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Mistras Group Exceeds Profit Expectations For Third Consecutive Quarter And Raises Profit Guidance

The following excerpt is from the company's SEC filing.

Quarterly Earnings per Diluted Share of 12 cents More than Doubles Consensus Estimate

Adjusted EBITDA Margin Improved vs. prior year Q3 by 250 basis points; YTD by 240 basis points

Adjusted EBITDA Guidance Raised by $4 Million for Fiscal Year 2016

Operating Cash Flow Improved by over $21 Million (62%) Year-to-date

PRINCETON JUNCTION, N.J., April 6, 2016 (GLOBE NEWSWIRE) - Mistras Group, Inc. (

MG: NYSE

), a leading "one source" global provider of technology-enabled asset protection solutions, reported record earnings for it s third quarter and first nine months of fiscal year 2016, which ended February 29, 2016.

Revenues for the third quarter declined year-on-year by 1.7% to $160.4 million. Excluding the impact of dispositions and adverse foreign exchange, the Company’s third quarter revenue improved by 2%. Revenues for the first nine months of fiscal year 2016 were 0.3% below prior year, at $535 million, inclusive of a cumulative reduction of approximately $24 million, or 4.4%, from the impact of dispositions and adverse foreign exchange.

Net income for the third quarter was $3.6 million, or $0.12 per diluted share, compared with $1.8 million or $0.06 per diluted share in the prior year’s third quarter. Net income for the first nine months of fiscal year 2016 was $21.9 million, or $0.74 per diluted share, compared with $13.9 million or $0.47 per diluted share in the prior year’s first nine months. The Company’s year-to-date improvements of over 56% in both net income and earnings per diluted share established new performance records and were achieved despite flat revenues in a challenging market. Net income for the three and nine-month periods ended February 29, 2016 were favorably impacted by approximately $0.5 million, or $.02 per diluted share by discrete tax items.

Adjusted EBITDA was $15.3 million or 9.5% of revenues in the third quarter of fiscal year 2016, compared with $11.4 million, or 7.0% of revenues in the prior year’s third quarter. Adjusted EBITDA was $66.7 million, or 12.5% of revenues in the first nine months of fiscal year 2016, compared with $54.0 million, or 10.1% of revenues in the prior year’s first nine months.

Organic revenue growth for the third quarter increased year-on-year by low to mid-single digits in the Services and International segments, offset by a decline in the Products & Systems segment. Acquisition growth during the third quarter was immaterial. Revenue growth from both organic and prior-year acquisitions had low single digit year-to-date increases.

Gross profit margins improved to 26.7% in the third quarter of fiscal year 2016 from the prior year’s 23.7% and to 28.2% year-to-date compared with the prior year’s 26.0%. The third quarter year-on-year improvement was driven primarily by the

International segment, which improved by more than 800 basis points, and the Services segment, which improved by 200 basis points. Drivers included improved technical labor utilization, cost reductions, organic sales growth and an improved sales mix.

The Company’s operating margin, exclusive of acquisition-related items, improved to 3.5% for the third quarter compared with the prior year’s 1.4%, and to 7.0% for the first nine months of fiscal year 2016, compared with the prior year’s 4.2%.

Cash flow from operating activities improved to $55.8 million in the first nine months of fiscal year 2016, compared with $34.5 million in the prior year’s first nine months, driven by improved profitability and more efficient use of working capital, as days sales outstanding improved by approximately 3 days or 4% compared with the prior year’s first nine months. Net debt was approximately 1.0x Adjusted EBITDA, down from 1.7x at May 31, 2015.

Performance by segment was as follows:

segment operating income improved by $2.8 million or 39% over the prior year’s third quarter, while revenues grew by 1%, as low single digit organic growth coupled with a small amount of acquisition growth more than offset the adverse impact of a weaker Canadian dollar.

Services operating income improved by $8.1 million or 22% during the nine months year-to-date on a 2% revenue increase.

Services third quarter and year-to-date operating income margins improved over the comparable prior year periods by 210 basis points and 190 basis points, respectively. Services’ operating income margin improvements were primarily driven by improvements in its gross margins, which improved during the third quarter and nine months year-to-date by 200 basis points and 110 basis points, respectively. Drivers included improved technical labor utilization, sales mix, contract management and lower overhead costs.

segment operating income grew by $2.5 million and swung to current year income from a prior year loss during the third quarter, even though revenues declined by 5%, as...


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