[Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section defines forward-looking statements, noting inherent risks and uncertainties that may cause actual results to differ materially - Statements about future estimates, expectations, beliefs, intentions, projections, goals, aspirations, commitments, or strategies are forward-looking statements[13](index=13&type=chunk) - Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from historical experience or present expectations[13](index=13&type=chunk) - Known material risk factors are described in "Item 1A. Risk Factors" of the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[13](index=13&type=chunk) [Report of Independent Registered Public Accounting Firm](index=4&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM) Ernst & Young LLP reviewed interim financial statements, finding no material modifications for GAAP conformity - Ernst & Young LLP reviewed the condensed consolidated interim financial statements for the periods ended September 30, 2025 and 2024[17](index=17&type=chunk) - The auditors are not aware of any material modifications needed for the interim financial statements to conform with U.S. GAAP[17](index=17&type=chunk) - The consolidated balance sheet as of December 31, 2024, is fairly stated in all material respects[18](index=18&type=chunk) [Part I. Financial Information](index=5&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents Delta's unaudited condensed consolidated financial statements, providing a snapshot of financial position and performance [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Balance Sheets show increased total assets and stockholders' equity, with a slight decrease in total liabilities | (in millions) | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total assets | $79,623 | $75,372 | | Total liabilities | $60,801 | $60,079 | | Total stockholders' equity | $18,822 | $15,293 | - Cash and cash equivalents increased to **$3,791 million** at September 30, 2025, from **$3,069 million** at December 31, 2024[22](index=22&type=chunk) - Air traffic liability increased to **$8,165 million** at September 30, 2025, from **$7,094 million** at December 31, 2024[22](index=22&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Delta reported increased operating revenue and net income for both three and nine months, driven by passenger revenue | (in millions, except per share data) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total operating revenue | $16,673 | $15,677 | $47,361 | $46,084 | | Total operating expense | $14,989 | $14,280 | $43,006 | $41,806 | | Operating Income | $1,684 | $1,397 | $4,355 | $4,278 | | Net Income | $1,417 | $1,272 | $3,786 | $2,614 | | Diluted Earnings Per Share | $2.17 | $1.97 | $5.80 | $4.04 | - Passenger revenue increased by **3%** for the three months ended September 30, 2025, and by **2%** for the nine months ended September 30, 2025, compared to the prior year periods[24](index=24&type=chunk) - Aircraft fuel and related taxes decreased by **6%** for the three months and **9%** for the nine months ended September 30, 2025, year-over-year[24](index=24&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities remained strong, while investing cash use increased and financing cash use decreased | (in millions) | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $6,082 | $6,131 | | Net cash used in investing activities | $(3,458) | $(2,570) | | Net cash used in financing activities | $(2,074) | $(2,670) | | Net Increase in Cash, Cash Equivalents and Restricted Cash Equivalents | $550 | $891 | | Cash, cash equivalents and restricted cash equivalents at end of period | $3,971 | $4,286 | - Property and equipment additions (flight and ground) totaled **$(3,592) million** for the nine months ended September 30, 2025[27](index=27&type=chunk) - Payments on debt and finance lease obligations were **$(3,931) million** for the nine months ended September 30, 2025[27](index=27&type=chunk) [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity significantly increased due to strong net income and comprehensive income, partially offset by dividends | (in millions) | Balance at Dec 31, 2024 | Balance at Sep 30, 2025 | | :--- | :--- | :--- | | Total Stockholders' Equity | $15,293 | $18,822 | | Retained Earnings | $8,783 | $12,126 | | Accumulated Other Comprehensive Loss | $(4,979) | $(4,858) | - Net income contributed **$3,787 million** to retained earnings during the nine months ended September 30, 2025[30](index=30&type=chunk) - Dividends declared totaled **$(318) million** for the nine months ended September 30, 2025[30](index=30&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations for the unaudited condensed consolidated financial statements, offering context for key figures [NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=NOTE%201.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the basis of presentation for interim financial statements under GAAP, noting interim results are not indicative of the full year - The financial statements are prepared in accordance with GAAP for interim financial information and should be read with the 2024 Form 10-K[33](index=33&type=chunk) - Operating results for interim periods are not necessarily indicative of the entire year due to seasonal variations and fuel price volatility[34](index=34&type=chunk) - The company is assessing the impact of ASU No. 2025-06, "Targeted Improvements to the Accounting for Internal-Use Software," effective January 1, 2028[36](index=36&type=chunk) [NOTE 2. REVENUE RECOGNITION](index=9&type=section&id=NOTE%202.%20REVENUE%20RECOGNITION) This note details passenger and other operating revenue components, including loyalty programs and refinery sales | (in millions) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Passenger revenue | $13,506 | $13,107 | $38,852 | $38,079 | | Cargo | $233 | $196 | $654 | $574 | | Other revenue | $2,934 | $2,374 | $7,855 | $7,431 | | Total operating revenue | $16,673 | $15,677 | $47,361 | $46,084 | - Cash sales from marketing agreements related to the loyalty program were **$6.0 billion** for the nine months ended September 30, 2025, up from **$5.5 billion** in 2024[40](index=40&type=chunk) | (in millions) | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | Domestic Passenger Revenue | $26,521 | $26,033 | | Atlantic Passenger Revenue | $7,221 | $7,159 | | Latin America Passenger Revenue | $3,047 | $3,008 | | Pacific Passenger Revenue | $2,063 | $1,879 | [NOTE 3. FAIR VALUE MEASUREMENTS](index=11&type=section&id=NOTE%203.%20FAIR%20VALUE%20MEASUREMENTS) This note provides a breakdown of assets and liabilities measured at fair value, including cash, investments, and fuel hedge contracts | (in millions) | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash equivalents | $2,364 | $1,619 | | Restricted cash equivalents | $180 | $351 | | Long-term investments and related | $3,391 | $2,372 | | Fuel hedge contracts | $4 | $(17) | - The company recognized a gain of **$12 million** on fuel hedge contracts for the nine months ended September 30, 2025, compared to a gain of **$9 million** in the prior year[51](index=51&type=chunk) - Equity investments in private companies are classified as Level 3 due to unobservable inputs in their valuations[50](index=50&type=chunk) [NOTE 4. INVESTMENTS](index=12&type=section&id=NOTE%204.%20INVESTMENTS) This note details Delta's equity investments, including stakes in various airlines, which significantly increased | (in millions) | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Air France-KLM | $98 | $62 | | China Eastern | $199 | $155 | | Grupo Aeroméxico | $402 | $354 | | Hanjin KAL | $712 | $507 | | LATAM | $1,379 | $837 | | Unifi Aviation | $132 | $146 | | Wheels Up | $485 | $435 | | Other investments | $476 | $350 | | Total Equity investments | $3,883 | $2,846 | - Delta's equity investments increased by over **$1 billion** from December 31, 2024, to September 30, 2025[52](index=52&type=chunk) - The company extended contractual transfer restrictions on its investment in Wheels Up until May 2026[52](index=52&type=chunk) [NOTE 5. DEBT](index=13&type=section&id=NOTE%205.%20DEBT) This note summarizes Delta's outstanding debt, which decreased due to new unsecured note issuances and an amended SkyMiles Credit Facility | (in millions) | September 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total secured and unsecured debt | $14,173 | $15,373 | | Total debt | $14,174 | $15,347 | | Total long-term debt | $12,299 | $13,546 | - In June 2025, Delta issued **$2.0 billion** in unsecured notes (4.95% due 2028 and 5.25% due 2030) to repay the PSP loan due 2030 and for general corporate purposes[55](index=55&type=chunk) - The SkyMiles Credit Facility was amended in September 2025, refinancing term loans at a reduced margin of **1.50%** per annum and extending maturity to October 2028[56](index=56&type=chunk) - As of September 30, 2025, Delta had approximately **$3.1 billion** undrawn and available under its revolving credit facilities[57](index=57&type=chunk) [NOTE 6. EMPLOYEE BENEFIT PLANS](index=14&type=section&id=NOTE%206.%20EMPLOYEE%20BENEFIT%20PLANS) This note outlines net periodic costs for Delta's pension and other postretirement benefit plans, with mixed cost changes | (in millions) | Nine Months Ended Sep 30, 2025 (Pension) | Nine Months Ended Sep 30, 2024 (Pension) | | :--- | :--- | :--- | | Service cost | $125 | $116 | | Interest cost | $623 | $603 | | Expected return on plan assets | $(800) | $(789) | | Recognized net actuarial loss | $151 | $186 | | Net periodic cost | $99 | $116 | | (in millions) | Nine Months Ended Sep 30, 2025 (Other Postretirement) | Nine Months Ended Sep 30, 2024 (Other Postretirement) | | :--- | :--- | :--- | | Service cost | $99 | $69 | | Interest cost | $135 | $136 | | Expected return on plan assets | $(1) | $(2) | | Recognized net actuarial loss | $15 | $14 | | Net periodic cost | $245 | $214 | - Service cost for employee benefit plans is recorded in salaries and related costs, while other components are in miscellaneous, net non-operating expense[62](index=62&type=chunk) [NOTE 7. COMMITMENTS AND CONTINGENCIES](index=15&type=section&id=NOTE%207.%20COMMITMENTS%20AND%20CONTINGENCIES) This note details Delta's future aircraft purchase commitments, totaling **$16.0 billion**, and addresses legal contingencies - Future aircraft purchase commitments totaled approximately **$16.0 billion** at September 30, 2025[64](index=64&type=chunk) | Aircraft Type | Purchase Commitments | | :--- | :--- | | A220-300 | 66 | | A321-200neo | 71 | | A350-900 | 6 | | A350-1000 | 20 | | B-737-10 | 100 | | Total | 263 | - The company believes the resolution of current legal proceedings will not have a material adverse effect on its Condensed Consolidated Financial Statements[67](index=67&type=chunk) [NOTE 8. ACCUMULATED OTHER COMPREHENSIVE LOSS](index=16&type=section&id=NOTE%208.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) This note presents the components of accumulated other comprehensive loss (AOCL), which decreased due to reclassifications into earnings | (in millions) | Balance at Jan 1, 2025 | Balance at Sep 30, 2025 | | :--- | :--- | :--- | | Pension and Other Benefit Liabilities | $(5,557) | $(5,398) | | Other | $42 | $41 | | Tax Effect | $536 | $499 | | Total | $(4,979) | $(4,858) | - Reclassifications into earnings for pension and other benefit liabilities amounted to **$122 million** (net of tax) for the nine months ended September 30, 2025[70](index=70&type=chunk) [NOTE 9. SEGMENTS](index=17&type=section&id=NOTE%209.%20SEGMENTS) This note provides financial information for Delta's Airline and Refinery segments, with the Airline segment dominating revenue and income - The refinery segment provides approximately **75%** of the airline's jet fuel consumption (**200,000 barrels per day**) through its own production and third-party agreements[71](index=71&type=chunk) | (in millions) | Airline (9M 2025) | Refinery (9M 2025) | Consolidated (9M 2025) | | :--- | :--- | :--- | :--- | | Operating revenue | $43,681 | $5,213 | $47,361 | | Operating income | $4,313 | $42 | $4,355 | | Capital expenditures | $3,537 | $55 | $3,592 | - Refinery operating income decreased to **$42 million** for the nine months ended September 30, 2025, from **$76 million** in the prior year, primarily due to lower pricing of refined products[121](index=121&type=chunk)[74](index=74&type=chunk) [NOTE 10. EARNINGS PER SHARE](index=19&type=section&id=NOTE%2010.%20EARNINGS%20PER%20SHARE) This note presents the computation of basic and diluted earnings per share (EPS), showing an increase for both three and nine months | (in millions, except per share data) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income | $1,417 | $1,272 | $3,786 | $2,614 | | Basic weighted average shares outstanding | 649 | 641 | 648 | 640 | | Diluted weighted average shares outstanding | 654 | 647 | 653 | 647 | | Basic earnings per share | $2.18 | $1.98 | $5.85 | $4.08 | | Diluted earnings per share | $2.17 | $1.97 | $5.80 | $4.04 | - Dilutive effect of share-based instruments was **5 million shares** for the nine months ended September 30, 2025[77](index=77&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Delta's financial condition and results, covering revenue, expenses, non-operating results, refinery, fleet, and liquidity [September 2025 Quarter Financial Highlights](index=20&type=section&id=September%202025%20Quarter%20Financial%20Highlights) Delta reported a strong September 2025 quarter with operating income increasing to **$1.7 billion**, driven by premium products and loyalty awards - Operating income for the September 2025 quarter was **$1.7 billion**, an increase of **$287 million** compared to September 2024[79](index=79&type=chunk) - Total revenue increased **$1.0 billion**, with passenger revenue up **$399 million**, driven by premium products and loyalty travel awards[80](index=80&type=chunk) - Total operating expense increased **$709 million (5%)**, primarily due to a **4%** capacity increase and higher employee costs, partially offset by lower aircraft fuel costs[81](index=81&type=chunk) - Liquidity as of September 30, 2025, was **$6.9 billion**, and operating activities generated **$1.8 billion** during the quarter[82](index=82&type=chunk)[83](index=83&type=chunk) [Results of Operations - Three Months Ended September 30, 2025 and 2024](index=21&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20September%2030,%202025%20and%202024) For the three months ended September 30, 2025, Delta saw **6%** revenue growth to **$16.7 billion**, while operating expenses rose **5%** to **$15.0 billion** [Total Operating Revenue](index=21&type=section&id=Total%20Operating%20Revenue%20(Three%20Months)) Total operating revenue for the three months increased by **$996 million (6%)** to **$16.7 billion**, driven by premium products and refinery sales | (in millions) | Sep 30, 2025 | Sep 30, 2024 | Increase (Decrease) | % Increase (Decrease) | | :--- | :--- | :--- | :--- | :--- | | Passenger revenue | $13,506 | $13,107 | $399 | 3% | | Cargo | $233 | $196 | $37 | 19% | | Other | $2,934 | $2,374 | $560 | 24% | | Total operating revenue | $16,673 | $15,677 | $996 | 6% | - Premium products ticket revenue increased by **9% ($460 million)** to **$5,796 million**[87](index=87&type=chunk) - Loyalty travel awards revenue increased by **13% ($130 million)** to **$1,108 million**[87](index=87&type=chunk) [Passenger Revenue by Geographic Region](index=21&type=section&id=Passenger%20Revenue%20by%20Geographic%20Region%20(Three%20Months)) Domestic passenger revenue increased by **5%** on **4%** capacity growth, while international revenue saw mixed results | (in millions) | Sep 30, 2025 Passenger Revenue | % Increase (Decrease) | | :--- | :--- | :--- | | Domestic | $9,103 | 5% | | Atlantic | $2,977 | (2)% | | Latin America | $759 | (3)% | | Pacific | $667 | 3% | | Total | $13,506 | 3% | - Domestic capacity increased by **4%**, while load factor decreased by **2 points**[88](index=88&type=chunk) - Pacific region saw a **10%** increase in Passenger Mile (RPMs) and a **2 point** increase in Load Factor[88](index=88&type=chunk) [Other Revenue](index=22&type=section&id=Other%20Revenue%20(Three%20Months)) Other revenue increased by **$560 million (24%)** to **$2.9 billion**, driven by refinery sales and ancillary businesses | (in millions) | Sep 30, 2025 | Sep 30, 2024 | Increase | % Increase | | :--- | :--- | :--- | :--- | :--- | | Refinery | $1,476 | $1,083 | $393 | 36% | | Loyalty program | $847 | $820 | $27 | 3% | | Ancillary businesses | $256 | $161 | $95 | 59% | | Miscellaneous | $355 | $310 | $45 | 15% | | Other revenue | $2,934 | $2,374 | $560 | 24% | - Loyalty program revenue, mainly from American Express cardholder spend and new acquisitions, increased by **3%**[92](index=92&type=chunk) - Miscellaneous revenue includes lounge access, codeshare agreements, and international joint venture partnership settlements[94](index=94&type=chunk) [Operating Expense](index=23&type=section&id=Operating%20Expense%20(Three%20Months)) Total operating expense increased by **$709 million (5%)** to **$15.0 billion**, driven by salaries, offset by **6%** lower fuel costs | (in millions) | Sep 30, 2025 | Sep 30, 2024 | Increase (Decrease) | % Increase (Decrease) | | :--- | :--- | :--- | :--- | :--- | | Salaries and related costs | $4,443 | $4,231 | $212 | 5% | | Aircraft fuel and related taxes | $2,570 | $2,747 | $(177) | (6)% | | Ancillary businesses and refinery | $1,724 | $1,250 | $474 | 38% | | Landing fees and other rents | $921 | $832 | $89 | 11% | | Profit sharing | $392 | $320 | $72 | 23% | | Total operating expense | $14,989 | $14,280 | $709 | 5% | - The market price of jet fuel decreased by **8%**, leading to a **$177 million** reduction in aircraft fuel and related taxes, despite a **4%** increase in consumption[97](index=97&type=chunk) - Profit sharing increased by **$72 million** due to higher quarterly results[102](index=102&type=chunk) [Results of Operations - Nine Months Ended September 30, 2025 and 2024](index=24&type=section&id=Results%20of%20Operations%20-%20Nine%20Months%20Ended%20September%2030,%202025%20and%202024) For the nine months, total operating revenue increased **3%** to **$47.4 billion**, while operating expenses rose **3%** to **$43.0 billion** [Total Operating Revenue](index=24&type=section&id=Total%20Operating%20Revenue%20(Nine%20Months)) Total operating revenue for the nine months increased by **$1.3 billion (3%)** to **$47.4 billion**, driven by premium products and loyalty awards | (in millions) | Sep 30, 2025 | Sep 30, 2024 | Increase (Decrease) | % Increase (Decrease) | | :--- | :--- | :--- | :--- | :--- | | Passenger revenue | $38,852 | $38,079 | $773 | 2% | | Cargo | $654 | $574 | $80 | 14% | | Other | $7,855 | $7,431 | $424 | 6% | | Total operating revenue | $47,361 | $46,084 | $1,277 | 3% | - Ticket - Premium products revenue increased by **7% ($1,025 million)** to **$16,402 million**[103](index=103&type=chunk) - Loyalty travel awards revenue increased by **12% ($342 million)** to **$3,140 million**[103](index=103&type=chunk) [Passenger Revenue by Geographic Region](index=24&type=section&id=Passenger%20Revenue%20by%20Geographic%20Region%20(Nine%20Months)) Domestic passenger revenue increased by **2%** on higher capacity, while international revenue increased **2%**, with Pacific region showing **10%** growth | (in millions) | Sep 30, 2025 Passenger Revenue | % Increase (Decrease) | | :--- | :--- | :--- | | Domestic | $26,521 | 2% | | Atlantic | $7,221 | 1% | | Latin America | $3,047 | 1% | | Pacific | $2,063 | 10% | | Total | $38,852 | 2% | - Domestic capacity increased by **4%**, while load factor decreased by **3 points**[105](index=105&type=chunk) - Pacific region RPMs increased by **18%** and load factor increased by **4 points**[105](index=105&type=chunk) [Other Revenue](index=24&type=section&id=Other%20Revenue%20(Nine%20Months)) Other revenue for the nine months increased by **$424 million (6%)** to **$7.9 billion**, driven by ancillary businesses and refinery revenue | (in millions) | Sep 30, 2025 | Sep 30, 2024 | Increase | % Increase | | :--- | :--- | :--- | :--- | :--- | | Refinery | $3,680 | $3,520 | $160 | 5% | | Loyalty program | $2,509 | $2,451 | $58 | 2% | | Ancillary businesses | $710 | $554 | $156 | 28% | | Miscellaneous | $956 | $906 | $50 | 6% | | Other revenue | $7,855 | $7,431 | $424 | 6% | [Operating Expense](index=25&type=section&id=Operating%20Expense%20(Nine%20Months)) Total operating expense for the nine months increased by **$1.2 billion (3%)** to **$43.0 billion**, with salaries rising and fuel costs decreasing by **9%** | (in millions) | Sep 30, 2025 | Sep 30, 2024 | Increase (Decrease) | % Increase (Decrease) | | :--- | :--- | :--- | :--- | :--- | | Salaries and related costs | $12,928 | $12,035 | $893 | 7% | | Aircraft fuel and related taxes | $7,439 | $8,157 | $(718) | (9)% | | Contracted services | $3,442 | $3,134 | $308 | 10% | | Landing fees and other rents | $2,650 | $2,347 | $303 | 13% | | Regional carrier expense | $1,913 | $1,731 | $182 | 11% | | Total operating expense | $43,006 | $41,806 | $1,200 | 3% | - Aircraft fuel and related taxes decreased by **$718 million** due to a **13%** decrease in the market price per gallon of jet fuel[108](index=108&type=chunk) - The refinery generated a **one cent** benefit per gallon for the nine months ended September 30, 2025, compared to **two cents** per gallon in the prior year[108](index=108&type=chunk) [Non-Operating Results](index=26&type=section&id=Non-Operating%20Results) Total non-operating income, net, significantly improved to **$317 million**, primarily driven by a substantial gain on investments | (in millions) | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | Favorable (Unfavorable) | | :--- | :--- | :--- | :--- | | Interest expense, net | $(521) | $(567) | $46 | | Gain/(loss) on investments, net | $1,007 | $(73) | $1,080 | | Loss on extinguishment of debt | $(26) | $(36) | $10 | | Miscellaneous, net | $(143) | $(146) | $3 | | Total non-operating income/(expense), net | $317 | $(822) | $1,139 | - Interest expense, net, decreased due to debt reduction initiatives, including **$3.9 billion** in payments on debt and finance lease obligations during the nine months ended September 30, 2025[114](index=114&type=chunk) - The gain on investments, net, was driven by changes in stock prices, foreign currency fluctuations, and other valuation techniques for equity investments[115](index=115&type=chunk) - The projected annual effective tax rate for 2025 is **24% to 25%**, excluding mark-to-market gains[117](index=117&type=chunk) [Refinery Segment](index=27&type=section&id=Refinery%20Segment) Delta's refinery segment, supplying **75%** of jet fuel, generated **$42 million** in operating income, a decrease due to lower product pricing - The refinery provides approximately **200,000 barrels per day**, or **75%** of Delta's jet fuel consumption[120](index=120&type=chunk) - Refinery operating income for the nine months ended September 30, 2025, was **$42 million**, down from **$76 million** in the prior year, primarily due to lower pricing of refined products[121](index=121&type=chunk)[123](index=123&type=chunk) | (in millions) | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | Exchanged products | $549 | $1,147 | | Sales of refined products | $132 | $197 | | Sales to airline segment | $852 | $1,147 | | Third party refinery sales | $3,680 | $3,520 | | Operating revenue | $5,213 | $6,011 | | Operating income/(loss) | $42 | $76 | [Operating Statistics](index=27&type=section&id=Operating%20Statistics) Delta's operating statistics show **4%** increase in ASM and **2%** in RPM, with load factor decreasing and mixed TRASM/CASM results | Consolidated | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2025 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue passenger miles (in millions) ("RPM") | 67,621 | 66,310 | 189,717 | 185,757 | | Available seat miles (in millions) ("ASM") | 79,054 | 76,162 | 225,099 | 216,360 | | Passenger load factor | 86 % | 87 % | 84 % | 86 % | | Total revenue per available seat mile ("TRASM") | 21.09 ¢ | 20.58 ¢ | 21.04 ¢ | 21.30 ¢ | | Cost per available seat mile ("CASM") | 18.96 ¢ | 18.75 ¢ | 19.11 ¢ | 19.32 ¢ | | Fuel gallons consumed (in millions) | 1,138 | 1,096 | 3,226 | 3,093 | | Average price per fuel gallon | $2.26 | $2.51 | $2.31 | $2.64 | - Fuel consumption increased by **4%** for both the three and nine months ended September 30, 2025, consistent with capacity growth[124](index=124&type=chunk) - Average price per fuel gallon decreased by **10%** for the quarter and **12%** for the nine-month period year-over-year[124](index=124&type=chunk) [Fleet Information](index=28&type=section&id=Fleet%20Information) Delta's mainline fleet comprised **986 aircraft** with an average age of **14.8 years**, with commitments for **263 new aircraft** | Fleet Type | Total Current Fleet | Purchase Commitments | Options | | :--- | :--- | :--- | :--- | | A220-300 | 34 | 66 | - | | A321-200neo | 84 | 71 | 70 | | A350-900 | 38 | 6 | 10 | | A350-1000 | - | 20 | - | | B-737-10 | - | 100 | 30 | | Total Mainline | 986 | 263 | 120 | - The average age of the mainline fleet is **14.8 years**[126](index=126&type=chunk) | Regional Carrier | Total Aircraft | | :--- | :--- | | Endeavor Air, Inc. | 140 | | SkyWest Airlines, Inc. | 126 | | Republic Airways, Inc. | 57 | | Total Regional | 323 | [Financial Condition and Liquidity](index=29&type=section&id=Financial%20Condition%20and%20Liquidity) Delta maintained strong liquidity of **$6.9 billion**, continued debt reduction, and initiated a **$1.0 billion** share repurchase program [Sources and Uses of Liquidity](index=29&type=section&id=Sources%20and%20Uses%20of%20Liquidity) Delta's liquidity is primarily generated from operating activities, with investing and financing activities focused on capital and debt management [Operating Activities](index=29&type=section&id=Operating%20Activities%20(Liquidity)) Delta generated **$6.1 billion** in cash flows from operations, influenced by seasonal ticket sales, fuel prices, and SkyMiles program cash sales - Cash flows from operations were **$6.1 billion** for the nine months ended September 30, 2025[131](index=131&type=chunk) - Fuel expense represented approximately **17%** of total operating expense for the nine months ended September 30, 2025[133](index=133&type=chunk) - Total cash sales to American Express were **$5.9 billion** for the nine months ended September 30, 2025, a **10%** increase from the prior year[136](index=136&type=chunk) [Investing Activities](index=30&type=section&id=Investing%20Activities%20(Liquidity)) Capital expenditures for the nine months were **$3.6 billion**, with an expected total capital spend of approximately **$5.0 billion** for 2025 - Capital expenditures were **$3.6 billion** for the nine months ended September 30, 2025[138](index=138&type=chunk) - Expected 2025 capital spend is approximately **$5.0 billion**, primarily for aircraft, fleet modifications, and technology[138](index=138&type=chunk) [Financing Activities](index=30&type=section&id=Financing%20Activities%20(Liquidity)) Delta had **$3.9 billion** in debt repayments, issued **$2.0 billion** in unsecured notes, and authorized a **$1.0 billion** share repurchase program - Cash outflows for debt and finance lease obligations totaled **$3.9 billion** for the nine months ended September 30, 2025[139](index=139&type=chunk) - Moody's upgraded Delta's credit rating to Baa2 (investment grade) in February 2025, and Fitch Ratings upgraded its outlook to Positive in the September 2025 quarter[142](index=142&type=chunk) - Total cash dividends for the nine months ended September 30, 2025, were **$318 million**[143](index=143&type=chunk) - A **$1.0 billion** opportunistic share repurchase program was authorized in June 2025, with no shares repurchased through September 30, 2025[144](index=144&type=chunk) [Critical Accounting Estimates](index=30&type=section&id=Critical%20Accounting%20Estimates) No material changes in Critical Accounting Estimates from the 2024 Form 10-K - No material changes in Critical Accounting Estimates from the 2024 Form 10-K[146](index=146&type=chunk) [Supplemental Information](index=31&type=section&id=Supplemental%20Information) This section provides reconciliations of non-GAAP financial measures to GAAP, excluding certain items for a clearer view of core operations - Non-GAAP financial measures are used to provide comparability and better understanding of core performance, excluding items like third-party refinery sales, MTM adjustments on hedges, and profit sharing[148](index=148&type=chunk)[150](index=150&type=chunk) | (in millions) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | Total revenue | $16,673 | $15,677 | | Third-party refinery sales | $(1,476) | $(1,083) | | Total revenue, adjusted | $15,197 | $14,594 | | (in millions) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | Operating expense | $14,989 | $14,280 | | Third-party refinery sales | $(1,476) | $(1,083) | | MTM adjustments and settlements on hedges | $(11) | $24 | | Operating expense, adjusted | $13,502 | $13,221 | | (cents) | Three Months Ended Sep 30, 2025 | Three Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | CASM | 18.96 ¢ | 18.75 ¢ | | Aircraft fuel and related taxes | (3.25) | (3.61) | | Third-party refinery sales | (1.87) | (1.42) | | Profit sharing | (0.50) | (0.42) | | CASM-Ex | 13.35 ¢ | 13.30 ¢ | | (in millions) | Three Months Ended Sep 30, 2025 | | :--- | :--- | | Net cash provided by operating activities | $1,847 | | Net cash used in investing activities | $(1,035) | | Pension plan contributions | $6 | | Net cash flows related to certain airport construction projects and other | $15 | | Free cash flow | $833 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk from the 2024 Form 10-K - No material changes in market risk from the 2024 Form 10-K[157](index=157&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Delta's management concluded that disclosure controls and procedures were effective, with no material changes in internal control - Disclosure controls and procedures were effective as of September 30, 2025[158](index=158&type=chunk) - No material changes in internal control over financial reporting during the three months ended September 30, 2025[159](index=159&type=chunk) [Part II. Other Information](index=34&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) This section updates on the Capacity Antitrust Litigation, which is proceeding to class discovery, with Delta maintaining claims are without merit - The Capacity Antitrust Litigation, alleging conspiracy to restrain capacity, is proceeding to class discovery[161](index=161&type=chunk) - In September 2025, the Court denied the defendants' motion to certify the decision for an interlocutory appeal or for reconsideration[161](index=161&type=chunk) - Delta believes the claims are without merit and is vigorously defending the lawsuits[161](index=161&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) No material changes from the risk factors described in the 2024 Form 10-K - No material changes from the risk factors described in the 2024 Form 10-K[162](index=162&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details common stock purchases, primarily shares withheld for tax obligations, noting no repurchases under the **$1.0 billion** program | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | July 2025 | 3,566 | $49.42 | | August 2025 | 4,105 | $55.37 | | September 2025 | 23,848 | $60.54 | | Total | 31,519 | - | - Shares were withheld from employees to satisfy tax obligations in connection with grants of stock under the Performance Compensation Plan[164](index=164&type=chunk) - A **$1.0 billion** opportunistic share repurchase program was authorized in June 2025, but no shares were repurchased under it through September 30, 2025[165](index=165&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including organizational documents, a credit agreement amendment, and CEO/CFO certifications - Exhibit 10.1 is the Second Amendment to Term Loan Credit and Guaranty Agreement, entered into as of September 30, 2025, among SkyMiles IP Ltd., Delta Air Lines, Inc. and Barclays Bank PLC[169](index=169&type=chunk) - Exhibits 31.1 and 31.2 are certifications by Delta's Chief Executive Officer and Chief Financial Officer, respectively, for the quarterly report[169](index=169&type=chunk) [Signature](index=37&type=section&id=Signature) This section contains the signature of William C. Carroll, Senior Vice President - Controller, certifying the report - The report was signed by William C. Carroll, Senior Vice President - Controller (Principal Accounting Officer) on October 9, 2025[172](index=172&type=chunk)

[Executive Summary & Q3 2025 Performance Overview](index=1&type=section&id=Executive%20Summary%20%26%20Q3%202025%20Performance%20Overview) Levi Strauss & Co. delivered strong Q3 2025 results, exceeding guidance and demonstrating significant financial improvements driven by strategic shifts [Key Highlights and Management Commentary](index=1&type=section&id=Key%20Highlights%20and%20Management%20Commentary) Levi Strauss & Co. reported strong third-quarter 2025 financial results, exceeding guidance for sales, margins, and EPS. The company's strategic pivot to a DTC-first, head-to-toe denim lifestyle retailer is driving significant financial performance improvements, leading to a raised full-year outlook - Q3 2025 results exceeded guidance for sales, margins, and EPS[2](index=2&type=chunk) - Reported and organic net revenues both increased by **7%**[2](index=2&type=chunk) - The company is raising its full-year net revenue and EPS outlook, including the updated impact of tariffs[2](index=2&type=chunk) - CEO Michelle Gass highlighted the pivot to a DTC-first, head-to-toe denim lifestyle retailer as a key driver of financial performance inflection[2](index=2&type=chunk) - CFO Harmit Singh noted four consecutive quarters of high-single-digit growth and record gross margins, driven by a focus on profitability[2](index=2&type=chunk) [Q3 2025 Financial Performance Summary](index=1&type=section&id=Q3%202025%20Financial%20Performance%20Summary) The company achieved significant growth in net revenues and profitability in Q3 2025, with strong improvements in operating income and net income compared to the prior year. Gross margin expanded, though adjusted EBIT margin saw a slight decrease due to higher SG&A Q3 2025 Key Financial Metrics (vs. Q3 2024) | Metric | Q3 2025 | Q3 2024 | Change (Reported) | Change (Organic/Adjusted) | | :-------------------------------- | :------ | :------ | :---------------- | :-------------------------- | | Net Revenues | $1.5B | $1.443B | +7% | +7% | | Operating Income | $167.4M | $32.7M | +412% | N/A | | Net Income from Continuing Operations | $122M | $23M | +430% | N/A | | Adjusted Net Income | $136M | $134M | +1% | (1)% (Constant Currency) | | Diluted EPS from Continuing Operations | $0.31 | $0.06 | +$0.25 | N/A | | Adjusted Diluted EPS | $0.34 | $0.33 | +$0.01 | —¢ (Constant Currency) | | Operating Margin | 10.8% | 2.3% | +850 bps | N/A | | Adjusted EBIT Margin | 11.8% | 12.3% | -50 bps | (1)% (Constant Currency) | | Gross Margin | 61.7% | 60.6% | +110 bps | N/A | | SG&A Expenses | $776M | $726M | +6.8% | N/A | | Adjusted SG&A | $769M | $696M | +10.5% | N/A | - Gross margin increased by **110 basis points** to **61.7%**, primarily due to favorable channel mix and price increases, partially offset by tariffs[6](index=6&type=chunk) - Restructuring charges related to Project Fuel amounted to **$9 million**[6](index=6&type=chunk) [Segment and Channel Performance](index=1&type=section&id=Segment%20and%20Channel%20Performance) All geographic segments and the Direct-to-Consumer (DTC) channel demonstrated positive net revenue growth in Q3 2025. Asia led with the highest growth, and DTC continued its strong performance, comprising a significant portion of total net revenues Q3 2025 Net Revenues by Segment (vs. Q3 2024) | Segment | Q3 2025 Net Revenues | Reported Growth | Organic Growth | | :-------- | :------------------- | :-------------- | :------------- | | Americas | $806M | +6% | +7% | | Europe | $426M | +5% | +3% | | Asia | $278M | +12% | +12% | | Beyond Yoga® | $33M | +2% | +2% | Q3 2025 Operating Income by Segment (vs. Q3 2024) | Segment | Q3 2025 Operating Income | Q3 2024 Operating Income | Reported Growth | | :-------- | :----------------------- | :----------------------- | :-------------- | | Americas | $189M | $174M | +9% | | Europe | $91M | $83M | +9% | | Asia | $33M | $28M | +17% | | Beyond Yoga® | $(5)M | $(6)M | +17% | Q3 2025 Net Revenues by Channel (vs. Q3 2024) | Channel | Reported Growth | Organic Growth | | :-------- | :-------------- | :------------- | | DTC | +11% | +9% | | E-commerce | +18% | +16% | | Wholesale | +3% | +5% | - DTC comprised **46%** of total net revenues in Q3 2025[3](index=3&type=chunk) - U.S. organic growth within Americas was **3%**[3](index=3&type=chunk) - DTC organic growth by region: U.S. **+7%**, Europe **+4%**, Asia **+14%**[3](index=3&type=chunk) [Balance Sheet Review](index=3&type=section&id=Balance%20Sheet%20Review) The company maintained strong liquidity and completed a significant portion of the Dockers® sale, impacting its balance sheet as of August 31, 2025 [Key Balance Sheet Items](index=3&type=section&id=Key%20Balance%20Sheet%20Items) As of August 31, 2025, the company maintained a strong liquidity position, with cash and cash equivalents of $613 million and total liquidity of approximately $1.5 billion. Total inventories increased by 12% compared to Q3 2024 Key Balance Sheet Figures (as of August 31, 2025) | Metric | Amount | | :------------------------ | :------------- | | Cash and cash equivalents | $613 million | | Total liquidity | ~$1.5 billion | | Total inventories (YoY) | +12% | - The company refinanced its **€475 million** **3.375%** senior notes due in **2027** with **€475 million** **4.000%** senior notes due in **2030**[13](index=13&type=chunk) [Dockers® Sale](index=3&type=section&id=Dockers%C2%AE%20Sale) The company completed the sale of Dockers® intellectual property and operations in the U.S. and Canada for $194.7 million in gross proceeds. The sale of remaining Dockers® operations is anticipated to conclude in Q1 2026 - On July 31, 2025, the company sold Dockers® intellectual property and operations in the U.S. and Canada for gross proceeds of **$194.7 million**[8](index=8&type=chunk) - The sale of the remaining Dockers® operations is expected to close in the first quarter of 2026[8](index=8&type=chunk) [Shareholder Returns](index=3&type=section&id=Shareholder%20Returns) The company demonstrated a commitment to shareholder returns through declared dividends and a significant share repurchase program in Q3 2025 [Dividends](index=3&type=section&id=Dividends) The company declared a Q4 dividend of $0.14 per share, totaling approximately $55 million, payable on November 4, 2025 - For Q4, a dividend of **$0.14** per share was declared, totaling approximately **$55 million**[10](index=10&type=chunk)[14](index=14&type=chunk) - The dividend is payable on November 4, 2025, to holders of record on October 20, 2025[10](index=10&type=chunk) [Share Repurchase Program](index=3&type=section&id=Share%20Repurchase%20Program) The company returned approximately $151 million to shareholders in Q3, an increase of 118% year-over-year, including a $120 million accelerated share repurchase program that retired approximately 5 million shares - Approximately **$151 million** was returned to shareholders in Q3, a **118%** increase over the prior year[9](index=9&type=chunk) - A **$120 million** accelerated share repurchase program was launched, retiring approximately **5 million shares**[14](index=14&type=chunk) - As of August 31, 2025, **$440 million** remained under the current share repurchase authorization[9](index=9&type=chunk) [Updated Fiscal 2025 Guidance](index=3&type=section&id=Updated%20Fiscal%202025%20Guidance) The company raised its fiscal 2025 outlook for key financial metrics, reflecting confidence in continued performance despite ongoing macroeconomic and tariff considerations [Updated Full-Year Outlook](index=3&type=section&id=Updated%20Full-Year%20Outlook) Levi Strauss & Co. raised its fiscal 2025 guidance for reported net revenue growth, organic net revenue growth, and adjusted diluted EPS, while maintaining its gross margin expansion, adjusted EBIT margin, and tax rate outlook Updated Fiscal 2025 Guidance | Metric | Previous Guidance | Updated Guidance | | :-------------------- | :---------------- | :--------------- | | Reported net revenue growth | 1% to 2% | ~3% | | Organic net revenue growth | 4.5% to 5.5% | ~6% | | Gross margin expansion | 80 basis points | 100 basis points | | Adjusted EBIT margin | 11.4% to 11.6% | Maintained at 11.4% to 11.6% | | Tax rate | ~23% | Maintained at ~23% | | Adjusted diluted EPS | $1.25 to $1.30 | $1.27 to $1.32 | [Guidance Assumptions](index=3&type=section&id=Guidance%20Assumptions) The fiscal 2025 guidance is based on continuing operations, excluding the Dockers® business, and assumes current U.S. tariffs on imports from China (30%) and Rest-of-World (20%) remain unchanged. It also assumes no significant worsening of macroeconomic pressures - Guidance is based on continuing operations, with the Dockers® business reported in discontinued operations[11](index=11&type=chunk) - Assumes U.S. tariffs on imports from China remain at **30%** and Rest-of-World at **20%** for the remainder of the year[11](index=11&type=chunk) - Assumes no significant worsening of macro-economic pressures, inflationary pressures, recessionary concerns, supply chain disruptions, increased tariffs, or currency impacts[12](index=12&type=chunk) [Company Information & Disclosures](index=4&type=section&id=Company%20Information%20%26%20Disclosures) This section provides essential company background, investor communication details, cautionary statements regarding future projections, and explanations of non-GAAP financial measures [About Levi Strauss & Co.](index=4&type=section&id=About%20Levi%20Strauss%20%26%20Co.) Levi Strauss & Co. is a global leader in jeanswear and one of the world's largest brand-name apparel companies, designing and marketing jeans, casual wear, and accessories under various brands, with products sold in approximately 120 countries - LS&Co. is a global leader in jeanswear and one of the world's largest brand-name apparel companies[17](index=17&type=chunk) - The company designs and markets products under Levi's®, Levi Strauss Signature™, Denizen®, Dockers® and Beyond Yoga® brands[17](index=17&type=chunk) - Products are sold in approximately **120 countries** through chain retailers, department stores, online sites, and **~3,200 retail stores/shop-in-shops**[17](index=17&type=chunk) - Reported 2024 net revenues were **$6.4 billion**[17](index=17&type=chunk) [Investor Conference Call Information](index=4&type=section&id=Investor%20Conference%20Call%20Information) Details for accessing the Q3 2025 investor conference call and webcast replay are provided for interested parties - Pre-registration link provided for the conference call[16](index=16&type=chunk) - Live webcast accessible via a provided link[16](index=16&type=chunk) - Webcast replay available on http://investors.levistrauss.com approximately two hours after the event and archived for one quarter[16](index=16&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) The press release contains forward-looking statements regarding future financial results, business outlook, strategic priorities, and macroeconomic conditions. These statements are estimates based on current judgment and involve risks and uncertainties that could cause actual results to differ materially - Statements related to future financial results, business outlook, strategic priorities, and macroeconomic conditions are forward-looking[18](index=18&type=chunk) - These statements are estimates reflecting management's best judgment and involve risks and uncertainties beyond the company's control[18](index=18&type=chunk) - Investors are cautioned not to place undue reliance on these statements and should consider information in SEC filings (Form 10-K, 10-Q)[18](index=18&type=chunk) [Non-GAAP Financial Measures Explanation](index=5&type=section&id=Non-GAAP%20Financial%20Measures%20Explanation) The company uses various non-GAAP financial measures, such as Adjusted SG&A, Adjusted EBIT, Adjusted net income, and organic net revenues, to provide additional insights into its financial performance, enhance understanding of past performance, and facilitate period-to-period comparisons. These measures have limitations and should be viewed as supplementary to GAAP results - Non-GAAP measures are used to supplement GAAP financial statements, offering additional useful information about financial performance and enhancing understanding[19](index=19&type=chunk) - Examples of non-GAAP measures include Adjusted SG&A, Adjusted EBIT, Adjusted net income, Adjusted diluted EPS, organic net revenues, and Adjusted free cash flow[19](index=19&type=chunk) - Non-GAAP measures have limitations, lack standardized GAAP meaning, and may not be comparable to similarly titled measures used by other companies[19](index=19&type=chunk) - Organic net revenues exclude the impact of fluctuating foreign currency exchange rates, business acquisitions/divestitures, and the estimated impact of any 53rd week[20](index=20&type=chunk) - Constant-currency results facilitate period-to-period comparisons without the impact of fluctuating foreign currency exchange rates[20](index=20&type=chunk)[22](index=22&type=chunk) [Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated balance sheets, statements of income, and cash flows, detailing the company's financial position and performance [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets provide a snapshot of the company's financial position as of August 31, 2025, showing total assets of $6,656.4 million and total liabilities of $4,493.7 million Consolidated Balance Sheet Highlights (Dollars in millions) | Metric | August 31, 2025 | December 1, 2024 | | :---------------------------------- | :-------------- | :--------------- | | **ASSETS** | | | | Cash and cash equivalents | $612.8 | $690.0 | | Inventories | $1,286.3 | $1,131.3 | | Total current assets | $3,006.8 | $2,851.1 | | Total assets | $6,656.4 | $6,375.5 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Accounts payable | $621.4 | $663.4 | | Total current liabilities | $1,979.0 | $2,010.5 | | Long-term debt | $1,042.8 | $994.0 | | Total liabilities | $4,493.7 | $4,405.0 | | Total stockholders' equity | $2,162.7 | $1,970.5 | | Total liabilities and stockholders' equity | $6,656.4 | $6,375.5 | [Consolidated Statements of Income](index=10&type=section&id=Consolidated%20Statements%20of%20Income) The consolidated statements of income show net revenues of $1,543.4 million for the three months ended August 31, 2025, with a net income of $218.1 million, significantly up from $20.7 million in the prior year Consolidated Statements of Income Highlights (Dollars in millions, except per share amounts) | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 25, 2024 | Nine Months Ended Aug 31, 2025 | Nine Months Ended Aug 25, 2024 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net revenues | $1,543.4 | $1,443.1 | $4,516.2 | $4,282.1 | | Gross profit | $951.6 | $873.9 | $2,805.0 | $2,576.1 | | Operating income | $167.4 | $32.7 | $467.0 | $54.2 | | Income from continuing operations before income taxes | $156.2 | $22.2 | $435.3 | $21.5 | | Net income from continuing operations | $122.0 | $22.7 | $341.8 | $30.0 | | Net income (loss) from discontinued operations, net of taxes | $96.1 | $(2.0) | $78.3 | $(2.0) | | Net income | $218.1 | $20.7 | $420.1 | $28.0 | | Diluted EPS - Continuing operations | $0.31 | $0.06 | $0.86 | $0.07 | | Diluted EPS - Discontinued operations | $0.24 | $(0.01) | $0.19 | — | | Net income - Diluted | $0.55 | $0.05 | $1.05 | $0.07 | [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended August 31, 2025, net cash provided by operating activities was $262.8 million, a decrease from the prior year, while net cash used for financing activities increased to $337.1 million Consolidated Statements of Cash Flows Highlights (Dollars in millions) | Metric | Nine Months Ended Aug 31, 2025 | Nine Months Ended Aug 25, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Net income | $420.1 | $28.0 | | Net cash provided by operating activities | $262.8 | $601.1 | | Net cash provided by (used for) investing activities | $(9.7) | $(192.2) | | Net cash used for financing activities | $(337.1) | $(229.1) | | Net increase (decrease) in cash and cash equivalents | $(77.2) | $178.3 | | Ending cash and cash equivalents | $612.8 | $577.1 | - Proceeds from the sale of business amounted to **$194.7 million** in the nine months ended August 31, 2025[33](index=33&type=chunk) - Accelerated share repurchase program utilized **$120.0 million** in the nine months ended August 31, 2025[33](index=33&type=chunk) [Reconciliation of GAAP to Non-GAAP Financial Measures](index=13&type=section&id=RECONCILIATION%20OF%20GAAP%20TO%20NON-GAAP%20FINANCIAL%20MEASURES) This section provides detailed definitions and reconciliations of various non-GAAP financial measures to their most directly comparable GAAP counterparts [Non-GAAP Measure Definitions](index=13&type=section&id=Non-GAAP%20Measure%20Definitions) This section defines key non-GAAP financial measures used by Levi Strauss & Co., such as Adjusted SG&A, Adjusted EBIT, Adjusted EBITDA, Adjusted net income, and Adjusted diluted earnings per share, outlining the adjustments made to their GAAP counterparts - Adjusted SG&A excludes property, plant, and equipment impairment, restructuring-related charges, and acquisition/integration-related charges[37](index=37&type=chunk) - Adjusted EBIT excludes income tax expense, interest expense, other income/expense, impairments, restructuring charges, and acquisition/integration-related charges from net income from continuing operations[37](index=37&type=chunk) - Adjusted EBITDA is Adjusted EBIT excluding depreciation and amortization expense[37](index=37&type=chunk) - Adjusted net income excludes various non-recurring or non-operational items and their tax impacts from net income from continuing operations[37](index=37&type=chunk) - Adjusted diluted earnings per share is Adjusted net income per weighted-average number of diluted common shares outstanding[37](index=37&type=chunk) [Adjusted SG&A Reconciliation](index=14&type=section&id=Adjusted%20SG%26A%20Reconciliation) The reconciliation shows that Adjusted SG&A for Q3 2025 was $769.3 million, an increase from $696.1 million in Q3 2024, primarily due to higher restructuring-related charges in the prior year Adjusted SG&A Reconciliation (Dollars in millions) | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 25, 2024 | Nine Months Ended Aug 31, 2025 | Nine Months Ended Aug 25, 2024 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Selling, general and administrative expenses (GAAP) | $775.6 | $726.4 | $2,313.4 | $2,233.4 | | Property, plant, and equipment impairment | — | $(11.1) | — | $(11.1) | | Restructuring related charges and other, net | $(6.3) | $(19.2) | $(14.0) | $(44.6) | | Acquisition and integration related charges | — | — | — | $(4.0) | | **Adjusted SG&A (Non-GAAP)** | **$769.3** | **$696.1** | **$2,299.4** | **$2,173.7** | | SG&A margin | 50.3% | 50.3% | 51.2% | 52.2% | | Adjusted SG&A margin | 49.8% | 48.2% | 50.9% | 50.8% | - Restructuring related and other charges for Q3 2025 primarily include **$4.3 million** of Project Fuel costs and **$2.0 million** in estimated legal settlements[40](index=40&type=chunk) [Adjusted EBIT and Adjusted EBITDA Reconciliation](index=15&type=section&id=Adjusted%20EBIT%20and%20Adjusted%20EBITDA%20Reconciliation) Adjusted EBIT for Q3 2025 was $182.3 million, up from $177.8 million in Q3 2024, reflecting improved operating performance after excluding various non-recurring items. Adjusted EBITDA also increased to $234.0 million Adjusted EBIT and Adjusted EBITDA Reconciliation (Dollars in millions) | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 25, 2024 | Nine Months Ended Aug 31, 2025 | Nine Months Ended Aug 25, 2024 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income from continuing operations (GAAP) | $122.0 | $22.7 | $341.8 | $30.0 | | Income tax expense (benefit) | 34.2 | (0.5) | 93.5 | (8.5) | | Interest expense | 12.5 | 10.1 | 35.2 | 30.4 | | Other (income) expense, net | (1.3) | 0.4 | (3.5) | 2.3 | | Property, plant, and equipment impairment | — | 11.1 | — | 11.1 | | Goodwill and other intangible asset impairment charges | — | 111.4 | 2.5 | 116.9 | | Restructuring charges, net | 8.6 | 3.4 | 22.1 | 171.6 | | Restructuring related charges and other, net | 6.3 | 19.2 | 14.0 | 44.6 | | Acquisition and integration related charges | — | — | — | 4.0 | | **Adjusted EBIT (Non-GAAP)** | **$182.3** | **$177.8** | **$505.6** | **$402.4** | | Depreciation and amortization | 51.7 | 48.8 | 151.2 | 136.4 | | **Adjusted EBITDA (Non-GAAP)** | **$234.0** | **$226.6** | **$656.8** | **$538.8** | | Adjusted EBIT margin | 11.8% | 12.3% | 11.2% | 9.4% | - Goodwill impairment charges for the nine months ended August 31, 2025, include **$2.5 million** related to the business in Bolivia[48](index=48&type=chunk) - Restructuring charges for Q3 2025 include **$8.6 million** in connection with Project Fuel, primarily severance and post-employment benefits[50](index=50&type=chunk) [Adjusted Net Income Reconciliation](index=16&type=section&id=Adjusted%20Net%20Income%20Reconciliation) Adjusted net income for Q3 2025 was $135.7 million, a slight increase from $133.9 million in Q3 2024, after accounting for various adjustments and their tax impacts Adjusted Net Income Reconciliation (Dollars in millions) | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 25, 2024 | Nine Months Ended Aug 31, 2025 | Nine Months Ended Aug 25, 2024 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income from continuing operations (GAAP) | $122.0 | $22.7 | $341.8 | $30.0 | | Property, plant, and equipment impairment | — | 11.1 | — | 11.1 | | Goodwill and other intangible asset impairment charges | — | 111.4 | 2.5 | 116.9 | | Restructuring charges, net | 8.6 | 3.4 | 22.1 | 171.6 | | Restructuring related charges and other, net | 7.4 | 15.1 | 15.1 | 40.5 | | Loss on early extinguishment of debt | 1.5 | — | 1.5 | — | | Acquisition and integration related charges | — | — | — | 4.0 | | Tax impact of adjustments | (3.8) | (29.8) | (8.8) | (74.6) | | **Adjusted net income (Non-GAAP)** | **$135.7** | **$133.9** | **$374.2** | **$299.5** | | Adjusted net income margin | 8.8% | 9.3% | 8.3% | 7.0% | - Restructuring related and other charges for Q3 2025 include Project Fuel costs, legal settlements, and an insurance recovery[65](index=65&type=chunk) [Adjusted Diluted Earnings per Share Reconciliation](index=18&type=section&id=Adjusted%20Diluted%20Earnings%20per%20Share%20Reconciliation) Adjusted diluted earnings per share for Q3 2025 was $0.34, a slight increase from $0.33 in Q3 2024, reflecting the impact of various non-GAAP adjustments on a per-share basis Adjusted Diluted EPS Reconciliation (Unaudited) | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 25, 2024 | Nine Months Ended Aug 31, 2025 | Nine Months Ended Aug 25, 2024 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Diluted earnings per share from continuing operations (GAAP) | $0.31 | $0.06 | $0.86 | $0.07 | | Property, plant, and equipment impairment | — | 0.03 | — | 0.03 | | Goodwill and other intangible asset impairment charges | — | 0.28 | 0.01 | 0.30 | | Restructuring charges, net | 0.02 | 0.01 | 0.06 | 0.43 | | Restructuring related charges and other, net | 0.02 | 0.04 | 0.04 | 0.10 | | Loss on early extinguishment of debt | — | — | — | — | | Acquisition and integration related charges | — | — | — | 0.01 | | Tax impact of adjustments | (0.01) | (0.09) | (0.03) | (0.19) | | **Adjusted diluted earnings per share (Non-GAAP)** | **$0.34** | **$0.33** | **$0.94** | **$0.75** | [Adjusted Free Cash Flow Reconciliation](index=19&type=section&id=Adjusted%20Free%20Cash%20Flow%20Reconciliation) Adjusted free cash flow for the nine months ended August 31, 2025, was $92.5 million, a decrease from $439.3 million in the prior year, primarily due to lower net cash provided by operating activities - Adjusted free cash flow is defined as net cash flow from operating activities less purchases of property, plant and equipment from continuing and discontinued operations[77](index=77&type=chunk) Adjusted Free Cash Flow Reconciliation (Dollars in millions) | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 25, 2024 | Nine Months Ended Aug 31, 2025 | Nine Months Ended Aug 25, 2024 | | :-------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities (GAAP) | $24.8 | $52.3 | $262.8 | $601.1 | | Purchases of property, plant and equipment | $(64.2) | $(50.0) | $(170.3) | $(161.8) | | **Adjusted free cash flow (Non-GAAP)** | **$(39.4)** | **$2.3** | **$92.5** | **$439.3** | [Return on Invested Capital (ROIC)](index=20&type=section&id=Return%20on%20Invested%20Capital%20(ROIC)) The Return on Invested Capital (ROIC) for the trailing four quarters ended August 31, 2025, was 17.4%, an improvement from 14.6% in the prior year, indicating increased efficiency in generating operating income relative to invested capital - ROIC is defined as the trailing four quarters of Adjusted net income before interest and after taxes divided by the average trailing five quarters of total invested capital[79](index=79&type=chunk) Return on Invested Capital (ROIC) (Dollars in millions) | Metric | Trailing Four Quarters Ended Aug 31, 2025 | Trailing Four Quarters Ended Aug 25, 2024 | | :-------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Adjusted net income before interest and after taxes | $611.9 | $511.9 | | Average Total invested Capital | $3,522.8 | $3,506.5 | | **Return on Invested Capital (ROIC)** | **17.4%** | **14.6%** | [Organic Net Revenues and Constant-Currency Explanation](index=20&type=section&id=Organic%20Net%20Revenues%20and%20Constant-Currency%20Explanation) This section reiterates the definitions of organic net revenues and constant-currency measures, emphasizing their role in facilitating period-to-period comparisons by excluding the impact of foreign currency fluctuations, acquisitions/divestitures, and the 53rd week - Organic net revenues exclude the impact of fluctuating foreign currency exchange rates, net revenues from business acquisitions or divestitures, and the estimated impact of any 53rd week[20](index=20&type=chunk) - Constant-currency results facilitate period-to-period comparisons by removing the impact of fluctuating foreign currency exchange rates[20](index=20&type=chunk)[22](index=22&type=chunk) - These measures exclude the results of the Dockers® business, classified as discontinued operations[21](index=21&type=chunk) [Organic Net Revenues by Segment](index=21&type=section&id=Organic%20Net%20Revenues%20by%20Segment) Total organic net revenues increased by 6.9% for Q3 2025 and 8.0% for the nine months ended August 31, 2025, with all segments showing positive organic growth, particularly strong in Asia Organic Net Revenues by Segment (Dollars in millions) | Segment | Q3 2025 As Reported | Q3 2024 Organic Net Revenues | Q3 2025 Organic Growth | 9M 2025 As Reported | 9M 2024 Organic Net Revenues | 9M 2025 Organic Growth | | :-------------- | :------------------ | :--------------------------- | :--------------------- | :------------------ | :--------------------------- | :--------------------- | | Total net revenues | $1,543.4 | $1,444.4 | 6.9% | $4,516.2 | $4,177.7 | 8.0% | | Americas | $806.4 | $751.7 | 7.3% | $2,337.8 | $2,141.9 | 9.0% | | Europe | $426.3 | $413.3 | 3.1% | $1,229.9 | $1,154.0 | 6.6% | | Asia | $277.7 | $247.2 | 12.3% | $843.5 | $784.6 | 7.5% | | Beyond Yoga® | $33.0 | $32.2 | 2.5% | $105.0 | $97.2 | 8.0% | [Organic Net Revenues by Channel](index=22&type=section&id=Organic%20Net%20Revenues%20by%20Channel) The Direct-to-Consumer (DTC) channel continued to drive strong organic net revenue growth, increasing by 8.8% in Q3 2025, while Wholesale also showed solid growth of 5.3% Organic Net Revenues by Channel (Dollars in millions) | Channel | Q3 2025 As Reported | Q3 2024 Organic Net Revenues | Q3 2025 Organic Growth | 9M 2025 As Reported | 9M 2024 Organic Net Revenues | 9M 2025 Organic Growth | | :-------- | :------------------ | :--------------------------- | :--------------------- | :------------------ | :--------------------------- | :--------------------- | | Wholesale | $832.2 | $790.6 | 5.3% | $2,301.4 | $2,174.8 | 5.7% | | DTC | $711.2 | $653.8 | 8.8% | $2,214.8 | $2,002.9 | 10.6% | [Organic Net Revenues by Brand](index=23&type=section&id=Organic%20Net%20Revenues%20by%20Brand) Levi's® brands collectively achieved 7.0% organic net revenue growth in Q3 2025, with Levi Strauss Signature™ showing particularly strong growth of 21.1% Organic Net Revenues by Brand (Dollars in millions) | Brand | Q3 2025 As Reported | Q3 2024 Organic Net Revenues | Q3 2025 Organic Growth | 9M 2025 As Reported | 9M 2024 Organic Net Revenues | 9M 2025 Organic Growth | | :---------------------- | :------------------ | :--------------------------- | :--------------------- | :------------------ | :--------------------------- | :--------------------- | | Total Levi's Brands | $1,510.4 | $1,412.2 | 7.0% | $4,411.2 | $4,080.5 | 8.0% | | Levi's® | $1,450.8 | $1,363.0 | 6.4% | $4,236.4 | $3,927.9 | 7.9% | | Levi Strauss Signature™ | $59.6 | $49.2 | 21.1% | $172.5 | $152.6 | 13.0% | | Denizen® | — | — | * | $2.3 | — | * | [Constant-Currency Adjusted EBIT and Margin](index=24&type=section&id=Constant-Currency%20Adjusted%20EBIT%20and%20Margin) Constant-currency Adjusted EBIT for Q3 2025 was $182.3 million, showing a slight decrease of 0.9% compared to the prior year, while the constant-currency Adjusted EBIT margin was 11.8% Constant-Currency Adjusted EBIT and Margin (Dollars in millions) | Metric | Q3 2025 As Reported | Q3 2024 Constant-Currency | Q3 2025 Constant-Currency Growth | 9M 2025 As Reported | 9M 2024 Constant-Currency | 9M 2025 Constant-Currency Growth | | :-------------------------------------- | :------------------ | :------------------------ | :------------------------------- | :------------------ | :------------------------ | :------------------------------- | | Adjusted EBIT | $182.3 | $184.0 | (0.9)% | $505.6 | $397.0 | 27.4% | | Adjusted EBIT margin | 11.8% | 12.5% | (5.6)% | 11.2% | 9.3% | 20.4% | [Constant-Currency Adjusted Net Income and Diluted EPS](index=25&type=section&id=Constant-Currency%20Adjusted%20Net%20Income%20and%20Diluted%20EPS) Constant-currency Adjusted net income for Q3 2025 was $135.7 million, a slight decrease of 0.6% compared to the prior year, while constant-currency Adjusted diluted EPS remained flat at $0.34 Constant-Currency Adjusted Net Income and Diluted EPS (Dollars in millions, except per share amounts) | Metric | Q3 2025 As Reported | Q3 2024 Constant-Currency | Q3 2025 Constant-Currency Growth | 9M 2025 As Reported | 9M 2024 Constant-Currency | 9M 2025 Constant-Currency Growth | | :-------------------------------------- | :------------------ | :------------------------ | :------------------------------- | :------------------ | :------------------------ | :------------------------------- | | Adjusted net income | $135.7 | $136.5 | (0.6)% | $374.2 | $296.9 | 26.0% | | Adjusted diluted earnings per share | $0.34 | $0.34 | —% | $0.94 | $0.74 | 27.0% |

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________ Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended August 31, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-06631 _________________ LEVI STRAUSS & CO. (Exact Name of Registrant as Specified in Its Charter) (State or Other Jurisdicti ...

[Part I - Financial Information](index=4&type=section&id=Part%20I%20-%20Financial%20Information) This section details the company's financial performance and position through statements and explanatory notes [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in equity, and cash flows, along with detailed notes providing context on business operations, accounting policies, debt, equity, and recent developments [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table presents the company's financial position, including assets, liabilities, and equity, at specific dates **Condensed Consolidated Balance Sheets (in thousands):** | Metric | August 31, 2025 | May 31, 2025 | Change | % Change | | :---------------------------------- | :-------------- | :----------- | :----- | :------- | | Total Assets | $2,398,995 | $1,870,090 | $528,905 | 28.3% | | Total Liabilities | $1,291,007 | $1,236,365 | $54,642 | 4.4% | | Total Stockholders' Equity | $1,044,260 | $497,688 | $546,572 | 109.8% | | Cash and cash equivalents | $73,911 | $41,552 | $32,359 | 77.9% | | Current assets held for sale | $310,006 | $304,200 | $5,806 | 1.9% | | Property and equipment, net | $1,461,775 | $1,206,341 | $255,434 | 21.2% | | Current portion of debt | $382,056 | $10,331 | $371,725 | 3600.1% | | Long-term debt | $305,283 | $677,825 | $(372,542) | -54.9% | | Additional paid in capital | $1,573,367 | $1,009,913 | $563,454 | 55.8% | | Accumulated deficit | $(497,981) | $(481,055) | $(16,926) | 3.5% | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This table outlines the company's revenues, costs, and net loss over specific reporting periods **Condensed Consolidated Statements of Operations (in thousands, except per share data):** | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Change | % Change | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----- | :------- | | Total revenue | $64,216 | $34,849 | $29,367 | 84.2% | | Cost of revenues | $55,606 | $22,743 | $32,863 | 144.5% | | Selling, general and administrative | $29,152 | $10,993 | $18,159 | 165.2% | | Operating (loss) income | $(22,293) | $25,293 | $(47,586) | -188.1% | | Net (loss) income from continuing operations | $(26,247) | $15,912 | $(42,159) | -264.9% | | Net (loss) income from discontinued operations | $9,321 | $(20,159) | $29,480 | -146.3% | | Net loss | $(16,926) | $(4,247) | $(12,679) | 298.5% | | Net loss attributable to common stockholders | $(18,502) | $(4,291) | $(14,211) | 331.2% | | Basic and diluted net loss per share | $(0.07) | $(0.03) | $(0.04) | 133.3% | | Basic and diluted weighted average shares outstanding | 255,892,902 | 149,099,336 | 106,793,566 | 71.6% | [Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Temporary%20Equity%20and%20Stockholders'%20Equity) This section details changes in the company's equity accounts, including stock issuances and conversions - Total stockholders' equity increased by **$546,572 thousand** from $497,688 thousand as of May 31, 2025, to **$1,044,260 thousand** as of August 31, 2025[14](index=14&type=chunk) - Additional paid-in capital increased by **$563,454 thousand**, primarily due to **$190,406 thousand** from shares issued in offerings, **$121,204 thousand** from warrant issuances, and **$242,452 thousand** from the conversion of Series G Preferred Stock[14](index=14&type=chunk) - Series G Preferred Stock decreased from **$72,094 thousand** (78,000 shares) as of May 31, 2025, to **$0** (0 shares) as of August 31, 2025, due to conversions[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes the company's cash inflows and outflows from operating, investing, and financing activities **Condensed Consolidated Statements of Cash Flows (in thousands):** | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Change | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----- | | Net cash used in operating activities | $(82,023) | $(75,890) | $(6,133) | | Net cash used in investing activities | $(249,420) | $(32,606) | $(216,814) | | Net cash provided by financing activities | $322,236 | $163,365 | $158,871 | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(9,207) | $54,869 | $(64,076) | | Cash, cash equivalents, and restricted cash, end of period | $114,111 | $86,557 | $27,554 | [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and context for the figures presented in the consolidated financial statements [Note 1. Business and Organization](index=9&type=section&id=Note%201.%20Business%20and%20Organization) This note describes the company's core business, operational segments, and organizational structure - Applied Digital Corporation designs, builds, and operates high-performance, sustainably engineered data centers and colocation services for artificial intelligence, cloud, networking, and blockchain workloads[18](index=18&type=chunk) - The Company has two reportable segments: Data Center Hosting Business and High-Performance Compute (HPC) Hosting Business[18](index=18&type=chunk)[26](index=26&type=chunk) [Note 2. Basis of Presentation and Significant Accounting Policies](index=9&type=section&id=Note%202.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note outlines the accounting principles, revenue recognition methods, and classification of discontinued operations used in financial reporting - The interim unaudited condensed consolidated financial statements are prepared in conformity with GAAP and SEC rules, with certain information condensed or omitted compared to annual statements[19](index=19&type=chunk)[21](index=21&type=chunk) - Revenue recognition follows ASC 606; Data Center Hosting revenue is recognized over time based on fixed rates, and HPC Hosting revenue is recognized over time based on input measures of costs incurred[22](index=22&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk) - The Cloud Services Business was classified as discontinued operations during the fiscal quarter ended May 31, 2025, due to meeting 'held for sale' criteria and representing a strategic shift[36](index=36&type=chunk) **Cash, Cash Equivalents, and Restricted Cash (in thousands):** | Category | August 31, 2025 | May 31, 2025 | | :---------------------------------- | :-------------- | :----------- | | Cash and cash equivalents | $73,911 | $41,552 | | Restricted cash - funds for construction | $2,851 | $41,026 | | Restricted cash - letters of credit | $37,342 | $31,342 | | Restricted cash included in other assets | $0 | $7,000 | | **Total cash, cash equivalents, and restricted cash** | **$114,104** | **$120,920** | [Note 3. Property and Equipment](index=12&type=section&id=Note%203.%20Property%20and%20Equipment) This note details the company's property and equipment, including construction in progress and depreciation expenses **Property and Equipment, Net (in thousands):** | Category | August 31, 2025 | May 31, 2025 | Change | | :-------------------------- | :-------------- | :----------- | :----- | | Construction in progress | $1,309,756 | $1,053,656 | $256,100 | | Total cost of property and equipment | $1,488,367 | $1,230,220 | $258,147 | | Accumulated depreciation | $(26,592) | $(23,879) | $(2,713) | | **Property and equipment, net** | **$1,461,775** | **$1,206,341** | **$255,434** | Depreciation expense totaled **$2.7 million** for the three months ended August 31, 2025, compared to **$2.6 million** for the same period in 2024 [Note 4. Revenue from Contracts with Customers](index=12&type=section&id=Note%204.%20Revenue%20from%20Contracts%20with%20Customers) This note provides information on revenue concentration by major customers and deferred revenue balances **Revenue Concentration by Major Customers (Three Months Ended August 31, 2025):** | Customer | % of Revenue | | :--------- | :----------- | | Customer A | 59 % | | Customer B | 41 % | **Deferred Revenue (in thousands):** | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | | :---------------------- | :------------------------------ | :------------------------------ | | Balance, beginning of period | $0 | $8,188 | | Advance billings | $39,584 | $26,910 | | Revenue recognized | $(37,921) | $(34,593) | | Balance, end of period | $626 | $3,780 | **Customer Deposits (in thousands):** | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | | :-------------------------- | :------------------------------ | :------------------------------ | | Balance, beginning of period | $16,125 | $15,367 | | Customer deposits received | $627 | $2,849 | | Customer deposits refunded | $0 | $(1,549) | | Customer deposits applied | $0 | $(2,991) | | Balance, end of period | $16,752 | $13,676 | [Note 5. Discontinued Operations](index=13&type=section&id=Note%205.%20Discontinued%20Operations) This note explains the reclassification and financial results of the Cloud Services Business as discontinued operations - The Cloud Services Business was classified as 'held for sale' and discontinued operations as of May 31, 2025, representing a strategic shift for the Company[46](index=46&type=chunk) **Financial Results of Cloud Services Business (Discontinued Operations, in thousands):** | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Change | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----- | | Revenue | $16,718 | $25,855 | $(9,137) | | Operating income (loss) | $12,531 | $(15,810) | $28,341 | | Net income (loss) from discontinued operations | $9,321 | $(20,159) | $29,480 | **Assets and Liabilities Held for Sale (Cloud Services Business, in thousands):** | Category | August 31, 2025 | May 31, 2025 | | :-------------------------------- | :-------------- | :----------- | | Total current assets held for sale | $310,006 | $304,200 | | Total current liabilities held for sale | $188,215 | $216,047 | [Note 6. Related Party Transactions](index=15&type=section&id=Note%206.%20Related%20Party%20Transactions) This note discloses revenue and other transactions with related parties, including changes in their status **Related Party Revenue (in thousands):** | Customer | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | | :--------- | :------------------------------ | :------------------------------ | | Customer D | $0 | $1,244 | | Customer E | $0 | $682 | Related party revenue decreased **100% to $0** for the three months ended August 31, 2025, as certain related parties ceased to be beneficial owners of more than 5% of the Company's common stock[49](index=49&type=chunk)[50](index=50&type=chunk) - Software license fees of **$0.1 million** were incurred with a company whose chairman is also a member of the Company's Board of Directors for both the three months ended August 31, 2025, and August 31, 2024[51](index=51&type=chunk) [Note 7. Debt](index=15&type=section&id=Note%207.%20Debt) This note details the company's outstanding debt components, interest rates, maturity dates, and principal payment schedules **Outstanding Debt Components (in thousands):** | Debt Type | Interest Rate | Maturity Date | August 31, 2025 | May 31, 2025 | | :-------------------------------- | :------------ | :------------ | :-------------- | :----------- | | Convertible Notes, senior unsecured | 2.75% | June 2030 | $450,000 | $450,000 | | SMBC Loan | Variable | August 2026 | $375,000 | $375,000 | | Starion Ellendale Loan | 7.48% | February 2028 | $11,268 | $12,283 | | Cornerstone Bank Loan | 8.59% | March 2029 | $12,153 | $12,866 | | Starion Term Loan | 6.50% | July 2027 | $6,289 | $7,061 | | Other long-term debt | | | $12,310 | $12,275 | | Less: Current portion of debt | | | $(382,056) | $(10,331) | | **Long-term debt, net** | | | **$305,283** | **$677,825** | **Remaining Principal Payments (in thousands):** | Fiscal Year | Amount | | :---------- | :----- | | FY26 | $7,867 | | FY27 | $386,193 | | FY28 | $7,715 | | FY29 | $3,209 | | FY30 | $35 | | Thereafter | $462,001 | | **Total** | **$867,020** | - The Company had letters of credit totaling **$37.3 million** as of August 31, 2025, held in restricted cash[54](index=54&type=chunk) [Note 8. Balance Sheet Components](index=17&type=section&id=Note%208.%20Balance%20Sheet%20Components) This note provides a breakdown of various balance sheet accounts, including prepaid expenses, other assets, and accrued liabilities **Prepaid Expenses and Other Current Assets (in thousands):** | Category | August 31, 2025 | May 31, 2025 | | :------------------------------ | :-------------- | :----------- | | Short term equipment deposit | $172,523 | $0 | | Deferred issuance costs | $7,176 | $5,443 | | Short term lease incentive | $2,390 | $1,290 | | Prepaid expenses | $2,766 | $1,225 | | Other current assets | $3,636 | $1,472 | | **Total** | **$188,491** | **$9,430** | **Other Assets (in thousands):** | Category | August 31, 2025 | May 31, 2025 | | :------------------------------ | :-------------- | :----------- | | Long term lease incentive | $204,520 | $84,416 | | Deposits on assets & construction | $26,825 | $69,500 | | Deferred construction costs | $26,151 | $33,600 | | Restricted cash: letters of credit | $0 | $7,000 | | Deferred lease costs | $10,738 | $8,811 | | Investments in other companies | $6,073 | $6,073 | | Other | $3,475 | $4,976 | | **Total** | **$277,782** | **$214,376** | **Accrued Liabilities (in thousands):** | Category | August 31, 2025 | May 31, 2025 | | :-------------------------- | :-------------- | :----------- | | Accrued construction payables | $158,458 | $0 | | Accrued expenses | $16,938 | $26,293 | | Accrued interest | $6,010 | $2,694 | | Other accrued liabilities | $1,542 | $562 | | **Total** | **$182,948** | **$29,549** | [Note 9. Stockholders' Equity](index=17&type=section&id=Note%209.%20Stockholders'%20Equity) This note describes changes in stockholders' equity, including common stock issuances from public offerings - Under the June 2025 At-the-Market Sales Agreement, the Company issued and sold approximately **15.3 million shares** of common stock for gross proceeds of approximately **$196.4 million**[57](index=57&type=chunk)[58](index=58&type=chunk) [Note 10. Warrants](index=18&type=section&id=Note%2010.%20Warrants) This note details warrant activity, including issuances, exercises, and their impact on common stock and additional paid-in capital **Warrant Activity (Three Months Ended August 31, 2025):** | Metric | Warrants | Weighted-Average Exercise Price | | :-------------------------- | :--------- | :------------------------------ | | Outstanding at May 31, 2025 | 18,097,718 | $7.63 | | Granted | 8,393,611 | $10.75 | | Exercised | (300) | $7.19 | | **Outstanding at August 31, 2025** | **26,491,029** | **$8.62** | - The Company issued a warrant to CoreWeave for **8,393,611 shares** of common stock at an exercise price of **$10.75 per share** on August 28, 2025, in connection with the Building 4 Lease[64](index=64&type=chunk) - The estimated fair value of the Building 4 Warrant was **$14.44 per share**, totaling **$121.2 million**, recorded as a lease incentive asset and additional paid-in capital[65](index=65&type=chunk) [Note 11. Stock-Based Compensation Plans](index=19&type=section&id=Note%2011.%20Stock-Based%20Compensation%20Plans) This note outlines stock-based compensation expenses and the remaining unrecognized expense for unvested awards **Stock-Based Compensation (in thousands):** | Category | August 31, 2025 | August 31, 2024 | | :-------------------------------- | :-------------- | :-------------- | | Cost of revenue | $691 | $425 | | Selling, general, and administrative | $13,755 | $(2,808) | | Capitalized | $929 | $102 | | **Total stock-based compensation** | **$15,375** | **$(2,281)** | - As of August 31, 2025, there were **7,163,970 unvested restricted stock units** outstanding, with a total remaining expense of **$56.5 million** to be recognized over a weighted average period of **2.1 years**[72](index=72&type=chunk) - As of August 31, 2025, there were **7,207,500 performance stock units** outstanding, with a total remaining expense of **$29.8 million** to be recognized over a weighted average period of **2.0 years**[74](index=74&type=chunk) [Note 12. Temporary Equity](index=20&type=section&id=Note%2012.%20Temporary%20Equity) This note describes the company's redeemable and convertible preferred stock, including dividend rates and conversion activities - Series E Redeemable Preferred Stock: **301,673 shares** outstanding, with **9.0% cumulative dividends**, ranking senior to common stock[75](index=75&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) - Series E-1 Redeemable Preferred Stock: **62,260 shares** outstanding, with **9.0% cumulative dividends**, ranking on parity with Series E Preferred Stock[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - Series G Convertible Preferred Stock: During the quarter, **180,000 shares** were issued for **$175.0 million**, and **258,000 shares** were converted into approximately **28.2 million common shares** As of August 31, 2025, no Series G Preferred Stock was outstanding[94](index=94&type=chunk) - On August 14, 2025, the initial Floor Price for Series G Preferred Stock conversion was increased to **$12.50** from **$4.25**[93](index=93&type=chunk) [Note 13. Leases](index=23&type=section&id=Note%2013.%20Leases) This note details the company's data center lease agreements, minimum contracted payments, and total net lease costs - The Company entered into three data center leases with CoreWeave for an aggregate of **400 MW** of infrastructure at Polaris Forge 1 (Building 2: **100 MW**, Building 3: **150 MW**, Building 4: **150 MW**)[95](index=95&type=chunk)[96](index=96&type=chunk) **Minimum Contracted Lease Payments (Lessor, in thousands):** | Fiscal Year | Amount | | :---------- | :----- | | FY26 | $81,000 | | FY27 | $356,340 | | FY28 | $586,030 | | FY29 | $606,611 | | FY30 | $624,809 | | Thereafter | $8,596,727 | | **Total** | **$10,851,517** | **Total Net Lease Cost (Lessee, in thousands):** | Category | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | | :-------------------- | :------------------------------ | :------------------------------ | | Total operating lease cost | $835 | $195 | | Total finance lease cost | $1,256 | $1,693 | | Variable lease cost | $65 | $55 | | **Total net lease cost** | **$2,156** | **$1,943** | [Note 14. Commitments and Contingencies](index=25&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) This note discloses the company's minimum energy commitments and ongoing legal proceedings, including class action lawsuits - The Company has a minimum commitment of approximately **$40.1 million** related to the energy services agreement for its Jamestown, North Dakota co-hosting facility, payable over approximately the next **1.4 years**[101](index=101&type=chunk) - The Company is a defendant in a putative securities class action lawsuit (McConnell v. Applied Digital Corporation, et al.) filed in August 2023, alleging false or misleading statements The lawsuit is currently stayed pending resolution of a motion to dismiss[104](index=104&type=chunk) - A derivative lawsuit (Weich v. Cummins, et al.) filed in November 2023 was dismissed without prejudice on June 5, 2024, for failure to plead demand futility or a claim for breach of fiduciary duty[106](index=106&type=chunk)[107](index=107&type=chunk) - The Company is unable to estimate a range of loss for the Securities Lawsuit, but an unfavorable outcome could be material to its results of operations[105](index=105&type=chunk) [Note 15. Business Segments](index=26&type=section&id=Note%2015.%20Business%20Segments) This note presents financial results for the company's Data Center Hosting and HPC Hosting business segments - The Company's two reportable segments are the Data Center Hosting Business and the HPC Hosting Business The Cloud Services Business is presented as discontinued operations[110](index=110&type=chunk)[114](index=114&type=chunk) **Segment Profit (Loss) (in thousands):** | Segment | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Change | | :------------------------ | :------------------------------ | :------------------------------ | :----- | | Data Center Hosting Business | $6,035 | $35,851 | $(29,816) | | HPC Hosting Business | $(2,022) | $(2,949) | $927 | | **Total segment profit** | **$4,013** | **$32,902** | **$(28,889)** | - Data Center Hosting Business profit decreased primarily due to a **$24.8 million** gain on classification of held for sale in the prior year and an approximate **17% increase** in power costs[190](index=190&type=chunk) - HPC Hosting Business operating loss decreased due to revenue generated from tenant fit-out services[191](index=191&type=chunk) [Note 16. Loss Per Share](index=28&type=section&id=Note%2016.%20Loss%20Per%20Share) This note provides basic and diluted net loss per share calculations and details potentially dilutive securities **Net Loss Per Share Attributable to Common Stockholders:** | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | | Basic and diluted net loss per share | $(0.07) | $(0.03) | | Basic and diluted weighted average shares outstanding | 255,892,902 | 149,099,336 | - Potentially dilutive securities, including approximately **14.6 million unvested stock awards**, **4.4 million preferred stock shares**, **25.5 million warrants**, and **46.1 million shares** from Convertible Notes, were excluded from diluted EPS calculation for August 31, 2025, as their inclusion would be anti-dilutive[119](index=119&type=chunk) [Note 17. Subsequent Events](index=29&type=section&id=Note%2017.%20Subsequent%20Events) This note describes significant events occurring after the reporting period, including new financing agreements and equity commitments - On September 9, 2025, the Company entered into a **$50 million Promissory Note** with Macquarie Equipment Capital, Inc. for the development of its Polaris Forge 2 campus, with potential for an additional **$25 million**[120](index=120&type=chunk)[124](index=124&type=chunk) - The Series G Preferred Stock offering was amended on September 11, 2025, to increase the aggregate commitment to **$450 million**, and again on October 7, 2025, to **$590 million**, to fund Polaris Forge 1 construction[126](index=126&type=chunk)[130](index=130&type=chunk) - On October 3, 2025, the Company entered into an Amended and Restated Unit Purchase Agreement with MIP HPC Holdings, LLC (an affiliate of Macquarie Asset Management), with an initial closing on October 6, 2025, for **$112.5 million investment** in the HPC Hosting Business and a right for MAM to invest up to an additional **$4.9 billion**[131](index=131&type=chunk)[132](index=132&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and future outlook, highlighting significant revenue growth driven by HPC Hosting, increased operating expenses, and strategic financing activities to support data center expansion. It also discusses regulatory trends, critical accounting estimates, and recent developments [Forward-Looking Statements](index=32&type=section&id=Forward-Looking%20Statements) This section cautions readers about the inherent risks and uncertainties in forward-looking statements, which may cause actual results to differ - The report contains forward-looking statements based on management's beliefs and assumptions, which are subject to substantial risks and uncertainties, meaning actual results could differ materially from expectations[135](index=135&type=chunk)[136](index=136&type=chunk) - Readers are cautioned to review the risks described in the Company's Annual Report on Form 10-K and other cautionary language in this report, as the operating environment is evolving with new, unpredictable risk factors[137](index=137&type=chunk)[138](index=138&type=chunk) [Executive Overview](index=32&type=section&id=Executive%20Overview) This section provides a high-level summary of the company's business, operational segments, and strategic direction - Applied Digital Corporation is a U.S. designer, developer, and operator of high-performance, sustainably engineered data centers and colocation services for AI, networking, and blockchain workloads[141](index=141&type=chunk) - The Company operates in two distinct business segments: Data Center Hosting and HPC Hosting The Cloud Services Business has been reclassified as discontinued operations[141](index=141&type=chunk)[142](index=142&type=chunk) [Trends and Other Factors Affecting Our Business](index=33&type=section&id=Trends%20and%20Other%20Factors%20Affecting%20Our%20Business) This section discusses the evolving regulatory landscape for AI and blockchain hosting services and the company's adaptive approach to compliance - The regulatory landscape for AI and blockchain hosting services is rapidly evolving, with anticipated increased scrutiny and potential regulation, including measures for responsible AI development and energy consumption[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) - The Company is committed to a proactive and adaptive approach to regulatory compliance, monitoring developments and engaging with stakeholders to align business practices with the evolving legal framework[146](index=146&type=chunk) [Critical Accounting Estimates](index=33&type=section&id=Critical%20Accounting%20Estimates) This section explains management's judgments and assumptions in preparing financial statements, acknowledging potential differences in actual results - The preparation of financial statements in accordance with GAAP requires management to make assumptions and estimates about future events and apply judgments that affect reported amounts[147](index=147&type=chunk) - Management regularly reviews accounting policies, assumptions, estimates, and judgments to ensure fair presentation, acknowledging that actual results could differ materially from estimates[147](index=147&type=chunk) [Business Update](index=34&type=section&id=Business%20Update) This section provides updates on the company's data center operations, HPC facility development, and key personnel changes - Data Center Hosting Business facilities in Jamestown (**106 MW**) and Ellendale (**180 MW**) continue to operate at full capacity[148](index=148&type=chunk) - HPC Hosting Business is building two HPC data centers (**100 MW** and **150 MW**) at Polaris Forge 1, with a third **150 MW** facility in planning for 2027, and has secured **400 MW** in leases with CoreWeave[150](index=150&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) - The Company recognized **$26.3 million** in tenant fit-out revenue from the HPC Hosting Business during the three months ended August 31, 2025[153](index=153&type=chunk) - The Company broke ground on its Polaris Forge 2 campus, a **$3 billion**, **280 MW** data center near Harwood, North Dakota, with initial capacity anticipated in 2026 and full capacity in early 2027[154](index=154&type=chunk) - The Cloud Services Business, now classified as discontinued operations, generated **$16.7 million** in revenue for the three months ended August 31, 2025[156](index=156&type=chunk) - Jason Zhang was appointed Chief Strategy Officer on August 1, 2025[157](index=157&type=chunk) [Public Offerings and Changes to Equity](index=35&type=section&id=Public%20Offerings%20and%20Changes%20to%20Equity) This section details recent equity financing activities, including common stock sales and preferred stock issuances and conversions - Under the June 2025 At-the-Market Sales Agreement, the Company issued and sold approximately **15.3 million shares** of common stock for gross proceeds of approximately **$196.4 million**[158](index=158&type=chunk) - The aggregate commitment amount for Series G Convertible Preferred Stock was increased from **$150 million to $300 million** on August 14, 2025 During the quarter, **180,000 shares** were issued for **$175.0 million**, and **258,000 shares** were converted into approximately **28.2 million common shares**, resulting in no Series G Preferred Stock outstanding as of August 31, 2025[159](index=159&type=chunk)[160](index=160&type=chunk) - On August 28, 2025, the Company issued a warrant to CoreWeave to acquire up to **8,393,611 shares** of common stock at an exercise price of **$10.75 per share**, related to the Building 4 Lease[161](index=161&type=chunk) [Recent Developments](index=35&type=section&id=Recent%20Developments) This section highlights significant recent events, including new financing agreements and increased commitments for preferred stock offerings - On September 9, 2025, the Company entered into a Promissory Note with Macquarie Equipment Capital, Inc. for an initial **$50 million loan** (with potential for an additional **$25 million**) to fund the purchase of properties, finance improvements, and acquire equipment for the Polaris Forge 2 campus[162](index=162&type=chunk)[166](index=166&type=chunk) - The aggregate commitment amount for Series G Convertible Preferred Stock was increased to **$450 million** on September 11, 2025, and further to **$590 million** on October 7, 2025, to fund Polaris Forge 1 construction The Floor Price was increased to **$22.00** from **$12.50** on September 25, 2025[168](index=168&type=chunk)[170](index=170&type=chunk)[172](index=172&type=chunk) - On October 6, 2025, an initial closing occurred under the Amended and Restated Unit Purchase Agreement with MIP HPC Holdings, LLC (Macquarie Asset Management affiliate), involving the sale of **$112.5 million** in Preferred Units and the issuance of warrants for **2.4 million common shares** MAM has the right to invest up to an additional **$4.9 billion**[174](index=174&type=chunk)[175](index=175&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including revenue growth, cost increases, and net loss changes **Comparative Results of Operations (in thousands):** | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Change | % Change | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----- | :------- | | Total revenue | $64,216 | $34,849 | $29,367 | 84.2% | | Cost of revenues | $55,606 | $22,743 | $32,863 | 144.5% | | Selling, general and administrative | $29,152 | $10,993 | $18,159 | 165.2% | | Operating (loss) income | $(22,293) | $25,293 | $(47,586) | -188.1% | | Net loss attributable to common stockholders | $(18,502) | $(4,291) | $(14,211) | 331.2% | - Revenue increased by **$31.3 million (95%)** due to **$26.3 million** from HPC Hosting tenant fit-out services and **$5.0 million** from Data Center Hosting performance improvements Related party revenue decreased **100% to zero**[180](index=180&type=chunk)[181](index=181&type=chunk) - Cost of revenues increased by **$32.9 million (144%)** due to **$25.0 million** in HPC Hosting tenant fit-out expenses and **$7.2 million** in Data Center Hosting energy costs[182](index=182&type=chunk) - Selling, general and administrative expense increased by **$18.2 million (165%)**, primarily due to **$16.6 million** in stock-based compensation and **$3.9 million** in personnel expenses[183](index=183&type=chunk)[185](index=185&type=chunk) - Net income from discontinued operations improved by **$29.5 million (146%)** to **$9.3 million**, driven by a **$28.3 million** increase in operating income[188](index=188&type=chunk) [Comparative Segment Data for the Three Months Ended August 31, 2025 and August 31, 2024](index=40&type=section&id=Comparative%20Segment%20Data%20for%20the%20Three%20Months%20Ended%20August%2031%2C%202025%20and%20August%2031%2C%202024) This section compares the financial performance of the Data Center Hosting and HPC Hosting business segments **Segment Profit (Loss) (in thousands):** | Segment | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Change | | :------------------------ | :------------------------------ | :------------------------------ | :----- | | Data Center Hosting Business | $6,035 | $35,851 | $(29,816) | | HPC Hosting Business | $(2,022) | $(2,949) | $927 | | **Total segment profit** | **$4,013** | **$32,902** | **$(28,889)** | - Data Center Hosting Business operating profit decreased by **$29.8 million (83%)** primarily due to a **$24.8 million** gain on classification of held for sale in the prior year and an approximate **17% increase** in power costs[190](index=190&type=chunk) - HPC Hosting Business operating loss decreased by **$0.9 million (31%)** due to revenue generated from tenant fit-out services[191](index=191&type=chunk) [Non-GAAP Measures](index=40&type=section&id=Non-GAAP%20Measures) This section explains the company's use of non-GAAP financial measures to provide additional insights into operational performance - The Company presents non-GAAP financial measures (Adjusted Operating (Loss) Income, Adjusted Net Loss from Continuing Operations Attributable to Common Stockholders, EBITDA, and Adjusted EBITDA) to provide additional information and facilitate comparison of past and present operations by excluding one-time or significant non-cash items[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) - Adjusted Operating (Loss) Income excludes items like stock-based compensation, non-recurring repair expenses, diligence/acquisition/disposition/integration expenses, litigation expenses, loss on abandonment of assets, gain on classification of held for sale, accelerated depreciation/amortization, restructuring expenses, and other non-recurring expenses[195](index=195&type=chunk) - Adjusted EBITDA is defined as EBITDA (earnings before interest, taxes, depreciation, and amortization) further adjusted for stock-based compensation, non-recurring expenses, and other non-recurring items[196](index=196&type=chunk) [Reconciliation of GAAP to Non-GAAP Measures](index=42&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) This table reconciles GAAP financial measures to their non-GAAP counterparts, detailing adjustments for specific items **Reconciliation of GAAP to Non-GAAP Measures (in thousands):** | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | | :---------------------------------------------------------------- | :------------------------------ | :------------------------------ | | Operating (loss) income (GAAP) | $(22,293) | $25,293 | | **Adjusted operating (loss) income (Non-GAAP)** | **$(3,616)** | **$2,164** | | Net (loss) income from continuing operations attributable to common stockholders (GAAP) | $(27,823) | $15,868 | | **Adjusted net loss from continuing operations attributable to common stockholders (Non-GAAP)** | **$(7,570)** | **$(795)** | | EBITDA (Non-GAAP) | $(19,716) | $22,970 | | **Adjusted EBITDA (Non-GAAP)** | **$537** | **$6,262** | - Key adjustments for August 31, 2025, include **$14.4 million** in stock-based compensation and **$1.8 million** in loss on abandonment of assets For August 31, 2024, key adjustments included a **$(24.8) million** gain on classification of held for sale and a **$6.4 million** loss on change in fair value of debt[198](index=198&type=chunk)[199](index=199&type=chunk) [Sources of Liquidity](index=43&type=section&id=Sources%20of%20Liquidity) This section discusses the company's cash position, historical funding sources, and management's assessment of future liquidity - As of August 31, 2025, the Company had **$73.9 million** in unrestricted cash and cash equivalents and **$2.9 million** in funds restricted for construction expenditures[200](index=200&type=chunk) - Historically, the Company has relied on equity and debt financings, including term loans, common and preferred stock issuances, convertible promissory notes, and debt facilities, to fund operations[200](index=200&type=chunk) - Management believes existing cash balances, cash flows from operations, existing debt facilities, and access to capital markets will provide sufficient liquidity to meet debt obligations, working capital needs, and planned capital expenditures for at least the next twelve months[201](index=201&type=chunk) [Recent Financing Activities](index=43&type=section&id=Recent%20Financing%20Activities) This section details the company's recent equity and debt financing efforts to support its growth and operations - Under the June 2025 At-the-Market Sales Agreement, the Company issued and sold approximately **15.3 million shares** of common stock for gross proceeds of approximately **$196.4 million**[203](index=203&type=chunk) - The aggregate commitment amount for Series G Preferred Stock was increased from **$150 million to $300 million** on August 14, 2025 During the three months ended August 31, 2025, the Company issued and sold **180,000 shares** of Series G Preferred Stock for **$175.0 million**, and **258,000 shares** were converted into approximately **28.2 million common shares**[205](index=205&type=chunk)[207](index=207&type=chunk) - The Company received **$39.4 million** in payments for future data center hosting services during the three months ended August 31, 2025[208](index=208&type=chunk) [Material Contractual Obligations](index=44&type=section&id=Material%20Contractual%20Obligations) This table outlines the company's significant contractual commitments, including debt, leases, and power agreements **Material Contractual Obligations as of August 31, 2025 (in thousands):** | Obligation Type | Total | Remainder of FY 2026 | FY 2027 | FY 2028 | FY 2029 | FY 2030 | Thereafter | | :------------------------ | :---- | :------------------- | :------ | :------ | :------ | :------ | :--------- | | Debt obligations | $867,020 | $7,867 | $386,193 | $7,715 | $3,209 | $35 | $462,001 | | Interest on debt obligations | $94,346 | $13,934 | $42,031 | $13,153 | $12,680 | $12,548 | $0 | | Operating lease obligations | $965 | $573 | $365 | $27 | $0 | $0 | $0 | | Financing lease obligations | $12,116 | $12,101 | $14 | $1 | $0 | $0 | $0 | | Power commitments | $40,120 | $20,942 | $19,178 | $0 | $0 | $0 | $0 | | Preferred share dividends | $36,237 | $4,727 | $6,302 | $6,302 | $6,302 | $6,302 | $6,302 | [Funding Requirements](index=44&type=section&id=Funding%20Requirements) This section addresses the company's anticipated funding needs, potential risks, and expected increases in operating and capital expenditures - The Company expects to have sufficient liquidity to support ongoing operations and meet working capital needs for at least the next 12 months, relying on cash on hand, customer payments, debt financing, and public capital markets[211](index=211&type=chunk) - There is a risk that the Company may need to raise additional funds sooner than expected if available capital resources are used more quickly, and such financing may not be available on favorable terms or at all[211](index=211&type=chunk) - General and administrative expenses and operating expenditures are expected to increase with business expansion, and significant investments in property and equipment will continue throughout fiscal year 2026 for HPC hosting facilities[212](index=212&type=chunk) [Summary of Cash Flows](index=45&type=section&id=Summary%20of%20Cash%20Flows) This table summarizes the company's cash flow activities from operations, investing, and financing, highlighting key changes **Summary of Cash Flows (in thousands):** | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Change | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----- | | Net cash used in operating activities | $(82,023) | $(75,890) | $(6,133) | | Net cash used in investing activities | $(249,420) | $(32,606) | $(216,814) | | Net cash provided by financing activities | $322,236 | $163,365 | $158,871 | | Net (decrease) increase in cash and cash equivalents | $(9,207) | $54,869 | $(64,076) | | Cash, cash equivalents, and restricted cash from continuing operations | $114,104 | $86,548 | $27,556 | - The increase in cash used in operating activities was primarily driven by an increase in accounts receivable due to tenant fit-out services revenue and a decrease in depreciation and amortization[216](index=216&type=chunk) - Net cash used in investing activities increased significantly by **$216.8 million**, mainly due to a **$194.6 million** increase in investments in property and equipment for the construction of Polaris Forge 1 data center facilities[217](index=217&type=chunk) - Net cash provided by financing activities increased by **$158.9 million**, primarily due to a **$274.0 million** increase in net proceeds from common and preferred stock offerings[218](index=218&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes in the company's exposure to market risk from the information provided in its Annual Report on Form 10-K for the fiscal year ended May 31, 2025 - No material changes in the Company's exposure to market risk have occurred since the filing of the Annual Report on Form 10-K for the fiscal year ended May 31, 2025[219](index=219&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of August 31, 2025 A previously identified material weakness in accounting for complex financial instruments was remediated during the quarter through new controls, additional personnel, and third-party consulting [Management's Evaluation of Disclosure Controls and Procedures](index=46&type=section&id=Management's%20Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and the remediation of a material weakness - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level as of August 31, 2025[220](index=220&type=chunk) - A previously identified material weakness in the design of internal controls around the accounting and assessment of complex financial instruments was remediated during the quarter ended August 31, 2025[221](index=221&type=chunk)[222](index=222&type=chunk) - Remediation measures included hiring additional qualified accounting personnel and engaging a third-party consultant to assist with analyzing and documenting complex financial instruments[222](index=222&type=chunk) [Changes in Internal Control over Financial Reporting](index=46&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section confirms that there were no material changes to internal control over financial reporting, aside from remediation efforts - There were no changes in internal control over financial reporting, other than the remediation steps for the material weakness, that materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting during the three months ended August 31, 2025[223](index=223&type=chunk) [Part II - Other Information](index=47&type=section&id=Part%20II%20-%20Other%20Information) This section covers legal proceedings, risk factors, equity sales, and other disclosures relevant to the company's operations [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a securities class action lawsuit, which is currently stayed pending a motion to dismiss, and a derivative lawsuit, which was dismissed without prejudice The potential loss from the securities lawsuit is unestimable but could be material - The Company is a defendant in a putative securities class action lawsuit (McConnell v. Applied Digital Corporation, et al.) filed in August 2023, alleging false or misleading statements The lawsuit is currently stayed pending resolution of a motion to dismiss[227](index=227&type=chunk) - A derivative lawsuit (Weich v. Cummins, et al.) filed in November 2023 was dismissed without prejudice on June 5, 2024, for failure to plead demand futility or a claim for breach of fiduciary duty[229](index=229&type=chunk)[230](index=230&type=chunk) - The Company is unable to estimate a range of loss for the Securities Lawsuit, but an unfavorable outcome could be material to its results of operations[228](index=228&type=chunk)[231](index=231&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) As of the filing date, there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended May 31, 2025 - There have been no material changes to the risk factors associated with the Company's business previously disclosed in its Annual Report on Form 10-K for the fiscal year ended May 31, 2025[232](index=232&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There are no unregistered sales of equity securities or use of proceeds to report for the period - None[233](index=233&type=chunk) [Item 3. Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the Company for the reporting period - Not applicable[234](index=234&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company for the reporting period - Not applicable[235](index=235&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) The company entered into a third amendment to the Preferred Equity Purchase Agreement on October 7, 2025, increasing the aggregate commitment for Series G Preferred Stock from $450.0 million to $590.0 million to fund Polaris Forge 1 construction - On October 7, 2025, the Company entered into the third amendment to the Preferred Equity Purchase Agreement, increasing the aggregate commitment amount of Series G Preferred Stock from **$450.0 million to $590.0 million**[236](index=236&type=chunk)[237](index=237&type=chunk) - This increase in capital access is intended to fund the continued construction and development of the Polaris Forge 1 data center campus in Ellendale, North Dakota[236](index=236&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including amendments to preferred stock designations, sales agreements, employment agreements, data center leases, and certifications - Exhibits include amendments to the Certificate of Designations for Series G Convertible Preferred Stock, the Sales Agreement with Northland Securities and Wells Fargo, the Employment Agreement with Jason Zhang, the Building 4 Datacenter Lease with CoreWeave, the Third Amendment to Preferred Equity Purchase Agreement, and CEO/CFO certifications[242](index=242&type=chunk) [Signatures](index=50&type=section&id=Signatures) The report is signed by Wes Cummins, Chief Executive Officer, and Saidal Mohmand, Chief Financial Officer, on October 9, 2025, certifying its submission - The report was signed by Wes Cummins, Chief Executive Officer, and Saidal Mohmand, Chief Financial Officer, on October 9, 2025[245](index=245&type=chunk)[246](index=246&type=chunk)

Preliminary Third Quarter 2025 Results Overview [Summary of Financial Performance](index=1&type=section&id=Summary%20of%20Financial%20Performance) USANA reported preliminary Q3 2025 net sales of $214 million, but a net loss of ($6.5) million and diluted EPS of ($0.36), with a 471% effective tax rate Q3 2025 Preliminary Financial Highlights vs Q3 2024 | Metric | Q3 2025 Preliminary | Q3 2024 | Change (YoY) | | :------------------------ | :-------------------- | :-------------- | :----------- | | Net sales | $214 million | $200 million | +$14 million | | Earnings from operations | $1.2 million | $15.6 million | -$14.4 million | | Operating Margin | 0.6% | 7.8% | -7.2% pts | | Net (loss) earnings | ($6.5) million | $10.6 million | -$17.1 million | | Diluted EPS | ($0.36) | $0.56 | -$0.92 | | Effective income tax rate | 471% | 43% | +428% pts | | Adjusted Diluted EPS | ($0.15) | $0.56 | -$0.71 | | Adjusted EBITDA | $13.8 million | $24.6 million | -$10.8 million | - The effective income tax rate for Q3 2025 significantly increased to **471%** from **43%** in Q3 2024, primarily due to lower than expected earnings coupled with the concentration of operating and administrative expenses in the United States[4](index=4&type=chunk)[5](index=5&type=chunk)[6](index=6&type=chunk) [Management Commentary on Performance and Strategy](index=1&type=section&id=Management%20Commentary%20on%20Performance%20and%20Strategy) Management noted Q3 operating results were below expectations due to softer sales and Brand Partner productivity, but remains confident in long-term strategy - Third quarter operating results came in below expectations, primarily due to softer-than-expected sales and Brand Partner productivity during the rollout of the enhanced Brand Partner compensation plan, and softer sales for Hiya due to lower customer acquisition rates[2](index=2&type=chunk) - Despite short-term challenges, the enhanced compensation plan is viewed as a strategic move for long-term success, with encouraging Brand Partner response and recent pickup in sales activity. Hiya is still expected to generate **double-digit sales growth for 2025**[2](index=2&type=chunk)[3](index=3&type=chunk) [CFO's Commentary and Outlook](index=2&type=section&id=CFO%27s%20Commentary%20and%20Outlook) CFO highlighted Q3 profitability challenges from softer sales and increased tax rate, expecting full-year sales at the lower end of outlook and EPS below range - Profitability challenges in Q3 included softer sales, meaningful investments in the enhanced Brand Partner compensation plan, and a disproportionate increase in the estimated annual effective income tax rate from **45% to 65%** (**471% for Q3 2025**)[4](index=4&type=chunk) - For the full year, sales are expected to be at or near the lower end of the previously issued outlook range, and earnings per share are expected to be below the range, starting from a lower base of active customer counts in Q4. The company plans to align costs with operating performance to achieve a meaningfully lower tax rate in future years[5](index=5&type=chunk) [Upcoming Earnings Release and Conference Call](index=3&type=section&id=Upcoming%20Earnings%20Release%20and%20Conference%20Call) Final Q3 results are scheduled for release on October 21, 2025, with a conference call for analysts on October 22, 2025 - Final results for the third quarter are expected to be released after the close of market on **Tuesday, October 21, 2025**[7](index=7&type=chunk) - A conference call to discuss the announcement with analysts and institutional investors will be held on **Wednesday, October 22, 2025, at 11:00 a.m. Eastern Time**[7](index=7&type=chunk) Non-GAAP Financial Measures [Definition and Purpose](index=3&type=section&id=Definition%20and%20Purpose) This section defines non-GAAP measures like Adjusted EBITDA and Adjusted diluted EPS, used by management for internal assessment but not as GAAP substitutes - Adjusted EBITDA and Adjusted diluted EPS are non-GAAP financial measures used by management to internally reflect how the Company measures the business[9](index=9&type=chunk)[10](index=10&type=chunk)[15](index=15&type=chunk) - Non-GAAP financial measures have limitations, lack standardized meaning, and should not be considered in isolation from, or as a substitute for, GAAP financial information[16](index=16&type=chunk) [Reconciliation of Net (Loss) Earnings to Adjusted EBITDA](index=5&type=section&id=Reconciliation%20of%20Net%20%28Loss%29%20Earnings%20to%20Adjusted%20EBITDA) This section provides a reconciliation of GAAP Net (loss) earnings to Adjusted EBITDA, detailing adjustments for taxes, interest, depreciation, amortization, and acquisition costs Reconciliation of Net (Loss) Earnings (GAAP) to Adjusted EBITDA (non-GAAP) (in thousands USD) | | Quarter Ended | | Nine Months Ended | | | --- | --- | --- | --- | --- | | | Q3 2025 | Q3 2024 | YTD Sep-25 | YTD Sep-24 | | | September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | | Net (loss) earnings attributable to USANA (GAAP) | $ (6,522) | $ 10,607 | $ 12,535 | $ 37,576 | | Net (loss) earnings attributable to noncontrolling interest | (140) | - | 537 | - | | Net (loss) earnings | $ (6,662) | $ 10,607 | $ 13,072 | $ 37,576 | | Adjustments: | | | | | | Income taxes | 8,456 | 8,001 | 24,278 | 28,346 | | Interest (income) expense | (529) | (3,093) | (1,201) | (8,429) | | Depreciation and amortization | 5,112 | 5,559 | 16,050 | 16,345 | | Amortization of intangible assets - Hiya | 4,455 | - | 13,366 | - | | Earnings before interest, taxes, depreciation, and amortization (EBITDA) | 10,832 | 21,074 | 65,565 | 73,838 | | Add EBITDA adjustments: | | | | | | Non-cash share-based compensation | 3,576 | 3,542 | 10,078 | 10,945 | | Transaction, integration and transition costs - Hiya | 179 | - | 871 | - | | Inventory step-up - Hiya | - | - | 1,126 | - | | Consolidated adjusted EBITDA | 14,587 | 24,616 | 77,640 | 84,783 | | Less: Adjusted EBITDA attributable to noncontrolling interest | (804) | - | (3,604) | - | | Adjusted EBITDA attributable to USANA | $ 13,783 | $ 24,616 | $ 74,036 | $ 84,783 | [Reconciliation of Diluted (Loss) Earnings Per Share to Adjusted Diluted (Loss) Earnings Per Share](index=6&type=section&id=Reconciliation%20of%20Diluted%20%28Loss%29%20Earnings%20Per%20Share%20to%20Adjusted%20Diluted%20%28Loss%29%20Earnings%20Per%20Share) This section reconciles GAAP Diluted (Loss) EPS to Adjusted Diluted (Loss) EPS, detailing adjustments for Hiya acquisition costs, intangible asset amortization, and tax effects Reconciliation of Diluted (Loss) Earnings Per Share (GAAP) to Adjusted Diluted (Loss) Earnings Per Share (non-GAAP) (in thousands USD, except per share data) | | Quarter Ended | | | Nine Months Ended | | --- | --- | --- | --- | --- | | | September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | | Net (loss) earnings attributable to USANA (GAAP) | $ (6,522) | $ 10,607 | $ 12,535 | $ 37,576 | | Earnings (loss) per common share - Diluted (GAAP) | $ (0.36) | $ 0.56 | $ 0.67 | $ 1.96 | | Weighted average common shares outstanding - Diluted | 18,293 | 19,083 | 18,671 | 19,181 | | Adjustment to net (loss) earnings: | | | | | | Transaction, integration and transition costs - Hiya | $ 179 | $ - | $ 871 | $ - | | Inventory step-up - Hiya | - | - | 1,126 | - | | Amortization of intangible assets - Hiya | 4,455 | - | 13,366 | - | | Adjustments to net (loss) earnings attributable to noncontrolling interest | (941) | - | (3,066) | - | | Income tax effect of adjustments to net (loss) earnings | - | - | (4) | - | | Adjusted net (loss) earnings attributable to USANA | $ (2,829) | $ 10,607 | $ 24,828 | $ 37,576 | | Adjusted (loss) earnings per common share - Diluted | $ (0.15) | $ 0.56 | $ 1.33 | $ 1.96 | | Weighted average common shares outstanding - Diluted | 18,293 | 19,083 | 18,671 | 19,181 | Company Information [About USANA Health Sciences](index=8&type=section&id=About%20USANA%20Health%20Sciences) USANA develops and manufactures nutritional supplements and personal care products, sold directly, and holds a **78.8%** stake in Hiya Health Products - USANA develops and manufactures high-quality nutritional supplements, functional foods, and personal care products, sold directly to Brand Partners and Preferred Customers in various global markets[21](index=21&type=chunk) - USANA owns a **78.8%** controlling ownership stake in Hiya Health Products, a children's health and wellness company[21](index=21&type=chunk) [Safe Harbor Statement](index=7&type=section&id=Safe%20Harbor%20Statement) This statement clarifies that the press release contains forward-looking statements subject to risks and uncertainties, including economic conditions and regulatory changes - The press release contains forward-looking statements based on current plans, expectations, estimates, forecasts, and projections, which involve a number of risks and uncertainties that could cause actual results to differ materially[19](index=19&type=chunk) - Key risks include global economic conditions, reliance on independent Brand Partners, effectiveness of compensation plans, governmental regulation, geopolitical relations, data privacy, and the integration of the Hiya acquisition[19](index=19&type=chunk)[20](index=20&type=chunk) [Investor and Media Contacts](index=8&type=section&id=Investor%20and%20Media%20Contacts) Contact information for investor relations and media inquiries is provided - Investor Relations Contact: **Andrew Masuda**, (801) 954-7201, investor.relations@usanainc.com[22](index=22&type=chunk) - Media Contact: **Sarah Searle**, (801) 954-7626, media@usanainc.com[22](index=22&type=chunk)

410 N. Michigan Ave. Chicago, Illinois 60611, U.S.A News Announcement For Immediate Release Exhibit 99.1 Oil-Dri Delivers Strongest Annual Financial Results in History, Bolstered by Solid Fourth Quarter Performance CHICAGO-(October 9, 2025) - Oil-Dri Corporation of America (NYSE: ODC), producer and marketer of sorbent mineral products, today announced results for its fourth quarter and fiscal year 2025. | | | | Fourth Quarter | | | | Year to Date | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended July 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _____ to _____ Commission File Number 001-12622 OIL-DRI CORPORATION OF AMERICA (Exact name of the registrant as specified in its charter) The registrant's telephone number, incl ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 9, 2025 OrthoPediatrics Corp. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation) 001-38242 26-1761833 (Commission File Number) (I.R.S. Employer Identification Number) ☐ Written communications pursuant to Rule 425 under the Secu ...

[Executive Summary](index=1&type=section&id=Executive%20Summary) Applied Digital achieved substantial revenue growth in Q1 2026, driven by HPC hosting and data center services, while securing a major CoreWeave lease and initiating Polaris Forge 2 construction for future AI infrastructure expansion [Q1 2026 Performance Overview](index=1&type=section&id=Q1%202026%20Performance%20Overview) Applied Digital reported **84%** revenue growth in Q1 2026, primarily from HPC hosting, alongside a net loss, while securing a **400 MW** CoreWeave lease and breaking ground on **300 MW** Polaris Forge 2 | Metric | Q1 2026 (USD) | Q1 2025 (USD) | Change (%) | | :--------------------------------------- | :------------ | :------------ | :--------- | | Revenues | $64.2 million | $34.8 million | +84% | | Net loss attributable to common stockholders | $(27.8) million | $15.9 million | -275% | | Net loss per basic and diluted share | $(0.11) | $0.11 | -200% | | Adjusted net loss attributable to common stockholders | $(7.6) million | $(0.8) million | -850% | | Adjusted EBITDA | $0.5 million | $6.3 million | -92% | - Secured an additional **150 MW** lease with CoreWeave for Polaris Forge 1, bringing the campus to full **400 MW** capacity under contract and securing approximately **$11 billion** in prospective lease revenue over **15 years**[6](index=6&type=chunk)[7](index=7&type=chunk) - Drew an initial **$112.5 million** from a **$5 billion** preferred equity facility with Macquarie Asset Management to fund Polaris Forge 1 completion and reduce future equity funding requirements[7](index=7&type=chunk) - Broke ground on Polaris Forge 2, a **300 MW** IT load AI Factory campus near Harwood, North Dakota, with initial **200 MW** expected online in **2026**[7](index=7&type=chunk) [Company Overview](index=5&type=section&id=About%20Applied%20Digital) Applied Digital specializes in designing, building, and operating high-performance, sustainably engineered data centers for AI, cloud, networking, and blockchain workloads [Company Profile](index=5&type=section&id=Company%20Profile) Applied Digital Corporation designs, builds, and operates high-performance, sustainably engineered data centers and colocation services for artificial intelligence, cloud, networking, and blockchain workloads, recognized for its hyperscale expertise, proprietary waterless cooling, and rapid deployment capabilities - Applied Digital designs, builds, and operates high-performance, sustainably engineered data centers and colocation services for AI, cloud, networking, and blockchain workloads[33](index=33&type=chunk) - The company combines hyperscale expertise, proprietary waterless cooling, and rapid deployment capabilities to deliver secure, scalable compute[33](index=33&type=chunk) - Awarded 'Best Data Center in the Americas 2025' by Datacloud[33](index=33&type=chunk) [Fiscal First Quarter 2026 Highlights](index=1&type=section&id=Fiscal%20First%20Quarter%202026%20Continuing%20Operations%20Financial%20Highlights) This section details Applied Digital's key financial and operational achievements during the first fiscal quarter of 2026, including revenue growth, strategic leases, and infrastructure expansion [Key Financial Metrics](index=1&type=section&id=Key%20Financial%20Metrics) The fiscal first quarter 2026 saw an **84%** increase in revenues year-over-year, primarily driven by HPC hosting tenant fit-out services, despite reporting a significant net loss and decreased Adjusted EBITDA | Metric | Q1 2026 (USD) | Q1 2025 (USD) | Change (%) | | :--------------------------------------- | :------------ | :------------ | :--------- | | Revenues | $64.2 million | $34.8 million | +84% | | Net loss attributable to common stockholders | $(27.8) million | $15.9 million | -275% | | Net loss per basic and diluted share | $(0.11) | $0.11 | -200% | | Adjusted net loss attributable to common stockholders | $(7.6) million | $(0.8) million | -850% | | Adjusted net loss per diluted share | $(0.03) | $(0.01) | -200% | | Adjusted EBITDA | $0.5 million | $6.3 million | -92% | [Recent Operational Highlights](index=1&type=section&id=Recent%20Highlights) Applied Digital achieved significant operational milestones, including fully leasing its Polaris Forge 1 campus with CoreWeave, securing substantial future revenue, and commencing construction on its second major AI Factory campus, Polaris Forge 2 - Finalized a new lease agreement with CoreWeave for an additional **150 MW** at Polaris Forge 1, making the campus fully leased and bringing total anticipated contracted lease revenue for Polaris Forge 1 to approximately **$11 billion**[7](index=7&type=chunk) - Drew an initial **$112.5 million** from the **$5 billion** preferred equity facility with Macquarie Asset Management to fund Polaris Forge 1 completion and reduce future equity funding requirements[7](index=7&type=chunk) - Broke ground on Polaris Forge 2, a **300 MW** IT load AI Factory campus, with the initial **200 MW** expected to come online in **2026**[7](index=7&type=chunk) - Raised an additional **$200 million** from an expanded offering of Series G Preferred Stock[7](index=7&type=chunk) [Management Commentary and Strategic Outlook](index=1&type=section&id=Management%20Commentary) Management discusses the validation of Applied Digital's platform through strategic partnerships, capital strategy, and future vision for AI infrastructure expansion and financial targets [Operational Progress and Partnerships](index=1&type=section&id=Operational%20Progress%20and%20Partnerships) Management highlighted the validation of their platform through the third CoreWeave lease, positioning Applied Digital as a strategic partner to major technology companies, with potential for significant expansion at Polaris Forge 1 and 2 - The third lease with CoreWeave validates Applied Digital's platform and execution, positioning it as a trusted strategic partner to the world's largest technology companies[9](index=9&type=chunk) - Polaris Forge 1 campus has the potential to expand beyond **1 gigawatt (GW)** starting in **2028-2030**[8](index=8&type=chunk) - Polaris Forge 2 could ultimately scale to **1 GW**, with advanced discussions underway with an investment-grade hyperscaler for a potential **200 MW** initial lease[9](index=9&type=chunk) [Capital Strategy and Expansion](index=2&type=section&id=Capital%20Strategy%20and%20Expansion) The company focuses on efficient capital securing, building repeatable financing structures, and scaling development across the U.S., while committing to minimizing environmental impact through advanced cooling designs - Team remains focused on securing capital at the lowest possible cost and building repeatable financing structures to scale development across the United States[11](index=11&type=chunk) - Built and funded over **$1.6 billion** in property and equipment[11](index=11&type=chunk) - Secured a structure with Macquarie Asset Management to recycle a portion of equity invested in Polaris Forge 1 into future developments[12](index=12&type=chunk) - Committed to minimizing environmental impact through advanced design innovations, including closed-loop, direct-to-chip liquid-cooling that lowers water use[13](index=13&type=chunk) [Future Vision and Targets](index=2&type=section&id=Future%20Vision%20and%20Targets) Applied Digital is positioned to capitalize on growing demand for advanced infrastructure with a multi-GW pipeline, projecting significant annualized Net Operating Income (NOI) and aiming for a **$1 billion** NOI target within five years - Poised to capitalize on a generational opportunity with a multi-GW pipeline, active and increasing hyperscaler interest, and long-term contracted visibility[14](index=14&type=chunk) - Projected annualized NOI run rate of approximately **$500 million** once Polaris Forge 1 is fully operational[15](index=15&type=chunk) - Firmly on the path toward a **$1 billion** NOI target within the next five years[15](index=15&type=chunk) - Positioned to become a leading force in AI infrastructure and on track to evolve into the next AI-focused data center REIT[15](index=15&type=chunk) [Business Segment Updates](index=3&type=section&id=HPC%20Hosting%20Update) This section provides updates on Applied Digital's High-Performance Computing (HPC) Hosting, Data Center Hosting, and Cloud Services business segments [HPC Hosting Business](index=3&type=section&id=HPC%20Hosting%20Business) The HPC Hosting Business is rapidly advancing, with the first **100 MW** facility at Polaris Forge 1 on track for Q4 2025 operation, contributing **$26 million** in revenue this quarter, and planning ultra-low-cost, liquid-cooled infrastructure - First **100 MW** facility at Polaris Forge 1 remains on track to be operational in calendar Q4 2025, with technical fit-out activities underway[16](index=16&type=chunk) | Metric | Q1 2026 (USD) | | :-------------------------------- | :------------ | | Revenue from tenant fit-out services | $26 million | - Facilities are designed to deliver ultra-low-cost, highly efficient liquid-cooled infrastructure, featuring a closed-loop, direct-to-chip liquid cooling system with an expected Design PUE of **1.18** and near-zero water consumption[17](index=17&type=chunk) - Estimated **100 MW** customer could save up to **$2.7 billion** over **30 years** compared to traditional data centers due to efficient design and low-cost energy[17](index=17&type=chunk) [Data Center Hosting Business](index=3&type=section&id=Data%20Center%20Hosting%20Update) Applied Digital's Data Center Hosting Business is operating at full capacity across its Jamestown (**106 MW**) and Ellendale (**180 MW**) facilities, generating **$37.9 million** in revenue, an increase of **9%** year-over-year, driven by increased online capacity and robust demand - **106 MW** facility in Jamestown, N.D., and **180 MW** facility in Ellendale, N.D., are operating at full capacity as of August 31, 2025[18](index=18&type=chunk) | Metric | Q1 2026 (USD) | Q1 2025 (USD) | Change (%) | | :----------------------- | :------------ | :------------ | :--------- | | Revenue from Data Center Hosting | $37.9 million | $34.8 million | +9% | - Growth was primarily driven by increased capacity online across the Company's Data Center Hosting facilities[19](index=19&type=chunk) - Demand for these services remains robust, with Bitcoin prices hitting all-time highs[20](index=20&type=chunk) [Cloud Services Business](index=3&type=section&id=Cloud%20Services%20Business%20Update) The strategic review for the Cloud Services Business, initiated in the prior fiscal year, is still ongoing, with updates to shareholders to be provided once more information becomes available - Strategic options for the Cloud Services Business are under review by the Board of Directors, and the process remains ongoing[21](index=21&type=chunk) [Financial Results from Continuing Operations](index=3&type=section&id=Financial%20Results%20from%20Continuing%20Operations%20for%20Fiscal%20First%20Quarter%202026) This section presents Applied Digital's detailed financial performance for Q1 2026, covering operating results, net loss, non-GAAP measures, and a balance sheet snapshot [Operating Results Overview](index=3&type=section&id=Operating%20Results) Total revenues for Q1 2026 increased by **84%** year-over-year, largely due to HPC hosting tenant fit-out services and improvements in the Data Center Business, despite significant increases in cost of revenues and selling, general and administrative expenses leading to an operating loss | Metric | Q1 2026 (USD) | Q1 2025 (USD) | Change (%) | | :-------------------------------- | :------------ | :------------ | :--------- | | Total revenues | $64.2 million | $34.8 million | +84% | | Cost of revenues | $55.6 million | $22.7 million | +144% | | Selling, general and administrative expenses | $29.2 million | $11.0 million | +165% | | Loss on abandonment of assets | $1.8 million | $0.6 million | +179% | | Interest expense, net | $3.9 million | $3.0 million | +33% | - Revenue increase primarily due to **$26.3 million** from HPC Hosting Business tenant fit-out services and **$5.0 million** from Data Center Business performance improvements[22](index=22&type=chunk) - Increase in SG&A expenses driven by **$16.6 million** in stock-based compensation due to accelerated vesting and **$3.9 million** in personnel expenses[24](index=24&type=chunk) [Net Loss and EPS](index=4&type=section&id=Net%20loss%20attributable%20to%20common%20stockholders) The company reported a net loss attributable to common stockholders of **$27.8 million**, or **$0.11** per share, for Q1 2026, a significant decline from a net income in the prior year comparable period | Metric | Q1 2026 (USD) | Q1 2025 (USD) | | :--------------------------------------- | :------------ | :------------ | | Net loss attributable to common stockholders | $(27.8) million | $15.9 million | | Net loss per basic and diluted share | $(0.11) | $0.11 | [Non-GAAP Financial Measures](index=4&type=section&id=Adjusted%20net%20loss%20attributable%20to%20common%20stockholders) Applied Digital's non-GAAP financial measures show an adjusted net loss attributable to common stockholders of **$7.6 million**, or **$0.03** per diluted share, and an Adjusted EBITDA of **$0.5 million** for Q1 2026, both indicating a decrease in profitability compared to the prior year | Metric | Q1 2026 (USD) | Q1 2025 (USD) | | :--------------------------------------------------- | :------------ | :------------ | | Adjusted net loss attributable to common stockholders | $(7.6) million | $(0.8) million | | Adjusted net loss per diluted share | $(0.03) | $(0.01) | | Adjusted EBITDA | $0.5 million | $6.3 million | [Balance Sheet Snapshot](index=4&type=section&id=Balance%20Sheet) As of August 31, 2025, Applied Digital held **$114.1 million** in cash, cash equivalents, and restricted cash, with total debt amounting to **$687.3 million**, excluding **$362.5 million** in proceeds from subsequent financings | Metric | As of August 31, 2025 (USD) | | :--------------------------------------- | :-------------------------- | | Cash, cash equivalents, and restricted cash | $114.1 million | | Total debt | $687.3 million | - Does not include **$362.5 million** in proceeds from financings that occurred subsequent to quarter end[30](index=30&type=chunk) [Condensed Consolidated Financial Statements](index=7&type=section&id=APPLIED%20DIGITAL%20CORPORATION%20AND%20SUBSIDIARIES) This section presents the unaudited condensed consolidated balance sheets, statements of operations, and statements of cash flows for Applied Digital [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) The unaudited condensed consolidated balance sheets show a significant increase in total assets from **$1,870.1 million** at May 31, 2025, to **$2,399.0 million** at August 31, 2025, primarily driven by increases in property and equipment, cash, and prepaid expenses, with total liabilities also increasing | ASSETS (in thousands) | August 31, 2025 | May 31, 2025 | | :------------------------------------ | :-------------- | :----------- | | Cash and cash equivalents | $73,911 | $41,552 | | Restricted cash | $40,193 | $72,368 | | Accounts receivable | $29,134 | $3,043 | | Prepaid expenses and other current assets | $188,491 | $9,430 | | Total current assets | $641,735 | $430,593 | | Property and equipment, net | $1,461,775 | $1,206,341 | | TOTAL ASSETS | $2,398,995 | $1,870,090 | | LIABILITIES (in thousands) | | | | Accounts payable | $172,823 | $247,528 | | Accrued liabilities | $182,948 | $29,549 | | Current portion of debt | $382,056 | $10,331 | | Total current liabilities | $985,493 | $558,144 | | Long-term debt | $305,283 | $677,825 | | Total liabilities | $1,291,007 | $1,236,365 | | Stockholders' equity | $1,044,260 | $497,688 | | TOTAL LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS' EQUITY | $2,398,995 | $1,870,090 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) Total revenue increased to **$64.2 million** in Q1 2026 from **$34.8 million** in Q1 2025, but significantly rising total costs and expenses led to an operating loss of **$22.3 million** and a net loss attributable to common stockholders of **$18.5 million** | Metric (in thousands) | Three Months Ended August 31, 2025 | Three Months Ended August 31, 2024 | | :------------------------------------------------- | :--------------------------------- | :--------------------------------- | | Total revenue | $64,216 | $34,849 | | Cost of revenues | $55,606 | $22,743 | | Selling, general and administrative | $29,152 | $10,993 | | Total costs and expenses | $86,509 | $9,556 | | Operating (loss) income | $(22,293) | $25,293 | | Net (loss) income before income tax expenses | $(26,239) | $15,912 | | Net loss attributable to common stockholders | $(18,502) | $(4,291) | | Basic and diluted net (loss) income per share (Continuing operations) | $(0.11) | $0.11 | | Basic and diluted net loss per share | $(0.07) | $(0.03) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Cash flow from operating activities resulted in a net use of **$82.0 million** in Q1 2026, with investing activities using **$249.4 million**, while financing activities provided **$322.2 million**, driven by proceeds from common and preferred stock issuance | Cash Flow Activity (in thousands) | Three Months Ended August 31, 2025 | Three Months Ended August 31, 2024 | | :---------------------------------------- | :--------------------------------- | :--------------------------------- | | CASH FLOW USED IN OPERATING ACTIVITIES | $(82,023) | $(75,890) | | CASH FLOW USED IN INVESTING ACTIVITIES | $(249,420) | $(32,606) | | CASH FLOW PROVIDED BY FINANCING ACTIVITIES | $322,236 | $163,365 | | NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | $(9,207) | $54,869 | | CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD | $114,111 | $86,557 | | Supplemental Non-Cash Activities (in thousands) | Three Months Ended August 31, 2025 | Three Months Ended August 31, 2024 | | :---------------------------------------------- | :--------------------------------- | :--------------------------------- | | Conversion of preferred stock to common stock | $242,480 | — | | Issuance of warrants, at fair value | $121,204 | $36,479 | | Property and equipment in accounts payable and accrued liabilities | $132,113 | $116,440 | [Non-GAAP Financial Measures and Reconciliation](index=5&type=section&id=Use%20and%20Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section explains and reconciles Applied Digital's non-GAAP financial measures, providing additional insights into operational performance by excluding specific non-cash or one-time items [Explanation of Non-GAAP Measures](index=5&type=section&id=Explanation%20of%20Non-GAAP%20Measures) Applied Digital uses non-GAAP financial measures like Adjusted Operating (Loss) Income, Adjusted Net Loss, EBITDA, and Adjusted EBITDA to provide additional insight into its operational performance by excluding one-time or significant non-cash items - Non-GAAP measures are provided to disclose additional information, facilitate comparison of past and present operations, and provide perspective on results absent one-time or significant non-cash items[35](index=35&type=chunk) - Adjusted Operating (Loss) Income excludes stock-based compensation, non-recurring repair expenses, diligence, acquisition, disposition and integration expenses, litigation expenses, loss on abandonment of assets, and other non-recurring expenses[38](index=38&type=chunk) - Adjusted EBITDA is defined as EBITDA adjusted for stock-based compensation, non-recurring repair expenses, diligence, acquisition, disposition and integration expenses, litigation expenses, gain on classification of held for sale, loss on abandonment of assets, loss on change in fair value of debt, preferred dividends, restructuring expenses and other non-recurring expenses[39](index=39&type=chunk) [Reconciliation of GAAP to Non-GAAP Measures](index=11&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures%20(Unaudited)) The reconciliation tables detail adjustments made to GAAP figures to arrive at non-GAAP measures, with significant adjustments for Q1 2026 including stock-based compensation and loss on abandonment of assets, transforming GAAP operating and net losses | Reconciliation Item (in thousands) | Q1 2026 (USD) | Q1 2025 (USD) | | :------------------------------------------------- | :------------ | :------------ | | Operating (loss) income (GAAP) | $(22,293) | $25,293 | | Stock-based compensation | $14,446 | $(2,383) | | Loss on abandonment of assets | $1,751 | $628 | | Adjusted operating (loss) income (Non-GAAP) | $(3,616) | $2,164 | | Net (loss) income from continuing operations attributable to common stockholders (GAAP) | $(27,823) | $15,868 | | Adjusted net loss from continuing operations attributable to common stockholders (Non-GAAP) | $(7,570) | $(795) | | EBITDA (Non-GAAP) | $(19,716) | $22,970 | | Adjusted EBITDA (Non-GAAP) | $537 | $6,262 | [Additional Information](index=4&type=section&id=Conference%20Call) This section provides details on the conference call, cautionary notes regarding forward-looking statements, and contact information for investor relations and media [Conference Call Details](index=4&type=section&id=Conference%20Call%20Details) Applied Digital hosted a conference call on October 9, 2025, to discuss its fiscal first quarter 2026 results, with details provided for participation and replay options - Conference call held on October 9, 2025, at 5:00 p.m. Eastern Time[31](index=31&type=chunk) - Participant Dial-In: **1-800-549-8228**, Conference ID: **39290**[31](index=31&type=chunk) - A phone replay was available from October 9, 2025, through October 16, 2025, with Replay Dial-In: **1-888-660-6264** and Playback Passcode: **39290 **[32](index=32&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section serves as a cautionary note regarding forward-looking statements, emphasizing that future operating and financial performance, product development, and business strategy are subject to inherent uncertainties and risks - Statements regarding future operating and financial performance, product development, market position, business strategy, and objectives are forward-looking[34](index=34&type=chunk) - These statements are inherently subject to uncertainty, and actual results could vary materially if underlying assumptions prove inaccurate or risks materialize[34](index=34&type=chunk) - Risks include ability to complete data center construction, raise additional capital, dependence on principal customers, power disruptions, and regulatory changes[34](index=34&type=chunk) [Investor Relations Contact](index=6&type=section&id=Investor%20Relations%20Contacts) Contact information for investor relations and media inquiries is provided for stakeholders seeking further information about Applied Digital - Investor Relations Contacts: Matt Glover or Ralf Esper at Gateway Group, Inc. (**949) 574-3860**, APLD@gateway-grp.com[40](index=40&type=chunk) - Media Contact: Buffy Harakidas, EVP at JSA (Jaymie Scotto & Associates) (**856) 264-7827**, jsa_applied@jsa.net[40](index=40&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K The Bank of New York Mellon Trust Company, N.A., Trustee 601 Travis Street 16th Floor Houston, Texas 77002 (Address of principal executive offices) (Zip Code) CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): October 9, 2025 BP Prudhoe Bay Royalty Trust (Exact name of registrant as specified in its charter) Delaware 1-10243 13-6943724 (State o ...