Mistras Group, Inc. (NYSE:MG) Q1 2020 Earnings Conference Call - Final Transcript

May 19, 2020 • 09:00 am ET

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Mistras Group, Inc. (NYSE:MG) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Dennis M. Bertolotti

customers lower their cost and this is currently getting a high level of interest. We believe this dedication to the needs of our clients not only enhances our franchise today but establishes a solid foundation on which to build upon the markets eventual recovery.

At the same time, we took decisive actions in response to this new business environment. We have significantly reduced cost, we've cut capex in line with revenue expectations and are more effectively managing working capital to maintain and enhance our positive cash flow. We have accelerated some of the structural changes to improve margins while deploying technology to further improve productivity.

I and other members of the executive team along with nearly all salaried employees have taken pay cuts and our Board has also forgone some of their compensation. Additionally, we have made adjustments to our variable headcount and broadly rationalize our assets to align with anticipated future levels of activity. We are taking these actions while maintaining our commitment to delivering superior services which help our customers increase their efficiency, reduce their costs, and improve their outcomes.

Consequently, we continue to forge ahead in areas that offer the greatest returns. For instance, customers are anxious to adapt digital technology that will help them improve efficiencies, as well as transition to more predictive solutions. In this respect, we continue to work with our customers to leverage our MISTRAS Digital solution that helps reduce non-productive time and improve labor and asset efficiency.

Complementary to MISTRAS Digital is our industrial Internet of Things offerings such as remote sensor monitoring where we are having great success as our MISTRAS Digital ruggedized tablets that are revolutionizing field reporting and we are seeing a steady increase in our mechanical work. All of these actions and initiatives are helping diversify our revenue streams and significantly strengthen our foundation for long-term growth and profitability.

And while our customers in the energy industry are trying to stretch their dollars just like everyone else's, they nevertheless have an obligation to keep their facilities in compliance with regulations and operating at top efficiency. So we are sensing new opportunities to even this environment of demand contraction.

We do acknowledge that some work is either being pushed out or canceled. We believe the second quarter should represent the largest deviation with our revenues potentially down as much as the high 30% range from a year ago. April looks like it should be a peak revenue decline as we are already sensing that May will be better and June could potentially see further improvement if oil prices continue to recover and states continue to relax shelter-in-place orders. The third quarter and fourth quarter will then be expected to rebound nicely.

Given the impact of COVID-19 to our business, we did perform an assessment of the carrying value of goodwill and other intangibles in the first quarter of 2020 and the result was that we recorded non-cash impairment charges of $106 million. Ed will go through the details.

With