Mistras Group, Inc.MG
Mistras Group, Inc. Income Taxes Disclosure
Income Taxes
Income (loss) before provision (benefit) for income taxes is as follows (in thousands):
| For the year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Income (loss) before provision (benefit) for income taxes from: | |||||||||||||||||
| U.S. operations | $ | 8,210 | $ | 16,010 | $ | (6,900) | |||||||||||
| Foreign operations | 14,268 | 8,234 | (11,765) | ||||||||||||||
| Income (loss) before provision (benefit) for income taxes | $ | 22,478 | $ | 24,244 | $ | (18,665) | |||||||||||
The provision (benefit) for income taxes consists of the following (in thousands):
| For the year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 900 | $ | 6,167 | $ | 1,388 | |||||||||||
| States and local | (11) | 1,333 | 705 | ||||||||||||||
| Foreign | 4,319 | 2,642 | 2,063 | ||||||||||||||
| Total current provision | $ | 5,208 | $ | 10,142 | $ | 4,156 | |||||||||||
| Deferred | |||||||||||||||||
| Federal | $ | 1,121 | $ | (3,405) | $ | (2,219) | |||||||||||
| States and local | 434 | 143 | (1,502) | ||||||||||||||
| Foreign | (1,206) | (1,606) | (1,655) | ||||||||||||||
| Net deferred provision (benefit) | 349 | (4,868) | (5,376) | ||||||||||||||
| Total provision (benefit) for income taxes | $ | 5,557 | $ | 5,274 | $ | (1,220) | |||||||||||
Cash paid for income taxes (net of refunds) was as follows (in thousands):
| For the year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | 3,500 | $ | 5,100 | $ | 2,500 | |||||||||||
| States and local | 1,539 | 1,077 | 540 | ||||||||||||||
| Foreign | 4,289 | 233 | 3,861 | ||||||||||||||
| Total cash paid for income taxes, net of refunds | $ | 9,328 | $ | 6,410 | $ | 6,901 | |||||||||||
Cash paid for income taxes (net of refunds) exceeded five percent (5%) of total cash paid for income taxes (net of refunds) in the following jurisdictions (in thousands):
| For the year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| State and local: | |||||||||||||||||
| Texas | * | * | 352 | ||||||||||||||
| All other state and local jurisdictions | 1,539 | 1,077 | 188 | ||||||||||||||
| Total State and local | $ | 1,539 | $ | 1,077 | $ | 540 | |||||||||||
| Foreign: | |||||||||||||||||
| Germany | 1,366 | * | 428 | ||||||||||||||
| Canada | 669 | (669) | 2,944 | ||||||||||||||
| Netherlands | 710 | 345 | 447 | ||||||||||||||
| Brazil | 1,221 | * | * | ||||||||||||||
| All other foreign jurisdictions | 323 | 557 | 42 | ||||||||||||||
| Total Foreign | $ | 4,289 | $ | 233 | $ | 3,861 | |||||||||||
*Jurisdiction is below the five percent (5%) threshold for the period presented.
The provision (benefit) for income taxes differs from the amount computed by applying the statutory federal tax rate to income tax as follows (in thousands):
| For the years ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| United States federal statutory tax rate | $ | 4,721 | 21.0 | % | $ | 5,091 | 21.0 | % | $ | (3,920) | 21.0 | % | |||||||||||||||||||||||
State and local income taxes, net of federal income tax effect (1) | 416 | 1.9 | 872 | 3.6 | (747) | 4.0 | |||||||||||||||||||||||||||||
| Foreign tax effects | |||||||||||||||||||||||||||||||||||
| Brazil | |||||||||||||||||||||||||||||||||||
| Changes in valuation allowances | 29 | 0.1 | (759) | (3.1) | (79) | 0.4 | |||||||||||||||||||||||||||||
| Other | (144) | (0.6) | 145 | 0.6 | 195 | (1.0) | |||||||||||||||||||||||||||||
| Canada | |||||||||||||||||||||||||||||||||||
| Changes in valuation allowances | (303) | (1.4) | (179) | (0.7) | 31 | (0.2) | |||||||||||||||||||||||||||||
| Other | 200 | 0.9 | 170 | 0.7 | (77) | 0.4 | |||||||||||||||||||||||||||||
| United Kingdom | |||||||||||||||||||||||||||||||||||
| Impairment of goodwill | — | — | — | — | 258 | (1.4) | |||||||||||||||||||||||||||||
| Changes in valuation allowances | (64) | (0.3) | (682) | (2.8) | (167) | 0.9 | |||||||||||||||||||||||||||||
| Other | (252) | (1.1) | 110 | 0.5 | 40 | (0.2) | |||||||||||||||||||||||||||||
| France | |||||||||||||||||||||||||||||||||||
| Impairment of goodwill | — | — | — | — | 966 | (5.2) | |||||||||||||||||||||||||||||
| Other | 150 | 0.7 | 42 | 0.2 | (205) | 1.1 | |||||||||||||||||||||||||||||
| Germany | |||||||||||||||||||||||||||||||||||
| Impairment of goodwill | — | — | — | — | 1,314 | (7.0) | |||||||||||||||||||||||||||||
| Statutory tax rate differences between United States and Germany | (279) | (1.2) | (78) | (0.3) | 464 | (2.5) | |||||||||||||||||||||||||||||
| State and local taxes | 738 | 3.3 | 197 | 0.8 | 164 | (0.9) | |||||||||||||||||||||||||||||
| Other | (84) | (0.4) | 67 | 0.3 | (64) | 0.3 | |||||||||||||||||||||||||||||
| Other foreign jurisdictions | 125 | 0.6 | 128 | 0.5 | 57 | (0.3) | |||||||||||||||||||||||||||||
| Effect of cross-border tax laws | (174) | (0.8) | 40 | 0.2 | 97 | (0.5) | |||||||||||||||||||||||||||||
| Tax credits | |||||||||||||||||||||||||||||||||||
| Research and development tax credit | (602) | (2.7) | (602) | (2.5) | (356) | 1.9 | |||||||||||||||||||||||||||||
| Changes in valuation allowances | (3) | — | 190 | 0.8 | (214) | 1.1 | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
| Share-based compensation | 333 | 1.5 | (20) | (0.1) | 731 | (3.9) | |||||||||||||||||||||||||||||
| Other | 199 | 0.9 | 227 | 0.9 | 270 | (1.4) | |||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | 361 | 1.6 | 3 | — | 16 | (0.1) | |||||||||||||||||||||||||||||
| Other adjustments | 190 | 0.7 | 312 | 1.2 | 6 | 0.1 | |||||||||||||||||||||||||||||
| Total provision (benefit) for income taxes | $ | 5,557 | 24.7 | % | $ | 5,274 | 21.8 | % | $ | (1,220) | 6.6 | % | |||||||||||||||||||||||
(1) State taxes in Arizona, Alaska, California, Alabama, Pennsylvania, Vermont, Louisiana, Minnesota, Georgia, Montana, New Jersey, Tennessee, and Iowa made up the majority (greater than 50 percent) of the tax effect in this category for the year ended December 31, 2025. State taxes in Florida, New Jersey, Alaska, and Louisiana made up the majority (greater than 50 percent) of the tax effect in this category for the year ended December 31, 2024. State taxes in Texas, California, Alaska, Louisiana, Pennsylvania, Connecticut, and Mississippi made up the majority (greater than 50 percent) of the tax effect in this category for the year ended December 31, 2023.
On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), was enacted, which includes a broad range of tax reform provisions. These tax reform provisions include the extension and modification of certain provisions of the Tax Cuts and Jobs Act and are effective for calendar year 2025. The changes include, but are not limited to, immediate expensing of domestic research and development expenditure, the restoration of 100% bonus depreciation, and an EBITDA-based interest expense limitation. These provisions did not have a material impact on the Company’s financial statements for the year ended December 31, 2025.
Deferred income tax attributes resulting from differences between financial accounting amounts and income tax basis of assets and liabilities are as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred income tax assets | |||||||||||
| Allowance for doubtful accounts | $ | 493 | $ | 470 | |||||||
| Inventory | 1,269 | 1,218 | |||||||||
| Intangible assets | 954 | 808 | |||||||||
| Accrued expenses | 4,014 | 4,090 | |||||||||
| Net operating loss carryforward | 3,774 | 4,369 | |||||||||
| Finance lease obligations | 485 | 189 | |||||||||
| Stock Options | 181 | 183 | |||||||||
| Deferred stock based compensation | 785 | 911 | |||||||||
| Interest carryforward | 8,302 | 6,328 | |||||||||
| Right-of-use liability | 8,072 | 8,696 | |||||||||
| R&D Expense | 3,283 | 6,671 | |||||||||
| Credits | 788 | 100 | |||||||||
| Other | 1,645 | 442 | |||||||||
| Deferred income tax assets | 34,045 | 34,475 | |||||||||
| Valuation allowance | (3,685) | (4,034) | |||||||||
| Net deferred income tax assets | $ | 30,360 | $ | 30,441 | |||||||
| Deferred income tax liabilities | |||||||||||
| Property and equipment | $ | (5,558) | $ | (5,404) | |||||||
| Goodwill | (10,702) | (10,134) | |||||||||
| Intangible assets | (1,917) | (1,952) | |||||||||
| Right-of-use asset | (8,070) | (8,657) | |||||||||
| Deferred income tax liabilities | (26,247) | (26,147) | |||||||||
| Net deferred income taxes | $ | 4,113 | $ | 4,294 | |||||||
As of December 31, 2025, the Company had a federal net operating loss carry forward ("NOLs") of $6.6 million. As of December 31, 2025, the Company had state and foreign NOLs of $55.1 million and $9.1 million, respectively. Approximately $43.6 million of state NOLs expire at various times from 2023 to 2043, while the remainder of the Company's state NOLs do not expire. Approximately $1.4 million of the foreign NOLs expire at various times from 2023 to 2042, while the remainder of the Company's foreign NOLs do not expire. In addition to NOLs, the company holds both foreign tax, research and development and other tax credits of $0.8 million.
In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. Valuation allowances are provided when management believes the Company's deferred tax assets are not recoverable based on future reversals of existing taxable temporary differences, taxable income in prior carryback year(s) if carryback is permitted under the tax law, and an assessment of estimated future taxable income, exclusive of reversing temporary differences and carryforwards, that incorporates on going, prudent and feasible tax planning strategies. At December 31, 2025 and December 31, 2024, the Company had a valuation allowance of approximately $3.7 million and $4.0 million, respectively, primarily against certain state and foreign NOLs and other specific deferred tax assets. The net decrease in the valuation allowance of approximately $0.3 million is primarily attributable to state and foreign net operating losses and changes in foreign exchange rates, which were offset by a reduction in expiring losses. Except for those deferred tax assets subject to the valuation allowance, management believes that it will realize all deferred tax assets as a result of sufficient future taxable income in each tax jurisdiction in which the Company has deferred tax assets.
The following table summarizes the changes in the Company’s gross unrecognized tax benefits, excluding interest and penalties (in thousands):
| For the year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Balance at beginning of period | $ | 251 | $ | 258 | |||||||
| Additions for tax positions related to the current fiscal period | — | — | |||||||||
| Additions for tax positions related to prior years | 361 | — | |||||||||
| Reductions related to the expiration of statutes of limitations | (14) | (7) | |||||||||
| Other | 4 | — | |||||||||
| Balance at end of period | $ | 602 | $ | 251 | |||||||
The Company has recorded the unrecognized tax benefits in other long-term liabilities in the consolidated balance sheets. As of December 31, 2025 and December 31, 2024, there were approximately $0.6 million and $0.3 million of unrecognized tax benefits, respectively, including penalties and interest. If the Company recognized these unrecognized tax benefits, approximately $0.6 million and $0.3 million would favorably affect the effective tax rate for both December 31, 2025 and December 31, 2024, respectively. Interest and penalties related to unrecognized tax benefits are recorded in income tax expense and are not significant for the years ended December 31, 2025, 2024 and 2023.
The Company is subject to taxation in the United States and various states and foreign jurisdictions. Currently the Company is undergoing a federal tax audit for years ending December 31, 2018 through December 31, 2020. The company’s statute of limitation remains open for the years 2021 to 2025 for Germany taxation purposes. The company’s statute of limitation remains open for Canadian entities for years 2024, 2023, and 2022.
The Tax Cuts and Jobs Act made significant changes to the taxation of undistributed earnings, requiring that all previously untaxed earnings and profits of the Company's controlled foreign operations be subjected to the transition tax. Since these earnings have now been subjected to U.S. federal tax, they would only be potentially subject to limited other taxes, including foreign withholding and certain state taxes. As of December 31, 2025, the Company has not recognized a deferred tax liability for foreign withholdings and state taxes on its undistributed international earnings or losses of its foreign subsidiaries since it intends to indefinitely reinvest the earnings outside the United States. The Company has estimated $68.4 million of unremitted international earnings which provides an unrecorded deferred tax liability related to undistributed international earnings of approximately $1.7 million.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 11, 2026 | Showing above |
| 2024 | Mar 11, 2025 | |
| 2023 | Mar 11, 2024 | |
| 2022 | Mar 15, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 16, 2021 | |
| 2019 | Mar 27, 2020 | |
| 2018 | Mar 18, 2019 | |
| 2017 | Mar 14, 2018 | |
| 2016 | Aug 15, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.