MG 10-K & 10-Q changes, risk factors and insider trading

This section describes the major risks to us, our business and our common stock. You should carefully read and consider the risks described below, together with the other information contained in this Annual Report, including our financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before making an investment decision. The statements contained in this section constitute cautionary statements under the Private Securities Litigation Reform Act of 1995. If any of these risks occur, our business, financial condition, results of operations and future growth prospects may be adversely affected. As a result, the trading price of our common stock would likely decline, and you may lose all or part of your investment. You should understand that it is not possible to predict or identify all risk factors that could impact us. For example, itongoing isgeopolitical unclearconflicts, what effectsincluding the on-going war between Russia and Ukraine andUkraine, the conflictunrest in the Middle EastEast, including the recent conflict between Israelthe U.S. and HamasIran, areand likelythe recent intervention in Venezuela, continue to havecontribute onto theglobal worldenergy economymarket volatility, supply chain disruption, and economic uncertainty that could affect certain of our targetend markets, including particularly the oil and gasgas. market,Broader inmacroeconomic theconditions, nearincluding inflationary pressures, higher interest rates, labor market tightness, and longevolving term.trade policies or tariffs and retaliatory responses, may also impact our costs, customer spending, and project timing. In addition, macroeconomicemerging factors such as inflation, unemployment, interest rates,regulatory and tariffsmarket developments related to climate change, the use of AI, cybersecurity, and sustainability reporting may introduce new compliance requirements or tradeoperational barriers (including recent U.S. tariffs imposed or threatened to be imposed on China, Canada, Mexico and other countries and any retaliatory actions take by such countries) amongst others, will impact our business.risks. Accordingly, youthe following discussion should not consider the following to be aviewed completeas discussionan exhaustive list of all risks and uncertainties pertainingthat tocould usimpact andour business or the value of our common stock.

Our customers in the oil and gas industry have accounted for a substantial portion of our historical revenues. Specifically, they accounted for approximately 55%, 57%, 59%, and 56%59% of our revenues for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively. Although we have expanded our customer base into industries other than the oil and gas industry, we still receive a majority of our revenues from this industry. Our services areremain vitalcritical to the operatorsintegrity and safety of plants,energy infrastructure, including refineries, andpipelines, pipelines,offshore platforms, and wepetrochemical facilities. We have expandedbroadened our servicesportfolio offerings,to suchinclude as expanding ourenhanced mechanical and in-line inspection servicesservices, capabilities.digital and data-driven integrity solutions, and asset protection technologies. However, the oil and gas industry is cyclical and subject to fluctuations in commodity prices, capital spending, and production activity. In addition, economic slowdowns or low oil prices have, and could continue to, result in cutbacks in contracts for our services. In addition, lowWhile oil prices couldhave depressgenerally thestabilized levelin 2025 following periods of newvolatility explorationin prior years, any sustained decline could lead to reduced maintenance spending and construction,deferrals of nonessential projects by our customers, which would adversely affect demand for our marketservices opportunities.and Ifour the priceresults of operations. Conversely, sustained periods of elevated oil wereprices can also negatively impact our business if our customers delay inspection and maintenance activities due to decrease,higher ouroperating revenues,costs, profitssupply andchain cash flows may be reduced. If the price of oil reaches record,constraints, or nearlabor record levels as it did in 2023, we may experience delays or deferrals in performing inspection services to customers in the oil and gas industry.shortages.

Climate change and related legislative, regulatory, and market developments could have a material adverse effect on our results of operations, financial condition, and liquidity. Restrictions on emissions, including those that have already been adopted and others that are expected to be adopted in the future, could affect our customers that (i) use commodities to produce energy, (ii) use significant amounts of fossil fuel to produce or deliver commodities, or (iii) manufacture or produce goods that consume significant amounts of fossil fuels or burn fossil fuels. Significant cost increases, government regulation, or changes of consumer preferences for goods or services relating to alternative sources of energy or emissions reductions could materially affect the markets we serve (including the oil and gas industry), which in turn could have a material adverse effect on our results of operations, financial condition and liquidity. Government incentives encouraging the use of alternative sources of energy also could affect certain of our customers and the markets we serve in an unpredictable manner. Any of these factors, individually or with one or more of the other factors, or other unforeseen impacts of climate change could have a material adverse effect on our results of operations, financial condition and liquidity.

For the years ended December 31, 2024,2025, 20232024 and 2022,2023, we generated approximately 30%, 31%, 29%, and 29% of our revenues outside the United States, respectively. In addition, our international operations as a percentage of our business may increase over time. Our primary operations outside the United States are in Canada, Germany, France, the United Kingdom, the Netherlands, and Brazil. We also have operations in Belgium, Greece, India and Mexico. From time to time, we may conduct business in other jurisdictions where we do not maintain significant or core operations. There are numerous risks inherent in doing business in international markets, including:

Our software and systems are complex and, accordingly, may contain undetected errors or failures. Software or system defects or inaccurate data may cause incorrect recording, reporting or display of information related to our asset protection solutions. Any such failures, defects and inaccurate data may prevent us from successfully providing our asset protection solutions, which could result in lost revenues. Software or system defects or inaccurate data may lead to customer dissatisfaction and could cause our customers to seek to hold us liable for any damages incurred. As a result, we could lose customers, our reputation may be harmed and our financial condition and results of operations could be materially adversely affected.

In 2023, we commencedinitiated a broad reviewoperational ofreview, our operations, which we referreferred to as "Project Phoenix". Through “Project Phoenix,” weaimed haveat been exploring ways to improveimproving profitability and Adjusted EBITDA,EBITDA through meaningful margin improvementenhancement and sustained cost savings. We have completed mostMost phases of theProject projectPhoenix were completed in 2023, whereinincluding the identification of efficiency and profitability opportunitiesopportunities, werevalidation identified,of actionable initiativesinitiatives, wereimplementation validated,of key changes throughout 2024, and manythe continuation of theseongoing actionscost containment and related initiatives during 2025. These efforts have been implemented prospectively throughout 2024. Project Phoenix has resulted in significant cost reductions, primarilyreductions through headcount reductions,optimization, more efficientstreamlined workflows, and streamliningprocess improvements, as well as the development of processes, and also led to developing and initiating action plans to increase revenue.

Most of our revenues are denominated in U.S. dollars, with the remaining amounts largely in euros, British pound sterling, the Brazilian Real, the Canadian Dollar and the Indian rupee. We have foreign currency exposure related to our operations in foreign locations and our foreign currency exposure arises primarily from the translation of our foreign subsidiaries’ financial statements into U.S. dollars. The exchange rates between the euro and other currencies in which we incur costs or receive revenues, on the one hand, and the U.S. dollar, on the other hand, have changed substantially in recent years and may fluctuate substantially in the future. See Item 7A-7A - “Quantitative and Qualitative Disclosures about Market Risk.”

In addition, much of our computer and communications hardware is located at a singleprimary facility.facility, Weand havealthough we maintain a back-upgeographically data-centerseparate andbackup storagedata in a different geographic area. Shouldcenter, a natural disaster or some other event occur that damages our primary data center or significantly disrupts its operation, such asdisaster, human error, fire, flood, power loss, telecommunications failure, break-ins,cyberattack, terroristor attacks,similar actsevent could cause temporary interruptions of war and similar events, we could suffer temporary interruption ofour key functions and capabilities before the back-up facility is fully operational.capabilities.

Any such events could cause a seriousOur business disruptioncan thatalso reducesbe ouraffected customers’by needsevere or interest in purchasing our asset protection solutions. In the past, such events have resulted in order cancellationsweather and delaysnatural becausedisasters. customer equipment, facilities or operations have been damaged, or are not then operational or available. A large portionMany of our customercustomers base has operationsoperate in regions such as the Gulf of Mexico,Mexico whichthat isare subjectvulnerable to hurricanes and tropical storms. Hurricane-relatedIn the past, hurricane-related disruptions to our customers’customer operations have adversely affectedimpacted our revenuesrevenues, inand the past. Suchsimilar events in the future maycould result in substantial delays in the provision of solutions to our customersprojects, andlost theequipment, lossor ofreduced valuabledemand equipment. In addition,for our resultsservices. can be adversely impacted byLikewise, severe winter weather conditions,and whichother adverse conditions can resultcause intemporary lostwork workdaysstoppages, reduced field activity, and temporary closures of customer facilitiesfacility or outdoor projects.closures.

The family of our late founder and Chairman Emeritus hasmay be able to exert significant influence over the direction of our business. The concentrated ownership of our common stock may prevent other stockholders from influencing significant corporate decisions.

The widow of Dr. Sotirios J. Vahaviolos, our late founder and Chairman Emeritus, who passed away on February 6, 2025, owned at the time ofand his passing,three adult children beneficially own, to our knowledge, approximately 6%33.7% of our outstanding common stock, his three adult children owned, at the time of his passing an additional 6%, in the aggregate, and a grantor retained annuity trust he created, for which his daughter is the sole trustee, owned approximately 22% at the time of his passing.stock. As a result, thethese familyshareholders, ofacting Dr.individually Vahaviolosor haspotentially as a group, have significant control over the Company and they have the ability to exert substantial influence over all matters requiring approval by our stockholders, including the election and removal of directors, amendments to our certificate of incorporation, and any proposed merger, consolidation or sale of all or substantially all of our assets and other corporate transactions.stockholders. This concentration of ownership could be disadvantageous to our other stockholders with interests differing from interests fromof the family of Dr. Vahaviolos.members.

Future sales by us or by our existing stockholders of substantial amounts of our common stock in the public market, or the perception that these sales may occur, could cause the market price of our common stock to decline. This could also impair our ability to raise additional capital in the future through the sale of our equity securities. We cannot predict the size of future issuances of our common stock or the effect, if any, that future sales and issuances of shares of our common stock, or the perception of such sales or issuances, would have on the market price of our common stock. We currently have approximately 170168 million shares of common stock available for issuance.issuance as of the date of this Annual Report.

Our quarterly operating results have fluctuated in the past and may do so in the future. Accordingly, we believe that period-to-period comparisons of our results of operations may be the best indicators of our business. You should not rely upon the results of one quarter as an indication of future performance. Our revenues and operating results may fall below the expectations of securities analysts or investors in any future period. Our failure to meet these expectations may cause the market price of our common stock to decline, perhaps substantially. Our quarterly revenues and operating results may vary depending on a number of factors, including those listed previously under “—Risks Related to Our Business.” In addition, the price of our common stock is subject to general economic, market, industry, and competitive conditions, the risk factors discussed herein and numerous other conditions outside of our control.

During the year ended December 31, 2023, we recognized goodwill impairment charges of $13.8 million within the International reporting units. Future deterioration in industry or economic conditions in which we operate, including increased inflationary costs, costs associated with proposed tariffs or other trade restrictions, energy costs, labor costs, social pressures and disruptions in Europe, the Middle EastEast, including the recent conflict between the U.S. and Iran, or elsewhere as a result of the ongoing war between Russia and Ukraine and the conflict between IsraelIsrael, Hamas and Hamas,other actors, disruptions to our business, not effectively integrating acquired businesses, macroeconomic factorsfactors, other geopolitical tensions or other factors, may cause impairment charges to our goodwill in future periods.

The Company enhances value for its customers by integrating asset integrity protection throughout supply chains and centralizing integrity data through a suite of Industrial IoT-connectedInternet digitalof Things ("IoT")-connected software and monitoring solutions.solutions, Theincluding OneSuite®, which serves as a cloud-based ecosystem that pulls together the Company’s core capabilities also include non-destructive testing ("NDT") fieldsoftware and in-linedata inspectionsservices enhancedcapabilities. byThis advancedintegrated robotics,approach laboratoryenables qualitycustomers controlto make data-driven decisions that improve asset reliability, enhance safety, reduce operational risk, and assuranceoptimize testing,performance sensingacross technologies and NDT equipment,the asset and mechanical integrity engineering services, and light mechanical maintenance and access services.lifecycle.

Our operations consist of three reportable segments: North America (which we previously referred to as our Services segment),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. ASoftware, majoritydigital ofand data analytical solutions revenuesservices are generatedincluded byin this segment.

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 theacross oil and gas, aerospace and defense, industrials,industrial, power generation and transmission (including alternative and renewable energy), other process industries and infrastructure, research and engineeringengineering, petrochemical, and other process industries.

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'customers inspection expendituresspend to be impacted by volatility in oil priceprices fluctuations.resulting from these factors.

Our cash position and liquidity remain strong. As of December 31, 2024,2025, our cash and cash equivalents balance was approximately $18.3$28.0 million, and we had available borrowing capacity of up to $107.4 million andunder the revolving credit facility under our Credit Agreement provides us with significant liquidity.Agreement.

On DecemberSeptember 12,15, 2024,2025, weEileen announcedCoggins thejoined appointmentMistras of Hani Hammad to the position ofas Executive Vice President and Chief OperatingLegal Officer effectiveand assumed the role of General Counsel and Secretary as of JanuaryNovember 1,15, 2025.

The Company prepares its consolidated financial statements in accordance with U.S. GAAP. In this MD&A under the heading "Income (loss) 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.

The following table summarizes our Consolidated Statements of Income (Loss) for the years ended December 31, 20242025 and 20232024:

Revenue was $729.6$724.0 million for the year ended December 31, 2024,2025, ana increasedecrease of $24.2$5.6 million, or 3.4%,0.8%, compared with the year ended December 31, 2023.2024. The increasedecrease was driven by the North America segment, which experienced a revenue increasedecrease of $14.2$9.4 million, or 2.5%,1.6%, driven by a low single-digit organic growthdecrease in certain end markets. The International segment revenue increased by $11.6$7.9 million, or 9.3%,5.8%, due predominantly to a low single-digit organic growth and by a low single-digit favorable impact of foreign exchange rates and by high single-digit organic growth.rates. The Products and Systems segment increased by $0.7$0.3 million, or 5.2%,2.3%, driven by higher sales volume.

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 increaseddecreased $32.4$27.2 million, or 6.9%,5.4%, for the twelve monthsyear ended December 31, 20242025 as compared to the twelve monthsyear ended December 31, 2023.2024. The increasedecrease was primarily due to increaseddecreases in sales volume in our oil and gasgas, other process industries, infrastructure and power generationresearch and transmissionengineering, and petrochemical end markets forwithin our North America segment and our oil and gas end market within our International segments.segment.

Shop LaboratoryLaboratories revenue is comprised of quality assurance inspections of components and materials at our in-house laboratory facilities. Shop LaboratoryLaboratories revenue increased $6.4$7.8 million, or 11.0%,12.1%, for the twelve monthsyear ended December 31, 20242025 as compared to the twelve months ended year ended December 31, 2023.2024. 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.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 $3.3$1.4 million, or 4.6%,2.0%, for the twelve monthsyear ended December 31, 20242025 as compared to the twelve monthsyear ended December 31, 2023.2024. The decrease was due primarily to decreased sales volume within PCMS, OnstreamPCMS and other Data Analytical Solutions offerings within our North America segment.

Other revenue areis comprised of locations that perform both asset inspection services and testing of components and materials at our in-house laboratories. Other revenue decreasedincreased $11.3$15.1 million, or 10.8%,16.2%, for the twelve monthsyear ended December 31, 20242025 as compared to the twelve monthsyear ended December 31, 2023.2024. Other revenue for the year ended December 31, 20242025 decreasedincreased primarily due to decreasedincreased sales within the other end marketsvolume within theour Northmixed Americaservice andoffering International segmentsfacilities as compared to the prior year period.

Gross profit increased $9.3$12.3 million, or 4.6%,6.4%, for the year ended December 31, 20242025 compared to the year ended December 31, 2023, with a sales increase of $24.2 million, or 3.4%.2024. Gross profit margin was 29.2%28.2% and 28.9%26.3% for the years ended December 31, 20242025 and 2023,2024, respectively, with the increase in 2025 due to a favorable sales mix. North America segment gross profit marginsmargin had a year-on-year decreaseincrease of 40190 basis points to 27.9%26.5% for the year ended December 31, 2024,2025, due primarily to unfavorablea favorable sales mix. International segment gross margins had a year-on-year increase of 230130 basis points to 29.3%30.0% for the year ended December 31, 2024,2025, due primarily to decreasedincreased inflationaryrevenues pressures.and a favorable sales mix. Products and Systems segment gross margins increased by 540170 basis points for the year ended December 31, 20242025 to 55.1%,52.9%, driven by favorable sales mix.

Total Company income from operations (GAAP) increased by $41.7$0.7 million, or 2,191.7%1.9%, for the year ended December 31, 2025 compared to the year ended December 31, 2023.2024. Total company income before special items (non-GAAP) increased by $21.0$8.8 million or 83.1%19.0% for year ended December 31, 2025 as compared withto the year ended December 31, 2023.2024. Operating expenses, excluding special items (non-GAAP), as a percentage of revenue, was 22.9%20.7% for the year ended December 31, 20242025 compared to 25.3%20.0% for the year ended December 31, 2023.2024. The primary driver for the increase in Total Company income before special items was increased gross profit margins on sales in 20242025 compared to 2023.2024 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 270130 basis points to 7.6% for the year ended December 31, 2025, from 6.3% for the year ended December 31, 2024, from 3.6% for the year ended December 31, 2023. Our discussion below is qualified by the unknown impact that the Russia - Ukraine war will continue to have on our business and the economy in general, including the resulting economic disruption. Refer to Item 1A. Risk Factors in Part I of this Annual Report for further discussion.2024.

Interest expense was $17.1$14.6 million and $16.8$17.1 million for the years ended December 31, 20242025 and December 31, 2023,2024, respectively. The increasedecrease was due to increasedlower interest rates in the current period.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.

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 more than sufficient to meet anticipated cash needs over the next 12 months and for the foreseeable future. We generated operating cash flows of $50.1$33.0 million and $26.7$50.1 million for the years ended December 31, 20242025 and 2023,2024, respectively. Capital expenditures for the purchase of property, plant and equipment and of intangible assets was $23.0$29.2 million and $23.6$23.0 million for the years ended December 31, 20242025 and 2023,2024, respectively.

Cash provided by operating activities for the year ended December 31, 20242025 was $50.1$33.0 million, ana increasedecrease of $23.4$17.1 million from the prior year period. The increasedecrease was mainly attributable to movements in working capital driven primarily by an increase in operating results and an increase in net accounts receivablereceivable, collectionsnet, in the current year as compared to the prior year.

Net cash used in investing activities for the year ended December 31, 20242025 was $21.4$25.1 million, aan decreaseincrease of $0.8$3.8 million used in investing activities from the prior year period. The Company used $0.7$6.2 million lessmore cash for purchases of property, plant and equipment and intangible assets in 20242025 compared to 2023.2024, partially offset by an increase in proceeds received from the sale of equipment.

Net cash used in financing activities for the year ended December 31, 20242025 was $27.4$0.6 million, compared to $7.7$27.4 million for the year ended December 31, 2023.2024. Net repayment of our revolving credit facility and term loan was approximately $19.5$28.3 million higherlower in 2025 compared to 2023.2024. In addition, for the year ended December 31, 2024,2025, we incurred approximately $0.3$0.4 million lessmore in taxes paid related to net share settlement of share-based awards than the prior period.

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 million for the year ended December 31, 2024, compared to an increase of $0.2 million for the year ended December 31, 2023.2024. The primary driver of the change was foreign currency fluctuations during the year ended December 31, 20242025 related to the Euro and the US Dollar.

As of December 31, 2024,2025, we had cash and cash equivalents totaling $18.3$28.0 million and available borrowing capacity of up to $119.2$107.4 million under the revolving credit facility under our Credit Agreement. Borrowings of $167.2$176.0 million and letters of credit of $3.1$3.4 million were outstanding under the Credit Agreement at December 31, 2024.2025. 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, 2024,2025, 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 11-Long-Term10 - Long-Term Debt of the notes to the consolidated financial statements, under the heading "Senior Credit Facility".

Our Credit Agreement does not limit our ability to acquire other businesses or companies except for certain provisions as described within Note 11-Long-Term10 - 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 11-Long-Term10 - Long-Term Debt and Note 17-16 - Leases of the notes to the consolidated financial statements.

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.

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 units.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, 2024.2025. Our quantitative assessment considered relevant events and circumstances occurring since our interimlast quantitative goodwill impairment test performed as of SeptemberOctober 30,1, 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 SeptemberOctober 30,1, 2024,2025, 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, 2024,2025, there are no indicators of an impairment. See Note 8-Goodwill7 - Goodwill of the notes to the consolidated financial statements for additional information.

The following Management’s Discussion and Analysis (“MD&A”) provides a discussion of our results of operations and financial position for the three and six months ended MarchJune 31,30, 2026 and 2025. The MD&A should be read together with our Unaudited Condensed Consolidated Financial Statements and related notes included in Item 1 in this Quarterly Report on Form 10-Q (the "Quarterly Report") and our audited consolidated financial statements and related notes included in our 2025 Annual Report. 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:

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 increasesany impacts from the imposition of tariffs or changes in tariffs,other trade restrictionsrestrictions, orchanges taxes;to supplythe chainU.S. disruptionstrade resultingpolicy and impacts and uncertainty arising from geopolitical instabilitiesinstability and disputesconflicts (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.

The Company enhances value for its customersclients by integrating asset integrity 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 a cloud-basedan ecosystem thatplatform, pullspulling together all of 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.

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 acrossin oil and gas, aerospace and defense, industrial,industrials, power generation and transmission (including alternative and renewable energy), infrastructure, research and engineering, petrochemical, and other process industries.

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 customerscustomers' inspection spendspending to be impacted by volatilityfluctuations in oil prices resultingand broader market conditions, including potential geopolitical disruptions and uncertainty arising from theseconflicts factors.in the Middle East.

Our cash position and liquidity remains strong. As of MarchJune 31,30, 2026, our cash and cash equivalents balance was approximately $25.0$22.0 million, and we had available borrowing capacity of up to $100.7$106.3 million under the revolving credit facility under our Credit Agreement.

The global trade landscape continues to be highly volatile. InDuring 2025, the U.S. government implemented a series of trade tariffs on goods imported into the U.S. from various countries. Incountries, many cases,of thesewhich tariffs resulted inprompted reciprocal tariffs and other actionstrade onmeasures goods being exported from theaffecting U.S. Theseexports. associatedThe tariffsongoing aretariff environment remains complex and continuecontinues to evolve as legal proceedings and trade negotiations occur.progress. In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (“"IEEPA”"), which the U.S. government relied onupon to impose certain tariffs, does not authorize the administrationimposition to imposeof tariffs. OnFollowing Marchthat 4, 2026,decision, the U.S. Court of International Trade ordereddirected the U.S. Customs and Border Protection (“"CBP”") to processbegin processing refunds of thepreviously collected IEEPA tariffs, althoughand during the Courtsecond immediatelyquarter suspendedof the order while the2026, CBP determinescommenced aaccepting and processing refund process. The IEEPA tariffs remain subject to ongoing litigation between the administration and other parties.claims. In response to the U.S. Supreme CourtCourt's ruling mentioned above,ruling, the U.S. administration announcedimplemented plans to implement newreplacement tariffs under alternative statutory authority.authorities, Theincluding fullSection 122 of the Trade Act of 1974, while also pursuing additional tariff actions under other existing trade authorities. Certain of these replacement tariffs have also been challenged in court, and the related litigation remains ongoing. On July 24, 2026, the U.S. administration announced the implementation of additional tariffs ranging from 10% to 12.5% on imports from numerous trading partners under Section 301 of the Trade Act of 1974. Accordingly, the ultimate scope, duration and financial impact of U.S. trade measures remain uncertain. Ongoing changes to trade policies and related uncertainty may affect global economic conditions, supply chains and costs, and may reduce trade between the U.S. Supreme Court’s ruling and theimpacted administration’s response, including the timing and extent of any refunds and the impact of the new tariffs, remain uncertain.countries. Tariffs and trade barriers have not had a material effect on our business or results of operations during 2026 to date. However, new tariffs or other trade measures could result in increased costs tofor 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 StatesU.S. and Iran, have contributed to increased volatility in global energy markets and broader macroeconomic uncertainty. The conflict in the Middle East has significantlyincreased reduceduncertainty thesurrounding exportglobal ofenergy supplies, international shipping routes and supply chains, contributing to fluctuations in oil and natural gas from the Persian Gulf, creating upward pressure on oil and natural gas prices, and has also disruptedprices and increased the costs offor certain othermaterials supplies.and transportation. Fluctuations in crude oil and natural gas prices may influence capital spending and maintenance activity by customers in the oil and gas sector, which could affect demand for certain of our services, particularly field inspection and asset integrity solutions. Additionally, continued instability in the regionMiddle East could contribute to supply chain disruptions, changes in foreign currency exchange rates, and delays in customer projects. While we have not experienced material impacts to date, the situation remains dynamic, and we continue to monitor developments and assess potential impacts on our operations, financial condition, and results of operations.

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,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 from operations before special items excludes the identified adjustments, which provides additional tools to compare our core business operating performance on a consistent basis and measure underlying trends and results in our business. Income from operations before special items is not used to determine incentive compensation for executives or employees, nor is it a replacement for the reported GAAP financial performance and/or necessarily comparable to the non-GAAP financial measures of other companies. Any measure that eliminates the foregoing items has material limitations as a performance or liquidity measure and should not be considered alternativesan alternative to net income or any other measures derived in accordance with GAAP. Because Income from operations before special items may not be calculated in the same manner by all companies, this measure may not be comparable to other similarly titled measures used by other companies.

Condensed consolidated results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows:

Revenue was $169.0$193.1 million for the three months ended MarchJune 31,30, 2026, an increase of $7.4$7.7 million, or 4.6%,4.2%, compared with the three months ended MarchJune 31,30, 2025.

Revenue by segment for the three and six months ended MarchJune 31,30, 2026 and 2025 were as follows:

In the three months ended MarchJune 31,30, 2026, total revenue increased 4.6%4.2% versus the prior year comparable period due predominantly to a low-single-digit organic increase driven by increases in the aerospace and defense, power generation and transmission, infrastructure, research, and engineering, and petrochemical end markets. North America segment revenue increased 5.0%,5.8%, driven predominantly by increases in the aerospace and defense, power generation and transmission, infrastructure, research, and engineeringengineering, and petrochemicalprocess industries end markets as a result of strong market demand. International segment revenue increaseddecreased 9.3%,2.7%, due predominantly to a low-double-digitmid-single-digit organic decrease driven by lower market demand. The decrease was partially offset by a low-single-digit favorable impact of foreign exchange rates. Products and Systems segment revenue decreasedincreased by 14.2%,43.0%, due to decreasedincreased sales volume and shipments as compared to the prior year comparable period.

Oil and gas customer revenue comprised approximately 51%49% and 60%55% of total revenue for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Aerospace and defense customer revenue comprised approximately 16%14% and 13% of total revenue for the three months ended MarchJune 31,30, 2026 and 2025, respectively. The Company’s top ten customers comprised approximately 36%35% of total revenue for the three months ended March 31, 2026, as compared to 37% forboth the three months ended MarchJune 31,30, 2026 and 2025, with no customer accounting for 10% or more of total revenue in either three-month period.

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$5.8 million for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025 and increased by $6.5 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to increases in sales volume in our power generation and transmission,transmission and infrastructure, research,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$1.9 million for the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, and increased by $8.6 million for the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to increased sales volumes in our aerospace and defense end market in our North America segment.

Gross profit increased by $3.8$2.5 million, or 9.4%,4.6%, in the three months ended MarchJune 31,30, 2026 versus the prior year comparable period,period primarily due to an improved and diversified business mix and operating efficiencies.

Gross profit by segment for the three and six months ended MarchJune 31,30, 2026 and 2025 was as follows:

Gross profit margin was 26.5%29.2% and 25.3%29.1% for the threethree-month monthsperiods ended MarchJune 31,30, 2026 and 2025, respectively. Gross profit margin for the North America segment increased by 1.4%0.2% for the three months ended MarchJune 31,30, 2026 as compared to the prior year comparable period primarily due to an improved and diversified business mix and operating efficiencies. International segment realized a 0.4% increasedecline in gross profit margin to 27.8%31.0% for the three months ended MarchJune 31,30, 2026 as compared to the prior year comparable period primarily due to a less favorable sales mix in the current year period. Products and Systems segment gross margin had a decrease of 12.3%2.0% to 40.2%46.8% for the three months ended MarchJune 31,30, 2026 primarily due to a less favorable sales mix as compared to the prior period.

Operating expenses for the three and six months ended MarchJune 31,30, 2026 and 2025 werewas as follows:

Operating expenses decreased $1.9$2.0 million, or 4.4%, for the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025. Selling, general and administrative expenses increaseddecreased $1.3$1.1 million during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 2025, due to strategicongoing investmentscost inmanagement our operations to support commercial execution and promote growth in our strategic markets, while maintaining discipline in overhead costs.activities. Reorganization and other costs decreased by $2.6$1.4 million to $0.5$1.5 million as compared to the prior year comparable period,period due to lower restructuring activity, including workforce reductions and laboratory rationalization initiatives in the three months ended MarchJune 31,30, 2025, which did not recur at similar levels during the current year period. Environmental expense, netexpense decreased by $0.7$0.1 million as compared to the prior year comparable period due to lower expenses related to the ongoing remediation efforts related to the Mistras Arizona claim discussed in Note 13 - Commitments and Contingencies. Research and engineering expenses decreasedremained flat period over period. Depreciation and amortization increased by $0.1$0.6 million during the three months ended MarchJune 31,30, 2026 compared to the three months ended MarchJune 31,30, 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.

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:

For the three months ended MarchJune 31,30, 2026, income from operations (GAAP) increased $5.7$4.5 millionmillion, or 562.6%,53.6%, compared withto the three months ended MarchJune 31,30, 2025, while income from operations before special items (non-GAAP) increased by $2.4$3.0 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, 2025.25.5%. As a percentage of revenue, income from operations before special items increased by 140130 basis points to 3.0%7.7% in the three months ended MarchJune 31,30, 2026 compared to 1.6%6.4% in the three months ended MarchJune 31,30, 2025.

Interest expense was approximately $2.9$4.1 million and $3.3$4.2 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. This decrease of $0.4$0.1 million in interest expense in the current year period was a result of lower interest rates during the three months ended MarchJune 31,30, 2026 in comparison to the prior year comparable period. Interest expense was approximately $7.0 million and $7.6 million for the six months ended June 30, 2026 and 2025, respectively. This decrease of $0.5 million in interest expense was a result of lower interest rates and lower average borrowings outstanding during the six months ended June 30, 2026 in comparison to the prior year comparable period.

Our effective income tax rate was approximately 13.8%23.1% and 25.4% for the three months ended MarchJune 31,30, 2026,2026 comparedand to2025, anrespectively. Our effective income tax benefitrate ofwas approximately 26.9%21.1% and 71.4% for the threesix months ended MarchJune 31,30, 2025.2026 and 2025, respectively.

The effective income tax rate for the three months ended MarchJune 31,30, 2026, was lowerhigher than the statutory rate primarily due to limitations on the impactdeductibility of favorablecertain discretecompensation items related to stock compensation.expenses. The effective income tax benefitrate for the three months ended MarchJune 31,30, 2025,2025 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,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.Act Effectiveand are effective for calendar year 2025. The changes include, but are not limited to, immediate expensing of domestic research and development expenditure, the restoration of 100% bonus depreciation, and an EBITDA-based interest expense limitation. These provisions did not have a material impact on the Company’s financial statements for the three and six months ended MarchJune 31,30, 2026.

During the threesix months ended MarchJune 31,30, 2026, cash provided by operating activities was $2.8$17.7 million, representing a year-over-year decreaseincrease of $2.8$21.3 million, or 50%.590%. This decreaseincrease was primarily attributable to an increase in net income and movements in working capital, primarily due to higher collections of accounts receivable as compared to the prior year comparable period.

During the threesix months ended MarchJune 31,30, 2026, cash used in investing activities was $5.6$11.9 million, representing a $0.1$0.4 million increase compared to the prior year comparable period. The increase is primarily attributable to an increase inincreased expenditures for property, plant, and equipment ofand $1.4intangible million,assets, partially offset by an increase in proceeds from the sale of equipment of $1.3 million.equipment.

Net cash used in financing activities was $0.3$11.2 million for the threesix months ended MarchJune 31,30, 2026, compared to net cash usedprovided inby financing activities of $0.7$14.9 million for the threesix months ended MarchJune 31,30, 2025. During the threesix months ended MarchJune 31,30, 2026, net payments of debt were approximately $9.5 million compared to net borrowings of debt wereof approximately $0.6$16.4 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.

The effect of exchange rate changes on our cash and cash equivalents was ana increasedecrease of $0.1$0.6 million in the threesix months ended MarchJune 31,30, 2026, compared to an increase of $0.7$1.8 million for the threesix months ended MarchJune 31,30, 2025.

As of MarchJune 31,30, 2026, we had cash and cash equivalents totaling $25.0$22.0 million and $100.7$106.3 million of unused commitments under our Credit Agreement with borrowings of $179.6$170.5 million and $3.4$3.8 million of letters of credit outstanding. We finance operations primarily through our existing cash balances, cash collected from operations, bank borrowings and capital lease financing. We believe these sources are sufficient to fund our operations for the foreseeable future.

As of MarchJune 31,30, 2026, we were in compliance with the terms of the Credit Agreement and will continuously monitor our compliance with the covenants contained in the Credit Agreement. The Company believes that it is probable that the Company will be able to comply with the financial covenants in the Credit Agreement and that sufficient credit remains available under the Credit Agreement to meet the Company's liquidity needs. 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". The terms related to the subsequent amendment to the Credit Agreement are described in Note 15 - Subsequent Events.

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