Revenue for the Quarter Exceeds Forecast
Cash on hand Increased from Year End
Selling, General & Administrative Expense Run Rate Reduced
Strategic Actions Implemented to Lower Costs Further in 2020
Highlights of the First Quarter 2020*
- Revenue of
$159.5 million , exceeding forecast - Cash from operations of
$6.1 million - Credit facility amended, to provide covenant flexibility while maintaining liquidity
- Selling, general and administrative expenses of
$41.6 million , down despite additive acquisition - Capital expenditures of
$4.4 million , down 23% reflecting lower full year CapEx budget - Coronavirus (“COVID-19”) and related impact on crude oil prices trigger non-cash impairment charges of
$106.1 million ;$92.1 million after-tax basis
* All comparisons are consolidated and versus the equivalent prior year period, unless otherwise noted.
Chief Executive Officer
“As recently forecasted, revenues were down in the first quarter of 2020 compared to a year ago, though less than anticipated due to our ability to quickly react to dynamic market conditions. This reduction impacted margins and profits.”
“Cash flows held strong at
“The severe contraction in near term economic activity is causing delays in projects, primarily in the energy markets, the result of which will be further decreases in revenues in the second quarter of 2020. Beyond the second quarter 2020, recent stabilization in the crude oil markets and the relaxing of certain stay-in-place mandates are allowing some of our energy industry customers to consider commencing delayed projects and restarting idled projects over the second half of the year. While it is extremely difficult to forecast with any degree of certainty, we are optimistic the second quarter will represent the low point of the year, with our prospects progressively improving in the third and fourth quarter. This should result in operating cash flow and adjusted EBITDA up significantly in the second half of the year from the first half of the year. Our plan is to exit fiscal 2020 on a growth trajectory and with momentum heading into next year.”
“Mistras has previously overcome stiff headwinds and we will emerge from these challenges all the stronger for it. We are confident that our long-term prospects have not changed. Our strategy to continually increase the value we deliver through innovative new technology, expansion into complementary adjacent businesses, and the introduction of new services will strengthen our business and create value for shareholders.”
Performance by key segments during the quarter was as follows:
Services segment first quarter revenues decreased by
International segment first quarter revenues decreased by
Non-Cash Impairment Charges
During the first quarter of 2020, the impact of COVID-19 and drop in crude oil prices was deemed to be a triggering event, requiring the Company to perform an interim assessment. As a result, the Company recorded non-cash
Credit Agreement Amended
Although the Company was in compliance with its bank covenants at
The Company’s net debt (total debt less cash and cash equivalents) was
The Company generated
Guidance for 2020
Ongoing macro concerns attributable to the impact of COVID-19 coronavirus, continue to put crude oil prices under intense pressure. Given the continuing economic uncertainty, the Company is not providing guidance for the full year 2020. The Company does anticipate revenues for the second quarter of 2020 to decrease up to high 30% from the prior period level, although cash from operations and adjusted EBITDA are expected to remain positive. While it is extremely difficult to forecast with any degree of certainty at this time, the Company is optimistic that consolidated revenue in the second half of 2020 will be higher than the first half of 2020 with corresponding improvements in both cash flow and adjusted EBITDA. This outlook is contingent on continuing macroeconomic improvements, including stabilization in the crude oil markets and the relaxing of certain stay-in-place mandates.
Conference Call
In connection with this release, MISTRAS will hold a conference call on
About
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 and aerospace components. 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; mechanical integrity ("MI") and non-destructive testing ("NDT") services; destructive testing services; and its proprietary world class data warehousing and analysis software and online monitoring - 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
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 2019 Annual Report on Form 10-K dated
Use of Non-GAAP Measures
In addition to financial information prepared in accordance with generally accepted accounting principles in the
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
ASSETS | (unaudited) | |||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 17,027 | $ | 15,016 | ||||
Accounts receivable, net | 125,130 | 135,997 | ||||||
Inventories | 13,510 | 13,413 | ||||||
Prepaid expenses and other current assets | 13,151 | 14,729 | ||||||
Total current assets | 168,818 | 179,155 | ||||||
Property, plant and equipment, net | 94,971 | 98,607 | ||||||
Intangible assets, net | 72,019 | 109,537 | ||||||
196,289 | 282,410 | |||||||
Deferred income taxes | 1,910 | 1,786 | ||||||
Other assets | 49,538 | 48,383 | ||||||
Total assets | $ | 583,545 | $ | 719,878 | ||||
LIABILITIES AND EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable | $ | 13,110 | $ | 15,033 | ||||
Accrued expenses and other current liabilities | 75,156 | 81,389 | ||||||
Current portion of long-term debt | 7,240 | 6,593 | ||||||
Current portion of finance lease obligations | 3,847 | 4,131 | ||||||
Income taxes payable | 2,067 | 2,094 | ||||||
Total current liabilities | 101,420 | 109,240 | ||||||
Long-term debt, net of current portion | 250,786 | 248,120 | ||||||
Obligations under finance leases, net of current portion | 12,401 | 13,043 | ||||||
Deferred income taxes | 6,761 | 21,290 | ||||||
Other long-term liabilities | 40,424 | 42,163 | ||||||
Total liabilities | 411,792 | 433,856 | ||||||
Commitments and contingencies | ||||||||
Equity | ||||||||
Preferred stock, 10,000,000 shares authorized | — | — | ||||||
Common stock, | 290 | 289 | ||||||
Additional paid-in capital | 230,472 | 229,205 | ||||||
Retained earnings (deficit) | (20,896 | ) | 77,613 | |||||
Accumulated other comprehensive loss | (38,294 | ) | (21,285 | ) | ||||
171,572 | 285,822 | |||||||
Non-controlling interests | 181 | 200 | ||||||
Total equity | 171,753 | 286,022 | ||||||
Total liabilities and equity | $ | 583,545 | $ | 719,878 | ||||
Unaudited Condensed Consolidated Statements of Income (Loss)
(in thousands, except per share data)
Three months ended | |||||||
Revenue | $ | 159,465 | $ | 176,787 | |||
Cost of revenue | 113,324 | 122,417 | |||||
Depreciation | 5,497 | 5,496 | |||||
Gross profit | 40,644 | 48,874 | |||||
Selling, general and administrative expenses | 41,558 | 41,763 | |||||
Bad debt provision for troubled customers, net of recoveries | — | 5,491 | |||||
Impairment charges | 106,062 | — | |||||
Pension withdrawal expense | — | 534 | |||||
Research and engineering | 824 | 857 | |||||
Depreciation and amortization | 3,970 | 4,172 | |||||
Acquisition-related expense, net | (542 | ) | 453 | ||||
Loss from operations | (111,228 | ) | (4,396 | ) | |||
Interest expense | 2,789 | 3,527 | |||||
Loss before provision (benefit) for income taxes | (114,017 | ) | (7,923 | ) | |||
Provision for income taxes | (15,495 | ) | (2,637 | ) | |||
Net loss | (98,522 | ) | (5,286 | ) | |||
Less: Net income (loss) attributable to non-controlling interests, net of taxes | (13 | ) | 7 | ||||
Net loss attributable to | $ | (98,509 | ) | $ | (5,293 | ) | |
Earnings (loss) per common share: | |||||||
Basic | $ | (3.40 | ) | $ | (0.19 | ) | |
Diluted | $ | (3.40 | ) | $ | (0.19 | ) | |
Weighted-average common shares outstanding: | 0 | ||||||
Basic | 28,963 | 28,574 | |||||
Diluted | 28,963 | 28,574 | |||||
Unaudited Operating Data by Segment
(in thousands)
Three months ended | |||||||
Revenues | |||||||
Services | $ | 128,873 | $ | 140,298 | |||
International | 29,067 | 35,162 | |||||
Products and Systems | 2,812 | 3,432 | |||||
Corporate and eliminations | (1,287 | ) | (2,105 | ) | |||
$ | 159,465 | $ | 176,787 | ||||
Three months ended | |||||||
Gross profit | |||||||
Services | $ | 32,237 | $ | 37,365 | |||
International | 8,023 | 10,360 | |||||
Products and Systems | 368 | 1,239 | |||||
Corporate and eliminations | 16 | (90 | ) | ||||
$ | 40,644 | $ | 48,874 | ||||
Unaudited Reconciliation of
Segment and Total Company Income from Operations (GAAP) to Income before Special Items (non-GAAP)
(in thousands)
Three months ended | |||||||
Services: | |||||||
Income (loss) from operations (GAAP) | $ | (81,494 | ) | $ | 4,053 | ||
Bad debt provision for troubled customers, net of recoveries | — | 4,755 | |||||
Impairment charges | 86,200 | — | |||||
Pension withdrawal expense | — | 534 | |||||
Acquisition and reorganization expense (benefit), net | (520 | ) | 305 | ||||
Income before special items (non-GAAP) | $ | 4,186 | $ | 9,647 | |||
International: | |||||||
Loss from operations (GAAP) | $ | (20,419 | ) | $ | (215 | ) | |
Bad debt provision for troubled customers, net of recoveries | — | 736 | |||||
Impairment charges | 19,862 | — | |||||
Acquisition and reorganization expense (benefit), net | (75 | ) | 156 | ||||
Income (loss) before special items (non-GAAP) | $ | (632 | ) | $ | 677 | ||
Products and Systems: | |||||||
Loss from operations (GAAP) | $ | (1,680 | ) | $ | (1,328 | ) | |
Loss before special items (non-GAAP) | $ | (1,680 | ) | $ | (1,328 | ) | |
Corporate and Eliminations: | |||||||
Loss from operations (GAAP) | $ | (7,635 | ) | $ | (6,906 | ) | |
Reorganization and other costs | — | — | |||||
Acquisition and reorganization expense (benefit), net | 38 | 208 | |||||
Loss before special items (non-GAAP) | $ | (7,597 | ) | $ | (6,698 | ) | |
Loss from operations (GAAP) | $ | (111,228 | ) | $ | (4,396 | ) | |
Bad debt provision for troubled customers, net of recoveries | — | 5,491 | |||||
Impairment charges | 106,062 | — | |||||
Pension withdrawal expense | — | 534 | |||||
Acquisition and reorganization expense (benefit), net | (557 | ) | $ | 669 | |||
Income (loss) before special items (non-GAAP) | $ | (5,723 | ) | $ | 2,298 | ||
Unaudited Summary Cash Flow Information
(in thousands)
Three months ended | |||||||
Net cash provided by (used in): | |||||||
Operating activities | $ | 6,107 | $ | 8,177 | |||
Investing activities | (4,204 | ) | (5,001 | ) | |||
Financing activities | 492 | (3,949 | ) | ||||
Effect of exchange rate changes on cash | (384 | ) | (171 | ) | |||
Net change in cash and cash equivalents | $ | 2,011 | $ | (944 | ) | ||
Unaudited Reconciliation of
Net Cash Provided by Operating Activities (GAAP) to Free Cash Flow (non-GAAP)
(in thousands)
Three months ended | |||||||
Net cash provided by operating activities (GAAP) | $ | 6,107 | $ | 8,177 | |||
Less: | |||||||
Purchases of property, plant and equipment | (4,301 | ) | (5,637 | ) | |||
Purchases of intangible assets | (87 | ) | (88 | ) | |||
Free cash flow (non-GAAP) | $ | 1,719 | $ | 2,452 | |||
Unaudited Reconciliation of
Net Income (Loss) (GAAP) to Adjusted EBITDA (non-GAAP)
(in thousands)
Three months ended | |||||||
Net loss (GAAP) | $ | (98,522 | ) | $ | (5,286 | ) | |
Less: Net income (loss) attributable to non-controlling interests, net of taxes | (13 | ) | 7 | ||||
Net loss attributable to | $ | (98,509 | ) | $ | (5,293 | ) | |
Interest expense | 2,789 | 3,527 | |||||
Benefit for income taxes | (15,495 | ) | (2,637 | ) | |||
Depreciation and amortization | 9,467 | 9,668 | |||||
Share-based compensation expense | 1,345 | 1,356 | |||||
Impairment charges | 106,062 | — | |||||
Acquisition-related expense (benefit), net | (542 | ) | 453 | ||||
Reorganization and other related costs (benefit) | — | 216 | |||||
Pension withdrawal expense | — | 534 | |||||
Bad debt provision for troubled customers, net of recoveries | — | 5,491 | |||||
Foreign exchange (gain) loss | 303 | (630 | ) | ||||
Adjusted EBITDA (non-GAAP) | $ | 5,420 | $ | 12,685 | |||
Unaudited Reconciliation of
Net Loss (GAAP) and Diluted EPS (GAAP) to Net Loss Excluding Special Items (non-GAAP)
and Diluted EPS Excluding Special Items (non-GAAP)
(in thousands, except per share data)
Three months ended | |||||||
Net loss attributable to | $ | (98,509 | ) | $ | (5,293 | ) | |
Special items | 105,505 | 6,694 | |||||
Tax impact on special items | (13,842 | ) | (2,209 | ) | |||
Special items, net of tax | $ | 91,663 | $ | 4,485 | |||
Net loss attributable to | $ | (6,846 | ) | $ | (808 | ) | |
Diluted EPS (GAAP)(1) | $ | (3.40 | ) | $ | (0.19 | ) | |
Special items, net of tax | 3.16 | 0.16 | |||||
Diluted EPS Excluding Special Items (non-GAAP) | $ | (0.24 | ) | $ | (0.03 | ) |
_______________
(1) For the three months ended
Source: MISTRAS Group, Inc.