[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) MIND Technology's unaudited financial statements detail improved revenues, net income, liquidity, and working capital [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Assets decreased, liabilities decreased, and stockholders' equity increased to **$28.8 million** by July 31, 2025 Balance Sheet Summary (in thousands) | Metric | July 31, 2025 (in thousands) | January 31, 2025 (in thousands) | | :-------------------------------- | :--------------------------- | :------------------------------ | | **Assets** | | | | Cash and cash equivalents | $7,832 | $5,336 | | Accounts receivable, net | $10,926 | $11,817 | | Inventories, net | $11,817 | $13,745 | | Prepaid expenses and other current assets | $1,153 | $1,217 | | Total current assets | $31,728 | $32,115 | | Property and equipment, net | $1,158 | $890 | | Operating lease right-of-use assets | $841 | $1,320 | | Intangible assets, net | $2,017 | $2,308 | | Deferred tax asset | $87 | $87 | | **Total assets** | **$35,831** | **$36,720** | | **Liabilities and Stockholders' Equity** | | | | Accounts payable | $1,179 | $2,558 | | Deferred revenue | $359 | $189 | | Customer deposits | $973 | $1,603 | | Accrued expenses and other current liabilities | $1,244 | $1,245 | | Income taxes payable | $2,391 | $2,473 | | Operating lease liabilities - current | $475 | $577 | | Total current liabilities | $6,621 | $8,645 | | Operating lease liabilities - non-current | $366 | $743 | | **Total liabilities** | **$6,987** | **$9,388** | | Common stock, $0.01 par value | $80 | $80 | | Additional paid-in capital | $136,219 | $135,666 | | Accumulated deficit | $(107,489) | $(108,448) | | Accumulated other comprehensive gain | $34 | $34 | | **Total stockholders' equity** | **$28,844** | **$27,332** | | **Total liabilities and stockholders' equity** | **$35,831** | **$36,720** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Revenues significantly increased for the three months ended July 31, 2025, leading to higher net income and positive EPS, while six-month net income decreased due to higher operating expenses Statements of Operations Summary (in thousands) | Metric (in thousands) | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | YoY Change | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | YoY Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Revenues | $13,561 | $10,036 | +35.1% | $21,463 | $19,714 | +8.9% | | Gross profit | $6,829 | $4,778 | +42.9% | $10,160 | $8,996 | +12.9% | | Operating income | $2,664 | $1,430 | +86.3% | $2,006 | $2,160 | -7.1% | | Income before income taxes | $2,599 | $1,470 | +76.8% | $1,923 | $2,669 | -27.9% | | Net income | $1,929 | $798 | +141.7% | $959 | $1,752 | -45.2% | | Net income (loss) attributable to common stockholders | $1,929 | $(149) | N/A | $959 | $(142) | N/A | | Net income (loss) per common share - Basic and diluted | $0.24 | $(0.11) | N/A | $0.12 | $(0.10) | N/A | | Shares used in computing net income (loss) per common share: Basic and diluted | 7,969 | 1,406 | +466.8% | 7,969 | 1,406 | +466.8% | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for both periods equaled net income, indicating no other comprehensive income or loss components Comprehensive Income Summary (in thousands) | Metric (in thousands) | For the Three Months Ended July 31, 2025 | For the Three Months Ended July 31, 2024 | For the Six Months Ended July 31, 2025 | For the Six Months Ended July 31, 2024 | | :-------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Net income | $1,929 | $798 | $959 | $1,752 | | Comprehensive income | $1,929 | $798 | $959 | $1,752 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly improved to **$2.9 million** for the six months ended July 31, 2025, while investing activities used cash Cash Flow Summary (in thousands) | Metric (in thousands) | For the Six Months Ended July 31, 2025 | For the Six Months Ended July 31, 2024 | YoY Change | | :------------------------------------------ | :------------------------------------- | :------------------------------------- | :--------- | | Net cash provided by (used in) operating activities | $2,909 | $(3,695) | +$6,604 | | Net cash (used in) provided by investing activities | $(419) | $311 | -$730 | | Net cash provided by financing activities | $0 | $0 | $0 | | Net change in cash and cash equivalents | $2,496 | $(3,385) | +$5,881 | | Cash and cash equivalents, end of period | $7,832 | $1,904 | +$5,928 | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity increased to **$28.8 million** by July 31, 2025, driven by net income and stock-based compensation Stockholders' Equity Summary (in thousands) | Metric (in thousands) | July 31, 2025 | January 31, 2025 | July 31, 2024 | January 31, 2024 | | :-------------------- | :------------ | :--------------- | :------------ | :--------------- | | Total Stockholders' Equity | $28,844 | $27,332 | $24,487 | $22,641 | | Common Stock Shares Outstanding | 7,969 | 7,969 | 1,406 | 1,406 | | Additional Paid-In Capital | $136,219 | $135,666 | $113,215 | $113,121 | | Accumulated Deficit | $(107,489) | $(108,448) | $(126,555) | $(128,307) | - On September 4, 2024, all outstanding preferred stock was converted into approximately **6.6 million** shares of common stock, eliminating preferred stock dividends and impacting accumulated deficit by approximately **$14.8 million**[51](index=51&type=chunk)[55](index=55&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes on organization, liquidity, accounting policies, revenue, balance sheet items, leases, intangible assets, income taxes, EPS, related parties, equity, segment reporting, and subsequent events [Note 1. Organization, Liquidity and Summary of Significant Accounting Policies](index=10&type=section&id=Note%201.%20Organization,%20Liquidity%20and%20Summary%20of%20Significant%20Accounting%20Policies) MIND Technology, Inc. designs, manufactures, and sells products for seismic, hydrographic, and offshore industries, with improved liquidity and working capital - MIND Technology, Inc. operates through its Seamap subsidiaries, designing, manufacturing, and selling products for seismic, hydrographic, and offshore industries globally[23](index=23&type=chunk) Working Capital and Cash (in thousands) | Metric (in thousands) | July 31, 2025 | January 31, 2025 | | :-------------------- | :------------ | :--------------- | | Working Capital | $25,100 | $23,500 | | Cash and Cash Equivalents | $7,800 | $5,300 | - The company relies on cash on hand and cash flows from operations for liquidity, with no credit facility in place, but believes it has adequate liquidity through various means including potential financing and equity issuance[24](index=24&type=chunk) [Note 2. Basis of Presentation](index=11&type=section&id=Note%202.%20Basis%20of%20Presentation) Unaudited interim financial statements are prepared per SEC rules, condensing disclosures, and are not indicative of full fiscal year 2026 performance - Unaudited interim financial statements are prepared per SEC rules, condensing disclosures, and include normal recurring adjustments[27](index=27&type=chunk) - They should be read with the fiscal 2025 Form 10-K, and interim results are not indicative of full fiscal year 2026 performance[27](index=27&type=chunk) [Note 3. New Accounting Pronouncements](index=11&type=section&id=Note%203.%20New%20Accounting%20Pronouncements) ASU 2023-09 (Income Taxes) was adopted with no material impact, while ASU 2024-03 is being evaluated for future disclosure impacts - ASU 2023-09 (Income Taxes) was adopted on February 1, 2025, with no material impact on financial statements[28](index=28&type=chunk) - ASU 2024-03 (Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures) is effective February 1, 2027, and the company is evaluating its potential impact on disclosures[29](index=29&type=chunk) [Note 4. Revenue from Contracts with Customers](index=12&type=section&id=Note%204.%20Revenue%20from%20Contracts%20with%20Customers) Total revenue increased to **$13.6 million** for the three months and **$21.5 million** for the six months ended July 31, 2025, with significant growth in Norway, Singapore, and Turkey Revenue by Type (in thousands) | Revenue Type (in thousands) | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Recognized at a point in time | $13,215 | $9,661 | $20,771 | $19,038 | | Recognized over time | $346 | $375 | $692 | $676 | | Total revenue | $13,561 | $10,036 | $21,463 | $19,714 | Geographic Revenue (in thousands) | Geographic Revenue (in thousands) | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Norway | $8,906 | $6,217 | $12,181 | $8,975 | | Singapore | $1,413 | $260 | $2,440 | $471 | | Turkey | $982 | $205 | $1,209 | $238 | | China | $618 | $1,462 | $877 | $7,230 | | United States | $736 | $446 | $1,286 | $771 | - Revenue from product sales is generally recognized at a point in time, while repair, maintenance, and Software Maintenance Agreements (SMAs) are recognized over time[32](index=32&type=chunk) [Note 5. Balance Sheet (Inventories, Property and Equipment)](index=14&type=section&id=Note%205.%20Balance%20Sheet%20(Inventories,%20Property%20and%20Equipment)) Inventories, net, decreased to **$11.8 million**, while property and equipment, net, increased to **$1.16 million** by July 31, 2025, with no impairment recorded Inventories Breakdown (in thousands) | Inventories (in thousands) | July 31, 2025 | January 31, 2025 | Change | | :------------------------- | :------------ | :--------------- | :----- | | Raw materials | $8,270 | $8,485 | -$215 | | Finished goods | $3,717 | $3,980 | -$263 | | Work in progress | $1,253 | $2,817 | -$1,564 | | Total inventories, net | $11,817 | $13,745 | -$1,928 | Property and Equipment (in thousands) | Property and Equipment (in thousands) | July 31, 2025 | January 31, 2025 | Change | | :------------------------------------ | :------------ | :--------------- | :----- | | Total property and equipment, net | $1,158 | $890 | +$268 | - No impairment was recorded for property and equipment in fiscal 2025, and no additional impairment analysis was necessary as of July 31, 2025[37](index=37&type=chunk) [Note 6. Leases](index=14&type=section&id=Note%206.%20Leases) Lease expense increased, while operating lease assets and liabilities decreased to **$0.84 million** by July 31, 2025, with a weighted average remaining lease term of **1.95 years** Lease Expense (in thousands) | Lease Expense (in thousands) | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Lease Expense | $232 | $207 | $464 | $422 | Lease Metrics (in thousands) | Lease Metrics (in thousands) | July 31, 2025 | January 31, 2025 | | :--------------------------- | :------------ | :--------------- | | Operating lease assets | $841 | $1,320 | | Operating lease liabilities | $841 | $1,320 | | Weighted average remaining lease term (years) | 1.95 | 1.39 | | Weighted average discount rate | 15% | 14% | Lease Liabilities Maturities (in thousands) | Lease Liabilities Maturities (in thousands) | July 31, 2025 | | :---------------------------------------- | :------------ | | 2026 | $276 | | 2027 | $463 | | 2028 | $163 | | 2029 | $75 | | Total payments under lease agreements | $977 | | Less: imputed interest | $(136) | | Total lease liabilities | $841 | [Note 7. Intangible Assets](index=16&type=section&id=Note%207.%20Intangible%20Assets) Net intangible assets decreased to **$2.02 million** by July 31, 2025, primarily proprietary rights, with no impairment indicators identified Intangible Assets Net Carrying Amount (in thousands) | Intangible Assets (in thousands) | July 31, 2025 Net Carrying Amount | January 31, 2025 Net Carrying Amount | Change | | :------------------------------- | :-------------------------------- | :----------------------------------- | :----- | | Proprietary rights | $1,764 | $1,971 | -$207 | | Patents | $225 | $271 | -$46 | | Trade name | $13 | $13 | $0 | | Other | $15 | $53 | -$38 | | Total Intangible assets | $2,017 | $2,308 | -$291 | Amortization Expense (in thousands) | Amortization Expense (in thousands) | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :---------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Aggregate amortization expense | $145 | $159 | $294 | $345 | - No substantive indicators of impairment for amortizable intangible assets were identified during the six months ended July 31, 2025[43](index=43&type=chunk) [Note 8. Income Taxes](index=17&type=section&id=Note%208.%20Income%20Taxes) Income tax expense was **$670,000** and **$964,000** for the three and six months ended July 31, 2025, respectively, with variances from the U.S. statutory rate due to foreign taxes and valuation allowances Income Tax Expense (in thousands) | Income Tax (in thousands) | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Income tax expense | $670 | $672 | $964 | $917 | | Pre-tax income | $2,599 | $1,470 | $1,923 | $2,669 | - The variance from the U.S. statutory rate is due to foreign income taxes in jurisdictions without net operating loss offsets and valuation allowances against deferred tax assets[45](index=45&type=chunk) - The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, is not anticipated to have a material impact on the company's tax expense[46](index=46&type=chunk) [Note 9. Earnings per Share](index=17&type=section&id=Note%209.%20Earnings%20per%20Share) Basic and diluted EPS significantly improved to **$0.24** for the three months and **$0.12** for the six months ended July 31, 2025, primarily due to preferred stock conversion EPS Metrics | EPS Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) per common share - Basic and diluted | $0.24 | $(0.11) | $0.12 | $(0.10) | | Shares used in computing net income (loss) per common share: Basic and diluted | 7,969 | 1,406 | 7,969 | 1,406 | - Dilutive potential common shares had no effect on EPS calculation for the periods[50](index=50&type=chunk) - The increase in common shares outstanding (from **1.4 million** to **8.0 million**) is primarily due to the conversion of all preferred stock into common stock on September 4, 2024[50](index=50&type=chunk)[51](index=51&type=chunk) [Note 10. Related Party Transaction](index=17&type=section&id=Note%2010.%20Related%20Party%20Transaction) The company retained Lucid Capital Markets, LLC for advisory services and an ATM offering, with no compensation to the Non-Executive Chairman who is also Lucid's Vice Chairman - MIND Technology retained Lucid Capital Markets, LLC for advisory services in February 2025, paying **$100,000** in retainer fees[52](index=52&type=chunk) - The Vice Chairman of Lucid is the Non-Executive Chairman of MIND Technology's board, but receives no compensation from these transactions[52](index=52&type=chunk)[54](index=54&type=chunk) - An equity distribution agreement was signed on August 28, 2025, for an at-the-market (ATM) offering of up to **$25.0 million** in common stock through Lucid, with a compensation of up to **2.0%** of gross proceeds[53](index=53&type=chunk)[54](index=54&type=chunk) - No shares have been sold under the ATM to date[54](index=54&type=chunk) [Note 11. Equity and Stock-Based Compensation](index=19&type=section&id=Note%2011.%20Equity%20and%20Stock-Based%20Compensation) Preferred stock was converted into approximately **6.6 million** common shares in September 2024, resulting in a **$14.8 million** credit to accumulated deficit, and stock-based compensation significantly increased - All outstanding preferred stock was converted into approximately **6.6 million** shares of common stock on September 4, 2024, eliminating preferred stock dividend obligations[55](index=55&type=chunk) - The conversion resulted in an approximately **$14.8 million** credit to accumulated deficit[55](index=55&type=chunk) Stock-Based Compensation (in thousands) | Stock-Based Compensation (in thousands) | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total compensation expense | $281 | $46 | $553 | $95 | [Note 12. Segment Reporting](index=19&type=section&id=Note%2012.%20Segment%20Reporting) Seamap Marine Products, the sole reporting segment, saw increased revenue and operating income for both periods, while corporate expenses also rose - Seamap Marine Products is the sole reporting segment, offering products and services for marine exploration, survey, and security, including GunLink, BuoyLink, and SeaLink systems[57](index=57&type=chunk)[58](index=58&type=chunk)[61](index=61&type=chunk)[74](index=74&type=chunk) Seamap Marine Products Performance (3 Months, in thousands) | Metric (in thousands) | Seamap Marine Products (3M 2025) | Corporate Expenses (3M 2025) | Consolidated (3M 2025) | Seamap Marine Products (3M 2024) | Corporate Expenses (3M 2024) | Consolidated (3M 2024) | | :-------------------- | :------------------------------- | :--------------------------- | :--------------------- | :------------------------------- | :--------------------------- | :--------------------- | | Revenues | $13,561 | $0 | $13,561 | $10,036 | $0 | $10,036 | | Operating income (loss) | $4,781 | $(2,117) | $2,664 | $2,679 | $(1,249) | $1,430 | | Capital expenditures | $181 | $1 | $182 | $80 | $0 | $80 | Seamap Marine Products Performance (6 Months, in thousands) | Metric (in thousands) | Seamap Marine Products (6M 2025) | Corporate Expenses (6M 2025) | Consolidated (6M 2025) | Seamap Marine Products (6M 2024) | Corporate Expenses (6M 2024) | Consolidated (6M 2024) | | :-------------------- | :------------------------------- | :--------------------------- | :--------------------- | :------------------------------- | :--------------------------- | :--------------------- | | Revenues | $21,463 | $0 | $21,463 | $19,714 | $0 | $19,714 | | Operating income (loss) | $5,913 | $(3,907) | $2,006 | $4,757 | $(2,597) | $2,160 | | Capital expenditures | $392 | $27 | $419 | $144 | $2 | $146 | [Note 13. Subsequent Events](index=21&type=section&id=Note%2013.%20Subsequent%20Events) The company initiated a **$25.0 million** ATM offering and authorized a **$4.0 million** share repurchase program on August 28, 2025 - On August 28, 2025, the company entered an equity distribution agreement for an ATM offering of up to **$25.0 million** in common stock[67](index=67&type=chunk) - The Board authorized a share repurchase program of up to **$4.0 million** of common stock through August 31, 2027[67](index=67&type=chunk) [Cautionary Statement about Forward-Looking Statements](index=22&type=section&id=Cautionary%20Statement%20about%20Forward-Looking%20Statements) This section warns that the report contains forward-looking statements subject to significant risks and uncertainties, and readers should not place undue reliance on them - The report contains forward-looking statements subject to significant risks and uncertainties, including manufacturing operations, customer loss, supply chain disruptions, and geopolitical events[68](index=68&type=chunk)[71](index=71&type=chunk) - Readers are cautioned not to place undue reliance on these statements, and the company undertakes no obligation to update them, except as required by law[70](index=70&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses improved financial performance, positive business outlook, strategic initiatives, and capital management through an ATM offering and share repurchase program [Overview](index=23&type=section&id=Overview) Financial performance has significantly improved, generating operating income in recent fiscal periods, attributed to increased market demand and cost reduction efforts - Financial performance has significantly improved, with operating income generated in fiscal 2024, 2025, and year-to-date fiscal 2026, reversing a history of operating losses[75](index=75&type=chunk) - Improvement is due to increased demand in primary markets and efforts to reduce costs and improve product margins[75](index=75&type=chunk) Net Income and EBITDA (in thousands) | Metric (in thousands) | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income | $1,929 | $798 | $959 | $1,752 | | EBITDA | $2,816 | $1,706 | $2,365 | $3,172 | | Adjusted EBITDA | $3,097 | $1,752 | $2,918 | $3,267 | [Business Outlook](index=24&type=section&id=Business%20Outlook) Facility expansion is complete, backlog provides good visibility, and strategic initiatives are expanding addressable markets, though revenue remains subject to risks - Facility expansion in Huntsville, Texas, completed at the end of Q2 fiscal 2026, is expected to increase repair and production operations and revenue[76](index=76&type=chunk) Order Backlog (in millions) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------- | :------------ | :--------------- | | Backlog of firm orders | $12.8 million | $16.9 million | - An additional **$10.0 million** in specific orders is believed to be imminent, providing good visibility for fiscal 2026 and into the next fiscal year[77](index=77&type=chunk) - Strategic initiatives include adapting SeaLink solid streamer technology for alternative energy projects (offshore windfarms, carbon capture) and maritime security applications, expanding addressable markets[81](index=81&type=chunk)[84](index=84&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) This section details increased revenues and improved gross profit margins, alongside rising SG&A expenses and a shift to other expense due to foreign exchange losses [Revenues and Cost of Sales](index=26&type=section&id=Revenues%20and%20Cost%20of%20Sales) Revenues increased by **35.1%** and **8.9%** for the three and six months ended July 31, 2025, respectively, with improved gross profit margins due to revenue mix Revenue and Cost of Sales Summary (in thousands) | Metric (in thousands) | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | YoY Change | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | YoY Change | | :-------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Revenues | $13,561 | $10,036 | +35.1% | $21,463 | $19,714 | +8.9% | | Cost of sales | $6,732 | $5,258 | +28.0% | $11,303 | $10,718 | +5.5% | | Gross profit | $6,829 | $4,778 | +42.9% | $10,160 | $8,996 | +12.9% | | Gross profit margin | 50% | 48% | +2 ppts | 47% | 46% | +1 ppt | - For the six months ended July 31, 2025, **32%** of revenues were from new systems, and **68%** from "after-market" activities (spare parts, repairs, services)[85](index=85&type=chunk) [Operating Expenses](index=26&type=section&id=Operating%20Expenses) SG&A expenses increased due to non-recurring costs and compensation, while R&D and depreciation/amortization expenses decreased Operating Expenses Summary (in thousands) | Operating Expense (in thousands) | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | YoY Change | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | YoY Change | | :------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Selling, general and administrative | $3,637 | $2,784 | +30.6% | $7,021 | $5,543 | +26.7% | | Research and development | $311 | $328 | -5.1% | $691 | $790 | -12.6% | | Depreciation and amortization | $217 | $236 | -8.0% | $442 | $503 | -12.1% | - Increase in SG&A expenses included non-recurring costs for UK operations restructuring, tax planning from preferred stock conversion, and higher stock-based and employee compensation[86](index=86&type=chunk) - R&D costs are primarily for the development of the next-generation towed streamer system[87](index=87&type=chunk) [Other Income and Expense](index=26&type=section&id=Other%20Income%20and%20Expense) The company recognized other expense primarily due to foreign exchange losses for the three and six months ended July 31, 2025, contrasting with prior year's other income Other Income (Expense) (in thousands) | Other Income (Expense) (in thousands) | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Other, net | $(65) | $40 | $(83) | $509 | - Other expense in 2025 was primarily due to foreign exchange losses, while other income in 2024 was from gains on equipment and scrap sales[89](index=89&type=chunk) [Provision for Income Taxes](index=26&type=section&id=Provision%20for%20Income%20Taxes) Income tax expense was **$670,000** and **$964,000** for the three and six months ended July 31, 2025, respectively, differing from the U.S. statutory rate due to foreign taxes and valuation allowances Income Tax Provision (in thousands) | Income Tax (in thousands) | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Provision for income taxes | $670 | $672 | $964 | $917 | | Income before income taxes | $2,599 | $1,470 | $1,923 | $2,669 | - The difference from the U.S. statutory rate is mainly due to foreign income taxes in jurisdictions without net operating loss offsets and valuation allowances against deferred tax assets in the U.S. and certain foreign locations[90](index=90&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity improved with working capital at **$25.1 million** and cash at **$7.8 million**, supported by positive operating cash flow, an ATM offering, and a share repurchase program Working Capital and Cash (in thousands) | Metric (in thousands) | July 31, 2025 | January 31, 2025 | | :-------------------- | :------------ | :--------------- | | Working Capital | $25,100 | $23,500 | | Cash and Cash Equivalents | $7,800 | $5,300 | - Net cash provided by operating activities was approximately **$2.9 million** for the six months ended July 31, 2025, a significant improvement from a negative **$3.7 million** in the prior year, mainly due to accounts receivable collections and inventory reductions[97](index=97&type=chunk)[98](index=98&type=chunk) - The company initiated a **$25.0 million** at-the-market (ATM) offering program and authorized a **$4.0 million** share repurchase program in September 2025 to provide capital flexibility and enhance stockholder value[94](index=94&type=chunk)[95](index=95&type=chunk) - The company owns unencumbered real estate near Huntsville, Texas, appraised at approximately **$5.0 million**, which could be used to generate capital if needed[95](index=95&type=chunk) [Off-Balance Sheet Arrangements](index=30&type=section&id=Off-Balance%20Sheet%20Arrangements) The company does not have any off-balance sheet arrangements - The company does not have any off-balance sheet arrangements[102](index=102&type=chunk) [Critical Accounting Estimates](index=30&type=section&id=Critical%20Accounting%20Estimates) No material changes to critical accounting estimates occurred during the three and six months ended July 31, 2025 - No material changes to critical accounting estimates occurred during the three and six months ended July 31, 2025[103](index=103&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to foreign currency risk from international operations and confirms no interest rate risk due to absence of debt [Foreign Currency Risk](index=30&type=section&id=Foreign%20Currency%20Risk) The company is exposed to foreign currency risk from international operations, with **$566,000** in foreign currency cash balances, but does not use derivative instruments for hedging - The company is exposed to foreign currency risk from transactions primarily in British pounds, Singapore dollars, and European Union euros[105](index=105&type=chunk) Foreign Currency Exposure (in thousands) | Metric | July 31, 2025 | | :------------------------------------ | :------------ | | Foreign currency denominated cash (USD equivalent) | $566,000 | | Impact of 10% USD increase | -$57,000 | | Impact of 10% USD decrease | +$57,000 | - The company does not currently hold or issue foreign exchange contracts or other derivative instruments to hedge these exposures[106](index=106&type=chunk) [Interest Rate Risk](index=31&type=section&id=Interest%20Rate%20Risk) As of July 31, 2025, the company had no debt, thus it is not exposed to interest rate risk - As of July 31, 2025, the company had no debt, indicating no exposure to interest rate risk[107](index=107&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=32&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of July 31, 2025 - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of July 31, 2025[108](index=108&type=chunk) - Controls are designed to ensure timely accumulation and communication of information for SEC reports[108](index=108&type=chunk) [Changes in Internal Control over Financial Reporting](index=32&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the quarter ended July 31, 2025 - No material changes in internal control over financial reporting occurred during the quarter ended July 31, 2025[109](index=109&type=chunk) [PART II. OTHER INFORMATION](index=32&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings believed to have a material adverse effect on its financial condition or results of operations - The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its financial condition or results of operations[111](index=111&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from the prior Annual Report on Form 10-K, but readers should consider all risks - No material changes to risk factors from the Annual Report on Form 10-K for the year ended January 31, 2025[112](index=112&type=chunk) - Additional unknown or currently immaterial risks may also adversely affect the business[112](index=112&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable to the current report - Not applicable[113](index=113&type=chunk) [Item 3. Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the current report - Not applicable[113](index=113&type=chunk) [Item 4. Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the current report - Not applicable[114](index=114&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) This item is not applicable to the current report - Not applicable[115](index=115&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate documents, CEO/CFO certifications, and Inline XBRL taxonomy documents - The exhibits include corporate documents (e.g., Certificate of Incorporation, Bylaws), certifications from the CEO and CFO, and Inline XBRL taxonomy documents[117](index=117&type=chunk)[118](index=118&type=chunk) [Signatures](index=34&type=section&id=Signatures) The report was signed by Robert P. Capps, President and Chief Executive Officer of MIND TECHNOLOGY, INC., on September 10, 2025 - The report was signed by Robert P. Capps, President and Chief Executive Officer of MIND TECHNOLOGY, INC., on September 10, 2025[122](index=122&type=chunk)

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the company's condensed consolidated financial statements, notes, and management's discussion [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This item presents the company's condensed consolidated financial statements [Condensed Consolidated Statements of Financial Condition](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) Total assets decreased by **7.14% to $6.99 billion**, primarily due to reduced securities and loans held for sale | Metric | March 31, 2025 (in thousands) | September 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :--------- | | Total assets | $6,994,786 | $7,532,017 | $(537,231) | -7.13% | | Cash and cash equivalents | $254,249 | $158,337 | $95,912 | 60.58% | | Securities available for sale | $1,411,520 | $1,741,221 | $(329,701) | -18.93% | | Loans held for sale | $45,767 | $691,688 | $(645,921) | -93.38% | | Loans and leases | $4,464,870 | $4,075,195 | $389,675 | 9.56% | | Total liabilities | $6,180,739 | $6,709,828 | $(529,089) | -7.88% | | Deposits | $5,819,209 | $5,875,085 | $(55,876) | -0.95% | | Short-term borrowings | $— | $377,000 | $(377,000) | -100.00% | | Total stockholders' equity | $814,047 | $822,189 | $(8,142) | -0.99% | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Net income attributable to the parent increased by **7.21%**, driven by higher net interest and noninterest income | Metric (in thousands, except EPS) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 (As Restated) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------------------- | :---------------------------------------------- | :-------------------- | :--------- | | Net interest income | $136,279 | $128,634 | $7,645 | 5.94% | | Provision for credit loss | $35,266 | $29,744 | $5,522 | 18.57% | | Total noninterest income | $138,524 | $128,945 | $9,579 | 7.43% | | Total noninterest expense | $148,177 | $140,742 | $7,435 | 5.28% | | Net income attributable to parent | $74,957 | $69,918 | $5,039 | 7.21% | | Basic EPS | $3.16 | $2.74 | $0.42 | 15.33% | | Diluted EPS | $3.14 | $2.74 | $0.40 | 14.60% | | Metric (in thousands, except EPS) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 (As Restated) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------------------- | :---------------------------------------------- | :-------------------- | :--------- | | Net interest income | $261,528 | $247,561 | $13,967 | 5.64% | | Provision for credit loss | $53,927 | $37,502 | $16,425 | 43.80% | | Total noninterest income | $195,902 | $181,706 | $14,196 | 7.81% | | Total noninterest expense | $275,973 | $261,819 | $14,154 | 5.41% | | Net income attributable to parent | $104,923 | $104,817 | $106 | 0.10% | | Basic EPS | $4.37 | $4.07 | $0.30 | 7.37% | | Diluted EPS | $4.35 | $4.07 | $0.28 | 6.88% | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Total comprehensive income attributable to the parent significantly increased to **$99.6 million** | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 (As Restated) | Change (in thousands) | % Change | | :------------------------------------------ | :-------------------------------- | :---------------------------------------------- | :-------------------- | :--------- | | Net income before noncontrolling interest | $75,194 | $70,167 | $5,027 | 7.17% | | Change in net unrealized gain (loss) on debt securities | $25,517 | $(23,414) | $48,931 | -208.90% | | Total other comprehensive income (loss) | $24,606 | $(18,137) | $42,743 | -235.67% | | Comprehensive income attributable to parent | $99,563 | $51,781 | $47,782 | 92.28% | | Metric (in thousands) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 (As Restated) | Change (in thousands) | % Change | | :------------------------------------------ | :-------------------------------- | :---------------------------------------------- | :-------------------- | :--------- | | Net income before noncontrolling interest | $105,359 | $105,323 | $36 | 0.03% | | Change in net unrealized gain (loss) on debt securities | $(36,823) | $65,121 | $(101,944) | -156.54% | | Total other comprehensive income (loss) | $(12,917) | $48,873 | $(61,790) | -126.43% | | Comprehensive income attributable to parent | $92,006 | $153,690 | $(61,684) | -40.13% | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity slightly decreased due to common stock repurchases and increased comprehensive loss | Metric (in thousands) | Balance, September 30, 2024 (As Restated) | Balance, March 31, 2025 | Change (in thousands) | % Change | | :-------------------------------- | :---------------------------------------- | :---------------------- | :-------------------- | :--------- | | Total stockholders' equity | $822,189 | $814,047 | $(8,142) | -0.99% | | Cash dividends declared | N/A | $(2,392) | N/A | N/A | | Repurchases of common stock | N/A | $(102,447) | N/A | N/A | | Stock compensation | N/A | $5,072 | N/A | N/A | | Total other comprehensive loss | N/A | $(12,917) | N/A | N/A | | Net income | N/A | $104,923 | N/A | N/A | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The Company saw a net increase in cash and cash equivalents, driven by investing activities | Metric (in thousands) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 (As Restated) | Change (in thousands) | % Change | | :------------------------------------ | :-------------------------------- | :---------------------------------------------- | :-------------------- | :--------- | | Net cash provided by operating activities | $116,593 | $232,510 | $(115,917) | -49.85% | | Net cash provided by investing activities | $507,816 | $1,995 | $505,821 | 25354.44% | | Net cash used in financing activities | $(526,458) | $(262,236) | $(264,222) | 100.76% | | Net change in cash and cash equivalents | $95,912 | $(27,692) | $123,604 | -446.35% | | Cash and cash equivalents at end of period | $254,249 | $347,888 | $(93,639) | -26.92% | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes on accounting policies, divestitures, securities, and loans [NOTE 1. BASIS OF PRESENTATION](index=11&type=section&id=NOTE%201.%20BASIS%20OF%20PRESENTATION) Interim financial statements adhere to U.S. GAAP and SEC rules, with reclassifications not affecting net income - Interim financial statements prepared under U.S. GAAP and SEC rules, with all necessary adjustments[27](index=27&type=chunk) - Reclassification of "Gain (Loss) on Sale of Loans and Leases" to "Secondary Market Revenue" for interim period ending March 31, 2025, with no impact on previously reported net income or financial condition[28](index=28&type=chunk) [NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENTLY ADOPTED ACCOUNTING STANDARDS UPDATES ("ASU")](index=11&type=section&id=NOTE%202.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES%20AND%20RECENTLY%20ADOPTED%20ACCOUNTING%20STANDARDS%20UPDATES%20(%22ASU%22)) Significant accounting policies are largely unchanged, with ASU 2023-07 effective and other ASUs pending - ASU 2023-07 (Segment Reporting) effective October 1, 2024, improves reportable segment disclosures but does not impact consolidated financial statements[29](index=29&type=chunk) - ASU 2023-09 (Income Taxes) effective October 1, 2025, requires enhanced income tax disclosures[31](index=31&type=chunk) - ASU 2024-03 (Expense Disaggregation) effective October 1, 2027, requires specified expense disaggregation disclosures[32](index=32&type=chunk)[33](index=33&type=chunk) [NOTE 3. DIVESTITURES](index=12&type=section&id=NOTE%203.%20DIVESTITURES) The Company completed the sale of its commercial insurance premium finance business, recognizing a **$15.0 million** pre-tax gain - Completed sale of commercial insurance premium finance business on October 31, 2024[34](index=34&type=chunk) | Metric (in thousands) | Value | | :-------------------- | :---- | | Purchase price | $611,513 | | Premium on transaction | $31,200 | | Gain on divestitures | $15,044 | - Settlement adjustments during Q2 fiscal 2025 resulted in a **$1.4 million** decrease in the previously recognized gain[34](index=34&type=chunk) [NOTE 4. SECURITIES](index=13&type=section&id=NOTE%204.%20SECURITIES) The fair value of debt securities AFS decreased to **$1.41 billion**, driven by **$217.9 million** in sales | Security Type | March 31, 2025 (Fair Value, in thousands) | September 30, 2024 (Fair Value, in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :---------------------------------------- | :---------------------------------------- | :-------------------- | :--------- | | Total debt securities AFS | $1,411,520 | $1,741,221 | $(329,701) | -18.93% | | Total debt securities HTM | $26,492 | $30,236 | $(3,744) | -12.38% | | Gross Unrealized Losses (AFS) | $(217,398) | $(203,542) | $(13,856) | 6.81% | - Decrease in AFS securities driven by **$217.9 million** in sales to offset gains from divestitures and reposition the portfolio[37](index=37&type=chunk) - Management assessed all unrealized losses on AFS securities as due to adverse market conditions/interest rates, not credit loss, and does not intend to sell prior to recovery of amortized cost[37](index=37&type=chunk) [NOTE 5. LOANS AND LEASES, NET](index=16&type=section&id=NOTE%205.%20LOANS%20AND%20LEASES,%20NET) Total gross loans and leases increased by **9.56% to $4.46 billion**, with ACL increasing to **$102.9 million** | Loan Category (in thousands) | March 31, 2025 | September 30, 2024 | Change (in thousands) | % Change | | :--------------------------- | :------------- | :----------------- | :-------------------- | :--------- | | Total gross loans and leases | $4,464,870 | $4,075,195 | $389,675 | 9.56% | | Commercial finance | $3,524,755 | $3,295,599 | $229,156 | 6.95% | | Consumer finance | $246,202 | $248,800 | $(2,598) | -1.04% | | Tax services | $55,973 | $8,825 | $47,148 | 534.26% | | Warehouse finance | $643,124 | $517,847 | $125,277 | 24.19% | | Allowance for credit losses | $(102,890) | $(71,765) | $(31,125) | 43.37% | | ACL Activity (in thousands) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 (As Restated) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------------- | :---------------------------------------------- | :-------------------- | :--------- | | Provision for credit losses | $53,771 | $37,031 | $16,740 | 45.21% | | Charge-offs | $(32,728) | $(31,186) | $(1,542) | 4.95% | | Recoveries | $10,082 | $8,582 | $1,500 | 17.48% | - Nonaccrual loans and leases increased to **$36.0 million** at March 31, 2025, from **$26.4 million** at September 30, 2024, primarily in commercial finance[71](index=71&type=chunk) [NOTE 6. EARNINGS PER COMMON SHARE ("EPS")](index=27&type=section&id=NOTE%206.%20EARNINGS%20PER%20COMMON%20SHARE%20(%22EPS%22)) Basic EPS for the three months ended March 31, 2025, was **$3.16**, with diluted EPS at **$3.14** | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 (As Restated) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 (As Restated) | | :------------------------------------ | :-------------------------------- | :---------------------------------------------- | :-------------------------------- | :---------------------------------------------- | | Basic earnings per common share | $3.16 | $2.74 | $4.37 | $4.07 | | Diluted earnings per common share | $3.14 | $2.74 | $4.35 | $4.07 | | Total weighted-average basic common shares outstanding | 23,657,145 | 25,281,743 | 23,941,980 | 25,529,186 | | Total weighted-average diluted common shares outstanding | 23,776,023 | 25,311,144 | 24,039,020 | 25,555,656 | - Diluted EPS reflects the two-class method, as it was more dilutive than the treasury stock method[76](index=76&type=chunk) [NOTE 7. RENTAL EQUIPMENT, NET](index=28&type=section&id=NOTE%207.%20RENTAL%20EQUIPMENT,%20NET) Net book value of rental equipment slightly decreased to **$202.2 million** | Metric (in thousands) | March 31, 2025 | September 30, 2024 | Change (in thousands) | % Change | | :-------------------- | :------------- | :----------------- | :-------------------- | :--------- | | Net book value | $202,194 | $205,339 | $(3,145) | -1.53% | | Future Minimum Lease Payments (in thousands) | Amount | | :------------------------------------------- | :----- | | Remaining in 2025 | $21,322 | | 2026 | $36,044 | | 2027 | $27,855 | | 2028 | $19,116 | | 2029 | $12,939 | | Thereafter | $6,769 | | Total | $123,965 | [NOTE 8. GOODWILL AND INTANGIBLE ASSETS](index=29&type=section&id=NOTE%208.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) Total goodwill decreased to **$297.9 million** due to **$11.6 million** derecognition | Metric (in thousands) | March 31, 2025 | September 30, 2024 | Change (in thousands) | % Change | | :-------------------- | :------------- | :----------------- | :-------------------- | :--------- | | Total goodwill | $297,928 | $309,505 | $(11,577) | -3.74% | - Goodwill derecognition of **$11.6 million** due to the sale of the commercial insurance premium finance business[80](index=80&type=chunk)[81](index=81&type=chunk) | Intangible Asset (in thousands) | March 31, 2025 | September 30, 2024 | Change (in thousands) | % Change | | :------------------------------ | :------------- | :----------------- | :-------------------- | :--------- | | Total Intangible Assets | $14,064 | $16,589 | $(2,525) | -15.22% | [NOTE 9. OPERATING LEASE RIGHT-OF-USE ASSETS AND LIABILITIES](index=30&type=section&id=NOTE%209.%20OPERATING%20LEASE%20RIGHT-OF-USE%20ASSETS%20AND%20LIABILITIES) Operating lease ROU assets and liabilities decreased, with a **$0.5 million** gain on remeasurement | Metric (in thousands) | March 31, 2025 | September 30, 2024 | Change (in thousands) | % Change | | :-------------------- | :------------- | :----------------- | :-------------------- | :--------- | | Operating lease ROU assets | $24,100 | $24,400 | $(300) | -1.23% | | Operating lease liabilities | $25,200 | $26,000 | $(800) | -3.08% | - Derecognition of lease ROU assets and liabilities from the commercial insurance premium finance business sale resulted in a **$0.5 million** gain on remeasurement[85](index=85&type=chunk) - Weighted-average remaining lease term for operating leases is **8.41 years** at March 31, 2025[86](index=86&type=chunk) [NOTE 10. STOCKHOLDERS' EQUITY](index=31&type=section&id=NOTE%2010.%20STOCKHOLDERS'%20EQUITY) The Company repurchased **1,277,664** common shares, with **5,722,336** remaining available - Repurchased **1,277,664** shares of common stock during the six months ended March 31, 2025, under share repurchase programs[87](index=87&type=chunk) - **5,722,336** shares of common stock remained available for repurchase as of March 31, 2025[88](index=88&type=chunk) - Repurchased **66,446** shares for employee tax withholding obligations during the six months ended March 31, 2025[89](index=89&type=chunk) [NOTE 11. STOCK COMPENSATION](index=32&type=section&id=NOTE%2011.%20STOCK%20COMPENSATION) The Company granted various stock awards and PSUs, with **$11.7 million** in unrecognized compensation | Award Type | Granted (Six Months Ended March 31, 2025) | Nonvested Outstanding (March 31, 2025) | | :-------------------- | :---------------------------------------- | :------------------------------------- | | Restricted Stock Awards | 15,600 | 83,546 | | Restricted Stock Units | 86,200 | 85,628 | | PSUs | 34,208 | 142,366 | - Unrecognized stock-based compensation expense of **$11.7 million** as of March 31, 2025, with a weighted average remaining recognition period of **1.78 years**[97](index=97&type=chunk) [NOTE 12. INCOME TAXES](index=33&type=section&id=NOTE%2012.%20INCOME%20TAXES) Income tax expense was **$22.2 million**, with an effective tax rate of **17.38%** | Metric (in thousands) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 (As Restated) | Change (in thousands) | % Change | | :-------------------- | :-------------------------------- | :---------------------------------------------- | :-------------------- | :--------- | | Income tax expense | $22,171 | $24,623 | $(2,452) | -9.96% | | Effective tax rate | 17.38% | 18.95% | -1.57% | -8.28% | - The lower effective tax rate is primarily due to the effect of investment tax credits during fiscal year 2025[98](index=98&type=chunk) [NOTE 13. REVENUE FROM CONTRACTS WITH CUSTOMERS](index=35&type=section&id=NOTE%2013.%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) Total revenue increased by **6.56% to $457.4 million**, driven by refund transfer product fees | Revenue Category (in thousands) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 (As Restated) | Change (in thousands) | % Change | | :------------------------------ | :-------------------------------- | :---------------------------------------------- | :-------------------- | :--------- | | Total Revenue | $457,430 | $429,267 | $28,163 | 6.56% | | Refund transfer product fees | $33,073 | $29,364 | $3,709 | 12.63% | | Refund advance and other tax fee income | $49,110 | $43,311 | $5,799 | 13.39% | | Card and deposit fees | $59,859 | $66,094 | $(6,235) | -9.43% | - Refund transfer fees are recognized immediately after the taxpayer's refund is disbursed[103](index=103&type=chunk) - Card and deposit fees are recognized as transactions occur or as services are performed[104](index=104&type=chunk)[105](index=105&type=chunk) [NOTE 14. SEGMENT REPORTING](index=36&type=section&id=NOTE%2014.%20SEGMENT%20REPORTING) The Company reports across Consumer, Commercial, and Corporate Services/Other segments - Company operates through three reportable segments: Consumer (Partner Solutions), Commercial (Commercial Finance), and Corporate Services/Other (shared services, treasury, investment portfolio, warehouse finance, wholesale deposits, borrowings)[107](index=107&type=chunk) | Metric (in thousands) | Consumer (6M 2025) | Commercial (6M 2025) | Corporate Services/Other (6M 2025) | Total (6M 2025) | | :-------------------- | :----------------- | :------------------- | :--------------------------------- | :-------------- | | Net interest income | $156,694 | $85,280 | $19,554 | $261,528 | | Noninterest income | $147,629 | $39,357 | $8,916 | $195,902 | | Income (loss) before income tax expense | $141,533 | $46,932 | $(60,935) | $127,530 | | Total assets | $431,962 | $3,975,353 | $2,587,471 | $6,994,786 | | Total deposits | $5,633,529 | $140 | $185,540 | $5,819,209 | [NOTE 15. FAIR VALUES OF FINANCIAL INSTRUMENTS](index=37&type=section&id=NOTE%2015.%20FAIR%20VALUES%20OF%20FINANCIAL%20INSTRUMENTS) Financial instruments are measured using a fair value hierarchy, with debt securities AFS primarily Level 2 - Fair value hierarchy categorizes inputs into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[110](index=110&type=chunk)[111](index=111&type=chunk) - Debt securities AFS are primarily Level 2, and marketable equity securities are Level 1[112](index=112&type=chunk)[113](index=113&type=chunk) | Financial Instrument (in thousands) | March 31, 2025 (Fair Value) | September 30, 2024 (Fair Value) | | :---------------------------------- | :-------------------------- | :------------------------------ | | Debt securities available for sale | $1,411,520 | $1,741,221 | | Loans and leases | $4,418,831 | $4,036,490 | | Deposits | $5,819,118 | $5,874,994 | [NOTE 16. SUBSEQUENT EVENTS](index=40&type=section&id=NOTE%2016.%20SUBSEQUENT%20EVENTS) Management identified no material subsequent events requiring recognition or disclosure - No material subsequent events identified after March 31, 2025, up to the filing date[121](index=121&type=chunk) [NOTE 17. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS](index=41&type=section&id=NOTE%2017.%20RESTATEMENT%20OF%20PREVIOUSLY%20ISSUED%20FINANCIAL%20STATEMENTS) The Company restated its unaudited historical condensed consolidated financial statements to correct accounting errors - Restatement of unaudited historical condensed consolidated financial statements for March 31, 2024[122](index=122&type=chunk) - Corrections for errors in allowance for credit losses, interest income, provision for credit losses, and noninterest expense[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's discussion and analysis of financial condition and results [FORWARD-LOOKING STATEMENTS](index=42&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section contains forward-looking statements subject to significant risks and uncertainties - Forward-looking statements are based on current information and assumptions, subject to significant risks and uncertainties[125](index=125&type=chunk) - Key risk factors include maintaining executive management, realizing growth opportunities, geopolitical conflicts, inflation, interest rate changes, regulatory actions, and technological risks[125](index=125&type=chunk) - The Company disclaims any obligation to update or revise forward-looking statements[126](index=126&type=chunk) [GENERAL](index=43&type=section&id=GENERAL) Pathward Financial, Inc. is a NASDAQ-listed bank holding company, analyzing financial condition and results - Pathward Financial, Inc. is a registered bank holding company, and its common stock trades on NASDAQ under "CASH"[127](index=127&type=chunk)[128](index=128&type=chunk) - Prior period financial information for March 31, 2024, has been restated as described in Note 17[129](index=129&type=chunk) [EXECUTIVE SUMMARY](index=43&type=section&id=EXECUTIVE%20SUMMARY) Pathward, N.A. was Certified™ by Great Place to Work®, with Q2 fiscal 2025 highlights including a **29%** increase in tax income - Pathward®, N.A. became Certified™ by Great Place to Work® for the third year in a row[130](index=130&type=chunk) | Metric | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | Change | % Change | | :---------------------------------------- | :-------------------------------- | :-------------------------------- | :------- | :--------- | | Total tax services product income (net) | $47.6 million | $36.9 million | $10.7 million | 29.00% | | Total revenue (Q2 fiscal) | $274.8 million | $257.6 million | $17.2 million | 6.68% | | Net Interest Margin (NIM) (Q2 fiscal) | 7.12% | 6.77% | 0.35% | 5.17% | | Gross loans and leases (March 31, 2025 vs March 31, 2024, excluding divested business) | $4.46 billion | $3.88 billion | $0.58 billion | 15.00% | - Repurchased **575,804** shares of common stock at an average price of **$78.11** during Q2 fiscal 2025[131](index=131&type=chunk) [FINANCIAL CONDITION](index=44&type=section&id=FINANCIAL%20CONDITION) Total assets decreased to **$6.99 billion** due to reduced loans held for sale and securities AFS | Metric (in millions) | March 31, 2025 | September 30, 2024 | Change | % Change | | :------------------- | :------------- | :----------------- | :----- | :--------- | | Total assets | $6,994.8 | $7,532.0 | $(537.2) | -7.13% | | Cash and cash equivalents | $254.2 | $158.3 | $95.9 | 60.58% | | Investment securities | $1,442.8 | $1,774.3 | $(331.5) | -18.68% | | Loans held for sale | $45.8 | $691.7 | $(645.9) | -93.38% | | Total gross loans and leases | $4,464.9 | $4,075.2 | $389.7 | 9.56% | | Commercial finance loans | $3,524.8 | $3,295.6 | $229.2 | 6.95% | | Total deposits | $5,819.2 | $5,875.1 | $(55.9) | -0.95% | | Total borrowings | $33.4 | $410.4 | $(377.0) | -91.86% | | Stockholders' equity | $814.0 | $822.2 | $(8.2) | -0.99% | - The increase in cash and cash equivalents was primarily due to proceeds from the sale of the commercial insurance premium finance business and debt securities AFS, partially offset by repayment of short-term borrowings[137](index=137&type=chunk) - The Company managed **$1.12 billion** of off-balance sheet custodial deposits at March 31, 2025, earning servicing fee income[150](index=150&type=chunk) [RESULTS OF OPERATIONS](index=47&type=section&id=RESULTS%20OF%20OPERATIONS) Net income for Q2 fiscal 2025 increased to **$75.0 million**, with diluted EPS of **$3.14** | Metric (in millions, except EPS) | Q2 Fiscal 2025 | Q2 Fiscal 2024 (Restated) | Change | % Change | | :------------------------------- | :------------- | :------------------------ | :----- | :--------- | | Net income | $75.0 | $69.9 | $5.1 | 7.21% | | Diluted EPS | $3.14 | $2.74 | $0.40 | 14.60% | | Net interest income | $136.3 | $128.6 | $7.7 | 5.99% | | Net Interest Margin (NIM) | 7.12% | 6.77% | 0.35% | 5.17% | | Provision for credit losses | $35.3 | $29.7 | $5.6 | 18.86% | | Noninterest income | $138.5 | $128.9 | $9.6 | 7.45% | | Noninterest expense | $148.2 | $140.7 | $7.5 | 5.33% | | Effective tax rate | 17.7% | 19.4% | -1.7% | -8.76% | - Average interest-earning assets increased by **$122.2 million** to **$7.76 billion** in Q2 fiscal 2025, driven by cash and loan/lease balances, partially offset by decreased investment securities[156](index=156&type=chunk) - Secondary market revenue, refund advance, and other tax product income, and refund transfer product fees primarily drove the increase in noninterest income[161](index=161&type=chunk) - Card and deposit fee income decreased due to lower quarterly average deposit balances at partner banks and reduced servicing fee income from lower EFFR[162](index=162&type=chunk) [Asset Quality](index=52&type=section&id=Asset%20Quality) Nonperforming assets decreased to **$41.6 million** (**0.59%** of total assets) | Metric (in thousands) | March 31, 2025 | September 30, 2024 | Change (in thousands) | % Change | | :------------------------------------ | :------------- | :----------------- | :-------------------- | :--------- | | Total nonperforming assets | $41,618 | $43,033 | $(1,415) | -3.29% | | Total nonperforming loans and leases | $39,806 | $41,562 | $(1,756) | -4.22% | | Nonaccruing loans and leases | $36,049 | $26,412 | $9,637 | 36.49% | | Accruing loans 90+ days delinquent | $3,757 | $15,150 | $(11,393) | -75.20% | | Classified loans & leases: Substandard | $202,900 | $180,900 | $22,000 | 12.16% | | Classified loans & leases: Doubtful | $5,000 | $10,300 | $(5,300) | -51.46% | | Allowance for Credit Losses (ACL) | $102,900 | $71,800 | $31,100 | 43.32% | - The decrease in nonperforming assets was primarily driven by a decrease in nonperforming loans in the seasonal tax services portfolio[174](index=174&type=chunk) - ACL as a percentage of total loans and leases increased to **2.30%** at March 31, 2025, from **1.76%** at September 30, 2024, due to seasonality in tax services and consumer finance portfolios[183](index=183&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=54&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) The Company's critical accounting policies and estimates remained without significant changes - No significant changes to critical accounting policies and estimates during the first six months of fiscal 2025[184](index=184&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=55&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The Company's total available liquidity exceeded **$3.89 billion**, and both the Company and Bank remain well-capitalized - Primary sources of funds are deposits, borrowings, and payments on loans/securities[185](index=185&type=chunk) - Total available liquidity was over **$3.89 billion** at March 31, 2025, including cash, off-balance sheet custodial deposits, and FHLB/FRB access[186](index=186&type=chunk) - Uninsured deposits remained less than **15%** of total deposits during Q2 fiscal 2025[186](index=186&type=chunk) | Capital Ratio | Company (March 31, 2025) | Bank (March 31, 2025) | Minimum to be Well Capitalized | | :------------------------ | :----------------------- | :-------------------- | :----------------------------- | | Tier 1 leverage capital ratio | 8.32% | 8.52% | 5.00% | | Common equity Tier 1 capital ratio | 13.64% | 14.25% | 6.50% | | Tier 1 capital ratio | 13.91% | 14.25% | 8.00% | | Total capital ratio | 15.57% | 15.51% | 10.00% | - The Company and Bank exceeded federal regulatory minimum capital requirements and were classified as well-capitalized at March 31, 2025[188](index=188&type=chunk) [CONTRACTUAL OBLIGATIONS](index=56&type=section&id=CONTRACTUAL%20OBLIGATIONS) No material changes occurred to contractual obligations outside the ordinary course of business - No material changes to contractual obligations from September 30, 2024, through March 31, 2025[195](index=195&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) This item discusses the company's exposure to market risks, particularly interest rate risk [Interest Rate Risk ("IRR")](index=57&type=section&id=Interest%20Rate%20Risk%20(%22IRR%22)) The Company actively manages interest rate risk using EAR and EVE analyses - The Company actively manages interest rate risk using Earnings at Risk (EAR) and Economic Value of Equity (EVE) analyses[203](index=203&type=chunk)[205](index=205&type=chunk) | Scenario (March 31, 2025) | Net Interest Income (in thousands) | Percentage Change from Base | | :------------------------ | :--------------------------------- | :-------------------------- | | -200 bps parallel shift | $384,557 | -11.1% | | -100 bps parallel shift | $405,270 | -6.3% | | Base Case | $432,439 | —% | | +100 bps parallel shift | $459,790 | 6.3% | | +200 bps parallel shift | $485,814 | 12.3% | | Scenario (March 31, 2025) | Economic Value of Equity at Risk % Change from Base | | :------------------------ | :-------------------------------------------------- | | -200 bps parallel shift | -5.1% | | -100 bps parallel shift | -2.0% | | +100 bps parallel shift | 1.1% | | +200 bps parallel shift | 1.6% | - The economic value of equity position is expected to benefit from rising interest rates due to the large amount of noninterest-bearing funding[208](index=208&type=chunk) [Item 4. Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) This item addresses disclosure controls, material weaknesses, and internal control changes [EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES](index=59&type=section&id=EVALUATION%20OF%20DISCLOSURE%20CONTROLS%20AND%20PROCEDURES) Management concluded disclosure controls were not effectively designed due to a material weakness - Disclosure controls and procedures were not effectively designed as of March 31, 2025[210](index=210&type=chunk) - A material weakness in internal control over financial reporting was identified[210](index=210&type=chunk) - Despite the material weakness, management believes the consolidated financial statements in this Form 10-Q fairly present the Company's financial position[211](index=211&type=chunk) [REMEDIATION PLAN AND STATUS](index=59&type=section&id=REMEDIATION%20PLAN%20AND%20STATUS) The Company is actively remediating the material weakness by engaging a consultant - Engaged a third-party technical accounting consultant to assist with identification, assessment, and accounting impacts for consumer lending program agreements[214](index=214&type=chunk) - Designed and is implementing a control enhancement for periodic review and validation of accounting policies for consumer lending program agreements[214](index=214&type=chunk) [CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING](index=60&type=section&id=CHANGES%20IN%20INTERNAL%20CONTROL%20OVER%20FINANCIAL%20REPORTING) No other material changes occurred in internal controls over financial reporting - No other material changes in internal controls over financial reporting during the second fiscal quarter, apart from the described material weakness and remediation[215](index=215&type=chunk) [PART II - OTHER INFORMATION](index=61&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) The Company has no material pending legal proceedings - No material pending legal proceedings or contemplated governmental proceedings[218](index=218&type=chunk) [Item 1A. Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) No material changes occurred to the risk factors - No material changes to risk factors during the six months ended March 31, 2025[219](index=219&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company repurchased **575,804** common shares, with **5,722,336** remaining available | Period (Fiscal 2025 Q2) | Total Number of Shares Purchased | Average Price Paid per Share | Shares Remaining Under Program | | :---------------------- | :------------------------------- | :--------------------------- | :----------------------------- | | January 1 to 31 | 305,900 | $76.80 | 5,992,240 | | February 1 to 28 | 269,904 | $79.59 | 5,722,336 | | March 1 to 31 | — | — | 5,722,336 | | Total | 575,804 | N/A | N/A | - **5,722,336** shares remained available for repurchase under the program as of March 31, 2025[222](index=222&type=chunk) [Item 3. Defaults Upon Senior Securities](index=61&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the Company for the current reporting period - Not applicable[223](index=223&type=chunk) [Item 4. Mine Safety Disclosures](index=61&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company for the current reporting period - Not applicable[225](index=225&type=chunk) [Item 5. Other Information](index=61&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements - No adoption or termination of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements by directors or executive officers[227](index=227&type=chunk) [Item 6. Exhibits](index=62&type=section&id=Item%206.%20Exhibits) Exhibits include Section 302 and 906 certifications and iXBRL financial information - Includes Section 302 and 906 certifications of Chief Executive Officer and Chief Financial Officer[229](index=229&type=chunk) - Financial information formatted in Inline Extensible Business Reporting Language (iXBRL) is provided[229](index=229&type=chunk) [SIGNATURES](index=63&type=section&id=SIGNATURES) The report is duly signed by Brett L. Pharr, CEO, and Gregory A. Sigrist, CFO - Report signed by Brett L. Pharr, CEO and Director, and Gregory A. Sigrist, EVP and CFO[233](index=233&type=chunk)

Executive Summary & Key Highlights [Fourth Quarter & Fiscal Year 2025 Financial Highlights](index=1&type=section&id=Fourth%20Quarter%20%26%20Fiscal%20Year%202025%20Financial%20Highlights) Alliance Entertainment reported significant financial improvements for Q4 and FY2025, with substantial increases in Adjusted EBITDA, gross margin, net income, and EPS, alongside a reduction in revolver debt and growth in Direct to Consumer Fulfilment sales Q4 and FY2025 Key Financial Highlights | Metric | Q4 FY2025 ($ million) | FY2025 ($ million) | YoY Change (Q4) | YoY Change (FY) | | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $12.2 | - | +481% | - | | Gross Margin | 15.8% | - | +38.6% | - | | EPS | - | $0.30 | - | Up from $0.09 in FY24 | | Net Income | - | $15.1 | - | +229% | | Revolver Debt Reduction | - | $15.7 | - | -22% | | DTC Fulfilment Sales (% of gross revenue) | - | 37% | - | - | - Q4 Adjusted EBITDA increased to **$12.2 million** from $2.1 million, a **481% increase** year-over-year[1](index=1&type=chunk) - Q4 Gross Margin increased to **15.8%** from 11.4%, a **38.6% increase** year-over-year[1](index=1&type=chunk) - FY25 EPS increased to **$0.30 per share**, up from $0.09 per share in FY24[1](index=1&type=chunk) - Delivered **$15.1 million** in net income for FY25, a **229% year-over-year improvement**[1](index=1&type=chunk) - Reduced revolver debt by **22%** or **$15.7 million** year-over-year, strengthening balance sheet and liquidity position[1](index=1&type=chunk) - Direct to Consumer Fulfilment sales increased to **37% of gross revenue**[2](index=2&type=chunk) [Strategic & Operational Achievements](index=1&type=section&id=Strategic%20%26%20Operational%20Achievements) The company expanded its collectibles portfolio through acquisitions and exclusive distribution agreements, significantly increased physical movie sales due to a new Paramount Pictures license, and launched a new home entertainment division, while also improving operational efficiency and reducing expenses - Expanded retail distribution of Handmade by Robots, acquired in December 2024, launching into anime collectibles and debuting a limited-edition Hello Kitty figure at San Diego Comic-Con[4](index=4&type=chunk)[6](index=6&type=chunk) - Expanded collectibles portfolio through a new exclusive agreement to serve as exclusive North American distributor for Master Replicas, adding premium collectibles from iconic sci-fi properties[4](index=4&type=chunk)[6](index=6&type=chunk) - Increased physical movie sales **36% year-over-year** to **$279 million**, fueled by the January 2025 launch of the exclusive Paramount Pictures license agreement[4](index=4&type=chunk)[6](index=6&type=chunk) - Launched Alliance Home Entertainment, a new division unifying Mill Creek Entertainment, Distribution Solutions, and strategic hires, and was selected by Walmart as its video category advisor in July 2025[7](index=7&type=chunk) - Vinyl record sales increased **2% year-over-year** to **$337 million** in FY25, driven by strong Record Store Day demand and collector-focused limited editions[7](index=7&type=chunk) - Direct to Consumer Fulfillment (DTC) channel represented **37% of FY25 gross revenue**, up from 36% in FY24[7](index=7&type=chunk) - Reduced total operating expenses by **10.5% year-over-year** in FY25, with distribution and fulfillment costs as a percentage of revenue declining by **0.6%** due to automation and warehouse consolidation[7](index=7&type=chunk) - Interest expense declined **13.7% year-over-year**[7](index=7&type=chunk) [Management Commentary](index=2&type=section&id=Management%20Commentary) CEO Jeff Walker highlighted solid execution, increased EPS, and strengthened partnerships, emphasizing the company's role as a key distribution and fulfillment partner. CFO Amanda Gnecco noted strong financial momentum, profitability improvements from product mix and expense management, and a strategic focus on high-margin channels, exclusive content, and AI for future growth - CEO Jeff Walker commented that Fiscal 2025 marked another year of solid execution, with earnings per share rising to **$0.30** from $0.09 in the prior year[5](index=5&type=chunk) - CEO Walker emphasized Alliance's strengthened role as the go-to distribution and fulfillment partner, delivering exclusive content with efficiency and scale in the evolving entertainment and collectibles market[5](index=5&type=chunk)[8](index=8&type=chunk) - CFO Amanda Gnecco stated that the company ended fiscal 2025 with strong financial momentum, delivering **$15.1 million** in net income (**up 229%**) and adjusted EBITDA of **$36.5 million** (**up 51%**)[9](index=9&type=chunk) - CFO Gnecco attributed these gains to a more profitable product mix, disciplined expense management, and meaningful leverage from automation and warehouse consolidation efforts[9](index=9&type=chunk) - CFO Gnecco outlined a focus for fiscal 2026 on scaling high-margin channels, expanding the exclusive content portfolio, and leveraging AI to drive sales growth and operational efficiency[11](index=11&type=chunk) Detailed Financial Performance [Fourth Quarter FY 2025 Financial Results](index=3&type=section&id=Fourth%20Quarter%20FY%202025%20Financial%20Results) Alliance Entertainment reported a slight decrease in net revenues for Q4 FY2025 compared to the prior year, but achieved significant increases in gross profit, gross margin, net income, and Adjusted EBITDA, demonstrating improved profitability and operational leverage Fourth Quarter FY2025 Financial Performance | Metric | Q4 FY2025 ($ million) | Q4 FY2024 ($ million) | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $227.8 | $236.9 | -3.8% | | Gross Profit | $36.0 | $26.9 | +33.8% | | Gross Margin | 15.8% | 11.4% | +38.6% | | Net Income | $5.8 | $2.5 | +132.0% | | Diluted EPS | $0.11 | $0.05 | +120.0% | | Adjusted EBITDA | $12.2 | $2.1 | +481.0% | - Net revenues for Q4 FY2025 were **$227.8 million**, compared to $236.9 million in the same period of 2024[12](index=12&type=chunk) - Gross profit for Q4 FY2025 was **$36.0 million**, up **33.8%** compared to $26.9 million in Q4 FY2024[12](index=12&type=chunk) - Adjusted EBITDA for Q4 FY2025 was **$12.2 million**, up **480%** compared to $2.1 million for Q4 FY2024[12](index=12&type=chunk) [Fiscal Year 2025 Financial Results](index=4&type=section&id=FY%202025%20Financial%20Results) For the full fiscal year 2025, Alliance Entertainment experienced a slight decrease in net revenues but delivered substantial growth in gross profit, gross margin, net income, and Adjusted EBITDA, reflecting enhanced operational efficiency and profitability Fiscal Year 2025 Financial Performance | Metric | FY2025 ($ million) | FY2024 ($ million) | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $1,063.457 | $1,100.483 | -3.4% | | Gross Profit | $132.9 | $128.9 | +3.1% | | Gross Margin | 12.5% | 11.7% | +6.8% | | Net Income | $15.1 | $4.6 | +229.0% | | Diluted EPS | $0.30 | $0.09 | +233.3% | | Adjusted EBITDA | $36.5 | $24.3 | +51.0% | - Net revenues for FY2025 were **$1.06 billion**, compared to $1.10 billion in fiscal year 2024[17](index=17&type=chunk) - Net income for FY2025 was **$15.1 million**, or **$0.30 per diluted share**, up **229%** compared to $4.6 million, or $0.09 per diluted share, for FY2024[17](index=17&type=chunk) - Adjusted EBITDA for FY2025 was **$36.5 million**, up **51%** compared to $24.3 million for FY2024[17](index=17&type=chunk) [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) Alliance Entertainment utilizes Adjusted EBITDA as a key non-GAAP financial measure to evaluate its operating performance, which saw a significant 51% year-over-year increase to $36.5 million in FY2025, reflecting enhanced profitability - Adjusted EBITDA for FY2025 was **$36.5 million**, an improvement of **$12.2 million** or **51% year-over-year** compared to $24.3 million in FY2024[27](index=27&type=chunk)[28](index=28&type=chunk) - Adjusted EBITDA is defined as net income or loss adjusted to exclude income tax expense, other income (loss), interest expense, depreciation and amortization expense, and other infrequent, non-recurring expenses[27](index=27&type=chunk) - The company uses Adjusted EBITDA to evaluate its operating performance and as an integral part of its planning process, believing it is a useful indicator for investors[27](index=27&type=chunk) Consolidated Financial Statements [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) The consolidated statements of operations for FY2025 show a decrease in net revenues but a substantial increase in net income and diluted EPS, driven by improved operating income and reduced operating expenses Consolidated Statements of Operations (Year Ended June 30, in thousands) | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | Net Revenues | $1,063,457 | $1,100,483 | | Cost of Revenues | $930,605 | $971,594 | | Total Operating Expenses | $102,716 | $114,748 | | Operating Income | $30,136 | $14,141 | | Net Income | $15,078 | $4,581 | | Net Income per Share – Diluted | $0.30 | $0.09 | - Operating Income significantly increased to **$30.136 million** in FY2025 from $14.141 million in FY2024[22](index=22&type=chunk) - Total Operating Expenses decreased to **$102.716 million** in FY2025 from $114.748 million in FY2024[22](index=22&type=chunk) [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets indicate an increase in total assets and stockholders' equity for FY2025, with notable changes including higher trade receivables and inventory, and a reduction in the revolving credit facility Consolidated Balance Sheets (As of June 30, in thousands) | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | Total Current Assets | $218,132 | $196,213 | | Total Assets | $361,228 | $340,812 | | Total Current Liabilities | $172,729 | $147,920 | | Revolving Credit Facility, Net | $55,268 | $69,587 | | Total Liabilities | $258,006 | $253,183 | | Total Stockholders' Equity | $103,222 | $87,629 | - Trade Receivables, Net increased to **$107.246 million** in FY2025 from $92.357 million in FY2024[24](index=24&type=chunk) - Inventory, Net increased to **$102.848 million** in FY2025 from $97.429 million in FY2024[24](index=24&type=chunk) - Revolving Credit Facility, Net decreased to **$55.268 million** in FY2025 from $69.587 million in FY2024[24](index=24&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The consolidated statements of cash flows show a decrease in net cash provided by operating activities in FY2025, while net cash used in investing activities increased, and net cash used in financing activities decreased, resulting in a net increase in cash Consolidated Statements of Cash Flows (Year Ended June 30, in thousands) | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $26,809 | $55,773 | | Net Cash Used in Investing Activities | $(8,134) | $(117) | | Net Cash Used in Financing Activities | $(18,571) | $(55,390) | | Net Increase in Cash | $104 | $266 | | Cash, End of the Period | $1,236 | $1,129 | - Net Cash Provided by Operating Activities decreased from **$55.773 million** in FY2024 to **$26.809 million** in FY2025[26](index=26&type=chunk) - Net Cash Used in Investing Activities increased significantly from **$(0.117) million** in FY2024 to **$(8.134) million** in FY2025, primarily due to cash paid for business asset purchases[26](index=26&type=chunk) - Net Cash Used in Financing Activities decreased from **$(55.390) million** in FY2024 to **$(18.571) million** in FY2025, largely due to changes in revolving credit facility payments and borrowings[26](index=26&type=chunk) Company Overview & Additional Information [About Alliance Entertainment](index=5&type=section&id=About%20Alliance%20Entertainment) Alliance Entertainment is a premier distributor and fulfillment partner for the entertainment and pop culture collectibles industry, offering a vast selection of physical media and licensed merchandise, leveraging exclusive partnerships and a scalable infrastructure to serve over 35,000 retail locations - Alliance Entertainment (NASDAQ: AENT) is a premier distributor and fulfillment partner for the entertainment and pop culture collectibles industry[18](index=18&type=chunk) - The company supplies more than **340,000 unique in-stock SKUs**, including over **57,300 exclusive titles** across compact discs, vinyl LPs, DVDs, Blu-rays, and video games, to over **35,000 retail and e-commerce storefronts**[3](index=3&type=chunk)[18](index=18&type=chunk) - Its growing collectibles portfolio includes Handmade by Robots™, a stylized vinyl figure line featuring licensed characters from leading entertainment franchises[18](index=18&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements regarding future financial and performance metrics, market opportunities, and business execution, which are subject to various risks and uncertainties, including market acceptance, reliance on suppliers, indebtedness, and adverse economic factors - Certain statements in the Press Release are forward-looking for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995[19](index=19&type=chunk) - These statements are based on current management expectations and assumptions, and are not predictions of actual performance, being provided for illustrative purposes only[19](index=19&type=chunk) - Forward-looking statements are subject to risks and uncertainties, including those related to anticipated growth rates, market opportunities, changes in regulations, ability to execute business model, reliance on suppliers and customers, increased inventory risk, indebtedness, litigation, economic factors, and internal controls[19](index=19&type=chunk) [Conference Call Information](index=4&type=section&id=Conference%20Call%20Information) Alliance Entertainment hosted a conference call on September 10, 2025, to discuss the Q4 and FY2025 results, with details provided for live access and replay options - Alliance Entertainment Chief Executive Officer Jeff Walker and Chief Financial Officer Amanda Gnecco hosted a conference call on Wednesday, September 10, 2025, at 4:30 p.m. Eastern Time[14](index=14&type=chunk)[15](index=15&type=chunk) - The conference call was broadcast live and is available for replay via webcast and telephone until November 10, 2025[16](index=16&type=chunk)

[Fiscal Year 2026 First Quarter Highlights](index=1&type=section&id=Fiscal%20Year%202026%20First%20Quarter%20Highlights) Kewaunee Scientific reported strong Q1 FY2026 results with significant sales and earnings growth, improved financial position, and positive segment performance, driven by the Nu Aire acquisition [Consolidated Financial Performance](index=1&type=section&id=Consolidated%20Financial%20Performance) Kewaunee Scientific reported strong consolidated results for Q1 FY2026, with significant increases in sales, pre-tax earnings, net earnings, and EBITDA compared to the prior year, driven by the Nu Aire acquisition and improved operational efficiency Consolidated Financial Highlights | Metric | Q1 FY2026 ($ in thousands) | Q1 FY2025 ($ in thousands) | Change (%) | | :----- | :------------------------- | :------------------------- | :--------- | | Sales | $71,104 | $48,393 | 46.9% | | Pre-tax Earnings | $3,920 | $2,430 | 61.3% | | Net Earnings | $3,093 | $2,193 | 41.1% | | EBITDA | $6,320 | $3,325 | 90.1% | | Diluted EPS | $1.04 | $0.74 | 40.5% | | Order Backlog (July 31, 2025) ($ million) | $205.0 | $159.4 (July 31, 2024) | 28.6% | | Order Backlog (April 30, 2025) ($ million) | $205.0 | $214.6 | -4.5% | [Segment Performance Overview](index=1&type=section&id=Segment%20Performance%20Overview) Both Domestic and International segments showed strong sales and earnings growth, while the Corporate segment experienced an increased pre-tax net loss due to strategic investments in its platform [Domestic Segment](index=1&type=section&id=Domestic%20Segment) The Domestic segment achieved significant sales and earnings growth, driven by the Nu Aire acquisition and operational improvements Domestic Segment Financials | Metric | Q1 FY2026 ($ in thousands) | Q1 FY2025 ($ in thousands) | Change (%) | | :----- | :------------------------- | :------------------------- | :--------- | | Sales | $54,352 | $35,523 | 53.0% | | Net Earnings | $4,722 | $2,871 | 64.5% | | EBITDA | $7,576 | $4,738 | 59.9% | - Growth was driven by the incorporation of Nu Aire's results, steady manufacturing volumes, improved productivity, and cost management actions[4](index=4&type=chunk) [International Segment](index=1&type=section&id=International%20Segment) The International segment experienced strong sales and earnings growth due to reduced customer site delays International Segment Financials | Metric | Q1 FY2026 ($ in thousands) | Q1 FY2025 ($ in thousands) | Change (%) | | :----- | :------------------------- | :------------------------- | :--------- | | Sales | $16,752 | $12,870 | 30.2% | | Net Earnings | $643 | $463 | 38.9% | | EBITDA | $1,055 | $696 | 51.6% | - Increased deliveries and billings were a result of decreasing customer site delays experienced during most of the prior fiscal year[5](index=5&type=chunk) [Corporate Segment](index=1&type=section&id=Corporate%20Segment) The Corporate segment's pre-tax net loss increased due to strategic investments in its platform and higher compliance costs Corporate Segment Financials | Metric | Q1 FY2026 ($ in thousands) | Q1 FY2025 ($ in thousands) | Change | | :----- | :------------------------- | :------------------------- | :----- | | Pre-tax Net Loss | $3,058 | $1,992 | Increased Loss | | EBITDA | ($2,311) | ($2,109) | Increased Negative | - Increased costs in the current year period are related to strategic investments in the Corporate platform, including increased compliance costs for anticipated Sarbanes-Oxley 404(b) requirements and investments in people, processes, and technology to support future growth[7](index=7&type=chunk) [Financial Position Snapshot](index=2&type=section&id=Financial%20Position%20Snapshot) The company improved its cash position and working capital while slightly reducing both short-term and long-term debt, leading to a lower debt-to-equity ratio compared to the previous quarter Key Financial Position Metrics | Metric | July 31, 2025 ($ in thousands) | April 30, 2025 ($ in thousands) | Change | | :----- | :----------------------------- | :----------------------------- | :----- | | Total Cash on Hand | $20,441 | $17,164 | Up $3,277 | | Working Capital | $66,662 | $64,651 | Up $2,011 | | Short-term Debt | $4,294 | $4,773 | Down $479 | | Long-term Debt | $60,269 | $60,730 | Down $461 | | Debt-to-Equity Ratio | 0.94-to-1 | 0.99-to-1 | Improved | | Debt-to-Equity Ratio (net of sale-leaseback) | 0.54-to-1 | 0.57-to-1 | Improved | [Management Commentary and Business Outlook](index=2&type=section&id=Management%20Commentary%20and%20Business%20Outlook) Management highlights solid Q1 performance, acknowledges project delivery volatility, and outlines strategic investments for long-term growth, expecting improved FY2026 unadjusted EBITDA [CEO's Remarks and Outlook](index=2&type=section&id=CEO%27s%20Remarks%20and%20Outlook) CEO Thomas D. Hull III highlighted solid Q1 performance despite challenging market conditions but anticipates uneven quarterly performance for FY2026 due to project delivery timeline volatility. The company is focused on strategic investments for sustainable long-term growth, expecting better unadjusted EBITDA for FY2026 than FY2025 despite near-term pressure on earnings - Domestic and International segments delivered **solid financial performance in Q1** despite challenging market conditions (uncertain government policy, evolving tariff structures, geopolitical upheaval)[10](index=10&type=chunk) - Overall backlog remains near historically high levels, but volatility in project delivery timelines is expected to cause **uneven quarterly performance for the balance of fiscal year 2026**, likely starting in Q2[10](index=10&type=chunk) - Kewaunee is focused on organic and inorganic growth, making strategic investments in people, processes, and technology, which will place pressure on near-term earnings but position the company for rapid and sustained long-term growth[10](index=10&type=chunk) - Despite anticipated uneven quarterly performance and increasing strategic investment, the company expects to deliver **better unadjusted EBITDA in fiscal year 2026 than in fiscal year 2025**[10](index=10&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) This section provides reconciliations for non-GAAP measures like EBITDA and adjusted net earnings, clarifying their calculation and purpose as supplemental financial information [EBITDA and Segment EBITDA Reconciliation](index=3&type=section&id=EBITDA%2C%20Segment%20EBITDA%2C%20Adjusted%20EBITDA%2C%20and%20Adjusted%20Segment%20EBITDA%20Reconciliation) This section provides a detailed reconciliation of Net Earnings (Loss) to EBITDA and Adjusted EBITDA for consolidated and segment levels for Q1 FY2026 and Q1 FY2025, highlighting adjustments for interest, taxes, depreciation, amortization, and professional/other fees related to the Nu Aire acquisition and integration Consolidated EBITDA and Adjusted EBITDA Reconciliation | Metric (Consolidated) | Q1 FY2026 ($ in thousands) | Q1 FY2025 ($ in thousands) | | :-------------------- | :------------------------- | :------------------------- | | Net Earnings | $3,093 | $2,193 | | Interest Expense | $1,058 | $472 | | Interest Income | ($141) | ($347) | | Income Taxes | $761 | $192 | | Depreciation and Amortization | $1,549 | $815 | | **EBITDA** | **$6,320** | **$3,325** | | Professional & Other Fees | $224 | $730 | | **Adjusted EBITDA** | **$6,544** | **$4,055** | - Professional and other fees in Q1 FY2025 related to the Nu Aire acquisition, while Q1 FY2026 fees related to the integration of Nu Aire[11](index=11&type=chunk) [Adjusted Consolidated Statement of Operations Reconciliation](index=4&type=section&id=Adjusted%20Consolidated%20Statement%20of%20Operations%20Reconciliation) This reconciliation adjusts the consolidated statement of operations for Q1 FY2026 and Q1 FY2025 to exclude professional and other fees related to the Nu Aire integration, providing adjusted net earnings and diluted EPS figures Adjusted Consolidated Statement of Operations | Metric (Consolidated) | As Reported 2025 ($ in thousands) | Professional & Other Fees 2025 ($ in thousands) | Adjusted 2025 ($ in thousands) | Adjusted 2024 ($ in thousands) | | :-------------------- | :-------------------------------- | :---------------------------------------------- | :----------------------------- | :----------------------------- | | Net sales | $71,104 | $— | $71,104 | $48,393 | | Gross profit | $20,930 | $— | $20,930 | $12,488 | | Operating expenses | $16,120 | $224 | $15,896 | $9,183 | | Operating profit | $4,810 | $224 | $5,034 | $3,305 | | Profit before income taxes | $3,920 | $224 | $4,144 | $3,160 | | Income tax (benefit) expense | $761 | $49 | $810 | $345 | | Net earnings attributable to Kewaunee Scientific Corporation | $3,093 | $175 | $3,268 | $2,770 | | Diluted EPS | $1.04 | $0.06 | $1.10 | $0.93 | - Adjustments for professional and other fees in Q1 FY2026 (including estimated tax impact) relate to the integration of the newly acquired subsidiary, Nu Aire[12](index=12&type=chunk) [Explanation of Non-GAAP Measures](index=5&type=section&id=About%20Non-GAAP%20Measures) This section clarifies the company's use of non-GAAP financial measures like adjusted net earnings, adjusted EPS, EBITDA, and Adjusted EBITDA, explaining their calculation and purpose as supplemental information for investors to understand financial and business trends, while emphasizing they are not GAAP alternatives - Adjusted net earnings and adjusted net earnings per share are GAAP net earnings adjusted for professional and other fees related to the integration of Nu Aire, Inc., and the corresponding tax impact[13](index=13&type=chunk) - EBITDA and Segment EBITDA are calculated as net earnings (loss), less interest expense and interest income, income taxes, depreciation, and amortization[14](index=14&type=chunk) - Adjusted EBITDA and Adjusted Segment EBITDA further exclude professional and other fees related to Nu Aire integration[14](index=14&type=chunk) - These non-GAAP measures provide useful information to investors for comparing performance consistently across companies, but should not be considered alternatives to GAAP net earnings or operating cash flows[13](index=13&type=chunk)[14](index=14&type=chunk) [Company Overview](index=5&type=section&id=Company%20Overview) Kewaunee Scientific, a global leader in laboratory furniture, recently acquired Nu Aire, a key manufacturer of biological safety cabinets, expanding its product portfolio and market reach [About Kewaunee Scientific](index=5&type=section&id=About%20Kewaunee%20Scientific) Founded in 1906, Kewaunee Scientific Corporation is a global leader in designing, manufacturing, and installing laboratory, healthcare, and technical furniture products, with manufacturing facilities in the US and India and sales offices worldwide - Kewaunee Scientific Corporation, founded in 1906, is a **global leader** in the design, manufacture, and installation of laboratory, healthcare, and technical furniture products[15](index=15&type=chunk) - Products include steel and wood casework, fume hoods, adaptable modular systems, moveable workstations, stand-alone benches, biological safety cabinets, and epoxy resin work surfaces and sinks[15](index=15&type=chunk) - Headquarters in Statesville, NC, with sales offices in the US, India, Saudi Arabia, and Singapore, and manufacturing facilities in Statesville (3) and Bangalore, India (1)[15](index=15&type=chunk) [About Nu Aire](index=5&type=section&id=Kewaunee%20Scientific%27s%20newly%20acquired%20subsidiary%2C%20Nu%20Aire) Nu Aire, acquired by Kewaunee Scientific, is a leading manufacturer of biological safety cabinets, CO2 incubators, ultralow freezers, and other essential laboratory products, complementing Kewaunee's portfolio, with headquarters and manufacturing in Minnesota - Nu Aire, founded in 1971 and newly acquired by Kewaunee Scientific, is a **leading manufacturer** of biological safety cabinets, CO2 incubators, ultralow freezers, and other essential laboratory products[16](index=16&type=chunk) - Headquarters and manufacturing facilities are in Plymouth, Minnesota, with additional manufacturing in Long Lake, Minnesota, and partnerships in the Netherlands and China[16](index=16&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section provides a standard disclaimer regarding forward-looking statements, outlining various risks and uncertainties that could cause actual results to differ materially from projections [Risks and Disclaimers](index=5&type=section&id=Risks%20and%20Disclaimers) This section contains a standard disclaimer regarding forward-looking statements, outlining various known and unknown risks, uncertainties, and assumptions that could cause actual results to differ materially from projections, including those related to the Nu Aire acquisition, economic conditions, customer demands, and international operations. The company disclaims any obligation to update these statements - The press release contains 'forward-looking statements' subject to known and unknown risks, uncertainties, assumptions, and other important factors that could significantly impact results[17](index=17&type=chunk)[18](index=18&type=chunk) - Factors include the ability to realize benefits from the Nu Aire acquisition, competitive and economic conditions, supply disruptions, changes in customer demands, technological changes, dependence on delivery schedules, international operation risks (e.g., currency fluctuations), regulatory changes, raw material costs, and Force Majeure events[18](index=18&type=chunk) - The company assumes no obligation to update any forward-looking statements[18](index=18&type=chunk) [Condensed Consolidated Financial Statements](index=7&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated statements of operations and balance sheets for the specified periods, detailing key financial performance and position [Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the unaudited condensed consolidated statements of operations for the three months ended July 31, 2025, and 2024, detailing net sales, cost of products sold, gross profit, operating expenses, and net earnings Condensed Consolidated Statements of Operations | Metric ($ in thousands) | July 31, 2025 | July 31, 2024 | | :-------------------- | :------------ | :------------ | | Net sales | $71,104 | $48,393 | | Cost of products sold | $50,174 | $35,905 | | Gross profit | $20,930 | $12,488 | | Operating expenses | $16,120 | $9,913 | | Operating profit | $4,810 | $2,575 | | Profit before income taxes | $3,920 | $2,430 | | Net earnings attributable to Kewaunee Scientific Corporation | $3,093 | $2,193 | | Diluted EPS | $1.04 | $0.74 | [Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides the unaudited condensed consolidated balance sheets as of July 31, 2025, and April 30, 2025, detailing assets, liabilities, and stockholders' equity, showing changes in cash, receivables, and debt Condensed Consolidated Balance Sheets | Metric ($ in thousands) | July 31, 2025 | April 30, 2025 | | :-------------------- | :------------ | :------------- | | Cash and cash equivalents | $19,489 | $14,942 | | Total Current Assets | $117,148 | $118,363 | | Total Assets | $193,486 | $194,654 | | Total Current Liabilities | $50,486 | $53,712 | | Total Liabilities | $124,617 | $128,409 | | Total Stockholders' Equity | $68,869 | $66,245 |

[Fiscal First Quarter 2026 Financial Results Overview](index=1&type=section&id=Fiscal%20First%20Quarter%202026%20Financial%20Results%20Overview) This section covers management's strategic initiatives, financial performance highlights, and key metrics for the quarter [Management Commentary](index=1&type=section&id=Management%20Commentary) Quantum's new CEO, Hugues Meyrath, is actively implementing measures to improve the company's cost structure and balance sheet, including strengthening the executive team and prioritizing debt reduction. Despite a challenging fiscal first quarter, the company anticipates improved bottom-line performance in the upcoming September quarter - New CEO Hugues Meyrath is focused on conducting in-depth business reviews, improving the cost structure and balance sheet, and strengthening the executive team with key new hires in sales and marketing[2](index=2&type=chunk) - The company has raised approximately **$83 million** in net proceeds from a standby equity purchase agreement to support debt reduction and working capital requirements[3](index=3&type=chunk) - Management expects decisive actions to result in noticeably improved bottom-line performance beginning in the September quarter (fiscal Q2 2026)[3](index=3&type=chunk) [Key Financial Highlights (Q1 2026 vs. Q1 2025)](index=1&type=section&id=Fiscal%20First%20Quarter%202026%20vs.%20Prior%20Fiscal%20Year%20Quarter) Quantum reported a decline in revenue and GAAP gross profit for Q1 FY2026 compared to the prior year. However, the company achieved a significant reduction in GAAP operating expenses, leading to a narrower GAAP net loss. Adjusted EBITDA remained negative and worsened year-over-year Q1 FY2026 vs. Q1 FY2025 Financial Highlights | Metric | Q1 FY2026 (Millions) | Q1 FY2025 (Millions) | Change (YoY) | | :------------------------------- | :------------------- | :------------------- | :----------- | | Revenue | $64.3 | $72.3 | -11.1% | | GAAP Gross Profit | $22.7 (35.3% of revenue) | $27.1 (37.4% of revenue) | -16.3% | | Total GAAP Operating Expenses | $35.3 (54.9% of revenue) | $43.9 (60.7% of revenue) | -19.6% | | GAAP Net Loss | ($17.2) | ($19.9) | +13.5% (narrower loss) | | GAAP Net Loss Per Share | ($1.87) | ($4.15) | +54.9% (narrower loss) | | Non-GAAP Adjusted Net Loss | ($14.5) | ($7.6) | -90.8% (wider loss) | | Non-GAAP Adjusted Net Loss Per Share | ($1.58) | ($1.59) | +0.6% (slightly narrower) | | Adjusted EBITDA | ($6.5) | ($2.2) | -195.5% (worsened) | [Detailed Financial Statements](index=4&type=section&id=Detailed%20Financial%20Statements) This section presents Quantum's balance sheets, statements of operations, and cash flows, offering a comprehensive view of its financial position and performance [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2025, Quantum's total assets increased by 8.8% from March 31, 2025, primarily driven by a significant rise in cash and cash equivalents. Total liabilities decreased by 11.4%, largely due to the elimination of outstanding borrowings on its revolving credit facility, resulting in a substantial reduction in stockholders' deficit Condensed Consolidated Balance Sheets Summary | Balance Sheet Item | June 30, 2025 (Thousands) | March 31, 2025 (Thousands) | Change | | :-------------------------------- | :-------------------------- | :------------------------- | :----- | | Cash and cash equivalents | $37,404 | $16,464 | +127.2% | | Total current assets | $118,443 | $102,806 | +15.2% | | Total assets | $169,154 | $155,402 | +8.8% | | Revolving credit facility | $0 | $26,600 | -100% | | Total current liabilities | $223,752 | $257,607 | -13.1% | | Total liabilities | $283,540 | $319,768 | -11.4% | | Total stockholders' deficit | ($114,386) | ($164,366) | +30.4% (reduced deficit) | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) For the three months ended June 30, 2025, Quantum experienced an 11.1% decrease in total revenue compared to the prior year, with declines across product, service, and royalty segments. Despite this, the company successfully reduced total operating expenses by 19.5%, leading to a narrower loss from operations and a 13.5% reduction in net loss Condensed Consolidated Statements of Operations Summary | Metric | Q1 FY2026 (Thousands) | Q1 FY2025 (Thousands) | Change (YoY) | | :-------------------------- | :-------------------- | :-------------------- | :----------- | | Product Revenue | $37,535 | $42,652 | -12.0% | | Service and Subscription Revenue | $24,943 | $26,711 | -6.7% | | Royalty Revenue | $1,808 | $2,902 | -37.7% | | Total Revenue | $64,286 | $72,265 | -11.1% | | Gross Profit | $22,712 | $27,057 | -16.0% | | Total Operating Expenses | $35,308 | $43,860 | -19.5% | | Loss from Operations | ($12,596) | ($16,803) | +25.0% (narrower loss) | | Net Loss | ($17,206) | ($19,898) | +13.5% (narrower loss) | | Net Loss per Share | ($1.87) | ($4.15) | +54.9% (narrower loss) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) In Q1 FY2026, Quantum's net cash used in operating activities significantly increased to ($16.9) million from ($1.9) million in the prior year. However, financing activities provided a substantial net cash inflow of $39.0 million, primarily driven by $67.0 million in net proceeds from shares issued related to the SEPA, resulting in a positive net change in cash, cash equivalents, and restricted cash for the period Condensed Consolidated Statements of Cash Flows Summary | Cash Flow Item | Q1 FY2026 (Thousands) | Q1 FY2025 (Thousands) | Change (YoY) | | :------------------------------------ | :-------------------- | :-------------------- | :----------- | | Net cash used in operating activities | ($16,892) | ($1,896) | -790.9% (more cash used) | | Net cash used in investing activities | ($1,192) | ($1,620) | +26.4% (less cash used) | | Net cash provided by financing activities | $39,028 | ($4,798) | N/A (swing from outflow to inflow) | | Proceeds from shares issued (SEPA), net | $66,994 | $0 | N/A | | Net change in cash, cash equivalents, and restricted cash | $20,944 | ($8,317) | N/A (swing from decrease to increase) | | Cash, cash equivalents, and restricted cash at end of period | $37,547 | $17,543 | +114.0% | [Non-GAAP Financial Measures](index=7&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and reconciles non-GAAP financial metrics, including Adjusted EBITDA and adjusted net loss, to provide insights into core operating performance [Non-GAAP Definitions and Rationale](index=7&type=section&id=NON-GAAP%20FINANCIAL%20MEASURES) Quantum utilizes non-GAAP financial measures, including Adjusted EBITDA and non-GAAP adjusted net income (loss), to offer investors a clearer view of its core operating performance by excluding certain non-recurring or non-cash items. The company acknowledges the inherent limitations of these measures and advises against their sole reliance - Adjusted EBITDA is defined as net income (loss) before interest, taxes, depreciation, amortization, stock-based compensation, restructuring charges, acquisition-related intangible assets, debt extinguishment, non-recurring project costs, and fair value of warrants adjustments[28](index=28&type=chunk) - Non-GAAP adjusted net income (loss) excludes restructuring charges, stock-based compensation, acquisition-related intangible assets, debt extinguishment, non-recurring project costs, and fair value of warrants adjustments[29](index=29&type=chunk) - These non-GAAP measures are used by management and the board to evaluate core operating performance and trends, and to prepare annual budgets and operating plans[30](index=30&type=chunk) [Adjusted EBITDA Reconciliation](index=8&type=section&id=Adjusted%20EBITDA) The reconciliation of GAAP net loss to Adjusted EBITDA shows a negative Adjusted EBITDA of ($6.5) million for Q1 FY2026, a significant decline from ($2.2) million in Q1 FY2025, primarily due to changes in non-recurring project costs and gain/loss on debt extinguishment Adjusted EBITDA Reconciliation Table | Item | Q1 FY2026 (Thousands) | Q1 FY2025 (Thousands) | | :------------------------------------ | :-------------------- | :-------------------- | | GAAP net loss | ($17,206) | ($19,897) | | Interest expense, net | $6,516 | $3,905 | | Provision for income taxes | $223 | $235 | | Depreciation expense | $1,277 | $1,318 | | Stock-based compensation expense | ($529) | $925 | | Restructuring charges | $2,532 | $1,192 | | Gain (loss) on debt extinguishment | ($2,559) | $695 | | Amortization of acquisition-related intangible assets | $230 | $462 | | Non-recurring project costs | $3,012 | $10,650 | | Fair value of warrants adjustments | $0 | ($1,666) | | **Adjusted EBITDA** | **($6,504)** | **($2,181)** | [Non-GAAP Adjusted Net Loss Reconciliation](index=8&type=section&id=Non-GAAP%20adjusted%20net%20loss%20and%20net%20loss%20per%20share) The reconciliation of GAAP net loss to non-GAAP adjusted net loss indicates a wider adjusted net loss of ($14.5) million for Q1 FY2026 compared to ($7.5) million in Q1 FY2025, with adjusted net loss per share at ($1.58) versus ($1.57) in the prior year, reflecting the impact of various adjustments Non-GAAP Adjusted Net Loss Reconciliation Table | Item | Q1 FY2026 (Thousands) | Q1 FY2025 (Thousands) | | :------------------------------------ | :-------------------- | :-------------------- | | GAAP net loss | ($17,206) | ($19,897) | | Stock-based compensation expense | ($529) | $925 | | Restructuring charges | $2,532 | $1,192 | | Loss on debt extinguishment | ($2,559) | $695 | | Amortization of acquisition-related intangible assets | $230 | $462 | | Non-recurring project costs | $3,012 | $10,650 | | Non-recurring interest expense | $0 | $116 | | Fair value of warrants adjustments | $0 | ($1,666) | | **Adjusted net loss** | **($14,520)** | **($7,523)** | | Adjusted net loss per share – basic and diluted | ($1.58) | ($1.57) | [Business Outlook](index=2&type=section&id=Business%20Outlook) This section provides Quantum's financial guidance for the upcoming fiscal second quarter of 2026, including revenue and profitability projections [Fiscal Second Quarter 2026 Guidance](index=2&type=section&id=Business%20Outlook) Quantum provides guidance for the fiscal second quarter of 2026, projecting revenue between $59 million and $63 million, non-GAAP adjusted operating expenses around $27 million, and an adjusted EBITDA of approximately breakeven Q2 FY2026 Financial Guidance | Metric | Q2 FY2026 Guidance | | :------------------------------------ | :----------------------------------- | | Revenue | $61 million, plus or minus $2 million | | Non-GAAP adjusted operating expenses | $27 million, plus or minus $2 million | | Non-GAAP adjusted basic net loss per share | ($0.26), plus or minus $0.10 | | Adjusted EBITDA | Approximately breakeven | [Company Information and Disclosures](index=2&type=section&id=Company%20Information%20and%20Disclosures) This section offers background on Quantum, details for investor communications, and important forward-looking statement disclaimers [About Quantum](index=2&type=section&id=About%20Quantum) Quantum Corporation, listed on Nasdaq (QMCO), is a company with over four decades of experience, providing end-to-end data management solutions tailored for the AI era. Its platform enables customers to maximize value from unstructured data, supporting high-performance AI applications and data-intensive workloads - Quantum delivers end-to-end data management solutions designed for the AI era, leveraging over four decades of experience[14](index=14&type=chunk) - The company's data platform helps customers extract maximum value from their unique, unstructured data, powering AI applications and demanding data-intensive workloads[14](index=14&type=chunk) - Quantum serves leading organizations in life sciences, government, media and entertainment, research, and industrial technology[14](index=14&type=chunk) [Conference Call and Webcast Details](index=2&type=section&id=Conference%20Call%20and%20Webcast) Quantum hosted an earnings and business update conference call on September 10, 2025, with details provided for live access and subsequent replay via telephone and webcast, available on the investor relations section of the company's website - Management hosted an earnings and business update conference call on September 10, 2025, at 5:00 p.m. ET (2:00 p.m. PT)[12](index=12&type=chunk) - A telephone replay was available through September 17, 2025, and a webcast replay will be accessible on the company's website for at least 90 days[13](index=13&type=chunk) [Forward-Looking Information](index=2&type=section&id=Forward-Looking%20Information) This section contains forward-looking statements regarding Quantum's future financial results, anticipated benefits, and strategic goals. These statements are subject to various business, economic, and other known and unknown risks and uncertainties that could cause actual results, levels of activity, performance, or achievements to differ materially from those expressed or implied - The press release includes forward-looking statements related to future financial results, anticipated benefits of the standby equity purchase agreement, and the company's focus, goals, opportunities, and strategy[16](index=16&type=chunk) - These statements are subject to business, economic, and other risks and uncertainties, both known and unknown, that may cause actual results to be materially different[17](index=17&type=chunk)[19](index=19&type=chunk) - Risks include macroeconomic and inflationary conditions, competitive pressures, challenges in executing strategy, and the ability to develop new products and meet customer needs[20](index=20&type=chunk) [Investor Relations Contacts](index=3&type=section&id=Investor%20Relations%20Contacts) Investor relations inquiries for Quantum Corporation can be directed to Shelton Group, with specific contacts and their information provided - Investor Relations contacts are Leanne K. Sievers and Brett L. Perry of Shelton Group, reachable via phone at 214-272-0070 or email at sheltonir@sheltongroup.com[21](index=21&type=chunk)

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents Macy's, Inc.'s unaudited consolidated financial statements, including income, comprehensive income, balance sheets, equity, cash flows, and detailed accounting notes [Consolidated Statements of Income](index=3&type=section&id=Consolidated%20Statements%20of%20Income) 13 Weeks Ended August 2, 2025 vs. August 3, 2024 | Metric | August 2, 2025 (millions) | August 3, 2024 (millions) | Change | | :-------------------------------- | :------------- | :------------- | :----- | | Net sales | $4,812 | $4,937 | (2.5%) | | Total revenue | $4,999 | $5,096 | (1.9%) | | Operating income | $149 | $222 | (32.8%) | | Net income | $87 | $150 | (42.0%) | | Basic EPS | $0.32 | $0.54 | (40.7%) | | Diluted EPS | $0.31 | $0.53 | (41.5%) | 26 Weeks Ended August 2, 2025 vs. August 3, 2024 | Metric | August 2, 2025 (millions) | August 3, 2024 (millions) | Change | | :-------------------------------- | :------------- | :------------- | :----- | | Net sales | $9,411 | $9,783 | (3.8%) | | Total revenue | $9,791 | $10,096 | (3.0%) | | Operating income | $242 | $346 | (30.0%) | | Net income | $124 | $212 | (41.5%) | | Basic EPS | $0.45 | $0.77 | (41.6%) | | Diluted EPS | $0.44 | $0.75 | (41.3%) | [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) - For both the 13 and 26 weeks ended August 2, 2025, and August 3, 2024, **total comprehensive income was equal to net income**, as other comprehensive income (net of tax) was zero or negligible[15](index=15&type=chunk) [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) - Total Assets decreased from **$16,402 million** on February 1, 2025, to **$15,551 million** on August 2, 2025[18](index=18&type=chunk) - Total Liabilities decreased from **$11,850 million** on February 1, 2025, to **$11,199 million** on August 2, 2025[18](index=18&type=chunk) - Shareholders' Equity decreased from **$4,552 million** on February 1, 2025, to **$4,451 million** on August 2, 2025[18](index=18&type=chunk) - Merchandise Inventories were **$4,342 million** as of August 2, 2025, a slight decrease from **$4,468 million** on February 1, 2025, and **$4,378 million** on August 3, 2024[18](index=18&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) - Shareholders' Equity remained at **$4,451 million** from May 3, 2025, to August 2, 2025, after starting at **$4,552 million** on February 1, 2025[22](index=22&type=chunk) - Stock repurchases for the 26 weeks ended August 2, 2025, totaled **$153 million**[22](index=22&type=chunk) - Common stock dividends paid for the 26 weeks ended August 2, 2025, totaled **$101 million**[22](index=22&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) - Net cash provided by operating activities increased to **$255 million** for the 26 weeks ended August 2, 2025, from **$137 million** in the prior year[28](index=28&type=chunk) - Net cash used by investing activities decreased to **$262 million** for the 26 weeks ended August 2, 2025, from **$373 million** in the prior year[28](index=28&type=chunk) - Net cash used by financing activities increased significantly to **$471 million** for the 26 weeks ended August 2, 2025, from **$152 million** in the prior year, primarily due to debt transactions and stock repurchases[28](index=28&type=chunk) - Cash, cash equivalents and restricted cash decreased to **$832 million** as of August 2, 2025, from **$1,310 million** at the beginning of the period[28](index=28&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. Organization and Summary of Significant Accounting Policies](index=9&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) - Macy's, Inc. operates as an omni-channel retail organization under three nameplates: Macy's, Bloomingdale's, and Bluemercury, selling a wide range of merchandise[30](index=30&type=chunk) - Effective February 4, 2024, the Company changed its inventory valuation method from LIFO retail inventory method (RIM) to the LIFO cost method for improved accuracy, transparency, and comparability[35](index=35&type=chunk) - The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, is not expected to materially impact the estimated fiscal 2025 effective tax rate but is expected to decrease fiscal 2025 cash tax payments[39](index=39&type=chunk) - The Company is evaluating the impacts of ASU 2023-09 (Income Tax Disclosures, effective FY2026), ASU 2024-03 (Expense Disaggregation Disclosures, effective FY2028), and ASU 2025-05 (Credit Losses for Accounts Receivable, effective FY2027)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) [2. Earnings Per Share](index=11&type=section&id=2.%20Earnings%20Per%20Share) - Diluted EPS for the 13 weeks ended August 2, 2025, was **$0.31**, down from **$0.53** for August 3, 2024[45](index=45&type=chunk) - Diluted EPS for the 26 weeks ended August 2, 2025, was **$0.44**, down from **$0.75** for August 3, 2024[45](index=45&type=chunk) - Stock options (**5.9 million shares**) and restricted stock units (**1.0 million shares**) were outstanding but excluded from diluted EPS computation for August 2, 2025, as their inclusion would have been antidilutive or performance conditions were not met[45](index=45&type=chunk) [3. Revenue](index=12&type=section&id=3.%20Revenue) - Net sales represented **96%** of total revenue for both the 13 and 26 weeks ended August 2, 2025[47](index=47&type=chunk) Revenue Breakdown (26 Weeks Ended August 2, 2025) | Revenue Type | Amount (millions) | | :-------------------------- | :---------------- | | Total Net Sales | $9,411 | | Credit card revenues, net | $306 | | Macy's Media Network revenue, net | $74 | | Total Other Revenue | $380 | | Total Revenue | $9,791 | - Macy's accounted for **84%** and **83%** of the Company's net sales for the 13 and 26 weeks ended August 2, 2025, respectively[50](index=50&type=chunk) - Digital sales accounted for **31%** and **32%** of net sales for the 13 and 26 weeks ended August 2, 2025, respectively[50](index=50&type=chunk) - Credit card revenues increased to **$306 million** for the 26 weeks ended August 2, 2025, from **$242 million** in the prior year, driven by a strong credit portfolio and active management of net credit card losses[48](index=48&type=chunk)[57](index=57&type=chunk) [4. Financing Activities](index=14&type=section&id=4.%20Financing%20Activities) - Debt repayments for the 26 weeks ended August 2, 2025, totaled **$650 million**, including **$6 million** short-term debt and **$644 million** long-term debt[60](index=60&type=chunk) - On July 29, 2025, Macy's Retail Holdings, LLC issued **$500 million** in **7.375%** senior notes due 2033[60](index=60&type=chunk) - The Company recognized a **$13 million loss** on extinguishment of debt in Q2 2025 due to tender offers and redemptions of senior notes and debentures[63](index=63&type=chunk) - On April 9, 2025, the ABL Credit Facility was reduced from **$3,000 million** to **$2,100 million** and extended to April 2030[64](index=64&type=chunk) - Approximately **12.6 million shares** were repurchased for **$151 million** during the 26 weeks ended August 2, 2025, with **$1,224 million** remaining under the share repurchase authorization[70](index=70&type=chunk) [5. Retirement Plans](index=15&type=section&id=5.%20Retirement%20Plans) - Defined contribution plan expense for the 401(k) Qualified Defined Contribution Plan was **$44 million** for the 26 weeks ended August 2, 2025[75](index=75&type=chunk) - The Pension Plan reported a net benefit of **$(19) million** for the 26 weeks ended August 2, 2025[75](index=75&type=chunk) - Supplementary Retirement Plan expense was **$13 million** for the 26 weeks ended August 2, 2025[75](index=75&type=chunk) [6. Fair Value Measurements](index=16&type=section&id=6.%20Fair%20Value%20Measurements) - The total fair value of marketable equity and debt securities was **$38 million** as of August 2, 2025, classified as Level 1[77](index=77&type=chunk) - The fair value of long-term debt was **$2,336 million** as of August 2, 2025, compared to a carrying amount of **$2,626 million**[80](index=80&type=chunk) - The Company concluded that goodwill and intangible assets with indefinite lives were not impaired in its annual assessment as of May 2025[81](index=81&type=chunk) [7. Supplier Finance Programs](index=17&type=section&id=7.%20Supplier%20Finance%20Programs) - Outstanding obligations related to suppliers participating in SCF programs were **$136 million** as of August 2, 2025, recorded within merchandise accounts payable[83](index=83&type=chunk) - The Company's obligations to its suppliers are not impacted by a supplier's participation in the SCF programs[82](index=82&type=chunk) [8. Segments](index=17&type=section&id=8.%20Segments) - Macy's, Inc. aggregates all its operations into a single reporting segment due to similar business activities, economic environments, and key economic metrics across its brands[85](index=85&type=chunk) - The Chief Executive Officer, Tony Spring, acts as the Chief Operating Decision Maker (CODM) and reviews segment performance based on net income, with disaggregation of depreciation and amortization from selling, general and administrative expenses[86](index=86&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Macy's, Inc.'s financial condition and results of operations, covering its 'A Bold New Chapter' strategy, performance, liquidity, capital resources, and non-GAAP reconciliations [Quarterly Overview and Company Strategy](index=18&type=section&id=Quarterly%20Overview%20and%20Company%20Strategy) - The Company is executing its 'A Bold New Chapter' strategy, focusing on enhancing the omni-channel shopping experience, strengthening the Macy's nameplate, accelerating luxury growth, and simplifying operations[89](index=89&type=chunk) - Macy's delivered its strongest second quarter net promoter score on record, with Reimagine 125 locations outperforming the rest of the Macy's fleet in traffic, average order value, and net promoter scores[89](index=89&type=chunk) - Bloomingdale's achieved its highest second quarter sales and net promoter score on record, and Bluemercury achieved its 18th consecutive quarter of comparable sales growth[89](index=89&type=chunk) Comparable Sales (Q2 2025 vs. Q2 2024) | Metric | Owned Basis | O+L+M Basis | | :-------------------------------- | :---------- | :---------- | | Macy's, Inc. | +0.8% | +1.9% | | Macy's, Inc. go-forward business | +1.1% | +2.2% | | Macy's | +0.4% | +1.2% | | Reimagine 125 locations | +1.1% | +1.4% | | Bloomingdale's | +3.6% | +5.7% | | Bluemercury | +1.2% | +1.2% | [Results of Operations](index=20&type=section&id=Results%20of%20Operations) [Comparison of the Second Quarter of 2025 and the Second Quarter of 2024](index=20&type=section&id=Comparison%20of%20the%20Second%20Quarter%20of%202025%20and%20the%20Second%20Quarter%20of%202024) - Net sales decreased by **$125 million (2.5%)** to **$4,812 million**, primarily due to the closing of 64 non-go-forward locations (approximately **$170 million** impact)[93](index=93&type=chunk) - Other revenue increased by **$28 million**, mainly driven by credit card revenues due to a strong credit portfolio and active management of net credit card losses[94](index=94&type=chunk) - Gross margin rate declined **80 basis points** to **39.7%**, attributed to proactive markdowns on early Spring assortments and the flow-through of product bought under **145%** China tariffs[95](index=95&type=chunk) - Selling, general and administrative (SG&A) expenses decreased by **$29 million (1.5%)** but increased as a percent of total revenue to **38.9%** from **38.7%** due to declining net sales[96](index=96&type=chunk) - Operating income decreased to **$149 million (3.0% of total revenue)** from **$222 million (4.4% of total revenue)** in the prior year[92](index=92&type=chunk) [Comparison of the 26 Weeks Ended August 2, 2025 and August 3, 2024](index=22&type=section&id=Comparison%20of%20the%2026%20Weeks%20Ended%20August%202%2C%202025%20and%20August%203%2C%202024) - Net sales for the first half of 2025 decreased by **$372 million (3.8%)** to **$9,411 million**, primarily due to the closing of 64 non-go-forward locations (approximately **$340 million** impact)[101](index=101&type=chunk) - Other revenue increased by **$67 million** to **$380 million**, mainly from a **$64 million** increase in credit card revenues and a **$3 million** increase in Macy's Media Network revenue[102](index=102&type=chunk) - Gross margin rate decreased **40 basis points** to **39.5%**, driven by proactive markdowns and the flow-through of **145%** China tariffs[103](index=103&type=chunk) - SG&A expenses decreased by **$28 million (0.7%)** but increased as a percent of total revenue to **39.4%** from **38.5%** due to declining net sales[104](index=104&type=chunk) - Operating income decreased to **$242 million (2.5% of total revenue)** from **$346 million (3.4% of total revenue)** in the prior year[100](index=100&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company's principal sources of liquidity are cash from operations, cash on hand, and the Amended & Extended ABL Credit Facility[108](index=108&type=chunk) - Management believes current liquidity sources will be sufficient to satisfy anticipated needs for working capital, capital expenditures, and cash dividends for at least the next twelve months and the foreseeable future[109](index=109&type=chunk) - Capital allocation goals include maintaining a healthy balance sheet, achieving investment-grade credit metrics, investing in long-term profitable growth, and returning capital to shareholders through dividends and share repurchases[110](index=110&type=chunk) - Cash and cash equivalents were **$829 million** as of August 2, 2025, an increase of **$183 million** from August 3, 2024[111](index=111&type=chunk) - Borrowing availability under the ABL Credit Facility was **$1,957 million** as of August 2, 2025, after accounting for standby letters of credit[111](index=111&type=chunk) [Operating Activities](index=24&type=section&id=Operating%20Activities) - Net cash provided by operating activities increased to **$255 million** for the first half of 2025, up from **$137 million** in the prior year, driven by decreased working capital requirements and lower cash taxes paid[112](index=112&type=chunk)[113](index=113&type=chunk) [Investing Activities](index=24&type=section&id=Investing%20Activities) - Capital expenditures were **$343 million** in the first half of 2025, down from **$432 million** in the prior year, primarily focused on digital, technology, and omni-channel capabilities[114](index=114&type=chunk) [Financing Activities](index=24&type=section&id=Financing%20Activities) - Dividends paid totaled **$100 million** in the first half of 2025, up from **$96 million** in the prior year[115](index=115&type=chunk) - Approximately **12.6 million shares** were repurchased for **$151 million** in the first half of 2025 under the existing share repurchase program; no shares were repurchased in the prior year[117](index=117&type=chunk) - On July 29, 2025, the Company issued **$500 million** in **7.375%** senior unsecured notes due 2033, redeemed **$393 million** of senior notes/debentures, and completed a tender offer for **$251 million** of senior notes/debentures, resulting in a **$13 million loss** on extinguishment of debt[118](index=118&type=chunk) - On April 9, 2025, the ABL Credit Facility was amended, reducing it from **$3,000 million** to **$2,100 million** and extending its maturity to April 2030, with no outstanding borrowings[118](index=118&type=chunk) [Contractual Obligations](index=25&type=section&id=Contractual%20Obligations) - There were no material changes to the Company's contractual obligations and commitments outside the ordinary course of business since February 1, 2025[119](index=119&type=chunk) [Guarantor Summarized Financial Information](index=25&type=section&id=Guarantor%20Summarized%20Financial%20Information) - The Company had **$1,941 million** in senior unsecured notes outstanding as of August 2, 2025, which are fully and unconditionally guaranteed by Macy's, Inc. but are structurally subordinated to all existing and future secured indebtedness[120](index=120&type=chunk) Summarized Balance Sheets (Obligor Group, August 2, 2025) | Asset/Liability | Amount (millions) | | :-------------- | :---------------- | | Current Assets | $993 | | Noncurrent Assets | $5,620 | | Current Liabilities | $1,450 | | Noncurrent Liabilities | $6,995 | Summarized Statement of Operations (Obligor Group, 26 Weeks Ended August 2, 2025) | Metric | Amount (millions) | | :-------------------------- | :---------------- | | Net sales | $372 | | Consignment commission income | $1,453 | | Other revenue | $63 | | Cost of sales | $(154) | | Operating loss | $(713) | | Loss before income taxes | $(322) | | Net loss | $(117) | [Important Information Regarding Non-GAAP Financial Measures](index=26&type=section&id=Important%20Information%20Regarding%20Non-GAAP%20Financial%20Measures) - The Company uses non-GAAP financial measures such as comparable sales (O+L+M basis), EBITDA, Adjusted EBITDA, and Core Adjusted EBITDA to provide additional useful information for evaluating operating performance, sales growth, and operational efficiency[125](index=125&type=chunk) Non-GAAP Reconciliation (26 Weeks Ended August 2, 2025) | Metric | Amount (millions) | | :-------------------------- | :---------------- | | Net income (GAAP) | $124 | | EBITDA | $687 | | Adjusted EBITDA | $717 | | Core Adjusted EBITDA | $685 | - Adjusted diluted earnings per share for the 26 weeks ended August 2, 2025, was **$0.57**, compared to GAAP diluted EPS of **$0.44**[134](index=134&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes to the Company's market risk exposure since the filing of its 2024 Form 10-K - There have been no material changes to the Company's market risk as described in the 2024 10-K[135](index=135&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) The Company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of August 2, 2025, and no material changes to internal control over financial reporting occurred during the quarter - The CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of August 2, 2025[136](index=136&type=chunk) - No changes in the Company's internal control over financial reporting occurred during the most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[137](index=137&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in various legal proceedings incidental to its normal course of business but does not anticipate any of them to have a material adverse effect on its financial position or results of operations - The Company does not expect any current legal proceedings to have a material adverse effect on its financial position or results of operations[139](index=139&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) This section updates the Company's risk factors, specifically revising the 'Supply Chain and Third-Party Risks' to highlight increased dependencies on vendors, potential disruptions from geopolitical tensions (e.g., U.S.-China trade dispute, tariffs), and the uncertain impact of price increases and reduced demand on profitability - The 'Supply Chain and Third-Party Risks' section has been revised to emphasize dependence on vendors, potential disruptions from geopolitical tensions, and the impact of price increases and reduced demand[140](index=140&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk) - New tariffs imposed by the Trump Administration on products from over 90 countries, including China, are expected to lead to strategic price increases across product categories, with uncertain impacts on gross margin and consumer demand[144](index=144&type=chunk) - The Company is evaluating sourcing options and working with vendors to mitigate tariff impacts, but these strategies may not be effective or timely[147](index=147&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides details on the Company's common stock repurchases during the second quarter of 2025 under its existing share repurchase program - The Company repurchased **3,965 thousand shares** of common stock at an average price of **$12.61** per share during the period of July 6, 2025 - August 2, 2025[150](index=150&type=chunk) - As of August 2, 2025, **$1,224 million** remained available under the **$2,000 million** share repurchase program authorized on February 22, 2022[150](index=150&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) This section includes cautionary statements regarding forward-looking information, outlining various risks and uncertainties that could affect future results, and confirms that no directors or officers engaged in Rule 10b5-1 or non-Rule 10b5-1 trading arrangement changes during the quarter [Forward-Looking Statements](index=31&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements subject to various risks and uncertainties, including the Company's ability to successfully implement its 'A Bold New Chapter' strategy, competitive pressures, and changes in economic conditions[151](index=151&type=chunk)[154](index=154&type=chunk) - Key risks include supply chain disruptions, labor shortages, wage pressures, rising inflation, geopolitical conditions, trade restrictions, tariffs, and the impact of weather and natural disasters[151](index=151&type=chunk)[154](index=154&type=chunk) [Trading Arrangements](index=32&type=section&id=Trading%20Arrangements) - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the fiscal quarter ended August 2, 2025[153](index=153&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including indentures, certifications from the CEO and CFO, and the iXBRL formatted financial statements - Key exhibits include the Indenture for Macy's Retail Holdings, LLC's **7.375%** Senior Notes due 2033, certifications of the Chief Executive Officer and Chief Financial Officer, and the iXBRL formatted financial statements[157](index=157&type=chunk) SIGNATURES [SIGNATURES](index=34&type=section&id=SIGNATURES) The report is duly signed on behalf of Macy's, Inc. by Tracy M. Preston, Chief Legal Officer and Corporate Secretary, and Paul Griscom, Senior Vice President and Controller, dated September 10, 2025 - The report was signed by Tracy M. Preston, Chief Legal Officer and Corporate Secretary, and Paul Griscom, Senior Vice President and Controller[160](index=160&type=chunk) - The signing date of the report is September 10, 2025[161](index=161&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents Oracle Corporation's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents Oracle Corporation's unaudited condensed consolidated financial statements for the three months ended August 31, 2025 and 2024, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes covering accounting policies, fair value measurements, restructuring activities, deferred revenues, leases, stockholders' equity, income taxes, segment information, earnings per share, and legal proceedings [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of Oracle's financial position, detailing assets, liabilities, and equity as of August 31, 2025, and May 31, 2025 | Metric | Aug 31, 2025 (millions) | May 31, 2025 (millions) | Change (millions) | | :-------------------------------- | :---------------------- | :---------------------- | :---------------- | | Total Assets | $180,449 | $168,361 | $12,088 | | Property, plant and equipment, net | $53,194 | $43,522 | $9,672 | | Total Current Liabilities | $39,874 | $32,643 | $7,231 | | Notes payable and other borrowings, current | $9,079 | $7,271 | $1,808 | | Deferred revenues | $12,098 | $9,387 | $2,711 | | Total Stockholders' Equity | $24,666 | $20,969 | $3,697 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines Oracle's financial performance, presenting revenues, expenses, operating income, and net income for the three months ended August 31, 2025 and 2024 | Metric | 3 Months Ended Aug 31, 2025 (millions) | 3 Months Ended Aug 31, 2024 (millions) | YoY Change (%) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :------------- | | Total Revenues | $14,926 | $13,307 | 12% | | Cloud Revenues | $7,186 | $5,623 | 28% | | Software Revenues | $5,721 | $5,766 | -1% | | Total Operating Expenses | $10,649 | $9,316 | 14% | | Operating Income | $4,277 | $3,991 | 7% | | Net Income | $2,927 | $2,929 | 0% | | Diluted EPS | $1.01 | $1.03 | -2% | [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section details Oracle's comprehensive income, including net income and other comprehensive income components, for the three months ended August 31, 2025 and 2024 | Metric | 3 Months Ended Aug 31, 2025 (millions) | 3 Months Ended Aug 31, 2024 (millions) | YoY Change (millions) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :-------------------- | | Net Income | $2,927 | $2,929 | -$2 | | Net foreign currency translation gains | $28 | $220 | -$192 | | Total other comprehensive income, net | $5 | $104 | -$99 | | Comprehensive Income | $2,932 | $3,033 | -$101 | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section presents changes in Oracle's stockholders' equity, including common stock, accumulated deficit, and total equity, for the three months ended August 31, 2025 and 2024 | Metric | 3 Months Ended Aug 31, 2025 (millions) | 3 Months Ended Aug 31, 2024 (millions) | YoY Change (millions) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :-------------------- | | Common stock and additional paid in capital (end of period) | $39,378 | $33,083 | $6,295 | | Accumulated deficit (end of period) | $(14,054) | $(20,939) | $6,885 | | Total Stockholders' Equity (end of period) | $24,666 | $11,269 | $13,397 | | Cash dividends declared per common share | $0.50 | $0.40 | $0.10 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes Oracle's cash inflows and outflows from operating, investing, and financing activities for the three months ended August 31, 2025 and 2024 | Metric | 3 Months Ended Aug 31, 2025 (millions) | 3 Months Ended Aug 31, 2024 (millions) | YoY Change (%) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :------------- | | Net cash provided by operating activities | $8,140 | $7,427 | 10% | | Net cash used for investing activities | $(8,718) | $(2,765) | 215% | | Capital expenditures | $(8,502) | $(2,303) | 269% | | Net cash provided by (used for) financing activities | $210 | $(4,585) | N/A (shift from outflow to inflow) | | Cash and cash equivalents at end of period | $10,445 | $10,616 | -2% | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, estimates, and specific financial items [1. BASIS OF PRESENTATION, RECENT ACCOUNTING PRONOUNCEMENTS AND OTHER](index=10&type=section&id=1.%20BASIS%20OF%20PRESENTATION%2C%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS%20AND%20OTHER) This note outlines the basis of financial statement presentation, discusses recent accounting pronouncements, and provides additional financial details including remaining performance obligations and investments - Remaining performance obligations were **$455.3 billion** as of August 31, 2025, with approximately **10%** expected to be recognized as revenues over the next twelve months[31](index=31&type=chunk) - Financing receivables sold to financial institutions were **$756 million** for the three months ended August 31, 2025, up from **$595 million** in the prior year[33](index=33&type=chunk) - Oracle's total carrying value of investments in Ampere Computing Holdings LLC was **$1.7 billion** as of August 31, 2025, with an ownership interest of approximately **29%**, and SoftBank Group Corp. has an agreement to acquire Ampere, ending Oracle's investment[34](index=34&type=chunk) Non-Operating Income, net (millions) | Non-Operating Income, net (millions) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Interest income | $103 | $133 | | Foreign currency losses, net | $(31) | $(50) | | Losses from marketable and non-marketable investments, net | $(52) | $(69) | | Total non-operating income, net | $73 | $20 | [2. FAIR VALUE MEASUREMENTS](index=12&type=section&id=2.%20FAIR%20VALUE%20MEASUREMENTS) This note details the fair value measurements of Oracle's financial assets and liabilities, including marketable securities and long-term borrowings Fair Value Measurements (millions) | Fair Value Measurements (millions) | Aug 31, 2025 (Total) | May 31, 2025 (Total) | | :--------------------------------- | :------------------- | :------------------- | | Total Assets | $3,737 | $2,859 | | Money market funds | $2,965 | $2,220 | | Time deposits and other | $742 | $585 | - The estimated fair value of senior notes and other long-term borrowings was **$81.1 billion** as of August 31, 2025, compared to **$81.3 billion** as of May 31, 2025[46](index=46&type=chunk) [3. RESTRUCTURING ACTIVITIES](index=13&type=section&id=3.%20RESTRUCTURING%20ACTIVITIES) This note describes Oracle's restructuring plans, including estimated costs and expenses recorded in connection with the Fiscal 2026 Oracle Restructuring Plan - Oracle approved the Fiscal 2026 Oracle Restructuring Plan with total estimated costs up to **$1.6 billion**[47](index=47&type=chunk) - **$415 million** of restructuring expenses were recorded in Q1 FY26 in connection with the 2026 Restructuring Plan[47](index=47&type=chunk) 2026 Restructuring Plan Costs (millions) | 2026 Restructuring Plan Costs (millions) | Costs Recorded (3 Months Ended Aug 31, 2025) | Total Expected Program Costs | | :--------------------------------------- | :------------------------------------------- | :--------------------------- | | Cloud and software | $119 | $484 | | Hardware | $16 | $67 | | Services | $36 | $326 | | Other | $244 | $737 | | Total | $415 | $1,614 | [4. DEFERRED REVENUES](index=14&type=section&id=4.%20DEFERRED%20REVENUES) This note provides a breakdown of Oracle's deferred revenues by business segment, including cloud, software, hardware, and services Deferred Revenues (millions) | Deferred Revenues (millions) | Aug 31, 2025 | May 31, 2025 | Change (millions) | | :--------------------------- | :----------- | :----------- | :---------------- | | Cloud | $3,944 | $2,959 | $985 | | Software | $7,062 | $5,350 | $1,712 | | Hardware | $584 | $614 | $(30) | | Services | $508 | $464 | $44 | | Total deferred revenues | $13,362 | $10,733 | $2,629 | [5. LEASES](index=15&type=section&id=5.%20LEASES) This note details Oracle's lease expenses, right-of-use assets, lease liabilities, and significant future lease commitments, particularly for data centers Lease Expense (millions) | Lease Expense (millions) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | | :----------------------- | :-------------------------- | :-------------------------- | | Operating lease cost | $575 | $362 | | Total finance lease cost | $107 | $0 | Lease Balance Sheet Info (millions) | Lease Balance Sheet Info (millions) | Aug 31, 2025 | May 31, 2025 | | :---------------------------------- | :----------- | :----------- | | Operating lease ROU assets | $15,979 | $13,145 | | Total operating lease liabilities | $16,290 | $13,450 | | Finance lease ROU assets | $3,937 | $2,874 | | Total finance lease liabilities | $4,017 | $2,934 | - Oracle had **$99.8 billion** of additional lease commitments, substantially for data centers, as of August 31, 2025, expected to commence between fiscal 2026 and 2028, with an additional **$6.6 billion** in lease commitments entered into subsequent to August 31, 2025[50](index=50&type=chunk)[51](index=51&type=chunk) [6. STOCKHOLDERS' EQUITY](index=16&type=section&id=6.%20STOCKHOLDERS%27%20EQUITY) This note provides information on Oracle's stock repurchase program, cash dividends, and stock-based compensation expenses affecting stockholders' equity - Approximately **$6.3 billion** remained available for stock repurchases as of August 31, 2025[52](index=52&type=chunk) Stock Repurchases | Stock Repurchases | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | | :---------------- | :-------------------------- | :-------------------------- | | Shares repurchased | 0.4 million | 1.1 million | | Value of repurchases | $93 million | $150 million | - A quarterly cash dividend of **$0.50 per share** was declared in September 2025, payable on October 23, 2025[54](index=54&type=chunk) Stock-based Compensation Expense (millions) | Stock-based Compensation Expense (millions) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | | :---------------------------------------- | :-------------------------- | :-------------------------- | | Cloud and software | $156 | $141 | | Research and development | $647 | $569 | | Total stock-based compensation | $1,124 | $1,007 | [7. INCOME TAXES](index=17&type=section&id=7.%20INCOME%20TAXES) This note discusses Oracle's effective tax rate, the impact of tax legislation, and changes in net deferred tax assets Income Tax Metric | Income Tax Metric | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | | :---------------- | :-------------------------- | :-------------------------- | | Effective tax rate | 14.6% | 7.6% | - A net tax expense of **$958 million** was recorded in Q1 FY26 due to the enactment of the U.S. One, Big, Beautiful Bill Act, primarily related to the remeasurement of a deferred tax liability[66](index=66&type=chunk)[153](index=153&type=chunk) - Net deferred tax assets were **$9.8 billion** as of August 31, 2025, down from **$10.2 billion** as of May 31, 2025[60](index=60&type=chunk) [8. SEGMENT INFORMATION](index=18&type=section&id=8.%20SEGMENT%20INFORMATION) This note presents Oracle's financial performance by operating segment (Cloud and Software, Hardware, Services) and by offering, highlighting revenue contributions - Oracle's three operating segments are Cloud and Software, Hardware, and Services[68](index=68&type=chunk) - Cloud and software business represented **86%** of total revenues on a trailing four-quarter basis[90](index=90&type=chunk) Segment Revenues (millions) | Segment Revenues (millions) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | YoY Change (%) | | :-------------------------- | :-------------------------- | :-------------------------- | :------------- | | Cloud and software | $12,907 | $11,389 | 13% | | Hardware | $670 | $655 | 2% | | Services | $1,349 | $1,263 | 7% | | Total Revenues | $14,926 | $13,307 | 12% | Revenue by Offering (millions) | Revenue by Offering (millions) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | YoY Change (%) | | :----------------------------- | :-------------------------- | :-------------------------- | :------------- | | Cloud applications | $3,839 | $3,469 | 11% | | Cloud infrastructure | $3,347 | $2,154 | 55% | | Software license | $766 | $870 | -12% | | Software support | $4,955 | $4,896 | 1% | [9. EARNINGS PER SHARE](index=21&type=section&id=9.%20EARNINGS%20PER%20SHARE) This note provides basic and diluted earnings per share calculations for Oracle for the three months ended August 31, 2025 and 2024 EPS Metric | EPS Metric | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | YoY Change | | :--------- | :-------------------------- | :-------------------------- | :--------- | | Basic EPS | $1.04 | $1.06 | -$0.02 | | Diluted EPS | $1.01 | $1.03 | -$0.02 | [10. LEGAL PROCEEDINGS](index=21&type=section&id=10.%20LEGAL%20PROCEEDINGS) This note details Oracle's ongoing legal proceedings, specifically the Netherlands Privacy Class Action, and management's assessment of its potential financial impact - Oracle is defending a Netherlands Privacy Class Action lawsuit alleging violations of GDPR and Dutch Telecommunications Act related to its Data Management Platform product[80](index=80&type=chunk) - The Dutch Court of Appeal overturned an earlier dismissal, allowing the case to proceed, and Oracle has filed an interim appeal to the Supreme Court[82](index=82&type=chunk)[83](index=83&type=chunk) - Oracle believes the final outcome will not have a material impact on its financial position or results of operations[84](index=84&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Oracle's businesses, critical accounting estimates, and a detailed analysis of its financial performance and condition for the three months ended August 31, 2025. It highlights revenue growth driven by cloud and software, increased operating expenses, and changes in liquidity and capital resources, including significant capital expenditures and a shift in financing activities [Business Overview](index=23&type=section&id=Business%20Overview) This section outlines Oracle's core business segments, the growing contribution of cloud revenues, and its strategy for acquisitions and investments - Oracle's three businesses are cloud and software, hardware, and services, addressing enterprise IT needs globally[89](index=89&type=chunk) - Cloud and software business represented **86%** of total revenues on a trailing four-quarter basis[90](index=90&type=chunk) - Cloud revenues represented **48%** of total revenues for Q1 FY26, up from **42%** in Q1 FY25, and this trend is expected to continue[92](index=92&type=chunk) - Oracle maintains an active acquisition program to further its corporate strategy and may fund future acquisitions through internal cash, operations, or additional borrowings[102](index=102&type=chunk)[103](index=103&type=chunk) - Oracle's investment in Ampere Computing Holdings LLC (**29%** ownership) had a carrying value of **$1.7 billion** as of August 31, 2025, and SoftBank Group Corp. has an agreement to acquire Ampere[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk) [Critical Accounting Estimates](index=26&type=section&id=Critical%20Accounting%20Estimates) This section identifies Oracle's critical accounting estimates, primarily in income taxes and non-marketable investments, noting no significant changes in the current quarter - Critical accounting estimates are in the areas of income taxes and non-marketable investments[107](index=107&type=chunk) - No significant changes to critical accounting estimates occurred during the first quarter of fiscal 2026[108](index=108&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section analyzes Oracle's overall financial performance, including total revenues, operating expenses, and operating margin, for the three months ended August 31, 2025 Total Revenues and Operating Expenses | Metric | 3 Months Ended Aug 31, 2025 (millions) | 3 Months Ended Aug 31, 2024 (millions) | YoY Change (%) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :------------- | | Total Revenues | $14,926 | $13,307 | 12% | | Total Operating Expenses | $10,649 | $9,316 | 14% | | Total Operating Margin | $4,277 | $3,991 | 7% | | Total Operating Margin % | 29% | 30% | -1% | - Total revenues increased by **$1.6 billion (12%)** in Q1 FY26, with cloud and software revenues contributing **$1.5 billion** of this growth[116](index=116&type=chunk) - Total GAAP operating expenses increased by **$1.3 billion (14%)** in Q1 FY26, primarily due to a **$1.0 billion** increase in cloud and software expenses, a **$329 million** increase in restructuring expenses, and a **$185 million** increase in R&D expenses[118](index=118&type=chunk) [Cloud and Software Business](index=29&type=section&id=Cloud%20and%20Software%20Business_Results) This section analyzes the financial performance of Oracle's Cloud and Software business, detailing revenue and expense growth, and margin changes Cloud and Software Metrics | Cloud and Software Metrics | 3 Months Ended Aug 31, 2025 (millions) | 3 Months Ended Aug 31, 2024 (millions) | YoY Change (Actual %) | YoY Change (Constant %) | | :------------------------- | :------------------------------------- | :------------------------------------- | :-------------------- | :---------------------- | | Total Revenues | $12,907 | $11,389 | 13% | 12% | | Total Expenses | $5,216 | $4,193 | 24% | 24% | | Total Margin | $7,691 | $7,196 | 7% | 5% | | Total Margin % | 60% | 63% | -3% | -3% | - Cloud applications and cloud infrastructure contributed **23%** and **77%**, respectively, to the growth in cloud revenues in Q1 FY26 (constant currency)[124](index=124&type=chunk) - Cloud and software expenses increased by **$1.0 billion (41% actual, 41% constant currency)** primarily due to a **$929 million** increase in infrastructure expenses and a **$41 million** increase in employee-related expenses to support cloud growth[125](index=125&type=chunk) [Hardware Business](index=31&type=section&id=Hardware%20Business_Results) This section reviews the financial performance of Oracle's Hardware business, focusing on revenue and expense trends, and margin stability Hardware Metrics | Hardware Metrics | 3 Months Ended Aug 31, 2025 (millions) | 3 Months Ended Aug 31, 2024 (millions) | YoY Change (Actual %) | YoY Change (Constant %) | | :--------------- | :------------------------------------- | :------------------------------------- | :-------------------- | :---------------------- | | Total Revenues | $670 | $655 | 2% | 1% | | Total Expenses | $223 | $217 | 3% | 1% | | Total Margin | $447 | $438 | 2% | 1% | | Total Margin % | 67% | 67% | 0% | 0% | - Hardware revenue growth was primarily due to Oracle Exadata and other strategic hardware product offerings[129](index=129&type=chunk) - Hardware expenses increased due to a **$14 million** increase in hardware product and support costs, partially offset by a **$12 million** decrease in sales and marketing expenses[130](index=130&type=chunk) [Services Business](index=32&type=section&id=Services%20Business_Results) This section examines the financial performance of Oracle's Services business, highlighting revenue growth and expense reductions leading to improved margins Services Metrics | Services Metrics | 3 Months Ended Aug 31, 2025 (millions) | 3 Months Ended Aug 31, 2024 (millions) | YoY Change (Actual %) | YoY Change (Constant %) | | :--------------- | :------------------------------------- | :------------------------------------- | :-------------------- | :---------------------- | | Total Revenues | $1,349 | $1,263 | 7% | 5% | | Total Expenses | $1,017 | $1,066 | -5% | -5% | | Total Margin | $332 | $197 | 67% | 64% | | Total Margin % | 25% | 16% | 9% | 9% | - Services revenue growth was due to increases across all primary services offerings[133](index=133&type=chunk) - Services expenses decreased primarily due to a **$55 million** decrease in bad debt expenses[134](index=134&type=chunk) [Research and Development Expenses](index=32&type=section&id=Research%20and%20Development%20Expenses) This section analyzes the trends in Oracle's research and development expenses, attributing increases primarily to employee-related and computer equipment costs R&D Expenses (millions) | R&D Expenses (millions) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | YoY Change (Actual %) | YoY Change (Constant %) | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------- | :---------------------- | | Total expenses | $2,491 | $2,306 | 8% | 8% | | % of Total Revenues | 17% | 17% | 0% | 0% | - Increase in R&D expenses was primarily due to a **$137 million** increase in employee-related expenses (including stock-based compensation) and a **$38 million** increase in computer equipment expenses[138](index=138&type=chunk) [General and Administrative Expenses](index=33&type=section&id=General%20and%20Administrative%20Expenses) This section reviews Oracle's general and administrative expenses, noting an increase primarily due to event sponsorship costs G&A Expenses (millions) | G&A Expenses (millions) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | YoY Change (Actual %) | YoY Change (Constant %) | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------- | :---------------------- | | Total expenses | $376 | $358 | 5% | 4% | | % of Total Revenues | 2% | 3% | -1% | -1% | - Increase in G&A expenses was primarily due to an increase in event sponsorship expenses[140](index=140&type=chunk) [Amortization of Intangible Assets](index=33&type=section&id=Amortization%20of%20Intangible%20Assets) This section discusses the decrease in Oracle's amortization of intangible assets, primarily due to certain assets becoming fully amortized Amortization (millions) | Amortization (millions) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | YoY Change (Actual %) | YoY Change (Constant %) | | :---------------------- | :-------------------------- | :-------------------------- | :-------------------- | :---------------------- | | Total amortization of intangible assets | $420 | $624 | -33% | -33% | - The decrease in amortization was due to a reduction in expenses associated with certain intangible assets that became fully amortized[142](index=142&type=chunk) [Acquisition Related and Other Expenses](index=34&type=section&id=Acquisition%20Related%20and%20Other%20Expenses) This section reports on Oracle's acquisition-related and other expenses, noting their consistent level year-over-year Acquisition Related Expenses (millions) | Acquisition Related Expenses (millions) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | YoY Change (Actual %) | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | Total acquisition related and other expenses | $13 | $13 | 0% | [Restructuring Expenses](index=34&type=section&id=Restructuring%20Expenses_Results) This section details the significant increase in Oracle's restructuring expenses, primarily driven by the Fiscal 2026 Restructuring Plan aimed at improving cost structure Restructuring Expenses (millions) | Restructuring Expenses (millions) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | YoY Change (Actual %) | YoY Change (Constant %) | | :------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | :---------------------- | | Restructuring expenses | $402 | $73 | 448% | 439% | - Restructuring expenses in Q1 FY26 primarily related to the 2026 Restructuring Plan, aimed at improving cost structure and operations, particularly for cloud-based offerings[147](index=147&type=chunk)[148](index=148&type=chunk) [Interest Expense](index=34&type=section&id=Interest%20Expense) This section analyzes the increase in Oracle's interest expense, primarily due to higher average borrowings from recently issued senior notes Interest Expense (millions) | Interest Expense (millions) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | YoY Change (Actual %) | YoY Change (Constant %) | | :------------------------ | :-------------------------- | :-------------------------- | :-------------------- | :---------------------- | | Interest expense | $923 | $842 | 10% | 10% | - Increase in interest expense was primarily due to higher average borrowings from **$14.0 billion** senior notes issued in fiscal 2025, partially offset by scheduled debt repayments[149](index=149&type=chunk) [Non-Operating Income, net](index=35&type=section&id=Non-Operating%20Income%2C%20net) This section reviews the increase in Oracle's net non-operating income, driven by gains from deferred compensation plans and reduced foreign currency losses Non-Operating Income, net (millions) | Non-Operating Income, net (millions) | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | YoY Change (Actual %) | YoY Change (Constant %) | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :---------------------- | | Total non-operating income, net | $73 | $20 | 250% | 286% | - The increase was primarily due to a **$43 million** increase in gains from the deferred compensation plan's investment portfolio, a **$19 million** decrease in foreign currency losses, and a **$17 million** decrease in losses from marketable and non-marketable investments, partially offset by a **$30 million** decrease in interest income[151](index=151&type=chunk) [Provision for Income Taxes](index=35&type=section&id=Provision%20for%20Income%20Taxes) This section discusses the significant increase in Oracle's provision for income taxes, influenced by new tax legislation and stock-based compensation benefits Income Tax Metric | Income Tax Metric | 3 Months Ended Aug 31, 2025 | 3 Months Ended Aug 31, 2024 | YoY Change (Actual %) | YoY Change (Constant %) | | :---------------- | :-------------------------- | :-------------------------- | :-------------------- | :---------------------- | | Provision for income taxes | $500 | $240 | 108% | 101% | | Effective tax rate | 14.6% | 7.6% | 7% | 7% | - The increase was primarily related to an unfavorable impact from the U.S. One, Big, Beautiful Bill Act (**$958 million** net tax expense) and the absence of **$99 million** in unrecognized tax benefits, partially offset by an **$853 million** increase in tax benefits related to stock-based compensation[153](index=153&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes Oracle's liquidity and capital resources, including changes in working capital, cash flows, free cash flow, and remaining performance obligations Liquidity Metric | Liquidity Metric | Aug 31, 2025 (millions) | May 31, 2025 (millions) | Change (millions) | | :--------------- | :---------------------- | :---------------------- | :---------------- | | Working capital | $(15,240) | $(8,064) | $(7,176) | | Cash, cash equivalents and marketable securities | $11,005 | $11,203 | $(198) | - Working capital decreased primarily due to **$8.5 billion** in capital expenditures, **$3.1 billion** of long-term borrowings reclassified to current liabilities, and **$1.4 billion** in dividend payments[155](index=155&type=chunk) Cash Flow Metric | Cash Flow Metric | 3 Months Ended Aug 31, 2025 (millions) | 3 Months Ended Aug 31, 2024 (millions) | YoY Change (%) | | :------------------------------- | :------------------------------------- | :------------------------------------- | :------------- | | Net cash provided by operating activities | $8,140 | $7,427 | 10% | | Net cash used for investing activities | $(8,718) | $(2,765) | 215% | | Net cash provided by (used for) financing activities | $210 | $(4,585) | N/A | - Net cash used for investing activities increased by **$6.0 billion**, primarily due to increased capital expenditures[160](index=160&type=chunk) Free Cash Flow (millions) | Free Cash Flow (millions) | Trailing Four-Quarters Ended Aug 31, 2025 | Trailing Four-Quarters Ended Aug 31, 2024 | Change (millions) | | :------------------------ | :---------------------------------------- | :---------------------------------------- | :---------------- | | Net cash provided by operating activities | $21,534 | $19,126 | $2,408 | | Capital expenditures | $(27,414) | $(7,855) | $(19,559) | | Free cash flow | $(5,880) | $11,271 | $(17,151) | - Remaining performance obligations increased to **$455.3 billion** as of August 31, 2025, from **$99.1 billion** in the prior year, primarily due to significant cloud contracts[164](index=164&type=chunk) - The maximum potential dilution from all outstanding stock-based awards was **4.0%** as of August 31, 2025[167](index=167&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there were no significant changes to Oracle's quantitative and qualitative disclosures about market risk during the first quarter of fiscal 2026, referring readers to the Annual Report on Form 10-K for a more complete discussion - No significant changes to quantitative and qualitative disclosures about market risk occurred during Q1 FY26[170](index=170&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Oracle's management concluded that its disclosure controls and procedures were effective as of August 31, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely. No material changes in internal control over financial reporting were identified during the quarter - Disclosure controls and procedures were effective as of August 31, 2025, providing reasonable assurance for timely and accurate financial reporting[171](index=171&type=chunk) - No material changes in internal control over financial reporting were identified during the last fiscal quarter[172](index=172&type=chunk) [PART II. OTHER INFORMATION](index=38&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information on legal proceedings, risk factors, equity security sales, other disclosures, and a list of exhibits [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the detailed information regarding legal proceedings and claims, including the Netherlands Privacy Class Action, from Note 7 and Note 10 of the Condensed Consolidated Financial Statements - Refers to Note 10 of the financial statements for details on legal proceedings, including the Netherlands Privacy Class Action[175](index=175&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to the comprehensive discussion of risk factors in Oracle's Annual Report on Form 10-K for the fiscal year ended May 31, 2025, emphasizing that those risks, along with potential new or currently insignificant risks, could materially affect the company's business and financial results - Refers to Part I, Item 1A Risk Factors in the Annual Report on Form 10-K for a comprehensive discussion of market risks[176](index=176&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) As of August 31, 2025, Oracle had approximately $6.3 billion remaining under its stock repurchase program. During the three months ended August 31, 2025, the company repurchased 0.4 million shares for $93 million. The pace of future repurchases is flexible and dependent on various financial and market conditions - Approximately **$6.3 billion** remained available for stock repurchases as of August 31, 2025[177](index=177&type=chunk) Stock Repurchase Activity (millions, except per share amounts) | Period | Shares Purchased (millions) | Average Price Paid per Share | | :------------------------ | :-------------------------- | :--------------------------- | | June 1, 2025—June 30, 2025 | 0.2 | $193.51 | | July 1, 2025—July 31, 2025 | 0.2 | $236.48 | | August 1, 2025—August 31, 2025 | — | $— | | Total | 0.4 | $212.30 | [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) This section discloses Rule 10b5-1 trading plans. Stuart Levey, Oracle's Executive Vice President and Chief Legal Officer, adopted a new trading plan on July 10, 2025, to sell up to 13,615 vested shares and approximately 11,805 gross shares (net of taxes) of restricted stock units, with the plan scheduled to terminate by April 10, 2026 - Stuart Levey, EVP, Chief Legal Officer, adopted a Rule 10b5-1 trading plan on July 10, 2025, to sell up to **13,615 vested shares** and approximately **11,805 gross shares (net of taxes)** of restricted stock units by April 10, 2026[180](index=180&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, stock option agreements, certifications from the Principal Executive and Financial Officer, and Interactive Data Files (Inline XBRL) for the financial statements - Lists exhibits filed with the Form 10-Q, including corporate governance documents, stock option agreements, certifications, and Interactive Data Files (Inline XBRL)[184](index=184&type=chunk) [SIGNATURES](index=41&type=section&id=SIGNATURES) This section provides the official signatures of Oracle's principal executive and accounting officers, certifying the accuracy of the report - The report was signed by Safra A. Catz (CEO and Principal Executive and Financial Officer) and Maria Smith (EVP, Chief Accounting Officer and Principal Accounting Officer) on September 10, 2025[188](index=188&type=chunk)

Part I [Business Overview](index=5&type=section&id=Item%201.%20Business) Alliance Entertainment is a leading global distributor and retailer of physical entertainment and collectibles, serving over 35,000 retail stores and 200 online stores in more than 70 countries through a multi-channel distribution model, with growth driven by strategic acquisitions and new divisions [Company Overview](index=5&type=section&id=Company%20Overview) Alliance Entertainment is a global leader in physical entertainment and collectibles distribution, connecting top content creators with leading retailers, and completed its business combination with Adara in February 2023 - Alliance Entertainment is a leading global distributor and retailer of physical entertainment and collectibles, including vinyl records, CDs, DVDs, Blu-rays, video games, electronics, and licensed fan merchandise[16](index=16&type=chunk) - The company connects top content creators (e.g., Universal Pictures, Warner Bros., Disney, Sony Music, Nintendo) with leading retailers (e.g., Walmart, Amazon, Best Buy, Target)[17](index=17&type=chunk) - The company completed its business combination with Adara on February 10, 2023, and was renamed Alliance Entertainment Holding Corporation[21](index=21&type=chunk) [Business Operations](index=6&type=section&id=Business%20Operations) Alliance's operations are built on service, selection, and technology, offering efficient omnichannel solutions, supported by various subsidiary brands and continuous warehouse automation improvements - Alliance's business is structured around service, selection, and technology, providing efficient omnichannel expansion solutions including e-commerce, DTC, and vendor-managed inventory (VMI)[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - The company owns multiple subsidiary brands such as COKeM (video game distribution), AMPED Distribution (exclusive supplier for independent music labels), Distribution Solutions (aggregator for independent film labels), and DirectToU (proprietary retail brand)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - The company continuously improves warehouse operations through investments in automated processing equipment (e.g., OPEX Sure Sort X® system and AutoStore system) to reduce labor costs, accelerate processing times, and enhance efficiency[34](index=34&type=chunk)[35](index=35&type=chunk) 2025财年和2024财年产品类别收入占比 | 产品类别 | 2025财年收入占比 | 2024财年收入占比 | | :--- | :--- | :--- | | 游戏产品 | 24% | 31% | | 黑胶唱片 | 32% | 30% | | DVD/蓝光/UltraHD | 26% | 19% | | 压缩光盘 (CDs) | 12% | 12% | | 收藏品和电子产品 | 4% | 4% | [Industry Background](index=8&type=section&id=Industry%20Background) The physical media distribution industry faces challenges from evolving consumer demand and retail environments, yet the collectibles market shows growth, favoring distributors with DTC and e-commerce fulfillment capabilities - Physical media distributors face challenges from changing consumer demand, evolving omnichannel retail environments, and supplier consolidation, but the physical media collectibles market (e.g., vinyl records, SteelBook® DVDs, CD box sets, and pop culture collectibles) continues to grow[38](index=38&type=chunk) - As major retail chains reduce physical media shelf space, distributors with direct-to-consumer (DTC) capabilities and retail e-commerce fulfillment services, like Alliance, gain an advantage[41](index=41&type=chunk) - Market competition is intense, requiring differentiation through exclusive content, curated products, enhanced customer service, and partnerships with artists and content creators for exclusive distribution rights[43](index=43&type=chunk)[44](index=44&type=chunk) [Market Opportunity](index=9&type=section&id=Market%20Opportunity) The company identifies market opportunities in content media through exclusive distribution agreements and new brand launches, and in fulfillment services via scalable 3PL and DTC solutions - The company identifies two market opportunities: content media and fulfillment services. In content media, it established Alliance Home Entertainment through an exclusive distribution agreement with Paramount Home Entertainment and expanded physical music and video products (e.g., vinyl records, SteelBooks™)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - The company also launched the Alliance Authentic brand, focusing on licensed merchandise and collectibles to meet demand for branded, limited-edition pop culture products[49](index=49&type=chunk) - In fulfillment services, the company capitalizes on the strong growth in the global e-commerce fulfillment services market through scalable third-party logistics (3PL) and DTC fulfillment solutions[50](index=50&type=chunk)[51](index=51&type=chunk) [Competitive Strengths](index=9&type=section&id=Competitive%20Strengths) Alliance is a leading global distributor of physical media and collectibles, leveraging its infrastructure, market leadership, and strategic partnerships for competitive advantage - Alliance is one of the largest global distributors of physical media, entertainment, and collectibles, and a leader in fulfillment and e-commerce distribution solutions[52](index=52&type=chunk) - The company expands into premium collectibles and licensed merchandise through its Alliance Authentic division, utilizing its core distribution infrastructure and deep entertainment industry relationships[54](index=54&type=chunk) - The company possesses an experienced management team, significant barriers to market entry, market leadership (over **340,000 SKUs**), and strategic partnerships with major content providers (e.g., exclusive distribution agreement with Paramount)[56](index=56&type=chunk) [Strategy for Future Growth](index=10&type=section&id=Strategy%20for%20Future%20Growth) The company plans to drive future growth through organic expansion and acquisitions, leveraging its distribution network, strategic partnerships, and enhanced DTC capabilities - The company will continue to leverage its service, selection, and scalable distribution network technology to drive future growth through organic expansion and acquisitions[55](index=55&type=chunk) - Strategies include executing an acquisition strategy to increase market share, utilizing strategic studio partnerships (e.g., Paramount), enhancing DTC relationships and capabilities, expanding into new consumer product categories, and continuous technological advancements[56](index=56&type=chunk)[57](index=57&type=chunk)[64](index=64&type=chunk) [Suppliers](index=11&type=section&id=Suppliers) Alliance distributes over 400,000 products from more than 600 suppliers, with a significant portion of product receipts from its top suppliers, operating under non-exclusive, short-term agreements - Alliance distributes and sells over **400,000 products** from more than **600 top physical media entertainment product suppliers**, with approximately **340,000 unique items** in inventory[58](index=58&type=chunk) 2025财年和2024财年主要供应商产品接收价值占比 | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | Top Five Suppliers' Product Receipt Value Share | 59% | - | | Top Eleven Suppliers' Product Receipt Value Share | 80% | - | | Single Largest Supplier's Product Receipt Value Share | 23% | 21% | - The company enters into non-exclusive distribution agreements with many suppliers, typically short-term and renewable annually, which may include termination without cause clauses[60](index=60&type=chunk)[61](index=61&type=chunk) [Customers](index=11&type=section&id=Customers) Alliance partners with leading entertainment product retailers globally, serving over 4,000 customers across 35,000 stores, with a significant portion of revenue concentrated among its top clients - Alliance partners with most leading global entertainment product and service retailers, serving over **4,000 customers** across more than **35,000 stores** and **2,500 independent music and video retailers**[62](index=62&type=chunk) - The company typically ships orders on the same day they are received and accepted, with backlogs usually not significant[63](index=63&type=chunk) 2025财年和2024财年主要客户收入贡献 | Metric | FY2025 | FY2024 | | :--- | :--- | :--- | | Top Three Customers' Revenue Share | 40% | 39% | | Largest Customer's Net Sales Share | 15% | 18% | [Seasonality](index=12&type=section&id=Seasonality) The company's business experiences seasonal fluctuations, with increased demand typically observed from October to December, driven by pre-holiday stocking in North American retail channels - The company's business experiences seasonal fluctuations, with demand typically increasing from October to December, primarily driven by pre-holiday stocking levels in North American retail channels[67](index=67&type=chunk) [Inventory Management](index=12&type=section&id=Inventory%20Management) Alliance manages inventory to optimize order fulfillment and mitigate risk through continuous monitoring, controlled purchasing, and supplier protection, with certain products handled as consignments or fully returnable - Alliance aims to maintain sufficient inventory for optimal order fulfillment rates, maximizing supplier protection and reducing inventory risk through continuous monitoring of inventory levels and controlled purchasing timing[68](index=68&type=chunk) - Music CDs and video movies are **100% returnable** to suppliers, while exclusive distribution products from AMPED and Distribution Solutions are treated as consignments[68](index=68&type=chunk) [Sales and Marketing](index=12&type=section&id=Sales%20and%20Marketing) Alliance's product management and marketing teams drive demand through advertising, market research, online marketing, and retail programs, utilizing performance marketing and CRM for DTC channels, and brand marketing for overall presence - Alliance's product management and marketing teams create demand for supplier products and services through advertising, market research, online marketing, retail programs, and sales promotions[70](index=70&type=chunk) - The company's DTC division employs performance marketing strategies across digital and offline channels, leveraging customer relationship management platforms for personalized campaigns and targeted advertising[71](index=71&type=chunk) - Marketing strategies also include brand marketing, performance marketing, and viral marketing, strengthening the brand through public relations activities (e.g., trade show participation) to reduce reliance on performance marketing[72](index=72&type=chunk) [Competition](index=13&type=section&id=Competition) Alliance faces intense competition from various entities in the entertainment and gaming sectors, including digital content providers, necessitating differentiation through unique products, exclusive content, and superior customer service - Alliance faces competition from suppliers, wholesale distributors, retailers, and internet companies, including large diversified entertainment and gaming companies and those focused on digital downloads and streaming products[73](index=73&type=chunk)[74](index=74&type=chunk) - The physical media market is increasingly competitive, requiring the company to differentiate through unique products, exclusive content, and superior customer service, while rapidly adapting to market trends and consumer preferences[76](index=76&type=chunk) [Intellectual Property](index=14&type=section&id=Intellectual%20Property) Alliance's intellectual property, including domains, trademarks, copyrights, and trade secrets, is crucial to its business, protected through various legal and contractual measures, though complete effectiveness is not guaranteed - Alliance's intellectual property is a vital component of its business, relying on domain names, trademarks, copyrights, proprietary technology, trade secrets, and contractual terms for protection[77](index=77&type=chunk) - As of June 30, 2025, the company holds **22 registered or pending U.S. trademarks**, **1 registered or pending trademark** in other jurisdictions, and **128 domain names**[78](index=78&type=chunk) - The company protects trade secrets and confidential information through confidentiality agreements and restrictions on unauthorized access to proprietary technology, but cannot guarantee these measures will be fully effective or provide a competitive advantage[79](index=79&type=chunk)[80](index=80&type=chunk) [Human Capital Resources](index=14&type=section&id=Human%20Capital%20Resources) Alliance manages its human capital through talent acquisition, internal promotions, and compensation reviews, maintaining a diverse workforce and an annualized employee turnover rate of approximately 11.4% for FY2025 员工和劳务派遣人员数量 | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Employees on Payroll | 697 | 657 | | Agency Workers | 168 | 226 | - As of June 30, 2025, approximately **49.5%** of the company's employees on payroll are female, and **50.5%** are male[82](index=82&type=chunk) - The company's annualized employee turnover rate for fiscal year 2025 was approximately **11.4%**, attracting and retaining talent through recruitment, internal promotions, and annual compensation reviews to ensure pay equity[83](index=83&type=chunk)[84](index=84&type=chunk) [Regulatory Compliance](index=15&type=section&id=Regulatory%20Compliance) The company's operations are subject to extensive U.S. and international laws and regulations, including privacy and data protection, employment, tax, and consumer protection laws, with ongoing efforts to ensure compliance and data security - The company's business is subject to extensive laws, regulations, and standards in U.S. and international jurisdictions, including privacy and data protection (e.g., GDPR, CCPA, PIPEDA), employment laws, tax laws, and consumer protection laws[86](index=86&type=chunk)[88](index=88&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) - The company has implemented various technical and organizational security measures to protect data and continuously evaluates and takes additional measures to comply with relevant privacy regulations[89](index=89&type=chunk) [Periodic Reporting and Financial Information](index=15&type=section&id=Periodic%20Reporting%20and%20Financial%20Information) The company's Class A common stock and warrants are listed on Nasdaq, and as a smaller reporting company and emerging growth company, it benefits from simplified disclosure obligations and extended transition periods for new accounting standards - The company's Class A common stock and warrants are listed on Nasdaq, and as a smaller reporting company, it enjoys certain exemptions from simplified disclosure obligations, such as not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act[92](index=92&type=chunk)[96](index=96&type=chunk) - As an 'emerging growth company,' the company can utilize the extended transition period provided by the JOBS Act to comply with new or revised accounting standards[93](index=93&type=chunk)[94](index=94&type=chunk) [Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors.) The company faces diverse risks, including technological shifts, supply chain disruptions, economic pressures, management challenges from expansion, evolving consumer preferences, reliance on key partners, debt, talent retention, IP protection, cybersecurity, trade policy changes, litigation, and accounting complexities [Risk Factor Summary](index=16&type=section&id=Risk%20Factor%20Summary) Key risks include failure to adapt to industry technological advancements, operational inefficiencies, supply chain and cost increases, economic downturns, expansion pressures, shifting consumer interests, reliance on key partners, significant debt, talent loss, cybersecurity threats, trade policy changes, and acquisition risks - Key risks include: failure to adapt to technological developments in the entertainment industry, improper operation of the fulfillment network, supply chain disruptions and cost increases, inflation, economic downturns, pressures from business expansion, rapid changes in consumer interest, reliance on key suppliers and customers, significant debt, loss of key talent, cybersecurity threats, changes in international trade policies, and potential acquisition risks[98](index=98&type=chunk)[99](index=99&type=chunk) [Risks Related to Our Business and Industry](index=18&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) The company faces risks from rapid technological advancements in the entertainment industry, potential inefficiencies in its fulfillment network, supply chain disruptions, and inflationary pressures, which could impact operations and profitability - The entertainment industry experiences rapid technological development, with consumers shifting to digital content; if the company fails to adapt its content and distribution capabilities in a timely manner, its business could be harmed[100](index=100&type=chunk)[101](index=101&type=chunk) - Failure to successfully optimize and operate the fulfillment network could lead to increased costs, lost sales, or inventory impairment[102](index=102&type=chunk) - Supply chain disruptions (e.g., pandemics, geopolitical events, labor shortages) could result in higher product costs, delayed deliveries, and reputational damage[110](index=110&type=chunk)[111](index=111&type=chunk) - Inflation could cause product costs and operating expenses to grow faster than net sales, thereby reducing gross margins and net income[113](index=113&type=chunk) [Risks Related to Expansion of our Business](index=20&type=section&id=Risks%20Related%20to%20Expansion%20of%20our%20Business) Rapid business expansion poses risks to management, operations, and financial resources, while acquisitions may not yield expected benefits, and international operations face diverse economic, political, and regulatory challenges - Rapid expansion of the company's business places pressure on management, operational, financial, and other resources, potentially impacting reputation and operating results[117](index=117&type=chunk) - The anticipated benefits of acquisitions and investments may not be realized or may be delayed, and they could consume significant management attention and resources[118](index=118&type=chunk)[119](index=119&type=chunk) - Entering new market segments like collectibles may present new technological challenges and lower profitability[120](index=120&type=chunk) - International operations face risks from local economic and political conditions, government regulations, trade protection measures, restrictions on fund repatriation, limited infrastructure, and cultural differences[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[129](index=129&type=chunk) [Risks Related to Shifts in Consumer Demand](index=24&type=section&id=Risks%20Related%20to%20Shifts%20in%20Consumer%20Demand) Rapid shifts in consumer interests and product acceptance, influenced by external factors, can lead to short product lifecycles and potential revenue and profit declines if demand is not accurately predicted - Consumer interests change rapidly, and product and entertainment product acceptance is influenced by external factors, potentially leading to short product lifecycles and decreased revenue and profit if consumer interest is not correctly predicted[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - Failure to timely and cost-effectively develop, launch, and ship planned products, product lines, and new brands could harm the company's business[133](index=133&type=chunk)[134](index=134&type=chunk) [Risks Related to Our Supply Chain and Sales Channels](index=25&type=section&id=Risks%20Related%20to%20Our%20Supply%20Chain%20and%20Sales%20Channels) Supply chain disruptions, failure to adapt to e-commerce shifts, customer concentration, reliance on third-party suppliers, and significant inventory risks could impair the company's ability to meet demand and increase costs - Supply chain or logistics network disruptions or inefficiencies could impact the company's ability to meet customer demand and increase costs, despite mitigation strategies like diversifying suppliers and alternative transportation[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk) - Failure to adapt to the ongoing shift towards e-commerce could harm the business, as e-commerce sales lead to reduced retailer inventory and higher demands for fast, low-cost delivery[138](index=138&type=chunk) - The company has a concentrated retail customer base, with the **top three customers accounting for 40% of FY2025 net sales** and the **largest customer accounting for 15%**, posing significant impact if major customers face difficulties or change purchasing policies[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) - The company relies on third-party suppliers, labels, studios, and publishers; if their product quality is substandard, supply is untimely, or partnerships cease, the company's brand and operating results could be harmed[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) - The company faces significant inventory risks due to seasonality, new product launches, rapid changes in product cycles and pricing, defective goods, and shifts in consumer demand, which could lead to excess or insufficient inventory[148](index=148&type=chunk) [Risks Related to Our Debt](index=29&type=section&id=Risks%20Related%20to%20Our%20Debt) The company's substantial debt, including a $120 million senior secured revolving credit facility, exposes it to interest rate fluctuations, restrictive covenants, and reduced cash availability for operations and strategic investments - As of June 30, 2025, the company had approximately **$57 million** in outstanding debt under its **$120 million** senior secured revolving credit facility, which matures on December 21, 2026[158](index=158&type=chunk) - Borrowing rates for the revolving credit facility are 30-day SOFR (minimum **2.00%**) plus a spread of **4.0% to 4.25%**, with effective interest rates of **9.25%** and **9.5%** for fiscal years 2025 and 2024, respectively[160](index=160&type=chunk)[161](index=161&type=chunk) - Breaching covenants in the credit agreement could lead to accelerated debt maturity and potentially prevent the company from obtaining further credit or repaying its debt[163](index=163&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) - Government efforts to combat inflation may result in the company incurring higher interest rates and financing costs[169](index=169&type=chunk) - The company's debt may limit cash availability, forcing it to use cash for debt service, thereby reducing funds for working capital, capital expenditures, and strategic opportunities[165](index=165&type=chunk)[166](index=166&type=chunk)[170](index=170&type=chunk) [Risks Related to our Management](index=32&type=section&id=Risks%20Related%20to%20our%20Management) The company's success depends on its executive team and employees; failure to retain key talent could lead to knowledge loss and reduced productivity, while related-party transactions may present conflicts of interest - The company's success depends on the efforts and dedication of its executives and other employees; failure to recruit, hire, or retain key talent could lead to loss of knowledge and relationships, decreased productivity, and reduced profitability[175](index=175&type=chunk)[176](index=176&type=chunk) - The company engages in transactions with related parties, including major shareholders, which may present conflicts of interest and adversely affect the company's business and operating results[178](index=178&type=chunk)[179](index=179&type=chunk) [Risks Related to Our Technology and Intellectual Property](index=34&type=section&id=Risks%20Related%20to%20Our%20Technology%20and%20Intellectual%20Property) Failure to protect key intellectual property, information system failures, or cybersecurity breaches could severely harm the company's business, competitive position, operations, and reputation, leading to significant costs - Failure to protect key intellectual property, including trademarks, copyrights, patents, and trade secrets, could harm the company's business and competitive position[180](index=180&type=chunk) - Information system failures or the inability to effectively implement new technologies could disrupt business or reduce sales and profitability[181](index=181&type=chunk) - Electronic data breaches could severely damage the company's operations and reputation, leading to significant costs and liabilities[182](index=182&type=chunk) [Risks Related to Matters Outside our Control That May Impact Our Business](index=35&type=section&id=Risks%20Related%20to%20Matters%20Outside%20our%20Control%20That%20May%20Impact%20Our%20Business) Changes in international trade policies, adverse economic conditions, and seasonal business fluctuations requiring accurate demand forecasting are external factors that could significantly impact the company's costs, sales, and profitability - Changes in international trade policies, including new or increased tariffs, could significantly raise the cost of goods sold, particularly impacting game and collectibles categories[184](index=184&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) - Adverse economic conditions (e.g., inflation, high interest rates, low employment) could lead to reduced consumer disposable income, thereby decreasing sales of the company's products and entertainment spending[189](index=189&type=chunk)[191](index=191&type=chunk) - The company's business experiences seasonal fluctuations, with retail sales increasing during the October to December holiday period, requiring accurate demand forecasting to avoid lost sales or excess inventory[194](index=194&type=chunk)[197](index=197&type=chunk) [Risks Related to Taxes and Government Related Matters](index=37&type=section&id=Risks%20Related%20to%20Taxes%20and%20Government%20Related%20Matters) Changes in economic conditions, tax laws, and government regulations could adversely affect the company's business and financial performance, potentially leading to increased tax liabilities, compliance costs, or product liability claims - Changes in U.S., global, or regional economic conditions could harm the company's business and financial performance, including levels of consumer disposable spending, inflation, and rising interest rates[191](index=191&type=chunk) - The company faces additional tax liabilities and collection obligations; changes in tax laws, regulations, or their interpretation could increase tax liabilities or compliance costs[199](index=199&type=chunk)[200](index=200&type=chunk) - The company is subject to various government regulations; violations could result in sanctions or harm to the business, and it may face product liability lawsuits or product recalls[201](index=201&type=chunk)[202](index=202&type=chunk) [Risks Related to Litigation](index=38&type=section&id=Risks%20Related%20to%20Litigation) The company faces increased costs related to sustainability goals and potential reputational damage, along with various litigation risks including claims for defamation, privacy infringement, intellectual property infringement, and significant lawsuits such as a trademark infringement claim exceeding $35 million and a $1.577 million VPPA class action settlement - The company may face increased costs in achieving sustainability goals, and failure to meet these goals could result in reputational damage[203](index=203&type=chunk)[204](index=204&type=chunk) - As a distributor of media content, the company may face liability claims for defamation, invasion of privacy, copyright, or trademark infringement[205](index=205&type=chunk) - The company is involved in multiple lawsuits, arbitrations, or regulatory matters, including a trademark infringement lawsuit against COKeM (claiming over **$35 million**), multiple Video Privacy Protection Act (VPPA) class action lawsuits (one settled for **$1.577 million**), and other commercial disputes[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk) [Risks Related to Accounting Matters](index=40&type=section&id=Risks%20Related%20to%20Accounting%20Matters) While the company has remediated prior material weaknesses in internal controls, maintaining effectiveness is ongoing, and the quarterly fair value determination of warrant liabilities can cause significant non-cash fluctuations in financial results, potentially impacting investor appeal and stock price volatility due to its reporting status - The company has fully remediated previously identified material weaknesses in internal control over financial reporting, but maintaining effective internal controls is an ongoing process, and new material weaknesses may arise in the future[213](index=213&type=chunk)[214](index=214&type=chunk) - The company is required to determine the fair value of warrant liabilities quarterly, which can significantly impact its financial condition and operating results, leading to non-cash gains or losses[215](index=215&type=chunk)[216](index=216&type=chunk) - The company's status as an 'emerging growth company' and 'smaller reporting company' may make its securities less attractive to investors and increase stock price volatility[217](index=217&type=chunk)[219](index=219&type=chunk) [Risks Related to Our Securities](index=41&type=section&id=Risks%20Related%20to%20Our%20Securities) Risks related to the company's securities include exclusive forum provisions for warrant litigation, potential warrant redemption making them worthless, dilution from cashless exercise, concentrated ownership by insiders, lack of an active trading market, delisting risk, no planned cash dividends, anti-takeover provisions, and potential future stock issuances - The warrant agreement designates New York State courts or the U.S. District Court for the Southern District of New York as the sole and exclusive forum for certain litigation, potentially limiting warrant holders' ability to choose a favorable jurisdiction[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk) - The company may redeem unexpired warrants before their exercise, rendering them worthless[223](index=223&type=chunk) - If warrant holders exercise public warrants on a 'cashless basis,' they will receive fewer shares of Class A common stock than if exercised for cash[224](index=224&type=chunk)[225](index=225&type=chunk) - Cash proceeds from warrant exercise depend on the market price exceeding the **$11.50** exercise price and warrants being exercised for cash[226](index=226&type=chunk)[227](index=227&type=chunk) - Highly concentrated ownership by the company's executives, directors, and their affiliates may prevent new investors from influencing significant corporate decisions[228](index=228&type=chunk)[229](index=229&type=chunk) - An active trading market for the company's Class A common stock may not develop, and the stock price could fluctuate significantly due to various factors, including a limited number of publicly traded shares[230](index=230&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk) - The company may not be able to maintain its listing on the Nasdaq Capital Market[233](index=233&type=chunk) - The company currently has no plans to pay cash dividends in the foreseeable future, and investors may not receive a return on investment through dividends[235](index=235&type=chunk) - Anti-takeover provisions in the company's charter and Delaware law may make it more difficult to acquire the company and could deter attempts by shareholders to replace or remove current management[236](index=236&type=chunk)[238](index=238&type=chunk)[240](index=240&type=chunk) - The company's charter requires certain derivative actions and other lawsuits to be brought exclusively in the Delaware Court of Chancery, which may deter lawsuits against directors, officers, other employees, or shareholders[239](index=239&type=chunk)[241](index=241&type=chunk) - A sudden significant increase in demand for Class A common stock exceeding supply could lead to a 'short squeeze,' causing extreme stock price volatility[242](index=242&type=chunk) - The company may issue additional Class A common stock or preferred stock under the 2023 Plan, which would dilute existing shareholders' equity[243](index=243&type=chunk)[244](index=244&type=chunk) [Unresolved Staff Comments](index=47&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments.) As of the reporting period end, the company has no unresolved staff comments [Cybersecurity](index=47&type=section&id=Item%201C.%20Cybersecurity) The company processes significant digital data, including customer and confidential information, and has implemented a program to assess, identify, and manage cybersecurity risks, overseen by the executive team and board, with external expert consultation - The company receives, processes, uses, and stores significant digital data, including customer data and confidential information, making the integrity and availability of information technology systems crucial[246](index=246&type=chunk) - The company has implemented a program designed to assess, identify, and manage risks of potential unauthorized incidents, which is managed by the executive team and consults external advisors and experts[246](index=246&type=chunk)[247](index=247&type=chunk) - The Board of Directors is responsible for overseeing cybersecurity and information technology matters and related risk exposures, receiving regular updates from management[248](index=248&type=chunk) [Properties](index=47&type=section&id=Item%202.%20Properties) The company's main administrative office is in Plantation, Florida, and it leases several distribution centers, including two facilities in Shepherdsville, Kentucky, and one in Shakopee, Minnesota, while also maintaining marketing and sales offices with an anticipated future reduction in fixed office space needs - The company's main administrative office is located in Plantation, Florida, and it leases several distribution center facilities[249](index=249&type=chunk) 主要租赁设施 | Location | Area/Capacity | Lease Terms | | :--- | :--- | :--- | | Shepherdsville, Kentucky | 662,087 sq ft | Lease until January 31, 2031, with 3.25% annual rent increase and a five-year renewal option | | Shepherdsville, Kentucky (additional storage) | Up to 3,000 pallets | **$11 per pallet**, minimum **$14,000 per month**, no time limit | | Shakopee, Minnesota | 29,688 sq ft | Lease until September 30, 2025 | - The company also maintains marketing and sales offices in six U.S. cities and believes its existing facilities are sufficient for current business needs[249](index=249&type=chunk) [Legal Proceedings](index=47&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, including trademark infringement, VPPA class actions, and commercial disputes, with a trademark claim exceeding **$35 million** and a VPPA settlement of **$1.577 million**, actively defending cases and accruing related liabilities - The company is involved in legal proceedings, claims, and government investigations in the ordinary course of business, which could result in monetary damages, fines, or injunctive relief[250](index=250&type=chunk)[252](index=252&type=chunk) - COKeM International Ltd. faces a trademark infringement lawsuit filed by Office Create Corporation, with claims increasing to over **$35 million**; COKeM's **$330,000** settlement offer was rejected, and it has **$2.5 million** in insurance coverage[253](index=253&type=chunk) - The company faces multiple Video Privacy Protection Act (VPPA) class action lawsuits, alleging disclosure of users' personally identifiable information and video viewing history to third parties via Facebook Pixel. One lawsuit settled for **$1.577 million** on June 12, 2025, with COKeM's insurer, CNA, approving coverage for **$1.377 million**[254](index=254&type=chunk)[255](index=255&type=chunk) - The company is also involved in California Proposition 65 violation allegations (products containing lead), Algomus's breach of non-solicitation clause allegations, and Sparkle Pop's trade secret theft and contract interference lawsuit[256](index=256&type=chunk)[257](index=257&type=chunk)[258](index=258&type=chunk) - The McConigle lawsuit settled for **$70,000** on August 8, 2025, an amount the company believes is not material to its consolidated financial statements[259](index=259&type=chunk) [Mine Safety Disclosure](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosure) Not applicable Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=50&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities.) The company's Class A common stock and warrants are listed on Nasdaq, with 28 record holders for common stock and 34 for warrants as of June 30, 2025; no cash dividends have been paid or are planned, and no unregistered equity securities were sold or common stock repurchased during the reporting period - The company's Class A common stock and warrants are listed on Nasdaq under the symbol 'AENT'[263](index=263&type=chunk) 2025年6月30日证券持有人数量 | Security Type | Number of Record Holders | | :--- | :--- | | Class A Common Stock | 28 | | Warrants | 34 | - The company has not paid any cash dividends and currently has no plans to pay dividends in the foreseeable future; future dividend decisions will depend on operating results, financial condition, and contractual restrictions[264](index=264&type=chunk) - During the reporting period, the company did not sell any unregistered equity securities or repurchase any common stock[265](index=265&type=chunk)[266](index=266&type=chunk) [Selected Financial Data](index=50&type=section&id=Item%206.%20Selected%20Financial%20Data.) This item is reserved [Management's Discussion and Analysis Of Financial Condition and Results Of Operations](index=50&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20Of%20Financial%20Condition%20and%20Results%20Of%20Operations) This section discusses Alliance Entertainment's financial condition and operating results for fiscal year 2025, highlighting its role as a leading global entertainment product distributor connecting content creators with retailers through diverse brands and technology platforms, achieving gross margin growth and reduced operating expenses despite macroeconomic headwinds, and detailing revenue, expense changes, liquidity, and key accounting policies [Company Overview](index=50&type=section&id=Company%20Overview) Alliance is a leading global wholesaler, DTC distributor, and e-commerce provider, connecting international entertainment content manufacturers with top retail partners across over 70 countries, offering advanced warehousing, distribution technology, and a vast inventory of over 340,000 SKUs - Alliance is a leading global wholesaler, DTC distributor, and e-commerce provider, connecting international entertainment content manufacturers with top retail partners, selling products in over **70 countries** worldwide[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk) - The company provides advanced warehousing and distribution technology, with an inventory of over **340,000 SKUs**, including vinyl records, video games, CDs, DVDs, Blu-rays, toys, electronics, and collectibles[272](index=272&type=chunk) [License Agreements](index=51&type=section&id=License%20Agreements) In January 2025, Alliance signed an exclusive home entertainment distribution agreement with Paramount Pictures, becoming the sole distributor of Paramount's physical media in the U.S. and Canada - In January 2025, Alliance signed an exclusive home entertainment distribution agreement with Paramount Pictures, becoming the sole distributor of Paramount's physical media (DVD, Blu-ray, 4K UHD) in the U.S. and Canada[273](index=273&type=chunk) [Merger and Business Acquisition](index=51&type=section&id=Merger%20and%20Business%20Acquisition) The company has a track record of successful acquisitions, including Handmade by Robots in December 2024 for $7.6 million, and completed a business combination with Adara in February 2023, resulting in non-cash losses from warrant fair value changes - The company has experience in successfully acquiring and integrating competitors and complementary businesses and will continue to evaluate acquisition opportunities[274](index=274&type=chunk) - On December 17, 2024, the company acquired Handmade by Robots for **$7.6 million**, adding a licensed vinyl figure collectibles line, expected to generate incremental revenue growth in the future[275](index=275&type=chunk)[276](index=276&type=chunk) - On February 10, 2023, the company completed its business combination with Adara Acquisition Corp., resulting in non-cash losses from warrant fair value changes of **$0.9 million** and **$0.04 million** for fiscal years 2025 and 2024, respectively[277](index=277&type=chunk) [Macroeconomic Uncertainties](index=52&type=section&id=Macroeconomic%20Uncertainties) Macroeconomic conditions, such as persistent inflation, continued to impact the company's operating environment in FY2025, leading to reduced warehouse costs and lower interest expenses on its credit facility, though potential tariff discussions could pressure future gross margins - In fiscal year 2025, macroeconomic conditions (e.g., persistent inflation) continued to affect the company's operating environment, with warehouse costs decreasing year-over-year and reduced interest expense under the credit facility[278](index=278&type=chunk) - Re-discussion of tariffs on imported physical media and electronics could lead to increased costs, putting pressure on future gross margins[278](index=278&type=chunk) [Key Performance Indicators](index=52&type=section&id=Key%20Performance%20Indicators) Management monitors key performance indicators including net revenue, cost of sales, gross and net margins, operating expenses (distribution, fulfillment, SG&A), and balance sheet metrics such as cash, inventory, accounts payable, and working capital - Key performance indicators monitored and analyzed by management include: net revenue, cost of sales (excluding depreciation and amortization), gross and net margins, operating expenses (distribution and fulfillment expenses, selling, general and administrative expenses), and balance sheet metrics (cash, product inventory, accounts payable, and working capital)[279](index=279&type=chunk)[280](index=280&type=chunk)[281](index=281&type=chunk)[282](index=282&type=chunk) [Results of Income Year Ended June 30, 2025, Compared to Year Ended June 30, 2024](index=53&type=section&id=Results%20of%20Income%20Year%20Ended%20June%2030,%202025,%20Compared%20to%20Year%20Ended%20June%2030,%202024) For FY2025, net revenue slightly decreased by 3% to **$1.063 billion**, while operating income significantly increased by 113.1% to **$30.1 million**, and net income grew by 229.1% to **$15.1 million**, driven by improved gross margins and reduced operating expenses 2025财年与2024财年合并损益表摘要（千美元） | Metric | June 30, 2025 | June 30, 2024 | Change Amount | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | **$1,063,457** | **$1,100,483** | (**$37,026**) | -3% | | Cost of Sales (excl. D&A) | **$930,605** | **$971,594** | (**$40,989**) | -4% | | Operating Expenses | **$102,716** | **$114,748** | (**$12,032**) | -10.5% | | Operating Income | **$30,136** | **$14,141** | **$15,995** | 113.1% | | Other Expenses | **$11,428** | **$12,288** | (**$860**) | -7% | | Income Before Income Taxes | **$18,708** | **$1,853** | **$16,855** | 910% | | Income Tax Expense (Benefit) | **$3,630** | (**$2,728**) | **$6,358** | -233% | | Net Income | **$15,078** | **$4,581** | **$10,497** | 229.1% | | Basic and Diluted Net Income Per Share | **$0.30** | **$0.09** | **$0.21** | 233.3% | - Fiscal year 2025 net revenue slightly decreased by **3%** year-over-year to **$1.063 billion**, primarily due to macroeconomic headwinds such as high interest rates, cautious consumer spending, and geopolitical uncertainties. DirectToU LLC contributed **37%** of total revenue, up from **36%** last year[284](index=284&type=chunk) 2025财年与2024财年产品类别销售额变化（千美元） | Product Category | FY2025 Sales | FY2024 Sales | Change Amount | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Vinyl Records | **$340,000** | **$329,000** | **$11,000** | 3% | | Music CDs | **$125,000** | **$130,000** | (**$5,000**) | -4% | | Physical Movies (DVD/Blu-ray/Ultra HD) | **$279,000** | **$204,000** | **$75,000** | 37% | | Games | **$255,000** | **$338,000** | (**$83,000**) | -25% | | Collectibles and Electronics | **$37,000** | **$43,000** | (**$6,000**) | -14% | | - Collectibles | **$22,000** | **$26,000** | (**$4,000**) | -15% | | - Electronics | **$15,000** | **$16,000** | (**$1,000**) | -6% | - Cost of sales (excluding depreciation and amortization) decreased by **4%** year-over-year to **$931 million**. Gross margin increased from **11.7% to 12.5%** (**+0.8 percentage points**), primarily due to higher average selling prices, exclusive content partnerships, and improved inventory management and vendor rebates[290](index=290&type=chunk) - Total operating expenses decreased by **10.3%** year-over-year, with the ratio to revenue falling from **10.4% to 9.7%** (**-0.7 percentage points**). Distribution and fulfillment expenses as a percentage of net revenue decreased from **4.4% to 3.8%** (**-0.6 percentage points**), mainly due to improved operational efficiency and the closure of the Shakopee warehouse[291](index=291&type=chunk)[292](index=292&type=chunk) - Selling, general, and administrative (SG&A) expenses decreased by **2.9%** year-over-year to **$56 million**, remaining at **5.3%** of net revenue[293](index=293&type=chunk) - Interest expense decreased by **13.1%** year-over-year to **$10.6 million**, primarily due to a reduction in the average effective interest rate from **9.5% to 9.2%** and a **25%** decrease in the average revolving credit balance to **$77.5 million**[294](index=294&type=chunk) - Income tax expense for fiscal year 2025 was **$3.6 million**, compared to an income tax benefit of **$2.7 million** in fiscal year 2024, with effective tax rates of **19%** and **147%**, respectively[295](index=295&type=chunk)[296](index=296&type=chunk) 2025财年与2024财年调整后EBITDA（千美元） | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net Income | **$15,078** | **$4,581** | | Adjusted EBITDA | **$36,543** | **$24,267** | | Year-over-Year Growth | - | **$12,276** | [Liquidity and Capital Resources](index=56&type=section&id=Liquidity%20and%20Capital%20Resources) The company relies on existing cash, operating cash flow, and its $120 million senior secured asset-backed revolving credit facility, which matures in December 2026, to meet liquidity needs, with no expected warrant exercises due to the current stock price - The company entered into a three-year, **$120 million** senior secured asset-backed revolving credit facility on December 21, 2023, and has implemented strategic initiatives to reduce expenses and focus on high-margin product sales[298](index=298&type=chunk)[299](index=299&type=chunk) 2025年和2024年6月30日循环信贷工具余额和可用性（百万美元） | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Revolving Credit Balance | **$57** | **$73** | | Availability | **$54** | **$44** | - The company primarily relies on existing cash, cash generated from operating activities, and borrowing capacity under its credit facility to meet liquidity needs. Due to the Class A common stock market price being below the **$11.50** warrant exercise price, the company currently does not anticipate warrants to be exercised[300](index=300&type=chunk)[301](index=301&type=chunk) 2025财年与2024财年现金流量摘要（千美元） | Cash Flow Type | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net Cash from Operating Activities | **$26,809** | **$55,773** | | Net Cash from Investing Activities | (**$8,134**) | (**$117**) | | Net Cash from Financing Activities | (**$18,571**) | (**$55,390**) | - Cash generated from operating activities in fiscal year 2025 was **$26.8 million**, with net income of **$15.1 million**, a year-over-year decrease primarily due to increased accounts payable and changes in inventory[305](index=305&type=chunk) - Cash used in investing activities in fiscal year 2025 was **$8 million**, primarily including **$7.6 million** for a business acquisition that ultimately did not materialize, with the company pursuing recovery of funds[306](index=306&type=chunk) - Cash used in financing activities in fiscal year 2025 was **$19 million**, primarily reflecting net repayments of **$15.7 million** under the revolving credit facility, compared to net repayments of **$60.3 million** in the prior year[307](index=307&type=chunk) [Critical Accounting Policies and Estimates](index=57&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements, prepared under GAAP, require management to apply significant judgment in areas such as sales return provisions, customer rebates, inventory valuation, goodwill and intangible asset impairment, and the fair value of warrants, with specific assumptions used for warrant valuation - The company's financial statements are prepared in accordance with GAAP, requiring management to apply accounting policies, estimates, and assumptions, with areas involving higher judgment or complexity including: sales return reserves, customer rebates and discount reserves, inventory valuation, goodwill and intangible asset impairment, and the fair value of warrants[308](index=308&type=chunk)[309](index=309&type=chunk) - Inventory is measured at the lower of cost or net realizable value, with adjustments assessed based on historical sales, current inventory levels, and market conditions[309](index=309&type=chunk)[310](index=310&type=chunk) - The company performs annual impairment tests for goodwill, with no impairment recognized in fiscal years 2025 and 2024. Intangible assets are presented at cost less accumulated amortization, and indefinite-lived intangible assets are tested for impairment annually[311](index=311&type=chunk)[312](index=312&type=chunk) - Purchase price allocation for business combinations involves estimates and judgments regarding future cash flows and the fair value of identifiable tangible and intangible assets[314](index=314&type=chunk) 2025年和2024年6月30日认股权证估值关键假设 | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Stock Price | **$3.77** | **$3.00** | | Exercise Price Per Share | **$11.50** | **$11.50** | | Risk-Free Interest Rate | **3.63%** | **4.41%** | | Expected Term (Years) | **2.62** | **3.6** | | Expected Volatility | **47.1%** | **36.0%** | | Expected Dividend Yield | - | - | [Quantitative and Qualitative Disclosures about Market Risk](index=59&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Not applicable [Financial Statements and Supplementary Data](index=59&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This information is included after Item 15 of this annual report and incorporated herein by reference [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=59&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) None [Controls and Procedures](index=59&type=section&id=Item%209A.%20Controls%20and%20Procedures) As of June 30, 2025, the company's management assessed and determined its disclosure controls and procedures to be effective, having fully remediated previously identified material weaknesses in internal control over financial reporting through strengthened governance, new IT general controls, and improved financial closing processes, demonstrating a commitment to continuous monitoring and enhancement of its internal control environment [Disclosure Controls and Procedures](index=59&type=section&id=Disclosure%20Controls%20and%20Procedures) As of June 30, 2025, the company's management, under the guidance of the CEO and CFO, assessed and determined its disclosure controls and procedures to be effective - As of June 30, 2025, the company's management, under the guidance and participation of the Chief Executive Officer and Chief Financial Officer, assessed and determined its disclosure controls and procedures to be effective[319](index=319&type=chunk) [Remediation of Previously Identified Material Weaknesses in Internal Control Over Financial Reporting](index=59&type=section&id=Remediation%20of%20Previously%20Identified%20Material%20Weaknesses%20in%20Internal%20Control%20Over%20Financial%20Reporting) Previously identified material weaknesses in internal control over financial reporting, stemming from insufficient qualified personnel and inadequate control design, have been fully remediated as of June 30, 2025, through enhanced governance, new IT controls, and improved financial processes - Previously disclosed material weaknesses involved the control environment, entity-level controls, information technology general controls, and financial closing and reporting processes, primarily due to insufficient qualified personnel, ineffective segregation of duties, and inadequate control activity design[321](index=321&type=chunk) - As of June 30, 2025, management has completed the remediation of all previously identified material weaknesses, including strengthening governance and oversight, implementing new user access controls and segregation of duties, and establishing formal accounting policies and improved management review controls[323](index=323&type=chunk) - Management tested the design and operating effectiveness of the remediated controls and concluded that these controls were operating effectively as of June 30, 2025[323](index=323&type=chunk) [Management's Report on Internal Controls Over Financial Reporting](index=61&type=section&id=Management's%20Report%20on%20Internal%20Controls%20Over%20Financial%20Reporting) Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding financial reporting reliability, acknowledging inherent limitations, and noting that this annual report does not include an independent registered public accounting firm's attestation report due to the company's status - Management is responsible for establishing and maintaining adequate internal control over financial reporting, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements[326](index=326&type=chunk) - Internal controls have inherent limitations and may not prevent or detect misstatements in a timely manner. This annual report does not include an attestation report of the independent registered public accounting firm, as the company is an emerging growth company and a non-accelerated filer[327](index=327&type=chunk)[328](index=328&type=chunk) [Changes in Internal Control over Financial Reporting](index=61&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) During fiscal year 2025, the company completed the implementation and testing of certain controls as part of its remediation efforts for previously identified material weaknesses in internal control, with no significant impact on financial reporting internal controls - In fiscal year 2025, the company completed the implementation and testing of certain controls as part of its remediation efforts for previously identified material weaknesses in internal control, and these changes did not materially affect internal control over financial reporting[329](index=329&type=chunk)[330](index=330&type=chunk) [Other Information](index=61&type=section&id=Item%209B%20Other%20Information.) For the three months ended June 30, 2025, no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements, and on June 30, 2025, the company amended its credit facility with White Oak to reduce the applicable interest rate spread, anticipating lower future interest expenses - For the three months ended June 30, 2025, no directors or officers adopted or terminated 'Rule 10b5-1 trading arrangements' or 'non-Rule 10b5-1 trading arrangements'[331](index=331&type=chunk) - On June 30, 2025, the company amended its credit facility with White Oak, reducing the applicable interest rate spread from **4.5%-4.75% to 4.0%-4.25%**, which is expected to lower future interest expenses[332](index=332&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=61&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections.) Not applicable Part III [Directors, Executive Officers and Corporate Governance](index=62&type=section&id=Item%2010%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance.) This section introduces Alliance Entertainment's board of directors and executive officers, including Executive Chairman Bruce Ogilvie and CEO Jeffrey Walker, highlighting the board's independent composition and its audit, compensation, and nominating committees, which ensure independent and effective corporate governance, further supported by adopted codes of ethics and insider trading policies to promote integrity and compliance with securities laws [Directors and Executive Officers](index=62&type=section&id=Directors%20and%20Executive%20Officers) This section lists Alliance Entertainment's directors and executive officers, including Executive Chairman Bruce Ogilvie, CEO Jeffrey Walker, COO Warwick Goldby, CFO Amanda Gnecco, and CCO Robert Black, along with independent directors 董事和高管 | Name | Age | Position | | :--- | :--- | :--- | | Bruce Ogilvie | 67 | Executive Chairman and AEC Director | | Jeffrey Walker | 57 | Chief Executive Officer and AEC Director | | Warwick Goldby | 49 | Chief Operating Officer | | Amanda Gnecco | 46 | Chief Financial Officer | | Robert Black | 65 | Chief Compliance Officer | | W. Tom Donaldson III | 48 | Independent Director | | Terilea J. Wielenga | 66 | Independent Director | | Chris Nagelson | 57 | Independent Director | - Bruce Ogilvie has served as Executive Chairman since 2023, Jeffrey Walker as Chief Executive Officer since February 2023, and Amanda Gnecco as Chief Financial Officer since July 21, 2025[336](index=336&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk)[340](index=340&type=chunk) [Director Independence](index=64&type=section&id=Director%20Independence) The Board of Directors has determined that W. Tom Donaldson III, Chris Nagelson, and Terilea J. Wielenga are independent directors, meeting Nasdaq listing standards and applicable SEC rules - The Board of Directors has determined that W. Tom Donaldson III, Chris Nagelson, and Terilea J. Wielenga are independent directors, meeting Nasdaq listing standards and applicable SEC rules[350](index=350&type=chunk) [Committees of the Board of Directors](index=64&type=section&id=Committees%20of%20the%20Board%20of%20Directors) The Board of Directors maintains Audit, Compensation, and Nominating Committees to ensure independent and effective corporate governance, with specific members designated for financial expertise and oversight responsibilities - The Board of Directors has an Audit Committee, a Compensation Committee, and a Nominating Committee to ensure independent and effective corporate governance[351](index=351&type=chunk) - The Audit Committee consists of Ms. Wielenga (Chair) and Mr. Nagelson, with Ms. Wielenga possessing financial literacy and Mr. Nagelson designated as an 'audit committee financial expert'[352](index=352&type=chunk)[353](index=353&type=chunk) - The Compensation Committee comprises Messrs. Donaldson (Chair), Nagelson, and Ms. Wielenga, responsible for reviewing and approving compensation for the CEO and other executive officers, and administering equity incentive plans[354](index=354&type=chunk)[355](index=355&type=chunk)[358](index=358&type=chunk) - The Nominating Committee consists of Mr. Donaldson and Ms. Wielenga, with Mr. Nagelson serving as Chair, responsible for identifying, screening, and recommending director candidates, and overseeing the implementation of corporate governance guidelines[357](index=357&type=chunk)[359](index=359&type=chunk) [Section 16(a) Beneficial Ownership Reporting Compliance](index=67&type=section&id=Section%2016(a)%20Beneficial%20Ownership%20Reporting%20Compliance) Based on a review of forms, the company believes there were no late filers for the fiscal year ended June 30, 2025, regarding Section 16(a) beneficial ownership reporting compliance - Based on a review of the forms, the company believes there were no late filers for the fiscal year ended June 30, 2025[362](index=362&type=chunk) [Code of Ethics](index=67&type=section&id=Code%20of%20Ethics) The company adopted a Code of Ethics, effective March 15, 2023, applicable to directors, officers, and employees, promoting integrity, full disclosure, and compliance with laws, with no waivers granted in FY2025 - The company adopted a Code of Ethics, applicable to directors, officers, and employees, designed to promote honest and ethical conduct, full disclosure, and compliance with laws and regulations, effective March 15, 2023[363](index=363&type=chunk) - No waivers were granted in fiscal year 2025[365](index=365&type=chunk) [Insider Trading Policy](index=67&type=section&id=Insider%20Trading%20Policy) The company adopted an Insider Trading Policy to ensure compliance with federal securities laws and Nasdaq rules, prohibiting trading in company securities while in possession of material non-public information - The company adopted an Insider Trading Policy designed to promote compliance with federal securities laws and Nasdaq Stock Market rules, prohibiting trading in company securities while in possession of material non-public information[366](index=366&type=chunk) [Executive Compensation](index=67&type=section&id=Item%2011%20Executive%20Compensation.) This section outlines Alliance Entertainment's executive compensation program, detailing compensation for Executive Chairman Bruce Ogilvie and CEO Jeffrey Walker, which includes base salaries, bonuses, and equity incentives, alongside termination and severance benefits, the 2023 Omnibus Equity Incentive Plan, a cash bonus incentive plan, and a clawback policy for accounting restatements [Overview](index=67&type=section&id=Overview) This section provides an overview of Alliance's executive compensation program, including a description of compensation information for named executive officers - This section provides an overview of Alliance's executive compensation program, including a description of compensation information for named executive officers[367](index=367&type=chunk) [2025 and 2024 Summary Compensation Table](index=68&type=section&id=2025%20and%202024%20Summary%20Compensation%20Table) The summary compensation table details the salaries, bonuses, and other compensation for named executive officers, including Bruce Ogilvie and Jeffrey Walker, for fiscal years 2025 and 2024, with other compensation covering allowances and benefits 2025财年和2024财年高管薪酬摘要（美元） | Name and Position | Fiscal Year | Salary | Bonus | Stock Awards | All Other Co

ATLANTA, September 10, 2025 (GLOBE NEWSWIRE) -- Oxford Industries, Inc. (NYSE:OXM) today announced financial results for its second quarter of fiscal 2025 ended August 2, 2025. Consolidated net sales in the second quarter of fiscal 2025 were $403 million compared to $420 million in the second quarter of fiscal 2024. EPS on a GAAP basis was $1.12 compared to $2.57 in the second quarter of fiscal 2024. On an adjusted basis, EPS was $1.26 compared to $2.77 in the second quarter of fiscal 2024. Tom Chubb, Chair ...

[Preliminary FY2025 Results and FY2026 Outlook](index=1&type=section&id=Preliminary%20FY2025%20Results%20and%20FY2026%20Outlook) Lesaka reports strong FY2025 profitability, despite net loss from non-cash charges, and provides optimistic FY2026 guidance for Adjusted EBITDA and EPS [FY2025 Performance Summary](index=1&type=section&id=1.1.%20FY2025%20Performance%20Summary) Lesaka delivered on its FY2025 profitability guidance, with significant year-on-year growth in key adjusted metrics, despite a substantial net loss primarily due to non-operating, non-cash charges FY2025 Financial Performance (YoY Growth in ZAR) | Metric | Value (USD) | Value (ZAR) | YoY Growth (ZAR) | | :--------------------------- | :---------- | :---------- | :--------------- | | Net Revenue (non-GAAP) | $328.7 million | ZAR 5.3 billion | 38% | | Net Loss | $87.5 million | ZAR 1.6 billion | 386% | | Group Adjusted EBITDA (non-GAAP) | $50.7 million | ZAR 922.2 million | 33% | | Basic loss per share | $1.14 | ZAR 19.49 | 284% | | Adjusted earnings (non-GAAP) | $10.4 million | ZAR 186.2 million | 263% | | Adjusted earnings per share (non-GAAP) | $0.13 | ZAR 2.29 | 187% | - Net Loss was largely due to a tax-adjusted **$49.3 million (ZAR 897.6 million)** non-operating, non-cash charge from a change in fair value and sale of MobiKwik, **$18.4 million (ZAR 326.2 million)** impairment losses, and **$17.8 million (ZAR 321.9 million)** once-off transaction costs[7](index=7&type=chunk) [Q4 2025 Performance Summary](index=1&type=section&id=1.2.%20Q4%202025%20Performance%20Summary) Lesaka reported strong year-on-year growth in Q4 2025 for Net Revenue and Group Adjusted EBITDA, with adjusted earnings per share also showing significant improvement, while net loss increased due to specific non-cash charges Q4 2025 Financial Performance (YoY Growth in ZAR) | Metric | Value (USD) | Value (ZAR) | YoY Growth (ZAR) | | :--------------------------- | :---------- | :---------- | :--------------- | | Net Revenue (non-GAAP) | $82.0 million | ZAR 1.5 billion | 47% | | Net Loss | $28.8 million | ZAR 515 million | 452% | | Group Adjusted EBITDA (non-GAAP) | $16.7 million | ZAR 305.6 million | 61% | | Basic loss per share | $0.35 | ZAR 6.33 | 338% | | Adjusted earnings (non-GAAP) | $4.4 million | ZAR 80.4 million | 292% | | Adjusted earnings per share (non-GAAP) | $0.05 | ZAR 0.99 | 211% | - Net Loss was largely due to a tax-adjusted **$5.7 million (ZAR 101.4 million)** non-operating, non-cash charge relating to a change in fair value and sale of MobiKwik, **$18.4 million (ZAR 326.2 million)** impairment losses, and **$13.2 million (ZAR 237.5 million)** once-off transaction costs[7](index=7&type=chunk) [FY2026 Guidance](index=1&type=section&id=1.3.%20FY2026%20Guidance) Lesaka reaffirms its FY2026 profitability outlook, guiding for substantial growth in Adjusted EBITDA and more than doubling Adjusted EPS, while withdrawing previous revenue guidance due to a restatement FY2026 Guidance (Year ending June 30, 2026) | Metric | Guidance Range (ZAR) | Implied Growth | | :--------------------------- | :------------------- | :-------------- | | Net Revenue | ZAR 6.4 billion - ZAR 6.9 billion | (Previous guidance withdrawn) | | Group Adjusted EBITDA | ZAR 1.25 billion - ZAR 1.45 billion | At least 35% growth | | Net Income Attributable to Lesaka | To be positive | N/A | | Adjusted earnings per share | At least ZAR 4.60 | >100% YoY growth | - The previously provided FY2026 revenue guidance has been withdrawn in light of the restatement[12](index=12&type=chunk) [Q1 2026 Guidance](index=1&type=section&id=1.4.%20Q1%202026%20Guidance) For Q1 FY2026, Lesaka expects Net Revenue between ZAR 1.50 billion and ZAR 1.65 billion and Group Adjusted EBITDA between ZAR 260 million and ZAR 300 million Q1 FY2026 Guidance (Quarter ending September 30, 2025) | Metric | Guidance Range (ZAR) | | :------------------- | :------------------- | | Net Revenue | ZAR 1.50 billion - ZAR 1.65 billion | | Group Adjusted EBITDA | ZAR 260 million - ZAR 300 million | [Chairman's Commentary](index=1&type=section&id=1.5.%20Chairman's%20Commentary) Chairman Ali Mazanderani highlighted FY2025 as a strong year, meeting profitability guidance and advancing strategic priorities. He expressed confidence in maintaining momentum into FY2026, projecting significant growth in Adjusted EBITDA and Adjusted EPS - **FY2025** was a strong year for the Group, delivering on profitability guidance and advancing key strategic priorities[4](index=4&type=chunk) - Expects to maintain momentum into **FY2026**, guiding for adjusted EBITDA growth of **at least 35%**[4](index=4&type=chunk) - Introduced an adjusted earnings per share guidance, expecting this to **more than double** in FY2026 to **at least ZAR 4.60**, from **ZAR 2.29** per share this year[4](index=4&type=chunk) [Key Financial and Operational Updates](index=2&type=section&id=Key%20Financial%20and%20Operational%20Updates) Lesaka provides crucial updates on the restatement of interim FY2025 financial results, the preliminary nature of current figures, and exclusions from its FY2026 guidance [Restatement of Interim Fiscal 2025 Financial Results](index=2&type=section&id=2.1.%20Restatement%20of%20Interim%20Fiscal%202025%20Financial%20Results) Lesaka's Audit Committee concluded that interim FY2025 financial statements need restatement due to re-evaluation of revenue classification (agent vs. principal). This restatement is expected to increase revenue and cost of goods sold but have no impact on operating income, net loss, or cash flows - Unaudited condensed consolidated financial statements for the quarters ended September 30, 2024, December 31, 2024, and March 31, 2025, should be restated[11](index=11&type=chunk) - Restatement is due to re-evaluation of the classification of certain revenue that has been reported as an agent rather than as principal, and related cost of goods sold[11](index=11&type=chunk) - The restatement is expected to have **no impact on reported operating income (loss), net loss or loss per share or net cash flows or liquidity**, but will result in an increase in revenue offset by a corresponding increase in cost of goods sold, IT processing, servicing and support[11](index=11&type=chunk) [Important Note Regarding Preliminary, Unaudited Financial Results](index=2&type=section&id=2.2.%20Important%20Note%20Regarding%20Preliminary,%20Unaudited%20Financial%20Results) The financial results presented are preliminary and unaudited, subject to finalization and audit. Actual reported results may differ based on year-end closing procedures, adjustments, and audit findings - The financial results in this press release are **preliminary estimates and unaudited**[13](index=13&type=chunk) - Actual results remain subject to completion of financial statements and their audit by the independent registered public accounting firm[13](index=13&type=chunk) - Audited results will be included in the filing on Form 10-K for the year ended June 30, 2025[14](index=14&type=chunk) [FY2026 Guidance Exclusions](index=2&type=section&id=2.3.%20FY2026%20Guidance%20Exclusions) The FY2026 guidance provided by Lesaka explicitly excludes the impact of the announced Bank Zero acquisition and any other unannounced mergers and acquisitions - **FY2026 guidance excludes** the impact of the Bank Zero acquisition (subject to regulatory approval)[9](index=9&type=chunk) - Guidance also excludes any unannounced mergers and acquisitions that may be concluded[9](index=9&type=chunk) [Non-GAAP Financial Measures](index=3&type=section&id=Non-GAAP%20Financial%20Measures) This section defines key non-GAAP financial metrics used by Lesaka, including Group Adjusted EBITDA, Net Revenue, Adjusted Earnings, and Headline (Loss) Earnings Per Share [Group Adjusted EBITDA Definition](index=3&type=section&id=3.1.%20Group%20Adjusted%20EBITDA%20Definition) Group Adjusted EBITDA is a non-GAAP measure calculated as net loss before interest, taxes, depreciation, and amortization, further adjusted for non-operational transactions, impairment loss, equity-accounted investments, stock-based compensation, and once-off items - **Group Adjusted EBITDA** is net loss before interest, taxes, depreciation and amortization[19](index=19&type=chunk) - It is adjusted for non-operational transactions (including loss on disposal of equity-accounted investments), impairment loss, loss from equity-accounted investments, stock-based compensation charges and once-off items[19](index=19&type=chunk) - Once-off items represent non-recurring expense items, including costs related to acquisitions and transactions consummated or ultimately not pursued[19](index=19&type=chunk) [Net Revenue Definition](index=3&type=section&id=3.2.%20Net%20Revenue%20Definition) Net Revenue is a non-GAAP measure derived from GAAP revenue by subtracting the cost of Pinned Airtime sold and commissions paid to third parties for agency-based prepaid solutions. This measure aims to neutralize the impact of revenue mix changes between principal and agent transactions - **Net Revenue** is a non-GAAP financial measure; GAAP revenue is the most directly comparable measure[20](index=20&type=chunk) - Calculated as GAAP revenue less (i) the cost of Pinned Airtime sold and (ii) commissions paid to third parties selling all other agency-based pre-paid solutions[21](index=21&type=chunk) - The use of Net Revenue is meaningful to users of financial information because it seeks to eliminate the impact of the change in the revenue mix from the revenue categories over the periods presented[21](index=21&type=chunk) [Adjusted Earnings and Adjusted Earnings Per Share Definition](index=3&type=section&id=3.3.%20Adjusted%20Earnings%20and%20Adjusted%20Earnings%20Per%20Share%20Definition) Adjusted earnings and Adjusted earnings per share are non-GAAP measures that modify GAAP net loss and loss per share by excluding amortization of acquisition-related intangibles, stock-based compensation, and unusual non-recurring items, with specific additional adjustments for fiscal years 2025 and 2024 - **Adjusted earnings** and **Adjusted earnings per share** are GAAP net loss and loss per share adjusted for the amortization of acquisition-related intangible assets (net of deferred taxes), stock-based compensation charges, and unusual non-recurring items[22](index=22&type=chunk) - For fiscal **2025**, adjustments also include changes in fair value of equity securities, impairment loss, deferred tax adjustments, loss on disposal of equity-accounted investments, and intangible asset amortization related to non-controlling interests[23](index=23&type=chunk) - For fiscal **2024**, adjustments also include an impairment loss related to an equity-accounted investment, unrealized currency loss related to non-core business, and a reversal of allowance for a doubtful loan receivable[24](index=24&type=chunk) [Headline (Loss) Earnings Per Share (H(L)EPS) Definition](index=4&type=section&id=3.4.%20Headline%20(Loss)%20Earnings%20Per%20Share%20(H(L)EPS)%20Definition) H(L)EPS is a JSE listing requirement, calculated using GAAP net (loss) income adjusted for impairment losses related to equity-accounted investments, impairment losses, and profit/loss on sale of property, plant, and equipment - The inclusion of **H(L)EPS** in this press release is a requirement of Lesaka's listing on the JSE[26](index=26&type=chunk) - H(L)EPS basic and diluted is calculated using net (loss) income which has been determined based on GAAP[26](index=26&type=chunk) - Adjusted for impairment losses related to equity-accounted investments, impairment losses and (profit) loss on sale of property, plant and equipment[27](index=27&type=chunk) [Company Information](index=4&type=section&id=Company%20Information) This section provides an overview of Lesaka Technologies Inc., clarifies the nature of forward-looking statements, and lists investor and media relations contacts [About Lesaka Technologies Inc.](index=4&type=section&id=4.1.%20About%20Lesaka%20Technologies%20Inc.) Lesaka Technologies Inc. is a South African fintech company providing financial services, software, and business services to underserviced consumers and merchants in Southern Africa. It offers an integrated multi-product platform and is listed on NASDAQ and JSE - **Lesaka** operates a South African fintech company driven by a purpose to provide financial services, software and other business services to Southern Africa's underserviced consumers and merchants[28](index=28&type=chunk) - Offers an integrated and holistic multiproduct platform that provides transactional accounts, lending, insurance, merchant acquiring, cash management, software and Alternative Digital Products ("ADP")[28](index=28&type=chunk) - Lesaka has a primary listing on **NASDAQ (NASDAQ:LSAK)** and a secondary listing on the **Johannesburg Stock Exchange (JSE: LSK)**[29](index=29&type=chunk) [Forward-Looking Statements](index=4&type=section&id=4.2.%20Forward-Looking%20Statements) The press release contains forward-looking statements subject to risks and uncertainties, including potential differences between preliminary and actual results, restatement impacts, and regulatory actions. Lesaka assumes no obligation to update these statements - This press release contains certain statements that may be considered **forward-looking statements** within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934[30](index=30&type=chunk) - Forward-looking statements are based upon current beliefs and expectations of management and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified[30](index=30&type=chunk) - Risks include, without limitation, the risk that unaudited preliminary results may differ from actual results, the timely completion of the restatement, and potential legal or regulatory action related to the restatement[30](index=30&type=chunk) [Investor and Media Relations](index=4&type=section&id=4.3.%20Investor%20and%20Media%20Relations) Contact information for investor and media relations is provided for Phillipe Welthagen and Idris Dungarwalla - Investor Relations and Media Relations Contacts: **Phillipe Welthagen** (phillipe.welthagen@lesakatech.com, **+27 84 512 5393**) and **Idris Dungarwalla** (idris.dungarwalla@lesakatech.com, **+44 786 225 4852**)[31](index=31&type=chunk) [Attachments: Preliminary Unaudited Financials & Reconciliations](index=6&type=section&id=Attachments:%20Preliminary%20Unaudited%20Financials%20%26%20Reconciliations) This section provides detailed preliminary unaudited financial statements and reconciliations for key non-GAAP measures, including Group Adjusted EBITDA, Adjusted Earnings, and Headline Loss Per Share [Reconciliation of GAAP Loss to Group Adjusted EBITDA](index=6&type=section&id=5.1.%20Reconciliation%20of%20GAAP%20Loss%20to%20Group%20Adjusted%20EBITDA) Attachment A provides a detailed reconciliation of GAAP net loss attributable to Lesaka to Group Adjusted EBITDA for Q4 2025, Q4 2024, Q3 2025, FY2025, and FY2024, outlining specific adjustments including once-off items Group Adjusted EBITDA Reconciliation (USD '000) | Metric | Q4 2025 | Q4 2024 | FY2025 | FY2024 | | :------------------------------------------------ | :------ | :------ | :----- | :----- | | Net loss attributable to Lesaka | (28,770) | (5,035) | (87,504) | (17,440) | | Loss attributable to Lesaka - GAAP | (28,948) | (5,035) | (87,634) | (17,440) | | Income tax (benefit) expense | (8,930) | 1,482 | (18,198) | 3,363 | | Change in fair value of equity securities | 5,676 | - | 59,828 | - | | Impairment loss | 18,863 | - | 18,863 | - | | PPA amortization | 7,796 | 3,657 | 21,384 | 14,419 | | Interest expense | 4,470 | 4,620 | 21,453 | 18,932 | | Interest income | (644) | (732) | (2,596) | (2,294) | | Depreciation | 2,997 | 2,548 | 12,337 | 9,246 | | Stock-based compensation charges | 2,032 | 2,258 | 9,550 | 7,911 | | Once-off items | 13,227 | 1,684 | 17,826 | 1,853 | | **Group Adjusted EBITDA - Non-GAAP** | **16,718** | **10,258** | **50,688** | **36,936** | - Once-off items for FY2025 include **$16.16 million** in transaction costs related to Adumo, Recharger and Bank Zero acquisitions, and **$1.79 million** in other transaction costs[33](index=33&type=chunk) - Once-off items are non-recurring in nature, however, certain items may be reported in multiple quarters, such as transaction costs related to acquisitions[34](index=34&type=chunk) [Reconciliation of GAAP Net Loss to Adjusted Earnings and EPS](index=8&type=section&id=5.2.%20Reconciliation%20of%20GAAP%20Net%20Loss%20to%20Adjusted%20Earnings%20and%20EPS) Attachment B provides reconciliations of GAAP net loss and basic loss per share to Adjusted earnings and basic Adjusted EPS for Q4 2025, Q4 2024, FY2025, and FY2024, detailing various adjustments Adjusted Earnings Reconciliation (USD '000) | Metric | Q4 2025 | Q4 2024 | FY2025 | FY2024 | | :------------------------------------------ | :------ | :------ | :----- | :----- | | GAAP Net (loss) income | (28,770) | (5,035) | (87,504) | (17,440) | | Impairment loss | 18,371 | - | 18,371 | - | | Transaction costs | 13,158 | 1,684 | 17,953 | 2,805 | | Deferred tax asset valuation allowance released | (11,741) | (342) | (12,665) | (906) | | Change in fair value of equity securities, net | 5,676 | - | 49,294 | - | | Intangible asset amortization, net | 5,691 | 2,670 | 15,610 | 10,543 | | Stock-based compensation charge | 2,032 | 2,258 | 9,550 | 7,911 | | **Adjusted Earnings** | **4,369** | **1,235** | **10,361** | **2,878** | Adjusted EPS (USD) | Metric | Q4 2025 | Q4 2024 | FY2025 | FY2024 | | :---------------- | :------ | :------ | :----- | :----- | | GAAP (L) EPS, basic | (0.35) | (0.08) | (1.14) | (0.28) | | **Adjusted EPS, basic** | **0.05** | **0.02** | **0.13** | **0.04** | [Unaudited Condensed Consolidated Statements of Operations](index=9&type=section&id=5.3.%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Attachment B includes the unaudited condensed consolidated statements of operations, presenting detailed revenue, expenses, and net loss figures for Q4 2025, Q4 2024, FY2025, and FY2024 Condensed Consolidated Statements of Operations (USD '000) | Metric | Q4 2025 | Q4 2024 | FY2025 | FY2024 | | :------------------------------------------ | :------ | :------ | :----- | :----- | | Operating (loss) income | (28,401) | 295 | (27,100) | 3,590 | | Loss before income tax (benefit) expense | (37,903) | (3,593) | (105,946) | (12,798) | | Income tax (benefit) expense | (8,930) | 1,482 | (18,198) | 3,363 | | Net loss from continuing operations | (28,948) | (5,035) | (87,634) | (17,440) | | Net loss attributable to Lesaka | (28,770) | (5,035) | (87,504) | (17,440) | | Basic loss attributable to Lesaka shareholders | (0.35) | (0.08) | (1.14) | (0.27) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=5.4.%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Attachment B provides the unaudited condensed consolidated statements of cash flows, detailing cash flows from operating, investing, and financing activities for Q4 2025, Q4 2024, FY2025, and FY2024 Condensed Consolidated Statements of Cash Flows (USD '000) | Metric | Q4 2025 | Q4 2024 | FY2025 | FY2024 | | :------------------------------------------ | :------ | :------ | :----- | :----- | | Net cash (used in) provided by in operating activities | (6,482) | 5,652 | (9,121) | 28,789 | | Net cash provided by (used in) investing activities | 9,877 | 1,266 | (11,342) | (16,415) | | Net cash (used in) provided by financing activities | (161) | (2,972) | 29,732 | (7,113) | | Net increase in cash, cash equivalents and restricted cash | 5,516 | 6,312 | 10,721 | 7,286 | | Cash, cash equivalents and restricted cash - end of period | 76,639 | 65,918 | 76,639 | 65,918 | [Unaudited Condensed Consolidated Balance Sheets](index=11&type=section&id=5.5.%20Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Attachment B presents the unaudited condensed consolidated balance sheets as of June 30, 2025, and June 30, 2024, showing assets, liabilities, and equity Condensed Consolidated Balance Sheets (USD '000) | Metric | June 30, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | Total current assets | 243,923 | 187,696 | | Total assets | 657,688 | 558,450 | | Total current liabilities | 160,473 | 129,887 | | Total liabilities | 396,305 | 303,164 | | Total equity | 172,426 | 175,857 | - An amount of **$11,841** was reclassified from long-term borrowings to current portion of long-term borrowings[44](index=44&type=chunk) [Reconciliation of Net Loss to Headline Loss Per Share](index=12&type=section&id=5.6.%20Reconciliation%20of%20Net%20Loss%20to%20Headline%20Loss%20Per%20Share) Attachment C provides the reconciliation of net loss to headline loss per share (basic and diluted) for Q4 2025, Q4 2024, FY2025, and FY2024, including adjustments for impairment losses and profit/loss on asset sales Headline Loss Per Share Reconciliation (USD '000) | Metric | Q4 2025 | Q4 2024 | FY2025 | FY2024 | | :------------------------------------------ | :------ | :------ | :----- | :----- | | Net loss (USD'000) | (22,058) | (5,035) | (87,504) | (17,440) | | Adjustments: Impairment loss | 18,864 | - | 18,864 | - | | Adjustments: Profit on sale of property, plant and equipment | (12) | (17) | 13 | (305) | | **Net loss used to calculate headline loss** | **(3,203)** | **(5,047)** | **(68,631)** | **(16,496)** | Headline Loss Per Share (USD) | Metric | Q4 2025 | Q4 2024 | FY2025 | FY2024 | | :---------------- | :------ | :------ | :----- | :----- | | Basic | (0.04) | (0.08) | (0.90) | (0.26) | | Diluted | (0.04) | (0.08) | (0.90) | (0.26) | - Weighted average number of shares used to calculate net loss per share basic loss and headline loss per share basic loss for FY2025 was **76,466 thousand**[46](index=46&type=chunk)