Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-07120 HARTE HANKS, INC. (Exact name of registrant as specified in its charter) Delaware 1 Executive Drive, Chelmsfor ...

(Mark One) UNITED STATES SECURITIES AND EXCHANGE COMMISSION ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Washington, D.C. 20549 FORM 10-Q OR For the quarterly period ended June 30, 2025 (Exact name of registrant as specified in its charter) ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Delaware 83-2909368 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1110 North Virg ...

[CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=4&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section contains forward-looking statements subject to substantial risks and uncertainties, reflecting management's current views on future events and financial performance - This section contains forward-looking statements subject to substantial risks and uncertainties, reflecting management's current views on future events and financial performance[10](index=10&type=chunk) - Actual results may differ materially due to known and unknown risks, uncertainties, and other important factors, including those detailed in the "Risk Factors" sections of this report and the Annual Report on Form 10-K[11](index=11&type=chunk) - The company undertakes no obligation to update forward-looking statements, except as required by law[11](index=11&type=chunk) [PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for AEye, Inc., including the balance sheets, statements of operations and comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, fair value measurements, and other financial details for the periods ended June 30, 2025, and December 31, 2024 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (2025 vs 2024) | | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Total current assets | $20,412 | $25,171 | -$4,759 | | Total assets | $22,102 | $27,120 | -$5,018 | | Total current liabilities | $10,587 | $11,307 | -$720 | | Total liabilities | $11,920 | $11,996 | -$76 | | Total stockholders' equity | $10,182 | $15,124 | -$4,942 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) | Metric (Six months ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (2025 vs 2024) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | | Revenue | $86 | $52 | +$34 (65% increase) | | Cost of revenue | $204 | $423 | -$219 (52% decrease) | | Gross loss | $(118) | $(371) | +$253 (68% decrease) | | Total operating expenses | $15,387 | $18,616 | -$3,229 (17% decrease)| | Loss from operations | $(15,505) | $(18,987) | +$3,482 (18% decrease)| | Net loss | $(17,286) | $(18,206) | +$920 (5% decrease) | | Net loss per share (basic & diluted)| $(0.95) | $(2.80) | +$1.85 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | Metric (Six months ended June 30) | 2025 (in thousands) | 2024 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Balance at December 31, 2024/2023 | $15,124 | $29,023 | | Stock-based compensation | $3,661 | $4,754 | | Issuance of common stock under CSPA | $8,397 | $5,560 | | Net loss | $(17,286) | $(18,206) | | Balance at June 30, 2025/2024 | $10,182 | $20,810 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity (Six months ended June 30) | 2025 (in thousands) | 2024 (in thousands) | Change (2025 vs 2024) | | :-------------------------------------------- | :------------------ | :------------------ | :-------------------- | | Net cash used in operating activities | $(14,158) | $(14,241) | +$83 (0.6% decrease in usage) | | Net cash used in investing activities | $(4,686) | $2,993 | -$7,679 (shift from provision to usage) | | Net cash provided by financing activities | $10,952 | $5,531 | +$5,421 (98% increase) | | Net decrease in cash, cash equivalents and restricted cash | $(7,892) | $(5,717) | -$2,175 (38% increase in decrease) | | Cash, cash equivalents and restricted cash—End of period | $2,374 | $13,365 | -$10,991 (82% decrease) | [Notes To Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements) [1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%201.%20ORGANIZATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - AEye, Inc. provides high-performance, active lidar systems for vehicle autonomy, ADAS, and robotic vision applications, featuring an Intelligent Sensing Platform with a solid-state software-definable active lidar sensor and adaptive sensing SmartScan architecture[25](index=25&type=chunk) - The company has incurred net losses and negative cash flows from operations since inception, with an accumulated deficit of **$390,381 thousand** as of June 30, 2025[34](index=34&type=chunk) - Management believes existing liquidity of **$19,210 thousand** (cash, cash equivalents, marketable securities) at June 30, 2025, combined with **$68,844 thousand** raised post-quarter-end, provides sufficient financial resources for the next twelve months[35](index=35&type=chunk) [2. FAIR VALUE MEASUREMENTS](index=12&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%202.%20FAIR%20VALUE%20MEASUREMENTS) - The company measures financial assets and liabilities at fair value using a hierarchy of Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[43](index=43&type=chunk)[44](index=44&type=chunk) - The 2025 Convertible Note and Derivative Warrant Liabilities are measured using Level 3 inputs, with fair value estimates based on binomial-lattice and Black-Scholes models, respectively[50](index=50&type=chunk)[52](index=52&type=chunk) | Metric | Derivative Warrant Liabilities (in thousands) | 2025 Note (in thousands) | Total (in thousands) | | :------------------------------------------ | :------------------------------------ | :----------------------- | :------------------- | | Balance at December 31, 2024 | $26 | $— | $26 | | Additions | $1,046 | $3,266 | $4,312 | | Payments and conversions | $— | $(1,466) | $(1,466) | | Change in fair value included in other income (expense), net | $(284) | $197 | $(87) | | Balance at June 30, 2025 | $788 | $1,997 | $2,785 | [3. INVENTORIES](index=15&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%203.%20INVENTORIES) | Category | June 30, 2025 (unaudited) | December 31, 2024 | | :------------ | :------------------------ | :---------------- | | Raw materials | $214 | $158 | | Finished goods| $18 | $18 | | Total inventory, net | $232 | $176 | - Current and noncurrent inventory was written down by **$4,648 thousand** as of June 30, 2025, and **$4,659 thousand** as of December 31, 2024, to reduce it to the lower of cost or net realizable value[57](index=57&type=chunk) [4. PREPAID AND OTHER CURRENT ASSETS](index=15&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%204.%20PREPAID%20AND%20OTHER%20CURRENT%20ASSETS) | Category | June 30, 2025 (unaudited) | December 31, 2024 | | :----------------------------- | :------------------------ | :---------------- | | Prepaid expenses | $886 | $966 | | Receivable for issuance of common stock | $— | $1,679 | | Other | $57 | $61 | | Total prepaid and other current assets | $943 | $2,706 | - Advances to suppliers were written down by **$1,041 thousand** as of both June 30, 2025, and December 31, 2024, due to the winding down of the legacy Non-Automotive product[58](index=58&type=chunk) [5. LEASES](index=16&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%205.%20LEASES) - The Company leases office facilities and terminated an existing lease early in August 2024, recording a net gain of **$491 thousand** on termination for the year ended December 31, 2024[59](index=59&type=chunk)[60](index=60&type=chunk) - On April 28, 2025, the Company settled disputes related to the early lease termination by paying **$1,400 thousand** in cash and issuing a warrant for **350,000 shares**, resulting in a net gain of **$1,612 thousand** for the six months ended June 30, 2025[61](index=61&type=chunk) | Period | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :---------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $70 | $582 | $141 | $1,171 | | Variable lease cost | $4 | $85 | $8 | $169 | | Total operating lease cost | $74 | $667 | $149 | $1,340 | [6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES](index=17&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%206.%20ACCRUED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) | Category | June 30, 2025 (unaudited) | December 31, 2024 | | :----------------------------- | :------------------------ | :---------------- | | Lease termination liability | $301 | $3,313 | | Accrued payroll | $342 | $347 | | Operating lease liabilities | $253 | $267 | | Accrued bonuses | $1,248 | $2,875 | | Total accrued expenses and other current liabilities | $3,117 | $7,709 | [7. CONVERTIBLE NOTES](index=17&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%207.%20CONVERTIBLE%20NOTES) - In January 2025, the Company issued a senior unsecured convertible promissory note (2025 Note) for **$3,240 thousand** principal amount (**$3,000 thousand** purchase price) and warrants to purchase up to **805,263 shares** of common stock[65](index=65&type=chunk) - The 2025 Note has an eighteen-month term, accrues **7% annual interest**, and is convertible into common stock at **$2.22 per share**, subject to adjustments and beneficial ownership limitations[65](index=65&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) - As of June 30, 2025, the 2025 Note had an outstanding principal balance and accrued interest of **$1,958 thousand**, recorded at a fair value of **$1,997 thousand** as a current liability[70](index=70&type=chunk) [8. INTEREST EXPENSE AND OTHER](index=18&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%208.%20INTEREST%20EXPENSE%20AND%20OTHER) | Category | Three months ended June 30, 2025 (in thousands) | Three months ended June 30, 2024 (in thousands) | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Common stock purchase agreements costs | $195 | $— | $306 | $— | | Debt issuance costs | $36 | $— | $2,020 | $— | | Amortization of premiums (accretion of discounts) on marketable securities, net | $(90) | $(170) | $(181) | $(441) | | Interest expense and other | $365 | $(56) | $2,473 | $(373) | [9. STOCKHOLDERS' EQUITY](index=19&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%209.%20STOCKHOLDERS'%20EQUITY) - On July 25, 2024, the Company entered into a Common Stock Purchase Agreement (CSPA) with New Circle, granting the right to sell up to **$50,000 thousand** of common stock over 36 months, with **3,480,713 shares** issued for **$6,480 thousand** gross proceeds through June 30, 2025[72](index=72&type=chunk)[75](index=75&type=chunk) - In connection with the CSPA, the Company issued **225,563 commitment shares** with a fair value of **$282 thousand** and recorded a **$200 thousand** cash commitment fee to Interest expense and other[74](index=74&type=chunk) - Through June 30, 2025, the Company sold **6,395,643 shares** under the ATM Agreement with A.G.P. for gross proceeds of **$8,825 thousand**, increasing the aggregate offering value to **$15,292 thousand** in January 2025[77](index=77&type=chunk) [10. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)](index=20&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%2010.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) | Category | Balance at Dec 31, 2024 | Balance at Mar 31, 2025 | Balance at June 30, 2025 | | :------------------------------------------ | :---------------------- | :---------------------- | :----------------------- | | Unrealized gains on available-for-sale securities | $5 | $6 | $— | [11. NET LOSS PER SHARE](index=20&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%2011.%20NET%20LOSS%20PER%20SHARE) | Metric (Six months ended June 30) | 2025 | 2024 | | :-------------------------------- | :---------- | :---------- | | Net loss attributable to common stockholders (in thousands) | $(17,286) | $(18,206) | | Weighted average common shares outstanding (basic and diluted) | 18,137,050 | 6,499,089 | | Net loss per share (basic and diluted) | $(0.95) | $(2.80) | - Basic and diluted net loss per share were the same due to net losses, making all potentially dilutive securities anti-dilutive[80](index=80&type=chunk) [12. STOCK-BASED COMPENSATION](index=21&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%2012.%20STOCK-BASED%20COMPENSATION) | Expense Category | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :------------------------ | :----------------------------- | :----------------------------- | | Research and development | $1,011 | $1,708 | | Sales and marketing | $255 | $185 | | General and administrative| $2,395 | $2,861 | | Total stock-based compensation | $3,661 | $4,754 | [13. SEGMENT INFORMATION](index=21&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%2013.%20SEGMENT%20INFORMATION) - The Company operates as one reportable segment, managed on a consolidated basis by the Chief Executive Officer, focusing on the design and development of high-performance, active lidar systems and applications[82](index=82&type=chunk) [14. REVENUE](index=21&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%2014.%20REVENUE) | Category (Six months ended June 30) | 2025 (in thousands) | 2024 (in thousands) | | :---------------------------------- | :--- | :--- | | Revenue by primary geographical market: | | | | United States | $5 | $41 | | Europe | $65 | $11 | | Asia-Pacific | $16 | $— | | Total | $86 | $52 | | Revenue by timing of recognition: | | | | Recognized at a point in time | $22 | $26 | | Recognized over time | $64 | $26 | | Total | $86 | $52 | - Revenue from prototype sales for the six months ended June 30, 2025, was **$22 thousand**, compared to **$26 thousand** in the prior year[84](index=84&type=chunk) - Development contract revenue for the six months ended June 30, 2025, was **$64 thousand**, compared to **$26 thousand** in the prior year[85](index=85&type=chunk) [15. RESTRUCTURING](index=22&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%2015.%20RESTRUCTURING) - In 2023, the Company implemented a revised strategic plan to reduce fixed operating costs by simplifying business operations and focusing on a single unifying product, Apollo, for both Automotive and Non-Automotive markets[89](index=89&type=chunk) - As part of restructuring, the Company wound down support for its legacy Non-Automotive product and terminated its headquarters lease in August 2024, settling the lease termination liability in 2025[89](index=89&type=chunk) | Category | Balance as of Dec 31, 2024 (in thousands) | Adjustments (in thousands) | Cash payments (in thousands) | Balance as of June 30, 2025 (in thousands) | | :------------------------- | :---------- | :------------ | :-------------------------- | | Losses on purchase commitments | $297 | $— | $(30) | $267 | | Lease Termination Liability | $3,313 | $(1,612) | $(1,400) | $301 | | Other | $5 | $— | $— | $5 | | Total | $3,615 | $(1,612) | $(1,430) | $573 | [16. INCOME TAXES](index=23&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%2016.%20INCOME%20TAXES) - The Company recognized a **$2 thousand** provision for income taxes for both the six months ended June 30, 2025, and 2024[91](index=91&type=chunk) - Income tax rates vary from statutory rates due to valuation allowances on net operating losses and foreign tax rate differences[91](index=91&type=chunk) [17. COMMITMENTS AND CONTINGENCIES](index=23&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%2017.%20COMMITMENTS%20AND%20CONTINGENCIES) - On April 28, 2025, the Company settled a legal dispute with its former landlord regarding an early lease termination, paying **$1,400 thousand** in cash and agreeing to issue warrants for up to **350,000 shares** of common stock[93](index=93&type=chunk) - The landlord had initially claimed up to **$8,500 thousand** and drew down a **$2,150 thousand** standby letter of credit in August 2024[93](index=93&type=chunk) [18. SUBSEQUENT EVENTS](index=23&type=section&id=Notes%20To%20Condensed%20Consolidated%20Financial%20Statements%20-%2018.%20SUBSEQUENT%20EVENTS) - Subsequent to June 30, 2025, the Company issued **17,889,400 shares** of common stock under purchase agreements, raising **$67,057 thousand** in gross proceeds[94](index=94&type=chunk) - A noteholder exercised warrants to purchase **805,263 shares** of common stock for **$1,788 thousand** after June 30, 2025[94](index=94&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations for the three and six months ended June 30, 2025, compared to 2024, highlighting key factors, market trends, strategic initiatives, and liquidity [Overview](index=24&type=section&id=MD%26A%20-%20Overview) - The overview provides a high-level discussion of operating results and trends affecting the business, important for understanding financial results for the six months ended June 30, 2025, and future prospects[96](index=96&type=chunk) [Key Factors Affecting Our Operating Results](index=24&type=section&id=MD%26A%20-%20Key%20Factors%20Affecting%20Our%20Operating%20Results) - Future performance depends on successful product development and commercialization, securing additional capital, establishing Tier 1 automotive supplier relationships, protecting intellectual property, and adapting to changing market conditions and regulations[98](index=98&type=chunk)[99](index=99&type=chunk) - The company faces risks common to early-stage technology companies, including the possibility of not successfully developing or commercializing products and challenges in securing favorable additional capital[99](index=99&type=chunk) [Market Trends and Uncertainties](index=25&type=section&id=MD%26A%20-%20Market%20Trends%20and%20Uncertainties) - The Company anticipates growing demand for its Intelligent Sensing Platform in Automotive (ADAS, autonomous driving, commercial trucking) and Non-Automotive (railway, airport safety, perimeter monitoring, transportation logistics) markets[100](index=100&type=chunk) - Growth in the Automotive market is heavily influenced by successful integration into OEM programs and Tier 1 partnerships, which provide competitive advantages due to scale and existing relationships[100](index=100&type=chunk) - The Company expects to continue incurring net losses and negative cash flows until commercialization, remaining dependent on raising additional capital, but recently secured funds for at least the next 12 months[101](index=101&type=chunk)[102](index=102&type=chunk) [Partnerships and Commercialization](index=25&type=section&id=MD%26A%20-%20Partnerships%20and%20Commercialization) - Design wins with customers are critical for future success, with development cycles varying from months to several years depending on the market and application[103](index=103&type=chunk) - The Company engaged LITEON as its Tier 1 automotive supplier in early 2024, successfully producing the first Apollo units, and partnered with ATI and LighTekton Co., Ltd to manufacture and distribute products in China[104](index=104&type=chunk) - Significant progress has been made in collaboration with Nvidia, integrating lidar technology into Nvidia's DRIVE AGX Orin platform, which is expected to open new opportunities with global automotive OEMs and Tier 1 suppliers[105](index=105&type=chunk) - In July 2025, the Company launched OPTIS™, a physical AI solution combining Apollo lidar with advanced computing to enhance legacy infrastructure and create an ecosystem for third-party partners beyond automotive applications[107](index=107&type=chunk) [Gross Margin](index=26&type=section&id=MD%26A%20-%20Gross%20Margin) - Gross margins are influenced by selling price, development contract pricing, royalty rates, unit volumes, product mix, component costs, and overhead, and have been negatively impacted by inventory write-downs[108](index=108&type=chunk) - The Company expects attractive gross margins from licensing lidar technology to Tier 1 partners in the Automotive market and leveraging this foundation to expand into Non-Automotive markets[108](index=108&type=chunk) - Development contracts, focusing on product customization, are expected to remain significant in the near term but will represent a smaller share of total revenue over time as technology licensing in the Automotive market increases[109](index=109&type=chunk) [Investment and Innovation](index=26&type=section&id=MD%26A%20-%20Investment%20and%20Innovation) - The Company's proprietary adaptive intelligent lidar technology, the Intelligent Sensing Platform, actively scans environments to enable faster, more accurate decisions in complex scenarios[110](index=110&type=chunk) - In June 2024, Apollo, the next-generation lidar sensor, was introduced, offering best-in-class range and resolution in a compact, cost-effective form factor for automotive and non-automotive applications, with a horizontal field of view up to **120°** and long-range detection up to **1 kilometer**[111](index=111&type=chunk) - Financial performance is highly dependent on maintaining technology leadership through R&D investments and commercialization, with price becoming a critical differentiator for OEMs favoring lower-cost, higher-volume products[113](index=113&type=chunk) [Basis of Presentation](index=27&type=section&id=MD%26A%20-%20Basis%20of%20Presentation) - The Company conducts its business through one operating segment[114](index=114&type=chunk) [Components of Results of Operations](index=27&type=section&id=MD%26A%20-%20Components%20of%20Results%20of%20Operations) - Prototype sales revenue is recognized at a point in time upon transfer of goods, while development contract revenue is recognized when performance obligations are satisfied, either at a point in time or over time[115](index=115&type=chunk) - Cost of revenue includes direct materials, labor, inventory write-downs, and overhead for prototypes, and direct costs and overhead for development contracts[116](index=116&type=chunk) - R&D expenses, primarily for hardware, software, and system engineering, are expected to increase as the company invests in product development and commercialization[117](index=117&type=chunk) - Sales and marketing expenses are expected to increase as the company pursues Non-Automotive opportunities and leverages Tier 1 partners for Automotive market commercialization[120](index=120&type=chunk) - General and administrative expenses are expected to decrease slightly due to reduced facility costs, while still supporting other departments[121](index=121&type=chunk) - Changes in the fair value of the 2025 Note and warrant liabilities are recognized in other income (expense), net, and are expected to decrease given subsequent cancellations and exercises[122](index=122&type=chunk) - Interest income and other primarily consists of interest on cash, cash equivalents, and marketable securities, and is expected to increase due to funds raised post-June 30, 2025[125](index=125&type=chunk) [Results of Operations](index=29&type=section&id=MD%26A%20-%20Results%20of%20Operations) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($ in thousands) | Change (%) | | :-------------------------- | :------ | :------ | :--------- | :--------- | | Revenue | $22 | $32 | $(10) | (31)% | | Cost of revenue | $108 | $160 | $(52) | (33)% | | Gross loss | $(86) | $(128) | $42 | (33)% | | Research and development | $3,670 | $3,838 | $(168) | (4)% | | Sales and marketing | $601 | $67 | $534 | 797% | | General and administrative | $4,348 | $4,223 | $125 | 3% | | Total operating expenses | $8,619 | $8,128 | $491 | 6% | | Loss from operations | $(8,705)| $(8,256)| $(449) | 5% | | Net loss | $(9,270)| $(7,987)| $(1,283) | 16% | | Metric | 2025 (in thousands) | 2024 (in thousands) | Change ($ in thousands) | Change (%) | | :-------------------------- | :------ | :------ | :--------- | :--------- | | Total revenue | $86 | $52 | $34 | 65% | | Cost of revenue | $204 | $423 | $(219) | (52)% | | Gross loss | $(118) | $(371) | $253 | (68)% | | Research and development | $7,160 | $8,370 | $(1,210) | (14)% | | Sales and marketing | $984 | $408 | $576 | 141% | | General and administrative | $7,243 | $9,838 | $(2,595) | (26)% | | Total operating expenses | $15,387 | $18,616 | $(3,229) | (17)% | | Loss from operations | $(15,505)| $(18,987)| $3,482 | (18)% | | Net loss | $(17,286)| $(18,206)| $920 | (5)% | - Net loss for the three months ended June 30, 2025, increased by **16%** to **$9,270 thousand**, primarily due to increased personnel costs, Apollo development investments, and changes in fair value of convertible notes and warrants[136](index=136&type=chunk) - Net loss for the six months ended June 30, 2025, decreased by **5%** to **$17,286 thousand**, driven by decreases in stock-based compensation, personnel, and facilities expenses, partially offset by changes in fair value of convertible notes and warrants and Apollo development investments[147](index=147&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=MD%26A%20-%20Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, cash, cash equivalents, and marketable securities totaled **$19,210 thousand**[148](index=148&type=chunk) - Subsequent to June 30, 2025, the Company raised an additional **$68,844 thousand** through common stock purchase agreements and warrant exercises, providing sufficient financial resources for at least the next twelve months[148](index=148&type=chunk)[149](index=149&type=chunk) - The Company expects to continue incurring losses for several years and remains dependent on issuing equity for liquidity, with potential dilution for existing stockholders[148](index=148&type=chunk)[159](index=159&type=chunk) - The Company is no longer subject to "baby shelf" rules as of July 28, 2025, which previously limited capital raising through Form S-3 shelf registration[152](index=152&type=chunk) [Cash Flow Summary](index=34&type=section&id=MD%26A%20-%20Cash%20Flow%20Summary) | Activity | 2025 (in thousands) | 2024 (in thousands) | | :------------------ | :---------- | :---------- | | Operating activities| $(14,158) | $(14,241) | | Investing activities| $(4,686) | $2,993 | | Financing activities| $10,952 | $5,531 | - Net cash used in operating activities was **$14,158 thousand** for the six months ended June 30, 2025, primarily due to net loss, partially offset by non-cash adjustments like stock-based compensation and debt issuance costs[162](index=162&type=chunk) - Net cash used in investing activities was **$4,686 thousand** for the six months ended June 30, 2025, driven by marketable securities purchases, partially offset by redemptions[164](index=164&type=chunk) - Net cash provided by financing activities was **$10,952 thousand** for the six months ended June 30, 2025, mainly from common stock purchase agreements and convertible note issuance[166](index=166&type=chunk) [Critical Accounting Estimates](index=35&type=section&id=MD%26A%20-%20Critical%20Accounting%20Estimates) - No significant changes occurred in critical accounting estimates during the six months ended June 30, 2025, compared to those disclosed in the 2024 Annual Report on Form 10-K[169](index=169&type=chunk) [Emerging Growth Company Status](index=35&type=section&id=MD%26A%20-%20Emerging%20Growth%20Company%20Status) - The Company is an "emerging growth company" and has elected to take advantage of the extended transition period for new or revised financial accounting standards, which may affect comparability with other public companies[170](index=170&type=chunk)[171](index=171&type=chunk) - The Company will remain an emerging growth company until the earliest of specific criteria, including market value of common stock exceeding **$700 million**, total annual gross revenue of **$1.07 billion**, issuing over **$1.0 billion** in non-convertible debt, or December 31, 2025[171](index=171&type=chunk) [Recent Accounting Pronouncements](index=35&type=section&id=MD%26A%20-%20Recent%20Accounting%20Pronouncements) - The Company is assessing the impact of ASU 2023-09 (Income Taxes) effective for fiscal years after December 15, 2024, and ASU 2024-03 (Disaggregation of Income Statement Expenses) effective for fiscal years after December 15, 2026[41](index=41&type=chunk)[42](index=42&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the Company's exposure to market risks, including interest rate risk, credit risk, and foreign currency exchange risk, and outlines how these risks are managed [Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Market%20Risk%20-%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) - The Company is exposed to market risks from adverse changes in financial market prices and rates, but does not believe inflation has had a material effect on its business[173](index=173&type=chunk)[174](index=174&type=chunk) [Interest Rate Risk](index=36&type=section&id=Market%20Risk%20-%20Interest%20Rate%20Risk) - As of June 30, 2025, the Company held **$19,210 thousand** in cash, cash equivalents, and marketable securities, primarily in money market funds and marketable securities[175](index=175&type=chunk) - A hypothetical **10%** change in interest rates would not materially impact the Company's financial condition or results of operations due to the short-term nature of its cash, cash equivalents, and marketable securities[175](index=175&type=chunk) [Credit Risk](index=36&type=section&id=Market%20Risk%20-%20Credit%20Risk) - Credit risk is concentrated with four customers accounting for **10%** or more of accounts receivable and one vendor for accounts payable as of June 30, 2025[176](index=176&type=chunk) - The Company mitigates credit risk through ongoing credit evaluations and generally does not require collateral[177](index=177&type=chunk) - For the six months ended June 30, 2025, write-offs were **$2 thousand** and provision for expected credit losses was **$2 thousand**[177](index=177&type=chunk) [Foreign Currency Exchange Risk](index=36&type=section&id=Market%20Risk%20-%20Foreign%20Currency%20Exchange%20Risk) - Foreign currency exchange gains and losses primarily result from fluctuations in the euro versus the U.S. dollar, recognized in other income (expense), net[178](index=178&type=chunk) - The Company has not engaged in exchange rate hedging activities and does not expect to in the foreseeable future[178](index=178&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures as of June 30, 2025, and reiterates the effectiveness of internal control over financial reporting as of December 31, 2024 [Evaluation of Disclosure Controls and Procedures](index=37&type=section&id=Controls%20and%20Procedures%20-%20Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - Management, including the principal executive and financial officers, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[180](index=180&type=chunk) [Management's Report on Internal Controls Over Financial Reporting](index=37&type=section&id=Controls%20and%20Procedures%20-%20Management's%20Report%20on%20Internal%20Controls%20Over%20Financial%20Reporting) - The Company's internal control over financial reporting was effective as of December 31, 2024, as discussed in its 2024 Annual Report on Form 10-K[181](index=181&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=37&type=section&id=Controls%20and%20Procedures%20-%20Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) - All control systems have inherent limitations, meaning no evaluation can provide absolute assurance against misstatements due to error or fraud, and effectiveness may deteriorate over time[182](index=182&type=chunk) [Changes in Internal Control Over Financial Reporting](index=37&type=section&id=Controls%20and%20Procedures%20-%20Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - No changes in internal control over financial reporting occurred during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[183](index=183&type=chunk) [PART II - OTHER INFORMATION](index=38&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section details legal proceedings, comprehensive risk factors, and other required disclosures for the reporting period [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not currently a party to any legal proceedings that would materially affect its business, financial condition, or results of operations - The Company is not currently involved in legal proceedings that would have a material adverse effect on its business, financial condition, or results of operations[186](index=186&type=chunk) - On April 28, 2025, the Company settled a lease dispute for its former headquarters, paying **$1,400 thousand** in cash and agreeing to issue warrants for up to **350,000 shares** of common stock[187](index=187&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section outlines numerous risks and uncertainties that could materially and adversely affect the Company's business, financial condition, results of operations, and cash flows [Summary of Risk Factors](index=38&type=section&id=Risk%20Factors%20-%20Summary%20of%20Risk%20Factors) - The Company is an early-stage company with a history of losses and expects to incur significant expenses and continuing losses for at least the next several years[190](index=190&type=chunk)[192](index=192&type=chunk) - Substantial reliance on Tier 1 automotive suppliers means business could be adversely affected if relationships are not maintained or if design wins with OEMs are not secured[190](index=190&type=chunk)[196](index=196&type=chunk) - The Company may need to raise additional capital, which may not be available on acceptable terms, and market adoption of lidar technology is uncertain, posing risks to business[190](index=190&type=chunk)[198](index=198&type=chunk)[234](index=234&type=chunk) [Risk Factors Relating to Our Business and Industry](index=39&type=section&id=Risk%20Factors%20-%20Risk%20Factors%20Relating%20to%20Our%20Business%20and%20Industry) - The Company has incurred net losses since inception (**$17.3 million** in H1 2025) and expects significant losses for several more years due to investments in design, testing, commercialization, and public company operations[192](index=192&type=chunk)[195](index=195&type=chunk) - The business model for the Automotive market relies heavily on maintaining relationships with Tier 1 suppliers (e.g., LITEON) to secure OEM design wins; failure to do so could materially affect the business[196](index=196&type=chunk)[197](index=197&type=chunk) - Quarterly financial results are difficult to predict and can fluctuate significantly due to factors like order timing, pricing, customer retention, product development, supply chain disruptions, and macroeconomic conditions[202](index=202&type=chunk)[204](index=204&type=chunk) - The Company's limited operating history makes it difficult to evaluate future prospects and risks, including the ability to develop and commercialize products, manage growth, and respond to market changes[206](index=206&type=chunk)[209](index=209&type=chunk) - The Company relies on third-party suppliers for most components, leading to susceptibility to shortages, long lead times, and price fluctuations, which could disrupt the supply chain and delay product deliveries[238](index=238&type=chunk) - International sales (**95%** of revenue in H1 2025) expose the Company to risks like tariffs, exchange rate fluctuations, political instability, and global health crises, particularly in new markets like China[243](index=243&type=chunk)[244](index=244&type=chunk) - The complexity of products can lead to unforeseen delays or expenses from undetected defects, errors, or reliability issues, potentially damaging reputation and exposing the company to product liability claims[246](index=246&type=chunk) - The average selling prices of products or licensing fees may decrease rapidly, requiring continuous cost reduction and new product introductions to maintain gross margins[254](index=254&type=chunk) - Adverse conditions in the automotive industry, global economic downturns, or geopolitical conflicts (e.g., Ukraine, Middle East) could reduce demand for products and licenses, negatively impacting results[255](index=255&type=chunk)[256](index=256&type=chunk) - The New Circle Purchase Agreement has contractual limitations that may prevent the Company from drawing the full **$50 million** commitment, and any draws will dilute existing stockholders, especially at low stock prices[273](index=273&type=chunk) [Legal and Regulatory Risks Related to Our Business](index=64&type=section&id=Risk%20Factors%20-%20Legal%20and%20Regulatory%20Risks%20Related%20to%20Our%20Business) - The Company is subject to U.S. and foreign import/export control laws and regulations; non-compliance could lead to substantial civil or criminal penalties and loss of privileges[300](index=300&type=chunk) - Changes in trade policy, tariffs, and import/export regulations could materially affect the business by increasing costs, disrupting supply chains, or limiting sales[301](index=301&type=chunk) - The Company is subject to various environmental laws and regulations, which could impose substantial costs, cause delays in production facility construction, and increase raw material costs[310](index=310&type=chunk)[311](index=311&type=chunk) - Compliance with U.S. and foreign anti-corruption and anti-money laundering laws is critical; violations can lead to criminal liability, fines, and reputational harm[312](index=312&type=chunk) - Regulations concerning automobiles and lasers, including product safety and emissions requirements, can impact product adoption and development timelines, potentially delaying sales[313](index=313&type=chunk)[314](index=314&type=chunk)[316](index=316&type=chunk) - Failures to comply with evolving privacy, data protection (e.g., GDPR, CCPA), and information security requirements could result in significant liability, costs, and reputational damage[318](index=318&type=chunk)[320](index=320&type=chunk) [Risks Related to Our Intellectual Property](index=68&type=section&id=Risk%20Factors%20-%20Risks%20Related%20to%20Our%20Intellectual%20Property) - The Company's success depends on its ability to obtain and enforce patents, trademarks, copyrights, and trade secrets; however, these protections may be challenged, invalidated, or circumvented[322](index=322&type=chunk)[323](index=323&type=chunk) - Protecting intellectual property is expensive and difficult, especially outside the U.S., and litigation may be necessary to enforce rights, potentially leading to substantial costs and diversion of management resources[324](index=324&type=chunk)[325](index=325&type=chunk) - Third-party claims of intellectual property infringement could lead to costly litigation, expensive licenses, damage customer relationships, and adversely affect the business[327](index=327&type=chunk)[328](index=328&type=chunk) - Patent applications may not issue as anticipated, or at all, and competitors may design around issued patents, affecting the ability to prevent commercial exploitation of similar products[330](index=330&type=chunk) - Reliance on unpatented proprietary technology, trade secrets, and know-how carries risks of unauthorized disclosure, independent development by competitors, or inadequate protection from confidentiality agreements[331](index=331&type=chunk)[332](index=332&type=chunk) - The Company uses third-party licensed software, including open-source, and inability to maintain licenses, errors, or non-compliance with open-source terms could increase costs or reduce service levels[333](index=333&type=chunk)[334](index=334&type=chunk) [Risks Related to Being a Public Company](index=71&type=section&id=Risk%20Factors%20-%20Risks%20Related%20to%20Being%20a%20Public%20Company) - Operating as a public company incurs significant legal, accounting, and compliance costs, and management must devote substantial time to these initiatives, increasing net loss[336](index=336&type=chunk) - Most of the management team has limited experience managing a public company, which could divert attention from day-to-day business operations[338](index=338&type=chunk) - Stockholder activism can lead to significant expenses, business disruption, proxy contests, litigation, and stock price volatility, as experienced in the 2025 annual meeting[339](index=339&type=chunk)[340](index=340&type=chunk) - The Company's Charter designates the Court of Chancery of Delaware and federal district courts as exclusive forums for certain disputes, potentially limiting stockholders' ability to choose a favorable judicial forum[342](index=342&type=chunk)[344](index=344&type=chunk) - The Board's authority to issue preferred stock may delay, defer, or prevent tender offers or takeover attempts[345](index=345&type=chunk) - Lack of analyst coverage or adverse changes in recommendations could cause the stock price and trading volume to decline[346](index=346&type=chunk) - Interest from retail and individual investors can lead to increased stock price volatility, potentially unrelated to operating performance, and may expose the stock to "short squeezes"[347](index=347&type=chunk)[349](index=349&type=chunk) - The Company does not anticipate declaring cash dividends in the foreseeable future, requiring stockholders to rely on stock price appreciation for gains[350](index=350&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=74&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - There were no unregistered sales of equity securities or use of proceeds to report for the period[351](index=351&type=chunk) [Item 3. Defaults Upon Senior Securities](index=74&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities to report for the period - There were no defaults upon senior securities to report for the period[352](index=352&type=chunk) [Item 4. Mine Safety Disclosures](index=74&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that the disclosure requirements for mine safety are not applicable to the Company - This item is not applicable to the Company[353](index=353&type=chunk) [Item 5. Other Information](index=74&type=section&id=Item%205.%20Other%20Information) This section reports that no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025 - No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025[354](index=354&type=chunk) [Item 6. Exhibits](index=75&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including various certificates of incorporation, bylaws, and certifications from executive officers - This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including various certificates of incorporation, bylaws, and certifications from executive officers[355](index=355&type=chunk) [Signatures](index=76&type=section&id=Signatures) This section provides the official signatures of the Chief Executive Officer and Chief Financial Officer, certifying the report's submission - The report was duly signed on August 8, 2025, by Matthew Fisch, Chief Executive Officer and Chairman of the Board, and Conor Tierney, Chief Financial Officer and Treasurer[357](index=357&type=chunk)

[PART I — FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) This section details KKR's financial performance, condition, and management's analysis for the period ended June 30, 2025 [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) KKR's unaudited condensed consolidated financial statements as of June 30, 2025, reflect significant asset growth and increased revenues, presented with a two-tiered approach for clarity - KKR presents its financial statements using a two-tiered approach, separating the Insurance operations (Global Atlantic) from the Asset Management and Strategic Holdings businesses. This is done to provide a more informative view, given the distinct characteristics and significance of each business, particularly the policy liabilities of the insurance segment[58](index=58&type=chunk) [Condensed Consolidated Statements of Financial Condition](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Financial%20Condition) The statements detail KKR's assets, liabilities, and equity, showing significant growth in total assets driven by both Asset Management and Insurance segments Condensed Consolidated Statements of Financial Condition (Unaudited) | Key Metrics | June 30, 2025 (In Thousands) | December 31, 2024 (In Thousands) | | :--- | :--- | :--- | | **Total Assets** | **$380,867,573** | **$360,099,411** | | *Asset Management and Strategic Holdings Assets* | $134,252,009 | $122,517,378 | | *Insurance Assets* | $246,615,564 | $237,582,033 | | **Total Liabilities** | **$309,899,128** | **$298,114,719** | | *Asset Management and Strategic Holdings Liabilities* | $61,510,960 | $57,906,939 | | *Insurance Liabilities* | $248,388,168 | $240,207,780 | | **Total KKR & Co. Inc. Stockholders' Equity** | **$28,219,229** | **$23,651,568** | | **Total Equity** | **$68,974,847** | **$60,399,515** | - Total assets of consolidated Variable Interest Entities (VIEs) were **$131.8 billion** as of June 30, 2025, up from **$122.4 billion** at December 31, 2024. These VIEs primarily consist of collateralized financing entities (CFEs), certain investment funds, and VIEs formed by Global Atlantic. The assets and liabilities of these VIEs are generally non-recourse to other KKR entities[29](index=29&type=chunk)[30](index=30&type=chunk)[32](index=32&type=chunk) [Condensed Consolidated Statements of Operations](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements present KKR's revenues, expenses, and net income for the three and six months ended June 30, 2025, highlighting growth in total revenues Condensed Consolidated Statements of Operations (Unaudited) | (In Thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$5,088,843** | **$4,171,910** | **$8,199,026** | **$13,828,648** | | *Asset Management & Strategic Holdings* | $1,835,166 | $1,560,449 | $3,881,081 | $3,516,917 | | *Insurance* | $3,253,677 | $2,611,461 | $4,317,945 | $10,311,731 | | **Total Expenses** | **$4,746,444** | **$3,946,329** | **$8,577,399** | **$13,259,273** | | **Income (Loss) Before Taxes** | **$1,528,768** | **$1,210,205** | **$2,299,835** | **$2,573,256** | | **Net Income (Loss)** | **$1,354,464** | **$993,236** | **$2,038,962** | **$2,087,086** | | **Net Income (Loss) Attributable to KKR & Co. Inc. Common Stockholders** | **$472,387** | **$667,926** | **$286,463** | **$1,350,140** | | **Diluted EPS** | **$0.50** | **$0.72** | **$0.29** | **$1.45** | [Notes to Financial Statements (Unaudited)](index=19&type=section&id=Notes%20to%20Financial%20Statements%20(Unaudited)) This section provides detailed disclosures and explanations supporting the condensed consolidated financial statements [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=118&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management provides an in-depth analysis of KKR's financial condition and operating results across its segments, highlighting key performance drivers and the prevailing business environment - KKR operates through three reportable segments: Asset Management, Insurance (Global Atlantic), and Strategic Holdings. The chief operating decision-makers use segment earnings to allocate resources and assess performance[287](index=287&type=chunk)[289](index=289&type=chunk) Total Segment Earnings Summary | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Asset Management Segment Earnings | $1,126,966 | $996,000 | | Insurance Operating Earnings | $277,932 | $253,213 | | Strategic Holdings Segment Earnings | $29,121 | $40,852 | | **Total Segment Earnings** | **$1,434,019** | **$1,290,065** | [Business Environment](index=133&type=section&id=Business%20Environment) This section describes the macroeconomic conditions and market trends influencing KKR's operations during the second quarter of 2025 - In Q2 2025, the U.S. economy expanded with real GDP growth of **3.0%**, while inflation remained persistent. The Federal Reserve held the federal funds rate target at **4.25% to 4.50%**. The Eurozone saw moderate GDP growth, and the European Central Bank lowered its deposit rate to **2.0%**[421](index=421&type=chunk)[422](index=422&type=chunk)[426](index=426&type=chunk) - Global equity markets showed positive returns in Q2 2025, with the S&P 500 up **10.9%** and the MSCI World Index up **11.6%**. Market volatility, as measured by the VIX, decreased from **22.3 to 16.7** during the quarter[425](index=425&type=chunk) - Elevated market volatility and uncertainty continued, driven by geopolitical and global trade concerns, including the imposition of tariffs by the United States and retaliation from trading partners since April 2025[425](index=425&type=chunk) [Analysis of Segment Operating Results](index=160&type=section&id=Analysis%20of%20Segment%20Operating%20Results) This section details the operating performance of KKR's Asset Management, Insurance, and Strategic Holdings segments for the quarter Asset Management Segment Operating Results (Q2) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Fee Related Earnings | $886,754 | $755,397 | | Realized Performance Income | $418,850 | $482,309 | | Realized Investment Income | $153,998 | $138,546 | | **Asset Management Segment Earnings** | **$1,126,966** | **$996,000** | Insurance Segment Operating Results (Q2) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Investment Income | $1,788,525 | $1,538,046 | | Net Cost of Insurance | ($1,277,381) | ($1,070,616) | | **Insurance Operating Earnings** | **$277,932** | **$253,213** | Strategic Holdings Segment Operating Results (Q2) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Dividends, Net | $29,121 | $40,852 | | **Strategic Holdings Segment Earnings** | **$29,121** | **$40,852** | [Analysis of Non-GAAP Performance Measures](index=172&type=section&id=Analysis%20of%20Non-GAAP%20Performance%20Measures) This section provides an analysis of KKR's non-GAAP financial measures, including Total Segment Earnings and Adjusted Net Income, to assess underlying business performance Non-GAAP Performance Measures (Q2) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total Operating Earnings | $1,193,807 | $1,049,462 | | Total Investing Earnings | $240,212 | $240,603 | | **Total Segment Earnings** | **$1,434,019** | **$1,290,065** | | **Adjusted Net Income (ANI)** | **$1,063,350** | **$971,869** | - Total Operating Earnings increased by **$144.3 million** YoY for Q2 2025, driven by higher Fee Related Earnings and Insurance Operating Earnings[619](index=619&type=chunk)[620](index=620&type=chunk) - Adjusted Net Income (ANI) increased to **$1.06 billion** in Q2 2025 from **$972 million** in Q2 2024, primarily due to higher total segment earnings[619](index=619&type=chunk)[623](index=623&type=chunk) [Liquidity and Capital Resources](index=192&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses KKR's sources and uses of liquidity, capital structure, and financial flexibility - KKR's primary sources of liquidity include operating activities, realizations on carried interest and investments, cash inflows from its insurance business, and borrowings under various credit facilities and debt offerings[725](index=725&type=chunk) - As of June 30, 2025, KKR had unfunded commitments of **$10.5 billion** to its investment funds and vehicles, and **$0.3 billion** in capital markets commitments[313](index=313&type=chunk)[314](index=314&type=chunk) - A dividend of **$0.185 per common share** was declared for Q2 2025. As of July 25, 2025, approximately **$459 million** remained available under the company's share repurchase program[344](index=344&type=chunk)[305](index=305&type=chunk) - As of June 30, 2025, approximately **$521 million** of carried interest was subject to clawback obligations, assuming all applicable funds were liquidated at their current fair values[320](index=320&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=198&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports no material changes to its market risks during the second quarter of 2025, referring to its Annual Report for comprehensive details - There were no material changes to KKR's market risks during the three months ended June 30, 2025[825](index=825&type=chunk) [Controls and Procedures](index=198&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 - Management concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level[827](index=827&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[828](index=828&type=chunk) [PART II — OTHER INFORMATION](index=199&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits [Legal Proceedings](index=199&type=section&id=Item%201.%20Legal%20Proceedings) KKR is involved in various legal proceedings incidental to its business, with detailed information provided in the notes to financial statements - The company refers to Note 24 "Commitments and Contingencies" for a detailed discussion of its legal proceedings[830](index=830&type=chunk) [Risk Factors](index=199&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to its risk factors beyond those discussed in the Business Environment section of the MD&A - There were no material changes to the risk factors disclosed in the company's Annual Report, aside from those discussed in the Business Environment section[831](index=831&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=199&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details KKR's share repurchase activities and the status of its equity award retirements and repurchase program during the quarter Share Repurchases in Q2 2025 | Period | Total Shares Purchased | Average Price Paid Per Share ($) | | :--- | :--- | :--- | | April 2025 | 36,411 | $92.32 | | May 2025 | — | $— | | June 2025 | — | $— | | **Total Q2 2025** | **36,411** | **$92.32** | - The share repurchase program was automatically increased by **$500 million** during Q2 2025 after the remaining available amount fell below the **$50 million** threshold. As of July 25, 2025, approximately **$459 million** remained available for repurchases[833](index=833&type=chunk)[835](index=835&type=chunk) [Defaults Upon Senior Securities](index=200&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable [Mine Safety Disclosures](index=200&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable [Other Information](index=200&type=section&id=Item%205.%20Other%20Information) Not applicable [Exhibits](index=200&type=section&id=Item%206.%20Exhibits) This section provides a comprehensive list of all exhibits filed as part of the report, including key corporate and financial documents - The report includes exhibits such as the Indenture for the **6.875% Subordinated Notes due 2065**, CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and interactive data files (XBRL)[839](index=839&type=chunk)

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed consolidated financial statements and related notes, offering a detailed view of the company's financial performance and position [ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)](index=4&type=section&id=ITEM%201%20-%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income statements, shareholders' equity statements, and cash flow statements, along with detailed notes explaining the basis of presentation, segment reporting, fair value measurements, financing activities, share repurchase program, and recent accounting pronouncements [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement presents the company's financial position, detailing assets, liabilities, and shareholders' deficit at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Item | June 30, 2025 (Unaudited) | December 31, 2024 (Note) | | :-------------------------------- | :------------------------ | :----------------------- | | **Assets** | | | | Cash and cash equivalents | $198,613 | $130,245 | | Total current assets | $6,315,806 | $5,839,895 | | Total assets | $15,820,619 | $14,893,741 | | **Liabilities and Shareholders' Deficit** | | | | Total current liabilities | $8,721,886 | $8,283,505 | | Long-term debt | $5,823,744 | $5,520,932 | | Total shareholders' deficit | $(1,231,862) | $(1,370,961) | | Total liabilities and shareholders' deficit | $15,820,619 | $14,893,741 | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This statement outlines the company's revenues, expenses, and net income over specific reporting periods Condensed Consolidated Statements of Income (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales | $4,525,058 | $4,272,201 | $8,661,982 | $8,248,441 | | Gross profit | $2,326,538 | $2,168,060 | $4,448,023 | $4,202,232 | | Operating income | $914,470 | $863,298 | $1,655,936 | $1,615,779 | | Net income | $668,595 | $622,848 | $1,207,080 | $1,170,086 | | Earnings per share-basic | $0.78 | $0.71 | $1.41 | $1.33 | | Earnings per share-assuming dilution | $0.78 | $0.70 | $1.40 | $1.32 | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement provides a comprehensive view of the company's income, including net income and other comprehensive income items Condensed Consolidated Statements of Comprehensive Income (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $668,595 | $622,848 | $1,207,080 | $1,170,086 | | Foreign currency translation adjustments | $45,400 | $(37,672) | $51,378 | $(30,496) | | Comprehensive income | $713,995 | $585,176 | $1,258,458 | $1,139,590 | [Condensed Consolidated Statements of Shareholders' Equity (Deficit)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20(Deficit)) This statement details changes in the company's equity accounts, including common stock, retained deficit, and accumulated other comprehensive income Changes in Shareholders' Equity (Deficit) (in thousands) | Item | Balance at Dec 31, 2024 | Net Income (6M 2025) | Total Other Comprehensive Income (6M 2025) | Share Repurchases (6M 2025) | Balance at June 30, 2025 | | :------------------------------------ | :---------------------- | :------------------- | :----------------------------------- | :-------------------------- | :----------------------- | | Common Stock (Par Value) | $8,622 | — | — | $(133) | $8,506 | | Additional Paid-In Capital | $1,454,518 | — | — | $(22,812) | $1,499,288 | | Retained Deficit | $(2,791,288) | $1,207,080 | — | $(1,153,695) | $(2,748,221) | | Accumulated Other Comprehensive Income (Loss) | $(42,813) | — | $51,378 | — | $8,565 | | **Total** | **$(1,370,961)** | **$1,207,080** | **$51,378** | **$(1,176,640)** | **$(1,231,862)** | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $1,511,966 | $1,653,074 | | Net cash used in investing activities | $(594,998) | $(622,455) | | Net cash used in financing activities | $(850,815) | $(1,164,070) | | Effect of exchange rate changes on cash | $2,215 | $(639) | | Net increase (decrease) in cash and cash equivalents | $68,368 | $(134,090) | | Cash and cash equivalents at end of period | $198,613 | $145,042 | | Income taxes paid | $393,872 | $80,401 | | Interest paid, net of capitalized interest | $110,374 | $110,449 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements [NOTE 1 – BASIS OF PRESENTATION](index=9&type=section&id=NOTE%201%20%E2%80%93%20BASIS%20OF%20PRESENTATION) This note describes the accounting principles and conventions used in preparing the financial statements, including significant events like stock splits and tax legislation - The financial statements are prepared in accordance with U.S. GAAP for interim financial information and reflect a **15-for-1 forward stock split** effected on June 10, 2025, with all share and per share information retrospectively adjusted[21](index=21&type=chunk)[22](index=22&type=chunk) - H.R. 1, a tax reform legislation, was signed into law in July 2025, but its impacts are not included in the operating results for the six months ended June 30, 2025, as it occurred after the fiscal quarter end[24](index=24&type=chunk) [NOTE 2 – SEGMENT REPORTING](index=9&type=section&id=NOTE%202%20%E2%80%93%20SEGMENT%20REPORTING) This note details the company's operating segments, revenue streams, and how performance is evaluated by the chief operating decision maker - The Company operates as a single operating segment, the automotive aftermarket parts segment, across the U.S., Canada, and Mexico, with consolidated net income used by the chief operating decision maker to evaluate performance[25](index=25&type=chunk) Automotive Aftermarket Parts Segment Performance (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales | $4,525,058 | $4,272,201 | $8,661,982 | $8,248,441 | | Gross profit | $2,326,538 | $2,168,060 | $4,448,023 | $4,202,232 | | Consolidated net income | $668,595 | $622,848 | $1,207,080 | $1,170,086 | [NOTE 3 – VARIABLE INTEREST ENTITIES](index=10&type=section&id=NOTE%203%20%E2%80%93%20VARIABLE%20INTEREST%20ENTITIES) This note explains the company's investments in unconsolidated tax credit fund entities and the associated maximum exposure to losses - The Company has invested in five unconsolidated tax credit fund entities (VIEs) that promote renewable energy, but it is not the primary beneficiary and accounts for these investments using the equity method[29](index=29&type=chunk)[30](index=30&type=chunk) - The maximum exposure to losses associated with these VIEs is limited to the net investment of **$21.2 million** as of June 30, 2025[31](index=31&type=chunk) [NOTE 4 – FAIR VALUE MEASUREMENTS](index=10&type=section&id=NOTE%204%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) This note provides information on the fair value of financial instruments, including marketable securities and senior notes, and changes in their valuation Marketable Securities Fair Value (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Marketable securities | $64,169 | $65,156 | Senior Notes Fair Value (in thousands) | Item | June 30, 2025 Carrying Amount | June 30, 2025 Estimated Fair Value | December 31, 2024 Carrying Amount | December 31, 2024 Estimated Fair Value | | :-------------------- | :------------------------------ | :--------------------------------- | :---------------------------------- | :----------------------------------- | | Senior Notes | $5,324,367 | $5,258,178 | $5,321,219 | $5,151,768 | - The Company recorded an increase in fair value related to its marketable securities of **$4.0 million** for the three months ended June 30, 2025, and **$3.4 million** for the six months ended June 30, 2025[34](index=34&type=chunk) [NOTE 5 – LEASES](index=14&type=section&id=NOTE%205%20%E2%80%93%20LEASES) This note outlines the total lease costs and cash payments for operating leases, reflecting the company's leasing activities Total Lease Cost (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total lease cost | $147,600 | $135,282 | $293,056 | $265,818 | | Cash paid for operating leases | N/A | N/A | $221,991 | $205,149 | [NOTE 6 – SUPPLIER FINANCE PROGRAM](index=14&type=section&id=NOTE%206%20%E2%80%93%20SUPPLIER%20FINANCE%20PROGRAM) This note details the outstanding obligations under the company's supplier finance programs and their changes over time - Obligations outstanding under supplier finance programs were **$4.9 billion** as of June 30, 2025, an increase from **$4.8 billion** as of December 31, 2024[41](index=41&type=chunk) [NOTE 7 – FINANCING](index=14&type=section&id=NOTE%207%20%E2%80%93%20FINANCING) This note provides comprehensive information on the company's long-term debt, credit facilities, and senior notes, including terms and outstanding amounts Long-term Debt (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Commercial paper program | $500,000 | $200,000 | | Total principal amount of debt | $5,850,000 | $5,550,000 | | Less: Unamortized discount and debt issuance costs | $26,256 | $29,068 | | Total long-term debt | $5,823,744 | $5,520,932 | - The Company has a **$2.25 billion** unsecured revolving credit facility maturing in March 2030, with no outstanding borrowings as of June 30, 2025[43](index=43&type=chunk)[44](index=44&type=chunk) - As of June 30, 2025, the Company had **$5.4 billion** in unsecured senior notes outstanding, due between 2026 and 2034, with interest rates ranging from **1.750% to 5.750%**[50](index=50&type=chunk) [NOTE 8 – WARRANTIES](index=17&type=section&id=NOTE%208%20%E2%80%93%20WARRANTIES) This note details the company's product warranty liabilities, including balances, claims, and accruals over specific periods Product Warranty Liabilities (in thousands) | Item | Amount | | :------------------------------------ | :----- | | Warranty liabilities, balance at December 31, 2024 | $133,251 | | Warranty claims (six months ended June 30, 2025) | $(115,804) | | Warranty accruals (six months ended June 30, 2025) | $120,219 | | Warranty liabilities, balance at June 30, 2025 | $137,720 | [NOTE 9 – SHARE REPURCHASE PROGRAM](index=17&type=section&id=NOTE%209%20%E2%80%93%20SHARE%20REPURCHASE%20PROGRAM) This note outlines the company's share repurchase authorizations, actual repurchases, and remaining authorized amounts - The Board of Directors approved additional **$2.0 billion** authorizations in November 2023 and November 2024, bringing the cumulative authorization to **$27.8 billion**[55](index=55&type=chunk) Share Repurchases (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------- | :------------------------------- | :----------------------------- | | Shares repurchased | 6,804 | 13,273 | | Average price per share | $90.71 | $88.65 | | Total investment | $617,184 | $1,176,612 | - As of June 30, 2025, **$1.3 billion** remained under the share repurchase authorization. Subsequent to quarter-end, an additional **2.6 million** shares were repurchased for **$240.0 million** through August 8, 2025[56](index=56&type=chunk)[57](index=57&type=chunk) [NOTE 10 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)](index=18&type=section&id=NOTE%2010%20%E2%80%93%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) This note details the components and changes in accumulated other comprehensive income (loss), primarily foreign currency translation adjustments Accumulated Other Comprehensive Income (Loss) (in thousands) | Item | Balance at Dec 31, 2024 | Change (6M 2025) | Balance at June 30, 2025 | | :------------------------------------ | :---------------------- | :--------------- | :----------------------- | | Foreign currency translation adjustments | $(42,813) | $51,378 | $8,565 | | Total Accumulated Other Comprehensive Income (Loss) | $(42,813) | $51,378 | $8,565 | [NOTE 11 – REVENUE](index=18&type=section&id=NOTE%2011%20%E2%80%93%20REVENUE) This note disaggregates the company's revenue by major customer type, providing insight into sales channels Revenue Disaggregated by Major Customer Type (in thousands) | Customer Type | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Sales to do-it-yourself customers | $4,280,425 | $4,156,485 | | Sales to professional service provider customers | $4,194,433 | $3,887,350 | | Total sales | $8,661,982 | $8,248,441 | [NOTE 12 – SHARE-BASED COMPENSATION AND BENEFIT PLANS](index=18&type=section&id=NOTE%2012%20%E2%80%93%20SHARE-BASED%20COMPENSATION%20AND%20BENEFIT%20PLANS) This note details the compensation expense related to stock options and other share-based plans, along with matching contributions to benefit plans Share-Based Compensation Expense (in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Compensation expense for stock options awarded | $15,630 | $11,337 | | Compensation expense for other share-based plans | $4,500 | $4,600 | | Matching contributions to benefit plans | $28,300 | $26,700 | - The remaining unrecognized compensation expense for unvested stock option awards was **$53.2 million** as of June 30, 2025, to be recognized over a weighted-average period of **2.8 years**[64](index=64&type=chunk) [NOTE 13 – COMMITMENTS](index=22&type=section&id=NOTE%2013%20%E2%80%93%20COMMITMENTS) This note outlines the company's significant contractual commitments, including obligations to purchase renewable energy tax credits - The Company has a remaining commitment of approximately **$340 million** to purchase transferable federal renewable energy tax credits (RETCs), with the final payment anticipated by April 2026[69](index=69&type=chunk) [NOTE 14 – EARNINGS PER SHARE](index=22&type=section&id=NOTE%2014%20%E2%80%93%20EARNINGS%20PER%20SHARE) This note provides a breakdown of basic and diluted earnings per share, including the weighted-average common shares outstanding Earnings Per Share (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $668,595 | $622,848 | $1,207,080 | $1,170,086 | | Weighted-average common shares outstanding – basic | 854,003 | 880,182 | 856,768 | 882,728 | | Weighted-average common shares outstanding – assuming dilution | 858,440 | 885,655 | 861,368 | 888,746 | | Earnings per share-basic | $0.78 | $0.71 | $1.41 | $1.33 | | Earnings per share-assuming dilution | $0.78 | $0.70 | $1.40 | $1.32 | [NOTE 15 – LEGAL MATTERS](index=22&type=section&id=NOTE%2015%20%E2%80%93%20LEGAL%20MATTERS) This note discusses the company's involvement in legal proceedings and management's assessment of their potential financial impact - The Company is involved in litigation incidental to its ordinary business but does not believe these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows[73](index=73&type=chunk)[74](index=74&type=chunk) [NOTE 16 – RECENT ACCOUNTING PRONOUNCEMENTS](index=24&type=section&id=NOTE%2016%20%E2%80%93%20RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This note describes recently issued accounting pronouncements and their anticipated impact on the company's financial statements - ASU 2023-09 (Income Taxes) is effective for annual periods beginning after December 15, 2024, and will be adopted by the Company in Q4 2025, with no material impact on financial condition, results of operations, or cash flows as it pertains to disclosure only[75](index=75&type=chunk) - ASU 2024-03 (Income Statement Expenses) is effective for annual periods beginning after December 15, 2026, and will be adopted by the Company in Q4 2027, with no material impact on financial condition, results of operations, or cash flows as it pertains to disclosure only[76](index=76&type=chunk) [ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=25&type=section&id=ITEM%202%20-%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides a narrative of the Company's financial condition, results of operations, and liquidity, highlighting key drivers of the automotive aftermarket industry, sales and profit performance, and capital resources. It also includes forward-looking statements, an overview of the business, and discussions on critical accounting estimates and recent accounting pronouncements [FORWARD-LOOKING STATEMENTS](index=25&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines the nature of forward-looking statements within the report and the various risks and uncertainties that could affect future results - The report contains forward-looking statements identified by words like 'estimate,' 'may,' 'could,' 'will,' 'believe,' 'expect,' 'would,' 'consider,' 'should,' 'anticipate,' 'project,' 'plan,' or 'intend,' which are subject to risks and uncertainties[79](index=79&type=chunk) - Key risks include the general economy, inflation, consumer debt levels, product demand, competition, weather, trade disputes, supply chain disruptions, and governmental regulations[79](index=79&type=chunk) [OVERVIEW](index=25&type=section&id=OVERVIEW) This section provides a general description of the company's business, its operational strategy, and the key market drivers influencing demand for its products - O'Reilly Automotive, Inc. is a specialty retailer of automotive aftermarket parts, tools, supplies, equipment, and accessories in the U.S., Puerto Rico, Mexico, and Canada, operating **6,360 stores** as of June 30, 2025[80](index=80&type=chunk) - The Company employs a 'dual market strategy,' selling products to both DIY customers and professional service providers, aiming for growth through new store openings, existing store sales, merchandising enhancements, and Omnichannel initiatives[80](index=80&type=chunk) - Key drivers of demand for automotive aftermarket products include the number of miles driven, registered vehicles, annual rate of light vehicle sales, and average vehicle age, with the average U.S. vehicle age increasing to **12.6 years** in 2024[86](index=86&type=chunk)[88](index=88&type=chunk) [RESULTS OF OPERATIONS](index=29&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance, focusing on sales, gross profit, operating expenses, and net income drivers [Sales](index=29&type=section&id=Sales) This section details sales performance, including year-over-year growth, comparable store sales, and new store openings Sales Performance (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Sales | $4,525 | $4,272 | $8,662 | $8,248 | | YoY Growth | 6% | - | 5% | - | | Comparable store sales growth | 4.1% | 2.3% | 3.9% | 2.8% | | Net new stores opened | 67 | 27 | 105 | 64 | - Sales increases were driven by higher domestic comparable store sales and contributions from new stores, with comparable store sales benefiting from increases in average ticket values and transaction counts for both professional service provider and DIY customers[94](index=94&type=chunk) - The Company anticipates opening **200 to 210** net new stores in 2025[93](index=93&type=chunk) [Gross Profit](index=29&type=section&id=Gross%20Profit) This section analyzes gross profit and its percentage of sales, highlighting factors influencing profitability Gross Profit Performance (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gross profit | $2,327 | $2,168 | $4,448 | $4,202 | | YoY Growth | 7% | - | 6% | - | | Gross profit as % of sales | 51.4% | 50.7% | 51.4% | 50.9% | - The increase in gross profit percentage was primarily due to improved acquisition costs and distribution operating efficiencies, partially offset by a greater percentage of sales from professional service provider customers, which carry lower gross margins[96](index=96&type=chunk) [Selling, General and Administrative Expenses](index=29&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) This section examines trends in selling, general, and administrative expenses, including their impact on overall profitability Selling, General and Administrative Expenses (SG&A) (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | SG&A | $1,412 | $1,305 | $2,792 | $2,586 | | YoY Growth | 8% | - | 8% | - | | SG&A as % of sales | 31.2% | 30.5% | 32.2% | 31.4% | - The increase in SG&A dollars was primarily due to additional Team Members and operating expenses supporting increased sales and store count, along with enhancements to store-level compensation and benefits and broad inflationary pressures[97](index=97&type=chunk) [Operating Income](index=29&type=section&id=Operating%20Income) This section presents the company's operating income and its percentage of sales, reflecting core business profitability Operating Income (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating income | $914 | $863 | $1,656 | $1,616 | | YoY Growth | 5.9% | - | 2% | - | | Operating income as % of sales | 20.2% | 20.2% | 19.1% | 19.6% | [Other Income and Expense](index=31&type=section&id=Other%20Income%20and%20Expense) This section details non-operating income and expenses, primarily focusing on interest expense and its impact on net income Total Other Expense (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total other expense | $53 | $52 | $110 | $104 | | YoY Growth | 2% | - | 6% | - | | Total other expense as % of sales | 1.2% | 1.2% | 1.3% | 1.3% | - The increase in total other expense was due to higher interest expense on increased average outstanding borrowings[101](index=101&type=chunk) [Income Taxes](index=31&type=section&id=Income%20Taxes) This section analyzes the provision for income taxes and the effective tax rate, including factors influencing tax expense Provision for Income Taxes (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Provision for income taxes | $193 | $189 | $339 | $342 | | YoY Change | +2% | - | -1% | - | | Effective tax rate | 22.4% | 23.3% | 21.9% | 22.6% | - The decrease in the effective tax rate for both periods was primarily due to the timing of the recognition of tax credits[102](index=102&type=chunk) [Net Income](index=31&type=section&id=Net%20Income) This section presents the company's net income and its percentage of sales, reflecting overall profitability Net Income (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $669 | $623 | $1,210 | $1,170 | | YoY Growth | 7% | - | 3% | - | | Net income as % of sales | 14.8% | 14.6% | 13.9% | 14.2% | [Earnings Per Share](index=31&type=section&id=Earnings%20Per%20Share) This section details diluted earnings per share and the weighted-average common shares outstanding, indicating shareholder value Diluted Earnings Per Share | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Diluted EPS | $0.78 | $0.70 | $1.40 | $1.32 | | YoY Growth | 11% | - | 6% | - | | Weighted-average common shares outstanding (diluted, in millions) | 858 | 886 | 861 | 889 | [LIQUIDITY AND CAPITAL RESOURCES](index=31&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section assesses the company's ability to generate and manage cash, covering operating, investing, and financing activities, along with debt and capital strategies - The Company's long-term business strategy requires capital for maintaining existing stores, opening new ones, strategic acquisitions, distribution infrastructure, IT systems, and opportunistic share repurchases[105](index=105&type=chunk) - Primary liquidity sources include cash from operations, borrowings under the unsecured revolving credit facility, commercial paper program, and senior note offerings[105](index=105&type=chunk) [Operating Activities](index=32&type=section&id=Operating%20Activities) This section analyzes cash flows from operating activities, highlighting key drivers of cash generation from core business operations Cash Flow from Operating Activities (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $1,511,966 | $1,653,074 | | YoY Change | -8.5% | - | | Free cash flow | $904,008 | $1,157,089 | - The decrease in net cash provided by operating activities was primarily due to the timing of payment for transferable federal renewable energy tax credits, partially offset by an increase in operating income[108](index=108&type=chunk) [Investing Activities](index=32&type=section&id=Investing%20Activities) This section details cash flows used in investing activities, including capital expenditures and acquisitions Cash Flow from Investing Activities (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in investing activities | $(594,998) | $(622,455) | | YoY Change | +4.4% (less cash used) | - | | Capital expenditures | $587,685 | $474,607 | - The decrease in net cash used in investing activities was a result of the prior year's acquisition of Vast Auto, partially offset by increased capital expenditures for distribution enhancement and new store growth[109](index=109&type=chunk) [Financing Activities](index=32&type=section&id=Financing%20Activities) This section outlines cash flows from financing activities, such as debt management and share repurchases Cash Flow from Financing Activities (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash used in financing activities | $(850,815) | $(1,164,070) | | YoY Change | +26.9% (less cash used) | - | | Repurchases of common stock | $(1,176,640) | $(1,063,791) | | Net proceeds (payments) of commercial paper | $298,918 | $(173,500) | - The decrease in net cash used in financing activities was primarily due to net borrowings on the commercial paper program in the current period compared to net paydown in the prior year, partially offset by increased common stock repurchases[110](index=110&type=chunk) [Debt Instruments](index=32&type=section&id=Debt%20Instruments) This section describes the company's various debt instruments, including credit facilities, commercial paper, and senior notes - The Company's debt instruments include a credit agreement, unsecured revolving credit facility, outstanding letters of credit, a commercial paper program, and unsecured senior notes, with further details provided in Note 7[111](index=111&type=chunk) [Debt Covenants](index=32&type=section&id=Debt%20Covenants) This section reports on the company's compliance with debt covenants, including key financial ratios Debt Covenant Ratios | Metric | June 30, 2025 | June 30, 2024 | Covenant Requirement | | :------------------------------------ | :------------ | :------------ | :------------------- | | Consolidated fixed charge coverage ratio | 6.02x | 6.22x | Minimum 2.50:1.00 | | Consolidated leverage ratio | 1.95x | 1.87x | Maximum 3.50:1.00 | - The Company was in compliance with all covenants under its Credit Agreement as of June 30, 2025[46](index=46&type=chunk)[114](index=114&type=chunk) [Share Repurchase Program](index=36&type=section&id=Share%20Repurchase%20Program) This section refers to detailed information on the company's share repurchase program as presented in the financial statement notes - Information regarding the Company's share repurchase program is detailed in Note 9 to the Consolidated Financial Statements[117](index=117&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=36&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) This section confirms that there have been no material changes to the company's critical accounting estimates since the previous annual report - There have been no material changes in the Company's critical accounting estimates since those discussed in its annual report on Form 10-K for the year ended December 31, 2024[118](index=118&type=chunk) [RECENT ACCOUNTING PRONOUNCEMENTS](index=36&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) This section refers to the detailed information on recent accounting pronouncements provided in the notes to the condensed consolidated financial statements - Information about recent accounting pronouncements is provided in Note 16 to the Condensed Consolidated Financial Statements[119](index=119&type=chunk) [ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=36&type=section&id=ITEM%203%20-%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section details the Company's exposure to market risks, specifically interest rate risk and foreign currency risk, and outlines strategies to manage these exposures. It also confirms no material changes to market risks since the previous annual report [Interest Rate Risk](index=36&type=section&id=Interest%20Rate%20Risk) This section assesses the company's exposure to fluctuations in interest rates, particularly on variable-rate borrowings - The Company is exposed to interest rate risk from variable-rate borrowings under its unsecured revolving credit facility (no outstanding borrowings as of June 30, 2025) and its commercial paper program[120](index=120&type=chunk)[121](index=121&type=chunk) - As of June 30, 2025, **$500.0 million** was outstanding under the commercial paper program at a weighted-average variable interest rate of **4.670%**; a **10%** increase in interest rates would result in an unfavorable annual impact of **$2.4 million** on pre-tax earnings and cash flows[121](index=121&type=chunk) [Cash Equivalents Risk](index=36&type=section&id=Cash%20Equivalents%20Risk) This section discusses the risk associated with the company's investments in short-term, highly-liquid cash equivalents - The Company invests excess cash in short-term, highly-liquid instruments with maturities of **90 days or less**, totaling **$198.6 million** as of June 30, 2025, and expects minimal interest rate exposure[122](index=122&type=chunk) [Foreign Currency Risk](index=36&type=section&id=Foreign%20Currency%20Risk) This section details the company's exposure to foreign currency exchange rate fluctuations, particularly for Mexican peso and Canadian dollar operations - Foreign currency exposure arises from Mexican peso and Canadian dollar denominated revenues and profits, with investments in Mexican and Canadian subsidiaries viewed as long-term[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) - Net asset exposure in Mexican subsidiaries was **$432.3 million** at June 30, 2025; a **10%** change in the Mexican peso exchange rate could result in a **$39.3 million** loss[124](index=124&type=chunk) - Net asset exposure in Canadian subsidiaries was **$178.2 million** at June 30, 2025; a **10%** change in the Canadian dollar exchange rate could result in a **$16.2 million** loss[125](index=125&type=chunk) [ITEM 4 - CONTROLS AND PROCEDURES](index=38&type=section&id=ITEM%204%20-%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter [EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES](index=38&type=section&id=EVALUATION%20OF%20DISCLOSURE%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the company's disclosure controls and procedures as evaluated by management - Management, under the supervision of the CEO and CFO, concluded that the Company's disclosure controls and procedures were functioning effectively as of June 30, 2025[128](index=128&type=chunk) [CHANGES IN INTERNAL CONTROLS](index=38&type=section&id=CHANGES%20IN%20INTERNAL%20CONTROLS) This section reports on any material changes to the company's internal control over financial reporting during the fiscal quarter - There were no material changes in the Company's internal control over financial reporting during the fiscal quarter ended June 30, 2025[129](index=129&type=chunk) [PART II - OTHER INFORMATION](index=39&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, other information, exhibits, and signature pages, providing additional context to the financial report [ITEM 1 - LEGAL PROCEEDINGS](index=39&type=section&id=ITEM%201%20-%20LEGAL%20PROCEEDINGS) This section addresses the Company's involvement in legal matters, stating that while litigation is ongoing, it is not expected to have a material adverse effect on the Company's financial position or operations - The Company is involved in litigation incidental to its ordinary business but does not currently believe these matters will have a material adverse effect on its consolidated financial position, results of operations, or cash flows[131](index=131&type=chunk) [ITEM 1A - RISK FACTORS](index=39&type=section&id=ITEM%201A%20-%20RISK%20FACTORS) This section confirms that there have been no significant changes to the risk factors previously disclosed in the Company's annual report - There have been no material changes to the risk factors set forth in the Company's annual report on Form 10-K for the year ended December 31, 2024[132](index=132&type=chunk) [ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=39&type=section&id=ITEM%202%20-%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section reports no unregistered sales of equity securities and details the Company's common stock repurchases during the quarter, including the remaining authorization under its share repurchase program - The Company had no sales of unregistered securities during the six months ended June 30, 2025[133](index=133&type=chunk) Common Stock Repurchases (in thousands, except per share data) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Programs | | :------------------------------------ | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------ | | April 1, 2025, to April 30, 2025 | 1,790 | $91.68 | $1,772,137 | | May 1, 2025, to May 31, 2025 | 2,175 | $91.03 | $1,574,157 | | June 1, 2025, to June 30, 2025 | 2,839 | $89.86 | $1,319,079 | | Total as of June 30, 2025 | 6,804 | $90.71 | N/A | [ITEM 5 - OTHER INFORMATION](index=39&type=section&id=ITEM%205%20-%20OTHER%20INFORMATION) This section confirms that no Rule 10b5-1 trading agreements were adopted, modified, or terminated by Directors or Officers during the fiscal quarter - None of the Company's Directors or Officers adopted, modified, or terminated a Rule 10b5-1 trading agreement during the fiscal quarter ended June 30, 2025[134](index=134&type=chunk) [ITEM 6 - EXHIBITS](index=40&type=section&id=ITEM%206%20-%20EXHIBITS) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, credit agreements, and certifications - The report includes various exhibits such as the Third Amended and Restated Articles of Incorporation, Fourth Amended and Restated Bylaws, First Amended and Restated Credit Agreement, and CEO/CFO certifications under the Sarbanes-Oxley Act[135](index=135&type=chunk) [SIGNATURE PAGES](index=41&type=section&id=SIGNATURE%20PAGES) This section contains the official signatures of the Company's Chief Executive Officer and Chief Financial Officer, certifying the report - The report was signed by Brad Beckham, Chief Executive Officer, and Jeremy A. Fletcher, Executive Vice President and Chief Financial Officer, on August 8, 2025[139](index=139&type=chunk)

[Company Overview and Business Update](index=1&type=section&id=Company%20Overview%20and%20Business%20Update) This section provides an introduction to Edesa Biotech, a clinical-stage biopharmaceutical company, and updates on its business and pipeline development [Company Introduction](index=1&type=section&id=Company%20Introduction) Edesa Biotech, a clinical-stage biopharmaceutical company focused on immuno-inflammatory diseases, reported its financial results for the three and nine months ended June 30, 2025, and provided a business update - Edesa Biotech, Inc. (Nasdaq: EDSA) is a clinical-stage biopharmaceutical company focused on developing host-directed therapeutics for immuno-inflammatory diseases[2](index=2&type=chunk) [Business Highlights and Pipeline Update](index=1&type=section&id=Business%20Highlights%20and%20Pipeline%20Update) Edesa advanced manufacturing activities for its drug candidate EB06 to support a Phase 2 study for moderate-to-severe nonsegmental vitiligo, with FDA IND submission anticipated by the end of calendar 2025 - Advanced manufacturing activities for **EB06** (an anti-CXCL10 monoclonal antibody) support U.S. regulatory approval of a Phase 2 study in moderate-to-severe nonsegmental vitiligo patients[3](index=3&type=chunk) - Anticipates submitting **EB06** drug manufacturing data to the U.S. FDA for its IND application by the end of calendar 2025[3](index=3&type=chunk) - Increased expenditures for the **EB06** program were offset by decreased **EB05** expenses, benefiting from the fully funded U.S. government 'Just Breathe' study for ARDS[4](index=4&type=chunk) [Financial Performance Summary](index=1&type=section&id=Financial%20Performance%20Summary) This section summarizes Edesa Biotech's financial results for the three and nine months ended June 30, 2025, detailing operating expenses, other income, and net loss [Three Months Ended June 30, 2025](index=1&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025) For the three months ended June 30, 2025, total operating expenses remained consistent at $1.9 million, while net loss was $1.7 million, or $0.25 per common share Financial Highlights (Three Months Ended June 30) | Metric | Q3 2025 | Q3 2024 | | :----- | :------ | :------ | | Total Operating Expenses | $1.9 million | $1.9 million | | Total Other Income | $154,000 | $264,000 | | Net Loss | $1.7 million | $1.7 million | | Loss per Common Share | $0.25 | $0.52 | - Total other income **decreased by $110,000**, primarily due to reduced Canadian government funding and lower interest income[6](index=6&type=chunk) [Nine Months Ended June 30, 2025](index=1&type=section&id=Nine%20Months%20Ended%20June%2030%2C%202025) For the nine months ended June 30, 2025, total operating expenses decreased by $0.6 million to $5.4 million, resulting in an improved net loss of $5.0 million Financial Highlights (Nine Months Ended June 30) | Metric | YTD 2025 | YTD 2024 | | :----- | :------- | :------- | | Total Operating Expenses | $5.4 million | $6.0 million | | Research and Development Expenses | $2.4 million | $2.8 million | | General and Administrative Expenses | $3.0 million | $3.2 million | | Total Other Income | $0.5 million | $0.8 million | | Net Loss | $5.0 million | $5.2 million | | Loss per Common Share | $0.95 | $1.64 | - Research and development expenses **decreased by $0.4 million to $2.4 million**, driven by lower **EB05** external research expenses, partially offset by increased **EB06** costs[8](index=8&type=chunk)[15](index=15&type=chunk) - General and administrative expenses **decreased by $0.2 million to $3.0 million**, primarily due to reduced professional service fees and noncash share-based compensation[8](index=8&type=chunk)[15](index=15&type=chunk) [Financial Statements](index=3&type=section&id=Financial%20Statements) This section presents the unaudited condensed interim consolidated statements of operations, financial position, and cash flows for Edesa Biotech [Condensed Interim Consolidated Statements of Operations](index=3&type=section&id=Condensed%20Interim%20Consolidated%20Statements%20of%20Operations) This section presents the unaudited condensed interim consolidated statements of operations, detailing revenues, expenses, and net loss for the three and nine months ended June 30, 2025, and 2024 Condensed Interim Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Research and development | $939,067 | $897,305 | $2,443,191 | $2,778,100 | | General and administrative | $964,676 | $1,035,140 | $2,998,127 | $3,232,248 | | Loss from operations | $(1,903,743) | $(1,932,445) | $(5,441,318) | $(6,010,348) | | Reimbursement grant income | $183,281 | $236,226 | $536,744 | $661,062 | | Other income (loss) | $(29,002) | $28,007 | $(51,791) | $142,092 | | Net loss | $(1,749,464) | $(1,668,212) | $(4,957,165) | $(5,207,994) | | Loss per common share - basic and diluted | $(0.25) | $(0.52) | $(0.95) | $(1.64) | [Condensed Interim Consolidated Statements of Financial Position](index=4&type=section&id=Condensed%20Interim%20Consolidated%20Statements%20of%20Financial%20Position) This section provides the unaudited condensed interim consolidated balance sheet, outlining the company's assets, liabilities, and shareholders' equity as of June 30, 2025, and September 30, 2024 Condensed Interim Consolidated Statements of Financial Position | Metric | June 30, 2025 | September 30, 2024 | | :-------------------------------- | :-------------- | :----------------- | | Cash and cash equivalents | $12,361,690 | $1,037,320 | | Total Assets | $14,804,800 | $3,813,982 | | Current liabilities | $672,674 | $1,832,827 | | Shareholders' equity | $14,132,126 | $1,981,155 | | Total liabilities and shareholders' equity | $14,804,800 | $3,813,982 | [Condensed Interim Consolidated Statements of Cash Flows](index=4&type=section&id=Condensed%20Interim%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the unaudited condensed interim consolidated statements of cash flows for the nine months ended June 30, 2025, and 2024, detailing cash movements from operating, financing, and the effect of exchange rate changes Condensed Interim Consolidated Statements of Cash Flows | Metric | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(5,601,268) | $(3,923,166) | | Net cash provided by financing activities | $16,844,415 | $623,466 | | Net change in cash and cash equivalents | $11,324,370 | $(3,320,513) | | Cash and cash equivalents, end of period | $12,361,690 | $2,040,884 | [Additional Information](index=2&type=section&id=Additional%20Information) This section provides supplementary details on Edesa Biotech's working capital, upcoming investor conferences, company overview, and forward-looking statements [Working Capital](index=2&type=section&id=Working%20Capital) As of June 30, 2025, Edesa Biotech reported $12.4 million in cash and cash equivalents and $12.1 million in working capital Working Capital as of June 30, 2025 | Metric | Amount | | :----- | :----- | | Cash and cash equivalents | $12.4 million | | Working capital | $12.1 million | [Investor Calendar](index=2&type=section&id=Investor%20Calendar) Edesa management is scheduled to participate in two investor conferences in August and September 2025: the Canaccord Genuity 45th Annual Growth Conference and the H.C. Wainwright 27th Annual Global Investment Conference - Edesa management will participate in the **Canaccord Genuity 45th Annual Growth Conference** (August 12-13, 2025) and the **H.C. Wainwright 27th Annual Global Investment Conference** (September 8-10, 2025)[12](index=12&type=chunk) [About Edesa Biotech, Inc.](index=2&type=section&id=About%20Edesa%20Biotech%2C%20Inc.) Edesa Biotech, Inc. is a clinical-stage biopharmaceutical company focused on developing innovative treatments for inflammatory and immune-related diseases - Edesa Biotech, Inc. is a clinical-stage biopharmaceutical company developing innovative treatments for inflammatory and immune-related diseases[13](index=13&type=chunk) - The clinical pipeline focuses on Medical Dermatology (**EB06** for vitiligo, **EB01** for chronic Allergic Contact Dermatitis) and Respiratory (**EB05** for Acute Respiratory Distress Syndrome)[13](index=13&type=chunk) - The **EB05** program is evaluated in a U.S. government-funded platform study and has received two funding awards from the Government of Canada[13](index=13&type=chunk) [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements regarding Edesa's business plans, including EB06 development and regulatory submission, and highlights various risks and uncertainties - Forward-looking statements are identified by words such as 'anticipate,' 'believe,' 'plan,' 'estimate,' 'expect,' 'intend,' 'may,' 'will,' 'would,' 'could,' 'should,' 'might,' 'potential,' or 'continue'[14](index=14&type=chunk) - Forward-looking statements include plans to channel operational efforts into regulatory preparation and drug manufacturing of **EB06**, aiming for rapid clinical testing and FDA IND submission by end of calendar 2025[14](index=14&type=chunk) - Risks include obtaining regulatory approval, access to sufficient capital, product efficacy, compliance with license agreements, intellectual property protection, and public health crisis impacts[16](index=16&type=chunk)

Part I. Financial Information [Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, showing a Q2 revenue decrease to $51.6 million, a widened net loss of $41.6 million, and reduced total assets to $867.6 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $192,560 | $274,248 | | Total current assets | $331,760 | $408,748 | | Total assets | $867,630 | $941,386 | | **Liabilities & Equity** | | | | Total current liabilities | $76,481 | $84,880 | | Long-term debt, net | $338,226 | $369,097 | | Total liabilities | $452,534 | $495,991 | | Total stockholders' equity | $415,096 | $445,395 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $51,634 | $52,355 | $105,711 | $104,708 | | Loss from operations | $(42,993) | $(36,634) | $(81,926) | $(86,281) | | Net loss | $(41,618) | $(21,000) | $(78,789) | $(55,223) | | Net loss attributable to indie | $(39,038) | $(19,160) | $(73,584) | $(50,339) | | Net loss per share — basic & diluted | $(0.20) | $(0.11) | $(0.38) | $(0.30) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(36,606) | $(29,073) | | Net cash used in investing activities | $(8,392) | $(9,179) | | Net cash provided by (used in) financing activities | $(34,008) | $6,558 | | Net decrease in cash and cash equivalents | $(81,695) | $(29,031) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes disclose a $7.1 million restructuring plan, significant debt, contingent consideration settlements, and the planned acquisition of emotion3D GmbH - On May 12, 2025, the company initiated a restructuring plan to improve operational efficiencies and reduce costs, resulting in total charges of **$7.1 million** in Q2 2025. These charges primarily consist of personnel costs (**$3.7 million**) and long-lived asset impairment (**$3.3 million**)[41](index=41&type=chunk)[42](index=42&type=chunk) - In June 2025, the company repurchased **$30 million** in principal of its 2027 Convertible Notes at a discount, resulting in a pre-tax gain on debt extinguishment of **$2.6 million**[70](index=70&type=chunk) Revenue by Geography (in thousands) | Region | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Greater China | $41,747 | $45,354 | | Europe | $23,784 | $18,386 | | United States | $16,747 | $18,820 | | Rest of Asia Pacific | $12,366 | $10,337 | | South Korea | $7,971 | $7,551 | | Other | $3,096 | $4,260 | - Subsequent to the quarter end, on August 6, 2025, the company entered into an agreement to acquire emotion3D GmbH for an aggregate consideration of up to **$30 million**, consisting of **$20 million** in cash at closing and up to **$10 million** in contingent earnout payments[119](index=119&type=chunk)[120](index=120&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 revenue decline, increased operating expenses due to restructuring, and a strong liquidity position of $202.9 million despite increased cash usage - The company is impacted by macroeconomic conditions including inflation, geopolitical tensions, and trade policies (tariffs), which can affect economic activity and consumer demand for automotive products[125](index=125&type=chunk) - As of June 30, 2025, the company had **$202.9 million** in cash, cash equivalents, and restricted cash. Management believes current liquidity is sufficient to meet needs for at least the next 12 months[151](index=151&type=chunk)[158](index=158&type=chunk) [Operating Results: Q2 2025 vs. Q2 2024](index=31&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) Q2 2025 total revenue decreased 1% to $51.6 million, while operating expenses rose 6% to $94.6 million due to a $7.1 million restructuring charge Q2 Revenue Comparison (in thousands) | Revenue Type | Q2 2025 | Q2 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Product revenue | $49,720 | $49,009 | $711 | 1% | | Contract revenue | $1,914 | $3,346 | $(1,432) | (43)% | | **Total revenue** | **$51,634** | **$52,355** | **$(721)** | **(1)%** | Q2 Operating Expenses Comparison (in thousands) | Expense Category | Q2 2025 | Q2 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Cost of goods sold | $30,693 | $30,241 | $452 | 1% | | Research and development | $38,472 | $41,301 | $(2,829) | (7)% | | Selling, general, and administrative | $18,355 | $17,447 | $908 | 5% | | Restructuring costs | $7,107 | $— | $7,107 | 100% | | **Total operating expenses** | **$94,627** | **$88,989** | **$5,638** | **6%** | [Operating Results: Six Months 2025 vs. 2024](index=33&type=section&id=Comparison%20of%20the%20six%20months%20ended%20June%2030%2C%202025%20and%202024) H1 2025 total revenue increased 1% to $105.7 million, while operating expenses decreased 2% to $187.6 million, offsetting restructuring costs Six Months Revenue Comparison (in thousands) | Revenue Type | H1 2025 | H1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Product revenue | $100,140 | $97,587 | $2,553 | 3% | | Contract revenue | $5,571 | $7,121 | $(1,550) | (22)% | | **Total revenue** | **$105,711** | **$104,708** | **$1,003** | **1%** | Six Months Operating Expenses Comparison (in thousands) | Expense Category | H1 2025 | H1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Cost of goods sold | $62,221 | $60,330 | $1,891 | 3% | | Research and development | $80,587 | $90,890 | $(10,303) | (11)% | | Selling, general, and administrative | $37,722 | $39,769 | $(2,047) | (5)% | | Restructuring costs | $7,107 | $— | $7,107 | 100% | | **Total operating expenses** | **$187,637** | **$190,989** | **$(3,352)** | **(2)%** | [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Cash decreased to $202.9 million, with H1 cash used in operations increasing to $36.6 million and financing activities shifting to a $34.0 million outflow Summary of Cash Flows (in thousands) | Cash Flow Activity | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(36,606) | $(29,073) | | Net cash used in investing activities | $(8,392) | $(9,179) | | Net cash (used in) provided by financing activities | $(34,008) | $6,558 | - Financing activities in H1 2025 included **$27.7 million** in payments on debt obligations and the repurchase of 2027 Notes, and **$3.7 million** in payments on financed software[163](index=163&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces foreign currency risk from international operations, mitigated by forward contracts, and minimal interest rate risk on its $202.9 million cash portfolio - The company's primary foreign currency exposures are the Canadian dollar, Chinese yuan/renminbi, Euro, British pound sterling and Israeli New Shekel[169](index=169&type=chunk) - To mitigate currency risk, the company enters into foreign currency forward contracts. The change in fair value of these contracts was a primary driver of foreign exchange gains in Q2 2025 versus losses in Q2 2024[169](index=169&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2025, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[173](index=173&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal controls[177](index=177&type=chunk) Part II. Other Information [Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any material legal proceedings, only routine claims incidental to ordinary business - The company is not party to any material legal proceedings[179](index=179&type=chunk) [Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the company's risk factors since the 2024 Annual Report on Form 10-K - No material changes have been made to the risk factors previously disclosed in the company's 2024 Form 10-K[180](index=180&type=chunk) [Other Information](index=39&type=section&id=Item%205.%20Other%20Information) Key executives, the COO and CEO, have adopted Rule 10b5-1 trading plans for future stock sales - On May 26, 2025, COO Michael Wittmann adopted a Rule 10b5-1 trading plan for the sale of up to **344,472 shares** of Class A common stock[184](index=184&type=chunk) - On June 13, 2025, CEO Donald McClymont adopted a Rule 10b5-1 trading plan for the sale of up to **1,550,000 shares** of Class A common stock[185](index=185&type=chunk) [Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including transaction agreements, governance documents, and officer certifications

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Unaudited Q2 2025 financials report a $441.1 million net loss, driven by a $406.9 million impairment, with revenues down 13.5% and negative operating cash flow [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 net revenues fell 13.5% to $379.8 million, leading to a $434.6 million operating loss primarily from a $406.9 million impairment Q2 2025 vs Q2 2024 Statement of Operations Highlights (in thousands) | Metric | Q2 2025 (13 weeks) | Q2 2024 (13 weeks) | Change (%) | | :--- | :--- | :--- | :--- | | Total net revenues | $379,767 | $438,809 | -13.5% | | Goodwill and other asset impairments | $406,932 | $201 | N/A | | Operating (loss)/income | $(434,551) | $6,859 | N/A | | Net loss attributable to Krispy Kreme, Inc. | $(435,260) | $(5,491) | N/A | | Diluted Net loss per share | $(2.55) | $(0.03) | N/A | - A substantial goodwill and other asset impairment charge of **$406.9 million** was the primary driver of the significant operating and net losses in the second quarter of 2025[9](index=9&type=chunk) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $2.63 billion due to goodwill impairment, with retained deficit widening to $774.2 million and total debt increasing Balance Sheet Highlights (in thousands) | Account | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $21,264 | $28,962 | | Goodwill, net | $711,780 | $1,047,581 | | Total assets | $2,630,474 | $3,072,030 | | **Liabilities & Equity** | | | | Total long-term debt (incl. current) | $957,045 | $900,903 | | Total liabilities | $1,912,285 | $1,907,598 | | Retained deficit | $(774,164) | $(299,638) | | Total shareholders' equity | $718,189 | $1,164,432 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 operating cash flow was negative $53.4 million, offset by $30.9 million from investing activities, mainly Insomnia Cookies divestiture proceeds Cash Flow Summary - Two Quarters Ended (in thousands) | Cash Flow Activity | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net cash (used for)/provided by operating activities | $(53,377) | $15,525 | | Net cash provided by/(used for) investing activities | $30,937 | $(65,161) | | Net cash provided by financing activities | $16,248 | $40,245 | | **Net decrease in cash** | **$(7,492)** | **$(9,506)** | - The company received **$75.0 million** in net proceeds from the divestiture of Insomnia Cookies, which was a major source of cash from investing activities[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail McDonald's USA agreement termination, a $356.0 million goodwill impairment, Insomnia Cookies divestiture, and new legal proceedings - The Business Relationship Agreement with McDonald's USA was terminated effective July 2, 2025, with neither party having further obligations except for confidentiality and indemnification[28](index=28&type=chunk) - The company recognized a cumulative, non-cash, partial goodwill impairment charge of **$356.0 million** in Q2 2025 for its U.S., KK U.K., and KK Australia reporting units[30](index=30&type=chunk) - The company sold its remaining ownership interest in Insomnia Cookies for **$75.0 million** in cash, resulting in a loss on divestiture of **$11.5 million**[40](index=40&type=chunk) - New legal proceedings were filed against the company, including federal securities class actions related to the McDonald's agreement and class actions related to a 2024 data breach[77](index=77&type=chunk)[78](index=78&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 revenue decline, McDonald's partnership termination, a $406.9 million impairment, increased leverage, and a new turnaround plan - The company has implemented a comprehensive turnaround plan focusing on refranchising international markets, reducing capital intensity, expanding profit margins through operational efficiency, and pursuing sustainable U.S. growth[104](index=104&type=chunk) - The partnership with McDonald's USA was terminated effective July 2, 2025, as it was deemed unsustainable, with expected positive impact on U.S. segment profitability from Q3 2025[105](index=105&type=chunk) - The company no longer expects to pay quarterly cash dividends, a change from its previously disclosed policy, to better align capital allocation with its growth strategy[174](index=174&type=chunk) [Results of Operations](index=46&type=section&id=Results%20of%20Operations) Q2 2025 net revenue fell 13.5% to $379.8 million, with organic revenue down 0.8%, leading to a $434.6 million operating loss and a 63.3% Adjusted EBITDA decline Q2 2025 vs Q2 2024 Revenue Performance | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Total Net Revenues | $379.8M | $438.8M | -13.5% | | Organic Revenue Decline | | | -0.8% | Q2 2025 Adjusted EBITDA by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | U.S. | $9,930 | $32,668 | -69.6% | | International | $18,221 | $21,655 | -15.9% | | Market Development | $8,948 | $12,875 | -30.5% | | **Total Adjusted EBITDA** | **$20,111** | **$54,726** | **-63.3%** | - The U.S. segment's Adjusted EBITDA decline was primarily driven by an estimated **$7 million to $9 million** adverse impact from the now-ended McDonald's USA partnership and lower transaction volumes[148](index=148&type=chunk) [Capital Resources and Liquidity](index=54&type=section&id=Capital%20Resources%20and%20Liquidity) Liquidity sources include cash and credit facilities, with total debt at $957.0 million, a leverage ratio of 4.5x, and a new policy of no quarterly dividends - The company's leverage ratio increased to **4.5 to 1.00** as of the end of Q2 2025, compared to **3.9 to 1.00** at the end of fiscal 2024, remaining in compliance with financial covenants[182](index=182&type=chunk)[183](index=183&type=chunk) - The company has changed its dividend policy and no longer expects to pay quarterly cash dividends to common stockholders[174](index=174&type=chunk) Key Liquidity and Debt Figures (in millions) | Metric | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $21.3 | $29.0 | | Total long-term debt | $957.0 | $900.9 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from commodity price volatility, interest rate fluctuations on variable debt, and foreign currency exchange rate changes - The company faces commodity price risk for key ingredients (flour, sugar, shortening) and gasoline, which are subject to market volatility and geopolitical factors[188](index=188&type=chunk)[189](index=189&type=chunk) - The company has interest rate risk on **$316.3 million** of unhedged variable-rate debt, where a **100 basis point** change in SOFR would alter annual interest expense by approximately **$3.2 million**[190](index=190&type=chunk) - Foreign currency exchange rate risk is significant, as **33%** of revenues come from outside the U.S., with a **10%** change in key exchange rates impacting H1 2025 revenues by an estimated **$25.2 million**[191](index=191&type=chunk) [Item 4. Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) A new material weakness in goodwill impairment assessment controls led to ineffective disclosure controls as of Q2 2025, replacing a remediated weakness - A previously disclosed material weakness related to journal entry system controls has been successfully remediated[194](index=194&type=chunk) - A new material weakness was identified in Q2 2025 related to the review of inputs and assumptions for the non-routine goodwill impairment assessment[196](index=196&type=chunk) - Due to the new material weakness, the CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of June 29, 2025[195](index=195&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, with new securities class actions and data breach litigation commencing - The company is subject to various legal proceedings, with details on new litigation that began in Q2 2025 available in Note 12 of the financial statements[201](index=201&type=chunk) [Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) No material changes to previously disclosed risk factors were reported in the current period - No material changes to risk factors were reported compared to the latest Annual Report on Form 10-K[202](index=202&type=chunk) [Other Items (Items 2, 3, 4, 5, 6)](index=61&type=section&id=Other%20Items) Part II includes no unregistered equity sales, no senior security defaults, no mine safety disclosures, and lists exhibits - The company reported "None" for Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), Item 4 (Mine Safety Disclosures), and Item 5 (Other Information)[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)[206](index=206&type=chunk)

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) This section provides foundational details of the Form 10-Q filing, including registrant identification and common stock information [Registrant Information](index=1&type=section&id=Registrant%20Information) This section provides basic identification details for TG Therapeutics, Inc. as a registrant filing a Quarterly Report on Form 10-Q, including its incorporation state and Nasdaq trading symbol - TG Therapeutics, Inc. is filing a Quarterly Report on Form 10-Q for the period ended June 30, 2025[2](index=2&type=chunk) Common Stock Trading Information | Title of Class | Trading Symbol(s) | Exchange Name | | :--------------- | :------------------ | :------------ | | Common Stock, par value $0.001 | TGTX | Nasdaq Capital Market | - The registrant is a Large Accelerated Filer and has filed all required reports and interactive data files during the preceding 12 months[4](index=4&type=chunk)[5](index=5&type=chunk) [Outstanding Shares](index=2&type=section&id=Outstanding%20Shares) As of August 5, 2025, TG Therapeutics, Inc. had 158,665,613 shares of common stock outstanding Common Stock Outstanding | As of Date | Common Stock Outstanding | | :--------- | :----------------------- | | August 5, 2025 | 158,665,613 shares | [Table of Contents](index=3&type=section&id=TABLE%20OF%20CONTENTS) This section provides an organized listing of all chapters and sub-sections contained within the report [Special Cautionary Notice Regarding Forward-Looking Statements](index=4&type=section&id=SPECIAL%20CAUTIONARY%20NOTICE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section provides a cautionary notice regarding forward-looking statements, highlighting inherent risks and uncertainties [Forward-Looking Statements Disclosure](index=4&type=section&id=Forward-Looking%20Statements%20Disclosure) This section highlights that the Quarterly Report contains forward-looking statements, subject to safe harbor provisions, which involve risks and uncertainties that could cause actual results to differ - All statements other than historical facts may constitute forward-looking statements, subject to safe harbor provisions of the Private Securities Litigation Reform Act of 1995[9](index=9&type=chunk) - Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from expressed or implied expectations[9](index=9&type=chunk) - Readers are cautioned not to rely unduly on any forward-looking statements, which speak only as of the report date, and the company does not undertake to update them except as required by law[10](index=10&type=chunk)[11](index=11&type=chunk) [Key Areas of Forward-Looking Statements](index=4&type=section&id=Key%20Areas%20of%20Forward-Looking%20Statements) Forward-looking statements cover critical aspects of operations, including regulatory approvals, commercialization, supply chain, clinical trials, intellectual property, financial projections, and funding - Ability to obtain and maintain regulatory approvals for product candidates (azer-cel) and BRIUMVI in various jurisdictions (U.S., EU, UK, Switzerland, Australia) - Ability to adapt and expand commercial infrastructure for BRIUMVI and other product candidates - Maintenance of a reliable supply of products to meet market demand - Timing and success of BRIUMVI commercialization, market acceptance, pricing, and reimbursement - Initiation, timing, progress, and results of preclinical studies and clinical trials - Ability to advance drug candidates into and successfully complete clinical trials - Ability to develop, formulate, manufacture, and commercialize product candidates - Ability to establish and maintain contractual relationships and partnerships for manufacturing, distribution, marketing, and supply - Implementation of business model and strategic plans - Scope of intellectual property protection for products and candidates - Estimates of expenses, future revenues, capital requirements, and need for additional financing - Ability to maintain or obtain adequate product liability and other insurance coverage - Effects of future regulatory developments or legislative actions - Prevailing economic, market, and business conditions - Ability to retain, attract, and hire key personnel - Competitive position and fluctuations in common stock trading price[12](index=12&type=chunk) [Summary Risk Factors](index=5&type=section&id=SUMMARY%20RISK%20FACTORS) This section provides a high-level overview of the principal risks associated with investing in the company [Overview of Principal Risks](index=5&type=section&id=Overview%20of%20Principal%20Risks) This section summarizes principal investment risks, categorized by commercialization, financial position, drug development, regulatory, third-party dependence, intellectual property, business organization, and common stock - The business is subject to numerous risks, and investors should carefully consider these risks before making an investment decision[13](index=13&type=chunk) - Risks Related to Commercialization - Risks Related to our Financial Position and Need for Additional Capital - Risks Related to Drug Development and Regulatory Approval - Risks Related to Governmental Regulation of the Pharmaceutical Industry and Legal Compliance Matters - Risks Related to our Dependence on Third Parties - Risks Related to Intellectual Property - Risks Related to Our Business Organization and Governance, Strategy, Employees and Growth Management - Risks Related to Our Common Stock and Being a Publicly Traded Company[14](index=14&type=chunk)[15](index=15&type=chunk)[16](index=16&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) [Specific Summary Risks](index=5&type=section&id=Specific%20Summary%20Risks) Key summary risks include limited revenues from product acceptance, undesirable side effects, intense competition, unfavorable pricing, significant operating losses, need for additional capital, regulatory challenges, third-party dependence, intellectual property, and growth management - Limited revenues if BRIUMVI or future product candidates do not achieve broad market acceptance among physicians, patients, and payors - Risk of undesirable side effects post-approval for BRIUMVI or other product candidates, leading to negative consequences - Market opportunities for BRIUMVI and azer-cel may be smaller than estimated, adversely affecting revenue and profitability - Substantial competition from other pharmaceutical companies may reduce or eliminate commercial opportunities - BRIUMVI and future products may face unfavorable pricing regulations or third-party payor coverage and reimbursement policies - Product liability lawsuits could result in substantial liabilities and limit commercialization - Significant operating losses incurred since inception, with potential for future losses - Potential need for additional capital, which if not raised, could delay or eliminate drug development and commercialization efforts - Inability to maintain or obtain regulatory approval for products and candidates, or significant delays, would materially harm the business - Preclinical and early clinical trial results are not necessarily predictive of future success, and later trials may not yield favorable results - Product candidates may cause undesirable side effects, delaying or preventing regulatory approval or impacting commercial potential - Extensive, costly, and time-consuming regulation of products and candidates, potentially causing delays or preventing approvals - New legislation, regulatory proposals, and third-party payor initiatives may increase compliance costs and adversely affect marketability - Inadequate funding or disruptions at government agencies (FDA, SEC) could hinder timely development and commercialization - Failure to comply with local laws in international markets could lead to losses - Approved products, including BRIUMVI, could face market restrictions or withdrawal, and non-compliance could result in penalties - Reliance on third parties for clinical, preclinical data, and clinical trial conduct; non-performance could delay or prevent regulatory approval and commercialization - Reliance on third parties for manufacturing and testing of BRIUMVI and clinical supply; risks of insufficient quantities, unacceptable cost, or quality - Sole source suppliers for starting materials, API/drug substance, and other materials; loss or disruption could significantly harm the business - In-licensed products (BRIUMVI, azer-cel) mean disputes or non-performance by licensors could adversely affect development and commercialization - Dependence on collaboration and commercialization partners (e.g., Neuraxpharm); unsuccessful relationships or terminations could negatively impact business and revenue - Inability to attract and retain key management, commercial, and clinical development personnel could hinder successful development or commercialization - Difficulties in managing business development and expansion could disrupt operations - Certain executive officers, directors, and principal stockholders can exercise significant influence over the company - Internal IT systems or those of third parties may fail or suffer security breaches, disrupting drug development and commercialization - Unfavorable global economic conditions could adversely affect business, financial condition, or results of operations - Stock price volatility could limit investors' ability to sell at a profit - Significant increased costs and management time devoted to public company compliance initiatives[17](index=17&type=chunk)[22](index=22&type=chunk) [PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [ITEM 1. FINANCIAL STATEMENTS](index=7&type=section&id=Item%201%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including Balance Sheets, Statements of Operations, Stockholders' Equity, and Cash Flows, with detailed notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased from **$577.7 million** to **$702.6 million**, driven by accounts receivable and inventories, with corresponding increases in liabilities and equity Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (Unaudited) | December 31, 2024 (Note 1) | | :-------------------------------- | :-------------------------- | :------------------------- | | **Assets** | | | | Cash and cash equivalents | $129,126 | $179,894 | | Short-term investment securities | $122,744 | $131,106 | | Accounts receivable, net | $231,516 | $129,185 | | Inventories | $155,202 | $110,458 | | Total current assets | $663,962 | $566,359 | | Total assets | $702,613 | $577,690 | | **Liabilities and Stockholders' Equity** | | | | Accounts payable and accrued expenses | $134,021 | $58,296 | | Deferred revenue - current portion | $23,911 | $11,414 | | Total current liabilities | $171,889 | $90,679 | | Loan payable – non-current | $245,037 | $244,429 | | Total liabilities | $426,181 | $355,326 | | Total stockholders' equity | $276,432 | $222,364 | | Total liabilities and stockholders' equity | $702,613 | $577,690 | - Total assets increased by **$124.9 million (21.6%)** from December 31, 2024, to June 30, 2025[25](index=25&type=chunk) - Accounts receivable, net, increased significantly by **$102.3 million (79.2%)** from December 31, 2024, to June 30, 2025[25](index=25&type=chunk) [Condensed Consolidated Statements of Operations (unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(unaudited)) Net income substantially increased for both three and six months ended June 30, 2025, driven by more than doubled product revenue, shifting from a net loss in the prior year Condensed Consolidated Statements of Operations (in thousands, except share and per share amounts) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Product revenue, net | $138,843 | $72,596 | $258,498 | $123,084 | | Total revenue | $141,148 | $73,466 | $262,004 | $136,939 | | Total costs and expenses | $106,305 | $64,650 | $218,539 | $137,393 | | Operating income (loss) | $34,843 | $8,816 | $43,465 | $(454) | | Net income (loss) | $28,187 | $6,879 | $33,247 | $(3,828) | | Net income (loss) per common share: Basic | $0.19 | $0.05 | $0.23 | $(0.03) | | Net income (loss) per common share: Diluted | $0.17 | $0.04 | $0.20 | $(0.03) | - Product revenue, net, increased by **91.2%** for the three months ended June 30, 2025, compared to the same period in 2024[28](index=28&type=chunk) - Total revenue increased by **92.1%** for the three months ended June 30, 2025, compared to the same period in 2024[28](index=28&type=chunk) - Net income for the three months ended June 30, 2025, was **$28.2 million**, a significant increase from **$6.9 million** in the prior year[28](index=28&type=chunk) - For the six months ended June 30, 2025, the company reported a net income of **$33.2 million**, a substantial improvement from a net loss of **$3.8 million** in the same period of 2024[28](index=28&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity (unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20(unaudited)) Total stockholders' equity increased to **$276.4 million** for the six months ended June 30, 2025, driven by net income and restricted stock compensation, partially offset by treasury stock purchases Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric | Balance at January 1, 2025 | Balance at June 30, 2025 | | :----------------------------------- | :------------------------- | :----------------------- | | Common Stock (Shares) | 156,204,159 | 158,786,335 | | Common Stock (Amount) | $156 | $159 | | Additional paid-in capital | $1,760,396 | $1,794,212 | | Treasury Stock (Shares) | 367,903 | 761,098 | | Treasury Stock (Amount) | $(8,994) | $(21,992) | | Accumulated Deficit | $(1,529,194) | $(1,495,947) | | Total Stockholders' Equity | $222,364 | $276,432 | - Total stockholders' equity increased by **$54.1 million** from January 1, 2025, to June 30, 2025[30](index=30&type=chunk) - Net income contributed **$33.2 million** to equity during the six months ended June 30, 2025[30](index=30&type=chunk) - Purchases of treasury stock amounted to **$12.9 million** during the six months ended June 30, 2025[30](index=30&type=chunk) [Condensed Consolidated Statements of Cash Flows (unaudited)](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) Net cash, cash equivalents, and restricted cash decreased by **$50.8 million** for the six months ended June 30, 2025, primarily due to cash used in operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(21,279) | $(2,671) | | Net cash used in investing activities | $(16,926) | $(7,490) | | Net cash (used in) provided by financing activities | $(12,545) | $145 | | NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | $(50,750) | $(10,016) | | CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $130,442 | $84,202 | - Net cash used in operating activities increased to **$21.3 million** for the six months ended June 30, 2025, from **$2.7 million** in the prior year, mainly due to increases in accounts receivable and inventory purchases[32](index=32&type=chunk)[173](index=173&type=chunk)[174](index=174&type=chunk)[175](index=175&type=chunk) - Net cash used in investing activities increased to **$16.9 million** from **$7.5 million**, primarily due to lower maturities of short-term securities[32](index=32&type=chunk) - Net cash used in financing activities was **$12.5 million**, a shift from **$0.1 million** provided in the prior year, largely due to share repurchases[32](index=32&type=chunk) [Notes to Condensed Consolidated Financial Statements (unaudited)](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) These notes provide detailed explanations of the condensed consolidated financial statements, covering business, accounting policies, revenue, investments, inventory, fair value, equity, loans, leases, licenses, related parties, and income taxes [NOTE 1 - Organization and Summary of Significant Accounting Policies](index=11&type=section&id=NOTE%201%20-%20ORGANIZATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines TG Therapeutics' business as a commercial-stage biopharmaceutical company focused on B-cell diseases, with FDA and international approvals for BRIUMVI, detailing accounting policies and liquidity - TG Therapeutics is a fully-integrated, commercial stage, biopharmaceutical company focused on the acquisition, development and commercialization of novel treatments for B-cell diseases[35](index=35&type=chunk) - BRIUMVI (ublituximab-xiiy) has received FDA approval for relapsing forms of multiple sclerosis (RMS) and international approvals from EC, MHRA, Swissmedic, and TGA[35](index=35&type=chunk) - Accumulated deficit as of June 30, 2025: Approximately **$1.5 billion**[37](index=37&type=chunk) - Cash, cash equivalents, and investment securities as of June 30, 2025: **$278.9 million**[38](index=38&type=chunk) - Anticipated liquidity: Sufficient for more than a twelve-month period from the filing date[37](index=37&type=chunk)[38](index=38&type=chunk) [NOTE 2 - Revenue](index=16&type=section&id=NOTE%202%20-%20REVENUE) This note details disaggregated revenue, showing a significant increase in net product revenue from U.S. BRIUMVI sales, with contributions from license, milestone, royalty, and other revenue Disaggregated Revenue (in thousands) | Revenue Type | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total product revenue, net | $138,843 | $72,596 | $258,498 | $123,084 | | License, milestone, royalty and other revenue | $2,305 | $870 | $3,506 | $13,855 | | Total Revenue | $141,148 | $73,466 | $262,004 | $136,939 | - Product revenue, net, for the three months ended June 30, 2025, increased by **91.2%** year-over-year, driven by U.S. sales of BRIUMVI[70](index=70&type=chunk) - For the six months ended June 30, 2025, product revenue, net, increased by **110.0%** year-over-year[70](index=70&type=chunk)[71](index=71&type=chunk) - License, milestone, royalty and other revenue for the six months ended June 30, 2024, included a **$12.5 million** milestone payment from Neuraxpharm for the first EU commercial launch of BRIUMVI[73](index=73&type=chunk) [NOTE 3 - Investment Securities](index=17&type=section&id=NOTE%203%20-%20INVESTMENT%20SECURITIES) This note details investment securities, primarily held-to-maturity obligations of domestic governmental agencies, totaling **$149.7 million** at amortized cost as of June 30, 2025 Investment Securities (in thousands) | Metric | June 30, 2025 (Amortized Cost) | December 31, 2024 (Amortized Cost) | | :----------------------------------- | :------------------------------- | :------------------------------- | | Short-term obligations of domestic governmental agencies | $122,744 | $131,106 | | Long-term obligations of domestic governmental agencies | $26,990 | $0 | | Total short-term and long-term investment securities | $149,734 | $131,106 | | Estimated fair value (June 30, 2025) | $149,766 | $131,170 | - All investment securities are classified as held-to-maturity and recorded at amortized cost[74](index=74&type=chunk) - Equity securities from the Precision License Agreement are included in long-term investments[75](index=75&type=chunk) [NOTE 4 - Inventory](index=17&type=section&id=NOTE%204%20-%20INVENTORY) Inventory increased to **$155.2 million** at June 30, 2025, primarily due to a rise in work-in-process for BRIUMVI, with no reserves for excess or obsolescence required Inventory (in thousands) | Inventory Type | June 30, 2025 | December 31, 2024 | | :--------------- | :------------ | :---------------- | | Raw Materials | $4,119 | $28,151 | | Work in Process | $129,239 | $68,369 | | Finished Goods | $21,844 | $13,938 | | Total Inventory | $155,202 | $110,458 | - Total inventory increased by **$44.7 million (40.5%)** from December 31, 2024, to June 30, 2025[76](index=76&type=chunk) - Work in Process inventory more than doubled, reflecting efforts to build inventory for BRIUMVI[76](index=76&type=chunk) - Inventory is solely related to BRIUMVI, with costs capitalized after FDA approval in December 2022[77](index=77&type=chunk)[78](index=78&type=chunk) - No reserve for excess quantities or obsolescence was required for BRIUMVI inventory as of June 30, 2025[79](index=79&type=chunk) [NOTE 5 - Fair Value Measurements](index=18&type=section&id=NOTE%205%20-%20FAIR%20VALUE%20MEASUREMENTS) This note details fair value measurements of financial assets and liabilities, categorized into Level 1, 2, and 3, including equity investments, forward contract liabilities, and 5% Notes Fair Value Measurements (in thousands) | Category | Level 1 | Level 2 | Level 3 | Total | | :----------------------- | :------ | :------ | :------ | :---- | | **Assets (June 30, 2025)** | | | | | | Equity Investments | $1,336 | $— | $— | $1,336 | | Total Assets | $1,336 | $— | $— | $1,336 | | **Liabilities (June 30, 2025)** | | | | | | Forward Contract Liabilities | $— | $1,404 | $— | $1,404 | | 5% Notes | $— | $— | $810 | $810 | | Total Liabilities | $— | $1,404 | $810 | $2,214 | - Equity investments primarily consist of common stock of Precision BioSciences, Inc., acquired through the Precision License Agreement for azer-cel[81](index=81&type=chunk) - Forward contract liabilities are valued using Precision's stock price and the probability of achieving Milestone Event 1[86](index=86&type=chunk) - The 5% Notes are classified as Level 3 liabilities, representing their fair value and related accrued interest[89](index=89&type=chunk) [NOTE 6 - Stockholders' Equity](index=20&type=section&id=NOTE%206%20-%20STOCKHOLDERS%27%20EQUITY) This note details stockholders' equity components, including common stock and equity incentive plans, highlighting **$12.9 million** in share repurchases and **$31.3 million** in stock-based compensation for the six months ended June 30, 2025 - Authorized common stock: **190,000,000 shares ($0.001 par value)**[96](index=96&type=chunk) - Share repurchase program: Up to **$100 million** authorized in August 2024; **$6.9 million** spent on repurchasing **193,500 shares** during the three months ended June 30, 2025[99](index=99&type=chunk) - Treasury stock held as of June 30, 2025: **761,098 shares** at a cost of **$22.0 million**[102](index=102&type=chunk) - Total stock-based compensation expense for six months ended June 30, 2025: **$31.3 million** (vs. **$18.8 million** in 2024)[103](index=103&type=chunk) - Unrecognized compensation expense for unvested time-based restricted stock: **$68.3 million** (weighted-average period of **3.0 years**)[103](index=103&type=chunk) - Unrecognized compensation expense for unvested milestone-based restricted stock: **$20.4 million**[103](index=103&type=chunk) - Unrecognized compensation expense for restricted stock with market conditions: **$46.1 million** (weighted-average period of **2.3 years**)[103](index=103&type=chunk) [NOTE 7 - Loan Payable](index=22&type=section&id=NOTE%207%20-%20LOAN%20PAYABLE) This note details the company's **$250 million** Initial Term Loan facility with Blue Owl Capital Corporation, maturing in August 2029, accruing SOFR-based interest, and secured by substantially all company assets - The company entered into a **$250 million** Initial Term Loan facility in August 2024 with Blue Owl Capital Corporation[107](index=107&type=chunk) - Loan Maturity Date: August 2, 2029[108](index=108&type=chunk) - Interest Rate: Applicable margin plus Term SOFR (no less than **1.00%**) or a base rate[109](index=109&type=chunk) - Security: Secured by a lien on substantially all assets of the company and certain subsidiaries[110](index=110&type=chunk) - Scheduled quarterly amortization payments: **$12.5 million**, commencing June 30, 2028 (may be deferred based on Total Net Leverage Ratio)[108](index=108&type=chunk) - Total financing and upfront costs: **$6.0 million**, amortized over the loan term[108](index=108&type=chunk) - Amortization of debt issuance and discount costs for six months ended June 30, 2025: **$0.6 million**[108](index=108&type=chunk) Loan Payable Balance (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Loan payable | $250,000 | $250,000 | | Less: unamortized debt issuance and debt discount costs | $(4,963) | $(5,571) | | Total loan payable | $245,037 | $244,429 | | Loan payable non-current | $245,037 | $244,429 | [NOTE 8 - Leases](index=23&type=section&id=NOTE%208%20-%20LEASES) This note details the company's lease obligations for office spaces, with a total lease liability of **$8.7 million** and a corresponding Right-of-Use (ROU) asset of **$6.7 million** as of June 30, 2025 - Office Agreement with Fortress Biotech, Inc. (FBIO) for New York City office space, with an average annual rental obligation of **$1.8 million**[112](index=112&type=chunk) - NC Lease for North Carolina office space, with an average annual rental obligation of **$0.2 million**[113](index=113&type=chunk) - Weighted-average remaining operating lease term: **5.2 years** as of June 30, 2025[114](index=114&type=chunk) - Weighted-average discount rate for operating leases: **10.07%** as of June 30, 2025[114](index=114&type=chunk) Lease Liabilities (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :----------------------- | :------------ | :---------------- | | Lease liability current portion | $1,091 | $1,157 | | Lease liability non-current | $7,588 | $8,133 | | Total lease liability | $8,679 | $9,290 | Lease Expense (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $474 | $551 | $978 | $1,151 | [NOTE 9 - License Agreements](index=24&type=section&id=NOTE%209%20-%20LICENSE%20AGREEMENTS) This note details key license agreements for BRIUMVI and azer-cel, involving upfront payments, milestone payments, and tiered royalties, contributing to the company's revenue and R&D pipeline - LFB License Agreement for ublituximab (BRIUMVI): Exclusive worldwide rights (excluding France/Belgium). Royalties escalate from mid-single digits to high-single digits on net sales. **$14.2 million** and **$26.2 million** recorded in cost of revenue for three and six months ended June 30, 2025, respectively[116](index=116&type=chunk)[117](index=117&type=chunk) - Ildong Pharmaceutical Co. Ltd. Sublicense: Exclusive rights for ublituximab in South Korea and Southeast Asia. Upfront payment of **$2.0 million** (received Dec 2012) recognized as license revenue over agreement life. Potential for up to **$5.0 million** in additional milestone payments and royalties on net sales[118](index=118&type=chunk)[119](index=119&type=chunk) - Neuraxpharm Commercialization Agreement: Exclusive right to commercialize BRIUMVI ex-U.S. (excluding Canada, Mexico, and certain Asian countries). Received **$140.0 million** upfront and **$12.5 million** milestone payment upon first EU launch (Feb 2024). Eligible for up to **$492.5 million** in additional milestones and tiered double-digit royalties up to **30%**. Royalty revenue of **$1.1 million** and **$1.7 million** recognized for three and six months ended June 30, 2025, respectively[120](index=120&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) - Precision License Agreement for azer-cel: Exclusive/non-exclusive license rights for azer-cel (allogeneic CAR T therapy) for autoimmune/non-oncology diseases. Upfront payment of **$7.5 million** (**$5.25 million** cash, **$2.25 million** equity). Deferred payment of **$2.5 million** (equity) made in Jan 2025. Eligible for up to **$288 million** in additional clinical, regulatory, and commercial milestones, plus high-single-digit to low-double-digit royalties on net sales[127](index=127&type=chunk)[128](index=128&type=chunk) - MaxCyte Strategic Platform License Agreement: Non-exclusive license for MaxCyte's cell loading technology for autoimmune/non-oncology diseases, including azer-cel. Eligible for **$1.0 million** payment upon first pivotal trial dosing and up to **$13 million** in additional regulatory marketing approval milestones. Low-single-digit royalties on net sales of approved products developed with licensed technology. Annual licensing fee of approximately **$0.2 million**[127](index=127&type=chunk)[128](index=128&type=chunk) [NOTE 10 - Related Party Transactions](index=26&type=section&id=NOTE%2010%20-%20RELATED%20PARTY%20TRANSACTIONS) This note discloses related party transactions, primarily the Shared Services Agreement with Fortress Biotech, Inc. (FBIO), with expenses of approximately **$0.8 million** for the six months ended June 30, 2025 - The company has a Shared Services Agreement with Fortress Biotech, Inc. (FBIO) to share costs for facilities, personnel, and administrative services[130](index=130&type=chunk) Related Party Expenses (in thousands) | Metric | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------- | :----------------------------- | :----------------------------- | | Shared Services Agreement Expenses | $800 | $900 | - Mr. Weiss, the company's Chairman and CEO, also serves as a director and Executive Vice Chairman, Strategic Development of FBIO[130](index=130&type=chunk) [NOTE 11 - Income Taxes](index=26&type=section&id=NOTE%2011%20-%20INCOME%20TAXES) This note details the company's income tax expense of **$3.1 million** and an effective tax rate of **8.6%** for the six months ended June 30, 2025, influenced by state taxes, R&D credits, and valuation allowance changes Income Tax Information (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) before taxes | $30,920 | $6,551 | $36,388 | $(4,127) | | Income tax benefit (expense) | $(2,733) | $328 | $(3,141) | $299 | | Effective tax rate | 8.8% | (5.0)% | 8.6% | 7.2% | - The effective tax rate for the six months ended June 30, 2025, was **8.6%**, differing from the federal statutory rate due to state income taxes, R&D tax credit, and change in valuation allowance[132](index=132&type=chunk) - The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, includes significant changes to federal tax law, which the company is evaluating for future impact[134](index=134&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=26&type=section&id=Item%202%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial performance, highlighting increased product revenue, pipeline progress, operating expenses, liquidity, capital resources, and critical accounting policies [Overview](index=27&type=section&id=OVERVIEW) TG Therapeutics is a commercial-stage biopharmaceutical company focused on B-cell diseases, with FDA and international approvals for BRIUMVI, actively pursuing portfolio expansion opportunities - TG Therapeutics is a fully-integrated, commercial stage, biopharmaceutical company focused on the acquisition, development and commercialization of novel treatments for B-cell diseases[137](index=137&type=chunk) - BRIUMVI (ublituximab-xiiy) is approved by the FDA, EC, MHRA, Swissmedic, and TGA for relapsing forms of multiple sclerosis (RMS)[137](index=137&type=chunk) [Our Products and Pipeline](index=27&type=section&id=OUR%20PRODUCTS) The company's portfolio includes approved intravenous BRIUMVI for RMS, with ongoing development for a subcutaneous formulation, and azer-cel in Phase 1 clinical trials for progressive MS Clinical Drug Candidate Status (as of July 2025) | Clinical Drug Candidate | Initial Target Disease | Stage/Status of Development | | :---------------------- | :--------------------- | :-------------------------- | | Ublituximab IV (anti-CD20 mAb) | RMS | APPROVED | | Ublituximab Subcutaneous (anti-CD20 mAb) | RMS | Phase 3 pending initiation of patient enrollment | | Azer-cel | Progressive Forms of Multiple Sclerosis | Phase 1 | - BRIUMVI (ublituximab-xiiy) is an anti-CD20 monoclonal antibody for RMS, administered as a one-hour infusion every **24 weeks** after starting doses[140](index=140&type=chunk) - Positive topline results from ULTIMATE I & II Phase 3 trials showed significant reduction in ARR (p<**0.005**) with BRIUMVI[142](index=142&type=chunk) - Three additional patents for BRIUMVI were issued by USPTO in February 2024, extending protection through **2042**[143](index=143&type=chunk) - U.S. commercial launch of BRIUMVI occurred on January 26, 2023, following FDA approval in December 2022[144](index=144&type=chunk) - Ex-U.S. commercialization of BRIUMVI began in February 2024 in the EU (Germany) through Neuraxpharm, following EC approval in June 2023[145](index=145&type=chunk) - A Phase 1 clinical trial for subcutaneous BRIUMVI in RMS patients was initiated in August 2024, with a Phase 3 pivotal program evaluating every other month and quarterly dosing schedules[146](index=146&type=chunk)[147](index=147&type=chunk) - Azer-cel, an allogeneic CD19-directed CAR T cell therapy, received FDA clearance for an IND for progressive forms of MS in August 2024, and the first patient was dosed in a Phase 1 trial in August 2025[148](index=148&type=chunk) [Results of Operations](index=30&type=section&id=RESULTS%20OF%20OPERATIONS) The company experienced significant revenue growth and a shift to net income for the three and six months ended June 30, 2025, driven by increased BRIUMVI sales, alongside rising operating expenses for R&D and commercialization Summary of Results of Operations (in thousands) | Metric | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Product revenue, net | $138,843 | $72,596 | $258,498 | $123,084 | | License, milestone, royalty and other revenue | $2,305 | $870 | $3,506 | $13,855 | | Total Revenue | $141,148 | $73,466 | $262,004 | $136,939 | | Cost of revenue | $18,938 | $8,304 | $34,479 | $13,745 | | Total research and development | $31,782 | $17,556 | $78,144 | $50,278 | | Total selling, general and administrative | $55,585 | $38,790 | $105,916 | $73,370 | | Total costs and expenses | $106,305 | $64,650 | $218,539 | $137,393 | | Operating income (loss) | $34,843 | $8,816 | $43,465 | $(454) | | Net income (loss) | $28,187 | $6,879 | $33,247 | $(3,828) | - Product revenue, net, increased by **91.2%** (QoQ) and **110.0%** (YoY) due to greater market penetration of BRIUMVI in the U.S[150](index=150&type=chunk)[151](index=151&type=chunk) - License, milestone, royalty and other revenue for the six months ended June 30, 2024, included a **$12.5 million** milestone from Neuraxpharm, leading to a YoY decrease in this category for 2025[153](index=153&type=chunk)[154](index=154&type=chunk) - Cost of revenue increased due to higher royalties and manufacturing costs as previously expensed inventory was depleted[155](index=155&type=chunk)[156](index=156&type=chunk) - Total R&D expenses increased by **81.0%** (QoQ) and **55.4%** (YoY), driven by ublituximab subcutaneous development, increased clinical trial expenses, and personnel costs[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk) - Total selling, general and administrative expenses increased by **43.3%** (QoQ) and **44.3%** (YoY), primarily due to commercialization efforts for BRIUMVI[161](index=161&type=chunk)[162](index=162&type=chunk) - Interest expense increased due to the Initial Term Loan with Blue Owl[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) - Other income increased due to higher interest income from investments[169](index=169&type=chunk)[170](index=170&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Despite recently generating net income, the company has an accumulated deficit of approximately **$1.5 billion** and holds **$278.9 million** in cash and investments, projected to provide sufficient liquidity for over twelve months, though future operations may require additional financing - The company has incurred significant operating losses since inception, with an accumulated deficit of approximately **$1.5 billion** as of June 30, 2025[171](index=171&type=chunk) - Cash, cash equivalents, and investment securities as of June 30, 2025: **$278.9 million**[172](index=172&type=chunk) - Projected liquidity: Sufficient for more than a twelve-month period from the filing date[172](index=172&type=chunk) - Future financing: May be dependent on significant future financing to execute ongoing and future operations[172](index=172&type=chunk) Summary of Cash Flows (in thousands) | Cash Flow Activity | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(21,279) | $(2,671) | | Net cash used in investing activities | $(16,926) | $(7,490) | | Net cash (used in) provided by financing activities | $(12,545) | $145 | [Off-Balance Sheet Arrangements](index=34&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) The company has not entered into any off-balance sheet arrangements involving financial guarantees, subordinated interests, derivative instruments, or other contingent arrangements exposing it to material risks - The company has not entered into any off-balance sheet arrangements that expose it to material continuing risks, contingent liabilities, or other obligations under a variable interest in an unconsolidated entity[176](index=176&type=chunk) [Critical Accounting Policies and Accounting Estimates](index=34&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ACCOUNTING%20ESTIMATES) This section identifies revenue recognition and stock-based compensation expenses as critical accounting policies due to significant judgment, subjectivity, and complexity in making estimates about uncertain matters - Critical accounting policies include revenue recognition and stock-based compensation expenses[177](index=177&type=chunk) - These policies require management's most difficult, subjective, or complex judgments due to inherent uncertainties[177](index=177&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=34&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that its exposure to market risk has not materially changed since the disclosure in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - Market risk exposure has not materially changed since the disclosure in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[178](index=178&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=35&type=section&id=Item%204%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2025, and reports no material changes in internal control over financial reporting during the quarter - As of June 30, 2025, the company's disclosure controls and procedures were effective[179](index=179&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[180](index=180&type=chunk) [PART II. OTHER INFORMATION](index=35&type=section&id=PART%20II) This section provides additional information beyond financial statements, covering legal proceedings, risk factors, equity sales, defaults, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=35&type=section&id=Item%201%20Legal%20Proceedings) The company and its subsidiaries are not currently involved in any material pending legal proceedings - The company and its subsidiaries are not a party to, and their property is not the subject of, any material pending legal proceedings[181](index=181&type=chunk) [ITEM 1A. RISK FACTORS](index=35&type=section&id=Item%201A%20Risk%20Factors) This comprehensive section details various risks that could materially harm the company's business, financial condition, or operating results, spanning commercialization, financial stability, drug development, regulatory, third-party dependence, intellectual property, business organization, and common stock factors - Investors should carefully consider the detailed risk factors before making an investment decision, as an investment in the company's securities is speculative and involves a high degree of risk[182](index=182&type=chunk) [Risks Related to Commercialization](index=35&type=section&id=Risks%20Related%20to%20Commercialization) Commercialization risks include potential for limited market acceptance, undesirable side effects post-approval, intense competition, unfavorable pricing, and product liability lawsuits, all limiting revenue and profitability - If BRIUMVI or future product candidates do not achieve broad market acceptance among physicians, patients, and payors, revenues will be limited[183](index=183&type=chunk)[184](index=184&type=chunk) - Regulatory approvals may be subject to limitations or post-marketing requirements, or the company may be unable to maintain marketing approval for BRIUMVI[186](index=186&type=chunk)[187](index=187&type=chunk) - BRIUMVI or future approved products may cause undesirable side effects after commercialization, leading to significant negative consequences[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) - Market opportunities for BRIUMVI and azer-cel may be smaller than estimated, adversely affecting revenue and profitability[192](index=192&type=chunk)[194](index=194&type=chunk) - Substantial competition from other pharmaceutical companies may reduce or eliminate commercial opportunities[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) - BRIUMVI and future products may become subject to unfavorable pricing regulations or third-party payor coverage and reimbursement policies[200](index=200&type=chunk)[201](index=201&type=chunk)[202](index=202&type=chunk) - Product liability lawsuits could result in substantial liabilities and limit commercialization[203](index=203&type=chunk)[204](index=204&type=chunk) - Inability to expand commercialization operations may hinder successful commercialization of BRIUMVI or other approved product candidates[207](index=207&type=chunk)[209](index=209&type=chunk) [Risks Related to Our Financial Position and Need for Additional Capital](index=41&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Additional%20Capital) The company faces risks from significant operating losses, potential need for additional capital that could dilute stockholders or impose restrictions, and the indebtedness from its **$250 million** term loan facility, which creates debt service obligations and operating restrictions - The company has incurred significant operating losses since inception and may incur future losses, requiring substantial revenue generation to maintain profitability[212](index=212&type=chunk)[213](index=213&type=chunk) - Development of pharmaceuticals is capital-intensive; significant additional funding may be required, which might not be available on favorable terms[214](index=214&type=chunk)[216](index=216&type=chunk) - Raising additional capital could dilute stockholders, restrict operations, or require relinquishing rights to technologies or drug candidates[217](index=217&type=chunk)[220](index=220&type=chunk) - Limited resources may cause the company to forego or delay pursuit of programs or product candidates with greater commercial opportunity[221](index=221&type=chunk)[222](index=222&type=chunk) - The **$250 million** Initial Term Loan facility creates indebtedness and debt service obligations that could adversely affect financial condition[223](index=223&type=chunk)[224](index=224&type=chunk) - Failure to satisfy debt obligations could result in acceleration of amounts due, potentially leading to delays or termination of development/commercialization efforts[225](index=225&type=chunk)[227](index=227&type=chunk) - The Financing Agreement imposes operating restrictions, limiting the company's ability to dispose of assets, incur additional debt, or pay dividends[228](index=228&type=chunk)[229](index=229&type=chunk) - Cash and cash equivalents could be adversely affected if financial institutions holding them fail[229](index=229&type=chunk) [Risks Related to Drug Development and Regulatory Approval](index=45&type=section&id=Risks%20Related%20to%20Drug%20Development%20and%20Regulatory%20Approval) Drug development and regulatory approval risks are substantial, including delays or failure to obtain approval, unreliability of early trial results, unexpected side effects, and the lengthy, expensive, and uncertain clinical development process, further complicated by biologics and subcutaneous formulations - Inability to maintain or obtain regulatory approval for products and candidates, or significant delays, would materially harm the business[232](index=232&type=chunk)[233](index=233&type=chunk) - Preclinical and early clinical trial results are not necessarily predictive of future results; later trials may not be favorable or receive regulatory approval[234](index=234&type=chunk)[237](index=237&type=chunk) - Interim, 'top-line,' and preliminary data from clinical trials may change upon comprehensive review, impacting the perceived product profile[238](index=238&type=chunk)[239](index=239&type=chunk) - Clinical drug development is lengthy, expensive, and uncertain; additional costs or delays may occur, or development may be unable to be completed[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) - Biologics carry unique risks and uncertainties, including limited access to biological materials and complex manufacturing regulations[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk) - Product candidates may cause undesirable side effects, delaying or preventing regulatory approval or impacting commercial potential[247](index=247&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) - Extensive regulation of clinical development, manufacturing, and marketing can be costly, time-consuming, and cause unanticipated delays or prevent approvals[250](index=250&type=chunk)[251](index=251&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk) - Focusing efforts on BRIUMVI and azer-cel for specific indications may lead to failure to capitalize on other potentially more profitable opportunities[255](index=255&type=chunk) - Breakthrough Therapy or Fast Track designations may not lead to faster development or approval[257](index=257&type=chunk)[258](index=258&type=chunk) - Unsuccessful in obtaining or maintaining orphan drug designation benefits, including market exclusivity[259](index=259&type=chunk)[260](index=260&type=chunk) - Clinical trials conducted outside the U.S. may be impacted by political conditions or international conflict, and data may not be accepted by regulatory authorities[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk) - Approval in the U.S. does not assure approval in foreign jurisdictions[264](index=264&type=chunk)[265](index=265&type=chunk) - Clinical and commercial manufacturing site additions and process improvements may affect timely delivery or quality of products[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk)[269](index=269&type=chunk][270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[273](index=273&type=chunk) - Inability to successfully develop, obtain regulatory approval for, or commercialize a subcutaneous formulation of BRIUMVI could limit market opportunity and patient reach[274](index=274&type=chunk)[276](index=276&type=chunk)[277](index=277&type=chunk)[278](index=278&type=chunk) [Risks Related to Governmental Regulation of the Pharmaceutical Industry and Legal Compliance Matters](index=55&type=section&id=Risks%20Related%20to%20Governmental%20Regulation%20of%20the%20Pharmaceutical%20Industry%20and%20Legal%20Compliance%20Matters) The heavily regulated pharmaceutical industry exposes the company to risks from new legislation, regulatory proposals, and third-party payor initiatives aimed at controlling healthcare costs and drug pricing, alongside critical compliance with fraud and abuse laws, data privacy, and evolving AI technology standards - New legislation, regulatory proposals, and third-party payor initiatives may increase compliance costs and adversely affect the ability to market products, obtain collaborators, and raise capital[279](index=279&type=chunk)[280](index=280&type=chunk) - The Affordable Care Act (ACA) and the One Big Beautiful Bill Act (OBBBA) introduce changes to healthcare coverage and tax laws that could impact the company[281](index=281&type=chunk)[282](index=282&type=chunk) - The Inflation Reduction Act (IRA) includes measures to lower prescription drug costs, such as price negotiations with Medicare and inflation-based rebates, which could reduce revenues[283](index=283&type=chunk)[285](index=285&type=chunk) - Increased competition from generic and biosimilar approvals, and state-level drug pricing controls, could exert downward pressure on product prices[286](index=286&type=chunk)[287](index=287&type=chunk) - Uncertainty regarding the impact of recent U.S. Supreme Court decisions (e.g., Loper Bright, Corner Post) and executive orders on regulatory agency authority and enforcement[288](index=288&type=chunk)[289](index=289&type=chunk) - Inadequate funding, government shutdowns, or policy changes affecting agencies like the FDA and SEC could hinder timely product development and commercialization[290](index=290&type=chunk)[291](index=291&type=chunk) - Relationships with customers and third-party payors are subject to fraud and abuse laws, false claims laws, transparency laws, and health information security laws, exposing the company to sanctions[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk][296](index=296&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk) - Violations of data privacy and security laws (e.g., HIPAA, CCPA, GDPR) could lead to penalties, damages, fines, and operational restructuring[299](index=299&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk) - Adoption of AI technology may introduce risks related to defects, security breaches, data loss, and compliance with a rapidly evolving regulatory framework for AI[303](index=303&type=chunk)[304](index=304&type=chunk)[305](index=305&type=chunk) [Risks Related to Our Dependence on Third Parties](index=65&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) The company heavily relies on third parties for data generation, clinical trial conduct, and manufacturing, posing risks of delays, increased costs, or regulatory approval failures due to non-performance or non-compliance, further amplified by dependence on single-source suppliers and potential disputes with licensors or collaborators - Reliance on third parties (CROs, licensing partners) to generate clinical, preclinical, and other data for regulatory applications; non-performance could delay or prevent approval[316](index=316&type=chunk)[317](index=317&type=chunk)[318](index=318&type=chunk) - Reliance on third parties for the manufacture and testing of BRIUMVI for commercial supply and all clinical product supply; risks of insufficient quantities, unacceptable cost, or quality[319](index=319&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk) - Sole source suppliers for starting materials, intermediates, API/drug substance, and other materials; loss or disruption could significantly harm the business[322](index=322&type=chunk)[323](index=323&type=chunk)[324](index=324&type=chunk)[325](index=325&type=chunk) - In-licensed products (BRIUMVI, azer-cel) mean disputes with or non-performance by licensors could adversely affect development and commercialization[326](index=326&type=chunk)[327](index=327&type=chunk)[328](index=328&type=chunk) - Dependence on collaboration and commercialization partners (e.g., Neuraxpharm) to develop, fund, manufacture, and commercialize drug products; unsuccessful relationships or terminations could negatively impact business and revenue[330](index=330&type=chunk)[331](index=331&type=chunk)[332](index=332&type=chunk)[333](index=333&type=chunk][334](index=334&type=chunk)[335](index=335&type=chunk)[336](index=336&type=chunk)[337](index=337&type=chunk][338](index=338&type=chunk)[339](index=339&type=chunk) - Difficulty in establishing additional collaborations on commercially reasonable terms could force alterations to development and commercialization plans[340](index=340&type=chunk)[341](index=341&type=chunk][342](index=342&type=chunk)[343](index=343&type=chunk)[344](index=344&type=chunk) [Risks Related to Our Intellectual Property](index=71&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The company's success depends on obtaining and protecting intellectual property (IP) rights, facing risks from insufficient patent breadth, validity challenges, limited lifespan, high prosecution and enforcement costs, infringement claims, need for third-party IP licenses, and potential trade secret misappropriation - Success depends on obtaining and protecting intellectual property; insufficient patent breadth could allow competitors to commercialize similar drugs[345](index=345&type=chunk)[346](index=346&type=chunk) - Patents have a limited lifespan, and the time required for drug development means patents might expire before or shortly after commercialization[347](index=347&type=chunk)[348](index=348&type=chunk) - Patent applications may not be granted, or claims may be narrowed, and the patent prosecution process is expensive and time-consuming[349](index=349&type=chunk)[350](index=350&type=chunk)[351](index=351&type=chunk) - Failure to comply with procedural requirements for obtaining and maintaining patent protection could lead to abandonment or lapse of patent rights[353](index=353&type=chunk)[354](index=354&type=chunk) - Inability to obtain patent term extensions under the Hatch-Waxman Act could shorten exclusive marketing periods[355](index=355&type=chunk)[356](index=356&type=chunk) - Enforcing intellectual property rights globally is expensive and challenging, with varying levels of protection in different countries[357](index=357&type=chunk)[358](index=358&type=chunk)[359](index=359&type=chunk) - Lawsuits to protect or enforce patents are costly, time-consuming, and may be unsuccessful, potentially leading to invalidation or narrow interpretation of patent rights[360](index=360&type=chunk)[361](index=361&type=chunk)[362](index=362&type=chunk)[363](index=363&type=chunk][364](index=364&type=chunk)[365](index=365&type=chunk)[366](index=366&type=chunk)[367](index=367&type=chunk][368](index=368&type=chunk)[369](index=369&type=chunk)[370](index=370&type=chunk)[371](index=371&type=chunk][372](index=372&type=chunk)[373](index=373&type=chunk][374](index=374&type=chunk)[375](index=375&type=chunk] - Risk of being sued for infringing third-party intellectual property rights, which could be costly, time-consuming, and result in the need for licenses or cessation of development[377](index=377&type=chunk)[378](index=378&type=chunk)[379](index=379&type=chunk)[380](index=380&type=chunk] - Inability to protect the confidentiality of trade secrets could harm business and competitive position[382](index=382&type=chunk)[383](index=383&type=chunk) - Risk of damages from claims of wrongful use or disclosure of competitors' trade secrets or breach of non-competition agreements[384](index=384&type=chunk) [Risks Related to Our Business Organization and Governance, Strategy, Employees and Growth Management](index=80&type=section&id=Risks%20Related%20to%20Our%20Business%20Organization%20and%20Governance%2C%20Strategy%2C%20Employees%20and%20Growth%20Management) The company faces risks from dependence on key personnel, challenges in managing business expansion, anti-takeover provisions, concentrated stockholder influence, limitations on net operating loss carryforwards, IT system failures, unfavorable global economic conditions, employee misconduct, and integration of future acquisitions - Failure to attract and retain key management, commercial, and clinical development personnel could hinder successful development or commercialization[386](index=386&type=chunk)[387](index=387&type=chunk) - Difficulties in managing business development and expansion, including integrating acquisitions or strategic alliances, could disrupt operations[388](index=388&type=chunk)[389](index=389&type=chunk) - Certain anti-takeover provisions in governing documents and Delaware law could make a third-party acquisition difficult, limiting stock price[390](index=390&type=chunk)[391](index=391&type=chunk) - Ability to utilize net operating loss carryforwards and other tax attributes may be limited due to ownership changes[392](index=392&type=chunk)[393](index=393&type=chunk) - Certain executive officers, directors, and principal stockholders can exercise significant influence over the company and matters submitted to stockholders for approval[394](index=394&type=chunk)[395](index=395&type=chunk) - Internal information technology systems, or those of third-party contractors, may fail or suffer security breaches, disrupting drug development and commercialization[397](index=397&type=chunk)[398](index=398&type=chunk) - Unfavorable global economic conditions, including high inflation, interest rates, and geopolitical conflicts, could adversely affect business, financial condition, or results of operations[399](index=399&type=chunk)[400](index=400&type=chunk) - Employees, principal investigators, CROs, CMOs, and consultants may engage in misconduct or improper activities, leading to criminal sanctions, civil penalties, or reputational harm[401](index=401&type=chunk) - Future acquisitions or strategic alliances may not realize expected benefits due to integration difficulties[402](index=402&type=chunk) - Adverse legislative or regulatory tax changes, such as those from the Tax Cuts and Jobs Act of 2017 and the OBBBA, could negatively impact financial condition[403](index=403&type=chunk) [Risks Related to Our Common Stock and Being a Publicly Traded Company](index=85&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock%20and%20Being%20a%20Publicly%20Traded%20Company) The company's common stock price is highly volatile, influenced by clinical results, regulatory approvals, competition, and economic conditions, with significant costs and management time devoted to public company compliance, and potential for price declines from future stock sales or an inactive trading market - Stock price is, and is expected to remain, volatile due to various factors including clinical results, regulatory approvals, competition, and economic conditions[404](index=404&type=chunk)[405](index=405&type=chunk) - The company is subject to risks related to corporate social responsibility and reputational matters, which can be influenced by ESG policies and negative publicity[407](index=407&type=chunk)[408](index=408&type=chunk) - Climate change or measures to address it may negatively affect business, supply chain, and financial condition[409](index=409&type=chunk)[410](index=410&type=chunk) - Ability to pay dividends is limited by current intentions to retain earnings and restrictions under the Financing Agreement[411](index=411&type=chunk)[412](index=412&type=chunk) - An active trading market for common stock may not be sustained, limiting investors' ability to resell shares at a profit[413](index=413&type=chunk)[414](index=414&type=chunk) - If equity research analysts publish negative evaluations or downgrade common stock, the price could decline[415](index=415&type=chunk) - Operating as a public company incurs significant increased costs and requires substantial management time for compliance initiatives, including Sarbanes-Oxley Act requirements[417](index=417&type=chunk)[418](index=418&type=chunk) - Volatility in stock price may subject the company to securities and shareholder derivative litigation, incurring substantial costs and diverting management's attention[419](index=419&type=chunk)[420](index=420&type=chunk) - Future sales of common stock, including by the company or insiders, could cause the stock price to decline[421](index=421&type=chunk) - The share repurchase program may not be fully consummated, enhance stockholder value, or could affect stock price and increase volatility, and may be suspended or terminated at any time[422](index=422&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=87&type=section&id=Item%202%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activities, with **193,500 shares** repurchased for approximately **$6.9 million** during the three months ended June 30, 2025, under a **$100 million** authorized program with **$78.2 million** remaining Issuer Purchases of Equity Securities (April-June 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | | :--------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | :---------------------------------------------------------------------------------------------------------- | | April 2025 | — | — | — | $85,117,780 | | May 2025 | 103,500 | $34.43 | 103,500 | $81,568,031 | | June 2025 | 90,000 | $37.07 | 90,000 | $78,241,866 | | Total | 193,500 | $35.75 | 193,500 | $78,241,866 | - The Board of Directors authorized a share repurchase program for up to **$100 million** of common stock in August 2024[426](ind

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%2E%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Presents DigitalBridge Group's unaudited consolidated financial statements for Q2 2025, covering balance sheets, income, equity, cash flows, and detailed notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Consolidated balance sheets show slight decreases in total assets and liabilities, with increases in stockholders' equity and cash | Metric (in thousands) | June 30, 2025 (Unaudited) | December 31, 2024 | | :-------------------------- | :-------------------------- | :------------------ | | Cash and cash equivalents | $340,698 | $302,154 | | Investments | $2,389,801 | $2,492,268 | | Total assets | $3,408,581 | $3,513,318 | | Total liabilities | $957,753 | $1,022,128 | | Total stockholders' equity | $2,018,531 | $1,958,582 | | Total equity | $2,425,796 | $2,466,834 | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported a net loss for Q2 and YTD 2025, a shift from prior year net income, primarily due to negative carried interest allocation, despite increased fee revenue | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Fee revenue | $85,262 | $78,605 | $175,401 | $151,560 | | Carried interest allocation | $(115,074) | $288,244 | $(170,538) | $279,766 | | Total revenues | $(3,207) | $390,336 | $42,240 | $464,729 | | Net income (loss) | $(25,684) | $129,928 | $(40,539) | $99,162 | | Net income (loss) attributable to common stockholders | $16,962 | $76,763 | $16,084 | $32,475 | | Net income (loss) attributable to common stockholders per common share—basic | $0.10 | $0.44 | $0.09 | $0.19 | [Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) The company reported a comprehensive loss for Q2 and YTD 2025, influenced by net income (loss) and foreign currency translation changes | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(25,684) | $129,928 | $(40,539) | $99,162 | | Changes in accumulated other comprehensive income (loss) related to foreign currency translation | $4,234 | $45 | $6,463 | $(709) | | Comprehensive income (loss) | $(21,450) | $129,973 | $(34,076) | $98,453 | | Comprehensive income (loss) attributable to stockholders | $35,602 | $91,465 | $51,471 | $61,137 | [Consolidated Statements of Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Equity) Total stockholders' equity increased from December 2024 to June 2025, driven by additional paid-in capital, despite a net loss | Metric (in thousands) | December 31, 2024 | June 30, 2025 | | :------------------------------------ | :---------------- | :-------------- | | Total Stockholders' Equity | $1,958,582 | $2,018,531 | | Noncontrolling Interests in Investment Entities | $430,528 | $357,216 | | Noncontrolling Interests in Operating Company | $77,724 | $50,049 | | Total Equity | $2,466,834 | $2,425,796 | [Consolidated Statements of Cash Flows](index=12&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The company generated significant net cash from operating activities in H1 2025, a reversal from prior year outflow, while investing and financing activities resulted in net cash outflows | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Net cash generated by (used in) operating activities | $127,271 | $(4,483) | | Net cash generated by (used in) investing activities | $(68,506) | $(17,227) | | Net cash generated by (used in) financing activities | $(25,064) | $(61,920) | | Cash, cash equivalents and restricted cash—end of period | $345,021 | $265,916 | [Notes to Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures supporting the consolidated financial statements, covering business, accounting policies, and financial details [1. Business and Organization](index=14&type=section&id=1.%20Business%20and%20Organization) DigitalBridge Group, Inc. is a global investment manager focused on digital infrastructure, with a 96% ownership in its operating subsidiary as of June 30, 2025 - DigitalBridge Group, Inc. is a leading global investment manager in digital infrastructure, including data centers, cell towers, fiber networks, small cells, and edge infrastructure[30](index=30&type=chunk) - The Company owned **96%** of its operating subsidiary, DigitalBridge Operating Company, LLC (OP), at June 30, 2025, which increased to **97%** as of July 31, 2025, following redemption of additional OP units[31](index=31&type=chunk) [2. Summary of Significant Accounting Policies](index=14&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the company's basis of presentation, consolidation principles, noncontrolling interest accounting, and recently adopted and future accounting pronouncements - The Company adopted ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective January 1, 2025, with no material impact expected on annual income tax disclosures[49](index=49&type=chunk)[50](index=50&type=chunk) - The FASB issued ASU 2025-05, 'Measurement of Credit Losses for Accounts Receivable and Contract Assets,' effective January 1, 2026, which the Company intends to early adopt and elect the practical expedient, with no material impact expected[51](index=51&type=chunk)[52](index=52&type=chunk) - ASU 2025-03, 'Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity,' issued in May 2025, modifies the framework for identifying accounting acquirers in VIE business combinations, effective January 1, 2027, with early adoption permitted[53](index=53&type=chunk)[55](index=55&type=chunk) - ASU 2024-03, 'Disaggregation of Income Statement Expenses,' issued in November 2024, requires tabular footnote disclosure of certain natural expenses, effective January 1, 2027, with the Company currently evaluating its effects[56](index=56&type=chunk)[57](index=57&type=chunk) [3. Investments](index=19&type=section&id=3.%20Investments) The company's investments primarily consist of equity method and debt investments, with carried interest allocation seeing a significant decrease from December 2024 to June 2025 | (In thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | **Equity method investments** | | | | Principal investments | $1,427,692 | $1,391,316 | | Carried interest allocation | $721,545 | $894,553 | | Other equity investments | $27,737 | $24,854 | | Debt investment | $32,697 | $35,122 | | **Equity investments of consolidated funds** | | | | Marketable equity securities | $99,516 | $83,269 | | Other investments | $80,614 | $63,154 | | **Total Investments** | $2,389,801 | $2,492,268 | - In 2025, carried interest of **$2.5 million** was distributed during Q1, with **$1.6 million** allocated to current and former employees[64](index=64&type=chunk) - The Company did not have a liability for clawback obligations on carried interest distributed as of June 30, 2025, and December 31, 2024[65](index=65&type=chunk) [4. Intangible Assets](index=22&type=section&id=4.%20Intangible%20Assets) The company's intangible assets, primarily investment management contracts, investor relationships, and trade names, decreased due to amortization from December 2024 to June 2025 | (In thousands) | June 30, 2025 Net Carrying Amount | December 31, 2024 Net Carrying Amount | | :----------------------------- | :-------------------------------- | :------------------------------------ | | Investment management contracts | $31,646 | $41,123 | | Investor relationships | $26,970 | $28,561 | | Trade name | $1,746 | $1,963 | | Other | $737 | $813 | | **Total Intangible Assets** | $61,099 | $72,460 | - Amortization expense for finite-lived intangible assets totaled **$6.6 million** for Q2 2025, and **$13.2 million** for H1 2025[76](index=76&type=chunk) [5. Restricted Cash, Other Assets and Other Liabilities](index=23&type=section&id=5.%20Restricted%20Cash%2C%20Other%20Assets%20and%20Other%20Liabilities) This section details restricted cash, other assets (including operating lease ROU assets and fixed assets), and other liabilities (such as deferred fees and accrued compensation), also addressing deferred income taxes and new U.S. tax legislation | (In thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :-------------- | :---------------- | | **Other Assets** | | | | Operating lease right-of-use asset for corporate offices | $24,651 | $28,901 | | Fixed assets, net | $7,847 | $9,712 | | Total other assets | $47,048 | $52,504 | | **Other Liabilities** | | | | Deferred investment management fees | $26,038 | $9,306 | | Accrued compensation | $36,030 | $54,644 | | Accrued incentive fee and carried interest compensation | $417,261 | $497,288 | | Total other liabilities | $659,761 | $725,766 | - The Company has significant deferred tax assets, primarily related to capital loss carryforwards, but a full valuation allowance has been established as their realizability did not meet the more-likely-than-not threshold[82](index=82&type=chunk) - New U.S. tax legislation, 'An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14' (One Big Beautiful Bill Act), enacted on July 4, 2025, could affect the Company's effective tax rate and deferred tax assets/liabilities, with effects recognized beginning Q3 2025[83](index=83&type=chunk)[84](index=84&type=chunk) [6. Debt](index=24&type=section&id=6.%20Debt) The company's corporate debt primarily consists of a securitized financing facility, with its Variable Funding Notes (VFN) capacity reduced in June 2025, and all exchangeable senior notes extinguished in H1 2024 | (In thousands) | June 30, 2025 Amortized Cost | December 31, 2024 Amortized Cost | | :----------------------------- | :--------------------------- | :------------------------------- | | Securitized financing facility | $297,992 | $296,362 | | ($ in thousands) | Outstanding Principal | Interest Rate (Per Annum) | Anticipated Repayment Date | Years Remaining to Maturity | | :----------------- | :-------------------- | :------------------------ | :------------------------- | :-------------------------- | | Class A-2 Notes | $300,000 | 3.93% | September 2026 | 1.2 | | Variable Funding Notes | — | Adjusted 1-month Term SOFR + 3% | September 2026 | NA | - In H1 2024, the remaining **$78.4 million** of 5.75% exchangeable senior notes were extinguished, with **$73.4 million** exchanged for Class A common stock and **$5.0 million** redeemed for cash[93](index=93&type=chunk) [7. Stockholders' Equity](index=27&type=section&id=7.%20Stockholders%27%20Equity) This section details changes in preferred and common stock, including Class B to Class A conversions, OP unit redemptions, equity award activities, and changes in accumulated other comprehensive income (loss) | (In thousands) | Preferred Stock | Class A Common Stock | Class B Common Stock | | :------------------------------------------ | :-------------- | :------------------- | :------------------- | | Shares outstanding at December 31, 2024 | 32,876 | 174,202 | 150 | | Shares issued upon redemption of OP units | — | 4,363 | — | | Conversion of class B to class A common stock | — | 150 | (150) | | Equity awards issued, net of forfeitures | — | 2,730 | — | | Shares canceled for tax withholding on vested equity awards | — | (558) | — | | Shares outstanding at June 30, 2025 | 32,876 | 180,887 | — | | Description | Dividend Rate Per Annum | Shares Outstanding (in thousands) | Liquidation Preference (in thousands) | | :---------- | :---------------------- | :-------------------------------- | :------------------------------------ | | Series H | 7.125 % | 8,395 | $209,870 | | Series I | 7.15 % | 12,867 | $321,668 | | Series J | 7.125 % | 11,614 | $290,361 | | **Total** | | 32,876 | $821,899 | - In 2025, all **149,571** shares of Class B common stock were converted into an equivalent number of Class A common stock shares and subsequently cancelled[101](index=101&type=chunk) [8. Noncontrolling Interests](index=28&type=section&id=8.%20Noncontrolling%20Interests) This section outlines activities in redeemable noncontrolling interests in open-end funds and noncontrolling interests in the Operating Company (OP), detailing contributions, distributions, net income (loss) allocations, and OP unit redemptions | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | **Redeemable noncontrolling interests** | | | | Beginning balance | $24,356 | $17,862 | | Contributions | $1,300 | $1,000 | | Distributions paid and payable, including redemptions | $(1,273) | — | | Net income (loss) | $649 | $891 | | Ending balance | $25,032 | $19,753 | - The Company redeemed **5,622,793** OP units in 2025 (including **1,259,793** in July 2025) and **452,418** in 2024, through the issuance of an equal number of Class A common stock shares[111](index=111&type=chunk) [9. Fair Value](index=29&type=section&id=9.%20Fair%20Value) This section describes the company's fair value measurements, categorized into a three-tier hierarchy, detailing the valuation of various financial instruments and highlighting changes in Level 3 assets and liabilities | (In thousands) | Level 1 | Level 2 | Level 3 | Total | | :------------------------------------------ | :------ | :------ | :------ | :------ | | **June 30, 2025 Assets** | | | | | | Other equity investments—Marketable equity securities | $313 | $— | $— | $313 | | CLO subordinated notes | $— | $— | $32,697 | $32,697 | | Equity investments of consolidated funds | $99,516 | $— | $80,614 | $180,130 | | Fair Value Option: Equity method investment | $— | $— | $140,645 | $140,645 | | **June 30, 2025 Liabilities** | | | | | | InfraBridge contingent consideration | $— | $— | $2,300 | $2,300 | | DBRG stock warrants | $— | $— | $500 | $500 | | Securities of consolidated funds sold short | $61,667 | $— | $— | $61,667 | | (In thousands) | Fair Value Option - Equity Method Investments | Equity Investment of Consolidated Funds | DBRG Stock Warrants | InfraBridge Contingent Consideration | | :------------------------------------------ | :------------------------------------ | :------------------------------------ | :------------------ | :----------------------------------- | | Fair value at December 31, 2024 | $137,154 | $63,154 | $(700) | $(6,100) | | Contributions | — | $17,333 | — | — | | Unrealized gain (loss) in earnings, net | $3,491 | $127 | $200 | $3,800 | | Fair value at June 30, 2025 | $140,645 | $80,614 | $(500) | $(2,300) | - In March 2024, three of the five DBRG stock warrants were reclassified from liability to equity due to the removal of the cash settlement feature, eliminating fair value remeasurement for those warrants[121](index=121&type=chunk) [10. Earnings per Share](index=32&type=section&id=10.%20Earnings%20per%20Share) This section presents basic and diluted earnings per common share computations, showing a decrease in both for Q2 and YTD 2025 compared to the prior year | Metric (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to common stockholders—basic | $16,561 | $75,146 | $15,733 | $31,851 | | Weighted average number of common shares outstanding—basic | 173,059 | 170,358 | 172,373 | 165,748 | | Net income (loss) attributable to common stockholders per common share—basic | $0.10 | $0.44 | $0.09 | $0.19 | | Net income (loss) attributable to common stockholders per common share—diluted | $0.10 | $0.44 | $0.09 | $0.19 | [11. Fee Revenue](index=33&type=section&id=11.%20Fee%20Revenue) The company's fee revenue, primarily management and incentive fees, increased, with three funds accounting for a significant concentration of total management fees | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Management fees | $84,373 | $75,687 | $174,233 | $147,531 | | Incentive fees | $600 | $1,651 | $606 | $2,532 | | Other fees | $289 | $1,267 | $562 | $1,497 | | **Total fee revenue** | $85,262 | $78,605 | $175,401 | $151,560 | - Three funds met the revenue concentration criteria, aggregating to **62.3%** and **64.5%** of total management fees for Q2 and H1 2025, respectively[137](index=137&type=chunk) [12. Equity-Based Compensation](index=33&type=section&id=12.%20Equity-Based%20Compensation) This section details the company's equity-based compensation plans, including restricted stock, RSUs, PSUs, LTIP units, and DSUs, outlining vesting conditions, valuation, and recognized compensation expense - The 2024 Omnibus Stock Incentive Plan, approved in April 2024, reserved **5.5 million** shares of Class A common stock for awards to officers, directors, employees, consultants, or advisors[139](index=139&type=chunk) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Compensation expense | $10,725 | $17,641 | $18,345 | $26,855 | | Administrative expense | $148 | — | $239 | — | | **Total** | $10,873 | $17,641 | $18,584 | $26,855 | - At June 30, 2025, aggregate unrecognized compensation cost for all unvested equity awards was **$47.1 million**, expected to be recognized over a weighted average period of **1.8 years**[158](index=158&type=chunk) [13. Variable Interest Entities](index=36&type=section&id=13.%20Variable%20Interest%20Entities) This section discusses the company's involvement with VIEs, including its operating subsidiary and company-sponsored funds, explaining consolidation criteria, presenting consolidated fund assets/liabilities, and maximum exposure to loss from unconsolidated funds - The Company consolidates its operating subsidiary (OP) as it is deemed the primary beneficiary, holding a majority interest and exercising full control over its activities[161](index=161&type=chunk) | (In thousands) | June 30, 2025 | December 31, 2024 | | :------------- | :-------------- | :---------------- | | **Assets** | | | | Cash and cash equivalents | $65,326 | $62,630 | | Investments | $180,130 | $146,423 | | Other assets | $860 | $724 | | **Total Assets** | $246,316 | $209,777 | | **Liabilities** | | | | Securities sold short | $61,667 | $47,930 | | Due to custodian | $10,833 | $9,121 | | Other | $192 | $697 | | **Total Liabilities** | $72,692 | $57,748 | - The Company's maximum exposure to loss from unconsolidated funds is limited to its outstanding investment balance of **$2.0 billion** at June 30, 2025, and it has unfunded commitments of **$187.3 million** to these funds[164](index=164&type=chunk)[165](index=165&type=chunk) [14. Transactions with Affiliates](index=39&type=section&id=14.%20Transactions%20with%20Affiliates) This section details transactions with affiliates, including investment vehicles, portfolio companies, directors, and employees, covering amounts due from/to affiliates, fee revenue, cost reimbursements, and CEO private aircraft expenses | (In thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :-------------- | :---------------- | | **Due from Affiliates** | | | | Investment vehicles and portfolio companies | | | | Fee revenue | $86,016 | $103,402 | | Cost reimbursements and recoverable expenses | $12,958 | $19,111 | | Employees and other affiliates | $1,036 | $1,673 | | **Total Due from Affiliates** | $100,010 | $124,186 | | **Due to Affiliates** | | | | Employees and other affiliates | $1,254 | $1,675 | | **Total Due to Affiliates** | $1,254 | $1,675 | - Expenses incurred for Mr. Ganzi's private aircraft use (business and personal) totaled **$1.0 million** for Q2 2025, and **$2.7 million** for H1 2025[175](index=175&type=chunk) [15. Segment Reporting](index=41&type=section&id=15.%20Segment%20Reporting) Effective 2024, the company reports its entire business as a single reportable segment, with segment earnings measured as net income (loss) from continuing operations attributable to common stockholders - Effective 2024, the Company operates and reports as a single reportable segment, aligning with the CODM's assessment of the entire business[176](index=176&type=chunk) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income (loss) from continuing operations attributable to common stockholders | $15,415 | $77,437 | $18,455 | $46,279 | [16. Commitments and Contingencies](index=43&type=section&id=16.%20Commitments%20and%20Contingencies) As of June 30, 2025, the company is not involved in any legal proceedings expected to have a material adverse effect on its financial results - As of June 30, 2025, the Company was not involved in any legal proceedings expected to have a material adverse effect on its financial results[184](index=184&type=chunk) [17. Subsequent Events](index=43&type=section&id=17.%20Subsequent%20Events) No subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the accompanying notes - No material subsequent events requiring recognition or disclosure have occurred[185](index=185&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=45&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes DigitalBridge Group, Inc.'s financial condition and results, covering business overview, investment platform, significant developments, revenue/expense analysis, operating metrics, non-GAAP measures, liquidity, and critical accounting policies [Our Business](index=45&type=section&id=Our%20Business) DigitalBridge Group, Inc. is a leading global investment manager in digital infrastructure, with $39.7 billion in fee-earning equity under management (FEEUM) and 96% ownership of its Operating Company as of June 30, 2025 - DigitalBridge is a leading global investment manager in digital infrastructure, with **$39.7 billion** of fee earning equity under management (FEEUM) as of June 30, 2025[193](index=193&type=chunk) - The Company owns **96%** of its Operating Company as of June 30, 2025, increasing to **97%** by July 31, 2025[194](index=194&type=chunk) [Our Investment Management Platform](index=45&type=section&id=Our%20Investment%20Management%20Platform) The company's investment management platform offers diverse strategies, including value-add digital infrastructure, core equity, private credit, liquid securities, and mid-market infrastructure, with varying performance metrics for key funds - The investment management platform includes DBP series (value-add digital infrastructure), Core Equity (Strategic Assets Fund), DigitalBridge Credit (private credit), Liquid Strategies (public equities), and InfraBridge (mid-market infrastructure)[195](index=195&type=chunk)[197](index=197&type=chunk)[203](index=203&type=chunk) | Fund | Inception Date | Total Commitments ($ in millions) | Invested Capital ($ in millions) | Total Investment Value ($ in millions) | Gross MOIC | Net MOIC | Gross IRR | Net IRR | | :-------- | :------------- | :-------------------------------- | :------------------------------- | :------------------------------------- | :--------- | :------- | :-------- | :------ | | DBP I | Mar-2018 | $4,059 | $4,825 | $7,540 | 1.6x | 1.4x | 12.0% | 9.0% | | DBP II | Nov-2020 | $8,286 | $8,057 | $10,928 | 1.4x | 1.2x | 11.0% | 8.0% | | SAF | Nov-2022 | $1,110 | $994 | $1,130 | 1.1x | 1.1x | 6.8% | 4.7% | | GIF I | Mar-2015 | $1,411 | $1,504 | $2,438 | 1.6x | 1.4x | 9.3% | 6.6% | | GIF II | Jun-2018 | $3,382 | $3,160 | $2,611 | 0.8x | 0.7x | <0% | <0% | | Credit I | Dec-2022 | $697 | $635 | $699 | 1.1x | 1.1x | 9.7% | 6.5% | [Significant Developments](index=47&type=section&id=Significant%20Developments) In 2025, the company raised $2.5 billion in capital, primarily for its third flagship value-add strategy, and realized $59.7 million from a DataBank secondary sale - In 2025, through Q2, the Company raised **$2.5 billion** of capital, primarily for its third flagship value-add strategy and co-investment vehicles[199](index=199&type=chunk) - The Company received approximately **$59.7 million** in proceeds from a secondary sale of equity by its DataBank portfolio company in February 2025, including **$34.0 million** in realized principal investment income[200](index=200&type=chunk) [Results of Operations](index=49&type=section&id=Results%20of%20Operations) The company experienced a significant decline in total revenues and net income (loss) in Q2 and YTD 2025 due to a large reversal in carried interest allocation, despite increased fee revenue and decreased expenses | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $(3,207) | $390,336 | $42,240 | $464,729 | | Total expenses | $32,433 | $268,503 | $87,730 | $352,402 | | Net income (loss) | $(25,684) | $129,928 | $(40,539) | $99,162 | | Net income (loss) attributable to common stockholders | $16,962 | $76,763 | $16,084 | $32,475 | | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Management fees | $84,373 | $75,687 | $174,233 | $147,531 | | Incentive fees | $600 | $1,651 | $606 | $2,532 | | Other fee revenue | $289 | $1,267 | $562 | $1,497 | | **Total fee revenue** | $85,262 | $78,605 | $175,401 | $151,560 | - Fee revenue increased by **$6.7 million (8%)** quarter-over-quarter and **$23.8 million (16%)** year-over-year, driven by additional capital raised for the third flagship fund and deployment of capital by various funds[210](index=210&type=chunk)[211](index=211&type=chunk) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Distributed | $— | $118 | $2,470 | $118 | | Unrealized | $(115,074) | $288,126 | $(173,008) | $279,648 | | **Carried interest allocation** | $(115,074) | $288,244 | $(170,538) | $279,766 | - Carried interest allocation experienced a significant net reversal of **$(115.1) million** in Q2 2025 and **$(170.5) million** YTD 2025, compared to net positive allocations in 2024, primarily due to continuing accrual of preferred returns outpacing changes in investment fair values[213](index=213&type=chunk)[214](index=214&type=chunk) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Realized | $(33,819) | $8,169 | $1,219 | $10,546 | | Unrealized | $54,256 | $7,813 | $24,525 | $8,281 | | **Principal investment income** | $20,437 | $15,982 | $25,744 | $18,827 | - Realized principal investment loss in Q2 2025 was driven by a **$40.3 million** loss from an InfraBridge fund portfolio company, partially offset by **$34.0 million** income from a DataBank secondary sale in the YTD period[218](index=218&type=chunk) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cash and equity-based compensation | $47,002 | $51,661 | $93,112 | $102,845 | | Incentive fee and carried interest compensation allocation (reversal) | $(43,372) | $178,430 | $(65,676) | $171,716 | | Administrative and other expenses | $11,440 | $26,508 | $27,386 | $50,818 | | Interest expense | $4,570 | $3,136 | $8,468 | $8,328 | | Transaction-related costs | $4,208 | $671 | $8,629 | $1,431 | | Depreciation and amortization | $8,585 | $8,097 | $15,811 | $17,264 | | **Total expenses** | $32,433 | $268,503 | $87,730 | $352,402 | - Administrative and other expenses decreased by **$15.1 million** (QoQ) and **$23.4 million** (YoY), largely due to insurance recoveries related to prior litigation costs and lower third-party professional service costs[224](index=224&type=chunk) - Transaction-related costs increased significantly by **$3.5 million** (QoQ) and **$7.2 million** (YoY) due to higher deal activity[226](index=226&type=chunk) - Other gain, net, was **$9.1 million** (QoQ) and **$8.5 million** (YoY) in 2025, driven by unrealized gains in marketable equity securities of consolidated funds and InfraBridge contingent consideration liability[228](index=228&type=chunk)[229](index=229&type=chunk) - Income tax expense was immaterial in all periods due to operating losses and capital loss carryforwards, with a full valuation allowance on deferred tax assets for domestic entities[230](index=230&type=chunk) - Discontinued operations reported net income of **$1.6 million** in Q2 2025, contrasting with net losses in prior periods, including a significant loss in YTD 2024 from a guarantee related to former real estate investments[231](index=231&type=chunk) [Operating Metrics](index=55&type=section&id=Operating%20Metrics) The company's Assets Under Management (AUM) increased to $105.6 billion, and Fee Earning Equity Under Management (FEEUM) grew to $39.7 billion at June 30, 2025, driven by capital raises and deployment | (In billions) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Assets Under Management | $105.6 | $95.6 | | Fee Earning Equity Under Management | | | | DBP Series | $17.3 | $15.9 | | Co-Investment Vehicles | $14.8 | $11.5 | | InfraBridge | $3.7 | $3.7 | | Core, Credit and Liquid Strategies | $2.7 | $3.2 | | Separately Capitalized Portfolio Companies | $1.2 | $1.2 | | **Total FEEUM** | $39.7 | $35.5 | | (In billions) | Six Months Ended June 30, 2025 | | :------------ | :----------------------------- | | Balance at January 1 | $35.5 | | Inflows | $5.4 | | Outflows | $(1.2) | | Market activity | — | | Balance at June 30 | $39.7 | - FEEUM increased by **$4.2 billion (12%)** to **$39.7 billion** at June 30, 2025, primarily due to capital raised for the third flagship fund and deployment of co-invest capital[237](index=237&type=chunk) [Non-GAAP Supplemental Financial Measures](index=56&type=section&id=Non-GAAP%20Supplemental%20Financial%20Measures) This section defines and presents non-GAAP financial measures, Fee-Related Earnings (FRE) and Distributable Earnings (DE), used to assess underlying financial performance, with FRE increasing and DE turning negative in Q2 2025 - Fee-Related Earnings (FRE) is a pre-tax measure reflecting recurring fee revenue net of compensation and administrative expenses, excluding non-cash equity-based compensation and carried interest compensation[243](index=243&type=chunk)[245](index=245&type=chunk) - Distributable Earnings (DE) is an after-tax measure representing net realized earnings, used to assess ongoing operating performance and guide distribution and reinvestment decisions[247](index=247&type=chunk)[248](index=248&type=chunk) | (In thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | | Fee-Related Earnings—attributable to Operating Company | $31,975 | $25,968 | | Distributable Earnings, after tax—attributable to Operating Company | $(18,618) | $19,629 | - FRE increased by **$6.0 million (23%)** to **$32.0 million** in Q2 2025, with FRE margin improving to **37%** from **33%** a year ago, driven by higher fee revenue[255](index=255&type=chunk)[257](index=257&type=chunk) - DE was negative **$18.6 million** in Q2 2025, compared to positive **$19.6 million** in Q2 2024, primarily due to a **$40 million** realized principal investment loss from an InfraBridge fund portfolio company[258](index=258&type=chunk) [Liquidity and Capital Resources](index=60&type=section&id=Liquidity%20and%20Capital%20Resources) The company evaluates its liquidity and cash needs, with primary sources including cash on hand, fees, and available financing; as of June 30, 2025, it had $158 million in corporate cash and $100 million available under its VFN facility - At June 30, 2025, the Company had **$158 million** of available corporate cash and the full **$100 million** available under its Variable Funding Notes (VFN) facility[262](index=262&type=chunk) - The Company's primary liquidity needs include funding operations, general partner commitments, debt payments, dividends, acquisitions, and lease obligations[266](index=266&type=chunk) - Significant liquidity activities in 2025 included **$59.7 million** proceeds from a DataBank secondary sale, **$13.3 million** from an InfraBridge fund liquidation, and a reduction of VFN borrowing capacity from **$300 million** to **$100 million**, saving **$1.0 million** annually in unused fees[267](index=267&type=chunk) | ($ in thousands) | Outstanding Principal | Interest Rate (Per Annum) | Anticipated Repayment Date | Years Remaining to Maturity | | :--------------- | :-------------------- | :------------------------ | :------------------------- | :-------------------------- | | Class A-2 Notes | $300,000 | 3.93% | September 2026 | 1.2 | - As of June 30, 2025, the Company had unfunded equity commitments of **$187 million** to its unconsolidated funds as general partner and general partner affiliate[271](index=271&type=chunk) - The estimated fair value of contingent consideration payable for the InfraBridge acquisition is **$2.3 million**, based on achieving prescribed fundraising targets[273](index=273&type=chunk) - The Company had no liability for carried interest clawback obligations at June 30, 2025[276](index=276&type=chunk) - Operating lease obligations totaled **$37 million** for current offices and **$58 million** for a future office lease commencing in 2026[277](index=277&type=chunk) | (In thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :----------------------------- | :----------------------------- | | Cash, cash equivalents and restricted cash—beginning of period | $306,298 | $350,250 | | Net cash generated by (used in): | | | | Operating activities | $127,271 | $(4,483) | | Investing activities | $(68,506) | $(17,227) | | Financing activities | $(25,064) | $(61,920) | | Effect of exchange rates on cash, cash equivalents and restricted cash | $5,022 | $(704) | | Cash, cash equivalents and restricted cash—end of period | $345,021 | $265,916 | [Critical Accounting Policies and Estimates](index=66&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements rely on critical accounting policies and estimates involving significant management judgment, with no changes since the December 31, 2024, Annual Report on Form 10-K - The Company's financial statements are prepared using critical accounting policies and estimates that require subjective judgment due to inherent uncertainties[296](index=296&type=chunk) - There have been no changes to the Company's critical accounting policies since the filing of its Annual Report on Form 10-K for the year ended December 31, 2024[297](index=297&type=chunk) [Recent Accounting Updates](index=66&type=section&id=Recent%20Accounting%20Updates) Information regarding accounting standards adopted in 2025 and potential future adoptions is detailed in Note 2 to the consolidated financial statements - Recent accounting updates are described in Note 2 to the consolidated financial statements[299](index=299&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=66&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rates, foreign currency, and equity prices, which can affect fee revenue, principal investment income, and carried interest, with a hypothetical 10% decline in fund investments significantly impacting income - The Company's business is exposed to market risks from interest rates, foreign currency rates, and equity prices, affecting fee revenue, principal investment income, and net carried interest allocation[301](index=301&type=chunk) - A hypothetical **10%** decline in the fair value of fund investments at June 30, 2025, would decrease the OP's share of principal investment income by approximately **$84 million** and carried interest by approximately **$166 million**[303](index=303&type=chunk)[305](index=305&type=chunk) - Foreign currency risk is limited, primarily affecting the InfraBridge advisor subsidiary's operating costs in Pound Sterling[308](index=308&type=chunk) - Interest rate risk is limited to the undrawn VFN revolver[309](index=309&type=chunk) - Equity price risk from marketable equity securities held by consolidated liquid funds is managed through portfolio rebalancing and a long/short equity strategy, with third-party capital reducing the impact on stockholders[310](index=310&type=chunk) [Item 4. Controls and Procedures](index=68&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of its disclosure controls and procedures, concluding they were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - The Company's disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025[312](index=312&type=chunk) - There have been no material changes in the Company's internal control over financial reporting during the quarter ended June 30, 2025[313](index=313&type=chunk) [PART II. OTHER INFORMATION](index=69&type=section&id=PART%20II%2E%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=69&type=section&id=Item%201.%20Legal%20Proceedings) As of June 30, 2025, the company is not involved in any material legal proceedings - As of June 30, 2025, the Company was not involved in any material legal proceedings[315](index=315&type=chunk) [Item 1A. Risk Factors](index=69&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[316](index=316&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details unregistered sales of equity securities, including the conversion of Class B common stock to Class A and the issuance of Class A common stock for OP unit redemptions in Q2 2025 - In Q2 2025, **149,571** shares of Class B common stock were converted into an equal number of Class A common stock shares[318](index=318&type=chunk) - In Q2 2025, **4,350,000** shares of Class A common stock were issued to satisfy redemption requests by an OP unit holder[319](index=319&type=chunk) [Item 3. Defaults Upon Senior Securities](index=69&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reported period - None[320](index=320&type=chunk) [Item 4. Mine Safety Disclosures](index=69&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[321](index=321&type=chunk) [Item 5. Other Information](index=69&type=section&id=Item%205.%20Other%20Information) During the quarter ended June 30, 2025, none of the company's directors or executive officers adopted or terminated any Rule 10b5-1 trading plans - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the quarter ended June 30, 2025[322](index=322&type=chunk) [Item 6. Exhibits](index=70&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including organizational documents, certifications, and XBRL-related files - The report includes exhibits such as the Restated Charter, Amended and Restated Bylaws, Articles Supplementary for preferred stock, and certifications from the CEO and CFO[324](index=324&type=chunk) [SIGNATURES](index=71&type=section&id=SIGNATURES) The Quarterly Report on Form 10-Q was duly signed on August 8, 2025, by Marc C. Ganzi (Chief Executive Officer), Thomas Mayrhofer (Chief Financial Officer), and Tracey Teh (Chief Accounting Officer) - The report was signed by Marc C. Ganzi (CEO), Thomas Mayrhofer (CFO), and Tracey Teh (Chief Accounting Officer) on August 8, 2025[328](index=328&type=chunk)