UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the fiscal year ended December 31, 2025
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from________to________
Commission file number 001-35944
POWER SOLUTIONS INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
| Delaware | 33-0963637 | |||||||
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
201 Mittel Drive, Wood Dale, IL | 60191 | |||||||
| (Address of Principal Executive Offices) | (Zip Code) | |||||||
(630) 350-9400 | ||||||||
| (Registrant’s Telephone Number, Including Area Code) | ||||||||
| Securities Registered Pursuant to Section 12(b) of the Act: | ||||||||
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||
| Common Stock, par value $0.001 per share | PSIX | Nasdaq Stock Market | ||||||
| Securities Registered Pursuant to Section 12(g) of the Act: | ||||||||
| __________________ | ||||||||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 and Section 15(d) of the Act. Yes ¨
No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer | x | Accelerated filer | ¨ | ||||||||||||||||||||
| Non-accelerated filer | ¨ | Smaller reporting company | x | ||||||||||||||||||||
| Emerging growth company | ¨ | ||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. x
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If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements
of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
As of June 30, 2025 the aggregate market value of voting stock held by non-affiliates of the registrant, based upon the closing sales price for the registrant’s Common Stock, as reported in the Nasdaq market was $717.9 million. Shares of the registrant’s Common Stock held by each executive officer and director and by each person who holds 10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of February 26, 2026, there were 23,050,450 outstanding shares of the Common Stock of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference to the registrant’s definitive proxy statement (the “2026 proxy statement”), to be filed with the United States Securities and Exchange Commission (the “SEC”) within 120 days after the fiscal year ended December 31, 2025.
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TABLE OF CONTENTS
| Page | ||||||||
| PART I | ||||||||
| Forward-Looking Statements | ||||||||
| Item 1. | Business | |||||||
| Item 1A. | Risk Factors | |||||||
| Item 1B. | Unresolved Staff Comments | |||||||
| Item 1C. | Cybersecurity | |||||||
| Item 2. | Properties | |||||||
| Item 3. | Legal Proceedings | |||||||
| Item 4. | Mine Safety Disclosures | |||||||
| PART II | ||||||||
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | |||||||
| Item 6. | Reserved | |||||||
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||||
| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk | |||||||
| Item 8. | Financial Statements and Supplementary Data | |||||||
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | |||||||
| Item 9A. | Controls and Procedures | |||||||
| Item 9B. | Other Information | |||||||
| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | |||||||
| PART III | ||||||||
| Item 10. | Directors, Executive Officers and Corporate Governance | |||||||
| Item 11. | Executive Compensation | |||||||
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | |||||||
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | |||||||
| Item 14. | Principal Accounting Fees and Services | |||||||
| PART IV | ||||||||
| Item 15. | Exhibits, Financial Statement Schedules | |||||||
| Item 16. | Form 10-K Summary | |||||||
| Signatures | ||||||||
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K (“2025 Annual Report”) that are not historical facts are intended to constitute “forward-looking statements” entitled to the safe-harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may involve risks and uncertainties. These statements often include words such as “anticipate,” “believe,” “budgeted,” “contemplate,” “estimate,” “expect,” “forecast,” “guidance,” “may,” “outlook,” “plan,” “projection,” “should,” “target,” “will,” “would” or similar expressions, but these words are not the exclusive means for identifying such statements. These forward-looking statements include statements regarding Power Solutions International, Inc.’s, a Delaware corporation (“Power Solutions,” “PSI” or the “Company”), projected sales, potential profitability and liquidity, strategic initiatives, future business strategies, warranty mitigation efforts and market opportunities, improvements in its business, improvement of product margins, and product market conditions and trends. These statements are not guarantees of performance or results, and they involve risks, uncertainties and assumptions. Although the Company believes that these forward-looking statements are based on reasonable assumptions, there are many factors that could affect the Company’s results of operations and liquidity and could cause actual results, performance or achievements to differ materially from those expressed in, or implied by, the Company’s forward-looking statements.
The Company cautions that the risks, uncertainties and other factors that could cause its actual results to differ materially from those expressed in, or implied by, the forward-looking statements include, without limitation: the factors discussed in this report set forth in Item 1A. Risk Factors; and from time to time in the Company’s subsequent filings with the United States Securities and Exchange Commission (the “SEC”); the impact of the macro-economic environment in both the U.S. and internationally on our business and expectations regarding growth of the industry; uncertainties arising from global events (including the Russia-Ukraine and Israel-Hamas conflicts), natural disasters or pandemics, and their impact on material prices; the effects of strategic investments on our operations, including our efforts to expand our global market share and actions taken to increase sales growth; the ability to develop and successfully launch new products; labor costs and other employment-related costs; loss of suppliers and disruptions in the supply of raw materials; the impact of rising interest rates; changes in economic conditions, including inflationary trends in the price of raw materials; our reliance on information technology and the associated risk involving potential security lapses and/or cyber-attacks; the ability of the Company to accurately forecast sales, and the extent to which sales result in recorded revenues; changes in customer demand for the Company’s products; volatility in oil and gas prices; the impact of U.S. tariffs on imports and exports; the impact of supply chain interruptions and raw material shortages, including compliance disruptions such as the Uyghur Forced Labor Prevention Act (the “UFLPA”) delaying goods from China; the potential impact of higher warranty costs and the Company’s ability to mitigate such costs; any delays and challenges in recruiting and retaining key employees consistent with the Company’s plans; the potential effects of damage to our reputation or other adverse consequences if our employees, suppliers, sub-suppliers or other contract parties, agents or business partners violate anti-bribery, competition, export and import, trade sanctions, data privacy, environmental, human rights or other laws; and the impact of unanticipated changes in our effective tax rate, the adoption of new tax legislation or exposure to additional income tax liabilities.
The Company’s forward-looking statements are presented as of the date hereof. Except as required by law, the Company expressly disclaims any intention or obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.
AVAILABLE INFORMATION
The Company is subject to the reporting and information requirements of the Exchange Act, and as a result, it is obligated to file annual, quarterly and current reports, proxy and information statements and other information with the SEC. The Company makes these filings available free of charge on its website (http://www.psiengines.com) as soon as reasonably practicable after it electronically files them with, or furnishes them to, the SEC. Information on the Company’s website does not constitute part of this 2025 Annual Report. In addition, the SEC maintains a website (http://www.sec.gov) that contains the annual, quarterly and current reports, proxy and information statements, and other information the Company electronically files with, or furnishes to, the SEC.
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PART I
Unless the context indicates otherwise, references in this 2025 Annual Report to “Power Solutions,” “PSI,” “the Company,” “Corporate,” “it,” “its” and “itself” mean Power Solutions International, Inc. and its wholly-owned subsidiaries. References herein to “2025,” “fiscal 2025” or “fiscal year 2025” refer to the fiscal year ended December 31, 2025. References herein to “2024,” “fiscal 2024” or “fiscal year 2024” refer to the fiscal year ended December 31, 2024.
Item 1. Business.
General Business Overview
Power Solutions International, Inc., incorporated under the laws of the state of Delaware in 2011, designs, engineers, manufactures, markets and sells a broad range of advanced, emission-certified engines and power systems that are powered by a wide variety of clean, alternative fuels, including natural gas, propane, and biofuels, as well as gasoline and diesel options, within the power systems, industrial and transportation end markets. The Company manages the business as a single reportable segment.
The Company’s products are primarily used by global original equipment manufacturers (“OEMs”) and end-user customers across a wide range of applications and equipment that includes standby and prime power generation, demand response, microgrid, combined heat and power, arbor equipment, material handling (including forklifts), agricultural and turf, construction, pumps and irrigation, compressors and utility vehicles.
The Company provides highly engineered, comprehensive solutions designed to meet specific customer application requirements and technical specifications, including those imposed by environmental regulatory bodies, including the U.S. Environmental Protection Agency (“EPA”), the California Air Resources Board (“CARB”), the People’s Republic of China’s Ministry of Ecology and Environment (“MEE”) and regulatory bodies within the European Union (“EU”).
The Company’s products include both sourced and internally designed and manufactured engines that are engineered and integrated with associated components. These comprehensive power systems are tested and validated to meet quality, safety, durability and environmental standards and regulations.
Through advanced research and development (“R&D”) and engineering capabilities, the Company is able to provide its customers with highly optimized, efficient, durable and emissions-compliant products that enhance their competitive position.
The Company’s business is diversified across end markets and applications and also includes extensive aftermarket and service parts programs. These programs consist of (i) internal aftermarket service parts programs with worldwide sales and distribution capabilities and (ii) internal OEM-developed service parts programs for components and products supplied by the Company.
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The Company’s end markets, product categories and equipment are as highlighted in the following table:
| End Market | Product Categories | Equipment/Products (End Use) | ||||||
| Power Systems | Electric Power Generation (“Gensets”) Large Custom Genset Enclosures | Mobile and Stationary Gensets for: Emergency Standby Rental Prime Power Demand Response Microgrid Oil & Gas Data Center Renewable Energy Resiliency (Wind, Solar, Storage) Combined Heat and Power (“CHP”) | ||||||
| Industrial | Material Handling Agricultural/Arbor Care Irrigation/Pumps Construction Compressors New Energy Other Industrial | Forklifts Wood Chippers Stump Grinders Sweepers/Industrial Scrubbers Aerial Lift Platforms/Scissor Lifts Irrigation Pumps Oil and Gas Compression Oil Lifts Off Road Utility Vehicles Ground Support Equipment Ice Resurfacing Equipment Pump Jacks Battery Packs | ||||||
| Transportation | Trucks Buses Fuel Systems and Tanks | Class 2 - 7 Vocational Trucks and Vans School Buses (Type A and Type C) Transit Buses Terminal and Utility Tractors | ||||||
Products
The Company’s sourced and internally designed and manufactured engine blocks are engineered and integrated with associated components in a range of configurations that includes basic engine blocks integrated with appropriate fuel system parts as well as completely packaged power systems that include combinations of front accessory drives, cooling systems, electronic systems, air intake systems, fuel systems, housings, power takeoff systems, exhaust systems, hydraulic systems, enclosures, brackets, hoses, tubes, packaging, telematics and other assembled componentry. The Company also designs and manufactures large, custom-engineered integrated electrical power generation systems for both standby and prime power applications. The Company’s comprehensive power systems are tested and validated to meet quality, safety, durability and environmental standards and regulations.
The Company sells engines and power systems, including both emission-certified compression ignition and spark-ignition internal combustion engines which are enabled by advanced controls to run on a wide variety of clean, alternative fuels, including natural gas, propane, and biofuels, as well as gasoline and diesel options, within the power systems, industrial and transportation end markets. Natural gas, gasoline, propane, and biofuel engines range from 0.99 liters (“L”) to 53L, while Diesel options range from 20L to 88L. The Company also designs and fabricates power system enclosures and sources electrification components that are engineered and integrated into desired configurations deemed “New Energy” within the industrial end market.
Strategic Initiatives/Growth Strategies
The Company continues to execute a comprehensive set of business objectives aimed at improving profitability, streamlining processes, strengthening the business and focusing on achieving growth in higher-return product lines. Key elements of these objectives and other initiatives are highlighted below.
Sustained profitability
The Company continues to improve profitability through the review of its customer and product portfolio. To date, this has resulted in strategic price increases in certain areas of the business, along with product redesign and the re-sourcing of certain components, to support improved margins. This program is a multi-year effort and will entail a strategic assessment of certain
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areas in which profitability does not meet established thresholds. The Company also continues to transform its manufacturing operations through the ongoing adoption of lean, agile and flexible lines, which provides opportunities for improved efficiency, margins and profitability, particularly as volume and sales increase. The Company has also been investing heavily in the expansion of its heavy-duty engine product line, which has historically provided better margins, particularly through its collaboration with Weichai America Corp., a wholly-owned subsidiary of Weichai Power Co., Ltd. (HK2338, 000338.SZ) (herein collectively referred to as “Weichai”). Weichai is the beneficial owner of 46.0% of the outstanding Common Stock.
Warranty expense mitigation efforts
The Company continues to limit its warranty expense through various mitigation efforts. As part of this, the Company is developing reimbursement and commercial remedies from key suppliers for components supplied by third parties, where applicable, at the same time ensuring any contractual obligations with customers include more favorable warranty terms for the Company wherever possible. Also, the Company continues to evaluate and improve its engineering validation and reliability programs for products and applications as well as make investments in technology to further enhance its tools and processes.
Streamlining of business processes and footprint rationalization
The Company has an ongoing program to review and identify cost reduction opportunities throughout the organization while simultaneously planning for strategic growth. As part of this program, the Company has adopted tighter controls over spending and centralized certain business processes.
Strengthen the business through the optimization of business systems and technology
The Company is working to strengthen its business through the optimization of its business systems and technology to support the strengthening of internal controls, improve processes, drive greater operational efficiencies and provide better and timelier decision making across the organization. The Company also continues to work on the enhancement and optimization of its Enterprise Resource Planning system and associated workflows.
Grow the business in the highest return on investment areas
The Company has been a major participant in the power systems market for many years as a supplier to several of the world’s leading power generation companies and through its large custom genset enclosure business. Continuing to build on its broad product offering, the Company received EPA certification for its 32L and 40L heavy-duty engines in 2018 and for its 53L heavy-duty engines in 2019. These heavy-duty engines provide a natural-gas-fueled power range from 500 kilowatt-electric (“kWe”) to 1.25 megawatt (“MW”), allowing the Company to serve a greater portion of the demand response, microgrid, combined heat and power, and oil and gas markets. Additionally, in 2019, the EPA granted emergency standby certification for certain diesel engines sold by the Company, which are largely designed for emergency use in critical infrastructure applications. Also, the engines can handle mission critical customer operations in the health care, data center, hospitality and transportation industries. In addition to dedicating significant R&D resources within the power systems end market, the Company has also strategically invested in expanding its management, sales and operations staff to support these efforts. The Company’s heavy-duty engines have historically provided better margins.
Capitalize on key market trends
The Company’s breadth of products and solutions will enable it to capitalize on numerous market trends that it believes have the potential to drive customer demand for its products and contribute toward its long-term growth. Further, the Company’s R&D activity is largely focused on expanding its solutions to further address trends in these areas. The key trends include the following:
•the worldwide growth of intermittent sources of energy, such as wind and solar, and an aged electric grid in the United States, coupled with power outage activity due to weather or power shutdowns, are driving increased demand for generators, microgrids and demand response equipment;
•stringent regulations and growing efforts to reduce emissions are driving demand for clean energy and alternatives to diesel power engines in several markets such as the power generation market for microgrids, oil and gas applications, and arbor care markets, among others;
•growth in data centers and their increasing demand for electricity, which is driving growth for backup power (commercial generators/microgrids);
•growth in e-commerce activity around the world, which is driving demand for last-mile delivery vehicles; and
•the availability of automotive engines that are suited for industrial application.
New product expansion by leveraging deep industry experience
Throughout the Company’s history, it has evolved from a provider of diesel power systems to becoming a major supplier of power systems fueled by alternatives to diesel, including gasoline, propane, and natural gas, among others. By leveraging the
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deep industry experience of its engineering and new-product development teams, the Company is continuing to take steps to broaden the range of its power system product offerings, including engine classes, power ratings and the OEM and direct user market categories into which it supplies products. The Company plans to capitalize on its technologically sophisticated, in-house design, prototyping, testing and application engineering capabilities to further refine its superior power system technology. Due to increasing demand for new energy and latest market trends, the Company continues to offer battery packs for its industrial market.
Leverage the Company’s relationship with Weichai
In March 2017, the Company and Weichai executed a strategic collaboration agreement (the “Collaboration Agreement”) under which they have been working together to accelerate market opportunities for each company’s respective product lines across various geographic and end-user markets. On March 22, 2023, the Collaboration Agreement was extended for an additional term of three years, expiring in March 2026. The Company received a renewal notice from Weichai and is in the process of negotiating the renewal of the Collaboration Agreement; however, no formal extension has been executed as of the date of this filing.
The Collaboration Agreement provides the Company with strategic benefits and opportunities, including the ability to leverage Weichai’s strengths and capabilities in R&D, manufacturing, procurement and distribution and its widespread sales channels in China and other emerging markets. This collaboration has enabled the Company to broaden its existing product portfolio, improve material quality, decrease costs, accelerate the development of new products and bring them to market, and expand access and exposure to new markets.
Also, through the Company’s relationship with Weichai, it has access to Weichai’s ‘New Energy’ product portfolio and is exploring product diversification opportunities in the areas of battery storage and electrification.
Expand global business
Through the expansion of its product lineup and the entry into new markets, the Company has a history of growing its product offerings internationally beyond North America. The Company sees long-term opportunity in continuing to grow its business worldwide with further R&D investment including new-product development and offerings. In January 2022, PSI and Société Internationale des Moteurs Baudouin (“Baudouin”), a subsidiary of Weichai, entered into an international distribution and sales agreement which enables Baudouin to bring PSI’s power systems line of products into the European, Middle Eastern, and African markets, which resulted in $1.2 million of sales during the year ended December 31, 2025. Beginning January 2024, this agreement automatically extends for additional one-year terms unless notice is given by one of the parties. In addition to sales, Baudouin will manage service, support, warranty claims, and technical requests. The Company believes that this agreement will continue to offer enhanced global growth opportunities, particularly in Europe.
Sales and Marketing
The Company employs a direct sales and marketing approach to maintain maximum interface with and service support for its OEM customers. This direct interface incorporates the corporate internal technical sales representatives. The Company complements its direct OEM relationships with a localized, independent sales and product support organization. This localized sales and support organization provides the necessary knowledge of local customs and requirements while also delivering immediate sales assistance and customer support.
The Company has invested in and is focused on capturing aftermarket sales of the value-added components that are included in its power systems. With a significant portion of the selling prices of the Company’s power systems coming from value-added components, this is a large, continuing growth opportunity for its aftermarket business.
Customers
The Company’s customers primarily include global OEMs and direct end-users across a wide range of applications that demand high product quality, best-in-class engineering support and on-time delivery. Within several applications for which the Company provides solutions, it maintains supplier relationships with customers, which are often among the largest in that category.
The Company’s largest customer represented 20% of consolidated net sales in 2025. The largest customer changes from time to time as a result of various factors, including prevailing market conditions, customers’ strategies and inventory of the Company’s power systems.
Competition
Each of the Company’s end markets have a variety of competitors, including engine manufacturers, independent suppliers and distributors of engines, fuel systems and component providers, manufacturers of power generation equipment, engine packagers
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and integrators, and the in-house operations of certain OEMs, some of which have longer operating histories, strong brand recognition and significantly greater financial and marketing resources.
Notwithstanding significant competition, the Company believes that the following factors provide it with a differentiated value proposition that allows the Company to compete effectively:
•fuel-agnostic strategy;
•demonstrated expertise in off-road applications;
•ability to leverage Weichai’s strengths and capabilities;
•completeness and comprehensiveness of engines and power systems;
•expansive product integrations, including electronics, controls, fuel systems and transmissions;
•commonality of technology platform spanning all product lines;
•emissions regulation compliance and certification;
•breadth and depth of advanced engineering disciplines;
•industry-leading product and application engineering;
•competitive pricing/cost;
•ability to tailor power systems to specific customer needs;
•performance and quality;
•speed to market; and
•customer support and service.
Manufacturing
The Company manufactures and assembles its products at facilities in suburban Chicago, Illinois, as well as in Darien and Beloit, Wisconsin, and customizes its power systems to meet specific requirements of OEM applications and the needs of its OEM customers. The Company has invested in precision computer numerical control (“CNC”) machining equipment to finish its internally designed engine blocks and cylinder heads, which are cast by various suppliers. The manufacturing lines in the Company’s production facilities are technologically sophisticated, lean, agile and flexible, and the Company allocates production capacity on its mixed model manufacturing lines to accommodate the demand levels and product mix required by its OEM customers.
The Company focuses on safety, people, quality, on-time delivery, cost and environment in its manufacturing operations. The Company is certified to the most recent International Organization for Standardization (“ISO”) standard, ISO 9001: 2015. The ISO 9000 family of quality management standards, which must be met in order to become ISO certified, is designed to help organizations monitor and improve the quality and delivery of their products and/or services to their customers. The Company uses tools such as Six Sigma, Lean Manufacturing, 80/20, Value Stream Mapping and other manufacturing engineering strategies to help manage its business, build quality, drive performance and continually improve culture within the manufacturing operations’ teams. The Company also uses a customer relationship management database to help collect customer feedback and to track overall quality performance at its OEM customers. Structured staff training is a constant priority and includes closed-loop quality monitoring and feedback systems.
Research, Development and Engineering
The Company’s research, development and engineering programs are focused on new product development and enhancements to current products, in addition to performance and quality improvements across its product lines. Its efforts are market driven, with the sales team identifying and defining market requirements and trends and its engineering and new-product development groups reviewing existing power system portfolios and developing new solutions that build upon the technology within that portfolio.
The Company’s product and application development engineering teams include in-house mechanical and electrical engineering functions, including advanced engine modeling, simulation, analysis and testing. Internal resources are supplemented with engineering outsourcing relationships for design, development and product testing. In addition to these engineering outsourcing relationships, the Company benefits from the design, development and testing capabilities of its supplier base. The Company staffs its engineering support activities associated with released product and component sourcing programs with dedicated internal engineering personnel.
Research, development and engineering expenditures include salaries, contractor fees, building costs, utilities, testing, information technology and administrative expenses and are expensed, net of contract reimbursements, when incurred. From time to time, the Company enters into agreements with its customers to fund a portion of the research, development and engineering costs of a particular project. These reimbursements are accounted for as a reduction of the related research, development and engineering expenditure. The Company’s net research, development and engineering expenditures for 2025 and 2024 were $18.2 million and $20.1 million, respectively.
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Supplier Relationships
In addition to producing its own engines, the Company has established relationships with its suppliers for certain engines that are integrated into the Company’s comprehensive power systems, the most significant of which are HD Hyundai Infracore Co., LTD (“HD Hyundai”), a subsidiary of HD Hyundai, Shenyang Packson Technology Co., LTD. (“SPY”), Chongqing Duchengrongfeng Mechanic Manufacture Co., Ltd (“CDM”) and Weichai. The Company also sources other power system components and coordinates design efforts with third-party suppliers for some of its key components. In general, the prices at which the Company purchases engines, components and other raw materials are based on market factors, including the prices offered by other suppliers operating in the same market and the prevailing market prices of raw materials.
The Company aggregates product sourcing efforts across its large and diverse OEM customer base and across industry categories, capitalizing on volume, economies of scale and global supply opportunities. The Company’s customers benefit from the aggregation of its global sourcing, procurement, and assembly and services, obtaining cost benefits that they might not obtain if they were to rely on their own internal resources, capabilities and more limited demand requirements. Through this process, customers are able to streamline their supply base by consolidating procurement and assembly efforts down to a single part number product supplied by the Company. The Company delivers this assembly to its customers’ production lines ready to install into the customers’ product.
The Company is party to a nonexclusive supply agreement with HD Hyundai, under which it purchases and distributes specified HD Hyundai engines within a territory consisting of the United States, Canada and Mexico with no minimum product purchase commitments. Beginning in 2024, the supply agreement automatically extends for additional one-year terms unless a notice of termination is provided by either party six months prior to the scheduled expiration.
In November 2023, the Company entered into a supply agreement with CDM, for the exclusive purchase and distribution of engines in North and South America, in the industrial and power system markets. The Company entered into this supply agreement to source certain engines previously supplied by Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd. (“SAME”), whose ability to supply product was suspended because of the intensified enforcement and expansion of the UFLPA near the end of 2023. Beginning December 2024, the supply agreement automatically extends for additional one-year terms unless a notice of termination is provided by either party six months prior to scheduled expiration.
In November 2023, the Company also entered into a supply agreement with SPY, for the exclusive purchase and distribution of engines in North and South America, in the industrial and power system markets. The Company entered into this supply agreement to source certain engines previously supplied by SAME, whose ability to supply product was suspended because of the intensified enforcement and expansion of the UFLPA near the end of 2023. Beginning December 2024, the supply agreement automatically extends for additional one-year terms unless a notice of termination is provided by either party six months prior to scheduled expiration.
Product Support
The Company’s dedicated team of product and application engineers enables it to deliver high-quality, responsive technical support to its OEM and end-user customers. The Company provides technical support and training to its customers, including in-plant training and support through web and phone-based field service. The Company further supports its customers by engaging regional providers to perform warranty services and offer support for its power systems. The Company also leverages its technical resources to provide service and support functions for its power systems sold to OEM customers.
Backlog
Backlog generally is not considered a significant factor in the Company’s business.
Employees and Human Capital
As of December 31, 2025, the Company’s workforce consisted of approximately 1,000 full-time employees. None of the members of the Company’s workforce are represented by a union or covered by a collective bargaining agreement.
Company values include focusing on developing and maintaining a world class workforce through personal accountability, teamwork, customer service and innovation. The Company monitors and manages attrition. It approves, through its human resources department, the replacement of key positions that it believes are critical to sustaining improved business performance and analyzes departure data to continually improve upon the experience of employees. Turnover for salaried employees in 2025 was approximately 18.0%.The Company’s talent management and succession planning process includes the identification of key positions based on current and future business strategies, the identification of potential successors, and a plan for talent development.
The Company focuses on attracting and retaining the best employees by providing market competitive pay and benefits. This ensures sustainability of the organization. The Company’s short-term and long-term incentive plans are designed to provide a variable pay opportunity to reward the attainment of key financial and operational goals as well as shareholder value creation.
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In addition to the base and variable pay plans, the Company offers employees other benefits including medical, paid-time off, and retirement savings plans.
Health and safety are also a key priority, as the Company is committed to removing conditions that cause personal injury or occupational illness. Employees participate in training sessions focused on these topics and are encouraged to promote behaviors that protect others from risk of injury. The Company sets annual targets for its Total Recordable Incident Rate (“TRIR”) and Days Away, Restricted or Transferred (“DART”) and regularly reviews these metrics. For 2025, the Company achieved an overall TRIR of 7.42, meaning that for every 100 full-time employees, 7.42 employees incurred an injury that resulted in recordable medical treatment. The DART Rate was 4.22 in 2025, meaning that for every 100 full-time employees, 4.22 individuals experienced an incident that resulted in lost time or modified duty.
Environmental Matters
The Company’s reporting facilities follow the guidelines required for its federally enforceable state operating permits (FESOP) used with the Illinois Environmental Protection Agency (IEPA), and the Wisconsin Department of Natural Resources (WDNR) Type-B permit guidelines. This includes monitoring the emissions produced from these locations as part of the requirements within the states where PSI operates. A majority of PSI's current production utilizes traditional utility supply. PSI’s production processes that require product testing rely on liquid propane and natural gas fuels, which produce lower emissions than diesel and gasoline.
The Company is committed to producing high quality products that provide reduced emissions and to operating its facilities in a manner that mitigates their impact on the environment.
For the full year ended 2025, approximately 74% of the engines sold run on either propane or natural gas. Also, the Company has taken the following steps to enhance its sustainability:
•updated most of the interior/exterior lighting in its buildings to LED lighting. As lamps or fixtures burn out or require replacement, they are converted to LED (if not already) as a measure of energy conservation;
•recycling of certain materials including cardboard, metal, wood scrap, used oil and antifreeze, and metal processing coolants and lubricants reclamation;
•reduced loaded hot testing of large displacement engines due to quality improvements (reduces noise, emissions and fuel consumption)
The Company intends to continue exploring additional avenues for greater sustainability through new product development and the exploration of additional operational opportunities.
Impact of Government Regulation
The Company’s power systems are subject to extensive statutory and regulatory requirements that directly or indirectly impose standards governing exhaust emissions, evaporative emissions, greenhouse gas (“GHG”) emissions and noise. The Company’s power systems are subject to compliance with regulatory standards imposed by the EPA, state regulatory agencies in the United States, including CARB, and other regulatory agencies around the world. Although as of January 1, 2024, the Company no longer sells engines into the on-road market, because its engines are still sold into the off-road market, the Company must ensure certification to the specific regulations within the applicable statutory segment. For products sold into the U.S. market, both EPA and CARB have imposed specific regulations on engines used in off-road equipment. These regulations generally serve to restrict exhaust emissions, with a primary focus on oxides of nitrogen, hydrocarbons and carbon monoxide. Exhaust emission regulations for engines used in off-road industrial and power generation equipment vary based upon the use of the equipment into which the engine is incorporated (such as stationary power generation or mobile off-highway industrial equipment) and the type of fuel used to drive the power system. The Company continues to make significant investments into the necessary intellectual property that supports full compliance of the Company’s engines now and into the foreseeable future.
The first EPA emissions regulations adopted for diesel engines, known as Tier 1, applied to diesel engines used in mobile off-highway applications in the U.S., and similar standards for diesel engines, known as Stage I regulations, were implemented thereafter in the EU. The EPA and applicable agencies in the EU have continued to develop emissions regulations for diesel engines in the U.S. and the EU, respectively, and have adopted more restrictive standards. The current diesel engine emission requirements in the U.S are known as Tier 4 and are applicable to off-road diesel engines used in industrial equipment. Similarly, the EU has adopted more restrictive standards under its Stage V regulations. Tier 4 and Stage V regulations call for reductions in levels of particulate matter and oxides of nitrogen.
The initial and ongoing certification requirements vary by power system application and market segment. Each application must undergo a series of rigorous and demanding tests to demonstrate compliance with regulatory standards, including useful life, zero hours and durability testing. Once a power system is certified, regulatory agencies impose ongoing compliance requirements, which include testing newly produced power systems on a regular quarterly schedule to ensure ongoing compliance with applicable regulations. In addition, there are field audit requirements, which require the removal of power
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systems from service at specified stages of their useful lives to perform confirmatory exhaust emissions testing and/or on-board diagnostic (“OBD”) system audits and testing. All of the Company’s emission-certified power systems meet existing exhaust emission standards of the EPA and CARB. Failure to comply with these standards could result in materially adverse effects on the Company’s future financial results.
Information about the Company’s Executive Officers
The following selected information for each of the Company’s current executive officers was prepared as of February 26, 2026.
Name | Age | Executive Officer Since | Present Position with the Company | |||||||||||||||||
| C. (Dino) Xykis | 67 | 2020 | Chief Executive Officer | |||||||||||||||||
| Xun (Kenneth) Li | 56 | 2022 | Chief Financial Officer | |||||||||||||||||
| Zhaoying (Dorothy) Du | 48 | 2025 | General Counsel and Corporate Secretary | |||||||||||||||||
C. (Dino) Xykis was appointed as the Chief Executive Officer on April 24, 2023, after serving as Interim CEO since June 2, 2022. Mr. Xykis also served as the Company’s Chief Technical Officer from March 15, 2021 until July 9, 2024. He is responsible for the oversight of the Company and its advanced product development, engineering design and analysis, on-highway engineering, applied engineering, emissions and certification, Waterford, Michigan engineering operations, program management and product strategic planning. Since joining the Company in 2010 and until his appointment as Chief Technical Officer in March 2021, Mr. Xykis served as Vice President of Engineering for the Company. He has more than 30 years of professional experience in multi-disciplined engineering areas including senior management and executive positions at various companies including Cummins Inc., a publicly traded company on the NYSE, and Generac Power Systems, a publicly traded company on the NYSE. Mr. Xykis also served as Adjunct Professor of Mechanical Engineering and Mechanics at the Milwaukee School of Engineering and previously served on the audit and compensation committees of the Board of Directors of Image Sensing Systems, a publicly traded company on Nasdaq, from 1996 to 2001. Mr. Xykis has also served on the advisory board of Civil, Environmental, and Geo-Engineering, College of Science and Engineering, University of Minnesota for the past eight years. Mr. Xykis holds a Bachelor’s degree in Structural Engineering, a Master’s degree in Vibration/Dynamics, and a PhD. in Structural/Applied Mechanics from the University of Minnesota, Minneapolis.
Xun (Kenneth) Li was appointed Chief Financial Officer of Power Solutions International, Inc. on August 26, 2022. As Chief Financial Officer, Mr. Li has responsibility for the Company’s finance, accounting, financial planning and analysis, treasury, tax, risk management, internal audit, and related functions, and supports the Chief Executive Officer and Board of Directors on financial and strategic matters. From 2020 to August 2022, Mr. Li served as Chief Financial Officer of ND Paper, a pulp, packaging, and paper company. He was a member of the executive leadership team with responsibility for finance and accounting functions and strategic planning. From 2008 to 2020, Mr. Li held financial leadership positions at Caterpillar Inc., a publicly traded company, including serving as Chief Financial Officer of machine product group from 2013 to 2020. From 2003 to 2008, Mr. Li held finance leadership roles at Ford Motor Company, a publicly traded company. Mr. Li holds a Master of Business Administration with high distinction and a Master of Science in Accounting from the University of Michigan, a Master of Science in Mechanical Engineering from the University of Oklahoma, and a Bachelor of Science in Mechanical Engineering from Shanghai Jiao Tong University. He is a Certified Public Accountant in the state of Illinois.
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Zhaoying (Dorothy) Du was appointed General Counsel and Corporate Secretary of Power Solutions International, Inc. on September 15, 2025. As General Counsel and Corporate Secretary, Ms. Du has responsibility for the Company's legal affairs, corporate governance, compliance, risk management, securities, and related functions, and supports the Chief Executive Officer and Board of Directors on legal and strategic matters. Ms. Du has 20 years of experience providing strategic legal counsel to U.S. and multinational companies, leading initiatives to address complex commercial and regulatory matters, helping businesses manage risks, drive innovation, and implement pragmatic legal solutions that support business success. From March 2025 to September 2025, Ms. Du led the global supply chain legal team of Lenovo, a publicly traded company. She was a member of the Lenovo global supply chain executive leadership team, advising on procurement, factory setup, trade compliance, regulatory risks, and contract negotiations across global operations. From February 2016 to March 2025, Ms. Du served as Global Head of Legal of Motorola Mobility, a Lenovo company, where she was a member of the executive leadership team, overseeing matters including artificial intelligence, R&D, commercial contracts, intellectual property, compliance, data privacy and information security, corporate governance, corporate secretary, litigation, and other legal functions. From 2013 to 2016, she served as General Counsel of the China operations and Senior Counsel for compliance and risk management at The Warranty Group (now part of Assurant, Inc.). From 2005 to 2012, Ms. Du served as Co-Chair of the APAC Practice Group at Freeborn & Peters (now part of Smith, Gambrell & Russell, LLP) and as an attorney at Sonnenschein Nath & Rosenthal, LLP (now Dentons LLP), advising on cross-border transactions, securities, corporate governance, mergers and acquisitions, financing, compliance, and other complex matters. Ms. Du holds a Juris Doctor degree from the University of Missouri - Kansas City School of Law, a Master of Arts degree in Political Science from the University of Georgia, and a Bachelor of Law degree from Sun Yat-Sen University Law School. She is licensed to practice law in Illinois and is admitted to practice law in China.
Item 1A. Risk Factors.
The Company’s business and results of operations are subject to various risks, including those listed below, many of which are not within the Company’s control, which may cause actual financial performance to differ materially from historical or projected future performance. New risks may emerge at any time, and the Company cannot predict those risks or estimate the extent to which they may affect its results of operations.
Geopolitical Factors
The Company utilizes a global supply chain to source products, including engines, components and materials, which may subject it to tariffs, including U.S. tariffs imposed on imports from China. The Company also sells its products on a global basis, and therefore its export sales could be impacted by tariffs.
Tariffs and changes in trade policy could materially increase our costs, disrupt our supply chain, and adversely affect our competitive position and results of operations.
Several of the Company’s products are sourced internationally, including from China. The U.S. government has imposed, and may continue to impose, tariffs on products imported from China and other countries. Since early 2025, President Donald Trump signed executive orders imposing various tariffs on certain imports from Mexico, Canada, and China, and stated his intent to impose tariffs on any country that imposes tariffs on U.S. products. Certain products that we buy from our suppliers are, and may in the future be, subject to these tariffs, which could increase our manufacturing costs.
We may not be able to pass these increased costs on to our customers without adversely affecting demand for our products. The scope, duration, and impact of current and future tariffs remain highly uncertain. Further, the imposition of tariffs on imports from China and other countries have the potential to materially and adversely impact the Company’s sales, profitability and future product launches.
Additionally, the tariffs imposed by the U.S. have resulted, and may in the future result, in retaliatory tariffs by other countries against U.S. exports. The Company also sells its products on a global basis; and, therefore, if such retaliatory tariffs are imposed on exports of the Company’s products, this could make our exported products less competitive than products of our competitors who are not subject to such retaliatory tariffs.
The U.S. government has indicated its intent to adopt a new approach to trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements. The Company is evaluating U.S. government policy, which is subject to change in the current negotiating environment, pricing, its supply chain and its operational strategies to mitigate the impact of these tariffs; however, there can be no assurances that any mitigation strategies employed will remain available under government policy or that the Company will be able to offset tariff-related costs or maintain competitive pricing of its products. Any material reduction in sales or increase in costs resulting from tariffs or trade restrictions could have a material adverse effect on our business, financial condition, and results of operations.
On February 20, 2026, subsequent to year end, the U.S. Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”). The President immediately imposed replacement tariffs under Section 122 of the
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Trade Act of 1974, which are temporary (150-day maximum duration), and has indicated intent to impose tariffs under other authorities going forward. The Company may be entitled to refunds of IEEPA tariffs paid during 2025, but to the extent PSI passed tariff costs through to customers, the Company may be required to reimburse customers for such amounts, which could reduce or eliminate any net benefit from refunds. The tariff environment remains highly uncertain.
Furthermore, escalating geopolitical tensions, including the ongoing conflict in Ukraine and instability in the Middle East, and developments in Venezuela could disrupt global supply chains, increase commodity prices, and create broader economic uncertainty that adversely affects our business.
Liquidity and Indebtedness
Our liquidity could be adversely affected by volatility in demand, supply‑chain constraints, and significant capital investment requirements inherent in our engine manufacturing operations.
Our business requires substantial liquidity to fund working capital, capital expenditures, research and development, inventory purchases, and long‑term strategic initiatives. We rely on cash generated from operations, supplemented by available credit facilities, to meet these needs. Our ability to maintain adequate liquidity depends on several factors outside our control. For example, fluctuations in customer demand—particularly in the heavy‑equipment, transportation, industrial, and power‑generation markets—can lead to uneven order patterns that impact cash inflows. A sudden or prolonged decline in sales volumes could reduce operating cash flows and negatively affect our liquidity position.
Additionally, our manufacturing processes depend on the availability of raw materials and key components such as castings, electronics, and specialized metals. Supply‑chain disruptions, including shortages, delivery delays, or sudden cost increases, may require us to hold higher levels of inventory or pay premium prices to secure materials. These conditions could increase our working capital requirements, compress margins, and reduce available cash.
We also operate in a capital‑intensive industry that requires ongoing investment in production equipment, testing facilities, tooling, and emissions‑compliance technology. If we are unable to generate sufficient cash from operations or secure financing on favorable terms, we may need to delay or scale back critical investments, which could impair our competitiveness and innovation pipeline.
Our access to credit markets may be affected by factors such as rising interest rates, tightening lending standards, deterioration in our credit metrics, or adverse changes in macroeconomic conditions. If we are unable to refinance existing indebtedness or obtain additional funding when needed, we may face increased borrowing costs or constraints on our operational and strategic flexibility.
If any of these risks materialize, our liquidity, financial condition, and ability to execute our business strategy could be materially and adversely affected.
The Company’s existing debt or any potential new debt could adversely affect its business and growth prospects.
As of December 31, 2025, the Company’s total debt obligations, including indebtedness under the Revolving Credit Agreement were $96.6 million. The Company’s debt arrangements contain and may contain in the future certain requirements, including specific financial and other covenants or restrictions. The failure or the inability to meet such obligations under existing debt or any new debt could materially and adversely affect the Company’s business and financial condition. In addition, the Company’s debt obligations could make it more vulnerable to adverse economic and industry conditions and could limit its flexibility in planning for or reacting to changes in its business and the industries in which it operates. The Company’s indebtedness and the cash flow needed to satisfy its debt obligations and the covenants contained in current and potential future debt agreements could have important consequences, including the following:
•limiting funds available for borrowing through the imposition of availability blocks;
•limiting funds otherwise available for financing capital expenditures by requiring dedication of a portion of cash flows from operating activities to the repayment of debt and the interest on such debt;
•limiting the ability to incur additional indebtedness;
•limiting the ability to capitalize on significant business opportunities, including mergers, acquisitions and other strategic transactions;
•making the Company more vulnerable to rising interest rates or higher interest rates; and
•making the Company more vulnerable in the event of a downturn in its business.
The Company’s new Revolving Credit Agreement places limitations on its ability to make acquisitions and restricts its ability to incur additional indebtedness.
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Financial Condition, Results of Operations, and Cash Flows
The Company is subject to price increases in some of the key components in its power systems.
The prices of some of the key components of the Company’s power systems are subject to fluctuation due to market forces, including changes in the costs of raw materials incorporated into these components. Such price increases occur from time to time due to increases in overall inflation, spot shortages of commodities, increases in labor costs or longer-term shortages due to market forces. In particular, the prices of certain precious metals, such as palladium and rhodium, used in emissions-control systems fluctuate frequently and often significantly. Substantial increases in the prices of raw materials used in components that the Company sources from suppliers may result in increased prices charged by suppliers. If the Company incurs price increases from suppliers for key components in its power systems, production costs will increase, and given competitive market conditions, or contractual limitations, the Company may not be able to pass all or any of those cost increases on to OEM customers in the form of higher sales prices. To the extent that its competitors do not suffer comparable component cost increases, the Company may have even greater difficulty passing along price increases, and the Company’s competitive position may be harmed. As a result, increases in costs of key components may adversely affect the Company’s margins and otherwise adversely affect its results of operations.
Many of the Company’s power systems involve long and variable design and sales cycles.
The design and sales cycle for customized power systems, from initial contact with potential OEM customers to the commencement of shipments, may be lengthy. Customers generally consider a wide range of solutions before making a decision to purchase power systems. Before an OEM commits to purchase power systems, they often require a significant technical review, assessment of competitive products and approval at a number of management levels within their organization. During the time the Company’s customers are evaluating its products, the Company may incur substantial sales and marketing, engineering, and research and development expenses to customize the power systems to the customer’s needs.
Warranty, Safety Standards, and Emissions
The Company could suffer warranty claims or be subject to product liability claims, both of which could materially adversely affect its business.
The Company’s power systems are sophisticated and complex, and the success of the power systems is dependent, in part, upon the quality and performance of key components, such as engines, fuel systems, generators, breakers, and complex electrical components and associated software. The Company may incur liabilities for warranty claims because of defective products or components, including claims arising from defective products or components provided by its suppliers that are integrated into its power systems.
The provisions the Company makes for warranty accruals may not be sufficient, or it may be unable to rely on a warranty provided by a third-party manufacturer or recover costs incurred associated with defective components or products provided by its suppliers. The Company may recognize additional expenses because of warranty claims in excess of its current expectations. Such warranty claims may necessitate a redesign, re-specification, a change in manufacturing processes and/or a recall of its power systems, which could have a material adverse impact on the Company’s financial condition and results of operations and on existing or future sales of its power systems and other products. Even in the absence of any warranty claims, a product deficiency such as a manufacturing defect or a safety issue may necessitate a product recall, which could have a material adverse impact on the Company’s financial condition and results of operations and on existing or future sales.
The Company is exposed to potential product liability claims that are inherent to natural gas, propane, gasoline and diesel and products that use these fuels. Natural gas, propane, diesel and gasoline are flammable and are potentially dangerous products. Any accidents involving the Company’s power systems could materially impede widespread market acceptance and demand for its power systems. In addition, the Company may be subject to a claim by end-users of its OEM customers’ products or others alleging that they have suffered property damage, personal injury or death because its power systems or the products of its customers into which its power systems are integrated did not perform adequately. Such a claim could be made whether or not the Company’s power systems perform adequately under the circumstances. From time to time, the Company may be subject to product liability claims in the ordinary course of business, and it carries a limited amount of product liability insurance for this purpose. However, current insurance policies may not provide sufficient or any coverage for such claims, and the Company cannot predict whether it will be able to maintain insurance coverage on commercially acceptable terms.
The Company and its products are subject to numerous environmental and regulatory policies, including emission and fuel economy rules.
The Company’s business is affected by government environmental policies, mandates and regulations around the world, most significantly with respect to emission standards in the United States. Examples of such regulations include those that (i) restrict the sale of power systems that do not meet emission standards and (ii) impose penalties on sellers of noncompliant power systems.
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The Company generally must obtain product certification from both the EPA and the CARB to sell its products in the United States. The Company may attempt to expand sales of its certified power systems to OEMs that sell their products in other countries, which may also have stringent emissions requirements. Accordingly, future sales of the Company’s products will depend upon its products being certified to meet the existing and future air quality and energy standards imposed by the relevant regulatory agencies. While the Company incurs significant research and development costs to ensure that its products comply with emission standards and meet certification requirements in the regions in which its products are sold, the Company cannot provide assurance that its products will continue to meet those standards. The failure to comply with certification requirements would not only adversely affect future sales but could result in the recall of products or the imposition of civil or criminal penalties.
The adoption of new, more stringent and burdensome government emissions regulations, whether at the foreign, federal, state or local level, in markets in which the Company supplies power systems may require modification of emission certification and other manufacturing processes for its power systems. The Company might incur additional and/or unanticipated expenses in meeting future compliance requirements, and it may be required to increase its research and product development expenditures. Increases in such costs and expenses could necessitate increases in the prices the Company charges for its power systems, which could adversely affect demand for such power systems. There are no assurances that the Company will have adequate financial or technical resources in the future to maintain compliance with government emissions standards.
Supply Chain
The Company is dependent on certain key third-party suppliers, and the partial or complete loss of one of these key suppliers, or the failure to find replacement suppliers or manufacturers in a timely manner, could result in supply shortages.
The Company sources engines, components and replacement parts used in the assembly of its power systems and aftermarket sales from various third-party suppliers. Much of the technology incorporated into the components that the Company sources from a limited number of suppliers is technologically sophisticated, and the Company does not believe that its competitors have access to some of this sophisticated technology in the components they are able to source. If the Company’s competitors were to gain access to these suppliers’ technology or if the Company’s relationships with these suppliers were to change adversely, the Company’s business could be harmed. The viability of certain key third-party suppliers, or the exiting by certain suppliers of certain business lines, could require the Company to find other suppliers for materials or components. Some components cannot be quickly or inexpensively re-sourced to another supplier due to long lead times and contractual commitments that might be required by another supplier in order to provide the components or materials. Any extended delay in receiving engines or other critical components, or the inability of third-party suppliers to meet the Company’s quality, quantity or cost requirements, could impair or prohibit the Company’s ability to deliver products to its OEM customers.
Disruptions arising from compliance with certain importation and trade laws and regulations, including those governing goods shipped from certain regions in China, have, and in the future may, cause supply chain interruptions and raw material shortages.
We are subject to various laws and regulations that affect our ability to obtain components and materials. On December 23, 2021, the UFLPA became law in the United States. The UFLPA, among other matters, prohibits the import of goods from the Xinjiang Uyghur Autonomous Region of the People’s Republic of China. In July 2023, the Company began experiencing delays in the imports of raw materials directly related to the UFLPA. Near the end of 2023, the importing of certain forklift products was suspended because of the intensified enforcement and expansion of the UFLPA and continued through the third quarter of 2024. In 2024, the Company re-sourced these products from CDM and SPY in place of SAME while maintaining the Company’s high-quality standards. Additionally, with the ongoing enforcement and expansion of the UFLPA, the Company has increased the vetting of new and existing vendors with links to the applicable areas to mitigate the likelihood of future disruption of imports.
Trade law and regulation compliance disruptions could occur again in the future and could result in other delays of importing raw materials needed to fulfill future orders while the Company works to comply with trade laws and regulations, including the UFLPA.
Growth and Profitability
The market for alternative-fueled, spark-ignited power systems may not continue to develop as expected.
The continued market acceptance and growth of the market for efficient alternative-fueled, spark-ignited power systems, including natural gas, propane and gasoline, is a key tenet of the Company’s growth strategy. The impact of diesel emission regulations is expected to increase the cost and complexity of diesel power systems, but this may not materialize to the expected extent or at all. Also, customers, or potential customers, may not substitute natural gas, propane and gasoline-powered power systems for diesel power systems in response to these regulations. In addition, to the extent that diesel power system manufacturers develop the ability to design and produce emission-compliant diesel power systems that are more competitive than the Company’s alternative-fueled power systems, customers and potential customers may be less likely to substitute
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alternative-fueled power systems for diesel power systems. Furthermore, if alternative-fueled power systems are substituted for diesel power systems, there can be no assurance that the Company’s power systems would capture any portion of the potential market increase. If the industrial OEM market generally, or more specifically any of the OEM categories that represent a significant portion of the Company’s business or in which it anticipates significant growth opportunities for its power systems, fails to develop or develops more slowly than the Company anticipates, its business could be materially adversely affected. Lastly, the Company also faces competition from other forms of power systems, including electrification and fuel cells, which could limit its ability to grow in the future.
The Company may be impacted by volatility of oil and gas prices and/or fuel price differentials.
The prices of various fuel alternatives are subject to fluctuation, based upon many factors, including, but not limited to, global supply and demand, changes in resource base, pipeline transportation capacity for natural gas, refining capacity for crude oil, and government tariff excise, and fuel tax policies. The price differential among various fuel alternatives can impact OEMs and their decisions on which, if any, power systems they purchase from the Company. Furthermore, if OEMs decide to purchase the Company’s power systems, relative fuel prices may affect which power systems they purchase, and the margins can vary significantly among the Company’s various power systems.
The Company may be affected by the price of oil and gas. For example, when the price of oil declines, oil becomes a more favorable source of fuel in the short term, and alternative fuel and energy producers suffer as a result. This volatility, as with any commodity, will occur from time to time and may adversely affect the Company’s business.
Also, a significant portion of the Company’s sales and profitability has historically been derived from sales of products that are used in the oil and gas industry, primarily in support of operating wells. Various factors, such as capital allocation strategies, oil pricing, rig counts, shifts in energy sources, and governments policies, among others, could lead oil and gas producers to curtail or limit capital expenditures. In addition, oil and gas producers may cease or suspend production at well sites that have or are likely to become unprofitable. As a result, sales of the Company’s products could be severely impacted during periods of a prolonged depression in energy prices, rig counts and capital expenditures which could have a material adverse effect on the Company’s results of operations. The Company estimates that as much as approximately $193.9 million and $105.5 million of its 2025 and 2024 net sales, respectively, were attributable to the sale of products used within the oil and gas industry. The potential impact of future disruptions, continued economic uncertainty, and depressed crude oil prices and low rig count levels may have a significant adverse impact that may result in the recognition of material impairments or other related charges.
The introduction of new products, including new engines that the Company develops, and the continued expansion of products may not succeed or achieve widespread acceptance.
The Company’s growth depends on its ability to develop and/or acquire new products and/or refine existing products and power system technology, to complement and enhance the breadth of its power system offerings with respect to engine class and the OEM market categories into which the Company supplies its products. The Company will generally seek to develop or acquire new products, or enhance existing products and power system technology, if it believes such acquisitions or enhancements will provide significant additional sales and favorable profit margins. However, the Company cannot know beforehand whether any new or enhanced products will successfully penetrate target markets. There can be no assurance that newly developed or acquired products will perform as well as the Company expects, or that such products will gain widespread adoption among the Company’s customers.
Additionally, there are greater design and operational risks associated with new products. The inability of the Company’s suppliers to produce technologically sophisticated components for new engines and power systems, the discovery of any product or process defects or failures associated with production of any new products, and any related product returns could each have a material adverse effect on the Company’s business and its results of operations. If new products that the Company expends significant resources to develop or acquire are not successful or do not obtain, or retain, required certifications, or such products do not achieve the required production volume and scale, its business could be adversely affected.
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The Company’s OEM customers may not continue to outsource their power system needs.
The purchasers of the Company’s power systems are OEMs that manufacture a wide range of applications and equipment that include standby and prime power generation, demand response, microgrid, combined heat and power, utility power, arbor equipment, material handling (including forklifts), agricultural and turf, construction, pumps and irrigation, compressors, and utility vehicles. As a result of the significant resources and expertise required to develop and manufacture emission-certified power systems, certain of these customers have historically chosen to outsource production of power systems to the Company. To a significant extent, the Company depends on OEMs continuing to outsource design and production of power systems, power system components and subsystems. OEM customers may not continue to outsource as much or any of their power system production in the future. Increased levels of OEM vertical integration could result from a number of factors, such as shifts in the Company’s customers’ business strategies, acquisition by a customer of a power system manufacturer or the emergence of low-cost production opportunities in foreign countries. Any number of these factors could have an adverse impact on the Company’s business.
Human Capital
The failure to attract, retain and motivate a highly qualified workforce and high functioning management team could, in the future, affect the Company’s business results.
The Company’s success depends on its ability to attract, retain and motivate a highly qualified workforce and high functioning management team. Failure to ensure that the Company has the depth and breadth of management and personnel with the necessary skill set and experience could impede its ability to deliver growth objectives and execute its operational strategy. Competition for qualified employees among companies that rely heavily upon engineering and technology is at times intense, and the loss of qualified employees could hinder the Company’s ability to conduct research activities successfully and develop marketable products. As the Company continues to expand, it will need to promote and hire additional staff, and, as a result of increased compensation and benefit mandates, it may be difficult to attract or retain such individuals without incurring significant additional costs.
Common Stock Ownership and Stockholder Influence
A decrease in stock price may have an unfavorable impact on our status on the Nasdaq and liquidity.
The Company’s stock is newly traded on Nasdaq. If we are not able to comply with the applicable listing requirements or standards of Nasdaq, our common stock could be delisted from Nasdaq. Our share price may be volatile, and purchasers of our common stock could incur substantial losses. The payment of dividends is currently restricted by the Company’s short-term credit facility. The Company intends to retain its future earnings to support operations, to finance expansion and reduce debt.
Ownership of the Company’s stock is concentrated with Weichai and therefore other stockholders’ ability to influence corporate matters is limited.
As of February 26, 2026, Weichai owned 46.0% of the Company’s outstanding shares of Common Stock. Weichai’s significant equity ownership in the Company, may be able to significantly influence, and control the outcome of all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions. The interests of these stockholders may not coincide with the interests of other stockholders. The concentration of ownership might also have the effect of delaying or preventing a change of control of the Company that other stockholders may view as beneficial. Weichai alone owns a majority of the outstanding shares of Common Stock and, therefore, it possesses voting control over the Company sufficient to prevent any change of control from occurring.
Our relationship with Weichai, a Chinese state-owned entity, and heightened U.S.-China geopolitical tensions could subject us to increased regulatory scrutiny, reputational harm, and operational restrictions.
The relationship between the United States and China has become increasingly strained in recent years, with ongoing tensions related to trade, technology, national security, and other matters. The U.S. government has taken, and may continue to take, actions that could affect companies with significant Chinese ownership or business relationships, including:
•Enhanced scrutiny by the Committee on Foreign Investment in the United States (CFIUS) of transactions involving Chinese-affiliated entities;
•Export control restrictions that could limit our ability to share technology or conduct business with Weichai or other Chinese entities;
•Sanctions or other restrictions targeting Chinese state-owned enterprises or their affiliates;
•Legislative or regulatory actions that could restrict or prohibit business relationships with Chinese state-owned entities; and
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•Increased disclosure requirements or other regulatory burdens applicable to companies with significant foreign government ownership.
Any such actions could disrupt our strategic collaboration with Weichai, limit our access to certain markets or technologies, increase our compliance costs, or subject us to reputational harm. Additionally, negative public perception of companies with Chinese state ownership could adversely affect our relationships with customers, suppliers, and other business partners, particularly those in the defense, government contracting, or critical infrastructure sectors.
We cannot predict the nature, timing, or impact of future geopolitical developments or government actions. Any material adverse developments in U.S.-China relations or actions targeting companies with Chinese state ownership could have a material adverse effect on our business, financial condition, results of operations, and stock price.
Weichai maintains certain rights through its Investor Rights Agreement with the Company.
In March 2017, Weichai entered into an Investor Rights Agreement (the “Rights Agreement”) with the Company. The Rights Agreement provides Weichai with majority representation on the Company’s Board and management representation rights. Weichai currently has four representatives on the Board which constitutes the majority of the directors serving on the Board. According to the Rights Agreement, during any period when the Company is a “controlled company” within the meaning of the Nasdaq Listing Rules, it will take such measures as to avail itself of the “controlled company” exemptions available under Rule 5615 of the Nasdaq Listing Rules of Rules 5605(b), (d) and (e). With Weichai being the majority owner of the Company’s outstanding shares of its Common Stock, Weichai is able to exercise control over matters requiring stockholders’ approval, including, among other matters, the election of the Directors, amendment of the Company’s Certificate of Incorporation and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of the Company or changes in management and will make the approval of certain transactions impractical without the support of Weichai.
Cyber Risk Factors
The Company is exposed to, and may be adversely affected by, potential security breaches or other disruptions to its information technology systems and data security.
The Company relies on its information technology systems and networks in connection with many of its business activities. The Company’s operations routinely involve receiving, storing, processing and transmitting sensitive information pertaining to its business, customers, dealers, suppliers, employees and other sensitive matters. Cyber incidents could materially disrupt operational systems, result in loss of trade secrets or other proprietary or competitively sensitive information, compromise personally identifiable information regarding customers or employees, and jeopardize the security of the Company’s facilities. A cyber incident could be caused by malicious outsiders using sophisticated methods to circumvent firewalls, encryption and other security defenses. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, the Company may be unable to anticipate these techniques or to implement adequate preventive measures. Information technology security threats, including security breaches, computer malware and other cyber-attacks, are increasing in both frequency and sophistication and could create financial liability, subject the Company to legal or regulatory sanctions, or damage its reputation with customers, dealers, suppliers and other stakeholders. The Company continuously seeks to maintain a robust program of information security and controls, but the impact of a material information technology event could have a material adverse effect on its reputation and results of operations.
Artificial Intelligence Risk Factors
The increasing use of artificial intelligence technologies by our competitors, customers, and suppliers could impact our competitive position.
Artificial intelligence (“AI”) and machine learning technologies are rapidly evolving and are increasingly being adopted across industries, including in manufacturing. Our competitors, customers, and suppliers may adopt AI technologies that could affect our competitive position. If we fail to effectively adopt and integrate AI technologies, or if our competitors do so more successfully, we could experience a decline in our competitive position.
We may also face risks from AI technologies used by third parties, including vendors, customers, and service providers, over which we have limited control. Any material disruption to our supply chain or competitive disadvantage resulting from third-party AI adoption could adversely affect our business, financial condition, and results of operations.
General Risk Factors
Adverse global and regional economic conditions may materially and adversely affect the Company’s business, results of operations and financial condition.
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The Company has international operations with sales outside the U.S. representing 7% of the Company’s total net sales. Further, the Company’s global supply chain is large and complex, and a majority of the Company’s supplier facilities, are located outside the U.S. As a result, the Company’s operations and performance depend significantly on global and regional economic conditions.
Adverse macroeconomic conditions, including inflation, slower growth or recession, new or increased tariffs and other barriers to trade, changes to fiscal and monetary policy, tighter credit, higher interest rates, high unemployment and currency fluctuations may materially and adversely affect demand for the Company’s products and services. In addition, spending may be materially and adversely affected in response to financial market volatility, negative financial news, conditions in the real estate and mortgage markets, declines in income or asset values, energy shortages and cost increases, labor and healthcare costs and other economic factors.
Also, uncertainty about, or a decline in, global or regional economic conditions may have a significant impact on the Company’s suppliers, contract manufacturers, logistics providers, distributors, and other channel partners. Potential effects include financial instability; inability to obtain credit to finance operations and purchases of the Company’s products; and insolvency.
A downturn in the economic environment may also lead to increased credit and collectability risk on the Company’s trade receivables; the failure of financial institutions (including those that the Company currently, or could potentially, transact with or those that currently, or could in the future, provide services to the Company); limitations on the Company’s ability to issue new debt; reduced liquidity; and declines in the fair value of the Company’s financial instruments. These and other economic factors may materially and adversely affect the Company’s business, results of operations, financial condition and stock price.
The Company is exposed to political, economic and other risks, in addition to various laws and regulations that arise from operating a multinational business.
The Company sells products internationally and sources a significant amount of materials from suppliers outside of the U.S. Accordingly, the Company is subject to the political, economic and other risks that are inherent in operating a multinational company, including risks related to the following:
•general economic conditions;
•the imposition of tariffs and other import or export barriers, which could potentially disrupt the Company’s existing supply chains and impose additional costs on the Company’s business;
•trade and technology protection measures;
•compliance with regulations governing import and export activities;
•import and export duties and restrictions;
•currency fluctuations and exchange restrictions;
•transportation delays and interruptions;
•political and economic instability;
•terrorist activities;
•acts of war, including the events currently underway in Ukraine and Israel, which could lead to volatility in commodity availability and pricing, access to current or new markets, and general overall market volatility and weakness, among other factors;
•labor unrest;
•natural disasters; and
•public health concerns including the potential negative impacts to suppliers, customers or the Company’s business.
Any of these factors could have a material adverse effect on the Company’s business and results of operations.
Also, the Company is subject to, and may become subject to, various state, federal and international laws and regulations governing its business, environmental, labor and trade practices. These laws and regulations, particularly those applicable to the Company’s international operations, are or may be complex, extensive and subject to change. The Company needs to ensure that it and its OEM customers and suppliers timely comply with such laws and regulations, which may result in increased operating costs. Other legislation has been, and may in the future be, enacted in other locations in which the Company manufactures or sells its products. If the Company or its component suppliers fail to timely comply with applicable legislation, its customers may refuse to purchase its products, or it may face increased operating costs because of fines or penalties. In connection with complying with such environmental laws and regulations as well as with industry environmental initiatives, the
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standards of business conduct required by some of its customers and its commitment to sound corporate citizenship in all aspects of its business, the Company could incur substantial compliance and operating costs and be subject to disruptions to its operations and logistics. In addition, if the Company were found to be in violation of these laws or noncompliant with these initiatives or standards of conduct, it could be subject to governmental fines, liability to its customers and damage to its reputation and corporate brand, any of which could cause its financial condition or results of operations to suffer.
We may incur fines or penalties, damage to our reputation or suffer other adverse consequences if our employees, suppliers, sub-suppliers or other contract parties, agents or business partners violate anti-bribery, competition, export and import, trade sanctions, data privacy, environmental, human rights, forced labor, or other laws.
We are subject to regulation under a wide variety of U.S. federal and state and non-U.S. laws, regulations and policies, including laws related to anti-corruption, human rights, forced labor, anti-bribery, export and import compliance, trade sanctions, data privacy, anti-trust and money laundering, due to our domestic and global operations. In particular, the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business, and we operate in many parts of the world that have experienced government corruption to some degree. We cannot provide assurance our internal controls will always protect us from the improper conduct of our employees, suppliers, sub-suppliers or other contract parties, agents and business partners. Violations of these laws, which are complex and often are difficult to interpret and apply, could subject us to civil or criminal investigations in the United States and other jurisdictions, could lead to substantial civil or criminal, monetary and non-monetary penalties and related stockholder lawsuits, could lead to increased costs of compliance and could damage our reputation, business, financial condition, operating results and cash flows.
Employee disputes or litigation and related unfavorable publicity may negatively affect our future business, financial condition, and operating results.
We may become involved in lawsuits or other disputes relating to employment matters, such as hostile workplace, discrimination, wage and hour disputes, sexual harassment, or other employment issues. These types of claims, depending on their nature, can have a significant negative impact on businesses. Certain companies that have faced employment- or harassment-related lawsuits have had to terminate management or other key personnel, have borne economic and other costs and have suffered reputational harm that has negatively impacted their business.
If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud. As a result, our stockholders could lose confidence in our financial results, which could materially and adversely affect us.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. There is no assurance that material weaknesses or significant deficiencies in internal controls will not be identified in the future or that we will be successful in adequately remediating any such material weaknesses or significant deficiencies. We may in the future discover areas of our internal controls that need improvement. We have had material weaknesses in our internal controls in the past and we cannot be certain that we will be successful in maintaining adequate internal controls over our financial reporting and accounting processes in the future. The existence of any material weakness or significant deficiencies would require management to devote significant time and incur significant expense to remediate, and management may not be able to remediate in a timely manner. The existence of any material weakness in our internal controls over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations, subject us to investigations from regulatory authorities or cause stockholders to lose confidence in our reported financial information, all of which could materially and adversely affect us.
The Company could incur restructuring and impairment charges as it continuously evaluates its portfolio of assets and identifies opportunities to restructure its business to optimize its cost structure.
The Company continuously evaluates its portfolio of assets and its operational structure in an effort to identify opportunities to optimize its cost structure as a result of its on-going business needs. These actions could result in restructuring and related charges, including but not limited to asset impairments and employee termination costs, any of which could be significant and could adversely affect the Company’s results of operations.
The Company has substantial amounts of long-lived assets, including goodwill and intangible assets, which are subject to periodic impairment analysis and review. Identifying and assessing whether impairment indicators exist, or if events or changes in circumstances have occurred, including market conditions, operating results, competition and general economic conditions requires significant judgment. Declines in profitability due to changes in volume, market pricing, cost or the business environment could result in charges that could have an adverse effect on the Company’s results of operations. Significant
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adverse changes to the Company’s business environment and future cash flows could cause the recognition of material impairment charges in future periods.
The Company currently faces, and will continue to face, significant competition.
The market for the Company’s products and related services is highly competitive, subject to rapid change and sensitive to new-product and service introductions and changes in technical requirements. New developments in power system technology may negatively affect the development or sale of some or all of the Company’s power systems or make them noncompetitive or obsolete. Other companies, some of which have longer operating histories, greater name recognition and significantly greater financial and marketing resources than the Company, are currently engaged in the development of products and technologies that are similar to, or may be competitive with, certain of the Company’s products and power system technologies. If the markets for its products grow as the Company anticipates, competition may intensify, as existing and new competitors identify opportunities in such markets.
The Company faces competition from companies that employ current power system technologies, and it may face competition in the future from additional companies as new power system technologies are adopted. Additionally, the Company may face competition from companies developing technologies such as cleaner diesel engines, biodiesel, fuel cells, electrification, advanced batteries and hybrid battery/internal combustion power systems. The Company may not be able to incorporate such technologies into its product offerings, or it may be required to devote substantial resources to do so. The success of its business depends in large part on its ability to provide single assembly, integrated, comprehensive, technologically sophisticated power systems to its customers. The development or enhancement by its competitors of similar capabilities could adversely affect the Company’s business.
Failure to keep pace with technological developments may adversely affect the Company’s operations.
The Company is engaged in an industry that will be affected by future technological developments. The Company’s success will depend upon its ability to develop and introduce, on a timely and cost-effective basis, new products, applications and processes that keep pace with technological developments and address increasingly sophisticated customer requirements. The Company may not be successful in identifying, developing and marketing new products, applications and processes, and product or process enhancements. The Company may experience difficulties that could delay or prevent the successful development, introduction and marketing of product or process enhancements or new products, applications or processes. The Company’s products, applications or processes may not adequately meet the requirements of the marketplace and achieve market acceptance. If the Company were to incur delays in developing new products, applications or processes, or product or process enhancements, or if its products do not gain market acceptance, its results of operations could be materially adversely affected.
The Company could fail to adequately protect its intellectual property rights or could face claims of intellectual property infringement by third parties.
The Company believes that the success of its business depends, in substantial part, upon its proprietary technology, information, processes and know-how. The Company does not own any material patents and relies on a combination of trademark and trade secret laws, along with confidentiality agreements, contractual provisions and licensing arrangements, to establish and protect its intellectual property rights. Despite the Company’s efforts to protect its intellectual property rights, existing laws may afford only limited protection, and the Company’s actions may be inadequate to protect its intellectual property rights or to successfully defend itself against claims from others that the Company has violated their intellectual property rights. In addition, the laws of some foreign countries may not protect the Company’s proprietary rights as fully or in the same manner as the laws of the United States. The unauthorized use of the Company’s intellectual property rights and proprietary technology by others could materially harm the Company’s business.
In addition, the Company cannot be certain that its products, services and power system technologies, including any intellectual property licensed from third parties for use therein or incorporated into components that it sources from its suppliers, do not, or in the future will not, infringe or otherwise violate the intellectual property rights of third parties. In the future, the Company may be subject to infringement claims that result in litigation. Successful infringement claims against the Company could result in substantial monetary liability, require the Company to enter into royalty or licensing arrangements, or otherwise materially disrupt the conduct of the Company’s business. In addition, even if the Company prevails in the defense of any such claims, any such litigation could be time-consuming and expensive to defend or settle and could materially adversely affect its business.
Limitations of the Company’s Directors’ and Officers’ liability insurance and potential indemnification obligations will have a material adverse effect on the Company’s financial condition, results of operations and cash flows.
Under its bylaws and certain indemnification agreements, the Company has obligations to indemnify current and former officers and directors. Expenses that may occur in the future and/or liabilities not covered by the Company’s directors and officers liability insurance policy, that may be imposed in connection with actions against certain of the Company’s past and present directors and officers and certain current and former employees who are entitled to indemnification would be funded by
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the Company with its existing cash resources. The Company directors’ and officers’ liability insurance policy renews annually and expires in July 2026.
Unanticipated changes in our effective tax rate, the adoption of new tax legislation or exposure to additional income tax liabilities could adversely affect our profitability.
We are subject to income taxes in the United States jurisdictions. Our effective tax rate and cash tax liability in the future could be adversely affected by the enactment of new tax legislation, changes in the level and mix of earnings in jurisdictions with differing statutory tax rates, and changes in the valuation of deferred tax assets and liabilities. The carrying value of deferred tax assets, which are predominantly in the United Sates, is dependent on our ability to generate future taxable income in the United States. We are also subject to ongoing tax audits. These audits can involve complex issues, which may require an extended period of time to resolve and can be highly judgmental. Tax authorities may disagree with certain of our tax reporting positions and, as a result, assess additional taxes against us. We regularly assess the likely outcomes of these audits to determine the appropriateness of our gross unrecognized tax benefits. The amounts ultimately paid upon resolution of current and future tax audits could be materially different from the amounts previously included in our income tax provision and, therefore, could have a material impact on our income tax provision.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
The Company continuously enhances policies and procedures, and controls to mitigate against the substantial rise in the prevalence of cybersecurity risks and challenges to protect its data.
Risk Management Strategy
The Company’s cybersecurity risk management function is led by the Vice President of Information Technology, who evaluates processes and activities within the Company’s information technology infrastructure and automated systems. In 2023, the Company completed a detailed assessment to identify all technology and cyber tools currently in place and assessed its information technology personnel’s cybersecurity capabilities and skill sets. In 2023, the Company focused on formalizing cybersecurity procedures and defining standards for risk identification and communication activities. The Company utilizes the National Institute of Standards and Technology guidance in all cybersecurity policies and procedures. Annual training for employees is required as well as ad hoc trainings for specific topics or events as deemed appropriate throughout the year. The Company also has cyber insurance to assist the Company both financially and operationally if a cyber event were to occur. Below is the basic framework used in the Company’s risk management strategy:
•Identify - set of procedures to identify assets to be protected, including computation, data, and integrity;
•Protect - set of procedures to effectively engage and monitor adequate safeguards of critical infrastructure
services;
•Detect - set of activities, tools, and procedures to timely identify anomalies through continuous monitoring;
•Respond - set of activities to effectively respond to and contain detected and confirmed cybersecurity events, and
•Recover - set of activities and procedures to ensure any assets impaired because of a cybersecurity event are restored to use within the stated recovery point/time objectives.
The Company has taken steps to gain insights into how cybersecurity risk management functions have been integrated into its overall risk management systems and process. Below are the risk management activities regularly performed:
•Cybersecurity, as described above;
•Financial control risk assessment which is a formal part of the annual internal control program;
•Management’s risk assessment associated with the budgeting and strategic planning process;
•Annual update of risk factors in the Company’s Form 10-K by key executives, and
•A broader fraud risk assessment (also performed as part of the internal control program).
The Company’s information technology and risk management function is highly centralized, with the Corporate Controller and Vice President of Information Technology involved in most of the risk related activities which provides a consistent input throughout risk management activities as well as aiding in identifying dependencies and duplications. The Company engaged a third party to conduct phishing and penetration tests in 2024. The Company continues to evolve its processes, procedures, and tools as a result of the observations from these tests.
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The Vice President of Information Technology oversees the population of third-party service providers connected to any of the Company’s networks. For each third-party service provider that would directly impact the Company’s financial reporting, the Company obtains a System and Organization Controls (SOC) 1, Type 2 Report (“SOC 1 Report”) to evaluate that service provider’s internal controls and help the Company assess the risk of obtaining services from that services provider. The SOC-1 Report is reviewed by members of the Company’s management and the Internal Audit group. The Company also limits access to information granted to any third-party service provider to only the information necessary for them to perform their services to the Company.
In 2025, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate all risks from cybersecurity threats or provide assurances that we have not experienced undetected cybersecurity incidents. We face ongoing risks from certain cybersecurity threats, and we cannot provide assurance that, if those risks materialize, our business strategy, results of operations or financial condition will not be materially affected in the future. For additional information about these risks, see Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K.
Governance and Process for Assessing, Identifying and Managing Material Risks from Cybersecurity Threats
The Audit Committee of the Board (the “Audit Committee”) has been designated as the board committee with oversight responsibility of cybersecurity as delegated in the Audit Committee charter. The following summarizes the role and frequency in which the Audit Committee oversees and monitors cybersecurity risks:
•At least annually the Vice President of Information Technology presents compliance activities related to cybersecurity to the Audit Committee which includes those activities related to compliance with the cybersecurity disclosure regulations;
•Material breaches, if any are, disclosed to the Audit Committee either in regularly scheduled meetings or, if urgent in calls with the Chair of the Audit Committee;
•Periodically, the Vice President of Information Technology provides updates to the Audit Committee on internal controls surrounding information technology (including cybersecurity);
•The Chair of the Audit Committee provides regular updates during Audit Committee meetings which includes cybersecurity; and
•The Vice President of Information Technology presents updates on the cybersecurity program to the Company’s Board annually.
The Vice President of Information Technology is responsible for managing overall cybersecurity and cyber risks, including infrastructure, development, and cybersecurity. The Vice President of Information Technology has extensive and progressive experience in supporting information technology risks and objectives in manufacturing companies equivalent to the Company and is a Certified Information Systems Security Professional from ISC2, a leading association for cybersecurity professionals. The Company’s Vice President of Information Technology is required to have the following qualifications:
•Asset Security;
•Security Architecture and Engineering;
•Communication and Network Security;
•Identity and Access Management;
•Security Assessment and Testing;
•Security Operations; and
•Software Development Security.
The Company’s Vice President of Information Technology is the central contact point to receive (i) alerts regarding potential cybersecurity incidents and (ii) reports from the Company’s Information Technology personnel regarding potential cybersecurity incidents. All confirmed cybersecurity events are communicated by the Vice President of Information Technology to the Corporate Controller and Vice President of Internal Audit. Material confirmed cybersecurity events are further escalated to the Chief Executive Officer and Chief Financial Officer for further review, discussion and remediation.
Item 2. Properties.
The Company’s operations are located in 8 leased facilities in the United States, totaling approximately 1.2 million square feet of floor space. The Company’s corporate headquarters is located in Wood Dale, Illinois, a suburb of Chicago.
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The Company’s primary manufacturing, assembly, engineering, research and development, sales and distribution facilities are located in suburban Chicago, Illinois, as well as in Darien and Beloit, Wisconsin.
The Company believes that all of its facilities have been adequately maintained, are in good operating condition and are suitable for its current needs. These facilities are expected to meet the Company’s needs in the foreseeable future.
Item 3. Legal Proceedings.
See Note 11. Commitments and Contingencies, included in Part II, Item 8. Financial Statements and Supplementary Data, for a discussion of legal proceedings, which are incorporated herein by reference.
Item 4. Mine Safety Disclosures.
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
The Company’s Common Stock is traded on the Nasdaq under the symbol “PSIX”.
As of February 26, 2026, the sale price for the Company’s Common Stock, as reported by the Nasdaq, was $92.07 per share.
Holders
As of February 26, 2026, there were approximately 36 holders of record of the Company’s Common Stock.
Dividend Policy
The Company has not paid any cash dividends on the Common Stock to date. The payment of dividends is currently restricted by the Credit Agreement. The Company intends to retain its future earnings to support operations, to finance expansion and reduce debt.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
During 2025 and 2024, the Company did not repurchase any equity securities.
Item 6.
Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis includes forward-looking statements about the Company’s business and consolidated results of operations for the fiscal years ended December 31, 2025 and 2024, including discussions about management’s expectations for the Company’s business. These statements represent projections, beliefs and expectations based on current circumstances and conditions and in light of recent events and trends, and these statements should not be construed either as assurances of performance or as promises of a given course of action. Instead, various known and unknown factors are likely to cause the Company’s actual performance and management’s actions to vary, and the results of these variances may be both material and adverse. A description of material factors known to the Company that may cause its results to vary, or may cause management to deviate from its current plans and expectations, is set forth under “Risk Factors” in this report. See also “Forward-Looking Statements.” The following discussion should also be read in conjunction with the Company’s consolidated financial statements and the related Notes included in this report.
Executive Overview
The Company designs, engineers, manufactures, markets and sells a broad range of advanced, emission-certified engines and power systems that run on a wide variety of clean, alternative fuels, including natural gas, propane, and biofuels, as well as gasoline and diesel options, within the power systems, industrial and transportation end markets with primary manufacturing, assembly, engineering, R&D, sales and distribution facilities located in suburban Chicago, Illinois and Darien and Beloit, Wisconsin. The Company provides highly engineered, comprehensive solutions designed to meet specific customer application requirements and technical specifications, including those imposed by environmental regulatory bodies, such as the EPA, CARB, MEE, and EU.
The Company’s products are primarily used by global OEM and end-user customers across a wide range of applications and equipment that includes standby and prime power generation, demand response, microgrid, combined heat and power, arbor care, material handling (including forklifts), agricultural and turf, construction, pumps and irrigation, compressors, utility vehicles, light- and medium-duty vocational trucks, school and transit buses, and utility power. The Company manages the business as a single reporting segment.
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Net sales by geographic area and by end market for 2025 and 2024 are presented below:
| (in thousands) | For the year ended December 31, 2025 | For the Year Ended December 31, 2024 | ||||||||||||||||||
| Geographic Area | % of Total | % of Total | ||||||||||||||||||
| United States | $ | 675,194 | 93 | % | $ | 419,706 | 88 | % | ||||||||||||
| North America (outside of United States) | 21,270 | 3 | % | 24,466 | 5 | % | ||||||||||||||
| Pacific Rim | 22,309 | 3 | % | 24,652 | 5 | % | ||||||||||||||
| Europe | 3,373 | 1 | % | 7,090 | 2 | % | ||||||||||||||
| Others | 259 | — | % | 53 | — | % | ||||||||||||||
| Total | $ | 722,405 | 100 | % | $ | 475,967 | 100 | % | ||||||||||||
| (in thousands) | For the year ended December 31, 2025 | For the Year Ended December 31, 2024 | ||||||||||||||||||
| End Market | % of Total | % of Total | ||||||||||||||||||
| Power Systems | $ | 586,347 | 81 | % | $ | 325,749 | 68 | % | ||||||||||||
| Industrial | 114,768 | 16 | % | 123,268 | 26 | % | ||||||||||||||
| Transportation | 21,290 | 3 | % | 26,950 | 6 | % | ||||||||||||||
| Total | $ | 722,405 | 100 | % | $ | 475,967 | 100 | % | ||||||||||||
During 2025, the Company sold approximately 19,800 engines of which 74% utilized propane or natural gas as their fuel source and 18% utilized gasoline. The remaining 8% of engines were dual fuel gasoline/propane, diesel and service engines. During 2024, the Company sold over 22,200 engines of which approximately 76% utilized propane or natural gas as their fuel source and 13% utilized gasoline. The remaining 11% of engines were dual fuel gasoline/propane, diesel and service/base engines.
Weichai Transactions
The Company sought to expand its range of products and its presence in the Pacific Rim through the Weichai Transactions (see Note 3. Weichai Transactions, included in Item 8. Financial Statements and Supplementary Data, for additional information).
The Company and Weichai executed the Collaboration Agreement in order to achieve their respective objectives, enhance the cooperation alliance and share experiences, expertise and resources. Among other things, the Collaboration Arrangement established a joint steering committee, permitted Weichai to employ a limited number of technical, marketing, sales, procurement and finance personnel to work at the Company and established several collaborations related to stationary natural-gas applications and Weichai diesel engines. The Collaboration Agreement also provides for the steering committee to create various subcommittees with operating roles and otherwise governs the treatment of intellectual property of the parties prior to the collaboration and the intellectual property developed during the collaboration. On March 22, 2023, the Collaboration Agreement was extended for an additional term of three years, expiring in March 2026. The Company received a renewal notice from Weichai and is in the process of negotiating the renewal of the Collaboration Agreement; however, no formal extension has been executed as of the date of this filing. The Company’s sales to Weichai were $1.3 million and $1.8 million during 2025 and 2024, respectively. The Company purchased $39.8 million and $21.5 million of inventory from Weichai during 2025 and 2024, respectively.
Legal Settlement Expenses
Legal settlement expenses were immaterial for the year ended December 31, 2025. The Company recognized a benefit of $4.7 million in the 2024 operating results (see Note 11. Commitments and Contingencies, included in Part II. Item 8. Financial Statements and Supplementary Data, for additional information).
Recent Trends and Business Outlook
PSI’s growth in net revenue in 2025 was driven by power systems markets, including data center and oil and gas products, partially offset by lower sales from more mature, lower-margin markets such as industrial. This shift in markets reflects the
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Company’s conscious strategic prioritization toward higher growth, higher-margin markets with less emphasis on more mature markets.
The Company is focused on leading the business through a growth phase with a stronger balance sheet while strategically prioritizing products that demonstrate strong demand and higher gross margins. Consistent with those goals, the Company is actively pursuing several initiatives to enhance and expand manufacturing capacity to meet the increasing demand from data center markets. Pivoting the focus to these markets is driving current net sales growth and profitability. Through expanded capacity and strategic partnerships, management expects this positive trend to continue.
PSI’s business is impacted by the current macroeconomic and geopolitical environment. For example, although the oil and gas market, in which the Company has historically operated, has experienced year over year growth from its historic lows, sales levels may not reach their previous higher levels because of lower rig counts. The Company has been actively navigating these challenges by balancing its investments, expenses, pricing and sales efforts in this market as well as others.
In addition to prioritizing gross profit, the Company is committed to efficiently managing expenses, including streamlining operating expenses and prioritizing certain R&D investments in support of long-term growth objectives. The Company is committed to focusing on growth opportunities and investment while also optimizing its cost structure to enhance growth and profitability, ultimately delivering sustained value to our shareholders.
The Company has experienced tariff costs associated with its supply chain products. The Supreme Court's decision to strike down tariffs and the administration's response have created significant uncertainty regarding the scope, rate, duration, and legal authority for future tariffs. We are actively assessing the evolving tariff environment and are committed to proactively mitigating any associated risks through strategic sourcing, pricing actions, and supply chain agility.
The potential for continued economic uncertainty and unfavorable oil and gas market dynamics may have a material adverse impact on the levels of future customer orders and the Company’s future business operations, financial condition and liquidity. On July 30, 2025, the Company amended its Revolving Credit Agreement with Standard Chartered Bank and three other lenders. The amended Revolving Credit Agreement allows the Company to borrow up to $135.0 million and extends the maturity date to July 30, 2027.
The Company is party to several legal contingencies. See Note 11. Commitments and Contingencies for further discussion of the Company’s indemnification obligations.
The company remains confident in the Company’s long-term strategy and market positioning. Given broader market conditions, ongoing operational initiatives, and variability in customer order timing, the Company has determined it is appropriate to take a disciplined approach and not provide business outlook for 2026 at this time. Management will continue to evaluate its ability to provide outlook as execution progresses and visibility improves.
Strategic Initiatives/Growth Strategies: The Company has initiated various business objectives aimed at improving profitability, streamlining processes, strengthening the business and focusing on achieving growth in higher-return product lines. Central to this plan is the Company’s increased emphasis on power systems product offerings through new product development and investments, in addition to leveraging the Company’s relationship with Weichai. With the recent introduction of numerous natural gas and diesel engines, coupled with its existing strong product lineup, the Company believes that it has a solid foundation to achieve long-term growth, particularly within the power systems market.
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Results of Operations
Results of operations for the year ended December 31, 2025 compared with the year ended December 31, 2024:
| (in thousands, except per share amounts) | For the Year Ended December 31, | |||||||||||||||||||||||||
| 2025 | 2024 | Change | % Change | |||||||||||||||||||||||
Net sales (to related parties $1,266 and $1,766 for the year ended December 31, 2025 and 2024, respectively) | $ | 722,405 | $ | 475,967 | $ | 246,438 | 52 | % | ||||||||||||||||||
Cost of sales (derived from related party net sales $863 and $1,304 for the year ended December 31, 2025 and 2024, respectively) | 537,506 | 335,430 | 202,076 | 60 | % | |||||||||||||||||||||
| Gross profit | 184,899 | 140,537 | 44,362 | 32 | % | |||||||||||||||||||||
| Gross margin % | 25.6 | % | 29.5 | % | (3.9) | % | ||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Research and development expenses | 18,164 | 20,056 | (1,892) | (9) | % | |||||||||||||||||||||
| Research and development expenses as a % of sales | 2.5 | % | 4.2 | % | (1.7) | % | ||||||||||||||||||||
| Selling, general and administrative expenses | 55,803 | 37,378 | 18,425 | 49 | % | |||||||||||||||||||||
| Selling, general and administrative expenses as a % of sales | 7.7 | % | 7.9 | % | (0.2) | % | ||||||||||||||||||||
| Amortization of intangible assets | 1,218 | 1,459 | (241) | (17) | % | |||||||||||||||||||||
| Total operating expenses | 75,185 | 58,893 | 16,292 | 28 | % | |||||||||||||||||||||
| Operating income | 109,714 | 81,644 | 28,070 | 34 | % | |||||||||||||||||||||
| Other expense (income), net | ||||||||||||||||||||||||||
Interest expense (from related parties $634 and $6,998 for the year ended December 31, 2025 and 2024, respectively) | 6,702 | 11,443 | (4,741) | (41) | % | |||||||||||||||||||||
| Other expense (income) | (352) | — | (352) | NM | ||||||||||||||||||||||
| Income before income taxes | 103,364 | 70,201 | 33,163 | 47 | % | |||||||||||||||||||||
| Income tax (benefit) expense | (10,623) | 922 | (11,545) | NM | ||||||||||||||||||||||
| Net income | $ | 113,987 | $ | 69,279 | $ | 44,708 | 65 | % | ||||||||||||||||||
| Earnings per common share: | ||||||||||||||||||||||||||
| Basic | $ | 4.95 | $ | 3.01 | $ | 1.94 | 64 | % | ||||||||||||||||||
| Diluted | $ | 4.94 | $ | 3.01 | $ | 1.93 | 64 | % | ||||||||||||||||||
| Non-GAAP Financial Measures: | ||||||||||||||||||||||||||
| Adjusted net income * | $ | 114,849 | $ | 64,675 | $ | 50,174 | 78 | % | ||||||||||||||||||
| Adjusted income per share * | $ | 4.98 | $ | 2.81 | $ | 2.17 | 77 | % | ||||||||||||||||||
| EBITDA * | $ | 115,454 | $ | 86,843 | $ | 28,611 | 33 | % | ||||||||||||||||||
| Adjusted EBITDA * | $ | 116,316 | $ | 82,239 | $ | 34,077 | 41 | % | ||||||||||||||||||
NM Not meaningful
* Non-GAAP measurement, see reconciliation below
Net Sales
Net sales increased $246.4 million, or 52%, compared to 2024, as a result of sales increases of $260.6 million in the power systems end market, partly offset by decreases of $8.5 million and $5.7 million within the industrial and transportation end markets, respectively. This shift in market mix reflects our deliberate strategic focus on higher-growth sectors such as data centers and oil and gas. In particular, we are prioritizing the rapidly expanding data center sector by enhancing our manufacturing capacity and capabilities to meet evolving customer demand. The decline in industrial sales is largely attributable to softer demand in the material handling market.
29
Gross Profit
Gross profit increased by $44.4 million, or 32%, to $184.9 million in 2025, compared to $140.5 million in 2024. Gross margin was 25.6% and 29.5% in 2025 and 2024, respectively. The decrease in gross margin is primarily due to inefficiencies related to our accelerated production ramp-up for data center product lines.
Research and Development Expenses
R&D expenses in 2025 and 2024 were $18.2 million and $20.1 million, respectively. The decrease of $1.9 million, or 9%, was primarily driven by the timing of R&D program expenditures and the recovery of R&D costs from certain customers.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) increased in 2025 by $18.4 million, or 49%, compared to 2024. The increase is primarily due to a $4.3 million favorable non-recurring legal reserve reduction in 2024, $4.4 million higher costs associated with employee incentive programs, $3.9 million expense related to customer relationship improvement efforts, and $5.8 million mainly from increased sales and administrative expenses to support ongoing business growth in 2025.
Interest Expense
Interest expense decreased $4.7 million to $6.7 million in 2025 from $11.4 million in 2024, largely due to reduced outstanding debt and lower overall effective interest rates. See Note 6. Debt, included in Item 8. Financial Statements and Supplementary Data for additional information.
Income Tax (Benefit) Expense
The Company recorded income tax benefit of $10.6 million in 2025 and income tax expense of $0.9 million in 2024. The Company’s pretax income was $103.4 million in 2025, compared to pretax income of $70.2 million in 2024. The 2025 tax benefit primarily reflects the $38.3 million valuation allowance, which resulted in a one-time increase of approximately $1.66 to earnings per share.
See Note 12. Income Taxes, included in Item 8. Financial Statements and Supplementary Data, for additional information related to the Company’s income tax provision.
Non-GAAP Financial Measures
In addition to the results provided in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) above, this report also includes non-GAAP (adjusted) financial measures. Non-GAAP financial measures provide insight into selected financial information and should be evaluated in the context in which they are presented. These non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP, and non-GAAP financial amounts as reported by the Company may not be comparable to similarly titled measures reported by other companies. The non-GAAP financial measures should be considered in conjunction with the consolidated financial statements, including the related notes, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this report. Management does not use these non-GAAP financial measures for any purpose other than the reasons stated below.
| Non-GAAP Financial Measure | Comparable GAAP Financial Measure | ||||
| Adjusted net income | Net income | ||||
| Adjusted net income per share – diluted | Net income per share – diluted | ||||
| EBITDA | Net income | ||||
| Adjusted EBITDA | Net income | ||||
The Company believes that Adjusted net income, Adjusted net income per share – diluted, EBITDA, and Adjusted EBITDA provide relevant and useful information, which is widely used by analysts, investors and competitors in its industry as well as by the Company’s management in assessing the performance of the Company. Adjusted net income is defined as net income as adjusted for certain items that the Company believes are not indicative of its ongoing operating performance. Adjusted net income per share – diluted is a measure of the Company’s diluted earnings per common share adjusted for the impact of special items. EBITDA provides the Company with an understanding of earnings before the impact of investing and financing charges and income taxes. Adjusted EBITDA further excludes the effects of other non-cash charges and certain other items that do not reflect the ordinary earnings of the Company’s operations.
Adjusted net income, Adjusted net income per share – diluted, EBITDA, and Adjusted EBITDA are used by management for various purposes, including as a measure of performance of the Company’s operations and as a basis for strategic planning and forecasting. Adjusted net income, Adjusted net income per share – diluted, and Adjusted EBITDA may be useful to an investor because these measures are widely used to evaluate companies’ operating performance without regard to items excluded from
30
the calculation of such measures, which can vary substantially from company to company depending on the accounting methods, the book value of assets, the capital structure and the method by which the assets were acquired, among other factors. They are not, however, intended as alternative measures of operating results or cash flow from operations as determined in accordance with U.S. GAAP.
The following table presents a reconciliation from Net income to Adjusted net income:
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Net income | $ | 113,987 | $ | 69,279 | ||||||||||
Stock-based compensation 1 | 427 | 89 | ||||||||||||
Severance 2 | 435 | — | ||||||||||||
Other legal matters 3 | — | (4,693) | ||||||||||||
| Adjusted net income | $ | 114,849 | $ | 64,675 | ||||||||||
The following table presents a reconciliation from Net income per share – diluted to Adjusted net income per share – diluted:
| For the Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Net income per share – diluted | $ | 4.94 | $ | 3.01 | ||||||||||
Stock-based compensation 1 | 0.02 | — | ||||||||||||
Severance 2 | 0.02 | — | ||||||||||||
Other legal matters 3 | — | (0.20) | ||||||||||||
| Adjusted net income per share – diluted | $ | 4.98 | $ | 2.81 | ||||||||||
| Diluted shares (in thousands) | 23,066 | 23,018 | ||||||||||||
The following table presents a reconciliation from Net income to EBITDA and Adjusted EBITDA:
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Net income | $ | 113,987 | $ | 69,279 | ||||||||||
| Interest expense | 6,702 | 11,443 | ||||||||||||
| Income tax (benefit) expense | (10,623) | 922 | ||||||||||||
| Depreciation | 4,170 | 3,740 | ||||||||||||
| Amortization of intangible assets | 1,218 | 1,459 | ||||||||||||
| EBITDA | 115,454 | 86,843 | ||||||||||||
Stock-based compensation 1 | 427 | 89 | ||||||||||||
Severance 2 | 435 | — | ||||||||||||
Other legal matters 3 | — | (4,693) | ||||||||||||
| Adjusted EBITDA | $ | 116,316 | $ | 82,239 | ||||||||||
1.Amounts reflect non-cash stock-based compensation expense for the year ended December 31, 2025 and 2024.
2.Amounts include severance expense for the year ended December 31, 2025 and 2024.
3.Amounts include legal settlements for the year ended December 31, 2025 and 2024.
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Cash Flows
Cash was impacted as follows:
| (in thousands) | For the Year Ended December 31, | |||||||||||||||||||||||||
| 2025 | 2024 | Change | % Change | |||||||||||||||||||||||
| Net cash provided by operating activities | $ | 24,113 | $ | 62,390 | $ | (38,277) | (61) | % | ||||||||||||||||||
| Net cash used in investing activities | (9,962) | (4,559) | (5,403) | 119 | % | |||||||||||||||||||||
| Net cash used in financing activities | (27,694) | (25,934) | (1,760) | 7 | % | |||||||||||||||||||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash | $ | (13,543) | $ | 31,897 | $ | (45,440) | (142) | % | ||||||||||||||||||
| Capital expenditures | $ | (9,973) | $ | (4,559) | $ | (5,414) | 119 | % | ||||||||||||||||||
NM Not meaningful
Cash Flow from Operating Activities
Net cash provided by operations was $24.1 million in 2025 compared to net cash provided by operations of $62.4 million in 2024, a decrease of $38.3 million in cash provided by operating activities year-over-year. The decrease in cash provided by operating activities primarily resulted from a $69.6 million decrease of cash provided by working capital accounts, partially offset by an increase in earnings of $44.7 million. The decrease in cash generated from working capital was primarily related to the purchases of inventory, decrease in accounts payables, and the timing of collections on accounts receivables, reflecting higher sales volume and operational growth during the year ended December 31, 2025 compared to December 31, 2024.
Cash Flow from Investing Activities
Net cash used in investing activities was $10.0 million for the year ended December 31, 2025 compared to cash used in investing activities of $4.6 million for year ended December 31, 2024, respectively. For the years ended December 31, 2025 and 2024, cash used in investing activities related to capital expenditures.
Cash Flow from Financing Activities
The Company used $27.7 million in cash from financing activities during the year ended December 31, 2025 compared to $25.9 million in cash used by financing activities during the year ended December 31, 2024. The cash used by financing activities for the year ended December 31, 2025 was due to the full repayment of the SLA and other existing debt year to date. See additional discussion below and in Note 6. Debt in Item 8. Financial Statements and Supplementary Data related to the amendments of the Company’s debt arrangements.
Liquidity and Capital Resources
The Company’s sources of funds are cash flows from operations, borrowings made pursuant to its credit facilities and cash and cash equivalents on hand. Uses of funds include payments of principal on our debt facilities, capital expenditures, and working capital needs. We currently anticipate that cash flows from operations, available funds and access to financing sources, including under our Revolving Credit Agreement, will continue to be sufficient to meet our cash needs for the next twelve months and beyond.
Our material cash requirements from known contractual and other obligations primarily relate to our debt and lease obligations. The Company has achieved profitability and generated positive cash flows from operating activities in 2025. As of December 31, 2025, the Company’s total outstanding debt obligations under the Revolving Credit Agreement and for finance leases and other debt, were $96.6 million in the aggregate, and its cash and cash equivalents were $41.3 million. See Item 1. Financial Statements, Note 6. Debt, for additional information. On July 30, 2025, the Company amended its Revolving Credit Agreement with Standard Chartered Bank and three other lenders. The second amended Revolving Credit Agreement allows the Company to borrow up to $135.0 million and extends the maturity date to July 30, 2027.
PSI’s business is impacted by the current macroeconomic and geopolitical environment. For example, although the oil and gas market, in which the Company has historically operated, has experienced year over year growth from its historic lows, sales levels may not reach previous higher levels because of lower rig counts. The Company experiences tariff costs associated with products in its supply chain. We are actively assessing the evolving tariff environment and are committed to proactively mitigating any associated risks through strategic sourcing, pricing actions, and supply chain agility. The potential for continued
32
economic uncertainty and unfavorable oil and gas market dynamics may have a material adverse impact on the levels of future customer orders and the Company’s future business operations, financial condition and liquidity.
At December 31, 2025, the Company had four outstanding letters of credit totaling $1.8 million. See Item 8. Financial Statements and Supplementary Data, Note 11. Commitments and Contingencies for additional information related to the Company’s off-balance sheet arrangements and the outstanding letters of credit.
Commitments and Contingencies
Legal matters are further discussed in Note 11. Commitments and Contingencies, included in Item 8. Financial Statements and Supplementary Data. See Part I. Item 1A. Risk Factors for further discussion of legal risks to the Company.
Critical Accounting Estimates
The Company’s consolidated financial statements are prepared in accordance with U.S. GAAP. Preparation of these financial statements requires the Company to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company’s most critical accounting policies and estimates are those most important to the portrayal of its financial condition and results of operations which require the Company to make its most difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. The Company has identified the following as its most critical accounting policies and judgments. Although management believes that its estimates and assumptions are reasonable, they are based on information available when they are made and, therefore, may differ from estimates made under different assumptions or conditions.
The Company’s significant accounting policies are discussed in Note 1. Summary of Significant Accounting Policies and Other Information, included in Item 8. Financial Statements and Supplementary Data, and should be reviewed in connection with the following discussion of accounting policies that require difficult, subjective, and complex judgments and estimates.
Revenue Recognition
Revenue for the Company is generated from contracts when performance obligations under terms of the contract with a customer are satisfied, which is generally when control of the product has been transferred to the customer. For contracts with customers that include multiple performance obligations, judgment is required to determine whether performance obligations specified in these contracts are distinct and should be accounted for as separate revenue transactions for recognition purposes. For the majority of the Company’s products, revenue is recognized when the products are shipped or delivered to the customer based on the shipping terms which is usually when control passes to the customer. Conversely, the Company recognizes revenue throughout the manufacturing process when constructing because the customer receives the benefit of the asset as the product is constructed. The Company recognizes revenue related to extended warranty programs based on the passage of time over the extended warranty period.
The allowance for credit losses is our best estimate of the amount of estimated lifetime credit losses in our accounts receivable. We regularly review the adequacy of our allowance for credit losses.
The credit environment in which our customers operate has been relatively stable over the past few years and the Company collections are bolstered by a robust collections department. Total bad debt expense was less than $0.1 million in both 2025 and 2024. If circumstances change, due to the occurrence of higher-than-expected defaults or a significant adverse change in a major customer’s ability to meet our financial obligations such as bankruptcies, estimates of the recoverability of receivable amounts due could be reduced.
Refer to Note 2. Revenue of the notes to the consolidated financial statements for more information on the Company’s revenue recognition.
Goodwill Impairment
Goodwill and indefinite-lived intangible assets are evaluated for impairment annually as of October 1 and whenever events or circumstances make it more likely than not that impairment may have occurred or when required by accounting standards. We test goodwill and individual indefinite-lived intangible assets for impairment at a single reporting unit level. These assessments may be performed quantitatively or qualitatively.
We have not made any changes in 2025 to our reporting unit or the accounting methodology we use to assess impairment loss on goodwill and indefinite-lived intangible assets. In 2025, management performed an assessment of the impairment of goodwill for our reporting unit and indefinite-lived intangible assets using a qualitative approach. Based on the totality of information considered, and after weighing both positive and negative qualitative factors, management concluded that it was not more likely than not that the fair value of any reporting unit was below its carrying amount. As a result, the Company determined that a quantitative goodwill impairment test was not required, and no impairment charge was recognized for the period ended December 31, 2025.
33
Because these estimates form a basis for the determination of whether the impairment charge should be recorded, these estimates are considered to be critical accounting estimates. See Note 1. Summary of Significant Accounting Policies and Other Information, included in Item 8. Financial Statements and Supplementary Data for further discussion.
Warranty
The Company offers a standard limited warranty on the workmanship of its products that in most cases covers defects for a defined period, warranties mandated by governments and warranties for products that carry limited warranties from suppliers. The Company estimates and records a liability and related charges to income for its warranty program at the time products are sold to customers. Estimates are based on historical experience and reflect management’s best estimates of expected costs at the time products are sold.
When the Company identifies cost effective opportunities to address issues in products sold or corrective actions for safety issues, it initiates product recalls or field campaigns. As a result of the uncertainty surrounding the nature and frequency of product recalls and field campaigns, the liability for such actions is generally recorded when the Company commits to a product recall or field campaign. When collection is reasonably assured, the Company also estimates the amount of warranty claim recoveries to be received from its suppliers. Warranty costs and recoveries are included in Cost of sales in the Consolidated Statements of Income. See Note 1. Summary of Significant Accounting Policies and Other Information, included in Item 8. Financial Statements and Supplementary Data for further discussion.
Impact of New Accounting Standards
For information about recently issued accounting pronouncements, see Note 1. Summary of Significant Accounting Policies and Other Information, included in Item 8. Financial Statements and Supplementary Data.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
The Company is eligible to comply with the disclosure requirements applicable to smaller reporting companies as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information under this item.
34
Item 8. Financial Statements and Supplementary Data.
The following consolidated financial statements are included in Item 8 of this Form 10-K.
Index to Consolidated Financial Statements
| Page | |||||
Consolidated Financial Statements of Power Solutions International, Inc. | |||||
Reports of Independent Registered Public Accounting Firm (BDO USA, P.C., Chicago, IL, PCAOB ID#243) | |||||
| Consolidated Balance Sheets as of December 31, 2025 and 2024 | |||||
| Consolidated Statements of Income for 2025 and 2024 | |||||
| Consolidated Statements of Stockholders’ Equity (Deficit) for 2025 and 2024 | |||||
| Consolidated Statements of Cash Flows for 2025 and 2024 | |||||
Notes to Consolidated Financial Statements | |||||
35
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors
Power Solutions International, Inc.
Wood Dale, Illinois
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Power Solutions International, Inc. (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated March 2, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accrued Product Warranty
As described in Note 1 to the consolidated financial statements, the Company’s consolidated accrued product warranty balance was $8.2 million as of December 31, 2025. The Company offers a standard limited warranty on the workmanship of its products. The Company estimates and records a liability and related charges to income for its warranty program at the time products are sold to customers. These estimates are established using historical warranty claims information including failure rates, repair costs and timing of failures. Previous estimates are adjusted as actual warranty claims data becomes available.
We identified the estimation of certain accrued product warranties as a critical audit matter, as auditing such accrued product warranties was especially challenging due to the nature and extent of audit effort required to address this matter.
The primary procedures we performed to address this critical audit matter included:
a.Testing the design and operating effectiveness of certain relevant internal controls related to the Company’s estimation of accrued product warranties.
b.Reconciling certain underlying historical warranty claims information to the calculation of estimated future warranty claims.
c.Testing the completeness and accuracy of certain underlying historical warranty claims information used in management’s estimation of accrued product warranties.
36
d.Testing the mathematical accuracy of management’s calculation of certain accrued product warranties.
/s/ BDO USA, P.C.
We have served as the Company’s auditor since 2018.
Chicago, Illinois
March 2, 2026
37
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors
Power Solutions International, Inc.
Wood Dale, Illinois
Opinion on Internal Control over Financial Reporting
We have audited Power Solutions International, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of income, stockholders’ equity, and cash flows for each of the years then ended, and the related notes and our report dated March 2, 2026 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ BDO USA, P.C.
Chicago, Illinois
March 2, 2026
38
POWER SOLUTIONS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
| (in thousands, except par values) | As of December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| ASSETS | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 41,250 | $ | 55,252 | ||||||||||
| Restricted cash | 3,698 | 3,239 | ||||||||||||
Accounts receivable, net of allowances of $967 and $1,889 as of December 31, 2025 and 2024, respectively; (from related parties $415 and $1,383 as of December 31, 2025 and 2024, respectively) | 90,446 | 68,958 | ||||||||||||
| Income tax receivable | 6,442 | 986 | ||||||||||||
| Inventories, net | 127,363 | 93,872 | ||||||||||||
| Prepaid expenses | 4,500 | 6,396 | ||||||||||||
| Contract assets | 15,965 | 21,462 | ||||||||||||
| Other current assets | 1,256 | 4,170 | ||||||||||||
| Total current assets | 290,920 | 254,335 | ||||||||||||
| Property, plant and equipment, net | 23,014 | 15,406 | ||||||||||||
| Operating lease right-of-use assets, net | 52,911 | 23,275 | ||||||||||||
| Intangible assets, net | 1,236 | 2,454 | ||||||||||||
| Goodwill | 29,835 | 29,835 | ||||||||||||
| Deferred tax assets | 13,322 | — | ||||||||||||
| Customs-related deposits | 12,893 | 2,503 | ||||||||||||
| Other noncurrent assets | 614 | 374 | ||||||||||||
| TOTAL ASSETS | $ | 424,745 | $ | 328,182 | ||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||
| Current liabilities: | ||||||||||||||
Accounts payable (to related parties $4,126 and $14,427 as of December 31, 2025 and 2024, respectively) | $ | 48,196 | $ | 58,208 | ||||||||||
| Current maturities of long-term debt | 28 | 52 | ||||||||||||
| Revolving line of credit, current | — | 95,000 | ||||||||||||
| Finance lease liability, current | 355 | 78 | ||||||||||||
| Operating lease liability, current | 6,346 | 4,503 | ||||||||||||
Other short-term financing (to related parties $25,000 as of December 31, 2024) | — | 25,000 | ||||||||||||
Other accrued liabilities (to related parties $60 and $807 as of December 31, 2025 and 2024, respectively) | 37,353 | 44,726 | ||||||||||||
| Total current liabilities | 92,278 | 227,567 | ||||||||||||
| Deferred tax liabilities | — | 1,568 | ||||||||||||
| Long-term debt, net of current maturities | 10 | 38 | ||||||||||||
| Revolving line of credit, long-term | 95,000 | — | ||||||||||||
| Finance lease liability, long-term | 1,224 | 16 | ||||||||||||
| Operating lease liability, long-term | 49,397 | 20,663 | ||||||||||||
| Noncurrent contract liabilities | 1,699 | 1,877 | ||||||||||||
| Other noncurrent liabilities | 6,528 | 11,203 | ||||||||||||
| TOTAL LIABILITIES | $ | 246,136 | $ | 262,932 | ||||||||||
| Commitments and Contingencies (Note 11) | ||||||||||||||
| STOCKHOLDERS’ EQUITY | ||||||||||||||
Common stock – $0.001 par value; 50,000 shares authorized; 23,117 shares issued; 23,041 and 23,000 shares outstanding at December 31, 2025 and 2024, respectively | 23 | 23 | ||||||||||||
| Additional paid-in capital | 157,602 | 157,561 | ||||||||||||
| Retained earnings (accumulated deficit) | 22,476 | (91,511) | ||||||||||||
Treasury stock, at cost, 76 and 117 shares at December 31, 2025 and 2024, respectively | (1,492) | (823) | ||||||||||||
| TOTAL STOCKHOLDERS’ EQUITY | 178,609 | 65,250 | ||||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 424,745 | $ | 328,182 | ||||||||||
See Notes to Consolidated Financial Statements
39
POWER SOLUTIONS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
| (in thousands, except per share amounts) | For the Year Ended December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
Net sales (to related parties $1,266 and $1,766 for the year ended December 31, 2025 and 2024, respectively) | $ | 722,405 | $ | 475,967 | ||||||||||
Cost of sales (derived from related party net sales $863 and $1,304 for the year ended December 31, 2025 and 2024, respectively) | 537,506 | 335,430 | ||||||||||||
| Gross profit | 184,899 | 140,537 | ||||||||||||
| Operating expenses: | ||||||||||||||
| Research and development expenses | 18,164 | 20,056 | ||||||||||||
| Selling, general and administrative expenses | 55,803 | 37,378 | ||||||||||||
| Amortization of intangible assets | 1,218 | 1,459 | ||||||||||||
| Total operating expenses | 75,185 | 58,893 | ||||||||||||
| Operating income | 109,714 | 81,644 | ||||||||||||
| Other expense (income), net | ||||||||||||||
Interest expense (from related parties $634 and $6,998 for the year ended December 31, 2025 and 2024, respectively) | 6,702 | 11,443 | ||||||||||||
| Other expense (income) | (352) | — | ||||||||||||
| Total other expense, net | 6,350 | 11,443 | ||||||||||||
| Income before income taxes | 103,364 | 70,201 | ||||||||||||
| Income tax (benefit) expense | (10,623) | 922 | ||||||||||||
| Net income | $ | 113,987 | $ | 69,279 | ||||||||||
Weighted-average common shares outstanding: | ||||||||||||||
| Basic | 23,022 | 22,983 | ||||||||||||
| Diluted | 23,066 | 23,018 | ||||||||||||
| Earnings per common share: | ||||||||||||||
| Basic | $ | 4.95 | $ | 3.01 | ||||||||||
| Diluted | $ | 4.94 | $ | 3.01 | ||||||||||
See Notes to Consolidated Financial Statements
40
POWER SOLUTIONS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| (in thousands) | Common Stock | Additional Paid-in Capital | Retained Earnings (Accumulated Deficit) | Treasury Stock | Total Stockholders’ Equity | |||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | 23 | $ | 157,770 | $ | (160,790) | $ | (920) | $ | (3,917) | ||||||||||||||||||||||
| Net income | — | — | 69,279 | — | 69,279 | |||||||||||||||||||||||||||
| Stock Appreciation Rights (“SAR”) issued | — | (187) | — | 187 | — | |||||||||||||||||||||||||||
| Stock-based compensation expense | — | 89 | — | — | 89 | |||||||||||||||||||||||||||
| Tax benefit from exercise of stock based compensation | — | — | — | (201) | (201) | |||||||||||||||||||||||||||
| Restricted Stock Awards | — | (111) | — | 111 | — | |||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | 23 | $ | 157,561 | $ | (91,511) | $ | (823) | $ | 65,250 | ||||||||||||||||||||||
| Net income | — | — | 113,987 | — | 113,987 | |||||||||||||||||||||||||||
| Stock Appreciation Rights (“SAR”) issued | — | (274) | — | 274 | — | |||||||||||||||||||||||||||
| Stock-based compensation expense | — | 427 | — | — | 427 | |||||||||||||||||||||||||||
| Repurchases to settle tax withholding obligations for stock-based compensation awards | — | — | — | (1,055) | (1,055) | |||||||||||||||||||||||||||
| Restricted Stock Awards | — | (112) | — | 112 | — | |||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | 23 | $ | 157,602 | $ | 22,476 | $ | (1,492) | $ | 178,609 | ||||||||||||||||||||||
See Notes to Consolidated Financial Statements
41
POWER SOLUTIONS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||
| Net income | $ | 113,987 | $ | 69,279 | ||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||
| Amortization of intangible assets | 1,218 | 1,459 | ||||||||||||
| Depreciation | 4,170 | 3,740 | ||||||||||||
| Noncash lease expense | 6,063 | 5,009 | ||||||||||||
| Stock-based compensation expense | 427 | 89 | ||||||||||||
| Amortization of financing fees | 646 | 513 | ||||||||||||
| Deferred income taxes | (14,890) | 90 | ||||||||||||
| (Credit) for losses in accounts receivable | (922) | (4,086) | ||||||||||||
| Increase in allowance for inventory obsolescence, net | 118 | 2,405 | ||||||||||||
| Other adjustments, net | 96 | 40 | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
| Accounts receivable | (20,566) | 2,117 | ||||||||||||
| Inventories | (33,426) | (10,557) | ||||||||||||
| Prepaid expenses | 1,896 | 2,241 | ||||||||||||
| Contract assets | 5,496 | (5,908) | ||||||||||||
| Other assets | (7,205) | (1,631) | ||||||||||||
| Accounts payable | (10,084) | (8,856) | ||||||||||||
| Income taxes receivable | (5,457) | (436) | ||||||||||||
| Accrued expenses | (6,789) | 12,003 | ||||||||||||
| Other noncurrent liabilities | (10,665) | (5,121) | ||||||||||||
| Net cash provided by operating activities | 24,113 | 62,390 | ||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||
| Capital expenditures | (9,973) | (4,559) | ||||||||||||
| Proceeds from disposal of assets | 11 | — | ||||||||||||
| Net cash used in investing activities | (9,962) | (4,559) | ||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||
| Repayment of long-term debt and lease liabilities | (482) | (204) | ||||||||||||
| Proceeds from short-term financings | — | 100,000 | ||||||||||||
| Repayment of short-term financings | (25,000) | (124,820) | ||||||||||||
| Repurchases to settle tax withholding obligations for stock-based compensation awards | (1,055) | (201) | ||||||||||||
| Payments of deferred financing costs | (1,157) | (709) | ||||||||||||
| Net cash used in financing activities | (27,694) | (25,934) | ||||||||||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash | (13,543) | 31,897 | ||||||||||||
| Cash, cash equivalents, and restricted cash at beginning of the year | 58,491 | 26,594 | ||||||||||||
| Cash, cash equivalents, and restricted cash at end of the year | $ | 44,948 | $ | 58,491 | ||||||||||
| (in thousands) | As of December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance Sheets | ||||||||||||||
| Cash and cash equivalents | $ | 41,250 | $ | 55,252 | ||||||||||
| Restricted cash | 3,698 | 3,239 | ||||||||||||
| Total cash, cash equivalents, and restricted cash | $ | 44,948 | $ | 58,491 | ||||||||||
See Notes to Consolidated Financial Statements
42
POWER SOLUTIONS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies and Other Information
Nature of Business Operations
Power Solutions International, Inc. (“Power Solutions,” “PSI” or the “Company”), a Delaware corporation, is a global producer and distributor of a broad range of high-performance, certified, low-emission power systems, including alternative-fueled power systems for original equipment manufacturers (“OEMs”) of off-highway industrial equipment and large custom-engineered integrated electrical power generation systems.
The Company’s customers include large, industry-leading and multinational organizations. The Company’s products and services are sold predominantly to customers throughout North America as well as to customers located throughout the Pacific Rim and Europe. The Company’s power systems are highly engineered, comprehensive systems which, through the Company’s technologically sophisticated development and manufacturing processes, including its in-house design, prototyping, testing and engineering capabilities and its analysis and determination of the specific components to be integrated into a given power system (driven in large part by emission standards and cost considerations), allow the Company to provide its customers with power systems customized to meet specific OEM application requirements, other customers’ technical specifications and requirements imposed by environmental regulatory bodies.
The Company’s power system configurations range from a basic engine integrated with appropriate fuel system components to completely packaged power systems that include any combination of cooling systems, electronic systems, air intake systems, fuel systems, housings, power takeoff systems, exhaust systems, hydraulic systems, enclosures, brackets, hoses, tubes and other assembled componentry. The Company also designs and manufactures large, custom-engineered integrated electrical power generation systems for both standby and prime power applications. The Company purchases engines from third-party suppliers and produces internally designed engines, all of which are then integrated into its power systems.
Of the other components that the Company integrates into its power systems, a substantial portion consist of internally designed components and components for which it coordinates significant design efforts with third-party suppliers, with the remainder consisting largely of parts that are sourced off-the-shelf from third-party suppliers. Some of the key components (including purchased engines) embody proprietary intellectual property of the Company’s suppliers. As a result of its design and manufacturing capabilities, the Company is able to provide its customers with a power system that can be incorporated into a customer’s specified application. In addition to the certified products described above, the Company sells diesel, gasoline and non-certified power systems and aftermarket components.
Stock Ownership and Control
Weichai America Corp., a wholly-owned subsidiary of Weichai Power Co., Ltd. (HK2338, SZ000338) (herein collectively referred to as “Weichai”), owns approximately 46.0% of the outstanding shares of the Company’s Common Stock as of December 31, 2025. Weichai has entered into an Investor Rights Agreement (the “Rights Agreement”) with the Company. The Rights Agreement provides Weichai with representation on the Company’s Board of Directors (the “Board”) and management representation rights. Weichai currently has four representatives on the Board, which constitutes the majority of the directors serving on the Board. In addition, the Company and Weichai have entered into a Shareholders Agreement with the Company’s founders (the “Founders”), pursuant to which the Founders have agreed to vote in favor of Weichai’s designees to the Board and for certain other matters. The Founders currently own less than 10% of the Company’s Common Stock as of December 31, 2025. As a result, Weichai is able to exercise control over matters requiring stockholders’ approval, including the election of directors, amendment of the Company’s Certificate of Incorporation (the “Charter”) and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of the Company or changes in management and will make the approval of certain transactions impractical without the support of Weichai.
According to the Rights Agreement, during any period when the Company is a “controlled company” within the meaning of the Nasdaq Listing Rules, it will take such measures as to avail itself of the “controlled company” exemptions available under Rule 5615 of the Nasdaq Listing Rules from Rules 5605(b), (d) and (e) to the extent applicable.
Liquidity
During 2025, the Company reported net income of $114.0 million and cash provided by operations of $24.1 million. On July 30, 2025, the Company amended its Uncommitted Revolving Credit Agreement (the “Revolving Credit Agreement”), which extended the maturity date from August 30, 2025 to July 30, 2027 (See Note 6. Debt) and increased the borrowing capacity to $135.0 million. As the Company has achieved profitability, is generating positive cash flows from operating activities, and has amended the Revolving Credit Agreement, the Company has concluded that its existing cash and cash equivalents and cash from operations will be sufficient for the Company for at least twelve months from the issuance of these consolidated financial statements.
43
Basis of Presentation and Consolidation
The consolidated financial statements include the accounts of Power Solutions International, Inc. and its wholly-owned subsidiaries. The Company’s consolidated financial statements were prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and include the assets, liabilities, sales and expenses of all wholly-owned subsidiaries and majority-owned subsidiaries in which the Company exercises control. All intercompany balances and transactions have been eliminated in consolidation.
Concentrations
The following table presents customers individually accounting for more than 10% of the Company’s net sales:
| For the Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Customer B | 20 | % | 11 | % | ||||||||||
| Customer C | 10 | % | 11 | % | ||||||||||
| Customer E | 10 | % | ** | |||||||||||
| Customer F | 13 | % | ** | |||||||||||
The following table presents customers individually accounting for more than 10% of the Company’s trade accounts receivable:
| As of December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Customer B | 14 | % | ** | |||||||||||
| Customer C | 10 | % | ** | |||||||||||
| Customer D | ** | 15 | % | |||||||||||
| Customer E | 11 | % | ** | |||||||||||
| Customer G | 11 | % | ** | |||||||||||
The following table presents suppliers individually accounting for more than 10% of the Company’s purchases:
| For the Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Supplier A | 21 | % | 16 | % | ||||||||||
** Less than 10% of the total
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates and assumptions include the valuation of allowances for uncollectible receivables, inventory reserves, warranty reserves, stock-based compensation, evaluation of goodwill, other intangibles, property, plant and equipment for impairment, income tax valuation allowances and determination of useful lives of long-lived assets. Actual results could materially differ from those estimates.
Cash and Cash Equivalents
Cash equivalents consist of short-term, highly liquid investments that have original maturities of three months or less from the date of purchase. Such investments are stated at cost, which approximates fair value.
Restricted Cash
Restricted cash consists of funds that are contractually restricted as to usage or withdrawal due to required minimum levels of cash collateral for letters of credits and contractual agreements with customers. As of December 31, 2025 and 2024, the Company had restricted cash of $3.7 million and $3.2 million, respectively, which includes $1.4 million restricted cash held in escrow which could be required to be refunded to the customer if conditions occur as defined in the agreement with the customer. The Company has not recognized revenue associated with the restricted cash. The liability is included within Noncurrent Contract Liabilities on the Consolidated Balance Sheet.
44
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to be settled or realized. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company records net deferred tax assets to the extent that it believes these assets will more likely than not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations.
The Company records uncertain tax positions in accordance with accounting guidance, on the basis of a two-step process whereby (i) it determines whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is greater than 50% likely to be realized upon ultimate settlement with the related tax authority. Tax benefits related to uncertain tax positions taken or expected to be taken on a tax return are recorded when such benefits meet a more-likely-than-not threshold. Otherwise, these tax benefits are recorded when a tax position has been effectively settled, which means that the appropriate taxing authority has completed its examination even though the statute of limitations remains open, or the statute of limitation has expired. Interest and penalties related to uncertain tax positions are recognized as part of income tax expense and are accrued beginning in the period that such interest and penalties would be applicable under relevant tax law until such time that the related tax benefits are recognized.
Accounts Receivable and Allowances
Trade accounts receivable represent amounts billed to customers and not yet collected. Trade accounts receivable are recorded at the invoiced amount, which approximates net recoverable value, and generally do not bear interest. The allowance for credit losses is the Company’s best estimate of the amount of probable credit losses in the existing accounts receivable and is established through a charge to selling, general and administrative expenses. We estimate losses over the contractual life using assumptions to capture the risk of loss, even if remote, based principally on how long a receivable has been outstanding and the geographic region. Other factors considered include historical write-off experience, current economic conditions and also factors such as customer credit, past transaction history with the customer and changes in customer payment terms. Trade accounts receivable and the allowance for credit losses are reviewed on a regular basis. When necessary, an allowance for the full amount of specific accounts deemed uncollectible is recorded. Accounts receivable losses are deducted from the allowance and the account balance is written off when means of collection have been exhausted and the potential for recovery is considered remote. Recoveries of previously written off balances are recognized when received. An allowance associated with anticipated future sales returns and accrued pricing adjustments are also included in the accounts receivable, net.
Inventories
The Company’s inventories consist primarily of engines and parts. Engines are valued at the lower of cost including estimated freight-in or net realizable value. Parts are valued at the lower of cost or net realizable value, except for integral parts provided by customers for installation on custom ordered engines. Such parts are accounted for as noncash consideration which is valued at fair value. Net realizable value approximates replacement cost. Cost is principally determined using the first-in, first-out method and includes material, labor and manufacturing overhead. It is the Company’s policy to review inventories on a continuing basis for obsolete, excess and slow-moving items and to record valuation adjustments for such items in order to eliminate non-recoverable costs from inventory. Valuation adjustments are recorded in an inventory reserve account and reduce the cost basis of the inventory in the period in which the reduced valuation is determined. Inventory reserves are established based on quantities on hand, usage and sales history, customer orders, projected demand and utilization within a current or future power system. Specific analysis of individual items or groups of items is performed based on these same criteria, as well as on changes in market conditions or any other identified conditions.
45
Inventories consist of the following:
| (in thousands) | As of December 31, | |||||||||||||
| Inventories | 2025 | 2024 | ||||||||||||
| Raw materials | $ | 105,225 | $ | 84,323 | ||||||||||
| Work in process | 5,103 | 872 | ||||||||||||
| Finished goods | 25,288 | 16,812 | ||||||||||||
| Total inventories | 135,616 | 102,007 | ||||||||||||
| Inventory allowance | (8,253) | (8,135) | ||||||||||||
| Inventories, net | $ | 127,363 | $ | 93,872 | ||||||||||
Activity in the Company’s inventory allowance was as follows:
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| Inventory Allowance | 2025 | 2024 | ||||||||||||
| Balance at beginning of period | $ | 8,135 | $ | 5,730 | ||||||||||
| Charged to expense | 306 | 3,394 | ||||||||||||
| Write-offs | (188) | (989) | ||||||||||||
| Balance at end of period | $ | 8,253 | $ | 8,135 | ||||||||||
As of December 31, 2025 and 2024, the Company’s inventory included $0.2 million and $0.8 million, respectively, of raw materials provided by its customers for installation in the fulfillment of its performance obligations to these customers and recorded an associated contract liability. See Note 2. Revenue for further information regarding contract assets and contract liabilities.
Property, Plant and Equipment
Property, plant and equipment is carried at cost and presented net of accumulated depreciation and impairments. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Property, plant and equipment is evaluated periodically to determine if an adjustment to depreciable lives is warranted. Such evaluation is based principally on the expected utilization of the long-lived assets.
Repairs and maintenance costs are charged directly to expense as incurred. Major renewals or replacements that substantially extend the useful life of an asset are capitalized and depreciated.
Estimated useful lives by each type of asset category are as follows:
| Years | ||||||||
| Buildings | Up to 39 | |||||||
| Leasehold improvements | Lesser of (i) expected useful life of improvement or (ii) life of lease (including likely extension thereof) | |||||||
| Machinery and equipment | 1 to 10 | |||||||
Intangible Assets
The Company’s intangible assets include customer relationships, developed technology, trade names and trademarks. Intangible assets are amortized on an accelerated basis over a period of time that approximates the pattern over which the Company expects to gain the estimated economic benefits, and such period generally ranges between three years and 15 years.
46
Impairment of Long-Lived Assets
The Company assesses potential impairments to its long-lived assets or asset groups, excluding goodwill which is separately tested for impairment, whenever events indicate that the carrying amount of such assets may not be recoverable. Long-lived assets are assessed for impairment by comparing the carrying value of the asset or asset group with the estimated future net undiscounted cash flows expected to result from the use of the asset or asset group, including cash flows from disposition. If the future net undiscounted cash flows are less than the carrying value, an impairment loss is calculated. An impairment loss is determined by the amount that the asset’s or asset group’s carrying value exceeds its estimated fair value. Estimated fair value is generally measured by discounting estimated future cash flows. If an impairment loss is recognized, the adjusted balance becomes the new cost basis and is depreciated (amortized) over the remaining useful life. The Company also periodically reassesses the useful lives of its long-lived assets due to advances and changes in technologies. No impairment losses were recorded during the years ended December 31, 2025 and 2024.
Goodwill
Goodwill represents the excess of the cost of an acquired business over the amounts assigned to the net acquired assets. Goodwill is not amortized but is tested for impairment at the reporting unit level, on an annual basis or more frequently, if events occur or circumstances change indicating potential impairment. The Company annually tests goodwill for impairment on October 1.
In evaluating goodwill for impairment, the Company first assesses qualitative factors to determine whether it is more likely than not (i.e., there is a likelihood of more than 50%) that the Company’s fair value is less than its carrying amount. Qualitative factors that the Company considers include, but are not limited to, macroeconomic and industry conditions, overall financial performance and other relevant entity-specific events. If the Company bypasses the qualitative assessment, or if the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs a quantitative goodwill impairment test to identify potential goodwill impairment and measures the amount of goodwill impairment it will recognize, if any.
In the quantitative goodwill impairment test, the Company compares the estimated fair value of the reporting unit with its related carrying value. If the estimated fair value exceeds the carrying amount, no further analysis is needed. If, however, the reporting unit’s estimated fair value is less than its carrying amount, the Company records an impairment for the difference between the estimated fair value and the carrying value.
Under the quantitative approach, the Company calculates its estimated fair value using the income and market approaches when feasible, or an asset approach when neither the income nor the market approach has sufficient data. For the income approach, a discounted cash flow method, the Company uses internally developed discounted cash flow models that include the following assumptions, among others: projections of revenues, expenses and related cash flows based on assumed long-term growth rates and demand trends, expected future investments to grow new units, and estimated discount rates. The Company based these assumptions on its historical data and experience, industry projections, and micro and macro general economic condition projections and expectations. The market approach, also called the Guideline Public Company Approach, compares the value of an entity to similar publicly traded companies. The asset approach estimates the selling price the unit could achieve under assumed market conditions.
The Company performed its annual goodwill impairment assessment as of October 1, 2025, utilizing the qualitative approach permitted under applicable accounting guidance. Based on the totality of information considered, and after weighing both positive and negative qualitative factors, management concluded that it was not more likely than not that the fair value of its reporting unit was below its carrying amount. As a result, the Company determined that a quantitative goodwill impairment test was not required, and no impairment charge was recognized for the period ended December 31, 2025. The Company performed its annual goodwill impairment assessment as of October 1, 2024, utilizing the quantitative approach to determine the estimated fair value of its reporting unit and no impairment charge was recognized for the period ended December 31, 2024.
47
Other Accrued Liabilities
Other accrued liabilities consisted of the following:
| (in thousands) | As of December 31, | |||||||||||||
| Other Accrued Liabilities | 2025 | 2024 | ||||||||||||
| Accrued product warranty | $ | 6,634 | $ | 10,233 | ||||||||||
Accrued litigation 1 | 1,400 | 3,847 | ||||||||||||
| Contract liabilities | 3,486 | 10,184 | ||||||||||||
| Accrued compensation and benefits | 19,565 | 10,721 | ||||||||||||
| Accrued interest expense | 268 | 1,237 | ||||||||||||
Stock appreciation rights liability 2 | 1,070 | 1,804 | ||||||||||||
| Non-interest bearing note payable | 740 | 693 | ||||||||||||
| Customs accrual | 1,248 | 1,162 | ||||||||||||
| Taxes payable | 257 | 200 | ||||||||||||
| Other | 2,685 | 4,645 | ||||||||||||
| Total | $ | 37,353 | $ | 44,726 | ||||||||||
1 As of December 31, 2025 and 2024, accrued litigation includes accruals related to various ongoing legal matters including associated legal fees. See Note 11. Commitments and Contingencies for further information regarding the various ongoing legal matters.
2 The Company has an incentive compensation plan, which authorizes the granting of a variety of different types of awards including, but not limited to, non-qualified stock options, incentive stock options, Stock Appreciation Rights (“SARs”), Restricted Stock Awards (“RSAs”), deferred stock and performance units to its executive officers, employees, consultants and Directors. The SAR awards granted for the year ended December 31, 2025 and 2024 were all liability classified awards and remained outstanding. See Note 14. Stock-Based Compensation for additional information on the SARs and RSAs.
Warranty Costs
The Company offers a standard limited warranty on the workmanship of its products that in most cases covers defects for a defined period. Warranties for certified emission products are mandated by the U.S. Environmental Protection Agency (the “EPA”) and / or CARB and are longer than the Company’s standard warranty on certain emission-related products. The Company’s products also carry limited warranties from suppliers. The Company’s warranties generally apply to engines fully manufactured by the Company and to the modifications the Company makes to supplier base products. Costs related to supplier warranty claims are generally borne by the supplier and passed through to the end customer.
Warranty estimates are based on historical experience and represent the projected cost associated with the product. A liability and related expense are recognized at the time products are sold. The Company adjusts estimates when it is determined that actual costs may differ from initial or previous estimates. The Company’s warranty liability is generally affected by failure rates, repair costs and the timing of failures. Future events and circumstances related to these factors could materially change the estimates and require adjustments to the warranty liability. In addition, new product launches require a greater use of judgment in developing estimates until historical experience becomes available.
The Company records adjustments to preexisting warranties for changes in its estimate of warranty costs for products sold in prior fiscal years in the period in which new information is received and the information indicates that actual costs may differ from the Company’s initial or previous estimates. Such adjustments typically occur when claims experience deviates from historic and expected trends.
When the Company identifies cost effective opportunities to address issues in products sold or corrective actions for safety issues, it initiates product recalls or field campaigns. As a result of the uncertainty surrounding the nature and frequency of product recalls and field campaigns, the liability for such actions is generally recorded when the Company commits to a product recall or field campaign. In each subsequent quarter after a recall or field campaign is initiated, the recorded warranty liability balance is analyzed, reviewed and adjusted, if necessary, to reflect any changes in the anticipated average cost of repair or number of repairs to be completed prospectively.
When collection is reasonably assured, the Company also estimates the amount of warranty claim recoveries to be received from its suppliers. Warranty costs and recoveries are included in Cost of sales in the Consolidated Statements of Income. As of both December 31, 2025 and 2024, reimbursed warranty costs due from a significant supplier included in accounts receivable are approximately $0.2 million.
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Accrued product warranty activities included in Other noncurrent liabilities on the Consolidated Balance Sheet are presented below:
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| Accrued Product Warranty | 2025 | 2024 | ||||||||||||
| Balance at beginning of year | $ | 13,972 | $ | 19,263 | ||||||||||
| Current year provision * | 6,039 | 6,054 | ||||||||||||
Changes in estimates for preexisting warranties ** | 829 | 1,239 | ||||||||||||
| Payments made during the period | (12,647) | (12,584) | ||||||||||||
| Balance at end of year | 8,193 | 13,972 | ||||||||||||
| Less: Current portion | 6,634 | 10,233 | ||||||||||||
| Noncurrent accrued product warranty | $ | 1,559 | $ | 3,739 | ||||||||||
*Warranty costs, net of supplier recoveries, and other adjustments, were $6.8 million and $6.5 million for the years ended December 31, 2025 and 2024, respectively. Supplier recoveries were $0.1 million and $0.8 million for the years ended December 31, 2025 and 2024, respectively.
**Changes in estimates for preexisting warranties reflect changes in the Company’s estimate of warranty costs for products sold in prior periods. Such adjustments typically occur when claims experience deviates from historical and expected trends. For the year December 31, 2025, the Company recorded a cost for changes in estimates of preexisting warranties of $0.8 million, or $0.04 per diluted share, and costs of $1.2 million, or $0.05 per diluted share, for the year ended December 31, 2024.
Revenue Recognition
See Note 2. Revenue for additional information the Company’s policy related to revenue recognition.
Recently Issued Accounting Pronouncements – Adopted
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures - Income Taxes (Topic 740). The amendments to this standard enhances the transparency and decision usefulness of income tax disclosures, primarily related to rate reconciliation and income taxes paid information as well as effectiveness of overall income tax disclosures. The new standard is effective for public entities for annual periods beginning after December 15, 2024. The Company adopted this guidance retrospectively for the year ended December 31, 2025. Refer to Note 12. Income Taxes for the related disclosures, which include updates to the specific categories presented in the tax rate reconciliation, additional information for reconciling items that meet the applicable quantitative threshold, and enhanced disclosures regarding income taxes paid on an annual basis.
Recently Issued Accounting Pronouncements – Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income: Expense Disaggregation Disclosures (Subtopic 220-40). This update requires entities to provide more detailed disclosures about the components of significant expense categories, enhancing the transparency and decision usefulness of financial statements. The amendments in this update are intended to provide investors with additional information about specific expense categories in the notes to the financial statements at interim and annual reporting periods. The updated standard is effective for annual periods beginning after December 15, 2026, and interim reporting periods thereafter, although early adoption is permitted. While we anticipate that the adoption of this standard will require additional disclosures, the Company is currently assessing the impact of the amendment to this standard on its consolidated financial statements.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses: Measurement of Credit Losses for Accounts Receivable and Contract Assets (Topic 326). The update permits entities to elect a practical expedient for estimating expected credit losses on current trade receivables and current contract assets by assuming that conditions existing at the balance sheet date will remain unchanged over the life of those assets. The updated standard is effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact of the amendment to this standard on its consolidated financial statements.
Note 2. Revenue
Revenue Recognition
The Company determines the amount of revenue to be recognized through the following steps:
•identification of the contract, or contracts with a customer;
•identification of the performance obligations in the contract;
•determination of the transaction price;
•allocation of the transaction price to the performance obligations in the contract; and
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•recognition of revenue when, or as, the Company satisfies the performance obligations.
Revenue for the Company is generated from contracts that may include a single performance obligation (generally, a single type of engine) or multiple performance obligations (which may include an engine with aftermarket parts, different types of engines, etc.). A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. Revenue is measured at the transaction price which is based on the amount of consideration that the Company expects to receive in exchange for transferring the promised goods or services to the customer, including consideration other than cash. The Company may receive integral parts provided by customers for installation on custom ordered engines. Such parts are accounted for as noncash consideration since the Company obtains control of the contributed parts and is included in the transaction price at fair value. The transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company is required to estimate the total consideration expected to be received from contracts with customers. The consideration expected to be received may be variable based on the specific terms of the contract and the Company’s past practices.
For contracts with multiple performance obligations, the Company allocates the total transaction price to distinct performance obligations based on directly observable data, if available, or the Company’s best estimate of the stand-alone selling price of each distinct performance obligation. The primary methods used to determine stand-alone selling price are directly observable prices and the cost plus a margin approach.
The Company applies judgment in order to identify and determine the number of performance obligations, determine the total transaction price, allocate the transaction price to each performance obligation, and determine the appropriate timing of revenue recognition.
Taxes collected from customers and remitted to governmental authorities are presented on a net basis; that is, such taxes are excluded from revenues.
The Company’s payment terms are generally 60 days or less and its sales arrangements do not contain any significant financing components.
Timing of revenue recognition. The Company recognizes revenue related to performance obligations in its contracts with customers when control passes to the customer. Control passes to the customer when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits from the asset. For the majority of the Company’s products, revenue is recognized at a point in time when the products are shipped or delivered to the customer based on the shipping terms as that is the point in time when control passes to the customer. For the years ended December 31, 2025 and 2024, the Company recognized revenue of $503.8 million and $355.2 million, respectively, related to products shipped or delivered at a point in time.
The Company also recognizes revenue over time primarily when the Company’s performance obligations include enhancing a customer-controlled asset (generally when an engine is provided by the customer), constructing an asset with no alternative future use and the Company has an enforceable right to payment throughout the period as the services are performed, or providing services over time such as an extended warranty beyond the Company’s standard warranty. The Company recognizes revenue throughout the manufacturing process when constructing an asset based on labor hours incurred because the customer receives the benefit of the asset as the product is constructed. The Company believes labor hours incurred relative to total estimated labor hours at completion faithfully depicts the transfer of control to the customer. The Company recognizes revenue related to extended warranty programs based on the passage of time over the extended warranty period. For the years ended December 31, 2025 and 2024, the Company recognized revenue of $218.6 million and $120.8 million, respectively, for products manufactured and services provided over time.
Shipping and handling costs. The Company accounts for shipping and handling costs as fulfillment costs which are recorded in Cost of sales in the Consolidated Statements of Income. This includes shipping and handling costs incurred after control of the asset has transferred to the customer as the Company has elected the practical expedient in ASC 606.
Principal vs. agent considerations. From time to time, the Company may involve more than one party when providing goods or services to a customer. The Company determines whether it is the principal or agent in these transactions by evaluating the nature of its promise to the customer. The analysis of whether the Company is a principal or an agent in a transaction is performed for each good or services provided to the customer. The Company determines whether it controls the good or service before it is transferred to the customer by considering the following factors:
a.Whether the Company is primarily responsible for fulfilling the promise to provide the specified good or service.
b.Whether the Company has inventory risk before the specified good or service has been transferred to the customer or after transfer of control to the customer.
c.Whether the Company has discretion in establishing the price for the specified good or service.
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If the Company determines that it is the principal in the transaction, it recognizes revenues at the gross transaction price for the good or service. If the Company determines that is an agent in the transaction, it recognizes revenue at the net amount of the transaction price.
Variable consideration. Variable consideration primarily includes rebates and discounts. The Company estimates the projected amount of rebates and discounts based on current assumptions, customer-specific information and historical experience. Variable consideration is recorded as a reduction of revenue to the extent that it is probable that there will not be significant changes to the Company’s estimate of variable consideration when any uncertainties are settled.
Costs to obtain a contract. The Company has elected the practical expedient to recognize incremental costs to obtain a contract (primarily commissions) as expense when incurred since the amortization period of the asset that the Company otherwise would have recognized is one year or less.
Disaggregation of Revenue
The following table summarizes net sales by end market:
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| End Market | 2025 | 2024 | ||||||||||||
| Power Systems | $ | 586,347 | $ | 325,749 | ||||||||||
| Industrial | 114,768 | 123,268 | ||||||||||||
| Transportation | 21,290 | 26,950 | ||||||||||||
| Total | $ | 722,405 | $ | 475,967 | ||||||||||
The following table summarizes net sales by geographic area:
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| Geographic Area | 2025 | 2024 | ||||||||||||
| United States | $ | 675,194 | $ | 419,706 | ||||||||||
| North America (outside of United States) | 21,270 | 24,466 | ||||||||||||
| Pacific Rim | 22,309 | 24,652 | ||||||||||||
| Europe | 3,373 | 7,090 | ||||||||||||
| Other | 259 | 53 | ||||||||||||
| Total | $ | 722,405 | $ | 475,967 | ||||||||||
Contract Balances
Most of the Company’s contracts are for a period of less than one year; however, extended warranty contracts extend beyond one year. The timing of revenue recognition may differ from the time of invoicing to customers and these timing differences result in contract assets, or contract liabilities on the Company’s Consolidated Balance Sheets. Contract assets include amounts related to the contractual right to consideration for completed performance when the right to consideration is conditional. The Company records contract liabilities when cash payments are received or due in advance of performance. The fair value of noncash consideration of parts provided by customers is recorded in contract liabilities. Contract assets and contract liabilities are recognized at the contract level.
| (in thousands) | As of December 31, | |||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
Short-term contract assets (included in Contract assets) | $ | 15,965 | $ | 21,462 | $ | 15,554 | ||||||||||||||
Short-term contract liabilities (included in Other accrued liabilities) | (3,486) | (10,184) | (2,741) | |||||||||||||||||
Long-term contract liabilities (included in Noncurrent contract liabilities) | (1,699) | (1,877) | (2,401) | |||||||||||||||||
| Net contract assets | $ | 10,780 | $ | 9,401 | $ | 10,412 | ||||||||||||||
During the years ended December 31, 2025 and 2024, the Company recognized $9.2 million and $1.7 million of revenue upon satisfaction of performance obligations related to amounts that were included in the net contract liabilities balance as of December 31, 2024 and 2023, respectively.
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Remaining Performance Obligations
The Company has elected the practical expedient to not disclose remaining performance obligations that have expected original durations of one year or less. For performance obligations that extend beyond one year, the Company had $2.1 million of remaining performance obligations as of December 31, 2025 primarily related to extended warranties. The Company expects to recognize revenue related to these remaining performance obligations of approximately $0.4 million in 2026, $1.5 million in 2027, $0.2 million in 2028, and none in 2029 and beyond.
Note 3. Weichai Transactions
Weichai Shareholder’s Loan Agreements
The Company entered into a $105.0 million Shareholder’s Loan Agreement (the “SLA”) with Weichai in August 2024. The SLA was fully repaid during the second quarter of 2025. See additional discussion of these debt agreements in Note 6. Debt.
Weichai Collaboration Arrangement and Related Party Transactions
The Company and Weichai executed a strategic collaboration agreement (the “Collaboration Agreement”) on March 20, 2017, in order to achieve their respective strategic objectives and enhance the strategic cooperation alliance to share experiences, expertise and resources. On March 22, 2023, the Collaboration Agreement was extended for an additional term of three years, expiring in March 2026. The Company has received a renewal notice from Weichai and is in the process of negotiating the renewal of the Collaboration Agreement; however, no formal extension has been executed as of the date of this filing.
The Company evaluates whether an arrangement is a collaborative arrangement at its inception based on the facts and circumstances specific to the arrangement. The Company also reevaluates whether an arrangement qualifies or continues to qualify as a collaborative arrangement whenever there is a change in either the roles of the participants or the participants’ exposure to significant risks and rewards dependent on the ultimate commercial success of the endeavor. For those collaborative arrangements where it is determined that the Company is the principal participant, costs incurred and revenue generated from third parties are recorded on a gross basis in the financial statements. Purchases of inventory from Weichai were $39.8 million and $21.5 million for the years ended December 31, 2025 and 2024, respectively.
In January 2022, PSI and Baudouin, a subsidiary of Weichai, entered into an international distribution and sales agreement which enables Baudouin to bring PSI’s power systems line of products into the European, Middle Eastern, and African markets. In addition to sales, Baudouin will manage service, support, warranty claims, and technical requests. Refer to the Consolidated Balance Sheets and Statements of Income for detailed related party information.
During the year ended December 31, 2025, the Company and KION North America Corporation ("KNA"), a subsidiary of Weichai, entered into an agreement to settle development costs incurred by the Company related to a 2.4L dual-fuel engine intended for use by KNA in the production of materials handling equipment. See Note 16 for further details.
See Note 16. Related Party Transactions for information regarding the purchase agreement with Shandong Weichai Import & Export Corporation (“SWIEC”), an affiliate of Weichai, KION North America Corporation ("KNA"), and manufacture of record (“MOR”) agreement with Weichai.
Note 4. Property, Plant and Equipment
Property, plant and equipment by type were as follows:
| (in thousands) | As of December 31, | |||||||||||||
| Property, Plant and Equipment | 2025 | 2024 | ||||||||||||
| Leasehold improvements | $ | 11,268 | $ | 8,352 | ||||||||||
| Machinery and equipment | 53,306 | 48,643 | ||||||||||||
| Construction in progress | 3,151 | 2,454 | ||||||||||||
| Total property, plant and equipment, at cost | 67,725 | 59,449 | ||||||||||||
| Accumulated depreciation | (44,711) | (44,043) | ||||||||||||
| Property, plant and equipment, net | $ | 23,014 | $ | 15,406 | ||||||||||
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Note 5. Goodwill and Other Intangibles
Goodwill
The carrying amount of goodwill at both December 31, 2025 and 2024 was $29.8 million. Accumulated impairment losses at both December 31, 2025 and 2024 were $11.6 million.
Other Intangible Assets
Components of intangible assets are as follows:
| (in thousands) | As of December 31, 2025 | |||||||||||||||||||
| Gross Carrying Value | Accumulated Amortization | Net Book Value | ||||||||||||||||||
| Customer relationships | $ | 34,940 | $ | (33,751) | $ | 1,189 | ||||||||||||||
| Developed technology | 700 | (700) | — | |||||||||||||||||
| Trade names and trademarks | 1,700 | (1,653) | 47 | |||||||||||||||||
| Total | $ | 37,340 | $ | (36,104) | $ | 1,236 | ||||||||||||||
| (in thousands) | As of December 31, 2024 | |||||||||||||||||||
| Gross Carrying Value | Accumulated Amortization | Net Book Value | ||||||||||||||||||
| Customer relationships | $ | 34,940 | $ | (32,589) | $ | 2,351 | ||||||||||||||
| Developed technology | 700 | (700) | — | |||||||||||||||||
| Trade names and trademarks | 1,700 | (1,597) | 103 | |||||||||||||||||
| Total | $ | 37,340 | $ | (34,886) | $ | 2,454 | ||||||||||||||
Estimated future amortization expense for intangible assets as of December 31, 2025 is as follows:
| (in thousands) | ||||||||
| Year Ending December 31, | Estimated Amortization | |||||||
| 2026 | $ | 997 | ||||||
| 2027 | 230 | |||||||
| 2028 | 3 | |||||||
| 2029 | 4 | |||||||
| 2030 and beyond | 2 | |||||||
| Total | $ | 1,236 | ||||||
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Note 6. Debt
The Company’s outstanding debt consisted of the following:
| (in thousands) | As of December 31, 2025 | As of December 31, 2024 | |||||||||||||||||||||
| Amount | Rate (2) | Amount | Rate (2) | Maturity Date | |||||||||||||||||||
| Short-term financing: | |||||||||||||||||||||||
Revolving Credit Agreement 1 | $ | — | —% | $ | 95,000 | 6.52% | |||||||||||||||||
| Shareholder’s Loan Agreement | — | —% | 25,000 | 8.49% | August 31, 2025 | ||||||||||||||||||
| Total short-term debt | $ | — | $ | 120,000 | |||||||||||||||||||
| Long-term debt: | |||||||||||||||||||||||
Revolving Credit Agreement 1 | $ | 95,000 | 6.35% | $ | — | —% | July, 30 2027 | ||||||||||||||||
| Finance leases and other debt | 1,617 | ** | 184 | ** | Various | ||||||||||||||||||
| Total long-term debt and finance leases | 96,617 | 184 | |||||||||||||||||||||
| Less: Current maturities of long-term debt and finance leases | 383 | 130 | |||||||||||||||||||||
| Long-term debt | $ | 96,234 | $ | 54 | |||||||||||||||||||
| 1 | Unamortized financing costs and deferred fees on the amended Revolving Credit Agreement are not presented in the above table as they are classified in Prepaid expenses and other current assets on the Consolidated Balance Sheet. Unamortized debt issuance costs, were $1.0 million and $0.4 million at December 31, 2025 and 2024, respectively. | ||||
| 2 | Includes the weighted average interest rate. | ||||
| ** | Finance lease obligations are a non-cash financing activity. See Note 8. Leases. | ||||
The Company paid $7.8 million and $12.6 million in cash for interest in 2025 and 2024, respectively.
Revolving Credit Agreement and Shareholder’s Loan Agreement
On August 30, 2024, the Company closed on the Revolving Credit Agreement, with Standard Chartered Bank (“Standard Chartered”) and two other lenders. The Revolving Credit Agreement allowed the Company to borrow up to $120.0 million and had a maturity date of August 30, 2025. The Revolving Credit Agreement was subject to customary events of default and covenants, including minimum consolidated EBITDA and Consolidated Interest Coverage Ratio covenants for the third and fourth quarters of 2024 and the first and second quarters of 2025. Borrowings under the Revolving Credit Agreement incurred interest at the applicable Secured Overnight Financing Rate (“SOFR”) plus 2.00% per annum. The obligations under the Revolving Credit Agreement were unconditionally guaranteed, on a joint and several basis, by certain wholly-owned, existing and subsequently acquired or formed direct and indirect subsidiaries of the Company, subject to customary exceptions. The obligations under the Revolving Credit Agreement were secured by substantially all assets of the Company and the Company’s wholly-owned subsidiaries. In addition, the Company paid fees of $0.6 million related to the Revolving Credit Agreement which were deferred and amortized over the term of the Revolving Credit Agreement. As part of the closing of the Revolving Credit Agreement, the Company made an initial draw in the amount of $100.0 million. The Company utilized the amount drawn under the Revolving Credit Agreement (i) to repay the outstanding balance of approximately $40.0 million under the Company’s Fourth Amended and Restated Uncommitted Revolving Credit Agreement, dated March 22, 2024, by and among the Company and Standard Chartered; and (ii) to prepay approximately $60.0 million under previous shareholder loan agreements between PSI and Weichai.
In connection with the Revolving Credit Agreement, on August 30, 2024, the Company also entered into a new SLA with Weichai, which allowed the Company to borrow up to $105.0 million and expired August 31, 2025. Borrowings under the SLA incurred interest at the applicable SOFR, plus 4.05% per annum. If the interest rate for any loan was lower than Weichai’s borrowing cost, the interest rate for such loan would be equal to Weichai’s borrowing cost plus 1.0%. The borrowing requests made under the SLA were subject to Weichai’s discretionary approval. The payment of the borrowings under the SLA was subordinated in all respects to the Revolving Credit Agreement with the exception that the Company was allowed to make a single payment of $10.0 million to Weichai. The $60.0 million portion of the initial advance under the Revolving Credit Agreement was applied to pay all principal, interest, and other amounts outstanding under the Shareholder’s Loan Agreements that the Company was previously party to with Weichai except for $25.0 million. In January 2025, the Company amended the Revolving Credit Agreement. After the amendment date, the Company was able to repay the outstanding balance under the
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SLA in principal and interest provided there are no new borrowings under the SLA. In June 2025, the Company made the final payment of outstanding balances and fully repaid the SLA.
On July 30, 2025, the Company closed on the Second Amendment (the “Amendment”) to the Revolving Credit Agreement with Standard Chartered and three other lenders. The Amendment continues to enable the Company to borrow under a revolving line of credit secured by substantially all the Company’s tangible and intangible assets. The Amendment extended the maturity to July 30, 2027, and increased the borrowing capacity of the revolving line of credit to a maximum of $135.0 million. The Amendment is subject to customary events of default and quarterly covenants, including minimum consolidated EBITDA, consolidated interest coverage ratio, and consolidated leverage ratio covenants for each fiscal quarter ending hereafter. Borrowings under the Amendment will incur interest at the applicable Secured Overnight Financing Rate (“SOFR”) plus 2.10%. In the event the Company’s majority shareholder, Weichai, holds less than fifty percent (50%) of the common equity of the Company, the interest rate under the Amendment will increase to the applicable SOFR plus 2.60% per annum. The obligations under the Amendment remain unconditionally guaranteed, on a joint and several basis, by certain wholly-owned, existing and subsequently acquired or formed direct and indirect subsidiaries of the Company, subject to customary exceptions. In addition, the Company paid fees of $1.2 million related to the Amendment which are deferred and amortized over the term of the Amendment. As of December 31, 2025, the Company had $95.0 million outstanding under the amended Revolving Credit Agreement.
As of December 31, 2025, the Company’s total outstanding debt obligations under the Revolving Credit Agreement and for finance leases and other debt were $96.6 million in the aggregate, and its cash and cash equivalents were $41.3 million. The Company's total accrued interest for the Revolving Credit Agreement was $0.3 million and $1.2 million as of December 31, 2025 and 2024, respectively. Accrued interest is included within Other Accrued Liabilities on the Consolidated Balance Sheets.
The below schedule of remaining maturities of long-term debt excludes finance leases (refer to Item 8., Note 8. Leases).
| (in thousands) | ||||||||
| Year Ending December 31, | Maturities of Long-Term Debt | |||||||
| 2026 | 28 | |||||||
| 2027 | 95,010 | |||||||
| Total | $ | 95,038 | ||||||
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Note 7. Other Non-Current Liabilities
On June 14, 2024, the Company executed a non-interest bearing note payable of $4.5 million upon settlement of a legal matter. The note payable is due May 2028 and is discounted based on an imputed interest rate of 6.66%. The note payable includes an option for the Company to extend maturity of the note to September 2029 upon written notice before the thirty-seventh payment and, if such option is exercised, the maximum payment amount of the note increases to $4.8 million.
As of both December 31, 2025 and 2024 the current portion of the note of $0.7 million is included in other accrued liabilities in the Company’s Consolidated Balance Sheets.
| (in thousands) | As of December 31, 2025 | As of December 31, 2024 | ||||||||||||
| Note payable | $ | 2,810 | $ | 3,502 | ||||||||||
| Unamortized discount | (265) | (473) | ||||||||||||
| Total | $ | 2,545 | $ | 3,029 | ||||||||||
The following table presents remaining maturities for the note payable as of December 31, 2025:
| (in thousands) | Maturities | Discount Amortization | ||||||||||||
| Year ending December 31, 2026 | 740 | 160 | ||||||||||||
| Year ending December 31, 2027 | 1,328 | 97 | ||||||||||||
| Year ending December 31, 2028 | 742 | 8 | ||||||||||||
| Total note payable | $ | 2,810 | $ | 265 | ||||||||||
The Company recorded $0.3 million and $0.1 million discount amortization as interest expense as of December 31, 2025 and 2024, respectively.
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Note 8. Leases
Lease Policies
The Company determines if an arrangement contains a lease in whole or in part at the inception of the contract. Right-of-use (“ROU”) assets represent the right to use an underlying asset for the lease term while lease liabilities represent the obligation to make lease payments arising from the lease. All leases with an expected term greater than twelve months result in the recognition of a ROU asset and a liability at the lease commencement date based on the present value of the lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the lease commencement date to determine the present value of the lease payments unless the implicit rate in the lease is readily determinable. The incremental borrowing rate is determined considering factors such as the lease term, the Company’s credit standing and the economic environment of the location of the lease.
The lease term includes all non-cancellable periods and may include options to extend (or to not terminate) the lease when it is reasonably certain that the Company will exercise the option. Leases that have a term of 12 months or less at the commencement date are expensed on a straight-line basis over the lease term and do not result in the recognition of a ROU asset or lease liability.
The Company classifies leases as finance leases when (i) there is a transfer of ownership of the underlying asset by the end of the lease term, (ii) the lease contains an option to purchase the asset that the Company is reasonably certain will be exercised, (iii) the lease term is for the majority of the remaining economic life of the asset, or (iv) the present value of the lease payments and any residual value guarantee equals or substantially exceeds the fair value of the asset.
Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense for finance leases is generally front-loaded as the finance lease ROU asset is depreciated on a straight-line basis, but interest expense on the lease liability is recognized using the interest method which results in more expense during the early years of the lease. Variable lease payments are expensed in the period in which the obligation for those payments is incurred. The Company has elected to combine lease and non-lease components, such as fixed maintenance costs, as a single lease component in calculating ROU assets and lease liabilities for all classes of leased assets.
Leases
The Company has obligations under lease arrangements primarily for facilities, equipment and vehicles. These leases have original lease periods expiring between March 2026 and March 2036. The following table summarizes the lease expense by category in the Consolidated Statements of Income:
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Cost of sales | $ | 11,082 | $ | 7,603 | ||||||||||
| Research, development and engineering expenses | 318 | 326 | ||||||||||||
| Selling, general and administrative expenses | 279 | 266 | ||||||||||||
| Interest expense | 100 | 8 | ||||||||||||
| Total | $ | 11,779 | $ | 8,203 | ||||||||||
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The following table summarizes the components of lease expense and income:
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
Operating lease cost | $ | 8,789 | $ | 6,126 | ||||||||||
| Finance lease cost: | ||||||||||||||
| Amortization of ROU asset | 367 | 66 | ||||||||||||
| Interest expense | 100 | 8 | ||||||||||||
Short-term lease cost | 744 | 861 | ||||||||||||
Variable lease cost | 1,779 | 1,142 | ||||||||||||
| Sublease income | — | — | ||||||||||||
| Total lease cost, net | $ | 11,779 | $ | 8,203 | ||||||||||
The following table presents supplemental cash flow information related to leases:
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
Cash paid for amounts included in the measurement of lease liabilities | ||||||||||||||
| Operating cash flows paid for operating leases | $ | 7,887 | $ | 6,063 | ||||||||||
| Operating cash flows paid for interest portion of finance leases | 100 | 8 | ||||||||||||
| Financing cash flows paid for principal portion of finance leases | 339 | 76 | ||||||||||||
Right-of-use assets obtained in exchange for lease obligations | ||||||||||||||
Operating leases | 35,709 | 1,139 | ||||||||||||
| Finance leases | 1,840 | — | ||||||||||||
As of December 31, 2025 and 2024, the weighted-average remaining lease term was 8.0 years and 5.3 years for operating leases and 4.2 years and 1.2 years for finance leases, respectively. As of December 31, 2025 and 2024, the weighted-average discount rate was 7.1% and 7.5% for operating leases, respectively, and 6.9% and 6.5% for finance leases, respectively.
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The following table presents supplemental balance sheet information related to leases:
| (in thousands) | As of December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
Operating lease ROU assets, net | $ | 52,911 | $ | 23,275 | ||||||||||
Operating lease liabilities, current | 6,346 | 4,503 | ||||||||||||
| Operating lease liabilities, non-current | 49,397 | 20,663 | ||||||||||||
Total operating lease liabilities | $ | 55,743 | $ | 25,166 | ||||||||||
Finance lease ROU assets, net 1 | $ | 1,533 | $ | 78 | ||||||||||
Finance lease liabilities, current | 355 | 78 | ||||||||||||
| Finance lease liabilities, non-current | 1,224 | 16 | ||||||||||||
Total finance lease liabilities | $ | 1,579 | $ | 94 | ||||||||||
1. Included in , net for finance leases on the Consolidated Balance Sheets.
The following table presents maturity analysis of lease liabilities as of December 31, 2025:
| (in thousands) | ||||||||||||||
| Year Ending December 31, | Operating Leases | Finance Leases | ||||||||||||
| 2026 | $ | 10,104 | $ | 451 | ||||||||||
| 2027 | 10,331 | 434 | ||||||||||||
| 2028 | 9,489 | 434 | ||||||||||||
| 2029 | 8,652 | 415 | ||||||||||||
| 2030 | 7,262 | 75 | ||||||||||||
| Thereafter | 28,104 | — | ||||||||||||
Total undiscounted lease payments | 73,942 | 1,809 | ||||||||||||
Less: imputed interest | 18,199 | 230 | ||||||||||||
Total lease liabilities | $ | 55,743 | $ | 1,579 | ||||||||||
Note 9. Fair Value of Financial Instruments
For assets and liabilities measured at fair value on a recurring and nonrecurring basis, a three-level hierarchy of measurements based upon observable and unobservable inputs is used to arrive at fair value. Observable inputs are developed based on market data obtained from independent sources, while unobservable inputs reflect the Company’s assumptions about valuation based on the best information available in the circumstances. Depending on the inputs, the Company classifies each fair-value measurement as follows:
•Level 1 – based on quoted prices in active markets for identical assets or liabilities;
•Level 2 – based on other significant observable inputs for the assets or liabilities through corroborations with market data at the measurement date; and
•Level 3 – based on significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.
Financial Instruments Measured at Carrying Value
Current Assets
Cash and cash equivalents (Level 1) are measured at carrying value, which approximates fair value because of the short-term maturities of these instruments.
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Debt
The Company measured its material debt obligations and notes payable at original carrying value. The fair value of the Revolving Credit Agreement and other short-term financing approximated carrying value, as it consisted primarily of variable rate loans. The Company measured its non-interest bearing note payable using a rate which the Company could obtain financing of similar nature from other sources at the date of the transaction. The unamortized discount is reported in the Consolidated Balance Sheets as a deduction from the face amount of the note payable. The Company measured its material debt obligations and note payable using Level 2 inputs as follows:
| (in thousands) | As of December 31, 2025 | |||||||||||||||||||||||||
| Carrying Value | Fair Value | |||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
| Revolving Credit Agreement | $ | 95,000 | $ | — | $ | 95,000 | $ | — | ||||||||||||||||||
| Note payable | 2,810 | — | 2,810 | — | ||||||||||||||||||||||
| (in thousands) | As of December 31, 2024 | |||||||||||||||||||||||||
| Carrying Value | Fair Value | |||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
| Revolving Credit Agreement | $ | 95,000 | $ | — | $ | 95,000 | $ | — | ||||||||||||||||||
| Note payable | 3,502 | — | 3,502 | — | ||||||||||||||||||||||
| Other financing | 25,000 | — | 25,000 | — | ||||||||||||||||||||||
Other Financial Assets and Liabilities
In addition to the methods and assumptions used for the financial instruments discussed above, accounts receivable, net income tax receivable, accounts payable, and certain accrued expenses are measured at carrying value, which approximates fair value because of the short-term maturities of these instruments.
Note 10. Defined Contribution Plans
The Company sponsors a defined contribution plan for its current employees. For the years ended December 31, 2025 and 2024, the Company incurred plan costs of $3.0 million and $2.0 million, respectively.
Note 11. Commitments and Contingencies
Legal Contingencies
The legal matters discussed below and others could result in losses, including damages, fines, civil penalties and criminal charges, which could be substantial. The Company records accruals for these contingencies to the extent the Company concludes that a loss is both probable and reasonably estimable. Regarding the matters disclosed below, unless otherwise disclosed, the Company has determined that liabilities associated with these legal matters are reasonably possible; however, unless otherwise stated, the possible loss or range of possible loss cannot be reasonably estimated. Given the nature of the litigation and investigations and the complexities involved, the Company is unable to reasonably estimate a possible loss for all such matters until the Company knows, among other factors the following:
•what claims, if any, will survive dispositive motion practice;
•the extent of the claims, particularly when damages are not specified or are indeterminate;
•how the discovery process will affect the litigation;
•the settlement posture of the other parties to the litigation; and
•any other factors that may have a material effect on the litigation or investigation.
However, the Company could incur judgments, enter into settlements or revise its expectations regarding the outcome of certain matters, and such developments could have a material adverse effect on the Company’s results of operations in the period in which the amounts are accrued and/or liquidity in the period in which the amounts are paid.
Jerome Treadwell v. the Company
In October 2018, a punitive class-action complaint was filed against the Company and NOVAtime Technology, Inc. (“NOVAtime” or “Plaintiff”) in the Circuit Court of Cook County, Illinois. In December 2018, NOVAtime removed the case to the U.S. District Court for the Northern District of Illinois, Eastern Division (the “Court”) under the Class Action Fairness Act. Plaintiff has since voluntarily dismissed NOVAtime from the lawsuit without prejudice and filed an amended complaint in
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April 2019. The operative, amended complaint asserts violations of the Illinois Biometric Information Privacy Act (“BIPA”) in connection with employees’ use of the time clock to clock in and clock out using a finger scan and seeks statutory damages, attorneys’ fees, and injunctive and equitable relief. An aggrieved party under BIPA may recover (i) $1,000 per violation if the Company is found to have negligently violated BIPA or (ii) $5,000 per violation if the Company is found to have intentionally or recklessly violated BIPA plus reasonable attorneys’ fees. In May 2019, the Company filed its motion to dismiss the plaintiff’s amended complaint. In December 2019, the court denied the Company’s motion to dismiss. In January 2020, the Company moved for reconsideration of the court’s order denying the motion to dismiss, or in the alternative, to stay the case pending the Illinois Appellate Court’s ruling in McDonald v. Symphony Healthcare on a legal question that would be potentially dispositive in this matter. In February 2020, the court denied the Company’s motion for reconsideration, but required the parties to submit additional briefing on the Company’s motion to stay. In April 2020, the court granted the Company’s motion to stay and stayed the case pending the Illinois Appellate Court’s ruling in McDonald v. Symphony Healthcare. In October 2020, after the McDonald ruling, the court granted the parties’ joint request to continue the stay of the case for 60 days. The court also ordered the parties to schedule a settlement conference with the Magistrate Judge in May 2021 which went forward without a settlement being reached. On May 22, 2023, the Company filed the answer to the amended complaint. Plaintiff and PSI have since reached a preliminary settlement of the case, and Plaintiff filed an Unopposed Motion for Preliminary Approval of Class Action Settlement on February 23, 2024. On February 5, 2025 Plaintiff filed an Unopposed Motion for Final Approval of the Class Settlement, which the Court granted on February 7, 2025. As of December 31, 2024, the Company had recorded an estimated liability of $2.4 million, recorded within Other accrued liabilities on the Consolidated Balance Sheets related to the potential settlement of this matter. During the first quarter of 2025, the final settlement amount of $2.4 million was paid to the Plaintiff, of which $0.7 million was paid by the Company and $1.7 million was paid by the Company’s insurance carrier.
Mast Powertrain v. the Company
In February 2020, the Company received a demand for arbitration from Mast Powertrain, LLC (“Mast”) pursuant to a development agreement entered into in November 2011 (the “Development Agreement”). Mast claimed that it was owed more than $9.0 million in past royalties and other damages for products sold by the Company pursuant to the Development Agreement. The Company disputed Mast’s damages, denied that any royalties are owed to Mast, denied any liability, and counterclaimed for overpayment on invoices paid to Mast. Mast subsequently clarified its claim for past royalties owed to be approximately $4.5 million. In July 2021, the Company reached a settlement with Mast to resolve past claims for royalties owed for $1.5 million which the Company had previously recorded within Selling, general and administrative expenses in the Consolidated Statement of Income for the year-ended December 31, 2020. The Company fully paid the settlement and had no recognized liability as of both December 31, 2025 and 2024. In September 2023, Mast filed a lawsuit against the Company in the Eastern District of Texas Federal Court, alleging, among other things, damages of approximately $6.0 million for fraudulent inducement leading to the 2021 arbitration settlement agreement and breach of said settlement agreement. Upon court order, the Company participated in separate mediations in May 2024 and December 2024, and no settlement was reached. The Company has filed a motion to stay the lawsuit and compel it to arbitration, and the Court granted that motion on January 31, 2025. As of both December 31, 2025 and 2024, the Company had recorded an estimated liability of $0.9 million, recorded within Other accrued liabilities on the Consolidated Balance Sheets related to the potential settlement of this matter.
Gary Winemaster Litigation v. The Company
In August 2021, the Company’s former Chairman of the Board and former Chief Executive Officer and President, Gary Winemaster (“Winemaster”) filed suit in the Court of Chancery of the State of Delaware against the Company and Travelers Casualty and Surety Company of America (“Travelers”) alleging the Company’s breach of its advancement obligations under Winemaster’s indemnification agreement and Travelers’ breach of the side A policy between Traveler’s and the Company of which Winemaster is a beneficiary. In his complaint, Winemaster was seeking reimbursement under his indemnification agreement in excess of $7.2 million of attorney’s fees plus interest incurred by Winemaster in his defense of the Department of Justice (“DOJ”) case, U.S. v. Winemaster et al. Since the filing of the complaint, the Company estimates that Travelers has paid approximately $8.8 million to Winemaster’s attorneys, Latham and Watkins, under the Company’s side A policy to settle existing outstanding attorney’s fees. Travelers is seeking reimbursement from the Company for those advances pursuant to the terms of the side A policy. In October 2021, the Company and Winemaster entered into a Stipulation and Advancement Order to handle all future attorney’s fees relating to his DOJ and SEC cases, to the extent not reimbursed by Travelers under the side A policy. In June 2024, the Company reached a settlement with Travelers for $4.5 million, resulting in a $4.3 million gain that was recorded within Selling, General and Administrative expenses on the Consolidated Statements of Income. As of both December 31, 2025 and 2024, the Company recorded the aforementioned settlement liability within Other noncurrent liabilities with the current portion within Other accrued liabilities on the Consolidated Balance Sheets. Refer to Note 7. Other Non-Current Liabilities for additional information related to this settlement.
Indemnification Agreements
The Company holds a directors’ and officers’ liability insurance policy, which is renewed annually and currently expires in July 2026. The insurance policy includes standard exclusions including for any previously pending litigation.
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Other Commitments
At December 31, 2025, the Company had four outstanding letters of credit totaling $1.8 million. The letters of credit primarily serve as collateral for the Company for certain facility leases and insurance policies. As discussed in Note 1. Summary of Significant Accounting Policies and Other Information, the Company had restricted cash of $3.7 million at December 31, 2025 related to these letters of credit and cash held in escrow due to a customer agreement.
Note 12. Income Taxes
The Company’s operations are located in the United States, therefore, the tax footnote includes only federal and state domestic tax obligations. For the years ended December 2025 and 2024, the Company recognized pretax income of $103.4 million and $70.2 million, respectively.
Income tax (benefit) expense was as follows:
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Current tax expense | ||||||||||||||
| Federal | $ | 2,510 | $ | 443 | ||||||||||
| State | 1,757 | 389 | ||||||||||||
| Total current tax expense | $ | 4,267 | $ | 832 | ||||||||||
| Deferred tax (benefit) expense | ||||||||||||||
| Federal | $ | (4,949) | $ | 229 | ||||||||||
| State | (9,941) | (139) | ||||||||||||
| Total deferred tax (benefit) expense | (14,890) | 90 | ||||||||||||
| Total tax (benefit) expense | $ | (10,623) | $ | 922 | ||||||||||
A reconciliation between the Company’s effective tax rate on income before income taxes and the statutory tax rate in accordance with ASU 2023-09 is as follows:
| (in thousands) | For the Year Ended December 31, | |||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||||||||||||
| $ | 21,706 | 21.0 | % | $ | 14,742 | 21.0 | % | |||||||||||||||||||
State income tax, net of federal benefit 1 | (8,520) | (8.3) | % | 469 | 0.7 | % | ||||||||||||||||||||
| Tax credits | (839) | (0.8) | % | (670) | (1.0) | % | ||||||||||||||||||||
| Changes in valuation allowance | (24,091) | (23.3) | % | (13,390) | (19.0) | % | ||||||||||||||||||||
| Nontaxable and nondeductible items | 520 | 0.5 | % | 27 | — | % | ||||||||||||||||||||
| Changes in unrecognized tax benefits | (443) | (0.4) | % | (110) | (0.2) | % | ||||||||||||||||||||
Other 2 | 1,044 | 1.0 | % | (146) | (0.2) | % | ||||||||||||||||||||
| Effective Tax Rate | $ | (10,623) | (10.3) | % | $ | 922 | 1.3 | % | ||||||||||||||||||
1 The state and local jurisdictions contributing to the majority (greater than 50%) of the tax effect in this category include Wisconsin, Pennsylvania, Illinois, and Texas.
2 Other represents the aggregation of individually insignificant reconciling items that do not meet the quantitative threshold for separate presentation in accordance with ASC 740, as amended by ASU 2023-09.
Qualitative Explanation of Effective Tax Rate Drivers
The Company’s effective tax rate of (10.3)% for 2025 differed significantly from the statutory U.S. federal rate of 21.0% primarily due to a large decrease in the valuation allowance following the Company’s removal of substantial doubt about its
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ability to continue as a going concern and improved financial performance. The reduction in the valuation allowance resulted in a significant tax benefit in 2025.
Significant components of deferred income tax assets and liabilities consisted of the following:
| (in thousands) | As of December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
Deferred tax assets: | ||||||||||||||
| Operating lease liability | $ | 14,203 | $ | 6,420 | ||||||||||
| Net operating loss carryforwards | 6,035 | 7,454 | ||||||||||||
| Research and development credits | 2,584 | 4,818 | ||||||||||||
| Other state credits | 2,284 | 3,142 | ||||||||||||
| Inventory | 2,213 | 3,925 | ||||||||||||
| Accrued warranty | 2,029 | 3,392 | ||||||||||||
| Other accrued expenses | 1,544 | 5,042 | ||||||||||||
| Capitalized research and development costs | — | 9,884 | ||||||||||||
| Other | 2,266 | 2,973 | ||||||||||||
| Total deferred tax assets | 33,158 | 47,050 | ||||||||||||
| Valuation allowance | (183) | (38,498) | ||||||||||||
| Total deferred tax assets, net of valuation allowance | $ | 32,975 | $ | 8,552 | ||||||||||
Deferred tax liabilities: | ||||||||||||||
| ROU operating lease asset | $ | (13,452) | $ | (5,827) | ||||||||||
| Intangible amortization | (2,844) | (1,846) | ||||||||||||
| Depreciation on property, plant and equipment | (3,357) | (2,008) | ||||||||||||
| Other | — | (439) | ||||||||||||
| Total deferred tax liabilities | $ | (19,653) | $ | (10,120) | ||||||||||
Net deferred tax asset (liability) | $ | 13,322 | $ | (1,568) | ||||||||||
A valuation allowance is required to be established or maintained when, based on currently available information, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The guidance on accounting for income taxes provides important factors in determining whether a deferred tax asset will be realized, including whether there has been sufficient taxable income in recent years and whether sufficient income can reasonably be expected in future years in order to utilize the deferred tax asset.
Through March 31, 2025, the Company maintained a full valuation allowance against its deferred tax assets due to significant negative evidence, about realizability of the assets, including cumulative losses and substantial doubt about its ability to continue as a going concern. Due to the successful refinancing of its debt, the Company concluded that substantial doubt about its ability to continue as a going concern no longer exists. After evaluating all available evidence, including the alleviation of substantial doubt about the Company’s ability to continue as a going concern, recent and forecasted earnings, historical performance, and the Company’s improved financial condition, management determined that it is more likely than not that its deferred tax assets will be realized. As a result, the Company released most of its valuation allowance during the second quarter of 2025 and now maintains a valuation allowance related to a capital loss carryforward resulting in total valuation allowance of $0.2 million and $38.5 million as of December 31, 2025 and 2024, respectively. For 2025, the release of the valuation allowance of $38.3 million consisted of $24.1 million of federal and $14.2 million of state deferred tax assets.
As of December 31, 2025, the Company had $6.1 million in research and development and state tax credit carryforwards which begin to expire in 2026. As of December 31, 2025, the Company had $7.6 million of state net operating loss carryforwards that are available to offset taxable income in the future. The state net operating loss carryforwards begin to expire in 2031.
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Cash payments for income taxes, disaggregated by jurisdiction, were as follows:
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Federal | $ | 7,310 | $ | 652 | ||||||||||
| State | 1,708 | 962 | ||||||||||||
| Total | $ | 9,018 | $ | 1,614 | ||||||||||
Income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) in the following jurisdictions:
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| State | ||||||||||||||
| Wisconsin | $ | 744 | * | |||||||||||
| Pennsylvania | 460 | * | ||||||||||||
| Illinois | * | 700 | ||||||||||||
| Minnesota | * | 126 | ||||||||||||
*Jurisdiction below the threshold for the period presented | ||
The change in unrecognized tax benefits excluding interest and penalties were as follows:
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
Balance at beginning of year | $ | 1,696 | $ | 1,819 | ||||||||||
Additions based on tax positions related to the current year | 153 | 129 | ||||||||||||
| Additions for tax positions of prior years | 35 | 12 | ||||||||||||
| Reduction for tax positions of prior years | (623) | $ | (264) | |||||||||||
Balance at end of year | $ | 1,261 | $ | 1,696 | ||||||||||
The amount of unrecognized tax benefits, that if recognized, would affect the annual effective tax rate was approximately $1.3 million and $0 million as of December 31, 2025 and 2024, respectively. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2025 and 2024, the amount accrued for interest and penalties was not material.
The major jurisdictions subject to examination by the relevant tax authorities and open tax years, stated as the Company’s fiscal years, are as follows:
| Jurisdiction | Open Tax Years | ||||||||||
| U.S. Federal | 2017 | to | 2025 | ||||||||
| U.S. States | 2017 | to | 2025 | ||||||||
Recent Tax Legislation
The One, Big, Beautiful Bill Act (the “Act”) was signed into law on July 4, 2025. The Act contains significant tax law changes with various effective dates affecting business taxpayers. Among the tax law changes that will impact the Company relate to the timing of certain tax deductions including depreciation expense, R&D expenditures and interest expense. As a result, the Company recognized incremental tax timing benefits primarily related to the restoration of 100% bonus depreciation and the ability to immediately expense R&D costs under Section 174. These changes did not have a material impact on the Company’s overall income tax expense for the year.
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Note 13. Stockholders’ Equity
Common and Treasury Stock
The changes in shares of Common and Treasury Stock are as follows:
| (in thousands) | Common Shares Issued | Treasury Stock Shares | Common Shares Outstanding | |||||||||||||||||
| Balance as of December 31, 2023 | 23,117 | 149 | 22,968 | |||||||||||||||||
| Net shares issued for stock awards | — | (32) | 32 | |||||||||||||||||
| Balance as of December 31, 2024 | 23,117 | 117 | 23,000 | |||||||||||||||||
| Net shares issued for stock awards | — | (41) | 41 | |||||||||||||||||
| Balance as of December 31, 2025 | 23,117 | 76 | 23,041 | |||||||||||||||||
Preferred Stock
The Company is authorized to issue 5,000,000 shares of Preferred stock, par value $0.001 per share. The Preferred stock may be designated into one or more series as determined by the Board. As of December 31, 2025, the Board had authorized two series of Preferred stock. At December 31, 2025 and 2024, there were no shares of Preferred stock outstanding.
Note 14. Stock-Based Compensation
The Company has an incentive compensation plan (the “2012 Plan”), which authorizes the granting of a variety of different types of awards including, but not limited to, non-qualified stock options, incentive stock options, Stock Appreciation Rights (“SARs”), Restricted Stock Awards (“RSAs”), deferred stock and performance units to its executive officers, employees, consultants and Directors. The 2012 Plan is administered by the Compensation Committee of the Board and expires on May 26, 2028.
Under the 2012 Plan, 830,925 shares were initially made available for awards, with 700,000 additional shares added to the 2012 Plan in 2013. Shares that were not delivered pursuant to forfeited awards are added back to the pool of shares available for future awards.
As of December 31, 2025, the Company had 363,066 shares available for issuance of future awards. To date, the Company’s granted awards have generally been either RSAs or SARs.
SAR awards are typically share settled except for certain executives which are settled in cash. Share settlement entitles the recipients to receive, upon exercise, a number of shares of Common Stock equal to (i) the number of shares for which the SAR is being exercised multiplied by the value of one share of Common Stock on the date of exercise (determined as provided in the SAR award agreement), less (ii) the number of shares for which the SAR is being exercised multiplied by the applicable exercise price, divided by (iii) the value of one share of Common Stock on the date of exercise (determined as provided in the SAR award agreement). The exercised SAR is to be settled only in whole shares of Common Stock, and the value of any fractional share of Common Stock is forfeited. Cash settled awards are recognized in the Consolidated Balance Sheets as a liability and adjusted each reporting period for changes in share value until the settlement of the award.
RSA grants represent Common Stock issued subject to forfeiture or other restrictions that will lapse upon satisfaction of specified conditions.
Both SAR awards and RSA grants are time-based awards that generally vest over a 2 to 3-year vesting schedule (except grants to members of the Board which have a 1-year vesting schedule). SAR awards generally have a term of 10 years. Compensation expense for recipients of these time-based awards is recognized on a straight-line basis over the vesting period from the date of grant. The Company accounts for forfeitures as they occur rather than apply an estimated forfeiture rate. Stock-based compensation expense is primarily recorded in Selling, general and administrative expenses in the Consolidated Statements of Income.
RSAs are valued based on the fair value of the common stock at grant date.
For all SAR award assumptions, the Company used rates on the grant date of zero-coupon government bonds with maturities over periods covering the term of the awards. The Company considered the historical volatility of its stock price over a term similar to the expected life of the awards in determining expected volatility. The expected term is the period that the awards granted are expected to remain outstanding. The Company has never declared or paid a cash dividend on its Common Stock.
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The following table represents stock-based compensation expense and the related income tax benefits:
| (in thousands) | For the Year Ended December 31, | |||||||||||||
| 2025 | 2024 | |||||||||||||
| Stock-based compensation expense | $ | 427 | $ | 89 | ||||||||||
| Income tax benefit | $ | — | $ | — | ||||||||||
SAR Awards
The Company granted 700 SAR awards in 2025 and did not grant any in 2024. The assumptions used for determining the fair value of the SARs included the following:
| For the Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Market closing price of the Common Stock | $ | 57.14 | $ | 29.75 | ||||||||||
| Exercise price | $2.99 - $65.76 | $ | 2.99 | |||||||||||
| Range of risk-free interest rates | 3.7 | % | 4.4 | % | ||||||||||
| Weighted-average volatility | 92.1 | % | 91.7 | % | ||||||||||
| Range of volatilities | 92.1% - 92.4% | 88.8% - 91.7% | ||||||||||||
| Expected term | 5.00 years | 5.00 years | ||||||||||||
| Dividend yield | — | % | — | % | ||||||||||
| Weighted-average grant date fair value | $40.23 - $55.13 | $ | 28.00 | |||||||||||
SAR activity for awards classified in equity consisted of the following:
| Number of Shares under SARs | Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in thousands) | ||||||||||||||||||||||
| Outstanding at December 31, 2023 | 125,862 | 6.13 | 6.14 | $ | 3 | |||||||||||||||||||||
| Granted | — | — | — | |||||||||||||||||||||||
| Exercised | (50,567) | 5.00 | — | |||||||||||||||||||||||
| Forfeited | — | — | — | |||||||||||||||||||||||
| Expired | — | — | — | |||||||||||||||||||||||
| Outstanding at December 31, 2024 | 75,295 | 6.88 | 4.24 | 2 | ||||||||||||||||||||||
| Granted | 700 | 65.76 | — | |||||||||||||||||||||||
| Other | 1,500 | — | — | |||||||||||||||||||||||
| Exercised | (46,575) | 7.51 | 3 | |||||||||||||||||||||||
| Forfeited | — | — | — | |||||||||||||||||||||||
| Expired | (750) | 11.25 | — | |||||||||||||||||||||||
| Outstanding at December 31, 2025 | 30,170 | 7.39 | 4.24 | $ | 2 | |||||||||||||||||||||
| Exercisable at December 31, 2024 | 60,295 | $ | 8.10 | 3.38 | 1 | |||||||||||||||||||||
| Exercisable at December 31, 2025 | 21,970 | $ | 7.37 | 3.38 | 1 | |||||||||||||||||||||
The total fair value of SARs that vested during both 2025 and 2024 was less than $0.1 million. The total aggregate intrinsic value of SARs that vested during 2025 and 2024 was less than $0.1 million and $0.1 million, respectively. Unrecognized compensation expense related to SARs as of December 31, 2025 was less than $0.1 million. As of December 31, 2025, the weighted-average period over which the unrecognized compensation cost is expected to be recognized was approximately 2.56 years.
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Restricted Stock Awards
Restricted stock activity consisted of the following:
| Shares | Weighted-Average Grant Date Fair Value | |||||||||||||
| Balance as of December 31, 2023 | 15,400 | $ | 3.91 | |||||||||||
Granted | 15,000 | 23.44 | ||||||||||||
Forfeited | — | — | ||||||||||||
Vested | (15,400) | 3.91 | ||||||||||||
| Balance as of December 31, 2024 | 15,000 | $ | 23.44 | |||||||||||
Granted | 15,000 | 65.76 | ||||||||||||
Forfeited | — | — | ||||||||||||
Vested | (15,000) | 23.44 | ||||||||||||
| Balance as of December 31, 2025 | 15,000 | $ | 65.76 | |||||||||||
The total grant date fair value of restricted stock that vested during 2025 and 2024 was $0.4 million and $0.1 million, respectively. The total aggregate fair value of restricted stock that vested during 2025 and 2024 was $1.0 million and $0.2 million, respectively. Unrecognized compensation expense related to RSAs as of December 31, 2025 was $0.9 million.
Note 15. Earnings Per Share
The Company computes basic earnings per share by dividing net income by the weighted-average common shares outstanding during the year. Diluted earnings per share is calculated to give effect to all potentially dilutive common shares that were outstanding during the year. Weighted-average diluted common shares outstanding primarily reflect the additional shares that would be issued upon the assumed exercise of stock options and the assumed vesting of unvested share awards. The treasury stock method has been used to compute diluted earnings per share for 2025 and 2024. The Company issued SARs and RSAs, all of which have been evaluated for their potentially dilutive effect under the treasury stock method.
The computations of basic and diluted earnings per share are as follows:
| (in thousands, except per share basis) | For the Year Ended December 31, | ||||||||||
| 2025 | 2024 | ||||||||||
Numerator: | |||||||||||
| Net income – basic and diluted | $ | 113,987 | $ | 69,279 | |||||||
Denominator: | |||||||||||
| Shares used in computing net income per share | |||||||||||
Weighted-average common shares outstanding - basic | 23,022 | 22,983 | |||||||||
Effect of dilutive securities | 44 | 35 | |||||||||
Weighted-average common shares outstanding – diluted | 23,066 | 23,018 | |||||||||
| Earnings per common share | |||||||||||
| Earnings per share of common stock – basic | $ | 4.95 | $ | 3.01 | |||||||
| Earnings per share of common stock – diluted | $ | 4.94 | $ | 3.01 | |||||||
The aggregate number of shares excluded from the diluted earnings per share calculations because they would have been anti-dilutive were none and less than 0.1 million shares 2025 and 2024, respectively. For the twelve months ended December 31, 2025 and 2024, SARs and RSAs were not included in the diluted earnings per share calculations as they would have been anti-dilutive because the Company’s average stock price was less than or equal to the exercise price of the SARs or the grant price of the RSAs.
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Note 16. Related Party Transactions
Weichai Transactions
See Note 3. Weichai Transactions for information regarding the SLA with Weichai and Collaboration Agreement.
Other Related Party Transactions
See Note 11. Commitments and Contingencies for information regarding the Company’s indemnification obligations related to certain former directors and officers of the Company.
In January 2025, the Company entered into a five-year purchase agreement with SWIEC, for the exclusive purchase and distribution of certain engine and engine components for the fulfillment of a contract with a customer in North America. The supply agreement includes annual minimum requirements of products ordered during the initial term. If all minimum targets are met within the first three-year periods, the contract may be negotiated to extend beyond the five-year initial term. The annual minimum requirements are as follows:
In February 2025, the Company entered into the MOR agreement with Weichai. The MOR agreement requires the Company to pay Weichai a fee of 1.75% of gross revenues generated by the sale of certain engines manufactured by Weichai. Fees are due on a quarterly basis. The 2025 fee is $0.1 million. The MOR agreement expires in December 2029.
During the year ended December 31, 2025, PSI and KNA, a subsidiary of Weichai, were negotiating the terms of an agreement for PSI to develop and supply a 2.4L dual-fuel engine for use by KNA in the production of materials handling equipment. Prior to entering into a written development agreement, KNA suspended its plans to purchase the engine. PSI had completed significant development milestones at the time of suspension. Effective December 31, 2025, the parties entered into a settlement agreement under which KNA paid approximately $0.5 million to resolve PSI's claims for development costs incurred. Under the settlement agreement, KNA retains the right to resume development through December 31, 2028, and is under no obligation to do so.
Note 17. Segment Reporting
Operating segments are defined as components of a business that can earn revenues and incur expenses for which discrete financial information is available that is reviewed on a regular basis by the chief operating decision maker (“CODM”). The Company operates as one business and geographic operating and reportable segment.
Chief Operating Decision Maker
The Company’s CODM is its Chief Executive Officer (“CEO”). The CEO oversees the strategic planning and direction of the Company, and the CEO has final approval in assessing the Company’s performance and allocating its resources.
Identification of Reportable Segment
The Company’s single reportable segment derives revenues primarily in North America from customers by designing, engineering, manufacturing, marketing and selling a broad range of advanced, emission-certified engines and power systems that are powered by a wide variety of clean, alternative fuels, including natural gas, propane, and biofuels, as well as gasoline and diesel options, within the power systems, industrial and transportation end markets. Revenue is attributed to geographic areas based on the country of sale. The sources of external revenue by end market and geographic area are previously disclosed in Note 2. Revenue.
The Company evaluated the basis for the CODM's decisions about the allocation of Company resources as well as the basis for the CODM's assessments of the evaluation of the Company's (segment) performance. Specifically, the Company evaluated the financial information that is generally provided and / or is available to the CODM. The Company’s CODM reviews consolidated statements of income to make decisions, allocate resources and assess performance.
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Measurement
The CODM assesses performance and decides how to allocate resources primarily using consolidated revenue by end market and consolidated net income (loss). The CODM uses consolidated net income (loss) to monitor budget and forecast information to actual results. The CODM reviews cash, accounts receivable, inventory, accounts payable, and total debt; however other long-lived asset information is not reviewed by the CODM.
The accounting policies of the Company’s single reportable segment are the same as those described in the Note 1. Summary of Significant Accounting Policies and Other Information. The measure of segment assets is consolidated total assets presented in the Company’s Consolidated Balance Sheets. Note 1 Concentrations discloses customers individually accounting for more than 10% of the Company’s consolidated net sales.
Significant Expenses
Significant segment expenses are presented in the Consolidated Statement of Operations.
Note 18. Subsequent Events
On January 9, 2026, the Company completed the acquisition of MTL Manufacturing & Equipment, Inc. (“MTL”), a company that specializes in the welding and fabrication of steel components, ranging from large Switchgear Sub Bases to Electrical Enclosure assemblies utilized in the data center industry, to various size fuel tanks used in power generation, for a total purchase price of $11.1 million. The acquisition is expected to enhance the Company’s competitive position in the data center market through vertical integration of MTL's specialized manufacturing capabilities. The integration is designed to provide improved supply chain control, reduced lead times, and access to MTL's established UL certifications. The acquisition occurred after December 31, 2025, but prior to the issuance of these financial statements. The initial accounting for the acquisition, including the allocation of purchase price to the assets acquired and liabilities assumed, is not yet complete. Accordingly, the financial statements do not reflect any adjustments related to this acquisition.
On February 20, 2026, the U.S. Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) exceeded presidential authority and were therefore invalid. The President immediately replaced the IEEPA tariffs with tariffs under alternative statutory authority, though the scope and duration of future tariffs remain uncertain.
The Company is evaluating the impact of these developments on its supply chain costs and pricing. PSI may be entitled to refunds of IEEPA tariffs paid during 2025, though the process and timing for obtaining such refunds remain uncertain. To the extent the Company passed tariff costs through to customers, PSI may be required to reimburse customers for such amounts if the Company recovers IEEPA tariff refunds. The extent to which tariffs will be reimposed under alternative statutory authorities, and their ultimate scope and duration, cannot be determined at this time. Continued tariff uncertainty may materially affect the Company's costs, competitive position, and results of operations.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures” is defined in Rule 13a-15(e) of the Exchange Act, as “controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the SEC rules and forms.” The Company’s disclosure controls and procedures are designed to ensure that material information relating to the Company and its consolidated subsidiaries is accumulated and communicated to its management, including its Chief Executive Officer and its Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.
The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of its disclosure controls and procedures as of December 31, 2025. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2025, to provide reasonable assurance that information required to be disclosed in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Exchange Act, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
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Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rules 13a-15(f) and 15d(f) under the Exchange Act, internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Because of its inherent limitations, the Company’s internal control over financial reporting may not prevent or detect all misstatements, including the possibility of human error, the circumvention or overriding of controls, or fraud. Effective internal control can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025 based on the criteria established by the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO Framework”).
As a result of management’s review of the Company’s financial and accounting records and the other work completed by the management team and its advisers, management concluded that, as of December 31, 2025, the Company’s internal control over financial reporting was effective.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Attestation Report of the Registered Public Accounting Firm
Our independent registered public accounting firm, BDO, has audited the effectiveness of our internal control over financial reporting as of December 31, 2025 and has issued an attestation report, which is included in Item 8. of this Annual Report on Form 10‑K.
Changes in Internal Control over Financial Reporting
There has been no change in the internal control over financial reporting during the fourth quarter of 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Item 9B. Other Information.
During the three months ended December 31, 2025, no director or Section 16 officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in item 408(a) of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
70
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this item is incorporated by reference herein from the 2026 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2025. If the Proxy Statement is not filed with the SEC by such time, such information will be included in an amendment to this Annual Report by such time.
See also Information about the Company’s Executive Officers in Part I of this Annual Report on Form 10-K.
The Company has adopted a code of business conduct and ethics that is applicable to its directors, officers and employees and is available on its website under the “Governance Documents/Committee Charters” tab within the “Governance” subsection of the “Investors” section of its website at https://investors.psiengines.com/committee-chartersgovernance-documents. The Company intends to include on its website any amendments to, or waivers from, a provision of the code of ethics that applies to its principal executive officer, principal financial officer or controller that relates to any element of the code of ethics definition contained in Item 406(b) of Regulation S-K.
The Company has adopted an insider trading policy governing the purchase, sale, and other dispositions of the Company’s securities by directors, senior management, and employees. A copy of such insider trading policy is filed as an exhibit to this Annual Report on Form 10-K.
Item 11. Executive Compensation.
The information required by this item is incorporated by reference herein from the 2026 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2025. If the Proxy Statement is not filed with the SEC by such time, such information will be included in an amendment to this Annual Report by such time.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this item is incorporated by reference herein from the 2026 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2025. If the Proxy Statement is not filed with the SEC by such time, such information will be included in an amendment to this Annual Report by such time.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this item is incorporated by reference herein from the 2026 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2025. If the Proxy Statement is not filed with the SEC by such time, such information will be included in an amendment to this Annual Report by such time.
Item 14. Principal Accounting Fees and Services.
The information required by this item is incorporated by reference herein from the 2026 Proxy Statement to be filed with the SEC no later than 120 days after December 31, 2025. If the Proxy Statement is not filed with the SEC by such time, such information will be included in an amendment to this Annual Report by such time.
71
PART IV
Item 15. Exhibits, Financial Statement Schedules.
| The following Financial Statements are filed as a part of this report: | Page | ||||
| Report of Independent Registered Public Accounting Firm | |||||
| Consolidated Balance Sheets as of December 31, 2025 and 2024 | |||||
| Consolidated Statements of Income for 2025 and 2024 | |||||
| Consolidated Statements of Stockholders’ Equity (Deficit) for 2025 and 2024 | |||||
| Consolidated Statements of Cash Flows for 2025 and 2024 | |||||
Notes to Consolidated Financial Statements | |||||
All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable and, therefore, have been omitted.
EXHIBIT INDEX
The following documents listed below that have been previously filed with the SEC (1934 Act File No. 001-35944) are incorporated herein by reference:
| Incorporated by Reference Herein | ||||||||||||||||||||
| Exhibit No. | Exhibit Description | Form | Exhibit | Filing Date | File No. | |||||||||||||||
| 2.1 | † | 8-K | 2.1 | 05/05/2011 | 000-52213 | |||||||||||||||
| 2.2 | 8-K | 10.1 | 04/02/2014 | 001-35944 | ||||||||||||||||
| 3.1 | S-1/A | 3.4 | 08/19/2011 | 333-174543 | ||||||||||||||||
| 3.2 | 8-K | 3.1 | 08/18/2015 | 001-35944 | ||||||||||||||||
| 3.3 | 8-K | 3.1 | 03/27/2017 | 001-35944 | ||||||||||||||||
| 3.4 | 8-K | 3.1 | 12/31/2020 | 001-35944 | ||||||||||||||||
| 4.1 | 10-K | 4.11 | 05/04/2020 | 001-35944 | ||||||||||||||||
| 10.1 | †† | 8-K | 10.3 | 06/07/2012 | 000-52213 | |||||||||||||||
| 10.2 | †† | DEF14A | Appendix A | 08/02/2013 | 001-35944 | |||||||||||||||
| 10.3 | †† | 8-K | 10.1 | 06/20/2013 | 001-35944 | |||||||||||||||
| 10.4 | †† | 8-K | 10.1 | 01/09/2014 | 001-35944 | |||||||||||||||
| 10.5 | 8-K | 10.2 | 04/02/2014 | 001-35944 | ||||||||||||||||
| 10.6 | 8-K | 10.2 | 10/01/2014 | 001-35944 | ||||||||||||||||
| 10.7 | 10-K | 10.26 | 05/16/2019 | 001-35944 | ||||||||||||||||
| 10.8 | 8-K | 10.1 | 07/18/2018 | 001-35944 | ||||||||||||||||
72
| Incorporated by Reference Herein | ||||||||||||||||||||
| Exhibit No. | Exhibit Description | Form | Exhibit | Filing Date | File No. | |||||||||||||||
| 10.9 | 8-K | 10.2 | 07/18/2018 | 001-35944 | ||||||||||||||||
| 10.10 | ††† | 8-K | 10.1 | 08/06/2014 | 001-35944 | |||||||||||||||
| 10.11 | 8-K | 10.1 | 05/06/2015 | 001-35944 | ||||||||||||||||
| 10.12 | 8-K | 10.3 | 03/27/2017 | 001-35944 | ||||||||||||||||
| 10.13 | 8-K | 10.4 | 03/27/2017 | 001-35944 | ||||||||||||||||
| 10.14 | ††† | 8-K | 10.5 | 03/27/2017 | 001-35944 | |||||||||||||||
| 10.15 | 8-K | 10.1 | 12/05/2017 | 001-35944 | ||||||||||||||||
| 10.16 | †† | 8-K/A | 10.1 | 06/21/2017 | 001-35944 | |||||||||||||||
| 10.17 | †† | 8-K | 10.1 | 12/04/2017 | 001-35944 | |||||||||||||||
| 10.18 | †† | 10-K | 10.40 | 05/16/2019 | 001-35944 | |||||||||||||||
| 10.19 | 8-K | 10.1 | 10/02/2019 | 001-35944 | ||||||||||||||||
| 10.20 | 8-K | 10.1 | 04/01/2020 | 001-35944 | ||||||||||||||||
| 10.21 | 8-K | 10.1 | 04/06/2020 | 001-35944 | ||||||||||||||||
| 10.22 | †† | 10-Q | 10.1 | 05/04/2019 | 001-35944 | |||||||||||||||
| 10.23 | 8-K | 10.1 | 12/31/2020 | 001-35944 | ||||||||||||||||
| 10.24 | 8-K | 10.2 | 12/31/2020 | 001-35944 | ||||||||||||||||
| 10.25 | †† | 8-K | 10.1 | 02/16/2021 | 001-35944 | |||||||||||||||
| 10.26 | †† | 8-K | 10.2 | 02/16/2021 | 001-35944 | |||||||||||||||
| 10.27 | †† | 8-K | 10.1 | 12/17/2021 | 001-35944 | |||||||||||||||
| 10.28 | 8-K | 10.1 | 12/16/2021 | 001-35944 | ||||||||||||||||
| 10.29 | 8-K | 10.1 | 03/28/2022 | 001-35944 | ||||||||||||||||
| 10.30 | 8-K | 10.2 | 03/28/2022 | 001-35944 | ||||||||||||||||
| 10.31 | 8-K | 10.3 | 03/28/2022 | 001-35944 | ||||||||||||||||
| 10.32 | 8-K | 10.4 | 07/25/2022 | 001-35944 | ||||||||||||||||
73
| Incorporated by Reference Herein | ||||||||||||||||||||
| Exhibit No. | Exhibit Description | Form | Exhibit | Filing Date | File No. | |||||||||||||||
| 10.33 | †† | 8-K | 10.1 | 08/29/2022 | 001-35944 | |||||||||||||||
| 10.34 | †† | 8-K | 10.1 | 09/22/2022 | 001-35944 | |||||||||||||||
| 10.35 | * †† | |||||||||||||||||||
| 10.36 | 8-K | 10.1 | 12/02/2022 | 001-35944 | ||||||||||||||||
| 10.37 | 8-K | 10.1 | 03/30/2023 | 001-35944 | ||||||||||||||||
| 10.38 | 8-K | 10.2 | 03/30/2023 | 001-35944 | ||||||||||||||||
| 10.39 | 8-K | 10.3 | 03/30/2023 | 001-35944 | ||||||||||||||||
| 10.40 | 8-K | 10.1 | 03/27/2023 | 001-35944 | ||||||||||||||||
| 10.41 | †† | 8-K | 10.1 | 04/25/2023 | 001-35944 | |||||||||||||||
| 10.42 | 8-K | 10.1 | 05/17/2023 | 001-35944 | ||||||||||||||||
| 10.43 | 8-K | 10.1 | 06/13/2023 | 001-35944 | ||||||||||||||||
| 10.44 | 8-K | 10.1 | 12/06/2023 | 001-35944 | ||||||||||||||||
| 10.45 | 8-K | 10.1 | 03/28/2024 | 001-35944 | ||||||||||||||||
| 10.46 | 8-K | 10.2 | 03/28/2024 | 001-35944 | ||||||||||||||||
| 10.47 | 8-K | 10.1 | 05/21/2024 | 001-35944 | ||||||||||||||||
| 10.48 | 8-K | 10.1 | 09/06/2024 | 001-35944 | ||||||||||||||||
| 10.49 | 8-K | 10.2 | 09/06/2024 | 001-35944 | ||||||||||||||||
| 10.50 | †† | 8-K | 10.1 | 03/01/2024 | 001-35944 | |||||||||||||||
| 10.51 | 8-K | 10.1 | 04/30/2025 | 001-35944 | ||||||||||||||||
| 10.52 | 8-K | 10.1 | 07/29/2025 | 001-35944 | ||||||||||||||||
| 10.53 | 8-K | 10.1 | 07/31/2025 | 001-35944 | ||||||||||||||||
| 10.54 | 8-K | 10.1 | 09/15/2025 | 001-35944 | ||||||||||||||||
| 19.1 | * | |||||||||||||||||||
| 21.1 | * | |||||||||||||||||||
| 23.1 | * | |||||||||||||||||||
| 31.1 | * | |||||||||||||||||||
| 31.2 | * | |||||||||||||||||||
74
| Incorporated by Reference Herein | ||||||||||||||||||||
| Exhibit No. | Exhibit Description | Form | Exhibit | Filing Date | File No. | |||||||||||||||
| 32.1 | ** | |||||||||||||||||||
| 32.2 | ** | |||||||||||||||||||
| 97.1 | * | |||||||||||||||||||
| 101.INS | * | XBRL Instance Document. | ||||||||||||||||||
| 101.SCH | * | XBRL Taxonomy Extension Schema Document. | ||||||||||||||||||
| 101.CAL | * | XBRL Taxonomy Extension Calculation Linkbase Document. | ||||||||||||||||||
| 101.LAB | * | XBRL Taxonomy Extension Labels Linkbase Document. | ||||||||||||||||||
| 101.PRE | * | XBRL Taxonomy Extension Presentation Linkbase Document. | ||||||||||||||||||
| 101.DEF | * | XBRL Taxonomy Definition Linkbase Document. | ||||||||||||||||||
* Filed with this Report.
** This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
† Exhibits and schedules omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant agrees to furnish a supplemental copy of an omitted exhibit or schedule to the SEC upon request.
†† Management contract or compensatory plan or arrangement.
††† Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been separately filed with the SEC.
Item 16. Form 10-K Summary.
None.
75
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 2nd day of March, 2026.
| POWER SOLUTIONS INTERNATIONAL, INC. | ||||||||||||||
| By: | /s/ Xun Li | |||||||||||||
| Name: | Xun Li | |||||||||||||
| Title: | Chief Financial Officer (Principal Financial Officer) | |||||||||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on the 2nd day of March, 2026.
| Signature | Title | |||||||
| /s/ Dino Xykis | Chief Executive Officer | |||||||
| Dino Xykis | (Principal Executive Officer) | |||||||
| /s/ Xun Li | Chief Financial Officer | |||||||
| Xun Li | (Principal Financial and Accounting Officer) | |||||||
| /s/ Jiwen Zhang | Chairman of the Board and Director | |||||||
| Jiwen Zhang | ||||||||
| /s/ Xuesen Yang | Director | |||||||
| Xuesen Yang | ||||||||
| /s/ Fuzhang Yu | Director | |||||||
| Fuzhang Yu | ||||||||
| /s/ Zhao Jin | Director | |||||||
| Zhao Jin | ||||||||
| /s/ Courtney Shea | Director | |||||||
| Courtney Shea | ||||||||
| /s/ Frank P. Simpkins | Director | |||||||
| Frank P. Simpkins | ||||||||
| /s/ Hong He | Director | |||||||
| Hong He | ||||||||
76
