Mistras Group, Inc. (NYSE:MG) Q3 2019 Earnings Conference Call - Final Transcript

Nov 05, 2019 • 09:00 am ET


Mistras Group, Inc. (NYSE:MG) Q3 2019 Earnings Conference Call - Final Transcript


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Good morning ladies and gentlemen. My name is Brian and I'll be your event manager today. We'll be accepting questions after management's prepared remarks. I'll now pass the call to Mistras Group Director of Marketing Communications. Please proceed.

Nestor Makarigakis

Welcome to the Mistras Group conference call for its third Quarter of 2019. My name is Nestor Makarigakis. Participating on the call for Mistras will be Dennis Bertolotti the company's President and Chief Executive Officer; Ed Prajzner Senior Vice President Chief Financial Officer and Treasurer; Dr. Sotirios Vahaviolos Founder and Executive Chairman; and Jon Wolk Senior Executive Vice President and Chief Operating Officer. I want to remind everyone that remarks made during this conference call will include forward-looking statements. The company's actual results could differ materially from those projected. Some of those factors that can cause actual results to differ are discussed in the company's most recent annual report on Form 10-K and other reports filed with the SEC. The discussion in this conference call will also include certain financial measures that were not prepared in accordance with U.S. GAAP. Reconciliation of these non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP financial measure can be found in the tables contained in yesterday's press release and in the company's related current report on Form 8-K. These reports are available at the company's website in the Investors section and on the SEC's website.

I will now turn the conference over to Dennis Bertolotti. Dennis?

Dennis M. Bertolotti

Thank you Nestor. Good morning everyone. During today's call we will provide an update on Mistras' business performance. Our financial results for the third quarter and first nine months of 2019 as well as discuss our lower outlook for the remainder of the year. Third quarter results continue to reflect the progress being achieved toward our long-term strategic initiatives. Revenues were up margins expanded and earnings increased on a year-over-year basis. We also generated strong cash flow a hallmark of Mistras. Let me note some key highlights for the quarter. Gross margin increased across all 3 segments. SG&A decreased by 100 basis points as a percentage of revenue generated strong cash from operations of $19.4 million and free cash flow of $13.4 million. On a per share basis free cash flow was $0.46 for the third quarter. Additional highlights for the first nine months of the year. Consolidated gross margin increased 160 basis points. Cash from operations of $40.5 million with free cash flow of $22.5 million.

Debt paydown of $23.3 million exclusive of the $4.8 million paid for New Century Software our latest acquisition. Revenue and operating earnings were ahead of fiscal 2018 on a year-to-date basis through the first nine months indicators of a robust business. However our strong momentum developed over the past 2 quarters encountered some headwinds coming into the fourth quarter of 2019. In particular a note of caution unexpectedly rose among our oil and gas customers attributable primarily to increased macroeconomic uncertainty. Although our long-term outlook remains intact. These factors are clearly