Thanks for joining the Mistras Conference Call for its Fourth Quarter and Year Ended 2019. My name is Kevin and I'll be your event manager today. We'll be accepting questions after managements prepared remarks.

Participating on the call for Mistras will be Dennis Bertolotti, the Company's President and Chief Executive Officer; Ed Prajzner Executive, Vice President and 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 U.S. GAAP. Reconciliation of these non-U.S.

GAAP financial measures to the most directly comparable U.S. GAAP financial measure can be found in the tables contained in yesterday's press release and in the Company's related current report on Form 8-K. Those reports are available at the Company's website in the Investors section and on the SEC's website.

I will now turn the conference over to Dennis Bertolotti.

Dennis?.

Thank you, Kevin, and good morning everyone. Before beginning, let me first provide some comments on the current state of the market and the actions that Mistras is taking under these extremely challenging conditions.

First, please note that we are hosting this investor conference call from remote locations, in compliance with New Jersey’s orders to shelter in place.

Because the speakers today are all in different locations, you may hear delays and other irregularities on the call, not only are we coordinating this call remotely, but we are continuing to run our business remotely as well. We have taken many steps in working with our customers, including setting up a dedicated virus response team.

We’ve been gathering as much information as possible to understand and react to the COVID-19 virus and evolving market conditions. We have been issuing health and safety precautions as well as travel advisory and tracking information to our workforce in order to inform them of our pandemic prevention and planning measures.

Mistras provides essential services keeping our customers facilities safe, reliable and efficient. So, we are always on customer sites, and we are now providing them with advanced notice of the practices we have implemented to manage our workforce within and as part of their virus response plan.

As you are aware, many cities and states including our primary facilities in New Jersey, California and Texas have already enacted various forms of shelter in place or stay at home orders, including definitions of essential businesses that are allowed to continue operating while about following rules of social distancing and minimizing the number of employees in one location.

Most U.S. customers are using the guidelines set up by the U.S. government under CISA provisions, which define what business entities are essential under 16 different categories. At this point, we are considered essential for the majority of our customers in every state we operate in and Mistras is very fortunate to have such a position.

Many customers are going to the extra step of writing letters, stating why they are exempt from the applicable state and local laws, and letting any authority reading their document know that Mistras is operating and essential business partner supporting their operations.

The same is true for Canada and the European countries in which we operate in, allowing us to have a significant portion of our business continue to do the work of ensuring safety and reliability for our customers.

We are daily tracking our temporary reductions that customer reports to our managers and updating our expected revenue versus our internal budget established for 2020. Due to the amount of revenue reductions and deferrals we are experiencing, we are making plans for cost reductions in all facets of our business.

This includes looking at temporary adjustments to capital spend, reduction of unnecessary spend in travel and some forms of R&D, balancing hours within the affected facilities experienced in revenue volumes, reduced revenue volumes, limiting of new hires essential only and including reduction of salary expense for all overhead positions.

Our goal is to minimize headcount reduction, but some reduction may be necessary. As this crisis unfolds in the coming weeks and probably months, the management team will continue to review resources versus expected revenue, with a goal of trying to maintain a healthy balance at all times between the two.

By taking these actions, we anticipate being able to stay compliant with our newly established bank leverage targets for the year and expect to have a positive cash flow for the full year 2020 as well.

This crisis can quickly alter our customers resource planning and as a valued partner, they are relying on us to quickly adjust to their staffing needs, both up and down as efficiently as possible. Mistras has long been recognized by the industry for operating excellence.

Our management team has extensive utilization tools, which can tell us our labor utilization per facility. We have multiple staffing personnel assigned in different parts of our system that offer assistance in placing human resources as well as moving needed equipment across our network. We also conduct weekly calls.

I look for opportunities to move labor from areas of slack to high demand. We have long been in the forefront of showing customers how to save money with our proprietary tools, technology and our wide array of offerings, in this crisis of health and finance only makes our offering stronger and more differentiated from that of our competition.

While we would typically use this call to provide an outlook for the upcoming year, given the rapid pace of change as well as the expectation that there are further changes on the horizon, it is extremely difficult to forecast with a high degree of confidence at this time.

Until we have a higher degree of certainty, hopefully when we talk to you about Q1, 2020 results in May, we are unable to provide a full year outlook. Mistras has a long history of showing the resilience and flexibility in responding to rapidly changing market conditions.

During the last downturn in the energy industry, we were able to quickly adjust to new market dynamics and maintain fairly stable performance. Today, we have even better tools at our disposal to evaluate labor utilization rates, and better systems to quickly move resources both manpower and equipment from location to location.

Consequently, we are highly confident that we will continue to build value for our shareholders during these trying times, and that over the long term, this will serve to further increase the value of our franchise. Now, allow me to update you on the year just completed.

2019 was a year of solid progress, as we continue to implement our strategy to leverage our extensive resources to capitalize on a large and growing market to accelerate growth and improve returns.

We reported record revenues significantly expanded margins, nearly doubled free cash flow, improved operating leverage and made great headway, strengthening and diversifying our operations, all of these achievements and all of the discussions we've had with you, which chart a path to long-term success.

First, for the second consecutive year, we generated record revenues and this was achieved despite writing down two significant contrast and in during a severe fourth quarter shock to our large city market. Most of that loss revenue was replaced through acquisitions.

We're now focused on generating organic revenue growth in markets, where we know we have distinct competitive advantages. Second, we had another year of significant gross margin expansion. Over the past two years, gross margins have improved by 220 basis points.

In particular, this expansion reflects the progress being made throughout our business, as all three segments improve their gross margin each year over the past two years.

Our gross profit margins are a great success story, representing a focus on management where we're achieving our objectives through both concentration and higher margin business opportunities and productivity improvements and better utilize our resources.

We believe the opportunity exists to further expand margins, which will remain one of our most important priorities. Third, we generated an almost 80% increase in free cash flow year-over-year. Free cash flow provides a clear view of the earnings power of our business model and produces resources to fuel our growth initiatives.

Fourth, we achieve increased operating leverage with operating margins up 20 basis points this year, despite an approximate $4 million increase in depreciation and amortization expense year-over-year. Beyond our short-term recalibration related to COVID-19.

We also have longer-term, ongoing programs for 2020 to speak out and implement efficiency improvement that will help further improve operating leverage, which should result in an even better bottom line and enhance returns for shareholders in the future once we get past this immediate crisis.

Finally, we achieve significant progress in strengthening and diversifying our operations. We also announced just recently to Dr.

Anthony Tether joined Mistras as an Advanced Technical Solutions Consultant, where he will use his experience as the Former Director of the Defense Advanced Research Projects Agency known as DARPA to help expand our presence in both the technology and digital data markets.

All of these focuses are advancing our strategy to meet the markets demand for faster, better and more comprehensive solutions, as well as actionable insights. Although these are very uncertain times, we are confident in our long-term strategy. Finally, let me speak to you about our digital solutions program.

This is a company-wide initiative involving all of our lines of business and the industries we serve. Customers have been telling us they are hungry for better, faster data as well as insights that can help them make better informed asset protection decisions.

The industrial internet of things is rapidly expanding, collecting real time information from sensors and other sources to provide a more comprehensive overview of an asset's condition. The challenge is to interpret the data so that users can deploy the resources for the best possible outcome.

MISTRAS Digital is an emerging proprietary technology that allows us to integrate our vast data capabilities to solve these problems. We are quickly combining our PCMS, New Century and Onstream Technologies to develop advanced offering that move us closer to a highly reliable predictive capability.

When we last spoke, there was a note of caution to our near-term outlook as we wrapped up 2019. Consequently, we are pleased that, we achieve close to the top end of our revenue guidance, exceeded the midpoint of our adjusted EBITDA guidance and exceeded our free cash flow guidance.

Despite the uncertainty overhanging in market when we issued this guidance, we value our credibility and relationships with the investment community, so we're working hard to improve transparency and increase disclosures. Let me now turn the call over the Ed, for a detailed review of the financials..

Thank you. Dennis. We ended the full year 2019 with solid operating performance, despite the market headwinds Dennis mentioned.

For the year, we grew consolidated revenue modestly to $748.6 million, up from the $742.4 million, as acquisitions added 3.7% offset by an approximate 3% decline attributable to 2 discontinue contracts and an additional 1.5% of reverse foreign exchange impact.

More importantly, a favorable sales mix improved gross profit to $217.3 million, up from $207.9 million last year, an increase of $9.4 million with our gross profit margin correspondingly increasing 100 basis points to 29%. For the second consecutive year, our gross profit margins also improved in all three of our segments.

We had another prudent year in maintaining overall cost control with a very modest 1.8% increase in SG&A expenses for the year. Note that, incremental SG&A from acquisitions alone added approximately $8 million of SG&A year-over-year.

We also had substantial increases in our sales and marketing investment as well as costs incurred in developing and launching MISTRAS Digital. Additionally, we reserve $1.5 million during the fourth quarter of 2019 for customer charges. After these items, our core SG&A expenses declined year-over-year by nearly 3%.

Income from operations for the year was up 9% to $24.1 million, as operating margins expanded by 20 basis points. This was achieved despite depreciation and amortization increasing by approximately $4 million year-over-year. Net income was $6.1 million for 2019, compared with $6.8 million a year ago.

For the year, adjusted EBITDA was $73.5 million, a nominal increase over last year. As I previously mentioned, $1.5 million of customer charges incurred in the fourth quarter of 2019 within SG&A have not been added back to the year-to-date adjusted EBITDA.

Cash from operating activities was $59.1 million for the year compared with 41.7 million last year, an increase of 17.4 million or 42%. Given our modest CapEx requirements, staying well within 25 million per year, our free cash flow was 36.2 million, compared with 20.5 million last year, an increase of 15.7 million or 76%.

Strong cash flow this year has benefited in part from our continuing commitment to improving working capital management. We essentially use nearly all of our free cash flow generated during 2019 to pay down 35.6 million of outstanding debt, and this was in addition to cash a 4.7 million paid for the New Century software acquisition.

As Dennis mentioned earlier, our cash generation capabilities are robust and our priority is to continue to use the majority of our free cash flow to pay down debt. We are not contemplating the confirmation of any material acquisitions in fiscal 2020. Let me quickly review some of the highlights of the fourth quarter.

Consolidated revenues were down 1% from the prior year. The overall organic revenue declined 2.6% in addition to a 0.7% declines due to unfavorable effects offset by acquisition growth of 2.3%. After adjusting however for the Staff Leasing run off, fourth quarter revenues would have decreased by approximately 1.5%.

Consolidated gross profit and gross margins were down for the quarter, both of which were from attributable to lower sales and an unfavorable sales mix in current year period.

Over the course of the year, we have mentioned that improving productivity and efficiency was a priority, and you can see the results of those efforts within SG&A down 1 million from a year ago to just 42.6 million in the fourth quarter, and we call that fourth quarter includes a customer charge of 1.5 million.

Net income was a little under 1 million for the fourth quarter of 2019, compared with a net loss of just over 1 million in the prior year period. Adjusted EBITDA was 14.5 million for the fourth quarter of 2019 compared to 16.1 million in the same quarter last year.

So, again, that's a 1.5 million customer charge in the fourth quarter of 2019 within SG&A is not being added back to the adjusted EBITDA. As Dennis mentioned earlier, Mistras is a strong cash generator. We stated last quarter that we had anticipated and continued strengthening of our cash flow generation coming into the back half of 2019.

As we achieve that, with fourth quarter cash from operations of 18.6 million and free cash flow a 13.7 million. Strong cash flow this year has benefited in part from our continuing commitment to improving working capital management.

The Company's net debt defined as total debt, less cash and cash equivalents was 239.7 million at December 31, 2019, compared to 265.1 million at December 31, 2018. Gross debt decreased by $35.9 million to our fiscal 2019 from 290.6 million at the beginning of the year, down to 254.7 million at the end of this year.

We continue to use our strong cash flow and effective working capital management to reduce outstanding borrowings. At defined in our credit agreement, our leverage ratio was approximately 3.6 times as of December 31, 2019. This was compliant with our credit agreement as of year-end.

We requested our bank group, and they granted us effective March 9, a deferral in the timing of the original ever leverage step down, such that our allowable leverage will now stay at 4.0 until June 30, 2020, reducing to 375 at September 30, 2020 and eventually reducing to 3.5 at December 2020 and periods thereafter.

Given our cash flow, annual interest expense and net debt, we believe our balance sheet is strong and will support the funding of our growth objectives.

As Dennis mentioned earlier, we anticipate being able to stay compliant with our newly established bank leverage targets for the year, and we expect to have positive cash flow for the full year of 2020 as well.

As we stated last quarter, we saw a weakening in the oil and gas market coming into the fourth quarter, which we felt would continue into the first quarter of 2020 as well. Additional macro concerns have surfaced since those prominently the impact of COVID-19, while crude oil prices remain under price pressure.

Given the uncertainty at this time, as Dennis mentioned, we will not be providing full year guidance. Our results have exhibited seasonal fluctuations with the first quarter of the year, typically the lowest level attributable to reduced energy industry activity and we anticipate fiscal 2020 to follow this historical pattern.

In addition, current factors such as low crude prices and COVID-19 are further impacting Q1 2020. Accordingly, we expect revenue for the first quarter of 2020 to be down sequentially from the fourth quarter of 2019 as well as from the first quarter of last year by approximately mid-teens percentage.

Despite the lower anticipated revenues, we expect positive adjusted EBITDA in the first quarter of 2020.

We are confident in our sustainable business model and we remain firmly committed to diversifying our end markets over the long-term, while at the same time serving our current markets with an evolving differentiated offering while also deleveraging our balance sheet with our strong free cash flow.

And with that, I'll now turn the call back to Dennis..

Thank you, Ed. We fully understand this crisis will cause stress throughout most of our daily lives and negatively affect most businesses, but by planning to make it past the crisis, we are excited about Mistras's future.

Industry is under intense pressure to optimize the efficiency of their assets and to continue to comply with increasingly complex environmental safety, environmental and other regulations. This is creating growing demand for our services.

From that fundamental view, we are strategically expanding into complimentary growth markets where we can leverage our broad capabilities and extensive experience where we create a competitive advantage.

We've already taken bold steps to capitalize on the opportunities this creates by expanding into midstream, strengthening aerospace presence and investing in our digital initiatives.

At the same time, we have taken decisive actions to improve returns, having shut underperforming business units, establishing pricing discipline, improve productivity and reduce costs. The COVID-19 virus has become a major threat to global growth and currently our customers are taking steps to reduce exposure to their sites and their employees.

Many times this means essential employees and contractors only, and so far customers are usually counting our crews as part of that essential headcount.

Normally, our crew size is being reduced due to the specific work projects, but this is varied from small to larger percentages of the crew, which we're looking to move effective employees to other sites as our original forecasts for the spring of 2020 was scheduled to be one of our busiest in years.

Unfortunately, this seems to be the new normal and we are keeping a diligent watch or not just the virus, but on our end markets and any impact it they have that can affect our operations.

The impact to Q1 2020 revenue is expected to be in the mid teens and will for remainder of the year, although customers may make up some of this deferred work once the crisis subsides.

Our first concern of course, is for the safety of our employees as well as those of our customers, and we are implementing actions as prescribed by government health officials to provide them with the highest degree of information and protection. The nature of our market is changing.

Global enterprises are asking for more comprehensive and better services. They are quickly evolving away from traditional asset condition reporting to more predictive intelligence that can help them make better decisions how to best deploy their maintenance and repair budgets.

And we believe we are at the forefront of this evolution with our creation of MISTRAS Digital the hub of revolutionary innovation. It is a testament to the hard work and dedication of the many loyal Mistras employees that we have been able to accomplish so much and so fast at the time. I sincerely appreciate the loyal support of Mistras’ employees.

In the face of this extreme market volatility, with health concerns and highly cyclical end market, I started this very business many years ago, and notice stress to going to new and unknown locations and operating under the pressure of staying safe and giving customers the critical information they need in order to operate their facilities.

Now with the additional stress of market and health concerns, we're supporting their efforts to find ways to continually stay focused on their health, as well as that of their peers and on the enormous benefits they provide to our customers.

I am supremely confident that Mistras remains not just the best choice for customers, but also for our employees and their careers, given our ongoing investment and not just our business, but more importantly in our people and their futures.

Care and connect is alive and well at Mistras, and I look forward to our collective success in 2020 and beyond. At the same time, I also want to recognize the patience of our long-term shareholders who continue to support us through ongoing journey. We will now take your questions. Kevin, please open up the phone lines..

[Operator instructions] Our first question comes from Edward Marshall with Sidoti & Company..

I wanted to start, I think you just addressed this Dennis, but looking at kind of some of the pent up demand that was related to some of the deferrals in 2020 and 2019. I anticipated that, that would hit in the first half of the year. As you're having conversations with your customers who are now seeing crack spread going negative.

I'm wondering, if those projects are just simply being differed or if they're actually being canceled out 2020? And any kind of color you can provide with discussions you have with customers? Thanks..

Sure. Ed, I’ll handle that question. So, it's a combination. We've had some locations that are pushing it off by 2 to 4 and 6-weeks, typically 2 to 4 weeks that are saying that they want to delay. We've had a few that have pushed it off completely out of Q2 and moved it into Q3, I don't know of any that have canceled it until further notice.

But typically, what they're doing is they are reducing the hours because I think what's going on with this oversupply of market that's out there and this lack of demand. If you go on the streets, you're the only call out there. I think refiners aren't in a rush to get back online.

So, we've seen a lot of refineries that have tapped out their schedule to do the maintenance. They reduce the amount of hours. They limited the amount of people coming from outside of their region because of the hotel, the lack of hotel space and everything else.

So, they're trying to keep it the more local folks, reducing the amount of hours and typically taken the outage itself, the ones that are keeping the outages going from say a two or three week outage to a four or five or maybe even a six week outage, just because of trying to work it at a slower pace, making sure that the crews that they have are virus free.

Another indication of places like where there's camps up in offshore or in remote areas where people have these close quarters and camps, you'll see customers extending the weeks, sometimes they go 10 days on, 10 days off or 21 and 21.

They're not going to 4, 5, 6, 7, 8 weeks on, extended period off to make sure people can quarantine themselves while they are off, and bring it back on in longer periods. So, what they're trying to do is make sure that, once they have an isolated virus free workforce that they maintain as long as possible.

So, I guess the answer to your question is, it's a little bit of everything but customers are trying to slow down the amount of bodies that go to their sites, because that will reduce the amount of virus and protection.

But at the same time it's not uncommon for customers to be doing questionnaires about where they traveled from in the last so many days to be doing respiratory through a stethoscope or even a thermal scan to check for temperatures, things like that are not uncommon for customers right now as part of their plan as well.

And that's why we're doing tracking of our employees so that we can tell them where they'd been personal and business wise..

And I guess this might be an unusual question, but with crack spread being where they are.

I'm wondering, have you seen any pull forward of work, maybe that was been originally scheduled for the second half of the year that might be being pulled into the first quarter and maybe the scope is changing or small projects as oppose to the big turnaround, just kind of curious?.

Yes. I'll take that one as well. I would say, we haven't seen anything pull forward, but what I'm seeing is in fact, even within the last day or two, I've got some of my senior vice presidents talking to me about some customers are trying to bring people back on. What happened is they severely limited what was essential and not to bring people back on.

I haven't seen while it could make sense to say if something was going on in fourth quarter, can we bring it in today's scope? I just don't know what the lack of people and everyone going remotely and lack people on the sites. I don't know if they could pull that kind of planning off in such a short period of time.

But, I think what they're trying to do is, I think from what we're seeing now, there's some places say in Western Canada and places like that where the fuel price has gone down so far that it just may be prohibitive to try to do too much right now and they're trying to watch to total capital.

That's where you're going to see more of the delays going further out right now. But for the most part, I haven't seen anyone pulling it in, but like I say, it seems like they're trying to do their best to hold it within the quarter if they can..

This might be the first call in a while that I haven't heard you guys talk about alternative initiatives, meaning aerospace and midstream penetration.

Any updates or comments that you can kind of elaborate on for those two markets and your penetration there?.

This is, Jon. I'll take the first part of that, and I'm sure Dennis might want to pick up on it.

I think from an aerospace perspective, that part of the business is holding up really well, virtually all of our customers are considered essential and therefore they give us a exemption letters to which enables us to continue working on their behalf, because we're by proxy essential as well. So, the aerospace business is holding up very nicely.

And in particular, we're working with, I think one or two important customers to expand scope and to be ever more useful to them. So, we feel very good about aerospace in the United States. In France, unfortunately that country is under virtually an entire lockdown for the month of April. We anticipate that in early May that will come up for air again.

So, we are seeing a virtual stoppage of our aerospace activities in mutual agreement with our largest customers there, even though our business development efforts are ongoing, and they're still very promising. On the midstream side, Onstream is in the process of having a good first quarter.

Our other midstream efforts are going at pace, but the spring is a little bit hard to peg right now..

Our next question comes from Andrew Obin of BOA..

Good Morning, this is David Ridley-Lane on from for Andrew.

Within the SG&A, what portion of your costs are variable versus more fixed in nature? And here you're taking several new term cost actions may be sorted in any way to give us an idea for the scope and size of those?.

So, this is Ed. David, I'll take that one. I mean, on the P&L, we certainly break out the differentiation emanation from SG&A that G&A is obviously fixed. Much of our SG&A is variable. What we're going through now is an exercise of as we said on the call, recalibrating the footprint to the revenue at hand and the volume.

So, we'll take the measures as necessary to continue to scale, the workforce and CapEx spend as well. We'll make sure that all costs all overheads future return scale to the revenue level, as far as G&A is fairly variable and we will manage that to their to the revenue cycles as they play out over 2020. So, we're setting that very hard right now.

But we do believe there's a there's a good level of control, we have to manage that number and we'll keep it again constantly kind of balanced and recalibrated with the revenue level to minimize that reaches to the bottom line to the operating profit line..

And just as a follow-up on the aerospace commentary, how much of your work is kind of tied to the divisional equipment versus aftermarket services which might be impacted by fleet grounding, and so forth?.

To-date the 736, 737 MAX program has impacted us, I say more in France than in the United States. But I wouldn't call the impact to be very large because we've got a pretty diversified aerospace business across many platforms. So, the MAX has had an impact.

I think earlier in the year, if we were estimating that impact of as much as a million or two, maybe a couple million dollars of adverse impact if it continued for very long into the year.

I think I saw a news bulletin the other day that that production may resume in May, and that would bode well for a slightly lesser impact upon our business, but we have other aerospace initiatives that could offset that reduction, so overall not a big impact..

Our next question comes from Sean Eastman with Keybanc..

This is high level for me to start. The color in the prepared remarks and how you guys are managing through the uncertainty is certainly very helpful. And I don't want to paint you into a box, but just some more color on what you guys are expecting as sort of a base case recovery in terms of timing.

Maybe what you expect to come back quickly, what might take more time? And then, at what point in the year will you have some good visibility into the fall? Anything even just qualitatively around setting sort of a baseline would be very helpful..

Okay. Sean, I'll take that. As you know, we're all watching the same news on CNN on my little home office all the time, trying to see without the volumes you're trying to watch what's going on.

From what we can see, I guess the best I can tell you is, it's going to be in the states that don't have the orders and are lease affected, but our gas and oil customers are really at the forefront of those that are taking the changes because of, during these turnarounds they can bring in anywhere from hundreds to thousands of new employees after their sites, and their concern is where they'd been, right.

So, what they're trying to do is minimize it. But, I think in areas that aren't affected very hard and if they can keep the crews as local as possible and do the testing and that bring in a lot of new people, I think they're going to try to follow this for 15 day or if it gets extended a little bit. I think they're trying to follow that more or less.

But we do see signs of those customers coming back sooner. Like Jon was saying in our shop environment, aerospace, it could be aerospace, it could be defense, those areas are going hard and strong.

So, on the shop environments, we see the only slow down there is what Jon was alluding to in countries like France and others, where they're just doing a total lockdown in the country for a while. But once that locked down comes back up, they’ll come back up.

So, it's hard to say date certain, but I really believe that, there's a possibility that customers could take this spring personally. We had a very, very busy April and then it fell off sharper into May and June for the spring. I believe that April will definitely be taken off from the top.

But the hope is that, it gets spread out among the three months of the quarter and you'll see May and June be a little bit more, maybe stronger or not as silly, not as weak as as what April look like and stay there until a prolonged spring.

So, it looks like from the energy side, from the manufacturing side, for aerospace and defense and things like that, I think what you're probably going to see is a hard push on April numbers and then probably gets much more moderated into may and June from what we're seeing.

But again, that's my guess and by region and certain areas of the country may get hit harder than others. For instance, Texas has gone to a city by city, but not yet to a statewide. If they go statewide, which I believe could be fairly soon on a shelter in place, could that crimp some of them operations as well too. So, that's still very fluid..

Okay, got it. I realize it's an impossible question, but just as much insight from the frontline folks.

It’s helpful from our end, right?.

Yes, and I appreciate it..

And then maybe just from a financial position perspective, any big chunky uses or sources of cash over the next 12 months that may not be totally obvious that we should be conscious of? And, maybe just a discussion on the flexibility you have around managing cash and debt levels through all this uncertainty would be helpful discussion?.

Yes, there's nothing out of the ordinary planned in terms of inflows and outflows for 2020.

We did keep CapEx under our guidance for 2019 and we'll manage that even further down, but we're not going to impair our business obviously, but we'll pull the CapEx down hopefully a meaningful percent this year and we do believe our cash flows are sound we're going to continue to manage the balance sheet very well.

As I mentioned, as always we do have a little more room on the other step down leverage for the covenants we have going through the year now down to the three, five at the end of the year.

So we believe our cash flows are strong, we will stay even a positive all year and cash flow positive all year, manage our liquidity, we are going to work very hard to keep our with as minimal as we can and to bring the cash in from the customers.

As Dennis and Jon said, we are essential personnel with our customers and they do choose as a partner so we do believe that cash inflows will continue on the pace that they have historically. So, we feel very comfortable there. We will manage down the CapEx requirements as well throughout the year ago.

So, we feel very comfortable that, we can manage through and again, we'll take the cost out as necessary to keep the cash inflows and outflows balanced and positive throughout the year. So, I'm very confident that that's always been a very good, strong suit across all the time and we'll manage that through these down cycles as well.

So, I'm confident that we will keep our liquidity and keep our cash flow as moving along..

And then lastly for me, we've just been reading about how remote monitoring applications around critical infrastructure could be a pretty prevalent theme coming out of all this.

Can you talk about what you're seeing there where MG fits in? And maybe this long-term, whether you see any potential sort of secular positives coming out of all this?.

Yes, this Jon, Sean. I’ll talk that. It's hard to predict on secular positives right now, when you're in the midst of the fog of war. It's hard to say that it's once the fog clears up, it's going to be sunny, but certainly we feel that way in general from our company perspective.

And to your point on remote monitoring, we're very active on that front right now. We've got our products team, doing quite a lot of development, working on beta product with a couple of different important customers in the wind turbine space of remote monitoring solutions that we in there are excited about in terms of the potential looking forward.

We think that this is certainly from what our customers are telling us.

This is an area they have a keen interest in awareness and it's an opportunity to add a ton of value and to replace manual inspection work that's done occasionally, even to augment replace to an extent drone work that's done today and provide more real time awareness and visibility of the status of those assets and the operating conditions.

So, we think it's very exciting also in oil and gas we've got a [caliber-rate] product which has been gaining steam as well for remote monitoring. And certainly of course, I'd be silly to not mention bridges. We've had a number of bridges we've been installing, for an important state department of transportation last year into this spring.

We are in the process of, we've been awarded several bridges in Europe that we're actively working to serve to install monitoring guarantee to perform monitoring services for including one bridge that's in the news right now in the UK. So, we feel very excited about the monitoring space. That's a key part of one of the legs of our future..

Interesting, go ahead, go ahead..

Sean, let me add to this, to your point, the new normal might be the customers start looking at this and saying, if there's key areas, maybe we should get some remote monitoring on it for times like now. I mean, we're learning to do this remotely and others that are trying to do more and more remotely.

So, I think to your point, and again it's hard to predict that, this is a turning point, but people might start looking at this and saying, is there capabilities we can do to add to keep monitoring? Because most refineries aren't going to want to shut down their because the amount of work and effort to shut down, vacate the lines come down properly and then start back up, it's too much work.

So, they're running on essential, I think times like now. They're running at a lighter load just to keep the place going. So, to your point, who knows, maybe people will start looking at the new norm is to try to have critical areas monitor. I mean, that's a possibility.

But as you know, it's hard to see what's the key turning point in people's minds, but it's certainly out there..

Our next question comes from Tate Sullivan with Maxim Group..

Hi. Thank you. Good morning and thanks for the previous commentary and I'm really focused right now at least the questions out 2Q. Of course, I think you already when you announced your revised covenants indicated your debt as of that day, which gives me an idea first quarter.

But can you remind me of your contract terms maybe outside refining? I understand, how, I mean, it will depend on how quickly they were fighters come back with some maintenance work after April, but everything else learning.

I mean, do you have an average length of current revenue? Do you have what level of revenue visibility do you have now for the current for 2Q please? Just following up previous questions on that..

Hi. This is Ed. We've got a decent visibility out for one quarter in normal markets in steady state environment which obviously is not at the moment. So, it is very fluid and they're changes happening where we're getting out sooner than we thought later. Hopefully say you longer than we thought.

So, there is a lot of movements, I mean, the turnaround schedule and project work, we generally have a rolling calendar going out at you even past a quarter. But, obviously we're forecasting as we go, and we've got good visibility to Q2 right now. But again, it is very fluid and there is, it's going to, that's why we held off on full year guidance.

We're hoping by early May, we'll have a much better view for the year..

Yes, Tate, it's John. I'll try to add on to that. I agree with everything Ed just said. For Q2, I think the toughest area for us is going to be Europe just because the degree to which France and now the UK have issued a work stoppages and restrictions and so forth and sheltering in place.

Those are somewhat different from how the United States has issued the same sorts of restrictions. So, for instance, as I mentioned earlier in my commentary, in France in particular, we're going to have a big shortfall versus certainly what we would have done in any previous expected period.

But United States, Ed’s right, I mean, in Dennis's commentary to certainly agree that you've got projects, some of which you moved, some of which you've extended, but have slowed down. We have some that are going out as planned, roughly as planned right now too.

So, it really runs the gamut and it's just so fluid as much as we want to guide right now and to really try to answer your question specifically, it's really hard to do that because day-to-day the inputs keep changing..

Yes, we understand given the current situation. And separately, Ed, too, on the CapEx and following up previous comments. I mean, how quickly can you cut off that valve right away? Or do you have some commitments for CapEx for the rest of the year? Just please little more commentary on that.

How quickly you can ramp that down?.

Yes, no we will and already have like as an example we had a large number of new fleet vehicles planned to invest a year to take delivery. We've already postponed that and canceled where wherever we could. Maintenance, run and maintain capital in our facilities, we'll keep that early to knock their business.

But no, we’re not -- there is no long-term build out or commitments there. We can scale that capital to fit to the scope of the business. So, we could easily take that down 10% very easily, if not closer to 20% to 25%. We could reduce CapEx for the full year.

That we will -- we are already looking into that, and I know we're not committed there, so we can scale that as needed throughout 2020..

It’s Dennis. If I could just add a little bit more some flavor of why we're saying its complex, I won't give -- what were exactly. But one of our European operations head in a smaller country out there had a large turnaround plan.

The turnaround was almost canceled because they had different crews coming in from different countries and because of the European border controls and all that, they almost had to cancel a turnaround just because they were finding not our skill set, but other skill sets were coming from outside countries.

And for a while, there was concern that they were going to cancel it then they found another vendor that can handle those operations within the country itself.

So, that's why it's, I mean, customers are trying to do this, but this is hole spacing and protection really does make a change where, truthfully, the amount of bodies that we had off last week versus this week has changed just a lot more dramatically anything.

So, it's, it's hard to get an idea of exactly when but we do see this as customers are trying to fight to maintain as much of the spring as they can..

And I'm not showing any further questions at this time..

Okay, I would like to thank everyone for listening today's call. I wish the best to everyone during this emergency. I hope for a safe and productive day, week and a return to normal activities for everyone in the near future. We appreciate your interest in Mistras and we look forward to updating you on our next scheduled call. Thank you, folks..

Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day..