What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-05-27 compared with 2025-05-21 · 99 added, 78 removed, 176 unchanged (50% of the section changed)

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Executive Overview

We are a leading system provider of megawatt-scale power resiliency solutions that orchestrate the rhythm and harmony of power on the grid™, and protect and expand the capability of our Navy's fleet.

Our solutions enhance the performance of the power grid, protect our Navy’s fleet, and lower the cost of wind power.

In the power grid market, we enable electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute smarter, cleaner and better power through our transmission planning services and power electronics and superconductor-based systems.

In the wind power market, we enable manufacturers to field highly competitive wind turbines through our advanced power electronics and control system products, engineering, and support services.

Our power grid and wind products and services provide exceptional reliability, security, efficiency and affordability to our customers.

Our power system solutions help to improve energy efficiency, alleviate power grid capacity constraints, improve system resiliency, and increase the adoption of renewable energy generation.

Demand for our solutions is driven by the growing needs for modernized smart grids that improve power reliability, security and quality, the U.S.

Navy's effort to upgrade onboard power systems to support fleet electrification, and the needs for increased renewable sources of electricity, such as wind and solar energy.

Concerns about these factors have led to increased spending by corporations and the military, as well as supportive government regulations and initiatives on local, state, and national levels, including renewable portfolio standards, tax incentives and international treaties.

We manufacture products using two proprietary core technologies:

PowerModule™ programmable power electronic converters and our Amperium® high temperature superconductor ("HTS") wires.

These technologies and our system-level solutions are protected by a robust intellectual property portfolio consisting of patents and patent applications worldwide and rights through exclusive and non-exclusive licenses.

Guided by a belief in the power of next, we are a leading provider of power control solutions that apply innovation and creativity to address today’s challenges and enable a more resilient and sustainable energy future.

Driven by our purpose “to power progress,” we integrate future-facing technologies to balance the growing global demand for power with the need for reliable, and efficient power delivery.

Our advanced grid systems, engineering services, power electronics, software controls, and superconductor-based solutions help the traditional and renewable energy sectors, electric utilities, the materials and mining sector, industrial facilities, and other critical infrastructure operators optimize network reliability, improve power quality, alleviate grid constraints, and scale operations without added complexity or size.

We also deliver ship protection and power management solutions that enhance fleet efficiency, survivability, and operational readiness for the U.S.

Navy and allied fleets.

In the wind power market, we provide advanced electrical control systems, engineering, and support services that help manufacturers lower the cost of wind energy and improve turbine performance.

Beyond these markets, we provide industrial process, environmental and emission control capabilities that support operational efficiency across the broader energy infrastructure.

Across our businesses, our solutions are helping optimize power networks, strengthen naval capabilities, and support gigawatts of renewable energy generation worldwide as governments and industries continue investing in more resilient, secure, and sustainable power systems.

We operate our business under two market-facing business segments:

Grid and Wind.

We believe this market-centric structure enables us to more effectively anticipate and meet the needs of power generation project developers, the Navy's ship protection systems, electric utilities and wind turbine manufacturers.

Through our Gridtec™ Solutions, our Grid business segment enables electric utilities, industrial facilities, and renewable energy project developers to connect, transmit and distribute power with exceptional efficiency, reliability, security and affordability.

We believe this market centric structure enables us to more effectively anticipate and meet the needs of power generators, power utilities, industrial manufacturers, the military and renewable energy companies.

Our Grid business segment enables electric utilities, industrial facilities, and traditional and renewable energy project developers to connect, transmit, transform and distribute power with exceptional efficiency, reliability, security and affordability.

We provide transmission planning services that allow us to identify power grid congestion, poor power quality, and other risks, which help us determine how our solutions can improve network performance.

These services often lead to sales of our grid interconnection solutions for wind farms and solar power plants, power quality systems and transmission and distribution cable systems.

We also sell ship protection products to the U.S.

Navy through our Grid business segment.

Through our Windtec™ Solutions, our Wind business segment enables manufacturers to field wind turbines with exceptional power output, reliability and affordability.

We also sell critical shipyard infrastructure power solutions, ship power supplies and ship protection products to U.S.

and allied Navies through our Grid business segment.

Our Wind business segment enables manufacturers to field wind turbines with exceptional power output, reliability and affordability.

We supply advanced power electronics and control systems, license our highly engineered wind turbine designs, and provide extensive customer support services to wind turbine manufacturers.

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Other fiscal years follow similarly.

Changes in macroeconomic conditions arising from various reasons, such as the ongoing wars between Russia and Ukraine, and Israel and Hamas, tariffs, trade restrictions and resulting trade conflicts, labor force availability, sourcing, material delays and global supply chain disruptions could have a material adverse effect on our business, financial condition and results of operation.

Changes in macroeconomic conditions arising from various reasons, such as the ongoing wars between Russia and Ukraine, and in the Middle East, tariffs, trade restrictions and resulting trade conflicts, labor force availability, sourcing, material delays and global supply chain disruptions could have a material adverse effect on our business, financial condition and results of operations.

On December 5, 2025 (the "Comtrafo Acquisition Date"), we entered into a Stock Exchange Agreement (the "Stock Exchange Agreement") with the selling stockholders named therein.

Pursuant to the terms of the Stock Exchange Agreement, Mardin Participações Ltda., an entity incorporated in Brazil (“AMSC Brazil”) and our wholly-owned subsidiary, directly or indirectly, purchased all of the issued and outstanding shares of Comtrafo Indústria de Transformadores Elétricos S.A.

("Comtrafo") (the "Comtrafo Acquisition") for (a) (i) 300.0 million Brazilian Real in cash;

and (b) 2,417,142 restricted shares of our common stock, $0.01 par value per share (the "AMSC Shares") that were paid and issued, respectively, at closing.

In addition, pursuant to certain additional real property agreements, AMSC Brazil through Comtrafo purchased certain real estate assets and transportation assets of Comtrafo for 155.6 million Brazilian Real and 13.4 million Brazilian Real, respectively, in cash.

Additionally, AMSC Brazil has agreed to pay the selling stockholders up to an additional 382.5 million Brazilian Real in cash (the "Earnout") upon the achievement of specified earnings before interest, taxes, depreciation, and amortization ("EBITDA") objectives during the three years following the closing.

On May 15, 2026, pursuant to the terms of the Stock Exchange Agreement, Comtrafo purchased a certain real estate asset from the selling stockholders that Comtrafo was leasing and using for administrative and manufacturing operations for 37.2 million Brazilian Real in cash.

Comtrafo is a Brazil-based manufacturer of large power and distribution transformers primarily for utility customers and also for industrial customers.

On August 1, 2024, we entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with the selling stockholders named therein.

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Megatran's wholly-owned subsidiary, NWL, Inc.

("NWL"), is a U.S.-based global provider of engineered power conversion solutions for demanding industrial and military applications.

(together with Megatran, "NWL"), is a U.S.-based global provider of engineered power conversion solutions for demanding industrial and military applications.

As a result of this transaction, Megatran became a wholly-owned subsidiary and is operated by our Grid business segment.

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Results of Operations

A discussion regarding our financial condition and results of operations for the year ended March 31, 2026 compared to the year ended March 31, 2025 is presented below.

A discussion regarding our financial condition and results of operations for year ended March 31, 2025 compared to March 31, 2024 is included under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended March 31, 2025 filed with the SEC on May 21, 2025.

Fiscal Years Ended March 31, 2026 and March 31, 2025

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("NEPSI") product sales, Neeltran, Inc.

("Neeltran") product sales, NWL product sales, HTS wire sales, ship protection systems ("SPS"), government-sponsored electric utility projects and other prototype development contracts.

("Neeltran") product sales, NWL product sales, Comtrafo product sales, HTS wire sales, ship protection systems ("SPS"), government-sponsored electric utility projects and other prototype development contracts.

We also engineer, install and commission our products on a turnkey-basis for some customers.

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Grid revenues increased 34% to $251.3 million in fiscal 2025 from $187.2 million in fiscal 2024.

The increase in revenues was driven by higher D-VAR and NEPSI revenues than in the prior year period along with the NWL revenues earned after the acquisition of NWL.

The increase in revenues was driven by higher new energy power systems revenues, higher ship protection systems revenues, and the contribution from the acquisition of Comtrafo in fiscal 2025.

Revenues in our Wind business segment are derived from wind turbine electrical control systems and core components, wind turbine license and development contracts, service contracts and consulting arrangements.

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Revenues in the Wind business segment increased 34% to $47.8 million in fiscal 2025 from $35.6 million in fiscal 2024.

The increase over the prior year period was driven by additional shipments of electrical control systems ("ECS") at increased prices.

The increase over the prior year period was driven by additional shipments of electrical control systems ("ECS") in fiscal 2025.

Cost of Revenues and Gross Margin

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Gross margin increased to 31% in fis cal 2025 from 28% in fiscal 2024.

The increase in gross margin in fiscal 2024 was due to additional revenues, a favorable product mix, and a sharp improvement in Neeltran project margins.

Cost of revenues include total amortization expense of $0.6 million in the fiscal year ended March 31, 2026 as a result of Comtrafo acquired backlog intangible assets.

In addition, $0.8 million related to a fair value adjustment for the step-up basis assigned to acquired inventory to properly reflect the fair value in purchase accounting was charged to cost of revenues in the fiscal year ended March 31, 2026.

The increase in gross margin in fiscal 2025 was due to higher revenues and a beneficial product mix in the Grid and Wind business segments.

Operating Expenses

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Research and development (“R&D”) expenses increased by 38% to $15.7 million, or 5% of revenue in fiscal 2025 , compared to $11.4 million, or 5% of revenue, in fiscal 2024.

The increase in R&D expenses is primarily a result of additional total compensation and stock compensation expense due in part to additional employees as a result of the acquisition of NWL.

The increase in R&D expenses is primarily a result of additional compensation and stock compensation expenses in fiscal 2025.

Selling, general, and administrative

Selling, general and administrative (“SG&A”) expenses increased by 34% to $57.6 million, or 19% of rev enue in fiscal 2025 from $43.1 million, or 19% of revenue, in fiscal 2024.

The increase in SG&A expenses is primarily a result of higher total compensation expense, additional stock compensation expense and acquisition costs related to the acquisition of NWL.

The increase in SG&A expenses is primarily a result of the addition of Comtrafo operating expenses and additional compensation and stock compensation expenses in fiscal 2025.

Amortization of acquisition related intangibles

We recorded $2.4 million in fiscal 2025 and $1.7 million in fiscal 2024 in amortization expense related to our core technology and know-how, customer relationships, and other intangible assets.

The decrease in amortization expense is primarily a result of using the economic consumption method as the basis to amortize the acquired customer relationship intangible assets related to NEPSI and Neeltran, partially offset by the increase related to amortization of NWL related intangibles.

The increase in amortization expense is primarily a result of additional amortization related to the Comtrafo acquisition.

Change in fair value of contingent consideration

The change in fair value of our contingent consideration for the earnout payment on the acquisition of NEPSI resulted in a loss of $3.4 million resulting from an increase in fair value in fiscal 2024, and $4.9 million during fiscal 2023.

The change in fair value of our contingent consideration for the earnout payment on the acquisition of Comtrafo resulted in a loss of $

4.2 million from an increase in fair value of the contingent consideration in fiscal

During fiscal 2024, we issued 300,000 shares of our common stock to the selling stockholders following certification of the achievement of specified earnout revenue objectives.

We also recorded a $3.3 million payment relating to the acquisition of NWL, as a payment to settle the remaining obligations after the acquisition.

The value of this contingent consideration was de minimis at the Acquisition Date and the resulting change in fair value was recorded in September 2024 when the payment was calculated and paid.

Operating income (loss)

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Unallocated corporate expenses

Our Grid business segment generated operating income o f $1.8 million in fiscal 2024 and operating loss of $6.9 million in fiscal 2023.

The improvement in the Grid business segment was due to higher revenues and gross margins in fiscal 2024, compared to fiscal 2023.

Our Grid business segment generated operating income o f $8.5 million in fiscal 2025 and $1.8 million in fiscal 2024.

The improvement in the Grid business segment operating income was due to higher revenues and improved gross margins in fiscal 2025.

The Wind segment generated operating income of $7.1 m illion in fiscal 2025 and $3.8 million in fiscal 2024.

The increase in the Wind business segment operating income was due to higher revenue and gross margins in fiscal 2024, compared to fiscal 2023.

Unallocated corporate expenses consisted of a loss on contingent consideration of $6.7 million in fiscal 2024, and a loss on contingent consideration of $4.9 million in fiscal 2023 .

The increase in the Wind business segment operating income was due to higher revenues and improved gross margins in fiscal 2025.

Unallocated corporate expenses consisted of a loss on contingent consideration of $4.2 million in fiscal 2025 and $6.7 million in fiscal 2024 .

Interest income, net

Interest income, net was $6.4 million in fiscal 2025 compared to $3.7 million for fiscal 2024.

The increase in interest income, net, was primarily due to higher cash balances in fiscal 2024.

The increase in interest income, net, was primarily due to higher cash balances generating additional interest income in fiscal 2025.

Other expense, net

Oth er expense, ne t was $1.1 million in fiscal 2025, compared to $0.3 million in fiscal 2024.

The decrease in other expense was driven by the impacts of more favorable fluctuations in foreign currencies in fiscal 2024, compared to fiscal 2023.

We recorded an income tax benefit of $3.7 million in fiscal 2024, compared to income tax expense of $0.3 million in fiscal 2023.

The net improvement in income tax is a result of the release of the valuation allowance due to the recording of the deferred tax liability from the acquisition of NWL.

Net income (loss)

Net income was $6.0 million in fiscal 2024, compared to net loss of $11.1 million in fiscal 2023.

The improvement in net income was driven primarily by higher revenues and gross margins in fiscal 2024 and other factors described above.

The increase in other expense, net was driven by unfavorable fluctuations in foreign exchange rates, resulting in translation losses.

We recorded an income tax benefit of $117.1 million in fiscal 2025, compared to $3.7 million in fiscal 2024.

The net impact to income tax is primarily a result of a non-cash tax benefit from the release of the majority of our valuation allowance against deferred tax assets due to a change in facts and circumstances that impact our conclusion on realizability of such assets.

Net income was $133.8 million in fiscal 2025, compared to $6.0 million in fiscal 2024.

The improvement in net income was driven primarily by the non-cash tax benefit from the release of the majority of our valuation allowance against deferred tax assets, higher revenues and improved gross margins in fiscal 2025.

Please refer to the “Risk Factors” section in Part I, Item 1A, for a discussion of certain factors that may affect our future results of operations and financial condition.

Non-GAAP Financial Measure - Non-GAAP Net Income

Non-GAAP Financial Measure - Non-GAAP Net Income and Non-GAAP Net Income Per Share

Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flow that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States (“GAAP”).

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In addition, we use non-GAAP net income as a factor to evaluate the effectiveness of our business strategies.

A reconciliation of GAAP net income (loss) to non-GAAP net income is set forth in the table below (in thousands, except per share data):

A reconciliation of GAAP net income to non-GAAP net income (loss) is set forth in the table below (in thousands, except per share data):

Year ended March 31,

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Weighted average shares outstanding - diluted

Non-GAAP net income was $24.0 million, or $0.65 per s hare, for fiscal 2024, compared to $0.6 million, or $0.02 per share, for fiscal 2023.

The improvement in non-GAAP net income in fiscal 2024 compared to fiscal 2023 was due to improved operating income driven by higher revenues and gross margins.

Non-GAAP net income was $158.1 million, or $3.68 per s hare, for fiscal 2025, compared to $24.0 million, or $0.65 per share, for fiscal 2024 and $0.6 million, or $0.02 per share, for fiscal 2023.

The improvement in non-GAAP net income in fiscal 2025 compared to fiscal 2024 was due primarily to the non-cash tax benefit from the release of the majority of our valuation allowance against deferred income tax assets, and improved operating margin in the Wind and Grid business segments.

Liquidity and Capital Resources

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The Company believes that these sources of liquidity provide adequate liquidity to meet both its short-term and reasonably foreseeable long-term requirements and obligations.

At March 31, 2025, we had cash, cash equivalents and restricted cash of $85.4 million, compared to $92.3 million at March 31, 2024, a decrease of $6.9 million.

At March 31, 2026, we had cash, cash equivalents and restricted cash of $147.6 million, compared to $85.4 million at March 31, 2025, an increase of $62.2 million.

As of March 31, 2026, we had approximately $17.8 million in cash, cash equivalents and restricted cash in foreign bank accounts.

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Total cash, cash equivalents and restricted cash

Net cash provided by operating activities was $28.3 m illion compared to net cash used in operating activities of $2.1 million in fiscal 2024 and 2023, respectively.

The increase in net cash provided by operations in fiscal 2024 compared to fiscal 2023 was driven primarily by higher gross margins, favorable changes in accounts payable and accrued expenses, relief of deferred revenue, increased non-cash expenses like stock-based compensation, depreciation and amortization, and change in fair value of contingent consideration, offset by decreased cash collections, increased prepaid balances, and change in deferred income taxes.

Net cash used in investing activities was $35.2 million and $1.0 million in fiscal 2024 and 2023, respectively.

Net cash provided by operating activities was $23.1 m illion, $28.3 million and $2.1 million in fiscal 2025, 2024, and 2023, respectively.

The decrease in net cash provided by operations in fiscal 2025 compared to fiscal 2024 was due primarily to changes in deferred revenue and accounts receivable, offset by changes in accounts payable and accrued expenses, deferred income taxes, changes in fair value of contingent consideration and stock-based compensation expense.

The increase in net cash provided by operations in fiscal 2024 compared to fiscal 2023 was driven primarily by higher gross margins, favorable changes in accounts payable and accrued expenses, relief of deferred revenues, increased non-cash expenses like stock compensation, depreciation and amortization, and change in fair value of contingent consideration, offset by decreased cash collections, increased prepaid balances, and change in deferred income taxes.

Net cash used in investing activities was $77.1 million, $35.2 million, and $1.0 million in fiscal 2025, 2024, and 2023, respectively.

The increase in net cash used in investing activities in fiscal 2025 compared to fiscal 2024 was primarily due to cash paid for the Comtrafo acquisition in the current fiscal year.

The increase in net cash used in investing activities in fiscal 2024 compared to fiscal 2023 was due primarily to cash paid for the acquisition of NWL.

Net cash provided by financing activities was less than $0.1 million compared to $65.4 million in fiscal 2024 and 2023, respectively.

The decrease in cash provided by financing activities was primarily related to net proceeds received from an equity offering in fiscal 2023, while the Company had no equity offerings in fiscal 2024.

Net cash provided by financing activities was $116.1 million compared to less than $0.1 million and $65.4 million in fiscal 2025, 2024, and 2023, respectively.

The increase in cash provided by financing activities in fiscal 2025 compared to fiscal 2024 was primarily related to net proceeds received from an equity offering in June 2025.

The decrease in cash provided by financing activities in fiscal 2024 compared to fiscal 2023 was primarily related to net proceeds received from an equity offering in fiscal 2023, while the company had no equity offerings in fiscal 2024.

At March 31, 2026, we had $3.3 million of restricted cash included in long-term assets and $3.5 million of restricted cash in current assets.

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These deposits are held in interest bearing accounts.

In January 2024, we filed a shelf registration statement on Form S-3 that will expire three years from the date on which it was declared effective, March 15, 2027 (the “Form S-3”).

The Form S-3 allows us to offer and sell from time-to-time up to $250 million of common stock, debt securities, warrants or units comprised of any combination of these securities.

The Form S-3 is intended to provide us flexibility to conduct registered sales of our securities, subject to market conditions, in order to fund our future capital needs.

The terms of any future offering under the Form S-3 will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.

On the Comtrafo Acquisition Date, we entered into the Stock Exchange Agreement with the selling stockholders.

Pursuant to the terms of the Stock Exchange Agreement, AMSC Brazil, directly or indirectly, purchased all of the issued and outstanding shares of Comtrafo for (a) (i) 300.0 million Brazilian Real in cash;

and (b) AMSC Shares that were paid and issued, respectively, at closing.

Additionally, AMSC Brazil has agreed to pay the Stockholders the Earnout upon the achievement of specified EBITDA objectives during the three years following the closing.

Comtrafo is a Brazil-based manufacturer of large power and distribution transformers primarily for utility customers and also for industrial customers.

In June 2025, we completed an offering of 4,743,750 shares of our common stock at a public offering price of $28.00 per share under our Registration Statement on Form S-3.

We received aggregate net proceeds of approximately $124.6 million after deducting underwriting discounts and commissions and offering expenses.

On August 1, 2024, we entered into the Stock Purchase Agreement with the selling stockholders named therein.

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On September 23, 2024, the Company paid $3.3 million to the selling stockholders, which was calculated based on the agreed upon formula set forth in the Stock Purchase Agreement.

As of September 30, 2024, there are no remaining obligations to the selling stockholders of Megatran.

As of March 31, 2025, there are no remaining obligations to the selling stockholders of Megatran.

In January 2024, we filed a shelf registration statement on Form S-3 that will expire three years from the date on which it was declared effective, March 15, 2027 (the “Form S-3”).

The Form S-3 allows us to offer and sell from time-to-time up to $250 million of common stock, debt securities, warrants or units comprised of any combination of these securities.

The Form S-3 is intended to provide us flexibility to conduct registered sales of our securities, subject to market conditions, in order to fund our future capital needs.

In August 2024, the Company filed an automatically-effective shelf registration statement on Form S-3 that will expire no later than August 12, 2027 (the “Second Form S-3”).

The Second Form S-3 allows the Company to offer and sell from time-to-time unspecified amounts of common stock, debt securities, warrants or units comprised of any combination of these securities and allows certain selling stockholders to offer and sell from time-to-time common stock.

The Second Form S-3 assisted the Megatran selling stockholders in the resale of their common stock and is intended to provide the Company flexibility to conduct registered sales of its securities, subject to market conditions, in order to fund its future capital needs.

The Second Form S-3 assisted the Megatran selling stockholders in the resale of their common stock and register the Comtrafo selling stockholder's AMSC shares, and is intended to provide the Company flexibility to conduct registered sales of its securities, subject to market conditions, in order to fund its future capital needs.

The terms of any future offering under the Second Form S-3 will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.

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For information regarding our other contractual obligations, refer to Note 13, "Contingent Consideration," Note 16, "Leases", and Note 18, "Commitments and Contingencies" to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

We believe we have sufficient available liquidity to fund our operations and capital expenditures for the next twelve months.

We believe we have sufficient available liquidity to fund our operations and capital expenditures for at least the next twelve months.

We may seek to raise additional capital, which could be in the form of loans, convertible debt or equity, to fund our operating requirements and capital expenditures.

There can be no assurance that we will be able to raise additional capital on favorable terms or at all or execute on any other means of improving our liquidity as described above.

Additionally.

the impact of global sources of instability, including tariffs, trade restrictions and resulting trade conflicts, the ongoing wars between Russia and Ukraine and Israel and Hamas, instability of financial institutions and political instability in the United States, on the global financial markets may reduce our ability to raise additional capital, if necessary, which could negatively impact our liquidity.

Additionally, the impact of global sources of instability, including tariffs, trade restrictions and resulting trade conflicts, the ongoing wars between Russia and Ukraine and in the Middle East, instability of financial institutions and political instability in the United States, on the global financial markets may reduce our ability to raise additional capital, if necessary, which could negatively impact our liquidity.

In addition, the current interest rate environment may affect the cost and availability of debt financing for future acquisitions or other capital needs.

While we funded our recent acquisitions primarily with cash on hand and equity, we may seek to use debt financing for future transactions, and higher interest rates could increase the cost of such financing or make certain transactions less attractive.

Legal Proceedings

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Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The amendments in ASU 2023-07 improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses.

Following the release of ASU 2023-07 in November 2023, the effective date will be annual reporting periods beginning after December 15, 2024.

As of March 31, 2025, we have adopted ASU 2023-07 and made the required disclosures, and noted no other material impact on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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Following the release of ASU 2023-09 in December 2023, the effective date will be annual reporting periods beginning after December 15, 2024.

We are evaluating the impact on our consolidated financial statements.

As of March 31, 2026, we have adopted ASU 2023-09, made the required disclosures, and noted no other material impact on our consolidated financial statements.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements .

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Following the release of ASU 2024-02 in March 2024, the effective date will be annual reporting periods beginning after December 15, 2024.

We are evaluating the impact on our consolidated financial statements .

As of March 31, 2026, we have adopted ASU 2024-02 and noted no other material impact on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures .

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We are evaluating the impact on our consolidated financial statements.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments —Credit Losses .

The amendments in ASU 2025-05 contain updates to how entities are permitted to estimate expected credit losses for accounts receivable and contract assets.

Following the release of ASU 2025-05 in July 2024, the effective date will be annual reporting periods beginning after December 15, 2025.

As of April 1, 2025, we early adopted ASU 2025-05 and noted no material impact on our consolidated financial statements.

In November 2025, the FASB issued ASU 2025-08, Financial Instruments — Credit Losses:

Purchased Loans.

The amendments in ASU 2025-08 requires that loans acquired without credit deterioration and deemed “seasoned” will be considered purchased seasoned loans and accounted for using the gross-up approach at acquisition.

Following the release of ASU 2025-08 in November 2025, the effective date will be annual reporting periods beginning after December 15, 2026.

As of April 1, 2025, we early adopted ASU 2025-08 and noted no material impact on our consolidated financial statements.

We do not believe that, outside of those disclosed here, there are any other recently issued accounting pronouncements that will have a material impact on our consolidated financial statem ents.

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The Company utilizes management estimates and an independent third-party valuation firm to assist in determining the fair values of assets acquired, including intangible assets and liabilities assumed.

The primary intangible assets acquired include customer relationship and trade names.

The primary intangible assets acquired include customer relationship.

Intangible assets are initially valued using a methodology commensurate with the intended use of the asset.

The fair value of customer relationships is measured using the multi-period excess earnings method (“MPEEM”).

The fair value of the trade names is measured using a relief-from-royalty (“RFR”) approach.

The basis for future sales projections for both the MPEEM and RFR are based on internal revenue forecasts which the Company believes represents reasonable market participant assumptions.

The future cash flows are discounted using an applicable discount rate.

The key uncertainties in the calculations, as applicable, are the selection of an appropriate royalty rate, assumptions used in developing estimates of future cash flows, including revenue growth and expense forecasts, assumed customer attrition rates, as well as perceived risks associated with those forecasts in determining the discount rate.

The key uncertainties in the calculations, as applicable, are assumptions used in developing estimates of future cash flows, including revenue growth and expense forecasts, assumed customer attrition rates, as well as perceived risks associated with those forecasts in determining the discount rate.

There is inherent uncertainty in forecasted cash flows and therefore, actual results may differ and could result in a subsequent impairment charge of acquired intangibles and/or goodwill.

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We record a contingent consideration obligation for such contingent consideration payments at fair value on the acquisition date.

We estimate the fair value of contingent consideration obligations through valuation models that incorporate probability adjusted assumptions related to the achievement of the milestones and the likelihood of making related payments.

Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period.

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We perform our annual assessment of goodwill on February 28th of each fiscal year and whenever events or changes in circumstances or a triggering event indicate that the carrying amount may not be recoverable.

An entity is permitted to first assess qualitatively whether it is necessary to perform a goodwill impairment test.

Significant judgment is required to determine if an indication of impairment has taken place.

Factors to be considered include the following:

adverse change in operating results, decline in strategic business plans, significantly lower future cash flows, and sustainable declines in market data such as market capitalization.

The quantitative impairment test is required only if the entity concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying amount.

Circumstances that could trigger an impairment test include, but are not limited to, a significant adverse change in the business climate or legal factors, an adverse action or assessment by a regulator, or unanticipated competition.

The Company may first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test, or the Company can bypass the qualitative assessment and proceed directly to the quantitative test.

The quantitative goodwill impairment test requires the Company to estimate and compare the fair value of the reporting unit with its carrying value.

We determine the fair value of a reporting unit, using a methodology which combines an income approach, using a discounted cash flow method, with a market approach.

The income approach includes estimates and assumptions about revenue growth rates, operating margins and terminal growth rates, discounted by an estimated weighted-average cost of capital derived from other publicly-traded companies that are similar but not identical from an operational and economic standpoint.

The income approach includes estimates and assumptions about revenue growth rates, EBITDA and discount rates, discounted by an estimated weighted-average cost of capital derived from other publicly traded companies that are similar but not identical from an operational and economic standpoint.

These estimates are based on historical experiences, our projects of future operating activity and our weighted-average cost of capital.

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Assessments of the realization of deferred tax assets require that management consider all available evidence, both positive and negative, and make significant judgments about many factors, including the amount and likelihood of future taxable income.

Based on all the available evidence, we have recorded valuation allowances to reduce our deferred tax assets to the amount that is more likely than not to be realizable due to the taxable losses that have been incurred since our inception and uncertainty around our future profitability.

As of March 31, 2026, the Company recorded a $118.4 million non-cash income tax benefit related to the release of a substantial portion of its valuation allowance against deferred tax assets.

This was based on the Company's evaluation of the positive evidence, including cumulative income position over the three year period ended March 31, 2026, revenue growth, current profitability, expectations regarding future forecasted income, and negative evidence, including uncertainty in economic and political environments from industry competition and dependence on government contracts.

This release of the valuation allowance resulted in the recognition of a deferred tax asset and a corresponding increase to income tax benefit in fiscal 2025, the effect of which is an increase in reported net income.

Accounting for income taxes requires a two-step approach to recognizing and measuring uncertain tax positions.

5 unchanged sentences

See Note 14, “Income Taxes,” of our consolidated financial statements for further information regarding our income tax assumptions and expenses.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This Item is not required for smaller reporting companies and the Company is relying on such exemption from disclosure as a former smaller reporting company during the year ended March 31, 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis