MISTRAS Group Inc.
03/11/2026 | Press release | Distributed by Public on 03/11/2026 12:37
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis (this "MD&A") provides a discussion of our results of operations and financial position for the year ended December 31, 2025. This section generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 are included in Part II-Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on March 11, 2025, which discussion is incorporated herein by reference. This MD&A should be read together with our audited consolidated financial statements and related notes included in Item 8 in this Annual Report. Unless otherwise specified or the context otherwise requires, "Mistras," "MISTRAS," the "Company," "we," "us" and "our" refer to Mistras Group, Inc. and its consolidated subsidiaries. This MD&A includes the following sections:
•Forward-Looking Statements
•Overview
•Note about Non-GAAP Measures
•Consolidated Results of Operations
•Liquidity and Capital Resources
•Critical Accounting Estimates
•Recent Accounting Pronouncements
Forward-Looking Statements
This Annual Report on Form 10-K, including this MD&A, contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Such forward-looking statements include those that express plans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact. These forward-looking statements are based on our current expectations and projections about future events and they are subject to risks and uncertainties known and unknown that could cause actual results and developments to differ materially from those expressed or implied in such statements. See "Forward-Looking Statements" at the beginning of Item 1 of this Annual Report.
Overview
Mistras Group, Inc., together with its subsidiaries (the "Company"), is a global leader in technology-enabled industrial asset integrity and laboratory testing solutions, serving critical industries including oil & gas, aerospace & defense, power & utilities, manufacturing, and civil infrastructure.
The Company provides a diversified portfolio of products and services, ranging from advanced non-destructive testing ("NDT") and pipeline inspections to real-time condition monitoring, maintenance planning, and specialized engineering, powered by a proprietary management software suite that centralizes integrity data for predictive analytics and benchmark analysis. With a long-standing track record of innovation and deep industry expertise, the Company helps clients reduce risk, extend asset life, and optimize operational performance.
The Company enhances value for its customers by integrating asset integrity protection throughout supply chains and centralizing integrity data through a suite of Industrial Internet of Things ("IoT")-connected software and monitoring solutions, including OneSuite®, which serves as a cloud-based ecosystem that pulls together the Company's software and data services capabilities. This integrated approach enables customers to make data-driven decisions that improve asset reliability, enhance safety, reduce operational risk, and optimize performance across the asset lifecycle.
The Company's core capabilities include NDT field inspections enhanced by advanced robotics, laboratory quality control, laboratory materials services, in-house laboratory assurance testing, sensing technologies and NDT equipment, asset and mechanical integrity engineering services, and light mechanical maintenance and access services.
Our operations consist of three reportable segments: North America, International, and Products and Systems.
•North Americaprovides asset protection solutions predominantly in North America, with the largest concentration in the United States, followed by Canada, consisting primarily of NDT, inspection, mechanical and engineering services that are used to evaluate the safety, structural integrity and reliability of critical energy, industrial and public infrastructure and commercial aerospace components. Software, digital and data services are included in this segment.
•Internationaloffers services, products and systems similar to those of the other segments to select markets within Europe, the Middle East, Africa, Asia and South America, but not to customers in China and South Korea, which are served by the Products and Systems segment.
•Products and Systemsdesigns, manufactures, sells, installs and services the Company's asset protection products and systems, including equipment and instrumentation, predominantly in the United States.
Given the role our solutions play in enhancing the safe and efficient operation of infrastructure, we have historically provided a majority of our solutions to our customers on a regular, recurring basis. We perform these services largely at our customers' facilities, while primarily servicing our aerospace customers at our network of state-of-the-art, in-house laboratories. These solutions typically include NDT and inspection services, and can also include a wide range of mechanical services, including heat tracing, pre-inspection insulation stripping, coating applications, re-insulation, engineering assessments and long-term condition-monitoring. Under this business model, many customers outsource their inspection to us on a "run and maintain" basis. 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.
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. We have made numerous acquisitions in the past in an effort to grow our base of experienced, certified personnel, expand our service lines and technical capabilities, increase our geographical reach, complement our existing offerings, and leverage our fixed costs. We have increased our capabilities and the size of our customer base through the development of applied technologies and managed support services, organic growth and the integration of acquired companies. These acquisitions have provided us with additional service lines, technologies, resources and customers which we believe enhance our advantages over our competition.
We believe long-term growth can be realized in our target markets. 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, and recent intervention in Venezuela continue to contribute to global energy market volatility, supply chain disruption, and economic uncertainty that could affect certain of our end markets, particularly oil and gas customers. Among other things, we expect the timing of our oil and gas customers inspection spend to be impacted by volatility in oil prices resulting from these factors.
We have continued providing our customers with an innovative asset protection software ecosystem through our OneSuite platform. The software platform offers functions of our software and services brands as integrated apps on a cloud environment. OneSuite serves as a single access portal for customers' data activities and provides access to 90 plus applications being offered on one centralized platform.
2025 Developments
Our cash position and liquidity remain strong. As of December 31, 2025, our cash and cash equivalents balance was approximately $28.0 million, and we had available borrowing capacity of up to $107.4 million under the revolving credit facility under our Credit Agreement.
As discussed in Note 1 - Summary of Significant Accounting Policies and Practices, we changed the presentation of certain costs incurred at our operational labs as well as for certain lab personnel on our Consolidated Statements of Income (Loss). This voluntary change in classification of certain overhead and personnel costs, which were determined to be directly related to the delivery of our services, resulted in a decrease in selling, general and administrative expenses and an offsetting increase in cost of revenue. We believe this presentation is preferable as it will provide greater transparency regarding our cost of revenue and better aligns with how our business is managed.
We continue to monitor the impact that tariffs and trade barriers may have on our business, including recent U.S. tariffs imposed or threatened to be imposed on China, Canada, Mexico and other countries and any retaliatory actions taken by such countries. Continued uncertainty surrounding such tariffs and trade barriers may have a material adverse effect on global economic conditions, inflation and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Such uncertainty limits our ability to anticipate, plan for, or effectively mitigate the adverse impacts of such measures on our operations and supply chain costs. The tariffs have not had
a material effect on our business or results of operations in 2025, but they could result in additional costs to us and could impact the import of materials by our customers which are inspected by us.
During 2025, the price of crude oil declined due to various macroeconomic and geopolitical factors. The decline in crude oil prices has had an adverse impact on our field-related services that we provide to the oil and gas sector, which could continue if prices remain low. More recently, geopolitical tensions in the Middle East, including the conflict involving the United States and Iran, have contributed to increased volatility in global oil markets. Fluctuations in crude oil prices may influence the spending decisions of our oil and gas customers and could affect demand for our field-related services.
On September 15, 2025, Eileen Coggins joined Mistras as Executive Vice President and Chief Legal Officer and assumed the role of General Counsel and Secretary as of November 15, 2025.
Note about Non-GAAP Measures
The Company prepares its consolidated financial statements in accordance with U.S. GAAP. In this MD&A under the heading "Income from Operations", the non-GAAP financial performance measure "Income (loss) from operations before special items" is used for each of our three operating segments, the "Corporate" segment and for the "Total Company", with tables reconciling the "Income (loss) from operations before special items" to "Income (loss) from operations", which is a financial measure under GAAP. This presentation excludes from "Income (loss) from Operations" (a) transaction expenses related to acquisitions, such as professional fees and due diligence costs, (b) the net changes in the fair value of acquisition-related contingent consideration liabilities, (c) impairment charges, (d) reorganization and other costs, which includes items such as severance, labor relations matters and asset and lease termination costs and (e) other special items. These adjustments have been excluded from the GAAP measure because these expenses and credits are not related to our or any individual segment's core business operations. The acquisition related costs and special items can be a net expense or credit in any given period. Our management uses this non-GAAP measure as a measure of operating performance and liquidity to assist in comparing performance from period to period on a consistent basis, as a measure for planning and forecasting overall expectations and for evaluating actual results against such expectations. We believe investors and other users of our financial statements benefit from the presentation of this non-GAAP measure in evaluating our performance. Income (loss) before special items excludes the identified adjustments, which provides additional tools to compare our core business operating performance on a consistent basis and measure underlying trends and results in our business. Income (loss) before special items is not used to determine incentive compensation for executives or employees, nor is it a replacement for the reported GAAP financial performance and/or necessarily comparable to the non-GAAP financial measures of other companies. Any measure that eliminates the foregoing items has material limitations as a performance or liquidity measure and should not be considered alternatives to net income (loss) or any other measures derived in accordance with GAAP. Because Income (loss) from operations before special items may not be calculated in the same manner by all companies, this measure may not be comparable to other similarly titled measures used by other companies.
Consolidated Results of Operations
Year ended December 31, 2025 vs. Year ended December 31, 2024
The following table summarizes our Consolidated Statements of Income for the years ended December 31, 2025 and 2024:
| For the year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| ($ in thousands) | |||||||||||
| Revenue | $ | 724,024 | $ | 729,640 | |||||||
| Gross profit | 204,511 | 192,173 | |||||||||
| Gross profit as a % of Revenue | 28.2 | % | 26.3 | % | |||||||
| Income from operations | 40,572 | 39,826 | |||||||||
| Income from operations as a % of Revenue | 5.6 | % | 5.5 | % | |||||||
| Income before provision for income taxes | 22,478 | 24,244 | |||||||||
| Net income | 16,921 | 18,970 | |||||||||
| Net income attributable to Mistras Group, Inc. | $ | 16,837 | $ | 18,958 | |||||||
Revenue
Revenue by segment for the years ended December 31, 2025 and 2024 were as follows:
| For the year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| ($ in thousands) | |||||||||||
| Revenue | |||||||||||
| North America | $ | 584,131 | $ | 593,527 | |||||||
| International | 143,843 | 135,969 | |||||||||
| Products and Systems | 13,970 | 13,661 | |||||||||
| Corporate and eliminations | (17,920) | (13,517) | |||||||||
| $ | 724,024 | $ | 729,640 | ||||||||
Revenue was $724.0 million for the year ended December 31, 2025, a decrease of $5.6 million, or 0.8%, compared with the year ended December 31, 2024. The decrease was driven by the North America segment, which experienced a revenue decrease of $9.4 million, or 1.6%, driven by a low single-digit organic decrease in certain end markets. The International segment revenue increased by $7.9 million, or 5.8%, due predominantly to a low single-digit organic growth and by a low single-digit favorable impact of foreign exchange rates. The Products and Systems segment increased by $0.3 million, or 2.3%, driven by higher sales volume.
Oil and gas customer revenue comprised approximately 55% and 57% of total revenue for the years ended December 31, 2025 and 2024, respectively. Aerospace and defense customer revenue comprised approximately 13% and 12% of total revenue for the years ended December 31, 2025 and 2024, respectively. Our top ten customers comprised approximately 36% of total revenue for the years ended December 31, 2025 and 2024, with no customer accounting for 10% or more of total revenue in either period.
The following table presents revenue by type, explained directly below the table.
| For the year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| ($ in thousands) | |||||||||||
| Revenue by type | |||||||||||
| Field Services | $ | 475,577 | $ | 502,810 | |||||||
| Laboratories | 72,398 | 64,564 | |||||||||
| Data Analytical Solutions | 67,800 | 69,152 | |||||||||
| Other | 108,249 | 93,114 | |||||||||
| Total | $ | 724,024 | $ | 729,640 | |||||||
In presenting the allocation of revenues 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 $27.2 million, or 5.4%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The decrease was primarily due to decreases in sales volume in our oil and gas, other process industries, infrastructure and research and engineering, and petrochemical end markets within our North America segment and our oil and gas end market within our International segment.
Laboratories revenue is comprised of quality assurance inspections of components and materials at our in-house laboratory facilities. Laboratories revenue increased $7.8 million, or 12.1%, for the year ended December 31, 2025 as compared to the
twelve months ended year ended December 31, 2024. The increase was due to increased sales volume related to our commercial aerospace and industrials end markets.
Data Analytical Solutions revenue is comprised of revenue derived from data software sales & subscriptions, implementation services and analytics that offer insights and recommendations to improve asset integrity for our customers. Data Analytical Solutions revenue is derived from work performed by our employees in our facilities, or at customer locations, using our proprietary portfolio of software applications. Data Analytical Solutions revenue decreased $1.4 million, or 2.0%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The decrease was due primarily to decreased sales volume within PCMS and other Data Analytical Solutions offerings within our North America segment.
Other revenue is comprised of locations that perform both asset inspection services and testing of components and materials at our in-house laboratories. Other revenue increased $15.1 million, or 16.2%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. Other revenue for the year ended December 31, 2025 increased primarily due to increased sales volume within our mixed service offering facilities as compared to the prior year period.
Gross Profit
Gross profit by segment for the years ended December 31, 2025 and 2024 were as follows:
| For the year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| ($ in thousands) | |||||||||||
| Gross profit | |||||||||||
| North America | $ | 154,520 | $ | 146,026 | |||||||
| % of segment revenue | 26.5 | % | 24.6 | % | |||||||
| International | 43,149 | 39,058 | |||||||||
| % of segment revenue | 30.0 | % | 28.7 | % | |||||||
| Products and Systems | 7,385 | 6,997 | |||||||||
| % of segment revenue | 52.9 | % | 51.2 | % | |||||||
| Corporate and eliminations | (543) | 92 | |||||||||
| $ | 204,511 | $ | 192,173 | ||||||||
| % of total revenue | 28.2 | % | 26.3 | % | |||||||
Gross profit increased $12.3 million, or 6.4%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. Gross profit margin was 28.2% and 26.3% for the years ended December 31, 2025 and 2024, respectively, with the increasein 2025 due to a favorable sales mix. North America segment gross profit margin had a year-on-year increase of 190 basis points to 26.5% for the year ended December 31, 2025, due primarily to a favorablesales mix. International segment gross margins had a year-on-year increase of 130 basis points to 30.0% for the year ended December 31, 2025, due primarily to increased revenues and afavorable sales mix. Products and Systems segment gross margins increased by 170 basis points for the year ended December 31, 2025 to 52.9%, driven by favorablesales mix.
Operating Expenses
Operating expenses for the years ended December 31, 2025 and 2024 was as follows:
| For the year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| ($ in thousands) | |||||||||||
| Operating Expenses | |||||||||||
| Selling, general and administrative expenses | $ | 139,876 | $ | 135,452 | |||||||
| Reorganization and other costs | 12,654 | 5,517 | |||||||||
| Environmental expense | 1,743 | 1,660 | |||||||||
| Legal settlement and insurance recoveries, net | - | (808) | |||||||||
| Research and engineering | 1,028 | 1,119 | |||||||||
| Depreciation and Amortization | 8,638 | 9,407 | |||||||||
| Total | $ | 163,939 | $ | 152,347 | |||||||
Operating expenses increased by $11.6 million, or 7.6%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. Selling, general and administrative expenses increased by $4.4 million, or 3.3%, for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to strategic investments in our operations. As discussed in Note 1 - Summary of Significant Accounting Policies and Practices, Selling, general and administrative expenses reflect the classification change for certain overhead and personnel costs from Selling, general and administrative expenses to Cost of revenue. Reorganization and other costs increased by $7.1 million to $12.7 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024 due to ongoing initiatives to reduce overhead costs, and incremental costs of other related actions. Environmental expense increased by $0.1 million to $1.7 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024 due to the ongoing remediation efforts related to the Mistras Arizona claim discussed in Note 17- Commitments and Contingencies. Legal settlement and insurance recoveries, net decreased by $0.8 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024 due to an insurance settlement, that occurred during the year ended December 31, 2024. Research and engineering expenses decreased by $0.1 million to $1.0 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024. Depreciation and amortization decreased by $0.8 million to $8.6 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024.
Income (Loss) from Operations
The following table shows a reconciliation of segment income (loss) from operations to income (loss) before special items (unaudited) for the years ended December 31, 2025 and 2024:
| For the year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| ($ in thousands) | |||||||||||
| North America: | |||||||||||
| Income from operations (GAAP) | $ | 62,788 | $ | 62,286 | |||||||
| Reorganization and other costs | 4,287 | 2,046 | |||||||||
| Legal settlement and insurance recoveries, net | - | (808) | |||||||||
| Income before special items (non-GAAP) | $ | 67,075 | $ | 63,524 | |||||||
| International: | |||||||||||
| Income from operations (GAAP) | $ | 10,353 | $ | 6,275 | |||||||
| Reorganization and other costs | 1,590 | 1,086 | |||||||||
| Income before special items (non-GAAP) | $ | 11,943 | $ | 7,361 | |||||||
| Products and Systems: | |||||||||||
| Income from operations (GAAP) | $ | 2,651 | $ | 2,510 | |||||||
| Reorganization and other costs | 356 | 184 | |||||||||
| Income before special items (non-GAAP) | $ | 3,007 | $ | 2,694 | |||||||
| Corporate and Eliminations: | |||||||||||
| Loss from operations (GAAP) | $ | (35,220) | $ | (31,245) | |||||||
| Environmental expense | 1,743 | 1,660 | |||||||||
| Reorganization and other costs | 6,421 | 2,201 | |||||||||
| Loss before special items (non-GAAP) | $ | (27,056) | $ | (27,384) | |||||||
| Total Company: | |||||||||||
| Income from operations (GAAP) | $ | 40,572 | $ | 39,826 | |||||||
| Legal settlement and insurance recoveries, net | - | (808) | |||||||||
| Environmental expense | 1,743 | 1,660 | |||||||||
| Reorganization and other costs | 12,654 | 5,517 | |||||||||
| Income before special items (non-GAAP) | $ | 54,969 | $ | 46,195 | |||||||
See "Note about Non-GAAP Measures"in this Annual Report for an explanation of our use of non-GAAP measures.
Total Company income from operations (GAAP) increased by $0.7 million, or 1.9%, for the year ended December 31, 2025 compared to the year ended December 31, 2024. Total company income before special items (non-GAAP) increased by $8.8 million or 19.0% for year ended December 31, 2025 as compared to the year ended December 31, 2024. Operating expenses, excluding special items (non-GAAP), as a percentage of revenue, was 20.7% for the year ended December 31, 2025 compared to 20.0% for the year ended December 31, 2024. The primary driver for the increase in Total Company income before special items was increased gross profit margins on sales in 2025 compared to 2024 and ongoing initiatives to reduce overhead costs. We incurred environmental expense for the years ended December 31, 2025 and 2024 related to the DEQ Proceeding (as defined herein). See Note 17 - Commitments and Contingencies, Legal Proceedings and Government Investigations, for additional detail. Total Company income before special items as a percentage of revenue increased by 130 basis points to 7.6% for the year ended December 31, 2025, from 6.3% for the year ended December 31, 2024.
Interest Expense
Interest expense was $14.6 million and $17.1 million for the years ended December 31, 2025 and December 31, 2024, respectively. The decrease was due to lower interest rates in the current period as compared to the prior year, effectively offsetting higher average borrowings for the year ended December 31, 2025 as compared to the year ended December 31, 2024.
Income Taxes
Our effective income tax rate was approximately 24.7% for the year ended December 31, 2025, compared to 21.8% for the year ended December 31, 2024.
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. Our effective income tax rate may fluctuate over the next few years due to many variables including the amount and future geographic distribution of our pre-tax income, changes resulting from our acquisition strategy, and increases or decreases in our permanent differences.
On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), was enacted, which includes a broad range of tax reform provisions. These tax reform provisions include the extension and modification of certain provisions of the Tax Cuts and Jobs Act and is effective for calendar year 2025. The changes include, but are not limited to, immediate expensing of domestic research and development expenditure, the restoration of 100% bonus depreciation, and an EBITDA-based interest expense limitation. These provisions did not have a material impact on the Company's financial statements for the year ended December 31, 2025.
Liquidity and Capital Resources
Overview
We have funded our operations from cash provided from operations, bank borrowings and lease financings. Management believes that our existing cash and cash equivalents, anticipated cash flows from operating activities, and available borrowings under our Credit Agreement will be sufficient to meet anticipated cash needs over the next 12 months and for the foreseeable future. We generated operating cash flows of $33.0 million and $50.1 million for the years ended December 31, 2025 and 2024, respectively. Capital expenditures for the purchase of property, plant and equipment and of intangible assets was $29.2 million and $23.0 million for the years ended December 31, 2025 and 2024, respectively.
Cash Flows Table
The following table summarizes our cash flows for the years ended December 31, 2025 and 2024:
| For the year ended December 31, | ||||||||||||||
| ($ in thousands) | 2025 | 2024 | ||||||||||||
| Net cash provided by (used in): | ||||||||||||||
| Operating activities | $ | 32,981 | $ | 50,129 | ||||||||||
| Investing activities | (25,122) | (21,366) | ||||||||||||
| Financing activities | (595) | (27,398) | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 2,427 | (694) | ||||||||||||
| Net change in cash and cash equivalents | $ | 9,691 | $ | 671 | ||||||||||
Cash Flows from Operating Activities
Cash provided by operating activities for the year ended December 31, 2025 was $33.0 million, a decrease of $17.1 million from the prior year period. The decrease was mainly attributable to an increase in accounts receivable, net, in the current year as compared to the prior year.
Cash Flows from Investing Activities
Net cash used in investing activities for the year ended December 31, 2025 was $25.1 million, an increase of $3.8 million used in investing activities from the prior year period. The Company used $6.2 million more cash for purchases of property, plant and equipment and intangible assets in 2025 compared to 2024, partially offset by an increase in proceeds received from the sale of equipment.
Cash Flows from Financing Activities
Net cash used in financing activities for the year ended December 31, 2025 was $0.6 million, compared to $27.4 million for the year ended December 31, 2024. Net repayment of our revolving credit facility and term loan was approximately $28.3 million lower in 2025 compared to 2024. In addition, for the year ended December 31, 2025, we incurred approximately $0.4 million more in taxes paid related to net share settlement of share-based awards than the prior period.
Effect of Exchange Rate Changes on Cash and Cash Equivalents
The effect of exchange rate changes on our cash and cash equivalents was an increase of $2.4 million for the year ended December 31, 2025, compared to a decrease of$0.7 millionfor the year ended December 31, 2024. The primary driver of the change was foreign currency fluctuations during the year ended December 31, 2025 related to the Euro and the US Dollar.
Cash Balance and Credit Facility Borrowings
As of December 31, 2025, we had cash and cash equivalents totaling $28.0 million and available borrowing capacity of up to $107.4 million under the revolving credit facility under our Credit Agreement. Borrowings of $176.0 million and letters of credit of $3.4 million were outstanding under the Credit Agreement at December 31, 2025. We finance our operations primarily through our existing cash balances, cash collected from operations, bank borrowings and lease financing. We believe these sources are sufficient to fund our operations for the foreseeable future. As of December 31, 2025, we were in compliance with the terms of the Credit Agreement and will continuously monitor our compliance with the covenants contained in the Credit Agreement.
The terms of our Credit Agreement are described in Note 10 - Long-Term Debt of the notes to the consolidated financial statements, under the heading "Senior Credit Facility".
Liquidity and Capital Resources Outlook
Future Sources of Cash
We expect our future sources of cash to include cash flow generated from our operating activities and borrowings under our Credit Agreement. Our revolving credit facility is available for cash advances required for working capital and for letters of credit to support our operations. Acquisitions, if any, are funded through available cash and borrowings under the Credit Agreement.
Future Uses of Cash
We expect our future uses of cash will primarily be for repayment of debt, purchases or manufacture of field-testing equipment to support growth, additional investments in technology and software products and the replacement of existing assets and equipment used in our operations. We often make purchases to support new sources of revenues, particularly in our North America segment. In addition, we annually fund a certain amount of replacement equipment, including a portion of our fleet vehicles. We historically spend approximately 2% to 4% of our total revenues on capital expenditures, excluding acquisitions, and expect to fund these expenditures through a combination of cash and lease financing. Our cash capital expenditures, excluding acquisitions, for each of the years ended December 31, 2025 and 2024 were approximately 4.0% and 3.2% of revenues, respectively. We continue to take steps to reduce spending and preserve cash.
Our Credit Agreement does not limit our ability to acquire other businesses or companies except for certain provisions as described within Note 10 - Long-Term Debt of the notes to the consolidated financial statements.Our future capital spending may increase as we pursue growth opportunities and acquire additional equipment to meet or pursue business opportunities. Other investments in infrastructure, training and software may also be required to match our growth, but we plan to continue using a disciplined approach to building our business. In addition, we will use cash to fund our operating leases, finance leases, long-term debt repayments and various other obligations as they arise as noted within Note 10 - Long-Term Debt and Note 16 - Leases of the notes to the consolidated financial statements.
We also expect to use cash to support our working capital requirements for our operations, particularly in the event of further growth and due to the impacts of seasonality on our business. Our future working capital requirements will depend on many factors, including the rate of our revenue growth, our introduction of new solutions and enhancements to existing solutions and our expansion of sales and marketing and product development activities. To the extent that our cash and cash equivalents and future cash flows from operating activities are insufficient to fund our future activities, we may need to raise additional funds through bank credit arrangements, or public or private equity, or debt financings. We also may need to raise additional funds in the event we determine in the future to effect one or more acquisitions of businesses, technologies or products that will complement our existing operations. In the event additional funding is required, we may not be able to obtain bank credit arrangements or effect an equity or debt financing on acceptable terms.
Off-Balance Sheet Arrangements
During the years ended December 31, 2025 and 2024, 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
The preparation of financial statements in accordance with U.S. GAAP requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. We have established policies and control procedures intended to ensure that estimation methods, including any judgments made as part of such methods, are well-controlled, independently reviewed and applied consistently from period to period. The accounting policies that we believe require more significant estimates and assumptions include revenue recognition, acquisitions, long-lived assets and goodwill. We base our estimates and assumptions on historical experience, known or expected trends and various other assumptions that we believe to be reasonable. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates, which may cause our future results to be significantly affected.
We believe that the following critical accounting policies comprise the more significant estimates and assumptions used in the preparation of our consolidated financial statements.
Revenue Recognition
The majority of our revenues are derived from providing services on a time and material basis and are short-term in nature. We account for revenue in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC Topic 606. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and is, therefore, not distinct. We provide highly integrated and bundled inspection services to our customers. Some of our contracts have multiple performance obligations, most commonly due to the contract providing both goods and services. For contracts with multiple performance obligations, we allocate the contract's transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is a relative selling price based on price lists.
Contract modifications are not routine in the performance of our contracts. Generally, when contracts are modified, the modification is to account for changes in scope to the goods and services that are provided. In most instances, contract modifications are for goods or services that are distinct, and, therefore, are accounted for as a separate contract.
Our performance obligations are satisfied over time as work progresses or at a point in time. The majority of our revenue recognized over time as work progresses is related to our service deliverables, which includes providing testing, inspection and mechanical services to our customers. Revenue is recognized over time based on time and material incurred to date which best portrays the transfer of control to the customer. We also utilize an available practical expedient that provides for revenue to be recognized in an amount that corresponds directly with the value to the customer of the entity's performance completed to date.
Fixed fee arrangements are determined based on expected labor, material and overhead to be consumed on fulfillment of such services. Revenue is recognized on a cost-to-cost method tracked on an input basis.
The majority of our revenue recognized at a point in time is related to product sales when the customer obtains control of the asset, which is generally upon shipment to the customer. Contract costs include labor, material and overhead.
We expect any significant remaining performance obligations to be satisfied within one year.
Contract Estimates
The majority of our revenues are short-term in nature. We have many Master Service Agreements ("MSAs") that specify an overall framework and contract terms, where we and our customers agree upon services or products to be provided. The actual contracting to provide services or furnish products are triggered by a work order, purchase order, or some similar document issued pursuant to an MSA which sets forth the scope of services and/or identifies the products to be provided. From time to time, we may enter into long-term contracts, which can range from several months to several years. Revenue on such long-term contracts is recognized as work is performed based on total costs incurred to date in relation to the total estimated costs for the performance of the contract at completion. This includes contract estimates of costs to be incurred for the performance of the contract. Cost estimation is based upon the professional knowledge and experience of our project managers, engineers and financial professionals. Factors that are considered in estimating the work to be completed include the availability of materials, the effect of any delays in our project performance and the recoverability of any claims. Whenever revisions of estimates, contract costs and/or contract values indicate that the contract costs will exceed estimated revenues, thus creating a loss, a provision for the total estimated loss is recorded in that period.
Long-Lived Assets
We perform a review of long-lived assets (or asset groups) for impairment when events or changes in circumstances indicate the carrying value of such assets may not be recoverable. If an indication of impairment is present, we compare the estimated undiscounted future net cash flows to be generated by the asset (or asset group) to its carrying amount. If the undiscounted future net cash flows are less than the carrying amount of the asset (or asset group), we record an impairment loss equal to the excess of the asset's carrying amount over its fair value. We estimate fair value based on valuation techniques such as a discounted cash flow analysis or a comparison to fair values of similar assets. As of December 31, 2025 and December 31, 2024, we had $93.2 million and $80.9 million in net property, plant and equipment, respectively, and $38.4 million and $39.7 million in intangible assets, net, respectively.
Goodwill
Goodwill represents the excess purchase price of acquired businesses over the fair values attributed to underlying net tangible assets and identifiable intangible assets. We test goodwill for impairment at a "reporting unit" level (which for us is represented by (i) our North America segment, (ii) our Products and Systems segment, (iii) the European component of our International segment and (iv) the Brazilian component of our International segment). Our annual impairment test is conducted on the first day of our fourth quarter, which is October 1. Goodwill is also tested for impairment whenever an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
In testing for goodwill impairment, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, we conclude that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing a quantitative impairment test is not necessary. If we conclude otherwise, we are required to perform a quantitative impairment test.
An impairment will be recorded in the amount that the fair value is less than the carrying value. We consider the income and market approaches to estimating the fair value of our reporting units, which requires significant judgment in evaluation of economic and industry trends, estimated future cash flows, discount rates and other factors. Sustained declines in our stock price and related market capitalization could impact key assumptions in the overall estimated fair values of our reporting units and could result in non-cash impairment charges that could be material to our consolidated balance sheet or results of operations.
During the third quarter of 2023, a triggering event was identified within the Company's reporting units within the International segment due to decreased gross margin in the current period as a result of inflationary pressures and rising energy costs
impacting the International reporting units' operations. As a result, the Company performed an interim quantitative goodwill impairment test.
In performing the interim quantitative goodwill impairment test and consistent with prior practice, the Company determined the fair value of each of the reporting units using a combination of the income approach and the market approach by assessing each of these valuation methodologies based upon availability and relevance of comparable company data and determining the appropriate weighting.
Under the income approach, the fair value for each of the reporting units was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate.
The market approach valuation was derived from metrics of publicly traded companies or historically completed transactions of comparable businesses. The selection of comparable businesses was based on the markets in which the reporting units operate, considering risk profiles, size, geography, and diversity of products and services.
Based upon the results of the interim quantitative goodwill impairment test, the Company recorded an impairment charge of $13.8 million within the International reporting unit during the third quarter of 2023. The impairment was calculated based on the difference between the estimated fair value and the carrying value of the reporting units. Any significant adverse changes in future periods to the Company's internal forecasts or the external market conditions, if any, could reasonably be expected to negatively affect its key assumptions and may result in future goodwill impairment charges which could be material.
We elected to perform a quantitative assessment of goodwill on October 1, 2025. Our quantitative assessment considered relevant events and circumstances occurring since our last quantitative goodwill impairment test performed as of October 1, 2024. Specifically, we considered changes in macroeconomic conditions, industry and market conditions, our internal forecasts of future revenue and expenses, our stock price, any significant events affecting the Company and actual changes in the carrying values of our net assets. After considering all positive and negative evidence for the assessment as of October 1, 2025, we concluded that it was not more likely than not that our carrying values exceeded fair values and as such, no additional impairment was indicated.
Additionally, as of December 31, 2025, there are no indicators of an impairment. See Note 7 - Goodwillof the notes to the consolidated financial statements for additional information.
Recent Accounting Pronouncements
For information about recent accounting pronouncements, see Note 1 - Summary of Significant Accounting Policies and Practicesof the notes to the consolidated financial statements.
MISTRAS Group Inc. published this content on March 11, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 11, 2026 at 18:37 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]