HMH 10-K & 10-Q changes, risk factors and insider trading

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with the unaudited consolidated financial statements and accompanying notes for the quarter ended MarchJune 31,30, 2026 included under Item 1. Financial Statements of this Quarterly Report on Form 10-Q and the audited consolidated financial statements and accompanying notes in the Final Prospectus. This discussion contains forward-looking statements that involve risks, assumptions and uncertainties that could cause actual results to differ materially from our expectations. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those described under “Risk Factors,” in the Final Prospectus.

Sales of Projects and Products. This includes (i) comprehensive drilling equipment packages containing a full suite of components needed for a newbuild or reactivated drilling rig and (ii) individual or grouped components of drilling and pressure control equipment that facilitate customers maintaining and upgrading their existing fleet. During the three and six months ended MarchJune 31,30, 2026, we derived 19.0%12.1% and 15.6% of our revenue from sales of projects and productsproducts, respectively, compared to 27.6%29.0% and 28.3% during the three and six months ended MarchJune 31,30, 2025.2025, respectively.

Aftermarket Services. This includes services on installed equipment and integrated digital solutions. Our aftermarket services facilitate customers maintaining and improving the lifespan, safety and efficiency of their existing drilling rig fleets. During the three and six months ended MarchJune 31,30, 2026, we derived 42.2%52.1% and 47.1% of our revenue from aftermarket servicesservices, respectively, compared to 42.1%45.4% and 43.8% during the three and six months ended MarchJune 31,30, 2025.2025, respectively.

Sales of Spare Parts. This includes replacement parts for installed equipment used in oil and gas drilling operations. During the three and six months ended MarchJune 31,30, 2026, we derived 38.8%35.8% and 37.3% of our revenue from sales of spare partsparts, respectively, compared to 30.3%25.6% and 27.9% during the three and six months ended MarchJune 31,30, 2025.2025, respectively.

On April 2, 2026, we completed our initial public offering (the “IPO”) of 10,520,000 shares of our Class A common stock, par value $0.01 (“Class A common stock”), representing approximately 24% of the equity interests in the Company, at a price to the public of $20.00 per share. The net proceeds from the IPO were approximately $197.8 million, after deducting the underwriters’ discounts. On MayApril 1,30, 2026, the underwriters elected to exercise their option to purchase an additional 685,844 shares of Class A common stock. Net proceeds from this exercise were $12.9 million after deducting discounts and offering fees of $0.8 million. See Note 191—“SubsequentBasis Eventsof Presentation and Summary of Significant Accounting Policies” in the notes to HMH B.V.’sthe Condensed Consolidated Financial Statements.

The results of operations discussed in this Quarterly Report on Form 10-Q include those of HMH B.V. prior to the completion of our IPO. As a result, the historical consolidated financial data may not give you an accurate indication of what our actual results would have been if the IPO and related corporate reorganization, as discussed in “Corporate Reorganization” in Note 31—“SubsequentBasis Eventsof Presentation and Summary of Significant Accounting Policies” of the notes to ourthe Condensed BalanceConsolidated Sheets,Financial Statements, had been completed at the beginning of the periods presented or of what our future results of operations are likely to be.

Oil and gas play a critical role in enabling modern society to function and providing increased standards of living to the global population. We believe that oil and gas will continue to play a leading role in the future global energy mix. While the world will take the needed efforts to diversify its energy supply into renewables and more sustainable forms of energy, including nuclear, the International Energy Agency estimates that oil and gas will nonetheless comprise 45% of global energy supply in 2050 and that global energy consumption is expected to increase to 533 exajouleexajoules by 2050, a 20% increase from 2023 levels and a 41% increase from 2010 levels.

The following table sets forth certain Condensed Consolidated Statement of Income data (in thousands):

Revenue: The following table sets forth disaggregated revenue by segment (in thousands):

We generate our revenue primarily from three broadly categorized offerings: (i) product revenue, which comprises revenue from sales of projects and products and includes (a) comprehensive drilling equipment packages containing a full suite of components needed for a newbuild or reactivated drilling rig and (b) individual or grouped components of drilling and pressure control equipment that facilitate customers maintaining and upgrading their existing fleet, (ii) service revenue, which comprises aftermarket services relating to installed equipment and integrated digital solutions, and (iii) spare parts revenue, which includes replacement spare parts. We also generate our revenue from related parties via sales to Baker Hughes,Hughes and Akastor through its affiliates, which primarily consists of sales of products and services consistent in nature with those of external parties.

Total revenue decreased by $27.1$32.6 million, or 13.7%,16.0%, inand $59.7 million, or 14.9%, for the firstthree quarterand ofsix months ended June 30, 2026, respectively, compared to the correspondingprior-year periodperiods. inThe 2025,declines were primarily due to lower product and service revenue,revenues, partially offset by higher spare parts revenue.

Total cost of sales decreased by $25.3$42.0 million, or 17.8%,27.7%, and $67.3 million, or 22.9%, for the three and six months ended June 30, 2026, respectively, compared to $116.6 million in the firstprior-year quarter of 2026, down from $141.9 million in the first quarter of 2025.periods. Cost of sales as a percentage of revenue decreased to 68.1%64.1% inand 66.1% for the firstthree quarterand ofsix 2026months asended June 30, 2026, respectively, compared to 71.5%74.5% inand 73.0% for the firstthree quarterand ofsix 2025.months Theended decreaseJune 30, 2025, respectively. These decreases in cost of sales and cost of sales as a percentage of revenue waswere due to lower volume, revenue mix, continued cost optimization efforts and increased utilization.

Cost of goodsservices sold - products decreased by $21.3$4.9 million, or 45.7%,7.7%, and $8.9 million, or 7.4%, for the three and six months ended June 30, 2026, respectively, compared to $25.4 million in the firstprior-year quarterperiods. ofThese 2026, down from $46.7 in the first quarter of 2025. The decreasedecreases in cost of goodsservices sold - products waswere in line with the decrease in productservice revenue. Cost of goods sold - productsservices as a percentage of productrevenue was 66.0% and related69.4% party revenue decreased to 79.1% infor the firstthree quarterand ofsix 2026months asended June 30, 2026, respectively, compared to 85.4%69.0% and 68.7% for the three and six months ended June 30, 2025, respectively. These decreases in the first quartercost of 2025sales and cost of sales as a percentage of revenue were due to recognitionlower of product and projectvolume, revenue withmix, higher margins driven bycontinued cost optimization efforts and theincreased completion of contracts with unfavorable margins in 2025.utilization.

Cost of goods sold -– spare parts remained relatively flat infor the firstthree quarterand ofsix 2026months ended June 30, 2026, compared to firstthe quartercorresponding ofperiods in 2025. Cost of goods sold -– spare parts as a percentage of spare parts revenue decreased to 57.2%56.0% inand 56.7% for the firstthree quarterand ofsix 2026months asended June 30, 2026, respectively, compared to 63.3%66.1% and 64.6% for the three and six months ended June 30, 2025, respectively. These decreases in first quartercost of 2025,goods sold – spare parts as a percentage of spare parts revenue were mainly due to volume mix.

InResearch and development expenses remained relatively flat for the firstthree quartermonths ofended June 30, 2026, compared to the three months ended June 30, 2025. For the six months ended June 30, 2026, research and development expenses decreased by $0.6$0.5 million, or 59.8%, to $0.4 million from $1.0 million in the first quarter of 2025.29.5%. This decrease was attributable mainly to the strategic deployment of development resources and the capitalization of development costs.

Restructuring and Other Expenses (Income), Net: Restructuring and other expenses consist of restructuring charges primarily related to manufacturing footprint optimization initiatives and other additional de minimis incidental operating expenses incurred by the business.

In the first quarter of 2026, theThe change in foreign currency gain (loss) decreased by $6.2$3.5 millionmillion, or 120.0%, and $9.8 million, or 140.6%, for the three and six months ended June 30, 2026, respectively, compared to a loss of $2.2 million from a gain of $4.0 million in the firstprior-year quarterperiods. of 2025. ThisThese unfavorable variancevariances waswere attributable to currency exchange rate movements of the U.S. dollar to other currencies in which we transact.

In the first quarter of 2026, interestInterest expense, net decreased by $2.2$5.2 million, or 24.3%,56.7%, and $7.4 million, or 40.4%, for the three and six months ended June 30, 2026, respectively, compared to $7.0the millionprior-year fromperiods. $9.2These milliondecreases inwere driven by the first quarter of 2025 as a resultrepayment of the refinancingShareholder Loans in DecemberApril 20252026 upon completion of the IPO, and the refinancing of our 9.875% senior secured bonds due in 2026 towith 7.875% senior secured bonds due in 2028.2028 in December 2025.

Net cash provided by operating activities decreasedincreased $6.3by $32.7 million in the first quartersix months of 2026, compared to the corresponding period in 2025, mainly due to a $2.0 million increase in net loss, a $2.4$39.2 million increase from changes in operating assets and liabilities andliabilities, a $1.9$10.3 million increase in non-cash items.items and a $16.8 million increase in net loss.

The unfavorablefavorable variance in non-cash expenses was driven by changesthe inrecognition restructuringof andshare-based othercompensation expenses andupon provisioncompletion forof inventorythe write-downIPO, which was offset by favorable changes in deferred tax expenses.expenses, paid-in-kind interest, restructuring and other expenses, and a provision for inventory write-down.

Net cash used in investing activities increased by $1.1$2.8 million in the first quartersix months of 2026, compared to the corresponding period in 2025,2025. primarilyThe dueincrease toin net cash used in investing activities was principally the result of a $4.8 million increase in development costs, offset by a $2.8 million decrease in purchases of property, plant and equipment and $0.8 million of DrillformDeep Blue acquisition working capital remeasurement period adjustments in the first quartersix months of 2026.

Adjusted EBITDA and Adjusted EBITDA Margin. We use Adjusted EBITDA and Adjusted EBITDA Margin (each, a non-GAAP measure) as one of the indicators to evaluate and compare the results of our operations from period to period by removing the effect of our capital structure and certain non-recurring items. We define Adjusted EBITDA as net income before interest expense, net, income tax expense, depreciation and amortization, IPO listing related cost and other non-recurring items. Management does not consider these non-recurring items to be indicative of our ongoing operating performance measure, and such items include, but are not limited to, restructuring and other operating expenses and foreign exchange currency (gain) loss. We track Adjusted EBITDA on an absolute dollar basis and as a percentage of revenue, which we refer to as Adjusted EBITDA Margin. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenue. We believe that Adjusted EBITDA is a supplemental measurement tool used by analysts and investors to evaluate overall operating performance, ability to pursue and service possible debt opportunities and possible future investment opportunities. In addition, we believe that Adjusted EBITDA Margin is a supplemental measurement tool used by analysts and investors to evaluate profitability of sales. Adjusted EBITDA does not represent funds available for our discretionary use and is not intended to represent or to be used as a substitute for net income, as measured in accordance with generally accepted accounting principles in the United States of America ("GAAP"). The items excluded from Adjusted EBITDA and Adjusted EBITDA Margin, but included in the calculation of reported net income, are significant components of the consolidated statements of income and must be considered in performing a comprehensive assessment of overall financial performance.

The following table reconciles net income to Adjusted EBITDA (inand thousands)Adjusted EBITDA Margin:

Free Cash Flow. We use Free Cash Flow (a non-GAAP measure) to evaluate our liquidity to provide flexibility and optionality to achieve our broader capital allocation strategy. We define Free Cash Flow as cash flow from operations minus purchases of property and equipment and development costs.costs and excluding the impact of one time non-cash IPO related expenses. Management believes that Free Cash Flow is a meaningful indicator of liquidity that provides information to our management and investors about the amount of cash generated from operations, after purchases of property and equipment that can be used for investment in our business and for acquisitions as well as to strengthen our balance sheet. Free Cash Flow has limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of other GAAP financial measures, such as net cash provided by (used in) operating activities. Free Cash Flow does not reflect our ability to meet future contractual commitments and may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.

The following table reconciles net cash provided by (used in) operating activities to Free Cash Flow (in thousands):

Our financial objectives include the maintenance of sufficient liquidity, adequate financial resources and financial flexibility to fund our business. Our primary sources of liquidity are our existing cash on hand and cash generated from operations. Depending upon market conditions, we may take any of the following steps, or a combination thereof, to improve our liquidity and financial position by incurring borrowings under our Revolver, issuing additional senior secured bonds in an aggregate principal amount up to $125.0 million or entering into separate bridge financing facilities as permitted by the terms of our existing Senior Secured Bonds.

As of MarchJune 31,30, 2026, we had $101.3$119.7 million in cash and cash equivalents and Revolver capacity of $75 million resulting in approximately $175$195 million of total liquidity, including the Revolver and the Credit Line in China (as defined herein).liquidity. As of MarchJune 31,30, 2026, we have $1.5 million of borrowings under the Credit Line in China due in the next 12 months, and we have no long-term debt maturity until June 2028. In the second quarter of 2026, we repaid the Shareholder Loans (as defined herein) from the net proceeds received from the IPO. See Note 19—“Subsequent Events” in the notes to HMH B.V.’s Condensed Consolidated Financial Statements.

On or around December 17, 2025, the Company issued $200.0 million aggregate principal amount of its senior secured bonds (ISIN code NO0013700039) (the “Senior Secured Bonds due 2028”), which mature on December 17, 2028. Interest on the bonds accrues at a fixed rate of 7.875% per annum as of MarchJune 31,30, 2026. The Senior Secured Bonds due 2028 are secured by liens on substantially all of the Company’s assets, including the equity of its material subsidiaries, and guarantees, either directly or indirectly, from its material subsidiaries. The security of the Senior Secured Bonds due 2028 is subject to an intercreditor agreement with the facility agent under the Revolver. Subject to compliance with certain conditions, the Company is permitted to issue additional bonds under the agreement governing the Senior Secured Bonds due 2028 in an aggregate principal amount up to $125.0 million, and the Company is also permitted to enter into certain bridge financing facilities. The Company intends to list the Senior Secured Bonds due 2028 were listed on the Euronext ABM duringin the firstsecond halfquarter of 2026.

As of MarchJune 31,30, 2026, the Company was in compliance with all financial covenants under the Senior Secured Bonds due 2028.

On October 1, 2021, the Company entered into a loan agreement with related parties, Baker Hughes Holdings LLC and Akastor AS (as amended, the “Shareholder Loan Agreement”), to finance its operating and financefinancing activities. Baker Hughes Holdings LLC provided an $80.0 million term loan under the Shareholder Loan Agreement (the “Baker Hughes Shareholder Loan”), and Akastor AS provided a $20.0 million term loan under the Shareholder Loan Agreement (together with the Baker Hughes Shareholder Loan, the “Shareholder Loans”). The Shareholder Loans mature on the earliest to occur of December 18, 2028 or a liquidation event (as defined in the Shareholder Loan Agreement) such as the consummation of the IPO. In connection with the closing of the IPO,IPO in April 2026, the Company repaid the Shareholder Loans from the net proceeds received from the IPO. For more information, see Note 19—“Subsequent Events” in the notes to HMH B.V.’s Condensed Consolidated Financial Statements.

On December 18, 2025, we the Company, DNB Bank ASA, as agent, certain financial institutions party thereto as lenders (the “Revolver Lenders”) and DNB Carnegie, a part of DNB Bank ASA, and Nordea Bank Abp, branch in Norway, as mandated lead arrangers and bookrunners, entered into a senior facility agreement (the “Revolver”) pursuant to which the Revolver Lenders provide revolving credit financing to the Company in an aggregate principal amount of up to $75.0 million. The scheduled maturity date of the Revolver is June 17, 2028.

The Revolver is secured by liens on substantially all of the Company’s assets, including the equity of its material subsidiaries, and guarantees, either directly or indirectly, from its material subsidiaries. The security of the Revolver is subject to an intercreditor agreement with the trustee under the Senior Secured Bonds due 2028. The Revolver includes certain restrictive covenants that may limit the Company’s ability to, among other things, incur additional indebtedness, guarantee obligations, incur liens, make investments, loans or capital expenditures, sell or dispose of assets, enter into mergers or consolidations, enter into transactions with affiliates or make or declare dividends. The Revolver also requires the Company to maintain at all times a minimum liquidity of not less than $30.0 million, a gearing ratio of Consolidated Net Total Borrowings to Consolidated Total Equity (each as defined in the Revolver) not to exceed 1.00 to 1.00 and an interest cover ratio of Adjusted EBITDA to Net Interest Expenses (each as defined in the Revolver) of not less than 2.50 to 1.00. The Revolver contains customary representations and warranties, affirmative covenants and events of default. If an event of default exists under the Revolver, the Revolver Lenders will be able to accelerate the maturity of the Revolver and exercise other rights and remedies. If an event of default exists under the Senior Secured Bonds due 2028, a cross-default will be triggered under the Revolver, and the Revolver Lenders will be able to accelerate the maturity of the Revolver and exercise other rights and remedies. Subject to certain notice requirements and certain partial prepayment amount restrictions, the Company may voluntarily prepay outstanding loans under the Revolver in whole or in part without premium or penalty. Following a Change of Control (as defined in the Revolver), which definition varies depending on whether an initial public offering has occurred, the Company can be required to prepay the loans in whole if the parties do not reach an agreement to continue the loan. As of MarchJune 31,30, 2026, the Company was in compliance with all financial covenants under the Revolver.

On March 27, 2025, the Company extended its credit line agreement (the “Credit Line in China”) with Bank of China Shanghai Pudong branch (the “Credit Line in China Lender”) pursuant to which the Credit Line in China Lender provided a credit line in an aggregate principal amount of up to Chinese renminbi (RMB) 10.0 million (USD: $1.43$1.47 million based on the exchange rate as of MarchJune 31,30, 2026). The extension period was effectivevalid through March 26, 2026.2026, with the Company retaining a one-year period from each respective withdrawal date to remit payment. Borrowings under the Credit Line in China bear interest at the compounded reference rate, which was the applicable China Loan Prime Rate minus margin of 0.4% as of MarchJune 31,30, 2026. Interest is paid quarterly in the last month of each quarter. There is no quarterly commitment fee or guarantee requirement based on the Company’s financial status. The borrowing length for each withdrawal is one year. The Credit Line in China was available to use for the Company’s daily operations and could not be used to purchase real estate, re-lend to other companies or make investments.

See “New Accounting Standards to be Adopted” in Note 1—“Basis of Presentation and Summary of Significant Accounting Policies” in the notes to HMH B.V.’sthe Condensed Consolidated Financial Statements.