Karman Holdings Inc.
For the period ended Sep 30, 2025. Filed Nov 7, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2025 · Filed Nov 7, 2025
KRMN$45.61+42.1%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-06-30; filed 2025-08-08.
0000950170-25-105378
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-09-30; filed 2025-11-07.
0001193125-25-270338
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 158 previous paragraphs and 144 current paragraphs.
106 unchanged; 29 reworded; 8 added; 22 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 15 previous and 15 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
Recent Developments
Current report
On July 23, 2025, we priced the underwritten public offering (the “Offering”) of our common stock, par value $0.001 per share (the “Common Stock”), at a public offering price of $49.00 per share (the “Offering Price”), pursuant to our registration statement on Form S-1 (File No. 333-288809), as amended (the “Registration Statement”). On July 23, 2025, in connection with the pricing of the Offering, certain of our existing stockholders (the “Selling Stockholders”) agreed to sell 21,000,000 shares of their Common Stock, in each case at the Offering Price, less underwriting discounts and commissions. The Underwriters were granted a 30-day option to purchase up to an additional 3,150,000 shares of Common Stock from a certain Selling Stockholder, which was fully exercised on July 24, 2025. The Offering and the shares were delivered on July 25, 2025. The Offering was non-dilutive and increased the public float of our common stock. We did not sell any shares or receive proceeds, and the Offering had no impact on our capital structure or operations.
Current report
On October 24, 2025, we entered into a second amendment to the Citi Credit Agreement (the “Credit Agreement Amendment”). The Credit Agreement Amendment provides for an incremental term loan in the aggregate original principal amount of $130.0 million (the “Incremental Term Loan”). The proceeds of the Incremental Term Loan are being used to repay our outstanding revolving credit loans under the Citi Credit Agreement and to fund the acquisition of Five Axis Industries Inc. (“Five Axis”), thereby expanding our capabilities in the commercial space industry. Pursuant to the Securities Purchase Agreement (the “Agreement”) completed October 28, 2025, a wholly-owned subsidiary of ours has agreed to acquire Five Axis for $83.0 million in cash and 68,625 shares of our common stock, subject to the satisfaction or waiver of certain customary closing adjustments.
Current report
Growth in Hypersonics and Strategic Missile Defense revenue for the three and nine months ended September 30, 2025 from the comparable periods in the prior year, was primarily driven by higher production output from missile programs, such as PrSM, Standard Missile 3 and 6, and development programs. The increase also benefited from the timing of orders and was partially offset by the timing of funding for classified programs.
Current report
General and administrative expenses increased by $31.4 million, or 100.6% , for the nine months ended September 30, 2025 compared to the prior year period. In addition to the factors contributing to the three-month period, the increase was attributed to higher share-based compensation from P units and Phantom Units that fully vested in connection with the completion of the Company’s IPO in February 2025.
Current report
Other non-recurring costs for the three and nine months ended September 30, 2025 include estimated legal settlements and related professional fees that are non-recurring and do not reflect ongoing business operations.
Current report
We describe our significant accounting policies in Note 1, Summary of Significant Accounting Policies, in the notes to the consolidated financial statements presented in the Annual Report on Form 10-K for the year ended December 31, 2024. We discuss our critical accounting estimates in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in the Annual Report on Form 10-K for the year ended December 31, 2024. There have been no significant changes in our significant accounting policies or critical accounting estimates since the end of fiscal 2024.
Current report
On October 24, 2025, we entered into a second amendment to the Citi Credit Agreement (the “Credit Agreement Amendment”). The Credit Agreement Amendment provides for an incremental term loan in the aggregate original principal amount of $130,000,000 (the “Incremental Term Loan”). The proceeds of the Incremental Term Loan were used to repay outstanding revolving credit loans under the Citi Credit Agreement, the acquisition of Five Axis, and for the payment of any fees, commissions and expenses associated therewith.
Removed paragraphs (22)
Previous report
Growth in Hypersonics and Strategic Missile Defense revenue for the three and six months ended June 30, 2025 from the comparable periods in the prior year, was driven by a net increase in funded development and production programs, primarily on the Next Generation Interceptor (“NGI”) program and classified programs, partially offset by a decrease in revenue from another development program due to the timing of program funding.
Previous report
Depreciation and amortization expense increased by and $2.0 million, or 16.7% for the six months ended June 30, 2025 from the comparative period of the prior year, which was primarily attributable to the amortization of aforementioned intangible assets acquired in the MTI and ISP acquisitions in the second quarter of 2025, as well as a full six months of amortization in 2025 related to assets acquired in RMS acquisition, compared to partial period in the prior year.
Previous report
Our discussion and analysis of financial condition and results of operations discusses our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. When we prepare these condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Some of our accounting policies require that we make subjective judgments, including estimates that involve matters that are inherently uncertain. Our most critical estimates include those related to revenue recognition, intangible assets acquired in a business combination and goodwill. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.
Previous report
Revenue Recognition
Previous report
Significant management judgments and estimates must be made and used in connection with the recognition of revenue in any accounting period. Material differences in the amount of revenue in any given period may result if these judgments or estimates prove to be incorrect or if management’s estimates change on the basis of development of the business or market conditions. Management judgments and estimates have been applied consistently and have been reliable historically.
Previous report
The majority of our revenue is generated pursuant to written contractual arrangements to design, develop, manufacture and/or modify complex products, and to provide related engineering, technical and other services according to customer specifications. In most cases, goods or services provided under the Company’s contracts are accounted for as a single performance obligation due to the complex and integrated nature of its products and services. These contracts generally require significant integration of a group of goods and services to deliver a combined output. These contracts may be cost-plus fixed price or time and materials. Revenue is recognized over time using the input method, by tracking costs incurred, which measures progress toward completion and control is transferred as the Company performs its contractual obligations due to the performance having no alternative use and the Company’s enforceable right to payment. The Company estimates profit on these contracts as the difference between total estimated revenues and total estimated costs at completion (EAC) and recognizes profit as costs are incurred. Significant judgment is used to estimate total costs at completion. EAC’s are estimated using historical actual margins as a percentage of revenue, applied to open jobs. Unforeseen events and circumstances can alter the estimate of the costs and potential benefits associated with a particular contract. Changes in job performance, job conditions, estimated profitability, and final contract settlements may result in revisions to costs and income. The Company recognizes changes in contract estimates on a cumulative “catch-up” basis in the period in which the changes are identified. Such changes in contract estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in a prior period. Changes in contract estimates may also result in the reversal of previously recognized revenue if the current estimate differs from the previous estimate.
Previous report
Goodwill and Intangible Assets
Previous report
Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. We test goodwill for impairment annually during the fourth quarter of our fiscal year or when events or circumstances change in a manner that indicates goodwill might be impaired.
Previous report
For the impairment test, we first assess qualitative factors, macroeconomic conditions, industry and market considerations, triggering events, cost factors, and overall financial performance, to determine whether it is necessary to perform a quantitative goodwill impairment test. Alternatively, we may bypass the qualitative assessment for some or all of its reporting units and apply the quantitative impairment test. If determined to be necessary, the quantitative impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any). For the quantitative impairment test we estimate the fair value by weighting the results from the income approach and the market approach. These valuation approaches consider a number of factors that include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in our industry and require us to make certain assumptions and estimates regarding industry economic factors and future profitability of its business. For purposes of testing goodwill for impairment, we operate as a single reporting unit. There was no impairment of our goodwill during the six months ended June 30, 2025 or 2024.
Previous report
Acquired intangible assets include: customer relationships, customer production backlog, patents and know-how. Finite-lived intangible assets are amortized over their estimated useful lives using the straight-line method which approximates the pattern in which the economic benefits of such assets are consumed. We assess amortized intangible assets for impairment when events or circumstances suggest that the carrying values may not be recoverable. This assessment involves comparing the carrying value of the assets to their undiscounted expected future cash flows. If the total undiscounted future cash flows are less than the carrying amount, we recognize an impairment loss equal to the difference between the carrying amount and the fair value of the assets. Determining fair value requires management to make estimates and judgments based on various factors, including projected revenues and associated earnings. We did not recognize any impairment losses during the three or six months ended June 30, 2025 and 2024.
Previous report
Material Weaknesses
Previous report
As a privately-held company, we were not required to evaluate our internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404(a) of the Sarbanes- Oxley Act (“Section 404”). As a public company, we are subject to significant requirements for enhanced financial reporting and internal controls. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. In addition, we are required, pursuant to Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.
Previous report
The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation. Testing and maintaining internal controls may divert our management’s attention from other matters that are important to our business.
Previous report
The SEC defines a material weakness as “a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.” As previously reported in our Form 10-K for the year ended December 31, 2024, the following entity-level material weaknesses have been identified in our internal control over financial reporting.
Previous report
we did not fully maintain components of the COSO framework, including elements of the control environment, risk assessment, control activities, information and communication and monitoring activities components, relating to (i) sufficiency of processes related to identifying and analyzing risks to the achievement of objectives, including technology, across the entity, (ii) developing general control activities over technology to support the achievement of objectives across the entity, and (iii) sufficiency of selecting and developing control activities that contribute to the mitigation of risks to the achievement of objectives to acceptable levels.
Previous report
The entity-level material weaknesses contributed to other material weaknesses within our system of internal control over financial reporting as follows:
Previous report
we did not design and maintain effective information technology general controls for certain information systems supporting its key financial reporting processes. Specifically, we did not design and maintain sufficient change management, security, operations, and system development controls for management-identified in-scope on-premise applications and vendor-supported applications; and
Previous report
we did not design and maintain effective process-level controls for all significant business process cycles;
Previous report
We have begun the process of evaluating the material weaknesses and developing our full remediation plan. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. Until the remediation plan is implemented, tested and deemed effective, we cannot assure that our actions will adequately remediate the material weaknesses or that additional material weaknesses in our internal controls will not be identified in the future. If we are unable to remediate the material weaknesses, our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the rules and forms of the Securities and Exchange Commission could be adversely affected and could reduce the market’s confidence in our financial statements and harm our stock price. While we will work to remediate the material weaknesses as quickly and efficiently as possible, we cannot at this time provide an expected timeline in connection with any remediation plan. These remediation measures may be time consuming and costly and might place significant demands on our financial and operational resources.
Previous report
As permitted under the U.S. securities laws, neither we nor our independent registered public accounting firm have performed or are yet required to perform an evaluation of the effectiveness of our internal control over financial reporting. In the future, we may identify additional material weaknesses or significant deficiencies in our internal control over financial reporting.
Previous report
Our ability to comply with the annual internal control reporting requirements will depend on the effectiveness of our financial reporting and data systems and controls across our company. Any weaknesses or deficiencies or any failure to implement new or improved controls, or difficulties encountered in the implementation or operation of these controls, could harm our operating results and cause us to fail to meet our financial reporting obligations, or result in material misstatements in our condensed consolidated financial statements, which could adversely affect our business and reduce the price of our common stock.
Previous report
If we are unable to conclude that we have effective internal control over financial reporting, investors could lose confidence in our reported financial information, which could have a material adverse effect on the trading price of our common stock. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital market.
Reworded paragraphs (29)
Previous wording
You should read the following discussion in conjunction with our unaudited interim condensed consolidated financial statements, including the related notes thereto, contained within this Item 1 of this Quarterly Report. In addition to historical information, this discussion contains forward-looking statements that involve risks and uncertainties. You should read the sections of this prospectus titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. For purposes of this section, references to the “Company,” “Karman,” “we,” “us,” and “our” refer to TCFIII Spaceco Holdings and its other subsidiaries prior to the Corporate Conversion and to Karman Holdings Inc. or Karman Holdco and its consolidated subsidiaries for all periods following the Corporate Conversion.
Current wording
You should read the following discussion in conjunction with our unaudited interim condensed consolidated financial statements, including the related notes thereto, contained within this Item 1 of this Quarterly Report. In addition to historical information, this discussion contains forward-looking statements that involve risks and uncertainties. You should read the sections of this Quarterly Report on Form 10-Q titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for a discussion of the factors that could cause our actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. For purposes of this section, references to the “Company,” “Karman,” “we,” “us,” and “our” refer to TCFIII Spaceco Holdings and its other subsidiaries prior to the Corporate Conversion and to Karman Holdings Inc. or Karman Holdco and its consolidated subsidiaries for all periods following the Corporate Conversion.
Previous wording
We specialize in the rapid design, development and production of critical, next-generation system solutions for launch vehicle, satellite, spacecraft, missile defense, hypersonic and Unmanned Aircraft Systems (“UAS”) customers. Our integrated payload protection, propulsion, and interstage system solutions are deployed across a wide variety of existing and emerging programs supporting important Department of Defense (“DoD”) and space sector initiatives. We estimate that no single program accounted for more than 11% of sales in the six months ended June 30, 2025 or the six months ended June 30, 2024, with revenue from over 100 active programs supporting current production and next-generation space, missile, hypersonic, and defense applications.
Current wording
We specialize in the rapid design, development and production of critical, next-generation system solutions for launch vehicle, satellite, spacecraft, missile defense, hypersonic and Unmanned Aircraft Systems (“UAS”) customers. Our integrated payload protection, propulsion, and interstage system solutions are deployed across a wide variety of existing and emerging programs supporting important Department of Defense (“DoD”) and space sector initiatives. We estimate that no single program accounted for more than 11% of sales in the nine months ended September 30, 2025 or the nine months ended September 30, 2024, with revenue from over 100 active programs supporting current production and next-generation space, missile, hypersonic, and defense applications.
Previous wording
Comparison of the Three and Six Months Ended June 30, 2025 and 2024
Current wording
Comparison of the Three and Nine Months Ended September 30, 2025 and 2024
Previous wording
Revenue for the three months ended June 30, 2025 increased $30.1 million or 35.3% to $115.1 million as compared to $85.0 million for the three months ended June 30, 2024. Revenue for the six months ended June 30, 2025 increased $47.2 million, or 28.1%, to $215.2 million as compared to $168.0 million for the same period last year.
Current wording
Revenue for the three months ended September 30, 2025 increased $35.8 million or 41.7% to $121.8 million as compared to $86.0 million for the three months ended September 30, 2024. Revenue for the nine months ended September 30, 2025 increased $83.0 million, or 32.7%, to $337.0 million as compared to $254.0 million for the same period last year.
Previous wording
The increase in revenue for the three months and six months ended June 30, 2025 as compared to the same periods in the prior year, was primarily attributable to organic growth across all end-markets, Tactical Missiles and Integrated Defense Systems, followed by Space and Launch and Hypersonics and Strategic Missile Defense.
Current wording
The increase in revenue for the three months and nine months ended September 30, 2025 as compared to the same periods in the prior year, was primarily attributable to organic growth across all end-markets, Tactical Missiles and Integrated Defense Systems, followed by Space and Launch and Hypersonics and Strategic Missile Defense.
Previous wording
Growth in Space and Launch revenue for the three and six months ended June 30, 2025 from the comparable periods in the prior year, was primarily driven by higher planned U.S. space launch cadence from commercial and defense missions and lead times associated with critical subsystems that we supply. For the Six months ended June 30, 2025, this growth was partially offset by lower revenue from the Space Launch Systems (“SLS”).
Current wording
Growth in Space and Launch revenue for the three and nine months ended September 30, 2025 from the comparable periods in the prior year, was primarily driven by the timing of orders from both legacy and emerging launch providers. For the nine months ended September 30, 2025, this growth was partially offset by lower revenue from the Space Launch Systems (“SLS”).
Previous wording
Growth in Tactical Missiles and Integrated Defense Systems for the three and six months ended June 30, 2025 from the comparable periods in the prior year, was primarily driven by a net increase in production in UAS and non-UAS programs. This market’s growth continues to be supported by successful system deployments, increasing adoption and continued investment in next-generation capabilities.
Current wording
Growth in Tactical Missiles and Integrated Defense Systems for the three and nine months ended September 30, 2025 from the comparable periods in the prior year, was primarily driven by an increase in production rates for GLMRS, AIM-9X and UAS programs.
Previous wording
Cost of goods sold increased by $17.6 million, or 35.0%, and $24.3 million, or 23.3%, for the three and six months ended June 30, 2025 from the comparable periods in the prior year, respectively, which was primarily driven by increased spending on materials and labor to support production growth.
Current wording
Cost of goods sold increased by $19.7 million, or 37.7%, and $44.0 million, or 28.1%, for the three and nine months ended September 30, 2025 from the comparable periods in the prior year, respectively, which was primarily driven by increased spending on materials and labor to support production growth.
Previous wording
Gross margin was relatively flat for the three months ended June 30, 2025 compared to the same period last year. Gross margin increased 2.3% for the six months ended June 30, 2025 compared to the same period last year, which was primarily driven by operating leverage and improved operating efficiency.
Current wording
Gross margin increased 1.7% and 2.1% for the three and nine months ended September 30, 2025 from the comparative period of the prior year, respectively. The increase was primarily driven by operating leverage and improved operating efficiency.
Previous wording
General and administrative expenses and the related percentage changes for the three and six months ended June 30, 2025 and 2024 were as follows:
Current wording
General and administrative expenses and the related percentage changes for the three and nine months ended September 30, 2025 and 2024 were as follows:
Previous wording
General and administrative expenses increased by $9.4 million, or 94.4%, and $22.6 million, or 112.7% , for the three and six months ended June 30, 2025 from the comparative periods of the prior year, respectively. The increase was primarily driven by higher compensation and benefits as we strengthen our team and expand our operational capabilities to support ongoing business growth.
Current wording
General and administrative expenses increased by $8.8 million, or 78.7%, for the three months ended September 30, 2025 compared to the prior year period, which was primarily driven by higher compensation and benefits as we strengthen our team and expand our operational capabilities to support ongoing business growth. Additionally, the increase was attributed to higher professional fees for tax, accounting, and consulting services, primarily related to operating as a public company and in connection with planned and completed acquisitions.
Previous wording
Depreciation and amortization expense increased by $1.2 million, or 18.5%, for the three months ended June 30, 2025 from the comparative period of the prior year, which was primarily attributable to the amortization expense on a total of $52.1 million intangible assets acquired in the MTI and ISP acquisitions in the second quarter of 2025.
Current wording
Depreciation and amortization expense increased by $2.9 million, or 56.7%, and $4.9 million, or 28.9%, for the three and nine months ended September 30, 2025 from the comparative period of the prior year, respectively. The increase was primarily attributable to the amortization expense on a total of $52.1 million intangible assets acquired in the MTI and ISP acquisitions in the second quarter of 2025.
Previous wording
Interest expense, net decreased by $1.5 million, or 11.3%, and $2.2 million, or 8.6%, for the three and six months ended June 30, 2025 from the comparative period of the prior year. Both the Revolving Credit Facility and Term Note payable are variable interest rate loans with an applicable spread. The decrease was primarily driven by a lower year-over-year interest rate, partially offset by the $2.5 million write-off of unamortized issuance costs related to the extinguishment of the TCW Term Note in the second quarter of 2025. For additional information related to debt, see Note 6, Debt, in the Notes to the Condensed Consolidated Financial Statements.
Current wording
Interest expense, net decreased by $4.7 million, or 12.4%, for the nine months ended September 30, 2025 from the comparative period of the prior year. In addition to the factors contributing to the three-month period, the decrease was partially offset by the $2.5 million write-off of unamortized issuance costs related to the extinguishment of the TCW Term Note in the second quarter of 2025. For additional information related to debt, see Note 6, Debt, in the Notes to the Condensed Consolidated Financial Statements.
Previous wording
Other income for each of the three months ended June 30, 2025 and 2024 was immaterial. Other income for the six months ended June 30, 2025 and 2024 was $0.3 million and $0.8 million, respectively. The difference between periods was primarily attributable to the gain from a settlement of a shareholder note in the six months ended June 30, 2024.
Current wording
Other income for each of the three months ended September 30, 2025 and 2024 was immaterial. Other income for the nine months ended September 30, 2025 and 2024 was $0.4 million and $1.2 million, respectively. The difference between periods was primarily attributable to the gain from a settlement of a shareholder note in the nine months ended September 30, 2024.
Previous wording
The provision for income taxes was $1.8 million and $0.3 million for the three months ended June 30, 2025 and 2024, respectively. The provision for income taxes was $5.1 million and $0.4 million for the six months ended June 30, 2025 and 2024, respectively. The increase in the provision for income taxes for the three months and six months ended June 30, 2025 from the comparative periods of the prior year was attributable to discrete items, including the change in entity classification, non-deductible officers’ compensation, and interest and penalties related to prior year tax returns and uncertain tax positions. For additional information regarding provisions for taxes, see Note 13, Provision for Income Taxes, in the Notes to the Condensed Consolidated Financial Statements.
Current wording
The provision for income taxes was $4.2 million and $0.9 million for the three months ended September 30, 2025 and 2024, respectively. The provision for income taxes was $9.3 million and $1.3 million for the nine months ended September 30, 2025 and 2024, respectively. The increase in the provision for income taxes for the three and nine months ended September 30, 2025 from the comparative periods of the prior year was attributable to discrete items, including the change in entity classification, non-deductible officers’ compensation, and interest and penalties related to prior year tax returns and uncertain tax positions. For additional information regarding provisions for taxes, see Note 13, Provision for Income Taxes, in the Notes to the Condensed Consolidated Financial Statements.
Previous wording
Includes depreciation of property, plant and equipment, amortization of intangible assets and right-of-use assets. Depreciation expense includes allocated depreciation from cost of goods sold of $2.8 million and $2.0 million for the three months ended June 30, 2025 and 2024, respectively, and $5.5 million and $3.9 million for the six months ended June 30, 2025 and 2024, respectively.
Current wording
Includes depreciation of property, plant and equipment, amortization of intangible assets and right-of-use assets. Depreciation expense includes allocated depreciation from cost of goods sold of $2.8 million and $2.9 million for the three months ended September 30, 2025 and 2024, respectively, and $8.3 million and $6.9 million for the nine months ended September 30, 2025 and 2024, respectively.
Previous wording
Represents legal and due diligence fees incurred in connection with planned and completed acquisitions, which are required to be expensed as incurred. For the three months ended June 30, 2025, these expenses related to the MTI and ISP acquisitions. Additionally, the Company incurred certain professional service fees related to its IPO that did not meet the requirements to be deferred issuance costs. These costs are considered non-recurring and outside the ordinary course of business, and therefore are not indicative of ongoing operating performance, which was reflected in the six months ended June 30, 2025.
Current wording
Represents legal and due diligence fees incurred in connection with planned and completed acquisitions, which are required to be expensed as incurred. For the three and nine months ended September 30, 2025, these expenses related to the Secondary Offering, MTI and ISP acquisitions. Additionally, the Company incurred certain professional service fees related to its IPO that did not meet the requirements to be deferred issuance costs. These costs are considered non-recurring and outside the ordinary course of business, and therefore are not indicative of ongoing operating performance.
Previous wording
Includes company-wide system implementation expenses and Company re-branding costs. This category also includes post-acquisition integration costs, and employee expenses related to acquisitions or restructuring activities.
Current wording
Includes company-wide system implementation expenses company re-branding costs and compliance efforts. This category also includes post-acquisition integration costs, and employee expenses related to acquisitions or restructuring activities.
Previous wording
Other non-recurring costs for the three and six months ended June 30, 2025 represent the write-off of unamortized debt issuance costs associated with our previous TCW term loan, which was refinanced with the new Citi Term Loan.
Current wording
Other non-recurring costs for the three months ended September 30, 2025 includes (i) estimated legal settlements and related professional fees and (ii) write-off of a tax refund that are non-recurring and do not reflect ongoing business operations. Other non-recurring costs for the nine months ended September 30, 2025 also included a $2.5 million write-off of unamortized debt issuance costs associated with our previous TCW term loan, which was refinanced with the new Citi Term Loan.
Previous wording
The Citi Credit Agreement contains a springing financial covenant that is tested on the last day of any testing fiscal quarter if and when the outstanding principal amount of revolving credit loans exceeds an applicable threshold. If the financial covenant is then in effect, we are required to maintain a Consolidated First Lien Net Leverage Ratio of less than or equal to 6.50 to 1.00. The financial covenant is also conditioned upon our requirement to deliver quarterly financial statements to the lender under the Citi Credit Agreement, which obligation commences with the fiscal quarter ending September 30, 2025. As a result, the financial covenant is not tested as of June 30, 2025.
Current wording
The Citi Credit Agreement contains a springing financial covenant that is tested on the last day of any testing fiscal quarter if and when the outstanding principal amount of revolving credit loans exceeds an applicable threshold. If the financial covenant is then in effect, we are required to maintain a Consolidated First Lien Net Leverage Ratio of less than or equal to 6.50 to 1.00. The financial covenant is also conditioned upon our requirement to deliver quarterly financial statements to the lender under the Citi Credit Agreement, which obligation commences with the fiscal quarter ending September 30, 2025. The Company was in compliance with its debt covenant as of September 30, 2025.
Previous wording
We believe that our cash and cash equivalents as of June 30, 2025, together with available borrowings under the Citi Credit Agreement and expected net cash provided by operating activities will be sufficient to fund our cash requirements for at least the next twelve months. As we continue to grow our business, including by any acquisitions we may make, we may in the future require additional working capital in the future.
Current wording
We believe that our cash and cash equivalents as of September 30, 2025, together with available borrowings under the Citi Credit Agreement and expected net cash provided by operating activities will be sufficient to fund our cash requirements for at least the next twelve months. As we continue to grow our business, including by any acquisitions we may make, we may in the future require additional working capital.
Previous wording
Net cash used in operating activities for the six months ended June 30, 2025 was $31.0 million , primarily consisting of net income of $2.0 million, non-cash item of $23.3 million and a net change in our operating assets and liabilities, excluding $11.7 million change related to acquisitions related accrued expenses, of $37.4 million. Change in our operating assets and liabilities was primarily driven by an increase in contract assets of $26.4 million, a decrease in contract liabilities of $10.1 million, which was mainly due to initial and subsequent measurement of contracts with customers, changes in business volume, and progress of existing contracts. Change in our operating assets and liabilities was also driven by a decrease in accounts payable, accruals and income tax payable of $18.9 million, which was mainly due to timing of payments.
Current wording
Net cash used in operating activities for the nine months ended September 30, 2025 was $30.8 million , primarily consisting of net income of $9.7 million, non-cash item of $40.3 million and a net change in our operating assets and liabilities of $80.8 million. Change in our operating assets and liabilities was primarily driven by an increase in contract assets of $39.8 million, a decrease in contract liabilities of $11.2 million, which was mainly due to initial and subsequent measurement of contracts with customers, changes in business volume, and progress of existing contracts. Change in our operating assets and liabilities was also driven by a decrease in accounts payable, accruals and income tax payable of $26.7 million, which was mainly driven by payment of $11.7 million acquisition-related expenses and timing of other payments.
Previous wording
Net cash provided by operating activities for the six months ended June 30, 2024 was $9.2 million, primarily consisting of net income of $6.7 million, non-cash items of $11.7 million and a net change in our operating assets and liabilities of $9.2 million. Change in our operating assets and liabilities was primarily driven by an increase in contract assets of $11.4 million, a decrease in contract liabilities of $5.5 million, which was mainly due to initial and subsequent measurement of contracts with customers, changes in business volume, and progress of existing contracts. Change in our operating assets and liabilities was also driven by a decrease in accounts receivable of $3.4 million,which was due to timing of invoicing and improved collection and a decrease in inventory of $5.8 million which was due to increased production activity to support higher sales volume.
Current wording
Net cash provided by operating activities for the nine months ended September 30, 2024 was $19.1 million, primarily consisting of net income of $11.0 million, non-cash items of $18.2 million and a net change in our operating assets and liabilities of $10.1 million. Change in our operating assets and liabilities was primarily driven by an decrease in contract assets of $12.1 million, a decrease in contract liabilities of $8.9 million, which was mainly due to initial and subsequent measurement of contracts with customers, changes in business volume, and progress of existing contracts. Change in our operating assets and liabilities was also driven by a decrease in accounts receivable of $3.6 million,which was due to timing of invoicing and improved collection.
Previous wording
Net cash used in investing activities for the six months ended June 30, 2025 was $140.9 million, as a result of MTI and ISP acquisitions of $126.3 million in total and investment in convertible note of $6.0 million.
Current wording
Net cash used in investing activities for the nine months ended September 30, 2025 was $147.9 million, as a result of MTI and ISP acquisitions of $126.3 million in total, investment in convertible note of $6.0 million and purchase of property and equipment.
Previous wording
Net cash used in investing activities for the six months ended June 30, 2024 was $37.4 million, which was principally attributable to the RMS acquisition.
Current wording
Net cash used in investing activities for the nine months ended September 30, 2024 was $42.0 million, which was principally attributable to the RMS acquisition and purchase of property and equipment.
Previous wording
Net cash provided by financing activities for the six months ended June 30, 2025 was $187.8 million, which was primarily driven by net proceeds from our IPO of $153.8 million, proceeds from our new Citi credit facilities of $398.5 million (net of debt issuance costs), partially offset by repayment of our old TCW credit facilities of $337.1 million.
Current wording
Net cash provided by financing activities for the nine months ended September 30, 2025 was $185.9 million, which was primarily driven by net proceeds from our IPO of $153.8 million, proceeds from our new Citi credit facilities of $398.5 million (net of payment of debt issuance costs), partially offset by repayment of our old TCW credit facilities of $337.1 million.
Previous wording
Net cash provided by financing activities for the six months ended June 30, 2024 was $27.4 million, which was primarily driven by net proceeds from increasing our TCW Term Note by $34.0 million (net of debt issuance costs), partially offset by repayment of TCW Term Note of $5.0 million.
Current wording
Net cash provided by financing activities for the nine months ended September 30, 2024 was $25.1 million, which was primarily driven by net proceeds from increasing our TCW Term Note by $34.0 million (net of payment of debt issuance costs), partially offset by repayment of TCW Term Note of $6.8 million.
Previous wording
On a consolidated basis, lease activity for the three and six months ended June 30, 2025 and 2024 were as follows:
Current wording
On a consolidated basis, lease activity for the three and nine months ended September 30, 2025 and 2024 were as follows:
Previous wording
On a consolidated basis, supplemental cash flow information for the six months ended June 30, 2025 and 2024 were as follows:
Current wording
On a consolidated basis, supplemental cash flow information for the nine months ended September 30, 2025 and 2024 were as follows:
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Interest expense, net decreased by $2.5 million, or 20.2%, for the three months ended September 30, 2025 from the comparative period of the prior year. Both the Revolving Credit Facility and Term Note payable are variable interest rate loans with an applicable spread. The decrease was primarily driven by a lower year-over-year interest rate.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Additionally, the increase was attributed to higher professional fees for tax, accounting, and consulting services primarily related to operating as a public company following the IPO in February 2025, as well as costs related to the integration of newly established regional campuses and acquisitions.