Global Industrial : Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

About this update from Global Industrial Company

Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements and Risk Factors. This report contains forward-looking statements within the meaning of that term in the Private Securities Litigation Reform Act of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). Additional written or oral forward-looking statements may be made by the Company from time to time in filings with the Securities and Exchange Commission or otherwise. Any such statements that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on management's estimates, assumptions and projections and are not guarantees of future performance. Forward-looking statements may include, but are not limited to statements regarding: i) projections or estimates of revenue, income or loss, exit costs, cash flow needs and capital expenditures; ii) fluctuations in general economic conditions, including effects of rising inflation and volatility of inflation metrics; iii) future operations, such as risks regarding strategic business initiatives, plans relating to new distribution facilities, plans for utilizing alternative sources of supply in response to government tariff and trade actions and/or due to supply chain disruptions arising from pandemics, war, geopolitical conflicts and plans for new products or services; iv) plans for acquisition or sale of businesses, including expansion or restructuring plans; v) financing needs, and compliance with financial covenants in loan agreements; vi) assessments of materiality; vii) predictions of future events and the effects of pending and possible litigation; and viii) assumptions relating to the foregoing. In addition, when used in this report, the words "anticipates," "believes," "estimates," "expects," "intends," and "plans" and variations thereof and similar expressions are intended to identify forward-looking statements. Forward-looking statements in this report are based on the Company's beliefs and expectations as of the date of this report and are subject to risks and uncertainties which may have a significant impact on the Company's business, operating results or financial condition. Investors are cautioned that these forward-looking statements are inherently uncertain and undue reliance should not be placed on them. We undertake no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events. Other factors that may affect our future results of operations and financial condition include, but are not limited to, unanticipated developments in any one or more of the following areas, as well as other factors which may be detailed from time to time in our Securities and Exchange Commission filings: • general economic conditions, such as customer inventory levels, consumer prices and inflation, interest rates, borrowing ability and economic conditions in the manufacturing and/or distribution industries generally, as well as government spending levels will continue to impact our business; • global, political, economic and market conditions, including the impact of natural disasters, military actions, wars, international shipping disruptions, cyber-attacks, terrorism and global pandemics or other health crises; • delays in the timely availability of products from our suppliers has in the past and could in the future delay receipt of needed product, resulting in delayed or lost sales; • global supply chains and the timely availability of products, particularly products, or product components used in domestic manufacturing, imported from China and other Asian nations as well as from other countries, have been, and in the future could continue to be adversely affected by allocation restrictions of difficult to source products by our vendors; • we are exposed to market risks from changes in tariff rates and import shipping costs particularly on goods from China and other Asia-based suppliers. These dynamic market conditions may result in fluctuations in our income and cash flows. Recently enacted tariffs on imports and exports with respect to a number of countries in our supply chain and/or customer markets, have increased and may continue to increase our procurement costs, the impact of which will increase pressure on our margins as we sell through lower cost inventory. The imposition of tariffs and other trade barriers, as well as reciprocal trade measures, have caused us to raise the prices on certain of our products and to seek alternate sources of supply. Pricing actions we have taken and may continue to take to mitigate these increased procurement costs could have a material adverse impact on our income, cash flows and overall financial results; • our use of alternate sources of supply, such as utilizing new vendors in additional countries, entails various risks, such as identifying, vetting and managing new business relationships, reliance on new vendors and maintaining quality control over their products, and protecting our intellectual property rights; • increases in freight and shipping costs, including fuel costs and other accessorial costs, could affect our margins to the extent the increases cannot be passed along to customers, as has occurred in the past; • extreme weather conditions have delayed or disrupted global product supply chains and have affected our ability to timely receive and ship products, which have and could adversely impact sales; • other critical factors affecting the shipping and distribution of products imported to the United States by us or our domestic vendors, such as a global shortage in availability of shipping containers, shipping port congestion, and pandemic related labor shortages, have in the past and could in the future adversely affect the timely availability of products, resulting in delayed or lost sales, as well as adversely affecting our margins; • our reliance on common carrier delivery services for shipping merchandise to customers; • our reliance on drop ship deliveries directly to customers by our product vendors for products we do not hold in inventory; • our ability to maintain available capacity in our distribution operations for stocked inventory and to enable on time shipment and deliveries, such as by timely implementing additional temporary or permanent distribution resources, whether in the form of additional facilities we operate or by outsourcing certain functions to third-party distribution and logistics partners; • we compete with other companies for recruiting, training, integrating and retaining talented and experienced employees, particularly in markets where we and they have central distribution facilities; and this aspect of competition is aggravated by the current tight labor market in the U.S. for such jobs; • our ability to realize the expected benefits from acquisitions and other strategic transactions that we believe will either expand or complement our business in new or existing markets or further enhance the value and offerings we are able to provide to our existing or future potential customers; • the maintenance, repair and operation ("MRO") and industrial equipment industry are consolidating as customers are increasingly aware of the total costs of fulfillment and the need to have consistent sources of supply at multiple locations. This consolidation has and will continue to cause the industry to become more competitive as greater economies of scale are achieved by competitors, or as competitors with new lower cost business models are able to operate with lower prices; • risks involved with e-commerce, including possible loss of business and customer dissatisfaction if outages or other computer-related problems should preclude customer access to our products and services; • our information systems and other technology platforms supporting our sales, procurement and other operations are critical to our operations and disruptions or delays have occurred and could occur in the future, and if not timely addressed could have a material adverse effect on us; • a data security breach due to our e-commerce, data storage or other information systems being hacked by those seeking to steal Company, vendor, employee or customer information, or due to employee error, resulting in disruption to our operations, litigation and/or loss of reputation or business; • our ability to remediate material weaknesses in our internal controls over financial reporting and the identification of additional material weaknesses in the future or other failure to maintain an effective system of internal controls; • managing various inventory risks, such as being unable to profitably resell excess or obsolete inventory and/or the loss of product return rights from our vendors; • meeting credit card industry compliance standards in order to maintain our ability to accept credit cards; • rising interest rates, increased borrowing costs or limited credit availability, could impact both our and our customers' ability to fund purchases and conduct operations in the ordinary course; • quarantines, factory slowdowns or shutdowns, border closings and travel restrictions resulting from pandemics have in the past and could in the future adversely affect the timely availability of products, resulting in delayed or lost sales; • pending or threatened litigation and investigations, and other government actions, such as anti-dumping, unclaimed property, or trade and customs actions by U.S. or foreign governmental authorities, have occurred in the past and although had no material impact to our business, there can be no assurance that such events would not have such impact on our business and results of operation. Should one or more of the risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein. Statements in this report, particularly in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Notes to Condensed Consolidated Financial Statements, as well as information under the heading "Risk Factors" in our Annual Report on Form 10-K for fiscal year 2025, describe certain factors, among others, that could contribute to or cause such differences. Overview Global Industrial Company, through its subsidiaries, is a value-added distributor and source for industrial equipment and supplies in North America going to market through a system of branded e-commerce websites and relationship marketers. Continuing Operations The Company specializes in providing maintenance, repair and operations ("MRO") solutions to businesses ranging from small to enterprise, and to the public sector. The Company is committed to its customer-centric strategy and uses industry expertise, products from its own Global Industrial Exclusive Brands TM , and nationally known brands to provide customers with a breadth of offerings to meet their needs. These industrial and MRO products are manufactured by other companies. Some products are manufactured for us and sold as a white label product, and some are manufactured to our own design and marketed as private brand products under the trademarks: Global TM , GlobalIndustrial.com TM , Nexel TM , Paramount TM , Interion TM and Absocold TM See Note 3, Revenue, of Notes to the Condensed Consolidated Financial Statements for financial information about our business' geographic operations. Discontinued Operations The results of discontinued operations in the accompanying financial statements are from the former North American Technology ("NATG") business. In March 2026 the Company received a refund of prior years alternative minimum taxes paid of approximately $1.8 million which was partially offset by an increased tax obligation recorded in the first quarter of 2026. Operating Conditions The market for the sale of industrial products in North America is highly fragmented and is characterized by multiple distribution channels. Industrial products distribution is working capital intensive, requiring us to incur significant costs associated with the warehousing of many products, including the costs of maintaining inventory, leasing warehouse space, inventory management systems and employing personnel to perform the associated tasks. We supplement our on-hand product availability by maintaining relationships with major distributors and manufacturers, utilizing a combination of stock and drop-shipment fulfillment. The primary component of our operating expenses historically has been employee-related costs, which includes items such as wages, commissions, bonuses, employee benefits and equity-based compensation, as well as marketing expenses, primarily comprised of digital marketing spend, and occupancy related charges associated with our leased distribution and call center facilities. We continually assess our operations to ensure that they are efficient, aligned with market conditions and responsive to customer needs. The discussion of our results of operations and financial condition that follows will provide information that will assist in understanding our financial statements, the factors that we believe may affect our future results and financial condition as well as information about how certain accounting policies and estimates affect the consolidated financial statements. This discussion should be read in conjunction with the condensed consolidated financial statements included herein and in conjunction with the audited financial statements as of December 31, 2025 and the other information provided in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Business Outlook The Company delivered a strong start to 2026, driven by solid execution and continued momentum across the business. First quarter revenue improved 9.2%, with average daily sales growth of 7.6% and operating income improved 13.2% compared to prior year. We generated growth each month during the quarter, supported by both price and volume improvement. Performance was led by our largest and most strategic accounts. We continue to closely monitor the macroeconomic and geopolitical environment, including developments in the Middle East and their impact on transportation and manufacturing costs, as well as the evolving tariff landscape and potential new Section 301 tariffs which are currently being evaluated by the US Government. Our goal is to mitigate these disruptions to our business and our customers and we believe we are well-positioned to do so as we continue to proactively manage price and other factors within our control; however, we anticipate headwinds will impact margin performance in the spring and summer as fuel prices remain elevated. On February 20, 2026, the U.S. Supreme Court held in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act of 1977 ("IEEPA") does not authorize tariffs. The Court's decision invalidated the Trump Administration's IEEPA-based tariff program permanently and in its entirety. The Company made material payments on imported goods pursuant to IEEPA tariffs while they were in force. On April 20, 2026, U.S. Customs and Border Protection implemented the Consolidated Administration and Processing of Entries system to facilitate the administration of related tariff refunds. The Company has begun submitting claims for refunds of tariffs paid under IEEPA; however, such claims are subject to review, validation and processing and the timing, amount, and ultimate recoverability of any such refunds remain uncertain. Critical Accounting Policies and Estimates Our significant accounting policies are described in Note 1, Basis of Presentation, of Notes to the Consolidated Financial Statements included in Item 15 of the Company's 2025 Annual Report on Form 10-K. Certain accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty, and as a result, actual results could differ materially from those estimates. These judgments are based on historical experience, observation of trends in the industry, information provided by customers, forecasts of future economic conditions and information available from other outside sources, as appropriate. Management has identified revenue recognition, inventory valuation and valuation of intangible assets acquired through a business combination as policies that entail significant judgments or estimates. Management believes that full consideration has been given to all relevant circumstances that we may be subject to, and the consolidated financial statements of the Company accurately reflect management's best estimate of the consolidated results of operations, financial position and cash flows of the Company for the years presented. There were no material changes in the Company's significant accounting policies during the first quarter ended March 31, 2026. Public companies in the United States are subject to the accounting and reporting requirements of various authorities, including the Financial Accounting Standards Board ("FASB") and the Securities and Exchange Commission ("SEC"). These authorities issue numerous pronouncements, most of which are not applicable to the Company's current or reasonably foreseeable operating structure. See Note 1, Basis of Presentation, of Notes to Condensed Consolidated Financial Statements, Recent Accounting Pronouncements. Highlights from Q1 2026 compared to Q1 2025 The discussion of our results of operations and financial condition that follows will provide information that will assist in understanding our financial statements and information about how certain accounting principles and estimates affect the condensed consolidated financial statements included herein. First Quarter 2026 Financial Summary: • Consolidated sales increased 9.2% to $350.4 million compared to $321.0 million last year and average daily sales* increased 7.6% compared to prior year. • Consolidated gross margin decreased to 34.8% compared to 34.9% last year. • Consolidated operating income from continuing operations increased 13.2% to $20.6 million compared to $18.2 million last year. • Net income per diluted share from continuing operations increased 11.4% to $0.39 compared to $0.35 last year. • Net income per diluted share from discontinued operations increased to $0.03 from $0.00 last year. *Average daily sales is calculated based upon the number of selling days in each period, with Canadian sales converted to U.S. dollars using the current year's average exchange rate. There were 65 selling days in the U.S. in the first quarter of 2026 compared to 64 selling days in the first quarter of 2025. There were 63 selling days in Canada in each of the first quarters of 2026 and 2025, respectively. Results of Operations Three Months Ended March 31, 2026 compared to the Three Months Ended March 31, 2025 Key Performance Indicators* (in millions except for percentages and per share amounts): Three Months Ended March 31, 2026 2025 % Change Net sales of continuing operations: Consolidated net sales $350.4 $321.0 9.2% Consolidated gross profit $121.9 $112.1 8.7% Consolidated gross margin 34.8% 34.9% (0.1)% Consolidated SG&A costs $101.3 $93.9 7.9% Consolidated SG&A costs as a % of net sales 28.9% 29.3% (0.4)% Operating income from continuing operations: Consolidated operating income $20.6 $18.2 13.2% Consolidated operating margin from continuing operations 5.9% 5.7% 0.2% Effective income tax rate 26.1% 25.4% 0.7% Net income from continuing operations $15.3 $13.5 13.3% Net income margin from continuing operations 4.4% 4.2% 0.2% Net income per diluted share from continuing operations $0.39 $0.35 11.4% Net income from discontinued operations $1.3 $0.1 1200% Net income per diluted share from discontinued operations $0.03 $0.00 NM NM not meaningful * Global Industrial Company manages its business and reports using a 52-53 week fiscal year that ends at midnight on the Saturday closest to December 31. For clarity of presentation, fiscal years and quarters are described as if they ended on the last day of the respective calendar month. The actual fiscal first quarters ended April 4, 2026 and March 29, 2025, respectively. Management's discussion and analysis that follows includes current operations. NET SALES The Company's net sales increased 9.2% to $350.4 million during the quarter ended March 31, 2026 compared to $321.0 million last year. Net sales benefited from both price and volume, with gains across both assigned accounts and e-commerce sales channels, and continued strong performance from our largest and most strategic accounts. U.S. sales increased 8.1% for the quarter compared to the same period in 2025 and Canada sales increased 30.3%, 24.4% in local currency, and on an average daily sales basis, sales grew 7.6%, in-line with our fourth quarter performance. There were 65 selling days and 64 selling days in the U.S. in the first quarter of 2026 and 2025, respectively, and in Canada, there were 63 selling days in each of the first quarters of 2026 and 2025, respectively. GROSS MARGIN Gross margin is dependent on variables such as product mix including sourcing and category, trade policy inclusive of the imposition of tariffs, competition, pricing strategy, vendor volume rebates, freight pricing decisions including the use of free or other promotional freight plans, freight cost inflation including both domestic outbound freight as well as international inbound ocean freight, inventory valuation and obsolescence and other variables, any or all of which may result in fluctuations in gross margin. Gross margin was 34.8% in the first quarter of 2026, a 10 basis point decline, as compared to 34.9% in the same period in 2025, and a 30 basis point improvement compared to the fourth quarter of 2025. Gross margin reflects the impact of incremental fuel surcharges within our outbound transportation in the back half of the quarter, as well as product mix, which was impacted by an increase in the number of large orders/projects during the quarter. Management of our margin profile remains a key area of focus for the Company. Performance will continue to reflect the impact of strategic promotion and freight actions as part of our competitive pricing initiatives, tariff related actions and ocean freight costs. The Company anticipates that there may be increased margin variability in future periods given the timing dynamics of on-hand inventory, inflationary pressures associated with tariff related cost increases and our efforts to continue to diversify our supply chain and historical seasonality. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ("SG&A") For the three month period ended March 31, 2026, SG&A costs as a percentage of sales improved by 40 basis points compared to the first quarter last year. The increase in absolute dollars was primarily due to planned net marketing costs to support sales growth of approximately $4.2 million, salary and related costs of approximately $2.9 million, inclusive of $0.7 million of increased variable compensation due to performance, offset by $1.2 million savings in separation and stock-based compensation costs. OPERATING MARGIN Operating margin for the three month period ended March 31, 2026 increased 20 basis points compared to the same period in 2025 driven by the sales increase, modest decline in gross margin, continued strong general and discretionary cost control offset by increased variable compensation expense related to performance. INTEREST AND OTHER (INCOME) EXPENSE, NET Interest and other (income) expense, net from continuing operations was $0.1 million income for the three months ended March 31, 2026 and $0.1 million expense for the three month periods ended March 31, 2025. INCOME TAXES For the three month period ended March 31, 2026 and March 31, 2025, the Company reported income taxes in continuing operations of approximately $5.4 million and $4.6 million, respectively, related to its U.S., Canada and India operations including tax expense for certain U.S. states. DISCONTINUED OPERATIONS In March 2026 the Company received a refund of prior years alternative minimum taxes paid of approximately $1.8 million related to our NATG discontinued operations. This refund was partially offset by an increased tax obligation recorded in the first quarter of 2026. Financial Condition, Liquidity and Capital Resources The following tables present selected liquidity data and historical cash flows (in millions): Selected liquidity data March 31, 2026 December 31, 2025 $ Change Cash and cash equivalents $ 61.7 $ 67.5 $ (5.8) Accounts receivable, net $ 149.9 $ 139.6 $ 10.3 Inventories $ 177.4 $ 174.6 $ 2.8 Prepaid expenses and other current assets $ 13.7 $ 14.8 $ (1.1) Accounts payable $ 101.9 $ 108.7 $ (6.8) Accrued expenses and other current liabilities $ 59.2 $ 53.7 $ 5.5 Operating lease liabilities $ 15.9 $ 16.1 $ (0.2) Working capital $ 225.7 $ 218.0 $ 7.7 Historical Cash Flows Three Months Ended March 31, 2026 2025 Net cash provided by operating activities from continuing operations $ 4.7 $ 3.3 Net cash provided by operating activities from discontinued operations $ 1.7 $ 0.1 Net cash used in investing activities from continuing operations $ (0.8) $ (0.2) Net cash used in financing activities from continuing operations $ (11.3) $ (8.8) Effects of exchange rates on cash $ (0.1) $ 0.0 Net decrease in cash and cash equivalents $ (5.8) $ (5.6) Our primary liquidity needs are to support working capital requirements in our business, funding recently declared and any future dividends, funding capital expenditures and inventory purchases, continuing investment in upgrading and expanding our technological capabilities specifically related to additional functionality and enhanced navigation of our web platform, continuing investment in sales, marketing, merchandising, customer service and upgrading our distribution footprint and funding acquisitions. We rely principally upon operating cash flow. We currently believe that current cash on hand and cash flow from operations will be sufficient to fund our working capital and other cash requirements for at least the next twelve months. We believe our current capital structure and cash resources are adequate for our internal growth initiatives. To the extent our growth initiatives expand, including major acquisitions, we would seek to raise additional capital. We believe that, if needed, we can access public or private funding alternatives to raise additional capital. Our working capital increased $7.7 million primarily related to increased accounts receivable, accounts payable and inventory balances offset by increased accrued expenses and other current liabilities balances and reduced cash and cash equivalents, and prepaid expenses and other current assets balances. Accounts receivable days outstanding were 38.6 in 2026 compared to 38.4 in 2025, inventory turns were 5.2 in 2026 compared to 5.0 in 2025 and accounts payable days outstanding were 44.0 in 2026 compared to 48.9 in 2025. We expect that future accounts receivable, inventory and accounts payable balances will fluctuate with net sales and the product mix of our net sales. Operating Activities Net cash provided by operating activities from continuing operations was $4.7 million in 2026 compared to $3.3 million provided in 2025, attributable to cash generated from net income adjusted by other non-cash items of $19.2 million compared to $17.9 million generated in 2025 primarily due to higher net income and reduced stock-based compensation expenses in 2026 compared to prior year. Changes in working capital accounts used $14.5 million in 2026 compared to $14.6 million used in 2025, primarily the result of the changes in inventory, accounts receivable, and income taxes balances offset by changes in accounts payable balances. Net cash provided by operating activities from discontinued operations was $1.7 million and $0.1 million for the three months ended March 31, 2026 and March 31, 2025, respectively. Investing Activities Net cash used in investing activities in 2026 totaled $0.8 million primarily used for warehouse machinery and equipment for distribution facilities, motor vehicles, leasehold improvements and and molds. Net cash used in investing activities totaled $0.2 million in 2025 was used for warehouse machinery and equipment for distribution facilities, computer equipment upgrades and molds. Financing Activities Net cash used in financing activities totaled $11.3 million in 2026 primarily related to the regular quarterly dividends of $0.28 per common share which totaled approximately $10.8 million. Offsetting these payments were proceeds of $0.9 million from the issuance of common stock from our employee stock purchase plan and proceeds of $0.4 million from the issuance of common stock from stock option exercises, offset by payments for payroll taxes through shares withheld, which totaled $0.9 million. In addition, $0.9 million was used for the purchase of treasury stock. In 2025, net cash used in financing activities totaled $8.8 million primarily related to the regular quarterly dividends of $0.26 per common share which totaled approximately $10.1 million. Offsetting these payments were proceeds of $1.2 million from the issuance of common stock from stock option exercises, offset by payments for payroll taxes through shares withheld, which totaled $0.7 million, and proceeds of $0.8 million from the issuance of common stock from our employee stock purchase plan. The Company maintains a $125.0 million secured revolving credit facility with one financial institution, which has a five year term, maturing on October 19, 2026 and provides for borrowings in the United States. The credit agreement contains certain operating, financial and other covenants, including limits on annual levels of capital expenditures, availability tests related to payments of dividends and stock repurchases and fixed charge coverage tests related to acquisitions. The revolving credit agreement requires that a minimum level of availability be maintained. If such availability is not maintained, the Company will be required to maintain a fixed charge coverage ratio (as defined). The borrowings under the agreement are subject to borrowing base limitations of up to 85% of eligible accounts receivable and the inventory advance rate computed as the lesser of 65% or 85% of the net orderly liquidation value ("NOLV"). Borrowings are secured by substantially all of the Borrower's assets, as defined, including all accounts, accounts receivable, inventory and certain other assets, subject to limited exceptions, including the exclusion of certain foreign assets from the collateral. The interest rate under the amended and restated facility is computed at applicable market rates based on the Secured Overnight Financing Rate ("SOFR"), the Federal Reserve Bank of New York ("NYFRB") or the Prime Rate, plus an applicable margin. The applicable margin varies based on borrowing base availability. As of March 31, 2026, eligible collateral under the credit agreement was $125.0 million, total availability was approximately $121.5 million, total outstanding letters of credit was $1.6 million, and total excess availability was $119.9 million. The Company was in compliance with all of the covenants of the credit agreement as of March 31, 2026. Levels of earnings and cash flows are dependent on factors such as consolidated gross margin and selling, general and administrative costs, product mix and relative levels of domestic and foreign sales. Unusual gains or expense items, such as special (gains) charges and settlements, may impact earnings and are separately disclosed. We expect that past performance may not be indicative of future performance due to the competitive nature of our business where the need to adjust prices to gain or hold market share is prevalent. Macroeconomic conditions, such as business and consumer sentiment, may affect our revenues, cash flows or financial condition. However, we do not believe that there is a direct correlation between any specific macroeconomic indicator and our revenues, cash flows or financial condition. We are not currently interest rate sensitive, as we have no outstanding debt. The expenses and capital expenditures described above will require significant levels of liquidity, which we believe can be adequately funded from our currently available cash resources and cash flow from operations. In 2026 we anticipate capital expenditures in the range of $3.0 to $4.0 million, though at this time we are not contractually committed to incur these expenditures. In the past we have engaged in opportunistic acquisitions, choosing to pay the purchase price in cash, and may do so in the future as favorable situations arise. However, a deep and prolonged period of reduced business spending could adversely impact our cash resources and force us to either forego future acquisition opportunities or to pay the purchase price using stock, debt or a combination of consideration which could have an adverse effect on our earnings. We believe that our cash balances and future cash flows from operations will be sufficient to fund our working capital and other cash requirements for at least the next twelve months. We maintain our cash and cash equivalents in money market funds or their equivalents that have maturities of less than three months and in non-interest bearing accounts that partially offset banking fees. As of March 31, 2026, we had no investments with maturities of greater than three months. Accordingly, we do not believe that our cash balances have significant exposure to interest rate risk. At March 31, 2026 cash balances held in foreign subsidiaries totaled approximately $5.0 million. These balances are held in local country banks and are held primarily to support local working capital needs. The Company had over $176 million of liquidity (cash and undrawn line of credit) in the U.S. as of March 31, 2026. Material Cash Requirements We are obligated under non-cancelable operating and finance leases for the rental of our facilities and certain of our equipment which expire at various dates through 2034. As of March 31, 2026 we were obligated for approximately $117.9 million under these non-cancelable leases. In 2026 we anticipate remaining cash expenditures of approximately $16.1 million for these operating leases. We have sublease agreements for unused space, as well as excess space in facilities we are currently occupying in the United States and Canada. In the event the sub lessee is unable to fulfill its obligations, we would be responsible for remaining rents due under the leases. Our purchase and other obligations consist primarily of purchase commitments for certain employment, consulting and service agreements. In addition to the previously mentioned commitments, at March 31, 2026, we had $1.6 million of standby letters of credit outstanding. We are party to certain litigation, the outcome of which we believe, based on discussions with legal counsel, will not have a material adverse effect on our condensed consolidated financial statements.

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