Sign in

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

MG

Mistras Group, Inc. (MG)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered revenue of $195.5M (+7.0% YoY), gross margin expanded 300 bps to 29.8%, GAAP diluted EPS of $0.41, and record Adjusted EBITDA of $30.2M (+29.6% YoY). These results reflect favorable mix, lab closures, and efficiency improvements .
  • Results beat S&P Global consensus: revenue $195.5M vs $189.9M*, and non-GAAP EPS $0.46 vs $0.29*; Q2 was roughly in line on revenue and a slight EPS miss ($0.19 actual vs $0.205*) .
  • FY2025 guidance: revenue $716–$720M (essentially flat YoY after ~1% lab exits) and Adjusted EBITDA raised to $86–$88M (from “> $82.5M” previously); management guides to positive FCF in Q4 2025 and normalization in 1H 2026 .
  • Portfolio and demand signals: double-digit growth in Aerospace & Defense, Industrials, Infrastructure, and Power Generation; PCMS data solutions grew ~25% YoY; international segment +5.5% YoY; catalysts include beat/raise, margin expansion, and improving cash conversion into Q4 .

Note: *Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Broad-based growth: revenue up across five largest industries, with double-digit gains in Aerospace & Defense, Industrials, Infrastructure, and Power Generation; CEO: “We have the foundation, technical know-how… and the people to win” .
  • Margin execution: gross margin +300 bps to 29.8% and Adjusted EBITDA margin +270 bps to 15.4%, driven by mix and operational efficiencies; CFO cites “proactive cost management” and higher-margin shift .
  • Data solutions momentum: PCMS grew nearly 25% in Q3 (second consecutive quarter of strong growth), underpinning oil & gas end-market growth without relying on field services alone .

What Went Wrong

  • Cash flow/working capital: YTD free cash flow was -$20.9M on AR build tied to ERP conversion; Q3 FCF -$4.9M, with net debt rising to $174.5M .
  • Reorganization costs: $1.8M in Q3 as portfolio pruning and overhead reductions continued; environmental expense also recorded .
  • Service mix optics: field services revenue declined 1% YoY in Q3 despite oil & gas strength, creating modeling confusion; management clarified “Other” category includes labs doing both field and in-lab work and highlighted PCMS’s non-field contribution .

Financial Results

Quarterly Progression (Q1 → Q3 2025)

MetricQ1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$161.6 $185.4 $195.5
GAAP Diluted EPS ($)-$0.10 $0.10 $0.41
Diluted EPS Excl. Special Items ($)-$0.01 $0.19 $0.46
Gross Margin (%)25.3% 29.1% 29.8%
Adjusted EBITDA ($USD Millions)$12.0 $24.1 $30.2

Q3 YoY Comparison

MetricQ3 2024Q3 2025
Revenue ($USD Millions)$182.7 $195.5
GAAP Diluted EPS ($)$0.20 $0.41
Gross Margin (%)26.8% 29.8%
Adjusted EBITDA ($USD Millions)$23.3 $30.2

Results vs S&P Global Consensus

MetricQ2 2025 Consensus*Q2 2025 ActualQ3 2025 Consensus*Q3 2025 Actual
Revenue ($USD Millions)$186.429*$185.405 $189.943*$195.549
Primary EPS ($)$0.205*$0.19 $0.29*$0.46

Note: *Values retrieved from S&P Global.

Segment/Industry Revenue Breakdown

IndustryQ3 2024 ($USD M)Q3 2025 ($USD M)
Oil & Gas$99.5 $105.7
Aerospace & Defense$21.9 $24.2
Industrials$19.5 $22.6
Power Generation & Transmission$11.7 $14.5
Other Process Industries$11.8 $8.8
Infrastructure, Research & Engineering$8.7 $10.6
Petrochemical$4.0 $3.7
Other$5.6 $5.5
Total$182.7 $195.5

KPIs (Q3 2025)

KPIValue
Cash from Operations ($USD M)$4.462
Free Cash Flow ($USD M)-$4.944
Gross Debt ($USD M)$202.270
Net Debt ($USD M)$174.465
Accounts Receivable, Net ($USD M)$174.787
Adjusted EBITDA ($USD M)$30.174
Weighted-Average Diluted Shares (M)31.880

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD M)FY 2025Not provided (Q2: no full-year guidance) $716–$720; essentially flat YoY after ~1% lab exits New range introduced
Adjusted EBITDA ($USD M)FY 2025“Exceed 2024 level of $82.5M” $86–$88 Raised
Free Cash FlowQ4 2025 / 1H 2026Normalize “in coming quarters” (Q2) Positive FCF projected in Q4 2025; normalization in 1H 2026 Clarified timing
Effective Tax Rate (%)FY 2025~25% (Q2 commentary) ~25%; Q3 ~22% due to discrete items Maintained FY; Q3 discrete benefit

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
AI/Data Centers & Power InfraEarly focus on integrated data solutions; PCMS Mobile launch Increased bid activity; strategy to diversify into data centers and power gen; strong power growth (+31%) New wins (Bechtel Hanford project); continued momentum, teams dedicated to data centers; power demand “unprecedented” Accelerating
Supply ChainA&D delays from supply chain constraints Ongoing customer volatility; pricing discipline A&D backlog visibility; capacity expansion in labs; joint customer-funded CapEx Improving execution
Tariffs/MacroCustomer pauses; uncertainty impacting timing Continued assessment; no FY revenue guidance; focus on EBITDA Macro acknowledged; FY revenue range given; portfolio diversification Stabilizing visibility
Product/PCMS PerformancePCMS +6% YoY; PCMS Mobile launch PCMS +30% YoY; strong user conference; mobile adoption PCMS ~+25% YoY; second consecutive strong quarter; lever for cross-sell Sustained growth
ERP/Working CapitalNoted operational focus ERP cutover in April; AR build; FCF negative; normalization expected Unbilled AR down QoQ; billed AR up; positive FCF Q4; normalization 1H 2026 Improving conversion
Lab Network & ReorgLeadership additions; lab services optimization Lab closures hurt revenue but helped margins; reorg costs elevated Continued pruning; Q3 reorg costs $1.8M; margins expanded Ongoing discipline

Management Commentary

  • CEO on diversified growth and operating leverage: “Quarterly Adjusted EBITDA of $30.2 million, up nearly 30% year-over-year… double-digit growth in Aerospace & Defense, Industrials, Infrastructure, and Power Generation” .
  • CFO on margin drivers and reclassification: “Gross profit margin expanded by 300 basis points… attributable to favorable business mix and operating efficiencies… reclassification has no impact on operating income, net income or adjusted EBITDA comparability” .
  • CEO on strategic priorities (Vision 2030): “Expand integrated solutions… diversify into new industries… build operational leverage… empowering our technicians with digital tools” .
  • CFO on cash flow trajectory: “Unbilled AR decreased vs June 30… anticipate positive free cash flow generation in Q4 2025… normalize free cash flow in the first half of 2026” .

Q&A Highlights

  • Oil & Gas subcategory reporting removed; downstream up ~14% in a strong turnaround season; LNG strong; midstream/upstream low single-digit growth, reflecting customer overlap across subcategories .
  • Field services appeared down despite oil & gas strength due to mix and PCMS (data solutions) not being classified as field; “Other” includes labs doing both field and in-lab .
  • A&D lab capacity: hub-and-spoke expansion, adding welding accreditation, machining and UT capabilities; some CapEx jointly funded by customers to address backlogs .
  • Q4 outlook: seasonal moderation vs Q3 but YoY revenue growth and moderate EBITDA growth expected; no revenue pulled forward into Q3 .
  • Free cash flow: focus on AR reduction, tools/structure/accountability; positive in Q4 and normalization in 1H 2026 .

Estimates Context

  • Q3 beat: revenue $195.5M vs $189.9M*, and non-GAAP EPS $0.46 vs $0.29*; highlighted operating leverage and mix improvements behind the beat .
  • Q2 in line/mixed: revenue slightly below consensus ($185.4M actual vs $186.4M*) and EPS $0.19 vs $0.205*; management emphasized gross margin expansion and Adjusted EBITDA record for Q2 .
  • Implications: Sell-side likely raises FY EBITDA and Q4 run-rate assumptions; revenue estimates may remain cautious given lab exits and seasonal normality in Q4 .

Note: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Broad-based beat and guidance raise: Strong Q3 print with gross margin and EBITDA expansion, plus FY EBITDA raised to $86–$88M—key catalyst supportive of multiple expansion .
  • Mix shift and data enablement: PCMS growth and integrated solutions strategy are driving higher-margin revenue and cross-sell; expect continued contribution independent of field services seasonality .
  • A&D capacity and customer co-investment: Hub-and-spoke lab expansions and customer-funded CapEx target backlog relief—sustaining high-margin growth vectors into 2026 .
  • Cash conversion improving: ERP-related AR issues are being remediated; management guides to positive FCF in Q4 and normalization by 1H 2026—deleveraging potential near term .
  • Portfolio discipline: Ongoing reorg and lab exits weigh on revenue optics but support margin/EBITDA; investors should prioritize EBITDA/FCF over headline revenue .
  • Near-term trading: Q3 beat plus FY EBITDA raise and Q4 positive FCF outlook are positive sentiment drivers; watch for Q4 seasonality and cash collection cadence .
  • Medium-term thesis: Diversification into data centers/power, PCMS/mobile adoption, and A&D capacity expansion underpin structurally higher margins and recurring revenues .

Additional Q3 2025 Press Releases of Note

  • Awarded NDT services for Bechtel on the Hanford Vit Plant Project, advancing diversification into infrastructure and nuclear-related remediation .