What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-11 compared with 2024-03-11 · 81 added, 83 removed, 311 unchanged (35% of the section changed)

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• Forward-Looking Statements

• COVID-19 and Other Updates

• Note about Non-GAAP Measures

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See “Forward-Looking Statements” at the beginning of Item 1 of this Annual Report.

COVID-19 and Other Updates

While our business and operations were negatively impacted the past several years by the COVID-19 pandemic, at the time of this Annual Report, the effects of the COVID-19 pandemic have subsided and our operations have normalized to pre-pandemic levels.

We are currently unable to predict with certainty the effects that inflationary pressures and the Russian-Ukrainian war may have on our business, results of operations or liquidity or in other ways which we cannot yet determine.

To date, our European operations have experienced increased costs associated with higher energy costs, among others, due in part to the on-going war between Russia & Ukraine.

Other Updates

We are currently unable to predict with certainty the effects that inflationary pressures and the ongoing war between Russia and Ukraine war may have on our business, results of operations or liquidity or in other ways which we cannot yet determine.

Our European operations have experienced increased costs associated with higher energy costs during 2023, among others, due in part to the on-going war between Russia and Ukraine.

We may also experience increased costs associated with tariffs or trade barriers (including recent U.S.

tariffs imposed or threatened to be imposed on China, Canada, Mexico and other countries and any retaliatory actions taken by such countries).

We will continue to monitor market conditions and respond accordingly.

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

Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, strong commitment to Environmental, Social, and Governance ("ESG") initiatives, and a decades-long legacy of industry leadership, MISTRAS leads customers in the oil and gas, petrochemical, aerospace and defense, renewable and nonrenewable power, civil infrastructure, and manufacturing industries towards achieving operational and environmental excellence.

Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, strong commitment to Environmental, Social, and Governance ("ESG") initiatives, and a decades-long legacy of industry leadership, the Company helps customers with asset-intensive infrastructure in the oil and gas, petrochemical, aerospace and defense, renewable and nonrenewable power, civil infrastructure, and manufacturing industries towards achieving operational and environmental excellence.

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

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building real-time monitoring equipment to enable safe travel across bridges;

and helping to propel sustainability, MISTRAS helps the world at large.

and helping to propel sustainability, the Company helps the world at large.

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

The Company’s core

capabilities also include non-destructive testing ("NDT") field and in-line inspections enhanced by advanced robotics, laboratory quality control and assurance testing, sensing technologies and NDT equipment, asset and mechanical integrity engineering services, and light mechanical maintenance and access services.

The Company’s core capabilities also include non-destructive testing ("NDT") field and in-line inspections enhanced by advanced robotics, laboratory quality control and assurance testing, sensing technologies and NDT equipment, asset and mechanical integrity engineering services, and light mechanical maintenance and access services.

Our operations consist of three reportable segments:

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Among other things, we expect the timing of our oil and gas customers' inspection expenditures to be impacted by oil price fluctuations.

We have continued providing our customers with an innovative asset protection software ecosystem through our MISTRAS OneSuite platform.

The software platform offers functions of MISTRAS' software and services brands as integrated apps on a cloud environment.

We have continued providing our customers with an innovative asset protection software ecosystem through our OneSuite platform.

The software platform offers functions of our software and services brands as integrated apps on a cloud environment.

OneSuite serves as a single access portal for customers' data activities and provides access to 90 plus applications being offered on one centralized platform.

2024 Developments

The Russian-Ukrainian war and the conflict in the Middle East between Israel and Hamas continue 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 primarily in Europe due to increased energy costs in connection with the Russian-Ukrainian war.

In 2022, the Company eliminated substantially all of the COVID related cost reduction initiatives undertaken in 2020, including re-installment of the savings plan employer match and increasing wages back to pre-pandemic amounts.

At the time of this Annual Report, the effects of the COVID-19 pandemic have subsided, and our operations are continuing to normalize to pre-pandemic levels.

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.

Our cash position and liquidity remain strong.

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In April 2021, the Biden Administration announced aggressive initiatives to battle climate change, which includes potential plans for a significant reduction in the use of fossil fuels and a transition to electric vehicles and increased use of alternative energy.

Any legislation or regulations that may be adopted to implement these measures may negatively impact our customers in the oil and gas market over the long-term, which presently is our largest market, although this initiative will likely benefit the alternative energy market, such as wind energy, for which we provide products and services.

alternative energy market, such as wind energy, for which we provide products and services.

At this time, it is difficult to determine the magnitude and timing of the impact that climate change initiatives and legislation, if any, will have on these markets and the resulting impact on our business and operational results.

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.

During the third quarter of 2023, a triggering event was identified within the Company's reporting units within the International segment due to decreased gross margin in the current period as a result of inflationary pressures and rising energy costs.

This resulted in goodwill impairment charges of $13.8 million within the International reporting units during the third quarter of 2023.

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

The Company's European operations are currently experiencing higher energy costs, among other increased costs, due in part to the on-going war between Russia and Ukraine and the conflict in the Middle East between Israel and Hamas.

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

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Risk Factors in Part I of our 2024 Annual Report.

On December 5, 2024, our Board of Directors (the “Board”), in furtherance of its management succession planning, appointed Natalia Shuman, as the Company’s President and Chief Executive Officer, and Manny Stamatakis will continue as the Executive Chairman of the Company effective as of January 1, 2025.

Stamatakis served as our Chairman of the Board and Interim President and Chief Executive Officer until December 31, 2024.

On December 12, 2024, we announced the appointment of Hani Hammad to the position of Executive Vice President and Chief Operating Officer effective as of January 1, 2025.

On February 6, 2025, we announced the passing of Dr.

Vahaviolos, our founder and Chairman Emeritus.

On February 7, 2025, we announced the termination of John A.

Smith as our Executive Vice President and President of Services.

Note about Non-GAAP Measures

The Company prepares its consolidated financial statements in accordance with U.S.

In this MD&A under the heading "Income (loss) from Operations", the non-GAAP financial performance measure "Income (loss) from operations before special items” is used for each of our three operating segments, the Corporate segment and the "Total Company", with tables reconciling the measure to a financial measure under GAAP.

In this MD&A under the heading "Income (loss) from Operations", the non-GAAP financial performance measure "Income (loss) from operations before special items” is used for each of our three operating segments, the "Corporate" segment and for the "Total Company", with tables reconciling the "Income (loss) from operations before special items" to "Income (loss) from operations", which is a financial measure under GAAP.

This presentation excludes from "Income (loss) from Operations" (a) transaction expenses related to acquisitions, such as professional fees and due diligence costs, (b) the net changes in the fair value of acquisition-related contingent consideration liabilities, (c) impairment charges, (d) reorganization and other costs, which includes items such as severance, labor relations matters and asset and lease termination costs and (e) other special items.

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$ 18,958 $ (17,453)

Revenues by segment for the years ended December 31, 2023 and 2022 were as follows:

Revenue by segment for the years ended December 31, 2024 and 2023 were as follows:

For the year ended December 31,

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The increase was driven by the North America segment, which experienced a revenue increase of $14.2 million, or 2.5%, driven by single-digit organic growth in certain end markets.

The International segment revenues increased by $12.0 million, or 10.7%, due predominantly to low single-digit favorable impact of foreign exchange rates and by mid single-digit organic growth.

The International segment revenue increased by $11.6 million, or 9.3%, due predominantly to low single-digit favorable impact of foreign exchange rates and by high single-digit organic growth.

The Products and Systems segment increased by $0.7 million, or 5.2%, driven by higher sales volume.

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Oil and gas upstream customer revenue increased approximately $9.9 million, or 6%, for the year ended December 31, 2024 compared to the year ended December 31, 2023, due to continued market share gains and expanded exploration operations, as compared to the prior year period.

Midstream customer revenues increased approximately $4.3 million, or 4%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, due to increased pipe inspection services.

Midstream customer revenues decreased approximately $12.6 million, or 12%, for the year ended December 31, 2024 compared to the year ended December 31, 2023, due to decreased pipe inspection services.

Downstream customer revenue increased $5.7 million, or 4%, for the year ended December 31, 2024 compared to the year ended December 31, 2023, due to increased sales volume at customer refineries and increased customer turnarounds.

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Total $ 729,640 $ 705,473

In presenting the allocation of revenues by type in the table above, management makes certain assumptions in its allocation of revenues from laboratories that provide more than one type of service.

In presenting the allocation of revenues by type in the table above, management makes certain assumptions in its allocation of revenue from laboratories that provide more than one type of service.

The allocation methodology and assumptions made are consistent for the years presented.

Field Services revenues are comprised of revenue derived primarily by technicians performing asset inspections and maintenance services for our customers at locations other than Mistras properties.

Field Services revenue is comprised of revenue derived primarily by technicians performing asset inspections and maintenance services for our customers at locations other than our properties.

Field Services revenue increased $32.4 million, or 6.9%, for the twelve months ended December 31, 2024 as compared to the twelve months ended December 31, 2023.

The increase was due to increased sales volume in our oil and gas end market for our North America and International segments.

Shop Laboratory revenues are comprised of quality assurance inspections of components and materials at our Mistras in-house laboratory facilities.

Shop revenues increased $9.4 million, or 19.2%, for the twelve months ended December 31, 2023 as compared to the twelve months ended December 31, 2022.

The increase was due to increased sales volume in our oil and gas and power generation and transmission end markets for our North America and International segments.

Shop Laboratory revenue is comprised of quality assurance inspections of components and materials at our in-house laboratory facilities.

Shop Laboratory revenue increased $6.4 million, or 11.0%, for the twelve months ended December 31, 2024 as compared to the twelve months ended December 31, 2023.

The increase was due to increased sales volume related to our commercial aerospace and industrials end markets.

Data Analytical Solutions revenues are comprised of revenue derived from data software sales & subscriptions, implementation services and analytics that offer insights and recommendations to improve asset integrity.

Data Analytical Solutions revenue is derived from work performed by Mistras employees in our facilities, or at customer locations, using our proprietary portfolio of software applications.

Data Analytical Solutions revenue increased $10.0 million, or 16.1%, for the twelve months ended December 31, 2023 as compared to the twelve months ended December 31, 2022.

The increase was due primarily to increased sales volume within PCMS, Onstream and other Data Analytical Solutions offerings within our North America segment.

Other revenues are comprised of locations that perform both asset inspection services and testing of components and materials at in-house Mistras laboratories.

Other revenues decreased $16.7 million, or 13.8%, for the twelve months ended December 31, 2023 as compared to the twelve months ended December 31, 2022.

Other revenues in 2023 decreased primarily due to decreased sales within the aerospace and defense sector and due to declines in our other end markets within the North America and International segments as compared to the prior year period.

Gross Profit (Loss)

Gross profit (loss) by segment for the years ended December 31, 2023 and 2022 were as follows:

Data Analytical Solutions revenue is comprised of revenue derived from data software sales & subscriptions, implementation services and analytics that offer insights and recommendations to improve asset integrity.

Data Analytical Solutions revenue is derived from work performed by our employees in our facilities, or at customer locations, using our proprietary portfolio of software applications.

Data Analytical Solutions revenue decreased $3.3 million, or 4.6%, for the twelve months ended December 31, 2024 as compared to the twelve months ended December 31, 2023.

The decrease was due primarily to decreased sales volume within PCMS, Onstream and other Data Analytical Solutions offerings within our North America segment.

Other revenue are comprised of locations that perform both asset inspection services and testing of components and materials at our in-house laboratories.

Other revenue decreased $11.3 million, or 10.8%, for the twelve months ended December 31, 2024 as compared to the twelve months ended December 31, 2023.

Other revenue for the year ended December 31, 2024 decreased primarily due to decreased sales within the other end markets within the North America and International segments as compared to the prior year period.

Gross profit by segment for the years ended December 31, 2024 and 2023 were as follows:

For the year ended December 31,

($ in thousands)

Gross profit (loss)

North America $ 165,679 $ 163,960

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Gross profit increased $9.3 million, or 4.6%, for the year ended December 31, 2024 compared to the year ended December 31, 2023, with a sales increase of $24.2 million, or 3.4%.

Gross profit margin was 28.9% and 28.8% for the years ended December 31, 2023 and 2022, respectively, due to favorable sales mix.

North America segment gross profit margins had a year-on-year increase of 60 basis points to 28.3% for the year ended December 31, 2023, due primarily to favorable sales mix.

International segment gross margins had a year-on-year decrease of 290 basis points to 27.0% for the year ended December 31, 2023, due primarily to increased inflationary pressures.

Gross profit margin was 29.2% and 28.9% for the years ended December 31, 2024 and 2023, respectively, with the increase due to favorable sales mix.

North America segment gross profit margins had a year-on-year decrease of 40 basis points to 27.9% for the year ended December 31, 2024, due primarily to unfavorable sales mix.

International segment gross margins had a year-on-year increase of 230 basis points to 29.3% for the year ended December 31, 2024, due primarily to decreased inflationary pressures.

Products and Systems segment gross margins increased by 540 basis points for the year ended December 31, 2024 to 55.1%, driven by favorable sales mix.

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Goodwill impairment charges — 13,799

Bad debt provision for troubled customers, net of recoveries — 42

Reorganization and other costs 5,515 12,269

Environmental expense 1,660 —

Research and engineering 1,119 1,723

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% of total revenue 23.7 % 29.2 %

Operating expenses increased $27.3 million, or 15.3%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 due primarily to impairment charges and reorganization charges recorded in the current period that were not

in the prior period.

Selling, general and administrative expenses increased $0.3 million, or 0.2% for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to unfavorable foreign currency exchange.

Operating expenses decreased $32.4 million, or 15.8%, for the year ended December 31, 2024 compared to the year ended December 31, 2023 due primarily to goodwill impairment charges being recorded in the prior period and reduced

reorganization charges recorded in the current period as compared to the prior period, which were a result of our Project Phoenix initiatives.

Selling, general and administrative expenses decreased $10.4 million, or 6.2% for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to actions taken related to our Project Phoenix initiatives to reduce selling, general and administrative expenses.

Income (Loss) from Operations

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Income from operations (GAAP) $ 62,286 $ 55,170

Bad debt provision for troubled customers, net of recoveries — 42

Reorganization and other costs 2,046 960

Legal settlement and insurance (recoveries) charges, net (808) 1,058

Acquisition-related expense, net — 45

Income before special items (non-GAAP) $ 63,524 $ 57,188

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Products and Systems:

Income (loss) from operations (GAAP) $ 267 $ (992)

Income from operations (GAAP) $ 2,510 $ 267

Reorganization and other costs 184 382

Income (loss) before special items (non-GAAP) $ 649 $ (992)

Income before special items (non-GAAP) $ 2,694 $ 649

Corporate and Eliminations:

Loss from operations (GAAP) $ (31,245) $ (45,112)

Legal settlement and insurance (recoveries) charges, net — (153)

Loss on debt modification — 693

Environmental expense 1,660 —

Reorganization and other costs 2,199 10,576

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Goodwill Impairment charges — 13,799

Bad debt provision for troubled customers, net of recoveries — 42

Legal settlement and insurance (recoveries) charges, net (808) 1,058

Loss on debt modification — 693

Environmental expense 1,660 —

Reorganization and other costs 5,515 12,269

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See " Note about Non-GAAP Measures" in this Annual Report for an explanation of our use of non-GAAP measures.

Total Company income from operations (GAAP) decreased by $21.7 million, or 109.6% compared to the year ended December 31, 2022.

Total Company income from operations (GAAP) increased by $41.7 million, or 2,191.7% compared to the year ended December 31, 2023.

Total company income before special items (non-GAAP) increased by $21.0 million or 83.1% compared with the year ended December 31, 2023.

Operating expenses, excluding special items (non-GAAP), as a percentage of revenue, was 25.3% for the year ended December 31, 2023 compared to 25.9% for the year ended December 31, 2022.

Operating expenses, excluding special items (non-GAAP), as a percentage of revenue,

was 22.9% for the year ended December 31, 2024 compared to 25.3% for the year ended December 31, 2023.

The primary driver for the increase in Total Company income before special items was increased sales in 2024 compared to 2023.

Income before special items as a percentage of revenue increased by 70 basis points to 3.6% for the year ended December 31, 2023 from 2.9% for the year ended December 31, 2022.

Total Company income before special items as a percentage of revenue increased by 270 basis points to 6.3% for the year ended December 31, 2024, from 3.6% for the year ended December 31, 2023.

Our discussion below is qualified by the unknown impact that the Russia - Ukraine war will continue to have on our business and the economy in general, including the resulting economic disruption.

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Our effective income tax rate was approximately 21.8% for the year ended December 31, 2024, compared to 6.5% for the year ended December 31, 2023.

The decrease in effective tax rate was primarily driven by a $1.7 million US R&D tax credit benefit in 2022, partially offset by the recording of a $1.1 million valuation allowance recorded in 2022 which was related to certain Canadian entities .

The increase in effective tax rate was primarily driven by an impairment of $13.8 million impairment in year ended December 31, 2023, partially offset by the releasing of valuation allowance of $1.8 million.

On December 27, 2020, the United States enacted the Consolidated Appropriations Act, 2021, (the "Appropriations Act") an additional stimulus package providing financial relief for individuals and small business.

The Appropriations Act contains a variety of tax provisions, including full expensing of business meals in 2021 and 2022, and expansion of the employee retention tax credit.

We are currently evaluating the impact of this guidance on our consolidated financial position, results of operations, and cash flows, but does not expect it to have a material impact.

Further in response to the COVID-19 pandemic, the American Rescue Plan Act was signed into law on March 11, 2021.

This act, among other things, provides economic relief provisions to individuals and funding to certain businesses and programs.

The Company does not expect this act to have a material impact.

We are currently evaluating the impact of this guidance on our consolidated financial position, results of operations, and cash flows, but do not expect it to have a material impact.

On August 19, 2022, the United States enacted the Inflation Reduction Act, (the "Inflation Act"), a package intended to reduce inflation.

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We have funded our operations from cash provided from operations, bank borrowings and lease financings.

Management believes that our existing cash and cash equivalents, anticipated cash flows from operating activities, and available borrowings under our New Credit Agreement will be more than sufficient to meet anticipated cash needs over the next 12 months and for the foreseeable future.

Management believes that our existing cash and cash equivalents, anticipated cash flows from operating activities, and available borrowings under our Credit Agreement will be more than sufficient to meet anticipated cash needs over the next 12 months and for the foreseeable future.

We generated operating cash flows of $50.1 million and $26.7 million for the years ended December 31, 2024 and 2023, respectively.

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Cash provided by operating activities for the year ended December 31, 2024 was $50.1 million, an increase of $23.4 million from the prior year period.

The increase was mainly attributable to movements in working capital driven primarily by an increase in net accounts receivable collections, an increase in accrued expenses and other liabilities, and an increase in accounts payable in the current year as compared to the prior year.

The increase was mainly attributable to movements in working capital driven primarily by an increase in operating results and an increase in net accounts receivable collections in the current year as compared to the prior year.

Cash Flows from Investing Activities

Net cash used in investing activities for the year ended December 31, 2023 was $22.1 million, an increase of $9.9 million used in investing activities from the prior year period.

The Company used $10.2 million more cash for purchases of property, plant and equipment and intangible assets in 2023 compared to 2022.

Net cash used in investing activities for the year ended December 31, 2024 was $21.4 million, a decrease of $0.8 million used in investing activities from the prior year period.

The Company used $0.7 million less cash for purchases of property, plant and equipment and intangible assets in 2024 compared to 2023.

Cash Flows from Financing Activities

Net cash used in financing activities for the year ended December 31, 2024 was $27.4 million, compared to $7.7 million for the year ended December 31, 2023.

During the year ended December 31, 2022, we entered into the New Credit Agreement which replaced our prior credit agreement, as detailed more in Note 11-Long-Term Debt.

As part of the New Credit Agreement, the prior revolving credit facility and term loan were repaid in full.

Net repayment of debt and revolver was approximately $9.6 million higher compared to 2022.

In addition, for the year ended December 31, 2023, we incurred approximately $0.6 million more taxes paid related to net share settlement of share-based awards.

Net repayment of our revolving credit facility and term loan was approximately $19.5 million higher compared to 2023.

In addition, for the year ended December 31, 2024, we incurred approximate ly $0.3 million less in taxes paid related to net share settlement of share-based awards than the prior period.

Effect of Exchange Rate Changes on Cash and Cash Equivalents

The effect of exchange rate changes on our cash and cash equivalents was a decrease of $0.2 million for the year ended December 31, 2023, compared to a decrease of $1.5 million for the year ended December 31, 2022.

The primary driver of the change was foreign currency fluctuations during the year related to the Euro and the US Dollar.

The effect of exchange rate changes on our cash and cash equivalents was a decrease of $0.7 million for the year ended December 31, 2024, compared to an increase of $0.2 million for the year ended December 31, 2023.

The primary driver of the change was foreign currency fluctuations during the year ended December 31, 2024 related to the Euro and the US Dollar.

Cash Balance and Credit Facility Borrowings

The terms of our New Credit Agreement are described in Note 11-Long-Term Debt of the Notes to Consolidated Financial Statements in this Annual Report, under the heading "Senior Credit Facility", the provisions of which are incorporated herein.

As of December 31, 2023, we had cash and cash equivalents totaling $17.6 million and available borrowing capacity of up to $116.0 million under our New Credit Agreement.

Borrowings of $186.4 million and letters of credit of $2.9 million were outstanding under the New Credit Agreement at December 31, 2023.

As of December 31, 2024, we had cash and cash equivalents totaling $18.3 million and available borrowing capacity of up to $119.2 million under our Credit Agreement.

Borrowings of $167.2 million and letters of credit of $3.1 million were outstanding under the Credit Agreement at December 31, 2024.

We finance our operations primarily through our existing cash balances, cash collected from operations, bank borrowings and lease financing.

We believe these sources are sufficient to fund our operations for the foreseeable future.

As of December 31, 2023, we were in compliance with the terms of the New Credit Agreement and will continuously monitor our compliance with the covenants contained in the New Credit Agreement.

See Note 11-Long-Term Debt of the notes to the consolidated financial statements for additional information.

As of December 31, 2024, we were in compliance with the terms of the Credit Agreement and will continuously monitor our compliance with the covenants contained in the Credit Agreement.

The terms of our Credit Agreement are described in Note 11-Long-Term Debt of the notes to the consolidated financial statements, under the heading " Senior Credit Facility ".

Liquidity and Capital Resources Outlook

Future Sources of Cash

We expect our future sources of cash to include cash flow generated from our operating activities and borrowings under our New Credit Agreement.

Our revolving credit facility is available for cash advances required for working capital and for letters of credit to support our operations.

Acquisitions, if any, are funded through available cash and borrowings under the New Credit Agreement.

We expect our future sources of cash to include cash flow generated from our operating activities and borrowings under our Credit Agreement.

Our revolving credit facility is available for cash advances required for working capital and for letters of

credit to support our operations.

Acquisitions, if any, are funded through available cash and borrowings under the Credit Agreement.

Future Uses of Cash

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We continue to take steps to reduce spending and preserve cash.

Our New Credit Agreement does not limit the Company’s ability to acquire other businesses or companies except for certain provisions as described within Note 11-Long-Term Debt.

Our Credit Agreement does not limit our ability to acquire other businesses or companies except for certain provisions as described within Note 11-Long-Term Debt of the notes to the consolidated financial statements .

Our future capital spending may increase as we pursue growth opportunities and acquire additional equipment to meet or pursue business opportunities.

Other investments in infrastructure, training and software may also be required to match our growth, but we plan to continue using a disciplined approach to building our business.

In addition, we will use cash to fund our operating leases, finance leases, long-term debt repayments and various other obligations as they arise as noted within Note 11-Long-Term Debt and Note 17 - Leases.

We also expect to use cash to support our working capital requirements for our operations, particularly in the event of further growth and due to the impacts of seasonality on our business.

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The Company used discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in the internally developed forecasts, updated for recent events.

Increased interest rates in the current period increased the discount rate associated with the reporting units which contributed in an unfavorable decrease in the reporting units value.

Increased interest rates in the current period increased the discount rate associated with the reporting units which contributed to an unfavorable decrease in the reporting units value.

The market approach valuation was derived from metrics of publicly traded companies or historically completed transactions of comparable businesses.

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Based upon the results of the interim quantitative goodwill impairment test, the Company recorded an impairment charge of $13.8 million within the International reporting units.

The impairment was calculated based on the difference between the estimated fair value and the carrying value of the reporting units and is included in Goodwill impairment charges on the condensed consolidated statements of income (loss) for the three and nine months ended September 30, 2023.

The impairment was calculated based on the difference between the estimated fair value and the carrying value of the reporting units.

Any significant adverse changes in future periods to the Company’s internal forecasts or the external market conditions, if any, could reasonably be expected to negatively affect its key assumptions and may result in future goodwill impairment charges which could be material.

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Our quantitative assessment considered relevant events and circumstances occurring since our interim quantitative goodwill impairment test performed as of September 30, 2024.

Specifically, we considered changes in macroeconomic conditions, industry and market conditions, our internal forecasts of future revenue and expenses, our stock price, any significant events affecting the Company and actual changes in the carrying values of our net assets.

the carrying values of our net assets.

After considering all positive and negative evidence for the assessment as of September 30, 2024, we concluded that it was not more likely than not that our carrying values exceeded fair values and as such, no additional impairment was indicated.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis