Financial Performance - Total revenues for Q3 2025 reached $365.4 million, a 7.5% increase from $338.9 million in Q3 2024[22]. - Commissions and fees contributed $362.3 million to total revenues in Q3 2025, up from $335.2 million in Q3 2024, reflecting an 8.1% growth[22]. - Operating income for Q3 2025 was $3.2 million, a significant decrease from $15.4 million in Q3 2024, indicating a decline of 79.1%[22]. - Net loss attributable to Baldwin for Q3 2025 was $18.7 million, compared to a loss of $8.4 million in Q3 2024, representing a 123.5% increase in losses[22]. - Basic and diluted loss per share for Q3 2025 was $0.27, compared to $0.13 in Q3 2024, reflecting a 107.7% increase in loss per share[22]. - Total operating expenses for Q3 2025 were $362.2 million, up from $323.5 million in Q3 2024, marking a 12.0% increase[22]. - The company reported a comprehensive loss of $29.2 million for Q3 2025, compared to a comprehensive loss of $14.5 million in Q3 2024[22]. - For the nine months ended September 30, 2025, total revenues were $1.16 billion, an increase of 9.3% from $1.06 billion in the same period of 2024[22]. - The company experienced a net loss of $10.5 million for the nine months ended September 30, 2025, compared to a loss of $6.2 million for the same period in 2024[22]. Assets and Liabilities - Total assets increased to $3.794 billion as of September 30, 2025, up from $3.535 billion at December 31, 2024, representing a growth of 7.36%[15]. - Current liabilities decreased to $959.7 million from $1.056 billion, a reduction of 9.15%[15]. - Cash and cash equivalents slightly decreased to $89.7 million from $90.0 million, a decline of 0.38%[15]. - Intangible assets increased to $1.017 billion from $953.5 million, reflecting a growth of 6.69%[15]. - Goodwill rose to $1.516 billion from $1.412 billion, an increase of 7.36%[15]. - The current portion of contingent earnout liabilities decreased significantly from $142.9 million to $17.1 million, a drop of 88.01%[15]. - Total stockholders' equity attributable to Baldwin increased to $619.7 million from $583.2 million, a growth of 6.24%[15]. - The Baldwin Insurance Group's total stockholders' equity increased to $1,036,234,000 as of September 30, 2024, from $1,018,488,000 at December 31, 2023[29]. Cash Flow and Expenditures - Cash flows from operating activities resulted in a net cash used of $39,687,000 for the nine months ended September 30, 2025, compared to net cash provided of $53,754,000 in 2024[32]. - The company incurred capital expenditures of $29,174,000 for the nine months ended September 30, 2025, compared to $28,897,000 in 2024[32]. - Cash and cash equivalents at the end of the period were $325,944,000 for September 30, 2025, down from $344,716,000 at the same time in 2024[32]. - The company reported capital expenditures of $29,174,000 for the nine months ended September 30, 2025, compared to $28,897,000 in 2024, showing a slight increase[155]. Business Combinations and Acquisitions - The Company completed two business combinations for a total purchase price of $129.1 million during the nine months ended September 30, 2025[72]. - The Company acquired assets and equity interests from MultiStrat Group to enhance its reinsurance underwriting capabilities effective April 1, 2025[75]. - The Company acquired Hippo's Homebuilder Distribution Network to improve property and casualty insurance solutions for homebuilder clients effective July 1, 2025[75]. - Total revenues from business combinations for the three months ended September 30, 2025, were $12.2 million, with net income of $2.7 million[77]. - For the nine months ended September 30, 2025, total revenues from business combinations were $14.2 million, with net income of $2.7 million[77]. - The total consideration for Hippo's Homebuilder Distribution Network acquisition was $129.078 million, including cash consideration of $87.399 million[80]. - Recognized amounts of identifiable net assets acquired totaled $122.879 million, with goodwill recognized at $104.119 million[80]. Debt and Financing - The company has a revolving credit facility with commitments totaling $600 million, maturing on May 24, 2029[13]. - The company's long-term debt as of December 31, 2024 was $1.44 billion, which included a term loan facility of $840 million and a revolving credit facility of $600 million[96]. - As of September 30, 2025, the outstanding borrowings under the 2025 Term Loans were $1.004 billion with an interest rate of 6.64%[101]. - The Company provided for $75.0 million of incremental term B loans as part of the amendments to the 2024 Credit Agreement[285]. - The aggregate principal amount of the 2025 Term Loans was increased to $1.006 billion following the amendments to the 2024 Credit Agreement[288]. Shareholder Information - The company reported a total of 71,416,940 Class A common shares issued and outstanding as of September 30, 2025, compared to 67,979,419 shares at December 31, 2024[15]. - The weighted-average shares of Class A common stock outstanding increased to 68.6 million in Q3 2025 from 64.0 million in Q3 2024[22]. - Share-based compensation expense for the nine months ended September 30, 2025, was $51,772,000, up from $46,764,000 in 2024[32]. - Share-based compensation expense for the three months ended September 30, 2025 was $22.0 million, compared to $17.9 million for the same period in 2024, representing a year-over-year increase of approximately 22.9%[115]. - The total fair value of shares that vested and settled under the Plans was $52.0 million for the nine months ended September 30, 2025, compared to $36.7 million for the same period in 2024[114]. Market and Risk Management - The company is exposed to market risk through investments and borrowings, utilizing derivative instruments to mitigate risks related to rising interest rates[283]. - A floating-to-fixed interest rate swap agreement was entered into with a notional amount of $500.0 million, converting variable rate cash flows into fixed rate payments at 3.244%[286]. - The objective of the interest rate swap is to manage exposure to interest rate risk and provide predictability in interest expense[286]. - An increase of 100 basis points on the SOFR rate would have increased annual interest expense under the 2024 Credit Facility by $5.7 million[287]. - There have been no material changes in market risk from the information presented in the Annual Report on Form 10-K for the year ended December 31, 2024[288].

Acquisitions - Atlas LLC acquired PropFlow, LLC for approximately $25.0 million in cash, with potential contingent earn-out consideration of up to $15.0 million based on revenue targets in fiscal years 2027 and 2028[243]. - The Moser Acquisition was completed for a total consideration of $180.0 million in cash and approximately 1.7 million shares of Common Stock[245]. - The company completed the Moser Acquisition on February 24, 2025, for cash consideration of $180.0 million, impacting operational results comparability[275]. - The Hi-Crush Transaction was completed on March 5, 2024, with cash consideration of $140.1 million, affecting year-over-year operational results[274]. Financial Performance - Net income for the three months ended September 30, 2025, was $(23,721) thousand, compared to $3,918 thousand for the same period in 2024[266]. - Adjusted EBITDA for the three months ended September 30, 2025, was $40,186 thousand, down from $71,051 thousand in 2024, representing a decrease of approximately 43.4%[266]. - Adjusted Free Cash Flow for the three months ended September 30, 2025, was $21,984 thousand, compared to $58,669 thousand in 2024, indicating a decline of about 62.5%[267]. - Total revenue for the nine months ended September 30, 2025, was $184,936 thousand, compared to $225,666 thousand for the same period in 2024, showing a decrease of about 18.1%[266]. - Total revenue for the three months ended September 30, 2025, was $259.6 million, down from $304.4 million in the same period of 2024, representing a decrease of approximately 14.7%[277]. - Gross profit for the three months ended September 30, 2025, was $23.8 million, a significant decrease from $53.0 million in 2024[277]. - Adjusted EBITDA Margin for the three months ended September 30, 2025, was approximately 22.0% compared to 32.0% in 2024, indicating a decline of 10 percentage points[266]. - Net cash provided by operating activities for the three months ended September 30, 2025, was $32,447 thousand, down from $85,189 thousand in 2024, a decrease of about 61.9%[267]. - Net cash provided by operating activities was $113.6 million for the nine months ended September 30, 2025, down from $185.6 million for the same period in 2024[311]. Revenue Breakdown - Product revenue decreased by $38.5 million to $106.8 million for the three months ended September 30, 2025, compared to $145.3 million for the same period in 2024, primarily due to lower proppant prices and sales volume[278]. - Service revenue decreased by $23.4 million to $135.7 million for the three months ended September 30, 2025, compared to $159.1 million in 2024, attributed to lower sales volumes shipped to last-mile logistics customers[279]. - Rental revenue for the three months ended September 30, 2025, was $17.1 million, resulting from the acquisition of Moser, with no rental revenue reported in the same period of 2024[280]. - Product revenue decreased by $14.2 million to $372.8 million for the nine months ended September 30, 2025, compared to $387.0 million for the same period in 2024[292]. - Service revenue increased by $35.0 million to $432.6 million for the nine months ended September 30, 2025, compared to $397.6 million for the same period in 2024[293]. Costs and Expenses - Maintenance Capital Expenditures for the three months ended September 30, 2025, were $18,202 thousand, up from $12,382 thousand in 2024, reflecting an increase of approximately 47.2%[267]. - The company incurred interest expense of $15,155 thousand for the three months ended September 30, 2025, compared to $11,831 thousand in 2024, representing an increase of approximately 27.5%[266]. - Cost of sales related to services decreased by $18.7 million to $117.8 million for the three months ended September 30, 2025, compared to $136.5 million for the same period in 2024[283]. - Selling, general and administrative expense increased by $10.8 million to $36.3 million for the three months ended September 30, 2025, compared to $25.5 million for the same period in 2024[286]. - Depreciation, depletion, and accretion expense increased by $50.0 million to $118.3 million for the nine months ended September 30, 2025, compared to $68.3 million for the same period in 2024[299]. Debt and Financing - Total debt as of September 30, 2025, was $556.5 million, an increase from $475.3 million in 2024[272]. - Atlas LLC entered into a 2025 Term Loan Credit Facility with a principal amount of $540.0 million, bearing interest at a rate of 9.51% per annum[316][317]. - The proceeds from the 2025 Term Loan were used to refinance the existing 2023 Term Loan Credit Facility, finance the Moser Acquisition, and for general corporate purposes[323]. - The Deferred Cash Consideration Note issued as part of the Hi-Crush Merger Agreement has a principal amount of $111.3 million, with interest rates of 5.00% per annum if paid in cash, or 7.00% if paid in kind[325]. - The 2023 ABL Credit Facility provides revolving credit financing of up to $75.0 million, with a scheduled maturity date of February 22, 2028[331]. - Atlas LLC drew down $25.0 million under the 2023 ABL Credit Facility for the PropFlow Acquisition, with interest expense of $0.3 million for the three months ended September 30, 2025[336]. - As of September 30, 2025, Atlas LLC had $25.0 million in outstanding borrowings and $0.3 million in outstanding letters of credit under the 2023 ABL Credit Facility, with a Borrowing Base of $112.9 million and Availability of $87.6 million[339]. - The ABL Amendment increased the revolving credit commitment to $125.0 million, with existing lenders increasing their commitment by $25.0 million and a new lender adding another $25.0 million[342]. - Atlas LLC has other indebtedness of $17.5 million in equipment finance notes as of September 30, 2025, with interest rates ranging from 2.24% to 10.89%[349]. Operational Insights - Revenue generation is primarily from mining, processing, and distributing proppant, with fluctuations based on production costs, volumes sold, and market conditions[253]. - Logistics service revenue is influenced by the volume of proppant transported, distance to customers, and prevailing freight rates[254]. - The company operates a differentiated logistics platform to enhance efficiency and sustainability in the oil and gas industry within the Permian Basin[241]. - The company has begun integrating autonomous driving technologies into its logistics operations, aiming to create a semi-autonomous oilfield logistics network[241]. - The company’s sand reserves are entirely located in Texas within the Permian Basin, supporting its proppant production and processing operations[240]. Market Conditions - The price for West Texas Intermediate crude oil decreased by approximately 9%, ending the third quarter of 2025 at $63.96 per barrel compared to $70.24 per barrel in the same quarter of 2024[248]. - The U.S. government announced a 10% tariff on product imports and a 50% tariff on steel imports, which may increase raw material input costs for the company and its customers[250]. - The anticipated increase in demand for power generation in the U.S. is driven by data centers, artificial intelligence, and other advanced technologies, coinciding with existing constraints on the electrical grid[249]. Tax and Compliance - Income tax expense decreased by $20.6 million to $(9.2) million for the nine months ended September 30, 2025, compared to $11.4 million for the same period in 2024[307]. - As of September 30, 2025, Atlas LLC was in compliance with the financial covenants of maintaining a maximum Leverage Ratio of 4.0 to 1.0 and a minimum Liquidity of $40 million[324][322]. - There have been no material changes to the company's critical accounting policies and estimates as of September 30, 2025[350].

Financial Performance - For the nine months ended September 30, 2025, gross billing increased by 4% to $9,279,000 compared to $8,901,000 for the same period in 2024[99]. - Net sales for the same period rose by 4% to $7,033,000 from $6,752,000[99]. - The company reported a net loss of $3,982,000 for the three months ended September 30, 2025, a decrease of 4% compared to a net loss of $4,150,000 in the same period of 2024[99]. - Gross billing for the nine months ended September 30, 2025, decreased by 3% to $31,861 million compared to $32,864 million in the same period last year[121]. - Net sales declined by 6% to $26,585 million from $28,221 million, attributed to lower volumes with recurring national customers and higher promotional allowances[128]. - Gross profit fell by 36% to $5,433 million, resulting in a gross margin of 20%, down from 30%[131]. - Loss from operations increased by 161% to $11,638 million compared to a loss of $4,457 million in the same period last year[136]. - Net loss for the nine months ended September 30, 2025, was $12,061 million, a 33% increase from $9,035 million[140]. - Modified EBITDA for the nine months ended September 30, 2025, was $(10,205) million, compared to $(3,323) million in the same period last year[140]. Cost and Expenses - The average cost of shipping and handling increased to $2.84 per case from $2.66 per case year-over-year[93]. - General and administrative expenses surged by 60% to $2,861,000, representing 41% of net sales, compared to 27% in the prior year[99]. - Cost of goods sold (COGS) increased by $272 in Q3 2025, with COGS as a percentage of net sales rising to 83% from 82% in the same period last year[107]. - Gross margin decreased to 17% in Q3 2025, down from 18% in the same period last year[109]. - Delivery and handling expenses decreased by $179 to $1,100 in Q3 2025, representing 16% of net sales, down from 19% in the same period last year[110]. - Total operating expenses rose by 32% to $17,071 million, with general and administrative expenses increasing by 65% to $8,633 million[135]. - Total cost of goods sold per case increased to $13.20 in Q3 2025, up from $12.94 in the same period last year[108]. Cash Flow and Financing - Cash used in operations was $13,230 million, primarily due to operating losses and working capital investments[142]. - As of September 30, 2025, the company had a cash balance of $4,136 million and no remaining availability under its Senior Secured Loan[142]. - The Company has existing cash of $4,136 and expects this, along with cash generated from operations and access to committed financing, to be sufficient to fund its operating plan for at least twelve months[148]. - Net cash used in operating activities totaled $13,230 for the nine months ended September 30, 2025, an increase from $2,254 for the same period in 2024, primarily due to operating losses and investment in strategic growth initiatives[153]. - Net cash provided by financing activities was $7,147 for the nine months ended September 30, 2025, compared to $2,015 for the same period in 2024, driven by proceeds from the sale of common stock in two private placements[155]. - Management may seek additional funding through equity, mezzanine, or debt securities, but there is no assurance that such financing will be available on favorable terms[150]. - The Company’s ability to obtain additional financing is subject to market conditions, performance, and investor sentiment[150]. Strategic Initiatives - The company formed a wholly owned subsidiary, Reed's (Asia) Limited, as part of its strategic expansion into the Asia Pacific region[90]. - A private placement on September 12, 2025, raised $5,000,000 by issuing 833,330 shares at $6.00 per share[94]. - The company amended its Senior Secured Loan Agreement, reducing the revolving credit commitment to $9,250,000 from $10,000,000[96]. - The Company is taking actions to improve operating performance, including product portfolio optimization and streamlining operations, but may face challenges in executing these actions[151]. - If the Company cannot raise additional capital or improve operating performance, it may need to curtail certain operations[152]. Operational Challenges - The company continues to face supply chain challenges, including increased lead times and inflation in raw materials and logistics costs[92]. - Modified EBITDA does not reflect cash expenditures for capital expenditures or changes in working capital needs[149]. - Management regularly evaluates key factors and assumptions for financial estimates, which could differ materially from actual results[156].

Financial Performance - Record revenue of $3.4 billion in Q3 2025, an 8% increase year-over-year, with organic revenue growth of 4%[4] - Net income rose to $60 million, compared to $35 million in Q3 2024, with diluted EPS increasing to $0.51 from $0.28[4] - Adjusted EBITDA reached $251 million, up from $223 million in Q3 2024, maintaining adjusted diluted EPS at $0.79[5] - Operating income for Q3 2025 increased to $118 million, compared to $81 million in Q3 2024, reflecting a 45.7% growth[26] - Net income attributable to GXO for Q3 2025 was $59 million, up from $33 million in Q3 2024, representing a 78.8% increase[26] - Revenue for Q3 2025 was $3,395 million, a 7.5% increase from $3,157 million in Q3 2024[26] - Adjusted EBITDA for the nine months ended September 30, 2025, was $626 million, compared to $564 million for the same period in 2024, reflecting an increase of 11%[35] - Organic revenue for the three months ended September 30, 2025, was $3,280 million, with organic revenue growth of 3.9% compared to the same period in 2024[47] Cash Flow and Capital Expenditures - Operating cash flow generated was $232 million, compared to $198 million in Q3 2024, with free cash flow of $187 million, up from $110 million[5] - Free cash flow for the three months ended September 30, 2025, was $187 million, compared to $110 million for the same period in 2024, indicating a significant increase of 70.9%[45] - Capital expenditures for the nine months ended September 30, 2025, were $269 million, compared to $255 million in 2024[31] Debt and Leverage - Total debt outstanding as of September 30, 2025, was $2.7 billion, with net debt at $2.4 billion[6] - Total debt as of September 30, 2025, was $2,698 million, resulting in a debt to net income ratio of 29.0x[52] - Net leverage ratio as of September 30, 2025, was 2.7x, calculated using net debt of $2,359 million and trailing twelve months adjusted EBITDA of $877 million[53] Guidance and Future Outlook - Full-year 2025 guidance reaffirmed, including organic revenue growth of 3.5% to 6.5% and adjusted EBITDA of $865 million to $885 million[11] - Adjusted diluted EPS guidance set between $2.43 to $2.63 for the full year 2025[11] - The integration of Wincanton is progressing well, with synergy realization on track[3] - Company aims to accelerate growth and expand margins, positioning itself for a new era of growth[3] Assets and Liabilities - Cash and cash equivalents decreased to $339 million as of September 30, 2025, down from $413 million at December 31, 2024[29] - Total assets increased to $11,907 million as of September 30, 2025, compared to $11,266 million at December 31, 2024[29] - Total liabilities decreased to $8,923 million as of September 30, 2025, from $8,231 million at December 31, 2024[29] Investment Metrics - The company's invested capital as of September 30, 2025, is $995 million, down from $1,044 million in 2024[56] - The trailing twelve months net income to average invested capital is 9.1%[56] - The operating return on invested capital stands at 48.6%[56] - Adjusted net income attributable to GXO for the nine months ended September 30, 2025, was $191 million, compared to $215 million for the same period in 2024[41] - Adjusted basic EPS for the nine months ended September 30, 2025, was $1.65, down from $1.80 in the same period of 2024[41] Accounts and Current Liabilities - Accounts receivable increased to $2,015 million in 2025 from $1,968 million in 2024[56] - Accounts payable decreased to $(716) million in 2025 from $(748) million in 2024[56] - Accrued expenses rose to $(1,523) million in 2025 compared to $(1,411) million in 2024[56] - Other current liabilities increased to $(430) million in 2025 from $(369) million in 2024[56] - Property and equipment, net, increased to $1,197 million in 2025 from $1,161 million in 2024[56] - Other current assets slightly increased to $452 million in 2025 from $443 million in 2024[56] - The average invested capital for the period is $1,020 million[56]

Revenue Performance - Revenue for the three months ended September 30, 2025, was $91.2 million, a decrease of $21.7 million (approximately 19.3%) compared to $112.9 million for the same period in 2024[144]. - Revenue for the nine months ended September 30, 2025, was $280.6 million, down $48.5 million (approximately 14.7%) from $329.1 million in the prior year[144]. - For the three months ended September 30, 2025, total revenue decreased by $21.7 million, or 19.2%, to $91.2 million compared to the same period in 2024, primarily due to a decline in product revenue of $20.7 million[146]. - For the nine months ended September 30, 2025, total revenue decreased by $48.5 million, or 14.7%, to $280.6 million compared to the same period in 2024, driven by a decline in product revenue of $47.9 million[147]. Cost and Expenses - Cost of sales for the three months ended September 30, 2025, was $61.8 million, a decrease of $9.4 million (approximately 13.2%) from $71.2 million in 2024[144]. - Selling, general and administrative expenses (SG&A) for the three months ended September 30, 2025, were $34.7 million, down $23.3 million (approximately 40.2%) from $58.0 million in 2024[144]. - Research and development expenses (R&D) for the three months ended September 30, 2025, were $16.0 million, a decrease of $4.7 million (approximately 22.8%) compared to $20.8 million in 2024[144]. - Selling, general and administrative expenses (SG&A) for the three months ended September 30, 2025, decreased by $23.3 million, or 40.1%, compared to the same period in 2024[151]. - Research and development expenses (R&D) for the three months ended September 30, 2025, decreased by $4.7 million, or 22.8%, compared to the same period in 2024[152]. Profitability - The company reported a loss from operations of $21.3 million for the three months ended September 30, 2025, an improvement of $159.4 million compared to a loss of $180.8 million in the same period of 2024[144]. - Gross profit for the three months ended September 30, 2025, decreased by $12.3 million, or 29.4%, to $29.4 million, with a gross profit margin of 32.3% compared to 36.9% in the prior year[149]. - Gross profit for the nine months ended September 30, 2025, decreased by $31.5 million, or 24.3%, to $98.3 million, with a gross profit margin of 35.0% compared to 39.4% in the prior year[150]. Business Transactions - The company recorded a pre-tax gain of $125.7 million from the sale of its Geomagic software business in the nine months ended September 30, 2025[135]. - The company completed the sale of its 3DXpert and Oqton businesses for $3.5 million plus a potential revenue-based royalty of up to $12.9 million[137]. - The gain on disposition of $125.7 million for the nine months ended September 30, 2025, was due to the sale of the Geomagic business on April 1, 2025[168]. Cash Flow and Debt - Cash and cash equivalents totaled $95.5 million, a decrease of $75.8 million since December 31, 2024, primarily from cash used in operations of $73.1 million and capital expenditures of $8.0 million[174]. - Cash flow used in operating activities was $73.1 million during the nine months ended September 30, 2025, an increase of $36.0 million compared to the prior year[178]. - Net cash provided by investing activities was $108.3 million during the nine months ended September 30, 2025, an increase of $121.4 million, driven primarily by proceeds from the sale of the Geomagic business[178]. - Net cash used in financing activities was $98.3 million during the nine months ended September 30, 2025, an increase of $7.6 million, primarily due to net repayments of long-term debt of $81.4 million[179]. - As of September 30, 2025, the company had $126.7 million of outstanding long-term debt, comprising $34.7 million of 2026 Notes and $92.0 million of 2030 Notes[187]. Restructuring and Future Plans - The company expects to incur approximately $8.5 million to $14.5 million in pre-tax restructuring costs by the end of the second fiscal quarter of 2026[133]. - The company has initiated a 2025 Restructuring Plan aimed at delivering sustainable growth and profitability through cost savings and streamlining operations[132]. Market and Risk Assessment - The company has no material changes to its critical accounting estimates as described in the 2024 Annual Report on Form 10-K[200]. - There have been no material changes or developments affecting the market risk assessment since December 31, 2024[201]. - The company evaluates its estimates and assumptions on an ongoing basis, acknowledging that actual results may differ from these estimates[193]. Goodwill and Impairment - Goodwill is assigned to the Healthcare reporting unit, and the company assesses goodwill for impairment at least annually[195][196]. - The remaining goodwill assigned to the Healthcare reporting unit could be subject to impairment if there is a decrease in its estimated fair value[199]. - The quantitative goodwill impairment test compares the carrying value of a reporting unit to its fair value, with charges recognized when the carrying value exceeds fair value[197]. - Impairment losses are measured as the excess of the carrying value of a long-lived asset over its estimated fair value, determined using discounted projected cash flows[194]. - The company uses a guideline company valuation method to estimate fair values, which involves selecting appropriate comparable publicly traded companies[198].

A-1 Corteva, Inc. Consolidated Statements of Operations (Dollars in millions, except per share amounts) | | | | Three Months Ended | | | | Nine Months Ended | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | September 30, | | | | September 30, | | | | | 2025 | | 2024 | | 2025 | | 2024 | | Net sales | $ | 2,618 | $ | 2,326 | $ | 13,491 | $ | 12,930 | | Cost of goods sold | | 1,644 | | 1,565 | | 6,918 | | 7,033 | | Research and development expense | | 351 | | 348 | | 1,061 | | 1,037 | | Selli ...

Financial Performance - For the three months ended September 30, 2025, the company reported a net loss of $10.6 million, a 108% decrease compared to net income of $133.5 million for the same period in the prior year [127]. - For the nine months ended September 30, 2025, net income was $55.1 million, a 78% decrease compared to $254.5 million for the same period in the prior year [128]. - Financial services pretax income decreased by 58% year-over-year to $11.7 million for the three months ended September 30, 2025 [124]. - Financial services pretax income for the three months ended September 30, 2025, was $11.7 million, a 58% decrease from $27.9 million in the same period of 2024 [166]. - The overall effective income tax rates were 38.9% and 15.2% for the three and nine months ended September 30, 2025, compared to 14.2% and 21.8% for the same periods in 2024 [171]. Home Sales and Revenue - Home sale revenues decreased by 40% year-over-year to $832.3 million for the three months ended September 30, 2025, compared to $1.4 billion in the same period in 2024 [124]. - For the three months ended September 30, 2025, total home sale revenues decreased by 40% to $832.3 million compared to $1.39 billion in the same period of 2024 [136]. - The West segment reported a 50% decrease in home sale revenues for the three months ended September 30, 2025, totaling $408.6 million compared to $804.6 million in 2024 [136]. - The East segment experienced a 53% decrease in home sale revenues for the three months ended September 30, 2025, amounting to $128.9 million compared to $242.1 million in 2024 [136]. - Financial services revenues for the three months ended September 30, 2025, were $23.7 million, a 45% decrease from $43.4 million in the same period of 2024 [166]. Homebuilding Operations - Homebuilding pretax income for the three months ended September 30, 2025, was $(29.1) million, a decrease of 123% from $127.8 million for the same period in the prior year [130]. - The gross margin from home sales dropped by 760 basis points to 10.2% for the three months ended September 30, 2025, down from 17.8% in the prior year [124]. - Gross margin from home sales decreased by 760 basis points year-over-year to 10.2% for the three months ended September 30, 2025, primarily due to inventory impairments and increased incentive levels [143]. - Total inventory impairments for the three months ended September 30, 2025, amounted to $39.85 million, significantly higher than $6.3 million in the same period of 2024 [146]. - The average selling price of homes for the three months ended September 30, 2025, increased by 5% to $571.6 thousand from $546.1 thousand in 2024 [136]. Orders and Absorption Rates - The number of net new orders for the three months ended September 30, 2025, was 1,499, a decrease of 21% from 1,904 in the same period of 2024 [153]. - The average monthly absorption rate for the total segment decreased to 2.39 for the three months ended September 30, 2025, down from 3.01 in 2024 [153]. - The cancellation rate as a percentage of gross sales decreased to 15% for the three months ended September 30, 2025, down from 19% in the same period of 2024 [162]. Assets and Liquidity - Total homebuilding assets increased by 3% from December 31, 2024, to $4.82 billion as of September 30, 2025 [133]. - The company ended the quarter with total cash and cash equivalents of $208.7 million and total liquidity of $1.01 billion [126]. - As of September 30, 2025, the company had outstanding senior notes totaling an aggregate principal amount of $1.50 billion, with future interest payments totaling $1.12 billion [178]. - The company had deposits of $35.3 million in cash and $16.2 million in letters of credit securing option contracts to purchase 5,671 lots for a total estimated purchase price of $682.5 million [179]. - As of September 30, 2025, availability under the Revolving Credit Facility was approximately $790.5 million [189]. Land and Development - The total lots owned and optioned increased by 6% year-over-year to 25,393 as of September 30, 2025 [165]. - During the nine months ended September 30, 2025, cash used to increase land and land under development was $588.2 million, contrasting with cash provided by a decrease of $52.9 million in the prior year [197]. - The total number of average active subdivisions increased by 7% year-over-year to 221 for the three months ended September 30, 2025, while the number of active subdivisions decreased by 10% for the nine months ended September 30, 2025 [154]. Cash Flow and Financing Activities - For the nine months ended September 30, 2025, net cash used in operating activities was $575.4 million, a significant decrease from net cash provided by operating activities of $139.1 million in the prior year [197]. - Net cash used in financing activities decreased significantly to $36.5 million in the nine months ended September 30, 2025, compared to $762.3 million in the same period of 2024, primarily due to a $611.4 million distribution to Parent related to a merger in 2024 [199]. - Cash provided by draws on homebuilding line of credit was $85.0 million for the nine months ended September 30, 2025, a significant increase from cash used of $9.0 million in the prior year, attributed to increased land acquisition [199]. Risk Management - The company utilizes a cash and investment policy that includes U.S. government securities, commercial bank deposits, and money market funds to manage risk and preserve principal [203]. - The company does not have an obligation to prepay senior notes prior to maturity, which mitigates the impact of interest rate risk on financial position and cash flows [208]. - Changes in interest rates affect earnings and cash flows for variable rate debt, such as the Revolving Credit Facility and Mortgage Repurchase Facility, but do not impact the fair value of the outstanding borrowings [208].

Final 11/04/2025 Financial Supplement Third Quarter 2025 This document is a statistical supplement to Aflac's quarterly earnings release. Throughout the presentation, amounts presented may not foot due to rounding. As you review the supplement, please note the non-U.S. GAAP financial measures and definitions found at the back of this document. The Company adopted the Financial Accounting Standards Board's Accounting Standard Update 2018-12 Financial Services - Insurance: Targeted Improvements to the Account ...

Financial Performance - Net sales increased by $17.7 million, or 7.6%, to $250.8 million for the three months ended September 30, 2025, compared to $233.1 million for the same period in 2024[97] - For the nine months ended September 30, 2025, net sales decreased by $13.5 million, or 1.8%, to $729.3 million from $742.8 million in the same period of 2024[111] - Net income for the three months ended September 30, 2025, was $7.5 million, a significant increase of $241.1 million compared to a net loss of $233.6 million for the same period in 2024[110] - Net income improved by $207.1 million to a net income of $17.8 million for the nine months ended September 30, 2025, compared to a net loss of $189.3 million for the same period in 2024[125] Gross Margin and Cost Management - The company recorded a gross margin impact of approximately 140 basis points for the three months and 90 basis points for the nine months ended September 30, 2025, due to higher tariffs compared to the same periods in 2024[73] - Gross margin improved to 39.5% for the three months ended September 30, 2025, up from 23.2% in the same period of 2024, due to a decrease in cost of sales by $27.3 million, or 15.2%[99] - Cost of sales decreased by $48.1 million, or 9.7%, to $446.9 million for the nine months ended September 30, 2025, contributing to an increase in gross margin to 38.7%[113] - The company expects that new technologies and products may have gross margins below the corporate average but aims to maintain industry-leading gross margins through sales growth and cost optimization[83] Research and Development - The company plans to continue investing in research and development to enhance existing products and develop new technologies, which is crucial for maintaining its leadership in the fiber laser industry[87] - Research and development expense rose by $3.2 million, or 11.8%, to $30.4 million for the three months ended September 30, 2025, representing 12.1% of sales[101] - Research and development expenses rose by $4.6 million, or 5.5%, to $88.6 million for the nine months ended September 30, 2025, accounting for 12.2% of sales, up from 11.3%[115] Operating Expenses - Operating expenses increased in 2025 due to hiring additional executives and managers to strengthen management capabilities, with expectations for continued investment in strategic initiatives[88] - General and administrative expense increased by $2.4 million, or 7.3%, to $35.1 million for the three months ended September 30, 2025, maintaining 14.0% of sales[102] - General and administrative expenses increased by $7.4 million, or 7.8%, to $102.8 million for the nine months ended September 30, 2025, which is 14.1% of sales compared to 12.8% in the previous year[116] - Sales and marketing expenses increased by $6.1 million, or 9.0%, to $73.8 million for the nine months ended September 30, 2025, representing 10.1% of sales compared to 9.1% in the prior year[114] Foreign Exchange and Market Risks - The foreign exchange loss for the quarter ended September 30, 2025, was primarily due to the depreciation of the Korean won and Indian rupee against the U.S. dollar[93] - The company incurred a foreign exchange transaction loss of $1.5 million for the three months ended September 30, 2025, compared to a loss of $1.1 million for the same period in 2024[107] - The company incurred a foreign exchange transaction loss of $7.0 million for the nine months ended September 30, 2025, compared to a loss of $6.1 million in the prior year[121] - A 5% change in the exchange rate of the U.S. dollar to the euro could result in a foreign exchange gain of $1.3 million or a loss of $1.4 million[142] - A 5% change in the exchange rate of the U.S. dollar to the Chinese yuan could result in a foreign exchange loss of $1.3 million or a gain of $1.4 million[142] - The company has no foreign currency derivative instruments as of September 30, 2025, but may consider financial hedging techniques in the future[144] - The company is exposed to market risks including interest rate risk and foreign exchange rate risk due to international operations[138] Inventory and Cash Flow - The company recorded provisions for slow-moving, obsolete, or excess inventory totaling $5.7 million for the three months ended September 30, 2025, compared to $43.4 million for the same period in 2024[85] - Cash provided by operating activities decreased by $127.6 million to $46.5 million for the nine months ended September 30, 2025, down from $174.1 million in 2024[131] - Net cash used in investing activities was $292.9 million for the nine months ended September 30, 2025, compared to cash provided of $471.3 million in 2024[132] - Net cash used in financing activities was $50.9 million for the nine months ended September 30, 2025, significantly lower than $284.6 million used in 2024[133] - Cash used by inventory increased as manufacturing ramped up in the first three quarters of 2025 compared to the same period in 2024[134] - Cash provided by accounts receivable decreased due to higher sales at the end of the first three quarters of 2025 and timing of collections[134] - Cash used by prepaid expenses and other assets increased due to timing of bank acceptance drafts and interest receivable[134] - Cash used by income and other taxes payable increased due to timing of estimated tax payments and refunds received[134] - Cash provided by accounts payable increased due to timing of payments[134] Tax Provisions - The company is closely monitoring the impact of the EU's Pillar Two Directive, which establishes a minimum effective tax rate of 15%, on its future income tax provisions[94] - The effective tax rate increased to 52.3% for the three months ended September 30, 2025, compared to 3.7% for the same period in 2024, primarily due to higher income before tax[109] - Provision for income taxes increased to $16.7 million for the nine months ended September 30, 2025, with an effective tax rate of 48.4% compared to $5.4 million in 2024[123] Impairment and Asset Valuation - An impairment charge of $26.6 million was recorded for long-lived assets in Belarus, with a remaining asset value of $4.2 million as of September 30, 2025[74] - The net asset value of the Belarus subsidiary has decreased by $17.6 million due to the cumulative translation effect of the Belarusian ruble against the U.S. dollar[74] Revenue Sources - Approximately 86% of the company's revenues for the first three quarters of 2025 were derived from customers in materials processing, highlighting the sector's significance[78] - Materials processing sales accounted for 87.5% of total revenue and increased by 6.0% year over year, driven by higher sales in welding, additive manufacturing, cleaning, and micromachining[98]

Financial Performance - Revenues for Q3 2025 were $659.5 million, a 15% increase from $575.0 million in Q3 2024[94] - Net income for Q3 2025 was $111.8 million, a 19% increase from $93.5 million in Q3 2024[94] - Revenues for the six months ended September 30, 2025, were $1.26 billion, a 16% increase from $1.09 billion in the same period of 2024[99] - Net income for the six months ended September 30, 2025, was $209.3 million, a 15% increase from $182.5 million in 2024[128] - Total revenues for the six months ended September 30, 2025, were $1,264.8 million, representing a 16% increase compared to $1,088.6 million for the same period in 2024[1] Operating Expenses - Total operating expenses for Q3 2025 were $508.1 million, up 14% from $444.3 million in Q3 2024[96] - Total operating expenses for the six months ended September 30, 2025, were $1,023.7 million, up 19% from $863.2 million in the same period of 2024[100] - Compensation expenses in Q3 2025 were $423.2 million, reflecting a 17% increase compared to $360.6 million in Q3 2024[96] - Compensation expenses for the six months ended September 30, 2025, were $816.0 million, an 18% increase from $690.8 million in the same period of 2024[100] - Corporate expenses increased by 21% to $71.5 million for the three months ended September 30, 2025, compared to $59.3 million for the same period in 2024[119] Profitability Metrics - The Compensation Ratio for Q3 2025 was 64.2%, compared to 62.7% in Q3 2024[96] - Total segment profit for the six months ended September 30, 2025, was $410.6 million, an 18% increase compared to $347.2 million for the same period in 2024[1] - Segment profit for Corporate Finance rose by 34% to $147.3 million for the three months ended September 30, 2025, compared to $109.7 million for the same period in 2024[108] - Segment profit for Financial Restructuring decreased by 18% to $50.1 million for the three months ended September 30, 2025, compared to $60.9 million for the same period in 2024[112] - Segment profit for Financial and Valuation Advisory increased by 31% to $25.4 million for the three months ended September 30, 2025, compared to $19.4 million for the same period in 2024[116] Tax and Other Income - The effective tax rate for Q3 2025 was 30.2%, down from 31.3% in Q3 2024[98] - Other (income) expense, net for Q3 2025 was $(8.7) million, compared to $(5.4) million in Q3 2024, primarily due to higher interest income[97] Cash Flow and Investments - Operating cash flows provided $193.4 million, down 14% from $224.7 million in the same period of 2024[129][130] - Investing activities resulted in a net outflow of $4.6 million, significantly reduced by 94% compared to $71.3 million in 2024[129][130] - Financing activities showed a net outflow of $268.8 million, an increase of 34% from $200.6 million in 2024, primarily due to employee tax obligations and dividends[129][130] - Cash, cash equivalents, and restricted cash at the end of the period totaled $928.4 million, a 34% increase from $692.9 million in 2024[128] Foreign Currency Impact - The company experienced an 80% increase in the effects of exchange rate changes on cash, from $18.2 million in 2024 to $32.8 million in 2025[128] - The net impact of foreign currency fluctuations on other comprehensive income was $34.3 million for the six months ended September 30, 2025, compared to $28.4 million in 2024[139] - A hypothetical 10% depreciation in the U.S. Dollar would have resulted in an increase in other comprehensive income of approximately $103 million for the six months ended September 30, 2025[139] - The company had no open foreign currency forward contracts as of September 30, 2025, compared to two contracts with a notional value of $37.0 million in 2024[141] Accounting Policies - There were no significant changes to critical accounting policies and estimates during the reporting period[133]