[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Presents the company's unaudited financial statements and management's analysis of financial condition and results of operations [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements for the periods ended June 30, 2025 and 2024 [CONDENSED CONSOLIDATED STATEMENTS OF INCOME](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) Three Months Ended June 30: | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Sales | $54,876,833 | $45,297,002 | | Cost of goods sold | $42,488,910 | $33,907,545 | | Gross margin | $12,387,923 | $11,389,457 | | Operating income | $3,255,445 | $1,909,142 | | Net income | $2,752,399 | $1,564,179 | | Basic EPS | $0.11 | $0.06 | | Diluted EPS | $0.11 | $0.06 | Six Months Ended June 30: | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Sales | $103,132,662 | $85,154,782 | | Cost of goods sold | $78,776,715 | $63,444,641 | | Gross margin | $24,355,947 | $21,710,141 | | Operating income | $6,373,866 | $4,249,285 | | Net income | $5,245,746 | $3,471,718 | | Basic EPS | $0.20 | $0.13 | | Diluted EPS | $0.20 | $0.13 | [CONDENSED CONSOLIDATED BALANCE SHEETS](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2025 and December 31, 2024: | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $22,851,869 | $20,609,003 | | Total current assets | $56,580,655 | $51,603,807 | | Total assets | $82,715,760 | $77,870,489 | | Total current liabilities | $12,360,432 | $12,518,134 | | Total liabilities | $24,939,202 | $25,218,351 | | Total stockholders' equity | $57,776,558 | $52,652,138 | [CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Six Months Ended June 30: | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operations | $3,722,594 | $3,002,262 | | Net cash used in investing | $(879,509) | $(1,265,004) | | Net cash used in financing | $(600,219) | $(2,247,110) | | Net change in cash and cash equivalents | $2,242,866 | $(509,852) | | Cash and cash equivalents, end of period | $22,851,869 | $17,344,001 | [CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) Three Months Ended June 30, 2025: | Metric | Amount | | :--- | :--- | | Balance as of April 1, 2025 | $55,142,859 | | Net Income | $2,752,399 | | Shares repurchased | $(118,700) | | Balance as of June 30, 2025 | $57,776,558 | Six Months Ended June 30, 2025: | Metric | Amount | | :--- | :--- | | Balance as of January 1, 2025 | $52,652,138 | | Net Income | $5,245,746 | | Shares repurchased | $(121,326) | | Balance as of June 30, 2025 | $57,776,558 | [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS](index=9&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) [NOTE 1 – BASIS OF PRESENTATION](index=9&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC regulations, and should be read in conjunction with the 2024 Annual Report on Form 10-K[22](index=22&type=chunk) [NOTE 2 – PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS](index=9&type=section&id=NOTE%202%20%E2%80%93%20PRINCIPLES%20OF%20CONSOLIDATION%20AND%20NATURE%20OF%20OPERATIONS) - Envela operates as a holding company through subsidiaries in re-commerce and recycling sectors, with all intercompany transactions eliminated[24](index=24&type=chunk) - The Consumer Segment focuses on online and brick-and-mortar sales of authenticated high-end luxury goods, including pre-owned fine jewelry, diamonds, luxury watches, and secondary market bullion, emphasizing environmentally responsible options[25](index=25&type=chunk) - The Commercial Segment specializes in de-manufacturing end-of-life electronic assets for commodity reclamation and IT asset disposition (ITAD), promoting a circular economy through reuse and recycling[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk) [NOTE 3 – ACCOUNTING POLICIES AND ESTIMATES](index=13&type=section&id=NOTE%203%20%E2%80%93%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) - Revenue recognition follows ASC 606, with the Consumer Segment recognizing revenue upon merchandise delivery or point of sale for retail, and shipment for e-commerce[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - The Commercial Segment recognizes refining revenue upon transfer of control of goods at the destination port, with an estimate for variable consideration based on precious metal spot price and weight[34](index=34&type=chunk)[35](index=35&type=chunk) - For the six months ended June 30, 2025, **two customers accounted for 50.3% of sales and 19.1% of accounts receivable**, indicating significant customer concentration[43](index=43&type=chunk) Shipping and Handling Costs (Three Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $13,914 | $49,350 | | Commercial | $926,483 | $1,194,203 | Shipping and Handling Costs (Six Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $30,600 | $49,789 | | Commercial | $1,917,808 | $2,588,280 | Advertising Costs (Three Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $290,277 | $324,868 | | Commercial | $124,873 | $61,672 | Advertising Costs (Six Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $570,440 | $572,982 | | Commercial | $206,008 | $132,977 | - The Company had a **deferred tax asset of $90,858** as of June 30, 2025, up from $49,526 as of December 31, 2024, with no valuation allowance recorded[52](index=52&type=chunk) - The FASB issued ASU 2024-03 in November 2024, requiring additional expense disaggregation disclosures, effective for annual periods beginning after December 15, 2026[74](index=74&type=chunk) [NOTE 4 – INVENTORIES](index=22&type=section&id=NOTE%204%20%E2%80%93%20INVENTORIES) Inventories as of June 30, 2025 and December 31, 2024: | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Consumer Trade inventories | $25,221,844 | $23,973,333 | | Commercial Trade inventories | $2,159,340 | $1,732,191 | | **Total Inventories** | **$27,381,184** | **$25,705,524** | [NOTE 5 – GOODWILL](index=22&type=section&id=NOTE%205%20%E2%80%93%20GOODWILL) Goodwill Changes as of June 30, 2025 and December 31, 2024: | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Consumer Opening balance | $— | $300,000 | | Consumer Additions (reductions) | $— | $(300,000) | | Commercial Opening balance | $3,621,453 | $3,621,453 | | Commercial Additions (reductions) | $— | $— | | **Total Goodwill** | **$3,621,453** | **$3,621,453** | - The **decrease in consumer goodwill by $300,000** in Fiscal 2024 was due to measurement period adjustments related to the Scottsdale Transaction (acquisition of a jewelry fabricator)[77](index=77&type=chunk) [NOTE 6 – PROPERTY AND EQUIPMENT, NET](index=23&type=section&id=NOTE%206%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT,%20NET) Property and Equipment, Net as of June 30, 2025 and December 31, 2024: | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Consumer Sub-total | $9,540,555 | $9,315,672 | | Commercial Sub-total | $595,203 | $677,491 | | Corporate Sub-total | $3,666,682 | $3,521,999 | | **Total Property and Equipment, Net** | **$13,802,440** | **$13,515,162** | - Construction in progress for Consumer and Corporate segments totaled **$62,211 and $83,185** respectively, as of June 30, 2025, and are not yet depreciable[79](index=79&type=chunk) [NOTE 7 – INTANGIBLE ASSETS, NET](index=24&type=section&id=NOTE%207%20%E2%80%93%20INTANGIBLE%20ASSETS,%20NET) Intangible Assets, Net as of June 30, 2025 and December 31, 2024: | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Consumer Sub-total | $42,382 | $46,297 | | Commercial Sub-total | $3,358,418 | $3,673,145 | | Corporate Sub-total | $379,966 | $378,336 | | **Total Intangible Assets, Net** | **$3,780,766** | **$4,097,778** | Estimated Future Amortization Expense as of June 30, 2025: | Year | Consumer | Commercial | Corporate | Total | | :--- | :--- | :--- | :--- | :--- | | 2025 | $4,464 | $314,724 | $54,280 | $373,468 | | 2026 | $8,928 | $629,448 | $108,562 | $746,938 | | 2027 | $8,928 | $629,448 | $108,562 | $746,938 | | 2028 | $8,056 | $629,448 | $108,562 | $746,066 | | 2029 | $3,273 | $539,923 | $— | $543,196 | | Thereafter | $4,809 | $615,427 | $— | $620,236 | | **Total** | **$38,458** | **$3,358,418** | **$379,966** | **$3,776,842** | [NOTE 8 – ACCRUED EXPENSES](index=25&type=section&id=NOTE%208%20%E2%80%93%20ACCRUED%20EXPENSES) Accrued Expenses as of June 30, 2025 and December 31, 2024: | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Consumer Sub-total | $582,565 | $506,113 | | Commercial Sub-total | $1,624,310 | $2,407,191 | | Corporate Sub-total | $176,021 | $302,039 | | **Total Accrued Expenses** | **$2,382,896** | **$3,215,343** | [NOTE 9 – SEGMENT INFORMATION](index=25&type=section&id=NOTE%209%20%E2%80%93%20SEGMENT%20INFORMATION) Operating Income (Three Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $726,955 | $(100,657) | | Commercial | $2,528,490 | $2,009,799 | | Consolidated | $3,255,445 | $1,909,142 | Operating Income (Six Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $869,320 | $103,366 | | Commercial | $5,504,546 | $4,145,919 | | Consolidated | $6,373,866 | $4,249,285 | Capital Expenditures (Three Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $291,521 | $435,671 | | Commercial | $52,271 | $108,222 | | Corporate | $153,380 | $333,139 | | **Total** | **$497,172** | **$877,032** | Capital Expenditures (Six Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $560,474 | $704,624 | | Commercial | $52,271 | $108,222 | | Corporate | $269,414 | $449,175 | | **Total** | **$882,159** | **$1,262,021** | Total Assets as of: | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Consumer | $43,903,025 | $40,454,328 | | Commercial | $16,001,230 | $33,068,887 | | Corporate | $22,811,505 | $4,347,274 | | **Total** | **$82,715,760** | **$77,870,489** | [NOTE 10 – REVENUE](index=29&type=section&id=NOTE%2010%20%E2%80%93%20REVENUE) Sales and Gross Margin (Three Months Ended June 30): | Segment | 2025 Sales | 2025 Gross Margin | 2025 Margin % | 2024 Sales | 2024 Gross Margin | 2024 Margin % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Consumer | $43,173,758 | $4,657,986 | 10.8% | $31,990,028 | $4,021,329 | 12.6% | | Commercial | $11,703,075 | $7,729,937 | 65.5% | $13,306,974 | $7,368,128 | 65.5% | | **Consolidated** | **$54,876,833** | **$12,387,923** | **22.6%** | **$45,297,002** | **$11,389,457** | **25.1%** | Sales and Gross Margin (Six Months Ended June 30): | Segment | 2025 Sales | 2025 Gross Margin | 2025 Margin % | 2024 Sales | 2024 Gross Margin | 2024 Margin % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Consumer | $79,944,362 | $8,868,889 | 11.1% | $60,216,045 | $7,570,518 | 12.6% | | Commercial | $23,188,300 | $15,487,058 | 66.8% | $24,938,737 | $14,139,623 | 56.7% | | **Consolidated** | **$103,132,662** | **$24,355,947** | **23.6%** | **$85,154,782** | **$21,710,141** | **25.5%** | Contract Liabilities (Customer Deposits and Gift Cards): | Segment | Opening Balance - 1/1/2025 | Closing Balance - 6/30/2025 | | :--- | :--- | :--- | | Consumer | $435,508 | $1,601,699 | | Commercial | $— | $3,623 | [NOTE 11 – LEASES](index=30&type=section&id=NOTE%2011%20%E2%80%93%20LEASES) Future Minimum Lease Payments as of June 30, 2025: | Year | Consumer Operating Leases | Commercial Operating Leases | Total | | :--- | :--- | :--- | :--- | | 2025 | $503,126 | $621,338 | $1,124,464 | | 2026 | $1,186,142 | $474,320 | $1,660,462 | | 2027 | $887,803 | $33,454 | $921,257 | | 2028 | $652,641 | $— | $652,641 | | 2029 | $533,234 | $— | $533,234 | | Thereafter | $203,191 | $— | $203,191 | | **Total minimum lease payments** | **$3,966,137** | **$1,129,112** | **$5,095,249** | | Less: imputed interest | $(342,884) | $(23,498) | $(366,382) | | **Sub-total** | **$3,623,253** | **$1,105,614** | **$4,728,867** | | Less: current portion | | | $(1,818,941) | | **Total non-current** | | | **$2,909,926** | Leasing Costs (Six Months Ended June 30): | Cost Type | 2025 | 2024 | | :--- | :--- | :--- | | Operating lease cost | $1,208,522 | $984,880 | | Variable lease cost | $420,664 | $387,028 | | Short-term lease cost | $100,977 | $180,729 | | **Total** | **$1,730,163** | **$1,552,637** | - As of June 30, 2025, the **weighted average remaining lease term** for operating leases was **2.8 years**, with a **weighted average discount rate of 4.2%**[89](index=89&type=chunk) [NOTE 12 – BASIC AND DILUTED AVERAGE SHARES](index=31&type=section&id=NOTE%2012%20%E2%80%93%20BASIC%20AND%20DILUTED%20AVERAGE%20SHARES) Weighted Average Shares Outstanding (Three Months Ended June 30): | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Basic | 25,991,979 | 26,248,554 | | Diluted | 25,991,979 | 26,263,554 | Weighted Average Shares Outstanding (Six Months Ended June 30): | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Basic | 25,993,802 | 26,333,796 | | Diluted | 25,993,802 | 26,348,796 | - The Board approved a stock repurchase program on March 14, 2023, authorizing up to **1.0 million shares** at a price not exceeding $9.00, expiring March 31, 2026[91](index=91&type=chunk) - An additional **100,000 shares** were authorized on March 27, 2025, bringing the total to **1.1 million shares**[92](index=92&type=chunk) Share Repurchases (Six Months Ended June 30, 2025): | Period | Shares Purchased | Average Price Paid per Share | Total Price Paid | | :--- | :--- | :--- | :--- | | January 1 - June 30, 2025 | 20,663 | $5.87 | $121,326 | [NOTE 13 – DEBT](index=34&type=section&id=NOTE%2013%20%E2%80%93%20DEBT) Long-Term Debt Obligations as of June 30, 2025 and December 31, 2024: | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Consumer Sub-total | $5,160,828 | $5,285,948 | | Commercial Sub-total | $5,442,691 | $5,735,838 | | Corporate Sub-total | $2,439,767 | $2,500,393 | | **Total** | **$13,043,286** | **$13,522,179** | | Less: current portion | $(3,374,442) | $(3,591,351) | | **Total non-current** | **$9,668,844** | **$9,930,828** | Future Principal Payments on Long-Term Debt as of June 30, 2025: | Year | Consumer | Commercial | Corporate | Total | | :--- | :--- | :--- | :--- | :--- | | 2025 | $550,619 | $127,986 | $2,439,767 | $3,118,372 | | 2026 | $2,473,027 | $5,314,705 | $— | $7,787,732 | | 2027 | $116,040 | $— | $— | $116,040 | | 2028 | $120,234 | $— | $— | $120,234 | | 2029 | $125,011 | $— | $— | $125,011 | | Thereafter | $1,775,897 | $— | $— | $1,775,897 | | **Total** | **$5,160,828** | **$5,442,691** | **$2,439,767** | **$13,043,286** | - The Company was in **compliance with all debt obligation covenants** for the three and six months ended June 30, 2025 and 2024[98](index=98&type=chunk) [NOTE 14 – STOCK-BASED COMPENSATION](index=38&type=section&id=NOTE%2014%20%E2%80%93%20STOCK-BASED%20COMPENSATION) - Shareholders approved the 2025 Equity Incentive Plan on June 25, 2025, authorizing up to **1.1 million shares** of Common Stock for awards, effective for 10 years[102](index=102&type=chunk) - **No awards have been granted** under this plan as of June 30, 2025, resulting in no stock-based compensation expense for the reported periods[103](index=103&type=chunk) [NOTE 15 – RELATED PARTY TRANSACTIONS](index=38&type=section&id=NOTE%2015%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) - The Company utilizes space owned by a related party for material processing, with no consideration exchanged, and estimates any potential costs would be immaterial[104](index=104&type=chunk) [NOTE 16 – CONTINGENCIES](index=38&type=section&id=NOTE%2016%20%E2%80%93%20CONTINGENCIES) - Management believes that the resolution of currently pending lawsuits, claims, and proceedings will **not have a material adverse effect** on the Company's financial position, results of operations, or liquidity[105](index=105&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=39&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the Company's financial condition, operational results, liquidity, and capital resources [Forward-Looking Statements](index=39&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements subject to safe harbors, and actual results may differ materially due to various risks and uncertainties[107](index=107&type=chunk) [Introduction](index=39&type=section&id=Introduction) - This section discusses operations for the three and six months ended June 30, 2025 and 2024, and should be read with the 2024 Annual Report and unaudited condensed consolidated financial statements[108](index=108&type=chunk) [Critical Accounting Policies and Estimates](index=39&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - There were **no material changes** to the Company's critical accounting policies and estimates from those described in the 2024 Annual Report[109](index=109&type=chunk) [Economic Conditions](index=39&type=section&id=Economic%20Conditions) - The 'One Big Beautiful Bill Act' signed on July 4, 2025, includes federal tax law changes, but the Company **does not expect a material impact** on its financial results[109](index=109&type=chunk)[110](index=110&type=chunk) - High interest rates, inflation, and commodity price risks may affect consumer spending, but the Company adjusts inbound purchase prices to counterbalance these economic cycles[111](index=111&type=chunk)[112](index=112&type=chunk) - Tariffs do not directly impact the Consumer Segment, while the Commercial Segment may face increased costs for international personal technology assets and parts[114](index=114&type=chunk)[115](index=115&type=chunk) [Our Business](index=41&type=section&id=Our%20Business) - Envela operates as a holding company with subsidiaries in re-commerce and recycling, including a Consumer Segment for luxury goods and a Commercial Segment for electronics[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - The Commercial Segment specializes in de-manufacturing end-of-life electronic assets for commodity reclamation and IT asset disposition (ITAD), emphasizing data security and environmental sustainability[120](index=120&type=chunk) [Segment Activities](index=43&type=section&id=Segment%20Activities) - The Consumer Segment aims to **expand its physical store footprint** across the U.S. and evaluate complementary product and service offerings[122](index=122&type=chunk) - The Commercial Segment plans to **grow both organically and through acquisitions**, leveraging its bolstered management team and operating systems[123](index=123&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) [Comparison of the Three Months Ended June 30, 2025 and 2024](index=44&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030,%202025%20and%202024) Consolidated Sales (Three Months Ended June 30): | Year | Sales | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $54,876,833 | $9,579,831 | 21.1% | | 2024 | $45,297,002 | | | - Consumer Segment sales **increased by 35.0% to $43,173,758**, driven by stronger volumes and pricing in wholesale precious metals and favorable retail store performance[126](index=126&type=chunk)[129](index=129&type=chunk) - Commercial Segment sales **decreased by 12.1% to $11,703,075**, primarily due to unfavorable performance in electronic scrap grades and lower ITAD revenue[127](index=127&type=chunk)[130](index=130&type=chunk) Consolidated Cost of Goods Sold (Three Months Ended June 30): | Year | Cost of Goods Sold | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $42,488,910 | $8,581,365 | 25.3% | | 2024 | $33,907,545 | | | - Consumer Segment cost of goods sold **increased by 37.7% to $38,515,772**, mainly due to higher sales volumes and rising gold prices[131](index=131&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) - Commercial Segment cost of goods sold **decreased by 33.1% to $3,973,138**, attributed to lower sales volumes and higher margins from personal technology assets and ITAD[135](index=135&type=chunk)[136](index=136&type=chunk) Consolidated Gross Margin (Three Months Ended June 30): | Year | Gross Margin | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $12,387,923 | $998,466 | 8.8% | | 2024 | $11,389,457 | | | - Consumer Segment gross margin **increased by 15.8% to $4,657,986**[137](index=137&type=chunk)[139](index=139&type=chunk) - Commercial Segment gross margin **increased by 4.9% to $7,729,937**[140](index=140&type=chunk) Consolidated Selling, General and Administrative (Three Months Ended June 30): | Year | SG&A | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $8,672,067 | $(445,981) | (4.9)% | | 2024 | $9,118,048 | | | - Consumer Segment SG&A **decreased by 6.8% to $3,735,427**, due to cost reductions from store onboarding and optimizing headcount[141](index=141&type=chunk)[143](index=143&type=chunk) - Commercial Segment SG&A **decreased by 3.4% to $4,936,640**, primarily due to reduced ERP onboarding support and variable-cost production expenses[144](index=144&type=chunk) Consolidated Depreciation and Amortization (Three Months Ended June 30): | Year | D&A | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $460,411 | $98,144 | 27.1% | | 2024 | $362,267 | | | - Consumer Segment D&A **increased by 73.8% to $195,604**, mainly due to depreciation of assets from new retail stores[145](index=145&type=chunk)[147](index=147&type=chunk) Consolidated Other Income (Three Months Ended June 30): | Year | Other Income | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $394,251 | $168,834 | 74.9% | | 2024 | $225,417 | | | - Consumer Segment other income **increased by 1,851.2% to $156,158**, primarily due to an employee retention credit and earnings on excess cash balances[149](index=149&type=chunk)[151](index=151&type=chunk) - Commercial Segment other income **increased by 9.5% to $238,093**, mainly due to earnings on excess cash balances[153](index=153&type=chunk) Consolidated Interest Expense (Three Months Ended June 30): | Year | Interest Expense | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $(106,228) | $2,913 | (2.7)% | | 2024 | $(109,141) | | | Consolidated Income Tax Expense (Three Months Ended June 30): | Year | Income Tax Expense | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $(791,069) | $(329,830) | 71.5% | | 2024 | $(461,239) | | | - The **effective income tax rate was 22.3% in 2025** and 22.8% in 2024[162](index=162&type=chunk) Consolidated Net Income (Three Months Ended June 30): | Year | Net Income | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $2,752,399 | $1,188,220 | 76.0% | | 2024 | $1,564,179 | | | - Consumer Segment net income **increased by $821,329**, moving from a net loss of $177,958 in 2024 to a net income of $643,371 in 2025[163](index=163&type=chunk)[165](index=165&type=chunk) - Commercial Segment net income **increased by 21.1% to $2,109,028**[166](index=166&type=chunk) Consolidated Basic and Diluted EPS (Three Months Ended June 30): | Year | EPS | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $0.11 | $0.05 | 83.3% | | 2024 | $0.06 | | | [Comparison of the Six Months Ended June 30, 2025 and 2024](index=57&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) Consolidated Sales (Six Months Ended June 30): | Year | Sales | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $103,132,662 | $17,977,880 | 21.1% | | 2024 | $85,154,782 | | | - Consumer Segment sales **increased by 32.8% to $79,944,362**, driven by stronger volumes and pricing in wholesale precious metals and contributions from retail stores[169](index=169&type=chunk)[171](index=171&type=chunk) - Commercial Segment sales **decreased by 7.0% to $23,188,300**, due to lower sales of personal technology assets, ITAD revenue share settlements, and electronic scrap volumes[172](index=172&type=chunk) Consolidated Cost of Goods Sold (Six Months Ended June 30): | Year | Cost of Goods Sold | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $78,776,715 | $15,332,074 | 24.2% | | 2024 | $63,444,641 | | | - Consumer Segment cost of goods sold **increased by 35.0% to $71,075,473**, primarily due to higher wholesale precious metals transactions[175](index=175&type=chunk)[176](index=176&type=chunk) - Commercial Segment cost of goods sold **decreased by 28.7% to $7,701,242**, attributed to lower sales volumes and higher margins from personal technology assets and ITAD[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) Consolidated Gross Margin (Six Months Ended June 30): | Year | Gross Margin | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $24,355,947 | $2,645,806 | 12.2% | | 2024 | $21,710,141 | | | - Consumer Segment gross margin **increased by 17.2% to $8,868,889**[180](index=180&type=chunk)[182](index=182&type=chunk) - Commercial Segment gross margin **increased by 9.5% to $15,487,058**[183](index=183&type=chunk) Consolidated Selling, General and Administrative (Six Months Ended June 30): | Year | SG&A | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $17,076,329 | $321,305 | 1.9% | | 2024 | $16,755,024 | | | - Consumer Segment SG&A **increased by 5.0% to $7,623,333**, due to full cost structures of new stores, partially offset by reduced onboarding costs[184](index=184&type=chunk)[186](index=186&type=chunk) Consolidated Depreciation and Amortization (Six Months Ended June 30): | Year | D&A | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $905,752 | $199,920 | 28.3% | | 2024 | $705,832 | | | - Consumer Segment D&A **increased by 82.5% to $376,236**, primarily due to depreciation of assets from new retail stores[188](index=188&type=chunk)[190](index=190&type=chunk) Consolidated Other Income (Six Months Ended June 30): | Year | Other Income | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $599,856 | $135,911 | 29.3% | | 2024 | $463,945 | | | - Consumer Segment other income **increased by 880.8% to $157,007**, mainly due to an employee retention credit and earnings on excess cash balances[192](index=192&type=chunk)[194](index=194&type=chunk) - Commercial Segment other income **decreased by 1.1% to $442,849**, attributed to a reduction in earned interest rates and rental income[196](index=196&type=chunk) Consolidated Interest Expense (Six Months Ended June 30): | Year | Interest Expense | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $(212,549) | $17,446 | (7.6)% | | 2024 | $(229,995) | | | Consolidated Income Tax Expense (Six Months Ended June 30): | Year | Income Tax Expense | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $(1,515,427) | $(503,910) | 49.8% | | 2024 | $(1,011,517) | | | - The **effective income tax rate was 22.4% in 2025** and 22.6% in 2024[204](index=204&type=chunk) Consolidated Net Income (Six Months Ended June 30): | Year | Net Income | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $5,245,746 | $1,774,028 | 51.1% | | 2024 | $3,471,718 | | | - Consumer Segment net income **increased by $801,947**, moving from a net loss of $89,482 in 2024 to a net income of $712,465 in 2025[205](index=205&type=chunk)[207](index=207&type=chunk) - Commercial Segment net income **increased by 27.3% to $4,533,281**[208](index=208&type=chunk) Consolidated Basic and Diluted EPS (Six Months Ended June 30): | Year | EPS | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $0.20 | $0.07 | 53.8% | | 2024 | $0.13 | | | [Non-U.S. GAAP Financial Measures](index=67&type=section&id=Non-U.S.%20GAAP%20Financial%20Measures) - The Company uses non-U.S. GAAP financial measures, such as Adjusted EBITDA and Net Cash, to provide a meaningful presentation of its operating and financial performance[211](index=211&type=chunk)[213](index=213&type=chunk)[215](index=215&type=chunk) Adjusted EBITDA Reconciliation (Three Months Ended June 30): | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net income (loss) | $2,752,399 | $1,564,179 | | Depreciation and amortization | $460,411 | $362,267 | | Other income | $(394,251) | $(225,417) | | Interest expense | $106,228 | $109,141 | | Income tax expense | $791,069 | $461,239 | | **Adjusted EBITDA** | **$3,715,856** | **$2,271,409** | Adjusted EBITDA Reconciliation (Six Months Ended June 30): | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net income | $5,245,746 | $3,471,718 | | Depreciation and amortization | $905,752 | $705,832 | | Other income | $(599,856) | $(463,945) | | Interest expense | $212,549 | $229,995 | | Income tax expense | $1,515,427 | $1,011,517 | | **Adjusted EBITDA** | **$7,279,618** | **$4,955,117** | Net Cash as of: | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total cash | $22,851,869 | $20,609,003 | | Less: debt obligations | $(13,043,286) | $(13,522,179) | | **Net Cash** | **$9,808,583** | **$7,086,824** | [Liquidity and Capital Resources](index=71&type=section&id=Liquidity%20and%20Capital%20Resources) Condensed Consolidated Statement of Cash Flows (Six Months Ended June 30): | Activity | 2025 | 2024 | Change Amount | Change % | | :--- | :--- | :--- | :--- | :--- | | Operating activities | $3,722,594 | $3,002,262 | $720,332 | 24.0% | | Investing activities | $(879,509) | $(1,265,004) | $385,495 | (30.5)% | | Financing activities | $(600,219) | $(2,247,110) | $1,646,891 | (73.3)% | | Net change in cash and cash equivalents | $2,242,866 | $(509,852) | $2,752,718 | NM | - Cash provided by operations **increased by 24.0% to $3,722,594**, driven by higher net income and changes in operating assets and liabilities[219](index=219&type=chunk)[220](index=220&type=chunk) - Cash used in investing activities **decreased by 30.5% to $879,509**, primarily due to reduced spending on the ERP system[221](index=221&type=chunk) - Cash used in financing activities **decreased by 73.3% to $600,219**, mainly due to a reduction in share buybacks[222](index=222&type=chunk) - The Company's primary liquidity source is cash from operating activities, with **no current draws on its line of credit**[223](index=223&type=chunk)[224](index=224&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=73&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Envela Corporation is not required to provide these disclosures - Envela Corporation is **exempt from disclosing** quantitative and qualitative information about market risk due to its status as a 'smaller reporting company'[226](index=226&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=73&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section details the evaluation of the Company's disclosure controls and procedures and reports on internal control changes [Evaluation of Disclosure Controls and Procedures](index=73&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management concluded that **disclosure controls and procedures were effective** as of June 30, 2025, providing reasonable assurance of timely reporting[227](index=227&type=chunk) [Changes in Internal Control over Financial Reporting](index=75&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - There were **no material changes** in internal control over financial reporting during the period covered by this Quarterly Report[229](index=229&type=chunk) [PART II. OTHER INFORMATION](index=76&type=section&id=PART%20II.%20OTHER%20INFORMATION) Covers legal proceedings, risk factors, share repurchases, and other required disclosures [ITEM 1. LEGAL PROCEEDINGS](index=76&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section addresses pending legal actions and their expected financial impact - Management believes that the ultimate resolution of current legal proceedings will **not materially adversely affect** the Company's financial condition, results of operations, or cash flow[231](index=231&type=chunk) [ITEM 1A. RISK FACTORS](index=76&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section states there have been no material changes to previously disclosed risk factors - **No material changes** have occurred to the risk factors previously disclosed in the Company's 2024 Annual Report[232](index=232&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=76&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES,%20USE%20OF%20PROCEEDS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) This section details the Company's share repurchase activities for the three months ended June 30, 2025 Share Repurchases (Three Months Ended June 30, 2025): | Fiscal Period | Total Number of Shares Purchased | Average Price Paid Per Share ($) | Total Price Paid | Maximum Number of Shares that May Yet be Purchased Under the Plan | | :--- | :--- | :--- | :--- | :--- | | Balance as of March 31, 2025 | 929,430 | $4.92 | $4,571,449 | 170,570 | | April 1 - 30, 2025 | — | — | — | 170,570 | | May 1 - 31, 2025 | — | — | — | 170,570 | | June 1 - 30, 2025 | 20,163 | $5.89 | $118,700 | 150,407 | | **Balance as of June 30, 2025** | **949,593** | **$4.94** | **$4,690,149** | **150,407** | - The stock repurchase program authorizes the repurchase of up to **1.1 million shares** and expires on March 31, 2026[235](index=235&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=78&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This item is not applicable to the Company for the reporting period - This item is **not applicable**[235](index=235&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=78&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the Company for the reporting period - This item is **not applicable**[235](index=235&type=chunk) [ITEM 5. OTHER INFORMATION](index=78&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section indicates that there is no other information to report for the period - No other information is reported under this item[236](index=236&type=chunk) [ITEM 6. EXHIBITS](index=79&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed as part of the Form 10-Q - Key exhibits include the 2025 Equity Incentive Plan, certifications pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350, and various XBRL documents[237](index=237&type=chunk) [SIGNATURE](index=80&type=section&id=SIGNATURE) This section contains the certifying signature of the Chief Financial Officer - The report was signed by John G. DeLuca, Chief Financial Officer, on August 6, 2025[239](index=239&type=chunk) [GLOSSARY OF DEFINED TERMS](index=81&type=section&id=GLOSSARY%20OF%20DEFINED%20TERMS) This section provides definitions for key terms used throughout the document - A glossary of defined terms is provided to clarify terminology used in the document[240](index=240&type=chunk)

Group 1 - The 'Trump Tariffs' situation is stabilizing, with the index rising 13% since April 8, nearly recovering year-to-date losses [1] Group 2 - The company specializes in analyzing restaurant stocks across various segments, including QSR, fast casual, casual dining, fine dining, and family dining [2] - Advanced analytical models and specialized valuation techniques are employed to provide insights and strategies for investors [2] - The company engages in academic and journalistic initiatives, contributing to institutions that promote economic freedom [2]

Group 1: Earnings Performance - Envela Corporation reported quarterly earnings of $0.10 per share, exceeding the Zacks Consensus Estimate of $0.04 per share, and up from $0.07 per share a year ago, representing an earnings surprise of 150% [1] - The company posted revenues of $48.26 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 6.62%, compared to year-ago revenues of $39.9 million [2] - Over the last four quarters, Envela has consistently surpassed consensus EPS estimates and revenue estimates [2] Group 2: Stock Performance and Outlook - Envela shares have declined approximately 7.5% since the beginning of the year, while the S&P 500 has decreased by 4.7% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the upcoming quarter is $0.07 on revenues of $48.92 million, and for the current fiscal year, it is $0.29 on revenues of $197.28 million [7] Group 3: Industry Context - The Retail - Jewelry industry, to which Envela belongs, is currently ranked in the top 9% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5] - The Zacks Rank for Envela is currently 3 (Hold), indicating that the shares are expected to perform in line with the market in the near future [6]

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents Envela Corporation's unaudited condensed consolidated financial statements for the three months ended March 31, 2025 and 2024, including statements of income, balance sheets, cash flows, and stockholders' equity, along with detailed notes on accounting policies, segment information, and other financial disclosures [CONDENSED CONSOLIDATED STATEMENTS OF INCOME](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME) The company reported a significant increase in sales and net income for the three months ended March 31, 2025, compared to the same period in 2024, driven by higher gross margin and operating income Condensed Consolidated Statements of Income (Three Months Ended March 31) | Metric | 2025 | 2024 | | :-------------------------- | :----------- | :----------- | | Sales | $48,255,829 | $39,857,780 | | Cost of goods sold | $36,287,805 | $29,537,096 | | Gross margin | $11,968,024 | $10,320,684 | | Operating income | $3,118,421 | $2,340,143 | | Net income | $2,493,347 | $1,907,539 | | Basic earnings per share | $0.10 | $0.07 | | Diluted earnings per share | $0.10 | $0.07 | - Sales increased by **21.1% YoY**, from **$39,857,780** in Q1 2024 to **$48,255,829** in Q1 2025[11](index=11&type=chunk) - Net income grew by **30.7% YoY**, reaching **$2,493,347** in Q1 2025 from **$1,907,539** in Q1 2024[11](index=11&type=chunk) [CONDENSED CONSOLIDATED BALANCE SHEETS](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The balance sheet shows an increase in total assets and stockholders' equity as of March 31, 2025, compared to December 31, 2024, with a slight decrease in total liabilities Condensed Consolidated Balance Sheets (As of March 31, 2025 and December 31, 2024) | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Total current assets | $53,503,337 | $51,603,807 | | Total assets | $79,664,327 | $77,870,489 | | Total current liabilities | $11,867,713 | $12,518,134 | | Total liabilities | $24,521,468 | $25,218,351 | | Total stockholders' equity | $55,142,859 | $52,652,138 | - Total assets increased by **$1,793,838** from December 31, 2024, to March 31, 2025[13](index=13&type=chunk) - Total stockholders' equity increased by **$2,490,721**, reflecting the net income for the period[13](index=13&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Net cash provided by operating activities significantly decreased in Q1 2025 compared to Q1 2024, while cash used in investing and financing activities also decreased, leading to a lower net change in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31) | Cash Flow Activity | 2025 | 2024 | | :-------------------------- | :----------- | :----------- | | Net cash provided by operations | $1,131,057 | $3,791,721 | | Net cash (used in) investing | $(382,987) | $(644,792) | | Net cash (used in) financing | $(328,808) | $(1,216,915) | | Net change in cash and cash equivalents | $419,262 | $1,930,014 | | Cash and cash equivalents, end of period | $21,028,265 | $19,783,867 | - Net cash provided by operations decreased by **70.2% YoY**[14](index=14&type=chunk)[174](index=174&type=chunk) - Net cash used in investing activities decreased by **40.6% YoY**, primarily due to reduced spending on ERP systems and new store build-outs[14](index=14&type=chunk)[175](index=175&type=chunk) - Net cash used in financing activities decreased by **73.0% YoY**, mainly due to reduced share buybacks[14](index=14&type=chunk)[176](index=176&type=chunk) [CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY](index=9&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY) Stockholders' equity increased from January 1, 2025, to March 31, 2025, primarily due to net income, partially offset by share repurchases Condensed Consolidated Statements of Stockholders' Equity (Three Months Ended March 31) | Metric | March 31, 2025 | January 1, 2025 | | :-------------------------- | :------------- | :-------------- | | Total Stockholders' Equity | $55,142,859 | $52,652,138 | | Net Income | $2,493,347 | - | | Shares repurchased (amount) | $(2,626) | - | - Net income contributed **$2,493,347** to stockholders' equity in Q1 2025[18](index=18&type=chunk) - The company repurchased **500 shares** for **$2,626** during Q1 2025[18](index=18&type=chunk)[96](index=96&type=chunk) [NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)](index=10&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) These notes provide detailed explanations of the accounting policies, estimates, and specific financial statement line items, offering crucial context for understanding the company's financial position and performance [NOTE 1 – BASIS OF PRESENTATION](index=10&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) The unaudited interim condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC regulations, and should be read in conjunction with the company's 2024 Annual Report on Form 10-K - Statements are prepared under **U.S. GAAP** for interim financial information and **SEC Regulation S-X**[20](index=20&type=chunk) - Results for Q1 2025 are not necessarily indicative of the full fiscal year 2025[20](index=20&type=chunk) - Company's operations are within the contiguous U.S., and its functional currency is the **U.S. Dollar**[20](index=20&type=chunk) [NOTE 2 – PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS](index=10&type=section&id=NOTE%202%20%E2%80%93%20PRINCIPLES%20OF%20CONSOLIDATION%20AND%20NATURE%20OF%20OPERATIONS) Envela operates as a holding company through subsidiaries in recommerce and recycling sectors, with distinct Consumer and Commercial segments. The Consumer segment focuses on luxury goods and bullion, while the Commercial segment specializes in de-manufacturing electronic assets and ITAD services, both emphasizing circular economy principles - Envela is a holding company operating through subsidiaries in recommerce and recycling[22](index=22&type=chunk) - Consumer segment: online and brick-and-mortar sales of authenticated high-end luxury goods (jewelry, diamonds, watches, bullion), incorporating recycled materials for ethical and low-carbon products[23](index=23&type=chunk) - Commercial segment: de-manufacturing end-of-life electronic assets for commodity reclamation and ITAD services, focusing on reuse, data security, and environmental sustainability[24](index=24&type=chunk)[25](index=25&type=chunk) [NOTE 3 – ACCOUNTING POLICIES AND ESTIMATES](index=12&type=section&id=NOTE%203%20%E2%80%93%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This note details the critical accounting policies and estimates used in preparing the financial statements, including revenue recognition for both consumer and commercial segments, inventory valuation, goodwill impairment, and depreciation/amortization of assets. It also covers new accounting standards pronouncements - Revenue recognition follows **ASC 606**, with specific approaches for consumer (delivery/point of sale, assay-based for precious metals) and commercial segments (transfer of control, SOW completion, outright sales)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk) - Inventories are stated at the lower of cost and net realizable value, with cost determined by fair value estimates for consumer goods and retail cost/weighted average for commercial technology assets/materials[66](index=66&type=chunk)[67](index=67&type=chunk) - Goodwill is evaluated for impairment annually in Q4 or earlier if triggering events occur; no impairment recorded in Q1 2025[69](index=69&type=chunk) - Property and equipment are depreciated on a straight-line basis over estimated useful lives (e.g., buildings **39 years**, machinery **5-10 years**)[71](index=71&type=chunk) - Finite-lived intangible assets (e.g., customer lists, domain names, ERP systems, trade names) are amortized on a straight-line basis over estimated useful lives (**5-10 years**)[74](index=74&type=chunk) - The company is evaluating the impact of **ASU 2024-03**, 'Disaggregation of Income Statement Expenses,' effective for annual periods beginning after December 15, 2026[76](index=76&type=chunk) [NOTE 4 – INVENTORIES](index=22&type=section&id=NOTE%204%20%E2%80%93%20INVENTORIES) Total inventories increased slightly from December 31, 2024, to March 31, 2025, primarily driven by an increase in consumer segment trade inventories Inventories (As of March 31, 2025 and December 31, 2024) | Segment | March 31, 2025 | December 31, 2024 | | :---------------- | :------------- | :---------------- | | Consumer | $24,776,022 | $23,973,333 | | Commercial | $1,348,069 | $1,732,191 | | Total Inventories | $26,124,091 | $25,705,524 | - Consumer segment inventories increased by **$802,689 (3.3%)** from year-end 2024[78](index=78&type=chunk) - Commercial segment inventories decreased by **$384,122 (22.2%)** from year-end 2024[78](index=78&type=chunk) [NOTE 5 – GOODWILL](index=23&type=section&id=NOTE%205%20%E2%80%93%20GOODWILL) Goodwill remained stable for the Commercial segment, while the Consumer segment's goodwill was reduced to zero due to measurement period adjustments related to the Scottsdale Transaction in Fiscal 2024 Goodwill (As of March 31, 2025 and December 31, 2024) | Segment | March 31, 2025 | December 31, 2024 | | :---------------- | :------------- | :---------------- | | Consumer | $0 | $0 | | Commercial | $3,621,453 | $3,621,453 | | Total Goodwill | $3,621,453 | $3,621,453 | - Consumer goodwill decreased by **$300,000** in Fiscal 2024 due to measurement period adjustments from the Scottsdale Transaction[79](index=79&type=chunk) [NOTE 6 – PROPERTY AND EQUIPMENT, NET](index=24&type=section&id=NOTE%206%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT,%20NET) Net property and equipment increased slightly from December 31, 2024, to March 31, 2025, with increases across all segments, particularly in the Consumer and Corporate segments due to ongoing construction and improvements Property and Equipment, Net (As of March 31, 2025 and December 31, 2024) | Segment | March 31, 2025 | December 31, 2024 | | :---------------- | :------------- | :---------------- | | Consumer | $9,416,070 | $9,315,672 | | Commercial | $604,181 | $677,491 | | Corporate | $3,617,253 | $3,521,999 | | Total | $13,637,504 | $13,515,162 | - Consumer segment property and equipment, net, increased by **$100,398**, driven by building and leasehold improvements[81](index=81&type=chunk) - Corporate segment property and equipment, net, increased by **$95,254**, including new construction in progress[81](index=81&type=chunk) [NOTE 7 – INTANGIBLE ASSETS, NET](index=25&type=section&id=NOTE%207%20%E2%80%93%20INTANGIBLE%20ASSETS,%20NET) Net intangible assets decreased from December 31, 2024, to March 31, 2025, primarily due to accumulated amortization across all segments, despite some assets under development Intangible Assets, Net (As of March 31, 2025 and December 31, 2024) | Segment | March 31, 2025 | December 31, 2024 | | :---------------- | :------------- | :---------------- | | Consumer | $44,611 | $46,297 | | Commercial | $3,515,782 | $3,673,145 | | Corporate | $354,690 | $378,336 | | Total | $3,915,083 | $4,097,778 | - Total estimated future amortization expense for 2025 is **$549,720**, with the Commercial segment accounting for the largest portion (**$472,086**)[83](index=83&type=chunk) [NOTE 8 – ACCRUED EXPENSES](index=26&type=section&id=NOTE%208%20%E2%80%93%20ACCRUED%20EXPENSES) Total accrued expenses decreased from December 31, 2024, to March 31, 2025, mainly driven by reductions in unvouchered inventory payments in the Commercial segment and payroll accruals across all segments, partially offset by increased corporate taxes Accrued Expenses (As of March 31, 2025 and December 31, 2024) | Category | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Consumer Sub-total | $325,301 | $506,113 | | Commercial Sub-total | $1,347,681 | $2,407,191 | | Corporate Sub-total | $1,054,577 | $302,039 | | Total Accrued Expenses | $2,727,559 | $3,215,343 | - Commercial segment accrued expenses decreased by **$1,059,510**, primarily due to a reduction in unvouchered inventory payments[84](index=84&type=chunk) - Corporate segment accrued expenses increased by **$752,538**, largely due to higher accrued taxes[84](index=84&type=chunk) [NOTE 9 – SEGMENT INFORMATION](index=26&type=section&id=NOTE%209%20%E2%80%93%20SEGMENT%20INFORMATION) The company operates in two reportable segments: Consumer and Commercial. The CODM evaluates performance based on operating income. Both segments contributed to consolidated operating income, with the Commercial segment showing significantly higher operating income and total assets Segment Operating Income (Three Months Ended March 31) | Segment | 2025 Operating Income | 2024 Operating Income | | :---------------- | :-------------------- | :-------------------- | | Consumer | $142,365 | $204,023 | | Commercial | $2,976,056 | $2,136,120 | | Consolidated | $3,118,421 | $2,340,143 | Segment Total Assets (As of March 31, 2025 and December 31, 2024) | Segment | March 31, 2025 | December 31, 2024 | | :---------------- | :------------- | :---------------- | | Consumer | $41,000,003 | $40,454,328 | | Commercial | $33,647,370 | $33,068,887 | | Corporate | $5,016,954 | $4,347,274 | | Total Assets | $79,664,327 | $77,870,489 | - Commercial segment operating income increased by **39.3% YoY**, while Consumer segment operating income decreased by **30.2% YoY**[85](index=85&type=chunk) [NOTE 10 – REVENUE](index=28&type=section&id=NOTE%2010%20%E2%80%93%20REVENUE) Consolidated sales increased significantly, primarily driven by the Consumer segment, while the Commercial segment maintained a higher gross margin percentage. Contract liabilities, representing customer deposits and gift cards, increased for the Consumer segment Sales and Gross Margin by Segment (Three Months Ended March 31) | Segment | 2025 Sales | 2025 Gross Margin | 2025 Margin % | 2024 Sales | 2024 Gross Margin | 2024 Margin % | | :---------------- | :----------- | :---------------- | :------------ | :----------- | :---------------- | :------------ | | Consumer | $36,770,604 | $4,210,903 | 11.5% | $28,226,017 | $3,549,189 | 12.6% | | Commercial | $11,485,225 | $7,757,121 | 67.5% | $11,631,763 | $6,771,495 | 58.2% | | Consolidated | $48,255,829 | $11,968,024 | 24.8% | $39,857,780 | $10,320,684 | 25.9% | Contract Liabilities (As of March 31, 2025 and January 1, 2025) | Segment | March 31, 2025 | January 1, 2025 | | :---------------- | :------------- | :-------------- | | Consumer | $974,185 | $435,508 | | Commercial | $0 | $0 | - Consumer sales increased by **30.3% YoY**, while Commercial sales decreased by **1.3% YoY**[87](index=87&type=chunk) - Commercial segment gross margin percentage improved from **58.2%** in Q1 2024 to **67.5%** in Q1 2025[87](index=87&type=chunk) [NOTE 11 – LEASES](index=30&type=section&id=NOTE%2011%20%E2%80%93%20LEASES) The company's future minimum lease payments for operating leases total $4,788,977 as of March 31, 2025, with a weighted average remaining lease term of 3.2 years and a weighted average discount rate of 4.0% Future Minimum Lease Payments (As of March 31, 2025) | Year | Consumer Operating Leases | Commercial Operating Leases | Total | | :--- | :------------------------ | :-------------------------- | :---- | | 2025 | $690,735 | $963,456 | $1,654,191 | | 2026 | $1,076,141 | $474,320 | $1,550,461 | | 2027 | $777,803 | $33,453 | $811,256 | | 2028 | $542,641 | $0 | $542,641 | | 2029 | $423,234 | $0 | $423,234 | | Thereafter | $148,191 | $0 | $148,191 | | Total Minimum Lease Payments | $3,658,745 | $1,471,229 | $5,129,974 | | Less: imputed interest | $(305,067) | $(35,930) | $(340,997) | | Sub-total | $3,353,678 | $1,435,299 | $4,788,977 | - Operating lease costs increased from **$473,534** in Q1 2024 to **$602,493** in Q1 2025[92](index=92&type=chunk) - Weighted average remaining lease term for operating leases was **3.2 years** as of March 31, 2025, up from **2.3 years** as of March 31, 2024[92](index=92&type=chunk) [NOTE 12 – BASIC AND DILUTED AVERAGE SHARES](index=31&type=section&id=NOTE%2012%20%E2%80%93%20BASIC%20AND%20DILUTED%20AVERAGE%20SHARES) Basic and diluted weighted average shares outstanding decreased in Q1 2025 compared to Q1 2024, primarily due to share repurchases under the company's authorized program Basic and Diluted Weighted Average Shares (Three Months Ended March 31) | Metric | 2025 | 2024 | | :-------------------------- | :----------- | :----------- | | Basic weighted average shares | 25,995,645 | 26,419,039 | | Diluted weighted average shares | 25,995,645 | 26,434,039 | - The Board approved an additional **100,000 shares** for repurchase on March 27, 2025, bringing the total authorization to **1,100,000 shares**[95](index=95&type=chunk) - The company repurchased **500 shares** for **$2,626** in Q1 2025, at an average price of **$5.25**[96](index=96&type=chunk) [NOTE 13 – DEBT](index=33&type=section&id=NOTE%2013%20%E2%80%93%20DEBT) Total long-term debt obligations decreased slightly from December 31, 2024, to March 31, 2025, with the company remaining in compliance with all debt covenants. The Avail Transaction note payable was fully paid in January 2025 Long-Term Debt Obligations (As of March 31, 2025 and December 31, 2024) | Segment | March 31, 2025 | December 31, 2024 | | :---------------- | :------------- | :---------------- | | Consumer Sub-total | $5,220,516 | $5,285,948 | | Commercial Sub-total | $5,505,712 | $5,735,838 | | Corporate Sub-total | $2,469,769 | $2,500,393 | | Total Debt | $13,195,997 | $13,522,179 | | Less: current portion | $(3,399,409) | $(3,591,351) | | Net Long-Term Debt | $9,796,588 | $9,930,828 | - The Avail Transaction note payable of **$166,667** was paid in full on January 1, 2025[97](index=97&type=chunk)[103](index=103&type=chunk) - Future principal payments on long-term debt are **$3,277,078** for 2025 and **$7,781,730** for 2026[100](index=100&type=chunk) [NOTE 14 – STOCK-BASED COMPENSATION](index=35&type=section&id=NOTE%2014%20%E2%80%93%20STOCK-BASED%20COMPENSATION) There was no stock-based compensation expense recognized for the three months ended March 31, 2025, or 2024 - No stock-based compensation expense was recorded in Q1 2025 or Q1 2024[102](index=102&type=chunk) [NOTE 15 – RELATED PARTY TRANSACTIONS](index=37&type=section&id=NOTE%2015%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) The company has a policy for identifying and approving related party transactions. It utilizes a space owned by a related party for material processing, with estimated immaterial costs - The company has a corporate policy for reviewing and approving related party transactions[105](index=105&type=chunk) - The company uses a related party-owned space for material processing, with estimated immaterial costs[105](index=105&type=chunk) [NOTE 16 – CONTINGENCIES](index=37&type=section&id=NOTE%2016%20%E2%80%93%20CONTINGENCIES) Management believes that the resolution of currently pending lawsuits, claims, and proceedings will not have a material adverse effect on the company's financial condition, results of operations, or liquidity, and no loss contingencies were reported for the periods presented - Management assesses loss contingencies and establishes liabilities when probable and estimable[106](index=106&type=chunk) - No material adverse effect is expected from current legal matters[106](index=106&type=chunk) - No loss contingencies were subject to reporting for Q1 2025 and Q1 2024[106](index=106&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=38&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on Envela's financial condition and results of operations for the three months ended March 31, 2025, compared to 2024. It covers economic conditions, business segments, detailed financial performance metrics, non-GAAP measures like Adjusted EBITDA and Net Cash, and liquidity and capital resources [Forward-Looking Statements](index=38&type=section&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially from expectations. Readers are cautioned not to place undue reliance on these statements - The report includes forward-looking statements identifiable by terms like 'may,' 'will,' 'expect,' 'intend,' etc[109](index=109&type=chunk) - These statements are subject to safe harbors under the Securities Act and Exchange Act[109](index=109&type=chunk) - Actual results may differ materially due to various risk factors, as described in the 2024 Annual Report and this Form 10-Q[109](index=109&type=chunk) [Introduction](index=38&type=section&id=Introduction) This introduction sets the scope for the discussion of operations for the three months ended March 31, 2025 and 2024, advising readers to review it alongside the 2024 Annual Report and the unaudited condensed consolidated financial statements - Discussion covers operations for Q1 2025 and Q1 2024[110](index=110&type=chunk) - To be read in conjunction with the 2024 Annual Report and unaudited condensed consolidated financial statements[110](index=110&type=chunk) [Critical Accounting Policies and Estimates](index=38&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There were no material changes to the company's critical accounting policies and estimates from those described in the 2024 Annual Report - No material changes to critical accounting policies and estimates since the 2024 Annual Report[111](index=111&type=chunk) [Economic Conditions](index=38&type=section&id=Economic%20Conditions) The company addresses the impacts of high interest rates, inflation, and commodity price risks on consumer spending and demand for resale technology assets. It also discusses the potential effects of tariffs on its Consumer and Commercial segments, outlining mitigation strategies [Impacts of High Interest Rates and Inflation](index=38&type=section&id=Impacts%20of%20High%20Interest%20Rates%20and%20Inflation) High interest rates and inflation, coupled with commodity price risk, can affect consumer discretionary spending and demand for resale technology assets. The company adjusts inbound purchase prices and monitors inventory to mitigate these impacts - High interest rates and inflation, along with commodity price risk, can impact consumer spending and demand for resale technology assets[112](index=112&type=chunk) - The company adjusts inbound purchase prices for commodity-based products, luxury assets, and resale technology to counterbalance economic cycles[114](index=114&type=chunk) - Inventory positions and working capital are continuously monitored to respond to market conditions and seasonal cycles[114](index=114&type=chunk) [Impacts of Tariffs](index=40&type=section&id=Impacts%20of%20Tariffs) While the Consumer segment is not directly impacted by tariffs due to domestic sourcing, global market uncertainty can increase commodity costs. The Commercial segment may face increased costs for international purchases of technology assets and parts. Both segments mitigate risks by monitoring inventory, maintaining disciplined buying, and optimizing sales channels - Consumer segment is not directly impacted by tariffs but may see increased commodity costs on safe-haven metals due to global market uncertainty[116](index=116&type=chunk) - Commercial segment may incur higher costs for personal technology assets and replacement parts sourced from international markets due to tariffs[117](index=117&type=chunk) - Mitigation strategies include monitoring inventory, disciplined buying practices, and using optimal sales channels to maintain margins[116](index=116&type=chunk)[117](index=117&type=chunk) [Our Business](index=41&type=section&id=Our%20Business) Envela operates as a holding company with subsidiaries in recommerce and recycling. The Consumer segment focuses on luxury goods and bullion, while the Commercial segment specializes in electronic asset de-manufacturing and ITAD services, both contributing to a circular economy - Envela is a holding company with subsidiaries in recommerce and recycling[120](index=120&type=chunk) - Consumer segment: sales of authenticated high-end luxury goods, including pre-owned jewelry, diamonds, watches, and bullion, with a focus on recycled materials[120](index=120&type=chunk) - Commercial segment: de-manufacturing of end-of-life electronic assets for commodity reclamation and ITAD services, promoting reuse and environmental sustainability[121](index=121&type=chunk) [Segment Activities](index=41&type=section&id=Segment%20Activities) The company's strategy involves expanding its Consumer segment through new store openings and evaluating complementary product offerings, while the Commercial segment aims for organic growth and acquisitions, leveraging existing production facilities - Consumer segment strategy: expand store locations across the U.S. and evaluate complementary product/service offerings[123](index=123&type=chunk) - Commercial segment strategy: pursue organic growth and acquisitions, consolidating targets into existing facilities[124](index=124&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) Envela experienced significant consolidated sales and net income growth in Q1 2025 compared to Q1 2024. The Consumer segment drove sales growth, while the Commercial segment improved its gross margin despite a slight sales decrease. Operating expenses increased, but operating income and net income saw substantial gains Consolidated Financial Performance (Three Months Ended March 31) | Metric | 2025 | 2024 | Change Amount | Change % | | :-------------------------- | :----------- | :----------- | :------------ | :------- | | Sales | $48,255,829 | $39,857,780 | $8,398,049 | 21.1% | | Gross margin | $11,968,024 | $10,320,684 | $1,647,340 | 16.0% | | Operating income | $3,118,421 | $2,340,143 | $778,278 | 33.3% | | Net income | $2,493,347 | $1,907,539 | $585,808 | 30.7% | [Sales](index=42&type=section&id=Sales) Consolidated sales increased by 21.1% YoY, primarily driven by a 30.3% increase in the Consumer segment due to stronger volumes and pricing in precious metals and bullion. The Commercial segment saw a slight decrease of 1.3% due to lower ITAD settlement volumes, offset by electronic scrap sales and product returns services Sales by Segment (Three Months Ended March 31) | Segment | 2025 Sales | 2024 Sales | Change Amount | Change % | | :---------------- | :----------- | :----------- | :------------ | :------- | | Consolidated | $48,255,829 | $39,857,780 | $8,398,049 | 21.1% | | Consumer | $36,770,604 | $28,226,017 | $8,544,587 | 30.3% | | Commercial | $11,485,225 | $11,631,763 | $(146,538) | (1.3)% | - Consumer segment sales were favorably impacted by exceptional inbound material flow from in-store buying programs and strong online/retail store performance[128](index=128&type=chunk) - Commercial segment sales decrease was almost fully offset by sales of electronic scrap grades and growth in product returns service business[129](index=129&type=chunk) [Cost of Goods Sold](index=44&type=section&id=Cost%20of%20Goods%20Sold) Consolidated cost of goods sold increased by 22.9% YoY. The Consumer segment's cost of goods sold rose by 31.9% due to higher volumes and rising gold prices, while the Commercial segment's decreased by 23.3% due to reduced sales volumes in ITAD settlements and personal technology assets Cost of Goods Sold by Segment (Three Months Ended March 31) | Segment | 2025 COGS | 2024 COGS | Change Amount | Change % | | :---------------- | :---------- | :---------- | :------------ | :------- | | Consolidated | $36,287,805 | $29,537,096 | $6,750,709 | 22.9% | | Consumer | $32,559,701 | $24,676,828 | $7,882,873 | 31.9% | | Commercial | $3,728,104 | $4,860,268 | $(1,132,164) | (23.3)% | - Consumer segment COGS as a percentage of sales increased from **87.4%** to **88.5%** due to product mix and selling into a rising gold market[133](index=133&type=chunk) - Commercial segment COGS as a percentage of sales decreased from **41.8%** to **32.5%** due to a high-margin ITAD settlement and increased revenue from service fees with no associated COGS[136](index=136&type=chunk) [Gross Margin](index=46&type=section&id=Gross%20Margin) Consolidated gross margin increased by 16.0% YoY. The Commercial segment saw a significant 14.6% increase in gross margin and an improved margin percentage (67.5% from 58.2%), while the Consumer segment's gross margin increased by 18.6% but its margin percentage slightly declined Gross Margin by Segment (Three Months Ended March 31) | Segment | 2025 Gross Margin | 2024 Gross Margin | Change Amount | Change % | | :---------------- | :---------------- | :---------------- | :------------ | :------- | | Consolidated | $11,968,024 | $10,320,684 | $1,647,340 | 16.0% | | Consumer | $4,210,903 | $3,549,189 | $661,714 | 18.6% | | Commercial | $7,757,121 | $6,771,495 | $985,626 | 14.6% | - Commercial segment's gross margin percentage improved from **58.2%** to **67.5% YoY**[137](index=137&type=chunk) - Consumer segment's gross margin percentage decreased from **12.6%** to **11.5% YoY**[137](index=137&type=chunk) [Selling, General and Administrative](index=46&type=section&id=Selling,%20General%20and%20Administrative) Consolidated selling, general and administrative (SG&A) expenses increased by 10.0% YoY. The Consumer segment's SG&A rose by 19.6% due to new store cost structures, while the Commercial segment's increased by 3.0% primarily due to human capital costs in its services business Selling, General and Administrative Expenses (Three Months Ended March 31) | Segment | 2025 SG&A | 2024 SG&A | Change Amount | Change % | | :---------------- | :---------- | :---------- | :------------ | :------- | | Consolidated | $8,404,262 | $7,636,976 | $767,286 | 10.0% | | Consumer | $3,887,906 | $3,251,490 | $636,416 | 19.6% | | Commercial | $4,516,356 | $4,385,486 | $130,870 | 3.0% | - Consumer segment SG&A increase was partially offset by reduced costs associated with new store openings compared to Q1 2024[143](index=143&type=chunk) - Commercial segment SG&A increase was offset by variable-cost production expenses scaling with sales volumes[144](index=144&type=chunk) [Depreciation and Amortization](index=48&type=section&id=Depreciation%20and%20Amortization) Consolidated depreciation and amortization expense increased by 29.6% YoY. The Consumer segment saw a substantial 92.8% increase, primarily due to assets placed into service for new stores, while the Commercial segment had a modest 5.9% increase Depreciation and Amortization Expenses (Three Months Ended March 31) | Segment | 2025 D&A | 2024 D&A | Change Amount | Change % | | :---------------- | :--------- | :--------- | :------------ | :------- | | Consolidated | $445,341 | $343,565 | $101,776 | 29.6% | | Consumer | $180,632 | $93,676 | $86,956 | 92.8% | | Commercial | $264,709 | $249,889 | $14,820 | 5.9% | - Consumer segment's significant increase in D&A is directly linked to the depreciation of assets from new store openings[147](index=147&type=chunk) [Other Income](index=49&type=section&id=Other%20Income) Consolidated other income decreased by 13.8% YoY. Both Consumer and Commercial segments experienced decreases, primarily due to the absence of rental income present in Q1 2024 and a reduction in earned interest rates for the Commercial segment Other Income (Three Months Ended March 31) | Segment | 2025 Other Income | 2024 Other Income | Change Amount | Change % | | :---------------- | :---------------- | :---------------- | :------------ | :------- | | Consolidated | $205,605 | $238,528 | $(32,923) | (13.8)% | | Consumer | $849 | $8,005 | $(7,156) | (89.4)% | | Commercial | $204,756 | $230,523 | $(25,767) | (11.2)% | - Consumer segment's other income decrease was mainly due to rental income in Q1 2024 not recurring[151](index=151&type=chunk) - Commercial segment's other income decrease was attributed to lower earned interest rates and rental income from the prior year[152](index=152&type=chunk) [Interest Expense](index=50&type=section&id=Interest%20Expense) Consolidated interest expense decreased by 12.0% YoY. Both Consumer and Commercial segments saw reductions in interest expense, with no material impact from debt additions or amortization in either period Interest Expense (Three Months Ended March 31) | Segment | 2025 Interest Expense | 2024 Interest Expense | Change Amount | Change % | | :---------------- | :-------------------- | :-------------------- | :------------ | :------- | | Consolidated | $(106,321) | $(120,854) | $14,533 | (12.0)% | | Consumer | $(54,047) | $(64,401) | $10,354 | (16.1)% | | Commercial | $(52,274) | $(56,453) | $4,179 | (7.4)% | - The decrease in interest expense was not materially impacted by debt additions or amortization[157](index=157&type=chunk)[158](index=158&type=chunk) [Income Tax Expense](index=50&type=section&id=Income%20Tax%20Expense) Consolidated income tax expense increased by 31.6% YoY, with an effective income tax rate of 22.5% in Q1 2025 (vs. 22.4% in Q1 2024). The increase was primarily driven by higher taxable income in the Commercial segment and state/local taxes Income Tax Expense (Three Months Ended March 31) | Segment | 2025 Tax Expense | 2024 Tax Expense | Change Amount | Change % | | :---------------- | :--------------- | :--------------- | :------------ | :------- | | Consolidated | $(724,358) | $(550,278) | $(174,080) | 31.6% | | Consumer | $(20,073) | $(59,151) | $39,078 | (66.1)% | | Commercial | $(704,285) | $(491,127) | $(213,158) | 43.4% | - The effective income tax rate was **22.5%** in Q1 2025, slightly up from **22.4%** in Q1 2024[160](index=160&type=chunk) - Differences from the U.S. federal statutory rate (**21.0%**) are due to state taxes and non-deductible expenses[160](index=160&type=chunk) [Net Income](index=52&type=section&id=Net%20Income) Consolidated net income increased by 30.7% YoY. The Commercial segment's net income grew substantially by 33.3%, while the Consumer segment experienced a 21.9% decrease in net income Net Income (Three Months Ended March 31) | Segment | 2025 Net Income | 2024 Net Income | Change Amount | Change % | | :---------------- | :-------------- | :-------------- | :------------ | :------- | | Consolidated | $2,493,347 | $1,907,539 | $585,808 | 30.7% | | Consumer | $69,094 | $88,476 | $(19,382) | (21.9)% | | Commercial | $2,424,253 | $1,819,063 | $605,190 | 33.3% | [Earnings Per Share](index=52&type=section&id=Earnings%20Per%20Share) Consolidated basic and diluted earnings per share increased by $0.03, or 42.9%, to $0.10 in Q1 2025 compared to $0.07 in Q1 2024 Earnings Per Share (Three Months Ended March 31) | Metric | 2025 EPS | 2024 EPS | Change Amount | Change % | | :-------------------------- | :------- | :------- | :------------ | :------- | | Consolidated Basic/Diluted EPS | $0.10 | $0.07 | $0.03 | 42.9% | [Non-U.S. GAAP Financial Measures](index=53&type=section&id=Non-U.S.%20GAAP%20Financial%20Measures) This section introduces and reconciles non-U.S. GAAP financial measures, Adjusted EBITDA and Net Cash, which management uses to assess operating performance and liquidity/leverage [Adjusted EBITDA](index=53&type=section&id=Adjusted%20EBITDA) Consolidated Adjusted EBITDA increased by 32.8% YoY, reflecting improved operating performance. The Commercial segment contributed significantly to this growth Adjusted EBITDA Reconciliation (Three Months Ended March 31) | Segment | 2025 Adjusted EBITDA | 2024 Adjusted EBITDA | | :---------------- | :------------------- | :------------------- | | Consumer | $322,997 | $297,699 | | Commercial | $3,240,765 | $2,386,009 | | Consolidated | $3,563,762 | $2,683,708 | - Consolidated Adjusted EBITDA increased by **$880,054**, or **32.8%**, YoY[170](index=170&type=chunk) - Adjusted EBITDA is used by management to assess operating performance and evaluate strategy effectiveness[169](index=169&type=chunk) [Net Cash](index=53&type=section&id=Net%20Cash) Net Cash, defined as cash and cash equivalents less debt obligations, increased by 10.5% from December 31, 2024, to March 31, 2025, indicating improved liquidity Net Cash (As of March 31, 2025 and December 31, 2024) | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Total cash | $21,028,265 | $20,609,003 | | Less: debt obligations | $(13,195,997) | $(13,522,179) | | Net Cash | $7,832,268 | $7,086,824 | - Net Cash increased by **$745,444** from year-end 2024[172](index=172&type=chunk) - Net Cash is presented as a measure of liquidity and leverage profile[171](index=171&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary liquidity source is cash from operations, which decreased significantly YoY. Investing activities used less cash, and financing activities also saw reduced cash outflow due to fewer share buybacks. The company has access to a line of credit but does not anticipate needing it, focusing on optimizing new store performance and organic/strategic growth in its Commercial business Cash Flow Summary (Three Months Ended March 31) | Activity | 2025 | 2024 | Change Amount | Change % | | :-------------------------- | :----------- | :----------- | :------------ | :------- | | Operating activities | $1,131,057 | $3,791,721 | $(2,660,664) | (70.2)% | | Investing activities | $(382,987) | $(644,792) | $261,805 | (40.6)% | | Financing activities | $(328,808) | $(1,216,915) | $888,107 | (73.0)% | | Net increase in cash | $419,262 | $1,930,014 | $(1,510,752) | (78.3)% | - Primary liquidity source is cash generated from operating activities[177](index=177&type=chunk) - No amounts drawn on the **$3.8 million** secured line of credit as of March 31, 2025[103](index=103&type=chunk)[177](index=177&type=chunk) - Focus in Fiscal 2025 is on optimizing new store performance and growing the Commercial business organically and strategically[180](index=180&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=56&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a 'smaller reporting company,' Envela is not required to provide the disclosures typically mandated by this item - The company is exempt from this disclosure requirement as a 'smaller reporting company'[182](index=182&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=56&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of March 31, 2025. No material changes in internal control over financial reporting occurred during the period [Evaluation of Disclosure Controls and Procedures](index=56&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management assessed the effectiveness of disclosure controls and procedures as of March 31, 2025, concluding they were effective in providing reasonable assurance for information reporting - Disclosure controls and procedures were evaluated as effective as of March 31, 2025[183](index=183&type=chunk) - Controls are designed to provide reasonable assurance, but not absolute assurance, of achieving objectives[184](index=184&type=chunk) [Changes in Internal Control over Financial Reporting](index=56&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the three months ended March 31, 2025 - No material changes in internal control over financial reporting during the period[185](index=185&type=chunk) [PART II. OTHER INFORMATION](index=39&type=section&id=PART%20II.%20OTHER%20INFORMATION) [ITEM 1. LEGAL PROCEEDINGS](index=39&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Management believes that the ultimate resolution of various claims, lawsuits, and pending actions arising in the normal course of business will not have a material adverse effect on the company's financial condition, results of operations, or cash flow - Management does not expect legal proceedings to have a material adverse effect on the company's financials[186](index=186&type=chunk) - Outcomes of pending lawsuits cannot be predicted with absolute certainty[186](index=186&type=chunk) [ITEM 1A. RISK FACTORS](index=39&type=section&id=ITEM%201A.%20RISK%20FACTORS) There have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report - No material changes to risk factors since the 2024 Annual Report[187](index=187&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=39&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES,%20USE%20OF%20PROCEEDS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) This section details the company's share repurchase activities, including the number of shares purchased, average price paid, and remaining authorization under the program [Repurchases](index=57&type=section&id=Repurchases) The company repurchased 500 shares for $2,626 in March 2025, at an average price of $5.25. The Board authorized an additional 100,000 shares for repurchase, bringing the total authorization to 1,100,000 shares under the program expiring March 31, 2026 Share Repurchases (Three Months Ended March 31, 2025) | Fiscal Period | Shares Purchased | Average Price Paid per Share | Total Price Paid | Shares Available to Purchase | | :-------------------------- | :--------------- | :--------------------------- | :--------------- | :--------------------------- | | Balance as of January 1, 2025 | 928,930 | $4.91 | $4,568,823 | 71,070 | | March 1 - 31, 2025 | 500 | $5.25 | $2,626 | 170,570 | | Balance as of March 31, 2025 | 929,430 | $4.92 | $4,571,449 | 170,570 | - The Board approved an additional **100,000 shares** for repurchase on March 27, 2025, increasing the total authorization to **1,100,000 shares**[190](index=190&type=chunk) - The repurchase program expires on March 31, 2026[190](index=190&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=59&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This item is not applicable to the company - This item is not applicable[190](index=190&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=59&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - This item is not applicable[190](index=190&type=chunk) [ITEM 5. OTHER INFORMATION](index=40&type=section&id=ITEM%205.%20OTHER%20INFORMATION) No other information is reported under this item - No other information is reported under this item[191](index=191&type=chunk) [ITEM 6. EXHIBITS](index=60&type=section&id=ITEM%206.%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including certifications, XBRL documents, and the interactive data file - Includes certifications pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350[192](index=192&type=chunk) - XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase Documents are filed[192](index=192&type=chunk) - Cover Page Interactive Data File is included[192](index=192&type=chunk) [SIGNATURE](index=61&type=section&id=SIGNATURE) The report is duly signed on behalf of Envela Corporation by its Chief Financial Officer, John G. DeLuca, as the Principal Financial Officer - Report signed by John G. DeLuca, Chief Financial Officer, on May 7, 2025[195](index=195&type=chunk) [GLOSSARY OF DEFINED TERMS](index=62&type=section&id=GLOSSARY%20OF%20DEFINED%20TERMS) This section provides definitions for key terms used throughout the document, such as '2024 Annual Report,' 'Adjusted EBITDA,' 'ASC,' 'ASU,' 'Avail Transaction,' 'Board,' 'CODM,' 'Common Stock,' 'Company,' 'Envela,' 'Exchange Act,' 'Financial Statements,' 'Fiscal 2024,' 'Fiscal 2025,' 'Form 10-Q,' 'FSB,' 'IT,' 'ITAD,' 'NYSE,' 'Net Cash,' 'Securities Act,' 'Scottsdale Transaction,' 'SEC,' 'SOW,' 'TBT,' 'U.S.,' 'U.S. Dollar,' and 'U.S. GAAP' - Provides definitions for key terms used in the Form 10-Q[196](index=196&type=chunk) - Includes definitions for financial and regulatory terms like Adjusted EBITDA, ASC, SEC, and U.S. GAAP[196](index=196&type=chunk) - Defines company-specific terms such as Avail Transaction and Scottsdale Transaction[196](index=196&type=chunk)

Company Overview - Envela Corporation (NYSE: ELA) is highlighted as a potentially valuable investment opportunity, suggesting that it may have significant implications for investors [1]. Analyst Background - The analyst specializes in restaurant stocks, with a strong foundation in Business Administration and Accounting, and holds an MBA in Forensic Accounting and Controllership [1]. - The analyst leads Goulart's Restaurant Stocks, focusing on various segments of the U.S. restaurant market, including QSR, fast casual, casual dining, fine dining, and family dining [1]. - Advanced analytical models and specialized valuation techniques are employed to provide insights and strategies for investors [1]. Engagement and Contributions - The analyst actively participates in academic and journalistic initiatives, contributing to institutions that promote individual and economic freedom [1]. - Previous contributions include writing for Investing, discussing topics such as monetary policy, financial education, and financial modeling [1].

Sales Performance - In Fiscal 2024, the consumer segment sold 2.2 metric tons of refining-grade precious metals, an increase from 2.0 metric tons in Fiscal 2023[37] - The commercial segment sold 1,267,632 individual units of secondary electronics and components in Fiscal 2024, compared to 1,202,838 units in Fiscal 2023[39] - The commercial segment also sold 12,837.7 metric tons of electronic scrap in Fiscal 2024, slightly down from 12,862.4 metric tons in Fiscal 2023[39] Business Expansion - The company opened 5 new stores under the Four Nines brand in Fiscal 2024, enhancing its bricks-and-mortar footprint[22] - The consumer segment entered into a purchase agreement for the acquisition of a bespoke jewelry fabricator in Scottsdale, Arizona in September 2024[21] - The company aims to maximize market reach through a multi-brand retail strategy, consolidating multiple retail merchants[17] Operational Focus - The commercial segment focused on unifying its systems and enhancing business intelligence platforms in Fiscal 2024[23] - The company’s electricity, natural gas, and water consumption costs represented 0.2% and 0.3% of sales for Fiscal 2024 and 2023, respectively[34] - The company employed 309 persons in Fiscal 2024, an increase from 289 in Fiscal 2023[42] Compliance and Governance - The company emphasizes a culture of trust and compliance, providing confidential reporting channels for employees[43] - The company is subject to various federal, state, and local laws, which may impact future compliance costs due to business expansion[51] - The company is classified as a "Smaller Reporting Company," exempting it from certain market risk disclosures[200] Safety and Reporting - Safety performance is tracked using total recordable injury frequency rate (TRIFR) and total lost time injury frequency rate (LTIFR)[44] - Annual and quarterly reports are filed with the SEC and are available on the company's website[54] - The company uses its website to disclose material non-public information in compliance with Regulation FD[55] Financial Information - Interest payments on notes payable are based on rates effective as of December 31, 2024, with actual payments potentially differing[201] - The company is incorporated in Nevada and its common stock is listed on the NYSE under the symbol "ELA"[53]

Core Viewpoint - The article emphasizes the importance of timing and sustainability in stock trends for successful short-term investing, highlighting that sound fundamentals and positive earnings revisions are crucial for maintaining momentum in stock prices [1][2]. Group 1: Stock Performance - Envela Corporation (ELA) has shown a solid price increase of 12.8% over the past 12 weeks, indicating strong investor interest [4]. - ELA has also experienced a price increase of 3.8% over the last four weeks, suggesting that the upward trend is still intact [5]. - Currently, ELA is trading at 87.5% of its 52-week high-low range, indicating a potential breakout [5]. Group 2: Fundamental Strength - ELA holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises [6]. - The stock has an Average Broker Recommendation of 1 (Strong Buy), reflecting high optimism from the brokerage community regarding its near-term price performance [7]. Group 3: Investment Strategy - The "Recent Price Strength" screen is a useful tool for investors to identify stocks like ELA that are on an uptrend supported by strong fundamentals [3]. - The article suggests that there are multiple stocks passing through this screen, providing additional investment opportunities for trend-focused investors [8].

Core Insights - Envela Corporation (ELA) reported quarterly earnings of $0.06 per share, exceeding the Zacks Consensus Estimate of $0.03 per share, marking a 100% earnings surprise [1] - The company achieved revenues of $46.9 million for the quarter ended September 2024, surpassing the Zacks Consensus Estimate by 17.69% and showing an increase from $36.27 million year-over-year [2] - Envela has outperformed consensus EPS estimates three times in the last four quarters [2] Earnings Performance - The earnings surprise of 100% indicates strong performance relative to expectations, with a previous quarter's surprise of 50% when earnings were $0.06 against an expectation of $0.04 [1] - The current consensus EPS estimate for the upcoming quarter is $0.05, with projected revenues of $41.37 million, and for the current fiscal year, the estimate is $0.21 on revenues of $166.37 million [7] Stock Performance and Outlook - Envela shares have increased by approximately 10.5% since the beginning of the year, while the S&P 500 has gained 19.8%, indicating underperformance relative to the broader market [3] - The company's Zacks Rank is currently 3 (Hold), suggesting that shares are expected to perform in line with the market in the near future [6] Industry Context - The Retail - Jewelry industry, to which Envela belongs, is currently ranked in the bottom 12% of over 250 Zacks industries, which may impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Performance - For the three months ended September 30, 2024, the consolidated Adjusted EBITDA was $2,435,251, compared to $2,287,902 for the same period in 2023, reflecting an increase of approximately 6.4%[157] - Adjusted EBITDA for the nine months ended September 30, 2024, was $7,390,368, compared to $8,191,994 for the same period in 2023, indicating a decrease of approximately 9.8%[158] - Consolidated sales increased by $10,023,073, or 27.2%, to $46,899,559 for the three months ended September 30, 2024, compared to $36,876,486 in the same period of Fiscal 2023[165] - Consolidated sales decreased by $5,727,554, or 4.2%, to $132,054,341 for the nine months ended September 30, 2024, compared to $137,781,895 in the same period of Fiscal 2023[209] - Net income decreased by $22,454, or 1.3%, to $1,685,039 for the three months ended September 30, 2024[202] - Net income for the nine months ended September 30, 2024, was $5,156,757, compared to $5,837,519 in the same period of Fiscal 2023[209] Segment Performance - The consumer segment focuses on expanding locations throughout the U.S. and evaluating complementary product and service offerings[152] - The commercial segment aims for growth through both organic expansion and acquisitions, enhancing management and operating systems to support this strategy[153] - Consumer segment sales rose by $6,875,398, or 25.6%, to $33,756,600, driven by increased revenue from wholesale channels and online business[167] - Commercial segment sales increased by $3,147,675, or 31.5%, to $13,142,959, attributed to strong performance in the ITAD business[168] - Consumer segment sales decreased by $9,254,388, or 9%, to $93,972,645, primarily due to softness in demand for bullion and inventory carry issues[211] - Commercial segment sales increased by $3,526,834, or 10.2%, to $38,081,696, driven by strong performance in personal technology assets and ITAD business growth[212] Cost and Expenses - Cost of goods sold increased by $8,293,116, or 30.6%, to $35,435,320, compared to $27,142,204 in the same period of Fiscal 2023[169] - Selling, general and administrative expenses rose by $1,582,608, or 21.3%, to $9,028,988, reflecting operational costs from new store openings[179] - Selling, general and administrative expenses increased by $2,069,775, or 8.7%, to $25,784,012, reflecting operational costs from new store openings[224] - Total operating expenses increased to $26,904,623, representing 20.3% of consolidated sales, up from 18.0% in the previous year[224] Margins - Gross margin improved by $1,729,957, or 17.8%, to $11,464,239, with a gross margin percentage of 24.4%[175] - Consumer segment gross margin increased by $327,052, or 9.1%, to $3,916,315, with a gross margin percentage of 11.6%[176] - Commercial segment gross margin increased by $1,402,905, or 22.8%, to $7,547,924, with a gross margin percentage of 57.4%[177] - Gross margin increased by $1,268,149, or 4.0%, to $33,174,380, with a gross margin percentage of 25.1% compared to 23.2% in the prior year[220] - Consumer segment gross margin decreased by $182,040, or 1.6%, to $11,486,833, impacted by decreased sales and cost of goods sold[221] - Commercial segment gross margin increased by $1,450,189, or 7.2%, to $21,687,547, benefiting from increased sales and cost management[222] Cash Flow and Liquidity - The total cash as of September 30, 2024, was $17,752,199, a slight decrease from $17,853,853 on December 31, 2023, while debt obligations decreased from $14,933,491 to $13,841,785, resulting in a net cash increase from $2,920,362 to $3,910,414[160] - Net cash provided by operating activities increased by $2,979,773, or 85.9%, to $6,449,764 for the nine months ended September 30, 2024[249] - Cash flows from operations increased by $2,979,773, or 85.9%, to $6,449,764 for the nine months ended September 30, 2024, compared to $3,469,991 in the same period of Fiscal 2023[250] - Cash flows used in investing activities rose by $2,175,355, or 200.4%, to $3,260,717 during the nine months ended September 30, 2024, compared to $1,085,362 in the same period of Fiscal 2023[251] - Cash flows used in financing activities increased by $1,041,492, or 46.3%, to $3,290,701 for the nine months ended September 30, 2024, compared to $2,249,209 in the same period of Fiscal 2023[252] - The company has no amounts drawn from its line of credit as of September 30, 2024, relying primarily on cash generated from operating activities for liquidity[253] Other Financial Metrics - Other income increased by $147,914, or 76.9%, to $340,351 for the three months ended September 30, 2024[187] - Other income increased by $247,428, or 44.4%, to $804,296 for the nine months ended September 30, 2024[233] - Basic and diluted earnings per share remained at $0.06 for the three months ended September 30, 2024[205] - Basic and diluted earnings per share decreased by $0.02, or 9.1%, to $0.20 for the nine months ended September 30, 2024[248] - Interest expense decreased by $11,027, or 9.4%, to $106,139 for the three months ended September 30, 2024[194] - Interest expense decreased by $12,784, or 3.7%, to $336,134 for the nine months ended September 30, 2024[239] Economic Environment - The company operates in a challenging economic environment characterized by high interest rates and inflation, which may impact consumer spending and demand for resale technology assets[144] Capital Expenditures and Investments - Capital expenditures in Fiscal 2024 are focused on growth, maintenance, and enhancements to the enterprise resource planning system, funded mainly through operating cash flow[254] - The company does not have any off-balance sheet arrangements that materially affect its financial condition or operations[256] - As a smaller reporting company, the company is not required to disclose certain market risk information[257]

Core Viewpoint - The sustainability of a trend is crucial for successful short-term investing, and confirming fundamental factors is essential to maintain momentum in stocks [1][2]. Group 1: Stock Performance - Envela Corporation (ELA) has shown a solid price increase of 28.1% over the past 12 weeks, indicating strong investor interest [4]. - ELA has also experienced a price increase of 11.4% over the last four weeks, suggesting that the upward trend is still intact [5]. - Currently, ELA is trading at 107.9% of its 52-week high-low range, indicating a potential breakout [5]. Group 2: Fundamental Strength - ELA holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises [6]. - The stock has an Average Broker Recommendation of 1 (Strong Buy), reflecting high optimism from the brokerage community regarding its near-term price performance [7]. - The Zacks Rank system has a strong historical performance, with Zacks Rank 1 stocks averaging an annual return of +25% since 1988 [7]. Group 3: Investment Strategy - The "Recent Price Strength" screen is a useful tool for identifying stocks with sufficient fundamental strength to maintain their uptrend [3]. - In addition to ELA, there are several other stocks that meet the criteria of the "Recent Price Strength" screen, providing additional investment opportunities [8]. - The effectiveness of stock-picking strategies can be backtested using the Zacks Research Wizard, which includes successful stock-picking strategies [9].