Mistras (MG) - 2019 Q4 - Annual Report

PART I This part provides a comprehensive overview of Mistras Group's business, including its solutions, market dynamics, competitive strengths, growth strategy, and financial performance. ITEM 1. BUSINESS Mistras Group provides global technology-enabled asset protection solutions for critical infrastructure, offering a 'OneSource' portfolio of services, products, and data management, with 2019 revenues of $748.6 million. Forward-Looking Statements This section highlights that the report contains forward-looking statements subject to risks and uncertainties, advising readers to consult risk factors. - The report contains forward-looking statements based on current expectations and projections, subject to known and unknown risks and uncertainties that could cause actual results to differ materially[11] - Readers are advised to consult risk factors and management's discussion and analysis, and the company disclaims any obligation to revise or update forward-looking statements[12] Our Business Mistras Group offers 'OneSource for Asset Protection Solutions' globally, providing technology-enabled solutions to ensure the safety and integrity of critical infrastructure. - Mistras Group provides 'OneSource for Asset Protection Solutions®' globally, focusing on technology-enabled solutions to evaluate the safety, structural integrity, and reliability of critical energy, industrial, and public infrastructure[13] - These solutions aim to maximize safety and uptime, ensure compliance with regulations, extend asset life, increase productivity, minimize repair costs, and manage risk[14] - Specialized asset protection solutions include: Field Inspections, Consulting, Maintenance, Data Management, Access, Monitoring, Laboratory Quality Assurance/Control (QA/QC), and Equipment[15] - The 'OneSource' model integrates these solutions across the asset lifecycle, with many customers outsourcing inspection and integrity data management on a 'run-and-maintain' basis[15] Our Specialized Solutions Mistras offers a comprehensive suite of integrated asset protection solutions, combining services, products, data management, and technologies for diverse customer needs. - Mistras offers a comprehensive suite of integrated asset protection solutions, combining services, products, data management, and technologies to meet diverse customer needs, from routine inspections to complex asset integrity management[18] Field Inspections This section details the company's field inspection services, including traditional and advanced NDT techniques, predictive maintenance, and automated data acquisition solutions. - Portfolio includes traditional and advanced Non-Destructive Testing (NDT) techniques, predictive maintenance (PdM) assessments, and inline inspection (ILI) for pipelines[19] - NDT allows examination of assets without impacting integrity, crucial for detecting issues like corrosion, cracking, and leaks in industrial assets[20] - Automated data acquisition solutions use smart sensing, robotic systems, and digitized spot inspections for enhanced asset integrity data[21] Consulting The company provides engineering consulting services for process equipment and facilities, including Asset Integrity Management/Mechanical Integrity (AIMS/MI) services. - Provides engineering consulting services for process equipment, technologies, and facilities, including plant operations support, turnaround planning, and profit improvement[23] - Asset Integrity Management/Mechanical Integrity (AIMS/MI) services enhance asset reliability and regulatory compliance through systematic, engineering-based approaches[24] Maintenance The company performs maintenance and light mechanical services, often complementing inspection services, utilizing multi-disciplined technicians for hard-to-access areas. - Performs maintenance and light mechanical services, such as corrosion removal, insulation work, electrical services, and welding, often complementing inspection services[25] - Multi-disciplined technicians offer services in hard-to-access areas using rope access or diving strategies[26] - Mechanical services remain a small part of the business, carefully avoiding conflicts with inspection services[26] Data Management Mistras offers integrated data management solutions, including its proprietary PCMS™ software and MISTRAS Digital™ platform, for asset protection data collection, storage, and analysis. - Offers integrated data management solutions across the asset protection cycle, including collection, storage, visualization, and analytics[27] - Proprietary Plant Condition Management Software (PCMS™) is widely used in North American refineries (estimated 50% of U.S. refining capacity) for inspection data storage, organization, and analysis, providing recurring fees and marketing opportunities[28][30] - MISTRAS Digital™ platform digitizes field inspection data transfer, captures results, and provides electronic reporting, integrating with PCMS and cloud-based monitoring portals for real-time access[32] Access The company specializes in accessing hard-to-reach locations using various methods like scaffolding, rope access, and unmanned systems to minimize human intervention. - The company specializes in accessing hard-to-reach locations (at-height, subsea, confined spaces) using scaffolding, rope access, certified divers, and unmanned aerial/land/subsea systems to minimize human intervention in unsafe areas[33] Monitoring Mistras provides online condition-monitoring solutions for real-time reports and analysis, utilizing a flexible, IIoT-compatible, cloud-based monitoring portal. - Provides online condition-monitoring solutions for real-time reports and analysis, alerting personnel to damages before critical failures[34] - Utilizes a flexible, IIoT-compatible, cloud-based monitoring portal to centralize and analyze collected data, enhancing safety by reducing the need for technicians in hazardous locations[35] - Offers continuous, periodic, and conditional monitoring for various assets and applications, including tube leaking, power transformer health, and bridge structural health[36] Laboratory Quality Assurance/Control (QA/QC) The company operates a network of in-house laboratories offering QA/QC solutions for metal, alloy, and composite components, holding various certifications and OEM approvals. - Operates a network of in-house laboratories in North America and Europe, offering QA/QC solutions for new and existing metal, alloy, and composite components[37] - Services include non-destructive evaluation/inspection (NDE/NDI), destructive testing (DT), metallurgical testing, chemical analysis, and finishing services[38] - Labs hold various certifications (e.g., Nadcap, AS9100/ISO-9001, FAA Repair Station) and approvals from major OEMs, prime contractors, and militaries[39] Equipment Mistras designs and manufactures portable, handheld, wireless, and turnkey NDT equipment, sensors, and software, specializing in acoustic emission (AE) and ultrasonic testing (UT) products. - Designs and manufactures portable, handheld, wireless, and turnkey NDT equipment, sensors, and software for spot inspections and long-term monitoring[41] - Sells individual components or complete systems, including integrated service-and-system technology packages utilizing proprietary testing procedures and advanced software[42] - A leader in acoustic emission (AE) products and also designs/manufactures ultrasonic testing (UT) equipment, with most hardware produced in its ISO-9001-certified Princeton Junction facility[43][44] Centers of Excellence Centers of Excellence provide specialized support for asset, technology, or industry-specific solutions, leveraging subject matter experts for strategic sales and standardized approaches. - Centers of Excellence (COEs) provide specialized support for asset, technology, or industry-specific solutions, leveraging subject matter experts for strategic sales and standardizing approaches to common problems in key market segments[45] Asset Protection Industry Overview The asset protection industry is shifting towards integrated solution providers with advanced NDT and data acquisition capabilities, crucial for critical infrastructure integrity. - Asset protection is crucial for critical infrastructure integrity, with NDT being a prominent solution[45][46] - The industry is shifting from small regional vendors to integrated solution providers with advanced NDT and data acquisition capabilities[46] - Vendors offering integrated solutions, scalable operations, skilled personnel, and a global footprint, especially those delivering advanced solutions and data analytics, gain a significant competitive advantage and recurring revenues[47] Key Dynamics of the Asset Protection Industry This section outlines key industry drivers including aging infrastructure, outsourcing, corrosion, advanced materials, safety regulations, expanding markets, and crude oil prices. - Aging Infrastructure & Increased Utilization: High costs of new infrastructure lead to extending the life of existing assets, increasing demand for frequent inspection and maintenance[48] - **Outs