Mistras Group, Inc. (NYSE:MG), a leading "one source" global
provider of technology-enabled asset protection solutions, reported
record earnings for its third quarter and first nine months of
fiscal year 2016, which ended February 29, 2016.
Revenues for the third quarter declined year-on-year by 1.7% to
$160.4 million. Excluding the impact of dispositions and adverse
foreign exchange, the Company’s third quarter revenue improved by
2%. Revenues for the first nine months of fiscal year 2016 were
0.3% below prior year, at $535 million, inclusive of a cumulative
reduction of approximately $24 million, or 4.4%, from the impact of
dispositions and adverse foreign exchange.
Net income for the third quarter was $3.6 million, or $0.12 per
diluted share, compared with $1.8 million or $0.06 per diluted
share in the prior year’s third quarter. Net income for the
first nine months of fiscal year 2016 was $21.9 million, or $0.74
per diluted share, compared with $13.9 million or $0.47 per diluted
share in the prior year’s first nine months. The Company’s
year-to-date improvements of over 56% in both net income and
earnings per diluted share established new performance records and
were achieved despite flat revenues in a challenging market. Net
income for the three and nine-month periods ended February 29, 2016
were favorably impacted by approximately $0.5 million, or $.02 per
diluted share by discrete tax items.
Adjusted EBITDA was $15.3 million or 9.5% of revenues in the
third quarter of fiscal year 2016, compared with $11.4 million, or
7.0% of revenues in the prior year’s third quarter. Adjusted EBITDA
was $66.7 million, or 12.5% of revenues in the first nine months of
fiscal year 2016, compared with $54.0 million, or 10.1% of revenues
in the prior year’s first nine months.
Organic revenue growth for the third quarter increased
year-on-year by low to mid-single digits in the Services and
International segments, offset by a decline in the Products &
Systems segment. Acquisition growth during the third quarter
was immaterial. Revenue growth from both organic and
prior-year acquisitions had low single digit year-to-date
increases.
Gross profit margins improved to 26.7% in the third quarter of
fiscal year 2016 from the prior year’s 23.7% and to 28.2%
year-to-date compared with the prior year’s 26.0%. The third
quarter year-on-year improvement was driven primarily by the
International segment, which improved by more than 800 basis
points, and the Services segment, which improved by 200 basis
points. Drivers included improved technical labor utilization, cost
reductions, organic sales growth and an improved sales mix.
The Company’s operating margin, exclusive of acquisition-related
items, improved to 3.5% for the third quarter compared with the
prior year’s 1.4%, and to 7.0% for the first nine months of fiscal
year 2016, compared with the prior year’s 4.2%.
Cash flow from operating activities improved to $55.8 million in
the first nine months of fiscal year 2016, compared with $34.5
million in the prior year’s first nine months, driven by improved
profitability and more efficient use of working capital, as days
sales outstanding improved by approximately 3 days or 4% compared
with the prior year’s first nine months. Net debt was approximately
1.0x Adjusted EBITDA, down from 1.7x at May 31, 2015.
Performance by segment was as follows:
Services segment operating income improved by
$2.8 million or 39% over the prior year’s third quarter, while
revenues grew by 1%, as low single digit organic growth coupled
with a small amount of acquisition growth more than offset the
adverse impact of a weaker Canadian dollar.
Services operating income improved by $8.1 million or 22% during
the nine months year-to-date on a 2% revenue increase.
Services third quarter and year-to-date operating income margins
improved over the comparable prior year periods by 210 basis points
and 190 basis points, respectively. Services’ operating income
margin improvements were primarily driven by improvements in its
gross margins, which improved during the third quarter and nine
months year-to-date by 200 basis points and 110 basis points,
respectively. Drivers included improved technical labor
utilization, sales mix, contract management and lower overhead
costs.
International segment operating income grew by
$2.5 million and swung to current year income from a prior year
loss during the third quarter, even though revenues declined by 5%,
as mid-single digit organic growth was more than offset by adverse
foreign exchange and dispositions.
International operating income grew by $5.8 million during the
nine months year-to-date, despite a revenue decline of 7%, as high
single digit organic growth was more than offset by adverse foreign
exchange and dispositions.
International gross margins improved to 29.0% for the third
quarter and 30.0% year-to-date, compared with the prior year’s
20.9% for the third quarter and 24.3% year-to-date. Improvement has
occurred in each of the Company’s four largest country locations,
driven by prior year management changes and staffing actions that
improved technical labor utilization, as well as improvements in
sales mix and overhead costs.
Products and Systems segment revenues for the
third quarter declined by 20% year-on-year, while operating income
declined by 67%. For the first nine months, revenues improved by
3%, while operating income doubled, to $2.7 million.
Dr. Sotirios Vahaviolos, Chairman and Chief Executive Officer
stated, "Market conditions have been difficult for the last year.
We have listened carefully to our customers and tailored our
offerings and our cost structure accordingly. Our management team
has responded to this challenge and we are working hard to
streamline our processes throughout our company. In addition to
improving profit margins in every country, we have improved our
cash flow and paid down our debt almost by half over the last 15
months.”
Dr. Vahaviolos continued, “The Mistras value proposition has
become even more resonant in these challenging times. Even though
our revenue growth is less than we hoped, I am confident that we
are gaining market share, and I am extremely pleased that we have
exceeded our profit expectations despite the challenging market.
Our entire team is committed to servicing our customers in the
world-class fashion that they deserve, while at the same time
generating healthy profits and cash flows that our shareholders can
be proud of. ”
Outlook and Guidance for Remainder of Fiscal
2016
The Company previously established financial guidance as
follows:
- Revenues increasing from 0% to 2% from prior year, inclusive of
a -3% impact from adverse foreign exchange and dispositions, to
$710 million to $725 million.
- Adjusted EBITDA of $72 million to $78 million, representing an
increase from 1% to 9% above prior year levels. This guidance was
increased three months ago to a range from $79 million to $83
million, or 10% to 15% above prior year levels.
The Company has updated its financial guidance as follows:
- Revenue range narrowed to $710 million to $715 million. The
Company expects to achieve low to mid-single digit organic revenue
growth in its fourth quarter that will be mostly offset by adverse
foreign exchange and dispositions.
- Adjusted EBITDA range increased; now $84 million to $87 million
or 17% to 21% higher than prior year. The Company expects Adjusted
EBITDA may exceed 12% of revenues, compared with 10.1% in the prior
year.
Conference Call
In connection with this release, Mistras will hold a conference
call on Thursday, April 7, 2016 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 73868390 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 "Adjusted EBITDA Margin", a
non-GAAP measurement, which the Company defines as Adjusted EBITDA
divided by Revenue. 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 29, 2016 |
|
May 31, 2015 |
ASSETS |
|
|
|
|
Current Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
18,095 |
|
|
$ |
10,555 |
|
Accounts receivable, net |
|
128,605 |
|
|
133,228 |
|
Inventories |
|
9,880 |
|
|
10,841 |
|
Deferred income taxes |
|
4,738 |
|
|
5,144 |
|
Prepaid expenses and other current
assets |
|
13,263 |
|
|
11,698 |
|
Total current assets |
|
174,581 |
|
|
171,466 |
|
Property, plant and
equipment, net |
|
75,665 |
|
|
79,256 |
|
Intangible assets,
net |
|
44,331 |
|
|
51,276 |
|
Goodwill |
|
166,719 |
|
|
166,414 |
|
Deferred income
taxes |
|
804 |
|
|
1,208 |
|
Other assets |
|
1,857 |
|
|
2,107 |
|
Total assets |
|
$ |
463,957 |
|
|
$ |
471,727 |
|
LIABILITIES AND
EQUITY |
|
|
|
|
Current
Liabilities |
|
|
|
|
Accounts payable |
|
$ |
10,240 |
|
|
$ |
10,529 |
|
Accrued expenses and other current
liabilities |
|
53,184 |
|
|
55,914 |
|
Current portion of long-term
debt |
|
12,488 |
|
|
17,902 |
|
Current portion of capital lease
obligations |
|
6,864 |
|
|
8,646 |
|
Income taxes payable |
|
2,126 |
|
|
532 |
|
Total current liabilities |
|
84,902 |
|
|
93,523 |
|
Long-term debt, net of
current portion |
|
74,878 |
|
|
95,557 |
|
Obligations under
capital leases, net of current portion |
|
10,653 |
|
|
10,717 |
|
Deferred income
taxes |
|
19,150 |
|
|
16,984 |
|
Other long-term
liabilities |
|
7,482 |
|
|
9,934 |
|
Total liabilities |
|
197,065 |
|
|
226,715 |
|
Commitments and
contingencies |
|
|
|
|
Equity |
|
|
|
|
Preferred stock, 10,000,000 shares
authorized |
|
— |
|
|
— |
|
Common stock, $0.01 par value,
200,000,000 shares authorized |
|
290 |
|
|
287 |
|
Additional paid-in capital |
|
212,013 |
|
|
208,064 |
|
Retained earnings |
|
79,464 |
|
|
57,581 |
|
Accumulated other comprehensive
loss |
|
(24,991 |
) |
|
(21,113 |
) |
Total Mistras Group, Inc.
stockholders’ equity |
|
266,776 |
|
|
244,819 |
|
Noncontrolling interests |
|
116 |
|
|
193 |
|
Total equity |
|
266,892 |
|
|
245,012 |
|
Total liabilities and equity |
|
$ |
463,957 |
|
|
$ |
471,727 |
|
Mistras Group, Inc. and
Subsidiaries |
Unaudited Condensed Consolidated Statements of
Income |
(in thousands, except per share
data) |
|
|
|
Three months ended |
|
Nine months ended |
|
|
February 29, 2016 |
|
February 28, 2015 |
|
February 29, 2016 |
|
February 28, 2015 |
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
160,355 |
|
|
$ |
163,100 |
|
|
$ |
534,994 |
|
|
$ |
536,566 |
|
Cost of revenue |
|
112,357 |
|
|
119,356 |
|
|
368,477 |
|
|
382,018 |
|
Depreciation |
|
5,189 |
|
|
5,010 |
|
|
15,509 |
|
|
14,781 |
|
Gross
profit |
|
42,809 |
|
|
38,734 |
|
|
151,008 |
|
|
139,767 |
|
Selling, general and administrative
expenses |
|
33,747 |
|
|
32,758 |
|
|
103,591 |
|
|
105,158 |
|
Research and engineering |
|
677 |
|
|
644 |
|
|
1,899 |
|
|
1,922 |
|
Depreciation and amortization |
|
2,742 |
|
|
3,104 |
|
|
8,345 |
|
|
9,998 |
|
Acquisition-related (benefit),
net |
|
(115 |
) |
|
(1,642 |
) |
|
(1,086 |
) |
|
(3,037 |
) |
Income from
operations |
|
5,758 |
|
|
3,870 |
|
|
38,259 |
|
|
25,726 |
|
Interest expense |
|
1,123 |
|
|
1,161 |
|
|
4,380 |
|
|
3,418 |
|
Income before
provision for income taxes |
|
4,635 |
|
|
2,709 |
|
|
33,879 |
|
|
22,308 |
|
Provision for income taxes |
|
1,034 |
|
|
941 |
|
|
12,001 |
|
|
8,457 |
|
Net
income |
|
3,601 |
|
|
1,768 |
|
|
21,878 |
|
|
13,851 |
|
Less: net (income) loss
attributable to noncontrolling interests, net of taxes |
|
(8 |
) |
|
49 |
|
|
12 |
|
|
59 |
|
Net income
attributable to Mistras Group, Inc. |
|
$ |
3,593 |
|
|
$ |
1,817 |
|
|
$ |
21,890 |
|
|
$ |
13,910 |
|
Earnings per common
share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.12 |
|
|
$ |
0.06 |
|
|
$ |
0.76 |
|
|
$ |
0.49 |
|
Diluted |
|
$ |
0.12 |
|
|
$ |
0.06 |
|
|
$ |
0.74 |
|
|
$ |
0.47 |
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
|
|
Basic |
|
28,906 |
|
|
28,656 |
|
|
28,832 |
|
|
28,583 |
|
Diluted |
|
29,899 |
|
|
29,529 |
|
|
29,760 |
|
|
29,559 |
|
Mistras Group, Inc. and
Subsidiaries |
Unaudited Operating Data by
Segment |
(in thousands) |
|
|
Three months ended |
|
Nine months ended |
|
February 29, 2016 |
|
February 28, 2015 |
|
February 29, 2016 |
|
February 28, 2015 |
Revenues |
|
|
|
|
|
|
|
Services |
$ |
123,616 |
|
|
$ |
121,845 |
|
|
$ |
411,484 |
|
|
$ |
404,651 |
|
International |
31,801 |
|
|
33,554 |
|
|
107,085 |
|
|
114,610 |
|
Products and Systems |
6,866 |
|
|
8,526 |
|
|
23,343 |
|
|
22,588 |
|
Corporate and eliminations |
(1,928 |
) |
|
(825 |
) |
|
(6,918 |
) |
|
(5,283 |
) |
|
$ |
160,355 |
|
|
$ |
163,100 |
|
|
$ |
534,994 |
|
|
$ |
536,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
|
February 29, 2016 |
|
February 28, 2015 |
|
February 29, 2016 |
|
February 28, 2015 |
Gross
profit |
|
|
|
|
|
|
|
Services |
$ |
30,256 |
|
|
$ |
27,429 |
|
|
$ |
107,943 |
|
|
$ |
101,452 |
|
International |
9,227 |
|
|
7,018 |
|
|
32,113 |
|
|
27,795 |
|
Products and Systems |
3,202 |
|
|
4,211 |
|
|
10,957 |
|
|
10,203 |
|
Corporate and eliminations |
124 |
|
|
76 |
|
|
(5 |
) |
|
317 |
|
|
$ |
42,809 |
|
|
$ |
38,734 |
|
|
$ |
151,008 |
|
|
$ |
139,767 |
|
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 |
|
Nine months ended |
|
February 29, 2016 |
|
February 28, 2015 |
|
February 29, 2016 |
|
February 28, 2015 |
Services: |
|
|
|
|
|
|
|
Income from operations before
acquisition-related expense (benefit), net |
$ |
9,857 |
|
|
$ |
7,082 |
|
|
$ |
43,478 |
|
|
$ |
36,819 |
|
Acquisition-related expense
(benefit), net |
(214 |
) |
|
(175 |
) |
|
(807 |
) |
|
611 |
|
Income from operations |
10,071 |
|
|
7,257 |
|
|
44,285 |
|
|
36,208 |
|
International: |
|
|
|
|
|
|
|
Income from operations before
acquisition-related expense (benefit), net |
$ |
1,156 |
|
|
$ |
(2,438 |
) |
|
$ |
6,488 |
|
|
$ |
(896 |
) |
Acquisition-related expense
(benefit), net |
20 |
|
|
(1,123 |
) |
|
(437 |
) |
|
(2,059 |
) |
Income from operations |
1,136 |
|
|
(1,315 |
) |
|
6,925 |
|
|
1,163 |
|
Products and
Systems: |
|
|
|
|
|
|
|
Income from operations before
acquisition-related expense (benefit), net |
$ |
438 |
|
|
$ |
1,346 |
|
|
$ |
2,677 |
|
|
$ |
1,330 |
|
Acquisition-related expense
(benefit), net |
— |
|
|
— |
|
|
— |
|
|
— |
|
Income from operations |
438 |
|
|
1,346 |
|
|
2,677 |
|
|
1,330 |
|
Corporate and
Eliminations: |
|
|
|
|
|
|
|
Loss from operations before
acquisition-related expense (benefit), net |
$ |
(5,808 |
) |
|
$ |
(3,762 |
) |
|
$ |
(15,470 |
) |
|
$ |
(14,564 |
) |
Acquisition-related expense
(benefit), net |
79 |
|
|
(344 |
) |
|
158 |
|
|
(1,589 |
) |
Loss from operations |
(5,887 |
) |
|
(3,418 |
) |
|
(15,628 |
) |
|
(12,975 |
) |
Total
Company |
|
|
|
|
|
|
|
Income from operations before
acquisition-related expense (benefit), net |
$ |
5,643 |
|
|
$ |
2,228 |
|
|
$ |
37,173 |
|
|
$ |
22,689 |
|
Acquisition-related expense
(benefit), net |
(115 |
) |
|
(1,642 |
) |
|
(1,086 |
) |
|
(3,037 |
) |
Income from operations |
5,758 |
|
|
3,870 |
|
|
38,259 |
|
|
25,726 |
|
Mistras Group, Inc. and
Subsidiaries |
Unaudited Summary Cash Flow
Information |
(in thousands) |
|
|
Nine months ended |
|
February 29, 2016 |
|
February 28, 2015 |
|
|
Net cash provided by
(used in): |
|
|
|
Operating activities |
$ |
55,802 |
|
|
$ |
34,516 |
|
Investing activities |
(12,968 |
) |
|
(46,137 |
) |
Financing activities |
(34,338 |
) |
|
17,067 |
|
Effect of exchange rate
changes on cash |
(956 |
) |
|
(2,081 |
) |
Net change in cash and
cash equivalents |
$ |
7,540 |
|
|
$ |
3,365 |
|
Mistras Group, Inc. and
Subsidiaries |
Unaudited Reconciliation of |
Net Income to EBITDA and Adjusted
EBITDA |
(in thousands) |
|
|
Three months ended |
|
Nine months ended |
|
February 29, 2016 |
|
February 28, 2015 |
|
February 29, 2016 |
|
February 28, 2015 |
|
|
|
|
Net income |
$ |
3,601 |
|
|
$ |
1,768 |
|
|
$ |
21,878 |
|
|
$ |
13,851 |
|
Less: net (income) loss
attributable to noncontrolling interests, net of taxes |
(8 |
) |
|
49 |
|
|
12 |
|
|
59 |
|
Net income attributable
to Mistras Group, Inc. |
$ |
3,593 |
|
|
$ |
1,817 |
|
|
$ |
21,890 |
|
|
$ |
13,910 |
|
Interest expense |
1,123 |
|
|
1,161 |
|
|
4,380 |
|
|
3,418 |
|
Provision for income
taxes |
1,034 |
|
|
941 |
|
|
12,001 |
|
|
8,457 |
|
Depreciation and
amortization |
7,931 |
|
|
8,114 |
|
|
23,854 |
|
|
24,779 |
|
EBITDA |
$ |
13,681 |
|
|
$ |
12,033 |
|
|
$ |
62,125 |
|
|
$ |
50,564 |
|
Share-based
compensation expense |
1,770 |
|
|
599 |
|
|
4,997 |
|
|
4,856 |
|
Acquisition-related
(benefit), net |
(115 |
) |
|
(1,642 |
) |
|
(1,086 |
) |
|
(3,037 |
) |
Severance |
54 |
|
|
160 |
|
|
293 |
|
|
401 |
|
Foreign exchange (gain)
loss |
(98 |
) |
|
247 |
|
|
357 |
|
|
1,213 |
|
Adjusted EBITDA |
$ |
15,292 |
|
|
$ |
11,397 |
|
|
$ |
66,686 |
|
|
$ |
53,997 |
|
|
|
|
|
|
|
|
|
Media Contact: Nestor S. Makarigakis,
Group Director of Marketing Communications,
marcom@mistrasgroup.com, 1(609)716-4000
Mistras (NYSE:MG)
Historical Stock Chart
From Jun 2024 to Jul 2024
Mistras (NYSE:MG)
Historical Stock Chart
From Jul 2023 to Jul 2024