MISTRAS Group, Inc. (MG: NYSE), (“MISTRAS”), a leading “one source”
global provider of technology-enabled asset protection solutions
used to maximize the uptime and safety of critical energy,
industrial, and public infrastructure, announced today that it had
acquired 100% of the stock of Onstream Pipeline Inspection
Services, Inc. (“Onstream”), a leading North American provider of
proprietary technology enabling pipeline inspection and data
analytics services primarily to the gathering and mid-stream
market. The preliminary purchase price for Onstream, acquired
from Novacap and affiliates, a Canadian private equity firm, and
other shareholders, was approximately $143 million. In
connection with the acquisition of Onstream, the Company upsized
its existing credit facility to $400 million for a new 5-year
period. The Company also updated its full year 2018 guidance
of estimated consolidated revenues to $740 million, an increase of
$10 million over the high end of the Company’s most recent outlook
and exclusive of the impact from Onstream.
Dennis Bertolotti, Chief Executive Officer stated, "The
acquisition of Onstream is an ideal opportunity to diversify our
business. It will enable us to leverage our strength in the
midstream market and accelerate our growth by accomplishing our
strategic initiative to add a pipeline integrity pillar to our
service portfolio. Onstream is recognized as a leading
company in the small- to mid-bore pipeline inspection market in
North America and it has been growing at better than 20% annually
over the past five years, while maintaining an extremely attractive
margin profile. Onstream is also a technological innovator,
with a growing proportion of its revenues derived from new markets
and services.”
About Onstream Pipeline InspectionOnstream is a
leading provider of proprietary, technology-enabled inline
inspection and data analytics services, and is a leading provider
of inline inspection services in the “unpiggable” segment of the
small to mid-bore North American gathering and midstream pipeline
market. The recently commercialized 16 inch combination tool
fleet marks the next stage in Onstream’s expansion into the large
diameter midstream market of pipelines up to 20 inches. Onstream is
able to produce actionable reports in approximately 20 days,
compared to the 60 to 90 day industry norm. Onstream is also
very proud of its culture of customer centricity and record for
being able to responsively service customers whenever a pipeline
inspection is necessary.
Onstream offers combination inspection tools with
high-resolution sensors in both free swimming and tethered
configurations to identify and record all pertinent pipeline data
including hardware, girth welds, bends, metal loss defects and
pipeline specific geometry features. Its bi-directional combination
tether tool provides an inline inspection option for pipelines
previously deemed to be “un-piggable” by traditional free swimming
methods. Most importantly, Onstream consolidates all of the
data it collects in its proprietary “Streamview” software, where a
dedicated team of expert data analysts utilize proprietary
algorithms to analyze data and quickly provide highly insightful
reports to customers.
Onstream will continue to be managed by its key executives,
(Chad Niehaus, President and Chief Executive Officer, and Gerry
Wilkinson, co-founder and Chief Technology Officer). On behalf of
Onstream, Chad Niehaus said, “The entire Onstream team is very
excited to become part of MISTRAS Group, which has earned a
reputation for its superior customer service, something for which
we share a deep passion. As part of MISTRAS, we will have
significant opportunities to utilize our extensive mutual customer
relationships to accelerate our rate of growth, especially in the
United States. While Onstream is not new to the pipeline
inspection industry, it is fairly new to the US market. In
addition, by incorporating MISTRAS’ world-class NDT (Nondestructive
Testing) services and Advanced NDT technologies, we believe we will
now be able to more quickly expand our existing service offering as
well as develop and introduce new technologies that enhance our
overall capabilities.”
Onstream was founded in 2005 and is based in Alberta, Canada
with an additional location in Houston, TX. Onstream
generated revenues of approximately $26.7 million (representing a
4-year compound annual growth rate of over 25%) for the year ended
December 31, 2017 [1]. The preliminary purchase price of
approximately $143 million was paid for with borrowings from the
Company’s credit facility as well as cash on hand. Based on the
Company's projections for 2019, the purchase price for Onstream was
approximately 9 times its expected 2019 EBITDA (earnings before
interest, taxes, depreciation and amortization).[1] Per Canadian
GAAP results, presented in US Dollars.
Increasing Fiscal 2018 Revenue GuidanceThe
Company also today announced that based on results to date in the
fourth quarter, it is revising its full year revenue guidance
higher for fiscal 2018 as shown below:
|
Previous |
Current |
Total revenues |
$725 to $730
million |
$740 million |
This
revenue guidance is exclusive of the impact of Onstream on 2018’s
results. |
All other guidance is reaffirmed, including the Company’s
original target of at least $78 million of adjusted EBITDA for full
year 2018. This guidance is based upon management's initial
review of its operating results for the fourth quarter of 2018 and
is subject to change based on the completion of the Company's
year-end financial reporting process. Updated guidance does not
include the impact of the Onstream acquisition.
Expanded Credit FacilityIn connection with the
acquisition of Onstream, the Company amended and restated its
existing credit facility (“credit facility”) for a new 5-year
period. Specifically, the Company increased its committed
credit capacity from $250 million to $400 million. The credit
facility consists of a funded $100 million term loan and a $300
million revolving facility, of which approximately $185 million was
outstanding immediately after deal closing. The Company
additionally has an uncommitted $150 million available to it, under
an accordion feature of the credit facility. On a pro forma
basis, the Company’s leverage ratio, defined as Total Funded
Indebtedness divided by adjusted EBITDA, which are terms defined
under the credit facility, was approximately 3.75X at closing,
whereas the permitted maximum leverage ratio is initially 4.25X,
stepping down to 3.5X over the next five quarters. Under
certain conditions, the Company would be permitted to temporarily
step back up to a 4.0X level, for up to four consecutive rolling
quarters, on two separate occasions, over the life of the credit
facility.
Conference CallIn connection with this release,
MISTRAS will hold a conference call on December 14, 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
4087347 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 maximize the uptime and safety of critical
energy, industrial, and public infrastructure. MISTRAS combines our
industry-leading services, systems, and technologies to provide a
unique, custom-tailored solution for each customer’s individual
asset protection need.
Our asset protection portfolio includes field and laboratory
inspections & testing; engineering services for asset integrity
management; maintenance and light mechanical services; online
asset-condition monitoring services; and manufacturing of
inspection and monitoring equipment. Data from these solutions is
centralized in MISTRAS’ world-class inspection data management
software - PCMS™ - to provide our clients with integrated,
comprehensive asset protection from a single provider.
For more information, please visit the company's website at
www.mistrasgroup.com or contact Nestor S. Makarigakis, Group
Director, Marketing Communications, by email at
marcom@mistrasgroup.com or by telephone at +1 (609)
716-4000.
Forward-Looking and Cautionary
StatementsCertain 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 MeasuresIn 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 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 as noted.
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