Mistras Group Q1 2025 Earnings Results & Report

Mistras Group EPS Results

• Actual EPS: -$0.01
• Consensus EPS: $0.16
• Beat/Miss: Missed by -$0.17
• One Year Ago EPS: N/A
• EPS Beat Rate: 6 of last 8 quarters

Mistras Group Revenue Results

• Actual Revenue: $161.62 million
• Expected Revenue: $180.70 million
• Beat/Miss: Missed by -$19.09 million
• YoY Revenue Growth: N/A

Mistras Group (NYSE:MG) provides asset protection and integrity services to companies that operate industrial facilities and infrastructure. Its work includes nondestructive testing and inspection, engineering and consulting, and monitoring systems designed to help customers assess asset condition, identify potential problems and support safe, reliable operations.

The company serves industries including energy, aerospace, manufacturing and infrastructure. Its services and technologies are used to inspect and monitor assets such as pipelines, power-generation facilities, aircraft and bridges.

Founded in 1978, Mistras has grown into an international provider of inspection and asset-integrity services, with operations serving customers in multiple regions. Its offerings combine on-site technical services with data and monitoring solutions.

Mistras Group Q1 2025 Earnings Call Transcript

Key Takeaways

• Revenue fell by about 12% year-over-year, driven by a $16.6 million decline in oil & gas and a $1.7 million drop in aerospace & defense as customers delayed projects amid market uncertainty.
• Rapid cost and expense recalibration preserved margins, with SG&A down 1.7%, a $6 million overhead reclassification for greater transparency, and a commitment to meet or exceed 2024 adjusted EBITDA levels in 2025.
• The Data Solutions segment grew revenue by 6% in Q1, highlighted by the launch of PCMS Mobile and the formal introduction of the Mistras Data Solutions brand to drive high-value, integrated software and analytics services.
• Operating cash flow improved to $5.6 million (up $5 million year-over-year), free cash flow was $0.2 million, interest expense fell 25%, and net leverage stood at 2.5× with a focus on balancing debt reduction and growth investments.
• Management declined to provide full-year guidance due to ongoing uncertainty but remains “cautiously optimistic,” expecting a recovery of $6.5 million in turnaround revenues later in 2025 and steady market share.

Presentation

[Operator]

Good day, everyone. My name is Abigail, and I will be your conference operator today. At this time, I would like to welcome you to MISTRAS Group, Inc Q1 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. If you would like to ask a question during this time, and if you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. At this time, I would like to turn the call over to Thomas Tobolski, Treasurer.

[Thomas Tobolski, Treasurer at MISTRAS Group, Inc]

Good morning, everyone, and welcome to MISTRAS Group's first quarter 2025 earnings conference call. I'm joined today by Natalia Shuman, President and Chief Executive Officer, and Ed Prajzner, Senior Executive Vice President and Chief Financial Officer. Before we start, I want to remind everyone that remarks made during this conference call, as well as supplemental information provided on our website, contain certain forward-looking statements and involve risks and uncertainties as described in MISTRAS's SEC filings. The company's actual factors that can cause actual results to differ are discussed in the company's most recent annual report on Form 10-K and other reports filed with the SEC. The discussion in this conference call will also include certain non-GAAP financial measures that we believe are useful to investors evaluating the company's performance, but that were not prepared in accordance with U.S. GAAP. Reconciliation of these non-U.S.

[Thomas Tobolski, Treasurer at MISTRAS Group, Inc]

GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found in the tables contained in yesterday's press release and the company's related current report on Form 8-K. These results are available on the company's website in the Investors section and on the SEC's website. I'll now turn the call over to Natalia Shuman.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Thank you. Good morning, everyone. Thank you for joining us today. It is my pleasure to be providing you with an update on our progress. Despite the larger-than-anticipated year-over-year decline in revenue driven by overall market uncertainty, we were nevertheless able to rapidly calibrate costs and expenses down during the first quarter to the revenue level in order to preserve our bottom-line operational matrix. Having said that, with our continued focus on cost and expense management, including a reduction in our administrative support functional costs and coupled with anticipated growth across all primary end markets, we are confident that these drivers will provide an improvement in key profitability measures over the remainder of the year.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

As shown on slide three, during the first quarter as a CEO of MISTRAS, I have been focused on three key initiatives for our business, which are, first, leadership talent evaluation; second, recalibration of our cost base to the current revenue levels and market conditions; and third, developing growth strategies across all businesses and service delivery optimization. On the talent evaluation initiative, I'm very pleased to have onboarded various high-caliber talent to our organization, including two senior executives focused on growth within our data solutions, a new leader for our aerospace and defense division, and new heads of our marketing, safety, and compliance and IT functions. Each of these individuals has proven track records of success in their careers and brings strong industry expertise and critical thought leadership to continuously improve and enhance our organization. These individuals are quickly getting up to speed.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

These positions, plus several strategic hires to our operations team, have the entire leadership team excited for the current and long-term future of the company. On the service delivery model optimization initiative, we are continuing to review all operational aspects of our current services portfolio in a collaborative manner with our customers to ensure that we are achieving a fair and adequate ROI for the services we provide. We are adjusting our cost base according to current conditions, price pressures, and other contract economics. On the growth strategies initiative, I am focused on accelerated expansion across core end markets like oil and gas and aerospace and defense, with a particular emphasis on delivering integrated solutions that leverage the full depth of our offerings, including data analytics and monitoring technologies.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

As part of MISTRAS's data solution strategy, we are accelerating growth by delivering tailored, high-value solutions that integrate our proprietary software, advanced analytics, and trusted field services. A prime example of this is our Q1 2025 release of PCMS Mobile, our cloud-based application purpose-built to optimize real data capture, quality, and analysis in mechanical integrity programs. Delivered within one suite ecosystem, PCMS Mobile connects inspection planning in PCMS, mobile field execution, and post-inspection analytics into a unified workflow, improving asset performance while reducing rework and administrative burden. This latest release introduces a new web-based portal for smarter work assignment and pre-submission data review, giving customers expanded control over data quality and enabling faster, more confident decision-making. This proprietary and vertically integrated approach, combining software, services, analytics, and engineering on the one platform, is what sets MISTRAS apart from competition.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

We are not just enabling digital transformation for our clients; we are leading it, helping our customers unlock value through connected intelligence, end-to-end integrity management, and scalable innovation built for the future of asset protection. Related to this initiative, we recently officially announced the launch of MISTRAS Data Solutions brand, which consolidates our data-centric services, software solutions, and technologies under one umbrella. MISTRAS Data Solutions strengthens our commitment to delivering smarter operations for asset-intensive end markets, including energy, aerospace and defense, infrastructure, and manufacturing. Let me now share some of my thoughts on our performance this quarter before Ed goes into more details behind the financials.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Although revenue was down over 12% year-over-year, this low level of revenue was somewhat anticipated because our first quarter of 2024 was a tough comparison, with a robust spring turnaround season in oil and gas and a strong aerospace and defense demand in the first quarter of 2024. The largest revenue decline of $16.6 million was in oil and gas end market and was most prominently noted in the downstream sector due to timing of turnarounds and other projects. With regards to customer turnarounds, our first quarter 2025 turnarounds were down $6.5 million from the prior year as anticipated, but we expect to recover this gap and exceed the remaining 2025 total turnarounds revenue versus prior year by approximately $6.5 million. We have seen a reduction of customer spending and project push-outs in upstream and midstream sub-industries as our customers are dealing with market uncertainties and budgetary reduction initiatives.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

We experienced a decline of $1.7 million in aerospace and defense end market, which was primarily due to macroeconomic uncertainty causing customer delays and deferrals. Delays in this market were also driven by supply chain disruption, causing our large customers to temporarily slow down production, which in turn led to less demand for non-destructive testing and other lab services. Although we experienced a somewhat slower-than-anticipated start to 2025 in our two largest end markets, we did not experience any significant customer attrition or market share changes in the first quarter, and therefore, we are cautiously optimistic for the balance of the year. Specifically, within the aerospace and defense industry, MISTRAS in-lab testing and services support OEMs and Tier 1 suppliers through a network of ISO 17025 accredited laboratories with NADCAP and regulatory certification. These core offerings include non-destructive testing, chemical and mechanical analysis, dimensional measurements, machining, and finishing services.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

These integrated services accelerate time to market for our customers and streamline quality assurance across manufacturing supply chain, which we believe will help provide growth over the remainder of the year and beyond. That being said, we are closely monitoring potential industry headwinds caused by global market uncertainty driven by our customers' reaction to tariffs and other market conditions and the potential impact that could have on our in-lab services business. Again, we are well-positioned to maintain market share in the primary industries we serve by leveraging our proprietary advanced technologies and testing methods. We are also focusing on our other existing end markets, such as industrials, infrastructure, and other industries, where our testing and inspection services, as well as our data analytics, would enable us to drive growth in the near future.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

I'm pleased to highlight the performance of PCMS offering within our data solutions group, where we delivered revenue growth of 6% this quarter as compared to the prior year period. As I have already shared, data solutions, particularly PCMS, are a key area of focus for the company and one in which we are strategically investing time and capital to foster future growth via market share gains. Now, I'd like to turn the call over to Ed for an update on our actual financial results for the first quarter of 2025.

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

Thank you, Natalia, and good morning, everyone. As we noted on our Q4 earnings call, as Natalia mentioned earlier, the spring turnaround season in 2024 was robust, and the fall turnaround season in 2024 was relatively weaker. We stated that we expect the inverse trend in 2025, with a weaker spring and more robust fall turnaround season, and this trend materialized in our first quarter results. This is reflected on slide eight. Additionally, our first quarter 2024 results benefited from low double-digit growth rates in our two largest end markets, that being oil and gas and aerospace and defense, which provides for a challenging prior year quarter to compare with the current period. These trends, coupled with project delays and overall market uncertainty, caused first quarter revenue to lag our expectations.

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

We have continued with our disciplined approach and commitment to only take on contracts that align with our profitability targets. Our international segment revenue was up for the first quarter, nearly 4% organic growth in local currency, which was offset by adverse FX translation. As noted in our press release and as shown on slide nine, our results reflect certain overhead and personnel expenses, which have been reclassified in our consolidated statement of operations from SG&A to cost of revenue, as we determined this reclassification would be preferable, as it provides greater transparency regarding the true cost of the company's revenue and aligns with how our business is managed. These overhead and personnel costs, which were determined to be directly related to the company's delivery of services, are generally variable to revenue being recognized and results in gross profit that fully encompasses all costs necessary to generate such revenue.

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

The reclassification recorded within our financials was $6 million and $4.9 million for the three months ended March 31 and March 31, 2024, respectively. The impact of this reclassification for full year 2024 was approximately $20.9 million from SG&A to cost of revenue. This redistribution of overhead and personnel expenses has no impact on operating income, net income, or adjusted EBITDA comparability. Selling general and administrative expenses were down $0.6 million, or 1.7%, from the prior year comparable period, despite adverse foreign exchange translation within our SG&A of $0.9 million and strategic spending within our data solutions business. This overall decrease in SG&A reflects our continued cost discipline and focus on calibration of our overhead cost relative to revenue achieved. For the first quarter of 2025, the company recorded $3.1 million of reorganization and other costs related to the continued calibration of the company's support overhead and other related costs.

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

For the first quarter, we reported a GAAP net loss of $3.2 million, or $0.10 per share. Excluding special items, non-GAAP net loss was $0.3 million, or $0.01 per share for the first quarter. Adjusted EBITDA was down $4.2 million to $12 million as compared to the first quarter last year. Despite the tough comparable, our adjusted EBITDA for the first quarter of 2025 was the second highest first quarter adjusted EBITDA performance for the company over the last five years. As shown on slide 10, our net cash provided by operating activities was $5.6 million for the first quarter of 2025, an increase of $5 million compared to the first quarter of last year.

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

Our slightly less than break-even free cash flow of $0.2 million is not unusual for the first quarter of any given year, given seasonality, but our free cash flow was improved by just over $5 million for the first quarter of 2025 compared to the prior year quarter. The company remains intently focused on working capital management and meaningful cash flow generation in the second quarter and for the remainder of 2025. Interest expense was $3.3 million for the first quarter, decreasing by $1.1 million, or 25%, from the prior year due to a decrease in the average debt balance outstanding and the lower interest rate environment. Our trailing 12-month bank-defined leverage ratio was just under 2.5x as of March 31, 2025, which is up slightly from year-end, but still well within our allowable permitted ratio of 3.75x.

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

We have articulated a strategy and continue to emphasize debt reduction as our priority use of free cash flow. However, based on current financial projections, we believe investments in capital expenditures and other resources that support our organic growth strategy while providing solid returns additionally represent an excellent use of our free cash flow. As our current leverage ratio is in line with our expectations, we do currently possess optionality as it relates to free cash flows, so we will be balancing these priorities to maximize shareholder value. Our effective tax rate, actually a tax benefit, was 26.9% for the first quarter, and we anticipate an effective tax rate of approximately 25% for the full year of 2025. We sincerely appreciate your continued support and expect to reward your patience with significantly improved results throughout 2025.

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

At this time, I would like to turn the call back over to Natalia for her closing remarks before we move on to take your questions.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Thank you, Ed. I have been intently focused on developing our five-year group strategic plan and roadmap along our senior leadership team and board of directors. This roadmap is still in progress, but is expected to provide a meaningful path to build upon for continued profitable growth for the company. We are also working closely with our customers and focus on bringing our skilled workforce of technicians and advanced technologies to continue to create value-add solutions wherein we can expect higher margins with their ROI benefit generated for our customers. As a result of this assessment and strategic planning, I'm very optimistic about the future of the company and our plan for growing our business across our key end markets and geographies.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Our currently addressable market of approximately $25 billion is a large and highly fragmented market that rewards innovative companies who can effectively and expeditiously help their customers keep their assets safe, compliant, and efficiently operating. For 40 years, MISTRAS has been a key industry leader in non-destructive testing and data analytics that solve these increasingly complex challenges. As we look forward with our long-term strategy, we are striving to become a credible provider in the larger tech market, and we are committed and focused on creating value for our customers by combining our software, services, and products to provide our customers with the knowledge and insight to operate their critical assets.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

We will not provide full-year guidance for fiscal 2025 due to unprecedented market uncertainty, and while we are still reviewing our entire portfolio of businesses, we are also assessing the impact of recently enacted tariffs on our business and results for fiscal 2025. Having said that, as a result of our ongoing cost calibration discipline, we expect our 2025 adjusted EBITDA achievement at least to meet or exceed the adjusted EBITDA level achieved in 2024. I'm very pleased to be leading MISTRAS into the future, and I'm extremely encouraged by the energy and enthusiasm of my nearly 5,000 dedicated colleagues who believe in our vision and are working tirelessly every day, helping us achieve our goals by delivering on our mission for our customers. While we have made significant progress, we recognize that there's still much more to be done. Thank you for being part of this journey.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

We truly appreciate your continued support. At this time, I would like to ask the operator to open the call for your questions.

[Operator]

We will now begin the Q&A. For today's session, we'll be utilizing the raise hand feature. If you'd like to ask a question, simply click on the raise hand button at the bottom of your screen. Once you've been called on, please unmute yourself and begin to ask your question. Thank you. We will now pause a moment to assemble the queue. Your first question comes from the line of John Franzreb of Sidoti & Company. Please unmute and ask your question.

[John Franzreb, Analyst at Sidoti & Company]

Good morning, everyone, and thanks for taking the questions.

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

Morning, John.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Good morning, John.

[John Franzreb, Analyst at Sidoti & Company]

Okay, just.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Yes.

[Mitch Pinheiro, Analyst at Sturdivant & Co]

Just wanted to test.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Yes, yes, good morning.

[John Franzreb, Analyst at Sidoti & Company]

I'm kind of curious. Today versus, you know, three months ago, can you talk a little bit about the operating environment and what's changed, either positively or negatively, that wasn't expected going in?

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Sure, sure. I can address this question. Obviously, what we've seen and as we're working with customers, as we are discussing the customers' situation with the tariffs, we see unprecedented uncertainty, right? The projects are being delayed, the customers are still evaluating their impact of tariffs on their business. That is what we see is different from what it has been three months ago. The operating environment is quite challenging at this time. Again, we're just using this time wisely, proactively, talking to the customers proactively, working with them, and figuring out the ways to help them.

[John Franzreb, Analyst at Sidoti & Company]

Natalia, are you actually seeing jobs being pushed to the right meaningfully? I guess especially, I'm kind of curious about data analytics, if we're seeing any kind of projects being stalled or pushed into later in the year?

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Actually, data analytics, specifically PCMS segment in our data solution, did quite well. As I mentioned in our prepared remarks, they grew the business 6% in this quarter. What we have seen is actually more interest from our customers as they are very intently focused on the savings and budgetary reductions. There is more interest in our platform that provides more analytics for them to gain that insights to manage their businesses better. We are very optimistic, John, about our performance when it comes to data, especially the PCMS platform.

[John Franzreb, Analyst at Sidoti & Company]

Okay. I just wanted to make sure nothing's been pushed to the right in general. I guess one other question, I'll get back into queue. Can you talk a little bit about your pricing initiatives? It sounded like in the prepared remarks that you're going back to customers and trying to get value for your offerings and what you do. How are those discussions working out right now? Can you kind of give us any kind of background?

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Yeah. Thank you, John. The commercial discipline that we have instituted a while ago still remains very much of a focus area for the company. We are reviewing the economics behind our larger customer contracts, and we're determining what levers we can pull in addition to ways to provide more services. Basically, this includes working together with our customers to provide fair and adequate ROI for the services that we provide. That's on pricing. We do see some price pressure at the moment, as again, there's some pressure from the macroeconomic situation. We're working again with the customers on that, but we believe that this commercial discipline that we have continues to serve us well.

[John Franzreb, Analyst at Sidoti & Company]

Okay. I'll let somebody ask some questions. I can get back into queue. Thank you.

[Operator]

Our next question will come from Mitch Pinheiro with Sturdivant & Co. Please unmute and ask your question.

[Mitch Pinheiro, Analyst at Sturdivant & Co]

Hello. Can you hear me?

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

Yes, Mitch.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Yes, Mitch. Good morning.

[Mitch Pinheiro, Analyst at Sturdivant & Co]

Hey, good morning. I'm curious specifically where you see tariffs affecting the business or your customers' decisions. I mean, is everything on hold, or what's on hold? What kind of projects do you see being delayed?

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Thank you, Mitch. Given that our business provides essential services to our customers, what we see is direct impact to MISTRAS on tariffs is not very significant, but rather the impact is coming from our customers, right? We are experiencing that impact from tariffs, supply chain disruption, economic policies, those factors causing our customers to pause or delay their spending. Based upon our discussions with the customers, there is still robust demand for our services, but the current economic conditions are hard to predict with our customers to really convert that demand into the actual projects. That is why we see that softer top line in Q1.

[Mitch Pinheiro, Analyst at Sturdivant & Co]

Is this mostly energy market related? I mean, and I'm just sort of curious. I mean, global demand looks pretty good. I mean, there's some uncertainty, but I don't really see a lot of things affected by the tariffs that probably will end up being for naught. It just doesn't make sense to me that energy markets would be affected by tariffs other than demand here or there for global oil output or something. It's just a little.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Yeah. That's right, Mitch. And that's what we see, right? That this sort of overall demand is unchanged. So it is temporarily paused as our customers are calibrating on the new environment, right? In fact, we're thinking that tariffs in the long run will be beneficial to us, right? Because as the advanced manufacturing moves to the U.S., we believe that there will be a higher demand for our services overall. So we are quite optimistic about the long-term prospects. But again, right now, it's temporary pause when our customers are evaluating their own situations.

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

It's a short-run uncertainty, Mitch. Our assets are largely North American-based. They're not subjected to tariffs, but the consumables, the raw materials that run through those assets that our customers operate are potentially subjected to supply chain stops and starts. Energy is related. A crude oil can be cracked and refined into all different byproducts going into lots of different industries, not just as a fuel source. It does cause a lot of little ebb and flowing there as the supply chain thinks through demand, supply, and tariff impacts. It does have this indirect effect, as Natalia said, not as much directly on us. Our in-lab testing might bring in a source outside of North America. They have to think through that as well. It's a temporary thing.

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

They're thinking through how it affects them here and now, but longer term could be a positive to us.

[Mitch Pinheiro, Analyst at Sturdivant & Co]

What about the price of oil being just below $60? How does that affect your outlook?

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Obviously, we are depending on oil prices, and the impact of declining crude prices is primarily contained to our downstream business. Our business model is predicated upon our customer spending behaviors, which, obviously, in turn, is potentially impacted by future oil prices and the duration of these price changes, right? Actually, when we look at the customers, their models are built to flex up and down with the future oil prices. That is what we see. We certainly have—we see right now that the prices are more of a lower end of normal prices, right? Where it is beneficial for us. Again, that is the impact to our downstream business.

[Mitch Pinheiro, Analyst at Sturdivant & Co]

Okay. Yeah. The other thing that really caught my eye is, again, midstream was weak again. I kind of thought midstream was going to be more of a steadier revenue picture. Can you talk a little bit about what's happening in the midstream business?

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Yes. Our midstream business, we had some reduction in revenue. This is, again, mostly because there were some budget restrictions. Although it is regulatory-driven, most of our business in midstream is regulatory-driven. We believe that we will catch up on that demand later in the year. It is just a temporary pause and temporary delay.

[Mitch Pinheiro, Analyst at Sturdivant & Co]

Okay. I think I heard you say that as far as your guidance, you're not giving formal guidance, but you think that, was it your adjusted EBITDA to be similar at a minimum to last year? Did I hear that correctly?

[Natalia Shuman, CEO at MISTRAS Group, Inc]

That's right. That's right. We believe that we at least will meet or exceed our prior year EBITDA levels.

[Mitch Pinheiro, Analyst at Sturdivant & Co]

I mean, does that imply at all that revenue will be not too far off from last year? Or because your margins have improved nicely, but I don't know if they could withstand a big revenue shock. For EBITDA to be flattish to maybe up would suggest that revenue is not going to be too far off from last year. Is that correct? Or are there other factors to consider?

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

No, Mitch, I think you're interpreting that correctly. We can't control that end market demand and our customers' buying decisions and when. Yeah, we're definitely signaling a moderation there. However, with our discipline, cost calibrations, focus, we can control the bottom line much more, and we fully intend to do that. We have been doing that. We will continue to do that. That's why we have a lot more confidence in that EBITDA outlook for the full year.

[Mitch Pinheiro, Analyst at Sturdivant & Co]

Okay. All right. Great. Thank you. Thanks for taking the questions.

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

Thank you, Mitch.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Thank you, Mitch.

[Operator]

Your next question will come from the line of Chris Sakai with Singular Research. Please unmute and ask your question.

[Chris Sakai, Analyst at Singular Research]

Yes, hi. Good morning.

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

Hi, Chris.

[Chris Sakai, Analyst at Singular Research]

Good morning. Can you talk about what's happening internationally? What growth is happening there, and do you foresee more growth there?

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

Yes, Chris. International was up about 4% organically. Unfavorable FX translation to U.S. dollars does flatten that out. International has a fairly diversified business model. They are a lot less oil and gas dependent than North America, much more diversified. They have some of the same macroeconomic challenges that we are dealing with in North America. A more diversified business model for them really probably reduces some of the variability going forward. They had a really good year in 2024 on the top line and bottom line, and we see them having—they are a little less volatile. It is really a function of their much more diverse end markets than we would have in North America.

[Chris Sakai, Analyst at Singular Research]

Okay. Great. Thanks for that. Looking at midstream and downstream, what sort of things are we to expect to see an uptick there on a macro level?

[Natalia Shuman, CEO at MISTRAS Group, Inc]

On a macro level, we predict that demand will not change that much. Again, because of the unknown situation currently and on a macro level, there is some uncertainty. This is for oil and gas overall, whether it's downstream or midstream, upstream. We're seeing that softness currently. Again, we believe that it will settle down as there's more clarity around the tariffs, around the rules, right?

[Chris Sakai, Analyst at Singular Research]

Okay. Great. Thanks for those answers.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Thank you, Chris.

[Operator]

Your next question will come from John Franzreb with Sturdivant & Company. Please unmute and ask your question.

[John Franzreb, Analyst at Sidoti & Company]

Yes. I actually got a question about how April kind of played out. Can you kind of talk to the context of how that played out compared to the March quarter? Is it down the same magnitude?

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Right. In April, we still impacted a bit of the turnarounds. The number of turnarounds is not as robust, right, as that we saw in H1 of 2024. We do see some improvement in demand. Definitely, again, we're very closely working with the customers to see how we can help and create that greater insight for them using our PCMS Mobile application. We see there's a slight improvement in April already.

[John Franzreb, Analyst at Sidoti & Company]

Should we be thinking about the magnitude of the weakness in the second quarter being similar to down in what you saw in the first quarter at roughly 10%? How should we contextualize the relative weakness on a year-over-year basis?

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

Yeah. Good question, John. Q2 will be a much easier comparison. Q1 to Q1, Q1 last year was so strong that, and we did expect a drop-off in the downstream. We had communicated that. Q2 does not have that variability built in there. It is an easier comparison. You will see less variability. And we have in Q2 versus Q2. Different model. Q1 was just extraordinarily high last year. That is what is causing much of that comparison, the variance. We expected to be down, as we said in the prepared remarks. We were down a little more than we had thought in Q1.

[Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc]

Q2, you'll see a little less, actually a lot less volatility versus expectations. Again, comparing to last year, it's not as peaky.

[John Franzreb, Analyst at Sidoti & Company]

Got it. Did I hear it properly that you expect that $6.5 million of revenue to be recovered in the balance of the year in the oil and gas sector? I do not think you said that it was downstream dependent, but I think it sounded like to me that you are going to get it through all three end markets.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

That's correct, John. What we expect is what I was talking about, turnarounds specifically. We noticed several times that turnarounds were softer. We did not have as many turnarounds as we had in 2024. However, if we look at the total backlog that we already have for turnarounds planned in H2, we believe that we at least exceeded overall total number in dollars as well, exceed the level of 2024 by $6.5 million.

[John Franzreb, Analyst at Sidoti & Company]

Got it. Okay. Thank you for taking my thoughts. I appreciate it.

[John Franzreb, Analyst at Sidoti & Company]

Thank you.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Thank you.

[Operator]

At this time, I see no callers in the queue, so I will hand the call back to Ms. Shuman for her closing remarks.

[Natalia Shuman, CEO at MISTRAS Group, Inc]

Thank you very much again for being with us on this journey. We are very confident in our prospects for the future. Again, thank you to all my team members and my colleagues for their continuous efforts and hard work in the field. Thank you.

[Operator]

This ends today's conference call. You may disconnect at this time.

Participants

Analysts

• Ed Prajzner, Senior Executive Vice President and CFO at MISTRAS Group, Inc
• Natalia Shuman, CEO at MISTRAS Group, Inc
• Mitch Pinheiro, Analyst at Sturdivant & Co
• Thomas Tobolski, Treasurer at MISTRAS Group, Inc
• John Franzreb, Analyst at Sidoti & Company
• Chris Sakai, Analyst at Singular Research