What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-11 compared with 2025-03-11 · 94 added, 136 removed, 256 unchanged (47% of the section changed)

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

Other Updates

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

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

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

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

We will continue to monitor market conditions and respond accordingly.

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

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

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

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

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

Mistras Group, Inc., together with its subsidiaries (the "Company"), is a global leader in technology-enabled industrial asset integrity and laboratory testing 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 customers by integrating asset integrity protection throughout supply chains and centralizing integrity data through a suite of Industrial Internet of Things ("IoT")-connected software and monitoring solutions, including OneSuite®, which serves as a cloud-based ecosystem that pulls together the Company’s software and data services capabilities.

This integrated approach enables customers to make data-driven decisions that improve asset reliability, enhance safety, reduce operational risk, and optimize performance across the asset lifecycle.

The Company’s core capabilities include NDT field inspections enhanced by advanced robotics, laboratory quality control, laboratory materials services, in-house laboratory 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:

North America (which we previously referred to as our Services segment), International, and Products and Systems.

• North America provides asset protection solutions with the largest concentration in the United States, followed by Canada, consisting primarily of NDT, inspection, mechanical and engineering services that are used to evaluate the structural integrity and reliability of critical energy, industrial and public infrastructure and commercial aerospace components.

A majority of data analytical solutions revenues are generated by this segment.

North America, International, and Products and Systems.

• North America 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 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.

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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 across oil and gas, aerospace and defense, industrial, power generation and transmission (including alternative and renewable energy), infrastructure, research and engineering, petrochemical, and other process 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 level of business and financial results are impacted by world-wide macro- and micro-economic conditions generally, as well as those within our target markets.

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

For example, ongoing geopolitical conflicts, including the war between Russia and Ukraine, the unrest in the Middle East, including the recent conflict between the U.S.

and Iran, and recent intervention in Venezuela continue to contribute to global energy market volatility, supply chain disruption, and economic uncertainty that could affect certain of our end markets, particularly oil and gas customers.

Among other things, we expect the timing of our oil and gas customers inspection spend to be impacted by volatility in oil prices resulting from these factors.

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

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2025 Developments

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

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

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

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

Our cash position and liquidity remain strong.

As of December 31, 2024, our cash and cash equivalents balance was approximately $18.3 million and our Credit Agreement provides us with significant liquidity.

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

Any legislation or regulations that may be adopted to implement these measures may negatively impact our customers in the oil and gas market over the long-term, which presently is our largest market, although this initiative will likely benefit the

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

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

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

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

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

Refer to Item 1A.

Risk Factors in Part I of our 2024 Annual Report.

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

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

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

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

Vahaviolos, our founder and Chairman Emeritus.

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

Smith as our Executive Vice President and President of Services.

As of December 31, 2025, our cash and cash equivalents balance was approximately $28.0 million, and we had available borrowing capacity of up to $107.4 million under the revolving credit facility under our Credit Agreement.

As discussed in Note 1 - Summary of Significant Accounting Policies and Practices , we changed the presentation of certain costs incurred at our operational labs as well as for certain lab personnel on our 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 selling, general and administrative expenses and 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 aligns with how our business is managed.

We continue to monitor the impact that tariffs and 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.

Continued uncertainty surrounding such tariffs and trade barriers may have a material adverse effect on global economic conditions, inflation and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States.

Such uncertainty limits our ability to anticipate, plan for, or effectively mitigate the adverse impacts of such measures on our operations and supply chain costs.

The tariffs have not had

a material effect on our business or results of operations 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.

During 2025, the price of crude oil declined due to various macroeconomic and geopolitical factors.

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.

More recently, geopolitical tensions in the Middle East, including the conflict involving the United States and Iran, have contributed to increased volatility in global oil markets.

Fluctuations in crude oil prices may influence the spending decisions of our oil and gas customers and could affect demand for our field-related services.

On September 15, 2025, Eileen Coggins joined Mistras as Executive Vice President and Chief Legal Officer and assumed the role of General Counsel and Secretary as of November 15, 2025.

Note about Non-GAAP Measures

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

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

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

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

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Year ended December 31, 2024

The following table summarizes our Consolidated Statements of Income (Loss) for the years ended December 31, 2024 and 2023:

The following table summarizes our Consolidated Statements of Income for the years ended December 31, 2025 and 2024:

For the year ended December 31,

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Gross profit as a % of Revenue 28.2 % 26.3 %

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

Income from operations 40,572 39,826

Income from operations as a % of Revenue 5.6 % 5.5 %

Income (loss) before provision for income taxes 24,244 (18,665)

Net income (loss) 18,970 (17,445)

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

Income before provision for income taxes 22,478 24,244

Net income 16,921 18,970

Net income attributable to Mistras Group, Inc.

$ 16,837 $ 18,958

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$ 724,024 $ 729,640

Revenue was $729.6 million for the year ended December 31, 2024, an increase of $24.2 million, or 3.4%, compared with the year ended December 31, 2023.

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

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

Revenue was $724.0 million for the year ended December 31, 2025, a decrease of $5.6 million, or 0.8%, compared with the year ended December 31, 2024.

The decrease was driven by the North America segment, which experienced a revenue decrease of $9.4 million, or 1.6%, driven by a low single-digit organic decrease in certain end markets.

The International segment revenue increased by $7.9 million, or 5.8%, due predominantly to a low single-digit organic growth and by a low single-digit favorable impact of foreign exchange rates.

The Products and Systems segment increased by $0.3 million, or 2.3%, driven by higher sales volume.

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Our top ten customers comprised approximately 36% of total revenue for the years ended December 31, 2025 and 2024, with no customer accounting for 10% or more of total revenue in either period.

For the year ended December 31,

($ in thousands)

Oil and Gas Revenue by sub-category

Upstream $ 167,741 $ 157,828

Midstream 88,630 101,278

Downstream 162,552 156,889

Total $ 418,923 $ 415,995

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

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

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

The following table presents revenue by type, explained directly below the table.

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Field Services $ 475,577 $ 502,810

Shop Laboratories 64,564 58,188

Laboratories 72,398 64,564

Data Analytical Solutions 67,800 69,152

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

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

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

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

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

Field Services revenue decreased $27.2 million, or 5.4%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024.

The decrease was primarily due to decreases in sales volume in our oil and gas, other process industries, infrastructure and research and engineering, and petrochemical end markets within our North America segment and our oil and gas end market within our International segment.

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

Laboratories revenue increased $7.8 million, or 12.1%, for the year ended December 31, 2025 as compared to the

twelve months ended year ended December 31, 2024.

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

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

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

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

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

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

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

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

Data Analytical Solutions revenue decreased $1.4 million, or 2.0%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024.

The decrease was due primarily 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 our in-house laboratories.

Other revenue increased $15.1 million, or 16.2%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024.

Other revenue for the year ended December 31, 2025 increased primarily due to increased sales volume within our mixed service offering facilities as compared to the prior year period.

Gross profit by segment for the years ended December 31, 2025 and 2024 were as follows:

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% of total revenue 28.2 % 26.3 %

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

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

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

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

Gross profit increased $12.3 million, or 6.4%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

Gross profit margin was 28.2% and 26.3% for the years ended December 31, 2025 and 2024, respectively, with the increase in 2025 due to a favorable sales mix .

North America segment gross profit margin had a year-on-year increase of 190 basis points to 26.5% for the year ended December 31, 2025, due primarily to a favorable sales mix.

International segment gross margins had a year-on-year increase of 130 basis points to 30.0% for the year ended December 31, 2025, due primarily to increased revenues and a favorable sales mix.

Products and Systems segment gross margins increased by 170 basis points for the year ended December 31, 2025 to 52.9%, driven by favorable sales mix.

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Selling, general and administrative expenses $ 139,876 $ 135,452

Goodwill impairment charges — 13,799

Reorganization and other costs 12,654 5,517

Environmental expense 1,743 1,660

Legal settlement and insurance recoveries, net — (808)

Research and engineering 1,028 1,119

Depreciation and Amortization 8,638 9,407

Acquisition-related expense, net 2 9

Legal settlement and litigation charges (benefit), net (808) 1,058

$ 173,283 $ 205,711

% of total revenue 23.7 % 29.2 %

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

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

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

Total $ 163,939 $ 152,347

Operating expenses increased by $11.6 million, or 7.6%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

Selling, general and administrative expenses increased by $4.4 million, or 3.3%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to strategic investments in our operations.

As discussed in Note 1 - Summary of Significant Accounting Policies and Practices, 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.

Reorganization and other costs increased by $7.1 million to $12.7 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024 due to ongoing initiatives to reduce overhead costs, and incremental costs of other related actions.

Environmental expense increased by $0.1 million to $1.7 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024 due to the ongoing remediation efforts related to the Mistras Arizona claim discussed in Note 17 - Commitments and Contingencies .

Legal settlement and insurance recoveries, net decreased by $0.8 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024 due to an insurance settlement, that occurred during the year ended December 31, 2024.

Research and engineering expenses decreased by $0.1 million to $1.0 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024.

Depreciation and amortization decreased by $0.8 million to $8.6 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024.

Income (Loss) from Operations

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Reorganization and other costs 4,287 2,046

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

Legal settlement and insurance recoveries, net — (808)

Income before special items (non-GAAP) $ 67,075 $ 63,524

International:

Income (loss) from operations (GAAP) $ 6,275 $ (12,229)

Goodwill Impairment charges — 13,799

Income from operations (GAAP) $ 10,353 $ 6,275

Reorganization and other costs 1,590 1,086

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Reorganization and other costs 6,421 2,201

Acquisition-related expense, net 2 9

Loss before special items (non-GAAP) $ (27,056) $ (27,384)

Total Company:

Income (loss) from operations (GAAP) $ 39,826 $ (1,904)

Goodwill Impairment charges — 13,799

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

Income from operations (GAAP) $ 40,572 $ 39,826

Legal settlement and insurance recoveries, net — (808)

Environmental expense 1,743 1,660

Reorganization and other costs 12,654 5,517

Acquisition-related expense, net 2 9

Income before special items (non-GAAP) $ 54,969 $ 46,195

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

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

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

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

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

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

Total Company income from operations (GAAP) increased by $0.7 million, or 1.9%, for the year ended December 31, 2025 compared to the year ended December 31, 2024.

Total company income before special items (non-GAAP) increased by $8.8 million or 19.0% for year ended December 31, 2025 as compared to the year ended December 31, 2024.

Operating expenses, excluding special items (non-GAAP), as a percentage of revenue, was 20.7% for the year ended December 31, 2025 compared to 20.0% for the year ended December 31, 2024.

The primary driver for the increase in Total Company income before special items was increased gross profit margins on sales in 2025 compared to 2024 and ongoing initiatives to reduce overhead costs.

We incurred environmental expense for the years ended December 31, 2025 and 2024 related to the DEQ Proceeding (as defined herein).

See Note 17 - Commitments and Contingencies, Legal Proceedings and Government Investigations, for additional detail.

Total Company income before special items as a percentage of revenue increased by 130 basis points to 7.6% for the year ended December 31, 2025, from 6.3% for the year ended December 31, 2024.

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

Refer to Item 1A.

Risk Factors in Part I of this Annual Report for further discussion.

Interest Expense

Interest expense was $14.6 million and $17.1 million for the years ended December 31, 2025 and December 31, 2024, respectively.

The increase was due to increased interest rates in the current period.

The decrease was due to lower interest rates in the current period as compared to the prior year, effectively offsetting higher average borrowings for the year ended December 31, 2025 as compared to the year ended December 31, 2024.

Our effective income tax rate was approximately 24.7% for the year ended December 31, 2025, compared to 21.8% for the year ended December 31, 2024.

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

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

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

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

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

The Inflation Act contains a variety of tax provisions, including a 15% corporate minimum tax, a tax on stock repurchases, and various tax credit opportunities.

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

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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Our effective income tax rate may fluctuate over the next few years due to many variables including the amount and future geographic distribution of our pre-tax income, changes resulting from our acquisition strategy, and increases or decreases in our permanent differences.

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.

These tax reform provisions include the extension and modification of certain provisions of the Tax Cuts and Jobs Act and is 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 year ended December 31, 2025.

Liquidity and Capital Resources

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

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

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

We generated operating cash flows of $33.0 million and $50.1 million for the years ended December 31, 2025 and 2024, respectively.

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Cash Flows from Operating Activities

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

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

Cash provided by operating activities for the year ended December 31, 2025 was $33.0 million, a decrease of $17.1 million from the prior year period.

The decrease was mainly attributable to an increase in accounts receivable, net, in the current year as compared to the prior year.

Cash Flows from Investing Activities

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

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

Net cash used in investing activities for the year ended December 31, 2025 was $25.1 million, an increase of $3.8 million used in investing activities from the prior year period.

The Company used $6.2 million more cash for purchases of property, plant and equipment and intangible assets in 2025 compared to 2024, partially offset by an increase in proceeds received from the sale of equipment.

Cash Flows from Financing Activities

Net cash used in financing activities for the year ended December 31, 2025 was $0.6 million, compared to $27.4 million for the year ended December 31, 2024.

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

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

Net repayment of our revolving credit facility and term loan was approximately $28.3 million lower in 2025 compared to 2024.

In addition, for the year ended December 31, 2025, we incurred approximate ly $0.4 million more in taxes paid related to net share settlement of share-based awards than the prior period.

Effect of Exchange Rate Changes on Cash and Cash Equivalents

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

The effect of exchange rate changes on our cash and cash equivalents was an increase of $2.4 million for the year ended December 31, 2025, compared to a decrease of $0.7 million for the year ended December 31, 2024.

The primary driver of the change was foreign currency fluctuations during the year ended December 31, 2025 related to the Euro and the US Dollar.

Cash Balance and Credit Facility Borrowings

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

As of December 31, 2025, we had cash and cash equivalents totaling $28.0 million and available borrowing capacity of up to $107.4 million under the revolving credit facility under our Credit Agreement.

Borrowings of $176.0 million and letters of credit of $3.4 million were outstanding under the Credit Agreement at December 31, 2025.

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

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

credit to support our operations.

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

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

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Sustained declines in our stock price and related market capitalization could impact key assumptions in the overall estimated fair values of our reporting units and could result in non-cash impairment charges that could be material to our consolidated balance sheet or results of operations.

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

impacting the International reporting units' operations.

As a result, the Company performed an interim quantitative goodwill impairment test.

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Under the income approach, the fair value for each of the reporting units was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate.

The Company used internal forecasts, updated for recent events, to estimate future cash flows estimated using a terminal value calculation, which incorporates historical and forecasted trends, including an estimate of long-term future growth rates, based on the Company’s most recent views of the long-term outlook for each reporting unit.

The internal forecasts include assumptions about future profitability, including the expected demand for the Company’s goods and services.

Due to the inherent uncertainties involved in making estimates and assumptions, actual results may differ from those assumed in the forecasts.

The Company derived the discount rates using a capital asset pricing model and analyzing published rates for industries relevant to the reporting units to estimate the cost of equity financing.

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

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

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

The selection of comparable businesses was based on the markets in which the reporting units operate, considering risk profiles, size, geography, and diversity of products and services.

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

Based upon the results of the interim quantitative goodwill impairment test, the Company recorded an impairment charge of $13.8 million within the International reporting unit during the third quarter of 2023.

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

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We elected to perform a quantitative assessment of goodwill on October 1, 2025.

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

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

the carrying values of our net assets.

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

Our quantitative assessment considered relevant events and circumstances occurring since our last quantitative goodwill impairment test performed as of October 1, 2024.

After considering all positive and negative evidence for the assessment as of October 1, 2025, we concluded that it was not more likely than not that our carrying values exceeded fair values and as such, no additional impairment was indicated.

Additionally, as of December 31, 2025, there are no indicators of an impairment.

See Note 7 - Goodwill of the notes to the consolidated financial statements for additional information.

We allocate the purchase price of acquired businesses to their identifiable tangible assets and liabilities as well as identifiable intangible assets, such as customer relationships, technology, non-compete agreements and trade names.

Allocations are based on estimated fair values of assets and liabilities, which reflects assumptions that would be made by typical market participants if they were to buy or sell each asset on an individual asset basis.

Certain estimates and judgments are required in the application of the fair value techniques, including estimates of the respective acquisitions' future performance and related cash flows, selection of a discount rate and economic lives, and use of Level 3 measurements as defined in ASC 820 Fair Value Measurements and Disclosure.

Deferred taxes are recorded for any differences between the assigned values and tax bases of assets and liabilities.

We typically engage third-party valuation experts to assist in determining the fair values for both identifiable tangible and intangible assets.

The judgments made in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, could materially impact our results of operations.

See Note 7-Acquisitions to the consolidated financial statements for additional information.

Recent Accounting Pronouncements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis