Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 2, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-35720 (Exact name of registrant as specified in its charter) Delaware 45-3052669 (State or other jurisdiction ...

PART I [ITEM 1. BUSINESS](index=7&type=section&id=ITEM%201.%20BUSINESS) LSI Industries Inc. provides non-residential lighting and retail display solutions, with segments in Lighting (43% of FY2025 net sales) and Display Solutions (57%) - LSI Industries Inc. is a leading producer of non-residential lighting and retail display solutions, providing American-made fixtures and custom products/services[17](index=17&type=chunk) [Overview](index=7&type=section&id=Overview) LSI Industries Inc. specializes in non-residential lighting and retail display solutions, aiming to provide comprehensive package solutions to customers in target vertical markets - LSI Industries Inc. specializes in non-residential lighting and retail display solutions, aiming to provide comprehensive package solutions to customers in target vertical markets[17](index=17&type=chunk) Segment Net Sales | Segment | FY2025 Net Sales % | | :---------------------- | :----------------- | | Lighting Segment | 43% | | Display Solutions Segment | 57% | [Lighting Segment](index=7&type=section&id=Lighting%20Segment) The Lighting Segment manufactures and sells outdoor and indoor LED lighting fixtures and controls for various vertical markets - The Lighting Segment manufactures and sells outdoor and indoor LED lighting fixtures and controls for various vertical markets, including refueling/convenience stores, parking lots, quick-service restaurants, and warehouses[19](index=19&type=chunk) - Products are designed for energy efficiency, reliability, performance, and ease of installation, adhering to safety and performance standards like UL Solutions and Design Lights Consortium[20](index=20&type=chunk) [Display Solutions Segment](index=7&type=section&id=Display%20Solutions%20Segment) The Display Solutions Segment expanded significantly through recent acquisitions, offering custom retail fixtures, store design, and visual image elements - The Display Solutions Segment expanded significantly through the acquisitions of Canada's Best Holdings (CBH) in Q3 FY2025 and EMI Industries, LLC (EMI) in Q4 FY2024[21](index=21&type=chunk) - This segment provides custom retail fixtures, store design solutions, visual image elements (signage, graphics, digital displays), and project management services for grocery, QSR, c-store, and other retail industries[21](index=21&type=chunk)[22](index=22&type=chunk) [Sales, Customers and Marketing](index=9&type=section&id=Sales%2C%20Customers%20and%20Marketing) Sales are primarily in the U.S., with lighting products sold through project-based business and display solutions through a direct sales force - Sales are primarily in the U.S., with approximately **3% of consolidated net sales** from Canada, Mexico, Latin America, and the Caribbean[23](index=23&type=chunk) - Lighting products are sold through project-based business and stocking distributors, primarily via manufacturer's sales representatives. Display solutions are program-driven and sold through a direct sales force[23](index=23&type=chunk) - The company leverages cross-selling opportunities between segments to act as a single-source provider and uses various marketing methods including trade shows, digital platforms, and direct customer contact[25](index=25&type=chunk)[26](index=26&type=chunk) [Manufacturing and Distribution](index=9&type=section&id=Manufacturing%20and%20Distribution) LSI operates 18 manufacturing facilities across the U.S., Mexico, and Canada, sourcing key raw materials from multiple suppliers - LSI operates 18 manufacturing facilities across 11 U.S. states, one leased facility in Mexico, and two provinces in Canada, utilizing lean manufacturing principles[27](index=27&type=chunk)[28](index=28&type=chunk) - Key raw materials include steel, aluminum, LEDs, power supplies, and various graphics substrates, sourced from multiple suppliers to mitigate supply chain risks[29](index=29&type=chunk) [Research and Development](index=10&type=section&id=Research%20and%20Development) R&D investments focus on new product development and existing product enhancements, including new technology for LED products and software R&D Costs | Fiscal Year | R&D Costs (Millions) | | :---------- | :------------------- | | 2025 | $3.3 | | 2024 | $3.5 | - R&D investments focus on new product development and existing product enhancements, including new technology for LED products and software, expensed as incurred[30](index=30&type=chunk) [Competition](index=10&type=section&id=Competition) The company faces intense competition in both segments across all markets, based on factors such as price, quality, and service - The company faces intense competition in both segments across all markets, based on factors such as price, quality, brand recognition, delivery, and service capabilities[31](index=31&type=chunk) [Working Capital](index=10&type=section&id=Working%20Capital) Discussion of working capital is referenced to 'Liquidity and Capital Resources' in Item 7 - Discussion of working capital is referenced to 'Liquidity and Capital Resources' in Item 7[32](index=32&type=chunk) [Environmental Regulations](index=10&type=section&id=Environmental%20Regulations) The company is subject to federal, state, and local environmental regulations, with non-compliance potentially leading to fines and liabilities - The company is subject to federal, state, and local environmental regulations concerning hazardous materials and waste, with non-compliance potentially leading to fines and liabilities[32](index=32&type=chunk) [Seasonality](index=10&type=section&id=Seasonality) Both segments experience seasonality due to weather, construction/installation programs, and major customers' annual budget cycles - Both lighting and display solutions segments experience seasonality due to weather, construction/installation programs, and major customers' annual budget cycles, particularly affecting sales during winter and holiday seasons[33](index=33&type=chunk) [Intellectual Property](index=10&type=section&id=Intellectual%20Property) The company relies on patents, trademarks, copyrights, and trade secret laws to protect its intellectual property and competitive position - The company relies on patents, trademarks, copyrights, and trade secret laws to protect its intellectual property, which is important to its competitive position[34](index=34&type=chunk) [Human Capital](index=10&type=section&id=Human%20Capital) As of June 30, 2025, the company has approximately 2,000 full-time/part-time employees and 175 agency employees - As of June 30, 2025, the company has approximately **2,000 full-time/part-time employees** and **175 agency employees**[36](index=36&type=chunk) - The company focuses on attracting, retaining, and motivating talent through internal development, external hires, a diverse workforce, and a comprehensive compensation and benefits program[35](index=35&type=chunk)[36](index=36&type=chunk) [Information Concerning the Company](index=11&type=section&id=Information%20Concerning%20the%20Company) The company files reports with the SEC and uses its website and social media channels for information distribution - The company files reports with the SEC (Forms 10-K, 10-Q, 8-K) and uses its website (www.lsicorp.com) and social media channels for company information distribution[37](index=37&type=chunk)[38](index=38&type=chunk) [ITEM 1A. RISK FACTORS](index=11&type=section&id=ITEM%201A.%20RISK%20FACTORS) Strategic, operational, legal, and financial risks that could materially impact the company's business and financial performance are detailed - The company's success is subject to risks related to strategy execution, including new product development, market penetration, and potential obsolescence[40](index=40&type=chunk)[45](index=45&type=chunk) - Operational risks include price increases and shortages of raw materials, transportation issues, cybersecurity threats, labor shortages, and product liability claims[47](index=47&type=chunk)[49](index=49&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - Financial risks encompass stock price volatility, inflation, interest rate increases, and the inability to raise additional capital[65](index=65&type=chunk)[66](index=66&type=chunk) [RISKS RELATED TO OUR STRATEGY](index=11&type=section&id=RISKS%20RELATED%20TO%20OUR%20STRATEGY) Inability to effectively execute business strategies, manage competitive pressures, or integrate acquisitions could adversely affect financial results - Inability to effectively execute business strategies, including new product development and market penetration, could adversely affect financial condition and results of operations[40](index=40&type=chunk) - Highly competitive markets may lead to pricing pressures, impacting operating results, especially with foreign competitors having different cost structures[41](index=41&type=chunk) - Concentration of sales in refueling/convenience store and grocery markets makes the business vulnerable to changes in these industries[42](index=42&type=chunk)[43](index=43&type=chunk) - Future growth through strategic acquisitions may not yield anticipated benefits due to integration difficulties, resource diversion, and potential impairment of goodwill[44](index=44&type=chunk) - Failure to develop appropriate new products or customer non-acceptance could lead to loss of competitive position and impact future revenues[45](index=45&type=chunk) - Inadequate protection of intellectual property (patents, trademarks, trade secrets) could result in loss of competitive advantage[46](index=46&type=chunk) [RISKS RELATED TO OUR OPERATIONS](index=13&type=section&id=RISKS%20RELATED%20TO%20OUR%20OPERATIONS) Operational risks include raw material price increases, supply chain disruptions, cybersecurity threats, labor issues, and product liability claims - Price increases and significant shortages of raw materials and components, along with increased transportation and fuel prices, could adversely affect operating margins[47](index=47&type=chunk)[48](index=48&type=chunk) - Information technology systems are subject to cyber risks, interruptions, and malicious activity, which could lead to service disruptions, data loss, and reputational damage[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - Labor shortages or increases in labor costs could negatively impact business operations and profitability[52](index=52&type=chunk) - Improperly designed, manufactured, packaged, or labeled products could necessitate recalls, increase warranty costs, and lead to product liability claims[53](index=53&type=chunk) - Changes in customer demands or failure to honor commitments for proprietary inventory could result in significant inventory write-offs[54](index=54&type=chunk) - Turnover of independent commissioned sales representatives, particularly in the Lighting Segment, could disrupt sales volume[55](index=55&type=chunk) - Inability to sustain significant customer and/or channel partner relationships could harm the company[56](index=56&type=chunk) - Loss of key personnel or inability to attract qualified personnel could adversely affect operating results[57](index=57&type=chunk) - Changes in product mix can significantly impact gross margins, as certain products have higher profitability[58](index=58&type=chunk) - The company may not recognize all revenues from its backlog or receive all anticipated payments under awarded projects if customers terminate contracts or defer shipments[59](index=59&type=chunk) [RISKS RELATED TO LEGAL AND REGULATORY MATTERS](index=17&type=section&id=RISKS%20RELATED%20TO%20LEGAL%20AND%20REGULATORY%20MATTERS) Potential changes in U.S. trade policies, tax rates, and increased emphasis on ESG matters could negatively affect the business - Potential changes in U.S. trade policies, including tariffs, could increase product costs, reduce demand, or lower margins[60](index=60&type=chunk)[61](index=61&type=chunk) - Changes in tax rates and exposures to additional income tax liabilities could unfavorably affect reported results[62](index=62&type=chunk) - Increased emphasis on environmental, social, and governance (ESG) matters by stakeholders could negatively affect the business through non-compliance, reputational damage, or increased investment costs[63](index=63&type=chunk) - Climate changes and extreme weather conditions create financial risks, potentially leading to reduced demand, product obsolescence, or pressure on manufacturing costs[64](index=64&type=chunk) [RISKS RELATED TO FINANCIAL MATTERS](index=17&type=section&id=RISKS%20RELATED%20TO%20FINANCIAL%20MATTERS) Financial risks include stock price decline, inflation, interest rate increases, and limitations in internal controls - A significant decline in stock price could adversely affect the company's ability to raise additional capital[65](index=65&type=chunk) - Increases in inflation and interest rates could negatively affect the business by increasing expenses and interest costs[66](index=66&type=chunk)[67](index=67&type=chunk) - Anti-takeover provisions in organizational documents and Ohio law could make it difficult or delay a change in management or negatively impact share price[68](index=68&type=chunk)[69](index=69&type=chunk) - Inherent limitations in disclosure and internal controls and procedures mean there is no absolute assurance against errors, theft, or fraud[70](index=70&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=19&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) No unresolved SEC staff comments were received regarding periodic or current reports issued 180 days or more before fiscal year 2025 end - No unresolved written comments from SEC staff regarding periodic or current reports issued 180 days or more preceding the end of fiscal year 2025[71](index=71&type=chunk) [ITEM 1C. CYBERSECURITY](index=19&type=section&id=ITEM%201C.%20CYBERSECURITY) The company's NIST-guided cybersecurity program manages threats, with Board oversight through the Audit Committee and IT leadership - The company's cybersecurity program follows the National Institute of Standards and Technology (NIST) Cybersecurity Framework for risk assessment, prevention, and incident response[72](index=72&type=chunk)[75](index=75&type=chunk) - An incident response team, comprising senior leaders from IT, finance, and compliance, is responsible for diagnosing cyber events and determining materiality for SEC reporting[74](index=74&type=chunk) - The Board of Directors, with delegated oversight to the Audit Committee, is responsible for cybersecurity risk oversight, policy, and compliance, receiving periodic updates from IT leadership[77](index=77&type=chunk)[78](index=78&type=chunk) [Risk Management and Strategy](index=19&type=section&id=Risk%20Management%20and%20Strategy) The company employs a cybersecurity program to assess, identify, and manage information security and data privacy threats - The company employs a cybersecurity program to assess, identify, and manage information security and data privacy threats, including risk assessment, prevention, training, and incident response[72](index=72&type=chunk)[73](index=73&type=chunk) - A Security Action Committee, composed of senior IT, finance, and compliance leaders, guides the cybersecurity program's evolution and reviews potential incidents[75](index=75&type=chunk) - Despite security measures, the company acknowledges susceptibility to cybersecurity incidents, which could materially affect business, operating margins, revenues, and competitive position[76](index=76&type=chunk) [Governance](index=21&type=section&id=Governance) The Board of Directors oversees cybersecurity risks, with specific oversight delegated to the Audit Committee, and the CIO leads strategic direction - The Board of Directors oversees cybersecurity risks, with specific information security and data privacy oversight delegated to the Audit Committee[77](index=77&type=chunk) - The Chief Information Officer, supported by the CEO and CFO, is responsible for strategic direction, compliance, and day-to-day information security management[80](index=80&type=chunk) [ITEM 2. PROPERTIES](index=22&type=section&id=ITEM%202.%20PROPERTIES) The company operates 18 manufacturing and office facilities across the U.S., Canada, and Mexico, including owned and leased properties - The company operates 18 manufacturing and office facilities across 11 U.S. states, one leased facility in Mexico, and two provinces in Canada[82](index=82&type=chunk) Company Facilities | Description | Size (sq. ft.) | Location | Status | | :---------------------------------------------- | :------------- | :---------------- | :----- | | Corporate HQ & Lighting/Display Mfg. | 243,000 | Cincinnati, OH | Owned | | Lighting Mfg. | 122,000 | Cincinnati, OH | Owned | | Lighting Office & Mfg. | 96,000 | Independence, KY | Owned | | Display Solutions Office & Mfg. | 183,000 | Houston, TX | Leased | | Display Solutions Mfg. | 77,000 | Milo, ME | Owned | [ITEM 3. LEGAL PROCEEDINGS](index=24&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) Legal proceedings information is incorporated by reference from Note 15 – Contingencies of the Consolidated Financial Statements - Legal proceedings information is detailed in Note 15 – Contingencies of the Notes to the Consolidated Financial Statements[83](index=83&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=24&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Mine Safety Disclosures are not applicable to LSI Industries Inc.[84](index=84&type=chunk) PART II [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=24&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) LSI common stock trades on NASDAQ (LYTS), with 497 holders, a $0.20 annual dividend, and no share repurchases in fiscal 2025 - LSI's common stock is traded on the NASDAQ Global Select Market under the symbol 'LYTS'[86](index=86&type=chunk) - The company has paid quarterly cash dividends since fiscal 1995, with an indicated annual rate of **$0.20 per share** for fiscal 2025[87](index=87&type=chunk) - A share repurchase program of up to **$15 million** was authorized in April 2022, but no shares were repurchased during the fiscal year ended June 30, 2025[88](index=88&type=chunk) [ITEM 6. [RESERVED]](index=24&type=section&id=ITEM%206.%20%5BRESERVED%5D) This item is reserved and contains no information [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=33&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Analysis of LSI's FY2025 and FY2024 financial performance, covering sales, operating income, non-GAAP measures, liquidity, and critical accounting policies Consolidated Net Sales and Operating Income (in thousands) | Metric | 2025 | 2024 | | :----------------- | :-------- | :-------- | | Total Net Sales | $573,377 | $469,638 | | Total Operating Income | $35,769 | $35,517 | | Adjusted Operating Income | $48,361 | $46,395 | - Fiscal 2025 net sales increased **22% year-over-year**, primarily due to a **57% increase** in the Display Solutions Segment's net sales, which included **$85.3 million** from EMI and CBH acquisitions and **17% organic growth**[131](index=131&type=chunk) - Operating income increased by **1%**, while adjusted operating income rose **4%**, with the increase in sales partially offset by the dilutive impact of acquisitions and customer mix[132](index=132&type=chunk) [Overview](index=33&type=section&id=Overview) LSI Industries Inc. is a leading producer of non-residential lighting and retail display solutions, offering integrated solutions to customers in target vertical markets - LSI Industries Inc. is a leading producer of non-residential lighting and retail display solutions, offering integrated solutions to customers in target vertical markets[129](index=129&type=chunk) [Summary of Consolidated Results](index=33&type=section&id=Summary%20of%20Consolidated%20Results) Consolidated net sales increased by 22% in fiscal 2025, driven by the Display Solutions Segment's growth, while operating income saw a slight increase Net Sales by Business Segment (in thousands) | Segment | 2025 | 2024 | | :---------------------- | :-------- | :-------- | | Lighting Segment | $248,357 | $262,413 | | Display Solutions Segment | $325,020 | $207,225 | | **Total Net Sales** | **$573,377** | **$469,638** | Operating Income (Loss) by Business Segment (in thousands) | Segment | 2025 | 2024 | | :---------------------- | :-------- | :-------- | | Lighting Segment | $30,253 | $33,327 | | Display Solutions Segment | $26,353 | $19,969 | | Corporate and Eliminations | ($20,837) | ($17,779) | | **Total Operating Income** | **$35,769** | **$35,517** | - Display Solutions Segment's net sales increased by **$117.8 million (57%)**, driven by **17% organic growth** and **$85.3 million** from EMI and CBH acquisitions. Lighting Segment sales declined by **$14.1 million (5%)** due to fewer large projects[131](index=131&type=chunk) [Non-GAAP Financial Measures](index=34&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like adjusted operating income, adjusted net income, and Adjusted EBITDA to provide transparency into core operating performance - The company uses non-GAAP measures like adjusted operating income, adjusted net income, adjusted EPS, EBITDA, Adjusted EBITDA, Net Debt to Adjusted EBITDA, and organic sales growth to provide increased transparency into core operating performance[133](index=133&type=chunk) Reconciliation of Net Income to Adjusted Net Income (in thousands, except per share data) | Metric | 2025 Net Income | 2025 Diluted EPS | 2024 Net Income | 2024 Diluted EPS | | :------------------------------------------- | :-------------- | :--------------- | :-------------- | :--------------- | | Net income as reported | $24,383 | $0.79 | $24,977 | $0.83 | | Long-term performance based compensation | 3,951 | 0.13 | 3,272 | 0.11 | | Acquisition costs | 838 | 0.03 | 735 | 0.02 | | Amortization expense of acquired intangible assets | 4,745 | 0.16 | 3,671 | 0.13 | | **Net income adjusted** | **$32,883** | **$1.07** | **$32,294** | **$1.07** | Reconciliation of Operating Income to Adjusted Operating Income (in thousands) | Metric | 2025 | 2024 | | :------------------------------------------- | :-------- | :-------- | | Operating income as reported | $35,769 | $35,517 | | Long-term performance based compensation | 4,939 | 4,380 | | Acquisition costs | 1,047 | 1,001 | | Amortization expense of acquired intangible assets | 5,869 | 4,958 | | **Adjusted operating income** | **$48,361** | **$46,395** | Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | 2025 | 2024 | | :------------------------------------------- | :-------- | :-------- | | Net income - reported | $24,383 | $24,977 | | Depreciation and amortization | 12,575 | 9,999 | | **EBITDA** | **$48,344** | **$45,516** | | Acquisition costs | 1,047 | 1,001 | | Long-term performance based compensation | 4,939 | 4,380 | | **Adjusted EBITDA** | **$55,067** | **$51,436** | Net Debt to Adjusted EBITDA | Metric | June 30, 2025 | June 30, 2024 | | :---------------------- | :------------ | :------------ | | Net debt | $45,100 | $50,119 | | Adjusted EBITDA | $55,067 | $51,436 | | **Net debt to adjusted EBITDA** | **0.82** | **0.97** | Organic vs. Inorganic Sales (in thousands) | Segment/Source | FY 2025 | FY 2024 | % Variance | | :------------------------ | :-------- | :-------- | :--------- | | Lighting Segment | $248,357 | $262,413 | -5% | | Comparable Display Solutions Sales | $221,641 | $189,152 | 17% | | EMI (Acquisition) | $94,830 | $18,073 | | | Canada's Best (Acquisition) | $8,549 | - | | | **Total organic net sales** | **$469,998** | **$451,565** | **4%** | [Results of Operations (2025 Compared to 2024)](index=37&type=section&id=Results%20of%20Operations) This section details the financial performance of the Display Solutions and Lighting segments, as well as corporate consolidated results [Display Solutions Segment](index=37&type=section&id=Display%20Solutions%20Segment) Display Solutions net sales increased 57% year-over-year, driven by organic growth and acquisitions, though gross profit percentage declined Display Solutions Segment Performance (in thousands) | Metric | 2025 | 2024 | | :--------------- | :-------- | :-------- | | Net Sales | $325,020 | $207,225 | | Gross Profit | $57,476 | $44,195 | | Operating Income | $26,353 | $19,969 | - Display Solutions net sales increased **57% (YoY)**, driven by **17% organic growth** across product categories and vertical markets (grocery, refueling/C-Store), and **$85.3 million** from EMI and CBH acquisitions[142](index=142&type=chunk) - Gross profit increased **30%**, but gross profit as a percentage of net sales decreased from **21% to 18%** due to the dilutive impact of acquisitions and customer mix[143](index=143&type=chunk) [Lighting Segment](index=38&type=section&id=Lighting%20Segment) Lighting Segment net sales decreased 5% year-over-year due to fewer large projects, but gross profit percentage marginally improved Lighting Segment Performance (in thousands) | Metric | 2025 | 2024 | | :--------------- | :-------- | :-------- | | Net Sales | $248,357 | $262,413 | | Gross Profit | $84,390 | $89,026 | | Operating Income | $30,253 | $33,327 | - Lighting Segment net sales decreased **5% (YoY)** due to the non-recurrence of several large lighting projects from fiscal 2024, though small project activity and large project order activity increased in Q4 FY2025[145](index=145&type=chunk) - Gross profit declined **5%** in line with sales, but gross profit as a percentage of sales marginally improved due to a higher mix of value applications and effective cost management[146](index=146&type=chunk) [Corporate and Eliminations](index=38&type=section&id=Corporate%20and%20Eliminations) Corporate operating expenses increased 17% year-over-year due to investments in commercial initiatives, acquisition costs, and compensation programs Corporate and Eliminations Operating (Loss) (in thousands) | Metric | 2025 | 2024 | | :--------------- | :---------- | :---------- | | Operating (Loss) | ($20,837) | ($17,779) | - Operating expenses increased **17% (YoY)** due to increased investment in commercial initiatives, acquisition costs, and performance-related compensation programs[148](index=148&type=chunk) [Consolidated Results](index=38&type=section&id=Consolidated%20Results) Consolidated net income slightly decreased, while adjusted net income increased, with higher interest expense and effective tax rate Consolidated Net Income and EPS | Metric | 2025 | 2024 | | :---------------------- | :---------- | :---------- | | Net income | $24.4 million | $25.0 million | | Non-GAAP adjusted net income | $32.9 million | $32.3 million | | Diluted adjusted EPS | $1.07 | $1.07 | - Net interest expense increased to **$3.1 million** in fiscal 2025 from **$2.2 million** in fiscal 2024, primarily due to funds borrowed for EMI and CBH acquisitions[149](index=149&type=chunk) - The consolidated effective tax rate increased to **26.2%** in fiscal 2025 from **24.5%** in fiscal 2024, driven by higher state, local, and foreign income taxes[150](index=150&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital increased to $96.8 million at June 30, 2025, with $35.7 million available under the credit facility - Working capital increased to **$96.8 million** at June 30, 2025, from **$83.3 million** at June 30, 2024, with **$9.7 million** of the increase attributed to the CBH acquisition[154](index=154&type=chunk) Key Liquidity Metrics (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :----------------------------------- | :------------ | :------------ | | Working Capital | $96,800 | $83,300 | | Current Ratio | 2.0 to 1 | 2.1 to 1 | | Net Accounts Receivable | $104,300 | $78,600 | | Net Inventories | $79,800 | $70,900 | | Cash from Operating Activities | $38,100 | $43,400 | | Cash used in Investing Activities | $28,000 | $55,300 | | Cash (used in)/provided by Financing Activities | ($11,400) | $14,300 | - The company has a **$100 million credit facility** (**$25 million term loan**, **$75 million revolving line of credit**) expiring in Q1 fiscal 2027, with **$35.7 million** available as of June 30, 2025[157](index=157&type=chunk) [Off-Balance Sheet Arrangements](index=39&type=section&id=Off-Balance%20Sheet%20Arrangements) The company has no financial instruments with off-balance sheet risk - The company has no financial instruments with off-balance sheet risk[162](index=162&type=chunk) [Cash Dividends](index=39&type=section&id=Cash%20Dividends) In August 2025, the Board declared a regular quarterly cash dividend of $0.05 per share, maintaining an annual rate of $0.20 per share - In August 2025, the Board declared a regular quarterly cash dividend of **$0.05 per share**, maintaining an indicated annual rate of **$0.20 per share** for fiscal 2025[163](index=163&type=chunk) [Critical Accounting Policies and Use of Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20Use%20of%20Estimates) The company's critical accounting policies involve significant judgments and estimates, particularly for warranty reserves and business combinations - The company's critical accounting policies involve significant judgments and estimates, particularly for warranty reserves and business combinations, which can materially impact financial results[164](index=164&type=chunk) [Warranty Reserves](index=40&type=section&id=Warranty%20Reserves) Warranty liabilities are recorded based on historical claims and estimates for known issues, with terms generally ranging from one to five years - The company records warranty liabilities based on historical claims and estimates for known issues, with terms generally ranging from one to five years, and up to 10 years for some products[165](index=165&type=chunk) - Warranty reserves are subject to adjustments if actual costs differ significantly from estimates, potentially affecting gross profit and operating results[165](index=165&type=chunk) [Business Combination](index=40&type=section&id=Business%20Combination) Business acquisitions are accounted for using the acquisition method, requiring significant estimates for fair value allocation of acquired assets and liabilities - Business acquisitions are accounted for using the acquisition method, requiring significant estimates for fair value allocation of acquired assets and liabilities, including intangible assets and goodwill[166](index=166&type=chunk) - Adjustments to preliminary estimates during the measurement period (up to one year) or subsequent adjustments outside this period could materially impact financial condition and results[166](index=166&type=chunk)[167](index=167&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=24&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company faces market risks from variable interest rates, raw material prices, and foreign currency, managing them through sourcing and price adjustments - The company is exposed to market risks from changes in variable interest rates, raw material prices, and foreign currency translation rates[90](index=90&type=chunk) [Interest Rate Risk](index=24&type=section&id=Interest%20Rate%20Risk) The company is exposed to interest rate fluctuations on its cash, investments, and debt, particularly its revolving line of credit and term loan - The company is exposed to interest rate fluctuations on its cash, cash equivalents, short-term investments, and debt, particularly its **$75 million revolving line of credit** and **$25 million term loan**[91](index=91&type=chunk)[92](index=92&type=chunk) [Raw Material Price Risk](index=24&type=section&id=Raw%20Material%20Price%20Risk) The company is susceptible to raw material price fluctuations, mitigating risk through multiple suppliers and attempting to pass increased costs to customers - The company purchases large quantities of raw materials (e.g., steel, aluminum, LEDs) and components, making it susceptible to price fluctuations[93](index=93&type=chunk) - Strategic sourcing plans include using multiple suppliers and negotiating annual contracts to mitigate supply chain risk and price volatility[93](index=93&type=chunk) - The company attempts to pass increased costs to customers through price increases, but timing lags and competitive reasons may limit success[94](index=94&type=chunk) [Foreign Currency Translation Risk](index=26&type=section&id=Foreign%20Currency%20Translation%20Risk) The company has foreign currency risk from its Mexican and Canadian subsidiaries, whose sales represent approximately 3% of consolidated net sales - The company has foreign currency risk from its Mexican and Canadian subsidiaries, whose sales in pesos and Canadian dollars represent approximately **3% of fiscal 2025 consolidated net sales**[95](index=95&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=26&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) Audited consolidated financial statements for FY2025 and FY2024, including core statements, internal control report, auditor reports, and detailed accounting notes - The consolidated financial statements for the years ended June 30, 2025, and 2024, are presented in accordance with U.S. GAAP[96](index=96&type=chunk)[177](index=177&type=chunk) - Management concluded that internal control over financial reporting was effective as of June 30, 2025, with the exclusion of Canada's Best Holdings (CBH) due to its recent acquisition[173](index=173&type=chunk)[174](index=174&type=chunk) - Grant Thornton LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of June 30, 2025[177](index=177&type=chunk)[178](index=178&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) [Index to Financial Statements](index=26&type=section&id=Index%20to%20Financial%20Statements) The index lists the various financial statements and supplementary data included in this item - The index lists the various financial statements and supplementary data included in this item, such as Consolidated Statements of Operations, Balance Sheets, Cash Flows, and Notes to Consolidated Financial Statements[96](index=96&type=chunk) [Management's Report On Internal Control Over Financial Reporting](index=41&type=section&id=Management%27s%20Report%20On%20Internal%20Control%20Over%20Financial%20Reporting) Management is responsible for internal control over financial reporting and concluded its effectiveness as of June 30, 2025, excluding Canada's Best Holdings - Management is responsible for establishing and maintaining adequate internal control over financial reporting and evaluated its effectiveness as of June 30, 2025, based on the COSO framework[169](index=169&type=chunk) - Management excluded Canada's Best Holdings (CBH) from its evaluation of internal control effectiveness as of June 30, 2025, as CBH represented **10% of total consolidated assets** and **1% of total consolidated sales**[173](index=173&type=chunk) - The principal executive officer and principal financial officer concluded that internal control over financial reporting was effective as of June 30, 2025[174](index=174&type=chunk)[175](index=175&type=chunk) [Report of Independent Registered Public Accounting Firm (Opinion on Financial Statements)](index=42&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20%28Opinion%20on%20Financial%20Statements%29) Grant Thornton LLP issued an unqualified opinion on the consolidated financial statements, identifying the valuation of acquired customer relationships as a critical audit matter - Grant Thornton LLP issued an unqualified opinion, stating that the consolidated financial statements present fairly, in all material respects, the financial position and results of operations for the periods ended June 30, 2025, and 2024[177](index=177&type=chunk) - The valuation of acquired customer relationships from Canada's Best Holdings (CBH) was identified as a critical audit matter due to significant auditor judgment required for fair value measurements[182](index=182&type=chunk)[183](index=183&type=chunk) [Report of Independent Registered Public Accounting Firm (Opinion on Internal Control)](index=45&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20%28Opinion%20on%20Internal%20Control%29) Grant Thornton LLP issued an unqualified opinion on the effectiveness of internal control over financial reporting, excluding Canada's Best Holdings - Grant Thornton LLP issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of June 30, 2025, based on COSO criteria[187](index=187&type=chunk) - The audit of internal control over financial reporting excluded Canada's Best Holdings (CBH), which was acquired during fiscal year 2025 and represented **10% of total assets** and **1% of revenues**[191](index=191&type=chunk) [Consolidated Statements of Operations](index=46&type=section&id=Consolidated%20Statements%20of%20Operations) This section presents the company's consolidated statements of operations, detailing net sales, gross profit, operating income, and net income for fiscal years 2025 and 2024 Consolidated Statements of Operations (in thousands, except per share data) | Metric | 2025 | 2024 | | :------------------------- | :-------- | :-------- | | Net Sales | $573,377 | $469,638 | | Gross profit | $141,780 | $133,168 | | Operating income | $35,769 | $35,517 | | Income before income taxes | $33,038 | $33,099 | | Net income | $24,383 | $24,977 | | Basic EPS | $0.82 | $0.86 | | Diluted EPS | $0.79 | $0.83 | [Consolidated Statements of Comprehensive Income](index=47&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the company's consolidated statements of comprehensive income, including net income and foreign currency translation adjustments Consolidated Statements of Comprehensive Income (in thousands) | Metric | 2025 | 2024 | | :---------------------------- | :-------- | :-------- | | Net Income | $24,383 | $24,977 | | Foreign currency translation adjustment | 627 | (137) | | **Comprehensive Income** | **$25,010** | **$24,840** | [Consolidated Balance Sheets](index=48&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's consolidated balance sheets, detailing assets, liabilities, and shareholders' equity as of June 30, 2025, and 2024 Consolidated Balance Sheets (in thousands) | Asset/Liability/Equity | June 30, 2025 | June 30, 2024 | | :------------------------------- | :------------ | :------------ | | **ASSETS** | | | | Total current assets | $194,166 | $162,499 | | Net property, plant and equipment | $31,154 | $32,960 | | Goodwill | $64,548 | $57,397 | | Intangible assets, net | $78,258 | $73,916 | | Total assets | **$396,362** | **$348,800** | | **LIABILITIES & SHAREHOLDERS' EQUITY** | | | | Total current liabilities | $97,349 | $79,207 | | Long-term debt | $44,986 | $50,658 | | Total shareholders' equity | $230,722 | $204,355 | | Total liabilities & shareholders' equity | **$396,362** | **$348,800** | [Consolidated Statements of Shareholders' Equity](index=50&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) This section presents the company's consolidated statements of shareholders' equity, detailing changes in common shares, treasury shares, retained earnings, and comprehensive income Consolidated Statements of Shareholders' Equity (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :--------------------------- | :------------ | :------------ | | Common Shares Amount | $163,692 | $156,365 | | Treasury Shares Amount | ($10,011) | ($8,895) | | Retained Earnings | $66,201 | $47,788 | | Accumulated other comprehensive income | $829 | $202 | | **Total Shareholders' Equity** | **$230,722** | **$204,355** | - Total shareholders' equity increased from **$204.4 million** in 2024 to **$230.7 million** in 2025, driven by net income, stock-based compensation, and other comprehensive gain, partially offset by dividends[201](index=201&type=chunk) [Consolidated Statements of Cash Flows](index=51&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's consolidated statements of cash flows, detailing cash flows from operating, investing, and financing activities Consolidated Statements of Cash Flows (in thousands) | Activity | 2025 | 2024 | | :------------------------------------- | :---------- | :---------- | | Net cash flows provided by operating activities | $38,118 | $43,392 | | Net cash flows used in investing activities | ($27,967) | ($55,253) | | Net cash flows provided by (used in) financing activities | ($11,431) | $14,308 | | Increase (decrease) in cash and cash equivalents | ($653) | $2,282 | | Cash and cash equivalents at end of period | $3,457 | $4,110 | - Cash from operating activities decreased from **$43.4 million** in 2024 to **$38.1 million** in 2025. Cash used in investing activities decreased from **$55.3 million** to **$28.0 million**, primarily due to the timing of EMI and CBH acquisitions[203](index=203&type=chunk) [Notes to Consolidated Financial Statements](index=52&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The consolidated financial statements are prepared in accordance with U.S. GAAP, with critical accounting policies involving significant judgments and estimates - The consolidated financial statements are prepared in accordance with U.S. GAAP, including wholly-owned subsidiaries, with all intercompany transactions eliminated[204](index=204&type=chunk) - Revenue is recognized when performance obligations are satisfied, typically at shipment for products, or over time for customized products and installation services using a cost-based input method[205](index=205&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk) - Critical accounting policies include warranty reserves and business combinations, which involve significant management judgment and estimates[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) [NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=52&type=section&id=NOTE%201%20%E2%80%94%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the company's significant accounting policies, including consolidation, revenue recognition, inventory valuation, and employee benefit plans [Consolidation](index=52&type=section&id=Consolidation) Consolidated financial statements include LSI Industries Inc. and its wholly-owned subsidiaries, prepared in accordance with U.S. GAAP - Consolidated financial statements include LSI Industries Inc. and its wholly-owned subsidiaries, prepared in accordance with U.S. GAAP, with all intercompany transactions eliminated[204](index=204&type=chunk) [Revenue Recognition](index=52&type=section&id=Revenue%20Recognition) Revenue is recognized when performance obligations are satisfied, typically at shipment for most products, or over time for customized products and installation services - Revenue is recognized when performance obligations are satisfied, typically at a point in time upon shipment for most products when control transfers to the customer[205](index=205&type=chunk) - For customized products (metal/millwork, print graphics, digital signage) and installation services, revenue is recognized over time using a cost-based input method[207](index=207&type=chunk)[208](index=208&type=chunk)[210](index=210&type=chunk) [Disaggregation of Revenue](index=53&type=section&id=Disaggregation%20of%20Revenue) This section provides a breakdown of revenue by timing of transfer and product/service type for fiscal year 2025 Disaggregated Revenue by Timing and Type (FY2025, in thousands) | Category | Lighting Segment | Display Solutions Segment | | :---------------------------------------- | :--------------- | :------------------------ | | Products and services transferred at a point in time | $208,193 | $259,432 | | Products and services transferred over time | $40,164 | $65,588 | | LED lighting, digital signage solutions, electronic circuit boards | $202,552 | $26,144 | | Poles and other display solutions elements | $43,211 | $233,792 | | Project management, installation services, shipping and handling | $2,594 | $65,084 | [Practical Expedients and Exemptions](index=53&type=section&id=Practical%20Expedients%20and%20Exemptions) The company expenses sales commissions for short-term contracts and omits disclosures on remaining performance obligations - The company expenses sales commissions as incurred for contracts with expected durations of one year or less and omits disclosures on remaining performance obligations[214](index=214&type=chunk) - Shipping costs are expensed as incurred if not material, and sales tax is excluded from revenue[214](index=214&type=chunk) [Credit and Collections](index=53&type=section&id=Credit%20and%20Collections) Allowances for credit losses are maintained for estimated losses from customer disputes or inability to pay - Allowances for credit losses are maintained for estimated losses from customer disputes or inability to pay, determined by known problems and historical percentages against aging receivables[213](index=213&type=chunk) Net Accounts Receivable (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Accounts receivable | $105,499 | $79,474 | | Less: Allowance for credit losses | ($1,152) | ($848) | | **Accounts receivable, net** | **$104,347** | **$78,626** | [Cash and Cash Equivalents](index=55&type=section&id=Cash%20and%20Cash%20Equivalents) Cash and cash equivalents include bank deposits and money market accounts with original maturities of less than three months - Cash and cash equivalents include bank deposits and money market accounts with original maturities of less than three months, stated at cost approximating fair value[218](index=218&type=chunk) [Inventories, Net](index=55&type=section&id=Inventories%2C%20Net) Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis - Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis, including raw materials, direct labor, and manufacturing overhead[219](index=219&type=chunk) - An inventory reserve is maintained for obsolete and excess inventory, based on specific known items and percentages applied to inventory categories[220](index=220&type=chunk) [Property, Plant and Equipment and Related Depreciation](index=55&type=section&id=Property%2C%20Plant%20and%20Equipment%20and%20Related%20Depreciation) Property, plant, and equipment are stated at cost, with depreciation computed on the straight-line method over estimated useful lives - Property, plant, and equipment are stated at cost, with depreciation computed on the straight-line method over estimated useful lives (e.g., buildings 28-40 years, machinery 3-10 years)[221](index=221&type=chunk) Depreciation Expense (in thousands) | Fiscal Year | Depreciation Expense | | :---------- | :------------------- | | 2025 | $6,700 | | 2024 | $5,000 | [Goodwill and Intangible Assets](index=55&type=section&id=Goodwill%20and%20Intangible%20Assets) Definite-lived intangible assets are amortized over 5 to 20 years, while goodwill and indefinite-lived intangible assets are subject to annual impairment review - Definite-lived intangible assets (customer relationships, technology, trade names, non-compete) are amortized over 5 to 20 years, while goodwill and indefinite-lived intangible assets (trademarks/trade names) are not amortized but are subject to annual impairment review[223](index=223&type=chunk) [Fair Value](index=55&type=section&id=Fair%20Value) The fair value of financial instruments approximates their carrying value, with fair value measurements for nonfinancial assets primarily used in impairment analyses - The fair value of financial instruments like cash, receivables, debt, and payables approximates their carrying value due to short-term maturity or variable interest rates[224](index=224&type=chunk) - Fair value measurements for nonfinancial assets and liabilities are primarily used in impairment analyses and valuation of acquired assets/liabilities[225](index=225&type=chunk) [Product Warranties](index=56&type=section&id=Product%20Warranties) The company offers limited warranties against defects and records warranty liabilities based on historical claims and estimates for future costs - The company offers limited warranties (1-10 years) against defects and records warranty liabilities based on historical claims and estimates for future repair/replacement costs[226](index=226&type=chunk) Changes in Warranty Liabilities (in thousands) | Metric | June 30, 2025 | June 30, 2024 | | :------------------------------ | :------------ | :------------ | | Balance at beginning of the period | $6,623 | $6,501 | | Additions charged to expense | $5,304 | $3,781 | | Deductions for repairs and replacements | ($4,495) | ($4,004) | | **Balance at end of the period** | **$7,505** | **$6,623** | [Employee Benefit Plans](index=56&type=section&id=Employee%20Benefit%20Plans) The company offers a 401(k) retirement plan with matching contributions and a non-qualified deferred compensation plan - The company offers a 401(k) retirement plan with matching contributions and a non-qualified deferred compensation plan for certain employees[228](index=228&type=chunk) Total Employee Benefit Plan Costs (in millions) | Fiscal Year | Total Costs | | :---------- | :---------- | | 2025 | $2.4 | | 2024 | $2.3 | [Research and Development Costs](index=56&type=section&id=Research%20and%20Development%20Costs) R&D costs, primarily for new product and technology development, are expensed as incurred and totaled $3.3 million in FY2025 - R&D costs, primarily for new product and technology development (including LED software), are expensed as incurred and totaled **$3.3 million** in FY2025 and **$3.5 million** in FY2024[229](index=229&type=chunk) [Cost of Products and Services Sold](index=56&type=section&id=Cost%20of%20Products%20and%20Services%20Sold) Cost of products sold includes direct materials, labor, manufacturing overhead, distribution, freight, and warehousing - Cost of products sold includes direct materials, labor, manufacturing overhead, distribution, freight, and warehousing. Cost of services sold includes internal/external labor for project management and installation[230](index=230&type=chunk) [Stock-Based Compensation](index=56&type=section&id=Stock-Based%20Compensation) Stock-based compensation for equity instruments is measured at grant date fair value and recognized as expense over the vesting period - Stock-based compensation for equity instruments (stock options, RSUs, PSUs) is measured at grant date fair value and recognized as expense over the vesting period[231](index=231&type=chunk) [Earnings Per Common Share](index=56&type=section&id=Earnings%20Per%20Common%20Share) Basic EPS is based on weighted average common shares outstanding, while diluted EPS includes common share equivalents from stock options, RSUs, and contingently issuable shares - Basic EPS is based on weighted average common shares outstanding, net of treasury shares. Diluted EPS includes common share equivalents from stock options, RSUs, and contingently issuable shares[232](index=232&type=chunk)[233](index=233&type=chunk) [Income Taxes](index=58&type=section&id=Income%20Taxes) Deferred income taxes are provided for temporary differences, requiring significant management judgment in estimating taxable income and effective tax rates - Deferred income taxes are provided for temporary differences between financial reporting and tax purposes, requiring significant management judgment in estimating taxable income and effective tax rates[234](index=234&type=chunk) [Foreign Exchange](index=58&type=section&id=Foreign%20Exchange) Assets and liabilities of foreign subsidiaries are translated using period-end exchange rates, with translation gains/losses reported in accumulated other comprehensive income - Assets and liabilities of Mexican and Canadian subsidiaries are translated using period-end exchange rates, while revenue and expenses use average rates. Translation gains/losses are reported in accumulated other comprehensive income[235](index=235&type=chunk) [New Accounting Pronouncements](index=58&type=section&id=New%20Accounting%20Pronouncements) The company adopted ASU 2023-07 (Segment Reporting) in FY2025 and is evaluating ASU 2023-06 and ASU 2023-09 - The company adopted ASU 2023-07 (Segment Reporting) in FY2025, providing greater visibility into segment performance metrics, with no significant impact on financial statements[237](index=237&type=chunk) - The company is evaluating ASU 2023-06 (Disclosure Improvements) and ASU 2023-09 (Income Tax Disclosures), with no material impact anticipated from ASU 2023-06 and early adoption permitted for ASU 2023-09[236](index=236&type=chunk)[237](index=237&type=chunk) [Use of Estimates](index=58&type=section&id=Use%20of%20Estimates) Financial statement preparation requires management to make estimates and assumptions, and actual results may differ from these estimates - Financial statement preparation requires management to make estimates and assumptions, and actual results may differ from these estimates[238](index=238&type=chunk) [Subsequent Events](index=59&type=section&id=Subsequent%20Events) The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, is expected to monetize the capitalized R&D deferred tax asset in the next fiscal year - The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, is expected to monetize the capitalized R&D deferred tax asset in the next fiscal year[239](index=239&type=chunk)[309](index=309&type=chunk) [NOTE 2 — ACQUISITION OF EMI INDUSTRIES, LLC](index=59&type=section&id=NOTE%202%20%E2%80%94%20ACQUISITION%20OF%20EMI%20INDUSTRIES%2C%20LLC) On April 18, 2024, the company acquired EMI Industries, LLC for $50.0 million, expanding its vertical market presence and adding goodwill and intangible assets - On April 18, 2024, the company acquired EMI Industries, LLC for **$50.0 million**, funded by cash and a revolving line of credit[240](index=240&type=chunk) - The acquisition expanded LSI's vertical market presence in Grocery, C-Store, and QSR/Restaurant, adding **$12.4 million in goodwill** and **$15.7 million in intangible assets**[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) EMI Intangible Assets Acquired (in thousands) | Intangible Asset | Estimated Fair Value | Estimated Useful Life (Years) | | :------------------ | :------------------- | :---------------------------- | | Tradename | $4,880 | Indefinite life | | Technology assets | $3,160 | 7 | | Non-compete | $140 | 5 | | Customer relationships | $7,490 | 20 | [Pro Forma Impact of the Acquisition of EMI (Unaudited)](index=61&type=section&id=Pro%20Forma%20Impact%20of%20the%20Acquisition%20of%20EMI%20%28Unaudited%29) Unaudited pro forma results for FY2024, assuming EMI acquisition on July 1, 2022, show sales of $535.8 million and operating income of $36.3 million - Unaudited pro forma results for FY2024, assuming EMI acquisition on July 1, 2022, show sales of **$535.8 million** and operating income of **$36.3 million**[244](index=244&type=chunk)[246](index=246&type=chunk) [NOTE 3— ACQUISITION OF CANADA'S BEST HOLDINGS](index=61&type=section&id=NOTE%203%E2%80%94%20ACQUISITION%20OF%20CANADA%27S%20BEST%20HOLDINGS) On March 11, 2025, the company acquired Canada's Best Holdings (CBH) for $25.9 million, resulting in $6.7 million in goodwill and $9.6 million in intangible assets - On March 11, 2025, the company acquired Canada's Best Holdings (CBH) for **$25.9 million**, with total purchase consideration of **$29.1 million** including a **$3.3 million contingent earnout liability**[247](index=247&type=chunk) - The acquisition resulted in **$6.7 million in goodwill** and **$9.6 million in intangible assets**, primarily customer relationships[248](index=248&type=chunk)[249](index=249&type=chunk) CBH Intangible Assets Acquired (in thousands) | Intangible Asset | Estimated Fair Value | Estimated Useful Life (Years) | | :------------------ | :------------------- | :---------------------------- | | Tradename | $991 | 10 | | Non-compete agreements | $180 | 3 - 5 | | Customer relationships | $8,431 | 20 | [Pro Forma Impact of the Acquisition of CBH (Unaudited)](index=62&type=section&id=Pro%20Forma%20Impact%20of%20the%20Acquisition%20of%20CBH%20%28Unaudited%29) Unaudited pro forma results, assuming CBH acquisition on July 1, 2023, show higher sales and gross profit for both fiscal years Pro Forma Impact of CBH Acquisition (Unaudited, in thousands) | Metric | FY 2025 | FY 2024 | | :--------------- | :-------- | :-------- | | Sales | $587,874 | $496,965 | | Gross Profit | $146,962 | $142,984 | | Operating Income | $37,848 | $41,337 | - Unaudited pro forma results, assuming CBH acquisition on July 1, 2023, show higher sales and gross profit for both fiscal years, with pro-forma operating income of **$37.8 million** for FY2025[250](index=250&type=chunk)[251](index=251&type=chunk)[253](index=253&type=chunk) [NOTE 4 — BUSINESS SEGMENT INFORMATION](index=64&type=section&id=NOTE%204%20%E2%80%94%20BUSINESS%20SEGMENT%20INFORMATION) The company operates two reportable segments, Lighting and Display Solutions, with profitability assessed by the CEO using adjusted operating income and adjusted EBITDA - The company operates two reportable segments: Lighting and Display Solutions, with profitability assessed by the CEO (CODM) using adjusted operating income and adjusted EBITDA[254](index=254&type=chunk)[255](index=255&type=chunk) - The Lighting Segment focuses on non-residential LED lighting fixtures and controls, while the Display Solutions Segment provides visual image and display elements, including digital signage and custom fixtures[256](index=256&type=chunk)[257](index=257&type=chunk) Segment Performance (FY2025, in thousands) | Metric | Lighting Segment | Display Solutions Segment | Corporate & Elims | Total | | :---------------------- | :--------------- | :------------------------ | :---------------- | :-------- | | Net sales | $248,357 | $325,020 | $0 | $573,377 | | Operating income | $30,253 | $26,353 | ($20,837) | $35,769 | | Adjusted operating income | $33,086 | $31,429 | ($16,154) | $48,361 | | Adjusted EBITDA | $35,725 | $35,144 | ($15,802) | $55,067 | [NOTE 5 — EARNINGS PER SHARE](index=67&type=section&id=NOTE%205%20%E2%80%94%20EARNINGS%20PER%20SHARE) This note details the calculation of basic and diluted earnings per common share for fiscal years 2025 and 2024 Earnings Per Common Share (in thousands, except per share data) | Metric | 2025 | 2024 | | :------------------------------------------- | :-------- | :-------- | | Net Income | $24,383 | $24,977 | | Weighted average shares outstanding (Basic) | 29,903 | 29,049 | | Basic income per share | $0.82 | $0.86 | | Weighted average shares outstanding (Diluted) | 30,832 | 30,068 | | Diluted income per share | $0.79 | $0.83 | - Diluted EPS calculation includes the dilutive effect of stock options, restricted stock units, and contingently issuable shares, totaling **2,024,000 shares** in FY2025 and **2,087,000 shares** in FY2024[233](index=233&type=chunk)[263](index=263&type=chunk) [NOTE 6 — INVENTORIES, NET](index=68&type=section&id=NOTE%206%20%E2%80%94%20INVENTORIES%2C%20NET) This note provides a breakdown of inventories by category and details open purchase orders as of June 30, 2025 Inventories, Net (in thousands) | Inventory Category | June 30, 2025 | June 30, 2024 | | :----------------- | :------------ | :------------ | | Raw materials | $60,726 | $52,644 | | Work-in-progress | $7,942 | $6,244 | | Finished goods | $11,150 | $12,025 | | **Total Inventories** | **$79,818** | **$70,913** | - The company had open purchase orders primarily related to inventory totaling **$48.1 million** as of June 30, 2025[264](index=264&type=chunk) [NOTE 7 — ACCRUED EXPENSES](index=68&type=section&id=NOTE%207%20%E2%80%94%20ACCRUED%20EXPENSES) This note details the components of accrued expenses, including customer prepayments, compensation, warranty, and operating lease liabilities Accrued Expenses (in thousands) | Accrued Expense Category | June 30, 2025 | June 30, 2024 | | :----------------------- | :------------ | :------------ | | Customer prepayments | $4,070 | $8,475 | | Compensation and benefits | $12,471 | $10,217 | | Accrued warranty | $7,505 | $6,623 | | Accrued sales commissions | $3,956 | $3,937 | | Operating lease liabilities | $6,037 | $5,560 | | **Total Accrued Expenses** | **$45,252** | **$43,444** | [NOTE 8 — GOODWILL AND OTHER INTANGIBLE ASSETS](index=68&type=section&id=NOTE%208%20%E2%80%94%20GOODWILL%20AND%20OTHER%20INTANGIBLE%20ASSETS) Goodwill and indefinite-lived intangible assets are reviewed annually for impairment, with all reporting units passing their impairment tests in fiscal 2025 - Goodwill and indefinite-lived intangible assets are reviewed annually for impairment, using qualitative factors or a combination of market and income approaches for fair value estimation[266](index=266&type=chunk) - In fiscal 2025, all five reporting units (one in Lighting, four in Display Solutions) passed their annual goodwill impairment tests[268](index=268&type=chunk) Goodwill, Net (in thousands) | Segment | June 30, 2025 | June 30, 2024 | | :---------------- | :------------ | :------------ | | Lighting Segment | $9,208 | $9,208 | | Display Solutions Segment | $55,340 | $48,189 | | **Goodwill, net** | **$64,548** | **$57,397** | Other Intangible Assets, Net (in thousands) | Asset Class | June 30, 2025 Net Amount | June 30, 2024 Net Amount | | :-------------------------- | :----------------------- | :----------------------- | | Customer relationships | $53,234 | $48,241 | | LED technology, software | $5,432 | $7,068 | | Trademarks and trade names (indefinite-lived) | $16,982 | $16,982 | | **Total Other Intangible Assets** | **$78,258** | **$73,916** | Expected Annual Amortization Expense (in thousands) | Year | Amount | | :-------- | :-------- | | 2026 | $6,220 | | 2027 | $6,037 | | 2028 | $5,560 | | 2029 | $4,916 | | 2030 | $4,911 | | After 2030 | $33,632 | [NOTE 9 — REVOLVING LINE OF CREDIT AND LONG-TERM DEBT](index=71&type=section&id=NOTE%209%20%E2%80%94%20REVOLVING%20LINE%20OF%20CREDIT%20AND%20LONG-TERM%20DEBT) The company has a $100 million credit facility expiring in Q1 fiscal 2027, with $35.7 million available for borrowing as of June 30, 2025 Long-Term Debt (in thousands) | Debt Type | June 30, 2025 | June 30, 2024 | | :---------------------- | :------------ | :------------ | | Secured line of credit | $36,956 | $38,766 | | Term loan, net | $11,601 | $15,463 | | **Total debt** | **$48,557** | **$54,229** | | Less: amounts due within one year | ($3,571) | ($3,571) | | **Total amounts due after one year, net** | **$44,986** | **$50,658** | - The company has a **$100 million credit facility** (a **$25 million term loan** and a **$75 million revolving line of credit**) expiring in Q1 fiscal 2027[276](index=276&type=chunk) - As of June 30, 2025, **$35.7 million** was available for borrowing under the revolving line of credit, and the company was in compliance with all loan covenants[276](index=276&type=chunk)[277](index=277&type=chunk) [NOTE 10 — CASH DIVIDENDS](index=71&type=section&id=NOTE%2010%20%E2%80%94%20CASH%20DIVI

[PART I](index=5&type=section&id=PART%20I) This section provides an overview of the company's business, including its operations, strategies, risk factors, cybersecurity posture, properties, and legal matters [ITEM 1. Business](index=5&type=section&id=ITEM%201.%20Business) Farmer Bros. Co. is a leading coffee roaster, wholesaler, and distributor, focusing on quality products, sustainable sourcing, and strategic operational enhancements - Farmer Bros. Co. is a leading coffee roaster, wholesaler, equipment servicer, and distributor of coffee, tea, and other allied products, founded in 1912 and reincorporated in Delaware in 2004[18](index=18&type=chunk) - The company serves a wide variety of customers, including small independent restaurants, large institutional buyers (restaurant, department, convenience store chains, hotels, casinos, healthcare facilities), gourmet coffee houses, grocery chains (private brand and consumer-branded products), and foodservice distributors[18](index=18&type=chunk) - Key business strategies include executing manufacturing and network optimization, leveraging its nationwide Direct-Store-Delivery (DSD) network for growth, enhancing product innovation, driving customer satisfaction, and improving service excellence through its Revive Service & Restoration program[21](index=21&type=chunk)[25](index=25&type=chunk) [Overview](index=5&type=section&id=Overview) The company is a Delaware corporation, operating as a leading coffee roaster, wholesaler, and distributor of coffee, tea, and allied products - Farmer Bros. Co. is a Delaware corporation, including its consolidated subsidiaries, operating as a leading coffee roaster, wholesaler, equipment servicer, and distributor of coffee, tea, and other allied products[18](index=18&type=chunk) - The company serves a wide variety of customers, from small independent restaurants to large institutional buyers and grocery chains, offering a breadth of high-quality products and value-added services like market insight, beverage planning, and equipment placement and service[18](index=18&type=chunk) [Products and Services](index=5&type=section&id=Products%20and%20Services) The company offers diverse coffee, tea, and culinary products, alongside comprehensive equipment installation, repair, and lifecycle management services - The company's product categories include roast and ground coffee (organic, Direct Trade, Fair Trade Certified, sustainably-produced), frozen and ambient liquid coffee, flavored and unflavored iced and hot teas (organic, Rainforest Alliance Certified), culinary products (spices, mixes, gravies, sauces, syrups), and other beverages (cappuccino, cocoa, granitas, cold brew)[19](index=19&type=chunk)[22](index=22&type=chunk) - Services include installation, repair, and refurbishment for coffee, tea, and juice equipment, managing the full equipment lifecycle, and providing enhanced service capabilities[22](index=22&type=chunk) [Business Strategy](index=5&type=section&id=Business%20Strategy) The company aims to optimize cash and margins through growth, operational efficiency, product innovation, and enhanced customer satisfaction - The company aims to increase cash optimization and improve margins by growing existing capabilities and developing new ones, focusing on delivering value to customers who prioritize quality, service, and sustainable sourcing[20](index=20&type=chunk)[21](index=21&type=chunk) - Strategic initiatives include manufacturing and network optimization (utilizing facilities in Portland, Oregon, and distribution centers in Rialto, California, to improve production efficiencies and balance volume), leveraging its nationwide Direct-Store-Delivery (DSD) network for growth, and enhancing product innovation[21](index=21&type=chunk)[23](index=23&type=chunk)[25](index=25&type=chunk) - Other key strategies involve driving customer satisfaction through improved service metrics, enhancing Revive Service & Restoration capabilities, implementing IT applications for supply chain optimization and customer analytics, and providing market insights and comprehensive coffee programs to key accounts[25](index=25&type=chunk) [Sustainability Leadership](index=7&type=section&id=Sustainability%20Leadership) The company is committed to sustainability, focusing on environmental impact reduction, supply chain stability, and responsible sourcing through programs like Project D.I.R.E.C.T - The company is committed to sustainability, focusing on measuring social and environmental impact, reducing waste, water, and energy, and promoting supply chain stability and food security[32](index=32&type=chunk) - Key programs include Project D.I.R.E.C.T., a direct trade sourcing model based on long-term partnerships with coffee growing communities, transparent pricing, and consumer education, verified as responsibly sourced through Enveritas[32](index=32&type=chunk) - Efforts also include green coffee traceability to ensure sustainably-sourced coffees and working with suppliers who adhere to the company's Supplier Standards of Engagement[32](index=32&type=chunk) [Charitable Activities](index=7&type=section&id=Charitable%20Activities) Charitable involvement is a core corporate responsibility, supporting communities and focusing on supply chain stability and food security through donations and volunteerism - Charitable involvement is a core part of corporate responsibility, supporting communities where customers, team members, businesses, and suppliers reside, with an emphasis on supply chain stability and food security[28](index=28&type=chunk) - Donations, including corporate cash, product, employee volunteerism, and workplace giving, are directed to organizations like Feeding America, Ronald McDonald House, and local food banks[29](index=29&type=chunk)[33](index=33&type=chunk) [Human Capital](index=7&type=section&id=Human%20Capital) As of June 30, 2025, the company employed approximately 865 employees, with a focus on a culture embracing family, service, quality, and sustainability - As of June 30, 2025, the company employed approximately **865 employees**, with **198** subject to collective bargaining agreements expiring by January 31, 2028[30](index=30&type=chunk) - The human capital management philosophy focuses on developing a culture that embraces values of family, service, quality, collaboration, simplicity, and sustainability, supported by a Total Rewards Program and a 'Safety First Culture'[31](index=31&type=chunk)[34](index=34&type=chunk) [Raw Materials and Supplies](index=8&type=section&id=Raw%20Materials%20and%20Supplies) Green coffee is the primary raw material, subject to price fluctuations, sourced globally, with derivative instruments used to mitigate price risk - Green coffee is the primary raw material, an exchange-traded agricultural commodity subject to price fluctuations, sourced globally from multiple regions, including Arabica beans purchased on a negotiated basis from brokers, exporters, and growers (Direct Trade, Fair Trade Certified, Rainforest Alliance Certified)[35](index=35&type=chunk)[36](index=36&type=chunk) - The company uses derivative instruments and customer/vendor arrangements to mitigate the impact of green coffee price fluctuations on financial results and stabilize margins[36](index=36&type=chunk) - Other principal materials include carton board, corrugate, plastic for packaging, and significant amounts of electricity, natural gas, and other energy sources for operations[35](index=35&type=chunk) [Intellectual Property](index=8&type=section&id=Intellectual%20Property) The company owns numerous trademarks, service marks, licenses, copyrights, and trade secrets, which are integral to product identification and competitive position - The company owns numerous registered and applied-for United States trademarks and service marks, which are considered integral to customer identification of its products[37](index=37&type=chunk) - It also holds licenses for certain trademarks and product formulas outside the U.S., along with copyrights, registered domain names, and proprietary trade secrets, technology, and know-how[37](index=37&type=chunk) [Seasonality](index=8&type=section&id=Seasonality) The company experiences seasonal sales patterns, with winter months typically strongest, though product and geographic diversity provide some stability - The company experiences seasonal influences, with winter months historically being the strongest sales period[38](index=38&type=chunk) - Product line and geographic diversity provide some sales stability during warmer months when coffee consumption typically decreases, with increases also seen in summer/early fall from seasonal businesses and retailers stocking for winter[38](index=38&type=chunk) [Distribution](index=8&type=section&id=Distribution) The company operates production and distribution facilities, primarily utilizing a nationwide Direct-Store-Delivery (DSD) network and third-party logistics providers - The company operates production and distribution facilities in Portland, Oregon, and additional distribution centers in Northlake, Illinois; Rialto, California; and Moonachie, New Jersey[39](index=39&type=chunk) - Products are primarily distributed through a nationwide Direct-Store-Delivery (DSD) network of over **200 delivery routes** and over **90 storage locations** as of June 30, 2025, utilizing a large fleet of trucks and third-party logistics (3PL) providers for long-haul distribution[39](index=39&type=chunk)[40](index=40&type=chunk) [Customers](index=9&type=section&id=Customers) The company serves a diverse customer base, from independent restaurants to large institutional buyers and grocery chains, with no single customer accounting for a significant portion of sales - The customer base is diverse, ranging from small independent restaurants to large institutional buyers, grocery chains, foodservice distributors, and e-commerce consumers[41](index=41&type=chunk) - In fiscal 2025, the top five customers accounted for approximately **3% of net sales**, indicating a diversified customer portfolio[41](index=41&type=chunk) - The company offers a full return policy and extended terms for qualified customers, with historically insignificant product returns[42](index=42&type=chunk) [Competition and Trends](index=9&type=section&id=Competition%20and%20Trends) The coffee industry is highly competitive, with the company differentiating itself through quality, distribution, service, and sustainability leadership - The coffee industry is highly competitive, facing competition from large multi-national manufacturers, wholesale foodservice distributors, regional and national coffee roasters, specialty coffee suppliers, and retail brand beverage manufacturers[43](index=43&type=chunk) - The company differentiates itself through longevity, product quality, national distribution, equipment service network, industry and sustainability leadership, market insight, and superior customer service[44](index=44&type=chunk) - Competition also arises from growth in single-serve, ready-to-drink, and cold-brewed coffee channels, as well as other beverages like soft drinks, juices, and bottled water[43](index=43&type=chunk) [Regulatory Environment](index=9&type=section&id=Regulatory%20Environment) The company's operations are subject to various federal, state, and local laws concerning product production, safety, labeling, and environmental protection - The company's operations are subject to various federal, state, and local laws and regulations concerning product production, storage, distribution, sale, labeling, quality, safety, and occupational health and safety practices[45](index=45&type=chunk) - Facilities are also subject to environmental laws regarding material release and environmental protection[45](index=45&type=chunk) [Other](index=9&type=section&id=Other) The business does not rely on a sales backlog and has no material foreign operations or long-lived assets abroad - The business does not rely on a sales backlog, has no material revenues from foreign operations, and no long-lived assets in foreign countries[46](index=46&type=chunk) [Available Information](index=9&type=section&id=Available%20Information) The company provides SEC filings and corporate governance documents free of charge on its investor relations website - The company makes its SEC filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, available free of charge on its investor relations website (http://www.farmerbros.com)[47](index=47&type=chunk) - Additional documents like Corporate Governance Guidelines, committee charters, and the Code of Conduct and Ethics are also available on the website[48](index=48&type=chunk) [ITEM 1A. Risk Factors](index=10&type=section&id=ITEM%201A.%20Risk%20Factors) The company faces diverse risks including economic downturns, intense competition, raw material cost volatility, regulatory compliance, and cybersecurity threats - Global economic conditions, including inflation, rising interest rates, and geopolitical uncertainties, may adversely affect customer and consumer spending, impacting demand for products[50](index=50&type=chunk) - The company's success depends on retaining key personnel and a consistent workforce; unexpected loss or difficulty in recruitment could materially affect operations[53](index=53&type=chunk) - Increases in the cost of green coffee, an exchange-traded agricultural commodity, due to factors like climate change, crop disease, or speculative trading, could reduce gross margins and increase volatility[64](index=64&type=chunk)[66](index=66&type=chunk) [Risks Related to our Business and Industry](index=10&type=section&id=Risks%20Related%20to%20our%20Business%20and%20Industry) Economic disruptions, personnel dependency, intense competition, and commodity cost fluctuations pose significant risks to the company's business and industry - Economic disruptions, including recession, high inflation, and rising interest rates, can negatively impact customer and consumer spending, affecting product demand[50](index=50&type=chunk) - Dependence on key personnel and the ability to recruit and retain qualified staff is crucial; labor cost increases and leadership changes pose significant risks[53](index=53&type=chunk)[56](index=56&type=chunk) - The highly competitive coffee industry, coupled with potential inability to anticipate customer preferences or successfully develop new products, could harm profitability and competitive position[57](index=57&type=chunk)[60](index=60&type=chunk) - Fluctuations in green coffee and other commodity costs, supply chain disruptions, and severe weather conditions (exacerbated by climate change) could increase expenses, damage facilities, and impair production/distribution capabilities[64](index=64&type=chunk)[71](index=71&type=chunk)[78](index=78&type=chunk) [Risks Related to Governance, Regulatory, Legislative and Legal Matters](index=17&type=section&id=Risks%20Related%20to%20Governance%2C%20Regulatory%2C%20Legislative%20and%20Legal%20Matters) The company faces risks from evolving government regulations, potential multiemployer pension plan withdrawal liabilities, and ongoing legal proceedings - Government regulations affecting business conduct, including food safety, labeling, and environmental laws, could increase operating costs, reduce demand, or lead to litigation[95](index=95&type=chunk) - The company faces potential significant withdrawal liability if it withdraws from multiemployer pension plans[96](index=96&type=chunk) - Ongoing legal proceedings and the company's partial self-insurance model could expose it to substantial liabilities and reputational damage if claims exceed coverage or reserves[97](index=97&type=chunk)[99](index=99&type=chunk) [Risks Related to our Capital Structure and Ownership of Our Common Stock](index=18&type=section&id=Risks%20Related%20to%20our%20Capital%20Structure%20and%20Ownership%20of%20Our%20Common%20Stock) Increased debt leverage, non-compliance with credit facility covenants, and equity market volatility pose risks to the company's capital structure and financial stability - Increased debt leverage could adversely affect liquidity and results of operations by requiring a substantial portion of cash flow for payments, limiting funds for capital expenditures, and increasing vulnerability to adverse economic conditions[102](index=102&type=chunk)[104](index=104&type=chunk) - Non-compliance with Credit Facility covenants could lead to immediate debt repayment and termination of commitments, severely impacting financial position[105](index=105&type=chunk)[106](index=106&type=chunk) - Volatility in equity markets or interest rate fluctuations could substantially increase pension funding requirements, negatively impacting financial position[115](index=115&type=chunk) [Risks Related to Cybersecurity and Data Privacy](index=21&type=section&id=Risks%20Related%20to%20Cybersecurity%20and%20Data%20Privacy) Failure to comply with privacy laws, information system breaches, and inadequate intellectual property protection pose significant cybersecurity and data privacy risks - Failure to comply with evolving privacy and data protection laws and regulations could result in substantial financial penalties, enforcement actions, and damage to brand reputation[119](index=119&type=chunk)[120](index=120&type=chunk) - Reliance on information technology and software means any material failure, inadequacy, interruption, or security breach could disrupt business operations, lead to data loss, reputational damage, and significant remediation costs[121](index=121&type=chunk)[122](index=122&type=chunk) - Inability to adequately protect intellectual property, including trademarks and trade secrets, could harm brand value and competitive position, potentially leading to costly rebranding or litigation[123](index=123&type=chunk)[124](index=124&type=chunk) [ITEM 1B. Unresolved Staff Comments](index=22&type=section&id=ITEM%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments to report - Not applicable[125](index=125&type=chunk) [ITEM 1C. Cybersecurity](index=22&type=section&id=ITEM%201C.%20Cybersecurity) The company maintains a robust cybersecurity program aligned with NIST and PCI standards, featuring continuous risk management, employee training, and Board-level oversight - The company has developed and maintained policies, procedures, and controls to mitigate material cybersecurity risks, including robust protocols for incident assessment and disclosure[126](index=126&type=chunk) - Cybersecurity processes align with the NIST Cybersecurity Framework and PCI compliance, including periodic risk assessments, security monitoring tools, vulnerability testing, and employee awareness training[127](index=127&type=chunk)[129](index=129&type=chunk) - Cybersecurity governance is led by a Director of Infrastructure & Security, reporting to the VP of IT, with oversight from the Board of Directors via a designated Technology Liaison who receives quarterly updates on significant risks and incidents[133](index=133&type=chunk)[135](index=135&type=chunk) [Overview](index=22&type=section&id=Overview) The company prioritizes cybersecurity to ensure the confidentiality, integrity, and availability of its systems and data - The company recognizes the importance of cybersecurity for maintaining confidentiality, integrity, and availability of systems and data[126](index=126&type=chunk) - Policies, procedures, and controls are in place to mitigate cybersecurity threats, including protocols for assessing and disclosing material incidents[126](index=126&type=chunk) [Risk Management and Strategy](index=23&type=section&id=Risk%20Management%20and%20Strategy) The company's cybersecurity framework aligns with NIST and PCI standards, employing periodic risk assessments, continuous monitoring, and employee training - The company's cybersecurity framework aligns with NIST's Cybersecurity Framework and maintains PCI compliance[127](index=127&type=chunk) - Processes include periodic risk assessments, continuous security monitoring, vulnerability testing, employee awareness testing, and incident-specific cybersecurity alerts[129](index=129&type=chunk) - Third parties are engaged to assess, test, and assist with implementing risk management strategies, policies, and procedures[131](index=131&type=chunk) [Cybersecurity Governance](index=23&type=section&id=Cybersecurity%20Governance) Cybersecurity governance is led by the Director of Infrastructure & Security, with Board oversight provided by a Technology Liaison receiving regular updates - The Director of Infrastructure & Security, reporting to the VP of IT, leads the cybersecurity program, managing a team of professionals with expertise in incident response, forensics, and threat intelligence[133](index=133&type=chunk) - The Board of Directors oversees the Enterprise Risk Management program, with a designated Technology Liaison providing regular updates on cybersecurity risks and incidents to the Board[135](index=135&type=chunk)[136](index=136&type=chunk) [ITEM 2. Properties](index=24&type=section&id=ITEM%202.%20Properties) The company operates production and distribution facilities, with **86% leased**, and coffee roasting utilization at **43%** in fiscal 2025, providing adequate capacity Key Facilities as of June 30, 2025 | Location | Approximate Area (Square Feet) | Purpose | Status | | :--- | :--- | :--- | :--- | | Fort Worth, TX | 25,000 | Corporate headquarters and product development lab | Leased | | Portland, OR | 220,000 | Manufacturing and distribution, product development lab | Leased | | Oklahoma City, OK | 81,105 | Equipment repair center | Leased | | Rialto, CA | 156,586 | Distribution and warehouse | Leased | | Northlake, IL | 89,837 | Distribution and warehouse | Leased | | Moonachie, NJ | 41,404 | Distribution and warehouse | Leased | - The company stages products in over **90 storage locations** throughout the contiguous United States, with approximately **86%** of facilities being leased[137](index=137&type=chunk)[138](index=138&type=chunk) - Utilization rates for coffee roasting facilities were approximately **43%** in fiscal 2025, a decrease from **67%** in fiscal 2024, but existing facilities are believed to provide adequate capacity[139](index=139&type=chunk)[140](index=140&type=chunk) [ITEM 3. Legal Proceedings](index=24&type=section&id=ITEM%203.%20Legal%20Proceedings) The company is involved in various legal and administrative proceedings, with management's opinion that the outcomes will not materially impact its financial position, results of operations, or cash flows - The company is a party to various pending legal and administrative proceedings[141](index=141&type=chunk) - Management believes the outcome of these proceedings will not have a material impact on the company's financial position, results of operations, or cash flows[141](index=141&type=chunk) [ITEM 4. Mine Safety Disclosures](index=24&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) The company has no mine safety disclosures to report - Not applicable[142](index=142&type=chunk) [PART II](index=24&type=section&id=PART%20II) This section details the company's common equity market, financial performance, liquidity, capital resources, and internal controls [ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=24&type=section&id=ITEM%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on Nasdaq under "FARM," with **176 shareholders**; no cash dividends are expected, and no equity securities were repurchased in Q4 fiscal 2025 - The company's common stock is listed for trading on the Nasdaq Global Select Market under the symbol "**FARM**"[144](index=144&type=chunk) - As of September 2, 2025, there were approximately **176 shareholders of record**[144](index=144&type=chunk) - The company has not recently declared or paid cash dividends and intends to retain future earnings for business operations and expansion, not expecting to pay cash dividends in the foreseeable future[145](index=145&type=chunk) - Neither the company nor any affiliated purchaser bought back any equity securities during the quarter ended June 30, 2025, and no unregistered securities were sold during fiscal 2025[146](index=146&type=chunk)[147](index=147&type=chunk) [ITEM 6. Reserved](index=24&type=section&id=ITEM%206.%20Reserved) This item is reserved and contains no information [ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=ITEM%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Fiscal 2025 saw net sales rise **0.3%** to **$342.3 million** and gross margins improve to **43.5%**, despite a **$14.5 million** net loss, with liquidity strengthened by reduced debt and increased cash - Net sales in fiscal 2025 increased by **$1.2 million**, or **0.3%**, to **$342.3 million** from **$341.1 million** in fiscal 2024, primarily due to higher pricing partially offset by a decline in sales volume[154](index=154&type=chunk)[164](index=164&type=chunk) - Gross margins improved by **4.2 percentage points** to **43.5%** in fiscal 2025 from **39.3%** in fiscal 2024, driven by price increases[155](index=155&type=chunk)[166](index=166&type=chunk) - The company reported a net loss of **$14.5 million** in fiscal 2025, compared to a net loss of **$3.9 million** in fiscal 2024, primarily due to a decrease in gain on sale of assets and pension settlement charges[156](index=156&type=chunk)[163](index=163&type=chunk)[169](index=169&type=chunk) - Outstanding debt on the Revolver Credit Facility decreased by **$9.0 million** to **$14.3 million** as of June 30, 2025, and cash increased by **$1.0 million** to **$7.0 million**[157](index=157&type=chunk) [Our Business](index=25&type=section&id=Our%20Business) Farmer Bros. Co. is a leading coffee roaster, wholesaler, and distributor, offering diverse products and value-added services through its DSD network - Farmer Bros. Co. is a leading coffee roaster, wholesaler, equipment servicer, and distributor of coffee, tea, and other allied products, serving a wide variety of customers from small independent restaurants to large institutional buyers[150](index=150&type=chunk)[151](index=151&type=chunk) - The company offers a robust line of roast and ground coffee, liquid coffee, teas, culinary products, and other beverages, along with value-added services like market insight, beverage planning, and equipment placement and service[152](index=152&type=chunk) - Distribution is primarily through a nationwide Direct-Store-Delivery (DSD) network and third-party logistics (3PL) providers for long-haul distribution[153](index=153&type=chunk) [Summary Overview of Fiscal 2025 Results](index=25&type=section&id=Summary%20Overview%20of%20Fiscal%202025%20Results) Fiscal 2025 saw net sales increase by **0.3%** to **$342.3 million** and gross margins improve to **43.5%**, while debt decreased and cash increased - Net sales increased by **$1.2 million (0.3%)** to **$342.3 million** in fiscal 2025, driven by higher pricing, partially offset by a decline in sales volume[154](index=154&type=chunk) - Gross margins improved by **4.2 percentage points** to **43.5%** in fiscal 2025 from **39.3%** in fiscal 2024, due to implemented price increases[155](index=155&type=chunk) - Operating expenses increased by **$14.2 million** in fiscal 2025, primarily due to a **$20.2 million** decrease in gain on sale of assets, partially offset by decreases in selling and general and administrative expenses[156](index=156&type=chunk) - Capital expenditures decreased by **$4.3 million** to **$9.6 million** in fiscal 2025, mainly due to reduced coffee brewing equipment spend[157](index=157&type=chunk) - Outstanding debt on the Revolver Credit Facility decreased by **$9.0 million** to **$14.3 million**, and cash increased by **$1.0 million** to **$7.0 million** as of June 30, 2025[157](index=157&type=chunk) [Financial Data Highlights](index=26&type=section&id=Financial%20Data%20Highlights) Key financial highlights for fiscal 2025 include a slight increase in net sales, improved gross margin, and a significant net loss, with coffee pounds decreasing Financial Data Highlights (in thousands, except per share data and percentages) | | 2025 | 2024 | Favorable (Unfavorable) Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Income Statement Data:** | | | | | | Net sales | $342,281 | $341,094 | $1,187 | 0.3 | | Gross margin | 43.5 % | 39.3 % | 4.2 % | 10.7 | | Operating expenses as a % of sales | 43.9 % | 39.9 % | (4.0)% | (10.0)| | Net loss | $(14,516) | $(3,875) | $(10,641) | NM | | Net loss available to common stockholders per common share—basic and diluted | $(0.68) | $(0.19) | $(0.49) | NM | | **Operating Data:** | | | | | | Coffee pounds | 19,984 | 22,169 | (2,185) | (9.9)| | EBITDA(1) | $(381) | $10,718 | $(11,099) | (103.6)| | EBITDA Margin(1) | (0.1)% | 3.1 % | (3.2)% | NM | | Adjusted EBITDA(1) | $14,832 | $558 | $14,274 | NM | | Adjusted EBITDA Margin(1) | 4.3 % | 0.2 % | 4.1 % | NM | | **Percentage of Total Net Sales By Product Category** | | | | | | Coffee (Roasted) | 48.1 % | 46.4 % | 1.7 % | 3.7 | | Tea & Other Beverages (2) | 27.0 % | 26.4 % | 0.6 % | 2.3 | | Culinary | 17.6 % | 19.3 % | (1.7)% | (8.8)| | Spices | 6.0 % | 6.4 % | (0.4)% | (6.3)| | Delivery Surcharge | 1.3 % | 1.5 % | (0.2)% | NM | | Net sales | 100.0 % | 100.0 % | | | | **Other data:** | | | | | | Total capital expenditures | 9,591 | 13,843 | 4,252 | 30.7 | | Depreciation & amortization expense | 11,448 | 11,588 | 140 | 1.2 | [Factors Affecting Our Business](index=26&type=section&id=Factors%20Affecting%20Our%20Business) Business success hinges on manufacturing investment, supply chain efficiency, new product development, green coffee price management, and comprehensive equipment service - Key factors include investment in the Portland, Oregon manufacturing facility to produce high-quality coffee and ensure reliable production while managing costs[160](index=160&type=chunk) - Supply chain efficiencies and competition are critical, requiring cost reduction initiatives, supply chain streamlining, and the ability to attract and retain a skilled workforce[160](index=160&type=chunk) - Success depends on developing new products in response to demographic and market trends, particularly in premium coffee and tea, and managing fluctuations in green coffee prices through sourcing and hedging strategies[160](index=160&type=chunk) - The Revive equipment service program differentiates the company by offering comprehensive equipment support and 24/7 nationwide service[161](index=161&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) Fiscal 2025 saw a slight net sales increase and improved gross profit, but higher operating expenses and a pension settlement charge led to a significant net loss Consolidated Results of Operations (in thousands) | | 2025 | 2024 | Favorable (Unfavorable) Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net sales | $342,281 | $341,094 | $1,187 | 0.3 | | Cost of goods sold | 193,371 | 207,201 | 13,830 | 6.7 | | Gross profit | 148,910 | 133,893 | 15,017 | 11.2 | | Selling expenses | 107,749 | 111,371 | 3,622 | 3.3 | | General and administrative expenses | 39,275 | 41,649 | 2,374 | 5.7 | | Net losses (gains) on disposal of assets | 3,347 | (16,877) | (20,224) | NM | | Operating expenses | 150,371 | 136,143 | (14,228) | (10.5)| | Loss from operations | (1,461) | (2,250) | 789 | 35.1 | | Interest expense | (7,480) | (7,835) | 355 | 4.5 | | Pension settlement charge | (7,726) | — | (7,726) | — | | Other, net | 2,267 | 6,224 | (3,957) | NM | | Total other expense | (12,939) | (1,611) | (11,328) | (703.2)| | Loss from operations before taxes | (14,400) | (3,861) | (10,539) | (273.0)| | Income tax expense | 116 | 14 | (102) | (728.6)| | Net loss | $(14,516) | $(3,875) | $(10,641) | (274.6)| | Net loss available to common stockholders per common share, basic and diluted | $(0.68) | $(0.19) | $(0.49) | NM | [Non-GAAP Financial Measures](index=29&type=section&id=Non-GAAP%20Financial%20Measures) The company uses non-GAAP measures like EBITDA and Adjusted EBITDA to assess operating performance, providing insights into ongoing operations and historical comparisons - The company uses non-GAAP financial measures like EBITDA and Adjusted EBITDA to assess operating performance, provide historical comparisons, and offer insight into ongoing operations[173](index=173&type=chunk)[175](index=175&type=chunk) - EBITDA is defined as net loss excluding income tax expense, interest expense, and depreciation and amortization expense[173](index=173&type=chunk)[177](index=177&type=chunk) - Adjusted EBITDA further excludes 401(k) and share-based compensation, net gains/losses from asset sales, pension settlement charges, strategic initiative costs, and loss related to sale of business[173](index=173&type=chunk)[177](index=177&type=chunk) Reconciliation of Net Loss to EBITDA (non-GAAP) (in thousands) | (In thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net loss | $(14,516) | $(3,875) | | Income tax expense | 116 | 14 | | Interest expense (1) | 2,571 | 2,991 | | Depreciation and amortization expense | 11,448 | 11,588 | | **EBITDA** | **$(381)** | **$10,718** | | **EBITDA Margin** | **(0.1)%** | **3.1 %** | Reconciliation of Net Loss to Adjusted EBITDA (non-GAAP) (in thousands) | (In thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net loss | $(14,516) | $(3,875) | | Income tax expense | 116 | 14 | | Interest expense (1) | 2,571 | 2,991 | | Depreciation and amortization expense | 11,448 | 11,588 | | 401(k) and share-based compensation expense | 1,999 | 3,762 | | Net losses (gains) on disposal of assets | 2,547 | (18,091) | | Pension settlement charge | 7,726 | — | | Loss related to sale of business (2) | 800 | 1,214 | | Severance costs | 1,882 | 2,955 | | Strategic initiative costs (3) | 259 | — | | **Adjusted EBITDA** | **$14,832** | **$558** | | **Adjusted EBITDA Margin** | **4.3 %** | **0.2 %** | [Liquidity, Capital Resources and Financial Condition](index=30&type=section&id=Liquidity%2C%20Capital%20Resources%20and%20Financial%20Condition) The company's liquidity is supported by cash flows, available cash, and its Credit Facility, with outstanding debt decreasing and operating cash flow improving in fiscal 2025 - The company's primary liquidity sources are cash flows from operations, available cash, and its Credit Facility[187](index=187&type=chunk) - As of June 30, 2025, outstanding borrowings on the Revolver Credit Facility were **$14.3 million**, with **$32.6 million** of availability, and the company was in compliance with all covenants[186](index=186&type=chunk)[184](index=184&type=chunk)[363](index=363&type=chunk)[364](index=364&type=chunk) - Net cash provided by operating activities increased by **$30.2 million** in fiscal 2025 compared to fiscal 2024, driven by decreased inventory and increased margin percentage[190](index=190&type=chunk) - Capital expenditures for fiscal 2025 were **$9.6 million**, a decrease from **$13.8 million** in fiscal 2024, and are projected to be between **$9.0 million** and **$11.0 million** in fiscal 2026[193](index=193&type=chunk) Consolidated Statements of Cash Flows Data (in thousands) | | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $16,097 | $(14,147) | | Net cash (used in) provided by investing activities | $(5,902) | $14,723 | | Net cash (used in) provided by financing activities | $(9,226) | $10 | | Net increase in cash and cash equivalents | $969 | $586 | [Settlement Agreement](index=31&type=section&id=Settlement%20Agreement) The company executed a Settlement Agreement effective March 27, 2025, related to the sale of its direct ship and private label business, requiring a **$0.8 million** payment - The company executed a Settlement Agreement and Release, effective March 27, 2025, related to the June 30, 2023, sale of its direct ship and private label business assets to TreeHouse Foods, Inc.[194](index=194&type=chunk)[195](index=195&type=chunk) - Under the settlement, the company agreed to pay the buyer an amount equal to **$0.8 million**[195](index=195&type=chunk) [Recent Accounting Pronouncements](index=32&type=section&id=Recent%20Accounting%20Pronouncements) Recent ASUs address improvements to income tax and segment reporting disclosures, with the company evaluating their impact or adopting retrospectively Recent ASUs Applicable to the Company | Standard | Description | Effective Date | Effect on the Financial Statements or Other Significant Matters | | :--- | :--- | :--- | :--- | | ASU No. 2023-09, "Income Taxes (Topic 740)", Improvements to Income Tax Disclosures | Addresses investor requests for more transparency about income tax information, primarily related to rate reconciliation and income taxes paid. | Annual periods beginning after December 15, 2024. | Company is still evaluating the impact. | | ASU No. 2023-07, "Segment Reporting (Topic 280)", Improvements to Reportable Segment Disclosures. | Improves disclosures about a public entity's reportable segments and provides more detailed information about segment expenses. | Annual periods beginning after December 15, 2023. | Company adopted retrospectively at the beginning of Q4 fiscal year 2025. | | ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures. | Improves disclosures about a public business entity's expenses and provides more detailed information about types of expenses. | Annual reporting periods beginning after December 15, 2026 | Company is still evaluating the impact. | [Off-Balance Sheet Arrangements](index=32&type=section&id=Off-Balance%20Sheet%20Arrangements) The company reported no off-balance sheet arrangements as of June 30, 2025, or June 30, 2024 - The company did not have any off-balance sheet arrangements as of June 30, 2025, or June 30, 2024[197](index=197&type=chunk) [Critical Accounting Estimates](index=32&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates involve significant judgment for coffee-related derivative instruments and single employer pension plans, impacting financial results - Critical accounting estimates involve significant judgment and assumptions about uncertain matters, with potential material impact on financial condition or results of operations if estimates change[198](index=198&type=chunk) - Key estimates include the fair value of coffee-related derivative instruments, which are used to manage commodity price risk and are accounted for as accounting hedges or marked-to-market[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) - Estimates for the single employer pension plan involve actuarial assumptions such as discount rates and expected long-term rates of return on plan assets, with material changes in these assumptions potentially affecting future pension costs[202](index=202&type=chunk)[203](index=203&type=chunk) [ITEM 8. Financial Statements and Supplementary Data](index=33&type=section&id=ITEM%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item incorporates by reference the consolidated financial statements and accompanying notes found in the F pages of this Form 10-K - The required information is incorporated by reference to the consolidated financial statements and accompanying notes set forth in the F pages of this Form 10-K[204](index=204&type=chunk) [ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=33&type=section&id=ITEM%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with accountants on accounting and financial disclosure - None[205](index=205&type=chunk) [ITEM 9A. Controls and Procedures](index=33&type=section&id=ITEM%209A.%20Controls%20and%20Procedures) As of June 30, 2025, management, with CEO and CFO participation, concluded that the company's disclosure controls and procedures were effective. Management also reported that the internal control over financial reporting was effective as of the same date, with no material changes during the fiscal quarter - As of June 30, 2025, the company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective[207](index=207&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of June 30, 2025, based on the COSO framework[211](index=211&type=chunk) - There were no material changes in internal control over financial reporting during the fiscal quarter ended June 30, 2025[209](index=209&type=chunk) [ITEM 9B. Other Information](index=34&type=section&id=ITEM%209B.%20Other%20Information) During the fiscal quarter ended June 30, 2025, no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - During the fiscal quarter ended June 30, 2025, none of the company's directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement"[212](index=212&type=chunk) [ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=34&type=section&id=ITEM%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) The company has no disclosures regarding foreign jurisdictions that prevent inspections - Not applicable[213](index=213&type=chunk) [PART III](index=34&type=section&id=PART%20III) This section incorporates by reference information on directors, executive compensation, security ownership, related transactions, and principal accountant fees [ITEM 10. Directors, Executive Officers and Corporate Governance](index=34&type=section&id=ITEM%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance will be incorporated by reference from the company's definitive proxy statement for the 2025 Annual Meeting of Shareholders - Information for this item is incorporated by reference from the company's definitive proxy statement for the 2025 Annual Meeting of Shareholders[215](index=215&type=chunk) [ITEM 11. Executive Compensation](index=34&type=section&id=ITEM%2011.%20Executive%20Compensation) Information regarding executive compensation will be incorporated by reference from the company's definitive proxy statement for the 2025 Annual Meeting of Shareholders - Information for this item is incorporated by reference from the company's definitive proxy statement for the 2025 Annual Meeting of Shareholders[216](index=216&type=chunk) [ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=34&type=section&id=ITEM%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership of certain beneficial owners and management, and related stockholder matters, will be incorporated by reference from the company's definitive proxy statement for the 2025 Annual Meeting of Shareholders - Information for this item is incorporated by reference from the company's definitive proxy statement for the 2025 Annual Meeting of Shareholders[217](index=217&type=chunk) [ITEM 13. Certain Relationships and Related Transactions, and Director Independence](index=34&type=section&id=ITEM%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding certain relationships and related transactions, and director independence, will be incorporated by reference from the company's definitive proxy statement for the 2025 Annual Meeting of Shareholders - Information for this item is incorporated by reference from the company's definitive proxy statement for the 2025 Annual Meeting of Shareholders[218](index=218&type=chunk) [ITEM 14. Principal Accountant Fees and Services](index=34&type=section&id=ITEM%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services will be incorporated by reference from the company's definitive proxy statement for the 2025 Annual Meeting of Shareholders - Information for this item is incorporated by reference from the company's definitive proxy statement for the 2025 Annual Meeting of Shareholders[219](index=219&type=chunk) [PART IV](index=34&type=section&id=PART%20IV) This section outlines the exhibits and financial statement schedules included in the Annual Report on Form 10-K [ITEM 15. Exhibits, Financial Statement Schedules](index=34&type=section&id=ITEM%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section details financial statements referenced in Part II, Item 8, and provides a comprehensive index of all exhibits filed with the Form 10-K - This section includes a list of financial statements incorporated in Part II, Item 8, such as Consolidated Balance Sheets, Statements of Operations, Comprehensive Loss, Stockholders' Equity, and Cash Flows for fiscal years 2025 and 2024, along with accompanying notes[221](index=221&type=chunk)[223](index=223&type=chunk) - A detailed index of exhibits is provided, incorporating various agreements (e.g., Asset Purchase Agreement, Credit Agreement), corporate governance documents (e.g., Certificate of Incorporation, Bylaws), employee benefit plans, and certifications (e.g., Principal Executive Officer Certification)[224](index=224&type=chunk)[225](index=225&type=chunk) [ITEM 16. Form 10-K Summary](index=39&type=section&id=ITEM%2016.%20Form%2010-K%20Summary) This item indicates that no Form 10-K Summary is provided - None[230](index=230&type=chunk) [SIGNATURES](index=40&type=section&id=SIGNATURES) This section contains the signatures of the registrant's authorized officers and directors, certifying the report's submission on behalf of Farmer Bros. Co. as of September 11, 2025 - The report is duly signed on behalf of Farmer Bros. Co. by its President and Chief Executive Officer, John E. Moore III, and other principal officers and directors[233](index=233&type=chunk)[234](index=234&type=chunk)[235](index=235&type=chunk) - The signing date for the report is September 11, 2025[234](index=234&type=chunk) [INDEX OF CONSOLIDATED FINANCIAL STATEMENTS](index=41&type=section&id=INDEX%20OF%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides an index to the company's consolidated financial statements, including the independent auditor's report, balance sheets, statements of operations, comprehensive income, stockholders' equity, cash flows, and detailed notes [Report of Independent Registered Public Accounting Firm](index=42&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Grant Thornton LLP, the independent registered public accounting firm, issued an unqualified opinion on Farmer Bros. Co.'s consolidated financial statements for the periods ended June 30, 2025, and 2024, affirming their fair presentation in accordance with GAAP. The audit was conducted under PCAOB standards, and no critical audit matters were identified - Grant Thornton LLP, the independent registered public accounting firm, issued an unqualified opinion, stating that the consolidated financial statements of Farmer Bros. Co. as of June 30, 2025, and 2024, and for the two years then ended, present fairly in all material respects the financial position, results of operations, and cash flows in conformity with GAAP[238](index=238&type=chunk) - The audit was conducted in accordance with PCAOB standards, and the firm has served as the company's auditor since 2021[239](index=239&type=chunk)[240](index=240&type=chunk)[243](index=243&type=chunk) - No critical audit matters were identified during the audit[242](index=242&type=chunk) [Consolidated Balance Sheets](index=43&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased by **$24.0 million** to **$161.2 million** in fiscal 2025, while total liabilities decreased by **$22.0 million** to **$117.7 million**, and stockholders' equity slightly declined Consolidated Balance Sheets (in thousands) | ASSETS | As of June 30, 2025 | As of June 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $6,796 | $5,830 | | Accounts and notes receivable, net | 24,758 | 35,147 | | Inventories | 49,839 | 57,230 | | Total current assets | 85,546 | 102,981 | | Property, plant and equipment, net | 27,845 | 34,002 | | Total assets | $161,232 | $185,213 | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Accounts payable | 37,669 | 48,478 | | Long-term borrowings under revolving credit facility | 14,300 | 23,300 | | Total liabilities | $117,684 | $139,664 | | Total stockholders' equity | $43,548 | $45,549 | | Total liabilities and stockholders' equity | $161,232 | $185,213 | - Total assets decreased by **$23.98 million (12.9%)** from **$185.21 million** in fiscal 2024 to **$161.23 million** in fiscal 2025[245](index=245&type=chunk) - Total liabilities decreased by **$21.98 million (15.7%)** from **$139.66 million** in fiscal 2024 to **$117.68 million** in fiscal 2025[245](index=245&type=chunk) [Consolidated Statements of Operations](index=44&type=section&id=Consolidated%20Statements%20of%20Operations) Fiscal 2025 net sales increased to **$342.3 million** and gross profit to **$148.9 million**, but increased operating expenses and a pension charge led to a **$14.5 million** net loss Consolidated Statements of Operations (in thousands, except share and per share data) | | For the Years Ended June 30, 2025 | For the Years Ended June 30, 2024 | | :--- | :--- | :--- | | Net sales | $342,281 | $341,094 | | Cost of goods sold | 193,371 | 207,201 | | Gross profit | 148,910 | 133,893 | | Selling expenses | 107,749 | 111,371 | | General and administrative expenses | 39,275 | 41,649 | | Net losses (gains) on disposal of assets | 3,347 | (16,877) | | Operating expenses | 150,371 | 136,143 | | Loss from operations | (1,461) | (2,250) | | Interest expense | (7,480) | (7,835) | | Pension settlement charge | (7,726) | — | | Other, net | 2,267 | 6,224 | | Total other expense | (12,939) | (1,611) | | Loss from operations before taxes | (14,400) | (3,861) | | Income tax expense | 116 | 14 | | Net loss | $(14,516) | $(3,875) | | Net loss available to common stockholders per common share, basic and diluted | $(0.68) | $(0.19) | - Net sales increased by **$1.2 million (0.3%)** from **$341.1 million** in fiscal 2024 to **$342.3 million** in fiscal 2025[247](index=247&type=chunk) - Gross profit increased by **$15.0 million (11.2%)** from **$133.9 million** in fiscal 2024 to **$148.9 million** in fiscal 2025[247](index=247&type=chunk) - Net loss significantly increased to **$14.5 million** in fiscal 2025 from **$3.9 million** in fiscal 2024, primarily due to a **$20.2 million** decrease in net gains on disposal of assets and a **$7.7 million** pension settlement charge[247](index=247&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=45&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Total comprehensive loss was **$4.0 million** in fiscal 2025, a significant shift from **$3.6 million** comprehensive income in fiscal 2024, driven by pension and retiree benefit changes Consolidated Statements of Comprehensive Income (Loss) (in thousands) | | For the Years Ended June 30, 2025 | For the Years Ended June 30, 2024 | | :--- | :--- | :--- | | Net loss | $(14,516) | $(3,875) | | Other comprehensive income (loss), net of taxes: | | | | Unrealized gains (losses) on derivatives designated as cash flow hedges | — | 406 | | Loss (gains) on derivatives designated as cash flow hedges reclassified to cost of goods sold | (313) | 615 | | Change in pension and retiree benefit obligations | 10,829 | 6,484 | | Total comprehensive (loss) income | $(4,000) | $3,630 | - Total comprehensive loss was **$4.0 million** in fiscal 2025, a shift from a total comprehensive income of **$3.6 million** in fiscal 2024[250](index=250&type=chunk) - The change was significantly impacted by a **$10.8 million** positive change in pension and retiree benefit obligations in fiscal 2025, compared to **$6.5 million** in fiscal 2024[250](index=250&type=chunk) [Consolidated Statements of Stockholders' Equity](index=46&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Total stockholders' equity decreased by **$2.0 million** to **$43.5 million** in fiscal 2025, primarily due to a **$14.5 million** net loss, partially offset by postretirement benefits and share-based compensation Consolidated Statements of Stockholders' Equity (in thousands, except share data) | | Common Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Earnings (Accumulated Deficit) | Accumulated Other Comprehensive Income (Loss) | Total | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance at June 30, 2024 | 21,264,327 | $21,265 | $79,963 | $(30,354) | $(25,325) | $45,549 | | Net loss | — | — | — | (14,516) | — | (14,516) | | Cash flow hedges, net of taxes | — | — | — | — | (313) | (313) | | Postretirement benefits curtailment, net of taxes | — | — | — | — | 10,829 | 10,829 | | Share-based compensation | — | — | 1,999 | — | — | 1,999 | | Issuance of common stock and stock option exercises | 296,658 | 296 | (296) | — | — | — | | Balance at June 30, 2025 | 21,560,985 | $21,561 | $81,666 | $(44,870) | $(14,809) | $43,548 | - Total stockholders' equity decreased by **$2.0 million (4.4%)** from **$45.5 million** in fiscal 2024 to **$43.5 million** in fiscal 2025[253](index=253&type=chunk) - The accumulated deficit increased from **$(30.35) million** in fiscal 2024 to **$(44.87) million** in fiscal 2025, reflecting the net loss[253](index=253&type=chunk) - Accumulated other comprehensive loss improved from **$(25.33) million** to **$(14.81) million**, primarily due to changes in postretirement benefit obligations[253](index=253&type=chunk) [Consolidated Statements of Cash Flows](index=47&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations significantly improved to **$16.1 million** in fiscal 2025, while investing activities used **$5.9 million**, and financing activities used **$9.2 million** for debt paydowns Consolidated Statements of Cash Flows (in thousands) | Cash flows from operating activities: | For the Years Ended June 30, 2025 | For the Years Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $16,097 | $(14,147) | | Cash flows from investing activities: | | | | Net cash (used in) provided by investing activities | $(5,902) | $14,723 | | Cash flows from financing activities: | | | | Net cash (used in) provided by financing activities | $(9,226) | $10 | | Net increase in cash and cash equivalents and restricted cash | $969 | $586 | | Cash and cash equivalents and restricted cash at end of period | $6,974 | $6,005 | - Net cash provided by operating activities increased by **$30.2 million**, from **$(14.1) million** in fiscal 2024 to **$16.1 million** in fiscal 2025, primarily due to a decrease in inventory and increased margin percentage[190](index=190&type=chunk)[256](index=256&type=chunk) - Net cash used in investing activities was **$5.9 million** in fiscal 2025, compared to **$14.7 million** provided in fiscal 2024, reflecting lower proceeds from asset sales (**$4.5 million** in 2025 vs. **$29.8 million** in 2024)[191](index=191&type=chunk)[256](index=256&type=chunk) - Net cash used in financing activities was **$9.2 million** in fiscal 2025, mainly due to **$9.0 million** in net paydowns on the Revolver Credit Facility[192](index=192&type=chunk)[256](index=256&type=chunk) [Notes to Consolidated Financial Statements](index=48&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes detail the company's accounting policies, financial instruments, asset sales, lease and debt obligations, employee benefits, share-based compensation, and income taxes [Note 1. Introduction and Basis of Presentation](index=48&type=section&id=Note%201.%20Introduction%20and%20Basis%20of%20Presentation) Farmer Bros. Co. is a Delaware corporation, operating as a leading coffee roaster, wholesaler, and distributor, primarily through its DSD network - Farmer Bros. Co. is a Delaware corporation, a leading coffee roaster, wholesaler, equipment servicer, and distributor of coffee, tea, and allied products, operating in one business segment[258](index=258&type=chunk) - The company's products reach customers primarily through its DSD network of over **200 delivery routes** and over **90 storage locations** as of June 30, 2025[260](index=260&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=48&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines key accounting policies including fair value measurements, derivative instruments, revenue recognition, inventory valuation, leases, and share-based compensation - The consolidated financial statements are prepared in conformity with U.S. GAAP, and management makes estimates and assumptions that affect reported amounts[261](index=261&type=chunk)[264](index=264&type=chunk) - Key accounting policies cover cash equivalents, allowance for credit losses, fair value measurements (Level 1, 2, 3 hierarchy), derivative instruments (hedge accounting for coffee-related derivatives), and revenue recognition (at a point in time upon delivery)[265](index=265&type=chunk)[266](index=266&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[286](index=286&type=chunk) - Other policies include inventory valuation (lower of cost or net realizable value, FIFO basis), property, plant and equipment depreciation, lease accounting (operating and finance leases), income taxes (deferred taxes, valuation allowance), net loss per common share (two-class method), and share-based compensation (fair value at grant date)[277](index=277&type=chunk)[278](index=278&type=chunk)[281](index=281&type=chunk)[284](index=284&type=chunk)[287](index=287&type=chunk)[290](index=290&type=chunk) [Note 3. Sales of Assets](index=54&type=section&id=Note%203.%20Sales%20of%20Assets) In fiscal 2025, the company sold **2 branch properties** for **$4.6 million**, generating a **$3.9 million** gain, following **13 branch sales** in fiscal 2024 for **$31.7 million** - During fiscal 2025, the company sold **2 branch properties** for a total sales price of **$4.6 million**, resulting in a gain on sale of **$3.9 million**[306](index=306&type=chunk) - In fiscal 2024, **13 branch properties** were sold for **$31.7 million**, yielding a gain on sale of **$21.5 million**[307](index=307&type=chunk) [Note 4. Derivative Instruments](index=54&type=section&id=Note%204.%20Derivative%20Instruments) The company uses forward and option contracts to manage green coffee price risk, with all derivative instruments settled as of March 2025 - The company uses forward and option contracts to manage commodity price risk from green coffee purchase contracts, with some designated as cash flow hedges and others not[308](index=308&type=chunk) - All derivative instruments, both designated and not designated as cash flow hedges, were settled as of March 2025[309](index=309&type=chunk) Fair Values of Derivative Instruments on Consolidated Balance Sheets (in thousands) | | As of June 30, 2025 | As of June 30, 2024 | | :--- | :--- | :--- | | Coffee-related derivative instruments (Short-term derivative assets) | $— | $11 | | Coffee-related derivative instruments (Other assets) | $— | $33 | | Coffee-related derivative instruments (Short-term derivative liability) | $— | $730 | | Coffee-related derivative instruments (Other Long-term liabilities) | $— | $1,505 | - Net losses on coffee-related derivative instruments not designated as accounting hedges were **$(3.81) million** in fiscal 2025, compared to net gains of **$0.50 million** in fiscal 2024[315](index=315&type=chunk) [Note 5. Leases](index=56&type=section&id=Note%205.%20Leases) The company holds operating and finance leases for facilities and equipment, with total lease assets of **$38.4 million** and liabilities of **$39.1 million** as of June 30, 2025 - The company has operating and finance leases for building facilities, vehicles, and other equipment, with remaining contractual terms up to **7 years** and options to extend up to an additional **10 years**[320](index=320&type=chunk) Total Lease Assets and Liabilities (in thousands) | | As of June 30, 2025 | As of June 30, 2024 | | :--- | :--- | :--- | | Total lease assets | $38,429 | $35,487 | | Total lease liabilities | $39,064 | $36,087 | - Total lease expense for fiscal 2025 was **$19.5 million**, an increase from **$14.0 million** in fiscal 2024, with operating lease expense being the primary component[321](index=321&type=chunk) - The weighted-average remaining lease term for operating leases was **4.0 years** in fiscal 2025, with a weighted-average discount rate of **6.56%**[322](index=322&type=chunk) [Note 6. Fair Value Measurements](index=57&type=section&id=Note%206.%20Fair%20Value%20Measurements) The company classifies fair value assets and liabilities into three levels based on market observability, with all coffee-related derivatives settled by June 30, 2025 - The company classifies assets and liabilities at fair value into three levels based on market observability: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs)[268](index=268&type=chunk)[271](index=271&type=chunk) - As of June 30, 2024, coffee-related derivative instruments were classified as Level 2, with total derivative assets of **$44 thousand** and liabilities of **$2.235 million**[323](index=323&type=chunk) - There were no coffee-related derivative assets or liabilities for the fiscal year ended June 30, 2025, as all derivatives were settled[324](index=324&type=chunk) [Note 7. Accounts Receivable, Net](index=57&type=section&id=Note%207.%20Accounts%20Receivable%2C%20Net) Accounts receivable, net, decreased by **$10.4 million** to **$24.8 million** in fiscal 2025, with a slight reduction in the allowance for credit losses Accounts Receivable, Net (in thousands) | (In thousands) | As of June 30, 2025 | As of June 30, 2024 | | :--- | :--- | :--- | | Trade receivables | $24,332 | $34,438 | | Other receivables | 1,076 | 1,419 | | Allowance for credit losses | (650) | (710) | | **Accounts receivable, net** | **$24,758** | **$35,147** | - Accounts receivable, net, decreased by **$10.39 million (29.6%)** from **$35.15 million** in fiscal 2024 to **$24.76 million** in fiscal 2025[325](index=325&type=chunk) - The allowance for credit losses decreased from **$(710) thousand** in fiscal 2024 to **$(650) thousand** in fiscal 2025[326](index=326&type=chunk) [Note 8. Inventories](index=58&type=section&id=Note%208.%20Inventories) Total inventories decreased by **$7.4 million** to **$49.8 million** in fiscal 2025, primarily due to a reduction in processed tea and culinary products Inventories (in thousands) | (In thousands) | As of June 30, 2025 | As of June 30, 2024 | | :--- | :--- | :--- | | Coffee (Processed) | $21,174 | $22,432 | | Coffee (Unprocessed) | 5,813 | 6,105 | | Tea and culinary products (Processed) | 19,807 | 25,166 | | Tea and culinary products (Unprocessed) | 34 | 41 | | Coffee brewing equipment parts | 3,011 | 3,486 | | **Total inventories** | **$49,839** | **$57,230** | - Total inventories decreased by **$7.39 million (12.9%)** from **$57.23 million** in fiscal 2024 to **$49.84 million** in fiscal 2025[327](index=327&type=chunk) - The decrease was primarily driven by a reduction in processed tea and culinary products, which fell by **$5.36 million**[327](index=327&type=chunk) [Note 9. Property, Plant and Equipment](index=58&type=section&id=Note%209.%20Property%2C%20Plant%20and%20Equipment) Net prop

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) [Registrant Information](index=1&type=section&id=Registrant%20Information) This section details Optical Cable Corporation's official registrant information, including address, telephone, and commission file number - Registrant's exact name: **OPTICAL CABLE CORPORATION**[3](index=3&type=chunk) - Commission file number: **0-27022**[3](index=3&type=chunk) - Principal executive offices: **5290 Concourse Drive, Roanoke, Virginia 24019**[3](index=3&type=chunk) [Filing Status](index=1&type=section&id=Filing%20Status) This section confirms the company's compliance with SEC filing requirements and its classification as a non-accelerated filer and smaller reporting company - The registrant has filed all required reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and has been subject to such filing requirements for the past 90 days[5](index=5&type=chunk) - The registrant has submitted electronically every Interactive Data File required by Rule 405 of Regulation S-T during the preceding 12 months[5](index=5&type=chunk) - The registrant is classified as a **Non-accelerated Filer** and a **Smaller Reporting Company**[5](index=5&type=chunk) - As of September 3, 2025, **8,870,444** shares of Common Stock, no par value, were outstanding[5](index=5&type=chunk) [Table of Contents](index=3&type=section&id=Table%20of%20Contents) [Form 10-Q Index](index=3&type=section&id=Form%2010-Q%20Index) This section provides an index to the various parts and items included in the Form 10-Q, outlining the structure of financial information and other disclosures - The index lists Part I (Financial Information) including Item 1 (Financial Statements), Item 2 (Management's Discussion and Analysis), and Item 4 (Controls and Procedures)[7](index=7&type=chunk) - Part II (Other Information) includes Item 6 (Exhibits) and the Signatures[7](index=7&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements of Optical Cable Corporation for the periods ended July 31, 2025, and October 31, 2024, along with accompanying notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets present the company's financial position, showing slight decreases in total assets and liabilities, and a notable decline in shareholders' equity due to net loss and redeemable common stock issuance | Metric | July 31, 2025 ($) | October 31, 2024 ($) | Change ($) | Change (%) | | :-------------------------------- | :------------ | :--------------- | :----- | :--------- | | Total Assets | 40,167,958 | 40,358,011 | -190,053 | -0.47% | | Total Liabilities | 18,735,906 | 19,516,095 | -780,189 | -4.00% | | Total Shareholders' Equity | 18,229,727 | 20,841,916 | -2,612,189 | -12.53% | | Redeemable Common Stock | 3,202,325 | 0 | 3,202,325 | N/A | - Current installments of long-term debt significantly increased from **$57,184** at October 31, 2024, to **$2,585,094** at July 31, 2025, primarily due to the reclassification of the Virginia Real Estate Loan[10](index=10&type=chunk)[34](index=34&type=chunk) - Note payable, revolver - current decreased from **$8,321,782** to **$6,465,321**, reflecting net repayments on the Revolver[10](index=10&type=chunk)[156](index=156&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements of operations show a significant improvement in profitability for both the three-month and nine-month periods ended July 31, 2025, driven by increased net sales and gross profit margins | Metric | 3 Months Ended July 31, 2025 ($) | 3 Months Ended July 31, 2024 ($) | Change (YoY) ($) | Change (YoY %) | | :-------------------------------- | :--------------------------- | :--------------------------- | :----------- | :------------- | | Net sales | 19,916,919 | 16,221,671 | 3,695,248 | 22.78% | | Gross profit | 6,319,311 | 3,920,224 | 2,399,087 | 61.19% | | Income (loss) from operations | 562,474 | (1,337,553) | 1,900,027 | 142.06% | | Net income (loss) | 301,886 | (1,557,053) | 1,858,939 | 119.39% | | Net income (loss) per share: Basic and diluted | 0.04 | (0.20) | 0.24 | 120.00% | | Metric | 9 Months Ended July 31, 2025 ($) | 9 Months Ended July 31, 2024 ($) | Change (YoY) ($) | Change (YoY %) | | :-------------------------------- | :--------------------------- | :--------------------------- | :----------- | :------------- | | Net sales | 53,209,284 | 47,188,534 | 6,020,750 | 12.76% | | Gross profit | 16,280,446 | 11,672,382 | 4,608,064 | 39.48% | | Income (loss) from operations | (719,080) | (4,038,375) | 3,319,295 | 82.20% | | Net income (loss) | (1,503,467) | (4,583,673) | 3,080,206 | 67.20% | | Net income (loss) per share: Basic and diluted | (0.19) | (0.59) | 0.40 | 67.80% | [Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) The statements detail changes in shareholders' equity, highlighting the impact of net losses, share-based compensation, and the issuance and subsequent increase in redemption value of redeemable common stock | Metric | July 31, 2025 ($) | October 31, 2024 ($) | Change ($) | | :-------------------------- | :------------ | :--------------- | :----- | | Total Shareholders' Equity | 18,229,727 | 20,841,916 | -2,612,189 | | Retained Earnings | 2,579,225 | 5,377,500 | -2,798,275 | | Common Stock Amount | 15,650,502 | 15,464,416 | 186,086 | | Common Stock Shares | 8,228,245 | 8,220,344 | 7,901 | - Net loss for the nine months ended July 31, 2025, was **$1,503,467**, contributing to the decrease in retained earnings[12](index=12&type=chunk)[15](index=15&type=chunk) - Share-based compensation, net, for the nine months ended July 31, 2025, was **$186,086**, increasing common stock amount[15](index=15&type=chunk)[158](index=158&type=chunk) - Issuance costs of redeemable common stock totaled **$92,483**, and the increase to aggregate redemption value of redeemable common stock was **$1,202,325**, both reducing retained earnings[15](index=15&type=chunk)[158](index=158&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The cash flow statements indicate a net increase in cash for the nine months ended July 31, 2025, primarily driven by operating activities, despite cash used in investing and financing activities | Cash Flow Activity | 9 Months Ended July 31, 2025 ($) | 9 Months Ended July 31, 2024 ($) | Change (YoY) ($) | | :-------------------------------- | :--------------------------- | :--------------------------- | :----------- | | Net cash provided by operating activities | 616,745 | 665,046 | -48,301 | | Net cash used in investing activities | (233,586) | (43,227) | -190,359 | | Net cash used in financing activities | (205,992) | (1,293,793) | 1,087,801 | | Net increase (decrease) in cash | 177,167 | (671,974) | 849,141 | | Cash at end of period | 421,414 | 796,735 | -375,321 | - Operating cash flow was positively impacted by depreciation and amortization (**$608,001**) and share-based compensation expense (**$293,399**) in 2025[18](index=18&type=chunk)[163](index=163&type=chunk) - Investing activities in 2025 primarily involved purchases of property and equipment (**$217,048**)[18](index=18&type=chunk)[165](index=165&type=chunk) - Financing activities in 2025 included the issuance of redeemable common stock (**$1,907,517**) and net repayments on the revolver (**$1,856,461**)[18](index=18&type=chunk)[166](index=166&type=chunk) [Condensed Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Condensed%20Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide additional information and disclosures to the condensed consolidated financial statements, covering accounting policies, specific financial line items, and recent corporate activities [(1) General](index=8&type=section&id=(1)%20General) This note outlines the basis of presentation for the unaudited interim financial statements and highlights various factors that could impact future operating results, such as macroeconomic conditions and supply chain constraints - The financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, and do not include all information required for complete annual statements[20](index=20&type=chunk) - Future results may be impacted by changing macroeconomic conditions, supply chain and labor constraints, market conditions, seasonality, inflation, interest rates, and timing of key customer projects[20](index=20&type=chunk) [(2) Stock Incentive Plan and Other Share‑Based Compensation](index=8&type=section&id=(2)%20Stock%20Incentive%20Plan%20and%20Other%20Share%E2%80%91Based%20Compensation) This note details the company's stock incentive plan, share-based compensation expense, and restricted stock award activity, including grants to non-employee Directors - Approximately **371,000** shares remained available for grant under the 2017 Stock Incentive Plan as of July 31, 2025[21](index=21&type=chunk) | Period | Share-based Compensation Expense ($) | | :-------------------------------- | :------------------------------- | | Three Months Ended July 31, 2025 | 107,101 | | Nine Months Ended July 31, 2025 | 293,399 | | Three Months Ended July 31, 2024 | 78,079 | | Nine Months Ended July 31, 2024 | 328,871 | - During the three months ended July 31, 2025, OCC granted **36,228** restricted stock awards to non-employee Directors with a one-year vesting period[25](index=25&type=chunk) - As of July 31, 2025, the estimated compensation cost related to unvested equity-based awards is approximately **$857,000**, to be recognized over a **3.7-year** weighted-average period[27](index=27&type=chunk) [(3) Allowance for Credit Losses for Trade Accounts Receivable](index=9&type=section&id=(3)%20Allowance%20for%20Credit%20Losses%20for%20Trade%20Accounts%20Receivable) This note summarizes the changes in the allowance for credit losses for trade accounts receivable for the nine-month periods | Metric | 9 Months Ended July 31, 2025 ($) | 9 Months Ended July 31, 2024 ($) | | :-------------------------- | :--------------------------- | :--------------------------- | | Balance at beginning of period | 92,125 | 71,189 | | Bad debt expense (recovery) | 496 | (447) | | Balance at end of period | 92,621 | 70,742 | [(4) Inventories](index=9&type=section&id=(4)%20Inventories) This note provides a breakdown of inventory components as of July 31, 2025, and October 31, 2024 | Inventory Component | July 31, 2025 ($) | October 31, 2024 ($) | | :------------------ | :------------ | :--------------- | | Finished goods | 5,488,480 | 5,098,148 | | Work in process | 4,449,031 | 3,724,999 | | Raw materials | 8,455,917 | 9,562,563 | | Production supplies | 304,006 | 339,607 | | Total | 18,697,434 | 18,725,317 | - Total inventories slightly decreased from **$18,725,317** at October 31, 2024, to **$18,697,434** at July 31, 2025[29](index=29&type=chunk) [(5) Product Warranties](index=9&type=section&id=(5)%20Product%20Warranties) This note details the accrual for estimated product warranty claims and the related expense for the reported periods | Metric | July 31, 2025 ($) | October 31, 2024 ($) | | :-------------------------- | :------------ | :--------------- | | Accrual for estimated product warranty claims | 105,000 | 65,000 | | Period | Warranty Claims Expense ($) | | :-------------------------------- | :---------------------- | | Three Months Ended July 31, 2025 | 53,088 | | Nine Months Ended July 31, 2025 | 85,029 | | Three Months Ended July 31, 2024 | 9,153 | | Nine Months Ended July 31, 2024 | 60,994 | | Warranty Accrual Changes | 9 Months Ended July 31, 2025 ($) | 9 Months Ended July 31, 2024 ($) | | :-------------------------------- | :--------------------------- | :--------------------------- | | Balance at beginning of period | 65,000 | 80,000 | | Liabilities accrued for warranties issued | 109,520 | 84,792 | | Warranty claims and costs paid | (45,029) | (65,994) | | Changes in liability for pre-existing warranties | (24,491) | (23,798) | | Balance at end of period | 105,000 | 75,000 | [(6) Long-term Debt and Notes Payable](index=10&type=section&id=(6)%20Long-term%20Debt%20and%20Notes%20Payable) This note describes the company's credit facilities, including the Virginia Real Estate Loan and the Revolving Credit Master Promissory Note, detailing their terms, balances, and security - The Virginia Real Estate Loan has an outstanding balance of **$2.6 million** as of July 31, 2025, and October 31, 2024, with its maturity date of May 5, 2026, leading to its reclassification as a current liability[34](index=34&type=chunk)[35](index=35&type=chunk) - The Revolver with SLR has a maximum aggregate principal amount of **$18.0 million**, with interest accruing at **1.5%** above the Prime Rate (**9.0%** at July 31, 2025)[37](index=37&type=chunk) | Revolver Metric | July 31, 2025 ($ millions) | October 31, 2024 ($ millions) | | :-------------------------- | :------------ | :--------------- | | Outstanding borrowings | 6.5 | 8.3 | | Available credit | 4.4 | 3.2 | - The Revolver balance is classified as a current liability due to a lockbox arrangement and a 'subjective acceleration clause'[38](index=38&type=chunk) [(7) Leases](index=11&type=section&id=(7)%20Leases) This note provides comprehensive details on the company's operating and finance leases, including lease terms, assets, liabilities, expenses, and future payment obligations - The company has operating leases for office, manufacturing, and warehouse space in Plano, Texas (expiring Nov 2029) and Roanoke, Virginia (expiring Apr 2026), and for office equipment (expiring Nov 2029)[42](index=42&type=chunk)[43](index=43&type=chunk) | Lease Metric | July 31, 2025 ($) | October 31, 2024 ($) | | :-------------------------------- | :------------ | :--------------- | | Operating lease right-of-use assets | 1,795,891 | 1,872,206 | | Operating lease liabilities (current) | 411,273 | 376,965 | | Operating lease liabilities (noncurrent) | 1,444,593 | 1,525,423 | | Finance lease right-of-use assets | 274,770 | 111,844 | | Finance lease liabilities (current) | 72,903 | 39,277 | | Finance lease liabilities (noncurrent) | 176,879 | 54,174 | | Lease Expense/Cash Paid | 3 Months Ended July 31, 2025 ($) | 9 Months Ended July 31, 2025 ($) | 3 Months Ended July 31, 2024 ($) | 9 Months Ended July 31, 2024 ($) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Operating lease expense | 153,107 | 462,766 | 109,143 | 327,431 | | Cash paid for operating lease liabilities | 147,390 | 432,529 | 112,670 | 335,628 | | Finance lease interest expense | 2,070 | 4,098 | 1,297 | 4,224 | | Finance lease amortization expense | 10,511 | 25,260 | 7,374 | 22,123 | | Cash paid for finance lease principal | 12,449 | 31,854 | 9,419 | 27,927 | | Future Lease Payments | Operating Leases ($) | Finance Leases ($) | | :-------------------------- | :--------------- | :------------- | | Total undiscounted lease payments | 2,263,334 | 290,710 | | Present value discount | (407,468) | (40,928) | | Total lease liability | 1,855,866 | 249,782 | [(8) Fair Value Measurements](index=13&type=section&id=(8)%20Fair%20Value%20Measurements) This note states that the carrying amounts of most financial instruments approximate their fair value due to their short maturity or variable interest rates - Carrying amounts for cash, trade accounts receivable, other receivables, current installments of long-term debt, accounts payable, accrued compensation, and income taxes payable approximate fair value due to short maturity[58](index=58&type=chunk) - The carrying value of the note payable (revolver) and long-term debt approximates fair value because interest rates vary with the market[58](index=58&type=chunk) [(9) Net Income (Loss) Per Share](index=14&type=section&id=(9)%20Net%20Income%20(Loss)%20Per%20Share) This note provides the reconciliation of the numerators and denominators used in calculating basic and diluted net income (loss) per share | Metric | 3 Months Ended July 31, 2025 ($) | 3 Months Ended July 31, 2024 ($) | 9 Months Ended July 31, 2025 ($) | 9 Months Ended July 31, 2024 ($) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) (numerator) | 301,886 | (1,557,053) | (1,503,467) | (4,583,673) | | Shares (denominator) | 8,394,988 | 7,739,266 | 7,900,901 | 7,753,148 | | Basic and diluted net income (loss) per share | 0.04 | (0.20) | (0.19) | (0.59) | - Nonvested shares totaling **370,720** as of July 31, 2025, were excluded from EPS computation for the nine months ended July 31, 2025, as their inclusion would have been antidilutive[61](index=61&type=chunk) [(10) Segment Information and Business and Credit Concentrations](index=14&type=section&id=(10)%20Segment%20Information%20and%20Business%20and%20Credit%20Concentrations) This note discusses the company's credit risk management, customer concentration, and confirms that it operates as a single reportable segment - Concentration of credit risk with respect to trade receivables is normally limited due to the company's large number of customers, managed through credit approvals and monitoring[63](index=63&type=chunk) | Period | Consolidated Net Sales Attributable to One Distributor Customer | | :-------------------------------- | :-------------------------------------------------------------- | | Three Months Ended July 31, 2025 | 20.5% | | Nine Months Ended July 31, 2025 | 19.4% | | Three Months Ended July 31, 2024 | 18.7% | | Nine Months Ended July 31, 2024 | 16.9% | - The Company has a single reportable segment for purposes of segment reporting[65](index=65&type=chunk) [(11) Revenue Recognition](index=15&type=section&id=(11)%20Revenue%20Recognition) This note outlines the company's policies for revenue recognition, including when control transfers, payment terms, and the disaggregation of revenue by geographic region - Revenue from product sales is recognized at the point in time when control transfers to the customer, typically upon shipment or delivery from the manufacturing facility[68](index=68&type=chunk)[70](index=70&type=chunk) | Liability Type | July 31, 2025 ($) | October 31, 2024 ($) | | :-------------------------- | :------------ | :--------------- | | Contract liability (advance consideration) | 270,870 | 70,263 | | Refund liability (price adjustments, rebates, returns) | 339,381 | 232,692 | | Geographic Net Sales | 3 Months Ended July 31, 2025 ($) | 3 Months Ended July 31, 2024 ($) | 9 Months Ended July 31, 2025 ($) | 9 Months Ended July 31, 2024 ($) | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | United States | 15,949,437 | 13,077,203 | 41,819,451 | 38,071,069 | | Outside the United States | 3,967,482 | 3,144,468 | 11,389,833 | 9,117,465 | | Total net sales | 19,916,919 | 16,221,671 | 53,209,284 | 47,188,534 | [(12) Issuance of Redeemable Restricted Common Stock](index=16&type=section&id=(12)%20Issuance%20of%20Redeemable%20Restricted%20Common%20Stock) This note details the issuance of redeemable restricted common stock to Lightera, LLC, as part of a strategic collaboration, and the accounting treatment for this instrument - On July 7, 2025, the Company issued **642,199** shares of common stock to Lightera, LLC for **$2.0 million** cash consideration, representing **7.24%** of OCC's outstanding common shares[78](index=78&type=chunk)[107](index=107&type=chunk) - The shares are subject to a Call Option by OCC and a Put Option by Lightera, exercisable after two years (July 7, 2027), with a redemption price based on the greater of issuance price or a 10-day average trading price[78](index=78&type=chunk)[80](index=80&type=chunk)[81](index=81&type=chunk)[83](index=83&type=chunk) - The common stock is classified as redeemable and recorded outside of permanent equity, with an initial value of **$1,907,517** (net of **$92,483** issuance costs) and a redemption value of **$3.2 million** as of July 31, 2025[86](index=86&type=chunk) - The Call and Put Options were concluded to be embedded derivative instruments, but their fair value was insignificant as the strike price adjusts with the underlying common stock's trading price[87](index=87&type=chunk) [(13) Contingencies](index=18&type=section&id=(13)%20Contingencies) This note addresses the company's involvement in various claims and legal actions, stating management's opinion on their potential impact - Management believes that the ultimate disposition of current claims, legal actions, and regulatory reviews will not have a material adverse effect on the company's financial position, results of operations, or liquidity[88](index=88&type=chunk) [(14) New Accounting Standards Not Yet Adopted](index=18&type=section&id=(14)%20New%20Accounting%20Standards%20Not%20Yet%20Adopted) This note provides an overview of recently issued FASB Accounting Standards Updates (ASUs) that have not yet been adopted by the company and their potential impact - ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Tax Disclosures), and ASU 2024-03/2025-01 (Expense Disaggregation) are being evaluated for their impact on financial statement disclosures[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) - ASU 2025-05 (Measurement of Credit Losses for Accounts Receivable) is not expected to have a material impact on the company's financial position, operating results, liquidity, or disclosures[92](index=92&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&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, condition, and liquidity, discussing key trends, operational results, and future outlook [Forward-Looking Information](index=19&type=section&id=Forward-Looking%20Information) This subsection serves as a cautionary statement regarding forward-looking information, outlining numerous variables, uncertainties, contingencies, and risks that could cause actual results to differ materially from expectations - Forward-looking information is subject to known and unknown variables, uncertainties, contingencies, and risks that may cause actual events or results to differ materially from expectations[94](index=94&type=chunk) - Key factors include sales to key customers, timing of projects, economic conditions, competitor actions, raw material price fluctuations, dependence on customized equipment, and ability to protect proprietary technology[94](index=94&type=chunk) - Other risks include market conditions, supply chain issues, labor costs, interest rates, cybersecurity, data privacy laws, and changes in accounting policies or government regulations[94](index=94&type=chunk) [Overview of Optical Cable Corporation](index=21&type=section&id=Overview%20of%20Optical%20Cable%20Corporation) This section provides a general overview of Optical Cable Corporation, detailing its business as a manufacturer of fiber optic and copper data communication solutions, its target markets, product offerings, and operational locations - Optical Cable Corporation (OCC®) is a leading manufacturer of fiber optic and copper data communication cabling and connectivity solutions[99](index=99&type=chunk) - The company primarily serves the enterprise market and various harsh environment and specialty markets (e.g., military, industrial, mining, petrochemical, renewable energy, broadcast), as well as the wireless carrier market[99](index=99&type=chunk) - Product offerings include fiber optic and copper cabling, hybrid cabling, connectors, patch cords, cable assemblies, racks, cabinets, and other management accessories[99](index=99&type=chunk) - OCC's headquarters and manufacturing facilities are located in Roanoke, Virginia; near Asheville, North Carolina; and near Dallas, Texas, with each facility specializing in different product categories[101](index=101&type=chunk) [Summary of Company Performance for Third Quarter of Fiscal Year 2025](index=22&type=section&id=Summary%20of%20Company%20Performance%20for%20Third%20Quarter%20of%20Fiscal%20Year%202025) This section highlights the company's strategic collaboration with Lightera, LLC, and key financial performance metrics for the third quarter of fiscal year 2025, showing significant improvements in sales and profitability - OCC and Lightera, LLC entered into a strategic collaboration agreement on July 7, 2025, to expand product offerings and solutions, particularly for data center and enterprise sectors[106](index=106&type=chunk) - In connection with the collaboration, OCC issued **642,199** redeemable restricted shares of common stock to Lightera for **$2.0 million**, giving Lightera a **7.24%** stake[107](index=107&type=chunk) | Metric | Q3 FY2025 ($ millions) | Q3 FY2024 ($ millions) | Change (YoY) ($ millions) | Change (YoY %) | | :-------------------------------- | :---------- | :---------- | :----------- | :------------- | | Consolidated net sales | 19.9 | 16.2 | 3.7 | 22.8% | | Gross profit | 6.3 | 3.9 | 2.4 | 61.2% | | Gross profit margin | 31.7% | 24.2% | 7.5 pp | N/A | | SG&A expenses | 5.7 | 5.2 | 0.5 | 9.5% | | SG&A as % of net sales | 28.8% | 32.3% | -3.5 pp | N/A | | Net income (loss) | 0.302 | (1.6) | 1.9 | 119.4% | | Net income (loss) per share | 0.04 | (0.20) | 0.24 | 120.0% | [Results of Operations](index=22&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance for the three and nine months ended July 31, 2025, compared to the prior year periods, explaining the drivers behind changes in sales, profits, and expenses [Three Months Ended July 31, 2025 and 2024](index=23&type=section&id=Three%20Months%20Ended%20July%2031,%202025%20and%202024) For the third quarter of fiscal year 2025, the company reported substantial growth in net sales and gross profit, leading to a return to operating income and net income, driven by market improvements and operating leverage | Metric | Q3 FY2025 ($ millions) | Q3 FY2024 ($ millions) | Change (YoY) ($ millions) | Change (YoY %) | | :-------------------------------- | :---------- | :---------- | :----------- | :------------- | | Net Sales | 19.9 | 16.2 | 3.7 | 22.8% | | Gross Profit | 6.3 | 3.9 | 2.4 | 61.2% | | Gross Profit Margin | 31.7% | 24.2% | 7.5 pp | N/A | | SG&A Expenses | 5.7 | 5.2 | 0.5 | 9.5% | | Income (loss) from operations | 0.562 | (1.3) | 1.9 | 142.0% | | Net Income (loss) | 0.302 | (1.6) | 1.9 | 119.4% | - Net sales increased in both enterprise and specialty markets, with general market improvements and strength in military and severe duty markets[116](index=116&type=chunk) - SG&A expenses increased primarily due to higher employee and contracted sales personnel-related costs (**$304,000**) and shipping costs (**$130,000**), both linked to increased net sales[124](index=124&type=chunk) - The improvement in income from operations was primarily due to the **$2.4 million** increase in gross profit, partially offset by the **$499,000** increase in SG&A expenses[127](index=127&type=chunk) [Nine Months Ended July 31, 2025 and 2024](index=26&type=section&id=Nine%20Months%20Ended%20July%2031,%202025%20and%202024) For the first nine months of fiscal year 2025, the company significantly reduced its operating loss and net loss compared to the prior year, driven by strong net sales growth and improved gross profit margins | Metric | 9 Months FY2025 ($ millions) | 9 Months FY2024 ($ millions) | Change (YoY) ($ millions) | Change (YoY %) | | :-------------------------------- | :-------------- | :-------------- | :----------- | :------------- | | Net Sales | 53.2 | 47.2 | 6.0 | 12.8% | | Gross Profit | 16.3 | 11.7 | 4.6 | 39.5% | | Gross Profit Margin | 30.6% | 24.7% | 5.9 pp | N/A | | SG&A Expenses | 16.9 | 15.7 | 1.2 | 8.2% | | Loss from operations | (0.719) | (4.0) | 3.3 | 82.2% | | Net Loss | (1.5) | (4.6) | 3.1 | 67.2% | - Net sales were positively impacted by general market improvements in the industry overall, as well as specifically in military and severe duty markets[138](index=138&type=chunk) - SG&A expenses increased due to higher employee and contracted sales personnel-related costs (**$643,000**) and shipping costs (**$298,000**), driven by new hires, rate increases, and increased net sales[142](index=142&type=chunk) - The reduction in loss from operations was primarily due to the **$4.6 million** increase in gross profit, partially offset by the **$1.3 million** increase in SG&A expenses[145](index=145&type=chunk) [Financial Condition](index=28&type=section&id=Financial%20Condition) The company's financial condition at July 31, 2025, showed minor changes in total assets and liabilities, but a notable decrease in shareholders' equity primarily due to net loss and the accounting for redeemable common stock | Metric | July 31, 2025 ($ millions) | October 31, 2024 ($ millions) | Change ($ millions) | Change (%) | | :-------------------------- | :------------ | :--------------- | :----- | :--------- | | Total assets | 40.2 | 40.4 | -0.2 | -0.47% | | Total liabilities | 18.7 | 19.5 | -0.8 | -4.00% | | Total shareholders' equity | 18.2 | 20.8 | -2.6 | -12.53% | - The decrease in total liabilities was mainly due to a **$1.9 million** decrease in the Revolver note payable, partially offset by a **$915,000** increase in accounts payable and accrued expenses[156](index=156&type=chunk) - The issuance of **642,199** shares of redeemable restricted common stock for **$2.0 million**, with its aggregate redemption value increasing to **$3.2 million**, significantly impacted the equity structure[157](index=157&type=chunk) - The decrease in total shareholders' equity was primarily driven by a **$1.5 million** net loss, **$92,000** in issuance costs for redeemable stock, and a **$1.2 million** increase in the redeemable stock's aggregate redemption value[158](index=158&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's sources and uses of capital, including cash on hand, operating cash flows, credit facilities, and capital expenditure plans, concluding that current resources are adequate for the next twelve months | Metric | July 31, 2025 ($ thousands) | October 31, 2024 ($ thousands) | Change ($ thousands) | | :-------------------------- | :------------ | :--------------- | :----- | | Cash | 421 | 244 | 177 | | Working capital | 13,700 | 15,500 | -1,800 | | Current ratio | 1.8 to 1.0 | 2.0 to 1.0 | -0.2 | - The decrease in working capital and current ratio was mainly due to the reclassification of **$2.5 million** of the real estate term loan to current liabilities and an increase in accounts payable, partially offset by a decrease in the Revolver balance[161](index=161&type=chunk) | Cash Flow Activity | 9 Months Ended July 31, 2025 ($ thousands) | 9 Months Ended July 31, 2024 ($ thousands) | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | 617 | 665 | | Net cash used in investing activities | (234) | (43) | | Net cash used in financing activities | (206) | (1,300) | - Outstanding Revolver balance was **$6.5 million** at July 31, 2025, with **$4.4 million** in available credit, and the Virginia Real Estate Loan balance was **$2.6 million**[162](index=162&type=chunk)[169](index=169&type=chunk)[175](index=175&type=chunk) - The company estimates **$1.0 million** in capital expenditures for fiscal year 2025, to be funded by working capital, operations, or Revolver borrowings[176](index=176&type=chunk) - Management believes future cash flow from operations, cash on hand, and the existing Revolver will be adequate to fund operations for at least the next twelve months[178](index=178&type=chunk) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section reaffirms that the company's financial statements are prepared in accordance with U.S. GAAP and that no significant accounting policies have changed since the last annual report - Financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, requiring management estimates and assumptions[180](index=180&type=chunk) - No significant accounting policies detailed in the fiscal year 2024 Form 10-K changed during the period from November 1, 2024, through July 31, 2025[181](index=181&type=chunk) [New Accounting Standards](index=32&type=section&id=New%20Accounting%20Standards) This section discusses recently issued FASB Accounting Standards Updates (ASUs) and their potential impact on the company's financial statements, noting that several are currently under evaluation - ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Tax Disclosures), and ASU 2024-03/2025-01 (Expense Disaggregation) are being evaluated for their impact on financial statement disclosures[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk) - ASU 2025-05 (Measurement of Credit Losses for Accounts Receivable) is not expected to have a material impact on the company's financial position, operating results, liquidity, or disclosures[185](index=185&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms that the company's management, including the CEO and CFO, evaluated the effectiveness of its disclosure controls and procedures, concluding they were effective as of July 31, 2025, with no material changes to internal control over financial reporting - The company maintains disclosure controls and procedures designed to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[188](index=188&type=chunk) - Management, with CEO and CFO participation, concluded that the company's disclosure controls and procedures were effective as of July 31, 2025[189](index=189&type=chunk) - There were no changes in the company's internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[189](index=189&type=chunk) [PART II. OTHER INFORMATION](index=34&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section provides a comprehensive list of all exhibits filed as part of the Form 10-Q, including corporate governance documents, debt agreements, stock incentive plans, and certifications - Exhibits include Articles of Amendment, Amended and Restated Bylaws, forms of Common Stock certificates, and various loan and security agreements[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) - Key agreements listed are the Loan and Security Agreement and Revolving Credit Master Promissory Note with North Mill Capital LLC (SLR Business Credit)[193](index=193&type=chunk) - Also included are the Optical Cable Corporation 2017 Stock Incentive Plan and its amendments, employment agreements, and the Stock Purchase Agreement with Lightera, LLC[194](index=194&type=chunk)[195](index=195&type=chunk) - Certifications from the CEO and CFO pursuant to the Sarbanes-Oxley Act of 2002 are filed herewith[195](index=195&type=chunk)[197](index=197&type=chunk) [SIGNATURES](index=39&type=section&id=SIGNATURES) [Signatures](index=39&type=section&id=Signatures) This section contains the official signatures of the registrant's authorized officers, confirming the submission of the Form 10-Q report - The report is signed by Neil D. Wilkin, Jr., Chairman of the Board of Directors, President and Chief Executive Officer, and Tracy G. Smith, Senior Vice President and Chief Financial Officer[201](index=201&type=chunk) - The signing date for the report is September 11, 2025[201](index=201&type=chunk)

[Executive Summary & Company Overview](index=1&type=section&id=Executive%20Summary%20%26%20Company%20Overview) This section provides an overview of EVI Industries' record fiscal 2025 financial performance and its profile as a leading commercial laundry distribution and service provider [Fiscal 2025 Highlights](index=1&type=section&id=Fiscal%202025%20Highlights) EVI Industries reported record financial results for fiscal year 2025, driven by strategic acquisitions, organic growth, and technological advancements. The company achieved significant increases in revenue, gross profit, operating income, net income, and Adjusted EBITDA, alongside a 7% compounded annual organic revenue growth rate over three years - Fiscal 2025 was a defining year, delivering record financial results, completing the largest acquisition, and making meaningful progress on the technology roadmap[3](index=3&type=chunk) Fiscal Year 2025 Key Financial Highlights (YoY Growth) | Metric | Value (FY25) | Growth (YoY) | | :---------------- | :----------- | :----------- | | Revenue | $390 million | 10% | | Gross Profit | $118 million | 12% | | Operating Income | $13.8 million | 18% | | Net Income | $7.5 million | 33% | | Adjusted EBITDA | $25.0 million | 11% | | Organic Revenue CAGR (3-year) | 7% | N/A | [Company Profile](index=4&type=section&id=Company%20Profile) EVI Industries, Inc. is a leading value-added distributor and provider of advisory and technical services in the North American commercial laundry distribution and service industry. The company offers planning, design, consulting, sales, leasing, and installation, maintenance, and repair services for commercial laundry equipment, parts, and accessories to a diverse customer base - EVI Industries is a value-added distributor and provider of advisory and technical services in the commercial laundry sector, offering equipment, parts, and comprehensive services[20](index=20&type=chunk) - The company serves retail, commercial, industrial, institutional, and government customers, providing solutions from individual parts to complex systems and services[20](index=20&type=chunk) [Financial Performance](index=1&type=section&id=Financial%20Performance) This section details EVI Industries' financial results for fiscal year 2025 and the fourth quarter, including GAAP and non-GAAP measures [Full Fiscal Year 2025 Results](index=1&type=section&id=Full%20Fiscal%20Year%202025%20Results) For the fiscal year ended June 30, 2025, EVI Industries achieved record revenues of $389.8 million, a 10% increase year-over-year. Gross profit rose 12% to $118.3 million, with the gross profit margin expanding to 30.4%. Net income saw a substantial 33% increase to $7.5 million, and diluted EPS grew from $0.37 to $0.49 Fiscal Year Ended June 30, 2025 vs. 2024 (in thousands, except per share data) | Metric | FY25 | FY24 | Change ($) | Change (%) | | :-------------------------- | :------- | :------- | :--------- | :--------- | | Revenues | $389,830 | $353,563 | $36,267 | 10.3% | | Cost of Sales | $271,482 | $248,310 | $23,172 | 9.3% | | Gross Profit | $118,348 | $105,253 | $13,095 | 12.4% | | SG&A | $104,580 | $93,625 | $10,955 | 11.7% | | Operating Income | $13,768 | $11,628 | $2,140 | 18.4% | | Interest Expense, net | $2,743 | $2,744 | $(1) | -0.0% | | Income before Income Taxes | $11,025 | $8,884 | $2,141 | 24.1% | | Provision for Income Taxes | $3,527 | $3,238 | $289 | 8.9% | | Net Income | $7,498 | $5,646 | $1,852 | 32.8% | | Net Earnings per Share - Basic | $0.50 | $0.39 | $0.11 | 28.2% | | Net Earnings per Share - Diluted | $0.49 | $0.37 | $0.12 | 32.4% | | Weighted Average Shares Outstanding - Basic | 12,734 | 12,650 | 84 | 0.7% | | Weighted Average Shares Outstanding - Diluted | 13,159 | 13,218 | (59) | -0.4% | [Fourth Quarter 2025 Results](index=1&type=section&id=Fourth%20Quarter%202025%20Results) In the fourth quarter of fiscal 2025, EVI Industries reported a 22% increase in revenue to $110.0 million. Gross profit grew 24% to $33.9 million, achieving a record gross margin of 30.8%. Operating income increased 13% to $4.1 million, and net income saw a modest 1% rise to $2.1 million, with diluted EPS remaining flat at $0.14 Fourth Quarter Ended June 30, 2025 vs. 2024 (in thousands, except per share data) | Metric | Q4 FY25 | Q4 FY24 | Change ($) | Change (%) | | :-------------------------- | :-------- | :-------- | :--------- | :--------- | | Revenues | $109,956 | $90,146 | $19,810 | 22.0% | | Cost of Sales | $76,040 | $62,777 | $13,263 | 21.1% | | Gross Profit | $33,916 | $27,369 | $6,547 | 23.9% | | SG&A | $29,802 | $23,717 | $6,085 | 25.6% | | Operating Income | $4,114 | $3,652 | $462 | 12.6% | | Interest Expense, net | $1,026 | $476 | $550 | 115.5% | | Income before Income Taxes | $3,088 | $3,176 | $(88) | -2.8% | | Provision for Income Taxes | $991 | $1,109 | $(118) | -10.6% | | Net Income | $2,097 | $2,067 | $30 | 1.5% | | Net Earnings per Share - Basic | $0.14 | $0.14 | $0.00 | 0.0% | | Net Earnings per Share - Diluted | $0.14 | $0.14 | $0.00 | 0.0% | | Weighted Average Shares Outstanding - Basic | 12,758 | 12,681 | 77 | 0.6% | | Weighted Average Shares Outstanding - Diluted | 13,192 | 13,127 | 65 | 0.5% | [Non-GAAP Financial Measures (Adjusted EBITDA)](index=4&type=section&id=Non-GAAP%20Financial%20Measures%20%28Adjusted%20EBITDA%29) EVI Industries utilizes Adjusted EBITDA as a key non-GAAP financial measure to assess operating performance, defining it as earnings before interest, taxes, depreciation, amortization, and amortization of stock-based compensation. For fiscal year 2025, Adjusted EBITDA increased 11% to $25.0 million, and for the fourth quarter, it grew 17% to $7.2 million - Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, and amortization of stock-based compensation, serving as an important indicator of operating performance[19](index=19&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Metric | FY25 | FY24 | Q4 FY25 | Q4 FY24 | | :----------------------------------- | :------- | :------- | :-------- | :-------- | | Net Income | $7,498 | $5,646 | $2,097 | $2,067 | | Provision for Income Taxes | $3,527 | $3,238 | $991 | $1,109 | | Interest Expense, Net | $2,743 | $2,744 | $1,026 | $476 | | Depreciation and Amortization | $6,692 | $5,983 | $1,958 | $1,491 | | Amortization of Stock-based Compensation | $4,558 | $4,974 | $1,130 | $1,018 | | **Adjusted EBITDA** | **$25,018** | **$22,585** | **$7,202** | **$6,161** | **Adjusted EBITDA Growth:** * **FY25 YoY Growth:** 10.8% ($25,018k vs $22,585k) * **Q4 FY25 YoY Growth:** 16.9% ($7,202k vs $6,161k) [Strategic Growth Initiatives](index=2&type=section&id=Strategic%20Growth%20Initiatives) This section outlines EVI Industries' key strategies for growth, including acquisitions and technological advancements [Buy-and-Build Strategy & Acquisitions](index=2&type=section&id=Buy-and-Build%20Strategy%20%26%20Acquisitions) EVI Industries continued its 'buy-and-build' growth strategy in fiscal 2025 by completing four acquisitions, including the largest in company history, Girbau North America (now Continental Laundry Solutions). This acquisition is expected to add approximately $50 million in annual revenue and establish a new strategic channel for growth by leveraging Continental as a master distributor and sourcing division - EVI completed four acquisitions in fiscal 2025, including the largest in company history, Girbau North America (now Continental Laundry Solutions)[6](index=6&type=chunk) - The Continental acquisition is expected to add approximately **$50 million in annual revenue** and will be leveraged as a master distributor and strategic sourcing division to enhance purchasing power and product availability[7](index=7&type=chunk) - EVI's acquisition success is built on valuing people, culture, and trust, earning a reputation as the acquirer of choice in the commercial laundry industry[8](index=8&type=chunk) [Innovation and Technology Advancements](index=2&type=section&id=Innovation%20and%20Technology%20Advancements) EVI made significant technological strides in fiscal 2025, focusing on modernizing operations and enhancing customer experience through its field service platform, enterprise-wide business intelligence tools, and a planned e-commerce platform [Field Service Platform](index=2&type=section&id=Field%20Service%20Platform) - The field service platform equips technicians with tools to optimize scheduling, streamline dispatch, provide real-time updates, and generate valuable data for improved efficiency and customer experience[9](index=9&type=chunk) - Technicians identify preventative maintenance needs and equipment replacement opportunities, generating qualified leads for the sales team and driving revenue growth[9](index=9&type=chunk) - Platform adoption rapidly expanded from 2 business units completing ~1,000 appointments in July 2024 to 27 business units completing over 8,500 appointments in June 2025[10](index=10&type=chunk) [Business Intelligence & ERP](index=3&type=section&id=Business%20Intelligence%20%26%20ERP) - By the end of fiscal 2025, 28 of 31 business units were operating on the Company's end-state ERP platform, combined with enterprise-wide business intelligence (BI) tools[11](index=11&type=chunk) - These initiatives provide real-time, data-driven insights for faster decision-making, aiming to optimize inventory, improve job costing, enhance service operations, and strengthen working capital efficiency[11](index=11&type=chunk)[12](index=12&type=chunk) [Planned E-Commerce Platform](index=3&type=section&id=Planned%20E-Commerce%20Platform) - EVI is developing an e-commerce platform, expected to launch in fiscal 2026, to deliver a seamless, data-driven, and service-integrated digital experience[12](index=12&type=chunk) - The platform will offer 24/7 ordering, real-time access to product information, inventory, pricing, and service capabilities, along with personalized recommendations and online service scheduling[12](index=12&type=chunk) - Supported by the industry's largest inventory and broadest product portfolio, this platform aims to enhance customer satisfaction, loyalty, and efficiency while lowering the cost to serve[13](index=13&type=chunk) [Financial Health & Capital Allocation](index=3&type=section&id=Financial%20Health%20%26%20Capital%20Allocation) This section examines EVI Industries' cash flow, liquidity, and capital allocation decisions, including special dividends [Cash Flow and Liquidity](index=3&type=section&id=Cash%20Flow%20and%20Liquidity) EVI Industries generated $21.3 million in operating cash flow in fiscal 2025, a decrease from the prior year primarily due to increased investment in working capital, specifically higher inventory and accounts receivable balances. Net debt increased to $44.1 million as of June 30, 2025, reflecting ongoing investments in acquisitions, technology, and working capital - EVI generated **$21.3 million in operating cash flow** in fiscal 2025, lower than the prior year due to increased investment in working capital[15](index=15&type=chunk) - Working capital investment included higher inventory (**$66.1 million**) and accounts receivable (**$60.5 million**) balances as of June 30, 2025[15](index=15&type=chunk) - Net debt increased from **$8.3 million** (June 30, 2024) to **$44.1 million** (June 30, 2025), reflecting **$46.9 million** deployed for strategic acquisitions and other growth initiatives[15](index=15&type=chunk) [Special Cash Dividend](index=4&type=section&id=Special%20Cash%20Dividend) EVI's Board of Directors declared a special cash dividend of $0.33 per share, payable on October 6, 2025, to shareholders of record as of September 25, 2025. This dividend, totaling approximately $4.9 million, reflects the company's strong fiscal 2025 results and disciplined capital structure, marking an increase from the previous year's $0.31 per share dividend - A special cash dividend of **$0.33 per share** was declared on September 11, 2025[16](index=16&type=chunk) - The dividend is payable on October 6, 2025, to shareholders of record as of September 25, 2025, with an aggregate amount of approximately **$4.9 million**[16](index=16&type=chunk) - This dividend reflects strong fiscal 2025 results and an increase from the prior year's special dividend of $0.31 per share[16](index=16&type=chunk) [Operational Context & Outlook](index=4&type=section&id=Operational%20Context%20%26%20Outlook) This section discusses external factors like tariff impacts and the company's future strategic direction [Tariff Impacts](index=4&type=section&id=Tariff%20Impacts) EVI Industries continues to monitor tariff developments and has responded to higher costs by adjusting pricing, diversifying sourcing, and collaborating with suppliers on cost strategies. Despite trade policy uncertainty, the company's focus on essential equipment and replacement parts across diverse markets provides a strong foundation for sustained performance - EVI monitors tariff developments and has adjusted pricing, diversified sourcing, and collaborated with suppliers to mitigate higher costs[17](index=17&type=chunk) - The company's focus on essential equipment and replacement parts across diverse markets provides a strong foundation for sustained performance despite trade policy uncertainty[17](index=17&type=chunk) [Future Outlook](index=4&type=section&id=Future%20Outlook) EVI Industries remains committed to executing its long-term strategy, focusing on growth, innovation, and achieving operating leverage. The company plans to build on its strong foundation and proven model to deliver sustained value for customers and shareholders - EVI will continue to execute its long-term strategy, focusing on growth, innovation, and achieving operating leverage[18](index=18&type=chunk) - The company is committed to disciplined execution, building on its strong foundation to deliver sustained value for customers and shareholders[18](index=18&type=chunk) [Financial Statements](index=6&type=section&id=Financial%20Statements) This section presents the condensed consolidated financial statements, including results of operations, balance sheets, and cash flows [Condensed Consolidated Results of Operations](index=6&type=section&id=Condensed%20Consolidated%20Results%20of%20Operations) The condensed consolidated results of operations provide a detailed breakdown of EVI Industries' financial performance for the twelve and three months ended June 30, 2025, compared to the same periods in 2024, showing significant growth across key revenue and profit metrics Condensed Consolidated Results of Operations | | | | For the twelve months ended | | | Unaudited | | Unaudited | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 12-Months | | 12-Months | | 3-Months | | 3-Months | | | | Ended | | Ended | | Ended | | Ended | | | | 6/30/25 | | 6/30/24 | | 6/30/25 | | 6/30/24 | | Revenues | $ | 389,830 | $ | 353,563 | $ | 109,956 | $ | 90,146 | | Cost of Sales | | 271,482 | | 248,310 | | 76,040 | | 62,777 | | Gross Profit | | 118,348 | | 105,253 | | 33,916 | | 27,369 | | SG&A | | 104,580 | | 93,625 | | 29,802 | | 23,717 | | Operating Income | | 13,768 | | 11,628 | | 4,114 | | 3,652 | | Interest Expense, net | | 2,743 | | 2,744 | | 1,026 | | 476 | | Income before Income Taxes | | 11,025 | | 8,884 | | 3,088 | | 3,176 | | Provision for Income Taxes | | 3,527 | | 3,238 | | 991 | | 1,109 | | Net Income | $ | 7,498 | $ | 5,646 | $ | 2,097 | $ | 2,067 | | Net Earnings per Share | | | | | | | | | | Basic | $ | 0.50 | $ | 0.39 | $ | 0.14 | $ | 0.14 | | Diluted | $ | 0.49 | $ | 0.37 | $ | 0.14 | $ | 0.14 | | Weighted Average Shares Outstanding | | | | | | | | | | Basic | | 12,734 | | 12,650 | | 12,758 | | 12,681 | | Diluted | | 13,159 | | 13,218 | | 13,192 | | 13,127 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets as of June 30, 2025, and 2024, show an increase in total assets to $307.0 million, primarily driven by growth in current assets like accounts receivable and inventories, as well as increases in intangible assets and goodwill due to acquisitions. Total liabilities also increased significantly, mainly due to long-term debt Condensed Consolidated Balance Sheets | | | 6/30/25 | | 6/30/24 | | --- | --- | --- | --- | --- | | Assets | | | | | | Current assets | | | | | | Cash | $ | 8,852 | $ | 4,558 | | Accounts receivable, net | | 60,494 | | 40,932 | | Inventories, net | | 66,059 | | 47,901 | | Vendor deposits | | 1,396 | | 1,657 | | Contract assets | | 289 | | 1,222 | | Other current assets | | 8,346 | | 5,671 | | Total current assets | | 145,436 | | 101,941 | | Equipment and improvements, net | | 17,772 | | 13,950 | | Operating lease assets | | 10,751 | | 8,078 | | Intangible assets, net | | 30,875 | | 22,022 | | Goodwill | | 91,667 | | 75,102 | | Other assets | | 10,527 | | 9,566 | | Total assets | $ | 307,028 | $ | 230,659 | | Liabilities and Shareholders' Equity | | | | | | Current liabilities | | | | | | Accounts payable and accrued expenses | $ | 50,963 | $ | 30,904 | | Accrued employee expenses | | 15,398 | | 11,370 | | Customer deposits | | 24,316 | | 24,419 | | Contract liabilities | | 408 | | — | | Current portion of operating lease liabilities | | 3,778 | | 3,110 | | Total current liabilities | | 94,863 | | 69,803 | | Deferred income taxes, net | | 7,691 | | 5,498 | | Long-term operating lease liabilities | | 7,997 | | 5,849 | | Long-term debt, net | | 53,000 | | 12,903 | | Total liabilities | | 163,551 | | 94,053 | | Shareholders' equity | | | | | | Preferred stock, $1.00 par value | | — | | — | | Common stock, $.025 par value | | 325 | | 322 | | Additional paid-in capital | | 111,219 | | 106,540 | | Treasury stock | | (5,155) | | (4,439) | | Retained earnings | | 37,088 | | 34,183 | | Total shareholders' equity | | 143,477 | | 136,606 | | Total liabilities and shareholders' equity | $ | 307,028 | $ | 230,659 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows highlight EVI Industries' cash movements for the twelve months ended June 30, 2025. Net cash provided by operating activities decreased to $21.3 million, while net cash used by investing activities significantly increased to $51.8 million, primarily due to cash paid for acquisitions. Financing activities provided $34.8 million, leading to a net increase in cash of $4.3 million Condensed Consolidated Statements of Cash Flows | | | | For the twelve months ended | | | --- | --- | --- | --- | --- | | | | 6/30/25 | | 6/30/24 | | Operating activities: | | | | | | Net income | $ | 7,498 | $ | 5,646 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | Depreciation and amortization | | 6,692 | | 5,983 | | Amortization of debt discount | | 54 | | 34 | | Provision for expected credit losses | | 1,052 | | 688 | | Non-cash lease expense | | 143 | | 14 | | Stock compensation | | 4,558 | | 4,974 | | Inventory reserve | | 182 | | 54 | | (Benefit) provision for deferred income taxes | | (821) | | 475 | | Other | | (87) | | 25 | | (Increase) decrease in operating assets: | | | | | | Accounts receivable | | (11,058) | | 7,028 | | Inventories | | 211 | | 11,901 | | Vendor deposits | | 261 | | 634 | | Contract assets | | 1,157 | | (41) | | Other assets | | (735) | | 2,476 | | (Decrease) increase in operating liabilities: | | | | | | Accounts payable and accrued expenses | | 10,272 | | (8,234) | | Accrued employee expenses | | 2,220 | | 646 | | Customer deposits | | (742) | | 1,017 | | Contract liabilities | | 408 | | (668) | | Net cash provided by operating activities | | 21,265 | | 32,652 | | Investing activities: | | | | | | Capital expenditures | | (4,861) | | (4,867) | | Cash paid for acquisitions, net of cash acquired | | (46,925) | | (1,949) | | Net cash used by investing activities | | (51,786) | | (6,816) | | Financing activities: | | | | | | Dividends paid | | (4,593) | | (4,071) | | Proceeds from borrowings | | 106,000 | | 62,500 | | Debt repayments | | (66,000) | | (84,500) | | Repurchases of common stock in satisfaction of employee tax withholding obligations | | (716) | | (1,244) | | Issuances of common stock under employee stock purchase plan | | 124 | | 116 | | Net cash provided (used) by financing activities | | 34,815 | | (27,199) | | Net increase (decrease) in cash | | 4,294 | | (1,363) | | Cash at beginning of period | | 4,558 | | 5,921 | | Cash at end of period | $ | 8,852 | $ | 4,558 | Supplemental Disclosures of Cash Flow Information (in thousands) | Metric | FY25 | FY24 | | :------------------------------------ | :------- | :------- | | Cash paid during the period for interest | $2,500 | $2,783 | | Cash paid during the period for income taxes | $2,976 | $4,575 | Supplemental Disclosures of Non-Cash Financing Activities (in thousands) | Metric | FY25 | FY24 | | :------------------------------------ | :------- | :------- | | Issuances of common stock for acquisitions | $— | $229 | Supplemental Disclosures of Non-Cash Investing Activities (in thousands) | Metric | FY25 | FY24 | | :------------------------------------ | :------- | :------- | | Amounts owed to sellers in connection with acquisitions | $4,181 | $— | [Adjusted EBITDA Reconciliation](index=10&type=section&id=Adjusted%20EBITDA%20Reconciliation) This section provides a reconciliation of net income, the most comparable GAAP financial measure, to Adjusted EBITDA for the twelve and three months ended June 30, 2025, and 2024, illustrating the calculation of this non-GAAP metric Adjusted EBITDA Reconciliation | | | | | | | Unaudited | | Unaudited | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 12-Months | | 12-Months | | 3-Months | | 3-Months | | | | Ended | | Ended | | Ended | | Ended | | | | 6/30/25 | | 6/30/24 | | 6/30/25 | | 6/30/24 | | Net Income | $ | 7,498 | $ | 5,646 | $ | 2,097 | $ | 2,067 | | Provision for Income Taxes | | 3,527 | | 3,238 | | 991 | | 1,109 | | Interest Expense, Net | | 2,743 | | 2,744 | | 1,026 | | 476 | | Depreciation and Amortization | | 6,692 | | 5,983 | | 1,958 | | 1,491 | | Amortization of Stock-based Compensation | | 4,558 | | 4,974 | | 1,130 | | 1,018 | | Adjusted EBITDA | $ | 25,018 | $ | 22,585 | $ | 7,202 | $ | 6,161 | [Legal & Disclosures](index=5&type=section&id=Legal%20%26%20Disclosures) This section provides important legal disclosures, including the safe harbor statement regarding forward-looking information [Safe Harbor Statement](index=5&type=section&id=Safe%20Harbor%20Statement) The Safe Harbor Statement outlines that the press release contains forward-looking statements subject to various known and unknown risks and uncertainties. These risks, detailed in the company's SEC filings, could cause actual results to differ materially from projections, and the company disclaims any obligation to update these statements - Statements in the press release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995[21](index=21&type=chunk) - Forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially, including economic conditions, tariffs, supply chain issues, inflation, interest rates, and acquisition integration risks[21](index=21&type=chunk) - The company cautions against undue reliance on forward-looking statements and disclaims any obligation to update them, except as required by law[21](index=21&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended August 2, 2025 or ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 1-14170 NATIONAL BEVERAGE CORP. (Exact name of registrant as specified in its charter) Delaware 59-2605822 (State of incorporation) (I.R.S. Employer Identifica ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): September 11, 2025 HEARTSCIENCES INC. (Exact name of Registrant as Specified in Its Charter) (State or Other Jurisdiction of Incorporation) Texas 001-41422 26-1344466 (Commission File Number) (IRS Employer Identification No.) FORM 8-K 550 Reserve Street, Suite 360 Southlake, Texas 76092 (Address of Prin ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2025 ☐ 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 001-14757 EVI Industries, Inc. (Exact name of registrant as specified in its charter) Delaware 11-2014231 ( ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___ to ___ Commission File Number 001-13449 (State or other jurisdiction of incorporation or organization) 10770 E. Briarwood Avenue Centenni ...

[Cautionary Statement Regarding Forward-Looking Statements](index=4&type=section&id=CAUTIONARY%20STATEMENT%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section outlines that the Form 10-K contains forward-looking statements, which are not guarantees of future performance and are subject to various risks and uncertainties detailed in the 'Risk Factors' section [Purpose and Risks of Forward-Looking Statements](index=4&type=section&id=4.1%20Purpose%20and%20Risks) This section clarifies that the Form 10-K contains forward-looking statements based on current expectations and assumptions, which are not guarantees of future performance, and highlights that actual results could differ materially due to known and unknown risks and uncertainties, as detailed in the 'Risk Factors' section - Forward-looking statements are based on current expectations and assumptions, not guarantees of performance, and involve **known and unknown risks and uncertainties**[12](index=12&type=chunk) - Important factors that could cause actual results to differ materially are disclosed under 'Risk Factors' in this Form 10-K[13](index=13&type=chunk) - The company undertakes no obligation to update or revise any forward-looking statement unless required by law[14](index=14&type=chunk) [Key Factors Affecting Future Results](index=4&type=section&id=4.2%20Key%20Factors%20Affecting%20Future%20Results) Key factors that could cause actual results to differ from expectations include the ability to attract and retain clients, profitability management, client consolidation or insourcing, general economic conditions, international operations management, natural events, technology adoption (including AI), workforce management, regulatory compliance, cybersecurity, and tax matters - Ability to attract new business and retain key clients[15](index=15&type=chunk) - Profitability based on utilization, pricing, and cost management[15](index=15&type=chunk) - Potential for client consolidation or expansion of insourcing activities[15](index=15&type=chunk) - General economic uncertainty, including inflation, interest rates, recession, and foreign exchange fluctuations[15](index=15&type=chunk) - Ability to manage international operations, particularly in the Philippines, Jamaica, Pakistan, and Nicaragua[15](index=15&type=chunk) - Impact of natural events, health epidemics, geopolitical conditions, and cyberattacks[15](index=15&type=chunk) - Ability to anticipate, develop, and implement information technology solutions, including Artificial Intelligence (AI)[15](index=15&type=chunk) - Ability to recruit, engage, motivate, manage, and retain the global workforce[15](index=15&type=chunk) - Compliance with applicable laws and regulations, including privacy, data protection, and information security[15](index=15&type=chunk) - Impact of tax matters, including new legislation and actions by taxing authorities[15](index=15&type=chunk) Part I [ITEM 1. BUSINESS](index=7&type=section&id=ITEM%201.%20BUSINESS) IBEX Limited provides technology-enabled customer lifecycle experience (CLX) solutions, leveraging its Wave iX platform, global delivery model, and agent-first culture to serve over 140 clients in the BPO industry - IBEX delivers innovative BPO, smart digital marketing, online acquisition technology, and end-to-end customer engagement solutions[28](index=28&type=chunk) - The company serves more than **140 clients**, leveraging its proprietary technology platform, company culture, and operational excellence[29](index=29&type=chunk) - As of June 30, 2025, IBEX operates **30 delivery centers** with approximately **33,000 employees** globally[38](index=38&type=chunk) [Company Overview](index=7&type=section&id=7.1%20Company%20Overview) IBEX Limited offers innovative business process outsourcing (BPO), digital marketing, and end-to-end customer engagement solutions to over 140 clients - IBEX Limited provides innovative business process outsourcing (BPO), smart digital marketing, online acquisition technology, and end-to-end customer engagement solutions[28](index=28&type=chunk) - The company helps over **140 clients** create innovative and differentiated customer experiences to increase loyalty, enhance brand awareness, and drive revenue[29](index=29&type=chunk) [Service Offerings](index=7&type=section&id=7.2%20Service%20Offerings) IBEX provides integrated technology-enabled customer lifecycle experience (CLX) solutions, including customer service, technical support, and digital marketing for customer acquisition - IBEX offers end-to-end technology-enabled customer lifecycle experience (CLX) solutions through an integrated platform[30](index=30&type=chunk) - The 'Connect' business delivers customer service, technical support, revenue generation, and back-office services via an omni-channel CX model[31](index=31&type=chunk) - The 'ibex Digital' suite provides digital marketing, e-commerce technology, and platform solutions for customer acquisition, alongside CX services for measuring and managing customer experiences[32](index=32&type=chunk) [Culture](index=7&type=section&id=7.3%20Culture) IBEX fosters an 'agent-first' culture through branded sites, technology-enabled recruiting, and engagement programs, achieving an Employee Net Promoter Score (eNPS) of 77 - IBEX is built around an **'agent-first' culture**, supported by branded sites, technology-enabled recruiting, and year-round employee engagement programs[33](index=33&type=chunk) - The company achieved an Employee Net Promoter Score (**eNPS) of 77** and has been recognized as a **top employer by Forbes and Newsweek in 2025**[33](index=33&type=chunk) [Technology](index=8&type=section&id=8.1%20Technology) The Wave iX technology platform, with its three-pronged AI strategy, underpins IBEX's service offerings to enhance agent interactions, client CX, and overall performance - The **Wave iX technology platform** is the foundation for IBEX's service offerings, featuring a **three-pronged AI strategy** to enhance agent interactions, client CX, and overall performance[34](index=34&type=chunk) - Wave iX integrates **AI-powered solutions** for hyper-personalized interactions, automation, and customized client solutions, deployed across most of the client portfolio[36](index=36&type=chunk)[37](index=37&type=chunk) [Flexible Operating Delivery Model](index=8&type=section&id=8.2%20Flexible%20Operating%20Delivery%20Model) IBEX employs a global delivery model with 30 centers and approximately 33,000 employees across onshore, nearshore, and offshore locations, including work-at-home capabilities - IBEX operates a **global delivery model** with onshore (U.S.), nearshore (Nicaragua, Honduras, Jamaica), and offshore (Philippines, Pakistan, India) customer experience centers, including work-at-home capabilities[38](index=38&type=chunk) - As of June 30, 2025, the company has **30 delivery centers** and approximately **33,000 employees**, with **97% of on-site capacity** in high-growth, high-margin offshore and nearshore geographies[38](index=38&type=chunk)[42](index=42&type=chunk) [Strategic Approach](index=9&type=section&id=9.1%20Strategic%20Approach) IBEX focuses on delivering exceptional customer experiences through innovative technology, operational excellence, a strong culture, and a client-devoted 'land and expand' strategy - IBEX prioritizes delivering exceptional customer experiences and has transformed into a **technology-led provider**, focusing on clients who view **CX as a competitive differentiator**[43](index=43&type=chunk)[44](index=44&type=chunk) - The growth strategy is based on **four pillars**: innovative technology, best-in-class operations, high-performing company culture, and a client-devoted mentality, utilizing a **'land and expand' approach**[45](index=45&type=chunk)[46](index=46&type=chunk)[49](index=49&type=chunk) [Our Clients](index=9&type=section&id=9.2%20Our%20Clients) IBEX partners with growing 'Digital-First' and established 'Blue Chip' companies across diverse verticals, maintaining high client retention and a Net Promoter Score (NPS) of 68 - IBEX partners with growing companies and established **Fortune 500 brands** across various verticals (Retail & E-commerce, HealthTech, Telecommunication, FinTech, Travel, Technology)[48](index=48&type=chunk) - Clients are categorized as **'Digital-First Companies'** (fast-growing, tech/e-commerce) and **'Blue Chip Companies'** (large customer bases, seeking digital transformation)[50](index=50&type=chunk)[51](index=51&type=chunk) - The company maintains **high client retention rates** and a **client Net Promoter Score (NPS) of 68**, reflecting strong relationships[53](index=53&type=chunk) [Industry Overview and Trends](index=10&type=section&id=10.1%20Industry%20Overview%20and%20Trends) The BPO industry is evolving towards technology-enabled solutions, with increasing integration of AI, a focus on customer experience, and demand for integrated end-to-end partners - The BPO industry is shifting from labor arbitrage to **technology-enabled solutions**, with Blue Chip clients increasingly evaluating **AI-enabled technologies**[55](index=55&type=chunk)[56](index=56&type=chunk) - Prioritization of Customer Experience (CX)[58](index=58&type=chunk)[59](index=59&type=chunk) - Focus on Consumer Centricity & Customer Lifetime Value (LTV)[58](index=58&type=chunk)[59](index=59&type=chunk) - Outsourcing across the entire operational value chain[58](index=58&type=chunk)[59](index=59&type=chunk) - Increasing integration of AI to enhance service delivery, including generative AI for automation and insights[58](index=58&type=chunk)[59](index=59&type=chunk) - Demand for integrated end-to-end partners offering unified solutions[58](index=58&type=chunk)[59](index=59&type=chunk) - Preference for 'Bestshore' flexible delivery models (onshore, nearshore, offshore, remote)[58](index=58&type=chunk)[59](index=59&type=chunk) - Heightened focus on Data Protection & Security[58](index=58&type=chunk)[59](index=59&type=chunk) - Integration of Data and Analytics into core service offerings[58](index=58&type=chunk)[59](index=59&type=chunk) [Sales and Marketing](index=12&type=section&id=12.1%20Sales%20and%20Marketing) Sales and marketing efforts focus on driving awareness, customer acquisition, and expanding existing client relationships through a 'land and expand' strategy across key verticals - Sales and marketing focus on driving awareness, customer acquisition, and expanding existing client relationships through a **'land and expand' strategy**[60](index=60&type=chunk) - Efforts target **key market verticals** (Retail & E-commerce, HealthTech, FinTech, Technology, Travel, Telecommunications) and **key decision-makers** (CDO, CIO, CXO, CCO, CMO)[61](index=61&type=chunk)[69](index=69&type=chunk) - The sales process for digital-first clients is **30-60 days**, while for larger blue-chip clients, it can extend **up to two years**[64](index=64&type=chunk) [Competition](index=13&type=section&id=13.1%20Competition) The highly fragmented BPO industry presents opportunities for differentiated providers like IBEX, which competes on service quality, value-added offerings, and advanced technology - The BPO industry is **highly fragmented**, creating opportunities for differentiated providers like IBEX, especially as clients seek **unified, end-to-end solutions**[71](index=71&type=chunk)[72](index=72&type=chunk) - IBEX faces competition from traditional BPO companies and in-house customer service departments, with key competitive factors including **service quality, value-added offerings, and advanced technological capabilities**[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) [Competitive Strengths and Differentiators](index=14&type=section&id=14.1%20Competitive%20Strengths%20and%20Differentiators) IBEX differentiates itself through its nimble, innovative culture, Wave iX AI technology, strong employer brand, broad digital service portfolio, and leading global delivery model - Differentiation as a nimble, disruptive provider with an innovative and entrepreneurial culture[78](index=78&type=chunk)[79](index=79&type=chunk)[84](index=84&type=chunk) - Wave iX technology solutions, leveraging generative AI (Wave iX AI Virtual Agent, Wave iX Translate) to drive performance and innovation[78](index=78&type=chunk)[79](index=79&type=chunk)[84](index=84&type=chunk) - Position as a leading brand and employer in its markets, fostering high employee engagement and lower attrition[78](index=78&type=chunk)[79](index=79&type=chunk)[84](index=84&type=chunk) - Broad portfolio of full lifecycle digital services (ibex Connect, ibex Digital, ibex CX)[78](index=78&type=chunk)[79](index=79&type=chunk)[84](index=84&type=chunk) - Leading global delivery model with significant growth in high-margin nearshore and offshore regions, offering geographic diversity and business continuity[78](index=78&type=chunk)[79](index=79&type=chunk)[84](index=84&type=chunk) [Seasonality](index=15&type=section&id=15.1%20Seasonality) IBEX's business experiences seasonal fluctuations, with increased customer engagement during the calendar year-end holiday period and customer acquisition revenues rising in summer and Q4 - IBEX's business performance is subject to **seasonal fluctuations**, with increased activity in customer engagement during the **calendar year-end holiday period**[81](index=81&type=chunk) - Customer acquisition revenues may increase during the **summer (household moves)** and the **final calendar quarter (holiday season)**[82](index=82&type=chunk) [Intellectual Property](index=15&type=section&id=15.2%20Intellectual%20Property) IBEX protects its competitive position through intellectual property laws, contractual arrangements, proprietary technology, registered trademarks, and trade secret controls - IBEX relies on **intellectual property laws, contractual arrangements, and proprietary technology** (next-generation software) to protect its competitive position[83](index=83&type=chunk) - The company registers **trademarks and service marks** in the U.S. and other countries and maintains **trade secrets** through contractual clauses and system access controls[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) [Regulation](index=16&type=section&id=16.1%20Regulation) IBEX is subject to diverse U.S. and foreign laws and regulations concerning privacy, data protection, intellectual property, and employment, with compliance being costly and time-consuming - IBEX is subject to **U.S. federal and state, and foreign laws and regulations** concerning privacy, data protection, intellectual property, competition, consumer protection, export taxation, and employment[87](index=87&type=chunk) - As a Bermuda company, IBEX must comply with the **Bermuda Companies Act 1981**, the **Economic Substance Act 2018** (effective July 1, 2019), and the **Personal Information Protection Act 2016** (fully implemented January 1, 2025)[88](index=88&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - Compliance with these diverse legal requirements is **costly and time-consuming**, with potential for **significant fines or penalties** for violations[99](index=99&type=chunk) [Human Capital Resources](index=18&type=section&id=18.1%20Human%20Capital%20Resources) IBEX had approximately **33,000 full-time employees** as of June 30, 2025, fostering a customer-centric, employee-driven culture with an eNPS of 77 - IBEX had approximately **33,000 full-time employees** as of June 30, 2025, **up from 30,000 in 2024**, driven by a customer-centric, employee-driven culture[100](index=100&type=chunk) - The company's culture is built on **three principles**: being the best employer, an employee-first approach, and highly immersive engagement, resulting in an **eNPS of 77**[101](index=101&type=chunk)[105](index=105&type=chunk) [Information about our Executive Officers](index=18&type=section&id=18.2%20Information%20about%20our%20Executive%20Officers) This section lists the executive officers of IBEX Limited as of September 11, 2025, who serve at the discretion of the Board with no family relationships Executive Officers as of September 11, 2025 | Name | Age | Title | | :--- | :--- | :--- | | Robert Dechant | 63 | Chief Executive Officer | | Taylor Greenwald | 57 | Chief Financial Officer | | Christy O'Connor | 56 | Chief Legal Officer and Assistant Secretary | | David Afdahl | 51 | Chief Operating Officer | | Julie Casteel | 64 | Chief Marketing and Strategic Accounts Officer | | Bruce Dawson | 61 | Chief Sales and Client Services Officer | | Paul Inson | 61 | Chief People Officer | | Andreas Wilkens | 53 | Chief Technology Officer | | Michael Darwal | 42 | Deputy CFO, President ibex Digital | - Executive officers serve at the discretion of the Board, with no family relationships between them or directors[104](index=104&type=chunk) [ITEM 1A. RISK FACTORS](index=21&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section details material risks to IBEX's business, financial condition, and operations, categorized across business, financial, operational, legal, Bermuda incorporation, and common share factors - Investment in IBEX is **speculative and risky** due to **material risks and uncertainties** that could adversely affect business, results of operation, reputation, prospects, financial condition, operating results, cash flows, profitability, liquidity, and stock price[116](index=116&type=chunk) - The risks described are **not exhaustive**, and **additional unknown or currently immaterial risks** may also harm the business[116](index=116&type=chunk) [Business Risks](index=21&type=section&id=21.1%20Business%20Risks) Business risks include dependence on key clients, challenges in maintaining profitability, potential client claims, effects of consolidation, inability to adapt to market trends, acquisition risks, and intellectual property protection failures - Dependence on key clients, with the top three clients accounting for **26% of revenue in FY2025**[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - Profitability relies on efficient asset utilization, appropriate pricing, and cost management, with most contracts lacking minimum volume requirements[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - Risk of client claims for reduced payments or damages if quality standards are not met[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - Adverse effects from client consolidation or increased insourcing activities[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - Inability to anticipate client needs, adapt to market/technology trends (including AI), or successfully convert customer acquisition website visitors[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - Risks associated with future acquisitions, including diversion of management attention, dilution, and integration difficulties[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - Failure to adequately protect intellectual property and proprietary information, leading to competitive impairment or costly litigation[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) [Financial, Accounting, and Economic Risks](index=25&type=section&id=25.1%20Financial%2C%20Accounting%2C%20and%20Economic%20Risks) Financial risks encompass high working capital needs, quarterly operating fluctuations, economic uncertainty, client payment defaults, debt covenant restrictions, goodwill impairment, and limitations on net operating loss carryforwards - Inability to fund high working capital requirements and new investments, potentially increasing financing costs[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - Operating results may fluctuate quarterly due to factors like client loss, new contracts, termination of existing contracts, and seasonal changes[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - Adverse effects from general economic uncertainty, including inflation, rising interest rates, recession, and foreign exchange fluctuations, particularly given **96% of FY2025 revenue from U.S. clients**[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - Risk of clients failing to pay accounts receivable balances in a timely manner, impacting financial condition and cash flow[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - Debt covenants may restrict operational flexibility, and non-compliance could lead to default[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - Potential for significant charges to earnings if goodwill or intangible assets become impaired[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - Limitations on the ability to use U.S. state and international net operating loss carryforwards, which begin to expire between 2026 and 2039[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) [Operational Risks](index=27&type=section&id=27.1%20Operational%20Risks) Operational risks involve reliance on technology, challenges with AI integration, dependence on international operations, workforce management, impacts of natural events, currency fluctuations, advertising effectiveness, and facility lease renewals - Heavy reliance on technology, telephone, and computer systems, as well as third-party telecommunications providers, exposing the company to technical difficulties or disruptions[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Risks from integrating AI and generative AI technology, including unintended consequences, data sourcing issues, program bias, security challenges, and potential replacement of lower-tier service offerings[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Significant dependence on international operations, particularly in the Philippines, Jamaica, Pakistan, and Nicaragua, where disruptions could diminish competitive advantage[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Challenges in attracting, retaining, and motivating qualified senior management, employees, and agents, exacerbated by high industry turnover and increasing labor costs[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Adverse effects from natural events, health epidemics, geopolitical conditions, widespread civil unrest, or terrorist attacks in operating countries[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Material impact on results of operations from unhedged fluctuations in local currencies against the U.S. dollar[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Negative impact if unable to advertise cost-effectively on internet search engines to attract consumers to customer acquisition websites[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Difficulties and increased expenses when expanding operations into new countries with less familiar local procedures or less developed infrastructure[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - Adverse effects if unable to renew leases for facilities on commercially acceptable terms or at all[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) [Legal and Regulatory Risks](index=31&type=section&id=31.1%20Legal%20and%20Regulatory%20Risks) Legal and regulatory risks include compliance with diverse laws, potential fines for non-compliance, liability from data breaches, and costs associated with intellectual property infringement claims - Exposure to numerous and sometimes conflicting legal and regulatory requirements across multiple countries and industries, including data privacy, telecommunications, import/export, and anti-corruption laws[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) - Non-compliance with legal regimes could result in significant fines, penalties, civil enforcement actions, criminal prosecution, and reputational damage[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) - Unauthorized or improper disclosure of personal information, privacy breaches, or cyber-attacks could lead to significant liability and harm reputation[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) - Claims of intellectual property infringement or violation of contractual protections by others could result in substantial costs, diversion of resources, and reputational harm[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk) [Risks Related to Being Incorporated in Bermuda](index=34&type=section&id=34.1%20Risks%20Related%20to%20Being%20Incorporated%20in%20Bermuda) Risks related to Bermuda incorporation include adverse tax impacts, less shareholder protection under Bermuda law, and difficulties enforcing foreign judgments against the company - Potential adverse impact from tax matters, new legislation (e.g., Bermuda Corporate Income Tax Act 2023 if revenues exceed **€750 million**), and actions by taxing authorities[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - Differences in Bermuda law compared to U.S. law may afford less protection to common shareholders, with limited rights for class actions or derivative actions[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) - Difficulty enforcing U.S. or other foreign judgments against IBEX in Bermuda due to its incorporation and asset location outside the U.S[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk)[203](index=203&type=chunk) [Risks Related to Our Common Shares](index=36&type=section&id=36.1%20Risks%20Related%20to%20Our%20Common%20Shares) Risks to common shares include influence from major shareholders, dilution from warrants, disclosure exemptions as an emerging growth company, increased compliance costs, potential PFIC characterization, market price volatility, and no planned dividends - The Resource Group International Limited (TRGI) beneficially owns **~13% of common shares** and has consent rights over certain actions, potentially limiting other shareholders' influence[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) - The Amazon Warrant, if exercised, will dilute ownership interests and could adversely affect the market price of common shares[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) - As an 'emerging growth company' and 'smaller reporting company,' IBEX benefits from disclosure exemptions, which may make its common shares less attractive to investors[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) - Increased costs and demands on management due to complying with public company laws and regulations, including Section 404 of Sarbanes-Oxley Act[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) - Risk of adverse U.S. tax consequences for certain U.S. holders if IBEX is characterized as a passive foreign investment company (PFIC)[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) - Potential for a significant portion of total outstanding shares to be sold into the market, causing a decrease in market price[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) - Anti-takeover provisions in bye-laws and the ability to issue preferred shares without shareholder approval could make acquisitions more difficult and limit shareholder influence[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) - The market price of common shares may be volatile due to various factors, including operating performance, analyst reports, and economic conditions[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) - IBEX does not plan to pay dividends in the foreseeable future, meaning investors may only realize gains if the share price increases[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk)[219](index=219&type=chunk)[220](index=220&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=40&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) This section states that there are no unresolved staff comments from the SEC regarding the company's previous filings - There are **no unresolved staff comments**[221](index=221&type=chunk) [ITEM 1C. CYBERSECURITY](index=40&type=section&id=ITEM%201C.%20CYBERSECURITY) IBEX outlines its comprehensive cybersecurity risk management program, integrated into its enterprise risk management framework, with Board oversight and management-led day-to-day operations - IBEX integrates cybersecurity processes into its overall **enterprise risk management framework** to evaluate and manage risks[222](index=222&type=chunk)[224](index=224&type=chunk) - The **Board of Directors** is responsible for **overseeing cybersecurity risk management**, receiving periodic updates from management[232](index=232&type=chunk)[235](index=235&type=chunk) - While cybersecurity threats in the last fiscal year have **not materially affected** the Company's business strategy, results of operations or financial condition, future incidents are **unavoidable** and could have **material adverse effects**[236](index=236&type=chunk) [Risk Management and Strategy](index=40&type=section&id=40.1%20Risk%20Management%20and%20Strategy) IBEX conducts periodic cybersecurity evaluations, assesses AI-related risks, oversees third-party risks, maintains robust incident response plans, and provides mandatory employee training - **Periodic evaluations** of cybersecurity policies, processes, and practices by in-house security teams and third-party firms, including **audits, penetration testing, and threat modeling**[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) - Consideration of likelihood, impact, and feasibility of controls in assessing cybersecurity risks, with controls including **vulnerability management, firewalls, access controls, and data encryption**[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) - Integration of **AI into solutions** and third-party offerings, with **risk assessments** conducted to identify potential threats and vulnerabilities in AI systems[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) - Established processes to oversee and identify cybersecurity risks from **third parties**, including **contractual controls and periodic assessments** of vendor practices[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) - Maintenance of **business continuity, incident response, and disaster recovery plans**, routinely evaluated and updated by IT Security, Operations, and Compliance teams[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) - **Regular, mandatory cybersecurity training** for all personnel and out-of-cycle notices from the CTO[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) [Governance](index=41&type=section&id=41.1%20Governance) The Board oversees cybersecurity risk management, receiving updates from management, while a dedicated Cybersecurity Committee and CISO handle day-to-day oversight - The **Board oversees cybersecurity risk management**, receiving periodic updates from management on strategy, risk assessments, and significant developments[232](index=232&type=chunk)[235](index=235&type=chunk) - Management, supported by dedicated professionals and a Cybersecurity Committee, handles day-to-day oversight, with the **Chief Information Security Officer (CISO)** leading the Information Security department[233](index=233&type=chunk) - The current CISO has **over eighteen years of experience** in cybersecurity and holds **multiple professional certifications** (CIISSP, CISA, CISM)[234](index=234&type=chunk) [Cybersecurity Threats](index=42&type=section&id=42.1%20Cybersecurity%20Threats) IBEX has implemented enhanced safeguards, and while past threats have not materially impacted the company, future cybersecurity incidents are unavoidable and could have material adverse effects - IBEX has implemented **additional technical and procedural safeguards** to strengthen its security posture, including **enhanced incident response protocols and employee awareness training**[236](index=236&type=chunk) - While cybersecurity threats in the last fiscal year have **not materially affected** the Company's business strategy, results of operations or financial condition, future cybersecurity incidents are **unavoidable** and could have **material adverse effects**[236](index=236&type=chunk) [ITEM 2. PROPERTIES](index=42&type=section&id=ITEM%202.%20PROPERTIES) IBEX operates executive management offices in Washington, D.C., and 30 leased global delivery centers, housing **20,456 workstations** as of June 30, 2025, primarily in offshore and nearshore regions - IBEX leases all of its facilities, including executive management offices in Washington, D.C. (**5,300 sq ft**) and **30 delivery centers** globally[237](index=237&type=chunk)[239](index=239&type=chunk) Delivery Centers and Workstations as of June 30, 2025 | Country | Number of centers | Number of workstations | | :--- | :--- | :--- | | United States | 2 | 654 | | Philippines | 9 | 8,567 | | Pakistan | 10 | 4,058 | | Jamaica | 4 | 3,810 | | Nicaragua | 4 | 2,691 | | Honduras | 1 | 676 | | Total | 30 | 20,456 | - The company expects to procure additional space and expand geographically to meet business demands[240](index=240&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=43&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) IBEX is involved in ordinary course legal actions, accruing for probable losses, but management believes current proceedings will not materially affect financial position or operations - IBEX is involved in legal actions in the ordinary course of business and accrues for probable and reasonably estimable losses[241](index=241&type=chunk) - Management believes that the disposition or ultimate resolution of any current legal proceedings will **not have a material adverse effect** on the Company's financial position, cash flows, or results of operations[242](index=242&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=43&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to IBEX Limited - This item is **not applicable**[243](index=243&type=chunk) Part II [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=43&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) This section provides information on IBEX's common shares trading on Nasdaq, outstanding shares, dividend policy, and details of the **$15 million** share repurchase program authorized on May 1, 2025 - IBEX common shares began trading on the **Nasdaq Global Market** under the symbol 'IBEX' on **August 7, 2020**[245](index=245&type=chunk) - As of August 29, 2025, there were **13,315,077 common shares outstanding** and **94 holders of record**[6](index=6&type=chunk)[245](index=245&type=chunk) - The company currently **does not plan to declare dividends**, intending to retain all future earnings to finance business growth and development[246](index=246&type=chunk) Share Repurchases for the Three Months Ended June 30, 2025 | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares That May Yet Be Purchased Under 2025 Share Repurchase Program ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | April 1 - 30, 2025 | — | — | — | — | | May 1 - 31, 2025 | 14,300 | $28.68 | 14,300 | $14,590 | | June 1 - 30, 2025 | 43,980 | $28.79 | 43,980 | $13,324 | | Total | 58,280 | $28.76 | 58,280 | | [ITEM 6. [RESERVED]](index=44&type=section&id=ITEM%206.%20%5BRESERVED%5D) This item is reserved and contains no information - This item is **reserved**[252](index=252&type=chunk) [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=44&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section analyzes IBEX's financial condition and results for FY2025, highlighting **9.8% revenue growth** to **$558.3 million**, **9.5% net income increase** to **$36.9 million**, and diluted EPS of **$2.36**, driven by client growth and strategic shifts - IBEX delivered revenues of **$558.3 million** during the fiscal year ended June 30, 2025, a **9.8% increase** compared to the prior year[257](index=257&type=chunk) - Net income for FY2025 was **$36.9 million**, a **9.5% increase** from **$33.7 million** in the prior year, driven by revenue growth in higher margin offshore regions and improved gross margin performance[257](index=257&type=chunk) - Fully diluted earnings per share for FY2025 was **$2.36**, **up from $1.84** in the prior year, due to higher net income and fewer diluted shares outstanding[257](index=257&type=chunk) [Overview](index=45&type=section&id=45.1%20Overview) IBEX provides innovative BPO, digital marketing, and customer engagement solutions, operating a global CX delivery model with 30 centers and approximately **33,000 employees** - IBEX delivers innovative BPO, smart digital marketing, online acquisition technology, and end-to-end customer engagement solutions[255](index=255&type=chunk) - The company operates a global CX delivery center model with **30 centers** and approximately **33,000 employees**, managing nearly **169 million customer interactions**[255](index=255&type=chunk) [Business Highlights](index=45&type=section&id=45.2%20Business%20Highlights) In FY2025, IBEX achieved strong financial results with growth in key verticals, expanded capacity in offshore/nearshore regions, and secured sixteen new client wins - During FY2025, IBEX delivered **strong financial results** with growth in Retail & E-commerce, HealthTech, Travel, Transportation & Logistics, and Other verticals[256](index=256&type=chunk) - The company increased capacity in offshore and nearshore regions, expanded into **two new sites**, and achieved **sixteen new client wins**[256](index=256&type=chunk) [Recent Financial Highlights](index=45&type=section&id=45.3%20Recent%20Financial%20Highlights) FY2025 saw **revenues of $558.3 million** (+**9.8%**), **net income of $36.9 million** (+**9.5%**), and **fully diluted EPS of $2.36** (+**28.3%**), driven by higher-margin offshore growth Key Financial Highlights (FY2025 vs FY2024) | Metric | FY2025 | FY2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues | $558.3 million | $508.6 million | +9.8% | | Net Income | $36.9 million | $33.7 million | +9.5% | | Fully Diluted EPS | $2.36 | $1.84 | +28.3% | - The increase in net income was driven by **revenue growth in higher margin offshore regions** and **improved gross margin performance**[257](index=257&type=chunk) [Trends and Factors Affecting our Performance](index=45&type=section&id=45.4%20Trends%20and%20Factors%20Affecting%20our%20Performance) Performance is influenced by macroeconomic factors, AI integration, demand for services, capacity utilization, wage pressures, operating margins from geographic shifts, client concentration, pricing strategies, employee turnover, and currency exchange rates - **Macroeconomic factors** (inflation, interest rates, geopolitical uncertainty, foreign exchange) have impacted financial results, leading some clients to shift work to offshore sites for **cost reduction**[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - IBEX is aggressively leveraging **generative AI** through its **Wave iX technology** to **increase agent productivity**, provide customer insights, and deploy voice/chat bots, aiming to capture **AI-enabled revenue**[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - Demand for customer interaction services reflects client business performance; FY2025 saw **higher demand** due to digital-first solutions, existing client growth, and new client wins[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - Capacity utilization impacts margins; overall utilization increased to **88% in FY2025** from **84% in FY2024**, with U.S. utilization **over 100%** due to work-at-home model[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - **Increasing wage pressure** in all geographies was offset by **higher agent quality, increased productivity, better retention, and contractual cost of living adjustments (COLA)**[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - Operating margins are influenced by the shift towards **higher-margin offshore and nearshore delivery locations**, which now account for approximately **97% of workstations**[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - IBEX has a **strong track record of new client wins**, with in-year wins historically generating **2.0x to 3.0x revenue** in subsequent years[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - Client concentration: largest client accounted for **11% of revenue**, and top three clients for **26% in FY2025**, but overall client diversification is increasing[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - Pricing strategies include **base price per minute/hour, bonuses/penalties**, and successful negotiation of **price increases/COLA** due to labor market tightening and facilities expenses[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - **High employee turnover** in the outsourcing industry impacts profitability; IBEX focuses on employee engagement to support **lower attrition rates**[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - **Increased costs** for sourcing or generating leads, or changes in conversion rates, can **impact profit margins** in customer acquisition solutions[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - **Increased up-front costs** for hiring and training new employees in response to demand can initially **depress operating profit margins**[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) - Net effect of currency exchange rate fluctuations: a **significant portion of operating expenses are in foreign currencies** (PHP, JMD, PKR), while **revenues are primarily in USD**, leading to **FX exposure**[259](index=259&type=chunk)[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) [Key Operational Metrics](index=48&type=section&id=48.1%20Key%20Operational%20Metrics) Key operational metrics include workstations, work-at-home agents, and capacity utilization, which increased to **88% in FY2025** from **84% in FY2024**, driven by offshore and nearshore optimization - Workstations: Number of physical workstations used for production at delivery centers[276](index=276&type=chunk) - Work at home: Number of production agents working from home[277](index=277&type=chunk) - Capacity Utilization: Efficiency metric defined as (on-site workstations in use + work at home seats) / total on-site workstations[278](index=278&type=chunk) - Capacity utilization increased to **88% in FY2025** from **84% in FY2024**, driven by utilization in nearshore and offshore geographies and optimization of onshore capacity[279](index=279&type=chunk) Capacity Utilization by Region (as of June 30, 2025 and 2024) | | As of June 30, 2025 | | As of June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | | Total Production Workstations | Utilization % | Tota