Thank you for joining Mistras Group's Conference Call for its Third Quarter Ended September 30, 2020. My name is Sarah, and I'll be your event manager today. We will be accepting questions after management's prepared remarks. Participating on the call from Mistras will be Dennis Bertolotti, the company's President and Chief Executive Officer; Ed Prajzner, Executive Vice President, 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 of 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 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 in the Investors section and on the SEC section's website. I'd like to turn the conference over to Dennis Bertolotti.

Thank you, Sarah. Good morning, everyone. Our financial performance was strong in the third quarter of 2020, with revenue, as we forecasted, up nearly 19% sequentially. Gross profit up from the year ago quarter by nearly 200 basis points, and overhead was down over 12%. As a result of this solid execution, we reported a net income of $1.6 million or $0.05 per share for the third quarter of 2020. Additionally, we continue to generate positive cash flow in the third quarter of 2020 as we had anticipated. Consequently, we generated more operating cash flow and free cash flow in the first nine months of 2020 than we did in the same period of 2019. This, in turn, has allowed us to pay down nearly $19 million of outstanding debt thus far in 2020, including over $3.5 million this quarter. Mistras has been adapting and evolving throughout the current pandemic and has been remarkably responsive to its customers. Before that, I want to thank the many dedicated Mistras employees who have endured these extremely volatile times over the past months, all while ensuring the safety of our employees and customers. I'm also pleased to report that we recently restored the remaining salary reductions for overhead positions that we had initiated at the beginning of April 2020 as part of our pandemic plan response. We remain altogether in working through this unprecedented period. Our results in the third quarter reflect a gradual strengthening in our key oil and gas end markets and lesser-than-expected reductions in our domestic aerospace sector. We also benefited from modest market share gains, driven by the increasing value of our comprehensive service offering, delivering to our customers, the added ongoing success of our diversification efforts as we further leverage our investment in technology into adjacent markets. Continuing…

Thank you, Dennis. For the second consecutive quarter, revenue was consistent with our forecast, increasing nearly 19% sequentially from the second quarter to $148 million. This was at the high end of the range in our outlook last quarter. And as Dennis mentioned, the impact of the August hurricanes reduced revenue by nearly $4 million this quarter, which would have put us over the top of our previous revenue outlook for the third quarter. While both services and international results were each down by more than 20% compared with prior year, international revenues were relatively little weaker, due to the ongoing challenges in the European aerospace market where aerospace comprises a larger percentage of the total international revenue as compared to the services segment. For the nine months ended September 30, 2020, our revenue was approximately 76% of prior year revenue for the same period. Despite the dual challenges of energy market volatility and the disruption caused by the global pandemic, customers still meet our essential services to comply with safety and regulatory standards and ensure their plants are operating at peak efficiency. This demand requirement essentially creates a floor underneath our market. Furthermore, we continue to gain market share as customers increasingly adopt our more comprehensive service offerings, including mechanical services; for instance, at the expense of other companies providing narrower solutions. Consistent with the second quarter, gross profit margin increased 190 basis points to 32%. This was down only slightly sequentially from our second quarter gross profit margin, which was the highest quarterly gross profit margin level achieved over the past five years. Gross profit margin improvement is once again attributable to productivity improvements and a favorable sales mix. In particular, gross profit margin benefited from the relative increased sales mix of on-stream aerospace and PCMS, all of…

Thank you. Let me quickly conclude today's prepared remarks with our outlook. It remains difficult to forecast with any degree of certainty at this time. The ongoing COVID-19 pandemic continues to significantly impact our two largest markets, oil and gas and aerospace. For instance, after recovering sequentially in the third quarter, the oil and gas industry appears to be signaling a flattening for the fourth quarter, and crude futures have fallen recently from earlier highs in the year. As I mentioned earlier, aerospace has held strong, particularly in North America for the first nine months of 2020, but it too is now facing headwinds, particularly in Europe. As such, it is likely that a fourth quarter consolidated revenue will be relatively flat to slightly down from the third quarter; adjusted EBITDA will be lower than the third quarter, while operating and free cash flow are expected to be higher than the third quarter. This outlook is contingent on continuing macroeconomic stability, including continuing stabilization in crude oil markets and no implementation of new or increased stay-in-place mandates resulting from an increased spread of COVID-19, which could impact our ability to work as a critical service provider. More importantly, we believe that as we look toward 2021, market conditions will improve, particularly in the oil and gas sector. These are, indeed, challenging times, but Mistras continues to play offense, growing share, investing in new technology and providing the innovation that will drive our industry forward. Our goal is to bring value to our customers. Their challenges will evolve as safety and compliance standards continue to rise and for new and emerging industries such as alternative energy is a brand new world where they are relying on the experience and skills of trusted advisors such as Mistras. As always, Mistras goal is to remain at the forefront of the industry and to drive value for our shareholders. Before taking your questions, I would like to thank all the Mistras’ employees once again for your outstanding customer service, dedication and attention of safety, which you have all shown in these extremely trying times, Caring Connects works. Sarah, please open up the phone lines.

[Operator Instructions] Your first question comes from the line of Sean Eastman from KeyBanc Capital Markets. Your line is open.

Hi, guys. This is Alex on for Sean. Thanks for taking our questions.

Good morning.

Good morning. Can you provide a little bit more color around the expansion into the alternative energy in wind turbines markets and then, also the space and defense markets within aerospace, like how you're positioning to grow in these markets, how fragmented the competition is with the services you provide there and maybe whether the slight mix shift is accretive to margins? Thanks.

Sure. I'll let Jon who's closest on that one.

Yes, I think there's several things there, but. Hi, it's Jon Wolk. Yes, we're very excited about the alternative energy, in particular wind turbines. We've got some important tests going right now where we've installed our online monitoring gear on wind turbine blades a number of turbines with owners that – with names that everybody will recognize. Those procedures – those tests are going extremely well. The trials are receiving very favorable feedback, and we're looking to roll out in a more broad way in 2021 those services once we've got commercial acceptance of our product and service offerings.

Yes. Is this – with this, how do the margin profiles compared to like your legacy typical stuff?

Better than average. And typically, this is because when we perform online monitoring, the revenues are recurring and then the margin – the margin profile is very favorable.

Got it.

I would like to add – I'd say I'd like if we could. When we talk about this for wind, the things that we're going to be doing is A, we're going to be data streaming and monitoring the customer's turbines or hubs or wherever the issues are for the different types of equipment. So we will be giving them online data and telling them right away, which ones are in need of service. So you go away from a time-based type of monitoring to one that is actually based on real-time data. We would also be servicing equipment to make sure that the sensors and the hardware is not what's causing the noise or the defect signals that we'd be getting. We make sure that it's something to do with the piece itself. We would have folks that could access it from at highs and get to – we're not having to bring out scaffolding that could either service the hardware or do to light repairs, if it's wind damage or lightening or anything like that, we would be able to do that and we'd be able to get it back online. So the idea of having one company that can be doing on all that is more of this consolidation. And I know, earlier, you asked about space and it's the same kind of thing. You've got – right now, our aerospace is comprised of commercial and some military. Well, we all know where their side, so that is definitely down, but we're augmenting it with the space. So we're helping out various names, doing things like not only doing the testing, but like we talked about where we might be doing some of the other mechanical services because when you start talking about aerospace and space, customers, their list is a much more complicated, more nuanced way to make sure that someone can do work for them and it creates a very difficult process to fund it all across the country to go from step to step. As we can consolidate not only do you save the time and the queuing up from location to location, but just the time on the road and the ability to get parts through so much quicker is creating immense value and to your earlier question, the space and the win have the same kind, if not better margins that we would see it in shopper or those types of environments.

Thanks. And if I can just ask one more, what's all the talk about tablet sensors and greater use of industrial IoT for monitoring predictive maintenance? Have you guys seen much of an impact to revenues and margin this year from these offerings? And if so, how material has it been and then, how much of a revenue and margin boost could we see resulting from these offerings in the next couple of years?

Sure, I'll take that first. And then Jon can add it. So in the beginning, right now, what we're trying to do is come up with a value for our customers in this. We're not pushing as hard on the revenue. So we're not really worried as much about the revenue, although we are more than recovering our R&D investment on the revenues we're getting from it. Right now, it's more of making sure that customers in trying times like this is going to start looking at every vendor and trying to do a holistic headcount or hourly rate or fixed rate reduction just because. If we can add these differencing services, we believe it gets us stickier in a lot of places and is a protector of margins. The margins, as we get this going and growing the sales and getting more of the online and all that, which we believe COVID is slowing up, it is definitely out there. Those will be very good margins for it. So we're not yet predicting exactly how much the increase will be, but we believe, not so much, you won't see it to be fair in 2020, but in mid and later 2021 is when we expect to see those things really start to add to our stickiness in the revenue and margins.

Yes. It's Jonathan. It's just not on to Dennis's comment that we're very excited also about the value being provided to customers and as Dennis said, the pandemic has slowed the progress, but still the feedback we're getting is really remarkable from customers in terms of the enhanced visibility being provided by Mistras Digital and not only for our traditional service areas, but in related mechanical service areas that Mistras Digital is also enabling higher visibility and productivity and real dollar savings day-after-day with customers. So what we're excited about this is not only for the pickup that we may get from the digital charges themselves, which will be relatively modest, but the market share gains that we can expect and the stickiness with customers that are starting to come as well.

Thank you. I'll hop back in queue.

Thanks.

Your next question comes from the line of Tate Sullivan from Maxim Group. You may ask your question.

Well, thank you. Good morning. Could the gross profit margin in the quarter are looking out – I've heard other companies talk about wage subsidies from Canada and other countries, is that – do you have any wage subsidies in 3Q and might that be an option to get reimbursed for some wages in the coming quarters with other shutdowns?

Yes, it's a good question. Tate, it's Dennis. So yes, there is this CEWS from Canada and all the different subsidies. I mean, we've definitely had those, but you got to remember when you're talking about European and Canadian process to deal with COVID, what they said is instead of like you do in America where you put into the unemployment and unemployed folks have to find their local governments or what have you to get reimbursed, the European and the Canadian said keep them at your site, we know where they are, we will reimburse you, right? So we are getting some subsidies for that, and they got a little bit modified in Q3. We're going to be modified more in Q4. Although I will say there is some European countries that are talking about COVID modifications all the way through 2022 I believe. So they're looking at from long-term ones, but they're reduced, right? It's – we're getting three quarters of 50% of the people that you bring on and – really, it's complicated formulas, but there is some reduction out there, but the thing I would say about that is we had the ability to keep some folks on because we were getting these direct subsidies. If we didn't have the work to keep them on, and we weren't getting a subsidy, we wouldn't have demand, right? So really, what you're getting is almost like push-through dollars because if you pay $1 to an employee that you're keeping them on because there is no work, but the government reimburses you a $1. It's not so much a gross margin bump as it is – it's keeping your flat, right. You're not really making any money on it. You're just getting reimbursed. In most cases, you're getting reimbursed for less than a $1. It's always in certain percentage up to somewhere it maxes out, but it's usually not a 100%. So even this quarter, we were getting some of that in Europe, in France and in Germany, in places like that and we're all changing as well as Canada. So there is going to be a little bit left in the fourth quarter. But they're much more modest than we've seen in Q2 and Q3 at any one country.

Okay. Thank you. Thank you, Dennis. And following-up the wind turbine comments to, I heard another company mentioned some faulty wind turbines when they were installing the spread, but do you – and you talked about going into adjacent markets and the sensor opportunity. It sounds like a great opportunity in the wind turbines. But you do other work currently inspecting the blades before they go on or anything else in that market, please.

So we've done a little bit on the manufacturing side. But to be fair, most of ours has been when they are existing or with the sensors, we may end up looking at deals where we can put the sensors on as they're being manufactured and then have data real-time kind of like you get your cars, you have got stereo on or whatever else is from day one, but we do a little bit on the manufacturing side, but for the most part, that's contained inside the manufacturers and most of our work is once the turbine is up, either with the owner of the wind turbine themselves or the manufacturer, we're actually talking to both. There's large amount of turbines out there that are owned by various companies that are looking at what their warranty will look like going forward. And it’s kind of getting the end of their warranty period for them as well as manufacturers are looking at not in their existing fleet, but like I said, putting this into the new fleet as it comes out.

Yes, Tate, it's John. I'll just piggyback on what Dennis just said. Part of the value proposition to owners of wind turbines is the idea that they can actually avoid some of the cost that they are spending on inspections today by continuously monitoring the status of the turbine blades. So if there is any impact damage, things like lightning strikes or other impacts to the blades, they know instantly because of our technology. And as well, we can determine other defects happening too whereas inspections are done is going to sit on timing deferrals where lots of damage sometimes does occur unfortunately causing millions of dollars of damage for owners that is undetected until some kind of catastrophic event occurs. So the idea is that with real-time monitoring, you can avoid not only the inspection cost, but you can prevent potentially catastrophic damages.

Okay. Thank you. Thank you all.

Thanks Tate.

Your next question comes from the line of Mitch Pinheiro from Sturdivant. You may ask your question.

Hey, good morning.

Hi, Mitch.

Hey, I'm juggling three conference calls here this morning, so I apologize if anything you touched on, but just listening to the wind turbine conversation here. I mean, are you displacing anybody? Is this like a whole new category or why all of a sudden our wind turbine monitoring, demand – why does that happen?

So that's a good question and the way I see it, Mitch, is the wind turbine market has been growing and is becoming a larger and larger segment of the tire service grid right and anything initially when they're up new and shining, it's like having your brand new boat, right, the fiberglass looks good and clean it on after a while you get to start scraping the barnacles and cut it off, right? Same thing with the turbines, they're going to age out like anything else and let's face it. When you look at wind turbine, many things you see is the top of it, the tower and the three big blades. And those delays are inherently where most of the issues are. So as these big pieces of equipment age, like everything else, things have to be looked at and the turbine blades, and the attachment hubs, and things like that are proven to be the most challenging parts of the entire system for the owners and the manufacturers as equipment ages out. So I think it's just a matter of just the whole market starting to get a little bit older, and it's starting to get to the point where how do you look at that and what's the best way. I mean, it used to be just send people out there with binoculars, your scopes or you fly around a drone, but that means you're looking at three blade times every term and trying to figure out where the damage is versus if you had sensors that were telling me, hey, something is going on here, whether it's a sensor going bad, or system going bad, or actual damage starting to incur, you will know it like John said, you will have some kind of indication of where to go to. And you can chase things that are active and ongoing, not just the calendars telling you it's time to do it again.

And just one other, just in for context, I mean, I don't know if there is a number you could put around this, but like how big is the wind turbine or alternative energy monitoring, how big of a market is that in the United States?

So that's a good question to your earlier question, which I didn't really answer is who are we displacing. I don't think we're displacing anybody because, I think, this is a new emerging part of the market. So trying to put a context around how big that is. I mean, I'm not – I can give you a guess, but it would be just a genotype guess without real a lot of facts, but I believe – we're talking to customers who have thousands – hundreds and sometimes thousands and tens of thousands of units that they have or project to have in the next three to five years. And those blades and that part of the rotating system is always going to be the key part of looking at it. More and more attention is being put on to the towers for bad applications of coatings and things like that and some failings here and there. So I mean it's a new market that's growing, and they're getting to have bigger and bigger turbines and you're getting to have bigger and bigger issues with these turbines, because you've got more torque and just larger the size creates more issues. So I think it's going to be something that as the market moves from traditional oil and gas to wind and alternatives, you're going to start to see more and more attention overall being paid to something like this. And the owners don't really have an online offering right now. So they're all trying to work or what's the best way for us to do real-time monitoring versus running around these farms and trying to figure out which one looks bad with a set of binoculars.

Okay. Another question – I just had another question, which – you mentioned something I just caught the very beginning or end of it. You talked about you are seeing robust bidding opportunities. I think you said in pipelines, but are the bids – what's the catalyst for the increase in RFPs and bids? Is it new pipelines that you're bidding on? Is it dissatisfaction with existing service providers, why are seeing robust pipeline?

So that's a good question. I think for us and we're talking about our bidding activity. There is some new in that mix, but it's probably more of the existing infrastructure we are speaking to. And I think it's less of a thing of something new coming into the market, more of that – we are encouraged to see that the capital spend for 2021 still has an appetite out there. There is no pulling back in some of these markets pipeline and some of the gas and oil. We're getting bids for 2021 that we would normally expect. It kind of got quiet there for a while in the second and early third quarter, right. So what we're really doing is telling you there is a return to normalcy in some of these markets, more of them. It's something different. I don't think it's the spring up from a slow mid-quarter, two or three. We're seeing getting back to what you would normally expect, right. So that's the first leading indicator that 2020 should be getting back to some type of normalcy in different markets at different times, but it looks like some of these markets are starting to get back to a pre-COVID stance.

Just a couple of quick ones. Can you talk – you might talk about this. I apologize, but – what's the sort of status of your technician labor force. I mean where – like from an employment point of view, where are you at relative to a year ago and what type of capacity is your sales force sort of operating at right now?

Sure.

That's something.

So we track that weekly in two different main ways. One is since March 15, we track folks that were on furlough because of customer demands, right, from COVID and in the early days of COVID in late March and early April, we had up to 21% of our North American market on some type of furlough either most of the hours taken away or all of the hours are taken away. We are now down below somewhere around 4.5% or so of the employees that are still impacted by that and some might be reduced hours versus no hours. The other thing we do is we track weekly – hourly billable count versus the same week the previous year and versus the previous week in the same year. So we look at sequentially and year-over-year. And we were down by much more than that 27%. We are down 30%, 40% on billable hours for a while. We're now hovering around high-single-digits to low-double-digits differences to the previous week because the customers are still watching how many people are at a site. They don't like crushing too many people in for the turnarounds. Turnarounds in traditional times are all about oil out to oil in, minimizing the amount of time that the unit is actually off line and not generating. Turnarounds this year, they are not worried about that pressure. They're allowing the hours to go slower. It used to be you're running six, seven-day weeks, 10, 12 hours a day. Many turnarounds are still being running at lower levels. Some regions are seeing over time, but not all, because the customers are concerned about COVID spacing and the amount of folks that are in contact with each other and just the overall cost and let's face it, the inventory that they have in their product out in their tanks farms means that they're not that much or rush to get back online. So they are watching their spend. So our hours over the previous year really dropped off quick, but it's starting to catch up too. So like I say that's within single to double-digit-type territory now previous.

Just one last question, on SG&A, you’ve done a terrific job reducing expenses there. And I did hear your comments that fourth quarter will be lower, but you are sort of lapping some of your – or is it some of the costs are being restored a little bit, but what's the sustainable rate over the next couple of quarters? Is it in this level and we see it pop up a little bit.

I'll let Ed cover that for us. Ed?

Sure, Dennis. Yes, more the latter there, it will come a little bit. We had the salary rollbacks throughout the year, we were deferring some other projects and new heads being higher, things like that. So, yes, that number will scale up a little, but it's going to be funded with contribution margin happening as the revenue rebound. So, yes, it's going to kind of we're going to keep the control there, modulate what we're doing. But, yes, the number, we've been holding it down obviously consciously. So it will creep up, but it's not going to pop up. So we're going to control it and scale it as revenue. And as we have said all along here, we're going to continue to keep recalibrating all the overhead cost footprint in SG&A, as well as the indirects up in COGS. We're going to continue to keep that calibrated to the revenue ahead such that the margins stay there for us. So, yes, there will be a little pressure on that number going up, but we think that will also – will be offset with the new revenue going up as well.

Okay. All right. Thanks for taking the questions.

Thanks.

Thank you.

Your next question comes from the line with Andrew Obin from BofA. Please ask your question.

Good morning. This is David Ridley-Lane on for Andrew Obin. What percentage of oil and gas service events have been pushed out from 2020 to 2021? I know that's tough to call exactly that even sort of anecdotal or qualitative thoughts?

Yes, I can give – it’s Dennis. I can you an answer qualitative, but I have been watching that throughout Q2 and Q3 to see how much is getting moved. And I will say that there is work getting moved from 2020 to 2021, but we have seen a very small handful of entire projects getting pushed out of the entire year. And that's internationally in Europe and Canada as well as here in the United States. For the most part, what customers are doing is watching their spend like I talked about, watching the hours, watching how many people they bring from overseas – or I mean, outside of their local area, so you don't get pretty. I mean, you don't get the travel and worry about trying to get a positive COVID back from a distance away and all those concerns. But for the most part, we haven't seen more than a couple in North America and only one or two in Europe, where they actually took the entire project. We had one customer in Europe that very early on had us staffing and giving all kind of work or doing work in the fall and at the same time, put an engineering analysis to say, if we couldn't get the work done because COVID was so looming and disruptive to our business and to getting people into that country to handle all the work. They want to know how much – how long they could push off to work. So we looked at the major equipment that was being serviced. It was maybe like a dozen piece of equipment that was major while they're doing the work and we gave them an estimate of how long that could be. So it was something like in the range of anywhere from 18 to 20 some months you could push off that work, if need be. They were ready for that, but they actually were in the throes of finishing that one up, and they pretty much went as planned because the COVID was a problem, but it wasn't such that it shut them down. So for the most part, the amount of work, effort and planning that goes into this mitigates them from throwing the entire thing out, but they certainly go to get the safety and the most pressing parts of the work done first and push off some of that work in 2021.

-Got it. That makes sense. Any quantification of what the temporary cost savings will end up being for full-year 2020. Just want to make sure we understand sort of the cost drivers as we look out next year.

The temporary cost savings – I mean, it's been a decent-sized number each quarter. I mean, as we said, earlier in the year, we were going for a 10% overall reduction in 2020 of all overheads. And again, that's SG&A as well as fixed overheads up within COGS. For the third quarter, we were at 12.5%, 12.3%. Full year, we're at, I think, 7.7% reduction in SG&A. So a lot of that is policy decisions and deferrals of things, some of that is going to come back. So it's somewhere between those numbers is what that number we went after, somewhere between 7.7% to 12.3% is what's happening. Full year, maybe it ends up being 8%, 9%. So we got pretty close to the 10%. So that's the number that's been there. All of that's not – that's the savings we went after. All of that doesn't go away. Some of that we're going to hang on to that and keep that just as a more efficient way of operating going forward. So we're going to try to hang on to all of that. We're on our budget right now, and we haven't rolled up just yet, but we are challenging all the budget managers. Think about what you went through and all the great effort and things you had to evolve into during 2020 and try to keep as much of that into the DNA as we operate going forward to keep that cost out in perpetuity if we can. So we're going to try to make as much of that permit, so to speak, as we can. We won't succeed with all of that. But hopefully, we get a meaningful percent of that stays in our run rate going forward, and we will be able to talk more to that when we put – when we have the official budget done and talk more about 2021, but that's the scale of what – of the cost outs that happened this year. So we're going to try to keep as much as we can in the 2021 actuals.

Understood. And then, last one from me, we've heard from other companies in our coverage that oil and gas customers kind of keeping tight lid on budgets in 2020 and it's really going to be until the new calendar year when budgets reset. So just on your own visibility, do you think – in your conversations with customers, are they – would you kind of agree they're waiting until they sort of see their new calendar year budget before making decisions, how do you think about your visibility right now in that space? Thank you.

Yes, that is a good question. I'll confirm what they're seeing on that. In fact, we slowed down, we are going to get our budget out a little bit sooner and everyone kind of pushed back the budget manager said because of that same type scenario with the customers and what they are saying. And like we can get a number now, but our confidence is going to be much less than what it had been in the past. So we slowed it down, and that's why we're not going to have ours rolled up until later in this month. We are going to have it a little bit earlier, because the customers, I think, are looking at all the pandemic response, where is the health and being all that. Like I said, the sign of bidding activity is encouraging to us, because people are thinking about it. But I'm not so sure what you're thinking about in the first quarter versus second and third, right.

Thank you very much.

Sure, no problem.

Thank you.

[Operator Instructions] Your next question comes from the line of Brian Russo from Sidoti. You may ask your question.

Yes. Hi, good morning.

Good morning. Yes. Hi, good morning. Just a follow-up on some of the oil and gas related questions. It seems that the majority of turnarounds were not done in 2020 and I'm curious as we get to that 18 or 24-month time period between turnarounds needed to avoid any equipment malfunctions, do you see the turnaround season picking up again this upcoming spring or is it being pushed out more toward the second half of 2021?

Yes, Brian, it's a great question. I mean, I would clarify by saying that, I think, most of our turnaround did get performed in 2020, but they got performed at a lesser than originally scheduled type of process, right. So I do think there was some deferment of work, but the major things that they had to get done. They didn't really have enough time to get away from what they needed to do from a process safety. To your point, it's getting on each site a little bit different, but typically, you're talking – the shortest is 12 months up to probably 24 months that you can defer things unless you really spend a lot of time and effort, did some timeline, and did some monitoring to make sure that whatever you knew about those damage wasn't growing or getting worse. So typically, you're going to see things get pushed in from a year, year and a half on average. I would think next year is going to be average to better year on turnaround. But I'm going to tell you, I'm not so sure about the spring yet. Customers are still planning and doing things. I just don't know how much of that's going to stick as what is planned. If something were to change in the health and all that, you can see that change. I think by midyear and later, we believe you are going to see a lot more of a return to a 2019 posture in a lot of our customers. We're just not so sure. It might be depending on each customer and depending on what happens here just with the health and all of that in the next few days.

Okay. Got it. And just from some of the industry statistics to get a lot of as follow. Is it the crack spread expansions that you think is needed for refineries to commit more investment to CapEx or is it utilization rates which one could argue have been overly depressed by the hurricanes the last couple of months and the oil price hovering around $40, but maybe any insight or thoughts there as what we should be tracking?

So again, from my perspective, I think, it's a demand, right. As long as they don't see heavy demand coming at them, they can run at these reduced rates, they could have prolonged turnaround, they can do things like that because they know they've got enough going on just in what they already have started produced and are waiting for the market that they are not that worried about it. I think as you see the demand pick up, you're going to definitely see the utilization back to closer to a normal because right now, you can have a longer turnaround and they're doing that. They are purposely making the turnarounds longer just to save on the cash. So I think right now, just some idea of what is normal, and when is normal and when is demand coming up, I think that's going to be the biggest driver on what's going to happen in the refiners.

Okay, got it. And then just a follow-up on some of the renewable energy-type questions. I think you've disclosed in the past that renewable energy was approximately 6% of total sales. Where do you see that trending over the next several years, given that it doesn't seem like there was much of this remote wind turbine censoring embedded in that single-digit sales percentage mix?

Yes, I could tell you – I mean, we believe you're not going to see new coal plants being built in the United States and North America. You're not going to – you are going to see natural gas, you are going to see things like that. So that could become in the base load where natural gas used to be the peakers, right, of days gone by. And now, you're going to see alternative trying to become a lot more of this space as well trying to augment there. So I think these turbines are going to be getting more and more in light of looking at how do you maintain them. They're not brand new they're becoming at an age where you guys are doing something about it. I'd be remiss to trying to throw a percentage, but I think it's going to be meaningful in mid-2021 and into 2022 such that you're going to see a lot of growth in that part of the market, not only from just the inspection and repair part that we cross over and do, but now more so if we can get into this other monitoring, it will be such a game changer for all those thousands of turbines out there, each one with three blades, that's three times the amount of problems that they could have. I think it could be a real game changer. So I do believe it's got real potential.

Yes. And just a follow-up on that, what are your – what is MISTRAS' competitive advantages in that space? A lot of your other markets are highly fragmented with a lot of local players. I assume the remote censoring, et cetera, and product offering set that you have are competitive advantages. And are there any real barriers to entry to this market?

So I would believe I could really find anyone that could put sensors on a turbine, anyone could do monitoring or anyone could do monitoring or anyone that could inspection for one or anyone who could do mechanical repair. But I think when you try to put all those together and some of the other things that we're going to be doing on them, you're not going to find many vendors to do all that and do all that in-house and have the R&D and driving the technology for what it looks like now versus what they need a year or two from now. So I don't think there's many competitors that put all that together into one package and have the online capability and then the ability to install, service, monitor that, the online hardware as well as actual equipment that centers around and do repairs and get it back up and running. Let's face it. All they really care about they don't care about sensors. They don't care about anything else. They care about is that piece of equipment operating in the way it should be and a better than what are you going to do to get you back operating and keep it running, right, because their uptime is their goal, and our job is to figure out how to help that customer figure out how to keep uptime by doing all those things. So I think our advantage as we bring all those together into one market offering versus having to have four or five different vendors trying to do that for the customer.

Yes, and this is Jon. I'd piggyback on that by saying that we do have, we are putting together an intellectual property portfolio. Surroundings are asset monitoring capabilities within wind turbines, because we do have some unique technology that we're bringing to bear in terms of the whole product offerings and the visibility and the real-time notification in dashboards and so forth that we're providing to customers.

Okay. And then, just real quickly last question, you've thrown out some leverage ratio targets over the next couple years of nearly three times debt-to-EBITDA. Is that still attainable in your opinion?

Yes, it's Ed. I'll address that. Absolutely. We have stepped down schedule in the current leverage throughout 2021. And yes, we're going to continue to take virtually all residual free cash flow and apply it the debt. We did that here significantly in 2020. We'll keep doing that in 2021 and drive that down. Historically that's where Mr. Ross was over time down in a 2.5% and a 3%. We won't quite get to a 3% by the end of 2021, but certainly it's 2022 we'd would there. We're going to continue to take all – allocate all residual free cash flow and debt service to keep driving that leverage number down.

Okay. Great. Thank you very much.

Thanks, Brian.

Thank you.

I'm showing no further question at this time. I would now like to turn the conference back to Mr. Dennis Bertolotti.

Okay, so the whole MISTRAS team would like to thank you for joining the call today, and we wish everyone a safe, prosperous and healthy future. Thank you.

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. And have a wonderful day. You may all disconnect.