Mistras (US:MG)2022-08-05 17:06PART I—FINANCIAL INFORMATION Financial Statements This section presents Mistras Group's unaudited condensed consolidated financial statements, detailing balance sheets, income, and cash flows Condensed Consolidated Balance Sheets The balance sheet shows total assets decreased slightly to $555.5 million, with stable liabilities and a decrease in total equity to $194.3 million Condensed Consolidated Balance Sheets (in thousands) | Account | June 30, 2022 (in thousands) | Dec 31, 2021 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $18,609 | $24,110 | | Total current assets | $172,916 | $161,338 | | Total assets | $555,542 | $562,195 | | Liabilities & Equity | | | | Total current liabilities | $127,382 | $121,415 | | Total liabilities | $361,281 | $361,283 | | Total equity | $194,261 | $200,912 | Unaudited Condensed Consolidated Statements of Income (Loss) Q2 2022 revenue slightly increased to $179.0 million, but net income decreased to $4.6 million, resulting in a six-month net loss Unaudited Condensed Consolidated Statements of Income (Loss) (in thousands, except per share data) | Metric (in thousands, except per share data) | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $179,031 | $177,677 | $340,693 | $331,412 | | Gross Profit | $53,558 | $55,336 | $93,450 | $95,337 | | Income from Operations | $9,576 | $11,374 | $4,877 | $6,628 | | Net Income (Loss) Attributable to Mistras | $4,643 | $5,937 | $(720) | $575 | | Diluted EPS | $0.15 | $0.20 | $(0.02) | $0.02 | Unaudited Condensed Consolidated Statements of Cash Flows Net cash from operations significantly decreased to $7.8 million for H1 2022, leading to a $5.5 million decline in cash and cash equivalents Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $7,809 | $18,126 | | Net cash used in investing activities | $(6,499) | $(10,318) | | Net cash used in financing activities | $(5,056) | $(12,970) | | Net change in cash and cash equivalents | $(5,501) | $(5,818) | | Cash and cash equivalents at end of period | $18,609 | $19,942 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail accounting policies, revenue, debt, and contingencies, highlighting impacts from the Russian-Ukrainian conflict and a new credit facility - The company provides integrated technology-enabled asset protection solutions for critical industrial and civil assets22 - The Russian-Ukrainian conflict disrupts European operations with higher energy costs, and high oil prices cause customers to defer maintenance2628 - No single customer accounted for 10% or more of the company's revenue for the three and six months ended June 30, 2022 and 202134 - Total long-term debt was $200.4 million as of June 30, 2022, with a new $190 million revolving credit facility and $125 million term loan secured post-quarter92127129 - The company agreed to a $2.3 million settlement for a California labor law case, receiving preliminary court approval115 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial results, noting a slight Q2 revenue increase, gross margin contraction, and enhanced liquidity from a new credit facility Overview The company provides technology-enabled asset protection solutions across three segments, focusing on proprietary technology for growth - The company operates through three reportable segments: Services, International, and Products and Systems141146 - Strategic focus includes advanced asset protection solutions via proprietary technology like MISTRAS OneSuite and Sensoria™143145146 - European operations face increased costs from the Russian-Ukrainian conflict, and high oil prices cause customer maintenance deferrals135154 Consolidated Results of Operations Q2 2022 revenue grew 0.8% to $179.0 million, but gross profit declined, with Services segment growth offset by International segment FX impacts Consolidated Results of Operations | Metric | Q2 2022 | Q2 2021 | Change | | :--- | :--- | :--- | :--- | | Revenue | $179.0M | $177.7M | +0.8% | | Gross Profit | $53.6M | $55.3M | -3.2% | | Gross Margin | 29.9% | 31.1% | -120 bps | - Q2 2022 revenue growth was driven by a 3.1% increase in the Services segment, offset by a 7.3% decrease in the International segment due to unfavorable foreign exchange rates160 - The Q2 gross profit margin decrease was primarily due to a 150 basis point reduction in the Services segment's margin from higher benefit costs and ended Canadian wage subsidies173 - Interest expense decreased to $2.1 million in Q2 2022 from $3.2 million in Q2 2021, due to a lower leverage ratio and the removal of the 1.0% LIBOR floor183184 Liquidity and Capital Resources Liquidity is supported by cash from operations and credit facilities, with operating cash flow decreasing to $7.8 million for H1 2022 Liquidity and Capital Resources (in thousands) | Cash Flow Activity (in thousands) | Six months ended June 30, 2022 | Six months ended June 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $7,809 | $18,126 | | Net cash used in investing activities | $(6,499) | $(10,318) | | Net cash used in financing activities | $(5,056) | $(12,970) | - The decrease in operating cash flow was primarily due to a net working capital increase193 - As of June 30, 2022, the company held $18.6 million in cash and $11.7 million in unused credit commitments197 - Subsequent to quarter-end, a new credit agreement was secured, including a $190 million revolving credit facility and a $125 million term loan127199 Quantitative and Qualitative Disclosures about Market Risk No significant changes occurred in the company's quantitative and qualitative market risk disclosures since the 2021 Annual Report - There have been no significant changes to the company's market risk disclosures since the 2021 Annual Report204 Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Management concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective205 - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls206 PART II—OTHER INFORMATION Legal Proceedings This section refers to Note 14 for legal proceedings, confirming no material developments since the 2021 Annual Report - For details on legal proceedings, the report refers to Note 14-Commitments and Contingencies in the financial statements209 Risk Factors No material changes occurred in the company's risk factors since the 2021 Annual Report on Form 10-K - There have been no material changes to the risk factors discussed in the company's 2021 Annual Report210 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities, only repurchases from employees for tax withholding obligations - The company did not have any sales of unregistered securities during the period211 - Shares were acquired from employees to satisfy tax withholding obligations in connection with the vesting of restricted stock units213 Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - None215 Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable216 Other Information The company reports no information for this item - None217 Exhibits This section lists exhibits filed with the Form 10-Q, including a settlement agreement, plan amendment, and certifications - Exhibits filed with the report include a settlement agreement, an amendment to the company's 2016 Long-Term Incentive Plan, and certifications from the CEO and CFO218