MISTRAS Group Announces Second Quarter 2019 Results

Highlights of the Second Quarter 2019*

• Q2 revenue up 5% to $200.6 million
• Q2 gross profit up 9% to $60.1 million and gross margin expands 120 basis points to 29.9%
• Q2 operating income up 50% to $15.4 million
• Q2 net income up 24% to $7.4 million or $0.26 per diluted share
• Q2 non-GAAP net income per diluted share up 10% to $0.22
• Q2 adjusted EBITDA up 14% to $24.0 million
• Q2 cash from operations of $12.9 million and debt repayment of $17.5 million

*- All comparisons are consolidated and versus the equivalent prior year period.

PRINCETON JUNCTION, N.J., Aug. 05, 2019 (GLOBE NEWSWIRE) -- MISTRAS Group, Inc. (MG: NYSE), a leading "one source" global provider of technology-enabled asset protection solutions, reported financial results for its second quarter ended June 30, 2019.

For the second quarter of 2019 compared to the prior year period, consolidated revenues increased 5% to $200.6 million from $191.8 million, consolidated gross profit was up 9% to $60.1 million from $55.1 million, consolidated gross margin expanded by 120 basis points to 29.9% from 28.7%, and operating income increased 50% to $15.4 million from $10.3 million.

Chief Executive Officer Dennis Bertolotti stated, "I am very pleased with our second quarter performance and remain confident in our outlook for the balance of the year.  Results in the second quarter picked up as anticipated and were consistent with our expectations.  Top and bottom line results improved significantly, both year-over-year and sequentially, reflecting continued market share gains and our strategic focus on increasing returns.  Our management of working capital and cash generation program are also achieving significant progress, allowing us to pay down $17.5 million of debt in the second quarter alone, bringing the total year to date 2019 reduction to $20.1 million.”

“We are focused on building a business that is sustainable and responsive to the customers we serve, as our industry and its needs evolve.  Our redesigned business model is robust, with gross margins significantly improved both year-over-year and sequentially, due to a better sales mix as well as ongoing efficiency and productivity enhancements.  We continue to keep tight control on our overhead cost structure, even as we continue to invest in strengthening our business.  We remain a recognized industry leader today and are increasing our current market share, and look to continue expanding in the future.”

“In addition to strength in our core businesses, our recent acquisition is also performing as expected.  Onstream has performed well in 2019, with a significant increase in volume in the United States, where we have been successful in gaining traction with MISTRAS’ existing midstream relationships.  Onstream is a strong pillar of our overall growth strategy focused on pipeline integrity”

Our specific performance by certain segments during the quarter was as follows:

Services segment second quarter revenues increased by $13.5 million or 9%.  This improvement in the top line was driven by acquisition expansion coupled with organic growth.  Services segment gross profit margins improved 210 basis points in the second quarter to 29.3% from 27.2% due to favorable operating leverage.

International segment second quarter revenues decreased by $4.0 million or 10%, primarily due to unfavorable currency translation and the run-off of German staff leasing contracts.  Lower revenue led to a slight decrease in the second quarter International segment gross profit margin compared to the year ago quarter.

The Company generated $21.1 million of cash flows from operating activities and $9.1 million of free cash flow in the first half of 2019, compared to $20.1 million and $8.9 million, respectively, in the prior year period.

Adjusted EBITDA was $24.0 million for the second quarter of 2019 compared with $21.1 million in the prior year, an increase of 14% year over year.

The Company’s net debt (total debt less cash and cash equivalents of $12.5 million) was $257.9 million at June 30, 2019, down from $265.1 million at December 31, 2018. The Company’s gross debt has decreased by $20.2 million during 2019, to $270.4 million at June 30, 2019 from $290.6 million at December 31, 2018, due to repayments made by the Company against outstanding borrowings.

In the second quarter of 2019, the Company recorded a recovery of bad debts of $2.7 million on a pre-tax basis.

Guidance for 2019

The Company is reaffirming its guidance for 2019. The Company’s outlook remains as follows:

• Total revenues are expected to be between $765 million to $785 million;
• Adjusted EBITDA is expected to be between $90 million and $93 million;
• Capital expenditures are expected to be up to $25 million; and
• Free cash flow is expected to be between $42 million to $45 million.

Mr. Bertolotti concluded, "Our second quarter organic revenue growth, market share gains, expanding margins and improved bottom line results were consistent with our expectations and validate that we are executing to our plan for 2019.  Our sequentially improving performance and momentum into the third quarter gives me confidence that we will achieve our outlook for the full year.”

Conference Call
In connection with this release, MISTRAS will hold a conference call on August 6, 2019 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 dial 1-844-832-7227 and use confirmation code 9961057 when prompted. The International dial-in number is 1-224-633-1529.  Those who wish to listen to the call later can access an archived copy of the conference call at the MISTRAS Website.

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 and commercial 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 - 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 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 2018 Annual Report on Form 10-K dated March 15, 2019, 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 the press release, the Company also uses the term "non-GAAP Net Income,", which is GAAP net income adjusted for certain items management believes are unusual and non-recurring.  In the tables attached is a table reconciling "Net Income (Loss) (GAAP)" to "Net Income Excluding Special Items (non-GAAP), which reconciles the non-GAAP amount to a GAAP measurement.  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, less cash and cash equivalents.

Mistras Group, Inc. and Subsidiaries
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 Media Contact: Nestor S. Makarigakis, Group Director of Marketing Communications, marcom@mistrasgroup.com, 1 (609) 716-4000