Mistras : 2021 MISTRAS Annual Report

KEY FINANCIAL HIGHLIGHTS

Historical Revenues

($ IN MILLIONS)

Revenues by End Market

(CY21)

$742 $749

CY19

$677

CY18

$593

CY20

CY21

Gross Profit Margin

30.1% 29.0%29.1%

Revenues by Region

CY18

CY19

CY20

CY21

(CY21)

Net Cash Provided by Operating

Activities

($ IN MILLIONS)

$42

CY18

$59

CY19

$68

CY20

$42

CY21

SHAREHOLDER LETTER

Dear Fellow Shareholders,

In the face of unprecedented challenges presented by the rapid transformation our world is undergoing, MISTRAS exited 2021 having strengthened our financial position while also improving profitability. Debt reduction is the top priority for the use of cash, and in 2021 we reduced debt by $16.3 million. Over the past three years, we have now reduced our total debt by just over $90 million through the end of 2021. We have also improved our gross margin level and lowered our overhead costs to pre-pandemic levels. We not only survived, but are thriving in this new era.

The pandemic and international crises continue to impact the markets we serve, though we have seen encouraging signs that the aerospace and oil & gas markets are returning to pre-2020 levels. We believe the waning pandemic and resulting resumption of air travel to be positive signs of an impending recovery in

the aerospace industry, possibly as early as the second half of 2022. Crude oil prices now significantly exceed pre-pandemic levels, and though this has caused many refineries to defer inspections as they capture the additional income, we expect conditions in this market to improve throughout 2022.

We have also seen a global shift in the demand for environmental, social, and governance (ESG) accountability, which could lead to increased demand for immediately-available cleaner energy alternatives, such as wind energy and natural gas. This focus on environmental responsibility could also potentially impact the demand for asset protection solutions that help energy producers reduce their carbon footprint.

"Our significant investments... bring innovative, data-driven solutions to the market that will fuel the next phase of our growth."

Together, all these factors have fundamentally altered the way we live and work, and have accelerated the pace of trends towards digital, remotely-accessible technologies, as well as an increased reliance on multi-disciplined vendors who can solve multiple asset protection problems, as customers seek to minimize the volume of on-site personnel.

While some of our competitors have struggled adapting to this "new normal," MISTRAS' evolution over the last 40+ years has been defined by our ability to adapt our business model to meet the ever-changing needs of our customers and the markets we serve. Our foresight and leadership in the digital transformation of asset protection has empowered us to take lasting steps to build on that foundation.

INTEGRATED & INSIGHTFUL NETWORK OF DATA SOLUTIONS

The release of the OneSuite™ asset protection software ecosystem is an essential step in this process. OneSuite is built on the extensive knowledge, technologies, and resources MISTRAS has developed over the past several decades, integrating our software, service, and data solution offerings into a single platform, creating a level of integrity-data integration that is groundbreaking for the industry.

OneSuite serves as a significant competitive differentiator for us to attract the growing number of organizations looking to make their asset protection operations leaner and more intelligent, helping them generate insights to drive asset performance through asset protection. The platform has already beenadopted by nearly 100 customers with over 1,000 individual subscriptions in just the past 12 months, and we anticipate further growth in 2022.

ALIGNING INTERNAL STRUCTURES WITH GROWTH STRATEGY

As OneSuite becomes the fulcrum of our data-oriented solutions, we are also taking the long view in transforming our internal operations to support this initiative. We recently codified the management of our data solutions into our organizational structure by creating the Data Solutions

Center of Excellence (COE). In line with our vision to be the "integrated-solution partner" for our customers, the Data Solutions COEwill be instrumental in maximizing the cross-functionality and value customers can generate from the 85 and growing applications within OneSuite, including apps from MISTRAS Digital®, PCMS®, New

Century Software, and more.

ADDRESSING ALTERNATIVE MARKETS

We have also identified opportunities to provide our digital and integration solutions to continue to diversify the markets we support, including renewable energy, aerospace & defense, and natural gas.

Wind Energy

One of our most exciting growth initiatives is the Sensoria™ wind blade monitoring system, which remotely detects damages to

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SHAREHOLDER LETTER (CONT.)

wind turbine blades and reports them to operators in real time through a web-based data portal. The patented blade monitoring system that backs Sensoria with sensing technology and its innovative web app provide wind farm operators with better information and faster than the blade integrity technologies currently used in the market today.

Sensoria fits seamlessly as a complement to our existing mechanical, inspection, and access solutions. We envision a product and service offering that includes the sale and installation of the sensors on the turbine, 24/7 monitoring service, data analysis, and ongoing inspection, repair, and maintenance service of any damage detected. We believe that there are currently no competitors for wind turbine blade repair and maintenance - a market we believe has a large growth potential - that can directly match MISTRAS' technological capabilities and breadth of solutions.

Sensoria is currently in proof-of-concept on dozens of turbines with a variety of brand-name owners. We expect to continue growing the number of turbines we monitor throughout 2022, and should possess the capability to manufacture enough systems by the end of 2023 to support monitoring for up to 1,000 turbines.

Aerospace & Defense

While the return of the commercial aerospace market to pre- pandemic levels has lagged other key markets, we have seen encouraging signs of progress and have seen strong results in the private space and defense sectors. Building off the successful model of our plant in Le Creusot, France - in which we streamlined manufacturing processes by performing multiple inspection, testing, and mechanical services in a single facility - we have recently invested in new equipment and processes for our Ellabell, Georgia and Heath, Ohio facilities to support both the commercial and private aerospace and defense sectors. We have also secured opportunities to perform field inspection services for defense submarines, and are actively staffing up to support the increased demand. We are optimistic these opportunities will propel and accelerate growth in the aerospace & defense sector as the commercial market returns later this year.

Natural Gas

The natural gas market similarly shows encouraging signs for the future, providing ample opportunity to expand our pipeline business. Natural gas provides an immediately-available energy source to facilitate the transition towards a predominantly renewable-based future. Natural gas transmission pipelines are a focus area for Onstream Pipeline Inspection, who had a record revenue year in 2021. With our expanding toolset service offerings and the launch of variable speed control technology that minimizes the interruption to natural gas pipelines during the inspection process, we expect additional growth from Onstream in 2022.

In summary, I am proud of the results we accomplished in 2021 despite facing challenges that affected virtually every corner of the world. We strengthened our financial condition while approaching pre-pandemic top-line performance. We are optimistic about our prospects for 2022, particularly regarding our significant investments to bring innovative, data-driven solutions to the market that will fuel the next phase of our growth.

On behalf of our Board of Directors and our management team, we extend our thanks to our customers, our partners, our employee workforce, and our loyal shareholders, for their continued support and trust.

Sincerely,

DENNIS M. BERTOLOTTI MISTRAS Group President and CEO

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