What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-07 compared with 2025-11-06 · 126 added, 143 removed, 156 unchanged (63% 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 nine months ended September 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 months ended March 31, 2026 and 2025.

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 2025 Annual Report.

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You are urged not to place undue reliance on any such forward-looking statements, any of which may turn out to be wrong due to inaccurate assumptions, various risks, uncertainties or other factors known and unknown.

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 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.

Factors that could cause or contribute to differences in results and outcomes from those in our forward-looking statements, including increases or changes in tariffs, trade restrictions or taxes;

supply chain disruptions resulting from geopolitical instabilities and disputes (including those related to the wars in the Middle East and Ukraine);

other impacts from the wars in the Middle East and Ukraine and related economic volatility and uncertainty resulting therefrom, include, without limitation, those discussed in the “Business—Forward-Looking Statements,” and “Risk Factors” sections of our 2025 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.

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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.

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.

Mistras Group, Inc.

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(tabular dollars are in thousands)

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 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 spend 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, 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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Our cash position and liquidity remains strong.

As of September 30, 2025, our cash balance was approximately $27.8 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.

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 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.

As of March 31, 2026, our cash and cash equivalents balance was approximately $25.0 million, and we had available borrowing capacity of up to $100.7 million under the revolving credit facility under our Credit Agreement.

The global trade landscape continues to be highly volatile.

In 2025, the U.S.

government implemented a series of trade tariffs on goods imported into the U.S.

from various countries.

In many cases, these tariffs resulted in reciprocal tariffs and other

Mistras Group, Inc.

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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.

actions on goods being exported from the U.S.

These associated tariffs are complex and continue to evolve as negotiations occur.

In February 2026, the U.S.

Supreme Court ruled that the International Emergency Economic Powers Act (“IEEPA”), which the U.S.

government relied on to impose certain tariffs, does not authorize the administration to impose tariffs.

On March 4, 2026, the U.S.

Court of International Trade ordered the U.S.

Customs and Border Protection (“CBP”) to process refunds of the IEEPA tariffs, although the Court immediately suspended the order while the CBP determines a refund process.

The IEEPA tariffs remain subject to ongoing litigation between the administration and other parties.

In response to the U.S.

Supreme Court ruling mentioned above, the administration announced plans to implement new tariffs under alternative statutory authority.

The full impact of the U.S.

Supreme Court’s ruling and the administration’s response, including the timing and extent of any refunds and the impact of the new tariffs, remain uncertain.

Tariffs and trade barriers have not had a material effect on our business or results of operations during 2026 to date.

However, new tariffs or trade measures could result in increased costs to us or our suppliers and could impact the import of materials by our customers, including materials subject to our inspection and testing services, which could adversely affect demand for our services.

Geopolitical tensions in the Middle East, including the conflict involving the United States and Iran, have contributed to increased volatility in global energy markets and broader macroeconomic uncertainty.

The conflict in the Middle East has significantly reduced the export of oil and natural gas from the Persian Gulf, creating upward pressure on oil and natural gas prices, and has also disrupted and increased the costs of certain other supplies.

Fluctuations in crude oil and natural gas prices may influence capital spending and maintenance activity by customers in the oil and gas sector, which could affect demand for certain of our services, particularly field inspection and asset integrity solutions.

Additionally, continued instability in the region could contribute to supply chain disruptions, changes in foreign currency exchange rates, and delays in customer projects.

While we have not experienced material impacts to date, the situation remains dynamic, and we continue to monitor developments and assess potential impacts on our operations, financial condition, and results of operations.

Note About Non-GAAP Measures

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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.

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, and (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.

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.

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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 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

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

Gross profit 58,193 48,905 153,030 146,397

Gross profit as a % of Revenue 29.8 % 26.8 % 28.2 % 26.3 %

Income from operations 20,381 11,858 27,797 29,368

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

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

Mistras Group, Inc.

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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,

Results of Operations

Condensed consolidated results of operations for the three months ended March 31, 2026 and 2025 were as follows:

Three Months Ended March 31,

Revenue $ 169,034 $ 161,615

Gross profit 44,732 40,892

Gross profit as a % of Revenue 26.5 % 25.3 %

Income (loss) from operations 4,682 (1,012)

Income (loss) from operations as a % of Revenue 2.8 % (0.6) %

Income (loss) before provision for income taxes 2,735 (4,336)

Net income (loss) 2,357 (3,168)

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

$ 2,388 $ (3,186)

Revenue was $169.0 million for the three months ended March 31, 2026, an increase of $7.4 million, or 4.6%, compared with the three months ended March 31, 2025.

Revenue by segment for the three months ended March 31, 2026 and 2025 were as follows:

Three months ended March 31,

North America $ 135,321 $ 128,902

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Total $ 169,034 $ 161,615

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.

In the three months ended March 31, 2026, total revenue increased 4.6% versus the prior year comparable period due predominantly to a low-single-digit organic increase driven by increases in the aerospace and defense, power generation and transmission, infrastructure, research, and engineering, and petrochemical end markets.

North America segment revenue increased 5.0%, driven predominantly by increases in the aerospace and defense, power generation and transmission, infrastructure, research, and engineering and petrochemical end markets as a result of strong market demand.

International segment revenue increased 9.3%, due predominantly to a low-double-digit favorable impact of foreign exchange rates.

Products and Systems segment revenue decreased by 14.2%, due to decreased sales volume and shipments as compared to the prior year comparable period.

Oil and gas customer revenue comprised approximately 51% and 60% of total revenue for the three months ended March 31, 2026 and 2025, respectively.

Aerospace and defense customer revenue comprised approximately 16% and 13% of total revenue for the three months ended March 31, 2026 and 2025, respectively.

The Company’s top ten customers comprised approximately 36% of total revenue for the three months ended March 31, 2026, as compared to 37% for the three months ended March 31, 2025, with no customer accounting for 10% or more of total revenue in either three-month period.

The Company has retrospectively reclassified certain revenue types for each quarterly period in 2025 in order to conform the classification with the current period presentation.

The table below presents the reclassified balances for each quarterly period for the year ended December 31, 2025.

Mistras Group, Inc.

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

2025 2024 2025 2024

2025 Quarterly Revenues

Three months ended March 31, 2025 Three months ended June 30, 2025 Three months ended September 30, 2025 Three months ended December 31, 2025

Revenue by type

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

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

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

Other 33,238 22,558 83,577 67,876

Integrated Field Solutions $ 139,115 $ 158,386 $ 166,578 $ 155,678

In-Laboratory Services 22,500 27,019 28,971 25,777

Total $ 161,615 $ 185,405 $ 195,549 $ 181,455

Three Months Ended March 31,

Revenue by type

Integrated Field Solutions $ 139,861 $ 139,115

In-Laboratory Services 29,173 $ 22,500

Total $ 169,034 $ 161,615

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

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

Field Services 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 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 $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:

Integrated Field Solutions revenue is comprised of revenue derived from on-site asset inspection, maintenance, and related technical services performed by our technicians at customer locations, as well as data-driven solutions, including software, analytics, and implementation services that provide insights and recommendations to enhance asset integrity and performance.

Integrated Field Solutions revenue increased by $0.7 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to increases in our power generation and transmission, infrastructure, research, and engineering and petrochemical end markets as a result of strong market demand, partially offset by decreases in sales volume in our oil and gas end market within our North America and International segments.

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

In-Laboratory Services revenue increased by $6.7 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to increased sales volumes in our aerospace and defense end market in our North America segment.

Gross profit increased by $3.8 million, or 9.4%, in the three months ended March 31, 2026 versus the prior year comparable period, primarily due to an improved and diversified business mix and operating efficiencies .

Gross profit by segment for the three months ended March 31, 2026 and 2025 was as follows:

Mistras Group, Inc.

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

2025 2024 2025 2024

Gross profit (1)

Mistras Group, Inc.

and Subsidiaries

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

(tabular dollars are in thousands)

Three months ended March 31,

North America $ 33,536 $ 30,165

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% of total revenue 26.5 % 25.3 %

(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 Unaudited Condensed Consolidated Statements of Income.

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 29.8% 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.

and Subsidiaries

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

(tabular dollars are in thousands)

Gross profit margin was 26.5% and 25.3% for the three months ended March 31, 2026 and 2025, respectively.

Gross profit margin for the North America segment increased by 1.4% for the three months ended March 31, 2026 as compared to the prior year comparable period primarily due to an improved and diversified business mix and operating efficiencies.

International segment realized a 0.4% increase in gross profit margin to 27.8% for the three months ended March 31, 2026 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 12.3% to 40.2% for the three months ended March 31, 2026 primarily due to a less favorable sales mix as compared to the prior period.

Operating Expenses

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

Operating expenses for the three months ended March 31, 2026 and 2025 were as follows:

Three months ended March 31,

Operating Expenses

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Reorganization and other costs 475 3,087

Environmental expense 199 — 1,257 —

Legal settlement and insurance recoveries, net — (868) — (808)

Environmental expense, net (131) 540

Research and engineering 221 299

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$ 40,050 $ 41,904

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 $0.2 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 $1.3 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.

Operating expenses decreased $1.9 million, or 4.4%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Selling, general and administrative expenses increased $1.3 million during the three months ended March 31, 2026 compared to the three months ended March 31, 2025, due to strategic investments in our operations to support commercial execution and promote growth in our strategic markets, while maintaining discipline in overhead costs.

Reorganization and other costs decreased by $2.6 million to $0.5 million as compared to the prior year comparable period, due to lower restructuring activity, including workforce reductions and laboratory rationalization initiatives in the three months ended March 31, 2025, which did not recur at similar levels during the current year period.

Environmental expense, net decreased by $0.7 million as compared to the prior year comparable period due to lower expenses related to the ongoing remediation efforts related to the Mistras Arizona claim discussed in Note 13 - Commitments and Contingencies.

Research and engineering expenses decreased by $0.1 million during the three months ended March 31, 2026 compared to the three months

Mistras Group, Inc.

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ended March 31, 2025.

Depreciation and amortization increased by $0.2 million during the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

Income (Loss) from Operations

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 September 30, Nine months ended September 30,

2025 2024 2025 2024

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

Three months ended March 31,

North America:

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Reorganization and other costs 74 1,358

Legal settlement and insurance recoveries, net — (868) — (808)

Income from operations before special items (non-GAAP) $ 10,494 $ 7,873

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Products and Systems:

Income from operations (GAAP) $ 1,051 $ 670 $ 1,714 $ 1,479

Income (loss) from operations (GAAP) $ (11) $ 327

Reorganization and other costs — 151

Income from operations before special items (non-GAAP) $ 1,051 $ 852 $ 1,865 $ 1,663

Income (loss) from operations before special items (non-GAAP) $ (11) $ 478

Corporate and Eliminations:

Loss from operations (GAAP) $ (7,203) $ (8,935)

Environmental expense 199 — 1,257 —

Environmental expense, net (131) 540

Reorganization and other costs 180 1,400

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Total Company:

Income from operations (GAAP) $ 20,381 $ 11,858 $ 27,797 $ 29,368

Environmental expense 199 — 1,257 —

Income (loss) from operations (GAAP) $ 4,682 $ (1,012)

Environmental expense, net (131) 540

Reorganization and other costs 475 3,087

Legal settlement and insurance recoveries, net — (868) — (808)

Income from operations before special items (non-GAAP) $ 5,026 $ 2,615

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 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.

For the three months ended March 31, 2026, income from operations (GAAP) increased $5.7 million or 562.6%, compared with the three months ended March 31, 2025, while income from operations before special items (non-GAAP) increased by $2.4 million, or 92.2%.

The increase in income from operations was due to higher gross profit and lower reorganization and other costs.

As a percentage of revenue, income from operations increased by 340 basis points to 2.8% in the three months ended March 31, 2026 compared to (0.6)% in the three months ended March 31, 2025.

As a percentage of revenue, income from operations before special items increased by 140 basis points to 3.0% in the three months ended March 31, 2026 compared to 1.6% in the three months ended March 31, 2025.

Mistras Group, Inc.

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Interest Expense

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.

Interest expense was approximately $2.9 million and $3.3 million for the three months ended March 31, 2026 and 2025, respectively.

This decrease of $0.4 million in interest expense in the current year period was a result of lower interest rates during the three months ended March 31, 2026 in comparison to the prior year comparable period.

Our effective income tax rate was approximately 13.8% for the three months ended March 31, 2026, compared to an effective income tax benefit of approximately 26.9% for the three months ended March 31, 2025.

The effective income tax rate for the three months ended March 31, 2026, was lower than the statutory rate primarily due to the impact of favorable discrete items related to stock compensation.

The effective income tax benefit for the three months ended March 31, 2025, was higher than the statutory rate primarily due to the impact of an unfavorable discrete item related to stock compensation.

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 expenses, valuation allowances, and other permanent differences.

It is also affected by discrete items that may occur in any given year but are not consistent from year to year.

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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.

These provisions did not have a material impact on the Company’s financial statements for the three months ended March 31, 2026.

Liquidity and Capital Resources

Cash flows are summarized in the table below:

Nine months ended September 30,

Three months ended March 31,

Net cash (used in) provided by:

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Financing activities (349) (702)

Effect of exchange rate changes on cash 1,393 1,642

Effect of exchange rate changes on cash and cash equivalents 79 690

Net change in cash and cash equivalents $ (3,019) $ 219

Cash Flows from Operating Activities

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.

Mistras Group, Inc.

and Subsidiaries

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

(tabular dollars are in thousands)

During the three months ended March 31, 2026, cash provided by operating activities was $2.8 million, representing a year-over-year decrease of $2.8 million, or 50%.

This decrease was primarily attributable to movements in working capital, as compared to the prior year comparable period.

Cash Flows from Investing Activities

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.

During the three months ended March 31, 2026, cash used in investing activities was $5.6 million, representing a $0.1 million increase compared to the prior year comparable period.

The increase is primarily attributable to an increase in expenditures for property, plant, and equipment of $1.4 million, partially offset by an increase in proceeds from the sale of equipment of $1.3 million.

Cash Flows from Financing Activities

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.

Net cash used in financing activities was $0.3 million for the three months ended March 31, 2026, compared to net cash used in financing activities of $0.7 million for the three months ended March 31, 2025.

During the three months ended March 31, 2026, net borrowings of debt were approximately $0.6 million higher than the prior year comparable period resulting in additional net debt borrowings during the current year period in comparison to the prior year comparable period.

The increase in net debt borrowings is partially offset by $0.1 million more in taxes paid related to net share settlement of share-based awards during the three months ended March 31, 2026.

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 $1.4 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.

The effect of exchange rate changes on our cash and cash equivalents was an increase of $0.1 million in the three months ended March 31, 2026, compared to an increase of $0.7 million for the three months ended March 31, 2025.

Cash Balance and Credit Facility Borrowings

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.

As of March 31, 2026, we had cash and cash equivalents totaling $25.0 million and $100.7 million of unused commitments under our Credit Agreement with borrowings of $179.6 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 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.

As of March 31, 2026, 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.

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Off-balance Sheet Arrangements

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.

During the three months ended March 31, 2026, 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