Kaixin Auto(KXIN) - 2025 Q2 - Quarterly Report
2025-09-12 20:00
[Condensed Consolidated Balance Sheets](index=1&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2025, Kaixin Holdings reported a decrease in total assets and total liabilities compared to December 31, 2024, with significant declines in cash and total equity [Balance Sheet Overview](index=1&type=section&id=Balance%20Sheet%20Overview) As of June 30, 2025, Kaixin Holdings reported a decrease in total assets and total liabilities compared to December 31, 2024. Cash and cash equivalents significantly declined, while total equity also saw a reduction Condensed Consolidated Balance Sheet Highlights (in thousands of US dollars) | Item | June 30, 2025 (in thousands of US dollars) | December 31, 2024 (in thousands of US dollars) | Change (in thousands of US dollars) | Percentage Change | |:-----------------------------------|:------------------------------------------|:----------------------------------------------|:-----------------------------------|:------------------| | TOTAL EQUITY | $11,106 | $13,174 | $(2,068) | -15.7% | - The company's cash and cash equivalents decreased significantly by **76.9%** from **$2,388 thousand** at December 31, 2024, to **$552 thousand** at June 30, 2025[2](index=2&type=chunk) - Total assets and total liabilities both decreased by approximately **15.7%** over the six-month period[2](index=2&type=chunk)[3](index=3&type=chunk) [Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss](index=3&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) For the six months ended June 30, 2025, Kaixin Holdings reported increased net revenue but widened net losses, primarily due to higher general and administrative expenses [Operational Performance](index=3&type=section&id=Operational%20Performance) For the six months ended June 30, 2025, Kaixin Holdings reported net revenue of $95 thousand, a significant increase from zero revenue in the prior year period. However, the company continued to incur substantial net losses, which widened to $8.412 million from $5.370 million year-over-year, primarily due to increased general and administrative expenses Condensed Consolidated Statements of Operations Highlights (in thousands of US dollars) | Item | Six Months Ended June 30, 2025 (US dollars) | Six Months Ended June 30, 2024 (US dollars) | Change (US dollars) | Percentage Change | |:-------------------------------------|:--------------------------------------------|:--------------------------------------------|:--------------------|:------------------| | Basic and diluted net loss per share | $(0.86) | $(6.02) | $5.16 | -85.7% | - Revenue for the six months ended June 30, 2025, was **$95 thousand**, generated from consulting services related to electric vehicle design and development, compared to no revenue in the same period of 2024[5](index=5&type=chunk)[35](index=35&type=chunk) - Net loss attributable to Kaixin's shareholders increased by **56.7%** to **$8.411 million** for the six months ended June 30, 2025, from **$5.370 million** in the prior year[5](index=5&type=chunk) - Basic and diluted net loss per share improved significantly to **$(0.86)** in 2025 from **$(6.02)** in 2024, despite a higher net loss, due to a substantial increase in weighted average shares outstanding (from **892,491** to **9,769,065**)[5](index=5&type=chunk)[94](index=94&type=chunk) [Unaudited Condensed Consolidated Statements of Changes in Equity](index=4&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20EQUITY) Kaixin Holdings' total equity decreased from December 31, 2024, to June 30, 2025, driven by net loss, partially offset by share awards and convertible note conversions [Equity Changes Overview](index=4&type=section&id=Equity%20Changes%20Overview) Kaixin Holdings' total equity decreased from $13.174 million as of December 31, 2024, to $11.106 million as of June 30, 2025. This decline was primarily driven by the net loss incurred during the period, partially offset by the vesting of restricted share awards and issuance of ordinary shares for convertible note conversions Key Equity Changes (in thousands of US dollars) | Item | Balance, December 31, 2024 (in thousands of US dollars) | Net Loss (in thousands of US dollars) | Share-based Compensation (in thousands of US dollars) | Convertible Note Conversions (in thousands of US dollars) | Other (in thousands of US dollars) | Balance, June 30, 2025 (in thousands of US dollars) | |:-----------------------------------|:--------------------------------------------------------|:--------------------------------------|:-----------------------------------------------------|:-----------------------------------------------------------|:-----------------------------------|:----------------------------------------------------| | Total Equity | $13,174 | $(8,412) | $5,700 | $638 | $7 | $11,106 | - The company issued **3,800,000 Class A Ordinary Shares** and **1,000,000 Class B Ordinary Shares** under the Kaixin 2024 Plan during the six months ended June 30, 2025, contributing **$5,700 thousand** to additional paid-in capital[6](index=6&type=chunk)[70](index=70&type=chunk)[97](index=97&type=chunk) - Ordinary shares issued for the conversion of convertible notes amounted to **$638 thousand** for the six months ended June 30, 2025[6](index=6&type=chunk)[59](index=59&type=chunk) [Unaudited Consolidated Statements of Cash Flows](index=5&type=section&id=UNAUDITED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Kaixin Holdings experienced continued net cash outflows from operating activities, with financing activities primarily using cash for related party repayments, leading to a significant decrease in cash and cash equivalents [Cash Flow Analysis](index=5&type=section&id=Cash%20Flow%20Analysis) Kaixin Holdings experienced continued net cash outflows from operating activities, with a slight increase in usage for the six months ended June 30, 2025, compared to the prior year. Investing activities provided minimal cash, while financing activities used cash primarily for repayment of borrowings from related parties, leading to a significant decrease in cash and cash equivalents at the end of the period Condensed Consolidated Statements of Cash Flows Highlights (in thousands of US dollars) | Item | June 30, 2025 (in thousands of US dollars) | June 30, 2024 (in thousands of US dollars) | Change (in thousands of US dollars) | |:-------------------------------------------|:-------------------------------------------|:-------------------------------------------|:-----------------------------------| | Cash and cash equivalents at end of period | $552 | $628 | $(76) | - Net cash used in operating activities increased slightly to **$1,478 thousand** for the six months ended June 30, 2025, from **$1,438 thousand** in the same period of 2024[7](index=7&type=chunk) - Financing activities shifted from no cash usage in 2024 to **$356 thousand** used in 2025, primarily due to the repayment of borrowings from related parties[7](index=7&type=chunk) - Cash and cash equivalents at the end of the period decreased to **$552 thousand** as of June 30, 2025, from **$628 thousand** as of June 30, 2024[7](index=7&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and disclosures regarding the company's accounting policies, significant transactions, and financial statement line items [1. Organization and Principal Activities](index=6&type=section&id=1.%20ORGANIZATION%20AND%20PRINCIPAL%20ACTIVITIES) Kaixin Holdings, incorporated in the Cayman Islands, operates primarily in domestic automobile and used car sales in the PRC. The company underwent significant share capital structure changes in 2023 and 2024, including share consolidations and authorized capital increases. It also established new subsidiaries in 2024 and 2025 and disposed of several subsidiaries, though management believes these dispositions do not represent a strategic shift - Kaixin Holdings (KX) was incorporated in the Cayman Islands in 2016 and completed a reverse acquisition with Haitaoche Limited in June 2021, with Haitaoche deemed the accounting acquirer[8](index=8&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk) - The Group effected a **one-for-fifteenth share consolidation** on September 14, 2023, and a **one-for-sixty share consolidation** on October 25, 2024, along with an increase in authorized share capital from **$500,000** to **$36,500,000**[11](index=11&type=chunk)[14](index=14&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) - New subsidiaries, Zhejiang Kaixin Zhihui Auto Co. Ltd. (**100% owned**) and Zhejiang Kaixin Changxing Auto Sales Co. Ltd. (**51% owned**), were set up in January 2024 and February 2025, respectively[12](index=12&type=chunk)[13](index=13&type=chunk) - Several subsidiaries, including Kaixin Manman Commuting Technology Co. Ltd., Wuhan Jieying Chimei Automobile Sales Co., Ltd., Chongqing Jieying Shangyue Automobile Sales Co., Ltd., Anhui Kaixin New Energy Vehicle Co., Ltd., and Morning Star Auto Inc., were disposed of during 2024. Kaixin Daman and Kaixin Jingtao were also disposed of in 2024 and 2025, respectively, due to minimal operations[15](index=15&type=chunk) - The Group's primary business is sales of domestic automobiles and used cars in the People's Republic of China (PRC)[17](index=17&type=chunk) [2. Summary of Significant Accounting Policies](index=9&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The financial statements are prepared in accordance with U.S. GAAP for interim reporting, with certain disclosures condensed or omitted. The company faces substantial doubt about its ability to continue as a going concern due to recurring net losses and operating cash outflows, though management believes it will continue for the next 12 months with potential financial support. Key accounting policies cover fair value measurement, warrant classification, revenue recognition (including new consulting services), and share-based compensation. Several new accounting pronouncements were issued, with the company evaluating their impact - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial reporting and have not been reviewed by an independent certified public accountant[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk) - The Company reported net losses of approximately **$8.4 million** and **$5.4 million**, and operating cash outflows of approximately **$1.5 million** and **$1.4 million** for the six months ended June 30, 2025 and 2024, respectively. Accumulated deficits reached **$386.0 million** as of June 30, 2025, raising substantial doubt about its going concern ability[21](index=21&type=chunk) - Management believes the Company will continue as a going concern for the next 12 months, supported by highly liquid cash of **$0.6 million** and agreements from two major shareholders to consider providing necessary financial support[22](index=22&type=chunk)[23](index=23&type=chunk) - Revenue from consulting services related to design and development of electric vehicles was recognized for the first time, amounting to **$95 thousand** for the six months ended June 30, 2025[35](index=35&type=chunk) - The FASB issued several new ASUs (**2025-05, 2025-01, 2024-03, 2023-09, 2023-06, 2023-01**) related to credit losses, income statement expense disaggregation, income tax disclosures, and leasehold improvements. The Company is evaluating their impact, but does not expect a material effect from those not yet effective[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk) [3. Disposal of Subsidiaries](index=14&type=section&id=3.%20DISPOSAL%20OF%20SUBSIDIARIES) Kaixin Holdings disposed of two subsidiaries, Kaixin Jingtao in February 2025 and Kaixin Manman in May 2024, both resulting in no loss on disposal. These disposals involved transferring equity interests to third parties for minimal consideration - On February 10, 2025, the Company transferred **70% equity interest** in Kaixin Jingtao for **$2**, resulting in no loss on disposal[46](index=46&type=chunk) - On May 21, 2024, the Company transferred **70% equity interest** in Kaixin Manman for **$16**, also resulting in no loss on disposal[47](index=47&type=chunk) [4. Intangible Assets](index=15&type=section&id=4.%20INTANGBILE%20ASSETS) As of June 30, 2025, Kaixin Holdings' net intangible assets totaled $18.852 million, primarily comprising trademarks and technology. Amortization expense for the six months ended June 30, 2025, was $1.862 million, consistent with the prior year Intangible Assets, Net (in thousands of US dollars) | Item | June 30, 2025 (in thousands of US dollars) | December 31, 2024 (in thousands of US dollars) | |:---------------------------|:-------------------------------------------|:-----------------------------------------------| | Intangible assets, net | $18,852 | $20,713 | - Amortization expense for the six months ended June 30, 2025, was **$1,862 thousand**, unchanged from the same period in 2024[48](index=48&type=chunk) - The total remaining amortization for intangible assets is projected to be **$18,852 thousand**, with significant amounts expected in 2026-2029[48](index=48&type=chunk) [5. Related Party Transactions and Balances](index=15&type=section&id=5.%20RELATED%20PARTY%20TRANSACTIONS%20AND%20BALANCES) As of June 30, 2025, Kaixin Holdings had no outstanding amounts due to related parties, including its controlling shareholder and CEO, Mr. Lin Mingjun, and CFO, Mrs. Yang Yi, a significant reduction from $355 thousand at December 31, 2024 Amounts Due to Related Parties (in thousands of US dollars) | Item | June 30, 2025 (in thousands of US dollars) | December 31, 2024 (in thousands of US dollars) | |:------|:-------------------------------------------|:-----------------------------------------------| | Total | $— | $355 | - All amounts due to related parties were settled by June 30, 2025, showing a decrease from **$355 thousand** at December 31, 2024[50](index=50&type=chunk) [6. Income Taxes](index=16&type=section&id=6.%20INCOME%20TAXES) Kaixin Holdings is not subject to income or capital gains taxes in the Cayman Islands. Its Hong Kong subsidiaries had no assessable profits. PRC subsidiaries are subject to a 25% Enterprise Income Tax rate, and the Group incurred $276 thousand in deferred income tax expenses for both the six months ended June 30, 2025, and 2024 - The Group is exempt from income or capital gains taxes in the Cayman Islands and Hong Kong subsidiaries had no assessable profits[51](index=51&type=chunk)[52](index=52&type=chunk) - PRC subsidiaries are subject to a statutory income tax rate of **25%**[53](index=53&type=chunk) - Deferred income tax expenses were **$276 thousand** for both the six months ended June 30, 2025, and 2024[54](index=54&type=chunk) [7. Convertible Notes](index=16&type=section&id=7.%20CONVERTIBLE%20NOTES) Kaixin Holdings fully settled its outstanding convertible notes as of June 30, 2025. During the six months ended June 30, 2025, the company issued $638 thousand in ordinary shares to settle a portion of Note B, following a $1,208 thousand settlement in the prior year period - The Group issued two Convertible Promissory Notes (Note A and Note B) to Streererville Capital, LLC, with a principal amount of **$2,180 thousand** each, bearing an **8%** annual interest rate[55](index=55&type=chunk)[56](index=56&type=chunk) - During the six months ended June 30, 2025, the Group issued **539,105 ordinary shares** (**$638 thousand**) to settle a portion of Note B. The company fully settled outstanding balances of convertible notes as of June 30, 2025[59](index=59&type=chunk) - Interest expense related to convertible notes was **$3 thousand** for the six months ended June 30, 2025, a significant decrease from **$121 thousand** in the prior year period[58](index=58&type=chunk) [8. Mezzanine Equity and Warrant Liabilities](index=17&type=section&id=8.%20MEZZANINE%20EQUITY%20AND%20WARRANT%20LIABILITIES) Kaixin Holdings previously issued Series A convertible preferred shares, which were classified as mezzanine equity and subsequently converted into ordinary shares by August 2021, with no outstanding Series A Preferred Shares as of June 30, 2025. Associated warrants were classified as warrant liabilities and remeasured at fair value, with $22 thousand outstanding as of June 30, 2025 - Series A convertible preferred shares, initially classified as mezzanine equity, were fully converted into ordinary shares by August 2021, with no outstanding shares as of June 30, 2025[64](index=64&type=chunk)[65](index=65&type=chunk) - Warrants (Series A, B, and C) issued in connection with Series A Preferred Shares were classified as warrant liabilities and remeasured at fair value at each reporting date[62](index=62&type=chunk)[63](index=63&type=chunk)[66](index=66&type=chunk) - As of June 30, 2025, and December 31, 2024, the Group had outstanding warrant liabilities of **$22 thousand**[66](index=66&type=chunk) [9. Equity](index=18&type=section&id=9.%20EQUITY) Kaixin Holdings' equity structure underwent significant changes, including two share consolidations in 2023 and 2024, an increase in authorized share capital, and redesignation into Class A and Class B Ordinary Shares. The company also has various series of preferred shares (D, F, G, H) and previously issued warrants (2023, 2022). PRC statutory reserves and restricted net assets limit dividend payments from PRC subsidiaries - The Group completed two share consolidations (**one-for-fifteenth** in September 2023 and **one-for-sixty** in October 2024) and increased authorized share capital to **$36,500,000**, divided into Class A and Class B Ordinary Shares and various preferred shares[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk) Outstanding Ordinary Shares (Number of Shares) | Item | June 30, 2025 (Number of Shares) | December 31, 2024 (Number of Shares) | |:--------|:---------------------------------|:-------------------------------------| | Class B | 2,100,000 | 1,100,000 | - Series D, F, G, and H Preferred Shares are considered permanent equity as their redemption is within the Group's control. As of June 30, 2025, **42,000 Series F Preferred Shares** remained outstanding after partial settlements[74](index=74&type=chunk)[77](index=77&type=chunk)[81](index=81&type=chunk)[85](index=85&type=chunk) - The Group issued 2023 Warrants to purchase Class A Ordinary Shares at an exercise price of **$108.00 per share**, and previously issued 2022 Warrants which were redeemed in November 2023 by issuing **6,500,000 ordinary shares**[86](index=86&type=chunk)[88](index=88&type=chunk)[90](index=90&type=chunk) - PRC subsidiaries are required to provide for statutory reserves (**10% of net profit after tax**) and are restricted in their ability to transfer net assets (paid-in capital and statutory reserve, totaling **$107,222 thousand**) to the Group as dividends, loans, or advances[91](index=91&type=chunk)[92](index=92&type=chunk) [10. Loss Per Share](index=23&type=section&id=10.%20LOSS%20PER%20SHARE) For the six months ended June 30, 2025, Kaixin Holdings reported a basic and diluted net loss per share of $(0.86), a significant improvement from $(6.02) in the prior year, despite a higher net loss. This improvement is attributed to a substantial increase in the weighted average shares outstanding Net Loss Per Share (in thousands of US dollars, except per share data) | Item | Six Months Ended June 30, 2025 (Number of Shares) | Six Months Ended June 30, 2024 (Number of Shares) | |:-------------------------------------------------------------|:--------------------------------------------------|:--------------------------------------------------| | Weighted average shares used in calculating net loss per share | 9,769,065 | 892,491 | - The weighted average shares used in calculating net loss per share increased over tenfold from **892,491** in 2024 to **9,769,065** in 2025[94](index=94&type=chunk) - Potential dilutive securities were not included in the calculation of diluted net loss per share for both periods as their inclusion would be anti-dilutive due to the net loss[94](index=94&type=chunk) [11. Share-Based Compensation](index=23&type=section&id=11.%20SHARE-BASED%20COMPENSATION) Kaixin Holdings granted a significant number of restricted shares under the Kaixin 2024 Plan, leading to a substantial increase in share-based compensation expenses. As of June 30, 2025, there was approximately $1.824 million in unrecognized compensation cost related to unvested restricted shares, expected to be recognized over 2.60 years - For the six months ended June 30, 2025, the Group granted **3,800,000 Class A Ordinary Shares** and **1,000,000 Class B Ordinary Shares** under the Kaixin 2024 Plan[97](index=97&type=chunk) - Share-based compensation expenses increased significantly to **$5,700 thousand** for the six months ended June 30, 2025, from **$1,447 thousand** in the prior year period, charged to general and administrative expenses[99](index=99&type=chunk) - As of June 30, 2025, total unrecognized compensation cost related to unvested restricted shares was approximately **$1,824 thousand**, with a weighted average recognition period of **2.60 years**[98](index=98&type=chunk) [12. Commitments and Contingencies](index=24&type=section&id=12.%20COMMITMENTS%20AND%20CONTINGENCIES) Kaixin Holdings may be subject to legal proceedings, claims, and disputes in the ordinary course of business, but management does not believe these will have a material adverse impact on its financial position, results of income, or liquidity - The Company does not believe that current legal proceedings, claims, and disputes will have a material adverse impact on its financial position, results of income, or liquidity[100](index=100&type=chunk) [13. Subsequent Events](index=24&type=section&id=13.%20SUBSEQUENT%20EVENTS) Subsequent to the reporting period, on August 6, 2025, Kaixin Holdings resolved to issue 10,000 Series I Convertible Preferred Shares with a total stated value of $10,000 thousand to Discover Flux Ltd as compensation for the transfer of 100% equity interest in Morning Star Auto Inc., which had net asset deficits - On October 15, 2024, the Company transferred **100% equity interest** of Morning Star Auto Inc. to Discover Flux Ltd. Morning Star Auto Inc. reported net asset deficits of approximately **$8,400 thousand** on the transfer day[101](index=101&type=chunk) - On August 6, 2025, the Company resolved to issue **10,000 Series I Convertible Preferred Shares** with a total Stated Value of **$10,000 thousand** to Discover Flux Ltd as part of the equity transfer transaction[101](index=101&type=chunk)
Hooker Furniture(HOFT) - 2026 Q2 - Quarterly Report
2025-09-12 19:38
PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) Presents the unaudited condensed consolidated financial statements and accompanying notes for the period [Condensed Consolidated Balance Sheets](index=2&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | Metric | August 3, 2025 | February 2, 2025 | Change | |:---|:---|:---|:---| | Total Assets | $278,043 | $313,942 | $(35,899) | | Total Liabilities | $84,923 | $109,559 | $(24,636) | | Total Shareholders' Equity | $193,120 | $204,383 | $(11,263) | [Condensed Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | Change | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | Change | |:---|:---|:---|:---|:---|:---|:---| | Net Sales | $82,149 | $95,081 | $(12,932) | $167,465 | $188,652 | $(21,187) | | Gross Profit | $16,837 | $20,922 | $(4,085) | $35,838 | $40,294 | $(4,456) | | Operating (Loss) / Income | $(4,401) | $(3,149) | $(1,252) | $(7,965) | $(8,169) | $204 | | Net (Loss) / Income | $(3,277) | $(1,951) | $(1,326) | $(6,329) | $(6,042) | $(287) | | Basic EPS | $(0.31) | $(0.19) | $(0.12) | $(0.60) | $(0.57) | $(0.03) | | Diluted EPS | $(0.31) | $(0.19) | $(0.12) | $(0.60) | $(0.57) | $(0.03) | [Condensed Consolidated Statements of Comprehensive (Loss) / Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20%2F%20Income) Condensed Consolidated Statements of Comprehensive (Loss) / Income (in thousands) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Net (loss) / income | $(3,277) | $(1,951) | $(6,329) | $(6,042) | | Actuarial adjustments (net of tax) | $(34) | $(45) | $(68) | $(90) | | Total comprehensive (loss) / income | $(3,311) | $(1,996) | $(6,397) | $(6,132) | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | Change | |:---|:---|:---|:---| | Net cash provided by operating activities | $18,107 | $5,314 | $12,793 | | Net cash used in investing activities | $(2,021) | $(808) | $(1,213) | | Net cash used in financing activities | $(21,560) | $(5,615) | $(15,945) | | Net decrease in cash and cash equivalents | $(5,474) | $(1,109) | $(4,365) | | Cash and cash equivalents - end of quarter | $821 | $42,050 | $(41,229) | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Consolidated Statements of Stockholders' Equity (in thousands) | Metric | Balance at Feb 2, 2025 | Net loss (26 weeks) | Cash dividends paid | Restricted stock compensation (net) | Balance at Aug 3, 2025 | |:---|:---|:---|:---|:---|:---| | Common Stock Amount | $50,474 | - | - | $356 | $50,619 | | Retained Earnings | $153,336 | $(6,329) | $(5,011) | - | $141,996 | | Accumulated Other Comprehensive Income | $573 | $(68) | - | - | $505 | | Total Shareholders' Equity | $204,383 | $(6,329) | $(5,011) | $356 | $193,120 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The financial statements are prepared in accordance with SEC rules and GAAP, with management's opinion that all necessary adjustments for fair statement are included[21](index=21&type=chunk) - Operating results for interim periods may not be indicative of full fiscal year results[21](index=21&type=chunk) - The company is evaluating the impact of new FASB ASUs 2023-09 (Income Taxes) and 2024-03 (Disaggregation of income statement expenses), effective for fiscal 2026 and 2028, respectively[23](index=23&type=chunk)[24](index=24&type=chunk) [1. Preparation of Interim Financial Statements](index=9&type=section&id=1.%20Preparation%20of%20Interim%20Financial%20Statements) [2. Recently Adopted Accounting Policies](index=9&type=section&id=2.%20Recently%20Adopted%20Accounting%20Policies) [3. Accounts Receivable](index=10&type=section&id=3.%20Accounts%20Receivable) Accounts Receivable (in thousands) | Metric | August 3, 2025 | February 2, 2025 | |:---|:---|:---| | Gross accounts receivable | $47,132 | $64,344 | | Customer allowances | $(1,084) | $(1,019) | | Allowance for doubtful accounts | $(4,732) | $(5,127) | | Trade accounts receivable | $41,316 | $58,198 | [4. Inventories](index=10&type=section&id=4.%20Inventories) Inventories (in thousands) | Metric | August 3, 2025 | February 2, 2025 | |:---|:---|:---| | Finished furniture | $70,745 | $82,635 | | Furniture in process | $1,588 | $1,524 | | Materials and supplies | $11,574 | $11,229 | | Inventories at FIFO | $83,907 | $95,388 | | Reduction to LIFO basis | $(25,375) | $(24,633) | | Inventories | $58,532 | $70,755 | [5. Property, Plant and Equipment](index=10&type=section&id=5.%20Property,%20Plant%20and%20Equipment) Property, Plant and Equipment, Net (in thousands) | Metric | August 3, 2025 | February 2, 2025 | |:---|:---|:---| | Total depreciable property, net | $23,857 | $25,163 | | Land | $1,077 | $1,077 | | Construction-in-progress | $3,288 | $1,955 | | Property, plant and equipment, net | $28,222 | $28,195 | [6. Cloud Computing Hosting Arrangement](index=10&type=section&id=6.%20Cloud%20Computing%20Hosting%20Arrangement) - The company capitalized **$287,000** in implementation costs and interest for ERP and supply chain planning software in Q2 FY26, down from **$1.2 million** in Q2 FY25[31](index=31&type=chunk) - Amortization expense for these costs was **$368,000** in Q2 FY26, up from **$292,000** in Q2 FY25[31](index=31&type=chunk) Capitalized Implementation Costs (in thousands) | Metric | August 3, 2025 (Gross carrying amount) | August 3, 2025 (Accumulated amortization) | February 2, 2025 (Gross carrying amount) | February 2, 2025 (Accumulated amortization) | |:---|:---|:---|:---|:---| | Implementation Costs | $17,210 | $(2,287) | $16,782 | $(1,561) | | Interest Expenses | $720 | $(36) | $596 | $(27) | [7. Fair Value Measurements](index=11&type=section&id=7.%20Fair%20Value%20Measurements) - Company-owned life insurance is measured at fair value on a recurring basis using **Level 2 inputs**, with changes reflected in income each reporting period[33](index=33&type=chunk) Assets Measured at Fair Value (in thousands) | Description | Fair value at August 3, 2025 (Level 2) | Fair value at February 2, 2025 (Level 2) | |:---|:---|:---| | Company-owned life insurance | $30,157 | $29,238 | [8. Intangible Assets](index=12&type=section&id=8.%20Intangible%20Assets) - Amortization expenses for intangible assets with definite lives were **$872,000** in Q2 FY26 and **$1.8 million** for H1 FY26, with an expected **$1.7 million** for the remainder of fiscal 2026[37](index=37&type=chunk) Intangible Assets (in thousands) | Metric | August 3, 2025 (Gross carrying amount) | August 3, 2025 (Accumulated Amortization) | February 2, 2025 (Gross carrying amount) | February 2, 2025 (Accumulated Amortization) | |:---|:---|:---|:---|:---| | Goodwill | $15,036 | - | $15,036 | - | | Trademarks and Trade names (indefinite) | $5,180 | - | $5,180 | - | | Customer Relationships | $38,001 | $(24,029) | $38,001 | $(22,349) | | Trademarks and Trade names (definite) | $2,334 | $(1,164) | $2,334 | $(1,062) | | Intangible assets, net | $45,515 | $(25,193) | $45,515 | $(23,411) | [9. Leases](index=12&type=section&id=9.%20Leases) - The company entered an agreement to terminate the Georgia warehouse lease by October 31, 2025, expected to reduce right-of-use assets by **$10.1 million**, lease liabilities by **$10.7 million**, and lease payments by **$13.4 million**[40](index=40&type=chunk) Lease Costs (in thousands) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Total operating lease cost | $2,639 | $2,699 | $5,318 | $5,447 | | Operating cash outflows | $2,601 | $2,554 | $5,213 | $5,163 | Operating Leases Right-of-Use Assets and Liabilities (in thousands) | Metric | August 3, 2025 | February 2, 2025 | |:---|:---|:---| | Total operating leases right-of-use assets | $41,797 | $45,575 | | Total operating lease liabilities | $44,901 | $48,575 | [10. Long-Term Debt](index=13&type=section&id=10.%20Long-Term%20Debt) - The company entered an Amended and Restated Loan Agreement on December 5, 2024, providing a revolving credit facility of up to **$70 million**, with an option to increase by **$30 million**[41](index=41&type=chunk)[42](index=42&type=chunk) - The facility is secured by a first priority security interest in substantially all of the Borrowers' assets, excluding real estate[47](index=47&type=chunk) - As of August 3, 2025, outstanding loans were **$5.6 million**, letters of credit were **$6.7 million**, and availability was **$57.7 million**[51](index=51&type=chunk) [11. Earnings Per Share](index=15&type=section&id=11.%20Earnings%20Per%20Share) - Due to net losses, approximately **106,000 shares** (Q2 FY26) and **115,000 shares** (H1 FY26) were excluded from diluted EPS calculation as they would have been antidilutive[56](index=56&type=chunk) Earnings Per Share Calculation (in thousands, except per share data) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Net (loss) / income | $(3,277) | $(1,951) | $(6,329) | $(6,042) | | (Loss) / Earnings available for common shareholders | $(3,306) | $(1,992) | $(6,391) | $(6,124) | | Weighted average shares outstanding (Basic & Diluted) | 10,612 | 10,521 | 10,587 | 10,509 | | Basic (loss) / earnings per share | $(0.31) | $(0.19) | $(0.60) | $(0.57) | | Diluted (loss) / earnings per share | $(0.31) | $(0.19) | $(0.60) | $(0.57) | [12. Income Taxes](index=17&type=section&id=12.%20Income%20Taxes) - The differences in effective tax rates reflect the impacts of favorable tax adjustments, specifically the cash surrender value gain of company-owned life insurance, over expected pretax income in fiscal 2025 as opposed to an expected pretax loss in fiscal 2026 under the annualization method[57](index=57&type=chunk) Income Tax (Benefit) / Expense and Effective Tax Rate | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Income tax (benefit) / expense (in thousands) | $(1,203) | $85 | $(1,967) | $(731) | | Effective tax rate | 26.9% | -4.5% | 23.7% | 10.8% | [13. Segment Information](index=17&type=section&id=13.%20Segment%20Information) - The company's segments are Hooker Branded, Home Meridian, Domestic Upholstery, and All Other, with H Contract sales now included in Hooker Branded and Domestic Upholstery[62](index=62&type=chunk) Segment Net Sales (in thousands) | Segment | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | % Change | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | % Change | |:---|:---|:---|:---|:---|:---|:---| | Hooker Branded | $36,250 | $35,785 | 1.3% | $73,359 | $72,593 | 1.1% | | Home Meridian | $16,932 | $30,516 | -44.5% | $35,742 | $56,940 | -37.2% | | Domestic Upholstery | $28,677 | $28,556 | 0.4% | $57,590 | $58,583 | -1.7% | | All Other | $290 | $224 | 29.5% | $774 | $536 | 44.4% | | **Consolidated** | **$82,149** | **$95,081** | **-13.6%** | **$167,465** | **$188,652** | **-11.2%** | Segment Operating (Loss) / Income (in thousands) | Segment | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | % Change | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | % Change | |:---|:---|:---|:---|:---|:---|:---| | Hooker Branded | $10 | $(329) | 103.0% | $37 | $(150) | 124.7% | | Home Meridian | $(3,916) | $(896) | -337.1% | $(6,754) | $(4,169) | -62.0% | | Domestic Upholstery | $(408) | $(1,285) | 68.2% | $(1,004) | $(2,593) | 61.3% | | All Other | $(87) | $(639) | 86.4% | $(244) | $(1,257) | 80.6% | | **Consolidated** | **$(4,401)** | **$(3,149)** | **-39.8%** | **$(7,965)** | **$(8,169)** | **2.5%** | [14. Subsequent Events](index=19&type=section&id=14.%20Subsequent%20Events) - On September 9, 2025, the board of directors declared a quarterly cash dividend of **$0.23 per share**, payable on September 30, 2025[68](index=68&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on financial performance, condition, liquidity, and future outlook for the period [Forward-Looking Statements](index=21&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially, including adverse political acts, general economic conditions, asset impairment, and industry cyclicality[70](index=70&type=chunk) - Key risks include challenges in international markets, macroeconomic uncertainties affecting consumer spending, and risks associated with cost reduction plans and the Home Meridian segment restructuring[70](index=70&type=chunk) - Other risks involve reliance on offshore sourcing, supply chain disruptions, information system security breaches, and the terms of the Amended and Restated Loan Agreement[71](index=71&type=chunk) [Quarterly Reporting](index=23&type=section&id=Quarterly%20Reporting) - This report covers the unaudited condensed consolidated financial statements for the 2026 fiscal year's thirteen-week and twenty-six-week periods ending August 3, 2025, compared to the corresponding periods in fiscal 2025[76](index=76&type=chunk) [Overview](index=23&type=section&id=Overview) - Hooker Furnishings Corporation is a designer, marketer, and importer of casegoods, leather, fabric-upholstered furniture, lighting, accessories, and home décor for residential, hospitality, and contract markets, also manufacturing premium domestic custom furniture[80](index=80&type=chunk)[81](index=81&type=chunk) [Orders and Backlog](index=25&type=section&id=Orders%20and%20Backlog) - Consolidated order backlog decreased by **2.8%** from fiscal year-end, driven by Home Meridian's decline due to macroeconomic pressures, tariff-related buying hesitancy, and a major customer's bankruptcy[84](index=84&type=chunk) - Domestic Upholstery backlog rose nearly **7%** compared to both year-end and prior-year quarter-end, while Hooker Branded's backlog increased nearly **20%** from year-end, supported by a **10.6%** rise in incoming orders[85](index=85&type=chunk) Order Backlog (in thousands) | Reporting Segment | August 3, 2025 | February 2, 2025 | July 28, 2024 | |:---|:---|:---|:---| | Hooker Branded | $15,701 | $13,109 | $15,895 | | Home Meridian | $16,138 | $21,002 | $43,918 | | Domestic Upholstery | $19,313 | $18,123 | $18,066 | | All Other | $- | $402 | $- | | **Consolidated** | **$51,152** | **$52,636** | **$77,879** | [Executive Summary](index=26&type=section&id=Executive%20Summary) - The home furnishings industry faced challenges in Q2 FY26 due to low existing home sales, elevated mortgage rates, and persistent inflation, leading to reduced consumer demand[86](index=86&type=chunk) - Home Meridian's net sales declined by **44.5%** in Q2 FY26, and gross margin decreased by **1,330 bps**, primarily due to macroeconomic pressures, tariff-related buying hesitancy, and the loss of a major customer[87](index=87&type=chunk) - Hooker Branded and Domestic Upholstery segments showed modest net sales recovery in Q2 FY26, though sales volumes remain historically low due to housing market weakness[88](index=88&type=chunk) - The company recorded a consolidated net loss of **$3.3 million** (or **$0.31 per diluted share**) for Q2 FY26, compared to a **$2.0 million** net loss (or **$0.19 per diluted share**) in the prior-year quarter[88](index=88&type=chunk) [Multi-Phased Cost Reduction Initiatives](index=26&type=section&id=Multi-Phased%20Cost%20Reduction%20Initiatives) - The company aims for approximately **$25 million** in annualized cost savings by fiscal year 2027 through a multi-phase cost reduction strategy[89](index=89&type=chunk) - In H1 FY26, **$3.7 million** in savings were achieved, despite **$1.7 million** in restructuring charges[89](index=89&type=chunk) - Phase 2 actions include closing the Savannah warehouse by October 31, 2025, and operating a new Vietnam warehouse, which has reduced direct container lead times from six months to four to six weeks[94](index=94&type=chunk) - Total fixed costs are expected to reduce by approximately **$25 million** (nearly **25%**), with **$11 million** from warehousing/distribution and **$14 million** from S&A expenses[92](index=92&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Consolidated Performance Metrics (% of Net Sales) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Net sales | 100% | 100% | 100% | 100% | | Cost of sales | 79.5% | 78.0% | 78.6% | 78.6% | | Gross profit | 20.5% | 22.0% | 21.4% | 21.4% | | Selling and administrative expenses | 24.8% | 24.3% | 25.1% | 24.7% | | Operating (loss)/income | (5.4)% | (3.3)% | (4.8)% | (4.3)% | | Net (loss)/income | (4.0)% | (2.1)% | (3.8)% | (3.2)% | [Consolidated Net Sales](index=28&type=section&id=Consolidated%20Net%20Sales) - Consolidated net sales decreased by **$12.9 million (13.6%)** in Q2 FY26 and **$21.2 million (11.2%)** for H1 FY26, mainly due to Home Meridian's decline[98](index=98&type=chunk) - Home Meridian's net sales decreased by **44.5%** in Q2 FY26, with **40%** from hospitality timing, **35%** from macroeconomic pressures/tariffs, and **25%** from a major customer's bankruptcy[101](index=101&type=chunk) - Consolidated average selling price (ASP) increased due to a favorable product mix shift, as lower-priced Home Meridian unit volume declined by **37.7%** in Q2 and **36.7%** for H1[99](index=99&type=chunk) [Consolidated Gross Profit](index=29&type=section&id=Consolidated%20Gross%20Profit) - Consolidated gross profit decreased by **$4.1 million** in Q2 FY26, and gross margin declined by **150 bps**, mainly due to Home Meridian's lower profitability[102](index=102&type=chunk) - Home Meridian's gross profit decreased by **$4.9 million** in Q2 FY26, and gross margin decreased by **1,330 bps** due to reduced sales, unfavorable product mix, increased warehousing/distribution expenses, and inventory liquidation losses[104](index=104&type=chunk) - Domestic Upholstery's gross profit increased by **$659,000** in Q2 FY26, with gross margin rising by **220 bps**, driven by consistent material costs and reduced labor/indirect costs[104](index=104&type=chunk) [Consolidated Selling and Administrative Expenses](index=30&type=section&id=Consolidated%20Selling%20and%20Administrative%20Expenses) - Consolidated S&A expenses decreased by **$2.8 million** in Q2 FY26 and **$4.6 million** in H1 FY26, driven by cost-reduction and restructuring plans across all segments[103](index=103&type=chunk) - As a percentage of net sales, S&A expenses increased in both periods due to the overall decline in net sales[103](index=103&type=chunk) - Home Meridian's S&A expenses decreased by **$1.9 million** in Q2 and **$3.0 million** in H1, but as a percentage of net sales, they increased by **610 bps** and **500 bps**, respectively, due to under-absorption from lower sales volumes[109](index=109&type=chunk) [Intangible Asset Amortization](index=31&type=section&id=Intangible%20Asset%20Amortization) - Intangible asset amortization decreased for Q2 FY26 and H1 FY26 compared to prior-year periods due to the full amortization of the Sam Moore trade name[106](index=106&type=chunk) [Consolidated Operating (Loss) / Profit](index=31&type=section&id=Consolidated%20Operating%20(Loss)%20%2F%20Profit) - The Q2 FY26 operating loss of **$4.4 million** was higher than the prior year's **$3.1 million** loss, driven by **$2.0 million** in restructuring costs and Home Meridian's weakness[107](index=107&type=chunk) - Domestic Upholstery significantly reduced its operating loss by **$877,000 (68%)** in Q2 FY26 despite **$152,000** in restructuring costs[88](index=88&type=chunk) Operating (Loss) / Income (in thousands) | Segment | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | % Change | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | % Change | |:---|:---|:---|:---|:---|:---|:---| | Hooker Branded | $10 | $(329) | 103.0% | $37 | $(150) | 124.7% | | Home Meridian | $(3,916) | $(896) | -337.1% | $(6,754) | $(4,169) | -62.0% | | Domestic Upholstery | $(408) | $(1,285) | 68.2% | $(1,004) | $(2,593) | 61.3% | | All Other | $(87) | $(639) | 86.4% | $(244) | $(1,257) | 80.6% | | **Consolidated** | **$(4,401)** | **$(3,149)** | **-39.8%** | **$(7,965)** | **$(8,169)** | **2.5%** | [Consolidated Income Taxes](index=31&type=section&id=Consolidated%20Income%20Taxes) - The differences in effective tax rates reflect the impacts of favorable tax adjustments, specifically the cash surrender value gain of company-owned life insurance, over expected pretax income in fiscal 2025 as opposed to an expected pretax loss in fiscal 2026 under the annualization method[110](index=110&type=chunk) Income Tax (Benefit) / Expense and Effective Tax Rate | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Income tax (benefit) / expense (in thousands) | $(1,203) | $85 | $(1,967) | $(731) | | Effective tax rate | 26.9% | -4.5% | 23.7% | 10.8% | [Consolidated Net (Loss) / Income](index=32&type=section&id=Consolidated%20Net%20(Loss)%20%2F%20Income) Net (Loss) / Income (in thousands, except per share data) | Metric | 13 Weeks Ended Aug 3, 2025 | 13 Weeks Ended Jul 28, 2024 | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---|:---|:---| | Net (loss) / income | $(3,277) | $(1,951) | $(6,329) | $(6,042) | | Diluted (loss) / earnings per share | $(0.31) | $(0.19) | $(0.60) | $(0.57) | [Outlook](index=32&type=section&id=Outlook) - The company is focused on scaling its cost structure for profitability, preparing for the October debut of the Margaritaville collection, and pursuing growth in hospitality, contract, and outdoor channels, supported by the new Vietnam warehouse[114](index=114&type=chunk) - Home Meridian's fixed cost structure is expected to be aligned by the end of Q3 FY25, positioning it for significantly enhanced performance by the end of the current fiscal year, barring disruptive events[113](index=113&type=chunk) - Hooker Legacy orders showed encouraging momentum in July, with Hooker Branded orders up nearly **11%** and Domestic Upholstery up **1.6%** for the quarter, despite industry headwinds[112](index=112&type=chunk) [Financial Condition, Liquidity and Capital Resources](index=33&type=section&id=Financial%20Condition,%20Liquidity%20and%20Capital%20Resources) - Operating cash flow increased significantly due to **$17.1 million** from trade receivable collections and **$12.2 million** from inventory reductions, particularly in Hooker Branded and Home Meridian[118](index=118&type=chunk) - Financing activities used **$21.6 million**, primarily due to **$16.5 million** in repayments on the revolving credit facility[117](index=117&type=chunk) Cash Flow Summary (in thousands) | Metric | 26 Weeks Ended Aug 3, 2025 | 26 Weeks Ended Jul 28, 2024 | |:---|:---|:---| | Net cash provided by operating activities | $18,107 | $5,314 | | Net cash used in investing activities | $(2,021) | $(808) | | Net cash used in financing activities | $(21,560) | $(5,615) | | Net decrease in cash and cash equivalents | $(5,474) | $(1,109) | [Cash Flows – Operating, Investing and Financing Activities](index=33&type=section&id=Cash%20Flows%20%E2%80%93%20Operating,%20Investing%20and%20Financing%20Activities) [Liquidity, Financial Resources and Capital Expenditures](index=33&type=section&id=Liquidity,%20Financial%20Resources%20and%20Capital%20Expenditures) - The company's financial resources include available cash and cash equivalents, expected cash flow from operations, available lines of credit, and cash surrender value of Company-owned life insurance[119](index=119&type=chunk) - Short-term cash requirements primarily fund operations, quarterly dividend payments, and capital expenditures for ERP, showroom renovations, and system upgrades[121](index=121&type=chunk) [Loan Agreements and Revolving Credit Facility](index=35&type=section&id=Loan%20Agreements%20and%20Revolving%20Credit%20Facility) - The company entered an Amended and Restated Loan Agreement on December 5, 2024, providing a revolving credit facility of up to **$70 million**, with an option to increase by **$30 million**[122](index=122&type=chunk)[123](index=123&type=chunk) - The facility is secured by a first priority security interest in substantially all of the Borrowers' assets, excluding real estate[127](index=127&type=chunk) - As of August 3, 2025, outstanding loans were **$5.6 million**, letters of credit were **$6.7 million**, and availability was **$57.7 million**[131](index=131&type=chunk) [Capital Expenditures](index=36&type=section&id=Capital%20Expenditures) - The company expects to spend approximately **$1 to $2 million** in capital expenditures for the remainder of fiscal 2026 to maintain and enhance operating systems and facilities[132](index=132&type=chunk) [Enterprise Resource Planning Project](index=36&type=section&id=Enterprise%20Resource%20Planning%20Project) - The ERP system went live at Sunset West in December 2022 and in the legacy Hooker divisions in early September 2023[133](index=133&type=chunk) [Dividends](index=36&type=section&id=Dividends_FinancialCondition) - On September 9, 2025, the board of directors declared a quarterly cash dividend of **$0.23 per share**, payable on September 30, 2025[134](index=134&type=chunk) [Critical Accounting Policies](index=36&type=section&id=Critical%20Accounting%20Policies) - There have been no material changes to the company's critical accounting policies and estimates from those provided in the 2025 Annual Report[135](index=135&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Outlines the company's exposure to interest rate, raw material price, and foreign currency risks - The company is exposed to interest rate risk on its variable-rate debt, raw materials price risk (wood, fabric, foam), and foreign currency risk for imported products[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk) - A **1% increase** in the SOFR rate would result in an annual increase of approximately **$56,000** in interest expenses at current borrowing levels[137](index=137&type=chunk) - The company generally negotiates firm pricing in USD with foreign suppliers for at least one year and does not use derivative financial instruments to manage currency risk[139](index=139&type=chunk) [Interest Rate Risk](index=36&type=section&id=Interest%20Rate%20Risk) [Raw Materials Price Risk](index=37&type=section&id=Raw%20Materials%20Price%20Risk) [Currency Risk](index=37&type=section&id=Currency%20Risk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective and reported no material changes in internal control - Management concluded that disclosure controls and procedures were **effective** as of August 3, 2025[141](index=141&type=chunk) - **No material changes** in internal control over financial reporting occurred during the fiscal quarter ended August 3, 2025[142](index=142&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=37&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) [Changes in Internal Control over Financial Reporting](index=37&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) PART II. OTHER INFORMATION [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) Confirms no director or officer trading arrangements were adopted, terminated, or modified during the quarter - No director or officer adopted, terminated, or modified a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended August 3, 2025[145](index=145&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including certifications and interactive data files - The exhibits include the company's Articles of Incorporation, Amended and Restated Bylaws, Rule 13a-14(a) and 13a-14(b) certifications, and Interactive Data Files (Inline XBRL)[145](index=145&type=chunk)
Culp(CULP) - 2026 Q1 - Quarterly Report
2025-09-12 13:55
[Part I - Financial Statements](index=3&type=section&id=Part%20I%20-%20Financial%20Statements) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited consolidated financial statements for the three months ended August 3, 2025 [Consolidated Statements of Net Loss](index=4&type=section&id=Consolidated%20Statements%20of%20Net%20Loss) Details the company's net sales, gross profit, operating income, and net loss for the recent quarter Consolidated Statements of Net Loss | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | Net sales | $50,691 | $56,537 | -10.3% | | Gross profit | $7,228 | $5,076 | 42.4% | | Income (loss) from operations | $1,617 | $(6,851) | -123.6% | | Net loss | $(231) | $(7,261) | -96.8% | | Net loss per share - basic | $(0.02) | $(0.58) | -96.6% | [Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) Outlines the comprehensive loss, including net loss and unrealized gains on investments Consolidated Statements of Comprehensive Loss | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | | :-------------------- | :------------- | :------------ | | Net loss | $(231) | $(7,261) | | Unrealized holding gain on investments, net of tax | $142 | $80 | | Comprehensive loss | $(89) | $(7,181) | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Provides a snapshot of the company's assets, liabilities, and shareholders' equity at the end of the period Consolidated Balance Sheets | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :-------------------- | :------------- | :------------ | :------------- | | Total current assets | $88,891 | $82,678 | $83,534 | | Total assets | $126,414 | $129,139 | $123,370 | | Total current liabilities | $47,903 | $42,221 | $46,964 | | Total liabilities | $68,767 | $60,015 | $65,730 | | Total shareholders' equity | $57,647 | $69,124 | $57,640 | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash movements from operating, investing, and financing activities during the quarter Consolidated Statements of Cash Flows | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | | :-------------------- | :------------- | :------------ | | Net cash used in operating activities | $(695) | $(206) | | Net cash provided by (used in) investing activities | $986 | $(332) | | Net cash provided by financing activities | $5,154 | $4,010 | | Increase in cash and cash equivalents | $5,465 | $3,460 | | Cash and cash equivalents at end of period | $11,094 | $13,472 | [Consolidated Statements of Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) Details the changes in shareholders' equity resulting from net loss and other equity-related activities Consolidated Statements of Shareholders' Equity | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | | :-------------------- | :------------- | :------------ | | Total Shareholders' Equity (end of period) | $57,647 | $69,124 | | Net loss | $(231) | $(7,261) | | Stock-based compensation | $156 | $176 | | Unrealized gain on investments | $142 | $80 | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations of accounting policies and specific financial statement items [1. Basis of Presentation](index=11&type=section&id=1.%20Basis%20of%20Presentation) The financial statements include all necessary recurring adjustments for fair presentation - The unaudited condensed consolidated financial statements include all necessary normal recurring adjustments for fair presentation[27](index=27&type=chunk) - The three months ended August 3, 2025, and July 28, 2024, represent **14-week and 13-week periods**, respectively[28](index=28&type=chunk) [2. Significant Accounting Policies](index=11&type=section&id=2.%20Significant%20Accounting%20Policies) Outlines key accounting policies and the impact of new accounting standards - No changes in significant accounting policies as of August 3, 2025; business segments were renamed to **bedding and upholstery**[29](index=29&type=chunk) - ASU 2023-09 (Improvements to Income Tax Disclosures) is effective for fiscal 2026 and will **materially impact disclosures**[31](index=31&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for fiscal 2028, and the company is **evaluating its impact**[32](index=32&type=chunk)[33](index=33&type=chunk) [3. Allowance for Doubtful Accounts](index=13&type=section&id=3.%20Allowance%20for%20Doubtful%20Accounts) Details the changes in the allowance for doubtful accounts based on customer credit risk - The allowance for doubtful accounts **increased to $723,000** as of August 3, 2025, from $413,000 as of July 28, 2024, based on credit risk assessment of customers[35](index=35&type=chunk) Allowance for Doubtful Accounts | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | | :-------------------- | :------------- | :------------ | | Beginning balance | $651 | $356 | | Provision for bad debts | $65 | $57 | | Write-offs, net of recoveries | $7 | $0 | | Ending balance | $723 | $413 | [4. Revenue from Contracts with Customers](index=13&type=section&id=4.%20Revenue%20from%20Contracts%20with%20Customers) Discloses revenue recognition policies and disaggregates revenue by type - The company's primary performance obligations include the sale of **bedding and upholstery products**, and customized fabrication/installation services for window treatments[38](index=38&type=chunk) - Deferred revenue, primarily from customer deposits and licensing fees, **increased to $485,000** as of August 3, 2025, from $422,000 as of April 27, 2025[39](index=39&type=chunk)[40](index=40&type=chunk) Revenue by Type | Revenue Type (in Thousands) | August 3, 2025 | July 28, 2024 | | :-------------------------- | :------------- | :------------ | | Products transferred at a point in time | $48,820 | $53,541 | | Services transferred over time | $1,871 | $2,996 | | Total net sales | $50,691 | $56,537 | [5. Inventories](index=14&type=section&id=5.%20Inventories) Provides a breakdown of inventory components and explains significant changes - Inventories **increased by $8.4 million (20.3%)** from July 28, 2024, to August 3, 2025, due to strategic sourcing of mattress fabrics with longer lead times and rising costs/tariffs[43](index=43&type=chunk)[273](index=273&type=chunk) Inventories by Type | Inventory Type (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :---------------------------- | :------------- | :------------ | :------------- | | Raw materials | $5,698 | $7,076 | $5,733 | | Work-in-process | $3,374 | $1,876 | $2,747 | | Finished goods | $41,037 | $32,716 | $40,829 | | Total Inventories | $50,109 | $41,668 | $49,309 | [6. Intangible Assets](index=16&type=section&id=6.%20Intangible%20Assets) Details the composition of and changes to intangible assets, including impairment charges - The Read tradename was **fully impaired in Q4 fiscal 2025**, resulting in a **$540,000 charge** due to a strategic business transformation[46](index=46&type=chunk) - Customer relationships and non-compete agreements are amortized over 9-17 years and 15 years, respectively; **no impairment was found** for the Bedding Asset Group as of August 3, 2025[47](index=47&type=chunk)[52](index=52&type=chunk)[55](index=55&type=chunk) Intangible Assets | Intangible Asset (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :------------------------------ | :------------- | :------------ | :------------- | | Tradename | $0 | $540 | $0 | | Customer relationships, net | $659 | $960 | $734 | | Non-compete agreement, net | $206 | $282 | $226 | | Total Intangible Assets | $865 | $1,782 | $960 | [7. Notes Receivable](index=18&type=section&id=7.%20Notes%20Receivable) Describes outstanding notes receivable from asset sales and lease terminations - A note receivable of **$4.8 million USD** (6.6 million CAD) is outstanding from the sale of the Quebec, Canada facility, due by April 30, 2026[56](index=56&type=chunk)[57](index=57&type=chunk) - Another note receivable of **$1.4 million** is outstanding from the termination of a lease in Haiti, due by December 31, 2029[58](index=58&type=chunk)[59](index=59&type=chunk)[61](index=61&type=chunk) Future Principal Payments on Notes Receivable | Fiscal Year | Future Principal Payments (in Thousands) | | :---------- | :------------------------------------- | | 2026 | $5,088 | | 2027 | $330 | | 2028 | $360 | | 2029 | $360 | | 2030 | $240 | | Total Undiscounted | $6,378 | | Less: Unearned Interest Income | $(196) | | Present Value of Note Receivable | $6,182 | [8. Assets Held for Sale](index=22&type=section&id=8.%20Assets%20Held%20for%20Sale) Reports on assets classified as held for sale and related gains or impairment charges - During Q1 fiscal 2026, the company sold property in Quebec, Canada, recognizing a **$4.0 million gain** classified as restructuring credit[64](index=64&type=chunk) - Equipment in the U.S. with a carrying value of $296,000 was impaired to its fair value of $40,000, resulting in a **$256,000 impairment charge** in Q1 fiscal 2026[64](index=64&type=chunk) Assets Held for Sale | Asset Category (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :---------------------------- | :------------- | :------------ | :------------- | | Bedding - U.S. | $40 | $357 | $0 | | Bedding - Haiti | $0 | $250 | $0 | | Bedding - Canada | $0 | $0 | $2,177 | | Total Assets Held for Sale | $40 | $607 | $2,177 | [9. Accrued Expenses](index=24&type=section&id=9.%20Accrued%20Expenses) Provides a breakdown of major components within accrued expenses Accrued Expenses | Accrued Expense (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :----------------------------- | :------------- | :------------ | :------------- | | Compensation, commissions and related benefits | $3,360 | $3,310 | $2,534 | | Other accrued expenses | $2,490 | $2,787 | $2,799 | | Total Accrued Expenses | $5,850 | $6,097 | $5,333 | [10. Restructuring Activities](index=24&type=section&id=10.%20Restructuring%20Activities) Details the financial impact of ongoing restructuring and strategic transformation initiatives - Restructuring activities announced May 1, 2024, are completed; a **$4.0 million gain** from the sale of the Quebec facility was recorded as restructuring credit in Q1 fiscal 2026[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) - A strategic transformation announced April 24, 2025, will **combine bedding and upholstery segments** into one Culp-branded business and consolidate facilities[69](index=69&type=chunk)[70](index=70&type=chunk) Restructuring Charges | Restructuring Charge (in Thousands) | August 3, 2025 | July 28, 2024 | | :---------------------------------- | :------------- | :------------ | | Additional depreciation expense | $22 | $875 | | Employee termination benefits | $(4) | $689 | | Lease Termination Costs | $62 | $670 | | Facility consolidation and relocation expenses | $52 | $251 | | Net (gain) loss on sale and impairment of property, plant, and equipment | $(3,747) | $95 | | Other Associated Costs | $107 | $51 | | Loss on disposal and markdowns of inventory | $0 | $116 | | Restructuring (credit) expense and restructuring related charge | $(3,508) | $2,747 | [11. Lines of Credit](index=27&type=section&id=11.%20Lines%20of%20Credit) Summarizes the company's various credit facilities, terms, and available borrowings - The U.S. ABL Facility term was **extended to June 12, 2028**, with a maximum principal of **$30.0 million**[75](index=75&type=chunk)[76](index=76&type=chunk)[79](index=79&type=chunk) - As of August 3, 2025, available borrowings under the U.S. Credit Agreement totaled **$17.6 million**, and the company was in compliance with all financial covenants[86](index=86&type=chunk)[93](index=93&type=chunk) Lines of Credit | Line of Credit (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :---------------------------- | :------------- | :------------ | :------------- | | Wells Fargo - U.S. revolving line of credit | $7,025 | $0 | $4,600 | | Agricultural Bank of China - revolving line of credit | $4,031 | $4,017 | $3,988 | | Agricultural Bank of China - supplier financing arrangements | $2,780 | $0 | $2,751 | | Agricultural Bank of China - working capital loan | $2,919 | $0 | $0 | | Bank of China - working capital loan | $1,390 | $0 | $1,375 | | Total Lines of Credit | $18,145 | $4,017 | $12,714 | [12. Fair Value](index=31&type=section&id=12.%20Fair%20Value) Discloses the fair value hierarchy and measurements for financial assets and liabilities - The company uses a **fair value hierarchy (Level 1, 2, 3)** to classify assets and liabilities based on observability of inputs[94](index=94&type=chunk)[95](index=95&type=chunk) - Investments in the rabbi trust for the deferred compensation plan totaled **$7.1 million** as of August 3, 2025, with accumulated unrealized gains of $292,000[98](index=98&type=chunk)[99](index=99&type=chunk) Fair Value of Assets | Asset (in Thousands) | August 3, 2025 (Level 1) | July 28, 2024 (Level 1) | April 27, 2025 (Level 1) | | :------------------- | :----------------------- | :---------------------- | :----------------------- | | U.S. Government Money Market Fund | $5,568 | $6,823 | $5,682 | | Growth Allocation Mutual Funds | $894 | $756 | $808 | | S&P 500 Index Fund | $340 | $212 | $275 | | Other | $308 | $252 | $282 | | Total | $7,110 | $8,043 | $7,047 | [13. Net Loss Per Share](index=35&type=section&id=13.%20Net%20Loss%20Per%20Share) Provides the calculation of basic and diluted net loss per share - Basic and diluted net loss per share were both **$(0.02)** for the three months ended August 3, 2025, compared to **$(0.58)** for the prior year[7](index=7&type=chunk) Net Loss Per Share Calculation | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | | :-------------------- | :------------- | :------------ | | Weighted average shares outstanding, basic | 12,570 | 12,470 | | Weighted average shares outstanding, diluted | 12,570 | 12,470 | | Antidilutive effect from net loss incurred | 90 | 137 | [14. Segment Information](index=35&type=section&id=14.%20Segment%20Information) Presents financial data for the company's operating segments, bedding and upholstery - Business segments were renamed to **'bedding' and 'upholstery'** to better reflect product offerings, with performance evaluated on net sales and gross profit[104](index=104&type=chunk)[106](index=106&type=chunk) Segment Performance | Segment (in Thousands) | Net Sales (Aug 3, 2025) | Net Sales (Jul 28, 2024) | Gross Profit (Aug 3, 2025) | Gross Profit (Jul 28, 2024) | | :--------------------- | :---------------------- | :----------------------- | :------------------------- | :-------------------------- | | Bedding | $28,046 | $28,076 | $2,942 | $(326) | | Upholstery | $22,645 | $28,461 | $4,286 | $5,518 | | Total | $50,691 | $56,537 | $7,228 | $5,076 | Segment Assets | Segment Assets (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :---------------------------- | :------------- | :------------ | :------------- | | Bedding Total Assets | $67,469 | $65,391 | $69,430 | | Upholstery Total Assets | $26,288 | $30,459 | $30,972 | | Total Segment Assets | $93,757 | $95,850 | $100,402 | [15. Income Taxes](index=41&type=section&id=15.%20Income%20Taxes) Explains the components of income tax expense and the effective tax rate - The effective income tax rate was significantly affected by the mix of earnings from U.S. and foreign operations and a **full valuation allowance** against U.S. deferred tax assets[114](index=114&type=chunk)[118](index=118&type=chunk) - The One Big Beautiful Bill Act (OBBBA) **did not impact the effective tax rate** due to the existing full U.S. valuation allowance[117](index=117&type=chunk)[250](index=250&type=chunk) - A full valuation allowance is maintained against U.S. net deferred income tax assets due to a **history of significant U.S. pre-tax losses**[121](index=121&type=chunk)[252](index=252&type=chunk) Income Tax Expense | Metric | August 3, 2025 | July 28, 2024 | | :----- | :------------- | :------------ | | Income tax expense | $1,369 | $240 | | Effective income tax rate | 120.3% | (3.4)% | [16. Stock-Based Compensation](index=45&type=section&id=16.%20Stock-Based%20Compensation) Details the company's equity incentive plan and related compensation expenses - The Amended and Restated 2015 Equity Incentive Plan authorizes an additional **960,000 shares**, with 669,853 shares available for future grants[129](index=129&type=chunk)[130](index=130&type=chunk) - Performance-based restricted stock units are granted to senior executives, measured by fair market value using **Monte Carlo simulation** for market-based components[131](index=131&type=chunk)[132](index=132&type=chunk) - Compensation expense for time-based restricted stock units was **$153,000** for the quarter, with $392,000 remaining unrecognized[141](index=141&type=chunk)[142](index=142&type=chunk) [17. Leases](index=48&type=section&id=17.%20Leases) Discloses information about the company's operating leases, including assets and liabilities - Operating lease expense was **$735,000** for the three months ended August 3, 2025, with a weighted average remaining lease term of **2.82 years**[146](index=146&type=chunk) Lease Balances | Lease Metric (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :-------------------------- | :------------- | :------------ | :------------- | | Right of use assets | $5,162 | $4,483 | $5,908 | | Operating lease liability - current | $2,209 | $1,565 | $2,394 | | Operating lease liability – long-term | $1,995 | $2,219 | $2,535 | [18. Commitments and Contingencies](index=50&type=section&id=18.%20Commitments%20and%20Contingencies) States management's assessment of the potential impact of legal proceedings and claims - Management believes current legal proceedings and claims will **not have a material adverse effect** on the company's financial position or results[147](index=147&type=chunk) [19. Statutory Reserves](index=50&type=section&id=19.%20Statutory%20Reserves) Describes the statutory reserve requirements for the company's China subsidiary - The China subsidiary's statutory surplus reserve fund reached its **50% registered capital requirement** ($4.0 million), ending the mandatory 10% net income transfer[148](index=148&type=chunk)[149](index=149&type=chunk) - The statutory surplus reserve fund is **non-distributable** except during liquidation but can be used for business expansion or converted into share capital[149](index=149&type=chunk) [20. Common Stock Repurchase Program](index=50&type=section&id=20.%20Common%20Stock%20Repurchase%20Program) Provides an update on the company's stock repurchase program activity - The board authorized a **$5.0 million** common stock repurchase program in March 2020; no shares were repurchased during the quarter[151](index=151&type=chunk)[153](index=153&type=chunk) - As of August 3, 2025, **$3.2 million remains available** for additional common stock repurchases[153](index=153&type=chunk) [Cautionary Statement Concerning Forward-Looking Information](index=53&type=section&id=Cautionary%20Statement%20Concerning%20Forward-Looking%20Information) Warns that forward-looking statements are subject to various risks and uncertainties - The report contains forward-looking statements subject to risks that may cause actual results to differ materially, including economic indicators, tariffs, and geopolitical instability[154](index=154&type=chunk)[155](index=155&type=chunk) - Key factors influencing future performance include housing starts, consumer tastes, trade policy, and the **success of restructuring initiatives**[155](index=155&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=55&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides an in-depth analysis of financial condition, operational results, and strategic initiatives [General](index=55&type=section&id=General) Provides an overview of the company's business segments and recent strategic transformations - The first quarter of fiscal 2026 was a **14-week period**, compared to a 13-week period in the prior year[158](index=158&type=chunk)[159](index=159&type=chunk) - The bedding segment manufactures fabrics and covers, while the upholstery segment sources and sells fabrics to furniture manufacturers[160](index=160&type=chunk)[162](index=162&type=chunk) - Strategic transformations include consolidating North American operations and **combining bedding and upholstery activities** into one Culp-branded business[161](index=161&type=chunk)[163](index=163&type=chunk) [Executive Summary](index=56&type=section&id=Executive%20Summary) Summarizes key financial results, including sales, gross profit, and liquidity for the quarter [Consolidated Results of Operations](index=56&type=section&id=Consolidated%20Results%20of%20Operations) Presents a high-level overview of the company's consolidated performance metrics Consolidated Results of Operations | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | Net sales | $50,691 | $56,537 | (10.3)% | | Gross profit | $7,228 | $5,076 | 42.4% | | Gross profit margin | 14.3% | 9.0% | 530bp | | Income (loss) from operations | $1,617 | $(6,851) | (123.6)% | | Net loss | $(231) | $(7,261) | (96.8)% | [Net Sales](index=56&type=section&id=Net%20Sales) Analyzes the drivers behind the year-over-year decrease in consolidated net sales - Consolidated net sales **decreased by 10.3%** year-over-year, with bedding sales flat and upholstery sales down **20.4%**[166](index=166&type=chunk) - Upholstery sales were impacted by **weakness in the residential furniture market** and tariff-related challenges[168](index=168&type=chunk) - The company is positioned for market share gains due to its **diversified production platform** offering supply chain optionality[169](index=169&type=chunk) [Gross Profit](index=56&type=section&id=Gross%20Profit) Explains the significant increase in consolidated gross profit and margin - Consolidated gross profit **increased by $2.1 million (42.4%)** to $7.2 million, driven by cost reductions and efficiency gains in the bedding segment[171](index=171&type=chunk)[172](index=172&type=chunk) - Bedding gross profit **increased by $3.3 million**, while upholstery gross profit decreased by $1.2 million[171](index=171&type=chunk) [Income (Loss) Before Income Taxes](index=58&type=section&id=Income%20(Loss)%20Before%20Income%20Taxes) Details the substantial improvement in pre-tax income compared to the prior year - Income before income taxes was **$1.1 million**, a significant improvement from a loss of **$(7.0) million** in the prior-year period[174](index=174&type=chunk) - Operating performance benefited from a more efficient bedding segment and a **$3.5 million restructuring credit** from the sale of the Canada facility[175](index=175&type=chunk) - Further cost benefits are expected in Q2 and Q3 fiscal 2026 from the **integration of upholstery and window business operations**[176](index=176&type=chunk) [Income Taxes](index=58&type=section&id=Income%20Taxes) Analyzes the factors contributing to the high effective income tax rate - Income tax expense was **$1.4 million (120.3% effective rate)**, compared to $240,000 ((3.4%) effective rate) in the prior-year period[177](index=177&type=chunk) - The effective tax rate was adversely affected by the mix of earnings from U.S. operations (pre-tax losses) and foreign subsidiaries, and a **full valuation allowance** against U.S. deferred tax assets[178](index=178&type=chunk) - Haitian operations' pre-tax losses of **$(362,000)** did not receive an income tax benefit due to a 0% income tax rate[178](index=178&type=chunk) [Liquidity](index=58&type=section&id=Liquidity) Summarizes the company's cash position and key cash flow activities - Cash and cash equivalents **increased by $5.5 million to $11.1 million**, primarily due to net borrowings on lines of credit and asset sales[181](index=181&type=chunk) - Net cash used in operating activities increased to **$(695,000)**, reflecting increased inventory and decreased accounts payable[182](index=182&type=chunk)[183](index=183&type=chunk) - Outstanding borrowings under lines of credit totaled **$18.1 million** as of August 3, 2025[184](index=184&type=chunk) [Segment Analysis](index=60&type=section&id=Segment%20Analysis) Provides a detailed performance review of the bedding and upholstery segments [Bedding Segment](index=60&type=section&id=Bedding%20Segment) Analyzes the bedding segment's flat sales but significantly improved profitability - Net sales were **flat year-over-year** due to low consumer demand and tariff uncertainty, despite growth in knit fabric product lines[188](index=188&type=chunk)[189](index=189&type=chunk) - Gross profit **significantly improved to $2.9 million** from a loss of $(326,000), driven by cost reductions from restructuring[192](index=192&type=chunk)[193](index=193&type=chunk) - Inventory **increased by $9.8 million (38.9%)** to $35.1 million, reflecting a transition to strategically source mattress fabrics[197](index=197&type=chunk) Bedding Segment Performance | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | Net sales | $28,046 | $28,076 | (0.1)% | | Gross profit (loss) | $2,942 | $(326) | N.M. | | Gross profit margin | 10.5% | (1.2)% | N.M. | [Upholstery Segment](index=64&type=section&id=Upholstery%20Segment) Discusses the decline in the upholstery segment's sales and profitability - Sales **declined 20.4%** due to muted residential demand, global trade uncertainty, and an uneven comparison from a large customer's prior-year purchasing[205](index=205&type=chunk) - Profitability decreased primarily due to lower sales; cost benefits from consolidating the Read Window business are expected in **Q3 fiscal 2026**[210](index=210&type=chunk)[211](index=211&type=chunk) - Accounts receivable **decreased by $3.3 million (28.9%)** and inventory **decreased by $1.4 million (8.4%)**, reflecting lower net sales[214](index=214&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) Upholstery Segment Performance | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | Net Sales | $22,645 | $28,461 | (20.4)% | | Gross profit | $4,286 | $5,518 | (22.3)% | | Gross margin | 18.9% | 19.4% | (50)bp | [Consolidated - Other Income Statement Categories](index=68&type=section&id=Consolidated%20-%20Other%20Income%20Statement%20Categories) Analyzes other key line items on the consolidated income statement [Selling, General, and Administrative Expenses ("SG&A")](index=68&type=section&id=Selling%2C%20General%2C%20and%20Administrative%20Expenses%20(%22SG%26A%22)) Details the slight decrease in SG&A expenses despite a longer reporting period - SG&A expenses **slightly decreased by 1.9%** due to lower net sales and cost reduction initiatives, partially offset by the longer 14-week period[227](index=227&type=chunk)[229](index=229&type=chunk) SG&A Expenses | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | SG&A expenses | $9,119 | $9,296 | (1.9)% | [Restructuring Credit (Expense)](index=70&type=section&id=Restructuring%20Credit%20(Expense)) Explains the significant restructuring credit recorded in the quarter - A **$3.9 million restructuring credit** was recorded, primarily from a **$4.0 million gain** on the sale of the Quebec, Canada facility[231](index=231&type=chunk)[232](index=232&type=chunk) - Restructuring expense of **$349,000** was incurred for the strategic transformation, with estimated cumulative charges of $2.2 million[234](index=234&type=chunk) Restructuring Credit (Expense) | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | | :-------------------- | :------------- | :------------ | | Restructuring credit (expense) | $3,508 | $(2,631) | [Interest Expense](index=71&type=section&id=Interest%20Expense) Highlights the substantial increase in interest expense due to higher borrowings - Interest expense **increased significantly** due to higher borrowings under line of credit agreements in the U.S. and China[237](index=237&type=chunk) Interest Expense | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | Interest expense | $(183) | $(28) | 553.6% | [Interest Income](index=71&type=section&id=Interest%20Income) Notes the decrease in interest income resulting from lower cash balances - Interest income **decreased** due to lower average cash balances in Q1 fiscal 2026 compared to the prior year[238](index=238&type=chunk) Interest Income | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | Interest income | $235 | $262 | (10.3)% | [Other Expense](index=71&type=section&id=Other%20Expense) Attributes the increase in other expense to unfavorable foreign currency exchange rates - The increase in other expense was primarily due to less favorable foreign currency exchange rates, resulting in a **$189,000 foreign currency exchange rate loss**[240](index=240&type=chunk) Other Expense | Metric (in Thousands) | August 3, 2025 | July 28, 2024 | Change (%) | | :-------------------- | :------------- | :------------ | :--------- | | Other expense | $531 | $404 | 31.4% | [Income Taxes](index=71&type=section&id=Income%20Taxes) Provides a detailed analysis of the effective tax rate and income taxes paid - The effective tax rate was significantly impacted by the mix of earnings from U.S. operations (pre-tax losses) and foreign subsidiaries, and a **full valuation allowance** against U.S. deferred tax assets[249](index=249&type=chunk) - The One Big Beautiful Bill Act (OBBBA) **did not impact the effective tax rate** due to the existing full U.S. valuation allowance[248](index=248&type=chunk)[250](index=250&type=chunk) - A full valuation allowance is maintained against U.S. net deferred income tax assets due to a **history of significant U.S. pre-tax losses**[252](index=252&type=chunk) Income Tax Expense | Metric | August 3, 2025 | July 28, 2024 | | :----- | :------------- | :------------ | | Income tax expense | $1,369 | $240 | | Effective income tax rate | 120.3% | (3.4)% | Income Taxes Paid | Income Taxes Paid (in Thousands) | August 3, 2025 | July 28, 2024 | | :------------------------------- | :------------- | :------------ | | China Income Taxes, Net of Refunds | $46 | $561 | | Canada - Income Taxes, Net of Refunds | $0 | $0 | | Total | $46 | $561 | [Liquidity and Capital Resources](index=77&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's liquidity position, capital resources, and working capital management [Overall](index=77&type=section&id=Overall) Outlines the company's primary sources of liquidity and key cash flow drivers - Current liquidity sources include **$11.1 million in cash**, cash flow from operations, and **$17.6 million available** under the U.S. revolving credit line[260](index=260&type=chunk) - Net cash used in operating activities increased to **$(695,000)**, primarily due to increased inventory and decreased accounts payable[262](index=262&type=chunk) - Cash balance may be adversely affected by low customer demand, **increased tariffs**, and supply chain disruptions[264](index=264&type=chunk) [By Geographic Area](index=78&type=section&id=By%20Geographic%20Area) Presents a breakdown of cash and cash equivalents by geographic location Cash and Cash Equivalents by Geography | Geographic Area (in Thousands) | August 3, 2025 | July 28, 2024 | April 27, 2025 | | :----------------------------- | :------------- | :------------ | :------------- | | United States | $510 | $2,472 | $151 | | China | $9,229 | $10,462 | $4,723 | | Canada | $1,316 | $326 | $701 | | Haiti | $17 | $141 | $38 | | Vietnam | $15 | $62 | $8 | | Cayman Islands | $7 | $9 | $8 | | Total | $11,094 | $13,472 | $5,629 | [Common Stock Repurchase Program](index=78&type=section&id=Common%20Stock%20Repurchase%20Program) Confirms no share repurchase activity during the quarter - **No shares were repurchased** during Q1 fiscal 2026 or Q1 fiscal 2025; **$3.2 million remains available** for repurchases[266](index=266&type=chunk)[267](index=267&type=chunk) [Dividends](index=78&type=section&id=Dividends) Notes the continued suspension of the quarterly cash dividend - The company **suspended its quarterly cash dividend** on June 29, 2022, to preserve capital, with no payments made in fiscal 2023-2026[268](index=268&type=chunk) [Consolidated Basis - Working Capital](index=78&type=section&id=Consolidated%20Basis%20-%20Working%20Capital) Analyzes the key changes in operating working capital components - Operating working capital was **$43.7 million** as of August 3, 2025, up from $35.1 million as of July 28, 2024[269](index=269&type=chunk) - Accounts receivable **decreased by $3.2 million (14.8%)** to $18.4 million, reflecting lower net sales[270](index=270&type=chunk) - Inventory **increased by $8.4 million (20.3%)** to $50.1 million, driven by strategic sourcing and rising costs/tariffs[273](index=273&type=chunk) - Accounts payable **decreased to $24.3 million**, primarily due to decreased consumer demand and timing of vendor payments[276](index=276&type=chunk) [Financing Arrangements](index=80&type=section&id=Financing%20Arrangements) Confirms compliance with financial covenants related to credit agreements - Outstanding borrowings under line of credit agreements totaled **$18.1 million**, with the company in compliance with all financial covenants[277](index=277&type=chunk) [Leases](index=80&type=section&id=Leases) References the detailed disclosure of lease obligations in the financial statement notes - Lease obligations are detailed in Note 17, including a **five-year maturity schedule**[279](index=279&type=chunk) [Capital Expenditures and Depreciation](index=80&type=section&id=Capital%20Expenditures%20and%20Depreciation) Discusses the reduction in capital spending and provides future projections - Cash capital expenditures **decreased to $179,000** from $501,000 in the prior year, reflecting reduced spending[280](index=280&type=chunk) - Depreciation expense was **$1.1 million**, down from $1.6 million in the prior year[281](index=281&type=chunk) - Fiscal 2026 capital spending is projected to be **comparable to fiscal 2025**, focusing on efficiency and future growth[283](index=283&type=chunk) [Critical Accounting Policies and Recent Accounting Developments](index=82&type=section&id=Critical%20Accounting%20Policies%20and%20Recent%20Accounting%20Developments) Confirms no changes to significant accounting policies during the period - No changes in significant accounting policies as of August 3, 2025; refer to Note 2 for recent accounting pronouncements[284](index=284&type=chunk) [Contractual Obligations](index=82&type=section&id=Contractual%20Obligations) States that there have been no significant changes to contractual obligations - There were **no significant or new contractual obligations** since the last Annual Report on Form 10-K[285](index=285&type=chunk) [Inflation](index=82&type=section&id=Inflation) Discusses the adverse impact of inflation and tariffs on costs and consumer demand - Rising raw material, energy, and labor costs could **adversely affect operating results** as market dynamics limit price increases[286](index=286&type=chunk) - New tariffs have increased upward pressure on raw material costs; **price increases were initiated in Q2 fiscal 2026** to mitigate these impacts[287](index=287&type=chunk)[288](index=288&type=chunk) - Persistent inflationary pressures **curtailed consumer spending** in fiscal 2023-2025, leading to lower demand[289](index=289&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=83&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Outlines the company's exposure to interest rate and foreign currency market risks [Interest Rates](index=83&type=section&id=Interest%20Rates) Details the company's exposure to variable interest rates on its credit agreements - The U.S. revolving credit agreement has a variable interest rate based on SOFR (**6.11%** as of August 3, 2025), with **$7.0 million outstanding**[291](index=291&type=chunk) - Chinese credit agreements have variable interest rates based on the China Loan Prime Rate (**2.6%** as of August 3, 2025), with total outstanding balances of **$8.3 million USD**[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk) [Foreign Currency](index=83&type=section&id=Foreign%20Currency) Assesses the company's exposure to fluctuations in foreign currency exchange rates - The company is exposed to foreign currency risk but attempts to maintain a **natural hedge** by balancing assets and liabilities in local currencies[296](index=296&type=chunk) - A **10% change in exchange rates** as of August 3, 2025, would not have materially affected results of operations or financial position[296](index=296&type=chunk) [Item 4. Controls and Procedures](index=83&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures as of the quarter-end - Disclosure controls and procedures were evaluated and **deemed effective** as of August 3, 2025, ensuring timely and accurate reporting[297](index=297&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter ended August 3, 2025[298](index=298&type=chunk) [Part II - Other Information](index=85&type=section&id=Part%20II%20-%20Other%20Information) [Item 1. Legal Proceedings](index=85&type=section&id=Item%201.%20Legal%20Proceedings) Confirms no material changes to legal proceedings during the quarter - **No material changes** to legal proceedings during the three months ended August 3, 2025[299](index=299&type=chunk) [Item 1A. Risk Factors](index=85&type=section&id=Item%201A.%20Risk%20Factors) States that no material changes to risk factors occurred during the quarter - **No material changes** to risk factors during the three months ended August 3, 2025[300](index=300&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=85&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no stock repurchase activity and the remaining authorization under the program - **No shares were purchased** under the common stock repurchase program during the reported period[301](index=301&type=chunk) Common Stock Repurchase Program Activity | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :----- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | :------------------------------------------------------------------------------------- | | April 28, 2025 to June 1, 2025 | — | — | — | $3,248,094 | | June 2, 2025 to June 29, 2025 | — | — | — | $3,248,094 | | June 30, 2025 to August 3, 2025 | — | — | — | $3,248,094 | | Total | — | — | — | $3,248,094 | [Item 5. Other Information](index=85&type=section&id=Item%205.%20Other%20Information) Discloses no adoption or termination of trading arrangements by directors or officers - **No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements** were adopted or terminated by directors or officers during the quarter[304](index=304&type=chunk) [Item 6. Exhibits](index=86&type=section&id=Item%206.%20Exhibits) Lists the exhibits filed as part of the Form 10-Q report - Exhibits include **certifications from the CEO and CFO** (31.1, 31.2, 32.1, 32.2) and various Inline XBRL documents[307](index=307&type=chunk) [Signatures](index=87&type=section&id=Signatures) Provides the official signatures authorizing the filing of the report - The report was signed by **Kenneth R. Bowling (EVP & CFO)** and **Ronald S. Chandler (VP & Corporate Controller)** on September 12, 2025[311](index=311&type=chunk)
Huize(HUIZ) - 2025 Q2 - Quarterly Report
2025-09-12 13:12
Exhibit 99.1 Huize Holding Limited Reports Second Quarter 2025 Unaudited Financial Results SHENZHEN, China, September 12, 2025 (GLOBE NEWSWIRE) – Huize Holding Limited, ("Huize", the "Company" or "we") (NASDAQ: HUIZ), a leading insurance technology platform connecting consumers, insurance carriers, and distribution partners digitally through data-driven and AI-powered solutions in Asia, today announced its unaudited financial results for the quarter ended June 30, 2025. Second Quarter 2025 Financial and Ope ...
Kewaunee Scientific (KEQU) - 2026 Q1 - Quarterly Report
2025-09-12 13:04
PART I. FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial statements and related disclosures for the company [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents Kewaunee Scientific Corporation's unaudited condensed consolidated financial statements, including statements of operations, comprehensive earnings, stockholders' equity, balance sheets, and cash flows, along with detailed notes explaining accounting policies, significant transactions like the Nu Aire acquisition, and financial instrument valuations for the three months ended July 31, 2025, and comparative periods [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Summarizes the company's net sales, gross profit, operating profit, and net earnings for the three months ended July 31, 2025 and 2024 | Metric | Three Months Ended July 31, 2025 ($ thousands) | Three Months Ended July 31, 2024 ($ thousands) | YoY Change (%) | | :--------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------- | | Net sales | 71,104 | 48,393 | 46.9% | | Cost of products sold | 50,174 | 35,905 | 39.7% | | Gross profit | 20,930 | 12,488 | 67.6% | | Operating expenses | 16,120 | 9,913 | 62.6% | | Operating profit | 4,810 | 2,575 | 86.8% | | Profit before income taxes | 3,920 | 2,430 | 61.3% | | Income tax expense | 761 | 192 | 296.4% | | Net earnings | 3,159 | 2,238 | 41.2% | | Net earnings attributable to Kewaunee Scientific Corporation | 3,093 | 2,193 | 41.0% | | Basic EPS | 1.08 | 0.77 | 40.3% | | Diluted EPS | 1.04 | 0.74 | 40.5% | [Condensed Consolidated Statements of Comprehensive Earnings](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Earnings) Presents net earnings and other comprehensive income/loss, including foreign currency adjustments, for the three months ended July 31, 2025 and 2024 | Metric | Three Months Ended July 31, 2025 ($ thousands) | Three Months Ended July 31, 2024 ($ thousands) | YoY Change (%) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :------------- | | Net earnings | 3,159 | 2,238 | 41.2% | | Foreign currency translation adjustments | (410) | (116) | 253.4% | | Other comprehensive loss | (410) | (116) | 253.4% | | Comprehensive earnings, net of tax | 2,749 | 2,122 | 29.5% | | Comprehensive earnings attributable to Kewaunee Scientific Corporation | 2,683 | 2,077 | 29.2% | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Details changes in stockholders' equity, including retained earnings and accumulated other comprehensive loss, between April 30, 2025 and July 31, 2025 | Metric | As of July 31, 2025 ($ thousands) | As of April 30, 2025 ($ thousands) | Change ($ thousands) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------- | | Total Kewaunee Scientific Corporation Stockholders' Equity | 67,078 | 64,457 | 2,621 | | Retained Earnings | 62,012 | 58,919 | 3,093 | | Accumulated Other Comprehensive Loss | (4,213) | (3,803) | (410) | - Net earnings attributable to Kewaunee Scientific Corporation for the three months ended July 31, 2025, were **$3,093 thousand**, contributing to the increase in retained earnings[16](index=16&type=chunk) - Other comprehensive loss for the three months ended July 31, 2025, was **$(410) thousand**[16](index=16&type=chunk) [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Outlines the company's financial position, including assets, liabilities, and equity, as of July 31, 2025 and April 30, 2025 | Metric | As of July 31, 2025 ($ thousands) | As of April 30, 2025 ($ thousands) | Change ($ thousands) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------- | | Total Current Assets | 117,148 | 118,363 | (1,215) | | Total Assets | 193,486 | 194,654 | (1,168) | | Total Current Liabilities | 50,486 | 53,712 | (3,226) | | Total Liabilities | 124,617 | 128,409 | (3,792) | | Total Stockholders' Equity | 68,869 | 66,245 | 2,624 | | Cash and cash equivalents | 19,489 | 14,942 | 4,547 | | Receivables, net | 56,897 | 62,384 | (5,487) | | Inventories | 34,923 | 32,849 | 2,074 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash flows from operating, investing, and financing activities for the three months ended July 31, 2025 and 2024 | Metric | Three Months Ended July 31, 2025 ($ thousands) | Three Months Ended July 31, 2024 ($ thousands) | Change ($ thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :------------------- | | Net cash provided by (used in) operating activities | 5,791 | (794) | 6,585 | | Net cash used in investing activities | (771) | (278) | (493) | | Net cash (used in) provided by financing activities | (1,463) | 343 | (1,806) | | Increase (decrease) in cash, cash equivalents and restricted cash | 3,277 | (752) | 4,029 | | Cash, cash equivalents and restricted cash, end of period | 20,441 | 25,186 | (4,745) | - Operating activities provided **$5,791 thousand** in cash for the three months ended July 31, 2025, a substantial improvement from **$794 thousand** used in the prior year[21](index=21&type=chunk) - Capital expenditures increased to **$771 thousand** for the three months ended July 31, 2025, from **$278 thousand** in the prior year[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, acquisitions, and financial instruments [A. Financial Information](index=11&type=section&id=A.%20Financial%20Information) Clarifies the basis of preparation for unaudited interim financial statements and their relation to the annual report - The interim financial statements are unaudited and prepared under SEC rules, condensing GAAP disclosures, and should be read in conjunction with the Company's 2025 Annual Report on Form 10-K[26](index=26&type=chunk)[27](index=27&type=chunk) - Interim results are not necessarily indicative of full-year results, and management's estimates and assumptions are subject to actual results differing[27](index=27&type=chunk)[28](index=28&type=chunk) [B. Cash, Cash Equivalents and Restricted Cash](index=11&type=section&id=B.%20Cash,%20Cash%20Equivalents%20and%20Restricted%20Cash) Details the composition of cash, cash equivalents, and restricted cash, including performance guarantee amounts - Restricted cash includes bank deposits of subsidiaries used for performance guarantees against customer orders[29](index=29&type=chunk) | Metric | July 31, 2025 ($ thousands) | April 30, 2025 ($ thousands) | | :-------------------------------------- | :-------------------------- | :--------------------------- | | Cash and cash equivalents | 19,489 | 14,942 | | Restricted cash | 952 | 2,222 | | Total cash, cash equivalents and restricted cash | 20,441 | 17,164 | [C. Nu Aire Acquisition](index=11&type=section&id=C.%20Nu%20Aire%20Acquisition) Describes the Nu Aire, Inc. acquisition, its financial impact, purchase price allocation, and pro forma information - Kewaunee Scientific Corporation acquired Nu Aire, Inc. on November 1, 2024, for **$53.0 million**, expanding its capabilities in laboratory furnishings and technical products[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - The acquisition was funded by **$29.669 million** cash and **$23.0 million** in subordinated seller notes[32](index=32&type=chunk)[33](index=33&type=chunk) - Nu Aire contributed **$19.7 million** in revenue and **$696,000** in net earnings for the three months ended July 31, 2025[37](index=37&type=chunk) Nu Aire Purchase Price Allocation (as of July 31, 2025) | Asset/Liability | Final Allocation ($ thousands) | | :-------------------------------- | :----------------------------- | | Cash and cash equivalents | 1,245 | | Receivables | 10,650 | | Inventories | 15,522 | | Property, plant and equipment | 7,349 | | Other intangible assets | 18,600 | | Goodwill | 12,487 | | Total assets acquired | 74,088 | | Total liabilities assumed | (21,108) | | Aggregate acquisition consideration | 52,980 | Pro Forma Financial Information (Three Months Ended July 31, 2024, as if Nu Aire acquired May 1, 2023) | Metric | 2025 (actual) ($ thousands) | 2024 (pro forma) ($ thousands) | | :------------------------------------------ | :-------------------------- | :----------------------------- | | Net sales | 71,104 | 65,448 | | Net earnings | 3,093 | 4,273 | | Basic EPS | 1.08 | 1.50 | | Diluted EPS | 1.04 | 1.44 | [D. Revenue Recognition](index=14&type=section&id=D.%20Revenue%20Recognition) Explains revenue recognition policies, disaggregated revenue by type and geography, and deferred revenue balances - The majority of the Company's revenues are recognized over time as the customer receives control, with a portion recognized at a distinct point in time[41](index=41&type=chunk) Disaggregated Revenue (Three Months Ended July 31) | Revenue Type | July 31, 2025 Domestic ($ thousands) | July 31, 2025 International ($ thousands) | July 31, 2025 Total ($ thousands) | July 31, 2024 Domestic ($ thousands) | July 31, 2024 International ($ thousands) | July 31, 2024 Total ($ thousands) | | :----------- | :----------------------------------- | :---------------------------------------- | :-------------------------------- | :----------------------------------- | :---------------------------------------- | :-------------------------------- | | Over Time | 32,713 | 16,752 | 49,465 | 34,389 | 12,870 | 47,259 | | Point in Time | 21,639 | — | 21,639 | 1,134 | — | 1,134 | | Total | 54,352 | 16,752 | 71,104 | 35,523 | 12,870 | 48,393 | - Deferred revenue at July 31, 2025, was **$4,983 thousand**, with approximately **100%** expected to be recognized as revenue in the succeeding **12 months**[43](index=43&type=chunk) [E. Inventories](index=14&type=section&id=E.%20Inventories) Outlines the valuation method and composition of inventories, including finished products, work in process, and raw materials - Inventories are measured using the first-in, first-out (FIFO) method at the lower of cost or net realizable value[44](index=44&type=chunk) Inventories Composition | Inventory Type | July 31, 2025 ($ thousands) | April 30, 2025 ($ thousands) | | :------------- | :-------------------------- | :--------------------------- | | Finished products | 6,056 | 5,543 | | Work in process | 6,827 | 3,784 | | Raw materials | 22,040 | 23,522 | | Total | 34,923 | 32,849 | [F. Fair Value of Financial Instruments](index=15&type=section&id=F.%20Fair%20Value%20of%20Financial%20Instruments) Discusses fair value measurement of financial instruments and their classification within the fair value hierarchy - The carrying value of the Company's financial instruments, including cash, mutual funds, and debt, approximates their fair value[45](index=45&type=chunk) Fair Value Hierarchy (July 31, 2025) | Financial Assets | Level 1 ($ thousands) | Level 2 ($ thousands) | Total ($ thousands) | | :------------------------------------------------- | :-------------------- | :-------------------- | :------------------ | | Trading securities held in non-qualified compensation plans | 2,340 | — | 2,340 | | Cash surrender value of life insurance policies | — | 1,514 | 1,514 | | Total Financial Assets | 2,340 | 1,514 | 3,854 | | Financial Liabilities | | | | | Non-qualified compensation plans | — | 4,334 | 4,334 | | Total Financial Liabilities | — | 4,334 | 4,334 | [G. Goodwill and Other Intangible Assets](index=15&type=section&id=G.%20Goodwill%20and%20Other%20Intangible%20Assets) Details goodwill from the Nu Aire acquisition and the composition, useful lives, and amortization of other intangible assets - Goodwill of approximately **$12.5 million** was recorded from the Nu Aire Acquisition, with no impairment losses during the three months ended July 31, 2025[45](index=45&type=chunk) Intangible Assets (July 31, 2025) | Intangible Asset | Estimated Useful Life | Gross Carrying Amount ($ thousands) | Accumulated Amortization ($ thousands) | Net Book Value ($ thousands) | | :----------------------- | :-------------------- | :---------------------------------- | :------------------------------------- | :--------------------------- | | Customer relationships | **10 years** | 9,800 | (735) | 9,065 | | Trade names and trademarks | indefinite | 4,900 | — | 4,900 | | Developed technology | **7 years** | 3,900 | (418) | 3,482 | | Total | | 18,600 | (1,153) | 17,447 | Expected Future Amortization Expense (excluding trade names and trademarks) | Fiscal Year | Amortization Expense ($ thousands) | | :------------------ | :------------------------------- | | Remainder of fiscal 2026 | 1,153 | | 2027 | 1,537 | | 2028 | 1,537 | | 2029 | 1,537 | | 2030 | 1,537 | | Thereafter | 5,246 | | Total | 12,547 | [H. Long-term Debt and Other Credit Arrangements](index=16&type=section&id=H.%20Long-term%20Debt%20and%20Other%20Credit%20Arrangements) Describes long-term debt, including the PNC Loan Agreement, Subordinated Seller Notes, and other credit facilities Long-term Debt Components | Debt Type | July 31, 2025 ($ thousands) | April 30, 2025 ($ thousands) | | :---------------- | :-------------------------- | :--------------------------- | | PNC Loan Agreement | 13,000 | 13,750 | | Seller Notes | 24,380 | 23,935 | | Total long-term debt | 37,380 | 37,685 | - The PNC Loan Agreement includes a **$20.0 million** Revolving Credit Facility (unused at July 31, 2025) and a **$15.0 million** Term Loan, both maturing on November 1, 2029[49](index=49&type=chunk)[51](index=51&type=chunk) - Subordinated Seller Notes of **$23.0 million**, accruing **8%** interest per annum, mature on November 1, 2027, and are subordinate to PNC's rights[53](index=53&type=chunk)[55](index=55&type=chunk) - International subsidiaries had **$495,000** in short-term borrowings at July 31, 2025[57](index=57&type=chunk) [I. Sale-Leaseback Financing Transaction](index=17&type=section&id=I.%20Sale-Leaseback%20Financing%20Transaction) Explains the headquarters sale-leaseback as a financing transaction, detailing associated liabilities and interest expense - The sale-leaseback arrangement for the Company's headquarters was accounted for as a financing transaction due to the lease being classified as a finance lease, indicating control of the property did not transfer[60](index=60&type=chunk)[62](index=62&type=chunk) - The carrying value of the financing liability was **$27,227 thousand** at July 31, 2025, with **$807 thousand** classified as current[63](index=63&type=chunk) - Interest expense associated with the financing arrangement was **$308 thousand** for the three months ended July 31, 2025[63](index=63&type=chunk) [J. Leases](index=18&type=section&id=J.%20Leases) Provides information on right-of-use assets, lease liabilities, and future minimum payments for operating and financing leases - Right-of-use assets totaled **$12,022 thousand** at July 31, 2025, for operating and financing leases[66](index=66&type=chunk) - Operating cash paid to settle lease liabilities was **$1,040 thousand** for the three months ended July 31, 2025, and operating lease expense was **$1,458 thousand**[66](index=66&type=chunk) Future Minimum Lease Payments (July 31, 2025) | Fiscal Year | Operating ($ thousands) | Financing ($ thousands) | | :------------------ | :---------------------- | :---------------------- | | Remainder of fiscal 2026 | 2,843 | 94 | | 2027 | 3,345 | 40 | | 2028 | 2,462 | 40 | | 2029 | 2,108 | 40 | | 2030 | 1,630 | 40 | | Thereafter | 160 | 22 | | Total Minimum Lease Payments | 12,548 | 276 | | Imputed Interest | (1,403) | (45) | | Total | 11,145 | 231 | [K. Stockholders' Equity](index=19&type=section&id=K.%20Stockholders'%20Equity) Details the number of outstanding common shares and the company's share repurchase program - As of July 31, 2025, there were approximately **2,865,000 shares** of Common Stock outstanding[69](index=69&type=chunk) - The Board of Directors amended the share repurchase program on March 12, 2025, authorizing an additional **100,000 shares**[71](index=71&type=chunk) - No shares were repurchased under the program during the three months ended July 31, 2025, with **100,603 shares** remaining authorized for purchase[71](index=71&type=chunk) [L. Earnings Per Share](index=19&type=section&id=L.%20Earnings%20Per%20Share) Explains basic and diluted earnings per share calculation and reconciliation of weighted average common shares outstanding - Basic EPS is based on the weighted average number of common shares outstanding, while diluted EPS reflects the assumed exercise of outstanding options and conversion of restricted stock units (RSUs)[72](index=72&type=chunk) Reconciliation of Basic to Diluted Weighted Average Common Shares Outstanding | Metric | Three Months Ended July 31, 2025 (thousands) | Three Months Ended July 31, 2024 (thousands) | | :------------------------------------------ | :------------------------------------------- | :------------------------------------------- | | Basic | 2,851 | 2,849 | | Dilutive effect of stock options and RSUs | 112 | 118 | | Weighted average common shares outstanding - diluted | 2,963 | 2,967 | [M. Stock Options and Stock-based Compensation](index=20&type=section&id=M.%20Stock%20Options%20and%20Stock-based%20Compensation) Describes the company's stock incentive plans, RSU grants, and stock-based compensation expense - The 2023 Omnibus Incentive Plan replaced the 2017 Plan, reserving **374,633 shares** for issuance, with **291,326 shares** available at July 31, 2025[74](index=74&type=chunk) - The Company granted **72,728 RSUs** in June 2025, vesting over **three years** with service and performance components[75](index=75&type=chunk) - Stock-based compensation expense was **$431 thousand** for the three months ended July 31, 2025, with **$3,877 thousand** remaining to be recorded[75](index=75&type=chunk) [N. Income Taxes](index=20&type=section&id=N.%20Income%20Taxes) Presents income tax expense, effective tax rates, and the impact of discrete tax benefits and new tax legislation Income Tax Expense and Effective Tax Rate | Metric | Three Months Ended July 31, 2025 ($ thousands) | Three Months Ended July 31, 2024 ($ thousands) | | :-------------------- | :--------------------------------------------- | :--------------------------------------------- | | Income tax expense | 761 | 192 | | Effective tax rate | 19.4% | 7.9% | - The effective tax rate for Q1 FY2026 (**19.4%**) reflects foreign operations' tax rates and a **$303 thousand** discrete tax benefit from RSU vesting[76](index=76&type=chunk) - The U.S. government enacted the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, and the Company is evaluating its potential impact on future tax obligations[78](index=78&type=chunk) [O. Segment Information](index=21&type=section&id=O.%20Segment%20Information) Provides financial data disaggregated by domestic and international operating segments, evaluated by earnings before income taxes - The Company operates in two business segments: Domestic (including the Nu Aire acquisition) and International, with the CEO evaluating performance based on earnings before income taxes[79](index=79&type=chunk)[80](index=80&type=chunk) Segment Financial Information (Three Months Ended July 31, 2025 vs. 2024) | Metric | Domestic Operations 2025 ($ thousands) | International Operations 2025 ($ thousands) | Total 2025 ($ thousands) | Domestic Operations 2024 ($ thousands) | International Operations 2024 ($ thousands) | Total 2024 ($ thousands) | | :------------------------------------ | :------------------------------------- | :------------------------------------------ | :----------------------- | :------------------------------------- | :------------------------------------------ | :----------------------- | | Revenues from external customers | 54,352 | 16,752 | 71,104 | 35,523 | 12,870 | 48,393 | | Depreciation and amortization | 1,428 | 96 | 1,549 | 662 | 107 | 815 | | Interest expense | 313 | 13 | 1,058 | 441 | 21 | 472 | | Earnings (loss) before income taxes | 5,835 | 1,143 | 3,920 | 3,635 | 787 | 2,430 | | Segment assets | 153,302 | 40,184 | 193,486 | 90,235 | 41,783 | 132,018 | [P. New Accounting Standards](index=22&type=section&id=P.%20New%20Accounting%20Standards) Discusses recently issued accounting pronouncements and their expected impact on financial statements - ASU 2023-09, "Improvements for Income Tax Disclosures," is effective for fiscal year 2026, with no significant impact expected[82](index=82&type=chunk) - ASU 2024-03/2025-01, "Expense Disaggregation Disclosures," is effective for annual disclosures in fiscal year 2028 and interim disclosures in fiscal year 2029, with no significant impact expected[83](index=83&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) This section provides management's perspective on the Company's financial performance and condition, highlighting the impact of the Nu Aire acquisition on sales and gross profit, discussing liquidity, and outlining the outlook amidst market challenges and strategic growth initiatives [Acquisition of Nu Aire, Inc.](index=22&type=section&id=Acquisition%20of%20Nu%20Aire,%20Inc.) Details the strategic rationale and financial aspects of the Nu Aire acquisition, expanding product offerings - The Nu Aire acquisition, completed November 1, 2024, for **$55.0 million**, significantly expands the Company's product portfolio to include biological safety cabinets, CO2 incubators, and ultralow freezers[85](index=85&type=chunk)[86](index=86&type=chunk) - This acquisition accelerates the Company's vision of becoming a market leader in laboratory furniture and technical products by combining capabilities and leveraging Nu Aire's established distribution partners[87](index=87&type=chunk) [Critical Accounting Estimates](index=22&type=section&id=Critical%20Accounting%20Estimates) Confirms no material changes to critical accounting estimates since the last annual report, except as noted - There have been no material changes to the Company's critical accounting estimates since the 2025 Annual Report on Form 10-K, beyond those set forth in this quarterly report[88](index=88&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Analyzes key financial performance indicators like sales, gross profit, operating expenses, and net earnings for the three months ended July 31, 2025 and 2024 Key Financial Performance Indicators (Three Months Ended July 31) | Metric | 2025 ($ thousands) | 2024 ($ thousands) | YoY Change ($ thousands) | YoY Change (%) | | :-------------------------- | :----------------- | :----------------- | :----------------------- | :------------- | | Sales | 71,104 | 48,393 | 22,711 | 46.9% | | Domestic Sales | 54,352 | 35,523 | 18,829 | 53.0% | | International Sales | 16,752 | 12,870 | 3,882 | 30.2% | | Gross Profit Margin | 29.4% | 25.8% | 3.6 pp | - | | Operating Expenses | 16,120 | 9,913 | 6,207 | 62.6% | | Interest Expense | 1,058 | 472 | 586 | 124.2% | | Income Tax Expense | 761 | 192 | 569 | 296.4% | | Net Earnings | 3,093 | 2,193 | 900 | 41.0% | | Diluted EPS | 1.04 | 0.74 | 0.30 | 40.5% | - Domestic sales increased **53.0%** primarily due to the Nu Aire acquisition, while International sales increased **30.2%** due to large project deliveries[89](index=89&type=chunk) - The Company's order backlog was **$205.0 million** at July 31, 2025, compared to **$159.4 million** at July 31, 2024[90](index=90&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses liquidity sources, working capital, and cash flows from operating, investing, and financing activities - Principal liquidity sources are funds from operating activities and the new PNC Revolving Credit Facility, which replaced the terminated Mid Cap Revolving Credit Facility[97](index=97&type=chunk) Working Capital and Ratios | Metric | July 31, 2025 ($ thousands) | April 30, 2025 ($ thousands) | | :-------------------------------- | :-------------------------- | :--------------------------- | | Working Capital | 66,662 | 64,651 | | Ratio of Current Assets to Current Liabilities | 2.3-to-1.0 | 2.2-to-1.0 | - Operating activities provided **$5,791 thousand** in cash, driven by decreases in receivables, partially offset by increases in inventories and decreases in accounts payable[99](index=99&type=chunk) - Investing activities used **$771 thousand** for capital expenditures, and financing activities used **$1,463 thousand**, primarily for long-term debt servicing[99](index=99&type=chunk) [Outlook](index=24&type=section&id=Outlook) Provides management's expectations for future performance, including project timelines, backlog, and strategic growth initiatives - The Company anticipates some volatility in project delivery timelines for fiscal year 2026 but maintains a strong overall backlog of **$205.0 million**[101](index=101&type=chunk)[90](index=90&type=chunk) - Management is focused on organic and inorganic growth, making strategic investments in people, processes, and technology to support sustainable growth[102](index=102&type=chunk) - The Company believes its strategic investments and healthy backlog position it well to manage short-term headwinds and ensure long-term business health[102](index=102&type=chunk) [Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995](index=24&type=section&id=Safe%20Harbor%20Statement%20under%20the%20Private%20Securities%20Litigation%20Reform%20Act%20of%201995) Warns about forward-looking statements, outlining risks and uncertainties that could cause actual results to differ - The document contains forward-looking statements subject to known and unknown risks, uncertainties, and assumptions that could significantly impact results[103](index=103&type=chunk) - Factors that could cause differences include the ability to realize Nu Aire acquisition benefits, competitive and economic conditions, customer demands, technological changes, international operations risks, and raw material costs[103](index=103&type=chunk) - The Company assumes no obligation to update any forward-looking statements[103](index=103&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) States no material changes to market risk disclosures from the most recent annual report - No material changes to market risk disclosures compared to the 2025 Annual Report on Form 10-K[104](index=104&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Reports on the effectiveness of disclosure controls and procedures and the ongoing integration of Nu Aire into the control environment - As of July 31, 2025, the Company's disclosure controls and procedures were deemed adequate and effective by management, including the CEO and CFO[105](index=105&type=chunk) - The Company is integrating Nu Aire into its systems and control environment, monitoring and maintaining appropriate internal control over financial reporting during this process[106](index=106&type=chunk) - No other significant changes in internal control over financial reporting occurred during the quarter[106](index=106&type=chunk) PART II. OTHER INFORMATION Contains additional information not covered in financial statements, including risk factors, equity sales, and exhibits [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) Refers to previously disclosed risk factors and notes any updates or new factors impacting the company's business - No material changes to risk factors from the 2025 Annual Report on Form 10-K, except as noted in this quarterly report[109](index=109&type=chunk) - Various known or unknown factors could materially and adversely affect the Company's business, financial condition, operating results, and stock price[109](index=109&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports on unregistered sales of equity securities and details the company's share repurchase activities - No unregistered sales of equity securities occurred during the period[110](index=110&type=chunk) - The Company did not purchase any shares under its share repurchase program during the three months ended July 31, 2025, with **100,603 shares** remaining authorized for purchase[111](index=111&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) Discloses information regarding Rule 10b5-1 trading arrangements by directors and executive officers - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended July 31, 2025[113](index=113&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) Lists all documents filed as exhibits to the Form 10-Q, including certifications and financial data in XBRL format - Exhibits include bylaws, CEO/CFO certifications (Sarbanes-Oxley Act Sections 302 and 906), and Inline XBRL documents for financial data[116](index=116&type=chunk) SIGNATURE Confirms the official signing of the report by an authorized financial officer - The report was signed by Donald T. Gardner III, Vice President, Finance and Chief Financial Officer, on behalf of Kewaunee Scientific Corporation on September 12, 2025[118](index=118&type=chunk)
Rent the Runway(RENT) - 2026 Q2 - Quarterly Report
2025-09-12 13:02
Part I - Financial Information This section presents the unaudited condensed consolidated financial statements, notes, and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements, notes, and details on net losses, liquidity, and a major recapitalization transaction [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Provides a snapshot of assets, liabilities, and stockholders' equity, highlighting changes in financial position Condensed Consolidated Balance Sheets (in millions) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------------- | :---------- | :--------------- | | Cash and cash equivalents | $43.6 | $77.4 | | Total current assets | $63.3 | $93.9 | | Rental product, net | $86.7 | $73.3 | | Total assets | $219.0 | $240.0 | | Total current liabilities | $68.3 | $47.4 | | Long-term debt, net | $343.9 | $333.7 | | Total liabilities | $451.1 | $422.5 | | Total stockholders' equity (deficit)| $(232.1) | $(182.5) | - **Total assets decreased from $240.0 million to $219.0 million**, while **total liabilities increased from $422.5 million to $451.1 million**, leading to a **larger stockholders' deficit**[21](index=21&type=chunk) - **Long-term debt, net increased by $10.2 million from $333.7 million to $343.9 million**[21](index=21&type=chunk) [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Details the Company's revenues, expenses, and net loss for the three and six months ended July 31, 2025 and 2024 Condensed Consolidated Statements of Operations (in millions) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Total revenue, net | $80.9 | $78.9 | $150.5 | $153.9 | | Operating loss | $(20.1) | $(9.6) | $(39.8) | $(26.1) | | Net loss | $(26.4) | $(15.6) | $(52.5) | $(37.6) | | Net loss per share (basic & diluted)| $(6.55) | $(4.17) | $(13.12) | $(10.18) | - **Total revenue, net increased by 2.5% for the three months ended July 31, 2025**, but **decreased by 2.2% for the six months ended July 31, 2025**, compared to the prior year periods[22](index=22&type=chunk) - **Net loss significantly widened for both the three-month period (from $(15.6) million to $(26.4) million) and the six-month period (from $(37.6) million to $(52.5) million) year-over-year**[22](index=22&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Deficit)) Outlines changes in additional paid-in capital, accumulated deficit, and total stockholders' equity (deficit) Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (in millions) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------------- | :------------ | :--------------- | | Additional Paid-in Capital | $943.4 | $940.5 | | Accumulated Deficit | $(1,175.5) | $(1,123.0) | | Total Stockholders' Equity (Deficit)| $(232.1) | $(182.5) | - The **accumulated deficit increased by $52.5 million from January 31, 2025, to July 31, 2025**, reflecting the **net loss incurred during the period**[27](index=27&type=chunk) - **Share-based compensation expense contributed $2.9 million to additional paid-in capital for the six months ended July 31, 2025**[27](index=27&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Summarizes cash flows from operating, investing, and financing activities for the six months ended July 31, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (in millions) | Metric | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net cash (used in) provided by operating activities | $(2.2) | $6.8 | | Net cash (used in) provided by investing activities | $(30.7) | $(12.7) | | Net cash (decrease) increase in cash and cash equivalents and restricted cash | $(34.3) | $(7.4) | | Cash and cash equivalents and restricted cash at end of period | $52.2 | $86.6 | - **Operating activities shifted from providing $6.8 million in cash in 2024 to using $(2.2) million in 2025**[29](index=29&type=chunk) - **Cash used in investing activities significantly increased from $(12.7) million in 2024 to $(30.7) million in 2025**, primarily due to **higher purchases of rental product**[29](index=29&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Business Description](index=14&type=section&id=1.%20Business) Rent the Runway operates a shared designer closet, offering subscription and a-la-carte rental services primarily in the United States - Company's mission is to empower women through a shared designer closet, offering **Subscription and Reserve rental services**[32](index=32&type=chunk) - All revenue is generated in the United States, primarily from **rental subscription and a-la-carte rental fees**, with a portion from **product sales**[33](index=33&type=chunk) [2. Summary of Significant Accounting Policies](index=14&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the Company's significant accounting policies, including basis of presentation, revenue recognition, and rental product depreciation - The Company operates as a **single operating and reportable segment**, with the CEO reviewing financial information on a consolidated basis[40](index=40&type=chunk) - **Rental product is depreciated using the straight-line method over estimated useful lives (3 years for apparel, 2 years for accessories) with estimated salvage values (20% for apparel, 30% for accessories)**[52](index=52&type=chunk) - **Subscription and Reserve rental revenue is recognized in accordance with ASC 842**, while **other revenue (primarily product sales) is recognized under ASC 606**[57](index=57&type=chunk) - The Company has identified new accounting pronouncements (**ASU 2024-03 and ASU 2023-09**) related to expense disaggregation and income tax disclosures, which are currently being evaluated for impact[69](index=69&type=chunk)[70](index=70&type=chunk) [3. Liquidity](index=20&type=section&id=3.%20Liquidity) Discusses the Company's financial position, including net losses, debt, and a planned recapitalization to improve capital structure - The Company incurred **net losses of $(26.4) million and $(52.5) million for the three and six months ended July 31, 2025**, respectively, with an **accumulated deficit of $(1,175.5) million**[71](index=71&type=chunk) Liquidity Metrics (in millions) | Metric | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net cash (used in) provided by operating activities | $(2.2) | $6.8 | | Cash outflows from investing activities | $(30.7) | $(12.7) | - As of July 31, 2025, **cash and cash equivalents were $43.6 million**, and **long-term debt was $343.9 million**, maturing in October 2026[71](index=71&type=chunk) - A **recapitalization transaction**, expected to close by December 31, 2025, aims to **significantly reduce total indebtedness, lower interest costs, and provide financial flexibility**, including a **temporary reduction of the minimum liquidity maintenance covenant to $15 million**[75](index=75&type=chunk)[76](index=76&type=chunk) [4. Restructuring and Related Charges](index=22&type=section&id=4.%20Restructuring%20and%20Related%20Charges) Details the restructuring plan initiated in January 2024, including workforce reductions and associated costs - A **restructuring plan initiated in January 2024 included a ~10% reduction in corporate workforce** to support profitability goals[77](index=77&type=chunk) - **Restructuring charges of $0.2 million for severance were recognized in the six months ended July 31, 2024**, with **no charges in the current period**[78](index=78&type=chunk) - The **restructuring plan was completed during the first quarter of fiscal year 2025**, with **cumulative charges of $2.2 million**[78](index=78&type=chunk) [5. Leases - Lessee Accounting](index=23&type=section&id=5.%20Leases%20-%20Lessee%20Accounting) Outlines the Company's minimum fixed lease obligations as a lessee for operating and financing leases Minimum Fixed Lease Obligations (in millions) | Fiscal Year | Operating Lease Obligations | Financing Lease Obligations | | :---------- | :------------------------ | :------------------------ | | 2025 | $5.8 | $0.1 | | 2026 | $11.5 | $0.1 | | 2027 | $11.2 | $0.1 | | 2028 | $11.3 | $0.1 | | 2029 | $10.0 | $0.1 | | Thereafter | $18.8 | $0.2 | | Total | $68.6 | $0.7 | - The Company entered into a **sublease agreement for its corporate headquarters' ninth floor**, commencing December 2024, with immaterial additional assets recorded and net proceeds in G&A expenses[79](index=79&type=chunk) [6. Rental Product, Net](index=23&type=section&id=6.%20Rental%20Product,%20Net) Details the composition and changes in rental product assets, including depreciation and write-offs Rental Product, Net (in millions) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------------- | :------------ | :--------------- | | Apparel | $154.5 | $138.2 | | Accessories | $4.9 | $4.2 | | Less: accumulated depreciation | $(72.7) | $(69.1) | | Rental product, net | $86.7 | $73.3 | Depreciation and Write-offs (in millions) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Depreciation and write-offs | $15.9 | $16.2 | $29.1 | $31.1 | [7. Long-Term Debt](index=24&type=section&id=7.%20Long-Term%20Debt) Provides details on the Company's long-term debt, including principal outstanding, payment-in-kind interest, and amendments to the debt facility Long-Term Debt (in millions) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------------- | :------------ | :--------------- | | Debt Facility principal outstanding | $271.6 | $271.6 | | Payment-in-kind interest | $47.6 | $40.3 | | Unamortized debt premium | $24.7 | $21.8 | | Debt Facility, net | $343.9 | $333.7 | - The **2023 Amended Temasek Facility eliminated all interest (PIK and cash) for six fiscal quarters starting Q4 FY2023** and **reduced the minimum liquidity covenant from $50 million to $30 million**[86](index=86&type=chunk) - The **Fourteenth Amendment (August 2025) capitalized cash interest, temporarily reduced the liquidity covenant to $15 million**, and **eliminated fiscal year 2025 spend levels**[88](index=88&type=chunk) - The Company was in **compliance with all applicable financial covenants as of July 31, 2025**[91](index=91&type=chunk) [8. Income Taxes](index=26&type=section&id=8.%20Income%20Taxes) Discusses the Company's income tax position, including valuation allowance, unrecognized tax benefits, and the impact of recent tax legislation - The Company maintains a **full valuation allowance on all United States net deferred tax assets**[93](index=93&type=chunk) Unrecognized Tax Benefits (in millions) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------------- | :------------ | :--------------- | | Unrecognized tax benefits | $1.3 | $1.2 | - The **One Big Beautiful Bill Act of 2025, enacted July 4, 2025, had an immaterial impact on the Company's financial statements for the quarter ended July 31, 2025**[95](index=95&type=chunk) [9. Accrued Expenses and Other Current Liabilities](index=26&type=section&id=9.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Details the components of accrued expenses and other current liabilities, highlighting significant changes Accrued Expenses and Other Current Liabilities (in millions) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------------- | :------------ | :--------------- | | Accrued operating and general expenses | $15.6 | $6.6 | | Revenue share payable | $9.6 | $6.9 | | Accrued interest | $4.0 | $— | | Total accrued expenses and other current liabilities | $36.4 | $20.3 | - **Accrued expenses and other current liabilities increased by $16.1 million**, driven by **higher operating expenses, revenue share, and accrued interest**[96](index=96&type=chunk) [10. Fair Value Measurements](index=27&type=section&id=10.%20Fair%20Value%20Measurements) Explains the fair value estimation for financial instruments, particularly long-term debt - The **estimated fair value of the Company's long-term debt was $236.0 million as of July 31, 2025**, classified as **Level 3 within the fair value hierarchy**[98](index=98&type=chunk) - **Carrying amounts of cash, restricted cash, prepaid expenses, accounts payable, and accrued liabilities approximated fair value due to short maturities**[97](index=97&type=chunk) [11. Stockholders' Equity](index=27&type=section&id=11.%20Stockholders'%20Equity) Provides information on the Company's common stock, including a reverse stock split and outstanding shares and warrants - A **1-for-20 reverse stock split became effective on April 2, 2024**, with trading on a post-split basis starting April 3, 2024[99](index=99&type=chunk) Shares Outstanding | Stock Class | Shares Outstanding (July 31, 2025) | | :---------- | :------------------------------- | | Class A | 3,899,124 | | Class B | 155,634 | Warrants Outstanding (in millions) | Warrant Type | Number of Shares | Fair Value at Issuance | | :----------- | :--------------- | :--------------------- | | Equity classified | 131,574 | $13.4 | [12. Share-based Compensation Plans](index=28&type=section&id=12.%20Share-based%20Compensation%20Plans) Details the Company's equity incentive plan, including RSU and stock option grants, and associated compensation expense - The **2021 Incentive Award Plan is the primary plan for equity awards**, with **300,504 Class A common shares available for issuance as of July 31, 2025**[105](index=105&type=chunk) - **No stock options were granted during the three and six months ended July 31, 2025 or 2024**[106](index=106&type=chunk) Total Share-based Compensation (in millions) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Total share-based compensation | $1.4 | $2.4 | $2.9 | $5.4 | - **Unrecognized compensation cost for RSUs was $2.5 million as of July 31, 2025**, with a **weighted average recognition period of 0.85 years**[111](index=111&type=chunk) [13. Net Loss per Share Attributable to Common Stockholders](index=30&type=section&id=13.%20Net%20Loss%20per%20Share%20Attributable%20to%20Common%20Stockholders) Reports basic and diluted net loss per share and the treatment of potentially dilutive securities Net Loss per Share (basic & diluted) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net loss per share (basic & diluted)| $(6.55) | $(4.17) | $(13.12) | $(10.18) | Potentially Dilutive Securities | Potentially Dilutive Securities | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | | Stock options | 30,284 | 35,325 | | Common stock warrants | 131,574 | 131,574 | | RSUs | 286,606 | 461,484 | | Total | 448,464 | 628,383 | - All **potentially dilutive securities were excluded from diluted loss per share computation because their inclusion would have been anti-dilutive due to the net loss**[114](index=114&type=chunk) [14. Commitments and Contingencies](index=31&type=section&id=14.%20Commitments%20and%20Contingencies) Outlines restricted cash, purchase commitments, and ongoing legal proceedings the Company is involved in Restricted Cash Balances (in millions) | Metric | July 31, 2025 | January 31, 2025 | | :-------------------------------- | :------------ | :--------------- | | Restricted cash balances | $8.6 | $9.1 | Technology Service Commitments (in millions) | Fiscal Year | Technology Service Commitments | | :---------- | :--------------------------- | | 2025 | $3.1 | | 2026 | $4.8 | | 2027 | $4.3 | | Total | $12.2 | - The Company is a defendant in a **putative class action lawsuit (Rajat Sharma v. Rent the Runway, Inc., et al.)** and a **stockholder derivative lawsuit (Bandyopadhyay v. Hyman, et al.)**, both of which it intends to vigorously defend[118](index=118&type=chunk)[119](index=119&type=chunk) [15. Subsequent Events](index=33&type=section&id=15.%20Subsequent%20Events) Details a comprehensive recapitalization transaction entered into on August 20, 2025, to improve capital structure and extend debt maturities - On **August 20, 2025, the Company entered into an Exchange Agreement and other related documents for a recapitalization to improve its capital structure and extend debt maturities**[120](index=120&type=chunk)[121](index=121&type=chunk) - The **recapitalization involves exchanging $100 million of existing debt for new term loans** and the **remaining outstanding debt for newly issued Class A common stock**, representing **86% of total outstanding shares post-conversion**[123](index=123&type=chunk) - A **New Credit Agreement will provide $120 million in term loans ($100 million from existing debt exchange, $20 million new money)** maturing on the fourth anniversary of closing, with a **temporarily reduced minimum liquidity covenant of $15 million**[130](index=130&type=chunk) - A **$12.5 million rights offering is planned**, with the **Investor Group agreeing to backstop all unsubscribed shares at $4.08 per share**[134](index=134&type=chunk) - The **CEO's employment agreement was amended**, and a **Management Incentive Plan (MIP) pool of approximately 18.3% of Class A common stock was authorized**, contingent on stockholder approval[136](index=136&type=chunk)[138](index=138&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on the Company's financial condition, operating results, liquidity, and critical accounting estimates, including details on a recapitalization [Overview](index=39&type=section&id=Overview) Introduces Rent the Runway's business model, offerings, and key subscriber metrics - Rent the Runway offers **'unlimited closet' access through Subscription and Reserve offerings**, and product sales via Resale[146](index=146&type=chunk) Subscriber Metrics | Metric | July 31, 2025 | | :---------------- | :------------ | | Ending Total Subscribers | 185,102 | | Active Subscribers | 146,373 | - **89% of total revenue for the six months ended July 31, 2025 and 2024 was generated by subscribers**[146](index=146&type=chunk) [Key Fiscal Second Quarter and Recent Business Highlights](index=39&type=section&id=Key%20Fiscal%20Second%20Quarter%20and%20Recent%20Business%20Highlights) Summarizes significant business developments and operational achievements during the fiscal second quarter and recent periods - Announced **Recapitalization Transactions to improve capital structure**[149](index=149&type=chunk) - Deployed a **bold inventory strategy, posting almost twice the inventory units year-over-year**, with **323% more styles in May, 235% in June, and 253% in July**[149](index=149&type=chunk) - **Increased customer engagement, with share of views up 84% YoY, hearts per style up 15% YoY, and new units at home up 57% YoY in Q2 FY2025**[149](index=149&type=chunk) - **Subscription net promoter score increased by 77% YoY in Q2 FY2025**[149](index=149&type=chunk) - **Revenue share units from existing partners increased by 40% YoY**, and **total revenue share units increased by 119% YoY**[150](index=150&type=chunk) - Launched **56 new brands in H1 FY2025 and seven new exclusive brand collaborations**[150](index=150&type=chunk) - **Organic social media engagement increased by ~800% YoY and views by 175% YoY in Q2 FY2025**[150](index=150&type=chunk) - Enhanced subscription experience with a **new personalized home screen, tiered rewards program, and 'coming soon' style previews**[150](index=150&type=chunk) - Implemented a **pricing adjustment for subscription plans on August 1, 2025**, with an **average increase of $2 per item**[150](index=150&type=chunk) [Recapitalization Transactions](index=42&type=section&id=Recapitalization%20Transactions) Details the announced recapitalization transactions aimed at improving the Company's capital structure and financial flexibility - **Recapitalization Transactions were announced to improve the Company's capital structure, enhance financial flexibility, and extend debt maturities**[153](index=153&type=chunk) [Our Product Acquisition Strategy](index=42&type=section&id=Our%20Product%20Acquisition%20Strategy) Explains the Company's methods for acquiring rental products, focusing on capital efficiency and future purchasing plans - Products are acquired via **Wholesale, Share by RTR (consignment with performance-based payments), and Exclusive Designs (data-driven collaborations)**[154](index=154&type=chunk) Product Acquisition Methods (% of new items) | Acquisition Method | FY2024 | FY2023 | | :----------------- | :----- | :----- | | Wholesale | 30% | 39% | | Share by RTR | 48% | 33% | | Exclusive Designs | 22% | 28% | - The Company expects to incur **higher purchases of rental product in fiscal year 2025 to approximately double new rental product added to the site**[156](index=156&type=chunk) [Key Factors Affecting Our Performance](index=42&type=section&id=Key%20Factors%20Affecting%20Our%20Performance) [Subscribers and Customers](index=42&type=section&id=Subscribers%20and%20Customers) Discusses the importance of attracting and retaining subscribers and customers, influenced by product availability and satisfaction - **Long-term growth depends on attracting new and retaining existing subscribers and customers**, influenced by **rental product availability and satisfaction**[159](index=159&type=chunk)[160](index=160&type=chunk) - In fiscal year 2025, the Company plans to **significantly increase the quantity and desirability of rental product purchases to improve customer satisfaction and retention**[161](index=161&type=chunk) [Brands and Products](index=43&type=section&id=Brands%20and%20Products) Highlights the importance of a strong product assortment and efficient acquisition methods for customer loyalty - **Ability to acquire, manage, and monetize products efficiently is crucial for customer loyalty**, leveraging deep partnerships and flexible buying timelines[162](index=162&type=chunk) - **Purchases of rental product as a percentage of revenue was 16% in fiscal year 2024**, but is **expected to increase in fiscal year 2025 due to a significant increase in units purchased**[163](index=163&type=chunk) [Ability to Achieve Leverage in our Cost Structure](index=44&type=section&id=Ability%20to%20Achieve%20Leverage%20in%20our%20Cost%20Structure) Focuses on operational efficiency, technology-driven processes, and key metrics for assessing performance and cash consumption - **Restructuring plans in September 2022 and January 2024 reduced operating expenses by approximately $27 million and $12 million annually**, respectively[165](index=165&type=chunk) - The Company uses **technology and customer data to drive efficiency in products, fulfillment, and operating costs**, including a **proprietary rental reverse logistics platform**[166](index=166&type=chunk) - **Adjusted EBITDA and combined net cash used in operating and investing activities are used to assess operating performance and cash consumption**[168](index=168&type=chunk) [Seasonality](index=44&type=section&id=Seasonality) Describes the seasonal fluctuations in subscriber acquisition, pause rates, and expenses throughout the year - **Highest subscriber acquisition typically occurs in March-May and September-November**[169](index=169&type=chunk) - **Higher subscriber pause rates are observed in summer and mid-December through January**[169](index=169&type=chunk) - **Transportation expense is typically highest in Q4**, and **most significant rental product receipts occur in Q1 and Q3**[170](index=170&type=chunk) [Impact of Macro and Consumer Environment on Our Business](index=44&type=section&id=Impact%20of%20Macro%20and%20Consumer%20Environment%20on%20Our%20Business) Addresses the significant uncertainty from macroeconomic factors impacting consumer spending and operational costs - **Macroeconomic factors (inflation, interest rates, global trade policies) create significant uncertainty**, impacting **consumer spending and operational costs**[171](index=171&type=chunk) - **Active Subscriber levels have been impacted by seasonal changes, remote work, inflationary pressures, and pricing sensitivity**[172](index=172&type=chunk) - The Company implemented a **price increase for subscription plans in August 2025** and **increased wage rates in Q1 FY2025 to address inflationary pressures**[173](index=173&type=chunk) [Key Business and Financial Metrics](index=45&type=section&id=Key%20Business%20and%20Financial%20Metrics) Presents key performance indicators such as Active Subscribers, Gross Profit, Net Loss, and Adjusted EBITDA Key Business and Financial Metrics (in millions, except subscribers) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Active Subscribers | 146,373 | 129,073 | 146,373 | 129,073 | | Average Active Subscribers | 146,765 | 137,455 | 140,116 | 137,455 | | Gross Profit | $24.3 | $32.4 | $46.2 | $60.8 | | Net Loss | $(26.4) | $(15.6) | $(52.5) | $(37.6) | | Adjusted EBITDA | $3.6 | $13.7 | $2.3 | $20.2 | - **Active Subscribers increased by 13.4% year-over-year to 146,373 as of July 31, 2025**, driven by **higher acquisitions, increased promotional activity, and improved retention**[179](index=179&type=chunk) - **Gross Profit and Adjusted EBITDA decreased for both periods**, primarily due to **higher revenue share and fulfillment costs as a percentage of revenue**[182](index=182&type=chunk)[185](index=185&type=chunk) [Components of Results of Operations](index=47&type=section&id=Components%20of%20Results%20of%20Operations) Describes the various revenue and expense categories, their drivers, and expected trends - **Total revenue, net, comprises Subscription and Reserve rental revenue (recognized ratably over subscription/rental period) and Other revenue (primarily product sales, recognized upon delivery)**[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk) - **Fulfillment expenses include shipping, personnel, and cleaning costs**, expected to **decrease as a percentage of revenue long-term due to efficiencies**[190](index=190&type=chunk) - **Rental product depreciation and revenue share expenses are expected to increase in absolute dollars to support subscriber growth**, varying with acquisition mix[194](index=194&type=chunk) - **G&A expenses are expected to increase in the near term due to Recapitalization Transactions costs** but **decrease as a percentage of revenue long-term**[193](index=193&type=chunk) [Comparison of the three months ended July 31, 2025 and 2024](index=49&type=section&id=Comparison%20of%20the%20three%20months%20ended%20July%2031,%202025%20and%202024) Analyzes the Company's financial performance for the three-month period, detailing changes in revenue, expenses, and net loss Financial Performance (in millions) | Metric | 3 Months Ended July 31, 2025 | 3 Months Ended July 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Total revenue, net | $80.9 | $78.9 | $2.0 | 2.5% | | Subscription and Reserve rental revenue | $69.2 | $68.5 | $0.7 | 1.0% | | Other revenue | $11.7 | $10.4 | $1.3 | 12.5% | | Total costs and expenses | $101.0 | $88.5 | $12.5 | 14.1% | | Rental product depreciation and revenue share | $34.1 | $25.9 | $8.2 | 31.7% | | Fulfillment | $22.5 | $20.6 | $1.9 | 9.2% | | Technology | $9.8 | $8.7 | $1.1 | 12.6% | | General and administrative | $24.6 | $22.2 | $2.4 | 10.8% | | Net loss | $(26.4) | $(15.6) | $(10.8) | 69.2% | - The **increase in total revenue was primarily driven by higher Other revenue (up 12.5%) and Subscription and Reserve rental revenue (up 1.0%)**[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - The **significant increase in costs and expenses was mainly due to higher Rental Product Depreciation and Revenue Share (up 31.7%) and Fulfillment costs (up 9.2%)**[204](index=204&type=chunk)[205](index=205&type=chunk)[213](index=213&type=chunk) [Comparison of the six months ended July 31, 2025 and 2024](index=51&type=section&id=Comparison%20of%20the%20six%20months%20ended%20July%2031,%202025%20and%202024) Analyzes the Company's financial performance for the six-month period, detailing changes in revenue, expenses, and net loss Financial Performance (in millions) | Metric | 6 Months Ended July 31, 2025 | 6 Months Ended July 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Total revenue, net | $150.5 | $153.9 | $(3.4) | (2.2)% | | Subscription and Reserve rental revenue | $131.2 | $134.6 | $(3.4) | (2.5)% | | Other revenue | $19.3 | $19.3 | $0.0 | 0.0% | | Total costs and expenses | $190.3 | $180.0 | $10.3 | 5.7% | | Rental product depreciation and revenue share | $61.4 | $51.9 | $9.5 | 18.3% | | Fulfillment | $42.9 | $41.2 | $1.7 | 4.1% | | Technology | $19.4 | $18.3 | $1.1 | 6.0% | | General and administrative | $45.3 | $45.0 | $0.3 | 0.7% | | Net loss | $(52.5) | $(37.6) | $(14.9) | 39.6% | - The **decrease in total revenue was primarily driven by lower Subscription and Reserve rental revenue (down 2.5%)**, partially offset by flat Other revenue[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) - The **increase in total costs and expenses was mainly due to higher Rental Product Depreciation and Revenue Share (up 18.3%) and Fulfillment costs (up 4.1%)**[224](index=224&type=chunk)[225](index=225&type=chunk)[233](index=233&type=chunk) [Non-GAAP Financial Metrics](index=53&type=section&id=Non-GAAP%20Financial%20Metrics) Provides a reconciliation of net loss to Adjusted EBITDA, a key non-GAAP metric used to assess operating performance Non-GAAP Financial Metrics (in millions) | Metric | Three Months Ended July 31, 2025 | Three Months Ended July 31, 2024 | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | :------------------------------- | | Net loss | $(26.4) | $(15.6) | $(52.5) | $(37.6) | | Adjusted EBITDA | $3.6 | $13.7 | $2.3 | $20.2 | | Adjusted EBITDA Margin | 4.4% | 17.4% | 1.5% | 13.1% | - **Adjusted EBITDA and Adjusted EBITDA Margin decreased year-over-year for both periods**, primarily due to **higher revenue share and fulfillment costs as a percentage of revenue**[241](index=241&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the Company's liquidity position, including cash, debt, and the impact of the ongoing recapitalization transaction - The Company has incurred **significant recurring net losses** and had an **accumulated deficit of $(1,175.5) million as of July 31, 2025**[243](index=243&type=chunk) Liquidity and Capital Resources (in millions) | Metric | July 31, 2025 | | :-------------------------------- | :------------ | | Cash and cash equivalents | $43.6 | | Long-term debt | $343.9 | - A **recapitalization transaction (detailed in Note 15) is intended to improve the capital structure, enhance financial flexibility, and extend debt maturities**[246](index=246&type=chunk) - The Company believes **existing cash and cash equivalents, and cash from operations, will be sufficient for the next twelve months**, assuming the Recapitalization Transactions close[249](index=249&type=chunk) [Cash Flows](index=56&type=section&id=Cash%20Flows) Analyzes the Company's cash flow activities, highlighting changes in operating, investing, and financing cash flows Cash Flows (in millions) | Metric | Six Months Ended July 31, 2025 | Six Months Ended July 31, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net cash (used in) provided by operating activities | $(2.2) | $6.8 | | Net cash (used in) provided by investing activities | $(30.7) | $(12.7) | | Net (decrease) increase in cash and cash equivalents and restricted cash | $(34.3) | $(7.4) | | Cash and cash equivalents and restricted cash at end of period | $52.2 | $86.6 | - **Cash consumption (operating + investing activities) increased from $(5.9) million in 2024 to $(32.9) million in 2025**, primarily due to **higher rental product purchases and increased net loss**[250](index=250&type=chunk) - **Purchases of rental product were $(42.0) million for the six months ended July 31, 2025**, compared to **$(26.3) million in the prior year**[253](index=253&type=chunk)[254](index=254&type=chunk) [Contractual Obligations and Commitments](index=57&type=section&id=Contractual%20Obligations%20and%20Commitments) Summarizes the Company's debt obligations, lease commitments, and technology service purchase commitments - The **2023 Amended Temasek Facility eliminated interest for six fiscal quarters** and **reduced the minimum liquidity maintenance covenant**[256](index=256&type=chunk) - **Fiscal year 2025 spend levels for rental product capital, fixed operating, and marketing expenditures were eliminated under the Fourteenth Amendment to the debt facility**[256](index=256&type=chunk) - As of July 31, 2025, the Company had **$343.9 million of total debt outstanding**, with a **pending recapitalization to restructure it**[256](index=256&type=chunk) [Critical Accounting Estimates](index=58&type=section&id=Critical%20Accounting%20Estimates) Identifies key accounting estimates requiring significant judgment, such as rental product useful life, lease liabilities, and long-lived asset recoverability - **Significant estimates include useful life and salvage value of rental product, incremental borrowing rate for lease liabilities, valuation of share-based compensation and warrants, and recoverability of long-lived assets**[44](index=44&type=chunk)[393](index=393&type=chunk) - An **impairment analysis was performed due to stock price decline in Q1/Q2 FY2025 and Q4 FY2024**, concluding **no impairment for long-lived assets**[259](index=259&type=chunk) [Recent Accounting Pronouncements](index=58&type=section&id=Recent%20Accounting%20Pronouncements) Discusses the Company's evaluation of recently issued accounting standards and their potential impact on financial statements - The Company is **evaluating ASU 2024-03 (Expense Disaggregation Disclosures) and ASU 2023-09 (Improvements to Income Tax Disclosures)** for their impact on consolidated financial statements[69](index=69&type=chunk)[70](index=70&type=chunk)[260](index=260&type=chunk) [JOBS Act](index=58&type=section&id=JOBS%20Act) Explains the Company's status as an "emerging growth company" and its election to use the extended transition period for accounting standards - The Company qualifies as an **'emerging growth company' under the JOBS Act**[261](index=261&type=chunk) - The Company has **elected to use the extended transition period for complying with new or revised accounting standards**, aligning with private companies[261](index=261&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) States that there were no material changes to market risk disclosures from the prior annual report - **No material changes to quantitative and qualitative disclosures about market risk for the three months ended July 31, 2025**[262](index=262&type=chunk) [Item 4. Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) Reports on the effectiveness of disclosure controls and procedures, identifying material weaknesses in internal control over financial reporting [Disclosure Controls and Procedures](index=59&type=section&id=Disclosure%20Controls%20and%20Procedures) Concludes on the effectiveness of the Company's disclosure controls and procedures as of July 31, 2025 - Management concluded that **disclosure controls and procedures were not effective as of July 31, 2025**, due to **material weaknesses in internal control over financial reporting**[263](index=263&type=chunk) - Despite weaknesses, management believes the **condensed consolidated financial statements fairly present the Company's financial condition**[264](index=264&type=chunk) [Material Weaknesses in Internal Control Over Financial Reporting](index=59&type=section&id=Material%20Weaknesses%20in%20Internal%20Control%20Over%20Financial%20Reporting) Identifies specific unremediated material weaknesses in the Company's internal control over financial reporting - **Material weaknesses remain unremediated as of July 31, 2025**[265](index=265&type=chunk) - Identified weaknesses include **insufficient evidence of control operation, inadequate segregation of duties and journal entry review, and ineffective IT general controls (program change management, user access, computer operations, program development)**[266](index=266&type=chunk)[267](index=267&type=chunk) - These weaknesses did not result in a misstatement to current financial statements but **could lead to material misstatements in the future**[269](index=269&type=chunk) [Remediation Efforts to Address Material Weaknesses](index=59&type=section&id=Remediation%20Efforts%20to%20Address%20Material%20Weaknesses) Outlines the Company's ongoing efforts to remediate identified material weaknesses in internal control - **Remediation efforts include formalizing control frameworks, improving segregation of duties, enhancing journal entry review, and implementing IT general controls**[270](index=270&type=chunk)[271](index=271&type=chunk) - The **timing for full remediation is uncertain**, and additional measures may be required[272](index=272&type=chunk) [Changes in Internal Control Over Financial Reporting](index=60&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) Reports on any changes in internal control over financial reporting during the quarter ended July 31, 2025 - **No changes in internal control over financial reporting occurred during the quarter ended July 31, 2025, that materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting**[273](index=273&type=chunk) Part II - Other Information This section covers legal proceedings, risk factors, equity sales, defaults, and exhibits, providing additional context to the financial disclosures [Item 1. Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) Incorporates by reference information on commitments and contingencies from Note 14 of the financial statements, detailing ongoing legal proceedings - Information on **legal proceedings is incorporated by reference from Note 14, Commitments and Contingencies**[275](index=275&type=chunk) [Item 1A. Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) Outlines numerous risks that could materially and adversely affect the Company's business, financial condition, results of operations, and prospects [Risks Related to the Recapitalization Transactions](index=61&type=section&id=Risks%20Related%20to%20the%20Recapitalization%20Transactions) Highlights risks associated with the pending recapitalization, including stockholder approval, dilution, and new debt covenants - **Failure to obtain stockholder approval for Recapitalization Transactions could lead to termination of the Exchange Agreement, inability to enter the New Credit Agreement, and potential default on the 2025 Amended Facility**, materially impacting the business and going concern ability[277](index=277&type=chunk)[279](index=279&type=chunk) - **Approval of the Required Proposals will result in immediate and substantial dilution to stockholders** due to the issuance of significant Exchange Stock and shares from the Rights Offering Backstop Agreement[280](index=280&type=chunk)[281](index=281&type=chunk) - The **New Credit Agreement, if entered, will include covenants that could restrict operations and growth strategies**; failure to comply could materially adversely affect the business[282](index=282&type=chunk)[283](index=283&type=chunk) [Risks Related to Our Business and Industry](index=63&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) Covers various business and industry-specific risks, including growth management, competition, consumer spending, and operational challenges - **Inability to drive future growth or manage it effectively could harm brand, culture, and financial performance**, especially given the need to attract and retain subscribers and manage product offerings[284](index=284&type=chunk)[285](index=285&type=chunk) - The **global fashion industry is highly competitive and rapidly changing**; failure to compete effectively against traditional and online retailers could result in lost market share[290](index=290&type=chunk)[295](index=295&type=chunk) - **Reliance on consumer discretionary spending makes the Company vulnerable to economic downturns, inflation, and macroeconomic conditions**, which could reduce demand and negatively affect operating results[297](index=297&type=chunk)[299](index=299&type=chunk) - **Continued growth depends on cost-effectively attracting and retaining customers through organic and paid marketing**; ineffective strategies or increased costs could harm the business[300](index=300&type=chunk)[301](index=301&type=chunk)[303](index=303&type=chunk) - **Failure to retain customers, influenced by product quality, pricing, experience, and customer service, could negatively affect operating results**, especially given the importance of longer-tenured subscribers[304](index=304&type=chunk)[305](index=305&type=chunk)[306](index=306&type=chunk) - The Company has a **history of net losses and may not achieve or sustain profitability**, particularly with planned investments in rental product and potential unanticipated costs[307](index=307&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk) - **Inability to anticipate and respond to changing fashion trends and consumer preferences, or accurately forecast demand**, could harm the business, especially if rental product availability is suboptimal[312](index=312&type=chunk)[313](index=313&type=chunk)[315](index=315&type=chunk) - **Shipping and logistics are critical**; changes or interruptions in operations, reliance on a single national carrier, or difficulties in reverse logistics could adversely affect operating results and customer satisfaction[316](index=316&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk) - **Failure to effectively acquire and manage products from brand and manufacturing partners, or plan for future expenses**, could adversely affect operating results, especially with reliance on capital-efficient channels and global sourcing risks[320](index=320&type=chunk)[321](index=321&type=chunk)[322](index=322&type=chunk) - **Inability to maintain and enhance the brand, or negative publicity**, could impair customer attraction and retention, harming business and financial performance[324](index=324&type=chunk)[325](index=325&type=chunk)[326](index=326&type=chunk) - **Failure to improve website/mobile app performance, keep pace with technological changes (e.g., AI), or develop new offerings in a timely way** could harm business, financial performance, and growth[327](index=327&type=chunk)[329](index=329&type=chunk) - **Heavy reliance on proprietary technology systems and third-party vendors**; effective operation is crucial, and disruptions, bugs, or vulnerabilities could adversely affect business and safeguard confidential information[330](index=330&type=chunk)[332](index=332&type=chunk) - **Significant technology disruption, cyberattack, or data security incident** could adversely affect business, financial condition, and operations, leading to costly investigations, litigation, and reputational harm[333](index=333&type=chunk)[334](index=334&type=chunk)[337](index=337&type=chunk) - **E-commerce business faces distinct risks, including order fulfillment, product availability visibility, and managing online sales**; failure to manage these could negatively impact profitability[339](index=339&type=chunk)[340](index=340&type=chunk) - **Quarterly and annual results may fluctuate due to various factors (e.g., customer acquisition, costs, product launches, economic conditions, seasonality)**, making future performance difficult to predict[344](index=344&type=chunk)[345](index=345&type=chunk)[346](index=346&type=chunk) - **Restructuring operations (e.g., workforce reductions) carry risks such as failure to achieve targeted savings, decreased employee morale, increased employment claims, and loss of institutional knowledge**[348](index=348&type=chunk) - **Evolving ESG expectations from stakeholders may result in additional costs, reputational damage, or impact demand for offerings**, adversely affecting financial condition[349](index=349&type=chunk)[350](index=350&type=chunk)[351](index=351&type=chunk) - **Reliance on key personnel, including the Co-Founder/CEO and senior management, and ability to attract/retain talent (especially in engineering, marketing, logistics, and fulfillment) is critical**; loss or inability to retain could harm the business[354](index=354&type=chunk)[355](index=355&type=chunk)[357](index=357&type=chunk) - **Inability to maintain Company culture as it grows**, due to factors like employee morale, restructurings, or competitive pressures, could harm the business[358](index=358&type=chunk)[360](index=360&type=chunk) - **Material changes in brand/manufacturing partner pricing or raw material costs could negatively impact profitability**, especially with global trade policy changes and tariffs[361](index=361&type=chunk) - **Seasonality affects subscriber acquisition, pause rates, and expenses**; adverse events during peak periods could disproportionately impact operating results[362](index=362&type=chunk)[363](index=363&type=chunk) - **Additional capital may be required for growth and debt obligations**, but might not be available on acceptable terms, leading to potential dilution or operational restrictions[365](index=365&type=chunk)[366](index=366&type=chunk) - **High indebtedness ($343.9 million as of July 31, 2025) could adversely affect ability to generate sufficient cash for obligations** and react to business changes[368](index=368&type=chunk)[369](index=369&type=chunk) - The **2025 Amended Facility contains covenants restricting actions (e.g., incurring debt, paying dividends)**; failure to comply could lead to default and acceleration of borrowings[370](index=370&type=chunk)[371](index=371&type=chunk) [Risks Related to Our Legal and Regulatory Environment](index=89&type=section&id=Risks%20Related%20to%20Our%20Legal%20and%20Regulatory%20Environment) Addresses legal and regulatory risks, including compliance with various laws, intellectual property, and potential litigation - The business is subject to **numerous evolving U.S. and non-U.S. laws and regulations (consumer protection, privacy, labor, etc.)**; non-compliance could lead to liabilities, fines, and reputational harm[402](index=402&type=chunk)[403](index=403&type=chunk) - **Compliance with export/import controls, sanctions, anti-corruption, and anti-money laundering laws is required**; violations could impair market competition and lead to criminal liability[404](index=404&type=chunk) - **Subject to claims, legal proceedings, regulatory disputes, and governmental inquiries (e.g., class action lawsuits, derivative lawsuits)** that could incur significant expenses, divert management attention, and harm business[405](index=405&type=chunk)[406](index=406&type=chunk) - **Failure to adequately obtain, maintain, protect, and enforce intellectual property and proprietary rights** could harm the brand, devalue proprietary content, and adversely affect competitive ability[408](index=408&type=chunk)[409](index=409&type=chunk)[410](index=410&type=chunk) - May incur costs to **defend against intellectual property infringement, misappropriation, and other claims by third parties**, potentially resulting in substantial damages or business model changes[413](index=413&type=chunk) - **Use of third-party open-source software could adversely affect ability to offer products** and subject the Company to possible litigation if license terms are violated or construed unfavorably[414](index=414&type=chunk)[415](index=415&type=chunk) - **Subject to rapidly changing and stringent data privacy, security, protection, and consumer protection laws (e.g., CCPA, GDPR, TCPA)**; non-compliance could materially impair business growth and lead to liabilities[416](index=416&type=chunk)[417](index=417&type=chunk)[419](index=419&type=chunk)[421](index=421&type=chunk)[424](index=424&type=chunk) - Could incur **significant liabilities and costs in complying with environmental, health, and safety laws and regulations**, including permitting issues and waste disposal[425](index=425&type=chunk)[426](index=426&type=chunk) - **Ability to utilize net operating loss carryforwards (federal $654.4M, state $633.2M as of Jan 31, 2025) may be limited by ownership changes (Section 382) or future regulatory changes**[428](index=428&type=chunk)[429](index=429&type=chunk) - **Changes in effective tax rate or tax liability due to varying income amounts, tax law changes, or audit outcomes** could adversely affect results of operations[430](index=430&type=chunk) [Risks Related to Our Dependence on Third Parties](index=97&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) Examines risks arising from reliance on brand partners, payment processors, cloud infrastructure, and marketing platforms - **Risks associated with brand and manufacturing partners (Wholesale, Share by RTR, Exclusive Designs) include discontinuation of supply, less favorable terms, supply chain disruptions, and financial instability**, which could impair product acquisition[431](index=431&type=chunk)[433](index=433&type=chunk)[435](index=435&type=chunk) - **Reliance on third parties for payment processing infrastructure**; unavailability or unfavorable terms could disrupt business, increase costs, and harm customer trust[436](index=436&type=chunk)[437](index=437&type=chunk) - **Reliance on third-party cloud infrastructures (e.g., for website, mobile app, operations)**; disruptions, interference, or security incidents could adversely affect business, financial condition, or results of operations[438](index=438&type=chunk)[439](index=439&type=chunk)[440](index=440&type=chunk) - **Dependence on search engines, social media platforms, and mobile app stores to attract consumers**; changes in algorithms, policies, or increased marketing costs could adversely affect customer acquisition[441](index=441&type=chunk)[442](index=442&type=chunk)[443](index=443&type=chunk)[445](index=445&type=chunk)[446](index=446&type=chunk) - **Failure by the Company, brand partners, or third-party manufacturers/marketing partners to comply with vendor code of conduct, product safety, labor, or other laws** could damage reputation and harm business[447](index=447&type=chunk)[448](index=448&type=chunk)[449](index=449&type=chunk) - **Significant losses from fraud (e.g., unauthorized purchases, unreturned rentals) could occur**, leading to higher fees, loss of credit card acceptance, litigation, and reputational damage[450](index=450&type=chunk) - **Insufficient insurance coverage or inability of providers to meet obligations** could prevent mitigation of business risks, leading to significant additional costs[451](index=451&type=chunk)[452](index=452&type=chunk) [Risks Related to Ownership of Our Class A Common Stock](index=102&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Class%20A%20Common%20Stock) Details risks associated with owning the Company's Class A Common Stock, including voting control, listing requirements, and stock price volatility - The **dual class structure of common stock (Class B has 20 votes/share) and a stockholders' agreement concentrate voting control with pre-IPO stockholders**, limiting other investors' influence on corporate matters, including change of control[453](index=453&type=chunk)[454](index=454&type=chunk)[455](index=455&type=chunk) - **Failure to meet Nasdaq Global Market's continued listing requirements (e.g., minimum share price) could risk delisting**, negatively affecting stock price and future financing ability[457](index=457&type=chunk)[460](index=460&type=chunk) - The **share price may be volatile and subject to wide fluctuations due to various factors (e.g., financial performance, competition, macroeconomic conditions, litigation)**, potentially causing investors to lose value[461](index=461&type=chunk)[462](index=462&type=chunk) - Management has **broad discretion in using cash resources**, which may not be effective in pursuing growth strategies or could be invested in ways stockholders disagree with[463](index=463&type=chunk) - **Business and financial performance may differ from disclosed projections or third-party attributions**, as projections involve risks and uncertainties beyond control[464](index=464&type=chunk) - **Future sales of common stock in the public market, including through equity incentive plans or future offerings**, could cause the share price to fall and dilute existing stockholders[465](index=465&type=chunk)[466](index=466&type=chunk)[467](index=467&type=chunk)[468](index=468&type=chunk) - **Provisions in corporate charter documents and Delaware law (e.g., blank check preferred stock, classified board, super-majority requirements) may prevent or hinder attempts to change management or acquire a controlling interest**[470](index=470&type=chunk)[471](index=471&type=chunk)[472](index=472&type=chunk) - The **Amended Charter designates Delaware Court of Chancery and federal district courts as exclusive forums for disputes**, potentially limiting stockholders' ability to choose a favorable judicial forum[474](index=474&type=chunk)[475](index=475&type=chunk) - The **Amended Charter states that the 'corporate opportunity' doctrine does not apply to non-employee directors**, allowing them to pursue business opportunities for personal advantage[477](index=477&type=chunk) - **Effects of climate change and related regulatory, customer, and investor responses may adversely impact business through facility damage, supply chain interruptions, increased costs, and reputational risks**[478](index=478&type=chunk) [Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds](index=107&type=section&id=Item%202.%20Unregistered%20Sales%20Of%20Equity%20Securities%20and%20Use%20Of%20Proceeds) States that there were no unregistered sales of equity securities or use of proceeds to report for the period - **No unregistered sales of equity securities**[479](index=479&type=chunk) [Item 3. Defaults Upon Senior Securities](index=107&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) States that there were no defaults upon senior securities to report for the period - **No defaults upon senior securities**[480](index=480&type=chunk) [Item 4. Mine Safety Disclosures](index=107&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Indicates that this item is not applicable to the Company - **Not applicable**[481](index=481&type=chunk) [Item 5. Other Information](index=107&type=section&id=Item%205.%20Other%20Information) States that there is no other information to report for the period - **Not applicable**[482](index=482&type=chunk) [Item 6. Exhibits](index=108&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including corporate documents, credit agreements, and certifications - Includes **amendments to the Certificate of Incorporation and Bylaws**[485](index=485&type=chunk) - Lists several **amendments to the Credit Agreement (Twelfth, Thirteenth, Fourteenth Amendments)**[485](index=485&type=chunk) - Includes the **Exchange Agreement, Investor Rights Agreement, and Rights Offering Backstop Agreement**[485](index=485&type=chunk) - Contains **certifications from the Chief Executive Officer and Chief Financial Officer, and Inline XBRL documents**[485](index=485&type=chunk)[486](index=486&type=chunk) [Signatures](index=110&type=section&id=Signatures) Confirms the due signing of the report by the Chief Financial Officer on September 12, 2025 - The report was **signed by Siddharth Thacker, Chief Financial Officer, on September 12, 2025**[490](index=490&type=chunk)
fee (JVA) - 2025 Q3 - Quarterly Report
2025-09-12 13:01
PART I. FINANCIAL INFORMATION [ITEM 1. Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements and detailed notes on business activities, accounting policies, and recent acquisitions [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20July%2031%2C%202025%20and%20October%2031%2C%202024) Total assets and liabilities significantly increased from October 2024 to July 2025, driven by higher current assets and liabilities, while stockholders' equity saw a modest rise Unaudited Condensed Consolidated Balance Sheets as of July 31, 2025 and October 31, 2024 | Metric | July 31, 2025 (in USD) | October 31, 2024 (in USD) | Change | | :-------------------------------- | :------------ | :--------------- | :----- | | Total Current Assets | $38,025,548 | $28,373,050 | +34.0% | | Total Assets | $45,879,967 | $34,010,688 | +34.9% | | Total Current Liabilities | $17,046,019 | $6,846,067 | +149.0% | | Total Liabilities | $19,110,502 | $7,833,121 | +144.0% | | Total Stockholders' Equity | $26,769,465 | $26,177,567 | +2.3% | - Significant increase in inventories from **$15,705,984** (Oct 2024) to **$21,685,412** (Jul 2025), and 'Due from broker' from **$1,466,059** to **$4,444,179**[11](index=11&type=chunk) - Introduction of a **$6,250,000** line of credit balance as of July 31, 2025, compared to zero in October 2024[11](index=11&type=chunk) [Unaudited Condensed Consolidated Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20three%20and%20nine%20months%20ended%20July%2031%2C%202025%20and%202024) The company reported a net loss for the three months ended July 31, 2025, due to higher cost of sales and operating expenses, and a decrease in net income for the nine months despite higher net sales Three Months Ended July 31 (YoY Comparison) | Metric | 2025 (in USD) | 2024 (in USD) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | | Net Sales | $23,910,514 | $18,813,162 | +27.1% | | Cost of Sales | $20,997,777 | $14,887,098 | +41.0% | | Gross Profit | $2,912,737 | $3,926,064 | -25.9% | | Operating Expenses | $4,007,888 | $3,206,201 | +25.0% | | Income (Loss) from Operations | $(1,095,151) | $719,863 | -252.1% | | Net Income (Loss) | $(1,205,413) | $626,796 | -292.5% | | Basic and Diluted EPS | $(0.21) | $0.11 | -290.9% | Nine Months Ended July 31 (YoY Comparison) | Metric | 2025 (in USD) | 2024 (in USD) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | | Net Sales | $68,535,860 | $57,349,477 | +19.5% | | Cost of Sales | $55,253,979 | $46,239,134 | +19.5% | | Gross Profit | $13,281,881 | $11,110,343 | +19.5% | | Operating Expenses | $11,897,386 | $9,840,219 | +20.9% | | Income (Loss) from Operations | $1,384,495 | $1,270,124 | +9.0% | | Net Income (Loss) | $591,898 | $955,979 | -38.1% | | Basic and Diluted EPS | $0.10 | $0.17 | -41.2% | [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20for%20the%20three%20and%20nine%20months%20ended%20July%2031%2C%202025%20and%202024) Stockholders' equity increased slightly from October 2024 to July 2025, primarily due to net income in the first two quarters of fiscal 2025, partially offset by a third-quarter net loss - Total Stockholders' Equity increased from **$26,177,567** at October 31, 2024, to **$26,769,465** at July 31, 2025[15](index=15&type=chunk) - Retained earnings increased by **$591,898** from October 31, 2024, to July 31, 2025, reflecting the net income for the nine-month period[15](index=15&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20nine%20months%20ended%20July%2031%2C%202025%20and%202024) Operating activities shifted from cash provided to cash used, investing activities used cash due to an acquisition, and financing activities provided substantial cash from increased line of credit borrowings Nine Months Ended July 31 - Cash Flow Summary | Cash Flow Activity | 2025 (in USD) | 2024 (in USD) | | :-------------------------------- | :----------- | :----------- | | Net cash (used in) provided by operating activities | $(5,396,716) | $5,209,235 | | Net cash (used in) provided by investing activities | $(1,254,535) | $2,879,320 | | Net cash provided by (used in) financing activities | $6,250,000 | $(7,724,374) | | Net change in cash and cash equivalents | $(401,251) | $364,181 | | Cash and cash equivalents, end of period | $979,772 | $3,098,158 | - Operating cash flow decreased significantly, primarily due to a **$5,711,012** increase in inventories in 2025 compared to a **$4,480,524** decrease in 2024[18](index=18&type=chunk) - Investing activities in 2025 included an **$800,000** acquisition of Empire Coffee Company and **$375,286** for leasehold improvements[18](index=18&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the financial statements, covering business activities, accounting policies, recent acquisitions, and other financial details - The interim financial statements are unaudited and prepared consistently with the annual statements, with no changes to significant accounting policies during the nine months ended July 31, 2025[26](index=26&type=chunk)[28](index=28&type=chunk) - Revenue is recognized according to ASC 606, evaluating the transfer of promised goods or services when the customer obtains control[29](index=29&type=chunk) Revenues by Product Line (Nine Months Ended July 31) | Product Line | 2025 (in USD) | 2024 (in USD) | Change (%) | | :----------- | :----------- | :----------- | :--------- | | Green | $28,731,856 | $25,505,606 | +12.6% | | Packaged | $39,804,004 | $31,843,871 | +25.0% | | Totals | $68,535,860 | $57,349,477 | +19.5% | Revenues by Product Line (Three Months Ended July 31) | Product Line | 2025 (in USD) | 2024 (in USD) | Change (%) | | :----------- | :----------- | :----------- | :--------- | | Green | $10,474,908 | $10,795,701 | -3.0% | | Packaged | $13,435,606 | $8,017,461 | +67.6% | | Totals | $23,910,514 | $18,813,162 | +27.1% | [Note 1 - Business Activities](index=8&type=section&id=Note%201%20-%20Business%20Activities) Coffee Holding Co., Inc. operates as a wholesale coffee roaster and dealer, manufacturing, marketing, and distributing roasted and blended coffees under private labels and its own brands, and selling green coffee - The Company's core business involves wholesale coffee operations, including manufacturing, roasting, packaging, marketing, and distributing roasted and blended coffees for private labels and its own brands, as well as selling green coffee and coffee roasters[20](index=20&type=chunk) - The company's product lines (Wholesale Green Coffee, Private Label Coffee, Branded Coffee) are considered a single reporting segment due to shared customers, manufacturing resources, sales channels, and marketing support[22](index=22&type=chunk) - The company maintains compliance with financial covenants for its line of credit and does not believe there is substantial doubt about its ability to continue as a going concern, reporting net income of **$591,898** and a net working capital surplus of **$20,979,529** for the nine months ended July 31, 2025[23](index=23&type=chunk) [Note 2 – Basis of Presentation and Significant Accounting Policy](index=9&type=section&id=Note%202%20%E2%80%93%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policy) The interim condensed consolidated financial statements are unaudited and prepared consistently with annual statements, with no changes to significant accounting policies during the nine months ended July 31, 2025 [Recent Accounting Pronouncements – Adopted](index=10&type=section&id=Recent%20Accounting%20Pronouncements%20%E2%80%93%20Adopted) The Company adopted ASU 2016-13 (Credit Losses) and ASU 2023-07 (Segment Reporting) during the period, with no material financial statement impact from either - Adoption of ASU 2016-13 (Credit Losses) on November 1, 2023, had no material impact on consolidated financial statements[32](index=32&type=chunk) - Adoption of ASU 2023-07 (Segment Reporting) for fiscal years beginning after December 15, 2023, resulted in enhanced disclosures but no material impact on consolidated financial statements[33](index=33&type=chunk) [Recent Accounting Pronouncements – Not Yet Adopted](index=10&type=section&id=Recent%20Accounting%20Pronouncements%20%E2%80%93%20Not%20Yet%20Adopted) The Company is evaluating the impact of ASU 2023-06 (Disclosure Improvements), ASU 2023-09 (Income Tax Disclosures), and ASU 2024-03/2025-01 (Expense Disaggregation Disclosures), with no material impact expected from ASU 2023-06 - The Company does not expect ASU 2023-06 (Disclosure Improvements) to have a material impact[34](index=34&type=chunk) - The Company is currently evaluating the impact of ASU 2023-09 (Improvements to Income Tax Disclosures) and ASU 2024-03/2025-01 (Expense Disaggregation Disclosures)[35](index=35&type=chunk)[37](index=37&type=chunk) [Note 3 – Business Combination](index=11&type=section&id=Note%203%20%E2%80%93%20Business%20Combination) On November 6, 2024, the Company acquired the remaining assets of Empire Coffee Company for **$800,000** through its wholly-owned subsidiary, Second Empire, contributing **$3,238,704** in revenues and a loss of **$694,130** to the Company's results - On November 6, 2024, the Company acquired Empire Coffee Company's remaining assets for **$800,000** via a UCC Chapter 9 sale, through its subsidiary Second Empire[38](index=38&type=chunk) - The acquisition contributed **$3,238,704** in revenues and a loss of **$694,130** to the Company's results from November 6, 2024, to July 31, 2025[39](index=39&type=chunk) Fair Values of Assets Acquired | Asset | Fair Value (in USD) | | :------------------ | :--------- | | Accounts Receivable | $531,585 | | Inventory | $268,415 | | Total Purchase Price | $800,000 | [Note 4 - Inventories](index=11&type=section&id=Note%204%20-%20Inventories) Inventories significantly increased from October 31, 2024, to July 31, 2025, primarily driven by a substantial rise in green coffee and packed coffee Inventories | Inventory Type | July 31, 2025 (in USD) | October 31, 2024 (in USD) | Change | | :------------- | :------------ | :--------------- | :----- | | Packed coffee | $3,851,853 | $2,025,335 | +90.2% | | Green coffee | $15,674,822 | $11,525,118 | +36.0% | | Total Inventories | $21,685,412 | $15,705,984 | +38.1% | [Note 5 - Commodities Held by Broker](index=12&type=section&id=Note%205%20-%20Commodities%20Held%20by%20Broker) The Company uses short-term coffee futures and options contracts to partially hedge against green coffee price fluctuations, but recent periods have seen significant losses, increasing cost of sales and decreasing profitability - The Company uses short-term coffee futures and options contracts for partial hedging of green coffee prices and to reduce cost of sales, classifying them as trading securities[43](index=43&type=chunk)[45](index=45&type=chunk) - Realized and unrealized gains/losses on these contracts are included in cost of sales, impacting earnings volatility[45](index=45&type=chunk) Realized and Unrealized Gains/Losses on Commodity Contracts | Metric | Three Months Ended July 31, 2025 (in USD) | Three Months Ended July 31, 2024 (in USD) | Nine Months Ended July 31, 2025 (in USD) | Nine Months Ended July 31, 2024 (in USD) | | :---------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Gross realized gains | $1,660,346 | $405,608 | $3,773,790 | $1,187,382 | | Gross realized losses | $(373,788) | $(133,392) | $(608,780) | $(903,162) | | Unrealized (losses) gains | $(2,056,404) | $464,272 | $(2,478,142) | $934,974 | | Total | $(769,846) | $736,488 | $686,868 | $1,219,194 | [Note 6 - Line of Credit](index=12&type=section&id=Note%206%20-%20Line%20of%20Credit) The Company's line of credit with Webster Financial Corp. was amended, extending the maturity date to June 28, 2026, and increasing the maximum facility to **$10,000,000**, with an outstanding balance of **$6,250,000** as of July 31, 2025 - The line of credit maturity date was extended to June 28, 2026, and the maximum facility amount increased to **$10,000,000**[47](index=47&type=chunk)[48](index=48&type=chunk) - The outstanding balance on the line of credit was **$6,250,000** as of July 31, 2025, compared to **$0** as of October 31, 2024[50](index=50&type=chunk) - The Company was in compliance with all financial covenants as of July 31, 2025[23](index=23&type=chunk)[50](index=50&type=chunk) [Note 7 – Income Taxes](index=13&type=section&id=Note%207%20%E2%80%93%20Income%20Taxes) The Company recorded income tax expense of **$17,584** for the three months and **$650,749** for the nine months ended July 31, 2025, primarily due to the tax impact of unrealized losses from coffee futures and options contracts, and is assessing the impact of the recently enacted One Big Beautiful Bill Act (OBBBA) Income Tax Expense | Period | 2025 (in USD) | 2024 (in USD) | | :---------------------- | :--------- | :--------- | | Three months ended July 31 | $17,584 | $259,249 | | Nine months ended July 31 | $650,749 | $323,954 | - The income tax expense for the three months ended July 31, 2025, was mainly due to the tax impact of unrealized losses from coffee futures and options contracts[54](index=54&type=chunk) - The Company is currently assessing the impact of the One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, which includes permanent extension of certain tax provisions and modifications to the international tax framework[55](index=55&type=chunk) [Note 8 – Earnings (Loss) Per Share](index=13&type=section&id=Note%208%20%E2%80%93%20Earnings%20%28Loss%29%20Per%20Share) For the three months ended July 31, 2025, the company reported a loss per share of **$(0.21)**, while for the nine months, it reported earnings per share of **$0.10** Basic and Diluted EPS | Period | 2025 (in USD) | 2024 (in USD) | | :---------------------- | :----- | :----- | | Three months ended July 31 | $(0.21) | $0.11 | | Nine months ended July 31 | $0.10 | $0.17 | - The weighted average common shares outstanding for both basic and diluted EPS remained constant at **5,708,599** for all periods presented[57](index=57&type=chunk) - **921,000** outstanding stock options were excluded from diluted EPS calculation as they were antidilutive[57](index=57&type=chunk) [Note 9 - Commitments and Contingencies](index=13&type=section&id=Note%209%20-%20Commitments%20and%20Contingencies) The Company and its subsidiaries are not involved in any pending legal proceedings that management believes would have a material effect on the business or financial condition - No material legal proceedings are pending against the Company or its subsidiaries[58](index=58&type=chunk) [Note 10 – Leases](index=14&type=section&id=Note%2010%20%E2%80%93%20Leases) The Company's right-of-use operating lease assets and total lease liabilities significantly increased from October 31, 2024, to July 31, 2025, primarily due to a new lease from the Second Empire Acquisition, while a May 2024 lease modification resulted in a gain on extinguishment Lease Assets and Liabilities | Metric | July 31, 2025 (in USD) | October 31, 2024 (in USD) | Change | | :-------------------------- | :------------ | :--------------- | :----- | | Right-of-use operating lease assets | $2,696,475 | $1,166,537 | +131.1% | | Total lease liability | $2,737,267 | $1,173,032 | +133.3% | - A new lease was recognized in November 2024 for **$2,113,581** in connection with the Second Empire Acquisition[65](index=65&type=chunk) - A lease modification in May 2024 resulted in a gain on extinguishment of lease of **$210,567**[64](index=64&type=chunk) [Note 11 – Related Party Transactions](index=15&type=section&id=Note%2011%20%E2%80%93%20Related%20Party%20Transactions) The Company maintains a Non-Qualified Deferred Compensation Plan for its CEO, with assets and corresponding liabilities of **$129,972** as of July 31, 2025 - The Company has a Non-Qualified Deferred Compensation Plan for its CEO, with a deferred compensation payable of **$129,972** as of July 31, 2025[66](index=66&type=chunk) [Note 12 - Stockholders' Equity](index=15&type=section&id=Note%2012%20-%20Stockholders%27%20Equity) The Company did not purchase any treasury shares or grant, forfeit, or expire any stock options during the three and nine months ended July 31, 2025, with all **921,000** outstanding stock options being exercisable and fully vested - No treasury shares were purchased during the three and nine months ended July 31, 2025[67](index=67&type=chunk) - No stock options were granted, forfeited, or expired during the three and nine months ended July 31, 2025[68](index=68&type=chunk) - As of July 31, 2025, **921,000** stock options were exercisable and fully vested, with no stock-based compensation expense recorded[68](index=68&type=chunk)[69](index=69&type=chunk) [Note 13 – Segment Information](index=15&type=section&id=Note%2013%20%E2%80%93%20Segment%20Information) The Company operates as a single reportable segment: coffee, with its CODM assessing performance and allocating resources based on consolidated operating income (loss), primarily deriving revenue from North America across wholesale green coffee, private label, and branded coffee sales - The Company has one reportable segment: coffee, managed on a consolidated basis, with Andrew Gordon serving as the Chief Operating Decision Maker (CODM)[71](index=71&type=chunk) - The coffee segment generates revenue from wholesale green coffee, private label coffee, and branded coffee, with revenue recognized upon shipment[72](index=72&type=chunk) - The CODM evaluates performance and allocates resources based on operating income (loss) and total consolidated assets[72](index=72&type=chunk)[73](index=73&type=chunk) [Note 14 - Subsequent Events](index=16&type=section&id=Note%2014%20-%20Subsequent%20Events) The Company has evaluated all subsequent events through the date the financial statements were available and determined that no events require reporting - No subsequent events requiring disclosure were identified[74](index=74&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&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 performance and condition, highlighting factors affecting operations, critical accounting policies, and a detailed comparison of results for the three and nine months ended July 31, 2025, versus 2024, along with discussions on liquidity, capital resources, and going concern [Overview](index=17&type=section&id=Overview) The Company is an integrated wholesale coffee roaster and dealer, offering a broad range of coffee products, with operations affected by sales, marketing, volatile green coffee prices (generally passed through), and hedging policies, and recently acquired Empire Coffee Company - The Company is an integrated wholesale coffee roaster and dealer, offering diverse coffee products across various price points, aiming for increased profitability and resilience to price volatility[78](index=78&type=chunk) - Net sales are driven by sales and marketing efforts and customer retention/acquisition[80](index=80&type=chunk) - Green coffee prices are volatile but historically, increases have been passed to customers, leading to increased net sales[81](index=81&type=chunk) - The Company uses short-term coffee futures and options contracts for partial hedging, but acknowledges that no strategy eliminates all pricing risks and past losses have impacted profitability[82](index=82&type=chunk)[83](index=83&type=chunk) - On November 6, 2024, the Company's subsidiary, Second Empire, acquired equipment, accounts receivable, and inventory of Empire Coffee Company[84](index=84&type=chunk) [Three Months Ended July 31, 2025 Compared to the Three Months Ended July 31, 2024](index=20&type=section&id=Three%20Months%20Ended%20July%2031%2C%202025%20Compared%20to%20the%20Three%20Months%20Ended%20July%2031%2C%202024) Net sales increased by **27%** due to higher sales of private label and branded coffees, but gross profit decreased by **26%** due to a **41%** increase in cost of sales, driven by higher tariffs and a net trading loss on coffee futures, leading to a net loss of **$1.2 million** compared to net income in the prior year Three Months Ended July 31 - Key Financials | Metric | 2025 (in USD) | 2024 (in USD) | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :----------- | :--------- | | Net Sales | $23,910,514 | $18,813,162 | $5,097,352 | +27% | | Cost of Sales | $20,997,777 | $14,887,098 | $6,110,679 | +41% | | Gross Profit | $2,912,737 | $3,926,064 | $(1,013,327) | -26% | | Operating Expenses | $4,007,888 | $3,206,201 | $801,687 | +25% | | Net Income (Loss) | $(1,205,413) | $626,796 | $(1,832,209) | -292.5% | - The increase in cost of sales was driven by higher tariffs on imported coffee and a net trading loss of approximately **$770,000** on coffee futures and options contracts[88](index=88&type=chunk) - Operating expenses increased primarily due to the acquisition of Empire Coffee Company[90](index=90&type=chunk) [Nine Months Ended July 31, 2025, Compared to the Nine Months Ended July 31, 2024](index=21&type=section&id=Nine%20Months%20Ended%20July%2031%2C%202025%2C%20Compared%20to%20the%20Nine%20Months%20Ended%20July%2031%2C%202024) Net sales increased by **20%** due to higher sales across product lines, and gross profit also increased by **19.5%**, but operating expenses rose by **21%** due to the Second Empire Acquisition, leading to a **38%** decrease in net income Nine Months Ended July 31 - Key Financials | Metric | 2025 (in USD) | 2024 (in USD) | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :----------- | :--------- | | Net Sales | $68,535,860 | $57,349,477 | $11,186,383 | +20% | | Cost of Sales | $55,253,979 | $46,239,134 | $9,014,845 | +19.5% | | Gross Profit | $13,281,881 | $11,110,343 | $2,171,538 | +19.5% | | Operating Expenses | $11,897,386 | $9,840,219 | $2,057,167 | +21% | | Net Income (Loss) | $591,898 | $955,979 | $(364,081) | -38% | - Operating expenses increased by approximately **$2.2 million** due to the Second Empire Acquisition[98](index=98&type=chunk) - Net income decreased primarily due to higher operating expenses, tariffs on imported coffee, and unrealized trading losses in the third quarter[101](index=101&type=chunk) [Liquidity, Capital Resources and Going Concern](index=21&type=section&id=Liquidity%2C%20Capital%20Resources%20and%20Going%20Concern) Working capital decreased by **$547,454** to **$20,979,529** as of July 31, 2025, with operating and investing activities using cash, while financing activities provided cash from increased line of credit borrowings, and the Company expects to fund operations through operating cash and its credit facility - Working capital decreased by **$547,454** to **$20,979,529** as of July 31, 2025, compared to October 31, 2024[102](index=102&type=chunk) - Operating activities used **$5,396,716** in cash for the nine months ended July 31, 2025, a significant change from **$5,209,235** provided in the prior year, mainly due to increased inventory[106](index=106&type=chunk) - Financing activities provided **$6,250,000** in cash for the nine months ended July 31, 2025, primarily from increased borrowings under the line of credit[108](index=108&type=chunk) - The Company expects to fund operations for at least the next twelve months through operating cash and its credit facility[109](index=109&type=chunk) [Off-Balance Sheet Arrangements](index=22&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company has no material off-balance sheet arrangements - The Company does not have any material off-balance sheet arrangements[110](index=110&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no applicable disclosures regarding quantitative and qualitative market risk - No applicable disclosures for quantitative and qualitative market risk[111](index=111&type=chunk) [ITEM 4. Controls and Procedures](index=23&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of July 31, 2025, due to several material weaknesses in internal control over financial reporting, for which a remediation plan is in progress [Evaluation of Disclosure Controls and Procedures](index=23&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were not effective as of July 31, 2025, due to material weaknesses in internal control over financial reporting - Disclosure controls and procedures were deemed not effective as of July 31, 2025, due to material weaknesses in internal control over financial reporting[112](index=112&type=chunk) [Material Weakness Over Financial Reporting](index=23&type=section&id=Material%20Weakness%20Over%20Financial%20Reporting) Several material weaknesses were identified, including inadequate controls over inventory quantities, system access, contract identification/accounting, physical custody of records, and journal entry/account reconciliation processes, along with inaccurate intercompany eliminations in prior financial statements - Inadequate controls to prevent and detect misstatements of inventory quantities at a subsidiary[113](index=113&type=chunk) - Inappropriate system access controls over the financial reporting system, lacking segregation of duties[114](index=114&type=chunk) - Lack of adequate controls for identifying and accounting for material contracts, specifically a material lease amendment[115](index=115&type=chunk) - Inadequate controls regarding physical custody of hardware, electronic, and hard copy records for Generations Coffee and Steep and Brew[116](index=116&type=chunk) - Lack of adequate controls for the preparation and review of journal entries and account reconciliations during the year-end financial statement closing process[117](index=117&type=chunk) - Inaccurate accounting for intercompany eliminations in fiscal year 2020, leading to an overstatement of net sales and cost of sales by approximately **$8.3 million** and requiring restatement[118](index=118&type=chunk) - Lack of adequate controls for recording year-end accruals for vendor liabilities and calculating required loan covenants[119](index=119&type=chunk) - Despite material weaknesses, management believes the financial information presented is materially correct and fairly presents the financial position and operating results[120](index=120&type=chunk) [Remediation Plan for the Material Weaknesses](index=24&type=section&id=Remediation%20Plan%20for%20the%20Material%20Weaknesses) The Company is implementing a remediation plan, including hiring third-party consultants, educating control owners, developing documentation, enhancing controls for financial reporting systems, redesigning access rights, performing cross-reference analysis, and implementing additional levels of internal review - Remediation efforts include hiring third-party consultants, educating control owners, developing documentation, enhancing financial reporting system controls, redesigning access rights, performing quarterly cross-reference analysis, and implementing additional internal review levels[121](index=121&type=chunk)[126](index=126&type=chunk) - Material weaknesses will not be considered remediated until efforts are fully implemented and controls are operating effectively[122](index=122&type=chunk) [Changes in Internal Control over Financial Reporting](index=24&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Other than the changes aimed at remediating the identified material weaknesses, there were no other material changes in internal control over financial reporting during the fiscal quarter ended July 31, 2025 - No material changes in internal control over financial reporting occurred during the quarter, other than those for remediation[125](index=125&type=chunk) PART II. OTHER INFORMATION [ITEM 1. Legal Proceedings](index=25&type=section&id=ITEM%201.%20Legal%20Proceedings) No legal proceedings are reported - No legal proceedings to report[127](index=127&type=chunk) [ITEM 1A. Risk Factors](index=25&type=section&id=ITEM%201A.%20Risk%20Factors) There have been no material changes to the Company's risk factors since the prior Form 10-Q filing for the quarter ending April 30, 2025 - No material changes to risk factors since the April 30, 2025, Form 10-Q[128](index=128&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=25&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds are reported - No unregistered sales of equity securities or use of proceeds[129](index=129&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=25&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities are reported - No defaults upon senior securities[130](index=130&type=chunk) [ITEM 4. Mine Safety Disclosures](index=25&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) Not applicable - Mine safety disclosures are not applicable[131](index=131&type=chunk) [ITEM 5. Other Information](index=25&type=section&id=ITEM%205.%20Other%20Information) No other information requiring disclosure under this item, including Rule 10b5-1 trading arrangements, was reported for directors or officers during the quarter - No other information to report, including Rule 10b5-1 trading arrangements by directors or officers[132](index=132&type=chunk)[133](index=133&type=chunk) [ITEM 6. Exhibits](index=26&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL documents - The report includes certifications (Section 302 and 906) and Inline XBRL documents as exhibits[135](index=135&type=chunk) SIGNATURES [SIGNATURES](index=27&type=section&id=SIGNATURES) The report is duly signed on behalf of Coffee Holding Co., Inc. by Andrew Gordon, President, Chief Executive Officer, and Chief Financial Officer, on September 12, 2025 - The report was signed by Andrew Gordon, President, CEO, and CFO, on September 12, 2025[138](index=138&type=chunk)
Vince.(VNCE) - 2026 Q2 - Quarterly Report
2025-09-12 12:40
[Introductory Note](index=4&type=section&id=Introductory%20Note) This section outlines Vince Holding Corp.'s history, including its IPO, IP sale, and P180 acquisition, and defines key terms - Vince Holding Corp. (VHC) completed an **IPO in November 2013**, separating non-Vince businesses[8](index=8&type=chunk) - V Opco, a subsidiary, sold its intellectual property assets related to the Vince brand to **ABG-Vince, LLC** on **May 25, 2023**[9](index=9&type=chunk) - **P180 Vince Acquisition Co.** acquired a **majority stake** in the Company from affiliates of Sun Capital Partners, Inc. on **January 22, 2025**[10](index=10&type=chunk) [Disclosures Regarding Forward-Looking Statements](index=4&type=section&id=DISCLOSURES%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section outlines forward-looking statements, noting actual results may differ materially due to various risks and uncertainties - Forward-looking statements are subject to **risks and uncertainties**, and actual results may differ materially from expectations[13](index=13&type=chunk) - Key risks include changes in **trade policies and tariffs**, ability to maintain **cash flow and credit facility availability**, general economic conditions, and ability to maintain wholesale partners[14](index=14&type=chunk) - Other risks involve the **license agreement with ABG Vince**, strategic initiative benefits, lease payments, **internal control weaknesses**, and **NYSE** listing compliance[14](index=14&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements and their accompanying notes [a) Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=a)%20Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) | (in thousands) | August 2, 2025 | February 1, 2025 | | :--------------- | :------------- | :--------------- | | **Assets** | | | | Total current assets | $112,071 | $96,576 | | Total assets | $238,972 | $222,735 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $69,736 | $73,546 | | Long-term debt | $31,096 | $19,156 | | Total stockholders' equity | $49,295 | $41,759 | | Total liabilities and stockholders' equity | $238,972 | $222,735 | - Total assets increased by **$16,237 (7.3%)** from **February 1, 2025**, to **August 2, 2025**, primarily driven by an increase in inventories[16](index=16&type=chunk) - Total stockholders' equity increased by **$7,536 (18.0%)** from **February 1, 2025**, to **August 2, 2025**[16](index=16&type=chunk) [b) Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=7&type=section&id=b)%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) | (in thousands, except per share data) | Three Months Ended August 2, 2025 | Three Months Ended August 3, 2024 | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net sales | $73,241 | $74,169 | $131,174 | $133,340 | | Gross profit | $36,938 | $35,131 | $66,101 | $65,044 | | Income from operations | $11,151 | $1,130 | $6,713 | $6,734 | | Net income | $12,060 | $569 | $7,257 | $4,949 | | Basic earnings per share | $0.93 | $0.05 | $0.56 | $0.39 | | Diluted earnings per share | $0.93 | $0.05 | $0.56 | $0.39 | - Net sales decreased by **1.3%** for the three months ended **August 2, 2025**, and by **1.6%** for the six months ended **August 2, 2025**, compared to the prior year periods[19](index=19&type=chunk) - Net income significantly increased to **$12,060 thousand** for the three months ended **August 2, 2025**, from **$569 thousand** in the prior year, and to **$7,257 thousand** for the six months, from **$4,949 thousand**[19](index=19&type=chunk) [c) Unaudited Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=c)%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | (in thousands, except share amounts) | Balance as of February 1, 2025 | Balance as of August 2, 2025 | | :----------------------------------- | :----------------------------- | :--------------------------- | | Common Stock (Number of Shares) | 12,758,852 | 12,968,548 | | Common Stock (Par Value) | $128 | $130 | | Additional Paid-In Capital | $1,158,279 | $1,158,508 | | Accumulated Deficit | $(1,116,681) | $(1,109,424) | | Accumulated Other Comprehensive Income (Loss) | $33 | $81 | | Total Stockholders' Equity | $41,759 | $49,295 | - Total stockholders' equity increased by **$7,536** from **February 1, 2025**, to **August 2, 2025**, primarily due to net income of **$12,060** and share-based compensation expense[24](index=24&type=chunk) - The number of common shares outstanding increased from **12,758,852** to **12,968,548** during the six-month period[24](index=24&type=chunk) [d) Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=d)%20Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | (in thousands) | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :--------------- | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(7,615) | $(7,072) | | Net cash used in investing activities | $(3,530) | $(1,421) | | Net cash provided by financing activities | $11,319 | $8,081 | | Increase (decrease) in cash, cash equivalents, and restricted cash | $174 | $(412) | | Cash and cash equivalents per balance sheet at end of period | $777 | $711 | - Net cash used in operating activities increased slightly to **$7,615 thousand** for the six months ended **August 2, 2025**, from **$7,072 thousand** in the prior year, primarily due to increased inventories[30](index=30&type=chunk) - Net cash used in investing activities more than doubled to **$3,530 thousand**, driven by higher capital expenditures[30](index=30&type=chunk) [e) Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=e)%20Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Description of Business and Basis of Presentation](index=11&type=section&id=Note%201.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) This note describes Vince Holding Corp.'s business, recent transactions, financial statement basis, liquidity, and revenue recognition - The Company operates the **Vince** brand, a global luxury apparel and accessories brand, after divesting Rebecca Taylor and Parker brands[32](index=32&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) - A strategic partnership with **Authentic Brands Group (ABG)** involved the sale of **Vince IP** for cash and a **25%** membership interest in **ABG Vince**, granting V Opco an exclusive, long-term license[33](index=33&type=chunk) - **P180** acquired a **majority stake** in the Company on **January 22, 2025**, leading to amendments in credit agreements and a significant pay-down of subordinated debt[36](index=36&type=chunk)[37](index=37&type=chunk) - The Company's liquidity sources include cash, operations, the **2023 Revolving Credit Facility**, and capital markets access, with primary cash needs for working capital, debt service, and capital expenditures[43](index=43&type=chunk) [Note 2. Recent Transactions](index=15&type=section&id=Note%202.%20Recent%20Transactions) This note details the Rebecca Taylor wind-down, Vince IP sale to ABG Vince, and P180 Acquisition, outlining their financial implications - The Rebecca Taylor business was wound down, and its intellectual property was sold in **December 2022**. The remaining shares of Rebecca Taylor, Inc. were sold in **May 2024**, resulting in a gain on sale of subsidiary of **$7,634 thousand** for the six months ended **August 3, 2024**[51](index=51&type=chunk)[53](index=53&type=chunk) - The **Vince** intellectual property was sold to **ABG-Vince LLC** for **$76,500 thousand** cash and a **25%** membership interest, with the Company accounting for this investment using the equity method[54](index=54&type=chunk)[56](index=56&type=chunk) - The **P180 Acquisition** involved **P180** purchasing a **majority stake (67%)** in the Company for approximately **$19,800 thousand** and included a **$20,000 thousand** pay-down of the Third Lien Credit Facility by V Opco and a **$7,000 thousand** debt forgiveness by **P180**, leading to a debt extinguishment gain of **$11,575 thousand** recorded as a capital contribution[65](index=65&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk) - Under the License Agreement with **ABG Vince**, V Opco has an exclusive, long-term license to use the **Vince** brand **IP** in specified territories and for certain products, with an annual guaranteed minimum royalty of **$11,000 thousand**[59](index=59&type=chunk)[62](index=62&type=chunk) [Note 3. Fair Value Measurements](index=19&type=section&id=Note%203.%20Fair%20Value%20Measurements) This note defines fair value, outlines the three-level hierarchy for financial instruments, and discusses non-financial asset impairment - Fair value is defined as the amount received from selling an asset or paid to transfer a liability in an orderly transaction[71](index=71&type=chunk) - The Company's financial assets and liabilities are measured using a three-level fair value hierarchy: **Level 2** for revolving credit facilities (variable rates, frequent activity) and **Level 3** for the Third Lien Credit Facility (variable rates, unobservable inputs)[71](index=71&type=chunk) - Non-financial assets, such as operating lease **ROU assets** and property and equipment, are assessed for impairment periodically, with no impairment identified for the three and six months ended **August 2, 2025**[73](index=73&type=chunk) [Note 4. Long-Term Debt and Financing Arrangements](index=21&type=section&id=Note%204.%20Long-Term%20Debt%20and%20Financing%20Arrangements) This note details the Company's long-term debt, including credit facilities, their terms, and the impact of the P180 Acquisition | (in thousands) | August 2, 2025 | February 1, 2025 | | :--------------- | :------------- | :--------------- | | Revolving Credit Facilities | $22,862 | $11,413 | | Third Lien Credit Facility | $8,234 | $7,743 | | Total long-term debt | $31,096 | $19,156 | - The **2023 Revolving Credit Facility** provides up to **$85,000 thousand**, maturing on **June 23, 2028**, with interest rates based on **SOFR** or **Base Rate** plus applicable margins, and requires Excess Availability to be no less than the greater of **10.0%** of the **Loan Cap** or **$7,500 thousand**[79](index=79&type=chunk)[80](index=80&type=chunk)[82](index=82&type=chunk) - The Third Lien Credit Facility, initially **$20,000 thousand**, was significantly reduced by approximately **$27,000 thousand** through the Sun Debt Paydown and **P180** Debt Forgiveness in connection with the **P180 Acquisition**, resulting in **$7,500 thousand** remaining outstanding and a debt extinguishment gain of **$11,575 thousand**[96](index=96&type=chunk)[97](index=97&type=chunk) - As of **August 2, 2025**, the Company was in compliance with applicable covenants, with **$42,607 thousand** available under the **2023 Revolving Credit Facility** and a weighted average interest rate of **6.9%** on outstanding borrowings[86](index=86&type=chunk) [Note 5. Inventory](index=26&type=section&id=Note%205.%20Inventory) This note provides the net finished goods inventory values for the reported periods | (in thousands) | August 2, 2025 | February 1, 2025 | | :--------------- | :------------- | :--------------- | | Finished goods, net of reserves | $76,705 | $59,146 | - Finished goods inventory, net of reserves, increased by **$17,559 (29.7%)** from **February 1, 2025**, to **August 2, 2025**[98](index=98&type=chunk) [Note 6. Share-Based Compensation](index=26&type=section&id=Note%206.%20Share-Based%20Compensation) This note details share-based compensation plans, including stock option and RSU activity, and recognized compensation expense - The **Vince 2013 Incentive Plan** allows for grants of stock options, restricted stock, and other awards, with **229,962** shares available for future grants as of **August 2, 2025**[99](index=99&type=chunk) | Stock Options Activity (Six Months Ended August 2, 2025) | Number of Options | | :--------------------------------------- | :---------------- | | Outstanding at February 1, 2025 | — | | Granted | 403,650 | | Forfeited or expired | (3,300) | | Outstanding at August 2, 2025 | 400,350 | | Restricted Stock Units Activity (Six Months Ended August 2, 2025) | Number of Units | | :---------------------------------------- | :-------------- | | Non-vested at February 1, 2025 | 366,399 | | Granted | 5,000 | | Vested | (167,425) | | Non-vested at August 2, 2025 | 203,974 | - Share-based compensation expense was **$96 thousand** for the three months ended **August 2, 2025** (vs. **$255 thousand** in prior year) and **$242 thousand** for the six months ended **August 2, 2025** (vs. **$250 thousand** in prior year)[102](index=102&type=chunk) [Note 7. Stockholders' Equity](index=28&type=section&id=Note%207.%20Stockholders'%20Equity) This note describes the Company's At-the-Market Offering program for common stock sales through Virtu Americas LLC - The Company has an **At-the-Market Offering** program with **Virtu Americas LLC**, allowing it to sell up to **$10 million** of common stock under the **2024 S-3 Registration Statement**[104](index=104&type=chunk) - No offerings or sales of common stock were made under the **Virtu At-the-Market Offering** during the three and six months ended **August 2, 2025**[105](index=105&type=chunk) - As of **August 2, 2025**, **$2,925 thousand** was available under the **Virtu At-the-Market Offering**[105](index=105&type=chunk) [Note 8. Earnings Per Share](index=28&type=section&id=Note%208.%20Earnings%20Per%20Share) This note explains basic and diluted earnings per share calculation and reconciles weighted average shares outstanding | Weighted Average Shares Outstanding | Three Months Ended August 2, 2025 | Three Months Ended August 3, 2024 | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Basic | 12,906,045 | 12,569,488 | 12,863,100 | 12,538,695 | | Diluted | 12,958,739 | 12,617,085 | 12,950,828 | 12,606,575 | - Basic **EPS** is calculated by dividing net income by weighted average common shares outstanding, while diluted **EPS** includes the dilutive effect of share-based awards[106](index=106&type=chunk) - Certain weighted average shares were excluded from diluted **EPS** computation due to their anti-dilutive effect: **522,638** for the three months and **182,809** for the six months ended **August 2, 2025**[107](index=107&type=chunk) [Note 9. Commitments and Contingencies](index=29&type=section&id=Note%209.%20Commitments%20and%20Contingencies) This note addresses legal proceedings, contingencies, and details the recognition and receipt of Employee Retention Tax Credits (ERC) - The Company is involved in ordinary course legal proceedings and believes their ultimate outcome will not materially impact financial position or results[108](index=108&type=chunk) - In the second quarter of fiscal **2025**, the Company received **$7,173 thousand** in payments for Employee Retention Tax Credits (**ERC**) from the **CARES Act**, including **$1,560 thousand** in interest[110](index=110&type=chunk) - The **ERC** benefit of **$5,613 thousand** was recorded as an offset to compensation expense within SG&A, and the **$1,560 thousand** interest was recorded as Other (income)[110](index=110&type=chunk) [Note 10. Income Taxes](index=29&type=section&id=Note%2010.%20Income%20Taxes) This note explains the Company's income tax provision, deferred tax assets, and the impact of the One Big Beautiful Bill Act (OBBBA) - The Company recorded a discrete tax expense of **$58 thousand** for the three and six months ended **August 2, 2025**, related to interest received from the **ERC**[112](index=112&type=chunk) - Despite year-to-date ordinary pre-tax losses, the Company anticipates annual ordinary pre-tax income, but has determined that the tax benefit of year-to-date losses is unlikely to be realized in the current or future years[112](index=112&type=chunk) - The Company maintains a full valuation allowance against its deferred tax assets, which will remain until sufficient positive evidence supports their realization[115](index=115&type=chunk) - The recently enacted **One Big Beautiful Bill Act (OBBBA)** did not have a material impact on the Company's income tax provision for the three and six months ended **August 2, 2025**, and no material effect is anticipated for the full fiscal year[116](index=116&type=chunk) [Note 11. Leases](index=31&type=section&id=Note%2011.%20Leases) This note outlines the Company's operating lease accounting, detailing ROU assets, lease liabilities, total lease cost, and future maturities - The Company has operating leases for real estate, with **ROU assets** and operating lease liabilities recognized based on the present value of future lease payments using an estimated incremental borrowing rate[117](index=117&type=chunk)[118](index=118&type=chunk) | (in thousands) | Three Months Ended August 2, 2025 | Six Months Ended August 2, 2025 | | :--------------- | :-------------------------------- | :------------------------------ | | Operating lease cost | $5,765 | $11,445 | | Variable operating lease cost | $29 | $94 | | Sublease income | $(216) | $(432) | | Total lease cost | $5,578 | $11,107 | | Future Maturity of Lease Liabilities (as of August 2, 2025) | | :------------------------------------ | | Fiscal 2025: $10,222 thousand | | Fiscal 2026: $22,499 thousand | | Fiscal 2027: $19,400 thousand | | Fiscal 2028: $18,581 thousand | | Fiscal 2029: $17,335 thousand | | Thereafter: $41,711 thousand | | Total operating lease liabilities: $102,821 thousand | [Note 12. Segment Financial Information](index=33&type=section&id=Note%2012.%20Segment%20Financial%20Information) This note identifies Vince Wholesale and Direct-to-consumer segments, providing summary financial information and unallocated corporate expenses - The Company operates two reportable segments: **Vince Wholesale** (distributing to department and specialty stores) and **Vince Direct-to-consumer** (distributing through branded retail stores, outlet stores, and e-commerce)[124](index=124&type=chunk) | (in thousands) | Vince Wholesale (3M Aug 2, 2025) | Vince Direct-to-consumer (3M Aug 2, 2025) | Total (3M Aug 2, 2025) | | :--------------- | :------------------------------- | :---------------------------------------- | :--------------------- | | Net Sales | $44,762 | $28,479 | $73,241 | | Total segment income before income taxes and equity in net income of equity method investment | $17,058 | $211 | $17,269 | | (in thousands) | Vince Wholesale (6M Aug 2, 2025) | Vince Direct-to-consumer (6M Aug 2, 2025) | Total (6M Aug 2, 2025) | | :--------------- | :------------------------------- | :---------------------------------------- | :--------------------- | | Net Sales | $75,052 | $56,122 | $131,174 | | Total segment income (loss) before income taxes and equity in net income of equity method investment | $26,455 | $(589) | $25,866 | - Unallocated corporate expenses include SG&A expenses for corporate activities and other charges not directly attributable to segments, and for the three and six months ended **August 2, 2025**, include an **ERC** benefit of **$7,173 thousand**[123](index=123&type=chunk)[130](index=130&type=chunk) [Note 13. Related Party Transactions](index=36&type=section&id=Note%2013.%20Related%20Party%20Transactions) This note details related party transactions, including agreements with ABG Vince, P180 reimbursements, and past dealings with CaaStle and SK Financial - The Company received cash distributions of **$252 thousand** and **$2,028 thousand** from **ABG Vince** under the Operating Agreement for the three and six months ended **August 2, 2025**, respectively[133](index=133&type=chunk) - Royalty payments to **ABG Vince** under the License Agreement were **$550 thousand** and **$8,463 thousand** for the three and six months ended **August 2, 2025**, respectively, with an annual guaranteed minimum royalty of **$11,000 thousand**[134](index=134&type=chunk)[135](index=135&type=chunk) - **P180** agreed to reimburse the Company for approximately **$599 thousand** in fees and expenses related to the **P180 Acquisition**, recorded as trade receivables[136](index=136&type=chunk) - CaaStle, previously a related party due to its relationship with **P180**, is no longer considered a related party, and the Vince Unfold program and platform services agreement were terminated on **April 24, 2025**[137](index=137&type=chunk)[139](index=139&type=chunk) - SK Financial, an affiliate of Sun Capital and former related party, was involved in the Third Lien Credit Facility, which was significantly reduced and is no longer a related party post-**P180 Acquisition**[140](index=140&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on operating results, financial condition, liquidity, seasonality, and critical accounting estimates [Executive Overview](index=40&type=section&id=Executive%20Overview) This overview describes Vince Holding Corp.'s operations of the Vince brand through wholesale and direct-to-consumer channels - **Vince Holding Corp.** operates the **Vince** brand, a global luxury apparel and accessories business, through wholesale and direct-to-consumer channels[150](index=150&type=chunk)[151](index=151&type=chunk) - Recent strategic transactions include a partnership with **Authentic Brands Group** for **Vince IP** and the acquisition of a majority stake by **P180 Vince Acquisition Co.**[152](index=152&type=chunk)[153](index=153&type=chunk) - The Company previously owned and operated Rebecca Taylor and Parker brands, which have since been wound down and sold[154](index=154&type=chunk)[155](index=155&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) [Three Months Ended August 2, 2025 Compared to Three Months Ended August 3, 2024](index=42&type=section&id=Three%20Months%20Ended%20August%202%2C%202025%20Compared%20to%20Three%20Months%20Ended%20August%203%2C%202024) | (in thousands, except per share data) | August 2, 2025 | August 3, 2024 | Change ($) | Change (%) | | :------------------------------------ | :------------- | :------------- | :--------- | :--------- | | Net sales | $73,241 | $74,169 | $(928) | (1.3)% | | Gross profit | $36,938 | $35,131 | $1,807 | 5.1% | | Gross margin | 50.4% | 47.4% | 3.0 pp | | | Selling, general and administrative expenses | $25,787 | $34,001 | $(8,214) | (24.2)% | | Income from operations | $11,151 | $1,130 | $10,021 | 886.8% | | Interest expense, net | $849 | $1,647 | $(798) | (48.5)% | | Other (income) | $(1,560) | — | $(1,560) | N/A | | Net income | $12,060 | $569 | $11,491 | 2020.0% | | Diluted earnings per share | $0.93 | $0.05 | $0.88 | 1760.0% | - Gross margin rate increased by **3.0 pp**, driven by lower product costing and higher pricing (**340 bps** positive impact) and lower discounting (**210 bps** positive impact), partially offset by higher tariffs (**170 bps** negative impact) and increased freight costs (**100 bps** negative impact)[161](index=161&type=chunk)[163](index=163&type=chunk) - SG&A expenses decreased significantly by **$8,214 thousand**, primarily due to a **$5,613 thousand ERC** benefit recorded as an offset to compensation expense and decreased severance costs[161](index=161&type=chunk) [Performance by Segment (Three Months)](index=43&type=section&id=Performance%20by%20Segment%20(Three%20Months)) | (in thousands) | Vince Wholesale (Aug 2, 2025) | Vince Wholesale (Aug 3, 2024) | Change ($) | Change (%) | | :--------------- | :---------------------------- | :---------------------------- | :--------- | :--------- | | Net sales | $44,762 | $47,184 | $(2,422) | (5.1)% | | Income from operations | $17,058 | $16,663 | $395 | 2.4% | | (in thousands) | Vince Direct-to-consumer (Aug 2, 2025) | Vince Direct-to-consumer (Aug 3, 2024) | Change ($) | Change (%) | | :--------------- | :------------------------------------- | :------------------------------------- | :--------- | :--------- | | Net sales | $28,479 | $26,985 | $1,494 | 5.5% | | Income (loss) from operations | $211 | $(1,398) | $1,609 | N/A | - **Vince Direct-to-consumer** comparable sales, including e-commerce, increased by **$1,950 thousand** or **8.1%**, driven by both e-commerce and retail store volume[174](index=174&type=chunk) - The Company closed three net stores since **August 3, 2024**, bringing the total retail store count to **58** (**44** full-price, **14** outlet) as of **August 2, 2025**[174](index=174&type=chunk) [Six Months Ended August 2, 2025 Compared to Six Months Ended August 3, 2024](index=44&type=section&id=Six%20Months%20Ended%20August%202%2C%202025%20Compared%20to%20Six%20Months%20Ended%20August%203%2C%202024) | (in thousands, except per share data) | August 2, 2025 | August 3, 2024 | Change ($) | Change (%) | | :------------------------------------ | :------------- | :------------- | :--------- | :--------- | | Net sales | $131,174 | $133,340 | $(2,166) | (1.6)% | | Gross profit | $66,101 | $65,044 | $1,057 | 1.6% | | Gross margin | 50.4% | 48.8% | 1.6 pp | | | Gain on sale of subsidiary | — | $(7,634) | $7,634 | N/A | | Selling, general and administrative expenses | $59,388 | $65,944 | $(6,556) | (9.9)% | | Income from operations | $6,713 | $6,734 | $(21) | (0.3)% | | Interest expense, net | $1,705 | $3,293 | $(1,588) | (48.2)% | | Other (income) | $(1,560) | — | $(1,560) | N/A | | Net income | $7,257 | $4,949 | $2,308 | 46.6% | | Diluted earnings per share | $0.56 | $0.39 | $0.17 | 43.6% | - Gross margin rate increased by **1.6 pp**, primarily due to lower product costing and higher pricing (**330 bps** positive impact) and lower discounting (**70 bps** positive impact), partially offset by increased freight costs (**150 bps** negative impact) and higher tariffs (**100 bps** negative impact)[177](index=177&type=chunk)[180](index=180&type=chunk) - SG&A expenses decreased by **$6,556 thousand**, mainly due to a **$5,613 thousand ERC** benefit and decreased severance costs, partially offset by increased legal expenses[178](index=178&type=chunk) - Equity in net income (loss) of equity method investment improved from a loss of **$173 thousand** to an income of **$747 thousand**, related to the **25%** interest in **ABG Vince**[184](index=184&type=chunk) [Performance by Segment (Six Months)](index=46&type=section&id=Performance%20by%20Segment%20(Six%20Months)) | (in thousands) | Vince Wholesale (Aug 2, 2025) | Vince Wholesale (Aug 3, 2024) | Change ($) | Change (%) | | :--------------- | :---------------------------- | :---------------------------- | :--------- | :--------- | | Net sales | $75,052 | $77,441 | $(2,389) | (3.1)% | | Income from operations | $26,455 | $26,847 | $(392) | (1.5)% | | (in thousands) | Vince Direct-to-consumer (Aug 2, 2025) | Vince Direct-to-consumer (Aug 3, 2024) | Change ($) | Change (%) | | :--------------- | :------------------------------------- | :------------------------------------- | :--------- | :--------- | | Net sales | $56,122 | $55,899 | $223 | 0.4% | | Loss from operations | $(589) | $(1,462) | $873 | N/A | - **Vince Direct-to-consumer** comparable sales, including e-commerce, increased by **$2,650 thousand** or **5.5%**, due to increased volume in both e-commerce and retail stores[190](index=190&type=chunk) - The **Vince Direct-to-consumer** segment reduced its operating loss from **$1,462 thousand** to **$589 thousand**, primarily due to improved gross margin[191](index=191&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) - The Company's liquidity sources include cash, cash flows from operations, borrowings under the **2023 Revolving Credit Facility**, and access to capital markets[192](index=192&type=chunk) - Primary cash needs are for working capital, royalty payments, debt service, and capital expenditures for new stores and leasehold improvements[192](index=192&type=chunk) | (in thousands) | Six Months Ended August 2, 2025 | Six Months Ended August 3, 2024 | | :--------------- | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(7,615) | $(7,072) | | Net cash used in investing activities | $(3,530) | $(1,421) | | Net cash provided by financing activities | $11,319 | $8,081 | - Net cash used in operating activities for the six months ended **August 2, 2025**, was **$7,615 thousand**, primarily due to a **$17,521 thousand** increase in inventories[195](index=195&type=chunk) - The **2023 Revolving Credit Facility** provides up to **$85,000 thousand**, with **$42,607 thousand** available as of **August 2, 2025**, and **$22,862 thousand** outstanding[202](index=202&type=chunk)[210](index=210&type=chunk) - The Third Lien Credit Facility was reduced by approximately **$27,000 thousand** through the Sun Debt Paydown and **P180** Debt Forgiveness, with **$7,500 thousand** remaining outstanding[220](index=220&type=chunk) [Seasonality](index=54&type=section&id=Seasonality) - The apparel and fashion industry is cyclical, with revenues affected by general economic conditions, consumer spending, and seasonal trends[222](index=222&type=chunk) - Fluctuations in quarterly sales are influenced by the timing of seasonal wholesale shipments and direct-to-consumer sales, indicating that quarterly results may not predict annual performance[222](index=222&type=chunk) [Critical Accounting Estimates](index=54&type=section&id=Critical%20Accounting%20Estimates) - Management's discussion relies on condensed consolidated financial statements prepared using critical accounting policies that require judgments and estimates[223](index=223&type=chunk) - No material changes to critical accounting estimates have occurred as of **August 2, 2025**, from those disclosed in the **2024** Annual Report on Form **10-K**[224](index=224&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a 'smaller reporting company,' Vince Holding Corp. is exempt from providing quantitative and qualitative market risk disclosures - The Company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a '**smaller reporting company**' under the Securities Exchange Act of **1934**[225](index=225&type=chunk) [Item 4. Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses disclosure controls and internal control over financial reporting, noting a material weakness in user access controls and ongoing remediation [Evaluation of Disclosure Controls and Procedures](index=56&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, with CEO and CFO participation, concluded that disclosure controls and procedures were not effective as of **August 2, 2025**, due to an identified material weakness[228](index=228&type=chunk) - Despite the material weakness, management believes the condensed consolidated financial statements fairly state the Company's financial condition, results of operations, and cash flows due to additional analysis and substantive testing[229](index=229&type=chunk) [Material Weakness in Internal Control over Financial Reporting](index=56&type=section&id=Material%20Weakness%20in%20Internal%20Control%20over%20Financial%20Reporting) - A material weakness was identified in internal control over financial reporting due to inadequate user access controls, which failed to ensure appropriate segregation of duties and restrict access to financial applications and data[230](index=230&type=chunk) - This material weakness did not result in a material misstatement to the financial statements but could impact the effectiveness of **IT**-dependent controls[231](index=231&type=chunk) [Remediation Efforts to Address the Material Weakness](index=56&type=section&id=Remediation%20Efforts%20to%20Address%20the%20Material%20Weakness) - Remediation efforts include modifying system access rights to limit generic **IDs**, implementing a full recertification of **AX** user access rights, and improving operational processes for user provisioning and de-provisioning[232](index=232&type=chunk) - The Company continues to follow a comprehensive remediation plan, including routine reviews of user system access and timely removal of access rights upon termination[233](index=233&type=chunk) [Limitations on the Effectiveness of Disclosure Controls and Procedures](index=56&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Disclosure%20Controls%20and%20Procedures) - Control systems provide only reasonable, not absolute, assurance that objectives are met due to inherent limitations[235](index=235&type=chunk) - Projections of effectiveness to future periods are subject to risks that controls may become inadequate or compliance may deteriorate[237](index=237&type=chunk) [Changes in Internal Control over Financial Reporting](index=58&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - There were no changes in internal control over financial reporting during the fiscal quarter ended **August 2, 2025**, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[238](index=238&type=chunk) [PART II. OTHER INFORMATION](index=58&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=58&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in ordinary course legal proceedings, which management believes will not materially impact its financial position or results - The Company is a party to legal proceedings, compliance matters, environmental, wage and hour, and other labor claims in the ordinary course of business[239](index=239&type=chunk) - Management believes the ultimate outcome of these items will not have a material adverse impact on the Company's financial position, results of operations, or cash flows[239](index=239&type=chunk) [Item 1A. Risk Factors](index=58&type=section&id=Item%201A.%20Risk%20Factors) This section highlights unchanged risk factors from the **2024** Annual Report, focusing on the risk of not maintaining **NYSE** listing due to non-compliance - The Company's risk factors have not materially changed from those disclosed in its **2024** Annual Report on Form **10-K**[240](index=240&type=chunk) - A significant risk is the potential inability to maintain the listing of its common stock on the **NYSE**, as the Company received a notice of non-compliance with the **$50,000 thousand** market capitalization or stockholders' equity requirement[241](index=241&type=chunk)[242](index=242&type=chunk) - The **NYSE** accepted the Company's business plan, granting it until **November 6, 2026**, to regain compliance, but there is no assurance this will be achieved[244](index=244&type=chunk)[245](index=245&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item confirms no unregistered sales of equity securities or use of proceeds occurred during the reporting period - No unregistered sales of equity securities or use of proceeds occurred during the reporting period[248](index=248&type=chunk) [Item 3. Defaults Upon Senior Securities](index=60&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item indicates that there were no defaults upon senior securities to report - No defaults upon senior securities were reported[249](index=249&type=chunk) [Item 4. Mine Safety Disclosures](index=60&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[250](index=250&type=chunk) [Item 5. Other Information](index=60&type=section&id=Item%205.%20Other%20Information) This item confirms no directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No directors or officers adopted, modified, or terminated a **Rule 10b5-1** trading arrangement or a non-**Rule 10b5-1** trading arrangement during the quarter ended **August 2, 2025**[251](index=251&type=chunk) [Item 6. Exhibits](index=60&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including CEO/CFO certifications and Inline XBRL data - The report includes CEO and CFO Certifications pursuant to Section **302** and Section **906** of the Sarbanes-Oxley Act of **2002**[252](index=252&type=chunk) - Inline **XBRL** Instance, Taxonomy Extension Schema, Calculation, Presentation, and Definition files are provided as exhibits[252](index=252&type=chunk)
Crown PropTech Acquisitions(CPTK) - 2023 Q4 - Annual Report
2025-09-12 01:59
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________. Commission file number 001-40017 CROWN PROPTECH ACQUISITIONS (Exact Name of Registrant as Specified in Its Charter) Cayman Islands N/A (S ...
Calavo(CVGW) - 2025 Q3 - Quarterly Results
2025-09-11 21:23
[Executive Summary](index=1&type=section&id=Executive%20Summary) This section provides an overview of Calavo Growers' financial performance for Q3 and the nine-month period ended July 31, 2025, highlighting key operational and financial metrics [Third Quarter 2025 Highlights](index=1&type=section&id=Third%20Quarter%202025%20Highlights) Calavo Growers reported a slight decrease in total net sales for Q3 2025, primarily due to a decline in the Fresh segment, which was significantly impacted by a temporary FDA detention hold on avocado imports and lower selling prices, while the Prepared segment showed strong growth in sales and gross profit, and adjusted net income and EBITDA increased Third Quarter 2025 Key Metrics | Metric | Q3 2025 (in millions) | Q3 2024 (in millions) | Change (%) | | :-------------------------------- | :-------------------- | :-------------------- | :--------- | | Total Net Sales | $178.8 | $179.6 | -0.4% | | Fresh Segment Sales | $155.9 | - | -5% | | Prepared Segment Sales | $22.9 | - | +40% | | Gross Profit | $18.2 | - | -9% | | Adjusted Net Income | $10.2 | $10.0 | +2% | | Adjusted Net Income Per Diluted Share | $0.57 | $0.56 | +1.8% | | Adjusted EBITDA | $15.1 | $12.9 | +17.1% | - Fresh segment results reflected an **8% decrease in cartons sold**, driven by declines in both avocado and tomato carton sales[9](index=9&type=chunk) - Gross profit included approximately **$4.2 million of discrete costs** associated with a temporary Food and Drug Administration ("FDA") detention hold on certain avocado imports from Mexico, which resulted in third-party inspection and testing costs, incremental logistics and handling expenses, and inventory write-downs[5](index=5&type=chunk)[9](index=9&type=chunk) - Prepared segment net sales increased primarily due to a **35% increase in sales volume**[9](index=9&type=chunk) [Nine-Month Period Ended July 31, 2025 Highlights](index=2&type=section&id=Nine-Month%20Period%20Ended%20July%2031%2C%202025%20Highlights) For the nine-month period, Calavo Growers achieved a 7% increase in total net sales, with both Fresh and Prepared segments contributing to growth, and net income and adjusted metrics saw significant improvements, partly due to reduced SG&A expenses and strong Prepared segment performance, despite the Fresh segment facing challenges including the FDA hold Nine-Month Period 2025 Key Metrics | Metric | 9M 2025 (in millions) | 9M 2024 (in millions) | Change (%) | | :-------------------------------- | :-------------------- | :-------------------- | :--------- | | Total Net Sales | $523.8 | $491.6 | +7% | | Fresh Segment Sales | $470.3 | - | +6% | | Prepared Segment Sales | $53.5 | - | +10% | | Gross Profit | $52.0 | $51.5 | +1% | | SG&A Expenses | $29.8 | $36.9 | -19% | | Net Income from Continuing Operations | $16.1 | $9.3 | +73.1% | | Diluted EPS from Continuing Operations | $0.89 | $0.52 | +71.2% | | Adjusted Net Income | $23.8 | $19.2 | +24% | | Adjusted Net Income Per Diluted Share | $1.33 | $1.08 | +23.1% | | Adjusted EBITDA | $35.7 | $29.9 | +19.4% | - Fresh segment results reflected a decline in avocado and tomato sales, together with approximately **$4.2 million of discrete costs** in the third quarter related to a temporary FDA detention hold on certain avocado imports from Mexico[9](index=9&type=chunk) - Prepared segment sales and profitability increased meaningfully, driven by higher volumes, lower fruit input costs, and improved operating efficiencies[9](index=9&type=chunk) - SG&A expenses declined **19%** compared to the prior year period, reflecting a reduction in professional and consulting fees (including reduced FCPA investigation-related legal expenses), a reduction in compensation expenses reflecting lower headcount and severance costs and a decrease in stock-based compensation expenses[10](index=10&type=chunk) [Management Commentary](index=3&type=section&id=Management%20Commentary) Management discusses Q3 operational challenges and successes, including the FDA hold resolution, avocado pricing, Prepared segment growth, and a significant legal development in Mexico [Management Commentary](index=3&type=section&id=Management%20Commentary) CEO Lee Cole acknowledged Q3 challenges in the Fresh segment due to the temporary FDA detention hold (now resolved) and lower avocado selling prices, highlighting the outstanding growth and higher volumes in the Prepared segment, and also noted a significant legal milestone in Mexico regarding maquila status, strengthening the company's position for IVA recovery and defense against a 2013 assessment, and projected strong fiscal 2026 sales for the Prepared segment - Fresh segment results were adversely affected by a temporary FDA detention hold tied to trace detection of Imazalil in a single shipment from the Mexican facility, which required enhanced testing and slowed cross-border movement[11](index=11&type=chunk) - Third quarter avocado selling prices were significantly lower sequentially versus the second quarter as avocado supply from Mexico, California, and Peru converged[11](index=11&type=chunk) - The Prepared segment delivered **outstanding growth with higher volumes**[11](index=11&type=chunk) - The FDA matter has been resolved as of September 2, 2025, and is believed to be a non-recurring event[11](index=11&type=chunk) - A Federal Court in Mexico formally recognized Calavo de Mexico as a maquila, strengthening the company's position to recover value-added tax ("IVA") receivables and bolstering its defense in the 2013 assessment[11](index=11&type=chunk) - The Prepared segment projects sales of approximately **$115 million for fiscal 2026**, with July sales annualizing to over $100 million on a monthly run-rate basis[11](index=11&type=chunk) [Consolidated Financial Review for Continuing Operations](index=3&type=section&id=Consolidated%20Financial%20Review%20for%20Continuing%20Operations) This section details Calavo Growers' financial performance for the third quarter and nine-month period, covering overall financials, segment-specific results, and liquidity [Third Quarter 2025 Financial Performance](index=3&type=section&id=Third%20Quarter%202025%20Consolidated%20Financial%20Review%20for%20Continuing%20Operations) Calavo Growers' third quarter saw a slight dip in total net sales and gross profit, primarily due to Fresh segment challenges and FDA-related costs, however, SG&A expenses decreased significantly, and adjusted net income showed a modest increase [Overall Financials](index=3&type=section&id=Overall%20Financials_Q3_2025) This subsection provides a summary of Calavo Growers' consolidated net sales, gross profit, operating expenses, and net income for the third quarter of 2025 Third Quarter 2025 Overall Financials | Metric | Q3 2025 (in thousands) | Q3 2024 (in thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Net Sales | $178,822 | $179,596 | -0.4% | | Gross Profit | $18,198 | $20,093 | -9.4% | | SG&A Expenses | $9,232 | $10,510 | -12.2% | | Net Income (GAAP) | $4,714 | $5,395 | -12.6% | | Diluted EPS (GAAP) | $0.26 | $0.30 | -13.3% | | Adjusted Net Income (Non-GAAP) | $10,156 | $10,005 | +1.5% | | Adjusted Diluted EPS (Non-GAAP) | $0.57 | $0.56 | +1.8% | | Adjusted EBITDA (Non-GAAP) | $15,051 | $12,909 | +16.6% | - SG&A expenses declined **12%** from the prior year quarter, primarily due to a reduction in professional and consulting fees (including lower FCPA investigation-related legal expenses), partially offset by increased bonus expense[14](index=14&type=chunk) [Segment Performance](index=3&type=section&id=Segment%20Performance_Q3_2025) This subsection details the net sales and gross profit performance of Calavo Growers' Fresh and Prepared segments for the third quarter of 2025 Third Quarter 2025 Segment Performance | Metric | Q3 2025 (in thousands) | Q3 2024 (in thousands) | Change (%) | | :--------------------- | :--------------------- | :--------------------- | :--------- | | **Fresh Segment:** | | | | | Net Sales | $155,851 | $163,218 | -4.5% | | Gross Profit | $12,427 | $18,175 | -31.6% | | **Prepared Segment:** | | | | | Net Sales | $22,971 | $16,378 | +40.2% | | Gross Profit | $5,771 | $1,918 | +200.9% | - Fresh segment sales were down **5%** year over year, reflecting an **8% decrease** in overall cartons sold, including lower avocado volumes (down 5%) and tomato volumes (down 27%)[16](index=16&type=chunk) - Fresh segment gross profit was down **32%**, primarily due to lower avocado volumes and approximately **$4.2 million of discrete costs** associated with a temporary FDA detention hold on certain avocado imports from Mexico[16](index=16&type=chunk) - Prepared segment sales were up **40%**, driven primarily by volume growth of approximately **35%**, complemented by modestly higher average selling prices, reflecting strong demand and the benefits of scaling programs with customers[16](index=16&type=chunk) - Prepared segment gross profit increased to **$5.8 million (up 201%)**, primarily reflecting improved operational efficiency and stronger cost management[16](index=16&type=chunk) [Nine-Month Period Ended July 31, 2025 Financial Performance](index=4&type=section&id=Nine-Month%202025%20Consolidated%20Financial%20Review%20for%20Continuing%20Operations) For the nine-month period, Calavo Growers reported a 7% increase in total net sales, with gross profit seeing a modest increase, while SG&A expenses significantly decreased, and net income and adjusted net income both showed substantial year-over-year improvements, driven by strong Prepared segment performance and cost management [Overall Financials](index=4&type=section&id=Overall%20Financials_9M_2025) This subsection provides a summary of Calavo Growers' consolidated net sales, gross profit, operating expenses, and net income for the nine-month period ended July 31, 2025 Nine-Month Period 2025 Overall Financials | Metric | 9M 2025 (in thousands) | 9M 2024 (in thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Net Sales | $523,753 | $491,585 | +6.5% | | Gross Profit | $52,015 | $51,514 | +1.0% | | SG&A Expenses | $29,822 | $36,993 | -19.4% | | Net Income (GAAP) | $15,979 | $9,281 | +72.2% | | Diluted EPS (GAAP) | $0.89 | $0.52 | +71.2% | | Adjusted Net Income (Non-GAAP) | $23,807 | $19,231 | +23.8% | | Adjusted Diluted EPS (Non-GAAP) | $1.33 | $1.08 | +23.1% | | Adjusted EBITDA (Non-GAAP) | $35,733 | $29,946 | +19.3% | - SG&A expenses for the nine-month period were down **19%** from the prior year period, primarily due to a reduction in professional and consulting fees (including reduced FCPA investigation-related legal expenses), a reduction in compensation expenses reflecting lower headcount and severance costs, and a decrease in stock-based compensation expenses[19](index=19&type=chunk) [Segment Performance](index=4&type=section&id=Segment%20Performance_9M_2025) This subsection details the net sales and gross profit performance of Calavo Growers' Fresh and Prepared segments for the nine-month period ended July 31, 2025 Nine-Month Period 2025 Segment Performance | Metric | 9M 2025 Fresh (in thousands) | 9M 2025 Prepared (in thousands) | 9M 2024 Fresh (in thousands) | 9M 2024 Prepared (in thousands) | | :-------------------- | :----------------------------- | :------------------------------ | :----------------------------- | :------------------------------ | | Net Sales | $470,307 | $53,446 | $442,999 | $48,586 | | Cost of sales | $431,690 | $40,048 | $402,041 | $38,030 | | Gross profit | $38,617 | $13,398 | $40,958 | $10,556 | - Fresh segment sales were up **6%**, driven by higher average avocado pricing year over year, partially offset by a decline in avocado and tomato sales[23](index=23&type=chunk) - Fresh segment gross profit was down **6%** from the prior year period, primarily reflecting lower avocado and tomato volumes and approximately **$4.2 million of discrete costs** associated with a temporary FDA detention hold on certain avocado imports from Mexico in the third quarter[23](index=23&type=chunk) - Prepared segment sales were up **10%**, reflecting higher volumes and expanded programs with key customers[23](index=23&type=chunk) - Prepared segment gross profit increased **27% to $13.4 million**, reflecting higher sales volumes, lower fruit input costs compared to last year, and improved operating efficiencies[23](index=23&type=chunk) [Balance Sheet and Liquidity](index=4&type=section&id=Balance%20Sheet%20and%20Liquidity) As of July 31, 2025, Calavo Growers maintained a strong liquidity position with $63.8 million in cash and cash equivalents and $114.3 million in available liquidity, with no borrowings under its revolving credit facility - Cash and cash equivalents were **$63.8 million** as of July 31, 2025[21](index=21&type=chunk) - Available liquidity was **$114.3 million**, defined as cash and cash equivalents plus available borrowing capacity under the revolving credit facility[21](index=21&type=chunk) - The company had **no borrowings** under its credit facility and total debt of **$5.1 million** consisting of other long-term obligations and finance leases as of July 31, 2025[21](index=21&type=chunk) [Non-GAAP Financial Measures](index=1&type=section&id=Non-GAAP%20Financial%20Measures) This section defines Calavo Growers' non-GAAP financial measures, explains their rationale, and provides detailed reconciliations to GAAP equivalents [Definition and Rationale](index=1&type=section&id=Definition%20and%20Rationale) Calavo Growers uses non-GAAP measures such as EBITDA, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per diluted share to provide investors with a clearer view of core operating performance and to help isolate unusual items, excluding specific items like interest, taxes, depreciation, amortization, stock-based compensation, acquisition/restructuring costs, litigation, foreign currency, asset impairments, tariffs, and one-time items, with the calculation of Adjusted Net Income modified in Q3 2025 to add back stock-based compensation expense for enhanced comparability - Non-GAAP measures include EBITDA, adjusted EBITDA, adjusted net income (loss), and adjusted net income (loss) per diluted share[22](index=22&type=chunk)[24](index=24&type=chunk) - EBITDA is defined as net income (loss) from continuing operations attributable to Calavo Growers, Inc. excluding interest income and expense, income tax (benefit) provision, depreciation and amortization, and stock-based compensation expense[22](index=22&type=chunk) - Adjusted EBITDA includes further adjustments for acquisition-related costs, restructuring-related costs, certain litigation/internal investigation costs, foreign currency gain (loss), asset impairments, discrete tariff or other tax charges, and one-time items[22](index=22&type=chunk) - Adjusted net income (loss) excludes acquisition-related costs, restructuring-related costs, certain litigation/internal investigation costs, foreign currency loss (gain), asset impairments, discrete tariff or other tax charges, and one-time items[24](index=24&type=chunk) - During the third quarter of fiscal 2025, the calculation of Adjusted Net Income was modified to add back stock-based compensation expense to enhance comparability with industry peers and provide a clearer representation of core operating performance[4](index=4&type=chunk)[35](index=35&type=chunk) - Management believes these measures are useful to investors because they help isolate unusual items not indicative of ongoing operations and reflect how management monitors operating performance and allocates resources[25](index=25&type=chunk) [Reconciliation of Adjusted Net Income](index=10&type=section&id=RECONCILIATION%20OF%20ADJUSTED%20NET%20INCOME%20AND%20ADJUSTED%20NET%20INCOME%20PER%20DILUTED%20SHARE%20%28UNAUDITED%29) This section provides a detailed reconciliation of GAAP net income from continuing operations to adjusted net income for both the three-month and nine-month periods ended July 31, 2025 and 2024, highlighting specific non-GAAP adjustments Reconciliation of Adjusted Net Income and Adjusted Net Income Per Diluted Share | Adjustment Category | Q3 2025 (in thousands) | Q3 2024 (in thousands) | 9M 2025 (in thousands) | 9M 2024 (in thousands) | | :---------------------------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income from continuing operations attributable to Calavo Growers, Inc. | $4,714 | $5,395 | $15,979 | $9,281 | | Restructure costs | — | — | — | $1,037 | | Expenses related to Mexican tax matters | $307 | $225 | $858 | $810 | | Professional fees related to internal investigation and legal settlement | $42 | $1,395 | $967 | $6,431 | | Foreign currency loss (gain) | $2,483 | $4,203 | $2,488 | $2,799 | | Tariffs | $11 | — | $951 | — | | Stock-Based Compensation | $280 | $388 | $875 | $1,736 | | FDA Regulatory Hold–Related Charges | $4,231 | — | $4,231 | — | | Tax impact of adjustments | $(1,912) | $(1,601) | $(2,542) | $(2,863) | | **Adjusted net income from continuing operations** | **$10,156** | **$10,005** | **$23,807** | **$19,231** | | Diluted EPS from continuing operations (GAAP) | $0.26 | $0.30 | $0.89 | $0.52 | | **Adjusted net income from continuing operations per diluted share** | **$0.57** | **$0.56** | **$1.33** | **$1.08** | - FDA Regulatory Hold–Related Charges of **$4.231 million** were incurred in Q3 and 9M 2025, representing third-party inspection and testing costs, incremental logistics/handling expenses, and inventory write-downs due to a temporary FDA detention hold on certain avocado imports from Mexico[36](index=36&type=chunk)[44](index=44&type=chunk) - Professional fees related to internal investigation and legal settlement significantly decreased from **$1.395 million in Q3 2024 to $42 thousand in Q3 2025**, and from **$6.431 million in 9M 2024 to $967 thousand in 9M 2025**, primarily due to reduced FCPA investigation-related legal expenses[36](index=36&type=chunk)[38](index=38&type=chunk) [Reconciliation of EBITDA and Adjusted EBITDA](index=11&type=section&id=RECONCILIATION%20OF%20EBITDA%20AND%20ADJUSTED%20EBITDA%20%28UNAUDITED%29) This section provides a detailed reconciliation of GAAP net income from continuing operations to EBITDA and adjusted EBITDA for both the three-month and nine-month periods ended July 31, 2025 and 2024, outlining the specific adjustments made Reconciliation of EBITDA and Adjusted EBITDA | Adjustment Category | Q3 2025 (in thousands) | Q3 2024 (in thousands) | 9M 2025 (in thousands) | 9M 2024 (in thousands) | | :---------------------------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income from continuing operations attributable to Calavo Growers, Inc. | $4,714 | $5,395 | $15,979 | $9,281 | | Interest Income | $(879) | $(100) | $(2,486) | $(340) | | Interest Expense | $199 | $833 | $616 | $2,619 | | Provision for Income Taxes | $1,807 | $(1,441) | $5,598 | $(478) | | Depreciation and Amortization | $1,856 | $2,011 | $5,656 | $6,121 | | Stock-Based Compensation | $280 | $388 | $875 | $1,736 | | **EBITDA from continuing operations** | **$7,977** | **$7,086** | **$26,238** | **$18,939** | | Restructure costs | — | — | — | $967 | | Expenses related to Mexican tax matters | $307 | $225 | $858 | $810 | | Professional fees related to internal investigation and legal settlement | $42 | $1,395 | $967 | $6,431 | | Foreign currency loss (gain) | $2,483 | $4,203 | $2,488 | $2,799 | | Tariffs | $11 | — | $951 | — | | FDA Regulatory Hold–Related Charges | $4,231 | — | $4,231 | — | | **Adjusted EBITDA from continuing operations** | **$15,051** | **$12,909** | **$35,733** | **$29,946** | - EBITDA from continuing operations increased by **12.6% in Q3 2025** and **38.5% in 9M 2025** compared to the prior year periods[43](index=43&type=chunk) - Adjusted EBITDA from continuing operations increased by **16.6% in Q3 2025** and **19.3% in 9M 2025** compared to the prior year periods[43](index=43&type=chunk) [Company Information](index=5&type=section&id=Company%20Information) This section provides an overview of Calavo Growers, Inc., its business operations, and a safe harbor statement regarding forward-looking information and associated risks [About Calavo Growers, Inc.](index=5&type=section&id=About%20Calavo%20Growers%2C%20Inc.) Calavo Growers, Inc. is a global leader in processing and distributing avocados, tomatoes, papayas, and guacamole, operating under its trusted brand name, sub-brands, and private labels, founded in 1924, the company emphasizes innovation, sustainable practices, and market growth, serving a wide range of customers worldwide from its headquarters in Santa Paula, California - Calavo Growers, Inc. is a global leader in the processing and distribution of avocados, tomatoes, papayas and guacamole[27](index=27&type=chunk) - Calavo products are sold under the trusted Calavo brand name, proprietary sub-brands, private label and store brands[27](index=27&type=chunk) - Founded in 1924, Calavo has a rich culture of innovation, sustainable practices and market growth[27](index=27&type=chunk) - The Company serves retail grocery, foodservice, club stores, mass merchandisers, food distributors and wholesalers worldwide[27](index=27&type=chunk) [Safe Harbor Statement](index=5&type=section&id=Safe%20Harbor%20Statement) This section contains forward-looking statements regarding future events and financial results, which are subject to various risks, uncertainties, and assumptions, cautioning that actual results may differ materially from projections due to factors such as management team dynamics, weather, market price sensitivity, regulatory changes, supply chain disruptions, acquisitions, cybersecurity risks, dependence on customers/personnel, labor issues, competition, recalls, environmental regulations, and international business risks, including tax disputes and regulatory scrutiny like FDA detention holds - The press release contains forward-looking statements relating to future events and results that involve risks, uncertainties, and assumptions[28](index=28&type=chunk) - Risks and uncertainties that may cause actual results to differ materially include, but are not limited to, management team ability, weather impact, seasonality, market price sensitivity of agricultural products, regulatory changes (USDA-APHIS, SADER), supply chain disruptions, acquisition risks, cybersecurity, dependence on large customers and key personnel, wage inflation, labor disputes, competitive pressures, recalls, environmental regulations, and international business risks[29](index=29&type=chunk) - Specific risks mentioned include the resolution of pending internal and external investigations, legal claims and tax disputes (e.g., SAT assessment), and risks related to enhanced regulatory scrutiny or inspection protocols, including detention holds by the FDA[29](index=29&type=chunk) [Unaudited Financial Statements](index=7&type=section&id=Unaudited%20Financial%20Statements) This section presents Calavo Growers' unaudited condensed consolidated balance sheets, statements of operations, and segment-specific net sales and gross profit [Condensed Consolidated Balance Sheets](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS%20%28UNAUDITED%29) This section presents the unaudited condensed consolidated balance sheets of Calavo Growers, Inc. as of July 31, 2025, and October 31, 2024, detailing assets, liabilities, and shareholders' equity Condensed Consolidated Balance Sheets | Metric (in thousands) | July 31, 2025 | October 31, 2024 | Change | | :-------------------------------- | :------------ | :--------------- | :----- | | **Assets:** | | | | | Cash and cash equivalents | $63,754 | $57,031 | +$6,723 | | Total current assets | $159,112 | $158,579 | +$533 | | Total assets | $301,249 | $301,119 | +$130 | | **Liabilities:** | | | | | Total current liabilities | $69,201 | $73,205 | -$4,004 | | Total long-term liabilities | $24,048 | $26,138 | -$2,090 | | **Shareholders' Equity:** | | | | | Total Calavo Growers, Inc shareholders' equity | $206,424 | $200,332 | +$6,092 | | Total shareholders' equity | $208,000 | $201,776 | +$6,224 | [Condensed Consolidated Statements of Operations](index=8&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20%28UNAUDITED%29) This section provides the unaudited condensed consolidated statements of operations for the three-month and nine-month periods ended July 31, 2025 and 2024, detailing net sales, cost of sales, gross profit, operating expenses, and net income (loss) Condensed Consolidated Statements of Operations | Metric (in thousands) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :---------------------------------------------------- | :------ | :------ | :------ | :------ | | Net sales | $178,822 | $179,596 | $523,753 | $491,585 | | Cost of sales | $160,624 | $159,503 | $471,738 | $440,071 | | Gross profit | $18,198 | $20,093 | $52,015 | $51,514 | | Selling, general and administrative | $9,232 | $10,510 | $29,822 | $36,993 | | Operating income | $8,659 | $9,358 | $21,335 | $13,711 | | Net income from continuing operations | $4,736 | $5,365 | $16,111 | $9,298 | | Net income (loss) attributable to Calavo Growers, Inc. | $4,714 | $(732) | $15,979 | $(937) | | Diluted EPS from Continuing Operations | $0.26 | $0.30 | $0.89 | $0.52 | [Net Sales and Gross Profit by Business Segment](index=9&type=section&id=NET%20SALES%20AND%20GROSS%20PROFIT%20BY%20BUSINESS%20SEGMENT%20%28UNAUDITED%29) This section presents the unaudited net sales and gross profit broken down by the Fresh and Prepared business segments for the three-month and nine-month periods ended July 31, 2025 and 2024 Net Sales and Gross Profit by Business Segment | Metric (in thousands) | Q3 2025 Fresh | Q3 2025 Prepared | Q3 2024 Fresh | Q3 2024 Prepared | 9M 2025 Fresh | 9M 2025 Prepared | 9M 2024 Fresh | 9M 2024 Prepared | | :-------------------- | :------------ | :--------------- | :------------ | :--------------- | :------------ | :--------------- | :------------ | :--------------- | | Net sales | $155,851 | $22,971 | $163,218 | $16,378 | $470,307 | $53,446 | $442,999 | $48,586 | | Cost of sales | $143,424 | $17,200 | $145,043 | $14,460 | $431,690 | $40,048 | $402,041 | $38,030 | | Gross profit | $12,427 | $5,771 | $18,175 | $1,918 | $38,617 | $13,398 | $40,958 | $10,556 |