Mistras Group Inc

Previous wording

We are currently unable to predict with certainty the effects that inflationary pressures and the Russian-Ukrainian war may have on our business, results of operations or liquidity or in other ways which we cannot yet determine. To date, our European operations have experienced increased costs associated with higher energy costs, among others, due in part to the on-going war between Russia & Ukraine. We will continue to monitor market conditions and respond accordingly.

Current wording

We are currently unable to predict with certainty the effects that inflationary pressures and the ongoing war between Russia and Ukraine war may have on our business, results of operations or liquidity or in other ways which we cannot yet determine. Our European operations have experienced increased costs associated with higher energy costs during 2023, among others, due in part to the on-going war between Russia and Ukraine. We may also experience increased costs associated with tariffs or trade barriers (including recent U.S. tariffs imposed or threatened to be imposed on China, Canada, Mexico and other countries and any retaliatory actions taken by such countries). We will continue to monitor market conditions and respond accordingly.

Previous wording

Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, strong commitment to Environmental, Social, and Governance ("ESG") initiatives, and a decades-long legacy of industry leadership, MISTRAS leads customers in the oil and gas, petrochemical, aerospace and defense, renewable and nonrenewable power, civil infrastructure, and manufacturing industries towards achieving operational and environmental excellence. By supporting these customers that help fuel our vehicles and power our society; inspecting components that are trusted for commercial, defense, and space craft; building real-time monitoring equipment to enable safe travel across bridges; and helping to propel sustainability, MISTRAS helps the world at large.

Current wording

Backed by an innovative, data-driven asset protection portfolio, proprietary technologies, strong commitment to Environmental, Social, and Governance ("ESG") initiatives, and a decades-long legacy of industry leadership, the Company helps customers with asset-intensive infrastructure in the oil and gas, petrochemical, aerospace and defense, renewable and nonrenewable power, civil infrastructure, and manufacturing industries towards achieving operational and environmental excellence. By supporting these customers that help fuel our vehicles and power our society; inspecting components that are trusted for commercial, defense, and space craft; building real-time monitoring equipment to enable safe travel across bridges; and helping to propel sustainability, the Company helps the world at large.

Previous wording

We have continued providing our customers with an innovative asset protection software ecosystem through our MISTRAS OneSuite platform. The software platform offers functions of MISTRAS' software and services brands as integrated apps on a cloud environment. OneSuite serves as a single access portal for customers' data activities and provides access to 90 plus applications being offered on one centralized platform.

Current wording

We have continued providing our customers with an innovative asset protection software ecosystem through our OneSuite platform. The software platform offers functions of our software and services brands as integrated apps on a cloud environment. OneSuite serves as a single access portal for customers' data activities and provides access to 90 plus applications being offered on one centralized platform.

Previous wording

Our cash position and liquidity remain strong. As of December 31, 2023, our cash and cash equivalents balance was approximately $17.6 million and our Credit Agreement provides us with significant liquidity.

Current wording

Our cash position and liquidity remain strong. As of December 31, 2024, our cash and cash equivalents balance was approximately $18.3 million and our Credit Agreement provides us with significant liquidity.

Previous wording

The Company is currently unable to predict with certainty the overall impact that the factors discussed above and the effect of inflationary pressures may have on its business, results of operations or liquidity or in other ways which the Company cannot yet determine. During the third quarter of 2023, a triggering event was identified within the Company's reporting units within the International segment due to decreased gross margin in the current period as a result of inflationary pressures and rising energy costs. This resulted in goodwill impairment charges of $13.8 million within the International reporting units during the third quarter of 2023. The Company will continue to monitor market conditions and respond accordingly. Refer to Item 1A. Risk Factors in Part I of our 2023 Annual Report.

Current wording

The Company is currently unable to predict with certainty the overall impact that the factors discussed above and the effect of continuing inflationary pressures or increased costs due to tariffs and trade barriers may have on its business, results of operations or liquidity or in other ways which the Company cannot yet determine. The Company's European operations are currently experiencing higher energy costs, among other increased costs, due in part to the on-going war between Russia and Ukraine and the conflict in the Middle East between Israel and Hamas. The Company will continue to monitor market conditions and respond accordingly. Refer to Item 1A. Risk Factors in Part I of our 2024 Annual Report.

Previous wording

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) from operations 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 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. Any measure that eliminates the foregoing items has material limitations as a performance or liquidity measure and should not be considered alternatives to net income (loss) or any other measures derived in accordance with GAAP. Because Income (loss) from operations before special items may not be calculated in the same manner by all companies, this measure may not be comparable to other similarly titled measures used by other companies.

Current wording

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) from operations before special items” is used for each of our three operating segments, the "Corporate" segment and for the "Total Company", with tables reconciling the "Income (loss) from operations before special items" to "Income (loss) from operations", which is 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 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. Any measure that eliminates the foregoing items has material limitations as a performance or liquidity measure and should not be considered alternatives to net income (loss) or any other measures derived in accordance with GAAP. Because Income (loss) from operations before special items may not be calculated in the same manner by all companies, this measure may not be comparable to other similarly titled measures used by other companies.

Previous wording

Revenues by segment for the years ended December 31, 2023 and 2022 were as follows:

Current wording

Revenue by segment for the years ended December 31, 2024 and 2023 were as follows:

Previous wording

Revenue was $705.5 million for the year ended December 31, 2023, an increase of $18.1 million, or 2.6%, compared with the year ended December 31, 2022. The increase was driven by the North America segment, which experienced a revenue increase of $6.0 million, or 1.0%, driven by single-digit organic growth in certain end markets. The International segment revenues increased by $12.0 million, or 10.7%, due predominantly to low single-digit favorable impact of foreign exchange rates and by mid single-digit organic growth. The Products and Systems segment increased by $0.3 million, or 2.0%, driven by higher sales volume.

Current wording

Revenue was $729.6 million for the year ended December 31, 2024, an increase of $24.2 million, or 3.4%, compared with the year ended December 31, 2023. The increase was driven by the North America segment, which experienced a revenue increase of $14.2 million, or 2.5%, driven by single-digit organic growth in certain end markets. The International segment revenue increased by $11.6 million, or 9.3%, due predominantly to low single-digit favorable impact of foreign exchange rates and by high single-digit organic growth. The Products and Systems segment increased by $0.7 million, or 5.2%, driven by higher sales volume.

Previous wording

Oil and gas customer revenue comprised approximately 59% and 56% of total revenue for the years ended December 31, 2023 and 2022, respectively. Aerospace and defense customer revenue comprised approximately 11% and 12% of total revenue for the years ended December 31, 2023 and 2022, respectively. Our top ten customers comprised approximately 35% of total revenue for the years ended December 31, 2023 and 2022, with no customer accounting for 10% or more of total revenue in either period.

Current wording

Oil and gas customer revenue comprised approximately 57% and 59% of total revenue for the years ended December 31, 2024 and 2023, respectively. Aerospace and defense customer revenue comprised approximately 12% and 11% of total revenue for the years ended December 31, 2024 and 2023, respectively. Our top ten customers comprised approximately 36% of total revenue for the years ended December 31, 2024 and 2023, with no customer accounting for 10% or more of total revenue in either period.

Previous wording

Oil and gas upstream customer revenue increased approximately $11.8 million, or 8%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, due to continued market share gains and expanded exploration operations, as compared to the prior year period.

Current wording

Oil and gas upstream customer revenue increased approximately $9.9 million, or 6%, for the year ended December 31, 2024 compared to the year ended December 31, 2023, due to continued market share gains and expanded exploration operations, as compared to the prior year period.

Previous wording

Midstream customer revenues increased approximately $4.3 million, or 4%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, due to increased pipe inspection services.

Current wording

Midstream customer revenues decreased approximately $12.6 million, or 12%, for the year ended December 31, 2024 compared to the year ended December 31, 2023, due to decreased pipe inspection services.

Previous wording

Downstream customer revenue increased $12.2 million, or 8%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, due to increased sales volume at customer refineries and increased customer turnarounds.

Current wording

Downstream customer revenue increased $5.7 million, or 4%, for the year ended December 31, 2024 compared to the year ended December 31, 2023, due to increased sales volume at customer refineries and increased customer turnarounds.

Previous wording

In presenting the allocation of revenues by type in the table above, management makes certain assumptions in its allocation of revenues from laboratories that provide more than one type of service. The allocation methodology and assumptions made are consistent for the years presented.

Current wording

In presenting the allocation of revenues by type in the table above, management makes certain assumptions in its allocation of revenue from laboratories that provide more than one type of service. The allocation methodology and assumptions made are consistent for the years presented.

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 $15.4 million, or 3.4%, for the twelve months ended December 31, 2023 as compared to the twelve months ended December 31, 2022. The increase was due to increased sales volume in our oil and gas end market for our North America and International segments.

Current wording

Field Services revenue is comprised of revenue derived primarily by technicians performing asset inspections and maintenance services for our customers at locations other than our properties. Field Services revenue increased $32.4 million, or 6.9%, for the twelve months ended December 31, 2024 as compared to the twelve months ended December 31, 2023. The increase was due to increased sales volume in our oil and gas and power generation and transmission end markets for 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 revenues increased $9.4 million, or 19.2%, for the twelve months ended December 31, 2023 as compared to the twelve months ended December 31, 2022. The increase was due to increased sales volume related to our commercial aerospace and industrials end markets.

Current wording

Shop Laboratory revenue is comprised of quality assurance inspections of components and materials at our in-house laboratory facilities. Shop Laboratory revenue increased $6.4 million, or 11.0%, for the twelve months ended December 31, 2024 as compared to the twelve months ended December 31, 2023. The increase was due to increased sales volume related to our commercial aerospace and industrials end markets.

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 increased $10.0 million, or 16.1%, for the twelve months ended December 31, 2023 as compared to the twelve months ended December 31, 2022. The increase was due primarily to increased sales volume within PCMS, Onstream and other Data Analytical Solutions offerings within our North America segment.

Current wording

Data Analytical Solutions revenue is 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 our employees in our facilities, or at customer locations, using our proprietary portfolio of software applications. Data Analytical Solutions revenue decreased $3.3 million, or 4.6%, for the twelve months ended December 31, 2024 as compared to the twelve months ended December 31, 2023. The decrease was due primarily to decreased sales volume within PCMS, Onstream and other Data Analytical Solutions offerings within our North America segment.

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 $16.7 million, or 13.8%, for the twelve months ended December 31, 2023 as compared to the twelve months ended December 31, 2022. Other revenues in 2023 decreased primarily due to decreased sales within the aerospace and defense sector and due to declines in our other end markets within the North America and International segments as compared to the prior year period.

Current wording

Other revenue are comprised of locations that perform both asset inspection services and testing of components and materials at our in-house laboratories. Other revenue decreased $11.3 million, or 10.8%, for the twelve months ended December 31, 2024 as compared to the twelve months ended December 31, 2023. Other revenue for the year ended December 31, 2024 decreased primarily due to decreased sales within the other end markets within the North America and International segments as compared to the prior year period.

Previous wording

Gross profit (loss) by segment for the years ended December 31, 2023 and 2022 were as follows:

Current wording

Gross profit by segment for the years ended December 31, 2024 and 2023 were as follows:

Previous wording

Gross profit increased $5.6 million, or 2.8%, for the year ended December 31, 2023 compared to the year ended December 31, 2022, with a sales increase of $18.1 million, or 2.6%. Gross profit margin was 28.9% and 28.8% for the years ended December 31, 2023 and 2022, respectively, due to favorable sales mix. North America segment gross profit margins had a year-on-year increase of 60 basis points to 28.3% for the year ended December 31, 2023, due primarily to favorable sales mix. International segment gross margins had a year-on-year decrease of 290 basis points to 27.0% for the year ended December 31, 2023, due primarily to increased inflationary pressures. Products and Systems segment gross margins increased by 660 basis points for the year ended December 31, 2023 to 49.7%, driven by favorable sales mix.

Current wording

Gross profit increased $9.3 million, or 4.6%, for the year ended December 31, 2024 compared to the year ended December 31, 2023, with a sales increase of $24.2 million, or 3.4%. Gross profit margin was 29.2% and 28.9% for the years ended December 31, 2024 and 2023, respectively, with the increase due to favorable sales mix. North America segment gross profit margins had a year-on-year decrease of 40 basis points to 27.9% for the year ended December 31, 2024, due primarily to unfavorable sales mix. International segment gross margins had a year-on-year increase of 230 basis points to 29.3% for the year ended December 31, 2024, due primarily to decreased inflationary pressures. Products and Systems segment gross margins increased by 540 basis points for the year ended December 31, 2024 to 55.1%, driven by favorable sales mix.

Previous wording

Operating expenses increased $27.3 million, or 15.3%, for the year ended December 31, 2023 compared to the year ended December 31, 2022 due primarily to impairment charges and reorganization charges recorded in the current period that were not in the prior period. Selling, general and administrative expenses increased $0.3 million, or 0.2% for the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to unfavorable foreign currency exchange.

Current wording

Operating expenses decreased $32.4 million, or 15.8%, for the year ended December 31, 2024 compared to the year ended December 31, 2023 due primarily to goodwill impairment charges being recorded in the prior period and reduced reorganization charges recorded in the current period as compared to the prior period, which were a result of our Project Phoenix initiatives. Selling, general and administrative expenses decreased $10.4 million, or 6.2% for the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to actions taken related to our Project Phoenix initiatives to reduce selling, general and administrative expenses.

Previous wording

Total Company income from operations (GAAP) decreased by $21.7 million, or 109.6% compared to the year ended December 31, 2022. Total company income before special items (non-GAAP) increased by $5.4 million or 27.4% compared with the year ended December 31, 2022. Operating expenses, excluding special items (non-GAAP), as a percentage of revenue, was 25.3% for the year ended December 31, 2023 compared to 25.9% for the year ended December 31, 2022. The primary driver for the increase in total company income before special items was increased sales in 2023 compared to 2022. Income before special items as a percentage of revenue increased by 70 basis points to 3.6% for the year ended December 31, 2023 from 2.9% for the year ended December 31, 2022. Our discussion below is qualified by the unknown impact that the Russia - Ukraine war will continue to have on our business and the economy in general, including the resulting economic disruption. Refer to Item 1A. Risk Factors in Part I of this Annual Report for further discussion.

Current wording

Total Company income from operations (GAAP) increased by $41.7 million, or 2,191.7% compared to the year ended December 31, 2023. Total company income before special items (non-GAAP) increased by $21.0 million or 83.1% compared with the year ended December 31, 2023. Operating expenses, excluding special items (non-GAAP), as a percentage of revenue, was 22.9% for the year ended December 31, 2024 compared to 25.3% for the year ended December 31, 2023. The primary driver for the increase in Total Company income before special items was increased sales in 2024 compared to 2023. Total Company income before special items as a percentage of revenue increased by 270 basis points to 6.3% for the year ended December 31, 2024, from 3.6% for the year ended December 31, 2023. Our discussion below is qualified by the unknown impact that the Russia - Ukraine war will continue to have on our business and the economy in general, including the resulting economic disruption. Refer to Item 1A. Risk Factors in Part I of this Annual Report for further discussion.

Previous wording

Interest expense was $16.8 million and $10.5 million for the years ended December 31, 2023 and December 31, 2022, respectively. The increase was due to increased interest rates in the current period.

Current wording

Interest expense was $17.1 million and $16.8 million for the years ended December 31, 2024 and December 31, 2023, respectively. The increase was due to increased interest rates in the current period.

Previous wording

Our effective income tax rate was approximately 6.5% for the year ended December 31, 2023, compared to 29.3% for the year ended December 31, 2022. The decrease in effective tax rate was primarily driven by a $1.7 million US R&D tax credit benefit in 2022, partially offset by the recording of a $1.1 million valuation allowance recorded in 2022 which was related to certain Canadian entities.

Current wording

Our effective income tax rate was approximately 21.8% for the year ended December 31, 2024, compared to 6.5% for the year ended December 31, 2023. The increase in effective tax rate was primarily driven by an impairment of $13.8 million impairment in year ended December 31, 2023, partially offset by the releasing of valuation allowance of $1.8 million.

Previous wording

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 are currently evaluating the impact of this guidance on our consolidated financial position, results of operations, and cash flows, but does not expect it to have a material impact.

Current wording

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 are currently evaluating the impact of this guidance on our consolidated financial position, results of operations, and cash flows, but do not expect it to have a material impact.

Previous wording

We have funded our operations from cash provided from operations, bank borrowings and lease financings. Management believes that our existing cash and cash equivalents, anticipated cash flows from operating activities, and available borrowings under our New Credit Agreement will be more than sufficient to meet anticipated cash needs over the next 12 months and for the foreseeable future. We generated operating cash flows of $26.7 million and $26.4 million for the years ended December 31, 2023 and 2022, respectively. Capital expenditures for the purchase of property, plant and equipment and of intangible assets was $23.6 million and $13.4 million for the years ended December 31, 2023 and 2022, respectively.

Current wording

We have funded our operations from cash provided from operations, bank borrowings and lease financings. Management believes that our existing cash and cash equivalents, anticipated cash flows from operating activities, and available borrowings under our Credit Agreement will be more than sufficient to meet anticipated cash needs over the next 12 months and for the foreseeable future. We generated operating cash flows of $50.1 million and $26.7 million for the years ended December 31, 2024 and 2023, respectively. Capital expenditures for the purchase of property, plant and equipment and of intangible assets was $23.0 million and $23.6 million for the years ended December 31, 2024 and 2023, respectively.

Previous wording

Cash provided by operating activities for the year ended December 31, 2023 was $26.7 million, an increase of $0.3 million from the prior year period. The increase was mainly attributable to movements in working capital driven primarily by an increase in net accounts receivable collections, an increase in accrued expenses and other liabilities, and an increase in accounts payable in the current year as compared to the prior year.

Current wording

Cash provided by operating activities for the year ended December 31, 2024 was $50.1 million, an increase of $23.4 million from the prior year period. The increase was mainly attributable to movements in working capital driven primarily by an increase in operating results and an increase in net accounts receivable collections in the current year as compared to the prior year.

Previous wording

Net cash used in investing activities for the year ended December 31, 2023 was $22.1 million, an increase of $9.9 million used in investing activities from the prior year period. The Company used $10.2 million more cash for purchases of property, plant and equipment and intangible assets in 2023 compared to 2022.

Current wording

Net cash used in investing activities for the year ended December 31, 2024 was $21.4 million, a decrease of $0.8 million used in investing activities from the prior year period. The Company used $0.7 million less cash for purchases of property, plant and equipment and intangible assets in 2024 compared to 2023.

Previous wording

Net cash used in financing activities for the year ended December 31, 2023 was $7.7 million, compared to $16.3 million for the year ended December 31, 2022. During the year ended December 31, 2022, we entered into the New Credit Agreement which replaced our prior credit agreement, as detailed more in Note 11-Long-Term Debt. As part of the New Credit Agreement, the prior revolving credit facility and term loan were repaid in full. Net repayment of debt and revolver was approximately $9.6 million higher compared to 2022. In addition, for the year ended December 31, 2023, we incurred approximately $0.6 million more taxes paid related to net share settlement of share-based awards.

Current wording

Net cash used in financing activities for the year ended December 31, 2024 was $27.4 million, compared to $7.7 million for the year ended December 31, 2023. Net repayment of our revolving credit facility and term loan was approximately $19.5 million higher compared to 2023. In addition, for the year ended December 31, 2024, we incurred approximately $0.3 million less in taxes paid related to net share settlement of share-based awards than the prior period.

Previous wording

The effect of exchange rate changes on our cash and cash equivalents was a decrease of $0.2 million for the year ended December 31, 2023, compared to a decrease of $1.5 million for the year ended December 31, 2022. The primary driver of the change was foreign currency fluctuations during the year related to the Euro and the US Dollar.

Current wording

The effect of exchange rate changes on our cash and cash equivalents was a decrease of $0.7 million for the year ended December 31, 2024, compared to an increase of $0.2 million for the year ended December 31, 2023. The primary driver of the change was foreign currency fluctuations during the year ended December 31, 2024 related to the Euro and the US Dollar.

Previous wording

As of December 31, 2023, we had cash and cash equivalents totaling $17.6 million and available borrowing capacity of up to $116.0 million under our New Credit Agreement. Borrowings of $186.4 million and letters of credit of $2.9 million were outstanding under the New Credit Agreement at December 31, 2023. We finance our operations primarily through our existing cash balances, cash collected from operations, bank borrowings and lease financing. We believe these sources are sufficient to fund our operations for the foreseeable future. As of December 31, 2023, we were in compliance with the terms of the New Credit Agreement and will continuously monitor our compliance with the covenants contained in the New Credit Agreement. See Note 11-Long-Term Debtof the notes to the consolidated financial statements for additional information.

Current wording

As of December 31, 2024, we had cash and cash equivalents totaling $18.3 million and available borrowing capacity of up to $119.2 million under our Credit Agreement. Borrowings of $167.2 million and letters of credit of $3.1 million were outstanding under the Credit Agreement at December 31, 2024. We finance our operations primarily through our existing cash balances, cash collected from operations, bank borrowings and lease financing. We believe these sources are sufficient to fund our operations for the foreseeable future. As of December 31, 2024, 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.

Previous wording

The terms of our New Credit Agreement are described in Note 11-Long-Term Debt of the Notes to Consolidated Financial Statements in this Annual Report, under the heading "Senior Credit Facility", the provisions of which are incorporated herein.

Current wording

The terms of our Credit Agreement are described in Note 11-Long-Term Debtof the notes to the consolidated financial statements, under the heading "Senior Credit Facility".

Previous wording

We expect our future sources of cash to include cash flow generated from our operating activities and borrowings under our New Credit Agreement. Our revolving credit facility is available for cash advances required for working capital and for letters of credit to support our operations. Acquisitions, if any, are funded through available cash and borrowings under the New Credit Agreement.

Current wording

We expect our future sources of cash to include cash flow generated from our operating activities and borrowings under our Credit Agreement. Our revolving credit facility is available for cash advances required for working capital and for letters of credit to support our operations. Acquisitions, if any, are funded through available cash and borrowings under the Credit Agreement.

Previous wording

We expect our future uses of cash will primarily be for repayment of debt, purchases or manufacture of field-testing equipment to support growth, additional investments in technology and software products and the replacement of existing assets and equipment used in our operations. We often make purchases to support new sources of revenues, particularly in our North America segment. In addition, we annually fund a certain amount of replacement equipment, including a portion of our fleet vehicles. We historically spend approximately 2% to 3% of our total revenues on capital expenditures, excluding acquisitions, and expect to fund these expenditures through a combination of cash and lease financing. Our cash capital expenditures, excluding acquisitions, for each of the years ended December 31, 2023 and 2022 were approximately 3.4% and 2.0% of revenues, respectively. We continue to take steps to reduce spending and preserve cash.

Current wording

We expect our future uses of cash will primarily be for repayment of debt, purchases or manufacture of field-testing equipment to support growth, additional investments in technology and software products and the replacement of existing assets and equipment used in our operations. We often make purchases to support new sources of revenues, particularly in our North America segment. In addition, we annually fund a certain amount of replacement equipment, including a portion of our fleet vehicles. We historically spend approximately 2% to 3% of our total revenues on capital expenditures, excluding acquisitions, and expect to fund these expenditures through a combination of cash and lease financing. Our cash capital expenditures, excluding acquisitions, for each of the years ended December 31, 2024 and 2023 were approximately 3.2% and 3.4% of revenues, respectively. We continue to take steps to reduce spending and preserve cash.

Previous wording

Our New Credit Agreement does not limit the Company’s ability to acquire other businesses or companies except for certain provisions as described within Note 11-Long-Term Debt. Our future capital spending may increase as we pursue growth opportunities and acquire additional equipment to meet or pursue business opportunities. Other investments in infrastructure, training and software may also be required to match our growth, but we plan to continue using a disciplined approach to building our business. In addition, we will use cash to fund our operating leases, finance leases, long-term debt repayments and various other obligations as they arise as noted within Note 11-Long-Term Debtand Note 17-Leases.

Current wording

Our Credit Agreement does not limit our ability to acquire other businesses or companies except for certain provisions as described within Note 11-Long-Term Debtof the notes to the consolidated financial statements. Our future capital spending may increase as we pursue growth opportunities and acquire additional equipment to meet or pursue business opportunities. Other investments in infrastructure, training and software may also be required to match our growth, but we plan to continue using a disciplined approach to building our business. In addition, we will use cash to fund our operating leases, finance leases, long-term debt repayments and various other obligations as they arise as noted within Note 11-Long-Term Debtand Note 17-Leasesof the notes to the consolidated financial statements.

Previous wording

We perform a review of long-lived assets (or asset groups) for impairment when events or changes in circumstances indicate the carrying value of such assets may not be recoverable. If an indication of impairment is present, we compare the estimated undiscounted future net cash flows to be generated by the asset (or asset group) to its carrying amount. If the undiscounted future net cash flows are less than the carrying amount of the asset (or asset group), we record an impairment loss equal to the excess of the asset’s carrying amount over its fair value. We estimate fair value based on valuation techniques such as a discounted cash flow analysis or a comparison to fair values of similar assets. As of December 31, 2023 and December 31, 2022, we had $81.0 million and $77.6 million in net property, plant and equipment, respectively, and $44.0 million and $49.0 million in intangible assets, net, respectively.

Current wording

We perform a review of long-lived assets (or asset groups) for impairment when events or changes in circumstances indicate the carrying value of such assets may not be recoverable. If an indication of impairment is present, we compare the estimated undiscounted future net cash flows to be generated by the asset (or asset group) to its carrying amount. If the undiscounted future net cash flows are less than the carrying amount of the asset (or asset group), we record an impairment loss equal to the excess of the asset’s carrying amount over its fair value. We estimate fair value based on valuation techniques such as a discounted cash flow analysis or a comparison to fair values of similar assets. As of December 31, 2024 and December 31, 2023, we had $80.9 million and $81.0 million in net property, plant and equipment, respectively, and $39.7 million and $44.0 million in intangible assets, net, respectively.

Previous wording

Under the income approach, the fair value for each of the reporting units was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The Company used internal forecasts, updated for recent events, to estimate future cash flows estimated using a terminal value calculation, which incorporates historical and forecasted trends, including an estimate of long-term future growth rates, based on the Company’s most recent views of the long-term outlook for each reporting unit. The internal forecasts include assumptions about future profitability, including the expected demand for the Company’s goods and services. Due to the inherent uncertainties involved in making estimates and assumptions, actual results may differ from those assumed in the forecasts. The Company derived the discount rates using a capital asset pricing model and analyzing published rates for industries relevant to the reporting units to estimate the cost of equity financing. The Company used discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in the internally developed forecasts, updated for recent events. Increased interest rates in the current period increased the discount rate associated with the reporting units which contributed in an unfavorable decrease in the reporting units value.

Current wording

Under the income approach, the fair value for each of the reporting units was determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. The Company used internal forecasts, updated for recent events, to estimate future cash flows estimated using a terminal value calculation, which incorporates historical and forecasted trends, including an estimate of long-term future growth rates, based on the Company’s most recent views of the long-term outlook for each reporting unit. The internal forecasts include assumptions about future profitability, including the expected demand for the Company’s goods and services. Due to the inherent uncertainties involved in making estimates and assumptions, actual results may differ from those assumed in the forecasts. The Company derived the discount rates using a capital asset pricing model and analyzing published rates for industries relevant to the reporting units to estimate the cost of equity financing. The Company used discount rates that are commensurate with the risks and uncertainties inherent in the respective businesses and in the internally developed forecasts, updated for recent events. Increased interest rates in the current period increased the discount rate associated with the reporting units which contributed to an unfavorable decrease in the reporting units value.

Previous wording

Based upon the results of the interim quantitative goodwill impairment test, the Company recorded an impairment charge of $13.8 million within the International reporting units. The impairment was calculated based on the difference between the estimated fair value and the carrying value of the reporting units and is included in Goodwill impairment charges on the condensed consolidated statements of income (loss) for the three and nine months ended September 30, 2023. Any significant adverse changes in future periods to the Company’s internal forecasts or the external market conditions, if any, could reasonably be expected to negatively affect its key assumptions and may result in future goodwill impairment charges which could be material.

Current wording

Based upon the results of the interim quantitative goodwill impairment test, the Company recorded an impairment charge of $13.8 million within the International reporting units. The impairment was calculated based on the difference between the estimated fair value and the carrying value of the reporting units. Any significant adverse changes in future periods to the Company’s internal forecasts or the external market conditions, if any, could reasonably be expected to negatively affect its key assumptions and may result in future goodwill impairment charges which could be material.

Previous wording

30, 2023. Specifically, we considered changes in macroeconomic conditions, industry and market conditions, our internal forecasts of future revenue and expenses, our stock price, any significant events affecting the Company and actual changes in the carrying values of our net assets. After considering all positive and negative evidence for the assessment as of September 30, 2023, we concluded that it was not more likely than not that our carrying values exceeded fair values and as such, no additional impairment was indicated.

Current wording

We elected to perform a quantitative assessment of goodwill on October 1, 2024. Our quantitative assessment considered relevant events and circumstances occurring since our interim quantitative goodwill impairment test performed as of September 30, 2024. Specifically, we considered changes in macroeconomic conditions, industry and market conditions, our internal forecasts of future revenue and expenses, our stock price, any significant events affecting the Company and actual changes in the carrying values of our net assets. After considering all positive and negative evidence for the assessment as of September 30, 2024, we concluded that it was not more likely than not that our carrying values exceeded fair values and as such, no additional impairment was indicated.