PCMS is a great example. They've been doing it for a number of years already. So we've got to get better at, in other, um, in other businesses as well. Then the second one is really lead with technical innovation. So we do have, Mistrust is, you know, historically been really, really good in innovating and leading with new technologies. And that's what we continue doing is really leading with that. And then the three is really get, um, customers to understand our, the full portfolio of services and the entire suite of our integrated solutions. Because, you know, we not just field services. We're not just data. We really have the data, data analytics solutions. We have field services. We have in-lab solutions. We have product and monitoring technologies. So what I've learned from my kind of conversations with customers that they did not necessarily were aware of all of our breadth and depth of our service offerings. And that's what we mean by those integrated solutions, right? Where, you know, if today maybe, you know, they are all very focused on operational efficiencies, we are right there to deliver at low cost that, you know, to meet them where they want to be. So that's what we mean by that kind of stronger partnership, stronger relationships with customers. It's been exciting because feedback was really, really good. So we're doing the right things, the right quality. It just, the customers are not fully aware of our full suite of services. Mitchell Pinheiro | Analyst, Sturdevent: And how long does it take, you think, to sort of convert, you know, sort of this new, sort of this new relationship, you know, and their awareness of your, you know, of your one-stop shop and your robust services? How long does it take before, you know, you sort of see that creeping into the revenue line? Natalia Schuman | President and Chief Executive Officer: Yes, we expect, well, first of all, we already seen it, right? Little by little, we've seen that. So we have already increased that cross-sell kind of when customers are using, you know, not just one service, but two. So we continue, we're seeing it now, you know, it will take time. But again, we have now have consolidated our sales approach, right? We hired new salespeople. We are training the entire sales team on all our services, right? So it will take time, but we believe that, again, we're starting that engine growth now. So we've seen it in airspace and defense. We've seen it in industrial. Look at our power. Yes, it's very small, but again, increase the double digits, you know, very pleased with the efforts of our sales team, of our operational folks, but it will take a little time. Mitchell Pinheiro | Analyst, Sturdevent: Okay, just if I could sneak in one more. I was very pleased to see the, well, first you talked about increased commercial bid activity, which is nice. I'm curious on that one. Is that, do you have a different sales force or different sales approach, or is there so much demand out there that you're just getting this bid activity just because you're there? And then second, is there, is the power generation, you know, was up 31% or so. It's small, but it's very nice growth. Is that something, is that going to be sort of the growth engine? You know, of all the smaller segments, you know, among your smaller segments? Natalia Schuman | President and Chief Executive Officer: Yeah, okay. So let me address the sales question first, and then I comment on power, because it's one of my, you know, really exciting topic to talk about. So the commercial team definitely strengthen the team, right? Hired just in this quarter alone, we hired seven additional salespeople, so sales executives. So we continue to focus on the commercial discipline. So yes, revenue is important to us, but we do not compromise on profitability. So that discipline that was, you know, instilled by many, you know, in Q, in last year, we continue with that. That's number one. Number two, again, that strengthening the training, training machine of our salespeople. So continuously keep happening. And the third one, we really rebuild our lead generation platform. So huge improvements there with the arrival of our chief marketing officer. So, and they're working very closely with our commercial officer. So that's been done. And that's already generating that sufficient amount of bid activity. And then we're really working on the maximizing our brand impact. You will see more from coming from us in this third quarter, when it comes to our brand, because again, Mistrust is a great brand, we are not leveraging it just, you know, enough. So we got to do more on that front. And so now moving into power. Yes, power is definitely one of the items where I would like us to diversify to because, you know, the demand for power is unprecedented, try to look at AI, it's a huge consumer of power. And there's obviously now, you know, natural gas, the energy infrastructure, Mistrust, this is our core, right? So data centers, this is our core applied to the new use case, right? So that's where we feel very strongly where we can contribute right away. We have already great success this quarter with data centers, the feedback from the customers were excellent, we helped them to avoid very, very costly repairs and delays in going life with the data center. So again, very encouraging feedback. And we believe the opportunity is just great in power, GNN transmission. Mitchell Pinheiro | Analyst, Sturdevent: Okay, and actually, thank you for the time. Natalia Schuman | President and Chief Executive Officer: Just to your question, really on the mainstream. So mainstream will play excellent, the very critical role when it comes to the natural gas distribution to data centers. So we believe again, we are we're going to turn around that business that serve mainstream customers, and they have tremendous opportunities. So that's another point that I just wanted to make on the energy infrastructure. Mitchell Pinheiro | Analyst, Sturdevent: Okay. All right. Well, thank you. Thank you for the questions. Natalia Schuman | President and Chief Executive Officer: Thank you, Mitch. Layla | Conference Operator: Your next question will come from Chris Sakai with Singular Research. Chris, your line is now open, feel free to unmute and ask your question. Hi, Chris. We'll go to, we can go to our next person and Chris can reenter the queue. Our next question will come from John Frenzrup with Sadatian Company. Justin | Analyst, Sadatian Company: Good morning. This is Justin on for John. Can you hear me? I Natalia Schuman | President and Chief Executive Officer: just, Justin | Analyst, Sadatian Company: yes. Great. Good morning. So it was great to hear about the strong attendance at the PCMS users conference. Can you share some of the key takeaways from your customer conversations there? And secondly, following the Q1 rollout of PCMS mobile, how is customer adoption trending? Natalia Schuman | President and Chief Executive Officer: Thank you. Thank you for that question. Yes. PCMS conference is usually the hallmark of our year and the team has been having those conferences on an annual basis. So it's had great attendance and, you know, the customer's feedback is very favorable. You know, the development and upgrades and new versions of software works very well. So we did include additional modules to the new offering. So again, this was based on the customer feedback from the last year conference, for example, digital twin, right? So the modeling of the assets virtually that is being adopted and a few of our customers already have implemented that digital twin and their operations that allow them to really kind of play with the asset, you know, in changing different parameters and see how it will influence their life cycle. We did also introduce additional services when it comes to the risk-based inspections. So that business that we see, it's reflecting in the revenue stream as well already. So we just mentioned that PCMS alone was 30% up versus prior year. So again, feedback has been very, very important to us and very favorable. So moving forward, there's already an R&D sort of pipe, right? When it comes to the software, but we also adding AI capabilities, which is very exciting. And this team is very excited about that, how that will allow the customers to implement it sooner and faster and also introduce it to their value chain. Because, you know, again, especially like oil and gas is PCMS servicing predominantly our oil and gas customers, all oil and gas customers going through their own digital transformation as they're looking for the operational efficiencies. So we're right there for them, you know, allowing them to manage their data and capture it and use it. So again, very favorable feedback. And Ed Preisner | Senior Executive Vice President and Chief Financial Officer: you mentioned, Justin, mobile as well. Same point there, quicker, faster, collect data at the point, do a calculation in the field. Data is king, the faster we get it up into the IVMS Workhorse database, more analysis can happen quicker. So mobile is being adopted very rapidly. It's another extension, it's easier to use. And PCMS, we've been going after that, it's a SaaS service. It's a very quick, easier adoption for the customer. And it keeps us very connected to them. And mobile is our newest launch there. And we feel very good about the adoption rate of that, that'll help, you know, increase that connectivity. Natalia talked about with the customer, that integrated value add stream. And this data piece is important because it can pull service through service can then use the data, they go hand in hand as a great cross selling and opportunity and a leverage for the customer to get, you know, much more information actionable for them. And the faster we can do it for them all the better. So hope that answers. Natalia Schuman | President and Chief Executive Officer: Yeah. And as you can hear, we all love PCMS story here. So it's a recurring revenue. You know, one, we are the customer. So it's a revenue that is going to recur and reoccur every year, right? So and we're now servicing half of US oil refineries. So that's kind of now we expanding it as well. So it's a great story. Justin | Analyst, Sadatian Company: Very helpful. Really appreciate the color there. And secondly, can you speak to the demand you're seeing from data center customers and how your services are positioned to support their needs in the back half of the year? Natalia Schuman | President and Chief Executive Officer: So data centers is another exciting story, right? As I just mentioned a few minutes ago, right? It's certainly a great consumer of power and the demand grows exponentially with those data centers. So for us, we are well positioned from two different ways, right? First is we serve data centers directly. So meaning that this is our core capabilities, you know, when you look at the systems being used in data centers, you know, they need NDT services. It's, you know, it's a cooling, it's making sure that there's no failure, it's making sure there's predictive maintenance, predictive analytics, all of that, right, is our core. So we've been doing it all along, you know, in with MISTROS, and now we're just applying it to data centers. So we are tracking very well. It's one of our top strategic priorities in order for us to diversify the company. So that's one thing is, again, like servicing data centers, but also then look at the energy infrastructure, right? How the power gets to data centers. That's another opportunity for us, again, to serve with those midstream customers that are very excited about data centers as they are delivering natural gas to them. So for us, it's a tremendous opportunity. We yet to capture it fully. So we made great strides this quarter, received very favorable feedback. That's encouraging, and we will report on our progress moving forward. Justin | Analyst, Sadatian Company: Very exciting. Thank you for answering my questions. I'll turn it back. Layla | Conference Operator: Thank you. For our next question. For our next question, we'll go to Chris Sakai with Singular Research. Please go ahead. Chris Sakai | Analyst, Singular Research: Yes, hi. Good morning. Can you hear me? Natalia Schuman | President and Chief Executive Officer: Yes. Hi. Good morning, Chris Sakai | Analyst, Singular Research: Chris. Okay, great. I just wanted to ask about the gross profit margin improvement for the quarter. Is this something that we can expect going forward, or is this a one-time mix shift? Can you give us some more color there? Natalia Schuman | President and Chief Executive Officer: Absolutely. Absolutely. Yes, very happy with the progress. So the drivers behind gross profit expansions are really three. One is diversification. That's we just talked about, right? It's focused on that, you know, high margin business. So secondly, operational efficiencies. So when you think about, you know, managing bill rate, build, unbuild, training costs, our operations doing really good job in looking at the how to generate those operational efficiencies. So again, that is something that we believe that we can do better and the third one, you know, if we're looking at the moving forward, we've done pretty good job, I would say, in the second quarter, we most likely will moderate off here and there a little, you know, but we expect that level of our gross margins to sustain itself, you know, in the second half and beyond. Chris Sakai | Analyst, Singular Research: Okay, great. And then, can you talk about the new ERP system? You know, what can we expect as far as the improvement there goes in the second half, as far as unbilled and bill accounts receivable is concerned? Ed Preisner | Senior Executive Vice President and Chief Financial Officer: Sure, Chris, thanks for the question. Yeah, so we went to April 1 adoption of, it's a cloud SaaS version of our prior system. So we went to the latest version of our incumbent. So as expected, or as is normal, we had some learning curve growing pains there as we cut over, obviously, we had to delay itself and cutting over the data. So yes, admittedly, we fell behind on generating WIP into build AR and invoicing customers timely. So that delay we talked about in the script did cause a build up, you know, that WIP value went up in April, it's back down in June. So there is a much higher, healthier level of AR to collect here in the third quarter. So we have confidence that free cash flow does get better over the second half, significantly better. Going forward, we're now coming up the learning curve, getting more efficient, there's more workflows built in, and efficiencies in the new ERP. But it'll take a little time to extract out the full benefits there again, getting through the learning curve, it was a significant change, new reports, new process flow. The good thing is it's very standardized, there's one way of doing it, one process, one chart of accounts. So there is a great way to standardize, regionalize and centralize and standardize how we're thinking how we're operating. So benefits to be had going forward, think of it as leveraging the footprint, we can grow the company now on this better backbone we built, where we're not adding people as we expand, we'll be able to leverage a system going forward and grow the company on top of it. And we're looking at other related systems, all workflow related, data flows, reports and systems that run the operations, we're looking at all of that now as well, to really enhance and speed up decision making going forward. That's the benefit, all these cost efficiencies, Natalia talked about efficiencies, will come from working all eyes in one place, working on a very common platform. But there's still opportunities in front of us to maximize the dashboard and the decision making and speed it up from the new system. It'll take a few more months to really ideally maximize that. But we're in a good place right now and we'll take full advantage of that. And we will absolutely get the build AR back on cycle here and flip the cash flow in the second half, we're very confident about that. Chris Sakai | Analyst, Singular Research: Okay, sounds good on that. And then lastly, can you give an idea about any sort of extra reorganization costs in the second half of the year? Are we going to see something similar to the second quarter or how should we go about that, looking at that? Natalia Schuman | President and Chief Executive Officer: Yeah, maybe Chris, I'll start on that and Ed will add additional details on what to expect. So, you know, as I'm, you know, took over right then beginning of the year, we are continuously recalibrating our structure, right? So we continue to assess our portfolio, our teams, we are, as I mentioned before, making it more integrated companies. So we're breaking those silos that we had before we layered the organization. So that's helping us with again, going as a one-stop shop to our customers as a one single front solution. And for us, it will continue, it will be an evergreen effort to make the organization more agile, more efficient, more kind of changing as we need to change, right? So having said that, we do not expect the large restructuring charges or cost moving forward. So there will be some, but it's going to be sort of moderate, let's put it this way. So what we continue to assess and calibrate the organization for sure, our structure and our kind of our costs, right, as well. Ed, do you want to? Ed Preisner | Senior Executive Vice President and Chief Financial Officer: Yeah, no, no, absolutely right, Chris. Or in Chinese, sorry. It will moderate, Chris, to your point in the second half. We go after a rather rapid, you know, return and payback for the actions we take. So, you know, continuing to balance headcount and facilities, we had the lab closures we talked about, that will continue, we'll continue to recalibrate as we go. There was a few one-time charges in the first half that won't recur in the second half. We will continue to make sure that the overhead footprint is supportive of the current run rate of revenue and the business. And we're in a good place right now, but that number will definitely drop off. It is significantly higher than last year, at this point through six months, but it will drop back off in the second half and moderate as we go forward. But we will continue to make this an important priority here to make sure that we're continuing to keep the to flex and leverage up with volume and, you know, it's keeping it balanced. Chris Sakai | Analyst, Singular Research: Okay, great. Thanks for the answers. Ed Preisner | Senior Executive Vice President and Chief Financial Officer: Thank Chris Sakai | Analyst, Singular Research: you. Natalia Schuman | President and Chief Executive Officer: Thank Layla | Conference Operator: you. 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 Schuman | President and Chief Executive Officer: Well, thank you, operator, and thank you, everyone, for joining this important call today and for our continued interest in MISTRUS. I look forward to providing you with an update on our business, Vision 2030, strategic plan, and progress achieved towards our ongoing initiatives on our next call. Thank you very much. Have a good day. Layla | Conference Operator: This ends today's conference call. You may disconnect at this time. jsPDF 3.0.3 D:20260606090246-00'00'