10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

Or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __ to __

Commission file number 001-34481

Mistras Group, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware		22-3341267
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
195 Clarksville Road
Princeton Junction,	New Jersey	08550
(Address of principal executive offices)		(Zip Code)

(609) 716-4000

(Registrant’s telephone number, including area code) 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	MG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

ý Yes  o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

ý Yes  o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller

reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o	Smaller reporting company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes  ý No

As of April 29, 2022, the registrant had 29,805,316 shares of common stock outstanding.

TABLE OF CONTENTS

 

			PAGE
PART I—FINANCIAL INFORMATION
	ITEM 1.	Financial Statements	1
		Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021	1
		Unaudited Condensed Consolidated Statements of Loss for the three months ended March 31, 2022 and March 31, 2021	2
		Unaudited Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2022 and March 31, 2021	3
		Unaudited Condensed Consolidated Statements of Equity for the three months ended March 31, 2022 and March 31, 2021	4
		Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and March 31, 2021	5
		Notes to Unaudited Condensed Consolidated Financial Statements	6
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
	ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	34
	ITEM 4	Controls and Procedures	34
PART II—OTHER INFORMATION
	ITEM 1.	Legal Proceedings	35
	ITEM 1.A.	Risk Factors	35
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
	ITEM 3.	Defaults Upon Senior Securities	35
	ITEM 4.	Mine Safety Disclosures	35
	ITEM 5.	Other Information	35
	ITEM 6.	Exhibits	36
SIGNATURES			37

i

PART I—FINANCIAL INFORMATION

ITEM 1.    Financial Statements

Mistras Group, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

	March 31, 2022		December 31, 2021
ASSETS	(unaudited)
Current Assets
Cash and cash equivalents	$	19,921	$	24,110
Accounts receivable, net	127,085		109,511
Inventories	12,589		12,686
Prepaid expenses and other current assets	11,709		15,031
Total current assets	171,304		161,338
Property, plant and equipment, net	83,689		86,578
Intangible assets, net	57,479		59,381
Goodwill	206,409		205,439
Deferred income taxes	2,225		2,174
Other assets	47,122		47,285
Total assets	$	568,228	$	562,195
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	12,422	$	12,870
Accrued expenses and other current liabilities	87,466		83,863
Current portion of long-term debt	21,336		20,162
Current portion of finance lease obligations	3,775		3,765
Income taxes payable	1,216		755
Total current liabilities	126,215		121,415
Long-term debt, net of current portion	187,478		182,403
Obligations under finance leases, net of current portion	9,552		9,752
Deferred income taxes	8,661		8,385
Other long-term liabilities	39,237		39,328
Total liabilities	371,143		361,283
Commitments and contingencies
Equity
Preferred stock, 10,000,000 shares authorized	—		—
Common stock, $0.01 par value, 200,000,000 shares authorized, 29,720,443 and 29,546,263 shares issued and outstanding	297		295
Additional paid-in capital	239,656		238,687
Accumulated deficit	(23,351)		(17,988)
Accumulated other comprehensive loss	(19,756)		(20,311)
Total Mistras Group, Inc. stockholders’ equity	196,846		200,683
Non-controlling interests	239		229
Total equity	197,085		200,912
Total liabilities and equity	$	568,228	$	562,195

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

1

Mistras Group, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Loss

(in thousands, except per share data)

	Three months ended March 31,
	2022		2021
Revenue	$	161,662	$	153,735
Cost of revenue	115,758		108,243
Depreciation	6,012		5,491
Gross profit	39,892		40,001
Selling, general and administrative expenses	42,036		39,639
Legal settlement and insurance recoveries, net	(841)		1,030
Research and engineering	551		727
Depreciation and amortization	2,795		3,074
Acquisition-related expense, net	49		277
Loss from operations	(4,698)		(4,746)
Interest expense	1,938		3,213
Loss before benefit for income taxes	(6,636)		(7,959)
Benefit for income taxes	(1,283)		(2,600)
Net Loss	(5,353)		(5,359)
Less: net income attributable to noncontrolling interests, net of taxes	10		3
Net Loss attributable to Mistras Group, Inc.	$	(5,363)	$	(5,362)
Loss per common share
Basic	$	(0.18)	$	(0.18)
Diluted	$	(0.18)	$	(0.18)
Weighted-average common shares outstanding:
Basic	29,634		29,425
Diluted	29,634		29,425

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

2

Mistras Group, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

 

	Three months ended March 31,
	2022		2021
Net Loss	$	(5,353)	$	(5,359)
Other comprehensive loss:
Foreign currency translation adjustments	$	555	$	(592)
Comprehensive Loss	(4,798)		(5,951)
Less: net income attributable to noncontrolling interest	10		3
Comprehensive loss attributable to Mistras Group, Inc.	$	(4,808)	$	(5,954)

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

3

Mistras Group, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Equity

(in thousands)

	Three months ended
	Common Stock			Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Total Mistras Group, Inc. Stockholders’ Equity		Noncontrolling Interest
	Shares	Amount												Total Equity
Balance at December 31, 2021	29,546	$	295	$	238,687	$	(17,988)	$	(20,311)	$	200,683	$	229	$	200,912
Net income (loss)	—	—		—		(5,363)		—		(5,363)		10		(5,353)
Other comprehensive income, net of tax	—	—		—		—		555		555		—		555
Share-based payments	—	—		1,515		—		—		1,515		—		1,515
Net settlement of restricted stock units	174	2		(546)		—		—		(544)		—		(544)
Balance at March 31, 2022	29,720	$	297	$	239,656	$	(23,351)	$	(19,756)	$	196,846	$	239	$	197,085
Balance at December 31, 2020	29,234	$	292	$	234,638	$	(21,848)	$	(16,061)	$	197,021	$	198	$	197,219
Net income (loss)	—	—		—		(5,362)		—		(5,362)		3		(5,359)
Other comprehensive loss, net of tax	—	—		—		—		(592)		(592)		—		(592)
Share-based payments	—	—		1,262		—		—		1,262		—		1,262
Net settlement of restricted stock units	113	1		(487)		—		—		(486)		—		(486)
Balance at March 31, 2021	29,347	$	293	$	235,413	$	(27,210)	$	(16,653)	$	191,843	$	201	$	192,044

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

4

Mistras Group, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

(In Thousands)

	Three months ended March 31,
	2022		2021
Cash flows from operating activities
Net loss	$	(5,353)	$	(5,359)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization	8,807		8,565
Deferred income taxes	196		866
Share-based compensation expense	1,515		1,262
Fair value adjustments to contingent consideration	45		243
Foreign currency loss	686		455
Other	86		(48)
Changes in operating assets and liabilities, net of effect of acquisitions and dispositions
Accounts receivable	(17,831)		(5,417)
Inventories	(96)		(87)
Prepaid expenses and other assets	3,421		(4,944)
Accounts payable	(440)		942
Accrued expenses and other liabilities	3,605		6,881
Income taxes payable	493		(211)
Payment of contingent consideration liability in excess of acquisition-date fair value	(533)		—
Net cash provided by (used in) operating activities	(5,399)		3,148
Cash flows from investing activities
Purchase of property, plant and equipment	(3,061)		(4,003)
Purchase of intangible assets	(151)		(350)
Acquisition of business, net of cash acquired	—		(411)
Proceeds from sale of equipment	475		588
Net cash used in investing activities	(2,737)		(4,176)
Cash flows from financing activities
Repayment of finance lease obligations	(1,076)		(1,069)
Repayment of long-term debt	(4,152)		(2,323)
Proceeds from revolver	26,000		23,000
Repayment of revolver	(15,500)		(17,750)
Payment of contingent consideration for business acquisitions	(405)		(938)
Taxes paid related to net share settlement of share-based awards	(544)		(485)
Net cash provided by financing activities	4,323		435
Effect of exchange rate changes on cash and cash equivalents	(376)		(990)
Net change in cash and cash equivalents	(4,189)		(1,583)
Cash and cash equivalents at beginning of period	24,110		25,760
Cash and cash equivalents at end of period	$	19,921	$	24,177
Supplemental disclosure of cash paid (received)
Interest, net	$	1,711	$	2,916
Income taxes, net of refunds	$	(4,661)	$	2,877
Noncash investing and financing
Equipment acquired through finance lease obligations	$	848	$	643

.

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

5

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

1.    Description of Business and Basis of Presentation

Description of Business

Mistras Group, Inc. and subsidiaries (the Company) is a leading “one source” multinational provider of integrated technology-enabled asset protection solutions helping to maximize the safety and operational uptime for civilization's most critical industrial and civil assets.

Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, and decades-long legacy of industry leadership, the Company helps clients with asset-intensive infrastructure in the oil and gas, aerospace and defense, industrials, power generation, and transmission (including alternative and renewable energy), other process industries and infrastructure, research and engineering and other industries towards achieving and maintaining operational excellence. By supporting these organizations that help fuel our vehicles and power our society; inspecting components that are trusted for commercial, defense, and space craft; and building real-time monitoring equipment to enable safe travel across bridges, the Company helps the world at large.

The Company enhances value for its clients by integrating asset protection throughout supply chains and centralizing integrity data through a suite of Industrial Internet of Things ("IoT")-connected digital software and monitoring solutions, including OneSuite™, which serves as an ecosystem platform, pulling together all of the Company’s software and data services capabilities, for the benefit of its customers.

The Company's core capabilities also include non-destructive testing (“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.

Recent Developments

The COVID-19 coronavirus (COVID-19) pandemic has continued to cause disruption and volatility in domestic and international markets although conditions continue to improve during 2022 as compared to 2021. The Company's businesses have been classified as non-healthcare critical infrastructure as defined by the U.S. Centers for Disease Control and Prevention (CDC). Our facilities, and the Company's customers facilities as well, have remained open with staffing modifications and precautionary procedures taken as necessary.

Overall, the Company has taken actions to help ensure the health and safety of Company employees and those of its customers and suppliers; maintain business continuity and financial strength and stability; and serve customers as they provide essential products and services to the world.

The COVID-19 pandemic uncertainty, significant volatility in oil prices, and decreased traffic in the aerospace industry have adversely affected the operations of the Company's customers, suppliers and contractors beginning in the first quarter of 2020, and as a consequence, the Company's results of operations, were adversely impacted. These negative factors continue to cause volatility and uncertainty in the markets in which the Company operates, although the Company in 2022 has nevertheless begun approaching pre-pandemic levels of activity in certain end markets, particularly oil and gas where crude oil prices have exceeded pre-pandemic levels.

The Company has eliminated substantially all of the cost reduction initiatives undertaken in 2020, including re-installment of the savings plan employer match and increasing wages back to pre-pandemic amounts.

The Company is currently unable to predict with certainty the overall impact that the factors discussed above and the effect of the Russian-Ukrainian conflict may have on its business, results of operations or liquidity or in other ways which the Company cannot yet determine. To date, the Company's European operations have begun to see increased costs associated with higher energy costs, among others, due in part to the on-going conflict. The Company will continue to monitor market conditions and respond accordingly.

6

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Basis of Presentation

The Unaudited Condensed Consolidated Financial Statements contained in this report have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") and Securities and Exchange Commission ("SEC") guidance allowing for reduced disclosure for interim periods. In the opinion of management, the Unaudited Condensed Consolidated Financial Statements include all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods of the years ending December 31, 2022 and December 31, 2021.

Certain items included in these statements are based on management’s estimates. Actual results may differ from those estimates. The results of operations for any interim period are not necessarily indicative of the results expected for the year. The accompanying Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the notes to the Audited Consolidated Financial Statements contained in the Company's 2021 Annual Report on Form 10-K ("2021 Annual Report").

Principles of Consolidation

The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of Mistras Group, Inc. as well as its wholly-owned subsidiaries, majority-owned subsidiaries and consolidated variable interest entities (VIE). For subsidiaries in which the Company’s ownership interest is less than 100%, the non-controlling interests are reported in stockholders’ equity in the accompanying Condensed Consolidated Balance Sheets. The non-controlling interests in net results, net of tax, is classified separately in the accompanying Unaudited Condensed Consolidated Statements of Loss. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations of companies acquired are included from the date of acquisition.

Reclassification

Certain amounts in prior periods have been reclassified to conform to the current year presentation. Such reclassifications did not have a material effect on the Company's financial condition or results of operations as previously reported.

Customers

For each of the three months ended March 31, 2022 and 2021, no customer represented 10% or more of the Company's revenue.

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in Note 1–Summary of Significant Accounting Policies and Practices in the 2021 Annual Report. On an ongoing basis, the Company evaluates its estimates and assumptions, including among other things, those related to revenue recognition, long-lived assets, goodwill and acquisitions. Since the date of the 2021 Annual Report, there have been no material changes to the Company's significant accounting policies.

7

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Income Taxes

Income taxes are accounted for under the asset and liability method. We recognize deferred tax assets and liabilities at enacted income tax rates for the temporary differences between the financial reporting bases and the tax bases of our assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. Our net deferred tax assets primarily consist of net operating loss carry forwards, or NOLs. A valuation allowance is provided if it is more likely than not that some or all of a deferred income tax asset will not be realized. A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the current and prior years.

As of March 31, 2022, management concluded that it is more likely than not that a substantial portion of the Company's deferred tax assets will be realized.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.

The Company’s effective income tax rate was approximately 19.3% and 32.7% for the three months ended March 31, 2022 and 2021, respectively. The effective income tax rate benefit for the three months ended March 31, 2022 was lower than the statutory rate primarily due to the impact of an unfavorable discrete item related to stock compensation. The effective income tax rate for the three months ended March 31, 2021 was higher than the statutory rate due to the capitalization of certain non-US intercompany balances which resulted in a deductible foreign exchange loss in the US.

Recent Accounting Pronouncements

In March 2020 and updated in January 2021, the FASB issued ASU 2020-04 and 2021-01,“Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The guidance provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating applicable contracts and the available expedients provided by the new guidance.

2.    Revenue

The Company derives the majority of its revenue by providing services on a time and material basis, and are short-term in nature. The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers.

Performance Obligations

The Company provides highly integrated and bundled inspection services to its customers. The majority of the Company's contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and is, therefore, not distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the Company's best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is a relative selling price based on price lists.

Contract modifications are not routine in the performance of the Company's contracts. Generally, when contracts are modified, the modification is to account for changes in scope to the goods and services that are provided. In most instances, contract modifications are for goods or services that are distinct, and, therefore, are accounted for as a separate contract.

The Company's performance obligations are satisfied over time as work progresses or at a point in time. The majority of the Company's revenue is recognized over time as work progresses for the Company's 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. The Company also utilizes an available

8

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

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. For these arrangements, revenue is recognized on a cost-to-cost method tracked on an input basis.

The majority of our revenue recognized at a point in time is related to product sales when the customer obtains control of the asset, which is generally upon shipment to the customer. Contract costs include labor, material and overhead.

The Company expects any significant remaining performance obligations to be satisfied within one year.

Contract Estimates

The majority of the Company's revenues are short-term in nature. The Company enters into master service agreements (MSAs) with customers that specify an overall framework and contract terms. The actual contracting to provide services or furnish products are triggered by a work order, purchase order, or some similar document issued pursuant to a MSA which sets forth the scope of services and/or identifies the products to be provided. From time-to-time, the Company may enter into longer-term contracts, which can range from several months to several years. Revenue on certain contracts is recognized as work is performed based on total costs incurred to date in relation to the total estimated costs for the performance of the contract at completion. This includes contract estimates of costs to be incurred for the performance of the contract. Cost estimation is based upon the professional knowledge and experience of the Company's project managers, engineers and financial professionals. Factors that are considered in estimating the work to be completed include the availability of materials, the effect of any delays in the Company's project performance and the recoverability of any claims. Whenever revisions of estimates, contract costs and/or contract values indicate that the contract costs will exceed estimated revenues, thus creating a loss, a provision for the total estimated loss is recorded in that period.

9

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Revenue by Category

The following series of tables present the Company's disaggregated revenue:

Revenue by industry was as follows:

Three Months Ended March 31, 2022	Services		International		Products		Corp/Elim		Total
Oil & Gas	$	86,613	$	7,572	$	38	$	—	$	94,223
Aerospace & Defense	15,022		4,940		108		—		20,070
Industrials	9,007		5,528		502		—		15,037
Power generation & Transmission	3,822		2,562		845		—		7,229
Other Process Industries	10,293		3,518		1		—		13,812
Infrastructure, Research & Engineering	2,506		2,039		897		—		5,442
Petrochemical	3,045		78		—		—		3,123
Other	2,638		1,901		545		(2,358)		2,726
Total	$	132,946	$	28,138	$	2,936	$	(2,358)	$	161,662

Three Months Ended March 31, 2021	Services		International		Products		Corp/Elim		Total
Oil & Gas	$	79,220	$	7,936	$	56	$	—	$	87,212
Aerospace & Defense	11,823		4,317		35		—		16,175
Industrials	8,819		4,849		327		—		13,995
Power generation & Transmission	5,534		1,978		759		—		8,271
Other Process Industries	7,856		2,912		9		—		10,777
Infrastructure, Research & Engineering	3,169		3,756		1,144		—		8,069
Petrochemical	5,464		72		—				5,536
Other	2,413		1,828		658		(1,199)		3,700
Total	$	124,298	$	27,648	$	2,988	$	(1,199)	$	153,735

Revenue per key geographic location was as follows:

Three Months Ended March 31, 2022	Services		International		Products		Corp/Elim		Total
United States	$	113,935	$	173	$	1,351	$	(655)	$	114,804
Other Americas	18,052		1,341		16		(609)		18,800
Europe	744		25,920		580		(924)		26,320
Asia-Pacific	215		704		989		(170)		1,738
Total	$	132,946	$	28,138	$	2,936	$	(2,358)	$	161,662

Three Months Ended March 31, 2021	Services		International		Products		Corp/Elim		Total
United States	$	104,546	$	208	$	1,460	$	(391)	$	105,823
Other Americas	18,878		1,177		67		(63)		20,059
Europe	294		25,894		460		(612)		26,036
Asia-Pacific	580		369		1,001		(133)		1,817
Total	$	124,298	$	27,648	$	2,988	$	(1,199)	$	153,735

10

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheets. Amounts are generally billed as work progresses in accordance with agreed-upon contractual terms, generally at periodic intervals (e.g., weekly, bi-weekly or monthly). Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, the Company sometimes receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities. These assets and liabilities are aggregated on an individual contract basis and reported on the Consolidated Balance Sheets at the end of each reporting period within accounts receivable, net or accrued expenses and other current liabilities.

Revenue recognized during the three months ended March 31, 2022 and 2021 that was included in the contract liability balance at the beginning of such year was $2.2 million and $1.9 million for each period. Changes in the contract asset and liability balances during these periods were not materially impacted by any other factors. The Company applies a practical expedient to expense incremental costs incurred related to obtaining a contract. The Company’s expenses are expected to be amortized over a period less than one year.

3.    Share-Based Compensation

The Company has share-based incentive awards outstanding to its eligible employees and non-employee directors under two equity incentive plans: (i) the 2009 Long-Term Incentive Plan (the "2009 Plan") and (ii) the 2016 Long-Term Incentive Plan (the "2016 Plan"). No further awards may be granted under the 2009 Plan, and the remaining stock option award granted under the 2009 Plan expired during the three months ended March 31, 2022. Awards granted under the 2016 Plan may be in the form of stock options, restricted stock units and other forms of share-based incentives, including performance restricted stock units, stock appreciation rights and deferred stock rights. At the annual shareholders meeting on May 19, 2020, the Company’s shareholders approved an amendment to increase the total number of shares that may be issued under the 2016 Plan by 2.0 million, for a total of 3.7 million shares that are authorized for issuance under the 2016 Plan, of which 383,743 shares were available for future grants as of March 31, 2022.

Stock Options

For each of the three months ended March 31, 2022 and 2021, the Company did not recognize any share-based compensation expense related to the stock option award, as the one outstanding stock option award was already fully vested. No unrecognized compensation costs remained related to the stock option award as of March 31, 2022.

The following table sets forth a summary of the stock option activity, weighted-average exercise prices and options outstanding as of March 31, 2022 and 2021:

	Three months ended March 31,
	2022			2021
	Common Stock Options	Weighted Average Exercise Price		Common Stock Options	Weighted Average Exercise Price
Outstanding at beginning of period:	5	$	22.35	5	$	22.35
Granted	—	$	—	—	$	—
Exercised	—	$	—	—	$	—
Expired or forfeited	(5)	$	22.35	—	$	—
Outstanding at end of period:	—	$	—	5	$	22.35

11

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Restricted Stock Unit Awards

For the three months ended March 31, 2022 and March 31, 2021, the Company recognized share-based compensation expense related to restricted stock unit awards of $0.9 million and $0.9 million, respectively. As of March 31, 2022, there was $9.6 million of unrecognized compensation costs, net of estimated forfeitures, related to restricted stock unit awards, which is expected to be recognized over a remaining weighted-average period of 3.1 years. Upon vesting, restricted stock units are generally net share-settled to cover the required withholding tax and the remaining amount is converted into an equivalent number of shares of common stock.

A summary of the vesting activity of restricted stock unit awards, with the respective fair value of the awards, is as follows:

	Three months ended March 31,
	2022		2021
Restricted stock awards vested	226		111
Fair value of awards vested	$	1,502	$	1,189

A summary of the fully-vested common stock the Company issued to its six non-employee directors, in connection with its non-employee director compensation plan, is as follows:

	Three months ended March 31,
	2022		2021
Awards issued	34		25
Grant date fair value of awards issued	$	225	$	258

A summary of the Company's outstanding, non-vested restricted share units is as follows:

	Three months ended March 31,
	2022			2021
	Units	Weighted Average Grant-Date Fair Value		Units	Weighted Average Grant-Date Fair Value
Outstanding at beginning of period:	1,208	$	7.96	1,076	$	7.41
Granted	675	$	7.65	519	$	10.06
Released	(226)	$	13.73	(111)	$	15.90
Forfeited	(7)	$	10.50	(10)	$	8.69
Outstanding at end of period:	1,650	$	7.16	1,474	$	7.70

Performance Restricted Stock Units

The Company maintains Performance Restricted Stock Units (PRSUs) that have been granted to select executives and senior officers whose ultimate payout is based on the Company’s performance over a one-year period based on specific metrics approved by the Compensation Committee of the Board of Directors of the Company.

For 2021, the Compensation Committee made changes to the Company’s equity incentive compensation plan for its executive officers and approved the new target awards for 2021. For 2021, the three metrics were:

1.Free Cash Flow net cash provided by operating activities less purchases of property, plant, equipment and intangible assets and is subject to adjustments approved by the Compensation Committee.

2.Adjusted EBITDA defined as net income attributable to the Company plus: interest expense, provision for income taxes, depreciation and amortization, share-based compensation expense and certain acquisition related costs (including transaction due diligence costs and adjustments to the fair value of contingent consideration), foreign exchange (gain) loss and, if applicable, certain special items which are noted).

3.Total Shareholder Return (TSR) measures the total return to shareholders of the Company during 2021 versus the total return to the shareholders of a predefined peer group of companies that provide inspection, testing, certification or similar industrial services. The return will be measured by the year over year percent change in share price. The share prices used to calculate the return are the average share price during the 20-trading day period ending on the initial

12

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

measurement date (the last 20 trading days of 2020), compared to the average share price during the 20-trading day period ending on the final measurement date (the last 20 trading days of 2021). Any cash dividends or distributions paid in 2021 will be added to calculate the return to shareholders during the year. TSR is considered a market condition for which the fair value of PRSUs with this condition is determined using a Monte Carlo valuation model. Key assumptions in the Monte Carlo valuation model included:

a.Expected Volatility. Expected volatility of the Company’s common stock at the date of grant was estimated based on a historical average volatility rate for the approximate 1-year performance period.

b.Dividend Yield. The dividend yield assumption was based on historical and anticipated dividend payouts (assumed at zero).

c.Risk-Free Interest Rate. The risk-free interest rate assumption was based on observed interest rates consistent with the approximate 1-year performance measurement period.

For 2022, the Compensation Committee retained the Company's prior year equity incentive compensation plan for its executive officers including utilizing the same metrics, as defined above, and approved the new target awards for 2022.

PRSUs are equity-classified and compensation costs are initially measured using the fair value of the underlying stock at the date of grant. Compensation costs related to the PRSUs are subsequently adjusted for changes in the expected outcomes of the performance conditions. Compensation cost related to the PRSUs with a market condition is not reversed if the market condition is not achieved, provided the employee requisite service has been rendered. PRSUs generally vest ratably on each of the first four anniversary dates upon completion of the performance period, for a total requisite service period of up to five years and have no dividend rights.

A summary of the Company's PRSU activity is as follows:

	Three months ended March 31,
	2022			2021
	Units	Weighted Average Grant-Date Fair Value		Units	Weighted Average Grant-Date Fair Value
Outstanding at beginning of period:	388	$	10.07	333	$	8.84
Granted	341	$	6.55	189	$	12.59
Performance condition adjustments	(56)	$	10.47	(125)	$	3.68
Released	(17)	$	6.85	(22)	$	13.63
Forfeited	—	$	—	—	$	—
Outstanding at end of period:	656	$	12.18	375	$	12.18

During the three months ended March 31, 2022 and March 31, 2021, the Compensation Committee approved the final calculation of the award metrics for calendar year 2021 and 2020, respectively. As a result, the calendar year 2022 PRSUs decreased by approximately 56,000 units as a result of the final calculation of award metrics.

For the three months ended March 31, 2022 and March 31, 2021, the Company recognized aggregate share-based compensation expense related to the awards described above of approximately $0.3 million and $0.1 million, respectively. At March 31, 2022, there was $2.6 million of total unrecognized compensation costs related to approximately 656,000 non-vested PRSUs, which is expected to be recognized over a remaining weighted-average period of 2.5 years.

4.    Earnings (loss) per Share

Basic earnings (loss) per share is computed by dividing net loss by the weighted-average number of shares outstanding during the period. Diluted earnings per share is computed by dividing net loss by the sum of (1) the weighted-average number of shares of common stock outstanding during the period, and (2) the dilutive effect of assumed conversion of equity awards using the treasury stock method. With respect to the number of weighted-average shares outstanding (denominator), diluted shares reflects: (i) the exercise of options to acquire common stock to the extent that the options’ exercise prices are less than the average market price of common shares during the period and (ii) the pro forma vesting of restricted stock units.

13

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

The following table sets forth the computations of basic and diluted loss per share:

 

	Three months ended March 31,
	2022		2021
Basic loss per share
Numerator:
Net loss attributable to Mistras Group, Inc.	$	(5,363)	$	(5,362)
Denominator:
Weighted average common shares outstanding	29,634		29,425
Basic loss per share	$	(0.18)	$	(0.18)
Diluted loss per share:
Numerator:
Net loss attributable to Mistras Group, Inc.	$	(5,363)	$	(5,362)
Denominator:
Weighted average common shares outstanding	29,634		29,425
Dilutive effect of stock options outstanding	—		—
Dilutive effect of restricted stock units outstanding (1)	—		—
	29,634		29,425
Diluted loss per share	$	(0.18)	$	(0.18)

_______________

(1) For the three months ended March 31, 2022 and 2021, 1,212,000 and 509,000 shares, respectively, related to restricted stock were excluded from the calculation of diluted EPS due to the net loss for the period.

5.    Acquisitions

Acquisition-Related Expense 

In the course of its acquisition activities, the Company incurs costs in connection with due diligence, such as professional fees, and other expenses. Additionally, the Company adjusts the fair value of acquisition-related contingent consideration liabilities on a quarterly basis. These amounts are reported as Acquisition-related expense, net on the Unaudited Condensed Consolidated Statements of Loss and were as follows for the three months ended March 31, 2022 and 2021:

	Three months ended March 31,
	2022		2021
Due diligence, professional fees and other transaction costs	$	4	$	34
Adjustments to fair value of contingent consideration liabilities	45		243
Acquisition-related expense, net	$	49	$	277

The Company's contingent consideration liabilities are included in Accrued expenses and other current liabilities and Other long-term liabilities on the Condensed Consolidated Balance Sheets.

6.    Accounts Receivable, net

Accounts receivable consisted of the following:

14

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

 

	March 31, 2022		December 31, 2021
Trade accounts receivable	$	130,504	$	112,739
Allowance for credit losses	(3,419)		(3,228)
Accounts receivable, net	$	127,085	$	109,511

The Company had $23.7 million and $11.9 million of unbilled revenue accrued as of March 31, 2022 and December 31, 2021, respectively. These amounts are included in the trade accounts receivable balances above. Unbilled revenue is generally billed in the subsequent quarter to their revenue recognition. The Company considers unbilled receivables as short-term in nature as they are normally converted to trade receivables within 90 days, thus future changes in economic conditions will not have a significant effect on the credit loss estimate.

The Company was contracted to perform inspections of welds on various pipeline projects in Texas for a customer. As of December 31, 2019, approximately $1.4 million of past due receivables were outstanding from this customer. The Company received notice from the customer in December 2019, alleging that the work performed was not in compliance with the contract. The Company recorded a full reserve for this receivable during 2019 and the status of this situation has not changed since 2019. See Note 14-Commitments and Contingencies for additional details.

7.    Property, Plant and Equipment, net

Property, plant and equipment consisted of the following:

 

	Useful Life (Years)	March 31, 2022		December 31, 2021
Land		$	2,766	$	2,762
Buildings and improvements	30-40	24,725		24,787
Office furniture and equipment	5-8	19,721		16,620
Machinery and equipment	5-7	245,003		250,166
		292,215		294,335
Accumulated depreciation and amortization		(208,526)		(207,757)
Property, plant and equipment, net		$	83,689	$	86,578

Depreciation expense for the three months ended March 31, 2022 and 2021 was approximately $6.6 million and $6.1 million, respectively.

8.    Goodwill

Changes in the carrying amount of goodwill by segment is shown below:

	Services		International		Products and Systems		Total
Balance at December 31, 2021	$	190,656	$	14,783	$	—	$	205,439
Foreign currency translation	1,219		(249)				970
Balance at March 31, 2022	$	191,875	$	14,534	$	—	$	206,409

The Company reviews goodwill for impairment on a reporting unit basis on October 1 of each year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.

15

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

The Company performed a quantitative annual impairment test as of October 1, 2021 and the Company did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable. Additionally, through March 31, 2022, the Company did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable. Significant adverse changes in future periods could negatively affect the Company's key assumptions and may result in future goodwill impairment charges which could be material.

9.    Intangible Assets

The gross amount, accumulated amortization and net carrying amount of intangible assets were as follows:

 

		March 31, 2022						December 31, 2021
	Useful Life (Years)	Gross Amount		Accumulated Amortization		Net Carrying Amount		Gross Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	5-18	$	111,883	$	(81,572)	$	30,311	$	112,109	$	(80,319)	$	31,790
Software/Technology	3-15	52,895		(27,307)		25,588		52,265		(26,415)		25,850
Covenants not to compete	2-5	12,644		(12,450)		194		12,623		(12,390)		233
Other	2-12	10,599		(9,213)		1,386		10,574		(9,066)		1,508
Total		$	188,021	$	(130,542)	$	57,479	$	187,571	$	(128,190)	$	59,381

Amortization expense for the three months ended March 31, 2022 and 2021 was approximately $2.4 million and $2.5 million, respectively.

10.    Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

 

	March 31, 2022		December 31, 2021
Accrued salaries, wages and related employee benefits	$	34,423	$	33,816
Contingent consideration, current portion	981		1,830
Accrued workers’ compensation and health benefits	4,314		3,994
Deferred revenue	7,578		6,202
Pension accrual	2,519		2,519
Right-of-use liability - Operating	10,278		10,040
Other accrued expenses	27,373		25,462
Total	$	87,466	$	83,863

16

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

11.    Long-Term Debt

Long-term debt consisted of the following:

	March 31, 2022		December 31, 2021
Senior credit facility	$	130,000	$	119,500
Senior secured term loan, net of unamortized debt issuance costs of $0.2 million and $0.2 million, respectively	72,949		76,673
Other	5,865		6,392
Total debt	208,814		202,565
Less: Current portion	(21,336)		(20,162)
Long-term debt, net of current portion	$	187,478	$	182,403

Senior Credit Facility

The Company has a credit agreement with its banking group (as amended, the "Credit Agreement") which provides the Company with a revolving line of credit and a $100 million senior secured term loan A facility with a balance of $72.9 million as of March 31, 2022. Pursuant to the Amendment described below, the revolving line of credit was reduced from $155 million to $150 million on December 31, 2021. Both the revolving line of credit and the term loan A facility under the Credit Agreement have a maturity date of December 12, 2023.

On May 19, 2021, the Company entered into the Fifth Amendment (the “Amendment”) to the Credit Agreement. The Amendment made the following changes:

•Removed the LIBOR floor of 1.0%, which provided that if LIBOR is below 1.0%, the interest rate will be calculated as if LIBOR is 1.0%. Now the actual LIBOR rate is used to calculate interest, even if LIBOR is below 1.0%. The LIBOR margins and base rate margins are unchanged but are based upon the new Total Consolidated Debt Leverage Ratio (defined below); previously the margin was based upon the Funded Debt Leverage Ratio.

•Requires the Company to maintain a Total Consolidated Debt Leverage Ratio not to exceed 4.0 to 1.0 as of the end of each quarter through the quarter ending March 31, 2022, and for each quarter thereafter the ratio shall not exceed 3.5 to 1.0.

◦Total Consolidated Debt Leverage Ratio means the ratio of (a) Total Consolidated Debt to (b) EBITDA (as defined in the Credit Agreement) for the trailing four consecutive quarters

◦Total Consolidated Debt means all indebtedness (including subordinated debt) of the Company on a consolidated basis (with a limited exception).

•If the Company incurs certain subordinated debt or other permitted indebtedness, then the Company must maintain a Total Consolidated Debt Leverage Ratio not to exceed 4.5 to 1.0 and maintain a ratio of Senior Debt to EBITDA not to exceed 3.5 to 1.0, with Senior Debt being Total Consolidated Debt, less permitted subordinated debt.

•The Company must repay loans under the Credit Agreement with the net proceeds from certain dispositions of assets under certain circumstances and limits investments in non-guarantor subsidiaries under certain circumstances if the Company's Total Consolidated Leverage Ratio is above 3.5 to 1.0.

•Quarterly payments on the term loan increased to $3.75 million through March 31, 2022, then to $5.0 million for each quarterly payment thereafter and a final balloon payment at maturity.

As a result of the borrowing capacity reduction on the revolving loan line of credit, the Company expensed $0.1 million in unamortized capitalized debt issuance costs during the year ended December 31, 2021, which was included in selling, general and administrative expenses on the Consolidated Statements of Loss. The Company incurred $0.5 million in financing costs for the Amendment, of which $0.2 million of third-party costs were expensed and included in selling, general and administrative expenses on the Consolidated Statements of Loss.

17

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Under the Credit Agreement, the Company may borrow up to $100 million in non-U.S. Dollar currencies and use up to $20 million of the credit limit for the issuance of letters of credit.

As of March 31, 2022, the Company had borrowings of $203.1 million and a total of $3.3 million of letters of credit outstanding under the Credit Agreement. The Company has capitalized costs associated with debt modifications of $0.8 million as of March 31, 2022, which is included in Other Assets on the Condensed Consolidated Balance Sheets and will be amortized into interest expense over the remaining term of the Credit Agreement through December 12, 2023

As of March 31, 2022, the Company was in compliance with the terms of the Credit Agreement. The Company continuously monitors compliance with the covenants contained in its 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, due to the uncertainties being caused by the COVID-19 pandemic, the significant volatility in oil prices, and volatility in the aerospace production, such matters cannot be predicted with certainty.

Other debt

The Company's other debt includes bank financing provided at the local subsidiary level used to support working capital requirements and fund capital expenditures. At March 31, 2022, there was an aggregate of approximately $5.9 million outstanding, payable at various times through 2030. Monthly payments range from $0.4 thousand to $16 thousand and interest rates range from 0.4% to 3.5%.

12.    Fair Value Measurements

The Company performs fair value measurements in accordance with the guidance provided by ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a three level hierarchy that prioritizes the inputs used to measure fair value.

Financial instruments measured at fair value on a recurring basis

The fair value of contingent consideration liabilities was estimated using a discounted cash flow technique with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. The significant inputs in the Level 3 measurement not supported by market activity include the probability assessments of expected future cash flows related to the acquisitions, appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with the terms of the applicable acquisition agreements.

The following table represents the changes in the fair value of Level 3 contingent consideration:

 

	Three months ended March 31,
	2022		2021
Beginning balance	$	1,831	$	1,640
Acquisitions	—		—
Payments	(938)		(938)
Accretion of liability	—		—
Revaluation	45		243
Foreign currency translation	—		—
Ending balance	$	938	$	945

Financial instruments not measured at fair value on a recurring basis

The Company has evaluated current market conditions and borrower credit quality and has determined that the carrying value of its long-term debt approximates fair value. The fair value of the Company’s notes payable and finance lease obligations

18

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

approximates their carrying amounts based on anticipated interest rates which management believes would currently be available to the Company for similar issuances of debt.

13.    Leases

The Company’s Condensed Consolidated Balance Sheets include the following related to right-of-use ("ROU") operating leases:

Leases	Classification	March 31, 2022		December 31, 2021
Assets
ROU assets	Other Assets	$	42,505	$	42,451
Liabilities
ROU - current	Accrued expenses and other current liabilities	$	10,278	$	10,040
ROU liability - long-term	Other long-term liabilities	33,719		34,030
Total ROU liabilities		$	43,997	$	44,070

Included within the balance of operating leases is a lease for the Company’s headquarters which is with a related party. The ROU liability for this facility was approximately $2.4 million and $2.9 million as of March 31, 2022 and December 31, 2021, respectively. Total rent payments for this facility were approximately $0.3 million and $0.5 million for the three months ended March 31, 2022 and March 31, 2021, respectively. An agreement was reached with the related party to reduce rental payments by 12.5% for the lease of the Company’s headquarters, effective February 2022 as part of a voluntary reduction.

The total ROU assets attributable to finance leases were approximately $13.4 million and $13.8 million as of March 31, 2022 and December 31, 2021, respectively, which is included in Property, plant, and equipment, net on the Condensed Consolidated Balance Sheets.

The components of lease costs were as follows:

		Three months ended March 31,
	Classification	2022		2021
Finance lease expense
Amortization of ROU assets	Depreciation and amortization	$	1,012	$	1,060
Interest on lease liabilities	Interest expense	158		192
Operating lease expense	Cost of revenue; Selling, general & administrative expenses	3,198		3,302
Short-term lease expense	Cost of revenue; Selling, general & administrative expenses	6		6
Variable lease expense	Cost of revenue; Selling, general & administrative expenses	539		867
Total		$	4,913	$	5,427

19

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Additional information related to leases was as follows:

	Three months ended March 31,
	2022			2021
Cash paid for amounts included in the measurement of lease liabilities for finance and operating leases
Finance - financing cash flows	$	1,076		$	1,069
Finance - operating cash flows	158			192
Operating - operating cash flows	3,163			3,322
ROU assets obtained in the exchange for lease liabilities
Finance leases	$	848		$	643
Operating leases	2,772			1,004
Weighted-average remaining lease term (in years)
Finance leases	5.3			5.6
Operating leases	5.2			5.6
Weighted-average discount rate
Finance leases	5.2		%	5.5		%
Operating leases	5.5		%	5.7		%

Maturities of lease liabilities as of March 31, 2022 were as follows:

	Finance		Operating
Remainder of 2022	$	4,515	$	9,113
2023	3,990		11,252
2024	3,062		9,083
2025	1,471		6,763
2026	823		5,074
Thereafter	482		9,191
Total	14,343		50,476
Less: Present value discount	1,016		6,479
Lease liability	$	13,327	$	43,997

14.    Commitments and Contingencies

Legal Proceedings and Government Investigations

The Company is periodically involved in lawsuits, investigations and claims that arise in the ordinary course of business. The Company cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against it. Except for possible losses from the matters described below, the Company does not believe that any currently pending or threatened legal proceeding to which the Company is or is likely to become a party will have a material adverse effect on its business, results of operations, cash flows or financial condition. The costs incurred by the Company to defend lawsuits, investigations and claims and amounts the Company pays to other parties because of these matters may be covered by insurance in some circumstances.

20

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Litigation and Commercial Claims

The Company was contracted to perform inspections of welds on various pipeline projects in Texas for a customer. As of March 31, 2022, approximately $1.4 million of past due receivables were outstanding from this customer. The customer provided the Company with notice in December 2019, alleging that the Company’s inspection of 66 welds (out of approximately 16,000 welds inspected) were not in compliance with the contract, claimed approximately $7.6 million in damages, and requested that the Company pay these damages and any other damages incurred. The Company filed a lawsuit in the District Court of Bexar County, Texas, 37th Judicial District, in an action captioned Mistras Group, Inc. v. Epic Y-Grade Pipeline LP, to recover the $1.4 million and other amounts due to the Company. The customer filed a counterclaim, alleging breach of contract and seeking recovery of its alleged damages. The Company believes that any successful claim by the customer regarding the Company’s workmanship will be covered by insurance, subject to payment of a deductible. At this time, the Company is unable to determine whether it has any liability in connection with this matter and if so, the amount or range of any such liability, and accordingly, has not established any accruals for this matter. Accordingly, the Company recorded a reserve in the amount of $1.4 million during the twelve months ended December 31, 2019 for these past due receivables.

Two proceedings have been filed in California Superior Court for the County of Los Angeles regarding alleged violations of the California Labor Code. Both cases are captioned Justin Price v. Mistras Group, Inc., one being a purported class action lawsuit on behalf of current and former Mistras employees in California and the other was filed on behalf of the State of California under the California Private Attorney General Act on the basis of the same alleged violations. The two cases have been consolidated and are requesting payment of all damages, including unpaid wages, and various fines and penalties available under California law. On May 4, 2021, the Company agreed to a settlement of all claims in the cases, which was more formally documented pursuant to a settlement agreement completed October 5, 2021. Pursuant to the settlement, the Company will pay $2.3 million to resolve the allegations in these proceedings and will be responsible for the employer portion of payroll taxes on the amount of the settlement allocated to wages. The settlement is subject to court approval and will cover claims for the period from June 2016 through July 31, 2021. The Company recorded expense of approximately $1.6 million during the three months ended March 31, 2021 related to this settlement, which is in addition to expense of $0.8 million the Company recorded during the three months ended December 31, 2020.

Pension Related Contingencies

Certain of Company’s subsidiaries had significant reductions in their unionized workers in 2018. The collective bargaining agreements for these employees required contributions for these employees to national multi-employer pension funds. The reduction in employees resulted in a subsidiary incurring a complete withdrawal to one of the pension funds under the Employee Retirement Income Security Act of 1974 ("ERISA"), which was fully satisfied in 2019. The Company has determined that the subsidiary is likely to incur partial or complete withdrawal liability to the other pension fund. The balance of the estimated total amount of this potential liability as of March 31, 2022 is approximately $2.5 million, which were incurred in 2018 and 2019.

Severance and labor disputes

During December 2019, the Company executed an agreement to sell the rights of certain customer "staff leasing" contracts related to its German subsidiary for total consideration of approximately $0.1 million, effective January 1, 2020. No other assets or liabilities other than those employee benefits related to employees working on the customer contracts were included in the sale. As of March 31, 2022, the Company has approximately $0.1 million of accrued estimated severance payment obligations, which takes into account the Company's estimate with respect to the employees that have been or will be transitioned to the German subsidiaries' other customers. The $0.2 million of estimated obligations is net of $0.4 million in payments made and $1.0 million in reversals due to employees being transitioned to customer contracts.

The Company was entitled to indemnification on certain labor claims from the sellers of a company acquired by its Brazilian subsidiary. The Company and the sellers entered into a settlement agreement for approximately $1.0 million, which provided for payment in two installments, the first for approximately 31% of the settlement and the second for the remaining 69%. The first installment in the amount of approximately $0.3 million was paid by the sellers in December 2020 and the Company recognized that amount as a gain in selling, general and administrative expenses in the same period. The remaining payment for $0.6 million was received in the first quarter of 2021 and the Company recognized that amount as a gain in selling, general and administrative expenses in the same period.

21

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Acquisition and disposition related contingencies

The Company is liable for contingent consideration in connection with certain of its acquisitions. As of March 31, 2022, total potential acquisition-related contingent consideration ranged from zero to approximately $1.9 million and would be payable upon the achievement of specific performance metrics by certain of the acquired companies over the next six months.

During 2018, the Company sold a subsidiary in the Products and Systems segment. As part of the sale, the Company entered into a three-year agreement to purchase products from the buyer, with a cumulative commitment of $2.3 million, of which $0.9 million is remaining as of March 31, 2022. The agreement is based on third-party pricing and the Company's planned purchase requirements over the three-year purchase period to meet the minimum contractual purchases. On August 3, 2021, the Company entered into an agreement and extended the period by twelve months. As of March 31, 2022, approximately $0.9 million is remaining on the amended purchase commitment. The agreement is based on third party pricing and the Company's planned purchase requirements over the duration of the extension to meet the minimum contractual purchases.

15.    Segment Disclosure

The Company’s three operating segments are:

•Services. This segment 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. This segment 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. This segment designs, manufactures, sells, installs and services the Company’s asset protection products and systems, including equipment and instrumentation, predominantly in the United States.

Costs incurred for general corporate services, including finance, legal, and certain other costs that are provided to the segments are reported within Corporate and eliminations. During the first quarter of 2022 the Company finalized a transfer pricing study which resulted in additional costs being allocated from Corporate to the operating segments with the majority of the costs allocated to the Services segment. These costs are reflected in operating income (loss) of each segment. Sales to the International segment from the Products and Systems segment and subsequent sales by the International segment of the same items are recorded and reflected in the operating performance of both segments. Additionally, engineering charges and royalty fees charged to the Services and International segments by the Products and Systems segment are reflected in the operating performance of each segment.

 The accounting policies of the reportable segments are the same as those described in Note 1-Description of Business and Basis of Presentation. Segment income from operations is one of the primary performance measures used by the chief operating decision maker, to assess the performance of each segment and make resource allocation decisions. Certain general and administrative costs such as human resources, information technology and training are allocated to the segments. Segment income from operations excludes interest and other financial charges and income taxes. Corporate and other assets are comprised principally of cash, deposits, property, plant and equipment, domestic deferred taxes, deferred charges and other assets. Corporate loss from operations consists of administrative charges related to corporate personnel and other charges that cannot be readily identified for allocation to a particular segment.

22

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

Selected consolidated financial information by segment for the periods shown was as follows: (with intercompany transactions eliminated in Corporate and eliminations)

 

	Three months ended March 31,
	2022		2021
Revenue
Services	$	132,946	$	124,298
International	28,138		27,648
Products and Systems	2,936		2,988
Corporate and eliminations	(2,358)		(1,199)
	$	161,662	$	153,735

 

	Three months ended March 31,
	2022		2021
Gross profit
Services	$	30,526	$	31,076
International	8,190		7,625
Products and Systems	1,168		1,281
Corporate and eliminations	8		19
	$	39,892	$	40,001

Income (loss) from operations by operating segment includes intercompany transactions, which are eliminated in Corporate and eliminations.

	Three months ended March 31,
	2022		2021
Income (loss) from operations
Services	$	3,761	$	4,548
International	284		(820)
Products and Systems	(582)		(581)
Corporate and eliminations	(8,161)		(7,893)
	$	(4,698)	$	(4,746)

  

	Three months ended March 31,
	2022		2021
Depreciation and amortization
Services	$	6,593	$	6,114
International	2,058		2,210
Products and Systems	218		228
Corporate and eliminations	(62)		13
	$	8,807	$	8,565

23

Mistras Group, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(tabular dollars and shares in thousands, except per share data)

 

	March 31, 2022		December 31, 2021
Intangible assets, net
Services	$	50,476	$	51,862
International	5,804		6,344
Products and Systems	1,071		1,042
Corporate and eliminations	128		133
	$	57,479	$	59,381

	March 31, 2022		December 31, 2021
Total assets
Services	$	436,996	$	424,058
International	108,733		111,619
Products and Systems	10,534		10,532
Corporate and eliminations	11,965		15,986
	$	568,228	$	562,195

Refer to Note 2–Revenue, for revenue by geographic area for the three months ended March 31, 2022 and 2021.

24

Mistras Group, Inc. and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

(tabular dollars are in thousands)

ITEM 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis (“MD&A”) provides a discussion of our results of operations and financial position for the three months ended March 31, 2022 and 2021. 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 and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on March 14, 2022 (“2021 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 report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934 (“Exchange Act”). Such forward-looking statements include those that express plans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact. These forward-looking statements are based on our current expectations and projections about future events and they are subject to risks and uncertainties known and unknown that could cause actual results and developments to differ materially from those expressed or implied in such statements.

In some cases, you can identify forward-looking statements by terminology, such as “goals,” or “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “could,” “should,” “would,” “predicts,” “appears,” “projects,” or the negative of such terms or other similar expressions. You are urged not to place undue reliance on any such forward-looking statements, any of which may turn out to be wrong due to inaccurate assumptions, various risks, uncertainties or other factors known and unknown. Factors that could cause or contribute to differences in results and outcomes from those in our forward-looking statements include, without limitation, those discussed in the “Business—Forward-Looking Statements,” and “Risk Factors” sections of our 2021 Annual Report as well as those discussed in this Quarterly Report on Form 10-Q and in our other filings with the SEC.

At the time of this report, the COVID-19 pandemic is continuing to have a negative impact on us and our key markets and is causing significant economic disruption worldwide, although the Company has nevertheless begun approaching pre-pandemic levels of activity in certain end markets, particularly oil and gas. Our discussion below is qualified by the unknown impact that the COVID-19 pandemic will continue to have on our business and the economy in general, including the duration of the health risk the COVID-19 pandemic will cause and the resulting economic disruption.

The Company is currently unable to predict with certainty the overall impact that the factors discussed above and the effect of the Russian-Ukrainian conflict may have on its business, results of operations or liquidity or in other ways which the Company cannot yet determine. To date, the Company's European operations have begun to see increased costs associated with higher energy costs, among others, due in part to the on-going conflict. The Company will continue to monitor market conditions and respond accordingly.

Overview

The Company is a leading "one source" multinational provider of integrated technology-enabled asset protection solutions, helping to maximize the safety and operational uptime for civilization’s most critical industrial and civil assets.

Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, and decades-long legacy of industry leadership, the Company helps clients with asset-intensive infrastructure in the oil and gas, aerospace and defense, industrials,

25

Mistras Group, Inc. and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

(tabular dollars are in thousands)

power generation, and transmission (including alternative and renewable energy), other process industries and infrastructure, research and engineering and other industries towards achieving and maintaining operational excellence. By supporting these organizations that help fuel our vehicles and power our society; inspecting components that are trusted for commercial, defense, and space craft; and building real-time monitoring equipment to enable safe travel across bridges, the Company helps the world at large.

The Company enhances value for its clients by integrating asset protection throughout supply chains and centralizing integrity data through a suite of Industrial IoT-connected digital software and monitoring solutions, including OneSuite™, which serves as an ecosystem platform, pulling together all of the Company’s software and data services capabilities, for the benefit of its customers.

The Company’s core capabilities also include non-destructive testing (“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: Services, International, and Products and Systems.

•Services 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 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 the oil and gas, aerospace and defense, industrials, power generation and transmission (including alternative and renewable energy), other process industries and infrastructure, research and engineering and other industries.

We have focused on providing our advanced asset protection solutions to our customers using proprietary, technology-enabled software and testing instruments, including those developed by our Products and Systems segment. We have made numerous acquisitions in 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 will enhance our advantages over our competition.

We believe long-term growth can be realized in all of our target markets. Our level of business and financial results are impacted by world-wide macro- and micro-economic conditions generally, as well as those within our target markets. Among other things, we expect the timing of our oil and gas customers inspection spend to be impacted by oil price fluctuations.

We have continued providing our customers with innovative asset protection software ecosystem through our MISTRAS OneSuite platform. The software platform offers functions of MISTRAS' popular 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 50 plus applications being offered on one centralized platform.

26

Mistras Group, Inc. and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

(tabular dollars are in thousands)

We have continued to develop new technologies to provide monitoring of wind blade integrity through our Sensoria™ tool. Sensoria helps provide real-time monitoring and damage detection of wind turbine blades and allows our customers to maximize uptime, performance and safety of wind turbine blades. This tool provides additional growth and expansion of our capabilities to serve both new and existing wind turbines and greatly enhances our product offerings within the renewable energy industry.

Recent Developments

The COVID-19 coronavirus (COVID-19) pandemic has continued to cause disruption and volatility in domestic and international markets although conditions continue to improve during 2022 as compared to 2021. The Company's businesses have been classified as non-healthcare critical infrastructure as defined by the U.S. Centers for Disease Control and Prevention (CDC). Our facilities, and the Company's customers facilities as well, have remained open with staffing modifications and precautionary procedures taken as necessary.

Overall, we have taken actions to help ensure the health and safety of our employees and those of our customers and suppliers; maintain business continuity and financial strength and stability; and serve our customers as they provide essential products and services to the world.

The COVID-19 pandemic uncertainty, significant volatility in oil prices and decreased traffic in the aerospace industry have adversely affected our workforce and operations, as well as the operations of our customers, suppliers and contractors beginning in 2020. These negative factors continue to cause volatility and uncertainty in the markets in which we operate, although we have nevertheless begun approaching pre-pandemic levels of activity in certain end markets, particularly oil and gas where crude oil prices have exceeded pre-pandemic levels.

The Company has eliminated substantially all of the cost reduction initiatives undertaken in 2020, including re-installment of the savings plan employer match and increasing wages back to pre-pandemic amounts. Our cash position and liquidity remains strong. As of March 31, 2022, the cash balance was approximately $19.9 million.

In April 2021, the Biden Administration announced aggressive initiatives to battle climate change, which includes a significant reduction in the use of fossil fuels and a transition to electric vehicles and increased use of alternative energy. Any legislation or regulations that may be adopted to implement these measures may negatively impact our customers in the oil and gas market over the long-term, which presently is our largest market, although this initiative will likely benefit the alternative energy market, such as wind energy, for which we provide products and services. At this time, it is difficult to determine the magnitude and timing of the impact that climate change initiatives and legislation, if any, will have on these markets and the resulting impact on our business and operational results.

We are currently unable to predict the overall impact that the COVID-19 pandemic uncertainty, volatility in oil prices and climate change initiatives to reduce the use of fossil fuels may have on our business, results of operations, liquidity or in other ways which we cannot yet determine. We will continue to monitor market conditions and respond accordingly. Refer to Item 1A. Risk Factors in Part I of our 2021 Annual Report.

Note About Non-GAAP Measures

The Company prepares its consolidated financial statements in accordance with U.S. GAAP. In this MD&A under the heading "Income (loss) from Operations", the non-GAAP financial performance measure "Income (loss) before special items” is used for each of our three operating segments, the Corporate segment and the "Total Company", with tables reconciling the measure to 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

27

Mistras Group, Inc. and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

(tabular dollars are in thousands)

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.

Results of Operations

Condensed consolidated results of operations for the three months ended March 31, 2022 and 2021 were as follows:

	Three months ended March 31,
	2022			2021
Revenues	$	161,662		$	153,735
Gross profit	39,892			40,001
Gross profit as a % of Revenue	24.7		%	26.0		%
Loss from operations	(4,698)			(4,746)
Loss from Operations as a % of Revenue	(2.9)		%	(3.1)		%
Loss before benefit for income taxes	(6,636)			(7,959)
Net Loss	(5,353)			(5,359)
Net Loss attributable to Mistras Group, Inc.	$	(5,363)		$	(5,362)

Revenue

Revenue was $161.7 million for the three months ended March 31, 2022, an increase of $7.9 million, or 5.2%, compared with the three months ended March 31, 2021.

Revenue by segment for the three months ended March 31, 2022 and 2021 were as follows:

	Three months ended March 31,
	2022		2021
Revenue
Services	$	132,946	$	124,298
International	28,138		27,648
Products and Systems	2,936		2,988
Corporate and eliminations	(2,358)		(1,199)
Total	$	161,662	$	153,735

Three Months

In the three months ended March 31, 2022, total revenue increased 5.2% versus the prior year comparable period due predominantly to a single-digit organic increase. Services segment revenue increased 7.0%, driven predominantly by a single-digit organic increase, minimally offset by low single-digit unfavorable impact of foreign exchange rates. International segment revenue increased 1.8%, due predominantly to high single-digit organic growth mostly offset by high single-digit unfavorable impact of foreign exchange rates. Products and Systems segment revenue decreased by 1.7%, due to reduced sales volume as compared to the prior period.

Oil and gas customer revenue comprised approximately 58% and 57% of total revenue for the three months ended March 31, 2022 and 2021, respectively. Aerospace and defense customer revenue comprised approximately 12% and 11% of total revenue for the three months ended March 31, 2022 and 2021, respectively. The Company’s top ten customers comprised approximately 34% of total revenue for the three months ended March 31, 2022, as compared to 35% for the three months ended March 31, 2021, with no customer accounting for 10% or more of total revenue in either three-month period.

28

Mistras Group, Inc. and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

(tabular dollars are in thousands)

	Three months ended March 31,
	2022		2021
Oil and Gas Revenue by sub-category
Upstream	$	41,665	$	33,926
Midstream	24,907		22,438
Downstream	27,651		30,848
Total	$	94,223	$	87,212

Oil and gas upstream customer revenue increased approximately $7.7 million, or 23%, due primarily to market share gains and expanded exploration operations compared to the prior period. Midstream customer revenues increased approximately $2.5 million, or 11%, due to increased pipe inspection services performed as compared to the prior year quarter. Downstream customer revenues decreased $3.2 million or, 10%, primarily due to delays in timing associated with customer turnarounds.

Gross Profit

Gross profit decreased by $0.1 million, or 0.3%, in the three months ended March 31, 2022 versus the prior year comparable period, on a increase in revenue of 5.2%.

Gross profit by segment for the three months ended March 31, 2022 and 2021 was as follows:

 

	Three months ended March 31,
	2022			2021
Gross profit
Services	$	30,526		$	31,076
% of segment revenue	23.0		%	25.0		%
International	8,190			7,625
% of segment revenue	29.1		%	27.6		%
Products and Systems	1,168			1,281
% of segment revenue	39.8		%	42.9		%
Corporate and eliminations	8			19
	$	39,892		$	40,001
% of total revenue	24.7		%	26.0		%

Three Months

Gross profit margin was 24.7% and 26.0% for the three-month periods ended March 31, 2022 and 2021, respectively. Services segment realized a 2.0% reduction in gross profit margin to 23.0% during the three months ended March 31, 2022. This was primarily due to higher benefit costs in the US and the end of government wage subsidies received in Canada, both as compared to the prior year period. International segment realized a 1.5% increase in gross profit margin to 29.1% during the three months ended March 31, 2022 due primarily to continued recovery and sales within the aerospace end market. Products and Systems segment gross margin had a decrease of 310 basis points to 39.8% during the three months ended March 31, 2022 due to unfavorable sales mix, as compared to gross margin of 42.9% during 2021.

29

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 months ended March 31, 2022 and 2021 was as follows:

	Three months ended March 31,
	2022		2021
Operating Expenses
Selling, general and administrative expenses	$	42,036	$	39,639
Research and engineering	551		727
Depreciation and amortization	2,795		3,074
Legal settlement and insurance recoveries, net	(841)		1,030
Acquisition-related expense, net	49		277

Three Months

Operating expenses decreased $0.2 million, or 0.4%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. Selling, general and administrative expenses increased $2.4 million during the three months ended March 31, 2022 compared to the three months ended March 31, 2021, due to increased costs and unfavorable foreign exchange impact as compared to the prior period. Depreciation and amortization decreased $0.3 million during the three months ended March 31, 2022 compared to the three months ended March 31, 2021. This was partially offset during the three months ended March 31, 2022 by a $0.8 million insurance recovery during the three months ended March 31, 2022.

30

Mistras Group, Inc. and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

(tabular dollars are in thousands)

Income (loss) from Operations

The following table shows a reconciliation of the income from operations to income (loss) before special items for each of our three segments, Corporate and Elimination and for the Company in total:

	Three months ended March 31,
	2022		2021
Services:
Income from operations (GAAP)	$	3,761	$	4,548
Reorganization and other costs	27		71
Legal settlement and insurance recoveries, net	(841)		1,650
Acquisition-related expense, net	44		243
Income before special items (non-GAAP)	$	2,991	$	6,512
International:
Income (Loss) from operations (GAAP)	$	284	$	(820)
Reorganization and other costs	87		96
Income (Loss) from operations before special items (non-GAAP)	$	371	$	(724)
Products and Systems:
Loss from operations (GAAP)	$	(582)	$	(581)
Reorganization and other costs	—		27
Loss from operations before special items (non-GAAP)	$	(582)	$	(554)
Corporate and Eliminations:
Loss from operations (GAAP)	$	(8,161)	$	(7,893)
Legal settlement and insurance recoveries, net	—		(620)
Acquisition-related expense, net	5		34
Loss from operations before special items (non-GAAP)	$	(8,156)	$	(8,479)
Total Company:
Loss from operations (GAAP)	$	(4,698)	$	(4,746)
Reorganization and other costs	114		194
Legal settlement and insurance recoveries, net	(841)		1,030
Acquisition-related expense, net	49		277
Loss from operations before special items (non-GAAP)	$	(5,376)	$	(3,245)

See section Note About Non-GAAP Measures in this report for an explanation of the use of non-GAAP measurements.

Three Months

For the three months ended March 31, 2022, the loss from operations (GAAP) decreased $0.05 million or 1.0%, compared with the three months ended March 31, 2021, while the loss before special items (non-GAAP) decreased $2.1 million, or 65.7%. As a percentage of revenue, the loss before special items decreased by 120 basis points to (3.3)% in the three months ended March 31, 2022 from (2.1)% in the three months ended March 31, 2021.

31

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Management's Discussion and Analysis of Financial Condition and Results of Operations

(tabular dollars are in thousands)

Interest Expense

Interest expense was approximately $1.9 million and $3.2 million for the three months ended March 31, 2022 and 2021, respectively. The decrease was a result of a change in the effective interest rate, due to a lower leverage ratio and the elimination of the minimum LIBOR floor.

An amendment in May 2021 to our Credit Agreement removed the LIBOR floor of 1.0%, which provided that if LIBOR is below 1.0%, the interest rate will be calculated as if LIBOR is 1.0%. Now the actual LIBOR rate is used to calculate interest, even if LIBOR is below 1.0%. This will reduce our interest rate, when LIBOR is below 1.0%.

Income Taxes

Our effective income tax rate was approximately 19.3% and 32.7% for the three months ended March 31, 2022 and 2021, respectively.

The effective income tax rate benefit for the three months ended March 31, 2022 was lower than the statutory rate primarily due to the impact of an unfavorable discrete item related to stock compensation. The effective income tax rate for the three months ended March 31, 2021 was higher than the statutory rate due to the capitalization of certain non-US intercompany balances which resulted in a deductible foreign exchange loss in the US.

On December 27, 2020, the United States enacted the Consolidated Appropriations Act, 2021, (the "Appropriations Act") an additional stimulus package providing financial relief for individuals and small business. The Appropriations Act contains a variety of tax provisions, including full expensing of business meals in 2021 and 2022, and expansion of the employee retention tax credit. We evaluated the impact of this guidance on our consolidated financial position, results of operations, and cash flows, and it will not have a material impact.

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.

Liquidity and Capital Resources

Cash flows are summarized in the table below:

	Three months ended March 31,
	2022		2021
Net cash provided by (used in):
Operating activities	$	(5,399)	$	3,148
Investing activities	(2,737)		(4,176)
Financing activities	4,323		435
Effect of exchange rate changes on cash	(376)		(990)
Net change in cash and cash equivalents	$	(4,189)	$	(1,583)

Cash Flows from Operating Activities

During the three months ended March 31, 2022, cash used in operating activities was $(5.4) million, representing a year-on-year decrease of $8.5 million, or 272%. The decrease was primarily attributable to movements in working capital and an increase in the accounts receivable balance.

Cash Flows from Investing Activities

32

Mistras Group, Inc. and Subsidiaries

Management's Discussion and Analysis of Financial Condition and Results of Operations

(tabular dollars are in thousands)

During the three months ended March 31, 2022 and 2021, cash used in investing activities was $2.7 million primarily attributable to a reduction in capital expenditures and no acquisitions in the three months ended March 31, 2022.

Cash Flows from Financing Activities

Net cash provided by financing activities was $4.3 million for the three months ended March 31, 2022, compared to net cash provided by financing activities of $0.4 million for the three months ended March 31, 2021. During the three months ended March 31, 2022, net borrowings of debt were approximately $3.4 million higher as compared to 2021 resulting in debt paydown during the period. In addition, $0.1 million more taxes were paid related to net share settlement of share-based awards during the three months ended March 31, 2022.

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 $0.4 million in the three months ended March 31, 2022, compared to a decrease of $1.0 million for the three months ended March 31, 2021.

Cash Balance and Credit Facility Borrowings

As of March 31, 2022, we had cash and cash equivalents totaling $19.9 million and $11.2 million of unused commitments under our Credit Agreement with borrowings of $203.1 million 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 March 31, 2022, 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.

Quarterly payments on the term loan increased to $3.75 million through March 31, 2022, and then to $5.0 million for each quarterly payment thereafter, with a final balloon payment at maturity.

The terms of our Credit Agreement (as modified) are described in Note 11- Long-Term Debt of the Notes to the Unaudited Condensed Consolidated Financial Statements, under the heading "Senior Credit Facility".

Contractual Obligations

There have been no significant changes in our contractual obligations and outstanding indebtedness as disclosed in the 2021 Annual Report.

Off-balance Sheet Arrangements

During the three months ended March 31, 2022, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

33

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 2021 Annual Report.

ITEM 3.    Quantitative and Qualitative Disclosures about Market Risk

There have been no significant changes to our quantitative and qualitative disclosures about market risk as discussed in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk,” included in the 2021 Annual Report.

ITEM 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Exchange Act, our management carried out an evaluation, under the supervision and with the participation of our President and Chief Executive Officer and our Executive Vice President, Chief Financial Officer and Treasurer, of the effectiveness of the design and operation of our disclosure controls (as defined in Rule 13a-15(e) of the Exchange Act) and procedures. Based upon that evaluation, our President and Chief Executive Officer and our Executive Vice President, Chief Financial Officer and Treasurer concluded that, as of March 31, 2022, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

34

PART II—OTHER INFORMATION

ITEM 1.    Legal Proceedings

See Note 14-Commitments and Contingencies to the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report for a description of our legal proceedings. There have been no material developments with regard to any matters disclosed under Part I, Item 3 "Legal Proceedings" in our 2021 Annual Report, except as disclosed in such Note 14-Commitments and Contingencies.

ITEM 1.A.    Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors discussed under the “Risk Factors” section included in our 2021 Annual Report. Except as described below, there have been no material changes to the risk factors previously disclosed in the 2021 Annual Report.

ITEM 2.    Unregistered Sale of Equity Securities and Use of Proceeds

(a) Sales of Unregistered Securities

None.

(b) Use of Proceeds from Public Offering of Common Stock

None.

(c) Repurchases of Our Equity Securities

The following table sets forth the shares of our common stock we acquired during the quarter as a result of the surrender of shares by employees to satisfy tax withholding obligations in connection with the vesting of restricted stock units.

 

Month Ending	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 31, 2022	—	$	—	—	$	—
February 28, 2022	—	$	—	—	$	—
March 31, 2022	81,747	$	6.66	—	$	—

ITEM 3.    Defaults Upon Senior Securities

None.

ITEM 4.    Mine Safety Disclosures

Not applicable.

ITEM 5.    Other Information

None.

35

ITEM 6.    Exhibits

 

Exhibit No.	Description
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.LAB	XBRL Labels Linkbase Document
101.PRE	XBRL Presentation Linkbase Document
101.DEF	XBRL Definition Linkbase Document

_________________

36

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

MISTRAS GROUP, INC.
By:	/s/ Edward J. Prajzner
	Edward J. Prajzner
	Executive Vice President, Chief Financial Officer and Treasurer
	(Principal Financial and Accounting Officer and duly authorized officer)

Date: May 6, 2022

37

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE 13A-14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

I, Dennis Bertolotti, certify that:

1.I have reviewed this report on Form 10-Q of Mistras Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 06, 2022

/s/ Dennis Bertolotti

Dennis Bertolotti

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULE 13A-14(a) OF THE SECURITIES

EXCHANGE ACT OF 1934

I, Edward J. Prajzner, certify that:

1.I have reviewed this report on Form 10-Q of Mistras Group, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 06, 2022

/s/ Edward J. Prajzner

Edward J. Prajzner

Executive Vice President, Chief Financial Officer and Treasurer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Each of the undersigned hereby certifies, for the purposes of section 1350 of chapter 63 of title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Mistras Group, Inc. (the “Company”), that, to his knowledge, the Quarterly Report on Form 10-Q of the Company for the quarter ended March 31, 2022 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. This written statement is being furnished to the Securities and Exchange Commission as an exhibit to the Report.

Dated: May 06, 2022

/s/ Dennis Bertolotti

Dennis Bertolotti

President and Chief Executive Officer

(Principal Executive Officer)

/s/ Edward J. Prajzner

Edward J. Prajzner

Executive Vice President, Chief Financial Officer and Treasurer

(Principal Financial Officer)

XML

Cover - shares	3 Months Ended
	Mar. 31, 2022	Apr. 29, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2022
Document Transition Report	false
Entity File Number	001-34481
Entity Registrant Name	Mistras Group, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	22-3341267
Entity Address, Address Line One	195 Clarksville Road
Entity Address, City or Town	Princeton Junction,
Entity Address, State or Province	NJ
Entity Address, Postal Zip Code	08550
City Area Code	609
Local Phone Number	716-4000
Title of 12(b) Security	Common Stock, $0.01 par value
Trading Symbol	MG
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		29,805,316
Entity Central Index Key	0001436126
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q1

XML

Unaudited Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Current Assets
Cash and cash equivalents	$ 19,921	$ 24,110
Accounts receivable, net	127,085	109,511
Inventories	12,589	12,686
Prepaid expenses and other current assets	11,709	15,031
Total current assets	171,304	161,338
Property, plant and equipment, net	83,689	86,578
Intangible assets, net	57,479	59,381
Goodwill	206,409	205,439
Deferred income taxes	2,225	2,174
Other assets	47,122	47,285
Total assets	568,228	562,195
Current Liabilities
Accounts payable	12,422	12,870
Accrued expenses and other current liabilities	87,466	83,863
Current portion of long-term debt	21,336	20,162
Current portion of finance lease obligations	3,775	3,765
Income taxes payable	1,216	755
Total current liabilities	126,215	121,415
Long-term debt, net of current portion	187,478	182,403
Obligations under finance leases, net of current portion	9,552	9,752
Deferred income taxes	8,661	8,385
Other long-term liabilities	39,237	39,328
Total liabilities	371,143	361,283
Commitments and contingencies
Equity
Preferred stock, 10,000,000 shares authorized	0	0
Common stock, $0.01 par value, 200,000,000 shares authorized, 29,741,053 and 29,546,263 shares issued and outstanding	297	295
Additional paid-in capital	239,656	238,687
Accumulated deficit	(23,351)	(17,988)
Accumulated other comprehensive loss	(19,756)	(20,311)
Total Mistras Group, Inc. stockholders’ equity	196,846	200,683
Non-controlling interests	239	229
Total equity	197,085	200,912
Total liabilities and equity	$ 568,228	$ 562,195

XML

Unaudited Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Mar. 31, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, shares issued (in shares)	29,720,443	29,546,263
Common stock, shares outstanding (in shares)	29,720,443	29,546,263

XML

Unaudited Condensed Consolidated Statements of Loss - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Income Statement [Abstract]
Revenue	$ 161,662	$ 153,735
Cost of revenue	115,758	108,243
Depreciation	6,012	5,491
Gross profit	39,892	40,001
Selling, general and administrative expenses	42,036	39,639
Legal settlement and insurance recoveries, net	(841)	1,030
Research and engineering	551	727
Depreciation and amortization	2,795	3,074
Acquisition-related expense, net	49	277
Loss from operations	(4,698)	(4,746)
Interest expense	1,938	3,213
Loss before benefit for income taxes	(6,636)	(7,959)
Benefit for income taxes	(1,283)	(2,600)
Net Loss	(5,353)	(5,359)
Less: net income attributable to noncontrolling interests, net of taxes	10	3
Net Loss attributable to Mistras Group, Inc.	$ (5,363)	$ (5,362)
Loss per common share
Basic (in dollars per share)	$ (0.18)	$ (0.18)
Diluted (in dollars per share)	$ (0.18)	$ (0.18)
Weighted-average common shares outstanding:
Basic (in shares)	29,634	29,425
Diluted (in shares)	29,634	29,425

XML

Unaudited Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Statement of Comprehensive Income [Abstract]
Net Loss	$ (5,353)	$ (5,359)
Other comprehensive loss:
Foreign currency translation adjustments	555	(592)
Comprehensive Loss	(4,798)	(5,951)
Less: net income attributable to noncontrolling interests, net of taxes	10	3
Comprehensive loss attributable to Mistras Group, Inc.	$ (4,808)	$ (5,954)

XML

Unaudited Condensed Consolidated Statements of Equity - USD ($)	Total	Total Mistras Group, Inc. Stockholders’ Equity	Common Stock	Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive loss	Noncontrolling Interest
Beginning balance (in shares) at Dec. 31, 2020			29,234,000
Beginning balance at Dec. 31, 2020	$ 197,219,000	$ 197,021,000	$ 292,000	$ 234,638,000	$ (21,848,000)	$ (16,061,000)	$ 198,000
Increase (Decrease) in Stockholders' Equity
Net Loss	(5,359,000)	(5,362,000)			(5,362,000)		3,000
Other comprehensive income, net of tax	(592,000)	(592,000)				(592,000)
Share-based payments	1,262,000	1,262,000		1,262,000
Net settlements of restricted stock units (in shares)			113,000
Net settlement of restricted stock units	(486,000)	(486,000)	$ 1,000	(487,000)
Ending balance (in shares) at Mar. 31, 2021			29,347,000
Ending balance at Mar. 31, 2021	192,044,000	191,843,000	$ 293,000	235,413,000	(27,210,000)	(16,653,000)	201,000
Beginning balance (in shares) at Dec. 31, 2021			29,546,000
Beginning balance at Dec. 31, 2021	200,912,000	200,683,000	$ 295,000	238,687,000	(17,988,000)	(20,311,000)	229,000
Increase (Decrease) in Stockholders' Equity
Net Loss	(5,353,000)	(5,363,000)			(5,363,000)		10,000
Other comprehensive income, net of tax	555,000	555,000				555,000
Share-based payments	1,515,000	1,515,000		1,515,000
Net settlements of restricted stock units (in shares)			174,000
Net settlement of restricted stock units	(544,000)	(544,000)	$ 2,000	(546,000)
Ending balance (in shares) at Mar. 31, 2022			29,720,000
Ending balance at Mar. 31, 2022	$ 197,085,000	$ 196,846,000	$ 297,000	$ 239,656,000	$ (23,351,000)	$ (19,756,000)	$ 239,000

XML

Unaudited Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Cash flows from operating activities
Net loss	$ (5,353)	$ (5,359)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Depreciation and amortization	8,807	8,565
Deferred income taxes	196	866
Share-based compensation expense	1,515	1,262
Fair value adjustments to contingent consideration	45	243
Foreign currency loss	686	455
Other	86	(48)
Changes in operating assets and liabilities, net of effect of acquisitions and dispositions
Accounts receivable	(17,831)	(5,417)
Inventories	(96)	(87)
Prepaid expenses and other assets	3,421	(4,944)
Accounts payable	(440)	942
Accrued expenses and other liabilities	3,605	6,881
Income taxes payable	493	(211)
Payment of contingent consideration liability in excess of acquisition-date fair value	(533)	0
Net cash provided by (used in) operating activities	(5,399)	3,148
Cash flows from investing activities
Purchase of property, plant and equipment	(3,061)	(4,003)
Purchase of intangible assets	(151)	(350)
Acquisition of business, net of cash acquired	0	(411)
Proceeds from sale of equipment	475	588
Net cash used in investing activities	(2,737)	(4,176)
Cash flows from financing activities
Repayment of finance lease obligations	(1,076)	(1,069)
Repayment of long-term debt	(4,152)	(2,323)
Proceeds from revolver	26,000	23,000
Repayment of revolver	(15,500)	(17,750)
Payment of contingent consideration for business acquisitions	(405)	(938)
Taxes paid related to net share settlement of share-based awards	(544)	(485)
Net cash provided by financing activities	4,323	435
Effect of exchange rate changes on cash and cash equivalents	(376)	(990)
Net change in cash and cash equivalents	(4,189)	(1,583)
Cash and cash equivalents at beginning of period	24,110	25,760
Cash and cash equivalents at end of period	19,921	24,177
Supplemental disclosure of cash paid (received)
Interest, net	1,711	2,916
Income taxes, net of refunds	(4,661)	2,877
Noncash investing and financing
Equipment acquired through finance lease obligations	$ 848	$ 643

XML

Description of Business and Basis of Presentation

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Description of Business and Basis of Presentation

Description of Business and Basis of Presentation

Description of Business

Mistras Group, Inc. and subsidiaries (the Company) is a leading “one source” multinational provider of integrated technology-enabled asset protection solutions helping to maximize the safety and operational uptime for civilization's most critical industrial and civil assets.

Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, and decades-long legacy of industry leadership, the Company helps clients with asset-intensive infrastructure in the oil and gas, aerospace and defense, industrials, power generation, and transmission (including alternative and renewable energy), other process industries and infrastructure, research and engineering and other industries towards achieving and maintaining operational excellence. By supporting these organizations that help fuel our vehicles and power our society; inspecting components that are trusted for commercial, defense, and space craft; and building real-time monitoring equipment to enable safe travel across bridges, the Company helps the world at large.

The Company enhances value for its clients by integrating asset protection throughout supply chains and centralizing integrity data through a suite of Industrial Internet of Things ("IoT")-connected digital software and monitoring solutions, including OneSuite™, which serves as an ecosystem platform, pulling together all of the Company’s software and data services capabilities, for the benefit of its customers.

The Company's core capabilities also include non-destructive testing (“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.

Recent Developments

The COVID-19 coronavirus (COVID-19) pandemic has continued to cause disruption and volatility in domestic and international markets although conditions continue to improve during 2022 as compared to 2021. The Company's businesses have been classified as non-healthcare critical infrastructure as defined by the U.S. Centers for Disease Control and Prevention (CDC). Our facilities, and the Company's customers facilities as well, have remained open with staffing modifications and precautionary procedures taken as necessary.

Overall, the Company has taken actions to help ensure the health and safety of Company employees and those of its customers and suppliers; maintain business continuity and financial strength and stability; and serve customers as they provide essential products and services to the world.

The COVID-19 pandemic uncertainty, significant volatility in oil prices, and decreased traffic in the aerospace industry have adversely affected the operations of the Company's customers, suppliers and contractors beginning in the first quarter of 2020, and as a consequence, the Company's results of operations, were adversely impacted. These negative factors continue to cause volatility and uncertainty in the markets in which the Company operates, although the Company in 2022 has nevertheless begun approaching pre-pandemic levels of activity in certain end markets, particularly oil and gas where crude oil prices have exceeded pre-pandemic levels.

The Company has eliminated substantially all of the cost reduction initiatives undertaken in 2020, including re-installment of the savings plan employer match and increasing wages back to pre-pandemic amounts.

The Company is currently unable to predict with certainty the overall impact that the factors discussed above and the effect of the Russian-Ukrainian conflict may have on its business, results of operations or liquidity or in other ways which the Company cannot yet determine. To date, the Company's European operations have begun to see increased costs associated with higher energy costs, among others, due in part to the on-going conflict. The Company will continue to monitor market conditions and respond accordingly.

Basis of Presentation

The Unaudited Condensed Consolidated Financial Statements contained in this report have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") and Securities and Exchange Commission ("SEC") guidance allowing for reduced disclosure for interim periods. In the opinion of management, the Unaudited Condensed Consolidated Financial Statements include all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods of the years ending December 31, 2022 and December 31, 2021.

Certain items included in these statements are based on management’s estimates. Actual results may differ from those estimates. The results of operations for any interim period are not necessarily indicative of the results expected for the year. The accompanying Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the notes to the Audited Consolidated Financial Statements contained in the Company's 2021 Annual Report on Form 10-K ("2021 Annual Report").

Principles of Consolidation

The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of Mistras Group, Inc. as well as its wholly-owned subsidiaries, majority-owned subsidiaries and consolidated variable interest entities (VIE). For subsidiaries in which the Company’s ownership interest is less than 100%, the non-controlling interests are reported in stockholders’ equity in the accompanying Condensed Consolidated Balance Sheets. The non-controlling interests in net results, net of tax, is classified separately in the accompanying Unaudited Condensed Consolidated Statements of Loss. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations of companies acquired are included from the date of acquisition.

Reclassification

Certain amounts in prior periods have been reclassified to conform to the current year presentation. Such reclassifications did not have a material effect on the Company's financial condition or results of operations as previously reported.

Customers

For each of the three months ended March 31, 2022 and 2021, no customer represented 10% or more of the Company's revenue.

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in Note 1–Summary of Significant Accounting Policies and Practices in the 2021 Annual Report. On an ongoing basis, the Company evaluates its estimates and assumptions, including among other things, those related to revenue recognition, long-lived assets, goodwill and acquisitions. Since the date of the 2021 Annual Report, there have been no material changes to the Company's significant accounting policies.

Income Taxes

Income taxes are accounted for under the asset and liability method. We recognize deferred tax assets and liabilities at enacted income tax rates for the temporary differences between the financial reporting bases and the tax bases of our assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. Our net deferred tax assets primarily consist of net operating loss carry forwards, or NOLs. A valuation allowance is provided if it is more likely than not that some or all of a deferred income tax asset will not be realized. A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the current and prior years.

As of March 31, 2022, management concluded that it is more likely than not that a substantial portion of the Company's deferred tax assets will be realized.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.

The Company’s effective income tax rate was approximately 19.3% and 32.7% for the three months ended March 31, 2022 and 2021, respectively. The effective income tax rate benefit for the three months ended March 31, 2022 was lower than the statutory rate primarily due to the impact of an unfavorable discrete item related to stock compensation. The effective income tax rate for the three months ended March 31, 2021 was higher than the statutory rate due to the capitalization of certain non-US intercompany balances which resulted in a deductible foreign exchange loss in the US.

Recent Accounting Pronouncements

In March 2020 and updated in January 2021, the FASB issued ASU 2020-04 and 2021-01,“Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The guidance provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating applicable contracts and the available expedients provided by the new guidance.

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Revenue

3 Months Ended

Mar. 31, 2022

Revenue from Contract with Customer [Abstract]

Revenue

Revenue

The Company derives the majority of its revenue by providing services on a time and material basis, and are short-term in nature. The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers.

Performance Obligations

The Company provides highly integrated and bundled inspection services to its customers. The majority of the Company's contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and is, therefore, not distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the Company's best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is a relative selling price based on price lists.

Contract modifications are not routine in the performance of the Company's contracts. Generally, when contracts are modified, the modification is to account for changes in scope to the goods and services that are provided. In most instances, contract modifications are for goods or services that are distinct, and, therefore, are accounted for as a separate contract.

The Company's performance obligations are satisfied over time as work progresses or at a point in time. The majority of the Company's revenue is recognized over time as work progresses for the Company's 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. The Company also utilizes 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. For these arrangements, revenue is recognized on a cost-to-cost method tracked on an input basis.

The majority of our revenue recognized at a point in time is related to product sales when the customer obtains control of the asset, which is generally upon shipment to the customer. Contract costs include labor, material and overhead.

The Company expects any significant remaining performance obligations to be satisfied within one year.

Contract Estimates

The majority of the Company's revenues are short-term in nature. The Company enters into master service agreements (MSAs) with customers that specify an overall framework and contract terms. The actual contracting to provide services or furnish products are triggered by a work order, purchase order, or some similar document issued pursuant to a MSA which sets forth the scope of services and/or identifies the products to be provided. From time-to-time, the Company may enter into longer-term contracts, which can range from several months to several years. Revenue on certain contracts is recognized as work is performed based on total costs incurred to date in relation to the total estimated costs for the performance of the contract at completion. This includes contract estimates of costs to be incurred for the performance of the contract. Cost estimation is based upon the professional knowledge and experience of the Company's project managers, engineers and financial professionals. Factors that are considered in estimating the work to be completed include the availability of materials, the effect of any delays in the Company's project performance and the recoverability of any claims. Whenever revisions of estimates, contract costs and/or contract values indicate that the contract costs will exceed estimated revenues, thus creating a loss, a provision for the total estimated loss is recorded in that period.

Revenue by Category

The following series of tables present the Company's disaggregated revenue:

Revenue by industry was as follows:

Three Months Ended March 31, 2022	Services		International		Products		Corp/Elim		Total
Oil & Gas	$	86,613	$	7,572	$	38	$	—	$	94,223
Aerospace & Defense	15,022		4,940		108		—		20,070
Industrials	9,007		5,528		502		—		15,037
Power generation & Transmission	3,822		2,562		845		—		7,229
Other Process Industries	10,293		3,518		1		—		13,812
Infrastructure, Research & Engineering	2,506		2,039		897		—		5,442
Petrochemical	3,045		78		—		—		3,123
Other	2,638		1,901		545		(2,358)		2,726
Total	$	132,946	$	28,138	$	2,936	$	(2,358)	$	161,662

Three Months Ended March 31, 2021	Services		International		Products		Corp/Elim		Total
Oil & Gas	$	79,220	$	7,936	$	56	$	—	$	87,212
Aerospace & Defense	11,823		4,317		35		—		16,175
Industrials	8,819		4,849		327		—		13,995
Power generation & Transmission	5,534		1,978		759		—		8,271
Other Process Industries	7,856		2,912		9		—		10,777
Infrastructure, Research & Engineering	3,169		3,756		1,144		—		8,069
Petrochemical	5,464		72		—				5,536
Other	2,413		1,828		658		(1,199)		3,700
Total	$	124,298	$	27,648	$	2,988	$	(1,199)	$	153,735

Revenue per key geographic location was as follows:

Three Months Ended March 31, 2022	Services		International		Products		Corp/Elim		Total
United States	$	113,935	$	173	$	1,351	$	(655)	$	114,804
Other Americas	18,052		1,341		16		(609)		18,800
Europe	744		25,920		580		(924)		26,320
Asia-Pacific	215		704		989		(170)		1,738
Total	$	132,946	$	28,138	$	2,936	$	(2,358)	$	161,662

Three Months Ended March 31, 2021	Services		International		Products		Corp/Elim		Total
United States	$	104,546	$	208	$	1,460	$	(391)	$	105,823
Other Americas	18,878		1,177		67		(63)		20,059
Europe	294		25,894		460		(612)		26,036
Asia-Pacific	580		369		1,001		(133)		1,817
Total	$	124,298	$	27,648	$	2,988	$	(1,199)	$	153,735

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheets. Amounts are generally billed as work progresses in accordance with agreed-upon contractual terms, generally at periodic intervals (e.g., weekly, bi-weekly or monthly). Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, the Company sometimes receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities. These assets and liabilities are aggregated on an individual contract basis and reported on the Consolidated Balance Sheets at the end of each reporting period within accounts receivable, net or accrued expenses and other current liabilities.

Revenue recognized during the three months ended March 31, 2022 and 2021 that was included in the contract liability balance at the beginning of such year was $2.2 million and $1.9 million for each period. Changes in the contract asset and liability balances during these periods were not materially impacted by any other factors. The Company applies a practical expedient to expense incremental costs incurred related to obtaining a contract. The Company’s expenses are expected to be amortized over a period less than one year.

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Share-Based Compensation

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Share-Based Compensation

Share-Based Compensation

The Company has share-based incentive awards outstanding to its eligible employees and non-employee directors under two equity incentive plans: (i) the 2009 Long-Term Incentive Plan (the "2009 Plan") and (ii) the 2016 Long-Term Incentive Plan (the "2016 Plan"). No further awards may be granted under the 2009 Plan, and the remaining stock option award granted under the 2009 Plan expired during the three months ended March 31, 2022. Awards granted under the 2016 Plan may be in the form of stock options, restricted stock units and other forms of share-based incentives, including performance restricted stock units, stock appreciation rights and deferred stock rights. At the annual shareholders meeting on May 19, 2020, the Company’s shareholders approved an amendment to increase the total number of shares that may be issued under the 2016 Plan by 2.0 million, for a total of 3.7 million shares that are authorized for issuance under the 2016 Plan, of which 383,743 shares were available for future grants as of March 31, 2022.

Stock Options

For each of the three months ended March 31, 2022 and 2021, the Company did not recognize any share-based compensation expense related to the stock option award, as the one outstanding stock option award was already fully vested. No unrecognized compensation costs remained related to the stock option award as of March 31, 2022.

The following table sets forth a summary of the stock option activity, weighted-average exercise prices and options outstanding as of March 31, 2022 and 2021:

	Three months ended March 31,
	2022			2021
	Common Stock Options	Weighted Average Exercise Price		Common Stock Options	Weighted Average Exercise Price
Outstanding at beginning of period:	5	$	22.35	5	$	22.35
Granted	—	$	—	—	$	—
Exercised	—	$	—	—	$	—
Expired or forfeited	(5)	$	22.35	—	$	—
Outstanding at end of period:	—	$	—	5	$	22.35

Restricted Stock Unit Awards

For the three months ended March 31, 2022 and March 31, 2021, the Company recognized share-based compensation expense related to restricted stock unit awards of $0.9 million and $0.9 million, respectively. As of March 31, 2022, there was $9.6 million of unrecognized compensation costs, net of estimated forfeitures, related to restricted stock unit awards, which is expected to be recognized over a remaining weighted-average period of 3.1 years. Upon vesting, restricted stock units are generally net share-settled to cover the required withholding tax and the remaining amount is converted into an equivalent number of shares of common stock.

A summary of the vesting activity of restricted stock unit awards, with the respective fair value of the awards, is as follows:

	Three months ended March 31,
	2022		2021
Restricted stock awards vested	226		111
Fair value of awards vested	$	1,502	$	1,189

A summary of the fully-vested common stock the Company issued to its six non-employee directors, in connection with its non-employee director compensation plan, is as follows:

	Three months ended March 31,
	2022		2021
Awards issued	34		25
Grant date fair value of awards issued	$	225	$	258

A summary of the Company's outstanding, non-vested restricted share units is as follows:

	Three months ended March 31,
	2022			2021
	Units	Weighted Average Grant-Date Fair Value		Units	Weighted Average Grant-Date Fair Value
Outstanding at beginning of period:	1,208	$	7.96	1,076	$	7.41
Granted	675	$	7.65	519	$	10.06
Released	(226)	$	13.73	(111)	$	15.90
Forfeited	(7)	$	10.50	(10)	$	8.69
Outstanding at end of period:	1,650	$	7.16	1,474	$	7.70

Performance Restricted Stock Units

The Company maintains Performance Restricted Stock Units (PRSUs) that have been granted to select executives and senior officers whose ultimate payout is based on the Company’s performance over a one-year period based on specific metrics approved by the Compensation Committee of the Board of Directors of the Company.

For 2021, the Compensation Committee made changes to the Company’s equity incentive compensation plan for its executive officers and approved the new target awards for 2021. For 2021, the three metrics were:

1.Free Cash Flow net cash provided by operating activities less purchases of property, plant, equipment and intangible assets and is subject to adjustments approved by the Compensation Committee.

2.Adjusted EBITDA defined as net income attributable to the Company plus: interest expense, provision for income taxes, depreciation and amortization, share-based compensation expense and certain acquisition related costs (including transaction due diligence costs and adjustments to the fair value of contingent consideration), foreign exchange (gain) loss and, if applicable, certain special items which are noted).

3.Total Shareholder Return (TSR) measures the total return to shareholders of the Company during 2021 versus the total return to the shareholders of a predefined peer group of companies that provide inspection, testing, certification or similar industrial services. The return will be measured by the year over year percent change in share price. The share prices used to calculate the return are the average share price during the 20-trading day period ending on the initial

measurement date (the last 20 trading days of 2020), compared to the average share price during the 20-trading day period ending on the final measurement date (the last 20 trading days of 2021). Any cash dividends or distributions paid in 2021 will be added to calculate the return to shareholders during the year. TSR is considered a market condition for which the fair value of PRSUs with this condition is determined using a Monte Carlo valuation model. Key assumptions in the Monte Carlo valuation model included:

a.Expected Volatility. Expected volatility of the Company’s common stock at the date of grant was estimated based on a historical average volatility rate for the approximate 1-year performance period.

b.Dividend Yield. The dividend yield assumption was based on historical and anticipated dividend payouts (assumed at zero).

c.Risk-Free Interest Rate. The risk-free interest rate assumption was based on observed interest rates consistent with the approximate 1-year performance measurement period.

For 2022, the Compensation Committee retained the Company's prior year equity incentive compensation plan for its executive officers including utilizing the same metrics, as defined above, and approved the new target awards for 2022.

PRSUs are equity-classified and compensation costs are initially measured using the fair value of the underlying stock at the date of grant. Compensation costs related to the PRSUs are subsequently adjusted for changes in the expected outcomes of the performance conditions. Compensation cost related to the PRSUs with a market condition is not reversed if the market condition is not achieved, provided the employee requisite service has been rendered. PRSUs generally vest ratably on each of the first four anniversary dates upon completion of the performance period, for a total requisite service period of up to five years and have no dividend rights.

A summary of the Company's PRSU activity is as follows:

	Three months ended March 31,
	2022			2021
	Units	Weighted Average Grant-Date Fair Value		Units	Weighted Average Grant-Date Fair Value
Outstanding at beginning of period:	388	$	10.07	333	$	8.84
Granted	341	$	6.55	189	$	12.59
Performance condition adjustments	(56)	$	10.47	(125)	$	3.68
Released	(17)	$	6.85	(22)	$	13.63
Forfeited	—	$	—	—	$	—
Outstanding at end of period:	656	$	12.18	375	$	12.18

During the three months ended March 31, 2022 and March 31, 2021, the Compensation Committee approved the final calculation of the award metrics for calendar year 2021 and 2020, respectively. As a result, the calendar year 2022 PRSUs decreased by approximately 56,000 units as a result of the final calculation of award metrics.

For the three months ended March 31, 2022 and March 31, 2021, the Company recognized aggregate share-based compensation expense related to the awards described above of approximately $0.3 million and $0.1 million, respectively. At March 31, 2022, there was $2.6 million of total unrecognized compensation costs related to approximately 656,000 non-vested PRSUs, which is expected to be recognized over a remaining weighted-average period of 2.5 years.

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Earnings (loss) per Share

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Earnings (loss) per Share

Earnings (loss) per Share

Basic earnings (loss) per share is computed by dividing net loss by the weighted-average number of shares outstanding during the period. Diluted earnings per share is computed by dividing net loss by the sum of (1) the weighted-average number of shares of common stock outstanding during the period, and (2) the dilutive effect of assumed conversion of equity awards using the treasury stock method. With respect to the number of weighted-average shares outstanding (denominator), diluted shares reflects: (i) the exercise of options to acquire common stock to the extent that the options’ exercise prices are less than the average market price of common shares during the period and (ii) the pro forma vesting of restricted stock units.

The following table sets forth the computations of basic and diluted loss per share:

 

	Three months ended March 31,
	2022		2021
Basic loss per share
Numerator:
Net loss attributable to Mistras Group, Inc.	$	(5,363)	$	(5,362)
Denominator:
Weighted average common shares outstanding	29,634		29,425
Basic loss per share	$	(0.18)	$	(0.18)
Diluted loss per share:
Numerator:
Net loss attributable to Mistras Group, Inc.	$	(5,363)	$	(5,362)
Denominator:
Weighted average common shares outstanding	29,634		29,425
Dilutive effect of stock options outstanding	—		—
Dilutive effect of restricted stock units outstanding (1)	—		—
	29,634		29,425
Diluted loss per share	$	(0.18)	$	(0.18)

_______________

(1) For the three months ended March 31, 2022 and 2021, 1,212,000 and 509,000 shares, respectively, related to restricted stock were excluded from the calculation of diluted EPS due to the net loss for the period.

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Acquisitions

3 Months Ended

Mar. 31, 2022

Business Combinations [Abstract]

Acquisitions

Acquisitions

Acquisition-Related Expense 

In the course of its acquisition activities, the Company incurs costs in connection with due diligence, such as professional fees, and other expenses. Additionally, the Company adjusts the fair value of acquisition-related contingent consideration liabilities on a quarterly basis. These amounts are reported as Acquisition-related expense, net on the Unaudited Condensed Consolidated Statements of Loss and were as follows for the three months ended March 31, 2022 and 2021:

	Three months ended March 31,
	2022		2021
Due diligence, professional fees and other transaction costs	$	4	$	34
Adjustments to fair value of contingent consideration liabilities	45		243
Acquisition-related expense, net	$	49	$	277

The Company's contingent consideration liabilities are included in Accrued expenses and other current liabilities and Other long-term liabilities on the Condensed Consolidated Balance Sheets.

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Accounts Receivable, net

3 Months Ended

Mar. 31, 2022

Receivables [Abstract]

Accounts Receivable, net

Accounts Receivable, net

Accounts receivable consisted of the following:

 

	March 31, 2022		December 31, 2021
Trade accounts receivable	$	130,504	$	112,739
Allowance for credit losses	(3,419)		(3,228)
Accounts receivable, net	$	127,085	$	109,511

The Company had $23.7 million and $11.9 million of unbilled revenue accrued as of March 31, 2022 and December 31, 2021, respectively. These amounts are included in the trade accounts receivable balances above. Unbilled revenue is generally billed in the subsequent quarter to their revenue recognition. The Company considers unbilled receivables as short-term in nature as they are normally converted to trade receivables within 90 days, thus future changes in economic conditions will not have a significant effect on the credit loss estimate.

The Company was contracted to perform inspections of welds on various pipeline projects in Texas for a customer. As of December 31, 2019, approximately $1.4 million of past due receivables were outstanding from this customer. The Company received notice from the customer in December 2019, alleging that the work performed was not in compliance with the contract. The Company recorded a full reserve for this receivable during 2019 and the status of this situation has not changed since 2019. See Note 14-Commitments and Contingencies for additional details.

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Property, Plant and Equipment, net

3 Months Ended

Mar. 31, 2022

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment, net

Property, Plant and Equipment, net

Property, plant and equipment consisted of the following:

 

	Useful Life (Years)	March 31, 2022		December 31, 2021
Land		$	2,766	$	2,762
Buildings and improvements	30-40	24,725		24,787
Office furniture and equipment	5-8	19,721		16,620
Machinery and equipment	5-7	245,003		250,166
		292,215		294,335
Accumulated depreciation and amortization		(208,526)		(207,757)
Property, plant and equipment, net		$	83,689	$	86,578

Depreciation expense for the three months ended March 31, 2022 and 2021 was approximately $6.6 million and $6.1 million, respectively.

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Goodwill

3 Months Ended

Mar. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill

Changes in the carrying amount of goodwill by segment is shown below:

	Services		International		Products and Systems		Total
Balance at December 31, 2021	$	190,656	$	14,783	$	—	$	205,439
Foreign currency translation	1,219		(249)				970
Balance at March 31, 2022	$	191,875	$	14,534	$	—	$	206,409

The Company reviews goodwill for impairment on a reporting unit basis on October 1 of each year and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.

The Company performed a quantitative annual impairment test as of October 1, 2021 and the Company did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable. Additionally, through March 31, 2022, the Company did not identify any changes in circumstances that would indicate the carrying value of goodwill may not be recoverable. Significant adverse changes in future periods could negatively affect the Company's key assumptions and may result in future goodwill impairment charges which could be material.

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Intangible Assets

3 Months Ended

Mar. 31, 2022

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Intangible Assets

Intangible Assets

The gross amount, accumulated amortization and net carrying amount of intangible assets were as follows:

 

		March 31, 2022						December 31, 2021
	Useful Life (Years)	Gross Amount		Accumulated Amortization		Net Carrying Amount		Gross Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	5-18	$	111,883	$	(81,572)	$	30,311	$	112,109	$	(80,319)	$	31,790
Software/Technology	3-15	52,895		(27,307)		25,588		52,265		(26,415)		25,850
Covenants not to compete	2-5	12,644		(12,450)		194		12,623		(12,390)		233
Other	2-12	10,599		(9,213)		1,386		10,574		(9,066)		1,508
Total		$	188,021	$	(130,542)	$	57,479	$	187,571	$	(128,190)	$	59,381

Amortization expense for the three months ended March 31, 2022 and 2021 was approximately $2.4 million and $2.5 million, respectively.

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Accrued Expenses and Other Current Liabilities

3 Months Ended

Mar. 31, 2022

Payables and Accruals [Abstract]

Accrued Expenses and Other Current Liabilities

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

 

	March 31, 2022		December 31, 2021
Accrued salaries, wages and related employee benefits	$	34,423	$	33,816
Contingent consideration, current portion	981		1,830
Accrued workers’ compensation and health benefits	4,314		3,994
Deferred revenue	7,578		6,202
Pension accrual	2,519		2,519
Right-of-use liability - Operating	10,278		10,040
Other accrued expenses	27,373		25,462
Total	$	87,466	$	83,863

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Long-Term Debt

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

Long-term debt consisted of the following:

	March 31, 2022		December 31, 2021
Senior credit facility	$	130,000	$	119,500
Senior secured term loan, net of unamortized debt issuance costs of $0.2 million and $0.2 million, respectively	72,949		76,673
Other	5,865		6,392
Total debt	208,814		202,565
Less: Current portion	(21,336)		(20,162)
Long-term debt, net of current portion	$	187,478	$	182,403

Senior Credit Facility

The Company has a credit agreement with its banking group (as amended, the "Credit Agreement") which provides the Company with a revolving line of credit and a $100 million senior secured term loan A facility with a balance of $72.9 million as of March 31, 2022. Pursuant to the Amendment described below, the revolving line of credit was reduced from $155 million to $150 million on December 31, 2021. Both the revolving line of credit and the term loan A facility under the Credit Agreement have a maturity date of December 12, 2023.

On May 19, 2021, the Company entered into the Fifth Amendment (the “Amendment”) to the Credit Agreement. The Amendment made the following changes:

•Removed the LIBOR floor of 1.0%, which provided that if LIBOR is below 1.0%, the interest rate will be calculated as if LIBOR is 1.0%. Now the actual LIBOR rate is used to calculate interest, even if LIBOR is below 1.0%. The LIBOR margins and base rate margins are unchanged but are based upon the new Total Consolidated Debt Leverage Ratio (defined below); previously the margin was based upon the Funded Debt Leverage Ratio.

•Requires the Company to maintain a Total Consolidated Debt Leverage Ratio not to exceed 4.0 to 1.0 as of the end of each quarter through the quarter ending March 31, 2022, and for each quarter thereafter the ratio shall not exceed 3.5 to 1.0.

◦Total Consolidated Debt Leverage Ratio means the ratio of (a) Total Consolidated Debt to (b) EBITDA (as defined in the Credit Agreement) for the trailing four consecutive quarters

◦Total Consolidated Debt means all indebtedness (including subordinated debt) of the Company on a consolidated basis (with a limited exception).

•If the Company incurs certain subordinated debt or other permitted indebtedness, then the Company must maintain a Total Consolidated Debt Leverage Ratio not to exceed 4.5 to 1.0 and maintain a ratio of Senior Debt to EBITDA not to exceed 3.5 to 1.0, with Senior Debt being Total Consolidated Debt, less permitted subordinated debt.

•The Company must repay loans under the Credit Agreement with the net proceeds from certain dispositions of assets under certain circumstances and limits investments in non-guarantor subsidiaries under certain circumstances if the Company's Total Consolidated Leverage Ratio is above 3.5 to 1.0.

•Quarterly payments on the term loan increased to $3.75 million through March 31, 2022, then to $5.0 million for each quarterly payment thereafter and a final balloon payment at maturity.

As a result of the borrowing capacity reduction on the revolving loan line of credit, the Company expensed $0.1 million in unamortized capitalized debt issuance costs during the year ended December 31, 2021, which was included in selling, general and administrative expenses on the Consolidated Statements of Loss. The Company incurred $0.5 million in financing costs for the Amendment, of which $0.2 million of third-party costs were expensed and included in selling, general and administrative expenses on the Consolidated Statements of Loss.

Under the Credit Agreement, the Company may borrow up to $100 million in non-U.S. Dollar currencies and use up to $20 million of the credit limit for the issuance of letters of credit.

As of March 31, 2022, the Company had borrowings of $203.1 million and a total of $3.3 million of letters of credit outstanding under the Credit Agreement. The Company has capitalized costs associated with debt modifications of $0.8 million as of March 31, 2022, which is included in Other Assets on the Condensed Consolidated Balance Sheets and will be amortized into interest expense over the remaining term of the Credit Agreement through December 12, 2023

As of March 31, 2022, the Company was in compliance with the terms of the Credit Agreement. The Company continuously monitors compliance with the covenants contained in its 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, due to the uncertainties being caused by the COVID-19 pandemic, the significant volatility in oil prices, and volatility in the aerospace production, such matters cannot be predicted with certainty.

Other debt

The Company's other debt includes bank financing provided at the local subsidiary level used to support working capital requirements and fund capital expenditures. At March 31, 2022, there was an aggregate of approximately $5.9 million outstanding, payable at various times through 2030. Monthly payments range from $0.4 thousand to $16 thousand and interest rates range from 0.4% to 3.5%.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The Company performs fair value measurements in accordance with the guidance provided by ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a three level hierarchy that prioritizes the inputs used to measure fair value.

Financial instruments measured at fair value on a recurring basis

The fair value of contingent consideration liabilities was estimated using a discounted cash flow technique with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. The significant inputs in the Level 3 measurement not supported by market activity include the probability assessments of expected future cash flows related to the acquisitions, appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with the terms of the applicable acquisition agreements.

The following table represents the changes in the fair value of Level 3 contingent consideration:

 

	Three months ended March 31,
	2022		2021
Beginning balance	$	1,831	$	1,640
Acquisitions	—		—
Payments	(938)		(938)
Accretion of liability	—		—
Revaluation	45		243
Foreign currency translation	—		—
Ending balance	$	938	$	945

Financial instruments not measured at fair value on a recurring basis

The Company has evaluated current market conditions and borrower credit quality and has determined that the carrying value of its long-term debt approximates fair value. The fair value of the Company’s notes payable and finance lease obligations

approximates their carrying amounts based on anticipated interest rates which management believes would currently be available to the Company for similar issuances of debt.

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Leases

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Leases

Leases

The Company’s Condensed Consolidated Balance Sheets include the following related to right-of-use ("ROU") operating leases:

Leases	Classification	March 31, 2022		December 31, 2021
Assets
ROU assets	Other Assets	$	42,505	$	42,451
Liabilities
ROU - current	Accrued expenses and other current liabilities	$	10,278	$	10,040
ROU liability - long-term	Other long-term liabilities	33,719		34,030
Total ROU liabilities		$	43,997	$	44,070

Included within the balance of operating leases is a lease for the Company’s headquarters which is with a related party. The ROU liability for this facility was approximately $2.4 million and $2.9 million as of March 31, 2022 and December 31, 2021, respectively. Total rent payments for this facility were approximately $0.3 million and $0.5 million for the three months ended March 31, 2022 and March 31, 2021, respectively. An agreement was reached with the related party to reduce rental payments by 12.5% for the lease of the Company’s headquarters, effective February 2022 as part of a voluntary reduction.

The total ROU assets attributable to finance leases were approximately $13.4 million and $13.8 million as of March 31, 2022 and December 31, 2021, respectively, which is included in Property, plant, and equipment, net on the Condensed Consolidated Balance Sheets.

The components of lease costs were as follows:

		Three months ended March 31,
	Classification	2022		2021
Finance lease expense
Amortization of ROU assets	Depreciation and amortization	$	1,012	$	1,060
Interest on lease liabilities	Interest expense	158		192
Operating lease expense	Cost of revenue; Selling, general & administrative expenses	3,198		3,302
Short-term lease expense	Cost of revenue; Selling, general & administrative expenses	6		6
Variable lease expense	Cost of revenue; Selling, general & administrative expenses	539		867
Total		$	4,913	$	5,427

Additional information related to leases was as follows:

	Three months ended March 31,
	2022			2021
Cash paid for amounts included in the measurement of lease liabilities for finance and operating leases
Finance - financing cash flows	$	1,076		$	1,069
Finance - operating cash flows	158			192
Operating - operating cash flows	3,163			3,322
ROU assets obtained in the exchange for lease liabilities
Finance leases	$	848		$	643
Operating leases	2,772			1,004
Weighted-average remaining lease term (in years)
Finance leases	5.3			5.6
Operating leases	5.2			5.6
Weighted-average discount rate
Finance leases	5.2		%	5.5		%
Operating leases	5.5		%	5.7		%

Maturities of lease liabilities as of March 31, 2022 were as follows:

	Finance		Operating
Remainder of 2022	$	4,515	$	9,113
2023	3,990		11,252
2024	3,062		9,083
2025	1,471		6,763
2026	823		5,074
Thereafter	482		9,191
Total	14,343		50,476
Less: Present value discount	1,016		6,479
Lease liability	$	13,327	$	43,997

Leases

Leases

The Company’s Condensed Consolidated Balance Sheets include the following related to right-of-use ("ROU") operating leases:

Leases	Classification	March 31, 2022		December 31, 2021
Assets
ROU assets	Other Assets	$	42,505	$	42,451
Liabilities
ROU - current	Accrued expenses and other current liabilities	$	10,278	$	10,040
ROU liability - long-term	Other long-term liabilities	33,719		34,030
Total ROU liabilities		$	43,997	$	44,070

Included within the balance of operating leases is a lease for the Company’s headquarters which is with a related party. The ROU liability for this facility was approximately $2.4 million and $2.9 million as of March 31, 2022 and December 31, 2021, respectively. Total rent payments for this facility were approximately $0.3 million and $0.5 million for the three months ended March 31, 2022 and March 31, 2021, respectively. An agreement was reached with the related party to reduce rental payments by 12.5% for the lease of the Company’s headquarters, effective February 2022 as part of a voluntary reduction.

The total ROU assets attributable to finance leases were approximately $13.4 million and $13.8 million as of March 31, 2022 and December 31, 2021, respectively, which is included in Property, plant, and equipment, net on the Condensed Consolidated Balance Sheets.

The components of lease costs were as follows:

		Three months ended March 31,
	Classification	2022		2021
Finance lease expense
Amortization of ROU assets	Depreciation and amortization	$	1,012	$	1,060
Interest on lease liabilities	Interest expense	158		192
Operating lease expense	Cost of revenue; Selling, general & administrative expenses	3,198		3,302
Short-term lease expense	Cost of revenue; Selling, general & administrative expenses	6		6
Variable lease expense	Cost of revenue; Selling, general & administrative expenses	539		867
Total		$	4,913	$	5,427

Additional information related to leases was as follows:

	Three months ended March 31,
	2022			2021
Cash paid for amounts included in the measurement of lease liabilities for finance and operating leases
Finance - financing cash flows	$	1,076		$	1,069
Finance - operating cash flows	158			192
Operating - operating cash flows	3,163			3,322
ROU assets obtained in the exchange for lease liabilities
Finance leases	$	848		$	643
Operating leases	2,772			1,004
Weighted-average remaining lease term (in years)
Finance leases	5.3			5.6
Operating leases	5.2			5.6
Weighted-average discount rate
Finance leases	5.2		%	5.5		%
Operating leases	5.5		%	5.7		%

Maturities of lease liabilities as of March 31, 2022 were as follows:

	Finance		Operating
Remainder of 2022	$	4,515	$	9,113
2023	3,990		11,252
2024	3,062		9,083
2025	1,471		6,763
2026	823		5,074
Thereafter	482		9,191
Total	14,343		50,476
Less: Present value discount	1,016		6,479
Lease liability	$	13,327	$	43,997

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Legal Proceedings and Government Investigations

The Company is periodically involved in lawsuits, investigations and claims that arise in the ordinary course of business. The Company cannot predict with certainty the ultimate resolution of lawsuits, investigations and claims asserted against it. Except for possible losses from the matters described below, the Company does not believe that any currently pending or threatened legal proceeding to which the Company is or is likely to become a party will have a material adverse effect on its business, results of operations, cash flows or financial condition. The costs incurred by the Company to defend lawsuits, investigations and claims and amounts the Company pays to other parties because of these matters may be covered by insurance in some circumstances.

Litigation and Commercial Claims

The Company was contracted to perform inspections of welds on various pipeline projects in Texas for a customer. As of March 31, 2022, approximately $1.4 million of past due receivables were outstanding from this customer. The customer provided the Company with notice in December 2019, alleging that the Company’s inspection of 66 welds (out of approximately 16,000 welds inspected) were not in compliance with the contract, claimed approximately $7.6 million in damages, and requested that the Company pay these damages and any other damages incurred. The Company filed a lawsuit in the District Court of Bexar County, Texas, 37th Judicial District, in an action captioned Mistras Group, Inc. v. Epic Y-Grade Pipeline LP, to recover the $1.4 million and other amounts due to the Company. The customer filed a counterclaim, alleging breach of contract and seeking recovery of its alleged damages. The Company believes that any successful claim by the customer regarding the Company’s workmanship will be covered by insurance, subject to payment of a deductible. At this time, the Company is unable to determine whether it has any liability in connection with this matter and if so, the amount or range of any such liability, and accordingly, has not established any accruals for this matter. Accordingly, the Company recorded a reserve in the amount of $1.4 million during the twelve months ended December 31, 2019 for these past due receivables.

Two proceedings have been filed in California Superior Court for the County of Los Angeles regarding alleged violations of the California Labor Code. Both cases are captioned Justin Price v. Mistras Group, Inc., one being a purported class action lawsuit on behalf of current and former Mistras employees in California and the other was filed on behalf of the State of California under the California Private Attorney General Act on the basis of the same alleged violations. The two cases have been consolidated and are requesting payment of all damages, including unpaid wages, and various fines and penalties available under California law. On May 4, 2021, the Company agreed to a settlement of all claims in the cases, which was more formally documented pursuant to a settlement agreement completed October 5, 2021. Pursuant to the settlement, the Company will pay $2.3 million to resolve the allegations in these proceedings and will be responsible for the employer portion of payroll taxes on the amount of the settlement allocated to wages. The settlement is subject to court approval and will cover claims for the period from June 2016 through July 31, 2021. The Company recorded expense of approximately $1.6 million during the three months ended March 31, 2021 related to this settlement, which is in addition to expense of $0.8 million the Company recorded during the three months ended December 31, 2020.

Pension Related Contingencies

Certain of Company’s subsidiaries had significant reductions in their unionized workers in 2018. The collective bargaining agreements for these employees required contributions for these employees to national multi-employer pension funds. The reduction in employees resulted in a subsidiary incurring a complete withdrawal to one of the pension funds under the Employee Retirement Income Security Act of 1974 ("ERISA"), which was fully satisfied in 2019. The Company has determined that the subsidiary is likely to incur partial or complete withdrawal liability to the other pension fund. The balance of the estimated total amount of this potential liability as of March 31, 2022 is approximately $2.5 million, which were incurred in 2018 and 2019.

Severance and labor disputes

During December 2019, the Company executed an agreement to sell the rights of certain customer "staff leasing" contracts related to its German subsidiary for total consideration of approximately $0.1 million, effective January 1, 2020. No other assets or liabilities other than those employee benefits related to employees working on the customer contracts were included in the sale. As of March 31, 2022, the Company has approximately $0.1 million of accrued estimated severance payment obligations, which takes into account the Company's estimate with respect to the employees that have been or will be transitioned to the German subsidiaries' other customers. The $0.2 million of estimated obligations is net of $0.4 million in payments made and $1.0 million in reversals due to employees being transitioned to customer contracts.

The Company was entitled to indemnification on certain labor claims from the sellers of a company acquired by its Brazilian subsidiary. The Company and the sellers entered into a settlement agreement for approximately $1.0 million, which provided for payment in two installments, the first for approximately 31% of the settlement and the second for the remaining 69%. The first installment in the amount of approximately $0.3 million was paid by the sellers in December 2020 and the Company recognized that amount as a gain in selling, general and administrative expenses in the same period. The remaining payment for $0.6 million was received in the first quarter of 2021 and the Company recognized that amount as a gain in selling, general and administrative expenses in the same period.

Acquisition and disposition related contingencies

The Company is liable for contingent consideration in connection with certain of its acquisitions. As of March 31, 2022, total potential acquisition-related contingent consideration ranged from zero to approximately $1.9 million and would be payable upon the achievement of specific performance metrics by certain of the acquired companies over the next six months.

During 2018, the Company sold a subsidiary in the Products and Systems segment. As part of the sale, the Company entered into a three-year agreement to purchase products from the buyer, with a cumulative commitment of $2.3 million, of which $0.9 million is remaining as of March 31, 2022. The agreement is based on third-party pricing and the Company's planned purchase requirements over the three-year purchase period to meet the minimum contractual purchases. On August 3, 2021, the Company entered into an agreement and extended the period by twelve months. As of March 31, 2022, approximately $0.9 million is remaining on the amended purchase commitment. The agreement is based on third party pricing and the Company's planned purchase requirements over the duration of the extension to meet the minimum contractual purchases.

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Segment Disclosure

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Segment Disclosure

Segment Disclosure

The Company’s three operating segments are:

•Services. This segment 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. This segment 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. This segment designs, manufactures, sells, installs and services the Company’s asset protection products and systems, including equipment and instrumentation, predominantly in the United States.

Costs incurred for general corporate services, including finance, legal, and certain other costs that are provided to the segments are reported within Corporate and eliminations. During the first quarter of 2022 the Company finalized a transfer pricing study which resulted in additional costs being allocated from Corporate to the operating segments with the majority of the costs allocated to the Services segment. These costs are reflected in operating income (loss) of each segment. Sales to the International segment from the Products and Systems segment and subsequent sales by the International segment of the same items are recorded and reflected in the operating performance of both segments. Additionally, engineering charges and royalty fees charged to the Services and International segments by the Products and Systems segment are reflected in the operating performance of each segment.

 The accounting policies of the reportable segments are the same as those described in Note 1-Description of Business and Basis of Presentation. Segment income from operations is one of the primary performance measures used by the chief operating decision maker, to assess the performance of each segment and make resource allocation decisions. Certain general and administrative costs such as human resources, information technology and training are allocated to the segments. Segment income from operations excludes interest and other financial charges and income taxes. Corporate and other assets are comprised principally of cash, deposits, property, plant and equipment, domestic deferred taxes, deferred charges and other assets. Corporate loss from operations consists of administrative charges related to corporate personnel and other charges that cannot be readily identified for allocation to a particular segment.

Selected consolidated financial information by segment for the periods shown was as follows: (with intercompany transactions eliminated in Corporate and eliminations)

 

	Three months ended March 31,
	2022		2021
Revenue
Services	$	132,946	$	124,298
International	28,138		27,648
Products and Systems	2,936		2,988
Corporate and eliminations	(2,358)		(1,199)
	$	161,662	$	153,735

 

	Three months ended March 31,
	2022		2021
Gross profit
Services	$	30,526	$	31,076
International	8,190		7,625
Products and Systems	1,168		1,281
Corporate and eliminations	8		19
	$	39,892	$	40,001

Income (loss) from operations by operating segment includes intercompany transactions, which are eliminated in Corporate and eliminations.

	Three months ended March 31,
	2022		2021
Income (loss) from operations
Services	$	3,761	$	4,548
International	284		(820)
Products and Systems	(582)		(581)
Corporate and eliminations	(8,161)		(7,893)
	$	(4,698)	$	(4,746)

  

	Three months ended March 31,
	2022		2021
Depreciation and amortization
Services	$	6,593	$	6,114
International	2,058		2,210
Products and Systems	218		228
Corporate and eliminations	(62)		13
	$	8,807	$	8,565

 

	March 31, 2022		December 31, 2021
Intangible assets, net
Services	$	50,476	$	51,862
International	5,804		6,344
Products and Systems	1,071		1,042
Corporate and eliminations	128		133
	$	57,479	$	59,381

	March 31, 2022		December 31, 2021
Total assets
Services	$	436,996	$	424,058
International	108,733		111,619
Products and Systems	10,534		10,532
Corporate and eliminations	11,965		15,986
	$	568,228	$	562,195

Refer to Note 2–Revenue, for revenue by geographic area for the three months ended March 31, 2022 and 2021.

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Description of Business and Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The Unaudited Condensed Consolidated Financial Statements contained in this report have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") and Securities and Exchange Commission ("SEC") guidance allowing for reduced disclosure for interim periods. In the opinion of management, the Unaudited Condensed Consolidated Financial Statements include all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the results for the interim periods of the years ending December 31, 2022 and December 31, 2021.

Certain items included in these statements are based on management’s estimates. Actual results may differ from those estimates. The results of operations for any interim period are not necessarily indicative of the results expected for the year. The accompanying Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the notes to the Audited Consolidated Financial Statements contained in the Company's 2021 Annual Report on Form 10-K ("2021 Annual Report").

Principles of Consolidation

Principles of Consolidation

The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of Mistras Group, Inc. as well as its wholly-owned subsidiaries, majority-owned subsidiaries and consolidated variable interest entities (VIE). For subsidiaries in which the Company’s ownership interest is less than 100%, the non-controlling interests are reported in stockholders’ equity in the accompanying Condensed Consolidated Balance Sheets. The non-controlling interests in net results, net of tax, is classified separately in the accompanying Unaudited Condensed Consolidated Statements of Loss. All significant intercompany accounts and transactions have been eliminated in consolidation. The results of operations of companies acquired are included from the date of acquisition.

Reclassification

Reclassification

Certain amounts in prior periods have been reclassified to conform to the current year presentation. Such reclassifications did not have a material effect on the Company's financial condition or results of operations as previously reported.

Income Taxes

Income Taxes

Income taxes are accounted for under the asset and liability method. We recognize deferred tax assets and liabilities at enacted income tax rates for the temporary differences between the financial reporting bases and the tax bases of our assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. Our net deferred tax assets primarily consist of net operating loss carry forwards, or NOLs. A valuation allowance is provided if it is more likely than not that some or all of a deferred income tax asset will not be realized. A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the current and prior years.

As of March 31, 2022, management concluded that it is more likely than not that a substantial portion of the Company's deferred tax assets will be realized.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.

The Company’s effective income tax rate was approximately 19.3% and 32.7% for the three months ended March 31, 2022 and 2021, respectively. The effective income tax rate benefit for the three months ended March 31, 2022 was lower than the statutory rate primarily due to the impact of an unfavorable discrete item related to stock compensation. The effective income tax rate for the three months ended March 31, 2021 was higher than the statutory rate due to the capitalization of certain non-US intercompany balances which resulted in a deductible foreign exchange loss in the US.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In March 2020 and updated in January 2021, the FASB issued ASU 2020-04 and 2021-01,“Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The guidance provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The amendments in ASU 2020-04 are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating applicable contracts and the available expedients provided by the new guidance.

Revenue

Revenue

The Company derives the majority of its revenue by providing services on a time and material basis, and are short-term in nature. The Company accounts for revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers.

Performance Obligations

The Company provides highly integrated and bundled inspection services to its customers. The majority of the Company's contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and is, therefore, not distinct. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using the Company's best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is a relative selling price based on price lists.

Contract modifications are not routine in the performance of the Company's contracts. Generally, when contracts are modified, the modification is to account for changes in scope to the goods and services that are provided. In most instances, contract modifications are for goods or services that are distinct, and, therefore, are accounted for as a separate contract.

The Company's performance obligations are satisfied over time as work progresses or at a point in time. The majority of the Company's revenue is recognized over time as work progresses for the Company's 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. The Company also utilizes 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. For these arrangements, revenue is recognized on a cost-to-cost method tracked on an input basis.

The majority of our revenue recognized at a point in time is related to product sales when the customer obtains control of the asset, which is generally upon shipment to the customer. Contract costs include labor, material and overhead.

The Company expects any significant remaining performance obligations to be satisfied within one year.

Contract Estimates

The majority of the Company's revenues are short-term in nature. The Company enters into master service agreements (MSAs) with customers that specify an overall framework and contract terms. The actual contracting to provide services or furnish products are triggered by a work order, purchase order, or some similar document issued pursuant to a MSA which sets forth the scope of services and/or identifies the products to be provided. From time-to-time, the Company may enter into longer-term contracts, which can range from several months to several years. Revenue on certain contracts is recognized as work is performed based on total costs incurred to date in relation to the total estimated costs for the performance of the contract at completion. This includes contract estimates of costs to be incurred for the performance of the contract. Cost estimation is based upon the professional knowledge and experience of the Company's project managers, engineers and financial professionals. Factors that are considered in estimating the work to be completed include the availability of materials, the effect of any delays in the Company's project performance and the recoverability of any claims. Whenever revisions of estimates, contract costs and/or contract values indicate that the contract costs will exceed estimated revenues, thus creating a loss, a provision for the total estimated loss is recorded in that period.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the Consolidated Balance Sheets. Amounts are generally billed as work progresses in accordance with agreed-upon contractual terms, generally at periodic intervals (e.g., weekly, bi-weekly or monthly). Generally, billing occurs subsequent to revenue recognition, resulting in contract assets. However, the Company sometimes receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities. These assets and liabilities are aggregated on an individual contract basis and reported on the Consolidated Balance Sheets at the end of each reporting period within accounts receivable, net or accrued expenses and other current liabilities.

Fair Value Measurements

Fair Value Measurements

The Company performs fair value measurements in accordance with the guidance provided by ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a three level hierarchy that prioritizes the inputs used to measure fair value.

Financial instruments measured at fair value on a recurring basis

The fair value of contingent consideration liabilities was estimated using a discounted cash flow technique with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. The significant inputs in the Level 3 measurement not supported by market activity include the probability assessments of expected future cash flows related to the acquisitions, appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with the terms of the applicable acquisition agreements.

Financial instruments not measured at fair value on a recurring basis

The Company has evaluated current market conditions and borrower credit quality and has determined that the carrying value of its long-term debt approximates fair value. The fair value of the Company’s notes payable and finance lease obligations

approximates their carrying amounts based on anticipated interest rates which management believes would currently be available to the Company for similar issuances of debt.

Segment Disclosure

Segment Disclosure

The Company’s three operating segments are:

•Services. This segment 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. This segment 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. This segment designs, manufactures, sells, installs and services the Company’s asset protection products and systems, including equipment and instrumentation, predominantly in the United States.

Costs incurred for general corporate services, including finance, legal, and certain other costs that are provided to the segments are reported within Corporate and eliminations. During the first quarter of 2022 the Company finalized a transfer pricing study which resulted in additional costs being allocated from Corporate to the operating segments with the majority of the costs allocated to the Services segment. These costs are reflected in operating income (loss) of each segment. Sales to the International segment from the Products and Systems segment and subsequent sales by the International segment of the same items are recorded and reflected in the operating performance of both segments. Additionally, engineering charges and royalty fees charged to the Services and International segments by the Products and Systems segment are reflected in the operating performance of each segment.

 The accounting policies of the reportable segments are the same as those described in Note 1-Description of Business and Basis of Presentation. Segment income from operations is one of the primary performance measures used by the chief operating decision maker, to assess the performance of each segment and make resource allocation decisions. Certain general and administrative costs such as human resources, information technology and training are allocated to the segments. Segment income from operations excludes interest and other financial charges and income taxes. Corporate and other assets are comprised principally of cash, deposits, property, plant and equipment, domestic deferred taxes, deferred charges and other assets. Corporate loss from operations consists of administrative charges related to corporate personnel and other charges that cannot be readily identified for allocation to a particular segment.

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Revenue (Tables)

3 Months Ended

Mar. 31, 2022

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregated Revenues

The following series of tables present the Company's disaggregated revenue:

Revenue by industry was as follows:

Three Months Ended March 31, 2022	Services		International		Products		Corp/Elim		Total
Oil & Gas	$	86,613	$	7,572	$	38	$	—	$	94,223
Aerospace & Defense	15,022		4,940		108		—		20,070
Industrials	9,007		5,528		502		—		15,037
Power generation & Transmission	3,822		2,562		845		—		7,229
Other Process Industries	10,293		3,518		1		—		13,812
Infrastructure, Research & Engineering	2,506		2,039		897		—		5,442
Petrochemical	3,045		78		—		—		3,123
Other	2,638		1,901		545		(2,358)		2,726
Total	$	132,946	$	28,138	$	2,936	$	(2,358)	$	161,662

Three Months Ended March 31, 2021	Services		International		Products		Corp/Elim		Total
Oil & Gas	$	79,220	$	7,936	$	56	$	—	$	87,212
Aerospace & Defense	11,823		4,317		35		—		16,175
Industrials	8,819		4,849		327		—		13,995
Power generation & Transmission	5,534		1,978		759		—		8,271
Other Process Industries	7,856		2,912		9		—		10,777
Infrastructure, Research & Engineering	3,169		3,756		1,144		—		8,069
Petrochemical	5,464		72		—				5,536
Other	2,413		1,828		658		(1,199)		3,700
Total	$	124,298	$	27,648	$	2,988	$	(1,199)	$	153,735

Revenue per key geographic location was as follows:

Three Months Ended March 31, 2022	Services		International		Products		Corp/Elim		Total
United States	$	113,935	$	173	$	1,351	$	(655)	$	114,804
Other Americas	18,052		1,341		16		(609)		18,800
Europe	744		25,920		580		(924)		26,320
Asia-Pacific	215		704		989		(170)		1,738
Total	$	132,946	$	28,138	$	2,936	$	(2,358)	$	161,662

Three Months Ended March 31, 2021	Services		International		Products		Corp/Elim		Total
United States	$	104,546	$	208	$	1,460	$	(391)	$	105,823
Other Americas	18,878		1,177		67		(63)		20,059
Europe	294		25,894		460		(612)		26,036
Asia-Pacific	580		369		1,001		(133)		1,817
Total	$	124,298	$	27,648	$	2,988	$	(1,199)	$	153,735

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Share-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Schedule of Stock Option Activity

The following table sets forth a summary of the stock option activity, weighted-average exercise prices and options outstanding as of March 31, 2022 and 2021:

	Three months ended March 31,
	2022			2021
	Common Stock Options	Weighted Average Exercise Price		Common Stock Options	Weighted Average Exercise Price
Outstanding at beginning of period:	5	$	22.35	5	$	22.35
Granted	—	$	—	—	$	—
Exercised	—	$	—	—	$	—
Expired or forfeited	(5)	$	22.35	—	$	—
Outstanding at end of period:	—	$	—	5	$	22.35

Schedule of Vesting Activity of Restricted Stock Unit Awards

A summary of the vesting activity of restricted stock unit awards, with the respective fair value of the awards, is as follows:

	Three months ended March 31,
	2022		2021
Restricted stock awards vested	226		111
Fair value of awards vested	$	1,502	$	1,189

Schedule of Fully-vested Common Stock Issued to Non-employee Directors

A summary of the fully-vested common stock the Company issued to its six non-employee directors, in connection with its non-employee director compensation plan, is as follows:

	Three months ended March 31,
	2022		2021
Awards issued	34		25
Grant date fair value of awards issued	$	225	$	258

Schedule of Company's Outstanding, Nonvested Restricted Share Units and Performance Restricted Stock Units

A summary of the Company's outstanding, non-vested restricted share units is as follows:

	Three months ended March 31,
	2022			2021
	Units	Weighted Average Grant-Date Fair Value		Units	Weighted Average Grant-Date Fair Value
Outstanding at beginning of period:	1,208	$	7.96	1,076	$	7.41
Granted	675	$	7.65	519	$	10.06
Released	(226)	$	13.73	(111)	$	15.90
Forfeited	(7)	$	10.50	(10)	$	8.69
Outstanding at end of period:	1,650	$	7.16	1,474	$	7.70

A summary of the Company's PRSU activity is as follows:

	Three months ended March 31,
	2022			2021
	Units	Weighted Average Grant-Date Fair Value		Units	Weighted Average Grant-Date Fair Value
Outstanding at beginning of period:	388	$	10.07	333	$	8.84
Granted	341	$	6.55	189	$	12.59
Performance condition adjustments	(56)	$	10.47	(125)	$	3.68
Released	(17)	$	6.85	(22)	$	13.63
Forfeited	—	$	—	—	$	—
Outstanding at end of period:	656	$	12.18	375	$	12.18

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Earnings (loss) per Share (Tables)

3 Months Ended

Mar. 31, 2022

Earnings Per Share [Abstract]

Schedule of Computations of Basic and Diluted Earnings (Loss) per Share

The following table sets forth the computations of basic and diluted loss per share:

 

	Three months ended March 31,
	2022		2021
Basic loss per share
Numerator:
Net loss attributable to Mistras Group, Inc.	$	(5,363)	$	(5,362)
Denominator:
Weighted average common shares outstanding	29,634		29,425
Basic loss per share	$	(0.18)	$	(0.18)
Diluted loss per share:
Numerator:
Net loss attributable to Mistras Group, Inc.	$	(5,363)	$	(5,362)
Denominator:
Weighted average common shares outstanding	29,634		29,425
Dilutive effect of stock options outstanding	—		—
Dilutive effect of restricted stock units outstanding (1)	—		—
	29,634		29,425
Diluted loss per share	$	(0.18)	$	(0.18)

_______________

(1) For the three months ended March 31, 2022 and 2021, 1,212,000 and 509,000 shares, respectively, related to restricted stock were excluded from the calculation of diluted EPS due to the net loss for the period.

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Acquisitions (Tables)

3 Months Ended

Mar. 31, 2022

Business Combinations [Abstract]

Schedule of Acquisition-related Expenses

These amounts are reported as Acquisition-related expense, net on the Unaudited Condensed Consolidated Statements of Loss and were as follows for the three months ended March 31, 2022 and 2021:

	Three months ended March 31,
	2022		2021
Due diligence, professional fees and other transaction costs	$	4	$	34
Adjustments to fair value of contingent consideration liabilities	45		243
Acquisition-related expense, net	$	49	$	277

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Accounts Receivable, net (Tables)

3 Months Ended

Mar. 31, 2022

Receivables [Abstract]

Schedule of Accounts Receivable, Net

Accounts receivable consisted of the following: 

	March 31, 2022		December 31, 2021
Trade accounts receivable	$	130,504	$	112,739
Allowance for credit losses	(3,419)		(3,228)
Accounts receivable, net	$	127,085	$	109,511

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Property, Plant and Equipment, net (Tables)

3 Months Ended

Mar. 31, 2022

Property, Plant and Equipment [Abstract]

Schedule of Property, Plant and Equipment, Net

Property, plant and equipment consisted of the following:

 

	Useful Life (Years)	March 31, 2022		December 31, 2021
Land		$	2,766	$	2,762
Buildings and improvements	30-40	24,725		24,787
Office furniture and equipment	5-8	19,721		16,620
Machinery and equipment	5-7	245,003		250,166
		292,215		294,335
Accumulated depreciation and amortization		(208,526)		(207,757)
Property, plant and equipment, net		$	83,689	$	86,578

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Goodwill (Tables)

3 Months Ended

Mar. 31, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Changes in Carrying Amount of Goodwill

Changes in the carrying amount of goodwill by segment is shown below:

	Services		International		Products and Systems		Total
Balance at December 31, 2021	$	190,656	$	14,783	$	—	$	205,439
Foreign currency translation	1,219		(249)				970
Balance at March 31, 2022	$	191,875	$	14,534	$	—	$	206,409

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Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2022

Intangible Assets, Net (Excluding Goodwill) [Abstract]

Schedule of Net Carrying Amount of Intangible Assets

The gross amount, accumulated amortization and net carrying amount of intangible assets were as follows:

 

		March 31, 2022						December 31, 2021
	Useful Life (Years)	Gross Amount		Accumulated Amortization		Net Carrying Amount		Gross Amount		Accumulated Amortization		Net Carrying Amount
Customer relationships	5-18	$	111,883	$	(81,572)	$	30,311	$	112,109	$	(80,319)	$	31,790
Software/Technology	3-15	52,895		(27,307)		25,588		52,265		(26,415)		25,850
Covenants not to compete	2-5	12,644		(12,450)		194		12,623		(12,390)		233
Other	2-12	10,599		(9,213)		1,386		10,574		(9,066)		1,508
Total		$	188,021	$	(130,542)	$	57,479	$	187,571	$	(128,190)	$	59,381

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Accrued Expenses and Other Current Liabilities (Tables)

3 Months Ended

Mar. 31, 2022

Payables and Accruals [Abstract]

Schedule of Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

 

	March 31, 2022		December 31, 2021
Accrued salaries, wages and related employee benefits	$	34,423	$	33,816
Contingent consideration, current portion	981		1,830
Accrued workers’ compensation and health benefits	4,314		3,994
Deferred revenue	7,578		6,202
Pension accrual	2,519		2,519
Right-of-use liability - Operating	10,278		10,040
Other accrued expenses	27,373		25,462
Total	$	87,466	$	83,863

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Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Schedule of Long-term Debt

Long-term debt consisted of the following:

	March 31, 2022		December 31, 2021
Senior credit facility	$	130,000	$	119,500
Senior secured term loan, net of unamortized debt issuance costs of $0.2 million and $0.2 million, respectively	72,949		76,673
Other	5,865		6,392
Total debt	208,814		202,565
Less: Current portion	(21,336)		(20,162)
Long-term debt, net of current portion	$	187,478	$	182,403

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2022

Fair Value Disclosures [Abstract]

Schedule of Changes in Fair Value of Level 3 Contingent Consideration

The following table represents the changes in the fair value of Level 3 contingent consideration:

 

	Three months ended March 31,
	2022		2021
Beginning balance	$	1,831	$	1,640
Acquisitions	—		—
Payments	(938)		(938)
Accretion of liability	—		—
Revaluation	45		243
Foreign currency translation	—		—
Ending balance	$	938	$	945

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Leases (Tables)

3 Months Ended

Mar. 31, 2022

Leases [Abstract]

Schedule of Supplemental Balance Sheet Information

The Company’s Condensed Consolidated Balance Sheets include the following related to right-of-use ("ROU") operating leases:

Leases	Classification	March 31, 2022		December 31, 2021
Assets
ROU assets	Other Assets	$	42,505	$	42,451
Liabilities
ROU - current	Accrued expenses and other current liabilities	$	10,278	$	10,040
ROU liability - long-term	Other long-term liabilities	33,719		34,030
Total ROU liabilities		$	43,997	$	44,070

Schedule of Components of Lease Costs and Other Information Related to Leases

The components of lease costs were as follows:

		Three months ended March 31,
	Classification	2022		2021
Finance lease expense
Amortization of ROU assets	Depreciation and amortization	$	1,012	$	1,060
Interest on lease liabilities	Interest expense	158		192
Operating lease expense	Cost of revenue; Selling, general & administrative expenses	3,198		3,302
Short-term lease expense	Cost of revenue; Selling, general & administrative expenses	6		6
Variable lease expense	Cost of revenue; Selling, general & administrative expenses	539		867
Total		$	4,913	$	5,427

Additional information related to leases was as follows:

	Three months ended March 31,
	2022			2021
Cash paid for amounts included in the measurement of lease liabilities for finance and operating leases
Finance - financing cash flows	$	1,076		$	1,069
Finance - operating cash flows	158			192
Operating - operating cash flows	3,163			3,322
ROU assets obtained in the exchange for lease liabilities
Finance leases	$	848		$	643
Operating leases	2,772			1,004
Weighted-average remaining lease term (in years)
Finance leases	5.3			5.6
Operating leases	5.2			5.6
Weighted-average discount rate
Finance leases	5.2		%	5.5		%
Operating leases	5.5		%	5.7		%

Schedule of Maturities of Operating Lease Liabilities

Maturities of lease liabilities as of March 31, 2022 were as follows:

	Finance		Operating
Remainder of 2022	$	4,515	$	9,113
2023	3,990		11,252
2024	3,062		9,083
2025	1,471		6,763
2026	823		5,074
Thereafter	482		9,191
Total	14,343		50,476
Less: Present value discount	1,016		6,479
Lease liability	$	13,327	$	43,997

Schedule of Maturities of Finance Lease Liabilities

Maturities of lease liabilities as of March 31, 2022 were as follows:

	Finance		Operating
Remainder of 2022	$	4,515	$	9,113
2023	3,990		11,252
2024	3,062		9,083
2025	1,471		6,763
2026	823		5,074
Thereafter	482		9,191
Total	14,343		50,476
Less: Present value discount	1,016		6,479
Lease liability	$	13,327	$	43,997

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Segment Disclosure (Tables)

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Schedule of Selected Consolidated Financial Information by Segment

Selected consolidated financial information by segment for the periods shown was as follows: (with intercompany transactions eliminated in Corporate and eliminations)

 

	Three months ended March 31,
	2022		2021
Revenue
Services	$	132,946	$	124,298
International	28,138		27,648
Products and Systems	2,936		2,988
Corporate and eliminations	(2,358)		(1,199)
	$	161,662	$	153,735

 

	Three months ended March 31,
	2022		2021
Gross profit
Services	$	30,526	$	31,076
International	8,190		7,625
Products and Systems	1,168		1,281
Corporate and eliminations	8		19
	$	39,892	$	40,001

Income (loss) from operations by operating segment includes intercompany transactions, which are eliminated in Corporate and eliminations.

	Three months ended March 31,
	2022		2021
Income (loss) from operations
Services	$	3,761	$	4,548
International	284		(820)
Products and Systems	(582)		(581)
Corporate and eliminations	(8,161)		(7,893)
	$	(4,698)	$	(4,746)

  

	Three months ended March 31,
	2022		2021
Depreciation and amortization
Services	$	6,593	$	6,114
International	2,058		2,210
Products and Systems	218		228
Corporate and eliminations	(62)		13
	$	8,807	$	8,565

 

	March 31, 2022		December 31, 2021
Intangible assets, net
Services	$	50,476	$	51,862
International	5,804		6,344
Products and Systems	1,071		1,042
Corporate and eliminations	128		133
	$	57,479	$	59,381

	March 31, 2022		December 31, 2021
Total assets
Services	$	436,996	$	424,058
International	108,733		111,619
Products and Systems	10,534		10,532
Corporate and eliminations	11,965		15,986
	$	568,228	$	562,195

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Description of Business and Basis of Presentation (Details)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Accounting Policies [Abstract]
Effective income tax rate	19.30%	32.70%

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Revenue - Narrative (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue recognized that was included in contract liability balance at the beginning of the year	$ 2.2	$ 1.9
Revenue, practical expedient, incremental cost of obtaining a contract, maximum period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-04-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Revenue, remaining performance obligation, expected timing of satisfaction period	1 year

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Revenue - Disaggregated Revenues (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Disaggregation of Revenue [Line Items]
Revenue	$ 161,662	$ 153,735
United States
Disaggregation of Revenue [Line Items]
Revenue	114,804	105,823
Other Americas
Disaggregation of Revenue [Line Items]
Revenue	18,800	20,059
Europe
Disaggregation of Revenue [Line Items]
Revenue	26,320	26,036
Asia-Pacific
Disaggregation of Revenue [Line Items]
Revenue	1,738	1,817
Oil & Gas
Disaggregation of Revenue [Line Items]
Revenue	94,223	87,212
Aerospace & Defense
Disaggregation of Revenue [Line Items]
Revenue	20,070	16,175
Industrials
Disaggregation of Revenue [Line Items]
Revenue	15,037	13,995
Power generation & Transmission
Disaggregation of Revenue [Line Items]
Revenue	7,229	8,271
Other Process Industries
Disaggregation of Revenue [Line Items]
Revenue	13,812	10,777
Infrastructure, Research & Engineering
Disaggregation of Revenue [Line Items]
Revenue	5,442	8,069
Petrochemical
Disaggregation of Revenue [Line Items]
Revenue	3,123	5,536
Other
Disaggregation of Revenue [Line Items]
Revenue	2,726	3,700
Operating segments | Services
Disaggregation of Revenue [Line Items]
Revenue	132,946	124,298
Operating segments | Services | United States
Disaggregation of Revenue [Line Items]
Revenue	113,935	104,546
Operating segments | Services | Other Americas
Disaggregation of Revenue [Line Items]
Revenue	18,052	18,878
Operating segments | Services | Europe
Disaggregation of Revenue [Line Items]
Revenue	744	294
Operating segments | Services | Asia-Pacific
Disaggregation of Revenue [Line Items]
Revenue	215	580
Operating segments | Services | Oil & Gas
Disaggregation of Revenue [Line Items]
Revenue	86,613	79,220
Operating segments | Services | Aerospace & Defense
Disaggregation of Revenue [Line Items]
Revenue	15,022	11,823
Operating segments | Services | Industrials
Disaggregation of Revenue [Line Items]
Revenue	9,007	8,819
Operating segments | Services | Power generation & Transmission
Disaggregation of Revenue [Line Items]
Revenue	3,822	5,534
Operating segments | Services | Other Process Industries
Disaggregation of Revenue [Line Items]
Revenue	10,293	7,856
Operating segments | Services | Infrastructure, Research & Engineering
Disaggregation of Revenue [Line Items]
Revenue	2,506	3,169
Operating segments | Services | Petrochemical
Disaggregation of Revenue [Line Items]
Revenue	3,045	5,464
Operating segments | Services | Other
Disaggregation of Revenue [Line Items]
Revenue	2,638	2,413
Operating segments | International
Disaggregation of Revenue [Line Items]
Revenue	28,138	27,648
Operating segments | International | United States
Disaggregation of Revenue [Line Items]
Revenue	173	208
Operating segments | International | Other Americas
Disaggregation of Revenue [Line Items]
Revenue	1,341	1,177
Operating segments | International | Europe
Disaggregation of Revenue [Line Items]
Revenue	25,920	25,894
Operating segments | International | Asia-Pacific
Disaggregation of Revenue [Line Items]
Revenue	704	369
Operating segments | International | Oil & Gas
Disaggregation of Revenue [Line Items]
Revenue	7,572	7,936
Operating segments | International | Aerospace & Defense
Disaggregation of Revenue [Line Items]
Revenue	4,940	4,317
Operating segments | International | Industrials
Disaggregation of Revenue [Line Items]
Revenue	5,528	4,849
Operating segments | International | Power generation & Transmission
Disaggregation of Revenue [Line Items]
Revenue	2,562	1,978
Operating segments | International | Other Process Industries
Disaggregation of Revenue [Line Items]
Revenue	3,518	2,912
Operating segments | International | Infrastructure, Research & Engineering
Disaggregation of Revenue [Line Items]
Revenue	2,039	3,756
Operating segments | International | Petrochemical
Disaggregation of Revenue [Line Items]
Revenue	78	72
Operating segments | International | Other
Disaggregation of Revenue [Line Items]
Revenue	1,901	1,828
Operating segments | Products
Disaggregation of Revenue [Line Items]
Revenue	2,936	2,988
Operating segments | Products | United States
Disaggregation of Revenue [Line Items]
Revenue	1,351	1,460
Operating segments | Products | Other Americas
Disaggregation of Revenue [Line Items]
Revenue	16	67
Operating segments | Products | Europe
Disaggregation of Revenue [Line Items]
Revenue	580	460
Operating segments | Products | Asia-Pacific
Disaggregation of Revenue [Line Items]
Revenue	989	1,001
Operating segments | Products | Oil & Gas
Disaggregation of Revenue [Line Items]
Revenue	38	56
Operating segments | Products | Aerospace & Defense
Disaggregation of Revenue [Line Items]
Revenue	108	35
Operating segments | Products | Industrials
Disaggregation of Revenue [Line Items]
Revenue	502	327
Operating segments | Products | Power generation & Transmission
Disaggregation of Revenue [Line Items]
Revenue	845	759
Operating segments | Products | Other Process Industries
Disaggregation of Revenue [Line Items]
Revenue	1	9
Operating segments | Products | Infrastructure, Research & Engineering
Disaggregation of Revenue [Line Items]
Revenue	897	1,144
Operating segments | Products | Petrochemical
Disaggregation of Revenue [Line Items]
Revenue	0	0
Operating segments | Products | Other
Disaggregation of Revenue [Line Items]
Revenue	545	658
Corp/Elim
Disaggregation of Revenue [Line Items]
Revenue	(2,358)	(1,199)
Corp/Elim | United States
Disaggregation of Revenue [Line Items]
Revenue	(655)	(391)
Corp/Elim | Other Americas
Disaggregation of Revenue [Line Items]
Revenue	(609)	(63)
Corp/Elim | Europe
Disaggregation of Revenue [Line Items]
Revenue	(924)	(612)
Corp/Elim | Asia-Pacific
Disaggregation of Revenue [Line Items]
Revenue	(170)	(133)
Corp/Elim | Oil & Gas
Disaggregation of Revenue [Line Items]
Revenue	0	0
Corp/Elim | Aerospace & Defense
Disaggregation of Revenue [Line Items]
Revenue	0	0
Corp/Elim | Industrials
Disaggregation of Revenue [Line Items]
Revenue	0	0
Corp/Elim | Power generation & Transmission
Disaggregation of Revenue [Line Items]
Revenue	0	0
Corp/Elim | Other Process Industries
Disaggregation of Revenue [Line Items]
Revenue	0	0
Corp/Elim | Infrastructure, Research & Engineering
Disaggregation of Revenue [Line Items]
Revenue	0	0
Corp/Elim | Petrochemical
Disaggregation of Revenue [Line Items]
Revenue	0
Corp/Elim | Other
Disaggregation of Revenue [Line Items]
Revenue	$ (2,358)	$ (1,199)

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Share-Based Compensation - Equity Incentive Plans (Details)		3 Months Ended
	May 19, 2020 shares	Mar. 31, 2022 plan shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of equity incentive plans | plan		2
2009 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of awards that may be granted (in shares)		0
2016 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of awards that may be granted (in shares)		383,743
Increase in total number of shares authorized for issuance (in shares)	2,000,000
Total number of shares authorized for issuance (in shares)	3,700,000

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Share-Based Compensation - Stock Options (Details) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options fully vested (in shares)	1
Unrecognized compensation costs	$ 0
Common Stock Options
Outstanding at beginning of period (in shares)	5,000	5,000
Granted (in shares)	0	0
Exercised (in shares)	0	0
Expired or forfeited (in shares)	(5,000)	0
Outstanding at end of period (in shares)	0	5,000
Weighted Average Exercise Price
Outstanding at beginning of period (in dollars per share)	$ 22.35	$ 22.35
Granted (in dollars per share)	0	0
Exercised (in dollars per share)	0	0
Expired or forfeited (in dollars per share)	22.35	0
Outstanding at end of period (in dollars per share)	$ 0	$ 22,350
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Recognized share-based compensation expense	$ 0	$ 0

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Share-Based Compensation - Restricted Stock Unit Awards - Narrative (Details) - Restricted Stock Unit Awards - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Recognized share-based compensation expense (benefit)	$ 0.9	$ 0.9
Unrecognized compensation cost, net of estimated forfeitures	$ 9.6
Weighted-average period over which unrecognized compensation cost is expected to be recognized (years)	3 years 1 month 6 days

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Share-Based Compensation - Vesting Activity of Restricted Stock Unit Awards (Details) - Restricted Stock Unit Awards - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Restricted stock awards vested (in shares)	226	111
Fair value of awards vested	$ 1,502	$ 1,189

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Share-Based Compensation - Fully-vested Common Stock Issued to Non-employee Directors (Details) - Common Stock - Non-employee Directors shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($) director shares	Mar. 31, 2021 USD ($) shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of non-employee directors to whom fully vested common stock is granted | director	6
Awards issued (in shares) | shares	34	25
Grant date fair value of awards issued | $	$ 225	$ 258

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Share-Based Compensation - Restricted Stock Units Awards - Activity (Details) - Restricted Stock Unit Awards - $ / shares shares in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Restricted Stock Units Awards (Units)
Outstanding at beginning of period (in shares)	1,208	1,076
Granted (in shares)	675	519
Released (in shares)	(226)	(111)
Forfeited (in shares)	(7)	(10)
Outstanding at end of period (in shares)	1,650	1,474
Weighted Average Grant-Date Fair Value (in dollars per share)
Outstanding at the beginning of period (in dollars per share)	$ 7.96	$ 7.41
Granted (in dollars per share)	7.65	10.06
Released (in dollars per share)	13.73	15.90
Forfeited (in dollars per share)	10.50	8.69
Outstanding at end of period (in dollars per share)	$ 7.16	$ 7.70

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Share-Based Compensation - Performance Restricted Stock Units - Narrative (Details) - PRSUs shares in Thousands, $ in Millions	3 Months Ended
	Mar. 31, 2022 USD ($) metric shares	Mar. 31, 2021 USD ($) shares	Dec. 31, 2021 shares	Dec. 31, 2020 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of units increased (decreased) during the period (in shares) | shares	56
Recognized share-based compensation expense (benefit) | $	$ 0.3	$ 0.1
Unrecognized compensation cost | $	$ 2.6
Nonvested shares outstanding (in shares) | shares	656	375	388	333
Weighted-average period over which unrecognized compensation cost is expected to be recognized (years)	2 years 6 months
Executive and Senior Officers
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance period (years)	1 year
Requisite service period	5 years
Executive and Senior Officers | Anniversary 1
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting percentage (ratably on each of the first four anniversary date)	25.00%
Executive and Senior Officers | Anniversary 2
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting percentage (ratably on each of the first four anniversary date)	25.00%
Executive and Senior Officers | Anniversary 3
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting percentage (ratably on each of the first four anniversary date)	25.00%
Executive and Senior Officers | Anniversary 4
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting percentage (ratably on each of the first four anniversary date)	25.00%
Executive Officers
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance period (years)	1 year
Number of performance award metrics | metric	3
Average share price trading period	20 days
Last days trading period	20 days
Dividend yield	0.00%

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Share-Based Compensation - Performance Restricted Stock Units - Activity (Details) - PRSUs - $ / shares shares in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Performance Restricted Stock (Units)
Outstanding at beginning of period (in shares)	388	333
Granted (in shares)	341	189
Performance condition adjustments (in shares)	(56)	(125)
Released (in shares)	(17)	(22)
Forfeited (in shares)	0	0
Outstanding at end of period (in shares)	656	375
Weighted Average Grant-Date Fair Value (in dollars per share)
Outstanding at the beginning of period (in dollars per share)	$ 10.07	$ 8.84
Granted (in dollars per share)	6.55	12.59
Performance condition adjustments (in dollars per share)	10.47	3.68
Released (in dollars per share)	6.85	13.63
Forfeited (in dollars per share)	0	0
Outstanding at end of period (in dollars per share)	$ 12.18	$ 12.18

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Earnings (loss) per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Basic loss per share
Net loss attributable to Mistras Group, Inc.	$ (5,363)	$ (5,362)
Denominator:
Weighted-average common shares outstanding (in shares)	29,634	29,425
Basic loss per share (in dollars per share)	$ (0.18)	$ (0.18)
Denominator:
Weighted-average common shares outstanding (in shares)	29,634	29,425
Dilutive effect of stock options outstanding (in shares)	0	0
Dilutive effect of restricted stock units outstanding (in shares)	0	0
Weighted-average common shares outstanding, diluted (in shares)	29,634	29,425
Diluted loss per share (in dollars per share)	$ (0.18)	$ (0.18)
Restricted Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive shares excluded from computation of diluted EPS due to net loss for the period (in shares)	1,212	509

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Acquisitions (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Business Combinations [Abstract]
Due diligence, professional fees and other transaction costs	$ 4	$ 34
Adjustments to fair value of contingent consideration liabilities	45	243
Acquisition-related expense, net	$ 49	$ 277

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Accounts Receivable, net - Summary (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Receivables [Abstract]
Trade accounts receivable	$ 130,504	$ 112,739
Allowance for credit losses	(3,419)	(3,228)
Accounts receivable, net	$ 127,085	$ 109,511

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Accounts Receivable, net - Narrative (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Mar. 31, 2022	Dec. 31, 2021
Accounts, Notes, Loans and Financing Receivable [Line Items]
Unbilled revenues accrued		$ 23,700	$ 11,900
Past due receivables outstanding		127,085	$ 109,511
Texas Customer
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past due receivables outstanding	$ 1,400
Texas Customer | Litigation and Commercial Claims
Accounts, Notes, Loans and Financing Receivable [Line Items]
Past due receivables outstanding		$ 1,400
Reserve for past due receivables	$ 1,400

XML

Property, Plant and Equipment, net (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Property, Plant and Equipment, net
Property, plant and equipment, gross	$ 292,215		$ 294,335
Accumulated depreciation and amortization	(208,526)		(207,757)
Property, plant and equipment, net	83,689		86,578
Depreciation and amortization expense	6,600	$ 6,100
Land
Property, Plant and Equipment, net
Property, plant and equipment, gross	2,766		2,762
Buildings and improvements
Property, Plant and Equipment, net
Property, plant and equipment, gross	$ 24,725		24,787
Buildings and improvements | Minimum
Property, Plant and Equipment, net
Useful Life (Years)	30 years
Buildings and improvements | Maximum
Property, Plant and Equipment, net
Useful Life (Years)	40 years
Office furniture and equipment
Property, Plant and Equipment, net
Property, plant and equipment, gross	$ 19,721		16,620
Office furniture and equipment | Minimum
Property, Plant and Equipment, net
Useful Life (Years)	5 years
Office furniture and equipment | Maximum
Property, Plant and Equipment, net
Useful Life (Years)	8 years
Machinery and equipment
Property, Plant and Equipment, net
Property, plant and equipment, gross	$ 245,003		$ 250,166
Machinery and equipment | Minimum
Property, Plant and Equipment, net
Useful Life (Years)	5 years
Machinery and equipment | Maximum
Property, Plant and Equipment, net
Useful Life (Years)	7 years

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Goodwill - Changes in Carrying Amount of Goodwill (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($)
Goodwill [Roll Forward]
Balance at December 31, 2021	$ 205,439
Foreign currency translation	970
Balance at March 31, 2022	206,409
Services
Goodwill [Roll Forward]
Balance at December 31, 2021	190,656
Foreign currency translation	1,219
Balance at March 31, 2022	191,875
International
Goodwill [Roll Forward]
Balance at December 31, 2021	14,783
Foreign currency translation	(249)
Balance at March 31, 2022	14,534
Products and Systems
Goodwill [Roll Forward]
Balance at December 31, 2021	0
Foreign currency translation
Balance at March 31, 2022	$ 0

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Intangible Assets - Summary (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2021
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 188,021		$ 187,571
Accumulated Amortization	(130,542)		(128,190)
Net Carrying Amount	57,479		59,381
Amortization expense of intangibles	2,400	$ 2,500
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Amount	111,883		112,109
Accumulated Amortization	(81,572)		(80,319)
Net Carrying Amount	$ 30,311		31,790
Customer relationships | Minimum
Finite-Lived Intangible Assets [Line Items]
Useful Life (Years)	5 years
Customer relationships | Maximum
Finite-Lived Intangible Assets [Line Items]
Useful Life (Years)	18 years
Software/Technology
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 52,895		52,265
Accumulated Amortization	(27,307)		(26,415)
Net Carrying Amount	$ 25,588		25,850
Software/Technology | Minimum
Finite-Lived Intangible Assets [Line Items]
Useful Life (Years)	3 years
Software/Technology | Maximum
Finite-Lived Intangible Assets [Line Items]
Useful Life (Years)	15 years
Covenants not to compete
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 12,644		12,623
Accumulated Amortization	(12,450)		(12,390)
Net Carrying Amount	$ 194		233
Covenants not to compete | Minimum
Finite-Lived Intangible Assets [Line Items]
Useful Life (Years)	2 years
Covenants not to compete | Maximum
Finite-Lived Intangible Assets [Line Items]
Useful Life (Years)	5 years
Other
Finite-Lived Intangible Assets [Line Items]
Gross Amount	$ 10,599		10,574
Accumulated Amortization	(9,213)		(9,066)
Net Carrying Amount	$ 1,386		$ 1,508
Other | Minimum
Finite-Lived Intangible Assets [Line Items]
Useful Life (Years)	2 years
Other | Maximum
Finite-Lived Intangible Assets [Line Items]
Useful Life (Years)	12 years

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Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Payables and Accruals [Abstract]
Accrued salaries, wages and related employee benefits	$ 34,423	$ 33,816
Contingent consideration, current portion	981	1,830
Accrued workers’ compensation and health benefits	4,314	3,994
Deferred revenue	7,578	6,202
Pension accrual	2,519	2,519
Right-of-use liability - Operating	10,278	10,040
Other accrued expenses	27,373	25,462
Total	$ 87,466	$ 83,863

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Long-Term Debt - Schedule of Long-Term Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Total debt	$ 208,814	$ 202,565
Less: Current portion	(21,336)	(20,162)
Long-term debt, net of current portion	187,478	182,403
Senior credit facility
Debt Instrument [Line Items]
Total debt	130,000	119,500
Senior credit facility | Senior Secured Term Loan
Debt Instrument [Line Items]
Unamortized debt issuance costs	200	200
Total debt	72,949	76,673
Other
Debt Instrument [Line Items]
Total debt	$ 5,865	$ 6,392

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Long-Term Debt - Narrative (Details) - USD ($)		3 Months Ended	12 Months Ended
	May 19, 2021	Mar. 31, 2022	Dec. 31, 2021	May 15, 2020
Debt Instrument [Line Items]
Debt outstanding		$ 208,814,000	$ 202,565,000
Revolving Credit Facility
Debt Instrument [Line Items]
Debt outstanding		130,000,000	119,500,000
Maximum borrowing capacity in non-U.S. Dollar currencies		100,000,000
Maximum amount available for the issuance of letters of credit		20,000,000
Outstanding borrowings		203,100,000
Outstanding letters of credit		3,300,000
Capitalized costs associated with debt modifications		800,000
Revolving Credit Facility | Credit Agreement
Debt Instrument [Line Items]
Maximum borrowing capacity		150,000,000		$ 155,000,000
Capitalized unamortized debt issuance costs			100,000
Financing costs incurred			500,000
Third party debt issuance costs expensed			200,000
Revolving Credit Facility | Credit Agreement | Maximum
Debt Instrument [Line Items]
Total consolidated leverage ratio, if the company incurs certain subordinated debt and other indebtedness	450.00%
Senior debt to EBIDTA ratio	350.00%
Revolving Credit Facility | Credit Agreement | Minimum
Debt Instrument [Line Items]
Total consolidated leverage ratio, limit after investment in non-guarantor subsidiary	350.00%
Revolving Credit Facility | Credit Agreement | LIBOR | Maximum
Debt Instrument [Line Items]
Margin rate (as a percent)	1.00%
Revolving Credit Facility | Credit Agreement | LIBOR | Minimum
Debt Instrument [Line Items]
Margin rate (as a percent)	1.00%
Revolving Credit Facility | Credit Agreement | Quarter ending March 31, 2022 | Maximum
Debt Instrument [Line Items]
Total consolidated debt leverage ratio	4.0
Revolving Credit Facility | Credit Agreement | End of each quarter subsequent to March 31, 2022 | Maximum
Debt Instrument [Line Items]
Total consolidated debt leverage ratio	3.5
Revolving Credit Facility | Senior Secured Term Loan A Facility
Debt Instrument [Line Items]
Maximum borrowing capacity		100,000,000
Debt outstanding		72,949,000	76,673,000
Revolving Credit Facility | Senior Secured Term Loan A Facility | Quarter ending March 31, 2022
Debt Instrument [Line Items]
Debt periodic payments	$ 3,750,000
Revolving Credit Facility | Senior Secured Term Loan A Facility | End of each quarter subsequent to March 31, 2022
Debt Instrument [Line Items]
Debt periodic payments	$ 5,000,000
Other
Debt Instrument [Line Items]
Debt outstanding		5,865,000	$ 6,392,000
Other | Maximum
Debt Instrument [Line Items]
Debt periodic payments		$ 16,000
Interest rate		3.50%
Other | Minimum
Debt Instrument [Line Items]
Debt periodic payments		$ 400
Interest rate		0.40%

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Fair Value Measurements (Details) - Level 3 - Contingent Consideration - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Fair Value Liabilities Measured On Recurring Basis, Unobservable Input Reconciliation Calculation [Roll Forward]
Beginning balance	$ 1,831	$ 1,640
Acquisitions	0	0
Payments	(938)	(938)
Accretion of liability	0	0
Revaluation	45	243
Foreign currency translation	0	0
Ending balance	$ 938	$ 945

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Leases - Supplemental Balance Sheet Information (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Assets
ROU assets	$ 42,505	$ 42,451
Liabilities
ROU - current	10,278	10,040
ROU liability - long-term	33,719	34,030
Total ROU liabilities	$ 43,997	$ 44,070
Operating Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Other assets	Other assets
Operating Lease, Liability, Current, Statement of Financial Position [Extensible List]	Accounts Payable and Other Accrued Liabilities, Current	Accounts Payable and Other Accrued Liabilities, Current
Operating Lease, Liability, Noncurrent, Statement of Financial Position [Extensible List]	Other long-term liabilities	Other long-term liabilities

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Leases - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		7 Months Ended
	Mar. 31, 2022	Mar. 31, 2021	Dec. 31, 2020	Dec. 31, 2021
Lessee, Lease, Description [Line Items]
ROU liabilities	$ 43,997			$ 44,070
Total rent payments	3,163	$ 3,322
ROU finance lease assets	$ 13,400			$ 13,800
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]	Property, plant and equipment, net			Property, plant and equipment, net
Operating Lease Arrangement | Company's Headquarters
Lessee, Lease, Description [Line Items]
ROU liabilities	$ 2,400			$ 2,900
Total rent payments	$ 300	$ 500
Operating Lease Arrangement | Company's Headquarters | COVID-19
Lessee, Lease, Description [Line Items]
Percentage of reduction of rental payments			12.50%

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Leases - Components of Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Finance lease expense
Amortization of ROU assets	$ 1,012	$ 1,060
Interest on lease liabilities	158	192
Operating lease expense	3,198	3,302
Short-term lease expense	6	6
Variable lease expense	539	867
Total	$ 4,913	$ 5,427

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Leases - Additional Information Related to Leases (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Cash paid for amounts included in the measurement of lease liabilities for finance and operating leases
Finance - financing cash flows	$ 1,076	$ 1,069
Finance - operating cash flows	158	192
Operating - operating cash flows	3,163	3,322
ROU assets obtained in the exchange for lease liabilities
Finance leases	848	643
Operating leases	$ 2,772	$ 1,004
Weighted-average remaining lease term (in years)
Finance leases	5 years 3 months 18 days	5 years 7 months 6 days
Operating leases	5 years 2 months 12 days	5 years 7 months 6 days
Weighted-average discount rate
Finance leases	5.20%	5.50%
Operating leases	5.50%	5.70%

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Leases - Maturity of Lease Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2022	Dec. 31, 2021
Finance
Remainder of 2022	$ 4,515
2023	3,990
2024	3,062
2025	1,471
2026	823
Thereafter	482
Total	14,343
Less: Present value discount	1,016
Lease liability	13,327
Operating
Remainder of 2022	9,113
2023	11,252
2024	9,083
2025	6,763
2026	5,074
Thereafter	9,191
Total	50,476
Less: Present value discount	6,479
Lease liability	$ 43,997	$ 44,070

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Commitments and Contingencies (Details)			1 Months Ended		3 Months Ended			12 Months Ended
	Aug. 03, 2021	May 04, 2021 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($) weld	Mar. 31, 2022 USD ($) claim	Mar. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2021 USD ($) installment	Jan. 01, 2020 USD ($)
Litigation
Accounts receivable, net					$ 127,085,000				$ 109,511,000
Pension plan withdrawal, potential liability					$ 2,519,000				$ 2,519,000
Contingent consideration payment period based upon achievement of specific performance metrics					6 months
Texas Customer
Litigation
Accounts receivable, net				$ 1,400,000
Litigation and Commercial Claims | Various Pipeline Projects for Texas Customer
Litigation
Amount of damages claimed				$ 7,600,000
Litigation and Commercial Claims | Texas Customer
Litigation
Accounts receivable, net					$ 1,400,000
Number or welds not in compliance | weld				66
Number of welds inspected (over) | weld				16,000
Litigation and Commercial Claims | Texas Customer | Various Pipeline Projects for Texas Customer
Litigation
Amount of damages claimed				$ 1,400,000
Estimated severance obligations				$ 1,400,000
Class Action
Litigation
Number of proceedings | claim					2
Settlement liability		$ 2,300,000
Contingency charges						$ 1,600,000	$ 800,000
Class Action on Behalf of Employees
Litigation
Number of proceedings | claim					1
Class Action on Behalf of State of California
Litigation
Number of proceedings | claim					1
Pension Related Contingencies
Litigation
Pension plan withdrawal, potential liability					$ 2,500,000
Severance and Labor Disputes | Foreign Subsidiary | Brazil
Litigation
Settlement amount			$ 1,000,000
Number of settlement installments | installment									2
Percentage of settlement installments					0.69				0.31
Gain on settlement			$ 300,000		$ 600,000
Severance and Labor Disputes | Foreign Subsidiary | Right to Customer Contracts | Disposal Group, Disposed of by Sale, Not Discontinued Operations | Germany
Litigation
Contingency charges					100,000
Consideration received on sale of subsidiary										$ 100,000
Estimated severance obligations					200,000
Payments of severance obligations					400,000
Reversal of severance obligations					1,000,000
Acquisition and Disposition Related Contingencies | Certain Acquired Companies
Litigation
Potential acquisition-related contingent consideration, low end of range					0
Potential acquisition-related contingent consideration, high end of range					1,900,000
Acquisition and Disposition Related Contingencies | Foreign Subsidiaries | Products and Systems | Disposal Group, Disposed of by Sale, Not Discontinued Operations
Litigation
Term of agreement to purchase products from the buyer on sale of subsidiary								3 years
Amount of purchased commitment to buy products from the buyer on sale of subsidiary								$ 2,300,000
Long-term purchase commitment, extension period	12 months
Remaining balance under purchase commitment agreement					$ 900,000

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Segment Disclosure (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2022 USD ($) segment	Mar. 31, 2021 USD ($)	Dec. 31, 2021 USD ($)
Segment Reporting [Abstract]
Number of operating segments | segment	3
Financial information by segment
Revenue	$ 161,662	$ 153,735
Gross profit	39,892	40,001
Income (loss) from operations	(4,698)	(4,746)
Depreciation and amortization	8,807	8,565
Intangible assets, net	57,479		$ 59,381
Total assets	568,228		562,195
Operating segments | Services
Financial information by segment
Revenue	132,946	124,298
Gross profit	30,526	31,076
Income (loss) from operations	3,761	4,548
Depreciation and amortization	6,593	6,114
Intangible assets, net	50,476		51,862
Total assets	436,996		424,058
Operating segments | International
Financial information by segment
Revenue	28,138	27,648
Gross profit	8,190	7,625
Income (loss) from operations	284	(820)
Depreciation and amortization	2,058	2,210
Intangible assets, net	5,804		6,344
Total assets	108,733		111,619
Operating segments | Products and Systems
Financial information by segment
Revenue	2,936	2,988
Gross profit	1,168	1,281
Income (loss) from operations	(582)	(581)
Depreciation and amortization	218	228
Intangible assets, net	1,071		1,042
Total assets	10,534		10,532
Corporate and eliminations
Financial information by segment
Revenue	(2,358)	(1,199)
Gross profit	8	19
Income (loss) from operations	(8,161)	(7,893)
Depreciation and amortization	(62)	$ 13
Intangible assets, net	128		133
Total assets	$ 11,965		$ 15,986