ADT(ADT) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. Unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, equity, and cash flows, are presented with detailed notes Condensed Consolidated Balance Sheets (Unaudited) Condensed Consolidated Balance Sheets (in thousands) | Assets/Liabilities & Equity | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Assets | | | | Total current assets | $940,258 | $1,004,920 | | Property and equipment, net | $240,770 | $247,183 | | Subscriber system assets, net | $2,914,895 | $2,981,161 | | Intangible assets, net | $4,875,837 | $4,854,099 | | Goodwill | $4,903,899 | $4,903,899 | | Deferred subscriber acquisition costs, net | $1,390,392 | $1,324,376 | | Other assets | $706,019 | $735,319 | | Total assets | $15,972,070 | $16,050,957 | | Liabilities and stockholders' equity | | | | Total current liabilities | $2,051,886 | $1,263,780 | | Long-term debt | $6,751,094 | $7,511,282 | | Deferred subscriber acquisition revenue | $2,090,428 | $2,067,608 | | Deferred tax liabilities | $1,169,753 | $1,167,213 | | Other liabilities | $235,549 | $224,384 | | Noncurrent liabilities of discontinued operations | $13,981 | $15,889 | | Total liabilities | $12,312,691 | $12,250,156 | | Total stockholders' equity | $3,659,379 | $3,800,801 | | Total liabilities and stockholders' equity | $15,972,070 | $16,050,957 | Condensed Consolidated Statements of Operations (Unaudited) Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Monitoring and related services revenue | $1,090,241 | $1,068,065 | $2,173,345 | $2,130,717 | | Security installation, product, and other revenue | $196,794 | $136,494 | $381,181 | $263,514 | | Total revenue | $1,287,035 | $1,204,559 | $2,554,526 | $2,394,231 | | Total cost of revenue | $250,186 | $196,234 | $490,308 | $390,539 | | Selling, general, and administrative expenses | $356,138 | $390,291 | $724,738 | $760,507 | | Depreciation and intangible asset amortization | $338,734 | $333,859 | $678,251 | $666,861 | | Operating income (loss) | $341,977 | $284,175 | $661,229 | $576,324 | | Interest expense, net | $(115,798) | $(109,700) | $(236,677) | $(197,150) | | Income (loss) from continuing operations | $168,233 | $126,185 | $310,710 | $290,076 | | Income (loss) from discontinued operations, net of tax | $(3,054) | $(33,791) | $(5,285) | $(106,131) | | Net income (loss) | $165,179 | $92,394 | $305,425 | $183,945 | | Net income (loss) per share - diluted (Common Stock) | $0.18 | $0.10 | $0.34 | $0.19 | Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $165,179 | $92,394 | $305,425 | $183,945 | | Other comprehensive income (loss), net of tax | $(1,258) | $1,527 | $86 | $3,235 | | Comprehensive income (loss) | $163,921 | $93,921 | $305,511 | $187,180 | Condensed Consolidated Statements of Stockholders' Equity (Unaudited) Key Changes in Stockholders' Equity (Six Months Ended June 30, 2025 vs. 2024) (in thousands) | Metric | 2025 | 2024 | | :-------------------------------- | :----------- | :----------- | | Beginning balance | $3,800,801 | $3,788,646 | | Net income (loss) | $305,425 | $183,945 | | Other comprehensive income (loss), net of tax | $86 | $3,235 | | Dividends | $(93,081) | $(100,218) | | Share-based compensation expense | $32,170 | $29,387 | | Repurchases of common stock (including excise tax) | $(394,617) | $(94,119) | | Transactions related to employee share-based compensation plans and other | $8,595 | $(2,666) | | Ending balance | $3,659,379 | $3,808,210 | - Common stock repurchases significantly increased in the six months ended June 30, 2025, totaling $394,617 thousand compared to $94,119 thousand in the prior year, leading to a decrease in total stockholders' equity[17] Condensed Consolidated Statements of Cash Flows (Unaudited) Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30) (in thousands) | Cash Flow Activity | 2025 | 2024 | | :-------------------------------- | :----------- | :----------- | | Net cash provided by (used in) operating activities | $1,030,525 | $927,005 | | Net cash provided by (used in) investing activities | $(622,559) | $(632,693) | | Net cash provided by (used in) financing activities | $(459,589) | $(275,345) | | Net increase (decrease) in cash and cash equivalents and restricted cash | $(51,623) | $18,967 | | Beginning balance | $204,065 | $129,950 | | Ending balance | $152,442 | $148,917 | - Net cash provided by operating activities increased by $103,520 thousand (11.2%) in the first six months of 2025 compared to 2024, primarily due to lower outflows from the former Solar Business and improved operating performance[19][260] - Net cash used in financing activities increased significantly by $184,244 thousand (66.9%) in the first six months of 2025, mainly driven by higher share repurchases[19][263] Notes to Condensed Consolidated Financial Statements (Unaudited) Detailed notes cover business operations, accounting policies, revenue, segment reporting, divestitures, goodwill, debt, derivatives, income taxes, equity, share-based compensation, EPS, commitments, leases, and related party transactions - ADT Inc. provides security, interactive, and smart home solutions to consumer and small business customers in the U.S.[21] - As of June 30, 2025, affiliates of Apollo Global Management, Inc. owned approximately 22% of the Company's outstanding Common Stock[22] - The Company's exit from the residential solar business in 2024 and the sale of its commercial business in 2023 are classified as discontinued operations[28] Total Revenue by Source (Six Months Ended June 30) (in thousands) | Source of Revenue | 2025 | 2024 | YoY Change | | :--------------------------------------- | :----------- | :----------- | :--------- | | Recurring monthly revenue | $2,109,326 | $2,077,071 | +$32,255 | | Other related services | $64,019 | $53,646 | +$10,373 | | Installation revenue | $202,692 | $93,956 | +$108,736 | | Amortization of deferred subscriber acquisition revenue | $178,489 | $169,558 | +$8,931 | | Total revenue | $2,554,526 | $2,394,231 | +$160,295 | - As of June 30, 2025, total remaining unsatisfied performance obligations for monitoring and related services amounted to $3,666,144 thousand[58] - The Company operates and reports as a single operating segment, with the CODM evaluating performance and allocating resources on a consolidated basis[68] - During the six months ended June 30, 2024, the ADT Solar Exit incurred aggregate exit charges of $89 million, primarily from inventory write-downs, installation pipeline disposition, employee separation, and contract termination costs[79] - Goodwill carrying amounts remained unchanged since December 31, 2024, while net other intangible assets increased from $4,854,099 thousand to $4,875,837 thousand[87][88] Total Debt Principal (excluding finance leases) (in thousands) | Debt Type | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | First Lien Term Loan B due 2030 | $1,974,169 | $1,984,090 | | First Lien Term Loan B-2 due 2032 | $598,500 | — | | First Lien Notes due 2026 | $850,000 | $1,350,000 | | First Lien Notes due 2027 | $1,000,000 | $1,000,000 | | First Lien Notes due 2029 | $1,000,000 | $1,000,000 | | Second Lien Notes due 2028 | $1,300,000 | $1,300,000 | | ADT Notes due 2032 | $728,016 | $728,016 | | ADT Notes due 2042 | $21,896 | $21,896 | | 2020 Receivables Facility | $439,772 | $407,901 | | Total debt principal, excluding finance leases | $7,912,353 | $7,791,903 | - In March 2025, the Company issued a new $600 million First Lien Term Loan B-2 due 2032 and redeemed $500 million of First Lien Notes due 2026. An additional $550 million redemption of First Lien Notes due 2026 is planned for July 2025, funded by new term loans[103][104] - The total notional amount of interest rate swap contracts increased from $3,800,000 thousand at December 31, 2024, to $4,350,000 thousand at June 30, 2025, with new cash flow hedges designated in June 2025[108] - The effective tax rate for continuing operations was 26.1% for the six months ended June 30, 2025, down from 28.6% in the prior year[118][120] - Under the 2025 Share Repurchase Plan, authorized for up to $500 million through April 2026, the Company repurchased 64,801 thousand common shares for $394,617 thousand during the six months ended June 30, 2025. Approximately $112 million remained under the plan as of June 30, 2025[17][127][132] - The Company granted approximately 3.4 million Restricted Stock Units (RSUs) and 8.3 million options in the first quarter of 2025 as part of its long-term incentive plan[135][136] - The Company received $15 million in reimbursements from Google Success Funds during the six months ended June 30, 2025, primarily for joint marketing and customer acquisition expenses[151] - The Company has a commitment to purchase $200 million of Google Cloud Platform services over seven years and a $370 million commitment for security system equipment through December 2025, with $91 million purchased in the first half of 2025[154][156] - As of June 30, 2025, the accrual for ongoing claims and lawsuits within the scope of an insurance program totaled $90 million[160] - Apollo's sale of 45 million shares in June 2025 reduced its ownership to less than 25%, terminating the Management Investor Rights Agreement (MIRA)[174] - The Opportunity Fund, a strategic investment by State Farm, had a balance of $82 million as of June 30, 2025, with $4 million in payments made during the six months ended June 30, 2025[180][181] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses financial performance, condition, and outlook, highlighting the shift to outright sales, macroeconomic impacts, key performance indicators, revenue/expense analysis, non-GAAP measures, and liquidity management - ADT provides security, interactive, and smart home solutions to consumer and small business customers in the U.S., serving approximately 6.4 million security monitoring service subscribers as of June 30, 2025[185][189] - The company is experiencing a growing number of direct channel new customer adds through outright sales, particularly with the national launch of its ADT+ platform, which is expected to be an increasing proportion of transactions[190] - Management is actively evaluating cost-saving opportunities, such as leveraging technology, reducing headcount, and cutting non-essential spend, to offset inflationary pressures and rising costs[195] - An ownership change occurred in Q2 2025, but the company does not expect a material impact on its ability to utilize tax attributes due to the limitation significantly exceeding the value of these attributes[197] Key Performance Indicators (Three Months Ended June 30) (in thousands, except per share data) | Metric | 2025 | 2024 | $ Change | | :------------------------------------------------ | :----------- | :----------- | :--------- | | Total revenue | $1,287,035 | $1,204,559 | $82,476 | | Operating income (loss) | $341,977 | $284,175 | $57,802 | | Net income (loss) | $165,179 | $92,394 | $72,785 | | Diluted income (loss) from continuing operations per share of Common Stock | $0.19 | $0.13 | $0.06 | | RMR | $362,750 | $355,179 | $7,571 | | Gross customer revenue attrition (percent) | 12.8% | 12.9% | N/A | | Adjusted EPS | $0.23 | $0.17 | $0.06 | | Adjusted EBITDA | $673,624 | $629,287 | $44,337 | Key Performance Indicators (Six Months Ended June 30) (in thousands, except per share data) | Metric | 2025 | 2024 | $ Change | | :------------------------------------------------ | :----------- | :----------- | :--------- | | Total revenue | $2,554,526 | $2,394,231 | $160,295 | | Operating income (loss) | $661,229 | $576,324 | $84,905 | | Net income (loss) | $305,425 | $183,945 | $121,480 | | Diluted income (loss) from continuing operations per share of Common Stock | $0.35 | $0.30 | $0.05 | | RMR | $362,750 | $355,179 | $7,571 | | Gross customer revenue attrition (percent) | 12.8% | 12.9% | N/A | | Adjusted EPS | $0.44 | $0.36 | $0.08 | | Adjusted EBITDA | $1,334,425 | $1,266,978 | $67,447 | - Monitoring and related services revenue increased due to higher average prices, while security installation, product, and other revenue saw a significant increase driven by a higher mix of professionally installed outright sales under the ADT+ platform[212] - Selling, general, and administrative expenses decreased due to lower general and administrative costs (including a legal settlement in the prior year and cost savings initiatives) and reduced share-based compensation, partially offset by an increase in the allowance for credit losses[213] Adjusted EPS Reconciliation (Six Months Ended June 30) | | 2025 | 2024 | $ Change | | :------------------------------------------------ | :--- | :--- | :------- | | Diluted income (loss) from continuing operations per share of Common Stock | $0.35 | $0.30 | $0.05 | | Share-based compensation expense | 0.04 | 0.03 | 0.01 | | Merger, restructuring, integration, and other | 0.01 | 0.01 | — | | Interest rate swaps, net | 0.05 | — | 0.05 | | Loss on extinguishment of debt | 0.01 | — | 0.01 | | Tax impact on adjustments | (0.03) | (0.01) | (0.02) | | Adjusted EPS (from continuing operations) | $0.44 | $0.36 | $0.08 | Adjusted EBITDA Reconciliation (Six Months Ended June 30) (in thousands) | (in thousands) | 2025 | 2024 | $ Change | | :------------------------------------------------ | :----------- | :----------- | :--------- | | Income (loss) from continuing operations | $310,710 | $290,076 | $20,634 | | Interest expense, net | 236,677 | 197,150 | 39,527 | | Income tax expense (benefit) | 109,781 | 116,270 | (6,489) | | Depreciation and intangible asset amortization | 678,251 | 666,861 | 11,390 | | Amortization of deferred subscriber acquisition costs | 122,507 | 109,335 | 13,172 | | Amortization of deferred subscriber acquisition revenue | (178,489) | (169,558) | (8,931) | | Share-based compensation expense | 32,170 | 29,359 | 2,811 | | Merger, restructuring, integration, and other | 7,122 | 13,504 | (6,382) | | Unrealized (gain) loss on interest rate swaps | 7,845 | 9,878 | (2,033) | | Loss on extinguishment of debt | 6,443 | 4,509 | 1,934 | | Other, net | 1,408 | (406) | 1,814 | | Adjusted EBITDA (from continuing operations) | $1,334,425 | $1,266,978 | $67,447 | - The company expects its cash position, available borrowing capacity under credit facilities, and cash from operating activities to be adequate for both short-term and long-term liquidity needs[237] - The next significant debt maturity is the First Lien Notes due 2026 in April 2026, which the company intends to redeem before maturity through ongoing liquidity sources and a refinancing transaction expected in July 2025[239] - The 2025 Share Repurchase Plan authorizes up to $500 million in common stock repurchases through April 30, 2026, with approximately $112 million remaining as of June 30, 2025[242][246] - The company began making federal cash tax payments in the second quarter of 2025[249] - As of June 30, 2025, the company was in compliance with all financial covenant and other maintenance tests for its debt obligations[257] INTRODUCTION BUSINESS AND BASIS OF PRESENTATION - ADT provides security, interactive, and smart home solutions to consumer and small business customers in the U.S.[185] - The company reports its results as a single operating and reportable segment, with financial information prepared in U.S. dollars in accordance with GAAP[186] - Results of former Solar and Commercial businesses are presented within discontinued operations for current and historical periods[186] FACTORS AFFECTING OPERATING RESULTS - As of June 30, 2025, the company served approximately 6.4 million security monitoring service subscribers, with a significant upfront investment required to acquire new subscribers[189] - A growing number of direct channel new customer additions are outright sales, particularly with the national launch of the ADT+ platform, shifting from a Company-owned equipment model[190] - Operating results are impacted by new customer additions, customer attrition (influenced by relocations and macroeconomic conditions), and increasing costs from product diversification, technological advancements, supply chain disruptions, and inflationary pressures[192][193][194] - The company is evaluating cost-saving opportunities and has largely offset rising costs through these initiatives and price increases to customers[195] - An ownership change occurred in Q2 2025, but no material impact on the company's ability to utilize tax attributes is expected[197] KEY PERFORMANCE INDICATORS - The company evaluates its results using End-of-Period Recurring Monthly Revenue (RMR), Gross Customer Revenue Attrition, Adjusted Earnings per Share (Adjusted EPS), and Adjusted EBITDA[199] - RMR measures the volume of revenue under contract at a given point in time, useful for forecasting future revenue performance[202] - Gross customer revenue attrition is calculated on a trailing twelve-month basis and evaluates retention and customer satisfaction performance[204][205] RESULTS OF OPERATIONS Summary of Results of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenue | $1,287,035 | $1,204,559 | $2,554,526 | $2,394,231 | | Operating income (loss) | $341,977 | $284,175 | $661,229 | $576,324 | | Net income (loss) | $165,179 | $92,394 | $305,425 | $183,945 | | Diluted income (loss) from continuing operations per share of Common Stock | $0.19 | $0.13 | $0.35 | $0.30 | | RMR | $362,750 | $355,179 | $362,750 | $355,179 | | Gross customer revenue attrition (percent) | 12.8% | 12.9% | 12.8% | 12.9% | | Adjusted EPS | $0.23 | $0.17 | $0.44 | $0.36 | | Adjusted EBITDA | $673,624 | $629,287 | $1,334,425 | $1,266,978 | - Total revenue increased by $82,476 thousand (6.8%) for the three months and $160,295 thousand (6.7%) for the six months ended June 30, 2025, driven by higher recurring monitoring and related services revenue and increased security installation, product, and other revenue from outright sales[207][212] - Operating income increased by $57,802 thousand (20.3%) for the three months and $84,905 thousand (14.7%) for the six months ended June 30, 2025[207] - Net income significantly increased by $72,785 thousand (78.8%) for the three months and $121,480 thousand (66.0%) for the six months ended June 30, 2025, partly due to a substantial reduction in losses from discontinued operations[207] - Selling, general, and administrative expenses decreased by $34,153 thousand (8.8%) for the three months and $35,769 thousand (4.7%) for the six months ended June 30, 2025, primarily due to lower general and administrative costs and reduced share-based compensation[207][213] - Interest expense, net, increased due to unrealized losses on interest rate swaps, while other income (expense) decreased due to lower Commercial TSA income[211][214] - The effective tax rate for continuing operations was 25.9% for the three months and 26.1% for the six months ended June 30, 2025, lower than the prior year periods[215][217] NON-GAAP MEASURES - Adjusted EPS is defined as diluted income (loss) from continuing operations per share, adjusted for share-based compensation, merger/restructuring items, impairment charges, unrealized gains/losses on interest rate swaps, other non-cash/non-routine adjustments, and their tax impacts[220] Adjusted EPS Reconciliation (Six Months Ended June 30) | | 2025 | 2024 | $ Change | | :------------------------------------------------ | :--- | :--- | :------- | | Diluted income (loss) from continuing operations per share of Common Stock | $0.35 | $0.30 | $0.05 | | Share-based compensation expense | 0.04 | 0.03 | 0.01 | | Merger, restructuring, integration, and other | 0.01 | 0.01 | — | | Interest rate swaps, net | 0.05 | — | 0.05 | | Loss on extinguishment of debt | 0.01 | — | 0.01 | | Tax impact on adjustments | (0.03) | (0.01) | (0.02) | | Adjusted EPS (from continuing operations) | $0.44 | $0.36 | $0.08 | - Adjusted EBITDA is defined as income (loss) from continuing operations, adjusted for interest, taxes, depreciation and amortization, amortization of deferred subscriber acquisition costs/revenue, share-based compensation, merger/restructuring items, impairment charges, and other non-cash/non-routine adjustments[228] Adjusted EBITDA Reconciliation (Six Months Ended June 30) (in thousands) | (in thousands) | 2025 | 2024 | $ Change | | :------------------------------------------------ | :----------- | :----------- | :--------- | | Income (loss) from continuing operations | $310,710 | $290,076 | $20,634 | | Interest expense, net | 236,677 | 197,150 | 39,527 | | Income tax expense (benefit) | 109,781 | 116,270 | (6,489) | | Depreciation and intangible asset amortization | 678,251 | 666,861 | 11,390 | | Amortization of deferred subscriber acquisition costs | 122,507 | 109,335 | 13,172 | | Amortization of deferred subscriber acquisition revenue | (178,489) | (169,558) | (8,931) | | Share-based compensation expense | 32,170 | 29,359 | 2,811 | | Merger, restructuring, integration, and other | 7,122 | 13,504 | (6,382) | | Unrealized (gain) loss on interest rate swaps | 7,845 | 9,878 | (2,033) | | Loss on extinguishment of debt | 6,443 | 4,509 | 1,934 | | Other, net | 1,408 | (406) | 1,814 | | Adjusted EBITDA (from continuing operations) | $1,334,425 | $1,266,978 | $67,447 | - The increase in Adjusted EBITDA was primarily driven by a decrease in general and administrative costs, higher monitoring and related services revenue (net of costs), and increased installation revenue (net of costs and commissions)[232] LIQUIDITY AND CAPITAL RESOURCES Liquidity and Capital Resources (in thousands) | Metric | June 30, 2025 | | :------------------------------------------------ | :------------ | | Cash and cash equivalents | $45,195 | | Restricted cash and restricted cash equivalents | $107,247 | | Availability under First Lien Revolving Credit Facility | $800,000 | | Uncommitted available borrowing capacity under 2020 Receivables Facility | $110,228 | | Carrying amount of total debt outstanding, including finance leases | $7,815,392 | - The company expects ongoing liquidity from cash generated from operations, borrowings under credit facilities, and potential equity/debt issuances, believing these sources are adequate for both short-term and long-term needs[234][237] - The next significant debt maturity is the First Lien Notes due 2026 in April 2026, which the company intends to redeem before maturity[239] - Under the 2025 Share Repurchase Plan, the company repurchased 12 million shares for $96 million during Q2 2025, with $112 million remaining under the plan as of June 30, 2025[246] - The company began making federal cash tax payments in Q2 2025, with amounts fluctuating based on financial results and tax positions[249] - In March 2025, the company issued a new $600 million First Lien Term Loan B-2 due 2032 and partially redeemed $500 million of First Lien Notes due 2026. An additional $550 million redemption of First Lien Notes due 2026 is planned for July 2025[251][253][254] - The 2020 Receivables Facility was amended in March 2025 to extend the revolving period, reduce interest rates, and increase the advance rate on pledged collateral; the outstanding balance was $440 million as of June 30, 2025[256] - The company was in compliance with all financial covenant and other maintenance tests for its debt obligations as of June 30, 2025[257] Cash Flow Analysis (Six Months Ended June 30) (in thousands) | Cash Flow Activity | 2025 | 2024 | $ Change | | :-------------------------------- | :----------- | :----------- | :--------- | | Net cash provided by (used in) operating activities | $1,030,525 | $927,005 | $103,520 | | Net cash provided by (used in) investing activities | $(622,559) | $(632,693) | $10,134 | | Net cash provided by (used in) financing activities | $(459,589) | $(275,345) | $(184,244) | CRITICAL ACCOUNTING ESTIMATES - There have been no material changes to the company's critical accounting estimates as disclosed in its 2024 Annual Report[262] CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS - This section contains forward-looking statements about the company's business, operations, and financial performance, which are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially[264] - Key uncertainties include the ability to retain personnel, risks related to divestitures, keeping pace with technological changes, implementing strategic partnerships (State Farm, Google), supply chain disruptions, market competition, regulatory changes, economic conditions, cybersecurity incidents, and the development/deployment of AI[266] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company faces market risks, mainly from interest rate changes on debt, managed through hedging instruments, with a larger portion of variable-rate debt as of June 30, 2025 - The company's operations expose it to market risks, primarily from changes in interest rates on its fixed-rate and variable-rate debt[268] - As of June 30, 2025, approximately 38% of the total carrying amount of the company's debt (excluding interest rate swaps) was subject to variable interest rates, a larger portion compared to December 31, 2024[270] ITEM 4. CONTROLS AND PROCEDURES Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes to ICFR, despite an ongoing multi-year IT transformation project - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[272] - There were no material changes in internal control over financial reporting (ICFR) during the three months ended June 30, 2025[273] - The company is engaged in a multi-year IT transformation project to migrate its infrastructure, including customer relationship management and enterprise resource planning systems, to the cloud[274] PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. Legal proceedings information refers to Note 12 'Commitments and Contingencies,' with no new material disclosures beyond what is already presented - For information on legal proceedings, refer to Note 12 'Commitments and Contingencies' in the condensed consolidated financial statements[277] ITEM 1A. RISK FACTORS. No material changes to the company's risk factors have occurred since those disclosed in its 2024 Annual Report - There have been no material changes in the company's risk factors from those disclosed in its 2024 Annual Report[278] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. No unregistered equity sales or proceeds from registered sales occurred; common stock repurchases under the 2025 plan totaled 11,833 thousand shares for $96 million in Q2 2025 - No unregistered sales of equity securities occurred during the six months ended June 30, 2025[279] - The company did not receive any proceeds from sales of registered equity securities during the six months ended June 30, 2025[280] Issuer Purchases of Equity Securities (Three Months Ended June 30, 2025) (in thousands) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (in thousands) | | :-------------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------- | :--------------------------------------------------------------------------------- | | April 1, 2025 - April 30, 2025 | 7,487 | $8.05 | 7,487 | $147,600 | | May 1, 2025 - May 31, 2025 | 1,161 | $8.29 | 1,161 | $137,980 | | June 1, 2025 - June 30, 2025 | 3,185 | $8.28 | 3,185 | $111,632 | | Total | 11,833 | $8.14 | 11,833 | $111,632 | ITEM 3. DEFAULTS UPON SENIOR SECURITIES. The company reported no defaults upon senior securities - There were no defaults upon senior securities[283] ITEM 4. MINE SAFETY DISCLOSURES. The company reported no mine safety disclosures - There were no mine safety disclosures[284] ITEM 5. OTHER INFORMATION. No directors or executive officers adopted or terminated Rule 10b5-1 trading arrangements during Q2 2025 - During the three months ended June 30, 2025, none of the company's directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements[285] ITEM 6. EXHIBITS. This section lists exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, debt agreements, employment letters, and certifications - Exhibits include Amended and Restated Certificate of Incorporation, Bylaws, debt agreements (Incremental Assumption and Amendment Agreement No. 19, Seventh Amendment to Receivables Financing Agreement), employment letters, and CEO/CFO certifications[289] SIGNATURES The report is signed by Jeffrey Likosar, President, Corporate Development and Transformation, and Chief Financial Officer, on July 24, 2025 - The report was signed by Jeffrey Likosar, President, Corporate Development and Transformation, and Chief Financial Officer, on July 24, 2025[295]