EX-99.1 2 a33118exhibit991.htm PRESS RELEASE Exhibit




Exhibit 99.1


Mistras Group Announces First Quarter Results

Highlights of the First Quarter 2018*
•
Q1 revenues increased 15%
•
Q1 income from operations of $6.4 million increased 97%
•
Q1 net income of $2.9 million increased 72%
•
Q1 adjusted EBITDA of $15.3 million increased 15%
•
Q1 cash flows from operating activities was $5.8 million
*- All comparisons are versus the equivalent prior year period.

MISTRAS Group, Inc. May 7, 2018 4:01 PM

PRINCETON JUNCTION, N.J., May 7, 2018 (GLOBE NEWSWIRE) - Mistras Group, Inc. (MG: NYSE), 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 quarter
2018 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 Subsidiaries
Condensed 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 Subsidiaries
Unaudited 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 Subsidiaries
Unaudited 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 Subsidiaries
Unaudited Reconciliation of
Segment 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 Subsidiaries
Unaudited 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 Subsidiaries
Reconciliation 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 Subsidiaries
Unaudited Reconciliation of
Net 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