Power Solutions International, Inc.: Form 10-K for the period ended Dec 31, 2025

General Business Overview

Power Solutions International, Inc., incorporated under the laws of the state of Delaware in 2011, designs, engineers, manufactures, markets and sells a broad range of advanced, emission-certified engines and power systems that are powered by a wide variety of clean, alternative fuels, including natural gas, propane, and biofuels, as well as gasoline and diesel options, within the power systems, industrial and transportation end markets. The Company manages the business as a single reportable segment.

The Company’s products are primarily used by global original equipment manufacturers (“OEMs”) and end-user customers across a wide range of applications and equipment that includes standby and prime power generation, demand response, microgrid, combined heat and power, arbor equipment, material handling (including forklifts), agricultural and turf, construction, pumps and irrigation, compressors and utility vehicles.

The Company provides highly engineered, comprehensive solutions designed to meet specific customer application requirements and technical specifications, including those imposed by environmental regulatory bodies, including the U.S. Environmental Protection Agency (“EPA”), the California Air Resources Board (“CARB”), the People’s Republic of China’s Ministry of Ecology and Environment (“MEE”) and regulatory bodies within the European Union (“EU”).

The Company’s products include both sourced and internally designed and manufactured engines that are engineered and integrated with associated components. These comprehensive power systems are tested and validated to meet quality, safety, durability and environmental standards and regulations.

Through advanced research and development (“R&D”) and engineering capabilities, the Company is able to provide its customers with highly optimized, efficient, durable and emissions-compliant products that enhance their competitive position.

The Company’s business is diversified across end markets and applications and also includes extensive aftermarket and service parts programs. These programs consist of (i) internal aftermarket service parts programs with worldwide sales and distribution capabilities and (ii) internal OEM-developed service parts programs for components and products supplied by the Company.

The Company’s end markets, product categories and equipment are as highlighted in the following table:

Products

The Company’s sourced and internally designed and manufactured engine blocks are engineered and integrated with associated components in a range of configurations that includes basic engine blocks integrated with appropriate fuel system parts as well as completely packaged power systems that include combinations of front accessory drives, cooling systems, electronic systems, air intake systems, fuel systems, housings, power takeoff systems, exhaust systems, hydraulic systems, enclosures, brackets, hoses, tubes, packaging, telematics and other assembled componentry. The Company also designs and manufactures large, custom-engineered integrated electrical power generation systems for both standby and prime power applications. The Company’s comprehensive power systems are tested and validated to meet quality, safety, durability and environmental standards and regulations.

The Company sells engines and power systems, including both emission-certified compression ignition and spark-ignition internal combustion engines which are enabled by advanced controls to run on a wide variety of clean, alternative fuels, including natural gas, propane, and biofuels, as well as gasoline and diesel options, within the power systems, industrial and transportation end markets. Natural gas, gasoline, propane, and biofuel engines range from 0.99 liters (“L”) to 53L, while Diesel options range from 20L to 88L. The Company also designs and fabricates power system enclosures and sources electrification components that are engineered and integrated into desired configurations deemed “New Energy” within the industrial end market.

Strategic Initiatives/Growth Strategies

The Company continues to execute a comprehensive set of business objectives aimed at improving profitability, streamlining processes, strengthening the business and focusing on achieving growth in higher-return product lines. Key elements of these objectives and other initiatives are highlighted below.

Sustained profitability

The Company continues to improve profitability through the review of its customer and product portfolio. To date, this has resulted in strategic price increases in certain areas of the business, along with product redesign and the re-sourcing of certain components, to support improved margins. This program is a multi-year effort and will entail a strategic assessment of certain areas in which profitability does not meet established thresholds. The Company also continues to transform its manufacturing operations through the ongoing adoption of lean, agile and flexible lines, which provides opportunities for improved efficiency, margins and profitability, particularly as volume and sales increase. The Company has also been investing heavily in the expansion of its heavy-duty engine product line, which has historically provided better margins, particularly through its collaboration with Weichai America Corp., a wholly-owned subsidiary of Weichai Power Co., Ltd. (HK2338, 000338.SZ) (herein collectively referred to as “Weichai”). Weichai is the beneficial owner of 46.0% of the outstanding Common Stock.

Warranty expense mitigation efforts

The Company continues to limit its warranty expense through various mitigation efforts. As part of this, the Company is developing reimbursement and commercial remedies from key suppliers for components supplied by third parties, where applicable, at the same time ensuring any contractual obligations with customers include more favorable warranty terms for the Company wherever possible. Also, the Company continues to evaluate and improve its engineering validation and reliability programs for products and applications as well as make investments in technology to further enhance its tools and processes.

Streamlining of business processes and footprint rationalization

The Company has an ongoing program to review and identify cost reduction opportunities throughout the organization while simultaneously planning for strategic growth. As part of this program, the Company has adopted tighter controls over spending and centralized certain business processes.

Strengthen the business through the optimization of business systems and technology

The Company is working to strengthen its business through the optimization of its business systems and technology to support the strengthening of internal controls, improve processes, drive greater operational efficiencies and provide better and timelier decision making across the organization. The Company also continues to work on the enhancement and optimization of its Enterprise Resource Planning system and associated workflows.

Grow the business in the highest return on investment areas

The Company has been a major participant in the power systems market for many years as a supplier to several of the world’s leading power generation companies and through its large custom genset enclosure business. Continuing to build on its broad product offering, the Company received EPA certification for its 32L and 40L heavy-duty engines in 2018 and for its 53L heavy-duty engines in 2019. These heavy-duty engines provide a natural-gas-fueled power range from 500 kilowatt-electric (“kWe”) to 1.25 megawatt (“MW”), allowing the Company to serve a greater portion of the demand response, microgrid, combined heat and power, and oil and gas markets. Additionally, in 2019, the EPA granted emergency standby certification for certain diesel engines sold by the Company, which are largely designed for emergency use in critical infrastructure applications. Also, the engines can handle mission critical customer operations in the health care, data center, hospitality and transportation industries. In addition to dedicating significant R&D resources within the power systems end market, the Company has also strategically invested in expanding its management, sales and operations staff to support these efforts. The Company’s heavy-duty engines have historically provided better margins.

Capitalize on key market trends

The Company’s breadth of products and solutions will enable it to capitalize on numerous market trends that it believes have the potential to drive customer demand for its products and contribute toward its long-term growth. Further, the Company’s R&D activity is largely focused on expanding its solutions to further address trends in these areas. The key trends include the following:

• the worldwide growth of intermittent sources of energy, such as wind and solar, and an aged electric grid in the United States, coupled with power outage activity due to weather or power shutdowns, are driving increased demand for generators, microgrids and demand response equipment;
• stringent regulations and growing efforts to reduce emissions are driving demand for clean energy and alternatives to diesel power engines in several markets such as the power generation market for microgrids, oil and gas applications, and arbor care markets, among others;
• growth in data centers and their increasing demand for electricity, which is driving growth for backup power (commercial generators/microgrids);
• growth in e-commerce activity around the world, which is driving demand for last-mile delivery vehicles; and
• the availability of automotive engines that are suited for industrial application.

New product expansion by leveraging deep industry experience

Throughout the Company’s history, it has evolved from a provider of diesel power systems to becoming a major supplier of power systems fueled by alternatives to diesel, including gasoline, propane, and natural gas, among others. By leveraging the deep industry experience of its engineering and new-product development teams, the Company is continuing to take steps to broaden the range of its power system product offerings, including engine classes, power ratings and the OEM and direct user market categories into which it supplies products. The Company plans to capitalize on its technologically sophisticated, in-house design, prototyping, testing and application engineering capabilities to further refine its superior power system technology. Due to increasing demand for new energy and latest market trends, the Company continues to offer battery packs for its industrial market.

Leverage the Company’s relationship with Weichai

In March 2017, the Company and Weichai executed a strategic collaboration agreement (the “Collaboration Agreement”) under which they have been working together to accelerate market opportunities for each company’s respective product lines across various geographic and end-user markets. On March 22, 2023, the Collaboration Agreement was extended for an additional term of three years, expiring in March 2026. The Company received a renewal notice from Weichai and is in the process of negotiating the renewal of the Collaboration Agreement; however, no formal extension has been executed as of the date of this filing.

The Collaboration Agreement provides the Company with strategic benefits and opportunities, including the ability to leverage Weichai’s strengths and capabilities in R&D, manufacturing, procurement and distribution and its widespread sales channels in China and other emerging markets. This collaboration has enabled the Company to broaden its existing product portfolio, improve material quality, decrease costs, accelerate the development of new products and bring them to market, and expand access and exposure to new markets.

Also, through the Company’s relationship with Weichai, it has access to Weichai’s ‘New Energy’ product portfolio and is exploring product diversification opportunities in the areas of battery storage and electrification.

Expand global business

Through the expansion of its product lineup and the entry into new markets, the Company has a history of growing its product offerings internationally beyond North America. The Company sees long-term opportunity in continuing to grow its business worldwide with further R&D investment including new-product development and offerings. In January 2022, PSI and Société Internationale des Moteurs Baudouin (“Baudouin”), a subsidiary of Weichai, entered into an international distribution and sales agreement which enables Baudouin to bring PSI’s power systems line of products into the European, Middle Eastern, and African markets, which resulted in $1.2 million of sales during the year ended December 31, 2025. Beginning January 2024, this agreement automatically extends for additional one-year terms unless notice is given by one of the parties. In addition to sales, Baudouin will manage service, support, warranty claims, and technical requests. The Company believes that this agreement will continue to offer enhanced global growth opportunities, particularly in Europe.

Sales and Marketing

The Company employs a direct sales and marketing approach to maintain maximum interface with and service support for its OEM customers. This direct interface incorporates the corporate internal technical sales representatives. The Company complements its direct OEM relationships with a localized, independent sales and product support organization. This localized sales and support organization provides the necessary knowledge of local customs and requirements while also delivering immediate sales assistance and customer support.

The Company has invested in and is focused on capturing aftermarket sales of the value-added components that are included in its power systems. With a significant portion of the selling prices of the Company’s power systems coming from value-added components, this is a large, continuing growth opportunity for its aftermarket business.

Customers

The Company’s customers primarily include global OEMs and direct end-users across a wide range of applications that demand high product quality, best-in-class engineering support and on-time delivery. Within several applications for which the Company provides solutions, it maintains supplier relationships with customers, which are often among the largest in that category.

The Company’s largest customer represented 20% of consolidated net sales in 2025. The largest customer changes from time to time as a result of various factors, including prevailing market conditions, customers’ strategies and inventory of the Company’s power systems.

Competition

Each of the Company’s end markets have a variety of competitors, including engine manufacturers, independent suppliers and distributors of engines, fuel systems and component providers, manufacturers of power generation equipment, engine packagers and integrators, and the in-house operations of certain OEMs, some of which have longer operating histories, strong brand recognition and significantly greater financial and marketing resources.

Notwithstanding significant competition, the Company believes that the following factors provide it with a differentiated value proposition that allows the Company to compete effectively:

• fuel-agnostic strategy;
• demonstrated expertise in off-road applications;
• ability to leverage Weichai’s strengths and capabilities;
• completeness and comprehensiveness of engines and power systems;
• expansive product integrations, including electronics, controls, fuel systems and transmissions;
• commonality of technology platform spanning all product lines;
• emissions regulation compliance and certification;
• breadth and depth of advanced engineering disciplines;
• industry-leading product and application engineering;
• competitive pricing/cost;
• ability to tailor power systems to specific customer needs;
• performance and quality;
• speed to market; and
• customer support and service.

Manufacturing

The Company manufactures and assembles its products at facilities in suburban Chicago, Illinois, as well as in Darien and Beloit, Wisconsin, and customizes its power systems to meet specific requirements of OEM applications and the needs of its OEM customers. The Company has invested in precision computer numerical control (“CNC”) machining equipment to finish its internally designed engine blocks and cylinder heads, which are cast by various suppliers. The manufacturing lines in the Company’s production facilities are technologically sophisticated, lean, agile and flexible, and the Company allocates production capacity on its mixed model manufacturing lines to accommodate the demand levels and product mix required by its OEM customers.

The Company focuses on safety, people, quality, on-time delivery, cost and environment in its manufacturing operations. The Company is certified to the most recent International Organization for Standardization (“ISO”) standard, ISO 9001: 2015. The ISO 9000 family of quality management standards, which must be met in order to become ISO certified, is designed to help organizations monitor and improve the quality and delivery of their products and/or services to their customers. The Company uses tools such as Six Sigma, Lean Manufacturing, 80/20, Value Stream Mapping and other manufacturing engineering strategies to help manage its business, build quality, drive performance and continually improve culture within the manufacturing operations’ teams. The Company also uses a customer relationship management database to help collect customer feedback and to track overall quality performance at its OEM customers. Structured staff training is a constant priority and includes closed-loop quality monitoring and feedback systems.

Research, Development and Engineering

The Company’s research, development and engineering programs are focused on new product development and enhancements to current products, in addition to performance and quality improvements across its product lines. Its efforts are market driven, with the sales team identifying and defining market requirements and trends and its engineering and new-product development groups reviewing existing power system portfolios and developing new solutions that build upon the technology within that portfolio.

The Company’s product and application development engineering teams include in-house mechanical and electrical engineering functions, including advanced engine modeling, simulation, analysis and testing. Internal resources are supplemented with engineering outsourcing relationships for design, development and product testing. In addition to these engineering outsourcing relationships, the Company benefits from the design, development and testing capabilities of its supplier base. The Company staffs its engineering support activities associated with released product and component sourcing programs with dedicated internal engineering personnel.

Research, development and engineering expenditures include salaries, contractor fees, building costs, utilities, testing, information technology and administrative expenses and are expensed, net of contract reimbursements, when incurred. From time to time, the Company enters into agreements with its customers to fund a portion of the research, development and engineering costs of a particular project. These reimbursements are accounted for as a reduction of the related research, development and engineering expenditure. The Company’s net research, development and engineering expenditures for 2025 and 2024 were $18.2 million and $20.1 million, respectively.

Supplier Relationships

In addition to producing its own engines, the Company has established relationships with its suppliers for certain engines that are integrated into the Company’s comprehensive power systems, the most significant of which are HD Hyundai Infracore Co., LTD (“HD Hyundai”), a subsidiary of HD Hyundai, Shenyang Packson Technology Co., LTD. (“SPY”), Chongqing Duchengrongfeng Mechanic Manufacture Co., Ltd (“CDM”) and Weichai. The Company also sources other power system components and coordinates design efforts with third-party suppliers for some of its key components. In general, the prices at which the Company purchases engines, components and other raw materials are based on market factors, including the prices offered by other suppliers operating in the same market and the prevailing market prices of raw materials.

The Company aggregates product sourcing efforts across its large and diverse OEM customer base and across industry categories, capitalizing on volume, economies of scale and global supply opportunities. The Company’s customers benefit from the aggregation of its global sourcing, procurement, and assembly and services, obtaining cost benefits that they might not obtain if they were to rely on their own internal resources, capabilities and more limited demand requirements. Through this process, customers are able to streamline their supply base by consolidating procurement and assembly efforts down to a single part number product supplied by the Company. The Company delivers this assembly to its customers’ production lines ready to install into the customers’ product.

The Company is party to a nonexclusive supply agreement with HD Hyundai, under which it purchases and distributes specified HD Hyundai engines within a territory consisting of the United States, Canada and Mexico with no minimum product purchase commitments. Beginning in 2024, the supply agreement automatically extends for additional one-year terms unless a notice of termination is provided by either party six months prior to the scheduled expiration.

In November 2023, the Company entered into a supply agreement with CDM, for the exclusive purchase and distribution of engines in North and South America, in the industrial and power system markets. The Company entered into this supply agreement to source certain engines previously supplied by Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd. (“SAME”), whose ability to supply product was suspended because of the intensified enforcement and expansion of the UFLPA near the end of 2023. Beginning December 2024, the supply agreement automatically extends for additional one-year terms unless a notice of termination is provided by either party six months prior to scheduled expiration.

In November 2023, the Company also entered into a supply agreement with SPY, for the exclusive purchase and distribution of engines in North and South America, in the industrial and power system markets. The Company entered into this supply agreement to source certain engines previously supplied by SAME, whose ability to supply product was suspended because of the intensified enforcement and expansion of the UFLPA near the end of 2023. Beginning December 2024, the supply agreement automatically extends for additional one-year terms unless a notice of termination is provided by either party six months prior to scheduled expiration.

Product Support

The Company’s dedicated team of product and application engineers enables it to deliver high-quality, responsive technical support to its OEM and end-user customers. The Company provides technical support and training to its customers, including in-plant training and support through web and phone-based field service. The Company further supports its customers by engaging regional providers to perform warranty services and offer support for its power systems. The Company also leverages its technical resources to provide service and support functions for its power systems sold to OEM customers.

Backlog

Backlog generally is not considered a significant factor in the Company’s business.

Employees and Human Capital

As of December 31, 2025, the Company’s workforce consisted of approximately 1,000 full-time employees. None of the members of the Company’s workforce are represented by a union or covered by a collective bargaining agreement.

Company values include focusing on developing and maintaining a world class workforce through personal accountability, teamwork, customer service and innovation. The Company monitors and manages attrition. It approves, through its human resources department, the replacement of key positions that it believes are critical to sustaining improved business performance and analyzes departure data to continually improve upon the experience of employees. Turnover for salaried employees in 2025 was approximately 18.0%.The Company’s talent management and succession planning process includes the identification of key positions based on current and future business strategies, the identification of potential successors, and a plan for talent development.

The Company focuses on attracting and retaining the best employees by providing market competitive pay and benefits. This ensures sustainability of the organization. The Company’s short-term and long-term incentive plans are designed to provide a variable pay opportunity to reward the attainment of key financial and operational goals as well as shareholder value creation.

In addition to the base and variable pay plans, the Company offers employees other benefits including medical, paid-time off, and retirement savings plans.

Health and safety are also a key priority, as the Company is committed to removing conditions that cause personal injury or occupational illness. Employees participate in training sessions focused on these topics and are encouraged to promote behaviors that protect others from risk of injury. The Company sets annual targets for its Total Recordable Incident Rate (“TRIR”) and Days Away, Restricted or Transferred (“DART”) and regularly reviews these metrics. For 2025, the Company achieved an overall TRIR of 7.42, meaning that for every 100 full-time employees, 7.42 employees incurred an injury that resulted in recordable medical treatment. The DART Rate was 4.22 in 2025, meaning that for every 100 full-time employees, 4.22 individuals experienced an incident that resulted in lost time or modified duty.

Environmental Matters

The Company’s reporting facilities follow the guidelines required for its federally enforceable state operating permits (FESOP) used with the Illinois Environmental Protection Agency (IEPA), and the Wisconsin Department of Natural Resources (WDNR) Type-B permit guidelines. This includes monitoring the emissions produced from these locations as part of the requirements within the states where PSI operates. A majority of PSI's current production utilizes traditional utility supply. PSI’s production processes that require product testing rely on liquid propane and natural gas fuels, which produce lower emissions than diesel and gasoline.

The Company is committed to producing high quality products that provide reduced emissions and to operating its facilities in a manner that mitigates their impact on the environment.

For the full year ended 2025, approximately 74% of the engines sold run on either propane or natural gas. Also, the Company has taken the following steps to enhance its sustainability:

• updated most of the interior/exterior lighting in its buildings to LED lighting. As lamps or fixtures burn out or require replacement, they are converted to LED (if not already) as a measure of energy conservation;
• recycling of certain materials including cardboard, metal, wood scrap, used oil and antifreeze, and metal processing coolants and lubricants reclamation;
• reduced loaded hot testing of large displacement engines due to quality improvements (reduces noise, emissions and fuel consumption)

The Company intends to continue exploring additional avenues for greater sustainability through new product development and the exploration of additional operational opportunities.

Impact of Government Regulation

The Company’s power systems are subject to extensive statutory and regulatory requirements that directly or indirectly impose standards governing exhaust emissions, evaporative emissions, greenhouse gas (“GHG”) emissions and noise. The Company’s power systems are subject to compliance with regulatory standards imposed by the EPA, state regulatory agencies in the United States, including CARB, and other regulatory agencies around the world. Although as of January 1, 2024, the Company no longer sells engines into the on-road market, because its engines are still sold into the off-road market, the Company must ensure certification to the specific regulations within the applicable statutory segment. For products sold into the U.S. market, both EPA and CARB have imposed specific regulations on engines used in off-road equipment. These regulations generally serve to restrict exhaust emissions, with a primary focus on oxides of nitrogen, hydrocarbons and carbon monoxide. Exhaust emission regulations for engines used in off-road industrial and power generation equipment vary based upon the use of the equipment into which the engine is incorporated (such as stationary power generation or mobile off-highway industrial equipment) and the type of fuel used to drive the power system. The Company continues to make significant investments into the necessary intellectual property that supports full compliance of the Company’s engines now and into the foreseeable future.

The first EPA emissions regulations adopted for diesel engines, known as Tier 1, applied to diesel engines used in mobile off-highway applications in the U.S., and similar standards for diesel engines, known as Stage I regulations, were implemented thereafter in the EU. The EPA and applicable agencies in the EU have continued to develop emissions regulations for diesel engines in the U.S. and the EU, respectively, and have adopted more restrictive standards. The current diesel engine emission requirements in the U.S are known as Tier 4 and are applicable to off-road diesel engines used in industrial equipment. Similarly, the EU has adopted more restrictive standards under its Stage V regulations. Tier 4 and Stage V regulations call for reductions in levels of particulate matter and oxides of nitrogen.

The initial and ongoing certification requirements vary by power system application and market segment. Each application must undergo a series of rigorous and demanding tests to demonstrate compliance with regulatory standards, including useful life, zero hours and durability testing. Once a power system is certified, regulatory agencies impose ongoing compliance requirements, which include testing newly produced power systems on a regular quarterly schedule to ensure ongoing compliance with applicable regulations. In addition, there are field audit requirements, which require the removal of power systems from service at specified stages of their useful lives to perform confirmatory exhaust emissions testing and/or on-board diagnostic (“OBD”) system audits and testing. All of the Company’s emission-certified power systems meet existing exhaust emission standards of the EPA and CARB. Failure to comply with these standards could result in materially adverse effects on the Company’s future financial results.

Information about the Company’s Executive Officers

The following selected information for each of the Company’s current executive officers was prepared as of February 26, 2026.

C. (Dino) Xykis was appointed as the Chief Executive Officer on April 24, 2023, after serving as Interim CEO since June 2, 2022. Mr. Xykis also served as the Company’s Chief Technical Officer from March 15, 2021 until July 9, 2024. He is responsible for the oversight of the Company and its advanced product development, engineering design and analysis, on-highway engineering, applied engineering, emissions and certification, Waterford, Michigan engineering operations, program management and product strategic planning. Since joining the Company in 2010 and until his appointment as Chief Technical Officer in March 2021, Mr. Xykis served as Vice President of Engineering for the Company. He has more than 30 years of professional experience in multi-disciplined engineering areas including senior management and executive positions at various companies including Cummins Inc., a publicly traded company on the NYSE, and Generac Power Systems, a publicly traded company on the NYSE. Mr. Xykis also served as Adjunct Professor of Mechanical Engineering and Mechanics at the Milwaukee School of Engineering and previously served on the audit and compensation committees of the Board of Directors of Image Sensing Systems, a publicly traded company on Nasdaq, from 1996 to 2001. Mr. Xykis has also served on the advisory board of Civil, Environmental, and Geo-Engineering, College of Science and Engineering, University of Minnesota for the past eight years. Mr. Xykis holds a Bachelor’s degree in Structural Engineering, a Master’s degree in Vibration/Dynamics, and a PhD. in Structural/Applied Mechanics from the University of Minnesota, Minneapolis.

Xun (Kenneth) Li was appointed Chief Financial Officer of Power Solutions International, Inc. on August 26, 2022. As Chief Financial Officer, Mr. Li has responsibility for the Company’s finance, accounting, financial planning and analysis, treasury, tax, risk management, internal audit, and related functions, and supports the Chief Executive Officer and Board of Directors on financial and strategic matters. From 2020 to August 2022, Mr. Li served as Chief Financial Officer of ND Paper, a pulp, packaging, and paper company. He was a member of the executive leadership team with responsibility for finance and accounting functions and strategic planning. From 2008 to 2020, Mr. Li held financial leadership positions at Caterpillar Inc., a publicly traded company, including serving as Chief Financial Officer of machine product group from 2013 to 2020. From 2003 to 2008, Mr. Li held finance leadership roles at Ford Motor Company, a publicly traded company. Mr. Li holds a Master of Business Administration with high distinction and a Master of Science in Accounting from the University of Michigan, a Master of Science in Mechanical Engineering from the University of Oklahoma, and a Bachelor of Science in Mechanical Engineering from Shanghai Jiao Tong University. He is a Certified Public Accountant in the state of Illinois.

Zhaoying (Dorothy) Du was appointed General Counsel and Corporate Secretary of Power Solutions International, Inc. on September 15, 2025. As General Counsel and Corporate Secretary, Ms. Du has responsibility for the Company's legal affairs, corporate governance, compliance, risk management, securities, and related functions, and supports the Chief Executive Officer and Board of Directors on legal and strategic matters. Ms. Du has 20 years of experience providing strategic legal counsel to U.S. and multinational companies, leading initiatives to address complex commercial and regulatory matters, helping businesses manage risks, drive innovation, and implement pragmatic legal solutions that support business success. From March 2025 to September 2025, Ms. Du led the global supply chain legal team of Lenovo, a publicly traded company. She was a member of the Lenovo global supply chain executive leadership team, advising on procurement, factory setup, trade compliance, regulatory risks, and contract negotiations across global operations. From February 2016 to March 2025, Ms. Du served as Global Head of Legal of Motorola Mobility, a Lenovo company, where she was a member of the executive leadership team, overseeing matters including artificial intelligence, R&D, commercial contracts, intellectual property, compliance, data privacy and information security, corporate governance, corporate secretary, litigation, and other legal functions. From 2013 to 2016, she served as General Counsel of the China operations and Senior Counsel for compliance and risk management at The Warranty Group (now part of Assurant, Inc.). From 2005 to 2012, Ms. Du served as Co-Chair of the APAC Practice Group at Freeborn & Peters (now part of Smith, Gambrell & Russell, LLP) and as an attorney at Sonnenschein Nath & Rosenthal, LLP (now Dentons LLP), advising on cross-border transactions, securities, corporate governance, mergers and acquisitions, financing, compliance, and other complex matters. Ms. Du holds a Juris Doctor degree from the University of Missouri - Kansas City School of Law, a Master of Arts degree in Political Science from the University of Georgia, and a Bachelor of Law degree from Sun Yat-Sen University Law School. She is licensed to practice law in Illinois and is admitted to practice law in China.

The Company’s business and results of operations are subject to various risks, including those listed below, many of which are not within the Company’s control, which may cause actual financial performance to differ materially from historical or projected future performance. New risks may emerge at any time, and the Company cannot predict those risks or estimate the extent to which they may affect its results of operations.

Geopolitical Factors

The Company utilizes a global supply chain to source products, including engines, components and materials, which may subject it to tariffs, including U.S. tariffs imposed on imports from China. The Company also sells its products on a global basis, and therefore its export sales could be impacted by tariffs.

Tariffs and changes in trade policy could materially increase our costs, disrupt our supply chain, and adversely affect our competitive position and results of operations.

Several of the Company’s products are sourced internationally, including from China. The U.S. government has imposed, and may continue to impose, tariffs on products imported from China and other countries. Since early 2025, President Donald Trump signed executive orders imposing various tariffs on certain imports from Mexico, Canada, and China, and stated his intent to impose tariffs on any country that imposes tariffs on U.S. products. Certain products that we buy from our suppliers are, and may in the future be, subject to these tariffs, which could increase our manufacturing costs.

We may not be able to pass these increased costs on to our customers without adversely affecting demand for our products. The scope, duration, and impact of current and future tariffs remain highly uncertain. Further, the imposition of tariffs on imports from China and other countries have the potential to materially and adversely impact the Company’s sales, profitability and future product launches.

Additionally, the tariffs imposed by the U.S. have resulted, and may in the future result, in retaliatory tariffs by other countries against U.S. exports. The Company also sells its products on a global basis; and, therefore, if such retaliatory tariffs are imposed on exports of the Company’s products, this could make our exported products less competitive than products of our competitors who are not subject to such retaliatory tariffs.

The U.S. government has indicated its intent to adopt a new approach to trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements. The Company is evaluating U.S. government policy, which is subject to change in the current negotiating environment, pricing, its supply chain and its operational strategies to mitigate the impact of these tariffs; however, there can be no assurances that any mitigation strategies employed will remain available under government policy or that the Company will be able to offset tariff-related costs or maintain competitive pricing of its products. Any material reduction in sales or increase in costs resulting from tariffs or trade restrictions could have a material adverse effect on our business, financial condition, and results of operations.

On February 20, 2026, subsequent to year end, the U.S. Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”). The President immediately imposed replacement tariffs under Section 122 of the

Trade Act of 1974, which are temporary (150-day maximum duration), and has indicated intent to impose tariffs under other authorities going forward. The Company may be entitled to refunds of IEEPA tariffs paid during 2025, but to the extent PSI passed tariff costs through to customers, the Company may be required to reimburse customers for such amounts, which could reduce or eliminate any net benefit from refunds. The tariff environment remains highly uncertain.

Furthermore, escalating geopolitical tensions, including the ongoing conflict in Ukraine and instability in the Middle East, and developments in Venezuela could disrupt global supply chains, increase commodity prices, and create broader economic uncertainty that adversely affects our business.

Liquidity and Indebtedness

Our liquidity could be adversely affected by volatility in demand, supply‑chain constraints, and significant capital investment requirements inherent in our engine manufacturing operations.

Our business requires substantial liquidity to fund working capital, capital expenditures, research and development, inventory purchases, and long‑term strategic initiatives. We rely on cash generated from operations, supplemented by available credit facilities, to meet these needs. Our ability to maintain adequate liquidity depends on several factors outside our control. For example, fluctuations in customer demand—particularly in the heavy‑equipment, transportation, industrial, and power‑generation markets—can lead to uneven order patterns that impact cash inflows. A sudden or prolonged decline in sales volumes could reduce operating cash flows and negatively affect our liquidity position.

Additionally, our manufacturing processes depend on the availability of raw materials and key components such as castings, electronics, and specialized metals. Supply‑chain disruptions, including shortages, delivery delays, or sudden cost increases, may require us to hold higher levels of inventory or pay premium prices to secure materials. These conditions could increase our working capital requirements, compress margins, and reduce available cash.

We also operate in a capital‑intensive industry that requires ongoing investment in production equipment, testing facilities, tooling, and emissions‑compliance technology. If we are unable to generate sufficient cash from operations or secure financing on favorable terms, we may need to delay or scale back critical investments, which could impair our competitiveness and innovation pipeline.

Our access to credit markets may be affected by factors such as rising interest rates, tightening lending standards, deterioration in our credit metrics, or adverse changes in macroeconomic conditions. If we are unable to refinance existing indebtedness or obtain additional funding when needed, we may face increased borrowing costs or constraints on our operational and strategic flexibility.

If any of these risks materialize, our liquidity, financial condition, and ability to execute our business strategy could be materially and adversely affected.

The Company’s existing debt or any potential new debt could adversely affect its business and growth prospects.

As of December 31, 2025, the Company’s total debt obligations, including indebtedness under the Revolving Credit Agreement were $96.6 million. The Company’s debt arrangements contain and may contain in the future certain requirements, including specific financial and other covenants or restrictions. The failure or the inability to meet such obligations under existing debt or any new debt could materially and adversely affect the Company’s business and financial condition. In addition, the Company’s debt obligations could make it more vulnerable to adverse economic and industry conditions and could limit its flexibility in planning for or reacting to changes in its business and the industries in which it operates. The Company’s indebtedness and the cash flow needed to satisfy its debt obligations and the covenants contained in current and potential future debt agreements could have important consequences, including the following:

• limiting funds available for borrowing through the imposition of availability blocks;
• limiting funds otherwise available for financing capital expenditures by requiring dedication of a portion of cash flows from operating activities to the repayment of debt and the interest on such debt;
• limiting the ability to incur additional indebtedness;
• limiting the ability to capitalize on significant business opportunities, including mergers, acquisitions and other strategic transactions;
• making the Company more vulnerable to rising interest rates or higher interest rates; and
• making the Company more vulnerable in the event of a downturn in its business.

The Company’s new Revolving Credit Agreement places limitations on its ability to make acquisitions and restricts its ability to incur additional indebtedness.

Financial Condition, Results of Operations, and Cash Flows

The Company is subject to price increases in some of the key components in its power systems.

The prices of some of the key components of the Company’s power systems are subject to fluctuation due to market forces, including changes in the costs of raw materials incorporated into these components. Such price increases occur from time to time due to increases in overall inflation, spot shortages of commodities, increases in labor costs or longer-term shortages due to market forces. In particular, the prices of certain precious metals, such as palladium and rhodium, used in emissions-control systems fluctuate frequently and often significantly. Substantial increases in the prices of raw materials used in components that the Company sources from suppliers may result in increased prices charged by suppliers. If the Company incurs price increases from suppliers for key components in its power systems, production costs will increase, and given competitive market conditions, or contractual limitations, the Company may not be able to pass all or any of those cost increases on to OEM customers in the form of higher sales prices. To the extent that its competitors do not suffer comparable component cost increases, the Company may have even greater difficulty passing along price increases, and the Company’s competitive position may be harmed. As a result, increases in costs of key components may adversely affect the Company’s margins and otherwise adversely affect its results of operations.

Many of the Company’s power systems involve long and variable design and sales cycles.

The design and sales cycle for customized power systems, from initial contact with potential OEM customers to the commencement of shipments, may be lengthy. Customers generally consider a wide range of solutions before making a decision to purchase power systems. Before an OEM commits to purchase power systems, they often require a significant technical review, assessment of competitive products and approval at a number of management levels within their organization. During the time the Company’s customers are evaluating its products, the Company may incur substantial sales and marketing, engineering, and research and development expenses to customize the power systems to the customer’s needs.

Warranty, Safety Standards, and Emissions

The Company could suffer warranty claims or be subject to product liability claims, both of which could materially adversely affect its business.

The Company’s power systems are sophisticated and complex, and the success of the power systems is dependent, in part, upon the quality and performance of key components, such as engines, fuel systems, generators, breakers, and complex electrical components and associated software. The Company may incur liabilities for warranty claims because of defective products or components, including claims arising from defective products or components provided by its suppliers that are integrated into its power systems.

The provisions the Company makes for warranty accruals may not be sufficient, or it may be unable to rely on a warranty provided by a third-party manufacturer or recover costs incurred associated with defective components or products provided by its suppliers. The Company may recognize additional expenses because of warranty claims in excess of its current expectations. Such warranty claims may necessitate a redesign, re-specification, a change in manufacturing processes and/or a recall of its power systems, which could have a material adverse impact on the Company’s financial condition and results of operations and on existing or future sales of its power systems and other products. Even in the absence of any warranty claims, a product deficiency such as a manufacturing defect or a safety issue may necessitate a product recall, which could have a material adverse impact on the Company’s financial condition and results of operations and on existing or future sales.

The Company is exposed to potential product liability claims that are inherent to natural gas, propane, gasoline and diesel and products that use these fuels. Natural gas, propane, diesel and gasoline are flammable and are potentially dangerous products. Any accidents involving the Company’s power systems could materially impede widespread market acceptance and demand for its power systems. In addition, the Company may be subject to a claim by end-users of its OEM customers’ products or others alleging that they have suffered property damage, personal injury or death because its power systems or the products of its customers into which its power systems are integrated did not perform adequately. Such a claim could be made whether or not the Company’s power systems perform adequately under the circumstances. From time to time, the Company may be subject to product liability claims in the ordinary course of business, and it carries a limited amount of product liability insurance for this purpose. However, current insurance policies may not provide sufficient or any coverage for such claims, and the Company cannot predict whether it will be able to maintain insurance coverage on commercially acceptable terms.

The Company and its products are subject to numerous environmental and regulatory policies, including emission and fuel economy rules.

The Company’s business is affected by government environmental policies, mandates and regulations around the world, most significantly with respect to emission standards in the United States. Examples of such regulations include those that (i) restrict the sale of power systems that do not meet emission standards and (ii) impose penalties on sellers of noncompliant power systems.

The Company generally must obtain product certification from both the EPA and the CARB to sell its products in the United States. The Company may attempt to expand sales of its certified power systems to OEMs that sell their products in other countries, which may also have stringent emissions requirements. Accordingly, future sales of the Company’s products will depend upon its products being certified to meet the existing and future air quality and energy standards imposed by the relevant regulatory agencies. While the Company incurs significant research and development costs to ensure that its products comply with emission standards and meet certification requirements in the regions in which its products are sold, the Company cannot provide assurance that its products will continue to meet those standards. The failure to comply with certification requirements would not only adversely affect future sales but could result in the recall of products or the imposition of civil or criminal penalties.

The adoption of new, more stringent and burdensome government emissions regulations, whether at the foreign, federal, state or local level, in markets in which the Company supplies power systems may require modification of emission certification and other manufacturing processes for its power systems. The Company might incur additional and/or unanticipated expenses in meeting future compliance requirements, and it may be required to increase its research and product development expenditures. Increases in such costs and expenses could necessitate increases in the prices the Company charges for its power systems, which could adversely affect demand for such power systems. There are no assurances that the Company will have adequate financial or technical resources in the future to maintain compliance with government emissions standards.

Supply Chain

The Company is dependent on certain key third-party suppliers, and the partial or complete loss of one of these key suppliers, or the failure to find replacement suppliers or manufacturers in a timely manner, could result in supply shortages.

The Company sources engines, components and replacement parts used in the assembly of its power systems and aftermarket sales from various third-party suppliers. Much of the technology incorporated into the components that the Company sources from a limited number of suppliers is technologically sophisticated, and the Company does not believe that its competitors have access to some of this sophisticated technology in the components they are able to source. If the Company’s competitors were to gain access to these suppliers’ technology or if the Company’s relationships with these suppliers were to change adversely, the Company’s business could be harmed. The viability of certain key third-party suppliers, or the exiting by certain suppliers of certain business lines, could require the Company to find other suppliers for materials or components. Some components cannot be quickly or inexpensively re-sourced to another supplier due to long lead times and contractual commitments that might be required by another supplier in order to provide the components or materials. Any extended delay in receiving engines or other critical components, or the inability of third-party suppliers to meet the Company’s quality, quantity or cost requirements, could impair or prohibit the Company’s ability to deliver products to its OEM customers.

Disruptions arising from compliance with certain importation and trade laws and regulations, including those governing goods shipped from certain regions in China, have, and in the future may, cause supply chain interruptions and raw material shortages.

We are subject to various laws and regulations that affect our ability to obtain components and materials. On December 23, 2021, the UFLPA became law in the United States. The UFLPA, among other matters, prohibits the import of goods from the Xinjiang Uyghur Autonomous Region of the People’s Republic of China. In July 2023, the Company began experiencing delays in the imports of raw materials directly related to the UFLPA. Near the end of 2023, the importing of certain forklift products was suspended because of the intensified enforcement and expansion of the UFLPA and continued through the third quarter of 2024. In 2024, the Company re-sourced these products from CDM and SPY in place of SAME while maintaining the Company’s high-quality standards. Additionally, with the ongoing enforcement and expansion of the UFLPA, the Company has increased the vetting of new and existing vendors with links to the applicable areas to mitigate the likelihood of future disruption of imports.

Trade law and regulation compliance disruptions could occur again in the future and could result in other delays of importing raw materials needed to fulfill future orders while the Company works to comply with trade laws and regulations, including the UFLPA.

Growth and Profitability

The market for alternative-fueled, spark-ignited power systems may not continue to develop as expected.

The continued market acceptance and growth of the market for efficient alternative-fueled, spark-ignited power systems, including natural gas, propane and gasoline, is a key tenet of the Company’s growth strategy. The impact of diesel emission regulations is expected to increase the cost and complexity of diesel power systems, but this may not materialize to the expected extent or at all. Also, customers, or potential customers, may not substitute natural gas, propane and gasoline-powered power systems for diesel power systems in response to these regulations. In addition, to the extent that diesel power system manufacturers develop the ability to design and produce emission-compliant diesel power systems that are more competitive than the Company’s alternative-fueled power systems, customers and potential customers may be less likely to substitute alternative-fueled power systems for diesel power systems. Furthermore, if alternative-fueled power systems are substituted for diesel power systems, there can be no assurance that the Company’s power systems would capture any portion of the potential market increase. If the industrial OEM market generally, or more specifically any of the OEM categories that represent a significant portion of the Company’s business or in which it anticipates significant growth opportunities for its power systems, fails to develop or develops more slowly than the Company anticipates, its business could be materially adversely affected. Lastly, the Company also faces competition from other forms of power systems, including electrification and fuel cells, which could limit its ability to grow in the future.

The Company may be impacted by volatility of oil and gas prices and/or fuel price differentials.

The prices of various fuel alternatives are subject to fluctuation, based upon many factors, including, but not limited to, global supply and demand, changes in resource base, pipeline transportation capacity for natural gas, refining capacity for crude oil, and government tariff excise, and fuel tax policies. The price differential among various fuel alternatives can impact OEMs and their decisions on which, if any, power systems they purchase from the Company. Furthermore, if OEMs decide to purchase the Company’s power systems, relative fuel prices may affect which power systems they purchase, and the margins can vary significantly among the Company’s various power systems.

The Company may be affected by the price of oil and gas. For example, when the price of oil declines, oil becomes a more favorable source of fuel in the short term, and alternative fuel and energy producers suffer as a result. This volatility, as with any commodity, will occur from time to time and may adversely affect the Company’s business.

Also, a significant portion of the Company’s sales and profitability has historically been derived from sales of products that are used in the oil and gas industry, primarily in support of operating wells. Various factors, such as capital allocation strategies, oil pricing, rig counts, shifts in energy sources, and governments policies, among others, could lead oil and gas producers to curtail or limit capital expenditures. In addition, oil and gas producers may cease or suspend production at well sites that have or are likely to become unprofitable. As a result, sales of the Company’s products could be severely impacted during periods of a prolonged depression in energy prices, rig counts and capital expenditures which could have a material adverse effect on the Company’s results of operations. The Company estimates that as much as approximately $193.9 million and $105.5 million of its 2025 and 2024 net sales, respectively, were attributable to the sale of products used within the oil and gas industry. The potential impact of future disruptions, continued economic uncertainty, and depressed crude oil prices and low rig count levels may have a significant adverse impact that may result in the recognition of material impairments or other related charges.

The introduction of new products, including new engines that the Company develops, and the continued expansion of products may not succeed or achieve widespread acceptance.

The Company’s growth depends on its ability to develop and/or acquire new products and/or refine existing products and power system technology, to complement and enhance the breadth of its power system offerings with respect to engine class and the OEM market categories into which the Company supplies its products. The Company will generally seek to develop or acquire new products, or enhance existing products and power system technology, if it believes such acquisitions or enhancements will provide significant additional sales and favorable profit margins. However, the Company cannot know beforehand whether any new or enhanced products will successfully penetrate target markets. There can be no assurance that newly developed or acquired products will perform as well as the Company expects, or that such products will gain widespread adoption among the Company’s customers.

Additionally, there are greater design and operational risks associated with new products. The inability of the Company’s suppliers to produce technologically sophisticated components for new engines and power systems, the discovery of any product or process defects or failures associated with production of any new products, and any related product returns could each have a material adverse effect on the Company’s business and its results of operations. If new products that the Company expends significant resources to develop or acquire are not successful or do not obtain, or retain, required certifications, or such products do not achieve the required production volume and scale, its business could be adversely affected.

The Company’s OEM customers may not continue to outsource their power system needs.

The purchasers of the Company’s power systems are OEMs that manufacture a wide range of applications and equipment that include standby and prime power generation, demand response, microgrid, combined heat and power, utility power, arbor equipment, material handling (including forklifts), agricultural and turf, construction, pumps and irrigation, compressors, and utility vehicles. As a result of the significant resources and expertise required to develop and manufacture emission-certified power systems, certain of these customers have historically chosen to outsource production of power systems to the Company. To a significant extent, the Company depends on OEMs continuing to outsource design and production of power systems, power system components and subsystems. OEM customers may not continue to outsource as much or any of their power system production in the future. Increased levels of OEM vertical integration could result from a number of factors, such as shifts in the Company’s customers’ business strategies, acquisition by a customer of a power system manufacturer or the emergence of low-cost production opportunities in foreign countries. Any number of these factors could have an adverse impact on the Company’s business.

Human Capital

The failure to attract, retain and motivate a highly qualified workforce and high functioning management team could, in the future, affect the Company’s business results.

The Company’s success depends on its ability to attract, retain and motivate a highly qualified workforce and high functioning management team. Failure to ensure that the Company has the depth and breadth of management and personnel with the necessary skill set and experience could impede its ability to deliver growth objectives and execute its operational strategy. Competition for qualified employees among companies that rely heavily upon engineering and technology is at times intense, and the loss of qualified employees could hinder the Company’s ability to conduct research activities successfully and develop marketable products. As the Company continues to expand, it will need to promote and hire additional staff, and, as a result of increased compensation and benefit mandates, it may be difficult to attract or retain such individuals without incurring significant additional costs.

Common Stock Ownership and Stockholder Influence

A decrease in stock price may have an unfavorable impact on our status on the Nasdaq and liquidity.

The Company’s stock is newly traded on Nasdaq. If we are not able to comply with the applicable listing requirements or standards of Nasdaq, our common stock could be delisted from Nasdaq. Our share price may be volatile, and purchasers of our common stock could incur substantial losses. The payment of dividends is currently restricted by the Company’s short-term credit facility. The Company intends to retain its future earnings to support operations, to finance expansion and reduce debt.

Ownership of the Company’s stock is concentrated with Weichai and therefore other stockholders’ ability to influence corporate matters is limited.

As of February 26, 2026, Weichai owned 46.0% of the Company’s outstanding shares of Common Stock. Weichai’s significant equity ownership in the Company, may be able to significantly influence, and control the outcome of all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions. The interests of these stockholders may not coincide with the interests of other stockholders. The concentration of ownership might also have the effect of delaying or preventing a change of control of the Company that other stockholders may view as beneficial. Weichai alone owns a majority of the outstanding shares of Common Stock and, therefore, it possesses voting control over the Company sufficient to prevent any change of control from occurring.

Our relationship with Weichai, a Chinese state-owned entity, and heightened U.S.-China geopolitical tensions could subject us to increased regulatory scrutiny, reputational harm, and operational restrictions.

The relationship between the United States and China has become increasingly strained in recent years, with ongoing tensions related to trade, technology, national security, and other matters. The U.S. government has taken, and may continue to take, actions that could affect companies with significant Chinese ownership or business relationships, including:

• Enhanced scrutiny by the Committee on Foreign Investment in the United States (CFIUS) of transactions involving Chinese-affiliated entities;
• Export control restrictions that could limit our ability to share technology or conduct business with Weichai or other Chinese entities;
• Sanctions or other restrictions targeting Chinese state-owned enterprises or their affiliates;
• Legislative or regulatory actions that could restrict or prohibit business relationships with Chinese state-owned entities; and
• Increased disclosure requirements or other regulatory burdens applicable to companies with significant foreign government ownership.

Any such actions could disrupt our strategic collaboration with Weichai, limit our access to certain markets or technologies, increase our compliance costs, or subject us to reputational harm. Additionally, negative public perception of companies with Chinese state ownership could adversely affect our relationships with customers, suppliers, and other business partners, particularly those in the defense, government contracting, or critical infrastructure sectors.

We cannot predict the nature, timing, or impact of future geopolitical developments or government actions. Any material adverse developments in U.S.-China relations or actions targeting companies with Chinese state ownership could have a material adverse effect on our business, financial condition, results of operations, and stock price.

Weichai maintains certain rights through its Investor Rights Agreement with the Company.

In March 2017, Weichai entered into an Investor Rights Agreement (the “Rights Agreement”) with the Company. The Rights Agreement provides Weichai with majority representation on the Company’s Board and management representation rights. Weichai currently has four representatives on the Board which constitutes the majority of the directors serving on the Board. According to the Rights Agreement, during any period when the Company is a “controlled company” within the meaning of the Nasdaq Listing Rules, it will take such measures as to avail itself of the “controlled company” exemptions available under Rule 5615 of the Nasdaq Listing Rules of Rules 5605(b), (d) and (e). With Weichai being the majority owner of the Company’s outstanding shares of its Common Stock, Weichai is able to exercise control over matters requiring stockholders’ approval, including, among other matters, the election of the Directors, amendment of the Company’s Certificate of Incorporation and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of the Company or changes in management and will make the approval of certain transactions impractical without the support of Weichai.

Cyber Risk Factors

The Company is exposed to, and may be adversely affected by, potential security breaches or other disruptions to its information technology systems and data security.

The Company relies on its information technology systems and networks in connection with many of its business activities. The Company’s operations routinely involve receiving, storing, processing and transmitting sensitive information pertaining to its business, customers, dealers, suppliers, employees and other sensitive matters. Cyber incidents could materially disrupt operational systems, result in loss of trade secrets or other proprietary or competitively sensitive information, compromise personally identifiable information regarding customers or employees, and jeopardize the security of the Company’s facilities. A cyber incident could be caused by malicious outsiders using sophisticated methods to circumvent firewalls, encryption and other security defenses. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, the Company may be unable to anticipate these techniques or to implement adequate preventive measures. Information technology security threats, including security breaches, computer malware and other cyber-attacks, are increasing in both frequency and sophistication and could create financial liability, subject the Company to legal or regulatory sanctions, or damage its reputation with customers, dealers, suppliers and other stakeholders. The Company continuously seeks to maintain a robust program of information security and controls, but the impact of a material information technology event could have a material adverse effect on its reputation and results of operations.

Artificial Intelligence Risk Factors

The increasing use of artificial intelligence technologies by our competitors, customers, and suppliers could impact our competitive position.

Artificial intelligence (“AI”) and machine learning technologies are rapidly evolving and are increasingly being adopted across industries, including in manufacturing. Our competitors, customers, and suppliers may adopt AI technologies that could affect our competitive position. If we fail to effectively adopt and integrate AI technologies, or if our competitors do so more successfully, we could experience a decline in our competitive position.

We may also face risks from AI technologies used by third parties, including vendors, customers, and service providers, over which we have limited control. Any material disruption to our supply chain or competitive disadvantage resulting from third-party AI adoption could adversely affect our business, financial condition, and results of operations.

General Risk Factors

Adverse global and regional economic conditions may materially and adversely affect the Company’s business, results of operations and financial condition.

The Company has international operations with sales outside the U.S. representing 7% of the Company’s total net sales. Further, the Company’s global supply chain is large and complex, and a majority of the Company’s supplier facilities, are located outside the U.S. As a result, the Company’s operations and performance depend significantly on global and regional economic conditions.

Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs and other barriers to trade, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations may materially and adversely affect demand for the Company’s products and services. In addition, spending may be materially and adversely affected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, declines in income or asset values, energy shortages and cost increases, labor and healthcare costs and other economic factors.

Also, uncertainty about, or a decline in, global or regional economic conditions may have a significant impact on the Company’s suppliers, contract manufacturers, logistics providers, distributors, and other channel partners. Potential effects include financial instability; inability to obtain credit to finance operations and purchases of the Company’s products; and insolvency.

A downturn in the economic environment may also lead to increased credit and collectability risk on the Company’s trade receivables; the failure of financial institutions (including those that the Company currently, or could potentially, transact with or those that currently, or could in the future, provide services to the Company); limitations on the Company’s ability to issue new debt; reduced liquidity; and declines in the fair value of the Company’s financial instruments. These and other economic factors may materially and adversely affect the Company’s business, results of operations, financial condition and stock price.

The Company is exposed to political, economic and other risks, in addition to various laws and regulations that arise from operating a multinational business.

The Company sells products internationally and sources a significant amount of materials from suppliers outside of the U.S. Accordingly, the Company is subject to the political, economic and other risks that are inherent in operating a multinational company, including risks related to the following:

• general economic conditions;
• the imposition of tariffs and other import or export barriers, which could potentially disrupt the Company’s existing supply chains and impose additional costs on the Company’s business;
• trade and technology protection measures;
• compliance with regulations governing import and export activities;
• import and export duties and restrictions;
• currency fluctuations and exchange restrictions;
• transportation delays and interruptions;
• political and economic instability;
• terrorist activities;
• acts of war, including the events currently underway in Ukraine and Israel, which could lead to volatility in commodity availability and pricing, access to current or new markets, and general overall market volatility and weakness, among other factors;
• labor unrest;
• natural disasters; and
• public health concerns including the potential negative impacts to suppliers, customers or the Company’s business.

Any of these factors could have a material adverse effect on the Company’s business and results of operations.

Also, the Company is subject to, and may become subject to, various state, federal and international laws and regulations governing its business, environmental, labor and trade practices. These laws and regulations, particularly those applicable to the Company’s international operations, are or may be complex, extensive and subject to change. The Company needs to ensure that it and its OEM customers and suppliers timely comply with such laws and regulations, which may result in increased operating costs. Other legislation has been, and may in the future be, enacted in other locations in which the Company manufactures or sells its products. If the Company or its component suppliers fail to timely comply with applicable legislation, its customers may refuse to purchase its products, or it may face increased operating costs because of fines or penalties. In connection with complying with such environmental laws and regulations as well as with industry environmental initiatives, the standards of business conduct required by some of its customers and its commitment to sound corporate citizenship in all aspects of its business, the Company could incur substantial compliance and operating costs and be subject to disruptions to its operations and logistics. In addition, if the Company were found to be in violation of these laws or noncompliant with these initiatives or standards of conduct, it could be subject to governmental fines, liability to its customers and damage to its reputation and corporate brand, any of which could cause its financial condition or results of operations to suffer.

We may incur fines or penalties, damage to our reputation or suffer other adverse consequences if our employees, suppliers, sub-suppliers or other contract parties, agents or business partners violate anti-bribery, competition, export and import, trade sanctions, data privacy, environmental, human rights, forced labor, or other laws.

We are subject to regulation under a wide variety of U.S. federal and state and non-U.S. laws, regulations and policies, including laws related to anti-corruption, human rights, forced labor, anti-bribery, export and import compliance, trade sanctions, data privacy, anti-trust and money laundering, due to our domestic and global operations. In particular, the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business, and we operate in many parts of the world that have experienced government corruption to some degree. We cannot provide assurance our internal controls will always protect us from the improper conduct of our employees, suppliers, sub-suppliers or other contract parties, agents and business partners. Violations of these laws, which are complex and often are difficult to interpret and apply, could subject us to civil or criminal investigations in the United States and other jurisdictions, could lead to substantial civil or criminal, monetary and non-monetary penalties and related stockholder lawsuits, could lead to increased costs of compliance and could damage our reputation, business, financial condition, operating results and cash flows.

Employee disputes or litigation and related unfavorable publicity may negatively affect our future business, financial condition, and operating results.

We may become involved in lawsuits or other disputes relating to employment matters, such as hostile workplace, discrimination, wage and hour disputes, sexual harassment, or other employment issues. These types of claims, depending on their nature, can have a significant negative impact on businesses. Certain companies that have faced employment- or harassment-related lawsuits have had to terminate management or other key personnel, have borne economic and other costs and have suffered reputational harm that has negatively impacted their business.

If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, our stockholders could lose confidence in our financial results, which could materially and adversely affect us.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. There is no assurance that material weaknesses or significant deficiencies in internal controls will not be identified in the future or that we will be successful in adequately remediating any such material weaknesses or significant deficiencies. We may in the future discover areas of our internal controls that need improvement. We have had material weaknesses in our internal controls in the past and we cannot be certain that we will be successful in maintaining adequate internal controls over our financial reporting and accounting processes in the future. The existence of any material weakness or significant deficiencies would require management to devote significant time and incur significant expense to remediate, and management may not be able to remediate in a timely manner. The existence of any material weakness in our internal controls over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations, subject us to investigations from regulatory authorities or cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect us.

The Company could incur restructuring and impairment charges as it continuously evaluates its portfolio of assets and identifies opportunities to restructure its business to optimize its cost structure.

The Company continuously evaluates its portfolio of assets and its operational structure in an effort to identify opportunities to optimize its cost structure as a result of its on-going business needs. These actions could result in restructuring and related charges, including but not limited to asset impairments and employee termination costs, any of which could be significant and could adversely affect the Company’s results of operations.

The Company has substantial amounts of long-lived assets, including goodwill and intangible assets, which are subject to periodic impairment analysis and review. Identifying and assessing whether impairment indicators exist, or if events or changes in circumstances have occurred, including market conditions, operating results, competition and general economic conditions requires significant judgment. Declines in profitability due to changes in volume, market pricing, cost or the business environment could result in charges that could have an adverse effect on the Company’s results of operations. Significant adverse changes to the Company’s business environment and future cash flows could cause the recognition of material impairment charges in future periods.

The Company currently faces, and will continue to face, significant competition.

The market for the Company’s products and related services is highly competitive, subject to rapid change and sensitive to new-product and service introductions and changes in technical requirements. New developments in power system technology may negatively affect the development or sale of some or all of the Company’s power systems or make them noncompetitive or obsolete. Other companies, some of which have longer operating histories, greater name recognition and significantly greater financial and marketing resources than the Company, are currently engaged in the development of products and technologies that are similar to, or may be competitive with, certain of the Company’s products and power system technologies. If the markets for its products grow as the Company anticipates, competition may intensify, as existing and new competitors identify opportunities in such markets.

The Company faces competition from companies that employ current power system technologies, and it may face competition in the future from additional companies as new power system technologies are adopted. Additionally, the Company may face competition from companies developing technologies such as cleaner diesel engines, biodiesel, fuel cells, electrification, advanced batteries and hybrid battery/internal combustion power systems. The Company may not be able to incorporate such technologies into its product offerings, or it may be required to devote substantial resources to do so. The success of its business depends in large part on its ability to provide single assembly, integrated, comprehensive, technologically sophisticated power systems to its customers. The development or enhancement by its competitors of similar capabilities could adversely affect the Company’s business.

Failure to keep pace with technological developments may adversely affect the Company’s operations.

The Company is engaged in an industry that will be affected by future technological developments. The Company’s success will depend upon its ability to develop and introduce, on a timely and cost-effective basis, new products, applications and processes that keep pace with technological developments and address increasingly sophisticated customer requirements. The Company may not be successful in identifying, developing and marketing new products, applications and processes, and product or process enhancements. The Company may experience difficulties that could delay or prevent the successful development, introduction and marketing of product or process enhancements or new products, applications or processes. The Company’s products, applications or processes may not adequately meet the requirements of the marketplace and achieve market acceptance. If the Company were to incur delays in developing new products, applications or processes, or product or process enhancements, or if its products do not gain market acceptance, its results of operations could be materially adversely affected.

The Company could fail to adequately protect its intellectual property rights or could face claims of intellectual property infringement by third parties.

The Company believes that the success of its business depends, in substantial part, upon its proprietary technology, information, processes and know-how. The Company does not own any material patents and relies on a combination of trademark and trade secret laws, along with confidentiality agreements, contractual provisions and licensing arrangements, to establish and protect its intellectual property rights. Despite the Company’s efforts to protect its intellectual property rights, existing laws may afford only limited protection, and the Company’s actions may be inadequate to protect its intellectual property rights or to successfully defend itself against claims from others that the Company has violated their intellectual property rights. In addition, the laws of some foreign countries may not protect the Company’s proprietary rights as fully or in the same manner as the laws of the United States. The unauthorized use of the Company’s intellectual property rights and proprietary technology by others could materially harm the Company’s business.

In addition, the Company cannot be certain that its products, services and power system technologies, including any intellectual property licensed from third parties for use therein or incorporated into components that it sources from its suppliers, do not, or in the future will not, infringe or otherwise violate the intellectual property rights of third parties. In the future, the Company may be subject to infringement claims that result in litigation. Successful infringement claims against the Company could result in substantial monetary liability, require the Company to enter into royalty or licensing arrangements, or otherwise materially disrupt the conduct of the Company’s business. In addition, even if the Company prevails in the defense of any such claims, any such litigation could be time-consuming and expensive to defend or settle and could materially adversely affect its business.

Limitations of the Company’s Directors’ and Officers’ liability insurance and potential indemnification obligations will have a material adverse effect on the Company’s financial condition, results of operations and cash flows.

Under its bylaws and certain indemnification agreements, the Company has obligations to indemnify current and former officers and directors. Expenses that may occur in the future and/or liabilities not covered by the Company’s directors and officers liability insurance policy, that may be imposed in connection with actions against certain of the Company’s past and present directors and officers and certain current and former employees who are entitled to indemnification would be funded by the Company with its existing cash resources. The Company directors’ and officers’ liability insurance policy renews annually and expires in July 2026.

Unanticipated changes in our effective tax rate, the adoption of new tax legislation or exposure to additional income tax liabilities could adversely affect our profitability.

We are subject to income taxes in the United States jurisdictions. Our effective tax rate and cash tax liability in the future could be adversely affected by the enactment of new tax legislation, changes in the level and mix of earnings in jurisdictions with differing statutory tax rates, and changes in the valuation of deferred tax assets and liabilities. The carrying value of deferred tax assets, which are predominantly in the United Sates, is dependent on our ability to generate future taxable income in the United States. We are also subject to ongoing tax audits. These audits can involve complex issues, which may require an extended period of time to resolve and can be highly judgmental. Tax authorities may disagree with certain of our tax reporting positions and, as a result, assess additional taxes against us. We regularly assess the likely outcomes of these audits to determine the appropriateness of our gross unrecognized tax benefits. The amounts ultimately paid upon resolution of current and future tax audits could be materially different from the amounts previously included in our income tax provision and, therefore, could have a material impact on our income tax provision.

The Company continuously enhances policies and procedures, and controls to mitigate against the substantial rise in the prevalence of cybersecurity risks and challenges to protect its data.

Risk Management Strategy

The Company’s cybersecurity risk management function is led by the Vice President of Information Technology, who evaluates processes and activities within the Company’s information technology infrastructure and automated systems. In 2023, the Company completed a detailed assessment to identify all technology and cyber tools currently in place and assessed its information technology personnel’s cybersecurity capabilities and skill sets. In 2023, the Company focused on formalizing cybersecurity procedures and defining standards for risk identification and communication activities. The Company utilizes the National Institute of Standards and Technology guidance in all cybersecurity policies and procedures. Annual training for employees is required as well as ad hoc trainings for specific topics or events as deemed appropriate throughout the year. The Company also has cyber insurance to assist the Company both financially and operationally if a cyber event were to occur. Below is the basic framework used in the Company’s risk management strategy:

• Identify - set of procedures to identify assets to be protected, including computation, data, and integrity;
• Protect - set of procedures to effectively engage and monitor adequate safeguards of critical infrastructure

services;

• Detect - set of activities, tools, and procedures to timely identify anomalies through continuous monitoring;
• Respond - set of activities to effectively respond to and contain detected and confirmed cybersecurity events, and
• Recover - set of activities and procedures to ensure any assets impaired because of a cybersecurity event are restored to use within the stated recovery point/time objectives.

The Company has taken steps to gain insights into how cybersecurity risk management functions have been integrated into its overall risk management systems and process. Below are the risk management activities regularly performed:

• Cybersecurity, as described above;
• Financial control risk assessment which is a formal part of the annual internal control program;
• Management’s risk assessment associated with the budgeting and strategic planning process;
• Annual update of risk factors in the Company’s Form 10-K by key executives, and
• A broader fraud risk assessment (also performed as part of the internal control program).

The Company’s information technology and risk management function is highly centralized, with the Corporate Controller and Vice President of Information Technology involved in most of the risk related activities which provides a consistent input throughout risk management activities as well as aiding in identifying dependencies and duplications. The Company engaged a third party to conduct phishing and penetration tests in 2024. The Company continues to evolve its processes, procedures, and tools as a result of the observations from these tests.

The Vice President of Information Technology oversees the population of third-party service providers connected to any of the Company’s networks. For each third-party service provider that would directly impact the Company’s financial reporting, the Company obtains a System and Organization Controls (SOC) 1, Type 2 Report (“SOC 1 Report”) to evaluate that service provider’s internal controls and help the Company assess the risk of obtaining services from that services provider. The SOC-1 Report is reviewed by members of the Company’s management and the Internal Audit group. The Company also limits access to information granted to any third-party service provider to only the information necessary for them to perform their services to the Company.

In 2025, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate all risks from cybersecurity threats or provide assurances that we have not experienced undetected cybersecurity incidents. We face ongoing risks from certain cybersecurity threats, and we cannot provide assurance that, if those risks materialize, our business strategy, results of operations or financial condition will not be materially affected in the future. For additional information about these risks, see Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K.

Governance and Process for Assessing, Identifying and Managing Material Risks from Cybersecurity Threats

The Audit Committee of the Board (the “Audit Committee”) has been designated as the board committee with oversight responsibility of cybersecurity as delegated in the Audit Committee charter. The following summarizes the role and frequency in which the Audit Committee oversees and monitors cybersecurity risks:

• At least annually the Vice President of Information Technology presents compliance activities related to cybersecurity to the Audit Committee which includes those activities related to compliance with the cybersecurity disclosure regulations;
• Material breaches, if any are, disclosed to the Audit Committee either in regularly scheduled meetings or, if urgent in calls with the Chair of the Audit Committee;
• Periodically, the Vice President of Information Technology provides updates to the Audit Committee on internal controls surrounding information technology (including cybersecurity);
• The Chair of the Audit Committee provides regular updates during Audit Committee meetings which includes cybersecurity; and
• The Vice President of Information Technology presents updates on the cybersecurity program to the Company’s Board annually.

The Vice President of Information Technology is responsible for managing overall cybersecurity and cyber risks, including infrastructure, development, and cybersecurity. The Vice President of Information Technology has extensive and progressive experience in supporting information technology risks and objectives in manufacturing companies equivalent to the Company and is a Certified Information Systems Security Professional from ISC2, a leading association for cybersecurity professionals. The Company’s Vice President of Information Technology is required to have the following qualifications:

• Asset Security;
• Security Architecture and Engineering;
• Communication and Network Security;
• Identity and Access Management;
• Security Assessment and Testing;
• Security Operations; and
• Software Development Security.

The Company’s Vice President of Information Technology is the central contact point to receive (i) alerts regarding potential cybersecurity incidents and (ii) reports from the Company’s Information Technology personnel regarding potential cybersecurity incidents. All confirmed cybersecurity events are communicated by the Vice President of Information Technology to the Corporate Controller and Vice President of Internal Audit. Material confirmed cybersecurity events are further escalated to the Chief Executive Officer and Chief Financial Officer for further review, discussion and remediation.

The Company’s operations are located in 8 leased facilities in the United States, totaling approximately 1.2 million square feet of floor space. The Company’s corporate headquarters is located in Wood Dale, Illinois, a suburb of Chicago.

The Company’s primary manufacturing, assembly, engineering, research and development, sales and distribution facilities are located in suburban Chicago, Illinois, as well as in Darien and Beloit, Wisconsin.

The Company believes that all of its facilities have been adequately maintained, are in good operating condition and are suitable for its current needs. These facilities are expected to meet the Company’s needs in the foreseeable future.

See Note 11. Commitments and Contingencies, included in Part II, Item 8*. Financial Statements and Supplementary Data*, for a discussion of legal proceedings, which are incorporated herein by reference.

The following discussion and analysis includes forward-looking statements about the Company’s business and consolidated results of operations for the fiscal years ended December 31, 2025 and 2024, including discussions about management’s expectations for the Company’s business. These statements represent projections, beliefs and expectations based on current circumstances and conditions and in light of recent events and trends, and these statements should not be construed either as assurances of performance or as promises of a given course of action. Instead, various known and unknown factors are likely to cause the Company’s actual performance and management’s actions to vary, and the results of these variances may be both material and adverse. A description of material factors known to the Company that may cause its results to vary, or may cause management to deviate from its current plans and expectations, is set forth under “Risk Factors” in this report. See also “Forward-Looking Statements.” The following discussion should also be read in conjunction with the Company’s consolidated financial statements and the related Notes included in this report.

Executive Overview

The Company designs, engineers, manufactures, markets and sells a broad range of advanced, emission-certified engines and power systems that run on a wide variety of clean, alternative fuels, including natural gas, propane, and biofuels, as well as gasoline and diesel options, within the power systems, industrial and transportation end markets with primary manufacturing, assembly, engineering, R&D, sales and distribution facilities located in suburban Chicago, Illinois and Darien and Beloit, Wisconsin. The Company provides highly engineered, comprehensive solutions designed to meet specific customer application requirements and technical specifications, including those imposed by environmental regulatory bodies, such as the EPA, CARB, MEE, and EU.

The Company’s products are primarily used by global OEM and end-user customers across a wide range of applications and equipment that includes standby and prime power generation, demand response, microgrid, combined heat and power, arbor care, material handling (including forklifts), agricultural and turf, construction, pumps and irrigation, compressors, utility vehicles, light- and medium-duty vocational trucks, school and transit buses, and utility power. The Company manages the business as a single reporting segment.

Net sales by geographic area and by end market for 2025 and 2024 are presented below:

(in thousands)

(in thousands)

During 2025, the Company sold approximately 19,800 engines of which 74% utilized propane or natural gas as their fuel source and 18% utilized gasoline. The remaining 8% of engines were dual fuel gasoline/propane, diesel and service engines. During 2024, the Company sold over 22,200 engines of which approximately 76% utilized propane or natural gas as their fuel source and 13% utilized gasoline. The remaining 11% of engines were dual fuel gasoline/propane, diesel and service/base engines.

Weichai Transactions

The Company sought to expand its range of products and its presence in the Pacific Rim through the Weichai Transactions (see Note 3. Weichai Transactions, included in Item 8. Financial Statements and Supplementary Data, for additional information).

The Company and Weichai executed the Collaboration Agreement in order to achieve their respective objectives, enhance the cooperation alliance and share experiences, expertise and resources. Among other things, the Collaboration Arrangement established a joint steering committee, permitted Weichai to employ a limited number of technical, marketing, sales, procurement and finance personnel to work at the Company and established several collaborations related to stationary natural-gas applications and Weichai diesel engines. The Collaboration Agreement also provides for the steering committee to create various subcommittees with operating roles and otherwise governs the treatment of intellectual property of the parties prior to the collaboration and the intellectual property developed during the collaboration. On March 22, 2023, the Collaboration Agreement was extended for an additional term of three years, expiring in March 2026. The Company received a renewal notice from Weichai and is in the process of negotiating the renewal of the Collaboration Agreement; however, no formal extension has been executed as of the date of this filing. The Company’s sales to Weichai were $1.3 million and $1.8 million during 2025 and 2024, respectively. The Company purchased $39.8 million and $21.5 million of inventory from Weichai during 2025 and 2024, respectively.

Legal Settlement Expenses

Legal settlement expenses were immaterial for the year ended December 31, 2025. The Company recognized a benefit of $4.7 million in the 2024 operating results (see Note 11. Commitments and Contingencies, included in Part II. Item 8. Financial Statements and Supplementary Data, for additional information).

Recent Trends and Business Outlook

PSI’s growth in net revenue in 2025 was driven by power systems markets, including data center and oil and gas products, partially offset by lower sales from more mature, lower-margin markets such as industrial. This shift in markets reflects the

Company’s conscious strategic prioritization toward higher growth, higher-margin markets with less emphasis on more mature markets.

The Company is focused on leading the business through a growth phase with a stronger balance sheet while strategically prioritizing products that demonstrate strong demand and higher gross margins. Consistent with those goals, the Company is actively pursuing several initiatives to enhance and expand manufacturing capacity to meet the increasing demand from data center markets. Pivoting the focus to these markets is driving current net sales growth and profitability. Through expanded capacity and strategic partnerships, management expects this positive trend to continue.

PSI’s business is impacted by the current macroeconomic and geopolitical environment. For example, although the oil and gas market, in which the Company has historically operated, has experienced year over year growth from its historic lows, sales levels may not reach their previous higher levels because of lower rig counts. The Company has been actively navigating these challenges by balancing its investments, expenses, pricing and sales efforts in this market as well as others.

In addition to prioritizing gross profit, the Company is committed to efficiently managing expenses, including streamlining operating expenses and prioritizing certain R&D investments in support of long-term growth objectives. The Company is committed to focusing on growth opportunities and investment while also optimizing its cost structure to enhance growth and profitability, ultimately delivering sustained value to our shareholders.

The Company has experienced tariff costs associated with its supply chain products. The Supreme Court's decision to strike down tariffs and the administration's response have created significant uncertainty regarding the scope, rate, duration, and legal authority for future tariffs. We are actively assessing the evolving tariff environment and are committed to proactively mitigating any associated risks through strategic sourcing, pricing actions, and supply chain agility.

The potential for continued economic uncertainty and unfavorable oil and gas market dynamics may have a material adverse impact on the levels of future customer orders and the Company’s future business operations, financial condition and liquidity. On July 30, 2025, the Company amended its Revolving Credit Agreement with Standard Chartered Bank and three other lenders. The amended Revolving Credit Agreement allows the Company to borrow up to $135.0 million and extends the maturity date to July 30, 2027.

The Company is party to several legal contingencies. See Note 11. Commitments and Contingencies for further discussion of the Company’s indemnification obligations.

The company remains confident in the Company’s long-term strategy and market positioning. Given broader market conditions, ongoing operational initiatives, and variability in customer order timing, the Company has determined it is appropriate to take a disciplined approach and not provide business outlook for 2026 at this time. Management will continue to evaluate its ability to provide outlook as execution progresses and visibility improves.

Strategic Initiatives/Growth Strategies: The Company has initiated various business objectives aimed at improving profitability, streamlining processes, strengthening the business and focusing on achieving growth in higher-return product lines. Central to this plan is the Company’s increased emphasis on power systems product offerings through new product development and investments, in addition to leveraging the Company’s relationship with Weichai. With the recent introduction of numerous natural gas and diesel engines, coupled with its existing strong product lineup, the Company believes that it has a solid foundation to achieve long-term growth, particularly within the power systems market.

Results of Operations

Results of operations for the year ended December 31, 2025 compared with the year ended December 31, 2024:

(in thousands, except per share amounts)

NM Not meaningful

* Non-GAAP measurement, see reconciliation below

Net Sales

Net sales increased $246.4 million, or 52%, compared to 2024, as a result of sales increases of $260.6 million in the power systems end market, partly offset by decreases of $8.5 million and $5.7 million within the industrial and transportation end markets, respectively. This shift in market mix reflects our deliberate strategic focus on higher-growth sectors such as data centers and oil and gas. In particular, we are prioritizing the rapidly expanding data center sector by enhancing our manufacturing capacity and capabilities to meet evolving customer demand. The decline in industrial sales is largely attributable to softer demand in the material handling market.

Gross Profit

Gross profit increased by $44.4 million, or 32%, to $184.9 million in 2025, compared to $140.5 million in 2024. Gross margin was 25.6% and 29.5% in 2025 and 2024, respectively. The decrease in gross margin is primarily due to inefficiencies related to our accelerated production ramp-up for data center product lines.

Research and Development Expenses

R&D expenses in 2025 and 2024 were $18.2 million and $20.1 million, respectively. The decrease of $1.9 million, or 9%, was primarily driven by the timing of R&D program expenditures and the recovery of R&D costs from certain customers.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) increased in 2025 by $18.4 million, or 49%, compared to 2024. The increase is primarily due to a $4.3 million favorable non-recurring legal reserve reduction in 2024, $4.4 million higher costs associated with employee incentive programs, $3.9 million expense related to customer relationship improvement efforts, and $5.8 million mainly from increased sales and administrative expenses to support ongoing business growth in 2025.

Interest Expense

Interest expense decreased $4.7 million to $6.7 million in 2025 from $11.4 million in 2024, largely due to reduced outstanding debt and lower overall effective interest rates. See Note 6. Debt, included in Item 8. Financial Statements and Supplementary Data for additional information.

Income Tax (Benefit) Expense

The Company recorded income tax benefit of $10.6 million in 2025 and income tax expense of $0.9 million in 2024. The Company’s pretax income was $103.4 million in 2025, compared to pretax income of $70.2 million in 2024. The 2025 tax benefit primarily reflects the $38.3 million valuation allowance, which resulted in a one-time increase of approximately $1.66 to earnings per share.

See Note 12. Income Taxes, included in Item 8. Financial Statements and Supplementary Data, for additional information related to the Company’s income tax provision.

Non-GAAP Financial Measures

In addition to the results provided in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) above, this report also includes non-GAAP (adjusted) financial measures. Non-GAAP financial measures provide insight into selected financial information and should be evaluated in the context in which they are presented. These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP, and non-GAAP financial amounts as reported by the Company may not be comparable to similarly titled measures reported by other companies. The non-GAAP financial measures should be considered in conjunction with the consolidated financial statements, including the related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this report. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated below.

The Company believes that Adjusted net income, Adjusted net income per share – diluted, EBITDA, and Adjusted EBITDA provide relevant and useful information, which is widely used by analysts, investors and competitors in its industry as well as by the Company’s management in assessing the performance of the Company. Adjusted net income is defined as net income as adjusted for certain items that the Company believes are not indicative of its ongoing operating performance. Adjusted net income per share – diluted is a measure of the Company’s diluted earnings per common share adjusted for the impact of special items. EBITDA provides the Company with an understanding of earnings before the impact of investing and financing charges and income taxes. Adjusted EBITDA further excludes the effects of other non-cash charges and certain other items that do not reflect the ordinary earnings of the Company’s operations.

Adjusted net income, Adjusted net income per share – diluted, EBITDA, and Adjusted EBITDA are used by management for various purposes, including as a measure of performance of the Company’s operations and as a basis for strategic planning and forecasting. Adjusted net income, Adjusted net income per share – diluted, and Adjusted EBITDA may be useful to an investor because these measures are widely used to evaluate companies’ operating performance without regard to items excluded from the calculation of such measures, which can vary substantially from company to company depending on the accounting methods, the book value of assets, the capital structure and the method by which the assets were acquired, among other factors. They are not, however, intended as alternative measures of operating results or cash flow from operations as determined in accordance with U.S. GAAP.

The following table presents a reconciliation from Net income to Adjusted net income:

(in thousands)

The following table presents a reconciliation from Net income per share – diluted to Adjusted net income per share – diluted:

The following table presents a reconciliation from Net income to EBITDA and Adjusted EBITDA:

(in thousands)

1. Amounts reflect non-cash stock-based compensation expense for the year ended December 31, 2025 and 2024.

2. Amounts include severance expense for the year ended December 31, 2025 and 2024.

3. Amounts include legal settlements for the year ended December 31, 2025 and 2024.

Cash Flows

Cash was impacted as follows:

(in thousands)

NM Not meaningful

Cash Flow from Operating Activities

Net cash provided by operations was $24.1 million in 2025 compared to net cash provided by operations of $62.4 million in 2024, a decrease of $38.3 million in cash provided by operating activities year-over-year. The decrease in cash provided by operating activities primarily resulted from a $69.6 million decrease of cash provided by working capital accounts, partially offset by an increase in earnings of $44.7 million. The decrease in cash generated from working capital was primarily related to the purchases of inventory, decrease in accounts payables, and the timing of collections on accounts receivables, reflecting higher sales volume and operational growth during the year ended December 31, 2025 compared to December 31, 2024.

Cash Flow from Investing Activities

Net cash used in investing activities was $10.0 million for the year ended December 31, 2025 compared to cash used in investing activities of $4.6 million for year ended December 31, 2024, respectively. For the years ended December 31, 2025 and 2024, cash used in investing activities related to capital expenditures.

Cash Flow from Financing Activities

The Company used $27.7 million in cash from financing activities during the year ended December 31, 2025 compared to $25.9 million in cash used by financing activities during the year ended December 31, 2024. The cash used by financing activities for the year ended December 31, 2025 was due to the full repayment of the SLA and other existing debt year to date. See additional discussion below and in Note 6. Debt in Item 8. Financial Statements and Supplementary Data related to the amendments of the Company’s debt arrangements.

Liquidity and Capital Resources

The Company’s sources of funds are cash flows from operations, borrowings made pursuant to its credit facilities and cash and cash equivalents on hand. Uses of funds include payments of principal on our debt facilities, capital expenditures, and working capital needs. We currently anticipate that cash flows from operations, available funds and access to financing sources, including under our Revolving Credit Agreement, will continue to be sufficient to meet our cash needs for the next twelve months and beyond.

Our material cash requirements from known contractual and other obligations primarily relate to our debt and lease obligations. The Company has achieved profitability and generated positive cash flows from operating activities in 2025. As of December 31, 2025, the Company’s total outstanding debt obligations under the Revolving Credit Agreement and for finance leases and other debt, were $96.6 million in the aggregate, and its cash and cash equivalents were $41.3 million. See Item 1. Financial Statements, Note 6. Debt, for additional information. On July 30, 2025, the Company amended its Revolving Credit Agreement with Standard Chartered Bank and three other lenders. The second amended Revolving Credit Agreement allows the Company to borrow up to $135.0 million and extends the maturity date to July 30, 2027.

PSI’s business is impacted by the current macroeconomic and geopolitical environment. For example, although the oil and gas market, in which the Company has historically operated, has experienced year over year growth from its historic lows, sales levels may not reach previous higher levels because of lower rig counts. The Company experiences tariff costs associated with products in its supply chain. We are actively assessing the evolving tariff environment and are committed to proactively mitigating any associated risks through strategic sourcing, pricing actions, and supply chain agility. The potential for continued economic uncertainty and unfavorable oil and gas market dynamics may have a material adverse impact on the levels of future customer orders and the Company’s future business operations, financial condition and liquidity.

At December 31, 2025, the Company had four outstanding letters of credit totaling $1.8 million. See Item 8. Financial Statements and Supplementary Data, Note 11. Commitments and Contingencies for additional information related to the Company’s off-balance sheet arrangements and the outstanding letters of credit.

Commitments and Contingencies

Legal matters are further discussed in Note 11. Commitments and Contingencies, included in Item 8. Financial Statements and Supplementary Data. See Part I. Item 1A. Risk Factors for further discussion of legal risks to the Company.

Critical Accounting Estimates

The Company’s consolidated financial statements are prepared in accordance with U.S. GAAP. Preparation of these financial statements requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company’s most critical accounting policies and estimates are those most important to the portrayal of its financial condition and results of operations which require the Company to make its most difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. The Company has identified the following as its most critical accounting policies and judgments. Although management believes that its estimates and assumptions are reasonable, they are based on information available when they are made and, therefore, may differ from estimates made under different assumptions or conditions.

The Company’s significant accounting policies are discussed in Note 1. Summary of Significant Accounting Policies and Other Information, included in Item 8. Financial Statements and Supplementary Data, and should be reviewed in connection with the following discussion of accounting policies that require difficult, subjective, and complex judgments and estimates.

Revenue Recognition

Revenue for the Company is generated from contracts when performance obligations under terms of the contract with a customer are satisfied, which is generally when control of the product has been transferred to the customer. For contracts with customers that include multiple performance obligations, judgment is required to determine whether performance obligations specified in these contracts are distinct and should be accounted for as separate revenue transactions for recognition purposes. For the majority of the Company’s products, revenue is recognized when the products are shipped or delivered to the customer based on the shipping terms which is usually when control passes to the customer. Conversely, the Company recognizes revenue throughout the manufacturing process when constructing because the customer receives the benefit of the asset as the product is constructed. The Company recognizes revenue related to extended warranty programs based on the passage of time over the extended warranty period.

The allowance for credit losses is our best estimate of the amount of estimated lifetime credit losses in our accounts receivable. We regularly review the adequacy of our allowance for credit losses.

The credit environment in which our customers operate has been relatively stable over the past few years and the Company collections are bolstered by a robust collections department. Total bad debt expense was less than $0.1 million in both 2025 and 2024. If circumstances change, due to the occurrence of higher-than-expected defaults or a significant adverse change in a major customer’s ability to meet our financial obligations such as bankruptcies, estimates of the recoverability of receivable amounts due could be reduced.

Refer to Note 2. Revenue of the notes to the consolidated financial statements for more information on the Company’s revenue recognition.

Goodwill Impairment

Goodwill and indefinite-lived intangible assets are evaluated for impairment annually as of October 1 and whenever events or circumstances make it more likely than not that impairment may have occurred or when required by accounting standards. We test goodwill and individual indefinite-lived intangible assets for impairment at a single reporting unit level. These assessments may be performed quantitatively or qualitatively.

We have not made any changes in 2025 to our reporting unit or the accounting methodology we use to assess impairment loss on goodwill and indefinite-lived intangible assets. In 2025, management performed an assessment of the impairment of goodwill for our reporting unit and indefinite-lived intangible assets using a qualitative approach. Based on the totality of information considered, and after weighing both positive and negative qualitative factors, management concluded that it was not more likely than not that the fair value of any reporting unit was below its carrying amount. As a result, the Company determined that a quantitative goodwill impairment test was not required, and no impairment charge was recognized for the period ended December 31, 2025.

Because these estimates form a basis for the determination of whether the impairment charge should be recorded, these estimates are considered to be critical accounting estimates. See Note 1. Summary of Significant Accounting Policies and Other Information, included in Item 8. Financial Statements and Supplementary Data for further discussion.

Warranty

The Company offers a standard limited warranty on the workmanship of its products that in most cases covers defects for a defined period, warranties mandated by governments and warranties for products that carry limited warranties from suppliers. The Company estimates and records a liability and related charges to income for its warranty program at the time products are sold to customers. Estimates are based on historical experience and reflect management’s best estimates of expected costs at the time products are sold.

When the Company identifies cost effective opportunities to address issues in products sold or corrective actions for safety issues, it initiates product recalls or field campaigns. As a result of the uncertainty surrounding the nature and frequency of product recalls and field campaigns, the liability for such actions is generally recorded when the Company commits to a product recall or field campaign. When collection is reasonably assured, the Company also estimates the amount of warranty claim recoveries to be received from its suppliers. Warranty costs and recoveries are included in Cost of sales in the Consolidated Statements of Income. See Note 1. Summary of Significant Accounting Policies and Other Information, included in Item 8. Financial Statements and Supplementary Data for further discussion.

Impact of New Accounting Standards

For information about recently issued accounting pronouncements, see Note 1. Summary of Significant Accounting Policies and Other Information, included in Item 8. Financial Statements and Supplementary Data.

The Company is eligible to comply with the disclosure requirements applicable to smaller reporting companies as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this item.

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures” is defined in Rule 13a-15(e) of the Exchange Act, as “controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms.” The Company’s disclosure controls and procedures are designed to ensure that material information relating to the Company and its consolidated subsidiaries is accumulated and communicated to its management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of its disclosure controls and procedures as of December 31, 2025. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2025, to provide reasonable assurance that information required to be disclosed in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rules 13a-15(f) and 15d(f) under the Exchange Act, internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Because of its inherent limitations, the Company’s internal control over financial reporting may not prevent or detect all misstatements, including the possibility of human error, the circumvention or overriding of controls, or fraud. Effective internal control can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025 based on the criteria established by the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO Framework”).

As a result of management’s review of the Company’s financial and accounting records and the other work completed by the management team and its advisers, management concluded that, as of December 31, 2025, the Company’s internal control over financial reporting was effective.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Attestation Report of the Registered Public Accounting Firm

Our independent registered public accounting firm, BDO, has audited the effectiveness of our internal control over financial reporting as of December 31, 2025 and has issued an attestation report, which is included in Item 8. of this Annual Report on Form 10‑K.

Changes in Internal Control over Financial Reporting

There has been no change in the internal control over financial reporting during the fourth quarter of 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.