MISTRAS Group Inc.
11/02/2026 | Press release | Distributed by Public on 11/02/2026 16:12
Quarterly Report for Quarter Ending September 30, 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 and nine months ended September 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:
•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, as amended (the "Exchange Act"), including statements regarding the anticipated timing and completion of the Merger, the anticipated benefits of the Merger, the consideration to be received by the Company's stockholders in connection with the Merger, and other statements about the future plans, objectives, expectations and intentions of the Company. 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. Forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond the Company's control. These risks and uncertainties include, but are not limited to, the following: (i) the ability to complete the Merger on the anticipated timeline, or at all; (ii) the satisfaction or waiver of the conditions to the completion of the Merger, including the approval by the Company's stockholders and receipt of the required regulatory approvals; (iii) the receipt of required regulatory approvals on the terms anticipated or at all, or the imposition of conditions on such approvals that could reduce the anticipated benefits of the Merger or cause the parties to abandon the Merger; (iv) the Merger may involve unexpected costs, liabilities or delays, including the payment of the Company Termination Fee (as defined herein) to Parent by the Company; (v) the Company may be adversely affected by other economic, business, legislative, regulatory and/or competitive factors; (vi) the outcome of any stockholder demands or legal proceedings that have been or may be instituted against the Company and others relating to the Merger Agreement or the Merger; (vii) the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement; (viii) potential disruption to the business of the Company as a result of the announcement and pendency of the Merger; (ix) the diversion of management attention from the Company's ongoing business operations as a result of the Merger; (x) adverse effects on the Company's ability to retain and hire key personnel as a result of the announcement or pendency of the Merger; (xi) volatility in the Company's stock price prior to the completion of the Merger; (xii) changes or developments in the industries in which the Company competes, general economic conditions, or conditions in the financial markets or capital markets; (xiii) any impacts from the imposition of tariffs or other trade restrictions and changes to U.S. trade policy, including the outcome of pending litigation regarding tariffs and the availability of refunds of tariffs previously imposed under the International Emergency Economic Powers Act; (xiv) impacts and uncertainty arising from geopolitical instability and conflicts, including those related to the conflict involving the U.S. and Iran and the war in Ukraine, and resulting volatility in oil and natural gas prices and in capital spending and maintenance activity by our oil and gas customers; (xv) the creditworthiness of our customers and our ability to collect our accounts receivable; (xvi) changes in interest rates and foreign currency exchange rates; and (xvii) other risks and uncertainties described in the Company's filings with the Securities and Exchange Commission (the "SEC"), including 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. 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
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
factors known and unknown. In addition, there are various developments discussed below which could create risks and uncertainty about our business, results of operations or liquidity.
Overview
The Company is a global leader in technology-enabled industrial asset integrity solutions, serving critical industries including oil & gas, aerospace & defense, power & utilities, manufacturing, and civil infrastructure.
The Company provides a diversified portfolio of products and services, ranging from advanced non-destructive testing ("NDT") and pipeline inspections to real-time condition monitoring, maintenance planning, and specialized engineering, powered by a proprietary management software suite that centralizes integrity data for predictive analytics and benchmark analysis. With a long-standing track record of innovation and deep industry expertise, the Company helps clients reduce risk, extend asset life, and optimize operational performance.
The Company enhances value for its clients by integrating asset protection throughout supply chains and centralizing integrity data through a suite of Industrial Internet of Things ("IoT")-connected digital software and monitoring solutions, including OneSuite™, which serves as an ecosystem platform, pulling together all of the Company's software and data services capabilities.
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 in oil and gas, aerospace and defense, industrials, power generation and transmission (including alternative and renewable energy), infrastructure, research and engineering, petrochemical, and other process industries.
We have focused on providing our advanced asset protection solutions to our customers using proprietary, technology-enabled software and testing instruments, including those developed by our Products and Systems segment. 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.
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
We believe long-term growth can be realized in our target markets. Our level of business and financial results are impacted by world-wide macro- and micro-economic conditions generally, as well as those within our target markets. Among other things, we expect the timing of our oil and gas customers' inspection spending to be impacted by fluctuations in oil prices and broader market conditions, including potential geopolitical disruptions and uncertainty arising from conflicts in the Middle East.
We have continued providing our customers with an innovative asset protection software ecosystem through our OneSuite platform. 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 remain strong. As of September 30, 2026, our cash and cash equivalents balance was approximately $19.0 million, and we had available borrowing capacity of up to $101.7 million under the revolving credit facility under our Credit Agreement.
On September 17, 2026, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Athena Purchaser, LLC, a Delaware limited liability company ("Parent"), and Athena Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent ("Acquisition Sub"), pursuant to which, subject to the terms and conditions of the Merger Agreement, Acquisition Sub will be merged with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of Parent. Parent and Acquisition Sub are controlled by funds affiliated with H.I.G. Capital ("H.I.G.").
Pursuant to the terms of the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each share of the Company's common stock, par value $0.01 per share, issued and outstanding immediately prior to the Effective Time (other than (i) shares held by the Company as treasury stock or held directly by Parent or Acquisition Sub, which will be automatically cancelled for no consideration, and (ii) shares held by stockholders who have properly exercised and not withdrawn their appraisal rights under Section 262 of the General Corporation Law of the State of Delaware) will be automatically converted into the right to receive $20.35 in cash, without interest.
The Merger is expected to close in late 2026 or early 2027, subject to, among other things, approval of the Merger by the Company's stockholders, expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the receipt of certain required regulatory approvals, and the satisfaction or waiver of certain other customary closing conditions. Effective October 22, 2026, the Federal Trade Commission granted early termination of the HSR Act waiting period. If the Merger is completed, the Company's common stock will be delisted from the New York Stock Exchange (the "NYSE") and deregistered under the Exchange Act.
The foregoing description of the Merger Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 to this Quarterly Report and is incorporated herein by reference.
On August 5, 2026, the Company entered into an amendment (the "Amendment") to its credit agreement dated August 1, 2022 (as amended, the "Credit Agreement"), with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent. The Amendment extended the maturity date of the Company's $190.0 million revolving credit facility and approximately $87.3 million outstanding term loan under the Credit Agreement from July 30, 2027 to July 28, 2028. In connection with the Amendment, the Company incurred an extension fee equal to a total of 0.15% of the aggregate committed amount of the revolving credit facility and term loan held by participating lenders. There were no other changes to the material terms of the Credit Agreement, including the applicable interest rate provisions and financial covenants, which remained substantially unchanged. Refer to Note 11 - Long-Term Debt for more details regarding the terms of the Credit Agreement.
The global trade landscape continues to be highly volatile. During 2025, the U.S. government implemented a series of trade tariffs on goods imported into the U.S. from various countries, many of which prompted reciprocal tariffs and other trade measures affecting U.S. exports. The ongoing tariff environment remains complex and continues to evolve as legal proceedings and trade negotiations progress. In February 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act ("IEEPA"), which the U.S. government relied upon to impose certain tariffs, does not authorize the imposition of tariffs. Following that decision, the U.S. Court of International Trade directed the U.S. Customs and Border Protection ("CBP")
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
to begin processing refunds of previously collected IEEPA tariffs, and CBP has since processed refund claims in phases, most recently commencing in October 2026 the processing of refunds for certain finally liquidated entries. In October 2026, the U.S. Court of International Trade also certified a class of importers seeking IEEPA tariff refunds and the U.S. government's appeals in the refund litigation remain pending. In response to the U.S. Supreme Court's ruling, the U.S. administration implemented replacement tariffs under alternative statutory authorities, including a temporary tariff under Section 122 of the Trade Act of 1974, which expired on July 24, 2026 at the end of its 150-day statutory period. The U.S. Court of International Trade ruled against the Section 122 tariffs, but that ruling has been stayed pending appeal, and the related litigation remains ongoing. Effective July 24, 2026, the U.S. administration implemented additional tariffs ranging from 10% to 12.5% on imports from numerous trading partners under Section 301 of the Trade Act of 1974, which are also subject to legal challenge. Accordingly, the ultimate scope, duration and financial impact of U.S. trade measures remain uncertain. Ongoing changes to trade policies and related uncertainty may affect global economic conditions, supply chains and costs, and may reduce trade between the U.S. and impacted countries. Tariffs and trade barriers have not had a material effect on our business or results of operations during 2026 to date. However, new tariffs or other trade measures could result in increased costs for us or our suppliers and could impact the import of materials by our customers, including materials subject to our inspection and testing services, which could adversely affect demand for our services.
Geopolitical tensions in the Middle East, including the conflict involving the U.S. and Iran that began in February 2026, have contributed to increased volatility in global energy markets and broader macroeconomic uncertainty. The conflict has disrupted shipping through the Strait of Hormuz and increased uncertainty surrounding global energy supplies, international shipping routes and supply chains, contributing to fluctuations in oil and natural gas prices and increased costs for certain materials and transportation. Efforts to resolve the conflict have not been successful to date, and renewed escalation remains possible. 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 Middle East could contribute to supply chain disruptions, changes in foreign currency exchange rates, and delays in customer projects. While we have not experienced material impacts to date, the situation remains dynamic, and we continue to monitor developments and assess potential impacts on our operations, financial condition, and results of operations.
Note About Non-GAAP Measures
The Company prepares its consolidated financial statements in accordance with GAAP. In this MD&A under the heading "Income from Operations", the non-GAAP financial performance measure "Income from operations before special items" is used for each of our three operating segments, "Corporate and Eliminations" and the "Total Company", with tables reconciling the measure to a financial measure under GAAP. This presentation excludes from "Income from Operations" (a) reorganization and other costs, which includes items such as severance, labor relations matters and asset and lease termination costs, (b) transaction-related expense, which are expenses that consist of legal, financial advisory and other professional fees incurred in connection with the Merger Agreement and beginning in the three months ended September 30, 2026, is excluded from this measure, and (c) 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 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 measure and should not be considered an alternative to net income or any other measures derived in accordance with GAAP. Because Income from operations before special items may not be calculated in the same manner by all companies, this measure may not be comparable to other similarly titled measures used by other companies.
In this MD&A under the heading "Adjusted EBITDA," we also present the non-GAAP financial measures "Adjusted EBITDA" and "Adjusted EBITDA Margin." We define Adjusted EBITDA as net income (loss) attributable to Mistras Group, Inc. plus: interest expense, provision (benefit) for income taxes, depreciation and amortization, share-based compensation expense, reorganization and other related costs, transaction-related expense, environmental expense, net, foreign exchange (gain) loss
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
and, if applicable, certain acquisition-related costs, non-cash impairment charges and other special items, which are noted. Adjusted EBITDA Margin is Adjusted EBITDA divided by revenue. The most directly comparable GAAP measures are net income (loss) attributable to Mistras Group, Inc. and net income (loss) attributable to Mistras Group, Inc. as a percentage of revenue, which were 3.4% and 6.7% for the three months ended September 30, 2026 and 2025, respectively, and 3.0% and 2.4% for the nine months ended September 30, 2026 and 2025, respectively. Adjusted EBITDA is also a performance metric used to determine incentive compensation for our executive officers, as described in Note 3 - Share-Based Compensation; for that purpose it may be subject to adjustments approved by the Compensation Committee. Adjusted EBITDA has material limitations as an analytical tool because it excludes charges and expenses we incur as part of our operations, and it should not be considered in isolation or as a substitute for net income or other measures derived in accordance with GAAP. Adjusted EBITDA may not be comparable to similarly titled measures used by other companies.
Results of Operations
Condensed consolidated results of operations for the three and nine months ended September 30, 2026 and 2025 were as follows:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue | $ | 204,621 | $ | 195,549 | $ | 566,787 | $ | 542,569 | |||||||||||||||
| Gross profit | 62,037 | 58,193 | 163,214 | 153,030 | |||||||||||||||||||
| Gross profit as a % of Revenue | 30.3 | % | 29.8 | % | 28.8 | % | 28.2 | % | |||||||||||||||
| Income from operations | 15,049 | 20,381 | 32,677 | 27,797 | |||||||||||||||||||
| Income from operations as a % of Revenue | 7.4 | % | 10.4 | % | 5.8 | % | 5.1 | % | |||||||||||||||
| Income before provision for income taxes | 11,081 | 17,000 | 23,637 | 16,853 | |||||||||||||||||||
| Net income | 6,909 | 13,203 | 16,818 | 13,161 | |||||||||||||||||||
| Net income attributable to Mistras Group, Inc. | $ | 6,949 | $ | 13,108 | $ | 16,918 | $ | 12,939 | |||||||||||||||
Revenue
Revenue was $204.6 million for the three months ended September 30, 2026, an increase of $9.1 million, or 4.6%, compared with the three months ended September 30, 2025.
Revenue by segment for the three and nine months ended September 30, 2026 and 2025 were as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| North America | $ | 166,362 | $ | 160,609 | $ | 458,312 | $ | 437,503 | |||||||||||||||
| International | 39,994 | 35,521 | 114,294 | 107,812 | |||||||||||||||||||
| Products and Systems | 4,284 | 4,036 | 10,855 | 9,867 | |||||||||||||||||||
| Corporate and eliminations | (6,019) | (4,617) | (16,674) | (12,613) | |||||||||||||||||||
| Total | $ | 204,621 | $ | 195,549 | $ | 566,787 | $ | 542,569 | |||||||||||||||
Three Months
In the three months ended September 30, 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, industrials, process industries and infrastructure, research and engineering end markets. North America segment revenue increased 3.6%, driven predominantly by the aerospace and defense, industrials, power generation and transmission, process industries, and infrastructure, research and engineering end markets as a result of strong market demand. International
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
segment revenue increased 12.6%, driven predominately by the oil and gas, aerospace and defense, industrials, infrastructure, research and engineering, and petrochemical end markets as a result of strong market demand. Products and Systems segment revenue increased by 6.1%, due to increased sales volume and shipments as compared to the prior year comparable period.
Oil and gas customer revenue comprised approximately 49% and 54% of total revenue for the three months ended September 30, 2026 and 2025, respectively. Aerospace and defense customer revenue comprised approximately 14% and 12% of total revenue for the three months ended September 30, 2026 and 2025, respectively. The Company's top ten customers comprised approximately 31% of total revenue for the three months ended September 30, 2026 and 36% for the three months ended September 30, 2025, with no customer accounting for 10% or more of total revenue in either three-month period.
Nine Months
In the nine months ended September 30, 2026, total revenue increased 4.5% versus the prior year comparable period due predominantly to a low single-digit organic increase. North America segment revenue increased 4.8% versus the prior year comparable period, driven by the aerospace and defense, power generation and transmission, infrastructure, research, and engineering end markets. International segment revenue increased 6.0% versus the prior year comparable period, due to low single-digit organic growth and a low single-digit favorable impact of foreign exchange rates. Organic growth in the international segment was primarily driven by the aerospace and defense, industrials, infrastructure, research and engineering and petrochemical end markets. Products and Systems segment revenue increased by 10.0%, due to increased sales volume and shipments as compared to the prior year comparable period.
Oil and gas customer revenue comprised approximately 49% and 56% of total revenue for the nine months ended September 30, 2026 and 2025, respectively. Aerospace and defense customer revenue comprised approximately 15% and 13% of total revenue for the nine months ended September 30, 2026 and 2025, respectively. The Company's top ten customers comprised approximately 34% and 36% of total revenue for the nine months ended September 30, 2026 and 2025, respectively, with no customer accounting for 10% or more of total revenue in either nine-month period.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue by type | |||||||||||||||||||||||
| Integrated Field Solutions | $ | 177,213 | $ | 166,578 | $ | 481,260 | $ | 464,078 | |||||||||||||||
| In-Laboratory Services | 27,408 | 28,971 | 85,527 | 78,491 | |||||||||||||||||||
| Total | $ | 204,621 | $ | 195,549 | $ | 566,787 | $ | 542,569 | |||||||||||||||
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 $10.6 million for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025 and increased by $17.2 million for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to increases in sales volume in our power generation and transmission, industrials and infrastructure, research and engineering end markets as a result of strong market demand, partially offset by decreases in sales volume in our oil and gas end market within our North America segment.
In-Laboratory Services revenue is comprised of quality assurance inspections of components and materials at our in-house laboratory facilities. In-Laboratory Services revenue decreased by $1.6 million for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025, due to decreased sales volumes in our North America segment. In-Laboratory Services revenue increased by $7.0 million for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025, primarily due to increased sales volumes in our aerospace and defense end market in our North America segment.
Gross Profit
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
Gross profit increased by $3.8 million, or 6.6%, in the three months ended September 30, 2026 versus the prior year comparable period primarily due to an improved and diversified business mix and operating efficiencies.
Gross profit by segment for the three and nine months ended September 30, 2026 and 2025 was as follows:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| North America | $ | 46,845 | $ | 45,103 | $ | 123,411 | $ | 115,653 | |||||||||||||||
| % of segment revenue | 28.2 | % | 28.1 | % | 26.9 | % | 26.4 | % | |||||||||||||||
| International | 13,043 | 11,190 | 34,934 | 32,548 | |||||||||||||||||||
| % of segment revenue | 32.6 | % | 31.5 | % | 30.6 | % | 30.2 | % | |||||||||||||||
| Products and Systems | 2,136 | 2,192 | 5,038 | 5,152 | |||||||||||||||||||
| % of segment revenue | 49.9 | % | 54.3 | % | 46.4 | % | 52.2 | % | |||||||||||||||
| Corporate and eliminations | 13 | (292) | (169) | (323) | |||||||||||||||||||
| $ | 62,037 | $ | 58,193 | $ | 163,214 | $ | 153,030 | ||||||||||||||||
| % of total revenue | 30.3 | % | 29.8 | % | 28.8 | % | 28.2 | % | |||||||||||||||
Three Months
Gross profit margin was 30.3% and 29.8% for the three-month periods ended September 30, 2026 and 2025, respectively. Gross profit margin for the North America segment increased 0.1% to 28.2% for the three months ended September 30, 2026 as compared to the prior year comparable period primarily due to a more favorable sales mix in the current year period. International segment realized a 1.1% increase in gross profit margin to 32.6% for the three months ended September 30, 2026 as compared to the prior year comparable period primarily due to an improved and diversified business mix and operating efficiencies. Products and Systems segment gross margin decreased 4.4% to 49.9% for the three months ended September 30, 2026 primarily due to a less favorable sales mix as compared to the prior period.
Nine Months
Gross profit margin was 28.8% and 28.2% for the nine-month periods ended September 30, 2026 and 2025, respectively. Gross profit margin for the North America segment increased 0.5% to 26.9% for the nine months ended September 30, 2026 as compared to the prior year comparable period primarily due to an improved and diversified business mix and operating efficiencies. International segment gross profit margin increased 0.4% to 30.6% due to an improved and diversified business mix and operating efficiencies. Products and Systems segment gross margin had a decline of 5.8% to 46.4% for the nine months ended September 30, 2026 primarily due to a less favorable sales mix as compared to the prior period.
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
Operating Expenses
Operating expenses for the three and nine months ended September 30, 2026 and 2025 was as follows:
| Three months ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Operating Expenses | |||||||||||||||||||||||
| Selling, general and administrative expenses | $ | 38,493 | $ | 33,478 | $ | 114,201 | $ | 108,923 | |||||||||||||||
| Reorganization and other costs | 1,455 | 1,764 | 3,457 | 7,802 | |||||||||||||||||||
| Transaction-related expense | 4,304 | - | 4,304 | - | |||||||||||||||||||
| Environmental expense, net | (110) | 199 | 219 | 1,257 | |||||||||||||||||||
| Research and engineering | 247 | 210 | 711 | 778 | |||||||||||||||||||
| Depreciation and amortization | 2,599 | 2,161 | 7,645 | 6,473 | |||||||||||||||||||
| $ | 46,988 | $ | 37,812 | $ | 130,537 | $ | 125,233 | ||||||||||||||||
Three Months
Operating expenses increased $9.2 million, or 24.3%, for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Selling, general and administrative expenses increased $5.0 million during the three months ended September 30, 2026 compared to the three months ended September 30, 2025, primarily 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 $0.3 million to $1.5 million as compared to the prior year comparable period due to lower restructuring activity, including workforce reductions and laboratory rationalization initiatives in the three months ended September 30, 2025, which did not recur at similar levels during the current year period. Transaction-related expense was $4.3 million during the three months ended September 30, 2026, due to costs associated with the Merger Agreement. Environmental expense decreased by $0.3 million as compared to the prior year comparable period. Research and engineering expenses remained flat period over period. Depreciation and amortization increased by $0.4 million during the three months ended September 30, 2026 compared to the three months ended September 30, 2025.
Nine Months
Operating expenses increased $5.3 million, or 4.2%, for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. Selling, general and administrative expenses increased $5.3 million during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025, due to strategic investments in our operations to support commercial execution and promote growth in our strategic markets, while maintaining discipline in overhead costs. Reorganization and other costs decreased by $4.3 million to $3.5 million as compared to the prior year comparable period due to lower restructuring activity, including workforce reductions and laboratory rationalization initiatives in the nine months ended September 30, 2025, which did not recur at similar levels during the current year period. Transaction-related expense was $4.3 million during the nine months ended September 30, 2026, due to costs associated with the Merger Agreement. Environmental expense decreased by $1.0 million as compared to the prior year comparable period. Research and engineering expenses decreased by $0.1 million during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025. Depreciation and amortization increased by $1.2 million during the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025.
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
Income (Loss) from Operations
The following table shows a reconciliation of the income from operations to income from operations before special items for each of our three segments, Corporate and Elimination and for the Company in total:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| North America: | |||||||||||||||||||||||
| Income from operations (GAAP) | $ | 22,779 | $ | 22,753 | $ | 50,951 | $ | 46,026 | |||||||||||||||
| Reorganization and other costs | 947 | 283 | 1,531 | 2,754 | |||||||||||||||||||
| Income from operations before special items (non-GAAP) | $ | 23,726 | $ | 23,036 | $ | 52,482 | $ | 48,780 | |||||||||||||||
| International: | |||||||||||||||||||||||
| Income from operations (GAAP) | $ | 4,122 | $ | 3,838 | $ | 8,617 | $ | 8,923 | |||||||||||||||
| Reorganization and other costs | 320 | 171 | 815 | 441 | |||||||||||||||||||
| Income from operations before special items (non-GAAP) | $ | 4,442 | $ | 4,009 | $ | 9,432 | $ | 9,364 | |||||||||||||||
| Products and Systems: | |||||||||||||||||||||||
| Income from operations (GAAP) | $ | 980 | $ | 1,051 | $ | 1,644 | $ | 1,714 | |||||||||||||||
| Reorganization and other costs | - | - | 63 | 151 | |||||||||||||||||||
| Income from operations before special items (non-GAAP) | $ | 980 | $ | 1,051 | $ | 1,707 | $ | 1,865 | |||||||||||||||
| Corporate and Eliminations: | |||||||||||||||||||||||
| Loss from operations (GAAP) | $ | (12,832) | $ | (7,261) | $ | (28,535) | $ | (28,866) | |||||||||||||||
| Environmental expense, net | (110) | 199 | 219 | 1,257 | |||||||||||||||||||
| Reorganization and other costs | 188 | 1,310 | 1,048 | 4,456 | |||||||||||||||||||
| Transaction-related expense | 4,304 | - | 4,304 | - | |||||||||||||||||||
| Loss from operations before special items (non-GAAP) | $ | (8,450) | $ | (5,752) | $ | (22,964) | $ | (23,153) | |||||||||||||||
| Total Company: | |||||||||||||||||||||||
| Income from operations (GAAP) | $ | 15,049 | $ | 20,381 | $ | 32,677 | $ | 27,797 | |||||||||||||||
| Environmental expense, net | (110) | 199 | 219 | 1,257 | |||||||||||||||||||
| Reorganization and other costs | 1,455 | 1,764 | 3,457 | 7,802 | |||||||||||||||||||
| Transaction-related expense | 4,304 | - | 4,304 | - | |||||||||||||||||||
| Income from operations before special items (non-GAAP) | $ | 20,698 | $ | 22,344 | $ | 40,657 | $ | 36,856 | |||||||||||||||
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 September 30, 2026, income from operations (GAAP) decreased $5.3 million, or 26.2%, compared to the three months ended September 30, 2025, while income from operations before special items (non-GAAP) decreased by $1.6 million, or 7.4%. As a percentage of revenue, income from operations before special items decreased by 130 basis points to 10.1% in the three months ended September 30, 2026 compared to 11.4% in the three months ended September 30, 2025.
Nine Months
For the nine months ended September 30, 2026, income from operations (GAAP) increased $4.9 million, or 17.6%, compared to the nine months ended September 30, 2025, while income from operations before special items (non-GAAP) increased by $3.8 million, or 10.3%. As a percentage of revenue, income from operations before special items increased by 40 basis points to 7.2% in the nine months ended September 30, 2026 compared to 6.8% in the nine months ended September 30, 2025.
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
Adjusted EBITDA
The following table shows a reconciliation from net income to adjusted EBITDA for the Company:
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net income (GAAP) | $ | 6,909 | $ | 13,203 | $ | 16,818 | $ | 13,161 | |||||||||||||||
| Less: Net income (loss) attributable to non-controlling interests, net of taxes | (40) | 95 | (100) | 222 | |||||||||||||||||||
| Net income attributable to Mistras Group, Inc. | $ | 6,949 | $ | 13,108 | $ | 16,918 | $ | 12,939 | |||||||||||||||
| Interest expense | 3,446 | 3,381 | 10,463 | 10,944 | |||||||||||||||||||
| Provision for income taxes | 4,172 | 3,797 | 6,819 | 3,692 | |||||||||||||||||||
| Depreciation and amortization | 8,862 | 7,691 | 25,115 | 23,161 | |||||||||||||||||||
|
Share-based compensation expense(1)
|
1,724 | 969 | 5,527 | 4,098 | |||||||||||||||||||
|
Reorganization and other related costs(1)
|
1,455 | 1,764 | 3,457 | 7,802 | |||||||||||||||||||
| Transaction-related expense | 4,304 | - | 4,304 | - | |||||||||||||||||||
| Environmental expense, net | (110) | 199 | 219 | 1,257 | |||||||||||||||||||
| Foreign exchange loss (gain) | 522 | (735) | (1,423) | 2,420 | |||||||||||||||||||
| Adjusted EBITDA (non-GAAP) | $ | 31,324 | $ | 30,174 | $ | 71,399 | $ | 66,313 | |||||||||||||||
| Revenue | $ | 204,621 | $ | 195,549 | $ | 566,787 | $ | 542,569 | |||||||||||||||
| Adjusted EBITDA Margin (non-GAAP) | 15.3 | % | 15.4 | % | 12.6 | % | 12.2 | % | |||||||||||||||
(1) For the three months ended September 30, 2025, the Company recognized share-based compensation expense within Reorganization and other costs of $0.5 million. For the nine months ended September 30, 2025, the Company recognized share-based compensation expense within Reorganization and other costs of $2.0 million. No share-based compensation expense was recognized within Reorganization and other costs for the three or nine months ended September 30, 2026.
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 September 30, 2026, adjusted EBITDA (non-GAAP) increased by $1.2 million, or 3.8%, compared to the three months ended September 30, 2025. As a percentage of revenue, adjusted EBITDA decreased by 10 basis points to 15.3% in the three months ended September 30, 2026 compared to 15.4% in the three months ended September 30, 2025.
Nine Months
For the nine months ended September 30, 2026, adjusted EBITDA (non-GAAP) increased by $5.1 million, or 7.7%, compared to the nine months ended September 30, 2025. As a percentage of revenue, adjusted EBITDA increased by 40 basis points to 12.6% in the nine months ended September 30, 2026 compared to 12.2% in the nine months ended September 30, 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 flat at approximately $3.4 million for both the three months ended September 30, 2026 and 2025. Interest expense was approximately $10.5 million and $10.9 million for the nine months ended September 30, 2026 and 2025, respectively. This decrease of $0.4 million in interest expense was a result of lower interest rates and lower average borrowings outstanding during the nine months ended September 30, 2026 in comparison to the prior year comparable period.
Income Taxes
Our effective income tax rate was approximately 37.7% and 22.3% for the three months ended September 30, 2026 and 2025, respectively. Our effective income tax rate was approximately 28.8% and 21.9% for the nine months ended September 30, 2026 and 2025, respectively.
The effective income tax rate for the three months ended September 30, 2026, was higher than the statutory rate primarily due to non-deductible transaction costs. The effective income tax rate for the three months ended September 30, 2025 was higher than the statutory rate primarily due to the impact of foreign currency losses.
The effective income tax rate for the nine months ended September 30, 2026, was higher than the statutory rate primarily due to non-deductible transaction costs. The effective income tax rate for the nine months ended September 30, 2025, was higher than the statutory rate primarily due to the impact of foreign currency losses.
Income tax expense varies as a function of pre-tax income and the level of non-deductible expenses, such as certain amounts of meals and entertainment expense, valuation allowances, and other permanent differences. It is also affected by discrete items that may occur in any given year but are not consistent from year to year. Our effective income tax rate may fluctuate over the next few years due to many variables including the amount and future geographic distribution of our pre-tax income, changes resulting from our acquisition strategy, and increases or decreases in our permanent differences.
On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), was enacted, which includes a broad range of tax reform provisions. These tax reform provisions include the extension and modification of certain provisions of the Tax Cuts and Jobs Act and were 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 nine months ended September 30, 2026.
Liquidity and Capital Resources
Cash flows are summarized in the table below:
|
Nine months ended September 30,
|
|||||||||||
| 2026 | 2025 | ||||||||||
| Net cash (used in) provided by: | |||||||||||
| Operating activities | $ | 29,436 | $ | 843 | |||||||
| Investing activities | (24,971) | (18,964) | |||||||||
| Financing activities | (12,288) | 26,216 | |||||||||
| Effect of exchange rate changes on cash | (1,198) | 1,393 | |||||||||
| Net change in cash and cash equivalents | $ | (9,021) | $ | 9,488 | |||||||
Mistras Group, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
(tabular dollars are in thousands)
Cash Flows from Operating Activities
During the nine months ended September 30, 2026, cash provided by operating activities was $29.4 million, representing a year-over-year increase of $28.6 million, or 3,392%. This increase was primarily attributable to an increase in net income and movements in working capital, primarily due to higher collections of accounts receivable as compared to the prior year comparable period.
Cash Flows from Investing Activities
During the nine months ended September 30, 2026, cash used in investing activities was $25.0 million, representing a $6.0 million increase compared to the prior year comparable period. The increase is primarily attributable to increased expenditures for property, plant, and equipment and intangible assets.
Cash Flows from Financing Activities
Net cash used in financing activities was $12.3 million for the nine months ended September 30, 2026, compared to net cash provided by financing activities of $26.2 million for the nine months ended September 30, 2025. During the nine months ended September 30, 2026, net payments of debt were approximately $10.0 million compared to net borrowings of debt of $27.7 million in the prior year comparable period.
Effect of Exchange Rate Changes on Cash and Cash Equivalents
The effect of exchange rate changes on our cash and cash equivalents was a decrease of $1.2 million in the nine months ended September 30, 2026, compared to an increase of $1.4 million for the nine months ended September 30, 2025.
Cash Balance and Credit Facility Borrowings
As of September 30, 2026, we had cash and cash equivalents totaling $19.0 million and $101.7 million of unused commitments under our Credit Agreement with borrowings of $172.3 million (consisting of $85.0 million under the revolving credit facility and $87.3 million under the term loan, net of unamortized debt issuance costs) and $3.3 million of letters of credit outstanding. We finance operations primarily through our existing cash balances, cash collected from operations, bank borrowings and capital lease financing. We believe these sources are sufficient to fund our operations for the foreseeable future.
As of September 30, 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
Except for the Amendment to the Credit Agreement described in Note 11 - Long-Term Debt, there have been no significant changes in our contractual obligations and outstanding indebtedness from those disclosed in our 2025 Annual Report.
Off-balance Sheet Arrangements
We did not have, and do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Critical Accounting Policies and Estimates
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.
MISTRAS Group Inc. published this content on November 02, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 02, 2026 at 22:12 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]