Onterris, Inc.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our historical audited and unaudited consolidated financial statements and related notes and other information included elsewhere in this filing and our other filings with the SEC, including our unaudited condensed consolidated financial statements and the accompanying notes as of and for the three and six months ended June 30, 2026 and 2025 included in Part I, Item 1. “Financial Statements” in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the section entitled “Forward-Looking Statements”, and elsewhere in this filing and our other filings with the SEC, including in Item 1A. Risk Factors in the 2025 Form 10-K and the Q1 2026 Form 10-Q.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our historical audited and unaudited consolidated financial statements and related notes and other information included elsewhere in this filing and our other filings with the SEC, including our unaudited condensed consolidated financial statements and the accompanying notes as of and for the three and nine months ended September 30, 2026 and 2025 included in Part I, Item 1. “Financial Statements” in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the section entitled “Forward-Looking Statements”, and elsewhere in this filing and our other filings with the SEC, including in Item 1A. Risk Factors in the 2025 Form 10-K and the Q1 2026 Form 10-Q.

Previous wording

Historically, the Company had three business segments—Assessment, Permitting and Response, Measurement and Analysis and Remediation and Reuse. Effective in the first quarter of 2026, we realigned two of our reportable segments to reflect updates made to our organizational structure and operating model. As a result of these changes, we aggregated the Assessment, Permitting and Response and Remediation and Reuse segments into a newly created Consulting and Treatment segment. The Company's Measurement and Analysis and corporate segments were not affected by the realignment.

Current wording

Historically, the Company had three business segments—Assessment, Permitting and Response, Measurement and Analysis and Remediation and Reuse. Effective in the first quarter of 2026, we realigned two of our reportable segments to reflect updates made to our organizational structure and operating model. As a result of these changes, we aggregated the Assessment, Permitting and Response and Remediation and Reuse segments into a newly created Consulting and Treatment segment. Our Measurement and Analysis and corporate segments were not affected by the realignment.

Previous wording

We have conformed our presentation for all prior periods presented to reflect its revised segment reporting. See Notes 1 and 19 to our unaudited condensed consolidated financial statements included in Part 1, Item 1 “Financial Statements.”

Current wording

We have conformed our presentation for all prior periods presented to reflect our revised segment reporting. See Notes 1 and 19 to our unaudited condensed consolidated financial statements included in Part 1, Item 1 “Financial Statements.”

Previous wording

Although we did not consummate any acquisitions in the three and six months ended June 30, 2026, or the year ended 2025, we have been, and expect to continue to be, an acquisitive company. Acquisitions expanded our environmental service capabilities across our segments, our access to technology, as well as our geographic reach in the United States, Canada, and Australia.

Current wording

Although we did not consummate any business acquisitions as defined in the relevant accounting guidance in the three and nine months ended September 30, 2026, or the year ended December 31, 2025, we entered into an asset purchase agreement to acquire certain assets, including customer contracts, on September 15, 2026, for a purchase price of $5.1 million, and expect to continue to be, an acquisitive company. Acquisitions expanded our environmental service capabilities across our segments, our access to technology, as well as our geographic reach in the United States, Canada, and Australia. We did complete one asset acquisition in the three months ended September 30, 2026. See Notes 7 and 22 to our unaudited condensed consolidated financial statements included in Part I, Item 1. “Financial Statements.”

Previous wording

As a result of our acquisitions, goodwill and other intangible assets represent a significant proportion of our total assets, and amortization of intangible assets has historically been a significant expense. Our historical financial statements also include other acquisition-related costs, including costs relating to external legal support, diligence and valuation services and other transaction and integration-related matters. In addition, in any year gains and losses from changes in the fair value of business acquisition contingencies such as earn-outs could be significant. The amount of each for the three and six months ended June 30, 2026 and 2025, was:

Current wording

As a result of our acquisitions, goodwill and other intangible assets represent a significant proportion of our total assets, and amortization of intangible assets has historically been a significant expense. Our historical financial statements also include other acquisition-related costs, including costs relating to external legal support, diligence and valuation services and other transaction and integration-related matters. In addition, in any year gains and losses from changes in the fair value of business acquisition contingencies such as earn-outs could be significant. The amount of each for the three and nine months ended September 30, 2026 and 2025, was:

Previous wording

During the three months ended June 30, 2026, we made a contingent consideration cash payment of $2.8 million for Epic Environmental Pty Ltd (Epic). During the three months ended June 30, 2025, we made contingent consideration payments of $4.0 million in cash related to earn-out payments for Epic.

Current wording

During the three months ended September 30, 2026, no contingent consideration payments were made. During the three months ended September 30, 2025, we made a contingent consideration cash payment of $1.2 million for Vandrensning.

Previous wording

During the six months ended June 30, 2026, we made contingent consideration cash payments of $8.0 million and $2.8 million for Origins Laboratory, Inc and Epic, respectively. During the six months ended June 30, 2025, we made contingent consideration payments of $10.6 million, of which $4.0 million was paid in cash to Epic, and the remaining $6.6 million was paid in the Company's common stock, of which $4.8 million related to deferred consideration payments for the acquisition of Epic, and $1.8 million related to earn-out payments for SensibleIoT, LLC.

Current wording

During the nine months ended September 30, 2026, we made contingent consideration cash payments of $8.0 million and $2.8 million for Origins Laboratory, Inc and Epic Environmental Pty Ltd (Epic), respectively. During the nine months ended September 30, 2025, we made contingent consideration payments of $11.8 million, of which $1.2 million was paid in cash for Vandrensning, $4.0 million was paid in cash for Epic, and the remaining $6.6 million was paid in the Company's common stock, of which $4.8 million related to deferred consideration payments for the acquisition of Epic, and $1.8 million related to earn-out payments for SensibleIoT, LLC.

Previous wording

In connection with certain of our acquisitions, we may make up to $7.0 million in aggregate earn-out payments between the years 2026 and 2027, of which up to $3.8 million may be paid only in cash, up to $2.8 million may be paid only in common stock and up to $0.4 million may be paid, at our option, in cash or common stock. See Note 7 to our unaudited condensed consolidated financial statements included in Part I, Item 1. “Financial Statements.”

Current wording

In connection with certain of our acquisitions, we expect to incur $6.2 million, and may make up to $7.0 million in aggregate earn-out payments between the years 2026 and 2027, of which up to $3.8 million may be paid only in cash, up to $2.8 million may be paid only in common stock and up to $0.4 million may be paid, at our option, in cash or common stock. See Note 7 to our unaudited condensed consolidated financial statements included in Part I, Item 1. “Financial Statements.”

Previous wording

Total debt, net of deferred debt issuance costs, at June 30, 2026 was $349.0 million, which was an increase of $60.8 million compared to December 31, 2025. The increase was primarily driven by an increase of $66.1 million outstanding under our revolving line of credit.

Current wording

Total debt, net of deferred debt issuance costs, at September 30, 2026 was $322.3 million, which was an increase of $34.0 million compared to December 31, 2025. The increase was primarily driven by an increase of $42.3 million outstanding under our revolving line of credit, partially offset by $7.5 million of quarterly term loan installment repayments made during the nine months ended September 30, 2026.

Previous wording

Interest expense, net was $5.5 million and $10.9 million in the three and six months ended June 30, 2026, respectively, and $4.8 million and $9.8 million in the three and six months ended June 30, 2025, respectively. We expect interest expense to remain a significant cost as we continue to leverage our 2025 Credit Facility to support our operations, share repurchase activity, and future acquisitions. Our 2025 Credit Facility funded a portion of the redemption of the Series A-2 Preferred Stock in April and July 2025.

Current wording

Interest expense, net was $5.6 million and $16.5 million in the three and nine months ended September 30, 2026, respectively, and $5.0 million and $14.9 million in the three and nine months ended September 30, 2025, respectively. We expect interest expense to remain a significant cost as we continue to leverage our 2025 Credit Facility to support our operations, share repurchase activity, and future acquisitions. Our 2025 Credit Facility funded a portion of the redemption of the Series A-2 Preferred Stock in April and July 2025.

Previous wording

In addition to the impact of seasonality on earnings, our environmental emergency response business exposes us to potentially significant revenue and earnings fluctuations tied to large environmental emergency response projects following an incident or natural disaster or more broad scale events. Total revenue from emergency response related services was $10.8 million and $48.5 million for the three months ended June 30, 2026 and 2025, respectively, and $18.9 million and $62.4 million for the six months ended June 30, 2026 and 2025, respectively. Demand for environmental emergency response services remains difficult to predict and as a result, we may have experienced revenues and earnings in prior years that are not indicative of future results, making those periods particularly difficult comparisons for future periods. Earnings volatility is also driven by the timing of large projects, particularly in our Consulting and Treatment segment, and the impact of acquisitions. As a result of these factors, and because demand for environmental services is not driven by specific or predictable patterns in one or more fiscal quarters, our business is better assessed based on annual results.

Current wording

In addition to the impact of seasonality on earnings, our environmental emergency response business exposes us to potentially significant revenue and earnings fluctuations tied to large environmental emergency response projects following an incident or natural disaster or more broad scale events. Total revenue from emergency response related services was $17.0 million and $11.5 million for the three months ended September 30, 2026 and 2025, respectively, and $35.9 million and $73.9 million for the nine months ended September 30, 2026 and 2025, respectively. Demand for environmental emergency response services remains difficult to predict and as a result, we may have experienced revenues and earnings in prior years that are not indicative of future results, making those periods particularly difficult comparisons for future periods. Earnings volatility is also driven by the timing of large projects and significant recovery projects that follow certain large emergency response incidents, particularly in our Consulting and Treatment segment, and the impact of acquisitions. As a result of these factors, and because demand for environmental services is not driven by specific or predictable patterns in one or more fiscal quarters, our business is better assessed based on annual results.

Previous wording

Cost of revenues for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 decreased by $28.4 million or 21.4% driven primarily by the decrease in revenues. Cost of revenues as a percentage of revenue for the three months ended June 30, 2026 was 55.9%, compared to 56.6% for the three months ended June 30, 2025. This improvement was driven primarily by lower non-labor project costs as a percentage of revenues, partially offset by higher project labor costs as a percentage of revenue, both due to project mix.

Current wording

Cost of revenues for the three months ended September 30, 2026 compared to the three months ended September 30, 2025 decreased by $21.5 million or 15.8% driven primarily by the decrease in revenues. Cost of revenues as a percentage of revenue for the three months ended September 30, 2026 was 56.5%, compared to 60.6% for the three months ended September 30, 2025. This improvement was driven primarily by lower non-labor project costs as a percentage of revenues, partially offset by higher project labor costs as a percentage of revenue, both due to project mix.

Previous wording

Cost of revenues for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 decreased by $35.3 million or 14.7% driven primarily by the decrease in revenues. Cost of revenues as a percentage of revenue for the six months ended June 30, 2026 was 58.0%, compared to 58.5% for the six months ended June 30, 2025. This improvement was driven primarily by lower non-labor project costs as a percentage of revenues, partially offset by higher project labor costs as a percentage of revenue, both due to project mix.

Current wording

Cost of revenues for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 decreased by $56.8 million or 15.1% driven primarily by the decrease in revenues. Cost of revenues as a percentage of revenue for the nine months ended September 30, 2026 was 57.4%, compared to 59.2% for the nine months ended September 30, 2025. This improvement was driven primarily by lower non-labor project costs as a percentage of revenues, partially offset by higher project labor costs as a percentage of revenue, both due to project mix.

Previous wording

Selling, general and administrative expense for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 decreased $15.6 million or 11.2% primarily due to $8.4 million in lower labor costs, which included lower bonus accruals, a $6.9 million year-over-year change in bad debt expense primarily driven by aged receivables from the City of Tustin in the prior year period, and lower stock-based compensation expense of $4.5 million, partially offset by higher IT expenses. Selling, general and administrative expense as a percentage of revenues increased to 35.0% from 33.9% in the comparable period primarily as a result of lower revenue.

Current wording

Selling, general and administrative expense for the three months ended September 30, 2026 compared to the three months ended September 30, 2025 decreased $2.3 million or 3.5% primarily due to $3.6 million in lower labor costs, which included lower bonus accruals, and a $1.4 million year-over-year change in bad debt expense due to improved collections of aged accounts receivables, partially offset by higher stock-based compensation expense of $0.4 million and higher IT expenses. Selling, general and administrative expense as a percentage of revenues increased to 31.2% from 29.2% in the comparable period primarily as a result of lower revenue.

Previous wording

Selling, general and administrative expense for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 decreased $10.7 million or 14.6% primarily due to $5.7 million in lower labor costs, which included lower bonus accruals, a $5.9 million year-over-year change in bad debt expense primarily driven by aged receivables from the City of Tustin in the prior year period, and lower stock-based compensation expense of $1.2 million, partially offset by higher IT expenses. Selling, general and administrative expense as a percentage of revenues increased to 33.7% from 31.4% in the comparable period primarily as a result of lower revenue.

Current wording

Selling, general and administrative expense for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 decreased $17.9 million or 8.7% primarily due to $12.0 million in lower labor costs, which included lower bonus accruals, a $8.3 million year-over-year change in bad debt expense primarily driven by aged receivables from the City of Tustin in the prior year period, and lower stock-based compensation expense of $4.1 million, partially offset by a $4.7 million increase in costs, comprised of rebranding costs and higher IT expenses. Selling, general and administrative expense as a percentage of revenues increased to 33.6% from 32.3% in the comparable period primarily as a result of lower revenue.

Previous wording

Depreciation and Amortization for the three and six months ended June 30, 2026 remained relatively consistent with the three and six months ended June 30, 2025 primarily due to the absence of significant changes in the underlying property and equipment and intangible asset base.

Current wording

Depreciation and Amortization for the three and nine months ended September 30, 2026 remained relatively consistent with the three and nine months ended September 30, 2025 primarily due to the absence of significant changes in the underlying property and equipment and intangible asset base.

Previous wording

Other income, net for the six months ended June 30, 2026 was comprised of fair value gains of $1.2 million on our interest rate swaps and $0.5 million on our foreign currency forward contracts. Other income, net for the six months ended June 30, 2025 was comprised of a fair value gain of $9.7 million related to the Series A-2 preferred stock conversion option, partially offset by losses of $1.6 million related to a fair value adjustment on our interest rate swaps.

Current wording

Other income, net for the three months ended September 30, 2026 was primarily comprised of proceeds of $3.7 million from an insurance settlement related to a business combination and fair value gains of $1.0 million on our interest rate swaps, partially offset by fair value losses of $0.3 million on our foreign currency forward contracts. Other income, net for the three months ended September 30, 2025 was primarily comprised of a fair value gain of $10.6 million related to the Series A-2 preferred stock conversion option, partially offset by losses of $0.2 million related to a fair value adjustment on our interest rate swaps.

Previous wording

Other income, net for the three months ended June 30, 2026 was comprised of fair value gains of $0.5 million on our interest rate swaps and $0.1 million on our foreign currency forward contracts. Other income, net for the three months ended June 30, 2025 was comprised of a fair value gain of $10.0 million related to the Series A-2 preferred stock conversion option, partially offset by losses of $0.7 million related to a fair value adjustment on our interest rate swaps.

Current wording

Other income, net for the nine months ended September 30, 2026 was primarily comprised of proceeds of $3.7 million from an insurance settlement related to a business combination, fair value gains of $2.2 million on our interest rate swaps, and $0.2 million on our foreign currency forward contracts. Other income, net for the nine months ended September 30, 2025 was primarily comprised of a fair value gain of $20.2 million related to the Series A-2 preferred stock conversion option, partially offset by losses of $1.8 million related to a fair value adjustment on our interest rate swaps.

Previous wording

Interest expense, net for the three and six months ended June 30, 2026 increased compared to the three and six months ended June 30, 2025 primarily due to higher debt balances during the current year periods.

Current wording

Interest expense, net for the three and nine months ended September 30, 2026 increased compared to the three and nine months ended September 30, 2025 primarily due to higher debt balances during the current year periods.

Previous wording

Weighted average interest rates, after giving effect to the impact of the interest rate swaps, as of June 30, 2026 and June 30, 2025 were 5.5% and 5.4%, respectively. See “—Key Factors that Affect Our Business and Our Results—Financing Costs” and Notes 12 and 13 to our unaudited condensed consolidated financial statements included in Part I, Item 1. “Financial Statements.”

Current wording

Weighted average interest rates, after giving effect to the impact of the interest rate swaps, as of September 30, 2026 and September 30, 2025 were 5.6% and 5.5%, respectively. See “—Key Factors that Affect Our Business and Our Results—Financing Costs” and Notes 12 and 13 to our unaudited condensed consolidated financial statements included in Part I, Item 1. “Financial Statements.”

Previous wording

The income tax expense for the three and six months ended June 30, 2026 decreased compared to the three and six months ended June 30, 2025 primarily due to the impact of available indefinite-lived deferred tax assets on the calculation of deferred income tax.

Current wording

The income tax expense for the three and nine months ended September 30, 2026 decreased compared to the three and nine months ended September 30, 2025 primarily due to the impact of available indefinite-lived deferred tax assets on the calculation of deferred income tax.

Previous wording

Consulting and Treatment segment revenues for the three months ended June 30, 2026 decreased compared to the three months ended June 30, 2025 primarily as a result of lower environmental emergency response revenues of $37.7 million, lower recovery services revenue tied to environmental events of $11.2 million, a $1.0 million decrease in revenues from exited European operations, which were exited in the fourth quarter of 2025, and lower renewables revenues of $0.9 million, which was wound down by the end of 2025. These decreases were partially offset by higher core consulting revenues of $3.5 million driven by growth in our United States and Australian markets. Environmental emergency response revenues were $10.8 million in the three months ended June 30, 2026, compared to $48.5 million in the three months ended June 30, 2025.

Current wording

Consulting and Treatment segment revenues for the three months ended September 30, 2026 decreased compared to the three months ended September 30, 2025 primarily as a result of a significant environmental emergency response event in the prior year that generated $45.4 million of revenue (of which $4.7 million was environmental emergency response revenue and $40.7 million was related to recovery services), a $0.9 million decrease in revenues from European operations, which were exited in the fourth quarter of 2025, and lower renewables revenues of $0.8 million, which was wound down by the end of 2025. Excluding the impact of the significant prior-year event, Consulting and Treatment revenues for the three months ended September 30, 2026 increased by $25.5 million due to higher environmental emergency response revenues of $10.2 million, higher core consulting revenues of $5.9 million driven by growth in our United States and Australian markets, higher recovery revenues of $5.6 million, and higher treatment revenues of $3.8 million. Environmental emergency response revenues were $17.0 million in the three months ended September 30, 2026, compared to $11.5 million in the three months ended September 30, 2025.

Previous wording

Consulting and Treatment segment revenues for the six months ended June 30, 2026 decreased compared to the six months ended June 30, 2025 primarily as a result of lower environmental emergency response revenues of $43.5 million, lower recovery services revenue tied to environmental events of $6.1 million, lower treatment revenues of $3.9 million due to project mix, which included a $2.0 million decrease in revenues from exited European operations, which were exited in the fourth quarter of 2025, and lower renewables revenues of $1.5 million, which was wound down by the end of 2025. These decreases were partially offset by higher core consulting revenues of $4.6 million driven by growth in our United States and Australian markets. Environmental emergency response revenues were $18.9 million in the six months ended June 30, 2026, compared to $62.4 million in the six months ended June 30, 2025. The three and six months ended June 30, 2025 included $53.6 million in revenue from a single response event, which did not recur in the current period.

Current wording

Consulting and Treatment segment revenues for the nine months ended September 30, 2026 decreased compared to the nine months ended September 30, 2025 primarily as a result of a significant environmental emergency response event in the prior year that generated $99.0 million of revenue (of which $53.2 million was environmental emergency response revenue and $45.8 million was related to recovery services), a $2.9 million decrease in revenues from European operations, which were exited in the fourth quarter of 2025, and lower renewables revenues of $2.3 million, which was wound down by the end of 2025. Excluding the impact of the significant prior-year event, Consulting and Treatment revenues for the nine months ended September 30, 2026 increased by $28.7 million primarily due to higher environmental emergency response revenues of $15.2 million, higher core consulting revenues of $10.6 million driven by growth in our United States and Australian markets, and higher recovery revenues of $3.0 million. Environmental emergency response revenues were $35.9 million in the nine months ended September 30, 2026, compared to $73.9 million in the nine months ended September 30, 2025.

Previous wording

Measurement and Analysis segment revenues for the three months ended June 30, 2026 decreased compared to the three months ended June 30, 2025 primarily due to a decrease in field services revenues of $3.5 million, partially offset by an increase in lab testing revenues of $1.0 million, which recovered from weather impacts in the first quarter.

Current wording

Measurement and Analysis segment revenues for the three months ended September 30, 2026 decreased compared to the three months ended September 30, 2025 primarily due to a decrease in field services revenues of $1.9 million.

Previous wording

Measurement and Analysis segment revenues for the six months ended June 30, 2026 decreased compared to the six months ended June 30, 2025 primarily due to a decrease in field services revenues of $7.7 million, which included the impact of adverse weather conditions in the first quarter of 2026.

Current wording

Measurement and Analysis segment revenues for the nine months ended September 30, 2026 decreased compared to the nine months ended September 30, 2025 primarily due to a decrease in field services revenues of $9.6 million, which included the impact of adverse weather conditions in the first quarter of 2026 and the impact of certain temporary regulatory waivers on parts of our air testing business resulting in project delays and cancellations.

Previous wording

Consulting and Treatment Segment Adjusted EBITDA for the three and six months ended June 30, 2026 decreased compared to the three and six months ended June 30, 2025 primarily as a result of lower revenues, partially offset by improved Segment Adjusted EBITDA margin. Segment Adjusted EBITDA margin for the three and six months ended June 30, 2026 increased to 22.2% and 20.0%, respectively, from 21.9% and 18.6% in the prior year periods due to significantly higher margins in our consulting and water treatment businesses driven by project mix and improved operational efficiency in the current year periods, and losses in the prior year periods related to our renewables business, partially offset by decreases in high margin emergency response revenues in the current year.

Current wording

Consulting and Treatment Segment Adjusted EBITDA for the three months ended September 30, 2026 increased compared to the three months ended September 30, 2025 primarily as a result of improved Segment Adjusted EBITDA margin, partially offset by lower revenues. Segment Adjusted EBITDA margin for the three months ended September 30, 2026 increased to 21.7% from 18.4% in the prior year period due to significantly higher margins in our consulting and water treatment businesses driven by project mix and improved operational efficiency in the current year period, and losses in the prior year period related to our renewables business, partially offset by decreases in high margin emergency response revenues in the current year period.

Previous wording

Measurement and Analysis Segment Adjusted EBITDA for the three and six months ended June 30, 2026 decreased compared to the three and six months ended June 30, 2025 as a result of lower revenues and lower Segment Adjusted EBITDA margin. Segment Adjusted EBITDA margin for the three and six months ended June 30, 2026 decreased to 26.2% and 22.5%, respectively, from 29.1% and 26.3% in the prior year periods, driven by project mix and lower operating leverage resulting from lower revenues in the current year periods.

Current wording

Measurement and Analysis Segment Adjusted EBITDA for the three and nine months ended September 30, 2026 decreased compared to the three and nine months ended September 30, 2025 as a result of lower revenues and lower Segment Adjusted EBITDA margin. Segment Adjusted EBITDA margin for the three and nine months ended September 30, 2026 decreased to 26.1% and 23.8%, respectively, from 27.5% and 26.7%, respectively, in the prior year periods, driven by project mix and lower operating leverage resulting from lower revenues in the current year periods.

Previous wording

Corporate and other costs for the three and six months ended June 30, 2026 when compared to the three and six months ended June 30, 2025 decreased primarily due to lower bonus accrual in the current year, partially offset by higher IT infrastructure and marketing costs.

Current wording

Corporate and other costs for the three and nine months ended September 30, 2026 decreased compared to the three and nine months ended September 30, 2025 primarily due to lower bonus accrual in the current year periods, partially offset by higher IT infrastructure and marketing costs.

Previous wording

Our principal sources of liquidity have been cash generated by operating activities, borrowings under our senior secured credit facilities, other borrowing arrangements, and proceeds from the issuance of common stock. Historically, we have financed our operations and acquisitions from a combination of cash generated from operations, periodic borrowings under senior secured credit facilities, and proceeds from the issuance of common and preferred stock. Our primary cash needs are for day to day operations, to fund working capital requirements, to fund our acquisition strategy and any related cash earn-out obligations, to pay interest and principal on our indebtedness and to make capital expenditures. Historically, our cash needs also included the payment of dividends on our Series A-2 preferred stock and, more recently, we have begun repurchasing shares of common stock pursuant to our share repurchase program. Additionally, in connection with certain acquisitions, we agree to earn-out provisions and other purchase price adjustments that may require future payments. We may make up to $7.0 million in aggregate earn-out payments between the years 2026 and 2027 in connection with certain of our acquisitions of which up to $3.8 million may be paid only in cash, up to $2.8 million may be paid only in common stock and up to $0.4 million may be paid in cash or, at our option, in common stock. See Note 7 to our unaudited condensed consolidated financial statements included in Part 1, Item 1. “Financial Statements.” As of June 30, 2026, we had $148.1 million available under the 2025 Credit Facility (after giving effect to any outstanding letters of credit, and subject to borrowing base limitations), and

Current wording

Our principal sources of liquidity have been cash generated by operating activities, borrowings under our senior secured credit facilities, other borrowing arrangements, and proceeds from the issuance of common stock. Historically, we have financed our operations and acquisitions from a combination of cash generated from operations, periodic borrowings under senior secured credit facilities, and proceeds from the issuance of common and preferred stock. Our primary cash needs are for day to day operations, to fund working capital requirements, to fund our acquisition strategy and any related cash earn-out obligations, to pay interest and principal on our indebtedness and to make capital expenditures. Historically, our cash needs also included the payment of dividends on our Series A-2 preferred stock and, more recently, we have begun repurchasing shares of common stock pursuant to our share repurchase program. Additionally, in connection with certain acquisitions, we agree to earn-out provisions and other purchase price adjustments that may require future payments. We expect to incur $6.2 million, and may make up to $7.0 million in aggregate earn-out payments between the years 2026 and 2027 in connection with certain of our acquisitions of which up to $3.8 million may be paid only in cash, up to $2.8 million may be paid only in common stock and up to $0.4 million may be paid in cash or, at our option, in common stock. See Note 7 to our unaudited condensed consolidated financial statements included in Part 1, Item 1. “Financial Statements.” As of September 30, 2026, we had $171.9 million available under the 2025 Credit Facility (after giving effect to any outstanding letters of credit, and subject to borrowing base limitations), and $20.1 million of cash on hand. In April and July 2025, we redeemed the remaining $122.2 million in aggregate stated value of the outstanding Series A-2 preferred stock using cash and borrowings under our revolving line of credit.

Previous wording

For the six months ended June 30, 2026, net cash used in operating activities was $5.5 million compared to net cash provided by operating activities of $27.4 million for the six months ended June 30, 2025. The period-over-period decrease of $32.9 million was primarily due to a decrease in earnings before non-cash items of $21.4 million and a higher increase in working capital of $11.6 million (comprised of an increase in working capital in the current year period of $37.8 million compared to an increase in working capital of $26.2 million in the prior year period).

Current wording

For the nine months ended September 30, 2026, net cash provided by operating activities was $35.4 million compared to $55.5 million for the nine months ended September 30, 2025. The period-over-period decrease of $20.1 million was primarily due to a higher increase in working capital of $10.9 million (comprised of an increase in working capital in the current year period of $23.7 million compared to an increase in working capital of $12.8 million in the prior year period) and a $9.7 million decrease in earnings before non-cash items.

Previous wording

Working capital (which excludes contingent consideration payments and changes in right-of-use assets) increased by $37.8 million in the six months ended June 30, 2026, primarily due to 1) a decrease in accrued payroll and benefits of $22.2 million, primarily due to the payment of accrued annual bonus in March 2026 of $27.7 million, representing a $16.0 million increase compared to the prior year bonus payment due to outperformance in 2025 2) a $17.4 million decrease in accounts payable and other accrued liabilities due to the timing of vendor payments, and 3) a $13.5 million increase in prepaid expenses and other current assets primarily due to an increase in deferred tax assets and prepaid software costs. These drivers were partially offset by a decrease in accounts receivable of $15.0 million due to a year-to-date decrease in revenue of $57.2 million compared to the prior-year period and a decrease in days sales outstanding due to improved collections.

Current wording

Working capital (which excludes contingent consideration payments and changes in right-of-use assets) increased by $23.7 million in the nine months ended September 30, 2026, primarily due to 1) a decrease in accrued payroll and benefits of $17.5 million, primarily due to the payment of accrued annual bonus in March 2026 of $27.7 million, representing a $16.0 million increase compared to the prior year bonus payment due to outperformance in 2025, 2) a $13.9 million decrease in accounts payable and other accrued liabilities due to the timing of vendor payments, 3) a $2.7 million increase in prepaid expenses and other current assets primarily due to prepaid software costs, and 4) a $2.5 million increase in income tax receivable primarily due to an increase in tax refunds. These drivers were partially offset by a decrease in accounts receivable of $16.2 million due to a year-to-date decrease in revenue of $79.0 million compared to the prior-year period and a decrease in days sales outstanding due to improved collections.

Previous wording

Working capital increased by $26.2 million in the six months ended June 30, 2025, primarily due to an increase in accounts receivable of $27.4 million driven by significantly higher revenues in the second quarter of 2025, partially offset by a $3.1 million increase in accrued payroll, as a result of higher bonus accruals.

Current wording

Working capital increased by $12.8 million in the nine months ended September 30, 2025, primarily due to an increase in accounts receivable of $28.8 million driven by significantly higher revenues in the third quarter of 2025, and an increase in prepaid expenses and other current assets of $2.8 million, partially offset by a $12.1 million increase in accrued payroll, as a result of higher bonus accruals, and a $6.1 million increase in accounts payable and other accrued liabilities.

Previous wording

For the six months ended June 30, 2026, net cash used in investing activities was $11.1 million, primarily driven by cash paid for the purchases of property and equipment of $11.3 million.

Current wording

For the nine months ended September 30, 2026, net cash used in investing activities was $15.6 million, primarily driven by cash paid for the purchases of property and equipment of $12.2 million, cash paid for the acquisition of assets of $5.1 million, and $2.3 million in proprietary software development costs, partially offset by proceeds from an insurance settlement related to a business combination of $3.7 million.

Previous wording

For the six months ended June 30, 2025, net cash used in investing activities was $7.9 million, driven by cash paid for the purchases of property and equipment of $5.1 million, and $2.8 million in proprietary software development costs.

Current wording

For the nine months ended September 30, 2025, net cash used in investing activities was $12.6 million, driven by cash paid for the purchases of property and equipment of $10.9 million and $1.8 million in proprietary software development costs.

Previous wording

For the six months ended June 30, 2026, net cash provided by financing activities was $18.3 million. Cash provided by financing activities was driven by borrowing under our 2025 Credit Facility of $258.4 million, partially offset by repayments of borrowings of $196.8 million, repurchases of common stock of $30.0 million, and payments for contingent consideration of $10.8 million.

Current wording

For the nine months ended September 30, 2026, net cash used in financing activities was $10.6 million. Cash used in financing activities was driven by repayments of borrowings under our 2025 Credit Facility of $285.2 million, repurchases of common stock of $30.0 million, and payments for contingent consideration of $10.8 million, partially offset by borrowing under our 2025 Credit Facility of $320.1 million.

Previous wording

For the six months ended June 30, 2025, net cash used in financing activities was $21.3 million. Cash used in financing activities was driven by repayments of borrowing of $364.5 million, a partial redemption of the Series A-2 preferred stock of $60.0 million, a payment for contingent consideration of $4.4 million, repayments of finance leases of $6.1 million, dividends on the Series A-2 preferred stock of $2.8 million, and payment of financing cost of $2.0 million, partially offset by borrowing under our credit facilities of $416.0 million.

Current wording

For the nine months ended September 30, 2025, net cash used in financing activities was $49.2 million. Cash used in financing activities was driven by repayments of borrowing of $495.6 million, redemption of the Series A-2 preferred stock of $122.2 million, a payment for contingent consideration of $5.5 million, repayments of finance leases of $8.9 million, dividends on the Series A-2 preferred stock of $4.2 million, and payment of financing cost of $2.0 million, partially offset by borrowing under our credit facility of $586.4 million.

Previous wording

On May 6, 2025, the Board of Directors approved a stock repurchase program of up to $40.0 million. The repurchase program does not have a set expiration date. During the three and six months ended June 30, 2026, the Company repurchased 1,251,450 and 1,627,763 shares of its common stock for approximately $20.0 million and $30.0 million, respectively, inclusive of transaction fees. As of June 30, 2026, approximately $10.0 million of the authorized capacity under the repurchase program remained available for future repurchases.

Current wording

On May 6, 2025, the Board of Directors approved a stock repurchase program of up to $40.0 million. The repurchase program does not have a set expiration date. During the three months ended September 30, 2026, we did not repurchase any shares of our common stock. During the nine months ended September 30, 2026, we repurchased 1,627,763 shares of our common stock for approximately $30.0 million, inclusive of transaction fees. As of September 30, 2026, approximately $10.0 million of the authorized capacity under the repurchase program remained available for future repurchases, subject to customary restrictions, including under Delaware law and the restrictive covenants under the 2025 Credit Facility.