Third Consecutive Year of over 100 Basis Point Expansion of Annual Gross Profit Margin to 30.1%
Operating Cash Flow Increases 39.6% in Fourth Quarter, Up 14.7% for Full Year to
Debt paydown of
Company Well Positioned for Strong Fiscal 2021 Rebound
Highlights of the Fourth Quarter 2020*
- Revenue of
$160.8 million , a decrease of 10.2% year-over-year, but an increase of 8.7% sequentially - Gross profit margin of 30.7%, a 240 basis point improvement
- SG&A expenses of
$40.7 million , a decrease of$1.9 million or 4.6% - Income from operations of
$4.7 million , an increase of$2.3 million or 99.3% - Operating cash flow of
$26.0 million , an increase of$7.4 million or 39.6% - Free cash flow of
$21.2 million , an increase of$7.5 million or 55.0%
Highlights for the Full Year 2020*
- Revenue of
$592.6 million , a decrease of 20.8% - Gross profit margin of 30.1%, a 110 basis point improvement
- SG&A expense of
$156.9 million , a reduction of$11.7 million , or 6.9% - Operating cash flow of
$67.8 million , an increase of$8.7 million or 14.7% - Free cash flow of
$52.0 million , an increase of$15.8 million or 43.8% - Full year debt repayment of
$36.0 million , resulting in a total debt reduction of 13.5%
* All comparisons are consolidated and versus the equivalent prior year period, unless otherwise noted.
For the fourth quarter of 2020, consolidated revenue was
Strong Cash Flow Resulting in Net Debt Reduced Over
The Company consistently generated significant operating cash flow and free cash flow throughout 2020.
The Company generated
Chief Executive Officer
As a result of our steady improvement, we have been able to leverage our asset-light business model to generate strong cash flows, with free cash flow of just over
Segment Performance:
Services segment fourth quarter revenues were
International segment fourth quarter revenues were
Products and Services revenue were
The Company generated
The Company’s net debt (total debt less cash and cash equivalents) was
Outlook for 2021
The Company’s business has been recovering over the past two quarters, from the low experienced in the second quarter of 2020, when the effect of COVID-19 was most impactful to its financial results. Although energy prices and demand are currently stable, the ongoing COVID-19 pandemic continues to impact the Company’s two largest markets, Oil & Gas and Aerospace. The Company expects annual revenue for 2021 to be higher than in 2020, however, first quarter 2021 revenues will decline modestly compared with those of prior year, due to a full quarter’s impact of COVID-19 in 2021 as compared to a partial month impact in 2020. Moreover, first quarter 2021 revenue will be lower sequentially compared with the fourth quarter of 2020, due to typical seasonality patterns. The Company is optimistic that its revenue will continue to rebound once it reaches the second quarter of fiscal 2021, and therefore expects that revenue will commence year-on-year improvements beginning in the second quarter of 2021. The Company expects that year-on-year Adjusted EBITDA improvements will commence beginning in the first quarter of 2021. This outlook is contingent on continuing macroeconomic stability, including i) continuing stabilization in crude oil markets, ii) a timely and effective implementation of COVID-19 vaccinations in 2021 and iii), no new or increased stay-in-place mandates resulting from an increased spread of COVID-19, which would impact the Company’s ability to work as a critical service provider.
Conference Call
In connection with this release, MISTRAS will hold a conference call on
About
Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, and a decades-long legacy of industry leadership, MISTRAS leads clients in the oil and gas, aerospace and defense, power generation, civil infrastructure, and manufacturing industries towards achieving and maintaining operational excellence. By supporting these organizations that help fuel our vehicles and power our society; inspecting components that are trusted for commercial, defense, and space craft; and building real-time monitoring equipment to enable safe travel across bridges, MISTRAS helps the world at large.
MISTRAS enhances value for its clients by integrating asset protection throughout supply chains and centralizing integrity data through a suite of Industrial IoT-connected digital software and monitoring solutions. The company’s core capabilities also include non-destructive testing (“NDT”) field inspections enhanced by advanced robotics, laboratory quality control and assurance testing, sensing technologies and NDT equipment, asset and mechanical integrity engineering services, and light mechanical maintenance and access services.
For more information about how MISTRAS helps protect civilization’s critical infrastructure, visit https://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 2020 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
Unaudited Consolidated Balance Sheets
(in thousands, except share and per share data)
2020 | 2019 | ||||||
ASSETS | |||||||
Current Assets | |||||||
Cash and cash equivalents | $ | 25,760 | $ | 15,016 | |||
Accounts receivable, net | 107,628 | 135,997 | |||||
Inventories | 13,134 | 13,413 | |||||
Prepaid expenses and other current assets | 16,066 | 14,729 | |||||
Total current assets | 162,588 | 179,155 | |||||
Property, plant and equipment, net | 92,681 | 98,607 | |||||
Intangible assets, net | 68,642 | 109,537 | |||||
206,008 | 282,410 | ||||||
Deferred income taxes | 2,069 | 1,786 | |||||
Other assets | 51,325 | 48,383 | |||||
Total Assets | $ | 583,313 | $ | 719,878 | |||
LIABILITIES AND EQUITY | |||||||
Current Liabilities | |||||||
Accounts payable | $ | 14,240 | $ | 15,033 | |||
Accrued expenses and other current liabilities | 78,500 | 81,389 | |||||
Current portion of long-term debt | 10,678 | 6,593 | |||||
Current portion of finance lease obligations | 3,765 | 4,131 | |||||
Income taxes payable | 2,664 | 2,094 | |||||
Total current liabilities | 109,847 | 109,240 | |||||
Long-term debt, net of current portion | 209,538 | 248,120 | |||||
Obligations under finance leases, net of current portion | 11,115 | 13,043 | |||||
Deferred income taxes | 8,236 | 21,290 | |||||
Other long-term liabilities | 47,358 | 42,163 | |||||
Total Liabilities | $ | 386,094 | $ | 433,856 | |||
Commitments and contingencies | |||||||
Equity | |||||||
Preferred stock, 10,000,000 shares authorized | — | — | |||||
Common stock, | 292 | 289 | |||||
Additional paid-in capital | 234,638 | 229,205 | |||||
Retained earnings (deficit) | (21,848 | ) | 77,613 | ||||
Accumulated other comprehensive loss | (16,061 | ) | (21,285 | ) | |||
197,021 | 285,822 | ||||||
Non-controlling interests | 198 | 200 | |||||
Total Equity | 197,219 | 286,022 | |||||
Total Liabilities and Equity | $ | 583,313 | $ | 719,878 |
Unaudited Consolidated Statements of Income (Loss)
(in thousands, except per share data)
For the quarter ended | For the year ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenue | $ | 160,777 | $ | 178,991 | $ | 592,571 | $ | 748,586 | |||||||
Cost of revenue | 105,647 | 122,768 | 391,855 | 509,489 | |||||||||||
Depreciation | 5,785 | 5,640 | 22,185 | 21,800 | |||||||||||
Gross profit | 49,345 | 50,583 | 178,531 | 217,297 | |||||||||||
Selling, general and administrative expenses | 40,659 | 42,607 | 156,937 | 168,621 | |||||||||||
Bad debt provision for troubled customers, net of recoveries | — | 240 | — | 3,038 | |||||||||||
Impairment charges | — | — | 106,062 | — | |||||||||||
Pension withdrawal expense | — | 359 | — | 848 | |||||||||||
Research and engineering | 722 | 784 | 2,892 | 3,045 | |||||||||||
Depreciation and amortization | 3,161 | 4,353 | 13,520 | 16,733 | |||||||||||
Acquisition-related expense, net | 151 | (95 | ) | 337 | 875 | ||||||||||
Income (loss) from operations | 4,652 | 2,335 | (101,217 | ) | 24,137 | ||||||||||
Interest expense | 3,545 | 3,633 | 12,955 | 13,698 | |||||||||||
Income (loss) before provision for income taxes | 1,107 | (1,298 | ) | (114,172 | ) | 10,439 | |||||||||
Provision (benefit) for income taxes | 939 | (2,134 | ) | (14,706 | ) | 4,359 | |||||||||
Net income (loss) | 168 | 836 | (99,466 | ) | 6,080 | ||||||||||
Less: net income (loss) attributable to noncontrolling interests, net of taxes | (13 | ) | 7 | (5 | ) | 20 | |||||||||
Net income (loss) attributable to | $ | 181 | $ | 829 | $ | (99,461 | ) | $ | 6,060 | ||||||
Earnings (loss) per common share | |||||||||||||||
Basic | $ | 0.01 | $ | 0.03 | $ | (3.41 | ) | $ | 0.21 | ||||||
Diluted | $ | 0.01 | $ | 0.03 | $ | (3.41 | ) | $ | 0.21 | ||||||
Weighted average common shares outstanding: | |||||||||||||||
Basic | 29,330 | 28,923 | 29,147 | 28,740 | |||||||||||
Diluted | 29,680 | 29,125 | 29,147 | 29,046 |
Unaudited Operating Data by Segment
(in thousands)
For the quarter ended | For the year ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenues | |||||||||||||||
Services | $ | 126,893 | $ | 141,051 | $ | 476,164 | $ | 595,130 | |||||||
International | 30,669 | 34,969 | 107,556 | 144,271 | |||||||||||
Products and Systems | 5,703 | 5,362 | 16,449 | 18,583 | |||||||||||
Corporate and eliminations | (2,488 | ) | (2,391 | ) | (7,598 | ) | (9,398 | ) | |||||||
$ | 160,777 | $ | 178,991 | $ | 592,571 | $ | 748,586 | ||||||||
For the quarter ended | For the year ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Gross profit | |||||||||||||||
Services | $ | 37,304 | $ | 37,610 | $ | 141,084 | $ | 165,513 | |||||||
International | 9,434 | 10,032 | 31,046 | 43,145 | |||||||||||
Products and Systems | 2,992 | 2,835 | 6,826 | 8,639 | |||||||||||
Corporate and eliminations | (385 | ) | 106 | (425 | ) | — | |||||||||
$ | 49,345 | $ | 50,583 | $ | 178,531 | $ | 217,297 |
Unaudited Reconciliation of
Segment and Total Company Income from Operations (GAAP) to Income before Special Items (non-GAAP)
(in thousands)
For the quarter ended | For the year ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Services: | |||||||||||||||
Income (loss) from operations (GAAP) | $ | 12,836 | $ | 8,878 | $ | (44,222 | ) | $ | 49,593 | ||||||
Impairment charges | — | — | 86,200 | — | |||||||||||
Pension withdrawal expense | — | 359 | — | 848 | |||||||||||
Bad debt provision for troubled customers, net of recoveries | — | 240 | — | 3,018 | |||||||||||
Reorganization and other costs | 16 | 100 | 141 | 302 | |||||||||||
Legal settlement and litigation charges, net | 441 | — | 81 | — | |||||||||||
Acquisition-related expense (benefit), net | 151 | (36 | ) | 337 | 541 | ||||||||||
Income before special items (unaudited, non-GAAP) | $ | 13,444 | $ | 9,541 | $ | 42,537 | $ | 54,302 | |||||||
International: | |||||||||||||||
Income (loss) from operations (GAAP) | $ | 567 | $ | 701 | $ | (21,855 | ) | $ | 5,856 | ||||||
Impairment charges | — | — | 19,862 | — | |||||||||||
Reorganization and other costs | 977 | (89 | ) | 1,290 | 266 | ||||||||||
Bad debt provision for troubled customers, net of recoveries | — | — | — | 20 | |||||||||||
Income (loss) before special items (unaudited, non-GAAP) | $ | 1,544 | $ | 612 | $ | (703 | ) | $ | 6,142 | ||||||
Products and Systems: | |||||||||||||||
Loss from operations (GAAP) | $ | 1,000 | $ | 695 | $ | (936 | ) | $ | (529 | ) | |||||
Reorganization and other costs | — | — | 5 | 218 | |||||||||||
Income (loss) before special items (non-GAAP) | $ | 1,000 | $ | 695 | $ | (931 | ) | $ | (311 | ) | |||||
Corporate and Eliminations: | |||||||||||||||
Loss from operations (GAAP) | $ | (9,751 | ) | $ | (7,939 | ) | $ | (34,204 | ) | $ | (30,783 | ) | |||
Legal settlement and litigation charges, net | (301 | ) | — | (301 | ) | — | |||||||||
Loss on debt modification | — | — | 645 | — | |||||||||||
Reorganization and other costs | 40 | — | 177 | 104 | |||||||||||
Acquisition-related expense (benefit), net | — | (59 | ) | — | 334 | ||||||||||
Loss before special items (unaudited, non-GAAP) | $ | (10,012 | ) | $ | (7,998 | ) | $ | (33,683 | ) | $ | (30,345 | ) | |||
Income (loss) from operations (GAAP) | $ | 4,652 | $ | 2,335 | $ | (101,217 | ) | $ | 24,137 | ||||||
Pension withdrawal expense | — | 359 | — | 848 | |||||||||||
Impairment charges | — | — | 106,062 | — | |||||||||||
Bad debt provision for troubled customers, net of recoveries | — | 240 | — | 3,038 | |||||||||||
Reorganization and other costs | 1,033 | 11 | 1,613 | 890 | |||||||||||
Legal settlement and litigation charges, net | 140 | — | (220 | ) | — | ||||||||||
Loss on debt modification | — | — | 645 | — | |||||||||||
Acquisition-related expense (benefit), net | 151 | (95 | ) | 337 | 875 | ||||||||||
Income before special items (unaudited, non-GAAP) | $ | 5,976 | $ | 2,850 | $ | 7,220 | $ | 29,788 |
Unaudited Summary Cash Flow Information
(in thousands)
For the quarter ended | For the year ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net cash provided by (used in): | |||||||||||||||
Operating activities | $ | 26,011 | $ | 18,634 | $ | 67,802 | $ | 59,110 | |||||||
Investing activities | (4,411 | ) | (3,652 | ) | (14,969 | ) | (25,280 | ) | |||||||
Financing activities | (19,092 | ) | (14,616 | ) | (44,169 | ) | (44,137 | ) | |||||||
Effect of exchange rate changes on cash | 1,136 | 278 | 2,080 | (221 | ) | ||||||||||
Net change in cash and cash equivalents | $ | 3,644 | $ | 644 | $ | 10,744 | $ | (10,528 | ) |
Unaudited Reconciliation of
Net Cash Provided by Operating Activities (GAAP) to Free Cash Flow (non-GAAP)
(in thousands)
For the quarter ended | For the year ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net cash provided by operating activities (GAAP) | $ | 26,011 | $ | 18,634 | $ | 67,802 | $ | 59,110 | |||||||
Less: | |||||||||||||||
Purchases of property, plant and equipment | (4,720 | ) | (4,772 | ) | (15,396 | ) | (22,047 | ) | |||||||
Purchases of intangible assets | (65 | ) | (169 | ) | (376 | ) | (873 | ) | |||||||
Free cash flow (non-GAAP) | $ | 21,226 | $ | 13,693 | $ | 52,030 | $ | 36,190 |
Unaudited Reconciliation of
Net Income (Loss) (GAAP) to Adjusted EBITDA (non-GAAP)
(in thousands)
For the quarter ended | For the year ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net income (loss) | $ | 168 | $ | 836 | $ | (99,466 | ) | $ | 6,080 | ||||||
Less: Net income (loss) attributable to noncontrolling interests, net of taxes | (13 | ) | 7 | (5 | ) | 20 | |||||||||
Net income (loss) attributable to | $ | 181 | $ | 829 | $ | (99,461 | ) | $ | 6,060 | ||||||
Interest expense | 3,545 | 3,633 | 12,955 | 13,698 | |||||||||||
(Benefit) provision for income taxes | 939 | (2,134 | ) | (14,706 | ) | 4,359 | |||||||||
Depreciation and amortization | 8,946 | 9,993 | 35,705 | 38,533 | |||||||||||
Share-based compensation expense | 1,539 | 1,174 | 5,851 | 5,766 | |||||||||||
Legal settlement and litigation charges, net | 140 | — | (220 | ) | — | ||||||||||
Pension withdrawal expense | — | 359 | — | 848 | |||||||||||
Loss on debt modification | — | — | 645 | — | |||||||||||
Impairment charges | — | — | 106,062 | — | |||||||||||
Acquisition-related expense (benefit), net | 151 | (95 | ) | 337 | 875 | ||||||||||
Reorganization and other costs | 1,033 | 11 | 1,613 | 890 | |||||||||||
Bad debt provision for troubled customers, net of recoveries | — | 240 | — | 3,038 | |||||||||||
Foreign exchange (gain) loss | 1,135 | 466 | 3,100 | (535 | ) | ||||||||||
Adjusted EBITDA | $ | 17,609 | $ | 14,476 | $ | 51,881 | $ | 73,532 |
Unaudited Reconciliation of
Net Income (Loss) (GAAP) and Diluted EPS (GAAP) to Net Income (Loss) Excluding Special Items (non-GAAP)
and Diluted EPS Excluding Special Items (non-GAAP)
(tabular dollars in thousands, except per share data)
For the quarter ended | For the year ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Net income (loss) attributable to | $ | 181 | $ | 829 | $ | (99,461 | ) | $ | 6,060 | ||||||
Special items | 1,324 | 515 | 108,437 | 5,651 | |||||||||||
Tax impact on special items | (242 | ) | 47 | (14,475 | ) | (1,260 | ) | ||||||||
Special items, net of tax | $ | 1,082 | $ | 562 | $ | 93,962 | $ | 4,391 | |||||||
Net income (loss) attributable to | $ | 1,263 | $ | 1,391 | $ | (5,499 | ) | $ | 10,451 | ||||||
Diluted EPS (GAAP) | $ | 0.01 | $ | 0.03 | $ | (3.41 | ) | $ | 0.21 | ||||||
Special items, net of tax | 0.04 | 0.02 | 3.22 | 0.15 | |||||||||||
Diluted EPS Excluding Special Items (non-GAAP) | $ | 0.05 | $ | 0.05 | $ | (0.19 | ) | $ | 0.36 |
Source: MISTRAS Group, Inc.