Mistras Group reported financial results for its second quarter of fiscal year 2016, which ended November 30, 2015.
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Revenues for the second quarter declined year-on-year by 5.9% to $194.8 million. Excluding the impact of dispositions and adverse foreign exchange rates, the company's second quarter revenue declined by 1.7%.
Revenues for the first six months of fiscal year 2016 had a small year-on-year increase of approximately 0.3% to $374.6 million, inclusive of a cumulative reduction of approximately $18 million, or 4.8%, from the impact of dispositions and adverse foreign exchange rates.
Net income for the second quarter was $11.4 million, or $0.39 per diluted share, compared with $10.4 million or $0.35 per diluted share in the prior year's second quarter.
Net income for the first six months of fiscal year 2016 was $18.3 million, or $0.62 per diluted share, compared with $12.1 million, or $0.41 per diluted share in the prior year's first six months.
These results represent new record levels for net income and earnings per diluted share for both the second quarter and first six months, even though revenues were relatively flat for the first six months and lower than prior year in the second quarter.
Adjusted EBITDA was $29.1 million, or 14.9% of revenues in the second quarter of fiscal year 2016, compared with $29.1 million, or 14.1% of revenues, in the prior year's second quarter. Adjusted EBITDA was $51.3 million, or 13.7% of revenues in the first six months of fiscal year 2016, compared with $42.5 million, or 11.4% of revenues, in the prior year's first six months.
As expected, the company's second quarter year-on-year decline in revenues was driven by the aforementioned adverse impacts of foreign exchange and dispositions, as well as a shift in the timing of turnaround work that caused a mid-single digit organic revenue decline in its Services segment. Organic growth continued to be strong in the International segment, up high-single digits, and was modestly positive in the Products & Systems segment.
Gross profit margins improved to 29.2% in the second quarter of fiscal year 2016 from the prior year's 28.5% and to 28.9% in the first six months from the prior year's 27.1%.
The second quarter year-on-year improvement was driven by the International and Products and Systems segments, each of which improved their gross margins by approximately 400 basis points, driven by prior year cost reductions, organic sales growth and an improved sales mix. Services gross margin rate was in line with the prior year's second quarter despite sales declining by more than $10 million.
Operating margin improved to 10.0% for the second quarter and 8.7% for the first six months of fiscal year 2016, representing year-on-year improvements of 130 basis points and 280 basis points for the respective three and six-month periods.
Cash flow from operating activities improved to $26.5 million in the first half of fiscal year 2016, compared with $3.2 million in the prior year's first half, driven by improved profitability and less drag from working capital, as days sales outstanding improved by approximately 5 days or 7% compared with the prior year's first six months.
Net debt was approximately 1.3x Adjusted EBITDA, down from 1.7x at May 31, 2015. ■