Q1 2024 Mistras Group Inc Earnings Call
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Brianna: Thank you for joining our Mistras Groups conference call for its first quarter ended March 31, 2024. My name is Brianna, and I'll be your event manager today.
Thank you for joining our Mistras group's conference call for its first quarter ended March 31st 2024 My.
Brianna: My name is brianna and I'll be your event manager today, we'll be accepting questions after management's prepared remarks.
Brianna: We'll be accepting questions after management's prepared remarks. Participating on the call for Mistras will be Manny Stamatakis, the company's Chairman of the Board and Interim President and Chief Executive Officer, and Ed Prajzner, Senior Executive Vice President and Chief Financial Officer. I want to remind everyone that remarks made during this conference call will include forward-looking statements. The company's actual results could differ materially from those projected. Some of those 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.
Brianna: Participating on the call for Mistras will be many stem attack is the company's chairman of the board and interim President and Chief Executive Officer.
Brianna: And Ed Eisner, Senior Executive Vice President and Chief Financial Officer.
Brianna: I want to remind everyone that remarks made during this conference call will include forward looking statements. The company's actual results could differ materially from those projected.
Brianna: Some of those 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.
Brianna: The discussion in this conference call will also include certain financial measures that were not prepared in accordance with US GAAP. Reconciliation of these non-US GAAP financial measures to the most directly comparable US GAAP financial measures can be found in the tables contained in yesterday's press release and in the company's related current report on Form 8K. These reports are available on the company's website in the Investor section and on the SEC's website.
Brianna: The discussion in this conference call will also include certain financial measures that were not prepared in accordance with the U S. G. A a P reckon.
Brianna: A reconciliation of these non U S. G. A a P financial measures to the most directly comparable U S. G. A a P financial measures can be found in the tables contained in yesterday's press release and in the company's related current report on form 8-K.
Brianna: These reports are available at the company's website in the investors section and on the Sec's website.
Manuel N. Stamatakis: I will now turn the conference over to Manny Stamatakis.
Brianna: I will now turn the conference over to Manny stand Metaxas.
Manuel N. Stamatakis: Good morning, everyone. Thank you for joining us today. The first quarter was a strong start to the year, as we continue to execute on our key financial, operational, and strategic initiatives. In particular, we achieved outstanding success in our Project Phoenix program, with adjusted EBITDA of 55% compared to the prior year. Revenue was up nearly 10%, primarily due to the strong spring turnaround activity in the oil and gas industry and continued expansion in our aerospace and defense industry. Additionally, our improved commercial focus provided the benefit of the successful implementation of strategic price increases, which consequently contributed to improved gross margin. Selling general and administrative expenses were reduced on both a sequential and year-over-year basis.
Manuel N. Stamatakis: Good morning, everyone.
Manuel N. Stamatakis: And we announced the hiring of a chief transformation officer whose primary focus will be on sustaining the momentum generated by Project Phoenix to further improve operating levels. Consequently, I am once again reiterating our expectation that fiscal 2024 adjusted EBITDA will be one of our all-time high performance years. While still early in the process, this is our second consecutive quarter of strong top and bottom line growth. With each successive quarter, we are gaining increasing confidence that the strategy and direction that emerged from our refocus in 2023 has put us on a trajectory to achieve record results this year and to maintain steady growth into 2025 and beyond. Let me first share some of my thoughts on the quarter, focusing on the objectives I have been outlining for you and the progress that we are making on those initiatives.
Speaker Change: Thank you for joining us today.
Manuel N. Stamatakis: The first quarter was a strong start to the year as.
Manuel N. Stamatakis: As we continue to execute on our key financial operational and strategic initiatives.
Manuel N. Stamatakis: In particular, we achieved outstanding success in our project Phoenix program.
Manuel N. Stamatakis: With adjusted EBITDA up 55% compared to the prior year.
Manuel N. Stamatakis: I am very pleased with our top line-up, nearly 10%, with our two largest end markets, oil and gas, and aerospace and defense, all up double digits year over year. This success thus far can be attributed to our new commercial focus, which we expected to drive organic growth this year and which has, in fact, materialized, in the oil and gas market, which was up 14.7%. We benefited from strong turnaround activity in the quarter, both domestically and internationally. This included growth in all three subsidiary sub-industries within oil and gas, of up, mid, and down.
Manuel N. Stamatakis: Revenue was up nearly 10%.
Manuel N. Stamatakis: Primarily due to the strong spring turnaround activity in the oil and gas industry.
Manuel N. Stamatakis: And continued expansion in our aerospace and defense industry.
Manuel N. Stamatakis: Additionally, our improved commercial focus provided the benefit from the successful implementation of strategic price increases.
Manuel N. Stamatakis: Which consequently contributed to improved gross margin.
Manuel N. Stamatakis: Selling general and administrative expenses were reduced on both a sequential and.
Manuel N. Stamatakis: Year over year basis.
Manuel N. Stamatakis: And we announced the hiring of a chief transformation officer, whose primary focus will be on sustaining the momentum generated by project Fenix.
Manuel N. Stamatakis: To further improve operating leverage.
Manuel N. Stamatakis: Consequently, I am once again reiterating our expectation that fiscal 2024, adjusted EBITDA will be one of our all time high performance years.
Manuel N. Stamatakis: While still early in the process. This is our second consecutive quarter of strong top and bottom line growth.
Manuel N. Stamatakis: With each successive quarter, we are gaining increasing confidence.
Manuel N. Stamatakis: But the strategy and direction that emerged from our refocus in 2023.
Manuel N. Stamatakis: Has put us on a trajectory to achieve record results this year and to maintain steady growth into 2025 and beyond.
Manuel N. Stamatakis: Yeah.
Manuel N. Stamatakis: Last quarter, I mentioned how we have been working closely with our customers to obtain needed price increases to offset cost increases we are seeing, and I can say that this initiative clearly contributed to our first quarter growth in both revenue and gross profit. I want to thank our customers for working with us to obtain these necessary increases. Oil and gas will remain an important market for Mistras, and it is our intention to improve performance by making sure we are getting appropriate returns for the value we provide through both price increases and project selectivity. Aerospace and defense revenue was up nearly 19 percent, reflecting strong end market demand.
Manuel N. Stamatakis: Let me first share some of my thoughts on the quarter focusing on the objectives I had been outlining for you and the progress that we're making against those initiatives.
Manuel N. Stamatakis: In particular, I would note that our commercial aerospace business continues to expand and is back to pre-COVID levels within North America, and our private space business is also growing, as we expand the breadth of services provided to our customers in this market. We plan to continue to make strategic capital expenditures in these higher-margin and most important businesses to accelerate their growth. Our data analytical solution businesses experienced some project delays that pushed back some revenue out into later in the year.
Manuel N. Stamatakis: All of the underlying fundamentals are on track, and we expect data analytical solutions to generate strong, high-margin growth over the balance of the year in line with their 2024 targets. We will also continue to invest capital to grow this strategic area. As part of our goal to better leverage our growth, our first quarter bottom line grew significantly faster than the top line. Profitability benefited from a reduction in both direct costs and overhead expenses, mostly attributed to our Project Phoenix activities, therefore causing operating costs to fall and margins to rise.
Manuel N. Stamatakis: I am very pleased with our top line up nearly 10%.
Manuel N. Stamatakis: With our two largest end markets oil and gas and aerospace and defense all up double digits year over year.
Manuel N. Stamatakis: This success, thus far can be attributed to our new commercial focus.
Manuel N. Stamatakis: Which we expected to drive organic growth this year.
Manuel N. Stamatakis: And which has in fact materialize.
Manuel N. Stamatakis: And the oil and gas market, which was up 14, 7%.
Manuel N. Stamatakis: We benefited from strong turnaround activity in the quarter.
Manuel N. Stamatakis: Both domestically and internationally.
Manuel N. Stamatakis: This included growth in all three subsidiaries sub industries within oil and gas as a.
Manuel N. Stamatakis: Up mid and downstream.
Manuel N. Stamatakis: Last quarter I mentioned, how we have been working closely with our customers in obtaining needed price increases to offset cost increases we are seeing.
Manuel N. Stamatakis: And I can say that this initiative clearly contributed to our first quarter growth in both revenue and gross profit.
Manuel N. Stamatakis: I want to thank our customers for working with us to obtain these necessary increases.
Manuel N. Stamatakis: Oil and gas will remain an important market for Mrs. Jos.
Manuel N. Stamatakis: And it is our intention to improve performance.
Manuel N. Stamatakis: By making sure we're getting appropriate returns for the value we provide through both price increases and project selectivity.
Manuel N. Stamatakis: Aerospace and defense revenue was up nearly 19%, reflecting strong end market demand.
Manuel N. Stamatakis: In particular I would note that our commercial aerospace business continues to expand.
Manuel N. Stamatakis: And is back to pre COVID-19 levels within North America.
Manuel N. Stamatakis: And our private space business is also growing.
Manuel N. Stamatakis: As we expand our breadth of services provided to our customers in this market.
Manuel N. Stamatakis: We plan to continue to make strategic capital expenditures and these higher margin.
Manuel N. Stamatakis: And most important businesses to accelerate their growth.
Manuel N. Stamatakis: Our data analytical solution businesses experienced some project delays.
Manuel N. Stamatakis: That pushed back some revenue out into later in the year.
Manuel N. Stamatakis: All of the underlying fundamentals are on track.
Manuel N. Stamatakis: And we expect data analytical solutions to generate strong high margin growth over the balance of the year in line with their 2024 targets.
Manuel N. Stamatakis: We will also continue to invest capital to grow this strategic area.
Manuel N. Stamatakis: And as part of our goal to better leverage our growth our first quarter bottom line grew significantly faster than the top line.
Manuel N. Stamatakis: Profitability benefited from a reduction in both direct costs and overhead expenses, mostly attributed to our project Phoenix activities.
Manuel N. Stamatakis: Therefore, causing operating costs to fall in margins to rise.
Manuel N. Stamatakis: The net result was a significant improvement in operating leverage, leading to the company's best-ever first-quarter adjusted earnings, and while free cash flow lagged somewhat due to an increase in working capital related to the timing of customer invoicing, we still expect at least $34 million of free cash flow in fiscal 2024.
Manuel N. Stamatakis: The net result was a significant improvement in operating leverage leading to the company's best ever first quarter adjusted EBITDA.
Manuel N. Stamatakis: And while free cash flow lagged somewhat due to an increase in working capital related to timing of customer invoicing.
Manuel N. Stamatakis: We still expect at least $34 million of free cash flow in fiscal 2024.
Edward J. Prajzner: There have been other significant actions taken and progress made in the first quarter. First, we have brought on Haney Hammond as Executive Vice President and Chief Transformational Officer. And he managed our Project Phoenix Initiative when he worked at Alex Park, and he previously worked for PwC Consulting, Baker Hughes, and GE. Haney will report directly to the CEO and is responsible for completing and improving upon the transformation plan arising from Project Phoenix, which initially identified a projected gross annual run rate of $47 million adjusted EBITDA benefit to be achieved by the end of 2025.
Manuel N. Stamatakis: There have been other significant actions taken and progress made in the first quarter.
Edward J. Prajzner: First we have brought on Hany Hammond.
Edward J. Prajzner: As executive Vice President and Chief transformation Officer.
Edward J. Prajzner: <unk> managed our project Phoenix initiative, when he worked at Alex partners.
Edward J. Prajzner: And he previously worked for Pwc consulting.
Edward J. Prajzner: Acre Hughes and G E.
Edward J. Prajzner: Hany will report directly to the CEO and is responsible for bleeding and improving upon the transformation plan arising from project Fenix.
Edward J. Prajzner: Which initially identified a projected gross annual run rate of $47 million adjusted EBITDA benefit.
Edward J. Prajzner: To be achieved by the end of 2025.
Edward J. Prajzner: With a seasoned executive of Haney's experience and accomplishments, now dedicated full-time to this program, along with an invigorated senior leadership, we are confident that we will achieve our Project Phoenix expectations and more. The search for a permanent CEO remains on track, and we are working with the preeminent leadership advisory firm to identify the best individual to lead the company into its next phase. Our goal is to have our next CEO in place by the end of our third quarter.
Edward J. Prajzner: With a seasoned executive of Hany's experience and accomplishments now dedicated full time to this program along with an invigorated senior leadership team. We are confident that we will achieve our project Phoenix expectations and more.
Edward J. Prajzner: The search for a permanent CEO remains on track.
Edward J. Prajzner: And we are working with the preeminent leadership advisory firm.
Edward J. Prajzner: To identify the best individual to lead the company into its next phase.
Edward J. Prajzner: Our goal is to have our next CEO in place.
Edward J. Prajzner: By the end of our third quarter.
Edward J. Prajzner: And finally, we continue to make significant progress with the organizational and cultural changes that I had previously noted and which are important to our success. These changes have not only energized and motivated everyone throughout the organization, but they have also led to unprecedented collaboration and creativity enabling us to deliver even greater value to both our customers and shareholders. I believe we are now more fully aligned and committed to our mission than at any time in the company's history. My focus and that of our next CEO for the company will be profitable growth. Now I'd like to turn this call over to our CEO, Ed Prajzner, for his update on our recent results.
Edward J. Prajzner: And finally, we continue to make significant progress with the organizational and cultural changes that I had previously noted.
Edward J. Prajzner: And which are important to our success.
Edward J. Prajzner: These changes have not only energized and motivated everyone throughout the organization.
Edward J. Prajzner: But have also led to the unprecedented collaboration and creativity, enabling us to deliver even greater value to both our customers and shareholders.
Edward J. Prajzner: I believe we are now more fully aligned and committed to our mission that at any time over the company's history.
Edward J. Prajzner: My focus and that of our next C E O for the company will be profitable growth.
Edward J. Prajzner: Now I'd like to turn this call over to our CEO.
Edward J. Prajzner: Ed passenger for his update on our recent results.
Edward J. Prajzner: Yeah.
Edward J. Prajzner: Thank you, Manny, and good morning, everyone. I share Manny's enthusiasm for Mistras' immediate outlook and longer-range future. Our focus on transformative discipline will allow us to leverage our footprint and, coupled with our new commercial focus, will lead to improved results and profitable growth. First quarter results continue to demonstrate our commitment to unlocking significant value through the ongoing implementation of Project Phoenix. While we have already made significant progress, there is more work to do as we plan to achieve our target of an incremental SG&A reduction of $12 million in 2024 compared to the prior year.
Edward J. Prajzner: Thank you Manny and good morning, everyone.
Edward J. Prajzner: I sure manny's enthusiasm from restaurants, as immediate outlook and longer range future.
Edward J. Prajzner: Our focus on transformative discipline will allow us to leverage our footprint.
Edward J. Prajzner: And coupled with our new commercial focus will lead to improved results and profitable growth.
Edward J. Prajzner: Yeah.
Edward J. Prajzner: First quarter results continue to demonstrate our commitment to unlocking significant value.
Edward J. Prajzner: Through the ongoing implementation of project Fenix.
Edward J. Prajzner: While we have already made significant progress there is more work to do as we plan to achieve our target of an incremental SG&A reduction of $12 million in 2024 versus the prior year.
Edward J. Prajzner: This will not only generate an improved bottom-line return but will also provide funds to reinvest in our high-margin growth initiatives, such as data analytical solutions and the aerospace and defense industry. This is an exciting time for Mistras, and the entire organization is focused on capitalizing on the unique growth opportunities in Armar.
Edward J. Prajzner: This will not only generate an improved bottom line return, but will also provide funds to reinvest in our high margin growth initiatives, such as data analytical solutions and the aerospace and defense industry.
Edward J. Prajzner: This is an exciting time for restaurants and the entire organization is focused on capitalizing on the unique growth opportunities in our markets.
Edward J. Prajzner: And our first quarter performance demonstrated this with a great start to what we anticipate will be one of our all-time high adjusted EBITDA performance years in 2024. For the second consecutive quarter, we exceeded financial expectations while making significant organizational progress. The first quarter marked the second consecutive quarter where we generated significant organic revenue growth, actually increasing from 8.2% in the fourth quarter of last year to 9.8% this quarter. As Manny noted, we were up in our two largest end markets, in part due to contributions from our improved commercial focus, which has provided a benefit from the successful implementation of strategic price increases. The oil and gas industry was up nearly 15% on a strong spring turnaround.
Edward J. Prajzner: And our first quarter performance demonstrated this with a great start to what we anticipate will be one of our all time high adjusted EBIT performance years in 2024.
Edward J. Prajzner: For the for the second consecutive quarter, we exceeded financial expectations, while making significant significant organizational progress.
Edward J. Prajzner: The first quarter marked the second consecutive quarter, where we generated significant organic revenue growth.
Edward J. Prajzner: Actually increasing from eight 2% in the fourth quarter of last year to nine 8% this quarter.
Edward J. Prajzner: As Mandy noted we were up in our two largest end markets in part due to contributions from our improved commercial focus.
Edward J. Prajzner: Which has provided a benefit from the successful implementation of strategic price increases.
Edward J. Prajzner: Yeah.
Edward J. Prajzner: The oil and gas industry was up nearly 15% on a strong spring turnaround season.
Edward J. Prajzner: Although turnaround activity remained robust, as stated last quarter, we are anticipating this sector's growth to level out in the second half of the year due to a more moderate fall turnaround season compared to the robust spring turnaround, which continued into April 2024. Aerospace and Defense continued its expansion, continuing its bounce back from the fourth quarter, with another quarter of solid growth. Up nearly 19%, our North American aerospace and defense business has recovered to pre-pandemic levels in the first quarter of 2024.
Edward J. Prajzner: Although turnaround activity remained robust as stated last quarter, we are anticipating this sector's growth to level out in the second half of the year.
Edward J. Prajzner: Due to a more moderate fall turnaround season compared to the robust spring turnaround, which continued into April 2024.
Edward J. Prajzner: Aerospace and defense continued its expansion continuing its bounced back from the fourth quarter with another quarter of solid growth up nearly 19%.
Edward J. Prajzner: Our North American Aerospace and defense business has recovered to pre pandemic levels in the first quarter of 2024.
Edward J. Prajzner: The aerospace and defense market remains robust and was once again led by the strong performance in our West Penn business. For the third consecutive quarter, they had record results, primarily as a result of the continued ramp-up of our new Georgia facility, as well as increased demand for our services, which are helping to de-bottleneck the industry's supply chain. The international aerospace business revenues were also up significantly in the quarter.
Edward J. Prajzner: The aerospace and defense market remains robust and was once again led by the strong performance in our West Penn business.
Edward J. Prajzner: For the third consecutive quarter. They had record results primarily as a result of the continued ramp up of our new Georgia facility.
Edward J. Prajzner: As well as increased demand for our services, which are helping to debottleneck the industry supply chain.
Edward J. Prajzner: The International Aerospace business revenues were also up significantly in the quarter.
Edward J. Prajzner: Private space was also strong in the first quarter, and we expect this business to hold up well over the immediate term as the pace of space launches has not slowed. As one of our primary growth initiatives, we are investing in our aerospace and defense business to accelerate growth. So we expect strong results from the aerospace and defense segment throughout the year. However, as Manny noted, data analytical solutions had a slower start than anticipated due to project delays and implementation pushouts.
Edward J. Prajzner: Private space was also strong in the first quarter and we expect this business to hold up well over the immediate term as the pace of space launches has not let up.
Edward J. Prajzner: As one of our primary growth initiatives, we are investing in our aerospace and defense business to accelerate growth. So.
Edward J. Prajzner: So we expect strong results from the aerospace and defense segment throughout the year.
Edward J. Prajzner: As Mandy noted Ada analytical solutions had a slower start than anticipated due to project delays in implementation push outs.
Edward J. Prajzner: However, we saw momentum build later in the quarter, which we believe will lead to continued growth during the second quarter and remainder of the year. Again, this is a focused growth area, and we are investing in our capabilities by adding highly skilled data analysts and expanding our predictive solutions. Both gross profit and margin were up in the first quarter, despite the slow start for data analytical solutions, driven by overall revenue growth.
Edward J. Prajzner: We saw momentum build later in the quarter, which we believe will lead to continued growth during the second quarter and remainder of the year.
Edward J. Prajzner: Again this is a focused growth area and we are investing in our capabilities by adding highly skilled data analyst and expanding our predictive solutions.
Edward J. Prajzner: Both gross profit and margin were up in the first quarter. Despite despite the slow start for data analytical solutions driven by overall revenue growth.
Edward J. Prajzner: Cost Reduction Benefit from Project Phoenix and the previously mentioned Positive Pricing Act. This was somewhat offset by higher health care plans expenses experienced in the quarter. Selling general and administrative expenses were down $1.6 million, or nearly 4% from a year ago, primarily reflecting the effect of Project Phoenix on headcount. We remain committed to our goal of reducing SG&A to approximately 21% of full-year 2024 revenue with $12 million of the expected savings being the product of Project Phoenix. As we have mentioned, we are still working our way through full implementation. For the quarter, we've reported a gap net income of $1 million, or $0.03 per share, excluding reorganization and other non-recurring costs that have been taxed.
Edward J. Prajzner: Cost reduction benefit from project Phoenix and.
Edward J. Prajzner: And the previously mentioned positive pricing actions.
Edward J. Prajzner: This was somewhat offset by higher health care claims expense experienced in the quarter.
Edward J. Prajzner: Selling general and administrative expenses were down $1 6 million or nearly 4% from a year ago, primarily reflecting the effect of project Phoenix on head count.
Edward J. Prajzner: We remain committed to our goal of reducing SG&A to approximately 21% of full year 2020 for revenue.
Edward J. Prajzner: With $12 million of the expected savings being the product of project helix.
Edward J. Prajzner: As we have mentioned we are still working our way through full implementation.
Edward J. Prajzner: Yes.
Edward J. Prajzner: For the quarter, we reported GAAP net income of $1 million or <unk> <unk> per share.
Edward J. Prajzner: Excluding reorganization and other nonrecurring costs net of tax non-GAAP net income was $2 2 million or <unk> <unk> per share for the quarter.
Edward J. Prajzner: Non-GAAP net income was $2.2 million, or $0.07 per share for the quarter. Adjusted EBITDA was up 55% to $16.2 million, which was our best ever first quarter adjusted EBITDA performance. This follows the record fourth quarter adjusted EBITDA reported just last quarter. As a result of an increase in working capital and incremental strategic capital expenditures, we generated negative free cash flow in the first quarter, which is not unusual for the first quarter of the year.
Edward J. Prajzner: Adjusted EBIT was up 55% to $16 2 million, which was our best ever first quarter adjusted EBITDA performance.
Edward J. Prajzner: This follows the record fourth quarter adjusted EBIT reported just last quarter.
Edward J. Prajzner: As a result of an increase in working capital and incremental strategic capital expenditures.
Edward J. Prajzner: We generated negative free cash flow in the first quarter, which is not unusual for the first quarter of the year.
Edward J. Prajzner: As it relates to 2024, this negative cash flow was related to an increase in working capital related to the timing of customer invoicing, which we are intently focused on improving in the second quarter and remainder of 2024. We still believe that we will generate at least $34 million in free cash flow for the year despite an increase in growth capital expenditures. Interest expense was $4.4 million for the quarter, increasing by $0.3 million from the prior year due to the higher interest rate environment and an increase in the average debt balance outstanding.
Edward J. Prajzner: As it relates to 2024 this negative cash flow was related to an increase in working capital related to timing of customer invoicing, which we are intently focused on improving in the second quarter and remainder of 2024.
Edward J. Prajzner: We still believe that we will generate at least $34 million in free cash flow for the year. Despite an increase in growth capital expenditures.
Edward J. Prajzner: Interest expense was $4 4 million for the quarter, increasing by $3 million from the prior year due to the higher interest rate environment and an increase in the average debt balance outstanding.
Edward J. Prajzner: Our trailing 12-month bank-to-fine leverage ratio was 3.06 times as of March 31, 2024, which is the lowest this ratio has been since the third quarter of 2028. Based on our current 2024 projections, we expect to be able to achieve a targeted three times or lower ratio by mid-year, primarily due to the anticipated increase in our trailing 12-month EBITDA, even if only a modest reduction in outstanding debt. We have articulated a strategy and continue to emphasize debt reduction as our primary use of free cash flow.
Edward J. Prajzner: Our trailing 12 month bank defined leverage ratio was 3.06 times as of March 31, 2024, which is the lowest this ratio has been since the third quarter of 2028.
Edward J. Prajzner: Based on our current 2024 projections, we expect to be able to achieve a targeted three times or lower ratio by mid year, primarily due to the anticipated increase in our trailing 12 month EBITDA, even if only a modest reduction in outstanding debt.
Edward J. Prajzner: We have articulated a strategy and continue to emphasize debt reduction as our primary use of free cash flow.
Edward J. Prajzner: However, based on current financial projections, we believe investments in capital expenditures and other resources that support our organic growth strategy while providing superior returns also represent an excellent use of free cash flow. In the longer term, we believe a 2.5 times leverage ratio is achievable, and at that point, we would gain additional optionality as it relates to free cash flows. Actually, we believe a 2.5 times leverage ratio can be achieved by the end of 24 and maintained over the longer term.
Edward J. Prajzner: However, based on current financial projections, we believe investments in capital expenditures and other resources that support our organic growth strategy.
Edward J. Prajzner: While providing superior returns also represent an excellent use of free cash flow.
Edward J. Prajzner: Longer term, we believe a two five times leverage ratio is achievable and at that point, we would gain additional optionality as it relates to free cash flows.
Edward J. Prajzner: We believe a two five times leverage ratio that can be achieved by the end of 'twenty four and maintained over the longer term. So we will be balancing these two priorities to maximize shareholder value.
Edward J. Prajzner: So we will be balancing these two priorities to maximize shareholder value. While these are still early days, our results have been very encouraging, and we are confident in our outcome. But there is more work to be done and additional objectives to be achieved. 2024 is shaping up to be both a transformative and record year. Most importantly, we expect to set a new foundation on which to grow profitably, given our new commercial focus and its ability to drive profitable growth.
Edward J. Prajzner: While these are still early days our results have been very encouraging and we are confident in our outlook, but there is more work to be done and additional objectives to be achieved.
Edward J. Prajzner: 2024 is shaping up to be both a transformative and record year.
Edward J. Prajzner: Importantly, we expect to set a new foundation on which to grow profitably given our new commercial focus and its ability to drive profitable growth.
Edward J. Prajzner: We sincerely appreciate your continued support and expect to reward your patience with significantly improved results in 2024. At this time, I would like to turn the call back over to Manny for his closing remarks before we move on to take your questions.
Speaker Change: Fairly appreciate your continued support and expect to reward your patients with significantly improved results in 2024.
Edward J. Prajzner: At this time I would like to turn the call back over to Manny for his closing remarks before we move on to take your questions.
Manny: Thanks, Ed.
Manuel N. Stamatakis: NDT is a large market that can reward innovative companies who can cost effectively and expeditiously help their customers keep their assets safe, compliant, and efficient. For 40 years, Mistras has been an industry leader with solutions that solve these increasingly complex challenges. Today, we are recommitted to those values.
Manny: <unk> is a large market that can reward innovative companies, who can cost effectively and expeditiously help their customers keep their assets safe.
Manuel N. Stamatakis: Client and efficient.
Manuel N. Stamatakis: Additionally, operating.
Manuel N. Stamatakis: For 40 years Mistras has been an industry leader with solutions that solve these increasingly complex challenges.
Manuel N. Stamatakis: Today, we are recommitted to those values.
Manuel N. Stamatakis: Mechanical integrity programs have been transitioning from a time-based to a risk-based methodology. Mistras has been a leader in this risk-based approach trend with our industry-leading asset integrity management software via our data analytical solution. We are also excited about furthering the development of the digitization of the field inspection process. This will help boost productivity by automating today's manual processes.
Manuel N. Stamatakis: Mechanical integrity programs have been transitioning from a time based to a risk based methodology.
Manuel N. Stamatakis: Mistras has been a leader in this risk based approach trend with our industry, leading asset integrity management software.
Manuel N. Stamatakis: Via our data analytical solutions.
Manuel N. Stamatakis: We are also further we are also excited about furthering the development of the Digitization of the field inspection process.
Manuel N. Stamatakis: This will help boost productivity.
Manuel N. Stamatakis: By automating today's manual processes.
Manuel N. Stamatakis: Reducing rework and standardizing reporting with our cloud-based platform. All of this will reduce customers' downtime, saving millions of dollars. We will continue to invest in this growing part of our business, and it will become an ever-increasing focus for us in the future. After a year of intense analysis and introspection.
Manuel N. Stamatakis: Reducing rework.
Manuel N. Stamatakis: And standardizing reporting with our cloud based platform.
Manuel N. Stamatakis: All of this will reduce customers' downtime.
Manuel N. Stamatakis: Saving millions of dollars.
Manuel N. Stamatakis: We will continue to invest in this growing part of our business.
Manuel N. Stamatakis: And it will become an ever increasing focus for us in the future.
Manuel N. Stamatakis: After a year of intense analysis and introspection.
Manuel N. Stamatakis: We've developed a strategy to capitalize on the trends shaping our market. This includes a keen focus on growing our high-margin businesses to provide meaningful profitability improvements while also enhancing our sales and commercial function. We will continue to put the right people in place that will execute on this strategy, and we are developing the systems and processes to assure that we remain on track. Everyone is engaged and committed to strategic improvement.
Manuel N. Stamatakis: We developed this strategy to capitalize on the trends shaping our markets.
Manuel N. Stamatakis: This includes a keen focus on growing our high margin businesses.
Manuel N. Stamatakis: To provide a meaningful profitability improvement.
Manuel N. Stamatakis: While also enhancing our sales and commercial functions.
Manuel N. Stamatakis: We will continue to put the right people in place that will execute on this strategy.
Manuel N. Stamatakis: And we are developing the systems and processes.
Manuel N. Stamatakis: To assure that we remain on track.
Manuel N. Stamatakis: Everyone is engaged and committed to these strategic improvements.
Manuel N. Stamatakis: Consequently, for 2024, we are reaffirming our previously announced guidance, full-year revenue between $725 million and $750 million, adjusted EBITDA between $84 million and $89 million, and we additionally expect to generate free cash flow of between $34 million and $38 million.
Manuel N. Stamatakis: Consequently for 2024.
Manuel N. Stamatakis: We are reaffirming our previously announced guidance.
Manuel N. Stamatakis: Our full year revenue between $725 million and $750 million.
Manuel N. Stamatakis: Adjusted EBITDA between $84 million and $89 million.
Manuel N. Stamatakis: And we additionally expect to generate the free cash flow of between $34 million and $38 million.
Manuel N. Stamatakis: This is an exciting time to be leading Mistras. I'm very proud of our nearly 5,000 employees that believe in our plan and are working hard every day to achieve our goals and objectives. You can feel that level of motivation throughout the organization. We are rebuilding a company that can deliver steady, stable growth over the long term with a bottom line that can increase significantly faster than the top line. Much has been done.
Manuel N. Stamatakis: This is an exciting time to be leading mistrust.
Manuel N. Stamatakis: Very proud of our nearly 5000 employees that believe in our plan and are working hard every day to achieve our goals and objectives.
Manuel N. Stamatakis: You can feel that level of motivation throughout the organization.
Manuel N. Stamatakis: We are rebuilding a company that can deliver steady stable growth over the long term with a bottom line that can increase significantly faster than the top.
Manuel N. Stamatakis: Much has been done.
Manuel N. Stamatakis: Much remains to be done.
Manuel N. Stamatakis: But much remains to be done. We appreciate you joining us for this journey. At this time, I would like to ask the operator to open the call to your questions. Thank you.
Manuel N. Stamatakis: We appreciate you joining us for this journey.
Speaker Change: At this time I would like to ask the operator to open the call to your questions.
Operator: Thank you. At this time, we will conduct the question and answer session. To ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A, Ross. Our first question comes from the line of Chris Sakai of Singular Research. Your line is now open.
Speaker Change: Thank you at this time, we will conduct a question answer session.
Operator: You will need to press star one on your telephone.
Chris Sakai: Your name to be announced.
Operator: To withdraw your question. Please press star one again.
Operator: Please standby, while we compile the Q&A roster.
Operator: Our first question comes from the line of Chris Sakai of singular Research. Your line is now open.
Chris Sakai: Hi, good morning. I just wanted to ask about oil and gas. You're saying that you're expecting it to moderate in the second half of the year. I wanted to get your sense of that, if you could provide any more color there.
Chris Sakai: Hi, good morning.
Chris Sakai: I just wanted to ask about youre, saying oil and gas that you're expecting that to moderate in the second half of the year wanted to get your sense of that.
Chris Sakai: You could provide any more color there.
Edward J. Prajzner: Sure, Chris. This is Ed. I can take that question. Thanks for the question.
Chris Sakai: Sure. Chris This is Ed I can take that question. Thanks for the question, yes. So the first quarter was extremely strong. It was an early start to spring turnaround that has been a long duration running into April. So we were very strong across the board our Gulf of Mexico, Alaska International you name it.
Edward J. Prajzner: Yeah, so this first quarter was extremely strong. It was an early spring turnaround that had a long duration running into April. So we were very strong across the board. Gulf of Mexico, Alaska, international, you name it.
Edward J. Prajzner: For the fall turnaround season, we're expecting just a normal cycle, back down a little moderation, back to a more routine regular cycle versus you having a little extra time and runtime here in the spring turnaround season. So we don't expect to exactly repeat that, but that's what we're feeling, an ordinary, normal fall turnaround season versus an extra bit of time in this spring turnaround season, which is coming up to a wrap here shortly.
Edward J. Prajzner: For the fourth for the fall turnaround season, we're expecting just a normal cycle back down a little moderation back to a more routine regular cycle versus you had a little extra time and run time here in the spring turnaround season. So we don't expect to exactly repeat that but that's what we're feeling ordinary normal fall turnaround season versus.
Edward J. Prajzner: An extra bill.
Edward J. Prajzner: A bit of time in this spring turnaround season, which is which is coming up to a wrap here shortly.
Edward J. Prajzner: Yeah.
Chris Sakai: Okay, thanks. And then, can you help me understand the capital expenditures, were they mainly for aerospace, and how is that, how is that going to improve margins going forward?
Speaker Change: Okay. Thanks, and then can you help me understand.
Chris Sakai: The capital expenditures, where they mainly for aerospace.
Speaker Change: And how is that how is that going to improve margins going forward.
Chris Sakai: Okay.
Edward J. Prajzner: Yeah, good question, Chris. Yes, our CapEx is largely in our shop lab, and aerospace in particular. That is a key focus there. You know, so that will take a little time for that revenue to start coming in, obviously, and impact margins, but you'll have a modest uplift. The shop margins are stronger than the field, not quite as strong as the data side. So yeah, our CapEx is largely geared towards the shop piece of our business, although the field business certainly takes up some CapEx as well.
Speaker Change: Yes. Good question, Chris Yes that is our Capex is largely in our shop lab aerospace in particular that is a key focus there.
Edward J. Prajzner: So that.
Edward J. Prajzner: That will take a little time for that revenue to be started obviously an impact margins, but you'll have a modest uplift the shop margins are stronger than the field not quite as strong as the data side. So yes, our capex is largely geared towards the shop piece of our business, although the field that fuel business certainly takes some capex as well, but yes, we are.
Edward J. Prajzner: But yeah, the small, modest gross profit margin improvement this quarter of BIPs that we saw is a good indicator for really what we're expecting going forward, some modest growth there. But yeah, that's a smaller piece of our business, the shops right now, but that should be incrementally helping margins. The CapEx is in our higher growth, higher margin type of business, so it will be improving margins over time. Okay, thank you.
Edward J. Prajzner: Modest gross profit margin.
Edward J. Prajzner: Improvement this quarter.
Edward J. Prajzner: Bps that we saw.
Edward J. Prajzner: That's a good indicator for really what we're expecting going forward some modest growth there.
Edward J. Prajzner: But.
Edward J. Prajzner: But yes, thats, a smaller piece of our business the shops right now, but that should be incrementally helping margins. The capex is in our higher growth higher margin type of business. So it will be improving margins over time from the capex.
Chris Sakai: Can you talk about SG&A improvements? What are you seeing there, and how much more can they improve?
Speaker Change: Okay. Thanks, and then last one for me can you talk about <unk>.
Speaker Change: SG&A improvements.
Chris Sakai: What are you seeing there and how much more can they improve.
Chris Sakai: Okay.
Edward J. Prajzner: Yeah, great to talk to you. Great to meet you. Sorry, Ned, do you want to answer? I can...
Speaker Change: Yes, great.
Ned: Sorry, Matt you want to answer I can I can answer.
Edward J. Prajzner: No, go ahead and answer that; I'll jump in if I need to. We committed, Chris, due to our Project Phoenix initiatives, that we would drop SG&A by $12 million year over year. We have every intention of doing that. We got partially there, more than halfway there in the first quarter.
Ned: No go ahead go ahead and answer that.
Edward J. Prajzner: Yes.
Edward J. Prajzner: We committed Chris to due to our project Phoenix initiatives that we would drop.
Edward J. Prajzner: SG&A $12 million year over year, we have every intention of doing that we got partially they're more than halfway there in the first quarter, we intend to keep dropping that down our full year expectation is to be at 21% of revenue. Our SG&A. We have every anticipation as expect expectation of getting their project Phoenix has done the hard work already.
Edward J. Prajzner: We intend to keep dropping that down. Our full year expectation is to be at 21% of revenue, SG&A. We have every anticipation and expectation of getting there. Project Phoenix has done the hard work already. So we have a little more savings to achieve as the year goes along. But no, we're very confident that we're at that level now and we'll continue to perform toward that objective. Okay, thank you.
Edward J. Prajzner: So we have a little more savings too.
Edward J. Prajzner: Achieve as the year goes along but we're very confident that.
Edward J. Prajzner: When we're at that level now and will continue to to perform towards that objective.
Edward J. Prajzner: Okay. Thank you.
Speaker Change: Thank you.
Operator: Thank you, and one moment for our next question. Our next question comes from Tim Moore of EF Hutton. Your line is now open. Thanks, and it was nice to see you so strong.
Speaker Change: Thank you and one moment our next question.
Operator: Yes.
Timothy M. Moore: Our next question comes from Tim more of E. F. Hutton Your line is now open.
Timothy M. Moore: Thanks, and it was nice to see the strong sales recovery in field services, Shop Lab's growth in North America, and the SG&A cost savings shining through.
Timothy M. Moore: Thanks, and it was nice to see the strong sales recovery in field services.
Timothy M. Moore: <unk> software apps growth in North America.
Timothy M. Moore: SG&A cost savings shining through.
Timothy M. Moore: Good work. I know it took a lot of time and effort, and it's definitely paying off. I thought I would just start with aerospace and defense. It's nice that it's bouncing back. I know you might... kind of only get back to pre-pandemic levels, which leads me to believe there's ample upside here. And I know you're working on the Georgia facility. So I was wondering maybe if you could talk a little bit more about the shop, lab, and facilities expansion. If Georgia's all gonna be aerospace and defense, and are there any other kind of... You know, shop, lab, the facilities that you're expanding, we're going to put in other types of customers besides aerospace and defense.
Timothy M. Moore: Work and I know there was a lot of time and effort and simply paying off.
Timothy M. Moore: I thought I would just start with aerospace and defense. It's nice it's bouncing back I know you mentioned kind of back to pre pandemic levels, which leads me to believe there is ample upside here.
Timothy M. Moore: I know you're working on the Georgia facility. So I'm wondering maybe if you can talk a little bit more.
Timothy M. Moore: The shop labs and facilities expansion, if George is all going to be aerospace and defense.
Timothy M. Moore: And are there any other kind of.
Timothy M. Moore: Sharply up the facilities that you are expanding we're going to put in other types of customers Besides aerospace and defense.
Edward J. Prajzner: I can start that off. Tim, great question. Yeah, we love that sector, aerospace and defense. So, the Georgia facility is primarily commercial aerospace focused. And that's an area that is growing nicely, is expanding. That supply chain is an area that we will continue to extend our service offerings for our customers. Private space is very similar.
Speaker Change: I can start that off.
Speaker Change: Yeah, Great question, Yeah, we we love that sector Aerospace and defense. So the Georgia facility is primarily commercial aerospace focused.
Edward J. Prajzner: And that's an area that is growing nicely is expanding that supply chain is an area that we will continue to extend our service offerings for our customer private space is very similar we're doing more and more for that sector as well defense is the third wheel searched.
Edward J. Prajzner: We're doing more and more for that sector as well. Defense is the third leg of that stool in aerospace and defense. But yeah, we will continue to expand and add product line extensions for our customers, more additive manufacturing steps, more mechanical steps beyond testing. It is a technology that the faster we can get those parts back to our customer supply chain, the faster that piece of extruded or stamped metal can become a fan blade on a turbine motor. That's what we're there for.
Edward J. Prajzner: Leg of that stool in aerospace and defense, but yeah, we will continue to expand and add product line extensions for our customer more additive manufacturing steps more mechanical steps beyond the testing is a technology that the faster we can get those ports back to our customer supply chain, the faster that piece of extruded or <unk>.
Edward J. Prajzner: Metal can become a fan blade on a turbine motor.
Edward J. Prajzner: That's what we're therefore, we're speeding up that supply chain, helping our customer worked through.
Edward J. Prajzner: We're speeding up that supply chain, helping our customers work through the glitches that they will be dealing with in supplying their end markets. So, we will continue to expand there. It is a very good margin business. You're dealing with the principal customer directly. It's a great value add. It's ROI. It's per part, per linear foot, per piece as we test and send it back to them.
Edward J. Prajzner: The glitches that they would be the only we're supplying their end markets. So we will continue to expand there. It is a very good.
Edward J. Prajzner: Margin business. Its you are dealing with the principal customer directly it's a great value add it's ROI.
Edward J. Prajzner: It's per part per linear foot per piece as we test and send it back to them. So.
Edward J. Prajzner: It's a very good sector of our business. So, we will keep doing more there. There are other shop labs that focus on things other than commercial aerospace and private space.
Edward J. Prajzner: We're very good sector of our business. So we will keep doing more there and theres other shop labs that focus on other than commercial aerospace and private space, we like that business as well.
Edward J. Prajzner: We like that business as well. It's very compelling there to do more for your customers and satisfy their needs and really help them serve their customers well. So, we will keep doing more of that.
Edward J. Prajzner: And a very compelling there to do more for your customer.
Edward J. Prajzner: And satisfy their needs and really help them serve their customers well. So we will keep doing more of that I would say that this aerospace fees commercial aerospace is in a very important hub there for us very important second largest end market in and of itself. So we will keep doing more there it's very attractive to us there is more and more of that.
Edward J. Prajzner: I would say that this aerospace piece, commercial aerospace, is a very important hub there for us. It's the second largest end market in and of itself. So, we will keep doing more there. It's very attractive to us.
Edward J. Prajzner: There's more and more that we can do there. It's a large market with lots of opportunities. So, we will keep investing in that, but prudently, judiciously, for things that have quick turnarounds and quick paybacks and where the customer is partnering with us, where they're guaranteeing that volume coming into our shop lab. It's a criterion we want to assure that it's a nice, healthy, robust, growing business with lots of interconnectivity with the customer. So, we do a rather intensive review before we take on new work for the customer. But it's very rewarding. It's very engaging and interesting.
Edward J. Prajzner: We can do there.
Edward J. Prajzner: A large market with lots of.
Edward J. Prajzner: Opportunities. So we will keep investing in that but prudently judiciously for things that have quick turnarounds and quick paybacks.
Edward J. Prajzner: The customer is partnering with us where they are guaranteeing that volume coming into our shop lab.
Edward J. Prajzner: It's a criteria we want to assure that it is a nice healthy robust growing business with lots of interconnectivity with the customer. So we do have rather.
Edward J. Prajzner: Tensive review before we take on new work for the customer, but it is very rewarding it's very engaging and I do believe that will continue to be a very strong sector of our business North America. As we said is back to pre pandemic levels internationally, we will get there soon as well they are lagging just a little bit behind that recovery, but they don't want a growth trajectory as well so it's a.
Edward J. Prajzner: And I do believe that'll continue to be a very strong sector of our business. North America, as we said, is back to pre-pandemic levels. Internationally, we'll get there soon as well. They're lagging just a little bit behind that recovery, but they're on a growth trajectory as well. So, it's a global business for us across the board, these aerospace laboratories. And the more they think as a unit and grow together, all the better. But it's a real key area of focus for us and a very large market of opportunity.
Edward J. Prajzner: Global business for us across the board these aerospace labs and the more they think as a unit and bring together all the better but it's a real key area of focus for us.
Edward J. Prajzner: And a very large market opportunity.
Timothy M. Moore: Great, great. That's a really helpful explanation because, you know, when we met a year ago at our EF Hutton conference, it was just so interesting how you are, you know, adding more value to the chain, not just doing the inspection and the testing but actually taking some of the work off their hands in the value chain and capturing more of that. I think that's something important investors maybe didn't know as much a year ago, but, you know, just switching to data analytical solutions.
Edward J. Prajzner: Great.
Timothy M. Moore: Really helpful elaboration, because I feel like when we met a year ago Hutton conference.
Timothy M. Moore: It was just so interesting how you are adding more value to the chain not doing that just an inspection of the testing, but actually taking some of the work off their hands.
Timothy M. Moore: <unk> train and capturing more of that.
Timothy M. Moore: Something important investors, maybe you didn't know it was March a year ago.
Timothy M. Moore: And then just switching to data analytical solutions.
Timothy M. Moore: You know, I know revenue declined in the quarter from project pushouts, but revenue was very strong in the December quarter. I think it was up 18%, you know, but it was only 5% growth in the September quarter. I'm just wondering maybe if quantified or ballparked, you know, are nearly half of data analytical solution revenues, are they really lumpy from big projects? Would you say, you know, like an implementation and kind of a conversion rather than kind of like ongoing, more smooth, smaller projects?
Timothy M. Moore: I know it declined in the quarter from project push outs revenue was very strong in the December quarter, I think it was up 18%.
Timothy M. Moore: But it was only a 5% growth in the September quarter I'm, just wondering maybe if you quantified or ballparks.
Timothy M. Moore: Nearly half of data analytical solution revenues are they really lumpy from big projects would you say you know like implementation and kind of the conversion.
Timothy M. Moore: Rather than kind of like ongoing more smooth.
Timothy M. Moore: The smaller projects.
Manuel N. Stamatakis: Traditionally, it has been ongoing, consistent revenue. This first quarter was an anomaly.
Timothy M. Moore: Traditionally it has been ongoing consistent revenue. This first quarter was an anomaly.
Manuel N. Stamatakis: A couple of projects did get pushed off, but we're on target to meet the numbers by the end of the year. And we have a lot of other exciting things that we're working on that we think are going to really revolutionize how data is collected in the field. As I mentioned, we're working on digitizing the collection of data. This is something that everybody's trying to get accomplished. We have a good plan to get there.
Manuel N. Stamatakis: Couple of projects did get pushed off but we're on target to.
Manuel N. Stamatakis: Meet the numbers by the end of the year.
Manuel N. Stamatakis: And we have a lot of other exciting things that we're working on.
Manuel N. Stamatakis: That we think is going to really.
Manuel N. Stamatakis: Revolutionized.
Manuel N. Stamatakis: How data is collected in the field as I mentioned.
Manuel N. Stamatakis: We're working on digitizing the collection of data.
Manuel N. Stamatakis: It is something that everybody is trying to get accomplished.
Manuel N. Stamatakis: We have a good.
Manuel N. Stamatakis: We have the software and the techniques in place to do that, and we're working on scaling that so that our customers can get their inspection data digitally, which will change the entire ballgame. It'll be much more efficient, the customer will be able to do a lot more with the data, and it will save a lot of time and energy.
Manuel N. Stamatakis: Plan to get there we have the software at the end.
Manuel N. Stamatakis: Tech techniques in place to do that and we're working on scaling that so that our customers can get can get their inspection data digitally.
Manuel N. Stamatakis: Which will change the entire ball game.
Manuel N. Stamatakis: It's really much more efficient it will be.
Manuel N. Stamatakis: How much the customer will be able to do a lot more.
Manuel N. Stamatakis: With the data and it will save.
Manuel N. Stamatakis: A lot of time and energy.
Timothy M. Moore: Great. I just want to switch gears to one other topic.
Speaker Change: Great I just wanted to switch gears one other topic.
Speaker Change: More of a low hanging fruit topic optima.
Timothy M. Moore: Optimizing our pricing contracts.
Timothy M. Moore: It seems like that could be maybe at least $5 million of potential there over a couple of years as those contracts rollover for renewals.
Timothy M. Moore: I'm, you know, more of a low-hanging fruit topic, you know, optimizing your pricing contracts. It seems like that could be, you know, maybe at least $5 million of potential there over a couple of years as those contracts roll over for renewals. You know, you've got that pass-through cost inflation clause that's starting to help. I'm just wondering about the non-pass-through cost inflation, where you're going to maybe reprice these contracts, and add extra features and services. How has the initial reception and responsiveness been from the customers? And, you know, has it made you more aware, maybe of which customers or projects to intentionally call and just cut and not renew?
Timothy M. Moore: You've got a pass through cost inflation clause, that's starting to help I'm just wondering for the non pass through cost inflation, where you're going to be repriced. These contracts add extra features and services. How has the initial reception and responsiveness been of the customers and as a major more of where maybe at which customers or projects.
Timothy M. Moore: Intentionally collyn just.
Speaker Change: Not right now.
Manuel N. Stamatakis: The customers have been very cooperative. This is a difficult time, costs are going up, and we need to be able to offset those costs in order to remain profitable. Many of our customers understand that and have been very cooperative in working with us to improve the pricing. Sometimes customers aren't as cooperative, but our focus is to keep our business profitable and to focus on those customers that can work with us. We feel the value that we can add is significant, and good customers understand and... cooperate with us in that regard. It's working out quite well, and we want to continue to improve in that area.
Timothy M. Moore: The customers have been.
Manuel N. Stamatakis: Very cooperative.
Manuel N. Stamatakis: This is a difficult time costs are going up and we need to be able to offset those costs in order to remain profitable.
Manuel N. Stamatakis: Many of our customers understand that and have been very cooperative.
Manuel N. Stamatakis: Working with us to improve the pricing.
Manuel N. Stamatakis: Sometimes customers arent desk cooperative, but our focus is to <unk>.
Manuel N. Stamatakis: Our business profitable and to focus on those customers.
Manuel N. Stamatakis: That can work with us we feel the value that we can add in.
Manuel N. Stamatakis: Is significant.
Manuel N. Stamatakis: And.
Manuel N. Stamatakis: Our good customers understand.
Manuel N. Stamatakis: And.
Manuel N. Stamatakis: Our cooperate with us in that regard so.
Manuel N. Stamatakis: It's working out quite well.
Manuel N. Stamatakis: And we wanted to continue to improve in that area.
Timothy M. Moore: Great, Manny, one last question for you. You know, I believe you said the CEO search might be concluded by the end of this quarter, if I heard correctly. I'm just wondering, you know, how long you plan maybe to stay involved with onboarding afterwards or, you know, is that duration maybe not going to be too long? Because, you know, you added the chief transformational officer.
Manuel N. Stamatakis: Great.
Speaker Change: Last question for you.
Timothy M. Moore: I believe you said the CEO search might be concluded by the end of this quarter. If I heard correctly I'm just wondering how long you plan maybe to stay involved with Onboarding afterwards or.
Timothy M. Moore: Is that duration, maybe not going to be too long because you've added the chief transformation officer.
Manuel N. Stamatakis: When you say onboarding, do you mean onboarding the new CEO? Definitely that, yeah.
Timothy M. Moore: When you say with Onboarding, you mean onboarding the new CEO.
Manuel N. Stamatakis: Definitely that yes.
Timothy M. Moore: Yeah, well, our goal is still to have that person in place by the end of Q3. We're working with an excellent firm who is working hard to identify the right person to come in and take over. I will still be chairman of the board and will be committed to working closely with that individual, but a lot of the work we've been doing for the past six months and will continue to do throughout the remainder of the year is to really clear the path for that next CEO.
Manuel N. Stamatakis: Yes.
Manuel N. Stamatakis: Our goal is still to have that person in place by the end of Q3.
Timothy M. Moore: We're working with an excellent firm.
Timothy M. Moore: Who has.
Timothy M. Moore: <unk> is working hard to identify the right person to come in and take over.
Timothy M. Moore: I will still be chairman of the board.
Timothy M. Moore: And we will be committed to working closely with that individual.
Timothy M. Moore: Yes.
Timothy M. Moore: But a lot of the work we've been doing for the past six months and we will continue to do throughout the remainder of the year is to really clear the path.
Timothy M. Moore: So that that next CEO.
Manuel N. Stamatakis: When they come in, we'll be positioned to really focus on moving the company forward and to be committed to cost-effectiveness and efficiency. We are committed to continuing to lower our costs. That is a commitment, and we feel that there are opportunities to do that. And it's not just to lower our costs; it's to do things better and more efficiently. So that is, we're committed to that. You'll keep it, and that's why we have the Chief Transformation Officer position. It's that important in the company. We were fortunate to get Haney as our CTO, and we're excited about these prospects moving forward.
Timothy M. Moore: When they come in we'll be positioned to really focus on moving the company forward and to keeping it.
Manuel N. Stamatakis: Committed too.
Manuel N. Stamatakis: Cost effectiveness and efficiency.
Manuel N. Stamatakis: We are committed to continuing to lower our costs.
Manuel N. Stamatakis: That is a commitment we feel that there is opportunities to do that and it's not just lower our cost is to do things better.
Manuel N. Stamatakis: And more efficiently.
Manuel N. Stamatakis: So that is we're committed to that.
Manuel N. Stamatakis: And that's why we have the chief transformation officer position.
Manuel N. Stamatakis: Important in the company, we were fortunate to get.
Manuel N. Stamatakis: Hany as.
Manuel N. Stamatakis: As.
Manuel N. Stamatakis: Our CTO.
Manuel N. Stamatakis: And we're excited about these prospects moving forward.
Timothy M. Moore: Thanks, Manny and Ed. That's it for my questions. Thanks, Tim.
Speaker Change: Thanks and that's.
Timothy M. Moore: Thats it for my questions.
Speaker Change: Thanks, Tim.
Operator: Thank you, and please wait one moment for our next question. Our next question comes from Mitchell Pinheiro from Sturdivant & Co. Your line is now open.
Speaker Change: Thank you and one moment our next question.
Operator: Okay.
Operator: Okay.
Mitchell Brad Pinheiro: Our next question comes from Mitchell Pinheiro Sturtevant <unk> co. Your line is now open.
Mitchell Brad Pinheiro: Hey, good morning. A couple questions for you. First, what did your price increases contribute to revenue in the quarter?
Mitchell Brad Pinheiro: Hey, good morning.
Mitchell Brad Pinheiro:
Mitchell Brad Pinheiro: Couple of questions for you.
Mitchell Brad Pinheiro: First what did.
Mitchell Brad Pinheiro: Your price increases contribute to revenue in the quarter.
Edward J. Prajzner: Hi Mitch, yeah, good question. That's approximately two and a half to three percent of that, you know, almost ten percent gain. So a nice significant piece of that, a little less than a third or so of the growth came from pure pricing is about the magnitude of it.
Mitchell Brad Pinheiro: Hi, Mitch good question.
Edward J. Prajzner: Approximately $2.
Edward J. Prajzner: Two 5% to 3% of that almost 10% gain so a nice significant piece of that a little less than a third or so of.
Edward J. Prajzner: The growth came from pure pricing is about the magnitude of it.
Mitchell Brad Pinheiro: Okay. That ends the chat. Um, does that, I know like you, you're I can turn around some things that they don't repeat regularly, but does the 2.5% to 3% type of level, is that what we should expect for the remaining three quarters this year, that type of contribution, or does it vary?
Edward J. Prajzner: Okay does that.
Mitchell Brad Pinheiro: Does that I know like I can.
Mitchell Brad Pinheiro: Turnarounds and things that.
Mitchell Brad Pinheiro: They don't repeat regularly but.
Mitchell Brad Pinheiro: Does the two 5% to 3% type of level is that what we should expect for the remaining three quarters. This year that type of contribution or does it vary.
Edward J. Prajzner: It'll vary a little bit, but that's a pretty good number. I mean, that is a piece of the growth. I think Q1 may have been a little stronger than, you know, than average for the full year. But no, there's a meaningful piece of price increase on top of volume that we anticipate this year. So, yeah, there'll be a portion of the growth absolutely coming from pricing this year.
Mitchell Brad Pinheiro: It will vary a little bit, but that's a pretty good I mean that is a piece of the growth.
Edward J. Prajzner: I think Q1 may have been a little stronger than.
Edward J. Prajzner: Than average for the full year, but no. There is a meaningful piece of price increase on top of volume that we anticipate this year.
Edward J. Prajzner: So yes, there will be.
Edward J. Prajzner: A portion of the growth absolutely coming from pricing this year.
Mitchell Brad Pinheiro: And was the pricing sort of equally distributed across all your subsegments, oil and gas, aerospace, industrials, or was it concentrated in your largest oil and gas market?
Edward J. Prajzner: And was the pricing.
Mitchell Brad Pinheiro: Equally distributed across all your sub segments oil and gas aerospace and industrials.
Mitchell Brad Pinheiro: Was it concentrated in.
Mitchell Brad Pinheiro: Your largest oil and gas market.
Edward J. Prajzner: Great question, Mitch. Yeah, it was across the board industry-wise, but it was more focused on smaller accounts. We kind of went through, you know, tiers 1, 2, 3, 4, 5, and focused on, you know, smaller accounts initially for non-repeat work. Then we moved up to more moderate sizes, and finally up to larger accounts. So we're kind of cycling that through. The larger accounts have longer-term work that would have had more fixed pricing.
Mitchell Brad Pinheiro: Great question, Mitch Yeah. It was across the board industry wise, but it was more focused on smaller accounts, we kind of went through.
Edward J. Prajzner: Tier 12345 and focused on.
Edward J. Prajzner: Walter accounts initially for non repeat work and we moved up to more moderate sized finally up to the larger accounts. So we're kind of cycling that through the larger accounts have longer term work that would have had more fixed pricing. So we're kind of structurally creating strategic pricing practices to kind of further that through the whole population. So as we worked through that.
Mitchell Brad Pinheiro: So we're kind of structurally creating strategic pricing practices to kind of feather that through the whole population. So as we work through that, you know, we're having that discussion, as Manny said, successfully with many, many customers. And we started in smaller pockets and moved up more structurally, building this as a process, as a strategy across the board. We're not fully there yet. We're still working through all of that. But it was an offshoot of Project Phoenix, this whole commercial pricing strategy that we're, you know, bringing into place.
Mitchell Brad Pinheiro: We're having that discussion as Manny said successfully with many many customers that we started in smaller pockets and moving up more structurally building. This as a process is a strategy across the board we're not fully there yet we're still working through all of that but it wasn't offshoot of project Phoenix, So commercial pricing strategy that we are.
Mitchell Brad Pinheiro: We are bringing into place, but it is across all industries, but we kind of went from smaller to larger customer as a as a process and we're still kind of working through the complete process to have a tree new strategic pricing plan in place across the board as the ultimate goal.
Mitchell Brad Pinheiro: But it is across all industries. But we kind of went from smaller to larger customers as a process. And, you know, we're still kind of working through the complete process to have a true new strategic pricing plan in place across the board is the ultimate goal.
Mitchell Brad Pinheiro: Okay.
Speaker Change: Very helpful.
Mitchell Brad Pinheiro: And then.
Mitchell Brad Pinheiro: Okay, that was very helpful. You know, when you look at your gross margin, can you, like, I want to just talk us through why you wouldn't see more leverage on such a nice growth in your upstream and downstream revenue this quarter? I would have expected maybe some type of leverage, but I'm curious what I'm missing.
Mitchell Brad Pinheiro: When you look at your gross margin can you like.
Mitchell Brad Pinheiro: Just talk us through.
Mitchell Brad Pinheiro: Why you wouldn't see more.
Mitchell Brad Pinheiro: Leverage on such a nice.
Mitchell Brad Pinheiro: Nice growth in your upstream and downstream.
Mitchell Brad Pinheiro: Revenue this quarter I would've expected, maybe some type of leverage but I'm curious what I'm missing.
Edward J. Prajzner: You're talking on the gross margin side. Yeah, gross margin. The mixed advantage wasn't necessarily helping us a whole lot there, that the oil and gas business, which was up, would have lower margins than average, and especially turnarounds and whatnot. So, you did pick up a large sector of the business growing, not at the best of margins. Data solutions, as we mentioned, lagged a little bit in the quarter.
Speaker Change: You're talking on the gross margin side, yes, gross margin the mix advantage wasn't necessarily helping us a whole lot there that oil and gas business, which was up would have lower margins than average, so, especially turnarounds or whatnot. So you did pick up.
Edward J. Prajzner: Large sector of the business rolling not at the best of margins data solutions, as we mentioned lagged a little bit in the quarter that would have been relatively higher margins.
Edward J. Prajzner: But in a lower proportion for the quarter I mean, EBIT is up significantly up five times the revenue increase so it trickles down into operating leverage at the O Y and EBITDA lines significantly greater but gross profit margin itself did not have a great favorable sales mix. It was more unfavorable quite frankly aerospace helped that helped the mix a little bit obviously there.
Edward J. Prajzner: That would have been relatively higher margins, but in a lower proportion for the quarter. I mean, EBIT is up significantly, up five times the revenue increase, so it trickles down into operating leverage at the OI, and EBIT aligns significantly better, but gross profit margin itself did not have a great favorable sales mix. It was more unfavorable, quite frankly. Aerospace helped; that helped the mix a little bit. Obviously, they were higher than average, so that helped the gross profit margin.
Edward J. Prajzner: We're up higher than average so that helped the gross profit margin.
Edward J. Prajzner: But, yeah, the mix there is going to be more sensitive; gross profit is going to be very, you know, sensitive to the mix that's happening, and we had a less than ideal mix there, so your gross profit margin didn't go up by a whole lot of bits, but clearly, your EBIT was up many, many multiples of the top-line revenue.
Edward J. Prajzner: But the mix the mix there is going to be more sensitive gross profit is going to be very sensitive to the mix that is happening and we had less than ideal mix. There. So your gross profit margin didn't go up a whole lot of bps, there, but clearly your EBIT was up many many multiples of the topline revenue.
Mitchell Brad Pinheiro: Great
Mitchell Brad Pinheiro: And within aerospace and defense, it's nice to see, you know, a strong quarter. Within that, the private space business you talk about, you know, you've always talked about is growing. How, you know, I don't know if you've ever given a size within the category, but I mean, how fast is private space growing or how fast did it grow in the quarter, and what should we expect for the remainder of this year?
Edward J. Prajzner: Great.
Mitchell Brad Pinheiro: Within aerospace and defense is it's nice to see.
Mitchell Brad Pinheiro: Strong quarter.
Mitchell Brad Pinheiro: Within that the private space business, you talked about you've always talked about is growing.
Mitchell Brad Pinheiro: I don't know if you've ever given like a size within the category, but I mean, how how fast this private space growing or how fast did it grow in the quarter and what should we expect for the remainder of this year.
Mitchell Brad Pinheiro: Okay.
Edward J. Prajzner: Good question, Mitch. Commercial aerospace is bigger and growing faster, so private space is more of a substory to that, but it is up single-digit kinds of growth. It is a nice piece of the business. You know, it's not as large, obviously, as commercial aerospace is. So yeah, we keep those aggregated together.
Speaker Change: Good question, Mitch the commercial aerospace is bigger and growing faster. So the private space is more of a sub story to that but it is up single digit kind of growth. It is a nice piece of the business.
Edward J. Prajzner: It's not as large obviously is commercial aerospace is.
Edward J. Prajzner: So yes, we keep those aggregated together it is very consistent and it's growing and it is a piece of the portfolio. It is at the same shop labs are Nat cap certified facilities with many of them focus on the commercial aerospace and private space. So it's good leveraging their they get there both through the same footprint at the shot lab perspective, so we like that.
Edward J. Prajzner: It is very consistent, and it's growing, and it is a piece of our portfolio. So it is in the same shop labs. Our NADCAP-certified facilities, many of them focus on commercial aerospace and private space, so it's good leveraging there. They're both through the same footprint at the shop lab level, so we like that aspect. It's bundled together.
Edward J. Prajzner: That aspect, it's bundled together.
Edward J. Prajzner: But no, it's an attractive market. It keeps growing, and it'll continue to do so. It's just, you know, thankfully, commercial aerospace is kind of bigger and larger and taking the spotlight for the moment. We've had more room to recover, you know, when it is back to pre-COVID levels now in North America and growing fast. So yeah, it's there.
Edward J. Prajzner: At attractive market it keeps growing and it will continue to do so it's just thankfully the commercial aerospace is kind of bigger and larger and taken the spotlight for the moment it had more room to recover when it is back to pre Covid levels now North America and growing fast. So yes. It's there it's just a lesser a spotlight for the moment private.
Mitchell Brad Pinheiro: It's just a smaller spotlight for the moment, private space, only because private space or commercial space is doing so well right now. But both are attractive markets. We like them, and they're coming through. Leveraging one another through the same shop labs footprint is where that offering is there to support customers. OK, and then.
Mitchell Brad Pinheiro: This only because private space or commercial space is doing so good right now, but both both are attractive markets, we like them and theyre coming through leveraging one another through the same shop lab's footprint is where that offering.
Mitchell Brad Pinheiro: Is there to support the customers.
Mitchell Brad Pinheiro: Okay, and then in terms of visibility for the aerospace and defense segment... What are you seeing? you know, for the remainder of this year?
Mitchell Brad Pinheiro: Okay, and then in terms of visibility for the aerospace and defense segment.
Mitchell Brad Pinheiro: <unk>.
Mitchell Brad Pinheiro: What are you what are you seeing.
Mitchell Brad Pinheiro: <unk>.
Mitchell Brad Pinheiro: For the remainder of this year.
Edward J. Prajzner: We like that sector. The supply and demand are in a great place. They're catching up.
Mitchell Brad Pinheiro: We are we like that sector or the demand supply and demand is in a great place, they're catching back up you've got.
Edward J. Prajzner: Good production needs there for our customers and more demands on us. So yes, we feel very confident very comfortable the aerospace commercial aerospace had a great year in 2003, we see more of the same at 24. So that is one of our <unk>.
Edward J. Prajzner: You've got good production needs there for our customers and more demands on us. So, yeah, we feel very confident, very comfortable. Commercial aerospace had a great year in 2023. We expect more of the same in 2024. So that is one of our high-growth markets. Again, we mentioned earlier we're investing some CapEx there to keep the growth going. We do like that sector, and we see it growing, continuing to grow this year in much the same way as it did in 2023.
Edward J. Prajzner: High growth markets again, we mentioned earlier, we're investing some capex there to keep the growth going we do like that sector and we see it growing continuing to grow this year much the same way as it did in 2003.
Mitchell Brad Pinheiro: And then, I guess, just two more questions. The first is on the data analytical solution business. I was always sort of under the impression that most of that was sort of bundled within, you know, your broader set of services. Is, are you selling data analytical solutions? Is it built separately, and do you have accounts that do nothing but buy your data analytical solution software and programs?
Speaker Change: Okay, and then I guess just two more questions.
Mitchell Brad Pinheiro: First is on the data analytical solution.
Mitchell Brad Pinheiro: <unk>.
Mitchell Brad Pinheiro: I was always sort of under the impression that most of that sort of bundled.
Mitchell Brad Pinheiro: Within your.
Mitchell Brad Pinheiro: Your broader set of services.
Mitchell Brad Pinheiro: Are you selling data analytical solutions is it like billed separately.
Mitchell Brad Pinheiro: And do you have have accounts that do nothing but by your.
Mitchell Brad Pinheiro: Your data analytical solution software and program.
Manuel N. Stamatakis: That is a larger part of the business, Mitch; most of our data analytical solutions customers and business are outside of our inspection customers. We do have to offer that for our own customers, and one of our goals is to continue to expand that within our customer base.
Speaker Change: That is.
Manuel N. Stamatakis: A larger part of the business merge.
Manuel N. Stamatakis: Most of our data analytical solutions customers.
Manuel N. Stamatakis: And business.
Manuel N. Stamatakis: Our outside of our.
Manuel N. Stamatakis: Inspection customers.
Manuel N. Stamatakis: We do have offer that for our own customers and one of our goals.
Manuel N. Stamatakis: Is to continue to expand that within our customer base.
Manuel N. Stamatakis: But the majority of our business is business that we do, that's all we do for those customers. We analyze their data. We work on a risk-based process, methodology, and help them identify which assets to focus on, and Wen. It saves them enormous amounts of money, and that's why we've had good growth in there, but I don't feel we've scratched the surface on that. Our plan for the next couple years is to really scale that portion of our business because it is the future, along with the digitization of data, is really where everybody wants to be.
Manuel N. Stamatakis: But the majority of our business is business.
Manuel N. Stamatakis: It's all we do for those customers, we analyze their data.
Manuel N. Stamatakis: We were.
Manuel N. Stamatakis: Work on our risk base.
Manuel N. Stamatakis: <unk>.
Manuel N. Stamatakis: Process methodology, and help them identify which assets to focus on.
Manuel N. Stamatakis: And when.
Manuel N. Stamatakis: It saves them enormous amounts of money and that's why we've had good growth in there, but I don't feel we've scratched the surface on that yet our plan for the next couple of years is to really scale that portion of our business because it is the future.
Manuel N. Stamatakis: That along with the Digitization.
Manuel N. Stamatakis: Of the data.
Manuel N. Stamatakis: Is really where everybody wants to be.
Mitchell Brad Pinheiro: Doesn't the Data Analytical Solutions product I.., you know, testing and things, isn't that like a sort of a feeder or potential feeder?
Manuel N. Stamatakis: Does that doesn't VM data and analytical solutions product.
Mitchell Brad Pinheiro: Become a <unk>.
Mitchell Brad Pinheiro: Sort of a source of new customer new business for your your full service.
Mitchell Brad Pinheiro: Hi.
Mitchell Brad Pinheiro:
Mitchell Brad Pinheiro: Testing and things is that is that.
Mitchell Brad Pinheiro: Isn't that like a sort of a feeder for potential theater.
Manuel N. Stamatakis: That's an interesting question. It could be a feeder.
Speaker Change: That's an interesting question.
Manuel N. Stamatakis: It can be a theater.
Manuel N. Stamatakis: That business. However focuses on looking at the data that's been collected.
Manuel N. Stamatakis: That business, however, focuses on looking at the data that's been collected, and sometimes it can help us get more inspection business of our own. Clearly, when we do the inspection and the analysis, it's much more efficient for the customer, and it's much more effective in the long run. But we can still do analytics no matter who has collected the data, as long as we can get it in an electronic format.
Manuel N. Stamatakis: And sometimes it can help us get more inspection business.
Manuel N. Stamatakis: Our own clear.
Manuel N. Stamatakis: Clearly when we do the inspection and the analytics, it's much more efficient for the customer.
Manuel N. Stamatakis: And it's much more effective.
Manuel N. Stamatakis: In the long run.
Manuel N. Stamatakis: But we can still do analytics on no matter, who has collected the data as long as we can get it and then.
Manuel N. Stamatakis: And that's what we've been doing for the past several years. A lot of our business comes from customers that primarily provide us with their data, and we can collect that data for them electronically, which is the most efficient way to work in that space.
Manuel N. Stamatakis: Chronic format and that's what we've been doing for the past several years.
Manuel N. Stamatakis: A lot of our business is coming from customers that primarily provide us with their data and we can collect that data for them.
Manuel N. Stamatakis: Electronically.
Manuel N. Stamatakis: Which is the most efficient way to.
Manuel N. Stamatakis: Work in that space.
Mitchell Brad Pinheiro: Okay, I'm just left with one last question. I did notice that the outstanding diluted shares were up about a million from the fourth quarter. What was driving that? Is that just option-related or restricted stock vesting?
Manuel N. Stamatakis: Okay.
Speaker Change: Last question.
Speaker Change: I did notice that shares outstanding.
Mitchell Brad Pinheiro: Diluted shares were up about 1 million.
Mitchell Brad Pinheiro: For the fourth quarter.
Speaker Change: What was what was driving that such as <unk>.
Mitchell Brad Pinheiro: Option related or or restricted stock vesting or.
Edward J. Prajzner: No, I think actually Mitch, what that is because, in the fourth quarter with some of the charges of Project Phoenix, you would have had, you know, a net loss there on a gap perspective before the ad backs, the shares are affected. You don't dilute your loss with the added shares.
Mitchell Brad Pinheiro: So there's certain things that are not a denominator. So they're just a mechanical gap change. They're not not not any real change. Substantially more just a change in the gap numerator due to the, I guess, rules. That's all.
Mitchell Brad Pinheiro: No I think actually Thats, what that is is because fourth quarter with some of the charges or project fenix.
Mitchell Brad Pinheiro: You would have had net loss there when a GAAP perspective before the add backs.
Mitchell Brad Pinheiro: Shares are affected you don't dilute your loss with the added share. So there is certain things or not the denominator. So just mechanical gap change, they're not not not any real change substantively more just a change in the GAAP numerator due to that.
Edward J. Prajzner: Okay, and then should we use the first quarter number for the remainder of the year?
Speaker Change: Thats all okay.
Mitchell Brad Pinheiro: Okay, and then so should we use.
Edward J. Prajzner: The first quarter number.
Mitchell Brad Pinheiro: Yep, absolutely. The current quarter would be the right number to use on a weighted basis going forward. Absolutely. Okay, got it.
Edward J. Prajzner: We had a great year.
Speaker Change: Yes, absolutely the current FERC, yet current quarter it would be the right number to use on a weighted basis going forward absolutely. Okay got it alright.
Mitchell Brad Pinheiro: Got it. All right, thank you for taking the question.
Speaker Change: Alright, Thank you for taking the questions.
Speaker Change: Thank you Mitch Thank you.
Operator: Thank you, and I am showing no further questions at this time. I would now like to turn it back to Manny for closing remarks.
Mitchell Brad Pinheiro: Thank you and I am showing no further questions at this time I would now like to turn it back to Manny for closing remarks.
Manuel N. Stamatakis: Thank you, operator. And thank you, everyone, for joining this important call today and also for your continued interest in Mistra. I look forward to providing you with an update on our business and progress achieved towards our ongoing initiatives on our next call. Everyone, please have a safe and prosperous day.
Manny: Thank you operator, and thank you everyone for joining this important call today and also for your continued interest in <unk>.
Manuel N. Stamatakis: Look forward to providing you with an update on our business and progress achieved towards our ongoing initiatives on our next call.
Manuel N. Stamatakis: Everyone. Please have a safe and prosperous day.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.
Operator: Okay.
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