Mistras Group, Inc. (NYSE:MG) Q4 2022 Earnings Call Transcript March 9, 2023 9:00 AM ET

Company Participants

Dennis Bertolotti - President & Chief Executive Officer

Ed Prajzner - Executive Vice President & Chief Financial Officer

Conference Call Participants

Chris Sakai - Singular Research

Mitch Pinheiro - Sturdivant

Brian Russo - Sidoti

Operator

Thank you for joining Mistras Group's Conference Call for its Fourth Quarter and Fiscal Year ended December 31, 2022. My name is Michelle, and I will be your event manager today. Participating on the call from Mistras Group will be Dennis Bertolotti, the company's President and Chief Executive Officer; and Ed Prajzner, Executive Vice President and Chief Financial Officer.

I wanted 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 on this conference call will also include certain financial measures that were not prepared in accordance with US GAAP. Reconciliation of these non-US GAAP financial measures to the most directly compared US GAAP financial measures can be found in the tables contained in yesterday's press release, and the company's related current report on Form 8-K. The reports are available at the company's website and in the Investors section of the SEC's website.

I will now turn the conference over to Dennis Bertolotti.

Dennis Bertolotti

Okay. Thank you, Michelle. Good morning, everyone. Thank you for joining us. As a result of the solid fourth quarter, we met our most recent top line and exceeded our bottom line guidance for the year. We continue to organically grow revenue despite the adverse effect of foreign currency exchange, while significantly improving profitability. Up, mid and downstream revenue were all up in 2022, driven by the continued improvement at our customers and strong demand for our services.

Aerospace and defense revenue was also up, led by strength in commercial aerospace, offset by project delays in defense revenue during the fourth quarter. Gross margin improved to over 30% for the second consecutive quarter, in part due to pricing actions taken earlier in the year, helping to offset the wage inflation that we have been absorbing in addition [ph] to lower employee benefit expenses.

With these customer pricing actions now in place, we expect some benefit to both reoccurring revenue and gross margin for 2023. In the fourth quarter of 2022, we were able to leverage our gross profit margin expansion into a 152% increase in operating income, through continued cost discipline with selling, general and administrative expenses down from the year ago quarter despite the impact of inflationary costs.