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MG

Mistras Group, Inc. (MG)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was a soft quarter: revenue fell to $161.6M (-12.4% YoY) and gross margin compressed to 25.3%, driving GAAP diluted EPS to -$0.10; adjusted EBITDA was $12.0M, the second-highest first-quarter level in the past five years .
  • Results missed Wall Street consensus: revenue $161.6M vs $180.7M*, EPS -$0.10 vs $0.13*, EBITDA $12.0M vs $20.2M*; management cited weaker spring turnarounds and midstream softness, plus tariffs/macro uncertainty as key drivers .
  • No formal FY25 guidance; management expects FY25 adjusted EBITDA to meet or exceed FY24 and guided an ~25% effective tax rate, with fall turnarounds expected to recover ~$6.5M vs prior year .
  • Near-term catalysts: cost calibration and pricing discipline, PCMS/Data Solutions momentum (PCMS grew 6% YoY in Q1), and an easier Q2 comp; offset by tariffs-driven customer deferrals and A&D supply chain delays .

What Went Well and What Went Wrong

What Went Well

  • Cost discipline held: SG&A fell 1.7% YoY despite $0.9M adverse FX; overhead reclassified to cost of revenue improved transparency without impacting operating income/adjusted EBITDA comparability .
  • Cash generation improved: net cash from operations rose to $5.6M in Q1 (up $5.0M YoY) with near-breakeven free cash flow (-$0.2M) aided by working capital reductions .
  • Data Solutions momentum: “PCMS offering…delivered revenue growth of 6% this quarter,” with leadership launch of the unified MISTRAS Data Solutions brand to integrate software, analytics, and IoT .

Management quotes:

  • “We were nevertheless able to rapidly calibrate costs and expenses down…to preserve our operational metrics.”
  • “PCMS…is a key area of focus…we delivered revenue growth of 6% this quarter.”
  • “Adjusted EBITDA for the first quarter of 2025 was the second highest first quarter…over the last five years.”

What Went Wrong

  • Demand softness: oil & gas revenue declined $16.6M YoY (downstream and midstream weakness; spring turnarounds down $6.5M vs prior year) and A&D saw customer delays and supply chain disruptions .
  • Margin compression: gross profit fell to $40.9M and margin to 25.3%, impacted by revenue mix, despite a 30 bps gross margin improvement YoY cited in the release; adjusted EBITDA declined to $12.0M from $16.2M (prior year) .
  • Macro uncertainty: tariffs and trade policy changes prompted customers to pause/defers projects, affecting upstream/midstream and in-lab services demand timing .

Financial Results

Consolidated results vs estimates and prior periods

MetricQ3 2024Q4 2024Q1 2025 ActualQ1 2025 Consensus
Revenue ($USD Millions)$182.7 $172.7 $161.6 $180.7*
Diluted EPS ($USD)$0.20 $0.17 -$0.10 $0.13*
Gross Profit Margin %29.9% 29.7% 25.3% —
Adjusted EBITDA ($USD Millions)$23.29 $20.94 $12.04 $20.23* (EBITDA Consensus Mean)
Net Income ($USD Millions)$6.40 $5.28 -$3.17 —
Cash from Operations ($USD Millions)$19.36 $25.66 $5.65 —

Note: Values marked with * retrieved from S&P Global.

Significant surprises:

  • Revenue: $161.6M vs $180.7M* — bold miss (weaker spring turnarounds; midstream softness) .
  • EPS: -$0.10 vs $0.13* — bold miss (volume decline; reorg/other costs of $3.1M) .
  • EBITDA: $12.0M vs $20.2M* — bold miss (mix and demand timing; A&D delays) .

Segment revenues and gross profit (Q1 2025 vs Q1 2024)

SegmentRevenue Q1 2024 ($M)Revenue Q1 2025 ($M)Gross Profit Q1 2024 ($M)Gross Profit Q1 2025 ($M)
North America$150.35 $128.90 $35.25 $30.17
International$33.05 $33.21 $9.27 $9.09
Products & Systems$3.21 $3.09 $1.61 $1.62
Corporate & Eliminations-$2.16 -$3.59 $0.03 $0.02
Total$184.44 $161.62 $46.15 $40.89

Revenue by industry (Q1 2025 vs Q1 2024)

IndustryQ1 2024 ($M)Q1 2025 ($M)
Oil & Gas$113.17 $96.56
Aerospace & Defense$22.12 $20.40
Industrials$15.20 $18.57
Power Generation & Transmission$5.85 $4.65
Other Process Industries$11.90 $10.25
Infrastructure, Research & Engineering$6.59 $7.22
Petrochemical$4.34 $2.63
Other$5.28 $1.32

Oil & Gas sub-industry (Q1 2025 vs Q1 2024)

Sub-IndustryQ1 2024 ($M)Q1 2025 ($M)
Upstream$41.77 $40.25
Midstream$21.39 $15.81
Downstream$50.01 $40.51
Total$113.17 $96.56

Revenue by type (Q1 2025 vs Q1 2024)

TypeQ1 2024 ($M)Q1 2025 ($M)
Field Services$126.36 $110.18
Shop Laboratories$17.20 $15.03
Data Analytical Solutions$15.54 $13.98
Other$25.35 $22.43
Total$184.44 $161.62

KPIs and balance sheet

MetricDec 31, 2024Mar 31, 2025
Cash & Equivalents ($M)$18.32 $18.54
Gross Debt ($M)$169.65 $171.87
Net Debt ($M)$151.33 $153.34
Net Cash from Ops ($M, quarter)Q4: $25.66 Q1: $5.65
Free Cash Flow ($M, quarter)Q4: $20.82 Q1: -$0.18
Interest Expense ($M, quarter)Q4: $3.88 Q1: $3.32

Non-GAAP reconciliation highlights:

  • Net loss excluding special items: -$0.34M; diluted EPS excluding special items: -$0.01 .
  • Reorganization and other costs: $3.1M in Q1 2025; environmental expense: $0.54M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
FY2025 Formal GuidanceFY 2025None issued (portfolio under review) Not providing FY25 guidance due to tariffs/trade policy uncertainty and ongoing portfolio review Maintained: no formal guidance
Adjusted EBITDAFY 2025Targeting profitable growth; FY24 $82.5M baseline Expect FY25 adjusted EBITDA to meet or exceed FY24 Raised (directional)
Effective Tax RateFY 2025~25% anticipated for FY25 (Q4 call) ~25% anticipated; Q1 effective tax benefit was 26.9% Maintained
Turnaround Revenue TimingFY 2025Inverse ’25 pattern: weaker spring, stronger fall Expect to recover and exceed remaining 2025 turnaround revenue by ~$6.5M vs ’24 Clarified upward recovery
Capital AllocationFY 2025Priority to reduce debt with FCF Balance deleveraging with growth capex; leverage just under 2.5x; optionality on FCF Clarified

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
Oil & Gas turnarounds’24: robust spring, moderate fall; normalize in ’25 Weaker spring realized; expect stronger fall; turnaround gap ~$6.5M to be recovered Seasonal inversion confirmed
Midstream demandDown 3 straight quarters; regulatory changes expected to aid ’25 Unexpected softness; budget restrictions; anticipate catch-up later in year Near-term soft; recovery expected
Aerospace & DefenseStrong in ’24; higher-margin driver Customer delays/supply chain disruptions temporarily slowed demand Near-term pause, long-term constructive
Data Solutions/PCMS’24 delays; strong adoption in refineries; expect ’25 growth PCMS +6% YoY; brand launched consolidating data assets Re-accelerating
Tariffs/MacroAssessing FY25 impact Customers pausing/deferring projects; operating environment “challenging” Heightened uncertainty
FX translationStronger USD to EUR risk to revenue translation Adverse FX in SG&A ($0.9M); EBITDA margin neutral Neutral to margins
Pricing disciplineCommercial discipline and contract ROI focus Continued focus; some price pressure amid macro Ongoing discipline
Working capital/FCFQ4: strong OCF/FCF; debt paydown Q1 OCF improved $5.0M YoY; FCF near breakeven Improving vs prior year

Management Commentary

  • Strategic focus: “Leadership talent evaluation…cost base recalibration…growth strategies…delivering integrated solutions that leverage…data analytics and monitoring technologies.”
  • Product/tech: “Q1 2025 release of PCMS Mobile…connects inspection planning…mobile field execution and post-inspection analytics into unified workflow.”
  • Macro/tariffs: “We are closely monitoring potential industry headwinds…customers’ reactions to tariffs…changes to U.S. trade policy…impact on our global businesses.”
  • Outlook: “We expect our 2025 adjusted EBITDA achievement at least meet or exceed the adjusted EBITDA level achieved in 2024.”

Q&A Highlights

  • Tariffs/macro impact: Customers are pausing and deferring projects; direct tariff impact to MG limited, but supply chain/consumables and in-lab sourcing can cause stops/starts; longer-term reshoring may be positive .
  • Midstream: Regulatory-driven demand expected to catch up; Q1 weakness tied to budget restrictions; recovery later in year .
  • Pricing and contracts: Ongoing “commercial discipline” to achieve fair ROI; some price pressure amid macro .
  • Turnarounds/Q2 comp: Q2 comparisons are easier vs prior year; expect less volatility than Q1; plan to recover ~$6.5M turnaround revenue in H2 .
  • Taxes/leverage: Q1 effective tax benefit 26.9%; FY25 ~25% expected; leverage just under 2.5x with optionality on FCF .

Estimates Context

  • Consensus vs actual (S&P Global): revenue $180.7M* vs $161.6M, EPS $0.13* vs -$0.10, EBITDA $20.2M* vs $12.0M — broad misses across top line and profitability, reflecting demand timing and mix .
  • Coverage depth: # of estimates = 2 for both revenue and EPS*, suggesting lighter sell-side coverage and potentially larger forecast error bands*.
  • Implication: Models likely need to reflect weaker spring turnarounds, midstream softness, A&D delays, FX, and a more back-half weighted year; adjust margin assumptions for mix and reorg costs, while incorporating the EBITDA floor commentary .

Note: Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term setup: Material miss vs consensus on revenue/EPS/EBITDA and lack of formal FY25 guidance likely weigh on sentiment; watch Q2 print for evidence of comp normalization .
  • Back-half weighting: Management expects fall turnarounds to recover ~$6.5M and adjusted EBITDA to meet/exceed FY24 — monitor backlog conversion and midstream catch-up .
  • Cost actions intact: SG&A reductions and overhead reclassification provide transparency and sustained operating leverage; track reorg costs cadence and FX impacts .
  • Data Solutions lever: PCMS growth (+6% YoY) and Data Solutions brand launch reinforce a differentiated, integrated software/analytics/services value proposition .
  • A&D transitory issues: Supply chain delays weighed on Q1; integrated labs and accreditations position for recovery as production normalizes .
  • Balance sheet/FCF: Improved OCF and near-breakeven FCF in seasonally weak Q1, with leverage just under 2.5x; management balancing deleveraging with growth capex .
  • Trading lens: Stock may be sensitive to datapoints on tariff clarity, midstream regulation timing, and H2 turnaround schedules; execution on pricing discipline and margin mix in A&D/Data Solutions could drive estimate revisions .