DXP ENTERPRISES INC

Previous wording

The Company's products are marketed in the U.S., Canada, Mexico, U.A.E., and India to customers that are engaged in a variety of industries, many of which may be counter cyclical to each other. Demand for our products generally is subject to changes in the U.S. and Canada, and global and macro-economic trends affecting our customers and the industries in which they compete. Certain of these industries, such as the oil and gas industry, are subject to volatility driven by a variety of factors, while others, such as the petrochemical industry and the construction industry, are cyclical and materially affected by changes in the U.S. and global economy. As a result, we may experience changes in demand within particular markets, segments and product categories as changes occur in our customers' respective markets.

Current wording

The Company's products are marketed in the U.S., Canada, Mexico, U.A.E., India, and Saudi Arabia to customers that are engaged in a variety of industries, many of which may be counter cyclical to each other. Demand for our products generally is subject to changes in the U.S. and Canada, and global and macro-economic trends affecting our customers and the industries in which they compete. Certain of these industries, such as the oil and gas industry, are subject to volatility driven by a variety of factors, while others, such as the petrochemical industry and the construction industry, are cyclical and materially affected by changes in the U.S. and global economy. As a result, we may experience changes in demand within particular markets, segments and product categories as changes occur in our customers' respective markets.

Previous wording

We define and calculate EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, amortization, and non-controlling interest. We define and calculate Adjusted EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, amortization minus stock-based compensation expense, non-controlling interest before taxes and all other non-cash charges, adjustments, and non-recurring items. We identify the impact of all other non-cash charges, adjustments and non-recurring items because we believe these items do not directly reflect our underlying operations.

Current wording

We define and calculate EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, and amortization. We define and calculate Adjusted EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, amortization plus stock-based compensation expense and all other non-cash charges, adjustments, and non-recurring items. We identify the impact of all other non-cash charges, adjustments and non-recurring items because we believe these items do not directly reflect our underlying operations.

Previous wording

The continued disruption in economic markets due to inflation, changing interest rates, tariffs, trade disputes, business interruptions due to natural disasters and changes in weather patterns, employee shortages, and supply chain issues, all pose challenges which may adversely affect our future performance. The Company continues to execute various strategies previously implemented to help mitigate the impact of these economic disruptors. Sales for the year ended December 31, 2024 increased $123.4 million, or 7.4%, to approximately $1.8 billion from $1.7 billion for the prior corresponding period. Customer demand was generally healthy throughout fiscal 2024, resulting in industry expected volume growth, complemented by additional pricing actions taken by the Company's vendors after strong pricing action in 2022 and 2023, which ultimately, gets passed on to customers. As such, some of the 2024 sales increase is the result of increases in price with increases in volume as well as the contribution from acquisitions and the related sales of rotating equipment and air compressors.

Current wording

The continued disruption in economic markets due to inflation, changing interest rates, tariffs, trade disputes, business interruptions due to natural disasters and changes in weather patterns, employee shortages, and supply chain issues, all pose challenges which may adversely affect our future performance. The Company continues to execute various strategies previously implemented to help mitigate the impact of these economic disruptors. Sales for the year ended December 31, 2025 increased $214.3 million, or 11.9%, to approximately $2.0 billion from $1.8 billion for the prior corresponding period. Customer demand was generally healthy throughout fiscal 2025, resulting in industry expected volume growth. Some of the 2025 sales increase was the result of our ability to maintain margins and focus on profitability as well as the contribution from accretive acquisitions over time.

Previous wording

The Company’s consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and related disclosures as of the date of the condensed consolidated financial statements. The Company considered the impact of economic trends on the assumptions and estimates used in preparing the consolidated financial statements. In the opinion of management, all material adjustments necessary for a fair presentation of the Company’s financial results for the year have been made. These adjustments are of a normal recurring nature but are complicated by the continued uncertainty surrounding these macro economic trends. The severity, magnitude and duration of certain economic trends continue to be uncertain and are difficult to predict. Therefore, our accounting estimates and assumptions may change over time in response to economic trends and may change materially in future periods.

Current wording

The Company’s consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and related disclosures as of the date of the condensed consolidated financial statements. The Company considered the impact of economic trends on the assumptions and estimates used in preparing the consolidated financial statements. In the opinion of management, all material adjustments necessary for a fair presentation of the Company’s financial results for the year have been made. These adjustments are of a normal recurring nature but are complicated by the continued uncertainty surrounding these macroeconomic trends. The severity, magnitude and duration of certain economic trends continue to be uncertain and are difficult to predict. Therefore, our accounting estimates and assumptions may change over time in response to economic trends and may change materially in future periods.

Previous wording

As our operations have generally stabilized from the COVID-19 pandemic and related inflationary pressures, we have seen growth from our supportive served end-markets and our focus on organic and inorganic sales growth. Our sales volume is expected to deliver sustainable and healthy growth, while our diversification efforts have unlocked gains in margins, cash flow and overall organizational efficiency. With our strong backlog and improved market environment, we expect to continue to see growth in 2025.

Current wording

We have seen growth from our supportive served end-markets and our focus on organic and inorganic sales growth. Our sales volume is expected to deliver sustainable and healthy growth, while our diversification efforts have unlocked gains in margins, cash flow and overall organizational efficiency. With our strong backlog and improved market environment, we expect to continue to see growth in 2026.

Previous wording

Assuming a positive general macroeconomic environment and continued supportive environments in our end markets, we expect fiscal 2025 growth to be comparable to 2024 growth metrics with the continued execution of acquisition activity. We expect our interest expense in 2025 will be relatively higher than the amounts incurred in 2024 due to our refinancing in the fourth quarter of 2024.

Current wording

Assuming a positive general macroeconomic environment and continued supportive environments in our end markets, we expect fiscal 2026 growth to be comparable to 2025 growth metrics with the continued execution of acquisition activity. We expect our interest expense in 2026 to be relatively higher than the amounts incurred in 2025 due to incremental financing activities, but mitigated by proactively securing favorable terms to reduce overall borrowing costs .

Previous wording

We expect to generate sufficient cash from operations and have sufficient capacity under our ABL credit facility to fund any working capital, capital expenditures, share repurchases, and debt payments in 2025. The amount of cash generated or consumed by working capital is dependent on our level of revenues, customer cash advances, backlog, customer-driven delays and other factors. We will seek to improve our working capital utilization, with a particular focus on improving the management of accounts receivable, inventory and cost in excess of billings. In 2025, our cash flows for investing activities will be focused on strategic initiatives, information technology software and infrastructure, general upgrades and cost reduction opportunities and we currently estimate capital expenditures to be between $15.0 million and $25.0 million, before consideration of any acquisition activity.

Current wording

We expect to generate sufficient cash from operations and have sufficient capacity under our ABL credit facility to fund any working capital, capital expenditures, share repurchases, and debt payments in 2026. The amount of cash generated or consumed by working capital is dependent on our level of revenues, customer cash advances, backlog, customer-driven delays and other factors. We will seek to improve our working capital utilization, with a particular focus on improving the management of accounts receivable, inventory and cost in excess of billings. In 2026, our cash flows for investing activities will be focused on strategic initiatives, information technology software and infrastructure, general upgrades and cost reduction opportunities.

Previous wording

SALES. Sales for the year ended December 31, 2024 increased $123.4 million, or 7.4%, to approximately $1.8 billion from $1.7 billion for the year ended December 31, 2023. The sales increase was primarily due to new acquisitions within our SC and IPS segments during the year ended December 31, 2024. Sales in our SC and IPS segments increased $23.1 million and $104.3 million, respectively, offset by a decrease in sales in our SCS segment of $4.0 million. The fluctuations in sales are further explained in our business segment discussions below.

Current wording

SALES. Sales for the year ended December 31, 2025 increased $214.3 million, or 11.9%, to approximately $2.0 billion from $1.8 billion for the year ended December 31, 2024. The sales increase was primarily due to increased sales within our SC and IPS segments during the year ended December 31, 2025. Sales in our SC and IPS segments increased $136.4 million and $81.4 million, respectively, offset by a decrease in sales in our SCS segment of $3.5 million. The fluctuations in sales are further explained in our business segment discussions below.

Previous wording

Service Centers Segment. Sales for the Service Centers segment increased by $23.1 million, or 1.9% for the year ended December 31, 2024, compared to the year ended December 31, 2023. Sales from acquisitions for the SC segment increased by $17.7 million during the twelve months ended December 31, 2024. Total sales for the SC segment excluding acquisitions increased $5.4 million from the prior year's corresponding period. This sales increase was primarily due to increase in sales within our Ohio River Valley, Southwest, South Rockies, and Canada regions; partially offset by decreases in our North Rockies and Texas Gulf Coast regions.

Current wording

Service Centers Segment. Sales for the SC segment increased by $136.4 million, or 11.0% for the year ended December 31, 2025, compared to the year ended December 31, 2024. Sales from recent acquisitions contributed $56.2 million during the twelve months ended December 31, 2025 compared to $36.9 million in the corresponding period. Total sales excluding recent acquisitions increased $117.1 million from the prior year's corresponding period. This sales increase was primarily due to an increase in larger projects with our customers within our Ohio River Valley, Southwest, Texas Gulf Coast, and California regions as well as metal working and air compressors division.

Previous wording

Innovative Pumping Solutions Segment. Sales for the IPS segment increased by $104.3 million, or 47.7% for the year ended December 31, 2024, compared to the year ended December 31, 2023. Sales from acquisitions for the IPS segment increased $47.8 million during the twelve months ended December 31, 2024. Total sales for the IPS segment excluding acquisitions increased $56.5 million from the prior year's corresponding period. This sales increase was primarily due to increase in sales within our water and wastewater division, our international division, and overall increases in project related jobs due to increased capital spending by oil and gas producers and the renewables sector.

Current wording

Innovative Pumping Solutions Segment. Sales for the IPS segment increased by $81.4 million, or 26.4% for the year ended December 31, 2025, compared to the year ended December 31, 2024. Sales from recent acquisitions contributed $39.9 million during the twelve months ended December 31, 2025 compared to $61.6 million in the corresponding period. Total sales excluding recent acquisitions increased $103.1 million from the prior year's corresponding period. The sales increase was primarily due to larger projects with customers. Additionally, the sales increase was also due to continuing diversification efforts into the water and wastewater end markets.

Previous wording

Supply Chain Services Segment. Sales for the SCS segment decreased by $4.0 million, or 1.5%, for the year ended December 31, 2024, compared to the year ended December 31, 2023. The decrease in sales was primarily the result of decreases in sales in our oil & gas, resin, and power end-markets.

Current wording

Supply Chain Services Segment. Sales for the SCS segment decreased by $3.5 million, or 1.4%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The decrease in sales was primarily due to a decrease in business activity amongst our oil and gas customers.

Previous wording

GROSS PROFIT. Gross profit as a percentage of sales for the twelve months ended December 31, 2024 increased by approximately 77 basis points from the prior year's corresponding period. The primary driver was an increase in contribution from IPS sales, going from 13.0% of consolidated sales in 2023 to 17.9% of sales in 2024. While IPS overall gross profit percentage decreased 148 basis points from 2023 to 2024, the decrease did not impact consolidated gross profit percentage due to IPS’ overall relative higher gross margins. Additionally, the increase in the gross profit percentage is primarily the result of an approximate 83 basis points and 114 basis points increase in the gross profit percentage in our SC and SCS segments, respectively, partially offset by an approximate 148 basis points decrease in our IPS segment.

Current wording

GROSS PROFIT. Gross profit as a percentage of sales for the twelve months ended December 31, 2025 increased by approximately 67 basis points from the prior year's corresponding period. The increase during the period was primarily attributable to IPS sales, going from 17.1% of consolidated sales in 2024 to 19.4% of sales in 2025. Additionally, the increase in the gross profit percentage during the period was primarily attributable to IPS and SCS segments basis points increasing 166 basis points and 121 basis points, respectively.

Previous wording

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (“SG&A”). SG&A for the year ended December 31, 2024 increased by approximately $44.3 million, or 12.1%, to $410.9 million from $366.6 million for the prior year's corresponding period. SG&A attributable to acquisitions during the period increased by $6.4 million. Excluding acquisitions, the increase in SG&A is primarily the result of increased professional fees, payroll expenses, incentive compensation and 401(k) expenses as a result of an increase in headcount during the period.

Current wording

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (“SG&A”). SG&A for the year ended December 31, 2025 increased by approximately $48.2 million, or 11.7%, to $459.1 million from $410.9 million for the prior year's corresponding period. SG&A attributable to acquisitions during the period increased by $4.6 million. Excluding acquisitions, the increase in SG&A is primarily the result of increased payroll, building expenses, depreciation, amortization, and IT expenses.

Previous wording

INCOME FROM OPERATIONS. Income from operations for the year ended December 31, 2024 increased by $6.7 million to $145.4 million from $138.7 million in the prior year's corresponding period. This increase in operating income is primarily related to the aforementioned increased business activity across all segments.

Current wording

INCOME FROM OPERATIONS. Income from operations for the year ended December 31, 2025 increased by $31.5 million to $176.9 million from $145.4 million in the prior year's corresponding period. This increase in operating income is primarily related to the aforementioned increased business activity across all segments.

Previous wording

INTEREST EXPENSE. Interest expense for the year ended December 31, 2024 increased $10.8 million compared to the prior year's corresponding period, primarily due to an increase outstanding borrowings on the Term Loan B. Both of the Company's facilities are subject to a variable interest rate for the twelve months ended December 31, 2024.

Current wording

INTEREST EXPENSE. Interest expense for the year ended December 31, 2025 decreased $3.4 million compared to the prior year's corresponding period, primarily due to the Company refinancing its Senior Secured Term Loan B. Both of the Company's facilities are subject to a variable interest rate for the twelve months ended December 31, 2025.

Previous wording

PROVISION FOR INCOME TAX EXPENSE. Our effective tax rate from continuing operations was a tax expense of 17.0 percent for the twelve months ended December 31, 2024, compared to a tax expense of 20.8 percent for the twelve months ended December 31, 2023. Compared to the U.S. statutory rate for the twelve months ended December 31, 2024, the effective tax rate was increased by state taxes, foreign taxes, nondeductible expenses, and uncertain tax positions recorded for research and development tax credits and was partially offset by research and development tax credits and other tax credits.

Current wording

PROVISION FOR INCOME TAX EXPENSE. Our effective tax rate from continuing operations was a tax expense of 25.6% for the twelve months ended December 31, 2025, compared to a tax expense of 17.0% for the twelve months ended December 31, 2024. Compared to the U.S. statutory rate for the twelve months ended December 31, 2025, the effective tax rate increased primarily due to return-to-provision adjustments related to the research and development credit, nondeductible expenses, limitations on executive compensation, and state income taxes, and was partially offset by discrete items, including the release of a reserve related to a historical acquisition method change and a tax-basis balance-sheet adjustment related to intangibles and goodwill.

Previous wording

The following table sets forth the reconciliation of Acquisition Sales and Organic Sales to the most comparable U.S. GAAP financial measure(in thousands):

Current wording

The following table sets forth the reconciliation of Acquisition Sales and Organic Sales to the most directly comparable U.S. GAAP financial measure(in thousands):

Previous wording

We define and calculate EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, amortization, less non-controlling interest. We define and calculate Adjusted EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, amortization plus stock-based compensation expense, non-controlling interest before taxes and all other non-cash charges, adjustments, and non-recurring items. We identify the impact of all other non-cash charges, adjustments and non-recurring items because we believe these items do not directly reflect our underlying operations.

Current wording

We define and calculate EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, and amortization. We define and calculate Adjusted EBITDA as Net income attributable to DXP Enterprises, Inc., plus interest, taxes, depreciation, amortization plus stock-based compensation expense and all other non-cash charges, adjustments, and non-recurring items. We identify the impact of all other non-cash charges, adjustments and non-recurring items because we believe these items do not directly reflect our underlying operations.

Previous wording

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. We continue to generate adequate cash from operating activities. We believe that our operating cash flow, cash on hand, and other sources of liquidity will be sufficient to allow us to continue investing in the business including capital expenditures, strategic acquisitions and investments, paying interest and servicing debt, repurchasing common stock when deemed appropriate, and manage our capital structure on a short-term and long-term basis.

Current wording

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. We continue to generate adequate cash from operating activities. We believe that our operating cash flow, cash on hand, and other sources of liquidity will be sufficient to allow us to continue investing in the business including capital expenditures, strategic acquisitions and investments, paying interest and servicing debt, repurchasing common stock when deemed appropriate, and managing our capital structure on a short-term and long-term basis.

Previous wording

Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt and existing cash balances. As a distributor of MRO products and services, we require certain amounts of working capital to primarily fund inventories and accounts receivables. Additional cash is required for capital items for information technology, warehouse equipment, leasehold improvements, pump manufacturing and safety services equipment. We also require cash to pay our lease obligations, fund project work-in-process and to service our debt.

Current wording

Our primary source of capital is cash flow from operations, supplemented as necessary by bank borrowings or other sources of debt and existing cash balances. As a distributor of MRO products and services, we require certain amounts of working capital to primarily fund inventories and accounts receivable. Additional cash is required for capital items for information technology, warehouse equipment, leasehold improvements, pump manufacturing and safety services equipment. We also require cash to pay our lease obligations, fund project work-in-process and to service our debt.

Previous wording

The Company generated $102.2 million of cash in operating activities during the year ended December 31, 2024 compared to generating $106.2 million of cash during the prior year's corresponding period. The $4.0 million decrease in the amount of cash generated between the two periods was primarily driven by an increase in operating assets including trade accounts receivable partially offset by decreased inventory purchases and accrued expenses as compared to the prior period.

Current wording

We generated $94.3 million of cash in operating activities during the year ended December 31, 2025 compared to generating $102.2 million of cash during the prior year's corresponding period.

Previous wording

For the year ended December 31, 2024, net cash generated in financing activities was $56.8 million, compared to net cash generated in financing activities of $43.6 million for the corresponding period in 2023. For the year ended December 31, 2024, the Company repurchased approximately $29.0 million worth of outstanding shares compared to $56.2 million worth of outstanding shares for the year ended December 31, 2023. The net inflow of cash from financing activities in 2024 was a benefit driven by the refinancing of our existing Senior Secured Term Loan B. Debt issuance costs associated with the amendment of our new Term Loan B was $1.8 million for the year ended December 31, 2024.

Current wording

For the year ended December 31, 2025, net cash generated in financing activities was $158.9 million, compared to net cash generated in financing activities of $56.8 million for the corresponding period in 2024. The net inflow of cash from financing activities in 2025 was primarily driven by the refinancing of our existing Senior Secured Term Loan B and raising an incremental $205.0 million. Deferred financing costs associated with refinancing activity was $3.2 million for the year ended December 31, 2025.

Previous wording

During the twelve months ended December 31, 2024 we repurchased 0.6 million shares of the Company's common stock for approximately $28.8 million compared to 1.7 million shares of the Company's stock for approximately $54.7 million for the twelve months ended December 31, 2023.

Current wording

During the twelve months ended December 31, 2025 we repurchased 0.2 million shares of the Company's common stock for approximately $17.0 million compared to 0.6 million shares of the Company's stock for approximately $28.8 million for the twelve months ended December 31, 2024.

Previous wording

At December 31, 2024, our total outstanding debt was $648.9 million, or 60.5% of total capitalization (total debt plus shareholders’ equity) of $1.1 billion. $647.9 million of this outstanding debt bears interest at various floating rates. See Item 7A. Quantitative and Qualitative Disclosure about Market Risk

Current wording

At December 31, 2025, our total outstanding debt was $846.8 million, or 62.9% of total capitalization (total debt plus shareholders’ equity) of $1.3 billion. $845.9 million of this outstanding debt bears interest at various floating rates. See Item 7A. Quantitative and Qualitative Disclosure about Market Risk

Previous wording

At December 31, 2024, the Company had $274.0 million of liquidity including $148.3 million in cash and $125.6 million in availability under the ABL Revolver.

Current wording

At December 31, 2025, the Company had $457.3 million of liquidity including $303.8 million in cash and $153.5 million in availability under the ABL Revolver.

Previous wording

We believe Free Cash Flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to fund acquisitions, make investments, repay debt obligations, repurchase shares of the Company's common stock, and for other activities. Our Free Cash Flow, which is calculated as cash provided by operations less net purchase of property and equipment, was $77.1 million, $94.0 million and $1.0 million for years 2024, 2023 and 2022, respectively.

Current wording

We believe Free Cash Flow is an important liquidity metric because it measures, during a given period, the amount of cash generated that is available to fund acquisitions, make investments, repay debt obligations, repurchase shares of the Company's common stock, and for other activities. Our Free Cash Flow, which is calculated as cash provided by operations less net purchase of property and equipment, was $54.0 million, $77.1 million and $94.0 million for years 2025, 2024 and 2023, respectively.

Previous wording

Working capital as of December 31, 2024 was $296.3 million, an increase of $20.9 million compared to $275.4 million as of December 31, 2023. The increase was primarily due to sustained sales growth and acquisitions.

Current wording

We monitor net working capital, which excludes cash and restricted cash, short-term debt obligations, and short-term operating leases. Net working capital as of December 31, 2025 was $361.7 million, an increase of $70.7 million compared to $291.0 million as of December 31, 2024. The increase was primarily due to sustained sales growth and acquisitions.

Previous wording

For a discussion of the Company’s acquisitions refer to Note 16 to the Consolidated Financial Statements. In 2024 and 2023, the Company invested $156.6 million and $10.4 million, respectively, in acquisitions.

Current wording

For a discussion of the Company’s acquisitions refer to Note 16 - Business Acquisitions. In 2025 and 2024, the Company invested $61.7 million and $156.6 million, respectively, in acquisitions, net of cash acquired.

Previous wording

In fiscal 2024, the Company's capital expenditures were $25.1 million and $12.3 million for the years ended December 31, 2024 and 2023, respectively. Capital expenditures for 2025 is expected to be in the range of $15.0 and $25.0 million. This includes continued facility enhancements, tools and equipment, software and technology enhancements across the Company.

Current wording

The Company's capital expenditures were $40.3 million and $25.1 million for the years ended December 31, 2025 and 2024, respectively. This includes continued facility enhancements, tools and equipment, software and technology enhancements across the Company.

Previous wording

For the years ended December 31, 2024 and 2023, we repurchased shares of our common stock for $28.8 million and $54.7 million, respectively. Share repurchases are executed at prices the Company determines appropriate subject to various factors, including market conditions and the Company's financial performance and may be affected through accelerated share repurchase programs, open market purchases, or privately negotiated transactions.

Current wording

For the years ended December 31, 2025 and 2024, we repurchased shares of our common stock for $17.0 million and $28.8 million, respectively. Share repurchases are executed at prices the Company determines appropriate subject to various factors, including market conditions and the Company's financial performance and may be affected through accelerated share repurchase programs, open market purchases, or privately negotiated transactions.

Previous wording

The Company under our Amended Senior Secured Term Loan B is required to make equal quarterly principal payments of 0.25%, with the remaining balance being payable on October 13, 2030. For Fiscal Year 2024 and 2023, the Company made cash principal payments of $5.7 million and $4.7 million, respectively. Additionally, the Company makes quarterly interest payments that accrue on outstanding borrowings under the Amended Senior Secured Term Loan B at a rate equal to Term SOFR (with a floor of 1.00%) plus 3.75%, or base rate plus 2.75%. The interest rate for the Amended Senior Secured Term Loan B was 8.32% as of December 31, 2024. The interest rate for the Senior Secured Term Loan B was 10.44% as of December 31, 2023. For Fiscal Year 2024 and 2023, the Company made cash interest payments of $59.8 million and $49.0 million, respectively. See Note 9 to the Consolidated Financial Statements.

Current wording

The Company under our Amended Senior Secured Term Loan B is required to make equal quarterly principal payments of 0.25%, with the remaining balance being payable on October 13, 2030. For Fiscal Year 2025 and 2024, the Company made cash principal payments of $7.1 million and $5.7 million, respectively. Additionally, the Company makes quarterly interest payments that accrue on outstanding borrowings under the Amended Senior Secured Term Loan B at a rate equal to Term SOFR (with a floor of 1.00%) plus 3.25%, or base rate plus 2.25%. The interest rate for the Amended Senior Secured Term Loan B was 7.17% as of December 31, 2025. The interest rate for the Senior Secured Term Loan B was 8.32% as of December 31, 2024.

Previous wording

The Company continues to monitor the economic climate in which its customers operate and the aging of its accounts receivable. The allowance for doubtful accounts is based on the aging of accounts under the aging schedule method, and an individual assessment of each invoice. Under this method, a historical credit loss rate is determined by age bucket or how long a receivable has been outstanding. The historical loss rates for each respective age bucket are then adjusted for current conditions using reasonable and supportable data points. The overall allowance is adjusted accordingly based upon historical experience and economic factors that impact our business and customers. At December 31, 2024, the allowance was approximately 1.5% of the gross accounts receivable. While credit losses have historically been within expectations and the provisions established, should actual write-offs differ from estimates, revisions to the allowance would be required.

Current wording

The Company continues to monitor the economic climate in which its customers operate and the aging of its accounts receivable. The allowance for doubtful accounts is based on the aging of accounts under the aging schedule method, and an individual assessment of each invoice. Under this method, a historical credit loss rate is determined by age bucket or how long a receivable has been outstanding. The historical loss rates for each respective age bucket are then adjusted for current conditions using reasonable and supportable data points. The overall allowance is adjusted accordingly based upon historical experience and economic factors that impact our business and customers. At December 31, 2025, the allowance was approximately 1.0% of the gross accounts receivable. While credit losses have historically been within expectations and the provisions established, should actual write-offs differ from estimates, revisions to the allowance would be required.

Previous wording

The Company tests goodwill and other intangible assets for impairment annually on October 1 st and when events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company assigns the carrying value of these intangible assets to its “reporting units” and applies the test for goodwill at the reporting unit level. A reporting unit is defined as an operating segment or one level below a segment (a “component”) if the component is a business and discrete information is prepared and reviewed regularly by segment management.

Current wording

Our methodology for allocating the purchase price relating to business acquisitions is determined through established valuation techniques. Goodwill represents a residual value as of the acquisition date, which in most cases results in measuring goodwill as an excess of the purchase consideration transferred over the fair value of net assets acquired, including contingent consideration. The Company tests goodwill for impairment annually on October 1 st and when events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company assigns the carrying value of these intangible assets to its “reporting units” and applies the test for goodwill at the reporting unit level. A reporting unit is defined as an operating segment or one level below a segment (a “component”) if the component is a business and discrete information is prepared and reviewed regularly by segment management.