Mistras Group, Inc. (NYSE:MG) Q1 2020 Earnings Conference Call - Final Transcript
May 19, 2020 • 09:00 am ET
[Operator Instructions] Our first question comes from the line of Edward Marshall from Sidoti & Company. Your line is now open.
Hi, guys. How are you, Dennis, Ed, Jon? Hope you and your families are doing well.
Dennis M. Bertolotti
Good. Thank you.
Thank you. Thank you. So I wanted to talk about the operating expense reduction of 10%. First, I wanted to understand is that corporate level, it sounds like it a lot of it might be versus maybe what run through the segments and I want to understand, are you through, or do you anticipate additional revisions. And then finally, as I look at these revisions, are they additive to the bottom line, or are they just simply offsetting the topline reduction. I just wanted to get a sense as to where you are there.
Edward J. Prajzner
Sure, I'll take that, Ed. This is Ed. Yeah, so that total 10% run rate that we're going to is total overhead savings, so of course, that's referring to SG&A as well as the indirect overheads up in SG&A, it's about an equal number, actually, there is about as much of fixed overheads up in SG&A, as the SG&A below. So it's critical across both of those. So it is a run rate. We did have, we did announce the nature of those charges earlier it's salary reductions, it's combining facilities, it's lease savings, you name it, some of that is temporary in the form of the salary reductions or there is more permanent.
But I mean it is additive and incremental as capex is a big piece of that as well minimizing the overhead from that as travel, you name it, all the activity that happens relative to the revenue stream. It goes in unison with it as revenue comes back, some of that would come back. That is a run rate, it's virtually equally split between SG&A and the other piece up in the indirect COGS line is where you'll see that savings come through. We did mention earlier in the year, we had some savings initially contemplated we've doubled down on that do to a higher level at this point, but you will see it really hitting SD&A as well as up in the indirect COGS line.
Got it. Understanding that maybe it's a difficult environment especially just coming out of April, maybe the beginnings of May. But as you talk to customers and I'm wondering what they're telling you and give you an opportunity to kind of talk about maybe some direct conversations. But when I think about the embedded personnel that you have at the sites, I assume that the kind of order of progression would be emergency call-out work would probably come first. Secondly would be your embedded solutions or your embedded product, your embedded people in the facilities, and third maybe project work. Where are you in the discussion, I'm assuming the call as probably pretty sound, but I wanted to get a sense of maybe how the embedded is