Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported August 10, 2026 · Beat 5 of last 7 quarters
The Buildout is a website built on agentic AI tools, currently in beta, and could have factual errors.
Mistras' infrastructure growth (+76.5%) is directly tied to the AI infrastructure buildout, with demand from data center construction and U.S. LNG projects driving inspection, commissioning, and asset integrity work. The company's expansion of in-lab testing capacity and investment in automation positions it to capture more of this high-value work, while power generation growth is also benefiting from data center-driven electricity demand.
Mistras delivered Q2 revenue of $193M, up 4.2% YoY, with record adjusted EBITDA of $25.8M (13.3% margin). Growth in infrastructure (+76.5%), power (+26.4%), and aerospace & defense (+13.2%) more than offset an 8.2% decline in oil & gas. Operating income rose 53.6% to $12.9M, and free cash flow improved by $23.9M YoY. The company expanded in-lab testing capacity in Houston and Los Angeles, launched AEScout, and hired an Executive Director of AI.
Management raised full-year 2026 guidance to $740M-$755M in revenue and $92M-$95M in adjusted EBITDA, citing continued strength in aerospace & defense, infrastructure, and power, partially offset by a low level of oil & gas activity due to elevated crude prices. They expect oil & gas to stabilize with flat-to-moderate growth in the second half, excluding turnarounds and exited programs. The company plans to nearly triple in-lab testing capacity by end of 2027, supported by visible customer demand, and expects to return to historically favorable cash flow levels in H2. They remain focused on debt reduction toward a 2x leverage target by year-end and continue to invest in automation and AI initiatives.
“Demand is temporarily outpacing capacity due to a healthy backlog, strong customer relationships and the mission-critical nature of the work we perform for some of the sector's most demanding customers.”
on Aerospace & Defense demand
“Over time, we believe these investments in facility expansion, automation and process improvements could nearly triple our in-lab testing capacity.”
on In-lab capacity expansion
“We expect to return to historically favorable cash flow levels in the second half of the year.”
on Cash flow outlook
It sounds to me that in raising your revenue guidance for the year, it's more a function of better demand in A&D and infrastructure and that you anticipate oil and gas to remain a little bit of a flat to down profile in the second half. Is that a right assessment?
Yes, that's correct. We see strength in strategic growth markets, while oil & gas is more of a stabilization. Excluding turnarounds and exited programs, we saw about 1% growth in Q2 and anticipate flat to moderate growth in Q3 and Q4.
Can you give me your thoughts about the 60% drop down, I think, is what you mentioned, Ed, the conversion. Is that a sustainable kind of number in this kind of environment?
That was for the second quarter. For the full year, it's actually slightly higher than that. In the in-lab and data business, there is a fixed cost element, so when volume rises, there is a very attractive contribution margin drop down. That's a good percentage to use in future periods. That's sustainable.
Can you discuss some of the backlog trends by segment?
We don't define visibility by a single backlog metric. On the field side, visibility is reflected by recurring activity and long-standing contracts. In-lab, we have strategic agreements with minimum volumes, providing visibility for foreseeable quarters. We also have confirmed backlog for turnarounds and projects in infrastructure and power.