What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-08-10 compared with 2026-05-04 · 198 added, 82 removed, 135 unchanged (67% of the section changed)

15 unchanged sentences

a decrease in freight or transit rail traffic;

a decrease in construction activity;

environmental matters and the impact of environmental regulations, including any costs associated with any remediation and monitoring of such matters;

the risk of doing business in international markets, including compliance with anti-corruption and bribery laws, foreign currency fluctuations and inflation, global shipping disruptions, the imposition of increased or new tariffs, and trade restrictions or embargoes, or uncertainties relating to the imposition and enforcement of tariffs;

our ability to timely effectuate our strategy, including cost reduction initiatives, and our ability to effectively integrate acquired businesses or to divest businesses, and to realize anticipated synergies and benefits;

our ability to timely effectuate our strategy, including cost reduction initiatives, including but not limited to the exit of certain product lines in the UK-based Tew Engineering business, and our ability to effectively integrate acquired businesses or to divest businesses, and to realize anticipated synergies and benefits;

costs of and impacts associated with shareholder activism;

25 unchanged sentences

Rail, Technologies, and Services (“Rail”) and Infrastructure Solutions (“Infrastructure”).

Product Line Exit

Product Line Exits

On August 30, 2023, the Company announced the discontinuation of its Bridge Products grid deck product line which was reported in the Steel Products business unit within the Infrastructure segment.

For the three months ended March 31, 2025, the product line had net sales of $501 and the Company completed all customer obligations as of December 31, 2025.

During the second quarter of 2025, the Company announced the discontinuation of its Automation and Materials Handling (“AMH”) product line which was reported in the Technology Services and Solutions business unit within the Rail segment.

AMH had net sales of $407 for the three months ended March 31, 2025.

The Company completed the remaining customer obligations in 2025 all exit costs were incurred in the second quarter of 2025.

For the three and six months ended June 30, 2025, the product line had net sales of $498 and $999, respectively.

The Company completed all customer obligations in 2025.

For the three and six months ended June 30, 2025, AMH had net sales of $813 and $1,220, respectively.

The Company incurred a total of $1,351 in exit costs associated with the AMH Exit, which included $655 in inventory and fixed asset write-downs, $507 in personnel expenses, and $189 in other exit costs.

Exit costs of $1,085 were recorded in “Cost of goods sold” and $266 were recorded in “Selling and administrative expenses” within our Rail segment.

The Company completed the remaining customer obligations in 2025 and all exit costs were incurred in the second quarter of 2025.

During the second quarter of 2026, the Company announced the discontinuation of certain product lines within our Tew Engineering business (the “Tew Exit”) which was reported in the Technology Services and Solutions business unit within the Rail segment.

The decision to exit was due to the Company's initiatives to scale back unprofitable product lines in the United Kingdom.

The product lines had net sales of $292 and $1,189 for the three months ended June 30, 2026 and 2025, respectively, and $1,252 and $1,834 for the six months ended June 30, 2026 and 2025, respectively.

The Company expects to complete remaining customer obligations by 2027.

The Company has recognized a total of $2,270 in exit costs associated with the Tew Exit, which included $1,059 in inventory write-downs, $1,159 in personnel expenses, and $52 in other exit costs during the quarter.

Exit costs of $2,084 were recorded in “Cost of goods sold” and $186 were recorded in “Selling and administrative expenses” within our Rail segment.

In addition to the Tew Exit costs, the Company incurred corporate costs recorded in “Selling and administrative expenses” of $292 related to the execution of strategic initiatives.

Results of Operations

First Quarter 2026 Compared to First Quarter 2025

Second Quarter 2026 Compared to Second Quarter 2025

Three Months Ended

March 31, Change

June 30, Change

2026 2025 2026 vs.

6 unchanged sentences

Amortization expense $ 618 $ 840 $ (222)

Operating income (loss) $ 2,045 $ (1,923) $ 3,968

Operating income (loss) margin 1.7 % (2.0) % 370 bps

Operating income $ 6,151 $ 7,678 $ (1,527)

Operating income margin 4.4 % 5.3 % (90) bps

Interest expense - net $ 891 $ 1,490 $ (599)

Other income - net (191) (95) (96)

Income (loss) before income taxes $ 1,411 $ (2,748) $ 4,159

Income tax benefit (81) (631) 550

Net income (loss) $ 1,492 $ (2,117) $ 3,609

Net loss attributable to noncontrolling interest (8) (7) (1)

Net income (loss) attributable to L.B.

Income before income taxes $ 5,451 $ 6,283 $ (832)

Income tax expense 2,336 3,444 (1,108)

Net income $ 3,115 $ 2,839 $ 276

Net income (loss) attributable to noncontrolling interest 3 (46) 49

Net income attributable to L.B.

Foster Company $ 3,112 $ 2,885 $ 227

Diluted earnings (loss) per common share $ 0.14 $ (0.20) $ 0.34

Diluted earnings per common share $ 0.29 $ 0.27 $ 0.02

Results Summary

Net sales for the three months ended March 31, 2026 increased $23,352, or 23.9%, over the prior year quarter.

The increase was driven by Rail sales growth of $20,761, or 38.4%, with Infrastructure sales also improving $2,591, or 5.9%.

Gross profit for the three months ended March 31, 2026 increased $5,545, or 27.5%, over the prior year quarter driven primarily by higher volumes in Rail which improved $4,113 and improved volumes, business mix, and manufacturing execution in Infrastructure which contributed $1,432.

Net sales for the three months ended June 30, 2026 decreased $5,008, or 3.5%, from the prior year quarter, driven by lower sales in both segments.

Rail net sales declined $3,961, or 5.2%, while Infrastructure declined $1,047, or 1.5%.

Gross profit for the three months ended June 30, 2026 was flat compared to the prior year quarter.

Rail gross profit declined $321, as benefits from favorable business mix were offset by $2,084 of costs related to the Tew Exit, compared to $1,085 of costs associated with the AMH Exit in the prior year quarter.

Infrastructure gross profit improved $295 driven by favorable business mix.

Gross profit margins improved 80 basis points to 22.3%.

Selling and administrative expenses for the three months ended March 31, 2026 increased $2,081, or 9.9%, over the prior year quarter, primarily attributable to higher personnel costs driven by merit, incentive costs, and a $675 accelerated stock expense due to retirement-eligible participants.

Selling and administrative expenses as a percentage of net sales decreased by 240 bps to 19.0%.

Amortization expense for the three months ended March 31, 2026 decreased $504, or 44.9%, from the prior year quarter due to acquired intangible assets becoming fully amortized.

Net interest expense for the three months ended March 31, 2026 decreased $292 from the prior year quarter.

The Company's outstanding debt balance was $59,684 as of March 31, 2026, compared to $82,498 as of March 31, 2025.

The Company’s effective income tax rate for the three months ended March 31, 2026 was (5.7)%, compared to 23.0% in the prior year quarter.

The Company's effective income tax rate for the three months ended March 31, 2026 differed from the statutory rate of 21% primarily due to the impact of excess tax benefits related to share-based compensation, offset by the impact of pre-tax losses in the United Kingdom for which no income tax benefit was recognized due to a valuation allowance.

Net income attributable to the Company for the three months ended March 31, 2026 was $1,500, or $0.14 per diluted share, compared to net loss in the prior year quarter of $2,110, or $0.20 per diluted share.

The increase is due to improved gross profit partially offset by higher selling and administrative expenses.

Selling and administrative expenses for the three months ended June 30, 2026 increased $1,723, or 7.7%, over the prior year quarter, primarily attributable to increased employment costs including higher variable incentive-based compensation costs.

Selling and administrative expenses as a percentage of net sales increased 180 bps to 17.4%.

Amortization expense for the three months ended June 30, 2026 decreased $222, or 26.4%, from the prior year quarter due to acquired intangible assets becoming fully amortized.

Net interest expense for the three months ended June 30, 2026 decreased $599 from the prior year quarter.

The Company's outstanding debt balance was $47,993 as of June 30, 2026, compared to $81,628 as of June 30, 2025.

The Company’s effective income tax rate for the three months ended June 30, 2026 was 42.9%, compared to 54.8% in the prior year quarter.

The current quarter income tax rate differed from the statutory rate of 21% primarily due to the impact of pre-tax losses in the United Kingdom for which no income tax benefit was recognized due to a valuation allowance.

Net income attributable to the Company for the three months ended June 30, 2026 was $3,112, or $0.29 per diluted share, compared to net income in the prior year quarter of $2,885, or $0.27 per diluted share.

The increase is due to reduced interest expense and a lower effective income tax rate.

Results of Operations - Segment Analysis

1 unchanged sentence

Three Months Ended

March 31, Change Percent Change

June 30, Change Percent Change

2026 2025 2026 vs.

5 unchanged sentences

Segment operating income margin 4.2 % 4.9 % (70) bps (14.3)

**Results of this calculation are not meaningful for presentation purposes.

Rail net sales for the three months ended March 31, 2026 increased $20,761, or 38.4 %, over the prior year quarter.

Rail Products net sales increased $11,960, or 40.8%, reflecting the recovery in the Rail Distribution business following softer demand in early 2025.

Global Friction Management sales increased $6,144, or 39.5%, driven by strong demand in domestic markets.

Technology Services and Solutions (“TS&S”) sales increased $2,657, or 29.1%, driven by short term project work in the UK.

Rail gross profit for the three months ended March 31, 2026 increased $4,113, or 34.2 %, over the prior year quarter due to improved sales volumes, while gross profit margins declined 70 basis points to 21.6 % due to unfavorable business mix.

Rail operating income for the three months ended March 31, 2026 increased $4,676 over the prior year quarter due primarily to improved gross profit and lower amortization expense.

For the three months ended March 31, 2026, Rail had new orders, net of $80,629, a decrease of $2,623 from the prior year quarter primarily attributable to a 18.6% decline in Global Friction Management associated with order timing.

Rail Products and TS&S modestly improved 0.9% and 2.3% over the prior year quarter, respectively.

Backlog as of March 31, 2026, was $102,126, a $10,402, or 11.3%, increase over the prior year quarter as a result of a large, multi-year order received in our UK business.

Rail net sales for the three months ended June 30, 2026 decreased $3,961, or 5.2 %, from the prior year quarter.

Rail Products net sales decreased $13,001, or 27.3%, primarily due to the timing of large orders.

This decline was offset by an increase of $3,703, or 18.1%, in Global Friction Management driven by strong domestic demand and an increase of $5,337, or 66.9%, in Technology Services and Solutions (“TS&S”) driven by short term project work in the UK.

Rail gross profit for the three months ended June 30, 2026 decreased $321, or 2.1 %, from the prior year quarter, primarily due to lower sales volumes in Rail Products which impacted gross profit by $2,159.

Partially offsetting this decline were gross profit improvements of $606 in Global Friction Management, driven by higher volumes, and $1,232 in TS&S, reflecting favorable business mix and short-term project work in the UK.

TS&S incurred $2,084 of Tew Exit costs in the current quarter compared to $1,085 of AMH Exit costs incurred in the prior year quarter.

Gross profit margin improved 70 basis points to 20.6 % due to favorable business mix.

Rail operating income for the three months ended June 30, 2026 decreased $758, or 20.2 %, from the prior year quarter driven by the gross profit decline coupled with $641 of higher selling and administrative costs.

For the three months ended June 30, 2026, Rail had new orders, net of $112,207, a decrease of $2,138 from the prior year quarter primarily attributable to the timing of large orders associated with Rail Products which declined 20.0%.

Global Friction Management

and TS&S improved 27.8% and 126.4%, respectively.

The improvement in TS&S was primarily attributable to increased short-term project work in the UK.

Backlog as of June 30, 2026, was $141,395, a $10,686, or 8.2%, increase over the prior year quarter as a result of a large order received in our UK business.

Infrastructure Solutions

Three Months Ended

March 31, Change Percent Change

June 30, Change Percent Change

2026 2025 2026 vs.

3 unchanged sentences

Gross profit margin 24.1 % 23.3 % 80 bps 3.4

Segment operating income (loss) $ 529 $ (444) $ 973 (219.1)

Segment operating income (loss) margin 1.1 % (1.0) % 210 bps 210.0

Infrastructure net sales for the three months ended March 31, 2026, increased $2,591 or 5.9%, over the prior year quarter driven primarily by growth of $4,841, or 17.2%, in Precast Concrete Products (“Precast”).

The increase was partially offset by a decline in Steel Products sales of $2,250, or 14.4%.

Infrastructure gross profit for the three months ended March 31, 2026 increased $1,432, or 17.6 %, over the prior year quarter.

Precast gross profit increased $1,991 due to the higher sales volume, coupled with improved business mix and manufacturing execution which was partially offset by lower volumes in Steel Products resulting in a $559 decrease in gross profit.

Gross profit margins improved 200 basis points to 20.6% driven by improved mix and manufacturing execution in Precast.

Infrastructure operating income for the three months ended March 31, 2026 increased $973, or 219.1%, over the prior year quarter due to improved gross profit offset in part by an increase in selling, general and administrative expenses.

For the three months ended March 31, 2026, Infrastructure had new orders, net of $61,457, a decrease of $4,355, from the prior year quarter.

Steel Products new orders, net decreased by 26.7% due to strong prior year order activity in the Protective Coatings businesses.

This decrease was partially offset by Precast which improved 5.5%.

Backlog as of March 31, 2026, was $107,447, a decrease of $38,044, or 26.1%, from the prior year quarter attributable to a 2025 order cancellation in Steel Products which resulted in a 57.5% decline, coupled with a decline of 8.5% in Precast.

Segment operating income $ 6,571 $ 6,766 $ (195) (2.9)

Segment operating income margin 9.9 % 10.0 % (10) bps 1.0

Infrastructure net sales for the three months ended June 30, 2026, decreased $1,047 or 1.5%, from the prior year quarter.

The decline was driven by $1,996, or 9.3%, in Steel Products, which was partially offset by sales growth of $949, or 2.1%, in Precast Concrete Products (“Precast”).

Infrastructure gross profit for the three months ended June 30, 2026 increased $295, or 1.9 %, over the prior year quarter.

Precast gross profit improved $615 due to improved business mix.

Steel Products gross profit declined $320 due to lower sales volumes.

Gross profit margins improved 80 basis points to 24.1%.

Infrastructure operating income for the three months ended June 30, 2026 decreased $195, or 2.9%, from the prior year quarter due to an increase in selling, general and administrative expenses, offset in part by improved gross profit.

For the three months ended June 30, 2026, Infrastructure had new orders, net of $63,869, an increase of $2,458, over the prior year quarter due primarily to a 73.3% increase in Steel Products stemming from improving Protective Coatings demand.

This increase was partially offset by a 15.4% decrease in Precast.

Backlog as of June 30, 2026, was $104,718, a decrease of $34,502, or 24.8%, from the prior year quarter attributable to a 2025 order cancellation in Steel Products which resulted in a 41.1% decline, coupled with a decline of 17.1% in Precast.

Three Months Ended

March 31, Change Percent

June 30, Change Percent

2026 2025 2026 vs.

3 unchanged sentences

Corporate management stock-based compensation 906 761 145 19.1

Strategic initiatives costs 292 — 292 **

Unallocated corporate expense - net $ 3,409 $ 2,835 $ 574 20.2 %

**Results of this calculation are not meaningful for presentation purposes.

Unallocated corporate expense - net for the three months ended March 31, 2026 was $3,304 compared to $1,623 for the three months ended March 31, 2025.

Corporate management stock-based compensation expense increased $1,131 due primarily to accelerated stock expense due to retirement-eligible participants.

Corporate executive management costs increased $570 due to higher professional fees.

Unallocated corporate expense - net for the three months ended June 30, 2026 was $3,409 compared to $2,835 for the three months ended June 30, 2025.

During the quarter, the Company incurred $292 of costs associated with strategic initiatives.

Public company costs decreased by $572 due to lower professional service fees.

Corporate executive management costs and stock-based compensation increased $709 and $145, respectively, due to increased variable incentive-based compensation expense.

Results of Operations

First Six Months 2026 Compared to First Six Months 2025

Six Months Ended

June 30, Change

2026 2025 2026 vs.

Net sales $ 259,694 $ 241,350 $ 18,344

Gross profit 56,570 51,051 5,519

Gross profit margin 21.8 % 21.2 % 60 bps

Selling and administrative expenses $ 47,138 $ 43,334 $ 3,804

Selling and administrative expenses as a percent of sales 18.2 % 18.0 % 20 bps

Amortization expense $ 1,236 $ 1,962 $ (726)

Operating income $ 8,196 $ 5,755 $ 2,441

Operating income margin 3.2 % 2.4 % 80 bps

Interest expense - net $ 1,742 $ 2,633 $ (891)

Other income - net (408) (413) 5

Income before income taxes $ 6,862 $ 3,535 $ 3,327

Income tax expense 2,255 2,813 (558)

Net income $ 4,607 $ 722 $ 3,885

Net loss attributable to noncontrolling interest (5) (53) 48

Net income attributable to L.B.

Foster Company $ 4,612 $ 775 $ 3,837

Diluted earnings per common share $ 0.44 $ 0.07 $ 0.37

Results Summary

Net sales for the six months ended June 30, 2026 increased $18,344, or 7.6%, over the prior year period.

The increase was driven by Rail sales growth of $16,800, or 12.9%, with Infrastructure sales modestly improving $1,544, or 1.4%.

Gross profit for the six months ended June 30, 2026 increased $5,519, or 10.8%, over the prior year period driven primarily by improved sales volumes and business mix in Rail, which increased $3,792.

Infrastructure gross profit improved $1,727 due to favorable business mix and manufacturing execution.

Gross profit margins improved 60 basis points to 21.8%.

Selling and administrative expenses for the six months ended June 30, 2026 increased $3,804, or 8.8%, over the prior year period, due primarily to an increase in employment costs driven by higher variable incentive-based compensation costs, and a $497 accelerated stock expense due to retirement-eligible participants.

Selling and administrative expenses as a percentage of net sales increased 20 basis points to 18.2%.

Net interest expense decreased $891 for the six months ended June 30, 2026 compared to the prior year period.

The Company's outstanding debt balance was $47,993 as of June 30, 2026, compared to $81,628 as of June 30, 2025.

The Company’s effective income tax rate for the six months ended June 30, 2026 was 32.9%, compared to 79.6% in the prior year period.

The current period effective income tax rate differed from the statutory rate of 21% primarily due to the impact of excess tax benefits related to share-based compensation, offset by the impact of pre-tax losses in the United Kingdom for which no income tax benefit was recognized due to a valuation allowance.

Net income attributable to the Company for the six months ended June 30, 2026 was $4,612, or $0.44 per diluted share, compared to net income in the prior year period of $775, or $0.07 per diluted share.

The higher net income for the six months ended June 30, 2026 was primarily driven by an increase in gross profit, reduced interest expense, and lower amortization expense offset in part by an increase in selling and administrative expenses.

Results of Operations - Segment Analysis

Rail, Technologies, and Services

Six Months Ended

June 30, Change Percent

2026 2025 2026 vs.

2025 2026 vs.

Net sales $ 146,788 $ 129,988 $ 16,800 12.9 %

Gross profit 30,953 27,161 3,792 14.0

Gross profit margin 21.1 % 20.9 % 20 bps 1.0

Segment operating income $ 7,809 $ 3,891 $ 3,918 100.7

Segment operating profit margin 5.3 % 3.0 % 230 bps 76.7

Rail net sales for the six months ended June 30, 2026 increased $16,800, or 12.9 %, over the prior year period.

The increase was primarily driven by Global Friction Management which increased $9,847, or 27.4%, reflecting strong domestic demand and TS&S which increased $7,994, or 46.7%, driven by short term project work in the UK.

These increases were partially offset by a decrease in Rail Products net sales of $1,041, or 1.4%.

Rail gross profit for the six months ended June 30, 2026 increased $3,792, or 14.0%, over the prior year period.

The improvement was due to higher sales volumes in Global Friction Management, which contributed $3,246 of gross profit improvement, and more favorable sales mix in TS&S which contributed an additional $976.

TS&S incurred $2,084 of Tew Exit costs in the six months ended June 30, 2026 compared to $1,085 of AMH Exit costs incurred in the prior year period.

These improvements were partially offset by a $430 decline in Rail Products gross profit attributable to lower sales volumes.

Gross profit margins improved 20 basis points to 21.1%.

Rail operating income for the six months ended June 30, 2026 increased $3,918 over the prior year period.

The increase was driven by an increase in gross profit associated with higher sales volumes and lower amortization expense.

For the six months ended June 30, 2026, Rail new orders, net were $192,835, a decrease of $4,762 from the prior year period.

The decline was primarily attributable to Rail Products which decreased 12.3% due to timing of large orders.

Partially offsetting this decline were increases in TS&S and Global Friction Management.

New orders, net in TS&S increased 68.6%, driven by a large order received in the UK business, while Global Friction Management reported a modest increase of 0.7%.

Infrastructure Solutions

Six Months Ended

June 30, Change Percent

2026 2025 2026 vs.

2025 2026 vs.

Net sales $ 112,906 $ 111,362 $ 1,544 1.4 %

Gross profit 25,617 23,890 1,727 7.2

Gross profit margin 22.7 % 21.5 % 120 bps 5.6

Segment operating income $ 7,100 $ 6,322 $ 778 12.3

Segment operating income margin 6.3 % 5.7 % 60 bps 10.5

Infrastructure net sales for the six months ended June 30, 2026 increased $1,544, or 1.4 %, over the prior year period.

The increase was primarily due to Precast sales growth of $5,790, or 7.8%, partially offset Steel Products which declined $4,246, or 11.5%.

Infrastructure gross profit for the six months ended June 30, 2026 increased $1,727, or 7.2%, over the prior year period.

The increase was primarily driven by a $2,606 improvement in Precast gross profit, reflecting higher sales volume, more favorable business mix, and improved manufacturing execution.

This improvement was partially offset by lower volumes in Steel Products, which resulted in a $879 decrease in gross profit.

Gross profit margins increased 120 basis points to 22.7 %.

Infrastructure operating income for the six months ended June 30, 2026 was favorable $778 compared to the prior year period due to improvements in gross profit partially offset by a $989 increase in selling and administrative expenses.

For the six months ended June 30, 2026, Infrastructure new orders, net were $125,327, a decrease of $1,896, from the prior year period.

The decrease was primarily due to Precast, where new orders, net declined 5.8% from the prior year period.

This decline was partially offset by a 8.5% increase in Steel Products, driven by strong order activity in our Protective Coatings business.

Six Months Ended

June 30, Change Percent

2026 2025 2026 vs.

2025 2026 vs.

Public company costs $ 1,879 $ 2,471 $ (592) (24.0) %

Corporate executive management costs 2,227 948 1,279 134.9

Corporate management stock-based compensation 2,315 1,039 1,276 122.8

Strategic initiatives costs 292 — 292 **

Unallocated corporate expense - net $ 6,713 $ 4,458 $ 2,255 50.6 %

**Results of this calculation are not meaningful for presentation purposes.

Unallocated corporate expense - net for the six months ended June 30, 2026 was $6,713 compared to the six months ended June 30, 2025 which was $4,458.

Public company costs decreased by $592 due to lower professional service fees.

Corporate executive management costs increased $1,279 due to higher incentive-based compensation costs.

Corporate management stock-based compensation expense increased $1,276 due in part to $497 of accelerated stock expense due to retirement-eligible participants.

During the six months ended June 30, 2026, the Company incurred $292 of costs associated with strategic initiatives.

Liquidity and Capital Resources

The Company’s principal sources of liquidity are its existing cash and cash equivalents, cash generated by operations, and the available capacity under the revolving credit facility.

The revolving credit facility provides for a total commitment of up to $150,000, of which $90,019 was available for borrowing as of March 31, 2026, subject to covenant restrictions.

The revolving credit facility provides for a total commitment of up to $150,000, of which $101,695 was available for borrowing as of June 30, 2026, subject to covenant restrictions.

The Company’s primary needs for liquidity relate to working capital requirements for operations, capital expenditures, debt service obligations, tax obligations, outstanding purchase obligations, acquisitions, restructuring payments, and to support the share repurchase program.

The Company’s total debt, including finance leases, was $59,684 and $42,756 as of March 31, 2026 and December 31, 2025, respectively, and was primarily comprised of borrowings under its revolving credit facility.

The following table reflects available funding capacity as of March 31, 2026:

March 31, 2026

The Company’s total debt, including finance leases, was $47,993 and $42,756 as of June 30, 2026 and December 31, 2025, respectively, and was primarily comprised of borrowings under its revolving credit facility.

The following table reflects available funding capacity as of June 30, 2026:

June 30, 2026

Cash and cash equivalents $ 5,783

4 unchanged sentences

Total available funding capacity $ 107,478

As of March 31, 2026, we were in compliance with all covenants of the Credit Agreement and have $94,010 available funding capacity, subject to covenant restrictions.

As of June 30, 2026, we were in compliance with all covenants of the Credit Agreement and have $107,478 available funding capacity, subject to covenant restrictions.

The Company’s operating cash flows are impacted from period to period by fluctuations in working capital needs, as well as its overall profitability.

1 unchanged sentence

The Company regularly assesses its receivables and contract assets for collectability and realization, and provides allowances for credit losses where appropriate.

The Company believes that its reserves for credit losses are appropriate as of March 31, 2026, but adverse changes in the economic environment and adverse financial conditions of its customers may impact certain of its customers’ ability to access capital and compensate the Company for its products and services, as well as impact demand for its products and services.

The changes in cash and cash equivalents for the three months ended March 31, 2026 and 2025 were as follows:

Three Months Ended March 31,

Net cash used in operating activities $ (10,438) $ (26,136)

The Company believes that its reserves for credit losses are appropriate as of June 30, 2026, but adverse changes in the economic environment and adverse financial conditions of its customers may impact certain of its customers’ ability to access capital and compensate the Company for its products and services, as well as impact demand for its products and services.

The changes in cash and cash equivalents for the six months ended June 30, 2026 and 2025 were as follows:

Six Months Ended June 30,

Net cash provided by (used in) operating activities $ 7,422 $ (15,734)

Net cash used in investing activities (6,521) (5,199)

1 unchanged sentence

Effect of exchange rate changes on cash and cash equivalents (71) 197

Net (decrease) increase in cash and cash equivalents $ (357) $ 158

Net increase in cash and cash equivalents $ 1,435 $ 1,732

Cash Flow from Operating Activities

During the three months ended March 31, 2026, net cash used in operating activities was $10,438, compared to net cash used in operating activities of $26,136 during the prior year period.

For the three months ended March 31, 2026, net income and adjustments to reconcile net income from operating activities provided $6,095, compared to $1,324 in the prior year period.

During the six months ended June 30, 2026, net cash provided by operating activities was $7,422, compared to net cash used in operating activities of $15,734 during the prior year period.

For the six months ended June 30, 2026, net income and adjustments to reconcile net income from operating activities provided $16,129, compared to $12,553 in the prior year period.

Working capital and other assets and liabilities were a use of $8,707 in the current period, compared to a use of $28,287 in the prior year period.

The increase in operating cash flow for the three months ended March 31, 2026 compared to the prior year period was largely driven by lower working capital needs and improved profitability.

Changes in payment timing can impact accounts receivable in any given quarter due to the seasonality of our businesses.

The increase in operating cash flow for the six months ended June 30, 2026 compared to the prior year period was largely driven by lower working capital needs and improved profitability.

Cash Flow from Investing Activities

Capital expenditures for the three months ended March 31, 2026 and 2025 were $2,960 and $2,575, respectively.

Capital expenditures for the six months ended June 30, 2026 and 2025 were $6,521 and $5,248, respectively.

Capital expenditures in both periods primarily relate to general plant and operational improvements throughout the Company, as well as organic growth initiatives.

Cash Flow from Financing Activities

During the three months ended March 31, 2026 the Company had an increase in outstanding debt of $16,945 compared to a $34,891 increase during the three months ended March 31, 2025.

The decrease in borrowings from the prior year quarter was by driven lower working capital needs and a reduction in treasury stock repurchases.

During the three months ended March 31, 2026, the Company repurchased $3,846 of its stock to satisfy employee tax withholding obligations related to the issuance of equity-based compensation awards.

During the six months ended June 30, 2026, outstanding debt increased $5,271 compared with an increase of $32,340 during the six months ended June 30, 2025.

The lower increase in borrowings from the prior year period was primarily driven by operating cash generation from lower working capital requirements and a reduction in treasury stock repurchases.

During the six months ended June 30, 2026, the Company repurchased $4,263 of its stock to satisfy employee tax withholding obligations related to the issuance of equity-based compensation awards.

The Company also made deferred acquisition-related payments of $403 and $782, during the six months ended June 30, 2026 and 2025, respectively, related to the June 2022 acquisition of Skratch Enterprises Ltd.

These payments were deferred at the date of the acquisition in accordance with the purchase agreement.

Additionally, during the six months ended June 30, 2025, the Company incurred debt issuance costs of $706 associated with entering into the June 27, 2025 Fifth Amended and Restated Credit Agreement.

The Board of Directors previously authorized the repurchase of up to $15,000 of the Company's common shares until February 2025, pursuant to the terms of the previously disclosed stock repurchase program adopted March 3, 2023, as amended August 5, 2024.

On March 3, 2025, the Company's Board of Directors approved a new authorization to repurchase up to $40,000 of the Company's common stock in open market transactions and/or 10b5-1 trading plans through February 29, 2028.

The Company did not repurchase any shares during the three months ended March 31, 2026 under this program.

From February 2023 through March 31, 2026, the Company repurchased a total of 1,016,899 shares of its stock for $23,554 under both programs.

The Company did not repurchase any shares during the six months ended June 30, 2026 under this program.

From February 2023 through June 30, 2026, the Company repurchased a total of 1,016,899 shares of its stock for $23,554 under both programs.

Repurchases of shares of the Company’s common stock may be made from time to time in the open market or in such other manner as determined by the Company.

2 unchanged sentences

Financial Condition

As of March 31, 2026, the Company had $3,991 in cash and cash equivalents and $90,019 of availability under its revolving credit facility, subject to covenant restrictions.

As of March 31, 2026, approximately $3,621 of the Company’s cash and cash equivalents were held in non-domestic bank accounts.

As of June 30, 2026, the Company had $5,783 in cash and cash equivalents and $101,695 of availability under its revolving credit facility, subject to covenant restrictions.

As of June 30, 2026, approximately $4,430 of the Company’s cash and cash equivalents were held in non-domestic bank accounts.

The Company’s principal uses of cash in recent years have been to fund its operations, including capital expenditures, repurchase of shares, acquisitions, and service indebtedness.

1 unchanged sentence

On June 27, 2025, the Company, its domestic subsidiaries, and certain of its Canadian and United Kingdom subsidiaries (collectively, the “Borrowers”), entered into the Fifth Amended and Restated Credit Agreement (the “Credit Agreement”) with PNC Bank, N.A., Bank of America, N.A., Citizens Bank, N.A., and Wells Fargo Bank N.A.

as Co-Syndication Agents, and Dollar Bank, Federal Savings Bank as a participant.

The Credit Agreement, which expires on June 27, 2030, provides for a five-year, revolving credit

facility that permits aggregate borrowings of the Borrowers up to $150,000 with sublimits for (a) the issuance of letters of credit in dollars and in alternative currencies in an amount not to exceed the dollar equivalent of $30,000, and (b) borrowings of swing loans in dollars in an amount not to exceed $20,000;

as Co-Syndication Agents, and Dollar Bank, Federal

Savings Bank as a participant.

The Credit Agreement, which expires on June 27, 2030, provides for a five-year, revolving credit facility that permits aggregate borrowings of the Borrowers up to $150,000 with sublimits for (a) the issuance of letters of credit in dollars and in alternative currencies in an amount not to exceed the dollar equivalent of $30,000, and (b) borrowings of swing loans in dollars in an amount not to exceed $20,000;

and with an incremental loan feature not to exceed $60,000.

18 unchanged sentences

Quantitative and Qualitative Disclosures about Market Risk

This item is not applicable to a smaller reporting company.

This item is not applicable to the Company.

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-Q

Item 2. Management’s Discussion and Analysis