PRINCETON JUNCTION, N.J., May 08, 2017 (GLOBE NEWSWIRE) -- 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, 2017.

Revenues for the first quarter of 2017 were $163.3 million, 2% lower than in the comparable period of 2016.  Net income during the first quarter of 2017 was $1.7 million or $0.06 per diluted share, inclusive of an $0.8 million after-tax charge pertaining to a bad debt provision taken in relation to the bankruptcy filing of a large customer in the nuclear industry. Exclusive of the bad debt provision, first quarter 2017 net income and earnings per diluted share were $2.5 million and $0.08 per diluted share, respectively, compared with $3.4 million and $0.11 per diluted share, respectively, in the prior year's first quarter.

The Company generated $13.4 million of cash from operating activities and $9.6 million of free cash flow during the first quarter of fiscal year 2017, both amounts reduced by a $6.3 million outflow pertaining to a prior year legal settlement. The Company utilized $4.5 million of its free cash flow for an acquisition and $6 million to repurchase its common stock during the first quarter of 2017. The Company's net debt (total debt less cash) of $85.4 million at March 31, 2017 was approximately 1.1x Adjusted EBITDA.

Adjusted EBITDA for the first quarter of 2017 was $13.3 million, compared with $15.0 million in the comparable period of the prior year. Performance by segment was as follows:

Services segment operating income declined from prior year by 35% in the first quarter of fiscal year 2017, on revenues that declined by 4%. Excluding the special bad debt provision, Services operating income declined by $2.8 million or 24%. The decline in operating income was driven by a mid-single digit organic revenue decline which reflected soft market conditions and a weak spring turnaround season, which in turn caused an 80 basis point reduction in Services gross margin to 23.9% of revenues.

International segment operating income more than tripled prior year levels, growing by $2.3 million over the prior year's first quarter, on revenues that grew by $3.3 million or 11%, driven primarily by strong performance in aerospace business. The Company enjoyed double digit first quarter organic revenue growth compared with prior year in Germany and France, which led to a 250 basis point improvement in the segment gross margin rate to 30.5%.

Products and Systems segment operating income declined by $0.3 million compared with the prior year's first quarter, driven by a volume-driven revenue decline of $1.1 million or 17%.

Dr. Sotirios Vahaviolos, Chairman and Chief Executive Officer stated, "As mentioned in our recent earnings calls, the fall 2016 and spring 2017 seasons were especially challenging in North America, as workloads from many customers were less than in the prior year. These conditions caused results in our Services segment to suffer poor comparisons to prior year that more than offset continued positive performance in our International segment."

Dr. Vahaviolos added: "Although the market rebound has not yet occurred, we are using this time to make further adjustments to our cost structure, and to enhance our competitive position by adding capabilities that will help our customers in new and exciting ways. We are actively quoting new business and are using this time to position Mistras to drive incrementally more value for our customers, and to make investments that will reignite our profitable growth in 2018 and beyond."

Updated Guidance for 2017

Information from North American oil and gas customers continues to suggest that their spending for inspection services in the first half of calendar 2017 will be lower than prior year. However, spending levels are expected to pick up modestly in the second half of 2017. The Company's results for the first half and second half of 2017 are expected to reflect this dynamic.

The Company's 2017 financial guidance remains unchanged, as follows:
  • Total revenues from $670 million to $700 million;
  • Net income for 2017 from $20 million to $23 million;
  • Earnings per diluted share from 68 cents to 78 cents;
  • Adjusted EBITDA from $73 million to $78 million;
  • Operating cash flow of approximately $50 million;
  • Capital expenditures of approximately $20 million.

Conference Call

In connection with this release, Mistras will hold a conference call on May 9, 2017 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 17141113 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 Transition Report on Form 10-K filed with the Securities and Exchange Commission on March 20, 2017, 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, 2017   December 31, 2016
ASSETS        
Current Assets        
Cash and cash equivalents   $ 27,592     $ 19,154  
Accounts receivable, net   124,221     130,852  
Inventories   10,589     10,017  
Deferred income taxes       6,230  
Prepaid expenses and other current assets   14,772     16,399  
Total current assets   177,174     182,652  
Property, plant and equipment, net   72,898     73,149  
Intangible assets, net   41,226     40,007  
Goodwill   173,907     169,940  
Deferred income taxes   1,897     1,086  
Other assets   2,628     2,593  
Total assets   $ 469,730     $ 469,427  
LIABILITIES AND EQUITY        
Current Liabilities        
Accounts payable   $ 9,345     $ 6,805  
Accrued expenses and other current liabilities   53,637     58,697  
Current portion of long-term debt   1,766     1,379  
Current portion of capital lease obligations   6,357     6,488  
Income taxes payable   3,659     4,342  
Total current liabilities   74,764     77,711  
Long-term debt, net of current portion   96,042     85,917  
Obligations under capital leases, net of current portion   8,861     9,682  
Deferred income taxes   12,024     17,584  
Other long-term liabilities   8,180     7,789  
Total liabilities   199,871     198,683  
Commitments and contingencies        
Equity        
Preferred stock, 10,000,000 shares authorized        
Common stock, $0.01 par value, 200,000,000 shares authorized, 29,257,763 and 29,216,745 shares issued   293     292  
Additional paid-in capital   219,176     217,211  
Treasury stock, at cost, 676,512 and 420,258 shares   (15,000 )   (9,000 )
Retained earnings   93,496     91,803  
Accumulated other comprehensive loss   (28,274 )   (29,724 )
Total Mistras Group, Inc. stockholders' equity   269,691     270,582  
Noncontrolling interests   168     162  
Total equity   269,859     270,744  
Total liabilities and equity   $ 469,730     $ 469,427  

Mistras Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
 
    Three months ended
    March 31, 2017   March 31, 2016
         
Revenue   $ 163,318     $ 167,455  
Cost of revenue   115,002     118,230  
Depreciation   5,163     5,255  
Gross profit   43,153     43,970  
Selling, general and administrative expenses   37,302     35,053  
Research and engineering   643     662  
Depreciation and amortization   2,502     2,762  
Acquisition-related expense (benefit), net   (544 )   (153 )
Income from operations   3,250     5,646  
Interest expense   1,018     1,100  
Income before provision for income taxes   2,232     4,546  
Provision for income taxes   534     1,088  
Net income   1,698     3,458  
Less: net income attributable to noncontrolling interests, net of taxes   6     11  
Net income attributable to Mistras Group, Inc.   $ 1,692     $ 3,447  
Earnings per common share        
Basic   $ 0.06     $ 0.12  
Diluted   $ 0.06     $ 0.11  
Weighted average common shares outstanding:        
Basic     28,687     28,915  
Diluted   29,905     29,980  

Mistras Group, Inc. and Subsidiaries
Unaudited Operating Data by Segment
(in thousands)
 
  Three months ended
  March 31, 2017   March 31, 2016
Revenues      
Services $ 126,329     $ 131,579  
International 34,256     30,980  
Products and Systems 5,550     6,680  
Corporate and eliminations (2,817 )   (1,784 )
  $ 163,318     $ 167,455  
       
       
  Three months ended
  March 31, 2017   March 31, 2016
Gross profit      
Services $ 30,213     $ 32,458  
International 10,460     8,673  
Products and Systems 2,594     2,738  
Corporate and eliminations (114 )   101  
  $ 43,153     $ 43,970  
       

Mistras Group, Inc. and Subsidiaries
Unaudited Reconciliation of
Segment and Total Company Income (Loss) from Operations (GAAP) to Income before Special Items (non-GAAP)
(in thousands)
 
  Three months ended
  March 31, 2017   March 31, 2016
Services:      
Income from operations $ 7,380     $ 11,339  
Bad debt provision for a customer bankruptcy 1,200      
Severance costs 16      
Acquisition-related expense (benefit), net (124 )   (173 )
Income before special items 8,472     11,166  
International:      
Income from operations 3,034     720  
Severance costs 13     65  
Acquisition-related expense (benefit), net (501 )   20  
Income before special items 2,546     805  
Products and Systems:      
Loss from operations (449 )   (132 )
Severance costs     (11 )
Acquisition-related expense (benefit), net      
Loss before special items (449 )   (143 )
Corporate and Eliminations:      
Loss from operations (6,715 )   (6,281 )
Acquisition-related expense (benefit), net 81      
Loss before special items (6,634 )   (6,281 )
Total Company      
Income from operations $ 3,250     $ 5,646  
Bad debt provision for a customer bankruptcy $ 1,200     $  
Severance costs $ 29     $ 54  
Acquisition-related expense (benefit), net $ (544 )   $ (153 )
Income before special items $ 3,935     $ 5,547  

Mistras Group, Inc. and Subsidiaries
Unaudited Summary Cash Flow Information
(in thousands)
 
  Three months ended
  March 31, 2017   March 31, 2016
   
Net cash provided by (used in):      
Operating activities $ 13,413     $ 29,113  
Investing activities (8,137 )   (4,109 )
Financing activities 2,853     (18,888 )
Effect of exchange rate changes on cash 309     (89 )
Net change in cash and cash equivalents $ 8,438     $ 6,027  
       

Mistras Group, Inc. and Subsidiaries
Reconciliation of Net Cash Provided from Operating Activities (GAAP) to Free Cash Flow (non-GAAP)
(in thousands)
 
  Three months ended March 31, 2017
GAAP:  Net cash provided by operating activities $ 13,413  
Less:  
Purchases of property, plant and equipment (3,416 )
Purchases of intangible assets (376 )
non-GAAP:  Free cash flow $ 9,621  

Mistras Group, Inc. and Subsidiaries
Unaudited Reconciliation of
Net Income to Adjusted EBITDA
(in thousands)
 
  Three months ended
  March 31, 2017   March 31, 2016
               
Net income $ 1,698     $ 3,458  
Less: net income attributable to noncontrolling interests, net of taxes 6     11  
Net income attributable to Mistras Group, Inc. $ 1,692     $ 3,447  
Interest expense 1,018     1,100  
Provision for income taxes 534     1,088  
Depreciation and amortization 7,665     8,017  
Share-based compensation expense 1,683     1,729  
Acquisition-related expense (benefit), net (544 )   (153 )
Severance 29     54  
Bad debt provision for customer bankruptcy 1,200      
Foreign exchange (gain) loss (23 )   (282 )
Adjusted EBITDA $ 13,254     $ 15,000  

Mistras Group, Inc. and Subsidiaries
Unaudited Reconciliation of
Net Income (GAAP) and Diluted EPS (GAAP) to Net Income Excluding Bad Debt Provision for a Customer Bankruptcy (non-GAAP) and Diluted
EPS Excluding Bad Debt Provision for a Customer Bankruptcy (non-GAAP)
(in thousands)
 
    Three months ended March 31, 2017
Net income (GAAP)   $ 1,692  
Bad debt provision for a customer bankruptcy, net of tax   770  
Net Income Excluding Bad Debt Provision for a Customer Bankruptcy (non-GAAP)   $ 2,462  
     
Diluted EPS (GAAP)   $ 0.06  
Bad debt provision for a customer bankruptcy, net of tax   0.02  
Diluted EPS Excluding Bad Debt Provision for a Customer Bankruptcy (non-GAAP)   $ 0.08  

 
Media Contact:Nestor S. Makarigakis, Group Director of Marketing Communications, marcom@mistrasgroup.com1(609)716-4000

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