Acuren Corp(TIC) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Condensed Consolidated Balance Sheets (unaudited) Acuren Corporation's Condensed Consolidated Balance Sheets detail financial position, with slight increases in assets and liabilities, and equity growth despite a rising accumulated deficit | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------- | :------------ | :---------------- | :----- | :------- | | Total assets | $2,242,358 | $2,207,739 | $34,619 | 1.57% | | Total liabilities | $1,063,295 | $1,056,567 | $6,728 | 0.64% | | Total stockholders' equity | $1,179,063 | $1,151,172 | $27,891 | 2.42% | | Cash and cash equivalents | $130,056 | $139,134 | $(9,078) | -6.52% | | Accounts receivable, net | $257,646 | $236,520 | $21,126 | 8.93% | | Goodwill | $876,790 | $845,939 | $30,851 | 3.65% | | Accumulated deficit | $(133,015) | $(106,989) | $(26,026)| 24.33% | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited) The Condensed Consolidated Statements of Operations show increased service revenue but declining gross profit and net losses for both periods, with a significantly higher loss in the six-month Successor period | Metric (in thousands) | 3 Months Ended June 30, 2025 (Successor) | 3 Months Ended June 30, 2024 (Predecessor) | Change | % Change | | :-------------------- | :--------------------------------------- | :--------------------------------------- | :----- | :------- | | Service revenue | $313,925 | $309,292 | $4,633 | 1.50% | | Gross profit | $74,101 | $80,619 | $(6,518) | -8.08% | | Income from operations | $18,350 | $19,749 | $(1,399) | -7.09% | | Net loss | $(233) | $(5,450) | $5,217 | -95.72% | | Metric (in thousands) | 6 Months Ended June 30, 2025 (Successor) | 6 Months Ended June 30, 2024 (Predecessor) | Change | % Change | | :-------------------- | :--------------------------------------- | :--------------------------------------- | :----- | :------- | | Service revenue | $548,140 | $532,354 | $15,786 | 2.97% | | Gross profit | $117,770 | $136,467 | $(18,697)| -13.70% | | Income from operations | $8,910 | $33,743 | $(24,833)| -73.60% | | Net loss | $(26,026) | $(6,721) | $(19,305)| 287.23% | Condensed Consolidated Statements of Stockholders' Equity (unaudited) The Condensed Consolidated Statements of Stockholders' Equity detail equity changes, with total equity increasing in the Successor period due to share-based compensation and other comprehensive income, despite net losses | Metric (in thousands) | Successor (Dec 31, 2024) | Successor (June 30, 2025) | Change (H1 2025) | | :-------------------- | :----------------------- | :------------------------ | :--------------- | | Total Stockholders' Equity | $1,151,172 | $1,179,063 | $27,891 | | Net loss (H1 2025) | | $(26,026) | | | Share-based compensation expense (H1 2025) | | $2,980 | | | Other comprehensive income (H1 2025) | | $50,937 | | | Metric (in thousands) | Predecessor (Dec 31, 2023) | Predecessor (June 30, 2024) | Change (H1 2024) | | :-------------------- | :----------------------- | :------------------------ | :--------------- | | Total Stockholders' Equity | $381,999 | $380,136 | $(1,863) | | Net loss (H1 2024) | | $(6,721) | | | Share-based compensation expense (H1 2024) | | $17,696 | | | Other comprehensive loss (H1 2024) | | $(12,838) | | Condensed Consolidated Statements of Cash Flows (unaudited) The Condensed Consolidated Statements of Cash Flows show significant improvement in Successor period operating cash flow, less cash used in investing, and a shift in financing activities from providing to using cash | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 (Successor) | 6 Months Ended June 30, 2024 (Predecessor) | Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :----- | | Operating activities | $26,305 | $(8,754) | $35,059 | | Investing activities | $(28,407) | $(56,627) | $28,220 | | Financing activities | $(10,308) | $8,750 | $(19,058)| | Net change in cash and cash equivalents | $(9,078) | $(56,265) | $47,187 | Notes to the Condensed Consolidated Financial Statements (unaudited) These notes provide essential context for the financial statements, detailing accounting policies, business combinations, equity, debt, tax, and other disclosures, clarifying the Acuren Acquisition's impact and recent corporate actions NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Acuren Corporation is a leading provider of critical asset integrity services, primarily operating in North America across various industrial markets such as chemical, pipeline, refinery, and power generation[20] - The company completed the Acuren Acquisition on July 30, 2024, and subsequently changed its name from Admiral Acquisition Limited. This acquisition established Acuren as the accounting acquirer (Successor) and ASP Acuren as the accounting Predecessor, resulting in non-comparable financial statements across periods due to the application of acquisition method accounting[21][23][24] NOTE 2. BUSINESS COMBINATIONS - During the first six months of 2025, Acuren (Successor) completed two minor business combinations for a total cash consideration of $16.7 million, contributing $3.0 million in service revenue and $3.9 million in goodwill[28] - The significant Acuren Acquisition was completed on July 30, 2024, with an aggregate purchase consideration of $1.9 billion, comprising $1.87 billion in cash and $4.0 million in equity consideration. This acquisition resulted in the recognition of $865.6 million in goodwill[29][31] - In the first six months of 2024, the Predecessor completed three minor business combinations for $47.6 million cash, generating $7.5 million in revenue and $22.2 million in goodwill[32] NOTE 3. STOCKHOLDERS' EQUITY - On December 16, 2024, the Company domesticated from the British Virgin Islands to Delaware, converting ordinary shares to common stock and Founder Preferred Shares to Series A Preferred Stock on a one-to-one basis, with no change in outstanding shares or proportional equity interest[33] | Share Class | Par Value | Authorized Shares | Issued & Outstanding (June 30, 2025) | | :---------- | :-------- | :---------------- | :----------------------------------- | | Common Stock | $0.0001 | 500,000,000 | 121,476,215 | | Preferred Stock | $0.0001 | 5,000,000 | | | Series A Preferred Stock | | | 1,000,000 | - Holders of Series A Preferred Stock are entitled to an annual dividend in common stock, equal to 20% of the common stock's market price appreciation above $10.00 per share, once the average price exceeds $11.50 for 10 consecutive trading days (condition met in Q1 2025). These shares automatically convert to common stock on a one-for-one basis on December 31, 2034, or at the holder's option prior to that date[36][37][40] - As of June 30, 2025, there were 18,264,876 warrants outstanding, exercisable for approximately 4,566,219 shares of common stock at an exercise price of $11.50 per share, expiring three years after the Acuren Acquisition[43] NOTE 4. EARNINGS PER SHARE | Metric | 3 Months Ended June 30, 2025 (Successor) | 6 Months Ended June 30, 2025 (Successor) | | :----- | :--------------------------------------- | :--------------------------------------- | | Basic loss per common stock | $(0.00) | $(0.21) | | Basic loss per Series A Preferred Stock | $(0.00) | $(0.21) | | Diluted loss per common stock | $(0.00) | $(0.21) | | Diluted loss per Series A Preferred Stock | $(0.00) | $(0.21) | | Metric | 3 Months Ended June 30, 2024 (Predecessor) | 6 Months Ended June 30, 2024 (Predecessor) | | :----- | :--------------------------------------- | :--------------------------------------- | | Basic loss per common share | $(1.08) | $(1.34) | | Diluted loss per common share | $(1.08) | $(1.34) | - For the three and six months ended June 30, 2025, potentially dilutive shares (stock options, warrants, RSUs, and contingently issuable Series A Preferred Stock dividends) were excluded from diluted EPS calculations as their impact would have been anti-dilutive[47] NOTE 5. ACCOUNTS RECEIVABLE | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Accounts receivable | $204,555 | $216,613 | $(12,058)| | Unbilled receivable | $56,281 | $24,171 | $32,110 | | Allowance for credit losses | $(3,190) | $(4,264) | $1,074 | | Total accounts receivable, net | $257,646 | $236,520 | $21,126 | NOTE 6. PROPERTY AND EQUIPMENT | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Property and equipment, net | $185,675 | $189,233 | $(3,558)| | Depreciation Expense (in thousands) | 3 Months Ended June 30, 2025 (Successor) | 3 Months Ended June 30, 2024 (Predecessor) | Change | | :---------------------------------- | :--------------------------------------- | :--------------------------------------- | :----- | | Total depreciation expense | $16,315 | $9,519 | $6,796 | | Depreciation Expense (in thousands) | 6 Months Ended June 30, 2025 (Successor) | 6 Months Ended June 30, 2024 (Predecessor) | Change | | :---------------------------------- | :--------------------------------------- | :--------------------------------------- | :----- | | Total depreciation expense | $31,912 | $18,712 | $13,200 | NOTE 7. GOODWILL | Metric (in thousands) | December 31, 2024 | June 30, 2025 | Change (H1 2025) | | :-------------------- | :---------------- | :------------ | :--------------- | | Balance | $845,939 | $876,790 | $30,851 | | Acquisitions | | $3,927 | | | Currency adjustments | | $26,924 | | NOTE 8. INTANGIBLE ASSETS | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Net Carrying Amount | $742,092 | $740,657 | $1,435 | | Amortization Expense (in thousands) | 3 Months Ended June 30, 2025 (Successor) | 3 Months Ended June 30, 2024 (Predecessor) | Change | | :---------------------------------- | :--------------------------------------- | :--------------------------------------- | :----- | | Amortization expense | $13,200 | $10,200 | $3,000 | | Amortization Expense (in thousands) | 6 Months Ended June 30, 2025 (Successor) | 6 Months Ended June 30, 2024 (Predecessor) | Change | | :---------------------------------- | :--------------------------------------- | :--------------------------------------- | :----- | | Amortization expense | $26,200 | $20,100 | $6,100 | NOTE 9. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Total accrued expenses and other current liabilities | $73,704 | $67,676 | $6,028 | | Accrued salaries, wages and related employee benefits | $35,737 | $33,929 | $1,808 | | Income taxes payable | $6,993 | $2,633 | $4,360 | NOTE 10. FAIR VALUE MEASUREMENTS - The Company categorizes fair value measurements into a three-level hierarchy: Level 1 for unadjusted quoted prices in active markets, Level 2 for observable inputs (direct or indirect), and Level 3 for unobservable inputs[57][63] - The carrying values of cash, accounts receivable, prepaid expenses, accounts payable, and accrued expenses approximate their fair values due to their short maturity. Long-term debt and finance lease obligations also approximate fair value based on current lending rates[58] NOTE 11. LONG-TERM DEBT | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Total debt | $751,263 | $754,798 | $(3,535)| | Long-term debt, net of current portion | $743,532 | $747,048 | $(3,516)| | Term Loan outstanding principal | $769,197 | $773,063 | $(3,866)| | Revolving credit facility outstanding | $0 | $0 | $0 | - The 2024 Credit Agreement provides for a $775.0 million seven-year senior secured Term Loan and a $75.0 million five-year senior secured Revolving Credit Facility. As of June 30, 2025, the Company was in compliance with all covenants[61][65] - On January 31, 2025, the Term Loan interest rate margins decreased (base rate from 2.50% to 1.75%, SOFR from 3.50% to 2.75%). Subsequently, on August 4, 2025, in connection with the NV5 acquisition, new fungible term loans of $875.0 million were added, increasing total term loans to $1.6 billion, and the Revolving Credit Facility increased to $125.0 million[67][69][98] NOTE 12. FINANCIAL INSTRUMENTS - The Company uses interest rate swap agreements to mitigate interest rate exposure on its variable rate debt. These derivatives were not designated as hedging instruments, and all historical agreements were terminated during the six months ended June 30, 2024 (Predecessor)[75] NOTE 13. INCOME TAXES | Metric | 3 Months Ended June 30, 2025 (Successor) | 3 Months Ended June 30, 2024 (Predecessor) | | :----- | :--------------------------------------- | :--------------------------------------- | | Income tax expense | $3,909 | $7,909 | | Effective tax rate | 106.3% | 321.6% | | Metric | 6 Months Ended June 30, 2025 (Successor) | 6 Months Ended June 30, 2024 (Predecessor) | | :----- | :--------------------------------------- | :--------------------------------------- | | Income tax expense | $5,374 | $7,199 | | Effective tax rate | (26.0)% | 1,506.1% | - The effective tax rates for the Successor period were significantly impacted by the disparity between results of operations across tax jurisdictions and a $11.1 million valuation allowance recorded against interest limitation carryforwards. The Predecessor's high effective tax rate was primarily due to non-deductible stock compensation expense[77][78][79] - The 'One Big Beautiful Bill Act,' enacted on July 4, 2025, includes changes to federal tax law (e.g., R&D expensing, bonus depreciation). The Company is evaluating its impact on future periods, as these changes were not reflected in the H1 2025 financial statements[80] NOTE 14. STOCK-BASED COMPENSATION - Acuren's RSU program includes time-based units (vest over three years), market-based units (vest upon stock price reaching $20.00), and performance-based units (vest based on Adjusted EBITDA targets)[82][83] | Metric (in thousands) | 3 Months Ended June 30, 2025 (Successor) | 6 Months Ended June 30, 2025 (Successor) | | :-------------------- | :--------------------------------------- | :--------------------------------------- | | Total share-based compensation expense | $1,900 | $3,000 | | Time-based RSUs | $900 | $1,700 | | Market-based RSUs | $300 | $600 | | Performance-based RSUs | $700 | $700 | - As of June 30, 2025, total unrecognized compensation expense was $9.3 million for time-based RSUs (avg. 2.3 years), $2.5 million for market-based RSUs (avg. 1.7 years), and $8.7 million for performance-based RSUs (avg. 2.8 years)[86] NOTE 15. COMMITMENTS AND CONTINGENCIES - The Company is involved in various legal claims arising in the normal course of business but does not anticipate any material adverse effect on its business, results of operations, cash flows, or financial condition from these liabilities[87] NOTE 16. SEGMENT REPORTING - Acuren operates in two reportable segments: United States and Canada, both providing the same services to a similar customer base. Operations in the UK are included within the United States segment[106] | Segment (in thousands) | 3 Months Ended June 30, 2025 (Successor) | 3 Months Ended June 30, 2024 (Predecessor) | Change | % Change | | :--------------------- | :--------------------------------------- | :--------------------------------------- | :----- | :------- | | US Service Revenue | $164,079 | $165,623 | $(1,544) | -0.93% | | Canada Service Revenue | $150,339 | $144,036 | $6,303 | 4.38% | | US Gross Profit | $37,828 | $44,079 | $(6,251) | -14.18% | | Canada Gross Profit | $36,273 | $36,540 | $(267) | -0.73% | | Segment (in thousands) | 6 Months Ended June 30, 2025 (Successor) | 6 Months Ended June 30, 2024 (Predecessor) | Change | % Change | | :--------------------- | :--------------------------------------- | :--------------------------------------- | :----- | :------- | | US Service Revenue | $311,769 | $308,927 | $2,842 | 0.92% | | Canada Service Revenue | $237,311 | $224,191 | $13,120 | 5.85% | | US Gross Profit | $65,922 | $81,075 | $(15,153)| -18.69% | | Canada Gross Profit | $51,848 | $55,392 | $(3,544) | -6.40% | NOTE 17. RELATED PARTIES - Mariposa Acquisition IX, LLC (the "Founder Entity"), controlled by Co-Chairman Sir Martin E. Franklin, holds 1,000,000 shares of Series A Preferred Stock and 18,877,500 shares of common stock[91] - The Company incurred advisory fees of $0.5 million and $1.0 million for the three and six months ended June 30, 2025, respectively, paid to Mariposa Capital, LLC, an affiliate of the Company's Co-Chairmen[92] - During the Predecessor period ended June 30, 2024, the Company expensed $0.9 million (three months) and $1.7 million (six months) to American Securities, LLC, an agreement that terminated upon the Acuren Acquisition[92][94] NOTE 18. SUPPLEMENTAL CASH FLOW DISCLOSURES | Metric (in thousands) | 6 Months Ended June 30, 2025 (Successor) | 6 Months Ended June 30, 2024 (Predecessor) | Change | | :-------------------- | :--------------------------------------- | :--------------------------------------- | :----- | | Interest paid | $28,269 | $7,377 | $20,892 | | Income taxes paid | $12,293 | $16,723 | $(4,430) | | Purchases of property and equipment accrued and not yet paid | $2,729 | $1,795 | $934 | | Increases in operating lease assets | $4,464 | $6,688 | $(2,224) | | Increases in finance lease assets | $7,512 | $5,776 | $1,736 | NOTE 19. SUBSEQUENT EVENTS - On August 4, 2025, the Company completed the acquisition of NV5 Global, Inc. for approximately $1.7 billion, consisting of $618.7 million in cash and the issuance of approximately 79.0 million shares of common stock[96] - In connection with the NV5 acquisition, the Credit Agreement was amended to include new fungible term loans of $875.0 million, increasing total term loans to $1.6 billion, and to increase the senior secured revolving credit facility from $75.0 million to $125.0 million[98] - The initial accounting for the NV5 acquisition is incomplete, and required disclosures will be provided in the Form 10-Q for the quarter ended September 30, 2025[97] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Acuren Corporation is a leading North American provider of critical asset integrity services, specializing in TICC, NDT, RAT solutions, and engineering consulting across diverse industrial markets - Acuren is a leading provider of critical asset integrity services in North America, catering to industrial markets such as chemical, pipeline, refinery, power generation, and renewable energy[104] - The company's services include Testing, Inspection, Certification and Compliance (TICC), Nondestructive Testing (NDT), Rope Access Technology (RAT) solutions for difficult-to-reach areas, and specialized materials engineering with in-lab destructive testing capabilities[105] - Acuren operates with two reportable segments: the United States (which includes UK operations) and Canada, both offering similar services to comparable customer bases[106] Recent Developments Recent developments include the $1.7 billion NV5 Global acquisition, new tax legislation, and repriced credit facility interest rate margins, impacting the company's financial structure and future tax obligations Merger with NV5 and Issuance of New Fungible Term Loans - On August 4, 2025, Acuren completed the acquisition of NV5 Global, Inc. for approximately $1.7 billion, paid with $618.7 million in cash and 79.0 million shares of common stock[107] - In connection with the NV5 acquisition, the Credit Agreement was amended to include $875.0 million in new fungible term loans, increasing the total term loans outstanding to $1.6 billion, and to increase the senior secured revolving credit facility from $75.0 million to $125.0 million[110] Tax Legislation - The 'One Big Beautiful Bill Act' was enacted on July 4, 2025, introducing changes to federal tax law, including the restoration of immediate expensing for domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for business interest expense limitations[108] - These tax law changes were not reflected in the income tax provision for the three and six months ended June 30, 2025, as the enactment occurred after the balance sheet date. The Company is currently evaluating the impact on future periods[108] Credit Facility Updates - On January 31, 2025, the Company entered into the First Amendment to the Credit Agreement, which decreased the interest rate margins for the Term Loan (base rate from 2.50% to 1.75%, SOFR from 3.50% to 2.75%)[109] - A Second Amendment to the Credit Agreement, entered into on August 4, 2025, in connection with the NV5 acquisition, increased the total term loans outstanding to $1.6 billion and the senior secured revolving credit facility from $75.0 million to $125.0 million[110] Certain Factors and Trends Affecting Acuren's Results of Operations Acuren's results are influenced by recent acquisitions, potential cost increases from tariffs, inflationary pressures, and the ongoing evaluation of the OECD's Pillar 2 global minimum corporate tax framework Summary of Acquisitions - In addition to the significant Acuren Acquisition, the Company completed other minor acquisitions during the reported periods, which impact the comparability of its results of operations[112] Economic, Industry and Market Factors - The Company may experience increased costs due to recent tariff developments between the United States, Canada, and the UK, and has observed inflationary pressures in 2024 and 2025, which it aims to mitigate through cost management and pricing initiatives[113] - Acuren is evaluating the impact of the OECD's Pillar 2 framework for a global minimum corporate tax of 15%, with certain aspects effective January 1, 2024, and others January 1, 2025. To date, Pillar 2 has not had a material impact on the effective tax rate or consolidated financial statements[114] Description of Key Financial Statement Line Items This section defines key financial statement line items: Service revenue, Cost of revenue, and Selling, general and administrative expenses, explaining their composition and recognition methods Service revenue - Service revenue is generated from Acuren's professionals (engineers, scientists, technicians) performing inspections, testing, and related services for customers, primarily on a time and materials basis, and is recognized as services are performed[115] Cost of revenue - Cost of revenue primarily consists of direct labor, materials, and indirect costs such as supplies, tools, facility costs, equipment depreciation, and travel expenses, recognized as labor hours are incurred[116] Selling, general and administrative expenses - Selling, general and administrative expenses include indirect costs of services, employee compensation, information systems and technology costs, share-based compensation, amortization of intangibles, and facility-related expenses[117] Results of Operations This section analyzes Acuren's operating results, comparing Successor (2025) to Predecessor (2024) periods, with the Acuren Acquisition significantly impacting comparability of service revenue, gross profit, and net loss | Metric (in thousands) | 3 Months Ended June 30, 2025 (Successor) | 3 Months Ended June 30, 2024 (Predecessor) | Change | % Change | | :-------------------- | :--------------------------------------- | :--------------------------------------- | :----- | :------- | | Service revenue | $313,925 | $309,292 | $4,633 | 1.5% | | Gross profit | $74,101 | $80,619 | $(6,518) | -8.1% | | Selling, general and administrative expenses | $55,236 | $60,870 | $(5,634) | -9.3% | | Income from operations | $18,350 | $19,749 | $(1,399) | -7.1% | | Net loss | $(233) | $(5,450) | $5,217 | -95.7% | | Metric (in thousands) | 6 Months Ended June 30, 2025 (Successor) | 6 Months Ended June 30, 2024 (Predecessor) | Change | % Change | | :-------------------- | :--------------------------------------- | :--------------------------------------- | :----- | :------- | | Service revenue | $548,140 | $532,354 | $15,786 | 3.0% | | Gross profit | $117,770 | $136,467 | $(18,697)| -13.7% | | Selling, general and administrative expenses | $107,694 | $102,724 | $4,970 | 4.8% | | Income from operations | $8,910 | $33,743 | $(24,833)| -73.6% | | Net loss | $(26,026) | $(6,721) | $(19,305)| 287.2% | Comparison of the three months ended June 30, 2025 (Successor) to the three months ended June 30, 2024 (Predecessor) - Service revenue increased by 1.5% to $313.9 million, driven by new customer wins and higher volumes of callout work[120] - Cost of revenue increased by 5.0% to $239.8 million, primarily due to higher direct costs supporting increased volumes, direct depreciation expense from the Acuren Acquisition, and incremental labor/onboarding costs for new customer sites[121] - Gross profit decreased by 8.1% to $74.1 million, mainly attributable to the absence of high-margin turnaround activity and changes in business mix, partially offset by strong callout activity and new customer contributions[122] - Selling, general and administrative (SG&A) expenses decreased by 9.3% to $55.2 million, primarily due to lower share-based compensation expense, partially offset by higher amortization from the Acuren Acquisition and increased employee/transaction-related costs[124] - Total depreciation and amortization expense increased by 50.2% to $29.5 million, driven by the step-up in property and equipment and intangible assets resulting from the Acuren Acquisition[125] - Net interest expense decreased by 12.1% to $15.5 million, primarily due to lower average interest rates compared to the prior year period[126] Comparison of the six months ended June 30, 2025 (Successor) to the six months ended June 30, 2024 (Predecessor) - Service revenue increased by 3.0% to $548.1 million, driven by strong performance in run and maintain and callout work, partially offset by lower non-recurring turnaround activity and adverse weather in the U.S. during Q1 2025[128] - Cost of revenue increased by 8.7% to $430.4 million, primarily due to direct costs associated with the increased revenue base and higher depreciation expense from the Acuren Acquisition[129] - Gross profit decreased by 13.7% to $117.8 million, mainly due to adverse weather events in Q1 2025, the timing of turnaround activity, a less favorable mix of work, and the absence of certain one-time, higher-margin projects from the prior year[130] - Selling, general and administrative (SG&A) expenses increased by 4.8% to $107.7 million, driven primarily by higher employee-related costs and increased amortization expense related to the step-up in intangible assets from the Acuren Acquisition[131] - Total depreciation and amortization expense increased by 50.0% to $58.1 million, primarily due to the step-up in property and equipment and intangible assets from the Acuren Acquisition[132] - Net interest expense decreased by 6.2% to $31.5 million, primarily due to lower average interest rates compared to the prior year period[133] Operating Segment Results This section analyzes Acuren's United States and Canada operating segments for the three and six months ended June 30, 2025 (Successor) compared to 2024 (Predecessor), detailing changes in service revenue and gross profit Comparison of the three months ended June 30, 2025 (Successor) to the three months ended June 30, 2024 (Predecessor) - United States service revenue decreased by 0.9% to $164.1 million, primarily due to lower turnaround volumes and softness in the chemicals and refining end markets[138] - United States segment gross profit decreased by 14.2% to $37.8 million, mainly attributable to lower turnaround and project activity compared to the prior year's second quarter[139] - Canada service revenue increased by 4.4% to $150.3 million, driven by higher customer penetration and improved volumes in run and maintain and callout work, supported by growth in energy processing and midstream energy infrastructure[140] - Canada segment gross profit slightly decreased by 0.7% to $36.3 million, primarily due to a less favorable mix of work and the absence of one-time higher margin projects that benefited the prior year period[141] Comparison of the six months ended June 30, 2025 (Successor) to the six months ended June 30, 2024 (Predecessor) - United States service revenue increased by 0.9% to $311.8 million, driven by improved run and maintain volumes and higher customer penetration, partially offset by adverse weather events in Q1 2025 and reduced customer demand in the chemicals and refining end markets[145] - United States segment gross profit decreased by 18.7% to $65.9 million, primarily attributable to adverse weather events in Q1 2025, lower turnaround and project volumes, and a less favorable mix of work compared to the prior-year period[146] - Canada service revenue increased by 5.9% to $237.3 million, driven by higher customer penetration and improved volumes in run and maintain and callout work, supported by growth in the energy processing and midstream energy infrastructure end markets[147] - Canada segment gross profit decreased by 6.4% to $51.8 million, primarily due to a less favorable mix of work and the absence of one-time higher margin projects that benefited the prior year period[148] Liquidity and Capital Resources Acuren's liquidity and capital resources are sufficient to fund operations, service debt, and strategic acquisitions, supported by a Term Loan and Revolving Credit Facility, with improved operating cash flows Overview - Acuren believes its available cash, future cash flows from operations, access to capital markets, and the Revolving Credit Facility are sufficient to fund operations, service indebtedness, and maintain compliance with debt covenants over the next 12 months[149][151] - Principal liquidity requirements include working capital, general corporate purposes (capital expenditures, debt service), and funding/integrating strategic acquisitions[151] Financing - The Company has a $775.0 million seven-year senior secured Term Loan and a $75.0 million five-year senior secured revolving credit facility. As of June 30, 2025, $769.2 million was outstanding under the Term Loan, with no amounts outstanding under the Revolving Credit Facility[152] - Acuren was in compliance with all covenants under its Credit Facility as of June 30, 2025[152] - The Predecessor's 2019 Credit Agreement, which provided for a $715.0 million term loan and a $75.0 million revolving credit facility, was repaid in full in connection with the Acuren Acquisition on July 30, 2024[153] Cash Flows | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2025 (Successor) | 6 Months Ended June 30, 2024 (Predecessor) | Change | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :----- | | Operating activities | $26,305 | $(8,754) | $35,059 | | Investing activities | $(28,407) | $(56,627) | $28,220 | | Financing activities | $(10,308) | $8,750 | $(19,058)| | Net change in cash and cash equivalents | $(9,078) | $(56,265) | $47,187 | - Net cash provided by operating activities for the six months ended June 30, 2025, increased by $35.1 million to $26.3 million, primarily driven by favorable changes in working capital, partially offset by lower gross profit and higher SG&A expenses[155] - Net cash used in investing activities decreased by $28.2 million to $28.4 million for the six months ended June 30, 2025, primarily due to less cash used in acquisitions[156] - Net cash used in financing activities for the six months ended June 30, 2025, was $10.3 million, mainly for Term Loan payments, finance lease obligations, and debt issuance costs. In the prior year, net cash provided by financing activities was $8.8 million, primarily from 2019 Credit Agreement borrowings[157] Off-Balance Sheet Arrangements - The Company did not have any material off-balance sheet arrangements with unconsolidated entities or financial partnerships during the six months ended June 30, 2025, or the six months ended June 30, 2024[160] Recently Issued Accounting Pronouncements - The Company has not adopted any new accounting pronouncements since the audited consolidated financial statements for the year ended December 31, 2024[27] Critical Accounting Estimates - There have been no significant changes to the Company's critical accounting policies and estimates from the information provided in its 2024 Annual Report[162] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - There have been no significant changes to the Company's quantitative and qualitative disclosures about market risk from those discussed in its 2024 Annual Report[163] ITEM 4. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Management concluded Acuren's disclosure controls and procedures were not effective as of June 30, 2025, due to previously identified material weaknesses - As of June 30, 2025, the CEO and CFO concluded that the Company's disclosure controls and procedures were not effective at a reasonable assurance level due to material weaknesses previously disclosed in the 2024 Annual Report[165] Material Weaknesses in Internal Control Over Financial Reporting Acuren identified material weaknesses in internal control over financial reporting due to insufficient accounting and IT resources, leading to ineffective period-end financial reporting and IT general controls - The Company lacked a sufficient complement of resources with appropriate accounting knowledge, training, and experience to timely and accurately analyze, record, and disclose accounting matters, and to establish effective processes and controls[167] - Ineffective controls were identified in the period-end financial reporting process, including the design and maintenance of formal accounting policies, procedures, and controls for complete, accurate, and timely financial accounting, reporting, and disclosures, as well as controls over account reconciliations and journal entries, including segregation of duties[167] - The Company did not design and maintain effective information technology (IT) general controls for financial reporting systems, specifically regarding user access, program change management, computer operations, and program development controls[169] - These material weaknesses resulted in the misstatement of income tax provision and deferred tax liabilities, leading to a restatement of financial statements for the Predecessor period, and immaterial audit adjustments to various financial statement line items[167] Management's Plans to Remediate the Material Weaknesses Management is actively implementing remediation plans for material weaknesses, including engaging a third-party SOX advisor, hiring qualified finance personnel, providing targeted training, and enhancing accounting and IT controls - Management has engaged a third-party advisor to support the design and implementation of a robust Sarbanes-Oxley Act (SOX) compliance program[174] - The Company has hired a new Corporate Controller and VP of Finance with experience in building and enhancing control environments to strengthen the finance organization[174] - Remediation efforts include delivering targeted training on SOX requirements and internal controls, completing a financial statement risk assessment, documenting business processes and controls, developing enhanced policies for journal entries and account reconciliations, initiating remediation of segregation of duties conflicts, and implementing monitoring controls over key information systems[174] - The Company plans to continue hiring qualified accounting, finance, and IT personnel to support ongoing remediation and sustain a strong control environment. Full remediation will be concluded only after new and enhanced controls have been in place and tested for effectiveness[171][172] Changes in Internal Control Over Financial Reporting Aside from ongoing remediation efforts for identified material weaknesses, there have been no other material changes to Acuren's internal control over financial reporting during the three months ended June 30, 2025 - Other than the described remediation efforts, there have been no other material changes to the Company's internal control over financial reporting during the three months ended June 30, 2025[173] PART II – OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - For information on legal proceedings, refer to Note 15. Commitments and Contingencies in this Quarterly Report, which states that the Company does not expect any material adverse effect from current claims[176] ITEM 1A. RISK FACTORS Risks Related to NV5 This section outlines specific risks for NV5, including vulnerability to economic downturns, government funding fluctuations, contract challenges, potential losses from lump-sum agreements, and operational risks - Demand for NV5's services from state and local government and private clients is cyclical and vulnerable to economic downturns, which could lead to project delays, cancellations, and adverse impacts on financial results[178][179] - NV5 derives approximately 63% of its gross revenues from public and quasi-public governmental agencies, making its business highly dependent on continued government program funding and susceptible to changes in appropriations, budget constraints, or policy shifts[180][181] - NV5's business relies on winning new contracts and renewing existing ones, a process affected by market conditions, financing, and governmental approvals. Failure to secure these could adversely impact profitability[183] - Lump-sum contracts, which accounted for 52% of NV5's revenue in fiscal 2024, expose the company to risks such as underestimation of costs, unforeseen difficulties, and delays, potentially leading to project losses[184] - NV5's financial results can be adversely impacted by adverse weather conditions and seasonal revenue fluctuations, particularly during the months of November through March[185] - The loss of key personnel or the inability to attract and retain qualified staff, especially those with government security clearances, could significantly disrupt NV5's business operations and ability to provide services[193][194] - Employee, agent, or partner misconduct, or NV5's failure to comply with various laws and regulations (e.g., government procurements, data privacy, anti-bribery), could harm its reputation, lead to fines, penalties, and criminal/civil enforcement actions[196] - NV5 is subject to stringent and evolving foreign data privacy and security laws (e.g., EU GDPR, UK GDPR). Non-compliance or challenges to data transfer mechanisms could lead to regulatory investigations, litigation, fines, and business disruptions[205][206][207][208] Risks Related to the NV5 Merger This section details risks from the NV5 merger, including potential litigation, integration challenges, stock price volatility, increased indebtedness, and loss of key business relationships - Litigation related to the merger could result in injunctions preventing its completion or substantial costs for Acuren and NV5, diverting management time and resources[209] - Acuren may face difficulties in successfully integrating NV5's business and realizing anticipated benefits and synergies due to complexities, differing operational philosophies, and challenges in combining systems and assets[211][212][217] - The market price of Acuren's common stock may experience volatility due to factors such as the inability to achieve expected benefits and synergies from the merger, transaction costs, or an increase in outstanding shares[214][215] - Acuren's indebtedness increased significantly upon completion of the merger (total term loans to $1.6 billion), which could heighten vulnerability to adverse economic conditions, limit access to additional financing, and require a substantial portion of cash flow for debt payments[216][220] - The merger may lead to a loss of customers, distributors, suppliers, and other business partners, or the termination of existing contracts, if these parties are adversely affected by the combination or prefer not to work with the combined entity[218] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS - There were no unregistered sales of equity securities or use of proceeds to report during the period[219] ITEM 3. DEFAULTS UPON SENIOR SECURITIES - There were no defaults upon senior securities to report during the period[221] ITEM 4. MINE SAFETY DISCLOSURES - This item is not applicable to the Company[222] ITEM 5. OTHER INFORMATION - During the three months ended June 30, 2025, none of the Company's officers or directors adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement"[223] ITEM 6. EXHIBITS - The exhibits filed with this Quarterly Report include certifications by the CEO and CFO (Exhibits 31.1, 31.2, 32.1, 32.2), the Agreement and Plan of Merger (Exhibit 2.1), and various Inline XBRL documents (Exhibits 101.INS, 101.SCH, 101.DEF, 101.CAL, 101.LAB, 101.PRE, 104)[224] Signatures - The report was duly signed on August 14, 2025, by Talman Pizzey, Chief Executive Officer and Director, and Kristin Schultes, Chief Financial Officer[230]