What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-05-06 · 246 added, 161 removed, 614 unchanged (40% of the section changed)

2 unchanged sentences

and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

Condensed Consolidated Balance Sheets

( in thousands, except share and per share data )

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

ASSETS (unaudited)

38 unchanged sentences

and Subsidiaries

Unaudited Condensed Consolidated Statements of Loss

Unaudited Condensed Consolidated Statements of Income (Loss)

( in thousands, except per share data )

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Revenue $ 179,031 $ 177,677 $ 340,693 $ 331,412

3 unchanged sentences

Selling, general and administrative expenses 40,676 39,719 82,712 79,358

Bad debt provision for troubled customers, net of recoveries 289 — 289 —

Legal settlement and insurance recoveries, net ( 153 ) — ( 994 ) 1,030

2 unchanged sentences

Acquisition-related expense, net 13 545 63 822

Loss from operations ( 4,698 ) ( 4,746 )

Income from operations 9,576 11,374 4,877 6,628

Interest expense 2,117 3,155 4,055 6,368

Loss before benefit for income taxes ( 6,636 ) ( 7,959 )

Benefit for income taxes ( 1,283 ) ( 2,600 )

Net Loss ( 5,353 ) ( 5,359 )

Income before provision (benefit) for income taxes 7,459 8,219 822 260

Provision (benefit) for income taxes 2,793 2,274 1,509 ( 326 )

Net Income (Loss) 4,666 5,945 ( 687 ) 586

net income attributable to noncontrolling interests, net of taxes 23 8 33 11

Net Loss attributable to Mistras Group, Inc.

Net Income (Loss) attributable to Mistras Group, Inc.

$ 4,643 $ 5,937 $ ( 720 ) $ 575

Loss per common share

Earnings (loss) per common share

Basic $ 0.15 $ 0.20 $ ( 0.02 ) $ 0.02

6 unchanged sentences

and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Loss

Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)

(in thousands )

Three months ended March 31,

Net Loss $ ( 5,353 ) $ ( 5,359 )

Other comprehensive loss:

Three months ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net Income (loss) $ 4,666 $ 5,945 $ ( 687 ) $ 586

Other comprehensive income (loss):

Foreign currency translation adjustments ( 8,531 ) 2,947 ( 7,976 ) 2,355

Comprehensive Loss ( 4,798 ) ( 5,951 )

Comprehensive Income (Loss) ( 3,865 ) 8,892 ( 8,663 ) 2,941

net income attributable to noncontrolling interest 23 8 33 11

Comprehensive loss attributable to Mistras Group, Inc.

$ ( 4,808 ) $ ( 5,954 )

Foreign currency translation adjustments attributable to noncontrolling interests — 1 — 1

Comprehensive income (loss) attributable to Mistras Group, Inc $ ( 3,888 ) $ 8,883 $ ( 8,696 ) $ 2,929

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

5 unchanged sentences

Common Stock Additional

paid-in capital Accumulated

paid-in capital Retained

(deficit) Accumulated

comprehensive loss Total

comprehensive income (loss) Total

Mistras Group,

1 unchanged sentence

Shares Amount Total Equity

Balance at December 31, 2021 29,546 $ 295 $ 238,687 $ ( 17,988 ) $ ( 20,311 ) $ 200,683 $ 229 $ 200,912

Net income (loss) — — — ( 5,363 ) — ( 5,363 ) 10 ( 5,353 )

Balance at March 31, 2022 $ 29,720 $ 297 $ 239,656 $ ( 23,351 ) $ ( 19,756 ) $ 196,846 $ 239 $ 197,085

Net income — — — 4,643 — 4,643 23 4,666

Other comprehensive loss, net of tax — — — — ( 8,531 ) ( 8,531 ) — ( 8,531 )

Share-based compensation — — 1,255 — — 1,255 — 1,255

Net settlement of restricted stock units 87 — ( 214 ) — — ( 214 ) — ( 214 )

Balance at June 30, 2022 29,807 $ 297 $ 240,697 $ ( 18,708 ) $ ( 28,287 ) $ 193,999 $ 262 $ 194,261

Balance at March 31, 2021 $ 29,347 $ 293 $ 235,413 $ ( 27,210 ) $ ( 16,653 ) $ 191,843 $ 201 $ 192,044

Net income — — — 5,937 — 5,937 8 5,945

Other comprehensive income, net of tax — — — — 2,946 2,946 1 2,947

1 unchanged sentence

Net settlement of restricted stock units 85 1 ( 490 ) — — ( 489 ) — ( 489 )

Balance at March 31, 2022 29,720 $ 297 $ 239,656 $ ( 23,351 ) $ ( 19,756 ) $ 196,846 $ 239 $ 197,085

Balance at June 30, 2021 29,432 $ 294 $ 236,125 $ ( 21,273 ) $ ( 13,707 ) $ 201,439 $ 210 $ 201,649

Six months ended

Common Stock Additional

paid-in capital Retained

(deficit) Accumulated

comprehensive income (loss) Total

Mistras Group,

Stockholders’ Equity Noncontrolling Interest

Shares Amount Total Equity

Balance at December 31, 2021 29,546 $ 295 $ 238,687 $ ( 17,988 ) $ ( 20,311 ) $ 200,683 $ 229 $ 200,912

1 unchanged sentence

Other comprehensive loss, net of tax — — — — ( 7,976 ) ( 7,976 ) — ( 7,976 )

Share-based payments — — 1,262 — — 1,262 — 1,262

Share-based compensation — — 2,770 — — 2,770 — 2,770

Net settlement of restricted stock units 261 2 ( 760 ) — — ( 758 ) — ( 758 )

Balance at March 31, 2021 29,347 $ 293 $ 235,413 $ ( 27,210 ) $ ( 16,653 ) $ 191,843 $ 201 $ 192,044

Balance at June 30, 2022 29,807 $ 297 $ 240,697 $ ( 18,708 ) $ ( 28,287 ) $ 193,999 $ 262 $ 194,261

Balance at December 31, 2020 29,234 $ 292 $ 234,638 $ ( 21,848 ) $ ( 16,061 ) $ 197,021 $ 198 $ 197,219

Net income — — — 575 — 575 11 586

Other comprehensive income, net of tax — — — — 2,354 2,354 1 2,355

Share-based compensation — — 2,464 — — 2,464 — 2,464

Net settlement of restricted stock units 198 2 ( 977 ) — — ( 975 ) — ( 975 )

Balance at June 30, 2021 29,432 $ 294 $ 236,125 $ ( 21,273 ) $ ( 13,707 ) $ 201,439 $ 210 $ 201,649

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

3 unchanged sentences

(in thousands )

Three months ended March 31,

Six months ended June 30,

Cash flows from operating activities

Net loss $ ( 5,353 ) $ ( 5,359 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities

Net income (loss) $ ( 687 ) $ 586

Adjustments to reconcile net income (loss) to net cash provided by operating activities

Depreciation and amortization 16,935 17,197

4 unchanged sentences

Other 709 ( 64 )

Changes in operating assets and liabilities, net of effect of acquisitions and dispositions

Changes in operating assets and liabilities, net of effect of acquisitions

Accounts receivable ( 23,035 ) ( 15,577 )

5 unchanged sentences

Payment of contingent consideration liability in excess of acquisition-date fair value ( 533 ) —

Net cash provided by (used in) operating activities ( 5,399 ) 3,148

Net cash provided by operating activities 7,809 18,126

Cash flows from investing activities

9 unchanged sentences

Repayment of revolver ( 48,250 ) ( 37,500 )

Payment of financing costs — ( 550 )

Payment of contingent consideration for business acquisitions ( 405 ) ( 938 )

Taxes paid related to net share settlement of share-based awards ( 756 ) ( 975 )

Net cash provided by financing activities 4,323 435

Net cash used in financing activities ( 5,056 ) ( 12,970 )

Effect of exchange rate changes on cash and cash equivalents ( 1,755 ) ( 656 )

2 unchanged sentences

Cash and cash equivalents at end of period $ 18,609 $ 19,942

Supplemental disclosure of cash paid (received)

Supplemental disclosure of cash paid

Interest, net $ 3,525 $ 5,898

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and subsidiaries (the Company) 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 decades-long legacy of industry leadership, the Company helps clients with asset-intensive infrastructure in the oil and gas, aerospace and defense, industrials, power generation, and transmission (including alternative and renewable energy), other process industries and infrastructure, research and engineering and other industries towards achieving and maintaining operational excellence.

Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, strong commitment to Environmental, Social, and Governance (ESG) initiatives and decades-long legacy of industry leadership, the Company helps clients with asset-intensive infrastructure in the oil and gas, aerospace and defense, industrials, power generation and transmission (including alternative and renewable energy), other process industries and infrastructure, research and engineering and other 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, the Company helps the world at large.

and building real-time monitoring systems to help avoid catastrophic incidents, the Company helps the world at large.

The Company enhances value for its clients by integrating asset protection throughout supply chains and centralizing integrity data through a suite of Industrial Internet of Things ("IoT")-connected digital software and monitoring solutions, including OneSuite™, which serves as an ecosystem platform, pulling together all of the Company’s software and data services capabilities, for the benefit of its customers.

1 unchanged sentence

Recent Developments

The COVID-19 coronavirus (COVID-19) pandemic has continued to cause disruption and volatility in domestic and international markets although conditions continue to improve during 2022 as compared to 2021.

The Company's businesses have been classified as non-healthcare critical infrastructure as defined by the U.S.

Centers for Disease Control and Prevention (CDC).

Our facilities, and the Company's customers facilities as well, have remained open with staffing modifications and precautionary procedures taken as necessary.

Issues related to the COVID-19 coronavirus (COVID-19) have subsided significantly, but COVID-19 is still causing some disruption in domestic and international markets although conditions continue to improve during 2022 as compared to 2021.

The Russian-Ukrainian conflict is creating disruption in the oil & gas market and the supply chain in general, which is resulting in some disruption to our business operations.

With oil prices high, refineries are working at full capacity and are deferring maintenance and inspection work as much as possible, which is impacting our business as well.

Overall, the Company has taken actions to help ensure the health and safety of Company employees and those of its customers and suppliers;

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and serve customers as they provide essential products and services to the world.

The COVID-19 pandemic uncertainty, significant volatility in oil prices, and decreased traffic in the aerospace industry have adversely affected the operations of the Company's customers, suppliers and contractors beginning in the first quarter of 2020, and as a consequence, the Company's results of operations, were adversely impacted.

These negative factors continue to cause volatility and uncertainty in the markets in which the Company operates, although the Company in 2022 has nevertheless begun approaching pre-pandemic levels of activity in certain end markets, particularly oil and gas where crude oil prices have exceeded pre-pandemic levels.

The Company has eliminated substantially all of the cost reduction initiatives undertaken in 2020, including re-installment of the savings plan employer match and increasing wages back to pre-pandemic amounts.

The Company is currently unable to predict with certainty the overall impact that the factors discussed above and the effect of the Russian-Ukrainian conflict may have on its business, results of operations or liquidity or in other ways which the Company cannot yet determine.

To date, the Company's European operations have begun to see increased costs associated with higher energy costs, among others, due in part to the on-going conflict.

To date, the Company’s European operations have begun to see increased costs associated with higher energy costs, among others, due in part to the Russian-Ukrainian conflict.

The Company will continue to monitor market conditions and respond accordingly.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Basis of Presentation

2 unchanged sentences

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, 2022 and December 31, 2021.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Certain items included in these statements are based on management’s estimates.

6 unchanged sentences

For subsidiaries in which the Company’s ownership interest is less than 100%, the non-controlling interests are reported in stockholders’ equity in the accompanying Condensed Consolidated Balance Sheets.

The non-controlling interests in net results, net of tax, is classified separately in the accompanying Unaudited Condensed Consolidated Statements of Loss.

The non-controlling interests in net results, net of tax, is classified separately in the accompanying Unaudited Condensed Consolidated Statements of Income (Loss).

All significant intercompany accounts and transactions have been eliminated in consolidation.

3 unchanged sentences

Such reclassifications did not have a material effect on the Company’s financial condition or results of operations as previously reported.

For each of the three months ended March 31, 2022 and 2021, no customer represented 10% or more of the Company's revenue.

For each of the three and six months ended June 30, 2022 and 2021, no customer represented 10% or more of the Company’s revenue.

Significant Accounting Policies

2 unchanged sentences

Since the date of the 2021 Annual Report, there have been no material changes to the Company’s significant accounting policies.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Income taxes are accounted for under the asset and liability method.

4 unchanged sentences

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, 2022, management concluded that it is more likely than not that a substantial portion of the Company's deferred tax assets will be realized.

As of June 30, 2022, 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 19.3 % and 32.7 % for the three months ended March 31, 2022 and 2021, respectively.

The effective income tax rate benefit for the three months ended March 31, 2022 was lower than the statutory rate primarily due to the impact of an unfavorable discrete item related to stock compensation.

The effective income tax rate for the three months ended March 31, 2021 was higher than the statutory rate due to the capitalization of certain non-US intercompany balances which resulted in a deductible foreign exchange loss in the US.

The Company’s effective income tax rate was approximately 37.4 % and 27.7 % for the three months ended June 30, 2022 and 2021, respectively.

The Company’s effective income tax rate was approximately 183.6 % and ( 125.4 )% for the six months ended June 30, 2022 and 2021, respectively.

The effective income tax rate for the three months ended June 30, 2022, was higher than the statutory rate primarily due to a $ 0.7 million valuation allowance recorded on a foreign jurisdiction.

The effective income tax rate for the three months ended

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

June 30, 2021 was higher than the statutory rate due to earnings in jurisdictions with higher income tax rates than the United States.

The valuation allowance of $ 0.7 million has been recorded to recognize only the portion of the deferred tax assets that are more likely than not to be realized.

The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.

The effective income tax rate for the six months ended June 30, 2022 was higher than the statutory rate due primarily to a $ 0.7 million valuation allowance recorded during the period which was related to a foreign jurisdiction.

The effective income tax rate for the six months ended June 30, 2021 was lower than the statutory rate due to capitalization of certain non-US intercompany balances which resulted in a deductible foreign exchange loss in the US.

Recent Accounting Pronouncements

18 unchanged sentences

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

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

practical expedient that provides for revenue to be recognized in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date.

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 entity’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.

3 unchanged sentences

The Company expects any significant remaining performance obligations to be satisfied within one year .

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Contract Estimates

8 unchanged sentences

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.

Revenue by Category

The following series of tables present the Company’s disaggregated revenue:

Revenue by industry was as follows:

Three Months Ended June 30, 2022 Services International Products Corp/Elim Total

Oil & Gas $ 93,098 $ 8,028 $ 139 $ — $ 101,265

Aerospace & Defense 17,300 5,118 26 — 22,444

Industrials 9,794 6,506 333 — 16,633

Power generation & Transmission 8,378 1,997 678 — 11,053

Other Process Industries 11,641 3,754 14 — 15,409

Infrastructure, Research & Engineering 3,183 2,193 442 — 5,818

Petrochemical 3,584 55 — — 3,639

Other 2,550 1,959 1,020 ( 2,759 ) 2,770

Total $ 149,528 $ 29,610 $ 2,652 $ ( 2,759 ) $ 179,031

Three Months Ended June 30, 2021 Services International Products Corp/Elim Total

Oil & Gas $ 85,831 $ 9,533 $ 212 $ — $ 95,576

Aerospace & Defense 12,779 4,127 29 — 16,935

Industrials 11,242 6,194 418 — 17,854

Power generation & Transmission 10,073 3,183 830 — 14,086

Other Process Industries 10,356 3,627 35 — 14,018

Infrastructure, Research & Engineering 5,174 3,254 825 — 9,253

Petrochemical 5,936 47 — — 5,983

Other 3,586 1,986 854 ( 2,454 ) 3,972

Total $ 144,977 $ 31,951 $ 3,203 $ ( 2,454 ) $ 177,677

Mistras Group, Inc.

2 unchanged sentences

(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, 2022 Services International Products Corp/Elim Total

Six Months Ended June 30, 2022 Services International Products Corp/Elim Total

Oil & Gas $ 179,711 $ 15,600 $ 177 $ — $ 195,488

7 unchanged sentences

Total $ 282,474 $ 57,748 $ 5,588 $ ( 5,117 ) $ 340,693

Three Months Ended March 31, 2021 Services International Products Corp/Elim Total

Six Months Ended June 30, 2021 Services International Products Corp/Elim Total

Oil & Gas $ 165,051 $ 17,469 $ 268 $ — $ 182,788

8 unchanged sentences

Revenue per key geographic location was as follows:

Three Months Ended March 31, 2022 Services International Products Corp/Elim Total

Three Months Ended June 30, 2022 Services International Products Corp/Elim Total

United States $ 126,286 $ 334 $ 1,492 $ ( 567 ) $ 127,545

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Total $ 149,528 $ 29,610 $ 2,652 $ ( 2,759 ) $ 179,031

Three Months Ended March 31, 2021 Services International Products Corp/Elim Total

Three Months Ended June 30, 2021 Services International Products Corp/Elim Total

United States $ 122,762 $ 241 $ 1,668 $ ( 895 ) $ 123,776

7 unchanged sentences

(tabular dollars and shares in thousands, except per share data)

Six Months Ended June 30, 2022 Services International Products Corp/Elim Total

United States $ 240,221 $ 507 $ 2,843 $ ( 1,222 ) $ 242,349

Other Americas 40,605 2,717 184 ( 1,714 ) 41,792

Europe 1,159 53,273 1,094 ( 1,879 ) 53,647

Asia-Pacific 489 1,251 1,467 ( 302 ) 2,905

Total $ 282,474 $ 57,748 $ 5,588 $ ( 5,117 ) $ 340,693

Six Months Ended June 30, 2021 Services International Products Corp/Elim Total

United States $ 227,308 $ 449 $ 3,128 $ ( 1,286 ) $ 229,599

Other Americas 40,166 2,326 168 ( 872 ) 41,788

Europe 890 55,978 963 ( 1,357 ) 56,474

Asia-Pacific 911 846 1,932 ( 138 ) 3,551

Total $ 269,275 $ 59,599 $ 6,191 $ ( 3,653 ) $ 331,412

Contract Balances

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These assets and liabilities are aggregated on an individual contract basis and reported on the Consolidated Balance Sheets at the end of each reporting period within accounts receivable, net or accrued expenses and other current liabilities.

Revenue recognized during the three months ended March 31, 2022 and 2021 that was included in the contract liability balance at the beginning of such year was $ 2.2 million and $ 1.9 million for each period.

Revenue recognized during the six months ended June 30, 2022 and 2021 that was included in the contract liability balance at the beginning of such year was $ 1.4 million and $ 3.3 million, for each period.

Changes in the contract asset and liability balances during these periods were not materially impacted by any other factors.

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Share-Based Compensation

The Company has share-based incentive awards outstanding to its eligible employees and non-employee directors under two equity incentive plans:

The Company grants share-based incentive awards to its eligible employees and non-employee directors under two equity incentive plans:

(i) the 2009 Long-Term Incentive Plan (the "2009 Plan") and (ii) the 2016 Long-Term Incentive Plan (the "2016 Plan").

1 unchanged sentence

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 restricted stock units, stock appreciation rights and deferred stock rights.

At the annual shareholders meeting on May 19, 2020, the Company’s shareholders approved an amendment to increase the total number of shares that may be issued under the 2016 Plan by 2.0 million, for a total of 3.7 million shares that are authorized for issuance under the 2016 Plan, of which 383,743 shares were available for future grants as of March 31, 2022.

At the annual shareholders meeting on May 23, 2022, the Company’s shareholders approved an amendment to increase the total number of shares that may be issued under the 2016 Plan by 1.2 million, for a total of 4.9 million shares that are authorized for issuance under the 2016 Plan, of which approximately 1,600,000 shares were available for future grants as of June 30, 2022.

Stock Options

For each of the three months ended March 31, 2022 and 2021, the Company did no t recognize any share-based compensation expense related to the stock option award, as the one outstanding stock option award was already fully vested.

No unrecognized compensation costs remained related to the stock option award as of March 31, 2022.

The following table sets forth a summary of the stock option activity, weighted-average exercise prices and options outstanding as of March 31, 2022 and 2021:

Three months ended March 31,

For each of the three and six months ended June 30, 2022 and 2021, the Company did no t recognize any share-based compensation expense related to the stock option award, as the one outstanding stock option award was already fully vested.

No unrecognized compensation costs remained related to the stock option award as of June 30, 2022.

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 a summary of the stock option activity, weighted-average exercise prices and options outstanding as of June 30, 2022 and 2021:

Six months ended June 30,

Outstanding at beginning of period:

5 unchanged sentences

— $ — 5 $ 22.35

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Restricted Stock Unit Awards

For the three months ended March 31, 2022 and March 31, 2021, the Company recognized share-based compensation expense related to restricted stock unit awards of $ 0.9 million and $ 0.9 million, respectively.

As of March 31, 2022, there was $ 9.6 million of unrecognized compensation costs, net of estimated forfeitures, related to restricted stock unit awards, which is expected to be recognized over a remaining weighted-average period of 3.1 years.

For the three months ended June 30, 2022 and June 30, 2021, the Company recognized share-based compensation expense related to restricted stock unit awards of $ 0.9 million and $ 0.9 million, respectively.

For the six months ended June 30, 2022 and 2021, the Company recognized share-based compensation expense related to restricted stock unit awards of $ 1.9 million and $ 1.8 million, respectively.

As of June 30, 2022, there was $ 8.6 million of unrecognized compensation costs, net of estimated forfeitures, related to restricted stock unit awards, which is expected to be recognized over a remaining weighted-average period of 2.9 years.

Upon vesting, restricted stock units 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 restricted stock unit awards, with the respective fair value of the awards, is as follows:

Three months ended March 31,

Six months ended June 30,

Restricted stock awards vested 326 238

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A summary of the fully-vested common stock the Company issued to its six non-employee directors, in connection with its non-employee director compensation plan, is as follows:

Three months ended March 31,

Six months ended June 30,

Awards issued 34 25

1 unchanged sentence

A summary of the Company’s outstanding, non-vested restricted share units is as follows:

Three months ended March 31,

Six months ended June 30,

Units Weighted

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1,537 $ 7.38 1,327 $ 7.78

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Performance Restricted Stock Units

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The return will be measured by the year over year percent change in share price.

The share prices used to calculate the return are the average share price during the 20 -trading day period ending on the initial

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

measurement date (the last 20 trading days of 2020), compared to the average share price during the 20 -trading day period ending on the final measurement date (the last 20 trading days of 2021).

The share prices used to calculate the return are the average share price during the 20 -trading day period ending on the initial measurement date (the last 20 trading days of 2020), compared to the average share price during the 20 -trading day period ending on the final measurement date (the last 20 trading days of 2021).

Any cash dividends or distributions paid in 2021 will be added to calculate the return to shareholders during the year.

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A summary of the Company’s PRSU activity is as follows:

Three months ended March 31,

Six months ended June 30,

Units Weighted

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549 $ 9.12 307 $ 12.56

During the three months ended March 31, 2022 and March 31, 2021, the Compensation Committee approved the final calculation of the award metrics for calendar year 2021 and 2020, respectively.

As a result, the calendar year 2022 PRSUs decreased by approximately 56,000 units as a result of the final calculation of award metrics.

For the three months ended March 31, 2022 and March 31, 2021, the Company recognized aggregate share-based compensation expense related to the awards described above of approximately $ 0.3 million and $ 0.1 million, respectively.

At March 31, 2022, there was $ 2.6 million of total unrecognized compensation costs related to approximately 656,000 non-vested PRSUs, which is expected to be recognized over a remaining weighted-average period of 2.5 years.

Earnings (loss) per Share

Basic earnings (loss) per share is computed by dividing net loss by the weighted-average number of shares outstanding during the period.

Diluted earnings per share is computed by dividing net 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 reflects:

(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.

Mistras Group, Inc.

2 unchanged sentences

(tabular dollars and shares in thousands, except per share data)

The following table sets forth the computations of basic and diluted loss per share:

Three months ended March 31,

Basic loss per share

Net loss attributable to Mistras Group, Inc.

During the six months ended June 30, 2022 and June 30, 2021, the Compensation Committee approved the final calculation of the award metrics for calendar year 2021 and calendar year 2020, respectively.

As a result, the calendar year 2022 PRSUs decreased by approximately 163,000 units during the six months ended June 30, 2022 as a result of the final calculation of the 2021 award and based on forecasted results for 2022 as compared to performance metrics determined by the Compensation Committee.

For the three months ended June 30, 2022 and June 30, 2021, the Company recognized aggregate share-based compensation expense related to the awards described above of approximately $ 0.3 million and $ 0.3 million, respectively.

For the six months ended June 30, 2022 and June 30, 2021, the Company recognized aggregate share-based compensation expense related to the awards described above of approximately $ 0.6 million and $ 0.4 million, respectively.

At June 30, 2022, there was $ 2.0 million of total unrecognized compensation costs related to approximately 549,000 non-vested PRSUs, which is expected to be recognized over a remaining weighted-average period of 2.2 years.

Earnings (loss) per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares outstanding during the period.

Diluted earnings 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 reflects:

The following table sets forth the computations of basic and diluted earnings (loss) per share:

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Basic earnings (loss) per share

Net income (loss) attributable to Mistras Group, Inc.

$ 4,643 $ 5,937 $ ( 720 ) $ 575

Weighted average common shares outstanding 29,957 29,602 29,840 29,514

Basic loss per share $ ( 0.18 ) $ ( 0.18 )

Diluted loss per share:

Net loss attributable to Mistras Group, Inc.

Basic earnings (loss) per share $ 0.15 $ 0.20 $ ( 0.02 ) $ 0.02

Diluted earnings (loss) per share:

Net income (loss) attributable to Mistras Group, Inc.

$ 4,643 $ 5,937 $ ( 720 ) $ 575

3 unchanged sentences

276 534 — 525

Diluted loss per share $ ( 0.18 ) $ ( 0.18 )

30,233 30,136 29,840 30,039

(1) For the three months ended March 31, 2022 and 2021, 1,212,000 and 509,000 shares, respectively, related to restricted stock were excluded from the calculation of diluted EPS due to the net loss for the period.

Diluted earnings (loss) per share $ 0.15 $ 0.20 $ ( 0.02 ) $ 0.02

_______________

(1) For the six months ended June 30, 2022, 1,412,073 shares related to restricted stock were excluded from the calculation of diluted EPS due to the net loss for the period.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Acquisition-Related Expense

1 unchanged sentence

Additionally, the Company adjusts the fair value of acquisition-related contingent consideration liabilities on a quarterly basis.

These amounts are reported as Acquisition-related expense, net on the Unaudited Condensed Consolidated Statements of Loss and were as follows for the three months ended March 31, 2022 and 2021:

Three months ended March 31,

These amounts are reported as Acquisition-related expense, net on the Unaudited Condensed Consolidated Statements of Income (Loss) and were as follows for the three and six months ended June 30, 2022 and 2021:

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Due diligence, professional fees and other transaction costs $ 13 $ — $ 18 $ 34

1 unchanged sentence

Acquisition-related expense, net $ 13 $ 545 $ 63 $ 822

The Company's contingent consideration liabilities are included in Accrued expenses and other current liabilities and Other long-term liabilities on the Condensed Consolidated Balance Sheets.

As of June 30, 2022, the Company’s contingent consideration liabilities are included in Accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets.

Accounts Receivable, net

Accounts receivable consisted of the following:

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Trade accounts receivable $ 133,600 $ 112,739

1 unchanged sentence

Accounts receivable, net $ 129,572 $ 109,511

The Company had $ 23.7 million and $ 11.9 million of unbilled revenue accrued as of March 31, 2022 and December 31, 2021, respectively.

The Company had $ 18.8 million and $ 11.9 million of unbilled revenue accrued as of June 30, 2022 and December 31, 2021, respectively.

These amounts are included in the trade accounts receivable balances above.

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Property, Plant and Equipment, net

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Property, plant and equipment consisted of the following:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Land $ 2,526 $ 2,762

8 unchanged sentences

Property, plant and equipment, net $ 80,585 $ 86,578

Depreciation expense for the three months ended March 31, 2022 and 2021 was approximately $ 6.6 million and $ 6.1 million, respectively.

Depreciation expense for the three months ended June 30, 2022 and 2021 was approximately $ 5.8 million and $ 6.2 million, respectively.

Depreciation expense for the six months ended June 30, 2022 and 2021 was $ 12.3 million and $ 12.3 million, respectively.

Changes in the carrying amount of goodwill by segment is shown below:

2 unchanged sentences

Foreign currency translation ( 1,188 ) ( 1,145 ) — ( 2,333 )

Balance at March 31, 2022 $ 191,875 $ 14,534 $ — $ 206,409

Balance at June 30, 2022 $ 189,468 $ 13,638 $ — $ 203,106

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, 2021 and the Company did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable.

Additionally, through June 30, 2022, 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.

Mistras Group, Inc.

2 unchanged sentences

(tabular dollars and shares in thousands, except per share data)

Additionally, through March 31, 2022, 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.

Intangible Assets

The gross amount, accumulated amortization and net carrying amount of intangible assets were as follows:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

(Years) Gross

7 unchanged sentences

Total $ 184,872 $ ( 130,594 ) $ 54,278 $ 187,571 $ ( 128,190 ) $ 59,381

Amortization expense for the three months ended March 31, 2022 and 2021 was approximately $ 2.4 million and $ 2.5 million, respectively.

Amortization expense for the three months ended June 30, 2022 and 2021 was approximately $ 2.3 million and $ 2.5 million, respectively.

Amortization expense for the six months ended June 30, 2022 and June 30, 2021 was $ 4.6 million and $ 4.9 million, respectively.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Accrued salaries, wages and related employee benefits $ 34,147 $ 33,816

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Long-term debt consisted of the following:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Senior credit facility $ 127,250 $ 119,500

6 unchanged sentences

Senior Credit Facility

The Company has a credit agreement with its banking group (as amended, the "Credit Agreement") which provides the Company with a revolving line of credit and a $ 100 million senior secured term loan A facility with a balance of $ 72.9 million as of March 31, 2022.

Pursuant to the Amendment described below, the revolving line of credit was reduced from $ 155 million to $ 150 million on December 31, 2021.

11 unchanged sentences

• The Company must repay loans under the Credit Agreement with the net proceeds from certain dispositions of assets under certain circumstances and limits investments in non-guarantor subsidiaries under certain circumstances if the Company’s Total Consolidated Leverage Ratio is above 3.5 to 1.0.

• Quarterly payments on the term loan increased to $ 3.75 million through March 31, 2022, then to $ 5.0 million for each quarterly payment thereafter and a final balloon payment at maturity.

As a result of the borrowing capacity reduction on the revolving loan line of credit, the Company expensed $ 0.1 million in unamortized capitalized debt issuance costs during the year ended December 31, 2021, which was included in selling, general and administrative expenses on the Consolidated Statements of Loss.

The Company incurred $ 0.5 million in financing costs for the Amendment, of which $ 0.2 million of third-party costs were expensed and included in selling, general and administrative expenses on the Consolidated Statements of Loss.

• Quarterly payments on the term loan increased from $ 3.75 million to $ 5.0 million during the quarter ended June 30, 2022 with a final balloon payment at maturity.

The Company incurred $ 0.5 million in financing costs for the Amendment, of which $ 0.2 million of third party costs were expensed and included in selling, general and administrative expenses on the Consolidated Statements of Income (Loss).

Under the Credit Agreement, the Company may borrow up to $ 100 million in non-U.S.

Dollar currencies and use up to $ 20 million of the credit limit for the issuance of letters of credit.

Mistras Group, Inc.

2 unchanged sentences

(tabular dollars and shares in thousands, except per share data)

Under the Credit Agreement, the Company may borrow up to $ 100 million in non-U.S.

Dollar currencies and use up to $ 20 million of the credit limit for the issuance of letters of credit.

As of March 31, 2022, the Company had borrowings of $ 203.1 million and a total of $ 3.3 million of letters of credit outstanding under the Credit Agreement.

The Company has capitalized costs associated with debt modifications of $ 0.8 million as of March 31, 2022, which is included in Other Assets on the Condensed Consolidated Balance Sheets and will be amortized into interest expense over the remaining term of the Credit Agreement through December 12, 2023

As of March 31, 2022, the Company was in compliance with the terms of the Credit Agreement.

As of June 30, 2022, the Company had borrowings of $ 195.3 million and a total of $ 3.0 million of letters of credit outstanding under the Credit Agreement.

The Company has capitalized costs associated with debt modifications of $ 0.7 million as of June 30, 2022, which is included in Other assets on the Condensed Consolidated Balance Sheets and will be amortized into interest expense over the remaining term of the Credit Agreement through December 12, 2023.

As of June 30, 2022, the Company was in compliance with the terms of the Credit Agreement.

The Company continuously monitors compliance with the covenants contained in its Credit Agreement.

1 unchanged sentence

However, due to the uncertainties being caused by the COVID-19 pandemic, the significant volatility in oil prices, and volatility in the aerospace production, such matters cannot be predicted with certainty.

On August 1, 2022, the Company entered into an agreement for a new Senior Credit Facility.

See Note 16- Subsequent Events for additional details.

The Company’s other debt includes bank financing provided at the local subsidiary level used to support working capital requirements and fund capital expenditures.

At March 31, 2022, there was an aggregate of approximately $ 5.9 million outstanding, payable at various times through 2030.

At June 30, 2022, there was an aggregate of approximately $ 5.2 million outstanding, payable at various times through 2030.

Monthly payments range from $ 1.0 thousand to $ 15.0 thousand and interest rates range from 0.4 % to 3.5 %.

7 unchanged sentences

The following table represents the changes in the fair value of Level 3 contingent consideration:

Three months ended March 31,

Six months ended June 30,

Beginning balance $ 1,831 $ 1,640

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approximates their carrying amounts based on anticipated interest rates which management believes would currently be available to the Company for similar issuances of debt.

The Company’s Condensed Consolidated Balance Sheets include the following related to right-of-use ("ROU") operating leases:

Leases Classification March 31, 2022 December 31, 2021

The Company’s Condensed Consolidated Balance Sheets include the following related to right-of-use ("ROU")

Leases Classification June 30, 2022 December 31, 2021

ROU assets Other assets $ 40,399 $ 42,451

3 unchanged sentences

Included within the balance of operating leases is a lease for the Company’s headquarters which is with a related party.

The ROU liability for this facility was approximately $ 2.4 million and $ 2.9 million as of March 31, 2022 and December 31, 2021, respectively.

Total rent payments for this facility were approximately $ 0.3 million and $ 0.5 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

The ROU liability for this facility was approximately $ 2.2 million and $ 2.9 million as of June 30, 2022 and December 31, 2021, respectively.

Total rent payments for this facility were approximately $ 0.2 million and $ 0.3 million for the three months ended June 30, 2022 and June 30, 2021, respectively.

Total rent payments for this facility were approximately $ 0.5 million and $ 0.7 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

An agreement was reached with the related party to reduce rental payments by 12.5 % for the lease of the Company’s headquarters, effective February 2022 as part of a voluntary reduction.

The total ROU assets attributable to finance leases were approximately $ 13.4 million and $ 13.8 million as of March 31, 2022 and December 31, 2021, respectively, which is included in Property, plant, and equipment, net on the Condensed Consolidated Balance Sheets.

The total ROU assets attributable to finance leases were approximately $ 12.8 million and $ 13.8 million as of June 30, 2022 and December 31, 2021, respectively, which is included in Property, plant, and equipment , net on the Condensed Consolidated Balance Sheets.

The components of lease costs were as follows:

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

Classification 2022 2021 2022 2021

14 unchanged sentences

Additional information related to leases was as follows:

Three months ended March 31,

Six months ended June 30,

Cash paid for amounts included in the measurement of lease liabilities for finance and operating leases

11 unchanged sentences

Operating leases 5.5 % 5.8 %

Maturities of lease liabilities as of March 31, 2022 were as follows:

Maturities of lease liabilities as of June 30, 2022 were as follows:

Finance Operating

20 unchanged sentences

The Company was contracted to perform inspections of welds on various pipeline projects in Texas for a customer.

As of March 31, 2022, approximately $ 1.4 million of past due receivables were outstanding from this customer.

As of June 30, 2022, approximately $ 1.4 million of past due receivables were outstanding from this customer.

The customer provided the Company with notice in December 2019, alleging that the Company’s inspection of 66 welds (out of approximately 16,000 welds inspected) were not in compliance with the contract, claimed approximately $ 7.6 million in damages, and requested that the Company pay these damages and any other damages incurred.

10 unchanged sentences

The two cases have been consolidated and are requesting payment of all damages, including unpaid wages, and various fines and penalties available under California law.

On May 4, 2021, the Company agreed to a settlement of all claims in the cases, which was more formally documented pursuant to a settlement agreement completed October 5, 2021.

On May 4, 2021, the Company agreed to a settlement of all claims in the cases, which was more formally documented pursuant to a settlement agreement completed October 5, 2021, as amended as of May 3, 2022.

Pursuant to the settlement, the Company will pay $ 2.3 million to resolve the allegations in these proceedings and will be responsible for the employer portion of payroll taxes on the amount of the settlement allocated to wages.

The settlement is subject to court approval and will cover claims for the period from June 2016 through July 31, 2021.

The settlement received preliminary court approval on May 12, 2022, but is still subject to final court approval and will cover claims for the period from June 2016 through July 31, 2021.

The Company recorded expense of approximately $ 1.6 million during the three months ended March 31, 2021 related to this settlement, which is in addition to expense of $ 0.8 million the Company recorded during the three months ended December 31, 2020.

4 unchanged sentences

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, 2022 is approximately $ 2.5 million, which were incurred in 2018 and 2019.

The balance of the estimated total amount of this potential liability as of June 30, 2022 is approximately $ 2.5 million, which were incurred in 2018 and 2019.

Severance and labor disputes

1 unchanged sentence

No other assets or liabilities other than those employee benefits related to employees working on the customer contracts were included in the sale.

As of March 31, 2022, the Company has approximately $ 0.1 million of accrued estimated severance payment obligations, which takes into account the Company's estimate with respect to the employees that have been or will be transitioned to the German subsidiaries' other customers.

As of June 30, 2022, the Company has approximately $ 0.1 million of accrued estimated severance payment obligations, which takes into account the Company’s estimate with respect to the employees that have been or will be transitioned to the German subsidiaries' other customers.

The $ 0.1 million of estimated obligations is net of $ 0.4 million in payments made and $ 1.0 million in reversals due to employees being transitioned to customer contracts.

9 unchanged sentences

The Company is liable for contingent consideration in connection with certain of its acquisitions.

As of March 31, 2022, total potential acquisition-related contingent consideration ranged from zero to approximately $ 1.9 million and would be payable upon the achievement of specific performance metrics by certain of the acquired companies over the next six months .

As of June 30, 2022, total potential acquisition-related contingent consideration ranged from zero to approximately $ 1.9 million and would be payable upon the achievement of specific performance metrics by certain of the acquired companies over the next three months .

During 2018, the Company sold a subsidiary in the Products and Systems segment.

As part of the sale, the Company entered into a three-year agreement to purchase products from the buyer, with a cumulative commitment of $ 2.3 million, of which $ 0.9 million is remaining as of March 31, 2022.

As part of the sale, the Company entered into a three-year agreement to purchase products from the buyer, with a cumulative commitment of $ 2.3 million, of which $ 0.8 million is remaining as of June 30, 2022.

The agreement is based on third-party pricing and the Company's planned purchase requirements over the three-year purchase period to meet the minimum contractual purchases.

On August 3, 2021, the Company entered into an agreement and extended the period by twelve months .

As of March 31, 2022, approximately $ 0.9 million is remaining on the amended purchase commitment.

As of June 30, 2022, approximately $ 0.8 million is remaining on the amended purchase commitment.

The agreement is based on third party pricing and the Company’s planned purchase requirements over the duration of the extension to meet the minimum contractual purchases.

24 unchanged sentences

(with intercompany transactions eliminated in Corporate and eliminations)

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Services $ 149,528 $ 144,977 $ 282,474 $ 269,275

3 unchanged sentences

$ 179,031 $ 177,677 $ 340,693 $ 331,412

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Services $ 42,954 $ 43,761 $ 73,479 $ 74,837

4 unchanged sentences

Income (loss) from operations by operating segment includes intercompany transactions, which are eliminated in Corporate and eliminations.

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Income (loss) from operations

4 unchanged sentences

$ 9,576 $ 11,374 $ 4,877 $ 6,628

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2022 2021 2022 2021

Depreciation and amortization

8 unchanged sentences

(tabular dollars and shares in thousands, except per share data)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Intangible assets, net

4 unchanged sentences

$ 54,278 $ 59,381

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Services $ 428,218 $ 424,058

3 unchanged sentences

$ 555,542 $ 562,195

Refer to Note 2 – Revenue , for revenue by geographic area for the three months ended March 31, 2022 and 2021.

Refer to Note 2 – Revenue , for revenue by geographic area for the three and six months ended June 30, 2022 and 2021.

Subsequent Events

On August 1, 2022 Mistras Group, Inc.

entered into a credit agreement (the "Credit Agreement") with JPMorgan Chase Bank N.A., as administrative agent for the lenders and a lender, BofA Securities as Syndication Agent and a lender, and the other lenders set forth in the Credit Agreement.

The Credit Agreement was filed as Exhibit 10.1 to the Company's Form 8-K filed with the SEC on August 2, 2022.

The Credit Agreement, among other things, provides the Company with a $ 190 million 5 -year committed revolving credit facility and a $ 125 million term loan.

The Credit Agreement has a maturity date of July 30, 2027 and permits the Company to borrow up to $ 100 million in non-US dollar currencies and to use up to $ 20 million of the credit limit for the issuance of letters of credit.

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.

We have the benefit of the lowest SOFR margin if our Total Consolidated Debt Leverage Ratio is equal to or less than 1.25 to 1, and the margin increases as the ratio increases, to the maximum margin if the ratio is greater than 3.75 to 1.

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.

Mistras Group, Inc.

3 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-Q

Item 1. Financial Statements