What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-11 · 110 added, 146 removed, 189 unchanged (58% of the section changed)

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

The following Management’s Discussion and Analysis (“MD&A”) provides a discussion of our results of operations and financial position for the three and six months ended June 30, 2025 and 2024.

The following Management’s Discussion and Analysis (“MD&A”) provides a discussion of our results of operations and financial position for the three and nine months ended September 30, 2025 and 2024.

The MD&A should be read together with our Unaudited Condensed Consolidated Financial Statements and related notes included in Item 1 in this Quarterly Report on Form 10-Q (the "Quarterly Report") and our audited consolidated financial statements and related notes included in our 2024 Annual Report.

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Factors that could cause or contribute to differences in results and outcomes from those in our forward-looking statements, including any impacts from the imposition of tariffs or other trade restrictions, changes to the

trade policy and impacts from the implementation of our new ERP (as defined below) system, include, without limitation, those discussed in the “Business—Forward-Looking Statements,” and “Risk Factors” sections of our 2024 Annual Report as well as those discussed in this Quarterly Report and in our other filings with the SEC.

trade policy and impacts from the recent U.S federal government shutdown, include, without limitation, those discussed in the “Business—Forward-Looking Statements,” and “Risk Factors” sections of our 2024 Annual Report as well as those discussed in this Quarterly Report and in our other filings with the SEC.

In addition, there are various developments discussed below which could create risks and uncertainty about our business, results of operations or liquidity.

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

Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, and a 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 is a global leader in technology-enabled industrial asset integrity solutions, serving critical industries including oil & gas, aerospace & defense, power & utilities, manufacturing, and civil infrastructure.

The Company provides a diversified portfolio of products and services, ranging from advanced non-destructive testing ("NDT") and pipeline inspections to real-time condition monitoring, maintenance planning, and specialized engineering, powered by a proprietary management software suite that centralizes integrity data for predictive analytics and benchmark analysis.

With a long-standing track record of innovation and deep industry expertise, the Company helps clients reduce risk, extend asset life, and optimize operational performance.

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 NDT field inspections enhanced by advanced robotics, laboratory quality control and assurance testing, sensing technologies and NDT equipment, asset and mechanical integrity engineering services, and light mechanical maintenance and access services.

Mistras Group, Inc.

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(tabular dollars are in thousands)

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

Our operations consist of three reportable segments:

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We have established long-term relationships as a critical solutions provider to many of the leading companies with asset-intensive infrastructure in our target markets.

These markets include companies 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.

These markets include companies in 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.

We have focused on providing our advanced asset protection solutions to our customers using proprietary, technology-enabled software and testing instruments, including those developed by our Products and Systems segment.

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Our cash position and liquidity remains strong.

As of June 30, 2025, our cash balance was approximately $20.0 million and, with our Credit Agreement, provides us with significant liquidity.

As discussed above in Note 1 - Description of Business and Basis of Presentation, we changed the presentation of certain costs incurred at our operational labs as well as for certain lab personnel on our 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 delivery of our services, resulted in a decrease in from Selling, general and administrative expenses and

As of September 30, 2025, our cash balance was approximately $27.8 million and, with our Credit Agreement, provides us with significant liquidity.

We believe this presentation is preferable as it will provide greater transparency regarding our cost of revenue and better align with how our business is managed.

Mistras Group, Inc.

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an offsetting increase in Cost of revenue.

We believe this presentation is preferable as it will provide greater transparency regarding our cost of revenue and better align with how our business is managed.

The Company is currently unable to predict with certainty the overall impact of continuing inflationary pressures or increased costs due to the imposition of tariffs and other trade barriers or changes to U.S.

trade policy may have on its business, results of operations or liquidity or in other ways which the Company cannot yet determine.

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

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

We continue to monitor the impact that tariffs or trade barriers may have on our business, 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 tariffs have not had a material effect on our business or results of operations to date in 2025, but they could result in additional costs to us and could impact the import of materials by our customers which are inspected by us.

In the third quarter of 2025, the price of crude oil continued to decline due to multiple macroeconomic and geopolitical forces.

The decline in crude oil prices has had an adverse impact on our field related services that we provide to the oil and gas sector, which could continue if prices remain low.

Note About Non-GAAP Measures

The Company prepares its consolidated financial statements in accordance with GAAP.

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

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

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

This presentation excludes from "Income from Operations" (a) reorganization and other costs, which includes items such as severance, labor relations matters and asset and lease termination costs, (b) environmental expense, which relates to costs associated with the environmental matter at the Phoenix lab operated by Mistras Arizona, as described in Note 13 to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report, and (c) legal settlement and insurance recoveries, net.

These adjustments have been excluded from the GAAP measure because these expenses and credits are not related to our or any individual segment's core business operations.

The acquisition related costs and special items can be a net expense or credit in any given period.

Our management uses this non-GAAP measure as a measure of operating performance and liquidity to assist in comparing performance from period to period on a consistent basis, as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations.

We believe investors and other users of our financial statements benefit from the presentation of this non-GAAP measure in evaluating our performance.

Income (loss) before special items excludes the identified adjustments, which provides additional tools to compare our core business operating performance on a consistent basis and measure underlying trends and results in our business.

Income (loss) before special items is not used to determine incentive compensation for executives or employees, nor is it a replacement for the reported GAAP financial performance and/or necessarily comparable to the non-GAAP financial measures of other companies.

Any measure that eliminates the foregoing items has material limitations as a performance or liquidity measure and should not be considered alternatives to net income (loss) or any other measures derived in accordance with GAAP.

Because Income (loss) from operations before special items may not be calculated in the same manner by all companies, this measure may not be comparable to other similarly titled measures used by other companies.

Income before special items excludes the identified adjustments, which provides additional tools to compare our core business operating performance on a consistent basis and measure underlying trends and results in our business.

Income before special items is not used to determine incentive compensation for executives or employees, nor is it a replacement for the reported GAAP financial performance and/or necessarily comparable to the non-GAAP financial measures of other companies.

Any measure that eliminates the foregoing items has material limitations as a performance or liquidity measure and should not be considered alternatives to net income or any other measures derived in accordance with GAAP.

Because Income from operations before special items may not be calculated in the same manner by all companies, this measure may not be comparable to other similarly titled measures used by other companies.

Results of Operations

Condensed consolidated results of operations for the three and six months ended June 30, 2025 and 2024 were as follows:

Three Months Ended June 30, Six Months Ended June 30,

Condensed consolidated results of operations for the three and nine months ended September 30, 2025 and 2024 were as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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Income from operations as a % of Revenue 10.4 % 6.5 % 5.1 % 5.3 %

Income (loss) before provision (benefit) for income taxes 4,189 7,546 (147) 8,669

Net income (loss) 3,126 6,373 (42) 7,377

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

Income before provision for income taxes 17,000 9,034 16,853 17,702

Net income 13,203 6,416 13,161 13,793

Net income attributable to Mistras Group, Inc.

$ 13,108 $ 6,401 $ 12,939 $ 13,765

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Revenue was $185.4 million for the three months ended June 30, 2025, a decrease of $4.4 million, or 2.3%, compared with the three months ended June 30, 2024.

Revenue by segment for the three and six months ended June 30, 2025 and 2024 were as follows:

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

Revenue was $195.5 million for the three months ended September 30, 2025, an increase of $12.9 million, or 7.0%, compared with the three months ended September 30, 2024.

Revenue by segment for the three and nine months ended September 30, 2025 and 2024 were as follows:

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

2025 2024 2025 2024

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Total $ 195,549 $ 182,694 $ 542,569 $ 556,909

In the three months ended June 30, 2025, total revenue decreased 2.3% versus the prior year comparable period due predominantly to a low single-digit organic decrease driven by voluntary laboratory consolidations.

North America segment revenue decreased 5.4%, driven predominantly by a decrease in our Oil and Gas market revenue and declines in demand in other key markets due to macroeconomic factors such as uncertainties driven by continuing inflationary pressures and increased costs due to the imposition of tariffs.

International segment revenue increased 14.0%, due predominantly to high single-digit organic growth and mid-single-digit favorable impact of foreign exchange rates.

Products and Systems segment revenue decreased by 18.8%, due to decreased sales volume and shipments as compared to the prior year comparable period.

Oil and gas customer revenue comprised approximately 55% and 58% of total revenue for the three months ended June 30, 2025 and 2024, respectively.

Aerospace and defense customer revenue comprised approximately 13% and 12% of total revenue for the three months ended June 30, 2025 and 2024, respectively.

The Company’s top ten customers comprised approximately 35% of total revenue for the three months ended June 30, 2025, as compared to 35% for the three months ended June 30, 2024, with no customer accounting for 10% or more of total revenue in either three-month period.

In the six months ended June 30, 2025, total revenue decreased 7.3% versus the prior year comparable period due predominantly to a high single-digit organic decrease.

North America segment revenue decreased 9.7%, driven predominantly by a decrease in our Oil and Gas market revenue and declines in demand in other key markets due to macroeconomic factors such as uncertainties driven by continuing inflationary pressures and increased costs due to the imposition of tariffs.

International segment revenue increased 7.4%, due predominantly to mid-single-digit organic growth and low single-digit favorable impact of foreign exchange rates.

Products and Systems segment revenue decreased by 11.4%, due to decreased sales volume and shipments as compared to the prior year comparable period.

Oil and gas customer revenue comprised approximately 57% and 59% of total revenue for the six months ended June 30, 2025 and 2024, respectively.

Aerospace and defense customer revenue comprised approximately 13% and 12% of total revenue for the six months ended June 30, 2025 and 2024, respectively.

The Company’s top ten customers comprised approximately 37% of total revenue for the six months ended June 30, 2025, as compared to 35% for the six months ended June 30, 2024, with no customer accounting for 10% or more of total revenue in either six-month period.

Mistras Group, Inc.

and Subsidiaries

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

(tabular dollars are in thousands)

The Company has retrospectively reclassified certain Oil and Gas sub-category revenues for each quarterly period in 2024 and the first quarter of 2025 in order to conform the classification with the current period presentation.

Total Oil and Gas sub-category revenues were unchanged in total in each quarterly period and for the full year ended December 31, 2024 and for the quarter ended March 31, 2025.

The table below presents the reclassified balances for each quarterly period in the prior year and the first quarter of 2025.

2024 Quarterly Revenues

Three months ended March 31, Three months ended June 30, Three months ended September 30, Three months ended December 31,

Oil and Gas Revenue by sub-category

Upstream $ 39,514 $ 41,013 $ 40,756 $ 36,753

Midstream 18,533 20,786 20,790 20,033

Downstream 55,118 47,457 37,957 40,212

Total $ 113,165 $ 109,256 $ 99,503 $ 96,998

2025 Quarterly Revenues

Three months ended March 31,

Oil and Gas Revenue by sub-category

Upstream $ 36,820

Midstream 15,341

Downstream 44,403

Total $ 96,564

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Oil and Gas Revenue by sub-category

Upstream $ 38,180 $ 41,013 $ 75,000 $ 80,527

Midstream 18,575 20,786 33,916 39,319

Downstream 46,061 47,457 90,464 102,575

Total $ 102,816 $ 109,256 $ 199,380 $ 222,421

Oil and gas upstream customer revenue decreased approximately $5.5 million, or 7%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, and $2.8 million, or 7%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, due primarily to market share losses and decreased exploration activity as compared to the prior year comparable period.

Midstream customer revenues decreased approximately $5.4 million, or 14%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, and $2.2 million, or 11%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, due to decreased pipe inspection services as compared to the prior year comparable period.

Downstream customer revenue decreased $12.1 million, or 12%, for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, and $1.4 million, or 3%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, primarily due to decreased customer turnarounds in the current year that were delayed in the prior year comparable period.

In the three months ended September 30, 2025, total revenue increased 7.0% versus the prior year comparable period due predominantly to a mid-single-digit organic increase driven by increases in the Oil and Gas and Power Generation markets.

North America segment revenue increased 7.2%, driven predominantly by increases in the Oil and Gas and Power Generation markets as a result of strong turnaround activity and market demand.

International segment revenue increased 5.5%, due predominantly to a mid-single-digit favorable impact of foreign exchange rates.

Products and Systems segment revenue increase by 23.2%, due to increased sales volume and shipments as compared to the prior year comparable period.

Oil and gas customer revenue comprised approximately 54% of total revenue for the three months ended September 30, 2025 and 2024, respectively.

Aerospace and defense customer revenue comprised approximately 12% of total revenue for the three months ended September 30, 2025 and 2024, respectively.

The Company’s top ten customers comprised approximately 36% of total revenue for the three months ended September 30, 2025, as compared to 35% for the three months ended September 30, 2024, with no customer accounting for 10% or more of total revenue in either three-month period.

In the nine months ended September 30, 2025, total revenue decreased 2.6% versus the prior year comparable period due predominantly to a low single-digit organic decrease.

North America segment revenue decreased 4.2%, driven predominantly by a decrease in our Oil and Gas market revenue due to multiple macroeconomic and geopolitical forces which slowed global oil demand growth and consequently, the demand for inspection services from Oil and Gas market customers.

International segment revenue increased 6.8%, due predominantly to low single-digit organic growth and low single-digit favorable impact of foreign exchange rates.

Products and Systems segment revenue was flat as compared to the prior year comparable period.

Oil and gas customer revenue comprised approximately 56% and 58% of total revenue for the nine months ended September 30, 2025 and 2024, respectively.

Aerospace and defense customer revenue comprised approximately 13% and 12% of total revenue for the nine months ended September 30, 2025 and 2024, respectively.

The Company’s top ten customers comprised approximately 36% of total revenue for the nine months ended September 30, 2025 and 2024, respectively, with no customer accounting for 10% or more of total revenue in either nine-month period.

Mistras Group, Inc.

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Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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Field Services $ 125,873 $ 127,246 $ 359,532 $ 388,129

Shop Laboratories 15,682 16,938 30,711 34,133

Laboratories 16,838 15,014 47,549 49,147

Data Analytical Solutions 19,600 17,876 51,911 51,757

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

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

Field Services revenue decreased by $11.0 million for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024 and decreased by $27.2 million for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, primarily due to decreases in sales volume in our oil and gas, industrials and infrastructure, research and engineering end markets within our North America segment and oil and gas end market within our International segment.

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

Shop Laboratory revenue decreased by $1.3 million for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024 and decreased by $3.4 million for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, primarily due to decreased sales volumes in our aerospace and defense end market in our North America and International segments.

Data Analytical Solutions revenue is comprised of revenue derived from data software sales & subscriptions, implementation services and analytics which offer insights and generate value from asset protection.

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

Field Services revenue decreased by $1.4 million for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 and decreased by $28.6 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to decreases in sales volume in our oil and gas, industrials and infrastructure, and research and engineering end markets within our North America segment and our oil and gas end market within our International segment.

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

Laboratory revenue increased by $1.8 million for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 primarily due to increased sales volumes in our aerospace and defense end market in our North America segment.

Laboratory revenue decreased by $1.6 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to lower volumes in our laboratory testing inspection services as compared to the prior year comparable period.

Data Analytical Solutions revenue is comprised of revenue derived from data software licenses and subscriptions, implementation services and analytics which offer insights and generate value from asset protection.

Data Analytical Solutions revenue is derived from work performed by our employees in our facilities, or at customer locations.

Data Analytical Solutions revenue remained flat for the three months ended June 30, 2025 as compared to the prior year comparable period.

Data Analytical Solutions revenue decreased by $1.6 million for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, primarily due to decreased sales volume within PCMS and other Data Analytical Solutions offerings within our North America segment.

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

Other revenue increased by $7.9 million for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024 and increased by $5.0 million for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024, primarily due to increased sales within the defense sector within the North America segment.

Data Analytical Solutions revenue increased by $1.7 million for the three months ended September 30, 2025 as compared to the prior year comparable period, and increased by $0.2 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to increased sales volume within PCMS and other Data Analytical Solutions offerings within our North America segment.

Other revenue is comprised of locations that perform both asset inspection services and testing of components and materials at our laboratories.

Other revenue increased by $10.7 million for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 and increased by $15.7 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to increased sales within our mixed service offering facilities.

Gross profit, which reflects the reclassification of certain overhead and personnel costs from selling, general and administrative

expenses to cost of revenue (see Note 1 - Description of Business and Basis of Presentation), increased by $2.6 million, or 5.1%, in the three months ended June 30, 2025 versus the prior year comparable period primarily due to an improved business mix and operating efficiencies .

expenses to cost of revenue (see Note 1 - Description of Business and Basis of Presentation), increased by $9.3 million, or 19.0%, in the three months ended September 30, 2025 versus the prior year comparable period primarily due to an improved business mix and operating efficiencies .

Gross profit by segment for the three and nine months ended September 30, 2025 and 2024 was as follows:

Mistras Group, Inc.

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Gross profit by segment for the three and six months ended June 30, 2025 and 2024 was as follows:

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

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

2025 2024 2025 2024

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% of total revenue 29.8 % 26.8 % 28.2 % 26.3 %

(1) As noted in Note 1, 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 Consolidated Statements of Income (Loss).

This voluntary change in classification of certain overhead and employee 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 impact on gross profit of this change in classification for the year ended December 31, 2024 was approximately $20.9 million.

Gross profit margin was 29.1% and 27.1% for the three-month periods ended June 30, 2025 and 2024, respectively.

Gross profit margin for the North America segment increased by 1.8% during the three months ended June 30, 2025 as compared to the prior year comparable period primarily due to an improved business mix and operating efficiencies.

International segment realized a 2.5% increase in gross profit margin to 31.4% during the three months ended June 30, 2025 as compared to the prior year comparable period primarily due to a favorable sales mix in the current year period.

Products and Systems segment gross margin had an increase of 2.7% in gross profit margin to 48.8% during the three months ended June 30, 2025 primarily due to a favorable sales mix as compared to the prior period.

Gross profit margin was 27.3% and 26.1% for the six-month periods ended June 30, 2025 and 2024, respectively.

Gross profit margin for the North America segment realized a 1.0% increase in gross profit margin to 25.5% during the six months ended June 30, 2025 as compared to the prior year comparable period primarily due to a favorable sales mix and operating efficiencies.

International segment realized a 1.0% increase in gross profit margin to 29.5% during the six months ended June 30, 2025 as compared to the prior year comparable period primarily due to a favorable sales mix.

Products and Systems segment gross margin had an increase of 4.7% in gross profit margin to 50.8% during the six months ended June 30, 2025 primarily due to a favorable sales mix as compared to the prior period.

Gross profit margin was 29.8% and 26.8% for the three-month periods ended September 30, 2025 and 2024, respectively.

Gross profit margin for the North America segment increased by 3.3% for the three months ended September 30, 2025 as compared to the prior year comparable period primarily due to an improved business mix and operating efficiencies.

International segment realized a 2.1% increase in gross profit margin to 31.5% for the three months ended September 30, 2025 as compared to the prior year comparable period primarily due to a favorable sales mix in the current year period.

Products and Systems segment gross margin had a decrease of 0.7% to 54.3% for the three months ended September 30, 2025 primarily due to a less favorable sales mix as compared to the prior period.

Gross profit margin was 28.2% and 26.3% for the nine-month periods ended September 30, 2025 and 2024, respectively.

Gross profit margin for the North America segment realized a 1.8% increase in gross profit margin to 26.4% for the nine months ended September 30, 2025 as compared to the prior year comparable period primarily due to a favorable sales mix and operating efficiencies.

International segment realized a 1.4% increase in gross profit margin to 30.2% for the nine months ended September 30, 2025 as compared to the prior year comparable period primarily due to a favorable sales mix.

Products and Systems segment gross margin had an increase of 3.2% to 52.2% for the nine months ended September 30, 2025 primarily due to a favorable sales mix as compared to the prior period.

Mistras Group, Inc.

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Operating Expenses

Operating expenses for the three and six months ended June 30, 2025 and 2024 was as follows:

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

Operating expenses for the three and nine months ended September 30, 2025 and 2024 was as follows:

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

2025 2024 2025 2024

($ in thousands)

Operating Expenses

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$ 37,812 $ 37,047 $ 125,233 $ 117,029

% of total revenue 24.6 % 20.8 % 25.2 % 21.4 %

Operating expenses increased $6.1 million, or 15.6%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Selling, general and administrative expenses increased $3.6 million during the three months ended June 30, 2025 compared to the three months ended June 30, 2024, due to adverse foreign exchange impact, partially offset by ongoing cost containment activities.

Operating expenses increased $0.8 million, or 2.1%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

Selling, general and administrative expenses increased $0.3 million during the three months ended September 30, 2025 compared to the three months ended September 30, 2024, due to strategic investments in our operations, partially offset by ongoing cost management activities.

As discussed in Note 1 - Description of Business and Basis of Presentation, Selling, general and administrative expenses reflect the classification change for certain overhead and personnel costs from Selling, general and administrative expenses to Cost of revenue.

Environmental expense increased by $0.5 million as compared to the prior year comparable period due to environmental costs incurred during the three months ended June 30, 2025, which were not incurred during the prior year comparable period.

Reorganization and other costs increased by $2.4 million to $3.0 million as compared to the prior year comparable period due to continued calibration of the Company’s headcount and other related costs.

Depreciation and amortization decreased $0.4 million during the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Operating expenses increased $7.4 million, or 9%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Selling, general and administrative expenses increased $3.0 million during the six months ended June 30, 2025 compared to the six months ended June 30, 2024, due to an unfavorable foreign exchange impact as compared to the prior year comparable period, partially offset by continued cost discipline and our focus on the calibration of our overhead costs relative to revenue achieved.

Environmental expense increased by $0.2 million as compared to the prior year comparable period due to environmental costs incurred during the three months ended September 30, 2025, which were not incurred during the prior year comparable period.

Reorganization and other costs decreased by $0.4 million to $1.8 million as compared to the prior year comparable period due to ongoing initiatives to reduce overhead costs.

Depreciation and amortization decreased by $0.2 million during the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

Operating expenses increased $8.2 million, or 7.0%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.

Selling, general and administrative expenses increased $3.3 million during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, due to an unfavorable foreign exchange impact as compared to the prior year comparable period, partially offset by continued cost discipline and our focus on the calibration of our overhead costs relative to revenue achieved.

Environmental expense increased by $1.1 million as compared to the prior year comparable period due to environmental costs incurred during the six months ended June 30, 2025, which were not incurred during the prior year comparable period.

Reorganization and other costs increased by $4.0 million to $6.0 million as compared to the prior year comparable period due to continued calibration of the Company’s headcount and other related costs.

Depreciation and amortization decreased by $0.5 million during the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Environmental expense increased by $1.3 million as compared to the prior year comparable period due to environmental costs incurred during the nine months ended September 30, 2025, which were not incurred during the prior year comparable period.

Reorganization and other costs increased by $3.6 million to $7.8 million as compared to the prior year comparable period due to ongoing initiatives to reduce overhead costs, and incremental costs of other related actions.

Depreciation and amortization decreased by $0.7 million during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.

Mistras Group, Inc.

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The following table shows a reconciliation of the income from operations to income (loss) from operations before special items for each of our three segments, Corporate and Elimination and for the Company in total:

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

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

2025 2024 2025 2024

($ in thousands) ($ in thousands)

North America:

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See section Note About Non-GAAP Measures in this Quarterly Report for an explanation of the use of non-GAAP measurements.

For the three months ended June 30, 2025, income from operations (GAAP) decreased $3.5 million or 29.5%, compared with the three months ended June 30, 2024, while income from operations before special items (non-GAAP) decreased by $0.6 million, or 5.1%.

As a percentage of revenue, income from operations before special items decreased by 20 basis points to 6.4% in the three months ended June 30, 2025 compared to 6.6% in the three months ended June 30, 2024.

For the six months ended June 30, 2025, income from operations (GAAP) decreased $10.1 million or 58%, compared with the six months ended June 30, 2024, while income from operations before special items (non-GAAP) decreased by $5.1 million, or 26%.

As a percentage of revenue, income from operations before special items decreased by 110 basis points to 4.2% in the six months ended June 30, 2025 compared to 5.3% in the six months ended June 30, 2024.

For the three months ended September 30, 2025, income from operations (GAAP) increased $8.5 million or 71.9%, compared with the three months ended September 30, 2024, while income from operations before special items (non-GAAP) increased by $9.2 million, or 70.1%.

As a percentage of revenue, income from operations before special items increased by 420 basis points to 11.4% in the three months ended September 30, 2025 compared to 7.2% in the three months ended September 30, 2024.

For the nine months ended September 30, 2025, income from operations (GAAP) decreased $1.6 million or 5.3%, compared with the nine months ended September 30, 2024, while income from operations before special items (non-GAAP) increased by $4.1 million, or 12.4%.

As a percentage of revenue, income from operations before special items increased by 90 basis points to 6.8% in the nine months ended September 30, 2025 compared to 5.9% in the nine months ended September 30, 2024.

Mistras Group, Inc.

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Interest Expense

Interest expense was approximately $4.2 million and $4.4 million for the three months ended June 30, 2025 and 2024, respectively.

This decrease of $0.2 million in interest expense was a result of lower debt balances during the three months ended June 30, 2025 in comparison to the prior year comparable period.

Interest expense was approximately $7.6 million and $8.8 million for the six months ended June 30, 2025 and 2024, respectively.

This decrease of $1.2 million in interest expense was a result of lower debt balances during the six months ended June 30, 2025 in comparison to the prior year comparable period.

Our effective income tax rate was approximately 25.4% and 15.5% for the three months ended June 30, 2025 and 2024, respectively.

Our effective income tax rate was approximately 71.4% and 14.9% for the six months ended June 30, 2025 and 2024, respectively.

The effective income tax rate for the three months ended June 30, 2025, was higher than the statutory rate primarily due to the impact of a favorable discrete item related to stock compensation.

The effective income tax rate for the three months ended June 30, 2024 was lower than the statutory rate primarily due to the impact of a favorable discrete item related to stock compensation.

The effective income tax rate for the six months ended June 30, 2025, was higher than the statutory rate primarily due to the impact of a favorable discrete item related to stock compensation.

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

Interest expense was approximately $3.4 million and $4.3 million for the three months ended September 30, 2025 and 2024, respectively.

This decrease of $0.9 million in interest expense was a result of lower interest rates during the three months ended September 30, 2025 in comparison to the prior year comparable period.

Interest expense was approximately $10.9 million and $13.1 million for the nine months ended September 30, 2025 and 2024, respectively.

This decrease of $2.2 million in interest expense was a result of lower interest rates during the nine months ended September 30, 2025 in comparison to the prior year comparable period.

Our effective income tax rate was approximately 22.3% and 29.0% for the three months ended September 30, 2025 and 2024, respectively.

Our effective income tax rate was approximately 21.9% and 22.1% for the nine months ended September 30, 2025 and 2024, respectively.

The effective income tax rate for the three months ended September 30, 2025, was higher than the statutory rate primarily due to the impact of foreign currency losses.

The effective income tax rate for the three months ended June 30, 2024 was higher than the statutory rate primarily due to the impact of an unfavorable discrete item related to stock compensation.

The effective income tax rate for the nine months ended September 30, 2025, was higher than the statutory rate primarily due to the impact of foreign currency losses.

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

Income tax expense varies as a function of pre-tax income and the level of non-deductible expenses, such as certain amounts of meals and entertainment expense, valuation allowances, and other permanent differences.

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On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), was enacted, which includes a broad range of tax reform provisions.

We are currently evaluating the impact of the OBBBA.

These tax reform provisions include the extension and modification of certain provisions of the Tax Cuts and Jobs Act.

Effective for calendar year 2025.

The changes include, but are not limited to, immediate expensing of domestic research and development expenditure, the restoration of 100% bonus depreciation, and an EBITDA-based interest expense limitation.

These provisions did not have a material impact on the Company’s financial statements for the nine months ended September 30, 2025.

Liquidity and Capital Resources

Cash flows are summarized in the table below:

Six months ended June 30,

Nine months ended September 30,

Net cash (used in) provided by:

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Cash Flows from Operating Activities

During the six months ended June 30, 2025, cash used in operating activities was $3.6 million, representing a year-on-year decrease of $8.7 million, or 171%.

During the nine months ended September 30, 2025, cash provided by operating activities was $0.8 million, representing a year-over-year decrease of $23.6 million, or 97%.

This decrease was primarily attributable to an increase in days sales outstanding and movements in working capital, as compared to the prior year comparable period.

Specifically, during the second quarter of 2025, we had a buildup in unbilled accounts receivable and a delay in invoicing related to our conversion to a new enterprise resource planning (“ERP”) system effective as of April 1, 2025.

Although unbilled and billed accounts receivable balances

Mistras Group, Inc.

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(tabular dollars are in thousands)

increased during the period ended June 30, 2025 related to the ERP implementation, we expect a reduction in these balances over the remainder of the year.

Cash Flows from Investing Activities

During the six months ended June 30, 2025, cash used in investing activities was $11.4 million, representing a $0.2 million increase compared to the prior year comparable period, primarily attributable to increased expenditures for property, plant, and equipment.

During the nine months ended September 30, 2025, cash used in investing activities was $19.0 million, representing a $1.8 million increase compared to the prior year comparable period, primarily attributable to increased expenditures for property, plant, and equipment.

Cash Flows from Financing Activities

Net cash provided by financing activities was $14.9 million for the six months ended June 30, 2025, compared to net cash provided by financing activities of $5.3 million for the six months ended June 30, 2024.

During the six months ended June 30, 2025, net borrowings of debt were approximately $9.8 million higher than compared to the prior year comparable period resulting in net debt borrowings during the period.

The increase in net cash provided by financing activities is partially offset by $0.2 million more in taxes paid related to net share settlement of share-based awards during the six months ended June 30, 2025.

Net cash provided by financing activities was $26.2 million for the nine months ended September 30, 2025, compared to net cash used in financing activities of $6.2 million for the nine months ended September 30, 2024.

During the nine months ended September 30, 2025, net borrowings of debt were approximately $32.7 million higher than the prior year comparable period resulting in net debt borrowings during the period.

The increase in net cash provided by financing activities is partially offset by $0.2 million more in taxes paid related to net share settlement of share-based awards during the nine months ended September 30, 2025.

Effect of Exchange Rate Changes on Cash and Cash Equivalents

The effect of exchange rate changes on our cash and cash equivalents was an increase of $1.8 million in the six months ended June 30, 2025, compared to an increase of $0.4 million for the six months ended June 30, 2024.

The effect of exchange rate changes on our cash and cash equivalents was an increase of $1.4 million in the nine months ended September 30, 2025, compared to an increase of $1.6 million for the nine months ended September 30, 2024.

Cash Balance and Credit Facility Borrowings

As of June 30, 2025, we had cash and cash equivalents totaling $20.0 million and $102.6 million of unused commitments under our Credit Agreement with borrowings of $187.2 million and $3.1 million of letters of credit outstanding.

As of September 30, 2025, we had cash and cash equivalents totaling $27.8 million and $86.4 million of unused commitments under our Credit Agreement with borrowings of $200.1 million and $3.4 million of letters of credit outstanding.

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

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

As of June 30, 2025, we were in compliance with the terms of the Credit Agreement and will continuously monitor our compliance with the covenants contained in the Credit Agreement.

As of September 30, 2025, we were in compliance with the terms of the Credit Agreement and will continuously monitor our compliance with the covenants contained in the Credit Agreement.

The 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 terms of our Credit Agreement are described in Note 11 - Long-Term Debt of the Notes to the Unaudited Condensed Consolidated Financial Statements, under the heading " Senior Credit Facility ".

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Off-balance Sheet Arrangements

During the six months ended June 30, 2025, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

During the nine months ended September 30, 2025, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis