Q3 2025 Mistras Group Inc Earnings Call

Speaker #1: At this time . I would like to welcome you to Mistras Group, Inc. Q3 2020 Earnings Conference call . All lines have been placed on mute to prevent any background noise .

Speaker #1: After the speakers remarks , there will be a question and answer session . If you would like to ask a question during this time , and if you have joined via the webinar , please use the raise Hand icon , which can be found at the bottom of your webinar application .

Speaker #1: At this time , I would like to turn the call over to Thomas Tobolsky , Senior Vice President of Finance and Treasurer .

Speaker #2: Good morning , everyone , and welcome to Mistras Group, Inc. third Quarter 2020 Earnings conference call . I'm joined today by Natalia Shuman President and Chief Executive Officer and Edward Prajzner Senior Executive Vice President and Chief Financial Officer .

Speaker #2: Before we start , I want to remind everyone that remarks made during this conference call , as well as supplemental information provided on our website , contains certain forward looking statements and involve risks and uncertainties , as described in SEC filings .

Speaker #2: The major 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.

Speaker #2: The discussion in this conference call will also include certain non-GAAP financial measures that we believe are useful to investors evaluating the company's performance , but that were not prepared in accordance with US GAAP .

Speaker #2: Reconciliation of these non-U.S. 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 8-K .

Speaker #2: These reports are available at the company's website in the investor section , and on the SEC's website . I'll now turn the conference over to Natalia Shuman .

Speaker #3: Thank you . Tommy . Good morning everyone . Thank you for joining us today . It is my pleasure to report on our Q3 results and update you on the progress made to date on our strategic initiatives .

Speaker #3: Let's start with our third quarter results . I'm pleased to report that third quarter was highlighted by consolidated revenue growth of 7% versus the prior year .

Speaker #3: As we planned , and communicated earlier in the year . Our goal was to grow revenue in the second half of 2025 , year over year , and we achieved this in the third quarter with the improved revenue we generated an expanded bottom line result in the third quarter with net income of $13.1 million , or earnings per diluted share of $0.41 .

Speaker #3: And our record quarterly adjusted EBITDA of 30.2 million , with regards to the performance within our end markets , we have delivered year over year revenue growth for Q3 and each of our five largest industry verticals energy market consistent of our oil and gas and power generation industries , led the way , growing 8.1% .

Speaker #3: Oil and gas was up 6.2 million , or 6.2% , and power generation was up 2.8 million , representing 24.3% growth year over year .

Speaker #3: This results are attributable to strong turnaround activity . Pcm's projects and market conditions , and power generation's driven by increased demand for rope access services within our renewables business .

Speaker #3: Aerospace and defense . Our second largest market was up 10.6% , or 2.3 million , due to a solid volume gain across the private space and defense industries and in addition to the successful price increase strategies , our largest customers in this market continue to forecast future growth in their businesses over both the short and long term .

Speaker #3: As evidenced by their robust backlogs with its higher than company average margin profile , aerospace and defense is one of our top strategic priorities for both top line revenue generation and margin improvements .

Speaker #3: Industrial and infrastructure markets were both up in the third quarter of a prior year . We achieved 15.8% growth or an increase of 3.1 million in industrials , driven by the increased demand of manufacturing , and we achieved 21.1% growth , or 1.8 million increase in infrastructure , driven by the increased activity in construction and capital projects .

Speaker #3: Overall , these diversified revenue growth across our five largest end markets and across geographies , including growth of 5.5% within our international segment , was driven by the broad market demand for our services and demonstrates the success of our differentiated solution and our ability to deliver on customer expectations .

Speaker #3: Turning to profitability , gross profit increased by 9.3 million , or 19% , with gross margin expanded by 300 basis points to 29.8% over the prior year quarter .

Speaker #3: The increase in gross margin was due to favorable business mix , closure of unprofitable labs early in the year , and operational efficiencies as a result of a streamlined operational structure and better focus and accountability .

Speaker #3: Consolidated adjusted EBITDA generated in the third quarter was 30.2 million , resulting in a 15.4% EBITDA margin . This represented an increase of 6.9 million , or 29.6% , versus the prior year period , underscoring the improved operating leverage in our business model .

Speaker #3: Let's now shift to a brief overview of our progress against our three key priorities in our strategic plan vision 2030 , the first of which is expanding and transforming our current services to a more comprehensive and integrated solutions for our existing and new customers .

Speaker #3: Our entire leadership team has continued to be keenly focused on meeting with as many customers as possible to hear their voice directly and better understand their perception of mistrust .

Speaker #3: Our integrated offerings and solutions are finding broader adoption and use cases as indicated by the strengths of our recent results . And there is more to come .

Speaker #3: As we continue to unlock mistrust , value . For example , there is an opportunity for many of our field services customers to utilize our proven pcms solution , which , as we demonstrated , would drive efficiency and improve their operational execution .

Speaker #3: This offering illustrates the value of bringing our whole integrated solution to our customers . Since only a very small percentage of our field services customers currently use our data analytics and software solutions .

Speaker #3: This is an exciting opportunity for us and in addition to doing more of existing and new customers in our core markets , we are also winning projects with brand new customers and new and adjacent markets .

Speaker #3: These efforts form the basis for the second key priority of our strategic plan diversification . Expanding our client base into new industries . While protecting our core business .

Speaker #3: Our recent announcement of wins with Bachelor and Kimball related to data center projects and Bechtel on the Hanford Project for the United States Department of Energy , I .

Speaker #3: Examples of recently awarded long term construction projects outside of our core energy markets . The third strategic priority of vision 2030 is focused on building operational leverage , but doing by doing what we do today .

Speaker #3: But better through efficiency and productivity gains . Beyond this , positive sales efforts and in the inflection in our growth , I have continued to strengthen Mistras capabilities and build a scalable , leading asset integrity and testing platform as many our Executive chairman started last year to ensure long term success , sustainability of our results .

Speaker #3: During this third quarter , I added a new chief Human Resources Officer and a new Chief Legal Officer . In addition , we have strengthened our sales and marketing team continued with commercial discipline and have further integrated our sales force .

Speaker #3: We have also reinforced our operational management team throughout 2025 with several new hires who all bring industry expertise , expertise and experience , and a fresh perspective to our lab operations .

Speaker #3: This new managers are already demonstrating early wins and contributing to our operating results . They are early success highlights the intensity , urgency and accountability at each of our locations across all our divisions .

Speaker #3: Mistras has the foundation technical know how proven expertise and people to win . We are advancing our organizational systems , empowering our technicians with digital tools and investing in relationships with our customers to drive ROI and shareholder value .

Speaker #3: I'm confident that we will execute with continuous improvement, and I plan to be very transparent in assessing and communicating our progress and reporting to you.

Speaker #3: I will share additional highlights of our vision 2030 strategy later , but let me now turn the call over to Ed for more details on the financial results .

Speaker #2: Thank you . Natalia . As shown on slide six , revenue for the third quarter was $195.5 million , a 7% increase which exceeded expectations .

Speaker #2: This growth in the quarter reflects increases across several key areas of our business , including our Pcms offering and the aerospace and Defense , industrials and power generation .

Speaker #2: End markets . In particular , our Pcms offering within our data solutions business grew by nearly 25% in the quarter , representing the second consecutive quarter of achieving significant growth .

Speaker #2: This growth was attributed to several implementation projects of Pcms programs . As Natalia mentioned earlier , gross profit increased by $9.3 million in the third quarter , with gross profit margin expanding by 300 basis points .

Speaker #2: This improvement was attributable to favorable business mix and operating efficiencies . On a nine month basis , our gross profit margin has expanded 180 basis points year over year from 26.3% to 28.2% .

Speaker #2: As a result of our gross profit expansion and G&A cost control . We generated $20.4 million of income from operations , which is an increase of 8.5 million , or nearly 72% growth versus the prior year comparable period .

Speaker #2: We improved adjusted EBITDA to 30.2 million , resulting in a 29.6% increase over the prior year quarter . This significant improvement reflects our proactive cost management , operational efficiency , leverage and a shift towards higher margin business .

Speaker #2: Our adjusted EBITDA margin increased to 15.4% from 12.7% for the third quarter and expansion of 270 basis points . As noted in our press release yesterday , our results reflect certain overhead and personnel expenses which have been reclassified from G&A to cost of revenue .

Speaker #2: This reclassification recorded within our financials was 5.7 million for the three months ended September 30th , 2020 . For . The impact of this reclassification for full year 2024 was approximately 20.9 million from SGA to cost of revenue .

Speaker #2: This redistribution of overhead and personnel expenses has no impact on operating income , net income , or adjusted EBITDA . Comparability . Selling , general and administrative expenses were essentially flat in the third quarter as compared to the prior year comparable period .

Speaker #2: Despite the higher revenue level achieved due to our ongoing cost control management . While also making strategic investments in our business . For the third quarter of 2025 , the company recorded $1.8 million of reorganization and other costs related to our continuing initiatives to reduce and recalibrate overhead costs .

Speaker #2: In addition to incremental costs of other related actions . Our effective income tax rate for the third quarter was approximately 22% , benefiting from discrete items in the quarter , whereas we expect the full year 2025 effective rate to be approximately 25% .

Speaker #2: Interest expense was $3.4 million for the third quarter , down by just under $1 million , or 21.4% from the prior year period , due to a lower cost of borrowing .

Speaker #2: For the third quarter , we reported GAAP net income of 13.1 million , or $0.41 per diluted share , compared to 6.4 million , or $0.20 per diluted share , in the prior year period .

Speaker #2: This improved result of doubling year over year for the quarter significantly exceeded expectations . Note that the build up of accounts receivable both billed and unbilled on our balance sheet as we discussed in the second quarter , has continued to cause a drag on our cash flow generation .

Speaker #2: In the third quarter , as we have shared earlier , this is a working capital timing item due to implementation and adoption of an upgraded ERP system .

Speaker #2: In April , which has taken us longer than anticipated to come up the learning curve . Note that unbilled accounts receivable did decrease as of September 30th compared to June 30th , 2025 , whereas billed accounts receivable increased over the same time frame .

Speaker #2: Hence, we anticipate positive free cash flow generation in the fourth quarter of 2025. We will focus on improving our cash flow performance in the quarters to come.

Speaker #2: Specifically , improvements to our back office structure , focused tools and accountability will contribute to reduced accounts receivable , both billed and unbilled .

Speaker #2: Although some improvement is projected in the fourth quarter , we anticipate to normalize our free cash flow generation . The first half of 2026 to more historical levels .

Speaker #2: In addition to the higher day sales , outstanding experienced in 2025 , the increased restructuring charges and incremental CapEx investments year over year have also adversely impacted our free cash flow .

Speaker #2: Due to this build up of net working capital . As of September 30th , 2025 , bank borrowings increased year over year , with net debt of 174.5 million as of September 30th , 2025 .

Speaker #2: On the positive side , we are continuing our investment in our business for the longer term . While lowering , maintaining a trailing 12 month leverage level of just below 2.7 times .

Speaker #2: We expect positive free cash flow and debt paydowns in the fourth quarter , and we continue to emphasize debt reduction as a priority .

Speaker #2: Use of our residual free cash flow . Although strong revenue growth was achieved in the third quarter , we expect full year 2025 revenue to be between 100 and 70 6 to 700 and 16 to 720 million .

Speaker #2: This would represent essentially flat performance compared to the prior year . After adjusting an approximate 1% reduction in revenue resulting from our ongoing efforts to voluntarily exit unprofitable business during 2025 .

Speaker #2: Whereas adjusted EBITDA has continued to improve and is expected to increase for full year 2025 . Accordingly , we are raising our prior qualitative adjusted EBITDA guidance range of exceeding the 2024 adjusted EBITDA level of 82.5 million .

Speaker #2: Based on our strong third quarter 2025 adjusted EBITDA performance results and the current fourth quarter forecast, we expect our full-year adjusted EBITDA to be between $86 million and $88 million.

Speaker #2: Our focus for 2025 has been and remains margin improvement and adjusted EBITDA expansion , such that we can generate profitable growth and invest further in our growth momentum heading into 2026 .

Speaker #2: We appreciate your continued support . And at this time , I would like to turn the call back over to Natalia for her closing remarks .

Speaker #2: Before we move on to take your questions .

Speaker #3: Thank you . And I'll conclude by summarizing the market opportunity . We see and preview why we believe Mistras is a well positioned to create and capture more value demand for our services is continuously driven by a mission critical projects , aging assets , and aging infrastructure across a diverse set of demanding and dynamic industries .

Speaker #3: That said , the stress of today is not operating at the full potential of our capabilities . We have historically operated as a company in silos and on a project by project basis .

Speaker #3: Historically , it was more common to be commissioned by a customer to provide a single nondestructive testing at a specific plant versus an entire program on a more strategic , enterprise wide basis .

Speaker #3: In fact, it is the exception and not the rule that the customers of Mistras utilized our services in a holistic way. This represents significant opportunities for future growth.

Speaker #3: Our overall strategic priority in the near term is to change this paradigm and drive more strategic value to our customers through the synergy and scale of our capabilities .

Speaker #3: The time is right because the challenges that our customers face today require an enterprise level approach to risk mitigation and optimal return on their CapEx investments .

Speaker #3: We believe Mistras has the technical know how to expertise , data analytics and advanced solutions portfolio to best serve as the new standard for 21st century testing and inspection industry .

Speaker #3: Our vision 2030 Strategic plan is built on the foundation that Mistras is significantly more valuable to our customers when we deliver the complete suite of services of our platform as an integrated solution in the months and quarters ahead .

Speaker #3: We will be sharing more detail on the execution of our plan and how we are connecting with our customers . In the meanwhile .

Speaker #3: Let me close with recapping the three priorities of our strategic plan . First , to continue to develop and deliver comprehensive and integrated solutions to our existing customers in our core markets .

Speaker #3: Our goal is to be more integrated with each client by providing holistic solutions instead of singular fixes . At the enterprise level , we drive value for customers and in doing so , we expect to broaden the addressable revenue and profit opportunity .

Speaker #3: Secondly , diversify into new industries while protecting our core business . We expect our revenue mix and end markets to become increasingly diverse as we do more for new customers .

Speaker #3: Historically , our company has been subject to oil and gas , secular cycles , and our objective is to diversify in order to mitigate the impact of cycles tied to commodity prices .

Speaker #3: Thirdly , to build upon operational efficiencies , do what we do today . But better to improve our margins primarily in the field services business .

Speaker #3: We have an opportunity to drive increased profitability as we deliver solutions for clients on a holistic enterprise basis . We have had recent success in margin progression through operational efficiency , and we believe it will be a catalyst of our vision 2030 strategy that will drive sustainable operating leverage , industry leading performance and scale .

Speaker #3: I will close by thanking all of our customers and partners who have contributed to our superior results this quarter , in particular , I would like to sincerely thank all of our employees from the front lines to back office for their tireless efforts in executing on their day to day tasks while embracing transformative change and evolving strategy of our company .

Speaker #3: These efforts are creating value for our customers and, in turn, our shareholders. We look forward to updating you on our performance as we progress further.

Speaker #3: With that , let me turn the call back to the operator for questions .

Speaker #1: We will now begin Q&A for today's session . We will be utilizing the Raise Hand feature . If you would like to ask a question , simply click on the Raise Hand button at the bottom of your screen .

Speaker #1: Once you have been called on , please unmute yourself and begin to ask your question . Thank you . We will now pause one moment to assemble the queue .

Speaker #1: Your first question will come from Mitch Pinheiro with Sturdevant . Your line is now open . Please go ahead .

Speaker #4: Hey . Good morning . Can you hear me ?

Speaker #3: Good morning . Mitch .

Speaker #5: Morning , Mitch .

Speaker #4: Okay . Hey . So a couple things . First . On the . I didn't see a breakdown of the oil and gas revenue by subcategory .

Speaker #4: And I didn't know if that was an omission or if you planned not to have that in your releases going forward .

Speaker #3: Yeah . Mitch , I will explain . We did , in fact , remove that subcategory reporting and I reported before , I have done a lot of analysis of , you know , how our customers buy and how we operate and basically what we we've learned that lots of clients , many clients of ours straddle between those two sub , you know , 2 or 3 subcategories .

Speaker #3: So reporting on those sub subcategories is not very accurate . So but I can tell you right now , you know , because of the strong quarter especially you know attributed to the turnarounds downstream was up about 14% .

Speaker #3: Where we also saw the LNG sector is very strong and midstream . And upstream was low single digit growth . So that's kind of gives you an idea of where we are .

Speaker #3: But again , several of our customers are in between those subcategories . So reporting doesn't make sense .

Speaker #4: Okay . Yeah . Maybe you should figure out a way to . Recategorize it because it's obviously the lion's share . Two thirds of your business .

Speaker #4: And it does have a , a , a fairly large impact . You know , when you have , you know , strong upstream , downstream , at least have some visibility there .

Speaker #4: And so enough of that . Then the other , the other question I have and this is sort of less to do with the quarter and more to do with reporting is , you know , as I look at your your business , I , it's hard to understand what field services shop lab .

Speaker #4: You know , I understand data analytics . It's hard to really understand and how to model that you know . So if you look at your and then to then on top of that with all your subsegments oil and gas , aerospace , industrials , power gen , it's a confusing way to present your story .

Speaker #4: Financially . And I was wondering if you're going to look at changing the way you present your financials to better reflect how you're looking at the business .

Speaker #3: Yeah . Good comments . Thanks , Mitch . We can certainly follow up with you on that . And see what would make sense .

Speaker #3: How you would like us to to to give you better picture . So do you have any comments ?

Speaker #2: Yeah . I mean , it's a good question . We struggle with this as well . The best ways to look at the business .

Speaker #2: But we try to give you as transparent of you as we can . We give you geography , you meaning all investors , geography , we give the markets being served .

Speaker #2: We're talking about our service types . Now , you know , between the field , you know , the in-lab and the data .

Speaker #2: So we are trying to pull it apart so you can better understand it . And we're trying to give you multiple views of it .

Speaker #2: But you know , we will continue to call out the the high the low and give you a feel for what's , you know , growth rates , relative mix is all very important .

Speaker #2: Run and maintain versus call out is something we also talk about . That's another important way of looking at the business to get to the run rates .

Speaker #2: But you know all of that's important . And we'd like to give you a different , different ways to view the business , to understand the drivers of the the activity .

Speaker #2: Yeah .

Speaker #4: No , I .

Speaker #5: Appreciate that .

Speaker #3: We report separately the in-lab services , as well as the field services . Some of our labs are still are doing both . So we are certainly now separating that .

Speaker #3: So to give more transparency into the operations and the performance so that you will see some improvements there for sure as we're going forward in 26 .

Speaker #3: So and again , our strategic plan is built around the specific industries and market protocols that we serve . So you will see more there for sure as we progressing with our plan okay .

Speaker #4: I mean, like for instance, so just taking a look at, you had oil and gas, you know, good performance there.

Speaker #4: Thank you. And I would have thought field services would have been up. Then I see field services down 1%. So why would field services be down 1?

Speaker #4: When you had such a nice quarter in the oil and gas segment ?

Speaker #3: But if you see the other category in the same table , excuse me . Yes . If you see the other category in the same table , that's the labs that do both those offices that do the the field inspection and the in-lab testing .

Speaker #3: So and that's where you see the increase . Right . So substantially increase . So and again to that point , you know we as we go forward in 26 , we will separate those .

Speaker #3: And you will not see others any longer . So that will give you a much better idea of field services . And in-lab .

Speaker #3: And then data analytics as well .

Speaker #2: And Pcms is another piece of that answer . Pcms is oil and gas focused . There in half the refineries in North America , but they're not field services .

Speaker #2: They're clearly data . So that's another example there where that industry is up because of pcms . But they're not field services . They're they're in a different category .

Speaker #2: I.e. the data solutions category .

Speaker #4: Okay . And then and then staying on this , you know , your aerospace and defense . Very nice growth sort of accelerating out of like a , a slower first half .

Speaker #4: And I see that , you know , shop laboratories was up 12% . I'm assuming the shop laboratories is mostly your aerospace and defense business .

Speaker #3: That is correct . That is correct . Yeah . Most aerospace defense and industrials are , as you know , third largest end market is industrial .

Speaker #3: So most of our in-lab is is testing for the industrials and aerospace and defense .

Speaker #4: So what kind of capacity do you have I mean so you know you've consolidated some of that . But you know do you have the capacity to grow at this type of rate for a couple of years .

Speaker #4: Or is there a is there a bottleneck there that you have to solve or can you talk a little bit about how you can grow the aerospace and defense business with the within the .

Speaker #3: Absolutely .

Speaker #5: The labs .

Speaker #3: Absolutely . A couple of things there . Yes . Very proud of the team . In in lab in there . They've done very good job .

Speaker #3: There was a volume increase as well as the the price calibration . So we can see that certainly that customers are now much more willing to pay for the services and the value we provide to them .

Speaker #3: So but to to answer to your specific question on capacity , that is our strategic plan . Right . So to to to expand further on the capacity , we are continuing to build out hub and spoke model where we have several large hubs in in different parts of the country , as well as Canada , where we have the most capabilities .

Speaker #3: And then we have a small labs where we can take the orders and be closer to the customers . So we expanding two things .

Speaker #3: We expand capacity by building out those , those hubs as well as the expanding capabilities where we're adding new services . You know , we reported earlier in Q2 that we added welding acquisition .

Speaker #3: So we continue to add machining repairs , rework , cleaning . So basically optimizing the supply chain for our customers . So we , you know , you've you've seen our CapEx is a little bit up .

Speaker #3: That is all goes in the growth growth investments . So that's CapEx . And we advancing our UDT capabilities , ultrasonic capabilities and our labs .

Speaker #3: So that's again will give us much better and bigger capacity to serve our clients because market is growing right . Market is you know , our customers are disclosing publicly .

Speaker #3: They have backlog . We continuously talking to our customers and they they are expecting growth . They are cautiously optimistic . Right . Especially in the commercial aerospace sector subsector .

Speaker #3: They are cautiously optimistic because there's some tightness in their own supply chain . Nevertheless , there is a is a growing , growing business for us .

Speaker #3: And it's growing not only in the US but also in Europe . And another thing don't forget is defense , right ? Defense .

Speaker #3: Defense growth is is obviously expected in whether it's in Europe military spend . And or us . Right . So it goes also well for , for us .

Speaker #2: Some of these same projects which are being funded jointly with the customer , they need us to grow . They need this capacity .

Speaker #2: They want us to expand . So they're actually jointly funding some of this CapEx to help expand the footprint to service them going forward , to help them catch up on their backlogs that they have .

Speaker #2: And we're very happy to support support them . And

Speaker #2: expand capacity to do that or .

Speaker #4: Okay . Yeah . Just one more question . I'll get back in the queue . But on the last call you were talking about new construction projects related to data centers .

Speaker #4: AI , electrical infrastructure . Can you talk a little bit more about anything that's developed over the last three months ?

Speaker #3: Yes . So so we announced that new projects with with Bachelor and Kimball . So that's that's win for us . Again , as I mentioned last time .

Speaker #3: Right . It's right now in intersection where technology can no longer advance without the the energy . Right . And we've been very prominent in the energy sector .

Speaker #3: So we basically taking the same you know our testing methods and inspection methods and apply it to new use cases . Right . So in data centers it's the same .

Speaker #3: We're doing exactly the same . What we've been doing all all these years . Right . Is , you know , ultrasonic testing .

Speaker #3: We're doing exactly the same . What we've been doing all all the good imaging . Right . To to detect the heat issues .

Speaker #3: So there's a radiography , there's a visual inspection and testing . So all of those services we provide for the for the data center .

Speaker #3: So you know , it's it's more to come on that it's it's a big sector for us . We certainly already you know creating capabilities or having the separate teams that are working on on data centers .

Speaker #3: You know , I reported earlier that we have hired some sales executives that continuously looking into this sector and , you know , developing the relationship with the prospective customers , with new customers .

Speaker #3: So more to come on that it's a good opportunity for us . We feel confident that's it's a good market for us . It's again , it's a part of our diversification strategy and our vision .

Speaker #3: 2030 as part of our strategic plan .

Speaker #4: All right . Well , thank you for the questions . I'll get back in the queue .

Speaker #3: Thank you Mitch .

Speaker #1: Your next question will come from John Franz with Sidoti & Company. John, your line is now open. Feel free to unmute and ask your question.

Speaker #3: Hi , John .

Speaker #1: Is now enabled . You'll just need to mute on your side . Well , why don't we come back to John ? We'll move on to Sri with singular company .

Speaker #6: Good morning . Can you hear me ?

Speaker #5: Yes , yes .

Speaker #2: Good morning .

Speaker #6: Good morning . Thank you . Thank you for taking my call on the , on the , on the Ebit , on the marketing side , can you , can you help me quantify how much of that margin improvement is coming from deliberate lamb lab or business exit versus pure operational execution ?

Speaker #6: And how much of that runway remains for further portfolio pruning ?

Speaker #3: Certainly . Absolutely . Yes . Certainly . The larger part of the margin improvement is attributed to the favorable business mix . So that led to the improved gross profit .

Speaker #3: And then, obviously, operational efficiencies and the closure of unprofitable labs contributed to the improved EBITDA margin overall. So, the majority of the improvement comes from that.

Speaker #3: The revenue improvement , gross profit improvement , mostly in oil and gas , right . Attributed to to to our turnaround . Very good traditional seasonality impact .

Speaker #3: There . And and then growth in all all the other sectors or industries . So but in terms of operational efficiencies , obviously it played played a role there .

Speaker #3: And closing of unprofitable unprofitable Ops as well .

Speaker #6: Okay . Sounds good . Thanks for that color . And I know you commented a little bit about the aerospace industry and the data analytics industry , which end markets are you really showing ?

Speaker #6: Some , most forward visibility into 2026 ? And , you know , the kind of acceleration in spend from your key customers .

Speaker #3: So what we are really seeing where we see . Well , first of all , the markets kind of all markets right now and that's contributed to our Q3 results as well , are quite stable .

Speaker #3: And we see growth is in aerospace and defense in particular defense . Right . Where we see the increased opportunities there as well as in the infrastructure data centers are , you know , infrastructure segment .

Speaker #3: So that's where we see that there will be potential opportunities and growth as well as in power generation as well , because , again , you know , it's now infrastructure and energy .

Speaker #3: And you know , energy demand is coming from again , technology expansion and advancement . And so on . So I would say those three sectors , right .

Speaker #3: Are aerospace and defense infrastructure and power generation . We believe that we will see growth in 2026 . Having said that , obviously large , percentage of our business mix is in oil and gas .

Speaker #3: And so we continuously working with our clients in that sector in that market vertical to offer integrated solutions . So that first pillar or first priority of our strategic plan is to increase the wallet share with existing customers .

Speaker #3: And we believe there is integrated solutions . We certainly can achieve that . Where we envision growth coming from customers using our oil and gas customers using more than just fuel services inspections .

Speaker #3: But we're adding , additional services such as Pcms , such as other robotics , rope access , and so on . So we quite confident about the about the markets as we're looking for for next year .

Speaker #3: But of course, what I can tell you right now is that we will start making growth investments in those sectors.

Speaker #3: Right , to get this ability to grow and capitalize on opportunities .

Speaker #6: Gotcha . And that CapEx that you are mentioning that you'll have to make that's dependent on the cash conversion that you will be able to accomplish by the end of this year .

Speaker #6: Is that correct ? Or would that are we trying to model increase in debt levels ?

Speaker #3: That's right . So obviously cash generation is one of our priorities internally . This is something that we can control . So and that is something that is absolutely will take priority as we're stepping into the new year .

Speaker #6: Okay . Sounds good . And just one more question . You mentioned that the pricing environment is quite stable as you transform into a more integrated solutions provider .

Speaker #6: What's the competitive environment like ? And what is your kind of your early win rates as you maybe I don't know how early that is as you as you present yourself as a more integrated solution .

Speaker #6: What's what's that ? What's the environment like ? Competitive environment like ? And how you gaining traction ?

Speaker #3: Thanks for this question . Yes , we tracking obviously the competitors . It's slightly different set of competitors as we you know reaching out to to the other markets or looking at the other services and adding services .

Speaker #3: Right . But this is not new to us . This is not new to the company . So although , you know , we we had the bulk of the services , so to speak , right in our portfolio as , as our foundation .

Speaker #3: So we know that environment . We , we just integrating the solutions and we believe that we will produce more value as integrated solutions .

Speaker #3: So that's in terms of the early wins . Yes , I can tell you it's one of our KPIs for our strategic plan is to measure the cross-selling , how we tracking on cross-selling about 3 to 3.5 million this quarter already attributed to the cross-selling results .

Speaker #3: So cross-selling efforts . So that's I can tell you , we will report as we're going forward . So how are we doing on on integrated specifically on integrated solutions .

Speaker #3: And what progress we're making in that regard ?

Speaker #6: Okay . Thank you so much . That's all I had . I'll jump back in the queue .

Speaker #5: Thank you .

Speaker #1: So our next question will return to John with Sidoti and Company . You may now unmute and ask your question .

Speaker #7: Good morning everyone and congratulations on a good quarter .

Speaker #5: Thank you John . I'm actually .

Speaker #7: I'm actually curious about the quarter itself. Was there any revenue that was pulled forward from the fourth quarter into the third quarter?

Speaker #3: No , that was the whole third quarter generated revenue .

Speaker #7: Okay . And I'm also curious about the guide . It kind of suggests , at least at the midpoint , that there's even there's more gross margins sensitivity than I was cognizant of or potentially G&A goes up sequentially .

Speaker #7: Am I thinking about that properly or am I missing one of the puts and takes here ?

Speaker #3: You're talking about Q4 . Is it correct ? John .

Speaker #5: Correct .

Speaker #7: Yes .

Speaker #5: Yes .

Speaker #3: So the way we modeling Q4 is that we certainly . So we believe that we will be in line with our own expectations .

Speaker #3: We already seen good again , good traditional seasonality for October . So our turnaround season was quite strong in October . We also know that again , traditionally Q4 is not as strong as Q3 .

Speaker #3: So we implying in our guidance some revenue growth versus prior year , we believe that will be a moderate growth in in EBITDA .

Speaker #3: So but we believe there's there's no surprises at this time . So that that we are we can tell you about Q4 .

Speaker #2: Yeah . Yeah . No definitely . Yeah . Yeah .

Speaker #7: I'm sorry . Did you want to say something .

Speaker #2: So no no no no no no nothing else to add there John .

Speaker #5: Okay .

Speaker #7: And I'm curious if you're starting to get orders for the upcoming spring season yet. If that's the case, can you give us some kind of qualitative thoughts on it?

Speaker #5: Yes .

Speaker #3: So as we plan for 26 and now in the middle of the budgeting season , as you can imagine , so we believe it will be strong spring turnaround season .

Speaker #3: You you might recall last year was quite different . Right . So this year it was quite different . So spring was not as strong as the fall .

Speaker #3: So right now we see that we have won some of the turnarounds , awards and bids . So we anticipate a stronger turnaround season that was in 2025 .

Speaker #7: That's that's good to hear . And just an odd question . I think . Do you have any you know , impact , you know in any business from the government shutdowns or is that a non-issue for you ?

Speaker #5: No .

Speaker #3: There is not an issue for us .

Speaker #7: Okay . I'm just curious . Okay . Thank you for taking my questions .

Speaker #5: Of course .

Speaker #2: Thank you John .

Speaker #5: Thank you .

Speaker #1: At this time , I see no callers in the queue , so I will hand back to Miss Schumann for her closing remarks .

Speaker #3: All right . Thank you , Layla , and thank you , everyone for joining this call today and for your continued interest in mistrust .

Speaker #3: I look forward to providing you with an update on our business vision 2030 Strategic Plan and progress achieved towards our ongoing initiatives on our next call .

Speaker #3: Thank you .