ITEM 1A. RISK FACTORS
This section describes the major risks to us, our business and our common stock. You should carefully read and consider the risks described below, together with the other information contained in this Annual Report, including our financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before making an investment decision. The statements contained in this section constitute cautionary statements under the Private Securities Litigation Reform Act of 1995. If any of these risks occur, our business, financial condition, results of operations and future growth prospects may be adversely affected. As a result, the trading price of our common stock would likely decline, and you may lose all or part of your investment. You should understand that it is not possible to predict or identify all risk factors that could impact us. For example, ongoing geopolitical conflicts, including the war between Russia and Ukraine, the unrest in the Middle East, including the recent conflict between the U.S. and Iran, and the recent intervention in Venezuela, continue to contribute to global energy market volatility, supply chain disruption, and economic uncertainty that could affect certain of our end markets, particularly oil and gas. Broader macroeconomic conditions, including inflationary pressures, higher interest rates, labor market tightness, and evolving trade policies or tariffs and retaliatory responses, may also impact our costs, customer spending, and project timing. In addition, emerging regulatory and market developments related to climate change, the use of AI, cybersecurity, and sustainability reporting may introduce new compliance requirements or operational risks. Accordingly, the following discussion should not be viewed as an exhaustive list of all risks and uncertainties that could impact our business or the value of our common stock.
Risks Related to Our Business
Due to our dependency on customers in the oil and gas industry, we are susceptible to prolonged negative trends relating to this industry that could adversely affect our operating results.
Our customers in the oil and gas industry have accounted for a substantial portion of our historical revenues. Specifically, they accounted for approximately 55%, 57%, and 59% of our revenues for the years ended December 31, 2025, 2024 and 2023, respectively. Although we have expanded our customer base into industries other than the oil and gas industry, we still receive a majority of our revenues from this industry. Our services remain critical to the integrity and safety of energy infrastructure, including refineries, pipelines, offshore platforms, and petrochemical facilities. We have broadened our portfolio to include enhanced mechanical and in-line inspection services, digital and data-driven integrity solutions, and asset protection technologies. However, the oil and gas industry is cyclical and subject to fluctuations in commodity prices, capital spending, and production activity. In addition, economic slowdowns or low oil prices have, and could continue to, result in cutbacks in contracts for our services. While oil prices have generally stabilized in 2025 following periods of volatility in prior years, any sustained decline could lead to reduced maintenance spending and deferrals of nonessential projects by our customers, which would affect demand for our services and our results of operations. Conversely, sustained periods of elevated oil prices can also impact our business if our customers inspection and maintenance activities due to higher operating costs, supply chain constraints, or labor .
Demand for a substantial portion of our products and services depends on the level of capital expenditures invested in the oil and natural gas industry. Ongoing uncertainties related to future crude oil demand and the willingness of operators to invest in U.S. land-based drilling, completion and production activities given efficiencies gained and regulatory pressures may result in a material adverse impact on our financial condition, results of operations and cash flows. Any prolonged reduction in the overall level of exploration and production activities, whether resulting from changes in oil and natural gas prices or otherwise, could have an adverse effect on our equipment utilization, revenues, cash flows and profitability; our ability to obtain additional capital to finance our business and the cost of that capital; and our ability to attract and retain skilled personnel.
Table of Contents
We continue to diversify our business across other end markets, including aerospace and defense, power generation and transmission, chemical processing, and infrastructure, as well as emerging opportunities in renewable energy and advanced materials. These industries, however, are also cyclical and can be affected by economic slowdowns, supply chain challenges, and changes in government policies or investment levels. Geopolitical instability, including the ongoing war between Russia and Ukraine, conflict in the Middle East, including the recent conflict between the U.S. and Iran, and the recent intervention in Venezuela, continues to contribute to energy market volatility and broader macroeconomic uncertainty. These conflicts have disrupted global supply chains and contributed to elevated energy and material costs in certain regions, particularly impacting our European operations.
Additionally, evolving trade policies, tariffs, and other regulatory or retaliatory actions affecting the flow of goods and materials, particularly between the United States, China, and other major trading partners, could increase our operating costs or impact customer demand in certain markets. Any of these factors could adversely affect our revenues, profitability, and cash flows.
If we are unable to successfully execute our growth strategy, our business, financial condition, and results of operations could be materially and adversely affected
Our long‑term growth strategy depends on expanding and digitalizing our asset‑protection solutions, increasing our presence in certain end markets, broadening our mechanical services, enhancing technology‑enabled offerings, and expanding our solutions to new and existing customers. Successful execution of our long-term growth strategy requires ongoing innovation, effective technology development, sufficient capital investment, scalable operations, qualified personnel, and strong customer and partner relationships.
We may not achieve the growth contemplated by our strategic plans. Our growth initiatives could take longer or cost more than expected, may not generate anticipated returns, or may be constrained by customer adoption rates, competitive pressures, regulatory changes, or operational limitations. If we fail to implement these growth initiatives successfully, or if they do not produce the expected benefits, our revenue trajectory, profitability, and competitive position could be materially harmed. As a result, our actual performance may differ materially from our expectations.
We may be affected by climate change and market or regulatory responses to climate change
Climate change and related legislative, regulatory, and market developments could have a material adverse effect on our results of operations, financial condition, and liquidity. Restrictions on emissions, including those that have already been adopted and others that are expected to be adopted in the future, could affect our customers that (i) use commodities to produce energy, (ii) use significant amounts of fossil fuel to produce or deliver commodities, or (iii) manufacture or produce goods that consume significant amounts of fossil fuels or burn fossil fuels. Significant cost increases, government regulation, or changes of consumer preferences for goods or services relating to alternative sources of energy or emissions reductions could materially affect the markets we serve (including the oil and gas industry), which in turn could have a material adverse effect on our results of operations, financial condition and liquidity. Government incentives encouraging the use of alternative sources of energy also could affect certain of our customers and the markets we serve in an unpredictable manner. Any of these factors, individually or with one or more of the other factors, or other unforeseen impacts of climate change could have a material adverse effect on our results of operations, financial condition and liquidity.
In addition, government incentives supporting renewable energy development and the broader energy transition may cause shifts in capital allocation away from traditional oil and gas infrastructure, which could reduce activity levels in markets we serve. Conversely, increased investment in renewable and alternative energy sources may create new opportunities for our services; however, the pace and scale of such transitions remain uncertain. New and evolving international, federal, state, and local legislation and regulation based on concerns about climate change, including emerging climate disclosure and reporting requirements such as the SEC’s final climate-related disclosure rules, which were stayed in April 2024, may also increase our compliance, data collection, and reporting costs. In addition, in October 2023, California enacted the Climate Corporate Data Accountability Act (“SB-253”), which mandates the disclosure of greenhouse gas emissions, including Scope 1, Scope 2 and Scope 3 emissions; and the Climate-Related Financial Risk Act (“SB-261”), which mandates the disclosure of climate-related financial risks, and measures adopted to reduce and adapt to such risks. California has delayed formal rulemaking for SB-253 until the first quarter of 2026. As of the date of this Annual Report, SB-261 is subject to a court injunction on its implementation. We continue to monitor and review developments relating to SB-253 and SB-261. Meeting these evolving regulatory and stakeholder expectations may require additional investment in systems, processes, and personnel, and could result in reputational or legal risks. Any of these factors, individually or collectively, could affect our results of operations, financial condition, and liquidity.
Table of Contents
Our international operations are subject to risks relating to non-U.S. operations.
For the years ended December 31, 2025, 2024 and 2023, we generated approximately 30%, 31%, and 29% of our revenues outside the United States, respectively. In addition, our international operations as a percentage of our business may increase over time. Our primary operations outside the United States are in Canada, Germany, France, the United Kingdom, the Netherlands, and Brazil. We also have operations in Belgium, Greece, India and Mexico. From time to time, we may conduct business in other jurisdictions where we do not maintain significant or core operations. There are numerous risks inherent in doing business in international markets, including:
• fluctuations in currency exchange rates and interest rates;
• regional micro and macro-economic pressures, inflationary costs, energy costs and geopolitical factors;
• compliance with applicable foreign regulations and licensing requirements, and U.S. laws and regulation with respect to conducting business in other countries, including export controls, sanctions, anti-terrorist and anti-bribery laws;
• the cost and uncertainty of obtaining data and creating solutions that are relevant to particular geographic markets;
• the need to provide sufficient levels of technical support in different locations;
• the complexity of maintaining effective policies and procedures in locations around the world;
• political instability, war or conflicts and civil unrest;
• increased risk of hacking, malware or security breaches of our data and databases;
• restrictions or limitations on outsourcing contracts or services abroad;
• the imposition of domestic and international tariffs, trade barriers and other trade restrictions;
• restrictions or limitations on the repatriation of funds, or tax consequences on the non-repatriation of overseas operationally generated funds; and
• other potentially adverse tax consequences.
Our operating results could be adversely affected by a reduction in business with our significant customers.
We derive a significant amount of revenues from a few customers. Taken as a group, our top ten customers were responsible for approximately 36%, 36%, and 35% of our revenues for the years ended December 31, 2025, 2024 and 2023, respectively. This concentration pertains almost exclusively to our North America segment, which accounted for 81%, 81%, and 82% of our revenues for the years ended December 31, 2025, 2024 and 2023, respectively. These customers are primarily in the oil and gas sector. Generally, our customers do not have an obligation to make purchases from us and may stop ordering our products and services or may terminate existing orders or contracts at any time with little or no financial penalty. The loss of any of our significant customers, any substantial decline in sales to these customers or any significant change in the timing or volume of purchases by our significant customers could result in lower revenues and could harm our business, financial condition or results of operations.
Our business, and the industries we currently serve, are currently subject to governmental regulation, and may become subject to modified or new government regulation that may negatively impact our ability to market our asset protection solutions.
We are required to comply with various government regulations and licensing requirements. For example, the transportation and overnight storage of radioactive materials used in providing certain of our asset protection solutions such as radiography are subject to regulation under federal and state laws and licensing requirements. Our North America segment is currently licensed to handle radioactive materials by the U.S. Nuclear Regulatory Commission, more than 30 state regulatory agencies and the Canadian Nuclear Safety Commission. If we allegedly fail to comply with these regulations, we may be investigated and incur significant legal expenses associated with such investigations, and if we are found to have violated these regulations, we may be fined or lose one or more of our licenses or permits, which would prevent or restrict our ability to provide radiography services. In addition, while we are being investigated, we may be required to suspend work on the projects associated with our alleged , resulting in of profits or customers, and to our reputation. Many of our customers have strict requirements concerning safety or time occurrences and if we are to meet these requirements it could result in revenues. In the future, governmental agencies may seek to change current regulations or impose additional regulations on our
Table of Contents
business. Any modified or new government regulation applicable to our current or future asset protection solutions may negatively impact the marketing and provision of those solutions and increase our costs of providing these solutions and have a corresponding adverse effect on our margins.
Additionally, greenhouse gases that result from human activities, including burning of fossil fuels, have been the focus of increased scientific and political scrutiny and are being subjected to various legal requirements. International agreements, national laws, state laws and various regulatory schemes limit or otherwise regulate emissions of greenhouse gases, and additional restrictions are under consideration by different governmental entities. We derive a significant amount of revenues and profits from such industries, including oil and gas, power generation and transmission, and chemicals processing. Such regulations could negatively impact our customers, which could negatively impact the market for the services and products we provide. This could materially adversely affect our business, financial condition, results of operations and cash flows.
We rely on certification of our NDT solutions by industry standards-setting bodies. We and/or our subsidiaries currently have International Organization for Standardization (ISO) 9001:2008 certification, ISO 14001:2004 certification and OHSAS 18001:2007 certification. In addition, we currently have Nadcap and similar certifications for certain of our locations. We continually review our NDT solutions for compliance with the requirements of industry specification standards and the Nadcap special processes quality requirements. However, if we fail to maintain our ISO, Nadcap or other certifications, our business may be harmed because our customers generally require that we have these certifications before they purchase our NDT solutions.
An accident or incident involving our asset protection solutions could expose us to claims, harm our reputation and adversely affect our ability to compete for business and, as a result, harm our operating performance.
We could be exposed to liabilities arising out of the solutions we provide. For instance, we furnish the results of our testing and inspections for use by our customers in their assessment of their assets, facilities, plants and other structures. If such results were to be incorrect or incomplete, as a result of, for instance, poorly designed inspections, malfunctioning testing equipment or our employees’ failure to adequately test or properly record data, we could be subject to claims. Further, if an accident or incident involving a structure we tested occurs and causes personal injuries or property damage, such as the collapse of a bridge or an explosion in a facility, and particularly if these or could have been prevented by our customers had we provided them with correct or complete results, we would likely face significant relating to personal , property or other . Even if our results are correct and complete, we may face for such or simply because we tested the structure or facility in . In addition, during the course of a single engagement, such as the inspection of a pipeline, we often perform tests on thousands of welds. Even if the accuracy of only a small number of these test results are , a customer may attempt to payment for the entire project. While we do have insurance, our insurance coverage does not cover non-payment by customers and may not be adequate to cover the from any of the prior referenced , us to bear these directly, which could our operating results and may result in additional expenses and possible of revenues. An or for which we are found partially or fully responsible, even if fully insured, or even an at a customer or site for which we provide services although we were found not to be responsible, may also result in publicity, which would our reputation among our customers and the public, cause us to existing and future contracts or make it more for us to compete effectively, thereby significantly our operating performance. In addition, the occurrence of an or might also make it more expensive or extremely for us to insure similar events in the future.
Many of the sites at which we work are inherently dangerous workplaces. If we fail to maintain a safe work environment, we may incur losses and lose business.
Many of our customers, particularly in the oil and gas and chemical industries, require their inspectors and other contractors working at their facilities to have good safety records because of the inherent danger at these sites. If our employees are injured at the work place, we could incur costs for the injuries and lost productivity. In addition, safety records are impacted by the number and amount of workplace incidents involving a contractor’s employees. If our safety record is not within the levels required by our customers, or compares unfavorably to our competitors, we could lose business, be prevented from working at certain facilities or suffer other adverse consequences, all of which could negatively impact our business, revenues, reputation and profitability.
If our software or system produces inaccurate information or are incompatible with the systems used by our customers and make us unable to successfully provide our solutions, it could lead to a loss of revenues and customers.
Our software and systems are complex and, accordingly, may contain undetected errors or failures. Software or system defects or inaccurate data may cause incorrect recording, reporting or display of information related to our asset protection solutions.
Table of Contents
Any such failures, defects and inaccurate data may prevent us from successfully providing our asset protection solutions, which could result in lost revenues. Software or system defects or inaccurate data may lead to customer dissatisfaction and could cause our customers to seek to hold us liable for any damages incurred. As a result, we could lose customers, our reputation may be harmed and our financial condition and results of operations could be materially adversely affected.
We currently serve a commercial, and industrial customer base that uses a wide variety of constantly changing hardware, software solutions and operating systems. Our asset protection solutions need to interface with these systems in order to gather and assess data. Our business depends on the following factors, among others:
• our ability to integrate our technology with new and existing hardware and software systems, of either Mistras or a customer;
• our ability to anticipate and support new standards, especially internet-based standards; and
• our ability to integrate additional software modules under development by either us or a customer, with our existing technology and operational processes.
If we are unable to adequately address any of these factors, our results of operations and prospects for growth and profitability
would be adversely impacted.
If we are unable to attract and retain a sufficient number of trained certified technicians, engineers and scientists at competitive wages, changes in laws and other labor issues could materially affect our financial performance.
We believe that our success depends, in part, upon our ability to attract, develop and retain a sufficient number of trained certified technicians, engineers and scientists at competitive wages. The demand for such employees fluctuates as the demand for NDT and inspection services fluctuates. When the demand for qualified technicians increases, we will often experience increased labor costs, which we may not recover in the amounts we can charge our customers. The markets for our products and services require us to use personnel trained and certified in accordance with standards set by domestic or international standard-setting bodies, such as the American Society of Non-Destructive Testing or the API. Because of the limited supply of these certified technicians, we expend substantial resources maintaining in-house training and certification programs. If we fail to attract sufficient new personnel or fail to motivate and retain our current personnel, our ability to perform under existing contracts and orders or to pursue new business may be harmed, preventing us from growing our business or causing us to lose customers and revenues, and the costs of performing such contracts and orders may increase, which would likely reduce our margins.
In addition, if our costs of labor or related costs increase for other reasons or if new or revised labor laws, rules or regulations or healthcare laws are adopted or implemented that further increase our labor costs, our financial performance could be materially adversely affected.
Our initiatives to improve our financial performance may not achieve results within expected time frames, or at expected levels.
We have undertaken strategies to transform our business so that we may operate more effectively, streamline and rationalize our cost structures, and look for strategic opportunities to expand our revenue and become more profitable. The extent of our future success depends on how successful we are in these endeavors.
In 2023, we initiated a broad operational review, referred to as “Project Phoenix,” aimed at improving profitability and Adjusted EBITDA through meaningful margin enhancement and sustained cost savings. Most phases of Project Phoenix were completed in 2023, including the identification of efficiency and profitability opportunities, validation of actionable initiatives, implementation of key changes throughout 2024, and the continuation of ongoing cost containment and related initiatives during 2025. These efforts have resulted in cost reductions through headcount optimization, streamlined workflows, and process improvements, as well as the development of plans to increase revenue.
While we believe Project Phoenix and ongoing cost containment initiatives will benefit the Company and its stockholders over the long term, there is no certainty that the initiatives will produce the intended results on our expected timeframes or at all. Cost reductions and operational changes could inadvertently disrupt our business, weaken internal controls or procedures, limit growth opportunities, or otherwise adversely affect operations. Additionally, headcount reductions and process changes may negatively impact employee morale, potentially leading to higher turnover, loss of key personnel, and further operational challenges, which could materially affect our financial performance.
Table of Contents
We operate in competitive markets and if we are unable to compete successfully, we could lose market share and revenues and our margins could decline.
We face strong competition from NDT and a variety of niche asset protection providers, both larger and smaller than we are. Some of our competitors have greater financial resources than we do and could focus their substantial financial resources to develop a competing business model or develop products or services that are more attractive to potential customers than what we offer. Some of our competitors are business units of companies substantially larger than us and could attempt to combine asset protection solutions into an integrated offering to customers who already purchase other types of products or services from them. Our competitors may offer asset protection solutions at lower prices than ours in order to attempt to gain market share. Smaller niche competitors with small customer bases could be aggressive in their pricing in order to retain customers. These competitive factors could reduce our market share, revenues and profits.
The success of our businesses depends, in part, on our ability to develop new asset protection solutions, increase the functionality of our current offerings and meet the needs and demands of our customers.
The market for asset protection solutions is impacted by technological change, uncertain product lifecycles, shifts in customer demands and evolving industry standards and regulations. If we fail to execute effective business strategies, or fail to successfully develop and market new asset protection solutions that comply with present or emerging industry regulations and technology standards, our competitive standing and results could suffer. Also, new regulations or technology standards could increase our cost of doing business.
From time to time, our customers have requested greater value and functionality in our solutions. As part of our strategy to enhance our asset protection solutions and grow our business, we continue to make investments in the research and development of new technologies, inspection tools and methodologies. We believe our future success will depend, in part, on our ability to continue to design new, competitive and broader asset protection solutions, enhance our current solutions and provide new, value-added services. Many traditional NDT and inspection services are subject to price competition by our customers. Accordingly, the need to demonstrate our value-added services is becoming more important. Developing new solutions will require continued investment, and we may experience unforeseen technological or operational challenges. In addition, our asset protection software is complex and can be expensive to develop, and new software and software enhancements can require long development and testing periods. If we are unable to develop new asset protection solutions or enhancements that meet market demands on a timely basis, including possible alternative products developed and marketed by our competitors, we may experience a of customers or otherwise be likely to to earn revenues and to customers or access to markets, and our business and results of operations will be affected.
Even if we develop new solutions, if our customers, or potential customers, do not see the value our solutions have over competing products and services, our operating results could be adversely impacted. In addition, because the asset protection solutions industry is evolving, we could lose insight into trends that may be emerging, which would further harm our competitive position by making it difficult to predict and respond to customer needs. If the market for our asset protection solutions does not continue to develop, our ability to grow our business would be limited and we might not be able to maintain profitability. If we cannot convince our customers of the advantages and value of our advanced NDT services, we could lose large contracts or suffer lower profit margin.
The seasonal nature of our business reduces our revenues and profitability in the winter and summer and related cash flows.
Our business is seasonal. The fall and spring revenues are typically higher than our revenues in the winter and summer because demand for our asset protection solutions from the oil and gas as well as the fossil and nuclear power industries increases during their non-peak production periods. For instance, U.S. refineries’ non-peak periods are generally in the fall, when they are retooling to produce more heating oil for winter, and in the spring, when they are retooling to produce more gasoline for summer. As a result of these trends, we generally have reduced cash flows in the fall and spring, as collections of receivables lag behind revenues, normally requiring us to increase our borrowings under our credit agreement. In addition, most of our operating expenses, such as employee compensation and property rental expense, are relatively fixed over the short term. Moreover, our spending levels are based in part on our expectations regarding future revenues. As a result, if revenues for a particular quarter are below expectations, we may not be able to proportionately reduce operating expenses for that quarter. We expect that the impact of seasonality will continue.
Our credit agreement contains financial and operating restrictions that may limit our access to credit. If we fail to comply with financial or other covenants in our credit agreement, we may be required to repay indebtedness to our existing lenders, which may harm our liquidity.
Table of Contents
Our credit agreement contains financial covenants that require us to maintain compliance with specified financial ratios. If we fail to comply with these covenants, the lenders could prevent us from borrowing under our credit agreement, require us to pay all amounts outstanding, require that we cash collateralize letters of credit issued under the credit agreement and restrict us from making acquisitions. If the maturity of our indebtedness is accelerated, we then may not have sufficient funds available for repayment or the ability to borrow or obtain sufficient funds to replace the accelerated indebtedness on terms acceptable to us, or at all. We believe that it is probable, based on the Credit Agreement (as defined herein), that we will be able to comply with the financial covenants in our existing credit agreement and that sufficient credit remains available under the credit agreement to meet our liquidity needs. However, due to the uncertainties being caused by the significant volatility in oil prices and volatility in the aerospace production, such matters cannot be predicted with certainty.
Our current credit agreement also imposes restrictions on our ability to engage in certain activities, such as creating liens, making certain investments, incurring more debt, disposing of certain property, paying dividends and making distributions and entering into a new line of business. While these restrictions have not impeded our business operations to date, if our plans change, these restrictions could be burdensome or require that we pay fees to have the restrictions waived. In addition, due to our current debt levels and restrictions related to the debt covenants in our credit facility, we do not expect to make any acquisitions in 2026 other than small acquisitions with the approval of the lenders under our Credit Agreement.
Currency exchange rate fluctuations in various currencies in which we do business, especially the Euro and the U.S. dollar, could have a material adverse effect on our business, results of operations and financial condition.
Most of our revenues are denominated in U.S. dollars, with the remaining amounts largely in euros, British pound sterling, the Brazilian Real, the Canadian Dollar and the Indian rupee. We have foreign currency exposure related to our operations in foreign locations and our foreign currency exposure arises primarily from the translation of our foreign subsidiaries’ financial statements into U.S. dollars. The exchange rates between the euro and other currencies in which we incur costs or receive revenues, on the one hand, and the U.S. dollar, on the other hand, have changed substantially in recent years and may fluctuate substantially in the future. See Item 7A - “Quantitative and Qualitative Disclosures about Market Risk.”
Our results of operations have been adversely affected and could be further adversely affected by certain movements in exchange rates, particularly if the foreign currencies in which we incur expenses appreciate against the U.S. dollar or if the foreign currencies in which we receive revenues depreciate against the U.S. dollar. For example, a portion of our annual sales and operating costs are denominated in British Pound Sterling and we have exposure related to sales and operating costs increasing or decreasing based on changes in currency exchange rates. If the U.S. Dollar increases in value against these foreign currencies, the value in U.S. Dollars of the assets and liabilities originally recorded in these foreign currencies will decrease. Conversely, if the U.S. Dollar decreases in value against these foreign currencies, the value in U.S. Dollars of the assets and liabilities originally recorded in these foreign currencies will increase. Thus, increases and decreases in the value of the U.S. Dollar relative to these foreign currencies have a direct impact on the value in U.S. Dollars of our foreign currency denominated assets and liabilities, even if the value of these items has not changed in their original currency. We do not currently enter into forward exchange contracts to hedge exposures denominated in foreign currencies. We may consider entering into hedging or forward exchange contracts in the future, as sales in international currencies increase due to growth in our International segment.
We face risks regarding our information technology and security.
We rely extensively on information technology systems to operate and support many aspects of our business, including data management, customer communications, and financial and operational processes. We routinely collect, store, process, and transmit significant amounts of sensitive, confidential, or proprietary information, including customer data, intellectual property, and the results of our testing and inspection services. As we continue to automate and digitize our inspection processes, deploy cloud-based applications, and use remote connectivity tools, our exposure to cybersecurity threats has increased. Cybersecurity incidents, whether resulting from malicious attacks (such as ransomware, phishing, or other network intrusions), employee or contractor error, system malfunction, or inadequate security practices by third parties, could compromise the confidentiality, integrity, or availability of our systems and data. These threats continue to evolve in frequency, scale, and sophistication and may be difficult to prevent, detect, or mitigate. Although we employ a range of security measures, including technical, administrative, and physical safeguards, as well as response procedures and cyber liability insurance, these controls and safeguards may not prevent or mitigate all cybersecurity or service .
Furthermore, we rely on third-party vendors and cloud service providers for various elements of our information technology infrastructure. A cybersecurity breach or failure of a third-party vendor’s systems could expose our confidential information or disrupt our operations. Any such event, whether involving our systems or those of a third party, could result in the loss, unauthorized access, or disclosure of sensitive data; interruptions in our operations; reputational harm; loss of customers;
Table of Contents
regulatory investigations; litigation; or other financial losses. Our cyber liability insurance coverage may not be sufficient to offset all costs or consequences arising from a significant cybersecurity incident.
In addition, much of our computer and communications hardware is located at a primary facility, and although we maintain a geographically separate backup data center, a natural disaster, human error, fire, flood, power loss, telecommunications failure, cyberattack, or similar event could cause temporary interruptions of our key functions and capabilities.
Events such as natural disasters, industrial accidents, epidemics, pandemics, war and acts of terrorism, and adverse weather conditions could disrupt our business or the business of our customers, which could significantly harm our operations, financial results and cash flow.
Our operations, and those of our customers, are susceptible to catastrophic events outside our control, including natural disasters, severe weather events, industrial accidents, epidemics or pandemics, acts of war or terrorism, and other large-scale disruptions. Any such events could cause significant business interruption, property damage, or supply chain disruption that could adversely affect our operations, financial results, and cash flows. We continue to monitor geopolitical instability, including the ongoing war between Russia and Ukraine, the conflict in the Middle East, including the recent conflict between the U.S. and Iran, and the recent intervention in Venezuela, as well as sanctions and other government actions arising from these conflicts. While, to date, these events have not had a material impact on our operations, their duration, escalation, or economic ripple effects, such as in energy markets, supply chain , or inflationary pressures, could affect our customers, particularly those in the oil and gas, power generation, and chemical processing industries.
Our business can also be affected by severe weather and natural disasters. Many of our customers operate in regions such as the Gulf of Mexico that are vulnerable to hurricanes and tropical storms. In the past, hurricane-related disruptions to customer operations have adversely impacted our revenues, and similar events in the future could result in delays to our projects, lost equipment, or reduced demand for our services. Likewise, severe winter weather and other adverse conditions can cause temporary work stoppages, reduced field activity, and customer facility closures.
Beyond physical disruptions, these events can also negatively impact commodity prices, financial markets, and overall customer spending levels. Extended or repeated disruptions from such events could materially affect our ability to provide services, damage customer relationships, and negatively impact our results of operations, financial condition, and cash flows.
We may use artificial intelligence in our business, which could result in reputational harm, competitive harm, and legal liability, and adversely affect our business, results of operations and financial condition.
We are increasingly integrating digital technologies, data analytics, and artificial intelligence (“AI”), including machine learning and generative AI, into our operations, service delivery, and business support functions. For example, we may use AI-driven tools to assist in data interpretation, automate aspects of inspection and analysis, enhance asset integrity assessments, improve workflow efficiency, and support back-office and administrative functions. We also utilize, and may further adopt, third-party software and platforms that incorporate AI technology. While we believe these technologies offer opportunities to enhance our productivity and competitiveness, their use presents new and evolving risks. Our competitors or other third parties may adopt and implement AI tools more rapidly or effectively than we do, which could adversely affect our competitive position. In addition, AI systems can be complex and may produce unintended or inaccurate outputs, particularly when trained on incomplete or biased data. or in AI-generated analyses could affect service quality, lead to asset assessments, or otherwise result in operational or reputational . The legal requirements relating to AI continue to evolve and remain uncertain, including how legal developments could impact our business and ability to enforce our proprietary rights or protect of those rights.
Cybersecurity threat actors may utilize AI tools to automate and enhance cybersecurity attacks against us. Such cybersecurity attacks, if successful, could lead to data breaches, loss of confidential or sensitive information, and financial or reputational harm.
In addition, investors, analysts, and other market participants may use AI tools to process, summarize or interpret our financial information or other data about us. The use of AI tools in financial and market analysis may introduce risks similar to those described above, including an inaccurate interpretation of our financial or operational performance or market trends or conditions, which in turn could result in inaccurate conclusions or investment recommendations.
The regulatory and legal framework governing AI use is rapidly developing across multiple jurisdictions, including emerging requirements around transparency, accountability, cybersecurity, and data privacy. Compliance with these evolving laws and
Table of Contents
regulations could increase our operating costs or limit our ability to deploy certain AI-enabled tools. Moreover, there has been a notable rise in AI-related litigation and regulatory actions involving areas such as intellectual property, privacy, product liability, consumer protection, and defamation. If our use of AI or that of our vendors results in errors, misuse, data breaches, or regulatory non-compliance—or is perceived as unethical or unsafe—our reputation, customer relationships, and brand value could be harmed. Any of these outcomes could adversely affect our business, financial condition, results of operations, or cash flows.
Changes to U.S. tariff and import/export regulations may have a negative effect on us.
There have been significant changes to United States trade policies, treaties and tariffs, and in the future there may be additional significant changes. These and any future developments, and continued uncertainty surrounding trade policies, treaties and tariffs, may have a material adverse effect on global economic conditions, inflation and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Such uncertainty limits our ability to anticipate, plan for, or effectively mitigate the adverse impacts of such measures on our operations and supply chain costs. Any of these factors could depress economic activity and restrict our access to suppliers or customers, increase our supply-chain costs and expenses and could have material adverse effects on our business, financial condition and results of operations.
Risks Related to Our Common Stock
The family of our late founder and Chairman Emeritus may be able to exert significant influence over the direction of our business. The concentrated ownership of our common stock may prevent other stockholders from influencing significant corporate decisions.
The widow of Dr. Sotirios J. Vahaviolos, our late founder and Chairman Emeritus, who passed away on February 6, 2025, and his three adult children beneficially own, to our knowledge, approximately 33.7% of our outstanding common stock. As a result, these shareholders, acting individually or potentially as a group, have significant control and the ability to exert influence over all matters requiring approval by our stockholders. This concentration of ownership could be disadvantageous to our other stockholders with interests differing from interests of the family members.
We currently have no plans to pay dividends on our common stock.
We have not declared or paid any cash dividends on our common stock to date, and we do not anticipate declaring or paying any dividends on our common stock in the foreseeable future. To the extent we do not pay dividends on our common stock, investors must look solely to stock appreciation for a return on their investment.
Shares eligible for future sale may cause the market price for our common stock to decline even if our business is doing well.
Future sales by us or by our existing stockholders of substantial amounts of our common stock in the public market, or the perception that these sales may occur, could cause the market price of our common stock to decline. This could also impair our ability to raise additional capital in the future through the sale of our equity securities. We cann ot predict the size of future issuances of our common stock or the effect, if any, that future sales and issuances of shares of our common stock, or the perception of such sales or issuances, would have on the market price of our common stock. We currently have approximately 168 million shares of common stock available for issuance as of the date of this Annual Report.
Provisions of our certificate of incorporation, bylaws and of Delaware law could discourage, delay or prevent a change of control of our company, which may adversely affect the market price of our common stock.
Certain provisions of our certificate of incorporation and bylaws could discourage, delay or prevent a merger, acquisition, or other change of control that stockholders may consider favorable, including transactions in which our stockholders might otherwise receive a premium for their shares. These provisions also could limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. Stockholders who wish to participate in these transactions may not have the opportunity to do so. Furthermore, these provisions could prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions:
• allow the authorized number of directors to be changed only by resolution of our Board;
• require that vacancies on the Board, including newly created directorships, be filled only by a majority vote of directors then in office;
Table of Contents
• authorize our Board to issue, without stockholder approval, preferred stock that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that is not approved by our Board;
• require that stockholder actions must be effected at a duly called stockholder meeting by prohibiting stockholder action by written consent;
• prohibit cumulative voting in the election of directors, which may otherwise allow holders of less than a majority of stock to elect some directors; and
• establish advance notice requirements for stockholder nominations to our Board or for stockholder proposals that can be acted on at stockholder meetings and limit the right to call special meetings of stockholders to the Chairman of our board, our Chief Executive Officer, our Board acting pursuant to a resolution adopted by a majority of directors or our Secretary upon the written request of stockholders entitled to cast not less than 35% of all the votes entitled to be cast at such meeting.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may, unless certain criteria are met, prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a prescribed period of time.
General Risk Factors
Our stock price could fluctuate for numerous reasons, including variations in our results.
Our quarterly operating results have fluctuated in the past and may do so in the future. Accordingly, we believe that period-to-period comparisons of our results of operations may be the best indicators of our business. You should not rely upon the results of one quarter as an indication of future performance. Our revenues and operating results may fall below the expectations of securities analysts or investors in any future period. Our failure to meet these expectations may cause the market price of our common stock to decline, perhaps substantially. Our quarterly revenues and operating results may vary depending on a number of factors, including those listed previously under “Risks Related to Our Business.” In addition, the price of our common stock is subject to general economic, market, industry, and competitive conditions, the risk factors discussed herein and numerous other conditions outside of our control.
Deteriorations in economic conditions in certain markets or other factors may cause us to recognize additional impairment charges for our goodwill.
During the year ended December 31, 2023, we recognized goodwill impairment charges of $13.8 million within the International reporting units. Future deterioration in industry or economic conditions in which we operate, including increased inflationary costs, costs associated with tariffs or other trade restrictions, energy costs, labor costs, social pressures and disruptions in Europe, the Middle East, including the recent conflict between the U.S. and Iran, or elsewhere as a result of the ongoing war between Russia and Ukraine and the conflict between Israel, Hamas and other actors, disruptions to our business, not effectively integrating acquired businesses, macroeconomic factors, other geopolitical tensions or other factors, may cause impairment charges to our goodwill in future periods.
We are subject to privacy and data security/protection laws in the jurisdictions in which we operate and may be exposed to substantial costs and liabilities associated with such laws and regulations.
The regulatory environment surrounding information security and privacy is increasingly demanding, with frequent imposition of new and changing requirements. The European Union's General Data Protection Regulation (“GDPR”), which became effective in May 2018, imposed significant new requirements on how companies process and transfer personal data, as well as significant fines for non-compliance. In addition to GDPR, many states in the U.S. and provinces in Canada have enacted, or are considering, data privacy requirements similar to GDPR, and thus we will need to ensure our procedures comply with these various state and provincial laws. Compliance with changes in privacy and information security laws and standards may result in significant expense due to increased investment in technology and the development of new operational processes, which could have a material adverse effect on our financial condition and results of operations. In addition, the payment of potentially significant fines or penalties in the event of a breach of privacy and information security laws, as well as the negative publicity associated with such a breach, could our reputation and impact product demand and customer relationships.
If we lose key members of our senior management team upon whom we are dependent, we may be less effective in managing our operations and may have more difficulty achieving our strategic objectives.
Table of Contents
Our future success depends to a considerable degree upon the availability, contributions, vision, skills, experience and effort of our senior management team. We have in place various compensation programs, such as an annual cash incentive program, equity incentive program and a severance policy, each designed to incentivize and retain our key senior managers. At this time, we do not have any reason to believe that we may lose the services of any of these key persons in the foreseeable future and we believe our compensation programs will help us retain these individuals. However, an unplanned loss or interruption of the service of numerous key members of our senior management team could harm our business, financial condition and results of operations and could significantly reduce our ability to manage our operations and implement our strategy.
Intellectual property may impact our business and results of operations.
Our ability to compete effectively depends in part upon the maintenance and protection of the intellectual property related to our asset protection solutions. Patent protection is unavailable for certain aspects of the technology and operational processes important to our business and any patent or patent applications, trademarks or copyrights held by us or to be issued to us, may not adequately protect us. To date, we have relied principally on copyright, trademark and trade secrecy laws, as well as confidentiality agreements and licensing arrangements, and more recently, patent protection, to establish and protect our intellectual property. However, we have not obtained confidentiality agreements from all our customers. Although we obligate our employees to confidentiality, we cannot be certain that these obligations will be honored or enforceable in all circumstances.
Social, political and economic changes or instability, or other circumstances beyond our control could affect our business operations.
Our business may be adversely affected by social, political and economic instability, unrest or disruption, including legal, regulatory and policy changes by a new presidential administration in the U.S., protests, demonstrations, strikes, riots, civil disturbance, disobedience, insurrection, or social and other political unrest. Such events may result in restrictions, curfews or other actions and give rise to significant changes in regional and global economic conditions and cycles, which may adversely affect our financial condition and operations.
Changes in federal policy, including tax policies, and at regulatory agencies occur over time through policy and personnel changes following elections, which can lead to changes involving the level of oversight and focus on certain industries and corporate entities. The nature, timing, and economic and political effects of potential changes to the current legal and regulatory frameworks affecting the industries in which we operate remain highly uncertain. Additionally, changes in federal policy that affect the geopolitical landscape, such as the imposition of tariffs and changes to U.S. trade policy, have, and could in the future, lead to adverse effects on the U.S. domestic economy and our business operations.
We may require additional capital to support business growth, which might not be available.
We intend to continue making investments to support our business growth and may require additional funds to respond to business challenges or opportunities, including the need to develop new, or enhance our current, asset protection solutions, enhance our operating infrastructure or acquire businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through further issuances of equity or convertible debt securities, our current stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Our current credit facility meets our current needs, except that due to our current debt levels, the facility limits our ability to make acquisitions without the banks' approval until our debt ratio improves. If we were to secure other debt financing in the future, it could involve restrictive covenants relating to our capital-raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business , including potential acquisitions. In addition, no assurance can be given that adequate or acceptable financing will be available to us, in which case we may not be to grow our business, including through acquisitions, or respond to business .
Changes in Tax Laws, Including the One Big Beautiful Bill Act, Could Adversely Affect Our Effective Tax Rates, Financial Condition, and Results of Operations
We are a U.S.-based multinational company subject to taxes in multiple U.S. and foreign jurisdictions. Our operations and results are affected by U.S. federal and state tax laws, as well as foreign tax laws in the countries in which we conduct business. These laws and related guidance, regulations, and interpretations are subject to change, and changes could be retroactive or have unanticipated consequences, which could materially increase our tax obligations or affect our financial results.
Table of Contents
In July 2025, the U.S. federal government enacted the One Big Beautiful Bill Act (“OBBBA”), implementing significant corporate tax reforms. OBBBA allows for immediate deductibility of domestic research and experimental expenses for tax years beginning after December 31, 2024, and provides elections to accelerate deductions for previously capitalized research and experimental expenses from 2022 through 2024. Corporations may deduct remaining unamortized amounts either fully in their first taxable year beginning after December 31, 2024, or ratably over two years. OBBBA also increased the effective tax rate associated with international operations and reduced the benefit of certain foreign-derived deductions for U.S.-domiciled corporations. In addition, the Base Erosion and Anti-Abuse Tax (BEAT) rate applicable to payments from U.S. corporations to foreign subsidiaries treated as Controlled Foreign Corporations was increased.
The U.S. Treasury Department is expected to issue extensive guidance addressing implementation and transition rules, and Congress may enact technical corrections. The ultimate impact of such guidance and corrections on our business, including our effective tax rate and cash flows, is uncertain at this time.
In addition, the Organization for Economic Cooperation and Development (“OECD”) has developed frameworks, including its global minimum corporate tax under Pillar 2, intended to prevent base erosion and profit shifting. While the United States has withdrawn support for Pillar 2, certain foreign jurisdictions in which we operate have adopted legislation to impose minimum “Top Up” taxes or other non-income-based taxes, including digital services or revenue-based taxes.
Due to our international business activities, changes under OBBBA or other U.S. or foreign tax reforms, new legislation, or the adoption of OECD-based rules could increase our worldwide effective tax rate, increase the amount of non-income taxes imposed on our business, and materially harm our financial position, results of operations, or cash flows. Such changes could apply retroactively, and there can be no assurance that future tax law changes will not increase our tax liabilities, limit deductions or credits, or otherwise negatively impact our business and operations.
