ONE SOURCE FOR ASSET PROTECTION SOLUTIONS

Transcription

1 MISTRAS INVESTOR PRESENTATION AS OF MAY 31 st 2018 ONE SOURCE FOR ASSET PROTECTION SOLUTIONS

2 SAFE HARBOR STATEMENT Forward-Looking Statements and Cautionary Statements Certain statements made in this presentation are "forward-looking statements" about Mistras' financial results and estimates, products and services, business model, strategy, growth opportunities, profitability and competitive position, and other matters. 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 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2018, 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. 2

3 AT A GLANCE IPO in 2009 Founded in 1978 HQTS in Princeton, NJ USA ~6,000 EMPLOYEES ~120 BRANCHES ~5,000 CUSTOMERS 3

4 MISTRAS AT A GLANCE 4

5 OUR LEADERSHIP TEAM DENNIS BERTOLOTTI JONATHAN WOLK EDWARD PRAJZNER DR. SOTIRIOS VAHAVIOLOS President & CEO SEVP & COO SVP, CFO & Treasurer Executive Chairman 25+ Years with MG 4+ Years with MG Joined MG in 2018 Founded MISTRAS Owns ~37% of MG Stock 5

6 OUR BUSINESS MISTRAS is a one-source provider of technology-enabled asset protection solutions, used to maximize the safety and operational uptime of our clients facilities and equipment. We evaluate the integrity and reliability of critical infrastructure by conducting inspections, providing light mechanical services, offering engineering consulting, selling inspection equipment and monitoring systems, and providing software solutions to house and analyze enterprise mechanical integrity data. Engineering Consulting On-line Monitoring and Trending Access Solutions Data Management & Analysis Software Traditional NDT Inspection ONE SOURCE APPROACH Products & Systems Advanced NDT Inspection In-House Laboratory Testing Mechanical & Maintenance Destructive Testing Our solution portfolio is comprised of complementary service and product lines, which integrate into customtailored packages to provide the right, comprehensive solution for each customer s specific needs. 6

7 OUR PROMISE: UPTIME & SAFETY $23MM LOST REVENUES RECOVERED ONLINE MONITORING OF AN AMMONIA CONVERSION VESSEL On-line monitoring enabled customer to avoid downtime and reduce major repair work resulting in significant savings. CUSTOMER EXPERIENCES $14MM OR $1MM PER DAY SAVINGS ULTRASONIC PHASED ARRAY INSPECTION & LOW ENERGY DIGITAL RADIOGRAPHY Certified with EPRI and insurance. Inspected 150 boiler headers. Inspected 14,000 boiler thin pipe welds. $10MM CLIENT SAVINGS PROPRIETARY AE TANKPAC TECHNOLOGY Avoided opening above ground storage tanks resulted in significant savings. Client avoided cleaning and disposal costs, and avoided having to perform hazardous remediation. 7

8 World Class NDT Inspection Services Outsourcer With a Wide Competitive Market Global Network of Over 4,000 Certified Technicians Extensive Geographical coverage in North America and primary European countries; primarily on-shore, also off-shore Extensive Technical coverage provided by multi-certified technicians with expertise in dozens of basic and advanced inspection techniques Drives Unmatched Scope Coverage, Safety and Spend Reductions Large, flexible technician network scales up and down with customer needs Customer-focused, hold quarterly performance meetings featuring KPI report-outs Risk-Based Inspection, Industry-leading software drives inspection efficiency Strong Focus on Recurring Revenues Provides stable operating platform and enables high technician utilization Drives higher employee retention via stable working environment Drives additional project revenues from run and maintain sites Strong Balance Sheet and Capital Allocation Discipline Enables Accretive Acquisitions which extend service offerings and value 8

9 MISTRAS ONE SOURCE APPROACH ONE SOURCE PRODUCTS PROPRIETARY PRODUCTS, SYSTEMS & KNOWLEDGE SOFTWARE SYNERGISTIC PROPRIETARY ENTERPRISE SOFTWARE SERVICES DELIVERING RUN & MAINTAIN INSPECTION & ENGINEERING ALLOWS CUSTOMERS TO Extend The Useful Life Of Assets reliably Comply With Codes, Standards And Government Safety Regulations Outsource Inspection, Destructive Testing And Engineering Services Manage Risk And Avoid Catastrophic Disasters Reduce Outages Or Turn Around Schedules Eliminate Unnecessary Time Scheduled Maintenance EXPERTISE IN: MECHANICAL INTEGRITY, NON-DESTRUCTIVE TESTING, DESTRUCTIVE TESTING, AND PROPRIETARY DATA ANALYSIS & MGMT. SOFTWARE INCLUDING RISK BASED INSPECTION 9

10 TECHNOLOGY Our online monitoring systems and compatible inspection equipment communicate mechanical integrity data to internet-connected devices. Our technology integrates with plant data management software and mobile devices to allow plant operators to stay informed of their asset s condition wherever they are. 10

11 Online Monitoring >2,000 Asset Monitoring Installations 1,040 VALVES Monitoring for leaking valves while closed. 700 POWER BOILERS/HRSG FEED WATER HEATERS RECOVERY BOILERS Monitoring for tube leak detection and location. 25 BRIDGES Wire breaks in post-tensioned concrete and cable structures, stain, rotation, acceleration, displacement, steel fatigue, crack and concrete microfracture detection, structural health. 230 TRANSFORMERS GSU/TRANSMISSION/ DISTRIBUTION Monitoring for electrical, thermal and mechanical faults. 700 PRESSURE VESSELS 55 COMBUSTION TURBINES Monitoring for crack growth on stationary blades. 4 HIGH ENERGY PIPING 11

12 Helps Customers Avoid Catastrophic Losses Wind Turbine Tower Nacelle Problems Refinery & Petrochemical Accidents Off Shore Platform Collapses Boiler Tube Ruptures Transformer Malfunctions Infrastructure Collapses Gas Turbine Damage Vessel Cracking or Collapse 12

13 MISTRAS AIMS SERVICES PROVIDING INSIGHT INTO THE LEVEL OF PLANT READINESS HOW TO BEST MANAGE THE INTEGRITY OF ASSETS HOW TO EXTEND THE USEFL LIFE OF ASSETS Best Practices Project Management Turnkey Services 13

14 Extensive Core NDT Inspection Services Visual inspection (API) Acoustic emission Ultrasonic imaging Eddy current testing X-ray Computed (CR) & Direct radiography (DR) Predictive Maintenance Vibration, Strain (PdM) Phased Array Ultrasonics Ground Penetrating Radar (GPR) Infrared testing and line scan thermography Guided Wave Ultrasonic Rope Access Engineering Services FFS; MI; RBI; Software 14

15 MISTRAS Safety Numerous locations have exceptional multi-year records without OSHA recordable incidents. Shell Martinez 20+ years Andeavor Carson 15 years Strong culture of reporting Good Catches or Near Misses Leading indicator for safety performance improvement Continually see year over year improvement in reporting Well established and implemented Behavior Based Safety programs Peer Observation Performance Program (POPP) peers looking after peers Continually improving vehicle safety program over 50% reduction in at fault vehicle incidents. 15

16 Safety Statistics 16

17 A Cyclical Market for Global NDT Spend Oil Prices have fluctuated; O&G Customer Spend Flexes Which in Turn has led to volatile Global Industry* NDT Revenues 20% Improvement 35% Reduction 15% Reduction % Reduction 3% Reduction Flat Mistras Group 2016 revenues were down 5% and 2017 were up 2%. *Industry Group includes: Comparable business segments of Intertek Resources, Team Inc., Bureau Veritas, Applus RTD and Oceaneering Asset Integrity. 17

18 Our Business Model is Resilient Chemical. 9% Infra & Other 7% Although 58% of Mistras Revenues are in Oil & Gas.. Majority of Revenues are Recurring (Turnarounds and call out work under evergreen contracts) Inspections required by OSHA; Risks post-macondo can be existential Our Value Focus drives savings for customers that in turn drive market share gains for Mistras 18

19 MISTRAS Vision: Provide Customers What They Really Need in a Challenging Market: VALUE Combine the Most Comprehensive, Value-Driven NDT Platform, with a suite of adjacent Mechanical Services EXPANDED SERVICES PLATFORM D R I V E S CUSTOMER VALUE INCREMENTAL SALES FROM EXISTING CUSTOMERS SALES & PROFIT GROWTH MARKET SHARE GAINS M E C H A N I C A L SERVICES A E R O S P A C E P I P E L I N E INTEGRITY MISTRAS CORE NDT PLATFORM SAFETY RELIABILITY BREADTH & DEPTH SERVICES GEOGRAPHIC COVERAGE 19

20 KEY INVESTOR THEMES MACROECONOMIC TRENDS SUPPORT STABILIZING OIL AND GAS MARKETS BUNDLED SERVICES EXPANSION INTO MECHANICAL 10+ YEAR BACKLOG OF NEXT GENERATION AIRCRAFT, ENGINES AND COMPOSITES PROPOSED PHMSA REGULATIONS (PIPELINE INTEGRITY & MAINTENANCE) M&A PIPELINE IS ROBUST, ENABLING DIVERSIFICATION 20

21 Margin Trends ($ millions) Revenue & Gross Margin Adjusted EBITDA & EBITDA Margin (1) 27.7% 26.0% Solid 2016 Demonstrates Operational Excellence 28.2% 28.4% 26.8% 11.3% 12.2% 10.1% 10.6% 9.1% $711.3 $719.2 $684.8 $701.0 $70.7 $71.9 $88.1 $72.5 $63.7 $623.4 FY14 FY15 FY16 CY16 CY17 FY14 FY15 FY16 CY16 CY17 (1) See supplemental slide for adjusted EBITDA reconciliation and important disclosures regarding Mistras use of this non-gaap financial measure. 21

22 Strong Free Cash Flow ($ in millions) Commitment to Free Cash Flow Generation FY 15 FY16 CY16 CY17 Net cash provided by operating activities* $ 49.8 $ 68.1 $ 63.2 $ 55.2 Capital expenditures $ (16.0) $ (16.2) $ (15.9) $ (20.6) Free cash flow $ 33.8 $ 51.9 $ 47.3 $ 34.6 Mistras has an attractive free cash flow business model with working capital excellence * CY17 includes a $6.5 million legal settlement payment. 22

23 Prudent Balance Sheet ($ in millions) Maintaining Balance Sheet Strength and Flexibility Selected Balance Sheet Information 5/31/15 5/31/16 12/31/16 12/31/17 Cash & Cash Equivalents $ 10.6 $ 21.2 $ 19.2 $ 27.5 Total Assets $ $ $ $ Total Debt $ $ 85.0 $ 87.3 $ Shareholders Equity $ $ $ $ Balance Sheet Detail Current Assets $ $ $ $ Current Liabilities $ (93.5) $ (96.9) $ (77.7) $(90.2) Working Capital $ 78.0 $ 91.0 $ $ Less Cash & Equivalents $ (10.6) $ (21.2) $ (19.2) $ (27.5) Net Working Capital $ 67.4 $ 69.8 $ 85.8 $ 77.3 Net working capital as % of revenue remains relatively low Note: Balance Sheet figures presented as reported in Company filings 23

24 QUESTIONS & ANSWERS ONE SOURCE FOR ASSET PROTECTION SOLUTIONS 24

25 NON-GAAP FINANCIAL MEASURES Use of Non-GAAP Financial Measures In addition to financial information prepared in accordance with generally accepted accounting principles in the U.S. (GAAP), this presentation also contains adjusted financial measures 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 projected information. The term "Adjusted EBITDA" used in this presentation is a financial measurement not calculated in accordance with GAAP and is defined as net income attributable to Mistras Group, Inc. plus: interest expense, provision for income taxes, depreciation and amortization, share-based compensation expense and certain acquisition related costs (including transaction due diligence costs and adjustments to the fair value of contingent consideration), foreign exchange (gain) loss and, if applicable, certain special items which are noted. A Reconciliation of Adjusted EBITDA to a financial measurement under GAAP is set forth in a table attached to this presentation. The Company also uses the term free cash flow, a non-gaap measurement the Company defines as cash provided by operating activities less capital expenditures (which is classified as an investing activity). The Company also uses the term net debt, a non-gaap measurement defined as the sum of the current and long-term portions of long-term debt and capital lease obligations, less cash and cash equivalents. 25

26 Supplemental Non-GAAP Financial Measures Maintaining Balance Sheet Strength and Flexibility FY 14 FY 15 FY 16 CY 16 CY 17 Net income (loss) attributable to Mistras Group, Inc. 22,518 16,081 24,654 14,409 (2,175) Interest expense 3,192 4,622 4,762 3,075 4,386 Provision for income taxes 12,528 9,740 13,765 8,008 1,942 Depreciation and Amortization 28,429 33,286 32,474 32,388 31,383 Share-based compensation expense 6,261 6,579 6,514 7,324 6,575 Acquisition-related expense (benefit), net (2,657) (5,167) (1,453) (5) 482 Legal settlement - - 6,320 6,320 1,600 Bad debt provision for unexpected customer bankruptcy ,200 Impairment charges ,810 Asset write-offs and lease terminations - 1,029-1, Charges related to sale of foreign operations - 2, Severance costs 306 1,723 1,107 1,425 1,818 Foreign exchange (gains) losses 101 1,474 (59) (1,461) 604 Adjusted EBITDA 70,678 71,883 88,084 72,525 63,748 26