Key highlights for the quarter included:
* Grew Services segment revenues by approximately 30% as compared to the same quarter in fiscal 2009. * Expanded adjusted EBITDA margin to 17.1% of revenues as compared to 12.4% in the first quarter, while more than doubling the consolidated operating income margin to 10.7% compared to 5.0% in the first quarter. * Achieved gross profit improvement of 422 basis points in the Products and Systems segment as compared to the same quarter in fiscal 2009 * Won a new contract to develop an ultrasonic imaging system to test advanced composite materials for the new Joint Strike Fighter * Acquired a small division of an engineering company that provides additional skilled service technicians to assist in addressing the growing nuclear industry
Chairman and Chief Executive Officer, Dr. Sotirios J. Vahaviolos commented that, "We continue to have solid growth attributable to customer acceptance of our unique and comprehensive asset protection solutions. Our record revenues and strong Services segment growth in the quarter was driven by several new multi-year contracts obtained this fiscal year, continued growth in our mechanical integrity services, and acquisitions."
"This growth was partially offset by revenue decreases in our International segment, which represented only 10.4% of our total revenues, as the economy and foreign exchange rates had a greater impact in the quarter. Our Product and Systems segment had revenues higher than the first fiscal quarter and on par with the same quarter last year. Overall, we see all our markets stabilizing and expect continued growth in our business. We are encouraged by the improved profitability compared to our first quarter, and believe we will continue this trend through the second half of our fiscal year."
Second Quarter Performance
Mistras Group, Inc.'s revenues were $71.9 million for the second quarter of fiscal 2010, up $12.6 million, or 21%, compared to the second quarter of fiscal 2009. Overall organic growth was approximately 9% and acquisitions contributed approximately 13%. Foreign currency impacts reduced the total growth by approximately 1%. For the second quarter of fiscal 2010, income from operations was $7.7 million and net income attributable to Mistras Group, Inc. was $3.6 million.
Segment results
On an operating segment basis, the Company's Services segment increased its second quarter revenues $13.9 million, or 30%, as compared to the same quarter last year as a result of new asset protection solution revenues and multi-year contracts obtained this fiscal year, as well as growth from existing customers and acquisitions. The organic and acquisition growth rates were approximately 13% and 17%, respectively from the second quarter of fiscal 2009. Gross profit was $17.4 million, or 28.6% of revenues, as compared to $14.9 million, or 31.6% of revenues, in the same quarter last fiscal year and 27.4% of revenues in the first quarter of 2010.
Revenues in the Products and Systems segment were $4.7 million as compared to $4.8 million for the second quarter of fiscal 2009. Gross profit was $2.8 million, or 59.4% of revenue as compared to $2.6 million, or 55.2% of revenue in the same quarter last fiscal year.
Revenues in the Company's International segment were $7.5 million compared to $8.9 million for the second quarter of fiscal 2009. On a local currency basis, the International segment revenues declined approximately 11%. This segment also incurred net adverse foreign currency impacts of another 5%. Gross profit was $2.9 million, or 39.4% of revenues compared to $4.1 million, or 45.8% of revenues in the same quarter last fiscal year.
Initial Public Offering and Related Transactions
Public trading of the Mistras common stock began on October 8, 2009, on the New York Stock Exchange under the ticker symbol MG. Mistras completed its initial public stock offering of 10,000,000 total shares of common stock at a public offering price of $12.50 per share. The Company sold 6,700,000 shares and the selling stockholders sold the remainder.
As a result of the offering, the Company received net proceeds of approximately $74.2 million, after deducting underwriting discounts, commissions and offering expenses. During the quarter, the Company used $66.6 million of the net proceeds to prepay, in full, amounts outstanding under its credit facilities. The Company anticipates using the remaining net proceeds for working capital and other general corporate purposes, which may include the acquisition of businesses and expansion internationally.
At the end of the second quarter of fiscal 2010, the Company had cash and cash equivalents of $14.6 million and $55.0 million available under its revolving credit facility.
Earnings Conference Call
In connection with this earnings release, Mistras will hold its quarterly conference call on Friday, January 8 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 800-901-5248 and use confirmation code 40211533 when prompted. (The International number is 617-786-4512.)
About Mistras Group, Inc.
Mistras is a leading global provider of technology-enabled asset protection solutions used to evaluate the structural integrity of critical energy, industrial and public infrastructure. Mistras combines industry-leading products and technologies, expertise in mechanical integrity (MI) and non-destructive testing (NDT) services and proprietary data analysis software to deliver a comprehensive portfolio of customized solutions, ranging from routine inspections to complex, plant-wide asset integrity assessments and management. These mission critical solutions enhance customers' ability to extend the useful life of their assets, increase productivity, minimize repair costs, comply with governmental safety and environmental regulations, manage risk and avoid catastrophic disasters. Given the role Mistras' services play in ensuring the safe and efficient operation of infrastructure, Mistras has historically provided a majority of its services to its customers on a regular, recurring basis. Mistras serves a global customer base of companies with asset-intensive infrastructure, including companies in the oil and gas, fossil and nuclear power, public infrastructure, chemicals, aerospace and defense, transportation, primary metals and metalworking, pharmaceuticals and food processing industries.
For more information, please visit the company's website at www.mistrasgroup.com or contact Paul "Pete" Peterik, Chief Financial Officer at 609-716-4103.
The Mistras Group, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=6966
Forward-Looking and Cautionary Statement
Certain statements made in this press release are "forward-looking statements" about Mistras' financial results and estimates, products and services, business model, strategy and growth opportunities, profitability and competitive position. These forward-looking statements are 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. You are cautioned that such statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, such performance or results will have been achieved. Such statements are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in these statements. Important factors that could cause such differences include, but are not limited to, those discussed in the "Risk Factors" section of the prospectus dated October 7, 2009 in connection with Mistras' initial public offering filed with the Securities and Exchange Commission on October 9, 2009, such as (i) the current economic downturn; (ii) loss of or reduction in business with a significant customer; (iii) adverse change in the industries Mistras serves, which include oil and gas, power transmission and generation, chemical, aerospace and infrastructure; (iv) Mistras' ability to manage its salary and compensation costs, particularly as to billable time; (v) Mistras' ability to generate cash from operations, secure external funding for its operations and manage its liquidity needs; (vi) market acceptance of Mistras' products and services; (vii) significant changes in the competitive environment; (viii) catastrophic events that cause disruptions to the business of Mistras or its customers; (ix) the ability to attract and train engineers, scientists, and skilled technicians; and (x) any accidents or incidents involving the Company's asset protection solutions. You should consider these factors in evaluating the forward-looking statements included in this press release and not place undue reliance on such statements. 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.
Mistras Group, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
(In thousands, except for share and per share data)
Three Months Ended Six Months Ended
November 30, November 30,
2009 2008 2009 2008
----------- ----------- ----------- -----------
Revenues: $ 71,899 $ 59,275 $ 127,988 $ 106,272
----------- ----------- ----------- -----------
Cost of Revenues:
Cost of services
and goods sold 46,248 35,676 82,716 64,202
Depreciation 2,635 2,061 5,106 3,920
----------- ----------- ----------- -----------
Total cost of
revenues 48,883 37,737 87,822 68,122
----------- ----------- ----------- -----------
Gross profit 23,016 21,538 40,166 38,150
Selling, general
and
administrative
expenses 13,686 11,153 26,819 22,048
Research and
engineering 449 481 932 945
Depreciation and
amortization 1,214 798 2,259 2,226
Legal settlement -- 1,915 (297) 2,051
----------- ----------- ----------- -----------
Income from
operations 7,667 7,191 10,453 10,880
Other expenses
Interest expense 1,017 1,578 2,081 2,589
Loss on
extinguishment
of long-term
debt 218 -- 387 --
----------- ----------- ----------- -----------
Income before
provision for
income taxes and
noncontrolling
interest 6,432 5,613 7,985 8,291
Provision for
income taxes 2,875 2,290 3,569 3,350
----------- ----------- ----------- -----------
Net income 3,557 3,323 4,416 4,941
Net (income) loss
attributable to
noncontrolling
interests 5 (88) (39) (189)
----------- ----------- ----------- -----------
Net income
attributable to
Mistras Group,
Inc. 3,562 3,235 4,377 4,752
Accretion of
preferred stock 6,499 (13,691) 6,499 (14,115)
----------- ----------- ----------- -----------
Net income
attributable to
common
stockholders $ 10,061 $ (10,456) $ 10,876 $ (9,363)
=========== =========== =========== ===========
Earnings per
common share:
Basic $ 0.48 $ (0.80) $ 0.64 $ (0.72)
Diluted $ 0.14 $ (0.97) $ 0.19 $ (0.91)
Weighted average
common shares
outstanding:
Basic 20,986,528 13,000,000 16,971,443 13,000,000
Diluted 24,993,493 16,883,113 22,980,305 16,883,113
Mistras Group, Inc. and Subsidiaries
Unaudited Operating Data by Segment
(In thousands)
Three Months Ended Six Months Ended
November 30, November 30,
2009 2008 2009 2008
--------- --------- --------- ---------
Revenues:
Services $ 60,938 $ 47,048 $ 106,640 $ 82,836
Products and Systems 4,744 4,762 8,369 8,797
International 7,479 8,896 15,230 17,317
Corporate and
eliminations (1,262) (1,431) (2,251) (2,678)
--------- --------- --------- ---------
$ 71,899 $ 59,275 $ 127,988 $ 106,272
========= ========= ========= =========
Gross profit:
Services $ 17,405 $ 14,869 $ 29,933 $ 25,499
Products and Systems 2,818 2,631 4,506 4,593
International 2,944 4,078 5,990 8,180
Corporate and
eliminations (151) (40) (263) (122)
--------- --------- --------- ---------
$ 23,016 $ 21,538 $ 40,166 $ 38,150
========= ========= ========= =========
Income from operations:
Services $ 7,625 $ 5,407 $ 10,857 $ 8,229
Products and Systems 1,111 937 1,041 1,261
International 808 1,883 2,070 3,858
Corporate and
eliminations (1,877) (1,036) (3,515) (2,468)
--------- --------- --------- ---------
$ 7,667 $ 7,191 $ 10,453 $ 10,880
========= ========= ========= =========
Mistras Group, Inc. and Subsidiaries
Unaudited Condensed Balance Sheets
(In thousands)
November 30, May 31,
2009 2009
------------ ------------
ASSETS
Cash and cash equivalents $ 14,553 $ 5,668
Other current assets 70,704 58,002
Property, plant and equipment, net 38,252 33,592
Other non-current assets 64,430 54,012
------------ ------------
Total assets $ 187,939 $ 151,274
============ ============
LIABILITIES, PREFERRED STOCK AND EQUITY
(DEFICIT)
Current portion of long-term debt and
leases $ 12,898 $ 19,371
Other current liabilities 29,394 24,737
Long-term debt and capital leases, net
of current portion 18,913 61,405
Other non-current liabilities 2,600 2,445
Preferred stock -- 90,983
Equity (deficit) 124,134 (47,667)
------------ ------------
Total liabilities, preferred stock and
equity $ 187,939 $ 151,274
============ ============
Mistras Group, Inc. and Subsidiaries
Unaudited Summary of Cash Flows
(In thousands)
Six Months Ended
November 30,
2009 2008
-------- --------
Cash flows from operating activities
Net income attributable to Mistras Group, Inc. $ 4,377 $ 4,752
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 7,365 6,146
Other non-cash adjustments, net 1,903 483
Changes in operating assets and liabilities,
net of effect of acquisitions (5,025) (10,963)
-------- --------
Net cash provided by operating activities 8,620 418
Cash flows used in investing activities (15,049) (10,741)
Cash flows provided by financing activities 15,319 10,343
Effect of exchange rate changes on cash (5) 813
-------- --------
Net change in cash and cash equivalents 8,885 833
Cash and cash equivalents
Beginning of period 5,668 3,555
-------- --------
End of period $ 14,553 $ 4,388
======== ========
Mistras Group, Inc. and Subsidiaries
Unaudited Reconciliation of
Net Income attributable to Mistras Group, Inc.
to EBITDA and Adjusted EBITDA(1)
(In thousands)
Three Months Ended Six Months Ended
November 30, November 30,
2009 2008 2009 2008
-------- -------- -------- --------
Net income attributable to
Mistras Group, Inc. $ 3,562 $ 3,235 $ 4,377 $ 4,752
Interest expense 1,017 1,578 2,081 2,589
Provision for income taxes 2,875 2,290 3,569 3,350
Depreciation and
amortization 3,849 2,859 7,365 6,146
-------- -------- -------- --------
EBITDA 11,303 9,962 17,392 16,837
Legal settlement -- 1,915 (297) 2,051
Large customer bankruptcy -- -- 767 --
Stock compensation expense 783 46 1,033 46
Loss on extinguishment of
debt 218 -- 387 --
-------- -------- -------- --------
Adjusted EBITDA $ 12,304 $ 11,923 $ 19,282 $ 18,934
======== ======== ======== ========
(1) Adjusted EBITDA is a performance measure used by management that is not calculated in accordance with U.S. generally accepted accounting principles (GAAP). "Adjusted EBITDA" is defined as net income plus: interest expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, the amount of a write-off for the remaining accounts receivable the company expected to collect from a customer that recently declared bankruptcy, loss on extinguishment of debt, and amounts for settlement of a class action law suit, minus a reduction in the amount the Company was required to pay in final settlement of the class action law suit. The Company's management uses adjusted EBITDA as a measure of operating performance to assist in comparing performance from period to period on a consistent basis, for planning and forecasting overall expectations, and for evaluating actual results against such expectations, and as a performance evaluation metric off which to base executive and employee incentive compensation programs.
For more information regarding the use of adjusted EBITDA, see Mistras Group Inc.'s current report on Form 8-K filed with the Securities and Exchange Commission on January 7, 2010.
CONTACT: Mistras Group, Inc.
Paul "Pete" Peterik, Chief Financial Officer
609-716-4103
www.mistrasgroup.com