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Mistras Group Announces Second Quarter Results

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Mistras Group Announces Second Quarter Results

Aug 6, 2018

Highlights of the Second Quarter 2018*

  • Q2 - $191.8 million of revenues; increased 13%
  • Q2  - $10.3 million of income from operations; increased 106%
  • Q2 - $6.0 million of net income; increased 171%
  • Q2  - $21.1 million of adjusted EBITDA; increased 35%
  • Q2 - $0.20 earnings per diluted share (GAAP) and $0.21 earnings per diluted share (non-GAAP)

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

PRINCETON JUNCTION, N.J., Aug. 06, 2018 (GLOBE NEWSWIRE) -- Mistras Group, Inc. (NYSE:MG), a leading "one source" global provider of technology-enabled asset protection solutions, reported financial results for its second quarter ended June 30, 2018.

Consolidated revenues for the second quarter of 2018 were $191.8 million, 13% higher than the prior year period of $170.4 million.  Services segment revenues were $147.7 million for the second quarter of 2018, 10% higher than $134.0 million in the prior year.  The increase in revenues was due to the combined effects of organic growth, acquisition expansion and favorable FX rates.  All three segments had organic revenue increases year-over-year.

Operating income for the second quarter was $10.3 million, 106% higher than the prior year period of $5.0 million. Second quarter 2018 net income was $6.0 million or $0.20 per diluted share, compared with $2.2 million and $0.07 per diluted share in the prior year period.

The Company generated $20.1 million of net cash from operations during the first six months of 2018.  Adjusted EBITDA for the first six months of 2018 was $36.4 million.  The Company's net debt (total debt and capital leases of $165.9 million less cash and cash equivalents of $17.5 million) was $148.4 million at June 30, 2018.

Performance by segment was as follows:

Services segment Q2 revenues increased by $13.7 million or 10% over prior year, attributable to high-single digit acquisition growth coupled with low-single digit organic growth. Services segment Q2 operating income increased by $4.2 million or 35% over prior year.  Services segment operating income margin increased by 200 bps.

International segment Q2 revenue increased by $7.2 million or 21% over prior year, attributable to mid-teens organic growth and mid-single digit favorable FX rates.  International Q2 operating income increased $2.6 million from the prior year's operating loss.

Products and Systems segment Q2 revenue increased by $0.3 million or 6% over prior year. Products and Systems Q2 operating loss improved by $0.2 million compared with the prior year.

Dennis Bertolotti, Chief Executive Officer stated, "I am very pleased with our robust top-line growth during Q2, as each segment grew revenue organically.  Our services segment also reached another all-time high for Q2 revenue, even after excluding the effect of all 2017 acquisitions.  It is particularly noteworthy that our Services segment achieved organic growth in Q2, offsetting the previously disclosed large contract loss that discontinued at the beginning of April 2018. Our strong overall performance was attributable to solid organic growth, the benefit of acquisitions completed last year as well as favorable FX rates.  Our consolidated operating margin improved by 250 basis points, driven by a 150 basis point improvement in our gross margin and a 100 basis point improvement in our operating expense ratio."

Mr. Bertolotti added "Market conditions that strengthened during the second half of 2017 continued to improve in the first half of 2018, with oil and gas customer spending patterns rebounding from low prior year levels. In addition, we have a
growing aerospace business and have also continued our successful push into expanding our complimentary mechanical services." Mr. Bertolotti concluded, stating "I believe macro-level economics drivers will be positive throughout the second half of 2018, and am confident in maintaining the forward momentum that we've built up over the past several successive quarters."

The Company's 2018 financial guidance was reaffirmed, with expected revenue and capital expenditures trending towards the high end of the stated ranges, as follows:

  • Total revenues expected to be between $715 million to $730 million;
  • Net income expected to be between $21 million to $24 million;
  • Earnings per diluted share expected to be between $0.71 to $0.83;
  • Adjusted EBITDA expected to be between $78 million to $83 million;
  • Operating cash flow expected to be approximately $70 million; and
  • Capital expenditures expected to be between $15 million and $20 million.

Conference Call
In connection with this release, Mistras will hold a conference call on August 7, 2018 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 6486346 when prompted. The International dial-in number is 1-224-633-1529.

About Mistras Group, Inc.
MISTRAS is a leading "one source" global provider of technology-enabled asset protection solutions used to evaluate the structural integrity of critical energy, industrial and public infrastructure. Mission critical services and solutions are delivered globally and provide customers with asset life extension, improved productivity and profitability, compliance with government safety and environmental regulations, and enhanced 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 (DT) services; process and fixed asset engineering and consulting services; and its world class enterprise inspection data management and analysis software (PCMS™) 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 14, 2018, 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 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 and capital lease obligations, less cash and cash equivalents.

Mistras Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)

 

 

(unaudited)

 

 

 

 

June 30, 2018

 

December 31, 2017

ASSETS

 

 

 

 

Current Assets

 

 

 

 

Cash and cash equivalents

 

$

17,530

 

 

$

27,541

 

Accounts receivable, net

 

144,200

 

 

138,080

 

Inventories

 

11,580

 

 

10,503

 

Prepaid expenses and other current assets

 

17,995

 

 

18,884

 

Total current assets

 

191,305

 

 

195,008

 

Property, plant and equipment, net

 

87,215

 

 

87,143

 

Intangible assets, net

 

59,171

 

 

63,739

 

Goodwill

 

199,656

 

 

203,438

 

Deferred income taxes

 

1,549

 

 

1,606

 

Other assets

 

5,093

 

 

3,507

 

Total assets

 

$

543,989

 

 

$

554,441

 

LIABILITIES AND EQUITY

 

 

 

 

Current Liabilities

 

 

 

 

Accounts payable

 

$

14,627

 

 

$

10,362

 

Accrued expenses and other current liabilities

 

63,922

 

 

65,561

 

Current portion of long-term debt

 

2,225

 

 

2,358

 

Current portion of capital lease obligations

 

5,294

 

 

5,875

 

Income taxes payable

 

3,365

 

 

6,069

 

Total current liabilities

 

89,433

 

 

90,225

 

Long-term debt, net of current portion

 

150,024

 

 

164,520

 

Obligations under capital leases, net of current portion

 

8,370

 

 

8,738

 

Deferred income taxes

 

9,247

 

 

8,803

 

Other long-term liabilities

 

9,061

 

 

11,363

 

Total liabilities

 

266,135

 

 

283,649

 

Commitments and contingencies

 

 

 

 

Equity

 

 

 

 

Preferred stock, 10,000,000 shares authorized

 

 

 

 

Common stock, $0.01 par value, 200,000,000 shares authorized, 28,373,535 and 28,294,968 shares issued

 

283

 

 

282

 

Additional paid-in capital

 

224,634

 

 

222,425

 

Retained earnings

 

73,624

 

 

64,717

 

Accumulated other comprehensive loss

 

(20,870

)

 

(16,805

)

Total Mistras Group, Inc. stockholders' equity

 

277,671

 

 

270,619

 

Non-controlling interests

 

183

 

 

173

 

Total equity

 

277,854

 

 

270,792

 

Total liabilities and equity

 

$

543,989

 

 

$

554,441

 

 

 

 

 

 

 

 

 

 

 

Mistras Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)

 

 

Three months ended

 

Six months ended

 

June 30,
2018

 

June 30,
2017

 

June 30,
2018

 

June 30,
2017

 

 

 

 

 

 

 

 

Revenue

$

191,793

 

 

$

170,439

 

 

$

379,423

 

 

$

333,757

 

Cost of revenue

131,084

 

 

118,825

 

 

264,872

 

 

233,828

 

Depreciation

5,626

 

 

5,271

 

 

11,323

 

 

10,433

 

Gross profit

55,083

 

 

46,343

 

 

103,228

 

 

89,496

 

Selling, general and administrative expenses

41,267

 

 

37,973

 

 

80,301

 

 

75,273

 

Research and engineering

913

 

 

552

 

 

1,669

 

 

1,195

 

Depreciation and amortization

2,965

 

 

2,613

 

 

5,916

 

 

5,116

 

Acquisition-related expense (benefit), net

(366

)

 

202

 

 

(1,360

)

 

(341

)

Income from operations

10,304

 

 

5,003

 

 

16,702

 

 

8,253

 

Interest expense

1,895

 

 

1,015

 

 

3,686

 

 

2,033

 

Income before provision for income taxes

8,409

 

 

3,988

 

 

13,016

 

 

6,220

 

Provision for income taxes

2,409

 

 

1,770

 

 

4,096

 

 

2,304

 

Net income

6,000

 

 

2,218

 

 

8,920

 

 

3,916

 

Less: net income attributable to non-controlling interests, net of taxes

 

 

1

 

 

12

 

 

7

 

Net income attributable to Mistras Group, Inc.

$

6,000

 

 

$

2,217

 

 

$

8,908

 

 

$

3,909

 

Earnings per common share:

 

 

 

 

 

 

 

Basic

$

0.21

 

 

$

0.08

 

 

$

0.31

 

 

$

0.14

 

Diluted

$

0.20

 

 

$

0.07

 

 

$

0.30

 

 

$

0.13

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

28,346

 

 

28,437

 

 

28,325

 

 

28,562

 

Diluted

29,334

 

 

29,599

 

 

29,349

 

 

29,754

 

 

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

 

 

Three months ended

 

Six months ended

 

June 30, 2018

 

June 30, 2017

 

June 30, 2018

 

June 30, 2017

Revenues

 

 

 

 

 

 

 

Services

$

147,718

 

 

$

134,043

 

 

$

293,313

 

 

$

260,372

 

International

41,111

 

 

33,904

 

 

79,567

 

 

68,160

 

Products and Systems

5,386

 

 

5,107

 

 

11,570

 

 

10,657

 

Corporate and eliminations

(2,422

)

 

(2,615

)

 

(5,027

)

 

(5,432

)

 

$

191,793

 

 

$

170,439

 

 

$

379,423

 

 

$

333,757

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Six months ended

 

June 30, 2018

 

June 30, 2017

 

June 30, 2018

 

June 30, 2017

Gross profit

 

 

 

 

 

 

 

Services

$

40,127

 

 

$

35,490

 

 

$

74,837

 

 

$

65,703

 

International

12,689

 

 

8,828

 

 

23,396

 

 

19,288

 

Products and Systems

2,213

 

 

1,966

 

 

5,103

 

 

4,560

 

Corporate and eliminations

54

 

 

59

 

 

(108

)

 

(55

)

 

$

55,083

 

 

$

46,343

 

 

$

103,228

 

 

$

89,496

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mistras Group, Inc. and Subsidiaries
Unaudited Reconciliation of
Segment and Total Company Income from Operations (GAAP) to Income before Special Items (non-GAAP)
(in thousands)

 

 

Three months ended

 

Six months ended

 

June 30, 2018

 

June 30, 2017

 

June 30, 2018

 

June 30, 2017

Services:

 

 

 

 

 

 

 

Income from operations (GAAP)

$

16,328

 

 

$

12,132

 

 

$

28,603

 

 

$

19,513

 

Bad debt provision for a customer bankruptcy

 

 

 

 

 

 

1,200

 

Reorganization and other related costs

 

 

437

 

 

 

 

453

 

Acquisition-related expense (benefit), net

43

 

 

201

 

 

(990

)

 

78

 

Income before special items (non-GAAP)

16,371

 

 

12,770

 

 

27,613

 

 

21,244

 

International:

 

 

 

 

 

 

 

Income (loss) from operations (GAAP)

2,455

 

 

(190

)

 

3,375

 

 

2,843

 

Reorganization and other related costs

492

 

 

63

 

 

581

 

 

76

 

Acquisition-related expense (benefit), net

(409

)

 

 

 

(409

)

 

(501

)

Income (loss) before special items (non-GAAP)

2,538

 

 

(127

)

 

3,547

 

 

2,418

 

Products and Systems:

 

 

 

 

 

 

 

Loss from operations (GAAP)

(656

)

 

(892

)

 

(384

)

 

(1,340

)

Reorganization and other related costs

29

 

 

 

 

29

 

 

 

Loss before special items (non-GAAP)

(627

)

 

(892

)

 

(355

)

 

(1,340

)

Corporate and Eliminations:

 

 

 

 

 

 

 

Loss from operations (GAAP)

(7,823

)

 

(6,047

)

 

(14,892

)

 

(12,763

)

Acquisition-related expense (benefit), net

 

 

1

 

 

39

 

 

82

 

Loss before special items (non-GAAP)

(7,823

)

 

(6,046

)

 

(14,853

)

 

(12,681

)

Total Company

 

 

 

 

 

 

 

Income from operations (GAAP)

$

10,304

 

 

$

5,003

 

 

$

16,702

 

 

$

8,253

 

Bad debt provision for a customer bankruptcy

 

 

 

 

 

 

1,200

 

Reorganization and other related costs

521

 

 

500

 

 

610

 

 

529

 

Acquisition-related expense (benefit), net

(366

)

 

202

 

 

(1,360

)

 

(341

)

Income before special items (non-GAAP)

$

10,459

 

 

$

5,705

 

 

$

15,952

 

 

$

9,641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mistras Group, Inc. and Subsidiaries
Unaudited Summary Cash Flow Information
(in thousands)

 

 

Six months ended

 

June 30, 2018

 

June 30, 2017

Net cash provided by (used in):

 

 

 

Operating activities

$

20,095

 

 

$

22,972

 

Investing activities

(10,287

)

 

(14,218

)

Financing activities

(19,257

)

 

(2,726

)

Effect of exchange rate changes on cash

(562

)

 

1,602

 

Net change in cash and cash equivalents

$

(10,011

)

 

$

7,630

 

 

 

 

 

 

 

 

 

 

Mistras Group, Inc. and Subsidiaries
Reconciliation of Net Cash Provided by Operating Activities (GAAP) to Free Cash Flow (non-GAAP)
(in thousands)

 

 

Six months ended

 

June 30, 2018

 

June 30, 2017

GAAP:  Net cash provided by operating activities

$

20,095

 

 

$

22,972

 

Less:

 

 

 

Purchases of property, plant and equipment

(10,963

)

 

(9,789

)

Purchases of intangible assets

(265

)

 

(688

)

non-GAAP:  Free cash flow

$

8,867

 

 

$

12,495

 

 

 

 

 

 

 

 

 

 

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

 

 

Three months ended

 

Six months ended

 

June 30,
2018

 

June 30,
2017

 

June 30,
2018

 

June 30,
2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

6,000

 

 

$

2,218

 

 

$

8,920

 

 

$

3,916

 

Less: net income attributable to noncontrolling interests, net of taxes

 

 

1

 

 

12

 

 

7

 

Net income attributable to Mistras Group, Inc.

$

6,000

 

 

$

2,217

 

 

$

8,908

 

 

$

3,909

 

Interest expense

1,895

 

 

1,015

 

 

3,686

 

 

2,033

 

Provision for income taxes

2,409

 

 

1,770

 

 

4,096

 

 

2,304

 

Depreciation and amortization

8,591

 

 

7,884

 

 

17,239

 

 

15,549

 

Share-based compensation expense

1,703

 

 

1,697

 

 

2,829

 

 

3,380

 

Acquisition-related expense (benefit), net

(366

)

 

202

 

 

(1,360

)

 

(341

)

Reorganization and other related costs

521

 

 

500

 

 

610

 

 

529

 

Bad debt provision for unexpected customer bankruptcy

 

 

 

 

 

 

1,200

 

Foreign exchange loss

338

 

 

349

 

 

389

 

 

326

 

Adjusted EBITDA

$

21,091

 

 

$

15,634

 

 

$

36,397

 

 

$

28,889

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mistras Group, Inc. and Subsidiaries
Unaudited Reconciliation of
Net Income (GAAP) and Diluted EPS (GAAP) to Net Income Excluding Special Items (non-GAAP)
and Diluted EPS Excluding Special Items (non-GAAP)
(in thousands, except per share data)

 

 

 

 

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

2018

 

2017

 

2018

 

2017

Net income (GAAP)

 

$

6,000

 

 

$

2,217

 

 

$

8,908

 

 

$

3,909

 

Special items, net of tax

 

44

 

 

396

 

 

(598

)

 

1,166

 

Net Income Excluding Special Items (non-GAAP)

 

$

6,044

 

 

$

2,613

 

 

$

8,310

 

 

$

5,075

 

 

 

 

 

 

 

 

 

 

Diluted EPS (GAAP)

 

$

0.20

 

 

$

0.07

 

 

$

0.30

 

 

$

0.13

 

Special items, net of tax

 

0.01

 

 

0.02

 

 

(0.02

)

 

0.04

 

Diluted EPS Excluding Special Items (non-GAAP)

 

$

0.21

 

 

$

0.09

 

 

$

0.28

 

 

$

0.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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