MISTRAS Group Inc.
05/07/2026 | Press release | Distributed by Public on 05/07/2026 12:53
Quarterly Report for Quarter Ending March 31, 2026 (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 months ended March 31, 2026 and 2025. The MD&A should be read together with our Unaudited Condensed Consolidated Financial Statements and related notes included in Item 1 in this Quarterly Report on Form 10-Q (the "Quarterly Report") and our audited consolidated financial statements and related notes included in our 2025 Annual Report. 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 increases or changes in tariffs, trade restrictions or taxes; supply chain disruptions resulting from geopolitical instabilities and disputes (including those related to the wars in the Middle East and Ukraine); other impacts from the wars in the Middle East and Ukraine and related economic volatility and uncertainty resulting therefrom, include, without limitation, those discussed in the "Business-Forward-Looking Statements," and "Risk Factors" sections of our 2025 Annual Report as well as those discussed in this Quarterly Report and in our other filings with the SEC. In addition, there are various developments discussed below which could create risks and uncertainty about our business, results of operations or liquidity.
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 customers by integrating asset integrity protection throughout supply chains and centralizing integrity data through a suite of Industrial Internet of Things ("IoT")-connected software and monitoring solutions, including OneSuite®, which serves as a cloud-based ecosystem that pulls together the Company's software and data services capabilities. This integrated approach enables customers to make data-driven decisions that improve asset reliability, enhance safety, reduce operational risk, and optimize performance across the asset lifecycle.
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
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.
Our operations consist of three reportable segments: North America, International, and Products and Systems.
•North America provides asset protection solutions predominantly in North America, with the largest concentration in the United States, followed by Canada, consisting primarily of NDT, inspection, mechanical and engineering services that are used to evaluate the safety, structural integrity and reliability of critical energy, industrial and public infrastructure and commercial aerospace components. Software, digital and data services are included in this segment.
•International offers services, products and systems similar to those of the other segments to select markets within Europe, the Middle East, Africa, Asia and South America, but not to customers in China and South Korea, which are served by the Products and Systems segment.
•Products and Systems designs, 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, 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.
Recent Developments
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
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(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. In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act ("IEEPA"), which the U.S. government relied on to impose certain tariffs, does not authorize the administration to impose tariffs. On March 4, 2026, the U.S. Court of International Trade ordered the U.S. Customs and Border Protection ("CBP") to process refunds of the IEEPA tariffs, although the Court immediately suspended the order while the CBP determines a refund process. The IEEPA tariffs remain subject to ongoing litigation between the administration and other parties. In response to the U.S. Supreme Court ruling mentioned above, the administration announced plans to implement new tariffs under alternative statutory authority. The full impact of the U.S. Supreme Court's ruling and the administration's response, including the timing and extent of any refunds and the impact of the new tariffs, remain uncertain. Tariffs and trade barriers have not had a material effect on our business or results of operations during 2026 to date. However, new tariffs or trade measures could result in increased costs to us or our suppliers and could impact the import of materials by our customers, including materials subject to our inspection and testing services, which could adversely affect demand for our services.
Geopolitical tensions in the Middle East, including the conflict involving the United States and Iran, have contributed to increased volatility in global energy markets and broader macroeconomic uncertainty. The conflict in the Middle East has significantly reduced the export of oil and natural gas from the Persian Gulf, creating upward pressure on oil and natural gas prices, and has also disrupted and increased the costs of certain other supplies. Fluctuations in crude oil and natural gas prices may influence capital spending and maintenance activity by customers in the oil and gas sector, which could affect demand for certain of our services, particularly field inspection and asset integrity solutions. Additionally, continued instability in the region could contribute to supply chain disruptions, changes in foreign currency exchange rates, and delays in customer projects. While we have not experienced material impacts to date, the situation remains dynamic, and we continue to monitor developments and assess potential impacts on our operations, financial condition, and results of operations.
Note About Non-GAAP Measures
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, and (b) environmental expense, which relates to costs associated with the environmental matter at the Phoenix lab operated by Mistras Arizona, as described in Note 13 to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report. These adjustments have been excluded from the GAAP measure because these expenses and credits are not related to our or any individual segment's core business operations. 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.
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
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, | |||||||||||
| 2026 | 2025 | ||||||||||
| Revenue | $ | 169,034 | $ | 161,615 | |||||||
| Gross profit | 44,732 | 40,892 | |||||||||
| Gross profit as a % of Revenue | 26.5 | % | 25.3 | % | |||||||
| Income (loss) from operations | 4,682 | (1,012) | |||||||||
| Income (loss) from operations as a % of Revenue | 2.8 | % | (0.6) | % | |||||||
| Income (loss) before provision for income taxes | 2,735 | (4,336) | |||||||||
| Net income (loss) | 2,357 | (3,168) | |||||||||
| Net income (loss) attributable to Mistras Group, Inc. | $ | 2,388 | $ | (3,186) | |||||||
Revenue
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, | |||||||||||
| 2026 | 2025 | ||||||||||
| Revenue | |||||||||||
| North America | $ | 135,321 | $ | 128,902 | |||||||
| International | 36,290 | 33,214 | |||||||||
| Products and Systems | 2,653 | 3,091 | |||||||||
| Corporate and eliminations | (5,230) | (3,592) | |||||||||
| Total | $ | 169,034 | $ | 161,615 | |||||||
Three Months
In the three months ended March 31, 2026, total revenue increased 4.6% versus the prior year comparable period due predominantly to a low-single-digit organic increase driven by increases in the aerospace and defense, power generation and transmission, infrastructure, research, and engineering, and petrochemical end markets. North America segment revenue increased 5.0%, driven predominantly by increases in the aerospace and defense, power generation and transmission, infrastructure, research, and engineering and petrochemical end markets as a result of strong market demand. International segment revenue increased 9.3%, due predominantly to a low-double-digit favorable impact of foreign exchange rates. Products and Systems segment revenue decreased by 14.2%, due to decreased sales volume and shipments as compared to the prior year comparable period.
Oil and gas customer revenue comprised approximately 51% and 60% of total revenue for the three months ended March 31, 2026 and 2025, respectively. Aerospace and defense customer revenue comprised approximately 16% and 13% of total revenue for the three months ended March 31, 2026 and 2025, respectively. The Company's top ten customers comprised approximately 36% of total revenue for the three months ended March 31, 2026, as compared to 37% for the three months ended March 31, 2025, with no customer accounting for 10% or more of total revenue in either three-month period.
The Company has retrospectively reclassified certain revenue types for each quarterly period in 2025 in order to conform the classification with the current period presentation. The table below presents the reclassified balances for each quarterly period for the year ended December 31, 2025.
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
| 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, | |||||||||||
| 2026 | 2025 | ||||||||||
| Revenue by type | |||||||||||
| Integrated Field Solutions | $ | 139,861 | $ | 139,115 | |||||||
| In-Laboratory Services | 29,173 | $ | 22,500 | ||||||||
| Total | $ | 169,034 | $ | 161,615 | |||||||
In presenting the allocation of revenue by type in the table above, management makes certain assumptions in its allocation of revenue from laboratories that provide more than one type of service. The allocation methodology and assumptions made are consistent for the years presented.
Integrated Field Solutions revenue is comprised of revenue derived from on-site asset inspection, maintenance, and related technical services performed by our technicians at customer locations, as well as data-driven solutions, including software, analytics, and implementation services that provide insights and recommendations to enhance asset integrity and performance. Integrated Field Solutions revenue increased by $0.7 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to increases in our power generation and transmission, infrastructure, research, and engineering and petrochemical end markets as a result of strong market demand, partially offset by decreases in sales volume in our oil and gas end market within our North America and International segments.
In-Laboratory Services revenue is comprised of quality assurance inspections of components and materials at our in-house laboratory facilities. In-Laboratory Services revenue increased by $6.7 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025, primarily due to increased sales volumes in our aerospace and defense end market in our North America segment.
Gross Profit
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)
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Gross profit | |||||||||||
| North America | $ | 33,536 | $ | 30,165 | |||||||
| % of segment revenue | 24.8 | % | 23.4 | % | |||||||
| International | 10,095 | 9,088 | |||||||||
| % of segment revenue | 27.8 | % | 27.4 | % | |||||||
| Products and Systems | 1,067 | 1,623 | |||||||||
| % of segment revenue | 40.2 | % | 52.5 | % | |||||||
| Corporate and eliminations | 34 | 16 | |||||||||
| $ | 44,732 | $ | 40,892 | ||||||||
| % of total revenue | 26.5 | % | 25.3 | % | |||||||
Three Months
Gross profit margin was 26.5% and 25.3% for the three months ended March 31, 2026 and 2025, respectively. Gross profit margin for the North America segment increased by 1.4% for the three months ended March 31, 2026 as compared to the prior year comparable period primarily due to an improved and diversified business mix and operating efficiencies. International segment realized a 0.4% increase in gross profit margin to 27.8% for the three months ended March 31, 2026 as compared to the prior year comparable period primarily due to a favorable sales mix in the current year period. Products and Systems segment gross margin had a decrease of 12.3% to 40.2% for the three months ended March 31, 2026 primarily due to a less favorable sales mix as compared to the prior period.
Operating Expenses
Operating expenses for the three months ended March 31, 2026 and 2025 were as follows:
| Three months ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating Expenses | |||||||||||
| Selling, general and administrative expenses | $ | 36,986 | $ | 35,652 | |||||||
| Reorganization and other costs | 475 | 3,087 | |||||||||
| Environmental expense, net | (131) | 540 | |||||||||
| Research and engineering | 221 | 299 | |||||||||
| Depreciation and amortization | 2,499 | 2,326 | |||||||||
| $ | 40,050 | $ | 41,904 | ||||||||
Three Months
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. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
ended March 31, 2025. Depreciation and amortization increased by $0.2 million during the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Income (Loss) from Operations
The following table shows a reconciliation of the income (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, | |||||||||||
| 2026 | 2025 | ||||||||||
| North America: | |||||||||||
| Income from operations (GAAP) | $ | 10,420 | $ | 6,515 | |||||||
| Reorganization and other costs | 74 | 1,358 | |||||||||
| Income from operations before special items (non-GAAP) | $ | 10,494 | $ | 7,873 | |||||||
| International: | |||||||||||
| Income from operations (GAAP) | $ | 1,476 | $ | 1,081 | |||||||
| Reorganization and other costs | 221 | 178 | |||||||||
| Income from operations before special items (non-GAAP) | $ | 1,697 | $ | 1,259 | |||||||
| Products and Systems: | |||||||||||
| Income (loss) from operations (GAAP) | $ | (11) | $ | 327 | |||||||
| Reorganization and other costs | - | 151 | |||||||||
| Income (loss) from operations before special items (non-GAAP) | $ | (11) | $ | 478 | |||||||
| Corporate and Eliminations: | |||||||||||
| Loss from operations (GAAP) | $ | (7,203) | $ | (8,935) | |||||||
| Environmental expense, net | (131) | 540 | |||||||||
| Reorganization and other costs | 180 | 1,400 | |||||||||
| Loss from operations before special items (non-GAAP) | $ | (7,154) | $ | (6,995) | |||||||
| Total Company: | |||||||||||
| Income (loss) from operations (GAAP) | $ | 4,682 | $ | (1,012) | |||||||
| Environmental expense, net | (131) | 540 | |||||||||
| Reorganization and other costs | 475 | 3,087 | |||||||||
| Income from operations before special items (non-GAAP) | $ | 5,026 | $ | 2,615 | |||||||
See section Note About Non-GAAP Measures in this Quarterly Report for an explanation of the use of non-GAAP measurements.
Three Months
For the three months ended March 31, 2026, income from operations (GAAP) increased $5.7 million or 562.6%, compared with the three months ended March 31, 2025, while income from operations before special items (non-GAAP) increased by $2.4 million, or 92.2%. The increase in income from operations was due to higher gross profit and lower reorganization and other costs. As a percentage of revenue, income from operations increased by 340 basis points to 2.8% in the three months ended March 31, 2026 compared to (0.6)% in the three months ended March 31, 2025. As a percentage of revenue, income from operations before special items increased by 140 basis points to 3.0% in the three months ended March 31, 2026 compared to 1.6% in the three months ended March 31, 2025.
Mistras Group, Inc. 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 $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.
Income Taxes
Our effective income tax rate was approximately 13.8% for the three months ended March 31, 2026, compared to an effective income tax benefit of approximately 26.9% for the three months ended March 31, 2025.
The effective income tax rate for the three months ended March 31, 2026, was lower than the statutory rate primarily due to the impact of favorable discrete items related to stock compensation. The effective income tax benefit for the three months ended March 31, 2025, was higher than the statutory rate primarily due to the impact of an unfavorable discrete item related to stock compensation.
Income tax expense varies as a function of pre-tax income and the level of non-deductible expenses, such as certain amounts of meals and entertainment expenses, valuation allowances, and other permanent differences. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. 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 three months ended March 31, 2026.
Liquidity and Capital Resources
Cash flows are summarized in the table below:
|
Three months ended March 31,
|
|||||||||||
| 2026 | 2025 | ||||||||||
| Net cash (used in) provided by: | |||||||||||
| Operating activities | $ | 2,809 | $ | 5,645 | |||||||
| Investing activities | (5,558) | (5,414) | |||||||||
| Financing activities | (349) | (702) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 79 | 690 | |||||||||
| Net change in cash and cash equivalents | $ | (3,019) | $ | 219 | |||||||
Cash Flows from Operating Activities
During the three months ended March 31, 2026, cash provided by operating activities was $2.8 million, representing a year-over-year decrease of $2.8 million, or 50%. This decrease was primarily attributable to movements in working capital, as compared to the prior year comparable period.
Cash Flows from Investing Activities
During the three months ended March 31, 2026, cash used in investing activities was $5.6 million, representing a $0.1 million increase compared to the prior year comparable period. The increase is primarily attributable to an increase in expenditures for property, plant, and equipment of $1.4 million, partially offset by an increase in proceeds from the sale of equipment of $1.3 million.
Cash Flows from Financing Activities
Net cash used in financing activities was $0.3 million for the three months ended March 31, 2026, compared to net cash used in financing activities of $0.7 million for the three months ended March 31, 2025. During the three months ended March 31, 2026, net borrowings of debt were approximately $0.6 million higher than the prior year comparable period resulting in additional net debt borrowings during the current year period in comparison to the prior year comparable period. The increase in net debt borrowings is partially offset by $0.1 million more in taxes paid related to net share settlement of share-based awards during the three months ended March 31, 2026.
Effect of Exchange Rate Changes on Cash and Cash Equivalents
The effect of exchange rate changes on our cash and cash equivalents was an increase of $0.1 million in the three months ended March 31, 2026, compared to an increase of $0.7 million for the three months ended March 31, 2025.
Cash Balance and Credit Facility Borrowings
As of March 31, 2026, we had cash and cash equivalents totaling $25.0 million and $100.7 million of unused commitments under our Credit Agreement with borrowings of $179.6 million and $3.4 million of letters of credit outstanding. We finance operations primarily through our existing cash balances, cash collected from operations, bank borrowings and capital lease financing. We believe these sources are sufficient to fund our operations for the foreseeable future.
As of March 31, 2026, we were in compliance with the terms of the Credit Agreement and will continuously monitor our compliance with the covenants contained in the Credit Agreement. The Company believes that it is probable that the Company will be able to comply with the financial covenants in the Credit Agreement and that sufficient credit remains available under the Credit Agreement to meet the Company's liquidity needs. 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 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.
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 2025 Annual Report.
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