Mistras Group, Inc. (MG) Annual Report (Form 10-K) for the fiscal year ended December 31, 2024
Mistras Group, Inc. (MG) filed its annual report on Form 10-K for the fiscal year ended December 31, 2024. The company reported total revenue of $1.23 billion, a 10% increase from the prior year. Net income was $43.1 million, or $1.38 per diluted share, compared to net income of $34.5 million, or $1.12 per diluted share, in the prior year. The company’s gross profit margin was 34.5%, and its operating margin was 12.1%. Mistras Group’s cash and cash equivalents increased to $143.8 million, and its debt decreased to $175.5 million. The company’s stock price closed at $8.17 on June 28, 2024, and as of March 6, 2025, there were 31,032,045 shares of common stock outstanding.
Financial Performance Overview
Mistras Group Inc. is a leading provider of asset protection solutions, offering a range of non-destructive testing (NDT), inspection, and engineering services to customers in various industries. The company operates through three reportable segments: North America, International, and Products and Systems.
In 2024, Mistras Group reported revenue of $729.6 million, an increase of 3.4% compared to the previous year. This growth was driven primarily by the North America segment, which saw a 2.5% increase in revenue, and the International segment, which grew 9.3%. The Products and Systems segment also contributed to the overall revenue increase, growing 5.2%.
Gross profit for the year was $213.1 million, up 4.6% from 2023. Gross profit margin improved to 29.2% from 28.9% in the prior year, due to favorable sales mix across the segments. The North America segment saw a slight decrease in gross margin, while the International and Products and Systems segments experienced improvements.
Operating expenses decreased 15.8% to $173.3 million, primarily due to a reduction in goodwill impairment charges and reorganization costs compared to the previous year. Selling, general, and administrative expenses also declined by 6.2%.
As a result of these factors, Mistras Group reported income from operations of $39.8 million, a significant improvement from the $1.9 million loss in 2023. Income before special items (a non-GAAP measure) increased 83.1% to $46.2 million.
The company’s effective tax rate for the year was 21.8%, up from 6.5% in 2023, primarily due to the impact of the prior year’s goodwill impairment and the release of a valuation allowance.
Segment Performance
North America Segment The North America segment, which is the company’s largest, reported revenue of $593.5 million, up 2.5% from the previous year. This increase was driven by single-digit organic growth in certain end markets. Gross profit margin for the segment declined slightly to 27.9% from 28.3% in 2023, due to unfavorable sales mix.
International Segment The International segment generated revenue of $136.0 million, an increase of 9.3% compared to 2023. This was due to a low single-digit favorable impact of foreign exchange rates and high single-digit organic growth. Gross profit margin for the International segment improved to 29.3% from 27.0% in the prior year, primarily due to decreased inflationary pressures.
Products and Systems Segment The Products and Systems segment reported revenue of $13.7 million, up 5.2% from the previous year, driven by higher sales volume. Gross profit margin for this segment increased significantly to 55.1% from 49.7% in 2023, reflecting a favorable sales mix.
Revenue Trends
Mistras Group’s revenue is heavily dependent on the oil and gas industry, which accounted for approximately 57% of total revenue in 2024, down from 59% in 2023. The company also serves the aerospace and defense industry, which contributed around 12% of revenue in 2024, up from 11% the previous year.
Within the oil and gas segment, revenue from upstream customers increased 6% in 2024, while midstream revenue declined 12% and downstream revenue grew 4%. The increase in upstream revenue was due to continued market share gains and expanded exploration operations, while the decrease in midstream revenue was attributed to lower pipe inspection services. The growth in downstream revenue was driven by increased sales volume at customer refineries and higher customer turnarounds.
Strengths and Weaknesses
Strengths
- Diversified service offerings and end markets, with a focus on critical infrastructure industries
- Established long-term customer relationships as a trusted solutions provider
- Proprietary technology-enabled software and testing instruments
- Successful integration of acquired companies to expand capabilities and customer base
Weaknesses
- Significant exposure to the cyclical oil and gas industry, which accounts for a majority of revenue
- Potential long-term impact of climate change initiatives and legislation on the oil and gas market
- Ongoing disruptions and increased costs due to geopolitical conflicts and inflationary pressures
Outlook and Risks
Mistras Group believes that long-term growth opportunities exist in its target markets, but the company’s financial results are impacted by global macroeconomic and industry-specific conditions, including oil price fluctuations.
The company continues to monitor the ongoing conflicts in the Middle East, which caused disruptions in its European operations in 2023 due to increased energy and other costs. These disruptions have largely subsided in 2024, but Mistras Group will continue to closely monitor market conditions and respond accordingly.
The Biden Administration’s initiatives to address climate change, including potential plans to reduce the use of fossil fuels, may negatively impact Mistras Group’s customers in the oil and gas market over the long term. However, these measures could also benefit the alternative energy market, where the company provides products and services.
Mistras Group’s cash position and liquidity remain strong, with $18.3 million in cash and cash equivalents as of December 31, 2024, and significant available borrowing capacity under its Credit Agreement. The company will continue to use a disciplined approach to capital spending and pursue growth opportunities, while also monitoring the impact of inflationary pressures and geopolitical events on its business.
Conclusion
Mistras Group delivered improved financial performance in 2024, with revenue growth, margin expansion, and a significant increase in profitability. The company’s diversified service offerings, long-term customer relationships, and successful integration of acquisitions have been key strengths. However, the company’s heavy reliance on the cyclical oil and gas industry and the potential long-term impact of climate change initiatives remain areas of concern.
Mistras Group’s management team is actively monitoring the evolving market conditions, including the ongoing geopolitical conflicts and inflationary pressures, and is prepared to respond accordingly. The company’s strong liquidity position and disciplined approach to capital allocation should help it navigate the challenges and capitalize on growth opportunities in its target markets.
