What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-10 compared with 2026-05-07 · 144 added, 115 removed, 167 unchanged (61% 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 months ended March 31, 2026 and 2025.

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

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 and uncertainty arising from geopolitical instability and conflicts (including those related to the wars in the Middle East and Ukraine) 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 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 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.

Mistras Group, Inc.

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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 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.

These markets include companies in oil and gas, aerospace and defense, industrials, 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.

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.

Among other things, we expect the timing of our oil and gas customers' inspection spending to be impacted by fluctuations in oil prices and broader market conditions, including potential geopolitical disruptions and uncertainty arising from conflicts in the Middle East.

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 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

As of June 30, 2026, our cash and cash equivalents balance was approximately $22.0 million, and we had available borrowing capacity of up to $106.3 million under the revolving credit facility under our Credit Agreement.

On August 5, 2026, the Company entered into an amendment (the "Amendment") to its Credit Agreement dated August 1, 2022, with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.

The Amendment extended the maturity date of the Company’s $190.0 million revolving credit facility and approximately $90.6 million term loan under the

Mistras Group, Inc.

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(tabular dollars are in thousands)

actions on goods being exported from the U.S.

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

Credit Agreement from July 30, 2027 to July 28, 2028.

In connection with the Amendment, the Company incurred an extension fee equal to a total of 0.15% of the aggregate committed amount of the revolving credit facility and term loan held by participating lenders.

There were no other changes to the material terms of the Credit Agreement, including the applicable interest rate provisions and financial covenants, which remained substantially unchanged.

Refer to Note 11 - Long-Term Debt for more details regarding the terms of the Credit Agreement.

The global trade landscape continues to be highly volatile.

During 2025, the U.S.

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

from various countries, many of which prompted reciprocal tariffs and other trade measures affecting U.S.

The ongoing tariff environment remains complex and continues to evolve as legal proceedings and trade negotiations progress.

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.

government relied upon to impose certain tariffs, does not authorize the imposition of tariffs.

Following that decision, the U.S.

Court of International Trade directed the U.S.

Customs and Border Protection ("CBP") to begin processing refunds of previously collected IEEPA tariffs, and during the second quarter of 2026, CBP commenced accepting and processing refund claims.

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.

Supreme Court's ruling, the U.S.

administration implemented replacement tariffs under alternative statutory authorities, including Section 122 of the Trade Act of 1974, while also pursuing additional tariff actions under other existing trade authorities.

Certain of these replacement tariffs have also been challenged in court, and the related litigation remains ongoing.

On July 24, 2026, the U.S.

administration announced the implementation of additional tariffs ranging from 10% to 12.5% on imports from numerous trading partners under Section 301 of the Trade Act of 1974.

Accordingly, the ultimate scope, duration and financial impact of U.S.

trade measures remain uncertain.

Ongoing changes to trade policies and related uncertainty may affect global economic conditions, supply chains and costs, and may reduce trade between the U.S.

and impacted countries.

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.

However, new tariffs or other trade measures could result in increased costs for 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 U.S.

and Iran, have contributed to increased volatility in global energy markets and broader macroeconomic uncertainty.

The conflict has increased uncertainty surrounding global energy supplies, international shipping routes and supply chains, contributing to fluctuations in oil and natural gas prices and increased costs for certain materials and transportation.

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.

Additionally, continued instability in the Middle East 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.

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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.

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

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

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

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

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

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

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

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

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

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

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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,

Condensed consolidated results of operations for the three and six months ended June 30, 2026 and 2025 were as follows:

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

2026 2025 2026 2025

Revenue $ 193,132 $ 185,405 $ 362,166 $ 347,020

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Gross profit as a % of Revenue 29.2 % 29.1 % 27.9 % 27.3 %

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)

Income from operations 12,946 8,428 17,628 7,416

Income from operations as a % of Revenue 6.7 % 4.5 % 4.9 % 2.1 %

Income (loss) before provision (benefit) for income taxes 9,821 4,189 12,556 (147)

Net income (loss) 7,552 3,126 9,909 (42)

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$ 7,581 $ 3,017 $ 9,969 $ (169)

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,

Revenue was $193.1 million for the three months ended June 30, 2026, an increase of $7.7 million, or 4.2%, compared with the three months ended June 30, 2025.

Revenue by segment for the three and six months ended June 30, 2026 and 2025 were as follows:

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

2026 2025 2026 2025

North America $ 156,629 $ 147,992 $ 291,950 $ 276,894

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Total $ 193,132 $ 185,405 $ 362,166 $ 347,020

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.

In the three months ended June 30, 2026, total revenue increased 4.2% 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 5.8%, driven predominantly by the aerospace and defense, power generation and transmission, infrastructure, research, and engineering, and process industries end markets as a result of strong market demand.

International segment revenue decreased 2.7%, due predominantly to a mid-single-digit organic decrease driven by lower market demand.

The decrease was partially offset by a low-single-digit favorable impact of foreign exchange rates.

Products and Systems segment revenue increased by 43.0%, due to increased sales volume and shipments as compared to the prior year comparable period.

Oil and gas customer revenue comprised approximately 49% and 55% of total revenue for the three months ended June 30, 2026 and 2025, respectively.

Aerospace and defense customer revenue comprised approximately 14% and 13% of total revenue for the three months ended June 30, 2026 and 2025, respectively.

The Company’s top ten customers comprised approximately 35% of total revenue for both the three months ended June 30, 2026 and 2025, with no customer accounting for 10% or more of total revenue in either three-month period.

Mistras Group, Inc.

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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

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,

In the six months ended June 30, 2026, total revenue increased 4.4% versus the prior year comparable period due predominantly to a low single-digit organic increase and a low-single-digit favorable impact of foreign exchange rates.

North America segment revenue increased 5.4% versus the prior year comparable period, driven by the aerospace and defense, power generation and transmission, infrastructure, research, and engineering end markets.

International segment revenue increased 2.8% versus the prior year comparable period, due to a mid-single-digit favorable impact of foreign exchange rates, partially offset by a low-single-digit organic decrease.

Products and Systems segment revenue increased by 12.7%, due to increased sales volume and shipments as compared to the prior year comparable period.

Oil and gas customer revenue comprised approximately 50% and 57% of total revenue for the six months ended June 30, 2026 and 2025, respectively.

Aerospace and defense customer revenue comprised approximately 15% and 13% of total revenue for the six months ended June 30, 2026 and 2025, respectively.

The Company’s top ten customers comprised approximately 35% and 37% of total revenue for the six months ended June 30, 2026 and 2025, respectively, with no customer accounting for 10% or more of total revenue in either six-month period.

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

2026 2025 2026 2025

Revenue by type

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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.

Integrated Field Solutions revenue increased by $5.8 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025 and increased by $6.5 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to increases in sales volume in our power generation and transmission and infrastructure, research and engineering 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.

and Subsidiaries

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

(tabular dollars are in thousands)

In-Laboratory Services revenue increased by $1.9 million for the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, and increased by $8.6 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to increased sales volumes in our aerospace and defense end market in our North America segment.

Gross profit increased by $2.5 million, or 4.6%, in the three months ended June 30, 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 and six months ended June 30, 2026 and 2025 was as follows:

Mistras Group, Inc.

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(tabular dollars are in thousands)

Three months ended March 31,

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

2026 2025 2026 2025

North America $ 43,030 $ 40,384 $ 76,566 $ 70,549

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% of total revenue 29.2 % 29.1 % 27.9 % 27.3 %

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.

Gross profit margin was 29.2% and 29.1% for the three-month periods ended June 30, 2026 and 2025, respectively.

Gross profit margin for the North America segment increased by 0.2% for the three months ended June 30, 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% decline in gross profit margin to 31.0% for the three months ended June 30, 2026 as compared to the prior year comparable period primarily due to a less favorable sales mix in the current year period.

Products and Systems segment gross margin had a decrease of 2.0% to 46.8% for the three months ended June 30, 2026 primarily due to a less favorable sales mix as compared to the prior period.

Gross profit margin was 27.9% and 27.3% for the six-month periods ended June 30, 2026 and 2025, respectively.

Gross profit margin for the North America segment increased 0.7% increase to 26.2% for the six months ended June 30, 2026 as compared to the prior year comparable period primarily due to an improved and diversified business mix and operating efficiencies.

International segment profit margin remained flat period over period.

Products and Systems segment gross margin had a decline of 6.6% to 44.2% for the six months ended June 30, 2026 primarily due to a less favorable sales mix as compared to the prior period.

Operating Expenses

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

Three months ended March 31,

Operating expenses for the three and six months ended June 30, 2026 and 2025 was as follows:

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

2026 2025 2026 2025

Operating Expenses

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Reorganization and other costs 1,527 2,951 2,002 6,038

Environmental expense, net (131) 540

Environmental expense 460 518 329 1,058

Research and engineering 243 269 464 568

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$ 43,499 $ 45,517 $ 83,549 $ 87,421

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.

Operating expenses decreased $2.0 million, or 4.4%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

Selling, general and administrative expenses decreased $1.1 million during the three months ended June 30, 2026 compared to the three months ended June 30, 2025, due to ongoing cost management activities.

Reorganization and other costs decreased by $1.4 million to $1.5 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 June 30, 2025 , w hich did not recur at similar levels during the current year period.

Environmental expense decreased by $0.1 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 remained flat period over period.

Depreciation and amortization increased by $0.6 million during the three months ended June 30, 2026 compared to the three months ended June 30, 2025.

Operating expenses decreased $3.9 million, or 4.4%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025.

Selling, general and administrative expenses increased $0.3 million during the six months ended June 30, 2026 compared to the six months ended June 30, 2025, due to strategic investments in our operations to support commercial execution and promote growth in our strategic markets, while maintaining discipline in overhead cost.

Reorganization and other costs decreased by $4.0 million to $2.0 million as compared to the prior year comparable period due to lower restructuring activity, including workforce reductions and laboratory rationalization initiatives in the six months ended June 30, 2025 , w hich did not recur at similar levels during the current year period.

Environmental expense 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 six months ended June 30, 2026 compared to the six months ended June 30, 2025.

Depreciation and amortization increased by $0.7 million during the six months ended June 30, 2026 compared to the six months ended June 30, 2025.

Mistras Group, Inc.

and Subsidiaries

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

(tabular dollars are in thousands)

Income (Loss) from Operations

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,

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

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

2026 2025 2026 2025

North America:

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Products and Systems:

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

Income from operations (GAAP) $ 676 $ 336 $ 664 $ 663

Reorganization and other costs 63 — 63 151

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

Income from operations before special items (non-GAAP) $ 739 $ 336 $ 727 $ 814

Corporate and Eliminations:

Loss from operations (GAAP) $ (8,502) $ (12,670) $ (15,704) $ (21,605)

Environmental expense, net (131) 540

Environmental expense 460 518 329 1,058

Reorganization and other costs 680 1,746 860 3,146

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Total Company:

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

Environmental expense, net (131) 540

Income from operations (GAAP) $ 12,946 $ 8,428 $ 17,628 $ 7,416

Environmental expense 460 518 329 1,058

Reorganization and other costs 1,527 2,951 2,002 6,038

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

For the three months ended 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.

For the three months ended June 30, 2026, income from operations (GAAP) increased $4.5 million, or 53.6%, compared to the three months ended June 30, 2025, while income from operations before special items (non-GAAP) increased by $3.0 million, or 25.5%.

As a percentage of revenue, income from operations before special items increased by 130 basis points to 7.7% in the three months ended June 30, 2026 compared to 6.4% in the three months ended June 30, 2025.

For the six months ended June 30, 2026, income from operations (GAAP) increased $10.2 million, or 137.7%, compared to the six months ended June 30, 2025, while income from operations before special items (non-GAAP) increased by $5.4 million, or 37.5%.

As a percentage of revenue, income from operations before special items increased by 130 basis points to 5.5% in the six months ended June 30, 2026 compared to 4.2% in the six months ended June 30, 2025.

Mistras Group, Inc.

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Interest Expense

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.

Interest expense was approximately $4.1 million and $4.2 million for the three months ended June 30, 2026 and 2025, respectively.

This decrease of $0.1 million in interest expense was a result of lower interest rates during the three months ended June 30, 2026 in comparison to the prior year comparable period.

Interest expense was approximately $7.0 million and $7.6 million for the six months ended June 30, 2026 and 2025, respectively.

This decrease of $0.5 million in interest expense was a result of lower interest rates and lower average borrowings outstanding during the six months ended June 30, 2026 in comparison to the prior year comparable period.

Our effective income tax rate was approximately 23.1% and 25.4% for the three months ended June 30, 2026 and 2025, respectively.

Our effective income tax rate was approximately 21.1% and 71.4% for the six months ended June 30, 2026 and 2025, respectively.

The effective income tax rate for the three months ended June 30, 2026, was higher than the statutory rate primarily due to limitations on the deductibility of certain compensation expenses.

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

The effective income tax rate for the six months ended June 30, 2026, was higher than the statutory rate primarily due to limitations on the deductibility of certain compensation expenses.

The effective income tax rate for the six months ended June 30, 2025, was higher 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.

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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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.

Effective for calendar year 2025.

These tax reform provisions include the extension and modification of certain provisions of the Tax Cuts and Jobs Act and are 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 three months ended March 31, 2026.

These provisions did not have a material impact on the Company’s financial statements for the three and six months ended June 30, 2026.

Liquidity and Capital Resources

Cash flows are summarized in the table below:

Three months ended March 31,

Six months ended June 30,

Net cash (used in) provided by:

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Financing activities (11,236) 14,910

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

Effect of exchange rate changes on cash (640) 1,765

Net change in cash and cash equivalents $ (6,020) $ 1,640

Mistras Group, Inc.

and Subsidiaries

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

(tabular dollars are in thousands)

Cash Flows from Operating Activities

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.

During the six months ended June 30, 2026, cash provided by operating activities was $17.7 million, representing a year-over-year increase of $21.3 million, or 590%.

This increase was primarily attributable to an increase in net income and movements in working capital, primarily due to higher collections of accounts receivable as compared to the prior year comparable period.

Cash Flows from Investing Activities

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.

During the six months ended June 30, 2026, cash used in investing activities was $11.9 million, representing a $0.4 million increase compared to the prior year comparable period.

The increase is primarily attributable to increased expenditures for property, plant, and equipment and intangible assets, partially offset by an increase in proceeds from sale of equipment.

Cash Flows from Financing Activities

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.

Net cash used in financing activities was $11.2 million for the six months ended June 30, 2026, compared to net cash provided by financing activities of $14.9 million for the six months ended June 30, 2025.

During the six months ended June 30, 2026, net payments of debt were approximately $9.5 million compared to net borrowings of debt of $16.4 million in the prior year comparable period.

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 $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.

The effect of exchange rate changes on our cash and cash equivalents was a decrease of $0.6 million in the six months ended June 30, 2026, compared to an increase of $1.8 million for the six months ended June 30, 2025.

Cash Balance and Credit Facility Borrowings

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.

As of June 30, 2026, we had cash and cash equivalents totaling $22.0 million and $106.3 million of unused commitments under our Credit Agreement with borrowings of $170.5 million and $3.8 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 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.

As of June 30, 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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The terms of our Credit Agreement are described in Note 11 - Long-Term Debt of the Notes to the Unaudited Condensed Consolidated Financial Statements, under the heading " Senior Credit Facility ".

The terms related to the subsequent amendment to the Credit Agreement are described in Note 15 - Subsequent Events .

Contractual Obligations

There have been no significant changes in our contractual obligations and outstanding indebtedness as disclosed in the 2025 Annual Report.

Except for the subsequent amendment to the Credit Agreement described in Note 15 - Subsequent Events , there have been no significant changes in our contractual obligations and outstanding indebtedness from those disclosed in our 2025 Annual Report.

Off-balance Sheet Arrangements

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.

We did not have, and do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Critical Accounting Policies and Estimates

3 unchanged sentences

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