"We once again delivered a solid performance on all major financial metrics, delivering top-line growth of almost 20% reflecting another record revenue quarter for our Sensors business, its eighth-consecutive quarter of revenue growth versus the same prior year period, and near-record level Test & Simulation business. This growth profile demonstrates the continuing benefits of our diversification strategy within the Test & Measurement space, and our success in new product sales across virtually all our major end markets.
While we are pleased with our top-line momentum, we also continue to focus on our cost structure and in driving operational efficiencies in both businesses. These efforts contributed to bottom-line net income improvement of 51%, translating to a net income margin of 5.9% for the quarter, and a 27% increase in Adjusted EBITDA, equating to an Adjusted EBITDA margin of 15.2% for the quarter. This solid performance for both our Test & Simulation and Sensors businesses supports our continued investments in new product development, diversification and capital structure optimization, all while returning cash to our shareholders through our quarterly dividend."
HIGHLIGHTS FOR THE 2019 THIRD FISCAL QUARTER
Revenue
Revenue was $232.2 million, up 19.3% compared to the same prior year period, driven by near record revenue in Test & Simulation, which included equipment volume growth in all sectors, revenue from the acquisition of E2M, which closed in the first quarter of fiscal year 2019, and continued growth in Test services. Sensors experienced record revenue driven by the continued ramp-up in volume associated with our U.S. Department of Defense contract and growth from the energy market within our Sensors industrial sector, slightly offset by weakness in the European and Asian regions in our Sensors position sector.
Orders
Test & Simulation orders for the quarter were $103.8 million, down 25.9% compared to the same prior year period, driven primarily by weakness in all regions, partially offset by double-digit growth in Test service orders. Our orders performance does not reflect the full impact of a new project received from the U.S. Department of Defense in the third quarter of fiscal year 2019, which will be funded incrementally throughout its execution. We recorded $1.8 million of the full $30.4 million order, inclusive of options, for this new test system in the third quarter.
Sensors orders for the quarter were $76.8 million, a 2.7% decrease over the same prior year period. This decline was primarily driven by weakness in the European and Asian regions specific to our Sensors position sector and timing of order funding in our Sensors test sector, partially offset by solid demand in the Americas region of our Sensors position sector and orders growth in our Sensors industrial sector from a continued rebound in the energy market.
Backlog
Backlog of $443.3 million was up 17.3% from the same prior year period. Sequentially from the second quarter of fiscal year 2019, backlog was down 10.2% as we saw a high-level of conversion to revenue on outstanding projects within the quarter, along with a decline in order volume to replenish the backlog.
Earnings Before Taxes
Earnings before taxes of $16.2 million was up $6.1 million compared to the same prior year period. This earnings increase was driven by gross profit growth in both Test & Simulation and Sensors, partially offset by higher operating expenses in both businesses and a $0.2 million acquisition inventory fair value adjustment related to the acquisition of E2M.
Net Income and Diluted Earnings Per Share
GAAP diluted earnings per share was $0.70 compared to $0.47 in the same prior year period on net income of $13.6 million and $9.0 million, respectively. The $0.23 increase was primarily driven by growth in Test & Simulation gross profit, which includes the contributions from the acquisition of E2M. Third quarter of fiscal year 2019 results include a $0.01 impact for the acquisition inventory fair value adjustment related to the acquisition of E2M. Similarly, results for the third quarter of fiscal year 2018 include a $0.02 impact for restructuring expenses. Adjusting for these items, adjusted diluted earnings per share was $0.71 for the third quarter of fiscal 2019, and $0.49 for the same period in the prior year. A reconciliation of adjusted diluted earnings per share, a non-GAAP financial measure, to diluted earnings per share, the most directly comparable GAAP financial measure, is provided in Exhibit B of this earnings release.
Adjusted EBITDA
Adjusted EBITDA grew to $35.4 million in the third quarter of fiscal year 2019, up 27.3% compared to the same prior year period. This growth was primarily due to higher gross profit in both businesses and contributions from the acquisition of E2M, partially offset by higher operating expenses in Sensors. A reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to net income, the most directly comparable GAAP financial measure, is provided in Exhibit D of this earnings release.
Balance Sheet
During the quarter, our total debt balance decreased by $2.4 million to $472.4 million. We ended the quarter with $75.7 million of cash on the balance sheet, leading to a net debt balance of $396.7 million.
Dividend
The Board of Directors declared a quarterly dividend of $0.30 per share. The dividend was payable on July 2, 2019 to shareholders of record as of the close of business on June 18, 2019. This was our 150th consecutive quarterly dividend.
Strategic Actions Completed Subsequent to Quarter End
Given the favorable market conditions, in early July we issued $350.0 million aggregate principal amount of new 5.750% senior unsecured notes due 2027. These new notes were issued to further optimize our capital structure and to take advantage of historically low long-term interest rates. The net proceeds from this offering were used to repay all outstanding debt under our revolving credit facility, to repay a portion of our outstanding debt under our term loan facility, to pay fees and expenses associated with the offering and for general corporate purposes.
In addition, on Monday, August 5, 2019, we executed an agreement with Meggitt PLC (MGGT.L), to purchase the assets of their Endevco sensors business. Founded in 1947, Endevco is a historic leader in high performance test & measurement sensors used primarily in the testing of new products. This strategic product line purchase brings together two iconic brands in the test & measurement sensors market, PCB and Endevco, and further enhances the MTS long-term strategy of growth and market leadership in our core businesses. The purchase price of the Endevco assets was approximately $70.0 million, and it is expected to contribute approximately $30.0 million in revenues on an annualized basis. Given the timing of the transaction, we do not anticipate that this will have a material impact on our financial performance for the end of fiscal year 2019; however, we do anticipate tremendous opportunities for accelerated growth in our Sensors business in fiscal year 2020 and beyond.
OUTLOOK
Test & Simulation Business
Our performance for the first nine months of the fiscal year supports our positive outlook for our Test & Simulation business. From a revenue perspective, our solid backlog position throughout the first nine months of fiscal year 2019 has correlated with strong momentum driven by the rapidly expanding use of advanced materials, such as carbon-fiber composites, the adoption of additive manufacturing methods for net-shape component fabrications, and the rapidly increasing complexity of ground and air vehicles which requires new simulation methods for determining product performance and life. Our energy and infrastructure markets remain robust, driven by continued growth in wind power and advanced building designs that are more resistant to damage from earthquakes, sea and storm events. The acquisition of E2M has further expanded our growth opportunities by diversifying us further into flight simulation, entertainment and other advanced simulation markets.
