In a recent earnings call, Mistras Group Inc . (NYSE: NYSE:MG), a leading "one source" global provider of technology-enabled asset protection solutions, reported a nearly 2% increase in revenue for the third quarter ending September 30, 2024, compared to the same period last year.
The company cited growth in international segments and strong performance in North American aerospace, defense, and industrial sectors. However, the oil and gas segment, particularly the downstream subindustry, experienced a decrease in revenue. Adjusted EBITDA rose over 11% year-over-year due to operational improvements, and the company reduced debt by over $10 million through generated cash flows.
Regardless of these positives, Mistras faced challenges leading to a revision of its full-year revenue and adjusted EBITDA guidance downward, and anticipates low double-digit adjusted EBITDA growth and low single-digit organic revenue growth for 2025.
Key Takeaways
- Revenue increased nearly 2% year-over-year, driven by growth in international segments and North American sectors.
- Adjusted EBITDA rose over 11%, reflecting operational improvements.
- The company reduced debt by over $10 million, with $19.4 million in operating cash flow and $13.2 million in free cash flow.
- Full-year revenue guidance adjusted to $725-$730 million, down from $725-$750 million.
- Adjusted EBITDA guidance revised to $80-$82 million.
- Low double-digit adjusted EBITDA growth and low single-digit organic revenue growth anticipated for 2025.
- Special items recorded in Q3 include a $2.1 million reorganization charge, a $900,000 favorable legal settlement, and a $1.5 million nonrecurring income benefit.
- Challenges included healthcare claims, flat volume despite pricing strategies, and project delays in the aerospace sector due to supply chain issues.
Company Outlook
- Mistras expects to focus on higher-margin business expansion and improved operating leverage for growth.
- The company anticipates low double-digit adjusted EBITDA growth and low single-digit organic revenue growth in 2025.
- Long-term agreements with major clients and continued cost discipline are emphasized for future profitability.
Bearish Highlights
- Decrease in revenue in the oil and gas segment, particularly in the downstream subindustry.
- Full-year revenue and adjusted EBITDA guidance revised downward due to an unexpected increase in accounts receivable.
- Project delays in aerospace due to supply chain issues and customer project pushouts.
- Decline in quarter revenues attributed to the absence of a large recurring project from the previous year.
Bullish Highlights
- Revenue growth driven by international segments and North American aerospace, defense, and industrial sectors.
- Adjusted EBITDA rose over 11% year-over-year.
- The aerospace sector is expected to achieve mid-teen revenue growth in the long term.
Misses
- Revenue and adjusted EBITDA forecasts for the full year were lowered due to challenges faced.
- Free cash flow expectations adjusted to $18 million to $22 million, down from earlier forecasts.
Q&A Highlights
- Management confirmed customer payment delays are not indicative of financial distress but rather a matter of timing.
- Reorganization efforts are ongoing, with $5 million incurred year-to-date and plans to continue into 2025.
- The company is committed to enhancing profitability and expects future investments to yield adequate returns.
- Updates on business progress will be provided in future communications.
Mistras Group Inc. remains optimistic about its long-term growth prospects despite the challenges faced in the third quarter of 2024. The company is committed to providing updates on its progress as it continues to execute its strategy and improve operational efficiency.
InvestingPro Insights
Mistras Group Inc.'s recent earnings report reveals a complex financial landscape, which is further illuminated by data from InvestingPro. Despite the challenges faced in Q3 2024, there are several positive indicators that align with the company's optimistic long-term outlook.
According to InvestingPro data, Mistras Group's market capitalization stands at $277.2 million USD, reflecting its position in the asset protection solutions market. The company's P/E ratio (adjusted) for the last twelve months as of Q3 2024 is 14.57, which is relatively low compared to its PEG ratio of 0.16 for the same period. This suggests that the stock may be undervalued relative to its earnings growth potential, supporting management's positive outlook for future profitability.
InvestingPro Tips highlight that Mistras Group's net income is expected to grow this year, which aligns with the company's projection of low double-digit adjusted EBITDA growth for 2025. Additionally, the tip indicating that liquid assets exceed short-term obligations is particularly relevant given the company's recent debt reduction of over $10 million through generated cash flows.
It's worth noting that while the stock has taken a hit over the last week, with a 1-week price total return of -21.32%, the company has shown a strong 1-year price total return of 56.77%. This volatility may present opportunities for investors who believe in the company's long-term strategy.
For readers interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for Mistras Group, providing a deeper understanding of the company's financial health and market position.
Full transcript - Mistras Group Inc (MG) Q3 2024:
Operator: Thank you for joining the Mistras Group's Conference Call for its Third Quarter ended September 30, 2024. My name is Amber, and I will be your event manager today. We will be accepting questions after management's prepared remarks. Participating on the call for Mistras will be Manuel Stamatakis, the company's Chairman of the Board and Interim President; and Chief Executive Officer, Ed Prajzner, Senior Executive Vice President and Chief Financial 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 cause actual results to differ are discussed in the company's most recent annual report on Form 10-K and the other reports filed within the SEC. The discussion in the conference call will also include certain financial measures that were not prepared in accordance with U.S. GAAP. Reconciliation 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 the Form 8-K. These reports are available at the company's website in the Investors section and on the SEC's website. I would now like to turn the conference call over to Manuel Stamatakis.
Manuel Stamatakis: Thank you, Amber. Good morning, everyone, and thank you for joining us today. The company's third quarter results were in line with our expectations with the bottom line growing significantly faster than the top line, once again demonstrating the margin accretive actions and significant operating leverage improvements that we have instituted into our business model. Revenue was up nearly 2% during the quarter, led by continuing growth in the international segment for the eighth consecutive quarter, along with double-digit revenue growth within the North American segment's aerospace and defense, and industrial industries. Our consolidated oil and gas industry revenue decreased during the third quarter, driven by a decrease in downstream subindustry revenue as we had anticipated due to a relatively moderate fall turnaround season compared to a more robust spring turnaround season earlier this year. Our midstream subindustry revenue also decreased in the third quarter due to timing of customer projects, whereas upstream subindustry revenue increased in the third quarter due to strong customer demand. Adjusted EBITDA was up over 11% compared to the prior year quarter and up over 32% compared to the year-to-date period, reflecting significant improvements in our operating leverage. I'm also pleased with our third consecutive quarter generating GAAP net income, which is a function of continued revenue growth, gross profit expansion and selling, general and administrative expense reductions. Selling, general and administrative expenses were down compared to both the year ago quarter and year-to-date periods. For the third quarter of 2024, SG&A was down 1.7% year-over-year to $38.9 million. SG&A was also down 5.1% sequentially from the second quarter of this year. I noted last quarter that both cash from operations and free cash flow performance, along with debt level through midyear June 30, significantly lagged that of prior year and the company's expectations. I mentioned that management would be intently focused on improving this performance via prioritization and focus during the second half of 2024. I am pleased to report that we made significant progress on this front during the third quarter, which Ed will cover later. A few additional comments on the third quarter are as follows: Revenue generated by our data analytical solutions category in the quarter was $17.9 million, which is essentially flat with the prior year as some scheduled jobs pushed out beyond the third quarter, and there were some unanticipated delays with new customer implementations. We expect revenue growth for this category to be a mid-teens growth rate in 2025. Our global consolidated aerospace and defense revenue grew 9.1% in the third quarter in spite of unanticipated project pushouts due to current market conditions. Nevertheless, assuming current market conditions don't materially change, we expect to finish up nearly 15% for the full year 2024. We additionally expect this key growth industry to continue with mid-teens revenue growth in 2025. We will continue with our longer-term strategy of increased investment in this industry, and we'll continue to extend our service offerings to include more additive manufacturing and mechanical work beyond inspection testing. We will also continue to expand our scope of work in the private space industry as a result of robust demand for our services in this area. As such, we expect continued strong performance in this industry over the longer-term. The search for a permanent CEO is on track and progressing well. And my goal is to announce our next CEO before the end of this year. Once in place, I will remain active as the Chairman of the Board and expect to work closely with the CEO, not just during a transitionary period, but on a recurring basis going forward to continue on the momentum and progress developed in 2024. And lastly, I once again want to note the renewed sense of commitment and dedication being demonstrated throughout the entire organization via an invigorated senior leadership team. Now I would like to turn the call over to Ed for a more detailed update on our recent results.
Edward Prajzner: Thank you, Manuel, and good morning, everyone. As Manuel mentioned, I am pleased to report that we did achieve significant progress in improving our cash from operations and free cash flow performance. We generated $19.4 million of operating cash flow and $13.2 million of free cash flow during the third quarter, attributable to our improved results and operating leverage. We used this cash flow to pay down over $10 million of borrowings during the third quarter. Our gross debt as of September 30, 2024, is the lowest level it has been since our acquisition of Onstream in December 2018, and we have paid down over $100 million of outstanding borrowings since that time. We are funding our organic growth initiatives with operating cash flow, which significantly improved in the third quarter of 2024. Although our second half of 2024 free cash flow and debt pay downs are expected to achieve our original ambitions for the year, we will not make up the shortfall from the first half of 2024, attributable to the earlier buildup of accounts receivable. Accordingly, we will revise our full-year free cash flow outlook to a range of between $18 million to $22 million. We will continue to fund our organic growth initiatives internally and the company's bottom line is growing significantly faster than the top line, once again, demonstrating the margin accretive actions and significant operating leverage improvements that we have instituted into our business model. The third quarter of 2024 was our fifth consecutive quarter of both revenue and adjusted EBITDA growth versus the prior year comparable periods. Revenue in the third quarter was up only 2% year-over-year, given the expected slowdown in the oil and gas industry, particularly in the downstream subcategory, which we had anticipated for the second half of this year. Our international segment revenue was up 8.7% in the quarter, continuing the strong trend they've experienced throughout 2024. Although overall, North American segment revenue was essentially flat in the third quarter, the aerospace and defense and industrial industry revenues were each up over double digits in the third quarter as compared to the prior year. Our global consolidated aerospace and defense business revenue grew 9.1% in the third quarter in spite of unanticipated project pushouts due to current market conditions on the heels of having been up 17.5% in the second quarter and 18.9% in the first quarter of '24. Nevertheless, as Manny stated earlier, assuming current market conditions don't materially change, we expect to finish up nearly 15% growth for the full year of 2024 in this industry, and we additionally expect the key growth industry to continue with mid-teens revenue growth in 2025. Consolidated industrials industry revenue was up 17.2% and power generation and transmission industry revenue was up 19.7%, respectively, in the third quarter versus the prior year on the strength of demand in these industries. Although downstream revenue moderated in the third quarter, as we had anticipated, upstream revenue continued to be strong in the third quarter and was up 15.2% compared to the prior year third quarter. Midstream revenue was down 17.8% in the quarter compared to the prior year, primarily due to a nonrecurring turnaround project, which occurred in the prior-year quarter. Oil and gas industry revenue as a whole has been very resilient for the year-to-date in 2024, up 4.5% over the prior year for the first 9 months of the year. Gross profit dollars were up on a year-to-date basis for the first 9 months of 2024 across all segments, as was operating income up for the same period. On a consolidated basis, operating income was $11.9 million for the third quarter of 2024, a significant increase over the prior year period. As Manuel mentioned, selling, general and administrative expenses were down both sequentially and year-over-year. For the third quarter, our SG&A was 21.3% of revenue and was 21.7% of revenue for the 9 months ended September 30. On a full-year basis, we anticipate 2024 SG&A of approximately 22% of revenue, which is down 160 basis points from a full-year 2023 SG&A percentage of revenue of 23.6%. The company's primary objective is to create shareholder value by improving our bottom-line profitability. And in the third quarter of 2024, we continue to make significant progress on that front with GAAP net income of $6.4 million or $0.20 per diluted share. On a year-to-date basis for 9 months, our GAAP net income was $13.8 million or $0.44 per diluted share. Interest expense was $4.3 million for the third quarter, up slightly from a year ago, but down sequentially from the second quarter. We expect interest expense to reduce further in the fourth quarter and on an annual run rate basis in fiscal '25 by first reducing leverage, which will lead to a lower credit margin spread; and second, by decreasing the amount of our average outstanding borrowings. On a trailing 12-month bank-defined leverage ratio on our credit rating -- credit facility rather, was approximately 2.6 as of September 30. This is the lowest ratio has been since the third quarter of 2018. Based on our current projections, we anticipate further reductions to our leverage ratio lower as of year-end due to increasing our trailing EBITDA and reducing debt further. Our effective income tax rate was 29% in the third quarter and was 22% for the 9 months ended September 30. We expect our effective income tax rate to be in the mid-20% range for the full year 2024. Note that there were several special items recorded during the third quarter, including a $2.1 million reorganization and other cost charge, a $900,000 favorable legal settlement, and a $1.5 million nonrecurring other income benefit, which in aggregate, essentially offset with only a very minimal impact to net income and no impact to diluted EPS. All in all, our efforts are resulting in improved performance. I am optimistic not only about this year, but about 2025 and beyond as we continue to implement initiatives that leverage the unparalleled excellence, talent experience, capabilities, and knowledge that have made Mistras a leader in this industry for over 40 years. We sincerely appreciate your continued support and expect to reward your patience with significantly improved results over full year 2024 and for the longer-term future. At this time, I would like to turn the call back over to Manny for his closing remarks before we move on to answer your questions.
Manuel Stamatakis: Thanks, Ed. The third quarter represented another sequential strong top and bottom-line quarter for Mistras. Providing evidence and confidence for our future performance given our newfound disciplined processes and approach. While we are optimistic of our outlook, we know that there is nevertheless still work to be done to achieve our long-term aspirations and goals. As I mentioned earlier, due to the short-run underperformance in certain sectors due to current market conditions and project pushouts, we are revising our 2024 guidance of full year revenue to between $725 million and $730 million, from $725 million to $750 million previously. And adjusted EBITDA to between $80 million and $82 million from $84 million to $89 million previously. And as Ed mentioned earlier, we are lowering our free cash flow guidance to between $18 million and $22 million, primarily related to an unanticipated buildup of accounts receivable. Despite these short-term guidance impacts to our 2024 results, we are confident in our long-term strategy and business model heading into 2025. As to our preliminary outlook for 2025, given the expected growth in our higher margin businesses and continued operating leverage improvements, we anticipate a meaningful improvement in our net income with low double-digit expansion in adjusted EBITDA and low single-digit organic revenue growth. I am encouraged with the progress being achieved by the collaboration between our commercial and operations functions, which is resulting in the successful renewal of long-term agreements with a number of our largest customers. Our continued cost discipline, strategic partnerships with our valuable portfolio of clients and the company's long-term vision have excited us for the prospect of continued profitable growth for Mistras. I am extremely proud of our nearly 5,000 employees who believe in our plan and are working hard every day to achieve our goals and objectives. You can feel that level of energy throughout the organization. And our customers are responding in kind as well with increasing levels of ROI recognition for the value that Mistras employees bring to the equation in delivering on our mission to maximize safety and operational uptime for our customers' vital assets. At this time, I would like to ask the operator to open the call to your questions.
Operator: [Operator Instructions]. Our first question comes from John Franzreb at Sidoti & Company.
John Franzreb: I'd like to start out with the reduction in the cash flow projections. Could you just talk us through what changed today versus 3 months ago when you had the higher projections for the full year?
Edward Prajzner: John, thanks. This is Ed. Yes, great question. Again, we had a very good progress in Q3, and we'll continue that into Q4. It's just very simply our AR balance, it's billed and unbilled AR is still higher than we'd like it. It is elevated year-over-year. So, we're still working to bring that back down. There's just not enough time to do that in the remainder 60 days of the year here to get back to the original aspirations, but it's really a function of just pulling the AR balance back down, is how we get there. So again, we are making progress now. We just didn't get on it quickly enough in the year. So, we're not digging out at this point from the shortfall earlier in the year during the first half. But otherwise, we're on course here, and we'll have further improvements in Q4 as we saw in Q3.
John Franzreb: Are you making systematic changes so that this doesn't occur again?
Edward Prajzner: We are, yes. It's a focus, John. It's an intensity. It's staying on WIP. It's the frequency of us meeting as a management team to get on top of the process, the schedule, having more frequent meetings, more intensity. We are making system changes. We are upgrading our ERP next year, a little more automation, a little more workflow to get late invoices out the door a little more rapidly, but it's more of a process of just making it the top priority for management is how we improve this. So, we lost a little bit of our focus here more than anything else. But we are making some system improvements, and we've intensified some of the timing and the process of how we're following up and pushing the envelope here. I think with higher interest rates now, some of our customers are probably a little less inclined to part with their money. So maybe it's gotten a little more challenging recently as well. I think that could be a part of it. But we are making it a top priority for management to lean in hard here, get the WIP down, get invoiced quickly and then preemptively call the customer and work hard to get the cash in the door. So, we are working on this as a process and do expect it to get back on track here in '25 and not make it the challenge that it's become here for '24 for us.
John Franzreb: Okay. And looking back at the third quarter, I didn't catch this if you mentioned it, but was there any revenue impact from price increases? And on the other flip side, was there any revenue impact from exiting unprofitable business lines?
Edward Prajzner: On your second question, definitely no exiting of work. On the pricing side, yes, same as we've seen throughout the year, there's been modest increase of pricing. That same couple of percent we're seeing. I would probably attribute much of the increase this quarter to pure pricing. Volume would have been flatter across the Board. But yes, our pricing strategies are still in place and very proactive and leading to improvement. But volume is what was off this quarter if you look at the sequential comparison. But yes, there was some pricing benefits during the third quarter.
Manuel Stamatakis: And John, just to add to that, we are constantly evaluating the mix of the business we have and the profitability of the business. Our commercial team has done a really good job in working with our customers to take unprofitable accounts and bring them back to some degree of profitability. As long as we will continue to do that, then we will not be walking away from any business. But if accounts are not profitable, we just can't continue to be in that space with that customer.
John Franzreb: One last question, I'll get back into queue. You highlighted that health care hit the gross margins. Can you kind of quantify how much that was of an impact in the quarter?
Edward Prajzner: I mean, we don't exactly quantify the amount, John, but it was not hundreds of thousands, but more like millions plus enough to impact that gross margin dollar period-over-period. So again, just more of a claims experience impact there, nothing more structural than that.
Operator: Our next question comes from Chris Sakai at Singular Research.
Christopher Sakai: To get back to the higher health care claims expense, was this more of a onetime thing? What happened there to really increase that?
Manuel Stamatakis: We had a couple of very high-cost claimants. Today, high-cost claimants are much more likely than they've been in the past. We had a couple of very high-cost claimants, and that did impact the overall claim activity. But when you remove those high-cost claimants out of the equation, things are relatively normal.
Christopher Sakai: Okay. Great. Can you talk about the power generation and transmission revenue increase? Same with other process industries. It seems to do pretty well this quarter. What do we expect next quarter and 2025?
Edward Prajzner: Yes. Good question, Chris. That's 2 of our smaller sectors across the board of industries we serve. But as we've seen all year, all of our sectors have been up nicely with good robust growth. I mean, a lot of that's just due to the general manufacturing level of activity out there across multiple industries. So yes, we expect to see decent growth, GDP plus kind of growth in some of those less pronounced sectors for us. So yes, we don't forecast necessarily at that level in our outlook. But yes, we do expect to see growth across a lot of those basic industrial and process-oriented industries are all showing a nice healthy level of activity, and we do expect those kind of growth rates we've seen in '24 to continue in '25 for those sectors.
Christopher Sakai: Okay. Great. And then as far as downstream is concerned, do you anticipate an uptick in that next year?
Edward Prajzner: Yes. Good question, Chris. Yes. As we said, our spring was rather robust. Our fall downstream was a little more moderate. Net for the 2 combined, a pretty good year overall for that sector. We see the same thing next year. We're looking at now with our longer-range planning on when turnarounds happen. And yes, we would expect to see a very similar year. Could be the inverse next year. We can't quite control the timing of when our customers want turnarounds to happen, but you may see a little bit of a flip-flop. But right now, it looks like the fall might be a little stronger than the spring. So, you may have sort of the opposite effect next year, but we are still looking at that and locking that down for next year. But overall, we do expect to see a good year again in downstream next year. Just a question of which half ends up being a little stronger than the other, and we're still working through that, but it should be a good year again for that sector next year.
Operator: Our next question comes from Mitchell Pinheiro at Sturdivant & Company.
Mitchell Pinheiro: A couple of questions for you. First, in the oil and gas segment, the midstream has been up and down and up and down. Any reason for the decline this particular quarter?
Edward Prajzner: Mitchell, it's Edward. Yes, it wasn't much a decline this quarter. There was a large recurring piece of work, turnaround work that does fall in midstream sometimes that occurred last year. So, this year, by comparison, looked off, but it was really last year was a little higher than normal due to some work that did not repeat in the current year is what led to that differential in the midstream?
Mitchell Pinheiro:
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Edward Prajzner: We don't think so, Mitchell. No. That's still in what we would deem to be a fairly ordinary band of pricing for future crude prices. No, supply and demand matters more to them. Capacity utilization matters more, and crude prices, future prices do generally affect probably the downstream more than anybody, the midstream and upstream are not very sensitive to crude prices. So net, the current price where it is and where it's expected to be pricing-wise. No, we do not see that impacting anything in '25. That's within the normal range of what our customers were anticipating and planning for. So no, we do not expect current prices to have any impact on the short-term here, no.
Mitchell Pinheiro: Okay. And then you had 2 separate areas that sort of had delays or pushouts on revenue, one being in the data analytics. I think, Manny, you talked about that. And then also aerospace, I guess, international aerospace, there were projects pushed out. You mentioned market conditions. Can you just give a little more color about what's happening in both data analytics and the aerospace project pushouts?
Edward Prajzner: I'll address the second one, and maybe Manny might address the data one. On the aerospace side, that's just a function that is our shop work where parts are coming to us. So, we are at the mercy of the supply chain there. Again, that growth moderated slightly. International is a little flatter. So, the Airbus platform is a little more extended maybe than the Boeing (NYSE:BA) platform is in North America. North America was up nicely in the quarter and has been all year. The European platform is catching up a little bit. But that's just some of the ongoings in that sector. There is a lot of supply chain glitches. We're in a good one. Engine parts are still in short supply. That's a primary area where we do testing. So, we believe the sector in niche that we serve is a little more robust, but there is announcements and some strikes going on in the sector there on the final assembly side, which could be affecting us and may have slightly in the quarter even impacted us. But again, we're looking out longer-term. It is a high-growth sector for us. So, we do expect to continue mid-teen kind of revenue growth in that sector globally. Again, North America got back to COVID levels faster than international. International is still catching back up and lagging a little bit. But again, we're agnostic to the platforms there we can equally serve them in the U.S. versus Europe. So, we believe that will continue to grow. Again, the pace might slow temporarily, but we feel very good about the long-term prospects in aerospace and defense. And it's not just commercial aerospace, yes, they may have a little more of the volatility at the moment, but that same sector also includes private space, which is very strong right now and defense in there as well, and other very stable sector. And we can balance the load amongst the 3 to a certain extent as well. Do you want to address the data side, Manny, or I can explain that one, too.
Manuel Stamatakis: Look, the data business is a little bit flat this year, primarily due to unanticipated delays with some implementations, but primarily due to pushouts by our customers, extending when they want to start the various projects. But we're very confident and comfortable that next year, we'll be back into the mid-teen growth rates in 2025 in this high-margin business. So, this is a temporary situation. It's more of a timing issue, and we're comfortable that next year, we'll be back on track.
Mitchell Pinheiro: So, just hearing pushouts and then seeing the account receivable stay stubbornly high. This isn't a function of your customers having any financial difficulties, but just starting to see some pressure on their own cash flows. Is there any of that happening? Or is it very just some random and audit and pushouts that just sort of all have come together here over the last quarter or 2?
Edward Prajzner: Yes, I would not connect those Mitch. No, our customers are all blue-chip good payers. We've had virtually no write-offs knock on wood for quite some time. So, it's not their ability to pay. It's just their desire to pay, which we have to get better at pushing and driving. As I said , I think that speaking of interest rates, I do think that's relevant. The last couple of years, you get a real yield on overnight money. That was not the case a couple of years before that. So, I think that's a factor. But that's on us. We have to work harder to pull that money in. But no, there's no cause and effect there. There's no issues on our customer side. It's just their desire to pay. It's not their ability to pay. There's not a credit concern that you should be implying there whatsoever. That's not the issue.
Mitchell Pinheiro: Okay. Fantastic. And then a couple of other questions. So, as you looked at the 2024 outlook, the bottom end of your revenue range remains at $725 million, but you did lower the bottom end of the adjusted EBITDA range by $4 million down to the $80 million mark. Is that a function of maybe higher margin aerospace revenue being delayed? Why would the bottom end of that adjusted EBITDA fall at the same revenue level?
Edward Prajzner: It's exactly that, Mitch. And as Manny said, the data business is also a little more flat year-over-year. Your 2 high flyers with higher margin profiles attached to them are lighter in the mix there. So, you have an unfavorable sales mix affecting you there on the EBITDA side where the EBITDA gap opened up a little more than the revenue side because you lost the more attractive piece of the portfolio there underperformed. So that's why that EBITDA number is a little lower in impact there when we lowered the scale of revenue.
Mitchell Pinheiro: Okay. That's helpful. And then I guess final question here for Manny, so your reorganizational costs continue to be there. I think it's -- I can't remember, $5 million year-to-date, and you did about $12 million last year. When do we see the reorg costs stop? And what have the current reorg costs been centered around? And where are we in the reorganization efforts? Are we in the eighth inning, ninth inning? If you could talk about that, that would be helpful.
Manuel Stamatakis: I can tell you that we are constantly evaluating where we are and where we should be. And we'll continue to make changes that are necessary. I wouldn't say we're in the ninth inning, but maybe the sixth or seventh inning because we have plans for '25 and beyond to continue to improve where we are, how we operate and how efficient we are. We have areas that we've identified for '25 that we're going to be looking at to improve profitability, and in some of those cases, we will have to make some investments, and there will be some costs associated to them. But the return on those investments will be more than adequate to justify the cost expense.
Operator: I am now showing no further questions at this time. I would like to turn the conference back to Manny Stamatakis for closing remarks.
Manuel Stamatakis: Thank you, operator, and thank you, everyone, for joining this important call today and also for your continued interest in Mistras. We look forward to providing you with an update on our business and progress achieved towards our ongoing initiatives on our next call. Everyone, please have a safe and prosperous day.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
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