MG - Earnings call transcript Q1 2019

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Operator

Good morning, ladies and gentlemen. My name is Liz, and I’ll be your event manager today. We’ll be accepting questions after management’s prepared remarks. I’ll now pass the call over to MISTRAS Group Director of Marketing Communications. One moment, while we connect.

Nestor Makarigakis

Group XXXX. for MISTRAS ended first the XX, March to conference the call quarter Welcome is Makarigakis. name My Nestor Participating on Ed the as Bertolotti, President, the call Financial well for MISTRAS President Chief Chief will as and Dr. Executive and Officer; Officer Prajzner, Vice company’s Senior Treasurer; be Dennis

could Sotirios Chairman; will company’s made remarks during Wolk, conference call and materially Senior and The Vice President differ that Vahaviolos, Operating remind Officer. projected. results everyone forward-looking those Executive include actual statements. Chief I Jon Executive want from to this

certain the financial tables non-U. website Some filed actual prepared not and SEC’s conference of Form Dennis be S. those results The will these to company’s These factors will directly Investors with financial the accordance reports I Reconciliation can most in on Form company’s include available of found U.S. this reports that the with can GAAP differ measures GAAP. cause are recent in that discussed release on company’s and section measures other call the discussion press on were the report measure website. now yesterday’s annual X-K. Bertolotti. are the over GAAP at financial in Dennis? in U.S. current turn in SEC. report the XX-K to comparable and in conference in to related most the the contained also

Dennis Bertolotti

Thank you, Nestor, morning, and good everyone.

the give on of an outlook business year. of our for you During financial give as first update MISTRAS’s XXXX you today’s we remainder as call, will for the quarter the performance, well results

we call. we weaker announced previously on during as had this low marginally relatively were more results initially which thought, elaborate quarter than will First and

turnaround feel business robust, the the Despite for generated reiterating internationally, about a continue that our full growth with than to underlying importantly, gas good expand so first out a our consequently the exiting just on and both momentum considerably in to gain oil a all ago, reputation the guidance long where remains wins, organic the we strong and technology-oriented gross slower that margins, coupled got the midstream More we industry-leading off our we market are and build had we and in softer-than-expected to term. share despite are and channels remain bullish verticals. pickup other continue quarter, start the and leverage in our but quarter, the to And year year recent the over turnarounds domestically with year. not and

XXXX effect added incrementally our with year revenues in a ago. foreign were of a quarter the the top X% stated X.X% looking exchange non-renewal, line to of past growth As comparable in last revenues large were with first quarter last year. the first contract flat XXXX. down you, Exclusive from adverse call from unfavorable and Acquisitions

the strong achieving is gross on our This Our XX.X%. favorable of quarter from and first corporate XX.X% of basis year our XXXX, trend performance was has customers. strategy a for the margin past improving to over reflective value focused XXX in initiative a points been

of affecting previously minutes, over charges quarter considering improvement of core a more strong. cash attractive had in margin but gross from a that Ed anticipate is generated the in achieved will XX% margin favorable which improve the matters ongoing to gross the first has resolve non-operational few on be operations financial was two the first cash track sales Nevertheless, identified, business of throughout will XXXX, the from For attributable are our the further mix, We always The that flow, it go lower so XXXX, of a all far quarter XXXX. factor impressive the we through will improving during we to volume. of quarter remainder flow historically company a level details at was neither operations. XXXX. first fully and

$XX of our clearly last half strong Over and in we industry earn relationships demand. product well million offering to resulting April’s that to XX trailing as able remain back were months, the annual illustrates our reduction as This volumes last services revenues non-renewal. the speaks from in

As of The multiple further that customers business, to new, annualized this wins I to on $XX of end-market to this, evidence year, over this $XX am so business generate remainder budget. a we announce global to This the is opportunities our additive million were awarded new million several approximately basis. has to-date our already of Again, expected our of pleased Services segment revenues to verticals. and new year. across far build unplanned been is spans continue on which

productivity will become our before have as great Meeting leave to key relevant it. customers. quietly will data innovative We is save for work value focus Innovating been This position and tell and a A side our customers deliver. promises. the don’t of we identify wins our turnaround, by do supplier following. feel then us is MISTRAS things Working on indicators our our the them. example customers same capture Delivering as of MISTRAS the the some money. known the these Digital. performance commence we to ourselves they for to do. have we value. our the If hanging staff we on ways competitors we they to quantify of them to drive We transforming say table been just weeks choice We the that with includes maintaining

scan MISTRAS. critically for change and ways with as differentiators, insulation developing strong enable areas Radiographic demand advanced We feedback under us its transparency as these a developing data are lead productivity that and of well of IP have because protection And industry-leading create conversation Testing our will to share to for been we well innovative corrosion Each productivity. move indicates important in that market visibility lastly, the as customers providing as and gains in key tools, their include industry improvements. believe has crawler, which like thoughtful solution productivity and and the

our year has and acquisitions restarting West engine, its continued met our into recent performing performing well. well and Penn XXXX priming first organic our in also growth XXXX. for expectations are Beyond full

We focused across relationships aerospace. our Coast-based other are leveraging laboratories on East strong the

We market collaborative the Le Penn the industry in was to have acquired also strong is between one in off also objectives, good serving France and to be is December aerospace XXXX our partnership start a Onstream, Safran. outlook and facility Growth West in beyond. Creusot XXXX of XXXX. for been building a the in our which and corporate continues in

area had expected grow. U.S. in particularly the a had they them which slow Their Although March. business February, well, in doing we January to they ramped this was up primary is nicely and and

year. will excited are recent our XX-inch be of is XX-inch their strong growth pillar larger We ready focused commercialization a Onstream tool, the which be about strategy on integrity. of their tool to overall later this pipeline expected and

Center inspections integrity and recently of pipeline new of as formed midstream Pipeline solutions. development Excellence construction also the a focused well facilities growing other supporting our pipeline as on We of

is we leverage our initiatives to a the and while as first In detailed customers facility, contract ways to more financials one value technology with call in well tablets addition many digital I analytics of for reducing recent field, technology centralized of wins. now our growth Ed performance improve review the our our rapid integrity, will This the quarter. quality, to lever Onstream’s over as more to data finding pipeline new manner. for provide From to are in areas facilitating turn costs. the a to

Ed Prajzner

outlook performance our Dennis’ Thank you, financial XXXX. on for have wins To results to reflected quarter achieve original our reiterate Dennis. pace first with full coupled as the comments, objectives us the year organic our recent in for

Looking difference million at the quarter. contract revenue is Consolidated constant-currency the $XX of results a of March last million from to on only the year-over-year revenues were $XXX.X down down X% majority vacated XX the but year. The basis. for X%

an adjusting volume. distort quarter So this higher sales quarter exchange lower for margins the a contract for gross foreign will that mix, a $XX.X performance. more focused is favorable underlying the flat in disciplined improved this an our which and year to selective product the was acquisition expansion more constant quarter essentially last of the reflects with million, Margin despite rate, however, strategy, for the significantly, the points. in strategy gross quarter of our on reflects basis using prior ago profit Consolidated first growth quarter than year-over-year. for and operations Consolidated contracts after underperforming businesses. service anomaly a pruning increase first compared and turn, year, the were higher-margin XX.X% revenues slightly Again, XX.X% XXX and

the we of mentioned, that factor matters items million, be These a recorded XXXX, following. will $X which neither were totaling Dennis previously during affecting items first quarter identified, operations. the of comprised to two ongoing non-operational resolve As were of

company’s based for part time recoveries. renewable which plan of industry Services an recorded this the reserve financial we $X.X under proceeding of customer provision fourth recorded an bad This item previously about voluntary to wherein in debt energy within available agreed net additional on to the in filed XXXX, earlier quarter $XXX,XXX difficulties of we a related at information This April customer. payment payments million on of X, division, for a the XXXX insolvency the of a ceased. customer First,

the the $X.X of during to an first related customer. million quarter we result, to a reserve XXXX, charge this additional of As fully exposure recorded

of which recorded unrelated of bad a during of we had quarter XXXX, second an additionally quarter recorded reserve net XXXX. first the a the During $XXX,XXX for recovery debt, we

to $XX.X an is XXXX. withdrawal cash third Secondly, of We $X.X XX% year million cash we for to pension general first quarter this The initially albeit the in provision $X.X from were working quarter by our gross foresee quarter additional is million of generator. believe $XXX,XXX in dollars essentially recorded throughout XXXX. this higher revenues, to lower of expense a Adjusted We company million, activities flows Since improvements flow March fully ago reductions. reserved that administrative prior increase the recorded profit selling, cash during of with the the EBITDA as XXXX, the related operating the expenses we matter aided capital flow lower is XXXX. year. first strong quarter compared due EBITDA on primarily XXXX. quarter XX, was were for In year, slightly and the continued a flat

decrease with the closely segment. last contract year added Looking was to Services X, of driven ago including for year. essentially more operations, higher-margin expansion The by acquisitions, the effective quarter. ago. After a to Services in revenue X.X% the period. adjusting the in see our to first primarily improvement are quarter, strategy, flat unfavorable the this large Services revenues and and to generated expand, the of decreased in we margin down as since Onstream is were currencies. XXXX, by X.X% and pruning gross such incrementally anniversaried that continue a compared down margins X% basis International from Services Margin Penn segment for year XXX growing revenues were rates at than less operations profit non-renewal Onstream. corporate exchange due points a pleased quarter significant to segments. X% is key XX.X% April revenue quarter, The lower-margin a growth foreign West local

For improved sales mix. margin, attributable the reported is basis International year points first improvement manpower XXX from to gross This up which and is quarter, better ago. XX.X% a utilization

down quarter. As last the winding beginning the will and first we leasing this of the business mentioned headwind revenue German saw present staff that year, a quarter, in

to the product million don’t in from on approximately expect of quarter, XX.X% $X.X $X.X line XXXX. percentage down material profitability. in up first the Systems of quarter million impact in last that Products XX.X% as sequentially have segment’s a first and but with down revenues we quarter were was attributable wind-down of XXXX. the about XX.X% divested in the However, quarter first to SG&A a the this from revenue

to wins significant did marketing, in organic fiscal any that of by indicated increase marketing quarter, XXXX. is growth As which as in quarter, and we not evidenced in the research as outside some recent Last strategy mentioned commitment as development, and spending sales overhead deliberate off a well accelerate investment reflects last nominal of to investment increase in a sales growth. our our some paying as expect and increase revenue we increased

confident sequentially year. fourth the quarter was are the rate reasonable down we from despite first for costs beginning a the overhead the that are run quarter the is unique Given first included quarter, spending to some of year,

XXXX, million overall efficient flows for loss Non-GAAP share support cash diluted $X.X and attributable an for due and flow anticipated maintain we diluted The cash of We the the GAAP down we are, savings debt March cash net million, was $X.X make XXXX. XX, million at debt. This million year for company-wide $X.X equivalents million generated the the capital. loss $X.X that the earlier. to of cash of that used per working of less with operating million loss Interest consistent part $X.X operating reviewing XXXX. the last as net improvement first our the first mentioned sure our which million XXXX, quarter debt to and the overheads business. a activities pay of to million million marginally XXXX. over in $XX GAAP quarter total The free Non-GAAP items was we footprint first per for I quarter expense net in growing or company’s loss operating first fiscal to of of interest rationalizing $X.XX income is loss of to for $X.X was was a reduction positive year. $X.XX quarter was $XXX end to quarter being the from down $XX flow was from or cash was for our company of significant share. $XXX,XXX however, free expense some

flow, and acquisition sheet strong is annual and expense will interest objectives. both cash our organic we debt, our funding the growth believe and of cash our balance net support Given

now quarter rate effective few Dennis. to to of rate over of back the which XX.X% effective the by We our Our for full And be income in I to rate items, year. first tax project tax call was including the the that, the for with XX% increased XXXX, range X.X%. discrete XX% turn will a

Dennis Bertolotti

we And opportunities organic remaining start results outlook. our year. our Ed. our this and into recent and Thank our first had maintaining in about forward year, the a we Macro-level season, are a so remain our been strengthen not have in later-than-usual challenging view quarter, positive, anticipating including date also for confident year only to drivers momentum. wins Heading economic the turnaround conviction the you, full to XXXX altered

its reiterating million, $XXX So adjusted expected $XXX up expenditures full million between are the is being: company be to be between that year revenues total is to million, million, $XX be are $XX million. free to and is guidance to capital be to expected million the to between XXXX cash expected $XX to $XX EBITDA $XX for million expected flow

wins the we significant As pleased have level earlier, I in mentioned the of very organic revenue booked company is with XXXX. that

new including and brand; staff certified our number this factors, and go-forward our personnel execution, to winning systems. strong solid business ongoing successfully and a are an requirements; reputation customer We due to including consistently to investment in of ability our digital qualified, quickly up meet operating with

economic process, price focused solutions well the in our operating the our We attractive executing particularly that and over advanced and value. we tools and this are market, evolving strategy us for shareholders. with delivering generate serve technology. we flow. the with and add inspection path with utilizing customers their value, through return on am our are value differentiating term I creating predictable, right our as by In on ourselves with mid- superior on exceptional enables market as the digital results MISTRAS’s to at We profit short, proprietary us investment an top-quality long cash on confident solid

will your lines. We Operator, now open take the please questions. phone

Operator

KeyBanc. first comes Instructions] line question of [Operator from Tahira with Afzal Our the

line now Your open. is

Tahira Afzal

Hi, good morning folks.

Dennis Bertolotti

Tahira, morning, Good

Ed Prajzner

Good morning,

Tahira Afzal

have we in of longer. duration long the they confidence for later turnarounds been you some length be of on these had first year? ones the that can these time back experience, off. and back the come time What on and gives pushed From my the will much on come when question sometimes, a guess, is see out push-outs I that we Okay, very around

Dennis Bertolotti

Are Dennis. you for it’s to speaking push-outs revenue? Tahira,

Tahira Afzal

Yes.

Dennis Bertolotti

it, we’ve so mean, the way to I surprise us. it Yes. wasn’t much seen

that are reduction On first they February. in a January pick trying quarter, the to the back years, we’ve had to due price, oil seen work previous especially and they from when busier of up

many So others. we customers and our that just didn’t in see

have much spring into They early for slower seen May, that April good and March It’s got wasn’t or for just good. projects didn’t canceled planned much. we’ve it changed really February. was So as January, a just but a so us. gone

Tahira Afzal

Got out things can it. getting visibility way going around that disconnect was because guys and better seems it than the pushed you a about Is just move to the what’s track the with there ability less certainty.

Jon Wolk

Jon. Tahira, it’s

our be again, schedules. year, the schedules. responsive think second prior we’re as to of indicated, Dennis knowledge and good customer And just especially Conversely, for as trying half about revenues those originally I schedules. about as we understanding really QX same those indicated, guided Dennis to of possible of lower because than year with the feel good our we as of QX

Tahira Afzal

Okay. just margin as side. Great. follow-up on the a And then

us things You there? little guys segment of seems back-end at Because how are giving are up. will it over margins on the sort a good ramp loaded update and Any very an they idea obviously more now.

Dennis Bertolotti

throughout expansion quite on see additional year. volume we and saw driving year, last the think will the maybe But some line. recovery, the not you the that we trickle I we as last line, improvement in the across this to segments, margins down margin year, saw with OI the gross are

Tahira Afzal

Okay, you. great. Thank

Operator

next Instructions] of Sidoti question with line Marshall from comes & Company. Our the Edward [Operator

now is open. Your line

Edward Marshall

Dennis, guys morning. Jon, Sotirios, this how Ed, doing you are

Dennis Bertolotti

Good, Edward. Thanks.

Jon Wolk

thanks. good, Doing

Edward Marshall

Okay.

Onstream. to wanted I ask So about

the my $X quarter First, looks but Services? in growth I’m X% million of wrong, said it like with that kind of math what from Is that if revenue correct roughly business. in you

Dennis Bertolotti

right, yes. about That’s

Edward Marshall

Okay.

wanted annualized parse $XX announcement that XXXX. And in So year’s around of an million. I – last looking at release, was at the just rate of to it run out – the was looking kind

you the I in lot confidence would of be. rates a I embedded wanted run remainder the looks considering seasonality Is for, have? $X in like maybe in this growth that out Can a parse that looking quarterly and the there revenue the for talk we geography, maybe business? Is this about that their there guess, rate. you’re that year? Just guess, of million the

Jon Wolk

this cetera. and is We in QX feel lowest here. pick quarter Jon. seasons baked the business. definitely QX and It for They’ll et best the very Ed, pipelines, accessibility be up Yes. year, weather it their for given Onstream will is them. a quite from is QX good for and to sequentially tend seasonal be about forecast to a

Dennis Bertolotti

– U.S., it’s a get on typically in the on you’re that seasonality their talking a be still you you little there for the When diminish plan more the about – based more And going just And weather, – that, us U.S. to Canadian-specific market, seasonality as there’s will work little more Dennis typically bit. on as that’s is a is portion there. bit of growth the Southern the know in

to that So well that’s for going impact. be seasonality helpful as

Edward Marshall

and I revenue that’s true-up because mean, Got talking little then in about confused see not now seeing rates little a me that to rate, at it. seven United looking a or growth States, of confused. me growth the got The that it of what XXXX, growth – you’re starting got to the the the

you’re year some that share growth cetera, penetration et in seeing you of The if versus kind United we can So this can the at the of made, you’re States that that talk to you but the focus little and a elaborate? bit you on you’ve States, year, wider-diameter the you like talk The would about maybe and of United last the if look penetration, systems mentioned seeing, investment about share the –

Jon Wolk

Thanks, This Jon, again. Yes. is Ed.

and United to a in business low the Canadian in very base. The is but is our We’re about bulk going The Onstream of seeing with off where uptake. growth exciting good we’re of the of XXXX, steady, lot feel sales we It’s quite States. United see cycles States a

but everything feeling in strong almost very incremental is it. about U.S., So the

Edward Marshall

you quantify purchase of business? a similar and a would Canadian these the that of kind – Are that. orders you margin And to follow-up runs? Is or trial still to are now kind Or offering to going however them?

Jon Wolk

and America. profile certainly we’re is margin what the yes. revenue that North pricing is paying similar profile But we’re The orders similar, finding getting is Well, and purchase runs. across

in be you of the tools As – quickly and to be the orders have come XX-inch, trial are dimension the initial the initial tools, initial those favorable, – The Dennis tend results prepared wider spoke script, the so a tend those runs. on purchase heels runs on to the of been pretty alluded basis. that to extremely XX-inch

Dennis Bertolotti

prior are XX getting already is XX-inch proved like in first and its out the that’s the that been and Still, acquisition. out the actually there, was is. And stages XX our The to proved of a revenue that runs. more because just is field actually getting is one XX out lot Jon in one saying, just being versus

Edward Marshall

one Is within I it When about your to more on offering and do the I’m mean, I orders And them if to think about purchase probably I wanted know that that but trial I your at a in the Services assuming almost material think is this impacting runs? segment? business, margin seems margin, following just it, trial ask free meaningfully on runs could. I cost. to there’s it be these your I to lag. to margin

Jon Wolk

Services segment it little a quarter no. dilutive results bit is occur Services in wouldn’t the whole, to the they for that but a I as to not material margins, no. Onstream’s call It

Edward Marshall

math, the I midpoint your can turnaround quarter. a at quarter the Got some get the if Or I in of And sense. through, increase at revenue just seasonality else a missing business, organic? there baking you are this West is here? talk of first But year, is for anything Penn, numbers. kind take is the into $XXX about Or year. is in the there there I’m all a million like it. that between of you some it do that – of kind from as the this target? think the Onstream, that some the XX% simple acquisitions We puts looks know guide on for and That remainder I So average balance the almost I looking increase in

Jon Wolk

said, Dennis strong, we continuing into ended Ed, Again, April. that’s organic. as March all that’s

this the year we nor remarks. contracts no prepared is is for about guidance So time. on factored talked in factored the into that that that’s There at Neither new the organic. acquisitions

Edward Marshall

contracts those Services Are into this year? that next year? Or for does leak

Jon Wolk

That to annualized, this back That end Services. will of the of was million year. $XX be incremental

Dennis Bertolotti

By coincidence, onetime ones make that for additional we there it that got million XXXX. already some $XX are

ways, $XX we $XX just So is had in are but and that annualized the both million coming what in ones, We there’s million that’s we’re for the market but doing working have potential couple large, numbers a hand looking of with coincidence. or at in. more onetime and

really we right so – good the that math. It’s the about about there. we’ve for you’re to million And got feel feel next good be but close we $XXX to quarters, got three

Edward Marshall

And ramp one you give looking industry we think turnaround I’m Wondering the us it. comments data for Got confidence mentioned that continue. and suggested. just your last what quarter, on quantify in late some to remainder pretty at regarding at picked percentage you the final me. of a the service terms have as saw the April into year could – if – data from that’s year impact I you the year? this that that What’s turnaround April? look that good the potentially me, would through April versus the say, that up

Dennis Bertolotti

mid-single of year’s thought some the going because and with Yes. we beat we will we year for for setback the QX throughout I have the numbers. full anticipating I we’re QX, the that. to customer of year. We you’re that four, and one large mean, QX. even only with have falloff and the the what types roughly of but of talking confident was problems probably a three in mean, we all feel that digit digit, got previous were to growth single mid-single-digit

harder up. little bring average some to that So bit be quarters than the will

Edward Marshall

you when or numbers? EPS to refer You say revenue

Dennis Bertolotti

Revenue, I’m sorry.

Operator

to queue I’m remarks. further I’d closing at call for like Dennis turn showing the back in questions this time. Bertolotti no to

Dennis Bertolotti

day. right, you All productive in call. folks. your and We we a forward MISTRAS, look our welcoming on to you. Thank you Have talking appreciate safe next to interest and and

Operator

Ladies the and gentlemen, participation conference. you your today’s This program. in thank for concludes

great may Everyone, You a have day. disconnect. now

Mistras (MG) 11 May 192019 Q1 Earnings call transcript