[PART I – FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for the period ended June 30, 2025, show a decrease in cash and cash equivalents to **$59.9 million** from **$72.9 million** at year-end 2024, with no revenue and a net loss of **$22.8 million** for the first six months of 2025, primarily due to an **$8.8 million** non-cash stock-based compensation expense [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets decreased to **$63.0 million** from **$76.9 million** at December 31, 2024, mainly due to reduced cash, while total stockholders' equity significantly decreased to **$19.0 million** from **$32.8 million** Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $59,928 | $72,904 | | Total Current Assets | $61,029 | $74,506 | | **Total Assets** | **$63,017** | **$76,899** | | **Liabilities and Stockholders' Equity** | | | | Total Current Liabilities | $8,314 | $8,148 | | Long-term license revenue deferred | $35,000 | $35,000 | | **Total Liabilities** | **$44,004** | **$44,141** | | **Total Stockholders' Equity** | **$19,013** | **$32,758** | | **Total Liabilities and Stockholders' Equity** | **$63,017** | **$76,899** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported no revenue for the periods, with a net loss of **$6.9 million** for Q2 2025 and an increased net loss of **$22.8 million** for the six months ended June 30, 2025, primarily due to higher general and administrative expenses including a significant stock-based compensation charge Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | Total revenue | $ - | $ - | $ - | $ - | | Research and development, net | $4,879 | $8,825 | $12,579 | $15,460 | | General and administrative | $2,624 | $3,593 | $11,562 | $6,555 | | Loss from operations | $(7,503) | $(12,418) | $(24,141) | $(22,015) | | **Net loss** | **$(6,878)** | **$(11,353)** | **$(22,816)** | **$(20,023)** | | Net loss per common share | $(0.22) | $(0.38) | $(0.73) | $(0.69) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities for the first six months of 2025 was **$13.0 million**, with no investing or financing activities, resulting in a net decrease in cash of **$13.0 million** compared to a net increase in the prior year due to stock sales Cash Flow Summary for Six Months Ended June 30 (in thousands) | | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(12,966) | $(15,346) | | Net cash used in investing activities | $ - | $(11) | | Net cash used in/provided by financing activities | $(5) | $24,722 | | **Net change in cash, cash equivalents, and restricted cash** | **$(12,971)** | **$9,365** | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's business as a developer of targeted radiotherapies, disclose commitments including a potential **$1 million** milestone payment and ongoing securities litigation, and highlight an **$8.8 million** stock compensation expense from option cancellations - The company is a clinical-stage firm focused on developing targeted radiotherapies for advanced cancers, with a pipeline of clinical and preclinical candidates[24](index=24&type=chunk) - A milestone payment of **$1 million** is due to Fred Hutchinson Cancer Research Center (FHCRC) upon FDA approval of the first drug using the licensed apamistamab antibody[52](index=52&type=chunk) - The company is facing a putative class action securities complaint and derivative shareholder complaints related to disclosures about the Iomab-B Phase 3 SIERRA Trial[53](index=53&type=chunk)[54](index=54&type=chunk) - In March 2025, the company cancelled 4.9 million stock options, resulting in an **$8.8 million** stock option compensation expense for the six months ended June 30, 2025[69](index=69&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a strategic pipeline prioritization towards solid tumor programs, notably ATNM-400 for prostate cancer, while seeking partners for its hematology assets, and reports sufficient cash to fund operations for more than 12 months despite an increased six-month net loss due to a one-time **$8.8 million** stock compensation charge [Business Overview and Strategy](index=20&type=section&id=Business%20Overview%20and%20Strategy) Actinium is a clinical-stage company developing targeted radiotherapies for advanced cancers, strategically prioritizing resources towards solid tumor pipeline candidates like ATNM-400 for prostate cancer, and actively seeking strategic partners for its hematology programs - The company is prioritizing development and resources for its targeted radiotherapy solid tumor pipeline, including the ATNM-400 program for prostate cancer[77](index=77&type=chunk) - Actinium is actively seeking strategic partners for its hematology programs, including Iomab-B, Actimab-A, and Iomab-ACT, potentially through partnerships, divestitures, or out-licensing[77](index=77&type=chunk) [Targeted Radiotherapy Candidate Pipeline](index=20&type=section&id=Targeted%20Radiotherapy%20Candidate%20Pipeline) The pipeline is led by Actimab-A, ATNM-400, and Iomab-ACT, with recent positive preclinical data for ATNM-400, an FDA agreement on a new Phase 2/3 trial protocol for Iomab-B, and ongoing clinical trials for Iomab-ACT - Presented preclinical data for ATNM-400, a novel non-PSMA Ac-225 radiotherapy for prostate cancer, showing it was more efficacious than the active agent in Pluvicto and can overcome resistance[78](index=78&type=chunk)[81](index=81&type=chunk) - The FDA provided definitive feedback that the SIERRA trial alone is not adequate to support a BLA filing for Iomab-B and that an additional trial demonstrating an overall survival benefit is necessary[131](index=131&type=chunk) - The company has reached an agreement with the FDA on a new Phase 2/3 clinical trial protocol for Iomab-B and is authorized to initiate the Phase 2 portion, while actively seeking a strategic partner to execute the trial[132](index=132&type=chunk) - The first patient was enrolled in the Iomab-ACT investigator-sponsored trial with a commercial CAR-T therapy at the University of Texas Southwestern Medical Center[81](index=81&type=chunk)[84](index=84&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) For the three months ended June 30, 2025, the net loss decreased to **$6.9 million** from **$11.4 million** in Q2 2024, while the six-month net loss increased to **$22.8 million** from **$20.0 million** in the prior-year period, primarily due to a **$9.1 million** non-cash stock-based compensation expense Comparison of Operations for the Three Months Ended June 30 (in thousands) | | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Research and development | $4,879 | $8,825 | $(3,946) | | General and administrative | $2,624 | $3,593 | $(969) | | **Net loss** | **$(6,878)** | **$(11,353)** | **$4,475** | Comparison of Operations for the Six Months Ended June 30 (in thousands) | | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Research and development | $12,579 | $15,460 | $(2,881) | | General and administrative | $11,562 | $6,555 | $5,007 | | **Net loss** | **$(22,816)** | **$(20,023)** | **$(2,793)** | - The cancellation of stock options in March 2025 resulted in a significant increase in non-cash stock-based compensation expense to **$9.1 million** for the six months ended June 30, 2025, compared to **$2.8 million** in the prior-year period[170](index=170&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) Net cash used in operating activities for the first six months of 2025 was **$13.0 million**, with no common stock sales during this period, and management expects existing resources to fund planned operations for more than 12 months Selected Cash Flow Information for the Six Months Ended June 30 (in thousands) | | 2025 | 2024 | | :--- | :--- | :--- | | Cash used in operating activities | $(12,966) | $(15,346) | | Cash used in/provided by financing activities | $(5) | $24,722 | | **Net change in cash, cash equivalents and restricted cash** | **$(12,971)** | **$9,365** | - The company did not sell any shares of common stock during the six months ended June 30, 2025. In the same period of 2024, it sold 2.9 million shares for net proceeds of **$24.7 million**[67](index=67&type=chunk)[177](index=177&type=chunk) - The company expects its existing resources will be sufficient to fund planned operations for more than 12 months from the date of this report[179](index=179&type=chunk)[199](index=199&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Actinium Pharmaceuticals, Inc. is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[185](index=185&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[186](index=186&type=chunk) - No changes in internal controls over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[187](index=187&type=chunk) [PART II – OTHER INFORMATION](index=44&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is facing a putative class action securities complaint and two consolidated derivative shareholder complaints filed in March and May 2025, alleging material misrepresentations and omissions concerning the Iomab-B Phase 3 SIERRA trial, which the company intends to vigorously defend - A putative class action complaint was filed on March 27, 2025, alleging material misrepresentations and omissions concerning the Iomab-B Phase 3 SIERRA Trial[190](index=190&type=chunk) - Two derivative shareholder complaints were filed in May 2025, also alleging derivative liability for the allegations made in the securities complaint. These have been consolidated into a single Derivative Action[191](index=191&type=chunk) - The company intends to defend vigorously against these claims, but the outcome cannot be assured[192](index=192&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) The company identifies significant risks including its clinical-stage status with no commercial revenue and a history of net losses, dependency on pipeline success and additional financing, the FDA's requirement for an additional trial for Iomab-B, reliance on third-party manufacturers, intellectual property uncertainty, and key personnel dependence - The company is a clinical-stage entity with no revenue from commercial sales and a history of net losses, anticipating continued losses in the future[194](index=194&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) - The FDA has determined the SIERRA trial alone is inadequate for a BLA filing for Iomab-B and requires an additional randomized trial to demonstrate an overall survival benefit, making the U.S. commercial opportunity highly uncertain[207](index=207&type=chunk) - The company depends on single third-party manufacturers for preclinical and clinical drug supplies, and any disruption could adversely affect business and results[195](index=195&type=chunk)[302](index=302&type=chunk) - The company's ability to utilize its net operating loss carryforwards of approximately **$398.6 million** may be limited by Section 382 ownership change rules[198](index=198&type=chunk)[362](index=362&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=84&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the period - None[369](index=369&type=chunk) [Defaults Upon Senior Securities](index=84&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the period - None[370](index=370&type=chunk) [Mine Safety Disclosures](index=84&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - None[371](index=371&type=chunk) [Other Information](index=85&type=section&id=Item%205.%20Other%20Information) There is no other information to report for the period - None[372](index=372&type=chunk) [Exhibits](index=86&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the quarterly report, including certifications from the CEO and CFO as required by the Sarbanes-Oxley Act of 2002 and Inline XBRL documents - The report includes required certifications from the Chief Executive Officer and Principal Financial and Accounting Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[374](index=374&type=chunk)

[Executive Summary & Q2 2025 Highlights](index=1&type=section&id=1.%20Executive%20Summary%20%26%20Q2%202025%20Highlights) McEwen Inc. reported strong Q2 2025 financial improvements, including positive net income and doubled Adjusted EBITDA, despite lower production, while advancing strategic development projects towards 2030 production goals [Introduction and CEO Commentary](index=1&type=section&id=1.1%20Introduction%20and%20CEO%20Commentary) McEwen Inc. reported its Q2 and H1 2025 results, highlighting continued progress towards doubling gold and silver production by 2030. CEO Rob McEwen emphasized strategic investments in development projects, including the proposed acquisition of Canadian Gold Corp., and noted the positive impact of higher gold prices on the company's financial performance - McEwen Inc. is continuing momentum to **double gold and silver production by 2030**[1](index=1&type=chunk) - H1 2025 investments in development projects, including the proposed acquisition of Canadian Gold Corp., are aimed at positioning the company for operational growth[3](index=3&type=chunk) - Net income is expected to improve with the publishing of the Los Azules Feasibility Study, allowing capitalization of the majority of development costs (year-to-date expense was **$15.6 million**)[3](index=3&type=chunk) - Higher gold prices had a welcome positive impact on cash flow and net income[3](index=3&type=chunk) [Financial Highlights](index=1&type=section&id=1.2%20Financial%20Highlights) McEwen Inc. demonstrated significant financial improvements in Q2 2025, with gross profit increasing to $12.3 million and a positive net income of $3.0 million, a substantial turnaround from a net loss in Q2 2024. Adjusted EBITDA more than doubled, and liquidity strengthened considerably with a rise in cash and equivalents and positive working capital, despite a slight decrease in revenue due to lower GEOs sold | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Gross Profit | $12.3M | $10.8M | +$1.5M | | Gross Margin | 26% | N/A | N/A | | Net Income (Loss) | $3.0M | ($13.0M) | +$16.0M | | EPS | $0.06 | ($0.26) | +$0.32 | | Adjusted EBITDA | $17.3M | $7.2M | +$10.1M | | Adjusted EBITDA per share | $0.32 | $0.15 | +$0.17 | | Revenue | $46.7M | $47.5M | -$0.8M | | GEOs Sold | 14,549 | 20,630 | -6,081 | | Average Realized Gold Price per GEO | $3,298 | $2,355 | +$943 | | Cash and Equivalents (June 30) | $53.6M | $13.7M | +$39.9M | | Marketable Securities (June 30) | $16.0M | N/A | N/A | | Working Capital (June 30) | $61.8M | ($6.5M) (Dec 31, 2024) | +$68.3M | | Debt Principal Outstanding | $130M | $40.0M | +$90.0M | | McEwen Copper Implied Market Value | $984.0M | N/A | N/A | | McEwen Ownership in McEwen Copper | 46.4% | N/A | N/A | | McEwen Shares Outstanding | 54,106,415 | N/A | N/A | [Operational Highlights](index=2&type=section&id=1.3%20Operational%20Highlights) Q2 2025 saw a decrease in consolidated production to 27,554 GEOs, accompanied by higher cash costs and AISC for 100%-owned operations. The company actively invested in exploration programs ($5.4 million) and the Los Azules copper project ($7.0 million, McEwen Copper's share), while maintaining excellent safety standards with zero lost-time incidents | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Consolidated Production (GEOs) | 27,554 | 35,265 | -7,711 | | Cash Costs per GEO (100%-owned) | $1,906 | $1,554 | +$352 | | AISC per GEO (100%-owned) | $2,120 | $1,728 | +$392 | | Exploration Investment | $5.4M | N/A | N/A | | McEwen Copper Investment (Los Azules) | $7.0M | N/A | N/A | - Fox Complex is advancing the Froome West discovery to production and the Stock mine ramp[7](index=7&type=chunk) - Zero lost-time incidents were recorded across 100%-owned sites[7](index=7&type=chunk) [Outlook and Strategic Catalysts](index=2&type=section&id=2.%20Outlook%20and%20Strategic%20Catalysts) The company reaffirmed 2025 production guidance, anticipating lower costs in H2, and outlined ambitious 2030 production goals supported by key near-term catalysts [2025 Full-Year Guidance](index=2&type=section&id=2.1%202025%20Full-Year%20Guidance) McEwen Inc. reaffirmed its full-year production guidance for 2025, expecting 120,000–140,000 GEOs. The company anticipates that projected production increases in the second half of 2025 will lead to lower costs per GEO - Full-year production guidance reaffirmed at **120,000–140,000 GEOs**[7](index=7&type=chunk) - Projected production increases in H2 2025 are expected to drive costs per GEO lower[7](index=7&type=chunk) [Long-Term Production Goals and Key Catalysts](index=2&type=section&id=2.2%20Long-Term%20Production%20Goals%20and%20Key%20Catalysts) The company has set an ambitious long-term production goal of 250,000 to 300,000 consolidated GEOs by 2030. This target is supported by seven key near-term catalysts, including resource updates, strategic acquisitions, feasibility studies, and the commencement of new mine production - Production goal of **250,000 to 300,000 GEOs consolidated by 2030**[8](index=8&type=chunk) - Seven near-term catalysts include: resource update for Windfall and Lookout Mountain (Q4 2025), completing Canadian Gold Corp. acquisition (early 2026), Grey Fox Pre-feasibility Study (H1 2026), Stock Mine production commencement (mid-2026), potential future dividend from San José, continuing exploration updates, and Los Azules Feasibility Study (late Q3 2025)[9](index=9&type=chunk) [Individual Asset Performance](index=3&type=section&id=3.%20Individual%20Asset%20Performance) Individual mine performance in Q2 2025 showed varied production and cost trends, with Gold Bar and Fox Complex anticipating H2 improvements, while San José faced higher costs due to inflation [Gold Bar Mine, Nevada (100% owned)](index=3&type=section&id=3.1%20Gold%20Bar%20Mine%2C%20Nevada%20(100%25%20owned)) The Gold Bar Mine produced 8,406 GEOs in Q2 2025, with cash costs and AISC within guidance. Production is anticipated to increase and costs to decrease in H2 2025 as accelerated stripping activities conclude. Significant investments were made to extend the mine life and advance other nearby projects | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | 2025 Guidance | | :--- | :--- | :--- | :--- | :--- | :--- | | GEOs Produced | 8,406 | 12,297 | 16,094 | 24,013 | 40,000–45,000 | | Cash Costs/GEO | $1,679 | $1,532 | $1,419 | $1,313 | $1,500–$1,700 | | AISC/GEO | $1,792 | $1,634 | $1,986 | $1,404 | $1,700–$1,900 | - Accelerated stripping activity is nearing completion, with expected production increases and decreased costs per GEO in H2[12](index=12&type=chunk) - **$1.2 million** was spent at Gold Bar Mine to extend the current mine life beyond 2029[12](index=12&type=chunk) - **$1.3 million** was spent at Lookout Mountain and Windfall projects to advance them towards production[12](index=12&type=chunk) [Fox Complex Mine, Ontario (100% owned)](index=3&type=section&id=3.2%20Fox%20Complex%20Mine%2C%20Ontario%20(100%25%20owned)) The Fox Complex Mine produced 5,429 GEOs in Q2 2025 from lower-grade zones, resulting in higher cash costs and AISC, which are projected to decrease with increased output in H2. Exploration efforts led to a new high-grade gold discovery at Froome West, extending mine life, and significant investments were made in drilling at Grey Fox and developing the Stock ramp for mid-2026 commercial production | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | 2025 Guidance | | :--- | :--- | :--- | :--- | :--- | :--- | | GEOs Produced | 5,429 | 8,297 | 10,948 | 15,782 | 30,000–35,000 | | Cash Costs/GEO | $2,212 | $1,588 | $2,142 | $1,572 | $1,600–$1,800 | | AISC/GEO | $2,563 | $1,874 | $2,534 | $1,886 | $1,700–$1,900 | - Delineation drilling around Froome Mine led to the discovery of new high-grade gold mineralization at Froome West, expected to extend mine life through mid-2026[12](index=12&type=chunk) - **$2.9 million** invested at Grey Fox's Gibson Zone, completing **20,000 m** of drilling[12](index=12&type=chunk) - **$5.6 million** invested on Stock ramp, targeting commercial production by the middle of 2026[12](index=12&type=chunk) [San José Mine, Argentina (49% owned)](index=4&type=section&id=3.3%20San%20Jos%C3%A9%20Mine%2C%20Argentina%20(49%25%20owned)) Attributable production from the San José Mine decreased to 13,719 GEOs in Q2 2025 due to lower grades and recovery rates. Cash costs and AISC significantly increased, primarily driven by high inflation and increased contractor use, though H2 production growth is expected to mitigate these costs. The mine received a $2.2 million dividend in H1 2025 and built cash balances to $55.6 million | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | 2025 Guidance | | :--- | :--- | :--- | :--- | :--- | :--- | | Attributable GEOs Produced | 13,719 | 14,672 | 24,643 | 27,605 | 50,000–60,000 | | Cash Costs/GEO | $2,310 | $1,624 | $2,428 | $1,615 | $1,600–$1,800 | | AISC/GEO | $2,842 | $2,032 | $2,933 | $1,978 | $1,900–$2,100 | - Costs per GEO sold were influenced by high inflation outpacing the devaluation of the Argentine peso and increased use of contractors[15](index=15&type=chunk) - A **$2.2 million** dividend distribution was received during H1 2025[15](index=15&type=chunk) - Cash balances at San José mine reached **$55.6 million** (100% basis) as of June 30, 2025[15](index=15&type=chunk) [Project Updates and Corporate Developments](index=4&type=section&id=4.%20Project%20Updates%20and%20Corporate%20Developments) The company advanced the Los Azules copper project towards a Feasibility Study and expanded corporate capabilities through a milling agreement and the strategic acquisition of Canadian Gold Corp [McEwen Copper – Los Azules Project, Argentina (46.4% ownership)](index=4&type=section&id=4.1%20McEwen%20Copper%20%E2%80%93%20Los%20Azules%20Project%2C%20Argentina%20(46.4%25%20ownership)) McEwen Copper invested $15.6 million in Q2 2025 to advance the Los Azules copper project, with the Feasibility Study on track for late Q3 2025. The study is focused on optimizing cost estimates, hydrogeological modeling, and engineering to reduce upfront capital. An RIGI application was submitted to secure tax and regulatory benefits, and new copper targets have been identified for drilling - **$15.6 million** invested in Q2, advancing towards publishing a Feasibility Study in late Q3 2025[15](index=15&type=chunk) - Feasibility Study is progressing with a focus on cost estimates, hydrogeological modeling, and engineering optimization to reduce upfront capital[15](index=15&type=chunk) - A RIGI application was submitted (revised July 11, 2025) to secure significant tax and regulatory benefits[15](index=15&type=chunk) - Exploration has generated three other nearby copper targets which will be drilled in late fall of 2025[15](index=15&type=chunk) [Further Corporate Developments](index=4&type=section&id=4.2%20Further%20Corporate%20Developments) McEwen Inc. strategically expanded its operational capabilities by entering a milling agreement with Inventus Mining Corp. to optimize costs and signed a binding Letter of Intent to acquire Canadian Gold Corp. This acquisition aims to significantly increase the company's resource base and future production in Manitoba, with immediate plans for resource updates, economic assessment, and permit amendments to restart the Tartan Mine - On July 2, 2025, the Company entered into a milling agreement with Inventus Mining Corp. to utilize excess milling capacity and reduce cost per ounce[15](index=15&type=chunk) - On July 27, 2025, the Company signed a binding LOI to acquire Canadian Gold Corp., a strategic move to increase its resource base and future production in Manitoba[15](index=15&type=chunk) - Upon completion of the acquisition, next steps include updating the resource estimate, preparing a preliminary economic assessment, and amending mining permits for a quick restart of the Tartan Mine, alongside continued exploration[15](index=15&type=chunk) [Non-GAAP Financial Measures](index=6&type=section&id=5.%20Non-GAAP%20Financial%20Measures) This section defines and reconciles non-GAAP financial measures, including Cash Costs, AISC, and Adjusted EBITDA, used to evaluate operational performance and cash flow, emphasizing their non-standardized nature [Cautionary Note and Definitions](index=6&type=section&id=5.1%20Cautionary%20Note%20and%20Definitions) This section provides a cautionary note on non-GAAP financial measures like Cash Costs, AISC, and Adjusted EBITDA, clarifying that they are common in the gold mining industry but lack standardized definitions under U.S. GAAP. The company uses these measures to evaluate operational performance and cash flow, but stresses they should not be considered in isolation. Detailed definitions for Cash Costs and All-in Sustaining Costs (AISC) are provided, outlining their components - Non-GAAP performance measures (Cash Costs, AISC, Adjusted EBITDA) are common in the gold mining industry but do not have standardized definitions under U.S. GAAP and should not be considered in isolation[22](index=22&type=chunk) - Cash costs include mining, processing, on-site G&A, community and permitting costs, royalty costs, refining and treatment charges, sales costs, export taxes, and operational stripping costs, excluding depreciation and amortization[25](index=25&type=chunk) - All-in sustaining costs (AISC) consist of cash costs plus accretion of retirement obligations, amortization of asset retirement costs, environmental rehabilitation, sustaining exploration and development, sustaining capital expenditures, and sustaining lease payments, excluding corporate G&A[26](index=26&type=chunk) [Reconciliation of Cash Costs and All-In Sustaining Costs (AISC)](index=7&type=section&id=5.2%20Reconciliation%20of%20Cash%20Costs%20and%20All-In%20Sustaining%20Costs%20(AISC)) The report presents detailed reconciliations of Cash Costs and All-In Sustaining Costs (AISC) to production costs applicable to sales for both 100%-owned operations (Gold Bar, Fox Complex) and the 49%-owned San José Mine. These reconciliations cover Q2 and H1 periods for 2025 and 2024, providing transparency on the calculation of these non-GAAP operational metrics | Metric | Q2 2025 (Total) | Q2 2024 (Total) | H1 2025 (Total) | H1 2024 (Total) | | :--- | :--- | :--- | :--- | :--- | | Production costs applicable to sales (100% owned) | $27,733 | $32,066 | $47,338 | $57,176 | | All-in sustaining costs | $30,851 | $35,657 | $60,994 | $64,352 | | Ounces sold, including stream (GEO) | 14,549 | 20,630 | 27,596 | 40,434 | | Cash cost per ounce sold ($/GEO) | $1,906 | $1,554 | $1,715 | $1,414 | | AISC per ounce sold ($/GEO) | $2,120 | $1,728 | $2,210 | $1,592 | | Metric | Q2 2025 (100% basis) | Q2 2024 (100% basis) | H1 2025 (100% basis) | H1 2024 (100% basis) | | :--- | :--- | :--- | :--- | :--- | | Production costs applicable to sales | $63,603 | $48,220 | $120,191 | $96,105 | | All-in sustaining costs | $78,246 | $60,342 | $145,218 | $117,694 | | Ounces sold (GEO) | 27,530 | 29,699 | 49,507 | 59,501 | | Cash cost per ounce sold ($/GEO) | $2,310 | $1,624 | $2,428 | $1,615 | | AISC per ounce sold ($/GEO) | $2,842 | $2,032 | $2,933 | $1,978 | [Reconciliation of Adjusted EBITDA](index=9&type=section&id=5.3%20Reconciliation%20of%20Adjusted%20EBITDA) The reconciliation of Adjusted EBITDA, a non-GAAP measure, is provided to evaluate operating performance and cash flow from gold operations, excluding the impacts of McEwen Copper. Adjusted EBITDA significantly increased to $17.3 million in Q2 2025 from $7.2 million in Q2 2024, and to $26.0 million in H1 2025 from $13.5 million in H1 2024, reflecting improved operational profitability - Adjusted EBITDA is a non-GAAP measure used to evaluate operating performance and ability to generate cash flow from gold operations, excluding McEwen Copper's income or loss impacts[34](index=34&type=chunk) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Income (loss) before income and mining taxes | $1,929 | ($15,371) | ($5,420) | ($38,311) | | Depreciation and depletion | $6,853 | $4,810 | $13,024 | $15,088 | | Loss from investment in McEwen Copper Inc. | $6,978 | $16,816 | $15,556 | $34,828 | | Interest expense | $1,549 | $972 | $2,858 | $1,945 | | **Adjusted EBITDA** | **$17,309** | **$7,227** | **$26,018** | **$13,550** | | Weighted average shares outstanding (thousands) | 53,968 | 49,718 | 53,623 | 49,580 | | Adjusted EBITDA per share | $0.32 | $0.15 | $0.49 | $0.27 | [Company Information and Disclosures](index=9&type=section&id=6.%20Company%20Information%20and%20Disclosures) This section provides an overview of McEwen Inc.'s operations and strategic vision, details technical information approval, and includes important forward-looking statements and contact information [About McEwen](index=9&type=section&id=6.1%20About%20McEwen) McEwen Inc. is a mining company focused on gold, copper, and silver in the Americas, operating three mines and developing the Los Azules copper project in Argentina, which aims for carbon neutrality by 2038. CEO Rob McEwen, a significant personal investor, is committed to building shareholder value and establishing a dividend, taking a symbolic $1 annual salary - McEwen provides exposure to gold, copper, and silver in the Americas through three operating mines (USA, Canada, Argentina) and a large, advanced-stage copper development project in Argentina[37](index=37&type=chunk) - The Los Azules copper project is designed to become one of the world's first regenerative copper mines, committed to achieving **carbon neutrality by 2038**[37](index=37&type=chunk) - Rob McEwen, Chairman and Chief Owner, has personally invested **US$205 million**, takes a salary of **$1/year**, and aims to build shareholder value and establish a dividend[38](index=38&type=chunk) [Technical Information and Reliability of San José Data](index=9&type=section&id=6.2%20Technical%20Information%20and%20Reliability%20of%20San%20Jos%C3%A9%20Data) The technical content of the news release has been reviewed and approved by William Shaver, COO of McEwen Mining, a Qualified Person. The company relies on Minera Santa Cruz S.A. (MSC) for financial information regarding the San José Mine, which is accounted for using the equity method, noting that MSC's reported results are unaudited - The technical content of this news release related to financial results, mining and development projects has been reviewed and approved by William (Bill) Shaver, P.Eng., COO of McEwen Mining and a Qualified Person[36](index=36&type=chunk) - The Company relies on the management of Minera Santa Cruz S.A. (MSC) for accurate financial information prepared in accordance with GAAP for the San José Mine, and such results are unaudited[36](index=36&type=chunk) [Forward-Looking Statements and Contact Information](index=10&type=section&id=6.3%20Forward-Looking%20Statements%20and%20Contact%20Information) This section includes a cautionary statement regarding forward-looking statements, emphasizing that they are subject to significant business, economic, and competitive uncertainties and risks that could cause actual results to differ materially. It also provides comprehensive contact information for investor relations and links to the company's digital platforms - This news release contains forward-looking statements and information, which are necessarily based upon estimates and assumptions subject to significant business, economic, and competitive uncertainties, risks, and contingencies[40](index=40&type=chunk) - Risks and uncertainties include fluctuations in market price of precious metals, mining industry risks, political/economic/social/security risks, permitting, construction, litigation, capital markets, environmental risks, uncertainty in resource calculation, and foreign exchange volatility[40](index=40&type=chunk) - Contact information for investor relations and links to the company's website and social media channels are provided[42](index=42&type=chunk)

FORM 10-Q Filing Information [Filing Details](index=1&type=section&id=FORM%2010-Q%20Filing%20Information) This section details the Form 10-Q filing for Xponential Fitness, Inc. for the period ended June 30, 2025, covering registrant status and stock information - Filing Type: Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934[2](index=2&type=chunk) - Period Ended: June 30, 2025[2](index=2&type=chunk) - Registrant Status: Accelerated filer and Emerging growth company[3](index=3&type=chunk) - Outstanding Shares as of July 31, 2025: Class A common stock: **35,097 thousand shares**; Class B common stock: **13,738 thousand shares**[3](index=3&type=chunk) Securities Registered | Securities Registered | | :-------------------- | | Class A common stock, par value $0.0001 per share | | Trading Symbol: XPOF | | Exchange: New York Stock Exchange | PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes to stockholders' equity, and cash flows, with corrections for prior misstatements [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets show a slight decrease in total assets and liabilities from December 31, 2024, to June 30, 2025, with an increased stockholders' deficit - Cash, cash equivalents and restricted cash increased from **$32,739 thousand** at December 31, 2024, to **$38,679 thousand** at June 30, 2025[8](index=8&type=chunk) - Goodwill decreased from **$135,240 thousand** to **$127,789 thousand**, and intangible assets, net, decreased from **$100,944 thousand** to **$94,350 thousand**[8](index=8&type=chunk) Metric (in thousands) | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total assets | $399,815 | $403,397 | | Total liabilities | $596,171 | $597,402 | | Total stockholders' deficit | $(313,166) | $(310,815) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended June 30, 2025, the company reported net income of $1,346 thousand, a significant improvement from a net loss in the prior year, driven by increased operating income and reduced costs - Franchise revenue increased by **5.4%** for the three months and **5.3%** for the six months ended June 30, 2025, compared to the prior year periods[10](index=10&type=chunk) - Selling, general and administrative expenses decreased by **34.9%** for the three months and **5.4%** for the six months ended June 30, 2025, primarily due to reduced legal expenses and equity-based compensation[10](index=10&type=chunk) Metric (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | | Total revenue, net | $76,208 | $76,903 | | Total operating costs and expenses | $61,385 | $79,992 | | Operating income (loss) | $14,823 | $(3,089) | | Net income (loss) | $1,346 | $(14,343) | | Net loss per share of Class A common stock (Basic) | $(0.01) | $(0.30) | Metric (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Total revenue, net | $153,091 | $156,596 | | Total operating costs and expenses | $128,589 | $151,691 | | Operating income (loss) | $24,502 | $4,905 | | Net income (loss) | $(1,313) | $(18,093) | | Net loss per share of Class A common stock (Basic) | $(0.11) | $(0.59) | [Condensed Consolidated Statements of Changes to Stockholders' Equity (Deficit)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20to%20Stockholders'%20Equity%20(Deficit)) The statements detail changes in stockholders' equity (deficit) for the six months ended June 30, 2025 and 2024, showing an overall increase in total stockholders' deficit - Total stockholders' deficit increased from **$(310,815) thousand** at December 31, 2024, to **$(313,166) thousand** at June 30, 2025[13](index=13&type=chunk) - Equity-based compensation contributed **$3,281 thousand** and **$2,666 thousand** for the periods ended March 31, 2025, and June 30, 2025, respectively[13](index=13&type=chunk) - Net income of **$969 thousand** was recorded for the period ended June 30, 2025, contrasting with a net loss of **$(1,923) thousand** for the period ended March 31, 2025[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities increased, cash used in investing activities significantly decreased, and cash provided by financing activities improved - The increase in operating cash flow was primarily due to higher net income after adjustments and favorable changes in working capital[19](index=19&type=chunk) - Investing cash flow improved by **$8.9 million**, mainly due to the absence of a business acquisition (Lindora in prior year) and reduced purchases of property and equipment[19](index=19&type=chunk) Metric (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $8,341 | $5,682 | | Net cash used in investing activities | $(2,860) | $(11,761) | | Net cash provided by (used in) financing activities | $459 | $(4,998) | | Increase (decrease) in cash, cash equivalents and restricted cash | $5,940 | $(11,077) | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed information on the company's business, accounting policies, corrections to prior financial statements, acquisitions, debt, leases, related party transactions, equity, income taxes, earnings per share, contingencies, litigation, restructuring, and segment information [Note 1 – Nature of Business and Operations](index=10&type=section&id=Note%201%20%E2%80%93%20Nature%20of%20Business%20and%20Operations) Xponential Fitness, Inc. operates as a holding company, franchising boutique health and wellness brands, with a portfolio of eight brands as of June 30, 2025, following recent divestitures and an acquisition - Portfolio of eight brands as of June 30, 2025: Club Pilates, CycleBar, StretchLab, YogaSix, Pure Barre, Rumble, BFT, and Lindora[26](index=26&type=chunk) - Lindora, a provider of medically guided wellness and metabolic health solutions, was acquired on **January 2, 2024**[26](index=26&type=chunk)[31](index=31&type=chunk) - Divested Stride brand on **February 13, 2024**, and Row House brand on **May 20, 2024**, and announced the wind down of AKT franchise operations during Q3 2024[27](index=27&type=chunk) [Note 2 – Correction of Previously Issued Financial Statements](index=11&type=section&id=Note%202%20%E2%80%93%20Correction%20of%20Previously%20Issued%20Financial%20Statements) The company identified and corrected misstatements in its previously issued condensed consolidated financial statements for the three and six months ended June 30, 2024, impacting various revenue and expense items - Misstatements identified impacting previously issued financial statements for the three and six months ended June 30, 2024[35](index=35&type=chunk) - Corrections included adjustments for rebates, revenue recognition issues, improper expense recognition for inventory-related costs, asset impairment assessment, legal accruals, and unrecorded equipment inventory[36](index=36&type=chunk)[40](index=40&type=chunk) Impact on Net Loss Attributable to Xponential Fitness, Inc. (in thousands) | Period | As Previously Reported | Adjustments | As Corrected | | :----- | :--------------------- | :---------- | :----------- | | 3 Months Ended June 30, 2024 | $(9,102) | $(461) | $(9,563) | | 6 Months Ended June 30,

Part I: Financial Information [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The company presents its unaudited consolidated financial statements for the periods ended June 30, 2025 and 2024 Q2 2025 vs Q2 2024 Key Financial Results | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | **Total Interest Income** | $193.3M | $179.8M | | **Net Interest Income** | $126.9M | $104.4M | | **Provision for credit losses** | $4.4M | $4.9M | | **Net Income** | $42.7M | $30.2M | | **Diluted EPS** | $0.50 | $0.36 | Consolidated Balance Sheet Highlights (June 30, 2025 vs Dec 31, 2024) | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | $15.94B | $15.18B | | **Loans, net** | $10.47B | $10.16B | | **Total Deposits** | $12.50B | $12.24B | | **Total Liabilities** | $13.67B | $12.99B | | **Total Shareholders' Equity** | $2.27B | $2.18B | - For the six months ended June 30, 2025, net cash from operating activities was **$103.3 million**, while investing activities used **$894.3 million** and financing activities provided **$646.8 million**[13](index=13&type=chunk)[14](index=14&type=chunk) [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section details the accounting policies and financial data for key areas like securities, loans, and acquisitions - The financial statements are prepared per **U.S. GAAP**, with management estimates crucial for the allowance for credit losses, acquisition accounting, and fair value measurements[17](index=17&type=chunk)[19](index=19&type=chunk) Debt Securities Portfolio (Amortized Cost) as of June 30, 2025 | Security Type | Available-for-Sale (AFS) (USD) | Held-to-Maturity (HTM) (USD) | | :--- | :--- | :--- | | U.S. Gov't & Agency | $25.2M | - | | Gov't Sponsored MBS/CMO | $2.61B | $613.3M | | Private MBS/CMO | $113.4M | - | | CLOs | $258.0M | - | | Other | $14.5M | - | | **Total** | **$3.02B** | **$613.3M** | Loan Portfolio Composition as of June 30, 2025 | Loan Segment | Total Balance (USD) | | :--- | :--- | | Construction and land development | $603.1M | | CRE - owner occupied | $1.78B | | CRE - non-owner occupied | $3.62B | | Residential real estate | $2.68B | | Commercial and financial | $1.74B | | Consumer | $183.1M | | **Total Loans** | **$10.61B** | - The allowance for credit losses (ACL) was **$142.2 million**, or **1.34% of total loans**, with a Q2 2025 provision of **$4.4 million**[53](index=53&type=chunk)[56](index=56&type=chunk) - The company completed its acquisition of Heartland Bancshares, Inc. and announced a proposed acquisition of Villages Bancorporation, Inc[85](index=85&type=chunk)[87](index=87&type=chunk) [Management's Discussion and Analysis (MD&A)](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes financial condition and operational results, highlighting growth, acquisitions, and margin expansion [Results of Operations](index=34&type=section&id=MD%26A%20-%20Results%20of%20Operations) Q2 2025 net income rose 41% YoY, driven by higher net interest income and an expanded net interest margin Q2 2025 Performance Highlights | Metric | Q2 2025 | | :--- | :--- | | Net Income | $42.7M | | Diluted EPS | $0.50 | | Net Interest Income | $126.9M | | Net Interest Margin | 3.58% | | Return on Average Assets | 1.08% | | Efficiency Ratio | 56.95% | - **Net interest margin expanded by 10 basis points** from the prior quarter, driven by lower deposit costs[110](index=110&type=chunk) - Noninterest expense in Q2 2025 included **$2.4 million in merger-related charges** from recent and proposed acquisitions[136](index=136&type=chunk) [Financial Condition](index=46&type=section&id=MD%26A%20-%20Financial%20Condition) Total assets grew to $15.9 billion, driven by loan and securities portfolio growth, with improved credit quality - Total assets increased by **$768.6 million (5%)** from December 31, 2024, reaching **$15.9 billion**[144](index=144&type=chunk) - The loan portfolio grew by **$308.9 million (3.0%)** since year-end 2024, with strong commercial and CRE origination[152](index=152&type=chunk)[165](index=165&type=chunk) - Credit quality improved significantly, with **Nonperforming Assets (NPAs) declining to 0.44%** of total assets[172](index=172&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=MD%26A%20-%20Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position and capital ratios that significantly exceed regulatory requirements - Total available liquidity sources amounted to **$5.9 billion in borrowing capacity** plus **$332.4 million in cash**[183](index=183&type=chunk) Regulatory Capital Ratios (Consolidated) as of June 30, 2025 | Ratio | Seacoast (Consolidated) | Minimum to be Well Capitalized | | :--- | :--- | :--- | | Total Risk-Based Capital | 16.09% | 10.00% | | Tier 1 Capital | 14.65% | 8.00% | | CET1 Ratio | 14.02% | 6.50% | | Leverage Ratio | 11.09% | 5.00% | - Shareholders' equity increased by **$88.3 million (4%)** since year-end 2024 to **$2.3 billion**[198](index=198&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages interest rate risk and is positioned to be asset-sensitive in a falling rate environment Projected Change in Net Interest Income (Next 12 Months) | Change in Interest Rates | % Change in Projected NII | | :--- | :--- | | +3.00% | (11.0)% | | +1.00% | (2.5)% | | -1.00% | 2.0% | | -3.00% | 7.5% | Projected Change in Economic Value of Equity (EVE) | Change in Interest Rates | % Change in EVE | | :--- | :--- | | +3.00% | (25.0)% | | +1.00% | (7.5)% | | -1.00% | 7.0% | | -3.00% | 12.2% | [Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures are effective with no material changes during the quarter - The Company's management concluded that **disclosure controls and procedures were effective** as of the end of the period covered by this report[221](index=221&type=chunk) - **No material changes** in internal control over financial reporting occurred during the quarter[222](index=222&type=chunk) Part II: Other Information [Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) Current legal proceedings are not expected to have a materially adverse effect on the company's financials - Management believes that none of the legal proceedings are likely to have a **materially adverse effect** on its consolidated financial position or results[223](index=223&type=chunk) [Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors disclosed in the company's 2024 Annual Report - There have been **no material changes** with respect to the risk factors disclosed in the Company's Annual Report on Form 10-K for 2024[224](index=224&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase shares under its authorized program during the quarter - The Board of Directors authorized a share repurchase program of up to **$100 million**, expiring December 31, 2025[225](index=225&type=chunk) - **No shares were repurchased** under the authorized program during the three months ended June 30, 2025[226](index=226&type=chunk) [Other Items (3, 4, 5, 6)](index=56&type=section&id=Other%20Items) This section confirms no defaults, mine safety issues, or new insider trading arrangements during the quarter - The report confirms **no defaults on senior securities**, no mine safety disclosures, and no new Rule 10b5-1 trading arrangements by directors or officers[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk)

[Front Matter](index=1&type=section&id=Front%20Matter) - Company Name: **ON24, INC.**[2](index=2&type=chunk) - Report Type: **10-Q Quarterly Report**[1](index=1&type=chunk)[2](index=2&type=chunk) - Report Quarter End Date: **June 30, 2025**[2](index=2&type=chunk) - Stock Ticker: **ONTF (New York Stock Exchange)**[4](index=4&type=chunk) - As of July 31, 2025, the number of common shares outstanding was **42,306,290**[5](index=5&type=chunk) [SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=3&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This report contains forward-looking statements based on management's beliefs and current information, primarily found in the "Risk Factors" and "Management's Discussion and Analysis" sections, which involve known and unknown risks and uncertainties that could cause actual results to differ materially from expectations, with no obligation to update these statements except as required by law - Forward-looking statements address the company's ability to grow revenue, performance fluctuations, attract new customers, market competition, macroeconomic conditions, cybersecurity risks, and intellectual property[13](index=13&type=chunk) - The report warns investors not to place undue reliance on these forward-looking statements, as actual future results may differ materially from expectations[11](index=11&type=chunk) [PART I FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section provides ON24's unaudited condensed consolidated financial statements as of June 30, 2025, including balance sheets, statements of operations, comprehensive loss, changes in stockholders' equity, and cash flows, along with related notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, the company's total assets were $235.1 million, a decrease from $250.95 million at the end of 2024, with total liabilities decreasing from $91.54 million to $85.10 million, and stockholders' equity decreasing from $159.41 million to $150.02 million, while cash and cash equivalents significantly increased to $37.73 million Balance Sheet Key Data (in thousands of dollars) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $37,732 | $14,933 | | Total current assets | $214,868 | $228,330 | | **Total assets** | **$235,116** | **$250,953** | | **Liabilities and Stockholders' Equity** | | | | Total current liabilities | $82,128 | $88,199 | | **Total liabilities** | **$85,099** | **$91,541** | | **Total stockholders' equity** | **$150,017** | **$159,412** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company's total revenue for Q2 and H1 2025 was $35.33 million and $70.07 million, respectively, both lower than the prior year's $37.35 million and $75.08 million, while net loss narrowed to $7.28 million in Q2 (vs. $11.18 million prior year) and $15.98 million in H1 (vs. $21.88 million prior year) Operating Performance Comparison (in thousands of dollars, except per share amounts) | Metric | 2025 Q2 | 2024 Q2 | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $35,333 | $37,349 | $70,066 | $75,076 | | Gross profit | $26,532 | $27,811 | $52,162 | $55,756 | | Operating loss | $(9,172) | $(13,059) | $(19,638) | $(25,533) | | **Net loss** | **$(7,277)** | **$(11,175)** | **$(15,980)** | **$(21,878)** | | Net loss per share (basic and diluted) | $(0.17) | $(0.27) | $(0.38) | $(0.53) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) In the first half of 2025, net cash provided by operating activities improved to $5.98 million from $3.53 million in the prior year, investing activities provided $24.73 million primarily due to reduced purchases and maturities of marketable securities, and financing activities used $8.10 million, mainly for stock repurchases Cash Flow Summary (for the six months ended June 30, in thousands of dollars) | Item | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $5,979 | $3,526 | | Net cash from investing activities | $24,733 | $(31,941) | | Net cash from financing activities | $(8,099) | $(9,114) | | Net increase (decrease) in cash and equivalents | $22,806 | $(37,726) | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) The notes detail the company's accounting policies, revenue recognition, contract balances, equity compensation, legal proceedings, and restructuring activities, highlighting total remaining performance obligations of **$131.2 million** as of June 30, 2025, a **$50 million** stock repurchase program approved by the board, and workforce reductions for cost structure optimization - As of June 30, 2025, the company's total remaining performance obligations (RPO) amounted to **$131.2 million**, with **72%** expected to be recognized as revenue within the next 12 months[40](index=40&type=chunk) - In May 2025, the Board of Directors approved a **$50 million** stock repurchase program, with **$45.7 million** remaining available for future repurchases as of June 30, 2025[67](index=67&type=chunk)[69](index=69&type=chunk) - In the first half of 2025, the company continued workforce reductions to lower its cost structure, incurring **$1.506 million** in restructuring costs, primarily for severance and one-time termination benefits[87](index=87&type=chunk) - The company faces a securities class action lawsuit regarding its IPO, which was dismissed by the trial court but appealed by the plaintiffs, with the company believing the allegations lack merit but unable to reasonably estimate potential losses[62](index=62&type=chunk) [Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's business overview, performance drivers, key business metrics, and operating results, noting a **7%** year-over-year revenue decline to **$70.07 million** in the first half of 2025 but a narrowed net loss, with key metrics showing declining customer count and Annual Recurring Revenue (ARR), as the company addresses challenges through cost management, product innovation (e.g., AI-driven ACE and ON24 IQ), and prudent expense control [Overview and Key Factors](index=25&type=section&id=Overview%20and%20Key%20Factors) The company provides a cloud-based intelligent engagement platform for sales and marketing, with recent performance influenced by cost management, new customer acquisition, existing customer retention and expansion, platform innovation (especially AI capabilities), and international expansion, having launched new products like ON24 Lumina and ON24 IQ to enhance competitiveness - The company focuses on reducing net loss through cost management and continued workforce reductions in the first half of 2025[108](index=108&type=chunk) - The company plans to drive growth through continuous product innovation, including the launch of AI-driven ACE, the Lumina design system, and ON24 IQ intelligent agents[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk)[112](index=112&type=chunk) - As of June 30, 2025, the company had **1,566** customers[106](index=106&type=chunk) [Key Business Metrics](index=28&type=section&id=Key%20Business%20Metrics) As of June 30, 2025, the company's total customer count was **1,566** and Annual Recurring Revenue (ARR) was **$127.1 million**, both declining from prior periods, with the customer count decrease primarily due to a net reduction in small and medium-sized business (SMB) customers, and ARR decline attributed to customer churn and reduced new customer acquisition Key Business Metrics Trends (amounts in thousands of dollars) | Metric | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Customer count | 1,566 | 1,645 | 1,682 | | Annual Recurring Revenue (ARR) | $127,135 | $129,659 | $133,702 | | Core Platform ARR | $125,084 | $127,341 | $131,032 | | Customers contributing over $100K ARR | 304 | 305 | 319 | - The decline in customer count is primarily due to a net reduction in SMB customers, reflecting marketing budget pressures in some organizations[115](index=115&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Total revenue for the first half of 2025 decreased **7%** year-over-year to **$70.07 million**, mainly due to reduced subscription and platform revenue, while gross margin remained stable at **74%**, and all operating expenses (sales & marketing, R&D, G&A) decreased year-over-year due to lower personnel-related costs and stock-based compensation, leading to a narrowed operating and net loss - Total revenue decreased **7%** in the first half of 2025, primarily due to a reduction in subscription revenue driven by fewer customers and lower ARR[123](index=123&type=chunk)[124](index=124&type=chunk) - Sales and marketing expenses decreased **10%** year-over-year in the first half of 2025, mainly due to reduced personnel-related costs from restructuring activities[130](index=130&type=chunk) - Research and development expenses decreased **8%** year-over-year in the first half of 2025, primarily due to lower stock-based compensation expense[132](index=132&type=chunk) - General and administrative expenses decreased **18%** year-over-year in the first half of 2025, primarily due to a **$3.6 million** reduction in stock-based compensation expense[136](index=136&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company held **$179.6 million** in cash, cash equivalents, and marketable securities, deeming its existing liquidity sufficient to meet needs for at least the next 12 months, having initiated a **$50 million** stock repurchase program in May 2025, and generating **$6 million** in net cash flow from operating activities in the first half, an improvement from the prior year - As of June 30, 2025, the company held **$179.6 million** in cash, cash equivalents, and marketable securities[141](index=141&type=chunk) - In the first half of 2025, the company spent **$8.8 million** on stock repurchases, with **$43.2 million** remaining available under the new **$50 million** repurchase program as of August 8, 2025[142](index=142&type=chunk) - The company's revolving credit facility with Comerica Bank was amended in August 2024, reducing the limit from **$50 million** to **$25 million**, and remained unused as of the reporting period end[154](index=154&type=chunk) [Item 3 Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's market risks primarily stem from foreign currency exchange rates and interest rate fluctuations, with limited foreign exchange exposure due to most revenue being USD-denominated, and interest rate risk mainly impacting its investment portfolio, which is managed by investing in high-quality, highly liquid securities, with a sensitivity analysis provided for interest rate changes on marketable securities' fair value - The company's market risks have not significantly changed since the 2024 annual report, primarily consisting of foreign exchange and interest rate risks[159](index=159&type=chunk) Interest Rate Risk Sensitivity Analysis (as of June 30, 2025, in thousands of dollars) | Parallel Shift in Interest Rates | Assumed Fair Value | | :--- | :--- | | -150 BPS | $143,213 | | -100 BPS | $142,751 | | -50 BPS | $142,290 | | **Current Fair Value** | **$141,828** | | +50 BPS | $141,366 | | +100 BPS | $140,905 | | +150 BPS | $140,443 | [Item 4 Controls and Procedures](index=40&type=section&id=Item%204%20Controls%20and%20Procedures) Management, including the Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of disclosure controls and procedures as of June 30, 2025, concluding they were effective at a reasonable assurance level, with no significant changes in internal control over financial reporting during the quarter - The company's CEO and CFO concluded that the disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[164](index=164&type=chunk) - There were no material changes to the company's internal control over financial reporting during the three months ended June 30, 2025[165](index=165&type=chunk) [PART II OTHER INFORMATION](index=40&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company, its officers, and IPO underwriters are defendants in a securities class action lawsuit concerning its IPO, alleging material misstatements or omissions in the registration statement and prospectus, which was dismissed by the district court in March 2024 but appealed by the plaintiffs, with the company believing the allegations are without merit - The company is facing a securities class action lawsuit regarding its IPO, alleging material misstatements in its prospectus[166](index=166&type=chunk) - Although the trial court dismissed the lawsuit in March 2024, the plaintiffs have appealed, and the litigation remains ongoing[166](index=166&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks associated with investing in the company's common stock, including business and industry risks (e.g., revenue decline, intense competition, macroeconomic impacts, technological changes, cybersecurity threats), legal and compliance risks (e.g., privacy laws, export controls, intellectual property disputes), and risks related to stock ownership (e.g., price volatility, equity concentration, anti-takeover provisions) [Risks Related to Our Business and Our Industry](index=41&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Our%20Industry) The company faces multiple business and industry risks, including recent revenue declines and uncertain future growth, intense market competition, adverse macroeconomic conditions potentially reducing customer marketing spend, reliance on and risks associated with new technologies like AI, and threats from cybersecurity attacks and data breaches, in addition to dependence on third-party infrastructure where service interruptions or performance issues could harm the business - The company's revenue has declined in recent years, and future growth is uncertain due to factors like reduced customer budgets and increased market competition[171](index=171&type=chunk) - Market competition is intense, with competitors including Zoom, Microsoft, and Cisco, who may offer lower-priced or broader products[179](index=179&type=chunk) - Cybersecurity attacks and data breaches pose significant risks, potentially leading to regulatory actions, litigation, and reputational damage, as exemplified by a ransomware incident in June 2021[192](index=192&type=chunk) - The company's increasing use of artificial intelligence (AI) in its platform introduces new risks such as data errors, infringement, and algorithmic flaws[188](index=188&type=chunk) [Risks Related to Legal, Regulatory, and Intellectual Property](index=54&type=section&id=Risks%20Related%20to%20Legal%2C%20Regulatory%2C%20and%20Intellectual%20Property) The company faces risks from a complex global legal and regulatory environment, including challenges in complying with evolving privacy laws (e.g., GDPR and CCPA) that may restrict data processing and marketing activities, adherence to US and other countries' export controls and sanctions laws, and significant risks from intellectual property infringement claims and difficulties in protecting its own intellectual property - The company's operations are subject to strict and evolving global data privacy laws, such as GDPR and CCPA, with non-compliance potentially leading to substantial fines and business restrictions[233](index=233&type=chunk)[239](index=239&type=chunk) - As an international company, its business is restricted by US and other countries' export controls, economic sanctions, and anti-corruption laws like the FCPA, with violations leading to severe consequences[246](index=246&type=chunk)[257](index=257&type=chunk) - The company may face intellectual property infringement lawsuits from third parties or encounter difficulties in protecting its own patents, trademarks, and trade secrets, which could harm its brand and competitiveness[264](index=264&type=chunk)[268](index=268&type=chunk) [Risks Related to Ownership of Our Common Stock](index=65&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Common%20Stock) Investing in the company's common stock carries multiple risks, including that stock repurchase programs may not enhance long-term shareholder value and consume cash, share price can fluctuate significantly due to market factors, performance changes, and analyst ratings, high equity concentration may limit retail shareholder influence, and anti-takeover provisions in the company's charter may deter potential changes in control - Stock repurchase programs, such as the **$50 million** plan approved in May 2025, consume cash reserves and may increase stock price volatility, not necessarily enhancing long-term shareholder value[286](index=286&type=chunk) - As of February 28, 2025, the company's executive officers, directors, and 5% or greater shareholders collectively controlled approximately **55%** of the shares, indicating high equity concentration[290](index=290&type=chunk) - The company's certificate of incorporation and Delaware law (e.g., Section 203) contain anti-takeover provisions that could delay or prevent third-party acquisitions, limiting shareholders' opportunities to receive a premium[292](index=292&type=chunk)[295](index=295&type=chunk) - The company reached an agreement with activist investor Indaba Capital Management L.P. to avoid a proxy contest at the 2026 annual meeting of stockholders[304](index=304&type=chunk) [Item 2 Unregistered Sales of Equity Securities and Use of Proceeds](index=71&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides details on the company's stock repurchase activities during the second quarter of 2025, disclosing the number of common shares repurchased, the average price per share, and the maximum amount remaining available for future repurchases under publicly announced plans Q2 2025 Stock Repurchase Summary | Period | Total Shares Repurchased | Average Price Per Share | Remaining Amount Under Plan | | :--- | :--- | :--- | :--- | | May 2025 | 387,261 | $5.45 | $47.9 million | | June 2025 | 406,685 | $5.50 | $45.7 million | | **Total** | **793,946** | **$5.48** | **$45.7 million** | - Repurchase activities were conducted under the **$50 million** 2025 repurchase program authorized by the Board of Directors in May 2025[313](index=313&type=chunk) [Item 5. Other Information](index=72&type=section&id=Item%205.%20Other%20Information) This section discloses that the company's Chief Executive Officer, Sharat Sharan, adopted a Rule 10b5-1 trading plan on May 14, 2025, which provides for the sale of a portion of net shares acquired upon option exercise and RSU/PSU vesting, subject to certain limitations, through February 28, 2026 - Company CEO Sharat Sharan adopted a Rule 10b5-1 trading plan on May 14, 2025, for the sale of shares acquired through equity awards[316](index=316&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents unaudited condensed consolidated financial statements, notes, and management's discussion and analysis [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20consolidated%20balance%20sheets%20%E2%80%94%20June%2030%2C%202025%20and%20December%2031%2C%202024) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | | Total assets | $218,873 | $221,725 | -$2,852 | | Total liabilities | $55,193 | $55,803 | -$610 | | Total shareholders' equity | $163,680 | $165,922 | -$2,242 | | Cash and cash equivalents | $15,791 | $18,860 | -$3,069 | | Short-term investments | $9,116 | $8,927 | +$189 | | Accounts receivable, net | $15,120 | $15,941 | -$821 | | Net property and equipment | $51,219 | $51,907 | -$688 | | Broadcast licenses | $91,478 | $91,497 | -$19 | | Long-term debt | $5,000 | $5,000 | $0 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20consolidated%20statements%20of%20operations%20%E2%80%94%20Three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024) This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net income or loss Condensed Consolidated Statements of Operations (in thousands) | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Net operating revenue | $28,229 | $29,716 | -$1,487 (-5.0%) | $52,441 | $55,010 | -$2,569 (-4.7%) | | Station operating expenses | $22,226 | $23,305 | -$1,079 (-4.6%) | $44,189 | $45,764 | -$1,575 (-3.4%) | | Operating income (loss) | $1,409 | $2,143 | -$734 (-34.3%) | $(889) | $(274) | -$615 (224.5%) | | Net income (loss) | $1,128 | $2,501 | -$1,373 (-54.9%) | $(447) | $924 | -$1,371 (-148.4%) | | Basic EPS | $0.18 | $0.40 | -$0.22 (-55.0%) | $(0.07) | $0.15 | -$0.22 (-146.7%) | | Diluted EPS | $0.18 | $0.40 | -$0.22 (-55.0%) | $(0.07) | $0.15 | -$0.22 (-146.7%) | | Dividends declared per share | $0.25 | $0.25 | $0.00 | $0.50 | $1.10 | -$0.60 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20consolidated%20statements%20of%20stockholders'%20equity%20%E2%80%93%20Three%20and%20six%20months%20ended%20June%2030%2C%202025%20and%202024) This section details changes in the company's equity accounts, including retained earnings, paid-in capital, and treasury stock Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | December 31, 2024 | June 30, 2025 | Change (in thousands) | | :-------------------- | :---------------- | :------------ | :-------------------- | | Total Shareholders' Equity | $165,922 | $163,680 | -$2,242 | | Retained Earnings | $128,216 | $124,554 | -$3,662 | | Additional Paid-In Capital | $74,334 | $74,747 | +$413 | | Treasury Stock | $(36,710) | $(35,703) | +$1,007 | - Net loss for the six months ended June 30, 2025, was **$(447) thousand**[14](index=14&type=chunk) - Dividends declared per common share for the six months ended June 30, 2025, totaled **$(3,215) thousand**[14](index=14&type=chunk) - Compensation expense related to restricted stock awards for the six months ended June 30, 2025, was **$1,130 thousand**[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20consolidated%20statements%20of%20cash%20flows%20%E2%80%94%20Six%20months%20ended%20June%2030%2C%202025%20and%202024) This section reports the cash generated and used by the company across operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) (in thousands) | | :------------------------------------ | :--------------------------- | :--------------------------- | :-------------------------- | | Net cash provided by operating activities | $2,119 | $5,047 | -$2,928 | | Net cash used in investing activities | $(1,973) | $(4,846) | +$2,873 | | Net cash used in financing activities | $(3,215) | $(14,391) | +$11,176 | | Net decrease in cash and cash equivalents | $(3,069) | $(14,190) | +$11,121 | | Cash and cash equivalents, end of period | $15,791 | $15,392 | +$399 | - Acquisition of broadcast properties was **$0** in 2025, compared to **$(5,705) thousand** in 2024[16](index=16&type=chunk) - Cash dividends paid were **$(3,215) thousand** in 2025, compared to **$(19,391) thousand** in 2024[16](index=16&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20unaudited%20condensed%20consolidated%20financial%20statements) This section provides detailed explanations and additional information supporting the unaudited condensed consolidated financial statements [1. Summary of Significant Accounting Policies](index=9&type=section&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the key accounting principles and methods used in preparing the financial statements - The company owns or operates broadcast properties in **28 markets**, including **82 FM** and **31 AM** radio stations and **79 metro signals**[20](index=20&type=chunk) - Earnings per share are calculated using the two-class method, allocating earnings to common shares and participating securities (restricted stock units)[22](index=22&type=chunk) - Held-to-maturity U.S. Treasury Bills were **$9.1 million** at June 30, 2025, and **$8.9 million** at December 31, 2024, recorded at amortized cost[26](index=26&type=chunk) - Allowance for credit losses increased slightly to **$1,099,000** at June 30, 2025, from **$1,071,000** at December 31, 2024[29](index=29&type=chunk) - The company operates as **one reportable business segment**: Radio[31](index=31&type=chunk) [2. Recent Accounting Pronouncements](index=13&type=section&id=2.%20Recent%20Accounting%20Pronouncements) This section details recently issued accounting standards and their potential impact on the company's financial reporting - ASU 2023-09 (Income Taxes): Effective for annual periods beginning after January 1, 2025, requiring expanded disclosure of income rate reconciliation and income taxes paid[38](index=38&type=chunk) - ASU 2024-03 (Expense Disaggregation Disclosures): Effective for annual periods beginning January 1, 2027, and interim periods beginning after January 1, 2028, requiring disclosures about specific types of expenses[39](index=39&type=chunk) - ASU 2025-05 (Credit Losses for Accounts Receivable and Contract Assets): Effective for annual periods beginning January 1, 2026, and interim periods within that year, simplifying credit loss estimation[40](index=40&type=chunk) [3. Revenue](index=13&type=section&id=3.%20Revenue) This section disaggregates revenue by type and explains the company's revenue recognition policies and contract liabilities Revenue (in thousands) | Type of Revenue | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change (YoY) | | :------------------------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Broadcast Advertising, net | $21,626 | $23,167 | -$1,541 | $40,480 | $43,649 | -$3,169 | | Digital Advertising | $4,558 | $4,254 | +$304 | $8,053 | $7,333 | +$720 | | Other Revenue | $2,045 | $2,295 | -$250 | $3,908 | $4,028 | -$120 | | **Net Revenue** | **$28,229** | **$29,716** | **-$1,487** | **$52,441** | **$55,010** | **-$2,569** | - Primary revenue source is from the sale of advertising for broadcast on stations, recognized upon airing[41](index=41&type=chunk) - Interactive advertising revenue from digital initiatives (targeted digital advertising, search engine management, online promotions, etc.) is recognized over time as performance obligations are met[42](index=42&type=chunk) - Contract liabilities, primarily prepayments for advertising, are generally recognized within one year and are immaterial[47](index=47&type=chunk) [4. Broadcast Licenses, Goodwill and Other Intangible Assets](index=15&type=section&id=4.%20Broadcast%20Licenses%2C%20Goodwill%20and%20Other%20Intangible%20Assets) This section describes the company's policies for valuing and testing impairment of broadcast licenses, goodwill, and other intangible assets - FCC licenses are evaluated for impairment annually or more frequently if circumstances indicate, using a discounted cash flow approach[49](index=49&type=chunk) - Goodwill is evaluated for impairment annually using an income approach based on discounted cash flow analysis[50](index=50&type=chunk) - No triggering events for interim impairment tests were identified during the six months ended June 30, 2025[54](index=54&type=chunk) - Amortizable intangible assets (favorable lease agreements, other intangibles, customer relationships) are amortized using the straight-line method over **1 to 26 years**[56](index=56&type=chunk) [5. Common Stock and Treasury Stock](index=17&type=section&id=5.%20Common%20Stock%20and%20Treasury%20Stock) This section details the company's common stock structure, dividend policies, and treasury stock activities, including buyback programs - All Class B Common Stock automatically converted to Class A Common Stock upon the founder's passing; no Class B shares are outstanding or will be issued[57](index=57&type=chunk) - Shareholders are entitled to receive equal dividends on all classes of Common Stock[58](index=58&type=chunk) - The company has a Stock Buy-Back Program with **$17.7 million** remaining authorization as of June 30, 2025[64](index=64&type=chunk) - No shares were repurchased under the Buy-Back Program during the three and six months ended June 30, 2025, or 2024[64](index=64&type=chunk) - The company intends to use proceeds from potential non-core asset sales to fund future stock buybacks[64](index=64&type=chunk) [6. Leases](index=19&type=section&id=6.%20Leases) This section provides information on the company's lease arrangements, including right-of-use assets, lease liabilities, and rental commitments - Right-of-use (ROU) assets were **$6.2 million** at June 30, 2025, down from **$6.9 million** at December 31, 2024[66](index=66&type=chunk) - Lease liabilities were **$6.5 million** at June 30, 2025, down from **$7.3 million** at December 31, 2024[66](index=66&type=chunk) - Total lease expense for the six months ended June 30, 2025, was **$887,000**, compared to **$950,000** in 2024[69](index=69&type=chunk) Minimum Annual Rental Commitments (in thousands) at June 30, 2025 | Years Ending December 31, | Amount (in thousands) | | :------------------------ | :-------------------- | | 2025 (remaining 6 months) | $915 | | 2026 | $1,795 | | 2027 | $1,613 | | 2028 | $1,212 | | 2029 | $784 | | Thereafter | $1,465 | | **Total lease payments** | **$7,784** | | Less: Interest | $1,262 | | **Present value of lease liabilities** | **$6,522** | - Weighted average remaining lease term and discount rate were **5.9 years** and **5.9%**, respectively, at June 30, 2025[74](index=74&type=chunk) [7. Acquisitions and Dispositions](index=21&type=section&id=7.%20Acquisitions%20and%20Dispositions) This section outlines the company's recent acquisitions and dispositions of broadcast properties and their financial impact - In 2025, the company canceled the FCC license for WVAX-AM, resulting in a **$19,000 loss**[73](index=73&type=chunk) - In 2024, the company acquired assets of six radio stations in Lafayette, Indiana, for **$5.3 million**, recognizing **$76,000** in goodwill[77](index=77&type=chunk) - In 2024, the company disposed of WNDN-FM for **$150,000** (loss of **$20,000**), WYSE-AM and translators for **$10,000** (loss of **$147,000**), and canceled the FCC license for KBAI-AM (loss of **$800,000**)[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) Pro Forma Results of Operations for Acquisitions (Unaudited) - Six Months Ended June 30, 2024 (in thousands, except per share data) | Metric | Actual 2024 (in thousands) | Pro Forma 2024 (in thousands) | | :-------------------- | :------------------------- | :---------------------------- | | Net operating revenue | $55,010 | $56,178 | | Net income (loss) | $924 | $846 | | Diluted EPS | $0.15 | $0.13 | [8. Income taxes](index=25&type=section&id=8.%20Income%20taxes) This section presents the company's income tax benefit/expense and effective tax rates for the reported periods Income Tax (Benefit) Expense (in thousands) | Period | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | | :--------------------------- | :------------------ | :------------------ | :-------------------- | | Three Months Ended June 30 | $385 | $955 | -$570 | | Six Months Ended June 30 | $(200) | $375 | -$575 | Effective Tax Rate | Period | 2025 | 2024 | | :--------------------------- | :----- | :----- | | Three Months Ended June 30 | 25.4% | 27.6% | | Six Months Ended June 30 | 30.9% | 28.9% | - A new tax law signed on July 4, 2025, extending several business tax provisions, is not anticipated to have a material impact on financial statements[89](index=89&type=chunk) [9. Stock-Based Compensation](index=26&type=section&id=9.%20Stock-Based%20Compensation) This section details the company's stock-based compensation plans, including restricted stock awards and related expenses - The 2023 Incentive Compensation Plan replaced the 2005 Plan, authorizing up to **600,000 shares** of Class A Common Stock for awards[92](index=92&type=chunk) - No stock options were granted or outstanding during 2025 or 2024[93](index=93&type=chunk) Restricted Stock Compensation Expense (in thousands) | Period | 2025 (in thousands) | 2024 (in thousands) | | :--------------------------- | :------------------ | :------------------ | | Three Months Ended June 30 | $603 | $520 | | Six Months Ended June 30 | $1,130 | $973 | - As of June 30, 2025, **277,243 non-vested restricted shares** were outstanding with a weighted average grant date fair value of **$15.63**[95](index=95&type=chunk) [10. Long-Term Debt](index=28&type=section&id=10.%20Long-Term%20Debt) This section describes the company's long-term debt arrangements, including its revolving credit facility and compliance with covenants - Long-term debt remained at **$5.0 million** at June 30, 2025, and December 31, 2024[96](index=96&type=chunk) - The revolving credit facility matures on **December 19, 2027**, with interest rates based on SOFR (**4.45%** at June 30, 2025) plus a spread[96](index=96&type=chunk)[100](index=100&type=chunk) - The company was in compliance with all financial covenants at June 30, 2025[101](index=101&type=chunk) - Approximately **$45 million** of unused borrowing capacity was available under the Credit Facility at June 30, 2025[101](index=101&type=chunk) [11. Litigation](index=29&type=section&id=11.%20Litigation) This section confirms that the company is not currently involved in any material legal proceedings - The company is not a party to any current legal proceedings that are material to its financial condition[102](index=102&type=chunk) [12. Dividends](index=29&type=section&id=12.%20Dividends) This section reports dividends declared on common stock and outlines the company's future dividend policy Dividends Declared on Class A Common Stock | Period | Per Share | Total (in millions) | | :--------------------------- | :-------- | :------------------ | | Six Months Ended June 30, 2025 | $0.50 | $3.2 | | Six Months Ended June 30, 2024 | $1.10 | $6.9 (plus $12.5 special dividend) | - The company intends to declare regular quarterly cash dividends and variable dividends, with future declarations subject to Board discretion based on financial results and cash requirements[105](index=105&type=chunk) [13. Other Income and Loss](index=30&type=section&id=13.%20Other%20Income%20and%20Loss) This section details significant non-operating income or loss items, such as gains from investment sales - A one-time gain of **$1,133,000** was recorded in Q2 2024 from the sale of an investment in Broadcast Music, Inc. (BMI), with no comparable gain in 2025[107](index=107&type=chunk) [14. Commitments and Contingencies](index=30&type=section&id=14.%20Commitments%20and%20Contingencies) This section outlines the company's future financial obligations and potential liabilities from various agreements - A **$480,000** payment was made on July 31, 2025, for the former CEO's estate's income tax obligation related to a life insurance policy payout[108](index=108&type=chunk) - A new Interim License Agreement with Broadcast Music, Inc. (BMI) for 2022-2026 is expected to be finalized in Q3 or Q4 2025, potentially incurring additional expenses[109](index=109&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance, condition, and liquidity, highlighting a decline in revenue and net income for the first half of 2025 [Cautionary Note Regarding Forward-Looking Statements](index=31&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section advises that the report contains forward-looking statements subject to risks and uncertainties that may cause actual results to differ materially - The report contains forward-looking statements identified by terms such as "will," "may," "believes," "intends," "expects," "anticipates," "plans," "projects," "estimates," and "guidance"[111](index=111&type=chunk) - Actual results may materially differ due to various risks and uncertainties, including adverse changes in interest rates, financial leverage, dependence on key personnel/stations, economic conditions, market volatility, competition, regulatory requirements, tax laws, technological advances, cyber-attacks, and geopolitical events[111](index=111&type=chunk) [Introduction](index=31&type=section&id=Introduction) This section provides context for the discussion, advising readers to review it with the accompanying financial statements and prior annual report - This discussion should be read in conjunction with the unaudited condensed consolidated financial statements and accompanying notes in this report, and the audited financial statements and Management's Discussion and Analysis in the annual report on Form 10-K for the year ended December 31, 2024[112](index=112&type=chunk) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section discusses key accounting policies and estimates, noting no significant changes since the prior annual report - No significant changes to critical accounting policies have occurred since the annual report on Form 10-K for the year ended December 31, 2024[113](index=113&type=chunk) - The company uses "station operating income" (a non-GAAP measure) to assess financial performance, market-level performance, and for incentive-based compensation[114](index=114&type=chunk)[115](index=115&type=chunk) [Financial Condition and Results of Operations](index=33&type=section&id=Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial health and performance, including revenue, expenses, and profitability trends [General](index=33&type=section&id=General) This section provides an overview of Saga Communications as a media company primarily engaged in broadcast property operations - Saga Communications is a media company primarily engaged in acquiring, developing, and operating broadcast properties, including digital, e-commerce, and non-traditional revenue initiatives[116](index=116&type=chunk) - The company owns or operates broadcast properties in **28 markets**, including **82 FM** and **31 AM** radio stations and **79 metro signals**[116](index=116&type=chunk) [Radio Stations](index=33&type=section&id=Radio%20Stations) This section details revenue sources, advertising trends, seasonality, and digital strategy for the company's radio station operations - The primary source of revenue for radio stations is from the sale of advertising, with most contracts being short-term[117](index=117&type=chunk)[118](index=118&type=chunk) - Approximately **90%** of gross radio station revenue for the six months ended June 30, 2025, was from local advertising[118](index=118&type=chunk) - Revenue varies seasonally, with the first quarter typically being the lowest, and political revenue is expected to decrease in 2025 due to fewer elections[119](index=119&type=chunk) - Interactive advertising revenue increased by **$720,000 (9.9%)** to **$8,053,000** for the six months ended June 30, 2025, compared to **$7,333,000** in 2024[127](index=127&type=chunk) - The company's "Blended Advertising" digital strategy focuses on providing simple digital advertising solutions (SEM, SEO, Targeted Display) in conjunction with radio[127](index=127&type=chunk) - The five largest markets (Charleston, Columbus, Des Moines, Milwaukee, Norfolk) represented approximately **35%** of consolidated net operating revenue and **38%** of consolidated station operating income for the six months ended June 30, 2025[129](index=129&type=chunk)[130](index=130&type=chunk) [Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=36&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) This section compares the company's financial performance for the three-month periods, highlighting revenue and expense changes Financial Performance (3 Months Ended June 30, 2025 vs. 2024) (in thousands) | Metric (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------- | :----- | :----- | :--------- | :--------- | | Net operating revenue | $28,229 | $29,716 | $(1,487) | (5.0)% | | Station operating expenses | $22,226 | $23,305 | $(1,079) | (4.6)% | | Operating income | $1,409 | $2,143 | $(734) | (34.3)% | | Net income | $1,128 | $2,501 | $(1,373) | (54.9)% | | Diluted EPS | $0.18 | $0.40 | $(0.22) | (55.0)% | - Same-station revenue decreased by **$1,883,000**, primarily due to decreases in gross local revenue (**$1,634,000**), political revenue (**$237,000**), and national revenue (**$182,000**)[133](index=133&type=chunk) - Gross interactive revenue increased by **$265,000**[133](index=133&type=chunk) - Same-station operating expense decreased by **$1,469,000**, mainly from lower compensation-related expenses (**$675,000**) and digital services expenses (**$283,000**)[134](index=134&type=chunk) - Net income decrease was also impacted by a **$1,132,000** decrease in other income due to a one-time gain from BMI investment sale in 2024[136](index=136&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=38&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) This section compares the company's financial performance for the six-month periods, detailing revenue, expense, and net income changes Financial Performance (6 Months Ended June 30, 2025 vs. 2024) (in thousands) | Metric (in thousands) | 2025 | 2024 | Change ($) | Change (%) | | :-------------------- | :----- | :----- | :--------- | :--------- | | Net operating revenue | $52,441 | $55,010 | $(2,569) | (4.7)% | | Station operating expenses | $44,189 | $45,764 | $(1,575) | (3.4)% | | Operating income (loss) | $(889) | $(274) | $(615) | 224.5% | | Net income (loss) | $(447) | $924 | $(1,371) | (148.4)% | | Diluted EPS | $(0.07) | $0.15 | $(0.22) | (146.7)% | - Same-station revenue decreased by **$3,548,000**, primarily from gross local revenue (**$3,443,000**), national revenue (**$613,000**), and political revenue (**$277,000**)[139](index=139&type=chunk) - Gross interactive revenue increased by **$609,000**[139](index=139&type=chunk) - Same-station operating expense decreased by **$2,582,000**, mainly due to lower compensation-related expenses (**$1,308,000**) and digital services expenses (**$426,000**)[140](index=140&type=chunk) - The net loss was significantly impacted by the absence of the **$1,133,000** gain from the BMI investment sale in 2024[142](index=142&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its short-term and long-term financial obligations and fund operations [Debt Arrangements and Debt Service Requirements](index=42&type=section&id=Debt%20Arrangements%20and%20Debt%20Service%20Requirements) This section details the company's debt structure, including its credit facility, interest rates, and covenant compliance - The Credit Facility, maturing **December 19, 2027**, has **$5.0 million** debt outstanding at June 30, 2025, and December 31, 2024[143](index=143&type=chunk)[147](index=147&type=chunk) - Interest rates are based on SOFR (**4.45%** at June 30, 2025) plus a spread, or the base rate plus a spread[146](index=146&type=chunk) - The company was in compliance with all financial covenants at June 30, 2025[147](index=147&type=chunk) - Approximately **$45 million** of unused borrowing capacity was available under the Credit Facility at June 30, 2025[148](index=148&type=chunk) [Sources and Uses of Cash](index=42&type=section&id=Sources%20and%20Uses%20of%20Cash) This section analyzes the company's cash flows from operating, investing, and financing activities, including capital expenditures and dividends - Net cash provided by operating activities was **$2,119,000** for the six months ended June 30, 2025, down from **$5,047,000** in 2024[149](index=149&type=chunk) - Capital expenditures (exclusive of acquisitions) were **$2,010,000** for H1 2025, with an anticipated **$3.0 million to $3.5 million** for the full year 2025[152](index=152&type=chunk) - Cash dividends paid totaled **$3.2 million** for H1 2025, significantly lower than **$19.4 million** for H1 2024 (which included a **$12.5 million** special dividend)[154](index=154&type=chunk)[155](index=155&type=chunk) - The company intends to use a portion of proceeds from potential non-core asset sales to fund stock buybacks under its Buy-Back Program[151](index=151&type=chunk) [Summary Disclosures About Contractual Obligations and Commercial Commitments](index=44&type=section&id=Summary%20Disclosures%20About%20Contractual%20Obligations%20and%20Commercial%20Commitments) This section outlines the company's future cash obligations from debt, leases, and other agreements, and their anticipated funding - Future cash obligations include those under the Credit Facility, operating leases, programming contracts, and employment agreements[157](index=157&type=chunk) - These obligations are anticipated to be financed through funds generated from operations or additional borrowings under the Credit Facility[158](index=158&type=chunk) [Recent Accounting Pronouncements](index=44&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to detailed information on recent accounting pronouncements provided in the financial statement notes - Refer to Note 2 of the accompanying financial statements for details on recent accounting pronouncements[159](index=159&type=chunk) [Inflation](index=44&type=section&id=Inflation) This section discusses the impact of inflation on the company's operations, noting rising costs and potential future adverse effects - The impact of inflation on operations has not been significant to date, but the company is observing rising costs for most goods and services[160](index=160&type=chunk) - A high rate of inflation in the future could have an adverse effect on operations[160](index=160&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) There have been no material changes to the market risk information previously disclosed in the company's 2024 annual report on Form 10-K - No material changes to the market risk information previously disclosed in the 2024 annual report on Form 10-K[161](index=161&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025, with a previously identified material weakness remediated - Disclosure controls and procedures were effective as of June 30, 2025[162](index=162&type=chunk) - A material weakness in internal control over financial reporting related to broadcast and digital revenue reconciliations, identified in the 2024 Form 10-K, has been fully remediated by June 30, 2025[163](index=163&type=chunk)[165](index=165&type=chunk) - Remediation included enhancements to system access controls, new reconciliation procedures, and increased management monitoring[164](index=164&type=chunk) [PART II OTHER INFORMATION](index=45&type=section&id=PART%20II%20OTHER%20INFORMATION) This section provides additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and corporate governance updates [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings that are considered material to its financial condition - The company is not a party to any current legal proceedings that are material to its financial condition, either individually or in the aggregate[168](index=168&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's 2024 annual report on Form 10-K - No material changes to the risk factors previously disclosed in the annual report on Form 10-K for the year ended December 31, 2024[169](index=169&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company made no unregistered sales of equity securities during the quarter ended June 30, 2025, and no shares were repurchased under its Stock Buy-Back Program - No unregistered sales of equity securities were made during the quarter ended June 30, 2025[170](index=170&type=chunk) - No shares were repurchased under the Stock Buy-Back Program during the three months ended June 30, 2025[171](index=171&type=chunk) - Remaining authorization for future repurchases under the Buy-Back Program is **$17,686,383**[171](index=171&type=chunk) [Item 5. Other Information](index=46&type=section&id=Item%205.%20Other%20Information) On June 20, 2025, the company adopted amended and restated bylaws, significantly changing procedures for shareholder nominations of directors and proposals - On June 20, 2025, the company filed a Current Report on Form 8-K announcing the adoption of amended and restated bylaws[172](index=172&type=chunk) - The Amended and Restated Bylaws enhance procedural mechanics and disclosure requirements for shareholder nominations of directors and submissions of other business proposals[172](index=172&type=chunk) - Shareholder proposals and nominations for the 2026 Annual Meeting must be submitted by **February 1, 2026**, or within specific adjusted timelines if the meeting date changes[174](index=174&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO, XBRL documents, and references to previously filed documents such as the Articles of Incorporation and Amended and Restated Bylaws - Exhibits include certifications (31.1, 31.2, 32), Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE), and references to Articles of Incorporation and Amended and Restated Bylaws[176](index=176&type=chunk) [SIGNATURES](index=50&type=section&id=SIGNATURES) This section confirms the official signing of the report by the company's Executive Vice President, CFO, and Chief Accounting Officer [SIGNATURES](index=50&type=section&id=SIGNATURES) The report was duly signed on August 8, 2025, by Samuel D. Bush, Executive Vice President and Chief Financial Officer, and Catherine A. Bobinski, Senior Vice President, Chief Accounting Officer and Corporate Controller - The report was signed on **August 8, 2025**, by Samuel D. Bush (Executive Vice President and Chief Financial Officer) and Catherine A. Bobinski (Senior Vice President, Chief Accounting Officer and Corporate Controller)[180](index=180&type=chunk)

[FORM 10-Q Cover Page](index=1&type=section&id=FORM%2010-Q%20Cover%20Page) [Registrant Information](index=1&type=section&id=Registrant%20Information) Live Ventures Incorporated is a Nevada corporation, with its principal executive offices in Las Vegas, Nevada - Registrant: **Live Ventures Incorporated**, Nevada corporation[1](index=1&type=chunk)[2](index=2&type=chunk) [Securities and Filing Status](index=1&type=section&id=Securities%20and%20Filing%20Status) The company's common stock trades on the Nasdaq Capital Market under the symbol "LIVE", and it is classified as a non-accelerated filer and a smaller reporting company Securities and Filing Status | Indicator | Status | | :--- | :--- | | Trading Symbol | LIVE | | Exchange | The Nasdaq Stock Market LLC (The Nasdaq Capital Market) | | Filer Status | Non-accelerated filer, Smaller reporting company | | Common Stock Outstanding (Aug 1, 2025) | 3,071,656 shares | [INDEX TO FORM 10-Q FILING](index=3&type=section&id=INDEX%20TO%20FORM%2010-Q%20FILING) [Table of Contents](index=3&type=section&id=Table%20of%20Contents) This section provides the table of contents for the Form 10-Q filing, detailing the structure of the financial information (Part I) and other information (Part II) for the three and nine months ended June 30, 2025 - The report includes financial statements, management's discussion and analysis, market risk disclosures, controls and procedures, legal proceedings, risk factors, equity sales, debt defaults, mine safety, other information, and exhibits[5](index=5&type=chunk)[6](index=6&type=chunk) [PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements of Live Ventures Incorporated, including the balance sheets, income statements, cash flow statements, and statements of changes in stockholders' equity, along with comprehensive notes for the periods ended June 30, 2025 and 2024 - Financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information, including normal recurring adjustments[8](index=8&type=chunk)[18](index=18&type=chunk) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The company's total assets decreased by approximately **$20.1 million** from September 30, 2024, to June 30, 2025, primarily due to reductions in trade receivables, inventories, and property and equipment, while total liabilities also decreased significantly, leading to an increase in total stockholders' equity Condensed Consolidated Balance Sheets (Selected Data, in thousands) | Metric | June 30, 2025 (Unaudited) | September 30, 2024 | Change (vs. Sep 30, 2024) | | :--- | :--- | :--- | :--- | | Total Assets | $387,464 | $407,547 | $(20,083) | | Total Liabilities | $293,207 | $334,658 | $(41,451) | | Total Stockholders' Equity | $94,257 | $72,889 | $21,368 | | Cash | $7,625 | $4,601 | $3,024 | | Trade receivables, net | $39,038 | $46,861 | $(7,823) | | Inventories, net | $120,456 | $126,350 | $(5,894) | | Total current liabilities | $103,256 | $129,659 | $(26,403) | [Condensed Consolidated Statements of Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(Loss)) For the three months ended June 30, 2025, the company reported a net income of **$5.4 million**, a significant improvement from a net loss of **$2.9 million** in the prior-year period, despite a decrease in revenue, driven by improved gross profit margin and reduced operating expenses; for the nine months, net income was **$21.7 million**, reversing a **$6.8 million** loss YoY, also due to improved margins and other income Condensed Consolidated Statements of Income (Loss) (Selected Data, in thousands, except per-share amounts) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 9 Months Ended Jun 30, 2025 | 9 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $112,530 | $123,878 | $331,051 | $360,097 | | Gross profit | $38,287 | $37,045 | $108,797 | $108,839 | | Operating income | $8,003 | $1,131 | $10,857 | $3,834 | | Net income (loss) | $5,388 | $(2,855) | $21,746 | $(6,818) | | Basic EPS | $1.75 | $(0.91) | $7.01 | $(2.16) | | Diluted EPS | $1.24 | $(0.91) | $4.97 | $(2.16) | - Significant other income for the nine months ended June 30, 2025, included a **$22.8 million** gain on modification of seller note and a **$2.8 million** gain on settlement of earnout liability[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended June 30, 2025, net cash provided by operating activities increased significantly to **$21.9 million** from **$13.9 million** YoY, driven by higher net income and improved working capital management, while cash used in investing activities decreased, and cash used in financing activities increased due to net debt payments Condensed Consolidated Statements of Cash Flows (Selected Data, in thousands) | Cash Flow Activity | 9 Months Ended Jun 30, 2025 | 9 Months Ended Jun 30, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $21,908 | $13,877 | $8,031 | | Net cash used in investing activities | $(5,753) | $(18,002) | $12,249 | | Net cash (used in) provided by financing activities | $(13,131) | $4,527 | $(17,658) | | Change in cash | $3,024 | $402 | $2,622 | | Cash, end of period | $7,625 | $4,711 | $2,914 | - Investing activities in 2024 included several acquisitions (CRO, Johnson, Midwest Grinding, Central Steel), which were not present in 2025[13](index=13&type=chunk) - Financing activities in 2025 included significant net payments on revolver loans and other notes, partially offset by related party borrowings[13](index=13&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity increased from **$72.9 million** at September 30, 2024, to **$94.3 million** at June 30, 2025, primarily due to net income and an in-substance distribution related to a convertible debt amendment, partially offset by treasury stock repurchases Condensed Consolidated Statements of Changes in Stockholders' Equity (Selected Data, in thousands) | Metric | Sep 30, 2024 | Jun 30, 2025 | Change | | :--- | :--- | :--- | :--- | | Total Stockholders' Equity | $72,889 | $94,257 | $21,368 | | Retained Earnings | $12,274 | $28,064 | $15,790 | | Paid in Capital | $69,692 | $75,798 | $6,106 | | Treasury Stock Common | $(9,072) | $(9,600) | $(528) | - An "In-Substance Distribution" of **$5.956 million** was recorded, increasing Paid-In Capital and decreasing Retained Earnings, related to the ICG Revolving Promissory Note amendment[15](index=15&type=chunk)[98](index=98&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed disclosures on the company's accounting policies, significant transactions, and financial instrument balances, offering context to the condensed consolidated financial statements - The notes are an integral part of the condensed consolidated financial statements and provide additional information on the company's financial position, results of operations, and cash flows[16](index=16&type=chunk) [Note 1: Background and Basis of Presentation](index=10&type=section&id=Note%201%3A%20Background%20and%20Basis%20of%20Presentation) Live Ventures Incorporated is a diversified holding company with five operating segments: Retail-Entertainment, Retail-Flooring, Flooring Manufacturing, Steel Manufacturing, and Corporate and Other, and the interim financial statements are unaudited and prepared in accordance with U.S. GAAP - Live Ventures is a diversified holding company focused on value-oriented acquisitions of domestic middle-market companies[17](index=17&type=chunk) - The company operates in five segments: Retail-Entertainment (Vintage Stock), Retail-Flooring (Flooring Liquidators), Flooring Manufacturing (Marquis Industries), Steel Manufacturing (Precision Marshall, Kinetic, PMW, Central Steel), and Corporate and Other[17](index=17&type=chunk) [Note 2: Summary of Significant Accounting Policies](index=10&type=section&id=Note%202%3A%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting policies, including principles of consolidation, use of estimates, and revenue recognition methods across different segments, and also discusses recently issued accounting pronouncements and their potential impact - Financial statements are prepared using U.S. GAAP, requiring management estimates for areas like inventory reserves, goodwill impairment, and deferred tax assets[18](index=18&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) [Principles of Consolidation](index=10&type=section&id=Principles%20of%20Consolidation) All intercompany accounts and transactions are eliminated in consolidation - All intercompany accounts and transactions are eliminated in consolidation[19](index=19&type=chunk) [Reclassifications](index=10&type=section&id=Reclassifications) Prior period reclassifications had no material effect on financial results - Prior period reclassifications had no material effect on financial results[20](index=20&type=chunk) [Use of Estimates](index=10&type=section&id=Use%20of%20Estimates) Significant estimates include reserves for obsolete inventory, fair values for goodwill and intangibles, valuation allowances for deferred tax assets, and useful lives for intangible assets - Significant estimates include reserves for obsolete inventory, fair values for goodwill and intangibles, valuation allowances for deferred tax assets, and useful lives for intangible assets[21](index=21&type=chunk)[22](index=22&type=chunk) [Revenue Recognition](index=11&type=section&id=Revenue%20Recognition) Revenue recognition follows ASC Topic 606, applying a five-step model, with retail-entertainment and manufacturing segments recognizing revenue at point-in-time, and retail-flooring recognizing installation services over time - Revenue recognition follows ASC Topic 606, applying a five-step model[23](index=23&type=chunk) - Retail-Entertainment and Manufacturing segments recognize revenue at point-in-time; Retail-Flooring recognizes installation services over time[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) [Recently Issued Accounting Pronouncements](index=11&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) The company is evaluating the impact of ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Tax Disclosures), and ASU 2024-03 (Expense Disaggregation) - Evaluating impact of ASU 2023-07 (Segment Reporting), ASU 2023-09 (Income Tax Disclosures), and ASU 2024-03 (Expense Disaggregation)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk)[32](index=32&type=chunk) [Note 3: Acquisitions](index=12&type=section&id=Note%203%3A%20Acquisitions) This note details the acquisitions made by the company, including Midwest Grinding, Central Steel, Johnson, and CRO, outlining the total consideration, purchase price allocation, and any related financial transactions like sale and leaseback - The company completed several acquisitions in 2023-2024, expanding its Steel Manufacturing and Retail-Flooring segments[33](index=33&type=chunk)[35](index=35&type=chunk)[41](index=41&type=chunk)[44](index=44&type=chunk) [Acquisition of Midwest Grinding](index=12&type=section&id=Acquisition%20of%20Midwest%20Grinding) The acquisition of Midwest Grinding on June 10, 2024, involved a total purchase price of **$1.0 million**, with acquired assets totaling **$1.0 million** and no goodwill recognized Midwest Grinding Acquisition (June 10, 2024, in $000's) | Item | Amount | | :--- | :--- | | Total purchase price | $1,000 | | Total assets acquired | $1,001 | | Total goodwill | $0 | [Acquisition of Central Steel](index=12&type=section&id=Acquisition%20of%20Central%20Steel) The Central Steel acquisition on May 15, 2024, involved **$13.9 million** in consideration, with **$12.4 million** in acquired assets and **$2.9 million** in goodwill, alongside a failed sale and leaseback transaction Central Steel Acquisition (May 15, 2024, in $000's) | Item | Amount | | :--- | :--- | | Total consideration | $13,880 | | Total assets acquired | $12,407 | | Total goodwill | $2,906 | - A simultaneous sale and leaseback transaction for a Central Steel property was classified as a failed financing transaction, generating **$7.9 million** in proceeds[37](index=37&type=chunk)[38](index=38&type=chunk) [Acquisition of Johnson](index=14&type=section&id=Acquisition%20of%20Johnson) The Johnson acquisition on November 30, 2023, for **$2.0 million** resulted in a **$0.3 million** loss on disposition when the business was sold on May 24, 2024 Johnson Acquisition & Disposition (in $000's) | Item | Acquisition (Nov 30, 2023) | Disposition (May 24, 2024) | | :--- | :--- | :--- | | Total consideration | $2,001 | N/A | | Total goodwill | $0 | N/A | | Loss on disposition | N/A | $(301) | [Acquisition of CRO](index=15&type=section&id=Acquisition%20of%20CRO) The CRO acquisition on October 13, 2023, involved **$1.4 million** in consideration, with **$3.4 million** in acquired assets and **$0.1 million** in goodwill CRO Acquisition (October 13, 2023, in $000's) | Item | Amount | | :--- | :--- | | Total consideration | $1,423 | | Total assets acquired | $3,402 | | Total goodwill | $89 | [Note 4: Inventory](index=16&type=section&id=Note%204%3A%20Inventory) Total net inventory decreased by **$5.9 million** from September 30, 2024, to June 30, 2025, primarily due to reductions in raw materials and merchandise, partially offset by an increase in work in progress, and inventory reserves increased by **$1.9 million** Inventory, Net (in $000's) | Category | June 30, 2025 | September 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Raw materials | $29,404 | $31,994 | $(2,590) | | Work in progress | $8,872 | $7,581 | $1,291 | | Finished goods | $49,925 | $49,264 | $661 | | Merchandise | $40,600 | $43,935 | $(3,335) | | Total inventory, net | $120,456 | $126,350 | $(5,894) | | Inventory reserves | $(8,345) | $(6,424) | $(1,921) | [Note 5: Property and Equipment](index=17&type=section&id=Note%205%3A%20Property%20and%20Equipment) Net property and equipment decreased by **$4.2 million** from September 30, 2024, to June 30, 2025, mainly due to accumulated depreciation exceeding additions, with depreciation expense for the nine months ended June 30, 2025, at **$9.6 million** Property and Equipment, Net (in $000's) | Category | June 30, 2025 | September 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Total property and equipment, at cost | $134,188 | $130,619 | $3,569 | | Less: Accumulated depreciation | $(55,503) | $(47,750) | $(7,753) | | Total property and equipment, net | $78,685 | $82,869 | $(4,184) | - Depreciation expense for the nine months ended June 30, 2025, was **$9.6 million**, up from **$9.2 million** in the prior-year period[48](index=48&type=chunk) [Note 6: Leases](index=17&type=section&id=Note%206%3A%20Leases) As of June 30, 2025, operating lease right-of-use assets were **$55.2 million** (9.5-year term, 9.8% discount rate), and finance lease right-of-use assets were **$25.1 million** (26.4-year term, 11.3% discount rate) Lease Assets and Liabilities (in $000's) | Category | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Right of use asset - operating leases | $55,168 | $55,701 | | Current lease obligations - operating | $12,385 | $12,885 | | Long term lease obligations - operating | $47,457 | $50,111 | | Current lease obligations - finance | $562 | $368 | | Long term lease obligations - finance | $42,265 | $41,677 | - Weighted average remaining lease term for operating leases is **9.5 years** (discount rate **9.8%**); for finance leases, it is **26.4 years** (discount rate **11.3%**)[50](index=50&type=chunk)[51](index=51&type=chunk) [Note 7: Intangibles](index=19&type=section&id=Note%207%3A%20Intangibles) Net intangible assets decreased by **$3.8 million** from September 30, 2024, to June 30, 2025, primarily due to accumulated amortization, with amortization expense for the nine months ended June 30, 2025, at **$3.8 million** Intangible Assets, Net (in $000's) | Category | June 30, 2025 | September 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Total intangible assets, at cost | $33,285 | $34,485 | $(1,200) | | Less: Accumulated amortization | $(11,949) | $(9,382) | $(2,567) | | Total intangibles, net | $21,336 | $25,103 | $(3,767) | - Amortization expense for the nine months ended June 30, 2025, was **$3.8 million**, up from **$3.7 million** in the prior-year period[53](index=53&type=chunk) [Note 8: Goodwill](index=19&type=section&id=Note%208%3A%20Goodwill) Goodwill remained stable at **$61.2 million** across all segments from September 30, 2024, to June 30, 2025 Goodwill by Segment (in $000's) | Segment | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Retail - Entertainment | $36,947 | $36,947 | | Retail - Flooring | $13,451 | $13,451 | | Flooring Manufacturing | $807 | $807 | | Steel Manufacturing | $9,947 | $9,947 | | Total Goodwill | $61,152 | $61,152 | [Note 9: Accrued Liabilities](index=20&type=section&id=Note%209%3A%20Accrued%20Liabilities) Total accrued liabilities slightly decreased by **$0.5 million** from September 30, 2024, to June 30, 2025, with notable changes in accrued payroll and bonuses (decrease) and other accrued expenses (increase) Accrued Liabilities (in $000's) | Category | June 30, 2025 | September 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Accrued payroll and bonuses | $7,286 | $8,125 | $(839) | | Accrued inventory | $5,471 | $6,722 | $(1,251) | | Accrued expenses - other | $6,582 | $4,489 | $2,093 | | Total accrued liabilities | $31,232 | $31,740 | $(508) | [Note 10: Long-Term Debt](index=20&type=section&id=Note%2010%3A%20Long-Term%20Debt) Total long-term debt, net of current portion, decreased by **$3.2 million** from September 30, 2024, to June 30, 2025, primarily due to reductions in revolver loans and current portion of long-term debt, and the company was in compliance with all loan covenants as of June 30, 2025 Long-Term Debt (in $000's) | Category | June 30, 2025 | September 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Total notes payable | $84,028 | $99,237 | $(15,209) | | Net amount | $83,586 | $98,810 | $(15,224) | | Current portion | $(31,838) | $(43,816) | $11,978 | | Total long-term debt | $51,748 | $54,994 | $(3,246) | - The company was in compliance with all loan covenants as of June 30, 2025[76](index=76&type=chunk) [Bank of America Revolver Loan](index=20&type=section&id=Bank%20of%20America%20Revolver%20Loan) The Bank of America Revolver Loan balance decreased from **$17.6 million** at September 30, 2024, to **$14.6 million** at June 30, 2025 BofA Revolver Loan Balance (in $000's) | Date | Balance | | :--- | :--- | | June 30, 2025 | $14,600 | | September 30, 2024 | $17,600 | [Loan with Fifth Third Bank (Precision Marshall)](index=22&type=section&id=Loan%20with%20Fifth%20Third%20Bank%20(Precision%20Marshall)) Loans with Fifth Third Bank for Precision Marshall included a **$21.9 million** revolving loan, a **$1.5 million** M&E term note, a **$2.3 million** Kinetic Term Loan 1, and a **$1.8 million** Capex loan as of June 30, 2025 Fifth Third Bank Loans (Precision Marshall, in $000's) | Loan Type | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Revolving loan | $21,900 | $21,300 | | Original M&E term note | $1,500 | $1,800 | | Kinetic Term Loan 1 | $2,300 | $2,700 | | Capex loan | $1,800 | $1,600 | [Eclipse Business Capital Loans](index=22&type=section&id=Eclipse%20Business%20Capital%20Loans) Eclipse Business Capital loans included a **$7.2 million** revolver and a **$1.2 million** M&E loan as of June 30, 2025, both showing decreases from September 30, 2024 Eclipse Business Capital Loans (in $000's) | Loan Type | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Eclipse Revolver | $7,200 | $9,300 | | Eclipse M&E loan | $1,200 | $1,800 | [Loan with Fifth Third Bank (PMW)](index=22&type=section&id=Loan%20with%20Fifth%20Third%20Bank%20(PMW)) Loans with Fifth Third Bank for PMW included a **$7.2 million** revolver and a **$3.6 million** M&E loan as of June 30, 2025, both showing decreases from September 30, 2024 Fifth Third Bank Loans (PMW, in $000's) | Loan Type | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Fifth Third Revolver | $7,200 | $10,100 | | Fifth Third M&E Loan | $3,600 | $4,100 | [Bank Midwest Revolver Loan](index=23&type=section&id=Bank%20Midwest%20Revolver%20Loan) The Bank Midwest Revolver Loan balance was fully repaid, decreasing from **$1.9 million** at September 30, 2024, to **$0** at June 30, 2025 Bank Midwest Revolver Loan Balance (in $000's) | Date | Balance | | :--- | :--- | | June 30, 2025 | $0 | | September 30, 2024 | $1,900 | [Note payable to JCM Holdings](index=23&type=section&id=Note%20payable%20to%20JCM%20Holdings) The note payable to JCM Holdings decreased from **$1.3 million** at September 30, 2024, to **$1.1 million** at June 30, 2025 JCM Holdings Note Payable Balance (in $000's) | Date | Balance | | :--- | :--- | | June 30, 2025 | $1,100 | | September 30, 2024 | $1,300 | [Note Payable to Store Capital Acquisitions, LLC](index=23&type=section&id=Note%20Payable%20to%20Store%20Capital%20Acquisitions%2C%20LLC) The note payable to Store Capital Acquisitions, LLC decreased from **$9.0 million** at September 30, 2024, to **$8.7 million** at June 30, 2025 Store Capital Acquisitions Note Payable Balance (in $000's) | Date | Balance | | :--- | :--- | | June 30, 2025 | $8,700 | | September 30, 2024 | $9,000 | [Equipment Loans](index=23&type=section&id=Equipment%20Loans) Equipment loans totaled **$9.3 million** at June 30, 2025, with maturities ranging from February 2027 to December 2029, reflecting a decrease from September 30, 2024 Equipment Loans Balances (in $000's) | Loan | June 30, 2025 | September 30, 2024 | Maturity | | :--- | :--- | :--- | :--- | | 5 | $0 | $164 | Dec 2024 | | 7 | $1,900 | $2,300 | Feb 2027 | | 8 | $1,200 | $1,600 | Sep 2027 | | 9 | $2,100 | $2,900 | Dec 2026 | | 10 | $4,100 | $4,600 | Dec 2029 | [Loan Covenant Compliance](index=24&type=section&id=Loan%20Covenant%20Compliance) The Company was in compliance with all loan covenants as of June 30, 2025[76](index=76&type=chunk) [Note 11: Notes Payable-Related Parties](index=24&type=section&id=Note%2011%3A%20Notes%20Payable-Related%20Parties) Total long-term notes payable to related parties, net of current portion, increased significantly from **$4.9 million** at September 30, 2024, to **$16.6 million** at June 30, 2025, primarily due to increased borrowings from Isaac Capital Group, LLC Notes Payable-Related Parties (in $000's) | Category | June 30, 2025 | September 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Total notes payable - related parties | $18,225 | $11,400 | $6,825 | | Current portion | $(900) | $(6,400) | $5,500 | | Total long-term portion, related parties | $16,599 | $4,934 | $11,665 | [Note 12: Related Party Seller Notes](index=25&type=section&id=Note%2012%3A%20Related%20Party%20Seller%20Notes) Total long-term seller notes, net of current portion, decreased significantly from **$40.4 million** at September 30, 2024, to **$18.2 million** at June 30, 2025, driven by the modification and extinguishment of the Flooring Liquidators seller note and the settlement of the PMW seller note Related Party Seller Notes (in $000's) | Category | June 30, 2025 | September 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Total Related Party Seller Notes | $19,100 | $40,600 | $(21,500) | | Long-term portion of seller notes payable | $18,214 | $40,361 | $(22,147) | [Note Payable to the Seller of PMW](index=25&type=section&id=Note%20Payable%20to%20the%20Seller%20of%20PMW) PMW Seller Financed Loans of **$2.5 million** settled for **$1.9 million**, resulting in a **$0.7 million** gain on extinguishment of debt and a **$2.8 million** gain on settlement of earnout liability[79](index=79&type=chunk)[80](index=80&type=chunk) [Note Payable to the Sellers of Kinetic](index=25&type=section&id=Note%20Payable%20to%20the%20Sellers%20of%20Kinetic) The Kinetic Seller Note balance remained stable at **$3.0 million** from September 30, 2024, to June 30, 2025 Kinetic Seller Note Balance (in $000's) | Date | Balance | | :--- | :--- | | June 30, 2025 | $3,000 | | September 30, 2024 | $3,000 | [Note Payable to the Seller of Central Steel](index=26&type=section&id=Note%20Payable%20to%20the%20Seller%20of%20Central%20Steel) The Central Steel Seller Note balance remained stable at **$1.1 million** from September 30, 2024, to June 30, 2025 Central Steel Seller Note Balance (in $000's) | Date | Balance | | :--- | :--- | | June 30, 2025 | $1,100 | | September 30, 2024 | $1,100 | [Note Payable to the Seller of Flooring Liquidators](index=26&type=section&id=Note%20Payable%20to%20the%20Seller%20of%20Flooring%20Liquidators) The Flooring Liquidators Seller Note principal was reduced from **$34.0 million** to **$15.0 million**, generating a **$22.8 million gain** on modification of seller note[85](index=85&type=chunk)[86](index=86&type=chunk) - The modification was accounted for as a debt extinguishment due to a change in present value of cash flows exceeding **10%**[86](index=86&type=chunk) [Note 13: Stockholders' Equity](index=26&type=section&id=Note%2013%3A%20Stockholders'%20Equity) This note details the components of stockholders' equity, including Series E Convertible Preferred Stock and Treasury Stock, which saw an increase in total equity due to net income and a convertible debt amendment - Stockholders' equity components include Series E Convertible Preferred Stock and Common Stock, Paid in Capital, Treasury Stock, and Retained Earnings[9](index=9&type=chunk)[15](index=15&type=chunk) [Series E Convertible Preferred Stock](index=26&type=section&id=Series%20E%20Convertible%20Preferred%20Stock) The number of Series E Convertible Preferred Stock shares issued and outstanding remained at 47,840 as of June 30, 2025 Series E Convertible Preferred Stock | Date | Shares Issued & Outstanding | | :--- | :--- | | June 30, 2025 | 47,840 | | September 30, 2024 | 47,840 | [Treasury Stock](index=27&type=section&id=Treasury%20Stock) The company repurchased 59,704 shares of common stock for **$0.5 million** during the nine months ended June 30, 2025, at an average price of **$8.85 per share** Common Treasury Stock Repurchases | Period | Shares Repurchased | Cost (in $000's) | Average Price per Share | | :--- | :--- | :--- | :--- | | 9 months ended Jun 30, 2025 | 59,704 | $528 | $8.85 | | 9 months ended Jun 30, 2024 | 34,351 | $862 | $25.09 | [Note 14: Stock-Based Compensation](index=27&type=section&id=Note%2014%3A%20Stock-Based%20Compensation) The company recognized **$0.15 million** in stock-based compensation expense for the nine months ended June 30, 2025, with all outstanding stock options forfeited, resulting in zero outstanding options Stock-Based Compensation Expense (in $000's) | Period | Compensation Expense | | :--- | :--- | | 3 months ended Jun 30, 2025 | $50 | | 3 months ended Jun 30, 2024 | $200 | | 9 months ended Jun 30, 2025 | $150 | | 9 months ended Jun 30, 2024 | $300 | - All 60,000 outstanding stock options were forfeited during the nine months ended June 30, 2025, resulting in zero outstanding options[91](index=91&type=chunk) [Note 15: Earnings Per Share](index=27&type=section&id=Note%2015%3A%20Earnings%20Per%20Share) Basic EPS for the nine months ended June 30, 2025, was **$7.01**, and diluted EPS was **$4.97**, with dilutive securities including restricted stock units, ICG convertible debt, and Series E Preferred Stock Basic and Diluted EPS (in $000's, except per-share amounts) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 9 Months Ended Jun 30, 2025 | 9 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic EPS | $1.75 | $(0.91) | $7.01 | $(2.16) | | Diluted EPS | $1.24 | $(0.91) | $4.97 | $(2.16) | | Basic Weighted Average Shares | 3,081,970 | 3,140,191 | 3,101,646 | 3,153,034 | | Diluted Weighted Average Shares | 4,356,355 | 3,140,191 | 4,376,031 | 3,153,034 | - Dilutive securities for 2025 include restricted stock units (29,116 shares), ICG convertible debt (1,245,030 shares), and Series E Preferred Stock (239 shares)[94](index=94&type=chunk) [Note 16: Related Party Transactions](index=28&type=section&id=Note%2016%3A%20Related%20Party%20Transactions) This note details various transactions with related parties, primarily Isaac Capital Group, LLC (controlled by the CEO), and Spriggs Investments, LLC (controlled by Vintage Stock CEO), including term loans, revolving credit facilities, and seller notes - Transactions involve Isaac Capital Group, LLC (controlled by CEO Jon Isaac) and Spriggs Investments, LLC (controlled by Vintage Stock CEO Rodney Spriggs)[95](index=95&type=chunk)[102](index=102&type=chunk) [Transactions with Isaac Capital Group, LLC](index=28&type=section&id=Transactions%20with%20Isaac%20Capital%20Group%2C%20LLC) Transactions with Isaac Capital Group, LLC included the full repayment of a term loan and an amendment to the revolving promissory note, extending maturity and increasing credit to **$12.0 million** with a fixed conversion price - ICG Term Loan (originally **$2.0 million**) was fully repaid by June 30, 2025[96](index=96&type=chunk) - ICG Revolving Promissory Note amended to extend maturity to April 2030, increase credit to **$12.0 million**, and include a fixed conversion price of **$7.85 per share**, resulting in a **$6.0 million** non-cash capital contribution[98](index=98&type=chunk) ICG Related Party Loan Balances (in $000's) | Loan Type | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | ICG Term Loan | $0 | $2,000 | | ICG Revolving Promissory Note | $9,680 | $2,600 | | ICG Flooring Liquidators Loan | $5,000 | $5,000 | | ICG PMW Note | $2,600 | N/A | [Transactions with Vintage Stock CEO](index=29&type=section&id=Transactions%20with%20Vintage%20Stock%20CEO) Transactions with Vintage Stock CEO included the full repayment of Spriggs Promissory Note I and an outstanding balance of **$0.9 million** for Spriggs Promissory Note II as of June 30, 2025 - Spriggs Promissory Note I (initial **$2.0 million**) was fully repaid by June 30, 2025[103](index=103&type=chunk) Spriggs Investments Loan Balances (in $000's) | Loan Type | June 30, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Spriggs Promissory Note I | $0 | $800 | | Spriggs Promissory Note II | $900 | $1,000 | [Transactions with ALT5 Sigma Corporation, formerly JanOne Inc.](index=30&type=section&id=Transactions%20with%20ALT5%20Sigma%20Corporation%2C%20formerly%20JanOne%20Inc.) Rent and reimbursed expenses from ALT5 Sigma Corporation totaled **$0.086 million** for the nine months ended June 30, 2025 Rent and Reimbursed Expenses from ALT5 Sigma (in $000's) | Period | Amount | | :--- | :--- | | 3 months ended Jun 30, 2025 | $28 | | 3 months ended Jun 30, 2024 | $35 | | 9 months ended Jun 30, 2025 | $86 | | 9 months ended Jun 30, 2024 | $109 | [Transactions with Spyglass Estate Planning, LLC](index=30&type=section&id=Transactions%20with%20Spyglass%20Estate%20Planning%2C%20LLC) Marquis entered into two 20-year building leases with Spyglass Estate Planning, LLC (CEO-controlled) at market rates[108](index=108&type=chunk) [Seller Notes](index=30&type=section&id=Seller%20Notes) Seller notes are routinely used for acquisitions, with further details provided in Note 12[109](index=109&type=chunk) [Note 17: Commitments and Contingencies](index=30&type=section&id=Note%2017%3A%20Commitments%20and%20Contingencies) The company is involved in various legal proceedings, including an ongoing SEC investigation and a class action lawsuit, with management believing the ultimate outcome will not have a material adverse effect on its financial position, and a holdback matter was settled, resulting in a **$1.3 million gain** - Management believes the ultimate outcome of current lawsuits and proceedings will not materially adversely affect financial position, results of operations, or cash flows[118](index=118&type=chunk) [Litigation](index=30&type=section&id=Litigation) Ongoing litigation includes an SEC civil complaint from August 2021 and a stayed Sieggreen Class Action lawsuit, with a holdback matter settled for a **$1.3 million gain** - SEC filed a civil complaint on August 2, 2021, alleging financial, disclosure, and reporting violations from 2016-2018; cross Motions for Summary Judgment filed in October 2024[112](index=112&type=chunk)[113](index=113&type=chunk) - Sieggreen Class Action lawsuit, similar to SEC allegations, is stayed; a Second Amended Complaint was filed in October 2024[114](index=114&type=chunk) - Holdback matter settled for **$850 thousand** on May 2, 2025, resulting in a **$1.3 million** gain for the nine months ended June 30, 2025[115](index=115&type=chunk)[116](index=116&type=chunk) [General](index=32&type=section&id=General) Management believes the ultimate outcome of various claims and lawsuits will not have a material adverse effect on the company's financial position, results of operations, or cash flows[118](index=118&type=chunk) [Note 18: Segment Reporting](index=32&type=section&id=Note%2018%3A%20Segment%20Reporting) This note provides detailed financial performance by the company's five operating segments: Retail-Entertainment, Retail-Flooring, Flooring Manufacturing, Steel Manufacturing, and Corporate and Other, for the three and nine months ended June 30, 2025 and 2024 - The company operates in five segments: Retail-Entertainment, Retail-Flooring, Flooring Manufacturing, Steel Manufacturing, and Corporate and Other[119](index=119&type=chunk) Segment Revenues (in $000's) | Segment | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 9 Months Ended Jun 30, 2025 | 9 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Retail-Entertainment | $19,017 | $16,503 | $58,758 | $53,930 | | Retail-Flooring | $30,373 | $36,981 | $89,519 | $103,332 | | Flooring Manufacturing | $29,487 | $31,264 | $85,302 | $94,689 | | Steel Manufacturing | $33,645 | $39,047 | $97,402 | $107,889 | | Corporate & Other | $8 | $83 | $70 | $257 | | **Total Revenues** | **$112,530** | **$123,878** | **$331,051** | **$360,097** | Segment Operating Income (Loss) (in $000's) | Segment | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 9 Months Ended Jun 30, 2025 | 9 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Retail-Entertainment | $2,318 | $1,332 | $8,223 | $6,305 | | Retail-Flooring | $(733) | $(1,498) | $(5,648) | $(4,433) | | Flooring Manufacturing | $4,135 | $1,856 | $5,536 | $4,779 | | Steel Manufacturing | $2,277 | $1,370 | $5,639 | $3,225 | | Corporate & Other | $6 | $(1,929) | $(2,893) | $(6,042) | | **Total Operating Income** | **$8,003** | **$1,131** | **$10,857** | **$3,834** | [Note 19: Subsequent Events](index=33&type=section&id=Note%2019%3A%20Subsequent%20Events) No subsequent events requiring adjustments to disclosures were identified through the filing date of the Form 10-Q - No subsequent events requiring adjustments to disclosures were identified through the filing date[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&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 and nine months ended June 30, 2025, compared to the prior-year periods, highlighting key drivers of performance and financial position - MD&A should be read in conjunction with condensed consolidated financial statements and the 2024 Form 10-K[123](index=123&type=chunk) - Includes forward-looking statements about future operations, liquidity, and legal outcomes, which involve risks and uncertainties[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) [Note about Forward-Looking Statements](index=34&type=section&id=Note%20about%20Forward-Looking%20Statements) This section clarifies that the report contains forward-looking statements regarding future operations, financial performance, and capital requirements, which are subject to risks and uncertainties and may differ materially from actual results - Forward-looking statements are characterized by terms like "may," "believes," "projects," and "expects," and do not reflect historical facts[124](index=124&type=chunk) - Factors and risks affecting results are identified in the 2024 Form 10-K and this report's "Risk Factors" section[126](index=126&type=chunk) [Our Company](index=34&type=section&id=Our%20Company) Live Ventures Incorporated is a diversified holding company that acquires and operates profitable middle-market companies across five segments: Retail-Entertainment, Retail-Flooring, Flooring Manufacturing, Steel Manufacturing, and Corporate and Other - Live Ventures is a holding company of diversified businesses, acquiring profitable and well-managed companies[128](index=128&type=chunk)[129](index=129&type=chunk) - Operates in five segments: Retail-Entertainment (Vintage Stock), Retail-Flooring (Flooring Liquidators), Flooring Manufacturing (Marquis), Steel Manufacturing (Precision Marshall, Kinetic, PMW, Central Steel), and Corporate and Other[128](index=128&type=chunk)[131](index=131&type=chunk)[133](index=133&type=chunk)[135](index=135&type=chunk)[137](index=137&type=chunk)[145](index=145&type=chunk) [Retail-Entertainment Segment](index=34&type=section&id=Retail-Entertainment%20Segment_MD%26A) Vintage Stock operates 72 retail locations across 14 states, offering new and pre-owned entertainment products[132](index=132&type=chunk) [Retail-Flooring Segment](index=35&type=section&id=Retail-Flooring%20Segment_MD%26A) Flooring Liquidators operates 27 warehouse-format stores and a design center in California and Nevada, serving retail and builder customers[134](index=134&type=chunk) [Flooring Manufacturing Segment](index=35&type=section&id=Flooring%20Manufacturing%20Segment_MD%26A) Marquis Industries is a leading carpet manufacturer and distributor, specializing in value-oriented polyester carpet for residential, commercial, and hospitality markets[135](index=135&type=chunk)[136](index=136&type=chunk) [Steel Manufacturing Segment](index=35&type=section&id=Steel%20Manufacturing%20Segment_MD%26A) This segment includes Precision Marshall, a leader in tool and die steel; Kinetic, producing industrial knives; PMW, offering metal forming solutions; and Central Steel, manufacturing specialized fabricated metal products for data centers - Precision Marshall is a North American leader in pre-finished de-carb free tool and die steel[138](index=138&type=chunk)[140](index=140&type=chunk) - Kinetic produces industrial knives and hardened wear products[141](index=141&type=chunk) - PMW offers metal forming, assembly, and finishing solutions across diverse industries[142](index=142&type=chunk)[143](index=143&type=chunk) - Central Steel manufactures specialized fabricated metal products, primarily for data centers[144](index=144&type=chunk) [Corporate and Other Segment](index=36&type=section&id=Corporate%20and%20Other%20Segment_MD%26A) This segment includes corporate general and administrative costs and legacy product and service operations - Includes corporate G&A costs and legacy product/service operations[145](index=145&type=chunk) [Critical Accounting Policies](index=36&type=section&id=Critical%20Accounting%20Policies) The company's critical accounting policies, which require significant judgment and estimates, include Trade and Other Receivables, Inventories, Goodwill, Revenue Recognition, Fair Value Measurements, and Income Taxes - Critical accounting policies include Trade and Other Receivables, Inventories, Goodwill, Revenue Recognition, Fair Value Measurements, and Income Taxes[146](index=146&type=chunk) [Adjusted EBITDA](index=36&type=section&id=Adjusted%20EBITDA_MD%26A) Adjusted EBITDA is a non-U.S. GAAP financial measure used by management to evaluate operational strength, funding capacity for acquisitions and capital expenditures, and debt servicing ability, defined as net income (loss) before interest, taxes, depreciation, amortization, stock-based compensation, and other non-cash/nonrecurring charges - Adjusted EBITDA is a non-U.S. GAAP measure used to evaluate operational strength, funding capacity, and debt servicing[147](index=147&type=chunk) - Defined as net income (loss) before interest, taxes, depreciation, amortization, stock-based compensation, and other non-cash or nonrecurring charges[147](index=147&type=chunk) [Results of Operations Three Months Ended June 30, 2025 and 2024](index=37&type=section&id=Results%20of%20Operations%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) For the three months ended June 30, 2025, revenue decreased by **9.2%** YoY, but gross profit margin improved significantly to **34.0%** from **29.9%**, with net income at **$5.4 million**, a substantial improvement from a **$2.9 million** net loss in the prior-year period, driven by higher margins and reduced operating expenses, and Adjusted EBITDA more than doubled to **$13.2 million** Key Financial Highlights (3 Months Ended June 30, in $000's) | Metric | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $112,530 | $123,878 | $(11,348) | (9.2%) | | Gross profit | $38,287 | $37,045 | $1,242 | 3.4% | | Gross profit % | 34.0% | 29.9% | 4.1 pp | N/A | | Net income (loss) | $5,388 | $(2,855) | $8,243 | N/A | | Adjusted EBITDA | $13,188 | $6,123 | $7,065 | 115.4% | [Revenue](index=38&type=section&id=Revenue_3M) Revenue decreased by **$11.3 million (9.2%)** to **$112.5 million**, primarily due to Retail-Flooring and Steel Manufacturing segments[151](index=151&type=chunk) [Gross Profit](index=38&type=section&id=Gross%20Profit_3M) Gross profit margin increased to **34.0%** (from **29.9%**), driven by Steel Manufacturing (efficiencies, Central Steel acquisition) and Flooring Manufacturing (product mix)[152](index=152&type=chunk) [General and Administrative Expense](index=38&type=section&id=General%20and%20Administrative%20Expense_3M) G&A expenses decreased by **12.6%** to **$26.3 million**, mainly due to cost reduction initiatives in Retail-Flooring[153](index=153&type=chunk) [Sales and Marketing Expense](index=38&type=section&id=Sales%20and%20Marketing%20Expense_3M) Sales and marketing expense decreased by **31.5%** to **$4.0 million**, due to reduced activities in Retail-Flooring and Flooring Manufacturing[154](index=154&type=chunk) [Interest Expense, net](index=39&type=section&id=Interest%20Expense%2C%20net_3M) Net interest expense decreased by **9.0%** to **$3.9 million**, driven by lower average debt balances[155](index=155&type=chunk) [Results of Operations Nine Months Ended June 30, 2025 and 2024](index=39&type=section&id=Results%20of%20Operations%20Nine%20Months%20Ended%20June%2030%2C%202025%20and%202024) For the nine months ended June 30, 2025, revenue decreased by **8.1%** YoY, but gross profit margin improved to **32.9%** from **30.2%**, and the company reported a net income of **$21.7 million**, a significant turnaround from a **$6.8 million** net loss in the prior-year period, largely due to improved margins, reduced operating expenses, and substantial other income from debt modifications and settlements, with Adjusted EBITDA increasing by **31.7%** to **$25.4 million** Key Financial Highlights (9 Months Ended June 30, in $000's) | Metric | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $331,051 | $360,097 | $(29,046) | (8.1%) | | Gross profit | $108,797 | $108,839 | $(42) | (0.04%) | | Gross profit % | 32.9% | 30.2% | 2.7 pp | N/A | | Net income (loss) | $21,746 | $(6,818) | $28,564 | N/A | | Adjusted EBITDA | $25,379 | $19,275 | $6,104 | 31.7% | [Revenue](index=40&type=section&id=Revenue_9M) Revenue decreased by **$29.0 million (8.1%)** to **$331.1 million**, mainly due to Flooring Manufacturing, Retail-Flooring, and Steel Manufacturing segments, partially offset by Retail-Entertainment[159](index=159&type=chunk) [Gross Profit](index=40&type=section&id=Gross%20Profit_9M) Gross profit margin increased to **32.9%** (from **30.2%**), primarily due to Steel Manufacturing (efficiencies, Central Steel acquisition)[160](index=160&type=chunk) [General and Administrative Expense](index=40&type=section&id=General%20and%20Administrative%20Expense_9M) G&A expenses decreased by **3.3%** to **$84.7 million**, mainly due to cost reduction initiatives in Retail-Flooring[161](index=161&type=chunk) [Sales and Marketing Expense](index=40&type=section&id=Sales%20and%20Marketing%20Expense_9M) Sales and marketing expense decreased by **23.9%** to **$13.3 million**, due to reduced activities in Retail-Flooring and Flooring Manufacturing[162](index=162&type=chunk) [Interest Expense, net](index=41&type=section&id=Interest%20Expense%2C%20net_9M) Net interest expense decreased by **4.9%** to **$11.9 million**, driven by lower average debt balances[163](index=163&type=chunk) [Results of Operations by Segment for the Three Months Ended June 30, 2025 and 2024](index=41&type=section&id=Results%20of%20Operations%20by%20Segment%20for%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) Segment performance for the three months ended June 30, 2025, showed Retail-Entertainment revenue up **15.2%** with improved operating income, Retail-Flooring revenue declined **17.9%** but reduced its operating loss due to cost cuts, Flooring Manufacturing revenue decreased **5.7%** but saw operating income more than double due to product mix and lower expenses, and Steel Manufacturing revenue declined **13.8%** but significantly improved gross margin and operating income, partly due to the Central Steel acquisition Segment Revenue and Operating Income (3 Months Ended June 30, in $000's) | Segment | 2025 Revenue | 2024 Revenue | % Change Revenue | 2025 Operating Income (Loss) | 2024 Operating Income (Loss) | | :--- | :--- | :--- | :--- | :--- | :--- | | Retail-Entertainment | $19,017 | $16,503 | 15.2% | $2,318 | $1,332 | | Retail-Flooring | $30,373 | $36,981 | (17.9%) | $(733) | $(1,498) | | Flooring Manufacturing | $29,487 | $31,264 | (5.7%) | $4,135 | $1,856 | | Steel Manufacturing | $33,645 | $39,047 | (13.8%) | $2,277 | $1,370 | | Corporate & Other | $8 | $83 | (90.4%) | $6 | $(1,929) | [Retail-Entertainment Segment](index=41&type=section&id=Retail-Entertainment%20Segment_3M) Revenue increased **15.2%** to **$19.0 million** due to product mix shift to new products, with operating income rising to **$2.3 million** from **$1.3 million**[166](index=166&type=chunk) - Operating income increased to **$2.3 million** from **$1.3 million**[166](index=166&type=chunk) [Retail-Flooring Segment](index=41&type=section&id=Retail-Flooring%20Segment_3M) Revenue decreased **17.9%** to **$30.4 million** due to Johnson store dispositions and decreased demand, but operating loss improved to **$0.7 million** from **$1.5 million** due to cost reduction initiatives[167](index=167&type=chunk) - Operating loss improved to **$0.7 million** from **$1.5 million** due to cost reduction initiatives[167](index=167&type=chunk) [Flooring Manufacturing Segment](index=41&type=section&id=Flooring%20Manufacturing%20Segment_3M) Revenue decreased **5.7%** to **$29.5 million** due to reduced consumer demand, but operating income increased to **$4.1 million** from **$1.9 million** due to improved gross margin and lower expenses[168](index=168&type=chunk) - Operating income increased to **$4.1 million** from **$1.9 million** due to improved gross margin and lower expenses[168](index=168&type=chunk) [Steel Manufacturing Segment](index=41&type=section&id=Steel%20Manufacturing%20Segment_3M) Revenue decreased **13.8%** to **$33.6 million**, partially offset by **$5.0 million** from Central Steel acquisition, while gross margin increased to **23.1%** (from **15.8%**) due to strategic price increases and the Central Steel acquisition, and operating income increased to **$2.3 million** from **$1.4 million**[169](index=169&type=chunk) - Gross margin increased to **23.1%** (from **15.8%**) due to strategic price increases and Central Steel acquisition[169](index=169&type=chunk) - Operating income increased to **$2.3 million** from **$1.4 million**[169](index=169&type=chunk) [Corporate and Other Segment](index=42&type=section&id=Corporate%20and%20Other%20Segment_3M) The Corporate and Other segment reported an operating income of **$6 thousand**, a significant improvement from a **$1.9 million** operating loss, due to cost reallocation and expense reductions[170](index=170&type=chunk) [Results of Operations by Segment for the Nine Months Ended June 30, 2025 and 2024](index=42&type=section&id=Results%20of%20Operations%20by%20Segment%20for%20the%20Nine%20Months%20Ended%20June%2030%2C%202025%20and%202024) For the nine months ended June 30, 2025, Retail-Entertainment revenue increased **9.0%** with higher operating income, Retail-Flooring revenue decreased **13.4%**, leading to an increased operating loss, Flooring Manufacturing revenue decreased **9.9%** but saw improved operating income, Steel Manufacturing revenue declined **9.7%** but significantly improved gross margin and operating income, partly due to the Central Steel acquisition, and the Corporate and Other segment significantly reduced its operating loss Segment Revenue and Operating Income (9 Months Ended June 30, in $000's) | Segment | 2025 Revenue | 2024 Revenue | % Change Revenue | 2025 Operating Income (Loss) | 2024 Operating Income (Loss) | | :--- | :--- | :--- | :--- | :--- | :--- | | Retail-Entertainment | $58,758 | $53,930 | 9.0% | $8,223 | $6,305 | | Retail-Flooring | $89,519 | $103,332 | (13.4%) | $(5,648) | $(4,433) | | Flooring Manufacturing | $85,302 | $94,689 | (9.9%) | $5,536 | $4,779 | | Steel Manufacturing | $97,402 | $107,889 | (9.7%) | $5,639 | $3,225 | | Corporate & Other | $70 | $257 | (72.7%) | $(2,893) | $(6,042) | [Retail-Entertainment Segment](index=42&type=section&id=Retail-Entertainment%20Segment_9M) Revenue increased **9.0%** to **$58.8 million** due to product mix shift to new products, with operating income rising to **$8.2 million** from **$6.3 million**[173](index=173&type=chunk) - Operating income increased to **$8.2 million** from **$6.3 million**[173](index=173&type=chunk) [Retail-Flooring Segment](index=42&type=section&id=Retail-Flooring%20Segment_9M) Revenue decreased **13.4%** to **$89.5 million** due to Johnson store dispositions and decreased demand, and operating loss increased to **$5.6 million** from **$4.4 million**, despite cost reduction initiatives[174](index=174&type=chunk) - Operating loss increased to **$5.6 million** from **$4.4 million**, despite cost reduction initiatives[174](index=174&type=chunk) [Flooring Manufacturing Segment](index=42&type=section&id=Flooring%20Manufacturing%20Segment_9M) Revenue decreased **9.9%** to **$85.3 million** due to reduced consumer demand, but operating income increased to **$5.5 million** from **$4.8 million**[175](index=175&type=chunk) - Operating income increased to **$5.5 million** from **$4.8 million**[175](index=175&type=chunk) [Steel Manufacturing Segment](index=42&type=section&id=Steel%20Manufacturing%20Segment_9M) Revenue decreased **9.7%** to **$97.4 million**, partially offset by **$11.9 million** from Central Steel acquisition, while gross margin increased to **20.9%** (from **15.3%**) due to strategic price increases and the Central Steel acquisition, and operating income increased to **$5.6 million** from **$3.2 million**[176](index=176&type=chunk)[177](index=177&type=chunk) - Gross margin increased to **20.9%** (from **15.3%**) due to strategic price increases and Central Steel acquisition[176](index=176&type=chunk)[177](index=177&type=chunk) - Operating income increased to **$5.6 million** from **$3.2 million**[177](index=177&type=chunk) [Corporate and Other Segment](index=43&type=section&id=Corporate%20and%20Other%20Segment_9M) The Corporate and Other segment's operating loss reduced to **$2.9 million** from **$6.0 million**, due to cost reallocation and expense reductions[178](index=178&type=chunk) [Adjusted EBITDA Reconciliation](index=43&type=section&id=Adjusted%20EBITDA%20Reconciliation) Adjusted EBITDA for the three months ended June 30, 2025, increased by **115.4%** to **$13.2 million**, and for the nine months, it increased by **31.7%** to **$25.4 million**, primarily due to decreases in operating expenses from targeted cost reduction initiatives Adjusted EBITDA Reconciliation (in $000's) | Metric | 3 Months Ended Jun 30, 2025 | 3 Months Ended Jun 30, 2024 | 9 Months Ended Jun 30, 2025 | 9 Months Ended Jun 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $5,388 | $(2,855) | $21,746 | $(6,818) | | Depreciation and amortization | $4,546 | $4,349 | $13,362 | $12,832 | | Stock-based compensation | $50 | $174 | $150 | $274 | | Interest expense, net | $3,854 | $4,233 | $11,949 | $12,563 | | Income tax expense (benefit) | $2,067 | $(968) | $7,385 | $(2,409) | | Gain on extinguishment of debt | $0 | $0 | $(713) | $0 | | Gain on modification of seller note | $0 | $0 | $(22,784) | $0 | | Gain on settlement of earnout liability | $0 | $0 | $(2,840) | $0 | | Gain on settlement of holdback | $(1,282) | $0 | $(1,186) | $0 | | Gain on receipt of ERC credits | $(1,469) | $0 | $(1,824) | $0 | | Acquisition costs | $0 | $889 | $0 | $1,762 | | Debt acquisition costs | $0 | $0 | $0 | $183 | | Disposition of Johnson | $0 | $301 | $0 | $301 | | Other non-recurring charges | $34 | $0 | $134 | $587 | | **Adjusted EBITDA** | **$13,188** | **$6,123** | **$25,379** | **$19,275** | - Adjusted EBITDA for the three months increased by **115.4%** to **$13.2 million**; for the nine months, it increased by **31.7%** to **$25.4 million**, driven by operating expense decreases[179](index=179&type=chunk)[180](index=180&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, the company had **$7.6 million** in cash and **$29.5 million** in available borrowing capacity, and management believes current cash, operating cash flows, and credit facilities will provide sufficient liquidity for at least the next 12 months to fund operations, loan payments, share repurchases, and preferred stock dividends Liquidity Position (as of June 30, 2025, in $000's) | Metric | Amount | | :--- | :--- | | Cash on hand | $7,600 | | Available borrowing under revolving credit facilities | $29,500 | - Management believes current liquidity is sufficient for operations, loan payments, share repurchases, and preferred stock dividends for at least the next 12 months[182](index=182&type=chunk)[183](index=183&type=chunk) [Working Capital](index=44&type=section&id=Working%20Capital) Working capital increased by **$14.3 million** to **$66.6 million** at June 30, 2025, from **$52.3 million** at September 30, 2024 Working Capital (in $000's) | Date | Amount | Change | | :--- | :--- | :--- | | June 30, 2025 | $66,600 | $14,300 | | September 30, 2024 | $52,300 | N/A | [Cash Flows from Operating Activities](index=44&type=section&id=Cash%20Flows%20from%20Operating%20Activities) Net cash provided by operating activities for the nine months ended June 30, 2025, increased by **$8.0 million** to **$21.9 million** Net Cash Provided by Operating Activities (in $000's) | Period | Amount | Change | | :--- | :--- | :--- | | 9 months ended Jun 30, 2025 | $21,900 | $8,000 | | 9 months ended Jun 30, 2024 | $13,900 | N/A | [Cash Flows from Investing Activities](index=44&type=section&id=Cash%20Flows%20from%20Investing%20Activities) Net cash used in investing activities for the nine months ended June 30, 2025, decreased by **$12.2 million** to **$5.8 million**, compared to **$18.0 million** in the prior-year period, which included several acquisitions Net Cash Used in Investing Activities (in $000's) | Period | Amount | Change | | :--- | :--- | :--- | | 9 months ended Jun 30, 2025 | $(5,800) | $12,200 | | 9 months ended Jun 30, 2024 | $(18,000) | N/A | - 2024 investing activities included acquisitions of CRO, Johnson, Central Steel, and Midwest Grinding[187](index=187&type=chunk) [Cash Flows from Financing Activities](index=44&type=section&id=Cash%20Flows%20from%20Financing%20Activities) Net cash used in financing activities for the nine months ended June 30, 2025, was **$13.1 million**, a **$17.6 million** decrease from the prior-year period, primarily due to net debt payments Net Cash (Used in) Provided by Financing Activities (in $000's) | Period | Amount | Change | | :--- | :--- | :--- | | 9 months ended Jun 30, 2025 | $(13,100) | $(17,600) | | 9 months ended Jun 30, 2024 | $4,500 | N/A | - 2025 financing activities included net payments on revolver loans (**$9.3 million**), notes payable (**$5.2 million**), related party notes (**$2.9 million**), and seller notes (**$1.9 million**), partially offset by related party revolver borrowings (**$7.1 million**)[188](index=188&type=chunk) [Future Sources of Cash; New Products and Services](index=44&type=section&id=Future%20Sources%20of%20Cash%3B%20New%20Products%20and%20Services) The company may require additional debt financing or capital for acquisitions, refinancing, or strategic investments, preferring asset-based lending and mezzanine financing, and may issue stock or derivative instruments for services or debt settlement - May require additional debt financing or capital for acquisitions, refinancing, or strategic investments[191](index=191&type=chunk) - Prefers asset-based lending and mezzanine financing for acquisitions; may issue stock or derivative instruments for services or debt settlement[190](index=190&type=chunk)[191](index=191&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As of June 30, 2025, the company did not participate in market risk-sensitive commodity instruments and believes it is not materially subject to other forms of market risk, such as foreign currency exchange risk or commodity price risk - No participation in market risk-sensitive commodity instruments[192](index=192&type=chunk) - Not materially subject to foreign currency exchange risk or commodity price risk[192](index=192&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2025, the company's disclosure controls and procedures were not effective due to a material weakness in internal control over financial reporting related to financial reporting and consolidation processes; despite this, management concluded that the financial statements fairly present the company's financial position, and remediation efforts are underway - Disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness[193](index=193&type=chunk) - Material weakness identified: lack of sufficient controls around the financial reporting and consolidation process[197](index=197&type=chunk) - Management concluded that consolidated financial statements fairly present financial position, results of operations, and cash flows despite the material weakness[194](index=194&type=chunk) [Evaluation of Disclosure Control and Procedures](index=45&type=section&id=Evaluation%20of%20Disclosure%20Control%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting - Disclosure controls and procedures were not effective as of June 30, 2025[193](index=193&type=chunk) [Management's Report on Internal Control Over Financial Reporting](index=45&type=section&id=Management's%20Report%20on%20Internal%20Control%20Over%20Financial%20Reporting) Management assessed internal control over financial reporting as ineffective due to a material weakness in controls around financial reporting and consolidation processes, with remediation initiatives planned for fiscal year 2025 - Internal controls over financial reporting were ineffective as of June 30, 2025[197](index=197&type=chunk) - Material weakness: lack of sufficient controls around the financial reporting and consolidation process[197](index=197&type=chunk) - Remediation initiatives are expected to be concluded during the fiscal year ended September 30, 2025[197](index=197&type=chunk) [PART II - OTHER INFORMATION](index=47&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings information is incorporated by reference from Note 17 of the financial statements and the 2024 Form 10-K, with no new material legal proceedings or developments reported - Legal proceedings information is included in Note 17 and the 2024 Form 10-K[201](index=201&type=chunk) - No new material legal proceedings or developments reported[201](index=201&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) No new risk factors were reported in this quarterly report - No new risk factors reported[202](index=202&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 12,695 shares of common stock for **$0.112 million** during the three months ended June 30, 2025, under its **$10 million** common stock repurchase program, which was extended until May 31, 2028 Common Stock Repurchases (3 Months Ended June 30, 2025) | Month | Shares Purchased | Average Purchase Price Paid | Maximum Amount Remaining (in $) | | :--- | :--- | :--- | :--- | | April 2025 | 7,549 | $8.50 | $9,515,346 | | May 2025 | — | — | $9,515,346 | | June 2025 | 5,146 | $9.31 | $9,467,429 | | **Totals** | **12,695** | **$8.83** | **$9,467,429** | - **$10 million** common stock repurchase program extended until May 31, 2028[203](index=203&type=chunk) [Item 3. Defaults Upon Senior Securities](index=47&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - No defaults upon senior securities reported[204](index=204&type=chunk) [Item 4. Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures were reported - No mine safety disclosures reported[205](index=205&type=chunk) [Item 5. Other Information](index=47&type=section&id=Item%205.%20Other%20Information) No other information was reported in this section - No other information reported[206](index=206&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with or incorporated by reference into the Quarterly Report, including organizational documents, certifications, and XBRL data - Lists exhibits filed or incorporated by reference, including organizational documents, certifications, and XBRL data[207](index=207&type=chunk)[208](index=208&type=chunk) [SIGNATURES](index=49&type=section&id=SIGNATURES) [Signatures](index=49&type=section&id=Signatures) The report

[Company Overview](index=3&type=section&id=Company%20Overview) Lument Finance Trust (LFT) is an externally-managed REIT specializing in CRE debt, leveraging its affiliation with Lument and ORIX Corporation USA for extensive origination and experienced management - The Company is an externally-managed real estate investment trust focused on investing in and managing a portfolio of commercial real estate debt investments[7](index=7&type=chunk) - LFT is managed by Lument Investment Management, LLC, an affiliate of ORIX Corporation USA, providing access to an extensive loan origination platform[6](index=6&type=chunk)[7](index=7&type=chunk) - The management team has an average of over **20 years of industry experience**[6](index=6&type=chunk) [Q2 2025 Financial & Operational Highlights](index=4&type=section&id=Q2%202025%20Updates) LFT reported Q2 2025 GAAP net income and Distributable Earnings of $0.05 per share, declared a $0.06 dividend, and managed a $924 million portfolio with significant payoffs Q2 2025 Key Financial Metrics | Metric | Value | | :--- | :--- | | GAAP Net Income per Share | $0.05 | | Distributable Earnings® per Share | $0.05 | | Dividend per Common Share | $0.06 | | Book Value per Common Share | $3.27 | - The investment portfolio totaled **$924 million** as of June 30, 2025, with **90.6% of loans collateralized by multifamily assets**[8](index=8&type=chunk) - During the quarter, the company experienced **$63.4 million in loan payoffs** and **$3.6 million in loan fundings**[8](index=8&type=chunk) - The ratio of total liabilities to total equity improved, decreasing from **3.6x to 3.3x** during the quarter[8](index=8&type=chunk) [Financial Performance](index=5&type=section&id=Financial%20Performance) The company's financial statements for Q2 2025 reflect a stable but evolving position, with total assets near $1 billion, $2.5 million net income for common stockholders, and recent declines in distributable earnings and dividends per share [Balance Sheet Summary](index=5&type=section&id=Q2%202025%20Balance%20Sheet%20Summary) As of June 30, 2025, LFT's total assets were approximately $998.4 million, with $231.5 million in equity and a 3.3x total liabilities to total equity ratio Balance Sheet Summary (as of June 30, 2025) | Account | Amount (in thousands) | | :--- | :--- | | Total Assets | $998,387 | | Commercial mortgage loans held-for-investment (net) | $905,420 | | Cash and cash equivalents | $59,404 | | Total Liabilities | $766,931 | | Total Equity | $231,456 | - The ratio of total liabilities to total equity was **3.3x**[9](index=9&type=chunk) - Book Value Per Share of Common Stock was **$3.27**[9](index=9&type=chunk) [Income Statement Summary](index=6&type=section&id=Q2%202025%20Income%20Statement%20Summary) For the three months ended June 30, 2025, LFT generated net interest income of approximately $7.0 million, leading to $2.5 million net income for common stockholders, or $0.05 per share Income Statement Highlights (Q2 2025) | Account | Amount (in thousands) | | :--- | :--- | | Net Interest Income | $6,961 | | Operating Expenses | ($3,156) | | Net Income Attributable to Common Stockholders | $2,506 | - Net income per common share was **$0.05** for the quarter[11](index=11&type=chunk) - Distributable Earnings per common share were also **$0.05** for the quarter, with a declared dividend of **$0.06 per share**[11](index=11&type=chunk) [Earnings and Book Value Per Share](index=7&type=section&id=Earnings%20and%20Book%20Value%20Per%20Share%20of%20Co) Q2 2025 Distributable Earnings and declared dividends per share decreased to $0.05 and $0.06 respectively, with book value also showing a slight decline Quarterly Earnings and Dividends per Share | Quarter | Distributable Earnings | Dividends | | :--- | :--- | :--- | | Q3 2024 | $0.10 | $0.08 | | Q4 2024 | $0.10 | $0.08 | | Q1 2025 | $0.08 | $0.08 | | Q2 2025 | $0.05 | $0.06 | [Investment Portfolio Analysis](index=8&type=section&id=Investment%20Portfolio) The $905.4 million CRE loan portfolio is multifamily-focused, experienced substantial payoffs, and showed some credit quality deterioration with increased risk ratings [Portfolio Composition](index=8&type=section&id=Investment%20Portfolio%20Composition) The $905.4 million CRE loan portfolio is 90.6% multifamily, with significant exposure to Florida, New Jersey, and Texas, while avoiding hospitality, retail, and office assets - The portfolio consists of floating-rate CRE loans with a carrying value of **$905.4 million**[17](index=17&type=chunk) Portfolio Composition by Property Type | Type | Percentage | Value (in millions) | | :--- | :--- | :--- | | Multifamily | 90.6% | ~$820.3 | | Seniors Housing & Healthcare | 8.8% | $79.5 | Top 5 Geographic Concentrations (by carrying value) | State | Percentage | Value (in millions) | | :--- | :--- | :--- | | Florida | 21.7% | $196.5 | | New Jersey | 12.6% | $114.2 | | Texas | 9.9% | ~$90.0 | | Georgia | 6.4% | $57.5 | | Pennsylvania | 5.4% | $48.6 | [Loan Activity](index=9&type=section&id=Q2%202025%20Loan%20Activity) Q2 2025 saw $63.4 million in loan payoffs and sales significantly exceeding $3.6 million in new fundings, alongside $23.8 million transferred to REO, reducing the portfolio - The company experienced **$63.4 million in loan payoffs** and **$3.6 million in new loan fundings** during Q2 2025[18](index=18&type=chunk) Portfolio Activity (Q2 2025, in millions) | Item | Amount | | :--- | :--- | | Q1 2025 Portfolio | $988.8 | | Loan Fundings | $3.6 | | Payoffs / Sales | ($63.4) | | Loans Transferred to REO | ($23.8) | | **Q2 2025 Portfolio** | **$905.4** | [Portfolio Credit Quality](index=10&type=section&id=Portfolio%20Credit) Portfolio credit quality declined in Q2 2025, with performing loans decreasing to 86.6% and eight loans totaling $124.1 million downgraded to a "5" risk rating - As of June 30, 2025, **86.6% of the Company's portfolio was performing**, with a weighted average risk rating of **3.5**[23](index=23&type=chunk) - During the quarter, management assigned a "**5**" risk-rating to eight loans with an aggregate unpaid principal balance of **$124.1 million**[23](index=23&type=chunk) Performing Loan Trend | Date | % Performing | | :--- | :--- | | 12/31/2024 | 90.8% | | 3/31/2025 | 89.3% | | 6/30/2025 | 86.6% | [Capital Structure and Risk Management](index=11&type=section&id=Capital%20Structure%20and%20Risk%20Management) LFT's capital structure relies on non-recourse secured financings, avoiding margin call risks, and its floating-rate portfolio provides a natural hedge against interest rate fluctuations [Capital Structure](index=11&type=section&id=Q2%202025%20Capital%20Structure%20Overview) LFT's $990.8 million capitalization is primarily secured financings (71.8%) and common equity (17.3%), utilizing non-recourse CLO structures to eliminate margin call risk - The Company does not currently utilize repurchase or warehouse facility financing and is not subject to margin calls on any of its loan assets[26](index=26&type=chunk) Capital Structure Composition | Source | Percentage of Total Capitalization | | :--- | :--- | | Secured Financing | 71.8% | | Common Equity | 17.3% | | Preferred Equity | 6.1% | | Term Loan | 4.8% | - Primary financing sources are two secured financings (2021-FLI CLO and LMF 2023-1), preferred stock, and a corporate term loan[26](index=26&type=chunk) [Interest Rate Sensitivity](index=12&type=section&id=Net%20Interest%20Income%20Sensitivity%20to%20Shifts%20in%20Term%20SOFR) With a $213 million net floating-rate asset exposure, LFT's net interest income shows minimal sensitivity to SOFR changes, indicating a well-hedged position - **100% of the loan portfolio is floating-rate** and indexed to 30-day term SOFR[29](index=29&type=chunk) Floating-Rate Exposure (in millions) | Item | Amount | | :--- | :--- | | Floating Rate Assets | $924 | | Floating Rate Liabilities | ($712) | | **Net Exposure** | **$213** | - A **+/- 25 basis point change in SOFR** is projected to have a **less than $0.01 per share impact** on net interest income[28](index=28&type=chunk) [Appendix](index=13&type=section&id=Appendix) The appendix provides supplementary details including the CRE loan portfolio breakdown, full financial statements, non-GAAP reconciliations, and definitions of key financial terms [CRE Loan Portfolio Details](index=14&type=section&id=6%2F30%2F2025%20CRE%20Loan%20Portfolio%20Details) This section details the 56 loans in the CRE portfolio as of June 30, 2025, including property type, location, unpaid principal balance, and weighted average note spread CRE Loan Portfolio Summary | Metric | Value | | :--- | :--- | | Total Unpaid Principal Balance | $924,227,644 | | Weighted Average Note Spread | 3.56% | [Consolidated Financial Statements](index=16&type=section&id=Consolidated%20Financial%20Statements) This section presents the unaudited consolidated balance sheets and income statement for Q2 2025, providing detailed GAAP figures for assets, liabilities, equity, revenues, and expenses - The consolidated balance sheet shows total assets of **$998.4 million** and total liabilities of **$766.9 million** as of June 30, 2025[34](index=34&type=chunk) - The consolidated statement of income for Q2 2025 reports total interest income of **$20.6 million** and total interest expense of **$13.6 million**, resulting in net interest income of approximately **$7.0 million**[36](index=36&type=chunk) [Reconciliation of Non-GAAP Measures](index=18&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) This section reconciles non-GAAP metrics like Distributable Earnings to GAAP net income, details the allowance for loan losses, and calculates Book Value Per Share of Common Stock - The allowance for credit losses decreased from **$17.1 million** at the beginning of the period to **$14.3 million** at the end of Q2 2025, after accounting for a **$0.1 million provision** and **$2.9 million in charge-offs**[39](index=39&type=chunk) - Total stockholders' equity of **$231.5 million** is adjusted for preferred equity (**$60 million**) to arrive at common equity of **$171.4 million**, resulting in a Book Value Per Share of **$3.27**[45](index=45&type=chunk) - Total GAAP liabilities and equity of **$998.3 million** are adjusted for non-capital items like payables to arrive at a total LFT Capitalization of **$990.8 million**[42](index=42&type=chunk) [Key Definitions](index=22&type=section&id=Key%20Definitions) This section defines "Distributable Earnings" as a non-GAAP measure for dividend capacity and "Book Value Per Share of Common Stock" based on common equity - "Distributable Earnings" is a non-GAAP measure that excludes various non-cash items from GAAP net income and is used as a performance metric for declaring dividends and calculating management incentive fees[48](index=48&type=chunk)[49](index=49&type=chunk) - "Book Value Per Share of Common Stock" is calculated by subtracting the liquidation preference of preferred stock (**$25.00 per share**) from total stockholders' equity and dividing by the number of common shares[47](index=47&type=chunk)

[PART I – FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for The Carlyle Group Inc. as of June 30, 2025, and for the three and six-month periods then ended, showing significant increases in net income and total assets [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets increased to $25.1 billion from $23.1 billion at year-end 2024, driven by growth in investments of Consolidated Funds, while total liabilities rose to $18.4 billion and total equity increased to $6.7 billion Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$25,067.8** | **$23,103.5** | | Cash and cash equivalents | $1,275.8 | $1,266.0 | | Investments | $11,203.1 | $10,936.7 | | Investments of Consolidated Funds | $9,857.5 | $7,782.4 | | **Total Liabilities** | **$18,350.2** | **$16,755.9** | | Debt obligations | $2,155.3 | $2,143.5 | | Loans payable of Consolidated Funds | $8,056.1 | $6,864.2 | | Accrued compensation and benefits | $5,598.9 | $5,446.6 | | **Total Equity** | **$6,717.6** | **$6,347.6** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, total revenues surged to $1.57 billion from $1.07 billion in the prior-year quarter, primarily due to a significant increase in performance allocations, leading to a net income of $319.7 million, or $0.89 per basic share Key Operating Results (in millions, except per share data) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$1,572.9** | **$1,069.7** | **$2,546.0** | **$1,758.1** | | Fund management fees | $620.4 | $534.4 | $1,206.5 | $1,058.0 | | Performance allocations | $638.8 | $198.2 | $861.7 | $41.2 | | **Total Expenses** | **$1,179.1** | **$845.8** | **$1,987.3** | **$1,406.5** | | **Net Income Attributable to CG** | **$319.7** | **$148.2** | **$449.7** | **$213.8** | | Basic EPS | $0.89 | $0.41 | $1.25 | $0.59 | | Diluted EPS | $0.87 | $0.40 | $1.23 | $0.58 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash used in operating activities significantly improved to $520.9 million, with net cash provided by financing activities totaling $526.8 million, resulting in a slight increase in total cash Six Months Ended June 30 Cash Flow Summary (in millions) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(520.9) | $(1,198.6) | | Net cash used in investing activities | $(34.2) | $(36.9) | | Net cash provided by financing activities | $526.8 | $717.2 | | **Increase (decrease) in cash** | **$10.4** | **$(525.0)** | [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's accounting policies, including consolidation of VIEs, revenue recognition for performance allocations, and fair value measurement, alongside significant disclosures on investments, borrowings, and equity-based compensation - The company consolidates Variable Interest Entities (VIEs) where it is the primary beneficiary. As of June 30, 2025, assets and liabilities of consolidated VIEs were **$10.6 billion** and **$9.1 billion**, respectively[59](index=59&type=chunk) - Performance allocations (carried interest) are accounted for under ASC 323 as earnings from financial assets and are recognized based on the amount that would be due if the funds were hypothetically liquidated at the reporting date[70](index=70&type=chunk)[87](index=87&type=chunk) - On March 31, 2025, the company restructured its strategic investment in NGP, resulting in an impairment charge of **$92.5 million** on its investment in NGP Management and a **$38 million** reduction in accrued performance allocations[195](index=195&type=chunk)[196](index=196&type=chunk)[199](index=199&type=chunk) - The company's Board of Directors reset the share repurchase authorization to **$1.4 billion** effective February 6, 2024. As of June 30, 2025, **$572.0 million** of repurchase capacity remained[305](index=305&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=72&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's performance amidst a volatile macroeconomic environment, highlighting strong investment and realization pace, segment-specific results, and robust liquidity management strategies [Overview and Business Trends](index=72&type=section&id=Overview%20and%20Business%20Trends) Management observed a volatile Q2 2025, marked by tariff concerns and strong financial market performance, with ongoing risks from trade policy changes, subdued M&A deal count, and continued strong investment and realization activity for Carlyle - The market faced volatility from higher-than-expected tariffs, though it ultimately performed well, with the S&P 500 up **10.6%** in Q2 2025. However, changes in trade policy pose ongoing risks to corporate profit margins and global growth[382](index=382&type=chunk)[385](index=385&type=chunk) - Global M&A activity was subdued in terms of deal count (**8,700 transactions**, the lowest since 2005), despite high aggregate dollar volumes flattered by mega-deals. Sponsor-led exit activity was also sluggish[388](index=388&type=chunk) - Carlyle's investment activity remained strong, deploying **$14.6 billion** and realizing **$7.6 billion** in proceeds in Q2 2025, significantly higher than Q2 2024. The carry fund portfolio appreciated **2%** during the quarter[390](index=390&type=chunk)[391](index=391&type=chunk) [Consolidated Results of Operations](index=85&type=section&id=Consolidated%20Results%20of%20Operations) The company's consolidated results for Q2 2025 show a 47% increase in total revenues to $1.57 billion, driven by a 222% surge in performance allocations, leading to a 116% increase in net income attributable to common stockholders Consolidated Results of Operations Summary (in millions) | Metric | Q2 2025 | Q2 2024 | Change % | YTD 2025 | YTD 2024 | Change % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$1,572.9** | **$1,069.7** | **47%** | **$2,546.0** | **$1,758.1** | **45%** | | Fund management fees | $620.4 | $534.4 | 16% | $1,206.5 | $1,058.0 | 14% | | Performance allocations | $638.8 | $198.2 | 222% | $861.7 | $41.2 | NM | | **Total Expenses** | **$1,179.1** | **$845.8** | **39%** | **$1,987.3** | **$1,406.5** | **41%** | | **Net Income Attributable to CG** | **$319.7** | **$148.2** | **116%** | **$449.7** | **$213.8** | **110%** | - The increase in fund management fees for the six months ended June 30, 2025 was driven by the commencement of investment periods for newly raised funds and higher transaction fees, which more than doubled to **$122.5 million** from **$50.0 million** in the prior year period[464](index=464&type=chunk)[468](index=468&type=chunk) - The decrease in Principal Investment Income for the six months ended June 30, 2025 was primarily due to a **$92.5 million** impairment charge and a **$38.0 million** reduction in accrued carry related to the NGP restructuring[478](index=478&type=chunk) [Segment Analysis](index=95&type=section&id=Segment%20Analysis) This section details the performance of Carlyle's three segments, showing Global Private Equity's Distributable Earnings (DE) slightly down, Global Credit's DE up 27% due to higher fee-related earnings, and Carlyle AlpInvest's DE surging 96% from increased fund management fees and principal investment income Distributable Earnings by Segment (in millions) | Segment | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Global Private Equity | $231.9 | $199.1 | $497.5 | $512.2 | | Global Credit | $120.9 | $99.8 | $231.4 | $181.9 | | Carlyle AlpInvest | $78.2 | $44.3 | $157.5 | $80.4 | | **Total Distributable Earnings** | **$431.0** | **$343.2** | **$886.4** | **$774.5** | Fee Related Earnings by Segment (in millions) | Segment | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Global Private Equity | $143.6 | $151.6 | $284.8 | $312.7 | | Global Credit | $111.4 | $81.3 | $215.3 | $152.5 | | Carlyle AlpInvest | $68.3 | $40.1 | $133.8 | $74.1 | | **Total Fee Related Earnings** | **$323.3** | **$273.0** | **$633.9** | **$539.3** | [Liquidity and Capital Resources](index=118&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with $1.3 billion in cash and equivalents and $1.0 billion available credit, utilizing capital for business growth, debt service, and shareholder returns through dividends and share repurchases, with detailed contractual obligations - As of June 30, 2025, Carlyle had approximately **$1.3 billion** in cash and cash equivalents and **$1.0 billion** of available capacity under its senior revolving credit facility[598](index=598&type=chunk)[599](index=599&type=chunk) - The company maintains a quarterly dividend policy of **$0.35 per common share**. Dividends paid during the first six months of 2025 totaled **$252.7 million**[621](index=621&type=chunk)[622](index=622&type=chunk) - During the six months ended June 30, 2025, the company paid **$280.1 million** to repurchase or retire **5.6 million shares**, including shares withheld for tax obligations on equity awards[628](index=628&type=chunk)[638](index=638&type=chunk) Contractual Obligations Summary as of June 30, 2025 (in millions) | Obligation Type (Carlyle Operating Entities) | Total | | :--- | :--- | | Debt obligations | $2,176.7 | | Interest payable | $1,997.9 | | Operating lease obligations | $590.4 | | Capital commitments to Carlyle funds (Company portion) | $674.8 | | Tax receivable agreement payments | $71.6 | | **Total** | **$5,569.5** | [Quantitative and Qualitative Disclosures About Market Risk](index=129&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposure is linked to the fair value of its fund investments, with no material changes observed during the first six months of 2025 - The company's main market risk is tied to the fair value of its funds' investments, which affects management fees, incentive fees, and performance allocations[670](index=670&type=chunk) - There was no material change in market risks during the six months ended June 30, 2025[672](index=672&type=chunk) [Controls and Procedures](index=129&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of the end of the reporting period[674](index=674&type=chunk) - No changes occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[675](index=675&type=chunk) [PART II – OTHER INFORMATION](index=131&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Legal Proceedings](index=131&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal matters, including the Authentix Matter concerning breach of fiduciary duty and the Tax Receivable Agreement Matter regarding stockholder payments, with outcomes not expected to materially exceed accrued amounts - The company is a defendant in the Authentix Matter, where former minority shareholders allege breach of fiduciary duty in the sale of a portfolio company. A trial court decision in favor of Carlyle is currently on appeal[255](index=255&type=chunk) - The company is also involved in the Tax Receivable Agreement Matter, a stockholder lawsuit challenging payments made to certain officers and directors in connection with the company's 2020 corporate conversion[256](index=256&type=chunk) [Risk Factors](index=131&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the comprehensive discussion of potential risks and uncertainties detailed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - For a discussion of potential risks and uncertainties, the report refers to Item 1A, "Risk Factors," in the Annual Report on Form 10-K for the year ended December 31, 2024[678](index=678&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=131&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2025, the company repurchased approximately 2.2 million shares of common stock for $100.0 million under its share repurchase program, with $572.0 million remaining authorized as of June 30, 2025 Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | Total Value (millions) | | :--- | :--- | :--- | :--- | | April 2025 | — | — | — | | May 2025 | 835,494 | $45.84 | $38.3 | | June 2025 | 1,338,472 | $46.13 | $61.7 | | **Total Q2** | **2,173,966** | **-** | **$100.0** | - The maximum remaining value of shares that may be purchased under the plan was **$572.0 million** as of June 30, 2025, factoring in both open market repurchases and net share settlements of equity-based awards[684](index=684&type=chunk) [Exhibits](index=132&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, credit agreements, compensatory plan forms, and officer certifications

PART I [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's total assets decreased to $998.4 million as of June 30, 2025, from $1.13 billion at December 31, 2024, with net income for Q2 2025 at $3.7 million, down from $4.6 million in Q2 2024, and H1 2025 net income at $3.2 million, a significant drop from $11.6 million in the prior year period [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased from $1.13 billion at year-end 2024 to $998.4 million as of June 30, 2025, driven by a decrease in commercial mortgage loans held-for-investment from $1.05 billion to $905.4 million, while total liabilities also decreased from $890.7 million to $766.9 million, and total equity saw a slight reduction from $237.9 million to $231.5 million Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $59,404 | $69,173 | | Commercial mortgage loans held-for-investment, net | $905,420 | $1,048,803 | | Real estate owned, held-for-investment, net | $23,818 | $0 | | **Total Assets** | **$998,387** | **$1,128,594** | | **Liabilities** | | | | Collateralized loan obligations and secured financings, net | $709,863 | $828,390 | | **Total Liabilities** | **$766,931** | **$890,695** | | **Total Equity** | **$231,456** | **$237,899** | - The company's consolidated balance sheets include significant assets and liabilities from consolidated variable interest entities (VIEs) As of June 30, 2025, assets of consolidated VIEs totaled **$934.1 million** and liabilities totaled **$712.8 million**[10](index=10&type=chunk) [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) For the second quarter of 2025, net interest income was $7.0 million, down from $9.5 million in Q2 2024, with net income attributable to common stockholders at $2.5 million, or $0.05 per share, compared to $3.4 million, or $0.07 per share, in the prior-year quarter, and for the six-month period, net income attributable to common stockholders was $0.8 million, a sharp decline from $9.2 million year-over-year Quarterly Performance Comparison (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Interest Income | $6,961 | $9,523 | | Provision for credit losses, net | ($95) | ($1,400) | | Net Income | $3,691 | $4,598 | | Net Income Attributable to Common Stockholders | $2,506 | $3,413 | | Basic and Diluted EPS | $0.05 | $0.07 | Six-Month Performance Comparison (in thousands, except per share data) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net Interest Income | $14,695 | $22,515 | | Provision for credit losses, net | ($5,792) | ($3,177) | | Net Income | $3,168 | $11,579 | | Net Income Attributable to Common Stockholders | $798 | $9,209 | | Basic and Diluted EPS | $0.02 | $0.18 | [Consolidated Statements of Changes in Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Equity) Total equity decreased from $237.9 million at the end of 2024 to $231.5 million at June 30, 2025, primarily driven by common and preferred stock dividends totaling $9.7 million, partially offset by net income of $3.2 million and minor common stock issuances - For the six months ended June 30, 2025, total equity decreased by approximately **$6.4 million** Key activities included net income of **$3.2 million**, offset by common stock dividends of **$7.3 million** and preferred stock dividends of **$2.4 million**[16](index=16&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities was $7.7 million, net cash provided by investing activities was $116.0 million, and net cash used in financing activities was $134.5 million, resulting in a net decrease in cash of $10.8 million Six-Month Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $7,705 | $14,571 | | Net Cash Provided by Investing Activities | $115,958 | $162,272 | | Net Cash (Used in) Financing Activities | ($134,480) | ($161,768) | | **Net (Decrease) Increase in Cash** | **($10,816)** | **$15,075** | - A significant non-cash investing activity was the transfer of a senior loan to Real Estate Owned (REO) valued at **$23.96 million** during the first six months of 2025[20](index=20&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) The notes provide detailed explanations of the company's accounting policies and financial activities, including the structure of its commercial mortgage loan portfolio, the use of Collateralized Loan Obligations (CLOs) as VIEs for financing, management fee structures, and the methodology for calculating the allowance for credit losses under CECL [NOTE 3 - COMMERCIAL MORTGAGE LOANS HELD-FOR-INVESTMENT](index=13&type=section&id=NOTE%203%20-%20COMMERCIAL%20MORTGAGE%20LOANS%20HELD-FOR-INVESTMENT) The commercial mortgage loan portfolio, consisting entirely of senior secured floating-rate loans, decreased to a carrying value of $905.4 million as of June 30, 2025, from $1.05 billion at year-end 2024, with the allowance for credit losses increasing to $14.3 million from $11.3 million, and the portfolio's average risk rating remaining stable at 3.5, heavily concentrated in multifamily properties (90.6%) and geographically focused in the South (36.3%) and Southwest (32.8%) Loan Portfolio Characteristics | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Unpaid Principal Balance | $924.2M | $1,065.6M | | Carrying Value (net of allowance) | $905.4M | $1,048.8M | | Loan Count | 56 | 65 | | Weighted Average Coupon | 7.9% | 8.1% | | Allowance for Credit Losses | $14.3M | $11.3M | Loan Portfolio Risk Rating (by Outstanding Principal) | Risk Rating | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | 2 (Low Risk) | $80.4M | $57.8M | | 3 (Moderate Risk) | $495.5M | $616.6M | | 4 (High Risk) | $224.2M | $292.8M | | 5 (Default Risk) | $124.1M | $98.3M | | **Total** | **$924.2M** | **$1,065.6M** | - As of June 30, 2025, there were **eight loans** with a risk rating of '5' (Default Risk) totaling **$124.1 million** in principal, an increase from **six loans** totaling **$98.3 million** at year-end 2024 Several loans were placed on non-accrual status or required specific allowances for credit losses due to monetary or maturity defaults[70](index=70&type=chunk)[71](index=71&type=chunk)[78](index=78&type=chunk) - The allowance for credit losses on loans held-for-investment increased from **$11.3 million** at the beginning of the period to **$14.3 million** at the end of June 2025, after a provision of **$5.8 million** and charge-offs of **$2.9 million**[75](index=75&type=chunk) [NOTE 4 - USE OF SPECIAL PURPOSE ENTITIES AND VARIABLE INTEREST ENTITIES](index=17&type=section&id=NOTE%204%20-%20USE%20OF%20SPECIAL%20PURPOSE%20ENTITIES%20AND%20VARIABLE%20INTEREST%20ENTITIES) The company utilizes two primary Variable Interest Entities (VIEs) for financing, the 2021-FL1 CLO and the LMF 2023-1 Financing, which LFT consolidates, holding $934.1 million in assets and $712.8 million in liabilities as of June 30, 2025, with all collateralization and coverage tests met Consolidated VIE Assets and Liabilities (June 30, 2025) | Account | Amount (in millions) | | :--- | :--- | | **Assets** | | | Loans held for investment, net | $902.9 | | Real estate owned, net | $23.8 | | **Total VIE Assets** | **$934.1** | | **Liabilities** | | | Collateralized loan obligations and secured financings | $709.9 | | **Total VIE Liabilities** | **$712.8** | - The 2021-FL1 CLO's reinvestment period expired in December 2023, meaning principal proceeds now reduce the outstanding debt The LMF 2023-1 Financing has a reinvestment period through July 2025[97](index=97&type=chunk)[98](index=98&type=chunk) [NOTE 5 - REAL ESTATE OWNED](index=19&type=section&id=NOTE%205%20-%20REAL%20ESTATE%20OWNED) As of June 30, 2025, the company held two multifamily properties as Real Estate Owned (REO) with a net book value of $23.8 million, acquired during the first half of 2025 through foreclosure on defaulted bridge loans within its consolidated CLO and financing vehicles, with a weighted average occupancy of approximately 73.5% - During the first six months of 2025, the company foreclosed on two multifamily bridge loans, resulting in the acquisition of REO assets One had a net carrying value of **$13.0 million** (net of **$2.4 million** CECL reserves) and the other had a net carrying value of **$11.0 million** (net of **$0.5 million** CECL reserves)[104](index=104&type=chunk)[105](index=105&type=chunk) [NOTE 7 - SECURED TERM LOAN](index=20&type=section&id=NOTE%207%20-%20SECURED%20TERM%20LOAN) The company has a $47.75 million Secured Term Loan maturing in February 2026, with its interest rate subject to step-ups, increasing to 7.50% on February 24, 2025, and to 7.85% on June 23, 2025, secured by substantially all assets of the credit parties and in compliance with all financial covenants as of June 30, 2025 Secured Term Loan Details | Metric | Value | | :--- | :--- | | Outstanding Balance (June 30, 2025) | $47.75M | | Maturity Date | February 14, 2026 | | Interest Rate (as of June 23, 2025) | 7.85% | [NOTE 10 - RELATED PARTY TRANSACTIONS](index=23&type=section&id=NOTE%2010%20-%20RELATED%20PARTY%20TRANSACTIONS) The company is externally managed by Lument Investment Management (Lument IM), to whom it paid management fees of $2.2 million and incentive fees of $0.7 million for the six months ended June 30, 2025, with the Manager waiving $453,222 in incentive fees for this period, and also reimbursing the Manager for certain operating expenses totaling $0.9 million for the first half of 2025 Fees Paid to Manager (Six Months Ended June 30) | Fee Type | 2025 | 2024 | | :--- | :--- | :--- | | Management Fees | $2,214,753 | $2,209,196 | | Incentive Fees (incurred) | $654,309 | $2,171,752 | | Reimbursable Expenses | $899,421 | $875,074 | - The Manager agreed to waive **$453,222** in incentive fees that would have otherwise been incurred for the six months ended June 30, 2025[129](index=129&type=chunk) [NOTE 13 - EQUITY](index=25&type=section&id=NOTE%2013%20-%20EQUITY) As of June 30, 2025, the company had 52.3 million common shares and 2.4 million Series A Preferred shares outstanding, with $9.4 million remaining authorized under its $10 million stock repurchase program, and declared common dividends of $0.14 per share and preferred dividends of $0.98438 per share during the first six months of 2025, also issuing 31,837 shares under an Independent Directors Stock-for-Fees Program Dividends Declared (H1 2025) | Stock Type | Total Dividend Amount | Per Share | | :--- | :--- | :--- | | Common Stock | $7,326,421 | $0.14 | | Series A Preferred Stock | $2,362,500 | $0.98438 | - The company has a stock repurchase program with **$9.4 million** remaining authorized as of June 30, 2025 No repurchases have been made since January 2016[150](index=150&type=chunk) [NOTE 16 - SUBSEQUENT EVENTS](index=29&type=section&id=NOTE%2016%20-%20SUBSEQUENT%20EVENTS) In August 2025, subsequent to the reporting period, the company acquired a multifamily property in San Antonio, TX, through foreclosure, where the associated loan, held in the 2021-FL1 CLO, had a risk rating of '5' and an outstanding principal balance of $26.6 million as of June 30, 2025 - In August 2025, the company foreclosed on a multifamily property in San Antonio, TX The loan had an outstanding principal of **$26.6 million** and was risk-rated '5'[166](index=166&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the challenging market environment characterized by high interest rates and slowing economic growth, which has increased credit risk in the portfolio, leading to a significant year-over-year decrease in net income due to lower net interest income and higher credit loss provisions on several risk-rated '5' multifamily loans, with the loan portfolio decreasing to $0.9 billion, financed primarily by $0.7 billion in non-mark-to-market CLOs, and key performance metrics for Q2 2025 including a net income of $0.05 per share and Distributable Earnings of $0.05 per share, with a declared dividend of $0.06 per share, and book value per common share declining to $3.27 [Recent Developments and Market Conditions](index=31&type=section&id=Recent%20Developments%20and%20Market%20Conditions) The market continues to face volatility from high inflation and interest rates, slowing economic growth, and geopolitical uncertainty, with elevated Federal Reserve rates posing challenges to commercial real estate values and borrower performance, although partially mitigated by interest rate caps on 75% of performing loans - Market volatility is driven by high inflation, elevated interest rates, and slowing economic growth, which adversely impacts the real estate industry and the company's borrowers[178](index=178&type=chunk) - The Federal Reserve has held the federal funds target range at **4.25% to 4.50%** through July 2025 The prolonged period of elevated rates may adversely affect borrowers and strain the operating cash flows of collateral properties[179](index=179&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk) [Second Quarter 2025 Summary](index=31&type=section&id=Second%20Quarter%202025%20Summary) For the second quarter of 2025, the company reported net income attributable to common stockholders of $2.5 million, or $0.05 per share, and Distributable Earnings of $2.8 million, or $0.05 per share, declared a common dividend of $0.06 per share, saw book value per common share stand at $3.27, and experienced $63.4 million in loan payoffs while funding $3.6 million in new loan participations Q2 2025 Key Metrics | Metric | Value | | :--- | :--- | | Net Income per Share | $0.05 | | Distributable Earnings per Share | $0.05 | | Common Dividend per Share | $0.06 | | Book Value per Share | $3.27 | [Key Financial Measures and Indicators](index=32&type=section&id=Key%20Financial%20Measures%20and%20Indicators) The company uses Earnings per Share, Dividends Declared, Distributable Earnings, and Book Value per Share as key indicators, with Q2 2025 Distributable Earnings at $2.8 million ($0.05/share), reconciled from GAAP net income by excluding non-cash items, and book value per common share decreasing to $3.27 from $3.40 at the end of 2024, impacted by a CECL allowance of $0.27 per share Reconciliation of Net Income to Distributable Earnings (Q2 2025) | Item | Amount (in thousands) | | :--- | :--- | | Net income attributable to common stockholders | $2,506 | | Unrealized loss on MSRs | $36 | | Unrealized provision for credit losses | $95 | | Depreciation of REO | $139 | | Adjustment for income taxes | ($4) | | **Distributable Earnings** | **$2,772** | Book Value Per Share Calculation | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total stockholders' equity | $231.4M | $237.8M | | Less: Preferred stock | ($60.0M) | ($60.0M) | | Total common stockholders' equity | $171.4M | $177.8M | | **Book value per share** | **$3.27** | **$3.40** | [Results of Operations](index=41&type=section&id=Results%20of%20Operations) Comparing Q2 2025 to Q1 2025, net income increased from a loss of $1.7 million to a gain of $2.5 million, primarily due to a significantly lower provision for credit losses in Q2, while net interest income decreased slightly from $7.7 million to $7.0 million due to a smaller loan portfolio, and on a year-over-year basis for the six-month period, net income fell sharply from $9.2 million in H1 2024 to $0.8 million in H1 2025, driven by a $7.8 million decrease in net interest income and a $2.6 million increase in other expenses - The increase in net income from Q1 2025 to Q2 2025 was mainly driven by a decrease in the provision for credit losses, from a **$5.7 million** provision in Q1 to a **$0.1 million** provision in Q2[255](index=255&type=chunk)[254](index=254&type=chunk) - The decrease in net income for the six months ended June 30, 2025 compared to the same period in 2024 was primarily due to a **$7.8 million** reduction in net interest income and a **$2.6 million** increase in total other expense, largely from higher credit loss provisions[268](index=268&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) The company's primary liquidity sources are cash flow from operations, proceeds from stock issuance, and debt facilities, with unrestricted cash at $59.4 million as of June 30, 2025, and a total debt-to-equity ratio of 3.3:1 on a GAAP basis, facing heightened risk of using unrestricted cash to purchase defaulted assets out of its CLOs to satisfy coverage tests, though management believes current liquidity is sufficient for short-term needs, with long-term requirements dependent on additional financing - Unrestricted cash and cash equivalents decreased to **$59.4 million** at June 30, 2025, from **$69.2 million** at December 31, 2024[282](index=282&type=chunk) - The company's total debt to equity ratio was **3.3:1** as of June 30, 2025 The ratio of recourse debt to equity was much lower at **0.2:1**[283](index=283&type=chunk)[284](index=284&type=chunk) - There is a heightened possibility that the Company may need to use unrestricted cash to purchase defaulted mortgage assets out of its CLO structures to ensure compliance with interest and overcollateralization coverage tests[280](index=280&type=chunk) [Quantitative and Qualitative Disclosures about Market Risks](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risks) The company has indicated that this item is not applicable for this reporting period - Not applicable[299](index=299&type=chunk) [Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the most recently completed fiscal quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[301](index=301&type=chunk) - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[302](index=302&type=chunk) PART II - Other Information [Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material legal proceedings as of the reporting date - As of the report date, the company is not subject to any legal proceedings that it considers to be material[303](index=303&type=chunk) [Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors since the Annual Report on Form 10-K for the year ended December 31, 2025, with risks disclosed in the Q1 2025 10-Q incorporated by reference - No material changes to risk factors have occurred since the company's Annual Report on Form 10-K for the year ended December 31, 2025[304](index=304&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the period - None[305](index=305&type=chunk) [Defaults Upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the period - None[306](index=306&type=chunk) [Other Information](index=48&type=section&id=Item%205.%20Other%20Information) During the quarter ended June 30, 2025, no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[308](index=308&type=chunk) [Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including CEO and CFO certifications and XBRL data files - The exhibits filed with the report include certifications from the CEO and CFO pursuant to Sarbanes-Oxley Sections 302 and 906, as well as XBRL Interactive Data Files[312](index=312&type=chunk)