Thank you for joining MISTRAS Group's Conference Call for its Fourth Quarter and Fiscal Year ending December 31, 2024. My name is Tanya and I'll be your event manager today. We will be accepting questions after management's prepared remarks. I would now like to turn the call over to Thomas Tobolski, Treasurer. Your line is open.

Thank you, Tanya. Good morning, everyone and welcome to MISTRAS Group's fourth quarter and full year 2024 earnings conference call. I'm joined today by Manny Stamatakis, the Company's Executive Chairman of the Board; Natalia Shuman, President and Chief Executive Officer; and Ed Prajzner, Senior Executive Vice President and Chief Financial Officer. Our press release and the accompanying slides that we will be referring to today can be found within the Investor Relations section of our website. As shown on Slide 2, 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. A reconciliation of these non U.S. GAAP financial measures to the most directly comparable U.S. GAAP financial measures can be found in the tables contained in yesterday's press release and the Company's related current report on Form 8-K. These reports are available at the Company's website in the Investors section as well as on the SEC's website. I will now turn the call over to Manny Stamatakis.

Thanks Tommy. Good morning everyone. Thank you for joining us today. Before we commence today's conference call, I want to take a minute to reflect on the life of Dr. Sotirios J. Vahaviolos, the Company's Founder, Chairman Emeritus and Board Director. Sotirios passed away nearly one month ago on February 6, 2025. On behalf of the Board of Directors and the entire MISTRAS family, I want to express our profound appreciation for the immeasurable contributions Dr. Vahaviolos made to the company, our shareholders and the communities we serve. A visionary leader and pioneer in the field of Non-Destructive Testing and Acoustic Emission. Dr. Vahaviolos founded MISTRAS, originally Physical Acoustics Corporation in 1978 and dedicated over four decades to building it into a global leader in testing, inspection and Asset Protection Solutions. His expertise, leadership and commitment to excellence were instrumental in shaping the Company's strategic direction and fostering a culture of innovation that remains at the core of MISTRAS today. His legacy will endure and live on as we move MISTRAS forward in his memory. Our Products and Systems segment, along with our NDT and AE services will remain as essential competencies at the core of MISTRAS's capabilities, enabling the company to deliver on its overall mission and purpose. On a personal note, on behalf of the entire company, I want to express our deepest sympathies to the entire Vahaviolos family. In remembrance of Dr. Sotirios Vahaviolos, I ask for a brief moment of silence. Thank you. I am sure Sotirios is looking down and smiling about our improved 2024 Q4 and full year results. Our consolidated fourth quarter results allowed us to exceed our revised annual guidance with the bottom line expanding significantly, demonstrating the margin accretive actions that we have instituted into our business model. On a full…

Good morning, everyone, and thank you. Thank you very much, Manny. I sincerely appreciate the warm welcome from you, the entire Board of Directors and my team. I'm deeply honored to be leading MISTRAS Group into its next phase of growth, building on the strong foundation established by Dr. Vahaviolos with the goal of driving meaningful value for all our customers and in turn, for all our shareholders. I have spent my first 60 days on the job actively talking to customers, being in the field at our in-house laboratories, meeting with the teams as well as discussing operational strategies with Manny, the Board of Directors and other stakeholders. Our strong partnership with our valuable customers, leading technologies and committed management teams create a solid foundation that aligns well with our long-term vision. I am very excited for the prospects of continued profitable growth heading in 2025 and beyond. 2024 was a truly pivotal year for MISTRAS under Manny's leadership as Interim CEO, wherein the road map for success was built and the company achieved a number of significant milestones, including the second highest level of adjusted EBITDA in the Company's history. Additionally, we have the successful execution of Project Phoenix. The Company's SG&A level in dollars and as a percentage of revenue was at the lowest level it has been in over five years. The Company's more efficient business model and cost discipline provide a significant level of operating leverage given our organic growth aspirations. As shown on Slide 7, the diversification across our end markets and the revenue growth in all of our segments and industries that we serve in full year 2024 over 2023 are creating strong momentum for us. I look forward to updating you throughout this year as we make additional progress, and I'm very excited for the journey. I would now like to turn the call over to Ed for more details on the fourth quarter and full year 2024 results.

Thank you, Natalia, and good morning, everyone. Due to our improved results and operating leverage, as shown on Slide 8, we generated $25.7 million of operating cash flow and $20.8 million of free cash flow during the fourth quarter. We used this cash flow to paydown $20.1 million of bank debt during the fourth quarter, and our bank-defined leverage level dropped to below 2.5x as of December 31, 2024. This is the lowest level this ratio has been since the third quarter of 2018. We continue to fund our organic growth initiatives, including our investment in capital expenditures with cash flow, strengthening our capabilities and footprint to better support our customers. As you might recall, our net cash flow generation lagged our expectations in the earlier part of 2024. We are pleased with the gains made in the fourth quarter, and we plan to maintain that momentum as we head into 2025, as we believe self-funded growth represents an attractive and durable option to drive shareholder returns. Turning to our full year results, as shown on Slide 9. 2024 consolidated revenue was $729.6 million, a 3.4% increase over 2023. As Natalia said, revenue increased in all reported segments and across all industries served in 2024. This was led by strong performance in the aerospace and defense industry, which experienced a substantial revenue increase of 13% on a full year basis to $87 million. Our core energy industries and infrastructure industry revenue were also up in 2024 over '23. Full year gross profit increased to $213.1 million, up 4.6% as compared to the prior year, with gross profit margin expanding 30 basis points. The increase in gross profit margin to 29.2% was primarily due to the strong growth in our aerospace and defense industry business, which offers a higher-than-average margin. SG&A…

Thank you. Thank you, Ed. Given my recent appointment as CEO, effective January 1 of this year, the senior leadership team and I have been and we will continue to review our entire business portfolio with a focus on continuing to grow adjusted EBITDA and earnings per share as well as continuing to improve our margins. Additionally, the U.S. dollar to euro exchange rate strengthened since we set our budget and this unanticipated foreign currency exchange risk should unfavorably impact actual revenue translation in '25. We believe this FX risk will be essentially neutral on our adjusted EBITDA margin and other profitability metrics. Nevertheless, we will be assessing this FX risk as well as potential impact of the recently announced U.S. foreign tariffs on our business and financial results for fiscal 2025. And once this assessment is complete, we anticipate releasing guidance for fiscal 2025 with our goal to continue driving profitable growth, margin expansion and increasing EPS. There are a few segments and end markets that I am most excited about. Our suite of industrial, IoT, its connected digital software and data analytics being one of them. This data evaluation journey with our customers dates back to our founding as a company, and we will further leveraging this competency for growth in the future. Our PCMS software and service offering remains at the core of our OneSource application. We will also continue with our long-term strategy of increased investments in solutions for aerospace and defense industries at our in-laboratory testing locations, and we will further expand our service offerings to include more additive manufacturing and mechanical work beyond quality inspection and testing. We will also continue to expand our scope of work in private space industry as a result of robust demand for our Non-Destructive and Destructive Testing Services…

Certainly. [Operator Instructions] Our first question will be coming from John Franzreb of Sidoti & Company. Your line is open, John.

Good morning everyone, and thanks for taking the questions. Natalia, welcome aboard. I'd like to start the first question directly to you. You mentioned in your prepared remarks that you not only return facilities, but you met with major customers. I'm curious what kind of feedback you got from customers, about their perception of MISTRAS, and what they can do better?

Super encouraged with the positive feedback that we're hearing from the customers, and in fact they are really excited about our - the complete suite of our offerings. When we are talking about the entire solution, for integrity and asset performance management, and I'm starting with the software analytics, engineering services, testing, inspection. So there's so much that we can do to unlock the value of our offerings. So the customers are really excited about that.

Good, good to hear. And I guess Ed, this might be more directed towards you. The receivable issue that you had in the past, is that fully behind you, or is there still repricing of some contracts that need to be done?

[technical difficulty] over the course of the year. So yes, we believe that's well at hand and that's become a very top priority for management to focus on. So we feel good about that heading into '25.

Fair enough. I got to admit everybody, that didn't come through entirely clear on my end, but that might be my issue only. The next question I got is what are your thoughts about the upcoming turnaround season, relative to last year's first half, strong one, is it a tough comp still, or are you any kind of qualitative impact, or review of the turnaround season would be helpful?

Please remain on your line.

I'm sorry, are you still hearing us? Okay.

That is much, much better.

Oh, sorry. John, are - you hearing us? Okay, so the operator interrupted us here, you hear me okay, John?

Yes, but I got. The last two responses were fairly broken up.

Oh, sorry. Hopefully you're hearing me okay clearly now?

Much, much better. Yes, sir.

Okay. Sorry about that. Yes. So we expect '25 to be a normalized year in the turnaround. Oil and gas and turnarounds in particular. As you just pointed out, '24 was sort of lopsided. The front end was very strong. The spring turnaround season was rather robust. The fall turnaround season we just completed was not. Expect an inverse of that in '25. We see that the spring will be weaker, the fall will be more robust. So year-over-year it's normalized. The volume is relatively similar, but it does fall into those two halves. So '25 will be essentially the opposite effect as we saw in '24.

That makes perfect sense. Thanks for the color. And one last question. I'll get back into queue. Can you talk a little bit about data analytics? From what I recall, there were some delays in the second half of last year that were pushing jobs into 2025, that would have implied double-digit growth. Is that still the case? Are there additional delays that we should be cognizant of?

Our data analytical solutions business revenue was indeed down in '24. And this is due to the timing of certain projects, and implementation delays. So, but we will have investments going into the business, and we do anticipate growth in '25. In particular, PCMS continues to be in demand, due to the heavier focus on production efficiencies, and the capital discipline that is in this oil and gas segment. So this - Jim Redmon, who leads our data analytical business, is very optimistic about growth prospects. And at this point, PCMS software has been implemented more than 50% of oil of the U.S. based refineries and market share continues to grow. So we are very optimistic.

Okay. Thanks for taking my questions. I'll get back into queue.

Thank you.

And one moment for our next question. Our next question will be coming from Mitchell Pinheiro of Sturdivant & Company. Your line is open, Mitchell.

Yes. Hi, good morning. So a question. Just curious how did tariffs affect your business? Excuse me? We're having trouble hearing you on our end. If you could, something is wrong with the communication here.

I'm sorry about that, Mitch. We're on the same exact line. We were just speaking their prepared remarks. We apologize for that. Any better, any better right now?

Right now, better. Yes, that's better right now.

Okay. Sorry about that, yes.

Yes, a set of questions…?

Okay, sorry, sorry. I'll re-answer that. Sorry, the microphone they have switched in the room here. We apologize for that. Yes, on the tariff question, too early to tell. We are assessing that, but no, no impact at the moment. We're studying however, what the tariffs might mean to our business.

So. Okay. I mean like, so not putting out guidance, because there is some uncertainty here. I get it. But it's like, if it's not going to have that much of an impact, I don't really understand the connection?

Mitch, I'll jump in on that. As Natalia said, she and her team are evaluating all our lines of business, and we felt it was appropriate for her to take a little time to do that. And once she has had time to look over everything, we will be releasing guidance. It's not predicated solely on the tariffs.

Okay. Okay. Got it. Understood. And that, just in the oil and guest business, midstream's been down for three straight quarters. And I always kind of thought midstream was going to be a more, steadier type of revenue line for you guys. Can you talk a little bit about what's going on the midstream?

Please stand.

Hello?

Please stand by. Your conference will resume momentarily. Ladies and gentlemen, please stand by.

I repeat my answer. So the midstream subcategory, did experience some project delays in 2024, but we do expect growth in 2025. There are some regulatory changes that are pending, driving stricter pipeline integrity requirements, and increased demand for the advanced inline inspection technologies that we offer. So that's what leads us, to believe that we will have improved performance in midstream.

Okay. Thank you for that. And then can you. I'd love a little - learn a little bit more about the data analytical solutions segment. I mean, it's obviously a big growth focus, but sales were down last year. They were down in the fourth quarter. I'm curious as to why, and what type of strategic changes, or if there's any strategy changes being made?

There is no strategic changes per se in data analytics. We continue investments in that. As I mentioned before, there are some delays in implementation, but we continue invest in this sector of our business. What is interesting is really that we now have very collaborative sales efforts offering the entire suite of our solutions, starting with the software, digital software, and offering engineering services, the implementation and then going into the inspection testing, and also followed by some of our products, like monitoring technology. So that's what I think differentiates us and as I mentioned, we already in the 50% of U.S. refineries. So we're certainly not changing our strategy. The idea is to really extend it, beyond oil and gas industry as well as the extent our market share within oil and gas industry.

Okay. And then, just one more question and I get back in the queue. But on the SG&A side, is like the fourth quarter level, the sustainable level in dollars or - was there some one-time help you had in the fourth quarter? Can you talk about that please?

No, Mitch, that's a good question. That's a relatively normal level to annualize going forward. So yes, we have internalized this Project Phoenix discipline into our cost control, cost recalibration. So yes, that's a relatively good base, to start for modeling forward. We intend to keep very tight controls on overhead up in cost of goods sold, as well as down in SG&A. So yes, that's a good run rate exiting the year with SG&A.

Okay. All right, well thank you. I appreciate the answers.

Thank you, Mitch.

Okay. And I'm showing no further questions at this time. I would now like to turn the call back to Manny for closing remarks.

Thank you, operator. And thank you everyone for joining this important call today, and also for your continued interest in MISTRAS. With the baton now officially passed to Natalia, she will be providing you with an update on our business, and progress achieved towards our ongoing initiatives, on our next earnings call. As I stated, I am very confident in her abilities, to succeed me as Chief Executive Officer, leading MISTRAS going forward. And I will continue to do my best, to honor the legacy that Dr. Sotirios Vahaviolos built by being a steward of MISTRAS going forward, with a focus on continuing to improve shareholder value. I believe we have an extremely bright future ahead of us with our invigorated executive team, who will lead MISTRAS for years to come, delivering improved results, and generating enhanced value for our shareholders. Safety and asset integrity will remain our core mission and purpose.

And this concludes today's conference call. Thank you for participating. You may now disconnect.