MISTRAS Group Inc.
11/06/2025 | Press release | Distributed by Public on 11/06/2025 13:29
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following Management's Discussion and Analysis ("MD&A") provides a discussion of our results of operations and financial position for the three and nine months ended September 30, 2025 and 2024. The MD&A should be read together with our Unaudited Condensed Consolidated Financial Statements and related notes included in Item 1 in this Quarterly Report on Form 10-Q (the "Quarterly Report") and our audited consolidated financial statements and related notes included in our 2024 Annual Report. Unless otherwise specified or the context otherwise requires, "Mistras," "the Company," "we," "us" and "our" refer to Mistras Group, Inc. and its consolidated subsidiaries. The 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 Policies and Estimates
Forward-Looking Statements
This Quarterly Report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934 ("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.
In some cases, you can identify forward-looking statements by terminology, such as "goals," or "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "may," "could," "should," "would," "predicts," "appears," "projects," or the negative of such terms or other similar expressions. You are urged not to place undue reliance on any such forward-looking statements, any of which may turn out to be wrong due to inaccurate assumptions, various risks, uncertainties or other factors known and unknown. Factors that could cause or contribute to differences in results and outcomes from those in our forward-looking statements, including any impacts from the imposition of tariffs or other trade restrictions, changes to the
U.S. trade policy and impacts from the recent U.S federal government shutdown, include, without limitation, those discussed in the "Business-Forward-Looking Statements," and "Risk Factors" sections of our 2024 Annual Report as well as those discussed in this Quarterly Report and in our other filings with the SEC. In addition, there are various developments discussed below which could create risks and uncertainty about our business, results of operations or liquidity.
Overview
The Company is a global leader in technology-enabled industrial asset integrity solutions, serving critical industries including oil & gas, aerospace & defense, power & utilities, manufacturing, and civil infrastructure.
The Company provides a diversified portfolio of products and services, ranging from advanced non-destructive testing ("NDT") and pipeline inspections to real-time condition monitoring, maintenance planning, and specialized engineering, powered by a proprietary management software suite that centralizes integrity data for predictive analytics and benchmark analysis. With a long-standing track record of innovation and deep industry expertise, the Company helps clients reduce risk, extend asset life, and optimize operational performance.
The Company enhances value for its clients by integrating asset protection throughout supply chains and centralizing integrity data through a suite of Industrial Internet of Things ("IoT")-connected digital software and monitoring solutions, including OneSuite™, which serves as an ecosystem platform, pulling together all of the Company's software and data services capabilities, for the benefit of its customers.
The Company's core capabilities also include NDT field inspections enhanced by advanced robotics, laboratory quality control and assurance testing, sensing technologies and NDT equipment, asset and mechanical integrity engineering services, and light mechanical maintenance and access services.
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
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 in oil and gas, aerospace and defense, industrials, power generation and transmission (including alternative and renewable energy), other process industries and infrastructure, research and engineering and other industries.
We have focused on providing our advanced asset protection solutions to our customers using proprietary, technology-enabled software and testing instruments, including those developed by our Products and Systems segment. 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. Among other things, we expect the timing of our oil and gas customers inspection spend to be impacted by oil price fluctuations.
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.
Recent Developments
Our cash position and liquidity remains strong. As of September 30, 2025, our cash balance was approximately $27.8 million and, with our Credit Agreement, provides us with significant liquidity.
As discussed above in Note 1 - Description of Business and Basis of Presentation, we changed the presentation of certain costs incurred at our operational labs as well as for certain lab personnel on our Unaudited Condensed Consolidated Statements of Income. This voluntary change in classification of certain overhead and personnel costs, which were determined to be directly related to the delivery of our services, resulted in a decrease in from selling, general and administrative expenses and an offsetting increase in cost of revenue. We believe this presentation is preferable as it will provide greater transparency regarding our cost of revenue and better align with how our business is managed.
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
We continue to monitor the impact that tariffs or trade barriers may have on our business, including recent U.S. tariffs imposed or threatened to be imposed on China, Canada, Mexico and other countries and any retaliatory actions taken by such countries. The tariffs have not had a material effect on our business or results of operations to date in 2025, but they could result in additional costs to us and could impact the import of materials by our customers which are inspected by us.
In the third quarter of 2025, the price of crude oil continued to decline due to multiple macroeconomic and geopolitical forces. The decline in crude oil prices has had an adverse impact on our field related services that we provide to the oil and gas sector, which could continue if prices remain low.
Note About Non-GAAP Measures
The Company prepares its consolidated financial statements in accordance with GAAP. In this MD&A under the heading "Income from Operations", the non-GAAP financial performance measure "Income from operations before special items" is used for each of our three operating segments, "Corporate and Eliminations" and the "Total Company", with tables reconciling the measure to a financial measure under GAAP. This presentation excludes from "Income from Operations" (a) reorganization and other costs, which includes items such as severance, labor relations matters and asset and lease termination costs, (b) environmental expense, which relates to costs associated with the environmental matter at the Phoenix lab operated by Mistras Arizona, as described in Note 13 to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report, and (c) legal settlement and insurance recoveries, net. These adjustments have been excluded from the GAAP measure because these expenses and credits are not related to our or any individual segment's core business operations. 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 before special items excludes the identified adjustments, which provides additional tools to compare our core business operating performance on a consistent basis and measure underlying trends and results in our business. Income before special items is not used to determine incentive compensation for executives or employees, nor is it a replacement for the reported GAAP financial performance and/or necessarily comparable to the non-GAAP financial measures of other companies. Any measure that eliminates the foregoing items has material limitations as a performance or liquidity measure and should not be considered alternatives to net income or any other measures derived in accordance with GAAP. Because Income from operations before special items may not be calculated in the same manner by all companies, this measure may not be comparable to other similarly titled measures used by other companies.
Results of Operations
Condensed consolidated results of operations for the three and nine months ended September 30, 2025 and 2024 were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue | $ | 195,549 | $ | 182,694 | $ | 542,569 | $ | 556,909 | |||||||||||||||
| Gross profit | 58,193 | 48,905 | 153,030 | 146,397 | |||||||||||||||||||
| Gross profit as a % of Revenue | 29.8 | % | 26.8 | % | 28.2 | % | 26.3 | % | |||||||||||||||
| Income from operations | 20,381 | 11,858 | 27,797 | 29,368 | |||||||||||||||||||
| Income from operations as a % of Revenue | 10.4 | % | 6.5 | % | 5.1 | % | 5.3 | % | |||||||||||||||
| Income before provision for income taxes | 17,000 | 9,034 | 16,853 | 17,702 | |||||||||||||||||||
| Net income | 13,203 | 6,416 | 13,161 | 13,793 | |||||||||||||||||||
| Net income attributable to Mistras Group, Inc. | $ | 13,108 | $ | 6,401 | $ | 12,939 | $ | 13,765 | |||||||||||||||
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
Revenue
Revenue was $195.5 million for the three months ended September 30, 2025, an increase of $12.9 million, or 7.0%, compared with the three months ended September 30, 2024.
Revenue by segment for the three and nine months ended September 30, 2025 and 2024 were as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| North America | $ | 160,609 | $ | 149,845 | $ | 437,503 | $ | 456,588 | |||||||||||||||
| International | 35,521 | 33,662 | 107,812 | 100,972 | |||||||||||||||||||
| Products and Systems | 4,036 | 3,276 | 9,867 | 9,860 | |||||||||||||||||||
| Corporate and eliminations | (4,617) | (4,089) | (12,613) | (10,511) | |||||||||||||||||||
| Total | $ | 195,549 | $ | 182,694 | $ | 542,569 | $ | 556,909 | |||||||||||||||
Three Months
In the three months ended September 30, 2025, total revenue increased 7.0% versus the prior year comparable period due predominantly to a mid-single-digit organic increase driven by increases in the Oil and Gas and Power Generation markets. North America segment revenue increased 7.2%, driven predominantly by increases in the Oil and Gas and Power Generation markets as a result of strong turnaround activity and market demand. International segment revenue increased 5.5%, due predominantly to a mid-single-digit favorable impact of foreign exchange rates. Products and Systems segment revenue increase by 23.2%, due to increased sales volume and shipments as compared to the prior year comparable period.
Oil and gas customer revenue comprised approximately 54% of total revenue for the three months ended September 30, 2025 and 2024, respectively. Aerospace and defense customer revenue comprised approximately 12% of total revenue for the three months ended September 30, 2025 and 2024, respectively. The Company's top ten customers comprised approximately 36% of total revenue for the three months ended September 30, 2025, as compared to 35% for the three months ended September 30, 2024, with no customer accounting for 10% or more of total revenue in either three-month period.
Nine Months
In the nine months ended September 30, 2025, total revenue decreased 2.6% versus the prior year comparable period due predominantly to a low single-digit organic decrease. North America segment revenue decreased 4.2%, driven predominantly by a decrease in our Oil and Gas market revenue due to multiple macroeconomic and geopolitical forces which slowed global oil demand growth and consequently, the demand for inspection services from Oil and Gas market customers. International segment revenue increased 6.8%, due predominantly to low single-digit organic growth and low single-digit favorable impact of foreign exchange rates. Products and Systems segment revenue was flat as compared to the prior year comparable period.
Oil and gas customer revenue comprised approximately 56% and 58% of total revenue for the nine months ended September 30, 2025 and 2024, respectively. Aerospace and defense customer revenue comprised approximately 13% and 12% of total revenue for the nine months ended September 30, 2025 and 2024, respectively. The Company's top ten customers comprised approximately 36% of total revenue for the nine months ended September 30, 2025 and 2024, respectively, with no customer accounting for 10% or more of total revenue in either nine-month period.
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenue by type | |||||||||||||||||||||||
| Field Services | $ | 125,873 | $ | 127,246 | $ | 359,532 | $ | 388,129 | |||||||||||||||
| Laboratories | 16,838 | 15,014 | 47,549 | 49,147 | |||||||||||||||||||
| Data Analytical Solutions | 19,600 | 17,876 | 51,911 | 51,757 | |||||||||||||||||||
| Other | 33,238 | 22,558 | 83,577 | 67,876 | |||||||||||||||||||
| Total | $ | 195,549 | $ | 182,694 | $ | 542,569 | $ | 556,909 | |||||||||||||||
In presenting the allocation of revenue by type in the table above, management makes certain assumptions in its allocation of revenue from laboratories that provide more than one type of service. The allocation methodology and assumptions made are consistent for the years presented.
Field Services revenue is comprised of revenue derived primarily by technicians performing asset inspections and maintenance services for our customers at locations other than our properties. Field Services revenue decreased by $1.4 million for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 and decreased by $28.6 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to decreases in sales volume in our oil and gas, industrials and infrastructure, and research and engineering end markets within our North America segment and our oil and gas end market within our International segment.
Laboratory revenue is comprised of quality assurance inspections of components and materials at our in-house laboratory facilities. Laboratory revenue increased by $1.8 million for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 primarily due to increased sales volumes in our aerospace and defense end market in our North America segment. Laboratory revenue decreased by $1.6 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to lower volumes in our laboratory testing inspection services as compared to the prior year comparable period.
Data Analytical Solutions revenue is comprised of revenue derived from data software licenses and subscriptions, implementation services and analytics which offer insights and generate value from asset protection. Data Analytical Solutions revenue is derived from work performed by our employees in our facilities, or at customer locations. Data Analytical Solutions revenue increased by $1.7 million for the three months ended September 30, 2025 as compared to the prior year comparable period, and increased by $0.2 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to increased sales volume within PCMS and other Data Analytical Solutions offerings within our North America segment.
Other revenue is comprised of locations that perform both asset inspection services and testing of components and materials at our laboratories. Other revenue increased by $10.7 million for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 and increased by $15.7 million for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024, primarily due to increased sales within our mixed service offering facilities.
Gross Profit
Gross profit, which reflects the reclassification of certain overhead and personnel costs from selling, general and administrative
expenses to cost of revenue (see Note 1 - Description of Business and Basis of Presentation), increased by $9.3 million, or 19.0%, in the three months ended September 30, 2025 versus the prior year comparable period primarily due to an improved business mix and operating efficiencies.
Gross profit by segment for the three and nine months ended September 30, 2025 and 2024 was as follows:
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
|
Gross profit (1)
|
|||||||||||||||||||||||
| North America | $ | 45,103 | $ | 37,173 | $ | 115,653 | $ | 112,423 | |||||||||||||||
| % of segment revenue | 28.1 | % | 24.8 | % | 26.4 | % | 24.6 | % | |||||||||||||||
| International | 11,190 | 9,912 | 32,548 | 29,068 | |||||||||||||||||||
| % of segment revenue | 31.5 | % | 29.4 | % | 30.2 | % | 28.8 | % | |||||||||||||||
| Products and Systems | 2,192 | 1,802 | 5,152 | 4,836 | |||||||||||||||||||
| % of segment revenue | 54.3 | % | 55.0 | % | 52.2 | % | 49.0 | % | |||||||||||||||
| Corporate and eliminations | (292) | 18 | (323) | 70 | |||||||||||||||||||
| $ | 58,193 | $ | 48,905 | $ | 153,030 | $ | 146,397 | ||||||||||||||||
| % of total revenue | 29.8 | % | 26.8 | % | 28.2 | % | 26.3 | % | |||||||||||||||
(1)As noted in Note 1, the Company changed the presentation of certain costs incurred at its operational labs as well as the costs for certain personnel that indirectly support the Company's delivery of services on its Unaudited Condensed Consolidated Statements of Income. This voluntary change in classification of certain overhead and employee costs, which, were determined to be directly related to the Company's delivery of services, resulted in a decrease in Selling, general and administrative expenses and an offsetting increase in Cost of revenue. The impact on gross profit of this change in classification for the year ended December 31, 2024 was approximately $20.9 million.
Three Months
Gross profit margin was 29.8% and 26.8% for the three-month periods ended September 30, 2025 and 2024, respectively. Gross profit margin for the North America segment increased by 3.3% for the three months ended September 30, 2025 as compared to the prior year comparable period primarily due to an improved business mix and operating efficiencies. International segment realized a 2.1% increase in gross profit margin to 31.5% for the three months ended September 30, 2025 as compared to the prior year comparable period primarily due to a favorable sales mix in the current year period. Products and Systems segment gross margin had a decrease of 0.7% to 54.3% for the three months ended September 30, 2025 primarily due to a less favorable sales mix as compared to the prior period.
Nine Months
Gross profit margin was 28.2% and 26.3% for the nine-month periods ended September 30, 2025 and 2024, respectively. Gross profit margin for the North America segment realized a 1.8% increase in gross profit margin to 26.4% for the nine months ended September 30, 2025 as compared to the prior year comparable period primarily due to a favorable sales mix and operating efficiencies. International segment realized a 1.4% increase in gross profit margin to 30.2% for the nine months ended September 30, 2025 as compared to the prior year comparable period primarily due to a favorable sales mix. Products and Systems segment gross margin had an increase of 3.2% to 52.2% for the nine months ended September 30, 2025 primarily due to a favorable sales mix as compared to the prior period.
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
Operating Expenses
Operating expenses for the three and nine months ended September 30, 2025 and 2024 was as follows:
| Three months ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Selling, general and administrative expenses | $ | 33,478 | $ | 33,200 | $ | 108,923 | $ | 105,632 | |||||||||||||||
| Reorganization and other costs | 1,764 | 2,143 | 7,802 | 4,219 | |||||||||||||||||||
| Environmental expense | 199 | - | 1,257 | - | |||||||||||||||||||
| Legal settlement and insurance recoveries, net | - | (868) | - | (808) | |||||||||||||||||||
| Research and engineering | 210 | 241 | 778 | 816 | |||||||||||||||||||
| Depreciation and amortization | 2,161 | 2,331 | 6,473 | 7,170 | |||||||||||||||||||
| $ | 37,812 | $ | 37,047 | $ | 125,233 | $ | 117,029 | ||||||||||||||||
Three Months
Operating expenses increased $0.8 million, or 2.1%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Selling, general and administrative expenses increased $0.3 million during the three months ended September 30, 2025 compared to the three months ended September 30, 2024, due to strategic investments in our operations, partially offset by ongoing cost management activities. As discussed in Note 1 - Description of Business and Basis of Presentation, Selling, general and administrative expenses reflect the classification change for certain overhead and personnel costs from Selling, general and administrative expenses to Cost of revenue. Environmental expense increased by $0.2 million as compared to the prior year comparable period due to environmental costs incurred during the three months ended September 30, 2025, which were not incurred during the prior year comparable period. Reorganization and other costs decreased by $0.4 million to $1.8 million as compared to the prior year comparable period due to ongoing initiatives to reduce overhead costs. Depreciation and amortization decreased by $0.2 million during the three months ended September 30, 2025 compared to the three months ended September 30, 2024.
Nine Months
Operating expenses increased $8.2 million, or 7.0%, for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. Selling, general and administrative expenses increased $3.3 million during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, due to an unfavorable foreign exchange impact as compared to the prior year comparable period, partially offset by continued cost discipline and our focus on the calibration of our overhead costs relative to revenue achieved. As discussed in Note 1 - Description of Business and Basis of Presentation, Selling, general and administrative expenses reflect the classification change for certain overhead and personnel costs from Selling, general and administrative expenses to Cost of revenue. Environmental expense increased by $1.3 million as compared to the prior year comparable period due to environmental costs incurred during the nine months ended September 30, 2025, which were not incurred during the prior year comparable period. Reorganization and other costs increased by $3.6 million to $7.8 million as compared to the prior year comparable period due to ongoing initiatives to reduce overhead costs, and incremental costs of other related actions. Depreciation and amortization decreased by $0.7 million during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.
Mistras Group, Inc. 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 from operations to income (loss) from operations before special items for each of our three segments, Corporate and Elimination and for the Company in total:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| North America: | |||||||||||||||||||||||
| Income from operations (GAAP) | $ | 22,753 | $ | 17,455 | $ | 46,026 | $ | 49,742 | |||||||||||||||
| Reorganization and other costs | 283 | 835 | 2,754 | 927 | |||||||||||||||||||
| Legal settlement and insurance recoveries, net | - | (868) | - | (808) | |||||||||||||||||||
| Income from operations before special items (non-GAAP) | $ | 23,036 | $ | 17,422 | $ | 48,780 | $ | 49,861 | |||||||||||||||
| International: | |||||||||||||||||||||||
| Income from operations (GAAP) | $ | 3,838 | $ | 1,778 | $ | 8,923 | $ | 4,548 | |||||||||||||||
| Reorganization and other costs | 171 | 147 | 441 | 410 | |||||||||||||||||||
| Income from operations before special items (non-GAAP) | $ | 4,009 | $ | 1,925 | $ | 9,364 | $ | 4,958 | |||||||||||||||
| Products and Systems: | |||||||||||||||||||||||
| Income from operations (GAAP) | $ | 1,051 | $ | 670 | $ | 1,714 | $ | 1,479 | |||||||||||||||
| Reorganization and other costs | - | 182 | 151 | 184 | |||||||||||||||||||
| Income from operations before special items (non-GAAP) | $ | 1,051 | $ | 852 | $ | 1,865 | $ | 1,663 | |||||||||||||||
| Corporate and Eliminations: | |||||||||||||||||||||||
| Loss from operations (GAAP) | $ | (7,261) | $ | (8,045) | $ | (28,866) | $ | (26,401) | |||||||||||||||
| Environmental expense | 199 | - | 1,257 | - | |||||||||||||||||||
| Reorganization and other costs | 1,310 | 979 | 4,456 | 2,698 | |||||||||||||||||||
| Loss from operations before special items (non-GAAP) | $ | (5,752) | $ | (7,066) | $ | (23,153) | $ | (23,703) | |||||||||||||||
| Total Company: | |||||||||||||||||||||||
| Income from operations (GAAP) | $ | 20,381 | $ | 11,858 | $ | 27,797 | $ | 29,368 | |||||||||||||||
| Environmental expense | 199 | - | 1,257 | - | |||||||||||||||||||
| Reorganization and other costs | 1,764 | 2,143 | 7,802 | 4,219 | |||||||||||||||||||
| Legal settlement and insurance recoveries, net | - | (868) | - | (808) | |||||||||||||||||||
| Income from operations before special items (non-GAAP) | $ | 22,344 | $ | 13,133 | $ | 36,856 | $ | 32,779 | |||||||||||||||
See section Note About Non-GAAP Measuresin this Quarterly Report for an explanation of the use of non-GAAP measurements.
Three Months
For the three months ended September 30, 2025, income from operations (GAAP) increased $8.5 million or 71.9%, compared with the three months ended September 30, 2024, while income from operations before special items (non-GAAP) increased by $9.2 million, or 70.1%. As a percentage of revenue, income from operations before special items increased by 420 basis points to 11.4% in the three months ended September 30, 2025 compared to 7.2% in the three months ended September 30, 2024.
Nine Months
For the nine months ended September 30, 2025, income from operations (GAAP) decreased $1.6 million or 5.3%, compared with the nine months ended September 30, 2024, while income from operations before special items (non-GAAP) increased by $4.1 million, or 12.4%. As a percentage of revenue, income from operations before special items increased by 90 basis points to 6.8% in the nine months ended September 30, 2025 compared to 5.9% in the nine months ended September 30, 2024.
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
Interest Expense
Interest expense was approximately $3.4 million and $4.3 million for the three months ended September 30, 2025 and 2024, respectively. This decrease of $0.9 million in interest expense was a result of lower interest rates during the three months ended September 30, 2025 in comparison to the prior year comparable period. Interest expense was approximately $10.9 million and $13.1 million for the nine months ended September 30, 2025 and 2024, respectively. This decrease of $2.2 million in interest expense was a result of lower interest rates during the nine months ended September 30, 2025 in comparison to the prior year comparable period.
Income Taxes
Our effective income tax rate was approximately 22.3% and 29.0% for the three months ended September 30, 2025 and 2024, respectively. Our effective income tax rate was approximately 21.9% and 22.1% for the nine months ended September 30, 2025 and 2024, respectively.
The effective income tax rate for the three months ended September 30, 2025, was higher than the statutory rate primarily due to the impact of foreign currency losses. The effective income tax rate for the three months ended June 30, 2024 was higher than the statutory rate primarily due to the impact of an unfavorable discrete item related to stock compensation.
The effective income tax rate for the nine months ended September 30, 2025, was higher than the statutory rate primarily due to the impact of foreign currency losses. The effective income tax rate for the nine months ended September 30, 2024, was lower than the statutory rate primarily due to the reversal of valuation allowances.
Income tax expense varies as a function of pre-tax income and the level of non-deductible expenses, such as certain amounts of meals and entertainment expense, valuation allowances, and other permanent differences. 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. Effective for calendar year 2025. The changes include, but are not limited to, immediate expensing of domestic research and development expenditure, the restoration of 100% bonus depreciation, and an EBITDA-based interest expense limitation. These provisions did not have a material impact on the Company's financial statements for the nine months ended September 30, 2025.
Liquidity and Capital Resources
Cash flows are summarized in the table below:
|
Nine months ended September 30,
|
|||||||||||
| 2025 | 2024 | ||||||||||
| Net cash (used in) provided by: | |||||||||||
| Operating activities | $ | 843 | $ | 24,471 | |||||||
| Investing activities | (18,964) | (17,152) | |||||||||
| Financing activities | 26,216 | (6,247) | |||||||||
| Effect of exchange rate changes on cash | 1,393 | 1,642 | |||||||||
| Net change in cash and cash equivalents | $ | 9,488 | $ | 2,714 | |||||||
Cash Flows from Operating Activities
During the nine months ended September 30, 2025, cash provided by operating activities was $0.8 million, representing a year-over-year decrease of $23.6 million, or 97%. This decrease was primarily attributable to an increase in days sales outstanding and movements in working capital, as compared to the prior year comparable period.
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
Cash Flows from Investing Activities
During the nine months ended September 30, 2025, cash used in investing activities was $19.0 million, representing a $1.8 million increase compared to the prior year comparable period, primarily attributable to increased expenditures for property, plant, and equipment.
Cash Flows from Financing Activities
Net cash provided by financing activities was $26.2 million for the nine months ended September 30, 2025, compared to net cash used in financing activities of $6.2 million for the nine months ended September 30, 2024. During the nine months ended September 30, 2025, net borrowings of debt were approximately $32.7 million higher than the prior year comparable period resulting in net debt borrowings during the period. The increase in net cash provided by financing activities is partially offset by $0.2 million more in taxes paid related to net share settlement of share-based awards during the nine months ended September 30, 2025.
Effect of Exchange Rate Changes on Cash and Cash Equivalents
The effect of exchange rate changes on our cash and cash equivalents was an increase of $1.4 million in the nine months ended September 30, 2025, compared to an increase of $1.6 million for the nine months ended September 30, 2024.
Cash Balance and Credit Facility Borrowings
As of September 30, 2025, we had cash and cash equivalents totaling $27.8 million and $86.4 million of unused commitments under our Credit Agreement with borrowings of $200.1 million and $3.4 million of letters of credit outstanding. We finance operations primarily through our existing cash balances, cash collected from operations, bank borrowings and capital lease financing. We believe these sources are sufficient to fund our operations for the foreseeable future.
As of September 30, 2025, we were in compliance with the terms of the Credit Agreement and will continuously monitor our compliance with the covenants contained in the Credit Agreement. The Company believes that it is probable that the Company will be able to comply with the financial covenants in the Credit Agreement and that sufficient credit remains available under the Credit Agreement to meet the Company's liquidity needs. However, such matters cannot be predicted with certainty.
The terms of our Credit Agreement are described in Note 11 - Long-Term Debt of the Notes to the Unaudited Condensed Consolidated Financial Statements, under the heading "Senior Credit Facility".
Contractual Obligations
There have been no significant changes in our contractual obligations and outstanding indebtedness as disclosed in the 2024 Annual Report.
Off-balance Sheet Arrangements
During the nine months ended September 30, 2025, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
There have been no significant changes to our critical accounting policies and estimates from the information provided in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in the 2024 Annual Report.
MISTRAS Group Inc. published this content on November 06, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 06, 2025 at 19:29 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]