Mistras Group, Inc. (MG) Earnings Call Transcript & Summary

Thank you for joining MISTRAS Group's Senior Leadership Transition Conference Call. My name is Chris, and I'll be your event manager today. Participating on the call from MISTRAS Group will be Manny Stamatakis, Chairman of the Board; and 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 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 may 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 Form 8-K. These reports are available at the company's website and in the Investors section on the SEC's website. I would now like to turn the conference over to Edward Prajzner.

Thank you, Chris, and good morning everyone. Thank you for joining us on our call to discuss transitions in our senior leadership team and Board designed to strengthen and improve the overall organization, and as task with improving shareholder value. In a minute, I will introduce our new Chairman of the Board of Directors to share his thoughts on these changes and his goals in this new role. But first, let me recap and provide more insight on yesterday's announcement. Dr. Sotirios Vahaviolos, our Founder, Executive Chairman and the heart and soul of the organization for nearly 40 years, has announced his retirement from daily involvement, and has been named MISTRAS' Chairman, Emeritus. We are very pleased that Sotirios has agreed to remain an active member of the Board of Directors, and he will continue -- and we will continue to benefit from his vast knowledge and experience as well as his vision of wisdom, for which we are very grateful. Sotirios and his family remain the largest owners of MISTRAS common stock, so his interest remain aligned with shareholders. Succeeding Sotirios, as Chairman of board is Mr. Manuel "Manny" Stamatakis. Manny has been a member of the MISTRAS Board since 2002 and has served as our Lead Director, Chair of the Governance Committee as well as a member of the Audit and Compensation Committee since the company went public. Additionally, after 20 years of service to the company, Dennis Bertolotti, CEO is departing MISTRAS. In addition to his many accomplishments during his tenure, Dennis has set MISTRAS on a course for continued success with his oversight of many new key leadership appointments and the conceptualization of Project Phoenix. Until a successor has been elected, the Board of Directors has asked Manny to also serve as Interim President and CEO of the company. As a result of his appointment as Interim President and CEO, Manny has relinquished several other of his Board roles, including Chair of the Corporate Governance Committee and Lead Outside Director. Mr. James Forese, Director and currently Chair of the Audit Committee has been appointed to succeed Manny in those roles. The company has also brought on new leadership and promoting others within the organization, primarily in response to the actions anticipated by the implementation of Project Phoenix. To assist Manny, with the implementation of certain key Project Phoenix initiatives, my role has expanded to include the oversight of all commercial functions initiated under Project Phoenix, where I will be able to use my MISTRAS experience and operational knowledge to help drive growth. Internally, John Smith has been promoted to Executive Vice President and President of our Services segment. John has been with the MISTRAS Group for 20 years and has served as Senior Group Vice President of Operations since 2017, where he managed the strategic plan and financial performance for operations primarily in the East and Midwest regions. John has been instrumental in broadening our footprint in the aerospace and defense sectors, notably through the successful acquisition and integration of the aerospace inspection provider West Penn testing group as well as the opening of our 2 aerospace hubs. And externally, we have hired Jerry D’Alterio and appointed him to Executive Vice President and Chief Commercial Officer. This strategic hire supports our ongoing commitment to a commercial transformation and builds on the foundational work of Project Phoenix. Jerry has over 20 years of proven executive leadership experience driving commercial transformations. He will focus on accelerating profitable growth to finding go-to-market strategies and implementing best-in-class commercial operating models to enhance growth across the organization. Jerry will be reporting to me. Before turning the call over to Manny, let me summarize by saying that I believe the Board in driving Project Phoenix and supporting these changes has shown that it is not only confident that we can unlock MISTRAS' intrinsic value, but that this is the right team with the right direction to create shareholder value. Earlier this week, we announced that Project Phoenix initiative related to the Products group has been implemented, and this single initiative is expected to improve financial performance by $4 million per year beginning in fiscal 2024. There are several other similar initiatives set to roll out over the coming months. Finally, before turning the call over to Manny, let me provide highlights of this background and qualifications. As I said, Manny has been a member of the MISTRAS Group Board since 20 -- 2002 where he served as Chair of the Governance Committee and Lead Director for the past decade. He has also served on the Audit and Compensation Committees and our recently formed ESG Committee. More recently, Manny has chaired the Project Phoenix Steering Committee, which is our -- the company's EBITDA improvement program. Manny was both the chief architect and driving force behind Project Phoenix. He has also an accomplished entrepreneur in his own way and he is an Executive Officer of Capital Management Enterprises. In addition, he has held multiple board and chairmanship positions, including Chairman of the Delaware River Port Authority, The Drexel College of Medicine, the Pennsylvania Supreme Court Investment Advisory Board, and the Pennsylvania Shipyard Development Corporation, (sic) [ Philadelphia Shipyard Development Corporation ], where he was a catalyst in bringing shipbuilding back to the Philadelphia region. He earned his bachelors in Industrial Engineering from the Pennsylvania State University and received an honorary Doctor of Business Administration from Drexel University. Our Chairs Emeritus, Sotirios stated, "We are all pleased and grateful that Manny has agreed to also take on the role of interim CEO and the entire Board of Directors has full confidence in Manny's leadership and determination to create value from MISTRAS shareholders." I would now like to turn the call over to Manny.

Thanks, Ed, and good afternoon, everybody. It's my pleasure to be with you today. I want to keep my remarks brief but I do want to share with you my thoughts both as Chairman of the Board and as Interim CEO. I'm very honored that the Board has elected me as Chairman of the Board. MISTRAS is fortunate to have such an esteemed and experienced Board of Directors and I look forward to continuing to work with them as their Chairman. I also want to say a few words about Sotirios. I have worked with Sotirios on MISTRAS projects and initiatives for over 20 years. He is a remarkable individual. We started this company when it was a small unknown company and has built it into a New York Stock Exchange publicly traded company. Sotirios is a fountain of knowledge, a tireless worker and an inspirational leader, and I am honored to succeed him as Chairman of the Board and very pleased that he will remain on our Board of Directors and hold the title as our Chairman Emeritus. I am honored that he has been so supportive of my taking over his successor chairmanship and to continue moving his legacy forward. My [indiscernible] as Chairman and that of my fellow directors will be to increase shareholder value. MISTRAS is a valuable franchise, a leader in its field but it seems that the Street has not seen that value. I along with my fellow directors and our enhanced management team are committed to changing that. Earlier this year, we decided to engage with an accomplished international consulting firm to help us identify and accelerate a path to more stable growth and improved financial results. We are calling this initiative, Project Phoenix. This initiative has resulted in many recommendations, which we have consolidated into various work streams. As Ed mentioned, our management team has already implemented the Products group work stream. I also want to say a few words about our departing CEO, Dennis Bertolotti. Dennis' goal for 2023 was to make sure the Project Phoenix was initiated and implemented. In addition, he wanted to make sure that our management team evolved and was strengthened as we embark on our mission to further enhance shareholder [indiscernible]. Now that this has been accomplished, Dennis has decided that this is the best time to move on to the next chapter of his life. On behalf of our Board of Directors, our management team and all of our 5,000-plus MISTRAS employees, I want to thank Dennis for his leadership as our CEO and previously as our President of Services, and for his 20 years of commitment to MISTRAS service. We all wish him well in his new endeavors. In that regard, we will be immediately engaging an international executive search firm to help us in this effort and to identify qualified and experienced candidates to lead this great company. Ed discussed some of our new leadership and there are other experienced leaders behind these senior executives that are equally prepared for the task in hand. I am very pleased to be working with Ed Prajzner, John Smith and Jerry D’Alterio as well as the other members of our senior management team, who are all highly accomplished and are well qualified and have the appropriate experience for their new roles. Our goal at MISTRAS will be to drive shareholder value by improving our EBITDA via productivity and efficiency improvements and by growing our top line revenue to generate better enhanced margins. We want to achieve a return that is commensurate with the value we deliver. I look forward to interacting with our shareholders as we move forward and keeping you apprised of our progress as we create value. Now I would like to turn it back to Ed for some closing remarks.

Thank you, Manny. I would like to thank everyone for joining this call today and for your continued interest in MISTRAS. While we won't be taking questions during this call, we will continue to communicate with you on our progress. As previously discussed, Manny and I intend to provide a more comprehensive description of the various Project Phoenix initiatives and work streams on our third quarter earnings call, which we expect to be during the early part of November. Thank you again. Have a nice day and stay safe.

This concludes today's conference call. Thank you all for participating. You may now disconnect, and have a pleasant day.