Mayville Engineering Company, Inc.: Form 10-Q for the period ended Sep 30, 2025

Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to assist in the understanding and assessing the trends and significant changes in our results of operations and financial condition. Historical results may not be indicative of future performance. This discussion includes forward-looking statements that reflect our plans, estimates and beliefs. Such statements involve risks and uncertainties. Our actual results may differ materially from those contemplated by these forward-looking statements as a result of various factors, including those set forth in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 and “Cautionary Statement Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q. This discussion should be read in conjunction with our audited Consolidated Financial Statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024 and our unaudited Condensed Consolidated Financial Statements and the notes thereto included in Part I, Item I of this Quarterly Report on Form 10-Q. In this discussion, we use certain non-GAAP financial measures. Explanation of these non-GAAP financial measures and reconciliation to the most directly comparable GAAP financial measures are included in this Management Discussion and Analysis of Financial Condition and Results of Operations. Investors should not consider non-GAAP financial measures in isolation or as substitutes for financial information presented in compliance with GAAP.

All amounts are presented in thousands except share amounts, per share data, years and ratios.

Overview

MEC is a leading U.S.-based vertically-integrated, value-added manufacturing partner providing a full suite of manufacturing solutions from concept to production, including design, prototyping and tooling, fabrication, aluminum extrusion, coating, assembly and aftermarket components. Our customers operate in diverse end markets, including heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, data center & critical power, agriculture, military and other end markets. We have developed long-standing relationships with our blue-chip customers based upon our commitment to “Unmatched Excellence”.

Our one operating segment focuses on producing metal components that are used in a broad range of heavy- and medium-duty commercial vehicles, construction & access equipment, powersports, data center & critical power, agricultural, military and other products.

Macroeconomic Conditions

Over the past few years, the broader market dynamics, combined with recent geopolitical and economic developments, including foreign trade relations and associated, threatened and implemented tariffs, have resulted in impacts to the Company. These influences have contributed to elevated interest rates, inconsistent customer demand, material cost inflation and labor availability. The Company expects some of these dynamics to continue through 2025 and could continue to have an impact on demand, material costs and labor.

How We Assess Performance

Net Sales. Net sales reflect sales of our components and products net of allowances for returns and discounts. In addition to the current macroeconomic conditions, several factors affect our net sales in any given period, including weather, timing of acquisitions and the production schedules of our customers. Net sales are recognized at the time of shipment or at delivery to the customer.

Manufacturing Margins. Manufacturing margins represents net sales less cost of sales. Cost of sales consists of all direct and indirect costs used in the manufacturing process, including raw materials, labor, equipment costs, depreciation, lease expenses, subcontract costs and other directly related overhead costs. Our cost of sales is directly affected by the fluctuations in commodity prices, primarily sheet steel and aluminum, but these changes are largely mitigated by contractual agreements with our customers that allow us to pass through these price variations based upon certain market indexes.

Depreciation and Amortization. We carry property, plant and equipment on our balance sheet at cost, net of accumulated depreciation. Depreciation on property, plant and equipment is computed on a straight-line basis over the estimated useful life of the asset. The periodic expense related to leasehold improvements and intangible assets is depreciation and amortization expense, respectively. Leasehold improvements are depreciated over the lesser of the life of the underlying asset or the remaining lease term. Our intangible assets were recognized as a result of certain acquisitions and are generally amortized on a straight-line basis over the estimated useful lives of the assets.

Other Selling, General, and Administrative Expenses (SG&A). Other selling, general and administrative expenses consist primarily of salaries and personnel costs for our sales and marketing, finance, human resources, information systems, administration and certain other managerial employees and certain corporate level administrative expenses such as audit, accounting, legal and other consulting and professional services, travel, and insurance.

Other Key Performance Indicators

EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow

EBITDA represents net income (loss) before interest expense, provision (benefit) for income taxes, depreciation and amortization. EBITDA Margin represents EBITDA as a percentage of net sales for each period.

Adjusted EBITDA represents EBITDA before stock-based compensation expense, legal costs due to former fitness customer, Chief Financial Officer (CFO) transition costs, natural disaster costs, acquisition related costs, restructuring and costs recognized on step-up of Accu-Fab acquired inventory. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of net sales for each period.

Free cash flow represents net cash provided by operating activities less cash flow used in the purchase of property, plant and equipment.

These metrics are supplemental measures of our operating performance that are neither required by, nor presented in accordance with, GAAP. These measures should not be considered as an alternative to net income (loss) or any other performance measure derived in accordance with GAAP as an indicator of our operating performance. We present EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow as management uses these measures as key performance indicators, and we believe they are measures frequently used by securities analysts, investors and other parties to evaluate companies in our industry. These measures have limitations as analytical tools and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP.

Our calculation of EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow may not be comparable to the similarly named measures reported by other companies. Potential differences between our measures of EBITDA and Adjusted EBITDA compared to other similar companies’ measures of EBITDA and Adjusted EBITDA may include differences in capital structure and tax positions.

The following table presents a reconciliation of net income (loss) and comprehensive income (loss), the most directly comparable measure calculated in accordance with GAAP, to EBITDA and Adjusted EBITDA, and the calculation of EBITDA Margin and Adjusted EBITDA Margin for each of the periods presented.

(1) Non-cash employee compensation based on the value of common stock issued pursuant to the 2019 Omnibus Incentive Plan.

(2) Legal costs associated with the enforcement of the Company’s supply contract with the former fitness customer.

(3) Costs associated with the separation of the former CFO.

(4) Costs incurred for facility clean-up following tornado damage at one of the Company’s locations.

(5) Transaction costs, primarily legal and professional services, related to the acquisition of Accu-Fab.

(6) Restructuring costs related to the consolidation of three warehouses and one manufacturing facility into the Company’s existing facilities.

(7) Expense associated with the recognized fair value step-up of inventory in correlation with the Accu-Fab acquisition. See Note 2 – Acquisition for additional detail.

The following table presents a reconciliation of net cash provided by operating activities, the most directly comparable measure calculated in accordance with GAAP, to free cash flow for each of the periods presented.

Free Cash Flow Analysis Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Free cash flow for the nine months ended September 30, 2025 was $16,751 as compared to $42,094 for the nine months ended September 30, 2024, a decrease of $25,343 or 60.2%. The decrease in free cash flow was due to a decrease in cash provided by operating activities, offset by lower capital expenditures. Please see the “Liquidity and Capital Resources” section below for further information.

Consolidated Results of Operations

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

Net Sales. Net sales were $144,310 for the three months ended September 30, 2025 as compared to $135,392 for the three months ended September 30, 2024, an increase of $8,918, or 6.6%. This increase was driven by the recent acquisition of Accu-Fab, which more than offset lower customer demand within the Commercial Vehicle, Agriculture and Other end markets.

Manufacturing Margins. Manufacturing margins were $15,939 for the three months ended September 30, 2025 as compared to $17,095 for the three months ended September 30, 2024, a decrease of $1,156, or 6.8%. The decrease was primarily driven by non-recurring restructuring costs, inventory step-up expense associated with the Accu-Fab acquisition and lower legacy customer sales, partially offset by higher-margin net sales contribution from the Accu-Fab acquisition.

Manufacturing margin percentages were 11.0% for the three months ended September 30, 2025, as compared to 12.6% for the three months ended September 30, 2024, a decrease of 160 basis points. The decrease was attributable to the items discussed in the preceding paragraph.

Amortization of Intangibles Assets. Amortization of intangible assets were $3,125 for the three months ended September 30, 2025, as compared to $1,733 for the three months ended September 30, 2024, an increase of $1,392 or 80.3%. The increase was due to amortization expense associated with identifiable intangible assets from the Accu-Fab acquisition. Refer to Note 2 – Acquisition for additional information related to these identifiable intangible assets.

Bonuses and Deferred Compensation Expenses. Bonuses and deferred compensation expenses were $2,221 for the three months ended September 30, 2025, as compared to $2,076 for the three months ended September 30, 2024, an increase of $145, or 7.0%. The increase was primarily driven by higher 401(k) match expense and the addition of plan participants as a result of the Accu-Fab acquisition, partially offset by lower stock-based compensation expense.

Other Selling, General and Administrative Expenses. Other SG&A expenses were $10,545 for the three months ended September 30, 2025 as compared to $7,559 for the three months ended September 30, 2024, an increase of $2,986, or 39.5%. The increase was primarily attributable to non-recurring costs and incremental SG&A expense, each associated with the Accu-Fab acquisition.

Interest Expense. Interest expense was $3,430 for the three months ended September 30, 2025 as compared to $2,653 for the three months ended September 30, 2024, an increase of $777, or 29.3%. The increase was due to an increase in borrowings associated with the Accu-Fab acquisition, partially offset by lower interest rates relative to the prior year period.

Provision (Benefit) for Income Taxes. Income tax benefit was $707 for the three months ended September 30, 2025 as compared to income tax expense of $100 for the three months ended September 30, 2024. The decrease of $807 is primarily due to a pre-tax loss in the current year period compared to pre-tax income in the prior year period. The effective tax rate for the current period also reflects discrete tax benefits recognized during the three months ended September 30, 2025. Refer to Note 8 – Income Taxes of the Condensed Consolidated Financial Statements for further details.

Due to the factors described in the preceding paragraphs, net income (loss) and comprehensive income (loss), EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin decreased during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Net Sales. Net sales were $412,217 for the nine months ended September 30, 2025 as compared to $460,298 for the nine months ended September 30, 2024, a decrease of $48,081 or 10.4%. This decrease was driven by reduced customer demand across nearly all end markets and customer de-stocking channel inventory. This decline was partially offset by increased after-market demand in our Military end market and the acquisition of Accu-Fab.

Manufacturing Margins. Manufacturing margins were $45,091 for the nine months ended September 30, 2025 as compared to $60,305 for the nine months ended September 30, 2024, a decrease of $15,214, or 25.2%. The decrease was primarily driven by the softening customer demand, non-recurring restructuring costs and inventory step-up expense associated with the Accu-Fab acquisition, partially offset by cost reduction actions and higher-margin net sales contribution from the Accu-Fab acquisition.

Manufacturing margin percentages were 10.9% for the nine months ended September 30, 2025, as compared to 13.1% for the nine months ended September 30, 2024, a decrease of 220 basis points. The decrease was attributable to reduced absorption of fixed costs as a result of lower legacy MEC sales and the items discussed in the preceding paragraph.

Amortization of Intangibles Assets. Amortization of intangible assets were $6,591 for the nine months ended September 30, 2025, as compared to $5,200 for the nine months ended September 30, 2024, an increase of $1,391 or 26.8%. The increase was due to amortization expense associated with identifiable intangible assets from the Accu-Fab acquisition. Refer to Note 2 – Acquisition for additional information related to these identifiable intangible assets.

Bonuses and Deferred Compensation Expenses. Bonuses and deferred compensation expenses were $7,071 for the nine months ended September 30, 2025 as compared to $10,010 for the nine months ended September 30, 2024, a decrease of $2,939, or 29.4%. The decrease was primarily driven by lower bonus accruals and stock-based compensation expense aligning with the Company financial performance.

Other Selling, General and Administrative Expenses. Other selling, general and administrative expenses were $29,727 for the nine months ended September 30, 2025 as compared to $23,589 for the nine months ended September 30, 2024, an increase of $6,138, or 26.0%. The increase was attributable to non-recurring costs related to the Accu-Fab acquisition and CFO transition, incremental SG&A expenses associated with Accu-Fab and higher costs related to compliance requirements.

Interest Expense. Interest expense was $6,395 for the nine months ended September 30, 2025 as compared to $8,977 for the nine months ended September 30, 2024, a decrease of $2,582, or 28.8%. The decrease was due to reduced interest rates relative to the prior year period, partially offset by an increase in borrowings associated with the recent Accu-Fab acquisition.

Provision (Benefit) for Income Taxes. Income tax benefit was $941 for the nine months ended September 30, 2025 as compared to income tax expense of $2,532 for the nine months ended September 30, 2024. The decrease of $3,473 is primarily due to a pre-tax loss in the current year period compared to pre-tax income in the prior year period. The effective tax rate for the current period also reflects discrete tax benefits recognized during the nine months ended September 30, 2025. Refer to Note 8 – Income Taxes of the Condensed Consolidated Financial Statements for further details.

Due to the factors described in the preceding paragraphs, net income (loss) and comprehensive income (loss), EBITDA, EBITDA Margin, Adjusted EBITDA and Adjusted EBITDA Margin decreased during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.

Liquidity and Capital Resources

Cash Flows Analysis

Operating Activities. Cash provided by operating activities was $25,181 for the nine months ended September 30, 2025, as compared to $51,847 for the nine months ended September 30, 2024. The decrease of $26,666 in cash provided by operating activities was primarily due to lower net income (loss) adjusted for reconciling items and a higher use of cash driven by an increase in accounts receivable due to timing of collections and stabilized inventory levels in the current year as compared to inventory reductions in the prior-year period. This was partially offset by an increase in accounts payable due to the timing of supplier payments.

Investing Activities. Cash used in investing activities was $148,470 for the nine months ended September 30, 2025, as compared to $9,645 for the nine months ended September 30, 2024. The $138,825 increase in cash used in investing activities was driven by the acquisition of Accu-Fab, which was completed on July 1, 2025, slightly offset by lower capital investments in the current year period as the Company focuses on leveraging recent investments and controlling spend in 2025 while continuing to prioritize investments in high-return, capital-light growth and automation.

Financing Activities. Cash provided by financing activities was $124,300 for the nine months ended September 30, 2025, as compared to cash used of $42,696 for the nine months ended September 30, 2024. The $166,996 increase in cash provided by financing activities was mainly due to borrowings in excess of debt repayments during the current year period on the Company’s revolving credit facility. Additionally, under the share repurchase plan, the Company purchased $4,607 of common stock in the first nine months of 2025 as compared to $1,996 in the prior year period. The Company’s decision to repurchase additional shares in 2025 will depend on business conditions, free cash flow generation, other cash requirements and stock price. Refer to Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds for additional information regarding share repurchases.

Amended and Restated Credit Agreement

On June 28, 2023, and as last amended on June 26, 2025, we entered into an amended and restated credit agreement (the Credit Agreement) with certain lenders and Wells Fargo Bank, National Association, as administrative agent (the Agent). The Credit Agreement provides for a $350,000 revolving credit facility, with a letter of credit sub-facility, and a swingline facility in an aggregate amount of $25,000. All amounts borrowed under the credit agreement mature on June 28, 2028.

Borrowings under the Credit Agreement bear interest at a fluctuating secured overnight financing rate (SOFR) plus an applicable margin based on the current consolidated total leverage ratio (which may be adjusted for certain reserve requirements), plus 1.25% to 2.75% depending on the current Consolidated Total Leverage Ratio (as defined in the Credit Agreement). Under certain circumstances, we may not be able to pay interest based on SOFR. If that happens, we will be required to pay interest at the Base Rate, which is the sum of the higher of (i) the Prime Rate (as publicly announced by the Agent from time to time), (ii) the Federal Funds Rate plus 0.50%, and (iii) Adjusted Term SOFR for a one-month tenor in effect on such day plus 1.00%.

At September 30, 2025, the interest rate on outstanding borrowings under the Revolving Loan was 5.39%. We had availability of $35,658 under the revolving credit facility at September 30, 2025.

We must pay a commitment fee of 0.20% to 0.35% per annum on the average daily unused portion of the aggregate unused revolving commitments under the Credit Agreement. At September 30, 2025, this fee was 0.30%. We must also pay fees as specified in the Fee Letter (as defined in the Credit Agreement) and with respect to any letters of credit issued under the Credit Agreement.

The Credit Agreement contains usual and customary negative covenants for agreements of this type, including, but not limited to, restrictions on our ability to, subject to certain exceptions, create, incur or assume indebtedness; create, incur, assume or suffer to exist liens; make certain investments; allow our subsidiaries to merge or consolidate with another entity; make certain asset dispositions; pay certain dividends or other distributions to shareholders; enter into transactions with affiliates; enter into sale leaseback transactions; and exceed the limits on annual capital expenditures. The Credit Agreement also requires us to satisfy certain financial covenants, including a minimum interest coverage ratio of 3.00 to 1.00. At September 30, 2025, our interest coverage ratio was 6.23 to 1.00. The Credit Agreement also requires us to maintain a consolidated total leverage ratio not to exceed 4.00 to 1.00. As of September 30, 2025, our consolidated total leverage ratio was 3.47 to 1.00 (which was modified as of July 1, 2025, from 3.50 to 1.00 in connection with the acquisition of Accu-Fab).

The Credit Agreement includes customary events of default, including, among other things, payment default, covenant default, breach of representation or warranty, bankruptcy, cross-default, material ERISA events, material money judgments, and failure to maintain subsidiary guarantees. If an event of default occurs, the Agent will be entitled to take various actions, including the acceleration of amounts due under the Credit Agreement, termination of the credit facility, and all other actions permitted to be taken by a secured creditor.

Other Debt

Additionally, the Company has a Fond du Lac County and Fond du Lac Economic Development Corporation term note (Fond du Lac Term Note). The Fond du Lac Term Note is secured by a security agreement, payable in annual installments of $500 plus interest at 2.00% and is due in full in December 2028. The balance outstanding as of September 30, 2025 was $1,875, with the short-term and long-term balance of $500 and $1,375, respectively, recorded in other current liabilities and other long-term liabilities in the Condensed Consolidated Balance Sheets.

Capital Requirements and Sources of Liquidity

During the nine months ended September 30, 2025 and 2024, our capital expenditures were $8,430 and $9,753 respectively. The decrease of $1,323 was driven by the Company’s focus on leveraging recent investments and controlling spend during 2025. Capital expenditures for the full year 2025 are expected to be between $13,000 and $17,000.

We have historically relied upon cash available through credit facilities, in addition to cash from operations, to finance our working capital requirements and to support our growth. At September 30, 2025, we had availability of $35,658 through our revolving credit facility. We regularly monitor potential capital sources, including equity and debt financings, in an effort to meet our planned capital expenditures and liquidity requirements. Our future success will be highly dependent on our ability to access outside sources of capital. We will continue to have access to the availability currently provided under the Credit Agreement as long as we remain compliant with the financial covenants. Based on our estimates at this time, we expect to be in compliance with these financial covenants through 2025 and the foreseeable future.

We believe that our operating cash flow and available borrowings under the Credit Agreement are sufficient to fund our operations for 2025 and beyond. However, future cash flows are subject to a number of variables, and additional capital expenditures will be required to conduct our operations. There can be no assurance that operations and other capital resources will provide cash in sufficient amounts to maintain planned or future levels of capital expenditures. In the event we make one or more acquisitions and the amount of capital required is greater than the amount we have available for acquisitions at that time, we could be required to reduce the expected level of capital expenditures and/or seek additional capital. If we seek additional capital, we may do so through borrowings under the Credit Agreement, joint ventures, asset sales, offerings of debt or equity securities or other means. We cannot guarantee that this additional capital will be available on acceptable terms or at all. If we are unable to obtain the funds we need, we may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to conduct our operations.

Contractual Obligations

The following table presents our obligations and commitments to make future payments under contracts and contingent commitments at September 30, 2025:

(1) Principal payments under the Company’s Credit Agreement, which expires in 2028 and the Fond du Lac Term Note, which is due in December 2028.

(2) Forecasted interest on debt obligations are based on the debt balance, interest rate, and unused fee of the Company’s revolving credit facility and debt balance and interest rate of the Company’s Fond due Lac Term Note.

(3) See Note 5 – Leases in the Notes to Condensed Consolidated Financial Statements for additional information.

We are exposed to market risk from changes in customer forecasts, interest rates, and to a lesser extent, commodities. To reduce such risks, we selectively use financial instruments and other proactive management techniques.

Customer Forecasts

The use and consumption of our components, products and services fluctuates depending on order forecasts we receive from our customers. These order forecasts can change dramatically from quarter-to-quarter dependent upon the respective markets that our customers provide products in.

Interest Rate Risk

We are exposed to interest rate risk on certain of our short- and long-term debt obligations used to finance our operations and acquisitions. We have SOFR-based floating rate borrowings under the Credit Agreement, which exposes us to variability in interest payments due to changes in the referenced interest rates.

The amount borrowed under the revolving credit facility under the Credit Agreement was $211,858 million with an interest rate of 5.39% as of September 30, 2025. Please see “Liquidity and Capital Resources – Amended and Restated Credit Agreement” in Part I, Item 2 and Note 4 in the Notes to the Unaudited Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q for more specifics.

A hypothetical 100-basis-point increase in interest rates would have resulted in an additional $0.8 million of interest expense based on our variable rate debt at September 30, 2025. We do not use derivative financial instruments to manage interest risk or to speculate on future changes in interest rates. A rise in interest rates could negatively affect our cash flow.

Commodity Risk

We source a wide variety of materials and components from a network of suppliers. Commodity raw materials, such as steel, aluminum, copper, paint and paint chemicals, and other production costs are subject to price fluctuations, which could have a negative impact on our results. We strive to pass along such commodity price increases to customers to avoid profit margin erosion and in many cases utilize contracts with those customers to mitigate the impact of commodity raw material price fluctuations. As of September 30, 2025, we did not have any commodity hedging instruments in place.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosure. In designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives.

As of September 30, 2025, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to the identification of the material weakness in our internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of September 30, 2025. Notwithstanding the material weakness in our internal control over financial reporting, management believes the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with accounting principles generally accepted in the United States of America (GAAP).

Remediation of Previously Identified Material Weakness

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim condensed consolidated financial statements will not be prevented or detected on a timely basis.

As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, Management identified deficiencies in the design and operating effectiveness of internal control over financial reporting related to the review and approval of journal entries that constitutes a material weakness.

Subsequent to the identification of the material weakness, management under the oversight of the Audit Committee has been implementing measures and taking steps to address the underlying causes of the material weakness. Specifically, the following remediation efforts are planned or ongoing to ensure adequate review and approval of journal entries, including:

• Enhancing the design and implementation of controls over the review and approval of journal entries to ensure that all journal entries are subject to appropriate review and approval; and
• Providing additional training to personnel involved in the preparation and review of journal entries to ensure they understand and adhere to the revised control procedures.

While we believe these efforts have improved our internal controls and address the underlying cause of the material weakness, the material weakness will not be remediated until our remediation plan has been fully implemented and tested and we have concluded that following the improvements to our internal controls, our control environment is operating effectively for a sufficient period of time. In particular, the enhanced compensating controls and training will require time to test and assess. We cannot be certain that the steps we are taking will be sufficient to remediate the control deficiencies that led to the material weakness in our internal control over financial reporting or prevent future material weaknesses or control deficiencies from occurring. In addition, we cannot be certain that we have identified all material weaknesses in our internal control over financial reporting, or that in the future we will not have additional material weaknesses in our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

In connection with the acquisition of Accu-Fab in July 2025, we are in the process of reviewing the internal control structure of Accu-Fab and, if necessary, will make appropriate changes as we continue to integrate Accu-Fab into our overall internal control over financial reporting process.

Except for the acquisition of Accu-Fab and the remediation efforts related to the previously identified material weakness, there were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2025, that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the risk factors previously disclosed in Part I, Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 6, 2025.