What changed in this filing

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Item 1. Financial Statements

2024-11-04 compared with 2024-08-02 · 165 added, 152 removed, 612 unchanged (34% of the section changed)

2 unchanged sentences

and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

Unaudited Condensed Consolidated Balance Sheets

( in thousands, except share and per share data )

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Current Assets

39 unchanged sentences

( 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,

2024 2023 2024 2023

5 unchanged sentences

Reorganization and other costs 2,143 2,702 4,218 6,017

Goodwill impairment charges — 13,799 — 13,799

Legal settlement and insurance recoveries, net ( 868 ) — ( 808 ) 150

2 unchanged sentences

Acquisition-related expense, net — — 1 5

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

Income (loss) from operations 11,858 ( 4,682 ) 29,368 ( 2,618 )

Other income ( 1,479 ) — ( 1,479 ) —

Interest expense 4,303 4,167 13,145 12,093

Income (loss) before provision (benefit) for income taxes 9,034 ( 8,849 ) 17,702 ( 14,711 )

Provision (benefit) for income taxes 1,173 ( 341 ) 1,292 ( 1,260 )

Provision for income taxes 2,618 1,489 3,909 229

Net Income (Loss) 6,416 ( 10,338 ) 13,793 ( 14,940 )

net income attributable to noncontrolling interests, net of taxes 4 39 13 47

net income (loss) attributable to noncontrolling interests, net of taxes 15 ( 40 ) 28 7

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

11 unchanged sentences

(in thousands )

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

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

2024 2023 2024 2023

3 unchanged sentences

Comprehensive Income (loss) 10,577 ( 15,766 ) 12,109 ( 16,013 )

net income attributable to noncontrolling interest 4 39 13 47

net income (loss) attributable to noncontrolling interest 15 ( 40 ) 28 7

Comprehensive Income (loss) attributable to Mistras Group, Inc $ 10,562 $ ( 15,726 ) $ 12,081 $ ( 16,020 )

12 unchanged sentences

Shares Amount Total Equity

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

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

Net income — — — 6,401 — 6,401 15 6,416

2 unchanged sentences

Net settlement of restricted stock units 30 — — — — — — —

Balance at September 30, 2024 31,007 $ 385 $ 250,016 $ ( 15,177 ) $ ( 30,020 ) $ 205,204 $ 339 $ 205,543

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

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

Net income — — — 337 — 337 39 376

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

Share-based payments — — 1,091 — — 1,091 — 1,091

Net loss — — — ( 10,298 ) — ( 10,298 ) ( 40 ) ( 10,338 )

Other comprehensive loss, net of tax — — — — ( 5,428 ) ( 5,428 ) — ( 5,428 )

Share-based compensation — — 1,017 — — 1,017 — 1,017

Net settlement of restricted stock units 51 — — — — — — —

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

Six months ended

Balance at September 30, 2023 30,353 $ 302 $ 246,075 $ ( 26,436 ) $ ( 34,463 ) $ 185,478 $ 306 $ 185,784

Nine months ended

Common Stock Additional

10 unchanged sentences

Net settlement of restricted stock units 409 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 September 30, 2024 31,007 $ 385 $ 250,016 $ ( 15,177 ) $ ( 30,020 ) $ 205,204 $ 339 $ 205,543

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

Net loss — — — ( 14,947 ) — ( 14,947 ) 7 ( 14,940 )

Other comprehensive loss, net of tax — — — — ( 1,073 ) ( 1,073 ) — ( 1,073 )

Share-based compensation — — 3,985 — — 3,985 — 3,985

Net settlement of restricted stock units 458 4 ( 941 ) — — ( 937 ) — ( 937 )

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

Balance at September 30, 2023 30,353 $ 302 $ 246,075 $ ( 26,436 ) $ ( 34,463 ) $ 185,478 $ 306 $ 185,784

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

2 unchanged sentences

Depreciation and amortization 24,726 25,470

Goodwill impairment charges — 13,799

Deferred income taxes ( 2,026 ) 816

23 unchanged sentences

Taxes paid related to net share settlement of share-based awards ( 1,326 ) ( 602 )

Net cash provided by (used in) financing activities 5,261 ( 11,187 )

Net cash used in financing activities ( 6,247 ) ( 1,839 )

Effect of exchange rate changes on cash and cash equivalents 1,642 ( 1,411 )

30 unchanged sentences

Recent Developments

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

maintain business continuity and financial strength and stability;

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

The Russian-Ukrainian war and the conflict in the Middle East between Israel and Hamas continues to create disruptions in the oil and gas market and the supply chain in general, which is resulting in some disruption to our business operations.

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 provides products and services to countries throughout the Middle East, where lawfully permitted, and in accordance with United States regulations.

We continue to monitor the on-going conflicts throughout the Middle East.

These conflicts caused disruptions in the Company's European operations in 2023 with increased costs associated with higher energy costs, amongst others.

These disruptions have largely subsided in 2024 and the Company will continue to monitor market conditions and respond accordingly.

Basis of Presentation

The Unaudited Condensed Consolidated Financial Statements contained in this report have been prepared in conformity with U.S.

generally accepted accounting principles ("GAAP") and Securities and Exchange Commission ("SEC") guidance allowing

Mistras Group, Inc.

2 unchanged sentences

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

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.

Basis of Presentation

The Unaudited Condensed Consolidated Financial Statements contained in this report have been prepared in conformity with U.S.

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

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

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as well as its wholly-owned subsidiaries, majority-owned subsidiaries and consolidated variable interest entities (VIE).

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.

For consolidated 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).

8 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.

4 unchanged sentences

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

As of 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.

As of September 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 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.

The Company’s effective income tax rate was approximately 29.0 % and ( 16.8 )% for the three months ended September 30, 2024 and 2023, respectively.

The Company’s effective income tax rate was approximately 22.1 % and ( 1.6 )% for the nine months ended September 30, 2024 and 2023, respectively.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

The effective income tax rate for the three months ended September 30, 2024 was higher than the statutory rate primarily due to the impact of permanent items in the period.

The effective income tax rate for the three months ended September 30, 2023 was lower than the statutory rate due to the impact of permanent tax adjustments related to executive compensation and goodwill impairments.

The effective income tax rate for the nine months ended September 30, 2024 was higher than the statutory rate primarily due to the impact of permanent items.

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

Recent Accounting Pronouncements

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The new standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

We are currently evaluating the impact of ASU 2023-07 on our financial statements.

We do not expect the impact of ASU 2023-07 to be material on our financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) to enhance the transparency and decision usefulness of income tax disclosures, primarily related to the rate reconciliation and income taxes paid disclosures.

The new standard is effective for fiscal years beginning after December 15, 2024.

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

We do not expect the impact of ASU 2023-09 to be material 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.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Performance Obligations

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

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Contract Estimates

8 unchanged sentences

Whenever revisions of estimates, contract costs and/or contract values indicate that the contract costs will exceed estimated revenues, thus creating a loss, a provision for the total estimated loss is recorded in that period.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Revenue by Category

1 unchanged sentence

Revenue by industry was as follows:

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

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

Oil & Gas $ 90,460 $ 9,040 $ 3 $ — $ 99,503

7 unchanged sentences

Total $ 149,845 $ 33,662 $ 3,276 $ ( 4,089 ) $ 182,694

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

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

Oil & Gas $ 94,390 $ 8,827 $ 35 $ — $ 103,252

7 unchanged sentences

Total $ 148,814 $ 30,980 $ 2,829 $ ( 3,269 ) $ 179,354

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

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Nine Months Ended September 30, 2024 North America International Products Corp/Elim Total

Oil & Gas $ 289,843 $ 31,841 $ 240 $ — $ 321,924

7 unchanged sentences

Total $ 456,588 $ 100,972 $ 9,860 $ ( 10,511 ) $ 556,909

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

Nine Months Ended September 30, 2023 North America International Products Corp/Elim Total

Oil & Gas $ 281,663 $ 26,291 $ 87 $ — $ 308,041

8 unchanged sentences

Revenue per key geographic location was as follows:

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

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

United States $ 124,194 $ 402 $ 1,658 $ ( 1,457 ) $ 124,797

3 unchanged sentences

Total $ 149,845 $ 33,662 $ 3,276 $ ( 4,089 ) $ 182,694

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

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

United States $ 126,239 $ 120 $ 1,032 $ ( 849 ) $ 126,542

3 unchanged sentences

Total $ 148,814 $ 30,980 $ 2,829 $ ( 3,269 ) $ 179,354

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

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Nine Months Ended September 30, 2024 North America International Products Corp/Elim Total

United States $ 384,522 $ 1,129 $ 4,800 $ ( 3,181 ) $ 387,270

3 unchanged sentences

Total $ 456,588 $ 100,972 $ 9,860 $ ( 10,511 ) $ 556,909

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

Nine Months Ended September 30, 2023 North America International Products Corp/Elim Total

United States $ 369,811 $ 709 $ 4,478 $ ( 1,718 ) $ 373,280

3 unchanged sentences

Total $ 431,295 $ 90,664 $ 9,897 $ ( 8,457 ) $ 523,399

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

Contract Balances

4 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, 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.

Revenue recognized during the nine months ended September 30, 2024 and 2023 that was included in the contract liability balance at the beginning of such year was $ 6.2 million and $ 5.7 million, respectively, for each period.

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

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Awards granted under the 2016 Plan may be in the form of stock options, restricted stock units and other forms of share-based incentives, including performance-based restricted stock units, stock appreciation rights and deferred stock rights.

At the annual shareholders meeting on May 14, 2024, the Company’s shareholders approved an amendment to 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.

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Stamatakis to accept the position of Interim President and CEO of the Company and were therefore granted outside the 2016 Plan, as permitted by the rules of the NYSE.

The Options can be exercised any time after the grant date until its expiration date, which is the earlier of 10 years from the grant date or one year following the date Mr.

The Options can be exercised any time after the grant date until its expiration date, which is the earlier of 10

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

years from the grant date or one year following the date Mr.

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 June 30, 2024 as follows (in thousands, except per share amounts and years):

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, 2024 as follows:

Nine months ended September 30,

Options Weighted

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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 June 30, 2024.

The Company recognized all share-based compensation expense related to the stock options granted in the fourth quarter of 2023 when they were granted and no further unrecognized share-based compensation expense remains as of the end of the current period.

Stock Issuances to Non-Employee Directors

As part of its compensation program for non-employee directors, the Company makes semi-annual issuances of fully-vested common stock to its non-employee directors.

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):

Six months ended June 30,

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:

Nine months ended September 30,

Awards issued 60 99

1 unchanged sentence

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.

For the three months ended September 30, 2024 and September 30, 2023, the Company recognized share-based compensation expense related to restricted stock unit awards of $ 1.6 million and $ 0.7 million, respectively.

For the nine months ended September 30, 2024 and 2023, the Company recognized share-based compensation expense related to restricted stock unit awards of $ 3.9 million and $ 2.5 million, respectively.

As of September 30, 2024, there was $ 8.9 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 2.4 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:

Nine months ended September 30,

Restricted stock awards vested 461 430

Fair value of awards vested $ 4,184 $ 2,639

Mistras Group, Inc.

2 unchanged sentences

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

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,

Restricted stock awards vested 461 430

Fair value of awards vested $ 4,184 $ 2,616

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

8 unchanged sentences

Performance Restricted Stock Units

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.

The Company maintains Performance Restricted Stock Units ("PRSUs") that have been granted to select executives and senior officers.

The ultimate payout of these PRSUs 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 used the following three performance metrics for PRSUs approved in that year.

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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

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168 $ 9.18 100 $ 9.83

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.

Performance condition adjustments during the nine months ended September 30, 2024 decreased by approximately 187,000 units based on forecasted results for 2024 as compared to performance metrics determined by the Compensation Committee.

For the three months ended September 30, 2024 and September 30, 2023, the Company recognized aggregate share-based compensation expense related to the awards described above of approximately $ 0.0 million and $ 0.1 million, respectively.

For the nine months ended September 30, 2024 and September 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 September 30, 2024, there was $ 0.9 million of total unrecognized compensation costs related to approximately 168,000 non-vested PRSUs, which is expected to be recognized over a remaining weighted-average period of 2.4 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 June 30, Six months ended June 30,

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

2024 2023 2024 2023

11 unchanged sentences

31,660 30,402 31,513 30,277

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

Diluted earnings (loss) per share $ 0.20 $ ( 0.34 ) $ 0.44 $ ( 0.49 )

_______________

(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.

(1) For the three and nine months ended September 30, 2023, 1,508,255 and 926,224 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 and six months ended June 30, 2024 and 2023:

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 (Loss) and were as follows for the three and nine months ended September 30, 2024 and 2023:

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

2024 2023 2024 2023

9 unchanged sentences

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Trade accounts receivable $ 146,410 $ 134,495

1 unchanged sentence

Accounts receivable, net $ 144,104 $ 132,847

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

The Company had $ 30.3 million and $ 18.5 million of unbilled revenue accrued as of September 30, 2024 and December 31, 2023, respectively.

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

Unbilled revenue is generally billed in the subsequent quarter to their revenue recognition.

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.

The Company considers unbilled receivables as short-term in nature as they are normally converted to trade receivables within 90 days, and thus future changes in economic conditions are unlikely to have a significant effect on the credit loss estimate.

Inventories consisted of the following (in thousands):

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Raw materials $ 5,302 $ 6,099

5 unchanged sentences

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

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Land $ 2,455 $ 2,453

8 unchanged sentences

Property, plant and equipment, net $ 79,852 $ 80,972

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.

Depreciation expense for the three months ended September 30, 2024 and 2023 was approximately $ 6.1 million and $ 6.6 million, respectively.

Depreciation expense for the nine months ended September 30, 2024 and 2023 was $ 18.9 million and $ 19.0 million, respectively.

Mistras Group, Inc.

6 unchanged sentences

Foreign currency translation ( 1,482 ) — — ( 1,482 )

Impairment charges — — — —

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

Balance at September 30, 2024 $ 185,872 $ — $ — $ 185,872

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 June 30, 2024, 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, 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:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

(Years) Gross

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Total $ 191,459 $ ( 149,955 ) $ 41,504 $ 188,835 $ ( 144,841 ) $ 43,994

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.

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

Amortization expense for the nine months ended September 30, 2024 and 2023 was $ 5.8 million and $ 6.5 million, respectively.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Accrued salaries, wages and related employee benefits $ 28,061 $ 27,372

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Long-term debt consisted of the following:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Senior credit facility $ 76,949 $ 71,150

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Senior Credit Facility

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.

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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 Credit Agreement, as defined in the Credit Agreement.

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

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

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

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

Mistras Group, Inc.

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

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 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.

As of September 30, 2024, the Company had borrowings of $ 186.8 million and a total of $ 3.1 million of letters of credit outstanding under the Credit Agreement.

The Company has capitalized costs associated with debt modifications of $ 0.9 million as of September 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 September 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.

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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, 2024, there was an aggregate of approximately $ 3.1 million outstanding, payable at various times through 2030.

At September 30, 2024, there was an aggregate of approximately $ 2.9 million outstanding, payable at various times through 2030.

Monthly payments range from $ 1.0 thousand to $ 16.1 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:

Six months ended June 30,

Nine months ended September 30,

Beginning balance $ — $ 938

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Financial instruments not measured at fair value on a recurring basis

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

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

Mistras Group, Inc.

2 unchanged sentences

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

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.

Commitments and Contingencies

Legal Proceedings and Government Investigations

The Company is periodically involved in lawsuits, investigations and claims that arise in the ordinary course of business.

While the Company cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against it, the Company does not believe that any currently pending or threatened legal proceeding to which the Company is or is likely to become a party will have a material adverse effect on its business, results of operations, cash flows or financial condition.

The Company is periodically involved in lawsuits, investigations and claims.

While uncertainties exist with respect to the ultimate resolution of lawsuits, investigations and claims asserted against it, the Company, based on currently available information, does not believe that any currently pending or threatened legal proceeding to which the Company is a party, or is likely to become a party, including those proceedings identified in this Note 14, will have a material adverse effect on its business, results of operations, cash flows or financial condition.

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

Litigation and Commercial Claims

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

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

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

The DEQ Complaint seeks, through injunctive relief, the closing of a chromic acid plating line at the testing facility, implementation of a site assessment plan approved by the DEQ, and corrective and remedial action to bring the testing facility into compliance with laws and regulations.

In addition, the DEQ Complaint seeks unspecified penalties and costs.

The Superior Court held a hearing September 2024 regarding the DEQ’s request for a preliminary injunction.

On October 23, 2024, the Superior Court issued a ruling, which declined to issue the preliminary injunction requested by the DEQ, but imposed the following conditions on the Company and Mistras Arizona unless and until modified by the Superior Court or entry of a final judgement:

(1) the Company and Mistras Arizona are prohibited from releasing or permitting any release of chromic acid from the facility;

(2) within a reasonable time, the Company and Mistras Arizona must complete improvements to the testing facility designed to prevent future discharges of chromium or chromic acid;

(3) the Company must notify the DEQ upon completion of the improvement to enable the DEQ to conduct an inspection;

and (4) the Company and Mistras Arizona are prohibited from engaging in any chrome plating operations at the testing facility until they notify the DEQ that the improvements have been completed.

The DEQ may seek relief if it determines that the improvements are not sufficient to prevent discharges.

The Company intends to comply with the Superior Court's ruling.

This matter is still in the relatively early stages, including as to factual and expert discovery.

It is probable that remediation costs, fines and penalties may be imposed related to this lawsuit.

However, the Company is unable to estimate the range of loss that it may incur.

In addition to the matters covered by the DEQ complaint on or about November 7, 2024, Mistras Arizona received notice from the Maricopa County Department of Air Quality for alleged violations of various regulations regarding air quality.

This matter has been resolved with an immaterial fine paid.

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

Mistras Arizona 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.

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

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 June 30, 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 September 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 June 30, Six months ended June 30,

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

2024 2023 2024 2023

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$ 182,694 $ 179,354 $ 556,909 $ 523,399

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

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

2024 2023 2024 2023

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$ 54,577 $ 54,382 $ 161,783 $ 150,181

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,

2024 2023 2024 2023

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$ 11,858 $ ( 4,682 ) $ 29,368 $ ( 2,618 )

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

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

2024 2023 2024 2023

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$ 8,056 $ 8,748 $ 24,726 $ 25,470

June 30, 2024 December 31, 2023

Mistras Group, Inc.

and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

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

September 30, 2024 December 31, 2023

Intangible assets, net

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$ 41,504 $ 43,994

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

North America $ 413,878 $ 402,782

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$ 551,681 $ 534,776

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

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