Mistras Delivers Strong Second Quarter FY'14 Results, Raises Full Year Guidance

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| Source: MISTRAS Group, Inc.

PRINCETON JUNCTION, N.J., Jan. 8, 2014 (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 half of fiscal 2014, which ended November 30, 2013.

During the second quarter, the Company had revenue of $156.8 million, an increase of 13.8% over the prior year period. Net income for the second quarter was $9.3 million, or $0.32 per diluted share compared with net income of $9.2 million or $0.32 per diluted share in the prior year period. Adjusted EBITDA* was $22.6 million in the quarter compared with $23.9 million in the prior year period.

During the first half of fiscal 2014, the Company had revenue of $292.6 million, an increase of 16.5% over the prior year period. Net income for the first half was $14.9 million, or $0.51 per diluted share, compared with net income of $13.4 million or $0.46 per diluted share in the prior year period. Adjusted EBITDA* was $38.6 million in the first half compared with $39.3 million in the prior year period.

Included in results for the second quarter and first half of fiscal 2014 were favorable pre-tax net acquisition-related adjustments of $0.4 million and $2.5 million, respectively, which favorably impacted earnings per diluted share by $0.01 in the second quarter and $0.06 in the first half.

Financial Highlights:

Revenues

  • Revenues for the second quarter of fiscal 2014 increased 13.8% over prior year, including 4.3% organic growth and 9.4% acquisition growth.
  • Revenues for the first half of fiscal 2014 increased by 16.5%, consisting of 4.4% organic growth and 12.2% acquisition growth. Due to key contract wins, organic growth for fiscal year 2014 is still expected to be within a range of from 7% to 12%.
  • Organic revenue for the Services segment grew 2% during the second quarter compared with a robust prior year result, and 8% during the first half due to continued strength in our key market segments.
  • The International segment grew organically by 17% during the second quarter and improved its first half organic growth to 2.5%.
  • The Products and Systems segment had 2% organic revenue growth in the second quarter but experienced a revenue decline of 15% in the first half of the fiscal year compared with the prior year, mainly due to the impact of the government sequester.

Gross Profit

  • Gross Profit grew by 14% over prior year during the second quarter of fiscal 2014 and by 15% during the first half.
  • Gross margin for the second quarter was 30.6% of revenues vs. 30.4% in the prior year.
  • Gross margin for the first half was 29.8% of revenues vs. 30.1% in the prior year. The slight decrease was driven by costs incurred to enable future growth, higher fringe benefit rates in our Services segment, and lower sales in our high margin Products and Systems segment.

Operating Cash Flow

  • The Company's operating cash flow was $15.6 million for the first half of fiscal 2014.

Sotirios Vahaviolos, Mistras Chairman and Chief Executive Officer stated, "We achieved strong results in the second quarter and first half of fiscal 2014 compared with robust prior year results. Mistras was awarded several new contracts, and was chosen by a key customer to be their exclusive provider for a large multi-year contract at one of their largest facilities in the United States. The Company's second quarter results included increased costs to secure these contracts and to continue building its capabilities to support future growth, especially in Canada."

"We remain optimistic about the continued health of the market especially within the North American oil & gas industry for the next several years, driven by consumer demand for energy, combined with our customers' needs to improve safety and comply with the ever growing environmental regulations. We are also very pleased with our recent contract wins and the feedback and receptivity from our customers toward our employees and our company's value based service offerings."

Dr. Vahaviolos added, "Unlike last year at this time, we are looking forward to a robust spring turnaround season which will accelerate the growth we experienced in the first half of our fiscal year. This improved environment, coupled with our recent market share gains, improving international results and strategic acquisitions, has led us to increase our guidance for fiscal 2014 results while meeting our organic growth goals."

Outlook and Guidance for Fiscal 2014

The Company is increasing its previously issued guidance for fiscal 2014 revenues and Adjusted EBITDA*. Previously the Company expected revenue to be in the range of from $570 million to $600 million, and Adjusted EBITDA* to be in the range of $74 million to $80 million. The Company now expects that its revenue will be in the range of $590 million to $615 million, and Adjusted EBITDA* will be in a range of from $77 million to $83 million.

Conference Call

In connection with this release, Mistras will hold a conference call on Thursday, January 9, 2014 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 1-866-314-5232 and use confirmation code 33910996 when prompted. The International dial-in number is 1-617-213-8052.

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 2013 filed with the Securities and Exchange Commission on August 14, 2013, 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)
     
     
  November 30, 2013 May 31, 2013
 ASSETS     
 Current Assets     
 Cash and cash equivalents   $ 16,240  $ 7,802
 Accounts receivable, net   122,418  108,554
 Inventories   12,828  12,504
 Deferred income taxes   2,647  2,621
 Prepaid expenses and other current assets   10,940  8,156
Total current assets  165,073  139,637
Property, plant and equipment, net  70,517  68,419
Deposit for business combination  11,000  -- 
Intangible assets, net  49,282  51,992
Goodwill  118,679  115,270
Other assets  1,315  1,342
Total assets  $ 415,866  $ 376,660
     
LIABILITIES AND EQUITY    
Current Liabilities    
Accounts payable  $ 11,273  $ 8,490
Accrued expenses and other current liabilities  46,967  47,839
Current portion of long-term debt  7,899  7,418
Current portion of capital lease obligations  6,760  6,766
Income taxes payable  1,198  1,703
Total current liabilities  74,097  72,216
Long-term debt, net of current portion  70,799  52,849
Obligations under capital leases, net of current portion  10,728  10,923
Deferred income taxes  12,629  11,614
Other long-term liabilities  17,760  18,778
Total liabilities  186,013  166,380
     
Commitments and contingencies    
     
Equity     
Preferred stock, 10,000,000 shares authorized  --   -- 
Common stock, $0.01 par value, 200,000,000 shares authorized, 28,382,851 and 28,210,862 shares issued and outstanding as of November 30, 2013 and May 31, 2013, respectively  283  282
Additional paid-in capital  197,462  195,241
Retained earnings  33,880  18,982
Accumulated other comprehensive loss  (2,020)  (4,452)
Total Mistras Group, Inc. stockholders' equity  229,605  210,053
Noncontrolling interests  248  227
Total equity  229,853  210,280
Total liabilities and equity  $ 415,866  $ 376,660
     
Mistras Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
         
         
   Three months ended November 30,   Six months ended November 30, 
  2013 2012 2013 2012
Revenues:        
Services  $ 143,139  $ 127,731  $ 271,481  $ 226,956
Products and systems  13,616  9,998  21,112  24,160
Total revenues  156,755  137,729  292,593  251,116
Cost of revenues:        
Cost of services  98,860  87,044  187,484  157,560
Cost of products and systems sold  5,634  4,485  9,263  9,495
Depreciation related to services  4,026  4,124  8,076  8,100
Depreciation related to products and systems  258  171  516  339
Total cost of revenues  108,778  95,824  205,339  175,494
Gross profit  47,977  41,905  87,254  75,622
         
Selling, general and administrative expenses  29,849  23,362  58,548  46,854
Research and engineering  786  530  1,429  1,047
Depreciation and amortization  2,501  2,167  4,958  4,062
Acquisition-related expense, net  (411)  99  (2,508)  206
Income from operations  15,252  15,747  24,827  23,453
Interest expense  772  816  1,517  1,576
Income before provision for income taxes   14,480  14,931  23,310  21,877
Provision for income taxes  5,196  5,745  8,391  8,400
Net income  9,284  9,186  14,919  13,477
Less: net income attributable to noncontrolling interests, net of taxes  (27)  (23)  (21)  (33)
Net income attributable to Mistras Group, Inc.  $ 9,257  $ 9,163  $ 14,898  $ 13,444
Earnings per common share        
Basic  $ 0.33  $ 0.33  $ 0.53  $ 0.48
Diluted  $ 0.32  $ 0.32  $ 0.51  $ 0.46
Weighted average common shares outstanding:        
Basic  28,378  28,144  28,309  28,094
Diluted  29,102  29,008  29,147  29,036
         
Mistras Group, Inc. and Subsidiaries
Unaudited Operating Data by Segment
(in thousands)
         
         
   Three months ended November 30,   Six months ended November 30, 
  2013 2012 2013 2012
 Revenues         
 Services   $ 108,862  $ 105,213  $ 204,672  $ 187,610
 International   43,209  26,777  80,968  51,206
 Products and Systems   8,604  8,439  15,189  17,973
 Corporate and eliminations   (3,920)  (2,700)  (8,236)  (5,673)
   $ 156,755  $ 137,729  $ 292,593  $ 251,116
         
         
   Three months ended November 30,   Six months ended November 30, 
  2013 2012 2013 2012
 Gross profit         
 Services   $ 30,918  $ 30,692  $ 57,665  $ 51,632
 International   13,293  7,299  23,413  14,380
 Products and Systems   3,718  3,975  6,102  9,220
 Corporate and eliminations   48  (61)  74  390
   $ 47,977  $ 41,905  $ 87,254  $ 75,622
         
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, 
  2013 2012 2013 2012
 Services:         
 Income from operations before acquisition-related expense, net (non-GAAP)   $ 14,387  $ 16,284  $ 25,402  $ 23,260
 Acquisition-related expense (benefit), net   (13)  483  156  693
 Income from operations (GAAP)   14,400  15,801  25,246  22,567
         
 International:         
 Income from operations before acquisition-related expense, net (non-GAAP)   $ 3,992  $ 1,343  $ 5,337  $ 3,052
 Acquisition-related expense (benefit), net   (3,301)  63  (3,771)  181
 Income from operations (GAAP)   7,293  1,280  9,108  2,871
         
 Products and Systems:         
 Income from operations before acquisition-related expense, net (non-GAAP)   $ 450  $ 1,088  $ 25  $ 3,479
 Acquisition-related (benefit), net   (19)  (615)  (1,035)  (1,304)
 Income from operations (GAAP)   469  1,703  1,060  4,783
         
 Corporate and Eliminations:         
 Income from operations before acquisition-related (benefit), net (non-GAAP)   $ (3,988)  $ (2,869)  $ (8,445)  $ (6,132)
 Acquisition-related expense, net   2,922  168  2,142  636
 (Loss) from operations (GAAP)   (6,910)  (3,037)  (10,587)  (6,768)
         
 Total Company         
 Income from operations before acquisition-related expense, net (non-GAAP)   $ 14,841  $ 15,846  $ 22,319  $ 23,659
 Acquisition-related expense (benefit), net   (411)  99  (2,508)  206
 Income from operations (GAAP)   15,252  15,747  24,827  23,453
         
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, 
  2013 2012 2013 2012
         
Net Income  $ 9,284  $ 9,186  $ 14,919  $ 13,477
Less: net income attributable to noncontrolling interests, net of taxes  (27)  (23)  (21)  (33)
Net income attributable to Mistras Group, Inc.  $ 9,257  $ 9,163  $ 14,898  $ 13,444
Interest expense   772  816  1,517  1,576
Provision for income taxes   5,196  5,745  8,391  8,400
Depreciation and amortization   6,785  6,462  13,550  12,501
EBITDA   $ 22,010  $ 22,186  $ 38,356  $ 35,921
Share-based compensation expense   1,040  1,572  2,747  3,206
Acquisition-related expense, net  (411)  99  (2,508)  206
Adjusted EBITDA   $ 22,639  $ 23,857  $ 38,595  $ 39,333
         
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, 
  2013 2012 2013 2012
         
Net income (GAAP)  $ 9,284  $ 9,186  $ 14,919  $ 13,477
Acquisition-related expense (benefit), net of tax   (382)  229  (1,755)  288
Net Income Excluding Acquisition-related Items (non-GAAP)  $ 8,902  $ 9,415  $ 13,164  $ 13,765
         
         
Diluted earnings per common share (GAAP)  $ 0.32  $ 0.32  $ 0.51  $ 0.46
Acquisition-related expense (benefit), net  (0.01)  0.01  (0.06)  0.01
Diluted EPS Excluding Acquisition-related Items (non-GAAP)   $ 0.31  $ 0.33  $ 0.45  $ 0.47
         
Note: Acquisition-related expense (benefit), net of tax, includes income tax expense of $29 thousand and $130 thousand for the three months ended November 30, 2013 and 2012, respectively and $753 thousand and $82 thousand for the six months ended November 30, 2013 and 2012, respectively. The aforementioned tax expenses are reflective of non-deductible and non-taxable tax differences related to acquisitions of common stock.
         
Nestor S. Makarigakis
Group Director of Marketing Communications

1(609)716-4000