UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ GSR III Acquisition Corp. (Exact name of registrant as specified in its charter) Cayman Islands 001-42399 N/A (State or other jurisdiction of incorporation) Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 3 ...

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The unaudited financial statements reflect the company's transition to commercial operations with initial revenues reported in 2025 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows stable total assets and a significant improvement in stockholders' equity, which turned positive due to liability reductions Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $38,032 | $44,937 | | Inventory | $11,067 | $— | | Total current assets | $51,730 | $47,859 | | Total assets | $138,795 | $137,872 | | **Liabilities & Equity** | | | | Total current liabilities | $21,085 | $19,954 | | Contingent Earnout Liability | $26,700 | $70,961 | | Common stock warrant liabilities | $4,358 | $19,254 | | Total liabilities | $134,743 | $190,541 | | Total stockholders' equity (deficit) | $4,052 | $(52,669) | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) The company reported its first revenues and achieved net income of $1.5 million, driven by a significant non-cash gain Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $301 | $— | $818 | $— | | Research and development | $22,006 | $23,753 | $37,424 | $45,017 | | Selling, general and administrative | $7,809 | $5,746 | $15,945 | $11,060 | | Loss from operations | $(29,727) | $(29,499) | $(52,911) | $(56,077) | | Change in fair value of Contingent Earnout Liability | $(5,470) | $(25,571) | $44,261 | $(30,164) | | Net income (loss) | $(37,658) | $(56,663) | $1,481 | $(88,559) | | Net income (loss) per share, basic | $(0.24) | $(0.48) | $0.01 | $(0.78) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash used in operations increased while financing inflows decreased, resulting in a net cash decrease of $6.9 million for the period Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(55,014) | $(48,638) | | Net cash used in investing activities | $(796) | $(575) | | Net cash provided by financing activities | $48,905 | $62,328 | | Net (decrease) increase in cash | $(6,905) | $13,115 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies, liquidity, fair value measurements, and the recent capitalization of inventory - The company has a history of operating losses, with an **accumulated deficit of $684.5 million** as of June 30, 2025[25](index=25&type=chunk) - Management believes its cash, cash equivalents, and existing financing capacity will be **sufficient to fund operations for at least twelve months** from the financial statement issuance date[31](index=31&type=chunk) - In early 2025, the company concluded it met the criteria to capitalize inventory costs, resulting in **$11.1 million of inventory** on the balance sheet as of June 30, 2025[47](index=47&type=chunk)[85](index=85&type=chunk) - On April 28, 2025, the company implemented a cost reduction plan, **reducing its workforce by 30 employees** and incurring $0.7 million in severance costs[184](index=184&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the transition to a commercial-stage entity, financial results, liquidity, and capital resources following the launch of Symvess - The FDA granted **full approval for Symvess** on December 19, 2024, for use in adults with extremity arterial injury, and the company commenced commercial shipments in March 2025[211](index=211&type=chunk)[213](index=213&type=chunk) - A cost reduction action implemented on April 28, 2025, is estimated to generate savings of approximately **$13.8 million in 2025** and up to **$38.0 million in 2026**[219](index=219&type=chunk) - In July 2025, the Centers for Medicare and Medicaid Services (CMS) **declined to approve** the company's New Technology Add-On Payment (NTAP) application for Symvess[220](index=220&type=chunk) [Results of Operations](index=47&type=section&id=Results%20of%20Operations) The company generated its first revenue, saw R&D expenses decrease due to inventory capitalization, and SG&A expenses increase with commercial launch activities Comparison of Six Months Ended June 30, 2025 and 2024 (in thousands) | Account | YTD 2025 | YTD 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total revenue | $818 | $— | 100% | | Research and development | $37,424 | $45,017 | (17)% | | Selling, general and administrative | $15,945 | $11,060 | 44% | | Loss from operations | $(52,911) | $(56,077) | (6)% | | Net income (loss) | $1,481 | $(88,559) | (102)% | - The decrease in R&D expenses was primarily driven by a **$3.6 million reduction** in materials and supplies expense due to inventory capitalization and a **$2.4 million decrease** in other R&D expenses related to capitalizing manufacturing overhead[244](index=244&type=chunk) - The increase in SG&A expenses was mainly due to a **$4.1 million increase** in payroll and personnel expenses and a **$0.5 million increase** in professional fees to support the commercial launch of Symvess[245](index=245&type=chunk) [Liquidity and Capital Resources](index=50&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by $38.0 million in cash, recent equity offerings, and available financing facilities - As of June 30, 2025, the company had **cash and cash equivalents of $38.0 million** and **working capital of $30.6 million**[248](index=248&type=chunk) - The company raised net proceeds of approximately **$46.7 million** from its 2025 Public Offering, which closed on March 27, 2025[257](index=257&type=chunk) - As of June 30, 2025, the company had **$69.3 million remaining** under its ATM Facility and **$47.5 million remaining** under its Common Stock Purchase Agreement with Lincoln Park[249](index=249&type=chunk)[254](index=254&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=56&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is exempt from providing market risk disclosures - As a smaller reporting company, Humacyte is **exempt from providing** quantitative and qualitative disclosures about market risk[278](index=278&type=chunk) [Item 4. Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes in internal controls during the quarter - Based on an evaluation as of June 30, 2025, the Chief Executive Officer and Chief Financial Officer concluded that the company's **disclosure controls and procedures were effective**[280](index=280&type=chunk) - **No changes occurred** in the company's internal control over financial reporting during the second quarter of 2025 that have materially affected, or are reasonably likely to materially affect, these controls[281](index=281&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) The company is defending a class action lawsuit and related derivative actions concerning its BLA and manufacturing facility disclosures - A putative class action lawsuit, *Cutshall v. Humacyte, Inc., et al.*, was filed against the company and certain officers, alleging **violations of the Exchange Act** related to statements about the BLA for Symvess and manufacturing deficiencies[284](index=284&type=chunk) - Multiple stockholder derivative actions have been filed and subsequently consolidated and **stayed pending the outcome** of the primary Securities Litigation[285](index=285&type=chunk)[288](index=288&type=chunk) - The company **disputes all claims** and has not accrued any material liabilities for these lawsuits, as a negative outcome is not deemed probable nor is a range of loss estimable[289](index=289&type=chunk) [Item 1A. Risk Factors](index=58&type=section&id=Item%201A.%20Risk%20Factors) A new risk factor was added concerning the potential negative consequences of the company's recent cost-saving measures - A new risk factor was added related to the cost-saving measures implemented on April 28, 2025, warning that these measures **may not be successful**, could be disruptive, and might lead to adverse effects such as personnel attrition[291](index=291&type=chunk) [Item 5. Other Information](index=59&type=section&id=Item%205.%20Other%20Information) Several executive officers terminated and adopted new Rule 10b5-1 trading plans during the second quarter of 2025 - CFO Dale Sander **terminated his 10b5-1 trading plan** on April 14, 2025, under which no shares had been sold[295](index=295&type=chunk) - CRO Yang (Cindy) Cao's 2024 plan terminated in May 2025, and she adopted a **new 10b5-1 plan** on May 20, 2025, for the sale of up to 41,944 shares[296](index=296&type=chunk)[297](index=297&type=chunk) - CCO William (B.J.) Scheessele terminated his 2024 plan in April 2025 and adopted a **new 10b5-1 plan** on June 12, 2025, covering the exercise of options and sale of up to 85,900 shares[298](index=298&type=chunk)[299](index=299&type=chunk)

[Business Update and Q2 2025 Financial Results](index=1&type=section&id=Business%20Update%20and%20Q2%202025%20Financial%20Results) [Management Commentary and Business Highlights](index=1&type=section&id=Management%20Commentary%20and%20Business%20Highlights) The company achieved key operational milestones in **H1 2025**, including successful materials fabrication and testing, while maintaining a strong financial position with **$97.9 million** in cash and enhanced market visibility - Key operational milestones achieved in **H1 2025** include successful co-extrusion demonstration, completion of the final experiment design review for irradiation testing, and fabrication of enriched uranium-zirconium alloy coupon samples[2](index=2&type=chunk) - The political environment is viewed as increasingly favorable, citing President Trump's nuclear energy Executive Orders supporting advanced nuclear technologies[2](index=2&type=chunk) - The company's inclusion in the **Russell 2000® and Russell 3000® Indexes** is expected to enhance visibility among institutional investors[2](index=2&type=chunk) - The company ended Q2 2025 with a strong financial position, holding **$97.9 million** in cash and cash equivalents and **$97.2 million** in working capital[3](index=3&type=chunk) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) The company's financial position strengthened in H1 2025 due to **$63.5 million** in financing activities, despite increased operational cash usage and a wider net loss driven by higher **R&D and G&A expenses** [Balance Sheet Summary](index=1&type=section&id=Balance%20Sheet%20Summary) Key Balance Sheet Figures (as of June 30, 2025) | Metric | June 30, 2025 (USD) | December 31, 2024 (USD) | | :--- | :--- | :--- | | Cash and cash equivalents | $97.9 million | $40.0 million | | Working Capital | $97.2 million | $39.9 million | | Total Assets | $99.0 million | $41.0 million | | Total Liabilities | $1.2 million | $0.4 million | | Stockholders' Equity | $97.8 million | $40.5 million | [Cash Flow Summary (H1 2025)](index=1&type=section&id=Cash%20Flow%20Summary%20(H1%202025)) Cash Flow Changes (Six Months Ended June 30) | Metric | 2025 (USD) | 2024 (USD) | | :--- | :--- | :--- | | Cash used in operating activities | ($5.6 million) | ($3.7 million) | | Cash provided by financing activities | $63.5 million | $2.2 million | - The increase in cash used in operations was primarily due to higher spending on **R&D and general and administrative expenses**[5](index=5&type=chunk) - The significant increase in cash from financing was mainly due to **$60.9 million** in net proceeds from the issuance of common stock under the at-the-market facility[5](index=5&type=chunk) [Operational Results Summary (Q2 & H1 2025)](index=2&type=section&id=Operational%20Results%20Summary%20(Q2%20%26%20H1%202025)) Q2 Operational Results Comparison | Metric | Q2 2025 (USD) | Q2 2024 (USD) | | :--- | :--- | :--- | | General and administrative expenses | $2.5 million | $1.8 million | | R&D expenses | $1.6 million | $0.9 million | | Net Loss | ($3.5 million) | ($2.4 million) | H1 Operational Results Comparison | Metric | H1 2025 (USD) | H1 2024 (USD) | | :--- | :--- | :--- | | General and administrative expenses | $6.0 million | $4.0 million | | R&D expenses | $3.3 million | $1.9 million | | Net Loss | ($8.3 million) | ($5.2 million) | [Detailed Financial Statements](index=4&type=section&id=Detailed%20Financial%20Statements) Unaudited financial statements detail the company's financial position as of June 30, 2025, showing increased cash and equity from financing activities, alongside higher operating expenses and net loss [Unaudited Condensed Consolidated Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Comparison (June 30, 2025 vs Dec 31, 2024) | Account | June 30, 2025 (USD) | December 31, 2024 (USD) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $97,901,357 | $39,990,827 | | Total Current Assets | $98,362,270 | $40,315,205 | | Total Assets | $98,968,970 | $40,952,875 | | **Liabilities & Equity** | | | | Total Current Liabilities | $1,194,377 | $424,585 | | Total Stockholders' Equity | $97,774,593 | $40,528,290 | | Total Liabilities and Stockholders' Equity | $98,968,970 | $40,952,875 | [Unaudited Condensed Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Statement of Operations (Q2 & H1 2025 vs 2024) | Metric | Q2 2025 (USD) | Q2 2024 (USD) | H1 2025 (USD) | H1 2024 (USD) | | :--- | :--- | :--- | :--- | :--- | | Total Operating Expenses | $4,142,501 | $2,702,225 | $9,288,424 | $5,883,793 | | Operating Loss | ($4,142,501) | ($2,702,225) | ($9,288,424) | ($5,883,793) | | Net Loss | ($3,520,434) | ($2,374,634) | ($8,291,446) | ($5,194,218) | | Net Loss Per Share (Basic & Diluted) | ($0.16) | ($0.17) | ($0.40) | ($0.38) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Statement of Cash Flows (Six Months Ended June 30) | Metric | 2025 (USD) | 2024 (USD) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($5,605,030) | ($3,725,447) | | Net Cash Used in Investing Activities | ($6,116) | $0 | | Net Cash Provided by Financing Activities | $63,521,676 | $2,194,041 | | Net Increase (Decrease) in Cash | $57,910,530 | ($1,531,406) | | Cash and Cash Equivalents, End of Period | $97,901,357 | $27,067,039 | [Corporate Information](index=2&type=section&id=Corporate%20Information) This section outlines Lightbridge's core business of developing advanced nuclear fuel technology, provides conference call details, and includes standard forward-looking statement disclaimers [Company Overview](index=3&type=section&id=Company%20Overview) - Lightbridge is developing **Lightbridge Fuel™**, a proprietary next-generation nuclear fuel technology for existing light water reactors and new small modular reactors (SMRs)[13](index=13&type=chunk) - The company has long-term framework agreements with **Battelle Energy Alliance**, the operating contractor for **Idaho National Laboratory (INL)**, and has received multiple awards from the **DOE's GAIN program**[14](index=14&type=chunk) [Conference Call Information](index=2&type=section&id=Conference%20Call%20Information) - A conference call to discuss financial results and provide a fuel development update is scheduled for **Tuesday, August 12, at 4:00 p.m. ET**[9](index=9&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements based on current expectations that involve **significant risks and uncertainties**. Readers are advised to consult the company's **SEC filings** for a full description of risks[16](index=16&type=chunk)[17](index=17&type=chunk)

[Overview and Strategic Highlights](index=1&type=section&id=Standard%20BioTools%20Reports%20Second%20Quarter%202025%20Financial%20Results) [Recent Highlights and CEO Commentary](index=1&type=section&id=Recent%20Highlights) The company announced the strategic sale of SomaLogic to Illumina, strengthening its balance sheet to pursue inorganic growth and a 2026 profitability target - Announced the strategic sale of SomaLogic to Illumina for up to **$425 million** in total cash consideration, plus potential future royalties[5](index=5&type=chunk) - The company expects to have at least **$550 million in cash** and cash equivalents upon closing the Illumina transaction, which will be used to fuel its inorganic growth strategy[3](index=3&type=chunk)[5](index=5&type=chunk) - Management is driving toward a profitability target, aiming for **adjusted EBITDA break-even in 2026**[3](index=3&type=chunk)[5](index=5&type=chunk) - CEO Michael Egholm stated the company is positioned to **"continue playing offense"** by strategically deploying capital into high-quality, underappreciated assets to drive scale and growth[3](index=3&type=chunk) [Financial Performance](index=1&type=section&id=Financial%20Performance) [Financial Highlights (Continuing Operations)](index=1&type=section&id=Financial%20Results%20Table%3A%20Continuing%20Operations) Q2 2025 continuing operations revenue was $21.8 million, with improved non-GAAP gross margin and a narrower operating loss Q2 & H1 2025 Financial Summary (Continuing Operations) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $21.8M | $22.5M | $42.0M | $44.1M | | Gross Margin | 48.8% | 46.1% | 51.6% | 48.5% | | Non-GAAP Gross Margin | 54.1% | 48.6% | 55.6% | 54.1% | | Operating Loss | $(25.7)M | $(30.3)M | $(52.7)M | $(74.7)M | | Net Loss from Continuing Operations | $(17.7)M | $(25.4)M | $(41.0)M | $(41.8)M | | Adjusted EBITDA | $(16.1)M | $(17.4)M | $(30.2)M | $(34.3)M | | Cash, Cash Equivalents, & Short-term Investments | $239.7M | $397.2M | $239.7M | $397.2M | [Detailed Financial Results (Continuing Operations)](index=2&type=section&id=Second%20Quarter%202025%20Financial%20Results%3A%20Continuing%20Operations) Q2 2025 revenue from continuing operations decreased 3% to $21.8 million, driven by lower instrument sales, though margins and net loss improved Q2 2025 Revenue Breakdown (Continuing Operations) | Revenue Stream | Q2 2025 | YoY Change | | :--- | :--- | :--- | | Consumables | $10.5M | +18% | | Instruments | $5.2M | -26% | | Services | $6.1M | -8% | | **Total Revenue** | **$21.8M** | **-3%** | - Gross margins improved to **48.8% (54.1% non-GAAP)** in Q2 2025 from 46.1% (48.6% non-GAAP) in Q2 2024, driven by favorable product mix and improvements from the Standard BioTools Business System (SBS)[9](index=9&type=chunk) - Operating expenses **decreased by 11% YoY** to $36.3 million, attributed to the realization of merger cost synergies and continued productivity gains[9](index=9&type=chunk) - Net loss from continuing operations **improved by 31%** to $17.7 million in Q2 2025, compared to a net loss of $25.4 million in Q2 2024[9](index=9&type=chunk) [Full Year 2025 Revenue Outlook](index=2&type=section&id=Full%20Year%202025%20Revenue%20Outlook) The company forecasts full-year 2025 combined revenue of $165-$175 million and continuing operations revenue of $78-$83 million Fiscal Year 2025 Revenue Guidance | Revenue Category | FY 2025 Outlook | | :--- | :--- | | Combined Revenue | $165M - $175M | | Revenue from Continuing Operations | $78M - $83M | - The outlook assumes a high single-digit millions decline in Americas academic revenue due to anticipated NIH funding pressures, with a more pronounced impact on continuing operations[7](index=7&type=chunk) [Discontinued Operations Performance (SomaLogic)](index=12&type=section&id=Condensed%20Results%20of%20Operations%20Discontinued%20Operations) The discontinued SomaLogic business generated $20.2 million in revenue for Q2 2025, with its operating loss narrowing to $15.8 million Discontinued Operations Financial Summary | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $20.2M | $14.7M | $40.8M | $38.6M | | Loss from Discontinued Operations | $(15.8)M | $(20.3)M | $(18.4)M | $(36.0)M | [Combined Company Performance](index=16&type=section&id=Condensed%20Combined%20Results%20of%20Operations) On a combined basis, total Q2 2025 revenue grew to $42.0 million, and the total net loss improved to $33.5 million Combined Company Financial Summary | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $42.0M | $37.2M | $82.8M | $82.7M | | Net Loss | $(33.5)M | $(45.7)M | $(59.5)M | $(77.9)M | [Financial Statements](index=5&type=section&id=Financial%20Statements) [Consolidated Statements of Operations (Continuing Operations)](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Continuing operations generated $21.8 million in Q2 2025 revenue, resulting in a net loss of $17.7 million, or ($0.05) per share Q2 2025 Statement of Operations Highlights (Continuing) | Line Item | Q2 2025 (in thousands) | Q2 2024 (in thousands) | | :--- | :--- | :--- | | Total revenue | $21,762 | $22,492 | | Gross profit | $10,628 | $10,374 | | Total operating expenses | $36,325 | $40,635 | | Loss from continuing operations | $(25,697) | $(30,261) | | Net loss from continuing operations | $(17,673) | $(25,444) | | Net loss per share from continuing operations | $(0.05) | $(0.07) | [Consolidated Balance Sheets](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2025, the company held total assets of $557.0 million, including $158.6 million in cash and cash equivalents Balance Sheet Highlights (as of June 30, 2025) | Account | Amount (in thousands) | | :--- | :--- | | **Assets** | | | Cash and cash equivalents | $158,617 | | Short-term investments | $78,468 | | Current assets held for sale | $223,089 | | **Total Assets** | **$556,965** | | **Liabilities & Equity** | | | Total current liabilities | $98,024 | | **Total Liabilities** | **$132,430** | | **Total Stockholders' Equity** | **$424,535** | [Consolidated Statements of Cash Flows](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the first half of 2025, net cash used in operating activities was $51.0 million, resulting in a period-end cash balance of $161.2 million Cash Flow Summary (Six Months Ended June 30, 2025) | Activity | Amount (in thousands) | | :--- | :--- | | Net cash used in operating activities | $(50,951) | | Net cash provided by investing activities | $42,130 | | Net cash provided by financing activities | $62 | | **Net decrease in cash** | **$(7,614)** | | **Cash at end of period** | **$161,204** | [Non-GAAP Reconciliations](index=9&type=section&id=RECONCILIATION%20OF%20GAAP%20TO%20NON-GAAP%20FINANCIAL%20INFORMATION) [Continuing Operations Reconciliations](index=9&type=section&id=Continuing%20Operations%20Reconciliations) For Q2 2025, adjusted EBITDA for continuing operations was a loss of $16.1 million, an improvement from a $17.4 million loss in the prior year Q2 2025 Non-GAAP Reconciliation Highlights (Continuing) | Metric | GAAP | Non-GAAP | | :--- | :--- | :--- | | Gross Profit | $10.6M | $11.8M | | Gross Margin | 48.8% | 54.1% | | Operating Expenses | $36.3M | $27.9M | | Adjusted EBITDA | N/A | $(16.1)M | [Discontinued Operations Reconciliations](index=13&type=section&id=Discontinued%20Operations%20Reconciliations) The discontinued SomaLogic operations showed an adjusted EBITDA loss of $2.4 million in Q2 2025, a substantial improvement from a $13.7 million loss in Q2 2024 Q2 2025 Non-GAAP Reconciliation Highlights (Discontinued) | Metric | GAAP | Non-GAAP | | :--- | :--- | :--- | | Gross Profit | $8.6M | $10.4M | | Gross Margin | 42.8% | 51.3% | | Operating Expenses | $24.8M | $12.8M | | Adjusted EBITDA | N/A | $(2.4)M | [Combined Company Reconciliations](index=17&type=section&id=Combined%20Company%20Reconciliations) The combined adjusted EBITDA loss for Q2 2025 was $18.6 million, a marked improvement from a $31.0 million loss in the prior-year quarter Q2 2025 Non-GAAP Reconciliation Highlights (Combined) | Metric | GAAP | Non-GAAP | | :--- | :--- | :--- | | Gross Profit | $19.3M | $22.1M | | Gross Margin | 45.9% | 52.8% | | Operating Expenses | $61.1M | $40.7M | | Adjusted EBITDA | N/A | $(18.6)M | [Company Information and Disclosures](index=3&type=section&id=Company%20Information%20and%20Disclosures) [Use of Non-GAAP Measures and Forward-Looking Statements](index=3&type=section&id=Use%20of%20Non-GAAP%20Financial%20Information) The company utilizes non-GAAP measures to show core performance and cautions that forward-looking statements are subject to risks and uncertainties - Management uses non-GAAP financial measures to supplement GAAP results, believing they provide useful information by excluding items not indicative of core operating performance[12](index=12&type=chunk) - Forward-looking statements involve risks related to divestitures, acquisitions, integration, cost savings, market conditions, NIH funding pressures, and competition[13](index=13&type=chunk)[14](index=14&type=chunk) [About Standard BioTools Inc.](index=4&type=section&id=About%20Standard%20BioTools%20Inc.) Standard BioTools provides essential technologies like SomaScan and mass cytometry to biomedical researchers, focusing on oncology and immunology - The company's core technologies include SomaScan, mass cytometry, and microfluidics[15](index=15&type=chunk) - Standard BioTools serves a global client base in academic, government, and private research sectors, with a focus on oncology and immunology[15](index=15&type=chunk)

[Second Quarter Highlights](index=1&type=section&id=Second%20Quarter%20Highlights) Diodes Incorporated achieved better-than-expected revenue in Q2 FY2025, marking the third consecutive quarter of year-over-year growth, indicating continuous market and demand improvement - Company revenue exceeded expectations, achieving third consecutive quarter of year-over-year growth, indicating continuous market and demand improvement[3](index=3&type=chunk)[5](index=5&type=chunk) - Point-of-sale (POS) grew sequentially in all regions, with **double-digit growth in Asia**[5](index=5&type=chunk) - Channel and internal inventory days further reduced[5](index=5&type=chunk) - Strong growth in the consumer end market led to an unfavorable product mix, with high-margin automotive and industrial markets' percentage of total revenue remaining largely flat[6](index=6&type=chunk)[7](index=7&type=chunk) - Channel inventory consumption limited manufacturing facility load increase, causing underutilized capacity costs to hinder gross margin expansion[7](index=7&type=chunk) - Non-GAAP adjusted net income grew nearly **70% sequentially** through strict expense management[7](index=7&type=chunk) Key Financial Data for Q2 FY2025 | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | Sequential Change (vs Q1 2025) | Year-over-Year Change (vs Q2 2024) | | :-------------------------------- | :--------------- | :--------------- | :-------------------------------- | :-------------------------------- | | **Revenue** | $366.2 | $319.8 | +10% (vs $332.1M) | +14% | | **GAAP Gross Profit** | $115.3 | $107.4 | +10.12% (vs $104.7M) | +7.36% | | **GAAP Gross Margin** | 31.5% | 33.6% | 0.0 ppt (vs 31.5%) | -2.1 ppt | | **GAAP Net Income** | $46.1 | $8.0 | Significant improvement (vs -$4.4M) | +476.25% | | **Non-GAAP Adjusted Net Income** | $15.0 | $15.4 | +70.45% (vs $8.8M) | -2.6% | | **GAAP Diluted EPS** | $0.99 | $0.17 | Significant improvement (vs -$0.10) | +482.35% | | **Non-GAAP Diluted EPS** | $0.32 | $0.33 | +68.42% (vs $0.19) | -3.03% | | **EBITDA** | $84.5 | $41.1 | +222.5% (vs $26.2M) | +105.6% | | **Cash Flow from Operations** | $41.5 | N/A | N/A | N/A | | **Free Cash Flow** | $21.1 | N/A | N/A | N/A | | **Net Cash Flow** | -$18.2 | N/A | N/A | N/A | [Business Outlook (Q3 2025 Guidance)](index=2&type=section&id=Business%20Outlook) Diodes anticipates continued strong growth in Q3 2025, with revenue projected to increase 7% sequentially and 12% year-over-year, driven by robust demand from AI-related computing applications, consumer electronics, and the Chinese EV market in Asia - Q3 2025 revenue is projected to reach approximately **$392 million (±3%)**, with the midpoint representing a **12% year-over-year increase**, marking the fourth consecutive quarter of YoY growth[8](index=8&type=chunk)[19](index=19&type=chunk) - Growth is primarily driven by strong demand from AI-related computing applications, consumer electronics, and the Chinese electric vehicle market in Asia[8](index=8&type=chunk) Q3 2025 Financial Guidance | Metric | Expectation | | :-------------------------------- | :-------------------------------- | | **Revenue** | Approximately $392 Million (±3%) | | **GAAP Gross Margin** | 31.6% (±1%) | | **Non-GAAP Operating Expenses as % of Revenue** | Approximately 26.0% (±1%) | | **Net Interest Income** | Approximately $1.0 Million | | **Income Tax Rate** | 18.0% (±3%) | | **Shares for Diluted EPS Calculation** | Approximately 46.5 Million Shares | [Detailed Financial Results](index=2&type=section&id=Detailed%20Financial%20Results) This section provides a comprehensive overview of Diodes Incorporated's financial performance, including GAAP and non-GAAP metrics, cash flow, and balance sheet highlights [Q2 2025 Financial Performance](index=2&type=section&id=Second%20Quarter%202025%20Financial%20Performance) Diodes Incorporated reported revenue of $366.2 million in Q2 2025, with GAAP gross profit of $115.3 million and a gross margin of 31.5% Q2 2025 GAAP Financial Data | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | Q1 2025 (Million USD) | | :------------------- | :--------------- | :--------------- | :--------------- | | **Revenue** | $366.2 | $319.8 | $332.1 | | **GAAP Gross Profit** | $115.3 | $107.4 | $104.7 | | **GAAP Gross Margin** | 31.5% | 33.6% | 31.5% | | **GAAP Operating Expenses** | $105.9 | $103.7 | $103.4 | | **GAAP Operating Expenses as % of Revenue** | 28.9% | 32.4% | 31.1% | | **GAAP Net Income** | $46.1 | $8.0 | -$4.4 | | **GAAP Diluted EPS** | $0.99 | $0.17 | -$0.10 | [Non-GAAP Adjusted Net Income and EPS](index=2&type=section&id=Non-GAAP%20Adjusted%20Net%20Income%20and%20EPS) Non-GAAP adjusted net income for Q2 2025 was $15.0 million, with diluted EPS of $0.32, excluding $23.4 million in non-cash unrealized investment mark-to-market gains, $12.7 million in gain on disposition of a subsidiary, and $4.8 million in acquisition-related intangible asset amortization Q2 2025 Non-GAAP Adjusted Net Income and EPS | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | Q1 2025 (Million USD) | | :------------------- | :--------------- | :--------------- | :--------------- | | **Non-GAAP Adjusted Net Income** | $15.0 | $15.4 | $8.8 | | **Non-GAAP Diluted EPS** | $0.32 | $0.33 | $0.19 | - Non-GAAP adjustments excluded **$23.4 million** in non-cash unrealized investment mark-to-market gains, **$12.7 million** in gain on disposition of a subsidiary, and **$4.8 million** in acquisition-related intangible asset amortization[12](index=12&type=chunk) - Includes approximately **$4.6 million** (after tax) of non-cash share-based compensation expense, which would increase GAAP and non-GAAP diluted EPS by **$0.10** if excluded[14](index=14&type=chunk) [EBITDA](index=3&type=section&id=EBITDA) EBITDA (a non-GAAP metric) for Q2 2025 was $84.5 million, representing 23.1% of revenue, showing significant growth compared to both the prior year and previous quarter EBITDA Performance | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | Q1 2025 (Million USD) | | :----- | :--------------- | :--------------- | :--------------- | | **EBITDA** | $84.5 | $41.1 | $26.2 | | **EBITDA as % of Revenue** | 23.1% | 12.8% | 7.9% | [Cash Flow and Balance Sheet Summary](index=3&type=section&id=Cash%20Flow%20and%20Balance%20Sheet%20Summary) In Q2 2025, net cash flow from operating activities was $41.5 million, and free cash flow was $21.1 million Q2 2025 Cash Flow | Metric | Amount (Million USD) | | :------------------- | :--------------- | | **Net Cash Flow from Operations** | $41.5 | | **Free Cash Flow** | $21.1 | | **Net Cash Flow** | -$18.2 | | **Capital Expenditures** | $20.4 | - Net cash flow was **negative $18.2 million**, primarily including approximately **$49.2 million** in increased equity investments and **$10 million** for the stock repurchase program[16](index=16&type=chunk) Key Balance Sheet Data as of June 30, 2025 | Metric | Amount (Million USD) | | :------------------- | :--------------- | | **Cash, Cash Equivalents, Restricted Cash, and Short-Term Investments** | Approximately $333 | | **Total Debt** | Approximately $54 | | **Working Capital** | Approximately $871 | [Corporate Information](index=4&type=section&id=Corporate%20Information) This section provides essential corporate details, including information on the conference call, an overview of Diodes Incorporated, a safe harbor statement, and contact information for investor relations [Conference Call](index=4&type=section&id=Conference%20Call) Diodes Incorporated held a conference call on August 7, 2025, to discuss its second-quarter financial results, providing dial-in information and webcast details for investors and analysts - The conference call was held on **August 7, 2025**, at 4:00 PM CT (5:00 PM ET)[20](index=20&type=chunk) - Dial-in information and a webcast link were provided, with a telephone replay service available until **August 14, 2025**[20](index=20&type=chunk)[21](index=21&type=chunk) [About Diodes Incorporated](index=4&type=section&id=About%20Diodes%20Incorporated) Diodes Incorporated is a provider of high-quality semiconductor products for automotive, industrial, computing, consumer, and communications markets, leveraging its extensive analog and discrete power solutions and advanced packaging technologies - Diodes Incorporated, an S&P SmallCap 600 and Russell 3000 Index company, supplies high-quality semiconductor products to leading global companies in the automotive, industrial, computing, consumer, and communications markets[22](index=22&type=chunk) - The company leverages its expanded analog and discrete power solutions product portfolio and leading-edge packaging technologies to meet customer needs[22](index=22&type=chunk) [Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995](index=4&type=section&id=Safe%20Harbor%20Statement%20Under%20the%20Private%20Securities%20Litigation%20Reform%20Act%20of%201995) This statement warns investors that forward-looking statements in the report involve risks and uncertainties that could cause actual results to differ materially from expectations, including market, acquisition, operational, and economic factors - Forward-looking statements in the report involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements[23](index=23&type=chunk) - Potential risks and uncertainties include: failure to achieve expectations, failure to realize anticipated benefits of acquisitions or slower-than-expected integration, inability to maintain current growth strategies or performance, inability to increase automotive, industrial, or other revenue and market share, risks of domestic and international operations, cyclical downturns in the semiconductor industry, changes in end-market demand or product mix, unfavorable exchange rates, inaccurate future outlook or guidance, global economic weakness or unstable financial markets, trade restrictions, and vulnerabilities in information technology systems[24](index=24&type=chunk) [Company and Investor Relations Contact Information](index=5&type=section&id=Company%20Contact) Provides detailed contact information for Diodes Incorporated's company contact (Gurmeet Dhaliwal, Director of Investor Relations and Corporate Marketing) and investor relations contact (Leanne Sievers, President of Shelton Group) - Company Contact: Gurmeet Dhaliwal (Director, Investor Relations and Corporate Marketing), Phone: **408-232-9003**, Email: Gurmeet_Dhaliwal@diodes.com[27](index=27&type=chunk) - Investor Relations Contact: Leanne Sievers (President, Shelton Group), Phone: **949-224-3874**, Email: lsievers@sheltongroup.com[27](index=27&type=chunk) [Supplemental Financial Information](index=6&type=section&id=Supplemental%20Financial%20Information) This section provides detailed consolidated financial statements, including statements of operations, reconciliations of GAAP to non-GAAP metrics, and balance sheets, offering a comprehensive view of the company's financial position and performance [Consolidated Condensed Statements of Operations](index=6&type=section&id=CONSOLIDATED%20CONDENSED%20STATEMENTS%20OF%20OPERATIONS) This section presents Diodes Incorporated's consolidated condensed statements of operations, detailing GAAP financial data for the three and six months ended June 30, 2025 and 2024, including net sales, cost of sales, gross profit, operating expenses, and net income Consolidated Condensed Statements of Operations (Unaudited, in Thousands of USD) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------- | :--------------- | :--------------- | :--------------- | :--------------- | | **Net Sales** | $366,212 | $319,771 | $698,325 | $621,743 | | **Cost of Sales** | $250,888 | $212,385 | $478,307 | $414,773 | | **Gross Profit** | $115,324 | $107,386 | $220,018 | $206,970 | | **Operating Expenses** | $105,935 | $103,678 | $209,333 | $190,314 | | **Operating Income** | $9,389 | $3,708 | $10,685 | $16,656 | | **Other Income (Expense)** | $43,834 | $9,096 | $39,771 | $14,954 | | **Income Before Income Taxes and Noncontrolling Interests** | $53,223 | $12,804 | $50,456 | $31,610 | | **Income Tax Expense** | $9,063 | $2,643 | $9,083 | $6,180 | | **Net Income** | $44,160 | $10,161 | $41,373 | $25,430 | | **Net Income Attributable to Common Stockholders** | $46,098 | $8,000 | $41,661 | $22,038 | | **Diluted EPS** | $0.99 | $0.17 | $0.90 | $0.48 | [Reconciliation of Net Income to Adjusted Net Income](index=7&type=section&id=RECONCILIATION%20OF%20NET%20INCOME%20TO%20ADJUSTED%20NET%20INCOME) This section provides detailed reconciliations of GAAP net income to non-GAAP adjusted net income, outlining various adjustments made across different reporting periods to offer a clearer view of operational performance [For the three months ended June 30, 2025](index=7&type=section&id=For%20the%20three%20months%20ended%20June%2030%2C%202025) This reconciliation details adjustments for acquisition-related intangible asset amortization, acquisition-related costs, restructuring charges, gain on disposition of a subsidiary, unrealized investment gains, and board member retirement benefits for the three months ended June 30, 2025 Q2 2025 Reconciliation of Net Income to Adjusted Net Income (Unaudited, in Thousands of USD) | Metric | Amount | | :------------------------------------- | :--------------- | | **GAAP Net Income** | $46,098 | | **Diluted EPS (GAAP)** | $0.99 | | **Adjustments:** | | | Acquisition-related intangible asset amortization | $4,805 | | Acquisition-related costs | $61 | | Restructuring charges | $54 | | Gain on disposition of a subsidiary | $(12,693) | | Unrealized investment gains | $(23,383) | | Board member retirement benefits | $92 | | **Non-GAAP Adjusted Net Income** | $15,034 | | **Non-GAAP Diluted EPS** | $0.32 | [For the three months ended June 30, 2024](index=8&type=section&id=For%20the%20three%20months%20ended%20June%2030%2C%202024) This reconciliation for the three months ended June 30, 2024, primarily includes adjustments for acquisition-related intangible asset amortization, executive retirement benefits, restructuring charges, and unrealized investment gains Q2 2024 Reconciliation of Net Income to Adjusted Net Income (Unaudited, in Thousands of USD) | Metric | Amount | | :------------------------------------- | :--------------- | | **GAAP Net Income** | $8,000 | | **Diluted EPS (GAAP)** | $0.17 | | **Adjustments:** | | | Acquisition-related intangible asset amortization | $3,147 | | Executive retirement benefits | $509 | | Restructuring charges | $7,244 | | Unrealized investment gains | $(3,480) | | **Non-GAAP Adjusted Net Income** | $15,420 | | **Non-GAAP Diluted EPS** | $0.33 | [For the six months ended June 30, 2025](index=9&type=section&id=For%20the%20six%20months%20ended%20June%2030%2C%202025) This reconciliation for the six months ended June 30, 2025, includes adjustments for acquisition-related intangible asset amortization, acquisition-related costs, restructuring charges, impairment of equity investment, gain on disposition of a subsidiary, unrealized investment gains, and board member retirement benefits H1 2025 Reconciliation of Net Income to Adjusted Net Income (Unaudited, in Thousands of USD) | Metric | Amount | | :------------------------------------- | :--------------- | | **GAAP Net Income** | $41,661 | | **Diluted EPS (GAAP)** | $0.90 | | **Adjustments:** | | | Acquisition-related intangible asset amortization | $9,598 | | Acquisition-related costs | $196 | | Restructuring charges | $280 | | Impairment of equity investment | $4,849 | | Gain on disposition of a subsidiary | $(12,693) | | Unrealized investment gains | $(20,157) | | Board member retirement benefits | $92 | | **Non-GAAP Adjusted Net Income** | $23,826 | | **Non-GAAP Diluted EPS** | $0.51 | [For the six months ended June 30, 2024](index=10&type=section&id=For%20the%20six%20months%20ended%20June%2030%2C%202024) This reconciliation for the six months ended June 30, 2024, includes adjustments for acquisition-related intangible asset amortization, executive retirement benefits, restructuring charges, unrealized investment gains, and manufacturing facility insurance proceeds H1 2024 Reconciliation of Net Income to Adjusted Net Income (Unaudited, in Thousands of USD) | Metric | Amount | | :------------------------------------- | :--------------- | | **GAAP Net Income** | $22,038 | | **Diluted EPS (GAAP)** | $0.48 | | **Adjustments:** | | | Acquisition-related intangible asset amortization | $6,258 | | Executive retirement benefits | $509 | | Restructuring charges | $7,244 | | Unrealized investment gains | $(3,776) | | Manufacturing facility insurance proceeds | $(3,843) | | **Non-GAAP Adjusted Net Income** | $28,430 | | **Non-GAAP Diluted EPS** | $0.61 | [Explanation of Adjusted Net Income and Adjusted EPS](index=11&type=section&id=ADJUSTED%20NET%20INCOME%20AND%20ADJUSTED%20EARNINGS%20PER%20SHARE) This section explains the various adjustments made to calculate non-GAAP adjusted net income and EPS, including acquisition-related intangible asset amortization, board member retirement benefits, acquisition-related costs, manufacturing facility insurance proceeds, unrealized investment gains, restructuring charges, gain on disposition of a subsidiary, and impairment of equity investment, along with their rationales - The company excludes acquisition-related intangible asset amortization to ensure comparability of operating results between newly acquired and long-held businesses, and to eliminate the significant variability and unpredictability of this expense across companies[39](index=39&type=chunk) - Excludes board member retirement-related costs (cash payments and accelerated vesting of equity awards) as they do not represent ongoing operating expenses[40](index=40&type=chunk) - Excludes acquisition-related costs (consulting, legal, and other professional fees) to more accurately reflect costs without special events like acquisitions and to facilitate comparison with periods without such costs[41](index=41&type=chunk) - Excludes manufacturing facility insurance proceeds to more accurately reflect the company's ongoing operations[42](index=42&type=chunk) - Excludes unrealized mark-to-market adjustments for various equity-related investments, as they do not reflect ongoing operations[43](index=43&type=chunk) - Excludes restructuring charges to provide an enhanced view of the company's cost structure and to facilitate comparison with periods without such charges[44](index=44&type=chunk) - Excludes gain on disposition of a subsidiary, as it does not reflect ongoing operations[45](index=45&type=chunk) - Excludes impairment of equity investment, as it does not reflect ongoing operations[46](index=46&type=chunk) [Cash Flow Items](index=12&type=section&id=CASH%20FLOW%20ITEMS) This section defines Free Cash Flow (FCF) as a non-GAAP financial measure and provides FCF data for Q2 2025, highlighting its role in supporting new product development, acquisitions, and debt reduction - Free Cash Flow (FCF) is a non-GAAP financial measure calculated by subtracting capital expenditures from cash flow from operations[48](index=48&type=chunk) - Q2 2025 FCF was **$21.1 million**, representing the cash and cash equivalents the company can generate after cash expenditures required to maintain or expand property, plant, and equipment[48](index=48&type=chunk) [Consolidated Reconciliation of Net Income to EBITDA](index=12&type=section&id=CONSOLIDATED%20RECONCILIATION%20OF%20NET%20INCOME%20TO%20EBITDA) This section provides a reconciliation of GAAP net income to EBITDA (a non-GAAP metric) and explains EBITDA's utility as a tool for evaluating company profitability and operational performance, especially when comparing with other companies in the industry - EBITDA, representing earnings before interest, taxes, depreciation, and amortization, is considered useful by management for investors as it is frequently used by securities analysts, investors, and financial institutions to evaluate companies within the industry and provides further clarity on profitability[50](index=50&type=chunk) Reconciliation of Net Income to EBITDA (Unaudited, in Thousands of USD) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------------- | :--------------- | :--------------- | :--------------- | :--------------- | | **Net Income (GAAP)** | $46,098 | $8,000 | $41,661 | $22,038 | | **Add:** | | | | | | Net interest expense | $(6,518) | $(3,385) | $(11,864) | $(7,467) | | Income tax expense | $9,063 | $2,643 | $9,083 | $6,180 | | Depreciation and amortization | $35,895 | $33,794 | $71,813 | $68,649 | | **EBITDA (Non-GAAP)** | $84,538 | $41,052 | $110,693 | $89,400 | [Consolidated Condensed Balance Sheets](index=13&type=section&id=CONSOLIDATED%20CONDENSED%20BALANCE%20SHEETS) This section presents Diodes Incorporated's consolidated condensed balance sheets, detailing assets, liabilities, and stockholders' equity as of June 30, 2025, and December 31, 2024 Consolidated Condensed Balance Sheets (Unaudited, in Thousands of USD) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------- | :--------------- | :--------------- | | **Assets:** | | | | Cash and cash equivalents | $317,049 | $308,671 | | Short-term investments | $10,285 | $7,464 | | Accounts receivable, net | $313,492 | $325,517 | | Inventories | $482,701 | $474,948 | | **Total current assets** | $1,244,614 | $1,224,153 | | Property, plant and equipment, net | $680,042 | $684,259 | | Goodwill | $185,292 | $181,555 | | Intangible assets, net | $56,328 | $67,397 | | **Total assets** | $2,471,555 | $2,386,281 | | **Liabilities:** | | | | Line of credit | $27,562 | $31,429 | | Accounts payable | $148,269 | $133,765 | | **Total current liabilities** | $373,633 | $375,596 | | Long-term debt, net | $24,865 | $19,563 | | **Total liabilities** | $537,384 | $517,334 | | **Stockholders' Equity:** | | | | Common stock | $37,142 | $37,083 | | Retained earnings | $1,760,959 | $1,719,298 | | Treasury stock | $(348,104) | $(338,100) | | **Total stockholders' equity** | $1,877,103 | $1,795,301 | | **Noncontrolling interests** | $57,068 | $73,646 | | **Total equity** | $1,934,171 | $1,868,947 | | **Total liabilities and stockholders' equity** | $2,471,555 | $2,386,281 |

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements and Notes](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20and%20Notes) This section presents the unaudited condensed consolidated financial statements and accompanying notes for the company as of June 30, 2025 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet reflects total assets of $291.4 million, a slight decrease from year-end 2024, with a notable increase in stockholders' equity Condensed Consolidated Balance Sheets (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $24,622 | $33,375 | | Total current assets | $72,827 | $81,382 | | Goodwill | $188,784 | $179,408 | | Total assets | $291,418 | $293,825 | | **Liabilities & Equity** | | | | Total current liabilities | $42,380 | $40,298 | | Long-term debt, net | $181,215 | $184,840 | | Total liabilities | $241,985 | $251,550 | | Redeemable non-controlling interest | $— | $12,500 | | Total stockholders' equity | $49,433 | $29,775 | | Total liabilities and stockholders' equity | $291,418 | $293,825 | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a significant net loss in Q2 2025, driven by a large foreign exchange loss and debt modification expenses Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net revenues | $42,486 | $43,458 | $84,699 | $86,423 | | Income from operations | $6,860 | $4,297 | $15,089 | $8,873 | | Debt modification expense | $(4,384) | $— | $(4,384) | $— | | Loss on debt extinguishment | $(1,993) | $— | $(1,993) | $— | | Foreign exchange (loss) gain | $(12,531) | $1,220 | $(18,110) | $5,021 | | Net (loss) income | $(19,604) | $(494) | $(23,421) | $3,981 | | Basic EPS | $(1.87) | $0.01 | $(2.27) | $0.24 | | Diluted EPS | $(1.87) | $0.01 | $(2.27) | $0.24 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations decreased significantly, while financing activities were dominated by a major debt refinancing transaction Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,578 | $11,840 | | Net cash used in investing activities | $(6,685) | $(7,510) | | Net cash used in financing activities | $(4,884) | $(5,105) | | Net decrease in cash and cash equivalents | $(8,753) | $(924) | | **Ending cash and cash equivalents** | **$24,622** | **$23,648** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail a major debt refinancing, the termination of a joint venture, and a significant post-quarter tax refund used for debt repayment - The company's revenue is primarily generated from North America, which accounted for **$80.5 million** of the $84.7 million total revenue for the first six months of 2025[35](index=35&type=chunk) - As of June 30, 2025, the company has **$133.7 million** in remaining performance obligations, with approximately **99.4%** expected to be recognized as revenue within the next two years[41](index=41&type=chunk) - In April 2025, the company entered into a new **$200 million term loan** (the "2025 Term Loan") to redeem its $121.4 million in 2021 Senior Notes and settle its existing $73.6 million 2024 Term Loan[72](index=72&type=chunk) - In July 2025, subsequent to the quarter end, the company received a **$33.9 million tax refund** and used **$25.4 million** to pay down the principal of the 2025 Term Loan[137](index=137&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the Q2 net loss to non-operating items like foreign exchange impacts and debt refinancing costs, while noting operational cost savings [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Revenues saw a slight decline from an expired contract, but operating income improved due to cost-saving measures, offset by significant non-operating expenses - Net revenues decreased by **$1.0 million** in Q2 2025 compared to Q2 2024, primarily due to a $1.3 million impact from an expired customer contract, partially offset by subscriber growth[154](index=154&type=chunk) - Cost of revenues, R&D, and SG&A expenses all decreased in Q2 2025 compared to the prior year period, driven by **cost-saving initiatives and restructuring measures** implemented in late 2024[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - A foreign exchange loss of **$12.5 million** was recorded in Q2 2025, compared to a gain of $1.2 million in Q2 2024, due to non-cash impacts on intercompany balances between U.S. and European entities[165](index=165&type=chunk) - The company incurred **$4.4 million** in debt modification expenses and a **$2.0 million** loss on debt extinguishment in Q2 2025 related to the refinancing of its debt facilities[163](index=163&type=chunk)[164](index=164&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is supported by existing cash and operating cash flows, and was significantly bolstered by a post-quarter tax refund - The company had **$24.6 million** in cash and cash equivalents at June 30, 2025, and generated **$2.6 million** in cash from operations during the first six months of the year[181](index=181&type=chunk) - Cash used in financing activities was **$4.9 million** for the six months ended June 30, 2025, driven by a major debt refinancing where proceeds from a new **$200M term loan** were used to repay $121.4M of senior notes and other debt[188](index=188&type=chunk) Summary of Contractual Obligations as of June 30, 2025 (in thousands) | Obligation | Total | 2025 (6 months) | 2026-2027 | 2028 | Thereafter | | :--- | :--- | :--- | :--- | :--- | :--- | | 2025 Term Loan | $200,000 | $2,500 | $20,000 | $17,500 | $160,000 | | Interest | $79,395 | $11,436 | $43,150 | $19,288 | $5,521 | | Operating lease obligations | $19,879 | $3,837 | $13,013 | $3,029 | $— | | Purchase obligations | $19,983 | $9,334 | $9,571 | $1,078 | $— | | **Total** | **$320,645** | **$27,650** | **$86,579** | **$40,895** | **$165,521** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency fluctuations and interest rate changes on its variable-rate debt - The company is exposed to **foreign currency translation risk** as it operates internationally and must translate foreign subsidiary financial results into U.S. dollars[200](index=200&type=chunk) - The company's 2025 Term Loan bears interest at a variable rate (SOFR + 7.00%, with a 2.50% floor); a hypothetical **100 basis point increase** in interest rates would increase annual interest expense by approximately **$1.6 million**[204](index=204&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - Based on an evaluation as of the end of the period, the Chief Executive Officer and Chief Financial Officer concluded that the company's **disclosure controls and procedures were effective**[205](index=205&type=chunk) - **No changes** in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[206](index=206&type=chunk) [PART II. OTHER INFORMATION](index=42&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its business - The company is **not currently subject to any legal proceedings** expected to have a material adverse effect on its operations[136](index=136&type=chunk)[208](index=208&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) A new risk factor related to the restrictive covenants in the 2025 Term Loan Agreement has been introduced - A new risk factor has been added concerning the 2025 Term Loan Agreement, which contains **restrictive covenants** that limit the company's operational and financial flexibility[210](index=210&type=chunk)[211](index=211&type=chunk) - A breach of the loan's covenants could lead to an **event of default**, allowing the lender to terminate commitments and declare all outstanding obligations immediately due and payable, which could significantly harm the business and its prospects[212](index=212&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the period - None[213](index=213&type=chunk) [Item 5. Other Information](index=43&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted or terminated a **Rule 10b5-1 trading plan** during the covered period[216](index=216&type=chunk)

PART I. FINANCIAL INFORMATION [ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section presents Monroe Capital Corporation's unaudited consolidated financial statements for the period ended June 30, 2025, including statements of assets and liabilities, operations, changes in net assets, cash flows, schedules of investments, and detailed notes on accounting policies and recent developments [Consolidated Statements of Assets and Liabilities](index=3&type=section&id=Consolidated%20Statements%20of%20Assets%20and%20Liabilities) Total assets and net assets decreased from December 31, 2024, to June 30, 2025, primarily due to reductions in investments at fair value and cash, alongside a decrease in total debt | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total investments, at fair value | $367,700 | $457,048 | | Cash and cash equivalents | $2,425 | $9,044 | | Total assets | $394,617 | $490,671 | | Total debt, less unamortized debt issuance costs | $208,578 | $291,975 | | Total liabilities | $215,025 | $298,909 | | Total net assets | $179,592 | $191,762 | | Net asset value per share | $8.29 | $8.85 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Total investment income and net investment income significantly decreased for the three and six months ended June 30, 2025, leading to a net decrease in net assets from operations, contrasting with an increase in 2024 | Metric (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Total investment income | $9,873 | $15,627 | | Total operating expenses | $6,618 | $8,933 | | Net investment income | $3,298 | $6,559 | | Net gain (loss) | $(5,167) | $(3,301) | | Net increase (decrease) in net assets resulting from operations | $(1,869) | $3,258 | | Net investment income per share - basic and diluted | $0.15 | $0.30 | | Net increase (decrease) in net assets resulting from operations per share - basic and diluted | $(0.09) | $0.15 | | Metric (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Total investment income | $21,511 | $30,809 | | Total operating expenses | $14,051 | $18,627 | | Net investment income | $7,383 | $12,029 | | Net gain (loss) | $(8,720) | $(5,576) | | Net increase (decrease) in net assets resulting from operations | $(1,337) | $6,453 | | Net investment income per share - basic and diluted | $0.34 | $0.56 | | Net increase (decrease) in net assets resulting from operations per share - basic and diluted | $(0.06) | $0.30 | [Consolidated Statements of Changes in Net Assets](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Net%20Assets) Total net assets decreased from **$191,762 thousand** at December 31, 2024, to **$179,592 thousand** at June 30, 2025, mainly due to net change in unrealized loss and stockholder distributions, partially offset by net investment income | Metric (in thousands) | Six months ended June 30, 2025 | | :-------------------- | :----------------------------- | | Balances at December 31, 2024 | $191,762 | | Net investment income | $7,383 | | Net realized gain (loss) | $(361) | | Net change in unrealized gain (loss) | $(8,359) | | Distributions to stockholders | $(10,833) |\n| Balances at June 30, 2025 | $179,592 | | Metric (in thousands) | Six months ended June 30, 2024 | | :-------------------- | :----------------------------- | | Balances at December 31, 2023 | $203,724 | | Net investment income | $12,029 |\n| Net realized gain (loss) | $510 | | Net change in unrealized gain (loss) | $(6,086) | | Distributions to stockholders | $(10,833) |\n| Balances at June 30, 2024 | $199,344 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) A net decrease in cash and cash equivalents for the six months ended June 30, 2025, resulted primarily from significant net cash used in financing activities, despite positive cash flow from operating activities | Metric (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $88,361 | $6,051 | | Net cash provided by (used in) financing activities | $(94,980) | $(7,133) | | Net increase (decrease) in cash and cash equivalents | $(6,619) | $(1,082) | | Cash and cash equivalents, end of period | $2,425 | $3,876 | [Consolidated Schedules of Investments as of June 30, 2025](index=7&type=section&id=Consolidated%20Schedules%20of%20Investments%20as%20of%20June%2030%2C%202025) The investment portfolio at fair value totaled **$367,700 thousand** as of June 30, 2025, primarily comprising senior secured loans (**73.5%**) and equity investments (**9.1%**), with FIRE: Real Estate (**24.4%**) and Healthcare & Pharmaceuticals (**15.5%**) as top industry concentrations | Investment Type | Amortized Cost (in thousands) | % of Total | Fair Value (in thousands) | % of Total | | :---------------------- | :---------------------------- | :--------- | :------------------------ | :--------- | | Senior secured loans | $285,753 | 68.9% | $270,091 | 73.5% | | Unitranche secured loans | $2,163 | 0.5% | $2,183 | 0.6% | | Junior secured loans | $41,810 | 10.1% | $31,679 | 8.6% | | LLC equity interest in SLF | $42,650 | 10.3% | $30,157 | 8.2% | | Equity investments | $42,432 | 10.2% | $33,590 | 9.1% | | Total | $414,808 | 100.0% | $367,700 | 100.0% | Industry (Fair Value in thousands) | Industry (Fair Value in thousands) | June 30, 2025 | % of Total | | :--------------------------------- | :------------ | :--------- | | FIRE: Real Estate | $89,625 | 24.4% | | Healthcare & Pharmaceuticals | $56,713 | 15.5% | | High Tech Industries | $37,155 | 10.1% | | Investment Funds & Vehicles | $30,157 | 8.2% | | Services: Business | $29,644 | 8.1% | | Media: Diversified & Production | $24,752 | 6.7% | [Consolidated Schedules of Investments as of December 31, 2024](index=21&type=section&id=Consolidated%20Schedules%20of%20Investments%20as%20of%20December%2031%2C%202024) The investment portfolio at fair value totaled **$457,048 thousand** as of December 31, 2024, with senior secured loans constituting **78.3%** and top industry concentrations in FIRE: Real Estate (**18.2%**) and Healthcare & Pharmaceuticals (**17.5%**) | Investment Type | Amortized Cost (in thousands) | % of Total | Fair Value (in thousands) | % of Total | | :---------------------- | :---------------------------- | :--------- | :------------------------ | :--------- | | Senior secured loans | $372,074 | 75.0% | $357,994 | 78.3% | | Unitranche secured loans | $3,835 | 0.8% | $3,862 | 0.8% | | Junior secured loans | $35,771 | 7.2% | $29,634 | 6.5% | | LLC equity interest in SLF | $42,650 | 8.6% | $32,730 | 7.2% | | Equity investments | $41,467 | 8.4% | $32,828 | 7.2% | | Total | $495,797 | 100.0% | $457,048 | 100.0% | Industry (Fair Value in thousands) | Industry (Fair Value in thousands) | December 31, 2024 | % of Total | | :--------------------------------- | :---------------- | :--------- | | FIRE: Real Estate | $83,037 | 18.2% | | Healthcare & Pharmaceuticals | $79,784 | 17.5% | | Services: Business | $51,175 | 11.2% | | Media: Diversified & Production | $43,717 | 9.6% | | High Tech Industries | $41,240 | 9.0% | | Investment Funds & Vehicles | $32,730 | 7.2% | [Notes to Consolidated Financial Statements](index=36&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section details the company's accounting policies, investment valuation, related party transactions, and recent developments, including the Adviser Change in Control and subsequent merger agreements [Note 1. Organization and Principal Business](index=36&type=section&id=Note%201.%20Organization%20and%20Principal%20Business) Monroe Capital Corporation, an externally managed BDC and RIC, aims to maximize stockholder returns through debt and equity investments, with a change of control in its investment adviser effective March 31, 2025 - Monroe Capital Corporation is an externally managed, non-diversified, closed-end management investment company regulated as a Business Development Company (BDC) under the 1940 Act and has elected to be treated as a Regulated Investment Company (RIC) for U.S. federal income tax purposes[80](index=80&type=chunk) - The company's investment objective is to maximize total return to stockholders through current income and capital appreciation via investments in senior secured, junior secured, and unitranche secured debt, and to a lesser extent, unsecured subordinated debt and equity co-investments[80](index=80&type=chunk) - An Adviser Change in Control became effective on **March 31, 2025**, with Momentum US Bidco LLC, an affiliate of Wendel SE, acquiring a **75% interest** in Monroe Capital, the parent of MC Advisors[81](index=81&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=36&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the company's GAAP-compliant accounting policies, including fair value measurement, revenue recognition for investments, non-accrual status, distributions, and debt issuance costs - The company prepares consolidated financial statements in accordance with GAAP, following ASC Topic 946 for investment companies, and consolidates wholly-owned taxable subsidiaries[82](index=82&type=chunk)[85](index=85&type=chunk) - Fair value is applied to substantially all financial instruments, categorized into a three-level hierarchy based on input observability (ASC Topic 820)[86](index=86&type=chunk)[164](index=164&type=chunk) - Interest and dividend income are recorded on an accrual basis, with PIK provisions added to principal[88](index=88&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) Loan origination fees and discounts are capitalized and amortized using the effective interest method[92](index=92&type=chunk) Investments are placed on non-accrual status when payments are materially past due or collection is doubtful[96](index=96&type=chunk) Total Investment Income (in thousands) | Income Type | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Interest income | $6,864 | $11,850 | | PIK interest income | $1,660 | $2,099 | | Dividend income | $829 | $1,017 | | Other income | $54 | $265 | | Prepayment gain (loss) | $288 | $145 | | Accretion of discounts and amortization of premiums | $178 | $251 | | **Total investment income** | **$9,873** | **$15,627** | Total Investment Income (in thousands) | Income Type | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Interest income | $14,830 | $23,512 | | PIK interest income | $3,560 | $4,214 | | Dividend income | $1,858 | $2,029 | | Other income | $282 | $302 | | Prepayment gain (loss) | $532 | $250 | | Accretion of discounts and amortization of premiums | $449 | $502 | | **Total investment income** | **$21,511** | **$30,809** | [Note 3. Investments](index=42&type=section&id=Note%203.%20Investments) This note details the investment portfolio's composition by type, region, and industry, along with a comprehensive overview of MRCC Senior Loan Fund I, LLC, an unconsolidated co-investment entity Investment Portfolio Composition (in thousands) | Investment Type | June 30, 2025 (Fair Value) | % of Total | December 31, 2024 (Fair Value) | % of Total | | :---------------------- | :------------------------- | :--------- | :----------------------------- | :--------- | | Senior secured loans | $270,091 | 73.5% | $357,994 | 78.3% | | Unitranche secured loans | $2,183 | 0.6% | $3,862 | 0.8% | | Junior secured loans | $31,679 | 8.6% | $29,634 | 6.5% | | LLC equity interest in SLF | $30,157 | 8.2% | $32,730 | 7.2% | | Equity investments | $33,590 | 9.1% | $32,828 | 7.2% | | **Total** | **$367,700** | **100.0%** | **$457,048** | **100.0%** | Investment Portfolio by Geographic Region (Fair Value in thousands) | Region | June 30, 2025 | % of Total | December 31, 2024 | % of Total | | :------------ | :------------ | :--------- | :---------------- | :--------- | | Midwest | $142,353 | 38.7% | $152,880 | 33.4% | | Northeast | $84,604 | 23.0% | $94,766 | 20.7% | | Southeast | $64,628 | 17.6% | $111,115 | 24.4% | | West | $66,051 | 18.0% | $79,683 | 17.4% | | Southwest | $8,738 | 2.4% | $13,186 | 2.9% | | International | $1,326 | 0.3% | $1,388 | 0.3% | Investment Portfolio by Industry (Fair Value in thousands) | Industry | June 30, 2025 | % of Total | December 31, 2024 | % of Total | | :--------------------------- | :------------ | :--------- | :---------------- | :--------- | | FIRE: Real Estate | $89,625 | 24.4% | $83,037 | 18.2% | | Healthcare & Pharmaceuticals | $56,713 | 15.5% | $79,784 | 17.5% | | High Tech Industries | $37,155 | 10.1% | $41,240 | 9.0% | | Investment Funds & Vehicles | $30,157 | 8.2% | $32,730 | 7.2% | | Services: Business | $29,644 | 8.1% | $51,175 | 11.2% | | Media: Diversified & Production | $24,752 | 6.7% | $43,717 | 9.6% | - As of June 30, 2025, ten borrowers had debt or preferred equity investments on non-accrual status, totaling **$13,373 thousand** at fair value (**3.6%** of total investments)[96](index=96&type=chunk) MRCC Senior Loan Fund I, LLC (SLF) Summary (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------------- | :------------ | :---------------- | | Company's investment in SLF (fair value) | $30,157 | $32,730 | | SLF Total assets (fair value) | $75,899 | $104,159 | | SLF Secured loans (outstanding principal) | $70,941 | $101,624 | | SLF Weighted average current interest rate on secured loans | 8.7% | 9.3% | | SLF Portfolio company investments on non-accrual status (fair value) | $5,560 | $5,184 | [Note 4. Fair Value Measurements](index=56&type=section&id=Note%204.%20Fair%20Value%20Measurements) This note details the company's fair value measurement policies for investments, categorizing them into a three-level hierarchy, with the Valuation Designee overseeing the process using income and market approaches for Level 3 assets - The company values all investments in accordance with ASC Topic 820, using a three-level fair value hierarchy based on market price observability of inputs[159](index=159&type=chunk)[161](index=161&type=chunk) - The Board has designated MC Advisors as the Valuation Designee, responsible for determining fair value, especially for investments lacking readily available market quotations, through a multi-step valuation process involving internal evaluations and independent appraisals[162](index=162&type=chunk)[163](index=163&type=chunk)[170](index=170&type=chunk) - Valuation techniques for Level 3 debt include the income approach (discounted cash flow models) and market approach (enterprise value methodology, often based on EBITDA or revenue multiples)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) Fair Value Measurements of Investments (in thousands) | Category | June 30, 2025 (Level 3) | December 31, 2024 (Level 3) | | :------------------------ | :---------------------- | :-------------------------- | | Senior secured loans | $270,091 | $357,994 | | Unitranche secured loans | $2,183 | $3,862 | | Junior secured loans | $31,679 | $29,634 | | Equity investments | $33,590 | $32,767 | | Investments measured at NAV | $30,157 | $32,730 | | **Total investments** | **$367,700** | **$457,048** | Debt Carrying Value vs. Fair Value (in thousands) | Debt Type | June 30, 2025 (Carrying Value) | June 30, 2025 (Fair Value) | December 31, 2024 (Carrying Value) | December 31, 2024 (Fair Value) | | :-------------------- | :----------------------------- | :------------------------- | :--------------------------------- | :----------------------------- | | Revolving Credit Facility | $79,080 | $79,080 | $162,872 | $162,872 | | 2026 Notes | $129,498 | $127,830 | $129,103 | $124,161 | | **Total Debt** | **$208,578** | **$206,910** | **$291,975** | **$287,033** | [Note 5. Transactions with Affiliate Companies](index=64&type=section&id=Note%205.%20Transactions%20with%20Affiliate%20Companies) This note details transactions with non-controlled and controlled affiliate companies, including changes in fair value, purchases, sales, and income generated, highlighting the impact of PIK interest and unrealized gains/losses - An affiliate company is defined as one where the Company holds **5% or more** of voting securities, while a controlled affiliate company involves **more than 25%** ownership[195](index=195&type=chunk) Non-Controlled Affiliate Company Investments (Fair Value in thousands) | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------------------- | :---------------- | :------------ | | Total non-controlled affiliate company investments | $80,483 | $76,379 | | Net change in unrealized gain (loss) | N/A | $(610) | | PIK interest capitalized (cost) | N/A | $1,919 | Controlled Affiliate Company Investments (Fair Value in thousands) | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------------------- | :---------------- | :------------ | | Total controlled affiliate company investments | $32,730 | $30,157 | | Net change in unrealized gain (loss) | N/A | $(2,573) | Investment Income from Affiliate Companies (Six months ended June 30, in thousands) | Income Type | 2025 (Interest Income) | 2025 (Dividend Income) | 2024 (Interest Income) | 2024 (Dividend Income) | | :-------------------------------------- | :--------------------- | :--------------------- | :--------------------- | :--------------------- | | Non-controlled affiliate company investments | $2,469 | $117 | $5,096 | $108 | | Controlled affiliate company investments | $0 | $1,600 | $0 | $1,800 | [Note 6. Transactions with Related Parties](index=69&type=section&id=Note%206.%20Transactions%20with%20Related%20Parties) This note details the company's relationships and transactions with related parties, including the Amended Investment Advisory Agreement with MC Advisors and the Administration Agreement with MC Management, outlining fee structures and the impact of the Wendel Transaction - On **March 31, 2025**, the company entered into the Second Amended and Restated Investment Advisory and Management Agreement with MC Advisors following a change of control where Wendel SE acquired a **75% interest** in Monroe Capital[206](index=206&type=chunk) The terms, including fee structure, remained unchanged[206](index=206&type=chunk) - The base management fee is **1.75% annually** of average invested assets, reduced to **1.00%** for assets exceeding **200%** of average net assets[207](index=207&type=chunk) - The incentive fee has two parts: **20%** of pre-incentive fee net investment income (subject to a **2% hurdle** and catch-up, and a total return limitation) and **20%** of cumulative realized capital gains (net of losses and unrealized depreciation)[211](index=211&type=chunk)[212](index=212&type=chunk) Management and Incentive Fees (in thousands) | Fee Type (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :---------------------- | :------------------------------- | :------------------------------- | | Base management fees | $1,742 | $2,037 | | Incentive fees | $0 | $351 | Management and Incentive Fees (in thousands) | Fee Type (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :---------------------- | :----------------------------- | :----------------------------- | | Base management fees | $3,593 | $4,085 | | Incentive fees | $0 | $1,719 | - The company incurred **$873 thousand** and **$1,716 thousand** in administrative expenses for the three and six months ended June 30, 2025, respectively, under the Administration Agreement with MC Management[215](index=215&type=chunk) [Note 7. Borrowings](index=71&type=section&id=Note%207.%20Borrowings) This note details the company's borrowing arrangements, including a **$255 million** revolving credit facility and **$130 million** in 2026 Notes, outlining terms, covenants, interest rates, and the company's **185%** asset coverage ratio - The company's asset coverage ratio was **185%** as of June 30, 2025, and **165%** as of December 31, 2024, exceeding the 1940 Act requirement of at least **150%**[218](index=218&type=chunk) - The company has a **$255,000 thousand** revolving credit facility with ING Capital LLC, maturing on **December 27, 2027**, with an accordion feature up to **$400,000 thousand**[219](index=219&type=chunk)[224](index=224&type=chunk) Borrowings bear interest at SOFR plus **2.625%** or a daily rate based on prime/federal funds/SOFR, with a SOFR floor of **0.5%**[224](index=224&type=chunk) - As of June 30, 2025, **$80,300 thousand** was outstanding on the revolving credit facility, with **$174,700 thousand** available for additional borrowings[306](index=306&type=chunk) - The company has **$130,000 thousand** in senior unsecured 2026 Notes outstanding, maturing on **February 15, 2026**, bearing interest at an annual rate of **4.75%**[225](index=225&type=chunk) Interest and Other Debt Financing Expenses (in thousands) | Expense Type | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Interest expense - revolving credit facility | $1,977 | $3,898 | | Interest expense - 2026 Notes | $1,555 | $1,555 | | Amortization of debt issuance costs | $401 | $327 | | **Total interest and other debt financing expenses** | **$3,933** | **$5,780** | | Average debt outstanding | $228,226 | $315,611 | | Average stated interest rate | 6.2% | 6.9% | Interest and Other Debt Financing Expenses (in thousands) | Expense Type | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Interest expense - revolving credit facility | $4,750 | $7,523 | | Interest expense - 2026 Notes | $3,110 | $3,110 | | Amortization of debt issuance costs | $750 | $654 | | **Total interest and other debt financing expenses** | **$8,610** | **$11,287** | | Average debt outstanding | $252,837 | $308,327 | | Average stated interest rate | 6.3% | 6.9% | [Note 8. Derivative Instruments](index=73&type=section&id=Note%208.%20Derivative%20Instruments) The company may use foreign currency forward contracts to mitigate exchange rate exposure but held no such contracts as of June 30, 2025, or December 31, 2024, resulting in no related gains or losses - The company may use foreign currency forward contracts to mitigate foreign currency exchange rate fluctuations[228](index=228&type=chunk) - As of June 30, 2025, and December 31, 2024, the company held no foreign currency forward contracts[43](index=43&type=chunk)[75](index=75&type=chunk)[228](index=228&type=chunk) - No net realized or unrealized gain (loss) on foreign currency forward contracts was recognized for the three and six months ended June 30, 2025 and 2024[229](index=229&type=chunk) [Note 9. Distributions](index=74&type=section&id=Note%209.%20Distributions) The company declared total distributions of **$0.50 per share** (**$10,833 thousand**) for both the six months ended June 30, 2025, and 2024, primarily as cash with a portion reinvested through the Dividend Reinvestment Plan Distributions Declared (Six months ended June 30, in thousands) | Period | Amount Per Share | Total Cash Distribution | DRIP Shares Repurchased (shares) | Cost of DRIP Shares Repurchased | | :---------------------- | :--------------- | :---------------------- | :------------------------------- | :------------------------------ | | Six months ended June 30, 2025 | $0.50 | $10,833 | 54,778 | $383 | | Six months ended June 30, 2024 | $0.50 | $10,833 | 36,735 | $274 | - The company adopted an 'opt out' Dividend Reinvestment Plan (DRIP) in October 2012, allowing stockholders to automatically reinvest cash distributions into additional common stock unless they elect to receive cash[99](index=99&type=chunk)[321](index=321&type=chunk) [Note 10. Stock Issuances and Repurchases](index=74&type=section&id=Note%2010.%20Stock%20Issuances%20and%20Repurchases) The company had no stock issuances through its At-The-Market (ATM) equity distribution program during the six months ended June 30, 2025, or 2024 - The company has an At-The-Market (ATM) equity distribution program, established in May 2017 and amended in May 2020, allowing for the sale of up to **$50,000 thousand** of common stock[232](index=232&type=chunk)[313](index=313&type=chunk) - There were no stock issuances through the ATM Program during the six months ended June 30, 2025, and 2024[232](index=232&type=chunk)[313](index=313&type=chunk) [Note 11. Commitments and Contingencies](index=74&type=section&id=Note%2011.%20Commitments%20and%20Contingencies) The company had outstanding commitments to fund investments totaling **$31,605 thousand** as of June 30, 2025, and **$38,509 thousand** as of December 31, 2024, and faces credit, counterparty, and market risks, but no material legal proceedings - As of June 30, 2025, and December 31, 2024, the company had outstanding commitments to fund investments of **$31,605 thousand** and **$38,509 thousand**, respectively, excluding unfunded commitments in SLF[233](index=233&type=chunk)[347](index=347&type=chunk) - The company had unfunded commitments of **$7,350 thousand** to SLF as of both June 30, 2025, and December 31, 2024[233](index=233&type=chunk)[347](index=347&type=chunk) - The company is subject to credit risk, counterparty risk, and market risk, but expects the risk of future obligations under indemnification provisions to be remote[239](index=239&type=chunk)[240](index=240&type=chunk) - The company is not currently aware of any material legal proceedings that would have a material adverse effect on its consolidated financial statements[242](index=242&type=chunk) [Note 12. Financial Highlights](index=77&type=section&id=Note%2012.%20Financial%20Highlights) This note provides key financial highlights for the six months ended June 30, 2025, and 2024, showing a decrease in net asset value per share and a negative total return based on market value in 2025 Financial Highlights (Six months ended June 30) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------------------- | :------------ | :------------ | | Net asset value at beginning of period | $8.85 | $9.40 | | Net increase (decrease) in net assets resulting from operations | $(0.06) | $0.30 | | Stockholder distributions - income | $(0.50) | $(0.50) | | Net asset value at end of period | $8.29 | $9.20 | | Total return based on market value | (19.84)% | 14.97% | | Total return based on average net asset value | 0.34% | 4.54% | | Ratio of net investment income to average net assets | 8.00% | 12.87% | | Ratio of total expenses to average net assets | 15.31% | 17.88% | [Note 13. Segment Reporting](index=78&type=section&id=Note%2013.%20Segment%20Reporting) The company operates as a single operating and reporting segment, with its CEO and CFO serving as Chief Operating Decision Makers, assessing performance on a consolidated basis using net income and net investment income - The company operates through a single operating and reporting segment, with an investment objective to generate current income and capital appreciation through debt and equity investments[246](index=246&type=chunk) - The Chief Operating Decision Makers (CODM) are the Chief Executive Officer and Chief Financial Officer, who assess performance and make operating decisions on a consolidated basis, primarily using net increase (decrease) in net assets and net investment income[246](index=246&type=chunk) [Note 14. Subsequent Events](index=78&type=section&id=Note%2014.%20Subsequent%20Events) Subsequent to June 30, 2025, the company entered into a Merger Agreement with Horizon Technology Finance Corporation and an Asset Purchase Agreement with Monroe Capital Income Plus Corporation, outlining an asset sale followed by a merger - On **August 7, 2025**, the company entered into a Merger Agreement with Horizon Technology Finance Corporation (HRZN) and an Asset Purchase Agreement with Monroe Capital Income Plus Corporation (MCIP)[247](index=247&type=chunk)[254](index=254&type=chunk) - The Asset Purchase Agreement stipulates that MCIP will acquire the company's investment assets at fair value for cash, immediately prior to the merger with HRZN[254](index=254&type=chunk)[255](index=255&type=chunk) - In the merger, each share of the company's common stock will be converted into HRZN common stock based on an Exchange Ratio, calculated from the respective Net Asset Values (NAVs) of the companies[248](index=248&type=chunk)[251](index=251&type=chunk) - The transactions are anticipated to close in the **fourth quarter of 2025**, subject to stockholder and regulatory approvals[253](index=253&type=chunk)[257](index=257&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=81&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section discusses Monroe Capital Corporation's financial condition, operations, and liquidity, highlighting a net decrease in investments and net assets from operations, and significant merger and asset sale agreements [FORWARD-LOOKING STATEMENTS](index=81&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section contains forward-looking statements based on current expectations and assumptions, which involve risks and uncertainties that could cause actual results to differ materially - The report contains forward-looking statements based on current expectations, estimates, and projections about the company, its industry, beliefs, and assumptions[262](index=262&type=chunk) - These statements involve risks and uncertainties, and actual results could differ materially due to factors such as future operating results, business prospects, general economy, political and regulatory conditions, market liquidity, competition, interest rates, inflation, and the valuation of investments[262](index=262&type=chunk)[263](index=263&type=chunk) - The company uses words like 'anticipates,' 'believes,' 'expects,' 'intends,' 'seeks,' 'plans,' 'estimates,' and 'targets' to identify forward-looking statements[263](index=263&type=chunk) [Overview](index=82&type=section&id=Overview) Monroe Capital Corporation is an externally managed BDC and RIC providing financing to lower middle-market companies, aiming to maximize total return through senior secured, unitranche secured, junior secured debt, and equity investments - Monroe Capital Corporation is an externally managed, closed-end, non-diversified management investment company regulated as a BDC and elected as a RIC[266](index=266&type=chunk) - The company specializes in providing financing solutions primarily to lower middle-market companies in the United States and Canada[267](index=267&type=chunk) - Investment objective is to maximize total return to stockholders through current income and capital appreciation via senior secured, unitranche secured, and junior secured debt, and equity investments[270](index=270&type=chunk) Portfolio Composition by Investment Type (Fair Value) | Investment Type | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Senior secured loans | 73.5% | 78.3% | | Unitranche secured loans | 0.6% | 0.8% | | Junior secured loans | 8.6% | 6.5% | | Equity investments | 17.3% | 14.4% | [Investment income](index=83&type=section&id=Investment%20income) Investment income is primarily generated from interest on debt investments (senior secured, unitranche secured, junior secured) and dividend income on preferred and common equity, including contractual interest, PIK interest, loan origination fees, and prepayment premiums, all recognized on an accrual basis - Investment income is generated from interest on debt investments (senior secured, unitranche secured, junior secured) and dividend income on preferred and common equity investments[272](index=272&type=chunk)[273](index=273&type=chunk) - Income sources include contractual interest, payment-in-kind (PIK) interest, commitment, origination, amendment, structuring or due diligence fees, and prepayment premiums[272](index=272&type=chunk) - Loan origination fees, original issue discount, and market discount/premium are capitalized and amortized into interest income using the effective interest method[272](index=272&type=chunk) [Expenses](index=84&type=section&id=Expenses) The company's primary operating expenses include base management and incentive fees to MC Advisors, administrative fees to MC Management, interest expense on indebtedness, and other out-of-pocket operational and transactional costs - Primary operating expenses include base management and incentive fees paid to MC Advisors under the Amended Investment Advisory Agreement[274](index=274&type=chunk) - Fees are also paid to MC Management for allocable overhead and other expenses under the Administration Agreement[274](index=274&type=chunk) - Other operating costs include interest expense on indebtedness and all other out-of-pocket expenses of operations and transactions[274](index=274&type=chunk) [Net gain (loss)](index=84&type=section&id=Net%20gain%20%28loss%29) Net realized gains or losses result from investment dispositions and derivative instruments, while net change in unrealized gain or loss reflects period-over-period fair value changes in investments and derivative instruments - Net realized gains or losses on investments, foreign currency forward contracts, and other foreign currency transactions are recognized based on the difference between net disposition proceeds and cost basis[275](index=275&type=chunk) - Net change in unrealized gain or loss reflects current period changes in the fair value of investments and derivative instruments[275](index=275&type=chunk) [Portfolio and Investment Activity](index=84&type=section&id=Portfolio%20and%20Investment%20Activity) For the six months ended June 30, 2025, the company experienced a net decrease in investments of **$85.1 million**, with a weighted average effective yield decreasing to **8.8%** from **10.2%** due to lower spreads and payoffs of higher-yielding assets Investment Activity (in millions) | Period | Investments in new portfolio companies | Investments in existing portfolio companies | Sales and principal repayments | Net decrease in investments | | :----------------------------- | :------------------------------------- | :------------------------------------------ | :----------------------------- | :-------------------------- | | Three months ended June 30, 2025 | $0.0 | $3.5 | $63.0 | $59.5 | | Six months ended June 30, 2025 | $7.6 | $12.3 | $105.0 | $85.1 | | Three months ended June 30, 2024 | $0.0 | $21.7 | $35.9 | $14.2 | | Six months ended June 30, 2024 | $10.2 | $35.7 | $48.0 | $2.1 | Portfolio Yield by Investment Type | Investment Type | June 30, 2025 (Weighted Average Annualized Effective Yield) | December 31, 2024 (Weighted Average Annualized Effective Yield) | | :--------------------- | :-------------------------------------------------------- | :-------------------------------------------------------------- | | Senior secured loans | 9.2% | 10.7% | | Unitranche secured loans | 12.2% | 14.5% | | Junior secured loans | 7.6% | 7.5% | | Equity investments | 2.8% | 2.8% | | **Total** | **8.8%** | **10.2%** | - The decrease in effective yield was primarily due to lower spreads on certain assets and the payoff of certain higher yielding assets during the six months ended June 30, 2025[282](index=282&type=chunk) [Portfolio Asset Quality](index=86&type=section&id=Portfolio%20Asset%20Quality) MC Advisors monitors portfolio asset quality using a 1-to-5 risk rating scale, with **80.6%** of investments rated Grade 2 (acceptable risk) and **14.4%** Grade 3 (below expectations) as of June 30, 2025 - MC Advisors monitors portfolio asset quality using an internal proprietary 1-to-5 investment performance risk rating system[286](index=286&type=chunk) - Investments rated Grade 3, 4, or 5 trigger increased monitoring and action plans by the Portfolio Management Group (PMG)[286](index=286&type=chunk)[287](index=287&type=chunk) Investment Performance Risk Rating Distribution (Fair Value in thousands) | Risk Rating | June 30, 2025 (Fair Value) | Percentage of Total Investments | | :---------- | :------------------------- | :------------------------------ | | Grade 1 | $0 | 0% | | Grade 2 | $296,419 | 80.6% | | Grade 3 | $52,725 | 14.4% | | Grade 4 | $13,351 | 3.6% | | Grade 5 | $5,205 | 1.4% | | **Total** | **$367,700** | **100.0%** | - As of June 30, 2025, ten borrowers had debt or preferred equity investments on non-accrual status, totaling **$13.4 million** at fair value (**3.6%** of total investments)[289](index=289&type=chunk) [Results of Operations](index=88&type=section&id=Results%20of%20Operations) The company experienced a significant decline in net investment income and a net decrease in net assets from operations for the three and six months ended June 30, 2025, primarily due to lower investment income and increased unrealized losses Operating Results (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Total investment income | $9,873 | $15,627 | | Total operating expenses | $6,618 | $8,933 | | Net investment income | $3,298 | $6,559 | | Net realized gain (loss) | $77 | $506 | | Net change in unrealized gain (loss) | $(5,244) | $(3,807) | | Net increase (decrease) in net assets resulting from operations | $(1,869) | $3,258 | Operating Results (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Total investment income | $21,511 | $30,809 | | Total operating expenses | $14,051 | $18,627 | | Net investment income | $7,383 | $12,029 | | Net realized gain (loss) | $(361) | $510 | | Net change in unrealized gain (loss) | $(8,359) | $(6,086) | | Net increase (decrease) in net assets resulting from operations | $(1,337) | $6,453 | [Investment Income](index=89&type=section&id=Investment%20Income) Total investment income decreased by **$5.8 million** and **$9.3 million** for the three and six months ended June 30, 2025, respectively, primarily due to lower interest and PIK interest income from reduced average invested assets and more non-accrual portfolio companies Investment Income (in thousands) | Income Type | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Interest income | $6,864 | $11,850 | | PIK interest income | $1,660 | $2,099 | | Dividend income | $829 | $1,017 | | Other income | $54 | $265 | | Prepayment gain (loss) | $288 | $145 | | Accretion of discounts and amortization of premiums | $178 | $251 | | **Total investment income** | **$9,873** | **$15,627** | Investment Income (in thousands) | Income Type | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Interest income | $14,830 | $23,512 | | PIK interest income | $3,560 | $4,214 | | Dividend income | $1,858 | $2,029 | | Other income | $282 | $302 | | Prepayment gain (loss) | $532 | $250 | | Accretion of discounts and amortization of premiums | $449 | $502 | | **Total investment income** | **$21,511** | **$30,809** | - Total investment income decreased by **$5.8 million** and **$9.3 million** during the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024[293](index=293&type=chunk) - The reduction was primarily due to lower interest and PIK interest income, driven by a decrease in average invested assets, lower effective rates, and the placement of additional portfolio companies on non-accrual status[293](index=293&type=chunk) [Operating Expenses](index=90&type=section&id=Operating%20Expenses) Total operating expenses decreased by **$2.3 million** and **$4.6 million** for the three and six months ended June 30, 2025, respectively, mainly due to lower interest and other debt financing expenses, incentive fees, and base management fees Operating Expenses (in thousands) | Expense Type | Three months ended June 30, 2025 | Three months ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | | Interest and other debt financing expenses | $3,933 | $5,780 | | Base management fees | $1,742 | $2,037 | | Incentive fees | $0 | $351 | | Professional fees | $267 | $199 | | Administrative service fees | $374 | $250 | | General and administrative expenses | $232 | $243 | | Directors' fees | $70 | $73 | | **Total operating expenses** | **$6,618** | **$8,933** | Operating Expenses (in thousands) | Expense Type | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Interest and other debt financing expenses | $8,610 | $11,287 | | Base management fees | $3,593 | $4,085 | | Incentive fees | $0 | $1,719 | | Professional fees | $530 | $467 | | Administrative service fees | $727 | $459 | | General and administrative expenses | $459 | $461 | | Directors' fees | $132 | $149 | | **Total operating expenses** | **$14,051** | **$18,627** | - Total operating expenses decreased by **$2.3 million** and **$4.6 million** during the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024[296](index=296&type=chunk) - The decrease was primarily due to lower interest and other debt financing expenses from a reduced interest rate environment and lower average debt outstanding, as well as decreases in incentive fees and base management fees[296](index=296&type=chunk) [Income Taxes, Including Excise Taxes](index=91&type=section&id=Income%20Taxes%2C%20Including%20Excise%20Taxes) As a RIC, the company distributes at least **90%** of its taxable income to avoid federal income tax, accruing excise tax on estimated excess taxable income, and recorded a net excise tax expense of **$70 thousand** for the six months ended June 30, 2025 - The company operates as a RIC, requiring annual distribution of at least **90%** of its investment company taxable income to avoid U.S. federal income tax[297](index=297&type=chunk) - For the three and six months ended June 30, 2025, the company recorded a net expense (benefit) of **$(49) thousand** and **$70 thousand**, respectively, for U.S. federal excise tax[298](index=298&type=chunk) - For the three and six months ended June 30, 2025, the company recorded a net tax expense of **$6 thousand** and **$7 thousand**, respectively, for its consolidated taxable subsidiaries[299](index=299&type=chunk) [Net Realized Gain (Loss)](index=91&type=section&id=Net%20Realized%20Gain%20%28Loss%29) For the three months ended June 30, 2025, the company recorded a net realized gain of **$0.1 million** on investments, while for the six months ended June 30, 2025, it recorded a net realized loss of **$(0.4) million** Net Realized Gain (Loss) on Investments (in millions) | Period | 2025 | 2024 | | :----------------------------- | :--- | :--- | | Three months ended June 30, 2025 | $0.1 | $0.5 | | Six months ended June 30, 2025 | $(0.4) | $0.5 | [Net Change in Unrealized Gain (Loss)](index=91&type=section&id=Net%20Change%20in%20Unrealized%20Gain%20%28Loss%29) The company experienced net unrealized losses of **$(5.2) million** and **$(8.4) million** for the three and six months ended June 30, 2025, respectively, primarily from mark-to-market losses on portfolio companies with credit performance concerns and unrealized losses on the SLF equity investment Net Change in Unrealized Gain (Loss) on Investments (in millions) | Period | 2025 | 2024 | | :----------------------------- | :----- | :----- | | Three months ended June 30, 2025 | $(5.2) | $(3.8) | | Six months ended June 30, 2025 | $(8.4) | $(6.1) | - The net change in unrealized loss on investments for the three and six months ended June 30, 2025, was primarily driven by mark-to-market losses from portfolio companies with underlying credit performance concerns (risk rating of Grade 3, 4 or 5) and unrealized losses on the equity investment in SLF[302](index=302&type=chunk) [Net Increase (Decrease) in Net Assets Resulting from Operations](index=92&type=section&id=Net%20Increase%20%28Decrease%29%20in%20Net%20Assets%20Resulting%20from%20Operations) For the three and six months ended June 30, 2025, the net increase (decrease) in net assets from operations was a decrease of **$(1.9) million** and **$(1.3) million**, respectively, translating to **$(0.09)** and **$(0.06) per share** Net Increase (Decrease) in Net Assets from Operations | Period | Net Increase (Decrease) (in millions) | Per Share | | :----------------------------- | :------------------------------------ | :-------- | | Three months ended June 30, 2025 | $(1.9) | $(0.09) | | Three months ended June 30, 2024 | $3.3 | $0.15 | | Six months ended June 30, 2025 | $(1.3) | $(0.06) | | Six months ended June 30, 2024 | $6.5 | $0.30 | [Liquidity and Capital Resources](index=92&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company had **$2.4 million** in cash, **$80.3 million** outstanding on its revolving credit facility, and **$130.0 million** on its 2026 Notes, maintaining an **185%** asset coverage ratio and relying on future offerings and borrowings for capital - As of June 30, 2025, the company had **$2.4 million** in cash and cash equivalents, **$80.3 million** of total debt outstanding on its revolving credit facility, and **$130.0 million** on the 2026 Notes[306](index=306&type=chunk) - The company had **$174.7 million** available for additional borrowings on its revolving credit facility, subject to borrowing base availability[306](index=306&type=chunk) - The asset coverage ratio was **185%** as of June 30, 2025, exceeding the 1940 Act requirement of at least **150%**[307](index=307&type=chunk) [Cash Flows](index=92&type=section&id=Cash%20Flows) For the six months ended June 30, 2025, the company experienced a net decrease in cash and cash equivalents of **$6.6 million**, with **$88.4 million** provided by operating activities and **$95.0 million** used in financing activities Cash Flow Summary (Six months ended June 30, in millions) | Activity | 2025 | 2024 | | :-------------------------------------- | :----- | :----- | | Net cash provided by (used in) operating activities | $88.4 | $6.1 | | Net cash provided by (used in) financing activities | $(95.0) | $(7.1) |\n| Net increase (decrease) in cash and cash equivalents | $(6.6) | $(1.0) | [Capital Resources](index=92&type=section&id=Capital%20Resources) As a BDC, the company distributes substantially all net income, requiring additional capital from future securities offerings, borrowings, and operational cash flows, with stockholder approval obtained to issue common stock below NAV - As a BDC, the company distributes substantially all net income, necessitating additional capital for investment purposes[310](index=310&type=chunk) - Capital will be generated from future securities offerings, borrowings, and cash flows from operations[310](index=310&type=chunk) - On **June 17, 2025**, stockholders approved the ability to sell common stock below Net Asset Value (NAV) per share for one year, subject to limitations[311](index=311&type=chunk) - The company has a standing authorization, approved on **June 24, 2015**, to issue warrants, options, or rights to purchase common stock[312](index=312&type=chunk) [Borrowings](index=93&type=section&id=Borrowings) The company's borrowing capacity includes a **$255 million** revolving credit facility and **$130 million** in 4.75% senior unsecured 2026 Notes, with the credit facility amended to provide refinancing flexibility and subject to borrowing base and financial covenants - The company has a **$255 million** revolving credit facility with ING Capital LLC, maturing **December 27, 2027**, with an accordion feature up to **$400 million**[314](index=314&type=chunk) - The revolving credit facility was amended on **February 27, 2025**, to provide additional flexibility for refinancing the 2026 Notes[314](index=314&type=chunk) - Borrowing under the facility is subject to borrowing base availability (up to **72.5%** of fair market value of portfolio investments), concentration limits, and financial covenants, including a minimum consolidated total net assets and asset coverage ratios[315](index=315&type=chunk) - As of June 30, 2025, **$80.3 million** in U.S. dollar borrowings were outstanding on the revolving credit facility, accruing at a weighted average interest rate of **7.1%**[317](index=317&type=chunk)[318](index=318&type=chunk) - The company has **$130.0 million** in **4.75%** senior unsecured 2026 Notes outstanding, maturing on **February 15, 2026**[319](index=319&type=chunk) [Distributions](index=94&type=section&id=Distributions) The Board determines quarterly distributions, aiming to distribute at least **90%** of ordinary income to maintain RIC status, with total distributions of **$10.8 million** (**$0.50 per share**) for the six months ended June 30, 2025 and 2024, under an 'opt out' Dividend Reinvestment Plan - The Board determines quarterly distributions, aiming to distribute at least **90%** of ordinary income and realized net short-term capital gains to maintain RIC status[320](index=320&type=chunk) - Total distributions for both the three and six months ended June 30, 2025 and 2024, totaled **$5.4 million** (**$0.25 per share**) and **$10.8 million** (**$0.50 per share**), respectively, with no portion characterized as a return of capital[320](index=320&type=chunk) - The company operates an 'opt out' Dividend Reinvestment Plan (DRIP), where cash distributions are automatically reinvested in common stock unless stockholders elect to receive cash[321](index=321&type=chunk) [MRCC Senior Loan Fund I, LLC](index=94&type=section&id=MRCC%20Senior%20Loan%20Fund%20I%2C%20LLC) The company co-invests with LSW in senior secured loans through MRCC Senior Loan Fund I, LLC (SLF), an unconsolidated entity, with the company's **50.0%** equity interest valued at **$30.2 million** as of June 30, 2025 - The company co-invests with Life Insurance Company of the Southwest (LSW) in senior secured loans through MRCC Senior Loan Fund I, LLC (SLF), an unconsolidated Delaware LLC[322](index=322&type=chunk) - As of June 30, 2025, and December 31, 2024, the company and LSW each owned **50.0%** of SLF's LLC equity interests[323](index=323&type=chunk) - The company's investment in SLF had a fair value of **$30.2 million** as of June 30, 2025, and **$32.7 million** as of December 31, 2024[324](index=324&type=chunk) - For the six months ended June 30, 2025, the company received **$1.6 million** in dividend income from its SLF equity interest[325](index=325&type=chunk) - As of June 30, 2025, SLF had total assets at fair value of **$75.9 million** and **$15.2 million** outstanding on its senior secured revolving credit facility[328](index=328&type=chunk) - As of June 30, 2025, SLF had seven portfolio company investments on non-accrual status with a fair value of **$5.6 million**[328](index=328&type=chunk) [Related Party Transactions](index=104&type=section&id=Related%20Party%20Transactions) The company has various business relationships with affiliated parties, including MC Advisors (investment adviser), MC Management (administrator), and Monroe Capital LLC (licensor of name), involving advisory and administrative services, fee structures, and a non-exclusive license - The company has an Amended Investment Advisory Agreement with MC Advisors, approved by stockholders, for investment advisory services, including base management and incentive fees[349](index=349&type=chunk) - An Administration Agreement with MC Management provides office facilities and administrative services, with the company reimbursing allocable overhead and expenses[349](index=349&type=chunk) - SLF also has an administration agreement with MC Management for loan servicing and administrative functions[349](index=349&type=chunk) - Theodore L. Koenig (CEO and Chairman) and Lewis W. Solimene, Jr. (CFO and CIO) hold management positions across MC Advisors and MC Management[349](index=349&type=chunk) - The company has a license agreement with Monroe Capital LLC for a non-exclusive, royalty-free use of the 'Monroe Capital' name[349](index=349&type=chunk) [Commitments and Contingencies and Off-Balance Sheet Arrangements](index=104&type=section&id=Commitments%20and%20Contingencies%20and%20Off-Balance%20Sheet%20Arrangements) As of June 30, 2025, the company had **$31.6 million** in outstanding commitments to fund investments and **$7.3 million** in unfunded commitments

PART I. FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201%2E%20Financial%20Statements) Presents the unaudited condensed consolidated balance sheets, statements of operations, and cash flows for the period [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Details the company's assets, liabilities, and stockholders' equity as of June 30, 2025, compared to the prior year-end Condensed Consolidated Balance Sheet Highlights (as of June 30, 2025 vs. Dec 31, 2024) | Account | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | 58,571 | 102,811 | | Inventory | 84,482 | 120,716 | | Goodwill | 133,751 | 152,351 | | **Total Assets** | **438,990** | **543,678** | | **Liabilities & Equity** | | | | Total current liabilities | 309,111 | 356,267 | | Short-term debt | 98,518 | 93,208 | | **Total Liabilities** | **341,075** | **391,989** | | **Total Stockholders' Equity** | **97,915** | **151,689** | - Total assets decreased to **$439.0 million** from $543.7 million, primarily due to a reduction in cash, inventory, and a goodwill impairment[16](index=16&type=chunk) - Total liabilities decreased to **$341.1 million** from $392.0 million, while total stockholders' equity declined to **$97.9 million** from $151.7 million, reflecting the net loss for the period[16](index=16&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Summarizes revenues, expenses, and net loss for the three and six-month periods ended June 30, 2025 Statement of Operations Summary (Three Months Ended June 30) | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 152,643 | 186,224 | -18.0% | | Gross Profit | 54,663 | 56,710 | -3.6% | | Operating Loss | (14,007) | (46,509) | 69.9% improvement | | Net Loss | (16,422) | (47,821) | 65.7% improvement | | Diluted Net Loss Per Share | ($0.10) | ($0.31) | 67.7% improvement | Statement of Operations Summary (Six Months Ended June 30) | Metric | YTD 2025 ($ thousands) | YTD 2024 ($ thousands) | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | 286,951 | 341,693 | -16.0% | | Gross Profit | 97,812 | 109,748 | -10.9% | | Goodwill Impairment | 18,600 | 0 | N/A | | Operating Loss | (59,215) | (87,922) | 32.7% improvement | | Net Loss | (63,131) | (386,909) | 83.7% improvement | | Diluted Net Loss Per Share | ($0.40) | ($2.55) | 84.3% improvement | - The company recorded a goodwill impairment charge of **$18.6 million** in the first six months of 2025, which was not present in the prior year period[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Details cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 Cash Flow Summary (Six Months Ended June 30) | Activity | 2025 ($ thousands) | 2024 ($ thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | (48,434) | (97,798) | | Net cash (used in) provided by investing activities | (1,783) | 10,012 | | Net cash provided by (used in) financing activities | 4,750 | (800) | | **Net change in cash and cash equivalents** | **(44,240)** | **(89,672)** | - Net cash used in operating activities improved to **$(48.4) million** for the first six months of 2025 from $(97.8) million in the same period of 2024, primarily due to a smaller net loss and favorable changes in working capital, including a significant reduction in inventory[23](index=23&type=chunk) - Financing activities provided **$4.8 million** in cash, driven by a net **$5.0 million** in borrowings ($25M proceeds, $20M repayment)[23](index=23&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Provides supplementary details on accounting policies, goodwill impairment, revenue segmentation, and subsequent financing events - The company's performance in the first six months of 2025 was impacted by macroeconomic issues, a competitive landscape, and a delay in its next-generation 360-camera, leading to a **16.0% revenue decline**, a **$59.2 million operating loss**, and **$48.4 million in operating cash outflows**[33](index=33&type=chunk) - Due to a 38% decline in market capitalization in Q1 2025, the company performed a quantitative analysis and recognized an **$18.6 million goodwill impairment charge**[41](index=41&type=chunk) - Subscription and service revenue was **$53.1 million (18.5% of total revenue)** for the six months ended June 30, 2025, compared to $52.2 million (15.3% of total revenue) in the prior year period[52](index=52&type=chunk) - Subsequent to the quarter end, on August 4, 2025, the company entered into a new **$50.0 million second lien credit facility** (2025 Credit Agreement) and issued warrants to purchase **11.1 million shares** of common stock[172](index=172&type=chunk)[180](index=180&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=30&type=section&id=Item%202%2E%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on financial performance, operational results, liquidity, and capital resources for the reporting period [Overview and Financial Performance](index=32&type=section&id=Overview%20and%20Financial%20Performance) Reviews key performance metrics, revenue drivers, and subscription trends for the second quarter of 2025 Q2 2025 Key Metrics vs. Prior Periods | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Revenue | $152.6M | $134.3M | $186.2M | | Camera units shipped (thousands) | 408 | 385 | 576 | | Gross margin | 35.8% | 32.1% | 30.5% | | Operating expenses | $68.7M | $88.4M | $103.2M | | Net loss | $(16.4)M | $(46.7)M | $(47.8)M | - Q2 2025 revenue decreased **18.0% YoY to $152.6 million**, primarily due to a **29.2% decrease in camera units shipped**, which was attributed to macroeconomic issues and increased competition[198](index=198&type=chunk) - Average selling price (ASP) increased **15.7% YoY to $374** in Q2 2025, partially offsetting the decline in unit volume[198](index=198&type=chunk) - The subscription attach rate from all sales channels was **56%** in Q2 2025, up from 45% in Q2 2024, while the aggregate retention rate for annual subscribers remained stable at **68%**[198](index=198&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Analyzes year-over-year changes in gross margin and operating expenses, detailing drivers for cost reductions - Gross margin for Q2 2025 increased to **35.8%** from 30.5% in Q2 2024, a **530 bps improvement**, mainly due to less promotional activity and a higher mix of subscription revenue[215](index=215&type=chunk) - Total operating expenses for Q2 2025 decreased by **33% YoY to $68.7 million**, driven by significant reductions in **R&D (down 35%)** and **Sales & Marketing (down 39%)**[197](index=197&type=chunk)[217](index=217&type=chunk)[220](index=220&type=chunk) - The decrease in R&D expense was primarily due to lower consulting costs for the next-generation system-on-chip and reduced personnel-related costs[217](index=217&type=chunk) - The decrease in Sales & Marketing expense was driven by lower spending on advertising, online campaigns, and events[220](index=220&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's cash position, debt obligations, recent financing activities, and its ability to continue as a going concern - As of June 30, 2025, the company had **$58.6 million** in cash and cash equivalents, down from $102.8 million at year-end 2024[237](index=237&type=chunk) - The company's 2025 Convertible Notes, with an outstanding principal of **$93.8 million**, mature on November 15, 2025[260](index=260&type=chunk) - Management has assessed its ability to continue as a going concern, citing restructuring actions, the new **$50.0 million 2025 Credit Agreement**, and plans to manage working capital as sufficient to maintain liquidity for at least 12 months[261](index=261&type=chunk)[262](index=262&type=chunk) - In February 2025, the company drew **$25.0 million** from its 2021 Credit Facility and repaid **$20.0 million** in June 2025, leaving **$39.8 million** available to draw as of June 30, 2025[246](index=246&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Outlines the company's exposure to market risks, primarily from foreign currency fluctuations and interest rate changes - The strength of the U.S. dollar negatively impacted revenue, gross margin, and net income per share by approximately **$43.7 million** in the 12 months ending June 30, 2025, relative to 2021 foreign currency rates[282](index=282&type=chunk) - The company's primary foreign currency exposures are to the Euro, British pound, Australian dollar, Japanese yen, Romanian leu, and Canadian dollar[282](index=282&type=chunk) - Interest rate risk is primarily related to cash and cash equivalents, but management does not believe a **10% shift** in rates would have a material effect on the portfolio's fair value[284](index=284&type=chunk) [Controls and Procedures](index=47&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Confirms the effectiveness of the company's disclosure controls and procedures as of the end of the reporting period - The principal executive officer and principal financial officer concluded that as of June 30, 2025, the company's disclosure controls and procedures were **effective**[286](index=286&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[287](index=287&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=48&type=section&id=Item%201%2E%20Legal%20Proceedings) Details significant ongoing legal matters, including patent infringement litigation with Contour IP Holdings and Insta360 - In the long-running patent case with Contour IP Holdings (CIPH), a district court ruling in GoPro's favor was reversed on appeal, and a new trial is scheduled for **September 29, 2025**[151](index=151&type=chunk) - GoPro filed a complaint against Insta360 for patent infringement; an Administrative Law Judge issued an Initial Determination finding Insta360 violated federal law regarding GoPro's HERO camera design, and a final ITC determination is expected by **November 10, 2025**[152](index=152&type=chunk) - Insta360 has filed three patent infringement actions against GoPro in China, which the company believes lack merit[152](index=152&type=chunk) [Risk Factors](index=48&type=section&id=Item%201A%2E%20Risk%20Factors) Outlines significant risks to the business, including operating losses, competition, and subscriber retention challenges - The company has incurred substantial operating losses, including **$135.0 million in 2024**, and may not achieve or sustain profitability due to factors like delayed product launches, competition, and macroeconomic conditions[292](index=292&type=chunk)[294](index=294&type=chunk) - Competition has intensified from established camera makers, large electronics companies, and smartphones with advanced photo/video capabilities, which could lead to a loss of market share[292](index=292&type=chunk)[312](index=312&type=chunk)[313](index=313&type=chunk) - The subscriber base **declined 3% year-over-year** in Q2 2025 to **2.45 million**, and future growth is not guaranteed, which could impact the company's highest-margin revenue stream[303](index=303&type=chunk) - The company's stock price has been highly volatile, ranging from a high of **$6.46** in Q1 2023 to a low of **$0.48** in Q2 2025, and a sustained decline could lead to further impairment charges[301](index=301&type=chunk)[372](index=372&type=chunk)[374](index=374&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=70&type=section&id=Item%202%2E%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Reports on the company's stock repurchase program status, noting no repurchases were made during the quarter - As of June 30, 2025, the company had a remaining share repurchase authorization of **$60.4 million**[405](index=405&type=chunk) - **No shares** of Class A or Class B common stock were repurchased during the three months ended June 30, 2025[405](index=405&type=chunk) [Other Information](index=70&type=section&id=Item%205%2E%20Other%20Information) Discloses the adoption of Rule 10b5-1 trading plans by two company executives during the second quarter Executive 10b5-1 Trading Plan Adoptions (Q2 2025) | Name | Title | Date Adopted | Expiration Date | Total Shares to be Sold | | :--- | :--- | :--- | :--- | :--- | | Brian T. McGee | EVP, CFO & COO | 5/19/2025 | 5/19/2027 | 1,195,412 | | Dean Jahnke | SVP, Global Sales | 5/20/2025 | 5/20/2026 | 429,615 |

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=10&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for the period ended June 30, 2025, reflect significant financial distress, culminating in a Chapter 11 bankruptcy filing, with a **$632.3 thousand** working capital deficiency, a **$485.4 thousand** stockholders' deficit, and a **$116.5 thousand** net loss - On August 11, 2025, the company and certain subsidiaries filed for Chapter 11 bankruptcy protection to facilitate a financial and operational restructuring, constituting an event of default and accelerating debt obligations[10](index=10&type=chunk)[11](index=11&type=chunk)[47](index=47&type=chunk) - Management has concluded that substantial doubt exists about the Company's ability to continue as a going concern, citing the Chapter 11 filing, a working capital deficiency of **$632.3 thousand**, a net loss of **$116.5 thousand** for the six-month period, and constrained liquidity[12](index=12&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) Key Financial Position Data (as of June 30, 2025) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $106,419 | $196,518 | | Total Current Assets | $348,668 | $445,090 | | Total Assets | $591,709 | $692,464 | | Total Current Liabilities | $981,012 | $473,968 | | Long-term debt, net | $0 | $485,239 | | Total Liabilities | $1,077,146 | $1,065,700 | | Total stockholders' deficit | $(485,437) | $(373,236) | Condensed Consolidated Statements of Operations Highlights | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net sales | $612,402 | $603,863 | | Gross loss | $(42,960) | $(52,101) | | Loss from continuing operations | $(62,198) | $(75,113) | | Net loss attributable to common stockholders | $(116,540) | $(152,557) | | Net loss per common share (Basic) | $(2.41) | $(3.22) | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion centers on the voluntary Chapter 11 bankruptcy filing on August 11, 2025, aimed at restructuring the company's finances, with operational challenges including a labor strike in Türkiye and a production stoppage in Mexico, leading to a **$90.6 thousand** cash decrease and a 'going concern' warning - The company filed for Chapter 11 bankruptcy on August 11, 2025, to restructure its business and balance sheet, continuing operations as a 'debtor-in-possession'[134](index=134&type=chunk)[135](index=135&type=chunk) - Significant operational challenges in Q2 2025 included an ongoing labor strike in Türkiye starting May 13, 2025, and a temporary production stoppage in Mexico, both of which negatively impacted production volumes and financial results[145](index=145&type=chunk)[146](index=146&type=chunk) - The company received a non-compliance notice from Nasdaq on August 8, 2025, for its stock price falling below the **$1.00** minimum bid requirement and expects to be delisted due to the Chapter 11 filing[138](index=138&type=chunk)[232](index=232&type=chunk) Key Financial Measures Summary | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net sales | $612,402 | $603,863 | | Net loss from continuing operations | $(116,866) | $(122,375) | | Adjusted EBITDA | $(36,739) | $(47,953) | | Free cash flow | $(31,785) | $(91,313) | [Results of Operations](index=47&type=section&id=Results%20of%20Operations) For the six months ended June 30, 2025, net sales increased by 1.4% to **$612.4 thousand**, driven by a 24.1% increase in the Mexico segment offsetting declines in EMEA and India, with gross loss decreasing due to lower startup costs and facility shutdown, narrowing the loss from continuing operations to **$62.2 thousand** Net Sales by Segment (Six Months Ended June 30) | Segment | 2025 (in thousands) | 2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | U.S. | $17,685 | $6,760 | 161.6% | | Mexico | $386,806 | $311,769 | 24.1% | | EMEA | $136,454 | $201,505 | (32.3)% | | India | $71,457 | $83,829 | (14.8)% | | **Total** | **$612,402** | **$603,863** | **1.4%** | - The decrease in EMEA sales was primarily due to a **41%** net decrease in wind blades produced in Türkiye, caused by an ongoing labor strike that commenced on May 13, 2025[160](index=160&type=chunk) - Total cost of goods sold decreased as a percentage of sales, mainly due to a **$25.9 million** (**60.3%**) reduction in startup and transition costs compared to the prior year[162](index=162&type=chunk)[164](index=164&type=chunk) [Liquidity and Capital Resources](index=55&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity has been severely strained, with unrestricted cash and equivalents falling to **$106.4 thousand** at June 30, 2025, from **$196.5 thousand** at year-end 2024, leading to a Chapter 11 filing that accelerated approximately **$600 million** in debt obligations and raised substantial doubt about going concern - Unrestricted cash and cash equivalents decreased by **$90.1 thousand**, from **$196.5 thousand** at Dec 31, 2024, to **$106.4 thousand** at June 30, 2025[181](index=181&type=chunk) - The Chapter 11 filing constituted an event of default, accelerating debt obligations of approximately **$465.9 million** under the Credit Agreement and **$132.5 million** under the Convertible Notes[184](index=184&type=chunk) Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(21,569) | $(75,908) | | Net cash used in investing activities | $(10,216) | $(15,405) | | Net cash (used in) provided by financing activities | $(56,181) | $29,407 | | **Net change in cash** | **$(90,570)** | **$(61,775)** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to market risks from foreign currency exchange rates and commodity prices, with a hypothetical **10%** change in exchange rates impacting income from operations by approximately **$9.4 million**, and a **10%** change in resin prices impacting income by about **$4.1 million** - A hypothetical **10%** change in foreign currency exchange rates would have resulted in a change to income from operations of approximately **$9.4 million** for the six months ended June 30, 2025[195](index=195&type=chunk) - A **10%** change in the price of resin and resin systems would impact income from operations by approximately **$4.1 million** for the six months ended June 30, 2025, after accounting for customer cost-sharing agreements[198](index=198&type=chunk) - As of June 30, 2025, all financing obligations are fixed-rate instruments, minimizing exposure to interest rate fluctuations[199](index=199&type=chunk) [Item 4. Controls and Procedures](index=60&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[201](index=201&type=chunk) - No material changes to the internal control over financial reporting were identified during the three months ended June 30, 2025[202](index=202&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=61&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is involved in a legal proceeding in Germany related to the Senvion insolvency, defending against a **$13.3 million** voidance claim, with the Chapter 11 filing resulting in an automatic stay on most legal proceedings - The company is defending against a **$13.3 million** voidance claim from the Senvion insolvency estate, with an independent expert's report in July 2025 largely supporting the company's position that Senvion was solvent when payments were made[106](index=106&type=chunk)[108](index=108&type=chunk) - The filing of the Chapter 11 Cases automatically stayed most legal proceedings against the company to recover on claims arising before the petition date[109](index=109&type=chunk) [Item 1A. Risk Factors](index=61&type=section&id=ITEM%201A.%20Risk%20Factors) This section introduces significant new risks arising from the Chapter 11 bankruptcy filing, including substantial doubt about the company's ability to continue as a going concern, the high probability of common stock cancellation, and numerous uncertainties of the bankruptcy process - The company has identified conditions that raise substantial doubt about its ability to continue as a going concern, which could adversely impact its business, reputation, and relationships[207](index=207&type=chunk) - It is expected that the company's common stock will be cancelled as part of the Chapter 11 cases, with no value distributed to shareholders, and trading in the stock is described as highly speculative[208](index=208&type=chunk) - The company is subject to numerous risks associated with the Chapter 11 process, including the ability to confirm a reorganization plan, the high costs of the proceedings, and potential loss of confidence from customers and suppliers[209](index=209&type=chunk)[210](index=210&type=chunk)[215](index=215&type=chunk) - The company expects its common stock to be delisted from Nasdaq as a result of the Chapter 11 filing, which will adversely affect the stock's liquidity and market price[224](index=224&type=chunk) [Item 3. Defaults Upon Senior Securities](index=69&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) The company's Chapter 11 bankruptcy filing on August 11, 2025, constituted an event of default under certain debt agreements, accelerating principal and interest, though creditor enforcement actions are automatically stayed - The Chapter 11 filing on August 11, 2025, triggered an event of default and acceleration of debt under certain senior securities agreements[230](index=230&type=chunk) [Item 5. Other Information](index=69&type=section&id=ITEM%205.%20Other%20Information) On August 8, 2025, Nasdaq notified the company of non-compliance with the minimum **$1.00** bid price requirement, though the company anticipates imminent delisting due to the Chapter 11 filing, rendering the compliance period moot - On August 8, 2025, Nasdaq notified the company of non-compliance with the minimum **$1.00** bid price rule, giving it until February 4, 2026, to regain compliance[232](index=232&type=chunk)[233](index=233&type=chunk) - The company anticipates being delisted from Nasdaq imminently due to the Chapter 11 filing, which would supersede the bid price compliance issue[234](index=234&type=chunk) [Item 6. Exhibits](index=70&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, and Inline XBRL data files

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x 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 o 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 001-40031 BigBear.ai Holdings, Inc. (Exact name of registrant as specified in its charter) | Delaware ...