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 StatementsThis 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 MeasuresIn 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 SubsidiariesCondensed 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 SubsidiariesUnaudited 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 SubsidiariesUnaudited 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 SubsidiariesUnaudited Revenues by Category(in thousands)

Revenue by industry was as follows:

Three Months Ended September 30, 2023 North 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, 2022 North 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, 2023 North 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, 2022 North 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 SubsidiariesUnaudited 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 endedMarch 31,   Three months endedJune 30,   Three months endedSeptember 30,   Three months endedDecember 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 SubsidiariesUnaudited Reconciliation ofSegment 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 SubsidiariesUnaudited 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 SubsidiariesUnaudited 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 SubsidiariesUnaudited 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 SubsidiariesUnaudited 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 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)(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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