Financial Analysis

4. Business Combinations On February 16, 2024 (the RMS Acquisition Date), the Company acquired 100 % of the equity interests of Rapid Machining Solutions - Wolcott Design Services (RMS) pursuant to the terms of a Securities Purchase Agreement (the RMS Agreement) in exchange for cash consideration (the RMS Acquisition). The primary purpose of the business combination was to create synergies based on RMSs expertise in Aviation and Aerospace industry and expand the Companys design and manufacturing capabilities. The RMS Acquisition was accounted for as a business combination under ASC 805 using the acquisition method of accounting. The assets and liabilities acquired, affected for adjustments to reflect fair values assigned to assets purchased and liabilities assumed, and results of operations, are included in the Companys consolidated financial statements from the RMS Acquisition Date. The Company recorded the acquired tangible and identifiable intangible assets and assumed liabilities based on their estimated fair values at the acquisition date as required under ASC 805. As of February 15, 2025, the valuation of the acquired assets and assumed liabilities has been completed. To fund the RMS Acquisition, the Company increased its TCW Term Note by $ 35.0 million. The fair value of the total purchase consideration transferred was $ 31.3 million in cash. The RMS Acquisition does not have any contingent consideration arrangements. The Company also incurred $ 1.6 million of direct a …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

14. Commitments and Contingencies In the course of doing business, the Company enters into various agreements. These agreements typically include commitments and indemnifications, which could create a liability for the Company in the event of damages or injuries related to providing these services. Management believes the Company is adequately insured. However, future claims related to these agreements could significantly affect the Companys financial results if a loss is incurred as a result of these agreements. The Company accrues a liability for legal contingencies when it is both probable that a liability has been incurred and the amount of loss is reasonably estimable. The Company reviews these accruals and adjusts them to reflect ongoing negotiations, settlements, rulings, advice of legal counsel, and other relevant information. To the extent new information is obtained and our views on the probable outcomes of claims, suits, assessments, investigations, or legal proceedings change, changes in our accrued liabilities would be recorded in the period in which such determination is made. For certain matters, the liability is not probable, or the amount cannot be reasonably estimated, and therefore, accruals have not been made. In addition, in accordance with the relevant authoritative guidance, for any matters in which the likelihood of a material loss is at least reasonably possible, the Company will provide disclosure of the possible loss or range of loss. If a reasonabl …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

6. Debt The Companys Notes Payable consisted of the following as of December 31, 2025 and 2024: As of December 31, 2025 2024 (in thousands) Term Note $ 502,800 $ 326,662 Other notes payable 3,967 10,452 Total notes payable 506,767 337,114 Issuance costs ( 7,619 ) ( 3,054 ) Subtotal 499,148 334,060 Less: current portion of notes payable ( 3,836 ) ( 7,140 ) Long-term notes payable 495,312 326,920 Term Note On April 1, 2025, the Company entered into a new Credit Agreement (the Citi Credit Agreement) by and among Karman, the lenders from time to time party thereto and Citibank, N.A. (Citi), as the administrative agent for the lenders, and, substantially contemporaneously therewith,certain direct and indirect subsidiaries of Karman terminated all outstanding commitments and repaid all outstanding obligations under the previous TCW Credit Agreement. This transaction resulted in the extinguishments of the previous TCW Term Note and facilities under the TCW Credit Agreement and the issuance of a new $ 300.0 million term loan and $ 50.0 million revolving line of credit. The new term loan will mature on April 1, 2032 and the new revolving line of credit will mature on April 1, 2030 . On May 27, 2025, the Company increased its Citi Term Note by $ 75.0 million to fund the acquisition of ISP. All other terms and conditions of the Citi Credit Agreement remain unchanged. On October 24, 2025, the Company increased its Citi Term Note by $ 130.0 million to fund the acquisition of Five Axis and …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

The following table presents our revenue disaggregated into markets as of December 31, 2025, 2024 and 2023: 2025 % of Revenue (in thousands, except percent) Hypersonics & Strategic Missile Defense $ 149,987 31.8 % Space & Launch 149,825 31.8 % Tactical Missiles & Integrated Defense Systems 171,688 36.4 % Total Revenue $ 471,500 100.0 % 2024 % of Revenue (in thousands, except percent) Hypersonics & Strategic Missile Defense $ 114,594 33.2 % Space & Launch 115,036 33.3 % Tactical Missiles & Integrated Defense Systems 115,621 33.5 % Total Revenue $ 345,251 100.0 % 2023 % of Revenue (in thousands, except percent) Hypersonics & Strategic Missile Defense $ 100,093 35.7 % Space & Launch 94,642 33.7 % Tactical Missiles & Integrated Defense Systems 85,970 30.6 % Total Revenue $ 280,705 100.0 % Revenue growth by market is presented in the tables below: 2025 2024 % Change (in thousands, except percent) Hypersonics & Strategic Missile Defense $ 149,987 $ 114,594 30.9 % Space & Launch 149,825 115,036 30.2 % Tactical Missiles & Integrated Defense Systems 171,688 115,621 48.5 % Total Revenue $ 471,500 $ 345,251 36.6 % 2024 2023 % Change (in thousands, except percent) Hypersonics & Strategic Missile Defense $ 114,594 $ 100,093 14.5 % Space & Launch 115,036 94,642 21.5 % Tactical Missiles & Integrated Defense Systems 115,621 85,970 34.5 % Total Revenue $ 345,251 $ 280,705 23.0 %

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10. Share-Based Compensation The Company historically, through Spaceco Management Equity LLC (the Management Company) under the Spaceco Management Equity LLC Equity Incentive Plan (the Equity Incentive Plan), granted P Units to certain employees of the Company and its subsidiaries, in exchange for their services to the Company. Management Company has an economic interest in the Company, but no other interests or business operations other than issuing P Units directly to management employees on behalf of the Company. The accounting for grants of P Units by the Company to Management Company and Management Companys contemporaneous issuance of P Units to individual Company employees represents a distribution from the Company immediately followed by a contribution from Management Company, which together would have no financial statement impact. As a result, the Company refers to P Units issued to Management Company as though the Company had issued P Units directly to the employee. The P Units entitled the holder to receive cash distributions from the Company, including, but not limited to upon a sale or change in control of the Company, provided that the proceeds received exceed the defined threshold value in the individual award agreements. Vesting was dependent on service-based and performance-based vesting conditions, as discussed in further detail below. The P Units were subject to time-based vesting conditions (Time-Based Units). The Time-Based Units generally vested over 5 y …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

5. Goodwill and Intangibles The Company completed the annual goodwill impairment testing in the fourth quarter of 2025 and 2024 and determined that no adjustments to the carrying value of goodwill were necessary. The Company performs its goodwill impairment test at the reporting unit level, which is the same as or one level below the operating segment level. The Company has one operating and reportable segment, and for the years ended December 31, 2025, 2024 and 2023 , the Company had one reporting unit for goodwill impairment testing purposes. For the impairment testing in the fourth quarter of 2025, the Company assessed the reporting unit using qualitative factors to determine whether it was more likely than not that the reporting units fair value is less than its carrying value (step 0) and determined that no further testing was required. For the impairment testing in the fourth quarter of 2024, the Company elected to bypass the qualitative assessment and performed a quantitative goodwill impairment test (Step 1), as permitted under ASC 350, which also indicated that the fair value of the reporting unit exceeded its carrying amount, and no impairment charge was recognized. The Company continuously monitors and evaluates relevant events and circumstances that could unfavorably impact our significant assumptions used in testing goodwill, including changes to U.S. treasury rates and equity risk premiums, tax rates, recent market valuations from transactions by comparable comp …

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"13. Provision for (Benefit from) Income Taxes Income Before Taxes The following are the pre-tax book income for the years ended December 31, 2025, 2024 and 2023: Years Ended December 31, 2025 2024 2023 (in thousands) Pre-tax book income: Domestic $ 32,522 $ 14,329 $ 1,190 Foreign Total $ 32,522 $ 14,329 $ 1,190 Income Tax Expense (Benefit) The provision for (benefit from) income taxes for the years ended December 31, 2025, 2024 and 2023 consists of the following: Years Ended December 31, 2025 2024 2023 (in thousands) Current income taxes: Federal $ 673 $ 10,977 $ 7,752 State 3,967 2,161 ( 214 ) Foreign Total current $ 4,640 $ 13,138 $ 7,538 Deferred income taxes: Federal 9,707 ( 10,087 ) ( 9,724 ) State 809 ( 1,423 ) ( 983 ) Foreign Total deferred $ 10,516 $ ( 11,510 ) $ ( 10,707 ) Provision for (benefit from) income taxes $ 15,156 $ 1,628 $ ( 3,169 ) Effective Tax Rate A reconciliation of the Companys effective tax rate and federal statutory tax rate after the adoption of ASU 2023-09 is summarized as follows. See Note 2. Summary Significant Accounting Policies - Recently Issued Accounting Pronouncements Adopted for additional details on the adoption of ASU 2023-09. Year Ended December 31, 2025 (in thousands, except percent) Income taxes (benefit) at statutory federal rate $ 6,830 21.0 % State and local taxes, net of federal income tax effect 1 2,983 9.2 % Tax credits R&D credit ( 792 ) ( 2.4 %) Changes in valuation allowance 0.0 % Nontaxable or nondeductible items Other …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Recently Issued Accounting Pronouncements Recently Issued Accounting Pronouncements Adopted In March 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-01, Compensation-Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. This update clarifies the scope of Profit Interest and similar awards and adds an illustrative example to the existing ASC 718 standard that includes four fact patterns to demonstrate how an entity should apply the scope guidance in paragraph 718-10-15-3 to determine whether a profits interest award should be accounted for in accordance with Topic 718. The amendments in this ASU are effective for annual periods beginning after December 15, 2024, and interim periods within those annual periods. Early adoption is permitted for interim and annual financial statements not yet issued or made available for issuance. The amendments in this ASU should be applied either (1) retrospectively to all prior periods presented in the financial statements or prospectively to profits interest and similar awards granted or (2) modified on or after the date at which the entity first applies the amendments. On January 1, 2025 , the Company retrospectively adopted ASU 2024-01. The standard did not have any material impact on the Companys financial position, results of operations or cash flows. On December 14, 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (ASU 2023 …

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8. Retirement Plans Employee Benefit Plan The Company maintains 401(k) Plans for all employees who have completed three months of service and have reached age 18. Qualified employees may contribute up to 90 % of their pre-tax annual compensation to this plan, not to exceed the dollar limit set by law. The Company may make discretionary matching contributions and discretionary non-elective contributions to this plan. The Company made contributions of $ 3.9 million , $ 2.6 million , and $ 1.6 million made to the plans during the years ended December 31, 2025, 2024 and 2023, respectively. Retirement plan contribution expense is included within either Cost of Goods Sold or General and Administrative expenses on the consolidated statement of operations and comprehensive income (loss), depending on the nature of the employees work. Nonqualified Deferred Compensation Plan The Company implemented a nonqualified deferred compensation plan (the Deferred Plan) under which a select group of management may make voluntary contributions that defer a portion of their compensation up to the maximum dollar amount under Section 409A of the Internal Revenue Code (IRC). The assets of the plan are the legal assets of the Company until they are distributed to the participants, and, therefore, the plan assets and a corresponding liability are reported on the accompanying consolidated balance sheets. Amounts owed to plan participants are unsecured obligations of the Company. The Company has establish …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

12. Segment Reporting ASC Subtopic 280-10, Segment Reporting, establishes standards for reporting information about operating segments, which are defined as components of an enterprise for which discrete financial information is available and regularly reviewed by the chief operating decision maker (CODM) to allocate resources and assess performance. The Companys Chief Executive Officer serves as the CODM and reviews financial information at a consolidated level. The Company operates as a single operating segment, and the accounting policies of the segment are consistent with those described in the summary of significant accounting policies. The CODM evaluates performance and allocates resources based on consolidated net income, and segment assets are reported as total consolidated assets on the balance sheet. The following table summarizes the Companys revenues, net income and significant expenses: Year Ended December 31, 2025 2024 2023 (in thousands) Revenue $ 471,500 $ 345,251 $ 280,705 Expenses and other items: Cost of goods sold: Labor ( 115,060 ) ( 95,404 ) ( 80,684 ) Materials ( 133,518 ) ( 91,808 ) ( 75,469 ) Overhead ( 21,587 ) ( 17,100 ) ( 12,256 ) Depreciation and amortization ( 11,309 ) ( 8,828 ) ( 6,747 ) Total cost of goods sold ( 281,474 ) ( 213,140 ) ( 175,156 ) General and administrative expenses ( 85,656 ) ( 44,421 ) ( 36,623 ) Depreciation and amortization not included in cost of goods sold ( 31,428 ) ( 24,130 ) ( 20,432 ) Other income 4,147 1,502 563 Inter …

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2. Summary of Significant Accounting Policies Basis of Presentation The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Certain line items on the consolidated balance sheets, consolidated statements of operations and comprehensive income (loss) and the consolidated statements of cash flows are reclassified in the prior period to conform to current period presentation. Principles of Consolidation The consolidated financial statements include the operations of AEC, AMRO, AAE, Systima, RMS, MTI, ISP, Five Axis and Corporate. Corporate consists of centralized general and administrative functions, including executive management, finance, legal, human resources, information technology, facilities, fixed overhead expenses, taxes, and other corporate-level activities that support the Companys operations. Intercompany accounts and transactions have been eliminated in consolidation. Segment Reporting Operating segments are identified as components of an enterprise that engage in business activities from which they may earn revenues and incur expenses, for which discrete financial information is available, and whose results are regularly reviewed by the chief operating decision maker to allocate resources and assess performance. The Companys chief operating decision maker is the chief executive officer . The Company and the chief executive officer view the Companys operations and manage i …

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15. Subsequent Events On December 31, 2025, the Company entered into a Securities Purchase Agreement (the Agreement) under which a wholly-owned subsidiary of the Company agreed to purchase Seemann Composites, LLC and Materials Sciences LLC (together, the Company Group), for (i) $ 210.0 million in cash and (ii) shares of common stock of the Company with an aggregate value equal to $ 10.0 million, subject to certain customary purchase price adjustments (the Seemann Acquisition). This acquisition was completed on February 3, 2026, pursuant to the Agreement, and the Company indirectly acquired all of the outstanding capital stock of the Company Group in exchange for the consideration described above. The Agreement contains customary representations, warranties and covenants of the parties. The Seemann Acquisition expands and enhances the Companys capabilities in the maritime defense end market, strengthening its portfolio of advanced composite and materials solutions for high-priority naval programs. This acquisition is expected to be accounted for as a business combination and the Company is in the process of preparing its preliminary purchase price allocation. On February 2, 2026, the Company entered into a Third Amendment to its Credit Agreement (the Third Amendment), which amends the Credit Agreement, dated as of April 1, 2025 (as amended by the First Amendment to Credit Agreement, dated as of May 27, 2025 and Second Amendment to Credit Agreement, dated as of October 24, 2025 …

SubsequentEventsTextBlock · excerpt; the full note is in the filing