Exhibit 99.1 ALPHA TAU MEDICAL LTD. INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2025 U.S. DOLLARS IN THOUSANDS UNAUDITED | | | | December | | June 30, | | --- | --- | --- | --- | --- | --- | | | | | 31, | | 2025 | | | Note | | 2024 | | (unaudited) | | ASSETS | | | | | | | CURRENT ASSETS: | | | | | | | Cash and cash equivalents | | $ | 13,724 | $ | 11,703 | | Short-term deposits | | | 45,876 | | 67,996 | | Restricted deposits | | | 3,255 | | 3,554 | | Prepaid expenses and other receivables | | | ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q ☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2025 or ☐ Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the transition period from 001-36388 (Commission File Number) PEOPLES FINANCIAL SERVICES CORP. (Exact name of registrant as specified in its charter) Pennsylvania 23-2391852 (State ...

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) [Registrant Information](index=1&type=section&id=Registrant%20Information) This section provides key identification details for BGC Group, Inc. as a registrant filing a Quarterly Report on Form 10-Q for the period ended June 30, 2025, including its incorporation state, address, and stock exchange listing - **BGC Group, Inc.** is filing a Quarterly Report on Form 10-Q for the period ended June 30, 2025[2](index=2&type=chunk) - As of August 8, 2025, the registrant had **364,862,092 shares** of **Class A common stock** and **109,452,953 shares** of **Class B common stock outstanding**[4](index=4&type=chunk) Condensed Consolidated Statements of Financial Condition (in thousands) | Title of each class | Symbol(s) | Name of each exchange on which registered | | :------------------ | :-------- | :---------------------------------------- | | Class A Common Stock, $0.01 par value | BGC | The Nasdaq Stock Market, LLC | [Table of Contents](index=2&type=section&id=Table%20of%20Contents) [Glossary of Terms, Abbreviations and Acronyms](index=3&type=section&id=GLOSSARY%20OF%20TERMS,%20ABBREVIATIONS%20AND%20ACRONYMS) [Special Note on Forward-Looking Information](index=12&type=section&id=SPECIAL%20NOTE%20ON%20FORWARD-LOOKING%20INFORMATION) [Where You Can Find More Information](index=16&type=section&id=WHERE%20YOU%20CAN%20FIND%20MORE%20INFORMATION) [PART I—FINANCIAL INFORMATION](index=17&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [ITEM 1. Financial Statements (unaudited)](index=17&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited condensed consolidated financial statements of BGC Group, Inc. for the periods ended June 30, 2025, and December 31, 2024, including statements of financial condition, operations, comprehensive income (loss), cash flows, and changes in equity, along with detailed notes [Condensed Consolidated Statements of Financial Condition](index=17&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) The Condensed Consolidated Statements of Financial Condition show a significant increase in total assets and liabilities for BGC Group, Inc. from December 31, 2024, to June 30, 2025, primarily driven by acquisitions and operational changes - **Total assets increased by $1.30 billion** (**36.2%**) from December 31, 2024, to June 30, 2025, **primarily due to the acquisition of OTC Global** and **increases in receivables and cash**[30](index=30&type=chunk)[443](index=443&type=chunk) - **Total liabilities increased by $1.27 billion** (**50.6%**) over the same period, **largely driven by increased notes payable and other borrowings**[30](index=30&type=chunk) Condensed Consolidated Statements of Financial Condition (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :------------------ | | **Assets** | | | | Cash and cash equivalents | $827,844 | $711,584 | | Financial instruments owned, at fair value | $139,470 | $186,197 | | Receivables from broker-dealers, clearing organizations, customers and related broker-dealers | $951,387 | $365,490 | | Accrued commissions and other receivables, net | $526,742 | $324,213 | | Loans, forgivable loans and other receivables from employees and partners, net | $468,259 | $360,060 | | Goodwill | $625,648 | $540,290 | | Other intangible assets, net | $445,771 | $240,910 | | Total assets | $4,892,042 | $3,591,967 | | **Liabilities** | | | | Accrued compensation | $309,565 | $227,869 | | Payables to broker-dealers, clearing organizations, customers and related broker-dealers | $777,209 | $225,377 | | Notes payable and other borrowings | $1,917,835 | $1,337,540 | | Total liabilities | $3,783,359 | $2,512,728 | | **Equity** | | | | Total stockholders' equity | $930,462 | $898,507 | | Total equity | $1,108,683 | $1,079,239 | [Condensed Consolidated Statements of Operations](index=18&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) BGC Group, Inc. reported substantial revenue and net income growth for both the three and six months ended June 30, 2025, compared to the prior year periods, driven by increased commissions and principal transactions, partially offset by higher expenses - **Total revenues increased by 42.3%** for the three months and **28.2%** for the six months ended June 30, 2025, compared to the prior year periods[32](index=32&type=chunk)[382](index=382&type=chunk)[385](index=385&type=chunk) - **Consolidated net income increased by 51.2%** for the three months and **27.2%** for the six months ended June 30, 2025, compared to the prior year periods[32](index=32&type=chunk) Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $784,004 | $550,761 | $1,448,244 | $1,129,375 | | Total expenses | $711,686 | $500,155 | $1,298,208 | $1,048,223 | | Consolidated net income (loss) | $56,215 | $37,175 | $109,644 | $86,216 | | Net income (loss) available to common stockholders | $57,545 | $37,828 | $112,709 | $87,038 | | Basic earnings (loss) per share | $0.11 | $0.08 | $0.22 | $0.17 | | Fully diluted earnings (loss) per share | $0.11 | $0.08 | $0.22 | $0.17 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=19&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) The Condensed Consolidated Statements of Comprehensive Income (Loss) show an increase in comprehensive income for both the three and six months ended June 30, 2025, primarily driven by consolidated net income and positive foreign currency translation adjustments - **Foreign currency translation adjustments shifted from a loss of $6.7 million** in Q2 2024 to a **gain of $13.0 million** in Q2 2025, **significantly contributing to comprehensive income**[33](index=33&type=chunk) Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Consolidated net income (loss) | $56,215 | $37,175 | $109,644 | $86,216 | | Foreign currency translation adjustments | $13,009 | $(6,678) | $19,332 | $(11,507) | | Comprehensive income (loss) | $69,224 | $30,497 | $128,976 | $74,709 | | Comprehensive income (loss) attributable to common stockholders | $70,170 | $31,190 | $131,487 | $75,712 | [Condensed Consolidated Statements of Cash Flows](index=20&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The Condensed Consolidated Statements of Cash Flows show a significant increase in net cash provided by operating activities for the six months ended June 30, 2025, compared to the prior year, while investing activities used more cash due to acquisitions, and financing activities provided more cash from debt issuances - **Net cash provided by operating activities improved significantly from a use of $24.9 million** in H1 2024 to a **provision of $72.1 million** in H1 2025[36](index=36&type=chunk) - **Payments for acquisitions, net of cash acquired, totaled $263.4 million** in H1 2025, compared to none in H1 2024, **contributing to increased cash used in investing activities**[38](index=38&type=chunk) - **Issuance of long-term debt, net of deferred issuance costs, significantly increased cash from financing activities to $1.20 billion** in H1 2025, up from **$770.0 million** in H1 2024[38](index=38&type=chunk) Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $72,078 | $(24,858) | | Net cash provided by (used in) investing activities | $(293,588) | $(216,437) | | Net cash provided by (used in) financing activities | $323,297 | $158,966 | | Net increase (decrease) in Cash and cash equivalents, and Cash segregated under regulatory requirements | $108,806 | $(86,751) | | Cash and cash equivalents, and Cash segregated under regulatory requirements at end of period | $842,079 | $586,145 | [Condensed Consolidated Statements of Changes in Equity](index=22&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) The Condensed Consolidated Statements of Changes in Equity reflect an increase in total equity for BGC Group, Inc. for the six months ended June 30, 2025, driven by consolidated net income and equity-based compensation, despite significant share repurchases and dividend payments - **Total equity increased by $29.4 million** from January 1, 2025, to June 30, 2025, **reaching $1.11 billion**[41](index=41&type=chunk) - The company **repurchased 18,572,136 shares** of **Class A common stock** for **$171.6 million** during the six months ended June 30, 2025[41](index=41&type=chunk) - **Dividends declared per share of common stock were $0.04** for the six months ended June 30, 2025, up from **$0.03** in the prior year[41](index=41&type=chunk) Condensed Consolidated Statements of Changes in Equity (in thousands, except share amounts) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Balance, January 1 | $1,079,239 | $898,156 | | Consolidated net income (loss) | $109,644 | $86,216 | | Equity-based compensation | $86,791 | $85,549 | | Dividends to common stockholders | $(19,564) | $(14,683) | | Repurchase of Class A common stock | $(171,635) | $(148,090) | | Balance, June 30 | $1,108,683 | $1,041,870 | [Notes to Condensed Consolidated Financial Statements](index=26&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the unaudited condensed consolidated financial statements, covering critical accounting policies, acquisitions, related party transactions, debt, equity, and regulatory requirements, offering context to the financial performance and position [Note 1. Organization and Basis of Presentation](index=26&type=section&id=Note%201%20Organization%20and%20Basis%20of%20Presentation) BGC Group, Inc. is a global marketplace, data, and financial technology company specializing in brokerage and trade execution across ECS and financial markets. The company completed a Corporate Conversion on July 1, 2023, simplifying its organizational structure from an Umbrella Partnership C-Corporation to a Full C-Corporation, with BGC Group becoming the public holding company. Recent changes in the Board of Directors and executive officers include the appointment of Co-Chief Executive Officers following Mr. Howard W. Lutnick's departure - **BGC** is a **leading global marketplace, data, and financial technology company** across the ECS and financial markets, specializing in brokerage and trade execution[50](index=50&type=chunk) - On July 1, 2023, **BGC Partners completed a Corporate Conversion to a Full C-Corporation**, **making BGC Group the public holding company** and successor to BGC Partners[53](index=53&type=chunk) - On February 18, 2025, **Mr. Howard W. Lutnick stepped down as Chairman and CEO**, and **John J. Abularrage, JP Aubin, and Sean A. Windeatt were appointed as Co-Chief Executive Officers**[60](index=60&type=chunk) [Note 2. Limited Partnership Interests in BGC Holdings and Newmark Holdings](index=30&type=section&id=Note%202%20Limited%20Partnership%20Interests%20in%20BGC%20Holdings%20and%20Newmark%20Holdings) This note details the historical structure of limited partnership interests in BGC Holdings and Newmark Holdings, including Founding/Working Partner Units (FPUs), Limited Partnership Units (LPUs), and Cantor Units. The Corporate Conversion on July 1, 2023, terminated BGC Holdings LPUs, converting them into BGC Group equity awards, while Newmark Holdings LPUs held by BGC employees remain unaffected - **Prior to the Corporate Conversion**, BGC Partners operated through BGC Holdings, which had various **limited partnership interests** (FPUs, LPUs, Cantor Units)[75](index=75&type=chunk) - The **Corporate Conversion on July 1, 2023, resulted in the termination of BGC Holdings limited partnership agreement**, **converting all BGC Holdings units into BGC Group equity awards**[59](index=59&type=chunk)[77](index=77&type=chunk)[79](index=79&type=chunk) - **Newmark Holdings LPUs held by BGC employees were not impacted by the Corporate Conversion** and continue to receive quarterly allocations of net income as compensation expense[79](index=79&type=chunk)[80](index=80&type=chunk) [Note 3. Summary of Significant Accounting Policies](index=33&type=section&id=Note%203%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the Company's significant accounting policies, with no major changes during the six months ended June 30, 2025, except for updates to Commissions revenue recognition due to the OTC Global acquisition, particularly for shipping brokerage fees which are recognized upon delivery - **No significant changes were made to the Company's accounting policies** during the six months ended June 30, 2025[86](index=86&type=chunk) - **Commissions revenues from securities and commodities are recognized at a point in time on the trade-date basis**[87](index=87&type=chunk) - **Shipping brokerage commissions are considered variable consideration** and recognized upon delivery of the underlying commodity[88](index=88&type=chunk) [Note 4. Acquisitions](index=34&type=section&id=Note%204%20Acquisitions) BGC Group completed one acquisition during the six months ended June 30, 2025: OTC Global, an energy and commodities brokerage firm, for $325.0 million. This acquisition significantly expanded the company's ECS business and is expected to generate synergies, with preliminary goodwill recorded at $88.7 million - On April 1, 2025, **BGC Group acquired OTC Global**, an energy and commodities brokerage firm, for **$325.0 million**[91](index=91&type=chunk) - The **acquisition was funded by cash on hand, borrowings from the Revolving Credit Agreement, and debt issuances**, **aiming to expand and diversify the global ECS business**[92](index=92&type=chunk) OTC Global Acquisition Financial Impact (in thousands) | Metric | Amount | | :------------------------------------------------ | :------- | | Total purchase price consideration transferred | $309,283 | | Goodwill recognized | $88,675 | | Finite-lived intangible assets acquired | $219,400 | | Revenues included (April 1 - June 30, 2025) | $118,301 | | Consolidated net income included (April 1 - June 30, 2025) | $11,967 | [Note 5. Divestitures](index=36&type=section&id=Note%205%20Divestitures) BGC Group reported no divestitures or sales of investments during both the three and six months ended June 30, 2025, and 2024 - The Company had **no divestitures or sale of investments** during both the six months ended June 30, 2025 and 2024[105](index=105&type=chunk) [Note 6. Earnings Per Share](index=37&type=section&id=Note%206%20Earnings%20Per%20Share) BGC Group, Inc. reported basic and fully diluted earnings per share of $0.11 for the three months and $0.22 for the six months ended June 30, 2025, showing an increase from the prior year periods. Potentially dilutive securities, primarily RSUs and restricted stock awards, were excluded if their effect was anti-dilutive - Approximately **15.5 million** and **15.9 million potentially dilutive securities were excluded from fully diluted EPS** for the three and six months ended June 30, 2025, respectively, **due to their anti-dilutive effect**[108](index=108&type=chunk) - **Contingent shares and non-participating equity awards totaling 54.2 million** as of June 30, 2025, **were excluded from diluted EPS** as issuance conditions had not been met[109](index=109&type=chunk) Basic and Fully Diluted EPS (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic earnings (loss) per share | $0.11 | $0.08 | $0.22 | $0.17 | | Fully diluted earnings (loss) per share | $0.11 | $0.08 | $0.22 | $0.17 | | Basic weighted-average shares outstanding | 480,138 | 475,272 | 479,655 | 472,895 | | Fully diluted weighted-average shares outstanding | 484,636 | 480,861 | 485,090 | 479,417 | [Note 7. Stock Transactions and Unit Redemptions](index=38&type=section&id=Note%207%20Stock%20Transactions%20and%20Unit%20Redemptions) BGC Group's Class A common stock outstanding decreased due to significant treasury stock repurchases, including a large sale from Mr. Howard W. Lutnick, partially offset by issuances for equity awards and acquisitions. The company's share repurchase authorization remains at $400.0 million, with $178.4 million remaining as of June 30, 2025 - The Company **repurchased 17.2 million shares** of **Class A common stock** for **$158.6 million** in Q2 2025, including **16.1 million shares** from Mr. Howard W. Lutnick[117](index=117&type=chunk) - As of June 30, 2025, **$178.4 million remained under the $400.0 million Share Repurchase Authorization**[116](index=116&type=chunk) Changes in Class A Common Stock Outstanding (in thousands) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------------------------------ | :------------------------------- | :----------------------------- | | Shares outstanding at beginning of period | 378,134 | 374,297 | | Total Share issuances | 5,375 | 12,677 | | Restricted stock forfeitures | (102) | (373) | | Treasury stock repurchases | (17,224) | (20,408) | | Shares outstanding at end of period | 366,193 | 366,193 | [Note 8. Financial Instruments Owned, at Fair Value](index=40&type=section&id=Note%208%20Financial%20Instruments%20Owned,%20at%20Fair%20Value) Financial instruments owned by BGC Group, primarily U.S. Treasury bills for liquidity, decreased to $139.5 million as of June 30, 2025, from $186.2 million at December 31, 2024. The company recognized minimal unrealized net gains from mark-to-market adjustments on these instruments - **Financial instruments owned, at fair value**, primarily U.S. Treasury bills, **decreased to $139.5 million** as of June 30, 2025, from **$186.2 million** at December 31, 2024[120](index=120&type=chunk) - The Company recognized **unrealized net gains of $0.1 million** for the six months ended June 30, 2025, from mark-to-market adjustments on these instruments[120](index=120&type=chunk) [Note 9. Collateralized Transactions](index=40&type=section&id=Note%209%20Collateralized%20Transactions) BGC Group had no Repurchase Agreements or Reverse Repurchase Agreements outstanding as of both June 30, 2025, and December 31, 2024 - The Company had **no Repurchase Agreements outstanding** as of June 30, 2025, and December 31, 2024[121](index=121&type=chunk) - The Company had **no Reverse Repurchase Agreements outstanding** as of June 30, 2025, and December 31, 2024[123](index=123&type=chunk) [Note 10. Receivables from and Payables to Broker-Dealers, Clearing Organizations, Customers and Related Broker-Dealers](index=41&type=section&id=Note%2010%20Receivables%20from%20and%20Payables%20to%20Broker-Dealers,%20Clearing%20Organizations,%20Customers%20and%20Related%20Broker-Dealers) Receivables from broker-dealers, clearing organizations, customers, and related broker-dealers significantly increased to $951.4 million as of June 30, 2025, from $365.5 million at December 31, 2024, primarily due to higher contract values of fails to deliver. Payables also increased substantially to $777.2 million from $225.4 million over the same period - **Receivables from broker-dealers, clearing organizations, customers and related broker-dealers increased by 160.3%** from December 31, 2024, to June 30, 2025[125](index=125&type=chunk) - **Payables to broker-dealers, clearing organizations, customers and related broker-dealers increased by 244.7%** over the same period[125](index=125&type=chunk) Receivables and Payables (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :------------------ | | Receivables from broker-dealers, clearing organizations, customers and related broker-dealers | $951,387 | $365,490 | | Contract values of fails to deliver | $775,393 | $213,409 | | Payables to broker-dealers, clearing organizations, customers and related broker-dealers | $777,209 | $225,377 | | Contract values of fails to receive | $747,651 | $201,301 | [Note 11. Derivatives](index=41&type=section&id=Note%2011%20Derivatives) BGC Group engages in derivative contracts, primarily FX swaps, forwards, interest rate swaps, and futures, to facilitate client transactions and hedge positions. The notional amounts of these contracts significantly increased from December 31, 2024, to June 30, 2025, reflecting higher derivative activity, with net gains reported in principal transactions - **Total notional amounts of derivative contracts increased from $10.11 billion** at December 31, 2024, to **$62.64 billion** at June 30, 2025, **primarily driven by interest rate swaps**[127](index=127&type=chunk) Derivative Contracts Fair Value and Notional Amounts (in thousands) | Derivative Contract | June 30, 2025 Assets | June 30, 2025 Liabilities | June 30, 2025 Notional Amounts | December 31, 2024 Assets | December 31, 2024 Liabilities | December 31, 2024 Notional Amounts | | :------------------ | :------------------- | :---------------------- | :----------------------------- | :----------------------- | :------------------------ | :----------------------------- | | FX swaps | $901 | $1,217 | $1,332,685 | $4,810 | $3,679 | $635,790 | | Forwards | $397 | $216 | $1,280,782 | $409 | $751 | $185,821 | | Interest rate swaps | $18 | $— | $52,266,392 | $— | $— | $534,085 | | Futures | $— | $826 | $7,758,139 | $165 | $— | $8,758,848 | | Total | $1,316 | $2,259 | $62,637,998 | $5,384 | $4,430 | $10,114,544 | Gains on Derivative Contracts (in thousands) | Derivative Contract | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Futures | $5,354 | $2,833 | $9,931 | $6,639 | | Interest rate swaps | $2,994 | $1,832 | $5,376 | $3,928 | | FX swaps | $1,208 | $558 | $2,029 | $1,056 | | FX/commodities options | $141 | $57 | $235 | $104 | | Gains, net | $9,697 | $5,280 | $17,571 | $11,727 | [Note 12. Fair Value of Financial Assets and Liabilities](index

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________________________________ FORM 10-Q _________________________________________________ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-35591 _________________________________________________ BGC Group, Inc. ( ...

PART I - FINANCIAL INFORMATION This section presents the company's unaudited financial statements, management's analysis of operations and liquidity, market risk disclosures, and internal controls [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents the unaudited consolidated financial statements for Telos Corporation, including statements of operations, comprehensive loss, balance sheets, cash flows, and changes in stockholders' equity, along with detailed notes explaining the company's accounting policies, revenue recognition, asset and liability components, and segment information for the periods ended June 30, 2025 and 2024 [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) The company's unaudited consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 are presented Consolidated Statements of Operations (Unaudited) - Three Months Ended June 30 (in thousands, except per share amounts) | Metric | 2025 | 2024 | | :---------------------------------- | :----- | :----- | | Revenue – services | $29,301 | $26,969 | | Revenue – products | $6,667 | $1,529 | | **Total revenue** | **$35,968** | **$28,498** | | Total cost of sales | $24,036 | $18,791 | | **Gross profit** | **$11,932** | **$9,707** | | Total operating expenses | $21,815 | $18,351 | | Operating loss | $(9,883) | $(8,644) | | Loss before income taxes | $(9,471) | $(7,740) | | **Net loss** | **$(9,517)** | **$(7,757)** | | Basic Net loss per share | $(0.13) | $(0.11) | | Diluted Net loss per share | $(0.13) | $(0.11) | Consolidated Statements of Operations (Unaudited) - Six Months Ended June 30 (in thousands, except per share amounts) | Metric | 2025 | 2024 | | :---------------------------------- | :----- | :----- | | Revenue – services | $58,146 | $55,820 | | Revenue – products | $8,438 | $2,297 | | **Total revenue** | **$66,584** | **$58,117** | | Total cost of sales | $42,470 | $37,449 | | **Gross profit** | **$24,114** | **$20,668** | | Total operating expenses | $43,019 | $37,750 | | Operating loss | $(18,905) | $(17,082) | | Loss before income taxes | $(18,079) | $(15,101) | | **Net loss** | **$(18,121)** | **$(15,135)** | | Basic Net loss per share | $(0.25) | $(0.21) | | Diluted Net loss per share | $(0.25) | $(0.21) | [Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) The company's unaudited consolidated statements of comprehensive loss for the three and six months ended June 30, 2025 and 2024 are presented Consolidated Statements of Comprehensive Loss (Unaudited) - Three Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | | :------------------------------------ | :----- | :----- | | Net loss | $(9,517) | $(7,757) | | Other comprehensive loss, net of tax | $(5) | $(21) | | **Comprehensive loss** | **$(9,522)** | **$(7,778)** | Consolidated Statements of Comprehensive Loss (Unaudited) - Six Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | | :------------------------------------ | :----- | :----- | | Net loss | $(18,121) | $(15,135) | | Other comprehensive income (loss), net of tax | $83 | $(86) | | **Comprehensive loss** | **$(18,038)** | **$(15,221)** | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) The company's unaudited consolidated balance sheets as of June 30, 2025, and December 31, 2024 are presented Consolidated Balance Sheets (Unaudited) - As of June 30, 2025 and December 31, 2024 (in thousands) | Asset | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $56,998 | $54,578 | | Accounts receivable, net | $19,105 | $19,172 | | Inventories, net | $4,176 | $1,783 | | Total current assets | $102,776 | $91,418 | | Property and equipment, net | $3,477 | $4,283 | | Goodwill | $17,922 | $17,922 | | Intangible assets, net | $31,568 | $30,410 | | **Total assets** | **$165,042** | **$158,235** | | Accounts payable and other accrued liabilities | $13,375 | $4,300 | | Contract liabilities | $12,951 | $6,838 | | Total current liabilities | $38,733 | $22,135 | | **Total liabilities** | **$46,629** | **$31,098** | | Total stockholders' equity | $118,413 | $127,137 | | **Total liabilities and stockholders' equity** | **$165,042** | **$158,235** | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The company's unaudited consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 are presented Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Net cash provided by (used in) operating activities | $13,056 | $(8,340) | | Net cash used in investing activities | $(4,658) | $(9,647) | | Net cash used in financing activities | $(5,978) | $(1,168) | | **Net change in cash, cash equivalents, and restricted cash** | **$2,420** | **$(19,155)** | | Cash, cash equivalents, and restricted cash, beginning of period | $54,717 | $99,396 | | Cash, cash equivalents, and restricted cash, end of period | $57,137 | $80,241 | [Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) The company's unaudited consolidated statements of changes in stockholders' equity for the six months ended June 30, 2025 are presented Changes in Stockholders' Equity - Six Months Ended June 30, 2025 (in thousands) | Item | Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Total Stockholders' Equity | | :------------------------------------------------ | :----- | :------------------ | :------------------------- | :--------------------------------- | :------------------ | :------------------------- | | Balance at December 31, 2024 | 72,515 | $111 | $454,502 | $(129) | $(327,347) | $127,137 | | Net loss | — | — | — | — | $(18,121) | $(18,121) | | Foreign currency translation gain | — | — | — | $75 | — | $75 | | Actuarial gain on pension liability adjustment | — | — | — | $8 | — | $8 | | Restricted stock unit awards vested, net of shares withheld | 687 | — | $(1,062) | — | — | $(1,062) | | Stock-based compensation | — | — | $12,315 | — | — | $12,315 | | Repurchases of common stock | (1,488) | $(1) | $(4,001) | — | — | $(4,002) | | Issuance of common stock for 401(k) match | 728 | $1 | $2,062 | — | — | $2,063 | | **Balance at June 30, 2025** | **72,442** | **$111** | **$463,816** | **$(46)** | **$(345,468)** | **$118,413** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited consolidated financial statements, explaining accounting policies, revenue, assets, liabilities, and segment information [1. Organization](index=9&type=section&id=1.%20Organization) This note describes Telos Corporation's business, including its core solutions and key subsidiaries - Telos Corporation is a Maryland corporation providing cyber, cloud, and enterprise security solutions. Key subsidiaries include Xacta Corporation, ubIQuity.com, inc., Teloworks, Inc., and Telos Identity Management Solutions, LLC[21](index=21&type=chunk) [2. Significant Accounting Policies](index=9&type=section&id=2.%20Significant%20Accounting%20Policies) This note outlines the significant accounting policies and estimates used in preparing the unaudited financial statements - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules, with certain annual disclosures condensed or omitted for interim periods. Management uses estimates and assumptions that affect reported amounts, which are regularly assessed[23](index=23&type=chunk)[24](index=24&type=chunk)[26](index=26&type=chunk) - The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, includes significant amendments to the Internal Revenue Code, such as restoring bonus depreciation and removing the requirement to capitalize and amortize domestic R&D expenditures. The company is evaluating its potential impact[30](index=30&type=chunk) - The FASB issued ASU No. 2023-09 (Income Tax Disclosure) and ASU 2024-03 (Expense Disaggregation Disclosure), which will be effective for public entities in fiscal years beginning after December 15, 2024, and December 15, 2026, respectively. The company is assessing their impact[32](index=32&type=chunk)[33](index=33&type=chunk) [3. Revenue Recognition](index=10&type=section&id=3.%20Revenue%20Recognition) This note details the company's revenue recognition policies, including timing, customer types, and contract types - The majority of revenue (**68% for Q2 2025, 73% for H1 2025**) is recognized over time as control is continuously transferred. Revenue recognized at a point in time increased to **32% for Q2 2025** and **27% for H1 2025**, up from 16% and 18% respectively in prior periods, primarily due to increased product sales volume[36](index=36&type=chunk) Revenue by Customer Type (in thousands) | Customer Type | Q2 2025 Amount | Q2 2025 % | Q2 2024 Amount | Q2 2024 % | H1 2025 Amount | H1 2025 % | H1 2024 Amount | H1 2024 % | | :---------------------- | :------------- | :-------- | :------------- | :-------- | :------------- | :-------- | :------------- | :-------- | | Federal | $32,672 | 91% | $24,832 | 87% | $59,972 | 90% | $51,439 | 89% | | State & local, and commercial | $3,296 | 9% | $3,666 | 13% | $6,612 | 10% | $6,678 | 11% | | **Total revenue** | **$35,968** | **100%** | **$28,498** | **100%** | **$66,584** | **100%** | **$58,117** | **100%** | Revenue by Contract Type (in thousands) | Contract Type | Q2 2025 Amount | Q2 2025 % | Q2 2024 Amount | Q2 2024 % | H1 2025 Amount | H1 2025 % | H1 2024 Amount | H1 2024 % | | :------------------ | :------------- | :-------- | :------------- | :-------- | :------------- | :-------- | :------------- | :-------- | | Firm fixed-price | $25,153 | 70% | $22,179 | 78% | $45,151 | 68% | $45,015 | 77% | | Time-and-materials | $8,913 | 25% | $3,022 | 11% | $17,290 | 26% | $6,159 | 11% | | Cost plus fixed fee | $1,902 | 5% | $3,297 | 11% | $4,143 | 6% | $6,943 | 12% | | **Total revenue** | **$35,968** | **100%** | **$28,498** | **100%** | **$66,584** | **100%** | **$58,117** | **100%** | - As of June 30, 2025, remaining performance obligations (funded backlog) totaled approximately **$51.7 million**, with **95%** expected to be recognized over the next 12 months[46](index=46&type=chunk) [4. Accounts Receivable, Net](index=12&type=section&id=4.%20Accounts%20Receivable%2C%20Net) This note provides a breakdown of accounts receivable, net, and discusses credit risk concentration Details of Accounts Receivable, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Billed accounts receivable | $17,139 | $10,070 | | Unbilled accounts receivable | $1,210 | $5,412 | | Contract assets | $784 | $3,746 | | Allowance for credit losses | $(28) | $(56) | | **Accounts receivable, net** | **$19,105** | **$19,172** | - **75%** of billed and unbilled accounts receivable as of June 30, 2025, were with U.S. government customers, representing a significant concentration of credit risk, though historically manageable[48](index=48&type=chunk) [5. Inventories, Net](index=12&type=section&id=5.%20Inventories%2C%20Net) This note presents the details of inventories, net, including gross inventory and obsolescence allowance Details of Inventories, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Gross inventory | $4,309 | $1,916 | | Allowance for inventory obsolescence | $(133) | $(133) | | **Inventories, net** | **$4,176** | **$1,783** | [6. Property and Equipment, Net](index=13&type=section&id=6.%20Property%20and%20Equipment%2C%20Net) This note details the net carrying value of property and equipment and related depreciation and amortization expenses Details of Property and Equipment, Net (in thousands) | Item | June 30, 2025 Net Carrying Value | December 31, 2024 Net Carrying Value | | :---------------------- | :-------------------------- | :-------------------------- | | Furniture and equipment | $2,873 | $3,622 | | Leasehold improvements | $604 | $661 | | **Total** | **$3,477** | **$4,283** | Depreciation and Amortization Expense (in thousands) | Period | June 30, 2025 | June 30, 2024 | | :-------------------------------- | :------------ | :------------ | | Three Months Ended | $422 | $259 | | Six Months Ended | $867 | $894 | [7. Goodwill](index=13&type=section&id=7.%20Goodwill) This note discusses the goodwill balance, its allocation, and the absence of impairment charges in the current period - Goodwill balance remained at **$17.9 million** as of June 30, 2025, allocated **$3.0 million** to Security Solutions and **$14.9 million** to Secure Networks. No impairment charges were recorded for the three and six months ended June 30, 2025, or 2024[52](index=52&type=chunk) - Management notes that sustained current financial performance in the Secure Networks segment could trigger a goodwill impairment test, potentially impacting results of operations[52](index=52&type=chunk) [8. Intangible Assets, Net](index=13&type=section&id=8.%20Intangible%20Assets%2C%20Net) This note provides a breakdown of intangible assets, net, and related amortization expenses Details of Intangible Assets, Net (in thousands) | Item | June 30, 2025 Net Carrying Value | December 31, 2024 Net Carrying Value | | :-------------------------- | :-------------------------- | :-------------------------- | | Acquired technology | $1,853 | $2,080 | | Software development costs | $14,914 | $11,605 | | In-process software development costs | $14,801 | $16,725 | | **Total** | **$31,568** | **$30,410** | Amortization Expense (in thousands) | Period | June 30, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | Three Months Ended | $1,736 | $2,926 | | Six Months Ended | $3,261 | $5,038 | [9. Other Balance Sheet Components](index=15&type=section&id=9.%20Other%20Balance%20Sheet%20Components) This note details other assets, accounts payable, other accrued liabilities, and other current liabilities Details of Other Assets (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Investment | $3,000 | $3,000 | | Prepaid expense – long-term portion | $665 | $4,975 | | Restricted cash | $139 | $139 | | Other | $196 | $75 | | **Other assets** | **$4,000** | **$8,189** | Details of Accounts Payable and Other Accrued Liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Accounts payable | $12,272 | $1,153 | | Accrued payables | $1,103 | $3,147 | | **Accounts payable and other accrued liabilities** | **$13,375** | **$4,300** | Details of Other Current Liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Other accrued expenses | $1,231 | $829 | | Restructuring expenses accrual | — | $37 | | Other | $366 | $436 | | **Other current liabilities** | **$1,597** | **$1,302** | [10. Revolving Credit Facility](index=15&type=section&id=10.%20Revolving%20Credit%20Facility) This note describes the company's senior secured revolving credit facility and its compliance with financial covenants - The company has a **$30.0 million** senior secured revolving credit facility, maturing December 30, 2025, with an uncommitted expansion feature of up to **$30.0 million**. No amounts have been drawn under the loan[58](index=58&type=chunk) - The loan is collateralized by substantially all company assets and includes financial covenants, such as maintaining a Senior Leverage Ratio no greater than **3 to 1**, with the company in compliance as of June 30, 2025[60](index=60&type=chunk)[61](index=61&type=chunk) [11. Stock-Based Compensation](index=16&type=section&id=11.%20Stock-Based%20Compensation) This note details stock-based compensation plans, expense recognition, and restricted stock unit activity - Stockholders approved an amendment to the 2016 LTIP on May 8, 2025, increasing available shares by **4,900,000**, leaving approximately **1.6 million shares** available for future grants as of June 30, 2025[65](index=65&type=chunk) Stock Compensation Expense by Category (in thousands) | Category | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :------------------------------ | :------ | :------ | :------ | :------ | | Cost of sales – services | $149 | $228 | $339 | $485 | | Research and development | $244 | $(877) | $284 | $(449) | | Selling, general and administrative | $7,364 | $2,868 | $14,182 | $5,167 | | **Total** | **$7,757** | **$2,219** | **$14,805** | **$5,203** | Restricted Stock Unit Activity | Item | Service-Based | Performance-Based | Total Shares | Weighted-Average Grant Date Fair Value | | :------------------------------------ | :------------ | :---------------- | :----------- | :------------------------------------- | | Unvested outstanding units as of Dec 31, 2024 | 1,952,103 | 10,683,230 | 12,635,333 | $3.52 | | Granted | 1,136,074 | 3,381,163 | 4,517,237 | $3.42 | | Vested | (799,366) | (283,375) | (1,082,741) | $4.15 | | Forfeited | (108,416) | (154,649) | (263,065) | $3.42 | | **Unvested outstanding units as of Jun 30, 2025** | **2,180,395** | **13,626,369** | **15,806,764** | **$3.24** | - As of June 30, 2025, approximately **$23.2 million** of total compensation costs related to stock-based awards remained unrecognized, expected to be recognized over a weighted-average remaining vesting period of **0.8 years**[76](index=76&type=chunk) [12. Share Repurchases](index=18&type=section&id=12.%20Share%20Repurchases) This note outlines the company's share repurchase program and activity during the reporting period - The Board of Directors approved a share repurchase program on May 24, 2022, authorizing up to **$50.0 million** of common stock repurchases. As of June 30, 2025, **$34.7 million** remained authorized[79](index=79&type=chunk) Share Repurchase Activity (in thousands, except per share and share data) | Period | Amounts paid for shares repurchased | Number of shares repurchased | Average per share price paid | | :-------------------------------- | :-------------------------------- | :--------------------------- | :--------------------------- | | For the Three Months Ended June 30, 2025 | $4,002 | 1,488,227 | $2.69 | | For the Six Months Ended June 30, 2025 | $4,002 | 1,488,227 | $2.69 | [13. Accumulated Other Comprehensive Loss](index=18&type=section&id=13.%20Accumulated%20Other%20Comprehensive%20Loss) This note provides a breakdown of changes in accumulated other comprehensive loss by category Details of Changes in Accumulated Other Comprehensive Loss by Category (in thousands) | Item | Foreign currency translation adjustment | Pension liability adjustment | Total | | :------------------------------------------ | :------------------------------ | :------------------------- | :---- | | Balance as of December 31, 2024 | $(175) | $46 | $(129) | | Other comprehensive income before reclassification, net of tax | $75 | $8 | $83 | | **Balance as of June 30, 2025** | **$(100)** | **$54** | **$(46)** | [14. Loss per Share](index=18&type=section&id=14.%20Loss%20per%20Share) This note explains the calculation of loss per share and the treatment of potentially dilutive securities - Potentially dilutive securities are excluded from diluted net earnings (loss) per share calculations during periods of net loss, as their inclusion would be anti-dilutive[82](index=82&type=chunk) Potentially Dilutive Securities (in thousands) | Period | June 30, 2025 | June 30, 2024 | | :---------------------------------------------------- | :------------ | :------------ | | Weighted-average number of shares – unvested RSUs, PSUs and stock options (Three Months Ended) | 976 | 654 | | Weighted-average number of shares – unvested RSUs, PSUs and stock options (Six Months Ended) | 1,158 | 1,058 | | Outstanding PSUs excluded from calculation (Three Months Ended) | 11,372,034 | 9,418,745 | | Outstanding PSUs excluded from calculation (Six Months Ended) | 11,372,034 | 9,418,745 | [15. Segment Information](index=18&type=section&id=15.%20Segment%20Information) This note provides financial results by business segment, including Security Solutions and Secure Networks - The company operates in two reportable segments: Security Solutions (cybersecurity, cloud, identity, secure messaging) and Secure Networks (secure networking architectures, mobility, network management). Profitability is measured by gross profit[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) Results of Operations by Business Segment (Three Months Ended June 30, in thousands) | Metric | Security Solutions 2025 | Secure Networks 2025 | Total 2025 | Security Solutions 2024 | Secure Networks 2024 | Total 2024 | | :-------------------- | :---------------------- | :------------------- | :--------- | :---------------------- | :------------------- | :--------- | | Revenues | $32,474 | $3,494 | $35,968 | $17,867 | $10,631 | $28,498 | | Total cost of sales | $21,176 | $2,860 | $24,036 | $10,602 | $8,189 | $18,791 | | Gross profit | $11,298 | $634 | $11,932 | $7,265 | $2,442 | $9,707 | Results of Operations by Business Segment (Six Months Ended June 30, in thousands) | Metric | Security Solutions 2025 | Secure Networks 2025 | Total 2025 | Security Solutions 2024 | Secure Networks 2024 | Total 2024 | | :-------------------- | :---------------------- | :------------------- | :--------- | :---------------------- | :------------------- | :--------- | | Revenues | $58,292 | $8,292 | $66,584 | $36,507 | $21,610 | $58,117 | | Total cost of sales | $35,934 | $6,536 | $42,470 | $20,616 | $16,833 | $37,449 | | Gross profit | $22,358 | $1,756 | $24,114 | $15,891 | $4,777 | $20,668 | [16. Commitments and Contingencies](index=21&type=section&id=16.%20Commitments%20and%20Contingencies) This note discusses the company's legal proceedings, claims, and risks associated with government contracts - The company is subject to various legal proceedings and claims in the ordinary course of business, but management believes the outcome of known matters will not have a material adverse effect on the financial statements[91](index=91&type=chunk) - As a U.S. government contractor, the company is subject to audits and investigations, which could result in liabilities, fines, or debarment, potentially having a material adverse effect due to dependence on government contracts[92](index=92&type=chunk) [17. Supplemental Cash Flow Information](index=21&type=section&id=17.%20Supplemental%20Cash%20Flow%20Information) This note provides supplemental details on cash, cash equivalents, restricted cash, and non-cash investing and financing activities Details of Cash, Cash Equivalents, and Restricted Cash (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Cash and cash equivalents | $56,998 | $54,578 | | Restricted cash | $139 | $139 | | **Cash, cash equivalents, and restricted cash** | **$57,137** | **$54,717** | Supplemental Cash Flow Information (Six Months Ended June 30, in thousands) | Item | 2025 | 2024 | | :---------------------------------------------------------------- | :----- | :----- | | Cash paid for Interest | $252 | $287 | | Cash paid for Income taxes | $39 | $100 | | Non-cash investing and financing activities: Issuance of common stock for 401(k) match | $2,063 | $1,619 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting key factors influencing performance, including revenue drivers, expense changes, liquidity, and critical accounting policies. It also discusses economic opportunities, challenges, and risks, particularly those related to U.S. government spending and recent legislative changes [Forward-Looking Statements](index=22&type=section&id=Forward-Looking%20Statements) This section cautions that forward-looking statements are subject to risks and uncertainties, and actual results may vary - This report contains forward-looking statements, and actual results may differ materially due to various factors, including those outlined in the company's Form 10-K for the year ended December 31, 2024[95](index=95&type=chunk) [General and Business Overview](index=22&type=section&id=General%20and%20Business%20Overview) This section provides an overview of Telos Corporation's business, its primary customer base, and the impact of recent legislative changes - Telos Corporation provides technologically advanced, software-based security solutions for cybersecurity, cloud, and identity, primarily serving the U.S. federal government (approximately **90% of H1 FY2025 revenue**), large commercial businesses, and state/local governments[96](index=96&type=chunk)[98](index=98&type=chunk) - The new Administration's evaluation of federal spending and potential reforms to the U.S. government acquisition process create uncertainty and risk, but also new business opportunities due to a focus on efficiency and transferring government functions to private entities[99](index=99&type=chunk) - The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, significantly impacts the defense sector through funding allocations and strategic investments in areas like AI, potentially boosting targeted defense investments and supporting related programs[100](index=100&type=chunk) [Financial Overview](index=23&type=section&id=Financial%20Overview) This section highlights key financial performance drivers for the second quarter of 2025, including revenue growth and expense changes - Key factors influencing financial performance in Q2 2025 include increased revenue from a significant program in Security Solutions, growth in TSA PreCheck enrollment revenue, higher stock-based compensation expenses, and a **$4.0 million** common stock repurchase[108](index=108&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) This section analyzes the consolidated and segment-specific financial results, including revenue, gross profit, and operating expenses Consolidated Results of Operations (in thousands) | Metric | Q2 2025 | Q2 2024 | Dollar Change Q2 | H1 2025 | H1 2024 | Dollar Change H1 | | :------------------------------------ | :------ | :------ | :--------------- | :------ | :------ | :--------------- | | Revenue | $35,968 | $28,498 | $7,470 | $66,584 | $58,117 | $8,467 | | Cost of sales | $24,036 | $18,791 | $5,245 | $42,470 | $37,449 | $5,021 | | Gross profit | $11,932 | $9,707 | $2,225 | $24,114 | $20,668 | $3,446 | | Gross margin | 33.2% | 34.1% | -0.9% | 36.2% | 35.6% | +0.6% | | Operating expenses | $21,815 | $18,351 | $3,464 | $43,019 | $37,750 | $5,269 | | Operating loss | $(9,883) | $(8,644) | $(1,239) | $(18,905) | $(17,082) | $(1,823) | | Net loss | $(9,517) | $(7,757) | $(1,760) | $(18,121) | $(15,135) | $(2,986) | - Operating expenses increased by **$3.5 million (18.9%)** in Q2 2025 and **$5.3 million (14.0%)** in H1 2025, primarily due to higher stock-based compensation costs, partially offset by lower labor costs from Q3 2024 restructuring efforts and reduced cash incentive compensation[105](index=105&type=chunk)[106](index=106&type=chunk) - Other income decreased by **$0.5 million (48.0%)** in Q2 2025 and **$1.2 million (51.9%)** in H1 2025, mainly due to changes in dividend income from money market placements[107](index=107&type=chunk) Security Solutions Segment Financial Results (in thousands) | Metric | Q2 2025 | Q2 2024 | Dollar Change Q2 | H1 2025 | H1 2024 | Dollar Change H1 | | :-------------------- | :------ | :------ | :--------------- | :------ | :------ | :--------------- | | Revenue | $32,474 | $17,867 | $14,607 | $58,292 | $36,507 | $21,785 | | Gross profit | $11,298 | $7,265 | $4,033 | $22,358 | $15,891 | $6,467 | | Gross margin | 34.8% | 40.7% | -5.9% | 38.4% | 43.5% | -5.1% | * **Q2 2025 Revenue:** Increased by **$14.6 million (81.8%)** YoY, driven by a significant program's ramp-up and increased volume on another large program[111](index=111&type=chunk) * **H1 2025 Revenue:** Increased by **$21.8 million (59.7%)** YoY, due to the same factors[113](index=113&type=chunk) * **Gross Margin Decline:** Primarily due to revenue mix, partially offset by lower depreciation and amortization expense on higher revenue[112](index=112&type=chunk)[114](index=114&type=chunk) Secure Networks Segment Financial Results (in thousands) | Metric | Q2 2025 | Q2 2024 | Dollar Change Q2 | H1 2025 | H1 2024 | Dollar Change H1 | | :-------------------- | :------ | :------ | :--------------- | :------ | :------ | :--------------- | | Revenue | $3,494 | $10,631 | $(7,137) | $8,292 | $21,610 | $(13,318) | | Gross profit | $634 | $2,442 | $(1,808) | $1,756 | $4,777 | $(3,021) | | Gross margin | 18.1% | 23.0% | -4.9% | 21.2% | 22.1% | -0.9% | * **Q2 2025 Revenue:** Decreased by **$7.1 million (67.1%)** YoY, primarily due to the ramp-down of several programs[116](index=116&type=chunk) * **H1 2025 Revenue:** Decreased by **$13.3 million (61.6%)** YoY, due to the ramp-down of several programs[118](index=118&type=chunk) * **Gross Margin Decline:** Primarily due to the results of revenue mix[117](index=117&type=chunk)[119](index=119&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity sources, working capital, and cash flow activities for operating, investing, and financing - Primary liquidity sources include cash on hand, future operating cash flows, and a **$30.0 million** revolving credit facility (maturing December 30, 2025) with an additional **$30.0 million** expansion feature[120](index=120&type=chunk) - As of June 30, 2025, the company had **$57.0 million** in cash and cash equivalents and **$64.0 million** in working capital, believing these resources are sufficient for operating, investing, and financing needs for the next 12 months[121](index=121&type=chunk)[122](index=122&type=chunk) Net Change in Cash, Cash Equivalents, and Restricted Cash (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Net cash provided by (used in) operating activities | $13,056 | $(8,340) | | Net cash used in investing activities | $(4,658) | $(9,647) | | Net cash used in financing activities | $(5,978) | $(1,168) | | **Net change in cash, cash equivalents, and restricted cash** | **$2,420** | **$(19,155)** | * **Operating Activities:** Increased by **$21.4 million** in H1 2025, driven by favorable working capital changes and higher cash earnings[123](index=123&type=chunk) * **Investing Activities:** Decreased by **$5.0 million** in H1 2025, due to lower capital expenditures and no repeat of a **$3.0 million** investment made in 2024[124](index=124&type=chunk) * **Financing Activities:** Increased by **$4.8 million** in H1 2025, primarily due to higher tax withholding payments for equity awards and **$4.0 million** in common stock repurchases[125](index=125&type=chunk) [Critical Accounting Policies and Estimates](index=27&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section outlines the company's critical accounting policies and estimates, including stock-based compensation and goodwill impairment - Critical accounting policies include stock-based compensation, goodwill, revenue recognition, and long-lived assets. No material changes to these policies or estimates occurred during the six months ended June 30, 2025[126](index=126&type=chunk)[133](index=133&type=chunk) - Stock-based compensation expense for awards with performance conditions is estimated based on probable achievement, while market-condition PSUs are valued using a Monte Carlo model. Goodwill is tested for impairment annually, or sooner if triggering events occur, with no impairment charges recorded in the current period[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to financial risks such as interest rate, foreign currency translation, and counterparty risk. No material changes to these market risk disclosures have occurred during the six months ended June 30, 2025, compared to the 2024 Form 10-K - The company is exposed to interest rate risk, foreign currency translation risk, and counterparty risk. There have been no material changes to the market risk disclosures from the 2024 Form 10-K[134](index=134&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025. There were no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[136](index=136&type=chunk) - No material changes in internal control over financial reporting were identified during the quarter ended June 30, 2025[137](index=137&type=chunk) PART II - OTHER INFORMATION This section details legal proceedings, updated risk factors, equity security transactions, and other miscellaneous information [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 16 – Commitments and Contingencies to the unaudited consolidated financial statements - Legal proceedings information is detailed in Note 16 – Commitments and Contingencies of the financial statements[140](index=140&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, specifically highlighting the potential adverse impact of the new Administration's international trade policies, including increased tariffs, on the company's procurement costs and overall business - Changes in international trade policies, such as increased tariffs by the new Administration, could raise procurement costs for IT hardware used internally, on contracts, or sold to customers, negatively affecting business, results of operations, or financial condition[142](index=142&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not engage in unregistered sales of equity securities or use of proceeds. However, it repurchased 1,488,227 shares of common stock for $4.0 million during the three months ended June 30, 2025, under its existing share repurchase program - No unregistered sales of securities or use of proceeds occurred[143](index=143&type=chunk) Common Stock Purchase Activity During the Three Months Ended June 30, 2025 | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Repurchase Plans | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans | | :-------------------------- | :------------------------------- | :--------------------------- | :---------------------------------------------------------------- | :---------------------------------------------------------------------- | | April 1, 2025 - April 30, 2025 | — | $— | — | $38,715,569 | | May 1, 2025 - May 31, 2025 | 761,338 | $2.61 | 761,338 | $36,731,490 | | June 1, 2025 - June 30, 2025 | 726,889 | $2.78 | 726,889 | $34,713,664 | | **Total** | **1,488,227** | **$2.69** | **1,488,227** | | [Item 3. Defaults upon Senior Securities](index=29&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - No defaults upon senior securities[144](index=144&type=chunk) [Item 4. Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[145](index=145&type=chunk) [Item 5. Other Information](index=29&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[146](index=146&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including certifications and XBRL taxonomy documents - The report includes certifications from the CEO and CFO (Exhibits 31.1, 31.2), a certification pursuant to 18 U.S.C. Section 1350 (Exhibit 32), and various XBRL taxonomy extension documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[147](index=147&type=chunk) [SIGNATURES](index=32&type=section&id=SIGNATURES) This section provides the official signatures of the company's executive officers, certifying the report's accuracy - The report was signed on August 11, 2025, by John B. Wood (Chief Executive Officer), Mark Bendza (Chief Financial Officer), and DJ Terreri (Controller and Chief Accounting Officer)[150](index=150&type=chunk)

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=8&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents AlTi Global, Inc.'s unaudited condensed consolidated financial statements, covering financial position, operations, comprehensive income, equity changes, and cash flows [Condensed Consolidated Statement of Financial Position (Unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position%20%28Unaudited%29) The Condensed Consolidated Statement of Financial Position shows a slight decrease in total assets and liabilities from December 31, 2024, to June 30, 2025, while total shareholders' equity increased | (Dollars in Thousands) | As of June 30, 2025 | As of December 31, 2024 | | :--------------------- | :------------------ | :---------------------- | | **Assets** | | | | Cash and cash equivalents | $42,414 | $65,494 | | Total assets | $1,242,771 | $1,255,833 | | **Liabilities** | | | | Accounts payable and accrued expenses | $28,893 | $33,976 | | Total liabilities | $252,584 | $285,638 | | **Mezzanine Equity** | | | | Series A Preferred Stock | $164,914 | $142,858 | | Series C Preferred Stock | $168,681 | $160,808 | | **Shareholders' Equity** | | | | Total shareholders' equity | $990,187 | $970,195 | [Condensed Consolidated Statement of Operations (Unaudited)](index=10&type=section&id=Condensed%20Consolidated%20Statement%20of%20Operations%20%28Unaudited%29) AlTi Global, Inc. reported a net loss for both the three and six months ended June 30, 2025, significantly widening compared to the prior year, primarily driven by increased operating expenses and other income/expenses | (Dollars in Thousands) | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :--------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | **Revenue** | | | | | | Management/advisory fees | $49,989 | $47,029 | $95,639 | $93,253 | | Incentive fees | $454 | $53 | $550 | $216 | | Distributions from investments | $2,664 | $2,240 | $14,874 | $6,410 | | Total income | $53,127 | $49,453 | $111,090 | $100,265 | | **Operating Expenses** | | | | | | Compensation and employee benefits | $44,601 | $38,893 | $86,875 | $78,450 | | Total operating expenses | $83,274 | $64,408 | $154,726 | $129,888 | | Total operating income (loss) | $(30,147) | $(14,955) | $(43,636) | $(29,623) | | Net income (loss) | $(30,043) | $(9,368) | $(32,925) | $12,717 | | Net income (loss) attributable to AlTi Global, Inc. | $(24,362) | $(6,403) | $(22,452) | $23,286 | | Net Income (Loss) Per Share - Basic | $(0.33) | $(0.18) | $(0.37) | $0.16 | | Net Income (Loss) Per Share - Diluted | $(0.33) | $(0.18) | $(0.37) | $0.00 | [Condensed Consolidated Statement of Comprehensive Income (Loss) (Unaudited)](index=11&type=section&id=Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income%20%28Loss%29%20%28Unaudited%29) The company reported a comprehensive loss for both the three and six months ended June 30, 2025, primarily influenced by the net loss and foreign currency translation adjustments | (Dollars in Thousands) | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :--------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Net income (loss) | $(30,043) | $(9,368) | $(32,925) | $12,717 | | Other Comprehensive Income (Loss) | | | | | | Foreign currency translation adjustments | $8,938 | $1,060 | $12,187 | $(2,929) | | Total comprehensive income (loss) | $(21,106) | $(8,009) | $(20,763) | $9,999 | | Comprehensive income (loss) attributable to AlTi Global, Inc. | $(18,153) | $(5,447) | $(13,857) | $22,201 | [Condensed Consolidated Statement of Changes in Mezzanine Equity and Shareholders' Equity (Unaudited)](index=12&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Mezzanine%20Equity%20and%20Shareholders%27%20Equity%20%28Unaudited%29) The company's total shareholders' equity increased from **$970.2 million** at January 1, 2025, to **$990.2 million** at June 30, 2025, despite a net loss, primarily due to preferred stock issuances, share-based compensation, and currency translation adjustments[28](index=28&type=chunk)[32](index=32&type=chunk) | (Dollars in Thousands) | Balance at January 1, 2025 | Net income (loss) | Currency translation adjustment | Preferred stock tranche issuance | Share based compensation | TRA Exchange | Balance at June 30, 2025 | | :--------------------- | :------------------------- | :---------------- | :------------------------------ | :------------------------------- | :----------------------- | :----------- | :----------------------- | | Series A Preferred Stock | $142,858 | — | — | $18,471 | — | — | $164,914 | | Series C Preferred Stock | $160,808 | — | — | — | — | — | $168,681 | | Additional paid-in capital | $652,857 | — | — | — | $21,320 | $1,587 | $665,605 | | Retained earnings (accumulated deficit) | $(296,561) | $(22,452) | — | — | — | — | $(320,768) | | Accumulated other comprehensive income | $(1,569) | — | $12,187 | — | — | — | $6,960 | | Non-controlling interest in subsidiaries | $311,793 | $(10,473) | $3,575 | — | — | $(2,592) | $304,785 | | Total Shareholders' Equity | $970,195 | $(32,925) | $12,187 | $18,471 | $21,320 | $(1,005) | $990,187 | [Condensed Consolidated Statement of Cash Flows (Unaudited)](index=16&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows%20%28Unaudited%29) For the six months ended June 30, 2025, AlTi Global, Inc. experienced a net decrease in cash and cash equivalents, primarily due to cash used in operating activities, partially offset by cash provided by investing and financing activities[35](index=35&type=chunk)[37](index=37&type=chunk) | (Dollars in Thousands) | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | :--------------------- | :------------------------------------- | :------------------------------------- | | Net cash provided by (used in) operating activities | $(50,118) | $(45,656) | | Net cash provided by (used in) investing activities | $13,339 | $(23,654) | | Net cash provided by (used in) financing activities | $12,004 | $112,225 | | Effect of exchange rate changes on cash | $1,69

General Information [Filing Information](index=1&type=section&id=Filing%20Information) The registrant, Motorcar Parts of America, Inc., an accelerated filer, has filed all required reports during the preceding 12 months - The registrant is Motorcar Parts of America, Inc., an accelerated filer, and has filed all required reports during the preceding 12 months[3](index=3&type=chunk)[4](index=4&type=chunk) | Title of each class | Trading symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock, par value $0.01 per share | MPAA | The Nasdaq Global Select Market | - There were **19,352,135 shares** of Common Stock outstanding at August 4, 2025[4](index=4&type=chunk) [Glossary](index=3&type=section&id=GLOSSARY) This section defines key terms frequently used throughout the report, specifically 'Used Core' and 'Remanufactured Core,' which are central to the company's remanufacturing process and inventory management - A 'Used Core' is a previously used original equipment automobile part, obtained primarily through core exchange programs or from core brokers, and serves as raw material for remanufacturing[9](index=9&type=chunk) - A 'Remanufactured Core' is a Used Core that has undergone the remanufacturing process, involving breakdown, replacement of non-reusable components, and reassembly into a new part[10](index=10&type=chunk) PART I — FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Motorcar Parts of America, Inc. and its subsidiaries, including the balance sheets, statements of operations, comprehensive income (loss), shareholders' equity, and cash flows, along with detailed notes explaining the accounting policies and specific line items [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | ASSETS (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------- | :------------ | :------------- | | Total current assets | $519,382 | $511,471 | | TOTAL ASSETS | $973,350 | $957,636 | | LIABILITIES AND SHAREHOLDERS' EQUITY (in thousands) | | | | Total current liabilities | $360,616 | $351,025 | | Total liabilities | $713,237 | $699,937 | | Total shareholders' equity | $260,113 | $257,699 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $973,350 | $957,636 | - Total assets increased by **$15.7 million** from March 31, 2025, to June 30, 2025, primarily driven by increases in current assets and plant and equipment[14](index=14&type=chunk) - Total liabilities increased by **$13.3 million**, mainly due to an increase in contract liabilities, while total shareholders' equity saw a **$2.4 million** increase[14](index=14&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Net sales | $188,364 | $169,887 | | Cost of goods sold | $154,447 | $140,713 | | Gross profit | $33,917 | $29,174 | | Operating income (loss) | $20,069 | $(6,456) | | Net income (loss) | $3,042 | $(18,085) | | Basic net income (loss) per share | $0.16 | $(0.92) | | Diluted net income (loss) per share | $0.15 | $(0.92) | - Net sales increased by **10.9%** year-over-year, from **$169.9 million** in Q1 2024 to **$188.4 million** in Q1 2025[16](index=16&type=chunk) - The company reported a net income of **$3.042 million** in Q1 2025, a significant improvement from a net loss of **$18.085 million** in Q1 2024[16](index=16&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $3,042 | $(18,085) | | Foreign currency translation gain (loss) | $888 | $(675) | | Comprehensive income (loss) | $3,930 | $(18,760) | - Comprehensive income improved significantly from a loss of **$18.76 million** in Q1 2024 to a gain of **$3.93 million** in Q1 2025, primarily driven by the turnaround in net income and a foreign currency translation gain[19](index=19&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) | (in thousands) | Balance at March 31, 2025 | Balance at June 30, 2025 | | :------------- | :------------------------ | :----------------------- | | Total Shareholders' Equity | $257,699 | $260,113 | - Total shareholders' equity increased by **$2.414 million** from March 31, 2025, to June 30, 2025, primarily due to net income and share-based compensation expense, partially offset by share repurchases[21](index=21&type=chunk) - The company repurchased and cancelled **197,796 shares** of common stock for **$1.966 million** during the quarter[21](index=21&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | $10,028 | $(20,841) | | Net cash used in investing activities | $(806) | $(512) | | Net cash (used in) provided by financing activities | $(6,778) | $15,166 | | Net increase (decrease) in cash and cash equivalents | $3,050 | $(6,443) | | Cash and cash equivalents — End of period | $12,479 | $7,531 | - Operating activities generated **$10.028 million** in cash in Q1 2025, a significant improvement from a cash outflow of **$20.841 million** in Q1 2024[23](index=23&type=chunk) - Cash used in financing activities was **$6.778 million** in Q1 2025, compared to cash provided of **$15.166 million** in Q1 2024, primarily due to net repayments of revolving loan and share repurchases[23](index=23&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Company Background and Organization](index=10&type=section&id=Note%201.%20Company%20Background%20and%20Organization) This note outlines Motorcar Parts of America, Inc.'s business as a leading supplier of automotive aftermarket replacement parts and test solutions, serving North American retail chain stores, warehouse distributors, and major automobile manufacturers - MPA is a leading supplier of automotive aftermarket non-discretionary replacement parts and test solutions/diagnostic equipment[26](index=26&type=chunk) - Products include light and heavy-duty rotating electrical products, wheel hub assemblies, brake-related products, turbochargers, and test solutions for combustion and electric vehicles[26](index=26&type=chunk) [Note 2. Basis of Presentation and New Accounting Pronouncements](index=10&type=section&id=Note%202.%20Basis%20of%20Presentation%20and%20New%20Accounting%20Pronouncements) This note explains that the unaudited condensed consolidated financial statements are prepared in accordance with GAAP for interim financial information and Form 10-Q instructions - Financial statements are prepared in accordance with U.S. GAAP for interim information and Form 10-Q instructions[27](index=27&type=chunk) - The company is evaluating the impact of several new FASB ASUs, including ASU 2023-06 (Disclosure Improvements), ASU 2023-09 (Income Tax Disclosures), ASU 2024-03 (Disaggregation of Income Statement Expenses), and ASU 2024-04 (Debt with Conversion and Other Options), with effective dates ranging from fiscal years beginning after December 2024 to December 2026[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) [Note 3. Accounts Receivable — Net](index=11&type=section&id=Note%203.%20Accounts%20Receivable%20%E2%80%94%20Net) This note provides a breakdown of the company's accounts receivable, net of allowances for credit losses, customer payment discrepancies, and customer returns | Accounts receivable - net (in thousands) | June 30, 2025 | March 31, 2025 | | :------------------------------------- | :------------ | :------------- | | Accounts receivable — trade | $109,041 | $113,807 | | Allowance for credit losses | $(264) | $(207) | | Customer payment discrepancies | $(2,015) | $(1,765) | | Customer returns RGA issued | $(21,230) | $(20,771) | | Total accounts receivable — net | $85,532 | $91,064 | - Total accounts receivable — net decreased by **$5.532 million** from **$91.064 million** at March 31, 2025, to **$85.532 million** at June 30, 2025[34](index=34&type=chunk) [Note 4. Inventory — Net](index=12&type=section&id=Note%204.%20Inventory%20%E2%80%94%20Net) This note details the composition of the company's inventory, including raw materials, work-in-process, and finished goods, net of an allowance for excess and obsolete inventory | Inventory — net (in thousands) | June 30, 2025 | March 31, 2025 | | :----------------------------- | :------------ | :------------- | | Raw materials | $154,325 | $150,274 | | Work-in-process | $8,917 | $7,821 | | Finished goods | $204,604 | $202,078 | | Less allowance for excess and obsolete inventory | $(19,566) | $(18,964) | | Inventory unreturned | $18,492 | $18,460 | | Total inventory — net | $366,772 | $359,669 | - Total inventory — net increased by **$7.103 million** from **$359.669 million** at March 31, 2025, to **$366.772 million** at June 30, 2025[35](index=35&type=chunk) [Note 5. Contract Assets](index=12&type=section&id=Note%205.%20Contract%20Assets) This note provides a breakdown of the company's short-term and long-term contract assets, which primarily include cores expected to be returned by customers, core premiums, and remanufactured cores held at customer locations | Contract assets (in thousands) | June 30, 2025 | March 31, 2025 | | :----------------------------- | :------------ | :------------- | | Total short-term contract assets | $30,329 | $29,606 | | Total long-term contract assets | $340,529 | $336,268 | - The carrying value of Remanufactured Cores held at customers' locations was reduced by **$1.026 million** for the three months ended June 30, 2025, compared to **$394 thousand** for the same period in 2024[36](index=36&type=chunk) [Note 6. Significant Customer and Other Information](index=13&type=section&id=Note%206.%20Significant%20Customer%20and%20Other%20Information) This note discloses significant customer concentrations for net sales and accounts receivable, as well as product line concentrations | Net sales concentration | June 30, 2025 | June 30, 2024 | | :-------------------- | :------------ | :------------ | | Customer A | 39% | 40% | | Customer B | 24% | 17% | | Customer C | 22% | 28% | | Accounts receivable - trade concentration | June 30, 2025 | March 31, 2025 | | :-------------------------------------- | :------------ | :------------- | | Customer A | 48% | 41% | | Customer B | 23% | 26% | | Customer C | 0% | 7% | | Product line concentration | June 30, 2025 | June 30, 2024 | | :------------------------- | :------------ | :------------ | | Rotating electrical products | 66% | 65% | | Brake-related products | 23% | 24% | | Wheel hub products | 6% | 7% | | Other products | 5% | 4% | [Note 7. Debt](index=13&type=section&id=Note%207.%20Debt) This note details the company's debt structure, including its senior secured Credit Facility and Convertible Notes - The company has a **$268.62 million** senior secured Credit Facility, including a **$238.62 million** Revolving Facility and a **$30 million** Term Loan facility (repaid in FY2024), maturing on December 12, 2028[42](index=42&type=chunk) | Revolving Facility Outstanding (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------------------------------- | :------------ | :------------- | | Outstanding balance | $86,856 | $90,787 | | Available under Revolving Facility | $134,341 | N/A | | Interest rate | 7.40% | 7.46% | - Convertible Notes of **$32 million** principal amount, due 2029, bear **10.0%** annual interest (compounded annually, payable in-kind or cash), with an effective interest rate of **18.3%** as of June 30, 2025[45](index=45&type=chunk) - A Compound Net Derivative Liability related to the Convertible Notes resulted in a non-cash loss of **$1.79 million** in Q1 2025, compared to a gain of **$2.58 million** in Q1 2024[47](index=47&type=chunk) [Note 8. Contract Liabilities](index=15&type=section&id=Note%208.%20Contract%20Liabilities) This note details the company's short-term and long-term contract liabilities, which include customer allowances, core returns accruals, core bank liability, and customer deposits | Contract liabilities (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Total short-term contract liabilities | $49,396 | $38,158 | | Total long-term contract liabilities | $240,021 | $241,404 | - Short-term contract liabilities increased by **$11.238 million**, primarily due to a significant increase in core bank liability from **$1.795 million** to **$11.399 million**[50](index=50&type=chunk) [Note 9. Leases](index=15&type=section&id=Note%209.%20Leases) This note provides detailed information on the company's operating and finance leases, including balance sheet classification, lease costs, and maturity schedules - The company recorded a non-cash gain of **$4.002 million** from the remeasurement of foreign currency-denominated lease liabilities in Q1 2025, compared to a loss of **$5.709 million** in Q1 2024[51](index=51&type=chunk) - Cessation of manufacturing at the Torrance, California facility required reassessment of the right-of-use asset, with no impairment identified at June 30, 2025[52](index=52&type=chunk) | Lease Costs (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------- | :------------------------------- | :------------------------------- | | Operating lease cost | $3,490 | $3,759 | | Finance lease cost | $429 | $409 | | Total lease cost | $4,268 | $4,644 | [Note 10. Accounts Receivable Discount Programs](index=17&type=section&id=Note%2010.%20Accounts%20Receivable%20Discount%20Programs) This note describes the company's accounts receivable discount programs, which allow it to sell customer receivables to banks at a discount to accelerate cash collection - The company uses accounts receivable discount programs to accelerate cash receipt from customers[55](index=55&type=chunk) | Accounts Receivable Discount Programs | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Receivables discounted | $168,194,000 | $144,541,000 | | Weighted average days collection accelerated | 345 | 342 | | Annualized weighted average discount rate | 5.7% | 6.9% | | Amount of discount recognized as interest expense | $9,158,000 | $9,507,000 | [Note 11. Supplier Finance Programs](index=17&type=section&id=Note%2011.%20Supplier%20Finance%20Programs) This note explains the company's supplier finance program, which enables suppliers to sell their receivables due from the company to participating financial institutions - The company utilizes a supplier finance program, allowing suppliers to sell receivables to financial institutions[57](index=57&type=chunk) - Outstanding supplier obligations confirmed under this program were **$31.292 million** at June 30, 2025, down from **$33.661 million** at March 31, 2025[57](index=57&type=chunk) [Note 12. Net Income (Loss) per Share](index=17&type=section&id=Note%2012.%20Net%20Income%20(Loss)%20per%20Share) This note provides the reconciliation of basic and diluted net income (loss) per share, detailing the weighted average number of shares outstanding and the impact of potentially dilutive securities | Net Income (Loss) per Share | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | Net income (loss) | $3,042,000 | $(18,085,000) | | Basic net income (loss) per share | $0.16 | $(0.92) | | Diluted net income (loss) per share | $0.15 | $(0.92) | - For Q1 2025, **1,049,341** potential common shares were anti-dilutive and excluded from diluted EPS calculation, compared to **2,285,834** in Q1 2024[59](index=59&type=chunk) [Note 13. Income Taxes](index=18&type=section&id=Note%2013.%20Income%20Taxes) This note details the company's income tax expense and effective tax rate, highlighting the impact of valuation allowances on deferred tax assets and foreign income | Income Tax | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------- | :------------------------------- | :------------------------------- | | Income tax expense (benefit) | $2,425,000 | $(178,000) | | Effective tax rate | 44.4% | 1% | - The effective tax rate for Q1 2025 was primarily impacted by changes in valuation allowance on deferred tax assets and foreign income taxed at different rates[61](index=61&type=chunk) - The company is evaluating the impact of the One Big Beautiful Bill Act (OBBBA), signed on July 4, 2025, on its future effective tax rate and deferred tax assets[64](index=64&type=chunk) [Note 14. Financial Risk Management and Derivatives](index=19&type=section&id=Note%2014.%20Financial%20Risk%20Management%20and%20Derivatives) This note describes the company's strategy for managing financial risks, primarily foreign exchange rate fluctuations, through the use of forward foreign currency exchange contracts - The company uses forward foreign currency exchange contracts to mitigate market risk from fluctuations in the Mexican peso and Chinese yuan[66](index=66&type=chunk)[67](index=67&type=chunk) | Forward Foreign Currency Exchange Contracts (in thousands) | June 30, 2025 | March 31, 2025 | | :------------------------------------------------------- | :------------ | :------------- | | U.S. dollar equivalent notional value | $42,531 | $45,921 | - A non-cash loss of **$5.369 million** from forward foreign currency exchange contracts was recorded in Q1 2025, compared to a gain of **$4.346 million** in Q1 2024[69](index=69&type=chunk) [Note 15. Fair Value Measurements](index=20&type=section&id=Note%2015.%20Fair%20Value%20Measurements) This note summarizes financial assets and liabilities measured at fair value, categorized by the fair value hierarchy (Level 1, 2, and 3) | Fair Value Measurements (in thousands) | June 30, 2025 | March 31, 2025 | | :------------------------------------- | :------------ | :------------- | | Mutual funds (Level 1) | $2,011 | $1,881 | | Forward foreign currency exchange contracts (Level 2) | $2,683 | $0 | | Compound Net Derivative Liability (Level 3) | $9,260 | $7,470 | - The fair value of the Compound Net Derivative Liability, valued using Level 3 inputs and the Monte Carlo simulation model, increased from **$7.47 million** at March 31, 2025, to **$9.26 million** at June 30, 2025[73](index=73&type=chunk)[75](index=75&type=chunk) - Key assumptions for the Compound Net Derivative Liability valuation include a risk-free interest rate of **3.70%**, cost of equity of **21.40%**, and expected volatility of common stock of **47.50%** at June 30, 2025[74](index=74&type=chunk) [Note 16. Share-based Payments](index=22&type=section&id=Note%2016.%20Share-based%20Payments) This note provides a summary of the company's share-based payment awards, including stock options, Restricted Stock Units (RSUs), and Performance Stock Units (PSUs) | Share-based Payments | Outstanding at March 31, 2025 | Outstanding at June 30, 2025 | | :------------------- | :---------------------------- | :--------------------------- | | Stock Options | 1,053,561 | 1,049,341 | | Non-vested RSUs | 505,373 | 811,981 | | Non-vested PSUs | 764,387 | 998,147 | - The company granted **428,552** time-based vesting RSUs and **353,778** PSUs (at target performance levels) during Q1 2025[80](index=80&type=chunk)[82](index=82&type=chunk) - Total unrecognized compensation expense for RSUs is **$5.931 million** (**2.7 years** remaining vesting period) and for PSUs is **$5.256 million** (**2.2 years** remaining vesting period) at June 30, 2025[81](index=81&type=chunk)[86](index=86&type=chunk) [Note 17. Commitments and Contingencies](index=24&type=section&id=Note%2017.%20Commitments%20and%20Contingencies) This note addresses the company's commitments and contingencies, specifically detailing the accrual for warranty returns and the status of various lawsuits, claims, and administrative proceedings | Warranty Returns (in thousands) | June 30, 2025 | June 30, 2024 | | :------------------------------ | :------------ | :------------ | | Balance at beginning of period | $19,677 | $19,326 | | Charged to expense | $38,453 | $33,352 | | Amounts processed | $(39,999) | $(37,632) | | Balance at end of period | $18,131 | $15,046 | - The total warranty return accrual was **$18.131 million** at June 30, 2025, a decrease from **$19.677 million** at March 31, 2025[88](index=88&type=chunk) - The company has an immaterial amount accrued for various lawsuits, claims, examinations, and administrative proceedings[89](index=89&type=chunk) [Note 18. Segment Information](index=25&type=section&id=Note%2018.%20Segment%20Information) This note identifies the company's three operating segments: Hard Parts, Test Solutions and Diagnostic Equipment, and Heavy Duty - The company operates in three segments: Hard Parts, Test Solutions and Diagnostic Equipment, and Heavy Duty[91](index=91&type=chunk)[92](index=92&type=chunk) - Hard Parts is the only reportable segment, with Test Solutions and Diagnostic Equipment and Heavy Duty segments being immaterial[91](index=91&type=chunk) | Hard Parts Segment (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Net sales to external customers | $174,889 | $158,187 | | Total operating income (loss) | $18,432 | $(6,459) | | Depreciation and amortization | $2,232 | $2,525 | | Capital expenditures | $394 | $253 | [Note 19. Share Repurchases](index=27&type=section&id=Note%2019.%20Share%20Repurchases) This note details the company's share repurchase program, which was increased to $37 million in August 2018 - The board approved an increase in the share repurchase program to **$37 million** in August 2018[95](index=95&type=chunk) - During Q1 2025, the company repurchased **197,796 shares** of common stock for **$1.966 million**[95](index=95&type=chunk) - As of June 30, 2025, **$11.457 million** remains available under the authorized share repurchase program[95](index=95&type=chunk) [Note 20. Related Party Transactions](index=27&type=section&id=Note%2020.%20Related%20Party%20Transactions) This note discloses related party transactions, specifically an operating lease for a manufacturing facility in Canada with a company co-owned by a member of management - The company has an operating lease for a Canadian facility with a company co-owned by a member of management, with rent expense of **$93 thousand** in Q1 2025[96](index=96&type=chunk) - Douglas Trussler, a co-founder of Bison Capital, was appointed to the Board in connection with the Convertible Notes issuance[97](index=97&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended June 30, 2025, compared to the prior year [Management Overview](index=28&type=section&id=Management%20Overview) The management overview highlights the company's focus on growing its aftermarket hard parts business in North America and expanding its leadership in the test solutions and diagnostic equipment market through innovative solutions - The company focuses on growing its aftermarket hard parts business in North America and its leadership in test solutions and diagnostic equipment[101](index=101&type=chunk) - Significant investments include a **410,000 sq ft** distribution center, two buildings totaling **372,000 sq ft** for remanufacturing/core sorting, and production realignment at a **312,000 sq ft** facility in Mexico[101](index=101&type=chunk) [Segment Reporting](index=28&type=section&id=Segment%20Reporting) This section reiterates the company's three operating segments: Hard Parts, Test Solutions and Diagnostic Equipment, and Heavy Duty - The company's three operating segments are Hard Parts, Test Solutions and Diagnostic Equipment, and Heavy Duty[102](index=102&type=chunk)[103](index=103&type=chunk) - Hard Parts is the only reportable segment, as the other two do not meet materiality thresholds[102](index=102&type=chunk) [Results of Operations for the Three Months Ended June 30, 2025 and 2024](index=29&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section provides a detailed analysis of the company's operating results, highlighting significant improvements in net sales, gross profit, and operating income | Key Operating Data (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | Cash flow provided by (used in) operations | $10,028 | $(20,841) | | Finished goods turnover (annualized) | 4.2 | 3.3 | [Net Sales and Gross Profit](index=29&type=section&id=Net%20Sales%20and%20Gross%20Profit) Net sales increased by 10.9% year-over-year, driven by strong demand for rotating electrical and brake-related products | Net Sales and Gross Profit (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | | Net sales | $188,364 | $169,887 | | Gross profit | $33,917 | $29,174 | | Gross margin | 18.0% | 17.2% | - Net sales increased by **$18.477 million**, or **10.9%**, year-over-year, reflecting strong demand for rotating electrical and brake-related products[106](index=106&type=chunk) - Gross margin increased due to increased facility utilization, operating efficiencies, cost-saving initiatives, and changes in product mix, partially offset by **$1.426 million** in net tariff costs[107](index=107&type=chunk) [Operating Expenses](index=30&type=section&id=Operating%20Expenses) Operating expenses decreased significantly year-over-year, primarily due to a non-cash foreign exchange gain on lease liabilities and forward contracts, and reduced general and administrative expenses from prior year headcount reductions | Operating Expenses (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | General and administrative | $12,680 | $16,670 | | Sales and marketing | $6,210 | $5,449 | | Research and development | $3,306 | $2,433 | | Foreign exchange impact of lease liabilities and forward contracts | $(8,348) | $11,078 | - General and administrative expenses decreased by **$3.99 million** (**23.9%**) due to prior year headcount reduction and favorable foreign currency fluctuations[109](index=109&type=chunk) - Foreign exchange impact shifted from a non-cash loss of **$11.078 million** in Q1 2024 to a non-cash gain of **$8.348 million** in Q1 2025[112](index=112&type=chunk) [Operating Income (Loss)](index=30&type=section&id=Operating%20Income%20(Loss)) The company achieved a consolidated operating income of $20.069 million in Q1 2025, a substantial improvement from an operating loss of $6.456 million in Q1 2024 | Operating Income (Loss) (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | | Consolidated operating income (loss) | $20,069 | $(6,456) | - The increase in operating income was primarily due to a non-cash foreign exchange gain of **$8.348 million** (vs. **$11.078 million** loss in prior year), increased gross profit, and decreased general and administrative expenses[113](index=113&type=chunk) [Interest Expense](index=31&type=section&id=Interest%20Expense) Net interest expense decreased by 10.9% year-over-year, primarily due to lower average outstanding balances under the credit facility and reduced interest rates on both the credit facility and accounts receivable discount programs | Interest Expense, net (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Interest expense, net | $12,812 | $14,387 | - Interest expense decreased by **$1.575 million** (**10.9%**) due to lower average outstanding balances under the credit facility and lower interest rates[114](index=114&type=chunk) [Change in Fair Value of Compound Net Derivative Liability](index=31&type=section&id=Change%20in%20Fair%20Value%20of%20Compound%20Net%20Derivative%20Liability) The change in fair value of the compound net derivative liability associated with convertible notes resulted in a non-cash loss of $1.790 million in Q1 2025, contrasting with a non-cash gain of $2.580 million in Q1 2024 | Change in Fair Value of Compound Net Derivative Liability (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--------------------------------------------------------------------- | :------------------------------- | :------------------------------- | | Change in fair value | $1,790 | $(2,580) | [Provision for Income Taxes](index=31&type=section&id=Provision%20for%20Income%20Taxes) The company recorded an income tax expense of $2.425 million, resulting in an effective tax rate of 44.4% for Q1 2025, a significant change from an income tax benefit of $178,000 (1.0% effective rate) in Q1 2024 | Income Tax (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | | Income tax expense (benefit) | $2,425 | $(178) | | Effective tax rate | 44.4% | 1.0% | - The effective tax rate for Q1 2025 was primarily impacted by changes in valuation allowance on deferred tax assets and foreign income taxed at different rates[116](index=116&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financial flexibility, including working capital, cash flow generation, and available credit facilities [Overview](index=31&type=section&id=Overview) The company's working capital was $158.766 million at June 30, 2025, with a current asset to current liability ratio of 1.4:1.0 | Working Capital (in thousands) | June 30, 2025 | March 31, 2025 | | :----------------------------- | :------------ | :------------- | | Working capital | $158,766 | $160,446 | | Current assets to current liabilities ratio | 1.4:1.0 | 1.5:1.0 | - Primary liquidity sources are cash from operations, receivable discount programs, and the credit facility[118](index=118&type=chunk) [Share Repurchase Program](index=31&type=section&id=Share%20Repurchase%20Program) The company's board approved an increase in its share repurchase program to $37 million in August 2018 - Share repurchase program increased to **$37 million** in August 2018[119](index=119&type=chunk) - **197,796 shares** were repurchased for **$1.996 million** during Q1 2025[119](index=119&type=chunk) - **$11.457 million** remains available for repurchases as of June 30, 2025[119](index=119&type=chunk) [Cash Flows](index=32&type=section&id=Cash%20Flows) Net cash provided by operating activities significantly improved to $10.028 million in Q1 2025 from a net cash outflow in Q1 2024, driven by increased accounts payable and improved operating results | Cash Flows (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | | Operating activities | $10,028 | $(20,841) | | Investing activities | $(806) | $(512) | | Financing activities | $(6,778) | $15,166 | - Net cash provided by operating activities improved by **$30.869 million** year-over-year, primarily due to increased accounts payable and improved operating results[120](index=120&type=chunk) - Net cash used in financing activities was **$6.778 million**, a change from **$15.166 million** provided in the prior year, mainly due to net repayments of the revolving loan and common stock repurchases[122](index=122&type=chunk) [Capital Resources](index=32&type=section&id=Capital%20Resources) The company's capital resources include a $268.62 million senior secured Credit Facility, with $86.856 million outstanding under the Revolving Facility and $134.341 million available at June 30, 2025 - The Credit Facility consists of a **$238.62 million** revolving loan facility and a **$30 million** term loan facility (repaid), maturing December 12, 2028[123](index=123&type=chunk) | Revolving Facility (in thousands) | June 30, 2025 | March 31, 2025 | | :-------------------------------- | :------------ | :------------- | | Outstanding balance | $86,856 | $90,787 | | Available credit | $134,341 | N/A | | Interest rate | 7.40% | 7.46% | - Convertible Notes of **$32 million** principal amount, due 2029, bear **10.0%** interest and had an effective interest rate of **18.3%** at June 30, 2025[126](index=126&type=chunk) [Accounts Receivable Discount Programs](index=33&type=section&id=Accounts%20Receivable%20Discount%20Programs) The company utilizes accounts receivable discount programs to accelerate cash collection, selling customer receivables to banks at a discount - Accounts receivable discount programs accelerate cash receipt by selling receivables to banks[130](index=130&type=chunk) | Accounts Receivable Discount Programs | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | | Receivables discounted | $168,194,000 | $144,541,000 | | Weighted average days collection accelerated | 345 | 342 | | Annualized weighted average discount rate | 5.7% | 6.9% | | Amount of discount recognized as interest expense | $9,158,000 | $9,507,000 | [Supplier Finance Programs](index=34&type=section&id=Supplier%20Finance%20Programs) The company uses a supplier finance program that allows its suppliers to sell their receivables to financial institutions - Supplier finance program allows suppliers to sell receivables to financial institutions; the company has no economic interest[133](index=133&type=chunk) - Outstanding supplier obligations confirmed under this program were **$31.292 million** at June 30, 2025, a decrease from **$33.661 million** at March 31, 2025[133](index=133&type=chunk) [Capital Expenditures and Commitments](index=34&type=section&id=Capital%20Expenditures%20and%20Commitments) Total capital expenditures for Q1 2025 were $2.708 million, significantly higher than the prior year, primarily for equipment supporting current operations and global growth initiatives | Capital Expenditures (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | | Total capital expenditures | $2,708 | $493 | - Capital expenditures for Q1 2025 primarily supported current operations and global growth initiatives[134](index=134&type=chunk) - The company expects approximately **$8 million** in capital expenditures for fiscal 2026[134](index=134&type=chunk) [Related Party Transactions](index=34&type=section&id=Related%20Party%20Transactions) This section reiterates the related party operating lease for a Canadian facility, with rent expense of $93,000 for Q1 2025, and the appointment of Douglas Trussler to the Board in connection with the Convertible Notes issuance - Operating lease for a Canadian facility with a company co-owned by management resulted in **$93 thousand** rent expense in Q1 2025[135](index=135&type=chunk) - Douglas Trussler was appointed to the Board in connection with the Convertible Notes issuance[136](index=136&type=chunk) [Litigation](index=35&type=section&id=Litigation) The company is subject to various lawsuits, claims, examinations, and administrative proceedings, but has accrued an immaterial amount related to these exposures - The company is subject to various lawsuits, claims, and administrative proceedings[137](index=137&type=chunk) - An immaterial amount is accrued for these exposures[137](index=137&type=chunk) [Critical Accounting Policies](index=35&type=section&id=Critical%20Accounting%20Policies) This section states that there have been no material changes to the company's critical accounting policies and estimates since its Annual Report on Form 10-K for the fiscal year ended March 31, 2025 - No material changes to critical accounting policies and estimates since the March 31, 2025, Annual Report on Form 10-K[138](index=138&type=chunk) [Accounting Pronouncements Not Yet Adopted](index=35&type=section&id=Accounting%20Pronouncements%20Not%20Yet%20Adopted) This section discusses several new FASB Accounting Standards Updates (ASUs) that are not yet adopted, including those related to disclosure improvements, income tax disclosures, disaggregation of income statement expenses, and debt with conversion options - The company is evaluating the impact of ASU 2023-06 (Disclosure Improvements), ASU 2023-09 (Income Tax Disclosures), ASU 2024-03 (Disaggregation of Income Statement Expenses), and ASU 2024-04 (Debt with Conversion and Other Options)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - These ASUs have various effective dates, with the earliest for fiscal years beginning after December 15, 2024, and the latest for annual reporting periods beginning after December 15, 2026[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes in market risk from the information previously provided in the company's Annual Report on Form 10-K as of March 31, 2025 - No material changes in market risk from the information provided in the Annual Report on Form 10-K as of March 31, 2025[143](index=143&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, based on an evaluation by management - The company's disclosure controls and procedures were effective as of June 30, 2025[145](index=145&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[150](index=150&type=chunk) - Internal control over financial reporting is designed to provide reasonable assurance regarding financial reporting reliability, but has inherent limitations[147](index=147&type=chunk)[149](index=149&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the company is subject to various lawsuits, claims, examinations, and administrative proceedings, but has accrued an immaterial amount related to these exposures - The company is subject to various lawsuits, claims, and administrative proceedings[152](index=152&type=chunk) - An immaterial amount is accrued for these exposures[152](index=152&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section indicates that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended March 31, 2025 - No material changes in risk factors from the Annual Report on Form 10-K for the fiscal year ended March 31, 2025[153](index=153&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activities during the quarter, including the number of shares purchased, average price paid, and the remaining amount available under the authorized program - The Credit Facility permits up to **$27.584 million** of dividends and share repurchases for fiscal year 2026[154](index=154&type=chunk) | Purchases of Equity Securities by the Issuer | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) | | :----------------------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | April 1 - April 30, 2025 | - | - | - | $13,423,000 | | May 1 - May 31, 2025 | 98,671 | $9.73 | 960,000 | $12,463,000 | | June 1 - June 30, 2025 | 99,125 | $10.15 | 1,006,000 | $11,457,000 | | Total | 197,796 | $1,966,000 | N/A | $11,457,000 | - As of June 30, 2025, **$11.457 million** remains available under the authorized share repurchase program[156](index=156&type=chunk) [Item 3. Defaults Upon Senior Securities](index=38&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section explicitly states that there were no defaults upon senior securities during the reported period - No defaults upon senior securities were reported[155](index=155&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) This section discloses that the company purchased 197,796 shares under a Rule 10b5-1 trading arrangement during the quarter, which allows for share repurchases during blackout periods or when in possession of material non-public information - The company purchased **197,796 shares** under a Rule 10b5-1 trading arrangement during Q1 2025[158](index=158&type=chunk) - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[160](index=160&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section provides a comprehensive list of exhibits filed with the Form 10-Q, including various corporate documents, incentive award plans, convertible promissory notes, common stock warrants, and certifications required by the Sarbanes-Oxley Act - The exhibits include corporate documents like the Certificate of Incorporation and By-Laws, various Incentive Award Plans (2010 and 2022), and forms related to Convertible Promissory Notes and Common Stock Warrants[161](index=161&type=chunk)[162](index=162&type=chunk) - Certifications from the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are filed herewith[162](index=162&type=chunk) SIGNATURES [Signatures](index=43&type=section&id=Signatures) This section contains the duly authorized signatures of the registrant's Chief Financial Officer and Chief Accounting Officer, affirming the submission of the report pursuant to the Securities Exchange Act of 1934 - The report is signed by David Lee, Chief Financial Officer, and Kamlesh Shah, Chief Accounting Officer, on August 11, 2025[167](index=167&type=chunk)

[HighPeak Energy, Inc. Second Quarter 2025 Financial and Operating Results](index=1&type=section&id=HighPeak%20Energy%2C%20Inc.%20Second%20Quarter%202025%20Financial%20and%20Operating%20Results) [Highlights and Recent Events](index=1&type=section&id=Highlights%20and%20Recent%20Events) The company reported stable Q2 2025 sales volumes and net income while amending its credit facilities to extend maturity and increase borrowing capacity Q2 2025 Key Metrics | Metric | Value | | :--- | :--- | | Average Sales Volumes | 48.6 MBoe/d | | Net Income | $26.2 million | | Diluted EPS | $0.19 | | EBITDAX | $156.0 million | | Lease Operating Expenses (ex. workover) | $6.55 per Boe | | Quarterly Dividend | $0.04 per share | - On August 4, 2025, the Company materially amended its Term Loan and Senior Credit Facility (Super Priority RCF) with key changes including **extended maturity to September 2028**, an **upsized Term Loan to $1.2 billion**, and deferred mandatory amortization payments until September 30, 2026[6](index=6&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) The amended Term Loan and proactive hedging strategy provide significant financial flexibility to capitalize on future opportunities, particularly with anticipated lower interest rates - The amendment and extension of the term loan is a strategic initiative that **increases capital structure flexibility**, enhances liquidity, and minimizes refinancing costs[4](index=4&type=chunk)[5](index=5&type=chunk) - The floating interest rate structure of the term loan is preferred over a high-yield, fixed-rate bond, as it allows the company to **benefit from projected lower interest rates**[5](index=5&type=chunk) - A significant portion of production has been hedged for the next 18 months to **minimize downside risk** from potential commodity price declines[5](index=5&type=chunk) [Operational and Financial Performance](index=3&type=section&id=Operational%20and%20Financial%20Performance) The company maintained production at 48.6 MBoe/d while reducing capital expenditures by over 30% quarter-over-quarter to $125.4 million [Operational Update](index=3&type=section&id=Operational%20Update) - Q2 2025 sales volumes averaged **48.6 MBoe/d**, composed of approximately 70% crude oil and 85% total liquids[7](index=7&type=chunk) - During the quarter, the company operated with an average of one drilling rig and one frac crew, drilling 13 gross wells and **turning 14 gross wells to production**[8](index=8&type=chunk) - As of June 30, 2025, there were **20 gross horizontal wells** in various stages of drilling and completion[8](index=8&type=chunk) [Financial Results](index=3&type=section&id=Financial%20Results) Q2 2025 Financial Summary | Metric | Value | | :--- | :--- | | Net Income | $26.2 million | | Diluted EPS | $0.19 | | EBITDAX | $156.0 million | | Diluted EBITDAX per share | $1.12 | Q2 2025 Average Realized Prices | Product | Price (Excluding Derivatives) | Price (Including Derivatives) | | :--- | :--- | :--- | | Crude Oil | $63.74 / Bbl | $65.27 / Bbl | | NGL | $20.34 / Bbl | $20.34 / Bbl | | Natural Gas | $1.50 / Mcf | $2.18 / Mcf | | **Overall** | **$45.27 / Boe** | **$46.94 / Boe** | - Total capital expenditures for Q2 2025 were **$125.4 million**, a decrease of over 30% compared to Q1 2025[11](index=11&type=chunk) - Cash costs for the quarter were **$11.69 per Boe**, leading to an unhedged EBITDAX margin of $33.58 per Boe[10](index=10&type=chunk) [Hedging Strategy](index=3&type=section&id=Hedging%20Strategy) HighPeak has entered into additional derivative contracts to hedge a significant portion of its forecasted production through early 2027 [Crude Oil Hedges](index=4&type=section&id=Crude%20Oil%20Hedges) - The company has outstanding crude oil derivative instruments, including swaps, collars, and puts, **extending through March 2027** to mitigate price volatility[12](index=12&type=chunk)[13](index=13&type=chunk) [Natural Gas Hedges](index=4&type=section&id=Natural%20Gas%20Hedges) - HighPeak has natural gas swap contracts in place for **30,000 MMBtu per day through 2026** and a reduced amount for Q1 2027, with weighted average prices ranging from $4.30 to $4.43 per MMBtu[14](index=14&type=chunk)[15](index=15&type=chunk) [Shareholder Returns and Corporate Information](index=5&type=section&id=Shareholder%20Returns%20and%20Corporate%20Information) The company declared a quarterly dividend of $0.04 per share, and outstanding warrants are set to expire on August 21, 2025 - The Board of Directors declared a quarterly dividend of **$0.04 per share**, payable on September 25, 2025, to stockholders of record on September 2, 2025[16](index=16&type=chunk) - The company's outstanding warrants (NASDAQ: HPKEW), which allow holders to purchase common stock at $11.50 per share, are set to **expire on August 21, 2025**[17](index=17&type=chunk) [Financial Statements](index=8&type=section&id=Financial%20Statements) Unaudited financials show total assets of $3.09 billion, with net income of $62.5 million and operating cash flow of $298.3 million for the first half of 2025 [Unaudited Condensed Consolidated Balance Sheet](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheet) Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $21,853 | $86,649 | | Total assets | $3,089,453 | $3,063,288 | | Long-term debt, net | $1,027,354 | $928,384 | | Total stockholders' equity | $1,654,086 | $1,602,456 | [Unaudited Condensed Consolidated Statements of Operations](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Statement of Operations Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total operating revenues | $200,400 | $275,266 | | Income from operations | $43,444 | $87,260 | | Net income | $26,176 | $29,717 | | Diluted EPS | $0.19 | $0.21 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $298,265 | $373,770 | | Net cash used in investing activities | ($322,078) | ($324,612) | | Net cash used in financing activities | ($40,983) | ($85,762) | | **Net decrease in cash** | **($64,796)** | **($36,604)** | [Unaudited Summary Operating Highlights](index=11&type=section&id=Unaudited%20Summary%20Operating%20Highlights) - Average daily sales volumes in Q2 2025 were **48,649 Boe**, nearly flat compared to 48,531 Boe in Q2 2024[33](index=33&type=chunk) - The average realized price per Boe, excluding derivatives, **decreased to $45.27** in Q2 2025 from $62.33 in Q2 2024, primarily due to lower crude oil prices[33](index=33&type=chunk) [Non-GAAP Financial Measures and Reconciliations](index=12&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) The company reported Q2 2025 EBITDAX of $156.0 million, negative free cash flow of $42.7 million, and adjusted net income of $13.9 million [Reconciliation of Net Income to EBITDAX and Discretionary Cash Flow](index=12&type=section&id=Reconciliation%20of%20Net%20Income%20to%20EBITDAX%20and%20Discretionary%20Cash%20Flow) EBITDAX Reconciliation for Q2 (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income | $26,176 | $29,717 | | EBITDAX | $156,024 | $215,829 | [Reconciliation of Net Cash Provided by Operations and Free Cash Flow](index=12&type=section&id=Reconciliation%20of%20Net%20Cash%20Provided%20by%20Operations%20and%20Free%20Cash%20Flow) Free Cash Flow Reconciliation for Q2 (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $141,213 | $202,331 | | Additions to crude oil and natural gas properties | ($126,338) | ($164,199) | | Free cash flow | ($42,677) | $6,447 | [Reconciliation of Net Income to Adjusted Net Income](index=13&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20Net%20Income) Adjusted Net Income Reconciliation for Q2 2025 (in thousands) | Metric | Amount | Per Diluted Share | | :--- | :--- | :--- | | Net income | $26,176 | $0.19 | | Noncash derivative gain, net | ($19,034) | ($0.14) | | **Adjusted net income** | **$13,851** | **$0.10** |

[GoPro Second Quarter 2025 Financial Results](index=1&type=section&id=GoPro%20Announces%20Second%20Quarter%20Results) [Q2 2025 Financial & Business Highlights](index=1&type=section&id=Q2%202025%20Financial%20%26%20Business%20Highlights) The company's Q2 revenue declined 18% YoY, but cost management drove significant improvements in gross margin and adjusted EBITDA **Q2 2025 Key Financial Metrics (YoY)** | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $152.6M | $186.2M | (18.0)% | | GAAP Gross Margin | 35.8% | 30.5% | +530 bps | | Non-GAAP Gross Margin | 36.0% | 30.7% | +530 bps | | GAAP Net Loss | $(16.4)M | $(47.8)M | (65.7)% | | Non-GAAP Net Loss | $(12.0)M | $(36.2)M | (67.0)% | | GAAP Diluted EPS | $(0.10) | $(0.31) | (67.7)% | | Non-GAAP Diluted EPS | $(0.08) | $(0.24) | (66.7)% | | Adjusted EBITDA | $(5.7)M | $(33.4)M | (83.0)% | - Management attributes the improved gross margin and adjusted EBITDA to successful initiatives to reduce operating expenses, which were **down 32% YoY**[3](index=3&type=chunk) - Subscription and service revenue remained flat YoY at **$26 million**, with the subscriber count ending Q2 at **2.45 million**, a 3% decrease YoY[7](index=7&type=chunk) - GoPro launched a new opt-in **AI Training program**, allowing U.S. subscribers to license their content for AI model training[9](index=9&type=chunk) - An Administrative Law Judge issued a favorable initial determination that competitor **Insta360 infringed on a GoPro patent**[7](index=7&type=chunk) - The company closed a **$50 million second lien credit facility** and issued 11.1 million warrants at an exercise price of $1.25 per share[7](index=7&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) This section presents the unaudited condensed consolidated statements of operations, balance sheets, and cash flows [Statements of Operations](index=5&type=section&id=Preliminary%20Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a Q2 net loss of $16.4 million, a significant improvement driven by a 33% reduction in operating expenses **Statement of Operations Summary (Three Months Ended June 30)** | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Revenue | $152,643 | $186,224 | | Gross Profit | $54,663 | $56,710 | | Total Operating Expenses | $68,670 | $103,219 | | Operating Loss | $(14,007) | $(46,509) | | Net Loss | $(16,422) | $(47,821) | [Balance Sheets](index=6&type=section&id=Preliminary%20Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows total assets of $439.0 million, with notable decreases in cash and inventory from year-end 2024 **Balance Sheet Summary** | (in thousands) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $58,571 | $102,811 | | Inventory | $84,482 | $120,716 | | Total Assets | $438,990 | $543,678 | | Total Liabilities | $341,075 | $391,989 | | Total Stockholders' Equity | $97,915 | $151,689 | [Statements of Cash Flows](index=7&type=section&id=Preliminary%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities improved to $48.4 million for the first half of 2025, with total cash decreasing by $44.2 million **Cash Flow Summary (Six Months Ended June 30)** | (in thousands) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(48,434) | $(97,798) | | Net cash provided by (used in) investing activities | $(1,783) | $10,012 | | Net cash provided by (used in) financing activities | $4,750 | $(800) | | Net change in cash and cash equivalents | $(44,240) | $(89,672) | [Reconciliation of GAAP to Non-GAAP Financial Measures](index=8&type=section&id=Reconciliation%20of%20Preliminary%20GAAP%20to%20Non-GAAP%20Financial%20Measures) This section reconciles GAAP to non-GAAP measures, showing a Q2 non-GAAP net loss of $12.0 million and adjusted EBITDA of negative $5.7 million - The company uses non-GAAP measures to facilitate comparability, identify business trends, and compare results against analyst models[21](index=21&type=chunk)[22](index=22&type=chunk) **Q2 2025 GAAP to Non-GAAP Net Loss Reconciliation** | (in thousands) | Amount | | :--- | :--- | | **GAAP net loss** | **$(16,422)** | | Stock-based compensation | $5,116 | | Acquisition-related costs | $469 | | Restructuring and other costs | $(58) | | Income tax adjustments | $(1,062) | | **Non-GAAP net loss** | **$(11,957)** | **Q2 2025 Adjusted EBITDA Reconciliation** | (in thousands) | Amount | | :--- | :--- | | **GAAP net loss** | **$(16,422)** | | Adjustments (Taxes, Interest, D&A, etc.) | $10,732 | | **Adjusted EBITDA** | **$(5,690)** | [Other Information](index=3&type=section&id=Other%20Information) This section contains investor call details, legal disclaimers, and outlines forward-looking statements and associated business risks - GoPro will host a conference call for analysts and investors to discuss the financial results[10](index=10&type=chunk) - The company warns that forward-looking statements are subject to risks, including **economic downturns, supply chain reliance, and competition**[16](index=16&type=chunk) - GoPro uses its investor relations website, SEC filings, and social media channels to announce material financial information[14](index=14&type=chunk)

Part I: Financial Information This section presents unaudited financial statements and management's analysis of financial condition and operations [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Forward Air Corporation's unaudited condensed consolidated financial statements and related notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20%E2%80%93%20June%2030%2C%202025%20and%20December%2031%2C%202024) This section provides a comparative overview of the company's financial position at two key dates Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | Percent Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------------- | | Total assets | $2,761,235 | $2,802,641 | $(41,406) | (1.5)% | | Total liabilities | $2,544,994 | $2,516,773 | $28,221 | 1.1% | | Total shareholders' equity | $216,241 | $285,868 | $(69,627) | (24.4)% | | Cash and cash equivalents | $95,128 | $104,903 | $(9,775) | (9.3)% | | Accounts receivable, net | $335,716 | $322,291 | $13,425 | 4.2% | | Long-term debt, less current portion | $1,681,468 | $1,675,930 | $5,538 | 0.3% | [Condensed Consolidated Statements of Comprehensive Loss (Three Months)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss%20-%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section details the company's financial performance for the three months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Comprehensive Loss (Three Months Ended June 30, in thousands) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Percent Change | | :------------------------------------------ | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | :------------- | | Operating revenue | $618,844 | $643,666 | $(24,822) | (3.9)% | | Total operating expenses | $599,322 | $1,739,421 | $(1,140,099) | (65.5)% | | Income (loss) from continuing operations | $19,522 | $(1,095,755) | $1,115,277 | 101.8% | | Net loss attributable to Forward Air | $(12,583) | $(645,433) | $632,850 | 98.1% | | Basic and diluted net loss per share | $(0.41) | $(23.47) | $23.06 | 98.2% | - The significant decrease in total operating expenses and improvement in income (loss) from continuing operations and net loss attributable to Forward Air for the three months ended June 30, 2025, compared to the same period in 2024, was primarily due to the absence of a **$1.09 billion goodwill impairment charge** incurred in the prior year period[14](index=14&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss (Six Months)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss%20-%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section details the company's financial performance for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Comprehensive Loss (Six Months Ended June 30, in thousands) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | Percent Change | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------------- | | Operating revenues | $1,232,125 | $1,185,479 | $46,646 | 3.9% | | Total operating expenses | $1,207,840 | $2,346,966 | $(1,139,126) | (48.5)% | | Income (loss) from continuing operations | $24,285 | $(1,161,487) | $1,185,772 | 102.1% | | Net loss attributable to Forward Air | $(63,220) | $(707,145) | $643,925 | 91.1% | | Basic and diluted loss per share | $(2.09) | $(27.71) | $25.62 | 92.4% | - Similar to the three-month period, the substantial improvement in operating expenses and net loss for the six months ended June 30, 2025, was primarily due to the absence of the **$1.09 billion goodwill impairment charge** recorded in the prior year[16](index=16&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%E2%80%93%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section outlines the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (Six Months Ended June 30, in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Change (in thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :-------------------- | | Net cash provided by (used in) operating activities of continuing operations | $14,398 | $(96,924) | $111,322 | | Net cash used in investing activities of continuing operations | $(15,124) | $(1,583,406) | $1,568,282 | | Net cash used in financing activities of continuing operations | $(9,943) | $(162,957) | $153,014 | | Net decrease in cash and cash equivalents and restricted cash | $(9,959) | $(1,847,418) | $1,837,459 | | Cash and cash equivalents, and restricted cash at end of period | $95,307 | $104,655 | $(9,348) | - Net cash provided by operating activities significantly improved in 2025, primarily due to changes in net income after non-cash items and adjustments in accounts receivable and other assets/liabilities[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) - Investing activities saw a substantial decrease in cash used, mainly because the prior year included a large cash outflow for the Omni Acquisition[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) - Financing activities also used less cash in 2025 due to the absence of debt issuance costs and earn-out liability payments from the prior year[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20%E2%80%93%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) This section presents changes in the company's equity components over the six-month period Condensed Consolidated Statements of Shareholders' Equity (Six Months Ended June 30, in thousands) | Shareholder Equity Component | Balance at Dec 31, 2024 (in thousands) | Balance at June 30, 2025 (in thousands) | Change (in thousands) | | :--------------------------- | :----------------------------------- | :------------------------------------ | :-------------------- | | Common Stock | $298 | $306 | $8 | | Additional Paid-in Capital | $542,392 | $551,845 | $9,453 | | Accumulated Deficit | $(338,230) | $(402,451) | $(64,221) | | Total Forward Air shareholders' equity | $201,728 | $151,794 | $(49,934) | | Noncontrolling interest | $84,140 | $64,447 | $(19,693) | | Total shareholders' equity | $285,868 | $216,241 | $(69,627) | - Total shareholders' equity decreased by **$69.6 million** from December 31, 2024, to June 30, 2025, primarily driven by an increase in accumulated deficit and a decrease in noncontrolling interest, partially offset by an increase in additional paid-in capital[23](index=23&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%E2%80%93%20June%2030%2C%202025) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Basis of Presentation](index=10&type=section&id=1.%20Basis%20of%20Presentation) This note describes the accounting principles and regulatory framework used for interim financial reporting - The condensed consolidated financial statements are prepared in conformity with U.S. GAAP for interim financial information and SEC regulations, reflecting all normal recurring adjustments[25](index=25&type=chunk) - ASU 2023-09, effective for fiscal years beginning after December 15, 2024, expands income tax disclosure requirements but is not expected to impact the Company's financial condition or results of operations[26](index=26&type=chunk) [2. Acquisitions and Umbrella Partnership C Structure](index=10&type=section&id=2.%20Acquisitions%20and%20Umbrella%20Partnership%20C%20Structure) This note details the Omni Acquisition, its strategic rationale, and the resulting partnership structure - On January 25, 2024, Forward Air Corporation completed the acquisition of Omni Newco, LLC (Omni Acquisition) for **$1.64 billion** in cash and equity consideration[27](index=27&type=chunk) - The Omni Acquisition enables the Company to offer differentiated service, an expanded geographic footprint, and integrated global supply chain solutions, with recognized goodwill representing planned operational synergies and strategic market positioning[32](index=32&type=chunk) - In connection with the Omni Acquisition, the Company restructured to create Clue Opco, LLC (Opco), a Variable Interest Entity, which the Company consolidates[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) - A Tax Receivable Agreement was also established, obligating the Company to pay Omni Holders **83.5%** of certain tax benefits realized from the acquisition[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk) Omni Logistics Acquisition Purchase Price Allocation (January 26, 2024, in thousands) | Item | Amount (in thousands) | | :------------------------------------ | :-------------------- | | Total purchase price (fair value of consideration) | $2,274,240 | | Total assets acquired | $1,579,213 | | Total liabilities assumed | $577,376 | | Goodwill | $1,272,403 | | Customer relationships (weighted average useful life) | 14 years | | Non-compete agreements (weighted average useful life) | 4 years | | Trademarks and other (weighted average useful life) | 5 years | [3. Indebtedness](index=14&type=section&id=3.%20Indebtedness) This note outlines the company's long-term debt structure and available credit facilities Long-term Debt (in thousands) | Debt Type | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Term Loan, expiring 2030 | $1,045,000 | $1,045,000 | | Senior Secured Notes, maturing 2031 | $725,000 | $725,000 | | Debt issuance discount | $(50,826) | $(54,067) | | Debt issuance costs | $(37,706) | $(40,003) | | Total long-term debt | $1,681,468 | $1,675,930 | - As of June 30, 2025, the revolving credit facility had **$273 million** of borrowings available with no outstanding borrowings[48](index=48&type=chunk) [4. Net Loss Per Share](index=14&type=section&id=4.%20Net%20Loss%20Per%20Share) This note presents the basic and diluted net loss per share attributable to Forward Air Basic and Diluted Net Loss Per Share Attributable to Forward Air (per share) | Period | Continuing Operations (per share) | Discontinued Operations (per share) | Net Loss Per Basic and Diluted Share (per share) | | :-------------------------------- | :-------------------------------- | :---------------------------------- | :----------------------------------------------- | | Three Months Ended June 30, 2025 | $(0.41) | — | $(0.41) | | Three Months Ended June 30, 2024 | $(23.29) | $(0.18) | $(23.47) | | Six Months Ended June 30, 2025 | $(2.09) | — | $(2.09) | | Six Months Ended June 30, 2024 | $(27.53) | $(0.18) | $(27.71) | - The net loss per basic and diluted share significantly improved for both the three and six months ended June 30, 2025, compared to the prior year periods, primarily due to the absence of the goodwill impairment charge[51](index=51&type=chunk) [5. Income Taxes](index=16&type=section&id=5.%20Income%20Taxes) This note details the company's income tax benefit/expense, effective tax rate, and deferred tax assets Income Tax (Benefit) Expense and Effective Tax Rate (in thousands) | Period | Income Tax (Benefit) Expense (in thousands) | Effective Tax Rate | | :-------------------------------- | :---------------------------------------- | :----------------- | | Six Months Ended June 30, 2025 | $2,840 | (3.6)% | | Six Months Ended June 30, 2024 | $(193,292) | 15.5% | - The effective tax rate for the six months ended June 30, 2025, was **(3.6)%**, varying from the **21.0%** statutory federal rate due to interest expense disallowances (full valuation allowance), noncontrolling interest, and state/local income taxes[53](index=53&type=chunk) - The Tax Receivable Agreement liability was revalued to **$14.7 million** as of June 30, 2025, an increase of **$1.4 million** from December 31, 2024, with an additional **$5.4 million** recorded for tax year 2025 attributes[54](index=54&type=chunk)[62](index=62&type=chunk) - The Company maintains a full valuation allowance against net deferred tax assets, primarily related to interest expense carryforwards, due to uncertainty of recovery from future taxable income[56](index=56&type=chunk) [6. Fair Value of Financial Instruments](index=17&type=section&id=6.%20Fair%20Value%20of%20Financial%20Instruments) This note describes the fair value measurements for the company's financial instruments Liabilities Under Tax Receivable Agreement (Level 3 Fair Value, in thousands) | Date | Amount | | :--------------- | :----- | | June 30, 2025 | $14,716 | | December 31, 2024 | $13,295 | - The fair value of the Tax Receivable Agreement liability increased by **$1.4 million** from December 31, 2024, to June 30, 2025, reflecting changes in expected future tax benefit payments to Omni Holders[62](index=62&type=chunk) - Cash, cash equivalents, restricted cash, accounts receivable, other receivables, accounts payable, and long-term debt are valued at their carrying amounts, which approximate fair value due to their immediate or short-term maturity or similar borrowing rates[63](index=63&type=chunk) [7. Commitments and Contingencies](index=18&type=section&id=7.%20Commitments%20and%20Contingencies) This note outlines ongoing legal proceedings and other contingent liabilities affecting the company - A shareholder class action complaint was filed alleging that the Company's directors violated Tennessee corporate law by not subjecting the Omni Acquisition to a shareholder vote and breached fiduciary duties[65](index=65&type=chunk) - The Company is involved in various legal claims incidental to its business, with accruals made for estimated losses, and believes resolutions will not materially adversely affect financial statements[66](index=66&type=chunk) [8. Segment Reporting](index=18&type=section&id=8.%20Segment%20Reporting) This note provides financial information for the company's three reportable segments: Expedited Freight, Omni Logistics, and Intermodal - The Company operates through three reportable segments: Expedited Freight, Omni Logistics, and Intermodal, with the CEO evaluating performance based on segment profit[67](index=67&type=chunk) Segment Profit (Loss) for Three Months Ended June 30 (in thousands) | Segment | June 30, 2025 | June 30, 2024 | Change (in thousands) | Percent Change | | :---------------- | :------------ | :------------ | :-------------------- | :------------- | | Expedited Freight | $19,495 | $21,946 | $(2,451) | (11.2)% | | Omni Logistics | $7,186 | $(1,105,871) | $1,113,057 | 100.6% | | Intermodal | $4,415 | $5,317 | $(902) | (17.0)% | | Corporate | $(11,574) | $(17,147) | $5,573 | (32.5)% | Segment Profit (Loss) for Six Months Ended June 30 (in thousands) | Segment | June 30, 2025 | June 30, 2024 | Change (in thousands) | Percent Change | | :---------------- | :------------ | :------------ | :-------------------- | :------------- | | Expedited Freight | $35,129 | $41,444 | $(6,315) | (15.2)% | | Omni Logistics | $10,561 | $(1,134,456) | $1,145,017 | 100.9% | | Intermodal | $9,957 | $8,903 | $1,054 | 11.8% | | Corporate | $(31,362) | $(77,378) | $46,016 | (59.5)% | - Omni Logistics segment profit significantly improved in both periods due to the absence of the goodwill impairment charge from the prior year[71](index=71&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk)[77](index=77&type=chunk) [9. Noncontrolling Interest](index=23&type=section&id=9.%20Noncontrolling%20Interest) This note details the ownership structure of Opco and the impact of noncontrolling interests on financial results - As of June 30, 2025, the Company holds **30,426** Class A Units in Opco, while Omni Holders hold **9,423** Opco Class B Units and corresponding Company Series B Preferred Units, exchangeable into **9,423** common shares of the Company[81](index=81&type=chunk) Opco Class B Units and Fully Diluted Ownership | Period | Opco Class B Units | Fully Diluted Ownership (%) | | :----------------------- | :----------------- | :-------------------------- | | Outstanding at Dec 31, 2024 | 10,088 | 25.3 | | Outstanding at March 31, 2025 | 9,503 | 23.8 | | Outstanding at June 30, 2025 | 9,423 | 23.5 | - The decrease in net loss attributable to noncontrolling interest for both periods is driven by the overall decrease in net loss and the decreasing number of noncontrolling units outstanding due to conversions into common stock[113](index=113&type=chunk)[145](index=145&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, operational results, and critical accounting policies [Overview](index=24&type=section&id=Overview) This section introduces Forward Air Corporation's business model, service offerings, and strategic focus - Forward Air Corporation is a leading asset-light freight provider offering LTL, truckload, and intermodal drayage services across North America, with global logistics solutions through its Omni Logistics segment[84](index=84&type=chunk) - The Company's services are classified into three reportable segments: Expedited Freight, Omni Logistics, and Intermodal[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) - The Company focuses on increasing freight volume and revenue per pound/shipment to leverage fixed costs, grow other services like LTL pickup/delivery, and create synergies across segments, particularly in fleet resources[88](index=88&type=chunk) - Estimated revenue for key product groups in 2024 was approximately **70%** for ground transportation, **12%** for air & ocean forwarding, **9%** for intermodal drayage, and **9%** for warehousing/value-added services[90](index=90&type=chunk) [Key Operating Statistics](index=25&type=section&id=Key%20Operating%20Statistics) This section defines the primary metrics used to evaluate the performance of the company's operating segments - For Expedited Freight, key metrics include Tonnage (total weight), Weight Per Shipment (mix of freight), Revenue Per Hundredweight (pricing trends, influenced by fuel surcharges and freight profile), Revenue Per Shipment, and Average Length of Haul[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) - For Intermodal, the primary metric is Drayage Revenue Per Shipment, which measures intermodal revenue divided by drayage shipments, excluding warehouse and linehaul services[97](index=97&type=chunk) - The Omni Logistics segment is managed based on its revenue and income, without specific key operating statistics identified for external reporting[89](index=89&type=chunk) [Trends and Developments](index=26&type=section&id=Trends%20and%20Developments) This section discusses economic conditions, regulatory impacts, strategic reviews, and integration progress affecting the company - The business is highly susceptible to economic conditions; industry freight volumes decreased in Q1 and Q2 2025 compared to 2024, with intermodal volumes increasing and truckload spot rates remaining depressed[98](index=98&type=chunk)[99](index=99&type=chunk) - U.S. government tariffs on imported goods from China, Canada, and other countries have impacted freight demand, leading to a decrease in total shipments, with the ultimate impact remaining uncertain[99](index=99&type=chunk)[100](index=100&type=chunk) - In January 2025, the Board initiated a comprehensive review of strategic alternatives to maximize shareholder value, including potential sale or merger, with Goldman Sachs & Co. LLC as financial advisor[101](index=101&type=chunk) - Significant progress has been made on Omni integration, exceeding initial cost synergy expectations, though uncertainties remain regarding full integration of technology platforms, maximizing revenue synergies, and retaining customers/vendors[102](index=102&type=chunk) [Factors Affecting Comparability](index=27&type=section&id=Factors%20Af%20ecting%20Comparability) This section explains how the Omni Acquisition impacts the comparability of financial results between periods - The Omni Acquisition, completed on January 25, 2024, significantly impacts comparability, as Omni Logistics revenues and segment income for the six months ended June 30, 2024, only include results from the acquisition date, whereas the current year period includes more days of ownership[103](index=103&type=chunk)[104](index=104&type=chunk) [Results from Operations (Three Months Ended June 30, 2025 vs. 2024)](index=28&type=section&id=Results%20from%20Operations%20(Three%20Months)) This section analyzes the consolidated financial performance for the three months ended June 30, 2025, compared to the prior year Consolidated Financial Data (Three Months Ended June 30, in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change | Percent Change | | :------------------------------------------ | :------------ | :------------ | :------- | :------------- | | Operating revenues | $618,844 | $643,666 | $(24,822) | (3.9)% | | Total operating expenses | $599,322 | $1,739,421 | $(1,140,099) | (65.5)% | | Income (loss) from continuing operations | $19,522 | $(1,095,755) | $1,115,277 | 101.8% | | Net loss attributable to Forward Air | $(12,583) | $(645,433) | $632,850 | 98.1% | - Operating revenues decreased by **3.9%** due to a decline in the Expedited Freight segment, while total operating expenses decreased significantly by **65.5%**, primarily due to the absence of a **$1.09 billion goodwill impairment charge** in the current period[107](index=107&type=chunk)[108](index=108&type=chunk) - Income from continuing operations improved by **101.8%**, and net loss attributable to Forward Air decreased by **98.1%**, both largely driven by the non-recurrence of the goodwill impairment[109](index=109&type=chunk)[112](index=112&type=chunk) - Total other expense increased by **24.0%** due to a **$6.86 million** charge from the tax receivable agreement liability increase and a **$6.22 million** negative impact from foreign currency exchange[110](index=110&type=chunk) [Expedited Freight (Three Months Ended June 30, 2025 vs. 2024)](index=30&type=section&id=Expedited%20Freight%20-%20Three%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) This section analyzes the Expedited Freight segment's performance for the three months ended June 30, 2025, compared to the prior year Expedited Freight Segment Performance (Three Months Ended June 30, in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change | Percent Change | | :-------------------------------- | :------------ | :------------ | :------- | :------------- | | Total operating revenues | $257,696 | $291,282 | $(33,586) | (11.5)% | | Income from operations | $19,495 | $21,946 | $(2,451) | (11.2)% | | Pounds per day | 9,741 | 11,155 | (1,414) | (12.7)% | | Shipments per day | 11.5 | 13.6 | (2.1) | (15.4)% | | Weight per shipment | 843 | 821 | 22 | 2.7% | | Revenue per hundredweight, ex fuel | $24.82 | $24.38 | $0.44 | 1.8% | - Operating revenues and income from operations decreased by **11.5%** and **11.2%** respectively, driven by a **12.7%** decrease in pounds per day and **15.4%** fewer shipments per day[118](index=118&type=chunk)[122](index=122&type=chunk) - This decline was partially offset by a **1.8%** increase in revenue per hundredweight (ex-fuel) and a **2.7%** increase in weight per shipment due to denser freight[118](index=118&type=chunk)[122](index=122&type=chunk) - Purchased transportation decreased by **12.7%** due to fewer shipments, and salaries, wages, and employee benefits decreased by **15.5%** due to reduced headcount and lower shipment volumes[119](index=119&type=chunk)[120](index=120&type=chunk) [Omni Logistics (Three Months Ended June 30, 2025 vs. 2024)](index=33&type=section&id=Omni%20Logistics%20-%20Three%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) This section analyzes the Omni Logistics segment's performance for the three months ended June 30, 2025, compared to the prior year Omni Logistics Segment Performance (Three Months Ended June 30, in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change | Percent Change | | :-------------------------------- | :------------ | :------------ | :------- | :------------- | | Operating revenue | $328,316 | $311,856 | $16,460 | 5.3% | | Income (loss) from operations | $7,186 | $(1,105,871) | $1,113,057 | 100.6% | | Purchased transportation (% of revenue) | 56.4% | 57.3% | (0.9)pp | | | Salaries, wages and employee benefits (% of revenue) | 18.8% | 18.4% | 0.4pp | | | Depreciation and amortization | $22,419 | $33,235 | $(10,816) | (32.5)% | - Operating revenue increased by **5.3%** due to increased demand for contract logistics and value-added services[124](index=124&type=chunk)[130](index=130&type=chunk) - Income from operations significantly improved by **100.6%**, primarily due to the absence of the **$1.09 billion goodwill impairment charge** in the current period[124](index=124&type=chunk)[130](index=130&type=chunk) - Purchased transportation increased by **3.6%** but decreased as a percentage of revenue due to a shift towards contract logistics and value-added services, which require lower purchased transportation levels[125](index=125&type=chunk) - Depreciation and amortization decreased by **32.5%** due to intangible amortization changes from measurement adjustments of the Omni Acquisition[127](index=127&type=chunk) [Intermodal (Three Months Ended June 30, 2025 vs. 2024)](index=34&type=section&id=Intermodal%20-%20Three%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) This section analyzes the Intermodal segment's performance for the three months ended June 30, 2025, compared to the prior year Intermodal Segment Performance (Three Months Ended June 30, in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change | Percent Change | | :-------------------------------- | :------------ | :------------ | :------- | :------------- | | Operating revenue | $59,146 | $59,299 | $(153) | (0.3)% | | Income from operations | $4,415 | $5,317 | $(902) | (17.0)% | | Drayage shipments | 62,313 | 64,877 | (2,564) | (4.0)% | | Drayage revenue per shipment | $862 | $826 | $36 | 4.4% | | Operating leases (% of revenue) | 9.0% | 8.1% | 0.9pp | | | Insurance and claims | $3,147 | $2,619 | $528 | 20.2% | - Operating revenues slightly decreased by **0.3%** due to a **4.0%** decrease in drayage shipments, largely offset by a **4.4%** increase in drayage revenue per shipment[132](index=132&type=chunk)[136](index=136&type=chunk) - Income from operations decreased by **17.0%** due to increased operating expenses with flat revenues[132](index=132&type=chunk)[136](index=136&type=chunk) - Operating leases increased by **11.7%** due to higher real estate lease costs, and insurance and claims increased by **20.2%** due to increased losses from property damage[133](index=133&type=chunk)[134](index=134&type=chunk) - Other operating expenses decreased by **19.9%** due to continued cost reduction efforts[135](index=135&type=chunk) [Corporate (Three Months Ended June 30, 2025 vs. 2024)](index=35&type=section&id=Corporate%20-%20Three%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) This section analyzes the Corporate segment's operating loss for the three months ended June 30, 2025, compared to the prior year - Corporate operating loss decreased from **$17.1 million** in Q2 2024 to **$11.6 million** in Q2 2025, primarily due to a **$4.07 million** decrease in transaction and integration costs related to the Omni Acquisition[137](index=137&type=chunk) [Results from Operations (Six Months Ended June 30, 2025 vs. 2024)](index=36&type=section&id=Results%20from%20Operations%20(Six%20Months)) This section analyzes the consolidated financial performance for the six months ended June 30, 2025, compared to the prior year Consolidated Financial Data (Six Months Ended June 30, in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change | Percent Change | | :------------------------------------------ | :------------ | :------------ | :------- | :------------- | | Operating revenues | $1,232,125 | $1,185,479 | $46,646 | 3.9% | | Total operating expenses | $1,207,840 | $2,346,966 | $(1,139,126) | (48.5)% | | Income (loss) from continuing operations | $24,285 | $(1,161,487) | $1,185,772 | 102.1% | | Net loss attributable to Forward Air | $(63,220) | $(707,145) | $643,925 | 91.1% | - Operating revenues increased by **3.9%**, primarily due to Omni Logistics having an additional **24 days** of ownership in 2025, partially offset by a decrease in Expedited Freight revenue[139](index=139&type=chunk) - Total operating expenses decreased by **48.5%**, mainly due to the absence of the **$1.09 billion goodwill impairment charge** in 2025 and lower acquisition/integration costs, partially offset by increased operating expenses from Omni Logistics' longer ownership period[140](index=140&type=chunk) - Income from continuing operations improved by **102.1%**, and net loss attributable to Forward Air decreased by **91.1%**, both primarily driven by the non-recurrence of the goodwill impairment[141](index=141&type=chunk)[144](index=144&type=chunk) - Total other expense increased by **18.3%** due to a **$6.86 million** charge from the tax receivable agreement liability change and the impact of foreign currency exchange[142](index=142&type=chunk) [Expedited Freight (Six Months Ended June 30, 2025 vs. 2024)](index=38&type=section&id=Expedited%20Freight%20-%20Six%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) This section analyzes the Expedited Freight segment's performance for the six months ended June 30, 2025, compared to the prior year Expedited Freight Segment Performance (Six Months Ended June 30, in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change | Percent Change | | :-------------------------------- | :------------ | :------------ | :------- | :------------- | | Total operating revenues | $507,077 | $564,577 | $(57,500) | (10.2)% | | Income from operations | $35,129 | $41,444 | $(6,315) | (15.2)% | | Total pounds | 1,234,029 | 1,398,914 | (164,885) | (11.8)% | | Total shipments | 1,466 | 1,698 | (232) | (13.7)% | | Weight per shipment | 842 | 824 | 18 | 2.2% | | Revenue per hundredweight, ex fuel | $24.79 | $24.27 | $0.52 | 2.1% | - Operating revenues decreased by **10.2%** due to an **11.8%** decrease in tonnage and **13.7%** fewer shipments, partially offset by a **2.1%** increase in revenue per hundredweight (ex-fuel) and a **2.2%** increase in weight per shipment[150](index=150&type=chunk) - Income from operations decreased by **15.2%** as lower freight volumes were not fully offset by cost reductions[151](index=151&type=chunk) - Purchased transportation decreased by **9.3%** and salaries, wages, and employee benefits decreased by **15.7%** due to lower volumes[152](index=152&type=chunk)[154](index=154&type=chunk) [Omni Logistics (Six Months Ended June 30, 2025 vs. 2024)](index=41&type=section&id=Omni%20Logistics%20-%20Six%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) This section analyzes the Omni Logistics segment's performance for the six months ended June 30, 2025, compared to the prior year Omni Logistics Segment Performance (Six Months Ended June 30, in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change | Percent Change | | :-------------------------------- | :------------ | :------------ | :------- | :------------- | | Operating revenue | $651,786 | $536,694 | $115,092 | 21.4% | | Income (loss) from operations | $10,561 | $(1,134,456) | $1,145,017 | 100.9% | | Purchased transportation (% of revenue) | 56.9% | 60.2% | (3.3)pp | | | Salaries, wages and employee benefits (% of revenue) | 18.2% | 19.8% | (1.6)pp | | | Depreciation and amortization | $44,649 | $50,104 | $(5,455) | (10.9)% | - Operating revenues increased by **21.4%** due to increased ownership days and higher demand for contract logistics and value-added services[156](index=156&type=chunk)[162](index=162&type=chunk) - Income from operations significantly improved by **100.9%** due to the absence of the goodwill impairment charge[156](index=156&type=chunk)[162](index=162&type=chunk) - Purchased transportation increased by **14.8%** but decreased as a percentage of revenue due to a product mix shift towards services requiring lower purchased transportation[157](index=157&type=chunk) - Salaries, wages, and employee benefits increased by **11.3%** due to increased ownership days and demand, but at a lower rate than revenue growth[158](index=158&type=chunk) - Depreciation and amortization decreased by **10.9%** due to intangible amortization changes from Omni Acquisition measurement adjustments[159](index=159&type=chunk) - Other operating expenses increased by **4.8%** but decreased as a percentage of revenue due to acquisition integration synergies[161](index=161&type=chunk) [Intermodal (Six Months Ended June 30, 2025 vs. 2024)](index=42&type=section&id=Intermodal%20-%20Six%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) This section analyzes the Intermodal segment's performance for the six months ended June 30, 2025, compared to the prior year Intermodal Segment Performance (Six Months Ended June 30, in thousands) | Metric | June 30, 2025 | June 30, 2024 | Change | Percent Change | | :-------------------------------- | :------------ | :------------ | :------- | :------------- | | Operating revenue | $121,638 | $115,591 | $6,047 | 5.2% | | Income from operations | $9,957 | $8,903 | $1,054 | 11.8% | | Drayage shipments | 126,762 | 127,536 | (774) | (0.6)% | | Drayage revenue per shipment | $872 | $824 | $48 | 5.8% | | Purchased transportation (% of revenue) | 33.1% | 31.7% | 1.4pp | | | Operating leases (% of revenue) | 9.1% | 8.2% | 0.9pp | | - Operating revenues increased by **5.2%**, primarily driven by a **5.8%** increase in drayage revenue per shipment, despite a slight **0.6%** decrease in drayage shipments[164](index=164&type=chunk)[169](index=169&type=chunk) - Income from operations increased by **11.8%** due to higher revenue per shipment[164](index=164&type=chunk)[169](index=169&type=chunk) - Purchased transportation increased by **9.9%** due to changes in capacity utilization, length of haul, and service provider mix[165](index=165&type=chunk) - Operating leases increased by **17.4%** due to higher real estate lease costs[167](index=167&type=chunk) - Other operating expenses decreased by **14.0%** due to continued cost reduction efforts[168](index=168&type=chunk) [Corporate (Six Months Ended June 30, 2025 vs. 2024)](index=43&type=section&id=Corporate%20-%20Six%20Months%20Ended%20June%2030%2C%202025%20compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) This section analyzes the Corporate segment's operating loss for the six months ended June 30, 2025, compared to the prior year - Corporate operating loss decreased from **$77.4 million** in H1 2024 to **$31.4 million** in H1 2025, primarily driven by a significant reduction in transaction and integration costs related to the Omni Acquisition (**$19.9 million** in 2025 vs. **$71.9 million** in 2024)[170](index=170&type=chunk) [Application of Critical Accounting Policies](index=44&type=section&id=Application%20of%20Critical%20Accounting%20Policies) This section describes the company's significant accounting policies, particularly those requiring complex judgments and estimates [Goodwill](index=44&type=section&id=Goodwill) This note explains the company's policy for testing goodwill for impairment and recent assessment results - Goodwill is tested annually for impairment as of June 30, and on an interim basis, using a discounted cash flow (DCF) model, or a combination of DCF and market approach (guideline public company approach)[171](index=171&type=chunk) - As of June 30, 2025, no reporting units were impaired, but the Omni reporting unit's fair value was approximately **10.0%** higher than its carrying value, indicating sensitivity to changes in underlying assumptions[174](index=174&type=chunk) [Finite-Lived Intangible Assets and Other Long-Lived Assets](index=44&type=section&id=Finite-Lived%20Intangible%20Assets%20and%20Other%20Long-Lived%20Assets) This note describes the company's policy for reviewing finite-lived intangible assets and other long-lived assets for impairment - Long-lived assets are reviewed for impairment when events indicate that the carrying amount may not be recoverable; impairment occurs if forecasted undiscounted cash flows are less than the carrying value, leading to a write-down to estimated value[175](index=175&type=chunk) - No triggering events or impairments of definite-lived assets were identified for the three and six months ended June 30, 2025 or 2024[175](index=175&type=chunk) [Liquidity and Capital Resources](index=45&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's ability to generate and manage cash to meet its financial obligations and fund operations - The Company expects to finance working capital, capital expenditures, and debt service over the next twelve months using available cash, cash flows from operations, and borrowings under its **$300 million** revolving credit facility[176](index=176&type=chunk) - Significant indebtedness was incurred in connection with the Omni Acquisition, which could have important consequences for the business[176](index=176&type=chunk) [Cash Flows](index=45&type=section&id=Cash%20Flows) This note provides a detailed analysis of cash flows from operating, investing, and financing activities - Net cash provided by operating activities was **$14.4 million** for the six months ended June 30, 2025, a significant improvement from **$96.9 million** used in the prior year, driven by changes in net income and working capital[177](index=177&type=chunk) - Net cash used in investing activities decreased substantially from **$1.58 billion** in 2024 to **$15.1 million** in 2025, primarily due to the Omni Acquisition cash outflow in the prior year[178](index=178&type=chunk) - Net cash used in financing activities decreased from **$163.0 million** in 2024 to **$9.9 million** in 2025, mainly due to the non-recurrence of debt issuance costs, long-term debt payments, and earn-out liability payments from the prior year[179](index=179&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses the company's exposure to market risks, particularly fuel price fluctuations, and refers to the Annual Report for further details - The Company's exposure to fuel price and availability fluctuations is not expected to materially impact its results of operations, cash flows, or financial position, as changes in fuel prices are generally passed on to customers through a weekly fuel surcharge program[183](index=183&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) This section evaluates the effectiveness of the company's disclosure controls and internal control over financial reporting, noting a material weakness [Disclosure Controls and Procedures](index=47&type=section&id=Disclosure%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures - As of June 30, 2025, the Company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures are not effective due to a material weakness in internal control over financial reporting, as disclosed in the 2024 Annual Report on Form 10-K[184](index=184&type=chunk) [Changes in Internal Control](index=47&type=section&id=Changes%20in%20Internal%20Control) This section describes any material changes in internal control over financial reporting during the quarter - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, other than the implementation of internal control over financial reporting at Omni Logistics[185](index=185&type=chunk) [Ongoing Remediation Plan](index=47&type=section&id=Ongoing%20Remediation%20Plan) This section outlines the company's continuing efforts to address previously disclosed material weaknesses - The Company continues to implement a remediation plan to address the previously disclosed material weaknesses, with remediation considered complete only after controls operate effectively for a sufficient period and are tested[186](index=186&type=chunk) Part II: Other Information This section covers legal proceedings, risk factors, equity sales, and other miscellaneous disclosures [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) This section details ongoing legal proceedings, including a shareholder class action, and other incidental litigation - A shareholder class action complaint (Second Amended Complaint) alleges that the Company's directors violated Tennessee corporate law by not subjecting the Omni Acquisition to a shareholder vote and breached fiduciary duties[187](index=187&type=chunk) - The Company is also party to other incidental litigation, primarily involving claims for personal injury and property damage, with accruals made for estimated losses, and believes these will not materially adversely affect its business or financial condition[188](index=188&type=chunk) [Item 1A. Risk Factors](index=49&type=page&id=Item%201A.%20Risk%20Factors) This section updates key risk factors, including economic conditions, tariffs, and obligations under the Tax Receivable Agreement - Overall economic conditions, including tariffs and trade policy changes, can materially reduce freight volumes and adversely impact operating results and growth, leading to decreased revenues, pricing pressures, and potential customer payment difficulties[192](index=192&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) - The Company is obligated to pay Omni Holders **83.5%** of certain tax benefits realized from the Omni Acquisition under the Tax Receivable Agreement, with expected payments being substantial and potentially accelerated upon a change of control, which could impair future transactions or impact shareholder value[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that the Company did not repurchase any of its equity securities during the three months ended June 30, 2025 - The Company did not repurchase any of its equity securities during the three months ended June 30, 2025[198](index=198&type=chunk) [Item 3. Defaults Upon Senior Securities](index=50&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is marked as 'Not applicable,' indicating no defaults upon senior securities - This item is not applicable, indicating no defaults upon senior securities[199](index=199&type=chunk) [Item 4. Mine Safety Disclosures](index=51&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is marked as 'Not applicable,' indicating no mine safety disclosures - This item is not applicable, indicating no mine safety disclosures[201](index=201&type=chunk) [Item 5. Other Information](index=51&type=section&id=Item%205.%20Other%20Information) This section discloses the adoption of a Rule 10b5-1 trading arrangement by a Board member for potential sales of common stock - On May 14, 2025, Michael B. Hodge, a Board member, adopted a Rule 10b5-1 trading arrangement for potential sales of up to **80,000** shares of Common Stock, expiring on December 26, 2025[202](index=202&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including merger plans, corporate governance documents, incentive compensation plans, and certifications - Key exhibits include the Plan of Merger, Amended and Restated Certificate of Incorporation, Bylaws, various Omnibus Incentive Compensation Plans, and certifications from the Principal Executive and Financial Officers[204](index=204&type=chunk) [Signatures](index=53&type=section&id=Signatures) This section contains the signatures of the Chief Executive Officer and Chief Financial Officer, certifying the report on behalf of Forward Air Corporation - The report is signed by Shawn Stewart, Chief Executive Officer, and Jamie Pierson, Chief Financial Officer, on August 11, 2025[207](index=207&type=chunk)