Mistras Group, Inc. Reports Quarterly Results for the Period Ended March 31, 2025

Mistras Group, Inc. Navigates Challenging Economic Conditions in Q1 2025

Mistras Group, Inc., a leading provider of asset protection solutions, has released its financial results for the first quarter of 2025. The report provides insights into the company’s performance amidst ongoing macroeconomic challenges.

Overview of Financial Performance

For the three months ended March 31, 2025, Mistras Group reported revenue of $161.6 million, a decrease of 12.4% compared to the same period in 2024. This decline was driven primarily by a high single-digit organic decrease, particularly in the company’s North America segment.

The North America segment, which accounts for the largest portion of Mistras’ business, saw revenue decrease by 14.3% due to a drop in demand from oil and gas customers as well as other key markets. The International segment, on the other hand, reported a 0.5% increase in revenue, driven by low double-digit organic growth and a favorable impact from foreign exchange rates. The Products and Systems segment experienced a 3.7% decrease in revenue due to lower sales volume and shipments.

Despite the revenue decline, Mistras maintained a relatively stable gross profit margin of 25.3% in Q1 2025, compared to 25.0% in the prior-year period. This was achieved through a favorable sales mix and lower healthcare claims expenses, which offset the impact of the revenue decrease.

Operational Highlights and Challenges

Mistras’ core business operations continue to be impacted by various macroeconomic factors, including ongoing inflationary pressures and increased costs due to tariffs and trade barriers. The company’s European operations, in particular, have experienced higher energy costs due to the ongoing conflict between Russia and Ukraine and the tensions in the Middle East.

The company’s oil and gas customers, which accounted for approximately 60% of total revenue in Q1 2025, have reduced their spending, leading to decreases in Mistras’ upstream, midstream, and downstream revenue streams. The aerospace and defense sector, which represented around 13% of total revenue, has also seen some softening in demand.

To address these challenges, Mistras has focused on cost discipline and the calibration of its overhead costs relative to the revenue achieved. The company has also continued to invest in its proprietary, technology-enabled software and testing instruments, including the OneSuite platform, which serves as an integrated ecosystem for its customers’ data activities.

Segment Performance

North America Segment The North America segment, which is the largest contributor to Mistras’ revenue, reported a 14.3% decrease in revenue compared to the prior-year period. This decline was primarily driven by a drop in the oil and gas market, as well as decreased demand in other key markets due to macroeconomic factors.

Despite the revenue decrease, the North America segment’s gross profit margin remained flat at 23.4% in Q1 2025. The segment’s income from operations before special items (a non-GAAP measure) decreased by 41.9% to $7.9 million, reflecting the impact of the revenue decline.

International Segment The International segment reported a 0.5% increase in revenue, driven by low double-digit organic growth and a favorable impact from foreign exchange rates. However, the segment’s gross profit margin declined by 0.6 percentage points to 27.4% due to an unfavorable sales mix and increased energy costs.

The International segment’s income from operations before special items (non-GAAP) increased slightly to $1.3 million, up from $1.2 million in the prior-year period.

Products and Systems Segment The Products and Systems segment, which designs, manufactures, and services Mistras’ asset protection products and systems, experienced a 3.7% decrease in revenue compared to the prior-year period. This was due to lower sales volume and shipments.

Despite the revenue decline, the segment’s gross profit margin improved by 2.3 percentage points to 52.5%, and its income from operations before special items (non-GAAP) increased to $0.5 million, up from $0.3 million in the prior-year period.

Liquidity and Capital Resources

Mistras maintains a strong cash position and liquidity, with a cash balance of approximately $18.5 million as of March 31, 2025. The company also has access to $114.0 million in unused commitments under its Credit Agreement, providing significant financial flexibility.

During the first quarter of 2025, Mistras generated $5.6 million in cash from operating activities, representing a significant increase compared to the prior-year period. This was primarily attributable to a decrease in days sales outstanding and favorable movements in working capital.

The company used $5.4 million in investing activities, primarily for capital expenditures, which was a decrease of $0.2 million compared to the prior-year period. In financing activities, Mistras used $0.7 million, a decrease from the $5.1 million provided in the prior-year period, due to lower net borrowings of debt.

Mistras remains in compliance with the covenants of its Credit Agreement and continues to monitor its compliance closely.

Outlook and Future Considerations

The company is currently unable to predict the full impact of ongoing inflationary pressures and increased costs due to tariffs and trade barriers on its business, results of operations, or liquidity. Mistras will continue to monitor market conditions and respond accordingly.

Despite the challenges, the company believes that long-term growth opportunities exist in its target markets, which include the oil and gas, aerospace and defense, industrials, power generation and transmission, and other process industries and infrastructure sectors.

Mistras has made several key leadership changes to support its management succession planning. Natalia Shuman was appointed as the company’s President and Chief Executive Officer, effective January 1, 2025, while Manny Stamatakis continues as the Executive Chairman. Additionally, Hani Hammad was appointed as the Executive Vice President and Chief Operating Officer, effective the same date.

The passing of Dr. Sotirios J. Vahaviolos, Mistras’ founder and Chairman Emeritus, was also announced during the quarter.

Conclusion

Mistras Group navigated a challenging macroeconomic environment in the first quarter of 2025, with revenue declining due to softening demand in key markets. However, the company maintained a relatively stable gross profit margin and continued to focus on cost discipline and the development of its technology-enabled solutions.

While the company faces ongoing uncertainties related to inflationary pressures and trade barriers, Mistras remains committed to supporting its customers’ asset protection needs and leveraging its innovative portfolio of services and products. The company’s strong liquidity position and leadership changes position it to navigate the current challenges and pursue long-term growth opportunities in its target markets.