Highlights of the First Quarter 2019*

• Results consistent with guidance outlook for the full year
  
  
• Q1 gross profit up 2% to $48.9 million
  
  
• Q1 gross margin expands 190 basis points to 27.6% from 25.7%; Services segment gross margin expands 280 basis points to 26.6% from 23.8%
  
  
• Q1 cash flows from operating activities of $8.2 million, up 41% from first quarter 2018

*- All comparisons are consolidated and versus the equivalent prior year period.

PRINCETON JUNCTION, N.J., May 06, 2019 (GLOBE NEWSWIRE) -- MISTRAS Group, Inc. (MG: NYSE), a leading "one source" global provider of technology-enabled asset protection solutions, reported financial results for its first quarter ended March 31, 2019.

For the first quarter of 2019, consolidated revenues were $176.8 million compared with $187.6 million in the prior year period.  Revenues are consistent with our expectations and reflective of the impact we anticipated from the previously disclosed non-renewal of a contract, effective April 1, 2019.  For the quarter, consolidated gross profit was up approximately 2% over 2018 to $48.9 million, as the consolidated gross margin expanded by 190 basis points to 27.6% compared with 25.7% in the same quarter a year ago.

Chief Executive Officer Dennis Bertolotti stated, "Results in the first quarter are consistent with the expectations and embedded in our outlook for the full year.  Gross margins were once again significantly improved from a year ago, due to both a better sales mix as well as ongoing efficiency and productivity enhancements.  And, while adjusted EBITDA was down year-over-year, cash generation was strong, with a portion of the proceeds being used to pay down outstanding debt.

“With what we previously communicated was going to be a challenging quarter behind us, we are extremely excited about our outlook for the balance of the year. By investing in strengthening the MISTRAS NDT business, we continue to be recognized as an industry leader and increase our market share.  This was once again confirmed when we were awarded several significant contracts here in the early part of 2019 amounting to $15 million of revenue on an annualized and incremental basis, across multiple customers, spanning several end market verticals and in various North American regions.

Activity at Onstream has also recently inflected, with a significant increase in activity in the United States, where we have been aggressively promoting them to our existing midstream relationships.  Both Onstream and our robust acquisition funnel continue to enhance our MISTRAS digital solutions initiative, which we see as foundational to our long-term growth.  There continues to be an active market in smaller acquisitions, many of which could strategically advance MISTRAS digital solutions.  In addition, this quarter we generated strong operating cash flow, which has always been a strength.”

Performance by segment during the quarter was as follows:

Services segment first quarter revenues decreased by $5 million or 4%.  While currently robust, turnaround activity in the first quarter ramped up significantly later than in the first quarter of a year ago; we also generated approximately $10 million on a contract that was vacated in last year’s second quarter.  Services segment gross profit margins improved 280 basis points in the first quarter to 26.6% from 23.8% despite lower revenues as we improve the leverage in our operations.

International segment first quarter revenues decreased by $3 million or 9%, primarily due to unfavorable currency translation but also due to an acceleration in the timing of the termination of the German staff leasing contract.  International segment gross profit margin was 29.5% in the first quarter, a 170 basis point improvement from 27.8% in the year ago quarter.  Margins benefited from a more favorable product mix reflective of a decrease in the proportion of low margin staff leasing revenues in the quarter.

Products and Systems segment revenue decreased by $2.8 million or 45% in the first quarter of 2019 compared to the prior year.  Both revenues and margins in the segment reflect the impact of the 2018 divestment of a product line.

The Company generated $8.2 million of cash flows from operating activities, an increase of nearly $2.4 million, or 41% from the first quarter of 2018.  Free cash flow in the first quarter was $2.5 million compared to $0.5 million in the prior year period.

The Company’s net debt (total debt less cash and cash equivalents of $24.6 million) was $263.1 million at March 31, 2019, down from $265.1 million at December 31, 2018.

In the fourth quarter of 2018, the Company recorded a reserve of $0.7 million for a renewable energy industry customer of the Company’s Services Division, based in part on the available information about the financial difficulties of the customer.  This customer filed for a voluntary insolvency proceeding on April 9, 2019 at which time payments under the previously agreed to payment plan ceased. As a result, during the first quarter of 2019, the Company recorded an additional charge of $5.7 million to fully reserve the exposure related to this customer.  Separately, the Company also recorded an additional $0.5 million provision related to the estimated pension withdrawal liability that was initially recorded during the third quarter of 2018.  We believe this matter is fully reserved for as of March 31, 2019.

Guidance for 2019

The Company is affirming its planning assumptions and guidance for 2019. The Company’s outlook remains as follows:

Conference Call

In connection with this release, MISTRAS will hold a conference call on May 7, 2019 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 dial 1-844-832-7227 and use confirmation code 8288676 when prompted. The International dial-in number is 1-224-633-1529.  Those who wish to listen to the call later can access an archived copy of the conference call at the MISTRAS Website.

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 or contact Nestor S. Makarigakis, Group Director, Marketing Communications at marcom@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 filed with the Securities and Exchange Commission on March 15, 2019, 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
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. The term "Adjusted EBITDA" used in this release is a financial measurement not calculated in accordance with GAAP and is defined as net income attributable to MISTRAS Group, Inc. plus: interest expense, provision for income taxes, depreciation and amortization, share-based compensation expense and certain acquisition related costs (including transaction due diligence costs and adjustments to the fair value of contingent consideration), foreign exchange (gain) loss and, if applicable, certain special items which are noted.  A reconciliation of Adjusted EBITDA to a financial measurement under GAAP is set forth in a table attached to this press release. In the press release, the Company also uses the term "non-GAAP Net Income,", which is GAAP net income adjusted for certain items management believes are unusual and non-recurring.  In the tables attached is a table reconciling "Net Income (Loss) (GAAP)" to "Net Income Excluding Special Items (non-GAAP), which reconciles the non-GAAP amount to a GAAP measurement.  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 cash provided by operating activities less capital expenditures (which is classified as an investing activity). 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, less cash and cash equivalents.

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

Source: Mistras Group Inc