[Management View]
Mistras Group reported consolidated revenue growth of 7% for fiscal Q3 2025, driven by broad growth across key end markets and the PCMS offering. Strategic priorities include expanding integrated solutions, market diversification, and operational leverage.

[Outlook]
Full-year 2025 revenue guidance is projected to be between $716 million to $720 million, reflecting essentially flat performance after adjusting for a 1% revenue reduction from exiting unprofitable business. Adjusted EBITDA guidance has been raised to $86 million to $88 million, citing stronger third-quarter results.

[Financial Performance]
Revenue for fiscal Q3 2025 was $195.5 million, up 7% YoY. Net income was $13.1 million, with earnings per diluted share of $0.41, compared to $400,000 or $0.20 per diluted share in the prior year period. Adjusted EBITDA was $30.2 million, a 29.6% increase, resulting in a 15.4% adjusted EBITDA margin, up from 12.7%. Gross profit increased $9.3 million (19%), and gross margin grew 300 basis points to 29.8%.

[Q&A Highlights]
Question 1: I didn't see a breakdown of the oil and gas revenue by subcategory. Is this an omission or a change in reporting?
Answer: We removed the subcategory reporting due to operational overlap among clients. Downstream was up about 14%, LNG sector was very strong, and midstream/upstream showed low single-digit growth.

Question 2: Can you clarify the field services and shop lab reporting? It's hard to model the business with the current segmentation.
Answer: We report separately the in-lab services and field services. Some labs do both, which is reflected in the 'other' category. We will separate these further in 2026 for better transparency.

Question 3: Why would field services be down 1% when oil and gas had a strong quarter?
Answer: The 'other' category includes labs that do both field inspection and in-lab testing, which saw substantial increases. PCMS, focused on oil and gas, is categorized under data solutions, not field services.

Question 4: What kind of capacity do you have to grow the aerospace and defense business within the labs?
Answer: We are expanding capacity through a hub-and-spoke model and adding new services like welding accreditation, machining, repairs, and rework. Some projects are jointly funded by customers to address supply chain backlogs.

Question 5: Can you provide more details on new construction projects related to data centers and AI?
Answer: We announced a new project with Bachelor and Kimball. We are applying our testing methods to new use cases in data centers, including ultrasonic testing, thermal infrared imaging, radiography, and visual inspection.

Question 6: How much of the margin improvement is from lab or business exits versus operational execution?
Answer: The majority of the margin improvement comes from favorable business mix and operational efficiencies, including the closure of unprofitable labs.

Question 7: Which end markets show the most forward visibility into 2026?
Answer: Aerospace and defense, infrastructure, and power generation show potential growth. We are also focusing on integrated solutions to increase wallet share with existing oil and gas customers.

Question 8: What's the competitive environment like as you transform into a more integrated solutions provider?
Answer: We are tracking competitors and integrating solutions to produce more value. Early wins from cross-selling efforts amounted to about $3 to $3.5 million this quarter.

Question 9: Was there any revenue pulled forward from Q4 into Q3?
Answer: No, all revenue was generated in Q3.

Question 10: Are you starting to get orders for the upcoming spring season?
Answer: Yes, we anticipate a strong turnaround season based on early customer indications and award wins.

[Sentiment Analysis]
Analysts showed interest in understanding the detailed segmentation and future growth potential. Management's tone was confident, emphasizing strategic initiatives and operational improvements.

[Quarterly Comparison]
| Metric | Q3 2025 | Q3 2024 | Change |
|-------------------------|---------------|---------------|--------------|
| Revenue | $195.5 million| $182.7 million| +7% |
| Net Income | $13.1 million | $0.4 million | +3175% |
| Adjusted EBITDA | $30.2 million | $23.3 million | +29.6% |
| Gross Profit | $57.9 million | $48.6 million | +19% |
| Gross Margin | 29.8% | 26.8% | +300 bps |

[Risks and Concerns]
Persistent headwinds to free cash flow from elevated working capital, increased reorganization charges, and ongoing ERP transition delays. Increased restructuring charges and incremental CapEx investments have also adversely impacted free cash flow.

[Final Takeaway]
Mistras Group demonstrated strong revenue growth and improved profitability in Q3 2025, driven by strategic diversification and operational efficiency. The company is focused on expanding integrated solutions and market diversification to mitigate sector cyclicality. Despite challenges in free cash flow generation, Mistras is well-positioned for future growth with raised adjusted EBITDA guidance and ongoing capacity expansions in key markets.