What changed in this filing

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Item 1. Financial Statements

2022-11-07 compared with 2022-08-05 · 182 added, 197 removed, 663 unchanged (36% of the section changed)

4 unchanged sentences

( in thousands, except share and per share data )

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

ASSETS (unaudited)

38 unchanged sentences

and Subsidiaries

Unaudited Condensed Consolidated Statements of Income (Loss)

Unaudited Condensed Consolidated Statements of Income

( in thousands, except per share data )

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

11 unchanged sentences

Interest expense 2,735 2,326 6,790 8,694

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

Income before provision for income taxes 6,379 6,910 7,201 7,170

Provision for income taxes 1,985 3,513 3,494 3,187

Net Income 4,394 3,397 3,707 3,983

net income attributable to noncontrolling interests, net of taxes 21 17 54 28

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

Net Income attributable to Mistras Group, Inc.

$ 4,373 $ 3,380 $ 3,653 $ 3,955

Earnings (loss) per common share

Earnings per common share

Basic $ 0.15 $ 0.11 $ 0.12 $ 0.13

8 unchanged sentences

(in thousands )

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

Three months ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

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

Net Income $ 4,394 $ 3,397 $ 3,707 $ 3,983

Other comprehensive income (loss):

13 unchanged sentences

(deficit) Accumulated

comprehensive income (loss) Total

comprehensive (loss) Total

Mistras Group,

1 unchanged sentence

Shares Amount Total Equity

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

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

Net income — — — 4,373 — 4,373 21 4,394

2 unchanged sentences

Net settlement of restricted stock units 35 — — — — — — —

Balance at September 30, 2022 29,842 $ 297 $ 242,093 $ ( 14,335 ) $ ( 41,282 ) $ 186,773 $ 283 $ 187,056

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

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

Net income — — — 3,380 — 3,380 17 3,397

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

Other comprehensive loss, net of tax — — — — ( 5,469 ) ( 5,469 ) ( 3 ) ( 5,472 )

Share-based payments — — 1,452 — — 1,452 — 1,452

Net settlement of restricted stock units 26 — — — — — — —

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

Six months ended

Balance at September 30, 2021 29,458 $ 294 $ 237,577 $ ( 17,893 ) $ ( 19,176 ) $ 200,802 $ 224 $ 201,026

Nine months ended

Common Stock Additional

1 unchanged sentence

(deficit) Accumulated

comprehensive income (loss) Total

comprehensive (loss) Total

Mistras Group,

2 unchanged sentences

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

Net income (loss) — — — ( 720 ) — ( 720 ) 33 ( 687 )

Net income — — — 3,653 — 3,653 54 3,707

Other comprehensive loss, net of tax — — — — ( 20,971 ) ( 20,971 ) — ( 20,971 )

1 unchanged sentence

Net settlement of restricted stock units 296 2 ( 760 ) — — ( 758 ) — ( 758 )

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

Balance at September 30, 2022 29,842 $ 297 $ 242,093 $ ( 14,335 ) $ ( 41,282 ) $ 186,773 $ 283 $ 187,056

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

Net income — — — 3,955 — 3,955 28 3,983

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

Other comprehensive loss, net of tax — — — — ( 3,115 ) ( 3,115 ) ( 2 ) ( 3,117 )

Share-based compensation — — 3,916 — — 3,916 — 3,916

Net settlement of restricted stock units 224 2 ( 977 ) — — ( 975 ) — ( 975 )

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

Balance at September 30, 2021 29,458 $ 294 $ 237,577 $ ( 17,893 ) $ ( 19,176 ) $ 200,802 $ 224 $ 201,026

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

3 unchanged sentences

(in thousands )

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities

Net income (loss) $ ( 687 ) $ 586

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

Net income $ 3,707 $ 3,983

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation and amortization 25,132 25,705

1 unchanged sentence

Share-based compensation expense 4,166 3,916

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

Fair value adjustments to contingent consideration 45 1,034

Foreign currency loss 4 932

Foreign currency (gain) loss ( 924 ) 366

Payment of finance costs ( 448 ) —

Other 969 265

16 unchanged sentences

Repayment of finance lease obligations ( 3,173 ) ( 3,032 )

Proceeds from borrowings of long-term debt 125,000 —

Repayment of long-term debt ( 79,519 ) ( 12,121 )

30 unchanged sentences

Recent Developments

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.

Issues related to the COVID-19 coronavirus (COVID-19) pandemic have subsided significantly 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.

3 unchanged sentences

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

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 Russian-Ukrainian conflict.

Earlier in 2022, the Company 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 inflationary pressures and the Russian-Ukrainian conflict may have on its business, results of operations or liquidity or in other ways which the Company cannot yet determine.

The Company’s European operations are currently experiencing 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.

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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 Income (Loss).

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

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

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

Significant Accounting Policies

8 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 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.

As of September 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 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

The Company’s effective income tax rate was approximately 31.1 % and 50.8 % for the three months ended September 30, 2022 and 2021, respectively.

The Company’s effective income tax rate was approximately 48.5 % and 44.4 % for the nine months ended September 30, 2022 and 2021, respectively.

The effective income tax rate for the three months ended September 30, 2022, was higher than the statutory rate primarily due to various permanent tax adjustments and a $ 0.1 million valuation allowance recorded on a foreign jurisdiction.

The Company's effective income tax rate for the three months ended September 30, 2021 was higher than the statutory rate primary due to

Mistras Group, Inc.

2 unchanged sentences

(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.

various permanent tax adjustments and a $ 1.2 million valuation allowance recorded during the period which was related to various state deferred tax assets and earnings in jurisdictions with higher income tax rates than the United States.

As of September 30, 2022, a valuation of $ 0.9 million has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized.

The amount of the deferred tax asset 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 nine months ended September 30, 2022 was higher than the statutory rate due primarily to various permanent tax adjustments and a $ 0.9 million valuation allowance recorded during the period which was related to a foreign jurisdiction.

The effective income tax rate for the nine months ended September 30, 2021 was higher than the statutory rate due to various permanent tax adjustments and a $ 1.2 million valuation allowance recorded during the year related to various state deferred tax assets offset by the capitalization of certain non-US intercompany balances which resulted in a deductible foreign exchange loss in the US.

Recent Accounting Pronouncements

23 unchanged sentences

Contract costs include labor, material and overhead.

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

Mistras Group, Inc.

2 unchanged sentences

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

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

Contract Estimates

11 unchanged sentences

Revenue by industry was as follows:

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

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

Oil & Gas $ 90,578 $ 6,418 $ 35 $ — $ 97,031

7 unchanged sentences

Total $ 152,778 $ 25,693 $ 3,078 $ ( 3,087 ) $ 178,462

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

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

Oil & Gas $ 83,534 $ 8,548 $ 370 $ — $ 92,452

11 unchanged sentences

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

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

Nine Months Ended September 30, 2022 Services International Products Corp/Elim Total

Oil & Gas $ 270,289 $ 22,018 $ 212 $ — $ 292,519

7 unchanged sentences

Total $ 435,251 $ 83,441 $ 8,666 $ ( 8,203 ) $ 519,155

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

Nine Months Ended September 30, 2021 Services International Products Corp/Elim Total

Oil & Gas $ 248,584 $ 26,017 $ 638 $ — $ 275,239

8 unchanged sentences

Revenue per key geographic location was as follows:

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

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

United States $ 130,206 $ 240 $ 1,523 $ ( 1,098 ) $ 130,871

3 unchanged sentences

Total $ 152,778 $ 25,693 $ 3,078 $ ( 3,087 ) $ 178,462

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

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

United States $ 122,506 $ 221 $ 1,562 $ ( 1,341 ) $ 122,948

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

Nine Months Ended September 30, 2022 Services International Products Corp/Elim Total

United States $ 370,426 $ 747 $ 4,366 $ ( 2,319 ) $ 373,220

3 unchanged sentences

Total $ 435,251 $ 83,441 $ 8,666 $ ( 8,203 ) $ 519,155

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

Nine Months Ended September 30, 2021 Services International Products Corp/Elim Total

United States $ 349,814 $ 670 $ 4,690 $ ( 2,627 ) $ 352,547

4 unchanged sentences

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheets.

Amounts are generally billed as work progresses in accordance with agreed-upon contractual terms, generally at periodic intervals (e.g., weekly, bi-weekly or monthly).

2 unchanged sentences

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 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.

Revenue recognized during the nine months ended September 30, 2022 and 2021 that was included in the contract liability balance at the beginning of such year was $ 4.0 million and $ 4.4 million, respectively.

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

The Company applies a practical expedient to expense incremental costs incurred related to obtaining a contract.

The Company’s expenses are expected to be amortized over a period less than one year .

The Company applies a practical expedient to expense incremental costs incurred related to obtaining a contract when the asset that the Company otherwise would have recognized is one year or less.

Share-Based Compensation

3 unchanged sentences

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 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 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.

For each of the three and nine months ended September 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 September 30, 2022.

Mistras Group, Inc.

2 unchanged sentences

(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,

The following table sets forth a summary of the stock option activity, weighted-average exercise prices and options outstanding as of September 30, 2022 and 2021:

Nine months ended September 30,

Outstanding at beginning of period:

6 unchanged sentences

Restricted Stock Unit Awards

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.

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

For the nine months ended September 30, 2022 and 2021, the Company recognized share-based compensation expense related to restricted stock unit awards of $ 2.8 million and $ 2.7 million, respectively.

As of September 30, 2022, there was $ 7.6 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 2.7 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:

Six months ended June 30,

Nine months ended September 30,

Restricted stock awards vested 326 238

1 unchanged sentence

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:

Six months ended June 30,

Nine months ended September 30,

Awards issued 70 51

1 unchanged sentence

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

Six months ended June 30,

Nine months ended September 30,

Units Weighted

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

Six months ended June 30,

Nine months ended September 30,

Units Weighted

12 unchanged sentences

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

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.

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

The calendar year 2022 PRSUs decreased by approximately 157,000 units during the nine months ended September 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 each of the three months ended September 30, 2022 and September 30, 2021, the Company recognized aggregate share-based compensation expense related to the awards described above of approximately $ 0.3 million.

For the nine months ended September 30, 2022 and September 30, 2021, the Company recognized aggregate share-based compensation expense related to the awards described above of approximately $ 0.9 million and $ 0.7 million, respectively.

At September 30, 2022, there was $ 1.5 million of total unrecognized compensation costs related to approximately 443,000 non-vested PRSUs, which is expected to be recognized over a remaining weighted-average period of 1.8 years.

Earnings per Share

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

Diluted earnings per share is computed by dividing net income 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.

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,

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

Basic earnings (loss) per share

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

Basic earnings per share

Net income attributable to Mistras Group, Inc.

$ 4,373 $ 3,380 $ 3,653 $ 3,955

Weighted average common shares outstanding 29,965 29,619 29,879 29,550

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.

Basic earnings per share $ 0.15 $ 0.11 $ 0.12 $ 0.13

Diluted earnings per share:

Net income attributable to Mistras Group, Inc.

$ 4,373 $ 3,380 $ 3,653 $ 3,955

3 unchanged sentences

30,245 30,127 30,209 30,093

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

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.

Diluted earnings per share $ 0.14 $ 0.11 $ 0.12 $ 0.13

Mistras Group, Inc.

5 unchanged sentences

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 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,

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

2 unchanged sentences

Acquisition-related expense, net $ 1 $ 246 $ 63 $ 1,068

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.

As of September 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:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Trade accounts receivable $ 135,694 $ 112,739

1 unchanged sentence

Accounts receivable, net $ 131,396 $ 109,511

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

The Company had $ 22.9 million and $ 11.9 million of unbilled revenue accrued as of September 30, 2022 and December 31, 2021, respectively.

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

12 unchanged sentences

Property, plant and equipment consisted of the following:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Land $ 2,499 $ 2,762

8 unchanged sentences

Property, plant and equipment, net $ 76,133 $ 86,578

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:

Depreciation expense for the three months ended September 30, 2022 and 2021 was approximately $ 5.9 million and $ 6.1 million, respectively.

Depreciation expense for the nine months ended September 30, 2022 and 2021 was $ 18.3 million and $ 18.4 million, respectively.

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

Services International Products and Systems Total

1 unchanged sentence

Foreign currency translation ( 5,996 ) ( 2,010 ) — ( 8,006 )

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

Balance at September 30, 2022 $ 184,660 $ 12,773 $ — $ 197,433

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.

Additionally, through September 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.

5 unchanged sentences

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(Years) Gross

7 unchanged sentences

Total $ 180,353 $ ( 130,016 ) $ 50,337 $ 187,571 $ ( 128,190 ) $ 59,381

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.

Amortization expense for the three months ended September 30, 2022 and 2021 was $ 2.3 million and $ 2.4 million, respectively.

Amortization expense for the nine months ended September 30, 2022 and September 30, 2021 was $ 6.9 million and $ 7.3 million, respectively.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Accrued salaries, wages and related employee benefits $ 31,600 $ 33,816

12 unchanged sentences

Long-term debt consisted of the following:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Senior credit facility $ 73,750 $ 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 $ 68.0 million as of June 30, 2022.

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

Both the revolving line of credit and the term loan A facility under the Credit Agreement have a maturity date of December 12, 2023.

On May 19, 2021, the Company entered into the Fifth Amendment (the “Amendment”) to the Credit Agreement.

The Amendment made the following changes:

• Removed the LIBOR floor of 1.0 %, which provided that if LIBOR is below 1.0 %, the interest rate will be calculated as if LIBOR is 1.0 %.

Now the actual LIBOR rate is used to calculate interest, even if LIBOR is below 1.0 %.

The LIBOR margins and base rate margins are unchanged but are based upon the new Total Consolidated Debt Leverage Ratio (defined below);

previously the margin was based upon the Funded Debt Leverage Ratio.

• Requires the Company to maintain a Total Consolidated Debt Leverage Ratio not to exceed 4.0 to 1.0 as of the end of each quarter through the quarter ending March 31, 2022, and for each quarter thereafter the ratio shall not exceed 3.5 to 1.0.

◦ Total Consolidated Debt Leverage Ratio means the ratio of (a) Total Consolidated Debt to (b) EBITDA (as defined in the Credit Agreement) for the trailing four consecutive quarters.

◦ Total Consolidated Debt means all indebtedness (including subordinated debt) of the Company on a consolidated basis (with a limited exception).

• If the Company incurs certain subordinated debt or other permitted indebtedness, then the Company must maintain a Total Consolidated Debt Leverage Ratio not to exceed 4.5 to 1.0 and maintain a ratio of Senior Debt to EBITDA not to exceed 3.5 to 1.0, with Senior Debt being Total Consolidated Debt, less permitted subordinated debt.

• 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 from $ 3.75 million to $ 5.0 million during the quarter ended June 30, 2022 with 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 Income (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 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.

Prior to entering into the new Credit Agreement described below, the Company had a credit agreement with its banking group (the "Credit Agreement") which provided the Company with a $ 150 million revolving credit facility and a $ 100 million term loan.

The Credit Agreement was most recently amended on May 19, 2021 and had a maturity date of December 12, 2023.

On August 1, 2022, the Company entered into a new credit agreement (the “New Credit Agreement”) which replaced the prior Credit Agreement and provides the Company with a $ 190 million 5 -year committed revolving credit facility and a $ 125 million term loan with a balance of $ 122.9 million as of September 30, 2022.

The New Credit Agreement 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.

Both the revolving line of credit and the term loan under the New Credit Agreement have a maturity date of July 30, 2027.

The New Credit Agreement has the following key terms, conditions and financial covenants:

• Borrowings bear interest at Secured Overnight Financing Rate ("SOFR") plus a credit spread adjustment and applicable SOFR margin ranging from 1.25 % to 2.75 %, based upon our Total Consolidated Debt Leverage Ratio (defined below);

under the Credit Agreement, the margin was based upon the LIBOR margin.

◦ Total Consolidated Debt Leverage Ratio means the ratio of (a) Total Consolidated Debt to (b) EBITDA (as defined in the New Credit Agreement) for the trailing four consecutive fiscal quarters.

◦ Total Consolidated Debt means all indebtedness (including subordinated debt) of the Company on a consolidated basis.

• The Company has the benefit of the lowest SOFR margin if its Total Consolidated Debt Leverage Ratio is equal to or less than 1.25 to 1.0, and the margin increases as the ratio increases, to the maximum margin if the ratio is greater than 3.75 to 1.0.

The New Credit Agreement is secured by liens on substantially all the assets of the Company and certain of its U.S subsidiaries and is guaranteed by those U.S subsidiaries.

• The Company has to maintain a Total Consolidated Debt Leverage Ratio of no more than 4.0 to 1.0 at the end of each quarter through June 30, 2023 and stepping down to a maximum permitted ratio of no more than 3.75 to 1.0 for the remainder of the term.

• The Company has to maintain a Fixed Charge Coverage Ratio of 1.25 to 1.0 for the duration of the New Credit Agreement, as defined in the New Credit Agreement.

• The New Credit Agreement limits the Company’s ability to, among other things, create liens, make investments, incur more indebtedness, merge or consolidate, make dispositions of property, pay dividends, make distributions to stockholders or repurchase our stock, enter into a new line of business, enter into transactions with affiliates and enter into burdensome agreements.

• The New Credit Agreement does not limit the Company’s ability to acquire other businesses or companies except that the acquired business or company must be in the Company's line of business, the Company must be in compliance with the financial covenants on a pro forma basis after taking into account the acquisition, and the Company must provide written notice at least five business days prior to the date of an acquisition of $ 10 million or more.

Mistras Group, Inc.

2 unchanged sentences

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

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.

The Company believes that it is probable that the Company will be able to comply with the financial covenants in the Credit Agreement and that sufficient credit remains available under the Credit Agreement to meet the Company’s liquidity needs.

However, 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.

• Quarterly payments on the term loan of $ 1.56 million through June 30, 2024, then increasing to $ 2.34 million through June 30, 2025, and to $ 3.12 million for each quarterly payment thereafter through maturity.

The New Credit Agreement was accounted for as a modification and the Company expensed $ 0.8 million in unamortized capitalized debt issuance costs and fees during the three months ended September 30, 2022, which was included in selling, general and administrative expenses on the Consolidated Statements of Income.

The Company incurred $ 1.6 million in financing costs for the New Credit Agreement, 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.

As of September 30, 2022, the Company had borrowings of $ 196.7 million and a total of $ 3.0 million of letters of credit outstanding under the New Credit Agreement.

The Company has capitalized costs associated with debt modifications of $ 1.4 million as of September 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 July 30, 2027.

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

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

The Company believes that it is probable that the Company will be able to comply with the financial covenants in the New Credit Agreement and that sufficient credit remains available under the New Credit Agreement to meet the Company’s liquidity needs.

However, due to the uncertainties of the global economy, including significant volatility in oil prices, and volatility in the aerospace production, such matters cannot be predicted with certainty.

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

At September 30, 2022, there was an aggregate of approximately $ 4.5 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 %.

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The significant inputs in the Level 3 measurement not supported by market activity include the probability assessments of expected future cash flows related to the acquisitions, appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with the terms of the applicable acquisition agreements.

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

Six months ended June 30,

Nine months ended September 30,

Beginning balance $ 1,831 $ 1,640

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The Company has evaluated current market conditions and borrower credit quality and has determined that the carrying value of its long-term debt approximates fair value.

The fair value of the Company’s notes payable and finance lease obligations

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

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 fair value of the Company’s notes payable and finance lease obligations approximates their carrying amounts based on anticipated interest rates which management believes would currently be available to the Company for similar issuances of debt.

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

Leases Classification June 30, 2022 December 31, 2021

Leases Classification September 30, 2022 December 31, 2021

ROU assets Other assets $ 37,777 $ 42,451

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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 $ 2.2 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.

The ROU liability for this facility was approximately $ 2.0 million and $ 2.9 million as of September 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 September 30, 2022 and September 30, 2021, respectively.

Total rent payments for this facility were approximately $ 0.7 million and $ 1.0 million for the nine months ended September 30, 2022 and September 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 $ 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 total ROU assets attributable to finance leases were approximately $ 12.7 million and $ 13.8 million as of September 30, 2022 and December 31, 2021, respectively, which is included in Property, plant, and equipment , net on the Condensed Consolidated Balance Sheets.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

The components of lease costs were as follows:

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

Three months ended September 30, Nine months ended September 30,

Classification 2022 2021 2022 2021

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Total $ 4,901 $ 4,957 $ 14,751 $ 15,430

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Additional information related to leases was as follows:

Six months ended June 30,

Nine months ended September 30,

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

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Operating leases 5.5 % 5.8 %

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

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

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

Finance Operating

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The costs incurred by the Company to defend lawsuits, investigations and claims and amounts the Company pays to other parties because of these matters may be covered by insurance in some circumstances.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Litigation and Commercial Claims

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

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

As of September 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.

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The Company believes that any successful claim by the customer regarding the Company’s workmanship will be covered by insurance, subject to payment of a deductible.

At this time, the Company is unable to determine whether it has any liability in connection with this matter and if so, the amount or range of any such liability, and accordingly, has not established any accruals for this matter.

Accordingly, the Company recorded a reserve in the amount of $ 1.4 million during the twelve months ended December 31, 2019 for these past due receivables.

At this time, the Company is unable to determine whether it has any liability in connection with this matter and if so, the amount or range of any such liability.

In the nine months ended September 30, 2022, the Company recorded a charge of $ 0.1 million for a potential loss from this matter.

The Company recorded a reserve in the amount of $ 1.4 million during the twelve months ended December 31, 2019 for the past due receivables.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Two proceedings have been filed in California Superior Court for the County of Los Angeles regarding alleged violations of the California Labor Code.

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, one being a purported class action lawsuit on behalf of current and former Mistras employees in California and the other was filed on behalf of the State of California under the California Private Attorney General Act on the basis of the same alleged violations.

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.

The two cases were consolidated and requested 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, 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 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.

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

The settlement as agreed upon by the parties received final court approval on September 26, 2022, and the Company paid the settlement proceeds and related payroll taxes to the claims administrator in the fourth quarter of 2022.

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.

Pension Related Contingencies

Certain of Company’s subsidiaries had significant reductions in their unionized workers in 2018.

The collective bargaining agreements for these employees required contributions for these employees to national multi-employer pension funds.

The reduction in employees resulted in a subsidiary incurring a complete withdrawal to one of the pension funds under the Employee Retirement Income Security Act of 1974 ("ERISA"), which was fully satisfied in 2019.

A subsidiary of the Company had a significant reduction in its unionized workers in 2018.

The collective bargaining agreements for the employees of this subsidiary required contributions for these employees to two national multi-employer pension funds.

The reduction in employees resulted in the subsidiary incurring a complete withdrawal to one of the pension funds under the Employee Retirement Income Security Act of 1974 ("ERISA"), which was fully satisfied in 2019.

The Company has determined that the subsidiary is likely to incur partial or complete withdrawal liability to the other pension fund.

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

Severance and labor disputes

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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 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.

As of September 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.

3 unchanged sentences

The remaining payment for $ 0.6 million was received in the first quarter of 2021 and the Company recognized that amount as a gain in selling, general and administrative expenses in the same period.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Acquisition and disposition related contingencies

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

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 .

As of September 30, 2022, total potential acquisition-related contingent consideration ranged from zero to approximately $ 1.9 million.

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 $ 0.8 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.

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.

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

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.

As of September 30, 2022, the commitment was fully satisfied.

Segment Disclosure

The Company’s three operating segments are:

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

This segment provides asset protection solutions predominantly in North America, with the largest concentration in the United States, followed by Canada, consisting primarily of NDT, inspection, mechanical and engineering services that are used to evaluate the safety, structural integrity and reliability of critical energy, industrial and public infrastructure and commercial aerospace components.

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Corporate loss from operations consists of administrative charges related to corporate personnel and other charges that cannot be readily identified for allocation to a particular segment.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Selected consolidated financial information by segment for the periods shown was as follows:

(with intercompany transactions eliminated in Corporate and eliminations)

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

4 unchanged sentences

$ 178,462 $ 174,556 $ 519,155 $ 505,968

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

4 unchanged sentences

$ 53,784 $ 52,216 $ 147,233 $ 147,553

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

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

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

5 unchanged sentences

$ 9,114 $ 9,236 $ 13,991 $ 15,864

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

Three months ended September 30, Nine months ended September 30,

2022 2021 2022 2021

5 unchanged sentences

$ 8,197 $ 8,508 $ 25,132 $ 25,705

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Intangible assets, net

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$ 50,337 $ 59,381

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Services $ 415,090 $ 424,058

3 unchanged sentences

$ 540,446 $ 562,195

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.

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

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