PART I — FINANCIAL INFORMATION [Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) The unaudited condensed consolidated financial statements for Genco Shipping & Trading Limited show a net loss for current periods compared to net income in prior year periods, driven by lower voyage revenues, with total assets slightly decreasing to $1.04 billion and liabilities increasing to $147.2 million [Condensed Consolidated Balance Sheets](index=5&type=section&id=a)%20Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030,%202025%20and%20December%2031,%202024) Total assets decreased slightly to $1.040 billion as of June 30, 2025, while total liabilities increased to $147.2 million, leading to a decrease in total equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $78,972 | $97,990 | | **Total Assets** | **$1,040,250** | **$1,056,602** | | **Total Current Liabilities** | $48,547 | $40,660 | | **Total Liabilities** | **$147,208** | **$128,374** | | **Total Equity** | **$893,042** | **$928,228** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=b)%20Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20ended%20June%2030,%202025%20and%202024) The company reported a net loss for Q2 and H1 2025, a significant shift from net income in prior periods, primarily due to decreased voyage revenues Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | **Voyage Revenues** | $80,939 | $107,047 | $152,208 | $224,482 | | **Operating (Loss) Income** | $(4,262) | $26,314 | $(14,031) | $48,407 | | **Net (Loss) Income** | $(6,809) | $23,493 | $(18,771) | $42,436 | | **Net (Loss) Earnings Per Share-diluted** | $(0.16) | $0.54 | $(0.43) | $0.97 | [Condensed Consolidated Statements of Comprehensive (Loss) Income](index=7&type=section&id=c)%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income%20for%20the%20Three%20and%20Six%20Months%20ended%20June%2030,%202025%20and%202024) Comprehensive loss for Q2 and H1 2025 mirrored net loss figures, with no significant other comprehensive income or loss items impacting results Comprehensive (Loss) Income (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | **Three Months Ended June 30** | $(6,809) | $23,493 | | **Six Months Ended June 30** | $(18,771) | $41,909 | [Condensed Consolidated Statements of Equity](index=8&type=section&id=d)%20Condensed%20Consolidated%20Statements%20of%20Equity%20for%20the%20Three%20and%20Six%20Months%20ended%20June%2030,%202025%20and%202024) Total equity decreased to $893.0 million by June 30, 2025, primarily due to net loss and cash dividends declared - Total equity decreased by **$35.2 million** in the first six months of 2025, driven by net loss and dividend payments[18](index=18&type=chunk) - Cash dividends declared in H1 2025 amounted to **$0.45 per share** ($0.30 in Q1 and $0.15 in Q2), totaling **$19.7 million**[18](index=18&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=e)%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20ended%20June%2030,%202025%20and%202024) Net cash from operating activities significantly decreased in H1 2025, while net cash used in investing activities shifted to an outflow, and financing activities saw lower cash usage Cash Flow Summary (in thousands) | Cash Flow Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $8,303 | $61,283 | | **Net Cash (used in)/from Investing Activities** | $(6,661) | $65,118 | | **Net Cash from Financing Activities** | $(9,893) | $(130,910) | | **Net Decrease in Cash** | $(8,251) | $(4,509) | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=f)%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail fleet composition, segment reporting, debt structure, compensation plans, and significant subsequent events including a dividend declaration and credit facility upsizing - As of June 30, 2025, the Company's fleet consisted of **42 drybulk vessels** (16 Capesize, 15 Ultramax, 11 Supramax) with an aggregate capacity of approximately **4,446,000 dwt**[25](index=25&type=chunk) - The company operates under two reportable segments: **Major Bulk** (Capesize vessels) and **Minor Bulk** (Ultramax and Supramax vessels)[41](index=41&type=chunk)[42](index=42&type=chunk) - Subsequent to the quarter end, on August 6, 2025, the company declared a quarterly dividend of **$0.15 per share**[102](index=102&type=chunk) - On July 10, 2025, the company upsized its revolving credit facility from **$500 million to $600 million** and extended the maturity to July 2030[103](index=103&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial results, highlighting decreased voyage revenues and TCE rates leading to a net loss, alongside capital allocation, fleet strategy, regulatory updates, and liquidity - The company's capital allocation strategy focuses on compelling quarterly dividends, financial deleveraging, and accretive fleet growth, with debt reduced by **$349.2 million** since 2021[110](index=110&type=chunk)[114](index=114&type=chunk) - Total liquidity as of June 30, 2025, was **$335.6 million**, comprising **$35.8 million** in cash and **$299.8 million** in undrawn revolver availability[111](index=111&type=chunk) Fleet Average Daily Results Comparison | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | **Time Charter Equivalent (TCE)** | $13,631 | $19,938 | (31.6)% | | **Daily Vessel Operating Expenses** | $6,213 | $6,855 | (9.4)% | - Subsequent to quarter end, the company agreed to acquire the Genco Courageous, a 2020-built Capesize vessel, for **$63.55 million**, expected for delivery in Q3 2025[122](index=122&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks primarily from floating-rate debt interest rate changes and fuel price fluctuations, with currency exchange rate risk deemed immaterial - The company is subject to interest rate risk on its floating rate debt tied to SOFR; a hypothetical **1% increase in SOFR** would have increased H1 2025 interest expense by **$0.5 million**[231](index=231&type=chunk)[232](index=232&type=chunk) - The company's last interest rate cap agreement expired in Q1 2024, increasing exposure to variable interest rate fluctuations[229](index=229&type=chunk)[233](index=233&type=chunk) - Bunker swap and forward fuel purchase agreements are utilized to mitigate risk from changing fuel prices, with gains or losses recognized in other income[235](index=235&type=chunk) [Controls and Procedures](index=68&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are **effective** as of June 30, 2025[237](index=237&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[238](index=238&type=chunk) PART II —OTHER INFORMATION [Exhibits](index=68&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and financial data in Inline XBRL format - The report includes CEO and CFO certifications as required by Rules 13a-14(a) and 15d-14(a) of the Exchange Act[240](index=240&type=chunk) - Financial statements and notes are provided in Inline XBRL format as part of the filing[242](index=242&type=chunk)

Form 10-Q Filing Information [Registrant Information](index=1&type=section&id=Registrant%20Information) The company filed its Form 10-Q, identifying as an accelerated filer, smaller reporting, and emerging growth company, with 61.7 million shares outstanding - CS Disco, Inc. is an accelerated filer, smaller reporting company, and emerging growth company, having opted out of the extended transition period for new accounting standards[3](index=3&type=chunk) Condensed Consolidated Registrant Information | Metric | Value | | :--- | :--- | | Common Stock Par Value | $0.005 | | Common Stock Outstanding (July 31, 2025) | 61,741,846 shares | Special Note Regarding Forward-Looking Statements [Nature of Forward-Looking Statements](index=4&type=section&id=Nature%20of%20Forward-Looking%20Statements) The report contains forward-looking statements based on management's beliefs, subject to risks and uncertainties, with actual results potentially differing materially - All statements in the 10-Q, other than historical facts, are forward-looking and based on management's current expectations and projections, subject to risks and uncertainties[8](index=8&type=chunk)[9](index=9&type=chunk) - Investors should not rely on forward-looking statements as predictions of future events, as actual results may differ materially due to various factors, including those described in 'Risk Factors'[9](index=9&type=chunk) [Key Forward-Looking Topics](index=4&type=section&id=Key%20Forward-Looking%20Topics) Forward-looking statements encompass financial performance, customer dynamics, growth, profitability, investments, market strategy, personnel, IP, macroeconomic conditions, and competition - Expectations regarding revenue, expenses, and other operating results - Impact of fluctuations in customer usage based on legal matters - Ability to acquire and retain customers, and increase product usage - Ability to achieve or sustain profitability and manage growth, including international expansion - Future investments, capital expenditures, and capital requirements - Costs and success of sales and marketing efforts and brand promotion - Growth strategies for product offerings and estimated addressable market opportunity - Ability to grow partner ecosystem and maintain strategic relationships - Reliance on key personnel and ability to recruit/retain skilled personnel - Ability to maintain, protect, and enforce intellectual property rights - Impact of macroeconomic conditions (inflation, interest rates, tariffs) and global events (Russia-Ukraine war, Middle East conflict) - Ability to compete effectively with existing and new market entrants - Growth rates of markets in which the company competes[11](index=11&type=chunk) - The company undertakes no obligation to update forward-looking statements to reflect events or circumstances after the report date, except as required by law[13](index=13&type=chunk) Part I - Financial Information [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, equity changes, cash flows, and explanatory notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $21,672 | $52,771 | | Short-term investments | $92,817 | $76,356 | | Accounts receivable, net | $23,861 | $23,117 | | Total current assets | $142,916 | $156,936 | | Total assets | $164,872 | $180,320 | | **Liabilities** | | | | Total current liabilities | $21,168 | $25,694 | | Total liabilities | $26,977 | $32,806 | | **Stockholders' Equity** | | | | Total stockholders' equity | $137,895 | $147,514 | | Total liabilities and stockholders' equity | $164,872 | $180,320 | - Cash and cash equivalents decreased by **$31,099 thousand** from December 31, 2024, to June 30, 2025[15](index=15&type=chunk) - Short-term investments increased by **$16,461 thousand** over the same period[15](index=15&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share amounts) | 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 | $38,106 | $36,005 | $74,759 | $71,576 | | Gross profit | $28,423 | $26,717 | $55,573 | $53,436 | | Total operating expenses | $40,233 | $39,101 | $79,993 | $78,152 | | Loss from operations | $(11,810) | $(12,384) | $(24,420) | $(24,716) | | Net loss attributable to common stockholders | $(10,812) | $(10,834) | $(22,205) | $(21,416) | | Net loss per share, basic and diluted | $(0.18) | $(0.18) | $(0.36) | $(0.35) | - Revenue increased by **6%** for the three months ended June 30, 2025, and **4%** for the six months ended June 30, 2025, compared to the respective prior periods[18](index=18&type=chunk) - Net loss remained relatively stable for the three-month period but increased for the six-month period, from **$(21,416) thousand** in 2024 to **$(22,205) thousand** in 2025[18](index=18&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric | Balance at Dec 31, 2024 | Balance at June 30, 2025 | | :--- | :--- | :--- | | Common stock | $302 | $309 | | Additional paid-in capital | $444,601 | $457,229 | | Accumulated other comprehensive income (loss) | $41 | $(8) | | Accumulated deficit | $(297,430) | $(319,635) | | Total stockholders' equity | $147,514 | $137,895 | - Total stockholders' equity decreased by **$9,619 thousand** from December 31, 2024, to June 30, 2025, primarily due to net loss and unrealized loss on investments, partially offset by stock compensation expense and ESPP issuances[20](index=20&type=chunk) - Additional paid-in capital increased by **$12,628 thousand**, driven by stock compensation expense and ESPP[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=13&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(14,719) | $(7,980) | | Net cash used in investing activities | $(16,288) | $(1,344) | | Net cash used in financing activities | $(92) | $(20,222) | | Net decrease in cash and cash equivalents | $(31,099) | $(29,546) | | Cash and cash equivalents at end of period | $21,672 | $130,005 | - Net cash used in operating activities increased by **$6,739 thousand**, primarily due to an increase in net loss and changes in working capital[26](index=26&type=chunk) - Net cash used in investing activities significantly increased by **$14,944 thousand**, mainly due to purchases of short-term investments[26](index=26&type=chunk) - Net cash used in financing activities decreased substantially by **$20,130 thousand**, primarily due to the absence of a share repurchase program in 2025 compared to 2024[26](index=26&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Organization and Nature of Operations](index=14&type=section&id=Note%201.%20Organization%20and%20Nature%20of%20Operations) - CS Disco, Inc. (DISCO) provides cloud-native, AI-powered legal product offerings for legal hold, ediscovery, legal document review, and case management to enterprises, law firms, and governments. Headquarters are in Austin, Texas[28](index=28&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=14&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) - The company is an emerging growth company but has irrevocably opted out of the extended transition period for new accounting standards, adopting them at the same time as other public companies[29](index=29&type=chunk) - Unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim information, with certain footnotes condensed or omitted[30](index=30&type=chunk)[32](index=32&type=chunk) - Macroeconomic conditions and global events (e.g., Russia-Ukraine war, Middle East conflict) have not materially impacted operations to date, but future impacts are unknown and actively monitored[33](index=33&type=chunk)[34](index=34&type=chunk) - Estimates are used for various financial items, including credit losses, capitalized software development, goodwill, and income taxes; actual results may differ materially[35](index=35&type=chunk) - All potentially dilutive securities were anti-dilutive for all periods presented due to reported losses, resulting in basic net loss per share equaling diluted net loss per share[37](index=37&type=chunk) - Short-term investments, consisting of U.S. Treasury and corporate debt securities, are classified as available-for-sale and carried at fair value (Level 1 inputs). No impairments were recorded for the three and six months ended June 30, 2025[39](index=39&type=chunk) Allowance for Credit Losses Related to Accounts Receivable (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Allowance for credit losses | $2,300 | $2,800 | | Unbilled receivables | $2,500 | $2,500 | - Capitalized software development costs are amortized over an estimated useful life of generally four years, included in property and equipment, net[51](index=51&type=chunk) - Goodwill is tested annually for impairment; no impairment was recognized for all periods presented[53](index=53&type=chunk) - The company operates in a single reporting segment, with the CEO reviewing consolidated financial information for resource allocation and performance evaluation[58](index=58&type=chunk) Advertising Expenses (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30, | $1,100 | $1,100 | | Six Months Ended June 30, | $1,900 | $2,300 | - Cost of revenue primarily includes third-party cloud infrastructure, outsourced staffing, amortization of capitalized software, and personnel costs[61](index=61&type=chunk) - Research and development expenses consist mainly of personnel costs, contractor fees, and third-party cloud infrastructure for product development[62](index=62&type=chunk) - Sales and marketing expenses include personnel costs, advertising, travel, and software services for sales and marketing functions[63](index=63&type=chunk) - General and administrative expenses cover personnel costs for finance, legal, HR, and administrative functions, along with external professional services, insurance, and credit loss allowance[64](index=64&type=chunk) - Stock-based compensation expense is recognized based on fair value at grant date, with forfeitures accounted for as they occur[65](index=65&type=chunk) - The company maintains a full valuation allowance on substantially all U.S. deferred tax assets due to a history of losses[67](index=67&type=chunk) - ASU 2023-09 (Income Taxes) is effective for annual periods after December 15, 2024, requiring additional rate reconciliation disclosures[69](index=69&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for fiscal years after December 15, 2026, requiring disaggregation of certain expense captions[70](index=70&type=chunk) [Note 3. Revenue Recognition](index=19&type=section&id=Note%203.%20Revenue%20Recognition) - Revenue is recognized when control of product offerings is transferred to customers, following a five-step framework (ASC 606)[71](index=71&type=chunk)[72](index=72&type=chunk)[74](index=74&type=chunk) - The company has two primary contractual arrangements: usage-based (**90%** of total revenue for three and six months ended June 30, 2025) and subscription (**10%** of total revenue for the same periods)[76](index=76&type=chunk)[77](index=77&type=chunk) Deferred Revenue (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current deferred revenue | $3,500 | $4,300 | | Revenue recognized from prior deferred revenue (6 months) | $3,000 (2025) | $3,300 (2024) | Remaining Performance Obligations (RPO) (in thousands) | Metric | As of June 30, 2025 | | :--- | :--- | | Total RPO | $26,900 | | RPO to be recognized in next 12 months | $11,100 | Revenue by Offering (in thousands) | Offering | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Software | $32,744 | $29,278 | $63,631 | $59,187 | | Services | $5,362 | $6,727 | $11,128 | $12,389 | | Total revenue | $38,106 | $36,005 | $74,759 | $71,576 | Revenue by Geographic Area (in thousands) | Geographic Area | 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 | $35,104 | $32,541 | $69,082 | $64,893 | | All other countries | $3,002 | $3,464 | $5,677 | $6,683 | | Total revenue | $38,106 | $36,005 | $74,759 | $71,576 | [Note 4. Segment Information](index=21&type=section&id=Note%204.%20Segment%20Information) - The company operates as a single reporting segment, with the CEO as the chief operating decision maker reviewing consolidated financial information[85](index=85&type=chunk) Significant Expenses (in thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Personnel costs | $28,576 | $27,252 | $56,905 | $54,252 | | Professional services | $3,590 | $3,066 | $6,563 | $6,249 | | Rent and facilities | $1,106 | $983 | $2,298 | $2,138 | | Software expense | $3,246 | $3,059 | $6,483 | $6,039 | | Advertising expense | $1,120 | $1,130 | $1,920 | $2,292 | [Note 5. Short-Term Investments](index=22&type=section&id=Note%205.%20Short-Term%20Investments) Available-for-Sale Investments by Major Type (in thousands) | Investment Type | Amortized Cost (June 30, 2025) | Unrealized Gain (Loss) (June 30, 2025) | Total Fair Value (June 30, 2025) | | :--- | :--- | :--- | :--- | | U.S. government securities | $82,283 | $(9) | $82,274 | | Corporate securities | $10,542 | $1 | $10,543 | | Total short-term investments | $92,825 | $(8) | $92,817 | | Investment Type | Amortized Cost (Dec 31, 2024) | Unrealized Gain (Dec 31, 2024) | Total Fair Value (Dec 31, 2024) | | :--- | :--- | :--- | :--- | | U.S. government securities | $76,315 | $41 | $76,356 | - Short-term investments are classified using Level 1 inputs and have a weighted-average maturity of **0.18 years** as of June 30, 2025[89](index=89&type=chunk) [Note 6. Property and Equipment](index=23&type=section&id=Note%206.%20Property%20and%20Equipment) Property and Equipment (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Computer equipment | $6,766 | $6,428 | | Capitalized software development | $13,427 | $12,212 | | Leasehold improvements | $1,135 | $1,103 | | Furniture | $1,219 | $1,211 | | Total property and equipment | $22,547 | $20,954 | | Less: accumulated depreciation and amortization | $(14,882) | $(13,076) | | Property and equipment, net | $7,665 | $7,878 | - Property and equipment, net, decreased by **$213 thousand** from December 31, 2024, to June 30, 2025[91](index=91&type=chunk) - Depreciation and amortization expense was **$1.7 million** for the six months ended June 30, 2025, down from **$1.9 million** in the prior year period[91](index=91&type=chunk)[92](index=92&type=chunk) - In Q4 2024, the company recorded a **$1.2 million** impairment charge against capitalized software development related to the integration of a primary law intangible asset, as its completion was no longer probable[93](index=93&type=chunk) [Note 7. Leases](index=23&type=section&id=Note%207.%20Leases) - The company leases office spaces (Austin, New York) under non-cancellable operating leases and furniture under a non-cancellable finance lease[94](index=94&type=chunk) Future Minimum Lease Payments (in thousands) as of June 30, 2025 | Year | Operating Leases | Finance Leases | | :--- | :--- | :--- | | Remainder of 2025 | $1,422 | $23 | | 2026 | $2,917 | $47 | | 2027 | $3,006 | $47 | | 2028 | $1,397 | $28 | | Thereafter | $0 | $0 | | Total lease payments | $8,742 | $145 | - Weighted average remaining lease terms are **2.98 years** for operating leases and **3.09 years** for finance leases as of June 30, 2025[95](index=95&type=chunk) [Note 8. Commitments and Contingencies](index=24&type=section&id=Note%208.%20Commitments%20and%20Contingencies) Purchase Obligations (in thousands) as of June 30, 2025 | Year | Amount | | :--- | :--- | | Remainder of 2025 | $12,376 | | 2026 | $23,629 | | 2027 | $22,471 | | 2028 | $22,140 | | 2029 | $11,070 | | Thereafter | $0 | | Total | $91,686 | - The company is involved in a purported stockholder class action lawsuit filed in September 2023, alleging materially false or misleading statements about revenue growth factors. A motion to dismiss was partially denied in January 2025, and a motion for reconsideration was denied in April 2025[99](index=99&type=chunk) [Note 9. Goodwill and Intangible Assets](index=24&type=section&id=Note%209.%20Goodwill%20and%20Intangible%20Assets) - Goodwill remained at **$5.9 million** as of June 30, 2025, with no impairment identified in 2024 or the first six months of 2025[100](index=100&type=chunk) - In Q4 2024, a **$14.0 million** non-cash impairment charge was recorded on the primary law intangible asset (from a 2023 licensing agreement with Fastcase) and a **$1.2 million** charge on related capitalized software development costs, as integration was no longer probable[103](index=103&type=chunk) Other Intangible Assets, Net (in thousands) | Category | Net Carrying Amount (June 30, 2025) | Net Carrying Amount (Dec 31, 2024) | | :--- | :--- | :--- | | Developed technology | $296 | $386 | | Customer relationships | $0 | $14 | | Total | $296 | $400 | Future Amortization Expense for Other Intangible Assets (in thousands) as of June 30, 2025 | Year | Amount | | :--- | :--- | | Remainder of 2025 | $90 | | 2026 | $180 | | 2027 | $26 | | Thereafter | $0 | | Total | $296 | [Note 10. Stockholders' Equity](index=25&type=section&id=Note%2010.%20Stockholders%27%20Equity) - Total stock-based compensation expense related to equity incentive awards was **$12.4 million** for the six months ended June 30, 2025, up from **$11.7 million** in the prior year period[107](index=107&type=chunk) Stock Option Activity (in thousands, except per share amounts) | Metric | Options Outstanding as of Dec 31, 2024 | Options Outstanding as of June 30, 2025 | | :--- | :--- | :--- | | Number of shares | 287 | 194 | | Weighted-average exercise price per share | $7.24 | $8.63 | | Weighted-average remaining contractual life (years) | 3.58 | 4.03 | | Aggregate intrinsic value | $375 | $112 | - As of June 30, 2025, there was no unrecognized stock-based compensation expense related to outstanding unvested stock options[110](index=110&type=chunk) - Unrecognized stock-based compensation related to RSAs was **$0.4 million** as of June 30, 2025, with a weighted average remaining service period of **0.50 years**[112](index=112&type=chunk) RSU and PSU Activity (in thousands, except per share amounts) | Metric | Unvested and Outstanding as of Dec 31, 2024 | Unvested and Outstanding as of June 30, 2025 | | :--- | :--- | :--- | | Number of shares | 5,095 | 8,199 | | Weighted-average fair value | $8.85 | $6.68 | | Aggregate intrinsic value | $25,424 | $35,828 | - Estimated total unrecognized stock-based compensation expense for RSUs and PSUs was **$47.3 million** as of June 30, 2025, with a weighted average remaining service period of **2.42 years**[116](index=116&type=chunk) - The company completed a **$20.0 million** share repurchase program in Q2 2024, purchasing approximately **2.6 million shares** at a weighted average price of **$7.66**[118](index=118&type=chunk) [Note 11. Income Taxes](index=27&type=section&id=Note%2011.%20Income%20Taxes) Income Tax Expense (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30, | $210 | $105 | | Six Months Ended June 30, | $347 | $191 | - Income tax expense primarily relates to operations in the United Kingdom and India[119](index=119&type=chunk) - A full valuation allowance is maintained on substantially all U.S. deferred tax assets due to a history of losses[119](index=119&type=chunk) - Effective tax rate for the six months ended June 30, 2025, was **(1.59)%**, compared to **(0.90)%** in the prior year, mainly affected by tax rates in the UK and India, state taxes, and valuation allowance changes[119](index=119&type=chunk) [Note 12. Defined Contribution Plan](index=28&type=section&id=Note%2012.%20Defined%20Contribution%20Plan) Employer Contributions to Defined Contribution Plan (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30, | $600 | $400 | | Six Months Ended June 30, | $1,100 | $1,000 | - The company sponsors a 401(k) plan in the U.S. and has an immaterial pension plan liability in the United Kingdom[120](index=120&type=chunk)[121](index=121&type=chunk) [Note 13. Net Loss Per Share Attributable to Common Stockholders](index=28&type=section&id=Note%2013.%20Net%20Loss%20Per%20Share%20Attributable%20to%20Common%20Stockholders) Net Loss Per Share Attributable to Common Stockholders (in thousands, except per share amounts) | 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 applicable to common stockholders | $(10,812) | $(10,834) | $(22,205) | $(21,416) | | Weighted-average shares, basic and diluted | 61,245 | 59,815 | 60,913 | 60,508 | | Net loss per share, basic and diluted | $(0.18) | $(0.18) | $(0.36) | $(0.35) | Anti-Dilutive Common Stock Equivalents (in thousands) | Equivalent Type | As of June 30, 2025 | As of June 30, 2024 | | :--- | :--- | :--- | | Stock options | 194 | 443 | | Unvested restricted stock awards | 25 | 75 | | Unvested restricted stock units (including PSUs) | 8,199 | 5,588 | | Total | 8,418 | 6,106 | - All common stock equivalents were excluded from diluted EPS calculation as their inclusion would be anti-dilutive due to net losses[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operational results, key performance factors, non-GAAP measures, liquidity, capital resources, and critical accounting estimates [Overview](index=29&type=section&id=Overview) - DISCO offers cloud-native, AI-powered legal product offerings for legal hold, ediscovery, legal document review, and case management, enabling legal departments to centralize data and improve efficiency[125](index=125&type=chunk) - Revenue is primarily generated from customer usage (**90%** usage-based, **10%** subscription-based for the three and six months ended June 30, 2025), which can fluctuate based on legal matters[126](index=126&type=chunk)[148](index=148&type=chunk) - Revenue for the three months ended June 30, 2025: **$38.1 million** (**6% growth YoY**)[130](index=130&type=chunk) - Revenue for the six months ended June 30, 2025: **$74.8 million** (**4% growth YoY**)[130](index=130&type=chunk) - Net loss for the three months ended June 30, 2025: **$10.8 million** (stable YoY)[131](index=131&type=chunk) - Net loss for the six months ended June 30, 2025: **$22.2 million** (increased from **$21.4 million** YoY)[131](index=131&type=chunk) Adjusted EBITDA (in thousands) | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30, | $(2,700) | $(4,700) | | Six Months Ended June 30, | $(7,800) | $(9,900) | [Macroeconomic and Industry Conditions](index=30&type=section&id=Macroeconomic%20and%20Industry%20Conditions) - Unfavorable macroeconomic conditions (inflation, interest rates, tariffs, global conflicts) and legal industry conditions (e.g., executive orders impacting law firms, reduced federal enforcement) could negatively affect business growth and results of operations, though no material adverse impact has been observed to date[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) [Key Factors Affecting Our Performance](index=30&type=section&id=Key%20Factors%20Affecting%20Our%20Performance) - Maintaining and advancing innovation and brand, including new AI-powered offerings like the ediscovery chatbot Cecilia - Increasing usage and penetration within the existing customer base by expanding offerings and centralizing legal data - Adding new customers, particularly those with significant ediscovery needs, through effective sales and marketing - Expanding sales coverage by increasing headcount in strategic locations globally - Extending and strengthening channel partnerships with legal services and cloud infrastructure providers - Expanding the offering portfolio to cover more legal processes using AI and automation - Expanding internationally, especially in the United Kingdom and India, where less than **10%** of revenue is currently generated outside the U.S - Pursuing strategic acquisitions and investments to expand product functionality and talent[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) [Key Components of Statement of Operations](index=32&type=section&id=Key%20Components%20of%20Statement%20of%20Operations) - Revenue is primarily usage-based (**90%**) and subscription-based (**10%**), derived from legal product offerings[147](index=147&type=chunk)[148](index=148&type=chunk) - Cost of revenue includes third-party cloud infrastructure, outsourced staffing, capitalized software amortization, and personnel costs, expected to be impacted by infrastructure investments and staffing changes[149](index=149&type=chunk) - Operating expenses (R&D, S&M, G&A) are largely driven by personnel costs (salaries, benefits, bonuses, stock-based compensation, commissions) and allocated overhead[150](index=150&type=chunk) - R&D expenses are expected to remain relatively consistent in absolute dollars but may fluctuate as a percentage of revenue, with capitalized software development costs also impacting this line item[151](index=151&type=chunk) - Sales and marketing expenses are expected to increase in absolute dollars and remain the largest operating expense, fluctuating as a percentage of revenue[152](index=152&type=chunk) - General and administrative expenses are expected to remain relatively consistent in absolute dollars but may fluctuate as a percentage of total revenue[153](index=153&type=chunk) - Interest and other income, net, includes interest income, non-operating income, interest expense, and foreign currency gains/losses[154](index=154&type=chunk) - Income tax provision primarily relates to foreign and state jurisdictions, with a full valuation allowance on federal and state deferred tax assets due to historical losses[155](index=155&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) [Comparison of the Three Months Ended June 30, 2025 and 2024](index=34&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) Revenue Comparison (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $38,106 | $36,005 | $2,101 | 6% | | Software Revenue | $32,744 | $29,278 | $3,466 | 12% | | Services Revenue | $5,362 | $6,727 | $(1,365) | (20)% | - Total revenue increase driven by **$4.4 million** from new customers, partially offset by a **$2.3 million** decrease from existing customers due to reduced usage[159](index=159&type=chunk)[160](index=160&type=chunk) - Software revenue increased due to higher usage, while services revenue decreased due to lower managed review activity[159](index=159&type=chunk)[160](index=160&type=chunk) Cost of Revenue Comparison (Three Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Cost of Revenue | $9,683 | $9,288 | $395 | 4% | | Percentage of Revenue | 25% | 26% | | | - Cost of revenue increased primarily due to a **$0.6 million** increase in cloud hosting costs and a **$0.4 million** increase in salary and benefits, partially offset by a **$0.7 million** decrease in outsourced staffing fees[162](index=162&type=chunk) Operating Expenses Comparison (Three Months Ended June 30, in thousands) | Expense Category | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $13,968 | $12,888 | $1,080 | 8% | | Sales and marketing | $15,241 | $15,498 | $(257) | (2)% | | General and administrative | $11,024 | $10,715 | $309 | 3% | - R&D increased due to a **$1.5 million** rise in personnel costs (including stock-based compensation) from increased headcount, partially offset by higher capitalized software development[163](index=163&type=chunk) - Sales and marketing decreased primarily due to a **$0.2 million** reduction in marketing expenses[164](index=164&type=chunk) - G&A increased mainly from a **$0.7 million** rise in professional services costs (legal fees for securities litigation), partially offset by a **$0.3 million** decrease in insurance expense[165](index=165&type=chunk) [Comparison of the Six Months Ended June 30, 2025 and 2024](index=36&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) Revenue Comparison (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $74,759 | $71,576 | $3,183 | 4% | | Software Revenue | $63,631 | $59,187 | $4,444 | 8% | | Services Revenue | $11,128 | $12,389 | $(1,261) | (10)% | - Total revenue increase driven by **$7.7 million** from new customers, partially offset by a **$4.5 million** decrease from existing customers due to reduced usage[166](index=166&type=chunk)[167](index=167&type=chunk) - Software revenue increased due to higher usage, while services revenue decreased due to lower managed review activity[166](index=166&type=chunk)[167](index=167&type=chunk) Cost of Revenue Comparison (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Cost of Revenue | $19,186 | $18,140 | $1,046 | 6% | | Percentage of Revenue | 26% | 25% | | | - Cost of revenue increased primarily due to a **$1.0 million** rise in cloud hosting costs and a **$0.6 million** increase in salary and benefits, partially offset by an **$0.8 million** decrease in outsourced staffing fees[168](index=168&type=chunk) Operating Expenses Comparison (Six Months Ended June 30, in thousands) | Expense Category | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $28,225 | $24,967 | $3,258 | 13% | | Sales and marketing | $29,768 | $31,306 | $(1,538) | (5)% | | General and administrative | $22,000 | $21,879 | $121 | 1% | - R&D increased due to a **$3.4 million** rise in personnel costs (including stock-based compensation) from increased headcount, partially offset by higher capitalized software development[169](index=169&type=chunk) - Sales and marketing decreased primarily due to an **$0.8 million** reduction in personnel costs (including stock-based and variable compensation) from decreased headcount, and a **$0.7 million** decrease in marketing expenses[170](index=170&type=chunk) - G&A increased mainly from a **$0.6 million** rise in personnel costs (including stock-based compensation) from increased headcount, partially offset by a **$0.5 million** decrease in insurance expense[171](index=171&type=chunk) [Non-GAAP Financial Measure](index=37&type=section&id=Non-GAAP%20Financial%20Measure) - Adjusted EBITDA is a non-GAAP measure used by management to evaluate operating performance, excluding depreciation, amortization, income tax, interest and other net, stock-based compensation, payroll tax on employee stock transactions, and stockholder litigation expenses[172](index=172&type=chunk)[173](index=173&type=chunk) Reconciliation of Adjusted EBITDA to Net Loss (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(10,812) | $(10,834) | $(22,205) | $(21,416) | | Depreciation and amortization expense | $902 | $1,028 | $1,829 | $2,103 | | Income tax provision | $210 | $105 | $347 | $191 | | Interest and other, net | $(1,208) | $(1,655) | $(2,562) | $(3,491) | | Stock-based compensation expense | $6,478 | $6,058 | $12,357 | $11,731 | | Payroll tax expense on employee stock transactions | $161 | $178 | $311 | $371 | | Expenses associated with stockholder litigation | $1,581 | $384 | $2,146 | $583 | | Adjusted EBITDA | $(2,688) | $(4,736) | $(7,777) | $(9,928) | - Adjusted EBITDA improved from **$(4.7) million** to **$(2.7) million** for the three months ended June 30, 2025, and from **$(9.9) million** to **$(7.8) million** for the six months ended June 30, 2025, indicating reduced operating losses on an adjusted basis[175](index=175&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, the company had **$21.7 million** in cash and cash equivalents and **$92.8 million** in short-term investments, which are believed to be sufficient to fund anticipated cash requirements for the next 12 months[176](index=176&type=chunk) Material Cash Requirements for Future Periods (in thousands) as of June 30, 2025 | Obligation Type | Remainder of 2025 | 2026 - 2027 | 2028 - 2029 | Total | | :--- | :--- | :--- | :--- | :--- | | Operating lease commitments | $1,422 | $5,923 | $1,397 | $8,742 | | Finance lease commitments | $23 | $94 | $28 | $145 | | Cloud platform purchase commitments | $11,070 | $44,280 | $33,210 | $88,560 | | Other purchase commitments | $1,306 | $1,820 | $0 | $3,126 | | Total | $13,821 | $52,117 | $34,635 | $100,573 | - Future capital requirements depend on revenue growth, product usage, billing frequency, and spending on sales, marketing, R&D, and strategic investments. The company may seek additional equity or debt financing[180](index=180&type=chunk)[182](index=182&type=chunk) Cash Flows Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Cash used in operating activities | $(14,719) | $(7,980) | $(6,739) | 84% | | Cash used in investing activities | $(16,288) | $(1,344) | $(14,944) | 1,112% | | Cash used in financing activities | $(92) | $(20,222) | $20,130 | (100)% | | Net decrease in cash and cash equivalents | $(31,099) | $(29,546) | $(1,553) | 5% | - Operating cash outflow increased by **$6.7 million**, driven by higher net loss and changes in accounts receivable and accrued expenses[185](index=185&type=chunk) - Investing cash outflow significantly increased by **$14.9 million**, primarily due to **$91.9 million** in short-term investment purchases, partially offset by **$77.1 million** in maturities[186](index=186&type=chunk) - Financing cash outflow decreased by **$20.1 million**, mainly due to the absence of a share repurchase program in 2025 that occurred in 2024[187](index=187&type=chunk) [Critical Accounting Estimates](index=40&type=section&id=Critical%20Accounting%20Estimates) - The preparation of financial statements requires significant estimates and assumptions, particularly for capitalized software development and acquisitions[188](index=188&type=chunk)[189](index=189&type=chunk) - Capitalized software development costs involve judgment in determining capitalization timing, ongoing value, and useful lives, which could materially affect financial results if assumptions change[190](index=190&type=chunk) - Acquisitions require extensive estimates and judgments to allocate purchase price to tangible and intangible assets based on fair values, with potential for adjustments during the measurement period[191](index=191&type=chunk) [Recent Accounting Pronouncements](index=40&type=section&id=Recent%20Accounting%20Pronouncements) - The company is evaluating the impact of ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures), effective for annual periods beginning after December 15, 2024, and fiscal years beginning after December 15, 2026, respectively[192](index=192&type=chunk) [JOBS Act Accounting Election](index=40&type=section&id=JOBS%20Act%20Accounting%20Election) - As an emerging growth company under the JOBS Act, the company has irrevocably opted out of the extended transition period for new accounting standards, adopting them at the same time as other public companies[193](index=193&type=chunk)[194](index=194&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, CS Disco, Inc. is exempt from providing quantitative and qualitative market risk disclosures - The company is a smaller reporting company and is not required to provide disclosures about market risk[195](index=195&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management assessed disclosure controls and procedures as effective, with no material changes to internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of June 30, 2025[197](index=197&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[198](index=198&type=chunk) - Management acknowledges inherent limitations in control systems, which can only provide reasonable, not absolute, assurance against errors or fraud[199](index=199&type=chunk) Part II - Other Information [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company faces a pending stockholder class action lawsuit from September 2023, alleging federal securities law violations regarding revenue growth statements - A stockholder class action lawsuit filed in September 2023, alleging violations of Sections 10(b) and 20(a) of the Exchange Act, remains pending. The complaint alleges materially false or misleading statements about revenue growth drivers[201](index=201&type=chunk) - A motion to dismiss the amended complaint was partially granted and partially denied in January 2025, and a motion for reconsideration was denied in April 2025[201](index=201&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) This section details various risks, including IT, growth, industry, socioeconomic, IP, litigation, regulatory, tax, accounting, and public company factors, that could adversely affect the business [Risk Factors Summary](index=42&type=section&id=Risk%20Factors%20Summary) - Compromise of IT systems or data could lead to significant costs, revenue loss, liabilities, and reputational harm - Past substantial growth may not indicate future growth, making future prospects difficult to evaluate - Limited operating history and history of losses make business evaluation difficult and increase investment risks - Dependence on customers increasing product usage; loss of customers or decline in usage could harm the business - Revenue is substantially derived from product usage - Inability to attract and retain customers will adversely affect financial results - Reliance on third-party cloud infrastructure providers; disruptions could harm business - Fluctuations in financial results may make quarterly comparisons not meaningful - Failure to accurately forecast revenue or manage expenditures, or meet guidance, could adversely affect operating results and stock price - Revenue growth depends on strategic relationships with law firms and legal services providers - Competitive markets; failure to compete effectively will harm the business - Pricing model challenges and inability to accurately predict optimal pricing - Inability to improve and sustain corporate culture as the company grows could harm success - Reliance on highly skilled personnel; loss of key employees could harm the business - International operations and expansion create various operational challenges - Unfavorable global economic conditions could reduce legal spending - Potential for legal proceedings and intellectual property disputes, which are costly - Operating in a highly regulated industry; non-compliance could harm the business - Insiders have substantial control over corporate matters[203](index=203&type=chunk)[207](index=207&type=chunk) [Risks Related to Information Technology and Cybersecurity](index=43&type=section&id=Risks%20Related%20to%20Information%20Technology%20and%20Cybersecurity) - Reliance on third-party software licenses; inability to renew or maintain terms could adversely affect business - Use of open source software may restrict functionality or require source code release, leading to litigation or re-engineering costs - Stringent and evolving data privacy and security laws (e.g., EU GDPR, UK GDPR, CCPA) pose compliance challenges, potential fines, litigation, and reputational harm - Cross-border data transfer restrictions (e.g., EU GDPR, UK GDPR) could interrupt operations or necessitate costly relocation of data processing - Reliance on targeted advertising is challenged by platform changes (Apple, Google), browser policies (third-party cookies), and increasing consumer resistance, potentially impairing customer reach - Vulnerability to cybersecurity incidents (e.g., cyberattacks, ransomware, human error, supply-chain attacks) could lead to system compromise, data loss, operational disruptions, significant liabilities, and reputational damage - Reliance on third-party cloud infrastructure (e.g., AWS) for hosting; disruptions, capacity limitations, or changes in terms could adversely affect business operations and financial results - Use of AI/ML in products and operations introduces risks such as operational challenges, flawed or biased outputs, sensitive data leakage, increased compliance costs, and potential legal liability from deceptive statements[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk)[232](index=232&type=chunk)[233](index=233&type=chunk)[235](index=235&type=chunk)[236](index=236&type=chunk)[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk) [Risks Related to Our Growth and Capital Requirements](index=50&type=section&id=Risks%20Related%20to%20Our%20Growth%20and%20Capital%20Requirements) - Substantial historical growth may not be indicative of future performance, with potential for declining revenue growth rates due to market maturation, competition, and other factors[240](index=240&type=chunk) - Significant financial and other resources are expended on technology infrastructure, sales and marketing, product development, customer services, acquisitions, and international expansion, with no guarantee of success or increased revenue[241](index=241&type=chunk) - Inability to successfully manage growth, including scaling infrastructure and internal systems, could lead to impaired performance and reduced customer satisfaction[242](index=242&type=chunk) - Limited operating history at current scale and history of net losses (**$22.2 million** for six months ended June 30, 2025) make future prospects difficult to evaluate and increase investment risks[243](index=243&type=chunk)[244](index=244&type=chunk) - Ability to raise future capital may be limited or unavailable on acceptable terms, potentially hindering growth opportunities and causing dilution to stockholders[245](index=245&type=chunk)[246](index=246&type=chunk) - Issuance of additional capital stock for financings, acquisitions, or equity incentive plans will dilute existing stockholders' ownership interests[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk) [Risks Related to Our Business and Industry](index=52&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) - Business depends on customers increasing usage; loss of customers or decline in usage (e.g., due to legal matter conclusions, budget constraints, competition) could harm revenue and operations[251](index=251&type=chunk)[252](index=252&type=chunk) - Usage of product offerings accounts for substantially all revenue; slow market adoption or decreased demand for e-discovery solutions would harm the business[253](index=253&type=chunk)[254](index=254&type=chunk) - Inability to attract new customers and retain existing ones, due to competition, switching costs, or negative perceptions, would adversely affect financial results[255](index=255&type=chunk)[256](index=256&type=chunk) - Platform failures (defects, interruptions, delays) could lead to customer loss, service claims, and significant costs[257](index=257&type=chunk)[258](index=258&type=chunk) - Incorrect or improper use of product offerings by customers or third parties could result in dissatisfaction, negative publicity, and harm to business[260](index=260&type=chunk) - Reliance on third-party cloud infrastructure providers (e.g., AWS); any disruption, capacity limitation, or change in terms could adversely affect business[261](index=261&type=chunk)[262](index=262&type=chunk) - Fluctuations in financial results are expected due to the usage-based model and inherent unpredictability of legal matters, making period-to-period comparisons difficult[263](index=263&type=chunk)[264](index=264&type=chunk) - Failure to accurately forecast revenue or manage expenditures, or meet publicly announced guidance, could adversely affect operating results and stock price[265](index=265&type=chunk)[266](index=266&type=chunk) - Inability to adapt to rapidly changing technology, evolving industry standards, and customer needs could make product offerings less competitive, potentially leading to impairment charges (e.g., **$15.2 million** in 2024 related to primary law intangible asset)[267](index=267&type=chunk)[268](index=268&type=chunk) - A limited number of customers represent a substantial portion of revenue; loss or reduced usage by these customers could significantly decline revenue[269](index=269&type=chunk)[270](index=270&type=chunk) - Success depends on strategic relationships with law firms and legal services providers; failure to establish or maintain these could adversely affect business[271](index=271&type=chunk)[272](index=272&type=chunk) - Failure to effectively develop and expand marketing and sales capabilities, including recruiting and retaining sales personnel, could harm customer acquisition and market acceptance[273](index=273&type=chunk)[274](index=274&type=chunk) - Highly fragmented and competitive market; inability to compete effectively against larger, more resourced competitors could harm business[275](index=275&type=chunk)[276](index=276&type=chunk) - Inaccurate estimates of addressable market opportunity could limit future growth rate and lead to misallocation of capital[277](index=277&type=chunk)[278](index=278&type=chunk) - Failure to develop, maintain, and enhance brand could impair customer base expansion and harm business[279](index=279&type=chunk)[280](index=280&type=chunk) - Pricing model challenges, including limited experience and potential need to reduce prices or develop new models, could adversely affect revenue and profitability[281](index=281&type=chunk)[282](index=282&type=chunk) - Long and unpredictable sales cycles, especially with enterprise customers, require considerable time and expense without guaranteed sales[283](index=283&type=chunk)[284](index=284&type=chunk) - Inability to build and sustain a productive corporate culture, particularly after management changes, could harm talent retention and customer relationships[285](index=285&type=chunk)[286](index=286&type=chunk) - Dependence on customers' continued and unimpeded internet access to the platform; disruptions could lead to reduced usage and harm to brand[287](index=287&type=chunk)[288](index=288&type=chunk) - Failure to offer high-quality support and professional services could harm customer relationships and future financial performance[289](index=289&type=chunk)[290](index=290&type=chunk) - Reliance on highly skilled personnel, including management and key employees; loss of such personnel could harm business[291](index=291&type=chunk)[292](index=292&type=chunk) - Future acquisitions, strategic investments, partnerships, or alliances may be difficult to identify and integrate, divert management attention, and dilute stockholder value[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk) - International operations and planned geographic expansion (e.g., India, UK) create operational challenges, including varying seasonality, currency fluctuations, and regulatory differences[299](index=299&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk)[304](index=304&type=chunk)[305](index=305&type=chunk)[306](index=306&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk][309](index=309&type=chunk)[310](index=310&type=chunk)[311](index=311&type=chunk)[312](index=312&type=chunk) - Exposure to fluctuations in currency exchange rates, particularly for foreign operating expenses, could adversely affect operating results[313](index=313&type=chunk)[314](index=314&type=chunk) [Risks Related to Socioeconomic Factors](index=65&type=section&id=Risks%20Related%20to%20Socioeconomic%20Factors) - Unfavorable global economic conditions (recession, inflation, interest rates, geopolitical conflicts) could reduce legal spending and harm business[315](index=315&type=chunk)[316](index=316&type=chunk) - International trade policies (tariffs, sanctions, trade barriers) may indirectly impact business by raising costs, constraining supply, or affecting customer demand[317](index=317&type=chunk)[318](index=318&type=chunk) [Risks Related to Our Intellectual Property](index=67&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) - Failure to protect proprietary technology and intellectual property rights (patents, trademarks, copyrights, trade secrets) could harm business and competitive advantage[319](index=319&type=chunk)[320](index=320&type=chunk) - Potential for legal proceedings and litigation, including intellectual property disputes, which are costly, time-consuming, and could result in significant liability or loss of rights[321](index=321&type=chunk)[322](index=322&type=chunk)[323](index=323&type=chunk)[324](index=324&type=chunk) - Risk of claims asserting wrongful use or disclosure of trade secrets by employees or ownership of company's intellectual property by third parties[325](index=325&type=chunk)[326](index=326&type=chunk)[327](index=327&type=chunk) - Contractual provisions with customers and third parties may expose the company to substantial liability for intellectual property infringement, data protection, and other losses, potentially uncapped[328](index=328&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk) [Risks Related to Litigation, Regulatory Compliance and Governmental Matters](index=70&type=section&id=Risks%20Related%20to%20Litigation%2C%20Regulatory%20Compliance%20and%20Governmental%20Matters) - Ongoing or future litigation, including securities litigation, could be costly, time-consuming, divert management attention, and harm business[331](index=331&type=chunk)[332](index=332&type=chunk) - Operating in a highly regulated legal industry; non-compliance with federal, state, local, and foreign laws (e.g., unauthorized practice of law, data privacy) could force operational changes or harm business[333](index=333&type=chunk)[334](index=334&type=chunk)[335](index=335&type=chunk) - Subject to anti-corruption, anti-bribery, and anti-money laundering laws (e.g., FCPA, UK Bribery Act); non-compliance can lead to criminal/civil liability and harm business[336](index=336&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk) - Sales to government entities and highly regulated organizations are subject to challenges, stringent regulations, audits, and potential contract termination for convenience[339](index=339&type=chunk)[340](index=340&type=chunk)[341](index=341&type=chunk)[342](index=342&type=chunk] - Subject to governmental export and import controls (e.g., U.S. Export Administration Regulations, OFAC sanctions); violations could lead to fines, penalties, and limitations on international market competition[343](index=343&type=chunk)[344](index=344&type=chunk)[345](index=345&type=chunk)[346](index=346&type=chunk)[347](index=347&type=chunk)[348](index=348&type=chunk) [Risks Related to Tax and Accounting Matters](index=73&type=section&id=Risks%20Related%20to%20Tax%20and%20Accounting%20Matters) - Ability to use net operating losses (NOLs) to offset future taxable income may be limited by expiration periods and Section 382 ownership change rules[349](index=349&type=chunk)[350](index=350&type=chunk) - International operations may lead to adverse tax consequences due to challenges in transfer pricing, changes in tax laws, or assertions of taxable connection in new jurisdictions[351](index=351&type=chunk)[352](index=352&type=chunk) - Potential requirement to collect sales or other related taxes in jurisdictions where not historically done, leading to substantial payments, administrative burdens, or reduced customer demand[353](index=353&type=chunk)[354](index=354&type=chunk) - Changes in effective tax rate or tax liability due to shifts in income distribution, tax law changes, or audit outcomes could harm business[355](index=355&type=chunk) - Financial results may be adversely affected by changes in U.S. GAAP or difficulties in implementing new accounting pronouncements[356](index=356&type=chunk) [Risks Related to Being a Public Company](index=75&type=section&id=Risks%20Related%20to%20Being%20a%20Public%20Company) - Management team has limited experience managing a public company, potentially diverting attention from day-to-day business[359](index=359&type=chunk)[360](index=360&type=chunk) - Failure to maintain effective internal control over financial reporting could impair timely and accurate financial statements, leading to regulatory discipline or restatements[361](index=361&type=chunk)[362](index=362&type=chunk) - Inability to successfully manage business growth by improving internal systems, processes, and controls could lead to operational difficulties and customer loss[363](index=363&type=chunk)[364](index=364&type=chunk) - As an 'emerging growth company,' reliance on reduced reporting and disclosure requirements may make common stock less attractive to investors, leading to lower trading volume and increased volatility[365](index=365&type=chunk)[366](index=366&type=chunk)[367](index=367&type=chunk) [Risks Related to Ownership of Our Common Stock](index=77&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) - Insiders (officers, directors, associated funds) have substantial control, influencing corporate matters and potentially limiting other stockholders' influence[368](index=368&type=chunk)[369](index=369&type=chunk) - Stock price may be volatile due to financial fluctuations, analyst expectations, competitive announcements, litigation, and general market conditions[370](index=370&type=chunk)[371](index=371&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk) - Sales of common stock in the public market by existing holders could depress the market price and impair ability to raise capital[374](index=374&type=chunk)[375](index=375&type=chunk) - If securities or industry analysts cease coverage or publish unfavorable research, stock price and trading volume could decline[376](index=376&type=chunk)[377](index=377&type=chunk) - No intention to pay dividends for the foreseeable future; return on investment depends on stock price appreciation[378](index=378&type=chunk)[379](index=379&type=chunk) - Anti-takeover provisions in charter documents and Delaware law could make acquisitions more difficult and limit stockholders' ability to replace management[380](index=380&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk)[383](index=383&type=chunk) - Exclusive forum provisions in the amended and restated certificate of incorporation could limit stockholders' ability to choose a favorable judicial forum for disputes[384](index=384&type=chunk)[385](index=385&type=chunk)[386](index=386&type=chunk) - Ongoing securities litigation and potential stockholder activism could negatively affect business, incur significant expenses, and impact stock price[387](index=387&type=chunk)[388](index=388&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=81&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity sales or use of proceeds were reported by the company during the period - No unregistered sales of equity securities were reported[390](index=390&type=chunk) - No use of proceeds was reported[391](index=391&type=chunk) [Item 3. Defaults Upon Senior Securities](index=81&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults on senior securities - No defaults upon senior securities were reported[392](index=392&type=chunk) [Item 4. Mine Safety Disclosures](index=81&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures - No mine safety disclosures were reported[393](index=393&type=chunk) [Item 5. Other Information](index=81&type=section&id=Item%205.%20Other%20Information) Directors and officers adopted Rule 10b5-1(c) trading plans for common stock purchases during the quarter ended June 30, 2025 Rule 10b5-1(c) Trading Plans Adopted by Directors and Officers | Name | Position | Adoption Date | Total Shares of Common Stock to be Purchased (1) | Expiration Date | | :--- | :--- | :--- | :--- | :--- | | James Offerdahl | Director | May 15, 2025 | 9,500 | August 15, 2026 | | Thomas Bogan | Director | June 13, 2025 | 100,000 | August 15, 2026 | - The actual number of shares purchased under these plans will depend on the company's share price and is not determinable at this time[395](index=395&type=chunk) [Item 6. Exhibits and Financial Statement Schedules](index=82&type=section&id=Item%206.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists Form 10-Q exhibits, including corporate governance documents, executive certifications, and XBRL files - Exhibit 3.1: Amended and Restated Certificate of Incorporation - Exhibit 3.2: Amended and Restated Bylaws - Exhibit 31.1* and 31.2*: Certifications of Principal Executive Officer and Principal Financial Officer (filed herewith) - Exhibit 32.1: Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 (deemed not filed for Section 18 purposes) - Exhibits 101.INS, 101.SCH, 104: Inline XBRL documents[398](index=398&type=chunk)[399](index=399&type=chunk) Signatures [Executive Signatures](index=83&type=section&id=Executive%20Signatures) The report was signed by the CEO and CFO on August 6, 2025, certifying its submission - The report was signed by Eric Friedrichsen, Chief Executive Officer, and Michael S. Lafair, Executive Vice President, Chief Financial Officer, on August 6, 2025[404](index=404&type=chunk)

[Report Information](index=1&type=section&id=Report%20Information) Viemed Healthcare, Inc. filed its Q2 2025 Form 10-Q, identifying as an accelerated filer with 38.8 million common shares outstanding - Viemed Healthcare, Inc. submitted its Form 10-Q quarterly report for the period ended June 30, 2025[1](index=1&type=chunk) - The company's stock ticker is VMD, listed on The Nasdaq Stock Market LLC[3](index=3&type=chunk) - The company is designated as an **Accelerated Filer**[4](index=4&type=chunk) - As of July 31, 2025, the company had **38,785,759 common shares outstanding**[4](index=4&type=chunk) [PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and notes for the periods ended June 30, 2025 and 2024 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section includes the company's unaudited condensed consolidated financial statements, comprising balance sheets, income statements, statements of changes in shareholders' equity, and cash flow statements, along with notes for the periods ended June 30, 2025, and 2024 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement details the company's financial position, including assets, liabilities, and shareholders' equity, as of specific reporting dates Condensed Consolidated Balance Sheets Key Data (in thousands of dollars) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | Change ($) | Change (%) | | :--------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | **Assets** | | | | | | Total current assets | $55,291 | $52,880 | $2,411 | 4.56% | | Total long-term assets | $129,312 | $124,189 | $5,123 | 4.12% | | **Total Assets** | **$184,603** | **$177,069** | **$7,534** | **4.25%** | | **Liabilities** | | | | | | Total

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: 1-6314 Tutor Perini Corporation (Exact Name of Registrant as Specified in its Charter) MASSACHUSETTS (State ...

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) SunOpta reported strong second-quarter fiscal 2025 results, with significant increases in revenue, earnings, and Adjusted EBITDA, driven by robust volume growth across its diverse portfolio Key Financial Metrics (Continuing Operations) | Metric (Continuing Operations) | Q2 2025 | Q2 2024 | Change (%) | | :----------------------------- | :------ | :------ | :--------- | | Revenue | $191.5M | $169.5M | 13% | | Earnings | $4.4M | ($4.4M) | 198% | | Adjusted EBITDA | $22.7M | $20.0M | 14% | | Adjusted EPS | $0.04 | $0.02 | 100% | - Revenue growth was primarily driven by a **14.4% increase in volume**, partially offset by a **1.4% price reduction** due to pass-through pricing for raw material cost savings[7](index=7&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Brian Kocher highlighted outstanding Q2 results, attributing them to strong competitive positioning, execution, and robust double-digit growth in revenue and Adjusted EBITDA, also noting significant progress in operational initiatives and a strong new business pipeline - Both revenue and Adjusted EBITDA continued **double-digit growth**, driven by robust volume gains across the portfolio[6](index=6&type=chunk) - Significant progress was made in operational initiatives to improve margins, including unlocking capacity and improving yields, with further traction expected in late 2025[6](index=6&type=chunk) - A new fruit snack manufacturing line is announced for the Omak, Washington facility, anticipated to come online in late 2026 to meet demand for 2027 and beyond, driven by powerful tailwinds in the better-for-you fruit snack category[6](index=6&type=chunk) [Financial Performance - Second Quarter 2025](index=2&type=section&id=Financial%20Performance%20-%20Second%20Quarter%202025) [Revenue Analysis](index=2&type=section&id=Revenue%20Analysis) Second quarter 2025 revenues increased by 12.9% to $191.5 million, primarily due to a 14.4% volume growth in plant-based beverages, broth, and fruit snacks, alongside new product launches, partially offset by a 1.4% price reduction from raw material cost savings passed through to customers Revenue Performance Overview | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | YoY Change | | :----- | :----------------- | :----------------- | :--------- | | Revenues | $191.5 | $169.5 | 12.9% |\n| Volume Growth | 14.4% | N/A | N/A |\n| Price Reduction | 1.4% | N/A | N/A | - Volume growth was observed across plant-based beverages, broth, and fruit snacks, supported by new product launches[8](index=8&type=chunk) [Profitability Analysis](index=2&type=section&id=Profitability%20Analysis) Gross profit increased significantly by 34.0% to $28.4 million, with gross margin expanding by 230 basis points to 14.8%, and operating income also saw a substantial increase, though adjusted gross margin decreased by 80 basis points due to tariff timing lags, labor/infrastructure investments, and increased depreciation, partially offset by higher sales and production volumes Profitability Metrics (Q2) | Metric (Q2) | 2025 (Millions) | 2024 (Millions) | YoY Change (%) | | :------------ | :-------------- | :-------------- | :------------- | | Gross Profit | $28.4 | $21.2 | 34.0% | | Gross Margin | 14.8% | 12.5% | +230 bps | | Operating Income | $10.5 | $2.0 | +$8.5M | | Earnings from Continuing Operations | $4.4 | ($4.4) | 198% | | Adjusted EBITDA from Continuing Operations | $22.7 | $20.0 | 13.9% | - Adjusted gross margin decreased by **80 basis points to 15.2%** (from 16.0% in Q2 2024) due to timing lag on tariff pass-through, investments in labor and infrastructure, and incremental depreciation, partially offset by improved plant utilization from higher volumes[9](index=9&type=chunk) [Financial Position & Cash Flow](index=2&type=section&id=Financial%20Position%20%26%20Cash%20Flow) [Balance Sheet Overview](index=2&type=section&id=Balance%20Sheet%20Overview) As of June 28, 2025, SunOpta's total assets increased to $704.9 million from $668.5 million at year-end fiscal 2024, while total debt slightly increased to $273.4 million from $265.2 million, improving its net leverage to 2.9x from 3.0x with a target of 2.5x by year-end Balance Sheet Summary | Metric | June 28, 2025 (Millions) | Dec 28, 2024 (Millions) | | :----- | :----------------------- | :---------------------- | | Total Assets | $704.9 | $668.5 | | Total Debt | $273.4 | $265.2 | | Net Leverage | 2.9x | 3.0x | - The company continues to expect to achieve its **2.5x net leverage target** by the end of fiscal 2025[13](index=13&type=chunk) [Cash Flow Activities](index=2&type=section&id=Cash%20Flow%20Activities) Cash provided by operating activities from continuing operations significantly increased to $17.8 million for the first two quarters of fiscal 2025, up from $2.0 million in the prior year, driven by improved working capital efficiency and increased operating income, while investing activities consumed $18.6 million, reflecting higher capital expenditures Cash Flow Summary (First Two Quarters) | Metric (First Two Quarters) | FY2025 (Millions) | FY2024 (Millions) | | :-------------------------- | :---------------- | :---------------- | | Cash from Operating Activities (Continuing Operations) | $17.8 | $2.0 | | Cash Used in Investing Activities (Continuing Operations) | $18.6 | $13.9 | - The increase in operating cash flow mainly reflected improved working capital efficiency and increased operating income due to revenue growth[13](index=13&type=chunk) [Capital Allocation](index=3&type=section&id=Capital%20Allocation) During the second quarter, SunOpta repurchased 163,227 common shares for $1.0 million at an average price of $6.04 per share, with $24.0 million remaining authorized under the Share Repurchase Program - Repurchased **163,227 common shares for $1.0 million** at an average price of **$6.04 per share** in Q2[14](index=14&type=chunk) - **$24.0 million** remained available under the Share Repurchase Program as of June 28, 2025[14](index=14&type=chunk) [Operational Factors & Outlook](index=3&type=section&id=Operational%20Factors%20%26%20Outlook) [Tariff Impact](index=3&type=section&id=Tariff%20Impact) Tariffs negatively impacted gross profit by $1.6 million and reduced gross margin by 90 basis points in Q2 due to a timing lag in passing through costs, though the company successfully implemented new pricing arrangements with customers by mid-July to mitigate known tariff exposure and expects to recover substantially all additional tariff costs, despite anticipating a similar timing lag impact in Q3 for recently announced changes - Tariffs negatively impacted Q2 gross profit by **$1.6 million**, reducing gross margin by **90 basis points** due to timing lag[15](index=15&type=chunk) - New pricing arrangements with all customers were successfully implemented by mid-July to mitigate known tariff exposure[15](index=15&type=chunk) - A similar timing lag impact is expected in Q3 for recently announced tariff changes, but the company anticipates recovering substantially all additional costs[15](index=15&type=chunk) [2025 Financial Outlook](index=3&type=section&id=2025%20Financial%20Outlook) SunOpta is raising its fiscal 2025 revenue outlook to $805 - $815 million (11% - 13% growth) from the prior $788 - $805 million (9% - 11% growth), reflecting strong Q2 performance and the expected impact of pass-through tariff pricing, while the Adjusted EBITDA outlook remains reaffirmed at $99 - $103 million (12% - 16% growth) Fiscal 2025 Outlook Comparison | Metric | Prior Outlook | Revised Outlook | | :----- | :------------ | :-------------- | | Revenue | $788 - $805M | $805 - $815M | | Adj. EBITDA | $99 - $103M | $99 - $103M | | Revenue Growth | 9% - 11% | 11% - 13% | | Adj. EBITDA Growth | 12% - 16% | 12% - 16% | - The revised revenue outlook includes an approximate **$8 million increase in revenue** and **$10 million in cost of goods sold** in the second half of 2025 due to expected tariff expenses and related pass-through pricing[16](index=16&type=chunk) [Company Information & Disclosures](index=3&type=section&id=Company%20Information%20%26%20Disclosures) [Conference Call Information](index=3&type=section&id=Conference%20Call%20Information) SunOpta hosted a conference call on August 6, 2025, at 5:30 P.M. Eastern time to discuss Q2 financial results, with details for accessing the live webcast and replay, along with dial-in information and conference ID, provided - Conference call held on **August 6, 2025, at 5:30 P.M. ET** to discuss Q2 results[17](index=17&type=chunk) - Webcast and replay available on SunOpta's website under 'Investor Relations'[17](index=17&type=chunk)[18](index=18&type=chunk) [About SunOpta](index=4&type=section&id=About%20SunOpta) SunOpta Inc. (Nasdaq: STKL) (TSX: SOY) is a company with over 50 years of expertise, providing customized supply chain solutions and innovation for top brands, retailers, and foodservice providers, specializing in beverages, broths, and better-for-you snacks, distributing high-quality, sustainability-forward solutions across North America through various channels - SunOpta delivers customized supply chain solutions and innovation for beverages, broths, and better-for-you snacks[20](index=20&type=chunk) - Products are distributed through retail, club, foodservice, and e-commerce channels across North America[20](index=20&type=chunk) [Forward-Looking Statements & Non-GAAP Disclaimer](index=4&type=section&id=Forward-Looking%20Statements%20%26%20Non-GAAP%20Disclaimer) The press release contains forward-looking statements regarding future financial performance, including expectations for gross margin improvement, debt reduction, share repurchases, tariff recovery, and fiscal 2025 outlook, which are subject to various risks and uncertainties, and the company uses non-GAAP financial measures like Adjusted EBITDA, which exclude certain items, and cannot reliably reconcile forward-looking non-GAAP measures to GAAP due to the unpredictability of excluded components - Forward-looking statements include intentions for disciplined financial approach, sustainable gross margin improvement, free cash flow generation, balance sheet de-leveraging, and achieving net leverage targets[21](index=21&type=chunk) - The company cannot present a quantitative reconciliation of forward-looking non-GAAP financial measures to GAAP due to the inability to reliably predict all necessary components of such GAAP measures[19](index=19&type=chunk) - Historically excluded items from non-GAAP measures include acquisition/divestiture expenses, restructuring charges, asset impairment, legal settlements, and their tax effects[22](index=22&type=chunk) [Contacts](index=5&type=section&id=Contacts) Contact information for Investor Relations (Reed Anderson, ICR) and Media Relations (Claudine Galloway, SunOpta) was provided for inquiries - Investor Relations contact: Reed Anderson, ICR, 646-277-1260, reed.anderson@icrinc.com[23](index=23&type=chunk) - Media Relations contact: Claudine Galloway, SunOpta, 952-295-9579, press.inquiries@sunopta.com[23](index=23&type=chunk) [Consolidated Financial Statements](index=6&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statements of Operations](index=6&type=section&id=Consolidated%20Statements%20of%20Operations) The Consolidated Statements of Operations show a significant improvement in profitability for Q2 2025 and the first two quarters of 2025 compared to the prior year, with a shift from net loss to net earnings, as revenue increased while cost of goods sold also rose, but at a slower pace, leading to higher gross profit and operating income Consolidated Statements of Operations (Thousands USD) | Metric (Thousands USD) | Q2 2025 | Q2 2024 | 2 Quarters 2025 | 2 Quarters 2024 | | :--------------------- | :------ | :------ | :-------------- | :-------------- | | Revenues | 191,489 | 169,541 | 393,117 | 353,963 | | Cost of goods sold | 163,082 | 148,349 | 334,391 | 301,719 | | Gross profit | 28,407 | 21,192 | 58,726 | 52,244 | | Operating income | 10,533 | 1,956 | 21,020 | 12,079 | | Net earnings (loss) | 4,351 | (5,334) | 9,162 | (2,455) | | Diluted EPS | 0.03 | (0.04) | 0.07 | (0.02) | [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets indicate an increase in total assets to $704.9 million as of June 28, 2025, from $668.5 million at December 28, 2024, with current assets, property, plant and equipment, and intangible assets all seeing increases, while total liabilities also rose, but shareholders' equity increased, reflecting improved financial health Consolidated Balance Sheets (Thousands USD) | Metric (Thousands USD) | June 28, 2025 | December 28, 2024 | | :--------------------- | :------------ | :---------------- | | Total current assets | 184,083 | 159,458 | | Property, plant and equipment, net | 345,968 | 343,618 | | Total assets | 704,940 | 668,527 | | Total current liabilities | 190,812 | 169,434 | | Long-term debt | 233,080 | 235,798 | | Total liabilities | 529,901 | 504,885 | | Total shareholders' equity | 159,816 | 148,594 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows show a significant increase in net cash provided by operating activities from continuing operations for the first two quarters of 2025 to $17.8 million, compared to $2.0 million in the prior year, while net cash used in investing activities increased to $18.6 million, and net cash provided by financing activities decreased to $1.9 million Consolidated Statements of Cash Flows (Thousands USD) | Metric (Thousands USD) | 2 Quarters 2025 | 2 Quarters 2024 | | :--------------------- | :-------------- | :-------------- | | Net cash provided by operating activities of continuing operations | 17,778 | 2,013 | | Net cash used in investing activities of continuing operations | (18,573) | (13,923) | | Net cash provided by financing activities of continuing operations | 1,947 | 10,583 | | Increase in cash, cash equivalents and restricted cash | 1,152 | 2,663 | [Non-GAAP Financial Measures Reconciliation](index=9&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) [Adjusted Gross Margin Reconciliation](index=9&type=section&id=Adjusted%20Gross%20Margin%20Reconciliation) The company reconciles reported gross margin to adjusted gross margin by excluding unusual items like wastewater haul-off charges, start-up costs, and product withdrawal costs, with Q2 2025 adjusted gross margin at 15.2%, compared to 16.0% in Q2 2024, reflecting a decrease due to factors like tariff timing lags and investments Adjusted Gross Margin Reconciliation | Metric | Q2 2025 | Q2 2024 | 2 Quarters 2025 | 2 Quarters 2024 | | :----- | :------ | :------ | :-------------- | :-------------- | | Reported Gross Margin | 14.8% | 12.5% | 14.9% | 14.8% | | Adjusted Gross Margin | 15.2% | 16.0% | 15.3% | 16.5% | - Adjustments primarily include wastewater haul-off charges, start-up costs, and product withdrawal costs[28](index=28&type=chunk)[29](index=29&type=chunk) [Adjusted Earnings Reconciliation](index=11&type=section&id=Adjusted%20Earnings%20Reconciliation) Adjusted earnings from continuing operations for Q2 2025 were $4.4 million ($0.04 per diluted share), up from $2.2 million ($0.02 per diluted share) in Q2 2024, with adjustments including wastewater haul-off charges, start-up costs, product withdrawal costs, unrealized foreign exchange, and other items, providing a clearer view of core operational performance Adjusted Earnings Reconciliation (Thousands USD) | Metric (Thousands USD) | Q2 2025 | Q2 2024 | 2 Quarters 2025 | 2 Quarters 2024 | | :--------------------- | :------ | :------ | :-------------- | :-------------- | | Earnings (loss) from continuing operations | 4,351 | (4,437) | 9,162 | (641) | | Adjusted earnings from continuing operations | 4,375 | 2,185 | 9,683 | 4,075 | | Adjusted EPS (diluted) | 0.04 | 0.02 | 0.08 | 0.03 | - Key adjustments include wastewater haul-off charges, start-up costs, product withdrawal costs, unrealized foreign exchange loss/gain, and other non-recurring items[31](index=31&type=chunk) [Adjusted EBITDA Reconciliation](index=12&type=section&id=Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA from continuing operations increased to $22.7 million in Q2 2025 from $20.0 million in Q2 2024, driven by strong volume growth, with the reconciliation adding back non-operating and non-cash expenses (interest, taxes, depreciation, amortization, stock-based compensation) and adjusting for unusual items to provide a measure of operating profitability Adjusted EBITDA Reconciliation (Thousands USD) | Metric (Thousands USD) | Q2 2025 | Q2 2024 | 2 Quarters 2025 | 2 Quarters 2024 | | :--------------------- | :------ | :------ | :-------------- | :-------------- | | Earnings (loss) from continuing operations | 4,351 | (4,437) | 9,162 | (641) | | Adjusted EBITDA from continuing operations | 22,744 | 19,962 | 45,137 | 41,833 | - Adjustments include interest expense, income tax expense, depreciation and amortization, stock-based compensation, wastewater haul-off charges, start-up costs, product withdrawal costs, and unrealized foreign exchange[33](index=33&type=chunk)[34](index=34&type=chunk) [Net Leverage Reconciliation](index=13&type=section&id=Net%20Leverage%20Reconciliation) Net leverage, calculated as net debt divided by trailing four quarters adjusted EBITDA, improved to 2.9x as of June 28, 2025, from 3.0x at December 28, 2024, with net debt at $271.2 million and trailing four quarters adjusted EBITDA at $92.0 million Net Leverage Reconciliation (Thousands USD) | Metric (Thousands USD) | June 28, 2025 | December 28, 2024 | | :--------------------- | :------------ | :---------------- | | Total debt | 273,371 | 265,191 | | Cash and cash equivalents | (2,161) | (1,552) | | Net debt | 271,210 | 263,639 | | Trailing Four Quarters Adjusted EBITDA | 92,010 | 88,706 | | Net leverage | 2.9x | 3.0x | - Adjustments to trailing four quarters Adjusted EBITDA include wastewater haul-off charges, start-up costs, product withdrawal costs, unrealized foreign exchange, and other items[37](index=37&type=chunk)[38](index=38&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 28, 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 No.: 000-00121 KULICKE AND SOFFA INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Pennsylvania 23-1498399 (State or other juri ...

[Financial and Operational Highlights](index=1&type=section&id=Financial%20and%20Operational%20Highlights) [First Half and Q2 2025 Performance Summary](index=1&type=section&id=First%20Half%20and%20Q2%202025%20Performance%20Summary) CF Industries reported strong first-half 2025 financial results, with net earnings of $698 million and adjusted EBITDA of $1.41 billion, driven by operational excellence and a favorable nitrogen market, including the Donaldsonville CCS project start-up Key Financial Metrics (1H & Q2 2025 vs 2024) | Metric | 1H 2025 | 1H 2024 | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Earnings | $698M | $614M | $386M | $420M | | Diluted EPS | $4.20 | $3.31 | $2.37 | $2.30 | | EBITDA | $1.37B | $1.24B | $757M | $752M | | Adjusted EBITDA | $1.41B | $1.21B | $761M | $752M | - The company's strong performance was attributed to excellent operational execution and constructive global nitrogen industry dynamics[3](index=3&type=chunk) - A significant milestone was achieved with the start-up of the Donaldsonville Carbon Capture and Sequestration (CCS) project in July 2025, which began generating 45Q tax credits[1](index=1&type=chunk)[3](index=3&type=chunk)[5](index=5&type=chunk) - Higher average selling prices in H1 2025 compared to H1 2024 were driven by increased global energy costs, which raised the market clearing price for nitrogen products[7](index=7&type=chunk) [Operations Overview](index=1&type=section&id=Operations%20Overview) The company maintained a strong safety record and increased first-half 2025 gross ammonia production to 5.2 million tons, projecting 10 million tons for the full year Gross Ammonia Production (in million tons) | Period | 2025 | 2024 | | :--- | :--- | :--- | | First Half | 5.2 | 4.8 | | Second Quarter | 2.6 | 2.6 | - The company expects gross ammonia production for the full year 2025 to be approximately **10 million tons**[4](index=4&type=chunk) - The 12-month rolling average recordable incident rate was **0.30 incidents per 200,000 work hours** as of June 30, 2025[4](index=4&type=chunk) [Capital Management](index=2&type=section&id=Capital%20Management) CF Industries formed the Blue Point JV for low-carbon ammonia, reported $1.69 billion in cash, and incurred $377 million in H1 2025 capital expenditures, projecting $800-$900 million for the full year - A joint venture (Blue Point) was formed with JERA Co., Inc. and Mitsui & Co., Ltd. for the production of low-carbon ammonia. CF Industries holds a **40% ownership stake**[13](index=13&type=chunk) - As of June 30, 2025, cash and cash equivalents were **$1.69 billion**, with **$264 million** held by the Blue Point joint venture[14](index=14&type=chunk) Capital Expenditures (1H 2025) | Category | Q2 2025 | 1H 2025 | | :--- | :--- | :--- | | Total Capital Expenditures | $245M | $377M | | - CF Industries Existing Ops | $155M | $287M | | - Blue Point Joint Venture | $90M | $90M | - Projected capital expenditures for the full year 2025 are estimated to be between **$800-$900 million**[16](index=16&type=chunk) [Market Outlook and Strategic Initiatives](index=4&type=section&id=Market%20Outlook%20and%20Strategic%20Initiatives) [Nitrogen Market Outlook](index=4&type=section&id=Nitrogen%20Market%20Outlook) The company maintains a constructive outlook on the global nitrogen market, anticipating continued strong demand, persistent North American energy cost advantages, and a long-term tightening supply-demand balance - Near-term outlook is positive due to strong demand from Brazil and India, low global inventories, and supply constraints from regions like Egypt and Trinidad[21](index=21&type=chunk) - Chinese urea exports are capped at **3 million metric tons** for 2025, which is not expected to significantly loosen the global supply-demand balance[22](index=22&type=chunk) - Medium-term outlook remains favorable for low-cost North American producers due to persistent energy cost differentials with Europe and Asia[22](index=22&type=chunk) - Long-term projections indicate a tightening global nitrogen market as demand growth (approx. **1.5% per year**) is expected to exceed new capacity growth over the next four years[23](index=23&type=chunk) [Strategic Initiatives Update](index=5&type=section&id=Strategic%20Initiatives%20Update) The company is advancing its clean energy strategy with the Blue Point JV's $3.7 billion low-carbon ATR ammonia facility and the Donaldsonville CCS project, which started in July 2025, generating 45Q tax credits - The Blue Point joint venture will build an autothermal reforming (ATR) ammonia facility with carbon capture, estimated to cost approximately **$3.7 billion**[24](index=24&type=chunk) - The Donaldsonville CCS project started up in July 2025, allowing for the permanent sequestration of up to **2 million metric tons of CO2 annually**[25](index=25&type=chunk) - The Donaldsonville project qualifies for tax credits under Section 45Q and is expected to produce approximately **1.9 million tons of low-carbon ammonia annually**[25](index=25&type=chunk) [Consolidated Financial Results](index=6&type=section&id=Consolidated%20Financial%20Results) Consolidated Results Summary (2025 vs 2024) | Metric | Q2 2025 | Q2 2024 | 1H 2025 | 1H 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,890M | $1,572M | $3,553M | $3,042M | | Gross Margin | $755M | $679M | $1,327M | $1,088M | | Net Earnings | $386M | $420M | $698M | $614M | | Diluted EPS | $2.37 | $2.30 | $4.20 | $3.31 | | Adjusted EBITDA | $761M | $752M | $1,405M | $1,211M | | Sales Volume (k tons) | 5,021 | 4,875 | 10,025 | 9,399 | | Natural Gas Cost ($/MMBtu) | $3.36 | $1.90 | $3.52 | $2.53 | [Segment Performance](index=7&type=section&id=Segment%20Performance) [Ammonia Segment](index=7&type=section&id=Ammonia%20Segment) The Ammonia segment's net sales increased to $1.01 billion in H1 2025, driven by higher sales volumes and average selling prices, leading to an improved adjusted gross margin per ton Ammonia Segment Performance (1H 2025 vs 1H 2024) | Metric | 1H 2025 | 1H 2024 | | :--- | :--- | :--- | | Net Sales | $1,011M | $811M | | Gross Margin | $322M | $212M | | Sales Volume (k tons) | 2,233 | 1,897 | | Avg. Selling Price/ton | $453 | $428 | - Sales volume increased in H1 2025 due to greater supply availability from higher gross ammonia production[30](index=30&type=chunk) - Adjusted gross margin per ton increased due to higher selling prices and lower maintenance costs, partially offset by higher realized natural gas costs[30](index=30&type=chunk) [Granular Urea Segment](index=8&type=section&id=Granular%20Urea%20Segment) The Granular Urea segment's net sales rose to $986 million in H1 2025, primarily due to higher average selling prices driven by global energy costs, which improved adjusted gross margin per ton Granular Urea Segment Performance (1H 2025 vs 1H 2024) | Metric | 1H 2025 | 1H 2024 | | :--- | :--- | :--- | | Net Sales | $986M | $864M | | Gross Margin | $452M | $381M | | Sales Volume (k tons) | 2,313 | 2,343 | | Avg. Selling Price/ton | $426 | $369 | - Sales volumes for granular urea were similar year-over-year for the first half[33](index=33&type=chunk) - The increase in average selling prices and adjusted gross margin per ton was primarily due to higher global energy costs raising the market clearing price[33](index=33&type=chunk) [UAN Segment](index=9&type=section&id=UAN%20Segment) The UAN segment's net sales increased to $1.08 billion in H1 2025, driven by higher sales volumes and average selling prices, while adjusted gross margin per ton remained similar UAN Segment Performance (1H 2025 vs 1H 2024) | Metric | 1H 2025 | 1H 2024 | | :--- | :--- | :--- | | Net Sales | $1,080M | $900M | | Gross Margin | $412M | $359M | | Sales Volume (k tons) | 3,777 | 3,359 | | Avg. Selling Price/ton | $286 | $268 | - UAN sales volumes were higher in H1 2025 due to inventory draw down, greater supply availability, and higher starting inventory[35](index=35&type=chunk) - Adjusted gross margin per ton for UAN was similar in H1 2025 compared to H1 2024[35](index=35&type=chunk) [AN Segment](index=10&type=section&id=AN%20Segment) The AN segment's net sales slightly increased to $218 million in H1 2025 due to higher average selling prices, which also improved adjusted gross margin per ton despite stable sales volumes AN Segment Performance (1H 2025 vs 1H 2024) | Metric | 1H 2025 | 1H 2024 | | :--- | :--- | :--- | | Net Sales | $218M | $212M | | Gross Margin | $41M | $32M | | Sales Volume (k tons) | 706 | 730 | | Avg. Selling Price/ton | $309 | $290 | - AN sales volumes were similar in H1 2025 compared to H1 2024[38](index=38&type=chunk) - Adjusted gross margin per ton for AN increased due to higher average selling prices, which were partially offset by higher natural gas costs[38](index=38&type=chunk) [Other Segment](index=11&type=section&id=Other%20Segment) The Other segment's net sales were $258 million in H1 2025, comparable to prior year, with lower sales volumes offset by higher average selling prices, maintaining a similar adjusted gross margin per ton Other Segment Performance (1H 2025 vs 1H 2024) | Metric | 1H 2025 | 1H 2024 | | :--- | :--- | :--- | | Net Sales | $258M | $255M | | Gross Margin | $100M | $104M | | Sales Volume (k tons) | 996 | 1,070 | | Avg. Selling Price/ton | $259 | $238 | - Sales volumes in the Other segment were lower in H1 2025 primarily due to decreased sales of nitric acid and diesel exhaust fluid (DEF)[41](index=41&type=chunk) - Adjusted gross margin per ton for the Other segment was similar in H1 2025 compared to H1 2024[41](index=41&type=chunk) [Shareholder Returns](index=4&type=section&id=Shareholder%20Returns) [Share Repurchase Programs](index=4&type=section&id=Share%20Repurchase%20Programs) The company repurchased 8.2 million shares for $636 million in H1 2025, with $425 million remaining under the current program, and a new $2 billion program authorized through December 2029 Share Repurchases in 2025 | Period | Shares Repurchased | Cost | | :--- | :--- | :--- | | Q2 2025 | 2.8 million | $202 million | | 1H 2025 | 8.2 million | $636 million | - As of June 30, 2025, approximately **$425 million** remains under the current share repurchase program[17](index=17&type=chunk) - A new **$2 billion** share repurchase program has been authorized, effective from the completion of the current program through December 2029[18](index=18&type=chunk) [Dividends and Distributions](index=12&type=section&id=Dividends%20and%20Distributions) CF Industries approved a $175 million semi-annual distribution to CHS Inc. and declared a quarterly dividend of $0.50 per common share, payable in August 2025 - A semi-annual distribution of **$175 million** was approved for payment to CHS Inc. on July 31, 2025[19](index=19&type=chunk) - A quarterly dividend of **$0.50 per common share** was declared, payable on August 29, 2025, to stockholders of record as of August 15, 2025[42](index=42&type=chunk) [Financial Statements and Reconciliations](index=14&type=section&id=Financial%20Statements%20and%20Reconciliations) [Consolidated Statements of Operations](index=14&type=section&id=Consolidated%20Statements%20of%20Operations) For the first half of 2025, CF Industries reported net sales of $3.55 billion and net earnings of $698 million, or $4.20 per diluted share, reflecting growth from the prior year period Statement of Operations Summary (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Sales | $3,553M | $3,042M | | Gross Margin | $1,327M | $1,088M | | Operating Earnings | $1,103M | $941M | | Net Earnings Attributable to Common Stockholders | $698M | $614M | [Condensed Consolidated Balance Sheets](index=15&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, the company's total assets were $13.75 billion, with cash and cash equivalents at $1.69 billion, and total equity increasing to $7.82 billion Balance Sheet Summary (As of June 30, 2025) | Category | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $2,676M | $2,520M | | Total Assets | $13,750M | $13,466M | | Total Current Liabilities | $830M | $818M | | Long-Term Debt | $2,973M | $2,971M | | Total Equity | $7,821M | $7,592M | [Consolidated Statements of Cash Flows](index=16&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the first half of 2025, net cash from operating activities was $1.15 billion, while investing and financing activities used $368 million and $733 million respectively, resulting in a $72 million net increase in cash Cash Flow Summary (Six Months Ended June 30, 2025) | Category | Amount | | :--- | :--- | | Net Cash from Operating Activities | $1,149M | | Net Cash used in Investing Activities | ($368M) | | Net Cash used in Financing Activities | ($733M) | | **Increase in Cash and Cash Equivalents** | **$72M** | [Non-GAAP Reconciliations](index=17&type=section&id=Non-GAAP%20Reconciliations) The company provided non-GAAP reconciliations, reporting free cash flow of $1.73 billion for the twelve months ended June 30, 2025, and adjusted EBITDA of $1.41 billion for the first half of 2025 - Free cash flow for the twelve months ended June 30, 2025, was **$1.729 billion**, up from **$1.153 billion** for the same period ending in 2024[59](index=59&type=chunk) Adjusted EBITDA Reconciliation Summary (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Earnings Attributable to Common Stockholders | $698M | $614M | | EBITDA | $1,374M | $1,240M | | Adjusted EBITDA | $1,405M | $1,211M |

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) Unaudited consolidated financial statements for Q2 and H1 2025, including balance sheets, income, equity, cash flows, and detailed notes [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements for Q2 and H1 2025, with detailed notes on key financial items and accounting policies [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Presents the company's financial position, including assets, liabilities, and equity, as of June 30, 2025, and December 31, 2024 Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | | Total assets | $5,434,767 | $4,931,155 | 10.2% | | Finance receivables, net | $4,562,576 | $4,140,742 | 10.2% | | Goodwill | $439,449 | $396,357 | 10.9% | | Total liabilities | $4,038,156 | $3,737,548 | 8.0% | | Borrowings | $3,614,208 | $3,326,621 | 8.6% | | Total equity | $1,396,611 | $1,193,607 | 17.0% | [Consolidated Income Statements](index=5&type=section&id=Consolidated%20Income%20Statements) Reports the company's financial performance, including revenues, expenses, and net income, for the three and six months ended June 30, 2025 and 2024 Consolidated Income Statement Highlights (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (%) | | :------------------------------------ | :------------------------------- | :------------------------------- | :--------- | :----------------------------- | :----------------------------- | :--------- | | Total revenues | $287,688 | $284,229 | 1.2% | $557,307 | $539,815 | 3.2% | | Income from operations | $85,111 | $89,222 | (4.6)% | $159,688 | $155,618 | 2.6% | | Income before income taxes | $61,128 | $33,816 | 80.8% | $74,504 | $47,955 | 55.4% | | Net income attributable to PRA Group, Inc. | $42,374 | $21,516 | 96.9% | $46,033 | $24,991 | 84.2% | | Diluted EPS | $1.08 | $0.54 | 100.0% | $1.16 | $0.63 | 84.1% | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Details net income and other comprehensive income components, such as foreign currency translation adjustments, for Q2 and H1 2025 and 2024 Consolidated Statements of Comprehensive Income 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 | $45,713 | $25,114 | $54,777 | $36,867 | | Other comprehensive income/(loss) | $83,892 | $(15,486) | $167,067 | $(60,823) | | Total comprehensive income/(loss) | $129,605 | $9,628 | $221,844 | $(23,956) | | Comprehensive income/(loss) attributable to PRA Group, Inc. | $123,553 | $12,725 | $205,693 | $(26,918) | [Consolidated Statements of Changes in Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Outlines changes in total equity, including net income, foreign currency adjustments, and stock repurchases, for the six months ended June 30, 2025 Key Changes in Equity (Six Months Ended June 30, 2025, in thousands) | Item | Amount | | :------------------------------------ | :------- | | Balance as of December 31, 2024 | $1,193,607 | | Net income attributable to PRA Group, Inc. | $46,033 | | Foreign currency translation adjustments | $175,339 | | Cash flow hedges | $(8,239) | | Repurchase and cancellation of common stock | $(10,000) | | Balance as of June 30, 2025 | $1,396,611 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Activity | 2025 | 2024 | Change | | :------------------------------------------ | :--------- | :--------- | :--------- | | Net cash used in operating activities | $(65,490) | $(102,488) | $36,998 | | Net cash used in investing activities | $(33,408) | $(96,195) | $62,787 | | Net cash provided by financing activities | $105,900 | $203,826 | $(97,926) | | Net increase in cash, cash equivalents and restricted cash | $27,887 | $6,225 | $21,662 | | Cash, cash equivalents and restricted cash, end of period | $135,318 | $119,917 | $15,401 | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures for the consolidated financial statements, covering accounting policies and specific financial items [Note 1. Organization and Business](index=10&type=section&id=Note%201.%20Organization%20and%20Business) Describes PRA Group's global financial services business, focusing on nonperforming loan portfolios and class action claims recoveries - PRA Group, Inc. is a global financial services company primarily focused on the purchase, collection, and management of nonperforming loan portfolios across the Americas, Europe, and Australia. It also provides fee-based services for class action claims recoveries in the U.S[23](index=23&type=chunk) [Note 2. Finance Receivables, net](index=10&type=section&id=Note%202.%20Finance%20Receivables,%20net) Details the composition and changes in finance receivables, net, including expected recoveries and foreign currency adjustments Finance Receivables, net (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Balance as of end of period | $4,562,576 | $4,140,742 | Changes in Finance Receivables, net (Six Months Ended June 30, in thousands) | Item | 2025 | 2024 | | :---------------------------------------------------- | :--------- | :--------- | | Balance as of beginning of period | $4,140,742 | $3,656,598 | | Initial negative allowance for expected recoveries on current period purchases | $638,207 | $625,186 | | Recoveries collected and applied to Finance receivables, net | $(554,715) | $(520,940) | | Changes in expected recoveries | $61,214 | $124,994 | | Foreign currency translation adjustment | $277,128 | $(65,652) | | Balance as of end of period | $4,562,576 | $3,820,186 | - Changes in expected recoveries for the six months ended June 30, 2025, were **$61.2 million**, primarily due to **$56.8 million** in cash collections overperformance in Europe and Brazil, partially offset by decreases to collections forecasts on the 2023 U.S. Core pool[35](index=35&type=chunk) [Note 3. Investments](index=13&type=section&id=Note%203.%20Investments) Outlines the company's investment portfolio, including debt securities, private equity funds, and significant investment sales Investments (in thousands) | Type | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Debt securities | $64,774 | $55,762 | | Private equity funds | $1,726 | $1,848 | | Equity method investment | $— | $8,694 | | Total investments | $66,500 | $66,304 | - The Company sold its **11.7%** interest in RCB Investimentos S.A. in April 2025, recording a **$38.4 million** pretax gain. This sale does not affect existing or future portfolio investments and operations in Brazil[39](index=39&type=chunk) [Note 4. Goodwill](index=13&type=section&id=Note%204.%20Goodwill) Reports the balance and changes in goodwill, primarily due to foreign currency translation, and discusses impairment risk Goodwill (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Balance as of end of period | $439,449 | $396,357 | Changes in Goodwill (Six Months Ended June 30, in thousands) | Item | 2025 | 2024 | | :-------------------------- | :--------- | :--------- | | Balance as of beginning of period | $396,357 | $431,564 | | Foreign currency translation | $43,092 | $(15,918) | | Balance as of end of period | $439,449 | $415,646 | - Goodwill increased by **$43.1 million** due to foreign currency translation. The company determined that an interim impairment test was not required as of June 30, 2025, but noted that goodwill in the Debt Buying and Collection (DBC) reporting unit may be at-risk for future impairment if market indicators or cash flow projections deteriorate[40](index=40&type=chunk) [Note 5. Borrowings](index=14&type=section&id=Note%205.%20Borrowings) Details the company's various borrowing facilities, including revolving credit and senior notes, and compliance with covenants Borrowings (in thousands) | Type | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | North American revolving credit facility | $667,875 | $519,519 | | North American term loan | $465,111 | $470,111 | | United Kingdom revolving credit facility | $479,282 | $494,185 | | European revolving credit facility | $713,529 | $555,726 | | 2028 senior notes | $398,000 | $398,000 | | 2029 senior notes | $350,000 | $350,000 | | 2030 senior notes | $550,000 | $550,000 | | Total borrowings | **$3,614,208** | $3,326,621 | - Total borrowings increased by **$287.6 million** to **$3.6 billion** as of June 30, 2025, primarily due to incremental net borrowings under North American and European revolving credit facilities. The Company was in compliance with all financing arrangement covenants[41](index=41&type=chunk)[44](index=44&type=chunk) [Note 6. Derivatives](index=14&type=section&id=Note%206.%20Derivatives) Presents the fair value and notional amounts of interest rate swaps and foreign exchange contracts used for hedging Fair Value of Derivatives (in thousands) | Type | Balance Sheet Location | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :-------------------------- | :--------------------- | :----------------------- | :----------------------- | | Interest rate swaps (assets) | Other assets | $2,508 | $8,514 | | Interest rate swaps (liabilities) | Other liabilities | $10,904 | $4,797 | | Foreign exchange contracts (assets) | Other assets | $256 | $2,209 | | Foreign exchange contracts (liabilities) | Other liabilities | $3,167 | $166 | - The notional amount of outstanding interest rate swaps increased to **$908.8 million** as of June 30, 2025, from **$800.7 million** at December 31, 2024. The notional amount of outstanding foreign exchange contracts increased to **$477.6 million** from **$376.4 million** over the same period[46](index=46&type=chunk)[47](index=47&type=chunk) [Note 7. Fair Value](index=15&type=section&id=Note%207.%20Fair%20Value) Discloses the fair value measurements for financial instruments, categorized by valuation levels, as of June 30, 2025 Financial Instruments Carried at Fair Value (June 30, 2025, in thousands) | Asset/Liability | Level 1 | Level 2 | Level 3 | Total | | :-------------------- | :------ | :------ | :------ | :------ | | Government securities | $64,774 | $— | $— | $64,774 | | Derivatives (assets) | $— | $2,764 | $— | $2,764 | | Derivatives (liabilities) | $— | $14,071 | $— | $14,071 | Financial Instruments Not Carried at Fair Value (June 30, 2025, in thousands) | Asset/Liability | Carrying Value | Estimated Fair Value (Level 3) | | :-------------------------- | :------------- | :----------------------------- | | Finance receivables, net | $4,562,576 | $4,338,291 | [Note 8. Accumulated Other Comprehensive Loss](index=17&type=section&id=Note%208.%20Accumulated%20Other%20Comprehensive%20Loss) Details changes in accumulated other comprehensive loss, including debt securities, cash flow hedges, and currency translation adjustments Changes in Accumulated Other Comprehensive Loss (Six Months Ended June 30, 2025, in thousands) | Component | Balance at Beginning of Period | Other Comprehensive Gain/(Loss) before Reclassifications | Reclassifications, net | Net Current Period Other Comprehensive Gain/(Loss) | Balance at End of Period | | :-------------------------- | :----------------------------- | :------------------------------------------------------- | :--------------------- | :------------------------------------------------- | :----------------------- | | Debt Securities Available-for-sale | $205 | $(33) | $— | $(33) | $172 | | Cash Flow Hedges | $2,111 | $(4,010) | $(4,229) | $(8,239) | $(6,128) | | Currency Translation Adjustments | $(445,710) | $167,932 | $— | $167,932 | $(277,778) | | Total Accumulated Other Comp. Loss | $(443,394) | $163,889 | $(4,229) | $159,660 | $(283,734) | [Note 9. Earnings per Share](index=18&type=section&id=Note%209.%20Earnings%20per%20Share) Provides basic and diluted earnings per share calculations and information on common stock repurchases Earnings Per Share (Six Months Ended June 30, in thousands, except per share amounts) | Metric | 2025 | 2024 | | :------------------------------------------ | :--------- | :--------- | | Net income attributable to PRA Group, Inc. | $46,033 | $24,991 | | Basic EPS | $1.17 | $0.64 | | Diluted EPS | $1.16 | $0.63 | | Weighted average number of shares outstanding (Diluted) | 39,536 | 39,497 | - During Q2 2025, the Company repurchased **660,395** shares of common stock for approximately **$10.0 million** at an average price of **$15.14** per share. As of June 30, 2025, **$57.7 million** remained authorized under the share repurchase program[56](index=56&type=chunk) [Note 10. Income Taxes](index=18&type=section&id=Note%2010.%20Income%20Taxes) Details income tax expense and effective tax rates, explaining changes due to jurisdictional income mix and discrete items Income Tax Expense and Effective Tax Rate (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 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income before income taxes | $61,128 | $33,816 | $74,504 | $47,955 | | Income tax expense | $15,415 | $8,702 | $19,727 | $11,088 | | Effective tax rate | **25.2%** | **25.7%** | **26.5%** | **23.1%** | - The effective tax rate changes were primarily due to shifts in the mix of income from different taxing jurisdictions and the timing/amount of discrete items. The Company is evaluating the impact of the recently signed One Big Beautiful Bill Act in the U.S[57](index=57&type=chunk)[58](index=58&type=chunk) [Note 11. Commitments and Contingencies](index=18&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) Discusses contractual purchase obligations and confirms no material developments in legal proceedings as of June 30, 2025 - The estimated minimum contractual purchase obligation under forward flow agreements was not significant as of June 30, 2025, as most agreements lack minimums and include early termination provisions[59](index=59&type=chunk)[60](index=60&type=chunk) - There were no material developments in previously disclosed legal proceedings as of June 30, 2025[61](index=61&type=chunk) [Note 12. Segments](index=19&type=section&id=Note%2012.%20Segments) Identifies the company's single reportable segment, Accounts Receivable Management, and its components - The Company operates as a single reportable segment, Accounts Receivable Management (ARM), which includes Debt Buying and Collection (DBC) and Claims Compensation Bureau, LLC (CCB). The CEO assesses performance based on consolidated GAAP results[62](index=62&type=chunk) [Note 13. Recently Issued Accounting Standards](index=19&type=section&id=Note%2013.%20Recently%20Issued%20Accounting%20Standards) Outlines recently issued FASB accounting standards and the company's evaluation of their potential disclosure impact - The FASB issued ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation), which will require enhanced annual disclosures. The Company is evaluating the impact of these ASUs on its disclosures[66](index=66&type=chunk)[67](index=67&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's analysis of financial condition and results for Q2 and H1 2025, including revenues, expenses, balance sheet, non-GAAP measures, and performance data [Executive Overview](index=23&type=section&id=Executive%20Overview) Summarizes PRA Group's business, strategic focus, and key financial highlights for Q2 and H1 2025, including portfolio purchases and cash collections - PRA Group's primary business is purchasing, collecting, and managing nonperforming loan portfolios globally. The company focuses on optimizing investments, operational execution, and managing expenses under its new CEO[74](index=74&type=chunk)[75](index=75&type=chunk) Financial Highlights (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :------------------------------------ | :-------- | :-------- | :--------- | | Portfolio purchases | $346.5M | $379.4M | (8.7)% | | Cash collections | $536.3M | $473.9M | 13.2% | | Net income attributable to PRA | $42.4M | $21.5M | 96.9% | | Diluted earnings per share | $1.08 | $0.54 | 100.0% | Financial Highlights (YTD June 30, 2025 vs YTD June 30, 2024) | Metric | YTD 2025 | YTD 2024 | Change (%) | | :------------------------------------ | :--------- | :--------- | :--------- | | Portfolio purchases | $638.2M | $625.2M | 2.1% | | Cash collections | $1,033.7M | $923.4M | 11.9% | | Net income attributable to PRA | $46.0M | $25.0M | 84.2% | | Diluted earnings per share | $1.16 | $0.63 | 84.1% | - Estimated remaining collections (ERC) increased by **11.2%** to **$8.3 billion** as of June 30, 2025, compared to December 31, 2024[76](index=76&type=chunk) - The Company completed the sale of its **11.7%** interest in RCB Investimentos S.A. for a pre-tax gain of **$38.4 million**, with proceeds used for portfolio purchases and general corporate needs[77](index=77&type=chunk) [Summary of Selected Financial Data](index=24&type=section&id=Summary%20of%20Selected%20Financial%20Data) Presents key financial metrics for Q2 and H1 2025, including revenues, expenses, net income, EPS, portfolio purchases, and cash collections Summary of Selected Financial Data (Q2 2025 vs Q2 2024, in thousands, except per share/ratio) | Metric | 2025 | 2024 | % Change | | :------------------------------------ | :--------- | :--------- | :--------- | | Portfolio income | $250,934 | $209,290 | 19.9% | | Changes in expected recoveries | $33,292 | $73,320 | (54.6)% | | Total revenues | $287,688 | $284,229 | 1.2% | | Total operating expenses | $202,577 | $195,007 | 3.9% | | Interest expense, net | $62,361 | $55,353 | 12.7% | | Net income attributable to PRA Group, Inc. | $42,374 | $21,516 | 96.9% | | Diluted earnings per share | $1.08 | $0.54 | 100.0% | | Portfolio purchases | $346,505 | $379,369 | (8.7)% | | Cash collections | $536,288 | $473,882 | 13.2% | | Estimated remaining collections (period-end) | $8,294,310 | $6,802,246 | 21.9% | | Total stockholders' equity - PRA Group, Inc. | $1,336,925 | $1,145,463 | 16.7% | | Credit facility availability (Total) | $840,670 | $1,448,541 | (42.0)% | | Full-time equivalents | 2,897 | 3,158 | (8.3)% | [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Analyzes the company's operational performance, detailing trends in portfolio purchases, cash collections, revenues, and expenses for Q2 and H1 2025 [Portfolio purchases](index=25&type=section&id=Portfolio%20purchases) Examines portfolio purchase trends by region for Q2 and H1 2025, highlighting changes in Americas and Australia versus Europe Portfolio Purchases (in thousands) | Region | Q2 2025 | Q2 2024 | $ Change | % Change | YTD 2025 | YTD 2024 | $ Change | % Change | | :---------------------- | :-------- | :-------- | :--------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Americas and Australia | $199,283 | $225,388 | $(26,105) | (11.6)% | $377,739 | $422,204 | $(44,465) | (10.5)% | | Europe | $147,222 | $153,981 | $(6,759) | (4.4)% | $260,468 | $202,982 | $57,486 | 28.3% | | Total | $346,505 | $379,369 | $(32,864) | (8.7)% | $638,207 | $625,186 | $13,021 | 2.1% | - Total portfolio purchases decreased by **8.7%** in Q2 2025 compared to Q2 2024, driven by decreases in both Americas and Australia and Europe. However, year-to-date purchases increased by **2.1%** due to a significant increase in Europe, partially offset by a decrease in Americas and Australia[83](index=83&type=chunk)[84](index=84&type=chunk) [Cash collections](index=25&type=section&id=Cash%20collections) Analyzes cash collection performance by region for Q2 and H1 2025, noting drivers like U.S. and Europe Core collections Cash Collections (in thousands) | Region | Q2 2025 | Q2 2024 | $ Change | % Change | YTD 2025 | YTD 2024 | $ Change | % Change | | :---------------------- | :-------- | :-------- | :--------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Americas and Australia | $326,027 | $290,799 | $35,228 | 12.1% | $637,887 | $572,868 | $65,019 | 11.3% | | Europe | $210,261 | $183,083 | $27,178 | 14.8% | $395,837 | $350,532 | $45,305 | 12.9% | | Total | $536,288 | $473,882 | $62,406 | 13.2% | $1,033,724 | $923,400 | $110,324 | 11.9% | - Total cash collections increased by **13.2%** in Q2 2025 and **11.9%** year-to-date, primarily driven by higher U.S. and Europe Core cash collections due to increased recent purchasing levels. This was partially offset by a decrease in Brazil due to foreign exchange rate variations and lower recent purchasing[85](index=85&type=chunk)[86](index=86&type=chunk) [Portfolio revenue](index=26&type=section&id=Portfolio%20revenue) Details portfolio revenue components, including portfolio income and changes in expected recoveries, for Q2 and H1 2025 Portfolio Revenue (in thousands) | Metric | Q2 2025 | Q2 2024 | $ Change | % Change | YTD 2025 | YTD 2024 | $ Change | % Change | | :-------------------------- | :-------- | :-------- | :--------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Portfolio income | $250,934 | $209,290 | $41,644 | 19.9% | $491,892 | $411,346 | $80,546 | 19.6% | | Changes in expected recoveries | $33,292 | $73,320 | $(40,028) | (54.6)% | $61,214 | $124,994 | $(63,780) | (51.0)% | | Total portfolio revenue | $284,226 | $282,610 | 1.616 | 0.6% | $553,106 | $536,340 | $16,766 | 3.1% | - Total portfolio revenue increased slightly by **0.6%** in Q2 2025 and **3.1%** year-to-date. Portfolio income saw strong growth (**19.9%** in Q2, **19.6%** YTD) due to higher purchasing and improved pricing in the U.S. since 2023, but this was largely offset by a significant decrease in changes in expected recoveries[88](index=88&type=chunk)[89](index=89&type=chunk) [Operating expenses](index=26&type=section&id=Operating%20expenses) Breaks down operating expenses by category for Q2 and H1 2025, identifying key drivers like legal costs and agency fees Operating Expenses (in thousands) | Expense Category | Q2 2025 | Q2 2024 | $ Change | % Change | YTD 2025 | YTD 2024 | $ Change | % Change | | :------------------------------------ | :-------- | :-------- | :--------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Compensation and benefits | $75,724 | $74,241 | $1,483 | 2.0% | $149,047 | $147,838 | $1,209 | 0.8% | | Legal collection costs | $37,583 | $35,274 | $2,309 | 6.5% | $70,977 | $61,965 | $9,012 | 14.5% | | Legal collection fees | $15,625 | $13,762 | $1,863 | 13.5% | $30,855 | $25,874 | $4,981 | 19.3% | | Agency fees | $22,688 | $21,008 | $1,680 | 8.0% | $44,056 | $40,731 | $3,325 | 8.2% | | Professional and outside services | $21,071 | $18,124 | $2,947 | 16.3% | $42,174 | $43,174 | $(1,000) | (2.3)% | | Communication | $9,417 | $11,577 | $(2,160) | (18.7)% | $19,894 | $24,155 | $(4,261) | (17.6)% | | Total operating expenses | $202,577 | $195,007 | $7,570 | 3.9% | $397,619 | $384,197 | $13,422 | 3.5% | - Total operating expenses increased by **3.9%** in Q2 2025 and **3.5%** year-to-date. Key drivers include higher legal collection costs and fees due to increased U.S. legal activity, increased agency fees, and higher professional services expenses from call center offshoring. Communication expenses decreased due to lower-cost strategies in the U.S[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) [Interest expense, net](index=27&type=section&id=Interest%20expense,%20net) Analyzes net interest expense for Q2 and H1 2025, attributing changes primarily to higher average debt balances Interest Expense, Net (in thousands) | Metric | Q2 2025 | Q2 2024 | $ Change | % Change | YTD 2025 | YTD 2024 | $ Change | % Change | | :-------------------------- | :-------- | :-------- | :--------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Interest on revolving credit facilities and term loan, and unused line fees | $38,534 | $33,180 | $5,354 | 16.1% | $75,116 | $67,135 | $7,981 | 11.9% | | Interest on senior notes | $24,911 | $22,246 | $2,665 | 12.0% | $49,823 | $40,448 | $9,375 | 23.2% | | Interest expense, net | $62,361 | $55,353 | $7,008 | 12.7% | $123,331 | $107,631 | $15,700 | 14.6% | - Net interest expense increased by **12.7%** in Q2 2025 and **14.6%** year-to-date, primarily due to a higher average debt balance supporting increased portfolio investments[97](index=97&type=chunk) [Income tax expense](index=27&type=section&id=Income%20tax%20expense) Details income tax expense and effective tax rates for Q2 and H1 2025, explaining changes due to jurisdictional income mix Income Tax Expense (in thousands) | Metric | Q2 2025 | Q2 2024 | $ Change | % Change | YTD 2025 | YTD 2024 | $ Change | % Change | | :-------------------- | :-------- | :-------- | :--------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Income tax expense | $15,415 | $8,702 | $6,713 | 77.1% | $19,727 | $11,088 | $8,639 | 77.9% | | Effective tax rate | **25.2%** | **25.7%** | | | **26.5%** | **23.1%** | | | - Income tax expense increased significantly (**77.1%** in Q2, **77.9%** YTD) due to changes in the mix of income from different taxing jurisdictions and the timing/amount of discrete items[98](index=98&type=chunk) [Balance sheet](index=28&type=section&id=Balance%20sheet) Reviews key balance sheet items, including finance receivables, goodwill, and borrowings, as of June 30, 2025 [Finance receivables, net](index=28&type=section&id=Finance%20receivables,%20net) Analyzes the increase in finance receivables, net, driven by portfolio acquisitions and foreign currency adjustments - Finance receivables, net, increased by **$421.8 million** (**10.2%**) to **$4.6 billion** as of June 30, 2025, primarily driven by portfolio acquisitions (**$638.2 million**) and foreign currency translation adjustments (**$277.1 million**), partially offset by recoveries collected (**$554.7 million**)[99](index=99&type=chunk) [Goodwill](index=28&type=section&id=Goodwill) Discusses the increase in goodwill due to foreign currency translation and potential future impairment risks - Goodwill increased by **$43.1 million** (**10.9%**) to **$439.4 million** as of June 30, 2025, due to foreign currency translation adjustments. The company noted that goodwill in its Debt Buying and Collection (DBC) reporting unit may be at-risk for future impairment[100](index=100&type=chunk) [Borrowings](index=28&type=section&id=Borrowings) Details the increase in borrowings, primarily from revolving credit facilities, as of June 30, 2025 - Borrowings increased by **$287.6 million** (**8.6%**) to **$3.6 billion** as of June 30, 2025, mainly due to incremental net borrowings under North American and European revolving credit facilities[101](index=101&type=chunk) [Non-GAAP Financial Measures](index=28&type=section&id=Non-GAAP%20Financial%20Measures) Presents and reconciles non-GAAP financial measures, including Adjusted EBITDA and Adjusted Return on Average Tangible Equity [Adjusted EBITDA](index=28&type=section&id=Adjusted%20EBITDA) Explains Adjusted EBITDA as a non-GAAP measure for evaluating operational and financial performance - Adjusted EBITDA is a non-GAAP measure used by management to evaluate operational and financial performance, excluding items whose fluctuations do not necessarily correspond to business operations[102](index=102&type=chunk) Adjusted EBITDA Reconciliation (Twelve Months Ended, in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------------------------------------------- | :------------ | :---------------- | | Net income attributable to PRA Group, Inc. | $91,643 | $70,601 | | Adjustments (Income tax, FX, Interest, Depreciation, etc.) | $1,148,449 | $1,066,951 | | Adjusted EBITDA | $1,240,092 | $1,137,552 | [Return on average tangible equity and adjusted return on average tangible equity](index=30&type=section&id=Return%20on%20average%20tangible%20equity%20and%20adjusted%20return%20on%20average%20tangible%20equity) Defines ROATE and Adjusted ROATE as non-GAAP measures for monitoring operating performance relative to equity - Return on average tangible equity (ROATE) and Adjusted ROATE are non-GAAP measures used to monitor operating performance relative to equity, with Adjusted ROATE standardizing performance by excluding non-recurring transactions[106](index=106&type=chunk)[107](index=107&type=chunk) ROATE and Adjusted ROATE (Six Months Ended June 30, in thousands, except ratio data) | Metric | YTD 2025 | YTD 2024 | | :------------------------------------------ | :--------- | :--------- | | Average tangible equity | $810,021 | $725,947 | | Net income attributable to PRA Group, Inc. | $46,033 | $24,991 | | Return on average tangible equity (ROATE) | **11.4%** | **6.9%** | | Adjusted net income attributable to PRA Group, Inc. | $16,347 | $24,991 | | Adjusted ROATE | **4.0%** | **6.9%** | [Supplemental Performance Data](index=32&type=section&id=Supplemental%20Performance%20Data) Provides additional performance data, including details on purchasing, estimated remaining collections (ERC), and cash collections [Purchasing](index=32&type=section&id=Purchasing) Explains the company's classification of purchased nonperforming loan portfolios and factors influencing purchase price multiples - The Company segregates purchased nonperforming loan portfolios into Core (non-insolvent) or Insolvency (bankruptcy/similar proceedings) based on account status at acquisition, and further by geographical regions and year of acquisition[114](index=114&type=chunk) - Purchase price multiple represents estimated total cash collections over the original purchase price, influenced by factors like pricing competition, supply levels, account age, and expected collection costs[115](index=115&type=chunk) [ERC and TEC](index=32&type=section&id=ERC%20and%20TEC) Defines Estimated Remaining Collections (ERC) and Total Estimated Collections (TEC) and their updates based on collection experience - Estimated Remaining Collections (ERC) is the sum of all future projected cash collections, while Total Estimated Collections (TEC) includes actual cash collections plus ERC. These are updated based on collection experience and cash forecasting[116](index=116&type=chunk)[159](index=159&type=chunk) [Estimated remaining collections](index=33&type=section&id=Estimated%20remaining%20collections) Presents a detailed breakdown of Estimated Remaining Collections (ERC) by geography and portfolio type as of June 30, 2025 Total Estimated Remaining Collections (ERC) by Geography and Portfolio (as of June 30, 2025, in thousands) | Region | Core | Insolvency | Total | | :---------------------- | :--------- | :--------- | :--------- | | Americas and Australia | $3,811,600 | $239,678 | $4,051,278 | | Europe | $4,062,305 | $180,727 | $4,243,032 | | Total ERC | | | $8,294,310 | [Cash collections](index=33&type=section&id=Cash%20collections) Provides a detailed breakdown of cash collections by geography and portfolio type for the six months ended June 30, 2025 Cash Collections by Geography and Portfolio (YTD June 30, 2025, in thousands) | Region | Call center and other | Legal | Core Total | Insolvency | Total | | :---------------------- | :-------------------- | :------ | :--------- | :--------- | :--------- | | Americas and Australia | $326,990 | $262,868 | $589,858 | $48,029 | $637,887 | | Europe | $211,289 | $138,734 | $350,023 | $45,814 | $395,837 | | Total Company | $538,279 | $401,602 | $939,881 | $93,843 | $1,033,724 | [Purchase Price Multiples](index=34&type=section&id=Purchase%20Price%20Multiples) Details current and original purchase price multiples by portfolio type, reflecting estimated total cash collections over purchase price Purchase Price Multiples (as of June 30, 2025) | Portfolio Type | Current Purchase Price Multiple | Original Purchase Price Multiple | | :-------------------------- | :------------------------------ | :------------------------------- | | Americas and Australia Core | **234%** | **202%** | | Americas Insolvency | **169%** | **135%** | | Europe Core | **199%** | **165%** | | Europe Insolvency | **145%** | **133%** | | Total PRA Group | **211%** | **179%** | [Portfolio Financial Information](index=36&type=section&id=Portfolio%20Financial%20Information) Presents comprehensive portfolio financial data, including cash collections, income, and net finance receivables, by purchase period Portfolio Financial Information (YTD June 30, 2025, in thousands) | Purchase Period | Cash Collections | Portfolio Income | Changes in Expected Recoveries | Total Portfolio Revenue | Net Finance Receivables (as of June 30, 2025) | | :-------------------------- | :--------------- | :--------------- | :----------------------------- | :---------------------- | :-------------------------------------------- | | Americas and Australia Core | $589,858 | $320,037 | $(1,307) | $318,730 | $1,971,534 | | Americas Insolvency | $48,029 | $13,780 | $1,254 | $15,034 | $183,844 | | Europe Core | $350,023 | $148,866 | $52,974 | $201,840 | $2,262,735 | | Europe Insolvency | $45,814 | $9,209 | $8,293 | $17,502 | $144,463 | | Total PRA Group | $1,033,724 | $491,892 | $61,214 | $553,106 | $4,562,576 | [Cash Collections by Year, By Year of Purchase](index=38&type=section&id=Cash%20Collections%20by%20Year,%20By%20Year%20of%20Purchase) Illustrates historical cash collection patterns by year of purchase and collection, showing long-term performance across vintages and geographies - The table provides a detailed breakdown of historical cash collections by the year of purchase and the year of collection, illustrating the long-term collection patterns across different portfolio vintages and geographies[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Outlines the company's primary market risks, including interest rate and foreign currency exposure, confirming no material changes since December 31, 2024 - As of June 30, 2025, **58%** of the Company's total debt (**$3.6 billion**) was either fixed rate or converted to a fixed rate through interest rate hedges[161](index=161&type=chunk) - Revenues from operations outside the U.S. were **$150.2 million** during Q2 2025, indicating significant foreign currency exposure[162](index=162&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Details the evaluation of disclosure controls and procedures, confirming their effectiveness and no material changes in internal control over financial reporting for Q2 2025 - The principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[163](index=163&type=chunk) - There were no material changes in the Company's internal control over financial reporting during the quarter ended June 30, 2025[164](index=164&type=chunk) [PART II. OTHER INFORMATION](index=46&type=section&id=PART%20II.%20OTHER%20INFORMATION) Presents other required information, including legal proceedings, risk factors, equity sales, and exhibits, for the reporting period [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) Refers to Note 11 for legal proceedings information, confirming no material developments as of June 30, 2025 - No material developments in legal proceedings were reported as of June 30, 2025[166](index=166&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) States no material changes to the company's risk factors since those disclosed in the 2024 Form 10-K - No material changes in risk factors were reported from those disclosed in the 2024 Form 10-K[167](index=167&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details the company's share repurchase program, including Q2 2025 repurchases and remaining authorization Common Stock Repurchases (Q2 2025, in thousands, except per share) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Remaining Purchase Price for Share Repurchases Under the Program | | :------------------------------ | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------- | | May 1, 2025 to May 31, 2025 | 660,395 | $15.14 | $57,742 | | Total | 660,395 | $15.14 | $57,742 | - The Board of Directors authorized a **$150.0 million** share repurchase program in February 2022, with **$57.7 million** remaining as of June 30, 2025[168](index=168&type=chunk)[170](index=170&type=chunk) [Item 3. Defaults Upon Senior Securities](index=46&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Indicates this item is not applicable, signifying no defaults upon senior securities - This item is not applicable[172](index=172&type=chunk) [Item 4. Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Indicates this item is not applicable, signifying no mine safety disclosures - This item is not applicable[173](index=173&type=chunk) [Item 5. Other Information](index=46&type=section&id=Item%205.%20Other%20Information) Confirms no Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during Q2 2025 - None of the Company's directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or non-rule 10b5-1 trading arrangement during the second quarter of 2025[174](index=174&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) Provides a comprehensive list of all exhibits filed with the Form 10-Q, including corporate documents, indentures, and certifications - The exhibits include corporate governance documents (Certificate of Incorporation, By-Laws), common stock certificates, indentures for senior notes, and various certifications (CEO, CFO, Sarbanes Oxley Act)[175](index=175&type=chunk)[176](index=176&type=chunk) [Signatures](index=48&type=section&id=Signatures) Contains official signatures of PRA Group, Inc.'s CEO and CFO, certifying the filing of the report - The report is signed by Martin Sjolund, President and Chief Executive Officer, and Rakesh Sehgal, Executive Vice President and Chief Financial Officer, on August 6, 2025[180](index=180&type=chunk)

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) Kodiak Gas Services presents a comprehensive overview of its Q2 2025 performance and revised full-year outlook, emphasizing strong financial results and strategic initiatives [Second Quarter 2025 Performance Highlights](index=1&type=section&id=Second%20Quarter%202025%20Performance%20Highlights) Kodiak Gas Services reported strong financial and operational results for Q2 2025, achieving record earnings per share, adjusted EBITDA, and free cash flow, alongside significant improvements in contract services adjusted gross margin and fleet utilization | Metric | Q2 2025 Value | Change vs. Q2 2024 | | :----------------------------------- | :------------ | :------------------- | | **Net income attributable to common shareholders** | **$39.5 million** | **+537%** (from $6.2M) | | **Earnings per share** (diluted) | **$0.43** | - | | **Adjusted EBITDA** | **$178.2 million** | **+15.5%** | | **Contract Services adjusted gross margin percentage** | **68.3%** | **+430 basis points** | | **Free cash flow** | **$70.3 million** | - | | **Capital Returned to Stockholders** (Dividends & Repurchases) | Over **$50 million** | - | | **New Large Horsepower Compression Units Deployed** | **31,800 horsepower** | - | | **Fleet utilization** | **97.2%** | **+290 basis points** | - Kodiak was added to the **S&P SmallCap 600 index** effective August 6, 2025, signifying **financial strength** and **commitment** to **profitable growth**[6](index=6&type=chunk)[11](index=11&type=chunk) [Revised Full-Year 2025 Outlook Highlights](index=1&type=section&id=Revised%20Full-Year%202025%20Outlook%20Highlights) The company increased its full-year 2025 guidance for adjusted EBITDA and discretionary cash flow, reflecting continued confidence in its operational performance and market position | Metric | Revised Full-Year 2025 Guidance Range | | :----------------------------------- | :------------------------------------ | | **Adjusted EBITDA** | **$700 million** to **$725 million** | | **Discretionary cash flow** | **$445 million** to **$465 million** | [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Mickey McKee highlighted the company's commitment to operational excellence, strategic focus on large horsepower compression, fleet optimization, and investments in technology and personnel as drivers for record adjusted EBITDA and improved margins. He expressed confidence in long-term growth prospects due to Permian Basin natural gas production growth and strong demand from data centers and LNG projects, reinforcing the decision to increase the share repurchase program - The company's **strategic focus** on large horsepower compression, **fleet optimization**, and **significant investments** in technology and personnel contributed to a fourth consecutive quarterly **increase** in **Contract Services adjusted gross margin percentage** and **record** quarterly **Adjusted EBITDA**[4](index=4&type=chunk) - **Confidence** in **long-term growth** is driven by highly visible **Permian Basin natural gas production growth** and **strong demand outlook from power demand for data centers and domestic LNG projects**[7](index=7&type=chunk) - The **increase** in the **share repurchase program** reflects **confidence** in the business and **commitment** to returning capital to shareholders, while maintaining focus on **superior service** and a **reliable** compression fleet[8](index=8&type=chunk) [Operational and Financial Updates](index=2&type=section&id=Operational%20and%20Financial%20Updates) This section details Kodiak's segment performance, debt management, S&P index inclusion, and share repurchase activities [Segment Performance](index=2&type=section&id=Segment%20Performance) Kodiak's Contract Services segment demonstrated robust growth in revenue and gross margin, while Other Services experienced a revenue decrease but a significant increase in gross margin [Contract Services](index=2&type=section&id=Contract%20Services) The Contract Services segment demonstrates robust revenue and gross margin growth, reflecting strong operational performance | Metric | Q2 2025 Value | Q2 2024 Value | YoY Change | | :-------------------------- | :------------ | :------------ | :--------- | | **Revenue** | **$293.5 million** | **$276.3 million** | **+6.3%** | | **Gross Margin** | **$134.3 million** | **$107.5 million** | **+24.9%** | | **Adjusted Gross Margin** | **$200.4 million** | **$176.9 million** | **+13.3%** | [Other Services](index=2&type=section&id=Other%20Services) The Other Services segment experienced a revenue decrease but a significant increase in gross margin, indicating improved profitability | Metric | Q2 2025 Value | Q2 2024 Value | YoY Change | | :-------------------------- | :------------ | :------------ | :--------- | | **Revenue** | **$29.3 million** | **$33.4 million** | **-12.3%** | | **Gross Margin & Adjusted Gross Margin** | **$7.2 million** | **$5.5 million** | **+31.6%** | [Long-Term Debt and Liquidity](index=2&type=section&id=Long-Term%20Debt%20and%20Liquidity) The company reduced its debt outstanding by approximately $48 million during Q2 2025, maintaining a healthy liquidity position with significant availability on its ABL Facility | Metric | As of June 30, 2025 | | :-------------------------------- | :------------------ | | **Debt Reduction** (Q2 2025) | ~**$48 million** | | **Total Debt Outstanding** | **$2.6 billion** | | **ABL Facility Availability** | **$366.4 million** | | **Credit Agreement Leverage Ratio** | **3.6x** | [S&P SmallCap 600 Index Inclusion](index=2&type=section&id=S%26P%20SmallCap%20600%20Index%20Inclusion) Kodiak Gas Services was announced to join the S&P SmallCap 600 index, effective August 6, 2025, marking a significant milestone that affirms its financial strength and commitment to profitable growth - Kodiak will join the **S&P SmallCap 600 index** effective August 6, 2025, which is a **significant milestone** affirming the company's **financial strength** and **commitment** to **profitable growth**[6](index=6&type=chunk)[11](index=11&type=chunk) [Share Repurchase Program](index=2&type=section&id=Share%20Repurchase%20Program) The Board of Directors approved a $100 million increase to the share repurchase program, extending its expiration to December 31, 2026, bringing the total available for repurchases to $115.0 million. To date, the company has repurchased approximately 2.0 million shares for $60.0 million | Metric | Details | | :-------------------------------- | :------------------------------------------------ | | **Program Increase** | **$100 million** | | New Expiration Date | December 31, 2026 | | **Total Available for Repurchases** | **$115.0 million** | | **Shares Repurchased to Date** | ~**2.0 million shares** | | **Aggregate Amount Repurchased to Date** | **$60.0 million** (at a weighted average price of **$30.24**) | [Summary Financial and Operating Data](index=3&type=section&id=Summary%20Financial%20and%20Operating%20Data) This section provides a detailed overview of Kodiak's financial and operating performance for Q2 2025 and comparative periods [Summary Financial Data](index=3&type=section&id=Summary%20Financial%20Data) The summary financial data for Q2 2025 shows significant improvements across key profitability and cash flow metrics compared to both the previous quarter and the prior year, driven by strong performance in Contract Services | Metric (in thousands) | June 30, 2025 | March 31, 2025 | June 30, 2024 | QoQ Change (vs. Mar 2025) | YoY Change (vs. Jun 2024) | | :----------------------------------- | :------------ | :------------- | :------------ | :------------------------ | :------------------------ | | **Total revenues** | **$322,843** | **$329,642** | **$309,653** | **-2.1%** | **+4.2%** | | **Net income attributable to common shareholders** | **$39,496** | **$30,411** | **$6,228** | **+29.9%** | **+534.2%** | | **Adjusted EBITDA** | **$178,216** | **$177,664** | **$154,342** | **+0.3%** | **+15.5%** | | **Adjusted EBITDA percentage** | **55.2%** | **53.9%** | **49.8%** | **+1.3 pp** | **+5.4 pp** | | **Contract Services revenue** | **$293,534** | **$288,956** | **$276,250** | **+1.6%** | **+6.3%** | | **Contract Services adjusted gross margin** | **$200,397** | **$195,721** | **$176,917** | **+2.4%** | **+13.3%** | | **Contract Services adjusted gross margin percentage** | **68.3%** | **67.7%** | **64.0%** | **+0.6 pp** | **+4.3 pp** | | **Other Services revenue** | **$29,309** | **$40,686** | **$33,403** | **-27.9%** | **-12.3%** | | **Other Services adjusted gross margin** | **$7,195** | **$5,460** | **$5,467** | **+31.8%** | **+31.6%** | | **Other Services adjusted gross margin percentage** | **24.5%** | **13.4%** | **16.4%** | **+11.1 pp** | **+8.1 pp** | | **Maintenance capital expenditures** | **$17,565** | **$16,407** | **$19,147** | **+7.1%** | **-8.2%** | | **Growth capital expenditures** | **$37,966** | **$55,983** | **$77,257** | **-32.2%** | **-50.9%** | | **Other capital expenditures** | **$16,398** | **$22,258** | **$13,133** | **-26.3%** | **+24.9%** | | **Discretionary cash flow** | **$116,424** | **$116,084** | **$90,617** | **+0.3%** | **+28.5%** | | **Free cash flow** | **$70,290** | **$47,219** | **$638** | **+48.8%** | **+10917.2%** | [Summary Operating Data](index=4&type=section&id=Summary%20Operating%20Data) Operating data as of June 30, 2025, indicates a slight decrease in total fleet horsepower but an increase in revenue-generating horsepower, leading to improved fleet utilization and higher horsepower per revenue-generating unit | Metric | June 30, 2025 | March 31, 2025 | June 30, 2024 | QoQ Change (vs. Mar 2025) | YoY Change (vs. Jun 2024) | | :------------------------------------------ | :------------ | :------------- | :------------ | :------------------------ | :------------------------ | | **Fleet horsepower** | **4,419,884** | **4,422,914** | **4,481,900** | **-0.1%** | **-1.4%** | | **Revenue-generating horsepower** | **4,296,978** | **4,284,103** | **4,224,839** | **+0.3%** | **+1.7%** | | **Fleet compression units** | **4,881** | **4,941** | **7,317** | **-1.2%** | **-33.3%** | | **Revenue-generating compression units** | **4,514** | **4,545** | **5,753** | **-0.7%** | **-21.5%** | | **Revenue-generating horsepower per revenue-generating compression unit** | **952** | **943** | **734** | **+1.0%** | **+29.7%** | | **Fleet utilization** | **97.2%** | **96.9%** | **94.3%** | **+0.3 pp** | **+2.9 pp** | [Full-Year 2025 Guidance](index=4&type=section&id=Full-Year%202025%20Guidance) Kodiak Gas Services provides its updated full-year 2025 financial and operational guidance, reflecting confidence in future performance [Full-Year 2025 Guidance](index=4&type=section&id=Full-Year%202025%20Guidance) Kodiak Gas Services has provided revised full-year 2025 guidance, increasing the low end of the Adjusted EBITDA range and raising the Discretionary Cash Flow guidance, while also providing specific revenue and margin targets for its Contract and Other Services segments, and capital expenditure forecasts | Metric (in thousands, excluding percentages) | Low | High | | :----------------------------------- | :---------- | :---------- | | **Adjusted EBITDA** | **$700,000** | **$725,000** | | **Discretionary cash flow** | **$445,000** | **$465,000** | | **Contract Services revenues** | **$1,160,000** | **$1,200,000** | | **Contract Services adjusted gross margin percentage** | **67.0%** | **69.0%** | | **Other Services revenues** | **$120,000** | **$140,000** | | **Other Services adjusted gross margin percentage** | **14.0%** | **17.0%** | | **Maintenance capital expenditures** | **$75,000** | **$85,000** | | **Growth capital expenditures** | **$180,000** | **$205,000** | | **Other capital expenditures** | **$60,000** | **$65,000** | | **Total Growth and Other capital expenditures** | **$240,000** | **$270,000** | [Company Information & Disclosures](index=5&type=section&id=Company%20Information%20%26%20Disclosures) This section provides essential company information, including conference call details, company overview, non-GAAP definitions, and forward-looking statements [Conference Call Details](index=5&type=section&id=Conference%20Call%20Details) Kodiak will host a conference call on Thursday, August 7, 2025, to discuss its Q2 2025 financial and operating results, with details provided for phone and webcast access - A conference call to discuss Q2 2025 results will be held on Thursday, August 7, 2025, at 10:00 a.m. Eastern Time (9:00 a.m. Central Time)[22](index=22&type=chunk) [About Kodiak Gas Services](index=5&type=section&id=About%20Kodiak%20Gas%20Services) Kodiak Gas Services is a leading contract compression services provider in the United States, offering critical energy infrastructure and services to oil and gas producers and midstream customers, headquartered in The Woodlands, Texas - Kodiak is a **leading contract compression services provider** in the U.S., providing **critical energy infrastructure** for natural gas and oil production and transportation[23](index=23&type=chunk) - The company serves oil and gas producers and midstream customers in high-volume gas gathering systems, processing facilities, multi-well gas lift applications, and natural gas transmission systems[23](index=23&type=chunk) [Non-GAAP Financial Measures Definitions](index=5&type=section&id=Non-GAAP%20Financial%20Measures%20Definitions) This section provides definitions and rationale for the non-GAAP financial measures used by Kodiak, including Adjusted EBITDA, Adjusted Gross Margin, Discretionary Cash Flow, and Free Cash Flow, explaining their utility for management and investors in assessing performance and liquidity - **Adjusted EBITDA** is defined as **net income (loss)** before interest, taxes, **depreciation and amortization**, plus specific non-recurring items, used to assess **financial performance** without financing methods or **capital structure impact**[24](index=24&type=chunk) - **Adjusted gross margin** is revenue less cost of operations (excluding **depreciation and amortization**), serving as a **supplemental measure** of **operating profitability**[25](index=25&type=chunk) - **Discretionary cash flow** is **net cash provided by operating activities** less **maintenance capital expenditures** and certain **changes in operating assets and liabilities**, plus specific non-recurring items, used to assess **ability to pay dividends** and make **growth capital expenditures**[26](index=26&type=chunk) - **Free cash flow** is **net cash provided by operating activities** less **maintenance**, **growth**, and **other capital expenditures**, plus specific non-recurring items and **proceeds from asset sales**, used to assess **ability to pursue business opportunities** and **service debt**[27](index=27&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=5&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) The report includes a cautionary note regarding forward-looking statements, emphasizing that these are based on current beliefs and assumptions, subject to inherent uncertainties and risks that could cause actual results to differ materially. The company disclaims any obligation to publicly update these statements - Forward-looking statements are based on **current beliefs**, **expectations**, and **assumptions**, and are subject to **inherent uncertainties**, **risks**, and **changes in circumstances** that are difficult to predict and outside of the company's control[28](index=28&type=chunk)[31](index=31&type=chunk) - **Actual results** and **financial condition** may differ materially from those indicated in forward-looking statements due to various factors, including **demand for natural gas/oil**, **customer financial condition**, **competitive pressures**, **integration of acquisitions**, and **economic conditions**[31](index=31&type=chunk) - The company undertakes no obligation to **publicly update** any forward-looking statement, except as required by **applicable law**[32](index=32&type=chunk) [Condensed Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents Kodiak's unaudited condensed consolidated financial statements, including statements of operations, balance sheets, and cash flows [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The unaudited condensed consolidated statements of operations provide a detailed breakdown of revenues, operating expenses, and net income for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024 - The table presents **detailed revenues**, **operating expenses**, **income from operations**, other income/expenses, **income before income taxes**, **income tax expense**, **net income**, and **earnings per share** for the specified periods[34](index=34&type=chunk) [Condensed Consolidated Balance Sheets](index=9&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The unaudited condensed consolidated balance sheets present the company's assets, liabilities, and stockholders' equity as of June 30, 2025, and December 31, 2024, showing changes in financial position over the period - The table provides a snapshot of **current assets**, **non-current assets** (including **property, plant and equipment**, **goodwill**, and **intangibles**), **current liabilities**, **long-term debt**, and **stockholders' equity** at the end of the reporting periods[36](index=36&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The unaudited condensed consolidated statements of cash flows detail the cash generated from or used in operating, investing, and financing activities for the six months ended June 30, 2025, and June 30, 2024 - The table outlines **net cash provided by operating activities**, **net cash used for investing activities** (including **purchase of property, plant and equipment**), and **net cash used for financing activities** (including **debt payments**, **dividends**, and **share repurchases**)[38](index=38&type=chunk) [Non-GAAP Reconciliations (Unaudited)](index=11&type=section&id=Non-GAAP%20Reconciliations%20(Unaudited)) This section provides detailed reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures [Reconciliation of Net Income (Loss) to Adjusted EBITDA](index=11&type=section&id=Reconciliation%20of%20Net%20Income%20(Loss)%20to%20Adjusted%20EBITDA) This section provides a reconciliation of net income (loss) to Adjusted EBITDA, a non-GAAP measure, for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, detailing adjustments for interest, taxes, depreciation, amortization, and other non-recurring items - The reconciliation shows the **adjustments made to GAAP net income** to arrive at **Adjusted EBITDA**, including adding back **interest expense**, **income tax expense**, **depreciation and amortization**, and other specific non-cash or non-recurring items[39](index=39&type=chunk) [Reconciliation of Adjusted Gross Margin to Gross Margin](index=12&type=section&id=Reconciliation%20of%20Adjusted%20Gross%20Margin%20to%20Gross%20Margin) This section reconciles Adjusted Gross Margin to Gross Margin for both Contract Services and Other Services segments for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, primarily by adding back depreciation and amortization - The reconciliation for Contract Services shows **Adjusted Gross Margin** is derived by adding back **depreciation and amortization** to **Gross Margin**[41](index=41&type=chunk) - For Other Services, **Gross Margin** and **Adjusted Gross Margin** are identical as there is no **depreciation and amortization** allocated to this segment in the calculation[42](index=42&type=chunk) [Reconciliation of Net Cash Provided by Operating Activities to Discretionary Cash Flow and Free Cash Flow](index=13&type=section&id=Reconciliation%20of%20Net%20Cash%20Provided%20by%20Operating%20Activities%20to%20Discretionary%20Cash%20Flow%20and%20Free%20Cash%20Flow) This section provides a reconciliation of net cash provided by operating activities to Discretionary Cash Flow and Free Cash Flow for the three months ended June 30, 2025, March 31, 2025, and June 30, 2024, detailing adjustments for capital expenditures, changes in operating assets and liabilities, and other items - **Discretionary cash flow** is calculated by adjusting **net cash provided by operating activities** for **maintenance capital expenditures**, **severance**, **transaction expenses**, **changes in operating assets and liabilities**, and other items[43](index=43&type=chunk) - **Free cash flow** is further derived from **discretionary cash flow** by subtracting **growth** and **other capital expenditures** and adding **proceeds from asset sales**[43](index=43&type=chunk)

[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section provides 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](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, comprehensive income (loss), cash flows, and shareholders' equity, along with detailed notes explaining the basis of presentation, accounting standards, revenue recognition, inventories, financial instruments, debt, share-based compensation, and segment reporting [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and shareholders' equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :-------------- | :------------------ | | Cash and cash equivalents | $49,772 | $71,832 | | Total current assets | $393,427 | $387,514 | | Total long-term assets | $245,981 | $234,042 | | **Total assets** | **$639,408** | **$621,556** | | Total current liabilities | $184,150 | $149,972 | | Revolving credit facility | $164,377 | $201,577 | | Total long-term liabilities | $194,742 | $226,324 | | **Total liabilities and shareholders' equity** | **$639,408** | **$621,556** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement reports the company's revenues, expenses, and net income or loss over specific periods, reflecting operational performance Condensed Consolidated Statements of Operations (in thousands, except per share data) | Item | 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 | $227,952 | $237,059 | $445,842 | $476,216 | | Operating (loss) income | $(2,601) | $3,407 | $(5,826) | $3,738 | | (Loss) income before income taxes | $(9,115) | $1,850 | $(14,747) | $(3,766) | | Net (loss) income | $(9,359) | $2,786 | $(16,555) | $(3,340) | | Basic (Loss) income per share | $(0.34) | $0.10 | $(0.60) | $(0.12) | | Diluted (Loss) income per share | $(0.34) | $0.10 | $(0.60) | $(0.12) | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) This statement presents net income or loss alongside other comprehensive income or loss items, such as foreign currency translation adjustments and derivative gains/losses Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Item | 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) income | $(9,359) | $2,786 | $(16,555) | $(3,340) | | Foreign currency translation | $13,666 | $(8,454) | $26,449 | $(13,333) | | Unrealized gain (loss) on derivatives | $1,766 | $(2,200) | $3,109 | $(2,130) | | Other comprehensive income (loss), net of tax | $15,432 | $(10,654) | $29,558 | $(15,463) | | **Comprehensive income (loss)** | **$6,073** | **$(7,868)** | **$13,003** | **$(18,803)** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement details the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (in thousands) | Item | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $21,588 | $17,762 | | Net cash used for investing activities | $(9,219) | $(12,958) | | Net cash used for financing activities | $(41,363) | $(1,679) | | Effect of exchange rate changes on cash and cash equivalents | $6,934 | $(1,854) | | **Net change in cash and cash equivalents** | **$(22,060)** | **$1,271** | | Cash and cash equivalents at end of period | $49,772 | $42,112 | [Condensed Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) This statement outlines changes in the company's equity accounts, including net income, currency translation adjustments, and share transactions Condensed Consolidated Statements of Shareholders' Equity (in thousands) | Item | Balance at December 31, 2024 | Net loss (6 months ended June 30, 2025) | Currency translation adjustments (6 months ended June 30, 2025) | Balance at June 30, 2025 | | :--------------------------------- | :--------------------------- | :-------------------------------------- | :------------------------------------------------------------ | :----------------------- | | Total shareholders' equity | $245,260 | $(16,555) | $26,449 | $260,516 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [(1) Basis of Presentation](index=9&type=section&id=%281%29%20Basis%20of%20Presentation) The condensed consolidated financial statements are unaudited, prepared according to SEC rules, and include normal recurring adjustments. Certain information is condensed or omitted per SEC regulations, and prior period amounts have been reclassified for consistent presentation - Unaudited condensed consolidated financial statements prepared by Stoneridge, Inc. (the "Company") per SEC rules[18](index=18&type=chunk) - Certain information and footnote disclosures condensed or omitted per SEC rules[18](index=18&type=chunk) - Prior period amounts reclassified to conform to 2025 presentation[19](index=19&type=chunk) [(2) Recently Issued Accounting Standards](index=9&type=section&id=%282%29%20Recently%20Issued%20Accounting%20Standards) The company is evaluating the impact of recently issued FASB ASUs, including ASU No. 2023-09 on Income Tax Disclosures (effective after Dec 15, 2024) and ASU No. 2024-03 on Expense Disaggregation Disclosures (effective after Dec 15, 2026), which are expected to modify disclosures but not significantly impact consolidated financial statements - ASU No. 2023-09, "Income Taxes (Topic 740) – Improvements to Income Tax Disclosures," effective for fiscal years beginning after **December 15, 2024**, will modify financial statement disclosures but not significantly impact consolidated financial statements[20](index=20&type=chunk) - ASU No. 2024-03, "Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures," effective for fiscal years beginning after **December 15, 2026**, is currently being evaluated for its impact on annual consolidated financial statement disclosures[21](index=21&type=chunk) [(3) Revenue](index=9&type=section&id=%283%29%20Revenue) Revenue is recognized upon transfer of control of products or services, typically at shipment or delivery. The company disaggregates revenue by its Control Devices, Electronics, and Stoneridge Brazil segments, as well as by geographical location, showing overall net sales decreases for both the three and six months ended June 30, 2025, compared to 2024 - Revenue is recognized when obligations under the terms of a contract with customers are satisfied, generally with the transfer of control of products and services, usually when parts are shipped or delivered[22](index=22&type=chunk) Net Sales by Reportable Segment (in thousands) | Segment | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Control Devices | $70,411 | $79,899 | $139,244 | $157,057 | | Electronics | $142,681 | $145,511 | $277,464 | $295,294 | | Stoneridge Brazil | $14,860 | $11,649 | $29,134 | $23,865 | | **Total net sales** | **$227,952** | **$237,059** | **$445,842** | **$476,216** | Net Sales by Geographical Location (in thousands) | Region | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | North America | $104,551 | $121,515 | $205,640 | $239,630 | | South America | $14,860 | $11,649 | $29,134 | $23,865 | | Europe and Other | $108,541 | $103,895 | $211,068 | $212,721 | | **Total net sales** | **$227,952** | **$237,059** | **$445,842** | **$476,216** | [(4) Inventories](index=11&type=section&id=%284%29%20Inventories) Inventories are valued at the lower of cost (FIFO or average cost) or net realizable value, with a quarterly evaluation of excess and obsolescence reserves. Total net inventories decreased slightly from $151.3 million at December 31, 2024, to $144.5 million at June 30, 2025 - Inventories are valued at the lower of cost (using either FIFO or average cost methods) or net realizable value[33](index=33&type=chunk) Inventories, net (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :--------------- | :-------------- | :---------------- | | Raw materials | $100,826 | $108,283 | | Work-in-progress | $8,741 | $7,627 | | Finished goods | $34,884 | $35,427 | | **Total inventories, net** | **$144,451** | **$151,337** | - Inventory valued using the FIFO method was **$130,250** at June 30, 2025, and **$138,420** at December 31, 2024[34](index=34&type=chunk) [(5) Financial Instruments and Fair Value Measurements](index=12&type=section&id=%285%29%20Financial%20Instruments%20and%20Fair%20Value%20Measurements) The company uses derivative financial instruments, specifically Mexican peso-denominated foreign currency forward contracts, as cash flow hedges to manage foreign currency exchange rate risk. These hedges were highly effective, with a notional amount of $15.9 million at June 30, 2025, and fair values measured using Level 2 inputs - The Company uses Mexican peso-denominated foreign currency forward contracts solely for hedging and not for speculative purposes[36](index=36&type=chunk) - Notional amount of Mexican peso-denominated foreign currency forward contracts was **$15,916** at June 30, 2025, and **$32,339** at December 31, 2024[41](index=41&type=chunk)[43](index=43&type=chunk) Fair Values of Financial Instruments (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :-------------- | :------------------ | | Financial assets carried at fair value: Forward currency contracts | $1,507 | $0 | | Financial liabilities carried at fair value: Forward currency contracts | $0 | $2,429 | [(6) Share-Based Compensation](index=14&type=section&id=%286%29%20Share-Based%20Compensation) Share-based compensation expense recognized in SG&A increased for both the three and six months ended June 30, 2025, compared to the prior year periods Share-Based Compensation Expense (in thousands) | Period | 2025 | 2024 | | :--------------------------------- | :----- | :----- | | Three months ended June 30 | $1,424 | $1,115 | | Six months ended June 30 | $2,560 | $2,207 | [(7) Debt](index=15&type=section&id=%287%29%20Debt) The company's primary debt is a $275 million revolving credit facility, with an outstanding balance of $164.4 million at June 30, 2025. An amendment in February 2025 provided covenant relief, and the company remained in compliance with all covenants. Foreign subsidiaries also maintain smaller credit lines Debt Overview (in thousands) | Item | June 30, 2025 | December 31, 2024 | Interest rate at June 30, 2025 | Maturity | | :---------------------- | :-------------- | :------------------ | :----------------------------- | :------------- | | Revolving Credit Facility | $164,377 | $201,577 | 6.35% | November 2026 | - On February 26, 2025, Amendment No. 1 to the Credit Facility provided covenant relief, including increased maximum leverage ratio and reduced minimum interest coverage ratio, during the "Covenant Relief Period" (ending **December 31, 2025**)[55](index=55&type=chunk)[57](index=57&type=chunk) - The Company was in compliance with all Credit Facility covenants at **June 30, 2025**, and **December 31, 2024**[59](index=59&type=chunk) [(8) Loss Per Share](index=16&type=section&id=%288%29%20Loss%20Per%20Share) Basic and diluted loss per share calculations are presented, with potential dilutive securities excluded for periods where their inclusion would be anti-dilutive due to net losses Loss Per Share Data | Item | 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 (Loss) income per share | $(0.34) | $0.10 | $(0.60) | $(0.12) | | Diluted (Loss) income per share | $(0.34) | $0.10 | $(0.60) | $(0.12) | - Potential dilutive shares were excluded from diluted loss per share for all periods in which the Company recognized a net loss, as their inclusion would be anti-dilutive[63](index=63&type=chunk) [(9) Accumulated Other Comprehensive Loss](index=17&type=section&id=%289%29%20Accumulated%20Other%20Comprehensive%20Loss) The accumulated other comprehensive loss decreased from $(122.0) million at January 1, 2025, to $(92.5) million at June 30, 2025, primarily due to significant foreign currency translation gains and unrealized gains on derivatives Changes in Accumulated Other Comprehensive Loss (in thousands) | Item | Balance at January 1, 2025 | Net other comprehensive income (loss), net of tax (6 months) | Balance at June 30, 2025 | | :--------------------------------- | :--------------------------- | :--------------------------------------------------------- | :----------------------- | | Foreign currency translation | $(120,095) | $26,449 | $(93,646) | | Unrealized gain (loss) on derivatives | $(1,918) | $3,109 | $1,191 | | **Total** | **$(122,013)** | **$29,558** | **$(92,455)** | [(10) Commitments and Contingencies](index=17&type=section&id=%2810%29%20Commitments%20and%20Contingencies) The company is subject to various legal actions, environmental remediation liabilities, long-term supply commitments, and product warranty/recall claims. Accruals are made for probable losses, and the company is vigorously defending a significant arbitration demand related to PM sensor products - Accrued liabilities for environmental remediation costs were **$215** at June 30, 2025, and **$244** at December 31, 2024, related to a former Sarasota, Florida facility[67](index=67&type=chunk)[68](index=68&type=chunk) - Stoneridge Brazil subsidiary has civil, labor, environmental, and other tax contingencies totaling **R$47,490 ($8,703)** at June 30, 2025, deemed reasonably possible but not probable, including a **R$7,995 ($1,465)** fine from CADE being challenged[69](index=69&type=chunk)[70](index=70&type=chunk) - Long-term supply agreement for semiconductor components requires minimum annual purchases, with **$5,571** expected in 2025[71](index=71&type=chunk) Product Warranty and Recall Reserve Liability (in thousands) | Item | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Product warranty and recall reserve at beginning of period | $27,523 | $21,610 | | Accruals for warranties established during period | $7,614 | $10,030 | | Settlements made during the period | $(8,302) | $(6,899) | | **Product warranty and recall reserve at end of period** | **$31,876** | **$24,448** | - The Company is vigorously defending a **$34,579** arbitration demand from a customer for warranty claims related to past sales of PM sensor products, believing the claims lack substantive merit[73](index=73&type=chunk)[74](index=74&type=chunk) [(11) Business Realignment](index=19&type=section&id=%2811%29%20Business%20Realignment) Business realignment charges, primarily severance-related, totaled $1.7 million for the three months and $4.5 million for the six months ended June 30, 2025. These costs are mainly for operational efficiency initiatives at the Juarez facility and executive separation Total Business Realignment Charges (in thousands) | Period | 2025 | 2024 | | :--------------------------------- | :----- | :----- | | Three months ended June 30 | $1,676 | $1,949 | | Six months ended June 30 | $4,503 | $1,949 | - The majority of business realignment costs relate to operational efficiency initiatives at the Juarez facility and executive separation costs[76](index=76&type=chunk)[77](index=77&type=chunk)[78](index=78&type=chunk) [(12) Income Taxes](index=20&type=section&id=%2812%29%20Income%20Taxes) Income tax expense for the three and six months ended June 30, 2025, was $0.2 million and $1.8 million, respectively, with effective tax rates of (2.7)% and (12.3)%. These rates vary from statutory rates due to the mix of earnings, foreign withholding taxes, tax credits, and U.S. taxes on foreign earnings. The company is assessing the impact of the recently enacted One Big Beautiful Bill Act (OBBBA) Income Tax Expense (Benefit) and Effective Tax Rate | Item | 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 (benefit) for income taxes | $244 | $(936) | $1,808 | $(426) | | Effective tax rate | (2.7)% | (50.6)% | (12.3)% | 11.3% | - The effective tax rate varies primarily due to the mix of earnings among tax jurisdictions, foreign withholding taxes, tax credits and incentives, and U.S. taxes on foreign earnings[83](index=83&type=chunk)[85](index=85&type=chunk) - The company is currently assessing the impact of the recently enacted One Big Beautiful Bill Act (OBBBA) on its consolidated financial statements[87](index=87&type=chunk) [(13) Segment Reporting](index=21&type=section&id=%2813%29%20Segment%20Reporting) The company operates through three reportable segments: Control Devices, Electronics, and Stoneridge Brazil. Detailed financial information, including net sales, operating income, and capital expenditures, is provided for each segment and unallocated corporate costs, along with geographical breakdowns of net sales and long-term assets - The Company has three reportable segments: Control Devices, Electronics, and Stoneridge Brazil, with performance evaluated based on revenues, operating income, and capital expenditures[90](index=90&type=chunk)[91](index=91&type=chunk) Net Sales by Reportable Segment (in thousands) | Segment | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------- | :----------------------------- | :----------------------------- | | Control Devices | $139,244 | $157,057 | | Electronics | $277,464 | $295,294 | | Stoneridge Brazil | $29,134 | $23,865 | | **Total net sales** | **$445,842** | **$476,216** | Operating (Loss) Income by Reportable Segment (in thousands) | Segment | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Control Devices | $3,731 | $5,889 | | Electronics | $8,244 | $16,920 | | Stoneridge Brazil | $1,554 | $163 | | Unallocated Corporate | $(19,355) | $(19,234) | | **Total operating (loss) income** | **$(5,826)** | **$3,738** | Capital Expenditures by Reportable Segment (in thousands) | Segment | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------- | :----------------------------- | :----------------------------- | | Control Devices | $2,159 | $3,104 | | Electronics | $4,920 | $4,354 | | Stoneridge Brazil | $695 | $1,739 | | Corporate | $281 | $760 | | **Total capital expenditures** | **$8,055** | **$9,957** | [(14) Investments](index=24&type=section&id=%2814%29%20Investments) The company holds an equity method investment in Autotech Fund II, a venture capital firm. As of June 30, 2025, cumulative contributions totaled $9.05 million, with recognized equity losses of $(0.34) million for the six months ended June 30, 2025 - The Company has a **$10,000** investment in Autotech Fund II, a venture capital firm focused on ground transportation technology, accounted for under the equity method[99](index=99&type=chunk) - Cumulative investment in Autotech Fund II was **$9,050** as of June 30, 2025[99](index=99&type=chunk) Equity in (Earnings) Loss of Investee (in thousands) | Period | 2025 | 2024 | | :--------------------------------- | :----- | :----- | | Three months ended June 30 | $(50) | $52 | | Six months ended June 30 | $(344) | $329 | [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 the company's financial condition and results of operations, covering segment performance, a detailed comparison of financial results for the three and six months ended June 30, 2025 and 2024, liquidity, capital resources, and the company's outlook amidst market challenges and strategic initiatives [Company Overview and Segments](index=25&type=section&id=Company%20Overview%20and%20Segments) Stoneridge, Inc. is a global supplier of electronics systems and technologies for commercial, automotive, off-highway, and agricultural vehicle markets, organized into three segments: Control Devices, Electronics, and Stoneridge Brazil - Stoneridge, Inc. is a global supplier of safe and efficient electronics systems and technologies for commercial, automotive, off-highway, and agricultural vehicle markets[101](index=101&type=chunk) - The company's operations are reported under three segments: Control Devices, Electronics, and Stoneridge Brazil[103](index=103&type=chunk)[104](index=104&type=chunk) [Second Quarter Overview](index=25&type=section&id=Second%20Quarter%20Overview) For Q2 2025, the company reported a net loss of $9.4 million, a significant increase from net income in Q2 2024. Net sales decreased by 3.8% due to lower volumes in North American automotive and Electronics segments, partially offset by growth in Stoneridge Brazil and favorable foreign exchange. Gross margin declined, and non-operating foreign currency losses unfavorably impacted results - Net loss for the three months ended June 30, 2025, was **$9.4 million**, or **$(0.34)** per diluted share, an increase of **$12.1 million** from net income of **$2.8 million** in the prior year[105](index=105&type=chunk)[106](index=106&type=chunk) - Net sales decreased by **$9.1 million (3.8%)** compared to Q2 2024, driven by lower volumes in North American automotive (Control Devices) and North American commercial/European off-highway (Electronics), partially offset by higher OEM sales at Stoneridge Brazil and favorable foreign exchange in Electronics[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) - Gross margin as a percent of sales decreased to **21.5%** in Q2 2025 from **22.7%** in Q2 2024 due to sales mix and lower contribution from sales[106](index=106&type=chunk) - Cash and cash equivalents decreased to **$49.8 million** at June 30, 2025, from **$71.8 million** at December 31, 2024, primarily due to repayments of Credit Facility borrowings from foreign cash repatriation[112](index=112&type=chunk) [Outlook](index=26&type=section&id=Outlook) The company's long-term strategy focuses on products addressing industry megatrends, such as safety, vehicle intelligence, and connectivity, including OEM MirrorEye® programs and next-generation tachographs. Despite expected market volatility, including tariffs and declining North American automotive production, the company anticipates continued growth in MirrorEye and Stoneridge Brazil OEM sales, alongside efforts in operational excellence and cost reduction - The company's long-term strategy focuses on expanding its product portfolio with advanced capabilities, applications, and data services, particularly in safety, vehicle intelligence, and connectivity (e.g., OEM MirrorEye® programs and next-generation tachograph)[113](index=113&type=chunk)[117](index=117&type=chunk) - The North American automotive market is expected to decrease from **15.5 million units** in 2024 to **14.9 million units** in 2025, impacting Control Devices sales[116](index=116&type=chunk) - Electronics segment sales are expected to outperform forecasted production volumes due to strong demand for the next-generation tachograph and ongoing MirrorEye® launches[117](index=117&type=chunk) - Stoneridge Brazil's OEM channel sales are expected to grow significantly based on existing programs and new awards, with an expansion of its engineering center[119](index=119&type=chunk) - The company continues to monitor and evaluate the direct and indirect impacts of new or additional tariffs and heightened global trade disputes, taking actions to mitigate costs[114](index=114&type=chunk)[115](index=115&type=chunk) [Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=27&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) Net sales decreased by 3.8% to $227.9 million, primarily due to lower volumes in North American automotive and Electronics, partially offset by Stoneridge Brazil's growth. Operating income shifted to a loss of $(2.6) million, a 176.3% decrease, driven by lower sales, higher material costs, and increased D&D expenses in Electronics, while Stoneridge Brazil's operating income significantly increased Key Financial Highlights (Three months ended June 30, in thousands) | Item | 2025 | 2024 | Dollar Change | Percent Change | | :--------------------------------- | :----- | :----- | :------------ | :------------- | | Net sales | $227,952 | $237,059 | $(9,107) | (3.8)% | | Cost of goods sold | $179,014 | $183,319 | $(4,305) | (2.3)% | | Selling, general and administrative | $32,835 | $31,876 | $959 | 3.0% | | Design and development | $18,704 | $18,457 | $247 | 1.3% | | Operating (loss) income | $(2,601) | $3,407 | $(6,008) | (176.3)% | | Interest expense, net | $3,134 | $3,801 | $(667) | (17.5)% | | Other expense (income), net | $3,430 | $(2,296) | $5,726 | 249.4% | | Net (loss) income | $(9,359) | $2,786 | $(12,145) | (435.9)% | - Control Devices net sales decreased **$9.5 million (-11.9%)** due to North American automotive (end-of-life actuator) and China commercial vehicle, while Electronics net sales decreased **$2.8 million (-1.9%)** due to lower North American commercial and European/North American off-highway volumes, partially offset by European commercial vehicle growth and favorable FX[125](index=125&type=chunk)[126](index=126&type=chunk) - Stoneridge Brazil net sales increased **$3.2 million (+27.6%)** from higher OEM product sales, despite unfavorable foreign currency translation[127](index=127&type=chunk) - Gross margin decreased to **21.5%** from **22.7%**, with material cost as a percentage of net sales increasing to **57.1%** due to higher material costs and unfavorable foreign exchange related variances[131](index=131&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=30&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) Net sales for the six months decreased by 6.4% to $445.8 million, primarily from declines in Control Devices and Electronics, partially offset by Stoneridge Brazil. The company reported a net loss of $(16.6) million, an increase from $(3.3) million in the prior year, with operating income shifting to a loss of $(5.8) million, a 255.9% decrease, mainly due to lower sales, higher business realignment costs, and D&D expenses in Electronics Key Financial Highlights (Six months ended June 30, in thousands) | Item | 2025 | 2024 | Dollar Change | Percent Change | | :--------------------------------- | :----- | :----- | :------------ | :------------- | | Net sales | $445,842 | $476,216 | $(30,374) | (6.4)% | | Cost of goods sold | $350,607 | $374,119 | $(23,512) | (6.3)% | | Selling, general and administrative | $64,531 | $62,299 | $2,232 | 3.6% | | Design and development | $36,530 | $36,060 | $470 | 1.3% | | Operating (loss) income | $(5,826) | $3,738 | $(9,564) | (255.9)% | | Interest expense, net | $6,301 | $7,435 | $(1,134) | (15.2)% | | Other expense (income), net | $2,964 | $(260) | $3,224 | 1240.0% | | Net loss | $(16,555) | $(3,340) | $(13,215) | (395.6)% | - Control Devices net sales decreased **$17.8 million (-11.3%)** due to North American automotive (end-of-life actuator) and China commercial/off-highway markets. Electronics net sales decreased **$17.8 million (-6.0%)** due to lower North American/European commercial and North American off-highway volumes, partially offset by MirrorEye® sales and favorable FX[142](index=142&type=chunk)[143](index=143&type=chunk) - Stoneridge Brazil net sales increased **$5.3 million (+22.1%)** from higher OEM product sales, despite unfavorable foreign currency translation[144](index=144&type=chunk) - Gross margin remained consistent at **21.4%**, with material cost as a percentage of net sales decreasing to **56.7%** due to favorable foreign exchange related variances[148](index=148&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) Cash provided by operating activities increased to $21.6 million for the six months ended June 30, 2025, but net cash used for financing activities significantly increased to $(41.4) million due to Credit Facility repayments from foreign cash repatriation. The company maintains $160.4 million in total liquidity (cash and undrawn credit), expects to meet future cash requirements, and remains in compliance with its credit facility covenants Summary of Cash Flows (Six months ended June 30, in thousands) | Activity | 2025 | 2024 | | :--------------------------------- | :----- | :----- | | Net cash provided by operating activities | $21,588 | $17,762 | | Net cash used for investing activities | $(9,219) | $(12,958) | | Net cash used for financing activities | $(41,363) | $(1,679) | | **Net change in cash and cash equivalents** | **$(22,060)** | **$1,271** | - Net cash used for financing activities increased significantly due to **$43.8 million** in Credit Facility repayments from the repatriation of cash held at foreign locations[160](index=160&type=chunk) - The Credit Facility had an outstanding balance of **$164.4 million** at June 30, 2025, and the company was in compliance with all covenants[161](index=161&type=chunk)[163](index=163&type=chunk) - Total undrawn commitments under the Credit Facility and cash balances amount to more than **$160.4 million**, which is expected to be sufficient to meet anticipated cash requirements for the next twelve months[169](index=169&type=chunk)[170](index=170&type=chunk) [Other Matters](index=27&type=section&id=Other%20Matters) The company's international operations expose it to foreign currency exchange rate fluctuations, which unfavorably impacted Q2 2025 results. Business realignment costs continue to be incurred for operational efficiency. The company manages customer pricing pressures and notes the moderate seasonality of its Control Devices and Electronics segments, with no material changes to critical accounting policies or market risk disclosures - Movements in foreign currency exchange rates can significantly affect results, with the weakening U.S. Dollar against the Swedish krona unfavorably impacting **Q2 2025** reported results[121](index=121&type=chunk) - Business realignment charges of **$1.7 million (Q2 2025)** and **$4.5 million (YTD Q2 2025)** were incurred for operational efficiency initiatives at the Juarez facility and executive separation costs, with additional costs expected[122](index=122&type=chunk) - The Control Devices and Electronics segments are moderately seasonal, impacted by mid-year and year-end shutdowns, while Stoneridge Brazil consumer products see higher demand in the second half of the year[172](index=172&type=chunk) - There have been no material changes in critical accounting policies and estimates or quantitative and qualitative disclosures about market risk during the second quarter of 2025[173](index=173&type=chunk)[176](index=176&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes to the company's quantitative and qualitative disclosures regarding market risk since its 2024 Form 10-K - No material changes to the quantitative and qualitative information about the Company's market risk from those previously presented within Part II, Item 7A of the Company's 2024 Form 10-K[176](index=176&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's management, including the PEO and PFO, concluded that disclosure controls and procedures were effective as of June 30, 2025. No material changes in internal control over financial reporting occurred during the six months ended June 30, 2025 - The Company's disclosure controls and procedures were effective as of June 30, 2025[177](index=177&type=chunk) - There were no material changes in the Company's internal control over financial reporting during the six months ended June 30, 2025[178](index=178&type=chunk) [PART II – OTHER INFORMATION](index=36&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, defaults, mine safety, other information, and a list of exhibits [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal actions and claims in the ordinary course of business, including product liability, warranty, and regulatory matters. Accruals are established for probable losses, and while certain contingencies exist in Stoneridge Brazil, the company does not believe current litigation will materially adversely affect its financial position - The Company is involved in various legal actions and claims, including those arising out of breach of contracts, product warranties, product liability, patent infringement, regulatory matters, and employment-related matters[179](index=179&type=chunk) - Accruals are established for matters where losses are probable and can be reasonably estimated[179](index=179&type=chunk) - The Company does not believe that any of the litigation in which it is currently engaged will have a material adverse effect on its business, consolidated financial position, or results of operations[179](index=179&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2024 Form 10-K - No material changes with respect to risk factors previously disclosed in the Company's 2024 Form 10-K[180](index=180&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the three months ended June 30, 2025, the company repurchased 10,983 Common Shares, primarily to satisfy employee tax withholding obligations upon the vesting of share-based awards Common Shares Repurchased (Three months ended June 30, 2025) | Period | Total number of shares purchased | Average price paid per share | | :--------------- | :------------------------------- | :--------------------------- | | 4/1/25-4/30/25 | 488 | $4.50 | | 5/1/25-5/31/25 | — | — | | 6/1/25-6/30/25 | 10,495 | $7.04 | | **Total** | **10,983** | | - Common Shares were delivered by employees as payment for withholding taxes due upon vesting of performance share awards and share unit awards[181](index=181&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - None[183](index=183&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) There were no mine safety disclosures during the reporting period - None[184](index=184&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the six months ended June 30, 2025 - No director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the six months ended June 30, 2025[185](index=185&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including the 2025 Long-Term Incentive Plan, CEO and CFO certifications, and various XBRL exhibits - Includes The Stoneridge, Inc. **2025 Long-Term Incentive Plan** (Exhibit 10.1)[186](index=186&type=chunk) - Contains Chief Executive Officer and Chief Financial Officer certifications pursuant to Sections **302** and **906** of the Sarbanes-Oxley Act of 2002 (Exhibits 31.1, 31.2, 32.1, 32.2)[186](index=186&type=chunk) - Includes various XBRL Exhibits (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 104)[186](index=186&type=chunk)