MTS Reports Fiscal 2020 Third Quarter Financial Results

EDEN PRAIRIE, Minn., Aug. 3, 2020

THIRD QUARTER FINANCIAL AND OPERATING HIGHLIGHTS

• Positive operating cash flow of $16.0 million
• Backlog of $451.4 million, an increase of 1.8% over prior year
• Revenue of $196.2 million, a decline of 15.5% over prior year, reflecting the global impact of the COVID-19 pandemic
• GAAP diluted earnings per share of $0.23, including $0.08 of discrete tax benefits
• Adjusted diluted earnings per share of $0.44, including $0.26 of amortization expense
• Subsequent to quarter end, amended revolving credit facility to enhance operating and financial flexibility

FINANCIAL TABLE

	Three Months Ended								Nine Months Ended
ARIVA.DE Börsen-Geflüster Kurse MTS Systems -   0,00% (in thousands, except per share data - unaudited)	June 27,  2020				June 29,  2019				June 27,  2020				June 29,  2019
Revenue	$	196,225			$	232,209			$	613,531			$	668,436
Revenue % increase (decrease)	(15.5)		%		19.3		%		(8.2)		%		15.2		%
Gross margin	33.4		%		36.6		%		34.8		%		37.5		%
Operating margin	6.4		%		9.9		%		5.8		%		9.7		%
Earnings before taxes	$	3,351			$	16,190			$	8,737			$	44,463
Net income	4,389				13,585				8,624				38,246
Diluted earnings per share	0.23				0.70				0.45				1.97
Adjusted diluted earnings per share1	0.44				0.71				1.08				2.07
Adjusted EBITDA1	28,800				35,357				89,954				103,013
Cash and cash equivalents, end of period	65,073				75,735
Backlog, end of period	451,435				443,271
Total debt, end of period	595,096				462,516

EXECUTIVE COMMENTARY - RANDY J. MARTINEZ, INTERIM PRESIDENT AND CHIEF EXECUTIVE OFFICER

"During my first two months as MTS' Interim President and Chief Executive Officer, I have seen firsthand the critical role we play in building global infrastructure, supporting decarbonization efforts, and driving success for our customers. I am inspired by how our employees have continued this vital work during the last quarter despite the global pandemic.

Throughout the third quarter, we acted decisively to mitigate COVID-19's impact on our business. We strengthened our financial position through restructuring and cost reduction initiatives, temporary curtailments in cash compensation for our Board of Directors and senior executives, and the suspension of dividend payments. More recently, we amended our revolving credit facility to maximize our liquidity position under our current capital structure. Importantly, we executed these initiatives while maintaining a safe work environment for our employees and business continuity for our customers.

We experienced softer demand as the pandemic forced many customers to temporarily shut down their operations and delay orders. This was partially offset by top-line contributions from our recent acquisition of the R&D entities in Denmark, which have shown strong momentum since the transaction was completed early in the second quarter of fiscal year 2020.

As we look to the fourth quarter, we expect to sustain our performance sequentially while recognizing improvements in our order profile. Despite continuing challenges posed by the pandemic, we remain confident that our differentiated technology, industry-leading engineering, deep customer relationships, global footprint and strong talent pool will drive future growth.

Our top priority remains protecting the well-being of our employees while providing a high-quality service to our valued customers. I am committed to executing on our strategic initiatives and returning MTS to strong profitability."

HIGHLIGHTS FOR THE 2020 THIRD FISCAL QUARTER

Revenue

Revenue was $196.2 million, down 15.5% compared to the same prior year period, due to declines in Test & Simulation and Sensors. Both businesses were negatively impacted by COVID-19 due to the closure of customer sites, travel restrictions and delayed customer spending. Test & Simulation revenue decreased primarily due to a decline in volume from softness in our ground vehicles and materials sectors, coupled with lower service volume. The decline was partially offset by top-line contributions from the acquisition of the R&D entities in Denmark (R&D) of $14.1 million, which was completed early in the second quarter of fiscal year 2020. Sensors revenue declined due to softness in all sectors except our test sector, which included the addition of Endevco, which closed during the fourth quarter of fiscal year 2019, and continued U.S. Department of Defense volume growth. Importantly, we had no material cancellations of orders or backlog in the third quarter.

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