Sabre Q2 2025 Earnings Release [Performance Overview](index=1&type=section&id=Performance%20Overview) Sabre's second quarter of 2025 was marked by significant strategic actions, including the $1.1 billion sale of its Hospitality Solutions business to reduce leverage, while achieving a strong 6 percentage point year-over-year improvement in operating margin despite weaker air distribution bookings Key Highlights Q2 2025 Financial Highlights | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Revenue | $687 million | -1% | | Operating Income | $89 million | +$40 million | | Operating Margin | 13% | +6 p.p. | | Net Loss Attributable to Common Stockholders | $256 million | Increased from $70M loss | | Adjusted EBITDA | $118 million | +7% | | Normalized Adjusted EBITDA | $127 million | +6% | - Closed the sale of its Hospitality Solutions business for **$1.1 billion** in July 2025[2](index=2&type=chunk) - Repaid over **$1 billion** of debt, including **~$825 million** from the Hospitality Solutions sale proceeds, and refinanced **$1.325 billion** of debt to extend maturities to 2030[2](index=2&type=chunk) - Signed new agency agreements, including with Christopherson Business Travel, demonstrating continued commercial momentum in air distribution[2](index=2&type=chunk) Management Commentary - CEO Kurt Ekert acknowledged that Q2 results were impacted by weaker-than-anticipated air distribution bookings, which offset gains from growth strategies, leading to an updated full-year outlook[3](index=3&type=chunk) - Management stated the current volume pressure is considered **"transitory"** and reaffirmed its focus on two strategic priorities: reducing leverage and driving sustainable growth through innovation[3](index=3&type=chunk)[4](index=4&type=chunk) [Financial Results](index=2&type=section&id=Financial%20Results) Sabre's Q2 2025 revenue decreased 1% to $687 million, but operating income surged 83% to $89 million due to cost reductions, though net loss widened to $256 million primarily from debt extinguishment and higher taxes, resulting in negative $240 million Free Cash Flow Consolidated Financial Performance Q2 2025 vs Q2 2024 Financial Performance (in thousands, except EPS) | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $687,149 | $695,050 | (1)% | | Operating Income | $89,134 | $48,722 | 83% | | Net loss attributable to common stockholders | $(256,364) | $(69,760) | (267)% | | Diluted net loss per share (EPS) | $(0.51) | $(0.18) | (183)% | | Adjusted EBITDA | $118,255 | $110,335 | 7% | - The increase in net loss was primarily driven by an **$85 million** loss on the extinguishment of debt from refinancing activities and an **$85 million** increase in the provision for income taxes from continuing operations[8](index=8&type=chunk) - The improvement in operating income was driven by lower labor costs from prior cost reduction plans, reduced technology expenses from cloud migrations, and a decrease in tax litigation reserves[6](index=6&type=chunk) Segment Performance Q2 2025 Segment Revenue | Segment | Q2 2025 Revenue | Change (YoY) | Reason for Change | | :--- | :--- | :--- | :--- | | Distribution | $546 million | -1% | Decrease in air distribution bookings, partly offset by higher hotel bookings | | IT Solutions | $141 million | -2% | Impact of previously disclosed de-migrated carriers, partly offset by higher license fees | - Total bookings, net of cancellations, were **90 million**, a **1% decrease** from Q2 2024[7](index=7&type=chunk) Cash Flow Analysis - Free Cash Flow was negative **$240 million** in Q2 2025, a significant decrease from positive **$7 million** in Q2 2024[10](index=10&type=chunk) - The negative Free Cash Flow includes a **$227 million** payment-in-kind interest payment recorded to cash flow from operations due to refinancing activity, with pro forma Free Cash Flow, excluding this, being negative **$2 million**[10](index=10&type=chunk) Q2 2025 Cash Flow Summary (vs Q2 2024, in millions) | Cash Flow Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Cash used in operating activities | $(218) | $26 (provided by) | | Cash used in investing activities | $(23) | $(19) | | Cash provided by financing activities | $21 | $(24) (used in) | [Business and Financial Pro Forma Financial Outlook](index=5&type=section&id=Business%20and%20Financial%20Pro%20Forma%20Financial%20Outlook) Sabre provides a pro forma financial outlook for Q3 and full-year 2025, adjusting for the Hospitality Solutions sale, with guidance across three air distribution volume scenarios projecting full-year Pro Forma Adjusted EBITDA between $530 million and $570 million and Pro Forma Free Cash Flow between $100 million and $140 million Pro Forma Basis Explanation - The outlook is provided on a pro forma basis to give effect to the sale of the Hospitality Solutions business, which is now classified as a discontinued operation[13](index=13&type=chunk) - Pro forma adjustments remove costs previously allocated to Hospitality Solutions and exclude the impact of a **$227 million** payment-in-kind interest payment from pro forma Free Cash Flow to enhance comparability of the company's go-forward operations[13](index=13&type=chunk)[15](index=15&type=chunk) Q3 and Full-Year 2025 Scenarios Q3 2025 Pro Forma Financial Outlook Scenarios | Air Distribution Volume (YoY Growth) | 2% | 4% | 6% | | :--- | :--- | :--- | :--- | | Revenue Growth | Low single digit | Low single digit | Mid single digit | | Pro Forma Adjusted EBITDA (in millions) | ~$140 (+15% YoY) | ~$145 (+19% YoY) | ~$150 (+23% YoY) | | Pro Forma Free Cash Flow (in millions) | ~$40 | ~$45 | ~$50 | Full Year 2025 Pro Forma Financial Outlook Scenarios | Air Distribution Volume (YoY Growth) | 0.5% | 2% | 3.5% | | :--- | :--- | :--- | :--- | | Revenue Growth | Flat | Low single digit | Low single digit | | Pro Forma Adjusted EBITDA (in millions) | ~$530 (+9% YoY) | ~$550 (+13% YoY) | ~$570 (+18% YoY) | | Pro Forma Free Cash Flow (in millions) | ~$100 | ~$120 | ~$140 | - The company expects its end-of-year 2025 cash balance to be greater than **$750 million**[17](index=17&type=chunk) [Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) This section presents Sabre Corporation's unaudited consolidated financial statements, including the Statement of Operations showing a $256.5 million net loss for Q2 2025, a Balance Sheet with $4.42 billion in total assets, and a Statement of Cash Flows detailing a $298.4 million net decrease in cash for the first six months of 2025 Consolidated Statements of Operations Statement of Operations Highlights - Three Months Ended June 30 (in thousands) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | Revenue | $687,149 | $695,050 | | Operating income | $89,134 | $48,722 | | Loss from continuing operations | $(201,018) | $(69,731) | | Loss from discontinued operations, net of tax | $(55,514) | $246 (income) | | Net loss | $(256,532) | $(69,485) | Consolidated Balance Sheets Balance Sheet Highlights (in thousands) | Line Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $426,118 | $724,479 | | Total current assets | $952,558 | $1,163,218 | | Total assets | $4,419,145 | $4,634,929 | | Long-term debt | $4,997,092 | $4,834,776 | | Total liabilities | $6,111,560 (calculated) | $6,226,598 (calculated) | | Total stockholders' deficit | $(1,804,310) | $(1,604,699) | Consolidated Statements of Cash Flows Cash Flow Highlights - Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Cash used in operating activities | $(281,841) | $(29,856) | | Cash used in investing activities | $(30,083) | $(45,850) | | Cash provided by financing activities | $34,500 | $54,124 | | Decrease in cash, cash equivalents and restricted cash | $(298,375) | $(35,592) | [Non-GAAP Financial Measures & Reconciliations](index=15&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) This section defines and reconciles non-GAAP financial measures like Adjusted EBITDA, Adjusted Net Loss, and Free Cash Flow, which management uses to monitor core operations by excluding specific items, with Q2 2025 Adjusted EBITDA reconciled to $118.3 million Definitions of Non-GAAP Measures - Adjusted EBITDA is defined as loss from continuing operations adjusted for items including D&A, interest expense, stock-based compensation, and restructuring costs[42](index=42&type=chunk) - Normalized Adjusted EBITDA is Adjusted EBITDA further adjusted for estimated costs historically allocated to the sold Hospitality Solutions business[43](index=43&type=chunk) - Free Cash Flow is defined as cash used in operating activities less cash used for additions to property and equipment[45](index=45&type=chunk) Reconciliation of Net Loss to Adjusted EBITDA Reconciliation to Adjusted EBITDA - Q2 2025 (in thousands) | Line Item | Q2 2025 | | :--- | :--- | | Loss from continuing operations | $(201,018) | | Adjustments: | | | Depreciation and amortization | $25,482 | | Interest expense, net | $111,244 | | Loss on extinguishment of debt | $85,182 | | Stock-based compensation | $11,290 | | Provision for income taxes | $91,262 | | Other adjustments | $(5,187) | | **Adjusted EBITDA** | **$118,255** | Reconciliation of Free Cash Flow Free Cash Flow Reconciliation - Q2 2025 (in thousands) | Line Item | Q2 2025 | | :--- | :--- | | Cash used in operating activities | $(217,881) | | Additions to property and equipment | $(22,279) | | **Free Cash Flow** | **$(240,160)** |

[Executive Summary & Turnaround Plan](index=1&type=section&id=Executive%20Summary%20%26%20Turnaround%20Plan) [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) Krispy Kreme reported a significant GAAP net loss in Q2 2025, primarily due to a large impairment charge and the terminated McDonald's partnership | Metric | Q2 2025 Value | Note | | :--- | :--- | :--- | | Net Revenue | $379.8 million | - | | Organic Revenue Decline | 0.8% | YoY | | GAAP Net Loss | $441.1 million | Includes $406.9M in impairment charges | | Adjusted EBITDA | $20.1 million | - | | Global Points of Access (POA) | 18,113 | +14.3% YoY | - The company's Q2 results were primarily impacted by **unsustainable operating costs** related to the McDonald's USA partnership, which ended on July 2, 2025[2](index=2&type=chunk) [Turnaround Plan](index=1&type=section&id=Turnaround%20Plan) The company launched a four-part turnaround plan to deleverage, improve capital returns, expand margins, and drive profitable growth - The turnaround plan is built on four key pillars: * **Refranchising:** Improving financial flexibility by refranchising international markets and restructuring a U.S. joint venture * **Driving Return on Invested Capital:** Reducing capital intensity by leveraging existing assets and focusing on franchisee development * **Expanding Margins:** Increasing operational efficiency, including outsourcing U.S. logistics * **Driving Sustainable, Profitable Growth:** Focusing on profitable revenue streams in the U.S. market[4](index=4&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) [Consolidated Financial Results (Q2 2025)](index=2&type=section&id=Consolidated%20Financial%20Results%20(Q2%202025)) Consolidated net revenue decreased by **13.5%** in Q2 2025, resulting in a **$441.1 million GAAP Net Loss** primarily from impairment and the McDonald's partnership impact | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $379.8M | $438.8M | (13.5)% | | Organic Revenue | $371.7M | $374.6M | (0.8)% | | GAAP Net Loss | $(441.1)M | $(4.9)M | nm | | GAAP Diluted EPS | $(2.55) | $(0.03) | $(2.52) | | Adjusted EBITDA | $20.1M | $54.7M | (63.3)% | | Adjusted EBITDA Margin | 5.3% | 12.5% | (720) bps | | Adjusted Diluted EPS | $(0.15) | $0.05 | $(0.20) | - The **$59.0 million decline** in net revenue was primarily caused by a **$64.2 million reduction** associated with the sale of a majority stake in Insomnia Cookies in Q3 2024[6](index=6&type=chunk) - A non-cash goodwill and other asset impairment charge totaling **$406.9 million** was the main driver of the significant GAAP Net Loss[7](index=7&type=chunk) [Segment Performance (Q2 2025)](index=2&type=section&id=Segment%20Performance%20(Q2%202025)) Segment performance in Q2 2025 was mixed, with U.S. declines from divestiture and partnership termination, and International organic growth [U.S. Segment](index=2&type=section&id=U.S.%20Segment) - Net revenue declined by **20.5%** (**$59.2 million**), primarily due to the **$64.2 million impact** from the sale of Insomnia Cookies[9](index=9&type=chunk) - Organic revenue declined by **3.1%** (**$6.9 million**) due to consumer softness and strategic door closures[9](index=9&type=chunk) - U.S. Adjusted EBITDA decreased by **69.6%** (**$22.7 million**), driven by the Insomnia Cookies sale, the terminated McDonald's partnership, and lower transaction volumes[10](index=10&type=chunk) [International Segment](index=3&type=section&id=International%20Segment) - Organic revenue grew by **5.9%** (**$7.4 million**), led by strong performance in Canada, Japan, and Mexico[11](index=11&type=chunk) - Adjusted EBITDA declined by **15.9%** (**$3.4 million**), with margins falling **360 basis points** to **13.7%**, primarily due to the ongoing turnaround in the U.K[12](index=12&type=chunk) [Market Development Segment](index=3&type=section&id=Market%20Development%20Segment) - Net revenue declined by **30.2%** (**$7.3 million**), and organic revenue declined by **14.2%**, as growth in new markets was offset by the timing of product and equipment sales to franchisees[13](index=13&type=chunk) - Adjusted EBITDA decreased by **30.5%** (**$3.9 million**), with a slight margin decline of **20 basis points** to **52.9%**[13](index=13&type=chunk) [Financial Position and Capital Management](index=3&type=section&id=Financial%20Position%20and%20Capital%20Management) [Balance Sheet and Liquidity](index=3&type=section&id=Balance%20Sheet%20and%20Liquidity) Krispy Kreme maintained **$243.8 million** in total available liquidity as of June 29, 2025, and amended its credit agreement while remaining compliant with covenants - Total available liquidity stood at **$243.8 million**, composed of **$21.3 million** in cash and **$222.5 million** in undrawn credit capacity[16](index=16&type=chunk) - The company amended its credit agreement, adding **$125.0 million** in term loans to pay down its revolving credit facility[15](index=15&type=chunk) | Metric | As of June 29, 2025 | | :--- | :--- | | Net Debt | $939.4 million | | Net Leverage Ratio | 7.5x | [Capital Allocation and Expenditures](index=3&type=section&id=Capital%20Allocation%20and%20Expenditures) The company is actively managing capital by halting dividends, selling Insomnia Cookies for **$75 million** to reduce debt, and pursuing refranchising - The quarterly cash dividend has been halted to preserve capital[17](index=17&type=chunk) - The remaining ownership stake in Insomnia Cookies was sold, generating **$75 million** in cash proceeds used for debt reduction[17](index=17&type=chunk) - The company is actively pursuing refranchising of markets including Australia, New Zealand, Japan, Mexico, and the U.K. to enhance financial flexibility and pay down debt[18](index=18&type=chunk) - Capital expenditures for the first half of 2025 totaled **$54.1 million** (**7.2% of net revenue**), but future investment in new capacity will be curtailed[14](index=14&type=chunk) [Key Business Developments](index=3&type=section&id=Key%20Business%20Developments) [McDonald's USA Partnership Termination](index=3&type=section&id=McDonald's%20USA%20Partnership%20Termination) Krispy Kreme and McDonald's USA mutually terminated their partnership effective July 2, 2025, due to misaligned operating costs - The partnership was terminated effective July 2, 2025, by mutual agreement[19](index=19&type=chunk) - The primary reason for termination was the failure to align Krispy Kreme's operating costs with the unit demand from McDonald's locations[19](index=19&type=chunk) [Goodwill and Other Asset Impairments](index=3&type=section&id=Goodwill%20and%20Other%20Asset%20Impairments) The company recognized **$406.9 million** in non-cash impairment charges in Q2 2025, triggered by stock price decline and revised forecasts - A cumulative, non-cash partial goodwill impairment charge of **$356.0 million** was recognized in Q2 2025[20](index=20&type=chunk) - Impairment indicators included a significant and sustained decline in stock price and market capitalization, and downward revisions to internal forecasts[20](index=20&type=chunk) - Additional non-cash charges of **$22.1 million** for long-lived assets and **$28.9 million** for lease impairment and termination costs were recorded, partly due to the termination of the McDonald's agreement[21](index=21&type=chunk) - The impairment charges do not impact the company's compliance with its debt covenants[22](index=22&type=chunk) [Key Operating Metrics](index=2&type=section&id=Key%20Operating%20Metrics) [Global Points of Access and Hubs](index=2&type=section&id=Global%20Points%20of%20Access%20and%20Hubs) Global Points of Access grew **14.3%** to **18,113** in Q2 2025, including McDonald's locations subsequently closed, and total production hubs increased | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Global Points of Access | 18,113 | 15,853 | +14.3% | | Total Hubs | 430 | 419 | +2.6% | - The Q2 2025 Global Points of Access count includes approximately **2,400 McDonald's doors** that were exited in Q3 2025[49](index=49&type=chunk) [Sales per Hub and Digital Sales](index=2&type=section&id=Sales%20per%20Hub%20and%20Digital%20Sales) Sales per Hub declined slightly in both U.S. and International segments, while digital sales as a percentage of doughnut shop sales increased to **18.0%** | Metric (Trailing Four Quarters) | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Sales per Hub (U.S.) | $4.9M | $5.0M | (2.0)% | | Sales per Hub (International) | $9.8M | $9.9M | (1.0)% | | Digital Sales % of Doughnut Shop Sales | 18.0% | 16.4% | +160 bps | [Financial Statements (Unaudited)](index=6&type=section&id=Financial%20Statements%20(Unaudited)) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section provides the unaudited consolidated statement of operations for the 13 and 26 weeks ended June 29, 2025, detailing revenues, costs, expenses, and net loss [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the unaudited consolidated balance sheet as of June 29, 2025, outlining the company's assets, liabilities, and shareholders' equity [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details the unaudited consolidated cash flows from operating, investing, and financing activities for the 26 weeks ended June 29, 2025 [Reconciliation of Non-GAAP Financial Measures](index=9&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) [Reconciliation of Adjusted EBITDA and Adjusted EBIT](index=9&type=section&id=Reconciliation%20of%20Adjusted%20EBITDA%20and%20Adjusted%20EBIT) This section provides a detailed reconciliation from GAAP Net Loss to non-GAAP Adjusted EBIT and Adjusted EBITDA, detailing key adjustments including goodwill impairment - Adjusted EBITDA is reconciled from Net Loss by adding back interest, taxes, D&A, and other items such as share-based compensation, strategic initiative costs, and impairment charges[36](index=36&type=chunk)[40](index=40&type=chunk) [Reconciliation of Adjusted Net (Loss)/Income](index=11&type=section&id=Reconciliation%20of%20Adjusted%20Net%20(Loss)%2FIncome) This section reconciles GAAP Net Loss to non-GAAP Adjusted Net (Loss)/Income and Adjusted EPS, detailing adjustments for goodwill impairment and strategic initiatives - Adjusted Net (Loss)/Income is reconciled from Net Loss by adjusting for items such as share-based compensation, goodwill impairment, strategic initiatives, and the tax impact of these adjustments[38](index=38&type=chunk)[42](index=42&type=chunk) [Reconciliation of Organic Revenue](index=14&type=section&id=Reconciliation%20of%20Organic%20Revenue) This section reconciles total net revenue growth to organic revenue growth by segment, excluding impacts from divestitures, acquisitions, and foreign currency - Organic revenue growth is calculated by excluding the impacts of acquisitions, divestitures (like Insomnia Cookies), and foreign currency translation from total net revenue growth[45](index=45&type=chunk)

Part I. Financial Information [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) For the first six months of 2025, the company reported slightly increased revenue and a significantly reduced net loss due to the absence of prior-year impairment charges, alongside a major debt refinancing that restructured its debt and impacted cash flows [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets slightly decreased to **$5.07 billion**, total liabilities increased to **$5.11 billion**, and shareholders' equity shifted to a **$39.9 million** deficit from **$84.0 million** equity at year-end 2024, primarily due to net loss and debt refinancing Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $247,138 | $175,515 | | Cash and cash equivalents | $56,390 | $16,848 | | **Total Assets** | **$5,071,980** | **$5,150,827** | | **Total Current Liabilities** | $253,142 | $213,790 | | **Total Liabilities** | **$5,111,888** | **$5,066,805** | | **Total Shareholders' Equity (Deficit)** | **($39,908)** | **$84,022** | [Unaudited Condensed Consolidated Statements of Loss and Comprehensive Loss](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Loss%20and%20Comprehensive%20Loss) For Q2 2025, revenues slightly increased to **$241.6 million**, and the company reported a significantly improved net loss of **$62.6 million** (or **$3.81 per share**) compared to **$576.7 million** in Q2 2024, primarily due to the absence of a **$553.7 million** goodwill impairment charge Statement of Loss Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $241,570 | $233,476 | $472,900 | $467,984 | | **Operating Income (Loss)** | $16,578 | ($523,927) | $26,320 | ($1,010,363) | | Loss on impairment | $0 | $553,701 | $0 | $1,072,751 | | **Net Loss** | **($62,640)** | **($576,727)** | **($133,959)** | **($1,116,416)** | | **Net Loss Per Share** | **($3.81)** | **($35.78)** | **($8.19)** | **($69.18)** | [Unaudited Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) Shareholders' equity transitioned from **$84.0 million** at year-end 2024 to a **$39.9 million** deficit as of June 30, 2025, primarily due to the **$134.0 million** net loss for the six-month period - The company's retained deficit increased from **$(2,145.1) million** at the end of 2024 to **$(2,279.1) million** at June 30, 2025, due to the net loss incurred during the first half of the year[21](index=21&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash from operating activities decreased to **$31.2 million**, investing activities used **$63.5 million**, and financing activities provided **$69.9 million**, a significant reversal from the prior year, largely due to **$130 million** in new borrowings Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $31,181 | $68,187 | | **Net Cash used in Investing Activities** | ($63,489) | ($55,989) | | **Net Cash from (used in) Financing Activities** | $69,924 | ($34,523) | | **Net Change in Cash** | $37,616 | ($22,325) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant corporate actions, including the company's name change to Claritev Corporation, a 1-for-40 reverse stock split in 2024, a major debt refinancing in January 2025, and disclosures on revenue, goodwill (with no impairments in 2025), derivatives, and ongoing legal matters - On February 17, 2025, the company changed its name from "MultiPlan Corporation" to "**Claritev Corporation**" and its ticker symbol to "**CTEV**"[26](index=26&type=chunk) - A **one-for-forty (1-for-40) reverse stock split** of its Class A common stock became effective on **September 20, 2024**. All share and per-share data have been retroactively adjusted[29](index=29&type=chunk)[30](index=30&type=chunk) - In **January 2025**, the company completed a major **Refinancing Transaction**, exchanging existing notes and term loans for new first lien term loans and notes with extended maturities, and establishing a new **$350 million revolving credit facility**[56](index=56&type=chunk) - The company recorded **no goodwill impairment in the first six months of 2025**, compared to a significant impairment loss of **$1,072.8 million** in the same period of 2024[42](index=42&type=chunk)[75](index=75&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reported a **1.1%** revenue increase for the first six months of 2025, driven by Network-Based and Payment and Revenue Integrity Services, with a significantly narrowed net loss due to the absence of 2024 impairment charges, while a January 2025 debt refinancing extended maturities and Adjusted EBITDA slightly increased to **$296.1 million** - The company initiated its first international expansion into the **Middle East and North Africa (MENA) region** through a strategic partnership with Claims Care Revenue Cycle Management LLC[98](index=98&type=chunk) Revenue by Service Line (in thousands) | Service Line | Six Months 2025 | Six Months 2024 | Change % | | :--- | :--- | :--- | :--- | | Network-Based Services | $101,015 | $91,878 | +9.9% | | Analytics-Based Services | $310,396 | $319,988 | -3.0% | | Payment and Revenue Integrity | $61,489 | $56,118 | +9.6% | | **Total Revenues** | **$472,900** | **$467,984** | **+1.1%** | Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net loss | ($133,959) | ($1,116,416) | | Adjustments | $430,056 | $1,409,876 | | **Adjusted EBITDA** | **$296,097** | **$293,460** | - General and administrative expenses increased by **49.2%** for the six months ended June 30, 2025, primarily due to **$15.7 million** in transformation costs and **$5.5 million** in losses on asset disposals[143](index=143&type=chunk) - As of June 30, 2025, the company had **$67.3 million** in cash and cash equivalents (including restricted cash) and **$263.6 million** of availability under its revolving credit facility[154](index=154&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that as of June 30, 2025, there have been no material changes in the market risks it faces compared to those described in its 2024 Annual Report - There were no material changes in the market risks described in the company's 2024 Annual Report as of June 30, 2025[188](index=188&type=chunk) [Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, noting the implementation of a new enterprise resource planning (ERP) system during the quarter, which led to new and modified internal controls - The principal executive and financial officers concluded that disclosure controls and procedures were effective as of June 30, 2025[190](index=190&type=chunk) - During the second quarter of 2025, the company completed the implementation of a **new enterprise resource planning (ERP) system**, resulting in changes to its internal control over financial reporting[191](index=191&type=chunk) Part II - Other Information [Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings arising from the ordinary course of business, which management does not expect to have a material adverse effect on its financial condition or operations - The company is a defendant in various lawsuits and regulatory investigations arising from the ordinary course of business but does not expect them to have a material adverse effect[194](index=194&type=chunk) [Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) While no material changes occurred to overall risk factors from the 2024 Annual Report, new risks emerged from international expansion, including challenges in managing foreign operations, complying with international laws, and increased susceptibility to global economic and political events - The company faces **new risks associated with its international business expansion**, including managing foreign operations, complying with international laws, and dealing with political or economic instability in foreign countries[201](index=201&type=chunk)[206](index=206&type=chunk) - As the company expands its international footprint, it becomes more susceptible to global events beyond its control, such as changes in trade policy, military conflict, and public health crises[203](index=203&type=chunk) [Other Information](index=48&type=section&id=Item%205.%20Other%20Information) During the second quarter of 2025, no officers or directors of the company adopted or terminated any Rule 10b5-1 trading plans for the purchase or sale of company securities - **No officers or directors adopted or terminated any Rule 10b5-1(c) trading arrangements** during the three months ended June 30, 2025[208](index=208&type=chunk) [Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act of 2002, and financial statements in Inline XBRL format - The report includes certifications from the CEO and CFO pursuant to **Sections 302 and 906 of the Sarbanes-Oxley Act of 2002**[208](index=208&type=chunk)

[PART I—FINANCIAL INFORMATION](index=10&type=section&id=Part%20I%E2%80%94FINANCIAL%20INFORMATION) This section presents Akebia Therapeutics, Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended June 30, 2025 [Item 1. Financial Statements (Unaudited)](index=10&type=section&id=Item%201.%20Financial%20Statements.) This section presents Akebia Therapeutics, Inc.'s unaudited condensed consolidated financial statements for the quarter ended June 30, 2025, including balance sheets, statements of operations and comprehensive income (loss), stockholders' equity (deficit), and cash flows, along with detailed notes explaining significant accounting policies, financial instruments, inventories, intangible assets, indebtedness, leases, commitments, and revenue recognition [Condensed Consolidated Balance Sheets](index=10&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) The Condensed Consolidated Balance Sheets show a significant increase in total assets and a shift from a stockholders' deficit to positive equity as of June 30, 2025, compared to December 31, 2024, driven primarily by an increase in cash and cash equivalents and accounts receivable Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total Assets | $345,595 | $220,670 | | Total Liabilities | $316,371 | $269,855 | | Total Stockholders' Equity (Deficit) | $29,224 | $(49,185) | - Cash and cash equivalents increased significantly from **$51.87 million** at December 31, 2024, to **$137.31 million** at June 30, 2025[17](index=17&type=chunk) - Accounts receivable, net, rose from **$34.37 million** to **$72.81 million** during the same period[17](index=17&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=11&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20INCOME%20%28LOSS%29) The Condensed Consolidated Statements of Operations show a significant improvement in financial performance, moving from a net loss in Q2 2024 and H1 2024 to net income in Q2 2025 and H1 2025, primarily driven by increased product revenue and the absence of intangible asset amortization Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenues | $62,472 | $43,648 | $119,808 | $76,255 | | Total Cost of Goods Sold | $9,919 | $17,047 | $17,544 | $28,651 | | Income (Loss) from Operations | $14,089 | $(8,725) | $27,603 | $(23,660) | | Net Income (Loss) | $247 | $(8,582) | $6,359 | $(26,567) | | Basic EPS | $0.00 | $(0.04) | $0.03 | $(0.13) | | Diluted EPS | $0.00 | $(0.04) | $0.02 | $(0.13) | - Total revenues increased by **43%** for the three months ended June 30, 2025, and by **57%** for the six months ended June 30, 2025, compared to the respective periods in 2024[20](index=20&type=chunk) - Amortization of intangible asset decreased by **100%** for both the three and six months ended June 30, 2025, as the asset was fully amortized by December 31, 2024[20](index=20&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=12&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS%27%20EQUITY%20%28DEFICIT%29) The Condensed Consolidated Statements of Stockholders' Equity (Deficit) reflect a significant improvement in equity from a deficit of **$(49.19) million** at December 31, 2024, to a positive equity of **$29.22 million** at June 30, 2025, primarily due to net income and proceeds from common stock issuances Condensed Consolidated Statements of Stockholders' Equity (Deficit) (in thousands) | Metric (in thousands) | December 31, 2024 | June 30, 2025 | | :-------------------- | :---------------- | :------------ | | Total Stockholders' Equity (Deficit) | $(49,185) | $29,224 | | Additional Paid-In Capital | $1,629,167 | $1,701,217 | | Accumulated Deficit | $(1,678,360) | $(1,672,001) | - Issuance of common stock, net of issuance costs, contributed **$64.91 million** and **$1.54 million** during the six months ended March 31, 2025, and the three months ended June 30, 2025, respectively[23](index=23&type=chunk) - Net income of **$6.11 million** for the period ending March 31, 2025, and **$0.25 million** for the period ending June 30, 2025, also contributed to the increase in equity[23](index=23&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=13&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) The Condensed Consolidated Statements of Cash Flows show a significant increase in cash, cash equivalents, and restricted cash, primarily driven by net cash provided by financing activities, including debt issuance and common stock sales, and a positive shift in operating activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $8,758 | $(29,498) | | Net cash provided by (used in) investing activities | $28 | $(29) | | Net cash provided by financing activities | $76,662 | $26,115 | | Increase (decrease) in cash, cash equivalents and restricted cash | $85,448 | $(3,412) | | Cash, cash equivalents and restricted cash — end of period | $138,998 | $41,167 | - Operating activities generated **$8.76 million** in cash for the six months ended June 30, 2025, a substantial improvement from a **$29.50 million** usage in the prior year[26](index=26&type=chunk) - Financing activities provided **$76.66 million** in cash, primarily from **$10.0 million** in debt issuance and **$66.45 million** from common stock sales[26](index=26&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Statements](index=14&type=section&id=NOTES%20TO%20THE%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) The notes provide detailed explanations of the company's financial position and performance, covering significant accounting policies, product information, fair value measurements, inventory valuation, intangible assets, debt agreements, lease commitments, revenue recognition, capital stock, stock-based compensation, net income per share calculations, segment information, and subsequent events [1. Nature of Business](index=14&type=section&id=1.%20NATURE%20OF%20BUSINESS) Akebia Therapeutics, Inc. is a commercial-stage biopharmaceutical company focused on innovative therapeutics, with two FDA-approved products: Vafseo (vadadustat) for anemia due to CKD in dialysis patients (launched Jan 2025) and Auryxia (ferric citrate) for hyperphosphatemia and IDA in CKD patients (lost exclusivity in March 2025). The company's cash resources are believed to be sufficient for at least 12 months, but future funding may be required - Vafseo (vadadustat) was approved in the U.S. in March 2024 for anemia due to CKD in adult dialysis patients and entered the U.S. market in January 2025[31](index=31&type=chunk) - Auryxia (ferric citrate) is marketed for controlling serum phosphorus in DD-CKD and treating IDA in NDD-CKD, and lost U.S. exclusivity in March 2025[31](index=31&type=chunk) - As of June 30, 2025, the Company had **$137.3 million** in cash and cash equivalents, expected to fund operations for at least 12 months[34](index=34&type=chunk) [2. Summary of Significant Accounting Policies](index=14&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The company's financial statements are prepared in accordance with GAAP, utilizing estimates and assumptions for various accounts. There have been no material changes to significant accounting policies since December 31, 2024. Key estimates include accrued expenses, revenue reserves, and long-term assets. The company also detailed its cash, cash equivalents, restricted cash, and credit risk management, and noted recent accounting pronouncements not yet adopted, including ASU 2023-09 (Income Tax Disclosures) and ASU 2024-03 (Expense Disclosures) - The company's allowance for credit losses increased from **$1.2 million** at December 31, 2024, to **$2.2 million** at June 30, 2025[50](index=50&type=chunk)[54](index=54&type=chunk) - ASU 2023-09 (Income Taxes) is effective for fiscal years beginning after December 15, 2024, and is not expected to materially affect consolidated financial statements[56](index=56&type=chunk) - ASU 2024-03 (Expense Disclosures) is effective for fiscal years beginning after December 15, 2026, and requires new tabular disclosures for cost and expense categories[57](index=57&type=chunk) [3. Fair Value of Financial Instruments](index=18&type=section&id=3.%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) The company measures certain assets and liabilities at fair value, primarily classifying money market funds (cash equivalents) as Level 1 and warrant liability as Level 2, reflecting valuation based on observable inputs like the Black-Scholes option pricing model Fair Value of Financial Instruments (in thousands) | Item (in thousands) | June 30, 2025 Total Fair Value | December 31, 2024 Total Fair Value | | :------------------ | :----------------------------- | :----------------------------- | | Cash equivalents: Money market funds | $117,868 | N/A | | Long-term liability: Warrant liability | $14,199 | $5,176 | - Money market funds are classified as **Level 1**, valued using quoted market prices in active markets[61](index=61&type=chunk) - Warrant liability is classified as **Level 2**, valued using the Black-Scholes option pricing model with observable inputs[62](index=62&type=chunk) [4. Inventories](index=20&type=section&id=4.%20INVENTORIES) Total inventories increased to **$58.57 million** at June 30, 2025, from **$51.20 million** at December 31, 2024, with a notable increase in long-term work-in-process. Inventory write-downs for excess or obsolescence were significantly lower in 2025 compared to 2024 Inventories (in thousands) | Inventory Category (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Current Inventories: | | | | Work-in-process | $14,202 | $12,031 | | Finished goods | $2,506 | $4,212 | | **Total Current Inventories** | **$16,708** | **$16,243** | | Long-term Inventories: | | | | Raw materials | $381 | $381 | | Work-in-process | $41,481 | $34,572 | | **Total Long-term Inventories** | **$41,862** | **$34,953** | | **Total Inventories** | **$58,570** | **$51,196** | - Inventory written down for excess/obsolescence was **$0.1 million** for the six months ended June 30, 2025, down from **$1.1 million** in the same period of 2024[63](index=63&type=chunk) [5. Intangible Asset and Goodwill](index=20&type=section&id=5.%20INTANGIBLE%20ASSET%20AND%20GOODWILL) The intangible asset related to Auryxia's developed product rights was fully amortized by December 31, 2024, resulting in no amortization expense in 2025, compared to **$18.0 million** in the first six months of 2024. Goodwill from the Keryx merger remains at **$59.0 million** with no impairment identified - Amortization expense for Auryxia's intangible asset was **$0** for the three and six months ended June 30, 2025, compared to **$9.0 million** and **$18.0 million** for the same periods in 2024, respectively[64](index=64&type=chunk) - Goodwill from the Keryx merger remains at **$59.0 million** as of June 30, 2025, with no impairment identified to date[65](index=65&type=chunk) [6. Additional Balance Sheet Detail](index=20&type=section&id=6.%20ADDITIONAL%20BALANCE%20SHEET%20DETAIL) Prepaid expenses and other current assets decreased to **$7.83 million** at June 30, 2025, mainly due to the reclassification of prepaid manufacturing. Other long-term assets increased to **$44.19 million**, driven by long-term inventories. Accrued expenses and other current liabilities significantly increased to **$91.62 million**, primarily due to higher product rebates and current portions of settlement royalties and Working Capital Fund liability Additional Balance Sheet Detail (in thousands) | Description (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------- | :------------ | :---------------- | | Prepaid expenses and other current assets | $7,832 | $11,350 | | Other long-term assets | $44,193 | $37,377 | | Accrued expenses and other current liabilities | $91,615 | $63,460 | - Product rebates within accrued expenses increased from **$6.07 million** to **$33.75 million**[71](index=71&type=chunk) - Current portion of settlement royalties increased from **$5.92 million** to **$14.66 million**[71](index=71&type=chunk) [7. Indebtedness](index=22&type=section&id=7.%20INDEBTEDNESS) Akebia entered into a **$55.0 million** BlackRock Credit Agreement, with the final **$10.0 million** tranche funded in February 2025, extending maturity to January 2028. The facility accrues interest at a floating rate (**11.08%** as of June 30, 2025) and is secured by company assets. Warrants were issued to the lender, with a fair value of **$14.2 million** at June 30, 2025. Previous Pharmakon Term Loans were extinguished in January 2024 - The BlackRock Credit Agreement provides a **$55.0 million** senior secured term loan facility, with the final **$10.0 million** Tranche C funded on February 3, 2025[72](index=72&type=chunk)[73](index=73&type=chunk)[74](index=74&type=chunk) - The loan matures on **January 29, 2028**, with interest-only payments until **December 31, 2026**, at a floating annual rate (**11.08%** as of June 30, 2025)[75](index=75&type=chunk)[76](index=76&type=chunk)[80](index=80&type=chunk) - Warrants to purchase **4,230,769** shares of common stock were issued to the lender, with a fair value of **$14.2 million** as of June 30, 2025[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) [8. Liability Related to Settlement Royalties, Working Capital Fund Liability and Liability Related to Sale of Future Royalties](index=26&type=section&id=8.%20LIABILITY%20RELATED%20TO%20SETTLEMENT%20ROYALTIES%2C%20WORKING%20CAPITAL%20FUND%20LIABILITY%20AND%20LIABILITY%20RELATED%20TO%20SALE%20OF%20FUTURE%20ROYALTIES) Akebia terminated its Vifor License Agreement, resulting in a **$63.39 million** settlement royalties liability (effective interest rate **37.0%**) and a **$40.57 million** Working Capital Fund liability (**15.0%** imputed interest), both to be repaid via tiered royalties on Vafseo net sales. The liability related to the sale of future royalties to HCR for Vafseo in Japan remains at **$53.23 million**, with a **0%** effective interest rate as of June 30, 2025 - The Vifor License Agreement was terminated on **July 10, 2024**, leading to a reclassification of **$43.3 million** received from CSL Vifor as debt[104](index=104&type=chunk)[107](index=107&type=chunk) Liability Related to Settlement Royalties, Working Capital Fund Liability and Liability Related to Sale of Future Royalties (in thousands) | Liability (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Total Settlement Royalties Liability | $63,389 | $52,621 | | Total Working Capital Fund Liability | $40,572 | $40,287 | | Total Liability Related to Sale of Future Royalties | $53,234 | $54,105 | - The annual effective interest rate for the settlement royalties liability was **37.0%** as of June 30, 2025, and for the Working Capital Fund liability was **15.0%**. The effective interest rate for the sale of future royalties was **0%**[107](index=107&type=chunk)[112](index=112&type=chunk)[117](index=117&type=chunk) [9. Leases](index=32&type=section&id=9.%20LEASES) Akebia leases office, storage, and lab space in Cambridge, Massachusetts, under a non-cancelable operating lease expiring **September 11, 2026**. Operating lease costs were **$1.2 million** for Q2 2025 and **$2.5 million** for H1 2025. Future lease commitments total **$6.53 million** - The Cambridge Lease for office, storage, and lab space expires on **September 11, 2026**[122](index=122&type=chunk) - Operating lease costs were **$1.2 million** for the three months ended June 30, 2025, and **$2.5 million** for the six months ended June 30, 2025[124](index=124&type=chunk) Operating Lease Commitments (in thousands) | Year | Operating Lease Commitments (in thousands) | | :--- | :--------------------------------------- | | 2025 | $2,915 | | 2026 | $3,613 | | Total | $6,528 | [10. Commitments and Contingencies](index=32&type=section&id=10.%20COMMITMENTS%20AND%20CONTINGENCIES) Akebia has various manufacturing and purchase commitments, including **$16.9 million** for Auryxia drug substance through 2026 with Siegfried, and **$7.6 million** for Vafseo drug substance from Esteve through 2025. The company also has license agreements with Panion (royalties on Auryxia/Riona sales) and Cyclerion (milestones and tiered royalties for praliciguat, with **$0.5 million** payment due by Sep 2025). Litigation and indemnification obligations are also noted - Required to purchase **$16.9 million** of Auryxia drug substance from Siegfried through 2026[127](index=127&type=chunk) - Committed to purchase **$7.6 million** of Vafseo drug substance from Esteve through 2025[136](index=136&type=chunk) - Panion is eligible for mid-single digit royalties on ferric citrate sales; Akebia incurred **$5.7 million** in royalties to Panion for the six months ended June 30, 2025[142](index=142&type=chunk)[143](index=143&type=chunk) - Cyclerion is eligible for up to **$198.5 million** in development/regulatory milestones and tiered royalties for praliciguat, with a **$0.5 million** payment due by September 30, 2025[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[151](index=151&type=chunk) [11. Product Revenue and Reserves for Variable Consideration](index=38&type=section&id=11.%20PRODUCT%20REVENUE%20AND%20RESERVES%20FOR%20VARIABLE%20CONSIDERATION) Product revenue significantly increased to **$60.46 million** for Q2 2025 and **$116.25 million** for H1 2025, driven by Vafseo's U.S. market entry in January 2025 and increased Auryxia sales. Product revenue allowances and reserves, including rebates and returns, totaled **$52.02 million** at June 30, 2025 Product Revenue (in thousands) | Product (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Vafseo | $13,279 | $0 | $25,313 | $0 | | Auryxia | $47,183 | $41,209 | $90,939 | $72,218 | | **Total Product Revenues** | **$60,461** | **$41,209** | **$116,252** | **$72,218** | - Vafseo's U.S. market entry in January 2025 generated **$13.28 million** in Q2 2025 and **$25.31 million** in H1 2025[156](index=156&type=chunk) Reserve Category (in thousands) | Reserve Category (in thousands) | Balance at December 31, 2024 | Balance at June 30, 2025 | | :------------------------------ | :--------------------------- | :----------------------- | | Rebates, Fees and Discounts | $1,436 | $348 | | Chargebacks and Other Deductions | $15,726 | $45,168 | | Product Returns | $6,442 | $6,505 | | **Total** | **$23,604** | **$52,021** | [12. License, Collaboration and Other Revenue](index=40&type=section&id=12.%20LICENSE%2C%20COLLABORATION%20AND%20OTHER%20REVENUE) License, collaboration, and other revenue decreased to **$2.01 million** for Q2 2025 and **$3.56 million** for H1 2025, primarily due to lower revenue from the MTPC supply agreement. Revenue sources include Medice (Vafseo in EEA/UK/Switzerland/Australia), MTPC (Vafseo in Japan), and JT/Torii (Riona in Japan). The Medice license agreement's **$10.0 million** upfront payment was recognized in 2023 License, Collaboration and Other Revenue (in thousands) | Entity | Description | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----- | :---------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Medice | Vafseo in EU | $16 | $0 | $24 | $0 | | MTPC | Vafseo in Japan | $502 | $1,169 | $870 | $1,581 | | JT and Torii | Riona in Japan | $1,493 | $1,270 | $2,662 | $2,456 | | **Total** | | **$2,011** | **$2,439** | **$3,556** | **$4,037** | - The decrease in revenue was primarily due to lower revenue from the MTPC supply agreement[165](index=165&type=chunk) - The **$10.0 million** upfront payment from the Medice License Agreement was recognized as revenue in 2023[175](index=175&type=chunk) [13. Capital Stock](index=48&type=section&id=13.%20CAPITAL%20STOCK) As of June 30, 2025, Akebia had **263,041,832** common shares outstanding. The company raised **$18.4 million** net from ATM offerings and **$48.1 million** net from a public offering in H1 2025. Warrants to purchase **4,230,769** common shares were issued in connection with the BlackRock Credit Agreement, with **1,408,588** shares issued via cashless exercise in July 2025 - **263,041,832** common shares were issued and outstanding as of June 30, 2025[196](index=196&type=chunk) - Net proceeds from ATM offerings were **$18.4 million** for the six months ended June 30, 2025[198](index=198&type=chunk) - A public offering in March 2025 generated **$46.5 million** net, with an additional **$1.6 million** net from the partial exercise of an option in April 2025[199](index=199&type=chunk)[200](index=200&type=chunk) - Warrants to purchase **4,230,769** shares of common stock were issued in connection with the BlackRock Credit Agreement[203](index=203&type=chunk)[206](index=206&type=chunk) - On July 21, 2025, **1,408,588** shares were issued via cashless exercise of warrants[207](index=207&type=chunk) [14. Stock-Based Compensation and Benefit Plan](index=50&type=section&id=14.%20STOCK-BASED%20COMPENSATION%20AND%20BENEFIT%20PLAN) Stock-based compensation expense increased to **$2.68 million** for Q2 2025 and **$4.86 million** for H1 2025. The company granted **4,009,600** stock options and **4,414,300** RSUs in H1 2025. As of June 30, 2025, **$13.5 million** in unrecognized stock option costs and **$11.3 million** in unrecognized RSU costs remain Stock-Based Compensation (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total stock-based compensation | $2,676 | $2,072 | $4,863 | $4,432 | - **4,009,600** stock options were granted to employees and directors during the six months ended June 30, 2025[210](index=210&type=chunk) - **4,414,300** RSUs were granted during the six months ended June 30, 2025[226](index=226&type=chunk) - Unrecognized compensation costs for stock options totaled **$13.5 million**, with a weighted average recognition period of **2.89 years**[219](index=219&type=chunk) - Unrecognized compensation costs for RSUs totaled **$11.3 million**, with a weighted average recognition period of **2.08 years**[226](index=226&type=chunk) [15. Net Income (Loss) Per Share](index=55&type=section&id=15.%20NET%20INCOME%20%28LOSS%29%20PER%20SHARE) Basic and diluted net income per share were **$0.00** for Q2 2025 and **$0.03/$0.02** for H1 2025, a significant improvement from losses in 2024. Potentially dilutive securities were included in 2025 calculations due to net income, but excluded in 2024 due to anti-dilutive effects from net losses Net Income (Loss) Per Share (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $247 | $(8,582) | $6,359 | $(26,567) | | Basic EPS | $0.00 | $(0.04) | $0.03 | $(0.13) | | Diluted EPS | $0.00 | $(0.04) | $0.02 | $(0.13) | - Dilutive securities (options, RSUs, warrants, ESPP) were included in 2025 EPS calculations due to net income, but excluded in 2024 due to anti-dilutive effects from net losses[231](index=231&type=chunk) [16. Segment Information](index=55&type=section&id=16.%20SEGMENT%20INFORMATION) Akebia operates as a single operating segment focused on developing and commercializing innovative therapeutics primarily in the U.S. The Chief Operating Decision Maker (CODM) reviews consolidated financial information, including income from operations and net income, to assess performance and allocate resources - The company operates as one operating segment, consistent with the CODM's review of consolidated financial information[232](index=232&type=chunk)[233](index=233&type=chunk) Segment Information (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $62,472 | $43,648 | $119,808 | $76,255 | | Income (loss) from operations | $14,089 | $(8,725) | $27,603 | $(23,660) | | Net income (loss) | $247 | $(8,582) | $6,359 | $(26,567) | [17. Subsequent Events](index=57&type=section&id=17.%20SUBSEQUENT%20EVENTS) On **July 21, 2025**, the Warrant Holder exercised an option to purchase **2,115,384** shares of common stock on a cashless basis, resulting in the issuance of **1,408,588** shares on **July 23, 2025** - On **July 21, 2025**, **2,115,384** shares of common stock were purchased via cashless exercise of warrants[240](index=240&type=chunk) - As a result, **1,408,588** shares were issued to the Warrant Holder on **July 23, 2025**[240](index=240&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=58&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Akebia's financial condition and results of operations, highlighting the company's transition to profitability driven by Vafseo's U.S. launch and Auryxia sales, while also discussing factors affecting performance, recent financing activities, liquidity, and critical accounting estimates [Business Overview](index=58&type=section&id=Business%20Overview) Akebia Therapeutics is a fully integrated biopharmaceutical company focused on kidney disease, with two commercial products: Vafseo (vadadustat) for anemia due to CKD in dialysis patients (U.S. launch Jan 2025) and Auryxia (ferric citrate) for hyperphosphatemia and IDA in CKD patients (lost U.S. exclusivity March 2025). The company is pursuing label expansion for Vafseo in non-dialysis patients and has a pipeline of HIF-based molecules and praliciguat for other unmet needs - Vafseo (vadadustat) was approved by the FDA in March 2024 for anemia due to CKD in adult dialysis patients and launched in the U.S. in January 2025, targeting a **$1 billion** market opportunity[247](index=247&type=chunk) - Akebia is pursuing label expansion for Vafseo for CKD non-dialysis dependent patients, aiming to initiate a Phase 3 cardiovascular outcome study (VALOR) by the end of 2025[248](index=248&type=chunk) - Auryxia (ferric citrate) is marketed in the U.S. for DD-CKD and NDD-CKD, but lost U.S. exclusivity in March 2025, with potential for slower revenue decline due to ESRD bundle dynamics[250](index=250&type=chunk)[251](index=251&type=chunk) - The company's pipeline includes two additional HIF molecules (AKB-9090 for CS-AKI/ARDS and AKB-10108 for ROP) and praliciguat for kidney disease indications[254](index=254&type=chunk)[255](index=255&type=chunk) [Factors Affecting Our Performance and Results of Operations](index=60&type=section&id=Factors%20Affecting%20Our%20Performance%20and%20Results%20of%20Operations) Akebia's performance is influenced by product revenue from Auryxia and Vafseo, which is subject to variables like discounts, rebates, and the impact of Auryxia's loss of exclusivity. License and collaboration revenue from partners like Medice and MTPC also contribute. Cost of goods sold includes manufacturing costs and royalties, with R&D expenses focused on Vafseo development and pipeline expansion. SG&A covers commercial and administrative costs, while other income/expense includes interest and changes in warrant liability fair value - Product revenue is generated from U.S. sales of Auryxia and Vafseo, influenced by discounts, rebates, and product returns[257](index=257&type=chunk) - Auryxia lost U.S. exclusivity in March 2025, with an authorized generic version now being sold, impacting future Auryxia revenues[258](index=258&type=chunk) - License, collaboration, and other revenue includes license fees, royalties, and product supply revenue from partners like Medice, MTPC, JT, and Torii[259](index=259&type=chunk) - R&D expenses primarily cover Vafseo development, pipeline expansion (HIF-based molecules, praliciguat), and preclinical/clinical activities, totaling **$1.7 billion** since inception through June 30, 2025[264](index=264&type=chunk)[266](index=266&type=chunk) - SG&A expenses include personnel, marketing, professional fees, and general corporate costs[271](index=271&type=chunk) [Recent Events](index=64&type=section&id=Recent%20Events) Akebia completed a public offering of common stock in March 2025, raising **$46.5 million** net, with an additional **$1.6 million** from an option exercise in April 2025. The company also drew the final **$10.0 million** tranche of the BlackRock Credit Agreement in February 2025, issuing additional warrants. ATM offerings in H1 2025 generated **$18.4 million** net - A public offering of **25,000,000** shares in March 2025 generated **$46.5 million** net proceeds, with an additional **$1.6 million** from **850,000** shares sold in April 2025[275](index=275&type=chunk)[276](index=276&type=chunk) - The final **$10.0 million** tranche of the BlackRock Credit Agreement was drawn on February 3, 2025, providing **$9.3 million** net proceeds after costs[277](index=277&type=chunk)[278](index=278&type=chunk)[279](index=279&type=chunk) - Additional warrants to purchase **1,153,846** shares of common stock were issued to the Warrant Holder in connection with the Tranche C drawdown[280](index=280&type=chunk) - ATM offerings generated **$18.4 million** net proceeds from the sale of **9,437,364** shares during the six months ended June 30, 2025[283](index=283&type=chunk) [Results of Operations](index=66&type=section&id=Results%20of%20Operations) Akebia's results of operations show a significant turnaround, with net income in Q2 and H1 2025 compared to net losses in 2024. This improvement is primarily driven by substantial increases in product revenue from Vafseo's U.S. launch and Auryxia sales, coupled with the cessation of intangible asset amortization. R&D expenses increased due to Vafseo clinical trials, while SG&A remained relatively stable [Comparison of the Three Months Ended June 30, 2025 and 2024](index=66&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) For Q2 2025, Akebia reported net income of **$0.25 million**, a significant improvement from a net loss of **$8.58 million** in Q2 2024. Total revenues increased by **43%** to **$62.47 million**, driven by Vafseo's U.S. market entry (**$13.28 million**) and increased Auryxia sales (**$47.18 million**). Cost of goods sold decreased by **42%** due to the absence of intangible asset amortization, despite an increase in cost of product and other revenue. R&D expenses rose by **44%** due to increased clinical trial activities Comparison of the Three Months Ended June 30, 2025 and 2024 (in thousands) | Metric (in thousands) | Q2 2025 | Q2 2024 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Total Revenues | $62,472 | $43,648 | $18,824 | 43% | | Product Revenue, Net | $60,461 | $41,209 | $19,252 | 47% | | Vafseo Revenue | $13,279 | $0 | $13,279 | N/A | | Auryxia Revenue | $47,183 | $41,209 | $5,974 | 14% | | Total Cost of Goods Sold | $9,919 | $17,047 | $(7,128) | (42)% | | Amortization of Intangible Asset | $0 | $9,011 | $(9,011) | (100)% | | R&D Expenses | $11,013 | $7,647 | $3,366 | 44% | | Net Income (Loss) | $247 | $(8,582) | $8,829 | (103)% | - The increase in product revenue was primarily due to Vafseo's U.S. market entry in January 2025 and increased sales volumes of Auryxia[286](index=286&type=chunk) - Cost of product and other revenue increased due to a **$4.9 million** benefit in Q2 2024 from selling previously written-down inventory, partially offset by a **$2.1 million** charge related to firm purchase commitment liability in Q2 2024[291](index=291&type=chunk) [Comparison of the Six Months Ended June 30, 2025 and 2024](index=69&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) For H1 2025, Akebia achieved net income of **$6.36 million**, a substantial improvement from a net loss of **$26.57 million** in H1 2024. Total revenues surged by **57%** to **$119.81 million**, driven by Vafseo's U.S. launch (**$25.31 million**) and increased Auryxia sales (**$90.94 million**). Total cost of goods sold decreased by **39%** due to the full amortization of intangible assets. R&D expenses increased by **19%** due to Vafseo clinical trials and other programs Comparison of the Six Months Ended June 30, 2025 and 2024 (in thousands) | Metric (in thousands) | H1 2025 | H1 2024 | Change ($) | Change (%) | | :-------------------- | :------ | :------ | :--------- | :--------- | | Total Revenues | $119,808 | $76,255 | $43,553 | 57% | | Product Revenue, Net | $116,252 | $72,218 | $44,034 | 61% | | Vafseo Revenue | $25,313 | $0 | $25,313 | N/A | | Auryxia Revenue | $90,939 | $72,218 | $18,721 | 26% | | Total Cost of Goods Sold | $17,544 | $28,651 | $(11,107) | (39)% | | Amortization of Intangible Asset | $0 | $18,021 | $(18,021) | (100)% | | R&D Expenses | $20,767 | $17,379 | $3,388 | 19% | | Net Income (Loss) | $6,359 | $(26,567) | $32,926 | (124)% | - The increase in product revenue was primarily due to Vafseo's U.S. market entry in January 2025 and an increase in sales volumes of Auryxia[303](index=303&type=chunk) - Cost of product and other revenue increased due to an **$8.6 million** benefit in H1 2024 from selling previously written-down inventory, partially offset by a **$2.1 million** charge related to firm purchase commitment liability in H1 2024[308](index=308&type=chunk) [Liquidity and Capital Resources](index=71&type=section&id=Liquidity%20and%20Capital%20Resources) Akebia's cash and cash equivalents stood at **$137.3 million** as of June 30, 2025, with total equity funding of **$929.2 million** since inception. The company believes current resources and expected revenues are sufficient for its operating plan, but acknowledges potential future financing needs due to Auryxia's loss of exclusivity and ongoing R&D. Major contractual obligations include the BlackRock Term Loans (**$55.0 million**), settlement royalties (**$63.39 million**), Working Capital Fund liability (**$40.57 million**), and future royalty sales liability (**$53.23 million**) - As of June 30, 2025, cash and cash equivalents were **$137.3 million**, with restricted cash of **$1.7 million**[317](index=317&type=chunk) - Since inception, Akebia has raised approximately **$929.2 million** net from equity sales[318](index=318&type=chunk) - The BlackRock Credit Agreement provides a **$55.0 million** term loan facility, maturing **January 29, 2028**, with interest-only payments until **December 31, 2026**[324](index=324&type=chunk)[325](index=325&type=chunk) - Liability related to settlement royalties totaled **$63.39 million** as of June 30, 2025, with an annual effective interest rate of **37.0%**[334](index=334&type=chunk) - Working Capital Fund liability was **$40.57 million** as of June 30, 2025, with an imputed interest rate of **15.0%**[338](index=338&type=chunk) - Liability related to sale of future royalties was **$53.23 million** as of June 30, 2025, with a **0%** effective interest rate[342](index=342&type=chunk) [Cash Flows](index=79&type=section&id=Cash%20Flows) Akebia's cash flows for the six months ended June 30, 2025, show a significant increase in cash, cash equivalents, and restricted cash by **$85.45 million**, primarily driven by **$76.66 million** from financing activities (debt and stock sales) and a positive shift in operating activities to **$8.76 million** provided Cash Flows (in thousands) | Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------- | :----------------------------- | :----------------------------- | | Operating activities | $8,758 | $(29,498) | | Investing activities | $28 | $(29) | | Financing activities | $76,662 | $26,115 | | Increase (decrease) in cash, cash equivalents and restricted cash | $85,448 | $(3,412) | - Net cash provided by operating activities was **$8.8 million** for H1 2025, a positive change from **$29.5 million** used in H1 2024[359](index=359&type=chunk)[360](index=360&type=chunk) - Net cash provided by financing activities was **$76.7 million** for H1 2025, mainly from **$10.0 million** in debt issuance and **$66.4 million** from common stock sales[364](index=364&type=chunk) [Recent Accounting Pronouncements](index=80&type=section&id=Recent%20Accounting%20Pronouncements) For a discussion of recent accounting pronouncements, refer to Note 2, Summary of Significant Accounting Policies, in the Notes to the unaudited condensed consolidated financial statements - Refer to Note 2 for details on recent accounting pronouncements[366](index=366&type=chunk) [Critical Accounting Estimates and Significant Judgments](index=80&type=section&id=Critical%20Accounting%20Estimates%20and%20Significant%20Judgments) Management's discussion of critical accounting estimates and significant judgments, including those related to accrued expenses, revenue reserves, inventories, and long-term assets, remains consistent with the 2024 Form 10-K, with no material changes in methodologies during H1 2025 - No material changes to methodologies for critical accounting estimates were reported during the six months ended June 30, 2025[368](index=368&type=chunk) - Key estimates include accrued expenses, revenue reserves, inventories, and long-term assets[367](index=367&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=80&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Akebia Therapeutics, Inc. is not required to provide quantitative and qualitative disclosures about market risk - Akebia is a smaller reporting company and is not required to provide market risk disclosures[369](index=369&type=chunk) [Item 4. Controls and Procedures](index=80&type=section&id=Item%204.%20Controls%20and%20Procedures) Akebia's disclosure controls and procedures were deemed ineffective as of June 30, 2025, due to a material weakness in internal control over financial reporting related to inventory accounting. Remediation efforts are ongoing, focusing on improving the precision of review controls for sales forecasts used in inventory evaluations [Management's Evaluation of Disclosure Controls and Procedures](index=80&type=section&id=Management%27s%20Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Akebia's disclosure controls and procedures were not effective as of June 30, 2025, due to a previously identified material weakness in internal control over financial reporting related to the completeness, accuracy, and reasonableness of the product sales forecast used for inventory evaluations - Disclosure controls and procedures were not effective as of **June 30, 2025**[371](index=371&type=chunk) - A material weakness was identified in internal control over financial reporting related to the precision of controls for evaluating product sales forecasts used in inventory accounting[372](index=372&type=chunk) [Remediation Efforts of the Material Weakness — Inventories](index=80&type=section&id=Remediation%20Efforts%20of%20the%20Material%20Weakness%20%E2%80%94%20Inventories) Akebia is actively remediating the material weakness in inventory accounting by increasing the precision of review controls for sales forecasts. The company acknowledges that the material weakness will persist until these controls operate effectively for a sufficient period - Remediation efforts include increasing the precision of review controls for sales forecasts used in inventory evaluations[374](index=374&type=chunk) - The material weakness will continue to exist until controls operate effectively and are tested[375](index=375&type=chunk) [Changes in Internal Control over Financial Reporting](index=82&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No changes in internal control over financial reporting materially affected or are reasonably likely to materially affect the company's internal control during the reporting period, except for the ongoing remediation efforts for the identified material weakness - No material changes in internal control over financial reporting occurred during the period, apart from ongoing remediation efforts[376](index=376&type=chunk) [PART II—OTHER INFORMATION](index=82&type=section&id=Part%20II%E2%80%94OTHER%20INFORMATION) This section details Akebia Therapeutics, Inc.'s legal proceedings, comprehensive risk factors, unregistered equity sales, and other disclosures for the reporting period [Item 1. Legal Proceedings](index=82&type=section&id=Item%201.%20Legal%20Proceedings.) Akebia is involved in ongoing legal proceedings, including opposition proceedings against its Indian patent for vadadustat and a European patent for vadadustat's dosing regimen, with responses submitted to the respective patent offices [Opposition Proceedings Against Akebia](index=82&type=section&id=Opposition%20Proceedings%20Against%20Akebia) Akebia is defending its Indian Patent No. 287720 for vadadustat's composition of matter and its European Patent No. 3007695 for vadadustat's once-daily dosing regimen against opposition filings by Dr. Reddy's Laboratories Limited and Sandoz AG, respectively - Dr. Reddy's Laboratories Limited filed an opposition to Akebia's Indian Patent No. **287720** (vadadustat composition of matter) in September 2018, with amended claims published **May 9, 2025**[378](index=378&type=chunk) - Sandoz AG filed an opposition against Akebia's European Patent No. **3007695** (vadadustat once daily dosing regimen) on **November 6, 2024**, to which Akebia submitted a reply on **March 18, 2025**[379](index=379&type=chunk) [Item 1A. Risk Factors](index=82&type=section&id=Item%201A.%20Risk%20Factors.) Akebia faces numerous risks, including financial challenges like sustained losses and the need for additional capital, commercialization hurdles for Auryxia (post-exclusivity) and Vafseo (market acceptance, reimbursement), and extensive product development risks. Regulatory complexities, reliance on third parties, intellectual property challenges, and operational management issues also pose significant threats to its business, financial condition, and stock price [Risks Related to our Financial Position, Need for Additional Capital and Growth Strategy](index=82&type=section&id=Risks%20Related%20to%20our%20Financial%20Position%2C%20Need%20for%20Additional%20Capital%20and%20Growth%20Strategy) Akebia has a history of significant losses and an accumulated deficit of **$1.7 billion**, despite recent net income. Future profitability is uncertain, dependent on Vafseo's commercial success, Auryxia's post-exclusivity performance, and managing substantial R&D and operating expenses. The company may require significant additional financing, which could dilute stockholders, restrict operations, or necessitate relinquishing product rights. Strategic transactions and resource allocation decisions also carry risks, potentially impairing growth if new products or candidates are not successfully identified or integrated - Akebia has incurred net losses since inception, with an accumulated deficit of **$1.7 billion** as of June 30, 2025, despite recent net income[381](index=381&type=chunk) - Vafseo's U.S. approval was for a narrower indication (dialysis patients only) and delayed, impacting commercialization and requiring significant additional resources[383](index=383&type=chunk) - Auryxia lost U.S. exclusivity in March 2025, and its future revenue depends on maintaining dialysis contracts, generic competition, and pricing[385](index=385&type=chunk) - The company may require substantial additional financing, which could lead to stockholder dilution, operational restrictions, or the need to relinquish product rights[398](index=398&type=chunk)[402](index=402&type=chunk)[403](index=403&type=chunk) - Failure to identify, acquire, or successfully develop additional products or product candidates could impair long-term growth[404](index=404&type=chunk)[406](index=406&type=chunk) [Risks Related to our Financial Arrangements](index=96&type=section&id=Risks%20Related%20to%20our%20Financial%20Arrangements) Akebia's financial condition is significantly impacted by its BlackRock Credit Agreement, which includes **$55.0 million** in term loans secured by company assets, with covenants requiring minimum cash balances or revenue. Non-compliance could lead to accelerated repayment and adverse effects. Additionally, the Royalty Interest Acquisition Agreement with HCR for Vafseo royalties in Japan contains covenants, and any violation could materially harm financial condition - The BlackRock Credit Agreement provides a **$55.0 million** senior secured term loan facility, maturing **January 29, 2028**[415](index=415&type=chunk) - Financial covenants require maintaining a minimum cash balance of **$15.0 million** or trailing twelve-month revenue of **$150.0 million**[416](index=416&type=chunk) - Failure to comply with covenants could result in acceleration of debt and enforcement of security interests, materially harming the business[416](index=416&type=chunk)[419](index=419&type=chunk) - The Royalty Agreement with HCR for Vafseo royalties in Japan has an annual cap of **$13.0 million** and an aggregate cap of **$150.0 million**, with covenants that, if violated, could materially adversely affect financial condition[421](index=421&type=chunk) [Risks Related to Commercialization](index=98&type=section&id=Risks%20Related%20to%20Commercialization) Akebia's commercial success hinges on Auryxia and Vafseo, facing challenges from Auryxia's loss of exclusivity and generic competition, and Vafseo's limited U.S. indication and market acceptance within dialysis networks. Reimbursement policies, competition from existing and new therapies, and the ability to maintain sales and marketing capabilities are critical. International operations for Riona and Vafseo also expose the company to foreign regulatory, economic, and currency risks - Auryxia's loss of U.S. exclusivity in **March 2025** and generic competition will adversely affect revenue, despite an authorized generic version[423](index=423&type=chunk)[425](index=425&type=chunk) - Vafseo's U.S. approval is limited to dialysis patients, potentially affecting market acceptance and revenue if not adopted by large dialysis organizations[422](index=422&type=chunk)[426](index=426&type=chunk) - Market acceptance and sales of products depend on adequate coverage and reimbursement from third-party payors, including dialysis organizations, and can be impacted by pricing pressures and formulary decisions[429](index=429&type=chunk)[438](index=438&type=chunk)[446](index=446&type=chunk)[447](index=447&type=chunk) - Akebia faces substantial competition from existing and new drugs for hyperphosphatemia (e.g., Renagel, Velphoro, XPHOZAH) and anemia (e.g., Epogen, Aranesp, roxadustat)[452](index=452&type=chunk)[454](index=454&type=chunk)[455](index=455&type=chunk)[459](index=459&type=chunk)[460](index=460&type=chunk)[462](index=462&type=chunk) - International commercialization efforts for Riona (Japan) and Vafseo (Europe, Japan) are subject to risks including political instability, changing reimbursement policies, and foreign currency fluctuations[466](index=466&type=chunk)[468](index=468&type=chunk) [Risks Related to Product Development](index=113&type=section&id=Risks%20Related%20to%20Product%20Development) Drug development is a lengthy, expensive, and uncertain process with high failure rates. Akebia faces risks in completing clinical trials for Vafseo label expansion and other candidates, including potential delays, negative results, or safety concerns (e.g., Vafseo's MACE and liver injury risks). Enrollment challenges, evolving regulatory requirements (like EU CTR and U.S. DAP guidance), and the acceptance of foreign clinical data further complicate development, potentially leading to increased costs, delayed approvals, or market limitations - Clinical drug development is lengthy, expensive, and uncertain, with high risk of failure at any stage[471](index=471&type=chunk) - Vafseo's U.S. approval was delayed and limited to dialysis patients due to FDA safety concerns regarding MACE in non-dialysis patients and drug-induced liver injury[487](index=487&type=chunk)[499](index=499&type=chunk) - Akebia is pursuing label expansion for Vafseo in NDD-CKD patients, requiring additional Phase 3 studies (VALOR) with uncertain outcomes and timing[472](index=472&type=chunk)[500](index=500&type=chunk) - Difficulties in patient enrollment for clinical trials, particularly for pediatric studies (e.g., Auryxia's Hyperphosphatemia Indication), can cause delays and increased costs[476](index=476&type=chunk)[477](index=477&type=chunk)[478](index=478&type=chunk) - Evolving regulatory landscapes, such as the EU Clinical Trials Regulation (CTR) and U.S. diversity action plan (DAP) guidance, introduce complexities and potential delays for global clinical trials[483](index=483&type=chunk)[484](index=484&type=chunk) [Risks Related to Governmental Regulation and Compliance](index=132&type=section&id=Risks%20Related%20to%20Governmental%20Regulation%20and%20Compliance) Akebia operates under complex regulatory schemes, including strict post-marketing requirements for Auryxia and Vafseo (e.g., pediatric studies, REMS), and faces risks of penalties for non-compliance. The company is exposed to fraud and abuse laws (Anti-Kickback, False Claims), off-label promotion restrictions, and evolving data privacy regulations (GDPR, CCPA). Disruptions at government agencies (FDA staffing cuts, shutdowns) and healthcare reform initiatives (IRA, drug price negotiations) could hinder approvals, increase costs, and impact product pricing and reimbursement - Auryxia and Vafseo are subject to extensive post-marketing regulatory requirements, including post-approval pediatric studies, with potential penalties for non-compliance (e.g., Auryxia's delayed Hyperphosphatemia Indication study)[515](index=515&type=chunk) - The company is exposed to federal and state anti-kickback, false claims, and off-label promotion laws, with violations potentially leading to significant civil/criminal penalties and exclusion from healthcare programs[523](index=523&type=chunk)[524](index=524&type=chunk)[528](index=528&type=chunk)[529](index=529&type=chunk) - Disruptions at the FDA (e.g., personnel losses, budget cuts, executive orders) could delay guidance, review, and approval of product candidates[533](index=533&type=chunk)[534](index=534&type=chunk)[535](index=535&type=chunk)[536](index=536&type=chunk) - Compliance with evolving data privacy laws (GDPR, CCPA, state health data laws) is costly and complex, with potential for significant fines and litigation for non-compliance[542](index=542&type=chunk)[546](index=546&type=chunk)[547](index=547&type=chunk)[548](index=548&type=chunk)[550](index=550&type=chunk)[552](index=552&type=chunk) - Healthcare reform measures, including the Inflation Reduction Act (IRA) and Medicare drug price negotiations, could increase costs, reduce reimbursement, and impact product pricing for Auryxia and Vafseo[568](index=568&type=chunk)[569](index=569&type=chunk)[571](index=571&type=chunk)[573](index=573&type=chunk) [Risks Related to our Reliance on Third Parties](index=156&type=section&id=Risks%20Related%20to%20our%20Reliance%20on%20Third%20Parties) Akebia heavily relies on third-party collaborations for development and commercialization of Auryxia, Riona, and Vafseo, and on single-source manufacturers and distributors for product supply. Failure of these partners to perform, comply with regulations, or meet deadlines could severely harm the business, leading to supply disruptions, increased costs, and inability to capitalize on market potential. Geopolitical tensions, particularly with China, Europe, and Canada, also pose risks to the supply chain and manufacturing relationships - Akebia depends on collaborations with JT/Torii (Riona in Japan), Averoa (ferric citrate in Europe), and an AG Partner (authorized generic Auryxia) for commercialization[595](index=595&type=chunk) - Collaborations for Vafseo include MTPC (Japan/Asia) and Medice (EEA/UK/Switzerland/Australia)[596](index=596&type=chunk) - Reliance on single-source third-party manufacturers (e.g., Siegfried for Auryxia, Patheon/WuXi STA for Vafseo) and distributors creates significant supply chain risks[606](index=606&type=chunk)[608](index=608&type=chunk) - Failure of third-party manufacturers or distributors to comply with cGMP, meet quality standards, or perform as agreed could lead to supply interruptions, increased costs, and regulatory sanctions[608](index=608&type=chunk)[609](index=609&type=chunk)[613](index=613&type=chunk)[615](index=615&type=chunk) - Geopolitical tensions and trade policies, especially with China, Europe, and Canada, could disrupt supply chains and increase manufacturing costs, particularly with reliance on Chinese CDMOs like WuXi STA[630](index=630&type=chunk)[631](index=631&type=chunk)[632](index=632&type=chunk) [Risks Related to our Intellectual Property](index=170&type=section&id=Risks%20Related%20to%20our%20Intellectual%20Property) Akebia's commercial success relies on robust intellectual property protection, but faces risks from the high cost and uncertainty of obtaining and defending patents globally. Challenges include competitors designing around patents, patent expiration before commercialization, and the difficulty of enforcing rights in certain jurisdictions. The market entry of generics, particularly for Auryxia post-exclusivity, and ongoing litigation (e.g., FibroGen disputes) pose significant threats to sales and financial performance. Additionally, the company is vulnerable to claims of wrongful use or disclosure of third-party confidential information by employees or contractors - Obtaining and defending patent protection globally is expensive and uncertain, with risks of patents being challenged, invalidated, or designed around by competitors[633](index=633&type=chunk)[635](index=635&type=chunk)[636](index=636&type=chunk)[638](index=638&type=chunk)[639](index=639&type=chunk) - The market entry of generic versions of Auryxia following its loss of exclusivity in **March 2025** will negatively impact net product revenue[657](index=657&type=chunk)[660](index=660&type=chunk) - Akebia is involved in opposition proceedings against its Indian and European patents for vadadustat, which could be costly and divert resources[669](index=669&type=chunk) - The company settled patent disputes with FibroGen and Astellas in the EU, UK, and Japan regarding Vafseo, but may face future challenges outside this territory[664](index=664&type=chunk) - Akebia is exposed to claims that employees or contractors have wrongfully used or disclosed third-party confidential information, potentially leading to litigation and loss of intellectual property rights[671](index=671&type=chunk)[672](index=672&type=chunk) [Risks Related to our Business and Managing Growth](index=182&type=section&id=Risks%20Related%20to%20our%20Business%20and%20Managing%20Growth) Akebia's ability to grow and commercialize products is highly dependent on attracting and retaining skilled personnel, especially senior management, in a competitive industry. The company faces challenges in managing operational growth, including complex partnerships and supply obligations. A material weakness in internal control over financial reporting related to inventory accounting requires ongoing remediation. Additionally, the company is exposed to product liability lawsuits, which could result in substantial liabilities and commercialization limits, and security breaches of IT systems pose risks to data integrity and intellectual property - Recruiting and retaining qualified senior management and personnel is critical, with past workforce reductions highlighting this risk[673](index=673&type=chunk)[674](index=674&type=chunk) - Managing growth, including complex collaborations and supply obligations for products like Vafseo and ferric citrate, presents operational difficulties[676](index=676&type=chunk)[677](index=677&type=chunk)[678](index=678&type=chunk) - A material weakness in internal control over financial reporting as of **December 31, 2024**, related to inventory accounting, could impact financial reporting accuracy and fraud prevention[680](index=680&type=chunk)[682](index=682&type=chunk) - Product liability lawsuits from clinical and commercial use of Auryxia and Vafseo pose an inherent risk, potentially leading to substantial liabilities and commercialization limits[704](index=704&type=chunk)[706](index=706&type=chunk) - Security breaches and unauthorized use of IT systems could damage clinical trials, impact regulatory filings, compromise intellectual property, and lead to significant fines[685](index=685&type=chunk)[686](index=686&type=chunk)[687](index=687&type=chunk)[690](index=690&type=chunk) [Risks Related to our Common Stock](index=195&type=section&id=Risks%20Related%20to%20our%20Common%20Stock) Akebia's stock price is highly volatile due to various factors, including clinical trial results, regulatory developments, and market competition, potentially leading to substantial losses for investors and increased litigation risk. Failure to meet Nasdaq listing requirements could result in delisting. The issuance or sale of additional common stock, including from large stockholders or future offerings, could dilute existing ownership and depress the stock price. Furthermore, provisions in organizational documents and Delaware law may have anti-takeover effects, and the absence of cash dividends means capital appreciation is the sole source of stockholder gain - Akebia's stock price is volatile, influenced by clinical trial results, regulatory developments, and market competition, leading to potential investor losses and litigation[717](index=717&type=chunk)[718](index=718&type=chunk) - Failure to comply with Nasdaq's continued listing requirements (e.g., minimum bid price) could result in delisting, negatively impacting stock price and capital access[720](index=720&type=chunk) - Sales of substantial amounts of common stock by large stockholders (BlackRock, Vanguard, CSL Vifor) or through future offerings could dilute existing ownership and depress the market price[721](index=721&type=chunk)[722](index=722&type=chunk)[723](index=723&type=chunk)[724](index=724&type=chunk)[725](index=725&type=chunk)[726](index=726&type=chunk) - Organizational documents and Delaware law contain anti-takeover provisions that could discourage acquisitions or make it difficult for stockholders to change management[728](index=728&type=chunk)[730](index=730&type=chunk) - Akebia does not anticipate paying cash dividends, making capital appreciation the sole source of gain for stockholders[731](index=731&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=201&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) During the quarter ended June 30, 2025, Akebia Therapeutics, Inc. did not have any unregistered sales of equity securities, other than those previously disclosed in its Current Reports on Form 8-K - No unregistered sales of equity securities occurred during **Q2 2025**, beyond those previously reported in Form 8-K filings[733](index=733&type=chunk) [Item 3. Defaults Upon Senior Securities](index=201&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) This item is not applicable to Akebia Therapeutics, Inc. for the reporting period - This item is not applicable[734](index=734&type=chunk) [Item 4. Mine Safety Disclosures](index=201&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) This item is not applicable to Akebia Therapeutics, Inc. for the reporting period - This item is not applicable[734](index=734&type=chunk) [Item 5. Other Information](index=201&type=section&id=Item%205.%20Other%20Information.) This section confirms that none of Akebia's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025 [Rule 10b5-1—Director and Officer Trading Arrangements](index=201&type=section&id=Rule%2010b5-1%E2%80%94Director%20and%20Officer%20Trading%20Arrangements) No directors or officers of Akebia Therapeutics, Inc. adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during **Q2 2025**[737](index=737&type=chunk) [Item 6. Exhibits](index=202&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed with the Form 10-Q, including organizational documents, the 2023 Stock Incentive Plan, certifications from executive officers, and Inline XBRL documents - Exhibits include the Ninth Amended and Restated Certificate of Incorporation, Second Amended and Restated Bylaws, and the **2023 Stock Incentive Plan**[739](index=739&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer (**Rule 13a-14(a)** and **13a-14(b)**) are filed[739](index=739&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Definition, Labels, Presentation Linkbase) and the Cover Page Interactive Data File are included[739](index=739&type=chunk) [Signatures](index=203&type=section&id=SIGNATURES) The report is duly signed on **August 7, 2025**, by John P. Butler (President and CEO), Erik J. Ostrowski (SVP, CFO, CBO, and Treasurer), and Richard C. Malabre (SVP, Chief Accounting Officer), certifying its submission on behalf of Akebia Therapeutics, Inc - The report was signed on **August 7, 2025**, by John P. Butler (President and CEO), Erik J. Ostrowski (SVP, CFO, CBO, and Treasurer), and Richard C. Malabre (SVP, Chief Accounting Officer)[743](index=743&type=chunk)

```markdown [PART I. FINANCIAL INFORMATION](index=4&type=section&id=Part%20I.%20Financial%20Information) This section presents unaudited consolidated financial statements and management's analysis of financial condition and operations [ITEM 1. FINANCIAL STATEMENTS (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents unaudited consolidated financial statements, including balance sheets, income, cash flow, equity, and notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents condensed consolidated balance sheets, detailing changes in assets, liabilities, and equity Condensed Consolidated Balance Sheets (Millions) | Metric | June 30, 2025 (Millions) | September 30, 2024 (Millions) | Change (Millions) | % Change | | :-------------------------------- | :----------------------- | :---------------------------- | :---------------- | :------- | | Cash and equivalents | $527 | $694 | $(167) | -24.1% | | Total current assets | $2,678 | $2,643 | $35 | 1.3% | | Total assets | $9,777 | $9,155 | $622 | 6.8% | | Total current liabilities | $4,050 | $3,897 | $153 | 3.9% | | Total liabilities | $8,965 | $8,480 | $485 | 5.7% | | Total equity | $812 | $675 | $137 | 20.3% | - **Total assets increased by $622 million, or 6.8%**, primarily driven by increases in royalty advances, intangible assets subject to amortization, and goodwill[9](index=9&type=chunk) - **Total equity increased by $137 million, or 20.3%**, largely due to an increase in additional paid-in capital and noncontrolling interest, partially offset by an accumulated deficit[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents condensed consolidated statements of operations, detailing revenue, expenses, and net income/loss Condensed Consolidated Statements of Operations Table | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------- | :------- | | Revenue | $1,689 | $1,554 | $135 | 8.7% | | Total costs and expenses | $(1,520) | $(1,348) | $(172) | 12.8% | | Operating income | $169 | $207 | $(38) | -18.4% | | Net (loss) income | $(16) | $141 | $(157) | -111.3% | | Net (loss) income attributable to WMG Corp. | $(16) | $139 | $(155) | -111.5% | | Class A – Basic and Diluted EPS | $(0.03) | $0.27 | $(0.30) | -111.1% | | Class B – Basic and Diluted EPS | $(0.03) | $0.27 | $(0.30) | -111.1% | Condensed Consolidated Statements of Operations Table | Metric | Nine Months Ended June 30, 2025 (Millions) | Nine Months Ended June 30, 2024 (Millions) | Change (Millions) | % Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :---------------- | :------- | | Revenue | $4,839 | $4,796 | $43 | 0.9% | | Total costs and expenses | $(4,288) | $(4,148) | $(140) | 3.4% | | Operating income | $551 | $680 | $(129) | -19.0% | | Net income | $261 | $430 | $(169) | -39.3% | | Net income attributable to WMG Corp. | $256 | $394 | $(138) | -35.0% | | Class A – Basic and Diluted EPS | $0.49 | $0.75 | $(0.26) | -34.7% | | Class B – Basic and Diluted EPS | $0.49 | $0.75 | $(0.26) | -34.7% | [Condensed Consolidated Statements of Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents condensed consolidated statements of comprehensive income, including net income and other gains/losses Condensed Consolidated Statements of Comprehensive Income Table | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | Change (Millions) | | :--------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------- | | Net (loss) income | $(16) | $141 | $(157) | | Foreign currency adjustment | $118 | $(10) | $128 | | Other comprehensive income (loss), net of tax | $118 | $(10) | $128 | | Total comprehensive income | $102 | $131 | $(29) | | Comprehensive income attributable to WMG Corp. | $102 | $129 | $(27) | Condensed Consolidated Statements of Comprehensive Income Table | Metric | Nine Months Ended June 30, 2025 (Millions) | Nine Months Ended June 30, 2024 (Millions) | Change (Millions) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :---------------- | | Net income | $261 | $430 | $(169) | | Foreign currency adjustment | $73 | $13 | $60 | | Other comprehensive income (loss), net of tax | $73 | $11 | $62 | | Total comprehensive income | $334 | $441 | $(107) | | Comprehensive income attributable to WMG Corp. | $329 | $405 | $(76) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents condensed consolidated statements of cash flows, detailing operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Table | Metric | Nine Months Ended June 30, 2025 (Millions) | Nine Months Ended June 30, 2024 (Millions) | Change (Millions) | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :---------------- | | Net cash provided by operating activities | $447 | $450 | $(3) | | Net cash used in investing activities | $(273) | $(201) | $(72) | | Net cash used in financing activities | $(344) | $(280) | $(64) | | Net decrease in cash and equivalents | $(167) | $(34) | $(133) | | Cash and equivalents at end of period | $527 | $607 | $(80) | - **Cash used in investing activities increased by $72 million**, primarily due to higher acquisitions of music publishing rights and music catalogs ($152M vs $123M) and capital expenditures ($111M vs $83M)[17](index=17&type=chunk) - **Cash used in financing activities increased by $64 million**, mainly driven by higher dividends paid ($283M vs $267M) and payment of deferred consideration ($23M vs $0)[17](index=17&type=chunk) [Condensed Consolidated Statements of Equity](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) This section presents condensed consolidated statements of equity, detailing changes in total equity and accumulated deficit Condensed Consolidated Statements of Equity Table | Metric | June 30, 2025 (Millions) | September 30, 2024 (Millions) | Change (Millions) | | :-------------------------------- | :----------------------- | :---------------------------- | :---------------- | | Total Warner Music Group Corp. equity | $589 | $518 | $71 | | Noncontrolling interest | $223 | $157 | $66 | | Total equity | $812 | $675 | $137 | - **Total equity increased by $137 million** from September 30, 2024, to June 30, 2025, primarily due to **net income** and other comprehensive income, partially offset by dividends paid and an increase in accumulated deficit[19](index=19&type=chunk) - **Accumulated deficit increased from $(1,313) million at September 30, 2024, to $(1,340) million at June 30, 2025**, reflecting the **net loss** for the three months ended June 30, 2025, and dividends[19](index=19&type=chunk)[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides details on notes to condensed consolidated financial statements [1. Description of Business](index=12&type=section&id=1.%20Description%20of%20Business) Warner Music Group operates as a major music entertainment company with Recorded Music and Music Publishing - The Company's business is primarily divided into two segments: **Recorded Music** and **Music Publishing**[24](index=24&type=chunk) - **Recorded Music** involves discovering, developing, marketing, promoting, distributing, selling, and licensing music by recording artists[25](index=25&type=chunk) - **Music Publishing** is an intellectual property business focused on generating revenue from the use of musical compositions, sharing revenues with songwriters or other rightsholders[26](index=26&type=chunk) [2. Summary of Significant Accounting Policies](index=12&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines significant accounting policies, including interim financial statements, consolidation, and new pronouncements - Interim financial statements are prepared in accordance with **U.S. GAAP** for interim financial information and Form 10-Q instructions[27](index=27&type=chunk) - The Company consolidates entities where it has a controlling voting interest or is the primary beneficiary of a **Variable Interest Entity (VIE)**[29](index=29&type=chunk)[30](index=30&type=chunk) - The Company uses the estimated annual effective tax rate method for interim tax provisions and recognizes **Global Intangible Low-Taxed Income (GILTI)** tax in the period it occurs[32](index=32&type=chunk)[33](index=33&type=chunk) - New accounting pronouncements (**ASU 2023-07**, **ASU 2023-09**, **ASU 2024-03**) related to segment reporting, income tax disclosures, and expense disaggregation are being evaluated for their potential impact on consolidated financial statements[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) [3. Earnings per Share](index=14&type=section&id=3.%20Earnings%20per%20Share) The Company calculates earnings per share using the two-class method, reporting a net loss for the three months - The Company uses the **two-class method** for EPS calculation, with no dilutive effect from potential common shares for the periods presented[37](index=37&type=chunk) Earnings per Share Table | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Net (loss) income attributable to WMG Corp. | $(16) million | $139 million | | Basic and Diluted EPS (Class A & B) | $(0.03) | $0.27 | Earnings per Share Table | Metric | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------ | :------------------------------ | | Net income attributable to WMG Corp. | $256 million | $394 million | | Basic and Diluted EPS (Class A & B) | $0.49 | $0.75 | [4. Revenue Recognition](index=16&type=section&id=4.%20Revenue%20Recognition) Revenue is disaggregated by type and geographical location, with total revenues increasing by **9% to $1,689 million** Revenue Recognition Table | Revenue Type | 3 Months Ended June 30, 2025 (Millions) | 3 Months Ended June 30, 2024 (Millions) | % Change | | :-------------------------- | :-------------------------------------- | :-------------------------------------- | :------- | | Digital | $929 | $882 | 5% | | Physical | $119 | $120 | -1% | | Artist services & expanded-rights | $195 | $159 | 23% | | Licensing | $111 | $90 | 23% | | Total Recorded Music | $1,354 | $1,251 | 8% | | Total Music Publishing | $336 | $305 | 10% | | Total revenues | $1,689 | $1,554 | 9% | Revenue Recognition Table | Geographical Location | 3 Months Ended June 30, 2025 (Millions) | 3 Months Ended June 30, 2024 (Millions) | % Change | | :-------------------------- | :-------------------------------------- | :-------------------------------------- | :------- | | Total U.S. | $722 | $678 | 6% | | Total International | $968 | $878 | 10% | | Total revenues | $1,689 | $1,554 | 9% | - **Deferred revenue increased by $845 million** during the nine months ended June 30, 2025, related to cash received for fixed fees and minimum guarantees in advance of performance[44](index=44&type=chunk) Remaining Performance Obligations Table | Remaining Performance Obligations | Total (Millions) | | :-------------------------------- | :--------------- | | Rest of FY25 | $422 | | FY26 | $647 | | FY27 | $171 | | Thereafter | $169 | | **Total** | **$1,409** | [5. Comprehensive Income](index=17&type=section&id=5.%20Comprehensive%20Income) Comprehensive income includes net income and other gains/losses, with accumulated other comprehensive loss improving - Components of other comprehensive income primarily include foreign currency translation gains/losses and minimum pension liabilities[47](index=47&type=chunk) Comprehensive Income Table | Metric | September 30, 2024 (Millions) | June 30, 2025 (Millions) | | :-------------------------------- | :---------------------------- | :----------------------- | | Foreign Currency Translation Loss | $(244) | $(171) | | Minimum Pension Liability Adjustment | $(3) | $(3) | | Accumulated Other Comprehensive Loss, net | $(247) | $(174) | - A **$73 million other comprehensive income** was recognized for the nine months ended June 30, 2025, primarily from foreign currency adjustments[48](index=48&type=chunk) [6. Goodwill and Intangible Assets](index=17&type=section&id=6.%20Goodwill%20and%20Intangible%20Assets) Goodwill increased to **$2,064 million**, and net intangible assets increased to **$2,918 million** due to acquisitions Goodwill and Intangible Assets Table | Segment | September 30, 2024 (Millions) | June 30, 2025 (Millions) | Change (Millions) | | :---------------- | :---------------------------- | :----------------------- | :---------------- | | Recorded Music | $1,557 | $1,600 | $43 | | Music Publishing | $464 | $464 | $0 | | Total Goodwill | $2,021 | $2,064 | $43 | Goodwill and Intangible Assets Table | Intangible Asset Type | September 30, 2024 (Millions) | June 30, 2025 (Millions) | Change (Millions) | | :-------------------------------- | :---------------------------- | :----------------------- | :---------------- | | Recorded music catalog | $1,616 | $1,780 | $164 | | Music publishing copyrights | $2,227 | $2,677 | $450 | | Total net intangible assets | $2,511 | $2,918 | $407 | - The acquisition of Tempo Music Holdings, LLC, for **$76 million**, resulted in the recognition of **$351 million** in music publishing copyrights and **$87 million** in recorded music catalogs[53](index=53&type=chunk) - Impairment of trademarks and other intangible assets totaled **$29 million** within the Recorded Music segment[52](index=52&type=chunk) [7. Debt](index=19&type=section&id=7.%20Debt) **Total long-term debt, net, increased to $4,363 million**, primarily due to Tempo Asset-Based Notes, with a lower interest rate Debt Table | Debt Instrument | June 30, 2025 (Millions) | September 30, 2024 (Millions) | | :--------------------------------------- | :----------------------- | :---------------------------- | | Senior Term Loan Facility due 2031 | $1,295 | $1,295 | | Total Acquisition Corp. long-term debt, net | $4,061 | $4,014 | | Tempo Asset-Based Notes due 2050, net | $302 | — | | Total long-term debt, including current portion, net | $4,363 | $4,014 | - The Company acquired **$311 million of Tempo Asset-Based Notes** due 2050, secured only by Tempo's music rights and nonrecourse to the Company[53](index=53&type=chunk)[55](index=55&type=chunk)[61](index=61&type=chunk) - A new Beethoven Credit Facility was established, providing up to **$500 million** in commitment amounts, secured by the borrowers' assets[63](index=63&type=chunk) - The **weighted-average interest rate of the Company's total debt decreased to 4.1%** at June 30, 2025, from **4.3%** at September 30, 2024[77](index=77&type=chunk) [8. Restructuring and Impairments](index=21&type=section&id=8.%20Restructuring%20and%20Impairments) The 2024 Strategic Restructuring Plan is nearing completion, incurring **$7 million** in costs and **$32 million** in impairment losses - The **2024 Strategic Restructuring Plan** is nearing completion, with remaining cash payments expected by the end of fiscal year 2026[78](index=78&type=chunk) - For the nine months ended June 30, 2025, the plan resulted in **$7 million** in severance and contract termination costs and **$32 million** in impairment losses, mainly in the Recorded Music segment[79](index=79&type=chunk)[80](index=80&type=chunk) - A separate pre-tax impairment charge of **$70 million** was recognized for long-lived assets associated with non-core e-tailer operations in the Recorded Music segment[84](index=84&type=chunk) Restructuring Accrual Activity (Nine Months Ended June 30, 2025) Table | Restructuring Accrual Activity (Nine Months Ended June 30, 2025) | Amount (Millions) | | :------------------------------------------------ | :---------------- | | Balance at September 30, 2024 | $104 | | Restructuring charges | $7 | | Cash payments | $(68) | | Balance at June 30, 2025 | $43 | [9. Commitments and Contingencies](index=23&type=section&id=9.%20Commitments%20and%20Contingencies) The Company is involved in routine legal claims, with management believing no material adverse effect on financials - The Company is subject to various claims and legal proceedings in the ordinary course of business[85](index=85&type=chunk) - Management does not believe that the resolution of pending matters will have a **material adverse effect** on financial condition, cash flows, or results of operations[85](index=85&type=chunk) - Litigation is subject to inherent uncertainties and can result in adverse impacts due to defense costs, diversion of resources, and negative publicity[85](index=85&type=chunk) [10. Equity](index=23&type=section&id=10.%20Equity) The Company recognized non-cash stock-based compensation, acquired TenThousand Projects equity, and authorized a share repurchase Equity Table | Metric | 3 Months Ended June 30, 2025 (Millions) | 9 Months Ended June 30, 2025 (Millions) | | :----------------------------------- | :-------------------------------------- | :-------------------------------------- | | Non-cash stock-based compensation expense | $16 | $43 | - The Company issued **869,009** and **2,607,027 shares of Class A Common Stock** for the three and nine months ended June 30, 2025, respectively, under the Senior Management Free Cash Flow Plan[89](index=89&type=chunk) - On August 5, 2025, the Company **acquired the remaining 49% equity interest in TenThousand Projects Holdings LLC for $165 million**, comprising **$40 million cash and $125 million in Class A Common Stock**[90](index=90&type=chunk)[309](index=309&type=chunk)[310](index=310&type=chunk) - A **$100 million share repurchase program was authorized** on November 14, 2024, with approximately **$97 million remaining available** as of June 30, 2025[91](index=91&type=chunk)[268](index=268&type=chunk) Equity Table | Period | Shares Repurchased | Amount (Millions) | | :---------------- | :----------------- | :---------------- | | 3 Months Ended June 30, 2025 | 20,000 | $1 | | 9 Months Ended June 30, 2025 | 80,383 | $3 | [11. Income Taxes](index=24&type=section&id=11.%20Income%20Taxes) Income tax expense was **$5 million** and **$123 million** for the three and nine months, impacted by pre-tax loss and foreign income Income Taxes Table | Metric | 3 Months Ended June 30, 2025 (Millions) | 3 Months Ended June 30, 2024 (Millions) | | :---------------- | :-------------------------------------- | :-------------------------------------- | | Income tax expense | $5 | $30 | Income Taxes Table | Metric | 9 Months Ended June 30, 2025 (Millions) | 9 Months Ended June 30, 2024 (Millions) | | :---------------- | :-------------------------------------- | :-------------------------------------- | | Income tax expense | $123 | $120 | - The **income tax expense for the three months ended June 30, 2025, was lower** than the statutory rate primarily due to a pre-tax loss and a tax benefit from an impairment charge[93](index=93&type=chunk) - The **income tax expense for the nine months ended June 30, 2025, was higher** than the statutory rate due to foreign income taxed at higher rates, non-deductible executive compensation, and the net impact of GILTI and FDII[93](index=93&type=chunk) - The Company estimates an **immaterial impact from OECD BEPS Pillar 2 rules** and is evaluating the potential impact of the One Big Beautiful Bill Act[97](index=97&type=chunk)[98](index=98&type=chunk) [12. Derivative Financial Instruments](index=25&type=section&id=12.%20Derivative%20Financial%20Instruments) The Company uses foreign currency forward exchange contracts to manage risk, reporting realized gains and unrealized losses - The Company uses foreign currency forward exchange contracts to manage foreign currency exchange rate risk[99](index=99&type=chunk) - As of June 30, 2025, **outstanding contracts included the sale of $197 million and purchase of $124 million of foreign currencies**[100](index=100&type=chunk) Derivative Financial Instruments Table | Metric (Nine Months Ended June 30, 2025) | Amount (Millions) | | :--------------------------------------- | :---------------- | | Realized pre-tax gains | $7 | | Unrealized pre-tax losses | $(5) | [13. Segment Information](index=25&type=section&id=13.%20Segment%20Information) The Company's business is segmented into Recorded Music and Music Publishing, with performance evaluated by **Adjusted OIBDA** - The Company's reportable segments are **Recorded Music** and **Music Publishing**[103](index=103&type=chunk) - **Adjusted OIBDA** is the primary financial measure for evaluating segment performance, excluding non-cash depreciation, amortization, stock-based compensation, and certain non-comparable items[103](index=103&type=chunk) Segment (3 Months Ended June 30) Table | Segment (3 Months Ended June 30) | 2025 (Millions) | 2024 (Millions) | % Change | | :-------------------------------- | :-------------- | :-------------- | :------- | | Recorded Music Revenues | $1,354 | $1,251 | 8% | | Recorded Music Adjusted OIBDA | $321 | $281 | 14% | | Music Publishing Revenues | $336 | $305 | 10% | | Music Publishing Adjusted OIBDA | $96 | $79 | 22% | Segment (9 Months Ended June 30) Table | Segment (9 Months Ended June 30) | 2025 (Millions) | 2024 (Millions) | % Change | | :-------------------------------- | :-------------- | :-------------- | :------- | | Recorded Music Revenues | $3,874 | $3,885 | -0% | | Recorded Music Adjusted OIBDA | $914 | $965 | -5% | | Music Publishing Revenues | $969 | $915 | 6% | | Music Publishing Adjusted OIBDA | $264 | $247 | 7% | [14. Additional Financial Information](index=27&type=section&id=14.%20Additional%20Financial%20Information) This section details cash flow disclosures, including interest and tax payments, investment gains, and dividend declarations Cash Flow Item Table | Cash Flow Item | 3 Months Ended June 30, 2025 (Millions) | 3 Months Ended June 30, 2024 (Millions) | | :-------------------------------- | :-------------------------------------- | :-------------------------------------- | | Interest payments | $43 | $35 | | Income and withholding taxes, net | $50 | $33 | Cash Flow Item Table | Cash Flow Item | 9 Months Ended June 30, 2025 (Millions) | 9 Months Ended June 30, 2024 (Millions) | | :-------------------------------- | :-------------------------------------- | :-------------------------------------- | | Interest payments | $114 | $125 | | Income and withholding taxes, net | $151 | $105 | - The Company recognized a **pre-tax realized net gain of $29 million** from the sale of an investment for the nine months ended June 30, 2025[110](index=110&type=chunk) - Dividends of **$0.18 per share** were paid on June 3, 2025, totaling **$94 million** for the three months and **$283 million** for the nine months ended June 30, 2025[113](index=113&type=chunk) - A **cash dividend of $0.19 per share** was declared on August 7, 2025, payable on September 3, 2025[114](index=114&type=chunk) [15. Fair Value Measurements](index=28&type=section&id=15.%20Fair%20Value%20Measurements) The Company measures financial instruments at fair value, including foreign currency contracts and equity investments Fair Value Measurements Table | Financial Instrument | June 30, 2025 (Millions) | September 30, 2024 (Millions) | | :--------------------------------------- | :----------------------- | :---------------------------- | | Foreign currency forward exchange contracts (net) | $(5) | — | | Equity investments with readily determinable fair value | $9 | $9 | | Fair value of total debt | $4,217 | $3,836 | - The fair value of foreign currency forward exchange contracts is based on dealer quotes of market forward rates (Level 2 measurement)[116](index=116&type=chunk) - Equity investments with readily determinable fair value are measured based on quoted prices in active markets (Level 1 measurement)[117](index=117&type=chunk) - The fair value of the Company's debt instruments is determined using quoted market prices from less active markets or for instruments with identical terms and maturities (Level 2 measurement)[120](index=120&type=chunk) [16. Subsequent Events](index=29&type=section&id=16.%20Subsequent%20Events) A new **2025 Restructuring Plan** aims for **$300 million** in annualized cost savings by fiscal year 2027 - The **2025 Restructuring Plan**, announced July 1, 2025, aims for approximately **$300 million in annualized pre-tax cost savings** by the end of fiscal year 2027[122](index=122&type=chunk) - The majority of the cost savings from the **2025 Restructuring Plan** are expected to be accretive to **Adjusted OIBDA**[122](index=122&type=chunk) - No charges related to the **2025 Restructuring Plan** were recognized in the current reporting period[122](index=122&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the Company's financial condition and results of operations, including segment performance and liquidity [SAFE HARBOR STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995](index=30&type=section&id=SAFE%20HARBOR%20STATEMENT%20UNDER%20PRIVATE%20SECURITIES%20LITIGATION%20REFORM%20ACT%20OF%201995) This statement outlines forward-looking statements and associated risks, disclaiming any obligation to update them - The report contains forward-looking statements subject to known and unknown risks and uncertainties beyond the Company's control[125](index=125&type=chunk) - Actual performance and outcomes may differ materially from expectations due to factors such as market competition, artist retention, streaming growth, digital service provider dependence, climate change, and intellectual property risks[125](index=125&type=chunk) - The Company does not undertake to update or revise any forward-looking statements unless required by law[126](index=126&type=chunk) [INTRODUCTION](index=32&type=section&id=INTRODUCTION) This section introduces the Company's business, key segments, and primary financial performance metrics - **Warner Music Group Corp.** is a major music entertainment company operating primarily through its subsidiaries, WMG Holdings Corp. and WMG Acquisition Corp[130](index=130&type=chunk)[131](index=131&type=chunk) - **Adjusted OIBDA** is used as a primary financial measure to evaluate operating performance, excluding non-cash depreciation, amortization, stock-based compensation, and certain non-comparable items[132](index=132&type=chunk) - Constant-currency presentation is used to compare revenue and **Adjusted OIBDA** between periods, adjusting for foreign exchange rate fluctuations[133](index=133&type=chunk) [BUSINESS OVERVIEW](index=33&type=section&id=BUSINESS%20OVERVIEW) This section provides an overview of the Company's Recorded Music and Music Publishing segments and revenue diversification - The Company operates through two fundamental segments: **Recorded Music** and **Music Publishing**[136](index=136&type=chunk) - **Recorded Music** involves artist discovery, development, marketing, distribution, sale, and licensing, with major labels like Atlantic Records and Warner Records, and a next-generation services division, WMX[137](index=137&type=chunk)[138](index=138&type=chunk)[140](index=140&type=chunk) - **Music Publishing**, primarily through Warner Chappell Music, focuses on generating revenue from musical compositions, owning or controlling rights to over **1.5 million** compositions by **180,000+** songwriters[144](index=144&type=chunk)[145](index=145&type=chunk) - Revenue diversification includes expanded-rights deals with artists for touring, merchandising, and sponsorships, and digital distribution through streaming services and online platforms[142](index=142&type=chunk)[143](index=143&type=chunk) [Recent Events and Factors Affecting Results of Operations and Comparability](index=36&type=section&id=Recent%20Events%20and%20Factors%20Affecting%20Results%20of%20Operations%20and%20Comparability) This section details recent events and factors impacting the Company's results of operations and comparability - The **2024 Strategic Restructuring Plan** is substantially complete, aiming to free up funds for music investment and accelerate growth through non-core operation disposal, overhead management, and operational efficiencies[148](index=148&type=chunk)[149](index=149&type=chunk) - For the nine months ended June 30, 2025, the **2024 plan incurred $7 million** in severance and contract termination costs and **$32 million** in impairment losses, primarily in the Recorded Music segment[150](index=150&type=chunk) - A pre-tax impairment charge of **$70 million** was recognized for long-lived assets related to non-core e-tailer operations in the Recorded Music segment for the three and nine months ended June 30, 2025[151](index=151&type=chunk) - The Company terminated its distribution agreement with BMG in September 2023, leading to a phased in-sourcing of distribution and an expected **$14 million** and **$64 million less Recorded Music revenue** for the three and nine months ended June 30, 2025, respectively[152](index=152&type=chunk)[158](index=158&type=chunk)[205](index=205&type=chunk) [Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024](index=37&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20with%20Three%20Months%20Ended%20June%2030%2C%202024) For the three months, revenues increased, but operating income and net income decreased due to charges and foreign currency losses [Consolidated Results](index=37&type=section&id=Consolidated%20Results%20%283%20Months%29) Consolidated revenues increased, but operating income and net income decreased due to impairment and foreign currency losses Consolidated Revenue by Type (3 Months Ended June 30) | Revenue Type | 2025 (Millions) | 2024 (Millions) | $ Change | % Change | | :-------------------------- | :-------------- | :-------------- | :------- | :------- | | Digital | $929 | $882 | $47 | 5% | | Physical | $119 | $120 | $(1) | -1% | | Artist services & expanded-rights | $195 | $159 | $36 | 23% | | Licensing | $111 | $90 | $21 | 23% | | Total Recorded Music | $1,354 | $1,251 | 8% | | Total Music Publishing | $336 | $305 | 10% | | Total revenues | $1,689 | $1,554 | 9% | Consolidated Financial Performance (3 Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | $ Change | % Change | | :--------------------------------------- | :-------------- | :-------------- | :------- | :------- | | Operating income | $169 | $207 | $(38) | -18% | | Interest expense, net | $43 | $40 | $3 | 8% | | Other (expense) income | $(137) | $4 | $(141) | -3525% | | Income tax expense | $5 | $30 | $(25) | -83% | | Net (loss) income attributable to WMG Corp. | $(16) | $139 | $(155) | -112% | | Adjusted OIBDA | $373 | $316 | $57 | 18% | - **Restructuring and impairment charges increased significantly to $69 million** (from **$1 million**), including a **$70 million** impairment for non-core e-tailer operations[177](index=177&type=chunk) - **Other expense increased to $137 million**, primarily due to **$70 million** in foreign currency losses on Euro-denominated debt and **$63 million** in currency exchange losses on intercompany loans[182](index=182&type=chunk) [Business Segment Results](index=43&type=section&id=Business%20Segment%20Results%20%283%20Months%29) Recorded Music and Music Publishing segments showed revenue growth, but Recorded Music operating income declined due to charges Segment Performance (3 Months Ended June 30) | Segment | Metric | 2025 (Millions) | 2024 (Millions) | $ Change | % Change | | :---------------- | :---------------- | :-------------- | :-------------- | :------- | :------- | | Recorded Music | Revenues | $1,354 | $1,251 | $103 | 8% | | | Operating income | $201 | $230 | $(29) | -13% | | | Adjusted OIBDA | $321 | $281 | $40 | 14% | | Music Publishing | Revenues | $336 | $305 | $31 | 10% | | | Operating income | $60 | $53 | $7 | 13% | | | Adjusted OIBDA | $96 | $79 | $17 | 22% | - **Recorded Music revenue growth** was driven by digital (up **$47M, 5%**), artist services and expanded-rights (up **$36M, 23%**), and licensing (up **$21M, 23%**), partially offset by a slight decrease in physical revenue[158](index=158&type=chunk) - **Music Publishing revenue growth** was driven by digital (up **$10M, 5%**), performance (up **$6M, 12%**), synchronization (up **$12M, 29%**), and mechanical (up **$3M, 23%**) revenues[160](index=160&type=chunk) - **Recorded Music operating income decreased** due to a **$67 million** increase in restructuring and impairment charges, including a **$70 million** impairment for non-core e-tailer operations[191](index=191&type=chunk) [Nine Months Ended June 30, 2025 Compared with Nine Months Ended June 30, 2024](index=47&type=section&id=Nine%20Months%20Ended%20June%2030%2C%202025%20Compared%20with%20Nine%20Months%20Ended%20June%2030%2C%202024) For the nine months, revenues marginally increased, but operating and net income decreased due to various charges and lower licensing [Consolidated Results](index=47&type=section&id=Consolidated%20Results%20%289%20Months%29) Consolidated revenues marginally increased, but operating and net income decreased due to various charges and lower licensing Consolidated Revenue by Type (9 Months Ended June 30) | Revenue Type | 2025 (Millions) | 2024 (Millions) | $ Change | % Change | | :-------------------------- | :-------------- | :-------------- | :------- | :------- | | Digital | $2,643 | $2,638 | $5 | 0% | | Physical | $397 | $385 | $12 | 3% | | Artist services & expanded-rights | $508 | $489 | $19 | 4% | | Licensing | $326 | $373 | $(47) | -13% | | Total Recorded Music | $3,874 | $3,885 | $(11) | 0% | | Total Music Publishing | $969 | $915 | $54 | 6% | | Total revenues | $4,839 | $4,796 | $43 | 1% | Consolidated Financial Performance (9 Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | $ Change | % Change | | :--------------------------------------- | :-------------- | :-------------- | :------- | :------- | | Operating income | $551 | $680 | $(129) | -19% | | Interest expense, net | $119 | $121 | $(2) | -2% | | Other expense | $48 | $9 | $39 | 433% | | Income tax expense | $123 | $120 | $3 | 3% | | Net income attributable to WMG Corp. | $256 | $394 | $(138) | -35% | | Adjusted OIBDA | $1,039 | $1,079 | $(40) | -4% | - **Recorded Music licensing revenue decreased by $47 million**, primarily due to a **$75 million** Licensing Extension in the prior year[209](index=209&type=chunk) - **Restructuring and impairment charges increased by $13 million to $109 million**, including a **$70 million** impairment for non-core e-tailer operations[229](index=229&type=chunk) [Business Segment Results](index=54&type=section&id=Business%20Segment%20Results%20%289%20Months%29) Recorded Music revenues slightly decreased with lower operating income, while Music Publishing revenues and OIBDA grew Segment Performance (9 Months Ended June 30) | Segment | Metric | 2025 (Millions) | 2024 (Millions) | $ Change | % Change | | :---------------- | :---------------- | :-------------- | :-------------- | :------- | :------- | | Recorded Music | Revenues | $3,874 | $3,885 | $(11) | 0% | | | Operating income | $642 | $739 | $(97) | -13% | | | Adjusted OIBDA | $914 | $965 | $(51) | -5% | | Music Publishing | Revenues | $969 | $915 | $54 | 6% | | | Operating income | $167 | $185 | $(18) | -10% | | | Adjusted OIBDA | $264 | $247 | $17 | 7% | - **Recorded Music revenue decrease** was driven by lower licensing revenue, partially offset by increases in artist services and physical revenues[240](index=240&type=chunk) - **Music Publishing revenue increase** was driven by growth across digital (up **$22M, 4%**), performance (up **$12M, 8%**), synchronization (up **$13M, 10%**), mechanical (up **$3M, 7%**), and other publishing revenues[211](index=211&type=chunk) - **Recorded Music operating income decreased** due to a **$17 million** net gain on divestitures in the prior year and higher restructuring and non-cash impairment charges (**$110 million** vs **$89 million**)[244](index=244&type=chunk) [FINANCIAL CONDITION AND LIQUIDITY](index=59&type=section&id=FINANCIAL%20CONDITION%20AND%20LIQUIDITY) The Company's net debt increased to **$3.836 billion**, with stable operating cash flow but increased investing and financing uses [Financial Condition at June 30, 2025](index=59&type=section&id=Financial%20Condition%20at%20June%2030%2C%202025) The Company reported **total debt of $4.363 billion** and **cash of $527 million**, resulting in a **net debt of $3.836 billion** Financial Condition at June 30, 2025 Table | Metric | June 30, 2025 (Millions) | September 30, 2024 (Millions) | | :--------------------------------------- | :----------------------- | :---------------------------- | | Total debt (net of premiums, discounts, DFCs) | $4,363 | $4,014 | | Cash and equivalents | $527 | $694 | | Net debt | $3,836 | $3,320 | | Total Warner Music Group Corp. equity | $589 | $518 | [Cash Flows](index=59&type=section&id=Cash%20Flows) Cash provided by operating activities was **$447 million**, with increased cash used in investing and financing activities Cash Flows Table | Cash Flow Activity (Nine Months Ended June 30) | 2025 (Millions) | 2024 (Millions) | | :--------------------------------------------- | :-------------- | :-------------- | | Operating activities | $447 | $450 | | Investing activities | $(273) | $(201) | | Financing activities | $(344) | $(280) | - The **$72 million increase in cash used in investing activities** was due to **$152 million** for music-related assets and **$111 million** for capital expenditures[263](index=263&type=chunk) - The **$64 million increase in cash used in financing activities** was primarily from **$283 million** in dividends paid and **$23 million** in deferred consideration[264](index=264&type=chunk) [Liquidity](index=59&type=section&id=Liquidity) The Company's primary liquidity sources are cash flows from operations, available cash, and the Revolving Credit Facility - Primary sources of liquidity include **cash flows from operations**, **available cash and equivalents**, and funds from the **Revolving Credit Facility**[265](index=265&type=chunk) - Management believes current liquidity sources are sufficient to support existing operations for the next twelve months[266](index=266&type=chunk) - Cash deposits in excess of FDIC or other deposit insurance limits pose a risk to liquidity and financial performance in the event of bank failure[265](index=265&type=chunk) [Debt Capital Structure](index=60&type=section&id=Debt%20Capital%20Structure) The Company actively manages its debt capital structure, improving credit ratings and reducing weighted-average interest rates - The Company has focused on extending debt maturity dates and reducing interest expense[267](index=267&type=chunk) - **Credit ratings have improved**: S&P corporate credit rating to **BBB- (stable)** in August 2024, and Moody's corporate family rating to **Ba1 (positive)** in March 2025[267](index=267&type=chunk) - The **weighted-average interest rate on outstanding indebtedness decreased to 4.1%** at June 30, 2025, from **10.5%** in 2011[267](index=267&type=chunk) - The **nearest-term debt maturity date is in 2028**[267](index=267&type=chunk) [Repurchase Program](index=60&type=section&id=Repurchase%20Program) A **$100 million share repurchase program** was authorized to offset dilution, with **$97 million remaining available** - A **$100 million share repurchase program was authorized** on November 14, 2024, to offset dilution[268](index=268&type=chunk) - As of June 30, 2025, **$97 million of the authorization remained available**[268](index=268&type=chunk) Repurchase Program Table | Period | Shares Repurchased | Amount (Millions) | | :---------------- | :----------------- | :---------------- | | 3 Months Ended June 30, 2025 | 20,000 | $1 | | 9 Months Ended June 30, 2025 | 80,383 | $3 | [Existing Debt as of June 30, 2025](index=60&type=section&id=Existing%20Debt%20as%20of%20June%2030%2C%202025) The Company's **total long-term debt, net, was $4,363 million**, including Acquisition Corp. and Tempo Asset-Based Notes Existing Debt as of June 30, 2025 Table | Debt Instrument | Amount (Millions) | | :--------------------------------------- | :-------------- | | Senior Term Loan Facility due 2031 | $1,295 | | 2.750% Senior Secured Notes due 2028 | $381 | | 3.750% Senior Secured Notes due 2029 | $540 | | 3.875% Senior Secured Notes due 2030 | $535 | | 2.250% Senior Secured Notes due 2031 | $522 | | 3.000% Senior Secured Notes due 2031 | $800 | | Mortgage Term Loan due 2033 | $17 | | Total Acquisition Corp. long-term debt, net | $4,061 | | Tempo Asset-Based Notes due 2050, net | $302 | | Total long-term debt, including current portion, net | $4,363 | - The **Revolving Credit Facility has $350 million in commitments** with no outstanding loans as of June 30, 2025[270](index=270&type=chunk) - **Tempo Asset-Based Notes are secured only by Tempo's music rights and are nonrecourse** to the Company and its other subsidiaries[271](index=271&type=chunk) [Dividends](index=61&type=section&id=Dividends) The Company intends to pay quarterly cash dividends, subject to board discretion and potential covenant restrictions - The Company intends to pay quarterly cash dividends, subject to board discretion and financial factors[274](index=274&type=chunk) - Dividend payments may be restricted if Acquisition Corp.'s **Total Indebtedness to EBITDA Ratio exceeds 3.50:1.00** and term loans do not achieve an investment grade rating[273](index=273&type=chunk) Dividends Table | Dividend Declaration | Per Share Amount | | :------------------- | :--------------- | | May 16, 2025 | $0.18 | | August 7, 2025 | $0.19 | [Covenant Compliance](index=61&type=section&id=Covenant%20Compliance) The Company was in compliance with all debt covenants, using **Adjusted EBITDA** for calculations with specific adjustments - The Company **was in compliance** with all debt covenants as of June 30, 2025[277](index=277&type=chunk) - The **Revolving Credit Facility's springing leverage ratio is currently suspended** but would be reinstated if aggregate borrowings exceed **$140 million**[279](index=279&type=chunk)[284](index=284&type=chunk) - **Adjusted EBITDA**, a non-GAAP measure, is used for covenant calculations and includes adjustments for restructuring costs, non-cash charges, foreign exchange, business optimization, and pro forma impacts of cost savings[279](index=279&type=chunk)[282](index=282&type=chunk) Covenant Compliance Table | Metric (Twelve Months Ended June 30, 2025) | Amount (Millions) | | :----------------------------------------- | :---------------- | | Net Income (loss) | $309 | | Adjusted EBITDA | $1,719 | | Senior Secured Indebtedness | $3,551 | | Leverage Ratio | 2.07x | [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=65&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company is exposed to market risks from foreign currency and interest rates, managed through derivatives and debt structure - The Company is exposed to market risks from foreign currency exchange rates and interest rates[288](index=288&type=chunk) - Foreign currency risk is managed using forward exchange contracts; at June 30, 2025, contracts for **$197 million** in sales and **$124 million** in purchases were outstanding[289](index=289&type=chunk) - A hypothetical **10%** depreciation of the U.S. dollar would decrease the fair value of foreign exchange forward contracts by **$7 million**[290](index=290&type=chunk) - At June 30, 2025, **70%** of the Company's **$4.401 billion** principal debt was at a fixed rate[291](index=291&type=chunk) - A **25 basis point** increase/decrease in interest rates would decrease/increase the fair value of fixed-rate debt by approximately **$31 million/$32 million**[292](index=292&type=chunk) - **Inflation has not had a material effect** on the Company's business, financial condition, or results of operations to date[293](index=293&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were effective, and ERP implementation is updating internal controls over financial reporting - The Company's **disclosure controls and procedures were effective as of June 30, 2025**, ensuring timely and accurate information disclosure[300](index=300&type=chunk)[301](index=301&type=chunk) - The Company is undergoing a **multi-year implementation to upgrade its information technology and finance infrastructure, including a new ERP system**[298](index=298&type=chunk) - The **core financials component of the new technology platform has been launched** for the Music Publishing segment and various Recorded Music territories[298](index=298&type=chunk) - **Internal controls over financial reporting have been updated** in connection with the ERP implementation, with further changes anticipated as the rollout continues[299](index=299&type=chunk) [PART II. OTHER INFORMATION](index=69&type=section&id=Part%20II.%20Other%20Information) This section covers legal proceedings, risk factors, equity sales, and other miscellaneous information [ITEM 1. LEGAL PROCEEDINGS](index=69&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in routine legal claims, with management believing no material adverse effect on financials - The Company is involved in claims and legal proceedings arising in the ordinary course of business[304](index=304&type=chunk) - Management does not believe that the resolution of pending matters will have a **material adverse effect** on financial condition, cash flows, or results of operations[304](index=304&type=chunk) - Litigation is subject to inherent uncertainties and can result in adverse impacts due to defense costs, diversion of resources, and negative publicity[304](index=304&type=chunk) [ITEM 1A. RISK FACTORS](index=69&type=section&id=Item%201A.%20Risk%20Factors) **No material changes** to the risk factors previously discussed in the Annual Report on Form 10-K - **No material changes to the risk factors discussed in the Annual Report on Form 10-K** for the fiscal year ended September 30, 2024[305](index=305&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company's **$100 million share repurchase program** had **$97 million remaining** as of June 30, 2025 Unregistered Sales of Equity Securities and Use of Proceeds Table | Period | Shares Repurchased | Average Price Paid per Share | Dollar Value Remaining (Millions) | | :--------- | :----------------- | :--------------------------- | :-------------------------------- | | April 2025 | 20,000 | $29.50 | $97 | | May 2025 | — | — | $97 | | June 2025 | — | — | $97 | - The **$100 million share repurchase program**, authorized on November 14, 2024, had approximately **$97 million remaining available** as of June 30, 2025[306](index=306&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=69&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the Company for the reporting period - **Not applicable**[307](index=307&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company for the reporting period - **Not applicable**[308](index=308&type=chunk) [ITEM 5. OTHER INFORMATION](index=69&type=section&id=Item%205.%20Other%20Information) Warner Music Inc. **acquired the remaining 49% equity interest in TenThousand Projects Holdings LLC for $165 million** post-period - On August 5, 2025, **Warner Music Inc. acquired the remaining 49% equity interest in TenThousand Projects Holdings LLC**[309](index=309&type=chunk) - The **aggregate consideration for the acquisition was $165 million**, comprising **$40 million cash and $125 million in Class A Common Stock**[310](index=310&type=chunk) - The **Class A Common Stock issued is subject to lock-up periods**, with the first installment's shares locked until March 1, 2026, and the second installment's shares locked until the second anniversary of the closing date[311](index=311&type=chunk) [ITEM 6. EXHIBITS](index=71&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including various agreements and certifications - **Exhibits include various agreements (separation, employment, JV, credit), certifications (CEO, CFO), and XBRL documents**[314](index=314&type=chunk) - Agreements and documents are not intended to provide factual information beyond their terms; representations and warranties are specific to the context of the agreement[313](index=313&type=chunk) [SIGNATURES](index=72&type=section&id=Signatures) The report was duly signed on August 7, 2025, by the Chief Executive Officer and Chief Financial Officer - The report was signed on August 7, 2025[318](index=318&type=chunk) - Signatories include Robert Kyncl, Chief Executive Officer, and Armin Zerza, Chief Financial Officer and Principal Accounting Officer[318](index=318&type=chunk) ```

[Executive Summary](index=1&type=section&id=Executive%20Summary) Cabaletta Bio reported Q2 2025 financial results and provided a business update, highlighting significant progress in advancing rese-cel, including FDA alignment for a registrational pathway in myositis, compelling clinical data, and a successful $100 million public offering extending cash runway [Q2 2025 Business and Financial Highlights](index=1&type=section&id=Q2%202025%20Business%20and%20Financial%20Highlights) Cabaletta Bio reported Q2 2025 financial results and provided a business update, highlighting significant progress in advancing rese-cel, including FDA alignment for a registrational pathway in myositis, compelling clinical data, and a successful $100 million public offering extending cash runway - Registrational cohort enrollment in RESET-Myositis™ trial on track to start in 2H25 with anticipated 2027 BLA submission for rese-cel in myositis[1](index=1&type=chunk) - Five disease-specific cohorts fully enrolled in the RESET™ clinical development program from over 70 clinical sites as of July 31, 2025, with expansion phase enrollment continuing[1](index=1&type=chunk) - FDA meetings to align on the next wave of registrational cohorts for rese-cel anticipated in 3Q25 for lupus, 4Q25 for systemic sclerosis and 1H26 for myasthenia gravis[1](index=1&type=chunk) - Rese-cel clinical data presented at the EULAR 2025 Congress reinforce compelling clinical responses with nearly all patients off immunomodulatory medications and steroids; favorable risk-benefit profile observed across myositis, lupus and systemic sclerosis patients[1](index=1&type=chunk) - Closed **$100 million** public offering to support late clinical-stage development and commercial readiness activities for rese-cel; cash runway extended into 2H26[1](index=1&type=chunk) [Recent Operational Highlights and Upcoming Anticipated Milestones](index=1&type=section&id=Recent%20Operational%20Highlights%20and%20Upcoming%20Anticipated%20Milestones) This section details rese-cel's mechanism, clinical progress, regulatory milestones including FDA alignment for myositis, manufacturing advancements, and a recent $100 million public offering [Rese-cel Program Overview](index=1&type=section&id=Rese-cel%20Program%20Overview) Rese-cel (resecabtagene autoleucel) is an investigational, autologous CAR-T cell therapy designed to treat autoimmune diseases by transiently and deeply depleting CD19-positive cells, aiming to reset the immune system for durable responses without chronic therapy. It is being evaluated in the RESET clinical development program across rheumatology, neurology, and dermatology - Rese-cel is an investigational, autologous CAR-T cell therapy engineered with a fully human CD19 binder and a 4-1BB co-stimulatory domain[3](index=3&type=chunk) - It is designed to transiently and deeply deplete CD19-positive cells, with the goal of resetting the immune system and achieving durable clinical responses without the need for chronic therapy[3](index=3&type=chunk) - Rese-cel is being evaluated in the RESET clinical development program, which includes multiple ongoing company-sponsored trials across a diverse and growing range of autoimmune diseases in rheumatology, neurology and dermatology[3](index=3&type=chunk)[4](index=4&type=chunk) [Clinical Development](index=2&type=section&id=Clinical%20Development) Cabaletta presented new clinical and translational data at EULAR 2025, reinforcing rese-cel's ability to achieve deep B cell depletion and compelling clinical responses. The company is on track to initiate myositis registrational cohorts in 2H25 and plans several upcoming data presentations in 2025 and 2026 for various RESET trials [EULAR 2025 Congress Data](index=2&type=section&id=EULAR%202025%20Congress%20Data) New clinical and translational data from RESET trials presented at EULAR 2025 demonstrated deep B cell depletion and compelling clinical responses - New clinical and translational data from 18 evaluable patients in RESET-Myositis, RESET-SLE™, and RESET-SSc™ trials were presented at the EULAR 2025 Congress in June 2025[8](index=8&type=chunk) - The data supported rese-cel's ability to generate deep B cell depletion and compelling clinical responses, with nearly all patients off immunomodulators and steroids through the follow-up period[8](index=8&type=chunk) [Myositis Registrational Cohorts](index=2&type=section&id=Myositis%20Registrational%20Cohorts) Cabaletta plans to initiate enrollment in two open-label, single-arm registrational myositis cohorts in the second half of 2025 - Cabaletta plans to initiate enrollment in two open-label, single-arm, registrational myositis cohorts, each consisting of approximately 15 patients, in the second half of 2025[8](index=8&type=chunk) [Upcoming Clinical Data Presentations](index=2&type=section&id=Upcoming%20Clinical%20Data%20Presentations) Cabaletta plans several upcoming clinical data presentations for RESET-Myositis, RESET-PV, RESET-MG, RESET-SLE, and RESET-SSc trials in 2025 and 2026 - In the second half of 2025, Cabaletta plans to present complete Phase 1/2 clinical data from the RESET-Myositis trial, initial dose data from the RESET-PV trial (evaluating rese-cel without preconditioning), and initial clinical data from the RESET-MG™ trial[8](index=8&type=chunk) - Additionally, complete Phase 1/2 clinical data from the RESET-SLE and RESET-SSc trials are expected to be presented in the first half of 2026[8](index=8&type=chunk) [Regulatory Updates](index=2&type=section&id=Regulatory) Cabaletta achieved FDA alignment on key design elements for two registrational myositis cohorts, planning a first BLA submission for rese-cel in myositis in 2027. Further FDA meetings are scheduled in 3Q25, 4Q25, and 1H26 to align on registrational designs for lupus, systemic sclerosis, and myasthenia gravis, respectively [Myositis BLA Submission Plan](index=2&type=section&id=Myositis%20BLA%20Submission%20Plan) Cabaletta achieved FDA alignment for myositis registrational cohorts and plans its first BLA submission for rese-cel in myositis in 2027 - In May 2025, Cabaletta announced alignment with the U.S. Food and Drug Administration (FDA) on key design elements for two registrational cohorts in the RESET-Myositis trial[8](index=8&type=chunk) - The Company plans to submit its first BLA for rese-cel in myositis in 2027 based on either cohort, if successful[8](index=8&type=chunk) [Additional Registrational Pathway Discussions](index=2&type=section&id=Additional%20Regulatory%20Discussions%20Planned) Cabaletta plans future FDA meetings to align on registrational designs for lupus, systemic sclerosis, and myasthenia gravis - Cabaletta plans to meet with the FDA to align on key registrational design elements for the RESET-SLE trial in 3Q25, the RESET-SSc trial in 4Q25, and the RESET-MG trial in 1H26[8](index=8&type=chunk) [Manufacturing Updates](index=2&type=section&id=Manufacturing) Cabaletta is advancing CMC commercial supply readiness and innovation activities, including BLA-enabling activities for lentiviral vector and cellular drug product processes, with the latter transferred to Lonza for registrational enrollment - Advancing CMC commercial supply readiness and innovation activities to support commercial supply, including BLA-enabling activities for both lentiviral vector process and cellular drug product process[7](index=7&type=chunk) - The Oxford Biomedica lentiviral process and the commercial drug product process, transferred to Lonza, will be used for initiating registrational enrollment[7](index=7&type=chunk) [Corporate Updates](index=3&type=section&id=Corporate%20Updates) In June 2025, Cabaletta completed a public offering, generating approximately $94 million in net proceeds to support its operations - In June 2025, Cabaletta closed an underwritten public offering consisting of shares of its common stock, pre-funded warrants and accompanying common stock warrants[9](index=9&type=chunk) - The net proceeds from the offering were approximately **$94 million**, after deducting underwriting discounts, commissions and offering expenses[9](index=9&type=chunk) [Second Quarter 2025 Financial Results](index=3&type=section&id=Second%20Quarter%202025%20Financial%20Results) Cabaletta Bio reported increased operating expenses and net loss for Q2 2025, while a public offering significantly boosted its cash position and extended its runway [Financial Summary](index=3&type=section&id=Financial%20Summary) Cabaletta Bio reported increased R&D and G&A expenses for Q2 2025 compared to Q2 2024, reflecting advanced clinical development. The company's cash position significantly improved to $194.7 million as of June 30, 2025, extending its cash runway into the second half of 2026 Key Financial Metrics (Q2 2025 vs. Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------- | :---------- | :---------- | :------- | | Research and development expenses | $37.6 million | $23.4 million | +60.7% | | General and administrative expenses | $8.3 million | $6.9 million | +20.3% | | Cash, cash equivalents and short-term investments (as of period end) | $194.7 million (Jun 30, 2025) | $164.0 million (Dec 31, 2024) | +18.7% | - The Company expects that its cash position as of June 30, 2025, will enable it to fund its operating plan into the second half of 2026[13](index=13&type=chunk) [Statements of Operations](index=5&type=section&id=Statements%20of%20Operations) For the three months ended June 30, 2025, Cabaletta Bio reported a net loss of $45.1 million, an increase from $27.6 million in the same period of 2024, primarily driven by higher operating expenses, particularly in research and development. The net loss for the six months ended June 30, 2025, was $81.1 million, compared to $52.6 million for the prior year period Statements of Operations (Three and Six Months Ended June 30, in thousands) | Metric | Three Months Ended June 30, 2025 (unaudited) | Three Months Ended June 30, 2024 (unaudited) | Six Months Ended June 30, 2025 (unaudited) | Six Months Ended June 30, 2024 (unaudited) | | :------------------------------------ | :------------------------------------------- | :------------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Research and development | $37,638 | $23,427 | $66,656 | $45,381 | | General and administrative | $8,268 | $6,852 | $16,386 | $12,929 | | Total operating expenses | $45,906 | $30,279 | $83,042 | $58,310 | | Loss from operations | $(45,906) | $(30,279) | $(83,042) | $(58,310) | | Interest income | $1,410 | $2,677 | $2,897 | $5,661 | | Interest expense | $(571) | — | $(865) | — | | Other expense | $(61) | — | $(61) | — | | Net loss | $(45,128) | $(27,602) | $(81,071) | $(52,649) | | Net loss per share (basic and diluted) | $(0.73) | $(0.56) | $(1.44) | $(1.07) | [Selected Balance Sheet Data](index=5&type=section&id=Selected%20Balance%20Sheet%20Data) As of June 30, 2025, Cabaletta Bio reported a significant increase in cash, cash equivalents, and investments to $194.7 million, up from $164.0 million at December 31, 2024. Total assets and stockholders' equity also increased, while total liabilities saw a moderate rise Selected Balance Sheet Data (as of period end, in thousands) | Metric | June 30, 2025 (unaudited) | December 31, 2024 | | :-------------------------------- | :------------------------ | :---------------- | | Cash, cash equivalents and investments | $194,682 | $163,962 | | Total assets | $224,500 | $185,046 | | Total liabilities | $46,019 | $32,711 | | Total stockholders' equity | $178,481 | $152,335 | [About Cabaletta Bio](index=3&type=section&id=About%20Cabaletta%20Bio) Cabaletta Bio is a clinical-stage biotechnology company developing targeted cell therapies for autoimmune diseases, with rese-cel as its lead CARTA strategy [Company Overview](index=3&type=section&id=Company%20Overview) Cabaletta Bio is a clinical-stage biotechnology company focused on developing curative targeted cell therapies for autoimmune diseases. Its CABA™ platform includes the lead CARTA strategy, prioritizing rese-cel, a CD19-CAR T cell investigational therapy, currently in the RESET™ clinical development program across multiple therapeutic areas - Cabaletta Bio is a clinical-stage biotechnology company focused on developing and launching the first curative targeted cell therapies designed specifically for patients with autoimmune diseases[11](index=11&type=chunk) - The CABA™ platform encompasses two complementary strategies, with the lead CARTA strategy prioritizing the development of rese-cel, a 4-1BB-containing fully human CD19-CAR T cell investigational therapy[11](index=11&type=chunk) - Rese-cel is currently being evaluated in the RESET™ clinical development program spanning multiple therapeutic areas, including rheumatology, neurology and dermatology[11](index=11&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section outlines forward-looking statements regarding Cabaletta Bio's future plans and potential risks that could impact actual results [Disclaimer and Risk Factors](index=3&type=section&id=Disclaimer%20and%20Risk%20Factors) This section contains forward-looking statements regarding Cabaletta Bio's future plans, objectives, clinical trial outcomes, regulatory interactions, financial performance, and ability to fund operations. It also outlines various risks and uncertainties that could cause actual results to differ materially from these statements, including regulatory risks, clinical trial risks, market conditions, and intellectual property risks - Forward-looking statements include express or implied statements regarding Cabaletta's business plans, ability to launch curative cell therapies, successful development and commercialization of drug candidates, timing and results of clinical trials, regulatory interactions, and financial outlook[12](index=12&type=chunk)[14](index=14&type=chunk) - These statements are subject to risks and uncertainties such as regulatory filings, the risk that biologic activity may not inform long-term results, ability to demonstrate safety/efficacy, clinical trial delays, unexpected safety/efficacy data, volatile market conditions, and intellectual property risks[15](index=15&type=chunk) - All information is as of the date of the release, and Cabaletta undertakes no duty to update this information unless required by law[15](index=15&type=chunk) [Contacts](index=5&type=section&id=Contacts) This section provides contact information for investor relations inquiries [Investor Relations Contact](index=5&type=section&id=Investor%20Relations%20Contact) This section provides the contact information for investor relations, specifically Anup Marda, Chief Financial Officer - Contact for investors: Anup Marda, Chief Financial Officer[20](index=20&type=chunk) - Email: investors@cabalettabio.com[20](index=20&type=chunk)

"Submitting the NDA on schedule is an important milestone that reflects the hard work and dedication of our team and partners," said Dr. Cindy Jacobs, President and Chief Medical Officer of Achieve Life Sciences. "Cytisinicline is supported by a comprehensive clinical data package, and we're committed to working closely with the FDA to advance this important potential treatment option for adults seeking to overcome nicotine dependence." • Submitted a New Drug Application (NDA) to the U.S. Food and Drug Admi ...

Executive Summary & Financial Highlights Warner Music Group reported strong Q3 FY2025 results driven by revenue growth in recorded music and music publishing, despite a net loss, with strategic investments and efficiency initiatives supporting adjusted OIBDA expansion [Q3 FY2025 Performance Overview](index=1&type=section&id=Q3%20FY2025%20Performance%20Overview) Warner Music Group's CEO and CFO highlighted strong Q3 FY2025 performance, driven by hit songs, market share growth, and strategic investments in artists, songwriters, and technology, while focusing on efficiency and profit expansion - CEO Robert Kyncl emphasized strong revenue growth and market share gains, attributing success to strategic focus on artists, songwriters, and global impact[3](index=3&type=chunk) - CFO Armin Zerza noted robust performance reflects commitment to investing in music, enhancing efficiency, and accelerating core business growth while expanding margins[3](index=3&type=chunk) [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) The company reported accelerated revenue growth in recorded music and music publishing, supporting double-digit adjusted OIBDA growth and margin expansion, despite a net loss this quarter - Revenue re-accelerated in recorded music and music publishing, driving **double-digit adjusted OIBDA growth** and margin expansion[4](index=4&type=chunk) - Recorded music streaming performance benefited from **strong US market share growth** and chart success across geographies and genres[4](index=4&type=chunk) - Recent restructuring and catalog acquisition joint venture are expected to provide **additional capital for reinvestment**[4](index=4&type=chunk) Q3 FY2025 Key Financial Highlights | Metric | Q3 2025 ($M) | Q3 2024 ($M) | Percentage Change | | :--------------------------------- | :------ | :------ | :------- | | Total Revenue | $1,689 | $1,554 | 9% | | Net (Loss) Income | $(16) | $141 | —% (Loss) | | Operating Income | $169 | $207 | -18% | | Adjusted OIBDA | $373 | $316 | 18% | | Cash Flow from Operations | $46 | $188 | -76% | Consolidated Financial Performance Warner Music Group's Q3 FY2025 results show overall revenue growth driven by segment performance, but operating income and net income were impacted by increased expenses and foreign exchange effects [Total WMG Summary Results](index=2&type=section&id=Total%20WMG%20Summary%20Results) Warner Music Group's total revenue grew **9% to $1.689 billion** in Q3 FY2025, driven by recorded music and music publishing, though operating income declined **18%** and a **$16 million net loss** was recorded due to restructuring and foreign exchange impacts, while adjusted OIBDA increased **18%** reflecting operational efficiencies Total WMG Summary Results (Three Months Ended June 30) | Metric | June 30, 2025 ($M) | June 30, 2024 ($M) | Percentage Change | | :--------------------------------- | :------------ | :------------ | :------- | | Revenue | $1,689 | $1,554 | 9 % | | Recorded Music Revenue | $1,354 | $1,251 | 8 % | | Music Publishing Revenue | $336 | $305 | 10 % | | Operating Income | $169 | $207 | -18 % | | Adjusted OIBDA | $373 | $316 | 18 % | | Net (Loss) Income | $(16) | $141 | — % | | Cash Flow from Operations | $46 | $188 | -76 % | | Free Cash Flow | $7 | $160 | -96 % | - Total revenue increased **8.7%** (**7.0% at constant currency**), with digital revenue growing **5.3%** (**4.1% at constant currency**) primarily driven by **4.0% streaming revenue growth** (**2.9% at constant currency**); excluding specific items, total revenue grew **10.2%** (**8.5% at constant currency**)[6](index=6&type=chunk) - Operating income decreased **18.4% to $169 million**, primarily due to a **$68 million increase in restructuring and impairment charges**, **$12 million higher amortization expense**, and increased non-cash equity-based compensation and executive transition costs[7](index=7&type=chunk) - Adjusted OIBDA increased **18.0% to $373 million**, with adjusted OIBDA margin expanding **1.8 percentage points to 22.1%**, driven by revenue mix, acquisition impact, and cost savings from the 2024 strategic restructuring plan, partially offset by reinvestment in technology[8](index=8&type=chunk) [Net Loss and EPS](index=2&type=section&id=Net%20Loss%20and%20EPS) The company reported a **$16 million net loss** in Q3 FY2025, a significant decline from **$141 million net income** in the prior year, primarily due to negative foreign exchange impacts on Euro-denominated debt and hedging losses, partially offset by reduced income tax expense Net (Loss) Income and EPS (Three Months Ended June 30) | Metric | June 30, 2025 ($M) | June 30, 2024 ($M) | Percentage Change | | :--------------------------------- | :------------ | :------------ | :------- | | Net (Loss) Income | $(16) | $141 | — % | | Basic and Diluted EPS for Class A and B Common Stock | $(0.03) | $0.27 | — % | - Net loss primarily resulted from a **$70 million loss** on foreign exchange rates for Euro-denominated debt (compared to a **$7 million gain** in the prior year) and **$8 million in realized and unrealized losses** from hedging activities (compared to a **$1 million gain** in the prior year)[9](index=9&type=chunk) - Net loss was partially offset by a **$25 million decrease in income tax expense**, mainly due to a pre-tax loss this quarter[9](index=9&type=chunk) [Liquidity and Cash Flow](index=3&type=section&id=Liquidity%20and%20Cash%20Flow) Warner Music Group's cash flow from operations significantly decreased **76% to $46 million**, and free cash flow dropped **96% to $7 million**, primarily due to increased A&R spending, working capital changes, and higher capital expenditures for technology investments, with a cash balance of **$527 million** and total debt of **$4.363 billion** as of June 30, 2025 Cash and Debt Position (As of June 30, 2025) | Metric | Amount ($M) | | :--------------------------------- | :---------------- | | Cash Balance | $527 | | Total Debt | $4,363 | | Net Debt | $3,836 | Cash Flow Summary (Three Months Ended June 30) | Metric | June 30, 2025 ($M) | June 30, 2024 ($M) | Percentage Change | | :--------------------------------- | :------------ | :------------ | :------- | | Cash Flow from Operations | $46 | $188 | -76 % | | Free Cash Flow | $7 | $160 | -96 % | | Capital Expenditures | $39 | $28 | 39 % | - Cash flow from operations decreased primarily due to **increased A&R spending** and other changes in working capital[12](index=12&type=chunk) - Free cash flow decline also attributed to a **39% increase in capital expenditures to $39 million**, mainly for technology investments[12](index=12&type=chunk) Segment Performance The company's segment performance highlights revenue growth in both recorded music and music publishing, with adjusted OIBDA expansion, despite varying impacts on operating income due to restructuring and amortization [Recorded Music](index=4&type=section&id=Recorded%20Music) Recorded Music revenue grew **8% to $1.354 billion**, driven by digital, artist services, expanded rights, and licensing income, despite a slight decline in physical revenue, while adjusted OIBDA increased **14% to $321 million** with margin expansion due to cost savings and revenue mix, though operating income decreased due to higher restructuring and impairment charges [Recorded Music Revenue](index=4&type=section&id=Recorded%20Music%20Revenue) Recorded Music revenue increased, primarily driven by digital, artist services, and licensing, with strong streaming performance and chart success, partially offset by a slight decline in physical revenue Recorded Music Revenue (Three Months Ended June 30) | Revenue Type | June 30, 2025 ($M) | June 30, 2024 ($M) | Percentage Change | | :--------------------------------- | :------------ | :------------ | :------- | | Total Recorded Music Revenue | $1,354 | $1,251 | 8 % | | Digital | $929 | $882 | 5 % | | Physical | $119 | $120 | -0.8 % | | Artist Services and Expanded Rights | $195 | $159 | 22.6 % | | Licensing | $111 | $90 | 23.3 % | - Digital revenue grew **5.3%** (**4.1% at constant currency**), with streaming revenue up **3.7%** (**2.6% at constant currency**), and subscription revenue increasing **5.3%** (**4.2% at constant currency**) due to positive market share trends and chart performance[15](index=15&type=chunk) - Licensing revenue increased **23.3%** (**19.4% at constant currency**) driven by UK and China licensing deals and the timing of other copyright infringement settlements[15](index=15&type=chunk) - Artist services and expanded rights revenue grew **22.6%** (**19.6% at constant currency**) primarily due to increased concert promotion revenue in France and Spain[15](index=15&type=chunk) - Physical revenue decreased **0.8%** (**4.0% at constant currency**), with growth from strong releases in Korea and Japan offset by a **$10 million impact** from the BMG termination agreement; excluding this, physical revenue grew **8.2%** (**4.4% at constant currency**)[15](index=15&type=chunk) - Top-selling artists this quarter included **BAEKHYUN, ROSÉ, Bruno Mars, Grateful Dead, and Teddy Swims**[15](index=15&type=chunk) [Recorded Music Operating Income & Adjusted OIBDA](index=4&type=section&id=Recorded%20Music%20Operating%20Income%20%26%20Adjusted%20OIBDA) Recorded Music operating income declined due to increased restructuring and amortization, while adjusted OIBDA grew with margin expansion, driven by strategic cost savings and revenue mix Recorded Music Operating Income and Adjusted OIBDA (Three Months Ended June 30) | Metric | June 30, 2025 ($M) | June 30, 2024 ($M) | Percentage Change | | :--------------------------------- | :------------ | :------------ | :------- | | Operating Income | $201 | $230 | -13 % | | Operating Margin | 14.8 % | 18.4 % | -3.6 ppts | | Adjusted OIBDA | $321 | $281 | 14 % | | Adjusted OIBDA Margin | 23.7 % | 22.5 % | +1.2 ppts | - Operating income decreased **12.6%**, primarily due to a **$67 million increase in restructuring and impairment charges** (including long-lived asset impairment related to non-core e-commerce business) and a **$3 million increase in amortization expense** from music-related asset acquisitions[16](index=16&type=chunk)[17](index=17&type=chunk) - Adjusted OIBDA increased **14.2%** (**12.2% at constant currency**), with adjusted OIBDA margin improving **1.2 percentage points**, driven by savings from the 2024 strategic restructuring plan, partially offset by reinvestment in the business and revenue mix[18](index=18&type=chunk) [Music Publishing](index=6&type=section&id=Music%20Publishing) Music Publishing revenue grew **10% to $336 million**, driven by digital, performance, synchronization, and mechanical revenue streams, with operating income increasing **13% to $60 million** and adjusted OIBDA growing **22% to $96 million**, expanding margins primarily due to revenue mix and acquisition impacts [Music Publishing Revenue](index=6&type=section&id=Music%20Publishing%20Revenue) Music Publishing revenue increased across all streams, notably digital, performance, and synchronization, benefiting from digital deal renewals, European live events, and copyright settlements Music Publishing Revenue (Three Months Ended June 30) | Revenue Type | June 30, 2025 ($M) | June 30, 2024 ($M) | Percentage Change | | :--------------------------------- | :------------ | :------------ | :------- | | Total Music Publishing Revenue | $336 | $305 | 10 % | | Performance | $58 | $52 | 11.5 % | | Digital | $204 | $194 | 5.2 % | | Mechanical | $16 | $13 | 23.1 % | | Synchronization | $54 | $42 | 28.6 % | - Digital revenue grew **5.2%** (**4.6% at constant currency**), with streaming revenue up **5.2%** (**4.1% at constant currency**), primarily influenced by digital deal renewals, mainly in the US[21](index=21&type=chunk) - Performance revenue increased **11.5%** (**9.4% at constant currency**) due to growth in concerts, radio, and live events across European territories[21](index=21&type=chunk) - Synchronization revenue grew **28.6%**, primarily due to the timing of other copyright infringement settlements, increased TV and commercial licensing activity, and a **$3 million impact** from the Tempo acquisition[21](index=21&type=chunk) [Music Publishing Operating Income & Adjusted OIBDA](index=6&type=section&id=Music%20Publishing%20Operating%20Income%20%26%20Adjusted%20OIBDA) Music Publishing operating income increased despite higher amortization, while adjusted OIBDA saw significant growth and margin expansion, driven by favorable revenue mix and acquisition impacts Music Publishing Operating Income and Adjusted OIBDA (Three Months Ended June 30) | Metric | June 30, 2025 ($M) | June 30, 2024 ($M) | Percentage Change | | :--------------------------------- | :------------ | :------------ | :------- | | Operating Income | $60 | $53 | 13 % | | Operating Margin | 17.9 % | 17.4 % | +0.5 ppts | | Adjusted OIBDA | $96 | $79 | 22 % | | Adjusted OIBDA Margin | 28.6 % | 25.9 % | +2.7 ppts | - Operating income increased **13.2%**, partially offset by a **$9 million increase in amortization expense** due to acquisition impacts[22](index=22&type=chunk) - Music Publishing adjusted OIBDA grew **21.5%** (**20.0% at constant currency**), with adjusted OIBDA margin improving **2.7 percentage points**, driven by revenue mix and acquisition impacts[23](index=23&type=chunk) Recent Developments & Company Information This section covers Warner Music Group's recent dividend announcement, an overview of its global music entertainment business, and important disclosures regarding forward-looking statements and investor resources [Dividend Announcement](index=6&type=section&id=Dividend%20Announcement) Warner Music Group's Board of Directors declared a regular quarterly cash dividend of **$0.19 per share** for Class A and Class B common stock, payable on September 3, 2025 - The Board of Directors declared a regular quarterly cash dividend of **$0.19 per share** on the company's Class A and Class B common stock[24](index=24&type=chunk) - The dividend is payable on **September 3, 2025**, to stockholders of record as of the close of business on **August 20, 2025**[24](index=24&type=chunk) [About Warner Music Group](index=8&type=section&id=About%20Warner%20Music%20Group) Warner Music Group is a global music entertainment company with over **200 years of history**, encompassing iconic recorded music labels and Warner Chappell Music, a leading music publisher with a catalog of over **one million copyrighted works** - Warner Music Group, with over **200 years of history**, is a global home to creative artists, songwriters, and companies driving culture worldwide[27](index=27&type=chunk) - WMG's Recorded Music division is anchored by four iconic companies: **Atlantic, Elektra, Parlophone, and Warner Records**, complemented by renowned labels such as TenThousand Projects, 300 Entertainment, and Asylum[27](index=27&type=chunk) - Warner Chappell Music, originating from Chappell & Company founded in 1811, is one of the world's leading music publishers, boasting a catalog of over **one million copyrighted works** across various musical genres[27](index=27&type=chunk) [Forward-Looking Statements & Investor Information](index=8&type=section&id=Forward-Looking%20Statements%20%26%20Investor%20Information) This report contains forward-looking statements reflecting Warner Music Group's current views on future events and financial performance, subject to various risks and uncertainties, with investors advised to consult SEC filings for detailed risk factors and company websites for investor information and email alerts - This communication contains forward-looking statements, identified by words like "estimate," "expect," "anticipate," "plan," "intend," "believe," "forecast," or similar expressions, reflecting Warner Music Group's current views on future events and financial performance[28](index=28&type=chunk) - Forward-looking statements are subject to various risks, uncertainties, and other factors that could cause actual results to differ materially from expectations, with investors advised to refer to the company's Form 10-K, Form 10-Q, and other SEC filings for factors that could cause actual results to differ significantly[28](index=28&type=chunk) - The company maintains an investor website (www.wmg.com) as a channel for important corporate information, regularly posting financial and other material information at http://investors.wmg.com, where investors can sign up for email alerts[29](index=29&type=chunk) Supplemental Financial Information This section provides definitions and reconciliations for non-GAAP financial measures, along with detailed consolidated financial statements, segment-level performance data, and notable items impacting results [Non-GAAP Financial Measures](index=11&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and explains Warner Music Group's key non-GAAP financial measures, including Adjusted OIBDA, Free Cash Flow, and Constant Currency, used to assess operating performance and liquidity as supplements to US GAAP metrics [Adjusted OIBDA Definition](index=11&type=section&id=Adjusted%20OIBDA%20Definition) Adjusted OIBDA is defined as operating income (loss) before non-cash depreciation and amortization, adjusted for non-cash equity-based compensation and other items affecting comparability - Adjusted OIBDA is defined as operating income (loss) before non-cash depreciation of tangible assets and non-cash amortization of intangible assets, further adjusted to exclude non-cash equity-based compensation and related expenses, and certain items impacting comparability, such as gains/losses on asset disposals and restructuring transformation costs[34](index=34&type=chunk) - The company considers Adjusted OIBDA an important indicator of the strength and performance of its business operations, but it should not be considered an alternative to operating income (loss) or net income (loss) reported under US GAAP[34](index=34&type=chunk) [Free Cash Flow Definition](index=17&type=section&id=Free%20Cash%20Flow%20Definition) Free Cash Flow is defined as cash flow from operating activities less capital expenditures, used to assess operational performance and available cash for various financial obligations and investments - Free Cash Flow is defined as cash flow provided by operating activities less capital expenditures[42](index=42&type=chunk) - The company uses Free Cash Flow to assess operating performance and cash available for debt repayment, working capital needs, capital expenditures, strategic acquisitions and investments, dividend payments, or debt repurchases[42](index=42&type=chunk) - Free Cash Flow is not a performance measure calculated in accordance with US GAAP and should not be considered in isolation or as a substitute for net income (loss) or cash flow from operating activities[43](index=43&type=chunk) [Constant Currency Explanation](index=15&type=section&id=Constant%20Currency%20Explanation) Constant currency information compares revenue and adjusted OIBDA by assuming consistent exchange rates across periods, aiding in understanding operational results and performance evaluation - Constant currency information compares revenue and Adjusted OIBDA by assuming exchange rates remain consistent across periods, aiding in understanding operational results and evaluating performance against prior periods[38](index=38&type=chunk) - Constant currency is calculated by applying the current year's foreign exchange rates to the prior year's revenue and Adjusted OIBDA[38](index=38&type=chunk) - Revenue and Adjusted OIBDA at constant currency are supplemental non-GAAP measures and should not be considered alternatives to revenue and Adjusted OIBDA reported under US GAAP[38](index=38&type=chunk) [Detailed Financial Statements and Reconciliations](index=8&type=section&id=Detailed%20Financial%20Statements%20and%20Reconciliations) This section provides comprehensive financial tables, including condensed consolidated statements of operations, balance sheets, cash flows, digital revenue breakdown, detailed reconciliations for non-GAAP measures like Adjusted OIBDA and Free Cash Flow, and revenue and OIBDA by geography and segment, along with notable items impacting performance [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This table presents the condensed consolidated statements of operations, detailing revenue, costs, operating income, and net income (loss) for the three months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Operations (Three Months Ended June 30) | Metric | June 30, 2025 ($M) | June 30, 2024 ($M) | Percentage Change | | :--------------------------------- | :------------ | :------------ | :------- | | Revenue | $1,689 | $1,554 | 9 % | | Total Costs and Expenses | $(1,520) | $(1,348) | 13 % | | Operating Income | $169 | $207 | -18 % | | Net (Loss) Income | $(16) | $141 | — % | | Net (Loss) Income Attributable to Warner Music Group Corp | $(16) | $139 | — % | | Class A – Basic and Diluted EPS | $(0.03) | $0.27 | | | Class B – Basic and Diluted EPS | $(0.03) | $0.27 | | [Condensed Consolidated Balance Sheets](index=10&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table provides the condensed consolidated balance sheets, outlining assets, liabilities, and equity as of June 30, 2025, compared to September 30, 2024 Condensed Consolidated Balance Sheets (As of June 30, 2025 vs. September 30, 2024) | Metric | June 30, 2025 ($M) | September 30, 2024 ($M) | Percentage Change | | :--------------------------------- | :------------ | :------------ | :------- | | Cash and Equivalents | $527 | $694 | -24 % | | Total Current Assets | $2,678 | $2,643 | 1 % | | Total Assets | $9,777 | $9,155 | 7 % | | Total Current Liabilities | $4,050 | $3,897 | 4 % | | Total Liabilities | $8,965 | $8,480 | 6 % | | Total Equity | $812 | $675 | 20 % | | Total Liabilities and Equity | $9,777 | $9,155 | 7 % | [Summarized Statements of Cash Flows](index=11&type=section&id=Summarized%20Statements%20of%20Cash%20Flows) This table summarizes cash flows from operating, investing, and financing activities, showing the net change in cash and equivalents for the three months ended June 30, 2025 and 2024 Summarized Statements of Cash Flows (Three Months Ended June 30) | Metric | June 30, 2025 ($M) | June 30, 2024 ($M) | | :--------------------------------- | :------------ | :------------ | | Cash Flow from Operations | $46 | $188 | | Cash Flow Used in Investing Activities | $(71) | $(76) | | Cash Flow Used in Financing Activities | $(96) | $(90) | | Net (Decrease) Increase in Cash and Equivalents | $(110) | $20 | [Digital Revenue Summary](index=11&type=section&id=Digital%20Revenue%20Summary) This table provides a summary of digital revenue by segment and type, including streaming, downloads, and other digital income, for the three months ended June 30, 2025 and 2024 Digital Revenue Summary (Three Months Ended June 30) | Segment/Type | June 30, 2025 ($M) | June 30, 2024 ($M) | Percentage Change | | :--------------------------------- | :------------ | :------------ | :------- | | Recorded Music Streaming | $895 | $863 | 4 % | | Recorded Music Downloads and Other Digital | $34 | $19 | 79 % | | Total Recorded Music Digital Revenue | $929 | $882 | 5 % | | Music Publishing Streaming | $202 | $192 | 5 % | | Total Music Publishing Digital Revenue | $204 | $194 | 5 % | | Consolidated Streaming | $1,097 | $1,055 | 4 % | | Total Digital Revenue | $1,132 | $1,075 | 5 % | [Reconciliation of Net Income to Adjusted OIBDA](index=12&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20OIBDA) This table reconciles net income (loss) to adjusted OIBDA, detailing adjustments for amortization, depreciation, restructuring, impairment, and non-cash equity-based compensation for the three months ended June 30, 2025 and 2024 Reconciliation of Net Income to Adjusted OIBDA (Three Months Ended June 30) | Metric | June 30, 2025 ($M) | June 30, 2024 ($M) | Percentage Change | | :--------------------------------- | :------------ | :------------ | :------- | | Net (Loss) Income | $(16) | $141 | — % | | Operating Income | $169 | $207 | -18 % | | Amortization Expense | $67 | $55 | 22 % | | Depreciation Expense | $29 | $25 | 16 % | | Restructuring and Impairment | $69 | $1 | — % | | Non-Cash Equity-Based Compensation and Other Related Costs | $16 | $11 | 45 % | | Adjusted OIBDA | $373 | $316 | 18 % | [Reconciliation of Segment Operating Income to Adjusted OIBDA](index=13&type=section&id=Reconciliation%20of%20Segment%20Operating%20Income%20to%20Adjusted%20OIBDA) This section provides detailed reconciliations of operating income to adjusted OIBDA for WMG total, Recorded Music, and Music Publishing segments, including adjustments for depreciation, amortization, restructuring, and non-cash equity compensation Total WMG Adjusted OIBDA Reconciliation (Three Months Ended June 30) | Metric | June 30, 2025 ($M) | June 30, 2024 ($M) | Percentage Change | | :--------------------------------- | :------------ | :------------ | :------- | | Total WMG Operating Income – GAAP | $169 | $207 | -18 % | | Depreciation and Amortization Expense | $96 | $80 | 20 % | | Restructuring and Impairment | $69 | $1 | — % | | Non-Cash Equity-Based Compensation and Other Related Costs | $16 | $11 | 45 % | | Total WMG Adjusted OIBDA | $373 | $316 | 18 % | Recorded Music Adjusted OIBDA Reconciliation (Three Months Ended June 30) | Metric | June 30, 2025 ($M) | June 30, 2024 ($M) | Percentage Change | | :--------------------------------- | :------------ | :------------ | :------- | | Recorded Music Operating Income – GAAP | $201 | $230 | -13 % | | Depreciation and Amortization Expense | $47 | $43 | 9 % | | Restructuring and Impairment | $69 | $0 | — % | | Non-Cash Equity-Based Compensation and Other Related Costs | $4 | $6 | -33 % | | Recorded Music Adjusted OIBDA | $321 | $281 | 14 % | Music Publishing Adjusted OIBDA Reconciliation (Three Months Ended June 30) | Metric | June 30, 2025 ($M) | June 30, 2024 ($M) | Percentage Change | | :--------------------------------- | :------------ | :------------ | :------- | | Music Publishing Operating Income – GAAP | $60 | $53 | 13 % | | Depreciation and Amortization Expense | $35 | $25 | 40 % | | Non-Cash Equity-Based Compensation and Other Related Costs | $1 | $1 | — % | | Music Publishing Adjusted OIBDA | $96 | $79 | 22 % | [Revenue by Geography and Segment](index=15&type=section&id=Revenue%20by%20Geography%20and%20Segment) This section presents revenue breakdowns by geographic region (US and International) and by business segment (Recorded Music and Music Publishing), both at constant currency, for the three months ended June 30, 2025 and 2024 Revenue by Geography (Three Months Ended June 30, Constant Currency) | Geographic Region | June 30, 2025 ($M) | June 30, 2024 (Constant Currency, $M) | Percentage Change (Constant Currency) | | :--------------------------------- | :------------ | :-------------------- | :------------------ | | US Recorded Music | $536 | $517 | 4 % | | US Music Publishing | $186 | $161 | 16 % | | International Recorded Music | $818 | $755 | 8 % | | International Music Publishing | $150 | $146 | 3 % | | Total Revenue | $1,689 | $1,578 | 7 % | Revenue by Segment (Three Months Ended June 30, Constant Currency) | Segment | June 30, 2025 ($M) | June 30, 2024 (Constant Currency, $M) | Percentage Change (Constant Currency) | | :--------------------------------- | :------------ | :-------------------- | :------------------ | | Recorded Music | $1,354 | $1,272 | 6 % | | Music Publishing | $336 | $307 | 9 % | | Total Revenue | $1,689 | $1,578 | 7 % | [Adjusted OIBDA by Segment](index=16&type=section&id=Adjusted%20OIBDA%20by%20Segment) This table presents adjusted OIBDA by segment for WMG total, Recorded Music, and Music Publishing, at constant currency, for the three months ended June 30, 2025 and 2024 Adjusted OIBDA by Segment (Three Months Ended June 30, Constant Currency) | Segment | June 30, 2025 ($M) | June 30, 2024 (Constant Currency, $M) | Percentage Change (Constant Currency) | | :--------------------------------- | :------------ | :-------------------- | :------------------ | | Total WMG Adjusted OIBDA | $373 | $322 | 15.8 % | | Recorded Music Adjusted OIBDA | $321 | $286 | 12.2 % | | Music Publishing Adjusted OIBDA | $96 | $80 | 20.0 % | [Notable Items](index=17&type=section&id=Notable%20Items) This section highlights specific items that significantly impacted revenue and adjusted OIBDA for Recorded Music in Q3 FY2025, including copyright settlements and the BMG termination agreement Notable Items Impacting Revenue (Q3 FY2025) | Item | Impact on Recorded Music Revenue (Q3 2025, $M) | | :--------------------------------- | :--------------------------------- | | Downloads and Other Digital - Copyright Settlement | $16 | Notable Items Impacting Adjusted OIBDA (Q3 FY2025) | Item | Impact on Recorded Music Adjusted OIBDA (Q3 2025, $M) | | :--------------------------------- | :--------------------------------- | | Copyright Settlement | $9 | - The BMG termination agreement negatively impacted Recorded Music revenue by **$14 million** compared to the prior year (comprising **$10 million in physical revenue** and **$4 million in streaming revenue**)[6](index=6&type=chunk)[15](index=15&type=chunk) - The prior year included **$22 million in incremental Recorded Music streaming revenue** from digital service providers (DSP make-whole payments), affecting year-over-year comparison[6](index=6&type=chunk)[15](index=15&type=chunk) [Calculation of Free Cash Flow](index=18&type=section&id=Calculation%20of%20Free%20Cash%20Flow) This table details the calculation of free cash flow by subtracting capital expenditures from cash flow from operating activities for the three months ended June 30, 2025 and 2024 Calculation of Free Cash Flow (Three Months Ended June 30) | Metric | June 30, 2025 ($M) | June 30, 2024 ($M) | | :--------------------------------- | :------------ | :------------ | | Cash Flow from Operations | $46 | $188 | | Less: Capital Expenditures | $39 | $28 | | Free Cash Flow | $7 | $160 |

Exhibit 99.1 PRESS RELEASE Ingles Markets, Inc. Contact: Pat Jackson, Chief Financial Officer pjackson@ingles-markets.com (828) 669-2941 (Ext. 223) ASHEVILLE, N.C. - Ingles Markets, Incorporated (NASDAQ: IMKTA) today reported results for the three and nine months ended June 28, 2025. August 7, 2025 For Immediate Release Ingles Markets, Incorporated Reports Results for Third Quarter and First Nine Months of Fiscal 2025 Robert P. Ingle II, Chairman of the Board, stated, "We appreciate our associates as they c ...

PART I—FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, and cash flows, with detailed notes on business, accounting policies, and financial components [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Summarizes the company's financial position, detailing assets, liabilities, and shareholders' equity at specific reporting dates Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | **Assets** | | | | Total current assets | $549,211 | $482,257 | | Total assets | $1,592,631 | $1,663,591 | | **Liabilities and Shareholders' Equity** | | | | Total current liabilities | $464,609 | $509,510 | | Total liabilities | $1,360,425 | $1,434,749 | | Total shareholders' equity | $232,206 | $228,842 | | Total liabilities and shareholders' equity | $1,592,631 | $1,663,591 | - Total assets decreased by approximately **$70.96 million** from December 31, 2024, to June 30, 2025, primarily driven by a decrease in intangible assets and goodwill[15](index=15&type=chunk) - Total liabilities decreased by approximately **$74.32 million**, mainly due to a reduction in accrued rebates, returns, and discounts, and term notes payable[15](index=15&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's revenues, expenses, and net income over specific periods, including earnings per share Condensed Consolidated Statements of Operations (in thousands, except per share) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Product revenues, net | $188,000 | $145,276 | $365,757 | $290,199 | | Total cost of product revenues | $79,616 | $54,470 | $160,049 | $107,937 | | Gross profit | $108,384 | $90,806 | $205,708 | $182,262 | | Income from operations | $35,105 | $47,471 | $56,792 | $96,945 | | Net income | $11,983 | $19,606 | $14,400 | $47,319 | | Earnings per share — basic | $0.38 | $0.60 | $0.45 | $1.46 | | Earnings per share — diluted | $0.34 | $0.52 | $0.44 | $1.24 | - Net product revenues increased by **$42.7 million (29.4%)** for the three months ended June 30, 2025, and by **$75.6 million (26.0%)** for the six months ended June 30, 2025, compared to the same periods in 2024, primarily driven by the acquisition of Jornay PM[17](index=17&type=chunk)[190](index=190&type=chunk)[203](index=203&type=chunk) - Net income decreased significantly for both the three-month and six-month periods ended June 30, 2025, compared to 2024, largely due to increased operating expenses (selling, general and administrative, and intangible asset amortization) and higher interest expense[17](index=17&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[211](index=211&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Presents net income and other comprehensive income components, reflecting total comprehensive income for the periods Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $11,983 | $19,606 | $14,400 | $47,319 | | Other comprehensive income (loss) | $96 | $(58) | $282 | $(196) | | Comprehensive income | $12,079 | $19,548 | $14,682 | $47,123 | - Comprehensive income decreased for both periods in 2025 compared to 2024, mirroring the trend in net income, despite a positive shift in unrealized gains on marketable securities[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Outlines cash flows from operating, investing, and financing activities, showing changes in cash and equivalents Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $127,837 | $129,335 | | Net cash used in investing activities | $(12,595) | $(27,034) | | Net cash used in financing activities | $(73,606) | $(168,354) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $41,636 | $(66,053) | | Cash, cash equivalents and restricted cash at end of period | $138,248 | $173,941 | - Net cash provided by operating activities remained stable year-over-year, at **$127.8 million** in 2025 compared to **$129.3 million** in 2024[24](index=24&type=chunk)[221](index=221&type=chunk) - Net cash used in investing activities decreased by **$14.4 million**, primarily due to lower purchases of marketable securities[24](index=24&type=chunk)[222](index=222&type=chunk) - Net cash used in financing activities significantly decreased by **$94.8 million**, mainly due to lower repayments of term notes, the redemption of 2026 Convertible Notes in the prior period, and reduced common stock repurchases[24](index=24&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the condensed consolidated financial statements [Note 1. Nature of Business](index=9&type=section&id=Note%201.%20Nature%20of%20Business) Describes the company's core business as a biopharmaceutical entity and its product portfolio - Collegium Pharmaceutical, Inc. is a biopharmaceutical company focused on improving the lives of people with serious medical conditions, with a product portfolio including Jornay PM, Belbuca, Xtampza ER, Nucynta Products, and Symproic[25](index=25&type=chunk) - The company acquired Ironshore Therapeutics Inc. on September 3, 2024, adding Jornay PM to its product offerings[26](index=26&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=9&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the key accounting principles and estimates used in preparing the financial statements - The unaudited Condensed Consolidated Financial Statements are prepared in accordance with GAAP for interim financial reporting and Regulation S-X, Rule 10-01, and include all necessary adjustments for fair presentation[28](index=28&type=chunk)[29](index=29&type=chunk) - The company's estimates and assumptions, such as revenue recognition, fair value of acquired assets, inventory valuation, and intangible asset useful lives, are evaluated on an ongoing basis[30](index=30&type=chunk)[31](index=31&type=chunk) - In July 2025, the Board authorized a new **$150 million** share repurchase program through December 31, 2026, and the One Big Beautiful Bill Act (OBBBA) was enacted, with the company evaluating its impact on the 2025 effective tax rate[33](index=33&type=chunk)[128](index=128&type=chunk)[174](index=174&type=chunk) [Note 3. Revenue from Contracts with Customers](index=11&type=section&id=Note%203.%20Revenue%20from%20Contracts%20with%20Customers) Explains the company's revenue recognition policies, including product sales and variable consideration - Revenue is primarily derived from product sales to wholesalers, recognized when customers obtain control of products, typically upon delivery[39](index=39&type=chunk)[43](index=43&type=chunk) - Transaction price includes variable consideration for sales deductions like rebates, returns, and trade allowances, estimated using historical data and market trends[44](index=44&type=chunk)[45](index=45&type=chunk) Net Product Revenues by Product (in thousands) | Product | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Belbuca | $52,600 | $52,198 | $104,258 | $102,861 | | Xtampza ER | $52,605 | $44,571 | $100,247 | $90,384 | | Jornay PM | $32,626 | $0 | $61,165 | $0 | | Nucynta IR | $26,501 | $25,203 | $53,918 | $51,163 | | Nucynta ER | $19,946 | $19,272 | $39,632 | $38,458 | | Symproic | $3,722 | $4,032 | $6,537 | $7,333 | | Total | $188,000 | $145,276 | $365,757 | $290,199 | - Jornay PM, acquired in September 2024, contributed **$32.6 million** and **$61.2 million** in net product revenues for the three and six months ended June 30, 2025, respectively[57](index=57&type=chunk)[59](index=59&type=chunk)[191](index=191&type=chunk)[204](index=204&type=chunk) [Note 4. Acquisition](index=18&type=section&id=Note%204.%20Acquisition) Details the Ironshore Acquisition, including its strategic rationale, consideration, and preliminary purchase price allocation - The company completed the Ironshore Acquisition on September 3, 2024, to expand into neuropsychiatry with Jornay PM, an ADHD treatment[26](index=26&type=chunk)[62](index=62&type=chunk) - The total fair value of the acquisition consideration was approximately **$306.1 million**, including an initial cash consideration of **$276.9 million** and contingent consideration of **$4.1 million**[64](index=64&type=chunk) Preliminary Purchase Price Allocation (in thousands) | Assets Acquired | Acquisition Date Fair Value | | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $9,350 | | Accounts receivable | $44,593 | | Inventory | $17,155 | | Intangible assets | $635,000 | | Deferred tax assets | $35,441 | | Total assets | $751,551 | | Liabilities Assumed | | | Accounts payable | $6,656 | | Accrued liabilities | $73,436 | | Accrued rebates, returns and discounts | $91,279 | | Senior secured notes payable | $151,500 | | Deferred royalty obligation | $116,900 | | Deferred revenue | $10,000 | | Total liabilities | $459,525 | | Total identifiable net assets acquired | $292,026 | | Goodwill | $14,078 | | Total consideration transferred | $306,104 | - Acquisition-related expenses for the six months ended June 30, 2025, totaled **$2.224 million**, primarily for integration consulting and employee-related expenses[68](index=68&type=chunk)[69](index=69&type=chunk) [Note 5. Earnings Per Share](index=21&type=section&id=Note%205.%20Earnings%20Per%20Share) Calculates basic and diluted earnings per share, considering the impact of potentially dilutive securities Earnings Per Share (in thousands, except per share) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $11,983 | $19,606 | $14,400 | $47,319 | | Earnings per share — basic | $0.38 | $0.60 | $0.45 | $1.46 | | Weighted-average shares — basic | 31,810,612 | 32,433,025 | 31,802,222 | 32,379,807 | | Earnings per share — diluted | $0.34 | $0.52 | $0.44 | $1.24 | | Weighted-average shares — diluted | 39,075,703 | 40,383,694 | 39,283,297 | 40,510,943 | - Diluted EPS decreased from **$0.52 to $0.34** for the three months ended June 30, 2025, and from **$1.24 to $0.44** for the six months ended June 30, 2025, primarily due to lower net income[71](index=71&type=chunk) - Certain dilutive securities, including stock options, restricted stock units, and performance share units, were excluded from diluted EPS calculations if their inclusion would have been antidilutive or if vesting conditions were not met[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) [Note 6. Fair Value of Financial Instruments](index=23&type=section&id=Note%206.%20Fair%20Value%20of%20Financial%20Instruments) Categorizes financial instruments by fair value hierarchy and discloses their fair values - The company categorizes fair value measurements into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[74](index=74&type=chunk) Fair Value of Financial Instruments (in thousands) | Category | June 30, 2025 Total | Level 1 | Level 2 | Level 3 | | :-------------------------- | :------------------ | :------ | :------ | :------ | | **Assets** | | | | | | Cash equivalents | $40,678 | $40,678 | $0 | $0 | | Marketable securities | $104,805 | $0 | $104,805 | $0 | | Total assets measured at fair value | $145,483 | $40,678 | $104,805 | $0 | | **Liabilities** | | | | | | Contingent consideration | $38 | $0 | $0 | $38 | | Total liabilities measured at fair value | $38 | $0 | $0 | $38 | - The contingent consideration liability, related to the Ironshore Acquisition, decreased from **$1.182 million** at December 31, 2024, to **$38 thousand** at June 30, 2025, due to a gain on fair value remeasurement[78](index=78&type=chunk)[80](index=80&type=chunk) - The fair value of the 2029 Convertible Senior Notes was **$260.820 million** (carrying value **$237.688 million**) and the deferred royalty obligation was approximately **$132.305 million** (carrying value **$122.627 million**) as of June 30, 2025, both classified as Level 2 and Level 3 liabilities, respectively[81](index=81&type=chunk)[83](index=83&type=chunk) [Note 7. Marketable Securities](index=27&type=section&id=Note%207.%20Marketable%20Securities) Details the composition and fair value of available-for-sale marketable securities Available-for-Sale Securities (in thousands) | Category | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :-------------------------- | :----------------------- | :----------------------- | | Corporate debt securities | $96,303 | $82,679 | | Government-sponsored securities | $8,502 | $6,560 | | Commercial paper | $0 | $4,952 | | Total | $104,805 | $94,191 | - Marketable securities increased from **$94.191 million** at December 31, 2024, to **$104.805 million** at June 30, 2025, with corporate debt securities forming the largest component[86](index=86&type=chunk) - The company did not record any allowances for credit losses or other-than-temporary impairment on available-for-sale debt securities during the six months ended June 30, 2025[87](index=87&type=chunk) [Note 8. Inventory](index=27&type=section&id=Note%208.%20Inventory) Provides a breakdown of inventory components and changes over the reporting periods Inventory Composition (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Raw materials | $9,521 | $12,531 | | Work in process | $12,058 | $13,163 | | Finished goods | $20,150 | $17,812 | | Total inventory | $41,729 | $43,506 | - Total inventory decreased from **$43.506 million** at December 31, 2024, to **$41.729 million** at June 30, 2025, primarily due to a reduction in raw materials and work in process[88](index=88&type=chunk) - Long-term inventory of **$3.581 million** as of June 30, 2025, is included in other noncurrent assets[90](index=90&type=chunk)[91](index=91&type=chunk) [Note 9. Goodwill and Intangible Assets](index=29&type=section&id=Note%209.%20Goodwill%20and%20Intangible%20Assets) Details changes in goodwill and intangible assets, including amortization expense - Goodwill decreased from **$162.333 million** at December 31, 2024, to **$147.936 million** at June 30, 2025, due to measurement period adjustments related to the Ironshore Acquisition[65](index=65&type=chunk)[92](index=92&type=chunk) Intangible Assets, Net (in thousands) | Intangible Asset | June 30, 2025 Carrying Amount | December 31, 2024 Carrying Amount | | :----------------- | :------------------------------ | :-------------------------------- | | Jornay PM | $565,844 | $607,758 | | Belbuca | $113,087 | $150,786 | | Nucynta Products | $55,384 | $83,076 | | Symproic | $46,141 | $49,782 | | Total | $780,456 | $891,402 | - Total intangible assets, net, decreased by **$110.946 million** from December 31, 2024, to June 30, 2025, primarily due to amortization expense[93](index=93&type=chunk) Amortization Expense (in thousands) | Period | 2025 | 2024 | | :---------------------------------- | :----- | :----- | | Three Months Ended June 30, | $55,473 | $34,515 | | Six Months Ended June 30, | $110,946 | $69,032 | [Note 10. Accrued Liabilities](index=31&type=section&id=Note%2010.%20Accrued%20Liabilities) Provides a detailed breakdown of accrued liabilities and their changes Accrued Liabilities (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :------------------------------------------------------- | :------------ | :---------------- | | Accrued royalties | $14,014 | $13,120 | | Accrued product taxes and fees | $8,944 | $6,660 | | Accrued interest | $7,123 | $6,146 | | Accrued payroll and related benefits | $6,121 | $4,589 | | Accrued incentive compensation | $4,299 | $4,054 | | Accrued sales and marketing | $4,283 | $4,398 | | Accrued bonuses | $3,283 | $8,399 | | Accrued inventory | $2,729 | $6,073 | | Liability for cash-settled share-based awards from Ironshore Acquisition | $2,435 | $3,044 | | Accrued audit and legal | $1,576 | $1,848 | | Accrued income taxes | $328 | $8,525 | | Accrued severance expense related to Ironshore Acquisition | $0 | $510 | | Accrued other operating costs | $4,301 | $4,758 | | Total accrued liabilities | $59,436 | $72,124 | - Total accrued liabilities decreased by **$12.688 million** from December 31, 2024, to June 30, 2025, primarily due to decreases in accrued bonuses, inventory, and income taxes[94](index=94&type=chunk) [Note 11. Term Notes Payable](index=31&type=section&id=Note%2011.%20Term%20Notes%20Payable) Describes the 2024 Term Loan, its terms, and associated interest expense - The company entered into a **$645.833 million** 2024 Term Loan on July 28, 2024, refinancing the 2022 Term Loan and funding a portion of the Ironshore Acquisition[97](index=97&type=chunk) - The 2024 Term Loan matures on July 28, 2029 (or November 18, 2028, if 2029 Convertible Notes exceed **$50 million**), bears an annual interest rate of term SOFR + 0.13% (subject to a 4.00% floor) + 4.50%, and requires quarterly principal payments of **$16.146 million**[99](index=99&type=chunk) Term Loan Interest Expense (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Contractual interest expense | $13,847 | $12,104 | $27,922 | $25,755 | | Amortization of debt discounts and issuance costs | $1,096 | $1,318 | $2,207 | $2,798 | | Total interest expense | $14,943 | $13,422 | $30,129 | $28,553 | - The effective interest rate on the 2024 Term Loan was **9.90%** as of June 30, 2025[102](index=102&type=chunk) [Note 12. Convertible Senior Notes](index=34&type=section&id=Note%2012.%20Convertible%20Senior%20Notes) Details the redemption of 2026 Convertible Notes and the terms of the 2029 Convertible Senior Notes - The remaining 2026 Convertible Notes were fully redeemed on June 18, 2024, with all conversions settled in cash[105](index=105&type=chunk) - The company issued **$241.5 million** in 2.875% 2029 Convertible Senior Notes on February 10, 2023, maturing on February 15, 2029[106](index=106&type=chunk)[107](index=107&type=chunk) - As of June 30, 2025, the 2029 Convertible Notes could not be converted, and the outstanding balance was **$237.688 million** (net of unamortized issuance costs)[109](index=109&type=chunk)[114](index=114&type=chunk) Convertible Notes Interest Expense (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Contractual interest expense | $1,736 | $1,879 | $3,472 | $3,787 | | Amortization of debt issuance costs | $259 | $286 | $515 | $586 | | Total interest expense | $1,995 | $2,165 | $3,987 | $4,373 | [Note 13. Deferred Royalty Obligation](index=37&type=section&id=Note%2013.%20Deferred%20Royalty%20Obligation) Explains the deferred royalty obligation from the Ironshore Acquisition, including royalty rates and carrying amount - The deferred royalty obligation, assumed from the Ironshore Acquisition, relates to royalty payments on net sales of Jornay PM, with a rate of **7.4%** prior to July 1, 2025, and **9.7%** thereafter through March 2032[117](index=117&type=chunk) - The net carrying amount of the deferred royalty obligation was **$122.627 million** as of June 30, 2025, with an effective interest rate of approximately **11.83%**[118](index=118&type=chunk)[119](index=119&type=chunk) - Total interest expense recognized for the deferred royalty obligation was **$7.137 million** for the six months ended June 30, 2025[119](index=119&type=chunk) [Note 14. Equity](index=39&type=section&id=Note%2014.%20Equity) Summarizes changes in shareholders' equity and details share repurchase programs - Total shareholders' equity increased from **$228.842 million** at December 31, 2024, to **$232.206 million** at June 30, 2025[15](index=15&type=chunk) - The 2024-2025 Repurchase Program expired on June 30, 2025, with **$80.025 million** used to repurchase **2,574,983 shares** at a weighted-average price of **$31.08 per share**[126](index=126&type=chunk)[127](index=127&type=chunk) - In July 2025, the Board authorized a new **$150 million** share repurchase program (2025-2026 Repurchase Program) through December 31, 2026[128](index=128&type=chunk) [Note 15. Stock-based Compensation](index=42&type=section&id=Note%2015.%20Stock-based%20Compensation) Reports stock-based compensation expense and unrecognized compensation related to unvested awards - Stock-based compensation expense was **$10.818 million** for the three months and **$22.342 million** for the six months ended June 30, 2025, an increase from **$10.012 million** and **$17.487 million** in the prior year periods, respectively[134](index=134&type=chunk) Stock-based Compensation Expense (in thousands) | Period | 2025 | 2024 | | :---------------------------------- | :----- | :----- | | Three Months Ended June 30, | $10,818 | $10,012 | | Six Months Ended June 30, | $22,342 | $17,487 | - As of June 30, 2025, unrecognized compensation expense related to unvested awards was approximately **$76.713 million**, expected to be recognized over a weighted-average period of **2.2 years**[135](index=135&type=chunk) [Note 16. Commitments and Contingencies](index=44&type=section&id=Note%2016.%20Commitments%20and%20Contingencies) Details ongoing legal proceedings, including patent infringement lawsuits and other claims - The company is involved in ongoing legal proceedings, including patent infringement lawsuits related to Xtampza ER (against Purdue) and Nucynta (against Purdue), and challenges to Belbuca patents (against Alvogen and Chemo Research, S.L.)[137](index=137&type=chunk)[148](index=148&type=chunk)[160](index=160&type=chunk)[165](index=165&type=chunk) - The PTAB found asserted claims of the '961 patent (related to Xtampza ER) invalid, a decision affirmed by the Federal Circuit, exhausting Purdue's appeal rights[143](index=143&type=chunk) - New lawsuits include an arbitration request from David Lickrish against Ironshore Pharmaceuticals & Development, Inc. for over **$500 million** in compensatory damages, and a lawsuit from Walgreen Co. alleging over **$14 million** in credits owed for product returns[171](index=171&type=chunk)[172](index=172&type=chunk) - The company continues to cooperate with state attorneys general regarding opioid sales and marketing practices, having settled with the Massachusetts Attorney General in December 2021[151](index=151&type=chunk)[152](index=152&type=chunk) [Note 17. Income Taxes](index=54&type=section&id=Note%2017.%20Income%20Taxes) Reports the provision for income taxes, effective tax rate, and impact of new tax legislation Provision for Income Taxes (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $5,042 | $9,491 | $5,747 | $18,400 | | Effective tax rate | 29.6% | 32.6% | 28.5% | 28.0% | - The provision for income taxes decreased by **$4.5 million** for the three months and **$12.7 million** for the six months ended June 30, 2025, primarily due to lower earnings before taxes[173](index=173&type=chunk)[200](index=200&type=chunk)[214](index=214&type=chunk) - The company maintains a valuation allowance for deferred tax assets not likely to be realized and is evaluating the impact of the recently enacted One Big Beautiful Bill Act (OBBBA) on its 2025 effective tax rate[173](index=173&type=chunk)[174](index=174&type=chunk) [Note 18. Segment Information](index=55&type=section&id=Note%2018.%20Segment%20Information) Identifies the company's single operating segment and details segment expenses - The company operates as a single operating and reportable segment, with the Chief Executive Officer serving as the chief operating decision maker (CODM) who reviews consolidated results and budget-to-actual variances[175](index=175&type=chunk) Segment Expenses (in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Commercial expenses | $44,115 | $17,186 | $84,908 | $37,411 | | Corporate expenses | $9,801 | $7,810 | $23,090 | $16,433 | | Medical expenses | $7,832 | $4,807 | $15,865 | $10,021 | | Technical operations expenses | $136 | $469 | $234 | $914 | | Stock-based compensation expense | $10,818 | $10,012 | $22,342 | $17,487 | | Other segment items | $577 | $3,051 | $2,477 | $3,051 | - Commercial expenses significantly increased for both periods in 2025, primarily due to the ongoing commercialization of Jornay PM following the Ironshore Acquisition[177](index=177&type=chunk)[201](index=201&type=chunk)[209](index=209&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=57&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes financial condition, results of operations, and liquidity, comparing performance for the three and six months ended June 30, 2025 and 2024, including non-GAAP measures [Overview](index=57&type=section&id=Overview) Introduces Collegium as a biopharmaceutical company with a focus on pain and ADHD products - Collegium is a biopharmaceutical company focused on differentiated products for moderate to severe pain and ADHD, including Jornay PM, Belbuca, Xtampza ER, Nucynta Products, and Symproic[181](index=181&type=chunk) - Jornay PM, an evening-dosed stimulant for ADHD, was acquired in September 2024, expanding the company's presence in neuropsychiatry[182](index=182&type=chunk) - Nucynta IR received New Patient Population exclusivity in pediatrics in August 2023, extending its U.S. exclusivity to July 3, 2026, with further pediatric exclusivity granted in June 2024 for the Nucynta Products[185](index=185&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=59&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) Highlights key accounting policies requiring significant management judgment and estimation - The company's critical accounting policies involve significant judgments and estimates, particularly in revenue recognition, fair value of acquired assets, inventory valuation, and intangible asset useful lives[188](index=188&type=chunk) [Results of Operations](index=59&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, comparing revenues, costs, and expenses across periods [Comparison of the three months ended June 30, 2025 and June 30, 2024](index=59&type=section&id=Comparison%20of%20the%20three%20months%20ended%20June%2030,%202025%20and%20June%2030,%202024) Compares key financial metrics and performance drivers for the three-month periods ended June 30, 2025 and 2024 Key Financial Highlights (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------------------------- | :----- | :----- | :--------- | :--------- | | Product revenues, net | $188,000 | $145,276 | $42,724 | 29.4% | | Total cost of product revenues | $79,616 | $54,470 | $25,146 | 46.2% | | Gross profit | $108,384 | $90,806 | $17,578 | 19.4% | | Selling, general and administrative | $73,637 | $43,335 | $30,302 | 69.9% | | Income from operations | $35,105 | $47,471 | $(12,366) | -26.1% | | Interest expense | $(20,463) | $(15,587) | $(4,876) | 31.3% | | Net income | $11,983 | $19,606 | $(7,623) | -38.9% | - Product revenues, net, increased by **$42.7 million**, primarily driven by **$32.6 million** from Jornay PM (acquired in September 2024) and **$8.0 million** from Xtampza ER due to lower gross-to-net adjustments[190](index=190&type=chunk)[191](index=191&type=chunk) - Total cost of product revenues increased by **$25.1 million**, with intangible asset amortization rising by **$21.0 million** due to the Ironshore Acquisition[194](index=194&type=chunk)[195](index=195&type=chunk) - Selling, general and administrative expenses increased by **$30.3 million**, mainly due to higher sales and marketing expenses (**$14.6 million**) and salaries, wages, and benefits (**$12.7 million**) related to the Ironshore Acquisition[196](index=196&type=chunk)[201](index=201&type=chunk) [Comparison of the six months ended June 30, 2025 and June 30, 2024](index=63&type=section&id=Comparison%20of%20the%20six%20months%20ended%20June%2030,%202025%20and%20June%2030,%202024) Compares key financial metrics and performance drivers for the six-month periods ended June 30, 2025 and 2024 Key Financial Highlights (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------------------------- | :----- | :----- | :--------- | :--------- | | Product revenues, net | $365,757 | $290,199 | $75,558 | 26.0% | | Total cost of product revenues | $160,049 | $107,937 | $52,112 | 48.3% | | Gross profit | $205,708 | $182,262 | $23,446 | 12.9% | | Selling, general and administrative | $150,060 | $85,317 | $64,743 | 75.9% | | Income from operations | $56,792 | $96,945 | $(40,153) | -41.4% | | Interest expense | $(41,253) | $(32,926) | $(8,327) | 25.3% | | Net income | $14,400 | $47,319 | $(32,919) | -69.6% | - Product revenues, net, increased by **$75.6 million**, primarily due to **$61.2 million** from Jornay PM and **$9.9 million** from Xtampza ER[203](index=203&type=chunk)[204](index=204&type=chunk) - Selling, general and administrative expenses increased by **$64.8 million**, driven by **$29.1 million** in salaries, wages, and benefits (including Ironshore headcount and executive transitions) and **$26.5 million** in sales and marketing for Jornay PM[209](index=209&type=chunk) - Interest expense increased by **$8.4 million**, mainly due to **$7.1 million** from the deferred royalty obligation assumed in the Ironshore Acquisition[211](index=211&type=chunk) [Liquidity and Capital Resources](index=65&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's sources of liquidity, cash position, debt obligations, and future capital requirements - The company's primary liquidity sources are product sales (Jornay PM, Belbuca, Xtampza ER, Nucynta Products), private/public offerings, and term loan debt[215](index=215&type=chunk) - As of June 30, 2025, the company had **$222.2 million** in cash, cash equivalents, and marketable securities, which are expected to fund operations, debt service, and capital expenditures for the foreseeable future[218](index=218&type=chunk) - The 2024 Term Loan has an outstanding principal balance of **$613.5 million**, and the 2029 Convertible Notes have an outstanding principal balance of **$241.5 million**, both due in 2029[216](index=216&type=chunk)[217](index=217&type=chunk) - Future capital requirements include operating expenses, debt repayment, royalties, lease obligations, minimum purchase obligations, income taxes, deferred royalty obligation, and contingent payments related to Jornay PM[225](index=225&type=chunk) [Additional Information](index=69&type=section&id=Additional%20Information) Presents non-GAAP financial measures like Adjusted EBITDA and Adjusted Earnings Per Share to supplement GAAP results - The company uses non-GAAP financial measures like Adjusted EBITDA, Adjusted Operating Expenses, Adjusted Net Income, and Adjusted Earnings Per Share to provide insights into operational activities and performance[226](index=226&type=chunk)[236](index=236&type=chunk)[239](index=239&type=chunk) Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP net income | $11,983 | $19,606 | $14,400 | $47,319 | | Total adjustments | $93,079 | $76,395 | $185,814 | $141,065 | | Adjusted EBITDA | $105,062 | $96,001 | $200,214 | $188,384 | - Adjusted EBITDA increased by **$9.1 million** for the three months and **$11.8 million** for the six months ended June 30, 2025, driven by higher product revenues partially offset by increased adjusted operating expenses[233](index=233&type=chunk)[234](index=234&type=chunk) Adjusted Earnings Per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Non-GAAP adjusted net income | $64,289 | $63,964 | $121,710 | $122,796 | | Adjusted earnings per share | $1.68 | $1.62 | $3.16 | $3.09 | [Contractual Obligations](index=74&type=section&id=Contractual%20Obligations) Confirms no material changes to the company's contractual obligations since the last annual report - There have been no material changes to the company's contractual obligations and commitments since the most recently filed Annual Report[241](index=241&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=76&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Assesses market risk exposure, focusing on interest rate sensitivity for the investment portfolio and the variable-rate 2024 Term Loan - The company's investment portfolio, totaling **$145.5 million** as of June 30, 2025 (including cash equivalents and marketable securities), is managed to minimize credit risk and ensure liquidity, with immaterial exposure to interest rate risk[246](index=246&type=chunk) - The 2024 Term Loan, with an outstanding principal of **$597.4 million** as of June 30, 2025, bears a variable interest rate (adjusted term SOFR + 4.50%), making it sensitive to interest rate changes; a hypothetical **1%** change would impact interest expense by approximately **$6.0 million**[247](index=247&type=chunk) [Item 4. Controls and Procedures](index=76&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[248](index=248&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[249](index=249&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=78&type=section&id=Item%201.%20Legal%20Proceedings) Refers to Note 16 for legal proceedings details, confirming no other material changes from the annual report - Legal proceedings are detailed in Note 16, Commitments and Contingencies, with no other material changes from the prior annual report[252](index=252&type=chunk) [Item 1A. Risk Factors](index=78&type=section&id=Item%201A.%20Risk%20Factors) Outlines various risks impacting business, financial condition, and stock price, including commercialization, indebtedness, regulatory, intellectual property, and macroeconomic factors [Risk Factors Summary](index=78&type=section&id=Risk%20Factors%20Summary) Summarizes key risks such as product commercialization, indebtedness, regulatory changes, and intellectual property litigation - Key risks include dependence on successful product commercialization, substantial outstanding indebtedness, adverse financial services industry developments, regulatory changes affecting product labeling and marketing, unfavorable intellectual property litigation outcomes, and challenges in maintaining intellectual property rights[253](index=253&type=chunk)[254](index=254&type=chunk) - Additional risks involve the impact of opioid/stimulant abuse concerns, reliance on sole/limited third-party manufacturers and distributors, post-marketing requirements, integration challenges from acquisitions, macroeconomic conditions, cybersecurity threats, and intense competition[256](index=256&type=chunk) [Risks Related to Our Financial Position and Capital Needs](index=80&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Capital%20Needs) Addresses risks concerning profitability, substantial indebtedness, access to funding, and debt covenant limitations - The company's profitability depends on successful commercialization of its products, requiring viable pricing, efficient manufacturing, effective sales/marketing, adequate reimbursement, and compliance with regulations[255](index=255&type=chunk)[257](index=257&type=chunk) - Substantial outstanding indebtedness (**$597.4 million** 2024 Term Loan and **$241.5 million** 2029 Convertible Notes) could limit cash flow, restrict additional financing, and increase vulnerability to economic downturns[261](index=261&type=chunk)[262](index=262&type=chunk) - Adverse developments in the financial services industry could impair access to funding, while covenants in debt agreements limit the company's operational flexibility[264](index=264&type=chunk)[267](index=267&type=chunk) [Risks Related to our Products](index=84&type=section&id=Risks%20Related%20to%20our%20Products) Covers risks related to product commercialization, regulatory changes, controlled substances, pricing, and market demand - Continued successful commercialization of products like Jornay PM, Belbuca, and Xtampza ER depends on factors such as manufacturing capacity, sales strategies, physician and patient education, and intellectual property defense[268](index=268&type=chunk)[269](index=269&type=chunk) - FDA may require changes to product labeling, including abuse-deterrent claims for Xtampza ER, which could adversely affect marketability; for example, the FDA announced safety labeling changes for all opioid pain medications in July 2025[271](index=271&type=chunk) - Opioid products are subject to mandatory REMS programs, and any modifications could increase costs or reduce prescription willingness[272](index=272&type=chunk)[275](index=275&type=chunk) - Failure to comply with governmental regulations for marketing, especially regarding abuse-deterrent labeling, could lead to enforcement actions, fines, and harm commercial success[276](index=276&type=chunk)[278](index=278&type=chunk) - Some products contain controlled substances (Schedule II and III), subjecting the company to stringent DEA and state regulations on manufacture, use, and distribution, which could limit commercialization[296](index=296&type=chunk)[299](index=299&type=chunk) - Current and future legislation, such as opioid taxes, drug pricing transparency laws, and the overturning of regulatory deference, may increase commercialization costs and reduce product prices[301](index=301&type=chunk)[302](index=302&type=chunk)[305](index=305&type=chunk) - Unfavorable pricing regulations or third-party coverage and reimbursement policies, including increased pressure for discounts and rebates, could materially adversely affect the business[308](index=308&type=chunk)[311](index=311&type=chunk)[313](index=313&type=chunk) - Social issues and law enforcement efforts against opioid and stimulant abuse could decrease market demand for products and negatively impact investor perceptions[320](index=320&type=chunk)[322](index=322&type=chunk) - Approval of generic abuse-deterrent products or authorized generics could lead to significant sales declines, and ongoing ANDA-related litigation is costly and distracting[323](index=323&type=chunk)[325](index=325&type=chunk)[326](index=326&type=chunk) [Risks Related to Intellectual Property](index=88&type=section&id=Risks%20Related%20to%20Intellectual%20Property) Examines risks associated with intellectual property litigation, maintenance, enforcement, and trade secret protection - Unfavorable outcomes in intellectual property litigation could be costly, limit commercialization, and result in monetary damages or injunctions[280](index=280&type=chunk)[281](index=281&type=chunk) - Failure to obtain or maintain intellectual property rights for technologies and products could lead to loss of valuable assets or inability to compete effectively[284](index=284&type=chunk)[285](index=285&type=chunk) - Litigation to enforce or defend intellectual property rights is expensive, time-consuming, and risks invalidation or narrowing of patents[286](index=286&type=chunk)[287](index=287&type=chunk) - Inability to protect trade secrets could harm the business and competitive position[288](index=288&type=chunk) - Non-compliance with procedural, document submission, and fee payment requirements by governmental patent agencies could reduce or eliminate patent protection[290](index=290&type=chunk) [Risks Related to the Commercialization of Our Products](index=92&type=section&id=Risks%20Related%20to%20the%20Commercialization%20of%20Our%20Products) Addresses challenges in sales and marketing capabilities, strategic alliances, and market acceptance of products - Inability to successfully utilize or grow internal sales and marketing capabilities, especially for newly acquired products like Jornay PM, or to maintain strategic alliances, could hinder product revenue generation[291](index=291&type=chunk) - Lack of acceptance and use of products by the medical community, patients, and healthcare payors, influenced by factors like safety, efficacy, pricing, and competitive products, could prevent sufficient revenue generation[292](index=292&type=chunk)[293](index=293&type=chunk)[295](index=295&type=chunk) [Risks Related to Our Dependence on Third Parties](index=102&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) Highlights risks from reliance on third-party manufacturers, suppliers, and distributors, and consortia for post-marketing requirements - Reliance on third-party manufacturers, particularly a single manufacturer for Xtampza ER and Nucynta ER, exposes the company to risks of production difficulties, quality issues, supply shortages, and regulatory non-compliance[329](index=329&type=chunk)[331](index=331&type=chunk)[334](index=334&type=chunk) - Dependence on sole or limited suppliers for active pharmaceutical ingredients (APIs) creates vulnerability to production problems, supply chain disruptions, and DEA quota limitations, potentially impacting commercial supply[333](index=333&type=chunk)[336](index=336&type=chunk)[338](index=338&type=chunk) - Significant reliance on a few wholesale pharmaceutical distributors for retail distribution poses risks if any accounts are lost or their networks are disrupted, potentially affecting financial condition and results of operations[342](index=342&type=chunk)[343](index=343&type=chunk) - Fulfilling post-marketing requirements (PMRs) for opioid products often relies on participation in consortia like the Opioid PMR Consortium (OPC), where the company has limited control, risking non-satisfaction of PMRs and potential FDA restrictions[344](index=344&type=chunk)[346](index=346&type=chunk) [Risks Related to Our Business and Strategy](index=108&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Strategy) Covers risks from acquisitions, macroeconomic conditions, cybersecurity, litigation, competition, product liability, and regulatory compliance - Failure to realize anticipated benefits from future acquisitions or successfully integrate acquired businesses could adversely affect operating results, diverting management attention and financial resources[347](index=347&type=chunk)[348](index=348&type=chunk) - Macroeconomic conditions (recession, inflation) and geopolitical turmoil (conflicts, political instability) could reduce demand for products and negatively impact sales, operations, and liquidity[349](index=349&type=chunk) - Security breaches and disruptions to information technology systems, or those of vendors, could compromise data, expose the company to liability, and harm financial condition and reputation[352](index=352&type=chunk)[353](index=353&type=chunk) - Ongoing litigation and regulatory actions regarding opioid medications could lead to injunctive relief or substantial monetary penalties, negatively affecting reputation, business, and cash flows[354](index=354&type=chunk)[356](index=356&type=chunk) - The pharmaceutical industry is highly competitive, with major companies possessing greater resources, potentially leading to competitors developing safer, more effective, or less costly products[357](index=357&type=chunk)[358](index=358&type=chunk) - Commercial sales expose the company to expensive product liability claims, and maintaining adequate insurance coverage may be challenging[359](index=359&type=chunk) - Relationships with customers and payors are subject to anti-kickback, fraud and abuse, and other healthcare laws, risking criminal sanctions, civil penalties, and exclusion from government programs[360](index=360&type=chunk)[361](index=361&type=chunk) - Natural disasters, health epidemics, or inadequate funding/disruptions at government agencies (FDA, DEA, SEC) could severely disrupt operations, delay product approvals, and negatively impact the business[362](index=362&type=chunk)[364](index=364&type=chunk)[367](index=367&type=chunk) [Risks Related to Our Common Stock](index=114&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) Discusses factors affecting common stock price volatility, anti-takeover provisions, internal control, and share repurchase programs - The market price of the common stock is highly volatile and subject to wide fluctuations due to various factors, including industry trends and the realization of other risks[370](index=370&type=chunk)[371](index=371&type=chunk) - Anti-takeover provisions in corporate documents and Virginia law could delay or prevent an acquisition, even if beneficial to shareholders[372](index=372&type=chunk) - Failure to maintain effective internal control over financial reporting could adversely affect investor confidence and the stock value, potentially leading to sanctions[373](index=373&type=chunk) - Sales of common stock by the company or existing shareholders, or the perception of such sales, could cause a decline in market price and dilute ownership interests[374](index=374&type=chunk) - There is no assurance that the company will repurchase additional shares of common stock at favorable prices under its new **$150 million** 2025-2026 Repurchase Program[378](index=378&type=chunk)[379](index=379&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=118&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no unregistered equity sales and details common stock repurchases under the 2024-2025 Repurchase Program - No unregistered sales of equity securities occurred during the reporting period[380](index=380&type=chunk) Common Stock Repurchases (Three Months Ended June 30, 2025) | Period | Total shares purchased | Average price paid per share | | :-------------------------------- | :--------------------- | :--------------------------- | | April 1, 2025 through April 30, 2025 | 3,756 | $24.67 | | May 1, 2025 through May 31, 2025 | 699,427 | $28.90 | | June 1, 2025 through June 30, 2025 | 4,047 | $30.37 | | Total | 707,230 | $28.89 | - The 2024-2025 Repurchase Program expired on June 30, 2025, with approximately **$65.0 million** available for repurchase at expiration[381](index=381&type=chunk) [Item 3. Defaults Upon Senior Securities](index=119&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Confirms no defaults occurred upon senior securities during the reporting period - There were no defaults upon senior securities[383](index=383&type=chunk) [Item 4. Mine Safety Disclosures](index=119&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) States that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable to the company[384](index=384&type=chunk) [Item 5. Other Information](index=120&type=section&id=Item%205.%20Other%20Information) Provides details on Rule 10b5-1 trading plans adopted, amended, or terminated by directors and officers Rule 10b5-1 Trading Arrangements (Three Months Ended June 30, 2025) | Name | Title | Action Date | Rule 10b5-1 | Non-Rule 10b5-1 | Scheduled Expiration Date of Trading Plan | Maximum Shares Subject to Trading Plan | | :------------- | :------------------------------------ | :---------- | :---------- | :-------------- | :---------------------------------------- | :------------------------------------- | | Colleen Tupper | Executive Vice President and Chief Finance Officer | May 30, 2025 | X | | April 30, 2026 | 30,679 | [Item 6. Exhibits](index=120&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including equity incentive plans, award agreements, and certifications - Exhibits include the 2025 Equity Incentive Plan, forms of Restricted Stock Unit, Incentive Stock Option, Performance-Based Restricted Stock Unit, and Non-Qualified Stock Option Award Agreements[387](index=387&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer, pursuant to Sarbanes-Oxley Act Sections 302 and 906, are also filed[387](index=387&type=chunk) [Signatures](index=122&type=section&id=Signatures) Contains authorized signatures of the CEO and CFO, certifying the report filing for Collegium Pharmaceutical, Inc - The report is signed by Vikram Karnani, Chief Executive Officer, and Colleen Tupper, Chief Financial Officer, on August 7, 2025[393](index=393&type=chunk)