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Mistras Group Announces Record Results for Second Quarter FY'15

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Mistras Group Announces Record Results for Second Quarter FY'15

Jan 7, 2015

PRINCETON JUNCTION, N.J., Jan. 7, 2015 (GLOBE NEWSWIRE) -- Mistras Group, Inc. (NYSE:MG), a leading "one source" global provider of technology-enabled asset protection solutions, today reported financial results for its second quarter and first six months of fiscal year 2015, which ended November 30, 2014.

Revenues increased by 32% over the prior year's second quarter, reaching a record level of $206.9 million. Net income for the second quarter achieved another record of $10.4 million, or $0.35 per diluted share, compared with the prior year second quarter's net income of $9.3 million, or $0.32 per diluted share. Acquisition-related items added $0.02 of earnings per diluted share in the second quarter of fiscal year 2015 and $0.01 per diluted share in the corresponding prior year period. Adjusted EBITDA rose 25% over the prior year's second quarter, to a record level of $28.2 million compared with the prior year's $22.6 million.

Revenues increased by 28% over the prior year's first six months, reaching $373.5 million. Net income for the first six months was $12.1 million, or $0.41 per diluted share, compared with the prior year's $14.9 million, or $0.51 per diluted share. Adjusted EBITDA of $41.4 million in the first six months of fiscal year 2015 was 7% higher than the comparable prior year amount of $38.6 million.

The Company's year-on-year revenue growth remained robust, exceeding 20% for the third consecutive quarter. The Company's Services segment experienced strong year-on-year growth of over 48%, of which 22% was organic, driven by market share gains, a healthy fall turnaround season, and project work. The Company's 32% year-on-year revenue growth was led by a combination of acquisitions (+19%) and strong organic growth (+14%), offset in part by weaker foreign exchange (-1%).

Gross profit margins improved sequentially to 28.5% from 25.2% in the first quarter of fiscal year 2015, but were lower than the prior year's 30.6%. As with the Company's revenue growth, this change was also driven primarily by the Services segment, which saw gross profit margins improve to 27.5% from the first quarter's 24.4%, but lower than the prior year's 28.4%. The improvement from the first quarter was driven by a seasonal uptick and healthy turnaround volume, while the unfavorable comparison to the prior year's second quarter was driven by the Company's continued investment in the Canadian oil sands region, as well as an adverse sales mix in some international countries.

Key Financial Metrics:

Revenues

  • Revenues for the second quarter of fiscal 2015 increased 32% over prior year. Organic revenue growth was 14%.
  • Services segment revenue for the second quarter of fiscal 2015 increased 48% over prior year, including 22% organic growth and 26% acquisition growth.
  • International segment revenue for the second quarter of fiscal 2015 declined 5% vs. prior year, with components: organic (-5%), acquisitions (+2%) and foreign exchange (-2%).
  • Products and Systems segment revenues for the second quarter of fiscal 2015 declined by 13% (all organic) compared with prior year.

Gross Profit

  • Gross profit for the second quarter of fiscal 2015 increased by 23% over prior year on a 32% increase in revenues;
  • Gross margin for the second quarter of fiscal year 2015 was 28.5% of revenues vs. 30.6% in the prior year.

Operating Cash Flow

  • The Company's operating cash flow was $3.2 million for the first half of fiscal year 2015.

Sotirios Vahaviolos, Chairman and Chief Executive Officer stated, "This was the strongest quarter that Mistras has ever had in terms of Adjusted EBITDA, net income, earnings per diluted share and revenue. The fact that this performance followed a difficult first quarter makes it even more gratifying. We are very encouraged by the continued strong organic revenue growth in our Services segment and we continue to work on several initiatives to improve our profit margins. Our progress to date is encouraging and bodes well for future results."

Dr. Vahaviolos continued, "We are excited about our expansion into two new areas, the Gulf offshore market, via our acquisition of The Nacher Corporation, and our continued efforts to grow organically in the Canadian oil sands region. NACHER has gotten off to a fast start, helping to propel our acquisition-related revenue growth, and we remain optimistic about our efforts in the Canadian oil sands for the second half of the fiscal year."

Outlook and Guidance for Fiscal 2015

Based on the strong second quarter and additional upside from NACHER, the Company is increasing its revenue expectation for fiscal year 2015 to a range of $720 million to $740 million, representing growth of 16% to 19% over prior year.

The Company expects its Adjusted EBITDA to be within the high end of its previously announced range of from $78 million to $84 million, representing an increase of from 11% to 20% over prior year.

Conference Call

In connection with this release, Mistras will hold a conference call on Thursday, January 8, 2015 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 1-844-832-7227 and use confirmation code 55599260 when prompted. The International dial-in number is 1-224-633-1529.

About Mistras Group, Inc.

Mistras offers one of the broadest "one source" services and technology-enabled asset protection solution portfolios in the industry used to evaluate the structural integrity of energy, industrial and public infrastructure. Mission critical services and solutions are delivered globally and provide customers with the ability to extend the useful life of their assets, improve productivity and profitability, comply with government safety and environmental regulations and enhance risk management operational decisions.

Mistras uniquely combines its industry leading products and technologies - 24/7 on-line monitoring of critical assets; mechanical integrity ("MI") and non-destructive testing ("NDT") services; destructive testing services; and its proprietary world class data warehousing and analysis software - to provide comprehensive and competitive products, systems and services solutions from a single source provider.

For more information, please visit the company's website at www.mistrasgroup.com.

Forward-Looking and Cautionary Statements

Certain statements made in this press release are "forward-looking statements" about Mistras' financial results and estimates, products and services, business model, strategy, growth opportunities, profitability and competitive position, and other matters. These forward-looking statements 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. Such statements are not guarantees of future performance or results, and will not necessarily be accurate indications of the times at, or by which, such performance or results will be achieved, if at all. These statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in these statements. A list, description and discussion of these and other risks and uncertainties can be found in the "Risk Factors" section of the Company's Annual Report on Form 10-K for fiscal year 2014 filed with the Securities and Exchange Commission on August 8, 2014, as updated by our reports on Form 10-Q and Form 8-K. 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.

* Use of Non-GAAP Measures

The term "Adjusted EBITDA" used in this release is a financial measurement not calculated in accordance with generally accepted accounting principles in the U.S. ("US GAAP"). A Reconciliation of Adjusted EBITDA to a financial measurement under US GAAP is set forth in a table attached to this press release. In addition, the Company has also included in the attached tables non-GAAP measurements "EBITDA", "Segment and Total Company Income from Operations before Acquisition-Related Expense (Benefit), net", "Net Income Excluding Acquisition-related Items" and "Diluted EPS Excluding Acquisition-related Items," reconciling these measurements to financial measurements under US GAAP. The Company believes that investors and other users of the financial statements benefit from the presentation of these non-GAAP measurements because they provide additional metrics to compare the Company's operating performance on a consistent basis and measure underlying trends and results of the Company's business.

Mistras Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
     
   (unaudited)   
 November 30, 2014May 31, 2014
 ASSETS   
 Current Assets     
 Cash and cash equivalents   $ 19,599  $ 10,020
 Accounts receivable, net   164,888  137,824
 Inventories   12,188  11,376
 Deferred income taxes   3,775  3,283
 Prepaid expenses and other current assets   15,536  12,626
Total current assets  215,986  175,129
Property, plant and equipment, net  82,266  77,811
Intangible assets, net  61,543  57,875
Goodwill  169,088  130,516
Deferred income taxes  1,301  1,344
Other assets  1,887  1,297
Total assets  $ 532,071  $ 443,972
     
LIABILITIES AND EQUITY    
Current Liabilities    
Accounts payable  $ 15,558  $ 14,978
Accrued expenses and other current liabilities  54,594  54,650
Current portion of long-term debt  17,988  8,058
Current portion of capital lease obligations  6,968  7,251
Income taxes payable  2,133  1,854
Total current liabilities  97,241  86,791
Long-term debt, net of current portion  137,080  68,590
Obligations under capital leases, net of current portion  12,968  13,664
Deferred income taxes  20,369  15,521
Other long-term liabilities  14,699  17,014
Total liabilities  282,357  201,580
     
Commitments and contingencies    
     
Equity     
Preferred stock, 10,000,000 shares authorized  --   -- 
Common stock, $0.01 par value, 200,000,000 shares authorized  286  284
Additional paid-in capital  204,987  201,831
Retained earnings  53,593  41,500
Accumulated other comprehensive loss  (9,427)  (1,511)
Total Mistras Group, Inc. stockholders' equity  249,439  242,104
Noncontrolling interests  275  288
Total equity  249,714  242,392
Total liabilities and equity  $ 532,071  $ 443,972
 
 
Mistras Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
         
         
  Three months ended November 30,  Six months ended November 30, 
 2014201320142013
         
Revenue  206,893  156,755  373,466  292,593
Cost of revenues  142,940  104,494  262,662  196,747
Depreciation related to products and systems  4,914  4,284  9,771  8,592
Gross profit  59,039  47,977  101,033  87,254
         
Selling, general and administrative expenses  37,180  29,849  72,400  58,548
Research and engineering  629  786  1,278  1,429
Depreciation and amortization  3,472  2,501  6,894  4,958
Acquisition-related expense, net  (434)  (411)  (1,395)  (2,508)
Income from operations  18,192  15,252  21,856  24,827
Interest expense  1,352  772  2,257  1,517
Income before provision for income taxes   16,840  14,480  19,599  23,310
Provision for income taxes  6,428  5,196  7,516  8,391
Net income  10,412  9,284  12,083  14,919
Less: net loss (income) attributable to noncontrolling interests, net of taxes  15  (27)  10  (21)
Net income attributable to Mistras Group, Inc.  $ 10,427  $ 9,257  $ 12,093  $ 14,898
Earnings per common share        
Basic  $ 0.36  $ 0.33  $ 0.42  $ 0.53
Diluted  $ 0.35  $ 0.32  $ 0.41  $ 0.51
Weighted average common shares outstanding:        
Basic  28,619  28,378  28,547  28,309
Diluted  29,397  29,102  29,551  29,147
 
 
Mistras Group, Inc. and Subsidiaries
Unaudited Operating Data by Segment
(in thousands)
         
  Three months ended November 30,  Six months ended November 30, 
 2014201320142013
 Revenues         
 Services   $ 160,874  $ 108,862  $ 282,806  $ 204,672
 International   41,018  43,209  81,056  80,968
 Products and Systems   7,495  8,604  14,062  15,189
 Corporate and eliminations   (2,494)  (3,920)  (4,458)  (8,236)
   $ 206,893  $ 156,755  $ 373,466  $ 292,593
         
         
  Three months ended November 30,  Six months ended November 30, 
 2014201320142013
 Gross profit         
 Services   $ 44,252  $ 30,918  $ 74,023  $ 57,665
 International   11,309  13,293  20,777  23,413
 Products and Systems   3,328  3,718  5,992  6,102
 Corporate and eliminations   150  48  241  74
   $ 59,039  $ 47,977  $ 101,033  $ 87,254
 
 
Mistras Group, Inc. and Subsidiaries
Unaudited Reconciliation of 
Segment and Total Company Income (Loss) from Operations before Acquisition-Related Expense (Benefit), net (non-GAAP) to 
Segment and Total Company Income (Loss) from Operations (GAAP)
(in thousands)
         
  Three months ended November 30,  Six months ended November 30, 
 2014201320142013
Services:         
Income from operations before acquisition-related expense (benefit), net (non-GAAP)   $ 20,596  $ 14,387  $ 29,737  $ 25,402
Acquisition-related expense (benefit), net   525  (13)  786  156
Income from operations (GAAP)   20,071  14,400  28,951  25,246
         
International:         
Income from operations before acquisition-related (benefit), net (non-GAAP)   $ 2,130  $ 3,992  $ 1,542  $ 5,337
Acquisition-related (benefit), net   (1,047)  (3,301)  (936)  (3,771)
Income from operations (GAAP)   3,177  7,293  2,478  9,108
         
Products and Systems:         
Income from operations before acquisition-related (benefit) net (non-GAAP)   $ 417  $ 450  $ (16)  $ 25
Acquisition-related (benefit), net   --  (19)  --  (1,035)
Income (loss) from operations (GAAP)   417  469  (16)  1,060
         
Corporate and Eliminations:         
Income from operations before acquisition-related expense (benefit), net (non-GAAP)   $ (5,385)  $ (3,988)  $ (10,802)  $ (8,445)
Acquisition-related expense (benefit) net   88  2,922  (1,245)  2,142
(Loss) from operations (GAAP)   (5,473)  (6,910)  (9,557)  (10,587)
         
Total Company         
Income from operations before acquisition-related (benefit), net (non-GAAP)   $ 17,758  $ 14,841  $ 20,461  $ 22,319
Acquisition-related (benefit), net   (434)  (411)  (1,395)  (2,508)
Income from operations (GAAP)   18,192  15,252  21,856  24,827
 
 
Mistras Group, Inc. and Subsidiaries
Unaudited Summary of Cash Flow Information
(in thousands)
   
  Six months ended November 30, 
 20142013
  
 Net cash provided by (used in):   
 Operating Activities   $ 3,230  $ 15,634
 Investing Activities   (40,666)  (20,237)
 Financing Activities   46,810  13,130
 Effect of exchange rate changes on cash   205  (89)
 Net change in cash and cash equivalents   $ 9,579  $ 8,438
 
 
Mistras Group, Inc. and Subsidiaries
Unaudited Reconciliation of 
Net Income to EBITDA and Adjusted EBITDA
(in thousands)
         
  Three months ended November 30,  Six months ended November 30, 
 2014201320142013
         
Net Income  $ 10,412  $ 9,284  $ 12,083  $ 14,919
Less: net income attributable to noncontrolling interests, net of taxes  15  (27)  10  (21)
Net income attributable to Mistras Group, Inc.  $ 10,427  $ 9,257  $ 12,093  $ 14,898
Interest expense   1,352  772  2,257  1,517
Provision for income taxes   6,428  5,196  7,516  8,391
Depreciation and amortization   8,386  6,785  16,665  13,550
EBITDA   $ 26,593  $ 22,010  $ 38,531  $ 38,356
Share-based compensation expense   2,090  1,040  4,257  2,747
Acquisition-related expense, net  (434)  (411)  (1,395)  (2,508)
Adjusted EBITDA   $ 28,249  $ 22,639  $ 41,393  $ 38,595
 
 
Mistras Group, Inc. and Subsidiaries
Unaudited Reconciliation of
Net Income (GAAP) and Diluted Earnings Per Share (GAAP) to 
Net Income Excluding Acquisition-related Items (non-GAAP) and Diluted EPS Excluding Acquisition-related Items (non-GAAP) 
(in thousands except per share data)
         
  Three months ended November 30,  Six months ended November 30, 
 2014201320142013
         
Net income (GAAP)  $ 10,412  $ 9,284  $ 12,083  $ 14,919
Acquisition-related (benefit), net of tax   (532)  (382)  (1,143)  (1,755)
Net Income Excluding Acquisition-related Items (non-GAAP)  $ 9,880  $ 8,902  $ 10,940  $ 13,164
         
         
Diluted earnings per common share (GAAP)  $ 0.35  $ 0.32  $ 0.41  $ 0.51
Acquisition-related (benefit), net  (0.02)  $ (0.01)  (0.04)  (0.06)
Diluted EPS Excluding Acquisition-related Items (non-GAAP)   $ 0.33  $ 0.31  $ 0.37  $ 0.45
         
Note: Acquisition-related (benefit), net of tax, includes income tax (benefit) expense of $(99) thousand and $29 thousand for the three months ended November 30, 2014 and 2013, and $252 thousand and $753 thousand for the six months ended November 30, 2014 and 2013. The aforementioned tax expenses are reflective of non-deductible and non-taxable tax differences related to acquisitions of common stock.
CONTACT: Media Contact:

         Nestor S. Makarigakis,

         Group Director of Marketing Communications

         marcom@mistrasgroup.com

         1(609)716-4000