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MISTRAS Announces Third Quarter 2023 Results

Continued Revenue Growth in Commercial Aerospace and Data Analytical Solutions Markets

Further Reductions in Quarterly Selling, General and Administrative expenses

Provides Update on Project Phoenix and Preliminary Anticipated Impact on 2024 Outlook

PRINCETON JUNCTION, N.J., Nov. 02, 2023 (GLOBE NEWSWIRE) -- MISTRAS Group, Inc. (MG: NYSE), a leading "one source" multinational provider of integrated technology-enabled asset protection solutions, reported financial results for its third quarter and nine months ended September 30, 2023.

Highlights of the Third Quarter 2023*

  • Revenue of $179.4 million, a 0.5% increase
  • Gross profit of $54.4 million, with gross profit margin of 30.3%, a 20 basis points increase
  • Non-cash goodwill impairment charge of $13.8 million in International segment triggered by macroeconomic factors in Europe
  • Net loss of $10.3 million, reflecting the goodwill impairment charge and reorganization and other related costs, including the associated tax impacts, incurred in the quarter
  • Adjusted EBITDA (non-GAAP) up 12.5% to $20.9 million

Highlights of the Year-to-Date 2023*

  • Revenue of $523.4 million, a 0.8% increase
  • Gross profit of $150.2 million, with gross profit margin of 28.7%, a 30 basis point increase
  • Net loss of $15.0 million, reflecting the goodwill impairment charge and reorganization and other related costs, including the associated tax impacts, incurred in the year
  • Adjusted EBITDA up 9.9% to $46.6 million

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

For the third quarter of 2023, consolidated revenue was $179.4 million, a 0.5% increase. Third quarter revenue reflects growth in all sub-categories of Oil & Gas, in addition to continued strength in the Company’s key growth areas, particularly Commercial Aerospace and Data Analytical Solutions markets offset by softness in the Power Generation & Transmission and Other Process Industries due to project timing.

Third quarter 2023 gross profit increased 1.1% with gross profit margin expanding 20 basis points, as compared to the prior year period. The improvement in gross margin to 30.3% was primarily due to a favorable sales mix and lower healthcare expenses. Gross profit margin was up 210 basis points sequentially from the second quarter of 2023, driven by an improved revenue mix.

Selling, general and administrative expenses (“SG&A”) in the third quarter of 2023 were $39.5 million, down 3.0% compared to $40.8 million in the third quarter of 2022 and were also down 4.7% sequentially from the second quarter of 2023, as a result of the ongoing implementation of Project Phoenix. Year to date SG&A is essentially flat with the prior year period and the Company expects further SG&A reduction in the fourth quarter of 2023 due to Project Phoenix related cost actions which have been incorporated into the Company’s updated 2023 guidance ranges discussed below.

The Company reported a GAAP net loss of $10.3 million, or $(0.34) per diluted share in the third quarter of 2023, which was primarily due to a non-cash impairment charge of $13.8 million recorded within the Company’s International Segment and reorganization charges of $2.7 million incurred in the quarter. Net income excluding special items (non-GAAP) was $5.6 million or $0.18 per diluted share.

Adjusted EBITDA was $20.9 million in the third quarter of 2023 compared to $18.6 million in the prior year period, an increase of 12.5%. Year to date Adjusted EBITDA was $46.6 million compared to $42.4 million in the prior year period, an increase of 9.9% primarily attributable to a favorable change in sales mix and overhead cost containment. Manny N. Stamatakis, Chairman of the Board and Interim President & CEO, stated, “I am pleased to be presenting the Company’s results and outlook to you for this quarter. I sincerely appreciate the support and patience that our long-term shareholders have shown to MISTRAS. Our results for the third quarter of 2023 were largely in line with our expectations for revenue and Adjusted EBITDA.”

Mr. Stamatakis continued, “With respect to Project Phoenix, we have completed the validation of a majority of the initial Project Phoenix opportunities. As previously disclosed, we completed our transformation of the Products and Systems Segment in September. We subsequently implemented additional initiatives in the month of October related to streamlining our North American operations and improvements related to pricing actions. The implementation of these transformations to our organization structure are expected to yield a projected annualized proforma cost savings of $24 million in 2024, of which an approximate $9 million overhead reduction is expected to be achieved in 2023 with an incremental $15 million expected be realized in 2024. These initiatives also provide a benefit to the bottom line and provide additional cash flow to invest into our higher growth sectors, such as Data Analytical Solutions.”

Edward Prajzner, Senior Executive Vice President and Chief Financial Officer commented “I also share Manny’s optimism for the future of MISTRAS. Our target related to Project Phoenix is to achieve a 15% reduction in global non-billable headcount, without any impact on our ability to manage our operations and service customers. With the ongoing implementation of our Project Phoenix initiatives, and our focus on lowering SG&A, improving free cash flow, and reinvigorating and refining our Go-to-Market plans and revenue strategies, we believe this will lead to improved overall performance enabling us to achieve meaningful profitable growth in 2024.”

Mr. Stamatakis concluded, “I am pleased to be leading the Company at this crucial juncture, supported by an invigorated senior leadership team. Our Board of Directors and I are optimistic for the future of the Company and believe that the implementation of these initiatives will lead to an increase in shareholder value.”

Refer to the Company’s press release associated with Project Phoenix released on November 2, 2023 for additional details associated with this important initiative.

Performance by certain segments during the third quarter was as follows:

North America segment (Referred to as “Services” in prior filings) third quarter 2023 revenue was $148.8 million, down 2.6% from $152.8 million in the prior year quarter. The revenue decline was primarily due to a decrease in workload under a defense contract and decreases in Power Generation and Other Process Industries due to project timing, which offset the strong growth achieved in our West Penn Aerospace lab, OnStream Pipeline InLine Inspection (“ILI”) business, and other Data Analytical Solutions related offerings. For the third quarter of 2023, gross profit was $44.8 million, compared to $44.9 million in the prior year period. Gross profit margin was 30.1% for the third quarter of 2023, a 70 basis point increase from 29.4% in the third quarter of the prior year. This increase was primarily due to improved sales mix in the current year period and lower healthcare expenses.

International segment third quarter 2023 revenue was $31.0 million, up 20.6% from $25.7 million in the prior year quarter inclusive of favorable foreign currency exchange. This revenue growth was primarily due to increased turnaround projects and higher activity levels than in the prior year comparable quarter in addition to strong commercial aerospace growth. International segment third quarter 2023 gross profit grew by 10.2% with gross margin of 27.4%, compared to 29.9% in the prior year period, a 250-basis point decrease, primarily attributable to inflationary pressures including rising energy costs and incremental subcontractor costs.

During the third quarter of 2023, a triggering event was identified within the Company's reporting units within the International segment due to decreased gross margin in the current period as a result of inflationary pressures and rising energy costs impacting the International reporting units' operations. As a result, the Company performed an interim quantitative goodwill impairment test. The decreased gross margins, in addition to increased interest rates in the current period, contributed to an unfavorable decrease in the reporting unit’s value. Based upon the results of the test, the Company recorded an impairment charge of $13.8 million within the International Segment reporting units.

Cash Flow and Balance Sheet

The Company’s net cash provided by operating activities was $10.7 million for the first nine months of 2023, compared to $10.5 million in the prior year period. Free cash flow, a non-GAAP financial measure, was negative $5.6 million for the first nine months of 2023, compared to a positive $0.9 million in the prior year period. This decrease was primarily attributable to an increase in capital expenditures during the current year and higher than normal accounts receivable balances as of September 30, 2023 due to the timing of projects in the third quarter of 2023. Capital expenditures increased by $6.6 million in the first nine months of 2023 compared to the prior year period, reflecting the Company’s increasing investments in its shop laboratories and Data Analytical Solutions offerings to foster revenue growth.

The Company’s gross debt was $193.9 million as of September 30, 2023, compared to $191.3 million as of December 31, 2022 and $183.7 million as of June 30, 2023. The increase in gross debt during the period was attributable to the cash flow dynamics described above. The Company’s net debt, a non-GAAP financial measure, was $181.1 million as of September 30, 2023.

Reorganization and Other

For the third quarter of 2023, the Company recorded $2.7 million of reorganization costs related to on-going efficiency and productivity initiatives, primarily related to overhead cost savings achieved via Project Phoenix. For the quarter, these charges included professional fees and certain restructuring charges associated with changes made in the Company’s organizational structure. For the nine months ended September 30, 2023, the Company recorded $6.0 million of total reorganization costs.

Outlook 2023
The Company is lowering its guidance ranges for the full year 2023. Revenue is now expected to be between $695 and $705 million (from $700-$720 million previously) and Adjusted EBITDA is now expected to be between $65 and $68 million (from $68 million to $71 million previously). These reductions in Revenue and Adjusted EBITDA are due to lower than previously forecasted fourth quarter results.

Free Cash Flow guidance is being lowered to be between $7 and $10 million (from $23-$25 million previously, excluding certain cash expenses to achieve cost savings). The reduction in Free Cash Flow guidance was due to an increase in accounts receivable, due to timing of projects in the third quarter and the incurrence of certain cash expenses to achieve Project Phoenix cost savings.

Preliminary 2024 Outlook
The Company anticipates a modest single digit revenue growth in 2024, yet a significant expansion in Adjusted EBITDA, attributable to operating leverage and the ongoing benefits of Project Phoenix. We believe this will result in an all-time high in Adjusted EBITDA in fiscal 2024 of greater than $88 million. This outlook includes approximately $20 million in incremental benefit from Project Phoenix in 2024.

Conference Call
In connection with this release, MISTRAS will hold a conference call on November 3, 2023, at 9:00 a.m. (Eastern).

To listen to the live webcast of the conference call, visit the Investor Relations section of MISTRAS Group’s website at www.mistrasgroup.com

Note there is a new process to participate in the live question and answer session. Individuals wishing to participate may preregister at: https://register.vevent.com/register/BI1d9e10d7ee7d412d8d7ff829b244567f

Upon registering, a dial-in number and unique PIN will be provided to join the conference call. Following the conference call, an archived webcast of the event will be available for one year by visiting the Investor Relations section of MISTRAS Group’s 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 civilization’s most critical industrial and civil assets.

Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, strong commitment to Environmental, Social, and Governance (ESG) initiatives, and a decades-long legacy of industry leadership, MISTRAS leads clients in the oil and gas, aerospace and defense, renewable and nonrenewable power, civil infrastructure, and manufacturing industries towards achieving operational and environmental 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; building real-time monitoring equipment to enable safe travel across bridges; and helping to propel sustainability, 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 www.mistrasgroup.com or contact Nestor S. Makarigakis, Group Vice President of Marketing & Communications at marcom@mistrasgroup.com.

Forward-Looking and Cautionary Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include, but are not limited to, our earnings guidance, cost savings and other benefits we expect to realize from Project Phoenix and actions that we expect or seek to take in furtherance of our strategies and activities to enhance our financial results and future growth. 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 2022 Annual Report on Form 10-K dated March 15, 2023, 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 Financial 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 are not prepared in accordance with GAAP and 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 trends and forward-looking information. The term "Adjusted EBITDA" used in this release is a financial measurement not calculated in accordance with GAAP and is defined by the Company as net income attributable to MISTRAS Group, Inc. plus: interest expense, provision for income taxes, depreciation and amortization, share-based compensation expense, 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, reorganization and related charges and, if applicable, certain additional special items which are noted. A reconciliation of Adjusted EBITDA to Net Income (loss) as computed under GAAP is set forth in a table attached to this press release. The Company also uses the term “net debt”, a non-GAAP financial measure defined as the sum of the current and long-term portions of long-term debt, less cash and cash equivalents and the term “free cash flow”, a non-GAAP measure the Company defines as cash provided by operating activities less capital expenditures (which is classified as an investing activity). A reconciliation of these non-GAAP financial measures to GAAP are also set forth in tables attached to this press release. In the tables attached is also a table reconciling “Segment and Total Company Income (Loss) from Operations (GAAP) to Income (Loss) from Operations before Special Items (non-GAAP)", “Net Loss (GAAP) and Diluted EPS (GAAP) to Net Loss Excluding Special Items (non-GAAP) and Diluted EPS Excluding Special Items (non-GAAP)” which reconciles the non-GAAP amounts to GAAP measures. Each of these non-GAAP financial measures has material limitations as a performance or liquidity measure and should not be considered alternatives to net income (loss) or any other measures derived in accordance with GAAP. Because Income (loss) from operations before special items and other non-GAAP financial measures used in this press release may not be calculated in the same manner by all companies, these measures may not be comparable to other similarly titled measures used by other companies.


 
MISTRAS Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
 
  September 30, 2023 December 31, 2022
ASSETS (unaudited)  
Current Assets    
Cash and cash equivalents $12,752  $20,488 
Accounts receivable, net  136,363   123,657 
Inventories  15,780   13,556 
Prepaid expenses and other current assets  18,259   10,181 
Total current assets  183,154   167,882 
Property, plant and equipment, net  79,762   77,561 
Intangible assets, net  44,468   49,015 
Goodwill  185,519   199,635 
Deferred income taxes  2,229   779 
Other assets  41,558   40,032 
Total assets $536,690  $534,904 
LIABILITIES AND EQUITY    
Current Liabilities    
Accounts payable $14,628  $12,532 
Accrued expenses and other current liabilities  81,853   77,844 
Current portion of long-term debt  8,402   7,425 
Current portion of finance lease obligations  5,253   4,201 
Income taxes payable  1,025   1,726 
Total current liabilities  111,161   103,728 
Long-term debt, net of current portion  185,466   183,826 
Obligations under finance leases, net of current portion  12,375   10,045 
Deferred income taxes  8,542   6,283 
Other long-term liabilities  33,362   32,273 
Total liabilities  350,906   336,155 
Equity    
Preferred stock, 10,000,000 shares authorized      
Common stock, $0.01 par value, 200,000,000 shares authorized, 30,353,100 and 29,895,487 shares issued and outstanding  302   298 
Additional paid-in capital  246,075   243,031 
Accumulated deficit  (26,436)  (11,489)
Accumulated other comprehensive loss  (34,463)  (33,390)
Total MISTRAS Group, Inc. stockholders’ equity  185,478   198,450 
Non-controlling interests  306   299 
Total equity  185,784   198,749 
Total liabilities and equity $536,690  $534,904 


 
MISTRAS Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Income (Loss)
(in thousands, except per share data)
 
 Three Months Ended September 30, Nine Months Ended September 30,
  2023   2022   2023   2022 
        
Revenue$179,354  $178,462  $523,399  $519,155 
Cost of revenue 118,812   119,110   355,304   354,848 
Depreciation 6,160   5,568   17,914   17,074 
Gross profit 54,382   53,784   150,181   147,233 
Selling, general and administrative expenses 39,537   40,767   123,844   123,545 
Bad debt provision for troubled customers, net of recoveries          289 
Reorganization and other costs 2,702   130   6,017   65 
Goodwill Impairment Charges 13,799      13,799    
Loss on Debt Modification    693      693 
Legal settlement and insurance recoveries, net       150   (994)
Research and engineering 438   450   1,428   1,523 
Depreciation and amortization 2,588   2,629   7,556   8,058 
Acquisition-related expense, net    1   5   63 
Income (loss) from operations (4,682)  9,114   (2,618)  13,991 
Interest expense 4,167   2,735   12,093   6,790 
Income (loss) before provision (benefit) for income taxes (8,849)  6,379   (14,711)  7,201 
Provision for income taxes 1,489   1,985   229   3,494 
Net Income (Loss) (10,338)  4,394   (14,940)  3,707 
Less: net income (loss) attributable to noncontrolling interests, net of taxes (40)  21   7   54 
Net Income (Loss) attributable to MISTRAS Group, Inc.$(10,298) $4,373  $(14,947) $3,653 
        
Earnings (loss) per common share:       
Basic$(0.34) $0.15  $(0.49) $0.12 
Diluted$(0.34) $0.14  $(0.49) $0.12 
Weighted-average common shares outstanding:       
Basic 30,402   29,965   30,277   29,879 
Diluted 30,402   30,245   30,277   30,209 


 
MISTRAS Group, Inc. and Subsidiaries
Unaudited Operating Data by Segment
(in thousands)
 
 Three Months Ended September 30, Nine Months Ended September 30,
  2023   2022   2023   2022 
Revenues       
North America$148,814  $152,778  $431,295  $435,251 
International 30,980   25,693   90,664   83,441 
Products and Systems 2,829   3,078   9,897   8,666 
Corporate and eliminations (3,269)  (3,087)  (8,457)  (8,203)
 $179,354  $178,462  $523,399  $519,155 
        
        
 Three Months Ended September 30, Nine Months Ended September 30,
  2023   2022   2023   2022 
Gross profit       
North America$44,773  $44,869  $121,088  $118,348 
International 8,481   7,694   24,247   25,324 
Products and Systems 1,096   1,189   4,773   3,514 
Corporate and eliminations 32   32   73   47 
 $54,382  $53,784  $150,181  $147,233 



MISTRAS Group, Inc. and Subsidiaries

Unaudited Revenues by Category
(in thousands)

Revenue by industry was as follows:

Three Months Ended September 30, 2023North America International Products Corp/Elim Total
Oil & Gas$94,390  $8,827  $35  $  $103,252 
Aerospace & Defense 14,240   5,778   47      20,065 
Industrials 10,325   6,018   310      16,653 
Power Generation & Transmission 7,388   1,653   696      9,737 
Other Process Industries 6,933   2,864   (5)     9,792 
Infrastructure, Research & Engineering 6,042   2,383   1,070      9,495 
Petrochemical 3,313   586         3,899 
Other 6,183   2,871   676   (3,269)  6,461 
Total$148,814  $30,980  $2,829  $(3,269) $179,354 


Three Months Ended September 30, 2022North America International Products Corp/Elim Total
Oil & Gas$90,578  $6,418  $35  $  $97,031 
Aerospace & Defense 16,784   4,397   112      21,293 
Industrials 9,728   5,834   436      15,998 
Power Generation & Transmission 10,378   1,946   456      12,780 
Other Process Industries 10,283   3,033   8      13,324 
Infrastructure, Research & Engineering 4,936   1,784   1,150      7,870 
Petrochemical 3,427   280         3,707 
Other 6,664   2,001   881   (3,087)  6,459 
Total$152,778  $25,693  $3,078  $(3,087) $178,462 


Nine Months Ended September 30, 2023North America International Products Corp/Elim Total
Oil & Gas$281,663  $26,291  $87  $  $308,041 
Aerospace & Defense 41,516   15,894   275      57,685 
Industrials 30,693   18,274   1,336      50,303 
Power Generation & Transmission 17,834   4,840   3,189      25,863 
Other Process Industries 24,906   10,567   73      35,546 
Infrastructure, Research & Engineering 12,696   6,547   2,759      22,002 
Petrochemical 10,027   887         10,914 
Other 11,960   7,364   2,178   (8,457)  13,045 
Total$431,295  $90,664  $9,897  $(8,457) $523,399 


          
Nine Months Ended September 30, 2022North America International Products Corp/Elim Total
Oil & Gas$270,289  $22,018  $212  $  $292,519 
Aerospace & Defense 49,106   14,455   246      63,807 
Industrials 28,529   17,868   1,271      47,668 
Power Generation & Transmission 22,578   6,505   1,979      31,062 
Other Process Industries 32,217   10,305   23      42,545 
Infrastructure, Research & Engineering 10,625   6,016   2,489      19,130 
Petrochemical 10,056   413         10,469 
Other 11,851   5,861   2,446   (8,203)  11,955 
Total$435,251  $83,441  $8,666  $(8,203) $519,155 



MISTRAS Group, Inc. and Subsidiaries

Unaudited Revenues by Category (continued)
(in thousands)

The Company has retrospectively reclassified certain Oil and Gas sub-category revenues for each quarterly period in 2022 in order to conform the classification with the current year presentation. Total Oil and Gas sub-category revenues were unchanged in total in each quarterly period and for the full year ended December 31, 2022. The table below presents the reclassified balances for each quarterly period in the prior year.

 2022 Quarterly Revenues
 Three months ended
March 31,
 Three months ended
June 30,
 Three months ended
September 30,
 Three months ended
December 31,
Oil and Gas Revenue by sub-category       
Upstream$36,397  $38,051  $35,173  $36,435 
Midstream 20,427   27,153   25,885   23,540 
Downstream 37,399   36,061   35,973   35,258 
Total$94,223  $101,265  $97,031  $95,233 


 Three Months Ended September 30, Nine Months Ended September 30,
  2023   2022   2023   2022 
Oil and Gas Revenue by sub-category       
Upstream$38,041  $35,173  $116,941  $109,621 
Midstream 26,215   25,885   74,739   73,465 
Downstream 38,996   35,973   116,361   109,433 
Total$103,252  $97,031  $308,041  $292,519 


Consolidated Revenue by type was as follows:

 Three Months Ended September 30, Nine Months Ended September 30,
  2023   2022   2023   2022 
        
Field Services$122,717  $118,526  $348,501  $345,385 
Shop Laboratories 14,840   12,528   42,216   35,533 
Data Analytical Solutions 17,997   17,151   52,916   45,786 
Other 23,800   30,257   79,766   92,451 
Total$179,354  $178,462  $523,399  $519,155 


 
MISTRAS Group, Inc. and Subsidiaries
Unaudited Reconciliation of
Segment and Total Company Income (Loss) from Operations (GAAP) to Income before Special Items (non-GAAP)
(in thousands)
 
 Three Months Ended September 30, Nine Months Ended September 30,
  2023   2022   2023   2022 
North America:       
Income from operations (GAAP)$18,004  $16,700  $39,719  $35,315 
Bad debt provision for troubled customers, net of recoveries          289 
Reorganization and other costs 35   12   574   40 
Legal settlement and insurance recoveries, net       150   (841)
Acquisition-related expense, net          45 
Income from operations before special items (non-GAAP)$18,039  $16,712  $40,443  $34,848 
International:       
Income (loss) from operations (GAAP)$(12,970) $814  $(13,031) $2,678 
Goodwill Impairment charges 13,799      13,799    
Reorganization and other costs, net 33   (15)  228   (114)
Income from operations before special items (non-GAAP)$862  $799  $996  $2,564 
Products and Systems:       
Loss from operations (GAAP)$(557) $(333) $(78) $(1,334)
Reorganization and other costs 189      189    
Income (loss) from operations before special items (non-GAAP)$(368) $(333) $111  $(1,334)
Corporate and Eliminations:       
Loss from operations (GAAP)$(9,159) $(8,067) $(29,228) $(22,668)
Loss on debt modification    693      693 
Legal settlement and insurance recoveries, net          (153)
Reorganization and other costs 2,445   133   5,026   139 
Acquisition-related expense, net    1   5   19 
Loss from operations before special items (non-GAAP)$(6,714) $(7,240) $(24,197) $(21,970)
Total Company:       
Income (loss) from operations (GAAP)$(4,682) $9,114  $(2,618) $13,991 
Bad debt provision for troubled customers, net of recoveries          289 
Goodwill Impairment charges 13,799      13,799    
Reorganization and other costs 2,702   130   6,017   65 
Loss on debt modification    693      693 
Legal settlement and insurance recoveries, net       150   (994)
Acquisition-related expense, net    1   5   64 
Income from operations before special items (non-GAAP)$11,819  $9,938  $17,353  $14,108 


 
MISTRAS Group, Inc. and Subsidiaries
Unaudited Reconciliation of
Gross Debt (GAAP) to Net Debt (non-GAAP)
(in thousands)
 
  September 30, 2023 December 31, 2022
     
Current portion of long-term debt $8,402  $7,425 
Long-term debt, net of current portion  185,466   183,826 
Total Gross Debt (GAAP)  193,868   191,251 
Less: Cash and cash equivalents  (12,752)  (20,488)
Total Net Debt (non-GAAP) $181,116  $170,763 


 
MISTRAS Group, Inc. and Subsidiaries
Unaudited Summary Cash Flow Information
(in thousands)
 
 Three Months Ended September 30, Nine Months Ended September 30,
  2023   2022   2023   2022 
Net cash provided by (used in):       
Operating activities$(7,637) $2,722  $10,684  $10,531 
Investing activities (5,359)  (2,378)  (15,170)  (8,877)
Financing activities 9,348   303   (1,839)  (4,753)
Effect of exchange rate changes on cash (1,599)  (1,172)  (1,411)  (2,927)
Net change in cash and cash equivalents$(5,247) $(525) $(7,736) $(6,026)
        
        


 
MISTRAS Group, Inc. and Subsidiaries
Unaudited Reconciliation of
Net Cash Provided by Operating Activities (GAAP) to Free Cash Flow (non-GAAP)
(in thousands)
 
 Three Months Ended September 30, Nine Months Ended September 30,
  2023   2022   2023   2022 
        
Net cash provided by operating activities (GAAP)$(7,637) $2,722  $10,684  $10,531 
Less:       
Purchases of property, plant and equipment (4,602)  (2,358)  (14,403)  (9,050)
Purchases of intangible assets (1,046)  (181)  (1,868)  (580)
Free cash flow (non-GAAP)$(13,285) $183  $(5,587) $901 


 
MISTRAS Group, Inc. and Subsidiaries
Unaudited Reconciliation of
Net Income (Loss) (GAAP) to Adjusted EBITDA (non-GAAP)
(in thousands)
 
 Three Months Ended September 30, Nine Months Ended September 30,
  2023   2022   2023   2022 
    
Net Income (loss) (GAAP)$(10,338) $4,394  $(14,940) $3,707 
Less: Net income attributable to non-controlling interests, net of taxes (40)  21   7   54 
Net Income (loss) attributable to MISTRAS Group, Inc.$(10,298) $4,373  $(14,947) $3,653 
Interest expense 4,167   2,735   12,093   6,790 
Provision for income taxes 1,489   1,985   229   3,494 
Depreciation and amortization 8,748   8,197   25,470   25,132 
Share-based compensation expense 1,010   1,396   3,649   4,166 
Acquisition-related expense    1   5   63 
Reorganization and other related costs, net 2,702   130   6,017   65 
Goodwill Impairment charges 13,799      13,799    
Legal settlement and insurance recoveries, net       150   (994)
Loss on debt modification    693      693 
Bad debt provision for troubled customers, net of recoveries          289 
Foreign exchange (gain) loss (721)  (928)  149   (924)
Adjusted EBITDA (non-GAAP)$20,896  $18,582  $46,614  $42,427 


 
MISTRAS Group, Inc. and Subsidiaries
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)
(dollars in thousands, except per share data)
 
 Three Months Ended September 30, Nine Months Ended September 30,
  2023   2022   2023   2022 
Net income (loss) attributable to MISTRAS Group, Inc. (GAAP)$(10,298) $4,373  $(14,947) $3,653 
Bad debt provision for troubled customers, net of recoveries          289 
Goodwill Impairment charges 13,799      13,799    
Reorganization and other costs 2,702   130   6,017   65 
Loss on debt modification    693      693 
Legal settlement and insurance recoveries, net       150   (994)
Acquisition-related expense, net    1   5   64 
Special Items Total$16,501  $824  $19,971  $117 
Tax impact on special items (653)  (188)  (1,468)  (8)
Special items, net of tax$15,848  $636  $18,503  $109 
Net income (loss) attributable to MISTRAS Group, Inc. Excluding Special Items (non-GAAP)$5,550  $5,009  $3,556  $3,762 
        
Diluted EPS (GAAP)(1)$(0.34) $0.14  $(0.49) $0.12 
Special items, net of tax 0.52   0.02   0.61    
Diluted EPS Excluding Special Items (non-GAAP)$0.18  $0.16  $0.12  $0.12 

_______________
(1) For the three and nine months ended September 30, 2023, 1,508,255 and 926,224 shares related to restricted stock were excluded from the calculation of diluted EPS due to the net loss for the period.

 


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