NOTE 3. MERGERS AND ACQUISITIONS

Our acquisition of businesses consisted of the transactions described below during the nine months ended September 30, 2026 and the twelve months ended December 31, 2025. Acquisition and integration costs in our Condensed Consolidated Statements of Operations and Comprehensive Income represent expenditures directly associated with the closing and integration activities of the Merger and acquisitions completed, and include (i) legal, accounting, and advisory fees to complete the Merger and acquisitions and (ii) costs to integrate acquired businesses into our existing operations, including move, severance, and other integration costs (collectively, “acquisition and integration costs”).

SCF Machining Corporation

On February 7, 2025, we acquired SCF in exchange for $17.7 million in cash consideration. 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 our 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 was accounted for using the acquisition method of accounting.

Final Purchase Price Allocation

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. The table below presents the final purchase price allocation to the estimated fair value of identifiable assets acquired and liabilities assumed and the resulting goodwill as of February 7, 2025. Goodwill is primarily attributable to the anticipated cost reductions and supply chain flexibility expected from the integration of SCF. Based on the current tax treatment, goodwill is not expected to be deductible for income tax purposes.

We incurred transaction costs of $0.2 million in connection with the acquisition. The costs were expensed as incurred and recognized in Acquisition and integration costs in our Condensed Consolidated Statements of Operations and Comprehensive Income.

Citadel Casing Solutions

On May 30, 2025, we acquired Citadel for $69.7 million in cash consideration. We believe this acquisition enhances our product portfolio and allows us to leverage Citadel’s industrial platform. The acquisition qualifies as a business combination and is 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. As of September 30, 2026, we have disbursed the entirety of the retained $3.0 million based on post-closing expenses identified.

Final Purchase Price Allocation

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. The table below presents the final purchase price 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.

We incurred transaction costs of $1.2 million in connection with the acquisition. The costs were expensed as incurred and recognized in Acquisition and integration costs in our Condensed Consolidated Statements of Operations and Comprehensive Income.

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.

Drilling Innovative Solutions

On April 10, 2026, we acquired DIS for total purchase consideration of $17.6 million, which includes $4 million (the "earnout") of contingent payment obligations payable upon achievement of defined performance metrics within two years of closing. The carrying value of the earnout approximates its fair value. The purchase consideration, except for the earnout, has been paid in cash. DIS manufactures and distributes unique patented products to the oil and gas industry, including float valves and plug cement retainers. We believe this acquisition enhances our product portfolio and allows us to deliver additional value to our global customer base. The acquisition qualifies as a business combination and is accounted for using the acquisition method of accounting. DIS is expected to achieve the full $4 million earnout. Therefore, we recognized the full earnout as a liability with $2.4 million recorded within Other current liabilities and $1.6 million recorded within Other long-term liabilities in the Condensed Consolidated Balance Sheets as of September 30, 2026. The assets acquired and liabilities assumed in this acquisition were recorded based on preliminary estimates of their fair values as of the acquisition date. The estimated fair value of identifiable assets acquired (excluding goodwill) and liabilities assumed is $12.5 million, inclusive of $7.8 million of intangible assets. Goodwill was estimated at $5.1 million and 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. Pro forma results of operations for this acquisition and the final purchase price allocation to the estimated fair value of identifiable assets acquired and liabilities by category have not been presented because the effects of the acquisition were not material to the Condensed Consolidated Financial Statements.

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.

TCO Group AS

On July 1, 2026, we acquired TCO Group. TCO Group is engaged in the development, manufacturing, and supply of equipment, tools, and related services to the oil and gas industry. TCO Group’s product offering includes completion barrier plugs, tubing-conveyed perforating services, chemical injection systems and annulus pressure relief systems. These products are used in well completion and testing, perforation services, targeted downhole chemical delivery and automatic relief of trapped pressure between casing strings. The total purchase consideration of $90.8 million consisted of: (i) 1,060,713 shares of Company Common Stock, valued at $25.8 million at July 1, 2026; (ii) $61.9 million in cash, subject to certain adjustments; and (iii) $3.1 million of debt paid on behalf of the seller. The acquisition qualifies as a business combination and is accounted for using the acquisition method of accounting.

Preliminary Purchase Price Allocation

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. We expect to finalize these amounts as soon as possible but no later than one year from July 1, 2026, the closing date of the acquisition.

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.

Revenue and Earnings

For the period from July 1, 2026 to September 30, 2026, we have included $14.5 million of revenues contributed by the business acquired. Due to the integration of operations since July 1, 2026, the closing date of the acquisition, it was impracticable to present stand-alone earnings since the date of the acquisition.

Unaudited Supplemental Pro Forma Financial Information

The unaudited supplemental pro forma information presented below has been prepared for the combined company as if the TCO Group acquisition had occurred on January 1, 2025. 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 amortization resulting from the intangible assets acquired, (ii) accounting policy alignment, (iii) adjustments to reflect non-recurring acquisition related costs incurred directly in connection with the TCO Group acquisition as if it had occurred in the earliest period presented above, and (iv) the tax-related effects as though the TCO Group acquisition had occurred on January 1, 2025.