Karman Holdings Inc.

Organization and Basis of Presentation

Description of Business

Karman Holdings Inc. (the “Company”) conducts business as Karman Space and Defense (“Karman”). Karman is headquartered in Huntington Beach, California. It currently operates multiple subsidiaries in California, Washington, Oregon, Utah, Mississippi, Pennsylvania, South Carolina and Alabama.

Karman specializes in the rapid design, development and production of mission-critical, next-generation system solutions for launch vehicle, satellite, spacecraft, missile defense, hypersonic and Unmanned Aircraft Systems (“UAS”) customers. Karman’s integrated payload protection, propulsion, and hydro/aerodynamic interstage system solutions are deployed across a wide variety of existing and emerging programs supporting priority Department of War (“DoW”) and space sector initiatives.

Initial Public Offering

On February 12, 2025 the Company’s Registration Statement on Form S-1 for its initial public offering (the “IPO”) was declared effective. Prior to the effectiveness of the IPO, the Company was a Delaware limited liability company named TCFIII Spaceco Holdings LLC. On February 12, 2025,the Company converted into a Delaware corporation and changed its name to Karman Holdings Inc. Pursuant to the conversion, all outstanding equity interests and all outstanding P Units were converted into an aggregate of 123.8 million shares of common stock of Karman Holdings Inc.

On February 14, 2025, the Company completed the IPO of 26.5 million shares of its common stock at a public offering price of $22.00 per share, of which,8.4 million shares were sold by the Company. The aggregate net proceeds from the offering, after deducting underwriting discounts and commissions, payments to Phantom Unit holders and other offering expenses, were approximately $147.3 million. See Note 10 and Note 11 for details.

Basis of Presentation

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.

These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, include all adjustments of a normal recurring nature necessary to present fairly, in all material respects, the Company’s financial position, results of operations and cash flows. These unaudited condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. Operating results for the three months periods presented are not necessarily indicative of the results to be expected for the full year.

2. Summary of Accounting Policies and Recent Accounting Pronouncements

The accounting policies followed by the Company are set forth in Part II, Item 8, Note 2, Summary of Significant Accounting Policies, of the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

Use of Estimates

Thepreparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. Management periodically evaluates estimates used in the preparation of the financial statements for continued reasonableness. Appropriate adjustments, if any, to estimates are made prospectively based upon such periodic evaluations. It is reasonably possible that changes may occur in the near term that would affect managements’ estimates with respect to revenue recognition, estimates of cost to complete contracts, allowance for credit losses, share-based payments, accrued expenses, inventory, deferred taxes, property and equipmentand valuation of net assets acquired in business combinations, and the impairment assessment of goodwill and intangible assets.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements Adopted

In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which simplifies the application of the current expected credit loss model for current accounts receivable and current contract assets under ASC 606. The update is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company adopted ASU 2025-05 on January 1, 2026, and the adoption did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which introduces targeted improvements to the recognition and measurement requirements for interim reporting. The amendments are intended to reduce the complexity of interim financial reporting by aligning certain requirements with those for annual reporting. The standard is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years, with early adoption permitted. The Company is assessing the effect of this update on our consolidated financial statements and related disclosures.

In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. The ASU requires updated disclosures, in the notes to the financial statements, of specified information about certain costs and expenses. The amendments require that at each interim and annual reporting period an entity disclose the amounts of purchases of inventory, employee compensation, depreciation, intangible asset amortization and depreciation, depletion, and amortization recognized as part of oil and gas producing activities included in relevant expense captions. The amendments also require disclosure of qualitative descriptions of amounts remaining in relevant expense captions that are not separately disaggregated and to disclose the total amount of selling expenses as well as the entity’s definition of selling expenses. The ASU is effective for the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2027, and subsequent interim periods, with early adoption permitted. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and footnote disclosures.

3. Revenue

The Company recognizes revenue for each separately identifiable performance obligation in a contract representing a promise to transfer a distinct good to a customer. In most cases, goods provided under the Company’s contracts are accounted for as a single performance obligation due to the complex and integrated nature of its products. These contracts generally require significant integration of a group of goods to deliver a combined output. Warranties are provided on certain contracts, but do not typically provide for services beyond standard assurances and are therefore not considered to be a separate performance obligation. Assets recognized from costs to obtain or fulfill a contract are not material. Payment terms are typically forty-five days, but may vary.

The Company generates revenue under a range of contract types including fixed-price, time and material and cost-plus fixed fee contracts. Substantially all revenue is recognized over time as control is transferred to the customer, measured with the input method based on costs incurred compared to estimated total costs at completion. In general, the Company’s contracts contain termination clauses that entitle the Company to payment for work performed to-date for goods that do not have an alternative use. Amounts recoverable in the event of terminations include reasonable profit margins. Control is effectively transferred as the Company performs its contractual obligations.

Remaining Performance Obligation

As of March 31, 2026, the Company had$723.3 million of remaining performance obligations. The Company expects to recognize approximately 42.0% of the remaining performance obligations as revenue in remaining 2026,24.1% in 2027, and 33.9% thereafter.

Contract Estimate

The Company generally recognizes revenue over time using the input method, measured by the percentage of total costs incurred to-date relative to estimated total anticipated costs for each contract. This method is used because the Company considers total costs to be the best available measure of progress toward satisfaction of its performance obligations. Use of the input method requires the Company to make reasonable estimates regarding the costs associated with the design, manufacture, and delivery of its products.

The Company estimates profit on these contracts as the difference between total estimated revenue 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 contracts. Unforeseen events and circumstances can alter the estimate of the costs and potential benefits associated with a particular contract.

The nature of Company’s business can give rise to significant contract modifications, which can impact performance obligations and transaction price. A contract modification exists when the parties to a contract agree to a change in the scope and/or price of a contract. Contracts are often modified for changes in contract specifications or requirements. Most of the Company’s contract modifications are for goods that are not distinct in the context of the contract and are therefore accounted for as part of the original performance obligation through a cumulative catch-up adjustment in the period they are identified.

Changes in contract estimate, including those arising from contract modifications, may result in the recognition of revenue in the current period for performance obligations satisfied or partially satisfied in prior periods or the reversal of previously recognized revenue when current estimates differ from prior estimates. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the total loss in the condensed consolidated statements of income (loss) in the period in which it is identified. During the three months ended March 31, 2026 and 2025, changes in contract estimates on revenue recognition were immaterial.

Contract Assets and Liabilities

The timing of Company billings is generally dependent upon agreed-upon contractual terms, milestone billings based on the completion of certain phases of the work, or when products are provided. Billing can occur prior to revenue recognition, resulting in deferred revenue or subsequent to revenue recognition, resulting in unbilled revenue. The asset, “contract assets” represents revenue recognized in excess of amounts billed. These contract assets are not considered a significant financing component of the Company’s contracts as the payment terms are intended to protect the customer in the event the Company does not fulfill its obligations under the contract. The liability, “contract liabilities” represents amounts billed in excess of revenue recognized. Contract liabilities are not a significant financing component as they are generally utilized to pay for contract costs within a one-year period or are used to ensure the customer meets contractual requirements.

The following table summarizes our contract assets and liabilities:

Changes in contract assets and contract liabilities are primarily due to the timing of payments from customers and the Company satisfying performance obligations during the normal course of business. The amount of revenue recognized from changes in the transaction price associated with performance obligations satisfied in prior year during the period ended March 31, 2026 and December 31, 2025 was not material. The following table summarizes the changes in contract assets and contract liabilities for the three months ended March 31, 2026 and 2025:

Disaggregation of Revenue

The following table presents our disaggregated revenue and revenue growth by end-markets for the three months ended March 31,2026 and 2025, respectively. Substantially all of the Company’s customers are government or commercial enterprises based in the United States.

4. Supplemental Financial Statement Data

Inventory

The Company determines the cost basis for inventory using the lower of cost or net realizable value. Cost is determined by using the weighted average method. The following table summarizes our inventory:

Accounts Receivable and Credit Loss Reserves

Accounts receivable are comprised of unsecured amounts due from customers and presented net of any allowance for credit losses. The Company recognizes its estimate of expected losses on accounts receivable within the scope of the current expected credit losses (“CECL”) model. All accounts receivable balances 180 days beyond the contractual due date will be reserved at 50% and balances one year beyond the contractual due date will be reserved at 100%. For contract assets, the Company establishes a reserve for contract assets when a job exceeds a certain length of inactivity unless there is persuasive evidence the balance will still be recoverable.

The following table summarizes accounts receivable as of March 31, 2025 and December 31, 2025, and the change in allowance for credit losses for the three months ended March 31, 2026 and 2025:

Concentration of Credit Risk

For the three months ended March 31, 2026, the Company had two customers with greater than 10% of the Company’s revenue, these customers comprised 25.6% and 11.6% of the Company’stotal revenue. These two customers accounted for 27.8% and 40.7% of accounts receivable, as of March 31, 2026 and December 31, 2025, respectively.

For the three months ended March 31, 2025, the Company had three customers with greater than 10% of the Company’s revenue, these customers comprised 23.4%,15.5% and 13.7% of the Company’stotal revenue.

One supplier accounted approximately 12.0% and 23.8% of accounts payable as of March 31,2026 and December 31, 2025, respectively.

Property and Equipment

Property and equipment consisted of the following as of March 31, 2026 and December 31, 2025:

Depreciation expense for the three months ended March 31, 2026 and 2025 was$3.4 million and $2.8 million, respectively, of which,$2.9 million and $2.1 million was recorded in cost of goods sold, respectively, and the remainder in operating expenses in the accompanying unaudited condensed consolidated statements of income (loss).

Business Combination

MTI acquisition

On April 2, 2025 (the “MTI Acquisition Date”), the Company, through its indirect wholly-owned subsidiary Karman Parent LLC (“Karman Parent”), acquired all the issued and outstanding membership interests and other equity interests of MTI Metal Technology Inc., pursuant to the terms of a Securities Purchase Agreement (the “MTI Agreement”) in exchange for cash consideration (the “ MTI Acquisition”). The acquisition of MTI expands the Company’s capabilities in advanced materials and is expected to strengthen its position in the strategic missile defense market through enhanced product offerings and customer relationships.

The MTI Acquisition met the requirements to be considered a business combination under ASC 805. The assets and liabilities acquired, affected for adjustments to reflect fair values assigned to assets purchased and liabilities assumed, and results of operations, are included in the Company’s condensed consolidated financial statements from the MTI Acquisition Date. The Company recorded the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the acquisition date as required under ASC 805.

The MTI Acquisition was funded with borrowings from the Company’s term note under its Citibank credit agreement and was accounted for using the acquisition method of accounting. The fair value of the total purchase consideration transferred was $82.3 million. The MTI Acquisition does not have any contingent consideration arrangements.

Acquisition-related costs for the MTI Acquisition have been expensed as incurred and are included in general and administrative expenses in the condensed consolidated statements of income (loss). No acquisition-related expenses were recorded for the three months ended March 31, 2026 or 2025.

The accounting for the MTI Acquisition was completed during the quarter ended March 31, 2026. The following table sets forth the preliminary allocation of the fair value of the assets acquired and liabilities assumed. No material adjustments were recognized during the measurement period.

The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets was recorded as goodwill and is fully deductible for tax purposes. The components of goodwill do not qualify as a separately recognized intangible asset.

Below is a summary of the intangible assets acquired in the MTI Acquisition:

The fair value for know-how was determined using the relief from royalty method and the fair values of customer relationships and backlog was determined using the multi-period excess earnings method (“MPEEM”). In total, the intangible assets acquired subject to amortization have a weighted average useful life of 11.0 years.

Net revenue and net income from this acquisition has been included in the condensed consolidated statements of income (loss) from the acquisition date through the end of the three months ended March 31, 2026, and the impact of the acquisition to the ongoing operations on the Company’s net revenue and net income was not significant. Supplemental pro forma results of operations have not been presented because they were not material to the condensed consolidated results of operations.

ISP acquisition

On May 28, 2025 (the “ISP Acquisition Date”), the Company completed its acquisition of Industrial Solid Propulsion (“ISP”) pursuant to a Securities Purchase Agreement (the “ISP Agreement”), under which the Company purchased all issued and outstanding equity interests in ISP and related real estate of ISP, for approximately $50 million in cash and 147,842 shares of common stock of the Company and a $5.0 million potential earnout (the “Earnout”), subject to satisfaction or waiver of certain customary closing adjustments. The ISP Agreement contains customary representations, warranties and covenants of the parties. The acquisition of ISP expands the Company’s capabilities in small-diameter solid propellant and energetic propulsion systems, strengthening its position in the UAS and missile defense markets through proprietary technologies and integrated manufacturing expertise.

The ISP Acquisition met the requirements to be considered a business combination under ASC 805, Business Combinations (“ASC 805”). The assets and liabilities acquired, affected for adjustments to reflect fair values assigned to assets purchased and liabilities assumed, and results of operations, are included in the Company’s condensed consolidated financial statements from the ISP Acquisition Date. The Company recorded the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the acquisition date as required under ASC 805.

The ISP Acquisition was funded with incremental borrowings from the Company’s term note under its Citi credit agreement and was accounted for using the acquisition method of accounting. The fair value of the total purchase consideration transferred was $58.6 million, of which $52.9 million represents cash consideration and $5.7 million represents the fair value of the equity consideration as of the ISP Acquisition Date. Of the $52.9 million cash consideration, $3.9 million represents the fair value of the Earnout, which was recorded in other current liabilities on the unaudited condensed consolidated balance sheets. The earnout liability was estimated using a Monte Carlo simulation under a risk-neutral framework, based on the average present value of the simulated earnout payments. The Earnout provides for a cash payment equal to $5.0 million to the seller of ISP, contingent upon the achi evement of specified Adjusted EBITDA threshold for the twelve months ended December 31, 2025, as defined in the ISP Agreement. As of December 31, 2025, the Company determined that the Adjusted EBITDA target was not achieved and therefore will not be paid. Accordingly, the Earnout no longer had any value, and the related contingent consideration liability was reduced tozero as of December 31, 2025, with the change in fair value recognized as other income on the consolidated statement of operations and comprehensive income (loss).

Acquisition-related costs for the ISP Acquisition have been expensed as incurred and are included in general and administrative expenses in the condensed consolidated statements of income (loss). No acquisition-related expenses were recorded for the three months ended March 31, 2026 or 2025.

The following table sets forth the preliminary allocation, as of March 31, 2026, of the fair value of the assets acquired and liabilities assumed in connection with the ISP Acquisition:

The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets was recorded as goodwill and is fully deductible for tax purposes. The components of goodwill do not qualify as a separately recognized intangible asset.

Below is a summary of the intangible assets acquired in the ISP Acquisition:

The fair value for developed technology was determined using the relief from royalty method and the fair values of customer relationships and backlog was determined using the MPEEM. In total, the intangible assets acquired subject to amortization have a weighted average useful life of 10.7 years.

Net revenue and net income from this acquisition has been included in the condensed consolidated statements of income (loss) from the acquisition date through the end of the three months ended March 31, 2026, and the impact of the acquisition to the ongoing operations on the Company’s net revenue and net income was not significant. Supplemental pro forma results of operations have not been presented because they were not material to the condensed consolidated results of operations.

Five Axis Acquisition

On October 28, 2025 (the “Five Axis Acquisition Date”), the Company, through its wholly owned subsidiary, Karman Space & Defense LLC, completed the acquisition of all of the issued and outstanding capital stock of Five Axis Industries, Inc. (“Five Axis”) pursuant to a Securities Purchase Agreement (the “Five Axis Agreement”), under which the Company purchased all issued and outstanding equity interests in Five Axis, for approximately $90.7 million in cash and 68,625 shares of common stock (the “Five Axis Acquisition”). Five Axis designs and manufactures specialized nozzle and fuel systems for launch vehicle engines. Its products support the performance and operation of both current and next-generation propulsion systems. The acquisition of Five Axis strengthens the Company’s core competency in the engineering and manufacturing of mission critical subsystems for the space and launch end market.

The Five Axis Acquisition met the requirements to be accounted for as a business combination under ASC 805. Five Axis’ assets and liabilities have been adjusted for preliminary estimates of fair value, and its results of operations have been included in the Company’s consolidated financial statements from the Five Axis Acquisition Date. The purchase price was allocated to tangible and identifiable intangible assets based on their estimated fair values at the Five Axis Acquisition Date.

The Five Axis Acquisition was funded with incremental borrowings from the Company’s term note under its Citibank credit agreement and was accounted for using the acquisition method of accounting.

Acquisition-related costs have been expensed as incurred and are included in the general, and administrative expenses in the condensed consolidated statements of income (loss). No acquisition-related expenses were recorded for the three months ended March 31, 2026 or 2025.

The following table sets forth the acquisition date fair value of the assets acquired, and liabilities assumed in connection with the acquisition:

The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets was recorded as goodwill, which is not deductible for tax purposes. Goodwill reflects expected synergies from the combined operations, specialized processes and procedures, and the assembled workforce. The components of goodwill do not qualify as a separately recognized intangible asset.

Below is a summary of the intangible assets acquired in the Five Axis Acquisition:

The fair value for the customer relationships and backlog was determined using the MPEEM. In total, the intangible assets acquired subject to amortization have a weighted average useful life of 13.0 years.

Net revenue and net income from this acquisition have been included in the condensed consolidated statements of income (loss) from the acquisition date through the end of the three months ended March 31, 2026, and the impact of the acquisition to the ongoing operations on the Company’s net revenue and net income was not significant. Supplemental pro forma results of operations have not been presented because they were not material to the condensed consolidated results of operations.

Seemann acquisition

On February 3, 2026 (the “Seemann Acquisition Date”), the Company, through its wholly owned subsidiary, completed the acquisition of all of the issued and outstanding membership interests of Seemann Composites, LLC and Materials Sciences LLC (together, the “Company Group”) pursuant to a Securities Purchase Agreement dated December 31, 2025 (the “Seemann Agreement”) (the “Seemann Acquisition”), under which the Company purchased all outstanding membership interests of the Company Group, for approximately (i) $215.9 million in cash and (ii) shares of common stock of the Company with an aggregate value equal to $17.0 million. The Company Group provides advanced composite systems and materials solutions for maritime defense applications. The Company believes the acquisition of Seemann and MSC expands its capabilities in the maritime defense end market and strengthens its portfolio supporting high-priority, funded U.S. Navy programs.

The Seemann Acquisition met the requirements to be accounted for as a business combination under ASC 805. The Company Group’s assets and liabilities have been adjusted for preliminary estimates of fair value, and its results of operations have been included in the Company’s condensed consolidated financial statements from the Seemann Acquisition Date. The purchase price was allocated to tangible and identifiable intangible assets based on their estimated fair values at the Seemann Acquisition Date. The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired was recorded as goodwill, which is not expected to be deductible for tax purposes.

The Seemann Acquisition was accounted for using the acquisition method of accounting. The Seemann Acquisition was funded with the incremental borrowing from the Company’s term note under its Citibank credit agreement. Total consideration transferred was $232.8 million. The Seemann Acquisition does not have any contingent consideration arrangements.

The Company incurred $4.0 million of direct acquisition-related expenses, of which $2.0 million was recognized in the prior year and the remaining $2.0 million was recognized asgeneral, and administrative expenses on the condensed consolidated statements of income (loss) for the three months ended March 31, 2026.

As the Company finalizes the estimation of the fair value of the assets acquired and liabilities assumed, additional adjustments may be recorded during the measurement period (a period not to exceed 12 months from the acquisition date). The following table sets forth the preliminary acquisition date fair value of the assets acquired, and liabilities assumed in connection with the Seemann Acquisition:

The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets was recorded as goodwill and is fully deductible for tax purposes. Goodwill reflects expected synergies from the combined operations, specialized processes and procedures, and the assembled workforce. The components of goodwill do not qualify as a separately recognized intangible asset. Goodwill is allocated to the Company’s single reporting unit.

Below is a summary of the intangible assets acquired in the Seemann Acquisition:

The fair values of the acquired trade names and know-how were determined using the relief-from-royalty method, and the fair value for the customer relationships and customer backlog was determined using the MPEEM. All intangible assets are subject to amortization. In total, the intangible assets acquired subject to amortization have a weighted average useful life of 16.8 years.

Since the Seemann Acquisition Date through March 31, 2026, revenue and net income attributable to the Seemann Acquisition included in the Company’s condensed consolidated financial statements were not significant. Supplemental pro forma information has not been included as it is impracticable to obtain the information due to the lack of availability of historical GAAP financial data.

Goodwill and Intangibles

The table below summarizes the changes in the Company’s goodwill balances:

The table below summarizes the carrying amounts of the Company’s identifiable intangible assets as of March 31, 2026 and December 31, 2025, respectively:

Amortization expense was 10.9 million and$4.4 million for the three months ended March 31, 2026 and 2025, respectively, which was recorded in general and administrative expenses in the accompanying unaudited condensed consolidated statements of income (loss).

Debt

The Company’s notes payable consisted of the following as of March 31, 2026 and December 31, 2025:

On February 2, 2026, the Company entered into a Third Amendment to its Credit Agreement (the “Third Amendment”), which amends the Credit Agreement, dated as of April 1, 2025 (as amended by the First Amendment to Credit Agreement, dated as of May 27, 2025 and Second Amendment to Credit Agreement, dated as of October 24, 2025) by and among the Company, Citibank, N.A., as Administrative Agent and Collateral Agent (“Citibank”), and the other parties thereto (as amended from time to time, the “Credit Agreement”).

Under the terms of the Third Amendment, the Company (i) refinanced its existing term loans in an aggregate principal amount of $502.8 million to reduce the interest rate applicable thereto by 75 basis points to SOFR plus 2.75% and (ii) reduced the interest rate applicable to its revolving credit facility by 75 basis points for each level of its leverage-based pricing grid, the highest of such levels beingset at SOFR plus 2.50%. In addition, following the refinancing of the existing term loans, the Company increased the principal amount of its term loans by $265.0 million, for a total principal amount of $772 million. As of March 31, 2026, the principal of the term erm note outstanding was $765.8 million.

Interest rates were 6.42% and 7.50% as of March 31,2026 and December 31, 2025, respectively. No accrued interest was recorded under the Credit Agreement as of March 31,2026 and December 31, 2025.

On March 9, 2026, the Company entered into a Fourth Amendment to its Credit Agreement. Under the terms of the Fourth Amendment, the Company (i) increased the revolving credit commitments by $100.0 million such that the total revolving credit commitments are now $150.0 million and (ii) removed the cap on incremental revolving credit commitments, which was previously $50.0 million. The Company did not draw from the revolving credit facility during the three months ended March 31, 2026. There’s no outstanding balance of the revolving credit facility as of March 31, 2026.

All other terms and conditions of the Credit Agreement remain unchanged. The aforementioned amendments are accounted for as debt modifications. The company incurred debt issuance costs of $4.9 million associated with these amendments.

The Credit Agreement governing the revolving credit facility and term note requires the Company to comply with 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, the Company is 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 the Company’s requirement to deliver quarterly financial statements to the lender under the credit agreement. As there wasno amount of revolving credit outstanding as of March 31, 2026, the springing financial covenant was not required. The Company was in compliance with its other debt covenant as of March 31, 2026.

Lease Obligations

The Company has certain property leases, with former owners and members for facilities of the Company’s subsidiaries. Most of these leases are accounted for as finance leases except for facilities leased by AEC and a plane hangar leased by Systima, which are accounted for as operating leases. Total lease payments amounted to$3.4 million and$4.2 million for the three months ended March 31, 2026 and 2025, respectively.

Consolidated Lease Summary

On a consolidated basis, lease activity for the three andthree months ended March 31, 2026 and 2025 were as follows:

Amortization of ROU assets are included in the depreciation and amortization expense line of the accompanying condensed consolidated statements of income (loss).

On a consolidated basis, supplemental cash flow information for thethree months ended March 31, 2026 and 2025 were as follows:

Retirement Plans

Employee Benefit Plan

The Company maintains a 401(k) plan for all employees who have completed three months of service and have reached age 18. Qualified employees may contribute up to 90% of their pre-tax annual compensation to this plan, not to exceed the dollar limit set by law. The Company may make discretionary matching contributions and discretionary non-elective contributions to this plan. There were contributions of $1.6 million and $0.8 million made to the plans during the three months ended March 31, 2026 and 2025 respectively. Retirement plan contribution expense is included within either Cost of Goods Sold or General and Administrative expenses on the condensed consolidated statements of income (loss), depending on the nature of the employee’s work.

Stockholders’ Equity and Membership Units

Prior to the IPO, the Company issued membership units both in conjunction with purchases of subsidiaries and to reflect further investment in the Company’s operations. The Company issued Class A, Class B, and Class C units with substantially identical rights, privileges and liquidation preferences. No member shall be liable for the debts, liabilities or obligations of the Company beyond the member’s contributions. Pursuant to the Third Amended and Restated Limited Liability Company Agreement of TCFIII Spaceco Holdings LLC, such membership units entitled unitholders to share in the proceeds from capital transactions, including a sale of the Company, and granted them voting rights on matters requiring the consent of the members. As of December 31, 2025, a total of 166,737,325 shares of membership units were outstanding. In connection with the IPO in February 2025, all of the outstanding membership units were converted on a 0.68-for-1 basis into 112,566,039 shares of common stock of the Company.

On July 23, 2025, the Company priced the underwritten public offering (the “Offering”) of its 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 the Company’s 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 the Company’s 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 in the Offering 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. No shares were sold by the Company in the Offering and the Company didnot receive any proceeds from the Offering.

Share-Based Compensation

2025 Stock Incentive Plan

The 2025 Stock Incentive Plan (the “2025 Plan”) was adopted by the Board on February 12, 2025 and approved by our shareholders on February 12, 2025. The 2025 Plan provides for the grant of stock options (including incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, restricted stock units, performance-based awards, other stock-based awards, or any combination thereof. Employees, directors or consultants or any of our subsidiaries or affiliates are eligible to receive an award under the 2025 Plan, to the extent that an offer of such award is permitted by applicable law, stock market or exchange rules, and regulations or accounting or tax rules and regulations. Each award will be set forth in a separate grant notice or agreement and will indicate the type and terms and conditions of the award. As of March 31, 2026, no awards were granted under the 2025 Plan. No share-based compensation was recognized for the three months ended March 31, 2026.

P Units and Phantom Units

The Company historically, through Spaceco Management Equity LLC (the “Management Company”) under the Spaceco Management Equity LLC Equity Incentive Plan (the “Equity Incentive Plan”) and the Transaction Bonuses plan (the “Phantom Plan”) , granted P Units and Phantom Units to certain employees of the Company and its subsidiaries, in exchange for their services to the Company. These Units were fully vested in connection with the completion of the Company’s IPO in February 2025. During the three months ended March 31, 2025, $8.1 million share-based compensation was recognized in general and administrative expenses in the condensed consolidated statement of operations.

Net Income Per Common Share

Net income per common share was computed as follows:

The Company hadno potentially dilutive securities in any period presented.

Segment Reporting

ASC Subtopic 280-10, “Segment Reporting,” establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available. This information is regularly evaluated by the chief operating decision maker (“CODM”) to allocate resources and assess performance. The Company’s Chief Executive Officer (“CEO”) serves as the CODM, and reviews financial information on an operating segment basis to make operational decisions and assess financial performance.

On March 23, 2026, the Company appointed a new CEO who serves as the CODM. Following the change, the CODM assesses performance at a consolidated level and allocates resources based on consolidated net income. Segment assets are measured as total consolidated assets, which is reported on the balance sheet. Accordingly, the Company concluded that no change in itssingle reportable segment occurred as of March 31, 2026. The Company will continue to monitor the CODM’s review practices and internal reporting structure and will update its segment disclosure in future periods if and when discrete financial information is regularly reviewed at the segment level. In accordance with ASC 280-10, Segment Reporting, if a change in reportable segments occurs in a future period, the Company will recast prior-period segment disclosure retrospectively to reflect the new segment structure.

The following table summarizes the Company’s revenue, net income and significant expenses:

General and administrative expenses include employee compensation and benefits of $12.9 million and $6.6 million for the three months ended March 31, 2026 and 2025, respectively.

Capital expenditures, which include purchases of property, plant, and equipment, are assessed and managed at the enterprise level. Refer to “Investing Activities” in the condensed consolidated statement of cash flows for the amount of cash paid for capital expenditures.

Provision for Income Tax

The following table summarizes the Company’s income tax expense and effective tax rate for the three andthree months ended March 31, 2026 and 2025:

The change in the effective income tax rate for the three months ended March 31, 2026, as compared to the same period in the prior year, was primarily attributable to the recognition of income tax expense on a pre-tax loss during the three months ended March 31, 2025. The prior-year effective income tax rate was further impacted by unfavorable discrete tax items related to non-deductible officer compensation, changes in entity classification and interest and penalties.

The effective income tax rate for the three months ended March 31, 2026 was 9.7%, lower than the Company’s estimated annual effective tax rate of approximately 25.3%, which was primarily due to a favorable discrete tax benefit related to the revaluation of the Company’s state deferred tax arising from the changes in the combined state tax rate following the Seemann Acquisition.

Commitments and Contingencies

In the course of doing business, the Company enters into various agreements. These agreements typically include commitments and indemnifications, which could create a liability for the Company in the event of damages or injuries related to providing these services. Management believes the Company is adequately insured. However, future claims related to these agreements could significantly affect the Company’s financial results if a loss is incurred as a result of these agreements.

The Company accrues a liability for legal contingencies when it is both probable that a liability has been incurred and the amount of loss is reasonably estimable. The Company reviews these accruals and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent new information is obtained and our views on the probable outcomes of claims, suits, assessments, investigations, or legal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made. For certain matters, the liability is not probable, or the amount cannot be reasonably estimated, and therefore, accruals have not been made. In addition, in accordance with the relevant authoritative guidance, for any matters in which the likelihood of a material loss is at least reasonably possible, the Company will provide disclosure of the possible loss or range of loss. If a reasonable estimate cannot be made, however, the Company will provide disclosure to that effect. As of March 31, 2026 and December 31, 2025, the Company has no material reserves for legal contingencies and does not believe it is subject to material litigation risk. Legal fees are expensed as incurred.