Mistras Group, Inc. 10-Q

ITEM 1. Financial Statements Mistras Group, Inc. and Subsidiaries Unaudited Condensed Consolidated Balance Sheets ( in thousands, except share and per share data ) March 31, 2025 December 31, 2024 ASSETS (unaudited) Current Assets Cash and cash equivalents $ 18,536 $ 18,317 Accounts receivable, net 128,192 127,281 Inventories 14,141 14,485 Prepaid expenses and other current assets 15,104 12,387 Total current assets 175,973 172,470 Property, plant and equipment, net 82,796 80,892 Intangible assets, net 39,187 39,708 Goodwill 181,530 181,442 Deferred income taxes 6,351 6,267 Other assets 40,952 42,259 Total assets $ 526,789 $ 523,038 LIABILITIES AND EQUITY Current Liabilities Accounts payable $ 13,385 $ 11,128 Accrued expenses and other current liabilities 85,485 85,233 Current portion of long-term debt 12,374 11,591 Current portion of finance lease obligations 5,735 5,317 Income taxes payable 573 1,656 Total current liabilities 117,552 114,925 Long-term debt, net of current portion 159,500 158,056 Obligations under finance leases, net of current portion 15,871 15,162 Deferred income taxes 2,093 1,973 Other long-term liabilities 32,772 34,027 Total liabilities 327,788 324,143 Commitments and contingencies (Note 13) Equity Preferred stock, 10,000,000 shares authorized — — Common stock, $ 0.01 par value, 200,000,000 shares authorized, 31,325,787 and 31,010,375 shares issued and outstanding 406 402 Additional paid-in capital 251,629 250,832 Accumulated deficit ( 13,170 ) ( 9,984 ) Accumulated other comprehensive loss ( 40,200 ) ( 42,682 ) Total Mistras Group, Inc. stockholders’ equity 198,665 198,568 Non-controlling interests 336 327 Total equity 199,001 198,895 Total liabilities and equity $ 526,789 $ 523,038 The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements. 1 Table of Contents Mistras Group, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Income (Loss) ( in thousands, except per share data ) Three months ended March 31, 2025 2024 Revenue $ 161,615 $ 184,442 Cost of revenue 115,286 132,355 Depreciation 5,437 5,934 Gross profit 40,892 46,153 Selling, general and administrative expenses 35,652 36,252 Reorganization and other costs 3,087 1,558 Environmental expense 540 — Research and engineering 299 343 Depreciation and amortization 2,326 2,447 (Loss) income from operations ( 1,012 ) 5,553 Interest expense 3,324 4,430 (Loss) income before (benefit) provision for income taxes ( 4,336 ) 1,123 (Benefit) provision for income taxes ( 1,168 ) 119 Net (loss) income ( 3,168 ) 1,004 Less: net income attributable to noncontrolling interests, net of taxes 18 9 Net (loss) income attributable to Mistras Group, Inc. $ ( 3,186 ) $ 995 Net (loss) income per common share Basic $ ( 0.10 ) $ 0.03 Diluted $ ( 0.10 ) $ 0.03 Weighted-average common shares outstanding: Basic 31,095 30,680 Diluted 31,095 31,356 The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements. 2 Table of Contents Mistras Group, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands ) Three months ended March 31, 2025 2024 Net (loss) income $ ( 3,168 ) $ 1,004 Other comprehensive loss: Foreign currency translation adjustments $ 2,473 $ ( 4,229 ) Comprehensive Loss ( 695 ) ( 3,225 ) Less: net income attributable to noncontrolling interest 18 9 Less: Foreign currency translation adjustments attributable to noncontrolling interests ( 9 ) — Comprehensive loss attributable to Mistras Group, Inc. $ ( 704 ) $ ( 3,234 ) The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements. 3 Table of Contents Mistras Group, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Equity ( in thousands ) Three months ended Common stock Additional paid-in capital Accumulated deficit Accumulated other comprehensive loss Total Mistras Group, Inc. stockholders’ equity Non-controlling interests Shares Amount Total Equity Balance at December 31, 2024 31,010 $ 402 $ 250,832 $ ( 9,984 ) $ ( 42,682 ) $ 198,568 $ 327 $ 198,895 Net loss — — — ( 3,186 ) ( 3,186 ) 18 ( 3,168 ) Other comprehensive loss, net of tax — — — — 2,482 2,482 ( 9 ) 2,473 Share-based payments — — 2,279 — — 2,279 — 2,279 Net settlement of restricted stock units 316 4 ( 1,482 ) — — ( 1,478 ) — ( 1,478 ) Balance at March 31, 2025 31,326 $ 406 $ 251,629 $ ( 13,170 ) $ ( 40,200 ) $ 198,665 $ 336 $ 199,001 Balance at December 31, 2023 30,598 $ 305 $ 247,165 $ ( 28,942 ) $ ( 28,336 ) $ 190,192 $ 311 $ 190,503 Net income — — — 995 — 995 9 1,004 Other comprehensive income, net of tax — — — — ( 4,229 ) ( 4,229 ) — ( 4,229 ) Share-based payments — — 1,228 — — 1,228 — 1,228 Net settlement of restricted stock units 313 23 ( 1,064 ) — — ( 1,041 ) — ( 1,041 ) Balance at March 31, 2024 30,911 $ 328 $ 247,329 $ ( 27,947 ) $ ( 32,565 ) $ 187,145 $ 320 $ 187,465 The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements. 4 Table of Contents Mistras Group, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Cash Flows (In Thousands) Three months ended March 31, 2025 2024 Cash flows from operating activities Net (loss) income $ ( 3,168 ) $ 1,004 Adjustments to reconcile net loss to net cash provided by (used in) operating activities Depreciation and amortization 7,763 8,381 Deferred income taxes 157 ( 144 ) Share-based compensation expense 2,279 1,228 Bad debt provision for troubled customers, net of recoveries 360 227 Foreign currency loss (gain) 374 ( 561 ) Other ( 237 ) 15 Changes in operating assets and liabilities, net of effect of acquisitions and dispositions Accounts receivable ( 145 ) ( 8,696 ) Inventories 441 ( 23 ) Prepaid expenses and other assets ( 2,426 ) ( 6,593 ) Accounts payable 1,978 ( 1,219 ) Accrued expenses and other liabilities ( 604 ) 6,905 Income taxes payable ( 1,127 ) 80 Net cash provided by operating activities 5,645 604 Cash flows from investing activities Purchase of property, plant and equipment ( 4,555 ) ( 4,804 ) Purchase of intangible assets ( 1,267 ) ( 1,117 ) Proceeds from sale of equipment 408 273 Net cash used in investing activities ( 5,414 ) ( 5,648 ) Cash flows from financing activities Repayment of finance lease obligations ( 1,320 ) ( 1,409 ) Repayment of long-term debt ( 2,653 ) ( 1,907 ) Proceeds from revolver 19,000 15,000 Repayment of revolver ( 14,250 ) ( 5,000 ) Taxes paid related to net share settlement of share-based awards ( 1,479 ) ( 1,557 ) Net cash (used in) provided by financing activities ( 702 ) 5,127 Effect of exchange rate changes on cash and cash equivalents 690 ( 874 ) Net change in cash and cash equivalents 219 ( 791 ) Cash and cash equivalents at beginning of period 18,317 17,646 Cash and cash equivalents at end of period $ 18,536 $ 16,855 Supplemental disclosure of cash paid Interest, net $ 3,087 $ 4,029 Income taxes, net of refunds $ 1,677 $ 756 Noncash investing and financing Equipment acquired through finance lease obligations $ 2,369 $ 1,165 . The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements. 5 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) 1. Description of Business and Basis of Presentation Description of Business Mistras Group, Inc., together with its subsidiaries (the "Company"), is 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 and decades-long legacy of industry leadership, the Company helps customers with asset-intensive infrastructure in the oil and gas, aerospace and defense, industrials, power generation and transmission (including alternative and renewable energy), other process industries and infrastructure, research and engineering and other industries towards achieving and maintaining operational excellence. By supporting these organizations that help fuel our vehicles and power our society; inspecting components that are trusted for commercial, defense, and space craft; 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 clients 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. The Company’s core capabilities also include non-destructive testing ("NDT") field inspections enhanced by advanced robotics, laboratory quality control, laboratory materials services, shop laboratory assurance testing, sensing technologies and NDT equipment, asset and mechanical integrity engineering services, and light mechanical maintenance and access services. The Company has three operating segments. 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. • International: This segment offers services, products and systems similar to those of the other segments to select markets within Europe, the Middle East, Africa, Asia and South America, but not to customers in China and South Korea, which are served by the Products and Systems segment. • Products and Systems: This segment designs, manufactures, sells, installs and services the Company’s asset protection products and systems, including equipment and instrumentation, predominantly in the United States. Recent Developments We may 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. Basis of Presentation The Unaudited Condensed Consolidated Financial Statements contained in this report have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") and Securities and Exchange Commission ("SEC") guidance allowing for reduced disclosure for interim periods. In the opinion of management, the Unaudited Condensed Consolidated Financial Statements include all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods of the years ending December 31, 2025 and December 31, 2024. 6 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) Certain items included in these statements are based on management’s estimates. Actual results may differ from those estimates. The results of operations for any interim period are not necessarily indicative of the results expected for the year. The accompanying Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the notes to the Audited Consolidated Financial Statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Annual Report"). Principles of Consolidation The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of Mistras Group, Inc. as well as its wholly-owned subsidiaries, majority-owned subsidiaries and consolidated variable interest entities (VIE). For consolidated subsidiaries in which the Company’s ownership interest is less than 100%, the non-controlling interests are reported in stockholders’ equity in the accompanying Condensed Consolidated Balance Sheets. The non-controlling interests in net results, net of tax, is classified separately in the accompanying Unaudited Condensed Consolidated Statements of Income (Loss). All significant intercompany accounts and transactions have been eliminated in consolidation. Change in Accounting Principle Certain amounts in prior periods have been reclassified to conform to the current year presentation. The impacts of the reclassifications are shown in the tables below. Any reclassifications not shown below did not have a material effect on the Company's financial condition or results of operations as previously reported. Change in Classification of Certain Expenses from Selling, General and Administrative Expenses to Cost of Revenue During the period from January 1, 2025 through March 31, 2025, the Company changed the presentation of certain costs incurred at its operational labs as well as the costs for certain personnel that indirectly support the Company’s delivery of services on its Unaudited Condensed Consolidated Statements of Income (Loss). This voluntary change in classification of certain overhead and personnel costs, which were determined to be directly related to the Company’s delivery of services, resulted in a decrease in selling, general and administrative expenses and an offsetting increase in cost of revenue. The Company believes this presentation is preferable as it will provide greater transparency regarding its cost of revenue and better align with how the business is managed. This change in classification has been applied retrospectively to all periods presented and affects Selling, general and administrative expenses; Cost of revenue; and Gross profit on the Company's Unaudited Condensed Consolidated Statements of Income (Loss). This change in presentation had no impact to Revenue, Income (loss) from operations, Income (loss) before provision (benefit) for income taxes, Provision (benefit) for income taxes, Net income (loss), Earnings (loss) per common share, or other components of equity, net assets or cash flows. In addition, Selling, general and administrative expenses and Other Expenses information disclosed in Note 14 Segment Disclosure was updated for this change. The impacts of the update to the presentation of certain indirect costs on the Company’s Condensed Consolidated Financial Statements for the three months ended March 31, 2025 and 2024 are reflected below under the "Effect of change" columns . Three Months Ended March 31, 2025 Prior Presentation Method Effect of change As Reported Cost of revenue $ 109,300 $ 5,986 $ 115,286 Gross profit 46,878 ( 5,986 ) 40,892 Selling, general and administrative expenses 41,638 ( 5,986 ) 35,652 Three Months Ended March 31, 2024 As Previously Reported Effect of change As Adjusted Cost of revenue $ 127,418 $ 4,937 $ 132,355 Gross profit 51,090 ( 4,937 ) 46,153 Selling, general and administrative expenses 41,189 ( 4,937 ) 36,252 7 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) Significant Accounting Policies The Company’s significant accounting policies are disclosed in Note 1– Summary of Significant Accounting Policies and Practices in the 2024 Annual Report. On an ongoing basis, the Company evaluates its estimates and assumptions, including among other things, those related to revenue recognition, long-lived assets, goodwill and acquisitions. Since the date of the 2024 Annual Report, there have been no material changes to the Company’s significant accounting policies. Income Taxes Income taxes are accounted for under the asset and liability method. We recognize deferred tax assets and liabilities at enacted income tax rates for the temporary differences between the financial reporting bases and the tax bases of our assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. Our net deferred tax assets primarily consist of net operating loss carry forwards, or NOLs. A valuation allowance is provided if it is more likely than not that some or all of a deferred income tax asset will not be realized. A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the current and prior years. As of March 31, 2025, management concluded that it is more likely than not that a substantial portion of the Company's deferred tax assets will be realized. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company’s effective income tax rate was approximately 26.9 % and 10.6 % for the three months ended March 31, 2025 and 2024, respectively. The effective income tax rate benefit for the three months ended March 31, 2025 was higher than the statutory rate primarily due to the impact of a favorable discrete item related to stock compensation. Recent Accounting Pronouncements 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 condensed 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 are currently evaluating the impacts this standard will have on our disclosures. On November 4, 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures, to require disaggregation of certain expense captions into specified categories in disclosures within the notes of the financial statements. The standard is effective for fiscal years beginning after December 31, 2026 and early adoption is permitted. The guidance is required to be applied prospectively and amendments in the ASU may be applied prospectively or retrospectively. We are currently evaluating the impacts this standard will have on our disclosures. On March 6, 2024, the SEC adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate-Related Disclosures for Investors, which will require registrants to provide certain climate-related information in their registration statements and periodic reports. The required disclosures will include, but are not limited to, specific disclosures about climate-related risks and their actual or likely material impacts on the registrant’s business, strategy, and outlook; the governance of climate-related risks and relevant risk management processes; Scope 1 and 2 greenhouse gas (GHG) emissions, if material or included in announced emission targets; certain climate-related financial statement metrics and related disclosures in a note to the audited financial statements; and information about climate-related targets and goals. The rules are effective on 8 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) a rolling basis for various fiscal years, beginning for the Company with annual reports for the year ending December 31, 2025. However, in response to various legal challenges, the SEC voluntarily stayed the rules on April 4, 2024, which may impact the ultimate effective date of the rules. We will continue to monitor any developments on these rules and expected timing for compliance. 2. Revenue The Company derives the majority of its revenue by providing services on a time and material basis, and are short-term in nature. The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers . Performance Obligations The Company provides highly integrated and bundled inspection services to its customers. The majority of the Company's contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and is, therefore, not distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the Company's best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is a relative selling price based on price lists. Contract modifications are not routine in the performance of the Company's contracts. Generally, when contracts are modified, the modification is to account for changes in scope to the goods and services that are provided. In most instances, contract modifications are for goods or services that are distinct, and, therefore, are accounted for as a separate contract. The Company's performance obligations are satisfied over time as work progresses or at a point in time. The majority of the Company's revenue is recognized over time as work progresses for the Company's service deliverables, which includes providing testing, inspection and mechanical services to our customers. Revenue is recognized over time, based on time and material incurred to date which best portrays the transfer of control to the customer. The Company also utilizes an available practical expedient that provides for revenue to be recognized in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date. Fixed fee arrangements are determined based on expected labor, material, and overhead to be consumed on fulfillment of such services. For these arrangements, revenue is recognized on a cost-to-cost method tracked on an input basis. The majority of our revenue recognized at a point in time is related to product sales when the customer obtains control of the asset, which is generally upon shipment to the customer. Contract costs include labor, material and overhead. The Company expects any significant remaining performance obligations to be satisfied within one year . Contract Estimates The majority of the Company's revenues are short-term in nature. The Company enters into master service agreements ("MSA"s) with customers that specify an overall framework and contract terms. The actual contracting to provide services or furnish products are triggered by a work order, purchase order, or some similar document issued pursuant to a MSA which sets forth the scope of services and/or identifies the products to be provided. From time-to-time, the Company may enter into longer-term contracts, which can range from several months to several years. Revenue on certain contracts is recognized as work is performed based on total costs incurred to date in relation to the total estimated costs for the performance of the contract at completion. This includes contract estimates of costs to be incurred for the performance of the contract. Cost estimation is based upon the professional knowledge and experience of the Company's project managers, engineers and financial professionals. Factors that are considered in estimating the work to be completed include the availability of materials, the effect of any delays in the Company's project performance and the recoverability of any claims. Whenever revisions of estimates, contract costs and/or contract values indicate that the contract costs will exceed estimated revenues, thus creating a loss, a provision for the total estimated loss is recorded in that period. 9 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) Revenue by Category The following series of tables present the Company's disaggregated revenue: Revenue by industry was as follows: Three Months Ended March 31, 2025 North America International Products & Systems Corp/Elim Total Oil & Gas $ 85,731 $ 10,646 $ 187 $ — $ 96,564 Aerospace & Defense 14,007 6,281 116 — 20,404 Industrials 11,688 6,517 365 — 18,570 Power generation & Transmission 3,224 985 444 — 4,653 Other Process Industries 6,501 3,744 8 — 10,253 Infrastructure, Research & Engineering 3,701 2,562 958 — 7,221 Petrochemical 2,523 110 — — 2,633 Other 1,527 2,369 1,013 ( 3,592 ) 1,317 Total $ 128,902 $ 33,214 $ 3,091 $ ( 3,592 ) $ 161,615 Three Months Ended March 31, 2024 North America International Products & Systems Corp/Elim Total Oil & Gas $ 103,027 $ 10,066 $ 72 $ — $ 113,165 Aerospace & Defense 15,375 6,732 11 — 22,118 Industrials 8,909 5,853 437 — 15,199 Power generation & Transmission 3,592 1,682 578 — 5,852 Other Process Industries 7,928 3,933 39 — 11,900 Infrastructure, Research & Engineering 3,972 2,205 409 — 6,586 Petrochemical 3,813 531 — — 4,344 Other 3,733 2,045 1,664 ( 2,164 ) 5,278 Total $ 150,349 $ 33,047 $ 3,210 $ ( 2,164 ) $ 184,442 Revenue per key geographic location was as follows: Three Months Ended March 31, 2025 North America International Products & Systems Corp/Elim Total United States $ 114,333 $ 542 $ 1,373 $ 2,016 $ 118,264 Other Americas 13,415 2,831 16 ( 3,144 ) 13,118 Europe 666 28,782 751 ( 1,997 ) 28,202 Asia-Pacific 488 1,059 951 ( 467 ) 2,031 Total $ 128,902 $ 33,214 $ 3,091 $ ( 3,592 ) $ 161,615 Three Months Ended March 31, 2024 North America International Products & Systems Corp/Elim Total United States $ 129,458 $ 296 $ 1,600 $ ( 1,515 ) $ 129,839 Other Americas 17,127 2,295 177 ( 238 ) 19,361 Europe 1,153 28,663 651 ( 346 ) 30,121 Asia-Pacific 2,611 1,793 782 ( 65 ) 5,121 Total $ 150,349 $ 33,047 $ 3,210 $ ( 2,164 ) $ 184,442 10 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) Contract Balances The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheets. Amounts are generally billed as work progresses in accordance with agreed-upon contractual terms, generally at periodic intervals (e.g., weekly, bi-weekly or monthly). Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, the Company sometimes receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities. These assets and liabilities are aggregated on an individual contract basis and reported on the Consolidated Balance Sheets at the end of each reporting period within accounts receivable, net or accrued expenses and other current liabilities. Revenue recognized during the three months ended March 31, 2025 and 2024 that was included in the contract liability balance at the beginning of the year was $ 3.3 million and $ 2.9 million, respectively. Changes in the contract asset and liability balances during these periods were not materially 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. 3. Share-Based Compensation 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 increase 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 665,000 shares were available for future grants as of March 31, 2025. Stock Options On December 31, 2024, the Compensation Committee (the "Compensation Committee") of the Company's Board of Directors 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 (the "NYSE"), on the grant date of January 6, 2025 (the "Grant Date"). This stock option will vest and become exercisable on the first anniversary of the Grant Date, subject to accelerated vesting and exercisability upon termination of Mr. Stamatakis's employment due to his death or disability. In addition, if Mr. Stamatakis' employment ceases due to his termination by the Company without cause or his resignation with good reason then pursuant to his employment agreement with the Company, the vesting and exercisability of this stock option will also accelerate. The outside expiration date of this stock option is the tenth anniversary of the Grant Date. 11 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) The following table sets forth a summary of stock option activity, weighted-average exercise prices and options outstanding as of March 31, 2025 (in thousands, except per share amounts and years): Three months ended March 31, 2025 2024 Common Stock Options Weighted Average Exercise Price Common Stock Options Weighted Average Exercise Price Outstanding at beginning of year: 250 $ 5.36 250 $ 5.36 Granted 375 $ 9.06 — $ — Exercised — $ — — $ — Expired or forfeited $ — — $ — Outstanding at end of period: 625 $ 7.58 250 $ 5.36 The Company recognized $ 0.5 million of share-based compensation expense within Reorganization and other costs related to the stock options granted in the first quarter of 2025 and $ 1.5 million of share-based compensation expense related to stock options remains unrecognized as of the end of the current period, which is all expected to be recognized during 2025. Stock Issuances to Non-Employee Directors As part of its compensation program for non-employee directors, the Company issues fully-vested common stock to its non-employee directors. Prior to 2025, the shares of common stock were issued in semi-annual awards during the quarters ended March 31 and September 30. In 2025, non-employee directors will receive a single award during the quarter ended June 30, 2025. A summary of the fully-vested common stock the Company issued to its non-employee directors, in connection with its non-employee director compensation, is as follows (in thousands): Three months ended March 31, 2025 2024 Awards issued — 31 Grant date fair value of awards issued $ — $ 274 Restricted Stock Unit Awards For the three months ended March 31, 2025 and March 31, 2024, the Company recognized share-based compensation expense within Selling, general and administrative expenses related to restricted stock unit awards of $ 1.1 million and $ 1.0 million, respectively. For the three months ended March 31, 2025, the Company recognized share-based compensation expense within Reorganization and other costs related to restricted stock unit awards of $ 0.5 million. As of March 31, 2025, there was $ 8.8 million of unrecognized compensation costs, net of estimated forfeitures, related to restricted stock unit awards, which is expected to be recognized over a remaining weighted-average period of 2.5 years. Upon vesting, restricted stock units are generally net share-settled to cover the required withholding tax and the remaining amount is converted into an equivalent number of shares of common stock. A summary of the vesting activity of restricted stock unit awards, with the respective fair value of the awards, is as follows: Three months ended March 31, 2025 2024 Restricted stock awards vested 451 364 Fair value of awards vested $ 4,523 $ 3,261 12 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) A summary of the Company's outstanding, non-vested restricted share units is as follows: Three months ended March 31, 2025 2024 Units Weighted Average Grant-Date Fair Value Units Weighted Average Grant-Date Fair Value Outstanding at beginning of period: 1,231 $ 8.41 1,184 $ 8.07 Granted 350 $ 9.32 598 $ 8.52 Vested ( 451 ) $ 10.03 ( 364 ) $ 8.95 Forfeited ( 38 ) $ 8.43 ( 10 ) $ 8.37 Outstanding at end of period: 1,092 $ 8.61 1,408 $ 8.04 Performance Restricted Stock Units The Company maintains Performance Restricted Stock Units ("PRSUs") that have been granted to select executives and senior officers, the ultimate payout of which 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 2024, the Compensation Committee used the following three performance metrics for PRSUs awarded in that year. 1. 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. 2. 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. 3. Revenue For PRSUs awarded in 2025, the Compensation Committee utilized the same metrics as 2024 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. Compensation costs related to the PRSUs with performance conditions are subsequently adjusted for changes in the expected outcomes of the performance conditions. 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 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. 13 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) A summary of the Company's PRSU activity is as follows: Three months ended March 31, 2025 2024 Units Weighted Average Grant-Date Fair Value Units Weighted Average Grant-Date Fair Value Outstanding at beginning of period: 125 $ 9.12 60 $ 9.33 Granted 507 $ 10.08 249 $ 8.76 Performance condition adjustments — $ — — $ — Released ( 3 ) $ 9.84 — $ — Forfeited ( 9 ) $ 3.68 — $ — Outstanding at end of period: 620 $ 9.92 309 $ 9.00 For the three months ended March 31, 2025 and March 31, 2024, the Company recognized aggregate share-based compensation expense related to the awards described above of approximately $ 0.2 million and $ 0.1 million, respectively. At March 31, 2025, there was $ 5.5 million of total unrecognized compensation costs related to approximately 620,000 non-vested PRSUs, which is expected to be recognized over a remaining weighted-average period of 3.2 years. 4. (Loss) earnings per Share Basic (loss) earnings per share is computed by dividing net (loss) income by the weighted-average number of shares outstanding during the period. Diluted (loss) earnings per share is computed by dividing net (loss) income by the sum of (1) the weighted-average number of shares of common stock outstanding during the period, and (2) the dilutive effect of assumed conversion of equity awards using the treasury stock method. With respect to the number of weighted-average shares outstanding (denominator), diluted shares reflect: (i) the exercise of options to acquire common stock to the extent that the options’ exercise prices are less than the average market price of common shares during the period and (ii) the pro forma vesting of restricted stock units. 14 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) The following table sets forth the computations of basic and diluted (loss) earnings per share: Three months ended March 31, 2025 2024 Basic (loss) earnings per share Numerator: Net (loss) income attributable to Mistras Group, Inc. $ ( 3,186 ) $ 995 Denominator: Weighted average common shares outstanding 31,095 30,680 Basic (loss) earnings per share $ ( 0.10 ) $ 0.03 Diluted (loss) earnings per share: Numerator: Net (loss) income attributable to Mistras Group, Inc. $ ( 3,186 ) $ 995 Denominator: Weighted average common shares outstanding 31,095 30,680 Dilutive effect of stock options outstanding (1) — 250 Dilutive effect of restricted stock units outstanding (1) — 426 31,095 31,356 Diluted (loss) earnings per share $ ( 0.10 ) $ 0.03 _______________ (1) For the three months ended March 31, 2025, 145,000 shares, related to stock options and 808,000 shares, related to restricted stock units were excluded from the calculation of diluted (loss) earnings per share due to the net loss for the period. 5. Accounts Receivable, net Accounts receivable consisted of the following (in thousands): March 31, 2025 December 31, 2024 Trade accounts receivable $ 131,295 $ 129,894 Allowance for credit losses ( 3,103 ) ( 2,613 ) Accounts receivable, net $ 128,192 $ 127,281 The Company had $ 34.4 million and $ 21.3 million of unbilled revenue accrued as of March 31, 2025 and December 31, 2024, respectively. These amounts are included in the trade accounts receivable balances above. Unbilled revenue is generally billed in the subsequent quarter to their revenue recognition. The Company considers unbilled receivables as short-term in nature as they are normally converted to trade receivables within 90 days, thus future changes in economic conditions will not have a significant effect on the credit loss estimate. 15 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) 6. Inventories Inventories consist of the following (in thousands): March 31, 2025 December 31, 2024 Raw materials $ 5,069 $ 5,344 Work in progress 1,230 1,018 Finished goods 4,759 5,146 Consumable supplies 3,083 2,977 Inventories $ 14,141 $ 14,485 7. Property, Plant and Equipment, net Property, plant and equipment, net consisted of the following: Useful Life (Years) March 31, 2025 December 31, 2024 Land $ 2,441 $ 2,429 Buildings and improvements 30 - 40 27,120 27,973 Office furniture and equipment 5 - 8 17,209 16,768 Machinery and equipment 5 - 7 284,453 274,907 331,223 322,077 Accumulated depreciation and amortization ( 248,427 ) ( 241,185 ) Property, plant and equipment, net $ 82,796 $ 80,892 Depreciation expense for the three months ended March 31, 2025 and 2024 was approximately $ 6.0 million and $ 6.5 million, respectively. 8. Goodwill Changes in the carrying amount of goodwill by segment is shown below: North America International Products and Systems Total Balance at December 31, 2024 $ 181,442 $ — $ — $ 181,442 Foreign currency translation 88 — — 88 Balance at March 31, 2025 $ 181,530 $ — $ — $ 181,530 The Company reviews goodwill for impairment on a reporting unit basis on October 1 of each year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. The Company performed a quantitative annual impairment test as of October 1, 2024 and the Company did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable. Additionally, through March 31, 2025, the Company did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable. Significant adverse changes in future periods could negatively affect the Company's key assumptions and may result in future goodwill impairment charges which could be material. 16 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) 9. Intangible Assets The gross amount, accumulated amortization and net carrying amount of intangible assets were as follows: March 31, 2025 December 31, 2024 Useful Life (Years) Gross Amount Accumulated Amortization Net Carrying Amount Gross Amount Accumulated Amortization Net Carrying Amount Customer relationships 5 - 18 $ 108,644 $ ( 94,153 ) $ 14,491 $ 107,704 $ ( 92,220 ) $ 15,484 Software/Technology 3 - 15 58,903 ( 34,921 ) 23,982 57,414 ( 33,930 ) 23,484 Covenants not to compete 2 - 5 12,403 ( 12,388 ) 15 12,391 ( 12,371 ) 20 Other 2 - 12 10,249 ( 9,550 ) 699 10,218 ( 9,498 ) 720 Total $ 190,199 $ ( 151,012 ) $ 39,187 $ 187,727 $ ( 148,019 ) $ 39,708 Amortization expense for the three months ended March 31, 2025 and 2024 was approximately $ 1.8 million and $ 1.9 million, respectively. 10. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following: March 31, 2025 December 31, 2024 Accrued salaries, wages and related employee benefits $ 28,137 $ 27,990 Accrued workers’ compensation and health benefits 3,937 4,898 Deferred revenue 10,065 8,096 Pension accrual 2,458 2,458 Right-of-use liability - Operating 11,380 11,375 Other accrued expenses 29,508 30,416 Total $ 85,485 $ 85,233 11. Long-Term Debt Long-term debt consisted of the following: March 31, 2025 December 31, 2024 Senior credit facility $ 64,399 $ 59,650 Senior secured term loan, net of unamortized debt issuance costs of $ 0.2 million and $ 0.3 million, respectively 105,228 107,545 Other 2,247 2,452 Total debt 171,874 169,647 Less: Current portion ( 12,374 ) ( 11,591 ) Long-term debt, net of current portion $ 159,500 $ 158,056 17 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) Senior Credit Facility 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 $ 105.2 million as of March 31, 2025. The Credit Agreement permits the Company to borrow up to $ 100 million in non-U.S. dollar currencies and to use up to $ 20 million of the credit limit for the issuance of letters of credit. Both the revolving line of credit and the term loan under the Credit Agreement have a maturity date of July 30, 2027. 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). ◦ 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 Credit Agreement is secured by liens on substantially all the assets of the Company and certain of its U.S subsidiaries and is guaranteed by those U.S. subsidiaries. • The Company 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. As of March 31, 2025, the Company had borrowings of $ 169.6 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 March 31, 2025, which is included in Other Assets on the Condensed Consolidated Balance Sheets and will be amortized into interest expense over the remaining term of the Credit Agreement through July 30, 2027. As of March 31, 2025, the Company was in compliance with the terms and covenants of the Credit Agreement. The Company continuously monitors compliance with the covenants contained in the Credit Agreement. The Company believes that it is probable that the Company will be able to comply with the financial covenants in the Credit Agreement and that sufficient credit remains available under the Credit Agreement to meet the Company's liquidity needs. However, such matters cannot be predicted with certainty. 18 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) Other debt The Company's other debt includes bank financing provided at the local subsidiary level used to support working capital requirements and fund capital expenditures. At March 31, 2025, there was an aggregate of approximately $ 2.2 million outstanding, payable at various times through 2030. Monthly payments range from $ 0.7 thousand to $ 16.0 thousand and interest rates range from 0.4 % to 3.5 %. 12. Fair Value Measurements The Company performs fair value measurements in accordance with the guidance provided by ASC 820, Fair Value Measurements and Disclosures . ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a three level hierarchy that prioritizes the inputs used to measure fair value. Financial instruments not measured at fair value on a recurring basis The Company has evaluated current market conditions and borrower credit quality and has determined that the carrying value of its long-term debt approximates fair value. The fair value of the Company’s notes payable and finance lease obligations approximates their carrying amounts based on anticipated interest rates which management believes would currently be available to the Company for similar issuances of debt. 13. Commitments and Contingencies Legal Proceedings and Government Investigations 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 13, will have a material adverse effect on its business, results of operations, cash flows or financial condition. The costs incurred by the Company to defend lawsuits, investigations and claims and amounts the Company pays to other parties because of these matters may be covered by insurance in some circumstances. Litigation and Commercial Claims The Company and a subsidiary of the Company, Mistras Arizona Inspection Services LLC (“Mistras Arizona”), are subject to a lawsuit filed by the 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. In April 2025, Mistras Arizona notified the DEQ of its completed improvements, and the DEQ inspected the improvements. Following the DEQ site visit, Mistras Arizona commenced its chrome plating operations on April 28, 2025. 19 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) The Company intends to continue complying 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. On April 29, 2025, the Company received a notice from the EPA requesting information regarding the improvements and other matters related to Phoenix testing facility. As it relates to this lawsuit, the recorded probable losses remain an estimate, and actual costs arising from this matter could materially differ depending on the actual costs incurred as well as the availability of additional insurance coverage. Pension Related Contingencies Certain of the Company’s subsidiaries had significant reductions in their unionized workers in 2018. The collective bargaining agreements for the employees of these subsidiaries required contributions for these employees to two national multi-employer pension funds. 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 March 31, 2025 is approximately $ 2.5 million, which were incurred in 2018 and 2019. 14. Segment Disclosure The Company’s three operating segments, which are also the Company's reportable segments, are: • 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. • International: This segment offers services, products and systems similar to those of the other segments to select markets within Europe, the Middle East, Africa, Asia and South America, but not to customers in China and South Korea, which are served by the Products and Systems segment. • Products and Systems: This segment designs, manufactures, sells, installs and services the Company’s asset protection products and systems, including equipment and instrumentation, predominantly in the United States. Costs incurred for general corporate services, including finance, legal, and certain other costs that are provided to the segments are reported within Corporate and eliminations. Sales to the International segment from the Products and Systems segment and subsequent sales by the International segment of the same items are recorded and reflected in the operating performance of both segments. 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 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. 20 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) 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. 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 - Description of Business and Basis of Presentation . 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 three months ended March 31, 2025 Segment North America International Products and Systems Total Reportable Segments Corporate and eliminations Total Revenue $ 128,902 $ 33,214 $ 3,091 $ 165,207 $ ( 3,592 ) $ 161,615 Selling, general & administrative expenses 20,739 7,206 838 28,783 6,869 35,652 Other Expenses 101,648 24,927 1,926 128,501 ( 1,526 ) 126,975 Income (loss) from operations $ 6,515 $ 1,081 $ 327 $ 7,923 $ ( 8,935 ) $ ( 1,012 ) For the three months ended March 31, 2024 Segment North America International Products and Systems Total Reportable Segments Corporate and eliminations Total Revenue $ 150,349 $ 33,047 $ 3,210 $ 186,606 $ ( 2,164 ) $ 184,442 Selling, general & administrative expenses 20,008 7,400 944 28,352 7,900 36,252 Other Expenses 116,780 24,523 1,952 143,255 ( 618 ) 142,637 Income (loss) from operations $ 13,561 $ 1,124 $ 314 $ 14,999 $ ( 9,446 ) $ 5,553 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 Unaudited Condensed Consolidated Statement of Income (Loss). Products and Systems segment revenue was comprised of approximately $ 1.0 million and $ 0.9 million of sales to the International segment, which were eliminated upon consolidation, for the three months ended March 31, 2025 and March 31, 2024, respectively. Intersegment revenue related to sales between other segments was immaterial for each of the three month periods ended March 31, 2025 and March 31, 2024. 21 Table of Contents Mistras Group, Inc. and Subsidiaries Notes to Unaudited Condensed Consolidated Financial Statements (tabular dollars and shares in thousands, except per share data) Selected consolidated financial information by segment for the periods shown was as follows: (with intercompany transactions eliminated in Corporate and eliminations): March 31, 2025 December 31, 2024 Intangible assets, net North America $ 29,912 $ 30,869 International 1,044 1,377 Products and Systems 871 946 Corporate and eliminations 7,360 6,516 $ 39,187 $ 39,708 March 31, 2025 December 31, 2024 Total assets North America $ 389,526 $ 390,052 International 101,644 97,546 Products and Systems 11,109 11,280 Corporate and eliminations 24,510 24,160 $ 526,789 $ 523,038 March 31, 2025 December 31, 2024 Long-lived assets North America $ 268,134 $ 268,608 International $ 25,948 $ 24,822 Products and Systems 963 1,049 Corporate and eliminations 8,468 7,563 $ 303,513 $ 302,042 Refer to Note 2 - Revenue , for revenue by geographic area for the three months ended March 31, 2025 and 2024. 22 Table of Contents Mistras Group, Inc. and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations (tabular dollars are in thousands)