POWER SOLUTIONS INTERNATIONAL, INC. 10-K

Item 8. Financial Statements and Supplementary Data. The following consolidated financial statements are included in Item 8 of this Form 10-K. Index to Consolidated Financial Statements Page Consolidated Financial Statements of Power Solutions International, Inc. Reports of Independent Registered Public Accounting Firm ( BDO USA, P.C. , Chicago, IL , PCAOB ID# 243 ) 36 Consolidated Balance Sheets as of December 31, 2025 and 2024 39 Consolidated Statements of Income for 2025 and 2024 40 Consolidated Statements of Stockholders’ Equity (Deficit) for 2025 and 2024 41 Consolidated Statements of Cash Flows for 2025 and 2024 42 Notes to Consolidated Financial Statements 43 35 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Stockholders and Board of Directors Power Solutions International, Inc. Wood Dale, Illinois Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Power Solutions International, Inc. (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 2, 2026 expressed an unqualified opinion thereon. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accrued Product Warranty As described in Note 1 to the consolidated financial statements, the Company’s consolidated accrued product warranty balance was $8.2 million as of December 31, 2025. The Company offers a standard limited warranty on the workmanship of its products. The Company estimates and records a liability and related charges to income for its warranty program at the time products are sold to customers. These estimates are established using historical warranty claims information including failure rates, repair costs and timing of failures. Previous estimates are adjusted as actual warranty claims data becomes available. We identified the estimation of certain accrued product warranties as a critical audit matter, as auditing such accrued product warranties was especially challenging due to the nature and extent of audit effort required to address this matter. The primary procedures we performed to address this critical audit matter included: a. Testing the design and operating effectiveness of certain relevant internal controls related to the Company’s estimation of accrued product warranties. b. Reconciling certain underlying historical warranty claims information to the calculation of estimated future warranty claims. c. Testing the completeness and accuracy of certain underlying historical warranty claims information used in management’s estimation of accrued product warranties. 36 d. Testing the mathematical accuracy of management’s calculation of certain accrued product warranties. /s/ BDO USA, P.C. We have served as the Company’s auditor since 2018. Chicago, Illinois March 2, 2026 37 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Stockholders and Board of Directors Power Solutions International, Inc. Wood Dale, Illinois Opinion on Internal Control over Financial Reporting We have audited Power Solutions International, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years then ended, and the related notes and our report dated March 2, 2026 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 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. /s/ BDO USA, P.C. Chicago, Illinois March 2, 2026 38 POWER SOLUTIONS INTERNATIONAL, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except par values) As of December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 41,250 $ 55,252 Restricted cash 3,698 3,239 Accounts receivable, net of allowances of $ 967 and $ 1,889 as of December 31, 2025 and 2024, respectively; (from related parties $ 415 and $ 1,383 as of December 31, 2025 and 2024, respectively) 90,446 68,958 Income tax receivable 6,442 986 Inventories, net 127,363 93,872 Prepaid expenses 4,500 6,396 Contract assets 15,965 21,462 Other current assets 1,256 4,170 Total current assets 290,920 254,335 Property, plant and equipment, net 23,014 15,406 Operating lease right-of-use assets, net 52,911 23,275 Intangible assets, net 1,236 2,454 Goodwill 29,835 29,835 Deferred tax assets 13,322 — Customs-related deposits 12,893 2,503 Other noncurrent assets 614 374 TOTAL ASSETS $ 424,745 $ 328,182 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable (to related parties $ 4,126 and $ 14,427 as of December 31, 2025 and 2024, respectively) $ 48,196 $ 58,208 Current maturities of long-term debt 28 52 Revolving line of credit, current — 95,000 Finance lease liability, current 355 78 Operating lease liability, current 6,346 4,503 Other short-term financing (to related parties $ 25,000 as of December 31, 2024) — 25,000 Other accrued liabilities (to related parties $ 60 and $ 807 as of December 31, 2025 and 2024, respectively) 37,353 44,726 Total current liabilities 92,278 227,567 Deferred tax liabilities — 1,568 Long-term debt, net of current maturities 10 38 Revolving line of credit, long-term 95,000 — Finance lease liability, long-term 1,224 16 Operating lease liability, long-term 49,397 20,663 Noncurrent contract liabilities 1,699 1,877 Other noncurrent liabilities 6,528 11,203 TOTAL LIABILITIES $ 246,136 $ 262,932 Commitments and Contingencies (Note 11) STOCKHOLDERS’ EQUITY Common stock – $ 0.001 par value; 50,000 shares authorized; 23,117 shares issued; 23,041 and 23,000 shares outstanding at December 31, 2025 and 2024, respectively 23 23 Additional paid-in capital 157,602 157,561 Retained earnings (accumulated deficit) 22,476 ( 91,511 ) Treasury stock, at cost, 76 and 117 shares at December 31, 2025 and 2024, respectively ( 1,492 ) ( 823 ) TOTAL STOCKHOLDERS’ EQUITY 178,609 65,250 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 424,745 $ 328,182 See Notes to Consolidated Financial Statements 39 POWER SOLUTIONS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) For the Year Ended December 31, 2025 2024 Net sales (to related parties $ 1,266 and $ 1,766 for the year ended December 31, 2025 and 2024, respectively) $ 722,405 $ 475,967 Cost of sales (derived from related party net sales $ 863 and $ 1,304 for the year ended December 31, 2025 and 2024, respectively) 537,506 335,430 Gross profit 184,899 140,537 Operating expenses: Research and development expenses 18,164 20,056 Selling, general and administrative expenses 55,803 37,378 Amortization of intangible assets 1,218 1,459 Total operating expenses 75,185 58,893 Operating income 109,714 81,644 Other expense (income), net Interest expense (from related parties $ 634 and $ 6,998 for the year ended December 31, 2025 and 2024, respectively) 6,702 11,443 Other expense (income) ( 352 ) — Total other expense, net 6,350 11,443 Income before income taxes 103,364 70,201 Income tax (benefit) expense ( 10,623 ) 922 Net income $ 113,987 $ 69,279 Weighted-average common shares outstanding: Basic 23,022 22,983 Diluted 23,066 23,018 Earnings per common share: Basic $ 4.95 $ 3.01 Diluted $ 4.94 $ 3.01 See Notes to Consolidated Financial Statements 40 POWER SOLUTIONS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) Common Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Treasury Stock Total Stockholders’ Equity Balance at December 31, 2023 $ 23 $ 157,770 $ ( 160,790 ) $ ( 920 ) $ ( 3,917 ) Net income — — 69,279 — 69,279 Stock Appreciation Rights (“SAR”) issued — ( 187 ) — 187 — Stock-based compensation expense — 89 — — 89 Tax benefit from exercise of stock based compensation — — — ( 201 ) ( 201 ) Restricted Stock Awards — ( 111 ) — 111 — Balance at December 31, 2024 $ 23 $ 157,561 $ ( 91,511 ) $ ( 823 ) $ 65,250 Net income — — 113,987 — 113,987 Stock Appreciation Rights (“SAR”) issued — ( 274 ) — 274 — Stock-based compensation expense — 427 — — 427 Repurchases to settle tax withholding obligations for stock-based compensation awards — — — ( 1,055 ) ( 1,055 ) Restricted Stock Awards — ( 112 ) — 112 — Balance at December 31, 2025 $ 23 $ 157,602 $ 22,476 $ ( 1,492 ) $ 178,609 See Notes to Consolidated Financial Statements 41 POWER SOLUTIONS INTERNATIONAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Year Ended December 31, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 113,987 $ 69,279 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of intangible assets 1,218 1,459 Depreciation 4,170 3,740 Noncash lease expense 6,063 5,009 Stock-based compensation expense 427 89 Amortization of financing fees 646 513 Deferred income taxes ( 14,890 ) 90 (Credit) for losses in accounts receivable ( 922 ) ( 4,086 ) Increase in allowance for inventory obsolescence, net 118 2,405 Other adjustments, net 96 40 Changes in operating assets and liabilities: Accounts receivable ( 20,566 ) 2,117 Inventories ( 33,426 ) ( 10,557 ) Prepaid expenses 1,896 2,241 Contract assets 5,496 ( 5,908 ) Other assets ( 7,205 ) ( 1,631 ) Accounts payable ( 10,084 ) ( 8,856 ) Income taxes receivable ( 5,457 ) ( 436 ) Accrued expenses ( 6,789 ) 12,003 Other noncurrent liabilities ( 10,665 ) ( 5,121 ) Net cash provided by operating activities 24,113 62,390 CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures ( 9,973 ) ( 4,559 ) Proceeds from disposal of assets 11 — Net cash used in investing activities ( 9,962 ) ( 4,559 ) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of long-term debt and lease liabilities ( 482 ) ( 204 ) Proceeds from short-term financings — 100,000 Repayment of short-term financings ( 25,000 ) ( 124,820 ) Repurchases to settle tax withholding obligations for stock-based compensation awards ( 1,055 ) ( 201 ) Payments of deferred financing costs ( 1,157 ) ( 709 ) Net cash used in financing activities ( 27,694 ) ( 25,934 ) Net (decrease) increase in cash, cash equivalents, and restricted cash ( 13,543 ) 31,897 Cash, cash equivalents, and restricted cash at beginning of the year 58,491 26,594 Cash, cash equivalents, and restricted cash at end of the year $ 44,948 $ 58,491 (in thousands) As of December 31, 2025 2024 Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance Sheets Cash and cash equivalents $ 41,250 $ 55,252 Restricted cash 3,698 3,239 Total cash, cash equivalents, and restricted cash $ 44,948 $ 58,491 See Notes to Consolidated Financial Statements 42 POWER SOLUTIONS INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Summary of Significant Accounting Policies and Other Information Nature of Business Operations Power Solutions International, Inc. (“Power Solutions,” “PSI” or the “Company”), a Delaware corporation, is a global producer and distributor of a broad range of high-performance, certified, low-emission power systems, including alternative-fueled power systems for original equipment manufacturers (“OEMs”) of off-highway industrial equipment and large custom-engineered integrated electrical power generation systems. The Company’s customers include large, industry-leading and multinational organizations. The Company’s products and services are sold predominantly to customers throughout North America as well as to customers located throughout the Pacific Rim and Europe. The Company’s power systems are highly engineered, comprehensive systems which, through the Company’s technologically sophisticated development and manufacturing processes, including its in-house design, prototyping, testing and engineering capabilities and its analysis and determination of the specific components to be integrated into a given power system (driven in large part by emission standards and cost considerations), allow the Company to provide its customers with power systems customized to meet specific OEM application requirements, other customers’ technical specifications and requirements imposed by environmental regulatory bodies. The Company’s power system configurations range from a basic engine integrated with appropriate fuel system components to completely packaged power systems that include any combination of cooling systems, electronic systems, air intake systems, fuel systems, housings, power takeoff systems, exhaust systems, hydraulic systems, enclosures, brackets, hoses, tubes 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 purchases engines from third-party suppliers and produces internally designed engines, all of which are then integrated into its power systems. Of the other components that the Company integrates into its power systems, a substantial portion consist of internally designed components and components for which it coordinates significant design efforts with third-party suppliers, with the remainder consisting largely of parts that are sourced off-the-shelf from third-party suppliers. Some of the key components (including purchased engines) embody proprietary intellectual property of the Company’s suppliers. As a result of its design and manufacturing capabilities, the Company is able to provide its customers with a power system that can be incorporated into a customer’s specified application. In addition to the certified products described above, the Company sells diesel, gasoline and non-certified power systems and aftermarket components. Stock Ownership and Control Weichai America Corp., a wholly-owned subsidiary of Weichai Power Co., Ltd. (HK2338, SZ000338) (herein collectively referred to as “Weichai”), owns approximately 46.0 % of the outstanding shares of the Company’s Common Stock as of December 31, 2025 . Weichai has entered into an Investor Rights Agreement (the “Rights Agreement”) with the Company. The Rights Agreement provides Weichai with representation on the Company’s Board of Directors (the “Board”) and management representation rights. Weichai currently has four representatives on the Board, which constitutes the majority of the directors serving on the Board. In addition, the Company and Weichai have entered into a Shareholders Agreement with the Company’s founders (the “Founders”), pursuant to which the Founders have agreed to vote in favor of Weichai’s designees to the Board and for certain other matters. The Founders currently own less than 10% of the Company’s Common Stock as of December 31, 2025. As a result, Weichai is able to exercise control over matters requiring stockholders’ approval, including the election of directors, amendment of the Company’s Certificate of Incorporation (the “Charter”) 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. 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 from Rules 5605(b), (d) and (e) to the extent applicable. Liquidity During 2025, the Company reported net income of $ 114.0 million and cash provided by operations of $ 24.1 million. On July 30, 2025, the Company amended its Uncommitted Revolving Credit Agreement (the “Revolving Credit Agreement”), which extended the maturity date from August 30, 2025 to July 30, 2027 (See Note 6. Debt ) and increased the borrowing capacity to $ 135.0 million. As the Company has achieved profitability, is generating positive cash flows from operating activities, and has amended the Revolving Credit Agreement, the Company has concluded that its existing cash and cash equivalents and cash from operations will be sufficient for the Company for at least twelve months from the issuance of these consolidated financial statements. 43 Basis of Presentation and Consolidation The consolidated financial statements include the accounts of Power Solutions International, Inc. and its wholly-owned subsidiaries. The Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and include the assets, liabilities, sales and expenses of all wholly-owned subsidiaries and majority-owned subsidiaries in which the Company exercises control. All intercompany balances and transactions have been eliminated in consolidation. Concentrations The following table presents customers individually accounting for more than 10% of the Company’s net sales: For the Year Ended December 31, 2025 2024 Customer B 20 % 11 % Customer C 10 % 11 % Customer E 10 % ** Customer F 13 % ** The following table presents customers individually accounting for more than 10% of the Company’s trade accounts receivable: As of December 31, 2025 2024 Customer B 14 % ** Customer C 10 % ** Customer D ** 15 % Customer E 11 % ** Customer G 11 % ** The following table presents suppliers individually accounting for more than 10% of the Company’s purchases: For the Year Ended December 31, 2025 2024 Supplier A 21 % 16 % ** Less than 10% of the total Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions include the valuation of allowances for uncollectible receivables, inventory reserves, warranty reserves, stock-based compensation, evaluation of goodwill, other intangibles, property, plant and equipment for impairment, income tax valuation allowances and determination of useful lives of long-lived assets. Actual results could materially differ from those estimates. Cash and Cash Equivalents Cash equivalents consist of short-term, highly liquid investments that have original maturities of three months or less from the date of purchase. Such investments are stated at cost, which approximates fair value. Restricted Cash Restricted cash consists of funds that are contractually restricted as to usage or withdrawal due to required minimum levels of cash collateral for letters of credits and contractual agreements with customers. As of December 31, 2025 and 2024, the Company had restricted cash of $ 3.7 million and $ 3.2 million, respectively, which includes $ 1.4 million restricted cash held in escrow which could be required to be refunded to the customer if conditions occur as defined in the agreement with the customer. The Company has not recognized revenue associated with the restricted cash. The liability is included within Noncurrent Contract Liabilities on the Consolidated Balance Sheet. 44 Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to be settled or realized. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company records net deferred tax assets to the extent that it believes these assets will more likely than not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. The Company records uncertain tax positions in accordance with accounting guidance, on the basis of a two-step process whereby (i) it determines whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority. Tax benefits related to uncertain tax positions taken or expected to be taken on a tax return are recorded when such benefits meet a more-likely-than-not threshold. Otherwise, these tax benefits are recorded when a tax position has been effectively settled, which means that the appropriate taxing authority has completed its examination even though the statute of limitations remains open, or the statute of limitation has expired. Interest and penalties related to uncertain tax positions are recognized as part of income tax expense and are accrued beginning in the period that such interest and penalties would be applicable under relevant tax law until such time that the related tax benefits are recognized. Accounts Receivable and Allowances Trade accounts receivable represent amounts billed to customers and not yet collected. Trade accounts receivable are recorded at the invoiced amount, which approximates net recoverable value, and generally do not bear interest. The allowance for credit losses is the Company’s best estimate of the amount of probable credit losses in the existing accounts receivable and is established through a charge to selling, general and administrative expenses. We estimate losses over the contractual life using assumptions to capture the risk of loss, even if remote, based principally on how long a receivable has been outstanding and the geographic region. Other factors considered include historical write-off experience, current economic conditions and also factors such as customer credit, past transaction history with the customer and changes in customer payment terms. Trade accounts receivable and the allowance for credit losses are reviewed on a regular basis. When necessary, an allowance for the full amount of specific accounts deemed uncollectible is recorded. Accounts receivable losses are deducted from the allowance and the account balance is written off when means of collection have been exhausted and the potential for recovery is considered remote. Recoveries of previously written off balances are recognized when received. An allowance associated with anticipated future sales returns and accrued pricing adjustments are also included in the accounts receivable, net. Inventories The Company’s inventories consist primarily of engines and parts. Engines are valued at the lower of cost including estimated freight-in or net realizable value. Parts are valued at the lower of cost or net realizable value, except for integral parts provided by customers for installation on custom ordered engines. Such parts are accounted for as noncash consideration which is valued at fair value. Net realizable value approximates replacement cost. Cost is principally determined using the first-in, first-out method and includes material, labor and manufacturing overhead. It is the Company’s policy to review inventories on a continuing basis for obsolete, excess and slow-moving items and to record valuation adjustments for such items in order to eliminate non-recoverable costs from inventory. Valuation adjustments are recorded in an inventory reserve account and reduce the cost basis of the inventory in the period in which the reduced valuation is determined. Inventory reserves are established based on quantities on hand, usage and sales history, customer orders, projected demand and utilization within a current or future power system. Specific analysis of individual items or groups of items is performed based on these same criteria, as well as on changes in market conditions or any other identified conditions. 45 Inventories consist of the following: (in thousands) As of December 31, Inventories 2025 2024 Raw materials $ 105,225 $ 84,323 Work in process 5,103 872 Finished goods 25,288 16,812 Total inventories 135,616 102,007 Inventory allowance ( 8,253 ) ( 8,135 ) Inventories, net $ 127,363 $ 93,872 Activity in the Company’s inventory allowance was as follows: (in thousands) For the Year Ended December 31, Inventory Allowance 2025 2024 Balance at beginning of period $ 8,135 $ 5,730 Charged to expense 306 3,394 Write-offs ( 188 ) ( 989 ) Balance at end of period $ 8,253 $ 8,135 As of December 31, 2025 and 2024, the Company’s inventory include d $ 0.2 million and $ 0.8 million, respectively, of raw materials provided by its customers for installation in the fulfillment of its performance obligations to these customers and recorded an associated contract liability. See Note 2. Revenue for further information regarding contract assets and contract liabilities. Property, Plant and Equipment Property, plant and equipment is carried at cost and presented net of accumulated depreciation and impairments. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Property, plant and equipment is evaluated periodically to determine if an adjustment to depreciable lives is warranted. Such evaluation is based principally on the expected utilization of the long-lived assets. Repairs and maintenance costs are charged directly to expense as incurred. Major renewals or replacements that substantially extend the useful life of an asset are capitalized and depreciated. Estimated useful lives by each type of asset category are as follows: Years Buildings Up to 39 Leasehold improvements Lesser of (i) expected useful life of improvement or (ii) life of lease (including likely extension thereof) Machinery and equipment 1 to 10 Intangible Assets The Company’s intangible assets include customer relationships, developed technology, trade names and trademarks. Intangible assets are amortized on an accelerated basis over a period of time that approximates the pattern over which the Company expects to gain the estimated economic benefits, and such period generally ranges between three years and 15 years. 46 Impairment of Long-Lived Assets The Company assesses potential impairments to its long-lived assets or asset groups, excluding goodwill which is separately tested for impairment, whenever events indicate that the carrying amount of such assets may not be recoverable. Long-lived assets are assessed for impairment by comparing the carrying value of the asset or asset group with the estimated future net undiscounted cash flows expected to result from the use of the asset or asset group, including cash flows from disposition. If the future net undiscounted cash flows are less than the carrying value, an impairment loss is calculated. An impairment loss is determined by the amount that the asset’s or asset group’s carrying value exceeds its estimated fair value. Estimated fair value is generally measured by discounting estimated future cash flows. If an impairment loss is recognized, the adjusted balance becomes the new cost basis and is depreciated (amortized) over the remaining useful life. The Company also periodically reassesses the useful lives of its long-lived assets due to advances and changes in technologies. No impairment losses were recorded during the years ended December 31, 2025 and 2024. Goodwill Goodwill rep resents the excess of the cost of an acquired business over the amounts assigned to the net acquired assets. Goodwill is not amortized but is tested for impairment at the reporting unit level, on an annual basis or more frequently, if events occur or circumstances change indicating potential impairment. The Company annually tests goodwill for impairment on October 1. In evaluating goodwill for impairment, the Company first assesses qualitative factors to determine whether it is more likely than not (i.e., there is a likelihood of more than 50%) that the Company’s fair value is less than its carrying amount. Qualitative factors that the Company considers include, but are not limited to, macroeconomic and industry conditions, overall financial performance and other relevant entity-specific events. If the Company bypasses the qualitative assessment, or if the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs a quantitative goodwill impairment test to identify potential goodwill impairment and measures the amount of goodwill impairment it will recognize, if any. In the quantitative goodwill impairment test, the Company compares the estimated fair value of the reporting unit with its related carrying value. If the estimated fair value exceeds the carrying amount, no further analysis is needed. If, however, the reporting unit’s estimated fair value is less than its carrying amount, the Company records an impairment for the difference between the estimated fair value and the carrying value. Under the quantitative approach, the Company calculates its estimated fair value using the income and market approaches when feasible, or an asset approach when neither the income nor the market approach has sufficient data. For the income approach, a discounted cash flow method, the Company uses internally developed discounted cash flow models that include the following assumptions, among others: projections of revenues, expenses and related cash flows based on assumed long-term growth rates and demand trends, expected future investments to grow new units, and estimated discount rates. The Company based these assumptions on its historical data and experience, industry projections, and micro and macro general economic condition projections and expectations. The market approach, also called the Guideline Public Company Approach, compares the value of an entity to similar publicly traded companies. The asset approach estimates the selling price the unit could achiev e under assumed market conditions. The Company performed its annual goodwill impairment assessment as of October 1, 2025, utilizing the qualitative approach permitted under applicable accounting guidance. 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 its 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. The Company performed its annual goodwill impairment assessment as of October 1, 2024, utilizing the quantitative approach to determine the estimated fair value of its reporting unit and no impairment charge was recognized for the period ended December 31, 2024 . 47 Other Accrued Liabilities Other accrued liabilities consisted of the following: (in thousands) As of December 31, Other Accrued Liabilities 2025 2024 Accrued product warranty $ 6,634 $ 10,233 Accrued litigation 1 1,400 3,847 Contract liabilities 3,486 10,184 Accrued compensation and benefits 19,565 10,721 Accrued interest expense 268 1,237 Stock appreciation rights liability 2 1,070 1,804 Non-interest bearing note payable 740 693 Customs accrual 1,248 1,162 Taxes payable 257 200 Other 2,685 4,645 Total $ 37,353 $ 44,726 1 As of December 31, 2025 and 2024 , accrued litigation includes accruals related to various ongoing legal matters including associated legal fees. See Note 11. Commitments and Contingencies for further information regarding the various ongoing legal matters. 2 The Company has an incentive compensation plan, which authorizes the granting of a variety of different types of awards including, but not limited to, non-qualified stock options, incentive stock options, Stock Appreciation Rights (“SARs”), Restricted Stock Awards (“RSAs”) , deferred stock and performance units to its executive officers, employees, consultants and Directors. T he SAR awards granted for the year ended December 31, 2025 and 2024 were all liability classified awards and remained outstanding. See Note 14. Stock-Based Compensation for additional information on the SARs and RSAs. Warranty Costs The Company offers a standard limited warranty on the workmanship of its products that in most cases covers defects for a defined period. Warranties for certified emission products are mandated by the U.S. Environmental Protection Agency (the “EPA”) and / or CARB and are longer than the Company’s standard warranty on certain emission-related products. The Company’s products also carry limited warranties from suppliers. The Company’s warranties generally apply to engines fully manufactured by the Company and to the modifications the Company makes to supplier base products. Costs related to supplier warranty claims are generally borne by the supplier and passed through to the end customer. Warranty estimates are based on historical experience and represent the projected cost associated with the product. A liability and related expense are recognized at the time products are sold. The Company adjusts estimates when it is determined that actual costs may differ from initial or previous estimates. The Company’s warranty liability is generally affected by failure rates, repair costs and the timing of failures. Future events and circumstances related to these factors could materially change the estimates and require adjustments to the warranty liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available. The Company records adjustments to preexisting warranties for changes in its estimate of warranty costs for products sold in prior fiscal years in the period in which new information is received and the information indicates that actual costs may differ from the Company’s initial or previous estimates. Such adjustments typically occur when claims experience deviates from historic and expected trends. 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. In each subsequent quarter after a recall or field campaign is initiated, the recorded warranty liability balance is analyzed, reviewed and adjusted, if necessary, to reflect any changes in the anticipated average cost of repair or number of repairs to be completed prospectively. 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. As of both December 31, 2025 and 2024 , reimbursed warranty costs due from a significant supplier included in accounts receivable are approximately $ 0.2 million . 48 Accrued product warranty activities included in Other noncurrent liabilities on the Consolidated Balance Sheet are presented below: (in thousands) For the Year Ended December 31, Accrued Product Warranty 2025 2024 Balance at beginning of year $ 13,972 $ 19,263 Current year provision * 6,039 6,054 Changes in estimates for preexisting warranties ** 829 1,239 Payments made during the period ( 12,647 ) ( 12,584 ) Balance at end of year 8,193 13,972 Less: Current portion 6,634 10,233 Noncurrent accrued product warranty $ 1,559 $ 3,739 * Warranty costs, net of supplier recoveries , and other adjustments, were $ 6.8 million and $ 6.5 million for the years ended December 31, 2025 and 2024 , respectively. Supplier recoveries were $ 0.1 million and $ 0.8 million for the years ended December 31, 2025 and 2024 , respectively. ** Changes in estimates for preexisting warranties reflect changes in the Company’s estimate of warranty costs for products sold in prior periods. Such adjustments typically occur when claims experience deviates from historical and expected trends. For the year December 31, 2025 , the Company recorded a cost for changes in estimates of preexisting warranties of $ 0.8 million, or $ 0.04 per diluted share, and costs of $ 1.2 million, or $ 0.05 per diluted share, for the year ended December 31, 2024. Revenue Recognition See Note 2. Revenue for additional information the Company’s policy related to revenue recognition. Recently Issued Accounting Pronouncements – Adopted In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures - Income Taxes (Topic 740) . The amendments to this standard enhances the transparency and decision usefulness of income tax disclosures, primarily related to rate reconciliation and income taxes paid information as well as effectiveness of overall income tax disclosures. The new standard is effective for public entities for annual periods beginning after December 15, 2024 . The Company adopted this guidance retrospectively for the year ended December 31, 2025. Refer to Note 12. Income Taxes for the related disclosures, which include updates to the specific categories presented in the tax rate reconciliation, additional information for reconciling items that meet the applicable quantitative threshold, and enhanced disclosures regarding income taxes paid on an annual basis. Recently Issued Accounting Pronouncements – Not Yet Adopted In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income: Expense Disaggregation Disclosures (Subtopic 220-40). This update requires entities to provide more detailed disclosures about the components of significant expense categories, enhancing the transparency and decision usefulness of financial statements. The amendments in this update are intended to provide investors with additional information about specific expense categories in the notes to the financial statements at interim and annual reporting periods. The updated standard is effective for annual periods beginning after December 15, 2026, and interim reporting periods thereafter, although early adoption is permitted. While we anticipate that the adoption of this standard will require additional disclosures, the Company is currently assessing the impact of the amendment to this standard on its consolidated financial statements. In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses: Measurement of Credit Losses for Accounts Receivable and Contract Assets (Topic 326) . The update permits entities to elect a practical expedient for estimating expected credit losses on current trade receivables and current contract assets by assuming that conditions existing at the balance sheet date will remain unchanged over the life of those assets. The updated standard is effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years, with early adoption perm itted. The Company is currently assessing the impact of the amendment to this standard on its consolidated financial statements. Note 2. Revenue Revenue Recognition The Company determines the amount of revenue to be recognized through the following steps: • identification of the contract, or contracts with a customer; • identification of the performance obligations in the contract; • determination of the transaction price; • allocation of the transaction price to the performance obligations in the contract; and 49 • recognition of revenue when, or as, the Company satisfies the performance obligations. Revenue for the Company is generated from contracts that may include a single performance obligation (generally, a single type of engine) or multiple performance obligations (which may include an engine with aftermarket parts, different types of engines, etc.). A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. Revenue is measured at the transaction price which is based on the amount of consideration that the Company expects to receive in exchange for transferring the promised goods or services to the customer, including consideration other than cash. The Company may receive integral parts provided by customers for installation on custom ordered engines. Such parts are accounted for as noncash consideration since the Company obtains control of the contributed parts and is included in the transaction price at fair value. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company is required to estimate the total consideration expected to be received from contracts with customers. The consideration expected to be received may be variable based on the specific terms of the contract and the Company’s past practices. For contracts with multiple performance obligations, the Company allocates the total transaction price to distinct performance obligations based on directly observable data, if available, or the Company’s best estimate of the stand-alone selling price of each distinct performance obligation. The primary methods used to determine stand-alone selling price are directly observable prices and the cost plus a margin approach. The Company applies judgment in order to identify and determine the number of performance obligations, determine the total transaction price, allocate the transaction price to each performance obligation, and determine the appropriate timing of revenue recognition. Taxes collected from customers and remitted to governmental authorities are presented on a net basis; that is, such taxes are excluded from revenues. The Company’s payment terms are generally 60 days or less and its sales arrangements do not contain any significant financing components. Timing of revenue recognition. The Company recognizes revenue related to performance obligations in its contracts with customers when control passes to the customer. Control passes to the customer when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits from the asset. For the majority of the Company’s products, revenue is recognized at a point in time when the products are shipped or delivered to the customer based on the shipping terms as that is the point in time when control passes to the customer. For the years ended December 31, 2025 and 2024, the Company recognized revenue of $ 503.8 million and $ 355.2 million, respectively, related to products shipped or delivered at a point in time. The Company also recognizes revenue over time primarily when the Company’s performance obligations include enhancing a customer-controlled asset (generally when an engine is provided by the customer), constructing an asset with no alternative future use and the Company has an enforceable right to payment throughout the period as the services are performed, or providing services over time such as an extended warranty beyond the Company’s standard warranty. The Company recognizes revenue throughout the manufacturing process when constructing an asset based on labor hours incurred because the customer receives the benefit of the asset as the product is constructed. The Company believes labor hours incurred relative to total estimated labor hours at completion faithfully depicts the transfer of control to the customer. The Company recognizes revenue related to extended warranty programs based on the passage of time over the extended warranty period. For the years ended December 31, 2025 and 2024, the Company recognized revenue of $ 218.6 million and $ 120.8 million, respectively, for products manufactured and services provided over time. Shipping and handling costs. The Company accounts for shipping and handling costs as fulfillment costs which are recorded in Cost of sales in the Consolidated Statements of Income. This includes shipping and handling costs incurred after control of the asset has transferred to the customer as the Company has elected the practical expedient in ASC 606. Principal vs. agent considerations. From time to time, the Company may involve more than one party when providing goods or services to a customer. The Company determines whether it is the principal or agent in these transactions by evaluating the nature of its promise to the customer. The analysis of whether the Company is a principal or an agent in a transaction is performed for each good or services provided to the customer. The Company determines whether it controls the good or service before it is transferred to the customer by considering the following factors: a. Whether the Company is primarily responsible for fulfilling the promise to provide the specified good or service. b. Whether the Company has inventory risk before the specified good or service has been transferred to the customer or after transfer of control to the customer. c. Whether the Company has discretion in establishing the price for the specified good or service. 50 If the Company determines that it is the principal in the transaction, it recognizes revenues at the gross transaction price for the good or service. If the Company determines that is an agent in the transaction, it recognizes revenue at the net amount of the transaction price. Variable consideration . Variable consideration primarily includes rebates and discounts. The Company estimates the projected amount of rebates and discounts based on current assumptions, customer-specific information and historical experience. Variable consideration is recorded as a reduction of revenue to the extent that it is probable that there will not be significant changes to the Company’s estimate of variable consideration when any uncertainties are settled. Costs to obtain a contract. The Company has elected the practical expedient to recognize incremental costs to obtain a contract (primarily commissions) as expense when incurred since the amortization period of the asset that the Company otherwise would have recognized is one year or less. Disaggregation of Revenue The following table summarizes net sales by end market: (in thousands) For the Year Ended December 31, End Market 2025 2024 Power Systems $ 586,347 $ 325,749 Industrial 114,768 123,268 Transportation 21,290 26,950 Total $ 722,405 $ 475,967 The following table summarizes net sales by geographic area: (in thousands) For the Year Ended December 31, Geographic Area 2025 2024 United States $ 675,194 $ 419,706 North America (outside of United States) 21,270 24,466 Pacific Rim 22,309 24,652 Europe 3,373 7,090 Other 259 53 Total $ 722,405 $ 475,967 Contract Balances Most of the Company’s contracts are for a period of less than one year; however, extended warranty contracts extend beyond one year. The timing of revenue recognition may differ from the time of invoicing to customers and these timing differences result in contract assets, or contract liabilities on the Company’s Consolidated Balance Sheets. Contract assets include amounts related to the contractual right to consideration for completed performance when the right to consideration is conditional. The Company records contract liabilities when cash payments are received or due in advance of performance. The fair value of noncash consideration of parts provided by customers is recorded in contract liabilities. Contract assets and contract liabilities are recognized at the contract level. (in thousands) As of December 31, 2025 2024 2023 Short-term contract assets (included in Contract assets ) $ 15,965 $ 21,462 $ 15,554 Short-term contract liabilities (included in Other accrued liabilities ) ( 3,486 ) ( 10,184 ) ( 2,741 ) Long-term contract liabilities (included in Noncurrent contract liabilities ) ( 1,699 ) ( 1,877 ) ( 2,401 ) Net contract assets $ 10,780 $ 9,401 $ 10,412 During the years ended December 31, 2025 and 2024, the Company recognized $ 9.2 million and $ 1.7 million of revenue upon satisfaction of performance obligations related to amounts that were included in the net contract liabilities balance as of December 31, 2024 and 2023, respectively. 51 Remaining Performance Obligations The Company has elected the practical expedient to not disclose remaining performance obligations that have expected original durations of one year or less. For performance obligations that extend beyond one year, the Company had $ 2.1 million of remaining performance obligations as of December 31, 2025 primarily related to extended warranties. The Company expects to recognize revenue related to these remaining performance obligations of approximately $ 0.4 million in 2026, $ 1.5 million in 2027, $ 0.2 million in 2028, and none in 2029 and beyond. Note 3. Weichai Transactions Weichai Shareholder’s Loan Agreements The Company entered into a $ 105.0 million Shareholder’s Loan Agreement (the “SLA”) with Weichai in August 2024. The SLA was fully repaid during the second quarter of 2025. See additional discussion of these debt agreements in Note 6. Debt. Weichai Collaboration Arrangement and Related Party Transactions The Company and Weichai executed a strategic collaboration agreement (the “Collaboration Agreement”) on March 20, 2017, in order to achieve their respective strategic objectives and enhance the strategic cooperation alliance to share experiences, expertise and resources . On March 22, 2023, the Collaboration Agreement was extended for an additional term of three years , expiring in March 2026. The Company has 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 evaluates whether an arrangement is a collaborative arrangement at its inception ba sed on the facts and circumstances specific to the arrangement. The Company also reevaluates whether an arrangement qualifies or continues to qualify as a collaborative arrangement whenever there is a change in either the roles of the participants or the participants’ exposure to significant risks and rewards dependent on the ultimate commercial success of the endeavor. For those collaborative arrangements where it is determined that the Company is the principal participant, costs incurred and revenue generated from third parties are recorded on a gross basis in the financial statements. Purchases of inventory from Weichai were $ 39.8 million and $ 21.5 million for the years ended December 31, 2025 and 2024, respectively. In January 2022, PSI and 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. In addition to sales, Baudouin will manage service, support, warranty claims, and technical requests. Refer to the Consolidated Balance Sheets and Statements of Income for detailed related party information. During the year ended December 31, 2025, the Company and KION North America Corporation ("KNA"), a subsidiary of Weichai, entered into an agreement to settle development costs incurred by the Company related to a 2.4L dual-fuel engine intended for use by KNA in the production of materials handling equipment. See Note 16 for further details. See Note 16. Related Party Transactions for information regarding the purchase agreement with Shandong Weichai Import & Export Corporation (“SWIEC”), an affiliate of Weichai, KION North America Corporation ("KNA"), and manufacture of record (“MOR”) agreement with Weichai. Note 4. Property, Plant and Equipment Property, plant and equipment by type were as follows: (in thousands) As of December 31, Property, Plant and Equipment 2025 2024 Leasehold improvements $ 11,268 $ 8,352 Machinery and equipment 53,306 48,643 Construction in progress 3,151 2,454 Total property, plant and equipment, at cost 67,725 59,449 Accumulated depreciation ( 44,711 ) ( 44,043 ) Property, plant and equipment, net $ 23,014 $ 15,406 52 Note 5. Goodwill and Other Intangibles Goodwill The carrying amount of goodwill at both December 31, 2025 and 2024 was $ 29.8 million. Accumulated impairment losses at both December 31, 2025 and 2024 were $ 11.6 million. Other Intangible Assets Components of intangible assets are as follows: (in thousands) As of December 31, 2025 Gross Carrying Value Accumulated Amortization Net Book Value Customer relationships $ 34,940 $ ( 33,751 ) $ 1,189 Developed technology 700 ( 700 ) — Trade names and trademarks 1,700 ( 1,653 ) 47 Total $ 37,340 $ ( 36,104 ) $ 1,236 (in thousands) As of December 31, 2024 Gross Carrying Value Accumulated Amortization Net Book Value Customer relationships $ 34,940 $ ( 32,589 ) $ 2,351 Developed technology 700 ( 700 ) — Trade names and trademarks 1,700 ( 1,597 ) 103 Total $ 37,340 $ ( 34,886 ) $ 2,454 Estimated future amortization expense for intangible assets as of December 31, 2025 is as follows: (in thousands) Year Ending December 31, Estimated Amortization 2026 $ 997 2027 230 2028 3 2029 4 2030 and beyond 2 Total $ 1,236 53 Note 6. Debt The Company’s outstanding debt consisted of the following: (in thousands) As of December 31, 2025 As of December 31, 2024 Amount Rate (2) Amount Rate (2) Maturity Date Short-term financing: Revolving Credit Agreement 1 $ — — % $ 95,000 6.52 % Shareholder’s Loan Agreement — — % 25,000 8.49 % August 31, 2025 Total short-term debt $ — $ 120,000 Long-term debt: Revolving Credit Agreement 1 $ 95,000 6.35 % $ — — % July, 30 2027 Finance leases and other debt 1,617 ** 184 ** Various Total long-term debt and finance leases 96,617 184 Less: Current maturities of long-term debt and finance leases 383 130 Long-term debt $ 96,234 $ 54 1 Unamortized financing costs and deferred fees on the amended Revolving Credit Agreement are not presented in the above table as they are classified in Prepaid expenses and other current assets on the Consolidated Balance Sheet. Unamortized debt issuance costs, were $ 1.0 million and $ 0.4 million at December 31, 2025 and 2024, respectively . 2 Includes the weighted average interest rate. ** Finance lease obligations are a non-cash financing activity. See Note 8. Leases . The Company paid $ 7.8 million and $ 12.6 million in cash for interest in 2025 and 2024, respectively. Revolving Credit Agreement and Shareholder’s Loan Agreement On August 30, 2024, the Company closed on the Revolving Credit Agreement , with Standard Chartered Bank (“Standard Chartered”) and two other lenders. The Revolving Credit Agreement allowed the Company to borrow up to $ 120.0 million and had a maturity date of August 30, 2025 . The Revolving Credit Agreement was subject to customary events of default and covenants, including minimum consolidated EBITDA and Consolidated Interest Coverage Ratio covenants for the third and fourth quarters of 2024 and the first and second quarters of 2025. Borrowings under the Revolving Credit Agreement incurred interest at the applicable Secured Overnight Financing Rate (“SOFR”) plus 2.00 % per annum. The obligations under the Revolving Credit Agreement were unconditionally guaranteed, on a joint and several basis, by certain wholly-owned, existing and subsequently acquired or formed direct and indirect subsidiaries of the Company, subject to customary exceptions. The obligations under the Revolving Credit Agreement were secured by substantially all assets of the Company and the Company’s wholly-owned subsidiaries. In addition, the Company paid fees of $ 0.6 million related to the Revolving Credit Agreement which were deferred and amortized over the term of the Revolving Credit Agreement. As part of the closing of the Revolving Credit Agreement , the Company made an initial draw in the amount of $ 100.0 million . The Company utilized the amount drawn under the Revolving Credit Agreement (i) to repay the outstanding balance of approximately $ 40.0 million under the Company’s Fourth Amended and Restated Uncommitted Revolving Credit Agreement, dated March 22, 2024, by and among the Company and Standard Chartered; and (ii) to prepay approximately $ 60.0 million under previous shareholder loan agreements between PSI and Weichai. In connection with the Revolving Credit Agreement , on August 30, 2024, the Company also entered into a new SLA with Weichai, which allowed the Company to borrow up to $ 105.0 million and expired August 31, 2025 . Borrowings under the SLA incurred interest at the applicable SOFR, plus 4.05 % per annum. If the interest rate for any loan was lower than Weichai’s borrowing cost, the interest rate for such loan would be equal to Weichai’s borrowing cost plus 1.0 % . The borrowing requests made under the SLA were subject to Weichai’s discretionary approval. The payment of the borrowings under the SLA was subordinated in all respects to the Revolving Credit Agreement with the exception that the Company was allowed to make a single payment of $ 10.0 million to Weichai. The $ 60.0 million portion of the initial advance under the Revolving Credit Agreement was applied to pay all principal, interest, and other amounts outstanding under the Shareholder’s Loan Agreements that the Company was previously party to with Weichai except for $ 25.0 million. In January 2025, the Company amended the Revolving Credit Agreement. After the amendment date, the Company was able to repay the outstanding balance under the 54 SLA in principal and interest provided there are no new borrowings under the SLA. In June 2025, the Company made the final payment of outstanding balances and fully repaid the SLA. On July 30, 2025, the Company closed on the Second Amendment (the “Amendment”) to the Revolving Credit Agreement with Standard Chartered and three other lenders. The Amendment continues to enable the Company to borrow under a revolving line of credit secured by substantially all the Company’s tangible and intangible assets. The Amendment extended the maturity to July 30, 2027, and increased the borrowing capacity of the revolving line of credit to a maximum of $ 135.0 million. The Amendment is subject to customary events of default and quarterly covenants, including minimum consolidated EBITDA, consolidated interest coverage ratio, and consolidated leverage ratio covenants for each fiscal quarter ending hereafter. Borrowings under the Amendment will incur interest at the applicable Secured Overnight Financing Rate (“SOFR”) plus 2.10 %. In the event the Company’s majority shareholder, Weichai, holds less than fifty percent ( 50 %) of the common equity of the Company, the interest rate under the Amendment will increase to the applicable SOFR plus 2.60 % per annum. The obligations under the Amendment remain unconditionally guaranteed, on a joint and several basis, by certain wholly-owned, existing and subsequently acquired or formed direct and indirect subsidiaries of the Company, subject to customary exceptions. In addition, the Company paid fees of $ 1.2 million related to the Amendment which are deferred and amortized over the term of the Amendment . As of December 31, 2025 , the Company had $ 95.0 million outstanding under the amended Revolving Credit Agreement. 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 . The Company's total accrued interest for the Revolving Credit Agreement was $ 0.3 million and $ 1.2 million as of December 31, 2025 and 2024, respectively . Accrued interest is included within Other Accrued Liabilities on the Consolidated Balance Sheets. The below schedule of remaining maturities of long-term debt excludes finance leases (refer to Item 8., Note 8. Leases ). (in thousands) Year Ending December 31, Maturities of Long-Term Debt 2026 28 2027 95,010 Total $ 95,038 55 Note 7. Other Non-Current Liabilities On June 14, 2024, the Company executed a non-interest bearing note payable of $ 4.5 million upon settlement of a legal matter. The note payable is due May 2028 and is discounted based on an imputed interest rate of 6.66 % . The note payable includes an option for the Company to extend maturity of the note to September 2029 upon written notice before the thirty-seventh payment and, if such option is exercised, the maximum payment amount of the note increases to $ 4.8 million. As of both December 31, 2025 and 2024 t he current portion of the note of $ 0.7 million is included in other accrued liabilities in the Company’s Consolidated Balance Sheets. (in thousands) As of December 31, 2025 As of December 31, 2024 Note payable $ 2,810 $ 3,502 Unamortized discount ( 265 ) ( 473 ) Total $ 2,545 $ 3,029 The following table presents remaining maturities for the note payable as of December 31, 2025 : (in thousands) Maturities Discount Amortization Year ending December 31, 2026 740 160 Year ending December 31, 2027 1,328 97 Year ending December 31, 2028 742 8 Total note payable $ 2,810 $ 265 The Company recorded $ 0.3 million and $ 0.1 million discount amortization as interest expense as of December 31, 2025 and 2024, respectively . 56 Note 8. Leases Lease Policies The Company determines if an arrangement contains a lease in whole or in part at the inception of the contract. Right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term while lease liabilities represent the obligation to make lease payments arising from the lease. All leases with an expected term greater than twelve months result in the recognition of a ROU asset and a liability at the lease commencement date based on the present value of the lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the lease commencement date to determine the present value of the lease payments unless the implicit rate in the lease is readily determinable. The incremental borrowing rate is determined considering factors such as the lease term, the Company’s credit standing and the economic environment of the location of the lease. The lease term includes all non-cancellable periods and may include options to extend (or to not terminate) the lease when it is reasonably certain that the Company will exercise the option. Leases that have a term of 12 months or less at the commencement date are expensed on a straight-line basis over the lease term and do not result in the recognition of a ROU asset or lease liability. The Company classifies leases as finance leases when (i) there is a transfer of ownership of the underlying asset by the end of the lease term, (ii) the lease contains an option to purchase the asset that the Company is reasonably certain will be exercised, (iii) the lease term is for the majority of the remaining economic life of the asset, or (iv) the present value of the lease payments and any residual value guarantee equals or substantially exceeds the fair value of the asset. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense for finance leases is generally front-loaded as the finance lease ROU asset is depreciated on a straight-line basis, but interest expense on the lease liability is recognized using the interest method which results in more expense during the early years of the lease. Variable lease payments are expensed in the period in which the obligation for those payments is incurred. The Company has elected to combine lease and non-lease components, such as fixed maintenance costs, as a single lease component in calculating ROU assets and lease liabilities for all classes of leased assets. Leases The Company has obligations under lease arrangements primarily for facilities, equipment and vehicles. These leases have original lease periods expiring between March 2026 and March 2036. The following table summarizes the lease expense by category in the Consolidated Statements of Income: (in thousands) For the Year Ended December 31, 2025 2024 Cost of sales $ 11,082 $ 7,603 Research, development and engineering expenses 318 326 Selling, general and administrative expenses 279 266 Interest expense 100 8 Total $ 11,779 $ 8,203 57 The following table summarizes the components of lease expense and income: (in thousands) For the Year Ended December 31, 2025 2024 Operating lease cost $ 8,789 $ 6,126 Finance lease cost: Amortization of ROU asset 367 66 Interest expense 100 8 Short-term lease cost 744 861 Variable lease cost 1,779 1,142 Sublease income — — Total lease cost, net $ 11,779 $ 8,203 The following table presents supplemental cash flow information related to leases: (in thousands) For the Year Ended December 31, 2025 2024 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows paid for operating leases $ 7,887 $ 6,063 Operating cash flows paid for interest portion of finance leases 100 8 Financing cash flows paid for principal portion of finance leases 339 76 Right-of-use assets obtained in exchange for lease obligations Operating leases 35,709 1,139 Finance leases 1,840 — As of December 31, 2025 and 2024, t he weighted-average remaining lease term was 8.0 years and 5.3 years for operating leases and 4.2 years and 1.2 years for finance leases, respectively. As of December 31, 2025 and 2024, the weighted-average discount rate was 7.1 % and 7.5 % for operating leases, respectively, and 6.9 % and 6.5 % for finance le ases, respectively. 58 The following table presents supplemental balance sheet information related to leases: (in thousands) As of December 31, 2025 2024 Operating lease ROU assets, net $ 52,911 $ 23,275 Operating lease liabilities, current 6,346 4,503 Operating lease liabilities, non-current 49,397 20,663 Total operating lease liabilities $ 55,743 $ 25,166 Finance lease ROU assets, net 1 $ 1,533 $ 78 Finance lease liabilities, current 355 78 Finance lease liabilities, non-current 1,224 16 Total finance lease liabilities $ 1,579 $ 94 1. Included in Property, plant and equipment , net for finance leases on the Consolidated Balance Sheets. The following table presents maturity analysis of lease liabilities as of December 31, 2025: (in thousands) Year Ending December 31, Operating Leases Finance Leases 2026 $ 10,104 $ 451 2027 10,331 434 2028 9,489 434 2029 8,652 415 2030 7,262 75 Thereafter 28,104 — Total undiscounted lease payments 73,942 1,809 Less: imputed interest 18,199 230 Total lease liabilities $ 55,743 $ 1,579 Note 9. Fair Value of Financial Instruments For assets and liabilities measured at fair value on a recurring and nonrecurring basis, a three-level hierarchy of measurements based upon observable and unobservable inputs is used to arrive at fair value. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about valuation based on the best information available in the circumstances. Depending on the inputs, the Company classifies each fair-value measurement as follows: • Level 1 – based on quoted prices in active markets for identical assets or liabilities; • Level 2 – based on other significant observable inputs for the assets or liabilities through corroborations with market data at the measurement date; and • Level 3 – based on significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date. Financial Instruments Measured at Carrying Value Current Assets Cash and cash equivalents (Level 1) are measured at carrying value, which approximates fair value because of the short-term maturities of these instruments. 59 Debt The Company measured its material debt obligations and notes payable at original carrying value. The fair value of the Revolving Credit Agreement and other short-term financing approximated carrying value, as it consisted primarily of variable rate loans. The Company measured its non-interest bearing note payable using a rate which the Company could obtain financing of similar nature from other sources at the date of the transaction. The unamortized discount is reported in the Consolidated Balance Sheets as a deduction from the face amount of the note payable. The Company measured its material debt obligations and note payable using Level 2 inputs as follows: (in thousands) As of December 31, 2025 Carrying Value Fair Value Level 1 Level 2 Level 3 Revolving Credit Agreement $ 95,000 $ — $ 95,000 $ — Note payable 2,810 — 2,810 — (in thousands) As of December 31, 2024 Carrying Value Fair Value Level 1 Level 2 Level 3 Revolving Credit Agreement $ 95,000 $ — $ 95,000 $ — Note payable 3,502 — 3,502 — Other financing 25,000 — 25,000 — Other Financial Assets and Liabilities In addition to the methods and assumptions used for the financial instruments discussed above, accounts receivable, net income tax receivable, accounts payable, and certain accrued expenses are measured at carrying value, which approximates fair value because of the short-term maturities of these instruments. Note 10. Defined Contribution Plans The Company sponsors a defined contribution plan for its current employees. For the years ended December 31, 2025 and 2024, the Company incurred plan costs of $ 3.0 million and $ 2.0 million, respectively. Note 11. Commitments and Contingencies Legal Contingencies The legal matters discussed below and others could result in losses, including damages, fines, civil penalties and criminal charges, which could be substantial. The Company records accruals for these contingencies to the extent the Company concludes that a loss is both probable and reasonably estimable. Regarding the matters disclosed below, unless otherwise disclosed, the Company has determined that liabilities associated with these legal matters are reasonably possible; however, unless otherwise stated, the possible loss or range of possible loss cannot be reasonably estimated. Given the nature of the litigation and investigations and the complexities involved, the Company is unable to reasonably estimate a possible loss for all such matters until the Company knows, among other factors the following: • what claims, if any, will survive dispositive motion practice; • the extent of the claims, particularly when damages are not specified or are indeterminate; • how the discovery process will affect the litigation; • the settlement posture of the other parties to the litigation; and • any other factors that may have a material effect on the litigation or investigation. However, the Company could incur judgments, enter into settlements or revise its expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on the Company’s results of operations in the period in which the amounts are accrued and/or liquidity in the period in which the amounts are paid. Jerome Treadwell v. the Company In October 2018, a punitive class-action complaint was filed against the Company and NOVAtime Technology, Inc. (“NOVAtime” or “Plaintiff”) in the Circuit Court of Cook County, Illinois. In December 2018, NOVAtime removed the case to the U.S. District Court for the Northern District of Illinois, Eastern Division (the “Court”) under the Class Action Fairness Act. Plaintiff has since voluntarily dismissed NOVAtime from the lawsuit without prejudice and filed an amended complaint in 60 April 2019. The operative, amended complaint asserts violations of the Illinois Biometric Information Privacy Act (“BIPA”) in connection with employees’ use of the time clock to clock in and clock out using a finger scan and seeks statutory damages, attorneys’ fees, and injunctive and equitable relief. An aggrieved party under BIPA may recover (i) $ 1,000 per violation if the Company is found to have negligently violated BIPA or (ii) $ 5,000 per violation if the Company is found to have intentionally or recklessly violated BIPA plus reasonable attorneys’ fees. In May 2019, the Company filed its motion to dismiss the plaintiff’s amended complaint. In December 2019, the court denied the Company’s motion to dismiss. In January 2020, the Company moved for reconsideration of the court’s order denying the motion to dismiss, or in the alternative, to stay the case pending the Illinois Appellate Court’s ruling in McDonald v. Symphony Healthcare on a legal question that would be potentially dispositive in this matter. In February 2020, the court denied the Company’s motion for reconsideration, but required the parties to submit additional briefing on the Company’s motion to stay. In April 2020, the court granted the Company’s motion to stay and stayed the case pending the Illinois Appellate Court’s ruling in McDonald v. Symphony Healthcare . In October 2020, after the McDonald ruling, the court granted the parties’ joint request to continue the stay of the case f or 60 days . The court also ordered the parties to schedule a settlement conference with the Magistrate Judge in May 2021 which went forward without a settlement being reached. On May 22, 2023, the Company filed the answer to the amended complaint. Plaintiff and PSI have since reached a preliminary settlement of the case, and Plaintiff filed an Unopposed Motion for Preliminary Approval of Class Action Settlement on February 23, 2024. On February 5, 2025 Plaintiff filed an Unopposed Motion for Final Approval of the Class Settlement, which the Court granted on February 7, 2025. As of December 31, 2024, the Company had recorded an estimated liabili ty of $ 2.4 million , recorded within Other accrued liabilities on the Consolidated Balance Sheets related to the potential settlement of this matter. During the first quar ter of 2025, the final settlement amount of $ 2.4 million was paid to the Plaintiff, of which $ 0.7 million was paid by the Company and $ 1.7 million was paid by the Company’s insurance carrier. Mast Powertrain v. the Company In February 2020, the Company received a demand for arbitration from Mast Powertrain, LLC (“Mast”) pursuant to a development agreement entered into in November 2011 (the “Development Agreement”). Mast claimed that it was owed more than $ 9.0 million in past royalties and other damages for products sold by the Company pursuant to the Development Agreement. The Company disputed Mast’s damages, denied that any royalties are owed to Mast, denied any liability, and counterclaimed for overpayment on invoices paid to Mast. Mast subsequently clarified its claim for past royalties owed to be approximately $ 4.5 million. In July 2021, the Company reached a settlement with Mast to resolve past claims for royalties owed for $ 1.5 million which the Company had previously recorded within Selling, general and administrative expenses in the Consolidated Statement of Income for the year-ended December 31, 2020 . The Company fully paid the settlement and had no recognized liability as of both December 31, 2025 and 2024. In September 2023, Mast filed a lawsuit against the Company in the Eastern District of Texas Federal Court, alleging, among other things, damages of approximately $ 6.0 million for fraudulent inducement leading to the 2021 arbitration settlement agreement and breach of said settlement agreement. Upon court order, the Company participated in separate mediations in May 2024 and December 2024, and no settlement was reached. The Company has filed a motion to stay the lawsuit and compel it to arbitration, and the Court granted that motion on January 31, 2025. As of both December 31, 2025 and 2024, the Company had recorded an estimated liabili ty of $ 0.9 million , recorded within Other accrued liabilities on the Consolidated Balance Sheets related to the potential settlement of this matter. Gary Winemaster Litigation v. The Company In August 2021, the Company’s former Chairman of the Board and former Chief Executive Officer and President, Gary Winemaster (“Winemaster”) filed suit in the Court of Chancery of the State of Delaware against the Company and Travelers Casualty and Surety Company of America (“Travelers”) alleging the Company’s breach of its advancement obligations under Winemaster’s indemnification agreement and Travelers’ breach of the side A policy between Traveler’s and the Company of which Winemaster is a beneficiary. In his complaint, Winemaster was seeking reimbursement under his indemnification agreement in excess of $ 7.2 million of attorney’s fees plus interest incurred by Winemaster in his defense of the Department of Justice (“DOJ”) case, U.S. v. Winemaster et al. Since the filing of the complaint, the Company estimates that Travelers has paid approximately $ 8.8 million to Winemaster’s attorneys, Latham and Watkins, under the Company’s side A policy to settle existing outstanding attorney’s fees. Travelers is seeking reimbursement from the Company for those advances pursuant to the terms of the side A policy. In October 2021, the Company and Winemaster entered into a Stipulation and Advancement Order to handle all future attorney’s fees relating to his DOJ and SEC cases, to the extent not reimbursed by Travelers under the side A po licy. In June 2024, the Company reached a settlement with Travelers for $ 4.5 million, resulting in a $ 4.3 million gain that was recorded within Selling, General and Administrative expenses on the Consolidated Statements of Income. As of both December 31, 2025 and 2024, the Company recorded the aforementioned settlement liability within Other noncurrent liabilities with the current portion within Other accrued liabilities on the Consolidated Balance Sheets. Refer to Note 7. Other Non-Current Liabilities for additional information related to this settlement. Indemnification Agreements The Company holds a directors’ and officers’ liability insurance policy, which is renewed annually and currently expires in July 2026. The insurance policy includes standard exclusions including for any previously pending litigation. 61 Other Commitments At December 31, 2025, the Company had four outstanding letters of credit totaling $ 1.8 million . The letters of credit primarily serve as collateral for the Company for certain facility leases and insurance policies. As discussed in Note 1. Summary of Significant Accounting Policies and Other Information , the Company had restricted cash of $ 3.7 million at December 31, 2025 related to these letters of credit and cash held in escrow due to a customer agreement. Note 12. Income Taxes The Company’s operations are located in the United States, therefore, the tax footnote includes only federal and state domestic tax obligations. For the years ended December 2025 and 2024, the Company recognized pretax income of $ 103.4 million and $ 70.2 million, respectively. Income tax (benefit) expense was as follows: (in thousands) For the Year Ended December 31, 2025 2024 Current tax expense Federal $ 2,510 $ 443 State 1,757 389 Total current tax expense $ 4,267 $ 832 Deferred tax (benefit) expense Federal $ ( 4,949 ) $ 229 State ( 9,941 ) ( 139 ) Total deferred tax (benefit) expense ( 14,890 ) 90 Total tax (benefit) expense $ ( 10,623 ) $ 922 A reconciliation between the Company’s effective tax ra te on income before income taxes and the statutory tax rate in accordance with ASU 2023-09 is as follows: (in thousands) For the Year Ended December 31, 2025 2024 Amount Percent Amount Percent Statutory U.S. Federal tax rate $ 21,706 21.0 % $ 14,742 21.0 % State income tax, net of federal benefit 1 ( 8,520 ) ( 8.3 ) % 469 0.7 % Tax credits ( 839 ) ( 0.8 ) % ( 670 ) ( 1.0 ) % Changes in valuation allowance ( 24,091 ) ( 23.3 ) % ( 13,390 ) ( 19.0 ) % Nontaxable and nondeductible items 520 0.5 % 27 — % Changes in unrecognized tax benefits ( 443 ) ( 0.4 ) % ( 110 ) ( 0.2 ) % Other 2 1,044 1.0 % ( 146 ) ( 0.2 ) % Effective Tax Rate $ ( 10,623 ) ( 10.3 ) % $ 922 1.3 % 1 The state and local jurisdictions contributing to the majority (greater than 50%) of the tax effect in this category include Wisconsin, Pennsylvania, Illinois, and Texas. 2 Other represents the aggregation of individually insignificant reconciling items that do not meet the quantitative threshold for separate presentation in accordance with ASC 740, as amended by ASU 2023-09. Qualitative Explanation of Effective Tax Rate Drivers The Company’s effective tax rate of ( 10.3 )% for 2025 differed significantly from the statutory U.S. federal rate of 21.0 % primarily due to a large decrease in the valuation allowance following the Company’s removal of substantial doubt about its 62 ability to continue as a going concern and improved financial performance. The reduction in the valuation allowance resulted in a significant tax benefit in 2025. Significant components of deferred income tax assets and liabilities consisted of the following: (in thousands) As of December 31, 2025 2024 Deferred tax assets: Operating lease liability $ 14,203 $ 6,420 Net operating loss carryforwards 6,035 7,454 Research and development credits 2,584 4,818 Other state credits 2,284 3,142 Inventory 2,213 3,925 Accrued warranty 2,029 3,392 Other accrued expenses 1,544 5,042 Capitalized research and development costs — 9,884 Other 2,266 2,973 Total deferred tax assets 33,158 47,050 Valuation allowance ( 183 ) ( 38,498 ) Total deferred tax assets, net of valuation allowance $ 32,975 $ 8,552 Deferred tax liabilities: ROU operating lease asset $ ( 13,452 ) $ ( 5,827 ) Intangible amortization ( 2,844 ) ( 1,846 ) Depreciation on property, plant and equipment ( 3,357 ) ( 2,008 ) Other — ( 439 ) Total deferred tax liabilities $ ( 19,653 ) $ ( 10,120 ) Net deferred tax asset (liability) $ 13,322 $ ( 1,568 ) A valuation allowance is required to be established or maintained when, based on currently available information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The guidance on accounting for income taxes provides important factors in determining whether a deferred tax asset will be realized, including whether there has been sufficient taxable income in recent years and whether sufficient income can reasonably be expected in future years in order to utilize the deferred tax asset. Through March 31, 2025, the Company maintained a full valuation allowance against its deferred tax assets due to significant negative evidence, about realizability of the assets, including cumulative losses and substantial doubt about its ability to continue as a going concern. Due to the successful refinancing of its debt, the Company concluded that substantial doubt about its ability to continue as a going concern no longer exists. After evaluating all available evidence, including the alleviation of substantial doubt about the Company’s ability to continue as a going concern, recent and forecasted earnings, historical performance, and the Company’s improved financial condition, management determined that it is more likely than not that its deferred tax assets will be realized. As a result, the Company released most of its valuation allowance during the second quarter of 2025 and now maintains a valuation allowance related to a capital loss carryforward resulting in total valuation allowance of $ 0.2 million and $ 38.5 million as of December 31, 2025 and 2024 , respectively. For 2025, the release of the valuation allowance of $ 38.3 million consisted of $ 24.1 million of federal and $ 14.2 million of state deferred tax assets. As of December 31, 2025, the Company had $ 6.1 million in research and development and state tax credit carryforwards which begin to expire in 2026 . As of December 31, 2025, the Company had $ 7.6 million of state net operating loss carryforwards that are available to offset taxable income in the future. The state net operating loss carryforwards begin to expire in 2031. 63 Cash payments for income taxes, disaggregated by jurisdiction, were as follows: (in thousands) For the Year Ended December 31, 2025 2024 Federal $ 7,310 $ 652 State 1,708 962 Total $ 9,018 $ 1,614 Income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) in the following jurisdictions: (in thousands) For the Year Ended December 31, 2025 2024 State Wisconsin $ 744 * Pennsylvania 460 * Illinois * 700 Minnesota * 126 *Jurisdiction below the threshold for the period presented The change in unrecognized tax benefits excluding interest and penalties were as follows: (in thousands) For the Year Ended December 31, 2025 2024 Balance at beginning of year $ 1,696 $ 1,819 Additions based on tax positions related to the current year 153 129 Additions for tax positions of prior years 35 12 Reduction for tax positions of prior years ( 623 ) $ ( 264 ) Balance at end of year $ 1,261 $ 1,696 The amount of unrecognized tax benefits, that if recognized, would affect the annual effective tax rate was approximately $ 1.3 million and $ 0 million as of December 31, 2025 and 2024, respectively. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2025 and 2024, the amount accrued for interest and penalties was not material. The major jurisdictions subject to examination by the relevant tax authorities and open tax years, stated as the Company’s fiscal years, are as follows: Jurisdiction Open Tax Years U.S. Federal 2017 to 2025 U.S. States 2017 to 2025 Recent Tax Legislation The One, Big, Beautiful Bill Act (the “Act”) was signed into law on July 4, 2025. The Act contains significant tax law changes with various effective dates affecting business taxpayers. Among the tax law changes that will impact the Company relate to the timing of certain tax deductions including depreciation expense, R&D expenditures and interest expense. As a result, the Company recognized incremental tax timing benefits primarily related to the restoration of 100% bonus depreciation and the ability to immediately expense R&D costs under Section 174. These changes did not have a material impact on the Company’s overall income tax expense for the year. 64 Note 13. Stockholders’ Equity Common and Treasury Stock The changes in shares of Common and Treasury Stock are as follows: (in thousands) Common Shares Issued Treasury Stock Shares Common Shares Outstanding Balance as of December 31, 2023 23,117 149 22,968 Net shares issued for stock awards — ( 32 ) 32 Balance as of December 31, 2024 23,117 117 23,000 Net shares issued for stock awards — ( 41 ) 41 Balance as of December 31, 2025 23,117 76 23,041 Preferred Stock The Company is authorized to issue 5,000,000 shares of Preferred stock, par value $ 0.001 per share. The Preferred stock may be designated into one or more series as determined by the Board. As of December 31, 2025, the Board had authorized two series of Preferred stock. At December 31, 2025 and 2024, there were no shares of Preferred stock outstanding. Note 14. Stock-Based Compensation The Company has an incentive compensation plan (the “2012 Plan”), which authorizes the granting of a variety of different types of awards including, but not limited to, non-qualified stock options, incentive stock options, Stock Appreciation Rights (“SARs”), Restricted Stock Awards (“RSAs”), deferred stock and performance units to its executive officers, employees, consultants and Directors. The 2012 Plan is administered by the Compensation Committee of the Board and expires on May 26, 2028. Under the 2012 Plan, 830,925 shares were initially made available for awards, with 700,000 additional shares added to the 2012 Plan in 2013. Shares that were not delivered pursuant to forfeited awards are added back to the pool of shares available for future awards. As of December 31, 2025, the Company had 363,066 shares available for issuance of future awards. To date, the Company’s granted awards have generally been either RSAs or SARs. SAR awards are typically share settled except for certain executives which are settled in cash. Share settlement entitles the recipients to receive, upon exercise, a number of shares of Common Stock equal to (i) the number of shares for which the SAR is being exercised multiplied by the value of one share of Common Stock on the date of exercise (determined as provided in the SAR award agreement), less (ii) the number of shares for which the SAR is being exercised multiplied by the applicable exercise price, divided by (iii) the value of one share of Common Stock on the date of exercise (determined as provided in the SAR award agreement). The exercised SAR is to be settled only in whole shares of Common Stock, and the value of any fractional share of Common Stock is forfeited. Cash settled awards are recognized in the Consolidated Balance Sheets as a liability and adjusted each reporting period for changes in share value until the settlement of the award. RSA grants represent Common Stock issued subject to forfeiture or other restrictions that will lapse upon satisfaction of specified conditions. Both SAR awards and RSA grants are time-based awards that generally vest over a 2 to 3-year vesting schedule (except grants to members of the Board which have a 1-year vesting schedule). SAR awards generally have a term of 10 years. Compensation expense for recipients of these time-based awards is recognized on a straight-line basis over the vesting period from the date of grant. The Company accounts for forfeitures as they occur rather than apply an estimated forfeiture rate. Stock-based compensation expense is primarily recorded in Selling, general and administrative expenses in the Consolidated Statements of Income. RSAs are valued based on the fair value of the common stock at grant date. For all SAR award assumptions, the Company used rates on the grant date of zero-coupon government bonds with maturities over periods covering the term of the awards. The Company considered the historical volatility of its stock price over a term similar to the expected life of the awards in determining expected volatility. The expected term is the period that the awards granted are expected to remain outstanding. The Company has never declared or paid a cash dividend on its Common Stock. 65 The following table represents stock-based compensation expense and the related income tax benefits: (in thousands) For the Year Ended December 31, 2025 2024 Stock-based compensation expense $ 427 $ 89 Income tax benefit $ — $ — SAR Awards The Company granted 700 SAR awards in 2025 and did not grant any in 2024. The assumptions used for determining the fair value of the SARs included the following: For the Year Ended December 31, 2025 2024 Market closing price of the Common Stock $ 57.14 $ 29.75 Exercise price $ 2.99 - $ 65.76 $ 2.99 Range of risk-free interest rates 3.7 % 4.4 % Weighted-average volatility 92.1 % 91.7 % Range of volatilities 92.1 % - 92.4 % 88.8 % - 91.7 % Expected term 5.00 years 5.00 years Dividend yield — % — % Weighted-average grant date fair value $ 40.23 - $ 55.13 $ 28.00 SAR activity for awards classified in equity consisted of the following: Number of Shares under SARs Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2023 125,862 6.13 6.14 $ 3 Granted — — — Exercised ( 50,567 ) 5.00 — Forfeited — — — Expired — — — Outstanding at December 31, 2024 75,295 6.88 4.24 2 Granted 700 65.76 — Other 1,500 — — Exercised ( 46,575 ) 7.51 3 Forfeited — — — Expired ( 750 ) 11.25 — Outstanding at December 31, 2025 30,170 7.39 4.24 $ 2 Exercisable at December 31, 2024 60,295 $ 8.10 3.38 1 Exercisable at December 31, 2025 21,970 $ 7.37 3.38 1 The total fair value of SARs that vested during both 2025 and 2024 w as less than $ 0.1 million. The total aggregate intrinsic value of SARs that vested during 2025 and 2024 w as less than $ 0.1 million and $ 0.1 million, respectively. Unrecognized compensation expense related to SARs as of December 31, 2025 was less than $ 0.1 million. As of December 31, 2025, the weighted-average period over which the unrecognized compensation cost is expected to be recognized was approximately 2.56 years. 66 Restricted Stock Awards Restricted stock activity consisted of the following: Shares Weighted-Average Grant Date Fair Value Balance as of December 31, 2023 15,400 $ 3.91 Granted 15,000 23.44 Forfeited — — Vested ( 15,400 ) 3.91 Balance as of December 31, 2024 15,000 $ 23.44 Granted 15,000 65.76 Forfeited — — Vested ( 15,000 ) 23.44 Balance as of December 31, 2025 15,000 $ 65.76 The total grant date fair value of restricted stock that vested during 2025 and 2024 was $ 0.4 million and $ 0.1 million, respectively . The total aggregate fair value of restricted stock that vested during 2025 and 2024 was $ 1.0 million and $ 0.2 million , respectively. Unrecognized compensation expense related to RSAs as of December 31, 2025 was $ 0.9 million . Note 15. Earnings Per Share The Company computes basic earnings per share by dividing net income by the weighted-average common shares outstanding during the year. Diluted earnings per share is calculated to give effect to all potentially dilutive common shares that were outstanding during the year. Weighted-average diluted common shares outstanding primarily reflect the additional shares that would be issued upon the assumed exercise of stock options and the assumed vesting of unvested share awards. The treasury stock method has been used to compute diluted earnings per share for 2025 and 2024. The Company issued SARs and RSAs, all of which have been evaluated for their potentially dilutive effect under the treasury stock method. The computations of basic and diluted earnings per share are as follows: (in thousands, except per share basis) For the Year Ended December 31, 2025 2024 Numerator: Net income – basic and diluted $ 113,987 $ 69,279 Denominator: Shares used in computing net income per share Weighted-average common shares outstanding - basic 23,022 22,983 Effect of dilutive securities 44 35 Weighted-average common shares outstanding – diluted 23,066 23,018 Earnings per common share Earnings per share of common stock – basic $ 4.95 $ 3.01 Earnings per share of common stock – diluted $ 4.94 $ 3.01 The aggregate number of shares excluded from the diluted earnings per share calculations because they would have been anti-dilutive were none and less than 0.1 million shares 2025 and 2024, respectively. For the twelve months ended December 31, 2025 and 2024, SARs and RSAs were not included in the diluted earnings per share calculations as they would have been anti-dilutive because the Company’s average stock price was less than or equal to the exercise price of the SARs or the grant price of the RSAs. 67 Note 16. Related Party Transactions Weichai Transactions See Note 3. Weichai Transactions for information regarding the SLA with Weichai and Collaboration Agreement . Other Related Party Transactions See Note 11. Commitments and Contingencies for information regarding the Company’s indemnification obligations related to certain former directors and officers of the Company. In January 2025, the Company entered into a five-year purchase agreement with SWIEC, for the exclusive purchase and distribution of certain engine and engine components for the fulfillment of a contract with a customer in North America. The supply agreement includes annual minimum requirements of products ordered during the initial term. If all minimum targets are met within the first three-year periods, the contract may be negotiated to extend beyond the five-year initial term. The annual minimum requirements are as follows: (in thousands) Year Ending December 31, 2026 $ 49,937 2027 49,937 2028 95,117 2029 95,117 Total $ 290,108 In February 2025, the Company entered into the MOR agreement with Weichai. The MOR agreement requires the Company to pay Weichai a fee of 1.75 % of gross revenues generated by the sale of certain engines manufactured by Weichai. Fees are due on a quarterly basis. The 2025 fee is $ 0.1 million. The MOR agreement expires in December 2029. During the year ended December 31, 2025, PSI and KNA, a subsidiary of Weichai, were negotiating the terms of an agreement for PSI to develop and supply a 2.4L dual-fuel engine for use by KNA in the production of materials handling equipment. Prior to entering into a written development agreement, KNA suspended its plans to purchase the engine. PSI had completed significant development milestones at the time of suspension. Effective December 31, 2025, the parties entered into a settlement agreement under which KNA paid approximately $ 0.5 million to resolve PSI's claims for development costs incurred. Under the settlement agreement, KNA retains the right to resume development through December 31, 2028, and is under no obligation to do so. Note 17. Segment Reporting Operating segments are defined as components of a business that can earn revenues and incur expenses for which discrete financial information is available that is reviewed on a regular basis by the chief operating decision maker (“CODM”). The Company operates as one business and geographic operating and reportable segment. Chief Operating Decision Maker The Company’s CODM is its Chief Executive Officer (“CEO”). The CEO oversees the strategic planning and direction of the Company, and the CEO has final approval in assessing the Company’s performance and allocating its resources. Identification of Reportable Segment The Company’s single reportable segment derives revenues primarily in North America from customers by designing, engineering, manufacturing, marketing and selling 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. Revenue is attributed to geographic areas based on the country of sale. The sources of external revenue by end market and geographic area are previously disclosed in Note 2. Revenue . The Company evaluated the basis for the CODM's decisions about the allocation of Company resources as well as the basis for the CODM's assessments of the evaluation of the Company's (segment) performance. Specifically, the Company evaluated the financial information that is generally provided and / or is available to the CODM. The Company’s CODM reviews consolidated statements of income to make decisions, allocate resources and assess performance. 68 Measurement The CODM assesses performance and decides how to allocate resources primarily using consolidated revenue by end market and consolidated net income (loss). The CODM uses consolidated net income (loss) to monitor budget and forecast information to actual results. The CODM reviews cash, accounts receivable, inventory, accounts payable, and total debt; however other long-lived asset information is not reviewed by the CODM. The accounting policies of the Company’s single reportable segment are the same as those described in the Note 1. Summary of Significant Accounting Policies and Other Information . The measure of segment assets is consolidated total assets presented in the Company’s Consolidated Balance Sheets. Note 1 Concentrations discloses customers individually accounting for more than 10% of the Company’s consolidated net sales. Significant Expenses Significant segment expenses are presented in the Consolidated Statement of Operations . Note 18. Subsequent Events On January 9, 2026, the Company completed the acquisition of MTL Manufacturing & Equipment, Inc. (“MTL”), a company that specializes in the welding and fabrication of steel components, ranging from large Switchgear Sub Bases to Electrical Enclosure assemblies utilized in the data center industry, to various size fuel tanks used in power generation, for a total purchase price of $ 11.1 million. The acquisition is expected to enhance the Company’s competitive position in the data center market through vertical integration of MTL's specialized manufacturing capabilities. The integration is designed to provide improved supply chain control, reduced lead times, and access to MTL's established UL certifications. The acquisition occurred after December 31, 2025, but prior to the issuance of these financial statements. The initial accounting for the acquisition, including the allocation of purchase price to the assets acquired and liabilities assumed, is not yet complete. Accordingly, the financial statements do not reflect any adjustments related to this acquisition. On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) exceeded presidential authority and were therefore invalid. The President immediately replaced the IEEPA tariffs with tariffs under alternative statutory authority, though the scope and duration of future tariffs remain uncertain. The Company is evaluating the impact of these developments on its supply chain costs and pricing. PSI may be entitled to refunds of IEEPA tariffs paid during 2025, though the process and timing for obtaining such refunds remain uncertain. To the extent the Company passed tariff costs through to customers, PSI may be required to reimburse customers for such amounts if the Company recovers IEEPA tariff refunds. The extent to which tariffs will be reimposed under alternative statutory authorities, and their ultimate scope and duration, cannot be determined at this time. Continued tariff uncertainty may materially affect the Company's costs, competitive position, and results of operations. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures. None.