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 2015, which ended February 28, 2015.
Revenues increased by 7.5% over the prior year's third quarter,
reaching $163.1 million. Net income for the third quarter was $1.8
million, or $0.06 per diluted share, compared with net income of
$1.2 million or $0.04 per diluted share in the prior year period.
Excluding acquisition-related items, net income in the third
quarter of fiscal year 2015 was $0.2 million or $0.01 per diluted
share, compared with $1.8 million or $0.06 per diluted share in the
prior year's third quarter. Adjusted EBITDA was $11.0 million in
the third quarter of fiscal year 2015 compared with $12.5 million
in the prior year period.
Revenues increased by 20.8% over prior year's first nine months,
reaching $536.6 million. Net income for the first nine months was
$13.9 million, or $0.47 per diluted share, compared with $16.1
million or $0.55 per diluted share in the prior year period.
Excluding acquisition-related items, net income for the first nine
months of fiscal year 2015 was $11.2 million or $0.38 per diluted
share, compared with $15.0 million or $0.51 per diluted share in
the prior year. Adjusted EBITDA was $52.4 million for the first
nine months of fiscal year 2015 compared with $51.1 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
2015, including:
- the nation's first refinery strike in 25 years impacted work at
several of the Company's largest customer work sites;
- uncertainty related to the price of oil, which has caused some
of the Company's customers to defer previously scheduled projects;
and
- the strong US dollar, which combined with a sluggish European
economy contributed to weaker than expected international
results.
Financial Highlights:
Revenues
- Revenues for the third quarter of fiscal 2015 increased 7.5%
over prior year, driven by acquisitions (+9.9%) and organic growth
(+0.5%), offset by foreign exchange (-2.9%).
- Revenues for the first nine months of fiscal 2015 increased
20.8% over prior year, driven by acquisitions (+13.9%) and organic
growth (+7.7%), offset by foreign exchange (-0.8%).
- Services segment revenue had year-on-year
revenue growth of 12% in the third quarter and 29% during the first
nine months, driven by both acquisitions (13% in Q3, 19% YTD) and
organic growth (-1% in Q3, +10% YTD).
- International segment revenue contracted
(-12%) in the third quarter and (-4%) during the first nine months,
driven by foreign exchange (-10% in Q3, -3% YTD), organic (-4% in
Q3 and -3% YTD), offset in part by acquisitions (+2% in Q3 and +2%
YTD).
- Products and Systems segment revenue improved
by 12% in the third quarter (all organic), improving its
year-to-date shortfall to -1%.
Gross Profit
- Gross Profit for the third quarter of fiscal year 2015
contracted by 1% compared with the prior year on a 7% increase in
revenues.
- Gross margin for the third quarter was 23.7% of revenues vs.
25.9% in the prior year.
Operating Cash Flow
- Operating cash flow for the first nine months of fiscal year
2015 improved to $34.3 million, compared with $22.6 million in the
comparable prior year period.
- Free cash flow (defined as operating cash flow less capital
expenditures) for the first nine months of fiscal year 2015
improved to $22.5 million, compared with $10.9 million in the
comparable prior year period.
Sotirios Vahaviolos, Chairman and Chief Executive Officer
stated, "After experiencing three consecutive quarters of over 20%
year-on-year revenue growth, market conditions and customer
sentiment have changed dramatically in recent months, driven by the
significant drop in the price of oil. The impact of the ongoing
refinery strike caused our organic Services revenue growth to turn
slightly negative in the third quarter, while uncertainty
concerning the oil price outlook has also caused some previously
scheduled projects to be deferred."
Dr. Vahaviolos continued, "These events impacted our Company
during its weakest seasonal quarter. Even so, I am pleased with our
cash flow and that our cost savings initiatives are beginning to
have an impact. As expected we experienced strong cash collections
and we were able to pay down debt by nearly $29 million during the
third quarter. Operating expenses for the Services (excluding
acquired companies) and Products and Systems segments declined
compared with the prior year's third quarter, driven by cost-saving
actions we have taken."
Dr. Vahaviolos added, "The Company had already been engaged in
constructive discussions with its key customers prior to these
market factors becoming prominent, and I am optimistic that we will
be able to work with our customers to achieve our mutual goals. As
a leading inspection services provider, Mistras is able to deliver
compelling customer solutions that best protect and extend the
lives of their assets while realizing savings that can approach the
fees that we charge. The relevance of these attributes is strongest
at times like these."
Outlook and Guidance for Fiscal 2015
Uncertainty concerning the price of oil has caused a significant
change in customer sentiment that is causing many companies to
reevaluate spending levels and the timing of projects. Based upon
these factors, the Company now expects that its revenue levels for
fiscal year 2015 will fall at the low end of its $720 million to
$740 million range, and that its EBITDA level may fall somewhat
short of its $78 to $84 million range.
Conference Call
In connection with this release, Mistras will hold a conference
call on Thursday, April 9, 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 15338512 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. In this
release, the term free cash flow, a non-GAAP measurement is also
used. We define free cash flow as cash provided by operating
activities less capital expenditures (which is classified as an
investing activity). 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,
2015 |
May 31, 2014 |
ASSETS |
|
|
Current Assets |
|
|
Cash and cash equivalents |
$ 13,385 |
$ 10,020 |
Accounts receivable, net |
125,548 |
137,824 |
Inventories |
12,294 |
11,376 |
Deferred income taxes |
3,886 |
3,283 |
Prepaid expenses and other
current assets |
16,309 |
12,626 |
Total current
assets |
171,422 |
175,129 |
Property, plant and equipment, net |
80,125 |
77,811 |
Intangible assets, net |
56,147 |
57,875 |
Goodwill |
166,531 |
130,516 |
Deferred income taxes |
1,214 |
1,344 |
Other assets |
1,890 |
1,297 |
Total assets |
$ 477,329 |
$ 443,972 |
|
|
|
LIABILITIES AND EQUITY |
|
|
Current Liabilities |
|
|
Accounts payable |
$ 8,950 |
$ 14,978 |
Accrued expenses and other
current liabilities |
47,881 |
54,650 |
Current portion of long-term
debt |
16,906 |
8,058 |
Current portion of capital
lease obligations |
6,859 |
7,251 |
Income taxes payable |
231 |
1,854 |
Total current
liabilities |
80,827 |
86,791 |
Long-term debt, net of current portion |
109,322 |
68,590 |
Obligations under capital leases, net of
current portion |
12,780 |
13,664 |
Deferred income taxes |
20,626 |
15,521 |
Other long-term liabilities |
11,686 |
17,014 |
Total liabilities |
235,241 |
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 |
206,289 |
201,831 |
Retained earnings |
55,410 |
41,500 |
Accumulated other comprehensive
loss |
(20,121) |
(1,511) |
Total Mistras Group, Inc.
stockholders' equity |
241,864 |
242,104 |
Noncontrolling interests |
224 |
288 |
Total equity |
242,088 |
242,392 |
Total liabilities
and equity |
$ 477,329 |
$ 443,972 |
|
|
|
|
|
|
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, |
|
2015 |
2014 |
2015 |
2014 |
|
|
|
|
|
Revenues |
$ 163,100 |
$ 151,727 |
$ 536,566 |
$ 444,320 |
Cost of revenues |
119,356 |
107,898 |
382,018 |
304,645 |
Depreciation related to
products and systems |
5,010 |
4,529 |
14,781 |
13,121 |
Gross profit |
38,734 |
39,300 |
139,767 |
126,554 |
Selling, general and
administrative expenses |
32,758 |
31,794 |
105,158 |
90,342 |
Research and engineering |
644 |
757 |
1,922 |
2,186 |
Depreciation and
amortization |
3,104 |
2,771 |
9,998 |
7,729 |
Acquisition-related (benefit),
net |
(1,642) |
978 |
(3,037) |
(1,530) |
Income from operations |
3,870 |
3,000 |
25,726 |
27,827 |
Interest expense |
1,161 |
792 |
3,418 |
2,309 |
Income before provision for income taxes |
2,709 |
2,208 |
22,308 |
25,518 |
Provision for income taxes |
941 |
984 |
8,457 |
9,375 |
Net income |
1,768 |
1,224 |
13,851 |
16,143 |
Less: net (income) loss
attributable to noncontrolling interests, net of taxes |
49 |
(23) |
59 |
(44) |
Net income attributable to Mistras
Group, Inc. |
$ 1,817 |
$ 1,201 |
$ 13,910 |
$ 16,099 |
Earnings per common share |
|
|
|
|
Basic |
$ 0.06 |
$ 0.04 |
$ 0.49 |
$ 0.57 |
Diluted |
$ 0.06 |
$ 0.04 |
$ 0.47 |
$ 0.55 |
Weighted average common shares
outstanding: |
|
|
|
|
Basic |
28,656 |
28,396 |
28,583 |
28,338 |
Diluted |
29,529 |
29,374 |
29,559 |
29,249 |
|
|
|
|
|
|
|
|
|
|
Mistras Group, Inc. and
Subsidiaries |
Unaudited Operating
Data by Segment |
(in
thousands) |
|
|
|
|
Three
months ended February 28, |
Nine
months ended February 28, |
|
2015 |
2014 |
2015 |
2014 |
Revenues |
|
|
|
|
Services |
$ 121,845 |
$ 109,122 |
$ 404,651 |
$ 313,794 |
International |
33,554 |
38,064 |
114,610 |
119,032 |
Products and Systems |
8,526 |
7,610 |
22,588 |
22,799 |
Corporate and eliminations |
(825) |
(3,069) |
(5,283) |
(11,305) |
|
$ 163,100 |
$ 151,727 |
$ 536,566 |
$ 444,320 |
|
|
|
|
|
|
|
|
|
Three
months ended February 28, |
Nine
months ended February 28, |
|
2015 |
2014 |
2015 |
2014 |
Gross profit |
|
|
|
|
Services |
$ 27,429 |
$ 26,216 |
$ 101,452 |
$ 83,881 |
International |
7,018 |
10,086 |
27,795 |
33,499 |
Products and Systems |
4,211 |
3,674 |
10,203 |
9,776 |
Corporate and eliminations |
76 |
(676) |
317 |
(602) |
|
$ 38,734 |
$ 39,300 |
$ 139,767 |
$ 126,554 |
|
|
|
|
|
|
|
|
|
|
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, |
|
2015 |
2014 |
2015 |
2014 |
Services: |
|
|
|
|
Income from operations before
acquisition-related expense, net |
$ 7,082 |
$ 7,759 |
$ 36,819 |
$ 33,161 |
Acquisition-related (benefit)
expense, net |
(175) |
307 |
611 |
463 |
Income from operations |
7,257 |
7,452 |
36,208 |
32,698 |
International: |
|
|
|
|
(Loss) Income from operations
before acquisition-related expense (benefit), net |
$ (2,438) |
$ 189 |
$ (896) |
$ 5,526 |
Acquisition-related (benefit)
expense, net |
(1,123) |
105 |
(2,059) |
(3,666) |
(Loss) Income from
operations |
(1,315) |
84 |
1,163 |
9,192 |
Products and Systems: |
|
|
|
|
Income from operations before
acquisition-related (benefit), net |
$ 1,346 |
$ 87 |
$ 1,330 |
$ 112 |
Acquisition-related (benefit),
net |
— |
— |
— |
(1,035) |
Income from operations |
1,346 |
87 |
1,330 |
1,147 |
Corporate and
Eliminations: |
|
|
|
|
Loss from operations before
acquisition-related (benefit) expense, net |
$ (3,762) |
$ (4,057) |
$ (14,564) |
$ (12,502) |
Acquisition-related (benefit)
expense, net |
(344) |
566 |
(1,589) |
2,708 |
Loss from operations |
(3,418) |
(4,623) |
(12,975) |
(15,210) |
Total Company |
|
|
|
|
Income from operations before
acquisition-related (benefit) expense, net |
$ 2,228 |
$ 3,978 |
$ 22,689 |
$ 26,297 |
Acquisition-related (benefit)
expense, net |
(1,642) |
978 |
(3,037) |
(1,530) |
Income from operations |
3,870 |
3,000 |
25,726 |
27,827 |
|
|
|
|
|
|
|
|
|
|
Mistras Group, Inc. and
Subsidiaries |
Unaudited Summary Cash
Flow Information |
(in
thousands) |
|
|
Nine
months ended February 28, |
|
2015 |
2014 |
Net cash provided by (used in): |
|
|
Operating Activities |
$ 34,317 |
$ 22,589 |
Investing Activities |
(46,433) |
(30,261) |
Financing Activities |
15,511 |
11,251 |
Effect of exchange rate changes on cash |
(30) |
(1,431) |
Net change in cash and cash equivalents |
$ 3,365 |
$ 2,148 |
|
|
|
|
|
|
Mistras Group, Inc. and
Subsidiaries |
Unaudited
Reconciliation of |
Net Income to EBITDA
and Adjusted EBITDA |
(in
thousands) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
February 28, |
February 28, |
|
2015 |
2014 |
2015 |
2014 |
|
|
|
|
|
Net Income |
$ 1,768 |
$ 1,224 |
$ 13,851 |
$ 16,143 |
Less: net income attributable to
noncontrolling interests, net of taxes |
49 |
(23) |
59 |
(44) |
Net income attributable to Mistras
Group, Inc. |
$ 1,817 |
$ 1,201 |
$ 13,910 |
$ 16,099 |
Interest expense |
1,161 |
792 |
3,418 |
2,309 |
Provision for income taxes |
941 |
984 |
8,457 |
9,375 |
Depreciation and amortization |
8,114 |
7,300 |
24,779 |
20,850 |
EBITDA |
$ 12,033 |
$ 10,277 |
$ 50,564 |
$ 48,633 |
Share-based compensation expense |
599 |
1,266 |
4,856 |
4,013 |
Acquisition-related expense, net |
(1,642) |
978 |
(3,037) |
(1,530) |
Adjusted EBITDA |
$ 10,990 |
$ 12,521 |
$ 52,383 |
$ 51,116 |
|
|
|
|
|
|
|
|
|
|
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) |
|
|
|
|
|
|
Three Months
Ended |
Nine Months
Ended |
|
February 28, |
February 28, |
|
2015 |
2014 |
2015 |
2014 |
|
|
|
|
|
Net income (GAAP) |
$ 1,768 |
$ 1,224 |
$ 13,851 |
$ 16,143 |
Acquisition-related (benefit) expense, net of
tax |
(1,554) |
597 |
(2,697) |
(1,158) |
Net Income Excluding Acquisition-related
Items (non-GAAP) |
$ 214 |
$ 1,821 |
$ 11,154 |
$ 14,985 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share (GAAP) |
$ 0.06 |
$ 0.04 |
$ 0.47 |
$ 0.55 |
Acquisition-related (benefit) expense,
net |
(0.05) |
0.02 |
(0.09) |
(0.04) |
Diluted EPS Excluding Acquisition-related
Items (non-GAAP) |
$ 0.01 |
$ 0.06 |
$ 0.38 |
$ 0.51 |
|
|
|
|
|
CONTACT: Media Contact:
Nestor S. Makarigakis
Group Director of Marketing Communications
marcom@mistrasgroup.com
1(609)716-4000
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