Innovex International, Inc.

Refer to “How We Evaluate our Results of Operations” for the definitions of our non-GAAP financial measures.

Adjusted EBITDA and Adjusted EBITDA Margin

The following table presents a reconciliation of the GAAP financial measure of net income and net income as a percentage of revenue to Adjusted EBITDA and Adjusted EBITDA Margin, respectively, for each of the periods indicated:

(1) Primarily represents foreign currency exchange (gain) loss, (gain) loss on lease terminations, and other non-operating items.

(2) For the year ended December 31, 2025, acquisition and integration costs consisted of legal, accounting, advisory fees, move, severance and other integration costs associated with the Merger, the acquisition of the remaining equity interest in DWS, and the acquisitions of SCF and Citadel. For the year ended December 31, 2024, acquisition and integration costs consisted of legal, accounting, advisory fees, move, severance and other integration costs associated with the Merger and the acquisition of the remaining equity interest in DWS. These acquisition and integration costs are one-time in nature and represent expenses that we do not view as normal operating expenses necessary to operate our business.

(3) Reflects the elimination of our percentage of interest expense, depreciation, amortization and other non-recurring expenses included within equity method earnings relating to our previously unconsolidated investment in DWS.

(4) Reflects legal, consulting and accounting fees and expenses related to the preparation of Legacy Innovex’s initial public offering.

Adjusted EBITDA for the year ended December 31, 2025 was $188.3 million, an increase of $49.8 million from the year ended December 31, 2024.

ROCE

The following table presents a reconciliation of the GAAP financial measure of income from operations to adjusted income from operations, after tax to ROCE for each of the periods indicated:

ROCE for the year ended December 31, 2025 was 10%, a decrease from the year ended December 31, 2024.

Free Cash Flow

The following table presents a reconciliation of the GAAP financial measure of net cash provided by operating activities to Free Cash Flow for each of the periods indicated:

Free Cash Flow for the year ended December 31, 2025 was $155.8 million, an increase of $75.9 million from the year ended December 31, 2024.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are our existing cash, cash provided by operating activities, and borrowings under the Credit Agreement. We have a share repurchase program in place and may repurchase shares from time to time based on management’s evaluation of market conditions, share price and other factors. As of December 31, 2025, we had cash and restricted cash of $203.4 million and availability under the Credit Agreement (as defined herein) of $138.0 million. Our total indebtedness was $25.6 million as of December 31, 2025.

Our principal liquidity needs have been, and are expected to continue to be, working capital, capital expenditures, debt service and potential mergers and acquisitions. Historically, capital expenditures have been relatively modest, with working capital being the predominant use of cash for the Company during periods of growth. We continuously evaluate our capital expenditures, and the amount we ultimately spend will depend on a number of factors, including, among other things, prevailing economic conditions, market conditions in the oil and natural gas industry, customers’ forecasts, demand volatility and company initiatives.

We have certain obligations related to debt maturities, finance leases and operating leases. As of December 31, 2025, we had $23.9 million of minimum non-cancelable lease obligations for 2026, comprised of $8.3 million of finance lease maturities and $15.6 million of non-cancelable operating lease obligations. We have an additional $74.1 million of minimum non-cancelable lease obligations for the periods after December 31, 2026, comprised of $24.2 million of finance lease maturities and $49.8 million of non-cancelable operating lease obligations. As of December 31, 2025, interest rates on our lease obligations range from 2.88% to 12.00%. Refer to Note 11. Leases of our Consolidated Financial Statements included elsewhere in this Annual Report for additional information. In addition, all amounts borrowed under the Credit Agreement become due and payable in 2030. Our effective interest rateon the Term Loan (as defined herein) for the year ended December 31, 2024 was 8.77%; there were no borrowings under the Term Loan as of December 31, 2025, as it was eliminated in connection with the Credit Agreement completed in February 2025. Refer to "Credit Agreement" herein for additional information. Our effective interest rate on the Revolver for the years ended December 31, 2025 and December 31, 2024 was 8.92% and 9.34%, respectively; there were no borrowings on the Credit Agreement as of December 31, 2025. Refer to Note 9. Debt of our Consolidated Financial Statements included elsewhere in this Annual Report for additional information.

We believe that our exis ting cash on hand, cash generated from operations and available capacity under the Credit Agreement will be sufficient to meet our liquidity needs in the short and long-term. However, if work activity increases, we expect further working capital investment will be required. Our ability to satisfy our liquidity requirements depends on our future operating performance, which is affected by prevailing economic conditions, market conditions in the oil and natural gas industry, availability and cost of raw materials, and other factors, many of which are beyond our control.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

Statements of cash flows for entities with international operations that are local currency functional exclude the effects of the changes in foreign currency exchange rates that occur during any given period, as these are non-cash changes. As a result, changes reflected in certain lines in our Consolidated Statements of Cash Flows may not reflect the changes in corresponding lines in our Consolidated Balance Sheets.

Operating Activities Net cash provided by operating activities for the year ended December 31, 2025 was $190.9 million, an increase of $97.5 million from the year ended December 31, 2024. The change was primarily attributable to the following:

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a decrease in net income of $57.0 million;

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changes in non-cash adjustments to net income from the comparative period, including an increase in (i) depreciation and amortization expense of $29.5 million due to an increase in average fixed assets during the comparative periods, (ii) deferred taxes of $38.9 million attributable to timing differences, (iii) amortization of operating lease right-of-use assets of $4.2 million due to an increase in average operating lease balances during the comparative periods, and (iv) gains on property, equipment disposals of $39.1 million, offset by a decrease in the gain on bargain purchase associated with the Merger of $89.2 million; and

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the movement in operating assets and liabilities, net of assets acquired as part of our acquisitions.

Investing Activities Net cash used in investing activities for the year ended December 31, 2025 was $18.7 million, a decrease of $97.2 million from the net cash provided by investing activities for the year ended December 31, 2024. The change was primarily attributable to the cash used to fund our acquisitions in 2025, offset by the proceeds from the Eldridge Facility sale in 2025 versus the cash acquired as part of the Merger for 2024.

Financing Activities Net cash used in financing activities for the year ended December 31, 2025 was $44.9 million, a decrease of $58.2 million from the year ended December 31, 2024. The change was primarily attributable to (i) a decrease of $4.8 million in Revolving Credit Facility payments, net of borrowings and (ii) a decrease of $75.0 million in dividend payments given there were no dividends paid in 2025, offset by an increase in common stock repurchases and Term Loan payments of $14.4 million for the twelve months ended December 31, 2025.

Credit Agreement

Legacy Innovex, Tercel Oilfield Products USA L.L.C., Top-Co Inc. and Pride Energy Services, LLC (collectively, the “Original Borrowers”) entered into the Second Amended and Restated Revolving Credit, Term Loan, Guaranty and Security Agreement in June 2022 (as amended in November 2022, April 2023, December 2023, and June 2024, the “Previous Credit Agreement”), with PNC Bank, National Association, as agent, and the lenders party thereto. On September 6, 2024, the Company and TIW Corporation (collectively and together with the Original Borrowers, the “Borrowers”) joined the Credit Agreement as borrowers thereunder. The Previous Credit Agreement provided for (i) a term loan tranche in a principal amount of the lesser of $25.0 million and a certain amount determined based, in part, on appraised values of certain assets of Legacy Innovex and certain of its subsidiaries (the “Term Loan”) and (ii) a revolving credit facility of up to $110.0 million with a $5.0 million sublimit for letters of credit and an $11.0 million swing loan.

The Company, as the borrower, entered into the Third Amended and Restated Revolving Credit, Guaranty and Security Agreement, dated as of February 27, 2025, to replace the Previous Credit Agreement and provide for a revolving credit facility of up to $200.0 million (the “Credit Agreement”), subject to a borrowing base. The Credit Agreement, among other things, (a) extended the maturity of the agreement from June 10, 2026 to February 27, 2030, (b) increased the maximum revolving advance amount from $110 million to $200 million, which may, subject to certain conditions, be increased to $250 million, (c) eliminated the term loan commitment and (d) provided for an applicable margin for interest on the loans to be based on availability, effective as of April 1, 2025. Refer to Note 9. Debt of our Consolidated Financial Statements included elsewhere in this Annual Report for additional information.

Amounts borrowed under the Credit Agreement are subject to an interest rate per annum equal to, at our option, either (a) an alternate base rate determined as the highest of (i) the base commercial lending rate of PNC Bank, National Association, (ii) the overnight federal funds rate plus 0.5% and (iii) so long as available, Daily Simple SOFR (as defined in the Credit Agreement) plus 1% (such base rate to be subject to a 0% floor) or (b) the forward-looking term rate based on the secured overnight financing rate (“SOFR”) for the applicable interest period two business days before such interest period divided by a number equal to 1.00 minus any SOFR reserve percentage (such term rate to be subject to a 0% floor), plus, in each case of clauses (a) and (b) above, an applicable margin based upon availability of the revolving credit line, of 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. Interest is payable monthly for alternate base rate loans and at the end of the applicable interest period for term SOFR loans (or quarterly if the applicable interest period is longer than three months). The Credit Agreement provides for the issuance of letters of credit, limited to the lesser of total capacity or $10.0 million. As of December 31, 2025 and December 31, 2024, we had no letters of credit outstanding under the Credit Agreement.

In addition to paying interest on outstanding borrowings under the Credit Agreement, we are required to pay a quarterly commitment fee to the lenders under the Credit Agreement equal to 0.25% per annum on the amount by which $200.0 million exceeds the daily unpaid balance of revolving loans under the Credit Agreement plus any swing loans plus any undrawn amount of outstanding letters of credit under the Credit Agreement on any day.

We are subject to various covenants under the Credit Agreement, including limitations on the incurrence of debt, granting of liens, investments, dividends, asset sales, and affiliate transactions. Additionally, if at any time an Event of Default (as defined in the Credit Agreement) has occurred and is continuing or if Excess Availability (as defined in the Credit Agreement) is less than 20% of the maximum revolving advance amount, we must maintain a fixed charge coverage ratio of not less than 1.10 to 1.00. As defined by the 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.

If an event of default exists under the Credit Agreement, the lenders will be able to accelerate the maturity of the obligations outstanding under the Credit Agreement and exercise other rights and remedies. An event of default includes, among other things, the nonpayment of principal, interest, fees or other amounts, the failure of any representation or warranty to be correct when made or deemed made in all material respects, the failure to perform or observe covenants in the Credit Agreement or other loan documents, subject, in limited circumstances, to certain grace periods, a cross-default to certain other indebtedness if the effect of such default is to cause, or permit the holders of such indebtedness to cause, the acceleration of such indebtedness, the occurrence of bankruptcy or insolvency events, the rendering of material monetary judgments, the invalidity of any guaranty, security agreement or pledge agreement and the occurrence of a Change of Control (as defined in the Credit Agreement).

The obligations under the Credit Agreement are secured by liens on substantially all of the assets of the Company and certain current and future subsidiaries of the Company and guarantees from certain current and future subsidiaries of the Company (the Company together with such subsidiaries, the “Loan Parties”). The Credit Agreement requires us to make mandatory prepayments on the outstanding amount of advances under the Credit Agreement if any Loan Party issues debt other than certain permitted debt or receives proceeds from certain insurance or condemnation claims.

As of December 31, 2024, we had $11.4 million and $14.0 million of borrowings outstanding under the Term Loan and applicable revolving credit facility, respectively. As of December 31, 2025, we had no borrowings outstanding under the Credit Agreement and borrowing capacity available under the Credit Facility was$138.0 million.

Repurchase of Equity Securities

In conjunction with the Merger, effective as of the Closing Date, we maintained the share repurchase plans authorized by the Dril-Quip Board of Directors. Under the share repurchase plans, we were authorized to repurchase up to an aggregate $200 million of our common stock. The repurchase plans had no set expiration date and any repurchased shares were expected to be cancelled. Repurchases under the program were to be made through open market purchases, privately negotiated transactions or plans, instructions or contracts established under Rule 10b5-1 under the Exchange Act. The manner, timing and amount of any purchase were to be determined by management based on an evaluation of market conditions, stock price, liquidity and other factors. The program did not obligate us to acquire any particular amount of common stock and may be modified or superseded at any time at our discretion.

On February 25, 2025, our Board of Directors approved a new share repurchase program (the “New Share Repurchase Program”) that authorizes repurchases of up to an aggregate of $100 million of shares of common stock of the Company with no specified expiration date and terminated all share repurchase plans previously authorized by the Dril-Quip Board of Directors.

For the year ended December 31, 2025, we purchased 625,000 shares under the New Share Repurchase Program for aggregate consideration of $9.3 million. The remaining maximum dollar value of shares that may yet be purchased under the New Share Repurchase Program is $90.7 million as of December 31, 2025. Refer to "Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities" for additional information.

OFF-BALANCE SHEET ARRANGEMENTS

Currently, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.

BUSINESS SEGMENTS

We operate in one reportable segment as our chief operating decision maker ("CODM") assesses performance and allocates resources based on financial information presented at a consolidated level.

CRITICAL ACCOUNTING ESTIMATES

The discussion and analysis of our financial condition and results of operations is derived from the review of our Consolidated Financial Statements prepared in accordance with GAAP, which includes our interpretation of accounting guidance and application through accounting policies. The preparation of financial statements requires the use of judgments and estimates. Our critical accounting estimates are described below to provide a better understanding of how we develop our assumptions and judgments about future events and related estimates and how they can impact our Consolidated Financial Statements. A critical accounting estimate is one that requires our most difficult, subjective or complex judgments and assessments and is fundamental to our results of operations.

We base our estimates on historical experience and on various other assumptions we believe to be reasonable according to the current facts and circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We believe the following are the critical accounting estimates used in the preparation of our Consolidated Financial Statements, as well as the significant estimates and judgments affecting the application of these policies. This discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related notes thereto presented elsewhere in this Annual Report.

Income Taxes

Deferred taxes are recorded using the asset and liability method, whereby tax assets and liabilities are determined based on the differences between the carrying amount and tax basis of assets and liabilities using enacted tax laws and rates expected to apply to taxable income in the year in which the differences are expected to reverse. We regularly evaluate the valuation allowances established against deferred tax assets for which future realization is uncertain. In assessing the realizability of deferred tax assets, we consider both positive and negative evidence, including scheduled reversals of deferred tax assets and liabilities, projected future taxable income, tax planning strategies and potential for benefits from attribute carrybacks. If, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, a valuation allowance is recorded. As of December 31, 2025, the valuation allowance for deferred tax assets was $60.6 million. Werecognize a tax benefit in our financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position.

The term “tax position” in the accounting standards for income taxes refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. Our financial statements could be materially affected if: (i) our actual results differ significantly from our forecast estimates; (ii) there are future changes in enacted tax laws with retroactive application; or (iii) tax authorities do not agree with our application of the tax law to our circumstances and the matter is not ultimately resolved in our favor.

Business Combinations and Goodwill

We recognize and measure the assets acquired and liabilities assumed in a business combination based on their estimated fair values at the acquisition date. Goodwill represents the excess of purchase price paid by the Company over the fair market value of the net assets acquired. A bargain purchase occurs when the fair market value of net assets acquired is higher than the purchase price paid. Certain assumptions and estimates are employed in evaluating the fair value of assets acquired and liabilities assumed. These estimates may be affected by factors such as changing market conditions, technological advances in the oil and natural gas industry or changes in regulations governing that industry. The most significant assumptions requiring judgment involve identifying and estimating the fair value of inventory, fixed assets and intangible assets. To finalize purchase accounting for significant acquisitions, we utilize the services of independent valuation specialists to assist in the determination of the fair value of acquired assets.

Impairments

We evaluate our property and equipment and identifiable intangible assets for impairment whenever changes in circumstances indicate that the carrying amount of an asset group may not be recoverable or if there are potential indicators of impairment. We also perform an annual impairment analysis of goodwill as of December 31st, or whenever there is a triggering event that indicates an impairment loss may have been incurred. Estimating future net cash flows requires us to make judgments regarding long-term forecasts of future revenues and costs related to the assets subject to review. These forecasts are uncertain in that they require assumptions about our revenue growth, operating margins, capital expenditures, future market conditions and technological developments. In addition, if we are required to determine the fair value of our reporting unit to test goodwill for impairment, we must apply estimates, assumptions, and judgment regarding revenue growth, operating margins, capital expenditures, future market conditions, weighted average costs of capital and terminal growth rate, and we must evaluate the metrics of a deemed set of comparable companies and market earnings multiples. Actual results may not align with these assumptions, and our expectations regarding future net cash flows may change such that a material impairment could result.

We believe that the estimates and assumptions used in our impairment assessments are reasonable. However, if market conditions change dramatically, the impact on our forecasts and projections may be significant which could result in future impairments for our reportable unit with long-term assets including goodwill.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2. Summary of Significant Accounting Policies of our Consolidated Financial Statements included elsewhere in this Annual Report for additional information.