What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2021-03-16 compared with 2020-03-27 · 159 added, 107 removed, 387 unchanged (41% of the section changed)

11 unchanged sentences

Asset Protection Industry Overview

MISTRAS Group, Inc.

is a leading "one source" multinational provider of integrated technology-enabled asset protection solutions, helping to maximize the safety and operational uptime for civilization’s most critical industrial and civil assets.

Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, and a decades-long legacy of industry leadership, MISTRAS leads clients in the oil and gas, aerospace and defense, power generation, civil infrastructure, and manufacturing industries towards achieving and maintaining operational excellence.

By supporting these organizations that help fuel our vehicles and power our society;

inspecting components that are trusted for commercial, defense, and space craft;

and building real-time monitoring equipment to enable safe travel across bridges, MISTRAS helps the world at large.

The company’s core capabilities also include non-destructive testing (“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.

MISTRAS enhances value for its clients by integrating asset protection throughout supply chains and centralizing integrity data through a suite of Industrial IoT-connected digital software and monitoring solutions.

We offer our customers “OneSource™ for Asset Protection Solutions ® ” and are a leading global provider of technology-enabled asset protection solutions used to evaluate the safety, structural integrity and reliability of critical energy, industrial and public infrastructure.

2 unchanged sentences

We deliver value through a comprehensive “OneSource™” portfolio of customized solutions, utilizing a proven systematic method that creates a closed-loop lifecycle for addressing continuous asset protection and improvement.

Table o f Contents

Our specialized asset protection solutions include:

• Field Inspections

• Maintenance

• Data Management

• Laboratory Quality Assurance/Control (QA/QC)

Our OneSource model emphasizes the integration of these solutions and corresponding data to service our customers throughout their assets’ lifetimes.

• Maintenance

• Engineering Consulting

• Data Management and Services

Our OneSource™ model emphasizes the integration of these solutions and the asset integrity data associated with them to service our customers throughout their assets’ lifetimes.

Under this business model, many customers outsource their inspection, integrity data management and other asset protection needs to us on a “run-and-maintain” basis to ensure the continued safety and structural and operational integrity of their assets.

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:

These markets primarily consist of:

• Oil & Gas (Downstream, Midstream, Upstream and Petrochemical)

4 unchanged sentences

A majority of our revenues are generated by deploying technicians at our customers' locations.

Most of our revenues from aerospace and certain manufacturing customers are generated by performing inspections and testing at our various in-house laboratories.

We generated revenues of $748.6 million, $742.4 million and $701.0 million for the years ended December 31, 2019, 2018 and 2017, respectively, net income of $6.1 million and $6.8 million for the years ended December 31, 2019 and 2018, respectively, and net loss of $2.2 million for the year ended December 31, 2017.

Most of our revenues from aerospace and defense as well as certain manufacturing customers are generated by performing inspections and testing at our various in-house laboratories.

We generated revenues of $592.6 million, $748.6 million and $742.4 million for the years ended December 31, 2020, 2019 and 2018, respectively.

We generated a net loss of $(99.5) million, net income of $6.1 million and net income of $6.8 million for the years ended December 31, 2020, 2019, and 2018 respectively.

For the years ended December 31, 2020, 2019 and 2018, we generated approximately 80%, 80% and 77%, respectively, of our revenues from our Services segment.

7 unchanged sentences

The ability to inspect infrastructure assets and not interfere with their operating performance makes NDT a highly-attractive alternative to many traditional techniques, which may require shutting down an asset or entire facility.

Typical issues for which MISTRAS technicians inspect include corrosion, cracking, leaking, faults and flaws in piping, storage tanks, pressure vessels and a wide range of other industrial assets.

Typical issues for which MISTRAS technicians inspect include corrosion, cracking, leaking, faults and flaws in piping, storage tanks, pressure vessels as well as a wide range of other industrial assets and public infrastructure.

Our automated data acquisition solutions utilize smart sensing and monitoring, robotic inspection systems, and digitized spot inspections to provide asset integrity data with greater insight into current and future asset conditions.

1 unchanged sentence

After an initial field inspection is performed, MISTRAS is able to provide multiple supplemental solutions that further serve to solidify our relationships with our customers and drive additional revenue.

We provide a broad range of engineering consulting services, primarily for process equipment, technologies and facilities.

Our engineering consultations include plant operations and management support, turnaround/shutdown planning, profit improvement, facilities planning studies, engineering design, process safety reviews, energy optimization evaluations, benchmarking/key performance indicator (KPI) development and technical training.

Our Asset Integrity Management/Mechanical Integrity (AIMS/MI) services help improve asset reliability and regulatory compliance through a systematic, engineering-based approach to ensure the ongoing integrity and safety of equipment and industrial facilities.

AIMS/MI services can include conducting an inventory of infrastructure assets;

developing, implementing and training personnel in executing inspection and maintenance procedures;

and managing MI programs.

We help to identify gaps between existing and desired practices and establish quality assurance standards for fabrication, engineering and installation of infrastructure assets.

Table o f Contents

Laboratory Quality Assurance/Control (QA/QC)

Our network of in-house laboratories located across North America and Europe offers quality assurance and quality control (QA/QC) solutions for new and existing metal and alloy components, materials, and composites.

Our in-house labs work with our customers throughout their components’ lifetimes, from preparation and production to post-processing and in-service component monitoring.

MISTRAS’ laboratory QA/QC solutions help to meet customer needs throughout their manufacturing cycles, with a focus on optimizing production logistics.

Our in-house lab solutions include:

• Non-destructive evaluation/inspection (NDE/NDI)

• Destructive testing (DT)

• Metallurgical testing

• Chemical analysis testing

• Mechanical services

• Pre-machining

• Finishing services

We often inspect and test components prior to assembly to screen for defects and discontinuities introduced in the manufacturing process.

We also inspect existing components to ensure they remain fit-for-purpose.

Our labs hold a wide variety of certifications, such as:

Nadcap (formerly NADCAP, the National Aerospace and Defense Contractors Accreditation Program), AS9100/ISO-9001, Federal Aviation Administration (FAA) Repair Station, and the International Traffic in Arms Regulations/Export Administration Regulations (ITAR/EAR) , that allow us to perform inspections to meet or exceed stringent regulatory and manufacturers' requirements.

With these certifications comes a comprehensive range of approvals from prime contractors of major projects, militaries, and internationally-renowned original equipment manufacturers (OEMs) from many of our key markets, including the oil and gas, aerospace and defense, power generation, and industrial markets.

We perform maintenance and light mechanical services to prepare assets for inspection and to return them to working condition post inspection.

6 unchanged sentences

Mechanical services are still a small part of our business, and we carefully try to avoid providing any such services that conflict with our inspection services.

Data Management

MISTRAS has the capability of providing integrated data management solutions throughout the asset protection cycle, including data collection, storage, visualization, and analytics.

Our world-class enterprise inspection database management software (IDMS) - Plant Condition Management Software (PCMS TM ) - was developed specifically for process industries and equipment, and enables the storage, organization and analysis of inspection data.

Engineering Consulting

We provide a broad range of engineering consulting services, primarily for process equipment, technologies and facilities.

AIMS/MI services can include conducting an inventory of infrastructure assets;

developing, implementing and training personnel in executing inspection and maintenance procedures;

and managing MI programs.

We help to identify gaps between existing and desired practices and establish quality assurance standards for fabrication, engineering and installation of infrastructure assets.

Much of our work is conducted in hard-to-access locations, including those in at-height, subsea and confined locations.

We utilize scaffolding and rope access to access at-height and confined assets;

certified divers for subsea inspection and maintenance;

and unmanned (drone) aerial, land-based and subsea systems to deliver a wide range of inspection applications, with an emphasis on minimizing at-height access and confined space entry (CSE).

Table o f Contents

Data Management and Services

The asset protection solutions that MISTRAS provides throughout our customers’ asset lifecycles generate asset integrity data that needs to be effectively archived, managed, and analyzed.

MISTRAS provides value to our customers through our ability to integrate these functions to a single provider, as customers often struggle to unify data that was collected by various contractors in different locations at different times.

Plant Condition Management Software (PCMS®).

Our world-class enterprise inspection database management software (IDMS) - Plant Condition Management Software (PCMS®) - was developed specifically for process industries and equipment, and enables the storage, organization and analysis of inspection data.

PCMS offers wide-ranging support for mechanical integrity programs, including:

6 unchanged sentences

In many instances, customers of our field inspections and consulting services also have licensed PCMS for storage and analysis of collected inspection and MI data.

A common difficulty that MISTRAS’ customers face is the ability to easily access data from multiple data collection inputs and contractors.

MISTRAS is actively advancing initiatives focused on creating digital pathways between multiple data applications, including PCMS, to provide streamlined access to asset integrity data and offer subject matter expert (SME) data analysis support.

We believe PCMS is one of the most widely used plant condition management software systems in North American refineries.

1 unchanged sentence

refining capacity, as well as by leading midstream pipeline energy companies and major energy companies in Canada and Europe.

This provides us with recurring maintenance and support fees and additional marketing opportunities for additional software and solutions.

Following our recent acquisitions of companies that support the midstream sector of the Oil & Gas industry, we believe MISTRAS provides amongst the most comprehensive, data-driven pipeline protection solution available to the industry.

This provides us with recurring maintenance and support fees and marketing opportunities for additional software and solutions.

Pipeline Data.

Following our acquisitions of companies that support the midstream sector of the Oil & Gas industry, we believe MISTRAS provides among the most comprehensive, data-driven pipeline protection solution available to the industry.

These proprietary pipeline data analysis solutions enable deep integration of inline inspection (ILI) big data with real-time risk analytics and business intelligence (BI) to provide capabilities for supporting pipeline integrity, which we believe provides us with an important competitive advantage.

MISTRAS also digitizes the transfer of field inspection and monitoring data to inspection data management systems (IDMS).

MISTRAS Digital™ is an electronic platform that digitally delivers field inspection assignments and related data, captures inspection results, and delivers electronic reporting and productivity tracking via Key Performance Indicators (KPIs).

MISTRAS Digital integrates with PCMS and other inspection data management systems to provide additional productivity improvements.

Similarly, our online monitoring systems feed data directly into our cloud-based monitoring portal, providing customers with real-time access to their asset integrity data.

Much of our work is conducted in hard-to-access locations, including those in at-height, subsea and confined locations.

We utilize scaffolding and rope access to access at-height and confined assets;

certified divers for subsea inspection and maintenance;

and unmanned aerial, land-based and subsea systems for a wide range of inspection applications, with an emphasis on minimizing at-height access and confined space entry (CSE).

MISTRAS Digital ® .

MISTRAS has also invested resources in digitalizing and optimizing the collection, transfer, and visibility of field inspection data.

MISTRAS Digital ® is an electronic platform that digitally delivers field inspection assignments and related data, captures inspection results, and delivers electronic reporting and productivity tracking via relevant KPIs to multiple members of a customer organization, including those not directly associated with the Inspection function.

Customers have made clear that the timely and accurate delivery of field data to their inspection data management systems (IDMS) is an important feature for them.

MISTRAS Digital ® integrates with MISTRAS’ PCMS and other inspection data management systems to provide additional productivity improvements.

Online Monitoring.

Our online condition-monitoring solutions provide real-time reports and analysis of infrastructure to alert facility personnel to damages before critical failures occur, while our flexible, Industrial Internet of Things (IIoT)-compatible, cloud-based online monitoring portal centralizes and analyzes all collected monitoring data.

8 unchanged sentences

• Fluid Corrosivity

Table o f Contents

• Through-Valve Leaking

1 unchanged sentence

We offer a variety of secure, web-based solutions that monitor structural integrity and analyze conditions against our library of historical inspection data, allowing users to stay aware of potential concerns and prioritize future inspections and maintenance.

We also offer custom-developed software that integrates into onsite IDMSs, stores and trends monitoring data and provides immediate automated data analysis.

We provide continuous, periodic and conditional monitoring, depending on the type of asset and its operating condition.

Continuous monitoring is applied on critical assets to observe the earliest onset of a defect to predict its progress and to track its progression to help avoid catastrophic failure.

Periodic monitoring, or “walk around” monitoring, is a preventative maintenance technique to observe changes in an asset's condition over a specified period of time.

Conditional monitoring solutions are typically used when there is a known defect that needs to be monitored until the asset is repaired or replaced.

Laboratory Quality Assurance/Control (QA/QC)

Our in-house labs work with our customers throughout their components’ lifetimes, from preparation and production to post-processing and in-service component monitoring.

MISTRAS’ laboratory QA/QC solutions help to meet customer needs throughout their manufacturing cycles, with a focus on optimizing production logistics.

Our in-house lab solutions include:

• Non-destructive evaluation/inspection (NDE/NDI)

• Destructive testing (DT)

• Metallurgical testing

• Chemical analysis testing

• Mechanical services

• Pre-machining

• Finishing services

We often inspect and test components prior to assembly to screen for defects and discontinuities introduced in the manufacturing process.

We also inspect existing components to ensure they remain fit-for-purpose.

Our labs hold a wide variety of certifications that allow them to perform inspections to meet or exceed stringent regulatory requirements, such as:

Nadcap (formerly NADCAP, the National Aerospace and Defense Contractors Accreditation Program), AS9100/ISO-9001, Federal Aviation Administration (FAA) Repair Station, the International Traffic in Arms Regulations/Export Administration Regulations (ITAR/EAR) and manufacturers' requirements.

We also offer custom-developed software that integrates with sensing technologies, reporting platforms, and onsite IDMSs;

stores and trends monitoring data;

and provides immediate automated data analysis.

Much of our monitoring is based on acoustical emissions technology.

We design and manufacture portable, handheld, wireless and turnkey NDT equipment, along with corresponding data acquisition sensors and software, for spot inspections and long-term, unattended monitoring applications.

6 unchanged sentences

Centers of Excellence

Another differentiator in our business model are our Centers of Excellence (COEs), which offer support for asset, technology, or industry-specific solutions.

Another differentiator in our business model is our Centers of Excellence (COEs), which offer support for asset, technology, or industry-specific solutions.

Our subject matter experts engage in strategic sales opportunities to offer customers value-added solutions using advanced technologies and methods.

22 unchanged sentences

ASSET PROTECTION INDUSTRY OVERVIEW

Table o f Contents

Asset protection plays a crucial role in assuring the integrity and reliability of critical infrastructure.

15 unchanged sentences

Due to the increasing sophistication and automation of NDT programs, a decreasing supply of skilled professionals and increasing governmental regulations, companies are increasingly outsourcing NDT to third-party providers with advanced solution portfolios, engineering expertise and trained workforces.

Digital Transformation of Asset Protection.

Plants in the oil & gas and process industries are recognizing the need to evolve their traditional, paper-based mechanical integrity programs in favor of digitalized solutions.

The rise of big data intelligence and the need to gain actionable insights from raw asset integrity data are growing trends that provide opportunities for contractors with a wide range of asset protection expertise and integrated data platforms to help customers maximize uptime while controlling costs.

Increasing Corrosion from Low-Quality Inputs .

4 unchanged sentences

These materials often cannot be tested using traditional NDT techniques.

We believe that demand for more advanced testing and assessment solutions will increase along with the demand for these advanced materials during the design, manufacturing, operating and quality control phases.

We believe that demand for more advanced testing and assessment solutions will increase along with the increased utilization of these advanced materials during the design, manufacturing, operating and quality control phases.

Meeting Safety Regulations .

3 unchanged sentences

As a result, these owners and operators are seeking highly-reliable asset protection suppliers with a track record of assisting organizations in meeting increasingly stringent regulations.

Our customers benefit from MISTRAS’ extensive engineering consulting base that supports them in devising mechanical integrity programs that both meet regulatory compliance standards and enable enhanced safety and uptime at their facilities.

Table o f Contents

Expanding Addressable End-Markets .

The continued emergence of and advances in asset protection technologies and software-based systems are increasing the demand for asset protection solutions in applications where existing techniques were previously ineffective.

Expanding Aerospace Industry .

We believe that increased demand will continue to come from the aerospace industry due to the approximately decade-long backlog for next-generation commercial aircraft to be built, driving the need for advanced solutions that drive cost and quality efficiencies.

Expanding Aerospace and Defense Industry .

We believe that increased demand will continue to come over the next several years from the commercial industry due to the approximately decade-long backlog for next-generation commercial aircraft to be built, driving the need for advanced solutions that drive cost and quality efficiencies.

Demand continues to be stable in the defense industry while demand in the outerspace industry is growing.

Crude Oil Prices.

We expect the current range for crude oil prices to continue for the foreseeable future.

With the prices lower than the 2006 to 2014 time period, we continue to see reductions in NDT and maintenance spending, although not to the extent as experienced in recent years, due in part to the price stabilization.

We expect customers may continue to defer inspection or maintenance spending into early 2020 .

Volatility in the energy sector has been profound during the 2015-2020 five-year period.

The collapse of world oil prices in 2015 and 2016 undermined industry expansion.

While energy prices recovered in 2017 and 2018, they have once more declined, with the current year collapse, fueled by the coronavirus pandemic.

With lower prices, we continue to see reductions in NDT and maintenance spending, although not to the extent as experienced in during 2015 and 2016, due in part to price stabilization.

Expanding Pipeline Integrity Regulations:

2 unchanged sentences

These regulations require inspection and integrity data records throughout a pipeline’s lifetime to be “reliable, traceable, verifiable, and complete,” increasing the demand for integrated inspection, engineering, monitoring, and data management and analysis solutions.

Consolidation of Refineries:

Consolidation of refinery ownership will create both pressure on refinery service providers due to increased customer purchasing power and provide an opportunity to those same refinery service providers to become preferred providers to these larger customers.

Our Competitive Strengths

We believe the following competitive strengths contribute to our being a leading provider of asset protection solutions and will allow us to further capitalize on growth opportunities in our industry:

One Source Provider for Asset Protection Solutions .

OneSource™ Provider for Asset Protection Solutions .

We believe we have one of the most comprehensive portfolios of integrated asset protection solutions worldwide, which positions us to be a leading single-source provider for our customers’ asset protection requirements.

This is particularly a competitive strength in regards to turnarounds and shutdowns - during which facilities temporarily cease operations in order to perform plant-wide inspections, maintenance and repairs - as these work stoppages make up significant portions of refinery, process and power plant maintenance budgets.

This is particularly a competitive strength in regards to turnarounds and shutdowns - during which facilities temporarily cease portions of their operations in order to perform plant-wide inspections, maintenance and repairs - as the services being requested and performed during these work stoppages make up significant portions of refinery, process and power plant maintenance budgets.

Demand for our solutions increases during these outages, as facilities seek third-party providers to perform a wide spectrum of asset protection operations while the plant is offline.

3 unchanged sentences

With solutions for integrated data acquisition, storage, visualization and analytics, our integrated data management solutions are ahead of the industry’s trend towards centralizing asset protection to fewer, highly-skilled and multi-disciplined vendors.

Many of our data solutions are platform-agnostic, which expands the potential customer pool for our solutions as we can integrate into customers’ existing operations.

Many of our data solutions are platform-agnostic, allowing us to integrate into customer's existing operations, and thereby expanding the potential customer pool for our solutions.

Our presence in our customers’ operations throughout their asset lifecycles also ideally positions us to be their primary vendor to centralize their asset integrity data collection, management, and analysis, creating opportunities to scale our relationships.

Long-Standing Trusted Provider to a Diversified and Growing Customer Base .

2 unchanged sentences

Repository of Customer-Specific Inspection Data .

Through our PCMS world-class enterprise data management and analysis software, we have accumulated extensive, proprietary process data that allows us to provide our customers with value-added services, such as benchmarking, risk-based inspection (RBI) and reliability-centered maintenance (RCM).

Through our world-class enterprise data management and analysis software, PCMS®, we have accumulated extensive, proprietary process data that allows us to provide our customers with value-added services, such as benchmarking, risk-based inspection (RBI) and reliability-centered maintenance (RCM).

Proprietary Products, Software and Technology Packages .

Our deep knowledge base in asset protection services and equipment enables us to offer technology packages, in which our field technicians utilize our proprietary and specialized testing procedures and hardware, advanced pattern recognition, neural network software and databases to compare test results against our prior testing data or national and international structural integrity standards.

Table o f Contents

Deep Domain Knowledge and Extensive Industry Experience .

18 unchanged sentences

Our growth strategy emphasizes the following key elements:

Expand Our Focus in the Aerospace Industry .

Continue to Digitalize Asset Protection Data and Processes.

MISTRAS places a data-centric focus on asset protection, enabling our customers to ease some of their biggest areas of concern (particularly the timely and accurate transfer of asset integrity data from the field to their IDMS, as well as the data’s visibility and accessibility once uploaded).

We expect that the demand for big data intelligence and remote data visibility will continue to grow, and are investing in data solutions that help our customers visualize and generate actionable insight from their asset integrity data, regardless of data input.

We are also actively seeking to optimize our customers’ asset protection workflows and processes, by creating digital paths between data applications to increase data visibility and reduce manual data entry and human error.

Expand Our Focus in the Aerospace and Defense Industries .

We believe that the introduction of next-generation airframes and aircraft engines has created an inherent demand for inspection, testing, machining and mechanical services required for the production of parts.

1 unchanged sentence

The Company consummated two acquisitions of aerospace inspection companies in 2017.

These recent actions are driven by our increased focus to provide solutions to our customers throughout their manufacturing value chains in this growing area.

These recent actions are driven by our increased focus to provide solutions to our customers in the aerospace and defense industries throughout their manufacturing value chains in this growing area.

Expand Our Focus in the Pipeline Integrity Industry.

7 unchanged sentences

We believe that performing mechanical services to complement inspections, such as removing and reapplying insulation or preparing surfaces for coating or painting, is an important market differentiator for us.

This is particularly true when considering the cost-efficiencies our customers realize when our rope access technicians perform these services at height without the use of scaffolding.

This is particularly true, for example, when considering the cost-efficiencies our customers realize when our rope access technicians perform these services at height without the use of scaffolding.

Many of our customers already require these services, but utilize multiple vendors to do so, creating an opportunity for us to provide greater value to a customer base that increasingly requires enhanced speed and efficiency.

3 unchanged sentences

We also intend to continue to develop technologies that enhance the flow of data throughout multiple operational phases and facilities, through solutions such as MISTRAS Digital, our integrated pipeline integrity data portfolio, and our cloud-based monitoring data portal.

Table o f Contents

Expand our Solution Offerings to Existing Customers .

1 unchanged sentence

Many of our customers are multinational corporations with asset protection requirements at multiple locations.

We believe that expanding our solution offerings, combined with the trend of customers outsourcing asset protection to service providers with integrated offerings, provides opportunities for significant additional recurring revenues.

We believe that expanding our solution offerings and merging and visualizing data across facilities for enterprise data analysis, combined with the trend of customers outsourcing asset protection to service providers with integrated offerings, provides opportunities for significant additional recurring revenues.

Continue to Expand Our Customer Base into New End Markets .

3 unchanged sentences

We have completed several acquisitions to supplement and enhance our solutions, add new customers, expand our sales channels and accelerate our expected growth.

Due to our current debt levels and restrictions related to the debt covenants in our credit facility, we do not expect to make any acquisitions in 2020.

Due to our current debt levels and restrictions related to the debt covenants in our credit facility, we do not expect to make any acquisitions in 2021 other than small acquisitions with the banks’ approval.

However, once we reduce our debt, we expect to make selective acquisitions beyond 2021.

The Company has three operating segments:

This segment provides asset protection solutions predominantly in North America, with the largest concentration in the United States, consisting primarily of non-destructive testing, inspection, mechanical and engineering services that are used to evaluate the structural integrity and reliability of critical energy, industrial and public infrastructure.

International .

This segment offers services, products and systems similar to those of our Services and Products and Systems 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 our Products and Systems segment.

Products and Systems .

This segment designs, manufactures, sells, installs and services our asset protection products and systems, including equipment and instrumentation, predominantly in the United States.

Services 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 structural integrity and reliability of critical energy, industrial and public infrastructure and commercial aerospace components.

PCMS software and pipeline related software and data analysis solutions 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.

For a discussion of segment revenues, operating results and other financial information, including geographic areas in which we generated revenues, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7, as well as Note 2-Revenue in the notes to consolidated financial statements in Item 8 of this Annual Report.

12 unchanged sentences

coal-fired and nuclear electricity generation is projected to decline, with most of the decline occurring by the mid-2020s.

The United States is projected to continue to produce historically high levels of crude oil and natural gas.

The EIA forecasts U.S.

crude oil production will average 13.2 million barrels per day (bpd) in 2020, up 1.0 million bpd from 2019, and then rise to 13.6 million bpd in 2021.

In addition, the EIA estimates that production of U.S.

crude oil reaches 14.0 million bpd by 2022 and remains near this level through 2045.

The global competitiveness of the U.S.

refining sector and the ability of the United States to increase exports as domestic consumption falls is projected to keep domestic refinery utilization near recent levels, between 90% and 93%.

crude oil production will average 11.0 million barrels per day (bpd) in 2021, down 0.3 million bpd from 2020, and then rise to 11.5 million bpd in 2022.

Table o f Contents

There are a number of economic factors which drive the aerospace market, including:

• The approximately decade-long backlog for next generation commercial aircraft to be built, including several large and mid-sized aircraft built by Boeing and Airbus, among other manufacturers;

• At CFM International's planned full Leap production rate of 2,000-plus engines a year from 2020 onward, the existing order backlog represents eight full years of production;

• The multi-year backlog for next generation commercial aircraft to be built, including several large and mid-sized aircraft built by Boeing and Airbus, among other manufacturers;

• The continuing regulatory scrutiny to ensure public safety serves to ensure the continued need for inspection and mechanical services to be performed.

3 unchanged sentences

(Year ended December 31, 2020)

Oil & Gas Breakdown

(Year ended December 31, 2020)

MISTRAS supplies oil and gas asset protection solutions to downstream (refining), midstream (transportation and storage), upstream (exploration and production) and petrochemical operations.

We use our vast solutions portfolio to help identify current and future asset performance, and actively prevent, mitigate or otherwise address potential issues, including corrosion, cracking, leaking and other damages that may lead to safety, productivity or environmental concerns.

Our solutions help identify conditions that could lead to potential catastrophic failures in tanks, vessels, valves, buried and above ground pipelines, pumps, motors, compressors and other critical assets found throughout the oil & gas production and delivery supply chain.

Our solutions help identify conditions that if not remedied, could lead to potential catastrophic failures in tanks, vessels, valves, buried and above ground pipelines, pumps, motors, compressors and other critical assets found throughout the oil & gas production and delivery supply chain.

We actively seek to evolve our solutions through technological enhancements and R&D to discover new applications.

2 unchanged sentences

In general, the energy market is poised to leverage digital solutions to facilitate process improvements as well as increase plant reliability and improve process and personnel safety.

This provides an opportunity for the Company to synergistically leverage our asset protection solutions into our new MISTRAS Digital platform.

This provides an opportunity for us to synergistically leverage our asset protection solutions into our new MISTRAS Digital platform.

Digital transmission of data in various industry sectors, with built-in analytic functions, will allow our customers to better leverage inspection data that is being generated in the field.

Table o f Contents

While we expect off-stream inspection of critical assets to remain a routine practice, we anticipate an increase in the demand for non-invasive, or on-stream inspections.

2 unchanged sentences

The aerospace industry is undergoing unprecedented growth with many original equipment manufacturers (OEMs) reporting record-high backlogs of up to ten years.

We serve this rapidly-growing target market by providing a full range of inspection, testing, machining, mechanical, finishing, additive manufacturing and equipment solutions, which we are Nadcap certified.

Our state-of-the-art in-house labs maintain numerous accreditations from industry organizations, including Nadcap and some of the largest prime manufacturers in the world, such as Boeing, Safran, Airbus, Bombardier and Embraer.

Our state-of-the-art in-house labs maintain numerous accreditations from industry organizations, including Nadcap and some of the largest manufacturers in the world, such as Boeing, Safran, Airbus, Bombardier and Embraer.

Advanced composite materials found in new classes of aircraft require advanced asset protection solutions, including x-ray of critical engine components, ultrasonic fatigue testing of complete aircraft structures and corrosion detection and other critical components.

10 unchanged sentences

We anticipate sharp growth in these types of plants as natural gas pricing remains low, and the environmental impacts of coal remain unattractive to the public.

We also offer solutions for inspection, maintenance, monitoring, and data services for wind turbines and their components.

These include NDT services — often performed through rope and/or drone access — to identify corrosion, cracking, and other defects that can affect the safety and operational effectiveness of wind turbines, along with remedial solutions to repair minor damages identified during inspections.

MISTRAS views the wind/renewables market as a market with growth potential, and we are actively engaging in technology R&D to further support wind turbine owner/operators.

We anticipate demand will continue to grow for wind/renewable energy solutions in the future.

Process Industries

4 unchanged sentences

Public authorities tasked with new construction and maintenance of existing public infrastructure increasingly use asset protection solutions to inspect these assets, including the use of embedded sensors to enable online monitoring throughout the life of the asset.

We have provided testing and structural health monitoring (SHM) solutions on bridges and structures worldwide, including some of the largest and most well-known bridges in the United States and United Kingdom.

Table o f Contents

We have provided testing and structural health monitoring (SHM) and data solutions on bridges and structures worldwide, including some of the largest and most well-known bridges in the United States and United Kingdom.

Our sensors continuously monitor these assets, alerting owner/operators when defects are detected.

1 unchanged sentence

We provide our asset protection solutions to a global customer base of diverse companies primarily in our target markets.

No customer represented 10% or more of our revenue for either of the years ended December 31, 2019 or 2018.

No customer represented 10% or more of our revenue in any of the years ended December 31, 2020, 2019 or 2018.

Geographic Areas

12 unchanged sentences

We also design and manufacture automated ultrasonic systems and scanners in France.

Providing our asset protection solutions requires a highly-skilled and technically proficient employee base.

As of December 31, 2019, we had approximately 5,500 employees worldwide, of which approximately 65% were based in the United States.

Human Capital

As of December 31, 2020, we had 5,400 employees worldwide, of which 3,600 were located in the U.S., 600 in Canada and 1,200 in our other non-U.S.

As described below, we value our employees and have established various programs to promote the satisfaction, health and safety of our employees.

Less than 0.5% of our employees in the United States are unionized.

We believe that we have good relations with our employees.

Caring Connects

We consider the Company and its employees as a team connected by a common thread of caring – about one another, our customers, the environment, and the work we do.

We see our responsibility as looking out for our employees and to encourage our employees to look out for one another, by fostering a culture of togetherness, safety, respect, and contribution which enables each individual member to feel that they are a part of something bigger.

A community of caring professionals with a genuine passion for helping people and making a difference, together – that’s the heart of the program we call Caring Connects.

MISTRAS’ Safety-Conscious Culture

We consider safety as the backbone of our operations.

Our asset protection solutions aim to ensure that industrial assets and facilities remain in safe, reliable working order, which in turn enhances safety for our clients, the public, and the environment.

Our lab and field personnel are trained to operate according to strict safety and quality standards so that our processes and procedures in regard to hazardous materials, worker safety, and accident prevention are sound and effective.

MISTRAS works to help ensure that our clients are in full compliance with all federal, state, and local regulations.

Our practices, policies and procedures are designed to help ensure we perform our duties through the use of safe, industry-best practices, seeking to minimize risk wherever possible.

We emphasize a “MISTRAS’ safety-conscious” culture with the intent that it becomes embedded in the day-to-day work of all our employees.

We use various training tools and other practices to instill attitudes,

Table o f Contents

beliefs, perceptions, and values that all employees share in the mandate to create and maintain a safe work environment for all.

We stay abreast of our safety performance through analysis of our company-wide safety statistics, which help us to determine behavioral trends while also instilling a culture of proactivity .

In 2020, our Board of Directors established the Social Responsibility, Environmental and Safety Committee, consisting of independent directors to help monitor and emphasize the importance of these core values at Mistras.

Our business is seasonal.

This seasonality relates primarily to our oil and gas business.

This seasonality relates primarily to our oil and gas business, and to a lesser extent from the fossil and nuclear power industries.

refineries’ non-peak periods are generally in the fall, when they are retooling to produce more heating oil for winter, and in the spring, when they are retooling to produce more gasoline for summer.

The peak periods for these customers are the summer and winter months, when they run at peak capacity and are not retooling or performing turnarounds or shut downs.

As a result, our revenues in the summer and winter months are typically lower than our revenues in the fall and spring because demand for our asset protection solutions from the oil and gas as well as the fossil and nuclear power industries increases during their non-peak production periods.

As a result, our revenues in the summer and winter months are typically lower than our revenues in the fall and spring, when demand for our asset protection solutions from the oil and gas as well as the fossil and nuclear power industries increases during their non-peak production periods.

Because we are increasing our work in the fall and spring, our cash flows are lower in those quarters than in the summer and winter, as collections of receivables lag behind revenues.

3 unchanged sentences

We believe that few, if any, of our competitors currently provide the full range of asset protection and NDT products, enterprise software (PCMS) and the traditional and advanced services solutions that we offer.

Our competition with respect to NDT services include the Acuren division of Rockwood Service Corporation, SGS Group, the Team Qualspec division of Team, Inc.

Our competition with respect to NDT services include Acuren, SGS Group, the Team Qualspec division of Team, Inc.

and APPLUS RTD.

17 unchanged sentences

• Development of permanently embedded inspection systems to provide continuous, online, in-service monitoring of critical structural components

Table o f Contents

Research and development expenses are reflected on our consolidated statements of income as research and engineering expenses.

7 unchanged sentences

As of December 31, 2020, we held two U.S.

patents (by direct ownership or exclusive licensing), which will expire in 2021 and 2026, respectively, and had four patents pending in the U.S.

patents (by direct ownership or exclusive licensing), which will expire in 2021 and 2026, respectively, and seven patents pending in the U.S.

for applications filed in 2018, 2019 and 2020, and had licenses to certain other patents.

However, we do not principally rely on these patents or licenses to provide our proprietary asset protection solutions.

However, we do not principally rely on these patents or licenses to provide most of our proprietary asset protection solutions.

Our trademarks and service marks provide us and our solutions with a certain amount of brand recognition in our markets.

2 unchanged sentences

Other key trademarks or service marks that we utilize in localized markets or product advertising include:

• One Source for Asset Protection Solutions ®

• Mistras Digital ®

• OneSource™ for Asset Protection Solutions ®

• Physical Acoustics and the PAC logo

• Streamview™

1 unchanged sentence

• Sensor Highway™

• CALIPERAY ®

• Transformer Clinic™

• Valve Squeak

Many elements of our asset protection solutions involve proprietary know-how, technology or data that are not covered by patents or patent applications because they are not patentable or would be difficult to enforce, including technical processes, equipment designs, algorithms and procedures.

We believe that this proprietary know-how, technology and data is the most

important component of our intellectual property used in our asset protection solutions and is a primary differentiator of our solutions from those of our competitors.

We believe that this proprietary know-how, technology and data is the most important component of our intellectual property used in our asset protection solutions and is a primary differentiator of our solutions from those of our competitors.

We rely on various trade secret protection techniques and agreements with our customers, service providers and vendors to protect these assets.

1 unchanged sentence

In addition, many of our employees have entered into confidentiality and proprietary information agreements with us.

Our employee handbook and these agreements require our employees not to use or disclose our confidential information, to assign to us all the inventions, designs and technologies they develop during the course of employment with us and to otherwise address intellectual property protection issues.

Our employee handbook and these agreements require our employees not to use or disclose our confidential information and to assign to us all the inventions, designs and technologies they develop during the course of employment with us, as well as addressing other intellectual property protection issues.

We also seek confidentiality agreements from our customers and business partners before we disclose any sensitive aspects of our technologies or business strategies.

We are not currently involved in any material intellectual property claims.

Table o f Contents

Environmental Matters

4 unchanged sentences

We evaluate and address the environmental impact of our operations by assessing properties in order to avoid future liabilities and comply with environmental, legal and regulatory requirements.

We received a notice in May 2015 that the U.S.

Environmental Protection Agency (“EPA”) performed a preliminary assessment of a leased facility we operate in Cudahy, California.

Based upon the preliminary assessment, the EPA conducted an investigation of the sites to determine whether any hazardous materials were released from the facility.

We were informed that certain hazardous materials and pollutants have been found in the ground water in the general vicinity of the site and the EPA is attempting to ascertain the origination or source of these materials and pollutants.

Given the historic industrial use of the site, the EPA determined that the site of our Cudahy facility should be examined along with numerous other sites in the vicinity.

In 2018, the California Department of Toxic Substances Control notified the owner of the property that it may perform additional investigation of the property.

At this time, we are not able to determine whether we have any liability in connection with this matter and if so, the amount or range of any such liability.

Executive Officers

5 unchanged sentences

Keefe 64 Executive Vice President, General Counsel and Secretary

Lange 59 Senior Executive Vice President of Global Business Development, Marketing & Strategic Planning, and Director

Lange 60 Senior Group Executive Vice President

Wolk 59 Senior Executive Vice President and Chief Operating Officer

31 unchanged sentences

from Seton Hall University School of Law.

Table o f Contents

Lange joined Mistras when we acquired Quality Services Laboratories in November 2000, and was elected a Director in 2003.

Lange has held various executive level positions with Mistras, becoming Vice Chairman in July 2015 and Senior Executive Vice President, effective June 1, 2016.

Lange has held various executive level positions with Mistras, becoming Senior Executive Vice President, effective June 1, 2016.

Lange is a well-recognized authority in Radiography and has held an ASNT Level III Certificate for almost 20 years.

20 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business