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Mistras Group Announces Record Results for Second Quarter FY'15

PRINCETON JUNCTION, N.J., Jan. 7, 2015 (GLOBE NEWSWIRE) -- Mistras Group, Inc. (NYSE:MG), a leading "one source" global provider of technology-enabled asset protection solutions, today reported financial results for its second quarter and first six months of fiscal year 2015, which ended November 30, 2014.

Revenues increased by 32% over the prior year's second quarter, reaching a record level of $206.9 million. Net income for the second quarter achieved another record of $10.4 million, or $0.35 per diluted share, compared with the prior year second quarter's net income of $9.3 million, or $0.32 per diluted share. Acquisition-related items added $0.02 of earnings per diluted share in the second quarter of fiscal year 2015 and $0.01 per diluted share in the corresponding prior year period. Adjusted EBITDA rose 25% over the prior year's second quarter, to a record level of $28.2 million compared with the prior year's $22.6 million.

Revenues increased by 28% over the prior year's first six months, reaching $373.5 million. Net income for the first six months was $12.1 million, or $0.41 per diluted share, compared with the prior year's $14.9 million, or $0.51 per diluted share. Adjusted EBITDA of $41.4 million in the first six months of fiscal year 2015 was 7% higher than the comparable prior year amount of $38.6 million.

The Company's year-on-year revenue growth remained robust, exceeding 20% for the third consecutive quarter. The Company's Services segment experienced strong year-on-year growth of over 48%, of which 22% was organic, driven by market share gains, a healthy fall turnaround season, and project work. The Company's 32% year-on-year revenue growth was led by a combination of acquisitions (+19%) and strong organic growth (+14%), offset in part by weaker foreign exchange (-1%).

Gross profit margins improved sequentially to 28.5% from 25.2% in the first quarter of fiscal year 2015, but were lower than the prior year's 30.6%. As with the Company's revenue growth, this change was also driven primarily by the Services segment, which saw gross profit margins improve to 27.5% from the first quarter's 24.4%, but lower than the prior year's 28.4%. The improvement from the first quarter was driven by a seasonal uptick and healthy turnaround volume, while the unfavorable comparison to the prior year's second quarter was driven by the Company's continued investment in the Canadian oil sands region, as well as an adverse sales mix in some international countries.

Key Financial Metrics:

Revenues

  • Revenues for the second quarter of fiscal 2015 increased 32% over prior year. Organic revenue growth was 14%.
  • Services segment revenue for the second quarter of fiscal 2015 increased 48% over prior year, including 22% organic growth and 26% acquisition growth.
  • International segment revenue for the second quarter of fiscal 2015 declined 5% vs. prior year, with components: organic (-5%), acquisitions (+2%) and foreign exchange (-2%).
  • Products and Systems segment revenues for the second quarter of fiscal 2015 declined by 13% (all organic) compared with prior year.

Gross Profit

  • Gross profit for the second quarter of fiscal 2015 increased by 23% over prior year on a 32% increase in revenues;
  • Gross margin for the second quarter of fiscal year 2015 was 28.5% of revenues vs. 30.6% in the prior year.

Operating Cash Flow

  • The Company's operating cash flow was $3.2 million for the first half of fiscal year 2015.

Sotirios Vahaviolos, Chairman and Chief Executive Officer stated, "This was the strongest quarter that Mistras has ever had in terms of Adjusted EBITDA, net income, earnings per diluted share and revenue. The fact that this performance followed a difficult first quarter makes it even more gratifying. We are very encouraged by the continued strong organic revenue growth in our Services segment and we continue to work on several initiatives to improve our profit margins. Our progress to date is encouraging and bodes well for future results."

Dr. Vahaviolos continued, "We are excited about our expansion into two new areas, the Gulf offshore market, via our acquisition of The Nacher Corporation, and our continued efforts to grow organically in the Canadian oil sands region. NACHER has gotten off to a fast start, helping to propel our acquisition-related revenue growth, and we remain optimistic about our efforts in the Canadian oil sands for the second half of the fiscal year."

Outlook and Guidance for Fiscal 2015

Based on the strong second quarter and additional upside from NACHER, the Company is increasing its revenue expectation for fiscal year 2015 to a range of $720 million to $740 million, representing growth of 16% to 19% over prior year.

The Company expects its Adjusted EBITDA to be within the high end of its previously announced range of from $78 million to $84 million, representing an increase of from 11% to 20% over prior year.

Conference Call

In connection with this release, Mistras will hold a conference call on Thursday, January 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 55599260 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. 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)
November 30, 2014 May 31, 2014
ASSETS
Current Assets
Cash and cash equivalents $ 19,599 $ 10,020
Accounts receivable, net 164,888 137,824
Inventories 12,188 11,376
Deferred income taxes 3,775 3,283
Prepaid expenses and other current assets 15,536 12,626
Total current assets 215,986 175,129
Property, plant and equipment, net 82,266 77,811
Intangible assets, net 61,543 57,875
Goodwill 169,088 130,516
Deferred income taxes 1,301 1,344
Other assets 1,887 1,297
Total assets $ 532,071 $ 443,972
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 15,558 $ 14,978
Accrued expenses and other current liabilities 54,594 54,650
Current portion of long-term debt 17,988 8,058
Current portion of capital lease obligations 6,968 7,251
Income taxes payable 2,133 1,854
Total current liabilities 97,241 86,791
Long-term debt, net of current portion 137,080 68,590
Obligations under capital leases, net of current portion 12,968 13,664
Deferred income taxes 20,369 15,521
Other long-term liabilities 14,699 17,014
Total liabilities 282,357 201,580
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 204,987 201,831
Retained earnings 53,593 41,500
Accumulated other comprehensive loss (9,427) (1,511)
Total Mistras Group, Inc. stockholders' equity 249,439 242,104
Noncontrolling interests 275 288
Total equity 249,714 242,392
Total liabilities and equity $ 532,071 $ 443,972
Mistras Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
Three months ended November 30, Six months ended November 30,
2014 2013 2014 2013
Revenue 206,893 156,755 373,466 292,593
Cost of revenues 142,940 104,494 262,662 196,747
Depreciation related to products and systems 4,914 4,284 9,771 8,592
Gross profit 59,039 47,977 101,033 87,254
Selling, general and administrative expenses 37,180 29,849 72,400 58,548
Research and engineering 629 786 1,278 1,429
Depreciation and amortization 3,472 2,501 6,894 4,958
Acquisition-related expense, net (434) (411) (1,395) (2,508)
Income from operations 18,192 15,252 21,856 24,827
Interest expense 1,352 772 2,257 1,517
Income before provision for income taxes 16,840 14,480 19,599 23,310
Provision for income taxes 6,428 5,196 7,516 8,391
Net income 10,412 9,284 12,083 14,919
Less: net loss (income) attributable to noncontrolling interests, net of taxes 15 (27) 10 (21)
Net income attributable to Mistras Group, Inc. $ 10,427 $ 9,257 $ 12,093 $ 14,898
Earnings per common share
Basic $ 0.36 $ 0.33 $ 0.42 $ 0.53
Diluted $ 0.35 $ 0.32 $ 0.41 $ 0.51
Weighted average common shares outstanding:
Basic 28,619 28,378 28,547 28,309
Diluted 29,397 29,102 29,551 29,147
Mistras Group, Inc. and Subsidiaries
Unaudited Operating Data by Segment
(in thousands)
Three months ended November 30, Six months ended November 30,
2014 2013 2014 2013
Revenues
Services $ 160,874 $ 108,862 $ 282,806 $ 204,672
International 41,018 43,209 81,056 80,968
Products and Systems 7,495 8,604 14,062 15,189
Corporate and eliminations (2,494) (3,920) (4,458) (8,236)
$ 206,893 $ 156,755 $ 373,466 $ 292,593
Three months ended November 30, Six months ended November 30,
2014 2013 2014 2013
Gross profit
Services $ 44,252 $ 30,918 $ 74,023 $ 57,665
International 11,309 13,293 20,777 23,413
Products and Systems 3,328 3,718 5,992 6,102
Corporate and eliminations 150 48 241 74
$ 59,039 $ 47,977 $ 101,033 $ 87,254
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 November 30, Six months ended November 30,
2014 2013 2014 2013
Services:
Income from operations before acquisition-related expense (benefit), net (non-GAAP) $ 20,596 $ 14,387 $ 29,737 $ 25,402
Acquisition-related expense (benefit), net 525 (13) 786 156
Income from operations (GAAP) 20,071 14,400 28,951 25,246
International:
Income from operations before acquisition-related (benefit), net (non-GAAP) $ 2,130 $ 3,992 $ 1,542 $ 5,337
Acquisition-related (benefit), net (1,047) (3,301) (936) (3,771)
Income from operations (GAAP) 3,177 7,293 2,478 9,108
Products and Systems:
Income from operations before acquisition-related (benefit) net (non-GAAP) $ 417 $ 450 $ (16) $ 25
Acquisition-related (benefit), net -- (19) -- (1,035)
Income (loss) from operations (GAAP) 417 469 (16) 1,060
Corporate and Eliminations:
Income from operations before acquisition-related expense (benefit), net (non-GAAP) $ (5,385) $ (3,988) $ (10,802) $ (8,445)
Acquisition-related expense (benefit) net 88 2,922 (1,245) 2,142
(Loss) from operations (GAAP) (5,473) (6,910) (9,557) (10,587)
Total Company
Income from operations before acquisition-related (benefit), net (non-GAAP) $ 17,758 $ 14,841 $ 20,461 $ 22,319
Acquisition-related (benefit), net (434) (411) (1,395) (2,508)
Income from operations (GAAP) 18,192 15,252 21,856 24,827
Mistras Group, Inc. and Subsidiaries
Unaudited Summary of Cash Flow Information
(in thousands)
Six months ended November 30,
2014 2013
Net cash provided by (used in):
Operating Activities $ 3,230 $ 15,634
Investing Activities (40,666) (20,237)
Financing Activities 46,810 13,130
Effect of exchange rate changes on cash 205 (89)
Net change in cash and cash equivalents $ 9,579 $ 8,438
Mistras Group, Inc. and Subsidiaries
Unaudited Reconciliation of
Net Income to EBITDA and Adjusted EBITDA
(in thousands)
Three months ended November 30, Six months ended November 30,
2014 2013 2014 2013
Net Income $ 10,412 $ 9,284 $ 12,083 $ 14,919
Less: net income attributable to noncontrolling interests, net of taxes 15 (27) 10 (21)
Net income attributable to Mistras Group, Inc. $ 10,427 $ 9,257 $ 12,093 $ 14,898
Interest expense 1,352 772 2,257 1,517
Provision for income taxes 6,428 5,196 7,516 8,391
Depreciation and amortization 8,386 6,785 16,665 13,550
EBITDA $ 26,593 $ 22,010 $ 38,531 $ 38,356
Share-based compensation expense 2,090 1,040 4,257 2,747
Acquisition-related expense, net (434) (411) (1,395) (2,508)
Adjusted EBITDA $ 28,249 $ 22,639 $ 41,393 $ 38,595
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 except per share data)
Three months ended November 30, Six months ended November 30,
2014 2013 2014 2013
Net income (GAAP) $ 10,412 $ 9,284 $ 12,083 $ 14,919
Acquisition-related (benefit), net of tax (532) (382) (1,143) (1,755)
Net Income Excluding Acquisition-related Items (non-GAAP) $ 9,880 $ 8,902 $ 10,940 $ 13,164
Diluted earnings per common share (GAAP) $ 0.35 $ 0.32 $ 0.41 $ 0.51
Acquisition-related (benefit), net (0.02) $ (0.01) (0.04) (0.06)
Diluted EPS Excluding Acquisition-related Items (non-GAAP) $ 0.33 $ 0.31 $ 0.37 $ 0.45
Note: Acquisition-related (benefit), net of tax, includes income tax (benefit) expense of $(99) thousand and $29 thousand for the three months ended November 30, 2014 and 2013, and $252 thousand and $753 thousand for the six months ended November 30, 2014 and 2013. The aforementioned tax expenses are reflective of non-deductible and non-taxable tax differences related to acquisitions of common stock.

CONTACT: Media Contact: Nestor S. Makarigakis, Group Director of Marketing Communications marcom@mistrasgroup.com 1(609)716-4000

Source:MISTRAS Group, Inc.