What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-11 compared with 2024-03-11 · 182 added, 238 removed, 883 unchanged (32% of the section changed)

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Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of Mistras Group, Inc.

and its subsidiaries (the “Company”) as of December 31, 2023, and the related consolidated statements of income (loss), of comprehensive income (loss), of equity and of cash flows for the year then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Mistras Group, Inc.

and its subsidiaries (the "Company") as of December 31, 2024 and 2023, and the related consolidated statements of income (loss), of comprehensive income (loss), of equity and of cash flows for the years then ended, including the related notes (collectively referred to as the "consolidated financial statements").

We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

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The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audit.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinions.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessment - North America Reporting Unit

As described in Notes 1 and 8 to the consolidated financial statements, the Company’s goodwill balance was $187.4 million as of December 31, 2023, which related to the North America reporting unit.

Management tests goodwill for impairment at a reporting unit level, which is represented by its North America segment.

Management reviews goodwill for impairment on October 1 of each year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.

Management considers the income and market approaches to estimate the fair value of the reporting unit, which requires significant judgments and assumptions related to revenue growth rates, gross margins, EBIT margins, and market multiples.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the North America reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the North America reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue growth rates, gross margins, and market multiples;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Revenue Recognition

As described in Note 2 to the consolidated financial statements, the Company derives the majority of its revenue by providing services on a time and material basis that are short-term in nature.

Revenue is recognized over time as work progresses for the Company's service deliverables, which includes providing testing, inspection and mechanical services to customers.

Revenue is recognized over time, based on time and material incurred to date which best portrays the transfer of control to the customer.

For the year ended December 31, 2024, the Company’s revenue was $729.6 million, a majority of which relates to revenue recognized for providing services on a time and material basis.

The principal consideration for our determination that performing procedures relating to revenue recognition is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company's revenue recognition.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the North America reporting unit.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the North America reporting unit;

(ii) evaluating the appropriateness of the income and market approaches used by management;

(iii) testing the completeness and accuracy of underlying data used in the income and market approaches;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue growth rates, gross margins, and market multiples.

Evaluating management’s assumptions related to revenue growth rates and gross margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the North America reporting unit;

(ii) the consistency with external market and industry data;

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the income and market approaches and (ii) the reasonableness of the market multiples assumption.

These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over revenue recognized over time.

These procedures also included, among others (i) evaluating revenue transactions by testing the issuance and settlement of invoices and credit memos, tracing transactions not settled to a detailed listing of accounts receivable, and testing the completeness and accuracy of data provided by management;

(ii) testing the unbilled revenue accrual at the end of the period, on a test basis, by obtaining the unbilled revenue analysis and supporting documentation, such as invoices, purchase orders/contracts, and timesheets;

and (iii) confirming, on a sample basis, outstanding customer invoice balances as of December 31, 2024 and obtaining and inspecting source documents, including invoices, delivery documents, and subsequent cash receipts, where applicable for confirmations not returned.

/s/ PricewaterhouseCoopers LLP

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Mistras Group, Inc.

and subsidiaries

(the Company) as of December 31, 2022, the related consolidated statements of income (loss), comprehensive income (loss), equity, and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with U.S.

We have audited the accompanying consolidated statements of income (loss), comprehensive income (loss), equity and cash flows of Mistras Group, Inc.

and subsidiaries (the Company) for the year ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations of the Company and its cash flows for the year ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

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These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

We believe that our audit provides a reasonable basis for our opinion.

We served as the Company’s auditor from 2013 to 2023.

Short Hills, New Jersey

March 15, 2023

March 15, 2023, except for Note 19, as to which the date is March 11, 2025

Mistras Group, Inc.

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Total Liabilities $ 324,143 $ 344,273

Commitments and contingencies

Commitments and contingencies (Note 18)

Preferred stock, 10,000,000 shares authorized

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Reorganization and other costs 5,515 12,269 195

Environmental expense 1,660 — —

Goodwill impairment charges — 13,799 —

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Income (loss) from operations 39,826 ( 1,904 ) 19,799

Other income ( 1,485 ) — —

Interest expense 17,067 16,761 10,505

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Foreign currency translation adjustments ( 14,342 ) 5,058 ( 13,084 )

Comprehensive loss ( 12,387 ) ( 6,510 ) ( 359 )

Comprehensive income (loss) 4,628 ( 12,387 ) ( 6,510 )

net income attributable to noncontrolling interests, net of taxes 12 8 75

Foreign currency translation adjustments attributable to noncontrolling interests 4 4 ( 5 )

Comprehensive loss attributable to Mistras Group, Inc.

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

$ 4,612 $ ( 12,399 ) $ ( 6,580 )

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Common Stock Additional

paid-in capital Retained

comprehensive income (loss) Total

paid-in capital Accumulated Deficit Accumulated

comprehensive loss Total

Mistras Group,

Stockholders’ Equity Noncontrolling Interest

Stockholders’ Equity Non-controlling interests

Shares Amount Total Equity

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Share-based compensation — — 5,335 — — 5,335 — 5,335

Net settlement on vesting of restricted stock units 312 3 ( 1,372 ) — — ( 1,369 ) — ( 1,369 )

Net settlement of restricted stock units 349 3 ( 991 ) — — ( 988 ) — ( 988 )

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

Net income — — — 6,499 — 6,499 75 6,574

Net income (loss) — — — ( 17,453 ) — ( 17,453 ) 8 ( 17,445 )

Other comprehensive loss, net of tax — — — — 5,054 5,054 4 5,058

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

Change in provision for doubtful accounts 346 — —

Change in allowance for credit losses 846 346 —

Foreign currency (gain) loss ( 1,805 ) 1,030 ( 208 )

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Purchase of intangible assets ( 5,084 ) ( 2,795 ) ( 825 )

Acquisition of businesses, net of cash acquired — — ( 440 )

Proceeds from sale of equipment 1,620 1,516 1,178

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inspecting components that are trusted for commercial, defense, and space craft;

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

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

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 Internet of Things ("IoT")-connected digital software and monitoring solutions, including OneSuite™, which serves as an ecosystem platform, pulling together all of the Company’s software and data services capabilities, for the benefit of its customers.

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The Company has three operating segments.

During the first quarter of 2023, the Company renamed the Services segment to the North America segment to more closely align to the geographical area in which the Services segment operates.

We did not recast the corresponding financial information for the historical periods presented, as there was no change in the manner which our chief operating decision maker reviews the financial results of each segment and allocates resources.

Our Segments, with the updated naming convention, are as follows:

• North America (Referred to as "Services" in prior filings).

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.

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.

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

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Recent Developments

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 which resulted in impairment charges within the International reporting units of $ 13.8 million.

Refer to Note 8 -Goodwill .

During 2022, the Company experienced unfavorable foreign currency exchange impacts as it relates to the Company's European operations.

Additionally, 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.

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

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

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.

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).

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

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The Company follows guidance on the consolidation of variable interest entities ("VIEs") that requires companies to utilize a qualitative approach to determine whether it is the primary beneficiary of a VIE.

The process for identifying the primary beneficiary of a VIE requires consideration of the factors that indicate a party has the power to direct the activities that most significantly impact the VIE’s economic performance, including powers granted to the VIE’s program manager, powers contained in the VIE governing board and, to a certain extent, a company’s economic interest in the VIE.

The process for identifying the primary beneficiary of a VIE requires consideration of the factors that indicate a party has the power to direct the activities that most

significantly impact the VIE’s economic performance, including powers granted to the VIE’s program manager, powers contained in the VIE governing board and, to a certain extent, a company’s economic interest in the VIE.

The Company analyzes its joint ventures and classifies them as either:

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The Company monitors and considers whether historical loss rates are consistent with expectation of supportable forward-looking estimates for its trade receivables noting any current or future economic considerations that would require adjusting the Company’s historical loss experience.

Each reporting period, the Company reassesses whether any accounts receivable no longer share similar risk characteristics and should instead be evaluated as part of another pool or on an individual basis.

Each reporting period, the Company reassesses whether any accounts receivable no

longer share similar risk characteristics and should instead be evaluated as part of another pool or on an individual basis.

Changes to the allowance for credit losses are adjusted through credit loss expense, which is presented within Selling, general and administrative expenses in the Consolidated Statements of Income (Loss).

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In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing a quantitative

impairment test is not necessary.

If the Company concludes otherwise, the Company is required to perform a quantitative impairment test.

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The Company reviews the recoverability of its long-lived assets (or asset groups) whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset (group) might not be recoverable.

The assessment for potential impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future undiscounted cash flows.

The assessment for potential

impairment is based primarily on the Company’s ability to recover the carrying value of its long-lived assets from expected future undiscounted cash flows.

If the total expected future undiscounted cash flows are less than the carrying amount of the assets, a loss is recognized for the difference between fair value (computed based upon the expected future discounted cash flows) and the carrying value of the assets.

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The Company is self-insured for certain losses relating to workers’ compensation and health benefit claims.

The Company maintains third-party excess insurance coverage for all workers' compensation and health benefit claims in excess of

approximately $ 0.3 million per occurrence to reduce its exposure from such claims.

The Company maintains third-party excess insurance coverage for all workers' compensation and health benefit claims in excess of approximately $ 0.3 million per occurrence to reduce its exposure from such claims.

Self-insured losses are accrued when it is probable that an uninsured claim has been incurred but not reported and the amount of the loss can be reasonably estimated at the balance sheet date.

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Awards to certain employees eligible for retirement prior to the award becoming fully vested are amortized to expense over the period through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn the award.

As share-based compensation expense is based on awards ultimately expected to vest, the amount of expense is reduced for estimated forfeitures.

As share-based compensation expense is based on awards ultimately expected to

vest, the amount of expense is reduced for estimated forfeitures.

The cost of these awards is recorded in selling, general and administrative expenses in the Company’s Consolidated Statements of Income (Loss).

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Recent Accounting Pronouncements

In March 2020 and updated in January 2021, the FASB issued Accounting Standards Update ("ASU") 2020-04 and 2021-01, “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting.

The guidance provides optional expedients and exceptions for applying U.S.

GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued.

The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2024.

The Company is currently evaluating applicable contracts and the available expedients provided by the new guidance.

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, Segment Reporting (Topic 280) to expand the disclosures about a public entity's reportable segments and address requests from investors for additional, more detailed information about a reportable segment's expenses.

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 adopted the provisions of this ASU in the fourth quarter of 2024 and applied the provisions retrospectively to each period presented in the consolidated financial statements.

Adoption of the new standard did not have a material impact on our consolidated 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 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 that are short-term in

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Changes in the contract asset and liability balances during the years ended December 31, 2024 and 2023, were not impacted by any other factors.

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.

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.

Earnings per Share

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With respect to the number of weighted-average shares outstanding (denominator), diluted shares reflects:

(i) the exercise of options to acquire common stock to the extent that the options’ exercise prices are less than the average market price of common stock during the period and (ii) the pro forma vesting of restricted stock units.

(i) the exercise of options to acquire common stock to the extent that the options’ exercise prices are less than the average market price of shares of common stock during the period and (ii) the pro forma vesting of restricted stock units.

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

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

As of December 31, 2019, approximately $ 1.4 million of past due receivables were outstanding from this customer.

The Company received notice from the customer in December 2019, alleging that the work performed was not in compliance with the contract.

The Company filed a lawsuit to recover the $ 1.4 million and other amounts due to the Company and the customer filed a counterclaim, alleging breach of contract and seeking damages.

The Company recorded a full reserve for this receivable during 2019.

The parties agreed to a settlement in the quarter ending June 30, 2023, with releases executed in July 2023, whereby the Company released its claim for the $ 1.4 million of outstanding receivables.

Accordingly, the receivable has been written off.

See Note 18-Commitments and Contingencies for additional details.

Inventories consist of the following (in thousands):

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Balance at December 31, 2022 $ 185,710 $ 13,925 $ — $ 199,635

Impairment charges — ( 13,799 ) — ( 13,799 )

Foreign currency translation 1,644 ( 126 ) — 1,518

Balance at December 31, 2023 $ 187,354 $ — $ — $ 187,354

Impairment charges — ( 13,799 ) — ( 13,799 )

Foreign currency translation ( 5,912 ) — ( 5,912 )

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Accrued salaries, wages and related employee benefits $ 27,990 $ 27,372

Contingent consideration — 937

Accrued workers' compensation and health benefits 4,898 4,385

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Senior Credit Facility

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

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

On August 1, 2022, the Company entered into a new credit agreement (the “New Credit Agreement”) which replaced the prior Credit Agreement and provides the Company with a $ 190 million, 5 -year committed revolving credit facility and a $ 125 million term loan with a balance of $ 115.3 million as of December 31, 2023.

The New Credit Agreement permits the Company to borrow up to $ 100 million in non-US dollar currencies and to use up to $ 20 million of the credit limit for the issuance of letters of credit.

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

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

On August 1, 2022, the Company entered into a 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 $ 107.5 million as of December 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.

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

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

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

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

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

◦ Total Consolidated Debt 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.

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

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

The New Credit Agreement is secured by liens on substantially all of 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 duration of the New Credit Agreement, as defined in the New Credit Agreement.

Refer to Note 21 - Subsequent Events for further information.

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

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

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

• 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.

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

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

The Company incurred $ 1.6 million in financing costs for the New Credit Agreement, of which $ 0.2 million of third party costs were expensed and included in selling, general and administrative expenses on the Consolidated Statements of Income (Loss).

As of December 31, 2023, the Company had borrowings of $ 186.4 million and a total of $ 2.9 million of letters of credit outstanding under the New Credit Agreement.

As of December 31, 2024, the Company had borrowings of $ 167.2 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 $ 0.8 million as of December 31, 2024, which is included in Other assets on the Consolidated Balance Sheet and will be amortized into interest expense over the remaining term of the Credit Agreement through July 30, 2027.

As of December 31, 2023, the Company was in compliance with the terms of the New Credit Agreement.

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

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

As of December 31, 2024, the Company was in compliance with the terms 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.

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 December 31, 2023, there was an aggregate of approximately $ 4.0 million

outstanding, payable at various times through 2030.

Monthly payments ran ge from $ 1 thousand to $ 19 thousand and interest rates range from 0.4 % to 3.5 %.

At December 31, 2024, there was an aggregate of approximately $ 2.5 million outstanding, payable at various times through 2030.

Monthly payments ran ge fro m $ 1 thousand to $ 15 thousand, and interest rates range from 0.4 % to 3.5 %.

Scheduled principal payments due under all borrowing agreements in each of the five years and thereafter subsequent to December 31, 2024 are as follows (in thousands):

2025 $ 11,591

Thereafter 62

Total $ 169,647

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Balance at the beginning of the period:

$ 937 $ 1,830

Acquisitions — —

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

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

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

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

Share-Based Compensation

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

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

No awards have been granted under the 2009 Plan since the 2016 Plan was approved by stockholders in 2016, and the remaining option award granted under the 2009 Plan expired during the three months ended March 31, 2022.

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

At the annual stockholders meeting on May 23, 2022, the Company’s stockholders approved an amendment to increase the total number of shares that may be issued under the 2016 Plan by 1.2 million, for a total of 4.9 million shares that are authorized for issuance under the 2016 plan, of which approximately 1,400,000 shares were available for future grants as of December 31, 2023.

The Company grants share-based incentive awards to its eligible employees and non-employee directors under its 2016 Long-Term Incentive Plan (the "2016 Plan").

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 1,850,000 shares were available for future grants as of as of December 31, 2024.

Stock Options

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The Options were granted as an inducement for Mr.

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

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.

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

During the three months ended December 31, 2023, the Company recorded $ 0.8 million share-based compensation expenses related to the Options.

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

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.

For the year ended 2022, the Company did no t recognize any share-based compensation expense related to stock option awards, as the one outstanding stock option award was already fully vested and expired during the year ended 2022.

No unrecognized compensation costs remained related to the stock option awards.

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Performance Restricted Stock Units

The Company maintains Performance Restricted Stock Units ("PRSUs") that have been granted to select executives and senior officers whose ultimate payouts 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 2022, the Compensation Committee of the Board of Directors utilized the same performance metrics for the Company's PRSUs awarded in 2022 as it utilized for the 2021 PRSUs.

For 2022, the Compensation Committee utilized the following three performance metrics for PRSUs approved in that year.

The three metrics were:

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

interest expense, provision for income taxes, depreciation and amortization, share-based compensation expense and certain acquisition related costs

(including transaction due diligence costs and adjustments to the fair value of contingent consideration), foreign exchange (gain) loss and, if applicable, certain special items which are noted.

Total Shareholder Return ("TSR") measures the total return to shareholders of the Company during 2021 versus the total return to the shareholders of a predefined peer group of companies that provide inspection, testing, certification or similar industrial services.

interest expense, provision for income taxes, depreciation and amortization, share-based compensation expense and certain acquisition related costs (including transaction due diligence costs and adjustments to the fair value of contingent consideration), foreign exchange (gain) loss and, if applicable, certain special items which are noted.

Total Shareholder Return ("TSR") measures the total return to shareholders of the Company during the 1-year performance period versus the total return to the shareholders of a predefined peer group of companies that provide inspection, testing, certification or similar industrial services.

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

The share prices used to calculate the return are the average share price during the 20 -trading day period ending on the initial measurement date (the last 20 trading days of 2021), compared to the average share price during the 20 -trading day period ending on the final measurement date (the last 20 trading days of 2022).

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

Any cash dividends or distributions paid in 2022 were added to calculate the return to shareholders during the year.

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The risk-free interest rate assumption was based on observed interest rates consistent with the approximate 1-year performance measurement period.

For 2023, the Compensation Committee of the Board of Directors used different performance metrics for PRSUs approved in that year.

The three metrics are:

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.

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For PRSUs awarded in 2024, the Compensation Committee utilized the same metrics as 2023 PRSUs, but with revised performance goals.

PRSUs are equity-classified and compensation costs related to PRSUs with performance conditions are initially measured using the fair value of the underlying stock at the date of grant.

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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.

Earned PRSUs generally vest ratably on each of the first four anniversary dates following 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 equivalent rights.

A summary of the Company's PRSU activity is presented as follows (in thousands, except per share amounts and years):

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For the year ended December 31, 2024, 295,000 PRSUs were granted.

There was a 305,000 net unit reduction to these awards, which represents Company performance below target, during the year ended December 31, 2023.

There was a 201,000 net unit reduction to these awards, which represents the Company's achievement of the threshold level of the Adjusted EBITDA target and not achieving the revenue or FCF performance goals, during the year ended December 31, 2024.

For the year ended December 31, 2023, 282,000 PRSUs were granted.

There was a 285,000 net unit reduction to these awards, which represents Company performance below target, during the year ended December 31, 2022.

There was a 305,000 net unit reduction to these awards, which reflects the Company's performance against specified goals, during the year ended December 31, 2023.

For the year ended December 31, 2022, 341,000 PRSUs were granted.

There was a 56,000 unit reduction to these awards, which represents Company performance against target, during the year ended December 31, 2021.

There was a 285,000 unit reduction to these awards, which reflects the Company's performance against specified goals, during the year ended December 31, 2022.

Compensation expense related to all PRSUs described above was $ 0.4 million, $ 0.7 million, and $ 1.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

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These costs are expected to be recognized over a weighted-average period of approximately 2.3 years.

For the years ended December 31, 2023, 2022 and 2021, the income tax benefit recognized on all share based compensation arrangements referenced above was approximately $ 0.8 million, $ 1.6 million, and $ 1.4 million, respectively.

For the years ended December 31, 2024, 2023 and 2022, the income tax benefit recognized on all share based compensation arrangements referenced above was approxim ately $ 1.6 million , $ 0.8 million, and $ 1.6 million, respectively.

Income (loss) before provision (benefit) for income taxes is as follows (in thousands):

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Goodwill impairment — — % 2,901 ( 15.5 ) % — — %

Nondeductible compensation 716 ( 3.8 ) % — — % 119 1.6 %

Equity compensation ( 20 ) ( 0.1 ) % 716 ( 3.8 ) % — — %

US taxation of foreign earnings 19 0.1 % 98 ( 0.5 ) % 100 1.1 %

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In addition, as of December 31, 2024, the Company had state and foreign NOLs of $ 23.8 million and $ 12.2 million, respectively.

Approximately $ 4.6 million of the state NOLs expire at various times from 2031 to 2040, while the remainder of the Company's state NOLs do not expire.

Approximately $ 11.8 million of state NOLs expire at various times from 2023 to 2042, while the remainder of the Company's state NOLs do not expire.

Approximately $ 1.9 million of the foreign NOLs expire at various times from 2023 to 2041, while the remainder of the Company's foreign NOLs do not expire.

In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.

Valuation allowances are provided when management believes the Company's deferred tax assets are not recoverable based on future reversals of existing taxable temporary differences, taxable income in prior carryback year(s) if carryback is permitted under the tax law, and an assessment of estimated future taxable income, exclusive of reversing temporary differences and carryforwards, that incorporates ongoing, prudent and feasible tax planning strategies.

At December 31, 2023 and December 31, 2022, the Company has a valuation allowance of approximately $ 6.0 million and $ 7.8 million, respectively, primarily against certain state and foreign NOLs and other specific deferred tax assets.

The net increase in the valuation allowance of approximately $ 1.8 million is primarily attributable to state and foreign net operating losses and changes in foreign exchange rates, offset by a reduction of expiring losses.

Valuation allowances are provided when management believes the Company's deferred tax assets are not recoverable based on future reversals of existing taxable temporary differences, taxable income in prior carryback year(s) if carryback is permitted under the tax law, and an assessment of estimated future taxable income, exclusive of reversing temporary differences and carryforwards, that incorporates on going, prudent and feasible tax planning strategies.

At December 31, 2024 and December 31, 2023, the Company had a valuation allowance of approximately $ 4.0 million and $ 6.0 million, respectively, primarily against certain state and foreign NOLs and other specific deferred tax assets.

The net decrease in the valuation allowance of approximately $ 2.0 million is primarily attributable to state and foreign net operating losses and changes in foreign exchange rates, offset by a reduction of expiring losses.

Except for those deferred tax assets subject to the valuation allowance, management believes that it will realize all deferred tax assets as a result of sufficient future taxable income in each tax jurisdiction in which the Company has deferred tax assets.

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As of December 31, 2024, the Company has no t recognized a deferred tax liability for foreign withholdings and state taxes on its undistributed international earnings or losses of its foreign subsidiaries since it intends to indefinitely reinvest the earnings outside the United States.

The Company has estimated $73.3 million of unremitted international earnings which provides an unrecorded deferred tax liability related to undistributed international earnings is approximately $ 1.5 million.

The Company has estimated $ 74.4 million of unremitted international earnings which provides an unrecorded deferred tax liability related to undistributed international earnings of approximately $ 1.2 million.

Employee Benefit Plans

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There is a five-year vesting schedule for the Company match.

During the third quarter of 2021, the Company re-installed the employer match which was previously suspended as part of the Company's cost reduction initiatives undertaken in 2020 due to the COVID-19 pandemic.

The Company’s contribution to the plan was $ 4.1 million, $ 3.9 million, and $ 3.0 million for the years ended December 31, 2024, 2023 and 2022, respectively.

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The Company receives benefits consulting services from Capital Management Enterprise (“CME”).

Stamatakis, Chairman of our Board of Directors and our interim President and Chief Executive Officer, is the Chief Executive Officer of CME.

Stamatakis, Executive Chairman of our Board of Directors, is the Chief Executive Officer of CME.

The Company does no t pay any fees to CME and any compensation CME receives related to work for the Company is received by commissions paid by the third-party benefit providers.

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Legal Proceedings and Government Investigations

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

The Company cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against it.

for possible losses from the matters described below, 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 18, 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 was contracted to perform inspections of welds on various pipeline projects in Texas for a customer.

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

The Company filed a lawsuit in the District Court of Bexar County, Texas, 37th Judicial District, on December 17, 2019, in an action captioned Mistras Group, Inc.

Epic Y-Grade Pipeline LP, to recover the $ 1.4 million and other amounts due to the Company.

The customer filed a counterclaim on March 6, 2020, alleging breach of contract and seeking recovery of its alleged damages.

On April 25, 2023, the parties agreed to settle all claims, and in July 2023, the parties executed a settlement agreement.

As part of the settlement, the Company paid $ 0.3 million in July 2023 (which the Company estimates is significantly less than the cost of going to trial) and released its claim of $ 1.4 million for associated past due receivables, which were fully reserved for in prior periods.

In the year ended December 31, 2022, the Company recorded a charge of $ 0.1 million for a potential loss from this matter.

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

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

Both cases were captioned Justin Price v.

Mistras Group, Inc.

, one being a purported class action lawsuit on behalf of current and former Mistras employees in California, filed on June 10, 2020, and the other was filed on September 18, 2020, on behalf of the State of California under the California Private Attorney General Act on the basis of the same alleged violations.

The two cases were consolidated and payment was demanded for all damages, including unpaid wages, and various fines and penalties available under California law.

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

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

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

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

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 "DEQ Complaint").

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, 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.

Pension Related Contingencies

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

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

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

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

The balance of the estimated total amount of this potential liability as of December 31, 2024 is approximately $ 2.5 million , which was incurred in 2018 and 2019.

Acquisition and disposition related contingencies

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

As part of the sale, the Company entered into a three-year agreement to purchase products from the buyer, with a cumulative commitment of $ 2.3 million.

On August 3, 2021, the parties amended the agreement and extended the period by 12 months .

As of December 31, 2022, the commitment was fully satisfied.

Segment Disclosure

The Company’s three operating segments are:

The Company’s three operating segments, which are also the Company's reportable segments, are:

• North America.

This segment provides asset protection solutions 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.

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.

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Additionally, engineering charges and royalty fees charged to the North America and International segments by the Products and Systems segment are reflected in the operating performance of each segment.

The accounting policies of the reportable segments are the same as those described in Note 1-Summary of Significant Accounting Policies and Practices .

Segment income from operations is one of the primary performance measures used by the chief operating decision maker, to assess the performance of each segment and make resource allocation decisions.

Certain general and administrative costs such as human resources, information technology and training are allocated to the segments.

Segment income from operations excludes interest and other financial charges and income taxes.

The chief operating decision maker ("CODM") reviews financial information at the operating segment level to allocate resources and to assess the operating results and financial performance for each operating segment.

For the year ended December 31, 2024, our CODM was identified as Manny Stamatakis, the Interim Chief Executive Officer, because he has final authority over performance assessment and resource allocation decisions.

Beginning January 1, 2025, our CODM was identified as Natalia Shuman, upon her appointment as our Chief Executive Officer effective January 1, 2025, as she has final authority over performance assessment and resource allocation decisions.

Our segments are based on the type and concentration of customers served, service requirements, methods of distribution and major product lines.

Segment income (loss) from operations is the primary performance measure used by the CODM to evaluate segment performance and allocate resources, including considering budget-to-actual variances and prior year-to-actual variances on a monthly basis in accordance with GAAP under ASC 280, Segment Reporting.

Segment income (loss) from operations for each of the Company's reportable segments are comprised of revenue, selling, general & administrative expenses, and "other expenses." "Other expenses" include cost of revenue, bad debt provision for troubled customers, goodwill impairment charges, reorganization and environmental costs, legal settlements and recoveries, acquisition-related expenses, depreciation and amortization and research and engineering.

Corporate and other assets are comprised principally of cash, deposits, property, plant and equipment, domestic deferred taxes, deferred charges and other assets.

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.

Selected consolidated financial information by segment for the periods shown was as follows (with intercompany transactions eliminated in Corporate and eliminations):

For the year ended December 31,

2023 2022 2021

North America $ 579,330 $ 573,336 $ 555,387

International 124,414 112,425 117,245

Products and Systems 12,986 12,727 13,831

Corporate and eliminations ( 11,257 ) ( 11,115 ) ( 9,332 )

$ 705,473 $ 687,373 $ 677,131

For the year ended December 31,

2023 2022 2021

North America $ 163,960 $ 159,049 $ 155,384

International 33,610 33,591 34,282

Products and Systems 6,457 5,490 7,001

Corporate and eliminations ( 220 ) 43 480

$ 203,807 $ 198,173 $ 197,147

These items of our operating profit are managed centrally at the corporate level and are excluded from the measure of segment income reviewed by the CODM, as well as the measure of segment performance used for incentive compensation purposes.

The accounting policies of the reportable segments are the same as those described in Note 1-Summary of Significant Accounting Policies and Practices .

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

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

For the year ended December 31, 2024

2023 2022 2021

North America International Products and Systems Total Reportable Segments Corporate and eliminations Total

Revenue $ 593,527 $ 135,969 $ 13,661 $ 743,157 $ ( 13,517 ) $ 729,640

Selling, general & administrative expenses 95,750 29,879 3,677 129,306 27,082 156,388

Other Expenses 435,491 99,815 7,474 542,780 ( 9,355 ) 533,425

Income (loss) from operations $ 62,286 $ 6,275 $ 2,510 $ 71,071 $ ( 31,245 ) $ 39,826

North America $ 55,170 $ 49,616 $ 48,458

International ( 12,229 ) 3,566 1,839

Products and Systems 267 ( 992 ) ( 117 )

Corporate and eliminations ( 45,112 ) ( 32,391 ) ( 32,010 )

$ ( 1,904 ) $ 19,799 $ 18,170

For the year ended December 31, 2023

2023 2022 2021

Depreciation and amortization

North America International Products and Systems Total Reportable Segments Corporate and eliminations Total

Revenue $ 579,330 $ 124,414 $ 12,986 $ 716,730 $ ( 11,257 ) $ 705,473

Selling, general & administrative expenses 99,446 29,140 4,049 132,635 34,114 166,749

Other Expenses 424,714 107,503 8,670 540,887 ( 259 ) 540,628

Income (loss) from operations $ 55,170 $ ( 12,229 ) $ 267 $ 43,208 $ ( 45,112 ) $ ( 1,904 )

For the year ended December 31, 2022

North America International Products and Systems Total Reportable Segments Corporate and eliminations Total

Revenue $ 573,336 $ 112,425 $ 12,727 $ 698,488 $ ( 11,115 ) $ 687,373

Selling, general & administrative expenses 102,087 27,554 4,236 133,877 32,523 166,400

Other Expenses 421,633 81,305 9,483 512,421 ( 11,247 ) 501,174

Income (loss) from operations $ 49,616 $ 3,566 $ ( 992 ) $ 52,190 $ ( 32,391 ) $ 19,799

The tables above only reconcile to income (loss) from operations as our measure of segment profitability and the remainder of the reconciliation to net income (loss) can be seen on the Consolidated Statement of Income (Loss).

For the year ended December 31, 2024, Products and Systems segment revenue was comprised of approximately $ 4.0 million of sales to the International segment, which was eliminated upon consolidation.

Intersegment revenue related to sales between other segments was immaterial for the years ended December 31, 2024, 2023, and 2022.

Intangible assets, net

North America $ 30,869 $ 37,622

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$ 39,708 $ 43,994

Intangible assets, net

North America $ 390,052 $ 402,782

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$ 523,038 $ 534,776

Long-lived assets

North America $ 268,608 $ 279,358

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$ 302,042 $ 312,320

Long-lived assets

United States $ 177,412 $ 176,237

Other Americas 107,356 108,582

Europe 27,552 41,392

$ 312,320 $ 326,211

Refer to Note 2-Revenue , for revenue by segment and by geographic area for the years ended December 31, 2023, 2022, and 2021.

Selected Quarterly Financial Information (unaudited)

The following is a summary of the quarterly results of operations for calendar years 2023, 2022, and 2021 (in thousands).

Quarter ended December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023

Revenue $ 182,073 $ 179,354 $ 176,030 $ 168,016

Gross Profit 53,627 54,382 49,722 46,077

Income (loss) from operations 706 ( 4,682 ) 3,893 ( 1,830 )

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

$ ( 2,514 ) $ ( 10,298 ) $ 337 $ ( 4,986 )

Earnings (loss) per common share:

Basic $ ( 0.08 ) $ ( 0.34 ) $ 0.01 $ ( 0.17 )

Diluted $ ( 0.08 ) $ ( 0.34 ) $ 0.01 $ ( 0.17 )

Quarter ended December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022

Revenue $ 168,218 $ 178,462 $ 179,031 $ 161,662

Gross Profit 50,939 53,784 53,558 39,892

Income (loss) from operations 5,802 9,114 9,576 ( 4,698 )

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

$ 2,842 $ 4,373 $ 4,643 $ ( 5,363 )

Earnings (loss) per common share:

Basic $ 0.09 $ 0.15 $ 0.15 $ ( 0.18 )

Diluted $ 0.09 $ 0.14 $ 0.15 $ ( 0.18 )

Quarter ended December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021

Revenue $ 171,163 $ 174,556 $ 177,677 $ 153,735

Gross Profit 49,594 52,216 55,336 40,001

Income (loss) from operations 2,306 9,236 11,374 ( 4,746 )

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

$ ( 94 ) $ 3,380 $ 5,937 $ ( 5,362 )

Earnings (loss) per common share:

Basic $ — $ 0.11 $ 0.20 $ ( 0.18 )

Diluted $ — $ 0.11 $ 0.20 $ ( 0.18 )

Refer to Note 2-Revenue , for revenue by industry and by geographic area for the years ended December 31, 2024, 2023, and 2022.

Subsequent Events

On February 27, 2024, the Company entered into the First Amendment (the “Amendment”) to its New Credit Agreement, dated August 1, 2022, with JPMorgan Chase Bank N.A., as administrative agent for the lenders and a lender and the other lenders under the New Credit Agreement.

The First Amendment was filed as Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on March 1, 2024.

The Amendment increases the amount of non-recurring cash charges (as defined in the New Credit Agreement) allowed to be added back for any period of four consecutive quarters for purposes of defining EBITDA under Section 1.01 of the New Credit Agreement from $ 10 million to $ 15 million for the periods ended December 31, 2023 to December 31, 2024.

The allowable non-recurring cash charge addback reverts to $ 10 million starting January 1, 2025.

Additionally, the minimum Consolidated Fixed Charge Coverage Ratio was reduced from 1.25 to 1, to 1.10 to 1, 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 as stated in the New Credit Agreement.

On December 5, 2024, the Board, in furtherance of its management succession planning, appointed Natalia Shuman, as the Company’s President and Chief Executive Officer, effective as of January 1, 2025.

In these positions, Ms.

Shuman will succeed Manuel N.

Stamatakis, who has served as the Company’s interim President and Chief Executive Officer since October 9, 2023.

Stamatakis will continue as the Executive Chairman of the Company and, in this position, will continue to lead the Board and exercise supervisory responsibility over the strategic direction of the Company, oversee, and receive reports from, the new President and Chief Executive Officer, and perform such other duties from time to time that may be assigned to him by the Board.

On December 12, 2024, the Company announced the appointment of Hani Hammad, previously the Company’s Executive Vice President and Chief Transformation Officer, to the position of Executive Vice President and Chief Operating Officer, effective January 1, 2025.

On December 31, 2024, the Compensation Committee approved the grant to Mr.

Stamatakis, of a stock option for the purchase of 375,000 shares of the Company’s common stock at an exercise price per share equal to the closing price of the common stock, as reported on the New York Stock Exchange, on January 6, 2025.

On February 6, 2025, the Company announced the passing of its founder and Chairman Emeritus, Dr.

Sotirios Vahaviolos.

On February 7, 2025, the Company terminated the employment of its Executive Vice President, and President of Services, John A.

Smith’s separation is without cause and he will be entitled to receive severance and related benefits for such a separation, subject to the execution of a release by Mr.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data