March 16, 2017

Mistras Group Announces Results for Period Ended December 31, 2016

PRINCETON JUNCTION, N.J., March 16, 2017 (GLOBE NEWSWIRE) -- Mistras Group, Inc. (NYSE:MG), a leading "one source" global provider of technology-enabled asset protection solutions, reported financial results for its abbreviated fiscal period (the "2016 stub period") which commenced on June 1, 2016 and ended December 31, 2016.  The 2016 stub period is a result of the Company's previously announced change in its fiscal year to December 31 in order to better align the Company's budgeting and planning cycles with those of its customers.

Revenues for the 2016 stub period were $404.2 million, or 6% lower than in the comparable period of 2015.  Net income during the 2016 stub period was $9.6 million or $0.32 per diluted share, both measures reflecting declines of approximately 50% compared with the comparable period of 2015. Included in the 2016 stub period were pre-tax charges aggregating approximately $5 million, primarily associated with the acceleration of certain costs to align with the Company's new December 31 fiscal year-end, and other charges which included severance and the write-off of an intangible asset.

The Company generated $30.3 million of cash from operating activities during the 2016 stub period and approximately $20 million in free cash flow, defined as cash flow from operating activities less cash used to purchase property, plant and equipment and intangible assets. The Company utilized its free cash flow during the 2016 stub period for acquisitions ($8.3 million) and to repurchase $9 million of stock. The Company's net debt (total debt less cash) of $84.3 million at December 31, 2016 was approximately 1.1x Adjusted EBITDA.

Adjusted EBITDA for the 2016 stub period was $43 million, or 10.6% of revenues, compared with $58 million in the comparable period of the prior year. The decline of $15 million was almost entirely driven by the Company's Services segment, which experienced a weaker than expected fall 2016 turnaround season.

Dr. Sotirios Vahaviolos, Chairman and Chief Executive Officer stated, "As mentioned in our recent earnings calls, the fall 2016 season was an especially challenging market in North America, as workloads from many customers were less than in prior year. These conditions caused results in our Services segment to suffer a poor comparison to prior year that more than offset continued positive performance in our International segment. Having realized strong improvements in our fiscal year that ended May 31, 2016, the fall off that we experienced in the second half of calendar 2016 was very disappointing."

Dr. Vahaviolos added: "Unfortunately, the market has not yet rebounded in the spring of 2017. We are using this time to make further adjustments to our cost structure, and to enhance our competitive position by adding capabilities that will help our customers in new and exciting ways. We will use 2017 to position Mistras to drive incrementally more value for our customers, and to make investments that will reignite our profitable growth in 2018 and beyond. "

Planning Assumptions and Guidance for 2017

The Company is introducing its planning assumptions and guidance for fiscal year 2017 that commenced on January 1, 2017. The Company expects that the present range for petroleum prices will persist for the foreseeable future, causing oil and gas customer spend for inspection services to be correspondingly flat to down.

Information obtained from North American oil and gas customers suggests that their spending in the first half of calendar 2017 will continue to trend lower than prior year, albeit at a lower rate of decline than in the fall of 2016. Spending levels are expected to pick up modestly in the second half of 2017. The Company's results for the first half and second half of 2017 are expected to reflect this dynamic.

Total revenues for 2017 are expected to be between $670 million to $700 million, or roughly flat with calendar 2016 revenues of $685 million. The Company's net income for calendar 2016 was $16 million, including net of tax charges of approximately $5 million. Net income for 2017 is expected to range from $20 million to $23 million. Earnings per diluted share is expected to range from 68 cents to 78 cents.  Adjusted EBITDA for calendar year 2016 was $74 million, or 11% of revenues. Adjusted EBITDA for calendar 2017 is expected to be between $73 million to $78 million.

The Company expects that its operating cash flow will approximate $50 million, inclusive of funding over $6 million pertaining to a prior year legal settlement. Capital expenditures are expected to be approximately $20 million, inclusive of approximately $5 million to be used to build out the Company's facilities and equipment to service its recent long-term contract with Safran in France.

Conference Call

In connection with this release, Mistras will hold a conference call on March 17, 2017 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 88319215 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 2016 filed with the Securities and Exchange Commission on August 15, 2016, 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 and Unaudited Proforma Financial Information
In addition to financial information prepared in accordance with generally accepted accounting principles in the U.S. (GAAP), this press release also contains adjusted financial measures that we believe provide investors and management with supplemental information relating to operating performance and trends that facilitate comparisons between periods and with respect to projected information. These adjusted financial measures are non-GAAP and should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. We typically exclude certain GAAP items that management does not believe affect our basic operations and that do not meet the GAAP definition of unusual or non-recurring items. Other companies may define these measures in different ways. The term "Adjusted EBITDA" used in this release is a financial measurement not calculated in accordance with GAAP. A Reconciliation of Adjusted EBITDA to a financial measurement under 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 measurement" "Segment and Total Company Income (Loss) Before Special Items", reconciling these measurements to financial measurements under GAAP. The Company uses the term "free cash flow", a non-GAAP measurement the Company defines as free cash flow as cash provided by operating activities less capital expenditures (which is classified as an investing activity).  Free cash flow does not represent residual cash flow available for discretionary expenditures since items such as debt repayments are not deducted in determining such measures.  The Company also uses the term "net debt", a non-GAAP measurement defined as the sum of the current and long-term portions of long-term debt and capital lease obligations, less cash and cash equivalents. 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.

The accompanying unaudited proforma summary operating information and unaudited proforma reconciliations of net income to Adjusted EBITDA for each of the 2016 and 2015 quarterly periods and calendar years presented has been prepared as-if the Company had historically reported on a calendar year basis.  Certain assumptions have been made in preparing the information on this basis.

 
Mistras Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share data)
 
  December 31, 2016 May 31, 2016
ASSETS    
Current Assets    
Cash and cash equivalents $19,154  $21,188 
Accounts receivable, net 130,852  137,913 
Inventories 10,017  9,918 
Deferred income taxes 6,230  6,216 
Prepaid expenses and other current assets 16,399  12,711 
Total current assets 182,652  187,946 
Property, plant and equipment, net 73,149  78,676 
Intangible assets, net 40,007  43,492 
Goodwill 169,940  169,220 
Deferred income taxes 1,086  1,000 
Other assets 2,593  2,341 
Total Assets $469,427  $482,675 
     
LIABILITIES AND EQUITY    
Current Liabilities    
Accounts payable $6,805  $10,796 
Accrued expenses and other current liabilities 58,697  62,983 
Current portion of long-term debt 1,379  12,553 
Current portion of capital lease obligations 6,488  7,835 
Income taxes payable 4,342  2,710 
Total current liabilities 77,711  96,877 
Long-term debt, net of current portion 85,917  72,456 
Obligations under capital leases, net of current portion 9,682  11,932 
Deferred income taxes 17,584  18,328 
Other long-term liabilities 7,789  6,794 
Total Liabilities 198,683  206,387 
     
Commitments and contingencies    
     
Equity    
Preferred stock, 10,000,000 shares authorized    
Common stock, $0.01 par value, 200,000,000 shares authorized, 29,216,745 and 28,939,993 shares issued 292  290 
Additional paid-in capital 217,211  213,737 
Treasury stock at cost, 420,258 and 0 shares (9,000)  
Retained earnings 91,803  82,235 
Accumulated other comprehensive loss (29,724) (20,099)
Total Mistras Group, Inc. stockholders' equity 270,582  276,163 
Noncontrolling interests 162  125 
Total Equity 270,744  276,288 
Total Liabilities and Equity $469,427  $482,675 
         


Mistras Group, Inc. and Subsidiaries
Unaudited Consolidated Statements of Income
(in thousands, except per share data)
 
  Stub period ended
  December 31,
2016
 December 31,
2015
Revenue $404,161  $427,913 
Cost of revenue 274,298  292,718 
Depreciation 12,859  12,005 
Gross profit 117,004  123,190 
Selling, general and administrative expenses 91,058  81,117 
Research and engineering 1,577  1,431 
Depreciation and amortization 6,340  6,503 
Acquisition-related expense (benefit), net 496  (959)
Income from operations 17,533  35,098 
Interest expense 2,052  3,672 
Income before provision for income taxes 15,481  31,426 
Provision for income taxes 5,870  11,627 
Net income 9,611  19,799 
Less: net income (loss) attributable to noncontrolling interests, net of taxes 43  (15)
Net income attributable to Mistras Group, Inc. $9,568  $19,814 
Earnings per common share    
Basic $0.33  $0.69 
Diluted $0.32  $0.67 
Weighted average common shares outstanding:    
Basic 28,989  28,810 
Diluted 30,125  29,676 


Mistras Group, Inc. and Subsidiaries
Unaudited Operating Data by Segment
(in thousands)
 
 Stub Period Ended
 December
31,  2016
 December
31, 2015
Revenues   
Services$293,218  $327,118 
International104,013  87,411 
Products and Systems14,541  18,786 
Corporate and eliminations(7,611) (5,402)
 $404,161  $427,913 
    
    
 Stub Period Ended
 December
31, 2016
 December
31, 2015
Gross profit   
Services$75,784  $87,514 
International34,210  26,762 
Products and Systems6,920  8,986 
Corporate and eliminations90  (72)
 $117,004  $123,190 
    


Mistras Group, Inc. and Subsidiaries 
Unaudited Reconciliation of 
Segment and Total Company Income (Loss) from Operations (GAAP) to Income before Special Items (non-GAAP) 
(in thousands) 
 Stub period ended 
 December
31, 2016
 December
31, 2015
 
Services:    
Income from operations (GAAP)$22,411  $37,175  
Severance costs77  188  
Acquisition-related expense (benefit), net236  (593) 
Income before special items (non-GAAP)22,724  36,770  
     
International:    
Income from operations (GAAP)10,597  6,888  
Severance costs474  175  
Asset write-offs and lease terminations1,042    
Acquisition-related expense (benefit), net29  (457) 
Income before special items (non-GAAP)12,142  6,606  
     
Products and Systems:    
(Loss) income from operations (GAAP)(254) 2,613  
Severance costs14  17  
(Loss) income before special items (non-GAAP)(240) 2,630  
     
Corporate and Eliminations:    
Loss from operations (GAAP)(15,221) (11,578) 
Severance costs133    
Acquisition-related expense (benefit), net231  91  
Loss before special items (non-GAAP)(14,857) (11,487) 
     
Total Company    
Income from operations (GAAP)$17,533  $35,098  
Severance costs$698  $380  
Asset write-offs and lease terminations$1,042  $  
Acquisition-related expense (benefit), net$496  $(959) 
Income before special items (non-GAAP)$19,769  $34,519  
         


Mistras Group, Inc. and Subsidiaries
Unaudited Summary Cash Flow Information
(in thousands)
 
 Stub period ended
 December 31, 2016
  
Net cash provided by (used in): 
Operating activities$30,259 
Investing activities(17,374)
Financing activities(12,869)
Effect of exchange rate changes on cash(2,050)
Net change in cash and cash equivalents$(2,034)
  


Mistras Group, Inc. and Subsidiaries
Reconciliation of Net Cash Provided from Operating Activities (GAAP) to Free Cash Flow (non-GAAP)
(in thousands)
 
  Stub Period ended December
31, 2016
GAAP:  Net cash provided from operating activities $30,259 
Less:  
Purchase of property, plant and equipment (9,093)
Purchase of intangible assets (697)
non-GAAP: Free cash flow $20,469 


Mistras Group, Inc. and Subsidiaries
Unaudited Reconciliation of
Net Income to Adjusted EBITDA
(in thousands)
 
 Stub period ended
 December 31,
2016
 December 31,
2015
        
Net income$9,611  $19,799 
Less: net income (loss) attributable to noncontrolling interests, net of taxes43  (15)
Net income attributable to Mistras Group, Inc.$9,568  $19,814 
Interest expense2,052  3,672 
Provision for income taxes5,870  11,627 
Depreciation and amortization19,199  18,508 
Share-based compensation expense4,601  3,792 
Acquisition-related expense (benefit), net496  (959)
Severance698  380 
Foreign exchange (gain) loss(675) 728 
Asset write-offs and lease terminations1,042   
Adjusted EBITDA$42,851  $57,562 
    


Mistras Group, Inc. and Subsidiaries
Unaudited Reconciliation of
Estimated Adjusted EBITDA and Estimated Net Income for 2017
(in millions)
 
 For the Year Ended December 31, 2017
 Low High
Estimated Net Income$20.0  $23.0 
Interest expense3.5  3.5 
Provision for income taxes11.0  13.0 
Depreciation and amortization31.5  31.5 
Share-based compensation expense7.0  7.0 
Estimated Adjusted EBITDA$73.0  $78.0 
    


Mistras Group, Inc. and Subsidiaries
Unaudited Proforma Summary of Operating Information
(in thousands, except per share data)
 
 Three Months Ended Year
Ended
 3/31/2016 6/30/2016 9/30/2016 12/31/2016 2016
Revenue$167,455  $178,340  $168,811  $170,156  $684,762 
Cost of revenue118,229  121,044  112,754  116,902  468,929 
Depreciation5,256  5,761  5,406  5,276  21,699 
Gross profit43,970  51,535  50,651  47,978  194,134 
Selling, general and administrative expenses35,054  43,537  34,995  39,713  153,299 
Research and engineering662  623  643  742  2,670 
Depreciation and amortization2,762  2,865  2,513  2,549  10,689 
Acquisition-related expense (benefit), net(153) (330) 384  94  (5)
Income from operations5,645  4,840  12,116  4,880  27,481 
Interest expense1,100  340  778  857  3,075 
Income before provision for income taxes4,545  4,500  11,338  4,023  24,406 
Provision for income taxes1,088  1,737  4,083  1,581  8,489 
Net income3,457  2,763  7,255  2,442  15,917 
Less: net income attributable to noncontrolling interests, net of taxes10  2  17  20  49 
Net income attributable to Mistras Group, Inc.$3,447  $2,761   $7,238   $2,422   $15,868 
Earnings per common share         
Basic$0.12  $0.10  $0.25  $0.08  $0.55 
Diluted$0.12  $0.09  $0.24  $0.08  $0.53 
Weighted average common shares outstanding:         
Basic28,915  28,932  29,051  28,943  28,960 
Diluted29,966  30,152  30,231  29,920  30,114 


Mistras Group, Inc. and Subsidiaries
Unaudited Proforma Reconciliation of Net Income to Adjusted EBITDA
and Unaudited Proforma Segment Data
 (in thousands, except per share data)
 
 Three Months Ended Year
Ended
 3/31/2016 6/30/2016 9/30/2016 12/31/2016 2016
Net income$3,457  $2,763  $7,255  $2,442  $15,917 
Less: net income attributable to noncontrolling interests, net of taxes10  2  17  20  49 
Net income attributable to Mistras Group, Inc.3,447  2,761   7,238   2,422   15,868 
Interest expense1,100  340  778  857  3,075 
Provision for income taxes1,088  1,737  4,083  1,581  8,489 
Depreciation and amortization8,018  8,626  7,919  7,825  32,388 
Share-based compensation expense1,729  1,466  1,966  2,163  7,324 
Acquisition-related expense (benefit), net(153) (330) 384  94  (5)
Severance54  673  265  433  1,425 
Foreign exchange (gain) loss(282) (237) (835) (11) (1,365)
Legal settlement  6,320      6,320 
Adjusted EBITDA$15,001  $21,356  $21,798  $15,364  $73,519 
          
Segment Data:         
Revenues         
Services$131,579  $136,358  $127,153  $124,289  $519,379 
International30,980  36,373  37,922  43,486  148,761 
Products6,680  6,467  6,807  6,094  26,048 
Corporate and Eliminations(1,784) (858) (3,071) (3,713) (9,426)
 $167,455  $178,340  $168,811  $170,156  $684,762 
Operating Income         
Services$11,339  $7,372  $12,221  $6,856  $37,788 
International720  2,454  5,751  5,918  14,843 
Products(132) (114) 806  (740) (180)
Corporate and Eliminations(6,282) (4,872) (6,662) (7,154) (24,970)
 $5,645  $4,840  $12,116  $4,880  $27,481 
Adjusted EBITDA         
Services$16,773  $19,467  $18,111  $12,121  $66,472 
International2,288  4,954  6,994  8,365  22,601 
Products445  492  1,358  (88) 2,207 
Corporate and Eliminations(4,505) (3,557) (4,665) (5,034) (17,761)
 $15,001  $21,356  $21,798  $15,364  $73,519 


Mistras Group, Inc. and Subsidiaries
Unaudited Proforma Summary of Operating Information
(in thousands, except per share data)
 
 Three Months Ended Year
Ended
 3/31/2015 6/30/2015 9/30/2015 12/31/2015 2015
Revenue$168,873  $170,932  $187,173  $184,306  $711,284 
Cost of revenue121,036  122,005  127,391  125,044  495,476 
Depreciation5,225  5,270  5,188  5,135  20,818 
Gross profit42,612  43,657  54,594  54,127  194,990 
Selling, general and administrative expenses32,814  39,256  34,241  34,408  140,719 
Research and engineering637  539  661  603  2,440 
Depreciation and amortization3,047  3,009  2,714  2,788  11,558 
Acquisition-related expense (benefit), net(1,656) (2,131) (883) (76) (4,746)
Income from operations7,770  2,984  17,861  16,404  45,019 
Interest expense1,181  1,155  1,960  1,360  5,656 
Income before provision for income taxes6,589  1,829  15,901  15,044  39,363 
Provision for income taxes2,479  689  5,982  5,659  14,809 
Net income4,110  1,140  9,919  9,385  24,554 
Less: net income (loss) attributable to noncontrolling interests, net of taxes(51) (35) (20) 9  (97)
Net income attributable to Mistras Group, Inc.$4,161  $1,175   $9,939   $9,376   $24,651 
Earnings per common share         
Basic$0.15  $0.04  $0.35  $0.32  $0.86 
Diluted$0.14  $0.04  $0.34  $0.32  $0.83 
Weighted average common shares outstanding:         
Basic28,683  28,703  28,776  28,878  28,760 
Diluted29,595  29,638  29,524  29,720  29,632 


Mistras Group, Inc. and Subsidiaries
Unaudited Proforma Reconciliation of Net Income to Adjusted EBITDA  and Unaudited Proforma Segment Data
(in thousands, except per share data)
 
 Three Months Ended Year
Ended
 3/31/2015 6/30/2015 9/30/2015 12/31/2015 2015
Net income$4,110  $1,140  $9,919  $9,385  $24,554 
Less: net income (loss) attributable to noncontrolling interests, net of taxes(51) (35) (20) 9  (97)
Net income attributable to Mistras Group, Inc.4,161  1,175   9,939   9,376   24,651 
Interest expense1,181  1,155  1,960  1,360  5,656 
Provision for income taxes2,479  689  5,982  5,659  14,809 
Depreciation and amortization8,272  8,279  7,902  7,923  32,376 
Share-based compensation expense458  1,694  1,909  1,304  5,365 
Acquisition-related expense (benefit), net(1,656) (2,131) (883) (76) (4,746)
Severance160  1,186  60  320  1,726 
Foreign exchange (gain) loss127  640  (214) 399  952 
Charges related to exit of foreign operations  2,516      2,516 
Asset write-offs and lease terminations  1,029      1,029 
Adjusted EBITDA$15,182  $16,232  $26,655  $26,265  $84,334 
          
Segment Data:         
Revenues         
  Services$131,161  $132,626  $143,249  $139,263  $546,299 
  International30,854  32,715  37,936  38,964  140,469 
  Products8,603  7,980  8,916  7,569  33,068 
  Corporate and Eliminations(1,745) (2,389) (2,928) (1,490) (8,552)
 $168,873  $170,932  $187,173  $184,306  $711,284 
Operating Income         
  Services$11,689  $12,821  $17,584  $15,584  $57,678 
  International(2,190) (1,845) 3,343  4,543  3,851 
  Products1,586  538  1,526  1,011  4,661 
  Corporate and Eliminations(3,315) (8,530) (4,592) (4,734) (21,171)
 $7,770  $2,984  $17,861  $16,404  $45,019 
Adjusted EBITDA         
  Services$16,135  $17,037  $22,178  $21,548  $76,898 
  International(675) 1,481  5,646  6,429  12,881 
  Products2,198  1,232  2,093  1,611  7,134 
  Corporate and Eliminations(2,476) (3,518) (3,262) (3,323) (12,579)
 $15,182  $16,232  $26,655  $26,265  $84,334 

 

Media Contact:
Nestor S. Makarigakis, Group Director of Marketing Communications, 
marcom@mistrasgroup.com
1(609)716-4000


Close window | Back to top


Copyright 2017 Mistras Group, Inc.