UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 31, 2026
Or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from __ to __
Commission file number 001-34481
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(609 ) 716-4000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
ý Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
ý Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | o | x | ||||||||||||
Non-accelerated filer | o | Smaller reporting company | ||||||||||||
| Emerging Growth Company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
As of May 4, 2026, the registrant had 31,816,681 shares of common stock outstanding.
TABLE OF CONTENTS
| PAGE | |||||||||||
Unaudited Condensed Consolidated Balance Sheets as of March 31, 2026 and December 31, 2025 | |||||||||||
Unaudited Condensed Consolidated Statements of Income (Loss) for the three months ended March 31, 2026 and March 31, 2025 | |||||||||||
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2026 and March 31, 2025 | |||||||||||
Unaudited Condensed Consolidated Statements of Equity for the three months ended March 31, 2026 and March 31, 2025 | |||||||||||
Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2026 and March 31, 2025 | |||||||||||
i
PART I—FINANCIAL INFORMATION
ITEM 1. Financial Statements
Mistras Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except share and per share data)
| March 31, 2026 | December 31, 2025 | ||||||||||
| ASSETS | (unaudited) | ||||||||||
| Current Assets | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property, plant and equipment, net | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Deferred income taxes | |||||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current Liabilities | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Current portion of long-term debt | |||||||||||
| Current portion of finance lease obligations | |||||||||||
| Income taxes payable | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt, net of current portion | |||||||||||
| Obligations under finance leases, net of current portion | |||||||||||
| Deferred income taxes | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 13) | |||||||||||
| Equity | |||||||||||
Preferred stock, | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total Mistras Group, Inc. stockholders’ equity | |||||||||||
| Non-controlling interests | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
1
Mistras Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Income (Loss)
(in thousands, except per share data)
| Three months ended March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Revenue | $ | $ | ||||||||||||
| Cost of revenue | ||||||||||||||
| Depreciation | ||||||||||||||
| Gross profit | ||||||||||||||
| Selling, general and administrative expenses | ||||||||||||||
| Reorganization and other costs | ||||||||||||||
| Environmental expense, net | ( | |||||||||||||
| Research and engineering | ||||||||||||||
| Depreciation and amortization | ||||||||||||||
| Income (loss) from operations | ( | |||||||||||||
| Other income, net | ( | |||||||||||||
| Interest expense | ||||||||||||||
| Income (loss) before provision for income taxes | ( | |||||||||||||
| Provision (benefit) for income taxes | ( | |||||||||||||
| Net income (loss) | ( | |||||||||||||
| Less: net income (loss) attributable to noncontrolling interests, net of taxes | ( | |||||||||||||
| Net income (loss) attributable to Mistras Group, Inc. | $ | $ | ( | |||||||||||
| Net income (loss) per common share: | ||||||||||||||
| Basic | $ | $ | ( | |||||||||||
| Diluted | $ | $ | ( | |||||||||||
| Weighted-average common shares outstanding: | ||||||||||||||
| Basic | ||||||||||||||
| Diluted | ||||||||||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
2
Mistras Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Other comprehensive income: | |||||||||||
| Foreign currency translation adjustments | $ | ( | $ | ||||||||
| Comprehensive loss | ( | ( | |||||||||
| Less: Net income (loss) attributable to noncontrolling interest | ( | ||||||||||
| Less: Foreign currency translation adjustments attributable to noncontrolling interests | ( | ||||||||||
| Comprehensive loss attributable to Mistras Group, Inc. | $ | ( | $ | ( | |||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
3
Mistras Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Equity
(in thousands)
| Three months ended | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock | Additional paid-in capital | Retained earnings (accumulated deficit) | Accumulated other comprehensive loss | Total Mistras Group, Inc. stockholders’ equity | Non-controlling interests | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Total equity | |||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Share-based payments | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Distribution to non-controlling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Net settlement of restricted stock units | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||
| Share-based payments | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Net settlement of restricted stock units | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
4
Mistras Group, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(In Thousands)
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities | |||||||||||
| Depreciation and amortization | |||||||||||
| Deferred income taxes | |||||||||||
| Share-based compensation expense | |||||||||||
| Bad debt provision for troubled customers, net of recoveries | |||||||||||
| Foreign currency (gain) loss | ( | ||||||||||
| Other | ( | ( | |||||||||
| Changes in operating assets and liabilities, net of effect of acquisitions and dispositions | |||||||||||
| Accounts receivable | ( | ||||||||||
| Inventories | ( | ||||||||||
| Prepaid expenses and other assets | ( | ||||||||||
| Accounts payable | |||||||||||
| Accrued expenses and other liabilities | ( | ( | |||||||||
| Income taxes payable | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities | |||||||||||
| Purchase of property, plant and equipment | ( | ( | |||||||||
| Purchase of intangible assets | ( | ( | |||||||||
| Proceeds from sale of equipment | |||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities | |||||||||||
| Repayment of finance lease obligations | ( | ( | |||||||||
| Repayment of long-term debt | ( | ( | |||||||||
| Proceeds from revolver | |||||||||||
| Repayment of revolver | ( | ( | |||||||||
| Distribution to non-controlling interests | ( | ||||||||||
| Taxes paid related to net share settlement of share-based awards | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | |||||||||||
| Net change in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
| Supplemental disclosure of cash paid | |||||||||||
| Interest, net | $ | $ | |||||||||
| Income taxes, net of refunds | $ | $ | |||||||||
| Noncash investing and financing | |||||||||||
| Equipment acquired through finance lease obligations | $ | $ | |||||||||
| Capital expenditures included in accounts payable and accrued liabilities | $ | $ | |||||||||
The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.
5
Mistras Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
1. Description of Business and Basis of Presentation
Description of Business
Mistras Group, Inc., together with its subsidiaries (the "Company"), is a global leader in technology-enabled industrial asset integrity and laboratory testing solutions, serving critical industries including oil & gas, aerospace & defense, power & utilities, manufacturing, and civil infrastructure.
The Company provides a diversified portfolio of products and services, ranging from advanced non-destructive testing ("NDT") and pipeline inspections to real-time condition monitoring, maintenance planning, and specialized engineering, powered by a proprietary management software suite that centralizes integrity data for predictive analytics and benchmark analysis. With a long-standing track record of innovation and deep industry expertise, the Company helps clients reduce risk, extend asset life, and optimize operational performance.
The Company enhances value for its customers by integrating asset integrity protection throughout supply chains and centralizing integrity data through a suite of Industrial Internet of Things ("IoT")-connected software and monitoring solutions, including OneSuite®, which serves as a cloud-based ecosystem that pulls together the Company’s software and data services capabilities. This integrated approach enables customers to make data-driven decisions that improve asset reliability, enhance safety, reduce operational risk, and optimize performance across the asset lifecycle.
The Company’s core capabilities include NDT field inspections enhanced by advanced robotics, laboratory quality control, laboratory materials services, in-house laboratory assurance testing, sensing technologies and NDT equipment, asset and mechanical integrity engineering services, and light mechanical maintenance and access services.
The Company has three operating segments. Our segments are as follows:
•North America: This segment provides asset protection solutions predominantly in North America, with the largest concentration in the United States, followed by Canada, consisting primarily of NDT, inspection, mechanical and engineering services that are used to evaluate the safety, structural integrity and reliability of critical energy, industrial and public infrastructure and commercial aerospace components. Software, digital and data services are included in this segment.
•International: This segment offers services, products and systems similar to those of the other segments to select markets within Europe, the Middle East, Africa, Asia and South America, but not to customers in China and South Korea, which are served by the Products and Systems segment.
•Products and Systems: This segment designs, manufactures, sells, installs and services the Company’s asset protection products and systems, including equipment and instrumentation, predominantly in the United States.
Recent Developments
The global trade landscape continues to be highly volatile. In 2025, the U.S. government implemented a series of trade tariffs on goods imported into the U.S. from various countries. In many cases, these tariffs resulted in reciprocal tariffs and other actions on goods being exported from the U.S. These associated tariffs are complex and continue to evolve as negotiations occur. In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (“IEEPA”), which the U.S. government relied on to impose certain tariffs, does not authorize the administration to impose tariffs. On March 4, 2026, the U.S. Court of International Trade ordered the U.S. Customs and Border Protection (“CBP”) to process refunds of the IEEPA tariffs, although the Court immediately suspended the order while the CBP determines a refund process. The IEEPA tariffs remain subject to ongoing litigation between the administration and other parties. In response to the U.S. Supreme Court ruling mentioned above, the administration announced plans to implement new tariffs under alternative statutory authority. The full impact of the U.S. Supreme Court’s ruling and the administration’s response, including the timing and extent of any refunds and the impact of the new tariffs, remain uncertain. Ongoing changes to trade policies and related uncertainty may affect global economic conditions, supply chains and costs, and may reduce trade between the U.S. and impacted countries. Tariffs and trade barriers have not had a material effect on our business or results of operations during 2026 to date. However, new tariffs or other trade measures could result in increased costs to us or our suppliers and could impact the import of materials by our
6
Mistras Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
customers, including materials subject to our inspection and testing services, which could adversely affect demand for our services.
Geopolitical tensions in the Middle East, including the conflict involving the United States and Iran, have contributed to increased volatility in global energy markets and broader macroeconomic uncertainty. The conflict in the Middle East has significantly reduced the export of oil and natural gas from the Persian Gulf, creating upward pressure on oil and natural gas prices, and has also disrupted and increased the costs of certain other supplies. Fluctuations in crude oil and natural gas prices may influence capital spending and maintenance activity by customers in the oil and gas sector, which could affect demand for certain of our services, particularly field inspection and asset integrity solutions. Additionally, continued instability in the Middle East could contribute to supply chain disruptions, changes in foreign currency exchange rates, and delays in customer projects. While we have not experienced material impacts to date, the situation remains dynamic, and we continue to monitor developments and assess potential impacts on our operations, financial condition, and results of operations.
Basis of Presentation
The Unaudited Condensed Consolidated Financial Statements contained in this report have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") and Securities and Exchange Commission ("SEC") guidance allowing for reduced disclosure for interim periods. In the opinion of management, the Unaudited Condensed Consolidated Financial Statements include all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods of the years ending December 31, 2026 and December 31, 2025.
Certain items included in these statements are based on management’s estimates. Actual results may differ from those estimates. The results of operations for any interim period are not necessarily indicative of the results expected for the year. The accompanying Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the notes to the Audited Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Annual Report").
Principles of Consolidation
Reclassifications
Certain amounts in prior periods have been reclassified to conform to the current year presentation. Such reclassifications did not affect the Company's consolidated financial condition or results of operations as previously reported.
Significant Accounting Policies
The Company’s significant accounting policies are disclosed in Note 1 – Summary of Significant Accounting Policies and Practices in the 2025 Annual Report. On an ongoing basis, the Company evaluates its estimates and assumptions, including among other things, those related to revenue recognition, long-lived assets, goodwill and acquisitions. Since the date of the 2025 Annual Report, there have been no material changes to the Company’s significant accounting policies.
7
Mistras Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
Income Taxes
Income taxes are accounted for under the asset and liability method. We recognize deferred tax assets and liabilities at enacted income tax rates for the temporary differences between the financial reporting bases and the tax bases of our assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. Our net deferred tax assets primarily consist of net operating loss carry forwards, or NOLs. A valuation allowance is provided if it is more likely than not that some or all of a deferred income tax asset will not be realized. A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the current and prior years.
As of March 31, 2026, management concluded that it is more likely than not that a substantial portion of the Company's deferred tax assets will be realized.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.
The Company’s effective income tax rate was approximately 13.8 % for the three months ended March 31, 2026, compared to an effective income tax benefit of approximately 26.9 % for the three months ended March 31, 2025.
The effective income tax rate for the three months ended March 31, 2026, was lower than the statutory rate primarily due to the impact of favorable discrete items related to stock compensation. The effective income tax rate benefit for the three months ended March 31, 2025, was higher than the statutory rate primarily due to the impact of an unfavorable discrete item related to stock compensation.
On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), was enacted, which includes a broad range of tax reform provisions. These tax reform provisions include the extension and modification of certain provisions of the Tax Cuts and Jobs Act and is effective for calendar year 2025. The changes include, but are not limited to, immediate expensing of domestic research and development expenditure, the restoration of 100% bonus depreciation, and an EBITDA-based interest expense limitation. These provisions did not have a material impact on the Company’s financial statements for the three months ended March 31, 2026.
Recent Accounting Pronouncements
On November 4, 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures, to require disaggregation of certain expense captions into specified categories in disclosures within the notes of the financial statements. The standard is effective for fiscal years beginning after December 31, 2026 and early adoption is permitted. The guidance is required to be applied prospectively and amendments in the ASU may be applied prospectively or retrospectively. We are currently evaluating the impacts this standard will have on our disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal Use Software (ASU 2025-06). This standard clarifies capitalization thresholds for software development costs and aligns accounting treatment more closely with the economic substance of modern software development activities. ASU 2025-06 is effective for annual and interim periods beginning after December 15, 2027 on a retrospective, prospective or modified prospective basis. Early adoption is permitted. We are currently evaluating the impact this standard will have on our disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow Scope Improvements (ASU 2025-11). This standard clarifies disclosure requirements and applicability for interim financial statements. This new guidance is effective for the Company for interim periods beginning October 1, 2028. Early adoption is permitted. The amendments in this ASU may be adopted using the prospective or retrospective methods. We are currently evaluating the impact this standard will have on our disclosures.
2. Revenue
8
Mistras Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
The Company derives the majority of its revenue by providing services on a time and materials basis, which are short-term in nature. The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers.
Performance Obligations
The Company provides highly integrated and bundled inspection services to its customers. The majority of the Company's contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and is, therefore, not distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the Company's best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is a relative selling price based on price lists.
Contract modifications are not routine in the performance of the Company's contracts. Generally, when contracts are modified, the modification is to account for changes in scope to the goods and services that are provided. In most instances, contract modifications are for goods or services that are distinct, and, therefore, are accounted for as a separate contract.
The Company's performance obligations are satisfied over time as work progresses or at a point in time. The majority of the Company's revenue is recognized over time as work progresses for the Company's service deliverables, which includes providing testing, inspection and mechanical services to our customers. Revenue is recognized over time, based on time and material incurred to date which best portrays the transfer of control to the customer. The Company also utilizes an available practical expedient that provides for revenue to be recognized in an amount that corresponds directly with the value to the customer of the Company's performance completed to date. Fixed fee arrangements are determined based on expected labor, material, and overhead to be consumed on fulfillment of such services. For these arrangements, revenue is recognized on a cost-to-cost method tracked on an input basis.
The majority of the Company's revenue recognized at a point in time is related to product sales when the customer obtains control of the asset, which is generally upon shipment to the customer. Contract costs include labor, material and overhead.
The Company expects any significant remaining performance obligations to be satisfied within one year .
Contract Estimates
The majority of the Company's revenues are short-term in nature. The Company enters into master service agreements ("MSA"s) with customers that specify an overall framework and contract terms. The actual contracting to provide services or furnish products are triggered by a work order, purchase order, or some similar document issued pursuant to a MSA which sets forth the scope of services and/or identifies the products to be provided. From time-to-time, the Company may enter into longer-term contracts, which can range from several months to several years. Revenue on certain contracts is recognized as work is performed based on total costs incurred to date in relation to the total estimated costs for the performance of the contract at completion. This includes contract estimates of costs to be incurred for the performance of the contract. Cost estimation is based upon the professional knowledge and experience of the Company's project managers, engineers and financial professionals. Factors that are considered in estimating the work to be completed include the availability of materials, the effect of any delays in the Company's project performance and the recoverability of any claims. Whenever revisions of estimates, contract costs and/or contract values indicate that the contract costs will exceed estimated revenues, thus creating a loss, a provision for the total estimated loss is recorded in that period.
9
Mistras Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
Revenue by Category
The following series of tables present the Company's disaggregated revenue:
Revenue by industry was as follows:
| Three Months Ended March 31, 2026 | North America | International | Products & Systems | Corp/Elim | Total | ||||||||||||||||||||||||
| Oil & Gas | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Aerospace & Defense | |||||||||||||||||||||||||||||
| Industrials | |||||||||||||||||||||||||||||
| Power Generation & Transmission | |||||||||||||||||||||||||||||
| Other Process Industries | |||||||||||||||||||||||||||||
| Infrastructure, Research & Engineering | |||||||||||||||||||||||||||||
| Petrochemical | |||||||||||||||||||||||||||||
| Other | ( | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
| Three Months Ended March 31, 2025 | North America | International | Products & Systems | Corp/Elim | Total | ||||||||||||||||||||||||
| Oil & Gas | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Aerospace & Defense | |||||||||||||||||||||||||||||
| Industrials | |||||||||||||||||||||||||||||
| Power Generation & Transmission | |||||||||||||||||||||||||||||
| Other Process Industries | |||||||||||||||||||||||||||||
| Infrastructure, Research & Engineering | |||||||||||||||||||||||||||||
| Petrochemical | |||||||||||||||||||||||||||||
| Other | ( | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
Revenue per key geographic location was as follows:
| Three Months Ended March 31, 2026 | North America | International | Products & Systems | Corp/Elim | Total | ||||||||||||||||||||||||
| United States | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
| Other Americas | ( | ||||||||||||||||||||||||||||
| Europe | ( | ||||||||||||||||||||||||||||
| Asia-Pacific | ( | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
| Three Months Ended March 31, 2025 | North America | International | Products & Systems | Corp/Elim | Total | ||||||||||||||||||||||||
| United States | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Other Americas | ( | ||||||||||||||||||||||||||||
| Europe | ( | ||||||||||||||||||||||||||||
| Asia-Pacific | ( | ||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
Contract Balances
10
Mistras Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Unaudited Condensed Consolidated Balance Sheets. Amounts are generally billed as work progresses in accordance with agreed-upon contractual terms, generally at periodic intervals (e.g., weekly, bi-weekly or monthly). Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, the Company sometimes receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities. These assets and liabilities are aggregated on an individual contract basis and reported on the Unaudited Condensed Consolidated Balance Sheets at the end of each reporting period within accounts receivable, net or accrued expenses and other current liabilities.
3. Share-Based Compensation
The Company grants share-based incentive awards to its eligible employees and non-employee directors under its 2016 Long-Term Incentive Plan (the "2016 Plan"). Awards granted under the 2016 Plan may be in the form of stock options, restricted stock units and other forms of share-based incentives, including performance-based restricted stock units, stock appreciation rights and deferred stock rights. At the annual shareholders meeting on May 14, 2024, the Company’s shareholders approved an amendment to increase the total number of shares that may be issued under the 2016 Plan by 1.3 million, for a total of 6.2 million shares that are authorized for issuance under the 2016 Plan, of which approximately 296,000 shares were available for future grants as of March 31, 2026.
Stock Options
On January 6, 2025, an executive officer of the Company was granted a stock option for the purchase of 375,000 shares of the Company's common stock at an exercise price of $9.06 , the closing price of the Company's common stock on the New York Stock Exchange (the "NYSE") on the grant date. These stock options can be exercised any time on or after January 6, 2026, and prior to their expiration date, which is the earlier of 10 years from the grant date or one year following the date the executive officer is no longer serving as an officer, director or in any other capacity of the Company.
The following table sets forth a summary of stock option activity, weighted-average exercise prices and options outstanding as of March 31, 2026 (in thousands, except per share amounts and years):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Common Stock Options | Weighted Average Exercise Price | Common Stock Options | Weighted Average Exercise Price | ||||||||||||||||||||
| Outstanding at beginning of period: | $ | $ | |||||||||||||||||||||
| Granted | $ | $ | |||||||||||||||||||||
| Exercised | $ | $ | |||||||||||||||||||||
| Expired or forfeited | $ | $ | |||||||||||||||||||||
| Outstanding at end of period: | $ | $ | |||||||||||||||||||||
| Exerciseable at end of period: | $ | $ | |||||||||||||||||||||
The Company recognized $0.1 million and $0.5 million of share-based compensation expense related to stock options during the three months ended March 31, 2026 and March 31, 2025, respectively. $0.1 million of share-based compensation expense related to stock options remains unrecognized as of the end of the current period, which is all expected to be recognized during 2026.
11
Mistras Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
Stock Issuances to Non-Employee Directors
As part of its compensation program for non-employee directors, the Company issues fully-vested common stock to its non-employee directors. The awards are issued to non-employee directors during the second quarter of each fiscal year. No awards were granted to non-employee directors during the three months ended March 31, 2026 and 2025.
Restricted Stock Unit Awards
For the three months ended March 31, 2026 and 2025, the Company recognized share-based compensation expense within Selling, general and administrative expenses related to Restricted Stock Unit ("RSU") awards of $0.7 million and $1.1 million, respectively. No share-based compensation expense was recognized within Reorganization and other costs related to RSU awards for the for the three months ended March 31, 2026. For the three months ended March 31, 2025, the Company recognized share-based compensation expense within Reorganization and other costs related to RSU awards of $0.5 million. As of March 31, 2026, there was $10.2 million of unrecognized compensation costs related to RSU awards, which is expected to be recognized over a remaining weighted-average period of 3.0 years. Upon vesting, RSUs are generally net share-settled to cover the required withholding tax and the remaining amount is converted into an equivalent number of shares of common stock.
A summary of the vesting activity of RSU awards, with the respective fair value of the awards, is as follows:
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Restricted stock awards vested | |||||||||||
| Fair value of awards vested | $ | $ | |||||||||
A summary of the Company's outstanding, non-vested RSUs is as follows:
| Three months ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Units | Weighted Average Grant-Date Fair Value | Units | Weighted Average Grant-Date Fair Value | ||||||||||||||||||||
| Outstanding at beginning of period: | $ | $ | |||||||||||||||||||||
| Granted | $ | $ | |||||||||||||||||||||
| Vested | ( | $ | ( | $ | |||||||||||||||||||
| Forfeited | ( | $ | ( | $ | |||||||||||||||||||
| Outstanding at end of period: | $ | $ | |||||||||||||||||||||
Performance Restricted Stock Units
The Company maintains Performance Restricted Stock Units ("PRSUs") that have been granted to select executives and senior officers, the ultimate payout of which may vary between zero and 200 % of the target award, based on the Company’s performance over a one-year period based on specific metrics approved by the Compensation Committee of the Board of Directors of the Company.
For 2026, the Compensation Committee (the “Compensation Committee”) of the Company’s Board of Directors is using the following three performance metrics for PRSU awards.
1.Free Cash Flow defined as net cash provided by operating activities less purchases of property, plant, equipment and intangible assets and is subject to adjustments approved by the Compensation Committee.
2.Adjusted EBITDA defined as net income attributable to the Company 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.
3.Revenue
12
Mistras Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
For PRSUs awarded in 2026, the Compensation Committee utilized the same metrics as 2025 PRSUs, but with revised performance goals and weighting.
PRSUs are equity-classified and compensation costs related to PRSUs with performance conditions are initially measured using the fair value of the underlying stock at the date of grant. Compensation costs related to the PRSUs with performance conditions are subsequently adjusted for changes in the expected outcomes of the performance conditions. Compensation cost related to the PRSUs with a market condition is not reversed if the market condition is not achieved, provided the employee requisite service has been rendered. Earned PRSUs generally vest ratably in four equal annual installments over the four years following completion of the performance period, for a total requisite service period of up to five years , and have no dividend equivalent rights. Upon vesting, PRSUs are generally net share-settled to cover required withholding tax amounts and the remaining amount is converted into an equivalent number of shares of common stock.
A summary of the Company's PRSU activity is as follows:
| Three months ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Units | Weighted Average Grant-Date Fair Value | Units | Weighted Average Grant-Date Fair Value | ||||||||||||||||||||
| Outstanding at beginning of period: | $ | $ | |||||||||||||||||||||
| Granted | $ | $ | |||||||||||||||||||||
| Performance condition adjustments | $ | $ | |||||||||||||||||||||
| Released | ( | $ | ( | $ | |||||||||||||||||||
| Forfeited | ( | $ | ( | $ | |||||||||||||||||||
| Outstanding at end of period: | $ | $ | |||||||||||||||||||||
For the three months ended March 31, 2026 and March 31, 2025, the Company recognized aggregate share-based compensation expense related to the awards described above of approximately $0.6 million and $0.2 million, respectively. At March 31, 2026, there was $6.9 million of total unrecognized compensation costs related to approximately 602,000 non-vested PRSUs, which is expected to be recognized over a remaining weighted-average period of 3.0 years.
4. Earnings (Loss) per Share
Basic earnings (loss) per share is computed by dividing net income by the weighted-average number of shares outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the sum of (1) the weighted-average number of shares of common stock outstanding during the period, and (2) the dilutive effect of assumed conversion of equity awards using the treasury stock method. With respect to the number of weighted-average shares outstanding (denominator), diluted shares reflect: (i) the exercise of options to acquire common stock to the extent that the options’ exercise prices are less than the average market price of common shares during the period and (ii) the pro forma vesting of restricted stock units.
13
Mistras Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
The following table sets forth the computations of basic and diluted earnings (loss) per share:
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Basic earnings (loss) per share | |||||||||||
| Numerator: | |||||||||||
| Net income (loss) attributable to Mistras Group, Inc. | $ | $ | ( | ||||||||
| Denominator: | |||||||||||
| Weighted average common shares outstanding | |||||||||||
| Basic earnings (loss) per share | $ | $ | ( | ||||||||
| Diluted earnings (loss) per share: | |||||||||||
| Numerator: | |||||||||||
| Net income (loss) attributable to Mistras Group, Inc. | $ | $ | ( | ||||||||
| Denominator: | |||||||||||
| Weighted average common shares outstanding | |||||||||||
Dilutive effect of stock options outstanding (1) | |||||||||||
Dilutive effect of restricted stock units outstanding (1) | |||||||||||
| Diluted earnings (loss) per share | $ | $ | ( | ||||||||
_______________
(1) For the three months ended March 31, 2026, 275,000 shares, related to RSUs were anti-dilutive and therefore were excluded from the calculation of diluted earnings (loss) per share. For the three months ended March 31, 2025, 145,000 shares, related to stock options and 808,000 shares, related to RSUs were excluded from the calculation of diluted earnings (loss) per share due to the net loss for the period.
5. Accounts Receivable, net
| March 31, 2026 | December 31, 2025 | ||||||||||
| Trade accounts receivable - billed | $ | $ | |||||||||
| Trade accounts receivable - unbilled | |||||||||||
| Allowance for credit losses | ( | ( | |||||||||
| Accounts receivable, net | $ | $ | |||||||||
Trade accounts receivable - unbilled are generally billed in the subsequent quarter to their revenue recognition. The Company considers Trade accounts receivable - unbilled as short-term in nature as they are normally converted to Trade accounts receivable - billed within 90 days, thus future changes in economic conditions will not have a significant effect on the credit loss estimate.
14
Mistras Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
6. Inventories
Inventories consist of the following (in thousands):
| March 31, 2026 | December 31, 2025 | ||||||||||
| Raw materials and consumable supplies | $ | $ | |||||||||
| Work in progress | |||||||||||
| Finished goods | |||||||||||
| Inventories | $ | $ | |||||||||
7. Property, Plant and Equipment, net
Property, plant and equipment, net consisted of the following:
Useful Life (Years) | March 31, 2026 | December 31, 2025 | |||||||||||||||
| Land | $ | $ | |||||||||||||||
| Buildings and improvements | |||||||||||||||||
| Office furniture and equipment | |||||||||||||||||
| Machinery and equipment | |||||||||||||||||
| Accumulated depreciation and amortization | ( | ( | |||||||||||||||
| Property, plant and equipment, net | $ | $ | |||||||||||||||
Depreciation expense for the three months ended March 31, 2026 and 2025 was approximately $6.0
8. Goodwill
Changes in the carrying amount of goodwill by segment is shown below:
| North America | International | Products and Systems | Total | ||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | |||||||||||||||||||
| Foreign currency translation | ( | ( | |||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | |||||||||||||||||||
The Company reviews goodwill for impairment on a reporting unit basis on October 1 of each year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.
The Company performed a quantitative annual impairment test as of October 1, 2025 and did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable. Additionally, through March 31, 2026, the Company did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable. Significant adverse changes in future periods could negatively affect the Company's key assumptions and may result in future goodwill impairment charges which could be material.
15
Mistras Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
9. Intangible Assets
The gross amount, accumulated amortization and net carrying amount of intangible assets were as follows:
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||||||||
| Useful Life (Years) | Gross Amount | Accumulated Amortization | Net Carrying Amount | Gross Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||||||||||||||
| Customer relationships | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
| Software/Technology | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Covenants not to compete | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Other | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||
10. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
| March 31, 2026 | December 31, 2025 | ||||||||||
| Accrued salaries, wages and related employee benefits | $ | $ | |||||||||
| Accrued workers’ compensation and health benefits | |||||||||||
| Deferred revenue | |||||||||||
| Pension accrual | |||||||||||
| Right-of-use liability - Operating | |||||||||||
| Other accrued expenses | |||||||||||
| Total | $ | $ | |||||||||
11. Long-Term Debt
Long-term debt consisted of the following:
| March 31, 2026 | December 31, 2025 | ||||||||||
| Senior credit facility | $ | $ | |||||||||
Senior secured term loan, net of unamortized debt issuance costs of $ | |||||||||||
| Other | |||||||||||
| Total debt | |||||||||||
| Less: Current portion | ( | ( | |||||||||
| Long-term debt, net of current portion | $ | $ | |||||||||
Senior Credit Facility
16
Mistras Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
On August 1, 2022, the Company entered into a credit agreement (the “Credit Agreement”), which provides the Company with a $190 million 5-year committed revolving credit facility and a $125 million term loan with a balance of $93.6 million as of March 31, 2026. The Credit Agreement permits the Company to borrow up to $100 million in non-U.S. dollar currencies and to use up to $20 million of the credit limit for the issuance of letters of credit. Both the revolving line of credit and the term loan under the Credit Agreement have a maturity date of July 30, 2027.
The Credit Agreement has the following key terms, conditions and financial covenants:
•Borrowings bear interest at Secured Overnight Financing Rate ("SOFR") plus a credit spread adjustment and applicable SOFR margin ranging from 1.25 % to 2.75 %, based upon our Total Consolidated Debt Leverage Ratio (defined below).
◦Total Consolidated Debt Leverage Ratio means the ratio of (a) Total Consolidated Debt to (b) EBITDA (as defined in the Credit Agreement) for the trailing four consecutive fiscal quarters.
◦Total Consolidated Debt means all indebtedness (including subordinated debt) of the Company on a consolidated basis.
•The Company has the benefit of the lowest SOFR margin if its Total Consolidated Debt Leverage Ratio is equal to or less than 1.25 to 1.0, and the margin increases as the ratio increases, to the maximum margin if the ratio is greater than 3.75 to 1.0. The Credit Agreement is secured by liens on substantially all the assets of the Company and certain of its U.S subsidiaries and is guaranteed by those U.S. subsidiaries.
•The Company is required to maintain a Total Consolidated Debt Leverage Ratio of no more than 4.0 to 1.0 at the end of each quarter through June 30, 2023 and stepping down to a maximum permitted ratio of no more than 3.75 to 1.0 for the remainder of the term.
•The Company is required to maintain a Fixed Charge Coverage Ratio of 1.25 to 1.0 for the duration of the Credit Agreement, as defined in the Credit Agreement.
•The Credit Agreement limits the Company’s ability to, among other things, create liens, make investments, incur more indebtedness, merge or consolidate, make dispositions of property, pay dividends, make distributions to stockholders or repurchase our stock, enter into a new line of business, enter into transactions with affiliates and enter into burdensome agreements.
•The Credit Agreement does not limit the Company’s ability to acquire other businesses or companies except that the acquired business or company must be in the Company's line of business, the Company must be in compliance with the financial covenants on a pro forma basis after taking into account the acquisition, and the Company must provide written notice at least business days prior to the date of an acquisition of $10 million or more.
•Quarterly payments on the term loan of $1.56 million through June 30, 2024, then increasing to $2.34 million through June 30, 2025, and to $3.12 million for each quarterly payment thereafter through maturity.
As of March 31, 2026, the Company had borrowings of $179.6 million and a total of $3.4 million of letters of credit outstanding under the Credit Agreement. The Company has capitalized costs associated with debt modifications of $0.4 million as of March 31, 2026, which are included in Other assets on the Unaudited Condensed Consolidated Balance Sheets and will be amortized into interest expense over the remaining term of the Credit Agreement through July 30, 2027.
As of March 31, 2026, the Company was in compliance with the terms and covenants of the Credit Agreement. The Company continuously monitors compliance with the covenants contained in the Credit Agreement.
Other debt
12. Fair Value Measurements
17
Mistras Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
The Company performs fair value measurements in accordance with the guidance provided by ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a three level hierarchy that prioritizes the inputs used to measure fair value.
Financial instruments not measured at fair value on a recurring basis
The Company has evaluated current market conditions and borrower credit quality and has determined that the carrying value of its long-term debt approximates fair value. The fair value of the Company’s notes payable and finance lease obligations approximates their carrying amounts based on anticipated interest rates which management believes would currently be available to the Company for similar issuances of debt.
13. Commitments and Contingencies
Legal Proceedings and Government Investigations
The Company is periodically involved in lawsuits, investigations and claims. While uncertainties exist with respect to the ultimate resolution of lawsuits, investigations and claims asserted against it, except as stated below, the Company, based on currently available information, does not believe that any currently pending or threatened legal proceeding to which the Company is a party, or is likely to become a party, will have a material adverse effect on its business, results of operations, cash flows or financial condition. The costs incurred by the Company to defend lawsuits, investigations and claims and amounts the Company pays to other parties because of these matters may be covered by insurance in some circumstances.
Litigation and Commercial Claims
The Company and a subsidiary of the Company, Mistras Arizona Inspection Services LLC (“Mistras Arizona”), are subject to a lawsuit ("the DEQ Proceeding") filed by the State of Arizona and the Arizona Department of Environmental Quality (collectively “DEQ”). The DEQ Proceeding, captioned State of Arizona v. Mistras Group, Inc., Mistras Arizona Inspection Services, LLC and Naiman Phoenix, Ltd., was originally filed on February 27, 2024, in the Superior Court of the State of Arizona for Maricopa County, CV 2024-003866 (the "DEQ Complaint"). The DEQ Complaint alleges various violations of Arizona environmental laws and regulations by Mistras Arizona in connection with the operation by Mistras Arizona of its testing facility in Phoenix, Arizona. The DEQ Complaint seeks, through injunctive relief, the closing of a chromic acid plating line at the testing facility, implementation of a site assessment plan approved by the DEQ, and corrective and remedial action to bring the testing facility into compliance with laws and regulations. In addition, the DEQ is seeking unspecified penalties and costs in connection with the DEQ Proceeding.
The Superior Court held a hearing in September 2024 regarding the DEQ’s request for a preliminary injunction. On October 23, 2024, the Superior Court issued a ruling, which declined to issue the preliminary injunction requested by the DEQ, but imposed the following conditions on the Company and Mistras Arizona unless and until modified by the Superior Court or entry of a final judgment: (1) the Company and Mistras Arizona are prohibited from releasing or permitting any release of chromic acid from the facility; (2) within a reasonable time, the Company and Mistras Arizona must complete improvements to the testing facility designed to prevent future discharges of chromium or chromic acid; (3) the Company and Mistras Arizona must notify the DEQ upon completion of the improvement to enable the DEQ to conduct an inspection; and (4) the Company and Mistras Arizona are prohibited from engaging in any chrome plating operations at the testing facility until they notify the DEQ that the improvements have been completed. The DEQ may seek relief if it determines that the improvements are not sufficient to prevent discharges. In April 2025, Mistras Arizona notified the DEQ that the improvements were completed, which the DEQ
then inspected. Following the DEQ site visit, Mistras Arizona commenced its chrome plating operations on April 28, 2025. Mistras Arizona has been and intends to continue complying with the Superior Court's ruling. In the meantime, the DEQ Proceeding is ongoing.
It is probable that additional investigation and/or remediation costs, as well as fines and penalties will be imposed related to the DEQ Proceeding. However, the Company is unable to estimate the range of loss that it may incur and whether these amounts will be material to the Company.
18
Mistras Group, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
(tabular dollars and shares in thousands, except per share data)
In addition, Mistras Arizona’s operations in Phoenix are located at a leased site within the footprint of the Motorola 52nd Street Superfund Site (the “Motorola Site”). Mistras Arizona has received two General Notice Letters from the US Environmental Protection Agency (the "EPA"), dated May 21, 2024 and December 1, 2025, informing Mistras Arizona that the EPA has identified it as a potentially responsible party in relation to the Motorola Site. On April 29, 2025, the Company received a notice from the EPA requesting information regarding the improvements and other matters related to Phoenix testing facility. Mistras Arizona provided the EPA with the requested information in July 2025.
Pension Related Contingencies
Certain of the Company’s subsidiaries had significant reductions in their unionized workers in 2018. The collective bargaining agreements for the employees of these subsidiaries required contributions for these employees to two national multi-employer pension funds. The reduction in employees resulted in one of the Company's subsidiaries incurring a complete withdrawal to one of the pension funds under the Employee Retirement Income Security Act of 1974 ("ERISA"), which was fully satisfied in 2019. The Company has determined that the subsidiary is likely to incur partial or complete withdrawal liability to the other pension fund. The balance of the estimated total amount of this potential liability as of March 31, 2026 is approximately $2.1 million, which was incurred in 2018 and 2019.
14. Segment Disclosure
The Company’s three
•North America: This segment provides asset protection solutions predominantly in North America, with the largest concentration in the United States, followed by Canada, consisting primarily of NDT, inspection, mechanical and engineering services that are used to evaluate the safety, structural integrity and reliability of critical energy, industrial and public infrastructure and commercial aerospace components. Software, digital and data services are included in this segment.
•International: This segment offers services, products and systems similar to those of the other segments to select markets within Europe, the Middle East, Africa, Asia and South America, but not to customers in China and South Korea, which are served by the Products and Systems segment.
•Products and Systems: This segment designs, manufactures, sells, installs and services the Company’s asset protection products and systems, including equipment and instrumentation, predominantly in the United States.
Costs incurred for general corporate services, including finance, legal, and certain other costs that are provided to the segments are reported within Corporate and eliminations. Sales to the International segment from the Products and Systems segment and subsequent sales by the International segment of the same items are recorded and reflected in the operating performance of both segments. Additionally, engineering charges and royalty fees charged to the North America and International segments by the Products and Systems segment are reflected in the operating performance of each segment.
The chief operating decision maker ("CODM") reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment. The Company's CODM is Natalia Shuman, our Chief Executive Officer, as she has final authority over performance assessment and resource allocation decisions. Our segments are based on the type and concentration of customers served, service requirements, methods of distribution and major product lines.
Segment income (loss) from operations is the primary performance measure used by the CODM to evaluate segment performance and allocate resources, including considering budget-to-actual variances and prior year-to-actual variances on a monthly basis in accordance with GAAP under ASC 280, Segment Reporting. Segment income (loss) from operations for each of the Company's reportable segments are comprised of revenue, selling, general & administrative expenses, and "other expenses." "Other expenses" include cost of revenue, reorganization and environmental costs, depreciation and amortization and research and engineering.
Corporate and other assets are comprised principally of cash, deposits, property, plant and equipment, domestic deferred taxes, deferred charges and other assets. Corporate loss from operations consists of administrative charges related to corporate
19
personnel and other charges that cannot be readily identified for allocation to a particular segment. These items of our operating profit are managed centrally at the corporate level and are excluded from the measure of segment income reviewed by the CODM, as well as the measure of segment performance used for incentive compensation purposes.
Selected consolidated financial information by segment for the periods shown was as follows. Income (loss) from operations by operating segment includes intercompany transactions, which are eliminated in Corporate and eliminations.
For the three months ended March 31, 2026
| Segment | |||||||||||||||||||||||||||||||||||
| North America | International | Products and Systems | Total Reportable Segments | Corporate and eliminations | Total | ||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| Selling, general & administrative expenses | |||||||||||||||||||||||||||||||||||
| Other Expenses | ( | ||||||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||
For the three months ended March 31, 2025
| Segment | |||||||||||||||||||||||||||||||||||
| North America | International | Products and Systems | Total Reportable Segments | Corporate and eliminations | Total | ||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||
| Selling, general & administrative expenses | |||||||||||||||||||||||||||||||||||
| Other Expenses | ( | ||||||||||||||||||||||||||||||||||
| Income (loss) from operations | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||
The tables above only reconcile to income (loss) from operations as our measure of segment profitability and the remainder of the reconciliation to net income (loss) can be seen on the Unaudited Condensed Consolidated Statement of Income (Loss). Products and Systems segment revenue was comprised of approximately $0.5 million and $1.0 million of sales to the International segment, which were eliminated upon consolidation, for the three months ended March 31, 2026 and March 31, 2025, respectively. Intersegment revenue related to sales between other segments was immaterial for the three months ended March 31, 2026 and March 31, 2025.
Selected consolidated financial information by segment for the periods shown was as follows (with intercompany transactions eliminated in Corporate and eliminations):
| March 31, 2026 | December 31, 2025 | ||||||||||
| Intangible assets, net | |||||||||||
| North America | $ | $ | |||||||||
| International | |||||||||||
| Products and Systems | |||||||||||
| Corporate and eliminations | |||||||||||
| Total | $ | $ | |||||||||
20
| March 31, 2026 | December 31, 2025 | ||||||||||
| Total assets | |||||||||||
| North America | $ | $ | |||||||||
| International | |||||||||||
| Products and Systems | |||||||||||
| Corporate and eliminations | ( | ||||||||||
| Total | $ | $ | |||||||||
| March 31, 2026 | December 31, 2025 | ||||||||||
| Long-lived assets | |||||||||||
| North America | $ | $ | |||||||||
| International | |||||||||||
| Products and Systems | |||||||||||
| Corporate and eliminations | |||||||||||
| Total | $ | $ | |||||||||
Refer to Note 2 - Revenue, for revenue by geographic area for the three months ended March 31, 2026 and 2025.
21
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis (“MD&A”) provides a discussion of our results of operations and financial position for the three months ended March 31, 2026 and 2025. The MD&A should be read together with our Unaudited Condensed Consolidated Financial Statements and related notes included in Item 1 in this Quarterly Report on Form 10-Q (the "Quarterly Report") and our audited consolidated financial statements and related notes included in our 2025 Annual Report. Unless otherwise specified or the context otherwise requires, “Mistras,” “the Company,” “we,” “us” and “our” refer to Mistras Group, Inc. and its consolidated subsidiaries. The MD&A includes the following sections:
•Forward-Looking Statements
•Overview
•Note about Non-GAAP Measures
•Consolidated Results of Operations
•Liquidity and Capital Resources
•Critical Accounting Policies and Estimates
Forward-Looking Statements
This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934 (“Exchange Act”). Such forward-looking statements include those that express plans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact. These forward-looking statements are based on our current expectations and projections about future events and they are subject to risks and uncertainties known and unknown that could cause actual results and developments to differ materially from those expressed or implied in such statements.
In some cases, you can identify forward-looking statements by terminology, such as “goals,” or “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “could,” “should,” “would,” “predicts,” “appears,” “projects,” or the negative of such terms or other similar expressions. You are urged not to place undue reliance on any such forward-looking statements, any of which may turn out to be wrong due to inaccurate assumptions, various risks, uncertainties or other factors known and unknown. Factors that could cause or contribute to differences in results and outcomes from those in our forward-looking statements, including increases or changes in tariffs, trade restrictions or taxes; supply chain disruptions resulting from geopolitical instabilities and disputes (including those related to the wars in the Middle East and Ukraine); other impacts from the wars in the Middle East and Ukraine and related economic volatility and uncertainty resulting therefrom, include, without limitation, those discussed in the “Business—Forward-Looking Statements,” and “Risk Factors” sections of our 2025 Annual Report as well as those discussed in this Quarterly Report and in our other filings with the SEC. In addition, there are various developments discussed below which could create risks and uncertainty about our business, results of operations or liquidity.
Overview
The Company is a global leader in technology-enabled industrial asset integrity solutions, serving critical industries including oil & gas, aerospace & defense, power & utilities, manufacturing, and civil infrastructure.
The Company provides a diversified portfolio of products and services, ranging from advanced non-destructive testing ("NDT") and pipeline inspections to real-time condition monitoring, maintenance planning, and specialized engineering, powered by a proprietary management software suite that centralizes integrity data for predictive analytics and benchmark analysis. With a long-standing track record of innovation and deep industry expertise, the Company helps clients reduce risk, extend asset life, and optimize operational performance.
The Company enhances value for its customers by integrating asset integrity protection throughout supply chains and centralizing integrity data through a suite of Industrial Internet of Things ("IoT")-connected software and monitoring solutions, including OneSuite®, which serves as a cloud-based ecosystem that pulls together the Company’s software and data services capabilities. This integrated approach enables customers to make data-driven decisions that improve asset reliability, enhance safety, reduce operational risk, and optimize performance across the asset lifecycle.
22
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
The Company’s core capabilities also include NDT field inspections enhanced by advanced robotics, laboratory quality control and assurance testing, sensing technologies and NDT equipment, asset and mechanical integrity engineering services, and light mechanical maintenance and access services.
Our operations consist of three reportable segments: North America, International, and Products and Systems.
•North America provides asset protection solutions predominantly in North America, with the largest concentration in the United States, followed by Canada, consisting primarily of NDT, inspection, mechanical and engineering services that are used to evaluate the safety, structural integrity and reliability of critical energy, industrial and public infrastructure and commercial aerospace components. Software, digital and data services are included in this segment.
•International offers services, products and systems similar to those of the other segments to select markets within Europe, the Middle East, Africa, Asia and South America, but not to customers in China and South Korea, which are served by the Products and Systems segment.
•Products and Systems designs, manufactures, sells, installs and services the Company’s asset protection products and systems, including equipment and instrumentation, predominantly in the United States.
Given the role our solutions play in enhancing the safe and efficient operation of infrastructure, we have historically provided a majority of our solutions to our customers on a regular, recurring basis. We perform these services largely at our customers’ facilities, while primarily servicing our aerospace customers at our network of state-of-the-art, in-house laboratories. These solutions typically include NDT and inspection services, and can also include a wide range of mechanical services, including heat tracing, pre-inspection insulation stripping, coating applications, re-insulation, engineering assessments and long-term condition-monitoring. Under this business model, many customers outsource their inspection to us on a “run and maintain” basis. We have established long-term relationships as a critical solutions provider to many of the leading companies with asset-intensive infrastructure in our target markets. These markets include companies across oil and gas, aerospace and defense, industrial, power generation and transmission (including alternative and renewable energy), infrastructure, research and engineering, petrochemical, and other process industries.
We have focused on providing our advanced asset protection solutions to our customers using proprietary, technology-enabled software and testing instruments, including those developed by our Products and Systems segment. We have made numerous acquisitions in the past in an effort to grow our base of experienced, certified personnel, expand our service lines and technical capabilities, increase our geographical reach, complement our existing offerings, and leverage our fixed costs. We have increased our capabilities and the size of our customer base through the development of applied technologies and managed support services, organic growth and the integration of acquired companies. These acquisitions have provided us with additional service lines, technologies, resources and customers which we believe enhance our advantages over our competition.
We believe long-term growth can be realized in our target markets. Our level of business and financial results are impacted by world-wide macro- and micro-economic conditions generally, as well as those within our target markets. For example, ongoing geopolitical conflicts, including the war between Russia and Ukraine, the unrest in the Middle East, including the recent conflict between the U.S. and Iran, continue to contribute to global energy market volatility, supply chain disruption, and economic uncertainty that could affect certain of our end markets, particularly oil and gas customers. Among other things, we expect the timing of our oil and gas customers inspection spend to be impacted by volatility in oil prices resulting from these factors.
We have continued providing our customers with an innovative asset protection software ecosystem through our OneSuite platform. The software platform offers functions of our software and services brands as integrated apps on a cloud environment. OneSuite serves as a single access portal for customers' data activities and provides access to 90 plus applications being offered on one centralized platform.
Recent Developments
Our cash position and liquidity remains strong. As of March 31, 2026, our cash and cash equivalents balance was approximately $25.0 million, and we had available borrowing capacity of up to $100.7 million under the revolving credit facility under our Credit Agreement.
The global trade landscape continues to be highly volatile. In 2025, the U.S. government implemented a series of trade tariffs on goods imported into the U.S. from various countries. In many cases, these tariffs resulted in reciprocal tariffs and other
23
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
actions on goods being exported from the U.S. These associated tariffs are complex and continue to evolve as negotiations occur. In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (“IEEPA”), which the U.S. government relied on to impose certain tariffs, does not authorize the administration to impose tariffs. On March 4, 2026, the U.S. Court of International Trade ordered the U.S. Customs and Border Protection (“CBP”) to process refunds of the IEEPA tariffs, although the Court immediately suspended the order while the CBP determines a refund process. The IEEPA tariffs remain subject to ongoing litigation between the administration and other parties. In response to the U.S. Supreme Court ruling mentioned above, the administration announced plans to implement new tariffs under alternative statutory authority. The full impact of the U.S. Supreme Court’s ruling and the administration’s response, including the timing and extent of any refunds and the impact of the new tariffs, remain uncertain. Tariffs and trade barriers have not had a material effect on our business or results of operations during 2026 to date. However, new tariffs or trade measures could result in increased costs to us or our suppliers and could impact the import of materials by our customers, including materials subject to our inspection and testing services, which could adversely affect demand for our services.
Geopolitical tensions in the Middle East, including the conflict involving the United States and Iran, have contributed to increased volatility in global energy markets and broader macroeconomic uncertainty. The conflict in the Middle East has significantly reduced the export of oil and natural gas from the Persian Gulf, creating upward pressure on oil and natural gas prices, and has also disrupted and increased the costs of certain other supplies. Fluctuations in crude oil and natural gas prices may influence capital spending and maintenance activity by customers in the oil and gas sector, which could affect demand for certain of our services, particularly field inspection and asset integrity solutions. Additionally, continued instability in the region could contribute to supply chain disruptions, changes in foreign currency exchange rates, and delays in customer projects. While we have not experienced material impacts to date, the situation remains dynamic, and we continue to monitor developments and assess potential impacts on our operations, financial condition, and results of operations.
Note About Non-GAAP Measures
The Company prepares its consolidated financial statements in accordance with GAAP. In this MD&A under the heading "Income from Operations", the non-GAAP financial performance measure "Income from operations before special items” is used for each of our three operating segments, “Corporate and Eliminations” and the "Total Company", with tables reconciling the measure to a financial measure under GAAP. This presentation excludes from "Income from Operations" (a) reorganization and other costs, which includes items such as severance, labor relations matters and asset and lease termination costs, and (b) environmental expense, which relates to costs associated with the environmental matter at the Phoenix lab operated by Mistras Arizona, as described in Note 13 to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report. These adjustments have been excluded from the GAAP measure because these expenses and credits are not related to our or any individual segment's core business operations. Our management uses this non-GAAP measure as a measure of operating performance and liquidity to assist in comparing performance from period to period on a consistent basis, as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations. We believe investors and other users of our financial statements benefit from the presentation of this non-GAAP measure in evaluating our performance. Income before special items excludes the identified adjustments, which provides additional tools to compare our core business operating performance on a consistent basis and measure underlying trends and results in our business. Income before special items is not used to determine incentive compensation for executives or employees, nor is it a replacement for the reported GAAP financial performance and/or necessarily comparable to the non-GAAP financial measures of other companies. Any measure that eliminates the foregoing items has material limitations as a performance or liquidity measure and should not be considered alternatives to net income or any other measures derived in accordance with GAAP. Because Income from operations before special items may not be calculated in the same manner by all companies, this measure may not be comparable to other similarly titled measures used by other companies.
24
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
Results of Operations
Condensed consolidated results of operations for the three months ended March 31, 2026 and 2025 were as follows:
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Revenue | $ | 169,034 | $ | 161,615 | |||||||
| Gross profit | 44,732 | 40,892 | |||||||||
| Gross profit as a % of Revenue | 26.5 | % | 25.3 | % | |||||||
| Income (loss) from operations | 4,682 | (1,012) | |||||||||
| Income (loss) from operations as a % of Revenue | 2.8 | % | (0.6) | % | |||||||
| Income (loss) before provision for income taxes | 2,735 | (4,336) | |||||||||
| Net income (loss) | 2,357 | (3,168) | |||||||||
| Net income (loss) attributable to Mistras Group, Inc. | $ | 2,388 | $ | (3,186) | |||||||
Revenue
Revenue was $169.0 million for the three months ended March 31, 2026, an increase of $7.4 million, or 4.6%, compared with the three months ended March 31, 2025.
Revenue by segment for the three months ended March 31, 2026 and 2025 were as follows:
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Revenue | |||||||||||
| North America | $ | 135,321 | $ | 128,902 | |||||||
| International | 36,290 | 33,214 | |||||||||
| Products and Systems | 2,653 | 3,091 | |||||||||
| Corporate and eliminations | (5,230) | (3,592) | |||||||||
| Total | $ | 169,034 | $ | 161,615 | |||||||
Three Months
In the three months ended March 31, 2026, total revenue increased 4.6% versus the prior year comparable period due predominantly to a low-single-digit organic increase driven by increases in the aerospace and defense, power generation and transmission, infrastructure, research, and engineering, and petrochemical end markets. North America segment revenue increased 5.0%, driven predominantly by increases in the aerospace and defense, power generation and transmission, infrastructure, research, and engineering and petrochemical end markets as a result of strong market demand. International segment revenue increased 9.3%, due predominantly to a low-double-digit favorable impact of foreign exchange rates. Products and Systems segment revenue decreased by 14.2%, due to decreased sales volume and shipments as compared to the prior year comparable period.
Oil and gas customer revenue comprised approximately 51% and 60% of total revenue for the three months ended March 31, 2026 and 2025, respectively. Aerospace and defense customer revenue comprised approximately 16% and 13% of total revenue for the three months ended March 31, 2026 and 2025, respectively. The Company’s top ten customers comprised approximately 36% of total revenue for the three months ended March 31, 2026, as compared to 37% for the three months ended March 31, 2025, with no customer accounting for 10% or more of total revenue in either three-month period.
The Company has retrospectively reclassified certain revenue types for each quarterly period in 2025 in order to conform the classification with the current period presentation. The table below presents the reclassified balances for each quarterly period for the year ended December 31, 2025.
25
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
| 2025 Quarterly Revenues | |||||||||||||||||||||||
| Three months ended March 31, 2025 | Three months ended June 30, 2025 | Three months ended September 30, 2025 | Three months ended December 31, 2025 | ||||||||||||||||||||
| Revenue by type | |||||||||||||||||||||||
| Integrated Field Solutions | $ | 139,115 | $ | 158,386 | $ | 166,578 | $ | 155,678 | |||||||||||||||
| In-Laboratory Services | 22,500 | 27,019 | 28,971 | 25,777 | |||||||||||||||||||
| Total | $ | 161,615 | $ | 185,405 | $ | 195,549 | $ | 181,455 | |||||||||||||||
| Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Revenue by type | |||||||||||
| Integrated Field Solutions | $ | 139,861 | $ | 139,115 | |||||||
| In-Laboratory Services | 29,173 | $ | 22,500 | ||||||||
| Total | $ | 169,034 | $ | 161,615 | |||||||
In presenting the allocation of revenue by type in the table above, management makes certain assumptions in its allocation of revenue from laboratories that provide more than one type of service. The allocation methodology and assumptions made are consistent for the years presented.
Integrated Field Solutions revenue is comprised of revenue derived from on-site asset inspection, maintenance, and related technical services performed by our technicians at customer locations, as well as data-driven solutions, including software, analytics, and implementation services that provide insights and recommendations to enhance asset integrity and performance. Integrated Field Solutions revenue increased by $0.7 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to increases in our power generation and transmission, infrastructure, research, and engineering and petrochemical end markets as a result of strong market demand, partially offset by decreases in sales volume in our oil and gas end market within our North America and International segments.
In-Laboratory Services revenue is comprised of quality assurance inspections of components and materials at our in-house laboratory facilities. In-Laboratory Services revenue increased by $6.7 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to increased sales volumes in our aerospace and defense end market in our North America segment.
Gross Profit
Gross profit increased by $3.8 million, or 9.4%, in the three months ended March 31, 2026 versus the prior year comparable period, primarily due to an improved and diversified business mix and operating efficiencies.
Gross profit by segment for the three months ended March 31, 2026 and 2025 was as follows:
26
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
27
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Gross profit | |||||||||||
| North America | $ | 33,536 | $ | 30,165 | |||||||
| % of segment revenue | 24.8 | % | 23.4 | % | |||||||
| International | 10,095 | 9,088 | |||||||||
| % of segment revenue | 27.8 | % | 27.4 | % | |||||||
| Products and Systems | 1,067 | 1,623 | |||||||||
| % of segment revenue | 40.2 | % | 52.5 | % | |||||||
| Corporate and eliminations | 34 | 16 | |||||||||
| $ | 44,732 | $ | 40,892 | ||||||||
| % of total revenue | 26.5 | % | 25.3 | % | |||||||
Three Months
Gross profit margin was 26.5% and 25.3% for the three months ended March 31, 2026 and 2025, respectively. Gross profit margin for the North America segment increased by 1.4% for the three months ended March 31, 2026 as compared to the prior year comparable period primarily due to an improved and diversified business mix and operating efficiencies. International segment realized a 0.4% increase in gross profit margin to 27.8% for the three months ended March 31, 2026 as compared to the prior year comparable period primarily due to a favorable sales mix in the current year period. Products and Systems segment gross margin had a decrease of 12.3% to 40.2% for the three months ended March 31, 2026 primarily due to a less favorable sales mix as compared to the prior period.
Operating Expenses
Operating expenses for the three months ended March 31, 2026 and 2025 were as follows:
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating Expenses | |||||||||||
| Selling, general and administrative expenses | $ | 36,986 | $ | 35,652 | |||||||
| Reorganization and other costs | 475 | 3,087 | |||||||||
| Environmental expense, net | (131) | 540 | |||||||||
| Research and engineering | 221 | 299 | |||||||||
| Depreciation and amortization | 2,499 | 2,326 | |||||||||
| $ | 40,050 | $ | 41,904 | ||||||||
Three Months
Operating expenses decreased $1.9 million, or 4.4%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Selling, general and administrative expenses increased $1.3 million during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, due to strategic investments in our operations to support commercial execution and promote growth in our strategic markets, while maintaining discipline in overhead costs. Reorganization and other costs decreased by $2.6 million to $0.5 million as compared to the prior year comparable period, due to lower restructuring activity, including workforce reductions and laboratory rationalization initiatives in the three months ended March 31, 2025, which did not recur at similar levels during the current year period. Environmental expense, net decreased by $0.7 million as compared to the prior year comparable period due to lower expenses related to the ongoing remediation efforts related to the Mistras Arizona claim discussed in Note 13 - Commitments and Contingencies. Research and engineering expenses decreased by $0.1 million during the three months ended March 31, 2026 compared to the three months
28
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
ended March 31, 2025. Depreciation and amortization increased by $0.2 million during the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Income (Loss) from Operations
The following table shows a reconciliation of the income (loss) from operations (GAAP) to income (loss) from operations before special items (non-GAAP) for each of our three segments, Corporate and Elimination and for the Company in total:
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| North America: | |||||||||||
| Income from operations (GAAP) | $ | 10,420 | $ | 6,515 | |||||||
| Reorganization and other costs | 74 | 1,358 | |||||||||
| Income from operations before special items (non-GAAP) | $ | 10,494 | $ | 7,873 | |||||||
| International: | |||||||||||
| Income from operations (GAAP) | $ | 1,476 | $ | 1,081 | |||||||
| Reorganization and other costs | 221 | 178 | |||||||||
| Income from operations before special items (non-GAAP) | $ | 1,697 | $ | 1,259 | |||||||
| Products and Systems: | |||||||||||
| Income (loss) from operations (GAAP) | $ | (11) | $ | 327 | |||||||
| Reorganization and other costs | — | 151 | |||||||||
| Income (loss) from operations before special items (non-GAAP) | $ | (11) | $ | 478 | |||||||
| Corporate and Eliminations: | |||||||||||
| Loss from operations (GAAP) | $ | (7,203) | $ | (8,935) | |||||||
| Environmental expense, net | (131) | 540 | |||||||||
| Reorganization and other costs | 180 | 1,400 | |||||||||
| Loss from operations before special items (non-GAAP) | $ | (7,154) | $ | (6,995) | |||||||
| Total Company: | |||||||||||
| Income (loss) from operations (GAAP) | $ | 4,682 | $ | (1,012) | |||||||
| Environmental expense, net | (131) | 540 | |||||||||
| Reorganization and other costs | 475 | 3,087 | |||||||||
| Income from operations before special items (non-GAAP) | $ | 5,026 | $ | 2,615 | |||||||
See section Note About Non-GAAP Measures in this Quarterly Report for an explanation of the use of non-GAAP measurements.
Three Months
For the three months ended March 31, 2026, income from operations (GAAP) increased $5.7 million or 562.6%, compared with the three months ended March 31, 2025, while income from operations before special items (non-GAAP) increased by $2.4 million, or 92.2%. The increase in income from operations was due to higher gross profit and lower reorganization and other costs. As a percentage of revenue, income from operations increased by 340 basis points to 2.8% in the three months ended March 31, 2026 compared to (0.6)% in the three months ended March 31, 2025. As a percentage of revenue, income from operations before special items increased by 140 basis points to 3.0% in the three months ended March 31, 2026 compared to 1.6% in the three months ended March 31, 2025.
29
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
Interest Expense
Interest expense was approximately $2.9 million and $3.3 million for the three months ended March 31, 2026 and 2025, respectively. This decrease of $0.4 million in interest expense in the current year period was a result of lower interest rates during the three months ended March 31, 2026 in comparison to the prior year comparable period.
Income Taxes
Our effective income tax rate was approximately 13.8% for the three months ended March 31, 2026, compared to an effective income tax benefit of approximately 26.9% for the three months ended March 31, 2025.
The effective income tax rate for the three months ended March 31, 2026, was lower than the statutory rate primarily due to the impact of favorable discrete items related to stock compensation. The effective income tax benefit for the three months ended March 31, 2025, was higher than the statutory rate primarily due to the impact of an unfavorable discrete item related to stock compensation.
Income tax expense varies as a function of pre-tax income and the level of non-deductible expenses, such as certain amounts of meals and entertainment expenses, valuation allowances, and other permanent differences. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. Our effective income tax rate may fluctuate over the next few years due to many variables including the amount and future geographic distribution of our pre-tax income, changes resulting from our acquisition strategy, and increases or decreases in our permanent differences.
On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), was enacted, which includes a broad range of tax reform provisions. These tax reform provisions include the extension and modification of certain provisions of the Tax Cuts and Jobs Act. Effective for calendar year 2025. The changes include, but are not limited to, immediate expensing of domestic research and development expenditure, the restoration of 100% bonus depreciation, and an EBITDA-based interest expense limitation. These provisions did not have a material impact on the Company’s financial statements for the three months ended March 31, 2026.
Liquidity and Capital Resources
Cash flows are summarized in the table below:
Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net cash (used in) provided by: | |||||||||||
| Operating activities | $ | 2,809 | $ | 5,645 | |||||||
| Investing activities | (5,558) | (5,414) | |||||||||
| Financing activities | (349) | (702) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 79 | 690 | |||||||||
| Net change in cash and cash equivalents | $ | (3,019) | $ | 219 | |||||||
Cash Flows from Operating Activities
During the three months ended March 31, 2026, cash provided by operating activities was $2.8 million, representing a year-over-year decrease of $2.8 million, or 50%. This decrease was primarily attributable to movements in working capital, as compared to the prior year comparable period.
Cash Flows from Investing Activities
During the three months ended March 31, 2026, cash used in investing activities was $5.6 million, representing a $0.1 million increase compared to the prior year comparable period. The increase is primarily attributable to an increase in expenditures for property, plant, and equipment of $1.4 million, partially offset by an increase in proceeds from the sale of equipment of $1.3 million.
30
Cash Flows from Financing Activities
Net cash used in financing activities was $0.3 million for the three months ended March 31, 2026, compared to net cash used in financing activities of $0.7 million for the three months ended March 31, 2025. During the three months ended March 31, 2026, net borrowings of debt were approximately $0.6 million higher than the prior year comparable period resulting in additional net debt borrowings during the current year period in comparison to the prior year comparable period. The increase in net debt borrowings is partially offset by $0.1 million more in taxes paid related to net share settlement of share-based awards during the three months ended March 31, 2026.
Effect of Exchange Rate Changes on Cash and Cash Equivalents
The effect of exchange rate changes on our cash and cash equivalents was an increase of $0.1 million in the three months ended March 31, 2026, compared to an increase of $0.7 million for the three months ended March 31, 2025.
Cash Balance and Credit Facility Borrowings
As of March 31, 2026, we had cash and cash equivalents totaling $25.0 million and $100.7 million of unused commitments under our Credit Agreement with borrowings of $179.6 million and $3.4 million of letters of credit outstanding. We finance operations primarily through our existing cash balances, cash collected from operations, bank borrowings and capital lease financing. We believe these sources are sufficient to fund our operations for the foreseeable future.
As of March 31, 2026, we were in compliance with the terms of the Credit Agreement and will continuously monitor our compliance with the covenants contained in the Credit Agreement. The Company believes that it is probable that the Company will be able to comply with the financial covenants in the Credit Agreement and that sufficient credit remains available under the Credit Agreement to meet the Company's liquidity needs. However, such matters cannot be predicted with certainty.
The terms of our Credit Agreement are described in Note 11 - Long-Term Debt of the Notes to the Unaudited Condensed Consolidated Financial Statements, under the heading "Senior Credit Facility".
Contractual Obligations
There have been no significant changes in our contractual obligations and outstanding indebtedness as disclosed in the 2025 Annual Report.
Off-balance Sheet Arrangements
During the three months ended March 31, 2026, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
31
Critical Accounting Policies and Estimates
There have been no significant changes to our critical accounting policies and estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the 2025 Annual Report.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no significant changes to our quantitative and qualitative disclosures about market risk as discussed in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” included in the 2025 Annual Report.
ITEM 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Exchange Act, our management carried out an evaluation, under the supervision and with the participation of our President and Chief Executive Officer and our Senior Executive Vice President, Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls (as defined in Rule 13a-15(e) of the Exchange Act) and procedures. Based upon that evaluation, our President and Chief Executive Officer and our Senior Executive Vice President, Chief Financial Officer concluded that, as of March 31, 2026, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2026 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
32
PART II—OTHER INFORMATION
ITEM 1. Legal Proceedings
See Note 13 - Commitments and Contingencies to the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report for a description of our legal proceedings. There have been no material legal proceedings and no material developments with regard to any matters disclosed under Part I, Item 3 "Legal Proceedings" in our 2025 Annual Report, except as disclosed herein under Note 13 - Commitments and Contingencies to the Notes to the Unaudited Condensed Consolidated Financial Statements.
ITEM 1.A. Risk Factors
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors discussed under the “Risk Factors” section included in our 2025 Annual Report. There have been no material changes to the risk factors previously disclosed in the 2025 Annual Report.
ITEM 2. Unregistered Sale of Equity Securities and Use of Proceeds
(a) Sales of Unregistered Securities
None.
(b) Use of Proceeds from Public Offering of Common Stock
None.
(c) Repurchases of Our Equity Securities
The following table sets forth the shares of our common stock we acquired during the quarter as a result of the surrender of shares by employees to satisfy tax withholding obligations in connection with the vesting or settlement of restricted stock units.
| Month Ending | Total Number of Shares (or Units) Purchased | Average Price Paid per Share (or Unit) | ||||||||||||
| January 31, 2026 | 211 | $ | 13.15 | |||||||||||
| February 28, 2026 | 5,223 | $ | 15.28 | |||||||||||
| March 31, 2026 | 106,558 | $ | 14.34 | |||||||||||
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Mine Safety Disclosures
Not applicable.
ITEM 5. Other Information
Rule 10b5-1 Trading Plans
During the three months ended March 31, 2026, none of the Company's directors or officers, as defined in Section 16 of the Securities Exchange Act of 1934, adopted terminated
33
ITEM 6. Exhibits
| Exhibit No. | Description | |||||||
| 101.INS | Inline XBRL Instance Document | |||||||
| 101.SCH | Inline XBRL Schema Document | |||||||
| 101.CAL | Inline XBRL Calculation Linkbase Document | |||||||
| 101.LAB | Inline XBRL Labels Linkbase Document | |||||||
| 101.PRE | Inline XBRL Presentation Linkbase Document | |||||||
| 101.DEF | Inline XBRL Definition Linkbase Document | |||||||
| 104 | Cover Page Interactive Data File (formatted Inline XBRL and contained in Exhibit 101) | |||||||
34
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| MISTRAS GROUP, INC. | ||||||||
| By: | /s/ Edward J. Prajzner | |||||||
| Edward J. Prajzner | ||||||||
| Senior Executive Vice President and Chief Financial Officer | ||||||||
| (Principal Financial and Accounting Officer and duly authorized officer) | ||||||||
Date: May 7, 2026
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 13A-14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
I, Natalia Shuman-Fabbri, certify that:
1.I have reviewed this report on Form 10-Q of Mistras Group, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 7, 2026
| /s/ Natalia Shuman-Fabbri | ||||||||
| Natalia Shuman-Fabbri | ||||||||
| President and Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 13A-14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
I, Edward J. Prajzner, certify that:
1.I have reviewed this report on Form 10-Q of Mistras Group, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 7, 2026
| /s/ Edward J. Prajzner | |||||
| Edward J. Prajzner | |||||
| Senior Executive Vice President and Chief Financial Officer | |||||
| (Principal Financial Officer and Principal Accounting Officer) | |||||
Exhibit 32.1
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Each of the undersigned hereby certifies, for the purposes of section 1350 of chapter 63 of title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Mistras Group, Inc. (the “Company”), that, to his knowledge, the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2026 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This written statement is being furnished to the Securities and Exchange Commission as an exhibit to the Report.
Dated: May 7, 2026
| /s/ Natalia Shuman-Fabbri | |||||
| Natalia Shuman-Fabbri | |||||
| President and Chief Executive Officer | |||||
| (Principal Executive Officer) | |||||
| /s/ Edward J. Prajzner | |||||
| Edward J. Prajzner | |||||
| Senior Executive Vice President and Chief Financial Officer | |||||
| (Principal Financial Officer and Principal Accounting Officer) | |||||