Enovis Q2 2025 Earnings Release [Second Quarter 2025 Performance Summary](index=1&type=section&id=Second%20Quarter%202025%20Performance%20Summary) Enovis reported strong Q2 2025 with **$565 million net sales** (7% reported, 5% organic) and **$97 million adjusted EBITDA** Q2 2025 Key Financial Metrics | Metric | Value | Growth (YoY, Reported) | Growth (YoY, Organic) | | :--- | :--- | :--- | :--- | | Net Sales | $565 million | 7% | 5% | | Recon Sales | - | 11% | 8% | | P&R Sales | - | 5% | 3% | | Net Loss | $37 million | - | - | | Adjusted EBITDA | $97 million | - | - | | Adjusted EBITDA Margin | 17.2% | - | - | | Net Loss per Share (GAAP) | $0.64 | - | - | | Adjusted EPS (diluted) | $0.79 | - | - | - CEO Damien McDonald expressed confidence in the company's foundation and momentum to drive **durable, profitable growth**, emphasizing operational discipline and scalable execution[5](index=5&type=chunk) [Full Year 2025 Financial Outlook](index=2&type=section&id=Full%20Year%202025%20Financial%20Outlook) Enovis raised FY2025 guidance, projecting higher revenue, adjusted EBITDA, and EPS, reflecting confidence Updated FY 2025 Guidance | Metric | New 2025 Guidance | Prior 2025 Guidance | | :--- | :--- | :--- | | Revenue (in billions) | $2.245 - $2.275 | $2.220 - $2.250 | | Adjusted EBITDA (in millions) | $392 - $402 | $385 - $395 | | Adjusted EPS ($) | $3.05 - $3.20 | $2.95 - $3.10 | [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) Consolidated financial statements detail Enovis's performance and position across operations, balance sheet, and cash flows [Statements of Operations](index=4&type=section&id=Statements%20of%20Operations) Q2 2025 operations show **$564.5 million net sales** and improved gross margin, despite a **$36.5 million net loss** Q2 Statement of Operations Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Sales | $564,545 | $525,160 | | Gross Profit | $334,697 | $288,883 | | Gross Profit Margin | 59.3% | 55.0% | | Operating Loss | $(16,796) | $(44,219) | | Net Loss from Continuing Operations | $(36,455) | $(18,444) | | Net Loss per Share (Continuing Ops) | $(0.64) | $(0.34) | [Balance Sheets](index=9&type=section&id=Balance%20Sheets) As of July 4, 2025, Enovis's total assets grew to **$5.02 billion**, with liabilities rising to **$2.44 billion** Balance Sheet Summary (in thousands) | Account | July 4, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $1,280,351 | $1,146,446 | | Total Assets | $5,021,398 | $4,718,777 | | Total Current Liabilities | $568,184 | $528,998 | | Total Liabilities | $2,440,438 | $2,154,448 | | Total Equity | $2,580,960 | $2,564,329 | [Statements of Cash Flows](index=10&type=section&id=Statements%20of%20Cash%20Flows) H1 2025 operating cash flow was **$46.2 million**, a significant improvement, with **$110.3 million** used in investing Six Months Ended Cash Flow Summary (in thousands) | Activity | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $46,173 | $(28,383) | | Net cash used in investing activities | $(110,320) | $(839,168) | | Net cash provided by financing activities | $57,422 | $867,049 | | **Decrease in Cash and cash equivalents** | **$(4,093)** | **$(1,408)** | [Segment Performance and Sales Analysis](index=11&type=section&id=Segment%20Performance%20and%20Sales%20Analysis) Q2 2025 net sales grew **7.5% to $564.5 million**, with **Reconstructive** up **10.8%** and **5.2% organic growth** Q2 2025 Net Sales Change by Segment (vs Q2 2024) | Segment | Q2 2025 Sales (in millions) | Total Change % | Organic Growth % (Existing Businesses) | Foreign Currency Impact % | | :--- | :--- | :--- | :--- | :--- | | Prevention and Recovery | $290.6 | 4.6% | 2.6% | 1.4% | | Reconstructive | $274.0 | 10.8% | 8.1% | 2.7% | | **Total Enovis** | **$564.5** | **7.5%** | **5.2%** | **2.0%** | [Reconciliation of GAAP to Non-GAAP Measures](index=3&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) GAAP to non-GAAP reconciliation adjusts **net loss** to **adjusted net income** and **operating loss** to **adjusted EBITDA** for clarity Q2 2025 GAAP Net Loss to Adjusted Net Income Reconciliation (in millions) | Description | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Net Loss (GAAP)** | **$(36.5)** | **$(18.5)** | | Amortization of acquired intangibles | $43.0 | $40.9 | | Strategic transaction costs | $13.5 | $22.7 | | Purchase of royalty interest | $10.0 | - | | Stock-based compensation | $8.7 | $7.6 | | Other adjustments | $(0.4) | $(33.8) | | Tax adjustment | $(3.2) | $(19.6) | | **Adjusted net income (non-GAAP)** | **$45.7** | **$34.4** | Q2 2025 GAAP Operating Loss to Adjusted EBITDA Reconciliation (in millions) | Description | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Operating loss (GAAP)** | **$(16.8)** | **$(44.1)** | | Depreciation and other amortization | $28.6 | $30.1 | | Amortization of acquired intangibles | $43.0 | $40.9 | | Strategic transaction costs | $13.5 | $22.7 | | Purchase of royalty interest | $10.0 | - | | Stock-based compensation | $8.7 | $7.6 | | Other adjustments | $10.2 | $33.0 | | **Adjusted EBITDA (non-GAAP)** | **$97.2** | **$90.2** | - Adjusted gross profit margin (Non-GAAP) for Q2 2025 was **60.5%**, compared to the GAAP gross profit margin of **59.3%**[27](index=27&type=chunk) [Disclosures and Company Information](index=2&type=section&id=Disclosures%20and%20Company%20Information) This section provides essential investor information: conference call, forward-looking statements, and non-GAAP measure explanations - The company will host an investor conference call and live webcast to discuss the **Q2 2025 results**[2](index=2&type=chunk)[8](index=8&type=chunk) - The press release contains **forward-looking statements** concerning plans, outlook, and expectations, subject to risks and uncertainties[11](index=11&type=chunk) - Enovis explains its use of **non-GAAP financial measures** (e.g., Adjusted EBITDA, Adjusted net income) to provide a clearer view of underlying business trends[13](index=13&type=chunk)[17](index=17&type=chunk)

[Executive Summary](index=1&type=section&id=1.%20Executive%20Summary) [Second Quarter 2025 Performance Highlights](index=1&type=section&id=1.1%20Second%20Quarter%202025%20Performance%20Highlights) Privia Health reported strong Q2 2025 financial and operational growth, with significant increases in total revenue, adjusted income, and key operating metrics, despite a GAAP net income decrease Second Quarter 2025 Financial Performance | Metric | Q2 2025 ($M) | Q2 2024 ($M) | Change (%) | | :-------------------------- | :----------- | :----------- | :--------- | | Total revenue | 521.2 | 422.3 | 23.4% | | Net income | 2.7 | 3.5 | (22.5)% | | Non-GAAP adjusted income | 30.6 | 23.5 | 30.1% | | Net income per share | 0.02 | 0.03 | (33.3)% | | Non-GAAP adjusted income per share | 0.24 | 0.19 | 26.3% | | Gross profit | 112.8 | 98.3 | 14.8% | | Operating income | 3.3 | 5.1 | (34.6)% | | Adjusted EBITDA | 29.0 | 22.0 | 31.6% | Second Quarter 2025 Key Operating Metrics | Metric | Q2 2025 | Q2 2024 | Change (%) | | :-------------------------- | :------ | :------ | :--------- | | Implemented Providers | 5,125 | 4,504 | 13.8% | | Value-Based Care Attributed Lives | 1,382,000 | 1,200,000 | 15.2% | | Practice Collections ($M) | 862.9 | 728.0 | 18.5% | | Care Margin ($M) | 115.2 | 99.8 | 15.4% | | Platform Contribution ($M) | 57.5 | 47.4 | 21.3% | - The company maintained a strong cash position of **$390.1 million** with no debt, even after deploying **$95 million** for the IMS transaction in Arizona[5](index=5&type=chunk) [First Half 2025 Performance Highlights](index=2&type=section&id=1.2%20First%20Half%202025%20Performance%20Highlights) For the first six months of 2025, Privia Health demonstrated robust growth across key financial and operational metrics, including significant increases in total revenue, non-GAAP adjusted net income, and Adjusted EBITDA, reflecting strong underlying business momentum First Half 2025 Financial Performance | Metric | H1 2025 ($M) | H1 2024 ($M) | Change (%) | | :-------------------------- | :----------- | :----------- | :--------- | | Total revenue | 1,001.3 | 837.6 | 19.5% | | Gross profit | 216.4 | 191.6 | 12.9% | | Operating income | 8.6 | 5.9 | 44.5% | | Net income | 6.9 | 6.5 | 7.1% | | Non-GAAP adjusted net income | 58.4 | 46.1 | 26.8% | | Net income per share | 0.05 | 0.05 | —% | | Non-GAAP adjusted net income per share | 0.46 | 0.37 | 24.3% | | Adjusted EBITDA | 55.9 | 41.9 | 33.3% | First Half 2025 Key Operating Metrics | Metric | H1 2025 ($M) | H1 2024 ($M) | Change (%) | | :-------------------------- | :----------- | :----------- | :--------- | | Practice Collections | 1,661.5 | 1,435.7 | 15.7% | | Care Margin | 220.4 | 194.7 | 13.2% | | Platform Contribution | 109.2 | 92.1 | 18.5% | [Updated FY'25 Guidance](index=2&type=section&id=1.3%20Updated%20FY'25%20Guidance) Privia Health has raised its full-year 2025 outlook for several key metrics, including Practice Collections, GAAP Revenue, Platform Contribution, and Adjusted EBITDA, now expecting them to be above the high end of the previously provided range. Guidance also includes the impact of the Arizona market entry Updated FY 2025 Guidance | Metric | FY 2024 Actual | Initial FY 2025 Guidance (Low) | Initial FY 2025 Guidance (High) | Updated FY 2025 Guidance | | :-------------------------- | :------------- | :----------------------------- | :------------------------------ | :----------------------- | | Implemented Providers | 4,789 | 5,200 | 5,300 | High End | | Attributed Lives | 1,256,000 | 1,300,000 | 1,400,000 | High End | | Practice Collections ($M) | 2,968.0 | 3,150 | 3,250 | Above High End | | GAAP Revenue ($M) | 1,736.4 | 1,800 | 1,900 | Above High End | | Care Margin ($M) | 403.9 | 435 | 445 | High End | | Platform Contribution ($M) | 195.6 | 208 | 218 | Above High End | | Adjusted EBITDA ($M) | 90.5 | 105 | 110 | Above High End | - The updated guidance incorporates the impact of the Arizona market entry and assumes no other new business development activity[9](index=9&type=chunk) - The company expects de minimis capital expenditures and at least **80% of Adjusted EBITDA** to convert to free cash flow in full-year 2025[9](index=9&type=chunk) [Company Information](index=3&type=section&id=2.%20Company%20Information) [About Privia Health](index=3&type=section&id=2.1%20About%20Privia%20Health) Privia Health is a leading physician enablement company in the U.S., operating in 15 states and D.C. It focuses on building scaled primary-care centric provider networks, offering a comprehensive technology and service platform to optimize practices, enhance patient experience, and reward physicians for high-value care - Privia Health is one of the largest physician enablement companies in the United States, with a presence in **15 states** and the District of Columbia[13](index=13&type=chunk) - The company's platform includes an extensive suite of technology and service solutions, supporting over **1,300 physician practices**, **5.3+ million patients**, and **5,100+ physicians** and advanced practitioners[13](index=13&type=chunk) - Privia's mission is to transform healthcare delivery to achieve better outcomes, lower costs, and improve community health and provider well-being[14](index=14&type=chunk) [Webcast and Conference Call Information](index=3&type=section&id=2.2%20Webcast%20and%20Conference%20Call%20Information) Privia Health hosted a conference call on August 7, 2025, to discuss its Q2 2025 financial results and future outlook. Details for accessing the live call and archived webcast were provided - A conference call was held on **August 7, 2025, at 8:00 am ET** to discuss financial results and management's outlook[11](index=11&type=chunk) - Webcast and presentation materials are available on the Privia Health Investor Relations website (ir.priviahealth.com)[11](index=11&type=chunk)[12](index=12&type=chunk) [Financial Statements](index=6&type=section&id=3.%20Financial%20Statements) [Condensed Consolidated Statements of Operations](index=6&type=section&id=3.1%20Condensed%20Consolidated%20Statements%20of%20Operations) The condensed consolidated statements of operations show a significant increase in total revenue for both the three and six months ended June 30, 2025, compared to the prior year. While operating income and net income attributable to Privia Health Group, Inc. saw mixed results, non-GAAP adjusted income metrics generally improved Condensed Consolidated Statements of Operations (Selected Data, $ in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------------ | :------ | :------ | :------ | :------ | | Revenue | 521,153 | 422,326 | 1,001,250 | 837,569 | | Total operating expenses | 517,817 | 417,228 | 992,696 | 831,648 | | Operating income | 3,336 | 5,098 | 8,554 | 5,921 | | Net income attributable to Privia Health Group, Inc. | 2,687 | 3,467 | 6,907 | 6,451 | | Net income per share (diluted) | 0.02 | 0.03 | 0.05 | 0.05 | - Non-cash stock compensation expense was **$18.8 million** for Q2 2025 and **$36.6 million** for H1 2025, impacting GAAP net income[2](index=2&type=chunk)[6](index=6&type=chunk) [Condensed Consolidated Balance Sheets](index=7&type=section&id=3.2%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2025, shows an increase in total assets, driven primarily by higher accounts receivable and intangible assets. Total liabilities also increased, mainly due to a rise in provider liability, while stockholders' equity grew Condensed Consolidated Balance Sheets (Selected Data, $ in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Cash and cash equivalents | 390,127 | 491,149 | | Accounts receivable | 443,994 | 316,179 | | Total current assets | 882,960 | 834,823 | | Intangible assets, net | 170,140 | 109,807 | | Goodwill | 172,215 | 141,615 | | Total assets | 1,272,542 | 1,135,783 | | Provider liability | 458,053 | 364,607 | | Total current liabilities | 534,854 | 449,146 | | Total liabilities | 538,996 | 452,336 | | Total stockholders' equity | 733,546 | 683,447 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=3.3%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, Privia Health experienced a net decrease in cash and cash equivalents, primarily due to significant cash used in investing activities for business acquisitions, despite positive adjustments from stock-based compensation and provider liability in operating activities Condensed Consolidated Statements of Cash Flows (Selected Data, $ in thousands) | Metric | H1 2025 | H1 2024 | | :------------------------------------------ | :------ | :------ | | Net income | 9,334 | 7,699 | | Stock-based compensation (non-cash adjustment) | 36,639 | 26,295 | | Changes in Accounts receivable | (121,497) | (79,287) | | Changes in Provider liability | 81,185 | 40,047 | | Net cash (used in) provided by operating activities | (16,090) | 1,330 | | Business acquisitions, net of cash acquired | (89,058) | (707) | | Net cash used in investing activities | (89,058) | (5,713) | | Net cash provided by financing activities | 4,126 | 2,224 | | Net decrease in cash and cash equivalents | (101,022) | (2,159) | | Cash and cash equivalents at end of period | 390,127 | 387,352 | - Cash used for business acquisitions significantly increased to **$89.1 million** in H1 2025, compared to **$0.7 million** in H1 2024[27](index=27&type=chunk) [Detailed Financial and Operational Metrics](index=9&type=section&id=4.%20Detailed%20Financial%20and%20Operational%20Metrics) [Revenues Disaggregated by Source](index=9&type=section&id=4.1%20Revenues%20Disaggregated%20by%20Source) Privia Health's revenue streams are diversified, with Fee-for-Service (FFS) patient care being the largest component, followed by capitated revenue and shared savings. All revenue categories showed growth for both the three and six months ended June 30, 2025 Revenues Disaggregated by Source ($ in thousands) | Revenue Source | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------- | :------ | :------ | :------ | :------ | | FFS-patient care | 331,464 | 275,761 | 643,225 | 550,584 | | FFS-administrative services | 35,116 | 32,132 | 67,371 | 61,208 | | Capitated revenue | 75,511 | 56,438 | 146,201 | 107,742 | | Shared savings | 60,021 | 39,818 | 107,933 | 87,282 | | Care management fees (PMPM) | 16,919 | 16,163 | 32,121 | 26,766 | | Other revenue | 2,122 | 2,014 | 4,399 | 3,987 | | **Total Revenue** | **521,153** | **422,326** | **1,001,250** | **837,569** | - Capitated revenue showed strong growth, increasing by **33.8%** in Q2 2025 and **35.7%** in H1 2025[28](index=28&type=chunk) - Shared savings also significantly increased by **50.7%** in Q2 2025 and **23.7%** in H1 2025[28](index=28&type=chunk) [Liabilities for Unpaid Medical Claims](index=9&type=section&id=4.2%20Liabilities%20for%20Unpaid%20Medical%20Claims) The company's liabilities for unpaid medical claims under at-risk capitation arrangements increased significantly from $74.2 million at June 30, 2024, to $99.7 million at June 30, 2025, driven by higher current year incurred health care costs Liabilities for Unpaid Medical Claims ($ in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Balance, beginning of period | 66,355 | 67,138 | | Incurred health care costs: Current year | 144,840 | 104,610 | | Incurred health care costs: Prior years | (555) | 3,305 | | Total claims incurred | 144,285 | 107,915 | | Claims paid: Current year | (63,025) | (47,979) | | Claims paid: Prior year | (47,959) | (52,877) | | Total claims paid | (110,984) | (100,856) | | Balance, end of period | 99,656 | 74,197 | - The balance of unpaid medical claims increased by **34.3%** year-over-year, primarily due to a **38.4%** increase in current year incurred health care costs[29](index=29&type=chunk) [Key Operating and Non-GAAP Financial Measures Definitions](index=10&type=section&id=4.3%20Key%20Operating%20and%20Non-GAAP%20Financial%20Measures%20Definitions) Privia Health utilizes several key operating and non-GAAP financial measures to assess business performance and trends. These include Implemented Providers, Attributed Lives, Practice Collections, Care Margin, Platform Contribution, and Adjusted EBITDA, each with specific definitions to provide a comprehensive view of the company's operations Key Operating Metrics (as of end of period) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------- | :------ | :------ | :------ | :------ | | Implemented Providers | 5,125 | 4,504 | 5,125 | 4,504 | | Attributed Lives | 1,382,000 | 1,200,000 | 1,382,000 | 1,200,000 | | Practice Collections ($M) | 862.9 | 728.0 | 1,661.5 | 1,435.7 | - Implemented Providers are credentialed service professionals on Privia Health's platform who billed for medical services[31](index=31&type=chunk) - Attributed Lives represent patients attributed to Privia for value-based care arrangements[31](index=31&type=chunk) - Practice Collections include total collections from all practices and reimbursement sources, differing from revenue by including Non-Owned Medical Groups[31](index=31&type=chunk) - Non-GAAP measures like Care Margin, Platform Contribution, and Adjusted EBITDA are used to evaluate operating performance, with specific adjustments for non-cash or non-recurring expenses[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) [Non-GAAP Reconciliations](index=11&type=section&id=4.4%20Non-GAAP%20Reconciliations) [Gross Profit to Care Margin Reconciliation](index=11&type=section&id=4.4.1%20Gross%20Profit%20to%20Care%20Margin%20Reconciliation) Care Margin, a non-GAAP measure, is derived by adding back amortization of intangible assets to Gross Profit. This reconciliation shows an increase in Care Margin for both the three and six months ended June 30, 2025 Gross Profit to Care Margin Reconciliation ($ in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------- | :------ | :------ | :------ | :------ | | Gross Profit | 112,765 | 98,263 | 216,380 | 191,643 | | Amortization of intangibles assets | 2,396 | 1,527 | 4,069 | 3,054 | | **Care Margin** | **115,161** | **99,790** | **220,449** | **194,697** | - Care Margin increased by **15.4%** in Q2 2025 and **13.2%** in H1 2025, reflecting improved operational efficiency before intangible asset amortization[3](index=3&type=chunk)[8](index=8&type=chunk)[35](index=35&type=chunk) [Gross Profit to Platform Contribution Reconciliation](index=11&type=section&id=4.4.2%20Gross%20Profit%20to%20Platform%20Contribution%20Reconciliation) Platform Contribution, another non-GAAP measure, is calculated by adjusting Gross Profit for amortization of intangible assets, cost of platform, and stock-based compensation expense within the cost of platform. This metric also showed growth for both periods Gross Profit to Platform Contribution Reconciliation ($ in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------- | :------ | :------ | :------ | :------ | | Gross Profit | 112,765 | 98,263 | 216,380 | 191,643 | | Amortization of intangibles assets | 2,396 | 1,527 | 4,069 | 3,054 | | Cost of platform | (64,918) | (57,106) | (124,444) | (111,163) | | Stock-based compensation (in Cost of Platform) | 7,223 | 4,710 | 13,194 | 8,597 | | **Platform Contribution** | **57,466** | **47,394** | **109,199** | **92,131** | - Platform Contribution increased by **21.3%** in Q2 2025 and **18.5%** in H1 2025, indicating improved profitability from the core platform services[3](index=3&type=chunk)[8](index=8&type=chunk)[36](index=36&type=chunk) [Net Income to Adjusted EBITDA Reconciliation](index=11&type=section&id=4.4.3%20Net%20Income%20to%20Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA, a key non-GAAP measure of operational performance, is reconciled from net income by adding back non-controlling interests, income taxes, interest, depreciation, amortization, stock-based compensation, and other non-recurring expenses. This reconciliation shows a substantial increase in Adjusted EBITDA for both periods Net Income to Adjusted EBITDA Reconciliation ($ in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------- | :------ | :------ | :------ | :------ | | Net income | 2,687 | 3,467 | 6,907 | 6,451 | | Net income attributable to non-controlling interests | 601 | 1,176 | 2,427 | 1,248 | | Provision for income taxes | 2,456 | 3,421 | 4,559 | 4,172 | | Interest income, net | (2,408) | (2,966) | (5,339) | (5,950) | | Depreciation and amortization | 2,583 | 1,818 | 4,484 | 3,639 | | Stock-based compensation | 18,849 | 14,391 | 36,639 | 26,295 | | Other expenses | 4,224 | 716 | 6,230 | 6,090 | | **Adjusted EBITDA** | **28,992** | **22,023** | **55,907** | **41,945** | - Adjusted EBITDA increased by **31.6%** in Q2 2025 and **33.3%** in H1 2025, demonstrating strong underlying operational profitability[3](index=3&type=chunk)[8](index=8&type=chunk)[37](index=37&type=chunk) [Net Income to Adjusted Net Income and Adjusted Net Income Per Share Reconciliation](index=12&type=section&id=4.4.4%20Net%20Income%20to%20Adjusted%20Net%20Income%20and%20Adjusted%20Net%20Income%20Per%20Share%20Reconciliation) Adjusted Net Income and Adjusted Net Income Per Share are non-GAAP measures that exclude stock-based compensation, intangible amortization, provision for income tax, and other non-recurring expenses from GAAP net income. These adjusted metrics show significant growth, providing a clearer view of core earnings Net Income to Adjusted Net Income Reconciliation ($ in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :-------------------------- | :------ | :------ | :------ | :------ | | Net income | 2,687 | 3,467 | 6,907 | 6,451 | | Stock-based compensation | 18,849 | 14,391 | 36,639 | 26,295 | | Intangible amortization expense | 2,396 | 1,527 | 4,069 | 3,054 | | Provision for income tax | 2,456 | 3,421 | 4,559 | 4,172 | | Other expenses | 4,224 | 716 | 6,230 | 6,090 | | **Adjusted net income** | **30,612** | **23,522** | **58,404** | **46,062** | | Adjusted net income per share (diluted) | 0.24 | 0.19 | 0.46 | 0.37 | - Adjusted net income increased by **30.1%** in Q2 2025 and **26.8%** in H1 2025, while diluted adjusted net income per share grew by **26.3%** and **24.3%** respectively[2](index=2&type=chunk)[6](index=6&type=chunk)[38](index=38&type=chunk) [Legal and Investor Information](index=3&type=section&id=5.%20Legal%20and%20Investor%20Information) [Non-GAAP Financial Measures Disclosure](index=3&type=section&id=5.1%20Non-GAAP%20Financial%20Measures%20Disclosure) Privia Health uses non-GAAP financial measures to supplement GAAP results, believing they offer useful insights into operating performance and trends for management and investors. These measures are not substitutes for GAAP results and are reconciled to the most directly comparable GAAP measures - Non-GAAP financial measures are presented as a supplement to GAAP results to provide a more consistent understanding of operating results and trends[15](index=15&type=chunk)[16](index=16&type=chunk)[18](index=18&type=chunk) - Reconciliations to the most directly comparable GAAP financial measures are provided in the press release[15](index=15&type=chunk)[17](index=17&type=chunk) [Safe Harbor Statement](index=4&type=section&id=5.2%20Safe%20Harbor%20Statement) The press release contains forward-looking statements regarding future expectations, projections, and assumptions, including the full-year 2025 guidance. These statements are subject to various risks and uncertainties, which could cause actual results to differ materially from those anticipated - The press release includes forward-looking statements, identifiable by terms like 'expects,' 'forecasts,' 'outlook,' and 'guidance,' which are based on current expectations and assumptions[19](index=19&type=chunk) - Actual results may differ materially due to various factors, including regulatory compliance, legal framework complexity, growth strategy execution, competition, third-party vendor failures, reimbursement rate changes, privacy and security risks, and workforce availability[19](index=19&type=chunk)[20](index=20&type=chunk) - The company cautions against undue reliance on forward-looking statements and undertakes no duty to update this information unless required by law[19](index=19&type=chunk)[20](index=20&type=chunk) [Contact Information](index=5&type=section&id=5.3%20Contact%20Information) Contact details for investor and corporate communications are provided for inquiries regarding Privia Health - Robert Borchert, SVP, Investor & Corporate Communications, is the contact person for inquiries[21](index=21&type=chunk) - Contact can be made via email at IR@priviahealth.com or phone at 817.783.4841[21](index=21&type=chunk)

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) For the quarter ended June 28, 2025, Haemonetics reported net revenues of $321.4 million, a decrease from $336.2 million year-over-year, while gross profit increased to $192.2 million (59.8% margin) and operating income grew significantly to $53.9 million [Condensed Consolidated Statements of Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The company reported net revenues of $321.4 million, gross profit of $192.2 million, operating income of $53.9 million, and net income of $34.0 million for the quarter ended June 28, 2025 Consolidated Statements of Income (Unaudited, in thousands) | Financial Metric | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | | :--- | :--- | :--- | | **Net Revenues** | $321,394 | $336,172 | | **Gross Profit** | $192,244 | $174,924 | | **Operating Income** | $53,872 | $39,756 | | **Net Income** | $34,031 | $38,373 | | **Diluted EPS** | $0.70 | $0.74 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 28, 2025, total assets were $2.46 billion, with cash and equivalents at $292.9 million and total stockholders' equity at $882.3 million Consolidated Balance Sheet Highlights (Unaudited, in thousands) | Balance Sheet Item | June 28, 2025 | March 29, 2025 | | :--- | :--- | :--- | | Cash and cash equivalents | $292,898 | $306,763 | | Total current assets | $913,160 | $934,975 | | **Total Assets** | **$2,462,094** | **$2,450,948** | | Total current liabilities | $531,407 | $578,113 | | Long-term debt | $920,833 | $921,230 | | **Total Stockholders' Equity** | **$882,300** | **$820,836** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities generated $17.4 million in cash, while investing activities used $33.0 million and financing activities used $2.4 million, resulting in a net cash decrease of $13.9 million Consolidated Statements of Cash Flows (Unaudited, in thousands) | Cash Flow Activity | Three Months Ended June 28, 2025 | Three Months Ended June 29, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $17,395 | $(27,421) | | Net cash used in investing activities | $(33,000) | $(139,197) | | Net cash (used in) provided by financing activities | $(2,442) | $333,692 | | **Net Change in Cash and Cash Equivalents** | **$(13,865)** | **$165,629** | [Notes to Financial Statements](index=8&type=section&id=Notes%20to%20Financial%20Statements) Key notes detail recent acquisitions of Attune Medical and OpSens, the divestiture of the Whole Blood product line, and ongoing restructuring initiatives, alongside the issuance of $700 million in convertible senior notes and segment revenue performance - Completed the acquisition of Attune Medical on April 1, 2024, for a net purchase price of **$176.2 million**, expanding the Hospital business unit's presence in electrophysiology[21](index=21&type=chunk)[22](index=22&type=chunk) - Completed the divestiture of the Whole Blood product line to GVS, S.p.A on January 13, 2025, for **$43.3 million** in upfront cash and up to **$22.5 million** in contingent consideration[36](index=36&type=chunk)[37](index=37&type=chunk) - In May 2025, a new market and regional alignment initiative was approved to improve operational performance and reduce costs, incurring **$2.8 million** in related costs during the quarter[49](index=49&type=chunk) - In May 2024, the company issued **$700.0 million** of 2.5% convertible senior notes due 2029, with net proceeds used to repay the revolving credit facility, repurchase a portion of the 2026 Notes, and fund capped call transactions[77](index=77&type=chunk) Net Revenues by Reportable Segment (in thousands) | Segment | Q1 FY2026 (ended June 28, 2025) | Q1 FY2025 (ended June 29, 2024) | | :--- | :--- | :--- | | Plasma | $129,897 | $135,910 | | Blood Center | $51,839 | $66,245 | | Hospital | $139,658 | $134,017 | | **Total Net Revenues** | **$321,394** | **$336,172** | [Management's Discussion and Analysis (MD&A)](index=33&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reported a 4.4% decrease in net revenues to $321.4 million, primarily due to lower Plasma sales and the Whole Blood divestiture, offset by Hospital segment growth, while operating income increased 35.5% to $53.9 million due to favorable pricing and product mix [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Total net revenues decreased 4.4% (4.9% in constant currency), driven by declines in Plasma and Blood Center segments, partially offset by Hospital revenue growth, while gross profit margin significantly improved from 52.0% to 59.8% due to pricing and product mix Net Revenues by Business Unit (YoY Growth) | Business Unit | Q1 FY2026 Revenue | Reported Growth | Constant Currency Growth | | :--- | :--- | :--- | :--- | | Plasma | $129.9M | (4.4)% | (4.7)% | | Blood Center | $51.8M | (21.7)% | (22.8)% | | Hospital | $139.7M | 4.2% | 3.8% | | **Total** | **$321.4M** | **(4.4)%** | **(4.9)%** | - The decrease in Plasma revenue was driven by lower sales volumes in North America, primarily related to the previously announced customer transition of CSL Plasma[150](index=150&type=chunk) - The decrease in Blood Center revenue was primarily driven by the divestiture of the Whole Blood product line in January 2025[151](index=151&type=chunk) - Gross profit increased by **9.9%** (**8.7%** constant currency), with the margin expanding to **59.8%** from **52.0%** YoY, driven by pricing benefits, product mix, and decreased restructuring and inventory step-up costs[153](index=153&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with $292.9 million in cash and $750 million available under its revolving credit facility, with a new $500 million share repurchase program authorized and operating cash flow significantly improving to $17.4 million Key Liquidity Indicators (in thousands) | Metric | June 28, 2025 | March 29, 2025 | | :--- | :--- | :--- | | Cash and cash equivalents | $292,898 | $306,763 | | Availability under revolving credit facility | $750,000 | $750,000 | | Working capital | $381,753 | $356,862 | | Net debt position | $(931,884) | $(918,025) | - A new three-year share repurchase program was approved in April 2025, authorizing the repurchase of up to **$500.0 million** of common stock through April 2028[140](index=140&type=chunk)[171](index=171&type=chunk) - Net cash provided by operating activities increased by **$44.8 million** year-over-year, driven by higher net income before non-cash gains and improved working capital management[175](index=175&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks from foreign exchange rates, interest rates, credit concentration, and investments, which are managed through hedging programs and careful monitoring of customer and investment portfolios - Primary foreign currency exposures relate to sales in Japanese Yen, Euro, and Chinese Yuan, managed through forward contracts to hedge anticipated cash flows over a rolling 18-month horizon[185](index=185&type=chunk)[187](index=187&type=chunk) - Interest rate risk is associated with the **$243.8 million** outstanding on the senior unsecured term loan, mitigated by two active interest rate swap agreements with a notional value of **$203.2 million**[190](index=190&type=chunk) - Credit risk is concentrated with several large customers in the Plasma business unit and with government-owned healthcare systems in certain international markets[191](index=191&type=chunk) - As of June 28, 2025, the company holds **$80.9 million** in strategic investments in privately held entities, classified as other long-term assets and subject to investment risk[193](index=193&type=chunk) [Controls and Procedures](index=43&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 28, 2025, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of June 28, 2025, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[194](index=194&type=chunk) - No changes occurred in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[195](index=195&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=44&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in patent infringement litigation, including a complaint filed by Knoninklijke Philips N.V. against OpSens and Haemonetics' own complaints against Terumo BCT and Fresenius Kabi USA LLC - A complaint was filed by Knoninklijke Philips N.V. against the company's subsidiary OpSens, alleging patent infringement related to interventional cardiology systems[115](index=115&type=chunk) - The company filed complaints against Terumo BCT and Fresenius Kabi USA LLC, alleging infringement of its intellectual property rights related to donor-centric blood plasma collection patents[116](index=116&type=chunk) [Risk Factors](index=44&type=section&id=ITEM%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended March 29, 2025 - No material changes from the Risk Factors disclosed in the Annual Report on Form 10-K for the fiscal year ended March 29, 2025[197](index=197&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the first quarter of fiscal 2026, the company repurchased 363,886 shares, completing the $150.0 million accelerated share repurchase (ASR) agreement and fully funding the $300.0 million authorization under the 2022 share repurchase program Issuer Purchases of Equity Securities (Q1 FY2026) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | March 30 – April 26, 2025 | 363,886 | Not specified in table | | **Total** | **363,886** | **N/A** | - In April 2025, the company completed a **$150.0 million** accelerated share repurchase (ASR) agreement, fully funding the **$300.0 million** authorization under its 2022 share repurchase program[198](index=198&type=chunk) [Exhibits](index=45&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, compensation plans, and required certifications by the CEO and CFO under the Sarbanes-Oxley Act - Exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, and XBRL data files[203](index=203&type=chunk)

[Fiscal 2026 First Quarter Financial Highlights](index=1&type=section&id=Fiscal%202026%20First%20Quarter%20Financial%20Highlights) [Executive Summary](index=1&type=section&id=1.1%20Executive%20Summary) Prestige Consumer Healthcare Inc. reported mixed Q1 FY26 results, with international growth and improved gross margin offset by Clear Eyes supply constraints, leading to a revenue decline and a revised full-year outlook - The company experienced momentum in **international segment growth**, year-over-year improvement in **gross margin**, and solid quarterly **free cash flow**[2](index=2&type=chunk) - Positives were offset by **Clear Eyes supply constraints**, resulting in **lower-than-expected shipments**[2](index=2&type=chunk)[3](index=3&type=chunk) - The company announced an agreement to **acquire Pillar5 Pharma**, a current eye care supplier, to **improve eye care supply** in the second half of fiscal 2026[2](index=2&type=chunk)[7](index=7&type=chunk) - Fiscal 2026 **revenue outlook was revised to $1,100 to $1,115 million**, and **Diluted EPS outlook to $4.50 to $4.58**[7](index=7&type=chunk) [Key Financial Results (Q1 FY26 vs Q1 FY25)](index=1&type=section&id=1.2%20Key%20Financial%20Results%20(Q1%20FY26%20vs%20Q1%20FY25)) Q1 FY26 reported revenues decreased by **6.6% to $249.5 million** due to Clear Eyes supply issues, while net income slightly declined and diluted EPS increased by **5.6%** (based on adjusted EPS from table) | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (%) | | :------------------- | :----------------- | :----------------- | :--------- | | Reported Revenues | $249.5 | $267.1 | -6.6% | | Net Income | $47.5 | $49.1 | -3.3% | | Diluted EPS | $0.95 | $0.98 | -3.1% | | Adjusted Diluted EPS | $0.95 | $0.90 | +5.6% | - The **revenue decline** was driven by **limited ability to supply demand for Clear Eyes** and an expected headwind from accelerated order timing in Q4 of the prior year[3](index=3&type=chunk) [Free Cash Flow and Balance Sheet](index=1&type=section&id=1.3%20Free%20Cash%20Flow%20and%20Balance%20Sheet) Q1 FY26 saw strong cash generation with a **44.2% increase** in operating cash flow and **45.9% increase** in non-GAAP free cash flow, maintaining stable net debt and a **2.4x** leverage ratio | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (YoY) | | :-------------------------------------- | :----------------- | :----------------- | :----------- | | Net cash provided by operating activities | $79.0 | $54.8 | +44.2% | | Non-GAAP Free Cash Flow | $78.2 | $53.6 | +45.9% | - The **material increase in free cash flow** was attributable to the **timing of working capital** and **lower interest expense**[6](index=6&type=chunk) | Metric | As of June 30, 2025 (Millions) | | :---------------------- | :----------------------------- | | Net Debt | ~$0.9 | | Covenant-defined Leverage Ratio | 2.4x | [Segment Performance Review](index=2&type=section&id=Segment%20Performance%20Review) [North American OTC Healthcare](index=2&type=section&id=2.1%20North%20American%20OTC%20Healthcare) North American OTC Healthcare segment revenue decreased by **8.5%** in Q1 FY26, primarily due to limited Clear Eyes supply and accelerated orders in the prior year | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (%) | | :--------------- | :----------------- | :----------------- | :--------- | | Segment Revenues | $212.6 | $232.3 | -8.5% | - The **revenue decrease** was primarily attributable to **lower Eye & Ear Care category sales**, driven by **limited ability to supply demand for Clear Eyes** and the expected headwind associated with accelerated order timing in Q4 of the prior year[9](index=9&type=chunk) [International OTC Healthcare](index=2&type=section&id=2.2%20International%20OTC%20Healthcare) International OTC Healthcare segment revenues grew strongly by **6.1%** in Q1 FY26, driven by broad-based growth across various geographies | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (%) | | :--------------- | :----------------- | :----------------- | :--------- | | Segment Revenues | $37.0 | $34.8 | +6.1% | - The revenue performance was driven by **broad-based growth across geographies**[10](index=10&type=chunk) [Strategic Initiatives and Outlook](index=2&type=section&id=Strategic%20Initiatives%20and%20Outlook) [Acquisition of Pillar5 Pharma](index=2&type=section&id=3.1%20Acquisition%20of%20Pillar5%20Pharma) Prestige Consumer Healthcare Inc. will acquire Pillar5 Pharma, a key Clear Eyes supplier, to expand eye care production capacity and secure supply, with the transaction expected to be EPS-neutral and close in Q3 FY26 - The Company has entered into a definitive agreement to **acquire Pillar5 Pharma Inc.**, a **leading sterile ophthalmic manufacturer** and **current Clear Eyes supplier**[11](index=11&type=chunk) - The acquisition is part of a long-term strategy to **expand eye care production capacity**, **secure near-term supply**, and **build long-term supply chain capacity for Clear Eyes**[11](index=11&type=chunk)[13](index=13&type=chunk) - The transaction is expected to be **approximately neutral to EPS** and is anticipated to **close in the third quarter of fiscal 2026**[11](index=11&type=chunk) [Updated Fiscal 2026 Outlook](index=2&type=section&id=3.2%20Updated%20Fiscal%202026%20Outlook) The company revised its FY26 outlook, lowering revenue and diluted EPS due to eye care supply shortfalls, but maintained its free cash flow forecast of **$245 million or more** - The revised outlook primarily reflects **supply chain shortfalls in eye care** expected to persist in the first half of fiscal 2026[14](index=14&type=chunk) | Metric | Initial Fiscal 2026 Outlook | Current Fiscal 2026 Outlook | | :-------------------- | :-------------------------- | :-------------------------- | | Revenue | $1,140 to $1,155 million | $1,100 to $1,115 million | | Organic Revenue Growth | Approximately 1% to 2% | Approximate 1.5% to 3.0% decrease | | Diluted E.P.S. | $4.70 to $4.82 | $4.50 to $4.58 | | Free Cash Flow | $245 million or more | $245 million or more | - The company still anticipates **year-over-year growth** from an **acceleration of supply in eye care in the second half**, thanks to its multi-year strategy to enhance long-term capacity[14](index=14&type=chunk) [Company Information](index=3&type=section&id=Company%20Information) [About Prestige Consumer Healthcare Inc.](index=4&type=section&id=4.1%20About%20Prestige%20Consumer%20Healthcare%20Inc.) Prestige Consumer Healthcare is a leading consumer healthcare products company with a diverse brand portfolio sold across the U.S., Canada, Australia, and other international markets - Prestige Consumer Healthcare is a **leading consumer healthcare products company** with **sales throughout the U.S. and Canada, Australia, and in certain other international markets**[22](index=22&type=chunk) - The company's **diverse portfolio** includes brands such as **Monistat®, Summer's Eve®, BC®, Goody's®, Clear Eyes®, TheraTears®, DenTek®, Dramamine®, Fleet®, Chloraseptic®, Luden's®, Compound W®, Little Remedies®, Boudreaux's Butt Paste®, Nix®, Debrox®, Gaviscon®, Hydralyte®, and Fess®**[22](index=22&type=chunk) [Conference Call Details](index=3&type=section&id=4.2%20Conference%20Call%20Details) A conference call was held on August 7, 2025, to discuss Q1 FY26 results, with access via live webcast, slide presentation, and archived replay on the Investor Relations page - A conference call to review Q1 FY26 results was held on **August 7, 2025, at 8:30 a.m. ET**[17](index=17&type=chunk) - Access to the **live internet webcast**, accompanying **slide presentation**, and an **archived replay** is available on the **Investor Relations page** of the Company's website[17](index=17&type=chunk)[18](index=18&type=chunk) [Forward-Looking Statements](index=3&type=section&id=4.3%20Forward-Looking%20Statements) This news release contains forward-looking statements based on management's estimates, subject to inherent uncertainties and risks that could cause actual results to differ materially - The news release contains **forward-looking statements** regarding **future operating results**, including **revenues, organic growth, diluted EPS, and free cash flow**, as well as the impact of the **Pillar5 acquisition** and the company's ability to **enhance shareholder value**[20](index=20&type=chunk) - These statements are based on **management's estimates and assumptions** and are **inherently uncertain and difficult to predict**[20](index=20&type=chunk) - Actual results could **differ materially** due to factors such as **business and economic conditions, consumer trends, competitive pressures, the ability to meet Pillar5 closing conditions, and supply chain capabilities**[20](index=20&type=chunk)[21](index=21&type=chunk) [Financial Statements (Unaudited)](index=5&type=section&id=Financial%20Statements%20(Unaudited)) [Condensed Consolidated Statements of Income and Comprehensive Income](index=5&type=section&id=5.1%20Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) | (In thousands, except per share data) | 2025 | 2024 | | :------------------------------------ | :---------- | :---------- | | Total Revenues | $249,530 | $267,142 | | Cost of sales | 109,199 | 121,120 | | Gross profit | 140,331 | 146,022 | | Total operating expenses | 68,575 | 73,976 | | Operating income | 71,756 | 72,046 | | Total other expense, net | 9,979 | 13,633 | | Income before income taxes | 61,777 | 58,413 | | Provision for income taxes | 14,311 | 9,345 | | Net income | $47,466 | $49,068 | | Diluted EPS | $0.95 | $0.98 | | Comprehensive income | $52,870 | $52,228 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=5.2%20Condensed%20Consolidated%20Balance%20Sheets) | (In thousands) | June 30, 2025 | March 31, 2025 | | :------------------------------------ | :------------ | :------------- | | Cash and cash equivalents | $139,502 | $97,884 | | Total current assets | 480,518 | 448,328 | | Property, plant and equipment, net | 73,786 | 74,548 | | Goodwill | 528,314 | 527,425 | | Intangible assets, net | 2,294,829 | 2,295,350 | | Total Assets | $3,431,625 | $3,402,218 | | Total current liabilities | 109,668 | 106,623 | | Long-term debt, net | 992,749 | 992,357 | | Total Liabilities | 1,576,143 | 1,567,321 | | Total Stockholders' Equity | 1,855,482 | 1,834,897 | | Total Liabilities and Stockholders' Equity | $3,431,625 | $3,402,218 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=5.3%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | (In thousands) | 2025 | 2024 | | :---------------------------------------- | :---------- | :---------- | | Net cash provided by operating activities | $79,013 | $54,776 | | Net cash used in investing activities | (1,938) | (2,130) | | Net cash used in financing activities | (36,282) | (65,522) | | Increase in cash and cash equivalents | 41,618 | (12,213) | | Cash and cash equivalents - end of period | $139,502 | $34,256 | [Condensed Consolidated Statements of Income - Business Segments](index=8&type=section&id=5.4%20Condensed%20Consolidated%20Statements%20of%20Income%20-%20Business%20Segments) | (In thousands) | North American OTC Healthcare (2025) | International OTC Healthcare (2025) | Consolidated (2025) | | :-------------------- | :----------------------------------- | :---------------------------------- | :------------------ | | Total segment revenues | $212,578 | $36,952 | $249,530 | | Cost of sales | 92,178 | 17,021 | 109,199 | | Gross profit | 120,400 | 19,931 | 140,331 | | Advertising and marketing | 28,954 | 5,983 | 34,937 | | Contribution margin | $91,446 | $13,948 | $105,394 | | (In thousands) | North American OTC Healthcare (2024) | International OTC Healthcare (2024) | Consolidated (2024) | | :-------------------- | :----------------------------------- | :---------------------------------- | :------------------ | | Total segment revenues | $232,316 | $34,826 | $267,142 | | Cost of sales | 105,559 | 15,561 | 121,120 | | Gross profit | 126,757 | 19,265 | 146,022 | | Advertising and marketing | 33,753 | 5,612 | 39,365 | | Contribution margin | $93,004 | $13,653 | $106,657 | [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) [About Non-GAAP Financial Measures](index=9&type=section&id=6.1%20About%20Non-GAAP%20Financial%20Measures) The company provides Non-GAAP financial measures (NGFMs) for greater transparency and performance understanding, used internally but not as alternatives to GAAP measures - NGFMs are provided to **aid investors** in understanding the Company's performance and offer **greater transparency**[32](index=32&type=chunk) - NGFMs are used internally for **evaluating operating performance**, making **financial and operational decisions**, and **assessing shareholder value**[32](index=32&type=chunk) - NGFMs are **not in accordance with GAAP**, should **not be considered a measure of profitability or liquidity**, and may **not be directly comparable** to similarly titled NGFMs reported by other companies[33](index=33&type=chunk) [Reconciliation of Non-GAAP Measures](index=10&type=section&id=6.2%20Reconciliation%20of%20Non-GAAP%20Measures) Reconciliation of GAAP Total Revenues to Non-GAAP Organic Revenues | (In thousands) | 2025 | 2024 | | :-------------------------- | :---------- | :---------- | | GAAP Total Revenues | $249,530 | $267,142 | | Revenue Change | (6.6)% | | | Impact of foreign currency exchange rates | — | (670) | | Non-GAAP Organic Revenues | $249,530 | $266,472 | | Non-GAAP Organic Revenue Change | (6.4)% | | Reconciliation of GAAP Net Income to Non-GAAP EBITDA | (In thousands) | 2025 | 2024 | | :-------------------------- | :---------- | :---------- | | GAAP Net Income | $47,466 | $49,068 | | Interest expense, net | 10,203 | 13,137 | | Provision for income taxes | 14,311 | 9,345 | | Depreciation and amortization | 7,666 | 8,124 | | Non-GAAP EBITDA | $79,646 | $79,674 | | Non-GAAP EBITDA Margin | 31.9 % | 29.8 % | Reconciliation of GAAP Net Income and Diluted EPS to Non-GAAP Adjusted Net Income and Diluted EPS | (In thousands, except per share data) | 2025 Net Income | 2025 Diluted EPS | 2024 Net Income | 2024 Diluted EPS | | :------------------------------------ | :-------------- | :--------------- | :-------------- | :--------------- | | GAAP Net Income and Diluted EPS | $47,466 | $0.95 | $49,068 | $0.98 | | Normalized tax rate adjustment | — | — | (4,030) | (0.08) | | Non-GAAP Adjusted Net Income and Adjusted Diluted EPS | $47,466 | $0.95 | $45,038 | $0.90 | Reconciliation of GAAP Net Income to Non-GAAP Free Cash Flow | (In thousands) | 2025 | 2024 | | :---------------------------------------- | :---------- | :---------- | | GAAP Net cash provided by operating activities | $79,013 | $54,776 | | Purchases of property and equipment | (838) | (1,152) | | Non-GAAP Free Cash Flow | $78,175 | $53,624 | Outlook for Fiscal Year 2026: Reconciliation of Projected GAAP Net cash provided by operating activities to Projected Non-GAAP Free Cash Flow | (In millions) | Amount | | :------------------------------------------------ | :----- | | Projected FY'26 GAAP Net cash provided by operating activities | $255 | | Additions to property and equipment for cash | (10) | | Projected FY'26 Non-GAAP Free Cash Flow | $245 |

[Q2 2025 Financial Highlights](index=1&type=section&id=Q2%202025%20Financial%20Highlights) Ducommun's Q2 2025 performance highlights strong revenue growth, record margins, and significant net income increase, aligning with its long-term financial goals [Overall Performance Summary](index=1&type=section&id=Overall%20Performance%20Summary) Ducommun reported strong Q2 2025 results, with revenues over $200 million, record margins, and 63% net income growth, aligning with VISION 2027 goals | Financial Metric | Q2 2025 | Change (YoY) | | :--- | :--- | :--- | | Net Revenue | $202.3 million | +3% | | Gross Margin | 26.6% | +60 bps | | Net Income | $12.6 million | +63% | | Diluted EPS | $0.82 | +58% | | Adjusted EBITDA | $32.4 million | +8% | | Adjusted EBITDA Margin | 16.0% | +80 bps | - Strong quarterly results were led by the **defense business**, particularly missile programs, radar, and military rotary-wing aircraft platforms, offsetting commercial aerospace headwinds[5](index=5&type=chunk) - The company is progressing towards its **VISION 2027 financial goal of 18% Adjusted EBITDA**, with Q2 margins showing continued expansion[6](index=6&type=chunk) - The tariff environment is not expected to materially impact the financial outlook, as **over 95% of revenue** is from domestic facilities, with active mitigation of raw material tariff exposures[7](index=7&type=chunk) [Consolidated Financial Performance](index=2&type=section&id=Consolidated%20Financial%20Performance) Ducommun's Q2 2025 consolidated financials show a 3% revenue increase to $202.3 million, driven by military and space, with net income up 63% to $12.6 million and improved cash flow [Revenue Analysis](index=2&type=section&id=Revenue%20Analysis) Net revenue grew **3% year-over-year to $202.3 million**, driven by a **$16.5 million increase in military and space**, offsetting declines in commercial aerospace and industrial markets | End-Use Market | Revenue Change (YoY) | Key Drivers | | :--- | :--- | :--- | | Military & Space | +$16.5 million | Higher rates on missile, rotary-wing aircraft, and radar platforms | | Commercial Aerospace | -$9.0 million | Lower revenues from Boeing and lower rates on rotary-wing aircraft | | Industrial | -$2.3 million | Selective pruning of non-core business | [Profitability Analysis](index=2&type=section&id=Profitability%20Analysis) Q2 2025 profitability improved significantly, with net income surging **63% to $12.6 million**, gross margin expanding **60 basis points to 26.6%**, and operating income rising to **$17.2 million** | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Income | $12.6 million | $7.7 million | +$4.9 million (+63%) | | Gross Profit | $53.7 million | $51.2 million | +$2.5 million | | Gross Margin | 26.6% | 26.0% | +60 bps | | Operating Income | $17.2 million | $13.9 million | +$3.2 million | - Gross margin increase was primarily driven by lower manufacturing costs and reduced restructuring charges from the Monrovia performance center wind-down[11](index=11&type=chunk) [Cash Flow and Interest Expense](index=2&type=section&id=Cash%20Flow%20and%20Interest%20Expense) Cash from operations significantly increased to **$22.4 million** in Q2 2025 from **$3.5 million** in Q2 2024, driven by higher net income and working capital management, while interest expense decreased - Net cash provided by operations increased substantially to **$22.4 million** in Q2 2025 from **$3.5 million** in Q2 2024[14](index=14&type=chunk) - Cash flow improvement was primarily due to higher net income, increased accounts payable, and a smaller increase in contract assets[14](index=14&type=chunk) - Interest expense fell by **$1.0 million** year-over-year due to lower interest rates and a reduced debt balance[13](index=13&type=chunk) [Business Segment Performance](index=2&type=section&id=Business%20Segment%20Performance) Electronic Systems drove Q2 2025 growth with an **8.7% revenue increase** and expanded operating margin, while Structural Systems saw a **3.7% revenue decline** due to reduced commercial aerospace demand [Electronic Systems](index=2&type=section&id=Electronic%20Systems) Electronic Systems delivered strong results, with net revenue increasing **8.7% to $110.2 million** and operating income growing **$4.2 million to $21.0 million**, expanding operating margin to **19.0%** | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Revenue | $110.2 million | $101.4 million | | Operating Income | $21.0 million | $16.8 million | | Operating Margin | 19.0% | 16.6% | - Revenue growth was primarily due to higher rates on selected missiles, radar, fixed-wing aircraft platforms, and a classified program[18](index=18&type=chunk) [Structural Systems](index=3&type=section&id=Structural%20Systems) Structural Systems revenue decreased **3.7% to $92.0 million**, primarily from a **$6.2 million reduction in Boeing commercial aerospace**, leading to a **$1.0 million decline in operating income** and margin contraction to **10.4%** | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Revenue | $92.0 million | $95.6 million | | Operating Income | $9.5 million | $10.6 million | | Operating Margin | 10.4% | 11.0% | - Revenue decline was driven by lower revenues from Boeing, partially offset by higher rates on selected military rotary-wing aircraft platforms[25](index=25&type=chunk) [Corporate General and Administrative (CG&A) Expenses](index=3&type=section&id=Corporate%20General%20and%20Administrative%20%28CG%26A%29%20Expenses) Q2 2025 Corporate General and Administrative (CG&A) expenses were **$13.3 million (6.6% of revenue)**, a slight decrease from the prior year, primarily due to lower professional services fees [CG&A Expense Details](index=3&type=section&id=CG%26A%20Expense%20Details) CG&A expenses decreased slightly year-over-year, driven by a **$1.0 million reduction in professional services fees**, partially offset by a **$0.6 million increase in compensation and benefits** | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | CG&A Expenses | $13.3 million | $13.4 million | | CG&A as % of Revenue | 6.6% | 6.8% | [Financial Statements and Reconciliations](index=6&type=section&id=Financial%20Statements%20and%20Reconciliations) This section presents unaudited financial statements for Q2 2025, including condensed balance sheets, income statements, GAAP to non-GAAP reconciliations, and backlog breakdown [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 28, 2025, Ducommun's balance sheet shows total assets of **$1.14 billion**, total liabilities of **$433.0 million**, and shareholders' equity increased to **$707.8 million** | Balance Sheet Item | June 28, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $598.2 million | $568.1 million | | Total Assets | $1,140.8 million | $1,126.1 million | | Total Current Liabilities | $184.5 million | $175.5 million | | Total Liabilities | $433.0 million | $443.6 million | | Total Shareholders' Equity | $707.8 million | $682.5 million | [Condensed Consolidated Statements of Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Q2 2025 income statement highlights a year-over-year increase in net revenue to **$202.3 million** and net income to **$12.6 million**, or **$0.82 per diluted share** | Income Statement Item (Q2) | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Net Revenues | $202.3 million | $197.0 million | | Gross Profit | $53.7 million | $51.2 million | | Operating Income | $17.2 million | $13.9 million | | Net Income | $12.6 million | $7.7 million | | Diluted EPS | $0.82 | $0.52 | [Non-GAAP Reconciliations](index=8&type=section&id=Non-GAAP%20Reconciliations) The company provides GAAP to non-GAAP reconciliations, showing Q2 2025 Adjusted EBITDA at **$32.4 million (16.0% of revenue)** and non-GAAP adjusted net income at **$13.4 million** GAAP Net Income to Adjusted EBITDA Reconciliation (Q2) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | GAAP net income | $12,553 | $7,724 | | Adjustments (Interest, Tax, D&A, etc.) | $19,855 | $22,249 | | **Adjusted EBITDA** | **$32,408** | **$29,973** | GAAP to Non-GAAP Net Income Reconciliation (Q2) | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | GAAP net income | $12,553 | $7,724 | | Total adjustments | $877 | $4,748 | | **Non-GAAP adjusted net income** | **$13,430** | **$12,472** | [Non-GAAP Backlog by Reporting Segment](index=13&type=section&id=Non-GAAP%20Backlog%20by%20Reporting%20Segment) As of June 28, 2025, total backlog was **$1.018 billion**, a decrease from **$1.061 billion** at year-end 2024, with declines across both Electronic and Structural Systems, mainly in military and space | Backlog (in thousands) | June 28, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Consolidated Total** | **$1,017,872** | **$1,060,819** | | Military and space | $592,580 | $624,785 | | Commercial aerospace | $404,080 | $415,905 | | **Electronic Systems Total** | **$532,871** | **$555,966** | | **Structural Systems Total** | **$485,001** | **$504,853** | [Supplementary Information](index=3&type=section&id=Supplementary%20Information) This section provides logistical and legal information, including investor call details, a corporate overview, forward-looking statements disclaimer, and non-GAAP financial measure definitions

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) Presents the company's unaudited condensed consolidated financial statements and related notes for the reported periods [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements, including balance sheets, income, cash flows, equity, and detailed notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Provides a summary of the company's assets, liabilities, and equity at key reporting dates Balance Sheet Summary (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total Assets | $4,675,040 | $4,381,993 | $293,047 | 6.7% | | Total Liabilities | $2,913,242 | $2,622,130 | $291,112 | 11.1% | | Total Stockholders' Equity | $1,750,018 | $1,747,863 | $2,155 | 0.1% | | Total Equity | $1,761,798 | $1,759,863 | $1,935 | 0.1% | [Condensed Consolidated Statements of Income and Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) Details the company's revenues, expenses, and net income for the three and six months ended June 30 Income Statement Summary (Three Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Total Revenues | $319,240 | $270,676 | $48,564 | 17.9% | | Total Expenses | $272,866 | $242,479 | $30,387 | 12.5% | | Income from Operations | $46,374 | $28,197 | $18,177 | 64.5% | | Walker & Dunlop Net Income | $33,952 | $22,663 | $11,289 | 49.8% | | Basic EPS | $1.00 | $0.67 | $0.33 | 49.3% | | Diluted EPS | $0.99 | $0.67 | $0.32 | 47.8% | Income Statement Summary (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Total Revenues | $556,607 | $498,735 | $57,872 | 11.6% | | Total Expenses | $504,989 | $456,859 | $48,130 | 10.5% | | Income from Operations | $51,618 | $41,876 | $9,742 | 23.3% | | Walker & Dunlop Net Income | $36,706 | $34,529 | $2,177 | 6.3% | | Basic EPS | $1.08 | $1.02 | $0.06 | 5.9% | | Diluted EPS | $1.07 | $1.02 | $0.05 | 4.9% | [Consolidated Statements of Changes in Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Outlines the changes in total equity, including net income, dividends, and stock transactions - **Total Equity** increased from **$1,759,863 thousand** at December 31, 2024, to **$1,761,798 thousand** at June 30, 2025. **Walker & Dunlop net income** contributed **$36,706 thousand**, while cash dividends paid totaled **$45,859 thousand**. Stock-based compensation added **$12,059 thousand**, and common stock repurchases reduced equity by **$9,232 thousand**[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash flows from operating, investing, and financing activities for the reported periods Cash Flow Summary (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Net cash provided by (used in) operating activities | $(519,560) | $(199,449) | $(320,111) | 160.5% | | Net cash provided by (used in) investing activities | $(61,926) | $(29,611) | $(32,315) | 109.1% | | Net cash provided by (used in) financing activities | $546,356 | $119,147 | $427,209 | 358.6% | | Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents | $(35,130) | $(109,913) | $74,783 | (68.0)% | | Total cash, cash equivalents, restricted cash, and restricted cash equivalents at end of period | $292,768 | $281,490 | $11,278 | 4.0% | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations of significant accounting policies and financial statement items [NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION](index=8&type=section&id=NOTE%201%E2%80%94ORGANIZATION%20AND%20BASIS%20OF%20PRESENTATION) Describes the company's structure, operations, and the basis for financial statement presentation - **Walker & Dunlop, Inc.** is a holding company operating primarily through **Walker & Dunlop, LLC**, a leading commercial real estate services and finance company in the U.S[22](index=22&type=chunk) - The Company originates, sells, and services commercial real estate debt and equity financing products, provides multifamily property sales brokerage and valuation, engages in commercial real estate investment management (focused on affordable housing via LIHTC syndication), offers housing market research, and delivers real estate-related investment banking and advisory services[22](index=22&type=chunk) - **Agency lending products** are offered through Fannie Mae, Freddie Mac (GSEs), Ginnie Mae, and HUD (Agencies). **Debt brokerage products** are for life insurance companies, commercial banks, and other institutional investors[23](index=23&type=chunk) [NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=NOTE%202%E2%80%94SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Details the company's key accounting policies, including credit loss provisions and revenue recognition Provision (Benefit) for Credit Losses (Three Months Ended June 30) | Component | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :------- | | Provision (benefit) for loan losses | $500 | $(17) | $517 | N/A | | Provision (benefit) for risk-sharing obligations | $1,320 | $353 | $967 | 273.9% | | Provision (benefit) for loan credit losses | $1,820 | $336 | $1,484 | 441.7% | | Provision (benefit) for other credit losses | $0 | $2,600 | $(2,600) | (100.0)% | | **Total Provision (benefit) for credit losses** | **$1,820** | **$2,936** | **$(1,116)** | **(38.0)%** | Provision (Benefit) for Credit Losses (Six Months Ended June 30) | Component | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :------- | | Provision (benefit) for loan losses | $500 | $(16) | $516 | N/A | | Provision (benefit) for risk-sharing obligations | $5,032 | $(1,124) | $6,156 | N/A | | Provision (benefit) for loan credit losses | $5,532 | $(1,140) | $6,672 | N/A | | Provision (benefit) for other credit losses | $0 | $4,600 | $(4,600) | (100.0)% | | **Total Provision (benefit) for credit losses** | **$5,532** | **$3,460** | **$2,072** | **59.9%** | - The Company has credit risk exclusively on loans secured by multifamily real estate, with no exposure to other commercial real estate sectors[26](index=26&type=chunk) - The Company is obligated to repurchase GSE loans if certain representations and warranties are breached. As of June 30, 2025, four loans were repurchased, and one loan with an outstanding balance of **$23.2 million** must be repurchased by March 29, 2026. All repurchased/indemnified loans are delinquent and non-accrual[28](index=28&type=chunk) - **Net warehouse interest income (expense)** for the three months ended June 30, 2025, was **$(1,760) thousand**, compared to **$(1,584) thousand** in 2024. For the six months, it was **$(2,546) thousand** in 2025, compared to **$(2,700) thousand** in 2024[33](index=33&type=chunk) - Co-broker fees netted against Loan origination and debt brokerage fees were **$4.5 million** (Q2 2025) vs **$2.0 million** (Q2 2024) and **$6.5 million** (YTD 2025) vs **$4.6 million** (YTD 2024)[34](index=34&type=chunk) - **Total revenues** derived from contracts with customers increased to **$77.7 million** for Q2 2025 (from **$68.4 million** in Q2 2024) and **$135.7 million** for YTD 2025 (from **$120.8 million** in YTD 2024)[36](index=36&type=chunk) [NOTE 3—MORTGAGE SERVICING RIGHTS](index=11&type=section&id=NOTE%203%E2%80%94MORTGAGE%20SERVICING%20RIGHTS) Explains the valuation, changes, and sensitivities of mortgage servicing rights - The fair value of **Mortgage Servicing Rights (MSRs)** was **$1.4 billion** as of both June 30, 2025, and December 31, 2024[39](index=39&type=chunk) MSR Key Economic Assumptions Sensitivities (June 30, 2025) | Assumption Change | Decrease in Fair Value (in millions) | | :---------------------- | :--------------------------------- | | 100 bps increase in Discount Rate | $40.3 | | 200 bps increase in Discount Rate | $77.9 | | 50 bps decrease in Placement Fee Rate | $49.1 | | 100 bps decrease in Placement Fee Rate | $98.3 | Roll Forward of MSRs (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :---------------------- | :-------- | :-------- | :--------- | :--------- | | Beginning balance | $825,761 | $881,834 | $852,399 | $907,415 | | Additions | $47,068 | $21,172 | $73,911 | $47,582 | | Amortization | $(53,264) | $(50,495) | $(105,086) | $(101,026) | | Pre-payments & write-offs | $(1,751) | $(1,680) | $(3,410) | $(3,140) | | Ending balance | $817,814 | $850,831 | $817,814 | $850,831 | - **Net carrying value of MSRs** was **$817.8 million** as of June 30, 2025, down from **$852.4 million** as of December 31, 2024[40](index=40&type=chunk) [NOTE 4—ALLOWANCE FOR RISK-SHARING OBLIGATIONS](index=12&type=section&id=NOTE%204%E2%80%94ALLOWANCE%20FOR%20RISK-SHARING%20OBLIGATIONS) Discusses the allowance for credit losses on risk-sharing obligations and related portfolio details - The Company records an estimate for **Current Expected Credit Losses (CECL)** for its Fannie Mae at-risk servicing portfolio and Freddie Mac SBLs[42](index=42&type=chunk) Roll Forward of Allowance for Risk-Sharing Obligations (in thousands) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :-------- | :-------- | :--------- | :--------- | | Beginning balance | $31,871 | $30,124 | $28,159 | $31,601 | | Provision (benefit) for risk-sharing obligations | $1,320 | $353 | $5,032 | $(1,124) | | Ending balance | $33,191 | $30,477 | $33,191 | $30,477 | - The at-risk Fannie Mae servicing portfolio UPB was **$64.7 billion** as of Q2 2025, up from **$59.5 billion** in Q2 2024[43](index=43&type=chunk) - Collateral-based reserves for individually evaluated loans (5 Fannie Mae DUS, 3 Freddie Mac SBLs) totaled **$8.6 million** as of June 30, 2025, compared to **$4.0 million** as of December 31, 2024[44](index=44&type=chunk) - **Maximum quantifiable contingent liability** for Fannie Mae DUS guaranties was **$13.4 billion** as of June 30, 2025, up from **$12.2 billion** in 2024[45](index=45&type=chunk) [NOTE 5—SERVICING](index=13&type=section&id=NOTE%205%E2%80%94SERVICING) Provides information on the total loan servicing portfolio and custodial deposit accounts - **Total UPB of loans serviced** for institutional investors was **$137.3 billion** as of June 30, 2025, an increase from **$135.3 billion** as of December 31, 2024[46](index=46&type=chunk) - **Custodial deposit accounts** (escrow deposits) totaled **$2.7 billion** as of both June 30, 2025, and December 31, 2024[47](index=47&type=chunk) [NOTE 6—DEBT](index=13&type=section&id=NOTE%206%E2%80%94DEBT) Details the company's various debt instruments, facilities, and covenant compliance - As of June 30, 2025, the Company had **$5.3 billion** in **total Agency Warehouse Facilities capacity** (**$1.65 billion** committed, **$3.65 billion** uncommitted) with an **outstanding balance** of **$1.157 billion**. Interest rates are based on SOFR plus a spread[49](index=49&type=chunk) - Maturity dates for Agency Warehouse Facilities 2, 3, and 4 were extended to April 10, 2026, May 15, 2026, and June 22, 2026, respectively[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - The Company has a **$450.0 million Term Loan** (balance **$448.9 million** as of June 30, 2025) and a **$50.0 million revolving credit facility** (no outstanding balance)[54](index=54&type=chunk) - The Company also has **$400.0 million** aggregate principal amount of **Senior Unsecured Notes** as of June 30, 2025[54](index=54&type=chunk) - The Company is in compliance with all financial covenants for warehouse facilities and notes payable as of June 30, 2025[55](index=55&type=chunk) [NOTE 7—GOODWILL AND OTHER INTANGIBLE ASSETS](index=14&type=section&id=NOTE%207%E2%80%94GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Presents the balances and changes in goodwill and other intangible assets - **Goodwill balance** was **$868.7 million** as of June 30, 2025, unchanged from December 31, 2024. **Accumulated goodwill impairment** was **$95.0 million** as of June 30, 2025, up from **$62.0 million** as of June 30, 2024[10](index=10&type=chunk)[56](index=56&type=chunk) - **Net carrying value of other intangible assets** was **$149.4 million** as of June 30, 2025, down from **$156.9 million** as of December 31, 2024[57](index=57&type=chunk)[58](index=58&type=chunk) - **Contingent consideration liabilities** decreased to **$19.7 million** as of June 30, 2025, from **$30.5 million** as of December 31, 2024, due to payments. The last earnout period for contingent consideration ends in Q3 2027[60](index=60&type=chunk) [NOTE 8—FAIR VALUE MEASUREMENTS](index=15&type=section&id=NOTE%208%E2%80%94FAIR%20VALUE%20MEASUREMENTS) Explains the fair value hierarchy and valuation of financial assets and liabilities - The Company uses a fair value hierarchy (Level 1, 2, 3) for valuation inputs, with MSRs measured at fair value at inception and thereafter on a nonrecurring basis[62](index=62&type=chunk)[65](index=65&type=chunk) - The Company entered into an interest rate swap for its Senior Notes in Q1 2025, converting fixed interest payments to variable (SOFR-based) and designating it as a fair value hedge[64](index=64&type=chunk) Financial Assets and Liabilities Measured at Fair Value (June 30, 2025, in thousands) | Category | Level 1 | Level 2 | Level 3 | Total | | :-------------------------- | :-------- | :---------- | :-------- | :---------- | | **Assets:** | | | | | | Loans held for sale | — | $1,177,837 | — | $1,177,837 | | Pledged securities | $17,966 | $200,469 | — | $218,435 | | Derivative assets | — | $52,370 | — | $52,370 | | **Liabilities:** | | | | | | Derivative liabilities | — | $16,208 | — | $16,208 | | Notes payable — Senior Notes | — | $399,572 | — | $399,572 | | Contingent consideration liabilities | — | — | $19,664 | $19,664 | - **Contingent consideration liabilities** (Level 3) are valued using a Monte Carlo Simulation with a **weighted-average probability of earnout achievement of 8%**[74](index=74&type=chunk) - **Total financial assets at fair value** were **$1,755.8 million** (June 30, 2025) vs **$1,355.1 million** (Dec 31, 2024). **Total financial liabilities at fair value** were **$2,077.0 million** (June 30, 2025) vs **$1,651.3 million** (Dec 31, 2024)[75](index=75&type=chunk) [NOTE 9—FANNIE MAE COMMITMENTS AND PLEDGED SECURITIES](index=21&type=section&id=NOTE%209%E2%80%94FANNIE%20MAE%20COMMITMENTS%20AND%20PLEDGED%20SECURITIES) Outlines Fannie Mae commitments, pledged securities, and liquidity requirements - The Company is required to secure Fannie Mae DUS risk-sharing obligations by assigning restricted cash and pledged securities[87](index=87&type=chunk) - As of June 30, 2025, the Company held **$218.4 million** in pledged securities (**$18.0 million** in pledged cash/cash equivalents, **$200.5 million** in Agency MBS)[90](index=90&type=chunk) - **Reserve requirements** for the DUS loan portfolio will require funding **$75.9 million** in additional restricted liquidity over the next 48 months[88](index=88&type=chunk) - The Company's **net worth** was **$1.0 billion** (vs **$337.4 million** requirement) and **operational liquidity** was **$220.2 million** (vs **$67.2 million** requirement) as of June 30, 2025, both in compliance[89](index=89&type=chunk) - **Agency MBS fair value** was **$200.5 million** (June 30, 2025) vs **$183.4 million** (Dec 31, 2024)[92](index=92&type=chunk) [NOTE 10—EARNINGS PER SHARE AND STOCKHOLDERS' EQUITY](index=23&type=section&id=NOTE%2010%E2%80%94EARNINGS%20PER%20SHARE%20AND%20STOCKHOLDERS%27%20EQUITY) Details the calculation of earnings per share and changes in stockholders' equity EPS Calculation (Three Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Walker & Dunlop Net Income | $33,952 | $22,663 | | Net Income applicable to common stockholders | $33,162 | $22,149 | | Basic EPS | $1.00 | $0.67 | | Diluted EPS | $0.99 | $0.67 | EPS Calculation (Six Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Walker & Dunlop Net Income | $36,706 | $34,529 | | Net Income applicable to common stockholders | $35,829 | $33,719 | | Basic EPS | $1.08 | $1.02 | | Diluted EPS | $1.07 | $1.02 | - The Board approved a **$75.0 million stock repurchase program** in February 2025, with **$75.0 million remaining capacity** as of June 30, 2025. No shares were repurchased under this program in the first six months of 2025[98](index=98&type=chunk)[281](index=281&type=chunk) - **Quarterly cash dividend** of **$0.67 per share** paid in Q1 and Q2 2025. A **$0.67 per share dividend** was declared for Q3 2025[99](index=99&type=chunk)[280](index=280&type=chunk) [NOTE 11—SEGMENTS](index=24&type=section&id=NOTE%2011%E2%80%94SEGMENTS) Describes the company's operating segments and their financial performance contributions - The Company operates through three reportable segments: Capital Markets (CM), Servicing & Asset Management (SAM), and Corporate[102](index=102&type=chunk) - **Capital Markets (CM)** provides commercial real estate finance products (Agency lending, debt brokerage, property sales, appraisal, valuation, investment banking, housing market research). It temporarily funds loans held for sale and earns net interest income, recognizing the fair value of expected net cash flows from servicing[102](index=102&type=chunk) - **Servicing & Asset Management (SAM)** services and asset-manages loan portfolios (Agency, brokered, principal lending) and manages third-party capital in tax credit equity funds and other commercial real estate, earning servicing fees and asset management fees[102](index=102&type=chunk) - Corporate primarily handles treasury operations, liquidity and funding management, corporate debt, equity-method investments, and various support functions (accounting, IT, legal, HR, marketing, internal audit). Costs from support functions are not allocated to CM or SAM[102](index=102&type=chunk) Segment Net Income (Three Months Ended June 30, 2025) | Segment | Net Income (loss) (in thousands) | | :---------------------- | :------------------------------- | | Capital Markets | $33,142 | | Servicing & Asset Management | $37,541 | | Corporate | $(36,731) | | **Consolidated** | **$33,952** | Segment Net Income (Six Months Ended June 30, 2025) | Segment | Net Income (loss) (in thousands) | | :---------------------- | :------------------------------- | | Capital Markets | $35,502 | | Servicing & Asset Management | $56,667 | | Corporate | $(55,463) | | **Consolidated** | **$36,706** | Segment Total Assets (June 30, 2025) | Segment | Total Assets (in thousands) | | :---------------------- | :-------------------------- | | Capital Markets | $1,851,055 | | Servicing & Asset Management | $2,337,205 | | Corporate | $486,780 | | **Consolidated** | **$4,675,040** | [NOTE 12—VARIABLE INTEREST ENTITIES](index=29&type=section&id=NOTE%2012%E2%80%94VARIABLE%20INTEREST%20ENTITIES) Discusses the company's involvement with consolidated and nonconsolidated variable interest entities - The Company is involved with **Variable Interest Entities (VIEs)** for tax credit funds and affordable housing development[114](index=114&type=chunk) Consolidated VIEs Assets & Liabilities (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Total assets of consolidated VIEs | $37,117 | $76,264 | | Total liabilities of consolidated VIEs | $10,523 | $55,527 | Nonconsolidated VIEs Interests (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Total interests in nonconsolidated VIEs | $246,012 | $363,822 | | Total commitments to fund nonconsolidated VIEs | $168,863 | $274,975 | | Maximum exposure to losses | $246,012 | $363,822 | [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) Management's analysis of financial condition, operations, segment performance, market factors, strategic focus, and accounting estimates [Forward-Looking Statements](index=30&type=section&id=Forward-Looking%20Statements) Highlights statements about future events and strategies, subject to various risks and uncertainties - The report contains forward-looking statements regarding future events, trends, and strategies, which are subject to numerous known and unknown risks and uncertainties[119](index=119&type=chunk)[120](index=120&type=chunk) - Key forward-looking subjects include the future of GSEs, interest rate environment, growth strategy, financial condition, funding arrangements, dividend payments, personnel retention, competition, governmental regulations, commercial real estate market trends, and capital market volatility[121](index=121&type=chunk) [Business Overview](index=31&type=section&id=Business%20Overview) Describes the company's core services, market position, and strategic use of technology - **Walker & Dunlop** is a leading commercial real estate services, finance, and technology company in the U.S., offering multifamily lending, property sales, appraisal, valuation, research, debt brokerage, investment management, and affordable housing services[122](index=122&type=chunk) - The Company leverages technology to enhance customer experience, identify opportunities, and drive internal efficiencies, resulting in **58% of refinancing volumes from new loans** and **17% of total transaction volumes from new customers** for the six months ended June 30, 2025[122](index=122&type=chunk) - It is one of the largest service providers to multifamily operators, originating, selling, and servicing loans through Agencies (GSEs, HUD) and brokering loans to institutional investors[123](index=123&type=chunk) - Strategic focus areas include growing the **small-balance multifamily lending platform** and **appraisal platform (Apprise)** through technology and acquisitions[124](index=124&type=chunk) [Segments](index=31&type=section&id=Segments) Details the activities, revenue streams, and risk profiles of the Capital Markets and Servicing & Asset Management segments - **Capital Markets (CM)** offers Agency lending (multifamily, manufactured housing, student, affordable, seniors, small-balance loans), debt brokerage, property sales, housing market research (Zelman & Associates), and appraisal/valuation services (Apprise)[127](index=127&type=chunk)[128](index=128&type=chunk)[134](index=134&type=chunk)[136](index=136&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) - **Servicing & Asset Management (SAM)** manages loan servicing for Agency and brokered loans, and third-party capital in tax credit equity funds (LIHTC syndication) and other commercial real estate. Earns servicing fees, placement fees on escrow deposits, and asset management fees[140](index=140&type=chunk)[141](index=141&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) - Corporate handles treasury operations, liquidity and funding management, corporate debt, equity-method investments, and various support functions (accounting, IT, legal, HR, marketing, internal audit)[147](index=147&type=chunk) - The Company retains servicing rights and asset management responsibilities for most Agency loans, generating cash revenues from servicing fees and placement fees on escrow deposits[141](index=141&type=chunk) - Risk-sharing obligations exist for Fannie Mae DUS loans, where the Company absorbs losses on a tiered formula, typically up to **20%** of the original UPB, with higher servicing fees compensating for this risk[142](index=142&type=chunk)[143](index=143&type=chunk) [Basis of Presentation](index=36&type=section&id=Basis%20of%20Presentation) Explains the preparation of condensed consolidated financial statements in accordance with GAAP - Condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions[21](index=21&type=chunk)[149](index=149&type=chunk) - All accounts of the Company and its wholly-owned subsidiaries are included, with intercompany transactions eliminated[148](index=148&type=chunk) [Critical Accounting Estimates](index=36&type=section&id=Critical%20Accounting%20Estimates) Discusses key accounting estimates for MSRs, risk-sharing obligations, and goodwill impairment - **Mortgage Servicing Rights (MSRs)** are recorded at fair value at loan sale, based on estimated net cash flows, discount rates (**8-14%**), placement fees, prepayment speeds, and servicing costs. The model assumes no prepayment before expiration of provisions and full prepayment thereafter[150](index=150&type=chunk) - **Allowance for Risk-Sharing Obligations** is a reserve liability for Fannie Mae at-risk and Freddie Mac SBL servicing portfolios, estimated using the **Current Expected Credit Losses (CECL)** model. Key inputs include runoff rate, weighted-average annual loss rate (10-year look-back), and a one-year forecast period[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk) - Goodwill is reviewed for impairment annually (October 1) and between annual analyses if events indicate fair value is below carrying value, requiring management judgments and assumptions on projected cash flows and discount rates[160](index=160&type=chunk) - **Goodwill impairment** of **$33.0 million** was attributed to the Capital Markets segment in Q4 2024 due to challenging macroeconomic conditions[160](index=160&type=chunk) [Overview of Current Business Environment](index=38&type=section&id=Overview%20of%20Current%20Business%20Environment) Analyzes macroeconomic factors, interest rate trends, and their impact on the commercial real estate market - The Commercial Real Estate (CRE) sector has experienced a challenging environment shaped by uncertain, and at times volatile, interest rates that have directly impacted the cost and availability of capital over the last three years[162](index=162&type=chunk) - Broad tariffs announced on April 2, 2025 ("Liberation Day") caused **market turmoil**, with the S&P 500 falling and Treasury yields fluctuating. **Tariffs were paused** on April 9, 2025, but market caution remains[163](index=163&type=chunk) - The FOMC began decreasing its target **Federal Funds Rate** in September 2024, lowering it to **4.25%-4.50%** by December 2024. Rates are expected to remain elevated, stabilizing interest rates and accelerating transaction activity in Q2 2025[164](index=164&type=chunk) - **GSEs deployed $120 billion** in 2024 (up from **$101 billion** in 2023), with **combined lending caps of $146 billion** for 2025 (**22% increase**). **Fannie Mae lending volumes are up 52% YTD**, and **Freddie Mac is up 9%**[165](index=165&type=chunk) - Multifamily **rent growth** slowed to approximately **2%** in 2024 due to record unit completions, but absorption remained strong. **Property values declined 19.6%** from their peak but are **11.9%** above pre-COVID levels. **New construction starts** have fallen dramatically[166](index=166&type=chunk) - The national **unemployment rate** remained low at **4.1%** at June 30, 2025, and **multifamily vacancies** stabilized around **4.4%**. **Transaction volumes** increased by **65%** in Q2 2025 compared to the same quarter last year[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) - **Capital Markets segment net income increased 200% to $33.1 million** in Q2 2025. Servicing & Asset Management managed portfolio grew **4% to $156.0 billion**, but revenues declined **5%** due to lower short-term interest rates impacting placement fees[169](index=169&type=chunk)[170](index=170&type=chunk) [Consolidated Results of Operations](index=40&type=section&id=Consolidated%20Results%20of%20Operations) Presents a consolidated view of the company's revenues, expenses, and key performance metrics Key Performance Metrics (Three Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :---------------------- | :----- | :----- | :----- | :------- | | Total Transaction Volume | $13,951,810 | $8,448,501 | $5,503,309 | 65.1% | | Operating Margin | 15% | 10% | 5% | 50.0% | | Return on Equity | 8% | 5% | 3% | 60.0% | | Walker & Dunlop Net Income | $33,952 | $22,663 | $11,289 | 49.8% | | Diluted EPS | $0.99 | $0.67 | $0.32 | 47.8% | | Personnel expenses (% of total revenues) | 51% | 49% | 2% | 4.1% | Key Performance Metrics (Six Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :---------------------- | :----- | :----- | :----- | :------- | | Total Transaction Volume | $20,987,742 | $14,842,960 | $6,144,782 | 41.4% | | Operating Margin | 9% | 8% | 1% | 12.5% | | Return on Equity | 4% | 4% | 0% | 0.0% | | Walker & Dunlop Net Income | $36,706 | $34,529 | $2,177 | 6.3% | | Diluted EPS | $1.07 | $1.02 | $0.05 | 4.9% | | Personnel expenses (% of total revenues) | 51% | 49% | 2% | 4.1% | - **Total revenues** increased by **$48.6 million (18%)** in Q2 2025, driven by increases in loan origination and debt brokerage fees (**+44%**), fair value of expected net cash flows from servicing (**+59%**), servicing fees (**+4%**), and property sales broker fees (**+33%**). This was partially offset by decreases in investment management fees (**-49%**) and placement fees and other interest income (**-12%**)[178](index=178&type=chunk) - **Total expenses** increased by **$30.4 million (13%)** in Q2 2025, primarily due to a **22% increase in personnel expense** (driven by higher commission costs) and a **5% increase in amortization and depreciation**. Interest expense on corporate debt decreased by **6%** due to lower average interest rates[179](index=179&type=chunk) - **Income tax expense** increased **57%** year-over-year in Q2 2025, driven by a **64% increase in income from operations** and a **$0.1 million** tax shortfall (compared to a **$0.4 million** benefit in Q2 2024)[180](index=180&type=chunk) [Non-GAAP Financial Measure (Adjusted EBITDA)](index=46&type=section&id=Non-GAAP%20Financial%20Measure) Defines and reconciles Adjusted EBITDA, a non-GAAP measure used for performance evaluation - **Adjusted EBITDA** is a non-GAAP measure used to evaluate operating performance, compare with forecasts, and benchmark against competitors[189](index=189&type=chunk) - It represents net income before income taxes, corporate debt interest expense, amortization and depreciation, adjusted for credit losses, net write-offs, stock-based compensation, MSR income, write-off of unamortized issuance costs, goodwill impairment, and contingent consideration liability fair value adjustments[188](index=188&type=chunk) Adjusted EBITDA (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :---------------------- | :-------------------- | :-------------------- | :-------------------- | :------- | | Adjusted EBITDA | $76,811 | $80,931 | $(4,120) | (5.1)% | Adjusted EBITDA (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :---------------------- | :-------------------- | :-------------------- | :-------------------- | :------- | | Adjusted EBITDA | $141,777 | $155,067 | $(13,290) | (8.6)% | - **Adjusted EBITDA** decreased **5%** for Q2 2025 and **9%** for YTD 2025, primarily due to lower investment management fees and placement fees, and higher personnel expenses, partially offset by increased origination and property sales broker fees[194](index=194&type=chunk)[197](index=197&type=chunk) [Financial Condition](index=48&type=section&id=Financial%20Condition) Discusses the sources and uses of cash flows from operating, investing, and financing activities - **Cash flows from operating activities** are generated from loan sales, servicing fees, placement fees, net warehouse interest income (expense), property sales broker fees, investment management fees, research subscription fees, investment banking advisory fees, and other income, net of loan origination and operating costs[198](index=198&type=chunk) - **Cash flows from investing activities** include the funding and repayment of loans held for investment, contributions to and distributions from joint ventures, purchases of equity-method investments, cash paid for acquisitions, and the purchase of available-for-sale ("AFS") securities pledged to Fannie Mae[199](index=199&type=chunk) - **Cash flows from financing activities** involve using warehouse loan facilities and corporate cash to fund loan closings, funding large acquisitions, repurchasing shares, paying cash dividends, making long-term debt principal payments, and repaying short-term borrowings[200](index=200&type=chunk) - **Net cash used in operating activities** increased by **$320.1 million (160%)** for the six months ended June 30, 2025, primarily due to originations outpacing sales by **$567.6 million**[203](index=203&type=chunk)[205](index=205&type=chunk) - **Net cash used in investing activities** increased by **$32.3 million (109%)** due to increased cash paid for Agency loan repurchases and purchases of equity-method investments[203](index=203&type=chunk)[204](index=204&type=chunk)[206](index=206&type=chunk) - **Net cash provided by financing activities** increased by **$427.2 million (359%)** due to increased warehouse notes payable borrowings and issuance of Senior Notes, partially offset by repayments of notes payable and debt issuance costs[203](index=203&type=chunk)[207](index=207&type=chunk) [Segment Results](index=51&type=section&id=Segment%20Results) Provides a detailed breakdown of financial performance for each operating segment [Capital Markets](index=51&type=section&id=Capital%20Markets_Segment) Reviews the performance of the Capital Markets segment, including transaction volumes and revenue drivers Transaction Volume (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------- | :-------------------- | :-------------------- | :------- | | Total Debt Financing Volume | $11,490,425 | $6,702,743 | $4,787,682 | 71% | | Property Sales Volume | $2,313,585 | $1,530,783 | $782,802 | 51% | | **Total Transaction Volume** | **$13,804,010** | **$8,233,526** | **$5,570,484** | **68%** | Transaction Volume (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------- | :-------------------- | :-------------------- | :------- | | Total Debt Financing Volume | $16,511,567 | $11,914,251 | $4,597,316 | 39% | | Property Sales Volume | $4,152,875 | $2,697,934 | $1,454,941 | 54% | | **Total Transaction Volume** | **$20,664,442** | **$14,612,185** | **$6,052,257** | **41%** | - **Net income for CM** increased **200% to $33.1 million** for Q2 2025 and **718% to $35.5 million** for YTD 2025[210](index=210&type=chunk)[213](index=213&type=chunk)[215](index=215&type=chunk) - **Origination fees** increased due to higher debt financing volume (especially Agency debt financing), despite declines in the origination fee rate due to a competitive environment and a large Fannie Mae portfolio with lower rates[218](index=218&type=chunk) - **MSR income** increased due to higher Agency debt financing volumes, partially offset by decreases in the weighted-average servicing fee (WASF) on Fannie Mae debt financing volume, also due to competition and large portfolios[219](index=219&type=chunk) - **Property sales broker fees** increased due to higher property sales volumes, partially offset by decreases in the broker fee rate due to competition[220](index=220&type=chunk) - **Personnel expenses** increased due to higher commission costs from increased origination and property sales broker fees, increased salaries/benefits (**5-7% headcount increase**), and severance expense[222](index=222&type=chunk)[223](index=223&type=chunk) [Servicing & Asset Management](index=57&type=section&id=Servicing%20%26%20Asset%20Management_Segment) Analyzes the Servicing & Asset Management segment's portfolio growth and revenue trends Managed Portfolio (June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------- | :-------------------- | :-------------------- | :------- | | Total Servicing Portfolio | $137,349,124 | $132,777,911 | $4,571,213 | 3% | | Assets Under Management | $18,623,451 | $17,566,666 | $1,056,785 | 6% | | **Total Managed Portfolio** | **$155,972,575** | **$150,344,577** | **$5,627,998** | **4%** | - **Net income for SAM** decreased **7% to $37.5 million** for Q2 2025 and **32% to $56.7 million** for YTD 2025[236](index=236&type=chunk)[238](index=238&type=chunk)[241](index=241&type=chunk) - **Servicing fees** increased due to growth in the **average servicing portfolio** (driven by Fannie Mae loans) and small increases in the **average servicing fee rate**[242](index=242&type=chunk) - **Investment management fees** declined primarily due to an **$8.5 million** (Q2) and **$11.9 million** (YTD) decrease from **LIHTC operations**, attributed to lower expected asset dispositions in 2025[243](index=243&type=chunk) - **Placement fees and other interest income** decreased due to lower **average placement fee rates** on escrow deposits, influenced by a lower **short-term interest rate environment**[244](index=244&type=chunk)[246](index=246&type=chunk) - **Other revenues** increased in Q2 2025 due to a **$4.2 million increase in syndication fees** (**45% increase in equity syndication volume**), partially offset by lower income from equity method investments[247](index=247&type=chunk) - **Personnel expenses** increased due to higher salaries, benefits, and bonus accruals, and a **7% increase in average segment headcount**[248](index=248&type=chunk)[249](index=249&type=chunk) [Corporate](index=63&type=section&id=Corporate_Segment) Examines the financial results of the Corporate segment, including revenues and expenses - **Net loss for Corporate** increased to **$(36.7) million** for Q2 2025 (from **$(28.8) million**) and to **$(55.5) million** for YTD 2025 (from **$(53.5) million**)[260](index=260&type=chunk)[262](index=262&type=chunk) - **Other revenues** increased in Q2 2025 due to **$1.1 million interest income on invested capital** and a **$1.5 million increase from the deferred compensation plan**[263](index=263&type=chunk) - **Personnel expenses** increased due to higher salaries and benefits (**7-8% headcount increase**) and deferred compensation plan expenses, partially offset by decreased subjective bonus accruals[264](index=264&type=chunk)[265](index=265&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=63&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details exposure to market risks, including interest rate and MSR fair value sensitivities, and their potential financial impact [Interest Rate Risk](index=69&type=section&id=Interest%20Rate%20Risk) Quantifies the potential impact of interest rate changes on various revenue and expense items - The Company is not exposed to unhedged interest rate risk for loans held for sale to Fannie Mae, Freddie Mac, and HUD, as sale/placement is negotiated prior to closing and coupon rates are set concurrently[306](index=306&type=chunk) Impact of 100 bps EFFR Change on Annual Placement Fee Revenue (in thousands) | Scenario | June 30, 2025 | June 30, 2024 | | :-------------------------- | :-------------- | :-------------- | | 100 bps increase in EFFR | $26,725 | $26,619 | | 100 bps decrease in EFFR | $(26,725) | $(26,619) | Impact of 100 bps SOFR Change on Annual Net Warehouse Interest Income (in thousands) | Scenario | June 30, 2025 | June 30, 2024 | | :-------------------------- | :-------------- | :-------------- | | 100 bps increase in SOFR | $(11,791) | $(8,077) | | 100 bps decrease in SOFR | $11,791 | $8,077 | Impact of 100 bps SOFR Change on Annual Income from Operations (in thousands) | Scenario | June 30, 2025 | June 30, 2024 | | :-------------------------- | :-------------- | :-------------- | | 100 bps increase in SOFR | $(8,489) | $(7,825) | | 100 bps decrease in SOFR | $8,489 | $7,825 | [Market Value Risk](index=70&type=section&id=Market%20Value%20Risk) Discusses the sensitivity of Mortgage Servicing Rights fair value to changes in market assumptions - The fair value of **Mortgage Servicing Rights (MSRs)** is subject to market-value risk. A **100-basis point increase/decrease** in the weighted average discount rate would decrease/increase MSR fair value by approximately **$40.3 million** as of June 30, 2025[311](index=311&type=chunk) - A **50-basis point increase/decrease** in placement fee rates would increase/decrease MSR fair value by approximately **$49.1 million** as of June 30, 2025[311](index=311&type=chunk) - **90% of loans** for which the Company earns servicing fees are protected from prepayment risk through provisions like prepayment premiums, loan defeasance, or yield maintenance fees[311](index=311&type=chunk) [Item 4. Controls and Procedures](index=70&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - **Disclosure controls and procedures** were evaluated and deemed effective as of June 30, 2025[312](index=312&type=chunk)[313](index=313&type=chunk) - **No material changes in internal control over financial reporting** occurred during the quarter ended June 30, 2025[314](index=314&type=chunk) [PART II OTHER INFORMATION](index=64&type=section&id=PART%20II%20OTHER%20INFORMATION) Presents other non-financial information and disclosures required for the reporting period [Item 1. Legal Proceedings](index=64&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, with no material adverse effects expected on its financial condition - The Company is party to various claims and litigation in the ordinary course of business, none of which are considered material[316](index=316&type=chunk) - Management believes any liability from pending lawsuits would not materially adversely affect business, results of operations, liquidity, or financial condition[316](index=316&type=chunk) [Item 1A. Risk Factors](index=64&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors from the 2024 Form 10-K - **No material changes to the risk factors** disclosed in the 2024 Form 10-K[317](index=317&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=64&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details share repurchases for tax obligations and the status of the $75.0 million stock repurchase program - The Company repurchased **8,632 shares of common stock** at an **average price of $73.94 per share** during Q2 2025 to satisfy grantee tax withholding obligations[318](index=318&type=chunk)[320](index=320&type=chunk) - A **$75.0 million stock repurchase program** was approved in February 2025, but no shares were repurchased under this program during the six months ended June 30, 2025, leaving **$75.0 million of authorized capacity remaining**[319](index=319&type=chunk)[281](index=281&type=chunk) [Item 3. Defaults Upon Senior Securities](index=71&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Confirms no defaults occurred upon senior securities during the reported period - **No defaults upon senior securities**[321](index=321&type=chunk) [Item 4. Mine Safety Disclosures](index=71&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This disclosure item is not applicable to the company's operations - Not applicable[322](index=322&type=chunk) [Item 5. Other Information](index=71&type=section&id=Item%205.%20Other%20Information) No Rule 10b5-1 or non-Rule 10b5-1 trading agreements were adopted or terminated by directors or officers - **No Rule 10b5-1 or non-Rule 10b5-1 trading agreements** were adopted or terminated by directors or officers during Q2 2025[323](index=323&type=chunk) [Item 6. Exhibits](index=72&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including agreements, corporate documents, and certifications - **Exhibits include** Contribution Agreements, Purchase Agreements, Articles of Amendment, Bylaws, Registration Rights Agreements, Voting Agreements, Indenture, Warehousing Credit and Security Agreement Amendment, and Certifications (302 and 906)[325](index=325&type=chunk) [Signatures](index=73&type=section&id=Signatures) The report is officially signed by the Chairman and CEO, and the Executive Vice President and CFO - **Report signed by** William M. Walker (Chairman and CEO) and Gregory A. Florkowski (EVP and CFO) on August 7, 2025[330](index=330&type=chunk)

[Second Quarter 2025 Performance Overview](index=1&type=section&id=Second%20Quarter%202025%20Results) [Executive Summary](index=1&type=section&id=Executive%20Summary) ProFrac's Q2 2025 results faced market headwinds, but operational excellence improved capital efficiency, exceeding Adjusted EBITDA less capital expenditures, with fleet redeployment and positive 2026 outlook - Q2 performance reflected market headwinds following a **sharp decline in commodity prices** in early April[4](index=4&type=chunk) - Operational excellence initiatives, particularly asset management programs, continuously **improved capital efficiency** and optimized capital investments[4](index=4&type=chunk) - **Adjusted EBITDA less capital expenditures exceeded expectations**, with the company maintaining an **industry-leading position** in this metric[4](index=4&type=chunk) - Since the end of Q2, a portion of the fleet has returned to work, and frac calendar utilization has **improved** from recent lows[4](index=4&type=chunk) [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) The company experienced a sequential decline in total revenue and Adjusted EBITDA in Q2 2025, with a significant net loss expansion, yet net cash flow from operating activities and free cash flow both substantially increased, while capital expenditures decreased Key Financial Data for Q2 2025 (vs. Q1) | Metric | Q2 2025 | Q1 2025 | Sequential Change | | :----------------------- | :------------- | :------------- | :--------- | | Total Revenue | $502 million | $600 million | ↓ $98 million | | Net Loss | $104 million | $15 million | ↑ $89 million | | Adjusted EBITDA | $79 million | $130 million | ↓ $51 million | | Adjusted EBITDA as % of Revenue | 16% | 22% | ↓ 6 percentage points | | Net Cash Provided by Operating Activities | $100 million | $39 million | ↑ $61 million | | Capital Expenditures | $47 million | $53 million | ↓ $6 million | | Free Cash Flow | $54 million | $(14) million | ↑ $68 million | [Strategic Initiatives and Business Outlook](index=1&type=section&id=Strategic%20Initiatives%20and%20Outlook) The company continues to deploy the ProPilot automated frac system, deepen its partnership with Flotek for gas quality and asset integrity management, and enhance financial flexibility through debt refinancing, while Q3 outlook anticipates a sequential decline in frac services but stable proppant production - The ProPilot automated frac system has been deployed to all active fleets, aiming for **transformative improvements** in frac operations[5](index=5&type=chunk) - Collaboration with Flotek provides ownership exposure to a **highly scalable gas quality and asset integrity management business**[5](index=5&type=chunk) - Financial flexibility was enhanced through targeted debt refinancing measures, providing **incremental liquidity**[5](index=5&type=chunk) - Active fleet count in the stimulation services segment bottomed out in late June to early July, with incremental fleets redeployed as of July 31, but Q3 performance is expected to **decline sequentially**[7](index=7&type=chunk) - The proppant production segment anticipates sales volumes to be **flat with Q2 levels**, with efficiency gains expected to maintain profitability similar to Q2[8](index=8&type=chunk) [Consolidated Financial Performance](index=7&type=section&id=Consolidated%20Financial%20Performance) [Consolidated Statements of Operations](index=8&type=section&id=Consolidated%20Statements%20of%20Operations) In Q2 2025, the company experienced a significant sequential decline in total revenue, leading to an expanded operating loss and a substantial increase in net loss, with both revenue and net income declining compared to the prior year period Key Data from Consolidated Statements of Operations | Metric | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----------------------- | :------------- | :------------- | :------------- | :------------- | :------------- | | Total Revenue | $501.9 million | $600.3 million | $579.4 million | $1,102.2 million | $1,160.9 million | | Operating Income (Loss) | $(54.3) million | $16.0 million | $(49.2) million | $(38.3) million | $(9.3) million | | Net Income (Loss) | $(103.5) million | $(15.4) million | $(65.6) million | $(118.9) million | $(62.6) million | [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) As of June 30, 2025, the company's total assets and total liabilities both decreased compared to the end of 2024, with cash and cash equivalents increasing but the accumulated deficit expanding Key Data from Consolidated Balance Sheets | Metric | June 30, 2025 | Dec 31, 2024 | | :----------------------- | :------------- | :------------- | | Total Assets | $2,830.7 million | $2,988.1 million | | Total Liabilities | $1,812.4 million | $1,848.5 million | | Cash and Cash Equivalents | $26.0 million | $14.8 million | | Accumulated Deficit | $(361.9) million | $(235.9) million | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) In Q2 2025, cash flow from operating activities significantly increased, while investing activities continued to be a net cash outflow, and financing activities shifted from a net inflow in Q1 to a net outflow Key Data from Consolidated Statements of Cash Flows | Metric | Q2 2025 | Q1 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----------------------- | :------------- | :------------- | :------------- | :------------- | :------------- | | Net Cash Provided by Operating Activities | $100.4 million | $38.7 million | $113.5 million | $139.1 million | $192.6 million | | Net Cash Used in Investing Activities | $(46.2) million | $(51.7) million | $(231.5) million | $(97.9) million | $(284.8) million | | Net Cash Provided by (Used in) Financing Activities | $(44.2) million | $14.2 million | $113.7 million | $(30.0) million | $90.9 million | [Business Segment Information](index=2&type=section&id=Business%20Segment%20Information) [Stimulation Services](index=2&type=section&id=Stimulation%20Services) The Stimulation Services segment experienced a significant sequential decline in both revenue and Adjusted EBITDA in Q2 2025, leading to a substantial contraction in profit margin Stimulation Services Segment Performance (Sequential) | Metric | Q2 2025 | Q1 2025 | Sequential Change | | :---------------- | :------------- | :------------- | :--------- | | Revenue | $432 million | $525 million | ↓ $93 million | | Adjusted EBITDA | $51 million | $105 million | ↓ $54 million | | Profit Margin | 12% | 20% | ↓ 8 percentage points | [Proppant Production](index=2&type=section&id=Proppant%20Production) The Proppant Production segment saw sequential revenue growth in Q2 2025, but Adjusted EBITDA decreased, resulting in margin contraction, with approximately 58% of its revenue from intercompany transactions Proppant Production Segment Performance (Sequential) | Metric | Q2 2025 | Q1 2025 | Sequential Change | | :---------------- | :------------- | :------------- | :--------- | | Revenue | $78 million | $67 million | ↑ $11 million | | Adjusted EBITDA | $15 million | $18 million | ↓ $3 million | | Profit Margin | 19% | 27% | ↓ 8 percentage points | | Intercompany Revenue Share | 58% | N/A | N/A | [Manufacturing](index=2&type=section&id=Manufacturing) The Manufacturing segment experienced a sequential revenue decline in Q2 2025, but Adjusted EBITDA significantly increased, leading to a substantial improvement in profit margin, with approximately 78% of its revenue from intercompany transactions Manufacturing Segment Performance (Sequential) | Metric | Q2 2025 | Q1 2025 | Sequential Change | | :---------------- | :------------- | :------------- | :--------- | | Revenue | $56 million | $66 million | ↓ $10 million | | Adjusted EBITDA | $7 million | $4 million | ↑ $3 million | | Profit Margin | 13% | 6% | ↑ 7 percentage points | | Intercompany Revenue Share | 78% | N/A | N/A | [Other Business Activities](index=2&type=section&id=Other%20Business%20Activities) The Other Business Activities segment saw a slight sequential revenue increase in Q2 2025, with stable Adjusted EBITDA and a minor decrease in profit margin, including performance from Flotek Industries and Livewire Power Other Business Activities Segment Performance (Sequential) | Metric | Q2 2025 | Q1 2025 | Sequential Change | | :---------------- | :------------- | :------------- | :--------- | | Revenue | $65 million | $62 million | ↑ $3 million | | Adjusted EBITDA | $8 million | $8 million | ↔ $0 million | | Profit Margin | 12% | 13% | ↓ 1 percentage point | - Other business activities include the performance of Flotek Industries and Livewire Power[12](index=12&type=chunk) [Capital Structure, Liquidity and Free Cash Flow](index=2&type=section&id=Capital%20Structure,%20Liquidity%20%26%20Free%20Cash%20Flow) [Capital Expenditures and Allocation](index=3&type=section&id=Capital%20Expenditures%20and%20Allocation) Cash capital expenditures decreased sequentially in Q2 2025, and the company raised its full-year 2025 capital expenditure guidance, primarily for frac fleet maintenance, selective growth, and Alpine mine improvements Capital Expenditures (Sequential) | Metric | Q2 2025 | Q1 2025 | Sequential Change | | :----------- | :------------- | :------------- | :--------- | | Cash Capital Expenditures | $47 million | $53 million | ↓ $6 million | - The company expects 2025 capital expenditures to be approximately **$175 million to $225 million**, primarily for frac fleet maintenance, selective growth, and quality and throughput improvements at the Alpine mine[14](index=14&type=chunk) [Balance Sheet and Liquidity Position](index=3&type=section&id=Balance%20Sheet%20and%20Liquidity%20Position) As of June 30, 2025, the company maintained high total and net debt levels, with increased cash and cash equivalents, and total liquidity of $108 million, including cash and available asset-backed credit facility Debt and Liquidity (Period End) | Metric | June 30, 2025 | Dec 31, 2024 | | :----------------------- | :------------- | :------------- | | Total Debt | $108.42 million | $110.9 million | | Total Principal Debt | $111.0 million | $113.89 million | | Net Debt | $108.4 million | $112.41 million | | Cash and Cash Equivalents | $26 million | $14.8 million | | Total Liquidity | $108 million | N/A | - Total liquidity includes approximately **$21 million in cash and cash equivalents** (excluding Flotek) and **$87 million in available asset-backed credit facility**[16](index=16&type=chunk) [Free Cash Flow Generation](index=1&type=section&id=Free%20Cash%20Flow%20Generation) The company generated $54 million in free cash flow in Q2 2025, a significant improvement from the negative value in Q1 Free Cash Flow (Sequential) | Metric | Q2 2025 | Q1 2025 | Sequential Change | | :----------- | :------------- | :------------- | :--------- | | Free Cash Flow | $54.4 million | $(13.6) million | ↑ $68.0 million | [Corporate Information and Disclosures](index=3&type=section&id=Corporate%20Information%20and%20Disclosures) [About ProFrac Holding Corp.](index=3&type=section&id=About%20ProFrac%20Holding%20Corp.) ProFrac Holding Corp. is a technology-driven, vertically integrated energy services holding company providing hydraulic fracturing, proppant production, related completion services, and supplementary products to North American unconventional oil and gas E&P companies - ProFrac Holding Corp. is a **technology-driven, vertically integrated energy services holding company**[18](index=18&type=chunk) - Core businesses include hydraulic fracturing, proppant production, related completion services, and supplementary products and services[18](index=18&type=chunk) - Operates through three business segments: Stimulation Services, Proppant Production, and Manufacturing, along with Other Business Activities[18](index=18&type=chunk) [Non-GAAP Financial Measures](index=6&type=section&id=Non-GAAP%20Financial%20Measures) This report defines and explains non-GAAP financial measures such as Adjusted EBITDA, Free Cash Flow, and Net Debt, used by management and investors to assess financial performance and liquidity, noting their limitations as non-substitutes for GAAP measures - **Adjusted EBITDA** is defined as net income (loss) adjusted for interest expense, income taxes, depreciation and amortization, gain or loss on asset disposals, stock-based compensation, and other items[23](index=23&type=chunk) - **Free Cash Flow** is defined as net cash provided by operating activities less investments in property, plant, and equipment, plus proceeds from asset sales[23](index=23&type=chunk) - **Net Debt** is defined as total debt plus unamortized debt discounts, premiums, and issuance costs, less cash and cash equivalents[26](index=26&type=chunk) - These non-GAAP measures are supplementary and should not be considered substitutes for GAAP financial measures, and may not be comparable to similarly titled measures used by other companies[22](index=22&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) [Cautionary Statement Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This press release contains forward-looking statements about future events or financial performance, based on current assumptions but subject to risks and uncertainties that may cause actual results to differ materially, with no obligation to update unless legally required - Forward-looking statements involve future events or the company's future financial or operating performance, often accompanied by words such as "may," "should," and "expect"[20](index=20&type=chunk) - Actual results may differ materially from forward-looking statements due to various risks and uncertainties, including acquisition benefits, market conditions, capital requirements, industry fluctuations, and economic conditions[20](index=20&type=chunk) - Readers should not place undue reliance on forward-looking statements, and the company undertakes no obligation to update them unless required by law[21](index=21&type=chunk) [Conference Call Information](index=3&type=section&id=Conference%20Call) ProFrac has scheduled a conference call for Thursday, August 7, 2025, at 11:00 AM ET / 10:00 AM CT to discuss results, with a webcast archive available on the company's investor relations website for 90 days - The conference call is scheduled for **Thursday, August 7, 2025, at 11:00 AM ET / 10:00 AM CT**[17](index=17&type=chunk) - An archive of the webcast will be available for **90 days** shortly after the call in the IR Calendar section of ProFrac's investor relations website[17](index=17&type=chunk)

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) YETI achieved significant progress in strategic priorities like innovation and global expansion, demonstrating resilience despite macroeconomic challenges and laying groundwork for future growth [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) YETI CEO Matt Reintjes highlighted significant progress in long-term strategic priorities, including accelerated innovation, global brand expansion, and supply chain diversification, while leveraging a strong balance sheet and free cash flow to drive sustainable growth - The company made significant progress on long-term strategic priorities, including accelerated innovation, global brand expansion, and supply chain diversification[3](index=3&type=chunk) - Product innovation and portfolio diversification, especially in bags, showed strong momentum; global expansion performed well in the UK and Europe, with robust end-user demand in Canada and Australia, and the Japan market launched[3](index=3&type=chunk) - The company maintains a strong balance sheet and robust free cash flow, supporting growth investments and capital allocation priorities, including share repurchases[3](index=3&type=chunk) - Key growth drivers showed encouraging momentum at the end of Q2, with continued improvement expected in Q3[3](index=3&type=chunk) [Second Quarter 2025 Financial Results](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results) YETI's Q2 2025 financial results show a decline in sales due to market challenges, while profitability saw mixed performance with improved gross margin but increased SG&A expenses [Sales Performance](index=1&type=section&id=Sales%20Performance_Q2) YETI's Q2 2025 sales and adjusted sales both decreased 4% year-over-year to $445.9 million, primarily impacted by a promotional drinkware market, cautious consumer and retail partner sentiment, and supply chain transition-related inventory constraints [Overall Sales](index=1&type=section&id=Overall%20Sales_Q2) Net sales decreased 4% year-over-year to $445.9 million, primarily due to increased competition in the drinkware market, cautious consumer and retail partner sentiment, and supply chain transition-related inventory constraints Q2 2025 Net Sales Performance (Millions USD) | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | Change (%) | | :-------- | :--------------------- | :--------------------- | :--------- | | Net Sales | $445.9 | $463.5 | -4% | - The sales decline reflects a promotional drinkware market, cautious consumer and retail partner sentiment, and inventory constraints due to supply chain transition[6](index=6&type=chunk) [Geographic Sales](index=1&type=section&id=Geographic%20Sales_Q2) U.S. sales decreased 5% to $367.8 million, while international sales grew 2% to $78.1 million, driven by strong growth in Europe and the launch of the Japan market, partially offset by conservative inventory purchases from wholesale partners in other international regions Q2 2025 Geographic Sales Performance (Millions USD) | Region | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | Change (%) | | :------------------ | :--------------------- | :--------------------- | :--------- | | U.S. Sales | $367.8 | $386.9 | -5% | | International Sales | $78.1 | $76.6 | +2% | - International sales growth reflects strong performance in Europe and the launch of the Japan market[5](index=5&type=chunk) - International sales growth was partially offset by conservative inventory purchases and cautious sentiment from wholesale partners in other international regions[5](index=5&type=chunk) [Channel Sales](index=1&type=section&id=Channel%20Sales_Q2) Direct-to-consumer (DTC) channel sales slightly decreased 1% to $248.6 million, while wholesale channel sales declined 7% to $197.3 million, primarily due to decreases in both drinkware and coolers & equipment sales Q2 2025 Channel Sales Performance (Millions USD) | Channel | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | Change (%) | | :-------- | :--------------------- | :--------------------- | :--------- | | DTC | $248.6 | $250.4 | -1% | | Wholesale | $197.3 | $213.1 | -7% | - The decline in wholesale channel sales was due to decreased sales in both drinkware and coolers & equipment[7](index=7&type=chunk) [Product Category Sales](index=1&type=section&id=Product%20Category%20Sales_Q2) Drinkware sales decreased 4% to $236.4 million, with international growth offset by a decline in the U.S. market due to challenges and supply chain transition-related inventory constraints, while Coolers & Equipment sales decreased 3% to $200.6 million, with hard coolers growth offset by soft coolers decline Q2 2025 Product Category Sales Performance (Millions USD) | Category | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | Change (%) | | :------------------ | :--------------------- | :--------------------- | :--------- | | Drinkware | $236.4 | $246.5 | -4% | | Coolers & Equipment | $200.6 | $205.9 | -3% | - The decline in drinkware sales was due to challenges in the U.S. market and inventory constraints from supply chain transition[7](index=7&type=chunk) - The decrease in Coolers & Equipment sales was due to a decline in soft coolers offsetting growth in hard coolers[7](index=7&type=chunk) [Profitability](index=2&type=section&id=Profitability_Q2) YETI's Q2 2025 profitability showed mixed results, with a slight decrease in gross profit but improved gross margin due to lower product costs and selective price increases, while SG&A expenses decreased in absolute terms but rose as a percentage of sales, impacting operating income and adjusted EPS [Gross Profit & Margin](index=2&type=section&id=Gross%20Profit%20%26%20Margin_Q2) Gross profit decreased 3% to $257.6 million, but GAAP gross margin improved by 80 basis points to 57.8%, and adjusted gross margin increased by 10 basis points to 57.8%, primarily due to lower product costs and selective price increases implemented in Q2 2025, partially offset by higher tariff costs Q2 2025 Gross Profit and Margin (Millions USD) | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | Change (%) | Q2 2025 Margin | Q2 2024 Margin | Change (bps) | | :-------------------- | :--------------------- | :--------------------- | :--------- | :------------- | :------------- | :----------- | | Gross Profit | $257.6 | $264.3 | -3% | 57.8% | 57.0% | +80 | | Adjusted Gross Profit | $257.6 | $267.5 | -4% | 57.8% | 57.7% | +10 | - The increase in gross margin was primarily attributable to lower product costs and selective price increases, partially offset by higher tariff costs[8](index=8&type=chunk)[9](index=9&type=chunk) [SG&A Expenses](index=2&type=section&id=SG%26A%20Expenses_Q2) GAAP Selling, General, and Administrative (SG&A) expenses decreased 1% to $195.5 million, and adjusted SG&A expenses decreased 2% to $184.4 million; however, as a percentage of sales, GAAP SG&A expenses increased 140 basis points to 43.9%, and adjusted SG&A expenses increased 80 basis points to 41.3%, primarily due to increased technology expenses related to growth investments Q2 2025 SG&A Expenses (Millions USD) | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | Change (%) | Q2 2025 % Sales | Q2 2024 % Sales | Change (bps) | | :--------------------- | :--------------------- | :--------------------- | :--------- | :-------------- | :-------------- | :----------- | | SG&A Expenses | $195.5 | $196.9 | -1% | 43.9% | 42.5% | +140 | | Adjusted SG&A Expenses | $184.4 | $187.5 | -2% | 41.3% | 40.5% | +80 | - The increase in SG&A expenses as a percentage of sales was primarily due to higher technology expenses related to growth investments[10](index=10&type=chunk)[11](index=11&type=chunk) [Operating Income](index=2&type=section&id=Operating%20Income_Q2) GAAP operating income decreased 8% to $62.0 million, and adjusted operating income decreased 9% to $73.2 million, with GAAP operating margin falling to 13.9% and adjusted operating margin to 16.4% Q2 2025 Operating Income (Millions USD) | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | Change (%) | Q2 2025 Margin | Q2 2024 Margin | | :------------------------ | :--------------------- | :--------------------- | :--------- | :------------- | :------------- | | Operating Income | $62.0 | $67.4 | -8% | 13.9% | 14.5% | | Adjusted Operating Income | $73.2 | $80.0 | -9% | 16.4% | 17.3% | [Net Income & EPS](index=2&type=section&id=Net%20Income%20%26%20EPS_Q2) Net income increased 1% to $51.2 million, with diluted EPS growing 3% to $0.61; however, adjusted net income decreased 7% to $55.2 million, and adjusted diluted EPS declined 6% to $0.66, including a $0.07 net impact from higher tariff costs, while other income significantly increased due to foreign exchange gains Q2 2025 Net Income and EPS (Millions USD) | Metric | Q2 2025 (Millions USD) | Q2 2024 (Millions USD) | Change (%) | Q2 2025 EPS | Q2 2024 EPS | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :--------- | :---------- | :---------- | :--------- | | Net Income | $51.2 | $50.4 | +1% | $0.61 | $0.59 | +3% | | Adjusted Net Income | $55.2 | $59.6 | -7% | $0.66 | $0.70 | -6% | | Other Income (Expense), net | $5.8 | $0.4 | +1350% | | | | - Adjusted EPS includes a **$0.07** net impact from higher tariff costs[6](index=6&type=chunk) - The increase in other income was primarily due to higher foreign exchange gains related to intercompany balances[13](index=13&type=chunk) [Six Months Ended June 28, 2025 Financial Results](index=2&type=section&id=Six%20Months%20Ended%20June%2028%2C%202025%20Financial%20Results) YETI's year-to-date financial results for 2025 show a slight sales decline, with international growth offsetting U.S. weakness, while profitability was impacted by increased SG&A expenses despite improved gross margin [Sales Performance](index=2&type=section&id=Sales%20Performance_YTD) For the first six months of 2025, YETI's sales and adjusted sales both decreased 1% year-over-year to $797.0 million, with U.S. sales declining while international sales grew significantly despite foreign exchange headwinds, and DTC channel sales increased driven by Coolers & Equipment, offsetting a decline in wholesale sales due to drinkware [Overall Sales](index=2&type=section&id=Overall%20Sales_YTD) Sales and adjusted sales for the six months ended June 28, 2025, both decreased 1% year-over-year to $797.0 million YTD 2025 Net Sales Performance (Millions USD) | Metric | YTD 2025 (Millions USD) | YTD 2024 (Millions USD) | Change (%) | | :-------- | :---------------------- | :---------------------- | :--------- | | Net Sales | $797.0 | $804.9 | -1% | [Geographic Sales](index=2&type=section&id=Geographic%20Sales_YTD) U.S. sales decreased 4% to $639.0 million, while international sales grew 11% to $158.0 million, reflecting strong growth in Europe and Canada and the launch of the Japan market, despite approximately 260 basis points of foreign exchange headwinds YTD 2025 Geographic Sales Performance (Millions USD) | Region | YTD 2025 (Millions USD) | YTD 2024 (Millions USD) | Change (%) | | :------------------ | :---------------------- | :---------------------- | :--------- | | U.S. Sales | $639.0 | $662.7 | -4% | | International Sales | $158.0 | $142.2 | +11% | - International sales growth reflects strong performance in Europe and Canada and the launch of the Japan market, but includes approximately **260 basis points** of foreign exchange headwinds[16](index=16&type=chunk) [Channel Sales](index=2&type=section&id=Channel%20Sales_YTD) Direct-to-consumer (DTC) channel sales grew 2% to $444.8 million, primarily driven by growth in Coolers & Equipment, while wholesale channel sales decreased 4% to $352.2 million, mainly due to a decline in drinkware sales, partially offset by growth in Coolers & Equipment YTD 2025 Channel Sales Performance (Millions USD) | Channel | YTD 2025 (Millions USD) | YTD 2024 (Millions USD) | Change (%) | | :-------- | :---------------------- | :---------------------- | :--------- | | DTC | $444.8 | $438.2 | +2% | | Wholesale | $352.2 | $366.7 | -4% | - DTC channel sales growth was primarily due to an increase in Coolers & Equipment sales[18](index=18&type=chunk) - The decline in wholesale channel sales was primarily due to decreased drinkware sales, partially offset by growth in Coolers & Equipment[18](index=18&type=chunk) [Product Category Sales](index=2&type=section&id=Product%20Category%20Sales_YTD) Drinkware sales decreased 4% to $442.0 million, with international growth offset by a decline in the U.S. market due to challenges and supply chain transition-related inventory constraints, while Coolers & Equipment sales grew 5% to $340.8 million, driven by strong performance in bags and hard coolers, partially offset by a decline in soft coolers YTD 2025 Product Category Sales Performance (Millions USD) | Category | YTD 2025 (Millions USD) | YTD 2024 (Millions USD) | Change (%) | | :------------------ | :---------------------- | :---------------------- | :--------- | | Drinkware | $442.0 | $461.1 | -4% | | Coolers & Equipment | $340.8 | $325.8 | +5% | - Coolers & Equipment sales growth was primarily driven by strong performance in bags and hard coolers[18](index=18&type=chunk) [Profitability](index=2&type=section&id=Profitability_YTD) For the first six months of 2025, YETI's gross profit slightly increased, and gross margin improved due to lower product costs and price increases, despite higher tariffs and a decline in the drinkware product mix, while SG&A expenses rose both in absolute terms and as a percentage of sales, impacting operating income and adjusted EPS, which also faced foreign exchange headwinds [Gross Profit & Margin](index=2&type=section&id=Gross%20Profit%20%26%20Margin_YTD) Gross profit slightly increased to $459.3 million, with GAAP gross margin improving by 60 basis points to 57.6%; adjusted gross profit decreased 1% to $458.9 million, and adjusted gross margin remained flat at 57.6%, as lower product costs and selective price increases were offset by higher tariff costs and a decline in the drinkware product mix YTD 2025 Gross Profit and Margin (Millions USD) | Metric | YTD 2025 (Millions USD) | YTD 2024 (Millions USD) | Change (%) | YTD 2025 Margin | YTD 2024 Margin | Change (bps) | | :-------------------- | :---------------------- | :---------------------- | :--------- | :-------------- | :-------------- | :----------- | | Gross Profit | $459.3 | $459.1 | +0% | 57.6% | 57.0% | +60 | | Adjusted Gross Profit | $458.9 | $463.9 | -1% | 57.6% | 57.6% | 0 | - The increase in gross margin was primarily attributable to lower product costs, no acquisition accounting inventory step-up amortization this year, and selective price increases implemented in Q2 2025, partially offset by higher tariff costs and a decline in the drinkware product mix[17](index=17&type=chunk)[19](index=19&type=chunk) [SG&A Expenses](index=3&type=section&id=SG%26A%20Expenses_YTD) GAAP Selling, General, and Administrative (SG&A) expenses increased 3% to $375.6 million, and adjusted SG&A expenses grew 2% to $350.5 million; as a percentage of sales, GAAP SG&A expenses increased 160 basis points to 47.1%, and adjusted SG&A expenses increased 120 basis points to 44.0%, primarily due to higher technology expenses related to growth investments and increased non-cash stock-based compensation expenses YTD 2025 SG&A Expenses (Millions USD) | Metric | YTD 2025 (Millions USD) | YTD 2024 (Millions USD) | Change (%) | YTD 2025 % Sales | YTD 2024 % Sales | Change (bps) | | :--------------------- | :---------------------- | :---------------------- | :--------- | :--------------- | :--------------- | :----------- | | SG&A Expenses | $375.6 | $365.9 | +3% | 47.1% | 45.5% | +160 | | Adjusted SG&A Expenses | $350.5 | $344.3 | +2% | 44.0% | 42.8% | +120 | - The increase in SG&A expenses as a percentage of sales was primarily due to higher technology expenses related to growth investments and increased employee costs associated with non-cash stock-based compensation[20](index=20&type=chunk)[21](index=21&type=chunk) [Operating Income](index=3&type=section&id=Operating%20Income_YTD) GAAP operating income decreased 10% to $83.7 million, and adjusted operating income decreased 9% to $108.4 million, with GAAP operating margin falling to 10.5% and adjusted operating margin to 13.6%, while the decline in adjusted operating income included approximately 210 basis points of foreign exchange headwinds YTD 2025 Operating Income (Millions USD) | Metric | YTD 2025 (Millions USD) | YTD 2024 (Millions USD) | Change (%) | YTD 2025 Margin | YTD 2024 Margin | | :------------------------ | :---------------------- | :---------------------- | :--------- | :-------------- | :-------------- | | Operating Income | $83.7 | $93.2 | -10% | 10.5% | 11.6% | | Adjusted Operating Income | $108.4 | $119.6 | -9% | 13.6% | 14.9% | - The decline in adjusted operating income included approximately **210 basis points** of foreign exchange headwinds[22](index=22&type=chunk) [Net Income & EPS](index=3&type=section&id=Net%20Income%20%26%20EPS_YTD) Net income increased 2% to $67.8 million, with diluted EPS growing 5% to $0.81; however, adjusted net income decreased 9% to $81.0 million, and adjusted diluted EPS declined 6% to $0.97, including approximately $0.02 or 220 basis points of foreign exchange headwinds, while other income significantly improved due to foreign exchange gains YTD 2025 Net Income and EPS (Millions USD) | Metric | YTD 2025 (Millions USD) | YTD 2024 (Millions USD) | Change (%) | YTD 2025 EPS | YTD 2024 EPS | Change (%) | | :-------------------------- | :---------------------- | :---------------------- | :--------- | :----------- | :----------- | :--------- | | Net Income | $67.8 | $66.3 | +2% | $0.81 | $0.77 | +5% | | Adjusted Net Income | $81.0 | $88.9 | -9% | $0.97 | $1.03 | -6% | | Other Income (Expense), net | $7.1 | $(3.7) | N/A | | | | - Adjusted diluted EPS included approximately **$0.02** or **220 basis points** of foreign exchange headwinds[24](index=24&type=chunk) - Other income significantly improved, primarily due to foreign exchange gains related to intercompany balances this year, compared to foreign exchange losses in the prior year period[23](index=23&type=chunk) [Financial Position & Capital Allocation](index=3&type=section&id=Financial%20Position%20%26%20Capital%20Allocation) YETI maintains a strong financial position with substantial cash and an undrawn credit facility, actively engaging in capital allocation through share repurchases and strategic acquisitions [Balance Sheet and Liquidity](index=3&type=section&id=Balance%20Sheet%20and%20Liquidity) As of June 28, 2025, YETI held $269.7 million in cash, total debt (excluding finance leases and unamortized deferred financing costs) of $75.9 million, and an undrawn $300 million revolving credit facility, with inventory decreasing 10% year-over-year to $342.1 million Balance Sheet and Liquidity (Millions USD) | Metric | June 28, 2025 (Millions USD) | June 29, 2024 (Millions USD) | Change (%) | | :--------- | :--------------------------- | :--------------------------- | :--------- | | Cash | $269.7 | $212.9 | +26.7% | | Total Debt | $75.9 | $75.8 | +0.1% | | Inventory | $342.1 | $378.3 | -10% | - The company's **$300 million** revolving credit facility remained undrawn at the end of Q2 2025[25](index=25&type=chunk) [Capital Allocation Update](index=3&type=section&id=Capital%20Allocation%20Update) In Q2 2025, YETI repurchased approximately 0.7 million shares of common stock for $23.0 million under its existing $450 million share repurchase authorization, with full-year 2025 share repurchases expected to be approximately $200 million, and in August 2025, the company acquired certain shaker-related assets for $38.0 million in cash Capital Allocation Summary (Millions USD) | Metric | Q2 2025 (Millions USD) | Full Year 2025 Target (Millions USD) | | :----------------------------------- | :--------------------- | :----------------------------------- | | Share Repurchases (Q2) | $23.0 | N/A | | Shares Repurchased (Q2) | 0.7 million | N/A | | Share Repurchases (Full Year Target) | N/A | $200 | - In August 2025, the company acquired certain shaker-related assets, including designs, tooling, and intellectual property, for **$38.0 million** in cash[27](index=27&type=chunk) [Fiscal Year 2025 Outlook](index=3&type=section&id=Fiscal%20Year%202025%20Outlook) YETI maintains confidence in its business and full-year outlook, adjusting revenue expectations while raising EPS guidance due to strong operational execution and tariff reductions [Management Commentary](index=3&type=section&id=Management%20Commentary) CEO Matt Reintjes expressed confidence in the business and full-year outlook, satisfied with supply chain transition execution for diversification and future expansion, while revenue expectations were moderately lowered due to an extended U.S. drinkware market recovery, but EPS outlook was raised due to strong operational execution and reduced tariffs on China-sourced products, partially offset by increased tariffs in other regions - The company remains confident in its business and underlying operational fundamentals supporting the full-year outlook, and is pleased with the execution of its ongoing supply chain transition[28](index=28&type=chunk) - Revenue expectations were moderately lowered to reflect a slightly extended recovery timeline for the U.S. drinkware market[28](index=28&type=chunk) - The EPS outlook was raised, primarily due to strong operational execution and reduced tariffs on China-sourced products, partially offset by increased tariffs in other regions[28](index=28&type=chunk) - The company looks forward to innovation, continued brand strength, and global opportunities in the second half of 2025[28](index=28&type=chunk) [Key Financial Projections](index=4&type=section&id=Key%20Financial%20Projections) For fiscal year 2025 (53 weeks), YETI projects adjusted sales to be flat to up 2%, adjusted operating income as a percentage of adjusted sales between 14.0% and 14.5%, an effective tax rate of approximately 25.5%, and adjusted diluted EPS between $2.34 and $2.48, with capital expenditures expected around $50 million and free cash flow between $150 million and $200 million Fiscal Year 2025 Key Financial Projections | Metric | FY2025 Outlook (New) | FY2025 Outlook (Previous) | Change | | :-------------------------------------- | :------------------- | :------------------------ | :------ | | Adjusted Sales Growth | Flat to +2% | +1% to +4% | Lowered | | Adjusted Operating Income % of Sales | 14.0% - 14.5% | 12.0% | Raised | | Effective Tax Rate | ~25.5% | ~26.0% | Lowered | | Adjusted Net Income per Diluted Share | $2.34 - $2.48 | $1.96 - $2.02 | Raised | | Diluted Weighted Average Shares Outstanding | ~82.0 million | ~83.7 million | Lowered | | Capital Expenditures | ~$50 million | ~$60 million | Lowered | | Free Cash Flow | $150 - $200 million | $100 - $125 million | Raised | - The adjusted sales outlook includes an approximate **300 basis point** headwind from supply chain disruptions[31](index=31&type=chunk) - The adjusted operating income as a percentage of adjusted sales outlook reflects a net impact of approximately **220 basis points** from higher tariff costs compared to the prior year[31](index=31&type=chunk) - The adjusted diluted EPS outlook includes an approximate **$0.40** net headwind from higher tariff costs[31](index=31&type=chunk) [Company Information](index=4&type=section&id=Company%20Information) YETI Holdings, Inc. is a global designer and distributor of innovative outdoor products, committed to high-performance offerings and community engagement, with details on its recent earnings call [About YETI Holdings, Inc.](index=4&type=section&id=About%20YETI%20Holdings%2C%20Inc.) Headquartered in Austin, Texas, YETI Holdings, Inc. is a global designer, retailer, and distributor of innovative outdoor products, including coolers, drinkware, bags, and apparel, dedicated to providing high-performance, exceptional products for diverse outdoor activities and building strong brand loyalty worldwide while remaining committed to the outdoor and recreational communities - YETI is a global designer, retailer, and distributor of innovative outdoor products, headquartered in Austin, Texas[30](index=30&type=chunk) - Products include coolers, drinkware, bags, and apparel, designed to meet the needs of diverse outdoor activities[30](index=30&type=chunk) - The company has built strong brand loyalty globally by consistently offering high-performance, exceptional products, and remains committed to the outdoor and recreational communities[30](index=30&type=chunk) [Conference Call Details](index=4&type=section&id=Conference%20Call%20Details) The company held a conference call to discuss Q2 2025 financial results on August 7, 2025, at 8:00 AM ET, with investors and analysts able to participate via designated phone numbers or a webcast on the company's website, and a replay available until August 21, 2025 - The Q2 2025 financial results conference call was held on **August 7, 2025, at 8:00 AM ET**[29](index=29&type=chunk) - A live audio webcast of the conference call is available at http://investors.yeti.com, with a replay accessible until **August 21, 2025**[29](index=29&type=chunk) [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) YETI utilizes non-GAAP financial measures to supplement GAAP results for performance evaluation, acknowledging their analytical limitations and the impracticality of forward-looking GAAP reconciliations [Explanation and Limitations](index=5&type=section&id=Explanation%20and%20Limitations) YETI uses non-GAAP financial measures, such as adjusted net sales, adjusted gross profit, and adjusted EPS, to supplement GAAP results for measuring profitability and evaluating financial performance, acknowledging that these metrics provide meaningful supplemental information but have limitations as analytical tools and should not be viewed in isolation or as substitutes for GAAP financial information, and the company does not provide forward-looking reconciliations due to inherent difficulties in forecasting certain necessary amounts - The company uses adjusted net sales, adjusted gross profit, adjusted SG&A expenses, adjusted operating income, adjusted net income, adjusted diluted EPS, and free cash flow as non-GAAP financial measures to supplement GAAP results for measuring profitability and evaluating financial performance[32](index=32&type=chunk)[33](index=33&type=chunk) - These non-GAAP financial measures have limitations as analytical tools and should not be viewed in isolation or as substitutes for GAAP financial information[33](index=33&type=chunk) - The company does not provide forward-looking reconciliations of non-GAAP to GAAP financial measures due to inherent difficulties in forecasting certain necessary amounts, such as product recalls and realized and unrealized foreign currency gains and losses[34](index=34&type=chunk) [Forward-looking statements](index=6&type=section&id=Forward-looking%20statements) This press release contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially from expectations, including economic conditions, consumer confidence, brand maintenance, new product development, growth management, market expansion, competition, supply chain issues, tariffs, demand forecasts, retail partnerships, natural disasters, IT failures, AI integration, personnel retention, debt impact, and share repurchase program effects, with YETI undertaking no obligation to update these statements unless required by law - This press release contains forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially from expectations[36](index=36&type=chunk) - Risks and uncertainties include economic conditions, consumer confidence, brand maintenance, new product development, supply chain issues, tariff impacts, and competition[36](index=36&type=chunk) - YETI undertakes no obligation to publicly update or revise any forward-looking statements unless required by law[38](index=38&type=chunk) [Condensed Consolidated Financial Statements](index=7&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents YETI's condensed consolidated GAAP financial statements, including statements of operations, balance sheets, and cash flows, for the reported periods [Statements of Operations](index=7&type=section&id=Statements%20of%20Operations) The condensed consolidated statements of operations provide GAAP financial results for the three and six months ended June 28, 2025, and June 29, 2024, detailing net sales, cost of goods sold, gross profit, selling, general, and administrative expenses, operating income, net interest income (expense), other income (expense), income before income taxes, income tax expense, net income, and diluted EPS Condensed Consolidated Statements of Operations (GAAP, Thousands USD) | Metric (GAAP) | Q2 2025 (Thousands USD) | Q2 2024 (Thousands USD) | YTD 2025 (Thousands USD) | YTD 2024 (Thousands USD) | | :------------------------------------ | :---------------------- | :---------------------- | :----------------------- | :----------------------- | | Net sales | $445,892 | $463,499 | $797,020 | $804,893 | | Gross profit | $257,569 | $264,306 | $459,291 | $459,119 | | Selling, general, and administrative expenses | $195,545 | $196,886 | $375,596 | $365,882 | | Operating income | $62,024 | $67,420 | $83,695 | $93,237 | | Net income | $51,151 | $50,396 | $67,760 | $66,251 | | Diluted EPS | $0.61 | $0.59 | $0.81 | $0.77 | [Balance Sheets](index=8&type=section&id=Balance%20Sheets) The condensed consolidated balance sheets present YETI's financial position as of June 28, 2025, December 28, 2024, and June 29, 2024, detailing assets (current and non-current), liabilities (current and non-current), and stockholders' equity, with key data including cash, accounts receivable, inventory, total assets, total liabilities, and total stockholders' equity Condensed Consolidated Balance Sheets (GAAP, Thousands USD) | Metric (GAAP) | June 28, 2025 (Thousands USD) | Dec 28, 2024 (Thousands USD) | June 29, 2024 (Thousands USD) | | :---------------------------- | :---------------------------- | :--------------------------- | :---------------------------- | | Cash | $269,673 | $358,795 | $212,937 | | Accounts receivable, net | $163,595 | $120,190 | $159,050 | | Inventory | $342,131 | $310,058 | $378,296 | | Total current assets | $828,170 | $826,766 | $807,249 | | Total assets | $1,303,044 | $1,286,120 | $1,232,305 | | Total current liabilities | $328,962 | $379,504 | $351,860 | | Long-term debt, net | $70,143 | $72,821 | $75,829 | | Total liabilities | $500,312 | $546,013 | $526,445 | | Total stockholders' equity | $802,732 | $740,107 | $705,860 | [Statements of Cash Flows](index=9&type=section&id=Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows summarize cash movements for the six months ended June 28, 2025, and June 29, 2024, categorized into operating, investing, and financing activities, with net cash used in operating activities improving to **$19.1 million** in H1 2025 from **$47.7 million** in H1 2024 Condensed Consolidated Statements of Cash Flows (GAAP, Thousands USD) | Metric (GAAP) | YTD 2025 (Thousands USD) | YTD 2024 (Thousands USD) | | :-------------------------------- | :----------------------- | :----------------------- | | Net cash used in operating activities | $(19,101) | $(47,714) | | Net cash used in investing activities | $(31,086) | $(72,435) | | Net cash used in financing activities | $(40,368) | $(105,802) | | Net decrease in cash | $(89,122) | $(226,023) | | Cash, end of period | $269,673 | $212,937 | [Reconciliation of GAAP to Non-GAAP Financial Information](index=10&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Financial%20Information) This section provides detailed reconciliations of GAAP to non-GAAP financial measures for income statement items, sales breakdowns, and free cash flow, offering a comprehensive view of adjustments [Reconciliation of Income Statement Items](index=10&type=section&id=Reconciliation%20of%20Income%20Statement%20Items) This section provides a detailed reconciliation of income statement items from GAAP to non-GAAP financial measures for the three and six months ended June 28, 2025, and June 29, 2024, with adjustments including non-cash stock-based compensation expense, long-lived asset impairment, organizational realignment costs, business optimization expenses, transition costs, shareholder matters, net other income (expense), and the tax impact of adjustments - The reconciliation details adjustments for non-cash stock-based compensation expense, long-lived asset impairment, organizational realignment costs, business optimization expenses, transition costs, shareholder matters, and foreign exchange gains and losses[47](index=47&type=chunk)[52](index=52&type=chunk) - Specific adjustments for Q2 2025 included **$11.173 million** in non-cash stock-based compensation expense and **negative $5.773 million** in net other income (expense)[52](index=52&type=chunk) - Specific adjustments for H1 2025 included **$21.317 million** in non-cash stock-based compensation expense, **$2.76 million** in shareholder matters expense, and **negative $7.149 million** in net other income (expense)[52](index=52&type=chunk) [Reconciliation of Sales by Channel, Category, Region](index=12&type=section&id=Reconciliation%20of%20Sales%20by%20Channel%2C%20Category%2C%20Region) This section provides a reconciliation of net sales to adjusted net sales by channel (wholesale, direct-to-consumer), product category (coolers & equipment, drinkware, other), and geographic region (United States, international) for the three and six months ended June 28, 2025, and June 29, 2024, noting that GAAP and adjusted net sales are identical due to no product recall adjustments during these periods Q2 2025 Sales Breakdown (Thousands USD) | Sales Breakdown (Q2 2025) | Net Sales (Thousands USD) | Adjusted Net Sales (Thousands USD) | | :------------------------ | :------------------------ | :--------------------------------- | | Wholesale | $197,296 | $197,296 | | Direct-to-consumer | $248,596 | $248,596 | | Coolers & Equipment | $200,572 | $200,572 | | Drinkware | $236,438 | $236,438 | | United States | $367,772 | $367,772 | | International | $78,120 | $78,120 | YTD 2025 Sales Breakdown (Thousands USD) | Sales Breakdown (YTD 2025) | Net Sales (Thousands USD) | Adjusted Net Sales (Thousands USD) | | :------------------------- | :------------------------ | :--------------------------------- | | Wholesale | $352,208 | $352,208 | | Direct-to-consumer | $444,812 | $444,812 | | Coolers & Equipment | $340,789 | $340,789 | | Drinkware | $442,039 | $442,039 | | United States | $639,047 | $639,048 | | International | $157,973 | $157,972 | - GAAP net sales and adjusted net sales remained consistent during the reporting period due to no product recall adjustments[58](index=58&type=chunk)[59](index=59&type=chunk) [Reconciliation of Free Cash Flow](index=13&type=section&id=Reconciliation%20of%20Free%20Cash%20Flow) This section provides a reconciliation of net cash flow from operating activities to free cash flow for the six months ended June 28, 2025, and June 29, 2024, with free cash flow improving to **negative $39.044 million** in H1 2025 from **negative $69.35 million** in H1 2024 Free Cash Flow Reconciliation (Thousands USD) | Metric (Thousands USD) | YTD 2025 (Thousands USD) | YTD 2024 (Thousands USD) | | :-------------------------------- | :----------------------- | :----------------------- | | Net cash used in operating activities | $(19,101) | $(47,714) | | Less: Purchases of property and equipment | $(19,943) | $(21,636) | | Free cash flow | $(39,044) | $(69,350) |

Table of Contents FINANCIAL SUMMARY (All financial information has been prepared in accordance with IFRS Accounting Standards) FY2026 First Quarter (April 1, 2025 through June 30, 2025) English translation from the original Japanese-language document TOYOTA MOTOR CORPORATION Table of Contents FY2026 First Quarter Consolidated Financial Results (All financial information has been prepared in accordance with IFRS Accounting Standards) English translation from the original Japanese-language document August 7, ...

Part I FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Citizens Financial Services, Inc. as of June 30, 2025, including balance sheet, income, comprehensive income, equity, and cash flow statements, with detailed notes [Consolidated Balance Sheet](index=3&type=section&id=Consolidated%20Balance%20Sheet) Total assets decreased to $2.97 billion from $3.03 billion at year-end 2024, driven by reduced net loans, while stockholders' equity increased to $313.7 million Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$2,967,274** | **$3,025,724** | | Cash and cash equivalents | $49,484 | $42,202 | | Available-for-sale securities | $431,649 | $425,912 | | Loans (net of allowance) | $2,219,646 | $2,291,543 | | **Total Liabilities** | **$2,653,621** | **$2,725,990** | | Total deposits | $2,292,662 | $2,382,028 | | Borrowed funds | $313,219 | $297,721 | | **Total Stockholders' Equity** | **$313,653** | **$299,734** | [Consolidated Statement of Income](index=4&type=section&id=Consolidated%20Statement%20of%20Income) Net income for the six months ended June 30, 2025, increased to $16.1 million from $12.3 million, with diluted EPS rising to $3.35 Statement of Income Highlights (in thousands, except per share data) | 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 Interest Income | $23,648 | $21,300 | $46,650 | $42,258 | | Provision for credit losses | $750 | $2,002 | $1,375 | $2,787 | | **Net Income** | **$8,463** | **$5,275** | **$16,084** | **$12,299** | | **Net Income - Diluted (per share)** | **$1.76** | **$1.10** | **$3.35** | **$2.56** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed disclosures cover accounting policies, investment and loan portfolios, allowance for credit losses, goodwill, fair value, and segment reporting - The loan portfolio is diversified, with commercial real estate representing the largest segment at **$1.15 billion** as of June 30, 2025[34](index=34&type=chunk) Allowance for Credit Losses Activity - Six Months Ended June 30, 2025 (in thousands) | Description | Amount | | :--- | :--- | | Balance at December 31, 2024 | $22,375 | | Net loans charged-off | ($727) | | Provision for credit losses | $1,375 | | **Balance at June 30, 2025** | **$23,023** | - As of June 30, 2025, total non-performing loans were **$24.9 million**, a decrease from **$26.0 million** at year-end 2024[44](index=44&type=chunk) - The company operates as a single reportable segment: Community Banking All operations are domestic[95](index=95&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance and condition, highlighting a 30.8% increase in net income for the first six months of 2025, driven by higher net interest income and lower credit loss provision [Results of Operations](index=38&type=section&id=Results%20of%20Operations) Net income for the first six months of 2025 increased to $16.1 million ($3.35 per share) from $12.3 million ($2.56 per share) in the prior year, primarily due to higher net interest income and lower credit loss provision Key Performance Metrics - Six Months Ended June 30 | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Income (in thousands) | $16,084 | $12,299 | | Basic EPS | $3.35 | $2.56 | | Annualized Return on Assets | 1.07% | 0.83% | | Annualized Return on Equity | 10.44% | 8.67% | - Net interest income for the first six months of 2025 increased by **10.4%** to **$46.7 million**, compared to the same period in 2024[121](index=121&type=chunk) - The provision for credit losses decreased to **$1.375 million** for the first half of 2025, down from **$2.787 million** in the first half of 2024, primarily due to improved performance of certain commercial loans acquired from HVBC[144](index=144&type=chunk) [Financial Condition](index=47&type=section&id=Financial%20Condition) Total assets decreased by $58.5 million to $2.97 billion at June 30, 2025, mainly due to a $71.5 million decrease in total loans, while stockholders' equity grew by $13.9 million to $313.7 million - Total loans decreased by **$71.5 million (3.1%)** since year-end 2024, largely due to the seasonal nature of the student loan portfolio[165](index=165&type=chunk)[166](index=166&type=chunk) - The allowance for credit losses to total loans increased to **0.99%** at June 30, 2025, from **0.94%** at December 31, 2024[173](index=173&type=chunk) - Deposits decreased by **$89.4 million**, driven by outflows from state and political organizations and a **$33.1 million** reduction in brokered deposits[189](index=189&type=chunk) - The Bank's leverage ratio under the Community Bank Leverage Ratio (CBLR) framework was **9.22%** as of June 30, 2025, meeting the **9.0%** requirement to be considered 'well-capitalized'[196](index=196&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=59&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with a simulation model indicating a 100 basis point rate increase would decrease one-year net interest income by 2.89%, while a decrease would increase it by 2.43% Interest Rate Shock Analysis on Net Interest Income (as of June 30, 2025) | Change in Rates (bps) | % Change In Prospective Net Interest Income | | :--- | :--- | | +400 | (11.52)% | | +300 | (8.97)% | | +200 | (6.10)% | | +100 | (2.89)% | | **Base** | **-** | | -100 | 2.43% | | -200 | 4.06% | | -300 | 5.60% | | -400 | 10.26% | [Item 4. Controls and Procedures](index=60&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of the end of the reporting period[210](index=210&type=chunk) - No material changes were made to the Company's internal control over financial reporting during the quarter ended June 30, 2025[211](index=211&type=chunk) Part II OTHER INFORMATION [Item 1. Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no pending or threatened litigation that would have a material adverse effect on its consolidated financial position - Management is not aware of any pending or threatened litigation that would materially and adversely affect the company's financial position[212](index=212&type=chunk) [Item 1A. Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - The risk factors of the Company have not changed materially from those reported in the 2024 Annual Report on Form 10-K[213](index=213&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) During the second quarter of 2025, the company repurchased 821 shares at an average price of $60.25 per share, with 144,418 shares remaining available under the current authorization Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | - | $0.00 | | May 2025 | - | $0.00 | | June 2025 | 821 | $60.25 | | **Total** | **821** | **$58.15** | [Other Items (3, 4, 5, 6)](index=61&type=section&id=Other%20Items%20(3%2C%204%2C%205%2C%206)) This section confirms no defaults upon senior securities, no mine safety disclosures, and no Rule 10b5-1 trading plan adoptions or terminations by directors or executive officers during the quarter, along with a list of exhibits - Items 3 (Defaults Upon Senior Securities) and 4 (Mine Safety Disclosure) are not applicable[216](index=216&type=chunk)[218](index=218&type=chunk) - No directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements during the quarter[219](index=219&type=chunk)