Innovex International, Inc.

NOTE 1. SUMMARY OF BUSINESS

Description of Business

Innovex International, Inc. (“Innovex”, the “Company”, the “Combined Company”, or “we”) designs, manufactures, sells and rents a broad suite of well-centric, engineered products to the global oil and natural gas industry. Our products are sold and rented to international oil companies, national oil companies, independent exploration and production companies and multinational service companies. The products we provide have applications across the well lifecycle for both onshore and offshore oil and natural gas wells, including well construction, well completion, and well production and intervention applications. The Company’s corporate office is located in Humble, Texas.

On March 18, 2024, Innovex Downhole Solutions, Inc., a Delaware corporation (“Legacy Innovex”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Dril-Quip, Inc., a Delaware corporation (“Dril-Quip”), Ironman Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Dril-Quip, and DQ Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of Dril-Quip. On September 6, 2024 (the “Closing Date”), the transactions contemplated in the Merger Agreement (the “Merger”) were consummated. Following the Merger, Legacy Innovex became a wholly owned subsidiary of Dril-Quip, and the name “Dril-Quip, Inc.” was changed to “Innovex International, Inc.” The Company’s stock remained listed on the New York Stock Exchange, and its symbol was changed to “INVX”. Except as otherwise indicated, references herein to “Dril-Quip” are to Dril-Quip, Inc. prior to the completion of the Merger.

The Merger was accounted for using the acquisition method of accounting with Legacy Innovex being identified as the accounting acquirer. The Consolidated Financial Statements of the Company reflect the financial position, results of operations and cash flows of only Legacy Innovex for all periods prior to the Merger and of the Combined Company for all periods subsequent to the Merger.

In connection with the consummation of the Merger, the outstanding shares of common stock, par value $0.01 per share, of Legacy Innovex (the“Legacy Innovex Common Stock”) were converted into the right to receive 32,183,966 shares of common stock, par value $0.01 per share, of the Company (the “Company Common Stock”). The number of shares of Company Common Stock received for each share of Legacy Innovex Common Stock by the Legacy Innovex shareholders was equal to 2.0125.

On November 29, 2024, the Company acquired the remaining 80% of the issued and outstanding equity securities of Downhole Well Solutions, LLC (“DWS”) for a mixture of cash and equity consideration, resulting in DWS becoming a wholly owned subsidiary of Innovex. Refer to Note 3. Mergers and Acquisitions for further details.

On February 7, 2025, the Company acquired SCF Machining Corporation (“SCF”) for cash, resulting in SCF becoming a wholly owned subsidiary of Innovex. Refer to Note 3. Mergers and Acquisitions for further details.

On February 25, 2025, the Company's board of directors (the "Board") approved a new share repurchase program (the “New Share Repurchase Program”) that authorizes repurchases of up to an aggregate of $100 million of outstanding Company Common Stock. In connection with the New Share Repurchase Program, all share repurchase plans previously authorized by the board of directors of Dril-Quip have been terminated. The New Share Repurchase Program does not require the Company to repurchase a specific number of shares or have an expiration date. Any shares repurchased under the New Share Repurchase will be cancelled.

In the second quarter of 2025, the Company's certificate of incorporation was amended to increase the number of capital stock authorized for issuance. Prior to the amendment, thecertificate of incorporation authorized the Company to issue 110,000,000 shares of capital stock, consisting of (i)100,000,000 shares of Company Common Stock, par value$0.01 per share, and (ii)10,000,000 shares of preferred stock, par value$0.01 per share. The amendment increased the number of authorized shares of Company Common Stock to 200,000,000 and correspondingly increased the number of authorized shares of our capital stock to 210,000,000; the authorized number of shares of our preferred stock remained at 10,000,000.

On May 30, 2025, the Company acquired Citadel Casing Solutions, LLC ("Citadel") for cash, resulting in Citadel becoming a wholly owned subsidiary of Innovex. Refer to Note 3. Mergers and Acquisitions for further details.

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP” or “GAAP”) for interim financial information. The Condensed Consolidated Financial Statements include the accounts of our subsidiaries where we have control over operating and financial policies. Investments in unconsolidated affiliates, in which the Company can exercise significant influence, but does not own a controlling financial interest, are accounted for using the equity method of accounting. These Condensed Consolidated Financial Statements should be read in conjunction with our financial statements and related notes thereto for the year ended December 31, 2024 (the “Audited Financial Statements”) included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 3, 2025 (the “Annual Report”). In the opinion of management, these Condensed Consolidated Financial Statements reflect all normal, recurring adjustments necessary for a fair statement of the interim periods presented. The results of operations for interim periods are not necessarily indicative of those for a full year. All intercompany accounts and transactions have been eliminated for purposes of preparing these Condensed Consolidated Financial Statements.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are described in Note 2. Summary of Significant Accounting Policies in the Audited Financial Statements.

Segment Information

The Company operates inone reportable segment. Our chief operating decision maker (“CODM”) is our Chief Executive Officer. Our CODM assesses performance and allocates resources based on financial information presented at a consolidated level. The types of products and services from which we derive our revenues is disclosed under “Revenue Recognition” within our Annual Report. The Company derives revenue globally, and our manufacturing and engineering capabilities exist in multiple locations, but these costs are managed centrally as manufactured parts and engineering capabilities are used to support the global Company. The CODM assesses performance for the single reportable segment, which represents the consolidated global entity, based on net income which is reported in the Condensed Consolidated Statements of Operations and Comprehensive Income. The measure of segment assets is reported on the Condensed Consolidated Balance Sheets as total consolidated assets.

Our CODM uses net income to evaluatethe profitability of our business operations, evaluate our return on capital, and to compare our operating performance to our competitors. Net income is also used in deciding whether to reinvest profits into the existing business or to use in other ways, such as for acquisitions.

Recent Accounting Pronouncements

Income Tax Disclosures (Topic 740) In December 2023, the FASB issued ASU 2023-09 which updated accounting guidance related to income tax disclosures. The updated accounting guidance, among other things, requires additional disclosures primarily related to the tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. The Company is currently assessing the impact of ASU 2023-09.

Expense Disaggregation Disclosures (Subtopic 220-40) In November 2024, the FASB issued ASU 2024-03 which requires additional disclosures of specific income statement expense line items in the notes to the financial statements on both an interim and annual basis. ASU 2024-03 is effective for annual periods beginning after December 15, 2026. The Company is currently assessing the impact of ASU 2024-03 on its disclosures.

NOTE 3. MERGERS AND ACQUISITIONS

The Company's acquisition of business and equity method investments consisted of the following transactions during the six months ended June 30, 2025 and the twelve months ended December 31, 2024. Acquisition and integration costs within the Condensed Consolidated Statements of Operations and Comprehensive Income consist of legal, accounting, advisory fees, and other integration costs related to the Merger, the acquisition of equity interest in DWS, the acquisition of SCF, and the acquisition of Citadel.

Citadel Casing Solutions, LLC (“Citadel”) Acquisition

On May 30, 2025, the Company acquired Citadel for$69.7 million in cash consideration, subject to post-closing adjustments. We believe this acquisition will enhance our product portfolio and allow us to leverage Citadel's industrial platform. The acquisition qualifies as a business combination and will be accounted for using the acquisition method of accounting. The purchase price includes$3.0 million that was retained by the Company for purposes of funding any post-closing expenses and liabilities identified after the close of the transaction, if necessary.

In accordance with Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”), identifiable assets acquired and liabilities assumed were recorded at their estimated fair values on the date of acquisition. The allocation of the purchase price included in the current period balance sheet is based on the best estimate of management and is preliminary and subject to change. We will continue to obtain information to assist in determining the fair value of net assets acquired during the measurement period. The Company expects to finalize these amounts as soon as possible but no later than one year from May 30, 2025, the closing date of the acquisition.

The table below presents the preliminary allocation to the estimated fair value of identifiable assets acquired and liabilities assumed and the resulting goodwill as of May 30, 2025. Goodwill represents the future economic benefits arising from other assets acquired that cannot be individually identified and separately recognized. Based on the current tax treatment, goodwill is expected to be deductible for income tax purposes over a 15-year period.

The Company incurred transaction costs in connection with the acquisition in the amount of$0.2 million. The costs have been expensed as incurred and recognized in Acquisition and integration costs in the Condensed Consolidated Statements of Operations and Comprehensive Income.

The table below represents the detail of the intangible assets acquired and the respective amortization periods (amounts in thousands):

The fair values of identifiable intangible assets were prepared using an income valuation approach, which requires a forecast of expected future cash flows either using the relief-from royalty method or the multi-period excess earnings method, which are discounted to approximate their current value. The assumptions used to derive these values include significant judgments relating to baseline revenue and revenue growth rates, EBITDA margins, contributory asset charges, customer attrition rate, and discount rate. The estimated useful lives are based on our historical experience and expectations as to the duration of time that benefits from these assets are expected to be realized.

Revenue and Earnings

For the period from May 30, 2025 to June 30, 2025, we have included$4.7 million of revenues contributed by the business acquired. Due to the integration of operations since May 30, 2025, the closing date of the acquisition, it was impracticable to present stand-alone earnings since the date of the acquisition.

Unaudited Supplemental Pro Forma Financial Information

The unaudited supplemental pro forma information presented below has been prepared for the combined company as if the Citadel acquisition had occurred on January 1, 2024. The pro forma summary uses estimates and assumptions based on information available at the time. The Company believes the estimates and assumptions to be reasonable; however, the unaudited pro forma information is not necessarily indicative of what the combined company’s results would have been had the acquisition been completed as of the beginning of the periods as indicated, nor does it purport to project the Company’s future results. The unaudited pro forma information does not reflect any synergy savings that might have been achieved from combining the operations. Amounts are presented in thousands:

Pro forma information includes, among others, (i) incremental depreciation and amortization resulting from the property and equipment and intangible assets acquired, (ii) accounting policy alignment, (iii) adjustments to reflect non-recurring acquisition related costs incurred directly in connection with the Citadel acquisition as if it had occurred in the earliest period presented above, and (iv) the tax-related effects as though the Citadel acquisition had occurred on January 1, 2024.

SCF Machining Corporation Acquisition

On February 7, 2025, the Company acquired SCF in exchange for$17.7 million in cash consideration, subject to post-closing adjustments. SCF is a Canadian-domiciled entity and parent company to SCF Machining Corporation Vietnam Company Limited, a Vietnam-based company that was established to grow Innovex’s low-cost country supply chain by establishing an exclusive manufacturing vendor to provide Innovex with high quality, low price machined goods. The acquisition qualifies as a business combination and will be accounted for using the acquisition method of accounting.

In accordance with ASC 805, identifiable assets acquired and liabilities assumed were recorded at their estimated fair values on the date of acquisition. The allocation of the purchase price included in the current period balance sheet is based on the best estimate of management and is preliminary and subject to change. We will continue to obtain information to assist in determining the fair value of net assets acquired during the measurement period. The Company expects to finalize these amounts as soon as possible but no later than one year from the closing date of the acquisition.

The table below presents the preliminary allocation to the estimated fair value of identifiable assets acquired and liabilities assumed and the resulting goodwill as of February 7, 2025. Goodwill is primarily attributable to the anticipated cost reductions and supply chain flexibility expected from the integration of SCF. Based on the current tax treatment, goodwill is not expected to be deductible for income tax purposes.

The Company incurred transaction costs in connection with the acquisition in the amount of$0.2 million. The costs have been expensed as incurred and recognized in Acquisition and integration costs in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Legacy Innovex and Dril-Quip Merger

As discussed in Note 1. Summary of Business, on the Closing Date, the Merger was consummated. Following the Merger, Legacy Innovex became a wholly owned subsidiary of Dril-Quip, and the name “Dril-Quip, Inc.” was changed to “Innovex International, Inc.” As provided for in the Merger Agreement, Legacy Innovex paid a cash dividend of $75.0 million, or $2.39 per share, to the holders of Legacy Innovex Common Stock on September 6, 2024. The Merger was pursued given the enhanced global scale, footprint, and financial flexibility of combining the two companies. The Merger is accounted for as a reverse acquisition under ASC 805, where Legacy Innovex, the legal acquiree, is determined to be the accounting acquirer of Dril-Quip.

Purchase Price Consideration

The accounting acquiree Dril-Quip’s stock price was used to measure the consideration transferred in the reverse acquisition, as Dril-Quip’s stock price was more reliably measurable than the value of the equity interest of the accounting acquirer Legacy Innovex, which was a privately held entity. The following table summarizes the consideration for the Merger (in thousands, except stock price and shares):

(1)The fair value of shares transferred to Dril-Quip stockholders is based on 34,452,230 shares of Dril-Quip common stock outstanding and the closing stock price of Dril-Quip common stock of $15.41 on the Closing Date.

In accordance with ASC 805, identifiable assets acquired and liabilities assumed from Dril-Quip were recorded at their estimated fair values on the Closing Date. The allocation of the purchase price included in the current period balance sheet is based on the best estimate of management and is preliminary and subject to change. We will continue to obtain information to assist in determining the fair value of net assets acquired during the measurement period. The Company expects to finalize these amounts as soon as possible but no later than one year from the Closing Date.

The Merger resulted in a gain on bargain purchase recognized on the Consolidated Statements of Operations and Comprehensive Income due to the estimated fair value of the identifiable net assets acquired exceeding the purchase consideration transferred. Upon completion of its preliminary assessment, the Company concluded that all of the assets acquired and liabilities assumed have been identified and recognized, including any additional assets and liabilities not previously identified or recognized in the acquisition accounting, and that recording a gain on bargain purchase was appropriate and required under U.S. GAAP. The bargain purchase gain was due to the decrease in the share price of legacy Dril-Quip stock from the date the Merger Agreement was signed to the Closing Date, while the agreed upon ratio of Innovex shareholder’s ownership of the Combined Company, as stipulated in the Merger Agreement, remained the same.

The table below presents the preliminary allocation to the estimated fair value of identifiable assets acquired and liabilities assumed, and the resulting gain on bargain purchase as of the Closing Date. Measurement period adjustments were based upon information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of the amounts recognized at that date.

(1) Represents the deferred tax asset adjustment recognized from a refinement of our estimated deferred tax positions by jurisdictions.

Downhole Well Solutions, LLC (“DWS”) Acquisition

On May 1, 2023, Legacy Innovex acquired a 20% equity interest in DWS, via purchasing membership units of DWS, for the purchase price of $17.6 million in cash consideration. On November 29, 2024, the Company acquired the remaining 80% of the issued and outstanding equity of DWS, resulting in DWS becoming a wholly owned subsidiary of Innovex. DWS rents drilling equipment and related technology which is complimentary to the Company’s existing product lines.

Prior to the acquisition of the remaining 80% ownership interest in 2024, Legacy Innovex obtained significant influence over DWS through a 20% ownership and one board seat out of three total board seats of representation on the board of directors of DWS. The acquisition was accounted for as an equity method investment under Accounting Standards Codification Topic 323, Investments—Equity Method and Joint Ventures (“ASC 323”). The cost of the investment was $15.0 million more than the acquired underlying equity in DWS net assets. The difference was attributable to intangible assets of $13.0 million and equity method goodwill of $2.0 million. The difference pertaining to intangible assets was amortized to equity method earnings over the remaining useful life of the related asset. Transaction costs recognized in connection with the acquisition were $0.7 million and were capitalized as part of the equity investment. For thethree months ended June 30, 2024, the Company recorded our proportionate share of DWS’s net income of$1.1 million, adjusted for$0.4 million amortization attributed to intangible assets, and DWS distributed$0.6 million of dividends to the Company, which were recorded as a reduction of the carrying value of the equity investment. For the six months ended June 30, 2024, the Company recorded our proportionate share of DWS’s net income of$1.9 million, adjusted for$0.7 million amortization attributed to intangible assets, and DWS distributed$1.6 million of dividends to the Company, which were recorded as a reduction of the carrying value of the equity investment.

Purchase Price Consideration

As noted above, on November 29, 2024, the Company acquired the remaining 80% of the issued and outstanding equity of DWS. The purchase price for the acquisition consisted of $75.1 million in cash, subject to post-closing adjustments, and 1,918,558 shares of Company Common Stock. An additional$4.0 million of the purchase price was retained by the Company for purposes of funding any post-closing expenses and liabilities related to a patent infringement-related litigation matter to which DWS is a party. Refer to Note 17. Commitments and Contingencies for further details.

Because Innovex acquired control of DWS in the 2024 purchase, the acquisition was accounted for as a step acquisition in accordance with ASC 805. The Company remeasured its previously held 20% equity interest at its acquisition-date fair value of$27.6 million, which was determined using the implied enterprise value based on the purchase price. The resulting gain of $8.0 million was reflected within Gain on consolidation of equity method investment on the Consolidated Statements of Operations and Comprehensive Income in our Annual Report.

The following table summarizes the consideration for the acquisition (in thousands, except stock price and shares):

(1)The fair value of equity consideration is based on 1,918,558 shares transferred and the closing stock price of Company Common Stock of $16.27 on the date of acquisition.

In accordance with ASC 805, identifiable assets acquired and liabilities assumed were recorded at their estimated fair values on the date of acquisition. The allocation of the purchase price included in the current period balance sheet is based on the best estimate of management and is preliminary and subject to change. We will continue to obtain information to assist in determining the fair value of net assets acquired during the measurement period. The Company expects to finalize these amounts as soon as possible but no later than one year from the closing date of the acquisition.

The table below presents the preliminary allocation to the estimated fair value of identifiable assets acquired and liabilities assumed and the resulting goodwill as of November 29, 2024. Goodwill is primarily attributable to the anticipated synergies expected from the integration of DWS. Based on the current tax treatment, $26.1 million of goodwill is expected to be deductible for income tax purposes over a 15-year period, while the remaining portion is not expected to be deductible for income tax purposes.

(1) Represents the indemnification asset and corresponding liability related to unresolved legal matters that existed pre-acquisition in connection with the Impulse Litigation (as defined in Note 17. Commitments and Contingencies). This measurement period adjustment is a result of legal fees incurred to date on the pre-acquisition legal matter. Refer to Note 17. Commitments and Contingencies for further discussion.

The table below represents the detail of the intangible assets acquired and the respective amortization periods (amounts in thousands):

Refer to Note 8. Intangible Assets and Goodwill for further discussion of accounting treatment for goodwill and other intangible assets recognized from these acquisitions.

NOTE 4. REVENUE

Revenue is recognized as, or when, the performance obligations are satisfied. The Company generates revenue primarily from three revenue streams: (i) product revenues, (ii) service revenues, and (iii) rental revenues. We sell or rent our products and provide services primarily in onshore U.S. and Canadian (“NAM”) markets and in international and offshore markets. We attribute rental and service revenue to the country in which the rental or service was performed, while we attribute product sales revenue to the country to which the product was shipped. The Company has elected the practical expedient to expense commissions as the amortization period associated with the asset that would have been recognized for each order is one year or less. Rental revenue as presented in the table below is accounted for under the lease guidance according to Accounting Standards Codification Topic 842, Leases ("ASC 842") and recognized ratably over the term of the lease.

From time to time, we may enter into contracts that contain multiple performance obligations, such as work orders containing a combination of product sales, equipment rentals and contract labor services. For these arrangements, we allocate the transaction price to each performance obligation identified in the contract based on relative standalone selling prices and recognize the related revenue as control of each individual product or service is transferred to the customer, in satisfaction of the corresponding performance obligations.

The following tables present our revenues disaggregated by category and by geography:

Trade receivables are stated at the historical carrying amount net of allowances for credit losses. These receivables are generally uncollateralized, and accounts outstanding longer than the payment terms are considered past due.

We evaluate our global trade receivable through a continuous process of assessing our portfolio on an individual customer and overall basis. This process consists of a thorough review of historical collection experience, current aging status of the customer accounts and financial condition of our customers. Based on our review of these factors, we establish or adjust allowances for specific customers. Past due balances are written-off against allowance for credit losses when the accounts are deemed no longer to be collectible. This process involves judgment and estimation; therefore, our results of operations could be affected by adjustments to the allowance due to actual write-offs that differ from estimated amounts.

The changes in allowance for credit losses during thesix months ended June 30, 2025 and 2024 were as follows:

Contract Balances

Based upon the terms of the specific contract, billings may be in excess of the revenue recognized, in which case the amounts are included in contract liabilities as a liability on the Condensed Consolidated Balance Sheets. Likewise, revenue recognized may exceed customer billings, in which case the amounts are reported in contract assets.

Contract assets are recognized for revenue related to products accounted for using the over time method of accounting and are earned on completion of the performance obligation, for which consideration to be received is conditional on something other than the passage of time. The amounts recognized as contract assets are reclassified to trade receivables upon billing, as at that point, consideration is conditional only upon the passage of time. Contract liabilities represent the Company’s obligations to transfer goods or services to customers for which the Company has received consideration, in full or part, from the customer. Balances related to contracts with customers consisted of the following:

Contract Assets (amounts shown in thousands)

Contract liabilities (amounts shown in thousands)

Obligations for returns and refunds were considered immaterial as of June 30, 2025.

Remaining Performance Obligations

The aggregate amount of the transaction price allocated to remaining performance obligations from our over time product lines was$1.0 million as of June 30, 2025. The Company expects to recognize revenue on 100% of the remaining performance obligations over the next twelve months.

The Company applies the practical expedient available under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers ("ASC 606"), which permits us not to disclose information about remaining performance obligations that have original expected durations of one year or less.

NOTE 5. INVENTORY

A summary of inventory as of June 30, 2025 and December 31, 2024 is as follows:

All amounts in the table above are reported net of obsolescence reserves of$125.0 million and$169.5 million as of June 30, 2025 and December 31, 2024, respectively.

NOTE 6. PROPERTY AND EQUIPMENT

A summary of property and equipment as of June 30, 2025 and December 31, 2024 is as follows:

The amortization expense for the right of use finance lease assets was$1.8 million and$1.5 million for the three months ended June 30, 2025 and 2024, respectively, and$3.5 million and$3.0 million for the six months ended June 30, 2025 and 2024, respectively.

Depreciation expense related to property and equipment was$9.4 million and$3.1 million for the three months ended June 30, 2025 and 2024, respectively, and$19.0 million and$4.4 million for the six months ended June 30, 2025 and 2024, respectively.

NOTE 7. ASSETS HELD FOR SALE

In accordance with Accounting Standards Codification Topic 360, Property, Plant, and Equipment ("ASC 360"), specifically ASC 360-10-45-9, the Company identified$42.0 million of land and buildings and$0.9 million of machinery and vehicles as held for sale. The assets’ net carrying amount are classified as Assets held for sale on the Condensed Consolidated Balance Sheets at June 30, 2025.

In the first quarter of 2025, the Company identified a decrease in the market price of long-lived assets related to land and a building in Mexico classified as assets held for sale at March 31, 2025. The Company determined the carrying values were not recoverable and exceeded their fair values. The Company then measured the impairment losses by comparing the book values with current third-party quoted market prices, resulting in a total impairment of$2.9 million. The impairment losses recorded are presented as Impairment of long-lived assets on the Condensed Consolidated Statements of Operations and Comprehensive Income for the six months ended June 30, 2025.

In April 2025, we entered into a purchase and sale agreement to sell our Eldridge facility for a total sum of$95.0 million, subject to adjustments. The sale is expected to close in the third quarter of 2025. In connection with the sale, and in accordance with ASC 360, we identified$40.1 million of land and buildings and$0.7 million of machinery as held for sale. These assets met the held for sale criteria and were thereby reclassified at their net carrying amount from Property and equipment, net to Assets held for sale on the Condensed Consolidated Balance Sheets at June 30, 2025.

NOTE 8. INTANGIBLE ASSETS AND GOODWILL

Intangible Assets. Intangible assets include customer relationships, non-compete agreements, trade names, technology, patents, and other intangibles associated with various business and asset acquisitions. These acquired intangible assets were recorded at fair value determined as of the date of acquisition and are being amortized over the period we expect to benefit from the assets.

A summary of intangible assets as of June 30, 2025 and December 31, 2024 is as follows.

Amortization expense on intangible assets was$3.8 million and$2.0 million for the three months ended June 30, 2025 and 2024, respectively, and$7.4 million and$4.0 million for the six months ended June 30, 2025 and 2024, respectively.

Goodwill. The following table presents a roll-forward of goodwill for the periods ended June 30, 2025 and December 31, 2024:

(1) Measurement period adjustment is related to legal costs that have been incurred due to unresolved legal matters pertaining to the Impulse Litigation that existed prior to the acquisition of the remaining equity of DWS. Refer to Note 3. Mergers and Acquisitions for further discussion.

Impairment. We analyzed definite lived intangible assets for impairment as of June 30, 2025 and December 31, 2024, in accordance with ASC 360, noting no impairment indicators were present. We analyzed goodwill for impairment as of June 30, 2025 and December 31, 2024, in accordance with Accounting Standards Codification Topic 350, Intangibles—Goodwill and Other ("ASC 350"), noting no impairment indicators were present. For our annual goodwill impairment test as of December 31, 2024, we performed a qualitative assessment to determine if it was more likely than not (that is, a likelihood of more than 50 percent) that the fair value of our reporting unit was less than its carrying value as of the test date, for which we determined that it was not. We evaluated events and circumstances since the date of our last quantitative or qualitative assessment, including macroeconomic conditions, industry and market conditions, and our overall financial performance, and it was determined that no changes in circumstances indicated that a potential impairment of Goodwill had occurred. Therefore, no impairment charges were recorded related to goodwill for the period ended June 30, 2025. We will continue to evaluate our goodwill and definite lived assets for potential triggering events as conditions warrant.

NOTE 9. PREPAIDS AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following as of June 30, 2025 and December 31, 2024:

NOTE 10. DEBT

Current and long-term debt obligations consisted of the following as of June 30, 2025 and December 31, 2024:

Term Loan and Revolving Credit Facility

On February 27, 2025, we entered into the Third Amended and Restated Revolving Credit, Guaranty and Security Agreement (the “New Credit Agreement”), dated as of February 27, 2025, with PNC Bank, National Association (“PNC”) as the agent, to replace the Second Amended and Restated Revolving Credit, Guaranty and Security Agreement and provide for and govern a revolving credit facility (the “Revolving Credit Facility”). The New Credit Agreement, among other things, (i) extended the maturity of the agreement from June 2026 to February 2030, (ii) increased the maximum revolving amount from $110 million to $200 million, which may, subject to certain conditions, be increased to $250 million, (iii) eliminated the term loan commitment and (iv) provided for an applicable margin for interest on the loans to be based on availability, effective as of April 1, 2025. The applicable margin under the New Credit Agreement will range from 0.50% to 1.00% for swing loans and alternate base rate revolving loans and 1.50% to 2.00% for term SOFR revolving loans. The New Credit Agreement includes various financial and non-financial covenants, including a fixed charge coverage ratio if at any time an Event of Default (as defined in the New Credit Agreement) has occurred and is continuing or if Excess Availability (as defined in the New Credit Agreement) is less than 20%, of not less than 1.10 to 1.00. As defined by the New Credit Agreement, the fixed charge coverage ratio represents the ratio of Adjusted EBITDA (as defined in the Credit Agreement), less certain capital expenditures, dividends and tax payments, to all scheduled debt payments during the applicable period.

We performed a debt modification analysis in accordance with Accounting Standards Codification Topic 470, Debt ("ASC 470"), and concluded that the elimination of the Term Loan represented a debt extinguishment. We recognized a loss in February 2025 due to the write-down of the remaining debt issuance costs pertaining to the Term Loan of$0.4 million. We were in compliance with our debt covenants at June 30, 2025 and December 31, 2024.

NOTE 11. ACCRUED EXPENSES

A summary of other accrued liabilities as of June 30, 2025 and December 31, 2024 is as follows:

NOTE 12. INCOME TAXES

The effective tax rate for the three and six months ended June 30, 2025 was 31.0% and 31.0%, respectively, compared to 31.2% and 26.7% for the same periods in 2024. The change in the effective tax rate between the periods was primarily due to discrete items recorded in the first half of 2025 with changes in projected earnings mix by geography and tax jurisdiction, foreign withholding tax, and changes in non-deductible expenses.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing its impact on our Condensed Consolidated Financial Statements.

NOTE 13. EARNINGS PER SHARE

Basic earnings per share of Company Common Stock is calculated by dividing the net income attributable to the Company during the period by the weighted average number of shares of Company Common Stock outstanding during the same period. Diluted earnings per share, if dilutive, includes the incremental effect of issuable shares from stock awards, as determined using the treasury stock method.

As a result of the Merger, as discussed in Note 1. Summary of Business, all historical per share data, number of shares and numbers of issuable shares from stock awards were retroactively adjusted. The following table summarizes the basic and diluted earnings per share calculations:

NOTE 14. SHARE REPURCHASE PLAN

On February 25, 2025, the Board approved the New Share Repurchase Program that authorizes repurchases of up to an aggregate of$100 million of outstanding Company Common Stock. In connection with the New Share Repurchase Program, all share repurchase plans previously authorized by the board of directors of Dril-Quip have been terminated. The New Share Repurchase Program does not require us to repurchase a specific number of shares or have an expiration date. Any shares repurchased under the New Share Repurchase Program will be cancelled.

During the six months ended June 30, 2025, the Company purchased 624,531 shares at an average price of$14.89 under the New Share Repurchase Program for approximately$9.3 million and has retired such shares. As of June 30, 2025, the Company had remaining authorization to repurchase up to approximately$90.7 million of its shares.

NOTE 15. STOCK BASED COMPENSATION

The Company accounts for equity-based compensation expense in accordance with Accounting Standards Codification Topic 718, Compensation—Stock Compensation ("ASC 718"). Equity instruments are measured at fair value on the grant date consistent with the terms of the award. Stock-based compensation expense recorded was$3.8 million and$0.4 million for the three months ended June 30, 2025 and 2024, respectively, and$5.5 million and$0.9 million for the six months ended June 30, 2025 and 2024, respectively. The compensation expense is recorded in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income.

NOTE 16. RELATED PARTY TRANSACTIONS

Related parties include key management personnel and their close family members having authority and responsibility for planning, directing, and monitoring the activities of the Company directly or indirectly. In the normal course of business, the Company from time to time receives services and products from, or sells products, services and rentals to, related parties, in transactions that are either not material or approved in accordance with our Related Party Transaction Approval Policy.

The total of purchases from vendors that are related parties were$0.1 million and$0.3 million for the three months ended June 30, 2025 and 2024, respectively, and$0.2 million and$0.3 million for the six months ended June 30, 2025 and 2024, respectively.

Total revenue earned from customers that are related parties were$0.4 million and$2.9 million for the three months ended June 30, 2025 and 2024, respectively, and$0.8 million and$5.9 million for the six months ended June 30, 2025 and 2024, respectively. In October 2023, we added a new member to Legacy Innovex's board of directors who was an executive of Pioneer Natural Resources, Inc. (“Pioneer”), an established customer of Legacy Innovex. Effective June 2024, this director no longer works for Pioneer and therefore is no longer considered a related party. Of the$5.9 million of revenue earned from related parties for the six months ended June 30, 2024,$5.7 million related to Pioneer. The outstanding net trade receivable due from customers that are related parties at June 30, 2025 and December 31, 2024 was$0.4 million and$0.2 million, respectively.

NOTE 17. COMMITMENTS AND CONTINGENCIES

Litigation

The Company is party to various legal proceedings from time to time. A liability is accrued when a loss is both probable and can be reasonably estimated. Management believes that the probability of a material loss with respect to any currently pending legal proceeding is remote or cannot be reasonably estimated. As of June 30, 2025 and December 31, 2024, the Company’s reserve for litigation, if any, is immaterial.

Impulse Litigation

In conjunction with the DWS acquisition,$4.0 million of the purchase price (the “Impulse Litigation Holdback Amount”) was retained by the Company for purposes of funding any post-closing expenses and liabilities related to a patent infringement-related litigation matter to which DWS is a party, captioned Impulse Downhole Solutions Ltd., and Impulse Downhole Tools USA Ltd, v. Downhole Well Solutions, LLC, Civil Action No. 4:23-cv-02954, in the United States District Court for the Southern District of Texas Houston Division (the “Impulse Litigation”). The Company is entitled to a claw back of 80% of any post-closing expenses and liabilities related to the Impulse Litigation up to the Impulse Litigation Holdback Amount and will be responsible for any expenses and liabilities related to the Impulse Litigation that exceed the Impulse Litigation Holdback Amount. Upon the conclusion of the Impulse Litiga tion, the remaining balance of the Impulse Litigation Holdback Amount, if any, will be payable to the sellers in the DWS acquisition. We determined that at June 30, 2025, a loss associated with this litigation cannot be reasonably estimated, primarily due to it being in the early stages of the case. As of June 30, 2025,$2.2 million of the Impulse Litigation Holdback Amount remains unused.