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

A large portion of our product sales are dependent on our customers’ need for increased capacity, productivity and cost saving initiatives, improved product quality and performance, and new investments. Weaknesses in our end markets could negatively impact our revenue and gross margin and consequently have a material adverse effect on our business, financial condition and results of operations. A severe and/or prolonged overall economic downturn or a negative or uncertain political climate could lead to weaknesses in our end markets and adversely affect our customers’ financial condition and the timing or levels of our customers’ capital expenditures or business activities. We have experienced significant cyclical end market fluctuations in the past. For example, diminished growth expectations, economic and political uncertainty in regions across the globe and effects of the COVID-19 pandemic adversely impacted our customers’ financial condition and ability to maintain product order levels and reduced the demand for our products in 2020, and other pandemics and public health crises could have similar consequences. Political conditions, including new and changing laws or tariffs, regulations, government funding, executive orders and enforcement priorities, may impact customer budgets and create uncertainty about how such laws and regulations will be interpreted and applied, which may impact customer demand and adversely impact our business. For example, changes in the regulatory environment affecting life sciences and pharmaceutical companies, and reduced budget allocations to government agencies that fund research and development activities, such as the U.S. National Institutes of Health, or NIH, or targeted cancellations by the U.S. federal government of certain grants or contracts, could adversely affect our business or results of operations. In addition, certain sub-segments of the advanced industrial market that we serve, including the microelectronics and industrial capital equipment sector, are cyclical and have historically experienced periods of oversupply, resulting in downturns in demand for capital equipment in which many of our products are used. It is difficult to predict the timing, length and severity of these downturns and their impact on our business. Further, our order levels or results of operations for a given period may not be indicative of order levels or results of operations for subsequent periods. For the foreseeable future, our operations will continue to depend upon industries that are subject to market cycles which, in turn, could adversely affect the market demand for our products.

Technology requirements in our markets are constantly changing. We must continually introduce new products that meet evolving customer needs. Our ability to grow depends on the successful development, introduction and market acceptance of new or enhanced products that address our customers’ requirements. Developing new technology is a complex and uncertain process requiring us to accurately anticipate technological and market trends and meet those trends with the right products. Our research and development efforts may not lead to the successful introduction of products within the time frame that our customers demand. Our competitors may also introduce new or improved products, processes or technologies that make our current or proposed products obsolete or less competitive. Additionally, the rapid advancement of artificial intelligence and machine learning technologies may accelerate the pace of innovation in our industry, potentially shortening product lifecycles, enabling competitors to achieve faster time-to-market, and requiring us to invest more heavily in AI-enabled capabilities to remain competitive. We may not manage the transition from older products effectively to minimize disruption in customer ordering patterns, avoid excess inventory and ensure adequate supplies of new products. New products may have fewer features than originally considered desirable, may have higher costs than initially estimated, may contain defects or perceived defects or have reliability, quality or compatibility problems or perceived problems. There could be difficulties in sourcing components for new products and delays in starting volume production. New products may also not be commercially successful as we cannot predict how the market will react to new products introduced by us or to enhancements made to our existing products. Failure to develop and introduce new products, failed market acceptance of new products or problems associated with new product transitions could impede our revenue growth, lead to loss of market share, and negatively affect our results of operations and our competitiveness in the market.

Delays in shipments near the end of a reporting period due to rescheduling by customers or unexpected production delays experienced by us may cause revenue in the period to decline significantly and may have a material adverse effect on our operating results for that period. In addition, shipment delays caused by our third‑party shipping carriers or by government regulations affecting the movement of goods may further increase the risk of timing‑related revenue shortfalls and negatively impact our operating results.

In addition, weWe or our competitors may raise or lower prices of products in response to market demands or competitive pressures. If we lower the prices of our products, or if our competitors lower the prices of their products such that demand for our products weakens, our revenue for one or more quarters may decline and our operating results would be adversely affected.

Like other global companies, there are constant cyber related threats and risks from internal and external perpetrators of random or targeted malicious cyberattacks, computer viruses, malware, worms, bot attacks or other destructive or disruptive software (for example, ransomware) and attempts to misappropriate customer information and cause system failures and disruptions, malfeasance by insiders, human or technological error, as well as power outages, natural disasters, hardware and software bugs, misconfigurations or failures, and other unforeseen events. We have experienced cyberattacks and other security incidents in the past and expect to experience such attacks and incidents in the future. We expect the frequency and magnitude of cyberattacks to continue to accelerate as attackers are becoming increasingly more sophisticated, for example, by using artificial intelligence to automate and enhance attacks, and by using techniques designed to circumvent controls, avoid detection, and obfuscate forensic evidence, such that we may be unable to timely or effectively detect, identify, investigate or remediate attacks in the future. In addition, remote and hybrid working arrangements have increased the risk of cybersecurity incidents given the prevalence of phishing and vulnerabilities inherent in non-corporate and home computing environments.

Our sales channels and supply chain in the international marketplace make us subject to tariffs, trade restrictions and other taxes when the raw materials or components we purchase, and the products we sell, cross international borders. Trade tensions between countries,countries have escalated in recent years. For example, U.S. tariff impositions against Chinese exports in recent years were followed by retaliatory Chinese tariffs on U.S. exports to China. Certain of the raw materials and components we purchase from China are or were subject to these tariffs, which have increased our manufacturing costs and have made our products less competitive than those of our competitors whose inputs are not subject to these tariffs. Such tariffs may increase in the future. Certain of our finished products manufactured in the U.S. have been and may in the future be subject to retaliatory tariffs in China, which may increase our costs and make our products less competitive than those of our competitors whose products are not subject to such retaliatory tariffs. If heightened tariffs or trade restrictions were to be imposed in the future, we may not be able to mitigate their impacts, and our business, results of operations and financial position could be materially adversely affected. Products we sell into certain other foreign markets could also become subject to retaliatory tariffs, making our products uncompetitive to similar products not subjected to such import tariffs. Further changes in trade policies, tariffs, taxes, export restrictions or other trade barriers, or restrictions on raw materials or components may limit our ability to produce products, increase our manufacturing costs, decrease our profit margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase raw materials or components, which would have a material adverse effect on our business, results of operations and financial condition.

As part of our business strategy, we expect to broaden our product and service offerings by acquiring businesses, technologies, assets and product lines that, we believe, complement or expand our existing businesses. We may have difficulty finding acquisition opportunities, or if we do identify these opportunities, we may not be able to complete the transactions for various reasons, including a failure to secure financing on acceptable terms. In recent years, we have made a number of acquisitions, including the acquisitions of Keonn Technologies, S.L., Motion Solutions Parent Corp., MPH Medical Devices S.R.O., ATI Industrial Automation, Inc., and Schneider Electric Motion USA, Inc., and we expect to continue to make acquisitions in the future. We may fail to successfully integrate acquired businesses, products, technologies or personnel into our businesses and, as a result, may fail to realize the synergies, cost savings and other benefits expected from the acquisitions. If we are not able to successfully achieve these objectives, the anticipated benefits of such acquisitions may not be realized fully or at all, and our results of operations could be adversely affected. If we consummate multiple acquisitions in a relatively short amount of time, these risks will be heightened due to limited resources available to integrate these new businesses. Our acquisition activities may divert management’s attention from our regular operations. Managing a larger and more geographically dispersed operation and product portfolio could also pose challenges for our management team.

We assemble our products at our facilities in the U.S., the U.K., GermanyGermany, Czech Republic and China. Each of our products is typically manufactured in a single manufacturing location. If our production activities at any of our manufacturing facilities were disrupted, including by mandatory power consumption reductions, natural disasters or other extreme weather events, health epidemics, acts of terrorism or otherwise, our operations would be negatively impacted until we could establish alternative production and service operations. Significant production difficulties could also be the result of: mistakes made while transferring manufacturing processes between locations; changing process technologies; ramping production; installing new equipment at our manufacturing facilities; implementing new information technology systems; shortage of key components; and loss of electricity or employees’ access to the manufacturing facilities due to man-made and natural disasters.

Some of our productsproducts, and the related salesdevelopment, manufacturing and marketing developmentcommercialization activities and manufacturing processes are subject to extensive and rigorous regulation by the FDA pursuant to the Federal Food, Drug, and Cosmetic Act (the “FDCA”), and by comparable agencies in foreign countries, and byor other regulatory agencies and governing bodies.bodies in the U.S. and around the world. Under the FDCA, medical devices must receive FDA clearance or approval or an exemption from such clearance or approval before they can be commercially marketed in the U.S. In the EU, medical devices must comply with the EU Medical Devices Regulation, which repeals and replaces the EU Medical Devices Directive. All medical devices placed on the market in the EU must meetincluding the general safety and performance requirements laid down in Annex I to the EU Medical Devices Regulation, includingwhich the requirementrequire that a medical device must be designed and manufactured in such a way that, during normal conditions of use, it is suitable for its intended purpose. Medical devices must be safe and effective and must not compromise the clinical condition or safety of patients, or the safety and health of users and – where applicable – other persons, provided that any risks which may be associated with their use constitute acceptable risks when weighed against the benefits to the patient and are compatible with a high level of protection of health and safety, taking into account the generally acknowledged state of the art. To demonstrate compliance with the general safety and performance requirements, medical devices must undergo a conformity assessment procedure, which varies according to the type of medical device and its risk classification. Except for low risk medical devices (Class I), where the manufacturer can self-assess the conformity of its products with the general safetyclassification, and performance requirements (except for any parts which relate to sterility, metrology or reuse aspects), a conformity assessment procedure requires the intervention of a notified body. The notified body would typically audit and examine the technical file and the quality system for the manufacture, design and final inspection of our devices. If satisfied that the relevant product conforms to the relevant general safety and performance requirements, the notified body issues a certificate of conformity, which the manufacturer uses as a basis for its own declaration of conformity. The manufacturer may then apply the European Conformity (“CE”) mark to the device, which allows the device to be placed on the market throughout the EU. If we fail to comply with applicable laws and regulations, we would be unable to affix the CE mark to our products, which would prevent us from selling them within the EU. The aforementioned EU rules are generally applicable in the EEA. Non-compliance with the above requirements would also prevent us from selling our products in these countries.

ComplianceIf we fail to comply with theseapplicable laws and regulations and the requirements isdescribed above or if we do not successfully pass a prerequisiterequired toaudit, we would be ableunable to affix the CE mark to medicalour devices, withoutproducts, which theywould cannotlikely beprevent soldus from selling them within the EU or marketed in the EU.EEA. The process of obtaining marketing approval, certification or clearance from the FDA, comparable agencies, or notified bodies in foreign countries for new products, or with respect to enhancements or modifications to existing products, could take a significant period of time; require substantial resources; involve rigorous pre-clinical and clinical testing, as well as increased post-market surveillance; require changes to products; and result in limitations on the indicated uses of products.

In addition, exported devices are subject to the regulatory requirements of each country to which the device is exported. Some countries do not have medical device regulations, but in most foreign countries, medical devices are regulated. Most countries outside of the U.S. require that product approvals be renewed or recertified on a regular basis, generally every four to five years.years, in order for us to continue selling our products in those countries. The renewal or recertification process requires that we evaluate any device changes and any new regulations or standards relevant to the device and conduct appropriate testing to document continued compliance. Where renewal or recertification applications are required, they may need to be renewed and/or approved or certified in order for us to continue selling our products in those countries. There can be no assurance that we will receive the required approvals or certification for new products or modifications to existing products on a timely basis or that any approval or certification will not be subsequently withdrawn or conditioned upon extensive post-market study requirements.

In the EU, notified bodies must be officially designated to certify products and services in accordance with the EU Medical Devices Regulation. Their designation process ishas significantlyexperienced stricterconsiderable underdelays thein newrecent regulation.years. Despite a recent increase in designations, the current number of notified bodies designated under the new regulation remains significantly lower than the number of notified bodies designated under theprior previous regime.regulations. The current designated notified bodies are therefore facing a backlog of requests, and as a consequence, review times have lengthened. This situation may impact the wayconduct we are conductingof our business in the EU and the EEA and the ability of our notified body to timely review and process our regulatory submissions and perform its audits.

The FDA, other worldwide regulatory agencies, and notified bodies actively monitor compliance with local laws and regulations through review, inspection and audit of design and manufacturing practices, recordkeeping, reporting of adverse events, labeling and promotional practices. The FDA and other regulatoryThese agencies worldwide can ban certain medical devices; detain or seize adulterated or misbranded medical devices; order recall, repair, replacement or refund of these devices; and require notification of healthcare professionals and others with regard to medical devices that present unreasonable risks of substantial harm to the public health. The FDA and other worldwide regulatory agencies can take action against a company that promotes “off-label” uses. The FDA may also enjoin and restrain a company for certain violations of the FDCA and regulations pertaining to medical devices, or initiate action for criminal prosecution of such violations. Similar requirements apply in foreign jurisdictions. Any adverse regulatory action, depending on its magnitude, may restrict a companyus from effectively marketing and selling itsour products, may limit a company'sour ability to obtain future premarket clearances, approvals or certifications, and could result in a substantial modification to the company'sour business practices and operations. International sales of medical devices manufactured in the U.S. that are not approved by the FDA for use in the U.S., or that are banned or deviate from lawful performance standards, are subject to FDA export requirements.

Regulations regarding the development, manufacture and sale of medical devices are evolving and subject to future changes. For instance, the landscape concerning medical devices in the EU recently evolved. On May 26, 2021, the EU Medical Devices Regulation became applicable, and repealed and replaced the EU Medical Devices Directive and the EU Active Implantable Medical Devices Directive. Unlike directives, which must be implemented into the national laws of the EU member states, regulations are directly applicable (i.e., without the need for adoption of EU member state laws implementing them) in all EU member states. The EU Medical Devices Regulation is intended to establish a uniform regulatory framework across the EU for medical devices. These requirements are in active implementation and may change as the European Commission adopts additional implementing acts and considers targeted revisions to related medical device rules. These modifications may have an effect on the way we conduct or intend to developconduct our business in the EU and EEA.

ThereThe areregulatory currentlyrequirements for our products can differ in different regulationsjurisdictions. inFor place inexample, Great Britain currently has a different regulatory framework for our products as compared to both Northern Ireland and the EU. Ongoing compliance with bothmultiple, sets ofdifferent regulatory requirements may result in increased complexity and costs for our business.

Furthermore, on December 16, 2024, the UK government published an amendment to the UK Medical Devices Regulations to clarify and strengthen the post-market surveillance requirements for medical devices in Great Britain. This amendment will come into force on June 16, 2025. In addition, the MHRA launched a consultation from November 14, 2024 to January 5, 2025 on proposals to update the pre-market requirements for medical devices in Great Britain. The MHRA has stated that it will incorporate feedback to this consultation into new UK legislation on pre-market requirements for medical devices in Great Britain. The new legislation is expected to come into force in 2026. Under the UK Medical Devices Regulations, in order to be lawfully placed on the Great Britain market, Class I (non-sterile, non-measuring or non-re-useable) medical devices need to be self-certified, in accordance with United Kingdom Conformity Assessment (“UKCA”), and other medical devices need to be “UKCA” certified by a UK approved body. However, certain medical devices in compliance with: the EU Medical Devices Directive can continue to be placed on the Great Britain market until the sooner of certificate expiration or June 30, 20282028, while certain medical devices in compliance with the EU Medical Devices Regulation can continue to be placed on the Great Britain market until the sooner of certificate expiration or June 30, 2030. Medical devices also need to bear a physical UKCA mark in order to be lawfully placed on the Great Britain market. However, one of the keyMHRA topics in the MHRA’s recent consultation was to obtain feedback on whetherintends to remove the requirement for a medical device and its labeling (i.e. packaging and instructions for use) in Great Britain to bear a physical UKCA mark. Instead of requiring a medical device and its labeling to bear a UKCA mark,Instead, manufacturers would be required to assign a unique design identification (“UDI”) to a medical devicesdevice and register the UDI in a publicly accessible database before theythe aremedical device is placed on the Great Britain market. If this change is implemented, we may no longer be required to affix the physical UKCA mark to our medical devices, but we may need to assign and affix a UDI.UDI, and register the UDI in a publicly accessible database. Understanding and ensuring compliance with any new requirements is likely to lead to further complexity and increased costs to our business. If there is insufficient UK approved body capacity, there is a risk that our product certification could be delayed which might impact our ability to market products in Great Britain after the respective transition periods.

From time to time, legislation is drafted and introduced in the U.S. Congress that could significantly change the statutory provisions governing the regulation of medical devices. In addition, the FDA may change its policies, adopt additional regulations or revise existing regulations, or take other actions, which may prevent or delay marketing authorization of our future products under development or impact our ability to modify any products for which we have already obtained marketing authorizations on a timely basis or otherwise increase the costs associated with compliance. For example, inon February 2024,2, 2026, the FDA issued aFDA’s final rule to amend and replaceimplementing the FDA’s Quality Management System Regulation (“QSRQMSR”), became effective. The QMSR, which replaced the FDA’s former Quality System Regulation, sets forth the FDA’s current good manufacturing practicecGMP requirements for medical devices, to align more closely with the International Organization for Standardization (“ISO”) standards. Specifically, this final rule, which the FDA expects to go into effect on February 2, 2026, establishes the “Quality Management System Regulation”, whichand among other things, incorporates by reference certain elements of the quality management system requirements of ISO 13485:2016. Although our quality system is currently designed to comply with ISO 13485:2016 in connection with our activities outside of the U.S., and although the FDA has stated that the standards contained in ISO 13485:2106216 are substantially similar to those set forth in the QSR,QMSR, and although our quality management system is designed to comply with ISO:13485, the FDA has indicated that ISO:13485 certification alone will not ensure compliance under the QMSR, nor will ISO certification exempt manufacturers from FDA inspection. The QMSR also includes certain compliance obligations, such as those relating to unique device identification, product traceability, and maintenance of complaint and service records, that align more closely with the FDA’s existing medical device requirements than with ISO standards. Accordingly, it isremains unclear the extent to which thisthe finalQMSR rule, once effective, couldmay impose additional or different regulatory requirements on us that could increase the costs of compliance or otherwise negatively affect our business.

A portion of our revenue is derived from our European and Asian operations and includes transactions in Euros, British Pounds, Chinese Yuan and Japanese Yen, while our products are mainly manufactured in the U.S., the U.K., Czech Republic, Germany and China. In the event of a decline in the value of the Euro, British Pounds, Chinese Yuan or Japanese Yen, we typically experience a decline in our revenues and profit margins. If we increase the selling prices on our products sold in Europe and Asia in order to maintain profit margins and recover costs, we may lose customer sales to lower cost competitors. Consequently, a strong U.S. dollar may adversely affect reported revenues and our profitability.

There has been increased public focus and scrutiny from investors, governmental and nongovernmental organizations, customers, and other stakeholders and third parties on corporate sustainability and responsibility practices in recent years, including with respect to global warming and climate change, diversity, equity and inclusion, and labor and human rights, among other similar issues. Both the standard setting and regulatory landscapes are evolving and extremely complex, presenting significant compliance challenges. Such increased complexity and scrutiny may result in increased costs, increased risk of litigation or reputational damage relating to our sustainability and responsibility practices or performance, enhanced compliance or disclosure obligations, or other adverse impacts on our business, financial condition or results of operations. Many different governmental organizations are promulgating reporting standards and rules that focus on a myriad of sustainability topics, including new reporting requirements in various jurisdictions. For example, we may be subject to, among others, the requirements of the EU Corporate Sustainability Reporting Directive, other EU directives, EU and EU member state regulations, various disclosure requirements (such as information on greenhouse gas emissions, climate risks, use of offsets, and emissions reduction claims) and/or from the State of CaliforniaCalifornia, aspending wellongoing as the SEC’s stayed rule on climate related disclosures, if put in place.litigation. Additional local, state, federal and international laws and rules with respect to sustainability and corporate responsibility matters may be enacted in the future and the extent and scope of their requirements and impacts on our business are unknown. As we continue to focus on developing our sustainability and corporate responsibility practices, such practices may not meet or be perceived to meet the standards of all of our stakeholders, and both advocates and opponents of such practices are increasingly resorting to a range of activism forms, including media campaigns, shareholder proposals, and litigations, to advance their perspectives. There has similarly been an increase in activism and litigation alleging that corporate diversity, equity and inclusion programs may discriminate against certain groups. Many of our large, global customers are also committing to long-term targets to reduce greenhouse gas emissions within their supply chains. If we are unable to support customers in achieving these reductions, we may lose revenue if our customers find other suppliers who are better able to support such reductions. A failure, or perceived failure, to respond to varying, and potential expectations of all key stakeholders could cause harm to our business and reputation and have a negative impact on the market price of our common shares. Further, organizations that provide information to investors on corporate governance and related matters have developed rating processes for evaluating companies on sustainability and corporate responsibility matters. Such ratings are used by some investors to inform their investment or voting decisions. Unfavorable ratings could lead to negative investor sentiment towards us and/or our industry, which could have a negative impact on our access to and costs of capital.

We may require additional capital to adequately respond to future business challenges or opportunities, including, but not limited to, the need to develop new products or enhance our existing products, the need to invest in cloud-based ERP systemssystems, artificial intelligence systems, and other digital technology platforms to help accelerate the growth of our businesses, the need to build inventory or to invest other cash to support business growth, and opportunities to acquire complementary businesses and technologies.

As of December 31, 2024,2025, we had outstanding debt of $419.2$149.0 million under our fourth amended and restated senior secured credit agreement (as amended, the “ThirdFourth Amended and Restated Credit Agreement”), and $346.2$850.0 million of additional borrowing capacity available under the revolving credit facility.facility, and $110.6 million outstanding under the senior amortizing notes (the “Amortizing Notes”) component of our 6.50% tangible equity units (“Units”). If we are unable to satisfy the conditions in the ThirdFourth Amended and Restated Credit Agreement or our needs exceed the amounts available under the revolving credit facility, we may need to obtain equity or debt financing. If we raise additional funds through further issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution. Any new equity securities we issue could have rights, preferences and privileges superior to those of the holders of our common shares. Further, our ThirdFourth Amended and Restated Credit Agreement restricts our ability to obtain additional debt financing from other sources. If we are unable to obtain adequate financing or obtain financing on terms satisfactory to us when we need it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited. In addition, the terms of any additional equity or debt issuances may adversely affect the value and price of our common shares.

As of December 31, 2024,2025, we had $419.2$259.6 million of total outstanding debt. This level of debt could have significant consequences on our future operations, including:

Our ThirdFourth Amended and Restated Credit Agreement, as amended, contains covenants that limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our borrowings thereunder.

In addition, theThe stock market has experienced extreme price and volume fluctuations in recent years. These fluctuations have had a substantial effect on the market prices of many companies, often unrelated to the operating performance of the specific companies. These market fluctuations could adversely affect the price of our common shares.

Customers with liquidity issues may lead to additional badcredit debt expense.losses. There can be no assurance that our open credit customers will pay the amounts they owe to us or that the reserves we maintain will be adequate to cover such credit exposures. In addition, to the extent that turmoil in the credit markets or increases in interest rates make it more difficult for some customers to obtain financing, their ability to pay may be adversely impacted. Our customers’ failure to pay and/or our failure to maintain sufficient reserves could have a material adverse effect on our future cash flows and financial condition.

Novanta Inc. and its subsidiaries (collectively referred to as,as the “Company”, “Novanta”, “we”, “us”, “our”) is a leading global supplier of core technology solutions that give medicalmedical, life science, and advanced industrial original equipment manufacturers (“OEMs”) a competitive advantage. We combine deep proprietary technology expertise and competencies in precision medicine, precision manufacturing, robotics and automation, and advanced surgery with a proven ability to solve complex technical challenges. This enables us to engineer coreproprietary componentstechnology and sub-systemssolutions that deliver extreme precision and performance, tailored to our customers' demanding applications.

disciplined focus on our diversified business model of providing functionalityproprietary technology solutions to long life-cycle OEM customer platforms in attractive medical and advanced industrial niche markets;

improvingstrengthening our existingoperational operationsperformance to expand profit margins and improveenhance customer satisfaction by implementingdeploying lean manufacturing principles,principles and advancing strategic sourcing initiatives across our major production sites, andwhile optimizingregionalizing our manufacturing footprint and limitingestablishing themanufacturing growthcenters of ourexcellence fixedto costachieve basegreater efficiency and reduce overall production complexity; and attracting,advancing retaining,a people first culture that promotes a growth mindset, cohesive and developingengaged world-class talentedteams, and motivatedcontinuous employees.employee development to enable long‑term organizational excellence.

Acquisition of MotionKeonn SolutionsTechnologies, S.L.

In recent years, the global economy has faced significant challenges, including inflation, supply chain disruptions, business slowdowns, labor shortages, and market volatility.volatility, and new and proposed tariffs announced by the U.S. Presidential Administration have introduced additional uncertainty. We address macroeconomic challenges by continuing to execute our strategy. There have been improvements in the supply chain with better on-time deliveries, and recent efforts have successfully addressed talent shortages. However, uncertainty remains about overall macroeconomic conditions due to geopolitical tensions and possible changes in trade policies.

Economic tensions and changes in trade policies, such as higher tariffs, retaliatory measures, and renegotiated free trade agreements, changes in government funding, and the ongoing impact from prolonged inflationary pressures couldhave impactimpacted the global market for our products.products Inand addition,the werelated continuecost to monitor geopolitical conflict in Israel, Russia and Ukraine for any potential impact on our businesses.manufacture.

Total revenue for 20242025 was $949.2$980.6 million, an increase of $67.6$31.4 million, or 7.7%,3.3%, versus 2023.2024. This increase was primarily due to revenue from our 20242025 acquisition,acquisition and an increase in revenue in the Automation Enabling Technologies segment, partially offset by a decrease in demandrevenue in the advancedMedical industrialSolutions andsegment medicalexcluding endthe markets.impact of our 2025 acquisition. The net effect of our 2024current year acquisition resulted in an increase in revenue of $82.4$21.8 million, or 9.4%.2.3%. In addition, foreign currency exchange rate favorably impacted our revenue by $14.6 million or 1.5%, in 2025.

Operating income for 20242025 was $110.6$94.0 million, anda remaineddecrease flatof $16.6 million, or 15.0%, versus the prior year.2024. This was primarily attributable to an increase in gross profit of $21.6 million, partially offset by an increase in selling, general and administrative (“SG&A”) expenses of $11.5$19.7 million, an increase in amortization expense of $5.3 million, an increase in research and development and engineering (“R&D”) expenses of $3.8 million, and an increase in restructuring, acquisition and related costs of $0.9$8.9 million, and an increase in amortization expense of $1.7 million, partially offset by an increase in gross profit of $13.7 million.

Basic earnings per common share (“basic EPS”) of $1.78$1.47 in 20242025 decreased $0.25$0.31 from basic EPS of $2.03$1.78 in 2023.2024. Diluted earnings per common share (“diluted EPS”) of $1.77$1.47 in 20242025 decreased $0.25$0.30 from diluted EPS of $2.02$1.77 in 2023.2024. The decreases in basic EPS and diluted EPS were primarily attributable to anlower increaseoperating inincome, partially offset by reduced interest expense and an increase in income tax provision.expense.

Specific components of our operating results for 2024, 20232025 and 20222024 are further discussed below.

The following table sets forth external revenue by reportable segment for 2024, 20232025 and 20222024 (dollars in thousands):

MedicalAutomation SolutionsEnabling Technologies segment revenue in 20242025 increased $76.2by $10.2 million, or 19.9%,2.1%, versus 2023,2024, primarily due to a $30.3 million increase in revenue from our 2024 acquisition,robotics and an increase in sales from our advanced surgeryautomation products, partially offset by a decrease$20.0 million decline in revenue from our precision medicinemanufacturing products.

Medical Solutions segment revenue in 20232025 increased $55.6$21.1 million, or 17.0%,4.6%, versus 2022,2024, primarily duedriven toby increasesa $33.7 million increase in salesrevenue from our advanced surgery andproducts, partially offset by a $12.6 million decline in precision medicine products,products. andThe $8.1decrease millionin ofprecision medicine product revenue was primarily attributable to lower demand, partially offset by revenue contributions from our 20222025 acquisition.

The following table sets forth the gross profit and gross profit margin for each of our reportable segments for 2024, 20232025 and 20222024 (dollars in thousands):

Automation Enabling Technologies segment gross profit for 20242025 increased $0.2$4.5 million, or 0.1%,1.9%, versus 2023,2024, primarily due to an increase in gross profit margin, partially offset by a decrease in revenue. Automation Enabling Technologies segment gross profit margin was 47.9%47.8% in 2024,2025, versus a gross profit margin of 47.0%47.9% for 2023.2024. The increasedecrease in gross profit margin was primarily attributable to ahigher lowertariff costs and temporary cost ofincreases poor quality, partially offset by unfavorable factory utilizationincurred as a resultpart of lowerour sales.regionalized manufacturing strategy.

Medical Solutions segment gross profit for 20242025 increased by $19.2$9.7 million, or 11.2%,5.1%, versus 2023,2024, primarily due to an increase in revenue. Medical Solutions gross profit margin was 41.4%41.6% for 2024,2025, versus a gross profit margin of 44.7%41.4% for 2023.2024. The decreaseincrease in gross profit margin was primarily attributable to margin improvements in advanced surgery products, driven by increased factory utilization and productivity, partially offset by margin declines due to antemporary cost increases incurred as part of our regionalized manufacturing strategy and lower factory utilization for precision medicine products. In addition, 2024 gross profit margin included a one-time inventory related charge associated with a precisionproduct medicineline product,closure and the dilutive effectamortization of inventory fair value adjustment associated with our 2024 acquisition, partially offset by improved factory utilization in our advanced surgery products.acquisition.

The following table sets forth operating expenses for 2024, 2023,2025 and 20222024 (dollars in thousands):

R&D expenses were $91.7$95.5 million, or 10.4%9.7% of revenue, in 2023,2025, versus $85.8$95.5 million, or 10.0%10.1% of revenue, in 2022. R&D expenses increased in terms of total dollars primarily due to higher compensation related expenses.2024.

SG&A expenses were $164.5$195.7 million, or 18.7%20.0% of revenue, in 2023,2025, versus $158.9$175.9 million, or 18.5% of revenue, in 2022.2024. SG&A expenses increased in terms of total dollars and as a percentage of revenue primarily due to increasescosts associated with the planning and design phase of our financial and operation system implementation, costs incurred in compensationconnection relatedwith expensesan insurance recovery claim, and discretionaryincreased spending.costs from our 2025 acquisition.

Amortization of purchased intangible assets, excluding the amortization of developed technologies that is included in cost of revenue, was $20.4$27.5 million, or 2.3%2.8% of revenue, in 2023,2025, versus $26.3$25.8 million, or 3.1%2.7% of revenue, in 2022.2024. The decrease,increase, in terms of total dollars and as a percentage of revenue, was primarilythe dueresult toof more acquired intangible assets from our 2025 acquisition, partially offset by certain intangible assets being fully amortized in 2022.2025.

The following table sets forth operating income (loss) by segment for 2024, 2023,2025 and 20222024 (in thousands):

Automation Enabling Technologies segment operating income was $96.3$114.5 million, or 19.3%22.9% of revenue, in 2023,2025, versus $105.4$106.4 million, or 19.7%21.7% of revenue, in 2022.2024. The decreaseincrease in operating income was primarily due to aan decreaseincrease in gross profit of $10.2$4.5 million, anda an increasedecrease in restructuring, acquisition and related costs of $6.8$1.8 million, partially offset by a decrease in amortization expense of $4.7$1.4 million, and a decrease in R&D expenses of $2.4$1.2 million, andpartially aoffset decreaseby an increase in SG&A expenses of $0.7$0.9 million.

Medical Solutions segment operating income was $51.2 million, or 10.7% of revenue, in 2025, versus $57.5 million, or 12.5% of revenue, in 2024, versus $63.3 million, or 16.5% of revenue, in 2023.2024. The decrease in operating income was primarily due to an increase in RSG&DA expenses of $7.7$6.2 million, an increase in amortization expense of $7.1 million as a result of our 2024 acquisition, an increase in restructuring, acquisition and related costs of $5.6$5.5 million, an increase in amortization expenses of $3.1 million as a result of our 2025 acquisition, and an increase in SGR&AD expenses of $4.6$1.2 million, partially offset by an increase in gross profit of $19.2$9.7 million.

Unallocated costs for 20242025 increased by $4.3$18.3 million, or 8.8%,34.4%, from 2023.2024. The increase in operating loss was primarily duedriven toby costs associated with the planning and design phase of our financial and operation system implementation, costs associated with the 2025 restructuring program, and costs incurred in connection with an increaseinsurance inrecovery SG&A expenses.claim.

The following table sets forth interest income (expense), foreign exchange transaction gains (losses), and other income (expense) for 2024, 2023,2025 and 20222024 (in thousands):

Net interest expense was $25.8$21.5 million in 20232025 versus $15.6$31.5 million in 2022.2024. The increasedecrease in net interest expense was primarily due to an increase in the weighted average interest rate, partially offset by a decrease in average debt levels underand oura seniordecrease creditin facilities.the weighted average interest rate. The weighted average interest rate on our outstanding debt was 6.21%5.57% and 3.24%6.58% for 20232025 and 2022,2024, respectively. Included in net interest expense was non-cash interest expense of approximately $1.2$1.5 million for both 20232025 and 2022,$1.2 million 2024, related to the amortization of deferred financing costscosts. onNet ourinterest debt.expense also included $0.9 million interest expense related to the amortizing notes.

Net other expenses were nominal in 2024, 2023,2025 and 2022.2024.

We recorded a tax provision of $15.8 million in 2025, compared to a tax provision of $15.0 million in 2024, compared to a tax provision of $10.9 million in 2023.2024. The effective tax rate for 20242025 was 18.9%22.7% of income before income taxes, compared to an effective tax rate of 13.0%18.9% of income before income taxes for 2023.2024. Our effective tax rate for 20242025 differed from the combined 29% Canadian federal and provincial statutory raterate, ofwhich 29.0%are 15% and 14%, respectively, primarily due to the mix of income earned in jurisdictions with varying tax rates,rates. $3.0Additionally, the Company reported a $0.7 million benefit for foreign derived intangible income, $4.0a $6.7 million benefit from U.K. patent box deductionsdeductions, and $2.6a $2.4 million benefit fromfor R&D and other U.S. tax credits,credits. These benefits to the Company’s tax rate are partially offset by a $1.9 million increasedetriment inrelated valuationto allowancesnon-tax anddeductible employee compensation, a $1.7$1.5 million detriment related to disallowedBase compensation.Erosion and Anti-Abuse Tax (“BEAT”), a $1.0 million detriment related to Pillar Two minimum taxes, and $1.1 million of withholding taxes.

On December 12, 2022, the EU member states agreed to implement the OrganizationOrganisation for Economic Co-operation and Development’s (“OECD”) Pillar Two Model Rules. These rules, which imposeestablish a global minimum corporate minimum income tax rate of 15%, have been enacted or introduced in proposed legislation in 45 countries. Additionalnumerous countries areworldwide, activelyincluding considering changes to their tax laws to adopt certain partsmost of the OECD’sjurisdictions proposals.in which we operate. We operatequalify in many jurisdictions that have adopted these rules. We fall underfor the transitional safe harbor rules in the majority of jurisdictions in which we operate and are therefore not subject to the Pillar Two global minimum tax.tax in those jurisdictions. Where we cannot apply the safe harbor rules, we have determinedestimated thatthe weimpact haveof nothis Pillar Twominimum tax adjustments. Although future legislation or changes in our financial results could materially increase our global minimumeffective tax expense,rate thisanalysis. legislationWe didcontinue notto havemonitor aany directlegislative materialdevelopments impact in 2024.closely.

Net income was $53.8 million for 2025, compared to $64.1 million for 2024, compared to $72.9 million for 2023, and $74.1 million for 2022, reflecting the impact of the factors described above.

Our risk factors are described in Part I, Item 1A, “Risk Factors”, of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Other than the risk factorfactors set forth below, there have been no material changes in our risk factors as included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

These forward-looking statements are neither promises nor guarantees. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various important factors, including, but not limited to, the following: economic and political conditions and the effects of these conditions on our businesses and on our customers’ businesses, capital expenditures and level of business activities; our dependence upon our ability to respond to fluctuations in product demand; our ability to continuously innovate, to introduce new products in a timely manner, and to manage transitions to new product innovations effectively; customer order timing and other similar factors; disruptions or breaches in security of our or our third-party providers’ information technology systems; risks associated with our operations in foreign countries; our increased use of outsourcing in foreign countries; risks associated with increased outsourcing of components manufacturing; our exposure to increased tariffs, trade restrictions or taxes on our products; our ability to contain or reduce costs; violations of our intellectual property rights and our ability to protect our intellectual property against infringement by third parties; risk of losing our competitive advantage; our failure to successfully integrate recent and future acquisitions into our business or to realize the anticipated benefits or synergies from those acquisitions; the accuracy of financial and other information regarding Riverpoint Medical on which we relied in connection with the acquisition and our related financial projections, which was not subject to the same accounting oversight and controls as our own historical financial information; our ability to accurately forecast Riverpoint Medical's future financial performance and our ability to maintain compliance with financial covenants under our credit facility, including our leverage ratio, which depends in part on the future financial performance of the combined company; our ability to attract and retain key personnel; our restructuring and realignment activities; product defects or problems integrating our products with other vendors’ products; disruptions in the supply of certain key components and other goods from our suppliers; our failure to accurately forecast component and raw material requirements leading to additional costs and significant delays in shipments; production difficulties and product delivery delays or disruptions; our exposure to extensive medical device regulations, which may impede or hinder the approval, certification or sale of our products and, in some cases, may ultimately result in an inability to obtain approval or certification of certain products or may result in the recall or seizure of previously approved or certified products; potential penalties for violating foreign and U.S. federal and state healthcare laws and regulations; impact of healthcare industry cost containment and healthcare reform measures; changes in governmental regulations related to our business or products; actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards, and other requirements; our failure to implement new information technology systems successfully; changes in foreign currency rates; our failure to realize the full value of our intangible assets; our reliance on original equipment manufacturer customers; the loss of sales, or significant reduction in orders from, any major customers; increasing scrutiny and changing expectations from investors, customers, governments and other stakeholders and third parties with respect to corporate sustainability policies and practices; the effects of climate change and related regulatory responses; our exposure to the credit risk of some of our customers and in weakened markets; being subject to U.S. federal income taxation even though we are a non-U.S. corporation; changes in tax laws and fluctuations in our effective tax rates; any need for additional capital to adequately respond to business challenges or opportunities and repay or refinance our existing indebtedness, which may not be available on acceptable terms or at all; our existing indebtedness limiting our ability to engage in certain activities; volatility in the market price for our common shares; and our failure to maintain appropriate internal controls in the future. Other important risk factors that could affect the outcome of the events set forth in these statements and that could affect the Company’s operating results and financial condition are discussed in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 under the heading “Risk Factors”, as updated in our other filings with the Securities and Exchange Commission.

For the threesix months ended AprilJuly 3, 2026, the medical market accounted for approximately 53%52% of our revenue. Revenue from our products sold to the medical market is generally affected by hospital, life science, and other healthcare provider capital spending, growth rates of surgical procedures, changes in regulatory requirements and laws, demand level for life science automation technology, aggregation of purchasing by healthcare networks, changes in technology requirements, timing of OEM customers’ product development and new product launches, changes in customer or patient preferences, and general demographic trends.

For the threesix months ended AprilJuly 3, 2026, the advanced industrial market accounted for approximately 47%48% of our revenue. Revenue from our products sold to the advanced industrial market is affected by a number of factors, including changing technology requirements and preferences of our customers, productivity or quality investments in a manufacturing environment, the financial conditions of our customers, changes in regulatory requirements and laws, and general economic conditions. We believe that the PMI on manufacturing activities specific to different regions around the world may provide an indication of the impact of general economic conditions on our sales into the advanced industrial market.

The global economy has continued to face significant challenges, including inflation, supply chain disruptions, business slowdowns, labor shortages, market volatility, and evolving U.S. trade policies such as tariffs and retaliatory measures. Tariffs imposed by the U.S. government on imports from certain countries, including China, havecontinue increasedto put pressure on our cost of revenue and contributed to grossserve margin compression in both of our reportable segments during the three months ended April 3, 2026.customers. Retaliatory tariffs and trade restrictions imposed by other countries have further increased the cost of cross-border commerce. The scope, duration, and ultimate impact of current and potential future tariff actions remain uncertain and difficult to predict, and the Company may not be able to fully offset the effects through pricing, sourcing, or operational adjustments.

Results of Operations for the Three and Six Months Ended AprilJuly 3, 2026 Compared with the Three and Six Months Ended MarchJune 28,27, 2025

Total revenue of $257.7$265.8 million for the three months ended AprilJuly 3, 2026 increased $24.3$24.8 million, or 10.4%,10.3%, from the prior year period primarily due to revenue from the 2025 acquisition, an increase in revenue in the Medical Solutions segment excluding the impact of the 2025 acquisition and an increase in revenue inboth the Automation Enabling Technologies segment.and TheMedical netSolutions effect of our acquisition resulted in an increase in revenue of $9.0 million, or 3.8%.segments. In addition, foreign currency exchange rates favorably impacted our revenue by $8.2$2.4 million, or 3.5%,1.0%, for the three months ended AprilJuly 3, 2026.

Operating income of $27.5$18.1 million for the three months ended AprilJuly 3, 2026 decreasedincreased $4.9$3.2 million, or 15.1%,21.1%, from the prior year period. This decreaseincrease was attributable to an increase in selling,gross generalprofit of $14.2 million, a decrease in research and administrativedevelopment, and engineering expenses of $8.8$1.3 million,million and ana increasedecrease in restructuring,amortization acquisition, and related costsexpenses of $5.1$0.5 million, partially offset by an increase in grossselling, profitgeneral, and administrative expenses of $9.2$12.9 million.

Basic earnings per common share (“Basic EPS”) of $0.52$0.31 for the three months ended AprilJuly 3, 2026 decreasedincreased $0.07$0.19 from the prior year period. Diluted earnings per common share (“Diluted EPS”) of $0.51$0.30 for the three months ended AprilJuly 3, 2026 decreasedincreased $0.08$0.18 from the prior year period. The decreasesincreases were primarily due to an increase in net income, partially offset by the increase in the weighted average common shares outstanding as a result of athe private placement and the prior year tangible equity unit offering.

Automation Enabling Technologies segment revenue for the three months ended AprilJuly 3, 2026 increased $8.1$14.5 million, or 6.6%,12.0%, versus the prior year period, primarily due to an increase in demandsales inof robotics and automation and precision manufacturing products.

MedicalAutomation SolutionsEnabling Technologies segment revenue for the threesix months ended AprilJuly 3, 2026 increased $16.3$22.6 million, or 14.8%,9.2%, versus the prior year period, primarily due to the net impact of $9.0 million revenue contributions from the 2025 acquisition, and an increase in sales of advancedrobotics surgeryand automation and precision manufacturing products.

Gross profit and gross profit margin can be influenced by a number of factors, including product mix, pricing, volume, manufacturing efficiencies and utilization, costs for raw materials and outsourced manufacturing, headcount, inventory obsolescence andobsolescence, fair value adjustments, warranty expenses, logistics and trade related costs, and intangible amortization.

Automation Enabling Technologies segment gross profit for the three months ended AprilJuly 3, 2026 increased $3.4$13.4 million, or 5.7%,23.0%, versus the prior year period, primarily due to an increase in revenue.both revenue and gross profit margin. Automation Enabling Technologies segment gross profit margin was 47.8%52.6% for the three months ended AprilJuly 3, 2026, versus a gross profit margin of 48.2%47.8% for the prior year period. The decreaseincrease in gross profit margin iswas primarily due to higher materialvolumes, costs,pricing, increasedduty freightdrawback and tariff costs,refunds, as well as temporaryand cost increasesreduction incurredactions, aspartially partoffset ofby material inflationary costs, tariffs, and factory redundancy costs associated with our regionalizedregional manufacturing strategy.initiative.

MedicalAutomation SolutionsEnabling Technologies segment gross profit for the threesix months ended AprilJuly 3, 2026 increased $6.2$16.8 million, or 13.5%,14.3%, versus the prior year period, primarily due to an increase in revenue.both Medicalrevenue Solutionsand gross profit margin. Automation Enabling Technologies segment gross profit margin was 41.3%50.2% for the threesix months ended AprilJuly 3, 2026, versus a gross profit margin of 41.7%48.0% for the prior year period. The decreaseincrease in gross profit margin was primarily due to higher volumes, pricing, duty drawback and tariff refunds, and cost reduction actions, partially offset by material inflationary costs, increasedtariffs, tariffand costs,factory asredundancy wellcosts asassociated changeswith inour productregional mix.manufacturing initiative.

Research and Development and Engineering (“R&D”) expenses are primarily comprised of employee compensation related expenses and cost of materials for R&D projects. R&D expenses were $23.3$24.0 million, or 9.0% of revenue, during the three months ended AprilJuly 3, 2026, versus $23.2$25.3 million, or 10.0%10.5% of revenue, during the prior year period. The decrease in R&D expenses, both in total dollars and as a percentage of revenue, was primarily driven by lower spending on R&D projects.

Selling, general and administrative (“SG&A”) expenses include costs for sales and marketing, sales administration, finance, human resources, legal, information systems, and executive management functions. SG&A expenses were $54.4$60.0 million, or 21.1%22.6% of revenue, during the three months ended AprilJuly 3, 2026, versus $45.6$47.1 million, or 19.5% of revenue, during the prior year period. The increase in SG&A expenses, both in total dollars and as a percentage of revenue, was primarily driven by higher variable employee compensation,compensation and costs associated with the planning and design phase of our financial and operation system implementation and the impact of our prior year acquisition.implementation.

Amortization of purchased intangible assets, excluding amortization of developed technologies which is included in cost of revenue, was $5.8$6.4 million, or 2.2%2.4% of revenue, during the three months ended AprilJuly 3, 2026, versus $5.6$6.9 million, or 2.4%2.9% of revenue, during the prior year period.

We recorded restructuring, acquisition, and related costs of $2.6$12.5 million during the three months ended AprilJuly 3, 2026, versus $(2.5)$12.6 million during the prior year period. The increasedecrease in restructuring, acquisition and related costs was primarily due to a gain recordeddecrease in therestructuring prior year on the salecosts of an$5.5 ownedmillion, facilityoffset andby an increase in restructuringacquisition and related costs incurredof in$5.5 connection with the 2025 restructuring program.million.

MedicalAutomation SolutionsEnabling Technologies segment operating income was $16.7$36.6 million, or 13.2%26.9% of revenue, during the three months ended AprilJuly 3, 2026, versus $14.0$26.9 million, or 12.7%22.1% of revenue, during the prior year period. The increase in operating income was primarily due to an increase in gross profit of $6.2$13.4 million, partially offset by an increase in SG&A expenses of $1.6 million, an increase in restructuring, acquisition, and related costs of $1.1$2.5 million, and an increase in amortizationrestructuring, expensesacquisition and related costs of $0.5$0.6 million.

Unallocated costs primarily represent costs of corporate and shared services functions that are not allocated to the operating segments, including certain restructuring and most acquisition costs. These costs for the three months ended AprilJuly 3, 2026 increased $7.2$13.6 million versus the prior year period. The increase in operating loss was primarily driven by higher compensation costs, higher acquisition and related costs, and costs associated with the planning and design phase of our financial and operation system implementation and higher employee compensation.implementation.

Net interest expense was $1.8$1.1 million for the three months ended AprilJuly 3, 2026, versus $5.6$5.8 million for the prior year period. The decrease in net interest expense was primarily due to lower interest expense as a result of reduced average debt levels and higher interest income. For the three months ended AprilJuly 3, 2026, the weighted average interest rate on our senior credit facilities was 5.81%,5.86%, versus 5.77%5.35% in the prior year period.

Net other expense was nominal for the three and six months ended AprilJuly 3, 2026 and the three and six months ended MarchJune 28,27, 2025.

Our effective tax rate for the three months ended AprilJuly 3, 2026 was 19.9%,21.1%, versus 19.7%22.3% for the same period in the prior year. Our effective tax rate of 19.9%21.1% for the three months ended AprilJuly 3, 2026 differs from the Canadian federal and provincial combined statutory tax rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, estimated U.S. tax benefits for Foreign-Derived Deduction Eligible Income (“FDDEI”) (formerly FDII), awindfall decreasefrom investing theof Canadianrestricted valuationstock allowance, R&D tax credits, andunits, U.K. patent box deductions and R&D tax credits; partially offset by various non-deductible transaction-related and compensation expenses, Pillar Two tax, and uncertain tax position accruals.expenses.

Our effective tax rate for the three months ended MarchJune 28,27, 2025 of 19.7%22.3% differs from the Canadian federal and provincial combined statutory tax rate of 29.0% primarily due to the mix of income earned in jurisdictions with varying tax rates, estimated deductionsU.S. tax benefits for Foreign Derived Intangible Income,Income U.K. patent box deductions(“FDII”) and R&D tax credits, and U.K. patent box deductions; partially offset by disallowedvarious non-deductible transaction-related, compensation deductions, withholding taxes, non-deductible expenses and anuncertain estimatedtax Pillarposition Two inclusion.accruals.

On December 12, 2022, the EU member states agreed to implement the Organisation for Economic Co-operation and Development’s (“OECD”) Pillar Two Model Rules. These rules, which establish a global minimum corporate income tax rate of 15%, have been enacted or proposed legislation in numerous countries worldwide, including most of the jurisdictions in which we operate. We qualify for the transitional safe harbor rules in thea majority of jurisdictions in which we operate and are therefore not subject to Pillar Two global minimum tax in those jurisdictions. Where we cannot apply the safe harbor rules, we have estimated the impact of this minimum tax in our effective tax rate analysis. We continue to monitor any legislative developments closely.

As of AprilJuly 3, 2026, $84.6$94.8 million of our $388.8$718.7 million cash and cash equivalents was held by subsidiaries outside of Canada and the U.S. Generally, our intent is to use cash held in these foreign subsidiaries to fund our local operations or acquisitions by those local subsidiaries and to pay down borrowings under our Senior Credit Facilities. Approximately $71.4$69.4 million of our outstanding borrowings under our Senior Credit Facilities were held in our subsidiaries outside of Canada and the U.S. as of AprilJuly 3, 2026. Additionally, we may use intercompany loans to address short-term cash flow needs for various subsidiaries.

On November 5, 2025, the Companywe entered into an amendment (the “First Amendment”) to the Fourth Amended and Restated Credit Agreement. The First Amendment increases the maximum consolidated leverage ratio permitted thereunder to 3.75:1.00, with a step-up to 4.25:1.00 following a designated acquisition and revised the Company'sour consolidated leverage ratio definition (as defined in the Fourth Amended and Restated Credit Agreement) allowing for the use of up to $100 million unrestricted cash and cash equivalents as a reduction to consolidated funded indebtedness (as defined in the Fourth Amended and Restated Credit Agreement).

As of AprilJuly 3, 2026, we had $71.4$69.4 (€61.960.8) million outstanding under the Euro Term Loans and $75.0 million outstanding under the U.S. Term Loans. As of AprilJuly 3, 2026, we had no outstanding revolver borrowings under our Senior Credit Facilities. Borrowings under the Credit Agreement bear interest at the Base Rate (as defined in the Credit Agreement) plus a margin ranging between zero and 0.75% per annum, determined by reference to the consolidated leverage ratio, or SOFR, SONIA or EURIBOR, as applicable, plus a margin ranging between 1.00% and 1.75% per annum, determined by reference to our consolidated leverage ratio. In addition, we are obligated to pay a commitment fee on the unused portion of the Revolving Facility. As of AprilJuly 3, 2026, we had outstanding borrowings under the Credit Agreement denominated in Euro and U.S. dollars of $71.4$69.4 million and $75.0 million, respectively.