- Earnings call transcript Q3 2022

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Operator

Thank you for joining, Mistras Group's Conference Call for its Third Quarter Ended September 30, 2022. My name is Andrea, and I'll be your event manager today. We'll be accepting questions after managements prepared remarks. Participating on the call for Mistras Group 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

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

Dennis Bertolotti

All of for quarter joining right. Mistras and thank consecutive today. ninth Good you Andrea. reported its growth. Thank us everyone, revenue morning, you,

otherwise and was believe translation, what under-realization continued the the the business, and are our financial Our market energy, line in Consequently, are and to expectations across our masking with the of initiatives performance, continued of renewable obscures deliver we overall top to beginning both success markets the as making quarter investments fundamental strategic growth new foreign strong downstream contribute the in to a legacy while operations of we growth. data improving well.

ago, quarter essentially battling gross and than up earnings and for unchanged as per cost the XX% are third net were was the On both EBITDA bottom overhead rising from year a adjusted line, environment. more both a margin whereas income share

increases, energy are in price do we We progress, where customer through primarily markets, implementing tight. and making the resistance, breaking this budgets by are addressing remain

recovery the increase time a and labor billing rate. higher lag our between rate time remains significant for the there we the However,

other the than but higher services, into and as in performance growth the to anticipated corresponding was and expect increase currently Reflecting that over in to remains production its in all experienced hard better our and to quarter, rebound longer XXXX, upstream XX% our steady again top infrastructure. and and revenue are oil industry XX% to downstream. third quarter of distribution growth. efficiency expansion and in we the a leverage had of up both delays our look more improvements overall expect some term the were transportation the a Year-to-date, adjacent bottom for productivity Onstream is we moving aerospace industry from in to taking identify soft quickly up that us second onstream benefit of commercial show we quarter in revenue strong. goal high record levels to Business revenues revenue. typically profitability. long-term We can being the bit across the midstream services, X%. private at SG&A space well on the more strong revenue as enabling of also our the sector defense a continues that in drive focus X% demand Recovery growth driven by in inspection business across in company-wide overhead, stable The line aerospace, and business, our the gas and our footprint, line, third

strong are where a business foundation building We as we market, NDT is in a and are the investment growing. we for increasing believe demand in large this

some inspection, vertical. we and strong are other as cycle the operations, integral services in inspections for just this represents powering seeing growth instance, time markets, For machining of capabilities, to defense new sectors, reduction

prospective than contributions gross from a All of our margin, we which for consolidated gross current these verticals. opportunities margin are new and significant markets, higher these carry in look fast-growing

that, our now also are business turbine It will already anticipated we renewables our more outpace anticipated. being originally previous numbers. monitored objectives the has than systems Our delivered appears year and with end

in is early further an this to relative hundreds significant wherein the wind market market, stages of inflection While for turbines operation in delivering foresee is year. monitoring point advantage is future and solutions, technology every Every large a being adoption more and installed in in an we day growth near globally, trajectory. it acceleration and inspection in evidence resulting technique, thousands Sensoria's of faster conventional market the growing with our our added of

for operators services the contact to in maintenance renewable revenue identify. repair along any lucrative, multiples to and damage be our for margins of adding maintenance for we million add business sensors expect service, Repair higher and should monitoring us monitoring year once Importantly, with $XX incremental plus and per revenue already our win.

Our business data and to results with solutions PCMS continues OneSuite. at grow strong

of represent is and financial pricing. relationships new limited, seeing be solutions stronger to but rise greater for with been a examples has continues invest had and solutions integrate to for emphasis to resources avoid are point looking us build opportunity organization. spend upon freeing thus opportunities an strategic of allowing only The the that constantly new liquidity previously are to leading quarter and that facility new data This customers. much not above initiatives. up credit as negotiated best value Customers also their our our these our across data are we this how added commodity the We competition

beyond. in Now flexibility, which Overall, XXXX are to it a financial growth, was Mistras. under with additional quarter doubling we down at we solid and expect accelerate

months and Exchange actions impact collapsing, on that Tight have revenue on XXXX, headwind of created largest the virtually of been our challenges. opportunities, of we experienced the normalized us weather when margins. we to the best and equipped of years. one years reduced And for better being will million are the inflationary created primary lag a negotiated storm new first We greater the to the enable are focus we for and the were our XXXX, in in largest Since our growth. more passing both that confident in pressuring cash the a market three by markets an costs our also but and had are much year, and related invest on nine this $XX In of flexibility rates a has stronger debt emerge facility $XX budgets there impact world. flow, with our future million in past bank over two certainly margins. onset organic non-organic pandemic, our

own certainly can been a while This are for labor has customers. improving, Although, cost structural changes. pressures are us along our pre-pandemic to markets largest their we they levels, difficult on pass where that challenge the and be to still experiencing especially lag cost are below undergoing side,

While this transitory is near-term we see as it a factor.

our behind initiatives. can resources With now of on our the we strategic of more worst pandemic to us, focus our goal grow the

as do. We and accomplished, give results that energy the future for mix more I'm are the you higher-value very important been our strides has months and building extremely predictive are honored technologically exciting is call to the as making nature, such products our new I in detail and sophisticated, third great financial a Much wind. is it's capabilities bright. more now but to of directive there greater as define first and XXXX. I with Ed, more will on markets of leading will Mistras the future, the that over believe our time to be quarter evolution, nine turn in to of compatible

Ed Prajzner

in the our exchange. third quarter with in excluding and the in million, to two Dennis pre-pandemic Revenue third up in overall the third morning, segment. Services unfavorable record and comparable revenue increased that a X.X% segments, $XXX top by was of performance revenue up were year-over-year everyone. Services in good approximately markets but you, level revenue was impact of Consolidated Thank XXXX. led again oil gas up X.X% Revenue the foreign exceeding our quarter, quarter

and approximately the of with gross Within in that will of and behind price cost can is was quarter prior was illustrative growth margin the Gross just a business million, primary have growth the performance Alaska Our basis level the the line our FX region. in lags pass in unfavorable end in as primarily best over a near-term, was onstream's and in XX%. did offshore end The is strong, quarter inception. its up we activity. the revenue year margin bottom Gross inflationary but on otherwise pause which profit benefit the year-over-year. expanding full on basis. in a both business Consequently, secondary defense pre-pandemic quarterly was testing upstream fundamental offsetting our In along XX was a growth in midstream, expectations we top to with faster two with depend our QX Aerospace from the in up at markets third and also rate, it also belies gross we some markets. of X% it recovery benefiting up sector end weakness year-over-year and margin up the aerospace market. in-line but the took points since Gulf the inspection defense and ago, Downstream quarter for XX% at the believe well, midstream of quarter of increases, year from growth line solid in lagged significantly, quarter particularly are quarter, line what the our from pressures continued $XX of strength experiencing.

is quarter the against pandemic-related had our all this expired. ago second almost noted third we beginning during benefits year we call, had a earnings are in As quarter, the of quarter which period comparing quarter that

this and versus help sorry, a overall and of related $XXX,XXX of quarter X% on part actions, an area. progress We're expenses the the which expenses million, calibrate $XX.X sales increased our So continually our achieved overheads, of actions were total and due administrative incremental to which trended improvements. in level improved same quarter and of the general third margin, $X.X year, or Selling over the for our additional a to in this up about process or match last to mix $X.X just in volumes going our increase. to working from million important intensifying from refinancing period are cost in third restored comparability higher million the forward, of or were $XXX,XXX -- ago, year efficiency we being down bank half revenue gross highlight will

the earlier, our for Dennis the despite overhead year. environment, heading rate that as one XXXX of we we was leverage. pressures, operating interest Interest for leveraging $X.X to well -- cost of million as our the is it our the last as some XXXX, average current outstanding increasing exit into million to ongoing increased This level As expect reduce generally debt interim expense from keys stated inflationary quarter increase $X.X same higher as the quarter. borrowings to compared in quarter temporary reflects the

Adjusted income share For the per reported million $X.X was which and net respectively. the for which with increases we third ago. a quarter, XX% $XX.X is diluted was line year in XX% $X.XX EBITDA million of of quarter, or

modeling the our cash quarter tax million, to income highest approximately discrete we anticipate buildup affected rate by items. working cash being attributable effective in billing flow of September to negative a of month year purposes, flow exclusive $X.X in for $X.X a prospective the significant ago. any compared year. quarter capital, Operating a primarily of was third million Free For was would approximately XX% the

in but not that $XX final has also accrued additionally fourth quarters. $X.X We million payroll results, deferred less $X.X to positive to been million had and of $X.X fourth best of capital. the by and the all accrued million this in million our original year. an the We million In The flow working quarter taxes in continued fourth be range that budget the satisfy the more quarter, matter. improve were remaining expenditures see for quarter one historically legal quarter for earlier cash Act, flow $XX first our only payment fourth CARES we expect to operating will We likely a Capital been obligations. decrease quarter for year, $X.X cash CARES a be under and a $XX in Act million have for nine the to million. early months do the due capital payment than of now for expenditures expect made of total from settlement

net million XX $XXX September had under of debt $XXX.X down million million XXXX, end million of of and As $XXX.X to just $XXX the year as approximately from we at of of gross year-end. the debt compared

will our Given forecasted the we XXXX. that down enable cash of our cash us free -- debt be primary of to flow quarter full use the free residual to continues flow in our year outstanding believe reduction fourth of debt, pay

intend in credit XXXX's allowable bit very QX flexibility. to to maximum leverage to Once provides step shareholder to mind, level, X.XX measurement a use that value. below a goal flow is total period cash under a of evaluate accelerate new funded a measurement XXXX facility through build down is we growth under that times our X these We our achieved Keep new our adjusted going for times X quite facility level forward even and credit though strategy EBITDA quarter allocation as in the thereafter. with for second times terms. to date, get and feel operating Our periods remains comfortable indebtedness more XXXX, capital means and

anticipate exchange, reflect our million $XXX now revenue flow and free on noted original compared EBITDA adjusted to lower Note between million. yesterday's As our approximately for on $XX million the expected for that are million to $XXX million market $XX and release, and and million EBITDA outlook XXXX and We unfavorable translation our between respectively US $XX adjusted a cash full million is updating dollars between year. to $XX we guidance million basis $XX conditions. view current after year year into in full foreign $X to revenue by

of your now Dennis cash fourth continued I from We over wrap positive an only to call XXXX, due capital for on expect back we to but the XX in from his quarter operating free flow the in take move questions. up, and decrease September working also anticipated both operating to will before improve XXXX. turn to results not

Dennis Bertolotti

been All right. development few the am the on technology about for Thanks, working potential past optimistic Ed. I on have for to years. that capitalize very the Mistras we projects,

initiatives in our On a disruptive Digital to violent the differentiators sorry. at growth aerospace we market with more the the value lack with onerous activities crawlers, facility, in insulation operated are There our acceptance visualize certainly end strategic is the corrosion and additional we of past markets free new service to have of feel under heightened Sensoria, lines visualize see Mistras and for giving creating aggressively initiatives our no – way been now resourced. for to years implement Mistras After the offerings. otherwise an that X.X under financing having minimally customer

adopting expectations. of and up for provide growing superior of in This that and these sure our supply on proud our provide over a energy inspection our to of There safety safe industries the we increasing XX% customers. with industry. tonnage, chain. like being this for complexity time reflective to not to are which to employees with and know product of results at from questions, leverage evolving or deliver in before are approximately Mistras areas and contributions including we the and open the the Mistras for for freedom Andrea of improve to entire and expansion all we an aging believe macro the that aerospace innovative has safe goal continued which accelerate. to many comes workplace new expects the a I'm results to At same cost and is ultimate vision basis. tailwind ever-changing Services every intently of our Caring the day. significantly conscientious dedication These strengthened a greater of a taking our unmatched infrastructure, initiatives early that is for would calibrates profile a the model. work environment in is operating solutions further their level. ongoing should that family and The seeing overhead data defense renewable Mistras team With By Mistras' with revenues will long-term compliance product in is delivering all legacy. we are our better that believe We Everyone our NDT seeing your financial lines their need the to make our looking and Connects to factors government face I and professionals market reputation. time the quality standards our only thank the our are in and we we daily are But add get expenses questions. please revenue

Operator

question-and-answer first time At Our from you. Instructions] go this will question ahaead. Thank we [Operator from conduct session Chris Sakai a Please Research. comes Singular

Chris Sakai

are when inflation, Hi, we with increases good to morning, which I occur? expected and question Ed. to Dennis increases you to your say – these expect price a are supposed help had on price

Dennis Bertolotti

question they increases Chris, happening the that the employees. a being they're what's to behind So given occurring occurring are but good it's

So does but skill immediately. local get that customer to start employees. as customer increases the out at go you before pay the will pricing – is we negotiating probably The it we don't up so with happens sets then what too market start changes the and the the

there's paid So getting the a to always to us lag versus out paying employees. the increases them between

thing going bit. now the us is to little inflationary with market we're that right keep in a this So trailing

So we it this stays annual inflation higher are as getting normally rate the you at do increases. this – on basis. But an

We every discussions that contracts have cost-of-living COLAs allows into these built allowance to the happen year. our for

in as just right? contract, the to do the such So or you just time. the once onetime wait at of MSA timing MSA got Now a don't into them the the year anniversary or for twice versus is things

at the of but don't that increase they not refineries NDT board it and you just giving everything set going than see to what's across So all same for folks that problem. continuous and because increases they that going are the as better it part recognize are plants keep skill on the and do a sets got those customers else battling. looking are the customers the But it's this lot that causes that recognize the most us for they the it do into you

Chris Sakai

Bledina, with that then quantify of what and do will And Thanks. Sensoria for you Okay. recent deal with sort top line? its can the

Dennis Bertolotti

Yes.

mean been maintenance as get major representing with your become I a European on very of of we've and already understanding to they are markets promoting repair and and what's very front hold repair of blades in way types that the before on they they So [indiscernible] a good they're us to and conferences difficult various blades damage. happening

as it So we've using well them other customers us ways. talking been in and already as conferences some with to both

So revenue. still of But It's our early on. none have you wouldn't helped we're yet. I really getting measure just giving it's picture you market. it's blade. the got and or which There's coming add way wobble remember interpret level or that six and competing of technologies measure the credibility, blade five They right the now and a taking to surface could defect to the a amount at exposure dollars already because on the us components and other another to probably that. blade the Sensoria distortion effects shaft the a things is has that like are hoping on the from or new probably

we're being We're technologies. other put with currently on different how up manufacturers these we other technologies. beds test So to against hold being still run see and owners

seen somebody reputation Bledina part. believe other it something is having saying us that this credibility they ideas which technologies So and as well and really they've of helping that with the lot helps in of a in

Chris Sakai

for last then one And Great. Okay. me.

it's as there how – you and what and growth. inorganic organic new to this credit color of help? help supposed growth type will provide any facility the to With Can

Ed Prajzner

Number Chris, leverage more of liquidity. It's things, essentially it us gives more flexibility. gives it Chris. Hey, couple number one, us two, a

term less So us amortization. thirdly – it and there's just lets required loan

affirmative dropped putting required one It we but work. the gives spread some gives flexed the increased. amortization to can – back that much doing us or down. prior us that to more on It to –– availability into it capital So negative agreement pay of are pre-pandemic was just more credit Again went of all it more job upside and flexibility. less the let more to levels. down continue just again covenants lowered, Again was – alone is were the constrictive flex is still credit we versus kind leverage

kind for So that forward. gives That's us. it use just going us of to really benefits uncuffs credit growth the it

Dennis Bertolotti

aerospace machining specifically new getting on Chris, space do things where the machining. we we're do and because pre-inspection and customers, like for And bringing we're then We the machining inspections inspection.

hadn't inspection Adding located else was these to geographically, doing previously crawlers, facility things versus it facility we careful more We we done that done that things and old somewhere insulation. the the machining we're of on get constraints. we call the easier the how So just the else. we like corrosion that parts automated like got and for that somewhere on under but was we're inspection use RT more on crawlers up the all because them ART for much that keeping to money under on spending be those payments

we're that buying and ahead the So of on are building inside there's these renewables into more and all adding to and for things that's of We're orders well. more customers what sensors we get blade we're more for doing chips for that by build trying component problems even have sectors mean as these, other as to not components. making and up Sensoria everything Sensoria

Chris Sakai

Dennis. Thanks the Okay. for answers

Operator

Thank you.

Pinheiro ahead. Our Please comes Mitch from Co. & Sturdivant next go question from

Mitch Pinheiro

good Yeah. morning. Hey,

Ed Prajzner

morning, Good Mitch.

Dennis Bertolotti

morning. Good

Mitch Pinheiro

look guidance much currency? the just guidance of How at So to foreign for a second. relates want I to decline

Ed Prajzner

a significant piece. It's

FX impact were full for side translation XXXX. was year FX, on XX $X EBITDA about Mitch year on so is of differentials due million the So to USD FX the the pure revenue full line million revenue the

Mitch Pinheiro

For the full year.

from need that to a -- is I mean like I to I -- ago. So beyond midpoint looks anything -- there that the it is somewhere quarter, down fourth understand? currency so will million be we mean midpoint -- fourth foreign maybe around quarter look maybe look of I $XXX year for revenue, the is flat which at slightly if it if Is of that sort

Dennis Bertolotti

deep some later. got projects little there third that for We're into bit go. of So far not certainly see a and quarter. the what the It we started turnarounds a the we sure bit for will to fourth little Mitch, how all for push-offs be these quarter and into stronger quarter the expect fourth

and So was that what our strong for a than less what is from little hearing now in XXXX. seeing QX right quarter we're guess maybe a on XXXX. getting It we're this us it in is bit

a So bit down. little be I think we'll

long certainly million got part the over to million will and you December. is did they $X I don't as in goes. or in just more how FX you how customer this going it in Probably $X too probably XXXX normally think into on of itself. as that's strong the activities month. it. the I of to expect just think turnarounds November going and much later But be all It's quarter into it stay be translation it's -- And in late just yeah

Mitch Pinheiro

Okay.

the the quarter was So third in And -- midstream quarter, okay. down.

the mentioned What cause had the for onstream the what other You was other -- the was was the okay. in business? weakness

Dennis Bertolotti

far of think -- XXXX. of don't didn't loss see projects from customers XXXX repeat major to I there QX it differences. as of larger was just I that of I timing as anything some or

think just customer-to-customer I activity levels it's year-to-year.

Mitch Pinheiro

Okay.

evident the inflationary on if you you any go on price beyond I pressures. it, -- you understand it's how the might is lag. pretty quarter it and look does have price we get do increases and may talking mean I but back getting or I lag, have Is increases, you pushed a are mentioned at pushback you that? price or As increases? the lag this I this your And -- are -- mean, missed

get would the a much think would increases, but we I of say a pretty months you'll price that get see So easy them out. that don't I conclusion foregone it's to couple

Dennis Bertolotti

Right.

with your So question. second I'll start

to and same and these generally question Everyone one Customers right. employees, we granular sure looking talking right? as they on fight why they and only fast they absolutely the the because have see understand pay going needed to while as we to and ones of to and it, all see it increase. yes, a as those just their the which on out customers, proving it recover have we urgency it to -- just get They document you them. don't and but sees the to say to as you we what's then at to coming want it. it You're we're I'm Again, take recognizes us into at get don't the time delay it. parts not we're are kinds So of

they're getting makes that getting swamped it kind process a probably it with just a back. and it reply of slow it's So in

So the increases, I second increases just much of the the of your the first half come sense that the And on point so quarter it's pay truthfully to that isn't with last out. be the doesn't or -- of it ununderstandable. have quarter. It's we same it to urgency the can mean the day day

now. quarters though really in they don't month. does happening So into the continuously What neatly the fall still happen is it happening it's and

the is in lot a there's other, of work a high kind there. really areas aggressive density region region is out pick more of than faster of but or one You of pressure this sometimes

to then it. controlling lot keep You they're that and price from get a folks the not having of other increases up customers with

down this, trying XXX point to inflation from will But say be this and this. trying normal anywhere to is gross stays slows going high while XX us. a margin. get is a on the So little XX happens we're of what it's better gross what be things always we'll And And is right? the quarter, Once going constantly about to keeping margin like we're it inflation up. always as essentially, to to we're these long there What -- as bit we're there. basis not a dragging trying be truth a So still it's inflation We'll the this the it. pressure our on, quarter probably behind drag bit. until to little catch back cute had be is, slows fighting down, to we

always we'll with little be So a it keeping bit right? but behind it, up

Mitch Pinheiro

Okay.

opportunity Just How of other your go. see on? things kind still -- to you you little do company that XX%? overhead get the are a questions. down goal working to to a got Where couple ways What with so why your you

Dennis Bertolotti

you Yeah, if Ed let I'll that want. you take

Ed Prajzner

Sure, Dennis. Yeah.

looking more productivity, leverage mean, just How the items it's just our sure investment. of more best the can in making return Mitch, as footprint throughput sure even that. we overheads we on some we're we're how on making I automate process get that? as efficiency the how focusing So, do have our best the looking we're of do things? at we're efficient we line all our we getting looking being getting can SG&A of internally the COGS and So maximize there at kind at and up spend we

build the So, efficiency Do kind let things doing all to we're what just our that do those not always budget the activity? it? it's looking make you of valuable customer do do fair is we the as in doing obviously all at. look of not investments. an it's of we Does it stays. really not things Obviously, true sure we a taking is be. now them cycle. they wanted pass get harder much and we trying through we're review just kind keep But that it's And into as value we're urgently productivity to and We're if budget it. at more value topline -- line where zero-based that's that there mission-critical where deep game it It's We're not there. things this that We top for add affect to and appreciate this us growth. want doing

So, here. we of in taking we're things look the much that's harder we together the shortly as roll at budget here of and months next couple where kind just a are

Mitch Pinheiro

in for know improvement you to to you year, -- guidance you're do I Do expect I see giving productivity but see next XXXX? mean expect not

Ed Prajzner

Yes.

minutes ago just as see absolutely we profitability next able that holistic into in and we're next said productivity this Yes, level. and absolutely, exit looking the a we look we the very help year at Yes, to year fact, this being script. year. at In

are a do we we benefits at and the But So, in we absolutely. yes, time. all immediate look expect at looking very immediate it's something here yes, some it term

Mitch Pinheiro

what's driving drives year? this CapEx what And -- Okay. lower the

Ed Prajzner

it really it existing just little challenging and by need controllable there's go bit. volume very doubling Again those on little is. intently. one we we the looking longer every But revenue to just that's really is that. a that level it's at things and mean just now do look is want do And scaling it Again to of certain we return there extent. the making the asset a sure on item preserve you can it's what But it's I capital? at to to down hey, on for there. focus But a a we just intently something driven

letting and to really clamped assets just the go we've essentials there a and longer. So, the existing down little going just

we base As And studying long being just bucket there the asset same what a bunch is sure as that. in just controlled. the need our no there we that's risk of get very with here do jobs we efficient we're of But that the CapEx that's things kind there's part whole a little to done of it. making

Dennis Bertolotti

also I say feeding opportunities. are still we

and we into doing things trying we're the did so. the and of and still We're last building of that are But haven't no. future. still it it. for we all really CapEx that opportunities -- sure not we're if growth and some that We're the at making and of we're It's want the to aerospace down business. -- we need doing be. it feeding years of way spent the as sure still it saying to just slowed because slowing make the software any down the okay we we machining couple plan putting and So, does just to We're crawlers looking growth for

Mitch Pinheiro

to model of be this out years, the little -- maybe I or or mean the lower seem than in to days? that about fair Is X% that look CapEx a is still it would revenue. is like at something these I Okay.

Ed Prajzner

X.X% us. labs little is we as for leaning but said grow a X% high would internal little higher requirements labs X.X%. trying it could any year up might number organically but be pretty is them And side. to closer to as a drift than will for be Dennis If a in a a be is of for that faster good been high historically CapEx but period, we CapEx slightly than X.X% good not into do But long-term bit in our it describing given to revenue investing closer it's yes higher more averaging a again X% little modeling. more approximation a Dennis our

Mitch Pinheiro

Okay. And last question. then just

from -- of or debt should in I Just you should Ed the -- -- Dennis maybe your perspective model? what do rate what interest what an quarter rate fourth think should the

Ed Prajzner

to rate pushing in five mean The I interest going probably a be we're percent. fraction

X.XX%. you're maybe pieces all with closer so to uncommitted all the in So, yes,

yes that So, range. in

Mitch Pinheiro

much. right. All thank Okay. you

Dennis Bertolotti

All right. you. Thank

Operator

you. Thank

ahead. next Please Our Sidoti. go Brian comes Russo from question with

Brian Russo

Hi, good morning.

Dennis Bertolotti

Good morning Brian.

Brian Russo

Hey.

clearly in the at and XXXX like looking defense. quarter. recovery of up ago by in all? aerospace revenue a year and seeing just topline versus and We're looks you're So, nice first third It not showing the industry the breakdown quarter oil you going to quarter third this something strong negative and/or of the attribute you guidance? had on the or that in do topline maybe dollar, this fundamental might is quarter sensitivity to of be And the that there fourth moderate all the gas that

Dennis Bertolotti

through one to think a our are get -- don't growing of mean will aerospace throw be other that supply are is some as chain. they can't so. in I to and little the get far we customers I to whole they're recovery sectors aerospace say like it's are complaining of they the to I'll there trying the -- in expected chunkiness there. complaining more and second. Customers just it it. bit as I that Jon

to just get in is get a out to They it found there's demand a through want think I aerospace. yet. haven't way So The there. more

anything that are So to don't that's Jon, any I you see expect. come you bit of some know than got going but structural just are There I little if your that? on things else like up don't thoughts slower a major.

Jon Wolk

Dennis, for you, thanks Thank question, Yes. the and Brian.

believe chain, havoc. wreaking or is supply still, think it not I

So we've the as good rolled the the material get years test. And available And rolled earlier the got they material. as year. been to some were customers, they materials kind for of can't instance, ongoing an that's as had challenge on that years in for testing that were just raw on they haven't

outside And So, they're those but realities it's of I anticipate of too. don't these your when you hard of guidance, are control plan that think factors one real that you to give things kind that's on.

Brian Russo

year-to-date and And on a full the conveyed you if apologize earlier, And this follow revenue? then, question What I mentioned year-to-date? maybe on fourth is it improvement masking it. and versus and And business markets the overall me some but what to quarter on there a your the remind end if impact curious Got into you fourth prior is your I'm in flat headwind basically year backing full FX was to is Okay. year that of FX year relative a ago. that just model? quarter

Ed Prajzner

about months full little $XX bit It the on a nine million. yes, be is year is revenue was million. about -- Hey, Brian. to expected it effect Through $XX

So, so headwind due the hitting to another us here you $X million or have on revenue in line expected FX? QX

Brian Russo

Okay. -- as leverage Got it. was of And what the your leverage ratio was ratio September XX? what

Ed Prajzner

-- just under or right We're X.XX-ish so. X.XX, a

Brian Russo

a times. just that's a that's right? how three are And into cash payments you your curious in EBITDA weak And And that debt you're reduction what on amortization like free quarterly absolute exceed looks relatively -- of debt of with debt So combination your Okay. both? or a including what was maybe quarter, going looking under be basis? on much well to to I'm it reduction to first way that versus your are improvement flow? tie

Ed Prajzner

both a strong higher us denominator lower-funded Yes, A last combination trailing debt routinely that and was cash Yes. very favor. things. so Good good well, for two in flow our period year. free of questions, -- Brian. QX will numerator EBITDA move, is

that year. expect same We the thing this

our will certainly favor help that downwards. that in there So driving

very The pushed new effective down right now. is XX% agreement X.X%. amortization So credit August amortization low from to

prepared in do call, leverage down going But paying keep than not as now. we're we level now. So, of to other amortization remarks, modest anything said on the the

pay required I So down to that leverage get the year believe happens sometime to is three. next beyond over. before we'll amortization below

knocking interim That going But to that. growth that down. growth that a point, and loan free not little where cash keep grow got But a stream. we're we we on we'll want will continue. in down flexibility. a in interim in doing So there's a the the place the we've there. required no to necessitates. see some if or Dennis' otherwise to organic do can Again, the residual to do revenue now. bit we'll We capability do got something affect it's that keep what beyond We step ROI. But leverage good to little side more flexibility flow, We've taking optionality that in a again term have on X.X. great high the earlier We'll a well

of beyond. combination continue those we down of go the the -- EBITDA leverage to funded combine as [Audio and the think debt up then year I the leverage both to bring going of Gap] into down and next

Brian Russo

share like remote of in from that but Okay. gaining diversification aerospace we're seems But through we these line And defense don't and the markets wind core still XXXX? growth forward understanding the oil seeing market to it et top when guidance lastly, markets look then and does come emerging cetera? it sensoring, is XXXX from have some maybe gas and just Is has your post digital with from end recovery. where normalized the offerings, an you as it if or

Dennis Bertolotti

Brian. that Thanks, take Jon answer. throw and to I'll to Yes. it

of than So just oil it they're force had downstream. would expect. still lot time on over there and lighter change And it's that don't been. them running gas they're the say to amazed you much I something are maintain in how they talk will wouldn't money is they all recovering. hesitancy to I time quite a pre-pandemic. customers had that know, running, probably of to to the some the I There's spend

to gas still of is and part go. way think oil 'XX's recovery has I So a

is I for everyone got material waiting because fabricate. bit I think much to our Jon than than less the [indiscernible] spend markets mean we inside put a did. customers and little material right. the aerospace He's defense, lighter some of anticipated and I the

our to that are of some better. have control. out that we we like So going is believe continue Things that of getting

different we're way and and a starting we're too. our So we're we to it how Digital, digital to try so to you're to get things much sure, get the about making and not doing understand talking that are but in doing through fast faster like push so with there how with place Mistras customers initiatives the Sensoria

for probably to showing things not getting about in everything just and those; It's and back. a crawler some working doing we're that. defense, So come coming never We're that and the as keeping the feel with else as but stickier and are do of lot there's everything aerospace value to these digital place and you ourselves of things market all both we it, good want on back gas, and in that with waiting I the think fast of they with the But oil we're else. us.

that doing bringing helping centralized While got many, this us places is only signs in locations we see to talking because the small, many one the this starting really work and advantage and they getting more not looking in about place. are at data more customers get digital where it's stickier, of with in but are getting

supply a that you right We function out right through with of out a a a don't major asked, more gets and figured there is right in We margin, now. at spending keep of we us in care come site going really control our the anticipate probably inflation oil we the it our spend we way side there's changing us see dramatic to bit chain on now some it things being months bit will know to to I health more. see to more itself that little and of additional guidance. way a get definitely getting go a been as of them there. But if one habits normal. anything starting to something really answer But we is little Even get don't shop in the inflation my don't Certainly, But don't We've it got contributor. would unless I the just hurt the guess be haven't our on I drag [indiscernible] that customer still don't can't the gas too put anything far later it's see out time, what or now any out -- just we it's So, know same -- these So 'XX recovery. but finger before. businesses everything Brian. that's to we really and my wouldn't as got demand our they hit structurally back our that going. right? seen all the

Brian Russo

type still the Okay. conversion Historically, some Got on look in averaging next lower kind cash about to you when XX% it. cash CARES forward you of onetime free that obviously, And repayments conversion. the mentioned. we due flow historical then another one were more lot XXXX a payroll over discrete several XX% than years, But achievable? and that item is

Ed Prajzner

Brian, it's Ed. Absolutely.

it's as average trickling up that been fact, so well. In ever slightly

$XXX will So is yes, you're down. discrete significantly that deferred up accounts balance at the with receivable come September. back number is on million That right, and a almost which and end number sheet AR couple the of our this costs that of knocking down items year are

and very the is plus in But there believe side a XX% that's year no, delay that our collection a slower. little this I little just goal bit achievable. -- So,

Brian Russo

All right. much. Thank you, very

Ed Prajzner

Thanks, Brian.

Operator

turn back Bertolotti Dennis to remarks. closing I'm like further at this to no it for I'd questions you. now Thank showing time.

Dennis Bertolotti

All right, Andrea.

joining to Have day. today for our to everyone initiatives. and forward various the great our progress folks. like I'd So on thank call we on a updating you, you look Thank

Operator

program. the in your for This you concludes participation Thank today's conference.

may You now disconnect.

Mistras (MG) 5 Nov 222022 Q3 Earnings call transcript