Innovex International, Inc.

NOTE 1. SUMMARY OF BUSINESS

Description of Business

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

On March 18, 2024, Innovex Downhole Solutions, Inc., a Delaware corporation (“Legacy Innovex”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Dril-Quip, Inc., a Delaware corporation (“Dril-Quip”), Ironman Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of Dril-Quip, and DQ Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of Dril-Quip. On September 6, 2024, the transactions contemplated in the Merger Agreement (the “Merger”) were consummated. Following the Merger, Legacy Innovex became a wholly owned subsidiary of Dril-Quip, and the name “Dril-Quip, Inc.” was changed to “Innovex International, Inc.” The Company’s stock remained listed on the New York Stock Exchange, and its symbol was changed to “INVX”. Except as otherwise indicated, references herein to “Dril-Quip” are to Dril-Quip, Inc. prior to the completion of the Merger. See our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 24, 2026 (the “Annual Report”) for further details.

The Merger was accounted for using the acquisition method of accounting with Legacy Innovex being identified as the accounting acquirer.

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

On November 29, 2024, we acquired the remaining 80% of the issued and outstanding equity securities of Downhole Well Solutions, LLC (“DWS”) for a mixture of cash and equity consideration, resulting in DWS becoming a wholly owned subsidiary of Innovex. See our Annual Report for further details.

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

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

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

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

On September 23, 2025, we completed the sale of the Eldridge facility and associated assets, resulting in the recognition of a gain on the sale of these assets. See our Annual Report for further details.

On February 25, 2026, Innovex and certain affiliates of Amberjack Capital Partners, L.P. (the “selling stockholders”) entered into an underwriting agreement with J.P. Morgan Securities LLC acting as book-running manager for the offering and as representative of the underwriters, relating to the offer and sale by the selling stockholders of 5,750,000 shares of Company Common Stock at a price to the public of$25.75 per share (the “February 2026 Secondary Offering”), pursuant to the Company’s effective Registration Statement on Form S-3 (File No. 333-282178). The selling stockholders granted the underwriters the option to purchase, within 30 days from the date of the underwriting agreement, an additional 862,500 shares of Company Common Stock, which was exercised in full. The underwriting agreement also provided for the Company’s purchase from the underwriters and simultaneous retirement of 575,000 shares out of the 5,750,000 shares for an aggregate purchase price of approximately$14.1 million (the "Share Repurchase"). The February 2026 Secondary Offering and Share Repurchase was completed on February 27, 2026. The Company did not receive any proceeds from the February 2026 Secondary Offering.

On April 10, 2026, we acquired Drilling Innovative Solutions, LLC (“DIS”) for cash, resulting in DIS becoming a wholly owned subsidiary of Innovex. Refer to Note 3. Mergers and Acquisitions for further details.

On June 15, 2026, Innovex entered into a Share Purchase Agreement (the “Purchase Agreement”) with Rieber & Søn AS, a Norwegian private limited liability company (the “Seller”), pursuant to which the Company agreed to acquire from the Seller all of the issued shares (other than treasury shares) of TCO Group AS, a Norwegian private limited liability company (“TCO Group”). The acquisition closed on July 1, 2026. TCO Group is engaged in the development, manufacturing, and supply of equipment, tools, and related services to the oil and gas industry. TCO Group’s product offering includes completion barrier plugs, tubing-conveyed perforating services, chemical injection systems and annulus pressure relief systems. These products are used in well completion and testing, perforation services, targeted downhole chemical delivery and automatic relief of trapped pressure between casing strings.

The aggregate purchase price for the acquisition was equal to the Norwegian krone equivalent of approximately$95 million. The purchase price consisted of: (i)1,060,713 shares of Company Common Stock, valued at approximately$30 million based on the average of the volume weighted average trading prices of the Company Common Stock on the New York Stock Exchange over the 15 trading days immediately preceding June 15, 2026, and (ii)$65 million in cash, subject to certain adjustments.

Due to the proximity of the acquisition date to the issuance of these financial statements, the initial accounting for the business combination is incomplete. The Company has not yet completed the purchase price allocation for this transaction nor the corresponding unaudited pro forma condensed combined financial statements as the financial information has not been finalized. Disclosures related to the identification and measurement of identifiable assets acquired and liabilities assumed, including the allocation of the purchase price and the determination of goodwill, along with unaudited pro forma financial information, will be provided in the third quarter of 2026.

Basis of Presentation

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

Segment Information

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

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

Recent Accounting Pronouncements

Changes to U.S. GAAP are established by the Financial Accounting Standards Board (“FASB”) generally in the form of Accounting Standards Updates (“ASUs”) to the FASB’s Accounting Standards Codification. We assessed ASUs and disclosure requirements not listed below and determined that they either were not applicable or were not expected to have a material impact to our Condensed Consolidated Financial Statements.

Expense Disaggregation Disclosures (Subtopic 220-40)—In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. The amendment requires additional disclosures of specific income statement expense line items in the notes to the financial statements on both an interim and annual basis. ASU 2024-03 is effective for annual periods beginning after December 15, 2026. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

NOTE 3. MERGERS AND ACQUISITIONS

Our acquisition of businesses consisted of the transactions described below during the six months ended June 30, 2026 and the twelve months ended December 31, 2025. Acquisition and integration costs in our Condensed Consolidated Statements of Operations and Comprehensive Income represent expenditures directly associated with the closing and integration activities of the Merger and acquisitions completed, and include (i) legal, accounting, and advisory fees to complete the Merger and acquisitions and (ii) costs to integrate acquired businesses into our existing operations, including move, severance, and other integration costs (collectively, “acquisition and integration costs”).

SCF Machining Corporation

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

Final Purchase Price Allocation

In accordance with Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”), identifiable assets acquired and liabilities assumed were recorded at their estimated fair values on the date of acquisition. The allocation of the purchase price included in the current period balance sheet is based on the best estimate of management. The table below presents the final purchase price allocation to the estimated fair value of identifiable assets acquired and liabilities assumed and the resulting goodwill as of February 7, 2025. Goodwill is primarily attributable to the anticipated cost reductions and supply chain flexibility expected from the integration of SCF. Based on the current tax treatment, goodwill is not expected to be deductible for income tax purposes.

We incurred transaction costs of$0.2 million in connection with the acquisition. The costs were expensed as incurred and recognized in Acquisition and integration costs in our Condensed Consolidated Statements of Operations and Comprehensive Income.

Citadel Casing Solutions

On May 30, 2025, we acquired Citadel for$69.7 million in cash consideration. We believe this acquisition enhances our product portfolio and allows us to leverage Citadel’s industrial platform. The acquisition qualifies as a business combination and is accounted for using the acquisition method of accounting. The purchase price includes$3.0 million that was retained by the Company for purposes of funding any post-closing expenses and liabilities identified after the close of the transaction, if necessary. As of June 30, 2026, we have disbursed the entirety of the retained$3.0 million based on post-closing expenses identified.

Final Purchase Price Allocation

In accordance with ASC 805, identifiable assets acquired and liabilities assumed were recorded at their estimated fair values on the date of acquisition. The allocation of the purchase price included in the current period balance sheet is based on the best estimate of management. The table below presents the final purchase price allocation to the estimated fair value of identifiable assets acquired and liabilities assumed and the resulting goodwill as of May 30, 2025. Goodwill represents the future economic benefits arising from other assets acquired that cannot be individually identified and separately recognized. Based on the current tax treatment, goodwill is expected to be deductible for income tax purposes over a 15-year period.

(1) Measurement period adjustment recognized related to updated estimated fair value for acquired inventories.

We incurred transaction costs of$1.2 million in connection with the acquisition. The costs have been expensed as incurred and recognized in Acquisition and integration costs in our Condensed Consolidated Statements of Operations and Comprehensive Income.

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

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

Drilling Innovative Solutions

On April 10, 2026, we acquired DIS for total purchase consideration of$17.6 million, which includes$4 million (the "earnout") of contingent payment obligations payable upon achievement of defined performance metrics within two years of closing. The purchase consideration, except for the earnout, has been paid in cash. DIS manufactures and distributes unique patented products to the oil and gas industry, including float valves and plug cement retainers. We believe this acquisition enhances our product portfolio and allows us to deliver additional value to our global customer base. The acquisition qualifies as a business combination and is accounted for using the acquisition method of accounting. DIS is expected to achieve the full$4 million earnout. Therefore, we recognized the full earnout as a liability with$2.4 million recorded within Other current liabilities and$1.6 million recorded within Other long-term liabilities in the Condensed Consolidated Balance Sheets for the period ended June 30, 2026. The assets acquired and liabilities assumed in this acquisition were recorded based on preliminary estimates of their fair values as of the acquisition date. The estimated fair value of identifiable assets acquired (excluding goodwill) and liabilities assumed is$12.5 million, inclusive of$7.8 million of intangible assets. Goodwill was estimated at$5.1 million and represents the future economic benefits arising from other assets acquired that cannot be individually identified and separately recognized. Based on the current tax treatment, goodwill is expected to be deductible for income tax purposes over a 15-year period. Pro forma results of operations for this acquisition have not been presented because the effects of the acquisition were not material to the Condensed Consolidated Financial Statements.

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

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

NOTE 4. REVENUE

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

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

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

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

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

The changes in allowance for credit losses during thesix months ended June 30, 2026 and 2025 were as follows:

Contract Balances

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

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

Balances related to contracts with customers consisted of the following (in thousands):

Contract Assets

Contract liabilities

Obligations for returns and refunds were considered immaterial as of June 30, 2026.

Remaining Performance Obligations

The aggregate amount of the transaction price allocated to remaining performance obligations from our over time product lines was $40.8 million as of June 30, 2026. We expect to recognize revenue on 100% of the remaining performance obligations over the next twelve months.

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

NOTE 5. INVENTORY

A summary of inventories as of June 30, 2026 and December 31, 2025 is as follows:

All amounts in the table above are reported net of obsolescence reserves of$115.5 million and$104.0 million as of June 30, 2026 and December 31, 2025, respectively.

NOTE 6. PROPERTY AND EQUIPMENT

A summary of property and equipment as of June 30, 2026 and December 31, 2025 is as follows:

The amortization expense for the right-of-use finance lease assets was$2.3 million and$1.8 million for the three months ended June 30, 2026 and 2025, respectively, and$4.4 million and$3.5 million for the six months ended June 30, 2026 and 2025, respectively.

Depreciation expense related to property and equipment was$9.5 million and$9.4 million for the three months ended June 30, 2026 and 2025, respectively, and$19.4 million and$19.0 million for the six months ended June 30, 2026 and 2025, respectively.

NOTE 7. ASSETS HELD FOR SALE

In accordance with Accounting Standards Codification Topic 360, Property, Plant, and Equipment (“ASC 360”), specifically ASC 360-10-45-9, we identified no assets held for sale in our Condensed Consolidated Balance Sheets at June 30, 2026.

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

NOTE 8. INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

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

A summary of intangible assets as of June 30, 2026 and December 31, 2025 is as follows:

Amortization expense on intangible assets was$4.5 million and$3.8 million for the three months ended June 30, 2026 and 2025, respectively, and$8.7 million and$7.4 million for the six months ended June 30, 2026 and 2025, respectively.

Goodwill

The following table presents a roll-forward of goodwill forthe periods ended June 30, 2026 and December 31, 2025:

Impairment

We analyzed definite lived intangible assets for impairment as of June 30, 2026 and December 31, 2025, in accordance with ASC 360, noting no impairment indicators were present. We analyzed goodwill for impairment as of June 30, 2026 and December 31, 2025, in accordance with Accounting Standards Codification Topic 350, Intangibles—Goodwill and Other (“ASC 350”), noting no impairment indicators were present. For our annual goodwill impairment test as of December 31, 2025, we performed a qualitative assessment to determine if it was more likely than not (that is, a likelihood of more than 50 percent) that the fair value of our reporting unit was less than its carrying value as of the test date, for which we determined that it was not. We evaluated events and circumstances since the date of our last quantitative or qualitative assessment, including macroeconomic conditions, industry, and market conditions, and our overall financial performance, and it was determined that no changes in circumstances indicated that a potential impairment of goodwill had occurred. Therefore, no impairment charges were recorded related to goodwill for the three and six months ended June 30, 2026. We will continue to evaluate our goodwill and definite lived assets for potential triggering events as conditions warrant.

NOTE 9. PREPAIDS AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following as of June 30, 2026 and December 31, 2025:

NOTE 10. DEBT

Current and long-term debt obligations, inclusive of finance lease obligations, consisted of the following as of June 30, 2026 and December 31, 2025:

As of June 30, 2026 and December 31, 2025, we had no borrowings outstanding under the Revolving Credit Facility (as defined below).

Revolving Credit Facility

On February 27, 2025, we entered into the Third Amended and Restated Revolving Credit, Guaranty and Security Agreement (the “Credit Agreement”), dated as of February 27, 2025, with PNC Bank, National Association (“PNC”) as the agent, to replace the Second Amended and Restated Revolving Credit, Guaranty and Security Agreement and provide for and govern a revolving credit facility (the “Revolving Credit Facility”). The Credit Agreement, among other things, (i) extended the maturity of the agreement from June 2026 to February 2030, (ii) increased the maximum revolving amount from $110 million to $200 million, which may, subject to certain conditions, be increased to $250 million, (iii) eliminated the term loan commitment and (iv) provided for an applicable margin for interest on the loans to be based on availability, effective as of April 1, 2025. The applicable margin under the Credit Agreement will range from 0.50% to 1.00% for swing loans and alternate base rate revolving loans and 1.50% to 2.00% for term SOFR revolving loans. The Company is 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%, 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.

We performed a debt modification analysis in accordance with Accounting Standards Codification Topic 470, Debt (“ASC 470”), and concluded that the elimination of the term loan represented a debt extinguishment. We recognized a loss in February 2025 due to the write-down of the remaining debt issuance costs pertaining to the term loan of$0.4 million. The debt issuance cost attributable to the Revolving Credit Facility as of June 30, 2026 was$1.1 million and is classified as Other long-term assets in our Condensed Consolidated Balance Sheets at June 30, 2026. We were in compliance with our debt covenants at June 30, 2026 and December 31, 2025.

NOTE 11. ACCRUED EXPENSES

A summary of accrued expenses as of June 30, 2026 and December 31, 2025 is as follows:

NOTE 12. INCOME TAXES

The effective tax rate for the three and six months ended June 30, 2026 was 29.3% and 39.5%, respectively, compared to 31.0% for the same periods in 2025. The change in the effective tax rate between the periods was primarily due to the discrete items recorded in the respective periods along with the change in projected earnings mix by geography and tax jurisdiction, foreign withholding tax, and changes in non-deductible expenses.

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

NOTE 13. EARNINGS (LOSS) PER SHARE

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

The following table summarizes the basic and diluted earnings per share calculations (in thousands, except share and per share amounts):

NOTE 14. STOCKHOLDERS’ EQUITY

Stock-Based Compensation

We account for equity-based compensation expense in accordance with Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“ASC 718”). Equity instruments are measured at fair value on the grant date consistent with the terms of the award. Stock-based compensation expense recorded was$3.4 million and$3.8 million for the three months ended June 30, 2026 and 2025, respectively, and$6.4 million and$5.5 million for the six months ended June 30, 2026 and 2025, respectively. The compensation expense is recorded in Selling, general and administrative expenses in our Condensed Consolidated Statements of Operations and Comprehensive Income.

Share Repurchase Plan

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

During the six months ended June 30, 2026 and 2025, we repurchased 575,000 and 624,531 shares at an average price of$24.59 and$14.89, under the Share Repurchase Program for approximately$14.1 million and$9.3 million, respectively, and have retired such shares. As of June 30, 2026, we had remaining authorization to repurchase up to approximately$76.6 million of our shares.

NOTE 15. RELATED PARTY TRANSACTIONS

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

The total of purchases from vendors that are related parties was$0.1 million and$0.1 million for the three months ended June 30, 2026 and 2025, respectively, and$1.3 million and$0.2 million for the six months ended June 30, 2026 and 2025, respectively.

Total revenue earned from customers that are related parties was de minimis and$0.4 million for the three months ended June 30, 2026 and 2025, respectively, and$0.2 million and$0.8 million for the six months ended June 30, 2026 and 2025, respectively. At June 30, 2026, we had de minimis outstanding net trade receivables due from customers that are related parties and at December 31, 2025, we hadno outstanding net trade receivables due from customers that are related parties.

NOTE 16. COMMITMENTS AND CONTINGENCIES

Litigation

We are sometimes involved in legal proceedings and certain regulatory matters. We record a liability for those legal proceedings and regulatory matters when we determine it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. We also disclose when it is reasonably possible that a material loss may be incurred. From time to time, we may enter into discussions regarding settlement of these matters, and may enter into settlement agreements, if we believe settlement is in the best interest of the Company and our stockholders. Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable.

Impulse Litigation

In 2023, Impulse Downhole Solutions Ltd. and Impulse Downhole Tools USA Ltd. (collectively, “Impulse”) filed a lawsuit against DWS (captioned Impulse Downhole Solutions Ltd., and Impulse Downhole Tools USA Ltd v. Downhole Well Solutions, LLC, Civil Action No. 4:23-cv-02954 in the U.S. District Court for the Southern District of Texas) alleging infringement of five United States patents owned by Impulse Downhole Solutions Ltd. relating to friction reduction tools used in directional drilling. The allegations of infringement of two of the patents were dismissed before the jury trial. The jury found the remaining patent claims were valid, that DWS had infringed on those patents and that such infringement was willful. The jury awarded monetary damages to Impulse of$47.6 million; however, no judgment has yet been entered and the jury decision is subject to post-trial motions. Damages could increase or decrease based on further proceedings and judicial determination, and the amount of ultimate loss may differ materially from the amount accrued to date.

Loss contingencies are inherently unpredictable; the assessment is highly subjective and requires judgment about future events, and unfavorable developments or resolutions can occur. Based on management’s current understanding of the relevant facts and circumstances, a loss related to this matter is both probable and estimable. Accordingly, we recorded a loss contingency accrual of$51.6 million, which includes an additional estimated loss of $2.8 million recognized since March 31, 2026, classified within Legal settlement accrual in our Condensed Consolidated Balance Sheets. We strongly disagree with the verdict, intend to continue to vigorously challenge it, and expect to pursue post-trial motions and appeal any resulting judgment to the U.S. Court of Appeals for the Federal Circuit.

In addition to the matter described above, there are other pending legal proceedings involving Innovex, considered ordinary routine litigation incidental to the business. While it is not feasible to predict the outcome of such proceedings, in the opinion of Innovex as of June 30, 2026, either the likelihood of loss is remote or any reasonably possible loss associated with the resolution of such proceedings is not expected to be material to our financial condition, results of operations or cash flows either individually or in the aggregate.

Legal Defense Accrual

Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. Some of the significant factors considered in the review of these legal defense accruals are as follows: the actual costs incurred by Innovex; the development of Innovex’s legal defense strategy and structure in light of the scope of its litigation; the cases being brought against Innovex; and the costs and outcomes of completed trials and the most current information regarding anticipated timing, progression, and related costs of trial activities in the associated litigation. The legal defense accrual as of June 30, 2026 and December 31, 2025 was$3.4 million and$5.0 million, respectively, and represented our best estimate of the minimum amount of defense costs to be incurred in connection with our outstanding litigation; however, events such as additional trials and other events that could arise in the course of our litigation could affect the ultimate amount of legal defense costs to be incurred by Innovex. We will continue to monitor our legal defense costs and review the adequacy of the associated accrual and may decide to increase the accrual at any time in the future if, based upon the factors set forth, we believe it would be appropriate to do so.