[Cautionary Statements Regarding Certain Forward-Looking Information](index=4&type=section&id=Cautionary%20Statements%20Regarding%20Certain%20Forward-Looking%20Information) This section outlines the forward-looking nature of statements, emphasizing that actual results may differ materially due to various risks and uncertainties - Forward-looking statements are subject to risks and uncertainties, including economic and weather conditions, regulatory actions, and changes in business strategy[14](index=14&type=chunk)[15](index=15&type=chunk) - Readers are advised to consider information in other SEC filings for additional risks and uncertainties[17](index=17&type=chunk) [Glossary of Terms](index=6&type=section&id=Glossary%20of%20Terms) This section provides a glossary of frequently used abbreviations and acronyms throughout the report to aid reader comprehension - The glossary defines common abbreviations and acronyms such as **AFUDC** (Allowance for funds used during construction), **EPS** (Earnings per common share), and **SPP** (Southwest Power Pool, Inc.)[21](index=21&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk) [Part I - Financial Information](index=8&type=section&id=Part%20I%20-%20Financial%20Information) [Item 1. Financial Statements](index=8&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Evergy, Inc., Evergy Kansas Central, Inc., and Evergy Metro, Inc., along with detailed notes [Evergy, Inc. Unaudited Consolidated Balance Sheets](index=8&type=section&id=Evergy%2C%20Inc.%20Unaudited%20Consolidated%20Balance%20Sheets) Evergy, Inc.'s consolidated balance sheets show a slight increase in total assets and liabilities as of June 30, 2025, with equity remaining stable **Consolidated Balance Sheet Highlights (Evergy, Inc.):** | Metric | June 30, 2025 (millions) | December 31, 2024 (millions) | Change (millions) | | :-------------------------------- | :-------------------------- | :--------------------------- | :---------------- | | Total Current Assets | $1,865.5 | $1,839.3 | +$26.2 | | Property, Plant and Equipment, Net | $25,409.8 | $24,930.9 | +$478.9 | | Total Other Assets | $5,636.0 | $5,511.9 | +$124.1 | | **TOTAL ASSETS** | **$32,911.3** | **$32,282.1** | **+$629.2** | | Total Current Liabilities | $3,709.6 | $3,662.4 | +$47.2 | | Total Long-Term Liabilities | $19,202.5 | $18,630.5 | +$572.0 | | Total Equity | $9,999.2 | $9,989.2 | +$10.0 | | **TOTAL LIABILITIES AND EQUITY** | **$32,911.3** | **$32,282.1** | **+$629.2** | [Evergy, Inc. Unaudited Consolidated Statements of Comprehensive Income](index=10&type=section&id=Evergy%2C%20Inc.%20Unaudited%20Consolidated%20Statements%20of%20Comprehensive%20Income) Evergy, Inc.'s comprehensive income shows a significant decrease in net income and diluted EPS for the three months and year-to-date periods ended June 30, 2025 **Consolidated Statements of Comprehensive Income (Evergy, Inc.):** | Metric | 3 Months Ended June 30, 2025 (millions) | 3 Months Ended June 30, 2024 (millions) | Change (millions) | YTD June 30, 2025 (millions) | YTD June 30, 2024 (millions) | Change (millions) | | :--------------------------------------- | :-------------------------------------- | :-------------------------------------- | :---------------- | :-------------------------- | :-------------------------- | :---------------- | | Operating Revenues | $1,437.0 | $1,447.5 | -$10.5 | $2,811.5 | $2,778.5 | +$33.0 | | Total Operating Expenses | $1,093.2 | $1,089.4 | +$3.8 | $2,176.1 | $2,160.2 | +$15.9 | | Income from Operations | $343.8 | $358.1 | -$14.3 | $635.4 | $618.3 | +$17.1 | | Net Income Attributable to Evergy, Inc. | $171.3 | $207.0 | **-$35.7** | $296.3 | $329.7 | **-$33.4** | | Basic Earnings Per Common Share | $0.74 | $0.90 | **-$0.16** | $1.29 | $1.43 | **-$0.14** | | Diluted Earnings Per Common Share | $0.74 | $0.90 | **-$0.16** | $1.28 | $1.43 | **-$0.15** | [Evergy, Inc. Unaudited Consolidated Statements of Cash Flows](index=11&type=section&id=Evergy%2C%20Inc.%20Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Evergy, Inc.'s cash flow statements show increased operating cash flows, decreased investing cash usage, and decreased financing cash flows year-to-date June 30, 2025 **Consolidated Statements of Cash Flows (Evergy, Inc.):** | Metric | YTD June 30, 2025 (millions) | YTD June 30, 2024 (millions) | Change (millions) | | :----------------------------------- | :-------------------------- | :-------------------------- | :---------------- | | Cash Flows from Operating Activities | $773.5 | $634.8 | **+$138.7** | | Cash Flows used in Investing Activities | $(1,235.4) | $(1,270.1) | **+$34.7** | | Cash Flows from Financing Activities | $467.0 | $643.1 | **-$176.1** | | Net Change in Cash, Cash Equivalents and Restricted Cash | $5.1 | $7.8 | -$2.7 | [Evergy, Inc. Unaudited Consolidated Statements of Changes in Equity](index=12&type=section&id=Evergy%2C%20Inc.%20Unaudited%20Consolidated%20Statements%20of%20Changes%20in%20Equity) This section details changes in Evergy, Inc.'s consolidated equity, highlighting movements from net income, common stock issuances, and dividends declared **Evergy, Inc. Shareholders' Equity:** | Metric | June 30, 2025 (millions) | December 31, 2024 (millions) | Change (millions) | | :-------------------------------- | :-------------------------- | :--------------------------- | :---------------- | | Common Stock | $7,258.1 | $7,245.9 | +$12.2 | | Retained Earnings | $2,721.8 | $2,732.9 | -$11.1 | | Accumulated Other Comprehensive Loss | $(21.1) | $(23.8) | +$2.7 | | Total Evergy, Inc. Shareholders' Equity | $9,958.8 | $9,955.0 | **+$3.8** | - **Net income** for the three months ended June 30, 2025, was **$171.3 million**, contributing to retained earnings[38](index=38&type=chunk) - **Dividends declared** on common stock were **$0.6675 per share** for the quarter ended June 30, 2025, totaling **$153.6 million**[38](index=38&type=chunk) [Evergy Kansas Central, Inc. Unaudited Consolidated Balance Sheets](index=14&type=section&id=Evergy%20Kansas%20Central%2C%20Inc.%20Unaudited%20Consolidated%20Balance%20Sheets) Evergy Kansas Central, Inc.'s balance sheets show an increase in total assets and equity, with decreased current liabilities and increased long-term liabilities **Consolidated Balance Sheet Highlights (Evergy Kansas Central, Inc.):** | Metric | June 30, 2025 (millions) | December 31, 2024 (millions) | Change (millions) | | :-------------------------------- | :-------------------------- | :--------------------------- | :---------------- | | Total Current Assets | $1,031.4 | $978.2 | +$53.2 | | Property, Plant and Equipment, Net | $13,162.4 | $12,880.1 | +$282.3 | | Total Other Assets | $1,231.7 | $1,150.8 | +$80.9 | | **TOTAL ASSETS** | **$15,425.5** | **$15,009.1** | **+$416.4** | | Total Current Liabilities | $1,643.9 | $2,028.1 | **-$384.2** | | Total Long-Term Liabilities | $8,272.3 | $7,696.1 | **+$576.2** | | Total Equity | $5,509.3 | $5,284.9 | **+$224.4** | | **TOTAL LIABILITIES AND EQUITY** | **$15,425.5** | **$15,009.1** | **+$416.4** | [Evergy Kansas Central, Inc. Unaudited Consolidated Statements of Income](index=16&type=section&id=Evergy%20Kansas%20Central%2C%20Inc.%20Unaudited%20Consolidated%20Statements%20of%20Income) Evergy Kansas Central, Inc.'s income statements show a slight decrease in net income year-over-year, despite an increase in operating revenues **Consolidated Statements of Income (Evergy Kansas Central, Inc.):** | Metric | 3 Months Ended June 30, 2025 (millions) | 3 Months Ended June 30, 2024 (millions) | Change (millions) | YTD June 30, 2025 (millions) | YTD June 30, 2024 (millions) | Change (millions) | | :----------------------------------------------- | :-------------------------------------- | :-------------------------------------- | :---------------- | :-------------------------- | :-------------------------- | :---------------- | | Operating Revenues | $733.5 | $727.3 | +$6.2 | $1,442.6 | $1,420.5 | **+$22.1** | | Total Operating Expenses | $552.3 | $544.6 | +$7.7 | $1,087.6 | $1,074.5 | +$13.1 | | Income from Operations | $181.2 | $182.7 | -$1.5 | $355.0 | $346.0 | +$9.0 | | Net Income Attributable to Evergy Kansas Central, Inc. | $120.4 | $121.4 | **-$1.0** | $228.2 | $229.9 | **-$1.7** | [Evergy Kansas Central, Inc. Unaudited Consolidated Statements of Cash Flows](index=17&type=section&id=Evergy%20Kansas%20Central%2C%20Inc.%20Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Evergy Kansas Central, Inc.'s cash flow statements show increased operating cash flows, increased investing cash usage, and slightly increased financing cash flows **Consolidated Statements of Cash Flows (Evergy Kansas Central, Inc.):** | Metric | YTD June 30, 2025 (millions) | YTD June 30, 2024 (millions) | Change (millions) | | :----------------------------------- | :-------------------------- | :-------------------------- | :---------------- | | Cash Flows from Operating Activities | $388.9 | $347.9 | **+$41.0** | | Cash Flows used in Investing Activities | $(673.7) | $(629.7) | **-$44.0** | | Cash Flows from Financing Activities | $287.1 | $279.6 | **+$7.5** | | Net Change in Cash and Cash Equivalents | $2.3 | $(2.2) | **+$4.5** | [Evergy Kansas Central, Inc. Unaudited Consolidated Statements of Changes in Equity](index=18&type=section&id=Evergy%20Kansas%20Central%2C%20Inc.%20Unaudited%20Consolidated%20Statements%20of%20Changes%20in%20Equity) This section details changes in Evergy Kansas Central, Inc.'s consolidated equity, showing an increase primarily due to net income, partially offset by dividends **Evergy Kansas Central, Inc. Shareholder's Equity:** | Metric | June 30, 2025 (millions) | December 31, 2024 (millions) | Change (millions) | | :----------------------------------------------- | :-------------------------- | :--------------------------- | :---------------- | | Common Stock | $2,737.6 | $2,737.6 | $0.0 | | Retained Earnings | $2,731.3 | $2,513.1 | **+$218.2** | | Total Evergy Kansas Central, Inc. Shareholder's Equity | $5,468.9 | $5,250.7 | **+$218.2** | - **Net income** for the three months ended June 30, 2025, was **$120.4 million**[52](index=52&type=chunk) - **Dividends declared** on common stock were **$10.0 million** for the year-to-date period ended March 31, 2025[52](index=52&type=chunk) [Evergy Metro, Inc. Unaudited Consolidated Balance Sheets](index=19&type=section&id=Evergy%20Metro%2C%20Inc.%20Unaudited%20Consolidated%20Balance%20Sheets) Evergy Metro, Inc.'s consolidated balance sheets show an increase in total assets, current liabilities, and equity, with a slight increase in long-term liabilities **Consolidated Balance Sheet Highlights (Evergy Metro, Inc.):** | Metric | June 30, 2025 (millions) | December 31, 2024 (millions) | Change (millions) | | :-------------------------------- | :-------------------------- | :--------------------------- | :---------------- | | Total Current Assets | $714.9 | $701.5 | +$13.4 | | Property, Plant and Equipment, Net | $8,333.8 | $8,292.4 | +$41.4 | | Total Other Assets | $1,064.4 | $982.8 | +$81.6 | | **TOTAL ASSETS** | **$10,113.1** | **$9,976.7** | **+$136.4** | | Total Current Liabilities | $1,227.5 | $1,139.9 | **+$87.6** | | Total Long-Term Liabilities | $5,488.9 | $5,460.6 | +$28.3 | | Total Equity | $3,396.7 | $3,376.2 | **+$20.5** | | **TOTAL LIABILITIES AND EQUITY** | **$10,113.1** | **$9,976.7** | **+$136.4** | [Evergy Metro, Inc. Unaudited Consolidated Statements of Comprehensive Income](index=21&type=section&id=Evergy%20Metro%2C%20Inc.%20Unaudited%20Consolidated%20Statements%20of%20Comprehensive%20Income) Evergy Metro, Inc.'s comprehensive income statements show a slight decrease in net income year-over-year, despite a slight increase in operating revenues year-to-date **Consolidated Statements of Comprehensive Income (Evergy Metro, Inc.):** | Metric | 3 Months Ended June 30, 2025 (millions) | 3 Months Ended June 30, 2024 (millions) | Change (millions) | YTD June 30, 2025 (millions) | YTD June 30, 2024 (millions) | Change (millions) | | :----------------------- | :-------------------------------------- | :-------------------------------------- | :---------------- | :-------------------------- | :-------------------------- | :---------------- | | Operating Revenues | $471.2 | $474.0 | -$2.8 | $898.9 | $894.9 | +$4.0 | | Total Operating Expenses | $358.1 | $351.2 | +$6.9 | $706.9 | $693.5 | +$13.4 | | Income from Operations | $113.1 | $122.8 | -$9.7 | $192.0 | $201.4 | -$9.4 | | Net Income | $68.8 | $74.6 | **-$5.8** | $105.7 | $107.3 | **-$1.6** | [Evergy Metro, Inc. Unaudited Consolidated Statements of Cash Flows](index=22&type=section&id=Evergy%20Metro%2C%20Inc.%20Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Evergy Metro, Inc.'s cash flow statements show increased operating cash flows, decreased investing cash usage, and decreased financing cash flows **Consolidated Statements of Cash Flows (Evergy Metro, Inc.):** | Metric | YTD June 30, 2025 (millions) | YTD June 30, 2024 (millions) | Change (millions) | | :----------------------------------- | :-------------------------- | :-------------------------- | :---------------- | | Cash Flows from Operating Activities | $287.0 | $239.0 | **+$48.0** | | Cash Flows used in Investing Activities | $(323.0) | $(364.7) | **+$41.7** | | Cash Flows from Financing Activities | $37.1 | $125.0 | **-$87.9** | | Net Change in Cash and Cash Equivalents | $1.1 | $(0.7) | **+$1.8** | [Evergy Metro, Inc. Unaudited Consolidated Statements of Changes in Equity](index=23&type=section&id=Evergy%20Metro%2C%20Inc.%20Unaudited%20Consolidated%20Statements%20of%20Changes%20in%20Equity) This section details changes in Evergy Metro, Inc.'s consolidated equity, showing an increase primarily due to net income, partially offset by dividends **Evergy Metro, Inc. Total Equity:** | Metric | June 30, 2025 (millions) | December 31, 2024 (millions) | Change (millions) | | :-------------------------------- | :-------------------------- | :--------------------------- | :---------------- | | Common Stock | $1,563.1 | $1,563.1 | $0.0 | | Retained Earnings | $1,830.4 | $1,809.7 | **+$20.7** | | Accumulated Other Comprehensive Income | $3.2 | $3.4 | -$0.2 | | Total Equity | $3,396.7 | $3,376.2 | **+$20.5** | - **Net income** for the three months ended June 30, 2025, was **$68.8 million**[68](index=68&type=chunk) - **Dividends declared** on common stock were **$35.0 million** for the quarter ended June 30, 2025[68](index=68&type=chunk) [Combined Notes to Unaudited Consolidated Financial Statements](index=24&type=section&id=Combined%20Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section provides combined notes to the unaudited consolidated financial statements for Evergy, Inc., Evergy Kansas Central, Inc., and Evergy Metro, Inc., detailing organizational structure, accounting policies, and significant financial disclosures [Note 1: Organization and Basis of Presentation](index=24&type=section&id=Note%201%3A%20Organization%20and%20Basis%20of%20Presentation) This note describes Evergy's organizational structure as a public utility holding company and details the basis of presentation for its financial statements - Evergy operates as a public utility holding company with subsidiaries Evergy Kansas Central, Evergy Metro, Evergy Missouri West, and Evergy Transmission Company[71](index=71&type=chunk)[75](index=75&type=chunk) - The Evergy Companies collectively have approximately **15,800 MWs** of owned generating capacity and renewable power purchase agreements, serving about **1.7 million customers** in Kansas and Missouri[73](index=73&type=chunk)[224](index=224&type=chunk) - Evergy plans to construct two combined-cycle natural gas plants in Kansas (**705 MW each**, operational by 2029/2030) and a **440 MW** simple-cycle natural gas plant in Missouri (operational by 2030)[101](index=101&type=chunk)[102](index=102&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) - Evergy Kansas Central intends to construct a **159 MW solar facility** (Kansas Sky) by summer 2027, and Evergy Missouri West plans two solar facilities (Sunflower Sky, **65 MW**; Foxtrot, **100 MW**) by summer 2027[103](index=103&type=chunk)[104](index=104&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk) [Note 2: Revenue](index=31&type=section&id=Note%202%3A%20Revenue) This note disaggregates operating revenues by customer class for Evergy, Evergy Kansas Central, and Evergy Metro for the three months and year-to-date periods **Evergy Operating Revenues by Customer Class (YTD June 30, millions):** | Customer Class | 2025 | 2024 | Change | | :--------------- | :----- | :----- | :----- | | Residential | $1,001.8 | $1,015.7 | -$13.9 | | Commercial | $904.1 | $918.5 | -$14.4 | | Industrial | $305.5 | $335.1 | -$29.6 | | Wholesale | $139.8 | $144.3 | -$4.5 | | Transmission | $262.3 | $237.8 | **+$24.5** | | Other | $162.3 | $90.8 | **+$71.5** | | **Total Operating Revenues** | **$2,811.5** | **$2,778.5** | **+$33.0** | - Evergy Kansas Central's total operating revenues increased by **$22.1 million** year-to-date June 30, 2025, to **$1,442.6 million**, primarily driven by wholesale and transmission revenues[107](index=107&type=chunk) - Evergy Metro's total operating revenues increased by **$4.0 million** year-to-date June 30, 2025, to **$898.9 million**, with a significant decrease in wholesale revenue offset by increases in other revenues[108](index=108&type=chunk) [Note 3: Receivables](index=32&type=section&id=Note%203%3A%20Receivables) This note details the Evergy Companies' receivables, including customer accounts, other receivables, and the allowance for credit losses, and describes the sale of accounts receivable **Evergy Receivables, Net (millions):** | Category | June 30, 2025 | December 31, 2024 | Change | | :----------------------------------- | :-------------- | :---------------- | :----- | | Customer accounts receivable - unbilled | $248.0 | $108.4 | **+$139.6** | | Other receivables | $153.4 | $150.0 | +$3.4 | | Allowance for credit losses | $(12.7) | $(15.7) | **+$3.0** | | **Total Receivables, net** | **$390.8** | **$245.4** | **+$145.4** | - The **allowance for credit losses** for Evergy decreased from **$15.7 million** at December 31, 2024, to **$12.7 million** at June 30, 2025, due to write-offs exceeding credit loss expense and recoveries[113](index=113&type=chunk) - Evergy Kansas Central, Evergy Metro, and Evergy Missouri West extended their receivable sale facilities from November 2025 to April 2028[115](index=115&type=chunk) [Note 4: Rate Matters and Regulation](index=34&type=section&id=Note%204%3A%20Rate%20Matters%20and%20Regulation) This note outlines significant regulatory proceedings and rate matters affecting the Evergy Companies, including rate cases and predetermination applications - Evergy Kansas Central reached a unanimous settlement for its 2025 Rate Case, providing a **$128.0 million increase** to retail revenues, effective September 29, 2025, subject to KCC approval[118](index=118&type=chunk)[226](index=226&type=chunk) - The KCC approved Evergy Kansas Central's predetermination for natural gas plant investments, allowing a CWIP rider one year after construction begins, and for the Kansas Sky solar investment, allowing recovery through a levelized revenue requirement[121](index=121&type=chunk)[123](index=123&type=chunk) - The MPSC approved Evergy Missouri West's CCN requests for planned renewable and natural gas plant investments, establishing their prudency and allowing the use of SB 4 CWIP inclusion and PISA[129](index=129&type=chunk)[130](index=130&type=chunk) [Note 5: Goodwill](index=36&type=section&id=Note%205%3A%20Goodwill) This note discusses Evergy's annual goodwill impairment test, conducted as of May 1, 2025, which indicated no impairment - Evergy's goodwill, totaling **$2,336.6 million**, was tested for impairment as of May 1, 2025[133](index=133&type=chunk) - The fair value of the reporting unit (Evergy's consolidated operations) exceeded its carrying amount, resulting in **no impairment of goodwill**[133](index=133&type=chunk) [Note 6: Pension Plans and Post-Retirement Benefits](index=37&type=section&id=Note%206%3A%20Pension%20Plans%20and%20Post-Retirement%20Benefits) This note details the Evergy Companies' participation in defined benefit pension plans and post-retirement benefits, providing components of net periodic benefit costs and expected contributions - Evergy, Evergy Kansas Central, and Evergy Metro participate in qualified non-contributory defined benefit pension plans and provide post-retirement benefits[136](index=136&type=chunk)[138](index=138&type=chunk) **Net Periodic Benefit Costs (YTD June 30, 2025, millions):** | Entity | Pension Benefits | Post-Retirement Benefits | | :-------------------- | :--------------- | :----------------------- | | Evergy | $24.7 | $(1.9) | | Evergy Kansas Central | $6.4 | $(0.6) | | Evergy Metro | $16.8 | $(1.0) | - Evergy expects to make additional cash pension contributions of **$24.4 million** in 2025, with **$8.6 million** from Evergy Kansas Central and **$15.8 million** from Evergy Metro[144](index=144&type=chunk) [Note 7: Short-Term Borrowings and Short-Term Bank Lines of Credit](index=39&type=section&id=Note%207%3A%20Short-Term%20Borrowings%20and%20Short-Term%20Bank%20Lines%20of%20Credit) This note describes the Evergy Companies' **$2.5 billion** master credit facility, its expiration in 2028, and compliance with debt covenants - Evergy Companies have a **$2.5 billion master credit facility** expiring in 2028, with specific sublimits for each borrower[146](index=146&type=chunk) **Committed Credit Facilities (June 30, 2025, millions):** | Entity | Master Credit Facility | Commercial Paper | Available Borrowings Capacity | Weighted Average Interest Rate | | :-------------------- | :--------------------- | :--------------- | :---------------------------- | :----------------------------- | | Evergy, Inc. | $500.0 | $341.5 | **$157.8** | **4.57%** | | Evergy Kansas Central | $900.0 | $502.2 | **$396.8** | **4.57%** | | Evergy Metro | $600.0 | $305.9 | **$293.0** | **4.57%** | | Evergy Missouri West | $500.0 | $273.6 | **$226.4** | **4.75%** | | **Total Evergy** | **$2,500.0** | **$1,423.2** | **$1,074.0** | | - As of June 30, 2025, Evergy, Evergy Kansas Central, Evergy Metro, and Evergy Missouri West were in compliance with all debt covenants, including a total indebtedness to total capitalization ratio not greater than **0.65 to 1.00**[147](index=147&type=chunk)[278](index=278&type=chunk) [Note 8: Long-Term Debt](index=39&type=section&id=Note%208%3A%20Long-Term%20Debt) This note details recent long-term debt issuances by Evergy Kansas Central and remarketing of pollution control bonds by Evergy Metro - In March 2025, Evergy Kansas Central issued **$300.0 million** of **5.25% First Mortgage Bonds** maturing in 2035 and **$300.0 million** of **4.70% Notes** maturing in 2028[150](index=150&type=chunk)[151](index=151&type=chunk) - In July 2025, Evergy Metro remarketed **$23.4 million** of its Series 2008 EIRR bonds, maturing in 2038, at a fixed rate of **4.05%** through June 2030[152](index=152&type=chunk) [Note 9: Derivative Instruments](index=40&type=section&id=Note%209%3A%20Derivative%20Instruments) This note explains the Evergy Companies' use of derivative instruments to manage market risks associated with electricity, natural gas, and interest rates - Evergy Companies use derivative instruments to manage commodity price volatility (electricity, natural gas) and interest rate fluctuations, and for non-regulated energy marketing[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) **Evergy's Total Derivative Assets and Liabilities (June 30, 2025, millions):** | Category | Assets | Liabilities | | :-------------------- | :----- | :---------- | | Total Derivative Assets | **$64.5** | | | Total Derivative Liabilities | | **$65.4** | - As of June 30, 2025, Evergy's and Evergy Kansas Central's maximum exposure to credit risk from derivative assets was **$35.0 million**, with a potential loss of **$25.9 million** after netting arrangements and collateral[165](index=165&type=chunk) [Note 10: Fair Value Measurements](index=44&type=section&id=Note%2010%3A%20Fair%20Value%20Measurements) This note outlines the hierarchical framework for fair value measurements and provides tables summarizing the fair values of financial assets and liabilities - Fair value measurements are categorized into **Level 1** (quoted prices in active markets), **Level 2** (observable inputs other than quoted prices), **Level 3** (significant unobservable inputs), and **NAV** (investments without readily determinable fair value)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) **Evergy Long-Term Debt Fair Value (June 30, 2025, millions):** | Entity | Book Value | Fair Value | | :----- | :--------- | :--------- | | Evergy | $13,050.5 | $12,437.6 | | Evergy Kansas Central | $5,178.9 | $4,707.1 | | Evergy Metro | $3,224.6 | $3,016.8 | - Evergy's nuclear decommissioning trust assets totaled **$929.8 million** as of June 30, 2025, with **$72.5 million** measured at NAV[177](index=177&type=chunk)[179](index=179&type=chunk) [Note 11: Commitments and Contingencies](index=50&type=section&id=Note%2011%3A%20Commitments%20and%20Contingencies) This note details environmental matters and legal proceedings that could impact the Evergy Companies, including regulations related to ozone, particulate matter, and greenhouse gases - The EPA's proposed and final rules on Ozone NAAQS, ITFIPs, and Regional Haze Rule could materially impact Evergy Companies' operations and compliance costs, with ongoing litigation and reconsideration plans[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk) - New GHG regulations from the EPA, including CO2 limitations for power plants and potential CCS requirements, are under reconsideration and judicial review, posing material compliance cost risks[197](index=197&type=chunk) - Lawsuits were filed against Evergy Metro alleging damages from CCRs associated with Montrose Station, and a nuclear antitrust class action was filed against Wolf Creek Nuclear Operating Corporation, in which Evergy has a **94% indirect ownership**[202](index=202&type=chunk)[203](index=203&type=chunk) [Note 12: Related Party Transactions and Relationships](index=54&type=section&id=Note%2012%3A%20Related%20Party%20Transactions%20and%20Relationships) This note describes related party transactions among Evergy Kansas Central, Evergy Metro, and Evergy Missouri West, including jointly-owned plants, shared services, and money pool arrangements - Evergy Kansas Central, Evergy Metro, and Evergy Missouri West engage in related party transactions for jointly-owned plants and shared services[204](index=204&type=chunk)[205](index=205&type=chunk) **Operating Expenses and Capital Costs Billed for Jointly-Owned Plants and Shared Services (YTD June 30, 2025, millions):** | Billing Entity | To Evergy Missouri West | To Evergy Metro | To Evergy Kansas Central | | :----------------------------- | :---------------------- | :-------------- | :----------------------- | | Evergy Kansas Central | $69.6 | | $26.5 | | Evergy Metro | $55.2 | | $68.1 | - Evergy Kansas Central and Evergy Metro had **no outstanding receivables or payables** under the Evergy, Inc. money pool as of June 30, 2025[211](index=211&type=chunk) [Note 13: Taxes](index=55&type=section&id=Note%2013%3A%20Taxes) This note provides the effective income tax rates for Evergy, Evergy Kansas Central, and Evergy Metro, detailing the reasons for differences from the statutory federal rates **Effective Income Tax Rates (YTD June 30, 2025):** | Entity | Federal Statutory Rate | Effective Income Tax Rate | | :-------------------- | :--------------------- | :------------------------ | | Evergy | **21.0%** | **6.1%** | | Evergy Kansas Central | **21.0%** | **4.5%** | | Evergy Metro | **21.0%** | **13.4%** | - Key factors causing differences from the federal statutory rate include COLI policies, state income taxes, flow-through depreciation, and federal tax credits[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) [Note 14: Segment Information](index=57&type=section&id=Note%2014%3A%20Segment%20Information) This note states that Evergy operates in a single reportable segment, with performance assessed based on consolidated net income attributable to Evergy, Inc - Evergy's chief operating decision maker assesses performance and allocates resources on a consolidated basis, meaning Evergy operates in a **single reportable segment**[218](index=218&type=chunk)[224](index=224&type=chunk) **Evergy Operating Revenues and Net Income Attributable to Evergy, Inc. (YTD June 30, millions):** | Metric | 2025 | 2024 | Change | | :--------------------------------------- | :----- | :----- | :----- | | Operating Revenues | $2,811.5 | $2,778.5 | +$33.0 | | Net Income Attributable to Evergy, Inc. | $296.3 | $329.7 | **-$33.4** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=58&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a combined MD&A for Evergy, Inc., Evergy Kansas Central, Inc., and Evergy Metro, Inc., covering executive summaries, results of operations, and liquidity and capital resources [Evergy, Inc. Executive Summary](index=58&type=section&id=Evergy%2C%20Inc.%20Executive%20Summary) This executive summary provides an overview of Evergy's business, recent regulatory developments, new legislation, planned investments, and an earnings overview - Evergy Kansas Central's 2025 Rate Case resulted in a unanimous settlement for a **$128.0 million retail revenue increase**, pending KCC approval, effective September 29, 2025[226](index=226&type=chunk) - Missouri SB 4 allows electric utilities to recover costs for new natural gas-fired generating units by including **Construction Work in Progress (CWIP)** in the rate base and extends **Plant-In-Service Accounting (PISA)** provisions[229](index=229&type=chunk)[230](index=230&type=chunk) - Kansas HB 2107 establishes a **two-year statute of limitations** and a **$5.0 million punitive damages limit** for wildfire-related claims against Kansas electric utilities[231](index=231&type=chunk) - Evergy plans significant investments in natural gas plants (two **705 MW** combined-cycle in Kansas, one **440 MW** simple-cycle in Missouri) and solar facilities (**159 MW** Kansas Sky, **65 MW** Sunflower Sky, **100 MW** Foxtrot), with regulatory approvals secured for most[233](index=233&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk) **Evergy, Inc. Earnings Overview (YTD June 30, millions, except EPS):** | Metric | 2025 | 2024 | Change | | :--------------------------------------- | :----- | :----- | :----- | | Net income attributable to Evergy, Inc. | $296.3 | $329.7 | **-$33.4** | | Diluted Earnings Per Common Share | $1.28 | $1.43 | **-$0.15** | [Evergy, Inc. Results of Operations](index=63&type=section&id=Evergy%2C%20Inc.%20Results%20of%20Operations) This section provides a detailed comparative analysis of Evergy's operating results, including revenues, expenses, and gross margin, for the three months and year-to-date periods **Evergy Operating Revenues and Expenses (YTD June 30, millions):** | Metric | 2025 | 2024 | Change | | :-------------------------- | :----- | :----- | :----- | | Operating revenues | $2,811.5 | $2,778.5 | +$33.0 | | Fuel and purchased power | $685.7 | $735.4 | **-$49.7** | | SPP network transmission costs | $211.3 | $172.7 | **+$38.6** | | Operating and maintenance | $487.1 | $469.2 | +$17.9 | | Depreciation and amortization | $576.5 | $556.2 | +$20.3 | | Taxes other than income tax | $215.5 | $226.7 | -$11.2 | | Income from operations | $635.4 | $618.3 | +$17.1 | | Interest expense | $306.3 | $276.8 | **+$29.5** | | Net income attributable to Evergy, Inc. | $296.3 | $329.7 | **-$33.4** | - Evergy's utility gross margin (non-GAAP) increased by **$44.1 million** year-to-date June 30, 2025, driven by new Evergy Missouri West retail rates and higher transmission revenue, partially offset by lower retail sales due to unfavorable weather[264](index=264&type=chunk) - Other income (expense), net, shifted from a net income of **$5.3 million** in YTD 2024 to a net expense of **$10.4 million** in YTD 2025, primarily due to **$29.0 million** in unrealized losses and impairment losses from non-regulated investments[259](index=259&type=chunk)[269](index=269&type=chunk) [Evergy, Inc. Liquidity and Capital Resources](index=67&type=section&id=Evergy%2C%20Inc.%20Liquidity%20and%20Capital%20Resources) This section discusses Evergy's primary sources of liquidity and capital requirements, covering short-term borrowing capacity, debt issuances, credit ratings, pension contributions, and cash flow changes - Evergy relies on cash from operations, short-term borrowings, long-term debt, and equity issuances to fund capital requirements, which include capital expenditures, contractual obligations, and dividends[271](index=271&type=chunk) - As of June 30, 2025, Evergy had **$1,074.0 million** of available borrowing capacity under its **$2.5 billion master credit facility**[272](index=272&type=chunk)[149](index=149&type=chunk) - Cash flows from operating activities increased by **$138.7 million** year-to-date June 30, 2025, primarily due to increased cash receipts from retail electric sales and decreased payments for a Wolf Creek refueling outage[281](index=281&type=chunk) - Cash flows from financing activities decreased by **$176.1 million** year-to-date June 30, 2025, mainly due to a **$327.3 million decrease** in proceeds from long-term debt, net, partially offset by a **$197.7 million increase** in short-term debt borrowings[282](index=282&type=chunk) [Evergy Kansas Central, Inc. Management's Narrative Analysis of Results of Operations](index=69&type=section&id=Evergy%20Kansas%20Central%2C%20Inc.%20Management%27s%20Narrative%20Analysis%20of%20Results%20of%20Operations) This section provides a narrative analysis of Evergy Kansas Central's results of operations, including changes in operating revenues, expenses, and gross margin **Evergy Kansas Central Operating Revenues and Expenses (YTD June 30, millions):** | Metric | 2025 | 2024 | Change | | :-------------------------- | :----- | :----- | :----- | | Operating revenues | $1,442.6 | $1,420.5 | +$22.1 | | Fuel and purchased power | $244.0 | $262.6 | **-$18.6** | | SPP network transmission costs | $211.3 | $172.7 | **+$38.6** | | Operating and maintenance | $229.2 | $233.6 | -$4.4 | | Depreciation and amortization | $286.3 | $279.7 | +$6.6 | | Taxes other than income tax | $116.8 | $125.9 | -$9.1 | | Income from operations | $355.0 | $346.0 | +$9.0 | | Interest expense | $120.4 | $114.0 | +$6.4 | | Net income attributable to Evergy Kansas Central, Inc. | $228.2 | $229.9 | **-$1.7** | - Evergy Kansas Central's utility gross margin (non-GAAP) increased by **$2.1 million** year-to-date June 30, 2025, driven by increased transmission revenue, partially offset by lower retail sales due to unfavorable weather and the Kansas property tax rider[288](index=288&type=chunk) - Operating and maintenance expense decreased by **$4.4 million**, primarily due to an **$8.2 million decrease** in plant operating and maintenance expense at fossil-fuel generating facilities, mainly at JEC due to a major maintenance outage in 2024[289](index=289&type=chunk) [Evergy Metro, Inc. Management's Narrative Analysis of Results of Operations](index=72&type=section&id=Evergy%20Metro%2C%20Inc.%20Management%27s%20Narrative%20Analysis%20of%20Results%20of%20Operations) This section provides a narrative analysis of Evergy Metro's results of operations, including changes in operating revenues, expenses, and gross margin **Evergy Metro Operating Revenues and Expenses (YTD June 30, millions):** | Metric | 2025 | 2024 | Change | | :-------------------------- | :----- | :----- | :----- | | Operating revenues | $898.9 | $894.9 | +$4.0 | | Fuel and purchased power | $282.6 | $282.1 | +$0.5 | | Operating and maintenance | $149.1 | $135.5 | **+$13.6** | | Depreciation and amortization | $204.0 | $202.4 | +$1.6 | | Taxes other than income tax | $71.2 | $73.5 | -$2.3 | | Income from operations | $192.0 | $201.4 | -$9.4 | | Interest expense | $70.5 | $76.0 | -$5.5 | | Net income | $105.7 | $107.3 | **-$1.6** | - Evergy Metro's utility gross margin (non-GAAP) increased by **$3.5 million** year-to-date June 30, 2025, primarily due to higher retail sales driven by increased retail pricing, despite unfavorable weather[297](index=297&type=chunk) - Operating and maintenance expense increased by **$13.6 million**, primarily due to a **$7.1 million increase** in general and administrative labor and employee benefits expense and a **$4.3 million increase** in plant operating and maintenance expense at fossil-fuel generating facilities, mainly at Iatan Station due to a major maintenance outage in 2025[298](index=298&type=chunk)[300](index=300&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=73&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that Evergy's exposure to market risk has not materially changed since December 31, 2024, and refers readers to the annual report for detailed disclosures - Evergy's exposure to market risk has **not materially changed** since December 31, 2024[303](index=303&type=chunk) - Risks include non-financial and non-quantifiable factors such as business, legal, operational, and credit risks[302](index=302&type=chunk) [Item 4. Controls and Procedures](index=74&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms that Evergy, Evergy Kansas Central, and Evergy Metro's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - Evergy, Evergy Kansas Central, and Evergy Metro's disclosure controls and procedures were **effective** at a reasonable assurance level as of June 30, 2025[304](index=304&type=chunk)[307](index=307&type=chunk)[309](index=309&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended June 30, 2025, for any of the registrants[305](index=305&type=chunk)[308](index=308&type=chunk)[310](index=310&type=chunk) [Part II - Other Information](index=74&type=section&id=Part%20II%20-%20Other%20Information) [Item 1. Legal Proceedings](index=74&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Notes 4 and 11 of the consolidated financial statements for information regarding material lawsuits and regulatory proceedings - Information on material lawsuits and regulatory proceedings is incorporated by reference from **Notes 4 and 11** to the consolidated financial statements[311](index=311&type=chunk) [Item 1A. Risk Factors](index=75&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the 2024 Form 10-K for Evergy, Evergy Kansas Central, and Evergy Metro - **No material changes** to risk factors have occurred since the filing of the 2024 Form 10-K for Evergy, Evergy Kansas Central, and Evergy Metro[313](index=313&type=chunk) - The business is influenced by many unpredictable factors and uncertainties that may materially affect actual results[312](index=312&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=76&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides information on Evergy's purchases of its equity securities during the three months ended June 30, 2025, specifically shares purchased for withholding taxes related to RSU vesting - Evergy purchased **451 shares** of its equity securities at an average price of **$69.25 per share** during May 2025[315](index=315&type=chunk) - These purchases were for withholding taxes related to the vesting of Restricted Share Units (RSUs)[315](index=315&type=chunk) [Item 3. Defaults Upon Senior Securities](index=76&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there are no defaults upon senior securities to report - **No defaults** upon senior securities are reported[316](index=316&type=chunk) [Item 4. Mine Safety Disclosures](index=76&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the registrant - Mine safety disclosures are **not applicable** to the registrant[317](index=317&type=chunk) [Item 5. Other Information](index=76&type=section&id=Item%205.%20Other%20Information) This section provides information on where to access SEC filings and other company information, including the SEC's website and Evergy Companies' investor relations website - SEC filings and other information for Evergy Companies are available on **sec.gov** and **http://investors.evergy.com**[318](index=318&type=chunk) - Material financial information is communicated through SEC filings, press releases, public conference calls, and the Investor Relations section of the company website[319](index=319&type=chunk) [Item 6. Exhibits](index=77&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the SEC, including certifications, XBRL documents, and other related materials - The exhibits include **Rule 13a-14(a)/15d-14(a) Certifications** and **Section 1350 Certifications** from David A. Campbell and W. Bryan Buckler for Evergy, Evergy Metro, and Evergy Kansas Central[321](index=321&type=chunk) - **XBRL Instance Document**, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Labels Linkbase, and Presentation Linkbase Documents are included[321](index=321&type=chunk) [Signatures](index=79&type=section&id=Signatures) This section contains the signatures of the authorized officer for Evergy, Inc., Evergy Kansas Central, Inc., and Evergy Metro, Inc., certifying the filing of the report - The report is signed by **W. Bryan Buckler**, Executive Vice President and Chief Financial Officer, on behalf of Evergy, Inc., Evergy Kansas Central, Inc., and Evergy Metro, Inc.[328](index=328&type=chunk)

[Glossary of Terms](index=3&type=section&id=Glossary%20of%20Terms) Provides definitions for key terms used throughout the financial report [PART I. FINANCIAL INFORMATION](index=8&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) Presents the company's comprehensive financial data, including statements and detailed notes, for the reported periods [Item 1. Financial Statements](index=8&type=section&id=Item%201%2E%20Financial%20Statements) This section presents the unaudited consolidated financial statements of Gulf Island Fabrication, Inc. for the quarter ended June 30, 2025, including the Balance Sheets, Statements of Operations, Statements of Changes in Shareholders' Equity, and Statements of Cash Flows, along with their accompanying notes. These statements provide a snapshot of the company's financial position, performance, and cash movements - Financial Statements Included: Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Changes in Shareholders' Equity, Consolidated Statements of Cash Flows[6](index=6&type=chunk) - Unaudited Nature: The financial statements are unaudited and prepared in accordance with GAAP for interim financial statements[28](index=28&type=chunk) [Consolidated Balance Sheets](index=8&type=section&id=Consolidated%20Balance%20Sheets) Presents the company's financial position, including assets, liabilities, and equity, at specific points in time Balance Sheet Summary (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Cash and cash equivalents | $46,825 | $27,284 | +$19,541 | | Short-term investments | $14,167 | $38,784 | -$24,617 | | Total current assets | $105,398 | $105,409 | -$11 | | Total assets | $134,348 | $133,216 | +$1,132 | | Total current liabilities | $22,775 | $21,376 | +$1,399 | | Total liabilities | $41,590 | $40,114 | +$1,476 | | Total shareholders' equity | $92,758 | $93,102 | -$344 | [Consolidated Statements of Operations](index=9&type=section&id=Consolidated%20Statements%20of%20Operations) Details the company's revenues, expenses, and net income or loss over specific reporting periods Three Months Ended June 30 (2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Revenue | $37,538 | $41,262 | -$3,724 | | Gross profit | $3,561 | $4,158 | -$597 | | Operating income (loss) | $(1,079) | $1,283 | -$2,362 | | Net income (loss) | $(574) | $1,889 | -$2,463 | | Basic income (loss) per share | $(0.04) | $0.12 | -$0.16 | | Diluted income (loss) per share | $(0.04) | $0.11 | -$0.15 | Six Months Ended June 30 (2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Revenue | $77,811 | $84,143 | -$6,332 | | Gross profit | $10,176 | $10,282 | -$106 | | Operating income (loss) | $2,201 | $6,991 | -$4,790 | | Net income (loss) | $3,253 | $8,129 | -$4,876 | | Basic income (loss) per share | $0.20 | $0.50 | -$0.30 | | Diluted income (loss) per share | $0.20 | $0.48 | -$0.28 | [Consolidated Statements of Changes in Shareholders' Equity](index=10&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) Outlines changes in the company's equity components, such as common stock and retained earnings, over time Shareholders' Equity Changes (December 31, 2024 to June 30, 2025) | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Common Stock Amount | $11,669 | $11,309 | -$360 | | Additional Paid-In Capital | $108,065 | $104,828 | -$3,237 | | Accumulated Deficit | $(26,632) | $(23,379) | +$3,253 | | Total Shareholders' Equity | $93,102 | $92,758 | -$344 | - Key Activities Impacting Equity (Six Months Ended June 30, 2025): - Net income: **$3,253 thousand**[20](index=20&type=chunk)[99](index=99&type=chunk) - Stock-based compensation expense: **$343 thousand**[20](index=20&type=chunk)[99](index=99&type=chunk) - Repurchases of common stock: **$(3,369) thousand**[20](index=20&type=chunk)[99](index=99&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Reports cash generated and used by the company across operating, investing, and financing activities 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) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Net cash provided by operating activities | $4,758 | $10,297 | -$5,539 | | Net cash provided by (used in) investing activities | $19,012 | $(37,508) | +$56,520 | | Net cash used in financing activities | $(4,229) | $(1,456) | -$2,773 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $19,541 | $(28,667) | +$48,208 | | Cash, cash equivalents and restricted cash, end of period | $48,022 | $10,984 | +$37,038 | - Key Investing Activities (Six Months Ended June 30, 2025): - Maturities of short-term investments: **$48,120 thousand**[23](index=23&type=chunk) - Purchases of short-term investments: **$(23,503) thousand**[23](index=23&type=chunk) - Acquisition of business: **$(3,500) thousand**[23](index=23&type=chunk) - Purchase of loan: **$(1,500) thousand**[23](index=23&type=chunk) [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations and additional information supporting the figures in the primary financial statements [Note 1. Organization and Summary of Significant Accounting Policies](index=12&type=section&id=1%2E%20ORGANIZATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the company's nature of operations, its recent acquisition of Englobal's businesses, the basis of financial statement presentation, and key accounting policies including revenue recognition, goodwill impairment, and fair value measurements. It also discusses the impact of oil and gas price volatility and macroeconomic conditions on estimates - Nature of Operations: Gulf Island Fabrication, Inc. is a **leading fabricator of complex steel structures, modules, and automation systems, and a provider of specialty services to industrial, energy, and government sectors**[26](index=26&type=chunk) - Reportable Segments: The company operates through **two operating divisions (Services and Fabrication)** and **one non-operating division (Corporate)**[26](index=26&type=chunk) - Englobal Acquisition: During **Q2 2025**, the company acquired **Englobal's Automation Business** (reflected in Fabrication Division) and **Engineering and Government Businesses** (reflected in Services Division)[27](index=27&type=chunk) - Significant Estimates and Judgments: Key estimates include **revenue recognition for long-term contracts (POC method)**, **fair value determination for acquired assets**, **impairment assessments for long-lived assets and goodwill**, **deferred income taxes**, and **reserves for bad debts**[31](index=31&type=chunk)[37](index=37&type=chunk) - Impact of Oil and Gas Price Volatility and Macroeconomic Conditions: These factors continue to create uncertainty, potentially leading to **reduced bidding, project suspensions, customer financial deterioration, and unanticipated project costs**[32](index=32&type=chunk)[33](index=33&type=chunk) - New Accounting Standards: The company adopted **ASU 2023-07 "Segment Reporting" in Q4 2024** and is evaluating **ASU 2023-09 "Income Taxes" (effective Q4 2025)** and **ASU 2024-03 "Income Statement Reporting" (effective Q4 2027)**[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk) [Note 2. Revenue, Contract Assets and Liabilities and Other Contract Matters](index=19&type=section&id=2%2E%20REVENUE%2C%20CONTRACT%20ASSETS%20AND%20LIABILITIES%20AND%20OTHER%20CONTRACT%20MATTERS) This note details the company's revenue recognition practices under Topic 606, disaggregating revenue by segment, contract type, and duration. It also provides information on future performance obligations, contract assets and liabilities, allowance for doubtful accounts, and changes in project estimates Revenue Disaggregation (Three Months Ended June 30, 2025) | Segment | Fixed-price and unit-rate (in thousands) | T&M and cost-reimbursable (in thousands) | Other (in thousands) | Total (in thousands) | | :-------- | :--------------------------------------- | :--------------------------------------- | :------------------- | :------------------- | | Services | $141 | $20,906 | $931 | $21,978 | | Fabrication | $7,764 | $8,081 | $0 | $15,845 | | Total | $7,896 | $28,987 | $655 | $37,538 | Revenue Disaggregation (Six Months Ended June 30, 2025) | Segment | Fixed-price and unit-rate (in thousands) | T&M and cost-reimbursable (in thousands) | Other (in thousands) | Total (in thousands) | | :-------- | :--------------------------------------- | :--------------------------------------- | :------------------- | :------------------- | | Services | $359 | $39,095 | $2,379 | $41,833 | | Fabrication | $18,799 | $17,740 | $0 | $36,539 | | Total | $19,080 | $56,835 | $1,896 | $77,811 | - Future Performance Obligations (June 30, 2025): - Total remaining performance obligations: **$6.8 million**[66](index=66&type=chunk) - Expected to be recognized as revenue during **2025**[66](index=66&type=chunk) - Includes approximately **$2.1 million** related to the Englobal Business[67](index=67&type=chunk) Contract Assets and Liabilities (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------------- | :----------------------------- | :----------------------------- | | Contract assets | $7,727 | $8,611 | | Contract liabilities | $(2,078) | $(1,278) | | Contracts in progress, net | $5,649 | $7,333 | - Allowance for Doubtful Accounts and Credit Losses: Provision for bad debts and credit losses was **$1.5 million** for Q2 and YTD June 30, 2025, related to a reserve for the Alliance Payment in connection with the Englobal Acquisition[70](index=70&type=chunk) [Note 3. Acquisition](index=23&type=section&id=3%2E%20ACQUISITION) This note details the acquisition of Englobal Business, including the DIP Loan and Alliance Loan, the preliminary purchase price allocation, and supplemental pro forma financial information. The acquisition involved a "credit bid" of the DIP Loan as the purchase price, while the Alliance Loan resulted in a $1.5 million reserve due to unlikelihood of recovery - Englobal Acquisition Details: - Acquired **Automation Business** (effective May 12, 2025) and **Engineering & Government Businesses** (effective June 16, 2025)[77](index=77&type=chunk) - Consideration: Assumption of certain liabilities and a **"credit bid" of the $3.5 million DIP Loan**[77](index=77&type=chunk) - Alliance Loan: Assumed **$2.4 million senior secured loan** from Englobal for a **$1.5 million cash payment (Alliance Payment)**. A **$1.5 million reserve** was recorded as recovery is not probable[78](index=78&type=chunk) - Transaction costs: **$0.3 million (Q2 2025)** and **$0.5 million (YTD June 30, 2025)**[77](index=77&type=chunk)[78](index=78&type=chunk) Preliminary Purchase Price Allocation (in thousands) | Category | Allocation | | :-------------------------------- | :--------- | | Net tangible assets and liabilities | $1,711 | | Intangible assets - trade name | $400 | | Goodwill | $1,389 | | **Purchase Price** | **$3,500** | Pro Forma Revenue (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :---------------- | :----------------------------- | :----------------------------- | | Pro forma revenue | $83,214 | $93,340 | Pro Forma Net Income (Loss) (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :---------------------- | :----------------------------- | :----------------------------- | | Pro forma net income (loss) | $1,907 | $6,032 | [Note 4. Credit Facilities and Debt](index=25&type=section&id=4%2E%20CREDIT%20FACILITIES%20AND%20DEBT) This note details the company's credit facilities and debt obligations, including the LC Facility, surety bonds, and the Note Agreement with Zurich, which is secured by a Mortgage Agreement on the Houma Facility - LC Facility: **$10.0 million letter of credit facility** with Whitney Bank, maturing **June 30, 2026**. **$1.2 million outstanding** at June 30, 2025, secured by restricted cash[86](index=86&type=chunk) - Surety Bonds: **$15.6 million outstanding** at June 30, 2025, used to support projects and insurance, with indemnification obligations[87](index=87&type=chunk) - Note Agreement: Promissory note with Zurich for **$20.0 million**, bearing **3.0% interest per annum**, payable in **15 equal annual installments**. First payment made December 30, 2024, final payment due December 31, 2038[88](index=88&type=chunk) Note Agreement Principal Maturities (in thousands) | Year | Principal Maturities | | :--- | :------------------- | | 2025 | $1,108 | | 2026 | $1,141 | | 2027 | $1,175 | | 2028 | $1,210 | | 2029 | $1,247 | | Thereafter | $13,044 | | **Total maturities** | **$18,925** | - Mortgage Agreement: Secures the Note Agreement with Zurich, encumbering the Houma Facility real estate[89](index=89&type=chunk) [Note 5. Commitments and Contingencies](index=26&type=section&id=5%2E%20COMMITMENTS%20AND%20CONTINGENCIES) This note discusses various commitments and contingencies, including routine legal proceedings, a lawsuit related to the forty-vehicle ferry projects, insurance coverage limitations, and environmental matters - Routine Legal Proceedings: Subject to various routine legal proceedings, primarily commercial disputes, workers' compensation, and personal injury claims, not expected to have a **material adverse effect**[90](index=90&type=chunk) - Forty-Vehicle Ferry Projects Lawsuit: Lawsuit filed against customer for cost and schedule impacts due to design deficiencies; customer denied claim and asserted counterclaim for defective workmanship. Mediation was unsuccessful, trial set for **February 2, 2026**[91](index=91&type=chunk) - Insurance Coverage: Generally uninsured for future damage to property and equipment due to **coverage limitations and high premiums/deductibles**. Maintains insurance for other aspects but exposed to losses due to deductibles and retentions[93](index=93&type=chunk)[94](index=94&type=chunk) - Letters of Credit and Surety Bonds: Contingent obligations for performance guarantees, with **cash securitization for LCs** and **indemnification for surety bonds**[95](index=95&type=chunk) - Environmental Matters: Believes to be in material compliance with environmental laws and regulations; no **material adverse effect** expected[96](index=96&type=chunk) [Note 6. Income (Loss) Per Share and Shareholders' Equity](index=29&type=section&id=6%2E%20INCOME%20%28LOSS%29%20PER%20SHARE%20AND%20SHAREHOLDERS%27%20EQUITY) This note provides the computation of basic and diluted income (loss) per share and details the company's share repurchase program Basic and Diluted EPS (Three Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Basic income (loss) per share | $(0.04) | $0.12 | | Diluted income (loss) per share | $(0.04) | $0.11 | Basic and Diluted EPS (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Basic income (loss) per share | $0.20 | $0.50 | | Diluted income (loss) per share | $0.20 | $0.48 | - Share Repurchase Program: - Authorized up to **$10.0 million** of common stock repurchases, expiring **December 15, 2026**[99](index=99&type=chunk) - Repurchased **523,593 shares for $3.4 million** during the six months ended June 30, 2025[99](index=99&type=chunk) - Remaining authorization: **$5.3 million** at June 30, 2025[99](index=99&type=chunk)[201](index=201&type=chunk) [Note 7. Reportable Segments](index=30&type=section&id=7%2E%20REPORTABLE%20SEGMENTS) This note details the company's reportable segments: Services, Fabrication, and Corporate. It explains the reclassification of the former Shipyard Division, the integration of the Englobal Acquisition results into the Services and Fabrication divisions, and provides summarized financial information for each segment - Segment Structure: **Two operating divisions (Services, Fabrication)** and **one non-operating division (Corporate)**[101](index=101&type=chunk) - Shipyard Division: No longer a reportable segment effective **January 1, 2025**, following the substantial completion of wind-down operations in **Q4 2023** and expiration of warranty in **Q1 2025**. Remaining results are in Corporate Division's other (income) expense, net[101](index=101&type=chunk) - Englobal Acquisition Integration: - Automation Business results integrated into **Fabrication Division**[102](index=102&type=chunk) - Engineering Business and Government Business results integrated into **Services Division**[102](index=102&type=chunk) - Services Division Activities: Provides **maintenance, repair, construction, scaffolding, coatings, welding enclosures, cleaning, environmental, engineering, design, project management, commissioning, and technical field services**[103](index=103&type=chunk) - Fabrication Division Activities: Fabricates **modules, skids, piping systems, foundations, steel components, support structures, industrial automation systems, and offshore production platforms**[104](index=104&type=chunk) Segment Operating Income (Loss) (Three Months Ended June 30, 2025, in thousands) | Segment | Operating Income (Loss) | | :---------- | :---------------------- | | Services | $1,569 | | Fabrication | $407 | | Corporate | $(3,055) | Segment Operating Income (Loss) (Six Months Ended June 30, 2025, in thousands) | Segment | Operating Income (Loss) | | :---------- | :---------------------- | | Services | $3,152 | | Fabrication | $4,202 | | Corporate | $(5,153) | [Note 8. Subsequent Events](index=32&type=section&id=8%2E%20SUBSEQUENT%20EVENTS) This note discloses the enactment of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, and the company's ongoing evaluation of its potential effects on financial statements and disclosures - OBBBA Enactment: The **One Big Beautiful Bill Act** was enacted on **July 4, 2025**, including tax reform provisions[109](index=109&type=chunk) - Evaluation of Impact: The company is evaluating the potential effect of OBBBA on its financial statements and disclosures[109](index=109&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a narrative discussion and analysis of Gulf Island Fabrication, Inc.'s financial condition and results of operations for the periods presented, offering insights into performance drivers, strategic initiatives, and future outlook. It includes forward-looking statements and discusses key factors impacting the business [Cautionary Statement on Forward-Looking Information](index=33&type=section&id=Cautionary%20Statement%20on%20Forward-Looking%20Information) Highlights inherent uncertainties and risks associated with forward-looking statements in the report - Forward-Looking Statements: Statements about **future performance, operations, projects, diversification, Englobal integration, industry outlook, cash flows, capital expenditures, tax rates, share repurchase program, liquidity, and strategic initiatives**[112](index=112&type=chunk) - Risk Factors: Actual results may differ due to factors like **Englobal integration, oil and gas industry cyclicality, competitive pricing, reliance on major customers, supply chain disruptions, changes in contract estimates, operating dangers, and ability to secure new projects**[113](index=113&type=chunk) - No Obligation to Update: The company undertakes **no obligation to publicly update or revise any forward-looking statements**[114](index=114&type=chunk) [Overview](index=34&type=section&id=Overview) Provides a high-level summary of the company's core business, customer base, and operational structure - Core Business: **Leading fabricator of complex steel structures, modules, and automation systems, and provider of specialty services**[115](index=115&type=chunk) - Customer Base: U.S. and international energy producers, refining, petrochemical, LNG, industrial and power operators, EPC companies, and government entities[115](index=115&type=chunk) - Reportable Segments: **Services, Fabrication, and Corporate divisions**[115](index=115&type=chunk) [Former Shipyard Division](index=34&type=section&id=Former%20Shipyard%20Division) Details the wind-down and reclassification of the former Shipyard Division's operations and financial results - Wind-down Completion: Shipyard Division operations substantially completed in **Q4 2023**, with final completion (warranty expiration) in **Q1 2025**[116](index=116&type=chunk) - Segment Reclassification: No longer a reportable segment effective **January 1, 2025**; remaining results included in Corporate Division[116](index=116&type=chunk) [Acquisition](index=34&type=section&id=Acquisition) Summarizes the recent Englobal acquisition and its integration into the company's operating divisions - Englobal Acquisition: Acquired **Automation Business (May 12, 2025)** and **Engineering & Government Businesses (June 16, 2025)**[117](index=117&type=chunk) - Integration: Automation Business results in **Fabrication Division**; Engineering & Government Business results in **Services Division**[117](index=117&type=chunk) [Impacts of Oil and Gas Price Volatility and Macroeconomic Conditions on Operations](index=34&type=section&id=Impacts%20of%20Oil%20and%20Gas%20Price%20Volatility%20and%20Macroeconomic%20Conditions%20on%20Operations) Discusses how fluctuating oil and gas prices and broader economic factors influence company operations - Ongoing Volatility: Oil and gas prices remain volatile, influenced by **geopolitical turmoil**[118](index=118&type=chunk) - Macroeconomic Factors: Global economic factors like **labor constraints, trade policies, supply chain disruptions, inflation, and economic slowdowns** continue to impact operations[118](index=118&type=chunk) - Potential Impacts: **Reduced bidding activity, project suspensions/terminations, customer financial deterioration, and unanticipated project costs/delays**[119](index=119&type=chunk) [Recent Regulatory Changes](index=34&type=section&id=Recent%20Regulatory%20Changes) Addresses the enactment of new legislation and its potential implications for the company's financial reporting - OBBBA Enactment: The **One Big Beautiful Bill Act** was enacted on **July 4, 2025**, with tax reform provisions[120](index=120&type=chunk) - Evaluation Underway: Company is evaluating the potential effect on financial statements and disclosures[120](index=120&type=chunk) [Strategic Transformation](index=35&type=section&id=Strategic%20Transformation) Outlines the company's ongoing strategic initiatives aimed at achieving stable, profitable growth and diversification - Current Strategic Focus: Generating **stable, profitable growth**[121](index=121&type=chunk) - Key Initiatives: - Expand skilled workforce[121](index=121&type=chunk) - Improve resource utilization[122](index=122&type=chunk) - Strengthen project execution and maintain bidding discipline[123](index=123&type=chunk) - Diversify offshore services customer base and expand services onshore[124](index=124&type=chunk) - Continue pursuing traditional offshore fabrication markets[126](index=126&type=chunk) - Reduce reliance on offshore oil and gas, pursue new growth end markets, and increase T&M vs. fixed price revenue mix[127](index=127&type=chunk)[128](index=128&type=chunk) [Operating Outlook](index=38&type=section&id=Operating%20Outlook) Presents the company's forward-looking perspective on operational priorities, success factors, and potential challenges - Primary Focus: Securing **profitable new project awards and backlog**, generating **operating income and cash flows**, and **workforce safety**[129](index=129&type=chunk) - Success Factors: Ability to **hire/retain skilled labor, oil and gas prices/volatility, fabrication opportunities in traditional and new markets, securing new project awards, facility utilization, project execution, Englobal integration, and strategic growth opportunities**[131](index=131&type=chunk) - Potential Adverse Effects: **Losses from Englobal Business, costs for temporary under-utilized personnel, investments in personnel/process improvements, strategic pursuit costs, and organic growth investment costs**[129](index=129&type=chunk) [Critical Accounting Policies](index=38&type=section&id=Critical%20Accounting%20Policies) Confirms the consistency of critical accounting policies and estimates since the last reporting period - No Changes: **No changes** to critical accounting policies and estimates since December 31, 2024[130](index=130&type=chunk) [New Project Awards and Backlog](index=39&type=section&id=New%20Project%20Awards%20and%20Backlog) Provides an overview of new project awards and the current backlog, indicating future revenue recognition New Project Awards (Three Months Ended June 30, 2025 vs. 2024) | Segment | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :---------- | :----------------------------- | :----------------------------- | :-------------------- | | Services | $21,858 | $22,392 | $(534) | | Fabrication | $10,558 | $17,610 | $(7,052) | | Total | $32,131 | $39,810 | $(7,679) | New Project Awards (Six Months Ended June 30, 2025 vs. 2024) | Segment | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :---------- | :----------------------------- | :----------------------------- | :-------------------- | | Services | $41,729 | $47,860 | $(6,131) | | Fabrication | $24,943 | $35,882 | $(10,939) | | Total | $66,111 | $83,628 | $(17,517) | Backlog (June 30, 2025 vs. December 31, 2024) | Segment | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :---------- | :----------------------------- | :----------------------------- | :-------------------- | | Services | $470 | $52 | +$418 | | Fabrication | $6,330 | $15,499 | -$9,169 | | Total | $6,800 | $15,551 | -$8,751 | - Backlog Recognition: All backlog at June 30, 2025, is expected to be recognized as revenue during **2025**[133](index=133&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, detailing revenue, gross profit, and net income trends across periods [Comparison of the Three Months Ended June 30, 2025 and 2024 (Consolidated)](index=40&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024%20%28Consolidated%29) For the three months ended June 30, 2025, consolidated revenue decreased by $3.7 million, leading to a decline in gross profit and a shift from operating income to an operating loss, and net income to a net loss, compared to the same period in 2024. This was primarily due to lower revenue in both Services and Fabrication divisions, a lower margin project mix in Services, and significant other expenses related to the Englobal Acquisition Consolidated Financial Performance (Three Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | New project awards | $32,131 | $39,810 | $(7,679) | | Revenue | $37,538 | $41,262 | $(3,724) | | Gross profit | $3,561 | $4,158 | $(597) | | Gross profit percentage | 9.5% | 10.1% | -0.6% | | Operating income (loss) | $(1,079) | $1,283 | $(2,362) | | Net income (loss) | $(574) | $1,889 | $(2,463) | - Key Drivers of Change: - Revenue decrease primarily due to **lower offshore services work** and **small-scale fabrication activity**[136](index=136&type=chunk) - Gross profit decrease due to **lower revenue, lower margin project mix in Services, and lower utilization in Fabrication** (including Automation Business)[138](index=138&type=chunk) - Other (income) expense, net: **$1.4 million expense in 2025** (vs. $0.5 million income in 2024) due to **$1.5 million Alliance Payment reserve** and **$0.3 million Englobal Acquisition transaction costs**[141](index=141&type=chunk) [Segments (Three Months Ended June 30, 2025 and 2024)](index=42&type=section&id=Segments%20%28Three%20Months%20Ended%20June%2030%2C%202025%20and%202024%29) For the three months ended June 30, 2025, the Services Division saw decreased revenue and gross profit due to lower offshore services work and a lower margin project mix, while the Fabrication Division also experienced lower revenue and gross profit from reduced small-scale fabrication activity and underutilization of resources, despite a higher margin project mix. The Corporate Division's operating loss increased significantly due to acquisition-related charges [Services Division (Three Months Ended June 30, 2025 and 2024)](index=42&type=section&id=Services%20Division%20%28Three%20Months%20Ended%20June%2030%2C%202025%20and%202024%29) Analyzes the Services Division's financial performance, highlighting revenue, gross profit, and operating income trends Financial Performance (Three Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | New project awards | $21,858 | $22,392 | $(534) | | Revenue | $21,978 | $22,767 | $(789) | | Gross profit | $2,398 | $2,888 | $(490) | | Gross profit percentage | 10.9% | 12.7% | -1.8% | | Operating income | $1,569 | $2,189 | $(620) | - Key Drivers: **Lower offshore services work, lower margin project mix**, and **underutilization of resources for acquired Engineering and Government Businesses**[144](index=144&type=chunk) [Fabrication Division (Three Months Ended June 30, 2025 and 2024)](index=43&type=section&id=Fabrication%20Division%20%28Three%20Months%20Ended%20June%2030%2C%202025%20and%202024%29) Examines the Fabrication Division's financial performance, focusing on revenue, gross profit, and operating income changes Financial Performance (Three Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | New project awards | $10,558 | $17,610 | $(7,052) | | Revenue | $15,845 | $18,727 | $(2,882) | | Gross profit | $1,163 | $1,239 | $(76) | | Gross profit percentage | 7.3% | 6.6% | +0.7% | | Operating income | $407 | $1,129 | $(722) | - Key Drivers: **Lower small-scale fabrication activity, lower utilization of facilities and resources** (including Automation Business), offset by a **higher margin project mix**[147](index=147&type=chunk) [Former Shipyard Division (Three Months Ended June 30, 2025 and 2024)](index=44&type=section&id=Former%20Shipyard%20Division%20%28Three%20Months%20Ended%20June%2030%2C%202025%20and%202024%29) Confirms the absence of financial activity for the former Shipyard Division during the reported period - No Activity in 2025: **No new project awards, revenue, or gross profit for Q2 2025**[150](index=150&type=chunk) - Completion: Ferry Projects completed in **2024**, last warranty expired **Q1 2025**[150](index=150&type=chunk) [Corporate Division (Three Months Ended June 30, 2025 and 2024)](index=44&type=section&id=Corporate%20Division%20%28Three%20Months%20Ended%20June%2030%2C%202025%20and%202024%29) Reviews the Corporate Division's operating loss and the key factors influencing its financial results Financial Performance (Three Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Operating loss | $(3,055) | $(2,044) | $(1,011) | - Key Drivers: - Other (income) expense, net: **$1.4 million expense in 2025** (vs. $0.1 million income in 2024) due to **$1.5 million Alliance Payment charge** and **$0.3 million Englobal Acquisition transaction costs**[152](index=152&type=chunk) - General and administrative expense decreased by **23.2%** due to lower incentive plan costs and timing of certain costs[153](index=153&type=chunk) [Comparison of the Six Months Ended June 30, 2025 and 2024 (Consolidated)](index=45&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%20%28Consolidated%29) For the six months ended June 30, 2025, consolidated revenue decreased by $6.3 million, and operating income significantly declined by $4.8 million, leading to a substantial decrease in net income compared to the same period in 2024. This was primarily driven by lower revenue in the Services and former Shipyard divisions, and a significant increase in other expenses related to the Englobal Acquisition Consolidated Financial Performance (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | New project awards | $66,111 | $83,628 | $(17,517) | | Revenue | $77,811 | $84,143 | $(6,332) | | Gross profit | $10,176 | $10,282 | $(106) | | Gross profit percentage | 13.1% | 12.2% | +0.9% | | Operating income | $2,201 | $6,991 | $(4,790) | | Net income | $3,253 | $8,129 | $(4,876) | - Key Drivers of Change: - Revenue decrease primarily due to **lower offshore services work** and **no revenue from the Shipyard Division**[155](index=155&type=chunk) - Gross profit slightly decreased due to **lower revenue and lower margin project mix in Services**, offset by **higher margin project mix in Fabrication**[157](index=157&type=chunk) - Other (income) expense, net: **$1.5 million expense in 2025** (vs. $3.5 million income in 2024) due to **$1.5 million Alliance Payment charge** and **$0.5 million Englobal Acquisition transaction costs**, contrasting with significant gains from asset sales in 2024[160](index=160&type=chunk) [Segments (Six Months Ended June 30, 2025 and 2024)](index=47&type=section&id=Segments%20%28Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%29) For the six months ended June 30, 2025, the Services Division experienced decreased revenue and operating income due to lower offshore services work and a lower margin project mix. The Fabrication Division saw increased revenue and gross profit due to higher small-scale fabrication activity and a higher margin project mix, despite a decline in new project awards. The Corporate Division's operating loss increased significantly due to acquisition-related charges [Services Division (Six Months Ended June 30, 2025 and 2024)](index=47&type=section&id=Services%20Division%20%28Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%29) Analyzes the Services Division's year-to-date financial performance, including revenue and operating income trends Financial Performance (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | New project awards | $41,729 | $47,860 | $(6,131) | | Revenue | $41,833 | $48,301 | $(6,468) | | Gross profit | $4,681 | $6,501 | $(1,820) | | Gross profit percentage | 11.2% | 13.5% | -2.3% | | Operating income | $3,152 | $5,056 | $(1,904) | - Key Drivers: **Lower offshore services work, lower margin project mix, costs for new cleaning and environmental service line**, and **underutilization of acquired Engineering and Government Businesses**[162](index=162&type=chunk)[165](index=165&type=chunk) [Fabrication Division (Six Months Ended June 30, 2025 and 2024)](index=48&type=section&id=Fabrication%20Division%20%28Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%29) Examines the Fabrication Division's year-to-date financial performance, focusing on revenue and gross profit changes Financial Performance (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | New project awards | $24,943 | $35,882 | $(10,939) | | Revenue | $36,539 | $35,865 | $674 | | Gross profit | $5,495 | $3,431 | $2,064 | | Gross profit percentage | 15.0% | 9.6% | +5.4% | | Operating income | $4,202 | $5,850 | $(1,648) | - Key Drivers: **Higher small-scale fabrication activity** and a **higher margin project mix** drove revenue and gross profit increases. Operating income decreased due to **higher G&A (business development, Automation Business acquisition)** and significantly lower other income (2024 included **$2.9M gain from real property sale** and **$1.1M from equipment sales**)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) [Former Shipyard Division (Six Months Ended June 30, 2025 and 2024)](index=49&type=section&id=Former%20Shipyard%20Division%20%28Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%29) Confirms the absence of financial activity for the former Shipyard Division for the year-to-date period - No Activity in 2025: **No new project awards, revenue, gross profit, or operating income for YTD June 30, 2025**[171](index=171&type=chunk) - Completion: Ferry Projects completed in **2024**, last warranty expired **Q1 2025**[171](index=171&type=chunk) [Corporate Division (Six Months Ended June 30, 2025 and 2024)](index=49&type=section&id=Corporate%20Division%20%28Six%20Months%20Ended%20June%2030%2C%202025%20and%202024%29) Reviews the Corporate Division's year-to-date operating loss and the key factors influencing its financial results Financial Performance (Six Months Ended June 30, 2025 vs. 2024) | Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Operating loss | $(5,153) | $(4,266) | $(887) | - Key Drivers: - Other (income) expense, net: **$1.6 million expense in 2025** (vs. $0.2 million income in 2024) due to **$1.5 million Alliance Payment charge** and **$0.5 million Englobal Acquisition transaction costs**[173](index=173&type=chunk) - General and administrative expense decreased by **18.7%** due to lower incentive plan costs and timing of certain costs[174](index=174&type=chunk) [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's cash position, working capital, and cash flow activities, along with future liquidity needs Available Liquidity (June 30, 2025, in thousands) | Metric | Amount | | :---------------------------------------------------- | :------- | | Cash and cash equivalents | $46,825 | | Short-term investments | $14,167 | | Restricted cash | $1,197 | | **Total cash, cash equivalents, short-term investments and restricted cash** | **$62,189** | - Working Capital (June 30, 2025, in thousands): **$82.6 million**. Excluding cash, cash equivalents, short-term investments, restricted cash, and current debt, working capital was **$21.6 million**[177](index=177&type=chunk) Cash Flow Activity (Six Months Ended June 30, 2025, in thousands) | Metric | Amount | | :---------------------------------------- | :------- | | Net cash provided by operating activities | $4,758 | | Net cash provided by investing activities | $19,012 | | Net cash used in financing activities | $(4,229) | - Primary Uses of Liquidity (Remainder of 2025 and foreseeable future): - Costs for under-utilization of facilities (including Englobal Business losses)[188](index=188&type=chunk) - Englobal Business integration costs[188](index=188&type=chunk) - Capital expenditures (estimated **$1.5M-$2.0M** for remainder of 2025)[190](index=190&type=chunk) - Working capital requirements[188](index=188&type=chunk) - Interest and principal payments on Note Agreement[188](index=188&type=chunk) - Corporate administrative expenses[188](index=188&type=chunk) - Organic and inorganic growth opportunities[188](index=188&type=chunk) - Share repurchases under Share Repurchase Program[188](index=188&type=chunk) - Liquidity Outlook: Believes current liquidity is sufficient for remainder of 2025 and foreseeable future, but acknowledges uncertainties from **financial forecasts, oil and gas volatility, macroeconomic conditions, and potential future losses**[189](index=189&type=chunk) [Off-Balance Sheet Arrangements](index=54&type=section&id=Off-Balance%20Sheet%20Arrangements) Confirms the absence of material off-balance sheet arrangements impacting the company's financial condition - No Material Off-Balance Sheet Arrangements: The company has **no off-balance sheet arrangements** with a material current or future effect on financial condition, results of operations, or liquidity[191](index=191&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk.](index=54&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk%2E) This section states that there are no applicable quantitative and qualitative disclosures about market risk for the company - Not Applicable: **No market risk disclosures are applicable**[192](index=192&type=chunk) [Item 4. Controls and Procedures](index=54&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management, with the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2025, and concluded they were effective. There were no material changes in internal control over financial reporting during Q2 2025, and the Englobal Business was excluded from the scope of management's review of internal control over financial reporting - Disclosure Controls Effectiveness: Disclosure controls and procedures were **effective as of June 30, 2025**[193](index=193&type=chunk) - No Material Changes in Internal Control: **No material changes** in internal control over financial reporting during Q2 2025[194](index=194&type=chunk) - Englobal Business Exclusion: The Englobal Business was **excluded from the scope of management's review of internal control over financial reporting**[194](index=194&type=chunk) [PART II. OTHER INFORMATION](index=55&type=section&id=PART%20II%2E%20OTHER%20INFORMATION) Presents additional non-financial information, including legal proceedings, risk factors, and equity security details [Item 1. Legal Proceedings](index=55&type=section&id=Item%201%2E%20Legal%20Proceedings) This section states that there are no legal proceedings to report under this item - None: **No legal proceedings to report**[197](index=197&type=chunk) [Item 1A. Risk Factors](index=55&type=section&id=Item%201A%2E%20Risk%20Factors) This section highlights a new risk factor related to the Englobal Acquisition: the company may not successfully integrate the Englobal Business or realize anticipated benefits, potentially impacting operations and financial condition due to integration expenses, operating losses, and potential litigation - New Risk Factor: **Inability to successfully integrate the Englobal Business or realize anticipated benefits**[199](index=199&type=chunk) - Potential Impacts: Adverse effects on operations and financial condition due to **integration expenses, operating losses, and potential litigation**[199](index=199&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section summarizes the company's common stock repurchases under its Share Repurchase Program during the three months ended June 30, 2025. The Board increased the authorization to $10.0 million and extended the program to December 15, 2026 Common Stock Repurchases (Three Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :------------------ | :----------------------------- | :--------------------------- | | April 1 to 30, 2025 | 167,106 | $6.38 | | May 1 to 31, 2025 | 199,153 | $6.32 | | June 1 to 30, 2025 | 70,970 | $6.72 | | **Total** | **437,229** | **$6.41** | - Share Repurchase Program Update: Authorization increased from **$5.0 million to $10.0 million** and extended to **December 15, 2026**[201](index=201&type=chunk) - Remaining Authorization: **$5.3 million** available at June 30, 2025[99](index=99&type=chunk) [Item 5. Other Information](index=55&type=section&id=Item%205%2E%20Other%20Information) This section states that no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the second quarter of 2025 - Insider Trading Arrangements: **No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements** adopted or terminated by directors or officers in Q2 2025[202](index=202&type=chunk) [Item 6. Exhibits](index=56&type=section&id=Item%206%2E%20Exhibits) This section lists the exhibits filed or furnished with the Form 10-Q, including organizational documents, restricted stock unit agreements, CEO/CFO certifications, and XBRL documents - Exhibits List: Includes **Amended and Restated Articles of Incorporation, Bylaws, various Restricted Stock Unit Agreements, CEO/CFO Certifications, Section 906 Certification, and Inline XBRL documents**[203](index=203&type=chunk) [Signatures](index=57&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q, confirming its submission by an authorized officer of Gulf Island Fabrication, Inc - Authorized Signature: Signed by **Westley S. Stockton, Executive Vice President, Chief Financial Officer, Treasurer and Secretary**[208](index=208&type=chunk) - Date: **August 6, 2025**[209](index=209&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 or ☐ TRANSITION REPORT PURSUANT TO Section 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-39735 The Beachbody Company, Inc. (Exact name of registrant as specified in its charter) Delaware 85-3222090 (State or other jurisdiction o ...

PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents The Beachbody Company, Inc.'s unaudited condensed consolidated financial statements for the quarter and six months ended June 30, 2025, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, revenue disaggregation, fair value measurements, inventory, debt, equity, and restructuring activities [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------- | :------------ | :---------------- | :--------- | :--------- | | Total Assets | $145,894 | $174,556 | $(28,662) | -16.4% | | Total Liabilities | $125,736 | $146,386 | $(20,650) | -14.1% | | Total Stockholders' Equity | $20,158 | $28,170 | $(8,012) | -28.4% | - Current assets decreased by **$21.39 million (27.2%)** from $78.685 million at December 31, 2024, to $57.295 million at June 30, 2025, primarily driven by decreases in other current assets and inventory[10](index=10&type=chunk) - Current liabilities decreased by **$31.504 million (24.7%)** from $127.638 million at December 31, 2024, to $96.134 million at June 30, 2025, largely due to a decrease in deferred revenue and the current portion of the Term Loan[10](index=10&type=chunk) [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Unaudited Condensed Consolidated Statements of Operations – Three Months Ended June 30 (in thousands) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Total Revenue | $63,941 | $110,183 | $(46,242) | -42.0% | | Gross Profit | $46,238 | $76,376 | $(30,138) | -39.5% | | Operating Loss | $(3,964) | $(9,482) | $5,518 | -58.2% | | Net Loss | $(5,900) | $(10,865) | $4,965 | -45.7% | | Net Loss per Share | $(0.85) | $(1.59) | $0.74 | -46.5% | Unaudited Condensed Consolidated Statements of Operations – Six Months Ended June 30 (in thousands) | Metric (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change ($) | Change (%) | | :-------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Total Revenue | $136,304 | $230,229 | $(93,925) | -40.8% | | Gross Profit | $97,787 | $157,658 | $(59,871) | -38.0% | | Operating Loss | $(7,638) | $(20,305) | $12,667 | -62.4% | | Net Loss | $(11,648) | $(25,081) | $13,433 | -53.6% | | Net Loss per Share | $(1.68) | $(3.70) | $2.02 | -54.6% | [Unaudited Condensed Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Unaudited Condensed Consolidated Statements of Comprehensive Loss – Three Months Ended June 30 (in thousands) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Net Loss | $(5,900) | $(10,865) | | Total Other Comprehensive Loss | $(6) | $(4) | | Total Comprehensive Loss | $(5,906) | $(10,869) | Unaudited Condensed Consolidated Statements of Comprehensive Loss – Six Months Ended June 30 (in thousands) | Metric (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(11,648) | $(25,081) | | Total Other Comprehensive Income (Loss) | $(15) | $34 | | Total Comprehensive Loss | $(11,663) | $(25,047) | [Unaudited Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Unaudited Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | Balances at Dec 31, 2024 | Net Loss | Other Comprehensive Loss | Equity-based Compensation | Options Exercised, net | Tax Withholdings | ESPP Issuance | Balances at Jun 30, 2025 | | :-------------------- | :----------------------- | :------- | :----------------------- | :------------------------ | :--------------------- | :--------------- | :-------------- | :----------------------- | | Additional Paid-In Capital | $671,735 | — | — | $3,741 | $47 | $(215) | $78 | $675,386 | | Accumulated Deficit | $(643,518) | $(11,648) | — | — | — | — | — | $(655,166) | | Total Stockholders' Equity | $28,170 | $(11,648) | $(15) | $3,741 | $47 | $(215) | $78 | $20,158 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Unaudited Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $6,580 | $8,209 | | Net cash (used in) provided by investing activities | $(2,511) | $2,655 | | Net cash provided by (used in) financing activities | $785 | $(11,504) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $5,374 | $(1,082) | | Cash, cash equivalents and restricted cash, end of period | $25,561 | $32,327 | - Operating cash flow decreased by **$1.629 million**, primarily due to increased cash used by deferred revenue and accounts payable, partially offset by a decrease in net loss and increased cash from other assets and inventory[21](index=21&type=chunk)[198](index=198&type=chunk) - Investing activities shifted from a net cash inflow of **$2.655 million** in 2024 to a net cash outflow of **$2.511 million** in 2025, mainly due to the absence of proceeds from the sale of the Van Nuys facility in the current period[21](index=21&type=chunk)[199](index=199&type=chunk) - Financing activities significantly improved from a net cash outflow of **$11.504 million** in 2024 to a net cash inflow of **$0.785 million** in 2025, driven by new debt borrowings from the ABL Facility and the repayment of the Term Loan[21](index=21&type=chunk)[200](index=200&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Description of Business and Summary of Significant Accounting Policies](index=9&type=section&id=Note%201.%20Description%20of%20Business%20and%20Summary%20of%20Significant%20Accounting%20Policies) - The Beachbody Company, Inc. (BODi) is a fitness and nutrition company offering streaming fitness programs and nutritional products, which announced a strategic 'Pivot' on September 30, 2024, transitioning its network business from a Multi-Level Marketing (MLM) model to a single-level affiliate model[24](index=24&type=chunk) - The company adopted ASU 2023-07 (Improvements to Reportable Segment Disclosures) retrospectively on January 1, 2024, with no material effect on financial statements[28](index=28&type=chunk) - The company is evaluating the potential impact of ASU 2023-09 (Improvements to Income Tax Disclosures) and ASU 2024-03 (Disaggregation of Income Statement Expenses), effective for annual periods beginning after December 15, 2024, and December 15, 2026, respectively[29](index=29&type=chunk)[30](index=30&type=chunk) [Note 2. Revenue](index=11&type=section&id=Note%202.%20Revenue) Revenue by Geographic Region (in thousands) | Geographic Region (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | United States | $58,997 | $99,423 | $125,849 | $206,173 | | Rest of world | $4,944 | $10,760 | $10,455 | $24,056 | | Total Revenue | $63,941 | $110,183 | $136,304 | $230,229 | - Approximately **95%** of remaining deferred revenue performance obligations are expected to be recognized in the next 12 months[33](index=33&type=chunk) - The company recognized **$21.5 million** and **$57.8 million** of revenue from deferred revenue balances as of December 31, 2024, for the three and six months ended June 30, 2025, respectively[33](index=33&type=chunk) [Note 3. Fair Value Measurements](index=11&type=section&id=Note%203.%20Fair%20Value%20Measurements) Fair Value of Financial Instruments (in thousands) | Financial Instrument (in thousands) | June 30, 2025 (Level 3) | December 31, 2024 (Level 3) | | :---------------------------------- | :---------------------- | :-------------------------- | | Term Loan Warrants | $239 | $390 | | Common Stock Warrants | $1,065 | $1,783 | | Total Liabilities | $1,304 | $2,173 | - Private Placement Warrants and Public Warrants had a fair value of **zero** at June 30, 2025, and December 31, 2024, due to their high exercise price (**$575.00**) compared to the company's stock price (**$4.12** at June 30, 2025)[37](index=37&type=chunk)[40](index=40&type=chunk) - The fair value of Term Loan Warrants decreased by **$265 thousand** for the three months ended June 30, 2025, and by **$151 thousand** for the six months ended June 30, 2025, primarily due to changes in the Class A Common Stock price, contractual term, and risk-free rate[44](index=44&type=chunk) - The fair value of Common Stock Warrants decreased by **$1.293 million** for the three months ended June 30, 2025, and by **$718 thousand** for the six months ended June 30, 2025, driven by similar factors[46](index=46&type=chunk) [Note 4. Inventory](index=16&type=section&id=Note%204.%20Inventory) Inventory Breakdown (in thousands) | Inventory (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Raw materials and work in process | $5,767 | $7,650 | | Finished goods | $5,639 | $8,653 | | Total inventory | $11,406 | $16,303 | - Inventory decreased by **$4.897 million (30.0%)** from December 31, 2024, to June 30, 2025[47](index=47&type=chunk) - Adjustments to inventory carrying value were **$0.4 million** and **$0.6 million** for the three and six months ended June 30, 2025, respectively, primarily recorded in nutrition and other cost of revenue[47](index=47&type=chunk) [Note 5. Other Current Assets](index=17&type=section&id=Note%205.%20Other%20Current%20Assets) Other Current Assets (in thousands) | Other Current Assets (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------------- | :------------ | :---------------- | | Deferred Partner costs | $7,736 | $25,578 | | Accounts receivable, net | $1,851 | $1,449 | | Deferred Affiliate costs | $512 | $152 | | Other | $1,292 | $1,732 | | Total other current assets | $11,391 | $28,911 | - Total other current assets decreased by **$17.52 million (60.6%)** from December 31, 2024, to June 30, 2025, primarily due to a significant reduction in deferred Partner costs[48](index=48&type=chunk) [Note 6. Property and Equipment, Net](index=17&type=section&id=Note%206.%20Property%20and%20Equipment,%20Net) Property and Equipment, Net (in thousands) | Property and Equipment (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Property and equipment, gross | $138,296 | $141,897 | | Less: Accumulated depreciation | $(127,690) | $(129,148) | | Total property and equipment, net | $10,606 | $12,749 | - Net property and equipment decreased by **$2.143 million (16.8%)** from December 31, 2024, to June 30, 2025[49](index=49&type=chunk) - The company recognized a **$0.8 million** gain on the sale of its Van Nuys production facility on February 29, 2024, recorded as a reduction in general and administrative expenses[49](index=49&type=chunk) Depreciation Expense (in thousands) | Depreciation Expense (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue | $775 | $2,225 | $2,333 | $4,283 | | Enterprise technology and development | $1,247 | $3,186 | $2,577 | $6,506 | | Total depreciation | $2,022 | $5,411 | $4,910 | $10,789 | [Note 7. Accrued Expenses and Other Current Liabilities](index=18&type=section&id=Note%207.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Accrued Expenses (in thousands) | Accrued Expenses (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Employee compensation and benefits | $5,868 | $5,180 | | Sales and other taxes | $2,759 | $3,125 | | Outside professional services | $2,496 | $1,997 | | Advertising | $2,010 | $2,208 | | Information technology | $1,720 | $2,211 | | Inventory, shipping and fulfillment | $1,158 | $2,925 | | Partner costs | $459 | $3,272 | | Other accrued expenses | $4,132 | $4,064 | | Total accrued expenses | $20,602 | $24,982 | - Accrued expenses decreased by **$4.38 million (17.5%)** from December 31, 2024, to June 30, 2025, primarily due to reductions in Partner costs and inventory, shipping, and fulfillment expenses[51](index=51&type=chunk) - Advertising costs were **$10.5 million** and **$22.1 million** for the three and six months ended June 30, 2025, respectively, an increase from $8.2 million and $17.3 million in the prior year periods[52](index=52&type=chunk) - The company financed **$2.2 million** in annual insurance premiums with AFCO Acceptance Corporation and **$2.2 million** with First Insurance Funding in October 2024, with outstanding balances of **$0.4 million** and **$0.2 million**, respectively, as of June 30, 2025[53](index=53&type=chunk)[54](index=54&type=chunk) [Note 8. Commitments and Contingencies](index=18&type=section&id=Note%208.%20Commitments%20and%20Contingencies) Future Minimum Payments for Noncancelable Agreements (in thousands) | Future Minimum Payments (in thousands) | Amount | | :------------------------------------- | :----- | | Six months ending December 31, 2025 | $10,852 | | Year ending December 31, 2026 | $2,299 | | Year ending December 31, 2027 | $730 | | Year ending December 31, 2028 | $75 | | Total | $13,956 | - The company has noncancelable inventory purchase and service agreements totaling **$13.956 million** through 2028, with **$10.852 million** due in the second half of 2025[56](index=56&type=chunk) - Lease obligations require payments of approximately **$0.7 million** during the six months ending December 31, 2025, **$1.5 million** for 2026, and **$0.9 million** thereafter through 2029[58](index=58&type=chunk) - The company is involved in several legal proceedings, including a class action alleging misclassification of Partners as contractors, a class action related to the 2021 merger, and arbitration demands alleging Video Privacy Protection Act violations, with the company denying the allegations and intending to vigorously defend itself[60](index=60&type=chunk)[61](index=61&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) [Note 9. Debt](index=22&type=section&id=Note%209.%20Debt) - On May 13, 2025, the company entered into a new **$35.0 million** Asset-Based Lending (ABL) Facility, borrowing **$25.0 million**, which matures on May 13, 2028, and bears interest at SOFR + **9.00%** (with a potential reduction to SOFR + **7.75%**), and has a SOFR floor of **3.5%**[66](index=66&type=chunk) - The ABL Facility proceeds were used to repay the existing Term Loan in full on May 13, 2025, resulting in a **$2.2 million** loss on debt extinguishment for the three and six months ended June 30, 2025[72](index=72&type=chunk) - The Term Loan, initially **$50.0 million**, bore interest at SOFR + **7.15%** plus **3.00%** paid-in-kind interest, with an effective interest rate of **28.00%** from January 1, 2025, to May 13, 2025[74](index=74&type=chunk) - The company had one irrevocable standby letter of credit outstanding for **$0.1 million** at June 30, 2025, collateralized by **$0.1 million** in restricted cash[83](index=83&type=chunk) [Note 10. Segment](index=26&type=section&id=Note%2010.%20Segment) - The company operates as a single reporting segment, with the Chief Operating Decision Maker (CODM) assessing performance based on net loss and reviewing budget-to-actual variances quarterly[84](index=84&type=chunk)[85](index=85&type=chunk)[87](index=87&type=chunk) Selected Expenses (in thousands) | Expense (in thousands) | Three months ended June 30, 2025 | Six months ended June 30, 2025 | | :--------------------- | :------------------------------- | :----------------------------- | | Depreciation expense | $2,022 | $4,910 | | Content amortization expense | $2,289 | $5,018 | | Interest income, net | $300 | $500 | [Note 11. Stockholders' Equity](index=26&type=section&id=Note%2011.%20Stockholders'%20Equity) - As of June 30, 2025, the company had **2,000,000,000** authorized shares, including Class A, Class X, Class C common stock, and preferred stock, where Class A holders get one vote, Class X ten votes, and Class C no votes[88](index=88&type=chunk)[89](index=89&type=chunk) - In December 2023, the company completed an Equity Offering, issuing **420,769** shares of Class A common stock, pre-funded warrants for **122,821** shares (exercised in January 2024), and **543,590** Common Stock Warrants[90](index=90&type=chunk) Accumulated Other Comprehensive Income (Loss) (in thousands) | Accumulated Other Comprehensive Income (Loss) (in thousands) | Balances at March 31, 2025 | Other comprehensive loss before reclassifications | Balances at June 30, 2025 | | :----------------------------------------------------------- | :------------------------- | :------------------------------------------------ | :------------------------ | | Total | $(58) | $(6) | $(64) | [Note 12. Equity-Based Compensation](index=27&type=section&id=Note%2012.%20Equity-Based%20Compensation) Equity Options Activity | Equity Options Activity | Outstanding at Dec 31, 2024 | Exercised | Forfeited | Expired | Outstanding at Jun 30, 2025 | | :---------------------- | :-------------------------- | :-------- | :-------- | :------ | :-------------------------- | | Number of Options | 1,008,017 | (7,233) | (79,426) | (60,858) | 860,500 | | Weighted Average Exercise Price | $18.64 | $6.43 | $14.32 | $15.76 | $20.04 | RSU Activity | RSU Activity | Outstanding at Dec 31, 2024 | Granted | Vested | Forfeited | Outstanding at Jun 30, 2025 | | :------------- | :-------------------------- | :------ | :----- | :-------- | :-------------------------- | | Number of RSUs | 326,226 | 414,560 | (123,613) | (62,407) | 554,766 | | Weighted-Average Fair Value (per RSU) | $17.42 | $6.30 | $15.40 | $7.59 | $9.78 | - The fair value of RSUs vested was **$0.8 million** and **$1.9 million** for the three and six months ended June 30, 2025, respectively[95](index=95&type=chunk) Equity-Based Compensation Expense (in thousands) | Equity-Based Compensation Expense (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of revenue | $195 | $355 | $396 | $731 | | Selling and marketing | $235 | $1,891 | $505 | $3,393 | | Enterprise technology and development | $114 | $244 | $275 | $484 | | General and administrative | $1,471 | $2,249 | $2,565 | $4,496 | | Total equity-based compensation | $2,015 | $4,739 | $3,741 | $9,104 | [Note 13. Restructuring](index=30&type=section&id=Note%2013.%20Restructuring) - On June 26, 2025, the company initiated a post-Pivot restructuring, reducing headcount by approximately **70 employees (22% of the workforce)**, which is expected to incur **$2.6 million** in costs, with **$2.5 million** recorded in Q2 2025[102](index=102&type=chunk) - The 2024 restructuring charges totaled **$1.6 million** for the six months ended June 30, 2024, primarily for termination benefits[104](index=104&type=chunk) Restructuring-Related Liability (in thousands) | Restructuring-Related Liability (in thousands) | Balance at Dec 31, 2024 | Restructuring Charges | Payments / Utilizations | Liability at Jun 30, 2025 | | :--------------------------------------------- | :---------------------- | :-------------------- | :---------------------- | :------------------------ | | Employee-related costs | $938 | $2,492 | $(831) | $2,599 | [Note 14. Income Taxes](index=32&type=section&id=Note%2014.%20Income%20Taxes) Income Tax Provision (in thousands) | Income Tax Provision (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax provision | $(101) | $(67) | $(146) | $(129) | | Effective tax rate | -1.7% | -0.6% | -1.3% | -0.5% | - The effective tax rate differs from the U.S. statutory rate primarily due to changes in valuation allowances on deferred tax assets[108](index=108&type=chunk) [Note 15. Loss per Share](index=32&type=section&id=Note%2015.%20Loss%20per%20Share) Loss per Share (in thousands, except per share data) | Loss per Share (in thousands, except per share data) | 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 loss | $(5,900) | $(10,865) | $(11,648) | $(25,081) | | Weighted-average common shares outstanding | 6,950,761 | 6,812,750 | 6,917,062 | 6,786,761 | | Net loss per common share, basic and diluted | $(0.85) | $(1.59) | $(1.68) | $(3.70) | - Basic and diluted net loss per common share are the same because the inclusion of potential common shares would have been antidilutive[111](index=111&type=chunk) Antidilutive Common Shares Excluded | Antidilutive Common Shares Excluded | June 30, 2025 | June 30, 2024 | | :---------------------------------- | :------------ | :------------ | | Time-vesting options | 860,500 | 809,765 | | Performance-vesting options | — | 318,440 | | RSUs | 554,766 | 450,528 | | Compensation warrants | 79,612 | 79,612 | | Public and Private Placement Warrants | 306,667 | 306,667 | | Term Loan Warrants | 97,482 | 97,482 | | Common Stock Warrants | 543,590 | 543,590 | | Forest Road Earn-out Shares | 75,000 | 75,000 | | Total | 2,517,617 | 2,681,084 | [Item 2. Management's Discussion and Analysis of Financial Condition and Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting the impact of the 'Pivot' to an affiliate model, recent debt restructuring, and a detailed analysis of revenue, costs, and operating expenses, also discussing key operational metrics, non-GAAP financial measures like Adjusted EBITDA, liquidity, and capital resources [Overview](index=36&type=section&id=Overview) - BODi is a fitness and nutrition company focused on digital content, supplements, and consumer health, known for programs like P90X® and Shakeology®[118](index=118&type=chunk)[119](index=119&type=chunk) - On September 30, 2024, the company initiated a 'Pivot' to transition from a multi-level marketing (MLM) model to a single-level affiliate model, reducing headcount by approximately **170 employees (33% of the workforce)**[121](index=121&type=chunk) Key Financial Metrics – Three Months Ended June 30 (in millions) | Metric (in millions) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Change (%) | | :------------------- | :------------------------------- | :------------------------------- | :--------- | | Total Revenue | $63.9 | $110.2 | -42% | | Digital Revenue | $39.7 | $58.8 | -32% | | Nutrition and other Revenue | $24.2 | $50.1 | -52% | | Connected Fitness Revenue | $0.1 | $1.3 | -94% | | Operating Expenses | $50.2 | $85.9 | -41.5% | | Net Loss | $(5.9) | $(10.9) | -45.9% | | Adjusted EBITDA | $4.6 | $4.9 | -6.1% | Key Financial Metrics – Six Months Ended June 30 (in millions) | Metric (in millions) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Change (%) | | :------------------- | :----------------------------- | :----------------------------- | :--------- | | Total Revenue | $136.3 | $230.2 | -41% | | Digital Revenue | $82.6 | $120.3 | -31% | | Nutrition and other Revenue | $52.8 | $105.6 | -50% | | Connected Fitness Revenue | $0.9 | $4.3 | -80% | | Operating Expenses | $105.4 | $178.0 | -40.8% | | Net Loss | $(11.6) | $(25.1) | -53.8% | | Adjusted EBITDA | $8.3 | $9.5 | -12.6% | [Recent Developments](index=37&type=section&id=Recent%20Developments) - On May 13, 2025, the company secured a new **$35.0 million** Asset-Based Lending (ABL) Facility, borrowing **$25.0 million**, which matures on May 13, 2028, and bears interest at SOFR + **9.00%**[124](index=124&type=chunk) - Proceeds from the ABL Facility were used to fully repay the existing Term Loan (**$17.3 million** outstanding principal) on May 13, 2025, resulting in a **$2.2 million** loss on debt extinguishment[125](index=125&type=chunk) - On June 26, 2025, the company initiated a post-Pivot restructuring, reducing headcount by approximately **70 employees (22% of the workforce)**, with expected costs of **$2.6 million**, of which **$2.5 million** was recorded in Q2 2025[127](index=127&type=chunk) [Key Operational and Business Metrics](index=37&type=section&id=Key%20Operational%20and%20Business%20Metrics) Subscriptions (in millions) | Metric (in millions) | As of June 30, 2025 | As of June 30, 2024 | Change (%) | | :------------------- | :------------------ | :------------------ | :--------- | | Digital subscriptions | 0.94 | 1.15 | -18.3% | | Nutritional subscriptions | 0.07 | 0.14 | -50.0% | Operational Metrics | 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 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Average digital retention | 96.7% | 96.5% | 96.8% | 96.1% | | Total streams (millions) | 18.0 | 22.7 | 38.8 | 48.3 | | DAU/MAU | 31.4% | 31.9% | 32.0% | 32.6% | - Digital subscriptions decreased by **18%** and nutritional subscriptions by **50%** year-over-year, indicating lower demand[130](index=130&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) - Average digital retention slightly increased to **96.7%** (Q2 2025) and **96.8%** (YTD Q2 2025) compared to prior year periods, while total streams and DAU/MAU decreased, suggesting reduced customer engagement despite improved retention rates[131](index=131&type=chunk) [Non-GAAP Information](index=38&type=section&id=Non-GAAP%20Information) - Adjusted EBITDA is a non-GAAP measure used by management to evaluate core operating performance, excluding non-cash expenses (depreciation, amortization, equity-based compensation) and non-recurring items (restructuring costs, interest income/expense)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) Net Loss and Adjusted EBITDA (in thousands) | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(5,900) | $(10,865) | $(11,648) | $(25,081) | | Adjusted EBITDA | $4,632 | $4,928 | $8,345 | $9,482 | - Adjusted EBITDA decreased by **6.1%** for the three months and **12.6%** for the six months ended June 30, 2025, compared to the prior year, despite a reduction in net loss, indicating ongoing operational challenges[140](index=140&type=chunk) [Results of Operations](index=39&type=section&id=Results%20of%20Operations) [Revenue](index=41&type=section&id=Revenue) Revenue by Category – Three Months Ended June 30 (in thousands) | Revenue Category (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :------------------------------ | :------------------------------- | :------------------------------- | :------- | :------- | | Digital | $39,693 | $58,771 | $(19,078) | -32% | | Nutrition and other | $24,172 | $50,101 | $(25,929) | -52% | | Connected fitness | $76 | $1,311 | $(1,235) | -94% | | Total revenue | $63,941 | $110,183 | $(46,242) | -42% | Revenue by Category – Six Months Ended June 30 (in thousands) | Revenue Category (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | $ Change | % Change | | :------------------------------ | :----------------------------- | :----------------------------- | :------- | :------- | | Digital | $82,604 | $120,277 | $(37,673) | -31% | | Nutrition and other | $52,825 | $105,613 | $(52,788) | -50% | | Connected fitness | $875 | $4,339 | $(3,464) | -80% | | Total revenue | $136,304 | $230,229 | $(93,925) | -41% | - Digital revenue decreased due to **18% fewer subscriptions** and a **$2.9 million** decrease in Partner fees (due to the Pivot) for the three months ended June 30, 2025[145](index=145&type=chunk) - Nutrition and other revenue declined significantly due to **49% fewer nutritional subscriptions**, a **$4.1 million** decrease in preferred customer fees (due to the Pivot), and reduced shipping revenue, partially offset by increased Amazon sales[146](index=146&type=chunk) - Connected fitness revenue decreased by **94%** (three months) and **80%** (six months) as management ceased bike inventory sales in Q1 2025[147](index=147&type=chunk)[150](index=150&type=chunk) [Cost of Revenue](index=41&type=section&id=Cost%20of%20Revenue) Cost of Revenue by Category – Three Months Ended June 30 (in thousands) | Cost of Revenue (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :----------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Digital | $4,893 | $11,476 | $(6,583) | -57% | | Nutrition and other | $11,740 | $19,621 | $(7,881) | -40% | | Connected fitness | $1,070 | $2,710 | $(1,640) | -61% | | Total cost of revenue | $17,703 | $33,807 | $(16,104) | -48% | Gross Margin by Category | Gross Margin | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :----------------------------- | :------------------------------- | :------------------------------- | | Digital | 87.7% | 80.5% | | Nutrition and other | 51.4% | 60.8% | | Connected fitness | NM | (106.7%) | | Total gross margin | 72.3% | 69.3% | - Digital cost of revenue decreased by **57%** (three months) and **54%** (six months) due to lower content amortization, reduced personnel expenses from restructuring, and decreased depreciation, leading to an increase in digital gross margin[156](index=156&type=chunk)[160](index=160&type=chunk) - Nutrition and other cost of revenue decreased by **40%** (three and six months) due to lower product costs and reduced fulfillment/shipping expenses; however, gross margin decreased due to the elimination of preferred customer fees and higher promotional offerings[157](index=157&type=chunk)[158](index=158&type=chunk)[161](index=161&type=chunk) - Connected fitness cost of revenue decreased by **61%** (three months) and **65%** (six months) due to the cessation of bike inventory sales, resulting in lower freight, shipping, and product costs[159](index=159&type=chunk)[162](index=162&type=chunk) [Operating Expenses](index=45&type=section&id=Operating%20Expenses) [Selling and Marketing](index=45&type=section&id=Selling%20and%20Marketing) Selling and Marketing Expenses – Three Months Ended June 30 (in thousands) | Selling and Marketing (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Selling and marketing | $25,528 | $56,308 | $(30,780) | -55% | | As a percentage of total revenue | 39.9% | 51.1% | | -11.2% | Selling and Marketing Expenses – Six Months Ended June 30 (in thousands) | Selling and Marketing (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Selling and marketing | $56,498 | $115,569 | $(59,071) | -51% | | As a percentage of total revenue | 41.4% | 50.2% | | -8.8% | - Selling and marketing expenses decreased significantly (**55%** for three months, **51%** for six months) primarily due to a **$24.4 million** (three months) and **$46.3 million** (six months) decrease in Partner compensation following the Pivot, and reduced personnel and event expenses[164](index=164&type=chunk)[166](index=166&type=chunk) - The decrease was partially offset by increased media expense (**$3.4 million** for three months, **$7.2 million** for six months) and affiliated compensation (**$0.7 million** for three months, **$1.6 million** for six months) related to the Pivot transition[164](index=164&type=chunk)[166](index=166&type=chunk) - Selling and marketing expense as a percentage of total revenue decreased by **1,120 basis points** (three months) and **880 basis points** (six months) due to the significant reduction in Partner compensation[165](index=165&type=chunk)[167](index=167&type=chunk) [Enterprise Technology and Development](index=45&type=section&id=Enterprise%20Technology%20and%20Development) Enterprise Technology and Development Expenses – Three Months Ended June 30 (in thousands) | Enterprise Technology and Development (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :--------------------------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Expense | $10,611 | $17,162 | $(6,551) | -38% | | As a percentage of total revenue | 16.6% | 15.6% | | 1.0% | Enterprise Technology and Development Expenses – Six Months Ended June 30 (in thousands) | Enterprise Technology and Development (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | $ Change | % Change | | :--------------------------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Expense | $23,207 | $34,879 | $(11,672) | -33% | | As a percentage of total revenue | 17.0% | 15.1% | | 1.9% | - Expenses decreased by **38%** (three months) and **33%** (six months) due to lower personnel-related expenses from restructuring and a decrease in depreciation expense as certain long-lived assets were fully depreciated by December 31, 2024, following the Pivot[170](index=170&type=chunk)[172](index=172&type=chunk) - As a percentage of total revenue, these expenses increased by **100 basis points** (three months) and **190 basis points** (six months) because revenue decreased at a faster pace than the expense reductions[171](index=171&type=chunk)[173](index=173&type=chunk) [General and Administrative](index=48&type=section&id=General%20and%20Administrative) General and Administrative Expenses – Three Months Ended June 30 (in thousands) | General and Administrative (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :---------------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Expense | $11,571 | $12,388 | $(817) | -7% | | As a percentage of total revenue | 18.1% | 11.2% | | 6.9% | General and Administrative Expenses – Six Months Ended June 30 (in thousands) | General and Administrative (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | $ Change | % Change | | :---------------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Expense | $23,228 | $25,871 | $(2,643) | -10% | | As a percentage of total revenue | 17.0% | 11.2% | | 5.8% | - Expenses decreased by **7%** (three months) and **10%** (six months) primarily due to lower personnel-related expenses from restructuring activities and a **$0.8 million** gain on the sale of the Van Nuys facility in 2024[176](index=176&type=chunk)[178](index=178&type=chunk) - As a percentage of total revenue, these expenses increased by **690 basis points** (three months) and **580 basis points** (six months) due to revenue declining faster than expense reductions[177](index=177&type=chunk)[179](index=179&type=chunk) [Restructuring](index=48&type=section&id=Restructuring) Restructuring Charges – Three Months Ended June 30 (in thousands) | Restructuring Charges (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Restructuring | $2,492 | $0 | $2,492 | NM | Restructuring Charges – Six Months Ended June 30 (in thousands) | Restructuring Charges (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | $ Change | % Change | | :----------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Restructuring | $2,492 | $1,644 | $848 | 52% | - Restructuring charges in 2025 primarily relate to additional post-Pivot headcount reductions, totaling **$2.492 million** for both the three and six months ended June 30, 2025[180](index=180&type=chunk)[181](index=181&type=chunk) - In 2024, restructuring charges were **$1.644 million** for the six months ended June 30, primarily for employee termination costs related to key initiatives[180](index=180&type=chunk)[181](index=181&type=chunk) [Other Income (Expense)](index=48&type=section&id=Other%20Income%20(Expense)) Other Income (Expense) – Three Months Ended June 30 (in thousands) | Other Income (Expense) (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :------------------------------------ | :------------------------------- | :------------------------------- | :------- | :------- | | Loss on debt extinguishment | $(2,166) | $(719) | $(1,447) | NM | | Change in fair value of warrant liabilities | $1,558 | $647 | $911 | NM | | Interest expense | $(1,268) | $(1,652) | $384 | -23% | | Other income, net | $41 | $408 | $(367) | -90% | Other Income (Expense) – Six Months Ended June 30 (in thousands) | Other Income (Expense) (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | $ Change | % Change | | :------------------------------------ | :----------------------------- | :----------------------------- | :------- | :------- | | Loss on debt extinguishment | $(2,166) | $(1,928) | $(238) | 12% | | Change in fair value of warrant liabilities | $869 | $(77) | $946 | NM | | Interest expense | $(2,833) | $(3,527) | $694 | -20% | | Other income, net | $266 | $885 | $(619) | -70% | - Loss on debt extinguishment increased due to the full repayment of the Term Loan in May 2025, compared to partial prepayments in 2024[184](index=184&type=chunk)[185](index=185&type=chunk) - The change in fair value of warrant liabilities shifted from a loss to a gain, primarily driven by a **45%** decline in the company's stock price in Q2 2025, compared to a **12%** decrease in Q2 2024[184](index=184&type=chunk)[185](index=185&type=chunk) - Interest expense decreased by **23%** (three months) and **20%** (six months) due to a lower average principal debt balance and a reduced effective interest rate on the new ABL Facility (**15.4%**) compared to the Term Loan (**28.0%**)[184](index=184&type=chunk)[185](index=185&type=chunk) [Income Tax Provision](index=50&type=section&id=Income%20Tax%20Provision) Income Tax Provision – Three Months Ended June 30 (in thousands) | Income Tax Provision (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | $ Change | % Change | | :---------------------------------- | :------------------------------- | :------------------------------- | :------- | :------- | | Income tax provision | $(101) | $(67) | $(34) | 51% | Income Tax Provision – Six Months Ended June 30 (in thousands) | Income Tax Provision (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | $ Change | % Change | | :---------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Income tax provision | $(146) | $(129) | $(17) | 13% | - The income tax provision increased by **51%** (three months) and **13%** (six months) primarily due to changes in the valuation allowance and an increase in net expense from discrete events[187](index=187&type=chunk)[188](index=188&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) - The company secured a new **$35.0 million** ABL Facility on May 13, 2025, borrowing **$25.0 million**, and used the proceeds to fully repay its existing Term Loan, providing approximately **$5 million** in additional capital[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) - The ABL Facility includes financial covenants such as minimum billings targets, minimum digital subscriptions targets, capital expenditure limits, and a minimum liquidity requirement of **$12 million**[193](index=193&type=chunk)[195](index=195&type=chunk) - As of June 30, 2025, the company had **$25.6 million** in cash and cash equivalents and was in compliance with its financial covenants[194](index=194&type=chunk)[197](index=197&type=chunk) - Management believes existing cash, cash equivalents, and cost control initiatives will provide sufficient liquidity for the next twelve months and longer-term, but may explore additional debt or equity financing[203](index=203&type=chunk)[204](index=204&type=chunk) [Critical Accounting Policies and Estimates](index=54&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - There have been no material changes to the company's critical accounting estimates discussed in the 2024 Annual Report on Form 10-K[206](index=206&type=chunk) [Recent Accounting Pronouncements](index=54&type=section&id=Recent%20Accounting%20Pronouncements) - Refer to Note 1, 'Description of Business and Summary of Significant Accounting Policies,' for information on recently adopted accounting pronouncements[207](index=207&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to foreign currency exchange risk, noting that approximately 8% of revenue for the six months ended June 30, 2025, was in foreign currencies, and the company has ceased entering into foreign exchange options and is exiting the sale of physical products in the UK and France - Approximately **8%** of the company's revenue for the six months ended June 30, 2025, was in foreign currencies, primarily Canadian dollars and British pounds[208](index=208&type=chunk) - The company has ceased entering into foreign exchange options and is exiting the sale of nutritional and other physical products in the United Kingdom and France as part of the Pivot[210](index=210&type=chunk) - A hypothetical **10%** change in exchange rates would result in an approximate **$1.5 million** increase or decrease in cost of revenue and operating expenses[212](index=212&type=chunk) - The aggregate notional amount of foreign exchange derivative instruments was **zero** at June 30, 2025, and December 31, 2024[213](index=213&type=chunk) [Item 4. Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and Interim CFO, 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 most recent fiscal quarter - The Chief Executive Officer and Interim Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[214](index=214&type=chunk) - There have been no material changes in internal control over financial reporting during the most recent fiscal quarter[216](index=216&type=chunk) - Management acknowledges that any control system has inherent limitations and cannot provide absolute assurance of achieving its objectives[217](index=217&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) This section updates on ongoing legal proceedings, including a class action lawsuit alleging misclassification of Partners as employees, a class action related to the 2021 merger, and arbitration demands concerning Video Privacy Protection Act violations, with the company denying the allegations and vigorously defending these matters - A class action complaint filed May 22, 2023, alleges misclassification of Partners as contractors rather than employees and other California Labor Code violations; the company is defending against this, with **13 arbitrations settled for nominal fees**[219](index=219&type=chunk) - A class action filed June 14, 2024 (Reilly Action) alleges breach of fiduciary duty related to the 2021 merger; aiding and abetting claims against the company were dismissed without prejudice on December 5, 2024, but indemnification obligations remain[220](index=220&type=chunk)[221](index=221&type=chunk) - On October 14, 2024, **10 arbitration demands** were filed, alleging Video Privacy Protection Act violations, with intentions to file similar demands for approximately **6,239 additional subscribers**; the company denies these allegations[223](index=223&type=chunk) [Item 1A. Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material developments regarding the risk factors previously reported in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - There have been no material developments with respect to the risk factors previously reported in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024[224](index=224&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=58&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section indicates that there were no unregistered sales of equity securities or use of proceeds to report for the period - There were no unregistered sales of equity securities or use of proceeds to report[226](index=226&type=chunk) [Item 3. Defaults Upon Senior Securities](index=58&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[227](index=227&type=chunk) [Item 4. Mine Safety Disclosures](index=58&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to the company[228](index=228&type=chunk) [Item 5. Other Information](index=58&type=section&id=Item%205.%20Other%20Information) This section reports that no director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[229](index=229&type=chunk) [Item 6. Exhibits](index=59&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, warrant forms, credit agreements, and certifications - The exhibits include the Second Amended and Restated Certificate of Incorporation and Bylaws, Form of Third Amended and Restated Warrant to Purchase Stock, and the Credit Agreement dated May 13, 2025[231](index=231&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) are filed herewith[231](index=231&type=chunk) [Signatures](index=60&type=section&id=Signatures) This section contains the official signatures of the registrant's Chief Executive Officer and Interim Chief Financial Officer, certifying the report's submission - The report is signed by Carl Daikeler, Chief Executive Officer, and Brad Ramberg, Interim Chief Financial Officer, on August 6, 2025[237](index=237&type=chunk)

PART I FINANCIAL INFORMATION [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Financial statements reflect the sale of the Professional segment, with continuing operations showing lower revenue and a wider net loss [Unaudited Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Consolidated%20Balance%20Sheets) Total assets were $149.7 million, while stockholders' equity decreased to $78.3 million due to net losses Balance Sheet Summary | Balance Sheet Items (in thousands) | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | **Total current assets** | $47,603 | $45,347 | | *Current assets of discontinued operations* | *$27,473* | *$24,354* | | **Total assets** | **$149,692** | **$150,111** | | **Total current liabilities** | $29,001 | $25,921 | | *Current liabilities of discontinued operations* | *$11,093* | *$11,825* | | **Total liabilities** | **$71,406** | **$67,842** | | **Total stockholders' equity** | **$78,286** | **$82,269** | [Unaudited Consolidated Statements of Operations](index=7&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Operations) Revenues from continuing operations decreased 8.6% year-over-year, leading to a significantly wider operating and net loss Quarterly Operations Summary | Metric (in thousands) | Thirteen Weeks Ended June 29, 2025 | Thirteen Weeks Ended June 30, 2024 | | :--- | :--- | :--- | | Revenues | $23,506 | $25,726 | | Gross profit | $8,410 | $9,596 | | Operating loss | $(4,425) | $(1,475) | | Net loss from continuing operations | $(4,862) | $(2,082) | | Net Loss | $(3,736) | $(761) | | Net loss per share - basic | $(0.34) | $(0.07) | [Unaudited Consolidated Statements of Cash Flows](index=10&type=section&id=Unaudited%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from continuing operating activities decreased significantly from $14.6 million to $3.0 million year-over-year Cash Flow Summary | Cash Flow Activity (in thousands) | Twenty-six Weeks Ended June 29, 2025 | Twenty-six Weeks Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by continuing operating activities | $2,962 | $14,585 | | Net cash used in continuing investing activities | $(13) | $(863) | | Net cash used in continuing financing activities | $(204) | $(13,496) | | **Net change in cash (continuing ops)** | **$2,745** | **$226** | [Notes to Unaudited Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail the sale of the Professional segment, debt covenant non-compliance, and subsequent waivers from lenders - On June 14, 2025, the Company entered into an Equity Purchase Agreement to sell its Professional segment for **$99.0 million in cash**[28](index=28&type=chunk)[68](index=68&type=chunk) - The Company was **not in compliance with financial covenants** for its credit agreement for multiple quarters but received waivers contingent on the sale of the Professional segment[82](index=82&type=chunk)[86](index=86&type=chunk)[109](index=109&type=chunk) - Following the reclassification, continuing operations consist solely of the **Property Management segment**[26](index=26&type=chunk)[106](index=106&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 8.6% revenue decline to reduced billed hours, while SG&A expenses rose due to strategic review costs Key Operating Metrics | Metric (in thousands) | Thirteen Weeks Ended June 29, 2025 | Thirteen Weeks Ended June 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $23,506 | $25,726 | (8.6)% | | Gross Profit | $8,410 | $9,596 | (12.4)% | | SG&A Expenses | $12,576 | $10,739 | 17.1% | - The decrease in revenue was primarily due to a **9.7% reduction in billed hours**, resulting from lower demand and increased competition[117](index=117&type=chunk) - The increase in SG&A expenses was primarily driven by **$1.6 million in costs** related to the strategic alternatives review process[119](index=119&type=chunk)[120](index=120&type=chunk) Adjusted EBITDA Reconciliation | Adjusted EBITDA (in thousands) | Thirteen Weeks Ended June 29, 2025 | Thirteen Weeks Ended June 30, 2024 | | :--- | :--- | :--- | | Net loss from continuing operations | $(4,862) | $(2,082) | | **Adjusted EBITDA from continuing operations** | **$(1,145)** | **$(264)** | [Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposure relates to variable interest rates on its debt facilities - The company is exposed to market risk from **variable interest rates** on its Revolving Facility and Term Loan, which could negatively impact future earnings[155](index=155&type=chunk)[156](index=156&type=chunk) [Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - Based on an evaluation as of June 29, 2025, the CEO and CFO concluded that the company's **disclosure controls and procedures are effective**[157](index=157&type=chunk) - No changes in internal control over financial reporting occurred during the fiscal quarter that have **materially affected** these controls[158](index=158&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) No material changes have occurred in legal proceedings since the last annual report - There has been **no change** from the information provided in the Annual Report on Form 10-K for the fiscal year ended December 29, 2024[161](index=161&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) New risks arise from the pending sale of the Professional segment, including non-completion and potential NYSE delisting - The closing of the sale of the Professional segment is contingent upon receiving **stockholder approval** and satisfying other conditions[163](index=163&type=chunk) - The pending sale may adversely affect the retained business through **management distraction** and higher employee turnover[164](index=164&type=chunk) - Following the sale, the company's reduced size may affect its ability to satisfy NYSE's continued listing standards, which could result in **delisting**[165](index=165&type=chunk) - If the sale is not completed, the company may be required to pay a **termination fee of $2,970,000** or expense reimbursement up to $3,000,000[167](index=167&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[170](index=170&type=chunk) [Exhibits](index=38&type=section&id=Item%206.%20Exhibits) Key exhibits include the Equity Purchase Agreement for the segment sale and an amendment to the credit agreement - Key exhibits filed include the **Equity Purchase Agreement** dated June 14, 2025, and the Waiver and Second Amendment to the Credit Agreement[174](index=174&type=chunk)

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for NN, Inc., including statements of operations, balance sheets, cash flows, and changes in stockholders' equity, along with detailed notes explaining the company's business, accounting policies, segment information, and specific financial line items for the periods ended June 30, 2025 and 2024 [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) This statement details the company's revenues, expenses, and net income or loss over specific periods Consolidated Statements of Operations and Comprehensive Income (Loss) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net sales | $107,921 | $122,992 | $213,609 | $244,190 | | Cost of sales | $89,699 | $101,257 | $181,345 | $202,343 | | Selling, general, and administrative expense | $12,095 | $13,511 | $23,265 | $26,859 | | Depreciation and amortization | $8,918 | $11,761 | $17,692 | $24,308 | | Loss from operations | $(1,464) | $(2,147) | $(6,253) | $(6,930) | | Interest expense | $5,657 | $5,873 | $10,851 | $11,239 | | Loss on extinguishment of debt | $3,007 | — | $3,007 | — | | Net loss | $(8,102) | $(2,203) | $(14,787) | $(14,740) | | Basic and diluted net loss per share | $(0.26) | $(0.12) | $(0.48) | $(0.46) | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents the company's assets, liabilities, and equity at specific points in time Consolidated Balance Sheets | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total current assets | $171,979 | $167,562 | | Total assets | $460,760 | $456,893 | | Total current liabilities | $89,153 | $83,912 | | Total liabilities | $298,702 | $288,874 | | Total stockholders' equity | $59,540 | $74,522 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(4,041) | $(569) | | Net cash used in investing activities | $(7,179) | $(8,815) | | Net cash provided by financing activities | $1,563 | $1,569 | | Net change in cash and cash equivalents | $(8,586) | $(8,157) | | Cash and cash equivalents at end of period | $9,542 | $13,746 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) This statement outlines changes in equity components, including net loss, dividends, and other comprehensive income - **Total stockholders' equity** decreased from **$74,522 thousand** at December 31, 2024, to **$59,540 thousand** at June 30, 2025, primarily due to **net loss** and dividends accrued for preferred stock, partially offset by other comprehensive income[23](index=23&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the financial statements [Note 1. Interim Financial Statements](index=10&type=section&id=Note%201.%20Interim%20Financial%20Statements) This note describes the company's business, operations, and significant accounting policies for interim reporting - **NN, Inc.** is a diversified industrial company manufacturing high-precision components globally, operating **24 facilities** across North America, South America, Europe, and China as of June 30, 2025[26](index=26&type=chunk) - The company adopted ASU 2023-07 (Segment Reporting) for the year ended December 31, 2024, and plans to adopt ASU 2023-09 (Income Taxes) in its 2025 Form 10-K. ASU 2024-03 (Expense Disaggregation) is effective for fiscal years beginning after December 15, 2026, with impact yet to be determined[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) - The Mobile Solutions plant in Dowagiac, Michigan, ceased production and its land and building, with a **net book value of $1.4 million**, are classified as held for sale as of June 30, 2025[33](index=33&type=chunk) [Note 2. Segment Information](index=11&type=section&id=Note%202.%20Segment%20Information) This note provides financial data and operational details for the company's reportable business segments - **NN, Inc.** operates two reportable segments: Mobile Solutions (automotive, general industrial, medical) and Power Solutions (electrical, general industrial, automotive, medical), plus a Corporate category for unallocated costs[34](index=34&type=chunk)[37](index=37&type=chunk) Segment Sales and Income (Loss) from Operations (Three Months Ended June 30) | Segment (in thousands) | 2025 Sales | 2024 Sales | 2025 Income (Loss) from Operations | 2024 Income (Loss) from Operations | | :--------------------- | :--------- | :--------- | :--------------------------------- | :--------------------------------- | | Mobile Solutions | $63,391 | $72,855 | $(1,110) | $(1,630) | | Power Solutions | $44,641 | $50,151 | $5,782 | $5,320 | | Corporate and Eliminations | $(111) | $(14) | $(6,136) | $(5,837) | | Total | $107,921 | $122,992 | $(1,464) | $(2,147) | Segment Sales and Income (Loss) from Operations (Six Months Ended June 30) | Segment (in thousands) | 2025 Sales | 2024 Sales | 2025 Income (Loss) from Operations | 2024 Income (Loss) from Operations | | :--------------------- | :--------- | :--------- | :--------------------------------- | :--------------------------------- | | Mobile Solutions | $125,635 | $145,915 | $(3,797) | $(3,773) | | Power Solutions | $88,149 | $98,389 | $8,805 | $9,299 | | Corporate and Eliminations | $(175) | $(114) | $(11,261) | $(12,456) | | Total | $213,609 | $244,190 | $(6,253) | $(6,930) | Segment Capital Expenditures and Depreciation & Amortization (Six Months Ended June 30) | Metric (in thousands) | 2025 Capital Expenditures | 2024 Capital Expenditures | 2025 Depreciation & Amortization | 2024 Depreciation & Amortization | | :-------------------- | :------------------------ | :------------------------ | :------------------------------- | :------------------------------- | | Mobile Solutions | $5,531 | $6,182 | $10,180 | $16,119 | | Power Solutions | $1,212 | $2,036 | $6,718 | $7,362 | | Corporate | $887 | $834 | $794 | $827 | | Total | $7,630 | $9,052 | $17,692 | $24,308 | Total Assets by Reportable Segment | Segment (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------- | :------------ | :---------------- | | Mobile Solutions | $297,796 | $294,204 | | Power Solutions | $131,057 | $124,460 | | Corporate | $31,907 | $38,229 | | Total | $460,760 | $456,893 | [Note 3. Revenue from Contracts with Customers](index=13&type=section&id=Note%203.%20Revenue%20from%20Contracts%20with%20Customers) This note details the company's revenue recognition policies and disaggregation of net sales by industry - Revenue is recognized when control of goods or services is transferred to the customer. The company's products serve automotive, commercial vehicle, general industrial, and residential/commercial electrical industries[44](index=44&type=chunk)[45](index=45&type=chunk) Net Sales by Customer Industry (Three Months Ended June 30) | Industry (in thousands) | 2025 Sales | 2024 Sales | | :---------------------- | :--------- | :--------- | | Automotive and Commercial Vehicle | $65,612 | $58,283 | | General Industrial | $12,210 | $31,203 | | Residential/Commercial Electrical | $18,444 | $21,486 | | Other | $11,655 | $12,020 | | Total net sales | $107,921 | $122,992 | Net Sales by Customer Industry (Six Months Ended June 30) | Industry (in thousands) | 2025 Sales | 2024 Sales | | :---------------------- | :--------- | :--------- | | Automotive and Commercial Vehicle | $125,736 | $115,514 | | General Industrial | $26,192 | $63,054 | | Residential/Commercial Electrical | $38,976 | $41,718 | | Other | $22,705 | $23,904 | | Total net sales | $213,609 | $244,190 | - A single customer in the Mobile Solutions segment accounted for **13% of consolidated revenue** during the six months ended June 30, 2025[49](index=49&type=chunk) - **Deferred revenue** increased from **$0.2 million** at December 31, 2024, to **$0.5 million** at June 30, 2025. Revenue recognized from prior period **deferred revenue** was **$0.1 million** for the six months ended June 30, 2025[50](index=50&type=chunk) [Note 4. Accounts Receivable](index=14&type=section&id=Note%204.%20Accounts%20Receivable) This note provides information on accounts receivable, including the allowance for credit losses and customer concentrations Changes in Allowance for Credit Losses (Six Months Ended June 30) | Metric (in thousands) | 2025 | 2024 | | :-------------------- | :--- | :--- | | Balance at beginning of year | $1,515 | $1,241 | | Additions | $134 | $582 | | Write-offs and other | $(86) | $(148) | | Currency impact | $37 | $(15) | | Balance at end of period | $1,600 | $1,660 | - Fees related to the sale of receivables decreased from **$0.6 million** in the six months ended June 30, 2024, to **$0.3 million** in the same period of 2025[53](index=53&type=chunk) - One customer represented **12% of consolidated accounts receivable** as of June 30, 2025, primarily related to the Mobile Solutions segment[54](index=54&type=chunk) [Note 5. Inventories](index=14&type=section&id=Note%205.%20Inventories) This note presents the breakdown of inventory components, including raw materials, work in process, and finished goods Inventories (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------- | :------------ | :---------------- | | Raw materials | $23,058 | $20,664 | | Work in process | $21,194 | $22,139 | | Finished goods | $18,541 | $19,074 | | Total inventories | $62,793 | $61,877 | [Note 6. Intangible Assets](index=15&type=section&id=Note%206.%20Intangible%20Assets) This note details the carrying value and amortization of the company's intangible assets by segment Changes in Intangible Assets, Net (in thousands) | Segment | Balance as of December 31, 2024 | Amortization | Balance as of June 30, 2025 | | :-------------- | :------------------------------ | :----------- | :-------------------------- | | Mobile Solutions | $15,649 | $(1,677) | $13,972 | | Power Solutions | $28,761 | $(5,134) | $23,627 | | Total | $44,410 | $(6,811) | $37,599 | - No impairment charges were recognized for **intangible assets** during the six months ended June 30, 2025 and 2024[57](index=57&type=chunk) [Note 7. Investment in Joint Venture](index=15&type=section&id=Note%207.%20Investment%20in%20Joint%20Venture) This note describes the company's equity method investment in a joint venture and changes in its carrying value - **NN, Inc.** holds a **49% equity method investment** in Wuxi Weifu Autocam Precision Machinery Company, Ltd. (the 'JV') in Wuxi, China[58](index=58&type=chunk) Changes in Investment in Joint Venture (in thousands) | Metric | Amount | | :-------------------------- | :----- | | Balance as of December 31, 2024 | $34,971 | | Share of earnings | $4,620 | | Foreign currency translation gain | $721 | | Balance as of June 30, 2025 | $40,312 | [Note 8. Debt](index=15&type=section&id=Note%208.%20Debt) This note provides details on the company's debt facilities, including term loans, ABL, and financing obligations Debt Facilities Outstanding (in thousands) | Debt Facility | June 30, 2025 | December 31, 2024 | | :---------------------------------- | :------------ | :---------------- | | Term loan facilities | $118,901 | $114,397 | | ABL Facility | $5,000 | $5,400 | | Financing obligations from sale-leaseback transactions | $30,493 | $24,496 | | International loans | $9,140 | $8,485 | | Unamortized debt issuance costs and discount | $(3,907) | $(4,148) | | Total debt | $159,627 | $148,630 | - On April 16, 2025, **NN, Inc.** entered into a new **$128.0 million** senior secured Term Loan Facility, consisting of a **$118.0 million** funded term loan and **$10.0 million** in delayed draw commitments, maturing on April 16, 2030. Proceeds were used to repay the previous 2021 Term Loan Facility[63](index=63&type=chunk) - The Term Loans currently bear interest at Adjusted Term SOFR plus **9.25%** (subject to a **2.00% floor**) or Base Rate plus **8.25%**. A portion of interest can be paid in-kind (PIK Election) before April 16, 2027, with an applicable margin increase of **0.50%**. At June 30, 2025, the rate was **14.18%**[64](index=64&type=chunk)[66](index=66&type=chunk) - The company was in compliance with the financial covenants of the Term Loan Facility and ABL Facility as of June 30, 2025[69](index=69&type=chunk)[77](index=77&type=chunk) - In 2024 and 2025, **NN, Inc.** completed sale-leaseback transactions for properties and equipment, generating **$21.2 million** and **$10.6 million** in proceeds, respectively. These are recognized as financing obligations with weighted average effective interest rates of **9.500%** for properties and **9.170%** for equipment[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) [Note 9. Preferred Stock](index=18&type=section&id=Note%209.%20Preferred%20Stock) This note describes the terms, classification, and carrying value of the company's Series D Perpetual Preferred Stock - The Series D Perpetual Preferred Stock, issued in March 2021, has an initial **liquidation preference of $1,000 per share** and earns cash dividends at **10.0% per year**, or **12.0%** in-kind if not paid in cash. Rates increase by **2.5%** annually starting March 22, 2026[82](index=82&type=chunk) - The Series D Preferred Stock is classified as mezzanine equity due to potential redemption upon a change of control. Its **carrying value** was **$102.5 million** as of June 30, 2025, including **$55.8 million** of accumulated unpaid and deemed dividends[83](index=83&type=chunk)[85](index=85&type=chunk) Changes in Series D Preferred Stock Carrying Value (in thousands) | Metric | Amount | | :-------------------------- | :----- | | Balance as of December 31, 2024 | $93,497 | | Accrual of in-kind dividends | $6,199 | | Amortization | $2,822 | | Balance as of June 30, 2025 | $102,518 | [Note 10. Leases](index=19&type=section&id=Note%2010.%20Leases) This note provides supplemental cash flow information and balances related to the company's operating and finance leases Supplemental Cash Flow Information Related to Leases (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | | :----------------------------------------- | :---- | :---- | | Operating cash flows used in operating leases | $4,315 | $4,731 | | Operating cash flows used in finance leases | $256 | $162 | | Financing cash flows used in finance leases | $1,960 | $1,105 | | Right-of-use assets obtained in exchange for new operating lease liabilities | — | $692 | | Right-of-use assets obtained in exchange for new finance lease liabilities | $276 | $645 | - **Sublease income** remained consistent at **$1.9 million** for both the six months ended June 30, 2025 and 2024[88](index=88&type=chunk) Finance Lease-Related Assets and Liabilities (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Finance lease assets | $17,174 | $16,579 | | Finance lease current liabilities | $3,671 | $3,565 | | Finance lease non-current liabilities | $4,133 | $5,469 | | Total finance lease liabilities | $7,804 | $9,034 | [Note 11. Commitments and Contingencies](index=19&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) This note outlines the company's legal proceedings, tax matters, and other contingent liabilities - The company is involved in a Brazil ICMS tax matter, disputing tax credits claimed on intermediary materials. While anticipating a favorable resolution, the **cumulative potential liability** for remaining open lawsuits is estimated to be less than **$2.0 million**, inclusive of interest and penalties[91](index=91&type=chunk)[92](index=92&type=chunk) - **NN, Inc.** expects indemnification from former Autocam shareholders for any losses related to the Brazil ICMS tax matter, mitigating material impact on financial results[93](index=93&type=chunk) - Other legal proceedings are considered ordinary and routine, and management believes they will not have a material adverse effect on the company's business, financial condition, results of operations, or cash flows[94](index=94&type=chunk) [Note 12. Income Taxes](index=20&type=section&id=Note%2012.%20Income%20Taxes) This note details the company's effective tax rates and factors influencing income tax expense or benefit Effective Tax Rates | Period | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Effective Tax Rate | (8.1)% | 4.7% | (12.0)% | (1.5)% | - The **effective tax rate** for the three and six months ended June 30, 2025, was unfavorably impacted by tax accruals on non-permanently reinvested unremitted foreign earnings and limitations on tax benefits for losses in certain jurisdictions[95](index=95&type=chunk) - The company is assessing the impact of the newly signed H.R.1, the One Big Beautiful Bill Act (OBBBA), on its consolidated financial statements, with effects to be reflected in the period of enactment and future periods[96](index=96&type=chunk) [Note 13. Net Loss Per Common Share](index=20&type=section&id=Note%2013.%20Net%20Loss%20Per%20Common%20Share) This note presents the calculation of basic and diluted net loss per common share, including antidilutive securities Basic and Diluted Net Loss Per Common Share | Metric (in thousands, except per share) | 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 loss | $(8,102) | $(2,203) | $(14,787) | $(14,740) | | Adjustment for preferred stock dividends | $(4,614) | $(3,843) | $(9,021) | $(7,513) | | Numerator for basic and diluted net loss per common share | $(12,716) | $(6,046) | $(23,808) | $(22,253) | | Shares used to calculate basic and diluted net loss per share | 49,433 | 48,839 | 49,255 | 48,281 | | Basic and diluted net loss per common share | $(0.26) | $(0.12) | $(0.48) | $(0.46) | Antidilutive Securities Excluded from EPS Calculation (in thousands) | Security Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Stock options | 134 | 207 | 151 | 232 | | Warrants | 1,500 | 1,500 | 1,500 | 1,500 | | Performance share units | 820 | 820 | 820 | 783 | | Total antidilutive securities | 2,454 | 2,527 | 2,471 | 2,515 | [Note 14. Share-Based Compensation](index=21&type=section&id=Note%2014.%20Share-Based%20Compensation) This note details the share-based compensation expense recognized and information on restricted stock and performance share units Share-Based Compensation Expense (in thousands) | Award Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Restricted stock | $470 | $532 | $1,020 | $1,119 | | Performance share units | $331 | $158 | $620 | $417 | | Total | $801 | $690 | $1,640 | $1,536 | - During the six months ended June 30, 2025, **664,000 restricted stock shares** were granted, vesting pro-rata over three years for employees and one year for non-executive directors. The **total grant date fair value** of vested restricted stock was **$1.9 million**[106](index=106&type=chunk) - **231,000 Performance Share Units (PSUs)** were granted to executive officers during the six months ended June 30, 2025, vesting based on relative total shareholder return against a specified index over a three-year performance period ending December 31, 2027[108](index=108&type=chunk) [Note 15. Accumulated Other Comprehensive Income](index=22&type=section&id=Note%2015.%20Accumulated%20Other%20Comprehensive%20Income) This note provides a breakdown of the components of accumulated other comprehensive income or loss Components of Accumulated Other Comprehensive Income (Loss) (in thousands) | Metric | Balance as of March 31, 2025 | Other comprehensive income (loss) before reclassifications | Net other comprehensive income (loss) | Balance as of June 30, 2025 | | :-------------------------- | :--------------------------- | :--------------------------------------------------------- | :------------------------------------ | :-------------------------- | | Foreign Currency Translation | $(45,042) | $4,454 | $4,454 | $(40,588) | | Interest rate swap | — | — | — | — | | Total | $(45,042) | $4,454 | $4,454 | $(40,588) | - **Accumulated other comprehensive loss** improved from **$(48,167) thousand** at December 31, 2024, to **$(40,588) thousand** at June 30, 2025, primarily due to foreign currency translation gains[111](index=111&type=chunk) [Note 16. Fair Value Measurements](index=22&type=section&id=Note%2016.%20Fair%20Value%20Measurements) This note describes the fair value hierarchy and measurements for the company's financial instruments and derivatives - Certain features of preferred stock and long-term debt are bifurcated and accounted for as embedded derivatives[113](index=113&type=chunk) - As of June 30, 2025, **1.5 million** of the 2023 Warrants (exercisable at **$0.01 per share**) remain outstanding. All 2021 Warrants were exercised in Q1 2024, resulting in **1,896,000 common shares** issued. 2019 Warrants (exercisable at **$11.03 per share**) for **1.5 million shares** remain outstanding[114](index=114&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) Changes in Embedded Derivatives Liability (in thousands) | Metric | Amount | | :-------------------------- | :----- | | Balance as of December 31, 2024 | $5,192 | | Change in fair value | $(2,036) | | Balance as of June 30, 2025 | $3,156 | - The **fair value** of the 2023 and 2021 Warrants is determined using Level 1 observable market prices, while the 2019 Warrants use a Level 3 valuation model with unobservable inputs[120](index=120&type=chunk)[121](index=121&type=chunk) - The 2021 Interest Rate Swap, terminated in Q1 2023, generated an interest benefit of **$0.4 million** and **$0.9 million** for the three and six months ended June 30, 2024, respectively, recognized as a reduction to interest expense[122](index=122&type=chunk)[123](index=123&type=chunk) - The **fair value** of the company's debt was **$166.1 million** (**carrying amount $159.6 million**) as of June 30, 2025, and **$147.8 million** (**carrying amount $148.6 million**) as of December 31, 2024, calculated using Level 3 inputs[124](index=124&type=chunk) [Note 17. Plant Optimization Activities](index=24&type=section&id=Note%2017.%20Plant%20Optimization%20Activities) This note details the costs and expected benefits associated with the company's facility closures and restructuring efforts - **NN, Inc.** substantially completed facility closures and organizational changes by June 30, 2025, including ceasing production at Mobile Solutions plants in Juarez, Mexico, and Dowagiac, Michigan, to reduce costs and improve efficiency[126](index=126&type=chunk)[127](index=127&type=chunk) - **Estimated total charges** for plant optimization are **$13.6 million**, with cumulative costs of **$13.4 million** recognized as of June 30, 2025. **Annual benefits** of approximately **$5.4 million** are expected once fully implemented[127](index=127&type=chunk) Summary of Plant Optimization Costs Incurred and Accrued (in thousands) | Category | Balance as of December 31, 2024 | Restructuring costs (6M 2025) | Amounts paid (6M 2025) | Balance as of June 30, 2025 | | :------------------------------------- | :------------------------------ | :---------------------------- | :--------------------- | :-------------------------- | | Severance and employee related | $2,686 | $380 | $(2,195) | $871 | | Impairment of property and equipment | — | — | — | — | | Costs associated with exit or disposal activities | — | $401 | $(401) | — | | Total | $2,686 | $781 | $(2,596) | $871 | - A Voluntary Early Retirement Program (ERIP) resulted in **$0.4 million** recognized during the six months ended June 30, 2025, with an **estimated total cost of $1.6 million**[130](index=130&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on NN, Inc.'s financial performance, condition, and liquidity [Forward-Looking Statements](index=25&type=section&id=Forward-Looking%20Statements) This section highlights the inherent risks and uncertainties associated with forward-looking statements in the report - The report contains forward-looking statements subject to risks and uncertainties, including general economic conditions, impacts of pandemics, tariffs, competitive influences, raw material costs, geopolitical instability, inflation, supply chain disruptions, dependence on major customers, and debt restrictions[132](index=132&type=chunk) [Overview](index=25&type=section&id=Overview) This section provides a high-level description of NN, Inc.'s business as a diversified industrial company - **NN, Inc.** is a diversified industrial company specializing in advanced engineering and materials science to design and manufacture high-precision components and assemblies for various global end markets[134](index=134&type=chunk) [Factors That May Influence Results of Operations](index=25&type=section&id=Factors%20That%20May%20Influence%20Results%20of%20Operations) This section discusses macroeconomic, geopolitical, and operational factors impacting the company's financial results - Macroeconomic and geopolitical events, including global trade negotiations, tariffs, inflationary cost pressures on raw materials, elevated interest rates, supply chain disruptions, and military conflicts, continue to influence the company's results[136](index=136&type=chunk) - The company is undertaking footprint optimization by closing two manufacturing facilities (Juarez, Mexico, and Dowagiac, Michigan) due to volume rationalization to reduce costs and improve operational efficiency, with further consolidation actions possible[138](index=138&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section analyzes the company's consolidated and segment-level financial performance over comparative periods [Three Months Ended June 30, 2025 compared to the Three Months Ended June 30, 2024](index=26&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20the%20Three%20Months%20Ended%20June%2030%2C%202024) This section compares the company's financial results for the three months ended June 30, 2025 and 2024 Consolidated Results (Three Months Ended June 30) | Metric (in thousands) | 2025 | 2024 | $ Change | % Change | | :-------------------- | :-------- | :-------- | :-------- | :------- | | Net sales | $107,921 | $122,992 | $(15,071) | (12.3)% | | Cost of sales | $89,699 | $101,257 | $(11,558) | (11.4)% | | SG&A expense | $12,095 | $13,511 | $(1,416) | (10.5)% | | Depreciation & amortization | $8,918 | $11,761 | $(2,843) | (24.2)% | | Loss from operations | $(1,464) | $(2,147) | $683 | 31.8% | | Interest expense | $5,657 | $5,873 | $(216) | (3.7)% | | Loss on extinguishment of debt | $3,007 | — | $3,007 | N/A | | Other income, net | $(619) | $(3,461) | $2,842 | (82.1)% | | Net loss | $(8,102) | $(2,203) | $(5,899) | 267.8% | - **Net sales** decreased by **$15.1 million** (**12.3%**) due to rationalization of underperforming businesses/plants, the sale of Lubbock operations, lower volumes, and unfavorable foreign exchange effects, partially offset by new business launches and higher precious metals pass-through pricing[139](index=139&type=chunk) - **Depreciation and amortization** decreased by **$2.8 million** due to historical purchase accounting step-up basis becoming fully depreciated in the second half of 2024[141](index=141&type=chunk) - A **$3.0 million loss on extinguishment of debt** was recognized due to the termination of the 2021 Term Loan Facility[143](index=143&type=chunk) - Mobile Solutions **net sales** decreased by **$9.5 million** (**13.0%**), while Power Solutions **net sales** decreased by **$5.5 million** (**11.0%**). Mobile Solutions' **loss from operations** decreased by **$0.5 million**, and Power Solutions' **income from operations** increased by **$0.5 million**[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) [Six Months Ended June 30, 2025 compared to the Six Months Ended June 30, 2024](index=28&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20the%20Six%20Months%20Ended%20June%2030%2C%202024) This section compares the company's financial results for the six months ended June 30, 2025 and 2024 Consolidated Results (Six Months Ended June 30) | Metric (in thousands) | 2025 | 2024 | $ Change | % Change | | :-------------------- | :-------- | :-------- | :-------- | :------- | | Net sales | $213,609 | $244,190 | $(30,581) | (12.5)% | | Cost of sales | $181,345 | $202,343 | $(20,998) | (10.4)% | | SG&A expense | $23,265 | $26,859 | $(3,594) | (13.4)% | | Depreciation & amortization | $17,692 | $24,308 | $(6,616) | (27.2)% | | Loss from operations | $(6,253) | $(6,930) | $677 | 9.8% | | Interest expense | $10,851 | $11,239 | $(388) | (3.5)% | | Loss on extinguishment of debt | $3,007 | — | $3,007 | N/A | | Other expense (income), net | $(2,788) | $692 | $(3,480) | (502.9)% | | Net loss | $(14,787) | $(14,740) | $(47) | 0.3% | - **Net sales** decreased by **$30.6 million** (**12.5%**) due to rationalized business/plants, sale of Lubbock operations, lower volumes, and unfavorable foreign exchange effects (**$3.5 million**), partially offset by new business launches and higher precious metals pass-through pricing[151](index=151&type=chunk) - Other expense (income), net, favorably changed by **$3.5 million**, primarily due to noncash derivative mark-to-market gains and favorable foreign exchange effects[156](index=156&type=chunk) - Share of **net income from joint venture** increased by **$0.2 million** due to higher sales and increased margin, despite higher fixed costs, depreciation, and interest expense[159](index=159&type=chunk) - Mobile Solutions **net sales** decreased by **$20.3 million** (**13.9%**), with **loss from operations** remaining unchanged. Power Solutions **net sales** decreased by **$10.2 million** (**10.4%**), and **income from operations** decreased by **$0.5 million**[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk) [Changes in Financial Condition from December 31, 2024 to June 30, 2025](index=29&type=section&id=Changes%20in%20Financial%20Condition%20from%20December%2031%2C%202024%20to%20June%2030%2C%202025) This section analyzes changes in the company's balance sheet, cash flows, and liquidity position - **Total assets** increased by **$3.9 million**, driven by increases in accounts receivable, property, plant and equipment, and **investment in a joint venture**, partially offset by decreased **intangible assets**[163](index=163&type=chunk) - **Total liabilities** increased by **$9.8 million**, primarily due to increases in accounts payable, other current liabilities, and long-term debt, partially offset by a decrease in accrued salaries, wages, and benefits[164](index=164&type=chunk) - **Working capital** decreased by **$0.8 million**, mainly due to increased accounts receivable and decreased accrued salaries, wages, and benefits, partially offset by increases in accounts payable and other current liabilities[165](index=165&type=chunk) - **Cash used in operations** increased to **$4.0 million** (from **$0.6 million** in prior year) due to lower gross margin and increased **working capital**. **Cash used in investing activities** decreased by **$1.6 million** due to lower capital expenditures. **Cash provided by financing activities** remained stable at **$1.6 million**[166](index=166&type=chunk)[167](index=167&type=chunk) - The company manages liquidity through credit facilities, sale-leaseback transactions, **working capital** management, accounts receivable sales programs, and expects a **$12.6 million tax refund** from the IRS in 2025[168](index=168&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) [Seasonality and Fluctuation in Quarterly Results](index=31&type=section&id=Seasonality%20and%20Fluctuation%20in%20Quarterly%20Results) This section discusses the impact of seasonal trends and other factors on the company's quarterly financial performance - While certain businesses experience seasonal trends (e.g., weaker European sales in summer, stronger OEM sales around new product launches), the company as a whole is not materially impacted by seasonality[177](index=177&type=chunk) [Critical Accounting Estimates](index=31&type=section&id=Critical%20Accounting%20Estimates) This section confirms no material changes to the company's significant accounting policies or critical estimates - There have been no material changes to the company's significant accounting policies or **critical accounting estimates** during the six months ended June 30, 2025[178](index=178&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to interest rate and foreign currency risks and their management [Interest Rate Risk](index=31&type=section&id=Interest%20Rate%20Risk) This section details the company's exposure to interest rate fluctuations on its variable-rate debt - The company is exposed to **interest rate risk** due to its variable rate debt, which constitutes a majority of its outstanding indebtedness. A **one-percent increase in one-month SOFR** would result in a **$1.2 million net increase in annualized interest expense** on the Term Loan Facility[180](index=180&type=chunk)[181](index=181&type=chunk) [Foreign Currency Risk](index=31&type=section&id=Foreign%20Currency%20Risk) This section describes the company's exposure to foreign currency exchange rate fluctuations from international operations - **NN, Inc.** faces **foreign currency risk** from operating cash flows, customer invoicing, and intercompany loans denominated in various foreign currencies. The company did not hold any foreign currency derivatives as of June 30, 2025[182](index=182&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and reports on internal control over financial reporting [Disclosure Controls and Procedures](index=31&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures - The Chief Executive Officer and Chief Financial Officer concluded that **NN, Inc.'s disclosure controls and procedures** were effective as of June 30, 2025[183](index=183&type=chunk) [Changes in Internal Control Over Financial Reporting](index=31&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on any material changes in the company's internal control over financial reporting - No changes in **internal control over financial reporting** occurred during the fiscal quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the company's **internal control over financial reporting**[184](index=184&type=chunk) [PART II. OTHER INFORMATION](index=32&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal and risk factors [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) This section references disclosures regarding the company's legal proceedings, including the Brazil ICMS tax matter - Legal proceedings, including the Brazil ICMS tax matter, are detailed in Note 11 of the Condensed Consolidated Financial Statements[186](index=186&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) This section updates the company's risk factors, emphasizing the impact of changes in U.S. administrative policy - No material changes to **risk factors** were disclosed, except for an emphasis on the adverse effects of changes in U.S. administrative policy, including tariffs and trade restrictions, especially from countries like Mexico and China[187](index=187&type=chunk) - Uncertainty regarding tariffs and potential trade wars could lead to decreased consumer spending, lower **net sales**, and reduced **operating cash flows**, materially impacting financial statements[188](index=188&type=chunk)[189](index=189&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's purchases of equity securities related to employee share-based awards Issuer Purchases of Equity Securities (Quarter Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------------------- | :------------------------------- | :--------------------------- | | April 1, 2025 to April 30, 2025 | 32,959 | $2.19 | | May 1, 2025 to May 31, 2025 | 131,100 | $1.90 | | June 1, 2025 to June 30, 2025 | 10,981 | $1.95 | | Total | 175,040 | $1.96 | - Shares were withheld to pay for tax obligations upon the vesting of share-based awards granted under the Incentive Plans, which allow for such withholding without specifying a maximum number of shares[191](index=191&type=chunk) [Item 3. Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms that there were no defaults on senior securities during the reporting period - There were no defaults upon senior securities[192](index=192&type=chunk) [Item 4. Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company's operations - Mine Safety Disclosures are not applicable to **NN, Inc.**[194](index=194&type=chunk) [Item 5. Other Information](index=33&type=section&id=Item%205.%20Other%20Information) This section confirms no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements by directors or executive officers - No directors or executive officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[195](index=195&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate organizational documents, credit agreements, certifications, and XBRL interactive data files - Exhibits include Restated Certificate of Incorporation, Amended and Restated By-Laws, Term Loan Credit Agreement, First Amendment to Revolving Credit and Security Agreement, Certifications of Principal Executive and Financial Officers, and XBRL Interactive Data Files[196](index=196&type=chunk) [SIGNATURES](index=34&type=section&id=SIGNATURES) This section provides the official signatures and dates for the filing of the report - The report was signed on August 6, 2025, by Harold C. Bevis, President, Chief Executive Officer and Director, and Christopher H. Bohnert, Senior Vice President and Chief Financial Officer[198](index=198&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) Sonos reported a net loss for the three and nine months ended June 28, 2025, a significant downturn from the net income in the prior year, driven by declining revenue and gross profit, while cash flow from operations decreased [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $834.4 million as of June 28, 2025, primarily due to a significant reduction in inventories, with corresponding decreases in total liabilities and stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 28, 2025 | September 28, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $503,141 | $551,086 | | Inventories | $115,427 | $231,505 | | **Total Assets** | **$834,402** | **$916,312** | | **Total Current Liabilities** | $315,603 | $366,153 | | **Total Liabilities** | **$435,096** | **$487,692** | | **Total Stockholders' Equity** | **$399,306** | **$428,620** | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) For Q3 2025, Sonos reported a **net loss of $3.4 million** on **revenue of $344.8 million**, a decline from the prior year's net income and revenue, with similar trends observed for the nine-month period Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2025 | Q3 2024 | Nine Months 2025 | Nine Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $344,764 | $397,146 | $1,155,376 | $1,262,676 | | Gross Profit | $149,724 | $191,641 | $504,739 | $586,356 | | Operating Income (Loss) | $(2,929) | $12,589 | $(16,059) | $21,323 | | Net Income (Loss) | $(3,379) | $3,709 | $(23,286) | $14,947 | | Diluted EPS | $(0.03) | $0.03 | $(0.19) | $0.12 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities for the nine months ended June 28, 2025, decreased to $133.9 million, primarily due to lower net income, while cash was used for investing activities and common stock repurchases Cash Flow Summary for Nine Months Ended (in thousands) | Cash Flow Activity | June 28, 2025 | June 29, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $133,948 | $227,640 | | Net cash used in investing activities | $(24,167) | $(88,153) | | Net cash used in financing activities | $(78,703) | $(133,184) | | **Net increase in cash and cash equivalents** | **$31,541** | **$6,883** | - The decrease in operating cash flow was primarily driven by a **net loss of $23.3 million** in fiscal 2025 compared to a net income of $14.9 million in fiscal 2024, with a significant positive contribution from a **$106.2 million decrease in inventories**[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, revenue declines across all regions and product categories, ongoing patent litigation with Google, and significant restructuring charges from workforce reductions Revenue by Region for Nine Months Ended (in thousands) | Region | June 28, 2025 | June 29, 2024 | % Change | | :--- | :--- | :--- | :--- | | Americas | $731,041 | $827,238 | (11.6)% | | EMEA | $363,642 | $372,074 | (2.3)% | | APAC | $60,693 | $63,364 | (4.2)% | | **Total** | **$1,155,376** | **$1,262,676** | **(8.5)%** | Revenue by Product Category for Nine Months Ended (in thousands) | Product Category | June 28, 2025 | June 29, 2024 | % Change | | :--- | :--- | :--- | :--- | | Sonos speakers | $915,330 | $991,378 | (7.7)% | | Sonos system products | $183,993 | $209,013 | (12.0)% | | Partner products and other | $56,053 | $62,285 | (10.0)% | | **Total** | **$1,155,376** | **$1,262,676** | **(8.5)%** | - The company is involved in multiple patent infringement lawsuits with Google, where a jury awarded Sonos **$32.5 million** in one case, though the patents were later held unenforceable, and Google's asserted patents against Sonos have been found invalid, non-infringed, or withdrawn[57](index=57&type=chunk)[58](index=58&type=chunk) - Sonos initiated a cost transformation initiative, including a **6% workforce reduction** in August 2024 and a **12% workforce reduction** in February 2025, resulting in **$25.6 million** in total restructuring charges for the nine months ended June 28, 2025[82](index=82&type=chunk)[83](index=83&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 8.5% revenue decline to softer market demand and app rollout challenges, while a cost transformation initiative, including workforce reductions, is underway to improve efficiency and reduce operating expenses, maintaining adequate liquidity - The company launched new products, including the Arc Ultra soundbar in October 2024, and redesigned its Sonos app in May 2024 to enhance user experience and drive future innovation[91](index=91&type=chunk) - A cost transformation initiative, including workforce reductions of **6% in August 2024** and **12% in February 2025**, is expected to save approximately **$20 million** in the remainder of fiscal 2025[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) Key Metrics Comparison (in thousands, except percentages) | Metric | Nine Months 2025 | Nine Months 2024 | | :--- | :--- | :--- | | Total revenue | $1,155,376 | $1,262,676 | | Products sold | 3,696 | 4,135 | | Net income (loss) | $(23,286) | $14,947 | | Adjusted EBITDA | $125,936 | $130,506 | | Adjusted EBITDA margin | 10.9% | 10.3% | - Gross margin for the nine months ended June 28, 2025, decreased by **270 basis points** compared to the prior year, primarily due to reorganization efforts, unfavorable channel mix, and increased inventory write-downs[124](index=124&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20qualitative%20disclosures%20about%20market%20risk) The company's primary market risk is foreign currency exposure from international sales, with a hypothetical 10% adverse change in exchange rates potentially impacting pre-tax income by $15.2 million - For the nine months ended June 28, 2025, the company recognized a foreign currency exchange **loss of $5.2 million**, compared to a gain of $4.2 million in the same period of 2024[160](index=160&type=chunk) - A hypothetical adverse change of **10% in foreign exchange rates** would have resulted in an adverse impact on loss before income taxes of approximately **$15.2 million** for the nine months ended June 28, 2025[160](index=160&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 28, 2025, with no material changes to internal control over financial reporting during the quarter - The Interim Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** at a reasonable assurance level as of the end of the period[161](index=161&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[162](index=162&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20proceedings) The company refers to Note 7 of the financial statements for details on its legal proceedings, believing no other current legal matters would materially adversely affect the business if determined unfavorably - Details regarding legal proceedings are provided in **Note 7** of the condensed consolidated financial statements[164](index=164&type=chunk) [Risk Factors](index=49&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 September 28, 2024, and the Quarterly Report on Form 10-Q for the quarter ended March 29, 2025 - No material changes to the risk factors disclosed in the Annual Report and the previous Form 10-Q were reported[165](index=165&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20sales%20of%20equity%20securities%20and%20use%20of%20proceeds) On February 24, 2025, the Board authorized a new common stock repurchase program of up to $150.0 million, replacing the previous program, with no shares repurchased during the three months ended June 28, 2025 - A new **$150.0 million stock repurchase program** was authorized on February 24, 2025, replacing the 2023 program[167](index=167&type=chunk) Issuer Purchases of Equity Securities (Q3 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Value of Shares Remaining for Purchase | | :--- | :--- | :--- | :--- | | Mar 30 - Apr 26 | 0 | $— | $150,000,000 | | Apr 27 - May 24 | 0 | $— | $150,000,000 | | May 25 - Jun 28 | 0 | $— | $150,000,000 | [Other Information](index=51&type=section&id=Item%205.%20Other%20information) There were no adoptions or terminations of Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements by directors or officers during the quarter - The company reported no activity related to Rule 10b5-1 trading plans[172](index=172&type=chunk) [Exhibit Index](index=52&type=section&id=Item%206.%20Exhibit%20index) This section lists all exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial statements formatted in Inline XBRL - Exhibits filed include CEO and CFO certifications (Exhibits 31.1, 31.2, 32.1, 32.2) and financial data in Inline XBRL format (Exhibit 101)[173](index=173&type=chunk)

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the company's unaudited condensed consolidated financial statements and detailed notes on accounting policies and agreements [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets and stockholders' equity from December 31, 2024, to June 30, 2025, while total liabilities remained relatively stable | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $1,192,532 | $1,398,813 | | Total Liabilities | $245,060 | $248,428 | | Total Stockholders' Equity | $947,472 | $1,150,385 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net loss for both the three and six months ended June 30, 2025, with a significant decrease in total revenues for the six-month period compared to the prior year, while research and development expenses increased for the six-month period | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Total Revenues | $1,214 | $3,075 | $4,246 | $59,451 | | Total Operating Expenses | $119,631 | $161,705 | $262,210 | $298,162 | | Net Loss | $(110,958) | $(138,378) | $(231,923) | $(203,654) | | Net Loss Per Share (basic & diluted) | $(0.80) | $(1.02) | $(1.68) | $(1.50) | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) The company reported a comprehensive loss for both the three and six months ended June 30, 2025, primarily driven by the net loss, with additional other comprehensive losses from unrealized investment losses | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Net Loss | $(110,958) | $(138,378) | $(231,923) | $(203,654) | | Total Other Comprehensive Loss | $(246) | $(482) | $(504) | $(2,064) | | Comprehensive Loss | $(111,204) | $(138,860) | $(232,427) | $(205,718) | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased from December 31, 2024, to June 30, 2025, primarily due to the net loss incurred during the period, partially offset by increases in additional paid-in capital from stock-based compensation and stock issuances | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | | :-------------------------- | :------------------------------- | :----------------------------- | | Total Stockholders' Equity | $1,150,385 | $947,472 | | Accumulated Deficit | $(759,784) | $(991,707) | | Additional Paid-in Capital | $1,911,872 | $1,941,386 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, the company experienced increased cash usage in operating activities and decreased cash provided by investing activities, resulting in a net decrease in cash, cash equivalents, and restricted cash | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------------ | :------------------------------------ | | Net cash used in operating activities | $(198,335) | $(187,237) | | Net cash provided by investing activities | $183,274 | $240,027 | | Net cash provided by financing activities | $2,644 | $3,094 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(12,417) | $55,884 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on the company's business, accounting policies, fair value measurements, and various agreements, offering context to the financial statements [Note 1. Organization](index=11&type=section&id=Note%201.%20Organization) Vir Biotechnology is a clinical-stage biopharmaceutical company focused on infectious diseases and cancer, with sufficient cash and investments to fund operations for at least twelve months - Vir Biotechnology is a clinical-stage biopharmaceutical company focused on discovering and developing medicines for serious infectious diseases and cancer[27](index=27&type=chunk) - As of June 30, 2025, the company had **$892.1 million in cash, cash equivalents, and investments**, which is believed to be sufficient to fund operations for at least twelve months[29](index=29&type=chunk) - The company also had **$95.2 million in restricted cash and cash equivalents** as of June 30, 2025, including a **$75.0 million milestone payment** due upon VIR-5525 achieving 'first in human dosing' by 2026, which occurred in July 2025[29](index=29&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=11&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the company's accounting policies, including basis of presentation, segment reporting, treatment of cash, investments, R&D expenses, and new accounting pronouncements - The company operates as one reportable segment, focusing on discovering and developing medicines for serious infectious diseases and cancer[34](index=34&type=chunk) - Research and development expenses are recognized as incurred, and upfront payments for acquired licenses or product rights are expensed immediately if they do not relate to regulatory approval milestones or business combinations[39](index=39&type=chunk)[40](index=40&type=chunk) - The company is evaluating the impact of new FASB Accounting Standards Updates (ASU 2023-09 on Income Tax Disclosures and ASU 2024-03 on Expense Disaggregation Disclosures) on its financial statements[43](index=43&type=chunk)[44](index=44&type=chunk) [Note 3. Fair Value Measurements](index=13&type=section&id=Note%203.%20Fair%20Value%20Measurements) The company measures financial assets and liabilities using a fair value hierarchy. Cash equivalents and available-for-sale securities are primarily Level 1 and Level 2, while contingent consideration is classified as Level 3, with its fair value decreasing due to a milestone payment | Asset Type | Valuation Hierarchy | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :------------------ | :----------------------------- | :------------------------------- | | Money market funds | Level 1 | $140,188 | $146,505 | | U.S. government treasuries | Level 2 | $379,426 | $589,483 | | Corporate bonds | Level 2 | $212,811 | $253,455 | | Equity securities | Level 1 | $7,270 | $4,350 | - The estimated fair value of contingent consideration related to the Humabs acquisition decreased from **$40.1 million** at December 31, 2024, to **$33.6 million** at June 30, 2025, following a **$17.5 million clinical milestone payment**[54](index=54&type=chunk)[55](index=55&type=chunk) - The company recognized an unrealized loss of **$3.4 million** for the three months ended June 30, 2025, and an unrealized gain of **$3.0 million** for the six months ended June 30, 2025, from changes in the fair value of equity investments[52](index=52&type=chunk) [Note 4. Grant Agreements](index=16&type=section&id=Note%204.%20Grant%20Agreements) The company holds various grant agreements with the Gates Foundation totaling up to $35.0 million to support HIV vaccine, HIV vaccinal antibody, and malaria vaccinal antibody programs. Certain HIV and tuberculosis programs were phased out in August 2024 - The company has grant agreements with the Gates Foundation totaling up to **$35.0 million** for HIV vaccine, HIV vaccinal antibody, and malaria vaccinal antibody programs, with some agreements expiring in the first half of 2025[57](index=57&type=chunk) - In August 2024, the company announced a strategic realignment that included phasing out certain research programs, such as the HIV vaccine program and tuberculosis vaccine program funded by Gates Foundation grants[59](index=59&type=chunk) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Grant Revenue | $200 | $300 | $1,400 | $2,200 | [Note 5. Collaboration and License Agreements](index=16&type=section&id=Note%205.%20Collaboration%20and%20License%20Agreements) The company entered into a license agreement with Sanofi for PRO-XTEN™ technology and TCEs, involving an upfront payment and milestone obligations. An amended agreement with Alnylam Pharmaceuticals resulted in a $30.0 million payment and a shift from profit-sharing to a milestone and royalty-based structure for elebsiran - In September 2024, the company closed a license agreement with Sanofi for exclusive worldwide rights to the PRO-XTEN™ universal masking technology and three early clinical-stage dual-masked TCEs for oncology and infectious disease[61](index=61&type=chunk) - Under the Sanofi Agreement, the company made an upfront payment of **$100.0 million** and placed a **$75.0 million milestone payment** into escrow, contingent on VIR-5525 achieving 'first in human dosing' by 2026, which occurred in July 2025[62](index=62&type=chunk) - In March 2025, an amendment to the Alnylam Agreement resulted in a **$30.0 million payment** to Alnylam, recorded as R&D expense, and Alnylam electing not to opt-in to the profit-sharing arrangement for elebsiran, shifting to a milestone and royalty-based structure[67](index=67&type=chunk)[70](index=70&type=chunk) [Note 6. Balance Sheet Components](index=18&type=section&id=Note%206.%20Balance%20Sheet%20Components) This note details the composition of property and equipment, net, which saw a slight decrease, and accrued and other liabilities, which remained stable, with research and development expenses being the largest component | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Total Property and Equipment, net | $60,795 | $63,183 | | Total Accrued and Other Liabilities | $82,661 | $85,873 | | R&D Expenses (Accrued) | $39,332 | $29,225 | [Note 7. Commitments and Contingencies](index=19&type=section&id=Note%207.%20Commitments%20and%20Contingencies) The company has unaccrued unpaid commitments for manufacturing agreements related to tobevibart and elebsiran, totaling approximately $24 million as of June 30, 2025. The company is not currently involved in any material legal proceedings - As of June 30, 2025, the company had unaccrued unpaid commitments of approximately **$17 million** under Tobevibart Agreements and **$7 million** under Elebsiran Agreements[76](index=76&type=chunk) - The company is not currently party to any material legal proceedings and is unaware of any pending or threatened legal proceedings that could have a material adverse effect[77](index=77&type=chunk)[160](index=160&type=chunk) [Note 8. Stock-Based Awards](index=19&type=section&id=Note%208.%20Stock-Based%20Awards) Stock-based compensation expense decreased for both the three and six months ended June 30, 2025, compared to the prior year, reflecting changes in awards granted to employees and non-employees | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Total Stock-Based Compensation | $12,451 | $22,162 | $26,510 | $45,919 | [Note 9. Net Loss Per Share](index=20&type=section&id=Note%209.%20Net%20Loss%20Per%20Share) Basic and diluted net loss per share for the three months ended June 30, 2025, was $(0.80), an improvement from $(1.02) in the prior year, while for the six months, it worsened to $(1.68) from $(1.50) | 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 Loss Per Share (basic & diluted) | $(0.80) | $(1.02) | $(1.68) | $(1.50) | [Note 10. Income Taxes](index=21&type=section&id=Note%2010.%20Income%20Taxes) The company recorded a nominal provision for income taxes for the three and six months ended June 30, 2025, compared to a benefit in the prior year. The company is evaluating the potential impacts of the recently signed One Big Beautiful Bill Act (OBBBA) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | (Provision for) benefit from income taxes | $(170) | $1,512 | $(186) | $1,236 | | Effective tax rate | (0.2%) | 1.1% | (0.1%) | 0.6% | - The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, and the company is evaluating its potential impacts on income taxes[88](index=88&type=chunk) [Note 11. Segment Reporting](index=22&type=section&id=Note%2011.%20Segment%20Reporting) The company manages its business activities on a consolidated basis and operates as one reportable segment, focusing on discovering and developing medicines for serious infectious diseases and cancer - The company operates as a single reportable segment, with its Chief Executive Officer serving as the chief operating decision maker (CODM)[91](index=91&type=chunk) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Segment Revenue | $1,214 | $3,075 | $4,246 | $59,451 | | Segment and Consolidated Net Loss | $(110,958) | $(138,378) | $(231,923) | $(203,654) | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial condition, results of operations, liquidity, and capital resources, highlighting key changes in revenues, expenses, and cash flows [Overview](index=23&type=section&id=Overview) Vir Biotechnology is a clinical-stage biopharmaceutical company focused on developing medicines for serious infectious diseases and cancer, with its pipeline including programs for Chronic Hepatitis Delta (CHD) and multiple dual-masked T-cell engagers (TCEs) for solid tumors - The company is a clinical-stage biopharmaceutical company focused on powering the immune system to transform lives by discovering and developing medicines for serious infectious diseases and cancer[96](index=96&type=chunk) - Its clinical-stage portfolio includes programs for Chronic Hepatitis Delta (CHD) and multiple dual-masked T-cell engagers (TCEs) across validated targets in solid tumor indications[96](index=96&type=chunk) - The ECLIPSE registrational program for HDV is fully underway, and Phase 1 clinical studies are advancing for dual-masked TCEs VIR-5818, VIR-5500, and VIR-5525 for various solid tumors[97](index=97&type=chunk) [Significant Developments](index=23&type=section&id=Significant%20Developments) Recent significant developments include the full initiation of the ECLIPSE registrational program for Chronic Hepatitis Delta, advancement of multiple T-cell engager programs for solid tumors with promising early safety data, and presentation of functional cure data for Chronic Hepatitis B [CHD](index=23&type=section&id=CHD) The ECLIPSE registrational program for Chronic Hepatitis Delta (CHD) is fully underway, with ECLIPSE 2 and ECLIPSE 3 trials initiated to compare the combination of tobevibart and elebsiran to bulevirtide monotherapy - The ECLIPSE registrational program for Chronic Hepatitis Delta (CHD) is fully underway, with all three trials initiated[100](index=100&type=chunk) - ECLIPSE 2 and ECLIPSE 3 trials are designed to compare the combination of tobevibart and elebsiran to bulevirtide monotherapy in CHD participants[100](index=100&type=chunk) [Solid Tumors](index=24&type=section&id=Solid%20Tumors) The company dosed the first patient in a Phase 1 clinical study for VIR-5525 (EGFR-targeting TCE) in July 2025. Early Phase 1 data for VIR-5818 (HER2-targeting TCE) and VIR-5500 (PSMA-targeting TCE) showed promising safety profiles with no dose-limiting cytokine release syndrome - The first patient was dosed in the Phase 1 clinical study of VIR-5525, an investigational PRO-XTEN™ dual-masked T-cell engager targeting EGFR, in July 2025[104](index=104&type=chunk) - Early Phase 1 data for VIR-5818 and VIR-5500, reported in January 2025, showed promising safety profiles with no dose-limiting cytokine release syndrome (CRS) observed and no CRS greater than grade 2 reported[104](index=104&type=chunk) - VIR-5500 received Investigational New Drug clearance from the FDA to evaluate it in combination with androgen receptor pathway inhibitors for earlier lines of metastatic castration-resistant prostate cancer treatment[104](index=104&type=chunk) [Chronic Hepatitis B (CHB)](index=24&type=section&id=Chronic%20Hepatitis%20B%20(CHB)) Functional cure data from the MARCH Part B Phase 2 clinical study for Chronic Hepatitis B (CHB) was presented, showing that 17-21% of participants with baseline HBsAg<1,000 IU/mL achieved undetectable HBsAg at 24 weeks post-treatment - Functional cure data from the 24-week follow-up of the MARCH Part B Phase 2 clinical study for CHB was presented at EASL Congress 2025[101](index=101&type=chunk) - The study-defined primary endpoint, proportion of participants with undetectable hepatitis B surface antigen (HBsAg) at 24 weeks post-end of treatment, was achieved by **17% to 21%** of participants with baseline HBsAg<1,000 IU/mL[101](index=101&type=chunk) [Preclinical Pipeline Candidates](index=24&type=section&id=Preclinical%20Pipeline%20Candidates) The company is advancing multiple undisclosed PRO-XTEN™ dual-masked T-cell engagers against clinically validated targets for solid tumors, leveraging its antibody discovery platform and proprietary dAIsY™ AI engine - The company continues to progress multiple undisclosed PRO-XTEN™ dual-masked TCEs against clinically validated targets with potential applications across a number of solid tumors[102](index=102&type=chunk) - These preclinical candidates integrate the PRO-XTEN™ masking technology with novel TCEs discovered and engineered using the company's antibody discovery platform and proprietary dAIsY™ (data AI structure and antibody) AI engine[102](index=102&type=chunk) [Our Collaboration, License and Grant Agreements](index=24&type=section&id=Our%20Collaboration,%20License%20and%20Grant%20Agreements) The company has various collaboration, license, and grant agreements, with details provided in the notes to the financial statements, which are crucial for its product development and financial arrangements - The company has entered into collaboration, license, and grant arrangements with various third parties, with details provided in Note 4 and Note 5 of the unaudited condensed consolidated financial statements[103](index=103&type=chunk) [Components of Operating Results](index=25&type=section&id=Components%20of%20Operating%20Results) This section outlines the components of operating results, including revenue streams, operating expenses, and other income/expense items, providing context for financial performance - Revenues consist of collaboration revenue (profit-share from sotrovimab, expected to be nominal in 2025), contract revenue (license rights, R&D services, clinical supply), and grant revenue (government-sponsored and private organizations)[106](index=106&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) - Research and development expenses, primarily related to discovery and preclinical/clinical development, are expected to increase substantially as product candidates advance[111](index=111&type=chunk)[113](index=113&type=chunk) - Selling, general and administrative expenses are expected to increase in absolute dollars in the long-term to support commercialization activities[118](index=118&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) The company's net loss increased for the six months ended June 30, 2025, primarily due to a significant decrease in contract and grant revenues, and higher R&D expenses, partially offset by lower selling, general and administrative expenses and restructuring charges | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Total Revenues | $1,214 | $3,075 | $4,246 | $59,451 | | Research and Development | $97,509 | $105,113 | $216,154 | $205,238 | | Selling, General and Administrative | $22,283 | $30,265 | $46,227 | $66,586 | | Net Loss | $(110,958) | $(138,378) | $(231,923) | $(203,654) | - The decrease in contract revenue for the six months ended June 30, 2025, was primarily due to **$51.7 million** of deferred revenue recognized in the first quarter of 2024 when GSK's rights to select additional target pathogens expired[126](index=126&type=chunk) - Research and development expenses increased for the six months ended June 30, 2025, primarily due to a **$30.0 million expense** from the Restated Alnylam Agreement and higher clinical costs for the ECLIPSE registrational program and oncology programs[129](index=129&type=chunk)[132](index=132&type=chunk) [Liquidity, Capital Resources and Capital Requirements](index=30&type=section&id=Liquidity,%20Capital%20Resources%20and%20Capital%20Requirements) The company's liquidity is primarily supported by its cash, cash equivalents, and investments, which are expected to fund operations for at least the next 12 months. However, substantial additional funding will likely be required for long-term development and commercialization, potentially through equity, debt, or collaborations - As of June 30, 2025, the company had **$892.1 million in cash, cash equivalents, and investments**, and **$95.2 million in restricted cash**, which is believed to be sufficient to fund operations for at least the next 12 months[138](index=138&type=chunk)[140](index=140&type=chunk) - The company expects to finance future cash needs through public or private equity or debt financings, third-party funding, and marketing/distribution arrangements, as well as other collaborations[141](index=141&type=chunk) - Cash used in operating activities increased during the six months ended June 30, 2025, primarily due to milestone payments for the ECLIPSE program and higher clinical costs, partially offset by cost savings from headcount reductions and program de-prioritization[147](index=147&type=chunk) [Critical Accounting Policies and Estimates](index=32&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements are prepared using GAAP, requiring management to make estimates and assumptions. There have been no significant changes in critical accounting policies during the six months ended June 30, 2025 - The preparation of financial statements requires management to make estimates and assumptions that affect reported amounts[150](index=150&type=chunk) - There have been no significant changes in critical accounting policies during the six months ended June 30, 2025, compared to those disclosed in the Annual Report on Form 10-K for 2024[151](index=151&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks primarily related to interest rates, foreign currency, and equity investments. Its interest rate risk is not significant due to short-term, investment-grade securities, and foreign currency transaction gains/losses were not material. Equity investment fair value is subject to stock market volatility - The company's exposure to interest rate risk is not significant, as its investments are primarily short-term U.S. government treasuries, agency bonds, and discount notes[153](index=153&type=chunk) - The company is exposed to foreign currency risk primarily related to the Euro, Swiss Franc, and Australian dollar, but transaction gains and losses were not material for the periods presented[154](index=154&type=chunk) - Equity investment risk stems from holding ordinary shares of Brii Bio Parent, valued at approximately **$7.3 million** as of June 30, 2025, with fair value changes impacted by stock market volatility[155](index=155&type=chunk) [Item 4. Controls and Procedures](index=33&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, and there were no material changes in internal control over financial reporting during the quarter - Management, with the participation of the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[156](index=156&type=chunk) - There have been no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the fiscal quarter ended June 30, 2025[157](index=157&type=chunk) [PART II. OTHER INFORMATION](index=34&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides information on legal proceedings, risk factors, equity security sales, defaults, other information, and exhibits [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings and is unaware of any pending or threatened legal actions that could significantly impact its business, operating results, or financial condition - The company is not currently party to any material legal proceedings and is not aware of any pending or threatened legal proceeding against it that could have an adverse effect on its business, operating results or financial condition[160](index=160&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks that could adversely affect the company's business, including financial position, product development, regulatory compliance, and intellectual property challenges - The company has incurred net losses and anticipates continued losses, requiring substantial additional funding to finance operations[162](index=162&type=chunk)[164](index=164&type=chunk)[170](index=170&type=chunk) - Future success is highly dependent on the successful clinical development, regulatory approval, and commercialization of product candidates, which is a lengthy, expensive, and uncertain process[162](index=162&type=chunk)[179](index=179&type=chunk)[193](index=193&type=chunk) - The company faces substantial competition and relies heavily on third parties for manufacturing and clinical studies, exposing it to risks of delays, supply shortages, and unsatisfactory performance[162](index=162&type=chunk)[209](index=209&type=chunk)[240](index=240&type=chunk)[250](index=250&type=chunk) [Risks Related to Our Financial Position and Capital Needs](index=36&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Capital%20Needs) The company faces significant financial risks, including a history of net losses and the expectation of continued losses, a limited commercialization track record, and a substantial need for additional funding, which could lead to stockholder dilution or operational restrictions. Furthermore, no meaningful future revenue is expected from sotrovimab - The company incurred net losses of **$231.9 million** for the six months ended June 30, 2025, and had an accumulated deficit of **$991.7 million**, with expectations of continued significant expenses and net losses[164](index=164&type=chunk)[165](index=165&type=chunk) - Existing cash, cash equivalents, and investments of **$892.1 million** are expected to fund operations for at least the next 12 months, but substantial additional financing will be required for long-term operations and product commercialization[170](index=170&type=chunk) - The FDA revoked the emergency use authorization (EUA) for sotrovimab in December 2024, and the company does not expect meaningful future revenue from its sale for COVID-19[176](index=176&type=chunk)[178](index=178&type=chunk) [Risks Related to Development and Commercialization](index=38&type=section&id=Risks%20Related%20to%20Development%20and%20Commercialization) Development and commercialization efforts are highly uncertain, with risks including the failure of clinical studies, potential for undesirable side effects, challenges in patient enrollment, and the possibility that regulatory designations (e.g., Fast Track) do not guarantee approval. The company also faces risks from developing combination therapies, relying on interim data, and negative public perception of new technologies - The company's future success is substantially dependent on the successful clinical development, regulatory approval, and commercialization of its product candidates, which is a lengthy, expensive, and uncertain process[179](index=179&type=chunk)[193](index=193&type=chunk) - Success in preclinical or early-stage clinical studies may not be indicative of results in future clinical studies, and product candidates may cause undesirable side effects, delaying or preventing regulatory approval[189](index=189&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) - Even if product candidates receive marketing approval, they may fail to achieve adoption by physicians, patients, or third-party payors, limiting commercial success[213](index=213&type=chunk)[214](index=214&type=chunk) [Risks Related to Regulatory Compliance](index=47&type=section&id=Risks%20Related%20to%20Regulatory%20Compliance) The company is subject to extensive regulatory compliance risks, including competition from biosimilar/generic products, strict healthcare fraud and abuse laws, challenges in obtaining adequate reimbursement, and the impact of evolving healthcare legislative reforms. Non-compliance with anti-corruption and anti-bribery laws also poses significant risks - Approved product candidates may face competition from biosimilar or generic products after regulatory exclusivity periods, impacting market share and sales[225](index=225&type=chunk)[228](index=228&type=chunk) - Relationships with healthcare professionals and third-party payors are subject to federal and state healthcare fraud and abuse laws, with non-compliance potentially leading to substantial penalties[229](index=229&type=chunk)[230](index=230&type=chunk) - Market acceptance and sales of approved products depend on adequate coverage and reimbursement from third-party payors, which is uncertain and can be negatively impacted by healthcare legislative reforms[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk)[236](index=236&type=chunk) [Risks Related to Our Dependence on Third Parties](index=50&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) The company's operations heavily rely on third parties for clinical supplies and the conduct of preclinical and clinical studies, which introduces risks such as manufacturing delays, supply shortages, non-compliance with regulatory standards, and limited control over third-party performance. Additionally, changes in trade policies and compliance with environmental laws for hazardous materials pose further risks - The company relies on third-party contract development and manufacturing organizations (CDMOs) to produce clinical supplies of its product candidates, exposing it to risks of delays, supply shortages, and non-compliance with cGMP requirements[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) - Reliance on contract research organizations (CROs) and clinical trial sites for preclinical and clinical studies results in less direct control over data management and potential delays if third parties perform unsatisfactorily[250](index=250&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk) - The company's business is subject to risks from changes in U.S. and international trade policies, such as tariffs, and compliance with environmental, health, and safety laws related to hazardous materials[247](index=247&type=chunk)[249](index=249&type=chunk) [Risks Related to Our Intellectual Property](index=54&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The company's success is highly dependent on its ability to obtain, maintain, and enforce patent protection and protect trade secrets globally. Risks include potential breaches of license agreements, challenges to patent validity, inadequate patent terms, third-party infringement claims, and the difficulty of protecting intellectual property in foreign jurisdictions. The potential exercise of licenses by the Gates Foundation also poses a risk to market position - Failure to obtain and maintain broad and robust patent protection for product candidates and technology, or challenges to existing patents, could allow competitors to commercialize similar products[255](index=255&type=chunk)[257](index=257&type=chunk)[259](index=259&type=chunk) - The company relies on trade secrets, but sharing confidential information with third parties increases the risk of disclosure or misappropriation, which could harm its competitive position[278](index=278&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk) - The Gates Foundation has the right to exercise non-exclusive, fully-paid licenses to certain intellectual property if specified defaults occur, which could adversely impact the company's market position[284](index=284&type=chunk)[285](index=285&type=chunk) [Risks Related to Our Business Operations, Employee Matters and Managing Growth](index=60&type=section&id=Risks%20Related%20to%20Our%20Business%20Operations,%20Employee%20Matters%20and%20Managing%20Growth) Operational risks include high dependence on key personnel, challenges in managing growth, and potential disruptions from natural disasters or geopolitical events. The company also faces significant risks from information system failures, security breaches, stringent privacy laws, and potential employee misconduct. Limitations on net operating losses (NOLs) could also impact financial results - The company is highly dependent on its key management, clinical, and scientific personnel, and the loss or inability to recruit and retain such individuals could harm its business[286](index=286&type=chunk)[287](index=287&type=chunk) - Information systems are vulnerable to cyber-attacks, malware, and other failures, which could disrupt product development, operations, and lead to unauthorized data access or disclosure[294](index=294&type=chunk)[295](index=295&type=chunk) - The company is subject to stringent global privacy laws (e.g., GDPR, HIPAA) and evolving AI regulations; non-compliance could result in significant fines, investigations, and reputational harm[297](index=297&type=chunk)[298](index=298&type=chunk)[301](index=301&type=chunk) [Risks Related to Ownership of Our Common Stock](index=65&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Ownership of the company's common stock carries risks due to potential fluctuations in financial results and stock price volatility. Investors should not expect cash dividends, and the company incurs significant costs as a public entity. Challenges in internal control over financial reporting, changes in accounting principles, and provisions in corporate charter documents could also adversely affect stockholders - The company's financial condition and results of operations are expected to fluctuate, and its stock price has been, and may continue to be, volatile, potentially resulting in substantial losses for investors[308](index=308&type=chunk)[310](index=310&type=chunk) - The company does not anticipate paying cash dividends in the foreseeable future, making capital appreciation the sole source of gain for stockholders[314](index=314&type=chunk) - Operating as a public company incurs significant costs and management time for compliance, and failure to maintain effective internal control over financial reporting could impair accurate financial statements and investor confidence[315](index=315&type=chunk)[317](index=317&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This item is marked as 'Not applicable,' indicating no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities occurred during the reporting period [Item 3. Defaults Upon Senior Securities](index=68&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is marked as 'Not applicable,' indicating no defaults upon senior securities during the reporting period [Item 4. Mine Safety Disclosures](index=68&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is marked as 'Not applicable,' indicating no mine safety disclosures are required for the company [Item 5. Other Information](index=68&type=section&id=Item%205.%20Other%20Information) This section discloses Rule 10b5-1 trading plans adopted by an executive and a director for the sale of common stock, primarily to cover tax obligations related to restricted stock unit (RSU) vesting - Mark Eisner, M.D., M.P.H., Executive Vice President and Chief Medical Officer, adopted a Rule 10b5-1 trading plan on May 19, 2025, for the sale of up to **100,463 stock option shares** and RSU shares to satisfy tax obligations[328](index=328&type=chunk) - Vanina de Verneuil, J.D., Executive Vice President, General Counsel and Corporate Secretary, adopted a Rule 10b5-1 trading plan on June 2, 2025, for the sale of RSU shares to cover tax obligations[329](index=329&type=chunk) - Director Janet Napolitano, J.D., adopted a Rule 10b5-1 trading plan on June 27, 2025, for the sale of RSU shares to satisfy tax obligations related to vested and future RSU awards[330](index=330&type=chunk) [Item 6. Exhibits](index=69&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, certifications, and XBRL-related files - Exhibits include the Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, Certifications of Principal Executive and Financial Officers (pursuant to Rules 13a-14(a) and 18 U.S.C. Section 1350), and Inline XBRL documents[332](index=332&type=chunk) [Signatures](index=70&type=section&id=Signatures) The report is signed by Marianne De Backer, Chief Executive Officer and Director, and Jason O'Byrne, Executive Vice President and Chief Financial Officer, on August 6, 2025, certifying its submission - The report is signed by Marianne De Backer, M.Sc., Ph.D., MBA, Chief Executive Officer and Director (Principal Executive Officer), and Jason O'Byrne, MBA, Executive Vice President and Chief Financial Officer (Principal Financial Officer)[336](index=336&type=chunk) - The signing date for the report is August 6, 2025[336](index=336&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-37900 Everspin Technologies, Inc. (Exact name of Registrant as specified in its Charter) Delaware 26-2640654 (S ...

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) This section presents the unaudited condensed consolidated financial statements and related disclosures for Stabilis Solutions, Inc. and its subsidiaries [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Stabilis Solutions, Inc. and its subsidiaries, including the balance sheets, statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, along with detailed notes providing context on business operations, accounting policies, and specific financial line items [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :------------------ | | Total Assets | $83,244 | $85,584 | | Total Liabilities | $17,762 | $18,576 | | Total Stockholders' Equity | $65,482 | $67,008 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance over specific periods, presenting revenues, expenses, and net income or loss Condensed Consolidated Statements of Operations 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 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $17,309 | $18,598 | $34,647 | $38,368 | | Net Income (Loss) | $(613) | $27 | $(2,211) | $1,496 | | Basic and Diluted EPS | $(0.03) | $0.00 | $(0.12) | $0.08 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section details the company's total comprehensive income or loss, including net income and other comprehensive income items Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income (Loss) | $(613) | $27 | $(2,211) | $1,496 | | Foreign currency translation adjustment, net of tax | $184 | $52 | $255 | $(414) | | Total Comprehensive Income (Loss) | $(429) | $79 | $(1,956) | $1,082 | [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section tracks changes in the company's equity over time, reflecting net income, dividends, and other equity transactions Condensed Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------- | :---------------- | :-------------- | | Total Stockholders' Equity | $67,008 | $65,482 | | Accumulated Deficit | $(35,647) | $(37,858) | | Net Loss (Six Months Ended June 30, 2025) | N/A | $(2,211) | | Stock-based compensation (Six Months Ended June 30, 2025) | N/A | $447 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities over a period Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $5,540 | $8,967 | | Net cash used in investing activities | $(911) | $(1,970) | | Net cash used in financing activities | $(1,410) | $(884) | | Net increase in cash and cash equivalents | $3,233 | $6,109 | | Cash and cash equivalents, end of period | $12,220 | $11,483 | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements - The Company operates as an energy transition company providing turnkey clean energy solutions using liquefied natural gas (LNG) to multiple end markets[23](index=23&type=chunk) - The Company holds a **40% interest** in BOMAY Electric Industries, Inc., a Chinese joint venture, which builds power and control systems for the energy industry in China and is accounted for under the equity method[25](index=25&type=chunk) - Management makes estimates and assumptions in preparing the financial statements, including the fair value of equity-based awards, natural gas derivatives, and carrying amount of contingencies[28](index=28&type=chunk) [Note 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION](index=10&type=section&id=Note%201.%20DESCRIPTION%20OF%20BUSINESS%20AND%20BASIS%20OF%20PRESENTATION) This note describes the company's core business, its operational structure, and the accounting principles underlying the financial statements - Stabilis Solutions, Inc. is an energy transition company providing turnkey clean energy production, storage, transportation, and fueling solutions using LNG to diverse end markets[23](index=23&type=chunk)[24](index=24&type=chunk) - The Company's **40% owned** Chinese joint venture, BOMAY Electric Industries, Inc., builds power and control systems for the energy industry in China[25](index=25&type=chunk) - The Company has determined it has a single operating and reporting segment, with the CEO as the Chief Operating Decision Maker[29](index=29&type=chunk) - The Company does not expect the adoption of ASU 2024-03 (effective January 1, 2027) and ASU 2023-09 (effective January 1, 2025) to have a significant impact on its consolidated financial statements[32](index=32&type=chunk)[33](index=33&type=chunk) [Note 2. REVENUE RECOGNITION](index=12&type=section&id=Note%202.%20REVENUE%20RECOGNITION) This note details the company's policies for recognizing revenue from various sources, including LNG product sales, rentals, and services - Revenues are recognized when promised goods or services are delivered and are disaggregated into LNG Product, rental, service, and other categories[35](index=35&type=chunk) Revenue Disaggregated by Source (in thousands) | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | LNG Product | $14,628 | $14,626 | $28,574 | $30,039 | | Rental | $1,296 | $1,682 | $2,846 | $3,855 | | Service | $1,169 | $1,693 | $2,874 | $3,617 | | Other | $216 | $597 | $353 | $857 | | **Total Revenues** | **$17,309** | **$18,598** | **$34,647** | **$38,368** | Revenue Disaggregated by Geographic Location (in thousands) | Location | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------- | :----------------------------- | :----------------------------- | | United States | $32,958 | $35,880 | | Mexico | $1,689 | $2,488 | | **Total Revenues** | **$34,647** | **$38,368** | [Note 3. PREPAID EXPENSES AND OTHER CURRENT ASSETS](index=14&type=section&id=Note%203.%20PREPAID%20EXPENSES%20AND%20OTHER%20CURRENT%20ASSETS) This note provides a breakdown of the company's prepaid expenses and other current assets, including insurance, supplier expenses, and other receivables Prepaid Expenses and Other Current Assets (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :---------------------------------- | :-------------- | :------------------ | | Prepaid insurance | $294 | $1,044 | | Prepaid supplier expenses | $289 | $167 | | Other receivables | $217 | $204 | | Natural gas derivatives at fair value, current | $0 | $207 | | Deposits | $99 | $129 | | Other | $140 | $151 | | **Total prepaid expenses and other current assets** | **$1,039** | **$1,902** | [Note 4. PROPERTY, PLANT AND EQUIPMENT](index=14&type=section&id=Note%204.%20PROPERTY,%20PLANT%20AND%20EQUIPMENT) This note details the company's property, plant, and equipment, including cost, accumulated depreciation, and depreciation expense Property, Plant and Equipment (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :------------------ | | Cost | $118,596 | $117,246 | | Less: accumulated depreciation | $(69,048) | $(65,518) | | **Property, plant and equipment, net** | **$49,548** | **$51,728** | - Depreciation expense totaled **$3.7 million** for the six months ended June 30, 2025, an increase from **$3.6 million** in the prior year period[46](index=46&type=chunk) [Note 5. INVESTMENT IN FOREIGN JOINT VENTURE](index=15&type=section&id=Note%205.%20INVESTMENT%20IN%20FOREIGN%20JOINT%20VENTURE) This note describes the company's equity investment in BOMAY Electric Industries, Inc., including its operational results and investment activity - The Company holds a **40% interest** in BOMAY Electric Industries, Inc., accounted for using the equity method[47](index=47&type=chunk)[48](index=48&type=chunk) BOMAY's Operational Results (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $29,488 | $22,062 | $51,198 | $39,301 | | Net income | $219 | $770 | $1,180 | $1,307 | Investment in BOMAY Activity (Six Months Ended June 30, 2025, in thousands) | Item | Amount | | :-------------------------------- | :----- | | Balance at December 31, 2024 | $11,659 | | Income from Equity Investment | $537 | | Less: dividend distributions | $(1,637) | | Foreign currency translation gain (loss) | $201 | | **Balance at June 30, 2025** | **$10,760** | - The Company does not believe an impairment of its investment in BOMAY is necessary for the period ending June 30, 2025[50](index=50&type=chunk) [Note 6. ACCRUED LIABILITIES](index=17&type=section&id=Note%206.%20ACCRUED%20LIABILITIES) This note provides a breakdown of the company's accrued liabilities, including compensation, taxes, and other accrued expenses Accrued Liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :------------------ | | Compensation and benefits | $2,902 | $2,408 | | Other taxes payable | $286 | $268 | | Other accrued liabilities | $268 | $890 | | **Total accrued liabilities** | **$3,456** | **$3,566** | - The Company recorded **$1.7 million** in separation-related expenses for the former President and CEO, Mr. Ballard, in the first quarter of 2025, with **$1.0 million** remaining unpaid as of June 30, 2025[52](index=52&type=chunk) [Note 7. DEBT](index=17&type=section&id=Note%207.%20DEBT) This note details the company's debt obligations, including secured term notes, other notes payable, and compliance with debt covenants Debt, Net of Debt Issuance Costs (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------------------------------------- | :-------------- | :------------------ | | Secured term note, net of debt issuance costs | $7,502 | $7,975 | | Insurance and other notes payable | $129 | $883 | | **Total** | **$7,631** | **$8,858** | | Less: amounts due within one year | $(1,295) | $(2,010) | | **Total long-term debt** | **$6,336** | **$6,848** | - The **$10.0 million** Revolving Credit Facility maturity date was extended to June 9, 2028, with **$2.9 million** availability as of June 30, 2025, and no amounts drawn[55](index=55&type=chunk)[56](index=56&type=chunk) - The Company was in compliance with all its debt covenants related to the Revolving Credit Facility and the AmeriState Loan as of June 30, 2025[58](index=58&type=chunk)[61](index=61&type=chunk) [Note 8. RELATED PARTY TRANSACTIONS](index=19&type=section&id=Note%208.%20RELATED%20PARTY%20TRANSACTIONS) This note discloses transactions with related parties, including lease agreements and purchases from entities controlled by company executives - The Company entered into a lease agreement for office space from The Modern Group, controlled by the Executive Chairman, at a market rate of **$28 thousand** per month[64](index=64&type=chunk) Related Party Purchases and Lease Payments (in thousands) | Related Party | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | The Modern Group | $0.1 million | $37 | $0.1 million | $0.1 million | | Chart E&C | $13 | $0.1 million | $0.1 million | $0.3 million | [Note 9. COMMITMENTS AND CONTINGENCIES](index=20&type=section&id=Note%209.%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the company's environmental compliance, legal proceedings, and other commitments and contingencies - The Company is subject to federal, state, and local environmental laws and regulations, and believes its operations comply in all material respects[67](index=67&type=chunk) - Management believes the ultimate resolution of various legal actions, claims, and audits will not have a material adverse effect on the Company's financial position, results of operations, or liquidity[68](index=68&type=chunk) [Note 10. STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION](index=20&type=section&id=Note%2010.%20STOCKHOLDERS'%20EQUITY%20AND%20STOCK-BASED%20COMPENSATION) This note details changes in stockholders' equity and the accounting for stock-based compensation, including expense recognition and award grants Stock Compensation Expense (in thousands) | Period | 2025 | 2024 | | :------------------------------- | :--- | :--- | | Three Months Ended June 30 | $0.0 | $0.4 | | Six Months Ended June 30 | $0.4 | $0.8 | - The Company recognized **$0.4 million** in additional non-cash stock compensation expense due to accelerated vesting and amended option exercise terms for the former CEO's equity awards[73](index=73&type=chunk) - No stock-based awards were granted during the six months ended June 30, 2025[71](index=71&type=chunk) [Note 11. NET INCOME PER SHARE](index=22&type=section&id=Note%2011.%20NET%20INCOME%20PER%20SHARE) This note presents the calculation of basic and diluted net income per common share, including the impact of dilutive securities Net Income (Loss) Per Common Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic and diluted per common share | $(0.03) | $0.00 | $(0.12) | $0.08 | - No dilutive securities were included in the calculation for the six months ended June 30, 2025, as all RSUs had vested and stock options had exercise prices exceeding the market price, making their inclusion anti-dilutive due to the net loss[75](index=75&type=chunk) [Note 12. SUPPLEMENTAL CASH FLOW INFORMATION](index=22&type=section&id=Note%2012.%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) This note provides additional details on cash flow activities, including interest and income taxes paid, and non-cash investing activities Supplemental Disclosure of Cash Flow Information (Six Months Ended June 30, in thousands) | Item | 2025 | 2024 | | :------------------------------------------------- | :--- | :--- | | Interest paid | $285 | $309 | | Income taxes paid | $191 | $403 | | Acquisition of fixed assets included within accounts payable and accrued expenses | $675 | $486 | | ROU assets acquired under operating leases | $425 | $0 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Stabilis Solutions' business as an energy transition company, detailing its LNG production, transportation, equipment rental, and engineering services. It analyzes the financial performance for the three and six months ended June 30, 2025, compared to the prior year, highlighting revenue declines, changes in operating expenses, and the company's liquidity position - Stabilis Solutions, Inc. is an energy transition company that provides turnkey clean energy production, storage, transportation and fueling solutions using liquefied natural gas (LNG) to multiple end markets[80](index=80&type=chunk) - The Company generates revenue by selling and delivering LNG, renting cryogenic equipment, and providing engineering and field support services[81](index=81&type=chunk) - The Company received authorization from the DOE in Q3 2022 to export domestically produced LNG to all free trade and non-free trade countries, with initial exports to Europe by June 30, 2025[86](index=86&type=chunk) [Overview](index=23&type=section&id=Overview) This section provides a general description of Stabilis Solutions' business model, including its LNG solutions, liquefaction facilities, and equipment fleet - Stabilis Solutions provides LNG solutions to customers in diverse end markets, including aerospace, agriculture, energy, industrial, marine bunkering, mining, pipeline, remote power and utility markets[80](index=80&type=chunk) - The Company owns and operates two liquefiers in George West, Texas (**100,000 LNG gallons/day**) and Port Allen, Louisiana (**30,000 LNG gallons/day**), and also purchases LNG from third-party sources[82](index=82&type=chunk) - Stabilis operates one of the largest fleets of small-scale LNG equipment in North America, including transportation trailers, vaporizers, storage tanks, and mobile vehicle fuelers[84](index=84&type=chunk) - The Company initiated LNG exports to Europe under its DOE authorization by June 30, 2025[86](index=86&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing changes in revenues, cost of revenues, and operating expenses over comparative periods Consolidated Operating Results (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :------------------------------------------ | :----- | :----- | :------- | :------- | | Total Revenues | $17,309 | $18,598 | $(1,289) | (6.9)% | | Cost of revenues | $12,724 | $13,550 | $(826) | (6.1)% | | Selling, general and administrative expenses | $3,131 | $3,331 | $(200) | (6.0)% | | Net income (loss) | $(613) | $27 | $(640) | n/a | Consolidated Operating Results (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :------------------------------------------ | :----- | :----- | :------- | :------- | | Total Revenues | $34,647 | $38,368 | $(3,721) | (9.7)% | | Cost of revenues | $25,512 | $27,064 | $(1,552) | (5.7)% | | Selling, general and administrative expenses | $8,064 | $6,787 | $1,277 | 18.8% | | Net income (loss) | $(2,211) | $1,496 | $(3,707) | n/a | - The increase in selling, general and administrative expenses for the six months ended June 30, 2025, was primarily due to **$2.1 million** in severance-related expenses for the former CEO[107](index=107&type=chunk) [Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=25&type=section&id=Three%20Months%20Ended%20June%2030,%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030,%202024) This section compares the company's financial performance for the three months ended June 30, 2025, against the same period in the prior year - Revenues decreased by **$1.3 million (7%)** due to decreased LNG gallons delivered (**$1.5 million** decrease) and lower rental, service, and other revenues (**$1.3 million** decrease), partially offset by increased revenues from higher natural gas prices (**$1.5 million** increase)[92](index=92&type=chunk) - Cost of revenues decreased by **$0.8 million (6%)**, primarily due to decreased LNG gallons delivered (**$1.0 million** decrease) and lower rental, service, and other costs (**$0.5 million** decrease), partially offset by higher natural gas pricing (**$1.5 million** increase)[92](index=92&type=chunk)[93](index=93&type=chunk) - Net equity income from foreign joint venture operations decreased by **$0.2 million (83.1%)** due to decreased net profits by the joint venture[98](index=98&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=28&type=section&id=Six%20Months%20Ended%20June%2030,%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030,%202024) This section compares the company's financial performance for the six months ended June 30, 2025, against the same period in the prior year - Revenues decreased by **$3.7 million (10%)** due to decreased LNG gallons delivered (**$3.6 million** decrease), lower rental, service, and other revenues (**$2.3 million** decrease), and unfavorable customer pricing mix/lower take-or-pay revenues (**$0.3 million** decrease), partially offset by increased revenues from higher natural gas prices (**$2.5 million** increase)[104](index=104&type=chunk) - Cost of revenues decreased by **$1.6 million (6%)**, primarily due to decreased LNG gallons delivered (**$2.4 million** decrease) and lower rental, service, and other costs (**$1.0 million** decrease), partially offset by higher natural gas pricing (**$2.5 million** increase)[104](index=104&type=chunk)[105](index=105&type=chunk) - Selling, general and administrative expenses increased by **$1.3 million (18.8%)**, with **$2.1 million** attributed to severance-related expenses for the former CEO, partially offset by lower other compensation expense[107](index=107&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations, including cash flows, debt, and capital requirements - The Company's principal sources of liquidity are cash from operations, cash on hand, and distributions from its BOMAY joint venture[113](index=113&type=chunk) - As of June 30, 2025, the Company had **$12.2 million** in cash and cash equivalents, **$8.4 million** in outstanding debt and lease obligations, and **$3.9 million** in total availability under its debt agreements[115](index=115&type=chunk) - The Revolving Credit Facility maturity date was extended to June 9, 2028, with **$2.9 million** availability at June 30, 2025, and no amounts drawn[114](index=114&type=chunk)[115](index=115&type=chunk) - Management believes current liquidity is sufficient for the next twelve months but continues to evaluate additional financing for future growth or expansion[116](index=116&type=chunk) [Cash Flows](index=31&type=section&id=Cash%20Flows) This section summarizes the cash generated from or used in operating, investing, and financing activities for comparative periods Cash Flows Summary (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | Change ($k) | | :-------------------------------- | :----- | :----- | :---------- | | Net cash provided by operating activities | $5,540 | $8,967 | $(3,427) | | Net cash used in investing activities | $(911) | $(1,970) | $1,059 | | Net cash used in financing activities | $(1,410) | $(884) | $(526) | [Future Cash Requirements](index=33&type=section&id=Future%20Cash%20Requirements) This section outlines the company's anticipated cash needs for operations, capital expenditures, debt, and potential strategic initiatives - Cash is required to fund operating expenses, working capital, capital expenditures, debt repayments, equipment maintenance, and potential mergers and acquisitions or market expansion[121](index=121&type=chunk) - Capital expenditures for the six months ended June 30, 2025, were **$1.1 million**, primarily for liquefaction assets, refurbishments, upgrades, and rolling stock[122](index=122&type=chunk) - The Company may pursue additional financing activities, such as refinancing existing debt, obtaining new debt, or debt/equity offerings, but there is no assurance of availability on acceptable terms[121](index=121&type=chunk) [Off-Balance Sheet Arrangements](index=33&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of material off-balance sheet arrangements that could significantly impact the company's financial position - As of June 30, 2025, the Company had no transactions that met the definition of off-balance sheet arrangements that would have a current or future material effect on its financial position, operating results, liquidity, cash requirements, or capital resources[123](index=123&type=chunk) [Critical Accounting Policies and Estimates](index=33&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section discusses the significant accounting policies and estimates that require management's judgment and can materially affect financial reporting - The Company's financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and assumptions that affect reported amounts[124](index=124&type=chunk) - There have been no significant changes in the Company's critical accounting policies and estimates during the three and six months ended June 30, 2025, from those disclosed in the 2024 Annual Report on Form 10-K[124](index=124&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a 'smaller reporting company,' Stabilis Solutions, Inc. is not required to provide quantitative and qualitative disclosures about market risk in this report - The Company is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a 'smaller reporting company'[125](index=125&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the principal executive and financial officers, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025. There have been no material changes in internal control over financial reporting during the last fiscal quarter - The principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[126](index=126&type=chunk) - There have been no changes in internal control over financial reporting that materially affected or are reasonably likely to materially affect internal control over financial reporting during the last fiscal quarter[127](index=127&type=chunk) [Part II. Other Information](index=34&type=section&id=Part%20II.%20Other%20Information) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in various legal proceedings and claims in the normal course of business. Management believes that the ultimate resolution of these matters will not have a material effect on the Company's financial position or results of operations - The Company may become party to various legal actions that arise in the ordinary course of its business[129](index=129&type=chunk) - Management's opinion is that the ultimate resolution of these matters will not have a material effect on the Company's financial position or results of operations[129](index=129&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors disclosed in the 2024 Form 10-K, except for the addition of a new risk factor concerning the potential adverse effects of changes in U.S. trade policy, including tariffs, on the Company's business and results of operations - No material changes in risk factors from the Company's Annual Report on Form 10-K for the year ended December 31, 2024, except for one addition[130](index=130&type=chunk) - A new risk factor highlights that changes in U.S. trade policy, including tariffs, may have a material adverse effect on the Company's business and results of operations by potentially reducing demand for LNG or increasing operating costs[131](index=131&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) No officers or directors adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the fiscal quarter ended June 30, 2025 - None of the Company's officers or directors adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the fiscal quarter ended June 30, 2025[132](index=132&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including organizational documents, registration rights agreements, and certifications from the principal executive and financial officers, along with XBRL-related documents - Exhibits include Amended and Restated Articles of Incorporation and Bylaws, Registration Rights Agreements, and Description of Securities[133](index=133&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer (Rule 13a-14(a) / 15d-14(a) and Section 1350) are filed[133](index=133&type=chunk) - Interactive XBRL Instance Document and Taxonomy Extension documents are included[133](index=133&type=chunk) [Signatures](index=36&type=section&id=Signatures) The report is officially signed by J. Casey Crenshaw, Interim President, Chief Executive Officer and Director, and Andrew L. Puhala, Chief Financial Officer, on behalf of Stabilis Solutions, Inc. on August 6, 2025 - The report was signed by J. Casey Crenshaw, Interim President, Chief Executive Officer and Director (Principal Executive Officer)[136](index=136&type=chunk) - The report was signed by Andrew L. Puhala, Chief Financial Officer (Principal Financial Officer)[136](index=136&type=chunk) - The signing date for the report was August 6, 2025[136](index=136&type=chunk)