This article first appeared on GuruFocus .
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Revenue:$193 million, up 4.2% year-over-year, marking the fourth consecutive quarter of growth.
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Adjusted EBITDA:Record second quarter at $25.8 million, up 7% year-over-year, with margin expanding 30 basis points to 13.3%.
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Gross Margin:Expanded by 10 basis points year-over-year.
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Operating Income:$12.9 million, up 53.6% from $8.4 million in the prior year period.
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GAAP Net Income:$7.6 million, with GAAP earnings per diluted share of $0.23.
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Non-GAAP Net Income:$9.1 million, with non-GAAP earnings per diluted share of $0.28.
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Free Cash Flow:Improved by $23.9 million quarter-over-quarter.
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SG&A Expenses:Decreased by $1.1 million or 2.7% year-over-year; excluding foreign currency translation impact, increased $1.7 million or 4.6%.
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Interest Expense:$4.1 million, down 2.4% from $4.2 million in the prior year quarter.
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Effective Tax Rate:23.1% for the second quarter; anticipated approximately 25% for full year 2026.
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Leverage Ratio:Approximately 2.2 times as of June 30, 2026, down from 2.4 times at March 31, 2026.
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Oil and Gas Revenue:Declined by $8.5 million or 8.2% year-over-year; adjusted for turnarounds and exited work, up 1%.
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Aerospace and Defense Revenue:Increased by $3.2 million or 13.2% year-over-year.
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Infrastructure Revenue:Increased by $6.2 million or 76.5% year-over-year.
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Power Generation Revenue:Increased by $3.1 million or 26.4% year-over-year.
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Full Year 2026 Guidance:Revenue raised to $740 million to $755 million; adjusted EBITDA raised to $92 million to $95 million.
Release Date: August 11, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Revenue increased 4.2% to $193 million, marking the fourth consecutive quarter of year-over-year growth.
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Record second quarter adjusted EBITDA of $25.8 million, with adjusted EBITDA margin expanding 30 basis points to 13.3%.
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Strategic end markets (aerospace and defense, infrastructure, power) grew 28% in aggregate, with infrastructure up 76.5% and power up 26.4%.
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Free cash flow improved by $23.9 million quarter-over-quarter, driven by better working capital management and higher net income.
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Leverage ratio decreased to 2.2 times, the lowest since 2018, and the company raised full-year guidance for revenue and adjusted EBITDA.
Negative Points
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Oil and gas revenue declined 8.2% year-over-year due to customer program exits and deferred maintenance activity.
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Deferrals in oil and gas maintenance and turnarounds are expected to continue pushing out through the second half of 2026.
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In-lab testing demand is temporarily outpacing capacity, limiting near-term revenue growth despite strong demand.
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Labor market for qualified technicians remains tight, requiring enhanced recruiting and benefit plans to fill gaps.
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SG&A expenses increased 4.6% year-over-year (excluding FX impact), reflecting ongoing investment costs.
Q & A Highlights
Q: Can you confirm that the raised revenue guidance is driven by better demand in Aerospace & Defense and Infrastructure, while Oil & Gas is expected to remain flat to down in the second half? A: Natalia Shuman (President and CEO) confirmed this assessment. The company sees strength in strategic growth markets like aerospace & defense, infrastructure, and power. In Oil & Gas, they anticipate stabilization, with flat to moderate growth expected in Q3 and Q4 after adjusting for turnarounds and exited programs.
Q: Is the planned tripling of capacity specific to Aerospace & Defense projects, or does it apply to all in-lab work? A: Natalia Shuman (President and CEO) clarified that the expansion is primarily for in-lab work, which serves both the aerospace & defense and industrial markets. The company projects to triple this capacity by the end of 2027, supported by visible customer demand.
Q: Is the ~60% conversion rate of incremental revenue into operating income sustainable? A: Edward Prajzner (CFO) stated that the 60% drop-down was for the second quarter, and the full-year rate is actually slightly higher. He explained that the in-lab and data businesses have a significant fixed-cost element, so when volume rises, the contribution margin drop-down is very attractive and sustainable in future periods.
Q: Can you provide color on the "other revenue" line, which was the highest it's been in years? A: Edward Prajzner (CFO) explained that "other revenue" consists of smaller call-out work that doesn't fit into predetermined end markets, highlighting the company's diversification. Natalia Shuman (CEO) added that this includes services for clients like cruise operators, which don't fall neatly into infrastructure or power categories.
Q: Can you discuss backlog trends by segment? A: Natalia Shuman (President and CEO) explained that the company's visibility isn't defined by a single backlog metric. On the field side, visibility comes from recurring activity and long-standing contracts. In-lab, they have strategic agreements with minimum volume commitments, providing visibility for foreseeable quarters. Confirmed backlog exists for turnarounds and projects in infrastructure and power.
Q: How has the M&A pipeline progressed since last quarter? A: Natalia Shuman (President and CEO) stated that the strategic plan (Vision 2030) does not depend on transformative M&A. The company is focused on execution and reducing leverage, but continues to look at opportunistic opportunities to enhance capabilities. No concrete updates were provided.
Q: In-lab revenue was slightly down sequentially. Are the milestones for adding shifts at the third hub still on schedule, and when will they impact revenue? A: Natalia Shuman (President and CEO) noted that in-lab revenue depends on unlocking capacity, with a lead time of about 9-12 months for investments to generate revenue. While growth may vary quarter-to-quarter due to capacity constraints, the company is optimistic due to visible supply chain constraints and customers proactively reserving capacity.
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
