UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-42369 COHEN CIRCLE ACQUISITION CORP. I (Exact Name of Registrant as Specified in Its Charter) Cayman Islands 98-1634072 (State or other juri ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 29, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission file number: 0-12933 LAM RESEARCH CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-2634797 (State or ot ...

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q _______________________ (Mark One) ☒ ☐ 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: 001-39463 _______________________ For the quarterly period ended June 30, 2025 OR 350 Treat Avenue San Francisco, California 94110 (Address of principal exe ...

[Fiscal 2025 Third-Quarter Financial Highlights](index=1&type=section&id=Fiscal%202025%20Third-Quarter%20Financial%20Highlights) The company reported significant year-over-year improvements in key financial metrics, driven by strong performance in both Salt and Plant Nutrition segments [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlighted strong third-quarter results with improved margins in Salt and increased operating income in Plant Nutrition, alongside enhanced financial flexibility - Salt Business: Costs declined, leading to **adjusted EBITDA margin expansion** and per-ton growth[2](index=2&type=chunk) - Plant Nutrition Business: Benefited from stronger sales volumes and lower production costs, driving improvements in operating income and adjusted EBITDA[2](index=2&type=chunk) - Financial Strategy: The company enhanced financial flexibility through refinancing and reduced net debt with the sale of certain Fortress assets[2](index=2&type=chunk) [Quarterly Financial Results](index=1&type=section&id=Quarterly%20Financial%20Results) Compass Minerals achieved a significant year-over-year improvement in its third-quarter fiscal 2025 results, narrowing its net loss and increasing adjusted EBITDA Q3 FY2025 Key Financial Metrics (vs. Q3 FY2024) | Metric | Q3 2025 | Q3 2024 | Change | | :--- | :--- | :--- | :--- | | **Revenue** | $214.6M | $202.9M | +5.8% | | **Net Loss** | $(17.0)M | $(43.6)M | Improved | | **Net Loss per Diluted Share** | $(0.41) | $(1.05) | Improved | | **Adjusted EBITDA** | $41.0M | $32.8M | +25.0% | | **Adjusted Net Loss per Diluted Share** | $(0.39) | $(1.01) | Improved | - Salt business sales volumes increased by **4%** year-over-year[3](index=3&type=chunk) - Plant Nutrition sales volumes saw a significant **21%** increase compared to the prior year period[3](index=3&type=chunk) [Business Segment Performance](index=2&type=section&id=Business%20Segment%20Performance) Both the Salt and Plant Nutrition segments demonstrated improved profitability, driven by increased sales volumes and reduced production costs [Salt Business](index=2&type=section&id=Salt%20Business) The Salt segment reported increased revenue and significantly improved profitability, driven by higher sales volumes and a decline in all-in product costs per ton Salt Segment Q3 FY2025 Performance | Metric | Q3 2025 | Q3 2024 | YoY Change | | :--- | :--- | :--- | :--- | | **Revenue** | $166.0M | $160.6M | +3% | | **Sales Volumes** | 1,544k tons | 1,483k tons | +4% | | **Operating Earnings** | $28.1M | $25.9M | +9% | | **Adjusted EBITDA** | $45.8M | $41.6M | +10% | | **Adjusted EBITDA per ton** | $29.66 | $27.98 | +6% | - Highway deicing sales volumes increased **5%** year-over-year, while Consumer and Industrial (C&I) sales volumes grew by **2%**[5](index=5&type=chunk) - All-in product costs per ton declined **2%** from the prior-year quarter, contributing to margin expansion[6](index=6&type=chunk) [Plant Nutrition Business](index=2&type=section&id=Plant%20Nutrition%20Business) The Plant Nutrition segment achieved strong revenue growth and a dramatic turnaround in profitability, primarily due to a substantial reduction in product costs Plant Nutrition Segment Q3 FY2025 Performance | Metric | Q3 2025 | Q3 2024 | YoY Change | | :--- | :--- | :--- | :--- | | **Revenue** | $44.8M | $38.8M | +15% | | **Sales Volumes** | 68k tons | 56k tons | +21% | | **Operating Earnings (Loss)** | $5.2M | $(1.4)M | Turnaround | | **Adjusted EBITDA** | $11.4M | $7.2M | +58% | - The average sales price per ton decreased by **5%** year-over-year to approximately **$659**, reflecting global supply conditions for potassium-based fertilizers[7](index=7&type=chunk) - A significant **23%** year-over-year decrease in all-in product costs per ton was a key driver of the improved profitability[8](index=8&type=chunk) [Financial Position and Cash Flow](index=3&type=section&id=Financial%20Position%20and%20Cash%20Flow) The company demonstrated robust cash flow generation and maintained a strong liquidity position, supported by inventory reduction and strategic asset sales [Cash Flow Analysis](index=3&type=section&id=Cash%20Flow%20Analysis) For the first nine months of fiscal 2025, the company significantly improved cash from operating activities and reduced cash used in investing activities Nine Months Ended June 30 Cash Flow Summary (in millions) | Cash Flow Activity | FY2025 | FY2024 | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | $204.6 | $27.1 | | **Net Cash used in Investing Activities** | $(34.7) | $(95.0) | | **Net Cash (used in) provided by Financing Activities** | $(111.5) | $42.2 | - The primary driver for the significant improvement in operating cash flow was a reduction in salt inventory levels[9](index=9&type=chunk) - The company received net proceeds of **$19.6 million** from the sale of assets related to its exit from the fire retardant business[10](index=10&type=chunk) [Liquidity and Financial Position](index=3&type=section&id=Liquidity%20and%20Financial%20Position) Compass Minerals concluded the third quarter with substantial liquidity, comprising cash and available revolving credit, ensuring strong financial flexibility Liquidity Position as of June 30, 2025 | Component | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $79.4 | | Availability under revolving credit facility | $309.3 | | **Total Liquidity** | **$388.7** | [Fiscal 2025 Outlook and Bid Season Update](index=4&type=section&id=Fiscal%202025%20Outlook%20and%20Bid%20Season%20Update) The company has updated its fiscal 2025 guidance, projecting increased adjusted EBITDA, and anticipates positive pricing and volume trends for the upcoming North American bid season [Updated Fiscal 2025 Guidance](index=4&type=section&id=Updated%20Fiscal%202025%20Guidance) The company has refined its full-year fiscal 2025 guidance, projecting an increased range for total adjusted EBITDA and providing segment-specific contributions FY2025 Adjusted EBITDA Guidance (in millions) | Segment | 2025 Range | | :--- | :--- | | Salt | $220 - $229 | | Plant Nutrition | $24 - $27 | | Corporate | ($59) - ($55) | | **Total Compass Minerals** | **$185 - $201** | FY2025 Other Guidance | Metric | 2025 Range | | :--- | :--- | | **Capital Expenditures** | $75M - $85M | | **Interest Expense, net** | $70M - $75M | | **Depreciation, depletion and amortization** | $105M - $115M | [2025/2026 North American Bid Season Update](index=5&type=section&id=2025%2F2026%20North%20American%20Bid%20Season%20Update) With approximately 70% of the bidding process complete, the company expects favorable pricing and volume increases for the upcoming North American highway deicing season - Expected average contract selling price for the upcoming season to be **2%-4%** higher than fiscal 2025[22](index=22&type=chunk) - Committed bid volumes are expected to increase by approximately **3%-5%** compared to fiscal 2025[22](index=22&type=chunk) [Appendix: Financial Statements and Reconciliations](index=7&type=section&id=Appendix%3A%20Financial%20Statements%20and%20Reconciliations) This appendix provides comprehensive financial data, including detailed non-GAAP reconciliations and unaudited GAAP financial statements for the reported periods [Non-GAAP Reconciliations](index=7&type=section&id=Non-GAAP%20Reconciliations) This section provides detailed reconciliations of non-GAAP financial measures, such as Adjusted EBITDA, to their most directly comparable GAAP counterparts, used by management to assess core business performance Reconciliation of Net Loss to Adjusted EBITDA (Q3 FY2025) | (in millions) | Amount | | :--- | :--- | | **Net loss** | **$(17.0)** | | Interest expense | 16.3 | | Income tax expense | 3.4 | | Depreciation, depletion and amortization | 23.2 | | **EBITDA** | **25.9** | | Adjustments (Loss on debt extinguishment, etc.) | 15.1 | | **Adjusted EBITDA** | **$41.0** | - Special items adjusted in the nine months ended June 30, 2025, totaled **$60.0 million** before tax, primarily consisting of **$53.7 million** in impairments related to the exit of the Fortress business[33](index=33&type=chunk) [Consolidated Financial Statements](index=16&type=section&id=Consolidated%20Financial%20Statements) This section includes the company's unaudited GAAP financial statements, encompassing the Consolidated Statements of Operations, Balance Sheets, Cash Flows, and Segment Information [Consolidated Statements of Operations](index=16&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported a narrowed net loss for both the third quarter and the nine-month period of fiscal 2025, indicating improved operational performance Nine Months Ended June 30 Results (in millions) | Line Item | 2025 | 2024 | | :--- | :--- | :--- | | **Sales** | $1,016.4 | $908.6 | | **Gross Profit** | $152.3 | $175.5 | | **Operating Income (Loss)** | $13.3 | $(87.0) | | **Net Loss** | $(72.6) | $(157.8) | [Condensed Consolidated Balance Sheets](index=17&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, the company's total assets decreased primarily due to reduced inventories, while total long-term debt also saw a notable reduction Balance Sheet Highlights (in millions) | Account | June 30, 2025 | Sept. 30, 2024 | | :--- | :--- | :--- | | **Total Assets** | $1,537.4 | $1,640.1 | | Inventories, net | $264.7 | $414.1 | | **Total Liabilities** | $1,287.6 | $1,323.5 | | Long-term debt, net | $825.3 | $910.0 | | **Total Stockholders' Equity** | $249.8 | $316.6 | [Consolidated Statements of Cash Flows](index=18&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended June 30, 2025, the company generated significant cash from operating activities, while managing investing and financing outflows - A significant positive change in inventories contributed **$138.0 million** to operating cash flow for the nine-month period[65](index=65&type=chunk) - Major financing activities included net repayments under the revolving credit facility and debt refinancing, including the issuance of 2030 Notes and repurchase of 2027 Notes[65](index=65&type=chunk) [Segment Information](index=19&type=section&id=Segment%20Information) For the nine months ended June 30, 2025, the Salt segment was the primary revenue and earnings driver, while Plant Nutrition also contributed positively to operating earnings Nine Months Ended June 30, 2025 Segment Results (in millions) | Segment | Sales to External Customers | Operating Earnings (Loss) | | :--- | :--- | :--- | | **Salt** | $840.9 | $124.4 | | **Plant Nutrition** | $164.5 | $0.3 | | **Corporate & Other** | $11.0 | $(111.4) | | **Total** | **$1,016.4** | **$13.3** |

[Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%20Highlights) [Key Financial Highlights](index=1&type=section&id=Key%20Financial%20Highlights) LivePerson reported Q2 2025 total revenue of **$59.6 million**, a **25.4% year-over-year decrease**, with Adjusted EBITDA exceeding guidance Q2 2025 Key Financial Highlights | Metric | Q2 2025 Value | | :------------------------------------ | :------------ | | Total Revenue | $59.6 million | | Total Revenue Growth (YoY) | (25.4)% | | Adjusted EBITDA | Above high-end of guidance | | Trailing-twelve-months ARPC (YoY) | +4.0% | | Trailing-twelve-months ARPC (Value) | $655,000 | [Strategic and Operational Commentary](index=1&type=section&id=Strategic%20and%20Operational%20Commentary) The company secured a refinancing agreement, deleveraging its balance sheet by **$226 million** and extending its runway through 2029, alongside a **45% sequential increase** in Generative AI conversations - Secured a refinancing agreement that significantly deleverages the balance sheet and provides a clear runway to execute strategy through 2029[5](index=5&type=chunk)[6](index=6&type=chunk) - Achieved a **45% sequential increase** in conversations powered by the Generative AI suite[5](index=5&type=chunk) - Deepened strategic partnership with Google Cloud[5](index=5&type=chunk) Debt Deleveraging Impact | Metric | Value | | :-------------------- | :------------ | | Debt Discount Captured | $181 million | | Balance Sheet Deleveraging | $226 million | [Customer Expansion](index=1&type=section&id=Customer%20Expansion) LivePerson signed **38 deals** in Q2, including **35 expansions** and renewals with existing customers, and **3 new logo deals** with major global clients - Signed **38 total deals** in Q2 2025[4](index=4&type=chunk)[7](index=7&type=chunk) - **35 deals** were with existing customers (expansions and renewals)[7](index=7&type=chunk) - **3 deals** were with new customers, including a global financial services company, a major European retailer, one of Australia's largest retail groups, and a leading U.S. health plan provider[7](index=7&type=chunk)[8](index=8&type=chunk) [Condensed Consolidated Financial Statements](index=6&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, LivePerson reported a net loss of **$15.7 million**, a significant decline from Q2 2024's net income, primarily due to a prior year gain on debt extinguishment Condensed Consolidated Statements of Operations (Selected Metrics, in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $59,600 | $79,875 | $124,300 | $165,024 | | Cost of revenue | $18,038 | $16,432 | $36,256 | $40,887 | | Sales and marketing | $19,888 | $25,733 | $43,373 | $54,963 | | General and administrative | $7,945 | $24,415 | $24,729 | $46,009 | | Product development | $13,843 | $19,674 | $29,877 | $44,309 | | Loss from operations | $(6,433) | $(29,799) | $(23,377) | $(66,163) | | Gain on debt extinguishment | — | $73,083 | — | $73,083 | | Net (loss) income | $(15,710) | $41,795 | $(29,843) | $6,164 | | Basic Net (loss) income per share | $(0.17) | $0.47 | $(0.32) | $0.07 | | Diluted Net (loss) income per share | $(0.17) | $(0.33) | $(0.37) | $(0.70) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities improved to **$(14.8) million** for the six months ended June 30, 2025, with financing activities shifting to net cash provided Condensed Consolidated Statements of Cash Flows (Selected Metrics, in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net (loss) income | $(29,843) | $6,164 | | Stock-based compensation expense | $8,969 | $13,458 | | Gain on debt extinguishment | — | $(73,083) | | Net cash used in operating activities | $(14,772) | $(16,832) | | Net cash used in investing activities | $(7,947) | $(17,716) | | Net cash provided by (used in) financing activities | $444 | $(31,797) | | Net decrease in cash and cash equivalents | $(21,274) | $(66,968) | | Cash and cash equivalents - end of period | $161,963 | $145,957 | [Condensed Consolidated Balance Sheets](index=11&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly decreased to **$605.0 million** as of June 30, 2025, while total liabilities increased and stockholders' equity remained negative Condensed Consolidated Balance Sheets (Selected Metrics, in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Cash and cash equivalents | $161,963 | $183,237 | | Accounts receivable, net | $23,505 | $28,737 | | Prepaid expenses and other current assets | $46,158 | $19,250 | | Total current assets | $231,626 | $231,224 | | Total assets | $605,041 | $607,778 | | Total current liabilities | $141,438 | $139,940 | | Convertible senior notes | $537,866 | $527,070 | | Total liabilities | $687,453 | $675,094 | | Total stockholders' equity | $(82,412) | $(67,316) | [Disaggregated Revenue](index=3&type=section&id=Disaggregated%20Revenue) [Disaggregated Revenue by Source](index=3&type=section&id=Disaggregated%20Revenue%20by%20Source) Hosted services revenue decreased by **25.3%** to **$50.3 million** in Q2 2025, while professional services revenue also declined by **26.1%** Disaggregated Revenue by Source (in thousands) | Revenue Source | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Hosted services | $50,321 | $67,316 | $105,455 | $138,811 | | Professional services | $9,279 | $12,559 | $18,845 | $26,213 | | Total revenue | $59,600 | $79,875 | $124,300 | $165,024 | [Non-GAAP Financial Measures and Reconciliations](index=2&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) [Adjusted EBITDA and Adjusted Operating (Loss) Income Reconciliation](index=2&type=section&id=Net%20(Loss)%20Income%2C%20Adjusted%20Operating%20(Loss)%20Income%20and%20Adjusted%20EBITDA) Adjusted EBITDA for Q2 2025 was **$2.9 million**, down from **$8.2 million** in Q2 2024, with adjusted operating loss at **$2.7 million** Adjusted EBITDA and Adjusted Operating (Loss) Income (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | GAAP net (loss) income | $(15,710) | $41,795 | $(29,843) | $6,164 | | Adjusted EBITDA | $2,919 | $8,208 | $3,086 | $8,685 | | Adjusted operating (loss) income | $(2,659) | $494 | $(8,079) | $(7,254) | [Free Cash Flow and Non-GAAP Expense Reconciliations](index=10&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Information%20to%20GAAP%20-%20Free%20Cash%20Flow%20and%20Non-GAAP%20Expenses) Free Cash Flow for Q2 2025 improved to **$(14.8) million**, and non-GAAP expenses exclude items like stock-based compensation Free Cash Flow (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(11,676) | $(17,931) | $(14,772) | $(16,832) | | Purchases of property and equipment, including capitalized software | $(3,136) | $(4,956) | $(6,895) | $(16,457) | | Total Free Cash Flow | $(14,812) | $(22,887) | $(21,667) | $(33,289) | Non-GAAP Expenses (Three Months Ended June 30, 2025, in thousands) | Expense Category | GAAP Amount | Non-GAAP Amount | | :------------------------------------ | :---------- | :-------------- | | Cost of revenue | $18,038 | $17,725 | | Sales and marketing expenses | $19,888 | $18,829 | | General and administrative expenses | $7,945 | $7,736 | | Product development expenses | $13,843 | $12,391 | [Financial Expectations](index=2&type=section&id=Financial%20Expectations) [Third Quarter 2025 Guidance](index=2&type=section&id=Third%20Quarter%202025%20Guidance) Q3 2025 revenue is projected between **$56 million** and **$59 million**, with Adjusted EBITDA expected to be a loss between **$(4) million** and **$(2) million** Third Quarter 2025 Guidance | Metric | Guidance | | :-------------------- | :----------------- | | Revenue (in millions) | $56 - $59 | | Revenue growth (YoY) | (25)% - (21)% | | Adjusted EBITDA (in millions) | $(4) - $(2) | | Adjusted EBITDA margin (%) | (7.1)% - (3.4)% | | Recurring revenue | 93% of total revenue | [Full Year 2025 Guidance](index=2&type=section&id=Full%20Year%202025%20Guidance) Full year 2025 revenue is anticipated between **$230 million** and **$240 million**, with Adjusted EBITDA ranging from **$(3) million** to **$7 million** Full Year 2025 Guidance | Metric | Guidance | | :-------------------- | :------------------------ | | Revenue (in millions) | $230 - $240 | | Revenue growth (YoY) | (26)% - (23)% | | Adjusted EBITDA (in millions) | $(3) - $7 | | Adjusted EBITDA margin (%) | (1.3)% - 2.9% | | Recurring revenue | 93% of total revenue | [Additional Information](index=3&type=section&id=Additional%20Information) [About LivePerson, Inc.](index=4&type=section&id=About%20LivePerson%2C%20Inc.) LivePerson leads enterprise conversational AI and digital transformation, powering nearly a billion monthly interactions and recognized as a top innovative AI company - LivePerson is a leader in trusted enterprise conversational AI and digital transformation[2](index=2&type=chunk)[23](index=23&type=chunk) - Powers nearly a **billion conversational interactions** every month for leading brands like HSBC and Virgin Media[23](index=23&type=chunk) - Named the **1 Most Innovative AI Company** in the world by Fast Company[23](index=23&type=chunk) [Non-GAAP Financial Measures Definition](index=4&type=section&id=Non-GAAP%20Financial%20Measures) This section defines non-GAAP measures like Adjusted EBITDA and Free Cash Flow, cautioning they are not alternatives to GAAP for performance indication - Defines non-GAAP financial measures such as **Adjusted EBITDA**, **Adjusted EBITDA margin**, **Adjusted Operating (Loss) Income**, **Free Cash Flow**, and non-GAAP expenses for various operational categories[24](index=24&type=chunk) - These measures exclude items like interest, taxes, depreciation, amortization, stock-based compensation, litigation costs, restructuring costs, and gain/loss on debt extinguishment[24](index=24&type=chunk) - Non-GAAP information should not be construed as an alternative to GAAP measures or as an indicator of operating performance, liquidity, or cash flows[25](index=25&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements, subject to risks and uncertainties that could cause actual results to differ materially from projections - Statements regarding LivePerson's future, including financial guidance and capital structure changes, are forward-looking[26](index=26&type=chunk) - These statements are subject to risks and uncertainties that could cause actual results to differ materially[26](index=26&type=chunk)[27](index=27&type=chunk) - Key risk factors include customer retention, personnel management, debt refinancing, lengthy sales cycles, payment-related risks, market competition, general economic conditions, security breaches, regulatory changes, and intellectual property protection[27](index=27&type=chunk) [Earnings Teleconference and Supplemental Presentation](index=3&type=section&id=Earnings%20Teleconference%20Information) LivePerson discussed Q2 2025 results via teleconference on **August 11, 2025**, with a replay and supplemental information available online - A teleconference to discuss Q2 2025 financial results was held on **August 11, 2025**, at 5:00 PM ET[20](index=20&type=chunk) - A replay of the teleconference is available until **August 25, 2025**[21](index=21&type=chunk) - Supplemental information for Q2 2025 is posted on the investor relations section of the Company's website at www.ir.liveperson.com[19](index=19&type=chunk)[22](index=22&type=chunk)

Q2 2025 Earnings Release Overview [Financial Highlights](index=1&type=section&id=Financial_Highlights) Arq achieved strong Q2 2025 financial performance with **13% YoY revenue growth**, improved gross margin, and significantly increased Adjusted EBITDA Q2 2025 Key Financial Highlights | Metric | Q2 2025 | Q2 2024 | Change YoY | | :-------------- | :------ | :------ | :--------- | | Revenue | $28.6M | $25.4M | +13% | | Gross Margin | 33.3% | 32.2% | +110 bps | | Adjusted EBITDA | $3.7M | $1.1M | >200% | - Average Sales Price (ASP) increased by approximately **9%** over the prior year period[5](index=5&type=chunk)[7](index=7&type=chunk) - Exited Q2 2025 with cash and restricted cash of **$15.4 million**[5](index=5&type=chunk) - Capital expenditures forecast for full year 2025 remain in line with previous guidance of **$8 - $12 million**[5](index=5&type=chunk) [Recent Business Highlights](index=1&type=section&id=Recent_Business_Highlights) Arq commissioned its first Granular Activated Carbon (GAC) line at Red River, initiating commercial production and accelerating plans for a second GAC line - Completed Red River plant commissioning with first commercial GAC production and sales, continuing transformation into new higher growth, higher margin businesses[5](index=5&type=chunk) - Expect to accelerate development planning for a second line of **25 million pounds of GAC production** at Red River and make a financial investment decision prior to year-end 2025[5](index=5&type=chunk) - Testing of Arq Wetcake as a feedstock for various asphalt related products with a leading US asphalt company has begun[5](index=5&type=chunk) [CEO Commentary and Strategic Outlook](index=1&type=section&id=CEO_Commentary_and_Strategic_Outlook) CEO Bob Rasmus highlighted successful GAC line commissioning and strong Q2 results, noting solid PAC business performance and favorable GAC market dynamics - Successful commissioning of the first GAC line at Red River represents a significant milestone for Arq, its customers, and shareholders[4](index=4&type=chunk) - The foundational PAC business delivered another solid quarter with further sustained price improvements and its fifth consecutive quarter of positive adjusted EBITDA[4](index=4&type=chunk) - The GAC market continues to show strength with steady demand (**3-5% annual growth**) and minimal new capacity, with potential for a **3-5x increase in demand** driven by recent EPA regulatory changes[6](index=6&type=chunk) - Arq is capitalizing on additional growth drivers like renewable natural gas, having already sold initial Phase 1 GAC product to RNG customers in Q3 2025[6](index=6&type=chunk) - Given favorable market dynamics, Arq now expects to make a Final Investment Decision on a second GAC line prior to the end of 2025[6](index=6&type=chunk) Second Quarter 2025 Detailed Financial Results [Revenue and Cost of Revenue](index=2&type=section&id=Revenue_and_Cost_of_Revenue) Revenue for Q2 2025 increased by **13% year-over-year** to **$28.6 million**, driven by higher average sales prices and increased volumes, while costs of revenue rose by **11%** Q2 2025 Revenue and Cost of Revenue | Metric | Q2 2025 | Q2 2024 | Change YoY | | :-------------- | :-------- | :-------- | :--------- | | Revenue | $28.6M | $25.4M | +13% | | Cost of Revenue | $19.1M | $17.2M | +11% | - Average sales price for Q2 2025 was up approximately **9%** compared to the prior year period[7](index=7&type=chunk) - Increase in costs of revenue was principally driven by an increase in volumes and associated revenue, as well as start-up costs associated with the GAC line at Red River[8](index=8&type=chunk) [Gross Margin](index=2&type=section&id=Gross_Margin) Gross margin improved to **33.3%** in Q2 2025, an increase of **110 basis points** from the prior year, primarily due to higher pricing and volume, partially offset by GAC line start-up costs Q2 2025 Gross Margin | Metric | Q2 2025 | Q2 2024 | Change (bps) | | :---------- | :------ | :------ | :----------- | | Gross Margin| 33.3% | 32.2% | +110 bps | - Gross margin increased as higher pricing and volume were partially offset by start-up costs associated with the GAC line at Red River[9](index=9&type=chunk) [Operating Expenses](index=2&type=section&id=Operating_Expenses) Selling, general and administrative (SG&A) expenses decreased by **16%** to **$5.9 million**, while research and development (R&D) costs significantly increased to **$2.7 million** due to GAC facility pre-production testing Q2 2025 Operating Expenses | Metric | Q2 2025 | Q2 2024 | Change YoY | | :------------------------------------ | :------ | :------ | :--------- | | Selling, general and administrative | $5.9M | $7.0M | -16% | | Research and development | $2.7M | $0.9M | +$1.8M | - The reduction in SG&A was primarily driven by lower payroll and benefits and G&A expenses, with a portion reflecting the capitalization of payroll and benefits associated with the Corbin Facility[10](index=10&type=chunk) - The increase in R&D costs was primarily due to non-recurring expenses relating to feedstock utilized in pre-production testing of the GAC Facility[11](index=11&type=chunk) [Profitability Metrics](index=2&type=section&id=Profitability_Metrics) Arq reported an operating loss of **$1.6 million** and a net loss of **$2.1 million** in Q2 2025, while Adjusted EBITDA significantly improved to **$3.7 million**, marking the fifth consecutive quarter of positive Adjusted EBITDA Q2 2025 Profitability Metrics | Metric | Q2 2025 | Q2 2024 | Change YoY | | :------------- | :-------- | :-------- | :--------- | | Operating Loss | $(1.6)M | $(1.4)M | $(0.2)M | | Net Loss | $(2.1)M | $(2.0)M | $(0.1)M | | Adjusted EBITDA| $3.7M | $1.1M | >200% | - The increase in Adjusted EBITDA over the prior year period was primarily driven by higher revenues[12](index=12&type=chunk) Capital Expenditures and Balance Sheet Summary [Capital Expenditures](index=2&type=section&id=Capital_Expenditures) Capital expenditures for Q2 2025 totaled **$1.9 million**, consistent with expectations, with the full-year 2025 forecast remaining at **$8-$12 million** Capital Expenditures | Metric | Q2 2025 | FY 2025 Forecast | | :------------------------- | :------ | :--------------- | | Capital Expenditures | $1.9M | $8M - $12M | [Cash and Debt Position](index=2&type=section&id=Cash_and_Debt_Position) Cash and restricted cash decreased to **$15.4 million** as of June 30, 2025, primarily due to GAC facility capital expenditures and inventory build-up, while total debt increased to **$28.7 million** Cash and Debt Position | Metric | June 30, 2025 | Dec 31, 2024 | Change | | :------------------------- | :------------ | :----------- | :----- | | Cash and Restricted Cash | $15.4M | $22.2M | $(6.8)M| | Total Debt | $28.7M | $24.8M | +$3.9M | - The decrease in cash was largely caused by capital expenditures relating to the GAC Facility at Red River, trade accounts payable, as well as build-up of inventory and spare parts at the Corbin Facility[15](index=15&type=chunk) - The increase in total debt was driven by an increase in the outstanding principal balance of the Company's revolving credit facility[16](index=16&type=chunk) Corporate Information and Disclosures [About Arq](index=3&type=section&id=About_Arq) Arq is a diversified environmental technology company, the only vertically integrated producer of activated carbon products in North America, providing innovative solutions for removing pollutants - Arq is a diversified, environmental technology company with products that enable a cleaner and safer planet while actively reducing environmental impact[19](index=19&type=chunk) - The company is the only vertically integrated producer of activated carbon products in North America, delivering a reliable domestic supply of innovative, hard-to-source, high-demand products[19](index=19&type=chunk) - Arq applies its expertise to develop groundbreaking solutions to remove harmful chemicals and pollutants from water, land, and air[19](index=19&type=chunk) [Conference Call and Webcast Information](index=2&type=section&id=Conference_Call_and_Webcast_Information) Arq will host its Q2 2025 earnings conference call on August 12, 2025, at 8:30 a.m. ET, with webcast and replay details provided - Arq will host its Q2 2025 earnings conference call on August 12, 2025, at 8:30 a.m. ET[17](index=17&type=chunk) - The live webcast can be accessed through the Investor Resources section of Arq's website at www.arq.com, with registration available at https://www.webcast-eqs.com/Arq_Q2_2025[17](index=17&type=chunk) - A replay of the event will be made available shortly after and accessible via the same webcast link or by dial-in until August 19, 2025[18](index=18&type=chunk) [Caution on Forward-Looking Statements](index=3&type=section&id=Caution_on_Forward-Looking_Statements) This section warns that the press release contains forward-looking statements subject to various risks and uncertainties, advising readers to consult SEC filings for details - This press release contains forward-looking statements within the meaning of Section

[Executive Summary & Q2 2025 Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Q2%202025%20Highlights) Overview of Arq's strong Q2 2025 financial performance, key business achievements, and CEO commentary on market outlook [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Arq reported strong Q2 2025 financial performance with significant revenue growth and improved profitability, marking its fifth consecutive quarter of positive Adjusted EBITDA Key Financial Metrics | Metric | Q2 2025 | Q2 2024 | YoY Change | Notes | | :-------------------- | :------ | :------ | :--------- | :---- | | Revenue | $28.6M | $25.4M | +13% | Driven by higher ASP and volumes | | Average Sales Price (ASP) | ~9% increase | - | +9% | Over prior year period | | Gross Margin | 33.3% | 32.2% | +110 bps | Improved pricing and volume, partially offset by GAC line start-up costs | | Adjusted EBITDA | $3.7M | $1.1M | +236% | Fifth consecutive quarter of positive Adjusted EBITDA | - Exited Q2 2025 with cash and restricted cash of **$15.4 million**[5](index=5&type=chunk) - Capital expenditures forecast for full year 2025 remain in line with previous guidance of **$8 - $12 million**[5](index=5&type=chunk) [Recent Business Highlights](index=1&type=section&id=Recent%20Business%20Highlights) The company achieved a major milestone with the commissioning of its first Granular Activated Carbon (GAC) line at Red River, advancing its transformation into higher-growth businesses, and initiated testing of Arq Wetcake for asphalt products - Completed Red River plant commissioning with first commercial GAC production and sales, continuing transformation into new **higher growth, higher margin businesses**[5](index=5&type=chunk) - Expect to accelerate development planning for a second line of **25 million pounds** of GAC production at Red River and make a financial investment decision prior to year-end 2025[5](index=5&type=chunk) - Testing of Arq Wetcake as a feedstock for various asphalt related products with a leading US asphalt company has begun[5](index=5&type=chunk) [CEO Commentary and Market Outlook](index=1&type=section&id=CEO%20Commentary%20and%20Market%20Outlook) CEO Bob Rasmus highlighted the successful GAC line commissioning and solid PAC business performance, emphasizing favorable GAC market conditions driven by steady demand, EPA regulations, and new growth drivers like renewable natural gas, leading to an accelerated Final Investment Decision (FID) for a second GAC line - The GAC market continues to show strength with steady demand and minimal new capacity entering the market, creating **favorable conditions for pricing**[6](index=6&type=chunk) - Expected **3-5% annual growth** from existing demand drivers alone, with the potential for a **3-5x increase in demand** driven by recent EPA regulatory changes[6](index=6&type=chunk) - Capitalizing on additional growth drivers like renewable natural gas (RNG) and already sold initial Phase 1 GAC product to RNG customers in Q3 2025[6](index=6&type=chunk) - Given continued favorable market dynamics, Arq now expects to make a Final Investment Decision on a second GAC line prior to the end of 2025[6](index=6&type=chunk) [Second Quarter 2025 Financial Performance](index=2&type=section&id=Second%20Quarter%202025%20Results) Details Arq's Q2 2025 financial results, covering revenue, costs, operating expenses, and profitability metrics [Revenue and Cost of Revenue](index=2&type=section&id=Revenue%20and%20Cost%20of%20Revenue) Arq's Q2 2025 revenue increased by 13% year-over-year, primarily due to higher average sales prices and increased volumes, while costs of revenue also rose due to higher volumes and GAC line start-up expenses Revenue and Cost of Revenue (in millions) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :------------- | :------ | :------ | :--------- | | Revenue | $28.6M | $25.4M | +13% | | Cost of Revenue | $19.1M | $17.2M | +11% | - Average Sales Price (ASP) for Q2 2025 was up approximately **9%** compared to the prior year period[7](index=7&type=chunk) - Increase in costs of revenue was principally driven by an increase in volumes and associated revenue, as well as start-up costs associated with the GAC line at Red River[8](index=8&type=chunk) [Operating Expenses](index=2&type=section&id=Operating%20Expenses) Selling, general, and administrative (SG&A) expenses decreased significantly, while research and development (R&D) costs saw a substantial increase due to non-recurring pre-production testing expenses for the GAC facility Operating Expenses (in millions) | Metric | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | | Selling, general and administrative | $5.9M | $7.0M | -16% | | Research and development | $2.7M | $0.9M | +200% | - The reduction in SG&A expenses was primarily driven by lower payroll and benefits and G&A expenses, partly reflecting the capitalization of payroll and benefits associated with the Corbin Facility[10](index=10&type=chunk) - The increase in R&D costs was primarily due to non-recurring expenses relating to feedstock utilized in pre-production testing of the GAC Facility[11](index=11&type=chunk) [Profitability](index=2&type=section&id=Profitability) Gross margin improved slightly, but operating loss and net loss widened year-over-year. However, Adjusted EBITDA saw a significant increase, marking the fifth consecutive quarter of positive Adjusted EBITDA Profitability Metrics | Metric | Q2 2025 | Q2 2024 | Change | | :-------------- | :------ | :------ | :----- | | Gross Margin | 33.3% | 32.2% | +110 bps | | Operating Loss | ($1.6M) | ($1.4M) | Widened | | Net Loss | ($2.1M) | ($2.0M) | Widened | | Adjusted EBITDA | $3.7M | $1.1M | +236% | - Gross margin increased as higher pricing and volume were partially offset by start-up costs associated with the GAC line at Red River[9](index=9&type=chunk) - Adjusted EBITDA increase was primarily driven by **higher revenues**[12](index=12&type=chunk) [Capital Expenditures and Balance Sheet Overview](index=2&type=section&id=Capex%20and%20Balance%20Sheet) Overview of Arq's capital expenditures, cash position, and debt structure as of Q2 2025 [Capital Expenditures](index=2&type=section&id=Capital%20Expenditures) Capital expenditures for Q2 2025 were $1.9 million, in line with management expectations, and the full-year 2025 forecast remains consistent with previous guidance of $8 - $12 million Capital Expenditures (in millions) | Metric | Q2 2025 | | :------------- | :------ | | Capex | $1.9M | - Capital expenditures forecast for full year 2025 remain in line with previous guidance of **$8 - $12 million**[14](index=14&type=chunk) [Cash and Liquidity](index=2&type=section&id=Cash%20and%20Liquidity) Cash and restricted cash decreased to $15.4 million as of June 30, 2025, primarily due to GAC facility capex, trade accounts payable, and inventory build-up Cash and Restricted Cash (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Cash and Restricted Cash | $15.4M | $22.2M | - The decrease in cash was largely caused by capex relating to the GAC Facility at Red River, trade accounts payable, as well as build-up of inventory and spare parts at the Corbin Facility[15](index=15&type=chunk) [Debt](index=2&type=section&id=Debt) Total debt, including financing leases, increased to $28.7 million as of June 30, 2025, driven by an increase in the outstanding principal balance of the revolving credit facility Total Debt (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :--------- | :------------ | :---------------- | | Total Debt | $28.7M | $24.8M | - The increase in total debt was driven by an increase in the outstanding principal balance of the Company's revolving credit facility[16](index=16&type=chunk) [About Arq](index=3&type=section&id=About%20Arq) Overview of Arq as a diversified environmental technology company, focusing on activated carbon products and purification solutions [Company Overview](index=3&type=section&id=Company%20Overview) Arq is a diversified environmental technology company and the sole vertically integrated producer of activated carbon products in North America, focusing on innovative solutions for purification and sustainable materials - Arq (NASDAQ: ARQ) is a diversified, environmental technology company with products that enable a cleaner and safer planet while actively reducing environmental impact[19](index=19&type=chunk) - As the only vertically integrated producer of activated carbon products in North America, Arq delivers a reliable domestic supply of innovative, hard-to-source, high-demand products[19](index=19&type=chunk) - The company applies its expertise to develop groundbreaking solutions to remove harmful chemicals and pollutants from water, land, and air[19](index=19&type=chunk) [Caution on Forward-Looking Statements](index=3&type=section&id=Caution%20on%20Forward-Looking%20Statements) This section outlines the disclaimer regarding forward-looking statements, emphasizing inherent risks and uncertainties that could impact actual financial results [Disclaimer and Risk Factors](index=3&type=section&id=Disclaimer%20and%20Risk%20Factors) This section provides a comprehensive disclaimer regarding forward-looking statements, outlining various risks and uncertainties that could cause actual results to differ

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides Xenon Pharmaceuticals Inc.'s unaudited condensed consolidated financial statements and related notes for the periods ended June 30, 2025, and December 31, 2024 [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Xenon Pharmaceuticals Inc.'s unaudited condensed consolidated financial statements and detailed notes for the periods ended June 30, 2025, and December 31, 2024 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's condensed consolidated balance sheets, detailing assets, liabilities, and shareholders' equity as of June 30, 2025, and December 31, 2024 | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Total Assets | $674,281 | $798,139 | $(123,858) | | Total Liabilities | $40,303 | $43,236 | $(2,933) | | Total Shareholders' Equity | $633,978 | $754,903 | $(120,925) | | Cash and cash equivalents | $135,381 | $142,712 | $(7,331) | | Marketable securities (current) | $352,164 | $484,193 | $(132,029) | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section presents the company's condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2025, and 2024 | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | | Collaboration revenue | $— | $— | $— | | Research and development | $74,985 | $49,702 | $25,283 | | General and administrative | $19,244 | $19,402 | $(158) | | Net loss | $(84,706) | $(57,924) | $(26,782) | | Net loss per common share (Basic and diluted) | $(1.07) | $(0.75) | $(0.32) | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :-------------------- | | Collaboration revenue | $7,500 | $— | $7,500 | | Research and development | $136,185 | $93,952 | $42,233 | | General and administrative | $38,282 | $34,193 | $4,089 | | Net loss | $(149,753) | $(105,855) | $(43,898) | | Net loss per common share (Basic and diluted) | $(1.90) | $(1.36) | $(0.54) | [Condensed Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) This section presents the company's condensed consolidated statements of shareholders' equity for the six months ended June 30, 2025, and 2024 | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | | :-------------------------- | :------------------------------- | :--------------------------- | | Common shares | $1,456,836 | $1,469,196 | | Additional paid-in capital | $199,149 | $213,892 | | Accumulated deficit | $(899,470) | $(1,049,223) | | Other comprehensive income | $(1,612) | $113 | | Total shareholders' equity | $754,903 | $633,978 | - Net loss for the six months ended June 30, 2025, was **$(149.8) million**, contributing to the accumulated deficit[14](index=14&type=chunk) - Stock-based compensation expense for the six months ended June 30, 2025, was **$25.9 million**[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's condensed consolidated statements of cash flows for the six months ended June 30, 2025, and 2024 | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | | Net cash used in operating activities | $(125,885) | $(77,339) | $(48,546) | | Net cash provided by investing activities | $116,770 | $65,999 | $50,771 | | Net cash provided by financing activities | $1,216 | $— | $1,216 | | Decrease in cash and cash equivalents | $(7,331) | $(11,909) | $4,578 | | Cash and cash equivalents, end of period | $135,381 | $136,734 | $(1,353) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the company's financial position, performance, and accounting policies - Xenon Pharmaceuticals Inc. is a neuroscience-focused biopharmaceutical company dedicated to drug discovery, clinical development, and commercialization of therapeutics[16](index=16&type=chunk) - The company had an accumulated deficit of **$1,049.2 million** and a net loss of **$149.8 million** for the six months ended June 30, 2025[17](index=17&type=chunk) - Cash, cash equivalents, and marketable securities totaled **$624.8 million** as of June 30, 2025, expected to fund current operations for at least the next 12 months[19](index=19&type=chunk) - A prior period error was corrected, reclassifying **$1.5 million** of accretion of discounts on marketable securities from investing to operating activities for the six months ended June 30, 2024[23](index=23&type=chunk) - The company recognized **$7.5 million** in collaboration revenue for the six months ended June 30, 2025, due to a milestone payment from Neurocrine Biosciences for NBI-921355 entering a Phase 1 study[39](index=39&type=chunk) - As of June 30, 2025, the unrecognized stock-based compensation expense related to unvested stock options was **$115.3 million**, expected to be recognized over 2.8 years[35](index=35&type=chunk) - Future potential regulatory milestone payments to 1st Order Pharmaceuticals for azetukalner could be up to **$6.0 million**[42](index=42&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Xenon Pharmaceuticals Inc.'s financial condition, results of operations, liquidity, and capital resources, highlighting operating losses and R&D investments [Overview](index=18&type=section&id=Overview) This section provides a strategic overview of Xenon Pharmaceuticals Inc.'s neuroscience-focused biopharmaceutical pipeline and clinical development programs - Xenon Pharmaceuticals Inc. is a neuroscience-focused biopharmaceutical company advancing an ion channel product portfolio for epilepsy and depression[51](index=51&type=chunk) - Azetukalner, a Kv7 potassium channel opener, is in late-stage clinical development for multiple indications including focal onset seizures (FOS), primary generalized tonic-clonic seizures (PGTCS), major depressive disorder (MDD), and bipolar depression (BPD)[52](index=52&type=chunk) - Phase 3 X-TOLE2 clinical study of azetukalner in FOS has completed patient recruitment, with topline data anticipated in early 2026 - Phase 3 X-NOVA2 and X-NOVA3 clinical trials evaluating azetukalner in MDD are underway and screening patients - Phase 3 X-CEED clinical study evaluating azetukalner in BPD I and BPD II depression has been initiated - A Phase 1 study is underway for NBI-921355, a selective Nav1.2 and Nav1.6 inhibitor, as part of the collaboration with Neurocrine Biosciences for epilepsy[55](index=55&type=chunk)[56](index=56&type=chunk) - Early-stage pipeline includes XEN1120 (Kv7 channel opener for pain) in Phase 1, XEN1701 (Nav1.7 development candidate for pain) in Phase 1, and a Nav1.1 lead candidate expected to enter IND-enabling studies in 2025 for Dravet Syndrome[60](index=60&type=chunk) [Financial Operations Overview](index=19&type=section&id=Financial%20Operations%20Overview) This section summarizes Xenon Pharmaceuticals Inc.'s financial performance, including revenue sources, net losses, and expected increases in operating expenses - Revenue is primarily derived from collaboration and licensing agreements; no product sales have been generated to date[58](index=58&type=chunk) - The company incurred net losses of **$149.8 million** for the six months ended June 30, 2025, and had an accumulated deficit of **$1,049.2 million**[57](index=57&type=chunk) - Operating expenses are expected to increase substantially due to continued investment in R&D, clinical trials, regulatory approvals, manufacturing, and preparations for potential commercial launch of azetukalner[61](index=61&type=chunk)[65](index=65&type=chunk)[68](index=68&type=chunk) - Collaboration revenue of **$7.5 million** was recognized for the six months ended June 30, 2025, from a milestone payment related to NBI-921355's progression into a Phase 1 clinical study[56](index=56&type=chunk)[62](index=62&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=23&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) This section outlines the critical accounting policies and significant judgments and estimates used in preparing the financial statements - The condensed consolidated financial statements are prepared in conformity with GAAP, requiring significant estimates and assumptions[72](index=72&type=chunk) - Critical accounting policies include revenue recognition, research and development costs, and stock-based compensation[73](index=73&type=chunk) - No material changes in critical accounting policies and significant judgments and estimates occurred during the six months ended June 30, 2025[74](index=74&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) This section details the company's financial results for the three and six months ended June 30, 2025, and 2024, including revenue, expenses, and net loss | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | | Collaboration revenue | $— | $— | $— | | Research and development expenses | $74,985 | $49,702 | $25,283 | | General and administrative expenses | $19,244 | $19,402 | $(158) | | Interest income | $7,199 | $10,837 | $(3,638) | | Foreign exchange gain | $1,698 | $10 | $1,688 | | Loss before income taxes | $(85,332) | $(58,257) | $(27,075) | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | | Collaboration revenue | $7,500 | $— | $7,500 | | Research and development expenses | $136,185 | $93,952 | $42,233 | | General and administrative expenses | $38,282 | $34,193 | $4,089 | | Interest income | $15,282 | $22,192 | $(6,910) | | Foreign exchange gain | $1,733 | $177 | $1,556 | | Loss before income taxes | $(149,952) | $(105,776) | $(44,176) | - Direct external costs for azetukalner increased by **$28.3 million** for the six months ended June 30, 2025, driven by ongoing Phase 3 clinical trials in epilepsy and MDD, and start-up costs for the Phase 3 BPD program[77](index=77&type=chunk) - Personnel-related R&D costs increased by **$12.8 million** for the six months ended June 30, 2025, due to higher headcount supporting late-stage development[77](index=77&type=chunk) - Interest income decreased by **$6.9 million** for the six months ended June 30, 2025, due to a lower average balance of marketable securities and lower average market yields[80](index=80&type=chunk) - Foreign exchange gains increased by **$1.6 million** for the six months ended June 30, 2025, due to Canadian dollar fluctuations and higher Canadian dollar cash balances[80](index=80&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, cash flow activities, and capital resources, assessing its ability to fund future operations - As of June 30, 2025, the company had **$624.8 million** in cash, cash equivalents, and marketable securities, which are expected to fund operating expenses and capital expenditure requirements for at least the next 12 months[81](index=81&type=chunk)[86](index=86&type=chunk) - Net cash used in operating activities increased to **$125.9 million** for the six months ended June 30, 2025, from **$77.3 million** in the prior year, primarily due to higher R&D and G&A expenses[88](index=88&type=chunk) - Net cash provided by investing activities increased to **$116.8 million** for the six months ended June 30, 2025, from **$66.0 million** in the prior year, mainly due to a decrease in net purchases of marketable securities[89](index=89&type=chunk) - Net cash provided by financing activities was **$1.2 million** for the six months ended June 30, 2025, primarily from stock option exercises[90](index=90&type=chunk) - As of August 7, 2025, the company had **77,105,799 common shares outstanding**, along with **over 14 million potentially dilutive securities**[93](index=93&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details Xenon Pharmaceuticals Inc.'s exposure to market risks, including foreign currency and interest rate sensitivity, and their potential financial impact [Foreign currency risk](index=29&type=section&id=Foreign%20currency%20risk) This section describes the company's exposure to foreign currency exchange rate fluctuations, particularly with Canadian dollars - The company is exposed to foreign currency exchange rate risk, particularly with Canadian dollars, as it holds CAD-denominated assets and incurs significant expenses in CAD[95](index=95&type=chunk)[96](index=96&type=chunk) - As of June 30, 2025, the company held **CAD$84.1 million** in Canadian dollar denominated cash and cash equivalents and marketable securities[95](index=95&type=chunk) - The company does not currently hedge its foreign currency exposure and does not believe a **10% increase or decrease** in the U.S. dollar's value relative to the Canadian dollar would materially affect operating results[97](index=97&type=chunk) [Interest rate sensitivity](index=29&type=section&id=Interest%20rate%20sensitivity) This section assesses the company's interest rate sensitivity, primarily related to its cash, cash equivalents, and marketable securities - Interest rate sensitivity is primarily attributable to the company's **$624.8 million** in cash, cash equivalents, and marketable securities as of June 30, 2025[98](index=98&type=chunk) - A **100 basis point (1%) increase** in interest rates would result in an approximate **$3.3 million decrease** in the fair value of marketable securities[98](index=98&type=chunk) - The company does not use derivative financial instruments to manage interest rate exposure[98](index=98&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) This section evaluates Xenon Pharmaceuticals Inc.'s disclosure controls and procedures, confirming their effectiveness and reporting no material changes in internal control [Evaluation of disclosure controls and procedures](index=29&type=section&id=Evaluation%20of%20disclosure%20controls%20and%20procedures) This section details the management's evaluation and conclusion on the effectiveness of disclosure controls and procedures - Management, including the CEO and CFO, concluded that disclosure controls and procedures were **effective**, in design and operation, at the reasonable assurance level as of June 30, 2025[99](index=99&type=chunk) [Changes in internal control over financial reporting](index=29&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting) This section reports on any material changes in internal control over financial reporting during the period - There were **no material changes** in internal control over financial reporting during the period ended June 30, 2025[100](index=100&type=chunk) [Inherent limitation on the effectiveness of internal control](index=29&type=section&id=Inherent%20limitation%20on%20the%20effectiveness%20of%20internal%20control) This section acknowledges the inherent limitations on the effectiveness of any internal control system - The effectiveness of any internal control system is subject to inherent limitations and can only provide reasonable, not absolute, assurances[101](index=101&type=chunk) [PART II. OTHER INFORMATION](index=30&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information, including legal proceedings, risk factors, other disclosures, and exhibits [Item 1. Legal Proceedings](index=30&type=section&id=Item%201.%20Legal%20Proceedings) This section confirms Xenon Pharmaceuticals Inc. is not currently involved in legal proceedings expected to materially adversely affect its business or financial condition - The company is not presently a party to any legal proceedings that are reasonably expected to have a **material adverse effect** on its business, financial condition, operating results, or cash flows[102](index=102&type=chunk) - Litigation, regardless of outcome, can adversely impact the company due to defense and settlement costs, and diversion of management resources[102](index=102&type=chunk) [Item 1A. Risk Factors](index=30&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks and uncertainties that could materially harm Xenon Pharmaceuticals Inc.'s business, financial condition, and operating results [Risks Related to Our Financial Condition and Capital Requirements](index=30&type=section&id=Risks%20Related%20to%20Our%20Financial%20Condition%20and%20Capital%20Requirements) This section outlines risks associated with the company's financial condition, including operating losses, funding needs, and potential dilution - The company has incurred significant operating losses since inception, with an accumulated deficit of **$1,049.2 million** as of June 30, 2025, and expects to continue incurring losses for the foreseeable future[104](index=104&type=chunk) - Additional funding will be required to develop product candidates and fund operations, which may not be available on acceptable terms, potentially forcing delays or termination of programs[109](index=109&type=chunk)[112](index=112&type=chunk) - Raising additional capital through equity or convertible securities would cause **dilution to existing shareholders** and could cause the market price of common shares to fall[115](index=115&type=chunk) - The company is subject to foreign currency exchange rate risk, particularly with Canadian dollars, and does not currently hedge this exposure, which could impact operating results[119](index=119&type=chunk) [Risks Related to Our Business and Industry](index=34&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) This section details risks inherent to the company's business and the biotechnology industry, including competition, growth management, and data security - The biotechnology and pharmaceutical industries are highly competitive, with many competitors possessing greater financial resources and expertise, potentially reducing Xenon's commercial opportunities[120](index=120&type=chunk)[122](index=122&type=chunk) - The company has no prior experience in completing Phase 3 clinical trials, obtaining regulatory approval, or independently commercializing products, making assessment of future commercialization difficult[125](index=125&type=chunk) - Managing growth, including increasing headcount and expanding operations, presents difficulties and could divert management attention and financial resources[136](index=136&type=chunk)[137](index=137&type=chunk) - Evolving global data privacy and security laws (e.g., EU GDPR, UK GDPR, CCPA, My Health My Data Act, Protecting Americans' Data from Foreign Adversaries Act) require substantial compliance costs and any failure could harm business and operations[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) - The company's business and operations could suffer from information security incidents (e.g., cybersecurity breaches, system failures), leading to loss of intellectual property, business disruptions, and significant liabilities[143](index=143&type=chunk) - International operations expose the company to risks such as differing regulatory requirements, reduced intellectual property protection, economic instability, and foreign currency fluctuations[145](index=145&type=chunk) - Xenon was a Passive Foreign Investment Company (PFIC) for 2024 and may be in 2025, which could result in **adverse tax consequences** for U.S. holders of its common shares[147](index=147&type=chunk)[149](index=149&type=chunk) [Risks Related to the Discovery, Development and Commercialization of Our Product Candidates](index=46&type=section&id=Risks%20Related%20to%20the%20Discovery%2C%20Development%20and%20Commercialization%20of%20Our%20Product%20Candidates) This section covers risks associated with the discovery, development, and commercialization of product candidates, including clinical trial success and regulatory approvals - The company's business substantially depends on the successful development, regulatory approval, and commercialization of azetukalner, which is subject to numerous risks including clinical trial success, regulatory processes, and market acceptance[165](index=165&type=chunk)[166](index=166&type=chunk) - Clinical trials may fail to adequately demonstrate the safety and efficacy of product candidates, leading to delays, termination of development, or a more restrictive label, materially harming the business[175](index=175&type=chunk)[176](index=176&type=chunk)[191](index=191&type=chunk) - Difficulties in patient enrollment for clinical trials could significantly delay or prevent successful completion, increasing costs and jeopardizing regulatory approval[179](index=179&type=chunk)[181](index=181&type=chunk) - The regulatory approval processes of the FDA, EMA, and other foreign jurisdictions are lengthy, expensive, and unpredictable, with no guarantee of timely approval or approval at all[196](index=196&type=chunk) - Product liability lawsuits, arising from clinical testing or commercialization, could result in substantial liabilities exceeding insurance coverage and require limitations on commercialization[203](index=203&type=chunk)[204](index=204&type=chunk) - The company lacks its own sales, marketing, and distribution capabilities, requiring significant investment or reliance on third parties, which may not be successful or favorable[207](index=207&type=chunk)[208](index=208&type=chunk) - Approved product candidates will be subject to ongoing regulatory obligations and review, potentially leading to significant additional expenses, delays, and restrictions[211](index=211&type=chunk)[214](index=214&type=chunk) - Future product candidates containing controlled substances will face additional regulatory requirements, potential delays, and adverse public perception[216](index=216&type=chunk)[220](index=220&type=chunk) - Unfavorable third-party coverage and reimbursement practices, along with pricing regulations, may adversely affect demand and profitability for approved products[222](index=222&type=chunk)[224](index=224&type=chunk) - Healthcare reforms in the U.S. and other jurisdictions, including drug pricing initiatives (e.g., Inflation Reduction Act), could increase commercialization costs and affect product prices[228](index=228&type=chunk)[229](index=229&type=chunk)[233](index=233&type=chunk) - Disruptions at government agencies (e.g., FDA staffing/funding shortages) could delay product development, approval, or commercialization[238](index=238&type=chunk)[239](index=239&type=chunk) [Risks Related to Our Dependence on Third Parties](index=65&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) This section addresses risks arising from the company's reliance on third parties for development, manufacturing, and clinical trials - The successful development and commercialization of partnered products and product candidates are dependent on the research, development, and marketing efforts of collaborators (e.g., Neurocrine Biosciences), over whom the company has limited control[240](index=240&type=chunk) - Failure to establish new collaborations or maintain existing alliances could adversely affect the ability to develop product candidates and commercialize products, potentially increasing cash expenditures and requiring additional financing[243](index=243&type=chunk)[245](index=245&type=chunk) - Reliance on third parties for manufacturing product candidates increases the risk of insufficient quantities, raw material issues, quality control problems, and potential delays in clinical trials or commercialization[245](index=245&type=chunk)[246](index=246&type=chunk) - Third-party manufacturers may face difficulties in scaling up production or optimizing manufacturing processes, leading to increased costs and delayed commercialization[252](index=252&type=chunk) - Reliance on third parties (e.g., CROs, academic institutions) to conduct pre-clinical studies and clinical trials means less control over timing and cost, and potential delays or data rejection if they fail to meet contractual duties or regulatory requirements[253](index=253&type=chunk)[254](index=254&type=chunk)[255](index=255&type=chunk) [Risks Related to Intellectual Property](index=70&type=section&id=Risks%20Related%20to%20Intellectual%20Property) This section details risks concerning the company's intellectual property, including patent protection, infringement claims, and trade secret safeguarding - The company may be unsuccessful in obtaining or maintaining adequate patent protection for its product candidates, or issued patents may be found invalid or unenforceable, failing to provide competitive advantage[261](index=261&type=chunk)[263](index=263&type=chunk) - Protecting intellectual property rights globally is expensive and challenging, as foreign laws may offer less protection, making it difficult to prevent infringement in certain countries[265](index=265&type=chunk) - Claims that the company's product candidates infringe third-party intellectual property rights could result in costly litigation, require substantial time and money, and potentially prevent or delay development/commercialization[274](index=274&type=chunk)[278](index=278&type=chunk) - Unfavorable outcomes in intellectual property litigation could limit research and development activities, commercialization efforts, or lead to significant liabilities[280](index=280&type=chunk)[281](index=281&type=chunk) - Breaching license agreements could result in the **loss of critical license rights**, materially harming the business[284](index=284&type=chunk) - Inability to prevent unauthorized disclosure of trade secrets and proprietary information could compromise the company's competitive position[285](index=285&type=chunk) - Changes in U.S. or foreign patent law could increase uncertainties and costs in patent prosecution and enforcement, impairing the ability to protect product candidates[288](index=288&type=chunk) - Failure to obtain patent term extensions under the Hatch-Waxman Act or similar foreign legislation could shorten exclusive marketing rights and reduce revenue[290](index=290&type=chunk)[291](index=291&type=chunk) - Inadequate trademark protection could hinder name recognition in target markets and adversely affect the business[293](index=293&type=chunk)[295](index=295&type=chunk) [Risks Related to Ownership of Our Common Shares](index=78&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Shares) This section outlines risks associated with owning the company's common shares, including market price volatility, dilution, and governance differences - The market price of the company's common shares may be volatile due to various factors, including clinical trial results, regulatory announcements, competitor actions, and general market conditions, potentially leading to substantial losses for purchasers[296](index=296&type=chunk)[297](index=297&type=chunk) - Future sales and issuances of common shares or securities convertible into common shares would cause **dilution to existing shareholders** and could cause the market price to fall[298](index=298&type=chunk)[300](index=300&type=chunk) - The company is governed by Canadian corporate and securities laws, which may affect shareholder rights differently than U.S. laws and could delay or discourage acquisitions[301](index=301&type=chunk)[303](index=303&type=chunk) - U.S. civil liabilities may be difficult to enforce against the company or its non-U.S. directors and officers due to their location and governing laws[304](index=304&type=chunk) - The company is at risk of securities class action litigation, which could result in substantial costs and diversion of management's attention[305](index=305&type=chunk) - Management has broad discretion over the use of cash, and ineffective application could adversely affect results of operations and common share value[306](index=306&type=chunk) - The company does not anticipate paying any cash dividends on its common shares in the foreseeable future, meaning capital appreciation is the sole source of gain for investors[307](index=307&type=chunk) [General Risk Factors](index=82&type=section&id=General%20Risk%20Factors) This section covers general risk factors, including unstable market conditions and compliance costs with corporate governance regulations - Unstable market and economic conditions, including global credit disruptions, inflation, and banking sector instability, may seriously and adversely affect the company's business and financial condition[311](index=311&type=chunk) - The company incurs significant and ongoing costs due to compliance with corporate governance laws and regulations (e.g., Dodd-Frank, Sarbanes-Oxley, CBCA, SEC rules) and evolving ESG matters[312](index=312&type=chunk)[314](index=314&type=chunk) [Item 5. Other Information](index=83&type=section&id=Item%205.%20Other%20Information) This section provides additional information not covered elsewhere, specifically addressing Rule 10b5-1 trading plans [Rule 10b5-1 Trading Plans](index=83&type=section&id=Rule%2010b5-1%20Trading%20Plans) This section reports on the adoption or termination of Rule 10b5-1 trading plans by directors or officers - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the last fiscal quarter[315](index=315&type=chunk) [Item 6. Exhibits](index=84&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including corporate governance documents, employment agreements, and certifications - Exhibits include corporate articles, by-laws, an employment agreement, and certifications from the Chief Executive Officer and Chief Financial Officer[318](index=318&type=chunk) - Certifications 32.1 and 32.2 are not deemed filed with the Securities and Exchange Commission[317](index=317&type=chunk) [SIGNATURES](index=85&type=section&id=SIGNATURES) This section contains the official signatures of authorized officers, confirming the submission of the Quarterly Report on Form 10-Q - The report was signed by Ian Mortimer as President and Chief Executive Officer, and Interim Chief Financial Officer, on **August 11, 2025**[321](index=321&type=chunk)

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Unaudited consolidated financial statements for Q3 and YTD 2025/2024, including key statements and notes on Milacron and TerraSource divestitures [Consolidated Statements of Operations](index=3&type=section&id=Consolidated%20Statements%20of%20Operations) Net revenue decreased for both periods, with a nine-month net loss improving from prior year's impairment, and Q3 2025 showing net income Consolidated Statements of Operations Highlights (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net revenue** | $598.9 | $786.6 | $2,021.7 | $2,345.2 | | **Gross profit** | $202.6 | $266.4 | $674.0 | $768.1 | | **Impairment charges** | $0.0 | $265.0 | $0.0 | $265.0 | | **Loss on divestiture** | $1.5 | $0.0 | $56.1 | $0.0 | | **Net income (loss) attributable to Hillenbrand** | $1.9 | $(248.9) | $(32.6) | $(225.6) | | **Diluted EPS attributable to Hillenbrand** | $0.03 | $(3.53) | $(0.46) | $(3.20) | [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to $4.68 billion from $5.24 billion, primarily due to Milacron divestiture impacts on goodwill, intangibles, and inventories Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 (unaudited) | September 30, 2024 | | :--- | :--- | :--- | | **Total current assets** | $1,286.3 | $1,509.9 | | **Goodwill** | $1,685.0 | $1,835.7 | | **Intangible assets, net** | $1,158.9 | $1,285.9 | | **Total Assets** | **$4,676.5** | **$5,238.7** | | **Total current liabilities** | $1,030.1 | $1,189.1 | | **Long-term debt** | $1,663.6 | $1,872.4 | | **Total Liabilities** | **$3,324.3** | **$3,781.3** | | **Total Shareholders' Equity** | $1,352.2 | $1,457.4 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities was $11.5 million, a decrease from prior year, with investing providing $84.4 million and financing using $107.0 million Cash Flow Summary (in millions) | Cash Flow Activity | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(11.5) | $24.8 | | Net cash provided by (used in) investing activities | $84.4 | $(40.2) | | Net cash (used in) provided by financing activities | $(107.0) | $13.4 | | **Net cash flows** | **$(37.9)** | **$(25.6)** | [Condensed Notes to Consolidated Financial Statements](index=9&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) Details accounting policies, revenue recognition, and key corporate actions, including Milacron divestiture loss, segment performance, and TerraSource divestiture - On March 31, 2025, the company divested its majority interest in the Milacron injection molding and extrusion business to an affiliate of Bain Capital, retaining a **48.74% minority ownership**. This resulted in a pre-tax loss of **$56.1 million** for the nine months ended June 30, 2025[30](index=30&type=chunk)[33](index=33&type=chunk) - As of June 30, 2025, the company's backlog was **$1,624.2 million**. Approximately **75%** of this is expected to be recognized as revenue over the next twelve months[28](index=28&type=chunk) - Subsequent to the quarter end, on July 1, 2025, the company completed the divestiture of its joint-venture TerraSource to Astec Industries for **$245.0 million**, expecting to record a pre-tax gain of approximately **$66.0 million**[99](index=99&type=chunk) - In the prior year (Q3 2024), the company recorded significant impairment charges of **$265.0 million**, consisting of a **$238.0 million** goodwill impairment and a **$27.0 million** trade name impairment within the Molding Technology Solutions segment[48](index=48&type=chunk)[49](index=49&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses operational and financial results, highlighting Q3 and YTD revenue decreases due to Milacron divestiture and lower volumes, alongside liquidity and financing [Operations Review — Consolidated](index=33&type=section&id=Operations%20Review%20%E2%80%94%20Consolidated) Consolidated net revenue decreased 24% for Q3 and 14% for nine months, driven by Milacron divestiture and lower APS volume, with stable gross margin Revenue and Gross Profit Comparison (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (%) | | :--- | :--- | :--- | :--- | | **Net Revenue** | $598.9 | $786.6 | (24%) | | **Gross Profit** | $202.6 | $266.4 | (24%) | | **Gross Profit Margin** | 33.8% | 33.9% | -10 bps | - The effective tax rate for Q3 2025 was **61.3%**, a significant increase from **4.1%** in Q3 2024, driven by an unfavorable geographic mix of earnings and an increase in unrecognized tax benefits[127](index=127&type=chunk) [Operations Review — Advanced Process Solutions](index=37&type=section&id=Operations%20Review%20%E2%80%94%20Advanced%20Process%20Solutions) APS segment net revenue decreased 11% to $507.0 million due to lower volume, with gross margin contracting 290 bps and backlog decreasing 10% - Q3 Net Revenue decreased **11%** YoY to **$507.0 million**, primarily from lower volume[139](index=139&type=chunk) - Order backlog stood at **$1,569.6 million** at June 30, 2025, a **10%** decrease from the prior year, mainly due to a decrease in capital equipment orders[140](index=140&type=chunk) - Q3 Gross profit margin fell **290 basis points** to **33.1%**, impacted by cost inflation and unfavorable product mix[141](index=141&type=chunk) [Operations Review — Molding Technology Solutions](index=38&type=section&id=Operations%20Review%20%E2%80%94%20Molding%20Technology%20Solutions) MTS segment net revenue sharply declined 58% to $91.9 million due to Milacron divestiture, yet gross margin improved 980 bps, and backlog fell 77% - Q3 Net Revenue decreased **58%** YoY to **$91.9 million**, primarily due to the Milacron divestiture[152](index=152&type=chunk) - Order backlog decreased **77%** YoY to **$54.6 million**, also due to the Milacron divestiture[152](index=152&type=chunk) - Q3 Gross profit margin improved significantly by **980 basis points** to **38.0%**, driven by productivity improvements and restructuring actions[153](index=153&type=chunk) [NON-GAAP OPERATING PERFORMANCE MEASURES](index=40&type=section&id=NON-GAAP%20OPERATING%20PERFORMANCE%20MEASURES) Consolidated adjusted EBITDA from continuing operations decreased 36% to $84.3 million for Q3 2025, driven by lower APS volume and cost inflation Reconciliation of Net Income (Loss) to Adjusted EBITDA (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Consolidated net income (loss)** | $4.1 | $(246.9) | $(25.6) | $(219.1) | | Interest, Taxes, D&A | $60.5 | $60.4 | $181.5 | $215.3 | | Impairment charges | $0.0 | $265.0 | $0.0 | $265.0 | | Loss on divestiture | $1.5 | $0.0 | $56.1 | $0.0 | | Other adjustments | $18.2 | $25.6 | $68.1 | $70.1 | | **Adjusted EBITDA from continuing operations** | **$84.3** | **$131.0** | **$280.1** | **$367.8** | [LIQUIDITY AND CAPITAL RESOURCES](index=41&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains sufficient liquidity, with $348.9 million available under its revolving credit facility and subsequent refinancing actions, including debt repayment - Subsequent to quarter-end, the company entered into a new Fifth Amended and Restated Credit Agreement, providing a **$700 million** revolving credit facility and two term loans (**$175M** and up to **€240M**)[180](index=180&type=chunk)[182](index=182&type=chunk) - Effective July 21, 2025, the company repaid its **$375 million** senior unsecured notes due 2026 using proceeds from the TerraSource divestiture and new Euro Term Loans[184](index=184&type=chunk) - The company had approximately **$125.0 million** remaining for share repurchases under its existing authorization as of June 30, 2025[189](index=189&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk disclosures have occurred since the 2024 Form 10-K filing - There have been no material changes in quantitative and qualitative disclosures about market risk since the filing of the 2024 Form 10-K[203](index=203&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting identified - The Certifying Officers concluded that the company's disclosure controls and procedures were effective as of the end of the period[204](index=204&type=chunk) - No changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, internal controls were identified during the quarter[206](index=206&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is referenced in Note 14 to the Consolidated Financial Statements - Information regarding legal proceedings is located in Note 14 to the Consolidated Financial Statements[207](index=207&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, highlighting potential negative impacts from U.S. global trade policy uncertainty and proposed tariffs on operations - A key risk factor is the uncertainty in U.S. global trade policy, including recently announced or proposed tariffs on imports from various countries, which could increase costs and negatively impact operations[209](index=209&type=chunk)[210](index=210&type=chunk) [Item 5. Other Information](index=48&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q3 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the third quarter of fiscal 2025[213](index=213&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including credit agreements, compensatory plan forms, and officer certifications

[PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents SoundHound AI's unaudited condensed consolidated financial statements for Q2 2025, including balance sheets, statements of operations, and cash flows, with notes on accounting policies and key financial events [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $230,340 | $198,240 | | Total current assets | $282,022 | $255,520 | | Goodwill | $101,210 | $101,704 | | Intangible assets, net | $159,880 | $174,943 | | **Total assets** | **$579,494** | **$553,953** | | **Liabilities & Equity** | | | | Total current liabilities | $58,290 | $67,742 | | Contingent acquisition liabilities | $142,113 | $286,898 | | **Total liabilities** | **$219,735** | **$371,300** | | **Total stockholders' equity** | **$359,759** | **$182,653** | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20(Loss)) Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $42,683 | $13,462 | $71,812 | $25,056 | | Gross Profit* | $16,662 | $8,482 | $27,280 | $15,407 | | Income (loss) from operations | $(78,051) | $(21,985) | $50,046 | $(50,514) | | Net income (loss) | $(74,724) | $(37,322) | $55,208 | $(70,331) | | Diluted EPS | $(0.19) | $(0.11) | $0.13 | $(0.23) | *Gross Profit calculated as Revenues - Cost of revenues - The significant income from operations for the six months ended June 30, 2025, was primarily driven by a non-cash gain of **$144.7 million** from the change in fair value of contingent acquisition liabilities[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(43,682) | $(40,440) | | Net cash used in investing activities | $(354) | $(4,788) | | Net cash provided by financing activities | $76,606 | $137,030 | | **Net change in cash** | **$32,360** | **$91,932** | - Financing activities in the first six months of 2025 provided **$76.6 million**, primarily from the sale of Class A common stock under equity distribution agreements, compared to **$137.0 million** in the same period of 2024, which also included proceeds from stock sales but was partially offset by a **$105.5 million** repayment of notes payable[24](index=24&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section details the company's accounting policies and financial activities, covering operations, acquisitions, revenue recognition, goodwill, legal proceedings, equity financing, and fair value measurements - The company has a history of recurring losses and negative operating cash flows, with an accumulated deficit of **$887.9 million** as of June 30, 2025; however, with **$230.3 million** in unrestricted cash, management believes it can fund operations for at least the next twelve months[29](index=29&type=chunk)[30](index=30&type=chunk) - The company operates as a single reportable segment, with the CEO acting as the chief operating decision maker who reviews financial information on a consolidated basis[36](index=36&type=chunk) - Customer concentration risk exists, with three customers (C, F, and G) each accounting for **16%**, **13%**, and **13%** of total revenue for the three months ended June 30, 2025, respectively, while two customers (D and E) accounted for **27%** and **35%** of revenue for the same period in 2024[40](index=40&type=chunk)[41](index=41&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=51&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's business overview, strategic direction, and recent developments, analyzing results of operations, liquidity, capital resources, and cash flow activities, highlighting revenue growth and equity financing [Company Overview and Strategy](index=51&type=section&id=Company%20Overview%20and%20Strategy) - SoundHound is a leader in conversational intelligence, providing independent Voice AI solutions across automotive, TV, IoT, and customer service industries, emphasizing proprietary technology for brand control[202](index=202&type=chunk)[205](index=205&type=chunk) - The company's revenue model is built on three pillars: Product Royalties from voice-enabled products, Service Subscriptions from customer service or food ordering, and Monetization through an ecosystem model connecting services to products for transaction-based revenue shared with product creators[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) [Results of Operations](index=56&type=section&id=Results%20of%20Operations) Revenue by Type (in thousands) | Revenue Type | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Service subscriptions | $32,057 | $3,638 | 781% | | Product royalties | $10,508 | $9,723 | 8% | | Monetization | $118 | $101 | 17% | | **Total** | **$42,683** | **$13,462** | **217%** | - Total revenue increased by **217%** YoY for Q2 2025, primarily driven by a **781%** increase in Service Subscriptions, largely due to contributions from recent acquisitions[248](index=248&type=chunk) - Gross margin decreased to **39%** in Q2 2025 from **63%** in Q2 2024, primarily due to the amortization of acquired intangible assets from the Amelia acquisition[250](index=250&type=chunk) - Operating expenses increased significantly YoY for Q2 2025, driven by higher personnel-related costs following the Amelia acquisition: sales and marketing increased by **180%** to **$15.8 million**, research and development increased by **64%** to **$25.8 million**, and general and administrative increased by **91%** to **$18.2 million**[251](index=251&type=chunk)[254](index=254&type=chunk)[257](index=257&type=chunk) - The company recorded a non-cash loss of **$31.4 million** for Q2 2025 from the change in fair value of contingent acquisition liabilities, driven by an increase in the company's stock price during the quarter[260](index=260&type=chunk) [Liquidity and Capital Resources](index=63&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, the company had **$230.3 million** in unrestricted cash and cash equivalents, which management believes is sufficient to fund operations for at least the next twelve months[272](index=272&type=chunk) - The company utilizes an "at-the-market" (ATM) equity program to raise capital, raising **$7.9 million** in gross proceeds during Q2 2025 under its Second Equity Distribution Agreement, with a remaining capacity to sell up to an additional **$174.4 million** of common stock as of June 30, 2025[274](index=274&type=chunk) - Subsequent to the quarter end, during July and August 2025, the company sold an additional **6.1 million shares** for **$82.2 million** in gross proceeds under the ATM program[275](index=275&type=chunk) Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(43,682) | $(40,440) | | Net cash used in investing activities | $(354) | $(4,788) | | Net cash provided by financing activities | $76,606 | $137,030 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=68&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses the company's exposure to market risks, primarily foreign exchange risk, which is not currently considered material to operating results - The company is subject to foreign exchange risk but does not believe a **10%** change in the U.S. dollar's value relative to other currencies would have a material effect on its operating results[310](index=310&type=chunk) [Item 4. Controls and Procedures](index=68&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective as of June 30, 2025, due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to identified material weaknesses in internal control over financial reporting[312](index=312&type=chunk) - Material weaknesses identified include a lack of sufficient oversight and experience in the control environment, ineffective controls for identifying and accounting for non-routine or complex transactions, ineffective controls to ensure proper segregation of duties, and deficiencies in IT general controls, including user access and change management[313](index=313&type=chunk)[315](index=315&type=chunk) - The company is actively working on a remediation plan, completing actions in Q2 2025 such as updating risk assessments, designing new controls for key business processes, and enhancing IT controls; however, material weaknesses will not be considered fully remediated until new controls have operated effectively for a sufficient period[316](index=316&type=chunk)[317](index=317&type=chunk) [PART II. OTHER INFORMATION](index=71&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=71&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 7 of the financial statements for details on ongoing legal proceedings, including patent infringement, securities class action, and shareholder derivative lawsuits - For details on legal proceedings, the report refers to Note 7 of the Notes to Condensed Consolidated Financial Statements[321](index=321&type=chunk) [Item 1A. Risk Factors](index=71&type=section&id=Item%201A.%20Risk%20Factors) This section notes no material changes to risk factors from the Annual Report on Form 10-K, except for a new risk concerning potential changes in U.S. tax laws - A new risk factor has been added concerning changes to U.S. tax laws, specifically the enactment of the "One Big Beautiful Bill Act" on July 4, 2025; the company is currently evaluating the impact but does not expect a significant change to its tax expense in the near term due to its taxable loss position[323](index=323&type=chunk) [Item 5. Other Information](index=71&type=section&id=Item%205.%20Other%20Information) This section discloses information on insider trading arrangements, noting the CEO's adoption of a new Rule 10b5-1 trading plan during the quarter - On May 16, 2025, CEO Dr. Keyvan Mohajer adopted a new Rule 10b5-1 trading plan, effective until November 30, 2025, for the potential sale of up to **2,400,000 shares** of Class B common stock and **728,124 shares** of Class A common stock[327](index=327&type=chunk)