Mistras Group, Inc. (NYSE:MG), a leading "one source" global
provider of technology-enabled asset protection solutions, today
reported financial results for its third quarter and first nine
months of fiscal year 2014, which ended February 28, 2014.
During its third quarter, the Company's revenues increased 13.5%
over prior year, reaching $151.7 million. Net income for the third
quarter was $1.2 million, or $0.04 per diluted share, compared with
net income of $2.8 million or $0.09 per diluted share in the prior
year period. Excluding acquisition-related items, net income in the
third quarter of fiscal year 2014 was $1.8 million or $0.06 per
diluted share, compared with $1.9 million or $0.06 per diluted
share in the prior year's third quarter. Adjusted EBITDA was $12.5
million in the third quarter of fiscal year 2014 compared with
$12.5 million in the prior year period.
During the first nine months of fiscal year 2014, the Company's
revenues grew 15.5% over prior year, reaching $444.3 million. Net
income for the first nine months was $16.1 million, or $0.55 per
diluted share, compared with $16.2 million or $0.56 per diluted
share in the prior year period. Excluding acquisition-related
items, net income for the first nine months of fiscal year 2014 was
$15.0 million or $0.51 per diluted share, compared with $15.7
million or $0.54 per diluted share in the prior year. Adjusted
EBITDA was $51.1 million for the first nine months of fiscal year
2014 compared with $51.8 million in the prior year period.
The Company's operations and profitability were adversely
impacted by several factors during the third quarter of fiscal year
2014, including shut-downs of numerous customer work sites caused
primarily by bad weather, start-up costs related to two important
contracts, other one-time costs and weak international results. We
believe that the combined impact of these factors reduced Adjusted
EBITDA by approximately $3 million and net income by approximately
$1.8 million, or $0.06 per diluted share.
Financial Highlights:
Revenues
- Revenues for the third quarter of fiscal 2014 increased 13.5%
over prior year. Despite the adverse weather conditions, organic
revenue growth was 7.2%.
- Revenues for the first nine months of fiscal 2014 increased by
15.5%, consisting of 5.4% organic growth and 10% acquisition
growth. Due to key contract wins, organic growth for fiscal year
2014 is still expected to approach 7% for the entire fiscal
year.
- Organic revenue for the Services segment grew 12.8% during the
third quarter and 9.6% during the first nine months due to
continued strength in our key market segments.
- The International segment contracted organically by 2.3% during
the third quarter, reducing its year-to-date organic growth to
0.5%.
- The Products and Systems segment contracted organically by 0.5%
in the third quarter and by 11.0% year-to-date, due primarily to
lower sales to the coal-based power sector.
Gross Profit
- Gross Profit grew by 15% over prior year for both the third
quarter of fiscal 2014 and year-to-date.
- Gross margin for the third quarter was 25.9% of revenues vs.
25.6% in the prior year.
- Gross margin for the first nine months was 28.5% of revenues in
both current and prior year. Weather and start-up costs adversely
impacted third quarter 2014 gross margin by approximately 1.3% of
revenues.
Operating Cash Flow
- The Company's operating cash flow was $22.6 million for the
first nine months of fiscal year 2014.
Sotirios Vahaviolos, Chairman and Chief Executive Officer
stated, "Our third quarter results and organic revenue growth for
Services were strong, considering the magnitude of the adverse
weather conditions and the start-up costs we incurred to fully
staff-up for our recent contract win in Alaska and to prepare for a
new contract that we just signed with a major integrated energy
company with significant operations in the Canadian oil sands
region. The impact of these factors was not fully expected in the
Company's previous earnings guidance. International results were
likewise weaker than expected, due primarily to the timing of
customer start-up for recent contract wins."
"We remain bullish about the continued health and growth
prospects of the North American oil & gas and chemical
industries for the next several years, driven both by consumer
demand for energy and our customers' needs to improve safety and
comply with stringent environmental regulations. Our recent
contract wins continue to demonstrate the market's receptivity
toward our employees and our company's value based service
offerings."
Dr. Vahaviolos added, "Customer feedback indicates that the new
Canadian contract win could become one of our largest contracts.
Because of the tremendous importance of this new opportunity, we
anticipate that our investments made thus far in Canada will
intensify during the fourth quarter, in order to ensure that we are
poised to begin realizing this opportunity in a meaningful way
during our coming fiscal year 2015 and beyond. The Company is
therefore reducing its earnings guidance for the remainder of
fiscal year 2014 due primarily to the impacts of this additional
investment, combined with the third quarter profit shortfall."
Outlook and Guidance for Fiscal 2014
The Company is adjusting its previously issued guidance for
fiscal 2014 revenues and Adjusted EBITDA. Previously the Company
expected revenue to be in the range of from $590 million to $615
million, and Adjusted EBITDA to be in the range of $77 million to
$83 million. The Company now expects that its revenue will be in
the range of $600 million to $615 million, and Adjusted EBITDA will
be in a range of from $70 million to $74 million.
Conference Call
In connection with this release, Mistras will hold a conference
call on Wednesday, April 9, 2014 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 1-800-706-7745
and use confirmation code 75137255 when prompted. The International
dial-in number is 1-617-614-3472.
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 2013
filed with the Securities and Exchange Commission on August 14,
2013, 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) |
|
|
February 28,
2014 |
May 31, 2013 |
ASSETS |
|
|
Current Assets |
|
|
Cash and cash equivalents |
$ 9,950 |
$ 7,802 |
Accounts receivable, net |
126,304 |
108,554 |
Inventories |
12,516 |
12,504 |
Deferred income taxes |
3,029 |
2,621 |
Prepaid expenses and other current
assets |
14,637 |
8,156 |
Total current assets |
166,436 |
139,637 |
Property, plant and equipment, net |
74,428 |
68,419 |
Intangible assets, net |
52,180 |
51,992 |
Goodwill |
132,321 |
115,270 |
Other assets |
1,352 |
1,342 |
Total assets |
$ 426,717 |
$ 376,660 |
|
|
|
LIABILITIES AND EQUITY |
|
|
Current Liabilities |
|
|
Accounts payable |
$ 11,078 |
$ 8,490 |
Accrued expenses and other current
liabilities |
48,212 |
47,839 |
Current portion of long-term debt |
7,542 |
7,418 |
Current portion of capital lease
obligations |
7,147 |
6,766 |
Income taxes payable |
1,485 |
1,703 |
Total current liabilities |
75,464 |
72,216 |
Long-term debt, net of current portion |
73,883 |
52,849 |
Obligations under capital leases, net of
current portion |
13,036 |
10,923 |
Deferred income taxes |
13,862 |
11,614 |
Other long-term liabilities |
19,152 |
18,778 |
Total liabilities |
195,397 |
166,380 |
|
|
|
Commitments and contingencies |
|
|
|
|
|
Equity |
|
|
Preferred stock, 10,000,000 shares
authorized |
-- |
-- |
Common stock, $0.01 par value,
200,000,000 shares authorized |
284 |
282 |
Additional paid-in capital |
199,254 |
195,241 |
Retained earnings |
35,081 |
18,982 |
Accumulated other comprehensive loss |
(3,573) |
(4,452) |
Total Mistras Group, Inc. stockholders'
equity |
231,046 |
210,053 |
Noncontrolling interests |
274 |
227 |
Total equity |
231,320 |
210,280 |
Total liabilities and equity |
$ 426,717 |
$ 376,660 |
|
|
Mistras Group, Inc. and
Subsidiaries |
Unaudited Condensed
Consolidated Statements of Income |
(in thousands, except
per share data) |
|
|
|
|
|
|
Three
months ended February 28, |
Nine months
ended February 28, |
|
2014 |
2013 |
2014 |
2013 |
Revenues: |
|
|
|
|
Services |
$ 142,967 |
$ 124,510 |
$ 414,448 |
$ 351,466 |
Products and systems |
8,760 |
9,151 |
29,872 |
33,311 |
Total revenues |
151,727 |
133,661 |
444,320 |
384,777 |
Cost of revenues: |
|
|
|
|
Cost of services |
104,196 |
91,209 |
291,680 |
248,769 |
Cost of products and systems sold |
3,702 |
3,527 |
12,965 |
13,022 |
Depreciation related to services |
4,257 |
4,465 |
12,333 |
12,565 |
Depreciation related to products and
systems |
272 |
254 |
788 |
593 |
Total cost of
revenues |
112,427 |
99,455 |
317,766 |
274,949 |
Gross profit |
39,300 |
34,206 |
126,554 |
109,828 |
|
|
|
|
|
Selling, general and administrative
expenses |
31,794 |
27,209 |
90,342 |
74,063 |
Research and engineering |
757 |
754 |
2,186 |
1,801 |
Depreciation and amortization |
2,771 |
2,473 |
7,729 |
6,535 |
Acquisition-related expense, net |
978 |
(1,212) |
(1,530) |
(1,006) |
Income from operations |
3,000 |
4,982 |
27,827 |
28,435 |
Interest expense |
792 |
882 |
2,309 |
2,458 |
Income before provision for income
taxes |
2,208 |
4,100 |
25,518 |
25,977 |
Provision for income taxes |
984 |
1,349 |
9,375 |
9,749 |
Net income |
1,224 |
2,751 |
16,143 |
16,228 |
Less: net income attributable to
noncontrolling interests, net of taxes |
(23) |
-- |
(44) |
(33) |
Net income attributable to Mistras Group,
Inc. |
$ 1,201 |
$ 2,751 |
$ 16,099 |
$ 16,195 |
Earnings per common share |
|
|
|
|
Basic |
$ 0.04 |
$ 0.10 |
$ 0.57 |
$ 0.58 |
Diluted |
$ 0.04 |
$ 0.09 |
$ 0.55 |
$ 0.56 |
Weighted average common shares
outstanding: |
|
|
|
|
Basic |
28,396 |
28,175 |
28,338 |
28,121 |
Diluted |
29,374 |
29,101 |
29,249 |
29,078 |
|
|
Mistras Group, Inc. and
Subsidiaries |
Unaudited Operating
Data by Segment |
(in
thousands) |
|
|
|
|
|
|
Three
months ended February 28, |
Nine months
ended February 28, |
|
2014 |
2013 |
2014 |
2013 |
Revenues |
|
|
|
|
Services |
$ 109,122 |
$ 90,537 |
$ 313,794 |
$ 278,147 |
International |
38,064 |
37,516 |
119,032 |
88,722 |
Products and Systems |
7,610 |
7,645 |
22,799 |
25,618 |
Corporate and
eliminations |
(3,069) |
(2,037) |
(11,305) |
(7,710) |
|
$ 151,727 |
$ 133,661 |
$ 444,320 |
$ 384,777 |
|
|
|
|
|
|
|
|
|
Three
months ended February 28, |
Nine months
ended February 28, |
|
2014 |
2013 |
2014 |
2013 |
Gross
profit |
|
|
|
|
Services |
$ 26,216 |
$ 20,496 |
$ 83,881 |
$ 72,128 |
International |
10,086 |
9,851 |
33,499 |
24,231 |
Products and Systems |
3,674 |
3,790 |
9,776 |
13,010 |
Corporate and
eliminations |
(676) |
69 |
(602) |
459 |
|
$ 39,300 |
$ 34,206 |
$ 126,554 |
$ 109,828 |
|
|
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 February 28, |
Nine months
ended February 28, |
|
2014 |
2013 |
2014 |
2013 |
Services: |
|
|
|
|
Income from operations before
acquisition-related expense, net (non-GAAP) |
$ 7,759 |
$ 6,755 |
$ 33,161 |
$ 29,752 |
Acquisition-related expense
(benefit), net |
307 |
462 |
463 |
1,155 |
Income from operations
(GAAP) |
7,452 |
6,293 |
32,698 |
28,597 |
|
|
|
|
|
International: |
|
|
|
|
Income from operations before
acquisition-related expense, net (non-GAAP) |
$ 189 |
$ 855 |
$ 5,526 |
$ 3,907 |
Acquisition-related expense
(benefit), net |
105 |
269 |
(3,666) |
450 |
Income from operations
(GAAP) |
84 |
586 |
9,192 |
3,457 |
|
|
|
|
|
Products and
Systems: |
|
|
|
|
Income from operations before
acquisition-related expense, net (non-GAAP) |
$ 87 |
$ 576 |
$ 112 |
$ 4,054 |
Acquisition-related (benefit),
net |
-- |
(1,123) |
(1,035) |
(2,427) |
Income from operations
(GAAP) |
87 |
1,699 |
1,147 |
6,481 |
|
|
|
|
|
Corporate and
Eliminations: |
|
|
|
|
Income from operations before
acquisition-related (benefit), net (non-GAAP) |
$ (4,057) |
$ (4,416) |
$ (12,502) |
$ (10,284) |
Acquisition-related expense,
net |
566 |
(820) |
2,708 |
(184) |
(Loss) from operations
(GAAP) |
(4,623) |
(3,596) |
(15,210) |
(10,100) |
|
|
|
|
|
Total
Company |
|
|
|
|
Income from operations before
acquisition-related expense, net (non-GAAP) |
$ 3,978 |
$ 3,770 |
$ 26,297 |
$ 27,429 |
Acquisition-related expense
(benefit), net |
978 |
(1,212) |
(1,530) |
(1,006) |
Income from operations
(GAAP) |
3,000 |
4,982 |
27,827 |
28,435 |
|
|
Mistras Group, Inc. and
Subsidiaries |
Unaudited
Reconciliation of |
Net Income to EBITDA
and Adjusted EBITDA |
(in
thousands) |
|
|
|
|
|
|
Three
months ended February 28, |
Nine months
ended February 28, |
|
2014 |
2013 |
2014 |
2013 |
|
|
|
|
|
Net Income |
$ 1,224 |
$ 2,751 |
$ 16,143 |
$ 16,228 |
Less: net income attributable to
noncontrolling interests, net of taxes |
(23) |
-- |
(44) |
(33) |
Net income attributable to Mistras Group,
Inc. |
$ 1,201 |
$ 2,751 |
$ 16,099 |
$ 16,195 |
Interest expense |
792 |
882 |
2,309 |
2,458 |
Provision for income taxes |
984 |
1,349 |
9,375 |
9,749 |
Depreciation and amortization |
7,300 |
7,192 |
20,850 |
19,693 |
EBITDA |
$ 10,277 |
$ 12,174 |
$ 48,633 |
$ 48,095 |
Share-based compensation expense |
1,266 |
1,544 |
4,013 |
4,749 |
Acquisition-related expense, net |
978 |
(1,212) |
(1,530) |
(1,006) |
Adjusted EBITDA |
$ 12,521 |
$ 12,506 |
$ 51,116 |
$ 51,838 |
|
|
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 February 28, |
Nine months
ended February 28, |
|
2014 |
2013 |
2014 |
2013 |
|
|
|
|
|
Net income (GAAP) |
$ 1,224 |
$ 2,751 |
$ 16,143 |
$ 16,228 |
Acquisition-related expense (benefit), net of
tax |
597 |
(812) |
(1,158) |
(525) |
Net Income Excluding Acquisition-related
Items (non-GAAP) |
$ 1,821 |
$ 1,939 |
$ 14,985 |
$ 15,703 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share (GAAP) |
$ 0.04 |
$ 0.09 |
$ 0.55 |
$ 0.56 |
Acquisition-related expense (benefit),
net |
0.02 |
(0.03) |
(0.04) |
(0.02) |
Diluted EPS Excluding Acquisition-related
Items (non-GAAP) |
$ 0.06 |
$ 0.06 |
$ 0.51 |
$ 0.54 |
|
|
|
|
|
Note: Acquisition-related expense
(benefit), net of tax, includes income tax (benefit)/expense of
$(381) thousand and $400 thousand for the three months ended
February 28, 2014 and 2013, respectively and $372 thousand and $481
thousand for the nine months ended February 28, 2014 and
2013, respectively. The aforementioned tax expense 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
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