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Mistras Delivers Increased Profitability and 21% Second Quarter Revenue Growth Net Income of $3.6 million and Adjusted EBITDA of $12.3 million

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Mistras Delivers Increased Profitability and 21% Second Quarter Revenue Growth Net Income of $3.6 million and Adjusted EBITDA of $12.3 million

Jan 7, 2010
Mistras Delivers Increased Profitability and 21% Second Quarter Revenue Growth Net Income of $3.6 million and Adjusted EBITDA of $12.3 millionPRINCETON JUNCTION, N.J., Jan. 7, 2010 (GLOBE NEWSWIRE) -- Mistras Group, Inc. (NYSE:MG) today reported financial results for the second quarter of fiscal 2010, which ended November 30, 2009. Revenues were a record high $71.9 million, a 21% increase as compared to the second quarter of fiscal 2009. Adjusted EBITDA for the quarter was $12.3 million as compared to $11.9 million for the second quarter of fiscal 2009 and $7.0 million for the first quarter of fiscal 2010. Net income attributable to Mistras Group, Inc. was $3.6 million as compared to $3.2 million during the second quarter of fiscal 2009 and $0.8 million for the first quarter of fiscal 2010. Fully diluted earnings per share for the quarter was $0.14 versus a negative ($0.97) reported in the second quarter of fiscal 2009.

Key highlights for the quarter included:


 * Grew Services segment revenues by approximately 30% as compared
   to the same quarter in fiscal 2009.

 * Expanded adjusted EBITDA margin to 17.1% of revenues as
   compared to 12.4% in the first quarter, while more than doubling
   the consolidated operating income margin to 10.7% compared to
   5.0% in the first quarter.

 * Achieved gross profit improvement of 422 basis points in the
   Products and Systems segment as compared to the same quarter in
   fiscal 2009

 * Won a new contract to develop an ultrasonic imaging system to
   test advanced composite materials for the new Joint Strike
   Fighter

 * Acquired a small division of an engineering company that
   provides additional skilled service technicians to assist in
   addressing the growing nuclear industry

Chairman and Chief Executive Officer, Dr. Sotirios J. Vahaviolos commented that, "We continue to have solid growth attributable to customer acceptance of our unique and comprehensive asset protection solutions. Our record revenues and strong Services segment growth in the quarter was driven by several new multi-year contracts obtained this fiscal year, continued growth in our mechanical integrity services, and acquisitions."

"This growth was partially offset by revenue decreases in our International segment, which represented only 10.4% of our total revenues, as the economy and foreign exchange rates had a greater impact in the quarter. Our Product and Systems segment had revenues higher than the first fiscal quarter and on par with the same quarter last year. Overall, we see all our markets stabilizing and expect continued growth in our business. We are encouraged by the improved profitability compared to our first quarter, and believe we will continue this trend through the second half of our fiscal year."

Second Quarter Performance

Mistras Group, Inc.'s revenues were $71.9 million for the second quarter of fiscal 2010, up $12.6 million, or 21%, compared to the second quarter of fiscal 2009. Overall organic growth was approximately 9% and acquisitions contributed approximately 13%. Foreign currency impacts reduced the total growth by approximately 1%. For the second quarter of fiscal 2010, income from operations was $7.7 million and net income attributable to Mistras Group, Inc. was $3.6 million.

Segment results

On an operating segment basis, the Company's Services segment increased its second quarter revenues $13.9 million, or 30%, as compared to the same quarter last year as a result of new asset protection solution revenues and multi-year contracts obtained this fiscal year, as well as growth from existing customers and acquisitions. The organic and acquisition growth rates were approximately 13% and 17%, respectively from the second quarter of fiscal 2009. Gross profit was $17.4 million, or 28.6% of revenues, as compared to $14.9 million, or 31.6% of revenues, in the same quarter last fiscal year and 27.4% of revenues in the first quarter of 2010.

Revenues in the Products and Systems segment were $4.7 million as compared to $4.8 million for the second quarter of fiscal 2009. Gross profit was $2.8 million, or 59.4% of revenue as compared to $2.6 million, or 55.2% of revenue in the same quarter last fiscal year.

Revenues in the Company's International segment were $7.5 million compared to $8.9 million for the second quarter of fiscal 2009. On a local currency basis, the International segment revenues declined approximately 11%. This segment also incurred net adverse foreign currency impacts of another 5%. Gross profit was $2.9 million, or 39.4% of revenues compared to $4.1 million, or 45.8% of revenues in the same quarter last fiscal year.

Initial Public Offering and Related Transactions

Public trading of the Mistras common stock began on October 8, 2009, on the New York Stock Exchange under the ticker symbol MG. Mistras completed its initial public stock offering of 10,000,000 total shares of common stock at a public offering price of $12.50 per share. The Company sold 6,700,000 shares and the selling stockholders sold the remainder.

As a result of the offering, the Company received net proceeds of approximately $74.2 million, after deducting underwriting discounts, commissions and offering expenses. During the quarter, the Company used $66.6 million of the net proceeds to prepay, in full, amounts outstanding under its credit facilities. The Company anticipates using the remaining net proceeds for working capital and other general corporate purposes, which may include the acquisition of businesses and expansion internationally.

At the end of the second quarter of fiscal 2010, the Company had cash and cash equivalents of $14.6 million and $55.0 million available under its revolving credit facility.



Earnings Conference Call

In connection with this earnings release, Mistras will hold its quarterly conference call on Friday, January 8 at 9:00 a.m. (Eastern). The call will be broadcast over the Web and can be accessed on Mistras' Website, www.mistrasgroup.com . Individuals in the U.S. wishing to participate in the conference call by phone may call 800-901-5248 and use confirmation code 40211533 when prompted. (The International number is 617-786-4512.)

About Mistras Group, Inc.

Mistras is a leading global provider of technology-enabled asset protection solutions used to evaluate the structural integrity of critical energy, industrial and public infrastructure. Mistras combines industry-leading products and technologies, expertise in mechanical integrity (MI) and non-destructive testing (NDT) services and proprietary data analysis software to deliver a comprehensive portfolio of customized solutions, ranging from routine inspections to complex, plant-wide asset integrity assessments and management. These mission critical solutions enhance customers' ability to extend the useful life of their assets, increase productivity, minimize repair costs, comply with governmental safety and environmental regulations, manage risk and avoid catastrophic disasters. Given the role Mistras' services play in ensuring the safe and efficient operation of infrastructure, Mistras has historically provided a majority of its services to its customers on a regular, recurring basis. Mistras serves a global customer base of companies with asset-intensive infrastructure, including companies in the oil and gas, fossil and nuclear power, public infrastructure, chemicals, aerospace and defense, transportation, primary metals and metalworking, pharmaceuticals and food processing industries.

For more information, please visit the company's website at www.mistrasgroup.com or contact Paul "Pete" Peterik, Chief Financial Officer at 609-716-4103.

The Mistras Group, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6966

Forward-Looking and Cautionary Statement

Certain statements made in this press release are "forward-looking statements" about Mistras' financial results and estimates, products and services, business model, strategy and growth opportunities, profitability and competitive position. These forward-looking statements are generally use words such as "future," "possible," "potential," "targeted," "anticipate," "believe," "estimate," "expect," "intend," "plan," "predict," "project," "will," "may," "should," "could," "would" and other similar words and phrases. You are cautioned that such statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, such performance or results will have been achieved. Such statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in these statements. Important factors that could cause such differences include, but are not limited to, those discussed in the "Risk Factors" section of the prospectus dated October 7, 2009 in connection with Mistras' initial public offering filed with the Securities and Exchange Commission on October 9, 2009, such as (i) the current economic downturn; (ii) loss of or reduction in business with a significant customer; (iii) adverse change in the industries Mistras serves, which include oil and gas, power transmission and generation, chemical, aerospace and infrastructure; (iv) Mistras' ability to manage its salary and compensation costs, particularly as to billable time; (v) Mistras' ability to generate cash from operations, secure external funding for its operations and manage its liquidity needs; (vi) market acceptance of Mistras' products and services; (vii) significant changes in the competitive environment; (viii) catastrophic events that cause disruptions to the business of Mistras or its customers; (ix) the ability to attract and train engineers, scientists, and skilled technicians; and (x) any accidents or incidents involving the Company's asset protection solutions. You should consider these factors in evaluating the forward-looking statements included in this press release and not place undue reliance on such statements. The forward-looking statements are made as of the date hereof, and Mistras undertakes no obligation to update such statements as a result of new information, future events or otherwise.


                          Mistras Group, Inc. and Subsidiaries
                    Unaudited Consolidated Statements of Operations
                   (In thousands, except for share and per share data)

                       Three Months Ended         Six Months Ended 
                          November 30,              November 30,
                       2009         2008         2009          2008
                    -----------  -----------  -----------  -----------


  Revenues:         $    71,899  $    59,275  $   127,988  $   106,272
                    -----------  -----------  -----------  -----------
  Cost of Revenues:
   Cost of services
    and goods sold       46,248       35,676       82,716       64,202
   Depreciation           2,635        2,061        5,106        3,920
                    -----------  -----------  -----------  -----------
    Total cost of
     revenues            48,883       37,737       87,822       68,122
                    -----------  -----------  -----------  -----------

  Gross profit           23,016       21,538       40,166       38,150
  Selling, general 
   and 
   administrative
   expenses              13,686       11,153       26,819       22,048
  Research and
   engineering              449          481          932          945
  Depreciation and
   amortization           1,214          798        2,259        2,226
  Legal settlement           --        1,915         (297)       2,051
                    -----------  -----------  -----------  -----------
   Income from
    operations            7,667        7,191       10,453       10,880
  Other expenses
  Interest expense        1,017        1,578        2,081        2,589
  Loss on
   extinguishment 
   of long-term 
   debt                     218           --          387           --
                    -----------  -----------  -----------  -----------
 Income before
  provision for 
  income taxes and
  noncontrolling
  interest                6,432        5,613        7,985        8,291
  Provision for 
   income taxes           2,875        2,290        3,569        3,350
                    -----------  -----------  -----------  -----------

   Net income             3,557        3,323        4,416        4,941
 Net (income) loss
  attributable to
  noncontrolling
  interests                   5          (88)         (39)        (189)
                    -----------  -----------  -----------  -----------

 Net income
  attributable to
  Mistras Group, 
  Inc.                    3,562        3,235        4,377        4,752
  Accretion of
   preferred stock        6,499      (13,691)       6,499      (14,115)
                    -----------  -----------  -----------  -----------

 Net income
  attributable to
  common 
  stockholders      $    10,061  $   (10,456) $    10,876  $    (9,363)
                    ===========  ===========  ===========  ===========

 Earnings per 
  common share:
  Basic             $      0.48  $     (0.80) $      0.64  $     (0.72)
  Diluted           $      0.14  $     (0.97) $      0.19  $     (0.91)
 Weighted average
  common shares
  outstanding:
  Basic              20,986,528   13,000,000   16,971,443   13,000,000
  Diluted            24,993,493   16,883,113   22,980,305   16,883,113

                           Mistras Group, Inc. and Subsidiaries
                            Unaudited Operating Data by Segment
                                      (In thousands)

                            Three Months Ended    Six Months Ended 
                               November 30,          November 30,
                             2009       2008       2009       2008
                           ---------  ---------  ---------  ---------
 Revenues:

  Services                 $  60,938  $  47,048  $ 106,640  $  82,836
  Products and Systems         4,744      4,762      8,369      8,797
  International                7,479      8,896     15,230     17,317
  Corporate and 
   eliminations               (1,262)    (1,431)    (2,251)    (2,678)
                           ---------  ---------  ---------  ---------

                           $  71,899  $  59,275  $ 127,988  $ 106,272
                           =========  =========  =========  =========
 Gross profit:

  Services                 $  17,405  $  14,869  $  29,933  $  25,499
  Products and Systems         2,818      2,631      4,506      4,593
  International                2,944      4,078      5,990      8,180
  Corporate and 
   eliminations                 (151)       (40)      (263)      (122)
                           ---------  ---------  ---------  ---------

                           $  23,016  $  21,538  $  40,166  $  38,150
                           =========  =========  =========  =========
 Income from operations:

  Services                 $   7,625  $   5,407  $  10,857  $   8,229
  Products and Systems         1,111        937      1,041      1,261
  International                  808      1,883      2,070      3,858
  Corporate and 
   eliminations               (1,877)    (1,036)    (3,515)    (2,468)
                           ---------  ---------  ---------  ---------

                           $   7,667  $   7,191  $  10,453  $  10,880
                           =========  =========  =========  =========

                  Mistras Group, Inc. and Subsidiaries
                 Unaudited Condensed Balance Sheets
                             (In thousands)

                                         November 30,     May 31,
                                             2009          2009
                                         ------------  ------------

                 ASSETS

 Cash and cash equivalents               $     14,553  $      5,668

 Other current assets                          70,704        58,002

 Property, plant and equipment, net            38,252        33,592
 
 Other non-current assets                      64,430        54,012
                                         ------------  ------------

  Total assets                           $    187,939  $    151,274
                                         ============  ============


 LIABILITIES, PREFERRED STOCK AND EQUITY 
             (DEFICIT)

 Current portion of long-term debt and 
  leases                                 $     12,898  $     19,371
 
 Other current liabilities                     29,394        24,737
 
 Long-term debt and capital leases, net 
  of current portion                           18,913        61,405
 
 Other non-current liabilities                  2,600         2,445
 
 Preferred stock                                   --        90,983
 
 Equity (deficit)                             124,134       (47,667)
                                         ------------  ------------
 Total liabilities, preferred stock and 
  equity                                 $    187,939  $    151,274
                                         ============  ============

          Mistras Group, Inc. and Subsidiaries
            Unaudited Summary of Cash Flows
                     (In thousands)
                                                   Six Months Ended
                                                     November 30,
                                                    2009      2008
                                                  --------  --------




 Cash flows from operating activities

 Net income attributable to Mistras Group, Inc.   $  4,377  $  4,752
 Adjustments to reconcile net income to net cash
  provided by operating activities
   Depreciation and amortization                     7,365     6,146
   Other non-cash adjustments, net                   1,903       483
 Changes in operating assets and liabilities,
  net of effect of acquisitions                     (5,025)  (10,963)
                                                  --------  --------

    Net cash provided by operating activities        8,620       418

 Cash flows used in investing activities           (15,049)  (10,741)
 Cash flows provided by financing activities        15,319    10,343

 Effect of exchange rate changes on cash                (5)      813

                                                  --------  --------
    Net change in cash and cash equivalents          8,885       833
 Cash and cash equivalents

 Beginning of period                                 5,668     3,555
                                                  --------  --------

 End of period                                    $ 14,553  $  4,388
                                                  ========  ========

                             Mistras Group, Inc. and Subsidiaries
                                Unaudited Reconciliation of 
                       Net Income attributable to Mistras Group, Inc.
                              to EBITDA and Adjusted EBITDA(1)
                                       (In thousands)

                              Three Months Ended   Six Months Ended 
                                 November 30,         November 30,
                                2009      2008      2009      2008
                              --------  --------  --------  --------

 Net income attributable to
  Mistras Group, Inc.         $  3,562  $  3,235  $  4,377  $  4,752
 Interest expense                1,017     1,578     2,081     2,589
 Provision for income taxes      2,875     2,290     3,569     3,350
 Depreciation and
  amortization                   3,849     2,859     7,365     6,146
                              --------  --------  --------  --------
 EBITDA                         11,303     9,962    17,392    16,837
 Legal settlement                   --     1,915      (297)    2,051
 Large customer bankruptcy          --        --       767        --
 Stock compensation expense        783        46     1,033        46
 Loss on extinguishment of
  debt                             218        --       387        --
                              --------  --------  --------  --------
 Adjusted EBITDA              $ 12,304  $ 11,923  $ 19,282  $ 18,934
                              ========  ========  ========  ========

(1) Adjusted EBITDA is a performance measure used by management that is not calculated in accordance with U.S. generally accepted accounting principles (GAAP). "Adjusted EBITDA" is defined as net income plus: interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, the amount of a write-off for the remaining accounts receivable the company expected to collect from a customer that recently declared bankruptcy, loss on extinguishment of debt, and amounts for settlement of a class action law suit, minus a reduction in the amount the Company was required to pay in final settlement of the class action law suit. The Company's management uses adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis, for planning and forecasting overall expectations, and for evaluating actual results against such expectations, and as a performance evaluation metric off which to base executive and employee incentive compensation programs.

For more information regarding the use of adjusted EBITDA, see Mistras Group Inc.'s current report on Form 8-K filed with the Securities and Exchange Commission on January 7, 2010.

CONTACT:  Mistras Group, Inc.
          Paul "Pete" Peterik, Chief Financial Officer
          609-716-4103
          www.mistrasgroup.com