What changed in this filing

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Item 1. Financial Statements

2024-08-02 compared with 2024-05-03 · 204 added, 133 removed, 560 unchanged (38% of the section changed)

2 unchanged sentences

and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

Condensed Consolidated Balance Sheets (Unaudited)

( in thousands, except share and per share data )

March 31, 2024 December 31, 2023

ASSETS (unaudited)

June 30, 2024 December 31, 2023

Current Assets

39 unchanged sentences

( in thousands, except per share data )

Three months ended March 31,

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

2024 2023 2024 2023

Revenue $ 189,773 $ 176,030 $ 374,215 $ 344,046

4 unchanged sentences

Reorganization and other costs 518 1,240 2,075 3,316

Legal settlement and insurance recoveries, net 60 150 60 150

Research and engineering 231 511 575 991

1 unchanged sentence

Acquisition-related expense, net — 1 1 3

Income (loss) from operations 5,553 ( 1,830 )

Income from operations 11,959 3,893 17,511 2,065

Interest expense 4,413 3,858 8,842 7,927

14 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,

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

2024 2023 2024 2023

Net Income (loss) $ 6,373 $ 376 $ 7,377 $ ( 4,602 )

1 unchanged sentence

Foreign currency translation adjustments ( 1,616 ) 3,082 ( 5,845 ) 4,355

Comprehensive Loss ( 3,225 ) ( 3,705 )

Comprehensive Income (loss) 4,757 3,458 1,532 ( 247 )

net income attributable to noncontrolling interest 4 39 13 47

Comprehensive loss attributable to Mistras Group, Inc.

$ ( 3,234 ) $ ( 3,713 )

Comprehensive Income (loss) attributable to Mistras Group, Inc $ 4,753 $ 3,419 $ 1,519 $ ( 294 )

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, 2023 30,598 $ 305 $ 247,165 $ ( 28,942 ) $ ( 28,336 ) $ 190,192 $ 311 $ 190,503

Balance at March 31, 2024 30,911 $ 328 $ 247,329 $ ( 27,947 ) $ ( 32,565 ) $ 187,145 $ 320 $ 187,465

Net income — — — 6,369 — 6,369 4 6,373

Other comprehensive loss, net of tax — — — — ( 1,616 ) ( 1,616 ) — ( 1,616 )

Share-based payments — — 1,228 — — 1,228 — 1,228

Share-based compensation — — 1,536 — — 1,536 — 1,536

Net settlement of restricted stock units 66 57 ( 341 ) — — ( 284 ) — ( 284 )

Balance at June 30, 2024 30,977 $ 385 $ 248,524 $ ( 21,578 ) $ ( 34,181 ) $ 193,150 $ 324 $ 193,474

Balance at March 31, 2023 30,230 $ 302 $ 244,131 $ ( 16,475 ) $ ( 32,117 ) $ 195,841 $ 307 $ 196,148

Balance at December 31, 2022 29,895 $ 298 $ 243,031 $ ( 11,489 ) $ ( 33,390 ) $ 198,450 $ 299 $ 198,749

Net loss — — — ( 4,986 ) — ( 4,986 ) 8 ( 4,978 )

Net income — — — 337 — 337 39 376

Other comprehensive income, net of tax — — — — 3,082 3,082 — 3,082

1 unchanged sentence

Net settlement of restricted stock units 72 — ( 164 ) — — ( 164 ) — ( 164 )

Balance at March 31, 2023 30,230 $ 302 $ 244,131 $ ( 16,475 ) $ ( 32,117 ) $ 195,841 $ 307 $ 196,148

Balance at June 30, 2023 30,302 $ 302 $ 245,058 $ ( 16,138 ) $ ( 29,035 ) $ 200,187 $ 346 $ 200,533

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, 2023 30,598 $ 305 $ 247,165 $ ( 28,942 ) $ ( 28,336 ) $ 190,192 $ 311 $ 190,503

Net income — — — 7,364 — 7,364 13 7,377

Other comprehensive loss, net of tax — — — — ( 5,845 ) ( 5,845 ) — ( 5,845 )

Share-based compensation — — 2,764 — — 2,764 — 2,764

Net settlement of restricted stock units 379 80 ( 1,405 ) — — ( 1,325 ) — ( 1,325 )

Balance at June 30, 2024 30,977 $ 385 $ 248,524 $ ( 21,578 ) $ ( 34,181 ) $ 193,150 $ 324 $ 193,474

Balance at December 31, 2022 29,895 $ 298 $ 243,031 $ ( 11,489 ) $ ( 33,390 ) $ 198,450 $ 299 $ 198,749

Net income (loss) — — — ( 4,649 ) — ( 4,649 ) 47 ( 4,602 )

Other comprehensive income, net of tax — — — — 4,355 4,355 — 4,355

Share-based compensation — — 2,968 — — 2,968 — 2,968

Net settlement of restricted stock units 407 4 ( 941 ) — — ( 937 ) — ( 937 )

Balance at June 30, 2023 30,302 $ 302 $ 245,058 $ ( 16,138 ) $ ( 29,035 ) $ 200,187 $ 346 $ 200,533

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 income (loss) $ 7,377 $ ( 4,602 )

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

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

Depreciation and amortization 16,670 16,722

1 unchanged sentence

Share-based compensation expense 2,764 2,968

Bad debt provision for troubled customers, net of recoveries 227 ( 30 )

Change in provision for doubtful accounts 414 —

Foreign currency (gain) loss ( 789 ) 875

Other ( 306 ) ( 513 )

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

Changes in operating assets and liabilities

Accounts receivable ( 19,103 ) 5,856

43 unchanged sentences

Our segments are as follows:

• North America.

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

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

Software, digital and data services are included in this segment.

9 unchanged sentences

The Company's European operations are currently experiencing increased costs associated with higher energy costs, among others, due in part to the Russian-Ukrainian war.

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

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

Mistras Group, Inc.

2 unchanged sentences

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

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

Basis of Presentation

1 unchanged sentence

generally accepted accounting principles ("GAAP") and Securities and Exchange Commission ("SEC") guidance allowing for reduced disclosure for interim periods.

In the opinion of management, the Unaudited Condensed Consolidated Financial Statements include all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods of the years ending December 31, 2024 and December 31, 2023.

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 statement of the results for the interim periods of the years ending December 31, 2024 and December 31, 2023.

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

16 unchanged sentences

Since the date of the 2023 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.

1 unchanged sentence

Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment.

Our net deferred tax assets primarily consist of net operating loss carry forwards, or NOLs.

A valuation allowance is provided if it is more likely than not that some or all or all of a deferred income tax asset will not be realized.

Our net deferred tax assets primarily consist of net operating loss carryforwards, or NOLs.

A valuation allowance is provided if it is more likely than not that some or all of a deferred income tax asset will not be realized.

A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the current and prior years.

As of March 31, 2024, 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, 2024, 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 10.6 % and 15.6 % for the three months ended March 31, 2024 and 2023, respectively.

The effective income tax rate benefit for the three months ended March 31, 2024 was lower than the statutory rate primarily due to the impact of a favorable discrete item related to stock compensation.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

The Company’s effective income tax rate was approximately 15.5 % and ( 974.3 )% for the three months ended June 30, 2024 and 2023, respectively.

The Company’s effective income tax rate was approximately 14.9 % and 21.5 % for the six months ended June 30, 2024 and 2023, respectively.

The effective income tax rate for the three months ended June 30, 2024 was lower than the statutory rate primarily due to the impact of a reversal of a valuation allowance which was a favorable discrete item in the period.

The effective income tax rate for the six months ended June 30, 2023 was higher than the statutory rate due primarily to a $ 0.7 million valuation allowance recorded during the period related to a foreign jurisdiction.

The effective income tax rate for the six months ended June 30, 2024 was lower than the statutory rate primarily due to the reversal of valuation allowances.

The effective income tax rate for the six months ended June 30, 2023 was lower than the statutory rate due primarily to an unfavorable discrete item related to stock compensation.

Recent Accounting Pronouncements

5 unchanged sentences

We are currently evaluating the impact of ASU 2023-09 on our financial statements.

The Company derives the majority of its revenue by providing services on a time and material basis, and are short-term in nature.

The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers .

Mistras Group, Inc.

2 unchanged sentences

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

The Company derives the majority of its revenue by providing services on a time and material basis, and are short-term in nature.

The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers .

Performance Obligations

32 unchanged sentences

Revenue by industry was as follows:

Three Months Ended March 31, 2024 North America International Products & Systems Corp/Elim Total

Three Months Ended June 30, 2024 North America International Products Corp/Elim Total

Oil & Gas $ 96,356 $ 12,735 $ 165 $ — $ 109,256

7 unchanged sentences

Total $ 156,394 $ 34,264 $ 3,373 $ ( 4,258 ) $ 189,773

Three Months Ended March 31, 2023 North America International Products & Systems Corp/Elim Total

Three Months Ended June 30, 2023 North America International Products Corp/Elim Total

Oil & Gas $ 97,500 $ 8,609 $ 15 $ — $ 106,124

7 unchanged sentences

Total $ 145,550 $ 30,277 $ 3,329 $ ( 3,126 ) $ 176,030

Six Months Ended June 30, 2024 North America International Products Corp/Elim Total

Oil & Gas $ 199,383 $ 22,801 $ 237 $ — $ 222,421

Aerospace & Defense 31,971 12,429 58 — 44,458

Industrials 20,762 11,731 1,000 — 33,493

Power Generation & Transmission 10,924 2,936 1,025 — 14,885

Other Process Industries 18,296 8,437 76 — 26,809

Infrastructure, Research & Engineering 9,097 5,018 1,104 — 15,219

Petrochemical 7,661 702 — — 8,363

Other 8,649 3,257 3,083 ( 6,422 ) 8,567

Total $ 306,743 $ 67,311 $ 6,583 $ ( 6,422 ) $ 374,215

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Six Months Ended June 30, 2023 North America International Products Corp/Elim Total

Oil & Gas $ 187,273 $ 17,464 $ 52 $ — $ 204,789

Aerospace & Defense 27,276 10,116 228 — 37,620

Industrials 20,368 12,256 1,026 — 33,650

Power Generation & Transmission 10,446 3,187 2,493 — 16,126

Other Process Industries 17,973 7,703 78 — 25,754

Infrastructure, Research & Engineering 6,654 4,164 1,689 — 12,507

Petrochemical 6,714 301 — — 7,015

Other 5,778 4,493 1,502 ( 5,188 ) 6,585

Total $ 282,482 $ 59,684 $ 7,068 $ ( 5,188 ) $ 344,046

Revenue per key geographic location was as follows:

Three Months Ended March 31, 2024 North America International Products & Systems Corp/Elim Total

Three Months Ended June 30, 2024 North America International Products Corp/Elim Total

United States $ 130,870 $ 432 $ 1,542 $ ( 209 ) $ 132,635

3 unchanged sentences

Total $ 156,394 $ 34,264 $ 3,373 $ ( 4,258 ) $ 189,773

Three Months Ended March 31, 2023 North America International Products & Systems Corp/Elim Total

Three Months Ended June 30, 2023 North America International Products Corp/Elim Total

United States $ 122,972 $ 280 $ 1,645 $ ( 271 ) $ 124,626

3 unchanged sentences

Total $ 145,550 $ 30,277 $ 3,329 $ ( 3,126 ) $ 176,030

Six Months Ended June 30, 2024 North America International Products Corp/Elim Total

United States $ 260,328 $ 728 $ 3,142 $ ( 1,724 ) $ 262,474

Other Americas 41,721 4,216 852 ( 3,027 ) 43,762

Europe 1,764 59,846 1,231 ( 1,461 ) 61,380

Asia-Pacific 2,930 2,521 1,358 ( 210 ) 6,599

Total $ 306,743 $ 67,311 $ 6,583 $ ( 6,422 ) $ 374,215

Six Months Ended June 30, 2023 North America International Products Corp/Elim Total

United States $ 243,572 $ 589 $ 3,446 $ ( 869 ) $ 246,738

Other Americas 35,311 7,310 624 ( 1,906 ) 41,339

Europe 2,694 48,657 765 ( 1,992 ) 50,124

Asia-Pacific 905 3,128 2,233 ( 421 ) 5,845

Total $ 282,482 $ 59,684 $ 7,068 $ ( 5,188 ) $ 344,046

Mistras Group, Inc.

8 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 three months ended March 31, 2024 and 2023 that was included in the contract liability balance at the beginning of such year was $ 2.9 million and $ 3.1 million for each period.

Revenue recognized during the six months ended June 30, 2024 and 2023 that was included in the contract liability balance at the beginning of such year was $ 4.8 million and $ 4.6 million, respectively, for each period.

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

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Share-Based Compensation

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-based 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 450,000 shares were available for future grants as of March 31, 2024.

At the annual shareholders meeting on May 14, 2024, the Company’s shareholders approved an amendment to the 2016 Plan, including an increase to the total number of shares that may be issued under the 2016 Plan by 1.3 million, for a total of 6.2 million shares that are authorized for issuance under the 2016 Plan, of which approximately 1,600,000 shares were available for future grants as of June 30, 2024.

Stock Options

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

On October 11, 2023, Mr.

4 unchanged sentences

Stamatakis is no longer serving as an officer, director or in any other capacity of the Company.

The following table sets forth a summary of the stock option activity, weighted-average exercise prices and options outstanding as of March 31, 2024 as follows (in thousands, except per share amounts and years):

Three months ended March 31,

The following table sets forth a summary of the stock option activity, weighted-average exercise prices and options outstanding as of June 30, 2024 as follows (in thousands, except per share amounts and years):

Six months ended June 30,

Options Weighted

7 unchanged sentences

250 $ 5.36 — $ —

The Company recognized all share-based compensation expense related to the stock options granted in the fourth quarter of 2023 and no further unrecognized share-based compensation expense remains as of March 31, 2024.

Stock Issuances to Non-Employee Directors

1 unchanged sentence

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

Three months ended March 31,

Six months ended June 30,

Awards issued 31 48

Grant date fair value of awards issued $ 274 $ 275

Restricted Stock Unit Awards

For the three months ended June 30, 2024 and June 30, 2023, the Company recognized share-based compensation expense related to restricted stock unit awards of $ 1.3 million and $ 0.8 million, respectively.

For the six months ended June 30, 2024 and 2023, the Company recognized share-based compensation expense related to restricted stock unit awards of $ 2.3 million and $ 1.8 million, respectively.

As of June 30, 2024, there was $ 10.7 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 2.6 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.

Mistras Group, Inc.

2 unchanged sentences

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

Restricted Stock Unit Awards

For the three months ended March 31, 2024 and March 31, 2023, the Company recognized share-based compensation expense related to restricted stock unit awards of $ 1.0 million and $ 0.9 million, respectively.

As of March 31, 2024, there was $ 11.2 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 3.0 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 461 430

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

3 unchanged sentences

Granted 726 $ 8.52 581 $ 8.42

Released ( 364 ) $ 8.95 ( 338 ) $ 5.76

Vested ( 461 ) $ 9.08 ( 430 ) $ 6.09

Forfeited ( 56 ) $ 8.49 ( 98 ) $ 7.94

3 unchanged sentences

The Company maintains Performance Restricted Stock Units ("PRSUs") that have been granted to select executives and senior officers whose ultimate payout may vary between zero and 200 % of the target award, based on the Company’s performance over a one-year period based on specific metrics approved by the Compensation Committee of the Board of Directors of the Company.

For 2023, the Compensation Committee utilized the following metrics for the Company's PRSUs awarded to its executive officers, and approved the new target awards for 2023.

The three metrics are:

Free Cash Flow net cash provided by operating activities less purchases of property, plant, equipment and intangible assets and is subject to adjustments approved by the Compensation Committee.

For 2023, the Compensation Committee used the following three performance metrics for PRSUs approved in that year.

Free Cash Flow defined as net cash provided by operating activities less purchases of property, plant, equipment and intangible assets and is subject to adjustments approved by the Compensation Committee.

Adjusted EBITDA defined as net income attributable to the Company plus:

4 unchanged sentences

Compensation cost related to the PRSUs with a market condition is not reversed if the market condition is not achieved, provided the employee requisite service has been rendered.

PRSUs generally vest ratably on each of the first four anniversary dates upon completion of the performance period, for a total requisite service period of up to five years , and have no dividend rights.

Earned PRSUs generally vest ratably in four equal annual installments over the four years following completion of the performance period, for a total requisite service period of up to five years , and have no dividend rights.

Mistras Group, Inc.

3 unchanged sentences

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

Three months ended March 31,

Six months ended June 30,

Units Weighted

4 unchanged sentences

Performance condition adjustments — $ — ( 215 ) $ 8.27

Released — $ — ( 64 ) $ 5.58

Vested — $ — ( 64 ) $ 5.58

Forfeited — $ — ( 84 ) $ 6.95

1 unchanged sentence

355 $ 8.97 199 $ 9.45

During the three months ended March 31, 2023, the Compensation Committee approved the final calculation of the award metrics for calendar year 2022.

Therefore, the calendar year 2022 PRSUs decreased by approximately 32,000 units as a result of the final calculation of award metrics.

For the three months ended March 31, 2024 and March 31, 2023, the Company recognized aggregate share-based compensation expense related to the awards described above of approximately $ 0.1 million and $ 0.7 million, respectively.

At March 31, 2024, there was $ 2.4 million of total unrecognized compensation costs related to approximately 309,000 non-vested PRSUs, which is expected to be recognized over a remaining weighted-average period of 3.0 years.

Performance condition adjustments during the six months ended June 30, 2023 were attributable to the Compensation Committee's final calculation of the award metrics for calendar year 2022.

As a result, the calendar year 2022 PRSUs decreased by approximately 215,000 units during the six months ended June 30, 2023.

For the three months ended June 30, 2024 and June 30, 2023, the Company recognized aggregate share-based compensation expense related to the awards described above of approximately $ 0.3 million and $ 0.2 million, respectively.

For the six months ended June 30, 2024 and June 30, 2023, the Company recognized aggregate share-based compensation expense related to the awards described above of approximately $ 0.3 million and $ 0.6 million, respectively.

At June 30, 2024, there was $ 2.5 million of total unrecognized compensation costs related to approximately 355,000 non-vested PRSUs, which is expected to be recognized over a remaining weighted-average period of 2.8 years.

Earnings (loss) per Share

8 unchanged sentences

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

Three months ended March 31,

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

2024 2023 2024 2023

Basic earnings (loss) per share

10 unchanged sentences

217 292 423 —

31,293 30,660 31,358 30,214

Diluted earnings (loss) per share $ 0.20 $ 0.01 $ 0.23 $ ( 0.15 )

_______________

(1 ) For the three months ended March 31, 2023, 1,513,000 shares, related to restricted stock were excluded from the calculation of diluted EPS due to the net loss for the period.

(1) For the six months ended June 30, 2023, 1,106,595 shares related to restricted stock, respectively, were excluded from the calculation of diluted EPS due to the net loss for the period.

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 Income (Loss) and were as follows for the three months ended March 31, 2024 and 2023:

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, 2024 and 2023:

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

2024 2023 2024 2023

Due diligence, professional fees and other transaction costs $ — $ 1 $ 1 $ 3

8 unchanged sentences

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

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Trade accounts receivable $ 151,945 $ 134,495

1 unchanged sentence

Accounts receivable, net $ 149,958 $ 132,847

The Company had $ 36.5 million and $ 18.5 million of unbilled revenue accrued as of March 31, 2024 and December 31, 2023, respectively.

The Company had $ 29.7 million and $ 18.5 million of unbilled revenue accrued as of June 30, 2024 and December 31, 2023, respectively.

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

1 unchanged sentence

The Company considers unbilled receivables as short-term in nature as they are normally converted to trade receivables within 90 days, thus future changes in economic conditions will not have a significant effect on the credit loss estimate.

Inventories consist of the following (in thousands):

March 31, 2024 December 31, 2023

Inventories consisted of the following (in thousands):

June 30, 2024 December 31, 2023

Raw materials $ 5,679 $ 6,099

4 unchanged sentences

Property, Plant and Equipment, net

Property, plant and equipment consisted of the following:

March 31, 2024 December 31, 2023

Property, plant and equipment, net consisted of the following:

June 30, 2024 December 31, 2023

Land $ 2,441 $ 2,453

8 unchanged sentences

Property, plant and equipment, net $ 78,785 $ 80,972

Depreciation expense for the three months ended March 31, 2024 and 2023 was approximately $ 6.5 million and $ 6.3 million, respectively.

Depreciation expense for the three months ended June 30, 2024 and 2023 was approximately $ 6.4 million and $ 6.2 million, respectively.

Depreciation expense for the six months ended June 30, 2024 and 2023 was $ 12.8 million and $ 12.4 million, respectively.

Mistras Group, Inc.

6 unchanged sentences

Foreign currency translation ( 2,366 ) — — ( 2,366 )

Balance at March 31, 2024 $ 185,726 $ — $ — $ 185,726

Impairment charges — — — —

Balance at June 30, 2024 $ 184,988 $ — $ — $ 184,988

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.

15 unchanged sentences

The Company performed a quantitative annual impairment test as of October 1, 2023 and the Company did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable.

Additionally, through March 31, 2024, 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, 2024, 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:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(Years) Gross

7 unchanged sentences

Total $ 188,267 $ ( 146,555 ) $ 41,712 $ 188,835 $ ( 144,841 ) $ 43,994

Amortization expense for the three months ended March 31, 2024 and 2023 was approximately $ 1.9 million and $ 2.1 million, respectively.

Amortization expense for the three months ended June 30, 2024 and 2023 was approximately $ 1.9 million and $ 2.2 million, respectively.

Amortization expense for the six months ended June 30, 2024 and 2023 was $ 3.9 million and $ 4.3 million, respectively.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Accrued salaries, wages and related employee benefits $ 29,567 $ 27,372

5 unchanged sentences

Total $ 85,727 $ 84,331

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Long-Term Debt

Long-term debt consisted of the following:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Senior credit facility $ 82,836 $ 71,150

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Senior Credit Facility

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

On August 1, 2022, the Company entered into a new credit agreement (the “Credit Agreement”), which provides the Company with a $ 190 million 5-year committed revolving credit facility and a $ 125 million term loan with a balance of $ 116 million as of March 31, 2024.

The 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.

On August 1, 2022, the Company entered into a new credit agreement (the “Credit Agreement”) which provides the Company with a $ 190 million 5-year committed revolving credit facility and a $ 125 million term loan with a balance of $ 113.7 million as of June 30, 2024.

The Credit Agreement permits the Company to borrow up to $ 100 million in non-U.S.

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

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

1 unchanged sentence

• 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 Prior 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 Credit Agreement) for the trailing four consecutive fiscal quarters.

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

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

The 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.

• As of December 31, 2023, the Fixed Charge Coverage Ratio was modified from a ratio of 1.25 to 1.0 to a ratio of 1.1 to 1.0 for the fiscal quarters ended December 31, 2023 and March 31, 2024.

For the period ending June 30, 2024 to maturity, the Fixed Charge Coverage Ratio is 1.25 to 1.

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

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

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

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

As of March 31, 2024, the Company had borrowings of $ 194.9 million and a total of $ 2.9 million of letters of credit outstanding under the Credit Agreement.

The Company has capitalized costs associated with debt modifications of $ 1.2 million as of March 31, 2024, 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 March 31, 2024, the Company was in compliance with the terms and covenants of the Credit Agreement.

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

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

However, such matters cannot be predicted with certainty.

Mistras Group, Inc.

2 unchanged sentences

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

As of June 30, 2024, the Company had borrowings of $ 196.6 million and a total of $ 3.2 million of letters of credit outstanding under the Credit Agreement.

The Company has capitalized costs associated with debt modifications of $ 1.0 million as of June 30, 2024, 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 June 30, 2024, 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.

However, 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 March 31, 2024, there was an aggregate of approximately $ 3.6 million outstanding, payable at various times through 2030.

At June 30, 2024, there was an aggregate of approximately $ 3.1 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 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 $ — $ 938

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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.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Commitments and Contingencies

3 unchanged sentences

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

A subsidiary of the Company, Mistras Arizona Inspection Services LLC (“Mistras Arizona”) is subject to a lawsuit filed by the Arizona Department of Environmental Quality (“DEQ”), which has been filed against the Company, captioned State of Arizona v.

Mistras Group, Inc.

and Naiman Phoenix, Ltd., filed on February 27, 2024, in the Superior Court of the State of Arizona for Maricopa County, CV 2024-003866.

The Company and a subsidiary of the Company, Mistras Arizona Inspection Services LLC (“Mistras Arizona”), are subject to a lawsuit filed by the Arizona Department of Environmental Quality (“DEQ”).

The lawsuit, captioned State of Arizona v.

Mistras Group, Inc., Mistras Arizona Inspection Services, LLC and Naiman Phoenix, Ltd., was originally filed on February 27, 2024, in the Superior Court of the State of Arizona for Maricopa County, CV 2024-003866.

The Complaint alleges various violations of the Arizona environmental laws and regulations in connection with the operation of the Mistras Arizona testing facility in Phoenix, Arizona.

The complaint seeks injunctive relief, the closing of a chromic acid plating line and air scrubber, implementation of a site assessment plan approved by the DEQ, corrective and remedial action to bring the facility in compliance, and costs and penalties.

Mistras Arizona and the Company have also received notice of violations from the DEQ for the violations of Arizona environmental laws and regulations and from the Maricopa County Department of Air Quality for violation of various regulations regarding air quality.

This matter is in the early stages and the Company is unable to assess the amount of liability the Company or Mistras Arizona may incur.

Mistras Arizona and the Company have also received notice of violations from the DEQ for alleged violations of Arizona environmental laws and regulations and from the Maricopa County Department of Air Quality for alleged violations of various regulations regarding air quality.

This matter is in the early stages but it is probable that remediation costs will be incurred, and it is possible fines and penalties may be imposed related to this lawsuit, but the Company is unable to assess the range of loss the Company, or Mistras Arizona may incur.

In addition, Mistras Arizona’s operations in Phoenix are located within a leased site within the footprint of the Motorola 52nd Street Superfund Site (the “Motorola Site”).

Mistras Arizona received a General Notice Letter from the US Environmental Protection Agency (the "EPA"), dated May 21, 2024, informing Mistras Arizona that the EPA has identified it as a potentially responsible party in relation to the Motorola Site.

Pension Related Contingencies

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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, 2024 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, 2024 is approximately $ 2.5 million, which were incurred in 2018 and 2019.

Segment Disclosure

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Software, digital and data services are included in this segment.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

• International.

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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 March 31,

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

2024 2023 2024 2023

North America $ 156,394 $ 145,550 $ 306,743 $ 282,482

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$ 189,773 $ 176,030 $ 374,215 $ 344,046

Three months ended March 31,

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

2024 2023 2024 2023

North America $ 44,336 $ 39,679 $ 84,326 $ 76,316

3 unchanged sentences

$ 56,116 $ 49,722 $ 107,205 $ 95,799

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 March 31,

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

2024 2023 2024 2023

Income (loss) from operations

4 unchanged sentences

$ 11,959 $ 3,893 $ 17,511 $ 2,065

Three months ended March 31,

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

2024 2023 2024 2023

Depreciation and amortization

4 unchanged sentences

$ 8,288 $ 8,309 $ 16,670 $ 16,722

Mistras Group, Inc.

and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

(tabular dollars are in thousands)

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Intangible assets, net

4 unchanged sentences

$ 41,712 $ 43,994

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

North America $ 418,363 $ 402,782

3 unchanged sentences

$ 548,147 $ 534,776

Refer to Note 2 - Revenue , for revenue by geographic area for the three months ended March 31, 2024 and 2023.

Refer to Note 2 – Revenue , for revenue by geographic area for the three and six months ended June 30, 2024 and 2023.

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