Mistras Group Inc

Previous wording

The following Management’s Discussion and Analysis (“MD&A”) provides a discussion of our results of operations and financial position for the three and six months ended June 30, 2024 and 2023. The MD&A should be read together with our Unaudited Condensed Consolidated Financial Statements and related notes included in Item 1 in this Quarterly Report on Form 10-Q (the "Quarterly Report") and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023, (“2023 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:

Current wording

The following Management’s Discussion and Analysis (“MD&A”) provides a discussion of our results of operations and financial position for the three and nine months ended September 30, 2024 and 2023. The MD&A should be read together with our Unaudited Condensed Consolidated Financial Statements and related notes included in Item 1 in this Quarterly Report on Form 10-Q (the "Quarterly Report") and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023, (“2023 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:

Previous wording

Our cash position and liquidity remains strong. As of June 30, 2024, the cash balance was approximately $17.2 million, and with our Credit Agreement, provides us with significant liquidity.

Current wording

Our cash position and liquidity remains strong. As of September 30, 2024, the cash balance was approximately $20.4 million, and with our Credit Agreement, provides us with significant liquidity.

Previous wording

Condensed consolidated results of operations for the three and six months ended June 30, 2024 and 2023 were as follows:

Current wording

Condensed consolidated results of operations for the three and nine months ended September 30, 2024 and 2023 were as follows:

Previous wording

Revenue was $189.8 million for the three months ended June 30, 2024, an increase of $13.7 million, or 7.8%, compared with the three months ended June 30, 2023. Revenue for the six months ended June 30, 2024 was $374.2 million, an increase of $30.2 million, or 8.8%, compared with the six months ended June 30, 2023.

Current wording

Revenue was $182.7 million for the three months ended September 30, 2024, an increase of $3.3 million, or 1.9%, compared with the three months ended September 30, 2023. Revenue for the nine months ended September 30, 2024 was $556.9 million, an increase of $33.5 million, or 6.4%, compared with the nine months ended September 30, 2023.

Previous wording

Revenue by segment for the three and six months ended June 30, 2024 and 2023 was as follows:

Current wording

Revenue by segment for the three and nine months ended September 30, 2024 and 2023 was as follows:

Previous wording

In the three months ended June 30, 2024, total revenue increased 7.8% versus the prior year comparable period due predominantly to increased sales volume as compared to the prior period. North America segment revenue increased 7.5% due to an increase in sales volume in our aerospace and defense and power generation & transmission end markets, amongst others. International segment revenue increased 13.2%, due predominantly to increased turnaround projects and low double digit aerospace and defense growth. Products and Systems segment revenue increased 1.3%, due to increased sales volume as compared to the prior period.

Current wording

In the three months ended September 30, 2024, total revenue increased 1.9% versus the prior year comparable period due to increased sales volume and price increases as compared to the prior period. North America segment revenue increased 0.7% due to an increase in sales volume in our aerospace and defense, industrials and power generation & transmission end markets, amongst others. International segment revenue increased 8.7%, due predominantly to growth in our other process industries and power generation and transmission end markets. Products and Systems segment revenue increased 15.8%, due to increased sales volume as compared to the prior period.

Previous wording

Oil and gas customer revenue comprised approximately 58% and 60% of total revenue for the three months ended June 30, 2024 and 2023, respectively. Aerospace and defense customer revenue comprised approximately 12% and 11% of total revenue for the three months ended June 30, 2024 and 2023, respectively. The Company’s top ten customers comprised approximately 35% of total revenue for the three months ended June 30, 2024, as compared to 36% for the three months ended June 30, 2023, with no customer accounting for 10% or more of total revenue in either three-month period.

Current wording

Oil and gas customer revenue comprised approximately 54% and 58% of total revenue for the three months ended September 30, 2024 and 2023, respectively. Aerospace and defense customer revenue comprised approximately 12% and 11% of total revenue for the three months ended September 30, 2024 and 2023, respectively. The Company’s top ten customers comprised approximately 35% of total revenue for the three months ended September 30, 2024, as compared to 36% for the three months ended September 30, 2023, with no customer accounting for 10% or more of total revenue in either three-month period.

Previous wording

In the six months ended June 30, 2024, total revenue increased 8.8% versus the comparable prior period. The increase was due predominantly to increased sales volume as compared to the prior period. Our North America segment revenue increased 8.6% due primarily to increased sales volume in our oil and gas and aerospace and defense end markets. International segment revenue increased 12.8% due to low double-digit organic growth and low single-digit favorable revenue impact from foreign exchange rates. Products and Systems segment revenue decreased 6.9% due to decreased sales volumes within the majority of end markets, as compared to the prior period.

Current wording

In the nine months ended September 30, 2024, total revenue increased 6.4% versus the comparable prior period. The increase was due predominantly to increased sales volume as compared to the prior period. Our North America segment revenue increased 5.9% due primarily to increased sales volume in our oil and gas and aerospace and defense end markets. International segment revenue increased 11.4% due mainly to increased turnaround activity in oil and gas end market and increased sales volume in our aerospace and defense end market. Products and Systems segment revenue decreased 0.4% due to decreased sales volumes most notably within the power generation and transmission end market, amongst others, as compared to the prior period.

Previous wording

Oil and gas customer revenue comprised approximately 59% and 60% of total revenue for the six months ended June 30, 2024 and 2023, respectively. Aerospace and defense customer revenue comprised approximately 12% and 11% of total revenue for the six months ended June 30, 2024 and 2023, respectively. The Company’s top ten customers comprised approximately 35% of total revenue for the six months ended June 30, 2024, as compared to 35% for the six months ended June 30, 2023, with no customer accounting for 10% or more of total revenue in either nine-month period.

Current wording

Oil and gas customer revenue comprised approximately 58% and 59% of total revenue for the nine months ended September 30, 2024 and 2023, respectively. Aerospace and defense customer revenue comprised approximately 12% and 11% of total revenue for the nine months ended September 30, 2024 and 2023, respectively. The Company’s top ten customers comprised approximately 36% of total revenue for the nine months ended September 30, 2024, as compared to 35% for the nine months ended September 30, 2023, with no customer accounting for 10% or more of total revenue in either nine-month period.

Previous wording

Oil and gas upstream customer revenue increased approximately $5.2 million, or 7%, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, and $0.4 million, or 1%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, due to increased exploration operations and market share gains compared to the prior period.

Current wording

Oil and gas upstream customer revenue increased approximately $11.0 million, or 9.4%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, and $5.8 million, or 15.2%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, due to increased exploration operations and market share gains compared to the prior period.

Previous wording

Midstream customer revenues decreased approximately $1.8 million, or 4%, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, and $2.0 million, or 7%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, due to decreased pipe inspection services as compared to the prior period.

Current wording

Midstream customer revenues decreased approximately $6.5 million, or (8.7)%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, and $4.7 million, or (17.8)%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, due to primarily to decreased pipe inspection services as compared to the prior period.

Previous wording

Downstream customer revenue increased $14.3 million, or 18%, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, and $4.7 million, or 13%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, due to increased sales volume at customer refineries and increased customer turnarounds.

Current wording

Downstream customer revenue increased $9.4 million, or 8.1%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, and $(4.9) million, or (12.5)%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, due to increased sales volume at customer refineries and increased customer turnarounds.

Previous wording

Field Services revenues are comprised of revenue derived primarily by technicians performing asset inspections and maintenance services for our customers at locations other than Mistras properties. Field Services revenue increased by $35.1 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, and increased $18.4 million, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The increase in both periods was due to increased sales volume in our oil and gas end market in our North America and International segments.

Current wording

Field Services revenues are comprised of revenue derived primarily by technicians performing asset inspections and maintenance services for our customers at locations other than Mistras properties. Field Services revenue increased by $39.6 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, and increased $4.5 million, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase in both periods was due to increased sales volume in our power generation and transmission end market in our North America and International segments.

Previous wording

Shop Laboratory revenues are comprised of quality assurance inspections of components and materials at our Mistras in house laboratory facilities. Shop Laboratory revenues increased by $6.8 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, and increased $2.7 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Shop Laboratory revenues increased in both periods as compared to the prior year periods due to increased sales volume related to our aerospace and defense end market.

Current wording

Shop Laboratories revenues are comprised of quality assurance inspections of components and materials at our Mistras in house laboratory facilities. Shop Laboratories revenues increased by $6.9 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, and increased $0.2 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. Shop Laboratories revenues increased in both periods as compared to the prior year periods due to increased sales volume related to our aerospace and defense end market.

Previous wording

Data Analytical Solutions revenues are comprised of revenue derived from data software sales & subscriptions, implementation services and analytics that offer insights and recommendations to improve asset integrity. Data Analytical Solutions revenue is derived from work performed by Mistras employees in our facilities, or at customer locations, using our proprietary portfolio of software applications. Data Analytical Solutions revenue decreased by $1.0 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, and increased $0.2 million, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 due primarily to decreased sales volume within PCMS, Onstream and other Data Analytical Solutions offerings within our North America segment for the three months ended June 30, 2024 and decreased sales volume for the same offerings for the six months ended June 30, 2024.

Current wording

Data Analytical Solutions revenues are comprised of revenue derived from data software sales & subscriptions, implementation services and analytics that offer insights and recommendations to improve asset integrity. Data Analytical Solutions revenue is derived from work performed by Mistras employees in our facilities, or at customer locations, using our proprietary portfolio of software applications. Data Analytical Solutions revenue decreased by $1.2 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, and decreased $0.1 million, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 due primarily to decreased sales volume within PCMS, Onstream and other Data Analytical Solutions offerings within our North America segment for the three months ended September 30, 2024 and decreased sales volume for the same offerings for the nine months ended September 30, 2024.

Previous wording

Other revenues are comprised of locations that perform both asset inspection services and testing of components and materials at in house Mistras laboratories. Other revenues decreased by $10.6 million for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, and decreased $7.6 million, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Other revenues decreased in both periods primarily due to decreased sales in our other end markets within the North America and International segments.

Current wording

Other revenues are comprised of locations that perform both asset inspection services and testing of components and materials at in house Mistras laboratories. Other revenues decreased by $11.9 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, and decreased $1.2 million, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. Other revenues decreased in both periods primarily due to decreased sales in our other end markets within the North America and International segments.

Previous wording

Gross profit increased by $6.4 million, or 12.9%, in the three months ended June 30, 2024 versus the prior year comparable period, on an increase in revenue of 7.8%.

Current wording

Gross profit increased by $0.2 million, or 0.4%, in the three months ended September 30, 2024 versus the prior year comparable period, on an increase in revenue of 1.9%.

Previous wording

Gross profit increased by $11.4 million, or 11.9%, in the six months ended June 30, 2024 on an increase in revenue of 8.8%.

Current wording

Gross profit increased by $11.6 million, or 7.7%, in the nine months ended September 30, 2024 on an increase in revenue of 6.4%.

Previous wording

Gross profit by segment for the three and six months ended June 30, 2024 and 2023 was as follows:

Current wording

Gross profit by segment for the three and nine months ended September 30, 2024 and 2023 was as follows:

Previous wording

Gross profit margin was 29.6% and 28.2% for the three-month periods ended June 30, 2024 and 2023, respectively. North America segment realized an increase of 1.0% in gross profit margin to 28.3% during the three months ended June 30, 2024. This was primarily due to improved operating leverage, lower healthcare claims expense and growth in our higher margin end markets, as compared to the prior year period. International segment realized an increase of 1.7% in gross profit margin to 29.4% during the three months ended June 30, 2024, due primarily to improved operating leverage and the implementation of strategic price increases. Products and Systems segment realized an increase of 1.5% in gross profit margin to 50.1% during the three months ended June 30, 2023 due to favorable sales mix.

Current wording

Gross profit margin was 29.9% and 30.3% for the three-month periods ended September 30, 2024 and 2023, respectively. North America segment realized a decrease of (1.7)% in gross profit margin to 28.4% during the three months ended September 30, 2024. This was primarily due to higher healthcare claims expense which was offset by growth in our higher margin end markets, as compared to the prior year period. International segment realized an increase of 2.7% in gross profit margin to 30.1% during the three months ended September 30, 2024, due primarily to improved operating leverage and the implementation of strategic price increases. Products and Systems segment realized an increase of 20.3% in gross profit margin to 59.0% during the three months ended September 30, 2024 due to favorable sales mix.

Previous wording

Gross profit margin was 28.6% and 27.8% for the six months ended June 30, 2024 and 2023, respectively. North America segment gross profit increased 0.5% to 27.5% due to favorable sales mix and lower healthcare claims for the six months ended June 30, 2024, as compared to the prior year period. International segment gross profit increased 2.6% to 29.0% due to lower inflationary costs and the implementation of strategic price increases during the six months ended June 30, 2024, as compared to the prior year period. Products and Systems segment gross profit decreased 1.9% during the six months ended June 30, 2024, as compared to the prior year period, due to unfavorable sales mix.

Current wording

Gross profit margin was 29.1% and 28.7% for the nine months ended September 30, 2024 and 2023, respectively. North America segment gross profit margin decreased 0.3% to 27.8% due to unfavorable sales mix and higher healthcare claims for the nine months ended September 30, 2024, as compared to the prior year period. International segment gross profit margin increased 2.7% to 29.4% due to lower inflationary costs and the implementation of strategic price increases during the nine months ended September 30, 2024, as compared to the prior year period. Products and Systems segment gross profit margin increased 4.9% during the nine months ended September 30, 2024, as compared to the prior year period, due to unfavorable sales mix.

Previous wording

Operating expenses for the three and six months ended June 30, 2024 and 2023 was as follows:

Current wording

Operating expenses for the three and nine months ended September 30, 2024 and 2023 was as follows:

Previous wording

Total operating expenses decreased $1.7 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, due predominantly to reductions occurring in the prior year period. Selling, general and administrative expenses decreased $0.5 million during the three months ended June 30, 2024 compared to the three months ended June 30, 2023, due predominantly to reductions occurring in the prior year period. Depreciation and amortization was flat during the three months ended June 30, 2024 compared to the three months ended June 30, 2023. During the three months ended June 30, 2024, $0.5 million of reorganization and other related costs were incurred, which were a result of the Company's on-going efficiency and productivity initiatives.

Current wording

Total operating expenses decreased $16.3 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, due predominantly to a goodwill impairment occurring in the prior year period. Selling, general and administrative expenses decreased $0.7 million during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, due predominantly to reductions occurring in the prior year period. Depreciation and amortization decreased $0.3 million during the three months ended September 30, 2024 compared to the three months ended September 30, 2023. During the three months ended September 30, 2024, $2.1 million of reorganization and other related costs were incurred, which were a result of the Company's on-going efficiency and productivity initiatives.

Previous wording

Operating expenses decreased $4.0 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 due predominantly to reductions occurring in the prior year period. Selling, general, and administrative expenses decreased $2.2 million during the six months ended June 30, 2024 compared to the six months ended June 30, 2023, due primarily to reductions occurring in the prior year period and favorable foreign currency exchange. Reorganization and other costs for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 decreased $1.2 million due to reduced professional fees and restructuring charges associated with changes in the Company's organizational structure. Depreciation and amortization decreased $0.1 million during the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Current wording

Operating expenses decreased $20.4 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 due predominantly to reductions occurring in the prior year period. Selling, general, and administrative expenses decreased $2.8 million during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, due primarily to reductions occurring in the prior year period. Reorganization and other costs for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 decreased $1.8 million due to reduced professional fees and restructuring charges associated with changes in the Company's organizational structure. Depreciation and amortization decreased $0.4 million during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.

Previous wording

For the three months ended June 30, 2024, income from operations (GAAP) increased $8.1 million compared to the three months ended June 30, 2023, while income from operations before special items (non-GAAP) increased $7.3 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. As a percentage of revenue, income from operations before special items increased by 360 basis points to 6.6% in the three months ended June 30, 2024 from 3.0% in the three months ended June 30, 2023.

Current wording

For the three months ended September 30, 2024, income from operations (GAAP) increased $16.5 million compared to the three months ended September 30, 2023, while income from operations before special items (non-GAAP) increased $1.3 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. As a percentage of revenue, income from operations before special items increased by 60 basis points to 7.2% in the three months ended September 30, 2024 from 6.6% in the three months ended September 30, 2023.

Previous wording

For the six months ended June 30, 2024, income from operations (GAAP) increased $15.4 million, compared to the six months ended June 30, 2023, while income from operations before special items (non-GAAP) increased $14.1 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. As a percentage of revenue, income from operations before special items increased by 370 basis points to 5.3% in the six months ended June 30, 2024 from 1.6% in the six months ended June 30, 2023. During the six months ended June 30, 2024, the Company experienced overall organic growth as well as decreased reorganization costs.

Current wording

For the nine months ended September 30, 2024, income from operations (GAAP) increased $32.0 million, compared to the nine months ended September 30, 2023, while income from operations before special items (non-GAAP) increased $15.4 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. As a percentage of revenue, income from operations before special items increased by 260 basis points to 5.9% in the nine months ended September 30, 2024 from 3.3% in the nine months ended September 30, 2023. During the nine months ended September 30, 2024, the Company experienced overall organic growth as well as decreased reorganization costs.

Previous wording

Interest expense was approximately $4.4 million and $3.9 million for the three months ended June 30, 2024 and 2023, respectively. Interest expense was approximately $8.8 million and $7.9 million for the six months ended June 30, 2024 and 2023, respectively. The increase in the three months ended June 30, 2024 was due to an increase in interest rates compared to the prior year period. The increase in interest expense for the six months ended June 30, 2024 compared to the prior year period was due to an increase in the interest rates.

Current wording

Interest expense was approximately $4.3 million and $4.2 million for the three months ended September 30, 2024 and 2023, respectively. Interest expense was approximately $13.1 million and $12.1 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in interest expense for the three and nine months ended September 30, 2024 compared to the prior year period was due to an increase in the interest rates.

Previous wording

Our effective income tax rate was approximately 15.5% and (974.3)% for the three months ended June 30, 2024 and 2023, respectively. Our effective income tax rate was approximately 14.9% and 21.5% for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Our effective income tax rate was approximately 29.0% and (16.8)% for the three months ended September 30, 2024 and 2023, respectively. Our effective income tax rate was approximately 22.1% and (1.6)% for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

The effective income tax rate for the three months ended June 30, 2024 was lower than the statutory rate primarily due to the impact of a favorable discrete item such as the reversal of valuation allowances. The effective income tax rate for the six months ended June 30, 2023 was higher than the statutory rate due primarily to a $0.7 million valuation allowance recorded during the period which was related to a foreign jurisdiction.

Current wording

The effective income tax rate for the three months ended September 30, 2024 was higher than the statutory rate primarily due to the impact of permanent items in the period. The effective income tax rate for the three months ended September 30, 2023 was lower than the statutory rate due to the impact of permanent tax adjustments related to executive compensation and goodwill impairments.

Previous wording

The effective income tax rate for the six months ended June 30, 2024 was lower than the statutory rate due primarily to items such as the reversal of valuation allowances. The effective income tax rate for the six months ended June 30, 2023 was lower than the statutory rate due primarily to an unfavorable discrete item related to stock compensation.

Current wording

The effective income tax rate for the nine months ended September 30, 2024 was higher than the statutory rate due primarily to the impact of permanent items. The effective income tax rate for the nine months ended September 30, 2023 was lower than the statutory rate due primarily to an unfavorable discrete item related to stock compensation.

Previous wording

During the six months ended June 30, 2024, net cash provided by operating activities was $5.1 million, representing a year-on-year decrease of $13.2 million, or 72%. The decrease was primarily related to increased working capital in the current period.

Current wording

During the nine months ended September 30, 2024, net cash provided by operating activities was $24.5 million, representing a year-on-year increase of $13.8 million, or 129%. The increase was primarily related to reduced net working capital, as well as improved operating results, in the current period.

Previous wording

During the six months ended June 30, 2024, net cash used in investing activities was $11.2 million, compared to $9.8 million net cash used in investing activities for the six months ended June 30, 2023. The change was primarily attributable to capital expenditures related to property, plant and equipment during the current period as compared to the prior period.

Current wording

During the nine months ended September 30, 2024, net cash used in investing activities was $17.2 million, compared to $15.2 million net cash used in investing activities for the nine months ended September 30, 2023. The change was primarily attributable to purchase of intangible assets during the current period as compared to the prior period.

Previous wording

Net cash provided in financing activities was $5.3 million for the six months ended June 30, 2024, compared to net cash used in financing activities of $11.2 million for the six months ended June 30, 2023. This was a result of higher net repayments of debt of $16.8 million during the six months ended June 30, 2024, as compared to the prior year period.

Current wording

Net cash used in financing activities was $6.2 million for the nine months ended September 30, 2024, compared to net cash used in financing activities of $1.8 million for the nine months ended September 30, 2023. This was a result of higher net repayments of debt of $3.7 million during the nine months ended September 30, 2024, as compared to the prior year period.

Previous wording

The effect of exchange rate changes on our cash and cash equivalents was an increase of $0.4 million in the six months ended June 30, 2024, compared to an increase of $0.2 million for the six months ended June 30, 2023. The primary driver of the change was foreign currency fluctuations related to the Euro and the US Dollar.

Current wording

The effect of exchange rate changes on our cash and cash equivalents was an increase of $1.6 million in the nine months ended September 30, 2024, compared to a decrease of $1.4 million for the nine months ended September 30, 2023. The primary driver of the change was foreign currency fluctuations related to the Euro and the US Dollar.

Previous wording

As of June 30, 2024, we had cash and cash equivalents totaling $17.2 million and $102.5 million of unused commitments under our Credit Agreement with borrowings of $196.6 million and $3.2 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.

Current wording

As of September 30, 2024, we had cash and cash equivalents totaling $20.4 million and $109.9 million of unused commitments under our Credit Agreement with borrowings of $186.8 million and $3.1 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.

Previous wording

During the six months ended June 30, 2024, 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.

Current wording

During the nine months ended September 30, 2024, 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.