GlobeNewswire Inc | Aug 2, 2021 04:01PM EDT

August 02, 2021

Strong Top and Bottom-line Growth resulting in Solid Cash FlowRevenue up 42.8% to $177.7 million with Net Income of $5.9 million and diluted EPS of $0.20Adjusted EBITDA increased 96.5% to $22.6 million and Operating Cash Flow of $15.0 million

PRINCETON JUNCTION, N.J., Aug. 02, 2021 (GLOBE NEWSWIRE) -- MISTRAS Group, Inc. (MG: NYSE), a leading "one source" global multinational provider of integrated technology-enabled asset protection solutions, reported financial results for its second quarter and six months ended June 30, 2021.

Highlights of the Second Quarter 2021*

-- Revenue of $177.7 million, up 42.8% -- Gross profit of $55.3 million, up 34.4% -- Operating income of $11.4 million -- Net income of $5.9 million, and diluted earnings per share of $0.20 -- Adjusted EBITDA of $22.6 million, up 96.5% -- Operating cash flow of $15.0 million and Free Cash Flow of $8.5 million

Highlights of the First Half 2021*

-- Revenue of $331.4 million, up 16.7% -- Gross profit of $95.3 million; gross profit margin of 28.8% -- SG&A of $79.4 million, essentially flat despite the significant revenue increase year-over-year -- Revised Credit Agreement, combined with lower outstanding debt and leverage level, significantly reduces borrowing cost prospectively -- Total debt repayment of $8.5 million during the six months ended June 30, 2021

* All comparisons are consolidated and versus the equivalent prior year period, unless otherwise noted.

For the second quarter of 2021, consolidated revenue was $177.7 million, a 42.8% increase compared to $124.4 million in the prior year period. Second quarter revenue exceeded the Companys outlook driven by growth of over 50% in the Companys oil and gas market year-over-year, especially in turnarounds, which started later in the Spring and ran longer than historical norms. In addition, the Industrial, Power Generation and Transmission, Other Process Industries and Infrastructure markets were all also up year-over-year for the second quarter of 2021. The Aerospace market was down modestly, as gains in the space and defense sectors somewhat offset commercial aerospace sector weakness, although the aerospace and defense market in the International segment was up over the prior year period. The Services segments recovery in the commercial aerospace sector is underway, as there was sequential revenue growth for the past two quarters, and this is anticipated to continue into the second half of 2021.

Second quarter 2021 consolidated gross profit was up 34.4% to $55.3 million, an increase of $14.2 million. Although the quarterly gross profit margin of 31.1% was down from 33.1% a year ago, this was primarily a result of an increase in pass-through costs in the current year. On a year-to-date basis, gross profit margin has held constant at 28.8%. Despite the significant sequential increase in revenue in the second quarter of 2021, selling, general and administrative expenses were essentially flat sequentially with the first quarter of 2021. For the second quarter of 2021, the Company reported net income of $5.9 million or $0.20 per diluted share. Adjusted EBITDA was $22.6 million for the second quarter of 2021, which was an increase of 96.5% over the prior year period, representing a nearly 5-year quarterly high percentage of revenue of 12.7%.

Chief Executive Officer Dennis Bertolotti commented, "Our excellent results in the second quarter represent the first phase of what I expect to be a normalization of our end markets, led this quarter by a strong rebound in our Oil and Gas market. As anticipated, the second quarter benefitted from a late start to the Spring turnaround season, which consequently ran longer than usual. It now appears the overall Energy market is stabilizing, so we expect revenues from this market to grow over the course of the year. Gross profit was up significantly over last year due to the gain in volume. Gross profit margin in the quarter was up compared to full year fiscal 2020 margins, reflecting continued progress in improving our efficiencies and productivity. I am also pleased with our expense controls, which enabled us to hold overhead costs essentially flat in the second quarter, while significantly increasing revenue. The net result was one of our most profitable recent quarters with strong cash flows. We had anticipated this quarter would mark the start of a return to year over year growth, and we are well positioned to consistently drive improvements across the organization and to capitalize on the increasing demand for the valuable services that we provide as we build value for our shareholders.

Mr. Bertolotti additionally commented on the Companys progress with its growth initiatives and provided an outlook for the upcoming quarter, Our end markets are on the mend and we are prepared to capitalize on the increased demand we expect to see, especially from the Energy sector. This remains a large market that seems to have recovered more quickly than some of our other markets, and where we are gaining share and expanding our services, such as into mechanical work and data services.

I am also very pleased to announce the launching of MISTRAS OneSuite software platform, which serves as an ecosystem of integrated software and data service apps making integrity data as insight-driven, user-friendly, accessible, and actionable for the benefit of our customers. Our revised credit agreement, in combination with our lower debt and leverage level, will reduce our annual interest expense by almost $6 million per year commencing in the third quarter. And with its more accommodative terms, this will enable us to increase our investment in emerging technologies, such as OneSuite, as well as emerging markets such as renewable energy and private space flight, each of which could develop into significant markets. We are very pleased to be back in a growth mindset, with the second quarter 2021 potentially representing an important inflection point. Our goal was to return to a revenue run rate by the end of 2021, that would be approximating the rate exiting fiscal 2019, and with the second quarter 2021, we have achieved that goal. We are cautiously optimistic the third quarter 2021 will be another good growth quarter, assuming the COVID-19 pandemic does not have a material impact on our domestic and international operations. Our continued investment during the pandemic on our sales, marketing and intellectual property advantages, along with our focus on customers needs, is leading us to more cross over services, thereby adding value and allowing us to outperform our competition.

Segment Performance

Services segment second quarter revenues were $145.0 million, up 44.0%, primarily due to an increase in Energy segment revenues against a quarter that was more significantly impacted by COVID-19. For the second quarter, gross profit was $43.8 million, up 28.9% from a year ago on a 30.2% gross margin versus a gross margin of 33.7% in the year ago quarter.

International segment second quarter revenues were $32.0 million, up 49.7% from $21.3 million a year ago. The increase is reflects the depths of the COVID-19 pandemic in 2020 and a recovery in the energy markets this year. International segment second quarter gross profits were up 78.3%, as gross margins improved to 30.1% from 25.3% in the year ago period.

Products and Systems revenue were $3.2 million in the second quarter, down from $4.0 million a year ago, although second quarter gross profits rose 6.2% to $2.0 million from $1.8 million a year ago as the gross margin increased to 60.9% as compared to 45.9% in the year ago period.

The Company generated $18.1 million of cash flows from operating activities, and $7.3 million of free cash flow respectively, for the first six months of 2021, enabling the Company to pay down $8.5 million of total debt during the first half of 2021.

The Companys total debt was $211.2 million at June 30, 2021, compared to $220.2 million at December 31, 2020. Cash and cash equivalents decreased by approximately $5.8 million, from $25.8 million at December 31, 2020 to $19.9 million at June 30, 2021. Net debt (total debt less cash and cash equivalents) decreased by $3.2 million during the first half of 2021.

Outlook for the Third Quarter of 2021

The Companys business has been recovering over the past four 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 significantly impact the Companys second largest market, Aerospace. The Company expects revenue to increase in the low-to-mid teens percentage in the third quarter of 2021 over the prior year quarter. Adjusted EBITDA is expected to be higher in the third quarter of 2021 than the prior year period, but lower sequentially than the second quarter of 2021, due to substantially all of the remaining temporary cost reductions from 2020 being restored during the third quarter of 2021. This outlook is contingent on continuing macroeconomic stability, including i) continuing stabilization in crude oil markets, ii) a timely and effective COVID-19 vaccination rollout in 2021 and iii), no new or increased stay-in-place mandates resulting from an increased spread of COVID-19 variants, which would impact the Companys ability to work as a critical service provider.

Conference Call

In connection with this release, MISTRAS will hold a conference call on August 3, 2021 at 9 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 6969718 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. - One Source for Asset Protection Solutions

MISTRAS Group, Inc. (NYSE: MG) is a leading one source multinational provider of integrated technology-enabled asset protection solutions, helping to maximize the safety and operational uptime for civilizations most critical industrial and civil assets.

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 utilizing OneSuite serving as an ecosystem platform, pulling together all of MISTRAS software and data services capabilities, for the benefit of customers and their evolving digital requirements.

The companys 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 civilizations critical infrastructure, visit https://www.mistrasgroup.com/or contact Nestor S. Makarigakis, Group Vice President of Marketing 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 2020 Annual Report on Form 10-K dated March 16, 2021, 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, non-cash impairment charges and, if applicable, certain additional 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. 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 equivalent. 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.

Mistras Group,Inc. and SubsidiariesCondensed Consolidated Balance Sheets(in thousands, except share and per share data)

June 30, December 2021 31, 2020ASSETS (unaudited) Current Assets Cash and cash equivalents $ 19,942 $ 25,760 Accounts receivable, net 122,887 107,628 Inventories 12,836 13,134 Prepaid expenses and other current assets 15,843 16,066 Total current assets 171,508 162,588 Property, plant and equipment, net 91,898 92,681 Intangible assets, net 64,608 68,642 Goodwill 208,175 206,008 Deferred income taxes 2,553 2,069 Other assets 48,639 51,325 Total assets $ 587,381 $ 583,313 LIABILITIES AND EQUITY Current Liabilities Accounts payable $ 18,015 $ 14,240 Accrued expenses and other current liabilities 87,472 78,500 Current portion of long-term debt 17,835 10,678 Current portion of finance lease obligations 3,809 3,765 Income taxes payable 1,269 2,664 Total current liabilities 128,400 109,847 Long-term debt, net of current portion 193,332 209,538 Obligations under finance leases, net of current 10,594 11,115 portionDeferred income taxes 8,623 8,236 Other long-term liabilities 44,783 47,358 Total liabilities 385,732 386,094 Commitments and contingencies Equity Preferred stock, 10,000,000 shares authorized ? ? Common stock, $0.01 par value, 200,000,000 sharesauthorized, 29,431,879 and 29,234,143 shares issued 294 292 and outstandingAdditional paid-in capital 236,125 234,638 Accumulated Deficit (21,273 ) (21,848 )Accumulated other comprehensive loss (13,707 ) (16,061 )Total Mistras Group,Inc. stockholders? equity 201,439 197,021 Noncontrolling interests 210 198 Total equity 201,649 197,219 Total liabilities and equity $ 587,381 $ 583,313

Mistras Group,Inc. and SubsidiariesUnaudited Condensed Consolidated Statements of Income (Loss)(in thousands, except per share data)

Three Months Ended June Six Months Ended June 30, 30, 2021 2020 2021 2020 Revenue $ 177,677 $ 124,435 $ 331,412 $ 283,900 Cost of revenue 116,787 77,954 225,030 191,278 Depreciation 5,554 5,323 11,045 10,820 Gross profit 55,336 41,158 95,337 81,802 Selling, general and 39,719 37,607 79,358 79,165 administrative expensesImpairment charges ? ? ? 106,062 Legal settlement and ? ? 1,030 ? litigation charges, netResearch and engineering 620 708 1,347 1,532 Depreciation and 3,078 3,207 6,152 7,177 amortizationAcquisition-related 545 19 822 (523 )expense (benefit), netIncome (loss) from 11,374 (383 ) 6,628 (111,611 )operationsInterest expense 3,155 2,976 6,368 5,765 Income (loss) before 8,219 (3,359 ) 260 (117,376 )benefit for income taxesProvision (benefit) for 2,274 (694 ) (326 ) (16,189 )income taxesNet Income (loss) 5,945 (2,665 ) 586 (101,187 )Less: net income (loss)attributable to 8 (9 ) 11 (22 )noncontrolling interests,net of taxesNet Income (loss)attributable to Mistras $ 5,937 $ (2,656 ) $ 575 $ (101,165 )Group, Inc Earnings (loss) per common share:Basic $ 0.20 $ (0.09 ) $ 0.02 $ (3.49 )Diluted $ 0.20 $ (0.09 ) $ 0.02 $ (3.49 )Weighted-average common shares outstanding:Basic 29,602 29,085 29,514 29,024 Diluted 30,136 29,085 30,039 29,024

Mistras Group, Inc. and SubsidiariesUnaudited Operating Data by Segment(in thousands)

Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020Revenues Services $ 144,977 $ 100,677 $ 269,275 $ 229,550 International 31,951 21,343 59,599 50,410 Products and 3,203 4,002 6,191 6,814 SystemsCorporate and (2,454 ) (1,587 ) (3,653 ) (2,874 )eliminations $ 177,677 $ 124,435 $ 331,412 $ 283,900 Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020Gross profit Services $ 43,761 $ 33,940 $ 74,837 $ 66,177 International 9,615 5,392 17,240 13,415 Products and 1,952 1,838 3,233 2,206 SystemsCorporate and 8 (12 ) 27 4 eliminations $ 55,336 $ 41,158 $ 95,337 $ 81,802

Mistras Group, Inc. and SubsidiariesUnaudited Reconciliation ofSegment and Total Company Income from Operations (GAAP) to Income before Special Items (non-GAAP)(in thousands)

Three Months Ended June Six Months Ended June 30, 30, 2020 2021 2020 2021 2020Services: Income (loss) from $ 18,358 $ 10,837 $ 22,906 $ (70,657 )operations (GAAP)Impairment charges ? ? ? 86,200 Reorganization and other 26 45 97 67 costsLegal settlement and ? ? 1,650 ? litigation charges, netAcquisition-related 545 19 788 (523 )expense (benefit), netIncome before special $ 18,929 $ 10,901 $ 25,441 $ 15,087 items (non-GAAP)International: Income (loss) from $ 1,809 $ (1,937 ) $ 989 $ (22,356 )operations (GAAP)Impairment charges ? ? ? 19,862 Reorganization and other 30 366 126 292 costsIncome (loss) before $ 1,839 $ (1,571 ) $ 1,115 $ (2,202 )special items (non-GAAP)Products and Systems: Income (loss) from $ 209 $ (96 ) $ (372 ) $ (1,776 )operations (GAAP)Reorganization and other ? ? 27 ? costsIncome (loss) before $ 209 $ (96 ) $ (345 ) $ (1,776 )special items (non-GAAP)Corporate and Eliminations:Loss from operations $ (9,002 ) $ (9,187 ) $ (16,895 ) $ (16,822 )(GAAP)Loss on debt modification 277 645 277 645 Legal settlement and ? ? (620 ) $ ? litigation charges, netReorganization and other ? 86 ? 123 costsAcquisition-related ? ? 34 ? expense, netLoss before special items $ (8,725 ) $ (8,456 ) $ (17,204 ) $ (16,054 )(non-GAAP)Total Company: Income (loss) from $ 11,374 $ (383 ) $ 6,628 $ (111,611 )operations (GAAP)Impairment charges ? ? ? 106,062 Reorganization and other 56 497 250 482 costsLoss on debt modification 277 645 277 645 Legal settlement and ? ? 1,030 ? litigation charges, netAcquisition-related 545 19 822 (523 )expense (benefit), netIncome (loss) before $ 12,252 $ 778 $ 9,007 $ (4,945 )special items (non-GAAP)

Mistras Group, Inc. and SubsidiariesUnaudited Summary Cash Flow Information(in thousands)

Three Months Ended June Six Months Ended June 30, 30, 2020 2021 2020 2021 2020Net cash provided by (used in):Operating activities $ 14,978 $ 28,755 $ 18,126 $ 34,862 Investing activities (6,142 ) (3,044 ) (10,318 ) (7,248 )Financing activities (13,405 ) (20,829 ) (12,970 ) (20,337 )Effect of exchange 334 679 (656 ) 295 rate changes on cashNet change in cash and $ (4,235 ) $ 5,561 $ (5,818 ) $ 7,572 cash equivalents

Mistras Group, Inc. and SubsidiariesUnaudited Reconciliation of Net Cash Provided by Operating Activities (GAAP) to Free Cash Flow (non-GAAP)(in thousands)

Three Months Ended June 30, Six Months Ended June 30, 2020 2021 2020 2021 2020 Net cash providedby operating $ 14,978 $ 28,755 $ 18,126 $ 34,862 activities (GAAP)Less: Purchases ofproperty, plant (6,185 ) (3,142 ) (10,188 ) (7,443 )and equipmentPurchases of (268 ) (108 ) (618 ) (195 )intangible assetsFree cash flow $ 8,525 $ 25,505 $ 7,320 $ 27,224 (non-GAAP)

Mistras Group, Inc. and SubsidiariesUnaudited Reconciliation of Gross Debt (GAAP) to Net Debt (non-GAAP)(in thousands)

June 30, 2021 December 31, 2020 Current portion of long-term debt $ 17,835 $ 10,678 Long-term debt, net of current portion 193,332 209,538 Total Gross Debt (GAAP) 211,167 220,216 Less: Cash and cash equivalents (19,942 ) (25,760 )Total Net Debt (non-GAAP) $ 191,225 $ 194,456

Mistras Group, Inc. and SubsidiariesUnaudited Reconciliation of Net Income (Loss) (GAAP) to Adjusted EBITDA (non-GAAP)(in thousands)

Three Months Ended Six Months Ended June 30, June 30, 2021 2020 2021 2020 Net Income (loss) (GAAP) $ 5,945 $ (2,665 ) $ 586 $ (101,187 )Less: Net income (loss)attributable to 8 (9 ) 11 (22 )non-controlling interests,net of taxesNet Income (loss)attributable to Mistras $ 5,937 $ (2,656 ) $ 575 $ (101,165 )Group,Inc.Interest expense 3,155 2,976 6,368 5,765 Provision (benefit) for 2,274 (694 ) (326 ) (16,189 )income taxesDepreciation and amortization 8,632 8,530 17,197 17,997 Share-based compensation 1,202 1,395 2,464 2,740 expenseImpairment charges ? ? ? 106,062 Acquisition-related expense 545 19 822 (523 )(benefit), netReorganization and other 56 497 250 482 related costsLegal settlement and ? ? 1,030 ? litigation charges, netLoss on debt modification 277 645 277 645 Foreign exchange loss 474 764 932 1,067 Adjusted EBITDA (non-GAAP) $ 22,552 $ 11,476 $ 29,589 $ 16,881

Mistras Group, Inc. and SubsidiariesUnaudited Reconciliation ofNet 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)

Three Months Ended June Six Months Ended June 30, 30, 2020 2021 2020 2021 2020Net income (loss)attributable to $ 5,937 $ (2,656 ) $ 575 $ (101,165 )Mistras Group, Inc.(GAAP)Special items 878 1,161 2,379 106,666 Tax impact on (189 ) (191 ) (557 ) (14,041 )special itemsSpecial items, net $ 689 $ 970 $ 1,822 $ 92,625 of taxNet income (loss)attributable toMistras Group, Inc. $ 6,626 $ (1,686 ) $ 2,397 $ (8,540 )Excluding SpecialItems (non-GAAP) Diluted EPS (GAAP)^ $ 0.20 $ (0.09 ) $ 0.02 $ (3.49 )(1)Special items, net 0.02 0.03 0.02 3.19 of taxDiluted EPSExcluding Special $ 0.22 $ (0.06 ) $ 0.04 $ (0.30 )Items (non-GAAP)

_______________(1) For the three and six months ended June 30, 2020, 118 and 223 shares, respectively, related to restricted stock were excluded from the calculation of diluted EPS due to the net loss for the period.