Mistras Group, Inc. (NYSE:MG), a leading "one source" global
provider of technology-enabled asset protection solutions, reported
financial results for its first quarter of fiscal year 2016, which
ended August 31, 2015.
Revenues were $179.9 million, an increase of 8.0% over the prior
year's first quarter. On a constant dollar basis excluding the
impact of adverse foreign exchange rates, the Company's revenue
improved by 13% over the prior year's first quarter. Net income for
the first quarter was $6.9 million, or $0.23 per diluted share,
compared with $1.7 million or $0.06 per diluted share in the prior
year period.
Adjusted EBITDA was $22.3 million in the first quarter of fiscal
year 2016, or 12.4% of revenues, compared with $13.4 million, or
8.0% of revenues, in the prior year's first quarter.
Organic revenue growth was the primary driver to the Company's
overall revenue growth, as each of the Company's three segments
achieved organic revenue growth of more than 5%. Revenue growth
from previous acquisitions was mostly offset by the adverse impact
of foreign exchange rates and dispositions.
Gross profit margins improved to 28.5% from the prior year's
25.2%. Gross margins improved in each of the Company's segments by
more than 200 basis points over prior year. Primary factors
contributing to the improvement included better utilization of
service technicians, improvements realized from recent cost
reduction initiatives, an improved sales mix and favorable leverage
from organic revenue growth.
Cash flow from operations improved to $17.7 million in the first
quarter of fiscal year 2016, compared with $9.2 million in the
prior year's first quarter, driven by improved profitability. Net
debt was reduced to 1.5X EBITDA, down from nearly 1.7X at May 31,
2015.
The Company also announced that its Board of Directors
authorized a stock repurchase program of up to $50 million of the
Company's outstanding common stock. The shares may be repurchased
from time to time in open market transactions at prevailing market
prices or by other means in accordance with federal securities
laws. The actual timing, number and value of shares repurchased
under the program will be determined by management at its
discretion and will depend on a number of factors, including the
market price of the Company's stock, general market and economic
conditions, legal requirements and compliance with the terms of the
Company's credit facility.
Performance of each of the Company's segments was as
follows:
Services segment revenues were 13% higher than
in the prior year's first quarter, driven by acquisition and
organic growth that was offset in part by the impact of the weaker
Canadian dollar. Organic growth was aided by small turnarounds that
occurred in the summer, which may have been impacted by refinery
strikes earlier in the calendar year. Revenue growth from previous
acquisitions will be limited for the remainder of the fiscal
year.
Services segment gross margin and operating income margin
improved by 220 basis points and 300 basis points, respectively,
compared with the prior year's first quarter. Primary drivers
included benefits from cost reduction initiatives, contract
management and process improvements, and improved sales volume and
sales mix.
International segment revenues declined 8%, as
the adverse impact from foreign exchange (-17%) and dispositions
(-1%) more than offset double digit organic growth. Each of the
Company's four largest country operations achieved positive
operating income. The largest improvements in operating income
occurred in France and Brazil, driven by improved utilization of
personnel, lower costs, and double digit organic revenue growth in
both countries.
Products and Systems segment revenues improved
by 32%, which drove a 460 basis point improvement in gross margin
and operating income of $1.2 million, compared with a small
operating loss in the prior year's first quarter.
Sotirios Vahaviolos, Chairman and Chief Executive Officer
stated, "We took a number of decisive actions in our previous
fiscal year that were made to improve our results despite oil and
gas market conditions that remain challenging and unsettled. We are
extremely pleased that we can already see positive impacts from
these actions, across our entire business globally. I am proud of
my team's ability to improve our adjusted EBITDA margins by over
400 basis points, while at the same time taking care to service our
customers in the world-class fashion that they deserve. "
Dr. Vahaviolos continued "We have been using our improved cash
flow to pay down debt for several quarters. We have improved our
financial flexibility and can use our balance sheet to drive
additional shareholder value. While we will continue to evaluate
potential acquisitions, we believe that our stock price is trading
well below its intrinsic value, and we have received approval from
our board to commence a stock repurchase program of up to $50
million."
Outlook and Guidance for Fiscal 2016
The Company previously established its revenue guidance at $710
million to $725 million, representing an increase of from 0% to 2%
over prior level levels, inclusive of a -3% impact from expected
adverse foreign exchange and dispositions.
Adjusted EBITDA guidance was established at $72 million to $78
million, representing an increase of from 1% to 9% above prior year
levels.
The Company's first quarter revenues exceeded its expectations.
However, considering the prior year's strong second quarter
comparison and the uncertain market conditions, the Company is
maintaining its revenue guidance at this time. The Company's first
quarter profits also exceeded its expectations, and it now expects
that profit levels for the year will be at the higher end of this
guidance range.
Conference Call
In connection with this release, Mistras will hold a conference
call on Thursday, October 8, 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 50324625 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 2015
filed with the Securities and Exchange Commission on August 12,
2015, 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" and "Segment and Total Company Income (Loss)
from Operations before Acquisition-Related Expense (Benefit), net",
reconciling these measurements to financial measurements under US
GAAP. The Company also 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). 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) |
|
|
August 31,
2015 |
May 31,
2015 |
ASSETS |
|
|
Current Assets |
|
|
Cash and cash equivalents |
$ 11,686 |
$ 10,555 |
Accounts receivable, net |
134,065 |
133,228 |
Inventories |
10,820 |
10,841 |
Deferred income taxes |
5,021 |
5,144 |
Prepaid expenses and other
current assets |
9,662 |
11,698 |
Total current
assets |
171,254 |
171,466 |
Property, plant and equipment, net |
77,671 |
79,256 |
Intangible assets, net |
48,835 |
51,276 |
Goodwill |
165,216 |
166,414 |
Deferred income taxes |
851 |
1,208 |
Other assets |
2,089 |
2,107 |
Total assets |
$ 465,916 |
$ 471,727 |
|
|
|
LIABILITIES AND EQUITY |
|
|
Current Liabilities |
|
|
Accounts payable |
$ 10,073 |
$ 10,529 |
Accrued expenses and other
current liabilities |
52,758 |
55,914 |
Current portion of long-term
debt |
16,352 |
17,902 |
Current portion of capital
lease obligations |
7,170 |
8,646 |
Income taxes payable |
581 |
532 |
Total current
liabilities |
86,934 |
93,523 |
Long-term debt, net of current portion |
89,443 |
95,557 |
Obligations under capital leases, net of
current portion |
10,811 |
10,717 |
Deferred income taxes |
18,188 |
16,984 |
Other long-term liabilities |
8,732 |
9,934 |
Total liabilities |
214,108 |
226,715 |
Commitments and contingencies |
|
|
Equity |
|
|
Preferred stock, 10,000,000
shares authorized |
— |
— |
Common stock, $0.01 par value,
200,000,000 shares authorized |
288 |
287 |
Additional paid-in capital |
208,727 |
208,064 |
Retained earnings |
64,453 |
57,581 |
Accumulated other comprehensive
loss |
(21,765) |
(21,113) |
Total Mistras Group, Inc.
stockholders' equity |
251,703 |
244,819 |
Noncontrolling interests |
105 |
193 |
Total equity |
251,808 |
245,012 |
Total liabilities
and equity |
$ 465,916 |
$ 471,727 |
|
|
|
|
|
|
Mistras
Group, Inc. and Subsidiaries |
Unaudited Condensed
Consolidated Statements of Income |
(in thousands, except
per share data) |
|
|
|
Three
months ended August 31, |
|
2015 |
2014 |
Revenues |
$ 179,853 |
$ 166,573 |
Cost of revenues |
123,400 |
119,722 |
Depreciation |
5,179 |
4,857 |
Gross profit |
51,274 |
41,994 |
Selling, general and
administrative expenses |
35,836 |
35,220 |
Research and engineering |
621 |
649 |
Depreciation and
amortization |
2,781 |
3,422 |
Acquisition-related (benefit),
net |
(896) |
(961) |
Income from operations |
12,932 |
3,664 |
Interest expense |
1,922 |
905 |
Income before provision for income taxes |
11,010 |
2,759 |
Provision for income taxes |
4,163 |
1,088 |
Net income |
6,847 |
1,671 |
Less: net (income) loss
attributable to noncontrolling interests, net of taxes |
25 |
(5) |
Net income attributable to Mistras
Group, Inc. |
$ 6,872 |
$ 1,666 |
Earnings per common share |
|
|
Basic |
$ 0.24 |
$ 0.06 |
Diluted |
$ 0.23 |
$ 0.06 |
Weighted average common shares
outstanding: |
|
|
Basic |
28,724 |
28,477 |
Diluted |
29,595 |
29,552 |
|
|
|
|
|
|
Mistras Group, Inc. and
Subsidiaries |
Unaudited Operating
Data by Segment |
(in
thousands) |
|
|
|
Three
months ended August 31, |
|
2015 |
2014 |
Revenues |
|
|
Services |
$ 137,405 |
$ 121,932 |
International |
36,859 |
40,038 |
Products and Systems |
8,686 |
6,567 |
Corporate and eliminations |
(3,097) |
(1,964) |
|
$ 179,853 |
$ 166,573 |
|
|
|
|
|
|
Three
months ended August 31, |
|
2015 |
2014 |
Gross profit |
|
|
Services |
$ 36,569 |
$ 29,771 |
International |
10,780 |
9,468 |
Products and Systems |
3,922 |
2,664 |
Corporate and eliminations |
3 |
91 |
|
$ 51,274 |
$ 41,994 |
|
|
|
|
|
|
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 August 31, |
|
2015 |
2014 |
Services: |
|
|
Income from operations before
acquisition-related (benefit) expense, net |
$ 14,468 |
$ 9,141 |
Acquisition-related (benefit)
expense, net |
(930) |
261 |
Income from operations |
15,398 |
8,880 |
International: |
|
|
Income (Loss) from operations
before acquisition-related expense, net |
$ 1,848 |
$ (588) |
Acquisition-related expense,
net |
30 |
111 |
Income (Loss) from
operations |
1,818 |
(699) |
Products and Systems: |
|
|
Income (Loss) from operations
before acquisition-related expense, net |
$ 1,184 |
$ (433) |
Acquisition-related expense,
net |
— |
— |
Income (Loss) from
operations |
1,184 |
(433) |
Corporate and
Eliminations: |
|
|
Loss from operations before
acquisition-related expense (benefit), net |
$ (5,464) |
$ (5,417) |
Acquisition-related expense
(benefit), net |
4 |
(1,333) |
Loss from operations |
(5,468) |
(4,084) |
Total Company |
|
|
Income from operations before
acquisition-related (benefit), net |
$ 12,036 |
$ 2,703 |
Acquisition-related (benefit),
net |
(896) |
(961) |
Income from operations |
12,932 |
3,664 |
|
|
|
|
|
|
Mistras Group, Inc. and
Subsidiaries |
Unaudited Summary Cash
Flow Information |
(in
thousands) |
|
|
|
|
Three
months ended August 31, |
|
2015 |
2014 |
Net cash provided by (used in): |
|
|
Operating Activities |
$ 17,712 |
$ 9,193 |
Investing Activities |
(4,432) |
(40,645) |
Financing Activities |
(10,881) |
30,489 |
Effect of exchange rate changes on cash |
(1,268) |
3,439 |
Net change in cash and cash equivalents |
$ 1,131 |
$ 2,476 |
|
|
|
|
|
|
Mistras Group, Inc. and
Subsidiaries |
Unaudited
Reconciliation of |
Net Income to EBITDA
and Adjusted EBITDA |
(in
thousands) |
|
|
|
|
Three Months
Ended |
|
August 31, |
|
2015 |
2014 |
EBITDA and Adjusted
EBITDA |
|
|
Net Income |
$ 6,847 |
$ 1,671 |
Less: net (loss) income attributable to
noncontrolling interests, net of taxes |
25 |
(5) |
Net income attributable to Mistras
Group, Inc. |
$ 6,872 |
$ 1,666 |
Interest expense |
1,922 |
905 |
Provision for income taxes |
4,163 |
1,088 |
Depreciation and amortization |
7,960 |
8,279 |
EBITDA |
$ 20,917 |
$ 11,938 |
Share-based compensation expense |
1,957 |
2,167 |
Acquisition-related (benefit), net |
(896) |
(961) |
Foreign exchange loss |
$ 292 |
$ 252 |
Adjusted EBITDA |
$ 22,270 |
$ 13,396 |
CONTACT: Nestor S. Makarigakis
Group Director of Marketing Communications
marcom@mistrasgroup.com
1(609)716-4000
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