Highlights of the First Quarter
2018*
Mistras Group, Inc. (NYSE:MG), a leading "one source" global
provider of technology-enabled asset protection solutions, reported
financial results for its first quarter ended March 31, 2018.
Consolidated revenues for the first quarter of 2018 were $187.6
million, 15% higher than the prior year period of $163.3
million. Services segment revenues were $145.6 million for
the first quarter of 2018, 15% higher than $126.3 million in the
prior year. The increase in revenues was due to the combined
effects of acquisition expansion, organic growth and favorable FX
rates. All three segments had revenue increases in excess of
10% year-over-year.
Operating income for the first quarter was $6.4 million, 97%
higher than the prior year period of $3.3 million. First
quarter2018 net income was $2.9 million or $0.10 per diluted share,
compared with $1.7 million and $0.06 per diluted share in the prior
year period.
The Company generated $5.8 million of net cash from operating
activities during the first quarter of 2018. Adjusted EBITDA
for the first quarter of 2018 was $15.3 million. The
Company’s net debt (total debt of $187.8 million less cash and cash
equivalents of $33.1 million) was $154.7 million at March 31,
2018.
Performance by segment was as follows:
Services segment Q1 revenues increased by $19.3
million or 15% over prior year, attributable to mid-single digit
organic growth coupled with high-single digit acquisition growth.
Services segment operating income increased by $4.9 million or 66%
and income before special items increased by $2.8 million or 33%,
respectively, over prior year. Services segment operating
income margin before special items increased by 100 bps.
International segment Q1 revenue increased by
$4.2 million or 12% over prior year, attributable to favorable FX
rates. As expected, International Q1 operating income
decreased from the prior year's strong comparable results, but
improved sequentially from the fourth quarter of 2017's
operating loss.
Products and Systems segment Q1 revenue
increased by $0.6 million or 11% over prior year. Products and
Systems Q1 operating income increased by $0.7 million compared with
the prior year operating loss.
Dennis Bertolotti, Chief Executive Officer stated, "I am pleased
with the top-line performance of all segments during Q1, as each
segment grew revenue at a double digit rate. Our services
segment also reached an all-time high in Q1 revenue, even after
excluding the effect of all 2017 acquisitions. This was
attributable to organic growth, the benefit of acquisitions
completed last year as well as favorable FX rates. Our
operating margin improved by 140 basis points, driven by a 220
basis improvement in our operating expense ratio.”
Mr. Bertolotti added “Market conditions have also improved over
2017 with higher petroleum prices and a growing aerospace
business. We have also continued our push into expanding our
mechanical services." Mr. Bertolotti concluded, stating “I believe
macro-level economics drivers will be positive throughout 2018, and
am confident in maintaining the forward momentum that we've built
up over the past few successive quarters."
The Company’s 2018 financial guidance remains unchanged, as
follows:
- Total revenues from $715 million to $730 million;
- Adjusted EBITDA from $78 million to $83 million;
- Operating cash flow of approximately $70 million;
- Capital expenditures expected between $15 million and $20
million.
The Company completed its initial assessment of the 2017 Tax
Reform Act using best estimates based on current data and guidance
available and expects its effective tax rate to be between 30% to
32% for 2018. Additionally, the Company has the following
expectations for net income and earnings per diluted share:
- Net income is expected to between $24 million to $28
million;
- Earnings per diluted share is expected to between $0.83 to
$0.95 cents.
Conference Call
In connection with this release, Mistras will hold a conference
call on May 8, 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 5777658 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
SubsidiariesCondensed Consolidated Balance
Sheets(in thousands, except share and per share
data)
|
|
(unaudited) |
|
|
|
|
March 31, 2018 |
|
December 31, 2017 |
ASSETS |
|
|
|
|
Current Assets |
|
|
|
|
Cash and
cash equivalents |
|
$ |
33,132 |
|
|
$ |
27,541 |
|
Accounts
receivable, net |
|
138,858 |
|
|
138,080 |
|
Inventories |
|
11,008 |
|
|
10,503 |
|
Prepaid
expenses and other current assets |
|
18,200 |
|
|
18,884 |
|
Total
current assets |
|
201,198 |
|
|
195,008 |
|
Property, plant and
equipment, net |
|
88,033 |
|
|
87,143 |
|
Intangible assets,
net |
|
62,465 |
|
|
63,739 |
|
Goodwill |
|
202,100 |
|
|
203,438 |
|
Deferred income
taxes |
|
1,632 |
|
|
1,606 |
|
Other assets |
|
4,813 |
|
|
3,507 |
|
Total
assets |
|
$ |
560,241 |
|
|
$ |
554,441 |
|
LIABILITIES AND
EQUITY |
|
|
|
|
Current
Liabilities |
|
|
|
|
Accounts
payable |
|
$ |
9,737 |
|
|
$ |
10,362 |
|
Accrued
expenses and other current liabilities |
|
60,302 |
|
|
65,561 |
|
Current
portion of long-term debt |
|
2,001 |
|
|
2,358 |
|
Current
portion of capital lease obligations |
|
5,202 |
|
|
5,875 |
|
Income
taxes payable |
|
5,528 |
|
|
6,069 |
|
Total
current liabilities |
|
82,770 |
|
|
90,225 |
|
Long-term debt, net of
current portion |
|
172,460 |
|
|
164,520 |
|
Obligations under
capital leases, net of current portion |
|
8,164 |
|
|
8,738 |
|
Deferred income
taxes |
|
9,144 |
|
|
8,803 |
|
Other long-term
liabilities |
|
11,339 |
|
|
11,363 |
|
Total
liabilities |
|
283,877 |
|
|
283,649 |
|
Commitments and
contingencies |
|
|
|
|
Equity |
|
|
|
|
Preferred
stock, 10,000,000 shares authorized |
|
— |
|
|
— |
|
Common
stock, $0.01 par value, 200,000,000 shares authorized, 28,313,744
and 28,294,968 shares issued |
|
282 |
|
|
282 |
|
Additional paid-in capital |
|
223,576 |
|
|
222,425 |
|
Retained
earnings |
|
67,624 |
|
|
64,717 |
|
Accumulated other comprehensive loss |
|
(15,305 |
) |
|
(16,805 |
) |
Total
Mistras Group, Inc. stockholders’ equity |
|
276,177 |
|
|
270,619 |
|
Non-controlling interests |
|
187 |
|
|
173 |
|
Total
equity |
|
276,364 |
|
|
270,792 |
|
Total
liabilities and equity |
|
$ |
560,241 |
|
|
$ |
554,441 |
|
|
|
|
|
|
|
|
|
|
Mistras Group, Inc. and
SubsidiariesUnaudited Condensed Consolidated
Statements of Income(in thousands, except per
share data)
|
|
Three months ended |
|
|
March 31, 2018 |
|
March 31, 2017 |
|
|
|
|
|
Revenue |
|
$ |
187,630 |
|
|
$ |
163,318 |
|
Cost of
revenue |
|
133,787 |
|
|
115,002 |
|
Depreciation |
|
5,698 |
|
|
5,163 |
|
Gross
profit |
|
48,145 |
|
|
43,153 |
|
Selling,
general and administrative expenses |
|
39,034 |
|
|
37,302 |
|
Research
and engineering |
|
756 |
|
|
643 |
|
Depreciation and amortization |
|
2,950 |
|
|
2,502 |
|
Acquisition-related expense (benefit), net |
|
(994 |
) |
|
(544 |
) |
Income from
operations |
|
6,399 |
|
|
3,250 |
|
Interest
expense |
|
1,792 |
|
|
1,018 |
|
Income before
provision for income taxes |
|
4,607 |
|
|
2,232 |
|
Provision
for income taxes |
|
1,688 |
|
|
534 |
|
Net
income |
|
2,919 |
|
|
1,698 |
|
Less: net
income attributable to noncontrolling interests, net of taxes |
|
12 |
|
|
6 |
|
Net income
attributable to Mistras Group, Inc. |
|
$ |
2,907 |
|
|
$ |
1,692 |
|
Earnings per common
share |
|
|
|
|
Basic |
|
$ |
0.10 |
|
|
$ |
0.06 |
|
Diluted |
|
$ |
0.10 |
|
|
$ |
0.06 |
|
Weighted average common
shares outstanding: |
|
|
|
|
Basic |
|
|
28,304 |
|
|
28,687 |
|
Diluted |
|
29,362 |
|
|
29,905 |
|
|
|
|
|
|
|
|
Mistras Group, Inc. and
SubsidiariesUnaudited Operating Data by
Segment(in thousands)
|
Three months ended |
|
March 31, 2018 |
|
March 31, 2017 |
Revenues |
|
|
|
Services |
$ |
145,595 |
|
|
$ |
126,329 |
|
International |
38,456 |
|
|
34,256 |
|
Products
and Systems |
6,184 |
|
|
5,550 |
|
Corporate
and eliminations |
(2,605 |
) |
|
(2,817 |
) |
|
$ |
187,630 |
|
|
$ |
163,318 |
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
March 31, 2018 |
|
March 31, 2017 |
Gross
profit |
|
|
|
Services |
$ |
34,710 |
|
|
$ |
30,213 |
|
International |
10,707 |
|
|
10,460 |
|
Products
and Systems |
2,890 |
|
|
2,594 |
|
Corporate
and eliminations |
(162 |
) |
|
(114 |
) |
|
$ |
48,145 |
|
|
$ |
43,153 |
|
|
|
|
|
Mistras Group, Inc. and
SubsidiariesUnaudited Reconciliation
ofSegment and Total Company Income from Operations
(GAAP) to Income before Special Items
(non-GAAP)(in thousands)
|
Three months ended |
|
March 31, 2018 |
|
March 31, 2017 |
|
|
|
|
Services: |
|
|
|
Income
from operations (GAAP) |
$ |
12,275 |
|
|
$ |
7,380 |
|
Bad debt
provision for a customer bankruptcy |
— |
|
|
1,200 |
|
Severance
costs |
— |
|
|
16 |
|
Acquisition-related expense (benefit), net |
(1,033 |
) |
|
(124 |
) |
Income
before special items (non-GAAP) |
11,242 |
|
|
8,472 |
|
International: |
|
|
|
Income
from operations (GAAP) |
920 |
|
|
3,034 |
|
Severance
costs |
89 |
|
|
13 |
|
Acquisition-related expense (benefit), net |
— |
|
|
(501 |
) |
Income
before special items (non-GAAP) |
1,009 |
|
|
2,546 |
|
Products and
Systems: |
|
|
|
Income
(loss) from operations (GAAP) |
273 |
|
|
(449 |
) |
Severance
costs |
— |
|
|
— |
|
Income
(loss) before special items (non-GAAP) |
273 |
|
|
(449 |
) |
Corporate and
Eliminations: |
|
|
|
Loss from
operations (GAAP) |
(7,069 |
) |
|
(6,715 |
) |
Acquisition-related expense (benefit), net |
39 |
|
|
81 |
|
Loss
before special items (non-GAAP) |
(7,030 |
) |
|
(6,634 |
) |
Total
Company |
|
|
|
Income
from operations (GAAP) |
$ |
6,399 |
|
|
$ |
3,250 |
|
Bad debt
provision for a customer bankruptcy |
— |
|
|
1,200 |
|
Severance
costs |
89 |
|
|
29 |
|
Acquisition-related expense (benefit), net |
(994 |
) |
|
(544 |
) |
Income
before special items (non-GAAP) |
$ |
5,494 |
|
|
$ |
3,935 |
|
|
|
|
|
|
|
|
|
Mistras Group, Inc. and
SubsidiariesUnaudited Summary Cash Flow
Information(in thousands)
|
Three months ended |
|
March 31, 2018 |
|
March 31, 2017 |
|
|
Net cash provided by
(used in): |
|
|
|
Operating
activities |
$ |
5,818 |
|
|
$ |
13,413 |
|
Investing
activities |
(4,772 |
) |
|
(8,137 |
) |
Financing
activities |
4,261 |
|
|
2,853 |
|
Effect of exchange rate
changes on cash |
284 |
|
|
309 |
|
Net change in cash and
cash equivalents |
$ |
5,591 |
|
|
$ |
8,438 |
|
|
|
|
|
|
|
|
|
Mistras Group, Inc. and
SubsidiariesReconciliation of Net Cash Provided by
Operating Activities (GAAP) to Free Cash Flow
(non-GAAP)(in thousands)
|
Three months ended |
|
March 31, 2018 |
|
March 31, 2017 |
GAAP: Net cash
provided by operating activities |
$ |
5,818 |
|
|
$ |
13,413 |
|
Less: |
|
|
|
Purchases of
property, plant and equipment |
(5,182 |
) |
|
(3,416 |
) |
Purchases of
intangible assets |
(165 |
) |
|
(376 |
) |
non-GAAP: Free
cash flow |
$ |
471 |
|
|
$ |
9,621 |
|
|
|
|
|
|
|
|
|
Mistras Group, Inc. and
SubsidiariesUnaudited Reconciliation
ofNet Income to Adjusted
EBITDA(in thousands)
|
Three months ended |
|
March 31, 2018 |
|
March 31, 2017 |
|
|
Net income |
$ |
2,919 |
|
|
$ |
1,698 |
|
Less: net
income attributable to noncontrolling interests, net of taxes |
12 |
|
|
6 |
|
Net income attributable
to Mistras Group, Inc. |
$ |
2,907 |
|
|
$ |
1,692 |
|
Interest expense |
1,792 |
|
|
1,018 |
|
Provision for income
taxes |
1,688 |
|
|
534 |
|
Depreciation and
amortization |
8,648 |
|
|
7,665 |
|
Share-based
compensation expense |
1,126 |
|
|
1,683 |
|
Acquisition-related
expense (benefit), net |
(994 |
) |
|
(544 |
) |
Severance |
89 |
|
|
29 |
|
Bad debt provision for
customer bankruptcy |
— |
|
|
1,200 |
|
Foreign exchange (gain)
loss |
51 |
|
|
(23 |
) |
Adjusted EBITDA |
$ |
15,307 |
|
|
$ |
13,254 |
|
|
|
|
|
|
|
|
|
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