Thank you for joining Mistras Group’s Conference Call for its First Quarter ended March 31, 2021. My name is Mattie and I will be your event manager today. Participating on the call for Mistras will be Dennis Bertolotti, the company’s President and Chief Executive Officer; Ed Prajzner, Executive Vice President, Chief Financial Officer and Treasurer; and Jon Wolk, Senior Executive Vice President and Chief Operating 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. The discussion in this conference call will also include certain financial measures that were not prepared in accordance with the U.S. GAAP. Reconciliations of these non-U.S. GAAP financial measures to the most directly comparable U.S. 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. These reports are available at the company’s website in the Investors section and on the SEC’s website. I will now turn the call over to Dennis Bertolotti.

Thank you, Mattie. Good morning, everyone. We delivered a solid first quarter and the New Year is off to the start we anticipated, which keeps us on track for a significant improvement in our full year results. Energy market revenues were solid, essentially unchanged from last year despite the COVID-19-related headwinds for the entire first quarter this year versus only a partial month impact last year. Additionally, the first quarter was impacted by a disruption caused by severe weather in the Gulf region this year as previously disclosed. This stability in energy was offset by weakness in commercial aerospace as well as industrial/manufacturing markets, the latter including the impact of the global semiconductor shortage. Lastly, the spring turnaround season started later than normal this year. While a drag on the first quarter, this likely means its duration will run longer into the second quarter. Our meaningful increase in the weekly total hours billed during the month of April supports these expectations and should drive year-over-year growth in our energy revenue for the balance of 2021. For context, our hours in the month of April 2021 were only off by approximately 10% from our actual pre-pandemic hours in the month of April of 2019. Due to ongoing productivity improvements, gross profit margin improved 50 basis points over last year, and we anticipate further expansion over the remainder of 2021. Our cost reduction and efficiency improvement programs are working. Overhead expense continues to be well controlled, with costs decreasing nearly 5% over the same period last year. We will continue to calibrate our overall cost structure to our revenue level throughout 2021 and only fully restore last year’s cost-out reductions once we believe we are returning to conditions that support the increased level of spending. The net result of our gross profit margin expansion and overhead cost control was a 30% increase in adjusted EBITDA this quarter on a slightly lower revenue base. This illustrates our continued emphasis on building value for our shareholders as we improve the operating margin to grow the bottom line faster than the top. We feel very good about generating over $3 million of operating cash flow, considering the first quarter is seasonally our weakest period of the year and therefore not typically cash flow positive as we ramp up volume and mobilize in the field with the spring turnaround season. We also met our goal of keeping net debt below $200 million as of March 31, 2021. As cash flow improves over the balance of the year, one of our top priorities remains debt reduction. Consequently, we expect to reduce debt over the remainder of the year. So, reflecting on our performance, first quarter results were as expected and the year is shaping up as previously envisioned. Looking more closely at the business, the energy sector continues to offer attractive opportunities, not just simply by virtue of the enormity of the opportunities for us within this market but also because our customers are looking for more complex and value-added partners, values Mistras has been building and focused on for decades. And as renewable energy sources, such as wind, continue to make inroads against traditional sources, such as fossil fuels, we are able to flex with and support our customers’ needs as they evolve. This year’s turnaround activity started later than usual and severe weather that virtually shut down Texas in the surrounding Gulf area in mid-February pushed some of the work expected in the first quarter into the second. Furthermore, the maintenance of COVID-19 protocols across the industry continues to limit flight access especially within Europe. Regardless, with oil prices hovering around $60 per barrel for the last couple of months, the industry seems to be stabilizing, and the spending expectations being reported seem to support the balance of fiscal 2021 as being much better than the first quarter. For instance, technicians’ billable hours in North America for the first three months of the year were down less than 4% from a year ago. Yet these hours have significantly increased in the month of April 2021 and were only down 10% from the pre-pandemic hours in the month of April 2019, like we mentioned earlier. We anticipate further strengthening during the remainder of Q2. Our revenue from the energy markets, both gas and oil and power generation, were modestly up in the first quarter compared to last year’s first quarter and that is remarkable since last year only had a partial month of COVID-19 impact. In aerospace, the commercial market remains constrained, although we are encouraged by recent reports that air miles traveled is rapidly increasing. In the U.S., we have offset a majority of commercial aerospace declines with increases in both new defense and private space flight contracts. In particular, our private space flight opportunity looks very promising with some of our customers’ increased spending activities. The European aerospace market continues to lag the overall market recovery as most of its aerospace revenues are still from the commercial market. We are excited by the alternative energy market, which continues to represent one of our best growth opportunities. As an example, we are beginning to inspect many new customer wind blades and turbine hubs, providing these customers with valuable information on the service life of these assets. While still in the early stages, we are showing the ability to monitor and analyze defects with our proprietary Acoustic Emission technology. This will enable the asset owner to evaluate safety in real-time and avoid potentially catastrophic failures in the future. We are quite excited about the forthcoming introduction of our insights-driven asset protection software ecosystem, referred to internally as Project CAPA. Project CAPA is a cloud-based subscription suite of applications and services. The new platform marks an important evolution from stand-alone applications to an integrated comprehensive toolset designed to help our customers achieve more from their asset integrity data through our innovative apps and data services. Project CAPA incorporates our company’s familiar software, service, and solution offerings, such as monitoring, predictive analytics, data warehousing, sensors, and field operation tools, technologies, and services built on the extensive knowledge and resources developed over the past several decades. We have explained to you how Mistras Digital is achieving acceptance of our mobile technology at several major customers in the energy market, but Mistras Digital has numerous other applications, which we believe will further the acceptance and demand for Mistras Digital. For instance, our labs would be able to track and trace the status of parts we are modifying as they move through our shops. That’s a new application that is being added to this ever-growing tool. To summarize, I am proud of our team’s progress. We continue building the foundational elements necessary to execute our strategic initiatives. This is a huge opportunity. Today, our software, sensors, remote monitoring, and other digital applications may only account for about 5% of our revenue, but we believe there is significant upside opportunity beyond this. We expect 2021 is going to be a very exciting time as we formally introduce Project CAPA. Here at Mistras, we continue to implement all the basic infrastructure improvements and organizational strengthening initiatives we have previously mentioned. This includes investing in sales and marketing, expanding our scope of services, developing innovative new products and services while improving efficiencies, all of which support our long-term goals to diversify our end markets and supply better value for the services we deliver. Results have been steadily improving since hitting bottom in last year’s second quarter due to the impact of COVID-19 as we were able to quickly adjust to a rapidly changing environment. Now, it’s encouraging to see many of our end markets recovering, especially our largest markets in energy. At the same time, we are establishing a robust foundation in emerging markets that are expected to experience rapid growth, such as private space flight, alternative energy, and digital technology. These markets offer the opportunity to generate above-corporate average margins. With a solid foundation in large markets, a leading position in emerging markets, and a solid financial position, we are well prepared for the inevitable transitions that will shape our industry in the coming years. Consequently, we remain confident that we are in the position to achieve by the end of 2021 a quarter revenue run rate approaching that seen at the end of 2019. I would now like to turn the call over to Ed to give you more detail on our financial results for the first quarter of 2021.

Thank you, Dennis. We grew several key performance measures in the first quarter, once again illustrating how our asset-light strategy works during all market cycles, preserving resources during the most challenging times as well as providing for significant operating leverage in periods of volume growth. Gross profit margin improved 50 basis points due to operational efficiencies and favorable sales mix. We anticipate additional expansion in gross profit dollars and gross profit margin over the course of 2021. We continued our focus on controlling overhead costs by reducing SG&A by nearly $2 million or approximately 5% over the prior year quarter. We will continue to calibrate our overhead cost to our current revenue level. Net loss was $5.4 million for the first quarter while adjusted EBITDA was $7 million, which was an increase of over 30% as compared to the prior year. Operating cash flow was $3.1 million for the first quarter, and free cash flow was negative $1.2 million, resulting in a modest borrowing for the first quarter, which is typical for us in the first quarter of any given year, as Dennis mentioned previously. Given our expectations for 2021 to be a growth year, operating cash flows are likely to be lower than the prior year as we invest in working capital to support our growth. Also, keep in mind that last year benefited from items such as the CARES Act payroll tax deferral, which we will be remitting later this year and next year. Regardless, we do expect to generate sufficient free cash flow to further reduce debt over the remainder of this year. We were in compliance with all of our debt covenants as of March 31, 2021. Specifically, the funded debt leverage ratio at quarter end was 4.7x versus an allowable 4.75x of our step-downs in the maximum funded debt leverage ratio during 2021. And we expect to remain in full compliance with this covenant and all covenants throughout the remainder of 2021 and beyond. Our goal is to achieve a funded debt leverage ratio of under 3x by no later than the end of 2022. Our consolidated effective tax rate was 32.7% for the first quarter of 2021. With respect to our segments, all three maintained or improved their respective gross profit margin over the prior year quarter. The Services segment grew operating income to $4.5 million for the first quarter. On a non-GAAP basis, the services segment operating income was $6.5 million in the first quarter compared to $4.2 million last year, which was an increase of 55.6%. Regarding revenue on our end markets, although aerospace and industrials/manufacturing were down, energy markets, both oil and gas and power generation, were up modestly as were other process industries and infrastructure. As Dennis mentioned, Q1 did get off to a very slow start, but it ended very strong in March. And this has carried over into the month of April, with hours approaching those of the pre-pandemic month of April 2019. Additionally, note that Q2 of 2019 has been an extremely strong revenue quarter. But that is the benchmark we are holding ourselves to. That is recovering to the 2019 pre-COVID volume levels as quickly as possible, starting with a strong rebound during the remainder of 2021. So, our revenue diversification strategy is taking hold as we further strengthen our evolving digitization as well as ongoing de-leveraging. We are highly confident that our business model is sustainable, and we remain firmly committed to carry this out. That is our strategy both today and over the long-term. And with that, I will now turn the call back over to Dennis.

Thank you. Let me conclude today’s prepared remarks with our outlook for 2021. Our business has been recovering over the past three quarters from the low experienced in the second quarter of 2020 and the effect of COVID-19 was most impactful to our financial results. Although energy prices and demand are currently stable, the ongoing COVID-19 pandemic continues to impact our two largest markets. Despite this adverse and ongoing impact, we expect annual revenue for 2021 to be higher than in 2020. In addition to the restoration of top line growth, we anticipate that our ongoing disciplined expense management will enable us to leverage this revenue growth and to significantly improve bottom line performance over the remainder of 2021. We anticipate that our quarterly revenue will reflect year-on-year improvement commencing in the second quarter of 2021, with revenue expected to increase as much as in the low to mid-30% range over the second quarter of 2020. We also anticipate that adjusted EBITDA will expand at a much greater rate in the second quarter of 2021 than it had in the first quarter of 2021 and given the significantly higher level of operating leverage that would accompany the expected revenue growth. The global pandemic has highlighted our ability to quickly adapt to a very dynamic environment, and the attractive cash-generating nature of our asset-light business model has proven resilient. We have accelerated our development of new data tools by providing a more focused technology-driven strategy, developing a roadmap to capitalize on the rapid growth of the alternative energy markets and customers looking for a more complex vendor base, has provided an expansion of our aerospace operations into the adjacent defense and private space flight market. Each of these new markets represents tremendous growth potential in which we can offer high-value services that generate attractive returns. I believe the second quarter will reflect our progress in each of these areas as well as an expanding recovery in the energy market. Our customers in both the aerospace and energy markets are looking for more nimble and integrated providers who can adapt to the new market, something Mistras is uniquely qualified to achieve. We remain very optimistic that all the plans we have in place will provide us with a very strong rebound throughout 2021 while acknowledging that the COVID-19 pandemic continues to impact our markets and operations. As always, Mistras’ goal is to remain at the forefront of the industry. We are not complacent to wait for change but are striving to become a disruptive force in our largest markets. And by doing so, we will drive value for our shareholders. Before taking your questions, I would like to thank all the Mistras employees once again for your understanding and the leadership shown in helping us through this crisis. We have shown an unwavering focus on building on our solid reputation for safety, quality and innovation, all while providing outstanding customer service and dedication during these extremely trying times. Please continue to show the same concern for your profession and performance while providing the leadership you have shown to all our stakeholders in the future. By sticking to the tenets of Caring Connects, we can provide a better workplace not only for the Mistras family but for all those we work with. Mattie, please open up the phone line.

Thank you. And our first question comes from Sean Eastman.

This is Alex on for Sean. Nice quarter.

Thank you.

So it seems like the severe weather in the Gulf didn’t really impact you guys as much as we would have thought. I’m just wondering if you can give us some detail around how you guys were able to combat this and if there is anything you learned this time around that you can use for future storms.

So I wouldn’t say it didn’t affect us. I mean we operate 365 days a year, so we expect weather to happen. I mean it did – truthfully, I was surprised it affected us even in our European operations. So a lot of those had some of the same freeze-outs and issues that we had in the Gulf. So we – some of the revenue was lost, but a lot of it really just got pushed. Our biggest problem was it was hitting just before the turnaround season. So in some places, we didn’t have power to open up or come back online as expected. Some weren’t right into the turnaround but were waiting to clear the facilities. And the lessons learned, we’re still doing things like using drones and other things that can do aerial surveys to help them out and other ways to help them understand the extent of the damage, especially in those areas that are up high that you’d normally need scaffolding. And rain and wind events like that or cold weather will always affect your ability to get up high. So we do have other tools and ideas that we’re having, but we’re not immune to it. We just – it’s just part of what you have to deal with. I mean, Ed, I don’t know if we have a number, but it did affect us to a tune of a few million dollars of lost pushed revenue. There is no doubt there.

Right. That’s fairly modest. Yes. Kind of like a large hurricane impact, it’s kind of the same analogy you could draw to what the ice storms were that were – again, as Dennis said, it happens all the time. It’s kind of in our business plan. We don’t really call it out but it does tend to defer some work. Some work does get canceled, but it happens. So it’s kind of a normal piece of the business. So we don’t generally call it out, but it was fairly inconsequential in the greater scheme.

Got it. Very helpful. And then my second question, it’s nice to see year-on-year growth in oil and gas even despite the severe weather and delayed spring turnaround season. But you guys still call out weakness in the commercial aerospace market as well as industrial and manufacturing. I’m just wondering when we should expect a recovery for these two markets. And what do we have to see happen in the broader economy for there to be an inflection point?

I’ll take that, and I’ll throw it to Jon. I think my initial thought is we’re recovering faster domestically or in the U.S. and Canada because of our ability to pivot into defense and private space flight where inside Europe, they don’t have those opportunities. Plus, I think Airbus and Boeing just handled the COVID in the market and who they are protecting and how they worked with it differently. So I think it was more impactful to the European operations. I’ve seen reports about mid-2022 things being up and running as opposed to 2023 from trade associations and others. And I could believe Europe will still lag a little bit. I would think by mid-2022, I would think we’re going to be a lot more comfortable with where we are in the market here domestically because of everything else going on, not just commercial but defense and private, whereas internationally, I could see it going later into 2022. Jon, I don’t know if you got any of your thoughts on it?

Yes. I’d go along with what Dennis said. The recent reports we’ve received from our customers initially suggested that we could not see a meaningful recovery in commercial aerospace until 2023. And I think as the world is starting to reopen and people are getting more optimistic, that’s been updated in a favorable way. And now we’re – they are telling us that we should start to see an uptick in 2022, the amount of which right now we’re not too sure about. But certainly, it’s trending more positively. The other good news there is that as a key supplier, we are picking up market share. We’re in active discussions with some additional customers as part of their becoming an increasing part of their supply chains to get more share of their business because we’ve been operating well.

It’s a great point. There is going to be a lot of consolidation in those markets, and we’re going to be looking for vendors that have a lot more complexity and capabilities. And that’s really leaned into our favor.

Thanks. I will back in the queue.

Thank you.

Hi, good morning.

Good morning.

Just if I recall, to follow-up on your alternative energy and specifically the wind market opportunities, if I recall, you’re involved in sensor beta testing for wind blades. Just curious how that’s progressing and when might we see any sort of material update there in terms of customer acceptance?

Go ahead, Jon. I’ll do a follow-up.

Yes, sure. Thanks for the question. Yes, we’re super excited about this area. We’ve got a team of people, and we work together across segments, which is the terrific thing about this initiative because every segment has got something to bring to offer customers on this. But the trials are working really well. So far, every single wind turbine we’ve deployed on, we’ve been able to come up with meaningful observations that clients are very appreciative of. And we’re now in commercial discussions with several to look for deployments in the second half of this year.

Brian, one thing I would say is – one thing quickly I’ll add is it’s not any diminishing of any one thing that we do, but we’re manufacturing equipment, we’re installing the equipment, it’s proprietary equipment to us. We’re interpreting it. We’re putting it onto a real-time website. We have the ability to do the repairs. And the full suite of services is really what I think makes us strong. I’m sure there are people who can compete in any one of these various steps to create a sensor, put a sensor on or try to understand the data or do the repairs. But having the ability to do all that and keep them up and running in a much more deliberate way, I think, is really where we differ from the rest of the market.

And in addition to that, sorry to go long on this, but also we’ve got intellectual property around the receiving of the signals, the interpretation, and the reporting of what we’re hearing. So it’s a terrific solution, I agree.

Right. So that intellectual property creates a barrier to entry for competition, is that accurate?

Yes. It’s that and having everything up and running because other people are going to have to – even if they could duplicate any one segment of it, they are going to have to create the rest of it, too.

Okay. And just curious, we hear about – especially with the ice storms down south and in the Gulf, we’re hearing about winterization efforts or strategies on various wind farms that were impacted by the storms. Do these sensors fall into that category or is it more just about as turbines and blades age they need monitoring?

To start, it’s actually both. So the great thing about this solution that we are developing is continuous monitoring. So you are continually aware of the condition of your wind turbine blades or other objects that are connected at the top of the wind turbine. So, everything you are aware of, 24/7 plus 365 of the condition of what is going on under the wind turbine. And for instance, during the ice storms, we actually had information that was affected and we adhered to winterization processes. So there is often technology that is sometimes a little bit of a pleasant surprise to us because you start with understanding the impact of icing and deploying in the way we have and with the data scientists that we have, we’re hearing things that our customers are very appreciative of learning.

Okay, great.

And Brian, we can always add additional sensors for temperature pressures or things like that if they were looking at other ways of monitoring it real-time as well if need be.

Right. And in terms of gross margin, as a percent of sales, long-term targets, obviously, you expanded margins again in a shelter quarter or, I guess, you could say. Any targets there or EBITDA margins or operating margins you could share with us?

I mean I’ll take that one, Brian. This is Ed. I mean we’ve been showing a very strong improvement year over year now, up 100 basis points three years in a row. This year, it might be challenging to get to that level. We’re not done yet, though, but it’s not a linear improvement every single quarter. But we do believe that overheads are locked down very well. We think mix is helping us. Operating leverage will clearly, as volume comes back, significantly bounce it up from where it is now as revenue volume comes back up. 30s, where we ended last year, we’d like to stay there and hopefully add a little more this year. But our goal is to keep looking for productivity, efficiency gains, and sales mix helps as well. And we look to keep improving that each year year-over-year, maybe not by that same exact magnitude every year, but the 30 is a good goal we’re going after for this year.

Okay, great. And then just lastly and real quickly, just what services are you providing in the private space sub-sector of aerospace? And how does that differ from what you do in traditional parks inspection or supply chain work in the other sub-sectors? I am curious.

I’ll jump to that quick and throw it to Jon. So it’s really about consolidating all the different steps of a supply chain and helping them out. So we started out with duty inspection. Like anything, Brian, you’re talking about a lab casting or some type of stamped part or something that’s coming out, and then they need it heat-treated. When you do an inspection, you’re going to find some defect. You have to remove some of the defect, then you may have to build back up things like that and/or measurement on deflection from the heat and all the different things that are going into it. There is a lot of steps just to get the pre- and post-inspection. And we are taking on more of those steps because it’s really just a very cumbersome supply chain when you have to ship from one part of the country to another or in Europe – from one country to another to get the different steps done. So by taking on more and more of that, we even got to the point we’re taking on – for some of our customers, we’re taking on project management of some of the parts. And it’s really just – it’s not only we do that in shops but we do it in the field, but it really plays a big dividend and a meaningful difference in how many parts are accepted and how fast they get through. Jon, if you want to add on that?

Yes. No, I think Dennis captured it really well. The only thing I think I would add to that is that we’re also layering on top of this Mistras Digital. So we’ve got a terrific Mistras Digital team, so shout-out to them because they are very innovative and very responsive to customers’ needs. And so we’ve – we are creating – have created a data portal which allows our key customers to observe the status of their parts at various stages of the process, as Dennis just described, between mechanical modifications that we may be doing on behalf of customers or repeated steps of inspection as needed.

Okay, great. Thanks very much.

Thanks, Brian.

And I’m not seeing any other questions in the queue.

Okay. Mattie, thank you. I’ll close it up. I’d like to thank – the whole Mistras team would like to thank you for joining our call today, and we wish everyone a safe, prosperous, and healthy future. Thank you for joining and have a great day.

And thank you, ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect.