Sign in

You're signed outSign in or to get full access.

MG

Mistras Group, Inc. (MG)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered record Adjusted EBITDA of $24.1M with margin expanding 130 bps to 13.0% on improved mix and efficiencies, while revenue fell 2.3% y/y to $185.4M and was effectively flat after lab consolidations .
  • Non-GAAP diluted EPS was $0.19 vs S&P Global consensus of $0.205*; revenue was $185.4M vs $186.4M*; GAAP diluted EPS was $0.10, reflecting $3.0M reorganization costs and FX loss . Values retrieved from S&P Global.
  • Free cash flow was -$16.0M for the quarter, driven by ERP-related invoicing delays and working capital timing; management expects normalization in H2 2025 and targets year-end leverage below 2.5x (TTM leverage just under 2.75x at 6/30) .
  • Outlook: No formal FY25 revenue guidance; company now expects FY25 Adjusted EBITDA to exceed FY24 (raised from “meet/exceed” in Q1), supported by robust fall turnaround backlog and continued Data Solutions growth (PCMS) .

What Went Well and What Went Wrong

What Went Well

  • Record Q2 Adjusted EBITDA of $24.1M (+8.9% y/y), with gross margin expanding 200 bps to 29.1% on improved business mix and operating efficiencies .
  • International segment showed strong organic growth, and aerospace & defense and industrials grew mid-single digits y/y; PCMS within Data Solutions grew ~30% y/y in Q2 per management commentary .
  • CEO emphasized structural cost actions and operational discipline: “These are not just short-term cost calibrations, they are structural improvements… and help ensure operating leverage through all business cycles” .

What Went Wrong

  • GAAP net income and GAAP diluted EPS declined y/y ($3.0M, $0.10 vs $6.4M, $0.20), impacted by $3.0M reorganization costs and a $2.8M FX loss in SG&A .
  • Oil & gas softness (customer deferrals/project delays) and continued pressure in midstream; management replaced leadership and is pursuing a turnaround, but acknowledged recent competitive pricing challenges .
  • Free cash flow and operating cash flow were negative in Q2 due to ERP cutover-related invoicing delays; unbilled/billed AR increased with expectation of second-half normalization .

Financial Results

Metric (USD)Q4 2024Q1 2025Q2 2025
Revenue ($MM)$172.7 $161.6 $185.4
Gross Profit ($MM)$51.3 $40.9 $53.9
Gross Margin %29.7% 25.3% 29.1%
Adjusted EBITDA ($MM)$20.9 $12.0 $24.1
GAAP Diluted EPS$0.17 ($0.10) $0.10
Diluted EPS excl. Special Items (non-GAAP)$0.24 ($0.01) $0.19

Segment revenue and gross profit (Q2 y/y):

SegmentQ2 2024 Revenue ($MM)Q2 2025 Revenue ($MM)Q2 2024 Gross Profit ($MM)Q2 2025 Gross Profit ($MM)
North America$156.4 $148.0 $39.9 $40.4
International$34.3 $39.1 $9.9 $12.3
Products & Systems$3.4 $2.7 $1.6 $1.3
Corporate & Eliminations($4.3) ($4.4) $0.0 ($0.0)

Industry mix (Q2 y/y selected):

IndustryQ2 2024 Total ($MM)Q2 2025 Total ($MM)
Oil & Gas$109.3 $102.8
Aerospace & Defense$22.3 $24.0
Industrials$18.3 $19.6
Power Gen & Transmission$9.0 $11.8

KPIs and balance sheet:

KPIQ2 2025
Operating Cash Flow ($MM)($9.1)
Free Cash Flow ($MM)($16.0)
Gross Debt ($MM)$189.4
Net Debt ($MM)$168.8
TTM Leverage (Bank-defined)~2.75x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Adjusted EBITDAFY 2025Meet or exceed FY24 Exceed FY24 Raised
RevenueFY 2025Not provided Not provided Maintained
Effective Tax RateFY 2025~25% ~25% Maintained
Leverage Ratio (TTM)FY 2025 year-endN/ABelow 2.5x expected New disclosure

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Data Solutions / PCMSImplementation delays, 2025 growth expected; >50% refinery penetration PCMS Mobile launched; 6% growth; SaaS/mobile adoption PCMS ~30% growth; users conference; digital twin use cases; AI roadmap Improving
Oil & Gas TurnaroundsInverse seasonal pattern expected for 2025 (weaker spring, stronger fall) Weaker spring; backlog to recover ~$6.5M Robust fall turnarounds awarded; line-of-sight backlog Improving H2
MidstreamDown in Q4; regulatory tailwinds expected Temporary pause; regulatory-driven demand later in year Competitive pricing pressure; leadership changes; turnaround plan Mixed
Tariffs/MacroAssessing impact; no guidance pending portfolio review Customer-driven uncertainty; projects pushed right Ongoing assessment; demand intact but timing volatile Neutral to cautious
ERP ImplementationN/ACloud SaaS cutover; invoicing delays; expect normalization ERP delays drove AR buildup and FCF drag; normalization expected Improving
Power & Data CentersN/AEarly focus on diversification Double-digit power growth; data center wins preventing costly repairs Improving
Cost Actions/StructureProject Phoenix momentum Cost calibration; reorg costs in Q1 Structural improvements, lab closures, reorg costs to moderate Improving margins

Management Commentary

  • CEO: “Record Adjusted EBITDA of $24.1 million… reflects the strength of our operating model, disciplined cost management, and continued focus on driving efficiencies… structural improvements designed to… ensure operating leverage through all business cycles” .
  • CEO on customer engagement: shifting from transactional to strategic partnerships; integrated, data-enabled solutions across full portfolio (field, lab, products, analytics) .
  • CFO: Q2 revenue “in line with analyst consensus” after adjusting for lab consolidation; gross margin +200 bps; Adjusted EBITDA margin +130 bps; SG&A up from FX loss; ERP invoicing delays impacted cash flow but expected to normalize; leverage target <2.5x by year-end .

Q&A Highlights

  • Revenue guidance: No formal FY25 revenue guide given macro/tariff uncertainty; focus on exceeding FY24 Adjusted EBITDA .
  • Oil & gas: Strong visibility into fall turnarounds and embedded run-and-maintain work; midstream remains challenged by pricing competition, with leadership changes and investment to regain share .
  • Data centers/power: High demand; Mistras’ NDT and predictive analytics solutions directly support uptime; customer case studies evidencing avoided costly repairs .
  • ERP/timing: Cloud ERP cutover caused invoicing delays and WIP buildup; AR cycle improving with expected FCF normalization in H2 .
  • Reorganization costs: Elevated in H1; expected to moderate in H2 as footprint recalibration actions subside .

Estimates Context

  • Q2 2025 consensus vs actual:
    • Revenue: $186.4M* consensus vs $185.4M actual (slight miss) . Values retrieved from S&P Global.
    • Primary EPS (normalized): $0.205* consensus vs $0.19 actual (slight miss); GAAP diluted EPS $0.10 . Values retrieved from S&P Global.
    • EBITDA: $20.1M* consensus vs $19.1M* actual; company reported Adjusted EBITDA $24.1M (different definition; non-GAAP beat prior-year and internal record) . Values retrieved from S&P Global.
  • Implications: Modest top-line/normalized EPS undershoot offset by stronger margins and Adjusted EBITDA execution; estimates likely to adjust upward for second-half margin trajectory given backlog, ERP normalization, and Data Solutions momentum .

Key Takeaways for Investors

  • Margin-led story: Mix and operational efficiencies drove 200 bps gross margin expansion and record Q2 Adjusted EBITDA; structural cost actions should support sustained margin strength into H2 .
  • Cash flow recovery catalyst: ERP invoicing delays are transitory; expect AR cycle normalization and improved FCF in H2; leverage targeted <2.5x by year-end .
  • H2 setup: Robust fall turnaround backlog and improving aerospace/industrials mix underpin second-half performance; watch midstream pricing recovery .
  • Data Solutions flywheel: PCMS/mobile adoption, digital twin/AI roadmap, and SaaS connectivity provide recurring revenue and cross-sell leverage across services .
  • Risk checks: Tariff/macro timing and FX translation can pressure revenue; reorg costs should moderate; monitor execution on midstream turnaround and ERP benefits .
  • Trading angle: Near-term catalysts include H2 margin/FCF normalization and Data Solutions updates; any confirmation of sustained backlog conversion and leverage below 2.5x could re-rate quality of earnings .
  • Longer-term thesis: Integrated asset integrity platform (field, lab, products, data) positions Mistras to benefit from power/data center build-outs, aerospace supply chain recovery, and digital transformation in energy infrastructure .

Values retrieved from S&P Global.*