The Company's acquisition of business and equity method investments consisted of the following transactions during the six months ended June 30, 2025 and the twelve months ended December 31, 2024. Acquisition and integration costs within the Condensed Consolidated Statements of Operations and Comprehensive Income consist of legal, accounting, advisory fees, and other integration costs related to the Merger, the acquisition of equity interest in DWS, the acquisition of SCF, and the acquisition of Citadel.

On May 30, 2025, the Company acquired Citadel for $69.7 million in cash consideration, subject to post-closing adjustments. We believe this acquisition will enhance our product portfolio and allow us to leverage Citadel's industrial platform. The acquisition qualifies as a business combination and will be accounted for using the acquisition method of accounting. The purchase price includes $3.0 million that was retained by the Company for purposes of funding any post-closing expenses and liabilities identified after the close of the transaction, if necessary.

In accordance with Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”), identifiable assets acquired and liabilities assumed were recorded at their estimated fair values on the date of acquisition. The allocation of the purchase price included in the current period balance sheet is based on the best estimate of management and is preliminary and subject to change. We will continue to obtain information to assist in determining the fair value of net assets acquired during the measurement period. The Company expects to finalize these amounts as soon as possible but no later than one year from May 30, 2025, the closing date of the acquisition.

The table below presents the preliminary allocation to the estimated fair value of identifiable assets acquired and liabilities assumed and the resulting goodwill as of May 30, 2025. Goodwill represents the future economic benefits arising from other assets acquired that cannot be individually identified and separately recognized. Based on the current tax treatment, goodwill is expected to be deductible for income tax purposes over a 15-year period.


(in thousands)	Preliminary Purchase Price Allocation
Cash and restricted cash	$	3,408
Trade receivables		13,059
Inventories		13,238
Prepaid expenses and other current assets		483
Property and equipment, net		8,576
Right of use assets – operating		1,193
Other long-term assets		51
Intangibles, net		23,800
Total assets		63,808
Accounts payable		6,111
Accrued expenses		1,539
Operating lease liabilities - current		552
Other current liabilities		143
Current portion of long-term debt and finance lease obligations		762
Operating lease liabilities - noncurrent		641
Long-term debt and finance lease obligations		2,623
Total liabilities		12,371
Net assets acquired		51,437
Goodwill		18,226
Total purchase consideration	$	69,663

The Company incurred transaction costs in connection with the acquisition in the amount of $0.2 million. The costs have been expensed as incurred and recognized in Acquisition and integration costs in the Condensed Consolidated Statements of Operations and Comprehensive Income.

The table below represents the detail of the intangible assets acquired and the respective amortization periods (amounts in thousands):

The fair values of identifiable intangible assets were prepared using an income valuation approach, which requires a forecast of expected future cash flows either using the relief-from royalty method or the multi-period excess earnings method, which are discounted to approximate their current value. The assumptions used to derive these values include significant judgments relating to baseline revenue and revenue growth rates, EBITDA margins, contributory asset charges, customer attrition rate, and discount rate. The estimated useful lives are based on our historical experience and expectations as to the duration of time that benefits from these assets are expected to be realized.

For the period from May 30, 2025 to June 30, 2025, we have included $4.7 million of revenues contributed by the business acquired. Due to the integration of operations since May 30, 2025, the closing date of the acquisition, it was impracticable to present stand-alone earnings since the date of the acquisition.

The unaudited supplemental pro forma information presented below has been prepared for the combined company as if the Citadel acquisition had occurred on January 1, 2024. The pro forma summary uses estimates and assumptions based on information available at the time. The Company believes the estimates and assumptions to be reasonable; however, the unaudited pro forma information is not necessarily indicative of what the combined company’s results would have been had the acquisition been completed as of the beginning of the periods as indicated, nor does it purport to project the Company’s future results. The unaudited pro forma information does not reflect any synergy savings that might have been achieved from combining the operations. Amounts are presented in thousands:

Pro forma information includes, among others, (i) incremental depreciation and amortization resulting from the property and equipment and intangible assets acquired, (ii) accounting policy alignment, (iii) adjustments to reflect non-recurring acquisition related costs incurred directly in connection with the Citadel acquisition as if it had occurred in the earliest period presented above, and (iv) the tax-related effects as though the Citadel acquisition had occurred on January 1, 2024.

On February 7, 2025, the Company acquired SCF in exchange for $17.7 million in cash consideration, subject to post-closing adjustments. SCF is a Canadian-domiciled entity and parent company to SCF Machining Corporation Vietnam Company Limited, a Vietnam-based company that was established to grow Innovex’s low-cost country supply chain by establishing an exclusive manufacturing vendor to provide Innovex with high quality, low price machined goods. The acquisition qualifies as a business combination and will be accounted for using the acquisition method of accounting.

In accordance with ASC 805, identifiable assets acquired and liabilities assumed were recorded at their estimated fair values on the date of acquisition. The allocation of the purchase price included in the current period balance sheet is based on the best estimate of management and is preliminary and subject to change. We will continue to obtain information to assist in determining the fair value of net assets acquired during the measurement period. The Company expects to finalize these amounts as soon as possible but no later than one year from the closing date of the acquisition.


(in thousands)	Preliminary Purchase Price Allocation
Cash and restricted cash	$	308
Inventories		758
Prepaid expenses and other current assets		722
Property and equipment, net		1,305
Right of use assets – operating		892
Other long-term assets		269
Total assets		4,254
Accounts payable		671
Accrued expenses		372
Operating lease liabilities - current		374
Operating lease liabilities - noncurrent		518
Total liabilities		1,935
Net assets acquired		2,319
Goodwill		15,402
Total purchase consideration	$	17,721

As discussed in Note 1. Summary of Business, on the Closing Date, the Merger was consummated. Following the Merger, Legacy Innovex became a wholly owned subsidiary of Dril-Quip, and the name “Dril-Quip, Inc.” was changed to “Innovex International, Inc.” As provided for in the Merger Agreement, Legacy Innovex paid a cash dividend of $75.0 million, or $2.39 per share, to the holders of Legacy Innovex Common Stock on September 6, 2024. The Merger was pursued given the enhanced global scale, footprint, and financial flexibility of combining the two companies. The Merger is accounted for as a reverse acquisition under ASC 805, where Legacy Innovex, the legal acquiree, is determined to be the accounting acquirer of Dril-Quip.

The accounting acquiree Dril-Quip’s stock price was used to measure the consideration transferred in the reverse acquisition, as Dril-Quip’s stock price was more reliably measurable than the value of the equity interest of the accounting acquirer Legacy Innovex, which was a privately held entity. The following table summarizes the consideration for the Merger (in thousands, except stock price and shares):

In accordance with ASC 805, identifiable assets acquired and liabilities assumed from Dril-Quip were recorded at their estimated fair values on the Closing Date. The allocation of the purchase price included in the current period balance sheet is based on the best estimate of management and is preliminary and subject to change. We will continue to obtain information to assist in determining the fair value of net assets acquired during the measurement period. The Company expects to finalize these amounts as soon as possible but no later than one year from the Closing Date.

The Merger resulted in a gain on bargain purchase recognized on the Consolidated Statements of Operations and Comprehensive Income due to the estimated fair value of the identifiable net assets acquired exceeding the purchase consideration transferred. Upon completion of its preliminary assessment, the Company concluded that all of the assets acquired and liabilities assumed have been identified and recognized, including any additional assets and liabilities not previously identified or recognized in the acquisition accounting, and that recording a gain on bargain purchase was appropriate and required under U.S. GAAP. The bargain purchase gain was due to the decrease in the share price of legacy Dril-Quip stock from the date the Merger Agreement was signed to the Closing Date, while the agreed upon ratio of Innovex shareholder’s ownership of the Combined Company, as stipulated in the Merger Agreement, remained the same.

The table below presents the preliminary allocation to the estimated fair value of identifiable assets acquired and liabilities assumed, and the resulting gain on bargain purchase as of the Closing Date. Measurement period adjustments were based upon information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of the amounts recognized at that date.


(in thousands)		Preliminary Purchase Price Allocation			Measurement Period Adjustments			Preliminary Purchase Price Allocation (as Adjusted)
Cash and restricted cash	$		154,312			—			154,312
Trade receivables			125,155			—			125,155
Contract assets			8,675			—			8,675
Inventories			148,958			—			148,958
Assets held for sale			1,535			—			1,535
Prepaid expenses and other current assets			20,023			—			20,023
Property and equipment, net			133,690			—			133,690
Right of use assets – operating			21,358			—			21,358
Deferred tax asset, net			124,634			(6,847	)		117,787
Other long-term assets			5,461			—			5,461
Total assets			743,801			(6,847	)		736,954
Accounts payable			48,887			—			48,887
Accrued expenses			28,906			—			28,906
Contract liabilities			14,332			—			14,332
Operating lease liabilities - current			2,080			—			2,080
Current portion of long-term debt and finance lease obligations			595			—			595
Other current liabilities			213			—			213
Long-term debt and finance lease obligations			1,645			—			1,645
Operating lease liabilities - noncurrent			15,397			—			15,397
Other long-term liabilities			1,814			—			1,814
Total liabilities			113,869			—			113,869
Net assets acquired			629,932			(6,847	)		623,085
Gain on bargain purchase			(92,659	)		6,847			(85,812	)
Total purchase consideration	$		537,273			—			537,273

(1) Represents the deferred tax asset adjustment recognized from a refinement of our estimated deferred tax positions by jurisdictions.

On May 1, 2023, Legacy Innovex acquired a 20% equity interest in DWS, via purchasing membership units of DWS, for the purchase price of $17.6 million in cash consideration. On November 29, 2024, the Company acquired the remaining 80% of the issued and outstanding equity of DWS, resulting in DWS becoming a wholly owned subsidiary of Innovex. DWS rents drilling equipment and related technology which is complimentary to the Company’s existing product lines.

Prior to the acquisition of the remaining 80% ownership interest in 2024, Legacy Innovex obtained significant influence over DWS through a 20% ownership and one board seat out of three total board seats of representation on the board of directors of DWS. The acquisition was accounted for as an equity method investment under Accounting Standards Codification Topic 323, Investments—Equity Method and Joint Ventures (“ASC 323”). The cost of the investment was $15.0 million more than the acquired underlying equity in DWS net assets. The difference was attributable to intangible assets of $13.0 million and equity method goodwill of $2.0 million. The difference pertaining to intangible assets was amortized to equity method earnings over the remaining useful life of the related asset. Transaction costs recognized in connection with the acquisition were $0.7 million and were capitalized as part of the equity investment. For the three months ended June 30, 2024, the Company recorded our proportionate share of DWS’s net income of $1.1 million, adjusted for $0.4 million amortization attributed to intangible assets, and DWS distributed $0.6 million of dividends to the Company, which were recorded as a reduction of the carrying value of the equity investment. For the six months ended June 30, 2024, the Company recorded our proportionate share of DWS’s net income of $1.9 million, adjusted for $0.7 million amortization attributed to intangible assets, and DWS distributed $1.6 million of dividends to the Company, which were recorded as a reduction of the carrying value of the equity investment.

As noted above, on November 29, 2024, the Company acquired the remaining 80% of the issued and outstanding equity of DWS. The purchase price for the acquisition consisted of $75.1 million in cash, subject to post-closing adjustments, and 1,918,558 shares of Company Common Stock. An additional $4.0 million of the purchase price was retained by the Company for purposes of funding any post-closing expenses and liabilities related to a patent infringement-related litigation matter to which DWS is a party. Refer to Note 17. Commitments and Contingencies for further details.

Because Innovex acquired control of DWS in the 2024 purchase, the acquisition was accounted for as a step acquisition in accordance with ASC 805. The Company remeasured its previously held 20% equity interest at its acquisition-date fair value of $27.6 million, which was determined using the implied enterprise value based on the purchase price. The resulting gain of $8.0 million was reflected within Gain on consolidation of equity method investment on the Consolidated Statements of Operations and Comprehensive Income in our Annual Report.

The table below presents the preliminary allocation to the estimated fair value of identifiable assets acquired and liabilities assumed and the resulting goodwill as of November 29, 2024. Goodwill is primarily attributable to the anticipated synergies expected from the integration of DWS. Based on the current tax treatment, $26.1 million of goodwill is expected to be deductible for income tax purposes over a 15-year period, while the remaining portion is not expected to be deductible for income tax purposes.


(in thousands)	Preliminary Purchase Price Allocation		Measurement Period Adjustments			Preliminary Purchase Price Allocation (as Adjusted)
Cash and restricted cash	$	9,530	$	—		$	9,530
Trade receivables		9,864		—			9,864
Indemnification asset (1)		—		1,775			1,775
Property and equipment, net		16,426		—			16,426
Right of use assets – operating		2,392		—			2,392
Intangibles, net		75,100		—			75,100
Total assets		113,312		1,775			115,087
Accounts payable		3,682		—			3,682
Accrued expenses		1,656		—			1,656
Other current liabilities (1)		—		2,218			2,218
Operating lease liabilities - current		423		—			423
Current portion of long-term debt and finance lease obligations		237		—			237
Long-term debt and finance lease obligations		588		—			588
Operating lease liabilities - noncurrent		1,969		—			1,969
Deferred income taxes		3,168		—			3,168
Total liabilities		11,723		2,218			13,941
Net assets acquired		101,589		(443	)		101,146
Goodwill		36,244		443			36,687
Total purchase consideration	$	137,833	$	—		$	137,833

(1) Represents the indemnification asset and corresponding liability related to unresolved legal matters that existed pre-acquisition in connection with the Impulse Litigation (as defined in Note 17. Commitments and Contingencies). This measurement period adjustment is a result of legal fees incurred to date on the pre-acquisition legal matter. Refer to Note 17. Commitments and Contingencies for further discussion.

Refer to Note 8. Intangible Assets and Goodwill for further discussion of accounting treatment for goodwill and other intangible assets recognized from these acquisitions.