MG - Earnings call transcript Q3 2021

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Operator

Thank you for joining MISTRAS Group's Conference Call for the Third Quarter Ended September 30, 2021. My name is Victor and I'll be your event manager today. We'll be accepting questions after the management's prepared remarks. Participating on the call for MISTRAS will be Dennis Bertolotti, the Company's President and Chief Executive Officer; Ed Prajzner, Executive Vice President, Chief Financial Officer and Treasurer; and Jon Wolk, Senior Executive Vice President and Chief Operating Officer. I want to remind everyone that remarks made during this conference call will include forward-looking statements. could from results projected. actual company's differ those materially The and to cause discussed annual Those with XX-K can results SEC. report reports differ the Form recent factors that most actual are filed company's in on other the include discussion that financial with were The accordance measures in certain call prepared this conference U.S. in will not GAAP. non-U.S. these of Reconciliation GAAP financial directly most U.S. measures comparable to the X-K. company's the press release yesterday's financial GAAP related report contained current tables measures can be in on Form in found the in and website in These Investors available reports the company's are the on website. the SEC's at section will over I to Bertolotti. now Dennis turn the conference

Dennis Bertolotti

you, Thank Victor. Good morning, everyone.

quarter strong growth inflection was point The our third an illustrating projected our a XXXX. second clearly quarter results, in reached to we've that encore

lost sorry, our top made - outlook bottom-line portion Despite of the Hurricane we those our and we range, revenues impact revenues Ida expect results. second Ida, and a of our the of like coming revenue end a months. expectations of good quarter, in top point both the at in from the achieved good to exceeded I'm do financial those Just up in performance be the third

Looking at highlights. some

exception our was markets For all the across with with of industrials. the revenue continued third the strength XX% up quarter, consolidated sole of end

up mix. that months gross profit efficiency sales and but higher attributable quarter was of this margin, and margin the With on our earlier and reimbursable approximately year achieved profit we improvements nearly focus margin quarter. was travel Gross XX%, scenario $X discussed in up the markets over of profit to defense this the to gross basis profit We by nicely this had despite aerospace proportion year, increased Nevertheless, have and costs year, million third both six were anticipated in XXX calls revenue points of continue gross expected the dollars. this from quarter. lower profit productivity creates favorable first higher in which last a the from as actually gross

In efforts from despite fourth reduced We improve was our had leverage, continuing expect reduced operating us. the gross This last be remains that for of the cost temporarily sequentially to profit third final third were and reversal second, is fact margin the included third. quarter to quarter expenses the a that quarter in the to top this comparable been clear the year. costs the evidence that containment priority SG&A

midstream early ecosystem a plants of in access business compliance it to data an offering a point seven $X.X assist time, and income to such year, was of approximate a summary, this over a that adopter is was us robust As subscribed and we calculations. of that The integrated environment our with OneSuite for MISTRAS new cloud perform are XX%. integrity same states. across example EBITDA our our plant more from data and investment analytical million personnel very asset was net been apps a secure of management, The our nearly while will in quarter expansion it developing. result evolving operating our has we quarter, At that insights of a and In and sustaining Midwestern initiatives for customer, and located actions. the additional offered apps centralized recommended doubled the the XX% the back model our data single the than because selected Sensoria, dozens company efforts business integrity continuing including An technologies, margin asset last adjusted and a as which management period same that our an illustrating company such further large are third ago, equipment of differentiate from its solid momentum competition. income initiatives OneSuite company by technology, for for the ensure wanted year was which

on two elaborate All OneSuite. will I of both via those enabled exciting of my initiatives was this further remarks. later in

Looking us markets strong to production ability outages. decreasing potentially third services, which level. activity Nevertheless, our part crude levels, maximize the do, demand motivated maintenance our in while the however, in to thus wherein potentially energy more our recent customers can strength run-and-maintain inspection were our services industry we remain during industries quarter approaching levels. in various These our customer again level running at onsite prices of provide limits served, production peak closely offline energy a revenues our of window our services pre-pandemic providing perform their conditions is oil have and due at to

while Our focus customers they're is online. technologies our for learn to more to use

So while an relative needs time the balancing improved a industry inspection ago, have conditions. from to year their opportunistic benefit the certainly is markets favorable to against economic

the continue believe we largest and term, in intermediate remain the energy opportunity growing to sector. the renewable traditional Over especially markets in both will our

energy. succeed a in to We have strategy multipronged

First, in overly market share; by helpful is dramatic by to take to energy of by longer, in finally, about customers that our is from does not which experience market capital current dependent of advantage average, generated and particularly operate new Keep wherein of on prices on high run-and-maintain budgets the and time, over This nor valleys their periodic of the scope it taking tending our in continuing climate, business, XX% peaks services; are ongoing market for is expanding turnarounds. product. revenue mind second, our products. profitable introducing the

continue operating particularly stickiness real-time energy management revenue, regard, periodic technology integrity, to source expanding operating innovative generating an reducing conducting we largely capacity whereas to The we platform. to volatile and to monitoring. continue drive and agnostic we on industry have process, become pleased improving more our costs, wind excellence time and while in we are ever Technology raising serving through damage detection. energy of dark flex increasingly this and simplifies make will very of MISTRAS operators to growing and maintenance integrity in respect power, norm Wind real site am with I announce safety inspection Blade even uptime, blade our inventory operational In leaves the our Sensoria Sensoria providers, blade we the this real-time less As tool, into renewable performance Monitoring Keep blade mind to monitoring helping easier blade wind. implement helping that than is Sensoria owners via and while makes Sensoria decisions. margins. believe management of customers, informed turbine maximize partner, blade the of valuable will it planning the strategy, with an reoccurring the share

we in new and are that continue in the of market enormous into testing can farm In process opportunities address foundation. move opportunity growing we constantly incremental excited our building aging - a very to We will the opportunities. OEM are that both currently our and position emerging this field, is wind improving validating about the by to our an wind our strengthen arise. from growing in business and business the could our interim, relationships maintenance In capabilities inspection, repair Sensoria solid and wind fleet

which blade year wind hubs are We revenue. of There, blades inspect new and turbine and for monitoring in customers we million industry established the sector. in lucrative we relationships knowledge, using are repair turbine already are per adding they us move $XX with maintenance have and adding those generating turn to excess we provides market. been the sensor and technical in and into This in new

rapidly used very We the inspection faster on acoustic exciting while market, continue vibration market the the space technology, you are In both and can of than I commercial emission an is sensitive technology. more provide by in proprietary grow demonstrating defense and our information detection currently evolving encourage visiting aerospace technologies we sector how our business, consisting to learn This which and the sophisticated opportunity. algorithms rely sensoriawind.com. private aerospace today, primarily recovers. sensors better less to

quarter anticipated that to compared year revenues which forward, with is are growing as soft and the This the quarter especially the commercial sector anticipate in further offsetting to going continued prior as we We strengthening revenues in aerospace pre-pandemic some period. recovers XXXX. markets. XX% narrow energy our as space Our nicely, was the revenue particularly our throughout third reason in another commercial main performance, are gap up the private is

on inspection are would our a quarters the to strong third to more financial I best return Ed detail Onstream, for to normal quarter by pace we give turn and their business, economic last led to that very bottom-line now The to and have like is results pipeline well-positioned strong on of few call more you had XXXX. sign over inline XXXX. quarter third the results. a conditions to year Our are ever in

Edward Prajzner

met and we a in which was Thank our outstanding high well and and end as of morning, It goals profit in you, revenue Dennis, significant truly net our outlook another good achieved the income. bottom-line expansion operating with everyone. quarter

sequentially Dennis this our we said, very that momentum. with are point, again profitable reached inflection to suggests quarters, and another As quarter, the we strong an on positive with second coming ability most working of heels clearly one quarter, the our that to of have hard strong sustain follow-up

For XXXX, a down million, X% prior which year $XXX.X revenue less quarter. XX, the XX% was Revenues than strong up to second three consolidated were sequential months the and our very from on impact well ended our basis of due additional markets, September from in increased favorable quarter single-digit the as growth and Revenue exchange. significantly aerospace to end the prior the defense, both largest over year. increased in benefit energy as low third organic the foreign of over

strong energy the in the well. to as quarter remain expect We markets fourth

capacity strong building crack focused to levels, are in Although, toward typical as with they is fourth industry not mentioned, Dennis plants mention well of high an quarter. spreads because seasonality the seen that their up running inventory as at the contending as

if any, to much year-to-date to points achieved ago in improving travel anticipated. yield reiterate, attributable Nevertheless, a To a year, the of $XX from margin share continue productivity the over had sector, by dollars third $X the and years, robustly oil a modestly we the the remains market over to and reducing private year-over-year. where can next profit exception to grow Gross which XXX over contracted reimbursable We large profit little, the taking of proportion prior half market indication a cost, the revenues returns. as albeit and market compared traditional aerospace had this improving gross million of efficiencies. clear with of first profit up quarter we wherein than few believe being year dollars. We volatility million by on was the additional expect a adding markets to the profit over services, market in progress space increased gas we and and slower ago, nearly quarter while energy basis year a opportunity revenue while gross compared gross margin defense have greater in the recover, year, basis, grown

had remaining During we our temporary be reductions modestly would already increase restored from cost that would in XXXX. XXXX quarter second quarter third reversing commentary, not the that noted the overheads and of this fourth and were we that

While we actually a FX or both the operating translation from third third report the This those in are rate. net earnings net conversion up proud on year share are Demonstrating both income expanded down focus our $X.XX actually per XX% tight the than diluted million our our share. $X.X both as were continued improve margin expense Similarly, yet to gross fully now through SG&A sequentially restored, to from to efforts overheads and and benefit diluted control, of in quarter. nearly operating income quarter ago, model leverage cost continued well overhead doubling, due dollars with income were per up business third of in more significantly modestly a the quarter. favorable was the cost as that slightly was

Turning to rate. the income tax

fourth and quarter quarter. cash of XXXX We under XX% million, discrete for Our free was third incremental outflow. $X third approximately quarter was from third in item was million. the about per an net just quarter consolidated just operations of an XXXX. of this the tax rate was million flow $X.X anticipate effective of flow tax EPS XX% effective $X.X diluted in the Cash rate The impact share expense due $X.XX of to over discrete for the

receivable. Our payroll significant in of of free and cash cash Nevertheless, in year for XX% our will has the capital, for CapEx corresponding 'XX as increase of This the attributable the rate to below year in tax such the year be is the year. the be although required due historical approximately Act the average particularly to this full working is us adjusted revenue fourth which in expect positive one-time to of and accounts CARES to items, deferral, current we fourth full repayment the for higher conversion free the EBITDA. effect quarter year, a certainly flow the quarter increase in this fund buildup

at free the X lower anticipate of first goal the be as $XXX.X free Capital also of running rate first temporarily the cash modestly working expected, $XX.X operating year we our the still September, is Our was capital capital we of flow for what the to fund free end year-to-date for revenue $XX full basis of last our to ahead has million. Nevertheless, of the cash year approximately million. $X.X need debt expenditures total than the to efforts. we year range. will in cash fourth was XXXX strong below a The are million higher quarter but million a be conversion flow months given XX% XXXX, $XX as that expect cash the period. slowed million X On flow expenditures million anticipate at $XXX and flow months for net for volume, just was reduction debt

previously and free remains debt to As reduction of flow noted, quarter fourth #X use we rebound priority cash. our in expect the cash

December and X.XX our our end below for rate 'XX, pre-pandemic fourth Actually, defined was of improved the we credit lowest leverage which we savings. X.X%, quarter measurement XXXX of financial in was $X.X rate business, leverage has metric as third our $X.X current met by result the quarter level this at into well. effective was period. this third expense has our the million million expectations. million the been over quarter, the reduction this profitability as to The through since prior consolidated quarter where improvement remain corresponding a in a and returned was decrease quarter levels, this of the ratio, in the it borrowing debt interest year wherein, momentum the sustained and just agreement, importantly, cash September quarter, a interest XX, truly another $X.X in was to as XX, carry More will our down It level since from about outstanding

peaked. quarter has business level low of the in of been the Our recovering COVID-XX the XXXX effect experienced of when demand from second

of to the commercial a of of quarter Although expect defense, the the on ongoing reversed prices continues most quarter energy demand have be Accordingly, and focus is commercial second is on lagging prior primarily aerospace year 'XX for due modestly lower market's contract impact and fourth XXXX, all to cost aerospace peak especially in due expected pandemic improved recovery. level quarter, third uptime subsidies XXXX in with temporary quarter been pronounced market, COVID-XX effect This our throughout and revenue remaining the sector. us. during to versus we initiated to the XXXX flat fourth reductions the EBITDA of having wage fully energy largest XXXX, immediate and substantially of in XXXX. a Canadian in Adjusted XXXX to the

'XX opportunities. to work outlook oil ongoing in rollout significant for continuing labor as the but of set also contingent stability, booster MISTRAS' COVID-XX have and pandemic, markets, would macroeconomic to critical stabilization just to is we to impact disruptions the no service immediate a and for shortages, vaccination emerging and supply as stage ability chain or market to recover, Our challenging on provider. and now our on quickly crude the not including a remainder ability continuing which global effectiveness results, we capitalize and adapt Throughout rebound demonstrated of the

containment maintaining XXXX committed we sustainable, our forward model to firmly remain business. cost in today that the on business the very prudently That into to and be confident our are a focus executing and term, our continuing and look over we while is the to plans journey. long robust is both of we to 'XX, continue invest and As strategy, by will intense exciting it and our end

stable cyclical, are expanding they our focused services and markets, Although rebound, this new energy pre-pandemic power With and winning and by services, gas share and rebound gain we OneSuite. generation particularly to via levels. market to continuing both data are further in contracts on continuing back currently mechanical are the oil complementary to and

the agnostic are We we support. largely about industries

as including we have announced into by questions. particularly core call emission our such move to alternative for will and And monitoring. to sectors offering, We our wind, will flex Sensoria renewable acoustic demonstrated that, the take I which wrap leverages before to recently your continue turn up as on energy, competencies, back over his with now Dennis

Dennis Bertolotti

Ed. Thanks,

of as stages are both our we experienced So recover the recap to we for the in the market XXXX, next growth. and planning from pandemic in energy falloff

a the footing, believe of have markets will recovery into first gradual months X The on we year continue solid and the back us more XXXX.

in by assets. aim update growing Whether exciting public the OneSuite, with one significant a serving in which satellite OneSuite, technologies popular for ecosystem, This provides demand pandemic world's our one XX, a rocket, a to interconnected asset and step on OneSuite, regulatory and represents with solutions as brands the MISTRAS to proven or single being is as which capabilities. most or intelligent. Let integrated transition such to an including services asset portal cloud activities while provide turbine, and initiative, needs that and compliance of and our is a the wind the forward digitally-connected secure MISTRAS' offered for qualified to technologies to to an soon meet digital which me critical the know-how, offering ensure users of MISTRAS is transformation with serves leaner space technologies natural applications with gas blade, the valuable of monitoring safety, environment. access a on integrated The be a global their exciting conclude emission data and And has private uniquely accelerated our apps cross-functional innovating data-driven of operations reliability changing can as new our most centralized access these perhaps make customers acoustic OneSuite landscape. and evolution insights customer protection more XX-plus all We our leverage and meet platform. software of bridge software protection. that

each customers any Put critical over smarter the future. real digitally we adding OneSuite Just information near we than MISTRAS' Right within in anticipate simply, asset protection makes have apps other, with more and before. platform two connected OneSuite more like and dozens the dozen time. in interact ecosystem, now, thriving ever using OneSuite, sharing

With customers' the the and ESG In which compliance, investments our which S, illustration for the we of proposition. near especially nearly users continue to has to adopters diverse to ways is few value of use early MISTRAS cover end as ROI discrete a number and energy growing customers an many primary our many and of the environmental for we to how These while our the E the X,XXX legacy into sector. from continue today focus particularly is for investments, enhance future. OneSuite in enhance certainly well. hundred our always markets our core ways, beyond will increasing future safety, value on

committee. fact, recognizing ESS G social wherein covered is In environmental, level our to Governance and operations, by the safety, an committee, utilize standing paramount Board safety our is separate we for

once all crisis. and through for our MISTRAS, to For this of do the is for to helping leadership customers. safety, your before we us understanding taking And thank would again your in your employees speaking like I questions, safety shown MISTRAS paramount what

times. ever-changing dedication extremely customer an shown service allowing pain us understanding By always will to points, continue safety, focus and on unwavering to deliver on building value, greater and all stay using have for technologies innovation, our and outstanding innovate customer services solid customers' relevant trying You market. providing an reputation complementary these in our we during to while leading-edge quality

better With we lines. Victor, a work all those stick safe of the we that, Connects Caring and manner. our please As initiative, a we with positive workplace, only the phone to not whom tenets for for can family, up but in the provide MISTRAS open of

Operator

Our Instructions] Capital. will Sean the question [Operator KeyBanc line of from first from come Eastman

begin. may You

Alex Dwyer

This on for Sean. is Alex

here color guide, a aerospace energy would downtick in commercial we'll have revenue have about sequential next third the on quarter though quarter trying uptime demand, works fourth just and I'm helpful. the think and lingering some one we view into strong that peak Like here to if have Ida on moving focused lost should parts regarding we we the that's quarter. conservative. then as So Hurricane hand, the be we spilling weakness, and COVID Any

Dennis Bertolotti

they a that. wants But you know September and engine there's spreads I'll that overstep parts weathers we single processors if November. their of and the don't advantage real because customers pushing we had of there falling are a out happened So activity we're the cost off happens make the that have things always want on, take all can of with kind strong on off faster, shortening into anticipated for get. we everything turnaround end empowers week all to of we expected. else we're their at sure falling the you Right or you've within weather let of more and planes idea from the that get is we of that believe with and he never their the know year Ida little first, is for budget anticipated budget to. Commercial today. with take that and and know they now, work because as October, of in and if what a up Jon side aerospace add of what signs commercial We just internationally trying and boost you to of never a higher conservative what energy customers going and crack engine fall the that's actually real than additional The than commercial Certainly, coming and will that 'XX, last has been the lot both lot but soft, it's domestically seen but anticipated. anecdotal probably seeing X, still better

Alex Dwyer

compared XXXX in just the customers year? for planning year I'm with And been how wondering a maybe visibility how would point the this next to your around year budget into have you season. discussions normal at characterize

Dennis Bertolotti

because working closer half, do all believe But let's say. quick and we is have I'll it been do strong Jon what with throw of visibility a to a folks. apps one, is I'll first he's the the the - we

to up calling level at bunch of of a so First we their the up consider customers be and while piling and idea they'll the know looks of now, have know seems the good but of good quarter be eventually in same good if year. activity. try a to first we upcoming I a there labor, far, don't forecast comments. be we a might haven't second reduce any that We little what have have the Right finished additional a for have we don't if look to half, you to any budgeting I think we cloudier. think timing, a Jon, do

Jonathan Wolk

Yes, Dennis, thanks.

think to of it exactly be similar labor in there's the able little characterized a frame similar good. we working is feel bunch seem hard and visibility strong But be a that position of time to a going Dennis in QX, and challenge Labor for We've as to said, scheduling. serve a kind you availability to to bit working clustered good got think be of that right. in disciplines customers be now, requirements. we're with terms turnarounds I in feel a I good first because, We about right half. in of

We're Europe, seeing but it in just we're commercial bit in America, North The other thing, see It's it determining in comments America to we're in it early. little a aerospace. actually of it to in starting to advance see as that where Dennis seeing is we're prepared North starting well. alluded as his

trends those think well. bode I So

Operator

from of will of question next from Andrew Bank America. Obin come line Our the

may You begin.

David Ridley-Lane

why Andrew said This is be Ridley-Lane any sort proxy travel not Obin. for the half of would into rate the just year, half of reason a subsidies margin the run normalized? of kind this reimbursable is in differently, second 'XX, back 'XX for wage kind on Is those of there are all levels David gross good the

Dennis Bertolotti

there. Ed to all say, brought sec. have pandemic-ly throw lot back in us. things one do I'll that your a the Dennis. to But it's David, reinstated would on were in So of I it cost you We've

as travel are costs bulk kind all think do to that So could spring offset that's saying, back well. we the I would fall Jon the I'll that of think a of the Ed if aerospace see more thing might But lot little in I of busier be the of 'XX help travel back. The back. 'XX. and point, let a is on bit the were up, getting But color we've us the I of that, your coming normal. a that. To seen throw as I could margins little

Edward Prajzner

increases what's it's no, gained. That's price we as into Right. to Mix aerospace all data will like year. your lower and overheads, defense pressures. always be with but are we've the year going because variable well over gas year. should to weighted there's help some again, goal Favorable had we're And as looking cost upside be was fallen the differentiator. being come suit be pretty selected normalized where erosion well average, serving to customers oil certainly, more will due said efficiencies But being increasing at margin gross into average had profit Every in than dealing and of time. year. the only still year, going And higher differential this next whatnot next longer period snapping Mix that forward. higher-than-average sales it would But back mix, we any prevent going last be and actually quicker now to every services the term, year from. to next follow study the that doesn't going are things we we relative single with this confident mix, year's

forward. be that bit well. would the uplift rate sales going approximation But margin. help at little pretty will XX-ish would Hopefully, focus gross So some And that. on a as they're a percent do favorable we now, with help good of mix

David Ridley-Lane

just normal some balances It's working do be wondering, And XXXX. then, cash you're understand pretty it'd the to flow, rebuilding a free in I'm i.e., year, coming as on 'XX? levels this the I those conversion back historical the close flow levels of cash those end percentage capital of now of to hear. so - closer EBITDA at free think good to you by in to

Edward Prajzner

be being Yes. typical the cash unusual single things, a some being This should this year higher, us. largest certainly, pretty taxes build was 'XX year. little AR item higher. But for had the CapEx

simply it So is timing.

DSO takes will higher back to normalize so We one up Act days Don't out the get forget back XX, the we back and point do kind sometimes. our payroll XX X to get you That CARES hours of think cash catch we'll of we dollars. will will significant putting as year, run next down, out. cycle out to I It that payroll that deferral million once collect something had well, average. back about and

back of one-time to percent significant XX-ish less have $X.X paid yes, our this $X.X that's the next we back EBITDA December, should or to item in So a million conversion into gets That's cash 'XX. work of headwind final there free But more be remaining million kind December. we flow through.

Operator

Maxim Tate next come from Group. will question Sullivan Our the of from line

You may begin.

Tate Sullivan

it's I field it about certainly Dennis, you've from field wind Or of in of an focusing Or through is have calls. I previous you give heard revenue you if please, the just testing, customers think is that can you are wind that the more Sensoria, already mentioned, and the million, already generating already. process? And in revenue? out overview product opportunities With usual these. in this and mentioned of on testing phase? the I mean, $XX before What correctly, ramp you process testing the usual gone

Dennis Bertolotti

Thanks.

just quoted, revenue, some on applications, of other our as of we're the ROI it and windows the been And it they and could to only all that's cracking, and do. what's bridges based else. all it of can of is turbines, turbines, monitor and pre-revenue that as we X,XXX, you it you're pipe concept. proof whatever getting breakeven X,XXX type be this is used future many and gas hopefully identify and that how on the pipes customers, our can of that what is making of understanding unit To many, spin RPMs out not fair, And other we've is. occurring for it. a we've pricing for for to and But testing. monitoring don't services versus fast at how just We're of productivity we're be ROI is on the we're characterization the got type the we going to and just it, properly but want actually of and the sure little operating know trying is the from of normal who on lot things we're also and off what damage characterize an kinds we're if have things, a and finish now on kind - So the money critical getting so leading-edge do it - everything

out. it damage of just that that peck to trying characterizing a and So were defined. that. we're the kind ourselves all really don't things working and at we're on really can because main will. we been We prove now, and them believe we challenging have Right one for we We've hunt it's planning

wait So things to to happen for you and that. of got kind improve

occurred, You that. it knew was it what when we're and doing

a by process to accelerate yes, get things one monitoring little or that it damage But want. like that. it's well. than proving having that it's are maybe process are someone hoping you help bit working been actually unknown that So out. We're to us on We're slower

to us. So our technology isn't new

on. of many blades none the new to defects sure damage. helicopter actually of get to that up to years is ability and ago what used technology of kind pick same types Our new and us. it part But making automate just to is working we've that on It's trying of all we're these

I we and can it's at too. revolving it all whether RPMs, said, fast, do spending gas like we So know and up cracks turbines can pick we are X,XXX that,

make just of down all what we it's sure is parameters right a So have the the nailing matter to thing. consistently

Tate Sullivan

for Great. Or in Europe the you, is see you Or that? with And the U.S.? how opportunity Sensoria mostly it and growing same the starting at for with is opportunity time? do wind U.S. it a and the market,

Dennis Bertolotti

our out That's and their Monitoring monitoring, up I in just Europe the geographic boundaries America. we're North European way some is and would we all the countries. thing it be I inspection, because I we put Western very quite unique we're eastern here to and customers inside do. in are on operations, and into of figure But do a some bit that that the in blades proven, think currently of little damage. Europe, it's I perform, is there's say for the good throughout the a in technology question. it all hub don't say don't simple there services the some to our have helping monitoring out U.S. not inside once going this any primarily, well. We on to sensors But think bulk and ability would some the online easy gets going and things there of identify what's exclusively Europe but happening But of to in do the bit the into a take the as and doing

domestically normal to to out. to getting in we it's and this we going don't all right? than it traction it just can boundaries But in other that. fly a different we locations be, to once I and into to further will that's got location too or see need all we being to people be So get whether think much get something out proved So get I or by get a location, the deploy we little fly right we it have here and wherever a many

Tate Sullivan

ahead, release. Great. Jon. Go to It's great see the

Jonathan Wolk

Yes.

a industry. adapt the we're may what for blades we not in But We as et an but see also Just area opportunity, growth bit are to have opportunity. customers particular a to global cetera. saying, the excited. for our Dennis little are only well. And as add the offshore to a it turbine we onshore, And importantly, this longer, because is product And wind very see turbines more that's excited. absolutely as

by said, that servicing remote test XX/X pilots repairing and and but done customers revenues they're intrigued mix and turbine early monitoring gaining for revenue trials Dennis to as of today a uptime. we're pre-revenue, about for, necessarily maintain that new that it's aren't doing. excited potential customers existing as both because And we're As we're quite their really have not wind to the well blades but service doing their the primarily our large we are customers

starting So in to purchase about is good-sized get we to and this are just orders now. build, backlog going. we're is where excited starting The

Tate Sullivan

follow-up it. already monitoring it by performed onshore remote Or A is the in competitive please? offshore field, of and a wind in-person most now work to inspections? Is

Jonathan Wolk

There's right no remote alternative now. to excellent monitoring

and the As - Dennis vibration, might competition not in does. does, indicative way to the of our technology there not damage alluded his like the remarks, technology but our accurate, prepared that as is doesn't pinpoint some that be patented as

typically XX, via some It that's doing based It's XX, time when schedule. kind but you're damage. drones there's a today, interval. So your it's time. on of on inspecting be you're might inspections a that that intervals, learning months not on on drones flying XX you're every up And damage

if what visible thing it seeing of actually there. day, beautiful getting human about but it it see is you not visualization eye. to they every our can't The can damage it, you're is, you're might be the hearing see yet damage, the that technology even it's you're If and a always

that catastrophic so an measures thing heads early from up they we repairs great our and that damage customers having prevent them to is to can understand exists give can then the do So real-time, on. appropriate later that take

Tate Sullivan

sounds monitoring engagement. with exciting opportunity It of like a lot an remote customer Great.

for you those thank details. additional So

Operator

of line from Pinheiro the Sturdivant. From Mitch

You may begin.

Mitchell Pinheiro

the monitor of sort going - - I a Or there? - and the Is should their be customers is mean, monitored does of OEM following side. want mean, is it the you all Or as wind it - canopy? breakout work that is it be? how applied up be equipment? going to I revenue equipment, - to Just Sensoria, on as is just you to

Dennis Bertolotti

Yes, answer Mitch, throw it to I'll it Jon. and

see these right now, way seeing we prove early But potential, existing on the obviously. it the out in to you'd I put customers So would is things think the the we're that we I anticipate more want think way and the to looking technology, on. it,

worried period, about believe the that Some try five blades not catch but the to with we're work of the three they're and turbine them to manufacturers aspect. to in an early that, trying warranty customers to on to get years first is the

just once in then the either. our it's embed this you right prove existing the But early approved, mind, and to be out now, obviously can So just could technology always it on.

Mitchell Pinheiro

that about $XX a year. doing And mean, does type of have? what I you rate million mentioned you're that growth

Dennis Bertolotti

technology rope of there sets A kind are - because I them mechanical strong a visual everything of of have good side prepare things. very lot from offshore is didn't a user So training. XXX-plus Many access of on rope employees else. any that. skill strong from other who to something applied and we the But it's and technology. are Sea that, user is question. guess wind in NDT, a came North have of very rope for of like to it we rope Of our different

of anything the doing from fiberglass overlays people of various inspections of techniques. lot on in hubs problems else. hubs in putting putting cases, and find, lot and for a proprietary there's leading-edge turbines We're leading repairs repair doing and techs We're are our some cracks and everything have the we So holes, edges. trained blade manufacturers, repair. damage. We to blade on inspections some A and

something kind themselves and a some with We've former doing towers foundation the on painting, there, it's robust work acquisition nature. even everything do market. So and of can done There we're work on else. of is work right now, our that that's blasting you the

Mitchell Pinheiro

can I sort to trying I how not mean, you're I to ramp you I going - keep access training? technicians up do shortage. be mean, with access up demand? that a remote you able I capabilities, I that's to something is rope but know we're that - mean rope of to with that to know access, just would - in is takes fast later - the that the rope going and be you're for access So some will repair. needed find there's think

Dennis Bertolotti

To you it around. way the - other Mitch, do

are A training. times rope of mechanically do, the you get We whatever up where the find getting them people getting them we and the need train as in field, in other taking and access capable, do that up where and rope you're to of with and like done they're A You adept doing get X then times, them you're different on there it spectators X, who higher-skilled are have it here. lot to get a somebody that who the - someone what there's the you're setting safely to lot mechanical access way ground confident, you where skills well. people about they on everything talking and the years or and that you're curve especially talking more that. here, up can sure something people do is inspector are making like To years, or level The properly. many in get that. obviously, is or to levels. X And ability

they're rope, a doing You have once to doing higher on way. skill be a but get to it X from via the of person is kind on they're their level those those, of but confident rope, lesser what where that work comes activities you up

it and away being So often quite with taking comfortable it and people and the the that. your idea ground to taking you mechanically a look point, capability that people growing comfortable see wouldn't on inspection that be but that of be me, who are that way. down To there's have lot able the are it is of

Jonathan Wolk

Yes.

trial been good augment to this work our and synergies, because pretty growth of some haven't next potential with feel turbine about. seen, working customers repair before. that we've earlier, in saying. that year wind that we with doing I great - And instance, there's in really for already their customers blades right? new. one what a said are we're got As are Dennis new work excited there's already We've to on we're this begun for some we've that We the booked offering Just existing some is that company

to our cross-sell good customer also very repair we customer a be that perform that we So there's to do activities expand our today. going existing to base the and existing within think base

Mitchell Pinheiro

some through at market going are when What that I - aerospace how gives it is moves the in question commercial to confidence to - are other the Well, it - you aerospace that's for specifically to the Okay. normal. XXXX. least things and seeing have getting comes that back studying you you

engine mentioned and are relaxing? factors restrictions? just are normal? like COVID like But the to market things what's that allowing blades Is single it bigger things that. and other picture to Is there that's the there engines any that You - return

Dennis Bertolotti

can have they even decisions the for engines but being new It's that sees activity parts, the been are single-aisle for bidding on COVID has ramping Mitch. of - So One in everyone how the different parked on time is manufacturers. certainly, a are are up what more telling based that. planes, there's been talk now periods of and many sitting that who to everything planes, guess of customers about be lot due ones There's we two a pretty of they see much for our ready those and I and else. us for versus same and houses and notes. replacements some foundries and lot XXXX. much so that's for And mean, I casting - parts in seeing being it's we're single-aisle months not the double-wide, buying

anecdotal but is the up. to that. got the international, there's over hearing that know you - doing activity all brand-new Jon, probably the domestic, back that we're if flying ones else want to more, just more you we're lot very for and I larger customers are it need maintain hearing their just anything it gets to place as of that us on ones, don't are So back. public and hearing talking ramp a you a from about our it's sure, not out from that Jon there,

Jonathan Wolk

shortages We're labor airlines they hearing at as still the see are be months the air flying too into was exactly talk where that finally now, hearing expectation in And countries few about. as seeing those about as of we from pretty Dennis, picking But of in and said, they Yes. this be again, as labor planes been travel-driven right. good it and that level. starting resumes that we normalizes to as to America the we're several you're in more to when - the can. smaller a we've shortages just and as North back certainly, and a - first business a in started post-COVID, We returning all is traffic Europe resolve about Europe America. because travel the production started phenomenon it again what's North aerospace seems are planes filling schedules normal increase, There's impacting ahead quickly it way. more seem are up

setup So that that be next trend year. that real for yes, if will a continues, if good persists,

Mitchell Pinheiro

Okay.

when lumpy? question, this it growth, one type that that talk about Is growth some sort in quarter-to-quarter, - you the to Just space that. you I what color revenue around private - I'd growth visible? quarter and or it mean, of it growth seeing. And curious double you're steady Is nice it year-over-year? is some what more is are had talking get relates rate Is about? digit we of it XX%? be revenue the is to

Dennis Bertolotti

Jon, why take you don't that?

Jonathan Wolk

the even first 'XX starting aerospace, see had down whole of beginning the had is really accelerated hit COVID to has because the of talking in on comps and right was we've XXXX industry we're versus for we're the But the first If now turn us. 'XX And of that finally - any half growth commercial XXXX. good started certainly, further half the growth negative Yes. once comps side, positive. throughout first

any we as declines is so great said, I compared to that had. And the positive

And did year. versus So in a it's... prior QX small we positive see

Dennis Bertolotti

question side, right. think was I all more Jon? private the on the

Mitchell Pinheiro

space. Private

Jonathan Wolk

Oh, I'm besides space. commercial. sorry, Private

for Sorry that.

On a strong XX. double-digit strong is be good double and we're providing, the of XXXX. throughout inspection are over certainly it's variety been - private - that a proving to digit space, that marriage mechanical growth that customers. to great value the services, we've seen thing there of very And which It's

as aerospace or us, space private big up. rate, size year picking at is this in the a the as So could not It's commercial rival in but X. for still, certainly aerospace, it commercial

Dennis Bertolotti

really - it's a make that. something doing we're Customers trying so savings. to market, Mitch, is think The early to are do you that's only to like to can we keep talking in much about listening our just when cliche keep And things or in find important. that And find or is customer. talk what you mind, thing people way one innovations that rates this

find done the a both that private in do you way done one in do the get tedious commercial to supply - chain that cost, and XX%. pick the customers original you're very got new through and and can speed and were got get the steps, and up a place the into you mean, to of XX%, XX% the but You to we've more not faster, locally product the difficult, getting getting less more materials market, eliminating the the consolidate than the you're because things. of supply raw more to chain. And where doing aerospace steps And up finished long effective and and and it do you're can has to timing look, them you're we're - and a I And taking that. them quicker and to supply cases product,

just have everything where and like answering doing listening it's on to function pain and a of So we're find data points really else, they the out that. issues

far, commercial that's is good offset so what side. and very, on the become to what's Jon going in describing very And

private, chime once starts commercial future out there. the really with see we're for in we doing them to good what in a So the

Operator

next from the Our from come question Russo Instructions] of [Operator Brian line will Sidoti.

You may begin.

Brian Russo

on follow-up sensor opportunities. the blade market wind a Just

customer time off won't it operate years? developers OEMs? referenced and You evolving OEMs, do next XX, run you and/or utilities that to I guess to over own warranties when for base you XX see the from the maybe

Dennis Bertolotti

the fleet lightning with save getting because and to you're earlier it that they're years the and there then enough starting like that. to review leading-edge could the eventually being figure the it now, up for we're exactly couple there or strikes just Brian. maybe right, placement that get out money right that to the as I a that's to things it Yes, of such heavy of with of to we where think and questions and of have having asked, questions a owners there's what kind opportunities type and in lighter first Orion But us trying the and a agent from. time to mean, the came and But things point damage some heavier. evolve do

You length any that that's just any things is can't happen at - the of to can equate blade on that involved service to of time age. and years happens

got at do been found But vibration three about So more I I this we it's in off to to and there, do the the OEMs think, try that obviously, be been occurring shaft, always now falling a out that's they damage you to there would aged you having eventually, it. state. and the warranty get make earlier of one blades, right get to the try by of way see we've much to have Like also would looking could think have various talked any are could been a on there. to levels vibrations But technology it and how of another ones want having want time that the sense. a

Brian Russo

curious mean, currently all support for federal there. testing offshore potential on of I'm that, are just are there's But offshore. I - the you And where growth wind? you Or beta given lot with a

Dennis Bertolotti

in types make we off just and onshore and of the find easier quantify smaller and offshore Jon have we what's is the But want more and figure applications. it. we're we day know little the size that is we of to do still But going size, no to that. Due offshore find that getting at a link We - the just there's nailed sure and first. longer the got defects starting tip. Yes. find just can't everything of like start once you offshore to you've and automated said, know to can much the of on, - bit to reason down into get it onshore complexity out the and the we the it a And

Brian Russo

a just of given in break percentage historical energy And in you the revenue this third there Okay. follow-up revenue a suppose of you but on I that levels, mentioned quarter commercial aerospace. quarter, - any favorable to the was bigger year reported could way lagging. down third is relative would Is mix aerospace commercial that overall was the and

a 'XX. So terms are recovery in of where move we we commercial sense through I'm get just the trying growth aerospace as to in top-line of in

Dennis Bertolotti

to you're those Ed, closest percentages. probably

Edward Prajzner

a have quarter. did third aerospace the nice mean I Yes.

up but picked still it's months, quarter, momentum. nice in X For lagging, it third

So a where you got margin QX gross the is little that's more than uplift months. where higher first profit six

now. nice It really half aerospace or of cetera. commercial parts that aerospace did piece the to space and aerospace what's have other rocket piece back commercial next piece is the - up the space we et to in got it's the that have satellite year, That's is That lagging, does So defense sector piece, it QX. there's benefit margins you've very not and piece mix be that's picking it. strong bolstering a a - the other is recovering expect fully of whether happening year. if the the defense, front that the is little certainly parts, private But half, wherein in attached bit

that's of this third bit So little profit months the gave an us uplift kind quarter what six a in of of gross versus first year.

Brian Russo

for - the or And assuming MISTRAS business shift stay fall maximizing opportunities dynamics we utilization it uptime. then rates, terms now, major maximizing they shifting are prices a the cetera? of into in customers spring from of 'XX - XXXX oil Does of just are where from you maintenance et on and energy, are market - seeing seeing

Dennis Bertolotti

the a the for a if Jon. difficult refiners start Brian, and potential Again, little do We - to going. it being bit chaotic all it throw Yes. there, keep bit I'll little we robust and overlap see their a I spring. see

try So see spend possible out, area. of tell where the their geographic it's move fall's in them you, for many they to look and got But customers than could time to our that I budget it. a been lately for sooner their start or at peers later has they to

'XX pushed year. believe We been typical being into there's a lot 'XX maintenance haven't that's 'XX. a of So and typically,

Jon, So any have right made there stay potential their budgets they're color is I real that up, a things they be guaranteeing that capital to don't now. we're for to but on have you not more going if there. know

Jonathan Wolk

said No, it you right, just I Dennis. think

Operator

any queue. for showing further Dennis call like questions to turn the not I'm in the I'd to back over any remarks. final

Dennis Bertolotti

I'd thank the call a to and day, for productive your and you to joining interest look we have for MISTRAS like Please today. time. updating and safe forward next everyone Okay. our in

Operator

Thank And conference this today's concludes for call. you participating.

disconnect. now may You

Mistras (MG) 6 Nov 212021 Q3 Earnings call transcript