Mistras (US:MG)2019-05-11 11:48Financial Data and Key Metrics Changes - First quarter 2019 revenues decreased by 6% to $176.8 million, but only down 4% on a constant-currency basis, primarily due to a $10 million revenue loss from a contract that was vacated on March 31 last year [23][24] - Gross profit for the quarter was $48.9 million, slightly higher than the previous year despite lower sales volume, with gross margins improving to 27.6% from 25.7%, an increase of 190 basis points [24][30] - Cash flows from operating activities were $8.2 million, a 41% increase compared to $5.8 million in the same quarter last year [28][34] Business Line Data and Key Metrics Changes - Services revenue decreased by 3.6% in the quarter, but was essentially flat when adjusted for the large contract non-renewal, with Onstream contributing an incremental 4% revenue growth to the Services segment [29] - The Services segment generated a gross profit margin of 26.6%, an improvement of 280 basis points compared to the previous year, driven by pruning lower-margin operations and growing higher-margin operations [29] - Products and Systems revenues decreased by $2.7 million, with SG&A as a percentage of revenue at approximately 23.6%, down from 24.4% last quarter but up from 20.8% in the first quarter of 2018 [31] Market Data and Key Metrics Changes - International revenues were down 8.6% from a year ago, primarily due to unfavorable foreign exchange rates, but were down less than 1% in local currencies [30] - International gross margin improved to 29.5%, up 170 basis points from a year ago, attributed to better manpower utilization and improved sales mix [30] Company Strategy and Development Direction - The company is focused on delivering value through innovative performance indicators and maintaining strong customer relationships, which are key differentiators in the market [13][16] - Recent acquisitions, such as West Penn and Onstream, are performing well and are integral to the company's growth strategy, particularly in the aerospace market and pipeline integrity solutions [17][18] - The company is leveraging technology to improve performance and quality while reducing costs, which is expected to facilitate growth and enhance contract wins [20] Management's Comments on Operating Environment and Future Outlook - Management reiterated guidance for full year 2019, expecting total revenues between $765 million to $785 million and adjusted EBITDA between $90 million and $93 million [39] - Despite a challenging first quarter, management remains confident in the underlying business strength and anticipates mid-single-digit growth throughout the year [38][73] - Macro-level economic drivers remain positive, supporting the company's forward momentum [38] Other Important Information - The company recorded two charges totaling $6 million during the first quarter to resolve non-operational matters, which will not affect ongoing operations [25] - Adjusted EBITDA for the first quarter was $12.7 million, primarily impacted by slightly higher selling, general, and administrative expenses [27] Q&A Session Summary Question: Confidence in Revenue Push-Outs - Management indicated that the slower start to the turnaround season was not unexpected and that they feel good about Q2 and the second half of the year [48][51] Question: Segment Margin Updates - Management expects additional margin expansion this year, although not as significant as the previous year, driven by volume recovery [53] Question: Onstream Revenue and Seasonality - Onstream is expected to see sequential growth from Q1, with Q2 and Q3 being the best seasons due to weather and accessibility [61][62] Question: Revenue Guidance and Organic Growth - Management confirmed that the revenue guidance for the remainder of the year is based on organic growth, with no acquisitions factored in [69] Question: Turnaround Business Impact - Management anticipates beating previous year's numbers in Q2, Q3, and Q4, with mid-single-digit growth expected for the full year [73]