[FORM 20-F Filing Information](index=1&type=section&id=FORM%2020-F) This section details the company's 2024 Form 20-F annual report, Cayman Islands incorporation, and NYSE American listing [Filing Details](index=1&type=section&id=Filing%20Details) This section details the company's 2024 Form 20-F annual report, its Cayman Islands incorporation, and NYSE American listing under DXF - The filing is an **Annual Report on Form 20-F** for the fiscal year ended December 31, 2024[2](index=2&type=chunk) - The registrant is **Eason Technology Limited** (formerly Dunxin Financial Holdings Limited), incorporated in the Cayman Islands[3](index=3&type=chunk) Securities Registered on NYSE American LLC | Title of each class | Trading Symbol(s) | Exchange on which registered | | :------------------ | :---------------- | :--------------------------- | | American depositary shares, each representing 60,000 ordinary shares | DXF | NYSE American LLC | - As of December 31, 2024, the company had **13.49 billion Class A ordinary shares** and **512.23 million Class B ordinary shares** outstanding[5](index=5&type=chunk) - The company is a **non-accelerated filer** and prepares its financial statements in accordance with **International Financial Reporting Standards (IFRS)** as issued by the IASB[6](index=6&type=chunk)[7](index=7&type=chunk) [Conventions and Financial Data Presentation](index=3&type=section&id=CONVENTIONS%20THAT%20APPLY%20TO%20THIS%20ANNUAL%20REPORT) This section defines key terms and outlines financial data presentation, with U.S. dollar figures and Renminbi conversions at RMB7.2993 to $1.00 [Definitions and Currency Translation](index=3&type=section&id=Definitions%20and%20Currency%20Translation) This section defines key terms and outlines financial data presentation, with U.S. dollar figures and Renminbi conversions at RMB7.2993 to $1.00 - The report includes **audited consolidated statements** for the years ended December 31, 2022, 2023, and 2024, and consolidated statements of financial position as of December 31, 2023 and 2024[15](index=15&type=chunk) - **Eason Technology Limited** was formerly known as Dunxin Financial Holdings Limited and China Xiniya Fashion Limited, with its ADSs listed on NYSE American LLC under the symbol **'DXF'** since March 5, 2018[12](index=12&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk) - The exchange rate used for Renminbi to U.S. dollar conversions in this report is **RMB7.2993 to $1.00**, as of December 31, 2024[19](index=19&type=chunk) - The company's former Variable Interest Entity (VIE), **Hubei Chutian Microfinance Co., Ltd.**, which was the operating company for microfinance business, was disposed of in 2024[17](index=17&type=chunk) [Forward-Looking Statements](index=5&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section highlights that the annual report contains forward-looking statements regarding the company's business, operating results, and financial condition, which involve risks and uncertainties [Nature and Risks of Forward-Looking Statements](index=5&type=section&id=Nature%20and%20Risks%20of%20Forward-Looking%20Statements) This section highlights that the annual report contains forward-looking statements regarding the company's business, operating results, and financial condition, which involve risks and uncertainties - Forward-looking statements relate to future events and financial trends, including potential impacts of PRC economic, political, and social conditions, changes in laws, COVID-19, inflation, currency fluctuations, and the company's ability to operate as a **going concern**[21](index=21&type=chunk)[22](index=22&type=chunk) - Other forward-looking statements include the company's ability to develop new businesses (real estate operation management and digital security technology), obtain certifications/licenses, maintain internal controls, increase market share, diversify offerings, manage litigation costs, secure financing, and retain key management[22](index=22&type=chunk) - The company undertakes **no obligation** to publicly update or revise any forward-looking statements after the report's date[23](index=23&type=chunk) [PART I](index=6&type=section&id=PART%20I) This part covers identity of directors, offer statistics, key information including risk factors, and detailed information on the company's business, structure, and regulatory environment [Item 1. Identity of Directors, Senior Management and Advisers](index=6&type=section&id=Item%201.%20Identity%20of%20Directors%2C%20Senior%20Management%20and%20Advisers) This item is not applicable to the company's filing - This item is marked as **'Not applicable'**[24](index=24&type=chunk) [Item 2. Offer Statistics and Expected Timetable](index=6&type=section&id=Item%202.%20Offer%20Statistics%20and%20Expected%20Timetable) This item is not applicable to the company's filing - This item is marked as **'Not applicable'**[25](index=25&type=chunk) [Item 3. Key Information](index=6&type=section&id=Item%203.%20Key%20Information) This section provides key information, including capitalization, indebtedness, and significant risks related to China operations, operational challenges, and securities [A. [Reserved]](index=6&type=section&id=A.%20%5BReserved%5D) This sub-item is reserved and contains no information [B. Capitalization and Indebtedness](index=6&type=section&id=B.%20Capitalization%20and%20Indebtedness) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[26](index=26&type=chunk) [C. Reasons for the Offer and Use of Proceeds](index=6&type=section&id=C.%20Reasons%20for%20the%20Offer%20and%20Use%20of%20Proceeds) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[27](index=27&type=chunk) [D. Risk Factors](index=6&type=section&id=D.%20Risk%20Factors) Investing in the company's securities is highly speculative due to significant risks related to China operations, regulatory environment, and share-related uncertainties - Investing in the company's securities is **highly speculative** and involves significant risk, particularly due to its substantial operations in China and a differing legal and regulatory environment compared to the United States[28](index=28&type=chunk) - Risks related to doing business in China include changes in economic, political, or social conditions, uncertainties in PRC law interpretation and enforcement, and increased government oversight on overseas offerings and foreign investment in China-based issuers[31](index=31&type=chunk)[33](index=33&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[68](index=68&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[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)[126](index=126&type=chunk) - Operational risks include **substantial doubt about the company's ability to continue as a going concern**, limited cash and need for additional capital, lack of product and business diversification, and challenges in maintaining effective internal controls[34](index=34&type=chunk)[127](index=127&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk)[147](index=147&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - Risks related to ordinary shares and ADSs include potential **delisting under the Holding Foreign Companies Accountable Act (HFCA Act)** due to PCAOB inspection limitations, volatility in trading prices, and anti-takeover provisions[33](index=33&type=chunk)[34](index=34&type=chunk)[112](index=112&type=chunk)[114](index=114&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk) - The company's independent auditors have expressed **substantial doubt about its ability to continue as a going concern**, citing a net loss of **RMB502.1 million**, negative operating cash flow of **RMB9.1 million**, net current liabilities of **RMB18.2 million**, and accumulated loss of **RMB535.2 million** as of December 31, 2024[134](index=134&type=chunk) [Item 4. Information on the Company](index=28&type=section&id=Item%204.%20Information%20on%20the%20Company) This section details the company's history, business transformation, corporate structure, and the regulatory environment in China [A. History and Development of the Company](index=28&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) Eason Technology Limited, a Cayman Islands holding company, divested its microfinance business in 2024 and transitioned to digital security technology and real estate operation management - **Eason Technology Limited** (formerly Dunxin Financial Holdings Limited) was incorporated in the Cayman Islands on June 24, 2010[182](index=182&type=chunk) - Historically, the company was primarily engaged in **microfinance lending** in Hubei province through its VIE, Chutian, which was suspended in 2019 due to financial constraints[183](index=183&type=chunk)[184](index=184&type=chunk) - On June 12, 2024, the company **divested its microfinance lending business** by selling Chutian HK and its subsidiaries, including Chutian, for a nominal cash consideration of **$1**[185](index=185&type=chunk)[186](index=186&type=chunk) - The company has established new business lines in **digital security technology** (headquartered in Hong Kong) and **real estate operation management** (in PRC)[187](index=187&type=chunk)[188](index=188&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - Recent developments in January 2025 include a PIPE offering of **6 billion Class A ordinary shares for $0.3 million** and the acquisition of a property in Hubei, China, for **RMB8.53 million (approx. $1.17 million)** in exchange for **36 billion restricted Class A ordinary shares**, to commence real estate leasing and management services[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk)[203](index=203&type=chunk) - A lease agreement was entered into on January 16, 2025, with Hubei Zongyang Hospital Co., Ltd. to lease the acquired property for a traditional Chinese medicine hospital, generating a monthly rent of **RMB42,000**[204](index=204&type=chunk) - On February 16, 2025, the company entered into an agreement to acquire **Hongkong Starlux Intelligent Technology**, a blockchain technology company, though the acquisition was not yet consummated as of the report date[205](index=205&type=chunk) [VIE Financial Information](index=32&type=section&id=VIE%20Financial%20Information) This section provides selected consolidated financial information for Eason and its former VIE for 2022-2024, prior to the microfinance business divestiture Consolidated Statements of Operations Information (RMB in thousands) | | Year Ended December 31, 2024 | | :---------------------------------- | :------------- | | Revenue | 12,315 | | Cost of goods sold | (2,744) | | Gross profit | 9,571 | | Interest income on loans | - | | Interest expenses on loans | (856) | | Net interest loss | (856) | | General and administrative | (11,553) | | Loss on disposal of discontinued operations and subsidiaries | (497,532) | | Net (loss)/income before income tax | (500,370) | | Income tax expenses | (1,711) | | Net (loss)/income | (502,081) | Consolidated Statements of Operations Information (RMB in thousands) | | Year Ended December 31, 2023 | | :---------------------------------- | :------------- | | Consolidated Cash Flows Information | 11,218 | | Interest expenses on loans | (18,720) | | Business related taxes and surcharges | (405) | | Total interest expense | (19,125) | | Net interest loss | (7,907) | | Credit impairment losses | (373,647) | | Net interest loss after impairment loss | (381,554) | | General and administrative | (14,249) | | Total operating costs and expenses | (14,249) | | Net loss | (395,803) | Consolidated Statements of Operations Information (RMB in thousands) | | Year Ended December 31, 2022 | | :---------------------------------- | :------------- | | Interest income on loans | 44,797 | | Interest expenses on loans | (21,296) | | Business related taxes and surcharges | (405) | | Total interest expense | (21,701) | | Net interest income/(loss) | 23,096 | | Credit impairment losses | (42,420) | | Net interest loss after impairment loss | (19,324) | | Sales and marketing | (514) | | General and administrative | (10,506) | | Total operating costs and expenses | (11,020) | | Net loss | (30,344) | Consolidated Balance Sheet Information (RMB in thousands) | | As of December 31, 2024 | | :---------------------------------- | :------------- | | Current assets | 24,563 | | Assets | 70,858 | | Total liabilities | 42,809 | | Total Shareholders' (Deficit)/Equity | 28,049 | Consolidated Balance Sheet Information (RMB in thousands) | | As of December 31, 2023 | | :---------------------------------- | :------------- | | Loans receivable, net of credit impairment losses | 193,682 | | Current assets | 202,344 | | Assets | 283,516 | | Total liabilities | 334,671 | | Total Shareholders' (Deficit)/Equity | (51,155) | Consolidated Balance Sheet Information (RMB in thousands) | | As of December 31, 2022 | | :---------------------------------- | :------------- | | Loans receivable, net of credit impairment losses | 556,112 | | Current assets | 561,036 | | Assets | 600,269 | | Total Shareholders' (Deficit)/Equity | 288,158 | Consolidated Cash Flows Information (RMB in thousands) | | Year Ended December 31, 2024 | | :---------------------------------- | :------------- | | Total cash used in operating activities | (9,098) | | Total cash generated by financing activities | 8,272 | | Effect of exchange rate changes | (1,628) | | Net decrease in cash, cash equivalents and restricted cash | (2,454) | Consolidated Cash Flows Information (RMB in thousands) | | Year Ended December 31, 2023 | | :---------------------------------- | :------------- | | Total cash used in operating activities | (11,017) | | Total cash generated by financing activities | 14,785 | | Effect of exchange rate changes | (1,530) | | Net increase in cash, cash equivalents and restricted cash | 2,238 | Consolidated Cash Flows Information (RMB in thousands) | | Year Ended December 31, 2022 | | :---------------------------------- | :------------- | | Total cash used in operating activities | (7,435) | | Total cash generated by/(used in) financing activities | 6,628 | | Effect of exchange rate changes | 706 | | Net increase/(decrease) in cash, cash equivalents and restricted cash | (101) | [Transfer of Cash Through our Organization](index=35&type=section&id=Transfer%20of%20Cash%20Through%20our%20Organization) Due to severe financial constraints, no cash contributions or transfers occurred among Eason, its VIE, and non-VIE subsidiaries in 2023 and 2024 - Due to severe financial restraint, Eason made **no cash contributions or transfers** among its VIE and non-VIE subsidiaries for the years ended December 31, 2023 and 2024[215](index=215&type=chunk) - Cash transfers of less than **RMB10.0 million ($1.6 million)** require review by Eason's financial department and the PRC subsidiary's/VIE's CEO, and approval by Eason's CFO and Chairman[218](index=218&type=chunk) - Cash transfers exceeding **RMB10 million ($1.6 million)** require approval by Eason's board of directors[218](index=218&type=chunk) [Dividends and Other Distributions](index=35&type=section&id=Dividends%20and%20Other%20Distributions) Eason relies on PRC subsidiary dividends, subject to statutory reserve requirements, with no distributions made to offshore entities or U.S. investors to date - Eason relies on **dividends and other distributions** from its PRC subsidiaries to fund cash and financing requirements[217](index=217&type=chunk) - PRC regulations permit subsidiaries to pay dividends only out of accumulated profits, after setting aside at least **10% of after-tax profits** annually for a statutory reserve until it reaches **50% of registered capital**[217](index=217&type=chunk)[219](index=219&type=chunk) - As of the report date, **no dividends or distributions** have been made from PRC subsidiaries or the VIE to offshore entities or U.S. investors[217](index=217&type=chunk) - Renminbi is **not freely convertible**, and PRC government controls on foreign currency exchange may limit the ability of PRC subsidiaries to remit foreign currency for dividends[220](index=220&type=chunk) [Corporate Information](index=36&type=section&id=Corporate%20information) The company's principal executive offices are in Hong Kong, its registered office in the Cayman Islands, and its website is http://www.fdvsglobal.com - The company's principal executive offices are located at Room 612, 6/f, Kaiyue Comm Building, No. 2C, Argyle Street, Mongkok Kowloon, Hong Kong[221](index=221&type=chunk) - The company's registered office in the Cayman Islands is at Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104[221](index=221&type=chunk) - The company's website is **http://www.fdvsglobal.com**[221](index=221&type=chunk) [B. Business Overview](index=36&type=section&id=B.%20Business%20Overview) Eason Technology Limited transitioned from microfinance to real estate operation management and digital security technology, leveraging its team and public company status - **Eason** is a Cayman Islands holding company with operations primarily conducted by its subsidiaries in China[222](index=222&type=chunk) - The company historically provided loan facilities to micro-sized enterprises, SMEs, sole proprietors, and individuals in Hubei province, PRC, but **suspended these operations in the second half of 2019** due to financial constraints[222](index=222&type=chunk)[223](index=223&type=chunk) - In **June 2024**, the company **divested its microfinance lending business** by selling 100% interests in its VIE and relevant subsidiaries[224](index=224&type=chunk) - Current operations include **real estate operation management and investment** in the PRC, focusing on medical and health services, commercial real estate, and emerging consumer sectors[225](index=225&type=chunk) - The company also operates a global **digital security technology business** headquartered in Hong Kong, focusing on digital asset security, intellectual property security, and AI computing power[226](index=226&type=chunk) [Microfinance Lending Business (Historical)](index=37&type=section&id=Microfinance%20Lending%20Business) Historically, Eason provided various loan facilities in Hubei Province, with typical loan sizes from RMB10,000 to RMB7,000,000, before its divestiture in June 2024 - Prior to divestment, the company offered consumer loans (**RMB10,000-RMB100,000**), commercial loans (**RMB100,000-RMB500,000**), collateral-backed loans (**RMB0.5 million-RMB3.0 million**), and enterprise loans (**RMB3.0 million-RMB7.0 million**), typically with 3-12 month terms[229](index=229&type=chunk)[230](index=230&type=chunk) - The microfinance lending business was **suspended in the second half of 2019** due to severe financial restraint and experienced defaults[228](index=228&type=chunk) - The microfinance lending business was **fully disposed of in June 2024**[228](index=228&type=chunk) [Real Estate Operation Management and Investment Business](index=38&type=section&id=Real%20Estate%20Operation%20Management%20and%20Investment%20Business) The company's real estate business focuses on managing, operating, and acquiring assets in key PRC industries to enhance profitability and achieve stable cash flow - The company operates in **real estate operation management and investment** in the PRC, focusing on medical and health services, commercial real estate, and emerging consumer sectors[231](index=231&type=chunk) - The professional team manages, operates, and conducts mergers and acquisitions of entrusted or self-owned assets to enhance profitability and achieve **stable cash flow**[231](index=231&type=chunk) [Digital Security Technology Business](index=38&type=section&id=Digital%20Security%20Technology%20Business) Headquartered in Hong Kong, the digital security technology business focuses on digital asset security, intellectual property security, and AI computing power - The **digital security technology business** is headquartered in Hong Kong and focuses on digital asset security, intellectual property security, and AI computing power[232](index=232&type=chunk) - The objective is to develop application-level security products with proprietary intellectual property rights and build strategic partnerships with financial institutions and smart technology enterprises[232](index=232&type=chunk) [Competitive Advantages](index=38&type=section&id=Competitive%20Advantages) The company's competitive advantages include professional teams, extensive real estate resources in mainland China, and public company status for data security product promotion - Professional team members have senior backgrounds in real estate investment, healthcare investment funds, investment banking, and technology development from prominent internet and blockchain firms[233](index=233&type=chunk) - Core team members have extensive experience in real estate investment, particularly in healthcare services, commercial real estate, and chain-based consumer enterprises in mainland China[234](index=234&type=chunk) - Leverages its status as a **publicly listed company** to promote and maintain the brand of its data security technology products, effectively reaching potential user groups[235](index=235&type=chunk) [Growth Strategies](index=38&type=section&id=Growth%20Strategies) The company's growth strategies focus on real estate operation management and digital security technology, aiming for market capitalization and diversified revenue streams - The company aims to become a key player in **real estate operations, management, and long-term investment** in mainland China, capitalizing on economic recovery and declining commercial property prices[237](index=237&type=chunk) - Real estate services include comprehensive management consulting, entrusted management, and generating **stable cash flow** through rental income and investment returns from self-owned properties[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk) - In digital security, the strategy is to provide infrastructure services for the digital economy and digital assets, developing distinct solutions for **enterprise (To B)** and **consumer (To C)** markets[241](index=241&type=chunk) - Digital security revenue streams include customizing and implementing digital security strategies for businesses, selling digital security hardware products to consumers, providing traffic diversion services to partners, and investing in growth-stage digital security enterprises[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk) [Employees](index=39&type=section&id=Employees) As of December 31, 2024, the company had 14 full-time employees, an increase from 2023, covered by PRC statutory social security plans - As of December 31, 2024, the company had **14 full-time employees**, an increase from 10 in 2023 and 11 in 2022[248](index=248&type=chunk) Full-time Employees by Function (as of December 31, 2024) | Function | As of December 31, 2024 | | :------------------- | :---------------------- | | Operations | 2 | | Technical personnel | 9 | | Finance and Administration | 3 | | Total | 14 | - The company participates in PRC government statutory social security plans, including pension, medical, unemployment, work-related injury, maternity insurance, and housing provident fund[247](index=247&type=chunk) [Intellectual Property](index=39&type=section&id=Intellectual%20Property) As of December 31, 2024, the company's significant intellectual property was limited to its domain name, with no material dependency on specific IP - As of December 31, 2024, the company's significant intellectual property rights were limited to its registered domain name (**http://www.fdvsglobal.com**), registered in November 2020[249](index=249&type=chunk) - The company is **not materially dependent** on any intellectual property[249](index=249&type=chunk) [Competition](index=40&type=section&id=Competition) The company faces competition in real estate operation management from commercial property service providers and in digital security technology from traditional market players - In the **real estate operation management sector**, competitors include commercial property service providers and affiliate operating subsidiaries of real estate groups[250](index=250&type=chunk) - In the **digital security technology business**, the company faces competition from traditional market players such as Sangfor Technologies Inc. and Qi An Xin Technology Group Inc.[251](index=251&type=chunk) [Customers](index=40&type=section&id=Customers) Shenzhen Four Divisions Global Industrial Operation Co., Ltd. provides real estate services for RMB1.8 million, and Hong Kong Three Entities provides digital security consultancy for RMB1.23 million - **Shenzhen Four Divisions Global Industrial Operation Co., Ltd.** provides real estate operation management services to Jiangsu Suqian Zhenming Enterprise Management LLC, with a total fee of **RMB1.8 million**[252](index=252&type=chunk) - **Hong Kong Three Entities** entered a consultancy agreement with Hong Kong Ren Ying Investment LLC for **RMB1.23 million** to develop digital assets management and operations systems[253](index=253&type=chunk) [Government Regulations](index=40&type=section&id=GOVERNMENT%20REGULATIONS) The company's China operations are subject to evolving PRC regulations on foreign investment, cybersecurity, data security, and overseas listings, creating compliance uncertainties - The PRC government has initiated a series of regulatory actions on business operations, including cracking down on illegal securities activities, enhancing supervision over China-based companies listed overseas, and expanding cybersecurity and anti-monopoly enforcement[256](index=256&type=chunk) - The **M&A Rules and Anti-Monopoly Law** impose additional procedures and requirements for foreign investor acquisitions and change-of-control transactions, with increased penalties for violations[257](index=257&type=chunk) - Recent regulations like the **Measures for Cybersecurity Review (2021 version)** and the **PRC Data Security Law** impose strict data security and privacy obligations, requiring cybersecurity review for online platform operators with over **one million users** seeking foreign listings[259](index=259&type=chunk)[269](index=269&type=chunk)[270](index=270&type=chunk) - The **Trial Administrative Measures for Overseas Securities Offering and Listing by Domestic Companies** (effective March 31, 2023) require PRC domestic companies to file with the CSRC for overseas listings and subsequent offerings, with significant uncertainties remaining[264](index=264&type=chunk)[265](index=265&type=chunk) - PRC laws restrict foreign exchange for capital account transactions and require statutory reserves from PRC subsidiaries' profits, potentially limiting dividend distributions to the holding company[278](index=278&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk)[281](index=281&type=chunk) [C. Organizational Structure](index=45&type=section&id=C.%20Organizational%20Structure) The organizational structure is described in Item 4.A. History and Development of the Company - The organizational structure is described in **'Item 4. Information on the Company-A. History and Development of the Company'**[285](index=285&type=chunk) [D. Property, Plants and Equipment](index=46&type=section&id=D.%20Property%2C%20Plants%20and%20Equipment) The company acquired land use rights in Wuhan City for $6.3 million and leases its principal executive office in Hong Kong - On November 13, 2013, the company acquired land use rights for a parcel in Xinzhou District, Wuhan City, China, with a transaction value of **$6.3 million**[286](index=286&type=chunk) - The principal executive office is leased in Hong Kong, with approximately **152 square meters** of office space, under a one-year term from February 1, 2024[287](index=287&type=chunk) [Item 4A. Unresolved Staff Comments](index=46&type=section&id=Item%204A.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments - This item is marked as **'None'**[288](index=288&type=chunk) [Item 5. Operating and Financial Review and Prospects](index=46&type=section&id=Item%205.%20Operating%20and%20Financial%20Review%20and%20Prospects) This section discusses the company's financial condition, operating results, business transformation, accounting policies, and comparative financial performance [CIB Transaction](index=46&type=section&id=CIB%20Transaction) On December 28, 2017, the company completed the CIB Transaction, divesting apparel and acquiring True Silver's microfinance business via reverse acquisition - On **December 28, 2017**, the company completed the **CIB Transaction**, divesting its apparel business and acquiring True Silver, which operated a microfinance lending business in Hubei Province[290](index=290&type=chunk)[292](index=292&type=chunk) - The CIB Transaction was accounted for as a **reverse acquisition**, with True Silver considered the accounting acquirer, meaning True Silver's historical financial statements were treated as the company's historical financial statements[293](index=293&type=chunk)[294](index=294&type=chunk) [A. Operating Results](index=46&type=section&id=A.%20Operating%20Results) The company's operating results reflect a significant business transformation, with a 2024 net loss of RMB502.1 million primarily due to discontinued operations disposal - **Eason** is a Cayman Islands holding company, with operations primarily conducted by its subsidiaries in China, having **divested its microfinance business in June 2024** to focus on real estate management and digital technology[295](index=295&type=chunk) - Key factors affecting operating results include China's economic and regulatory conditions, market interest rates, and bankruptcy rates[307](index=307&type=chunk) Summary Statements of Operations (RMB '000) | Indicator | 2022 | 2023 | 2024 | 2024 (US$) | | :-------------------------------------------- | :-------- | :-------- | :-------- | :--------- | | Revenue | - | - | 12,315 | 1,712 | | Cost of revenue | - | - | (2,744) | (381) | | Gross profit | - | - | 9,571 | 1,331 | | Interest income on loans | 44,797 | 11,218 | - | - | | Total interest expense | (21,701) | (19,125) | (856) | (119) | | Net interest income/(loss) | 23,096 | (7,907) | (856) | (119) | | Credit impairment losses | (42,420) | (373,647) | - | - | | Net interest loss after credit impairment losses | (19,324) | (381,554) | (856) | (119) | | Sales and marketing | (514) | - | - | - | | General and administrative | (10,506) | (14,249) | (11,553) | (1,606) | | Total operating expenses | (11,020) | (14,249) | (11,553) | (1,606) | | Loss on disposal of discontinued operations and subsidiaries | - | - | (497,532) | (69,165) | | Loss before tax | (30,344) | (395,803) | (500,370) | (69,559) | | Income tax expense | - | - | (1,711) | (238) | | Net loss | (30,344) | (395,803) | (502,081) | (69,797) | [Critical Accounting Policies and Estimates](index=48&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's IFRS financial statements require significant estimates, with key policies covering interest income, impairment measurement for ECL, and income taxes - Interest income and expense for financial instruments are recognized using the **effective interest method**, with the effective interest rate discounting estimated future cash flows[309](index=309&type=chunk)[310](index=310&type=chunk) - Impairment measurement follows an **IFRS 9 'three-stage' model** based on changes in credit quality: Stage 1 (12-month ECL), Stage 2 (lifetime ECL for significant increase in credit risk), and Stage 3 (lifetime ECL for credit-impaired assets)[314](index=314&type=chunk)[315](index=315&type=chunk)[322](index=322&type=chunk) - A financial asset is **'credit-impaired' (Stage 3)** when events have a detrimental impact on estimated future cash flows, such as significant financial difficulty or breach of contract[321](index=321&type=chunk) - Deferred tax assets and liabilities are recognized for temporary differences between tax bases and financial reporting amounts, with deferred tax assets recognized only if future taxable profits are probable[339](index=339&type=chunk) - The PRC tax returns for the company's PRC subsidiary and VIE are open to examination by tax authorities for tax years beginning in 2018, with **no uncertain tax positions** as of December 31, 2024[340](index=340&type=chunk) [Comparison of results of operations for the years ended December 31, 2024 and 2023](index=52&type=section&id=Comparison%20of%20results%20of%20operations%20for%20the%20years%20ended%20December%2031%2C%202024%20and%202023) In 2024, new businesses generated RMB12.3 million revenue, while the net loss increased to RMB502.1 million, primarily due to a RMB497.5 million loss on discontinued operations disposal Revenue and Gross Profit (2024 vs 2023) | Metric | 2023 (RMB) | 2024 (RMB) | Change (RMB) | | :------------ | :--------- | :--------- | :----------- | | Revenue | - | 12,315,000 | +12,315,000 | | Cost of sales | - | (2,744,000)| (2,744,000) | | Gross profit | - | 9,571,000 | +9,571,000 | | Gross margin | - | 77.7% | N/A | Interest Expenses and Credit Impairment Losses (2024 vs 2023) | Metric | 2023 (RMB) | 2024 (RMB) | Change (RMB) | | :-------------------------- | :----------- | :--------- | :----------- | | Interest income on loans | 11,218,000 | - | (11,218,000) | | Interest expenses on loans | (18,720,000) | (856,000) | +17,864,000 | | Credit impairment losses | (373,647,000)| - | +373,647,000 | | Business related taxes and surcharges | (405,000) | - | +405,000 | - The decrease in interest expenses and credit impairment losses was primarily attributable to the **divestiture of the microfinance business in 2024**[350](index=350&type=chunk)[352](index=352&type=chunk)[354](index=354&type=chunk) Operating Expenses and Net Loss (2024 vs 2023) | Metric | 2023 (RMB) | 2024 (RMB) | Change (RMB) | | :----------------------------------------- | :------------ | :------------ | :----------- | | General and administrative expenses | (14,249,000) | (11,553,000) | +2,696,000 | | Loss on disposal of discontinued operations and subsidiaries | - | (497,532,000) | (497,532,000)| | Income tax expenses | - | (1,711,000) | (1,711,000) | | Net loss | (395,803,000) | (502,081,000) | (106,278,000)| [Comparison of results of operations for the years ended December 31, 2023 and 2022](index=53&type=section&id=Comparison%20of%20results%20of%20operations%20for%20the%20years%20ended%20December%2031%2C%202023%20and%202022) In 2023, interest income decreased by RMB33.6 million, credit impairment losses surged by RMB331.2 million, and net loss increased by RMB365.5 million to RMB395.8 million Interest Income and Expenses (2023 vs 2022) | Metric | 2022 (RMB) | 2023 (RMB) | Change (RMB) | | :-------------------------- | :----------- | :----------- | :----------- | | Interest income on loans | 44,797,000 | 11,218,000 | (33,579,000) | | Interest expenses on loans | (21,296,000) | (18,720,000) | +2,576,000 | | Business related taxes and surcharges | (405,000) | (405,000) | - | - The decline in interest income on loans was mainly attributable to the revaluation of loan recoverability and cessation of interest accrual on loans with **100% impairment loss** provided in 2023[358](index=358&type=chunk) Credit Impairment Losses and Operating Expenses (2023 vs 2022) | Metric | 2022 (RMB) | 2023 (RMB) | Change (RMB) | | :-------------------------- | :----------- | :----------- | :----------- | | Credit impairment losses | (42,420,000) | (373,647,000)| (331,227,000)| | Sales and marketing expenses| (514,000) | - | +514,000 | | General and administrative expenses | (10,506,000) | (14,249,000) | (3,743,000) | | Net loss | (30,344,000) | (395,803,000)| (365,459,000)| - Allowance for loan losses increased significantly in 2023 due to a **100% impairment loss provision** for long-aging and uncollectible loans after assessment of debtor circumstances and recoverability[362](index=362&type=chunk) - General and administrative expenses increased primarily due to higher legal and other professional services fees, as well as costs incurred for the issuance of convertible notes and ADSs[364](index=364&type=chunk) [B. Liquidity and Capital Resources](index=54&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) The company faces severe liquidity issues with negative operating cash flows and significant liabilities, planning intensified collections, collateral monetization, and equity financing - The company had **negative cash flows of RMB0.8 million ($0.1 million)** in 2024, and **net current liabilities of RMB18.2 million ($2.5 million)** and an **accumulated loss of RMB535.2 million ($73.3 million)** as of December 31, 2024[368](index=368&type=chunk) - Severe liquidity issues arose from securities exchanges ceasing financing and loan receivables becoming credit-impaired, leading to defaults on loans payable and obligations to service providers and employees, and resulting in multiple legal proceedings[369](index=369&type=chunk) - Management plans to intensify loan and interest collection, monetize collateral, and actively seek **equity financing from private placements** to meet cash needs for the next 12 months[370](index=370&type=chunk)[371](index=371&type=chunk) - A director, Mr. Hao Xu, has provided a **financial support letter** expressing willingness to provide necessary financial support[370](index=370&type=chunk) Summary of Cash Flows (RMB '000) | Metric | 2023 | 2024 | 2024 (US$) | | :----------------------------------------- | :-------- | :-------- | :--------- | | Net cash used in operating activities | (11,017) | (9,098) | (1,264) | | Net cash generated by financing activities | 14,785 | 8,272 | 1,150 | | Net increase/(decrease) in cash, cash equivalents and restricted cash | 3,768 | (826) | (114) | | Cash, cash equivalents and restricted cash at end of the year | 2,533 | 79 | 16 | [C. Research and Development](index=56&type=section&id=C.%20Research%20and%20Development) The company has not made significant R&D expenditures recently but plans to invest in this area for its new businesses - The company has **not made significant expenditures on research and development** in recent years but plans to invest in this aspect for its new business lines[384](index=384&type=chunk) [D. Trend Information](index=56&type=section&id=D.%20Trend%20Information) No significant trends, uncertainties, demands, commitments, or events for 2024 are expected to materially adversely affect the company's financial performance or liquidity - No significant trends, uncertainties, demands, commitments, or events for the year ended December 31, 2024, are reasonably likely to have a material adverse effect on net revenues, income, profitability, liquidity, or capital resources, other than those already disclosed[385](index=385&type=chunk) [E. Critical Accounting Estimates](index=56&type=section&id=E.%20Critical%20Accounting%20Estimates) This item is not applicable, as critical accounting estimates are discussed within the operating results section - This item is marked as **'Not applicable'**[386](index=386&type=chunk) [Item 6. Directors, Senior Management and Employees](index=56&type=section&id=Item%206.%20Directors%2C%20Senior%20Management%20and%20Employees) This section provides information on the company's directors, executive officers, compensation, board practices, and employee details, including recent board changes and an equity incentive plan [A. Directors and Senior Management](index=56&type=section&id=A.%20Directors%20and%20Senior%20Management) The board consists of seven members, including four independent directors, with Mr. Longwen (Stanley) He serving as CEO and Chairman, following recent board changes - On **September 23, 2024**, Mr. Ai (Kosten) Mei resigned as CEO and Chairman, and Mr. Qi Chen resigned as a director[386](index=386&type=chunk) - **Mr. Longwen (Stanley) He** was appointed as the new CEO and Chairman of the Board on September 23, 2024[386](index=386&type=chunk) - On **March 26, 2025**, Mr. Jun Hu, Mr. Stephen Liao, and Mr. Halen Fu were ratified and appointed as **independent directors**[387](index=387&type=chunk) Directors and Executive Officers | Name | Age | Position | | :---------------- | :-- | :------------------------------------- | | Longwen (Stanley) He | 37 | Director (Chairman); Chief Executive Officer | | Yuan Gao | 32 | Director | | Hao Xu | 36 | Director | | Siyuan Xu | 32 | Independent director | | Jun Hu | 35 | Independent director | | Stephan Liao | 40 | Independent director | | Halen Fu | 51 | Independent director | | Xiang (Johnny) Zhou | 49 | Chief Financial Officer | [B. Compensation](index=58&type=section&id=B.%20Compensation) In 2024, aggregate compensation for executive officers and directors was RMB1.287 million ($179,000), and a 2025 Equity Incentive Plan was adopted, authorizing up to 2 billion Class A ordinary shares Aggregate Compensation for Executive Officers and Directors | Fiscal Year Ended | Amount (RMB) | Amount (US$) | | :---------------- | :----------- | :----------- | | December 31, 2024 | 1,287,000 | 179,000 | - The company participates in PRC government statutory social security plans for employees, including pension, medical, unemployment, work-related injury, maternity insurance, and housing provident fund[398](index=398&type=chunk) - The **2025 Equity Incentive Plan**, effective December 13, 2024, authorizes the issuance of up to **2 billion Class A ordinary shares** for awards to employees, directors, and consultants[399](index=399&type=chunk) - As of the report date, **no Class A ordinary shares have been granted** under the 2025 Plan[400](index=400&type=chunk) [C. Board Practices](index=59&type=section&id=C.%20Board%20Practices) The company's board comprises seven members with four independent directors, operating with three committees, and its corporate governance practices differ from NYSE American standards - The board of directors consists of **seven directors, four of whom are independent**[409](index=409&type=chunk) - Directors serve until resignation or removal by ordinary resolution; officers serve at the discretion of the Board[410](index=410&type=chunk) - The company has an **Audit Committee** (chaired by Hao Xu), a **Compensation Committee** (chaired by Stephen Liao), and a **Nominating and Corporate Governance Committee** (chaired by Halen Fu), all composed of independent directors[412](index=412&type=chunk)[414](index=414&type=chunk)[415](index=415&type=chunk) - The company's corporate governance practices, as a foreign private issuer, **differ from NYSE American standards**, particularly regarding the majority of independent directors and shareholder approval requirements for certain transactions[593](index=593&type=chunk)[594](index=594&type=chunk) [D. Employees](index=61&type=section&id=D.%20Employees) Information regarding the company's employees is detailed in Item 4.B. Business Overview - Employees - Employee information is provided in **'Item 4. Information on the Company - B. Business Overview - Employees'**[424](index=424&type=chunk) [E. Share Ownership](index=61&type=section&id=E.%20Share%20Ownership) As of the report date, the company had 82.76 billion Class A and 512.23 million Class B ordinary shares outstanding, with Deutsche Bank holding 99.3% of total ordinary shares Share Ownership by Directors and Executive Officers | Name | Class A ordinary shares | Class B ordinary shares | Total ordinary shares (as-converted basis) | | :---------------- | :---------------------- | :---------------------- | :--------------------------------------- | | Xiang (Johnny) Zhou | 8,640,000 | — | 8,640,000 | - As of the report date, the company had **82.76 billion Class A ordinary shares** and **512.23 million Class B ordinary shares** issued and outstanding[428](index=428&type=chunk) - **Deutsche Bank Trust Company Americas**, as the depositary for ADSs, was the only record holder of ordinary shares in the United States, holding approximately **99.3% of total outstanding ordinary shares**[428](index=428&type=chunk) - Each holder of Class A ordinary shares is entitled to **one vote per share**, while each holder of Class B ordinary shares is entitled to **50 votes per share**[433](index=433&type=chunk) [F. Disclosure of a Registrant's Action to Recover Erroneously Awarded Compensation.](index=62&type=section&id=F.%20Disclosure%20of%20a%20Registrant's%20Action%20to%20Recover%20Erroneously%20Awarded%20Compensation.) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[427](index=427&type=chunk) [Item 7. Major Shareholders and Related Party Transactions](index=62&type=section&id=Item%207.%20Major%20Shareholders%20and%20Related%20Party%20Transactions) This section refers to major shareholder information and details material related party transactions before 2024, which were disposed of in June 2024 [A. Major Shareholders](index=62&type=section&id=A.%20Major%20Shareholders) Information on major shareholders is provided in Item 6.E. Share Ownership - Information on major shareholders is referred to **'Item 6. Directors, Senior Management and Employees-E. Share Ownership'**[428](index=428&type=chunk) [B. Related Party Transactions](index=62&type=section&id=B.%20Related%20Party%20Transactions) The audit committee reviews related party transactions, which prior to June 2024 divestiture, included overdue loans payable to related parties and shareholders, and consulting expenses - The audit committee reviews and approves all related party transactions[430](index=430&type=chunk) - Prior to the microfinance business divestiture in June 2024, there were overdue loans payable to related parties **Hubei Shanyin Wealth Management Co., Ltd.** and **Hubei New Nature Investment Co., Ltd.**, both owned by the former Chairman, Mr. Ricky Qizhi Wei[431](index=431&type=chunk)[434](index=434&type=chunk)[436](index=436&type=chunk)[437](index=437&type=chunk)[890](index=890&type=chunk)[891](index=891&type=chunk)[892](index=892&type=chunk)[893](index=893&type=chunk) Loans Payable to Related Parties (as of Dec 31, 2023) | Related Party | Loans Payable (RMB) | Interest Payable (RMB) | | :-------------------------------- | :------------------ | :--------------------- | | Hubei Shanyin Wealth Management Co., Ltd. | 50,000,000 | 24,400,000 | | Hubei New Nature Investment Co., Ltd. | 900,000 | 1,900,000 | - Overdue loans payable to shareholders Wang Hailin and Li Ling totaled **RMB20.0 million in principal** and **RMB20.6 million in interest** as of December 31, 2023[438](index=438&type=chunk)[439](index=439&type=chunk)[444](index=444&type=chunk)[894](index=894&type=chunk)[895](index=895&type=chunk)[900](index=900&type=chunk) - Consulting expenses were incurred for representatives from Hubei Daily, a shareholder of the former VIE, in 2021, 2022, and 2023, but were **nil in 2024** after divestiture[445](index=445&type=chunk)[901](index=901&type=chunk)[902](index=902&type=chunk) - In 2024, the company provided **RMB1.8 million in real estate operation management services** to a related party, with **RMB1.6 million due** from the related party as of December 31, 2024[910](index=910&type=chunk) [C. Interests of Experts and Counsel](index=64&type=section&id=C.%20Interests%20of%20Experts%20and%20Counsel) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[450](index=450&type=chunk) [Item 8. Financial Information](index=64&type=section&id=Item%208.%20Financial%20Information) This section refers to consolidated financial statements, outlines dividend policy, and details past legal proceedings related to the divested microfinance business [A. Consolidated Statements and Other Financial Information](index=65&type=section&id=A.%20Consolidated%20Statements%20and%20Other%20Financial%20Information) The company's consolidated financial statements are in Item 18; its dividend policy is discretionary and subject to PRC laws, with past microfinance legal proceedings transferred upon divestiture - The company's board has **complete discretion on dividend payments**, which are subject to future operations, earnings, capital requirements, and PRC regulations[451](index=451&type=chunk)[452](index=452&type=chunk) - PRC subsidiaries can only pay dividends from accumulated profits after setting aside at least **10% of after-tax profits** for a statutory reserve until it reaches **50% of paid-up capital**[453](index=453&type=chunk) - The divested microfinance business was involved in multiple legal proceedings, including execution cases for property preservation, pre-litigation protective measures, and loan contract disputes, with significant amounts frozen or subject to court orders[454](index=454&type=chunk)[455](index=455&type=chunk)[456](index=456&type=chunk)[457](index=457&type=chunk)[458](index=458&type=chunk)[460](index=460&type=chunk)[461](index=461&type=chunk)[462](index=462&type=chunk)[463](index=463&type=chunk)[464](index=464&type=chunk)[466](index=466&type=chunk)[467](index=467&type=chunk)[471](index=471&type=chunk)[472](index=472&type=chunk)[473](index=473&type=chunk) - Upon divestiture of the microfinance business in **June 2024**, all related assets and liabilities, including legal proceedings, were transferred to the acquiring party[455](index=455&type=chunk)[912](index=912&type=chunk)[913](index=913&type=chunk) - As of the reporting date, the company is **not involved in any legal proceedings**[914](index=914&type=chunk) [B. Significant Changes](index=67&type=section&id=B.%20Significant%20Changes) No significant changes have occurred since the audited consolidated financial statements, other than those disclosed in this annual report - No significant changes have occurred since the date of the audited consolidated financial statements, other than those disclosed elsewhere in the annual report[474](index=474&type=chunk) [Item 9. The Offer and Listing](index=68&type=section&id=Item%209.%20The%20Offer%20and%20Listing) This section details the company's ADS listing history on NYSE and NYSE American, including changes in the ADS to ordinary share ratio [A. Offer and Listing Details](index=68&type=section&id=A.%20Offer%20and%20Listing%20Details) The company's ADSs were listed on NYSE in 2010, transitioned to NYSE American in 2017, and the ADS to ordinary share ratio changed to 1:60,000 in 2025 - The company's ADSs were listed on the NYSE on **November 23, 2010**, and transitioned to the NYSE American on **December 28, 2017**, trading under the symbol **'DXF'** since March 5, 2018[475](index=475&type=chunk) - The ADS to ordinary share ratio has changed multiple times, most recently to **1:60,000 effective January 10, 2025**[475](index=475&type=chunk) [B. Plan of Distribution](index=68&type=section&id=B.%20Plan%20of%20Distribution) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[476](index=476&type=chunk) [C. Markets](index=68&type=section&id=C.%20Markets) The company's ADSs are listed on the NYSE American, with a history of trading symbol and ADS ratio changes - The company's ADSs were listed on the NYSE on **November 23, 2010**, and transitioned to the NYSE American on **December 28, 2017**, trading under the symbol **'DXF'** since March 5, 2018[477](index=477&type=chunk) - The ADS to ordinary share ratio has changed multiple times, most recently to **1:480 from July 25, 2023**[477](index=477&type=chunk) [D. Selling Shareholders](index=68&type=section&id=D.%20Selling%20Shareholders) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[478](index=478&type=chunk) [E. Dilution](index=68&type=section&id=E.%20Dilution) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[479](index=479&type=chunk) [F. Expenses of the Issue](index=68&type=section&id=F.%20Expenses%20of%20the%20Issue) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[480](index=480&type=chunk) [Item 10. Additional Information](index=68&type=section&id=Item%2010.%20Additional%20Information) This section provides additional corporate information, including share capital, articles of association, material contracts, exchange controls, and taxation in the Cayman Islands, PRC, and U.S [A. Share Capital](index=68&type=section&id=A.%20Share%20Capital) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[481](index=481&type=chunk) [B. Memorandum and Articles of Association](index=68&type=section&id=B.%20Memorandum%20and%20Articles%20of%20Association) The company is an exempted Cayman Islands company, whose corporate law differs from U.S. law regarding filing, mergers, shareholder rights, and anti-takeover provisions - The company is an **exempted company with limited liability** under the Cayman Islands Companies Act, which offers exemptions from certain filing and meeting requirements[484](index=484&type=chunk) - Cayman Islands law permits mergers and consolidations with specific approval and filing requirements, and dissenting shareholders have **appraisal rights**[487](index=487&type=chunk)[490](index=490&type=chunk) - Shareholders have **limited rights** to requisition a general meeting and no statutory right to put proposals before a general meeting, unlike under Delaware law[507](index=507&type=chunk) - The company's articles of association contain **anti-takeover provisions**, such as the board's authority to issue preferred shares, which could discourage changes in control[499](index=499&type=chunk) - Directors' fiduciary duties under Cayman Islands law include acting bona fide in the company's best interests and with skill and care, similar to U.S. standards but with some differences in judicial precedent[504](index=504&type=chunk) [C. Material Contracts](index=72&type=section&id=C.%20Material%20Contracts) The company has not entered into any material contracts other than in the ordinary course of business and those described elsewhere in this annual report - The company has **not entered into any material contracts** other than in the ordinary course of business and those described elsewhere in this annual report[516](index=516&type=chunk) [D. Exchange Controls](index=72&type=section&id=D.%20Exchange%20Controls) The Cayman Islands has no exchange controls, but PRC government controls on Renminbi convertibility may limit PRC subsidiaries' ability to remit funds - The Cayman Islands currently has **no exchange control restrictions**[517](index=517&type=chunk) - The PRC government imposes controls on the convertibility of Renminbi into foreign currencies, with current account items generally freely convertible but capital account items requiring SAFE approval or registration[220](index=220&type=chunk)[278](index=278&type=chunk)[279](index=279&type=chunk) [E. Taxation](index=73&type=section&id=E.%20Taxation) This section outlines taxation in the Cayman Islands, PRC, and U.S., covering corporate income, dividends, dispositions, and potential PFIC rules for U.S. Holders - The Cayman Islands currently levies **no taxes** on individuals or corporations based on profits, income, gains, or appreciation[518](index=518&type=chunk) - If classified as a PRC tax resident enterprise, the company's global income would be subject to a **25% PRC enterprise income tax**, and dividends to non-PRC enterprise shareholders may be subject to a **10% PRC withholding tax**[519](index=519&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk) - For U.S. Holders, dividends are generally included in gross income as dividend income and may qualify for lower capital gains rates if certain conditions are met[526](index=526&type=chunk)[527](index=527&type=chunk) - U.S. Holders may recognize taxable capital gain or loss on the disposition of ADSs or ordinary shares[532](index=532&type=chunk) - The company's **PFIC status** is determined annually based on income and assets; if deemed a PFIC, U.S. Holders may face adverse tax consequences on excess distributions and gains unless a 'mark-to-market' or 'deemed sale' election is made[533](index=533&type=chunk)[534](index=534&type=chunk)[535](index=535&type=chunk)[537](index=537&type=chunk)[539](index=539&type=chunk)[540](index=540&type=chunk)[541](index=541&type=chunk) [F. Dividends and Paying Agents](index=77&type=section&id=F.%20Dividends%20and%20Paying%20Agents) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[548](index=548&type=chunk) [G. Statement by Experts](index=77&type=section&id=G.%20Statement%20by%20Experts) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[549](index=549&type=chunk) [H. Documents on Display](index=77&type=section&id=H.%20Documents%20on%20Display) The company files its annual report on Form 20-F and other documents with the SEC, and as a foreign private issuer, is exempt from certain U.S. proxy rules - The company files its **annual report on Form 20-F** and other documents with the SEC, accessible on **www.sec.gov**[550](index=550&type=chunk)[551](index=551&type=chunk) - As a **foreign private issuer**, the company is exempt from certain U.S. proxy rules and Section 16 reporting requirements[551](index=551&type=chunk) - Annual reports, including audited financial statements prepared in conformity with IFRS, will be furnished to shareholders[553](index=553&type=chunk) [I. Subsidiary Information](index=77&type=section&id=I.%20Subsidiary%20Information) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[554](index=554&type=chunk) [J. Annual Report to Security Holders](index=77&type=section&id=J.%20Annual%20Report%20to%20Security%20Holders) If required to provide an annual report to security holders in response to Form 6-K, the company will submit it in electronic format - If required to provide an annual report to security holders in response to Form 6-K, the company will submit it in electronic format[555](index=555&type=chunk) [Item 11. Quantitative and Qualitative Disclosure About Market Risk](index=78&type=section&id=Item%2011.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) This section discusses the company's exposure to market risks, including credit, liquidity, foreign currency, and interest rate risks, and their management - **Credit risk** is a significant risk, arising principally from lending activities, and is managed by a credit committee through practices, policies, and continuous monitoring[557](index=557&type=chunk)[558](index=558&type=chunk)[565](index=565&type=chunk) - **Liquidity risk** is the risk of insufficient financial resources to meet obligations, arising from cash flow timing mismatches inherent in lending operations[558](index=558&type=chunk) - **Foreign currency risk** is generally limited as revenues and expenses are mostly in RMB, but the value of ADSs is affected by the U.S. dollar and RMB exchange rate[560](index=560&type=chunk) - **Interest rate risk** primarily relates to net interest income, managed through monitoring interest rate gaps and basis risk, with no use of derivative financial instruments for hedging[562](index=562&type=chunk) Assets and Liabilities Subject to Market Risk (RMB '000) | Category | As of December 31, 2023 | As of December 31, 2024 | | :------------------------ | :---------------------- | :---------------------- | | **Assets subject to market risk** | | | | Loans receivable | 193,682 | - | | Trade receivable | - | 12,568 | | **Liabilities subject to market risk** | | | | Loan payable | 161,439 | - | | Convertible notes payable | 10,011 | 12,922 | | Trade payable | - | 1,302 | [Item 12. Description of Securities Other Than Equity Securities](index=78&type=section&id=Item%2012.%20Description%20of%20Securities%20Other%20Than%20Equity%20Securities) This section details fees and charges associated with the company's American Depositary Shares (ADSs); other sub-items are not applicable [A. Debt Securities](index=78&type=section&id=A.%20Debt%20Securities) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[563](index=563&type=chunk) [B. Warrants and Rights](index=79&type=section&id=B.%20Warrants%20and%20Rights) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[564](index=564&type=chunk) [C. Other Securities](index=79&type=section&id=C.%20Other%20Securities) This sub-item is not applicable to the company's filing - This item is marked as **'Not applicable'**[566](index=566&type=chunk) [D. American Depositary Shares](index=79&type=section&id=D.%20American%20Depositary%20Shares) Deutsche Bank Trust Company Americas, as the ADS depositary, may charge various service fees for issuance, cancellation, distribution, and annual maintenance Depositary Service Fees for ADSs | Service | Fees | | :------------------------------------------ | :---------------------------------------- | | Issuance or distribution of ADSs | Up to $0.05 per ADS issued | | Surrender of ADSs for cancellation/withdrawal | Up to $0.05 per ADS surrendered | | Distribution of cash proceeds | Up to $0.05 per ADS held | | Distribution of ADSs upon rights exercise | Up to $0.05 per ADS issued | | Operation and maintenance costs | Up to $0.05 per ADS held (annual basis) | - Holders and beneficial owners of ADSs are also required to pay taxes, registration fees, cable/telex

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents Movano Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Movano Inc.'s unaudited condensed consolidated financial statements, highlighting significant losses and going concern doubt [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table summarizes key changes in Movano Inc.'s balance sheet items between December 31, 2024, and June 30, 2025 **Condensed Consolidated Balance Sheets (in thousands):** | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total assets | $5,660 | $11,320 | | Total liabilities | $4,023 | $3,965 | | Total stockholders' equity | $1,637 | $7,355 | **Key Balance Sheet Changes (in thousands):** | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | :--------- | | Cash and cash equivalents | $2,109 | $7,902 | $(5,793) | -73.3% | | Total current assets | $4,886 | $10,390 | $(5,504) | -53.0% | | Total assets | $5,660 | $11,320 | $(5,660) | -50.0% | | Total current liabilities | $3,627 | $3,445 | $182 | 5.3% | | Total liabilities | $4,023 | $3,965 | $58 | 1.5% | | Total stockholders' equity | $1,637 | $7,355 | $(5,718) | -77.7% | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This table details Movano Inc.'s revenue, expenses, and net loss for the three and six months ended June 30, 2025 and 2024 **Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $103 | $0 | $309 | $852 | | Total costs and expenses | $3,363 | $6,397 | $8,807 | $13,003 | | Loss from operations | $(3,260) | $(6,397) | $(8,498) | $(12,151) | | Net loss and total comprehensive loss | $(3,225) | $(6,190) | $(8,403) | $(11,910) | | Net loss per share, basic and diluted | $(0.41) | $(0.93) | $(1.13) | $(2.30) | **Key Income Statement Changes (in thousands):** | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Revenue | $103 | $0 | $103 | N/A | | Cost of revenue | $362 | $380 | $(18) | -4.7% | | Research and development | $1,401 | $2,907 | $(1,506) | -51.8% | | Sales, general and administrative | $1,600 | $3,110 | $(1,510) | -48.6% | | Net loss | $(3,225) | $(6,190) | $2,965 | 47.9% | | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------- | | Revenue | $309 | $852 | $(543) | -63.7% | | Cost of revenue | $1,004 | $1,595 | $(591) | -37.1% | | Research and development | $3,784 | $5,794 | $(2,010) | -34.7% | | Sales, general and administrative | $4,019 | $5,614 | $(1,595) | -28.4% | | Net loss | $(8,403) | $(11,910) | $3,507 | 29.4% | [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20(Deficit)) This section outlines changes in Movano Inc.'s stockholders' equity, including stock-based compensation and common stock issuance **Stockholders' Equity Changes (in thousands):** | Metric | Balance at Dec 31, 2024 | Stock-based Compensation | Issuance of Common Stock | Net Loss | Balance at June 30, 2025 | | :-------------------------- | :---------------------- | :----------------------- | :----------------------- | :------- | :----------------------- | | Total Stockholders' Equity | $7,355 | $1,079 | $1,606 | $(8,403) | $1,637 | - The number of common shares issued and outstanding increased from 6,840,291 at December 31, 2024, to **8,301,204 at June 30, 2025**, primarily due to the issuance of common stock[8](index=8&type=chunk)[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents Movano Inc.'s cash flow activities, highlighting operating, investing, and financing changes **Condensed Consolidated Statements of Cash Flows (in thousands):** | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(7,399) | $(12,303) | | Net cash used in investing activities | $0 | $(6) | | Net cash provided by financing activities | $1,606 | $23,059 | | Net increase/(decrease) in cash and cash equivalents | $(5,793) | $10,750 | | Cash and cash equivalents at end of period | $2,109 | $16,868 | **Cash Flow Summary (Six Months Ended June 30, in thousands):** | Activity | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Net cash used in operating activities | $(7,399) | $(12,303) | | Net cash used in investing activities | $0 | $(6) | | Net cash provided by financing activities | $1,606 | $23,059 | | Net increase/(decrease) in cash and cash equivalents | $(5,793) | $10,750 | | Cash and cash equivalents at end of period | $2,109 | $16,868 | - Operating cash outflow decreased by **$4.9 million (39.9%)** from $12.3 million in H1 2024 to $7.4 million in H1 2025, primarily due to a reduced net loss[15](index=15&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) - Financing cash inflow significantly decreased from **$23.1 million in H1 2024 to $1.6 million in H1 2025**, mainly due to a large issuance of common stock, pre-funded warrants, and common stock warrants in April 2024 that did not recur in 2025[15](index=15&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting Movano Inc.'s condensed consolidated financial statements [NOTE 1 – BUSINESS ORGANIZATION, NATURE OF OPERATIONS](index=7&type=section&id=NOTE%201%20%E2%80%93%20BUSINESS%20ORGANIZATION,%20NATURE%20OF%20OPERATIONS) This note describes Movano Health's business, product development, and ongoing going concern issues due to accumulated losses - Movano Inc. (Movano Health) is a technology company developing a platform for medical-grade, high-quality data in consumer health devices, including vital health information and future non-invasive glucose and blood pressure monitoring[18](index=18&type=chunk)[19](index=19&type=chunk)[132](index=132&type=chunk) - The company has incurred significant losses and negative cash flows since inception, with an accumulated deficit of **$156.5 million as of June 30, 2025**, raising substantial doubt about its ability to continue as a going concern beyond 2025 without additional financing[21](index=21&type=chunk)[23](index=23&type=chunk) - The company terminated its At-the-Market (ATM) issuance program in May 2025, having raised approximately **$9.3 million in gross proceeds** through June 30, 2025[22](index=22&type=chunk) [NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=7&type=section&id=NOTE%202%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines Movano Inc.'s key accounting principles, including revenue recognition and the impact of recent pronouncements - The financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information, reflecting management's estimates and assumptions[25](index=25&type=chunk)[29](index=29&type=chunk) - The Company operates as a single operating and reportable segment, with revenue from Evie Ring sales generated solely in the United States[31](index=31&type=chunk) - Revenue is recognized upon transfer of control of distinct Evie Ring Elements (ring, charger, cables, sizers, mobile apps), with an estimated portion allocated to customer support and future software updates recognized ratably over the product's estimated life[46](index=46&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) - Recent accounting pronouncements (ASU 2023-07, 2024-03, 2023-09) are primarily disclosure-related and are not expected to significantly impact the Company's financial condition or results of operations[71](index=71&type=chunk)[72](index=72&type=chunk) [NOTE 3 – FAIR VALUE MEASUREMENTS](index=14&type=section&id=NOTE%203%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) This note details the fair value measurements of Movano Inc.'s financial instruments, specifically cash equivalents **Fair Value Measurements of Cash Equivalents (in thousands):** | Asset | June 30, 2025 (Fair Value) | December 31, 2024 (Fair Value) | | :------------------ | :------------------------- | :----------------------------- | | Money market funds | $1,787 | $7,158 | | Total cash equivalents | $1,787 | $7,158 | - All cash equivalents are classified as Level 1, meaning their fair values are based on quoted market prices in active markets[75](index=75&type=chunk) [NOTE 4 – CASH AND CASH EQUIVALENTS](index=15&type=section&id=NOTE%204%20%E2%80%93%20CASH%20AND%20CASH%20EQUIVALENTS) This note provides a breakdown of Movano Inc.'s cash and cash equivalents and their significant decrease **Cash and Cash Equivalents (in thousands):** | Component | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Cash | $322 | $744 | | Money market funds | $1,787 | $7,158 | | Total cash and cash equivalents | $2,109 | $7,902 | - Total cash and cash equivalents decreased by **73.3%** from $7.9 million at December 31, 2024, to **$2.1 million at June 30, 2025**[77](index=77&type=chunk) [NOTE 5 – BALANCE SHEET COMPONENTS](index=16&type=section&id=NOTE%205%20%E2%80%93%20BALANCE%20SHEET%20COMPONENTS) This note details changes in Movano Inc.'s inventory and property and equipment, net, components **Inventory (in thousands):** | Component | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Raw materials | $2,222 | $1,845 | | Finished goods | $257 | $201 | | Total inventory | $2,479 | $2,046 | **Property and Equipment, Net (in thousands):** | Component | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total property and equipment | $714 | $714 | | Less: accumulated depreciation | $(557) | $(501) | | Total property and equipment, net | $157 | $213 | - Inventory increased by **$0.4 million (21.2%)** from December 31, 2024, to June 30, 2025, primarily in raw materials[80](index=80&type=chunk) - Property and equipment, net, decreased by **$0.06 million (26.3%)** due to accumulated depreciation[80](index=80&type=chunk) [NOTE 6 – OTHER CURRENT LIABILITIES](index=16&type=section&id=NOTE%206%20%E2%80%93%20OTHER%20CURRENT%20LIABILITIES) This note outlines the composition and changes in Movano Inc.'s other current liabilities **Other Current Liabilities (in thousands):** | Component | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Accrued compensation | $135 | $324 | | Accrued research and development | $81 | $235 | | Accrued vacation | $147 | $307 | | Lease liabilities, current portion | $226 | $186 | | Other | $242 | $341 | | Total | $831 | $1,393 | - Total other current liabilities decreased by **$0.56 million (40.3%)** from $1.39 million at December 31, 2024, to $0.83 million at June 30, 2025, driven by reductions in accrued compensation, R&D, and vacation[81](index=81&type=chunk) [NOTE 7 – COMMON STOCK](index=17&type=section&id=NOTE%207%20%E2%80%93%20COMMON%20STOCK) This note details changes in Movano Inc.'s common stock, including shares outstanding and reserved for future issuance - As of June 30, 2025, **8,301,204 shares of common stock** were outstanding, up from 6,840,291 shares at December 31, 2024[83](index=83&type=chunk) - The Company issued **1,460,913 shares of common stock** through its At-the-Market (ATM) program for net proceeds of **$1.6 million** during the six months ended June 30, 2025. The ATM program was terminated as of June 30, 2025[87](index=87&type=chunk) **Common Stock Reserved for Future Issuance (June 30, 2025):** | Item | Shares | | :-------------------------------- | :------- | | Warrants to purchase common stock | 3,513,919 | | Stock options outstanding | 773,699 | | Stock options available for future grants | 782,641 | | Shares subject to restricted stock units | 615,939 | | Total | 5,686,198 | [NOTE 8 – COMMON STOCK WARRANTS](index=18&type=section&id=NOTE%208%20%E2%80%93%20COMMON%20STOCK%20WARRANTS) This note summarizes Movano Inc.'s common stock warrant activity, including outstanding and expired warrants **Common Stock Warrant Activity (Six Months Ended June 30, 2025):** | Warrant Issuance | Outstanding, Dec 31, 2024 | Canceled/Expired | Outstanding, June 30, 2025 | | :-------------------------- | :------------------------ | :--------------- | :------------------------- | | Preferred A Placement Warrants | 19,536 | (19,536) | 0 | | Preferred B Placement Warrants | 30,920 | (30,920) | 0 | | Convertible Notes Placement Warrants | 11,455 | 0 | 11,455 | | Underwriter Warrants | 63,798 | 0 | 63,798 | | January 2023 warrants | 154,800 | 0 | 154,800 | | February 2023 warrants | 23,220 | 0 | 23,220 | | August 2023 warrants | 13,441 | 0 | 13,441 | | April 2024 Pre Funded warrants | 209,936 | 0 | 209,936 | | April 2024 warrants | 3,015,172 | 0 | 3,015,172 | | August 2024 warrants | 22,097 | 0 | 22,097 | | **Total** | **3,564,375** | **(50,456)** | **3,513,919** | - Total outstanding warrants decreased by **50,456 shares** due to the expiration of Preferred A and Preferred B Placement Warrants during the six months ended June 30, 2025[90](index=90&type=chunk) [NOTE 9 – STOCK-BASED COMPENSATION](index=20&type=section&id=NOTE%209%20%E2%80%93%20STOCK-BASED%20COMPENSATION) This note details Movano Inc.'s stock option and restricted stock unit activity and related compensation expenses **Stock Option Activity (Six Months Ended June 30, 2025):** | Metric | Number of Options | Weighted Average Exercise Price | | :-------------------------------- | :---------------- | :------------------------------ | | Outstanding at December 31, 2024 | 721,399 | $21.98 | | Granted | 53,300 | $5.28 | | Cancelled | (1,000) | $34.81 | | Outstanding at June 30, 2025 | 773,699 | $22.41 | | Exercisable as of June 30, 2025 | 658,619 | $21.97 | **Stock-Based Compensation Expense (in thousands):** | Expense Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cost of revenue | $0 | $23 | $1 | $34 | | Research and development | $71 | $638 | $166 | $822 | | Sales, general and administrative | $179 | $883 | $382 | $1,305 | | **Total Stock Options** | **$250** | **$1,544** | **$549** | **$2,161** | | **Total Restricted Stock Units** | **$530** | **$0** | **$530** | **$0** | | **Grand Total** | **$780** | **$1,544** | **$1,079** | **$2,161** | - During the three months ended June 30, 2025, the Company granted **408,090 Employee RSUs** (vesting over service period) and **207,849 Director RSUs** (vesting immediately) in lieu of salary and cash compensation, respectively[102](index=102&type=chunk) [NOTE 10 – COMMITMENTS AND CONTINGENCIES](index=23&type=section&id=NOTE%2010%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines Movano Inc.'s lease liabilities and royalty commitments to vendors **Lease Liabilities (in thousands):** | Lease Type | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Right-of-use assets | $509 | $600 | | Operating lease liabilities - Short-term | $208 | $169 | | Operating lease liabilities - Long-term | $387 | $502 | | Finance lease liabilities - Short-term | $18 | $17 | | Finance lease liabilities - Long-term | $9 | $18 | | Total lease liabilities | $622 | N/A | - The Company has future minimum lease payments totaling **$712,000** for operating and finance leases as of June 30, 2025, with a weighted average remaining operating lease term of **2.5 years**[109](index=109&type=chunk)[111](index=111&type=chunk) - The Company has a royalty commitment of approximately **$6.1 million** to a vendor for Evie Rings shipped, which is reduced by research and development expenses paid to the vendor (approximately **$0.9 million** through June 30, 2025)[117](index=117&type=chunk) [NOTE 11 – NET LOSS PER SHARE](index=25&type=section&id=NOTE%2011%20%E2%80%93%20NET%20LOSS%20PER%20SHARE) This note presents Movano Inc.'s net loss per share calculations and potentially dilutive securities **Net Loss Per Share (Basic and Diluted):** | Period | Net Loss (in thousands) | Weighted Average Shares | Net Loss Per Share | | :--------------------------- | :---------------------- | :---------------------- | :----------------- | | Three Months Ended June 30, 2025 | $(3,225) | 7,793,900 | $(0.41) | | Three Months Ended June 30, 2024 | $(6,190) | 6,635,891 | $(0.93) | | Six Months Ended June 30, 2025 | $(8,403) | 7,460,398 | $(1.13) | | Six Months Ended June 30, 2024 | $(11,910) | 5,185,388 | $(2.30) | - Net loss per share improved for both the three-month and six-month periods ended June 30, 2025, compared to 2024, despite an increase in weighted average shares outstanding[119](index=119&type=chunk) **Potentially Dilutive Securities Excluded (Six Months Ended June 30):** | Item | 2025 | 2024 | | :-------------------------------- | :------- | :------- | | Shares subject to options | 773,699 | 754,504 | | Shares subject to restricted stock units | 615,939 | 0 | | Shares subject to warrants | 3,303,983 | 3,332,342 | | Total | 4,693,621 | 4,086,846 | [NOTE 12 – SUBSEQUENT EVENTS](index=25&type=section&id=NOTE%2012%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note discloses significant events occurring after June 30, 2025, including a bridge loan and Nasdaq compliance - On August 6, 2025, the Company secured a **$1.5 million bridge loan** at **12.0% interest**, maturing November 4, 2025, to pursue strategic alternatives, granting the lender a security interest in all assets, including intellectual property[121](index=121&type=chunk) - On August 27, 2025, Nasdaq granted the Company's request for continued listing, conditional on filing overdue 10-Q reports by September 30, 2025, and regaining a **$1.00 bid price** by October 30, 2025[122](index=122&type=chunk) - The Company granted **797,387 Employee RSUs** and **95,149 Director RSUs** during Q3 2025, vesting over the period or immediately, respectively, in lieu of compensation[123](index=123&type=chunk) - The Company has incurred significant losses and negative cash flows from operating activities since inception, with an accumulated deficit of **$156.5 million as of June 30, 2025**. It expects to continue incurring net losses and requires additional financing to fund future operations beyond 2025[21](index=21&type=chunk)[23](index=23&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) Management discusses Movano Inc.'s financial condition, operational results, limited history, net losses, and strategic initiatives - Movano Inc. is developing healthcare solutions with its initial commercial product, the Evie Ring, a wearable for women launched in November 2023 as a general wellness device[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - In November 2024, the EvieMED Ring received **FDA 510(k) clearance** for its pulse oximetry feature, making it a medical device for clinical applications like remote patient monitoring[131](index=131&type=chunk) - The company is developing a patented System-on-a-Chip (SoC) for non-invasive continuous glucose monitoring (CGM) and cuffless blood pressure monitoring, aiming for a Class II FDA-cleared device[132](index=132&type=chunk) - The Board of Directors initiated a process to explore strategic alternatives to maximize shareholder value, engaging financial and legal advisors[133](index=133&type=chunk) [Forward-Looking Statements](index=26&type=section&id=Forward-Looking%20Statements) This section cautions readers about inherent uncertainties and risks associated with Movano Inc.'s future plans and financial performance - This section contains forward-looking statements regarding future plans, strategies, expectations, and financial performance, which are subject to inherent uncertainties, risks, and changes in circumstances[124](index=124&type=chunk)[125](index=125&type=chunk) - Key risks include limited operating history, ability to achieve profitability, continued Nasdaq listing, going concern issues, product development success, competitive pressures, and regulatory approvals[125](index=125&type=chunk)[127](index=127&type=chunk) [Overview](index=28&type=section&id=Overview) This section introduces Movano Health's business, the Evie Ring product, and its medical device development - Movano Health is developing a platform for medical-grade data in consumer health devices, with its initial product being the Evie Ring, a wearable for women launched in November 2023[128](index=128&type=chunk)[129](index=129&type=chunk) - The Evie Ring provides health metrics such as heart rate, HRV, SpO2, respiration rate, skin temperature, period/ovulation tracking, activity, sleep stages, and mood tracking[130](index=130&type=chunk) - The EvieMED Ring received **FDA 510(k) clearance** for its pulse oximetry feature in November 2024, positioning it as a medical device for clinical applications[131](index=131&type=chunk) - The company is also developing a System-on-a-Chip (SoC) for non-invasive continuous glucose monitoring (CGM) and cuffless blood pressure monitoring, aiming for a Class II FDA-cleared device[132](index=132&type=chunk) [Financial Operations Overview](index=28&type=section&id=Financial%20Operations%20Overview) This section summarizes Movano Inc.'s limited operating history, consistent net losses, and reliance on equity financing - Movano Inc. has a limited operating history, has generated only limited revenue, and has incurred net losses since inception, primarily funding operations through equity securities sales[134](index=134&type=chunk)[135](index=135&type=chunk) **Net Losses (in millions):** | Period | Net Loss | | :--------------------------- | :------- | | Six months ended June 30, 2025 | $8.4 | | Six months ended June 30, 2024 | $11.9 | - As of June 30, 2025, the company had **$2.1 million in cash and cash equivalents**[136](index=136&type=chunk) [Critical Accounting Policies and Estimates](index=29&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section discusses management's judgments and assumptions in preparing Movano Inc.'s financial statements - The preparation of financial statements requires management to make estimates and assumptions affecting reported asset/liability amounts and revenue/expenses[138](index=138&type=chunk) - There have been no material changes in critical accounting policies and estimates during the three and six months ended June 30, 2025, compared to the 2024 Form 10-K[139](index=139&type=chunk) [Recently Issued and Adopted Accounting Pronouncements](index=29&type=section&id=Recently%20Issued%20and%20Adopted%20Accounting%20Pronouncements) This section refers to Note 2 for details on new accounting pronouncements and their expected impact - Information on recently adopted and issued accounting pronouncements is disclosed in Note 2 of the condensed consolidated financial statements[140](index=140&type=chunk)[141](index=141&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) This section analyzes Movano Inc.'s financial performance, including revenue, expenses, and net loss, for the reporting periods [Revenue](index=30&type=section&id=Revenue) This section details Movano Inc.'s revenue performance for the three and six months ended June 30, 2025 and 2024 **Revenue (in thousands):** | Period | 2025 | 2024 | Change ($) | Change (%) | | :--------------------------- | :--- | :--- | :--------- | :--------- | | Three Months Ended June 30 | $103 | $0 | $103 | N/A | | Six Months Ended June 30 | $309 | $852 | $(543) | -63.7% | - Revenue for the three months ended June 30, 2025, was **$0.1 million**, up from $0 in the prior year, while six-month revenue decreased by **$0.6 million (64%)** due to reduced marketing efforts and lower sales volume[145](index=145&type=chunk)[146](index=146&type=chunk) [Cost of revenue](index=30&type=section&id=Cost%20of%20revenue) This section analyzes Movano Inc.'s cost of revenue for the three and six months ended June 30, 2025 and 2024 **Cost of Revenue (in thousands):** | Period | 2025 | 2024 | Change ($) | Change (%) | | :--------------------------- | :--- | :--- | :--------- | :--------- | | Three Months Ended June 30 | $362 | $380 | $(18) | -5% | | Six Months Ended June 30 | $1,004 | $1,595 | $(591) | -37% | - Cost of revenue for the six months ended June 30, 2025, decreased by **$0.6 million (37%)** primarily due to lower revenue, comprising direct costs, labor, stock-based compensation, and order processing/shipping[148](index=148&type=chunk) [Research and Development](index=31&type=section&id=Research%20and%20Development) This section examines Movano Inc.'s research and development expenses for the three and six months ended June 30, 2025 and 2024 **Research and Development Expenses (in thousands):** | Period | 2025 | 2024 | Change ($) | Change (%) | | :--------------------------- | :--- | :--- | :--------- | :--------- | | Three Months Ended June 30 | $1,401 | $2,907 | $(1,506) | -52% | | Six Months Ended June 30 | $3,784 | $5,794 | $(2,010) | -35% | - R&D expenses decreased by **$2.0 million (35%)** for the six months ended June 30, 2025, mainly due to lower research and laboratory expenses and other professional fees[150](index=150&type=chunk) [Sales, General and Administrative](index=31&type=section&id=Sales,%20General%20and%20Administrative) This section reviews Movano Inc.'s sales, general, and administrative expenses for the three and six months ended June 30, 2025 and 2024 **Sales, General and Administrative Expenses (in thousands):** | Period | 2025 | 2024 | Change ($) | Change (%) | | :--------------------------- | :--- | :--- | :--------- | :--------- | | Three Months Ended June 30 | $1,600 | $3,110 | $(1,510) | -49% | | Six Months Ended June 30 | $4,019 | $5,614 | $(1,595) | -28% | - SG&A expenses decreased by **$1.6 million (28%)** for the six months ended June 30, 2025, primarily due to lower headcount and decreased marketing costs, partially offset by increased stock compensation[152](index=152&type=chunk) [Loss from Operations](index=32&type=section&id=Loss%20from%20Operations) This section analyzes Movano Inc.'s loss from operations for the three and six months ended June 30, 2025 and 2024 **Loss from Operations (in thousands):** | Period | 2025 | 2024 | Change ($) | Change (%) | | :--------------------------- | :------- | :------- | :--------- | :--------- | | Three Months Ended June 30 | $(3,260) | $(6,397) | $3,137 | 49% | | Six Months Ended June 30 | $(8,498) | $(12,151) | $3,653 | 30% | - Loss from operations decreased by **$3.7 million (30%)** for the six months ended June 30, 2025, reflecting reduced operating expenses[154](index=154&type=chunk) [Other Income (Expense), Net](index=32&type=section&id=Other%20Income%20(Expense),%20Net) This section details Movano Inc.'s other income and expenses, net, for the three and six months ended June 30, 2025 and 2024 **Other Income (Expense), Net (in thousands):** | Period | 2025 | 2024 | Change ($) | Change (%) | | :--------------------------- | :--- | :--- | :--------- | :--------- | | Three Months Ended June 30 | $35 | $207 | $(172) | -83% | | Six Months Ended June 30 | $95 | $241 | $(146) | -61% | - Other income (expense), net, decreased by **$0.15 million (61%)** for the six months ended June 30, 2025[155](index=155&type=chunk) [Net Loss](index=32&type=section&id=Net%20Loss) This section presents Movano Inc.'s net loss for the three and six months ended June 30, 2025 and 2024 **Net Loss (in thousands):** | Period | 2025 | 2024 | Change ($) | Change (%) | | :--------------------------- | :------- | :------- | :--------- | :--------- | | Three Months Ended June 30 | $(3,225) | $(6,190) | $2,965 | 48% | | Six Months Ended June 30 | $(8,403) | $(11,910) | $3,507 | 29% | - Net loss decreased by **$3.5 million (29%)** for the six months ended June 30, 2025, to **$8.4 million**, compared to $11.9 million in the prior year[156](index=156&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses Movano Inc.'s cash position, funding needs, and ability to continue as a going concern - As of June 30, 2025, the Company had **$2.1 million in cash and cash equivalents**, which is not expected to fund operations beyond 2025, raising substantial doubt about its ability to continue as a going concern[157](index=157&type=chunk)[161](index=161&type=chunk) - The Company obtained a **$1.5 million bridge loan** on August 6, 2025, to support its pursuit of strategic alternatives[157](index=157&type=chunk)[121](index=121&type=chunk) - The At-the-Market (ATM) program, which provided **$1.6 million in net proceeds** during the first six months of 2025, expired as of June 30, 2025[158](index=158&type=chunk) - Future cash needs are expected to be financed through equity offerings, debt financings, or collaborations, with no assurance of availability on acceptable terms[160](index=160&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) As a smaller reporting company, Movano Inc. is not required to provide quantitative and qualitative disclosures about market risk - Movano Inc. is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a smaller reporting company[171](index=171&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that Movano Inc.'s disclosure controls and procedures were not effective as of June 30, 2025, due to previously identified material weaknesses in internal controls over financial reporting. These weaknesses include an ineffective control environment, insufficient personnel, inadequate IT general controls, and ineffective process-level controls - Movano Inc.'s disclosure controls and procedures were deemed **ineffective** as of June 30, 2025, due to material weaknesses in internal controls over financial reporting[173](index=173&type=chunk) - Identified material weaknesses include an ineffective control environment (insufficient personnel, inadequate risk assessment, control activities, and monitoring), ineffective IT general controls (change management, access controls, segregation of duties), and ineffective process-level controls affecting financial statement balances[174](index=174&type=chunk) - No changes in internal control over financial reporting occurred during the six months ended June 30, 2025, that materially affected or are reasonably likely to materially affect these controls[176](index=176&type=chunk) [PART II – OTHER INFORMATION](index=35&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, and other required disclosures [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) Movano Inc. is not currently involved in any legal proceedings that are expected to have a material adverse effect on its business or financial condition - The Company is not currently a party to any pending legal proceedings that are believed to have a material adverse effect on its business or financial condition[178](index=178&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors previously disclosed in the 2024 Form 10-K, emphasizing the substantial doubt about Movano Inc.'s ability to continue as a going concern due to lack of revenue, history of losses, and insufficient liquidity. It also highlights the ongoing risk of delisting from Nasdaq if the company fails to meet continued listing requirements, particularly the minimum bid price and timely filing rules - There is **substantial doubt** about the Company's ability to continue as a going concern due to lack of revenue, history of losses, and insufficient liquidity, with cash and cash equivalents not expected to fund operations beyond 2025[180](index=180&type=chunk) - Failure to raise additional capital could force the Company to curtail technology development, reduce operations, or liquidate assets, with potential significant dilution for existing stockholders if equity is issued[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk) - The Company faces a risk of delisting from Nasdaq if it fails to regain compliance with the Minimum Bid Price Requirement by **October 30, 2025**, and the Periodic Filing Rule by **September 30, 2025**[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) [Item 2. Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities](index=36&type=section&id=Item%202.%20Recent%20Sales%20of%20Unregistered%20Securities;%20Use%20of%20Proceeds%20from%20Registered%20Securities) This item is not applicable to Movano Inc. for the reporting period - This item is marked as 'Not applicable'[189](index=189&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to Movano Inc. for the reporting period - This item is marked as 'Not applicable'[190](index=190&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Movano Inc. for the reporting period - This item is marked as 'Not applicable'[191](index=191&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) During the first quarter of 2025, none of Movano Inc.'s directors or executive officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or executive officers during the first quarter of 2025[192](index=192&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including organizational documents, specimen certificates, warrant forms, certifications, and XBRL-related documents - The exhibits include various corporate documents such as the Certificate of Incorporation, Bylaws, specimen common stock certificates, and forms of warrants[193](index=193&type=chunk) - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002 are filed herewith[193](index=193&type=chunk) - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation Linkbase Documents, and Cover Page Interactive Data File) are included[193](index=193&type=chunk) [SIGNATURES](index=38&type=section&id=SIGNATURES) The report is duly signed on behalf of Movano Inc. by its Chief Executive Officer, John Mastrototaro, and Chief Financial Officer, J. Cogan, on September 24, 2025 - The report was signed by John Mastrototaro, Chief Executive Officer, and J. Cogan, Chief Financial Officer, on September 24, 2025[198](index=198&type=chunk)

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Movano Inc.'s unaudited condensed consolidated financial statements, including the balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity (deficit), and statements of cash flows, along with detailed notes explaining the accounting policies and specific financial components for the three months ended March 31, 2025, and 2024 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table presents Movano Inc.'s condensed consolidated balance sheets, detailing assets, liabilities, and stockholders' equity as of March 31, 2025, and December 31, 2024 | | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | --- | --- | --- | | ASSETS | | | | Current assets: | | | | Cash and cash equivalents | $4,357 | $7,902 | | Payroll tax credit, current portion | $52 | $52 | | Vendor deposits | $2 | $28 | | Inventory | $2,258 | $2,046 | | Prepaid expenses and other current assets | $246 | $362 | | Total current assets | $6,915 | $10,390 | | Property and equipment, net | $184 | $213 | | Right-of-use asset | $555 | $600 | | Other assets | $112 | $117 | | Total assets | $7,766 | $11,320 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Current liabilities: | | | | Accounts payable | $2,525 | $2,016 | | Deferred revenue | $18 | $36 | | Other current liabilities | $1,530 | $1,393 | | Total current liabilities | $4,073 | $3,445 | | Noncurrent liabilities: | | | | Other noncurrent liabilities | $459 | $520 | | Total noncurrent liabilities | $459 | $520 | | Total liabilities | $4,532 | $3,965 | | Commitments and contingencies (Note 10) | | | | Stockholders' equity: | | | | Preferred stock, $0.0001 par value, 5,000,000 shares authorized at March 31, 2025 and December 31, 2024; no shares issued and outstanding at March 31, 2025 and December 31, 2024 | — | — | | Common stock, $0.0001 par value, 500,000,000 shares authorized at March 31, 2025 and December 31, 2024; 7,036,475 and 6,840,291 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively | $10 | $10 | | Additional paid-in capital | $156,509 | $155,452 | | Accumulated deficit | $(153,285) | $(148,107) | | Total stockholders' equity | $3,234 | $7,355 | | Total liabilities and stockholders' equity | $7,766 | $11,320 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This table outlines Movano Inc.'s condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025, and 2024, showing revenue, expenses, and net loss | | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | --- | --- | --- | | Revenue | $206 | $852 | | COSTS AND EXPENSES: | | | | Cost of revenue | $642 | $1,215 | | Research and development | $2,383 | $2,887 | | Sales, general and administrative | $2,419 | $2,504 | | Total costs and expenses | $5,444 | $6,606 | | Loss from operations | $(5,238) | $(5,754) | | Other income (expense), net: | | | | Interest and other income, net | $60 | $34 | | Other income (expense), net | $60 | $34 | | Net loss and total comprehensive loss | $(5,178) | $(5,720) | | Net loss per share, basic and diluted | $(0.73) | $(1.53) | | Weighted average shares used in computing net loss per share, basic and diluted | 7,123,191 | 3,734,885 | [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) This table details changes in Movano Inc.'s stockholders' equity (deficit) for the three months ended March 31, 2025, and 2024, including common stock, additional paid-in capital, and accumulated deficit | | Shares | Common Stock Amount (in thousands) | Additional Paid-In Capital (in thousands) | Accumulated Deficit (in thousands) | Total Stockholders' Equity (in thousands) | | --- | --- | --- | --- | --- | --- | | **Three Months Ended March 31, 2025** | | | | | | | Balance at December 31, 2024 | 6,840,291 | $10 | $155,452 | $(148,107) | $7,355 | | Stock-based compensation | — | — | $299 | — | $299 | | Issuance of common stock | 196,184 | — | $758 | — | $758 | | Net loss | — | — | — | $(5,178) | $(5,178) | | Balance at March 31, 2025 | 7,036,475 | $10 | $156,509 | $(153,285) | $3,234 | | **Three Months Ended March 31, 2024** | | | | | | | Balance at December 31, 2023 | 3,723,218 | $6 | $127,823 | $(124,380) | $3,449 | | Stock-based compensation | — | — | $617 | — | $617 | | Issuance of common stock | 18,221 | — | $164 | — | $164 | | Vesting of early exercised stock options | — | — | $12 | — | $12 | | Net loss | — | — | — | $(5,720) | $(5,720) | | Balance at March 31, 2024 | 3,741,439 | $6 | $128,616 | $(130,100) | $(1,478) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table presents Movano Inc.'s condensed consolidated statements of cash flows, categorizing cash movements from operating, investing, and financing activities for the three months ended March 31, 2025, and 2024 | | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | --- | --- | --- | | CASH FLOWS FROM OPERATING ACTIVITIES: | | | | Net loss | $(5,178) | $(5,720) | | Adjustments to reconcile net loss to net cash used in operating activities: | | | | Depreciation and amortization | $38 | $52 | | Stock-based compensation | $299 | $617 | | Noncash lease expense | $8 | $56 | | Changes in operating assets and liabilities: | | | | Payroll tax credit | — | $41 | | Inventory | $(212) | $50 | | Prepaid expenses, vendor deposits and other current assets | $142 | $256 | | Other assets | $(4) | — | | Accounts payable | $509 | $865 | | Deferred revenue | $(18) | $(1,001) | | Other current and noncurrent liabilities | $113 | $653 | | Net cash used in operating activities | $(4,303) | $(4,131) | | CASH FLOWS FROM INVESTING ACTIVITIES: | | | | Purchases of property and equipment | — | $(6) | | Net cash used in investing activities | — | $(6) | | CASH FLOWS FROM FINANCING ACTIVITIES: | | | | Issuance of common stock, net of issuance costs | $758 | $164 | | Net cash provided by financing activities | $758 | $164 | | Net (decrease) in cash and cash equivalents | $(3,545) | $(3,973) | | Cash and cash equivalents at beginning of period | $7,902 | $6,118 | | Cash and cash equivalents at end of period | $4,357 | $2,145 | | NONCASH INVESTING AND FINANCING ACTIVITIES: | | | | Vesting of common stock issued upon early exercise | — | $12 | | Unpaid issuance costs recorded in other current liabilities | — | $137 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes explaining the accounting policies and specific financial components underlying Movano Inc.'s condensed consolidated financial statements [NOTE 1 – BUSINESS ORGANIZATION, NATURE OF OPERATIONS](index=7&type=section&id=NOTE%201%20%E2%80%93%20BUSINESS%20ORGANIZATION%2C%20NATURE%20OF%20OPERATIONS) Movano Inc. develops healthcare solutions, has incurred significant losses, and faces going concern doubts due to insufficient cash to fund operations beyond 2025 - Movano Health develops purpose-driven healthcare solutions like the Evie Ring and EvieMED Ring, offering vital health metrics[19](index=19&type=chunk)[20](index=20&type=chunk) - The company has incurred significant losses and negative cash flows since inception, with an accumulated deficit of **$153.3 million** as of March 31, 2025[22](index=22&type=chunk)[24](index=24&type=chunk) - Cash and cash equivalents as of March 31, 2025, are not sufficient to fund projected operating requirements beyond 2025, raising substantial doubt about the company's ability to continue as a going concern[24](index=24&type=chunk) - The company expects to require additional financing through equity issuance, borrowings, or strategic alliances to fund future planned operations[23](index=23&type=chunk) [NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=7&type=section&id=NOTE%202%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines Movano Inc.'s significant accounting policies, including its basis of presentation, use of estimates, segment information, revenue recognition, and income tax treatment - The company operates and manages its business as a single operating and reportable segment, with the Chief Executive Officer allocating resources and assessing performance based on consolidated financial information[31](index=31&type=chunk) - Revenue is recognized from the sale of Evie Rings and related elements upon transfer of control, with future unspecified software updates and customer support recognized on a straight-line basis over the product's estimated life[45](index=45&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - The company maintains a full valuation allowance against its deferred tax assets, resulting in no provision or benefit from income taxes for the three months ended March 31, 2025, and 2024[63](index=63&type=chunk) Segment Reporting | | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | --- | --- | --- | | Revenue | $206 | $852 | | Less: | | | | Cost of revenue | $641 | $1,160 | | Research and development | $2,288 | $2,704 | | Sales, general and administrative | $2,216 | $2,125 | | Other segment expenses | $239 | $583 | | Consolidated net loss | $(5,178) | $(5,720) | [NOTE 3 – FAIR VALUE MEASUREMENTS](index=14&type=section&id=NOTE%203%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) This note describes the company's fair value measurements, categorizing money market funds as Level 1 financial assets valued based on quoted market prices Fair Value Measurements | | Fair Value (in thousands) | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | | --- | --- | --- | --- | --- | | **March 31, 2025** | | | | | | Cash equivalents: | | | | | | Money market funds | $3,673 | $3,673 | $— | $— | | Total cash equivalents | $3,673 | $3,673 | $— | $— | | **December 31, 2024** | | | | | | Cash equivalents: | | | | | | Money market funds | $7,158 | $7,158 | $— | $— | | Total cash equivalents | $7,158 | $7,158 | $— | $— | [NOTE 4 – CASH AND CASH EQUIVALENTS](index=15&type=section&id=NOTE%204%20%E2%80%93%20CASH%20AND%20CASH%20EQUIVALENTS) This note provides a breakdown of the company's cash and cash equivalents, primarily consisting of cash and money market funds, as of March 31, 2025, and December 31, 2024 Cash and Cash Equivalents Breakdown | | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | --- | --- | --- | | Cash and cash equivalents: | | | | Cash | $684 | $744 | | Money market funds | $3,673 | $7,158 | | Total cash and cash equivalents | $4,357 | $7,902 | [NOTE 5 – BALANCE SHEET COMPONENTS](index=16&type=section&id=NOTE%205%20%E2%80%93%20BALANCE%20SHEET%20COMPONENTS) This note details the composition of inventory, consisting of raw materials and finished goods, and property and equipment, net, including office equipment, software, and test equipment, as of March 31, 2025, and December 31, 2024 Inventory Composition | | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | --- | --- | --- | | Raw materials | $2,015 | $1,845 | | Finished goods | $243 | $201 | | Total inventory | $2,258 | $2,046 | Property and Equipment, Net | | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | --- | --- | --- | | Office equipment and furniture | $260 | $260 | | Software | $144 | $144 | | Test equipment | $310 | $310 | | Total property and equipment | $714 | $714 | | Less: accumulated depreciation | $(530) | $(501) | | Total property and equipment, net | $184 | $213 | [NOTE 6 – OTHER CURRENT LIABILITIES](index=16&type=section&id=NOTE%206%20%E2%80%93%20OTHER%20CURRENT%20LIABILITIES) This note provides a detailed breakdown of other current liabilities, including accrued compensation, accrued research and development, accrued vacation, current portion of lease liabilities, and other miscellaneous liabilities, as of March 31, 2025, and December 31, 2024 Other Current Liabilities Breakdown | | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | --- | --- | --- | | Accrued compensation | $309 | $324 | | Accrued research and development | $313 | $235 | | Accrued vacation | $263 | $307 | | Lease liabilities, current portion | $206 | $186 | | Other | $439 | $341 | | Total | $1,530 | $1,393 | [NOTE 7 – COMMON STOCK](index=17&type=section&id=NOTE%207%20%E2%80%93%20COMMON%20STOCK) This note outlines the company's common stock authorization and outstanding shares, details the At-the-Market (ATM) Issuance Agreement for selling common stock, and lists shares reserved for future issuance, including warrants and stock options - As of March 31, 2025, Movano Inc. had **7,036,475 shares** of common stock outstanding, compared to 6,840,291 shares at December 31, 2024[81](index=81&type=chunk) - During the three months ended March 31, 2025, the company issued **196,184 shares** of common stock through its ATM program, generating net proceeds of **$0.8 million**[85](index=85&type=chunk) - Approximately **$41.7 million** remained available to be issued and sold under the ATM Issuance Agreement as of March 31, 2025[85](index=85&type=chunk) Shares Reserved for Future Issuance | | March 31, 2025 (Number of Shares) | | --- | --- | | Warrants to purchase common stock | 3,564,375 | | Stock options outstanding | 773,699 | | Stock options available for future grants | 782,641 | | Total | 5,120,715 | [NOTE 8 – COMMON STOCK WARRANTS](index=18&type=section&id=NOTE%208%20%E2%80%93%20COMMON%20STOCK%20WARRANTS) This note provides a summary of the company's common stock warrant activity for the three months ended March 31, 2025, and 2024, detailing various warrant issuances, their exercise prices, and expiration dates Common Stock Warrant Activity (March 31, 2025) | Warrant Issuance | Issuance Date | Weighted Average Exercise Price ($) | Outstanding, December 31, 2024 (Shares) | Granted (Shares) | Exercised (Shares) | Canceled/Expired (Shares) | Outstanding, March 31, 2025 (Shares) | Expiration | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Preferred A Placement Warrants | March and April 2018 and August 2019 | $21.00 | 19,536 | — | — | — | 19,536 | April 2025 | | Preferred B Placement Warrants | April 2019 | $31.50 | 30,920 | — | — | — | 30,920 | April 2025 | | Convertible Notes Placement Warrants | August 2020 | $38.55 | 11,455 | — | — | — | 11,455 | August 2025 | | Underwriter Warrants | March 2021 | $90.00 | 63,798 | — | — | — | 63,798 | March 2026 | | January 2023 warrants | January 2023 | $23.55 | 154,800 | — | — | — | 154,800 | January 2028 | | February 2023 warrants | February 2023 | $23.55 | 23,220 | — | — | — | 23,220 | February 2028 | | August 2023 warrants | August 2023 | $18.60 | 13,441 | — | — | — | 13,441 | August 2028 | | April 2024 Pre Funded warrants | April 2024 | $0.02 | 209,936 | — | — | — | 209,936 | None | | April 2024 warrants | April 2024 | $6.11 | 3,015,172 | — | — | — | 3,015,172 | April 2029 | | August 2024 warrants | August 2024 | $6.11 | 22,097 | — | — | — | 22,097 | August 2029 | | Total | | | 3,564,375 | — | — | — | 3,564,375 | | Common Stock Warrant Activity (March 31, 2024) | Warrant Issuance | Issuance Date | Exercise Price ($) | Outstanding, December 31, 2023 (Shares) | Granted (Shares) | Exercised (Shares) | Canceled/Expired (Shares) | Variable Settlement Provision Adjustment | Outstanding, March 31, 2024 (Shares) | Expiration | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Preferred A Placement Warrants | March and April 2018 and August 2019 | $21.00 | 19,536 | — | — | — | — | 19,536 | April 2024 | | Preferred B Placement Warrants | April 2019 | $31.50 | 30,920 | — | — | — | — | 30,920 | April 2024 | | Convertible Notes Placement Warrants | August 2020 | $38.55 | 11,455 | — | — | — | — | 11,455 | August 2025 | | Underwriter Warrants | March 2021 | $90.00 | 63,798 | — | — | — | — | 63,798 | March 2026 | | January 2023 warrants | January 2023 | $23.55 | 154,800 | — | — | — | — | 154,800 | January 2028 | | February 2023 warrants | February 2023 | $23.55 | 23,220 | — | — | — | — | 23,220 | February 2028 | | August 2023 warrants | August 2023 | $18.60 | 13,441 | — | — | — | — | 13,441 | August 2028 | | Total | | | 317,170 | — | — | — | — | 317,170 | | [NOTE 9 – STOCK-BASED COMPENSATION](index=20&type=section&id=NOTE%209%20%E2%80%93%20STOCK-BASED%20COMPENSATION) This note details the company's stock-based compensation, including shares available under the 2019 Equity Incentive Plan and 2021 Employment Inducement Plan, stock option activity, and the fair value estimation using the Black-Scholes option pricing model. It also presents the allocation of stock-based compensation expense across different cost categories Stock Option Activity | | Number of Options | Weighted Average Exercise Price ($) | Weighted Average Remaining Life | Intrinsic Value (in thousands) | | --- | --- | --- | --- | --- | | Outstanding at December 31, 2024 | 721,399 | $21.98 | 7.2 years | $11 | | Granted | 53,300 | $5.28 | | | | Exercised | — | $— | | | | Cancelled | (1,000) | $34.81 | | | | Outstanding at March 31, 2025 | 773,699 | $20.81 | 6.8 years | $9,141 | | Exercisable as of March 31, 2025 | 646,260 | $21.69 | 6.7 years | $8,493 | | Vested and expected to vest as of March 31, 2025 | 773,699 | $20.81 | 6.8 years | $9,141 | Stock-Based Compensation Expense Allocation | | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | --- | --- | --- | | Cost of revenue | $1 | $55 | | Research and development | $95 | $183 | | Sales, general and administrative | $203 | $379 | | Total | $299 | $617 | - As of March 31, 2025, unamortized compensation expense related to unvested stock options was approximately **$1.1 million**, expected to be recognized over a weighted average period of **1.5 years**[99](index=99&type=chunk) [NOTE 10 – COMMITMENTS AND CONTINGENCIES](index=22&type=section&id=NOTE%2010%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note details Movano Inc.'s commitments and contingencies, including operating and finance lease agreements for its headquarters and laboratory space, future minimum lease payments, and information on potential litigation, indemnification agreements, non-cancelable obligations for raw materials, and royalty commitments to a vendor Operating and Finance Lease Liabilities | | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | --- | --- | --- | | Right-of-use assets | $555 | $600 | | Operating lease liabilities - Short-term | $188 | $169 | | Operating lease liabilities - Long-term | $445 | $502 | | Finance lease liabilities - Short-term | $18 | $17 | | Finance lease liabilities - Long-term | $14 | $18 | Future Minimum Lease Payments | Year | Amount (in thousands) | | --- | --- | | 2025 remaining | $212 | | 2026 | $290 | | 2027 | $280 | | Total lease payments | $782 | | Less: Interest | $(117) | | Total lease liabilities | $665 | - The company has a maximum royalty commitment of approximately **$6.1 million** to a vendor, which is reduced by research and development expenses paid (approximately **$0.8 million** through March 31, 2025)[110](index=110&type=chunk) [NOTE 11 – NET LOSS PER SHARE](index=24&type=section&id=NOTE%2011%20%E2%80%93%20NET%20LOSS%20PER%20SHARE) This note provides the computation of basic and diluted net loss per share for the three months ended March 31, 2025, and 2024, indicating that potentially dilutive securities were excluded as their inclusion would have been antidilutive Net Loss Per Share Computation | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | --- | --- | --- | | Numerator: | | | | Net loss (in thousands) | $(5,178) | $(5,720) | | Denominator: | | | | Weighted average shares used in computing net loss per share, basic and diluted | 7,123,191 | 3,734,885 | | Net loss per share, basic and diluted | $(0.73) | $(1.53) | Potentially Dilutive Securities | | Three Months Ended March 31, 2025 (Number of Shares) | Three Months Ended March 31, 2024 (Number of Shares) | | --- | --- | --- | | Shares subject to options to purchase common stock | 773,699 | 496,561 | | Shares subject to warrants to purchase common stock | 3,354,439 | 317,170 | | Total | 4,128,138 | 813,731 | [NOTE 12 – SUBSEQUENT EVENTS](index=24&type=section&id=NOTE%2012%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note discloses significant events that occurred after March 31, 2025, including the Board's initiation of a strategic alternatives exploration process, grants of Restricted Stock Units (RSUs) to employees and directors, the securing of a $1.5 million bridge loan, and Nasdaq's decision to grant continued listing subject to compliance with filing and bid price rules - On May 15, 2025, the Board of Directors initiated a process to explore strategic alternatives to maximize shareholder value[114](index=114&type=chunk) - The company granted **408,090 Employee RSUs** and **207,849 Director RSUs** during Q2 2025, and **797,387 Employee RSUs** and **95,149 Director RSUs** during Q3 2025, in lieu of salary and cash compensation, respectively[115](index=115&type=chunk) - On August 6, 2025, Movano Inc. obtained a **$1.5 million** bridge loan at a **12.0% annual interest rate**, maturing on November 4, 2025, secured by all company assets, including intellectual property[116](index=116&type=chunk) - On August 27, 2025, Nasdaq granted the company's request for continued listing, conditional on filing Q1 and Q2 2025 10-Qs by September 30, 2025, and demonstrating **$1.00 bid price** compliance by October 30, 2025[117](index=117&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Movano Inc.'s financial condition and results of operations for the three months ended March 31, 2025, and 2024. It includes forward-looking statements, an overview of the business and products, a summary of financial operations, critical accounting policies, and a detailed analysis of revenue, expenses, net loss, and liquidity and capital resources [Forward-Looking Statements](index=26&type=section&id=Forward-Looking%20Statements) This report contains forward-looking statements, which are subject to inherent uncertainties and risks that may cause actual results to differ materially - This report contains forward-looking statements, identifiable by terms like 'believe,' 'expect,' 'may,' 'will,' and 'should,' which describe future plans, strategies, and expectations[118](index=118&type=chunk) - Actual results and financial conditions may differ materially from forward-looking statements due to inherent uncertainties, risks, and changes in circumstances, including limited operating history, ability to achieve profitability, Nasdaq listing compliance, and need for additional capital[119](index=119&type=chunk) [Overview](index=27&type=section&id=Overview) Movano Health launched the Evie Ring as a general wellness wearable and received FDA clearance for the EvieMED Ring's pulse oximetry feature, while developing a SoC for CGM and blood pressure monitoring - Movano Health launched the Evie Ring in November 2023 as a general wellness wearable for women, providing health and wellness metrics such as heart rate, sleep, and activity[122](index=122&type=chunk)[123](index=123&type=chunk) - The EvieMED Ring received FDA 510(k) clearance for its pulse oximetry feature in November 2024, making it a medical device for clinical applications like remote patient monitoring[124](index=124&type=chunk) - The company is developing a patented System-on-a-Chip (SoC) for non-invasive continuous glucose monitoring (CGM) and cuffless blood pressure monitoring, aiming for Class II FDA clearance[125](index=125&type=chunk) [Financial Operations Overview](index=28&type=section&id=Financial%20Operations%20Overview) Movano Inc. has a limited operating history, incurring net losses since inception, with $4.4 million in cash and cash equivalents as of March 31, 2025 - Movano Inc. has a limited operating history since January 2018, generating only limited revenue and incurring net losses since inception, primarily from research and development and sales, general and administrative costs[127](index=127&type=chunk)[128](index=128&type=chunk) - Net losses were **$5.2 million** for the three months ended March 31, 2025, compared to **$5.7 million** for the same period in 2024[128](index=128&type=chunk) - As of March 31, 2025, the company had **$4.4 million** in available cash and cash equivalents[129](index=129&type=chunk) [Critical Accounting Policies and Estimates](index=28&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) There have been no material changes in the company's critical accounting policies and estimates during the three months ended March 31, 2025 - There have been no material changes in the company's critical accounting policies and estimates during the three months ended March 31, 2025, compared to those disclosed in the 2024 Form 10-K[131](index=131&type=chunk) [Recently Issued and Adopted Accounting Pronouncements](index=28&type=section&id=Recently%20Issued%20and%20Adopted%20Accounting%20Pronouncements) The company adopted ASU 2023-07 (Segment Reporting) with no financial impact and will adopt ASU 2024-03 and ASU 2023-09 in 2025 - The company adopted ASU 2023-07 (Segment Reporting) on December 31, 2024, with no impact on its financial statements[68](index=68&type=chunk) - ASU 2024-03 (Expense Disaggregation) and ASU 2023-09 (Income Tax Disclosures) will be adopted prospectively in the annual financial statements for the year ending December 31, 2025, requiring additional disclosures but not significantly impacting financial condition or results of operations[68](index=68&type=chunk)[69](index=69&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) This section provides a comparative analysis of Movano Inc.'s financial performance for the three months ended March 31, 2025, and 2024, highlighting changes in revenue, cost of revenue, research and development, sales, general and administrative expenses, loss from operations, other income, and net loss Comparative Results of Operations | | March 31, 2025 (in thousands) | March 31, 2024 (in thousands) | Change (in thousands) | Change (%) | | --- | --- | --- | --- | --- | | Revenue | $206 | $852 | $(646) | -76% | | OPERATING EXPENSES: | | | | | | Cost of revenue | $642 | $1,215 | $(573) | -47% | | Research and development | $2,383 | $2,887 | $(504) | -17% | | Sales, general and administrative | $2,419 | $2,504 | $(85) | -3% | | Total operating expenses | $5,444 | $6,606 | $(1,162) | -18% | | Loss from operations | $(5,238) | $(5,754) | $516 | 9% | | Other income (expense), net: | | | | | | Interest and other income, net | $60 | $34 | $26 | 76% | | Other income (expense), net | $60 | $34 | $26 | 76% | | Net loss | $(5,178) | $(5,720) | $542 | 9% | [Revenue](index=29&type=section&id=Revenue) Revenue decreased by $0.6 million, or 76%, to $0.2 million for the three months ended March 31, 2025, primarily due to timing of Evie Ring Elements transfer of control - Revenue decreased by **$0.6 million**, or **76%**, to **$0.2 million** for the three months ended March 31, 2025, from $0.9 million for the same period in 2024, primarily due to the timing of Evie Ring Elements transfer of control[136](index=136&type=chunk)[135](index=135&type=chunk) [Cost of revenue](index=29&type=section&id=Cost%20of%20revenue) Cost of revenue decreased by $0.6 million, or 47%, to $0.6 million for the three months ended March 31, 2025, mainly attributable to lower revenue - Cost of revenue decreased by **$0.6 million**, or **47%**, to **$0.6 million** for the three months ended March 31, 2025, from $1.2 million for the same period in 2024, mainly attributable to lower revenue[137](index=137&type=chunk)[135](index=135&type=chunk) [Research and Development](index=29&type=section&id=Research%20and%20Development) Research and development expenses decreased by $0.5 million, or 17%, to $2.4 million for the three months ended March 31, 2025, due to lower research and laboratory expenses - Research and development expenses decreased by **$0.5 million**, or **17%**, to **$2.4 million** for the three months ended March 31, 2025, from $2.9 million for the same period in 2024, primarily due to lower research and laboratory expenses and other professional fees[138](index=138&type=chunk)[135](index=135&type=chunk) [Sales, General and Administrative](index=29&type=section&id=Sales%2C%20General%20and%20Administrative) Sales, general and administrative expenses decreased by $0.1 million, or 3%, to $2.4 million for the three months ended March 31, 2025, due to lower headcount and marketing costs - Sales, general and administrative expenses decreased by **$0.1 million**, or **3%**, to **$2.4 million** for the three months ended March 31, 2025, from $2.5 million for the same period in 2024, mainly due to lower headcount and marketing costs, partially offset by increased stock compensation expenses[139](index=139&type=chunk)[140](index=140&type=chunk)[135](index=135&type=chunk) [Loss from Operations](index=31&type=section&id=Loss%20from%20Operations) Loss from operations improved by $0.5 million, or 9%, to $5.2 million for the three months ended March 31, 2025, compared to the prior year - Loss from operations improved by **$0.5 million**, or **9%**, to **$5.2 million** for the three months ended March 31, 2025, compared to $5.8 million for the same period in 2024[141](index=141&type=chunk)[135](index=135&type=chunk) [Other Income (Expense), Net](index=31&type=section&id=Other%20Income%20(Expense)%2C%20Net) Other income (expense), net increased by $26,000, or 76%, to $60,000 for the three months ended March 31, 2025 - Other income (expense), net increased by **$26,000**, or **76%**, to **$60,000** for the three months ended March 31, 2025, from $34,000 for the same period in 2024[142](index=142&type=chunk)[135](index=135&type=chunk) [Net Loss](index=31&type=section&id=Net%20Loss) Net loss decreased by $0.5 million, or 9%, to $5.2 million for the three months ended March 31, 2025, compared to the prior year - Net loss decreased by **$0.5 million**, or **9%**, to **$5.2 million** for the three months ended March 31, 2025, compared to $5.7 million for the same period in 2024[143](index=143&type=chunk)[135](index=135&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, Movano Inc. had $4.4 million in cash and cash equivalents, which are not expected to fund operations beyond 2025, raising substantial doubt about its ability to continue as a going concern - At March 31, 2025, the company had **$4.4 million** in cash and cash equivalents, which are not expected to be sufficient to fund operations beyond 2025[144](index=144&type=chunk) - The company used **$4.3 million** of cash in operating activities during the three months ended March 31, 2025[144](index=144&type=chunk) - On August 6, 2025, the company obtained **$1.5 million** in bridge financing to continue its pursuit of strategic alternatives[144](index=144&type=chunk) - These circumstances raise substantial doubt about the company's ability to continue as a going concern within one year after the financial statements are issued[148](index=148&type=chunk) Cash Flow Summary | | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | --- | --- | --- | | Net cash used in operating activities | $(4,303) | $(4,131) | | Net cash used in investing activities | — | $(6) | | Net cash provided by financing activities | $758 | $164 | | Net decrease in cash and cash equivalents | $(3,545) | $(3,973) | [Operating Activities](index=32&type=section&id=Operating%20Activities) Net cash used in operating activities was $4.3 million for the three months ended March 31, 2025, primarily due to net loss, partially offset by non-cash items - Net cash used in operating activities was **$4.3 million** for the three months ended March 31, 2025, primarily due to a net loss of $5.2 million, partially offset by non-cash items and changes in operating assets and liabilities[150](index=150&type=chunk)[151](index=151&type=chunk) [Investing Activities](index=32&type=section&id=Investing%20Activities) The company used no cash in investing activities during the three months ended March 31, 2025, compared to $6,000 in the prior year - The company used **no cash** in investing activities during the three months ended March 31, 2025, compared to **$6,000** used in the prior year for property and equipment purchases[153](index=153&type=chunk) [Financing Activities](index=32&type=section&id=Financing%20Activities) Net cash provided by financing activities was $0.8 million for the three months ended March 31, 2025, primarily from common stock issuance through the At-the-Market (ATM) program - Net cash provided by financing activities was **$0.8 million** for the three months ended March 31, 2025, primarily from the issuance of common stock through the At-the-Market (ATM) program[154](index=154&type=chunk) [Off-Balance Sheet Transactions](index=32&type=section&id=Off-Balance%20Sheet%20Transactions) As of March 31, 2025, the company did not have any off-balance sheet arrangements - As of March 31, 2025, the company did not have any off-balance sheet arrangements[155](index=155&type=chunk) [Non-cancelable Obligations](index=32&type=section&id=Non-cancelable%20Obligations) As of March 31, 2025, the company had $0.4 million in non-cancelable obligations for raw materials purchased by a contract manufacturer - As of March 31, 2025, the company had **$0.4 million** in non-cancelable obligations for raw materials purchased by a contract manufacturer, for which title had not yet transferred[156](index=156&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) As a smaller reporting company, Movano Inc. is not required to provide quantitative and qualitative disclosures about market risk - Movano Inc. is exempt from providing quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company[157](index=157&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses Movano Inc.'s disclosure controls and procedures and internal control over financial reporting. Management concluded that disclosure controls were not effective as of March 31, 2025, due to identified material weaknesses in internal controls, and acknowledges the inherent limitations of control systems [Evaluation of Disclosure Controls and Procedures](index=33&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that Movano Inc.'s disclosure controls and procedures were not effective as of March 31, 2025, due to identified material weaknesses - Management concluded that Movano Inc.'s disclosure controls and procedures were **not effective** as of March 31, 2025, due to previously identified material weaknesses in internal controls over financial reporting[159](index=159&type=chunk) - Material weaknesses include an ineffective control environment (insufficient personnel, lack of proper risk assessment, control activities, information/communication, and monitoring), ineffective IT general controls (change management, access controls, segregation of duties, operations controls), and ineffective process-level controls affecting financial statement balances[160](index=160&type=chunk) [Inherent Limitations on Effectiveness of Controls](index=33&type=section&id=Inherent%20Limitations%20on%20Effectiveness%20of%20Controls) Management acknowledges that control systems provide only reasonable assurance and are subject to inherent limitations, including human error and circumvention - Management acknowledges that control systems provide only reasonable, not absolute, assurance and are subject to inherent limitations, such as resource constraints, faulty judgments, simple errors, circumvention by individuals, collusion, or management override[161](index=161&type=chunk) [Changes in Internal Control over Financial Reporting](index=33&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) There were no material changes in Movano Inc.'s internal control over financial reporting during the three months ended March 31, 2025 - There were no changes in Movano Inc.'s internal control over financial reporting during the three months ended March 31, 2025, that materially affected, or are reasonably likely to materially affect, these controls[162](index=162&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) Movano Inc. is not currently involved in any pending legal proceedings that are expected to have a material adverse effect on its business or financial condition, although it may encounter various claims in the ordinary course of business - The company is not currently a party to any pending legal proceedings that are believed to have a material adverse effect on its business or financial condition[165](index=165&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) This section highlights significant risks, including substantial doubt about Movano Inc.'s ability to continue as a going concern due to a lack of revenue, history of losses, and insufficient liquidity to fund operations beyond 2025. The company's ability to remain in business depends on successfully raising additional capital, and failure to do so could lead to curtailment of operations or liquidation. Additionally, the company faces risks related to maintaining its Nasdaq listing - Substantial doubt exists about the company's ability to continue as a going concern due to lack of revenue, history of losses, and insufficient liquidity, with cash and cash equivalents not expected to fund operations beyond 2025[167](index=167&type=chunk) - Failure to raise sufficient additional capital on acceptable terms could force the company to curtail technology development, materially reduce operations, or potentially lead to business failure and liquidation[169](index=169&type=chunk) - The company faces risks related to meeting Nasdaq's continued listing requirements, specifically the Minimum Bid Price Requirement and timely filing of periodic reports, which could result in delisting[175](index=175&type=chunk) [Item 2. Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities](index=36&type=section&id=Item%202.%20Recent%20Sales%20of%20Unregistered%20Securities%3B%20Use%20of%20Proceeds%20from%20Registered%20Securities) This item is not applicable to Movano Inc. for the reporting period - This item is not applicable to the company[176](index=176&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to Movano Inc. for the reporting period - This item is not applicable to the company[177](index=177&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Movano Inc. for the reporting period - This item is not applicable to the company[178](index=178&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) This section provides other information, specifically regarding Rule 10b5-1 trading plans [Rule 10b5-1 Trading Plans](index=36&type=section&id=Rule%2010b5-1%20Trading%20Plans) None of Movano Inc.'s directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements during the first quarter of 2025 - None of Movano Inc.'s directors or executive officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the first quarter of 2025[179](index=179&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including various corporate documents, warrant forms, and certifications Exhibits List | Number | Description | | --- | --- | | 3.1 | Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on March 25, 2021) | | 3.2 | Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on June 21, 2023) | | 3.3 | Certificate of Amendment to Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on July 10, 2024) | | 3.4 | Certificate of Amendment to Third Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K filed on October 25, 2024) | | 3.5 | Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant's Current Report on Form 8-K filed on March 25, 2021) | | 4.1 | Specimen Certificate representing shares of common stock of the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 filed on March 10, 2021) | | 4.2 | Form of Underwriter Warrant (incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-1 filed on March 10, 2021) | | 4.3 | Form of Amended and Restated Warrant to Purchase Common Stock issued to the placement agent in the Registrant's 2018 private placement offering (incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-1 filed on February 2, 2021) | | 4.4 | Form of Amended and Restated Warrant to Purchase Common Stock issued to the placement agent in the Registrant's 2019 private placement offering (incorporated by reference to Exhibit 4.4 to the Registrant's Registration Statement on Form S-1 filed on February 2, 2021) | | 4.5 | Form of Warrant to Purchase Common Stock issued in 2020 (incorporated by reference to Exhibit 4.6 to the Registrant's Registration Statement on Form S-1 filed on February 2, 2021) | | 4.6 | Form of Warrant to Purchase Common Stock issued in 2023 (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on January 31, 2023) | | 4.7 | Warrant Agent Agreement, dated January 31, 2023, by and between the Registrant and Pacific Stock Transfer Company (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on January 31, 2023) | | 4.8 | Form of Pre-Funded Warrant issued in April 2024 (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on April 3, 2024) | | 4.9 | Form of Warrant issued in April 2024 (incorporated by reference to Exhibit 4.2 to the Registrant's Current Report on Form 8-K filed on April 3, 2024) | | 4.10 | Form of Warrant issued in August 2024 (incorporated by reference to Exhibit 4.11 to the Registrant's Quarterly Report on Form 10-Q filed on November 14, 2024) | | 31.1 | Certification of Periodic Report by Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14a and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) | | 31.2 | Certification of Periodic Report by Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14a and pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) | | 32.1 | Certification of Periodic Report by Chief Executive Officer and Chief Financial Officer pursuant to U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith) | | 101.INS | Inline XBRL Instance Document (filed herewith) | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document (filed herewith) | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed herewith) | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document (filed herewith) | | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document (filed herewith) | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed herewith) | | 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | SIGNATURES [SIGNATURES](index=38&type=section&id=SIGNATURES) The report was duly signed on behalf of Movano Inc. by its Chief Executive Officer and Chief Financial Officer on September 24, 2025 - The report was duly signed on behalf of Movano Inc. by John Mastrototaro, Chief Executive Officer, and J. Cogan, Chief Financial Officer, on September 24, 2025[184](index=184&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2025 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ____________ Commission file number 001-40535 UPEXI, INC. (Exact name of registrant as specified in its charter) Delaware 83-3378978 (State or other jurisdiction ...

[Executive Summary & CEO Commentary](index=1&type=section&id=Executive%20Summary%20%26%20CEO%20Commentary) KB Home reported strong Q3 2025 financial results, exceeding guidance with **$1.62 billion** in revenue and **$1.61** diluted EPS, alongside significant capital returns and operational improvements [Third Quarter 2025 Highlights](index=1&type=section&id=Third%20Quarter%202025%20Highlights) KB Home reported solid financial results for the third quarter ended August 31, 2025, meeting or exceeding guidance across key metrics, with revenues totaling **$1.62 billion** and diluted earnings per share of **$1.61**, alongside **$188.5 million** in common stock repurchases Third Quarter 2025 Highlights | Metric | Q3 2025 | Q3 2024 | | :----- | :------ | :------ | | Revenues (Billions USD) | 1.62 | 1.75 | | Diluted EPS (USD) | 1.61 | 2.04 | | Common Stock Repurchased (Millions USD) | 188.5 | - | [CEO Commentary](index=1&type=section&id=CEO%20Commentary) Jeffrey Mezger, Chairman and CEO, highlighted outstanding operational execution, including reduced build times and costs, a consistent sales approach, improving affordability, and a healthy balance sheet supporting future growth and substantial capital returns to stockholders, totaling over **$490 million** in the first nine months - Achieved solid financial results, meeting or exceeding guidance ranges across key metrics[3](index=3&type=chunk) - Outstanding operational execution, making meaningful progress in reducing both build times and costs[3](index=3&type=chunk) - Returned more than **$490 million** to stockholders in the first nine months of the fiscal year through share repurchases and dividends, representing approximately **11%** of shares outstanding[3](index=3&type=chunk) [Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) The company's financial performance for Q3 and YTD 2025 showed decreased revenues and net income, with declining margins across homebuilding and financial services [Three Months Ended August 31, 2025](index=1&type=section&id=Three%20Months%20Ended%20August%2031,%202025) For the third quarter, KB Home experienced a decrease in revenues and net income compared to the prior year, with homebuilding operating income and gross profit margins declining due to price reductions, higher relative land costs, and geographic mix, partly offset by lower construction costs, while financial services pretax income also decreased Consolidated Financial Highlights (Three Months Ended August 31) | Metric | 2025 | 2024 | Change (YoY) | | :----- | :--- | :--- | :----------- | | Total Revenues (Millions USD) | 1,620.5 | 1,752.6 | -7.5% | | Net Income (Millions USD) | 109.8 | 157.3 | -30.2% | | Diluted EPS (USD) | 1.61 | 2.04 | -21.1% | | Effective Tax Rate (%) | 23.3% | 24.2% | -0.9 pp | Homebuilding Operating Performance (Three Months Ended August 31) | Metric | 2025 | 2024 | Change (YoY) | | :----- | :--- | :--- | :----------- | | Homebuilding Operating Income (Millions USD) | 131.2 | 189.0 | -30.6% | | Homebuilding Operating Income Margin (%) | 8.1% | 10.8% | -2.7 pp | | Adjusted Homebuilding Operating Income Margin (excl. inventory charges) (%) | 8.8% | 10.9% | -2.1 pp | | Housing Gross Profit Margin (%) | 18.2% | 20.6% | -2.4 pp | | Adjusted Housing Gross Profit Margin (excl. inventory charges) (%) | 18.9% | 20.7% | -1.8 pp | | SG&A as % of Housing Revenues (%) | 10.0% | 9.8% | +0.2 pp | Financial Services Pretax Income (Three Months Ended August 31) | Metric | 2025 | 2024 | Change (YoY) | | :----- | :--- | :--- | :----------- | | Financial Services Pretax Income (Millions USD) | 8.7 | 11.0 | -21.0% | [Nine Months Ended August 31, 2025](index=2&type=section&id=Nine%20Months%20Ended%20August%2031,%202025) For the first nine months of fiscal 2025, total revenues decreased to **$4.54 billion**, and net income fell to **$327.3 million**, resulting in a **23%** decline in diluted earnings per share, with homes delivered also down **9%** year-over-year, while the average selling price increased Consolidated Financial Highlights (Nine Months Ended August 31) | Metric | 2025 | 2024 | Change (YoY) | | :----- | :--- | :--- | :----------- | | Total Revenues (Billions USD) | 4.54 | 4.93 | -7.9% | | Net Income (Millions USD) | 327.3 | 464.4 | -29.5% | | Diluted EPS (USD) | 4.60 | 5.94 | -22.6% | | Homes Delivered | 9,283 | 10,191 | -9.0% | | Average Selling Price (USD) | 487,500 | 481,400 | +1.3% | [Operational Metrics](index=2&type=section&id=Operational%20Metrics) Key operational metrics for Q3 2025 indicate a decrease in net orders and backlog, mixed regional performance in homes delivered and average selling prices, and a slight increase in community count [Net Orders and Backlog](index=2&type=section&id=Net%20Orders%20and%20Backlog) Net orders for the third quarter decreased by **4%** year-over-year, with monthly net orders per community also declining, and the cancellation rate increased to **17%**, while the ending backlog in both homes and value saw significant reductions compared to the prior year Net Orders and Backlog (Three Months Ended August 31) | Metric | 2025 | 2024 | Change (YoY) | | :----- | :--- | :--- | :----------- | | Net Orders | 2,950 | 3,085 | -4.4% | | Monthly Net Orders per Community | 3.8 | 4.1 | -7.3% | | Cancellation Rate (% of gross orders) (%) | 17% | 15% | +2.0 pp | | Ending Backlog Homes | 4,333 | 5,724 | -24.3% | | Ending Backlog Value (Billions USD) | 1.99 | 2.92 | -31.9% | [Homes Delivered and Average Selling Price by Region](index=7&type=section&id=Homes%20Delivered%20and%20Average%20Selling%20Price%20by%20Region) Homes delivered decreased by **7%** in Q3 2025, with regional variations including declines in the West Coast and Central regions, an increase in the Southeast, and flat performance in the Southwest, while average selling prices showed mixed trends across regions Homes Delivered by Region (Three Months Ended August 31) | Region | 2025 | 2024 | Change (YoY) | | :----- | :--- | :--- | :----------- | | West Coast | 972 | 1,150 | -15.5% | | Southwest | 681 | 681 | 0.0% | | Central | 943 | 1,073 | -12.1% | | Southeast | 797 | 727 | +9.6% | | Total | 3,393 | 3,631 | -6.6% | Average Selling Price by Region (Three Months Ended August 31) | Region | 2025 | 2024 | Change (YoY) | | :----- | :--- | :--- | :----------- | | West Coast (USD) | 684,000 | 661,400 | +3.4% | | Southwest (USD) | 492,700 | 459,300 | +7.3% | | Central (USD) | 329,400 | 347,500 | -5.3% | | Southeast (USD) | 380,200 | 412,200 | -7.7% | | Total (USD) | 475,700 | 480,900 | -1.1% | [Community Count](index=2&type=section&id=Community%20Count) The average community count for the third quarter increased by **3%** to **259**, and the ending community count rose by **4%** to **264**, indicating a slight expansion in the company's operational footprint Community Count (Q3 2025 vs. Q3 2024) | Metric | 2025 | 2024 | Change (YoY) | | :----- | :--- | :--- | :----------- | | Average Community Count | 259 | 251 | +3.2% | | Ending Community Count | 264 | 254 | +3.9% | [Balance Sheet and Capital Management](index=2&type=section&id=Balance%20Sheet%20and%20Capital%20Management) The company's balance sheet reflects increased inventories, decreased land investments, and a higher debt-to-capital ratio, while capital management includes significant share repurchases [Key Balance Sheet Items](index=2&type=section&id=Key%20Balance%20Sheet%20Items) As of August 31, 2025, inventories increased by **6%** from November 30, 2024, and **3%** year-over-year, while investments in land and land development decreased, and the total lot portfolio declined by **15%** from year-end 2024 and **6%** year-over-year, with stockholders' equity decreasing primarily due to common stock repurchases and cash dividends Key Balance Sheet Items (as of August 31, 2025) | Metric | August 31, 2025 | November 30, 2024 | Change (vs. Nov 30, 2024) | | :----- | :-------------- | :---------------- | :------------------------ | | Inventories (Billions USD) | 5.84 | 5.53 | +5.6% | | Investments in Land & Land Development (Billions USD) | 1.95 | 2.10 | -7.1% | | Lots Owned or Under Contract | 65,251 | 76,750 | -15.0% | | Stockholders' Equity (Billions USD) | 3.90 | 4.06 | -3.9% | | Book Value per Share (USD) | 60.25 | - | +11% (YoY) | [Liquidity and Debt](index=2&type=section&id=Liquidity%20and%20Debt) KB Home maintained total liquidity of **$1.16 billion**, comprising cash and available credit, while notes payable increased, leading to a higher debt to capital ratio compared to the end of the previous fiscal year Liquidity and Debt (as of August 31, 2025) | Metric | August 31, 2025 | November 30, 2024 | Change (vs. Nov 30, 2024) | | :----- | :-------------- | :---------------- | :------------------------ | | Total Liquidity (Billions USD) | 1.16 | - | - | | Cash and Cash Equivalents (Millions USD) | 330.6 | 598.0 | -44.8% | | Available Revolving Credit Facility (Millions USD) | 831.7 | - | - | | Notes Payable (Billions USD) | 1.94 | 1.69 | +14.8% | | Debt to Capital Ratio (%) | 33.2% | 29.4% | +3.8 pp | [Shareholder Returns](index=1&type=section&id=Shareholder%20Returns) The company continued its commitment to shareholder returns, repurchasing **$188.5 million** of common stock in Q3 2025 and a total of **$438.5 million** in the first nine months of the fiscal year, contributing to over **$490 million** returned to stockholders, including dividends Common Stock Repurchases | Period | Shares Repurchased | Cost (Millions USD) | Average Price per Share (USD) | | :----- | :----------------- | :------------------ | :---------------------------- | | Q3 2025 | 3.3 million | 188.5 | 57.12 | | 9 Months Ended Aug 31, 2025 | 7.8 million | 438.5 | 56.30 | - As of August 31, 2025, the Company had **$261.5 million** remaining under its current common stock repurchase authorization[13](index=13&type=chunk) [Financial Guidance](index=3&type=section&id=Financial%20Guidance) KB Home provided its full year 2025 outlook, projecting housing revenues between **$6.10 billion** and **$6.20 billion** with anticipated operating income and gross profit margins [Full Year 2025 Outlook](index=3&type=section&id=Full%20Year%202025%20Outlook) KB Home provided guidance for its 2025 full year, projecting housing revenues between **$6.10 billion** and **$6.20 billion**, with an average selling price of approximately **$483,000**, and anticipates a homebuilding operating income margin of about **8.9%** and a housing gross profit margin between **19.2%** and **19.3%**, assuming no inventory-related charges Full Year 2025 Guidance | Metric | Guidance | | :----- | :------- | | Housing Revenues (Billions USD) | $6.10 to $6.20 | | Average Selling Price (USD) | ~$483,000 | | Homebuilding Operating Income as % of Revenues (excl. inventory charges) (%) | ~8.9% | | Housing Gross Profit Margin (excl. inventory charges) (%) | 19.2% to 19.3% | | SG&A as % of Housing Revenues (%) | 10.2% to 10.3% | | Effective Tax Rate (%) | ~23% | | Ending Community Count | ~260 | [Supplemental Financial Data](index=5&type=section&id=Supplemental%20Financial%20Data) This section provides detailed consolidated statements of operations and balance sheets, along with supplemental homebuilding information and non-GAAP financial measure reconciliations [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) The consolidated statements of operations provide detailed financial performance for the three and nine months ended August 31, 2025 and 2024, covering total revenues, homebuilding and financial services segment results, pretax income, income tax expense, net income, and earnings per share | | Three Months Ended August 31, | | Nine Months Ended August 31, | | :--- | :--- | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 2024 | | Total revenues (Thousands USD) | 1,620,474 | 1,752,608 | 4,541,836 | 4,930,187 | | Homebuilding operating income (Thousands USD) | 131,163 | 188,950 | 389,965 | 534,809 | | Financial services pretax income (Thousands USD) | 8,686 | 10,953 | 24,373 | 35,793 | | Total pretax income (Thousands USD) | 143,228 | 207,429 | 424,968 | 603,213 | | Net income (Thousands USD) | 109,828 | 157,329 | 327,268 | 464,413 | | Diluted EPS (USD) | 1.61 | 2.04 | 4.60 | 5.94 | | Diluted Weighted Average Shares Outstanding | 67,737 | 76,630 | 70,643 | 77,565 | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets present the company's financial position as of August 31, 2025, and November 30, 2024, detailing assets, liabilities, and stockholders' equity for both homebuilding and financial services segments | | August 31, 2025 | November 30, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents (Thousands USD) | 330,586 | 597,973 | | Inventories (Thousands USD) | 5,838,816 | 5,528,020 | | Total assets (Thousands USD) | 6,985,572 | 6,936,169 | | **Liabilities and stockholders' equity** | | | | Notes payable (Thousands USD) | 1,943,582 | 1,691,679 | | Stockholders' equity (Thousands USD) | 3,902,363 | 4,060,616 | | Total liabilities and stockholders' equity (Thousands USD) | 6,985,572 | 6,936,169 | [Homebuilding Supplemental Information](index=7&type=section&id=Homebuilding%20Supplemental%20Information) This section provides additional details on homebuilding revenues, costs, and operational metrics, including regional breakdowns for homes delivered, net orders, net order value, and backlog data for the three and nine months ended August 31, 2025 and 2024 Homebuilding Revenues (Three Months Ended August 31) | Metric | 2025 | 2024 | | :----- | :--- | :--- | | Housing Revenues (Thousands USD) | 1,613,975 | 1,745,979 | | Land Revenues (Thousands USD) | 487 | — | | Total Homebuilding Revenues (Thousands USD) | 1,614,462 | 1,745,979 | Homebuilding Costs and Expenses (Three Months Ended August 31) | Metric | 2025 | 2024 | | :----- | :--- | :--- | | Construction and Land Costs (Housing) (Thousands USD) | 1,320,611 | 1,385,563 | | Selling, General and Administrative Expenses (Thousands USD) | 162,152 | 171,466 | | Total Homebuilding Costs and Expenses (Thousands USD) | 1,483,299 | 1,557,029 | Regional Net Orders (Three Months Ended August 31) | Region | 2025 | 2024 | Change (YoY) | | :----- | :--- | :--- | :----------- | | West Coast | 870 | 958 | -9.2% | | Southwest | 459 | 616 | -25.4% | | Central | 795 | 871 | -8.8% | | Southeast | 826 | 640 | +29.1% | | Total | 2,950 | 3,085 | -4.4% | [Non-GAAP Financial Measures Reconciliation](index=9&type=section&id=Non-GAAP%20Financial%20Measures%20Reconciliation) This section provides a reconciliation of the company's housing gross profit margin (GAAP) to its adjusted housing gross profit margin (non-GAAP), with the adjusted measure excluding inventory impairment and land option contract abandonment charges to offer a clearer view of profitability and enable comparisons Adjusted Housing Gross Profit Margin Reconciliation (Three Months Ended August 31) | Metric | 2025 | 2024 | | :----- | :--- | :--- | | Housing Gross Profits (GAAP) (Thousands USD) | 293,364 | 360,416 | | Add: Inventory-related charges (Thousands USD) | 11,338 | 1,177 | | Adjusted Housing Gross Profits (Thousands USD) | 304,702 | 361,593 | | Housing Gross Profit Margin (GAAP) (%) | 18.2% | 20.6% | | Adjusted Housing Gross Profit Margin (Non-GAAP) (%) | 18.9% | 20.7% | - Adjusted housing gross profit margin is a non-GAAP measure that isolates the impact of housing inventory impairment and land option contract abandonment charges, providing a more comparable profitability metric for investors[27](index=27&type=chunk) [Corporate Information](index=3&type=section&id=Corporate%20Information) This section provides an overview of KB Home, details on the Q3 2025 earnings conference call, and important forward-looking and cautionary statements [About KB Home](index=3&type=section&id=About%20KB%20Home) KB Home is a leading US homebuilder operating in **49** markets, known for building nearly **700,000** quality homes over **65** years, emphasizing personalized homebuying experiences, affordability, and sustainability as a leader in ENERGY STAR certified homes - One of the largest and most trusted homebuilders in the United States, operating in **49** markets[11](index=11&type=chunk) - Built nearly **700,000** quality homes in over **65** years and ranked 1 customer-ranked national homebuilder[11](index=11&type=chunk) - Industry leader in sustainability, achieving high residential energy-efficiency ratings and delivering more ENERGY STAR certified homes than any other builder[11](index=11&type=chunk) [Conference Call](index=3&type=section&id=Conference%20Call) A conference call to discuss the 2025 third quarter earnings was scheduled for September 24, 2025, at 2:00 p.m. Pacific Time, with details available on the company's investor relations website - Conference call to discuss 2025 third quarter earnings broadcast live on September 24, 2025, at 2:00 p.m. Pacific Time[10](index=10&type=chunk) [Forward-Looking and Cautionary Statements](index=3&type=section&id=Forward-Looking%20and%20Cautionary%20Statements) This section contains important disclosures regarding forward-looking statements, highlighting that actual events and results may differ materially from forecasts due to various risk factors, including general economic conditions, capital market conditions, material and trade costs, interest rate changes, and government policies - Statements in the press release that are predictive in nature or concern future market and economic conditions, business prospects, or financial performance are 'forward-looking statements' under the Private Securities Litigation Reform Act of 1995[12](index=12&type=chunk) - Actual events and results may differ materially from forward-looking statements due to factors such as general economic conditions, capital market conditions, material and trade costs, changes in interest rates, and government actions affecting the housing market[12](index=12&type=chunk)[14](index=14&type=chunk) - The company does not have a specific policy or intent of updating or revising forward-looking statements[12](index=12&type=chunk)

[Financial Results Overview](index=1&type=section&id=Financial%20Results%20Overview) Stitch Fix reported mixed Q4 and full fiscal year 2025 results, with revenue decreases but improved gross margin and Adjusted EBITDA, driven by strategic execution and client experience enhancements [Q4 and Full Fiscal Year 2025 Highlights](index=1&type=section&id=Q4%20and%20Full%20Fiscal%20Year%202025%20Highlights) Stitch Fix reported mixed results for Q4 and full fiscal year 2025, with Q4 net revenue decreasing 2.6% YoY but increasing 4.4% YoY on a 13-week adjusted basis, while full fiscal year 2025 net revenue decreased 5.3% YoY, or 3.7% YoY adjusted, with gross margin expanding for the full year to 44.4% and improved Adjusted EBITDA despite net losses | Metric | Q4 FY25 (Actual) | Q4 FY25 (Adjusted YoY Change) | FY25 (Actual) | FY25 (Adjusted YoY Change) | FY24 (Actual) | | :-------------------------------- | :--------------- | :---------------------------- | :------------ | :--------------------------- | :------------ | | Net Revenue | $311.2 million | +4.4% | $1.27 billion | -3.7% | $1.34 billion | | Gross Margin | 43.6% | -100 bps YoY | 44.4% | +10 bps YoY | 44.3% | | Net Loss | $8.6 million | N/A | $28.8 million | N/A | $128.8 million | | Diluted Loss Per Share | $0.07 | N/A | $0.22 | N/A | $1.07 | | Adjusted EBITDA | $8.7 million | N/A | $49.1 million | N/A | $29.3 million | | Adjusted EBITDA Margin | 2.8% | N/A | 3.9% | N/A | 2.2% | | Active Clients | 2.309 million | -7.9% YoY | N/A | N/A | 2.508 million | | Net Revenue Per Active Client (RPAC) | $549 | +3.0% YoY | N/A | N/A | $533 | [CEO Commentary and Strategic Direction](index=1&type=section&id=CEO%20Commentary%20and%20Strategic%20Direction) CEO Matt Baer highlighted fiscal 2025 as a milestone year, driven by successful execution of the transformation strategy, leading to improved client experience and assortment, achieving the second consecutive quarter of adjusted year-over-year revenue growth and market share gains in the US apparel market, with future growth fueled by AI, leading brands, and human stylists for personalized shopping experiences - Fiscal 2025 was a milestone year, achieving the **second consecutive quarter of year-over-year revenue growth** on an adjusted basis and gaining share in the US apparel market[3](index=3&type=chunk) - Positive momentum was driven by the successful execution of the transformation strategy, including improvements to client experience and assortment[3](index=3&type=chunk) - Future growth will be fueled by harnessing AI, assortment of leading brands, and the human connection of Stylists to deliver client-centric and personalized shopping experiences[3](index=3&type=chunk) [Financial Outlook](index=1&type=section&id=Financial%20Outlook) Stitch Fix provides positive revenue and Adjusted EBITDA guidance for Q1 and full fiscal year 2026, anticipating continued growth and free cash flow positivity [Q1 Fiscal Year 2026 Outlook](index=1&type=section&id=Q1%20Fiscal%20Year%202026%20Outlook) Stitch Fix provided guidance for the first quarter of fiscal year 2026, projecting net revenue between $333 million and $338 million, representing 4.4% to 6.0% year-over-year growth, with Adjusted EBITDA expected to be between $8 million and $11 million, at a margin of 2.4% to 3.3% | Metric | Q1 2026 Guidance | YoY Change | | :---------------- | :----------------------- | :--------- | | Net Revenue | $333 million - $338 million | 4.4% - 6.0% | | Adjusted EBITDA | $8 million - $11 million | 2.4% - 3.3% margin | [Full Fiscal Year 2026 Outlook](index=3&type=section&id=Full%20Fiscal%20Year%202026%20Outlook) For the full fiscal year 2026, Stitch Fix anticipates net revenue between $1.28 billion and $1.33 billion, a 1.0% to 5.0% year-over-year increase, with Adjusted EBITDA projected to be $30 million to $45 million, at a margin of 2.3% to 3.4%, alongside expectations for gross margin between 43% and 44%, advertising expense between 9% and 10% of revenue, and positive free cash flow | Metric | FY 2026 Guidance | YoY Change | | :---------------- | :----------------------- | :--------- | | Net Revenue | $1.28 billion - $1.33 billion | 1.0% - 5.0% | | Adjusted EBITDA | $30 million - $45 million | 2.3% - 3.4% margin | - Full fiscal year 2026 gross margin is expected to be between **43% and 44%**[8](index=8&type=chunk) - Full fiscal year 2026 advertising expense as a percentage of revenue is expected to be between **9% and 10%**[8](index=8&type=chunk) - The company expects to be **free cash flow positive** for the full fiscal year 2026[8](index=8&type=chunk) [Discontinued Operations](index=3&type=section&id=Discontinued%20Operations) Stitch Fix ceased its UK business operations in Q1 fiscal 2024, now reported as a discontinued operation [UK Business Cessation](index=3&type=section&id=UK%20Business%20Cessation) During the first quarter of fiscal 2024, Stitch Fix ceased operations of its UK business, which is now reported as a discontinued operation in its unaudited condensed consolidated financial statements for all periods presented - Stitch Fix ceased operations of its UK business in **Q1 fiscal 2024**, reporting it as a discontinued operation[10](index=10&type=chunk) [Company Information](index=3&type=section&id=Company%20Information) This section provides an overview of Stitch Fix as a personal styling service, outlines forward-looking statements and associated risks, and details investor communication channels [About Stitch Fix, Inc.](index=3&type=section&id=About%20Stitch%20Fix%2C%20Inc.) Stitch Fix is a leading online personal styling service founded in 2011, headquartered in San Francisco, combining expert stylists with AI and recommendation algorithms to offer personalized clothing selections from exclusive and national brands, aiming to simplify style discovery for clients - Stitch Fix is a leading online personal styling service that helps clients discover styles that fit perfectly[12](index=12&type=chunk) - The service pairs expert stylists with best-in-class AI and recommendation algorithms, leveraging an assortment of exclusive and national brands[12](index=12&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements regarding future financial performance, strategic initiatives, and market expectations, which involve substantial risks and uncertainties, including macroeconomic conditions, consumer behavior, ability to acquire and retain clients, supply chain issues, and the impact of tariffs, cautioning readers not to rely on these statements as predictions of future events - Forward-looking statements cover expectations for future financial performance, profitability, long-term targets, and guidance for Q1 and full fiscal year 2026[13](index=13&type=chunk) - Key strategic areas include the impact of the transformation strategy, client experience improvements, expanded Fix options, investments in client-Stylist relationships, generative AI, and product assortment[13](index=13&type=chunk)[15](index=15&type=chunk) - Statements involve substantial risks and uncertainties, such as macroeconomic environment, ability to generate sufficient revenue, changing consumer behavior, tariffs, client acquisition/retention, and supply chain risks[15](index=15&type=chunk) [Conference Call and Webcast Information](index=3&type=section&id=Conference%20Call%20and%20Webcast%20Information) Stitch Fix's CEO and CFO hosted a conference call on September 24, 2025, at 2:00 p.m. Pacific Time to discuss financial results and outlook, with a live webcast and replay made available on the investor relations section of the company's website - A conference call was held on **September 24, 2025, at 2:00 p.m. Pacific Time** to discuss financial results and outlook[11](index=11&type=chunk) - A live webcast and replay are accessible on the investor relations section of the Stitch Fix website[11](index=11&type=chunk) [Investor and Public Relations Contacts](index=11&type=section&id=IR%20Contact) Contact information for investor relations and public relations inquiries is provided - IR Contact: **ir@stitchfix.com**[28](index=28&type=chunk) - PR Contact: **media@stitchfix.com**[28](index=28&type=chunk) [Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Consolidated%20Financial%20Statements%20(Unaudited)) Unaudited consolidated financial statements present the company's balance sheets, statements of operations, and cash flows for fiscal years 2024 and 2025, highlighting key financial positions and performance [Consolidated Balance Sheets](index=6&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) As of August 2, 2025, Stitch Fix reported total assets of $480.6 million, a slight decrease from $486.9 million in the prior year, with cash and cash equivalents decreasing while short-term investments and inventory increased, and total liabilities also decreased, leading to an increase in total stockholders' equity | Metric (in thousands) | August 2, 2025 | August 3, 2024 | Change (YoY) | | :-------------------------------- | :------------- | :------------- | :----------- | | Cash and cash equivalents | $113,952 | $162,862 | -$48,910 | | Short-term investments | $120,901 | $84,106 | +$36,795 | | Inventory, net | $118,370 | $97,903 | +$20,467 | | Total current assets | $373,872 | $366,710 | +$7,162 | | Total assets | $480,622 | $486,864 | -$6,242 | | Total current liabilities | $206,227 | $203,551 | +$2,676 | | Total liabilities | $277,644 | $299,842 | -$22,198 | | Total stockholders' equity | $202,978 | $187,022 | +$15,956 | [Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20AND%20COMPREHENSIVE%20LOSS) For Q4 FY25, net revenue was $311.2 million, a decrease from $319.6 million in Q4 FY24, with gross margin decreasing to 43.6% from 44.6%, and the company reported a net loss of $8.6 million, a significant improvement from $36.5 million in Q4 FY24, while for the full fiscal year 2025, net revenue was $1.27 billion, down from $1.34 billion, but net loss improved substantially to $28.7 million from $128.8 million in FY24 | Metric (in thousands) | Q4 FY25 | Q4 FY24 | FY25 | FY24 | | :-------------------------------- | :------ | :------ | :----- | :------- | | Revenue, net | $311,227 | $319,550 | $1,267,171 | $1,337,468 | | Cost of goods sold | $175,512 | $177,073 | $704,232 | $745,430 | | Gross profit | $135,715 | $142,477 | $562,939 | $592,038 | | Gross margin | 43.6% | 44.6% | 44.4% | 44.3% | | Operating loss | $(11,206) | $(41,888) | $(38,905) | $(133,427) | | Net loss from continuing operations | $(8,577) | $(35,741) | $(28,844) | $(118,885) | | Net loss | $(8,576) | $(36,498) | $(28,739) | $(128,840) | | Diluted loss per share | $(0.07) | $(0.30) | $(0.22) | $(1.07) | [Consolidated Statements of Cash Flow](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOW) For fiscal year 2025, net cash provided by operating activities from continuing operations was $25.6 million, a decrease from $28.2 million in FY24, while net cash used in investing activities from continuing operations decreased to $59.1 million from $78.7 million, primarily due to changes in securities, and net cash used in financing activities remained stable at $15.0 million, with the company ending the year with $114.0 million in cash and cash equivalents | Metric (in thousands) | FY25 | FY24 | | :-------------------------------------------------- | :----- | :----- | | Net cash provided by operating activities from continuing operations | $25,575 | $28,207 | | Net cash used in investing activities from continuing operations | $(59,121) | $(78,742) | | Net cash used in financing activities from continuing operations | $(14,967) | $(15,493) | | Net decrease in cash and cash equivalents | $(48,910) | $(76,575) | | Cash and cash equivalents at end of period | $113,952 | $162,862 | [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) This section reconciles non-GAAP financial measures, Adjusted EBITDA and Free Cash Flow, to their most directly comparable GAAP measures, illustrating core operational performance [Adjusted EBITDA Reconciliation](index=9&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA is defined as net loss from continuing operations excluding interest income, other income/expense, income taxes, depreciation and amortization, stock-based compensation, restructuring and other one-time costs, and non-ordinary course legal fees, with Q4 FY25 Adjusted EBITDA at $8.7 million (2.8% margin) and FY25 at $49.1 million (3.9% margin), showing significant improvement from FY24 - Adjusted EBITDA is a non-GAAP measure excluding specific non-core or non-recurring items from net loss from continuing operations to provide a clearer view of core business performance[21](index=21&type=chunk)[23](index=23&type=chunk) | Metric (in thousands) | Q4 FY25 | Q4 FY24 | FY25 | FY24 | | :-------------------------------- | :------ | :------ | :----- | :----- | | Net loss from continuing operations | $(8,577) | $(35,741) | $(28,844) | $(118,885) | | Stock-based compensation expense | $13,069 | $16,845 | $56,727 | $76,756 | | Restructuring and other one-time costs | $121 | $26,356 | $3,228 | $50,463 | | Adjusted EBITDA | $8,713 | $9,523 | $49,139 | $29,281 | | Adjusted EBITDA margin | 2.8% | 3.0% | 3.9% | 2.2% | [Free Cash Flow Reconciliation](index=10&type=section&id=Free%20Cash%20Flow) Free Cash Flow is defined as net cash flows from operating activities from continuing operations minus purchases of property and equipment, and for fiscal year 2025, it was $9.3 million, a decrease from $14.2 million in FY24 - Free Cash Flow is a non-GAAP measure representing cash available after operating activities and capital expenditures[21](index=21&type=chunk)[24](index=24&type=chunk) | Metric (in thousands) | Q4 FY25 | Q4 FY24 | FY25 | FY24 | | :-------------------------------------------------- | :------ | :------ | :----- | :----- | | Net cash provided by operating activities from continuing operations | $7,003 | $8,200 | $25,575 | $28,207 | | Purchases of property and equipment | $(4,228) | $(3,706) | $(16,293) | $(13,965) | | Free Cash Flow | $2,775 | $4,494 | $9,282 | $14,242 | [Operating Metrics](index=11&type=section&id=Operating%20Metrics) Key operating metrics, including active clients and net revenue per active client, are presented to show client engagement and revenue efficiency trends [Active Clients](index=11&type=section&id=Active%20Clients) Active clients are defined as those who checked out a Fix or were shipped an item via Freestyle in the preceding 52 weeks, and as of August 2, 2025, active clients decreased to 2.309 million, a 1.9% QoQ decrease and 7.9% YoY decrease - An active client is defined as a client who checked out a Fix or was shipped an item via Freestyle in the preceding 52 weeks[26](index=26&type=chunk) | Date | Active Clients (in thousands) | QoQ Change | YoY Change | | :----------------- | :---------------------------- | :--------- | :--------- | | August 2, 2025 | 2,309 | -1.9% | -7.9% | | May 3, 2025 | 2,353 | -0.76% | N/A | | February 1, 2025 | 2,371 | -2.59% | N/A | | November 2, 2024 | 2,434 | -2.9% | N/A | | August 3, 2024 | 2,508 | N/A | N/A | [Net Revenue per Active Client (RPAC)](index=11&type=section&id=Net%20Revenue%20per%20Active%20Client) Net revenue per active client (RPAC) is calculated based on net revenue over the preceding four fiscal quarters divided by active clients, and RPAC increased 3.0% year-over-year to $549 as of August 2, 2025 - Net revenue per active client (RPAC) is calculated based on net revenue over the preceding four fiscal quarters divided by the number of active clients[27](index=27&type=chunk) | Date | Net Revenue per Active Client | YoY Change | | :----------------- | :---------------------------- | :--------- | | August 2, 2025 | $549 | +3.0% | | May 3, 2025 | $542 | N/A | | February 1, 2025 | $537 | N/A | | November 2, 2024 | $531 | N/A | | August 3, 2024 | $533 | N/A |

EXHIBIT 99.1 Steelcase Reports Second Quarter Fiscal 2026 Results GRAND RAPIDS, Mich., Sept. 24, 2025 (GLOBE NEWSWIRE) -- Steelcase Inc. (NYSE: SCS) today reported second quarter revenue of $897.1 million, net income of $35.0 million, or $0.29 per share, and adjusted earnings per share of $0.45. In the prior year, Steelcase reported revenue of $855.8 million, net income of $63.1 million, or $0.53 per share, and adjusted earnings per share of $0.39. As previously announced, on August 3, 2025, the company ent ...

PART I—FINANCIAL INFORMATION This part provides Adobe's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the reported periods [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents Adobe Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of income, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items for the periods ended August 29, 2025, and August 30, 2024 (or November 29, 2024 for balance sheet) [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity as of August 29, 2025, and November 29, 2024 | (In millions) | August 29, 2025 | November 29, 2024 | | :-------------------------------- | :---------------- | :------------------ | | **ASSETS** | | | | Cash and cash equivalents | $4,982 | $7,613 | | Short-term investments | 958 | 273 | | Trade receivables, net | 2,093 | 2,072 | | Prepaid expenses and other current assets | 1,379 | 1,274 | | Total current assets | 9,412 | 11,232 | | Property and equipment, net | 1,908 | 1,936 | | Operating lease right-of-use assets, net | 307 | 281 | | Goodwill | 12,862 | 12,788 | | Other intangibles, net | 555 | 782 | | Deferred income taxes | 2,092 | 1,657 | | Other assets | 1,618 | 1,554 | | **Total assets** | **$28,754** | **$30,230** | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | **Current liabilities:** | | | | Trade payables | $337 | $361 | | Accrued expenses and other current liabilities | 2,289 | 2,336 | | Debt | — | 1,499 | | Deferred revenue | 6,385 | 6,131 | | Income taxes payable | 154 | 119 | | Operating lease liabilities | 74 | 75 | | Total current liabilities | 9,239 | 10,521 | | **Long-term liabilities:** | | | | Debt | 6,200 | 4,129 | | Deferred revenue | 149 | 128 | | Income taxes payable | 502 | 548 | | Operating lease liabilities | 362 | 353 | | Other liabilities | 532 | 446 | | **Total liabilities** | **16,984** | **16,125** | | **Stockholders' equity:** | | | | Additional paid-in capital | 14,968 | 13,419 | | Retained earnings | 43,516 | 38,470 | | Accumulated other comprehensive income (loss) | (341) | (201) | | Treasury stock, at cost | (46,373) | (37,583) | | **Total stockholders' equity** | **11,770** | **14,105** | | **Total liabilities and stockholders' equity** | **$28,754** | **$30,230** | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This statement presents the company's financial performance, detailing revenues, costs, operating expenses, and net income for the three and nine months ended August 29, 2025, and August 30, 2024 | (In millions, except per share data) | Three Months Ended August 29, 2025 | Three Months Ended August 30, 2024 | Nine Months Ended August 29, 2025 | Nine Months Ended August 30, 2024 | | :----------------------------------- | :--------------------------------- | :--------------------------------- | :-------------------------------- | :-------------------------------- | | **Revenue:** | | | | | | Subscription | $5,791 | $5,180 | $16,915 | $15,156 | | Product | 68 | 82 | 251 | 305 | | Services and other | 129 | 146 | 409 | 438 | | **Total revenue** | **5,988** | **5,408** | **17,575** | **15,899** | | **Cost of revenue:** | | | | | | Subscription | 510 | 413 | 1,505 | 1,324 | | Product | 5 | 6 | 17 | 19 | | Services and other | 127 | 135 | 380 | 399 | | **Total cost of revenue** | **642** | **554** | **1,902** | **1,742** | | **Gross profit** | **5,346** | **4,854** | **15,673** | **14,157** | | **Operating expenses:** | | | | | | Research and development | 1,088 | 1,022 | 3,196 | 2,945 | | Sales and marketing | 1,639 | 1,431 | 4,760 | 4,228 | | General and administrative | 408 | 366 | 1,152 | 1,073 | | Acquisition termination fee | — | — | — | 1,000 | | Amortization of intangibles | 38 | 43 | 120 | 127 | | **Total operating expenses** | **3,173** | **2,862** | **9,228** | **9,373** | | **Operating income** | **2,173** | **1,992** | **6,445** | **4,784** | | **Non-operating income (expense):** | | | | | | Interest expense | (67) | (51) | (197) | (119) | | Investment gains (losses), net | 23 | 12 | 31 | 34 | | Other income (expense), net | 58 | 89 | 191 | 241 | | **Total non-operating income (expense), net** | **14** | **50** | **25** | **156** | | **Income before income taxes** | **2,187** | **2,042** | **6,470** | **4,940** | | **Provision for income taxes** | **415** | **358** | **1,196** | **1,063** | | **Net income** | **$1,772** | **$1,684** | **$5,274** | **$3,877** | | Basic net income per share | $4.18 | $3.78 | $12.28 | $8.63 | | Diluted net income per share | $4.18 | $3.76 | $12.26 | $8.58 | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement details the company's comprehensive income, including net income and other comprehensive income (loss) components, for the three and nine months ended August 29, 2025, and August 30, 2024 | (In millions) | Three Months Ended August 29, 2025 | Three Months Ended August 30, 2024 | Nine Months Ended August 29, 2025 | Nine Months Ended August 30, 2024 | | :------------------------------------------------ | :--------------------------------- | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $1,772 | $1,684 | $5,274 | $3,877 | | **Other comprehensive income (loss), net of taxes:** | | | | | | Unrealized gains / losses on available-for-sale securities | — | 3 | 1 | 10 | | Net increase (decrease) from derivatives designated as hedging instruments | (29) | (59) | (239) | (50) | | Foreign currency translation adjustments | 21 | 23 | 98 | 16 | | **Other comprehensive income (loss), net of taxes** | **(8)** | **(33)** | **(140)** | **(24)** | | **Total comprehensive income, net of taxes** | **$1,764** | **$1,651** | **$5,134** | **$3,853** | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This statement outlines changes in stockholders' equity, including net income, other comprehensive income, stock repurchases, and stock-based compensation, from November 29, 2024, to August 29, 2025 | (In millions) | Balances at November 29, 2024 | Net income | Other comprehensive income (loss), net of taxes | Re-issuance of treasury stock under stock compensation plans | Repurchases of common stock | Stock-based compensation | Balances at August 29, 2025 | | :-------------------------------- | :---------------------------- | :--------- | :-------------------------------------------- | :---------------------------------------------------------- | :-------------------------- | :----------------------- | :-------------------------- | | Common Stock (Shares) | 601 | — | — | — | — | — | 601 | | Common Stock (Amount) | $— | $— | $— | $— | $— | $— | $— | | Additional Paid-In Capital | 13,419 | — | — | 96 | — | 1,453 | 14,968 | | Retained Earnings | 38,470 | 5,274 | — | (228) | — | — | 43,516 | | Accumulated Other Comprehensive Income (Loss) | (201) | — | (140) | — | — | — | (341) | | Treasury Stock (Shares) | (160) | — | — | 3 | (24) | — | (181) | | Treasury Stock (Amount) | $(37,583) | — | — | 99 | (8,889) | — | $(46,373) | | Total | $14,105 | $5,274 | $(140) | $(33) | $(8,889) | $1,453 | $11,770 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes the company's cash inflows and outflows from operating, investing, and financing activities for the nine months ended August 29, 2025, and August 30, 2024 | (In millions) | Nine Months Ended August 29, 2025 | Nine Months Ended August 30, 2024 | | :---------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | **Cash flows from operating activities:** | | | | Net income | $5,274 | $3,877 | | Adjustments to reconcile net income to net cash provided by operating activities | 1,705 | 1,258 | | Changes in operating assets and liabilities, net | (195) | (999) | | **Net cash provided by operating activities** | **6,871** | **5,135** | | **Cash flows from investing activities:** | | | | Purchases of short-term investments | (1,351) | — | | Maturities of short-term investments | 681 | 379 | | Proceeds from sales of short-term investments | 4 | 9 | | Acquisitions, net of cash acquired | (17) | — | | Purchases of property and equipment | (145) | (135) | | Purchases of long-term investments, intangibles and other assets | (216) | (125) | | Proceeds from sale of long-term investments and other assets | 3 | 2 | | **Net cash provided by (used for) investing activities** | **(1,041)** | **130** | | **Cash flows from financing activities:** | | | | Repurchases of common stock | (8,807) | (7,000) | | Proceeds from re-issuance of treasury stock | 348 | 361 | | Taxes paid related to net share settlement of equity awards | (381) | (525) | | Proceeds from issuance of debt | 1,997 | 1,997 | | Repayment of debt | (1,500) | — | | Other financing activities, net | (162) | (56) | | **Net cash used for financing activities** | **(8,505)** | **(5,223)** | | Effect of foreign currency exchange rates on cash and cash equivalents | 44 | 10 | | **Net change in cash and cash equivalents** | **(2,631)** | **52** | | Cash and cash equivalents at beginning of period | 7,613 | 7,141 | | **Cash and cash equivalents at end of period** | **$4,982** | **$7,193** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, revenue, cash, debt, and contingencies [NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=NOTE%201.%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the basis for preparing the unaudited condensed consolidated financial statements in accordance with SEC rules and GAAP, confirming that all necessary adjustments have been made. It also states that there have been no material changes to significant accounting policies and discusses recent accounting pronouncements (ASU 2023-07, 2023-09, 2024-03) that are not yet effective but are being evaluated for potential impact on future disclosures - **The financial statements are prepared in accordance with GAAP and SEC rules, with all necessary adjustments made**[34](index=34&type=chunk) - **No material changes to significant accounting policies have occurred**[37](index=37&type=chunk) - **New accounting standards (ASU 2023-07, 2023-09, 2024-03) are being evaluated for future impact, with adoption dates ranging from fiscal 2025 to 2029**[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) [NOTE 2. REVENUE](index=10&type=section&id=NOTE%202.%20REVENUE) This note provides a detailed breakdown of revenue by segment (Digital Media, Digital Experience, Publishing and Advertising) and geographic area, highlighting the significant contribution of subscription revenue. It also details contract balances, including trade receivables, contract assets, deferred revenue, and remaining performance obligations, and discusses the accounting for capitalized contract acquisition costs and refund liabilities Revenue by Segment (Three Months Ended) | (dollars in millions) | August 29, 2025 | August 30, 2024 | | :-------------------- | :---------------- | :---------------- | | Digital Media | $4,459 | $3,995 | | Digital Experience | 1,476 | 1,354 | | Publishing and Advertising | 53 | 59 | | **Total Revenue** | **$5,988** | **$5,408** | Subscription Revenue by Segment (Nine Months Ended) | (in millions) | August 29, 2025 | August 30, 2024 | | :----------------------- | :---------------- | :---------------- | | Digital Media | $12,836 | $11,474 | | Digital Experience | 3,999 | 3,599 | | Publishing and Advertising | 80 | 83 | | **Total subscription revenue** | **$16,915** | **$15,156** | - Total remaining performance obligations were approximately **$20.44 billion** as of August 29, 2025, with about **67%** expected to be recognized over the next **12 months**[55](index=55&type=chunk) - Deferred revenue increased to **$6.53 billion** as of August 29, 2025, from **$6.26 billion** as of November 29, 2024[51](index=51&type=chunk)[54](index=54&type=chunk) [NOTE 3. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS](index=12&type=section&id=NOTE%203.%20CASH,%20CASH%20EQUIVALENTS%20AND%20SHORT-TERM%20INVESTMENTS) This note details the composition of cash, cash equivalents, and short-term investments, which are classified as available-for-sale and carried at fair value. It provides a breakdown of these assets by type and confirms that no credit-related losses were recognized during the reported periods Cash, Cash Equivalents and Short-Term Investments (August 29, 2025) | (in millions) | Amortized Cost | Fair Value | | :--------------------------------------- | :------------- | :--------- | | Cash | $940 | $940 | | Cash equivalents | 4,042 | 4,042 | | Short-term fixed income securities | 958 | 958 | | **Total cash, cash equivalents and short-term investments** | **$5,940** | **$5,940** | - **All short-term fixed income debt securities had stated effective maturities within one year as of August 29, 2025**[62](index=62&type=chunk) - **No allowance for credit-related losses on investments was recognized during the nine months ended August 29, 2025, or August 30, 2024**[66](index=66&type=chunk) [NOTE 4. FAIR VALUE MEASUREMENTS](index=14&type=section&id=NOTE%204.%20FAIR%20VALUE%20MEASUREMENTS) This note outlines the fair value measurements for financial assets and liabilities, categorizing them into Level 1, Level 2, and Level 3 inputs. It specifies that fixed income available-for-sale debt securities are classified as Level 2, while money market funds, time deposits, and deferred compensation plan assets are Level 1. Derivative instruments are valued using pricing models based on observable data Fair Value Measurements (August 29, 2025) | (in millions) | Total Fair Value | Level 1 | Level 2 | Level 3 | | :-------------------------------- | :--------------- | :------ | :------ | :------ | | **Assets:** | | | | | | Cash equivalents | $4,042 | $3,435 | $607 | $— | | Short-term investments | 958 | — | 958 | — | | Prepaid expenses and other current assets (derivatives) | 21 | — | 21 | — | | Other assets (deferred comp, derivatives) | 425 | 329 | 96 | — | | **Total assets** | **$5,446** | **$3,764** | **$1,682** | **$—** | | **Liabilities:** | | | | | | Accrued expenses and other current liabilities (derivatives) | $170 | $— | $170 | $— | | Other liabilities (derivatives) | 31 | — | 31 | — | | **Total liabilities** | **$201** | **$—** | **$201** | **$—** | - **Fixed income available-for-sale debt securities are classified as Level 2, valued using matrix pricing and discounted cash flow methodologies**[71](index=71&type=chunk) - **Money market funds, time deposits, and deferred compensation plan assets are based on quoted prices in active markets (Level 1)**[72](index=72&type=chunk) [NOTE 5. DERIVATIVE FINANCIAL INSTRUMENTS](index=16&type=section&id=NOTE%205.%20DERIVATIVE%20FINANCIAL%20INSTRUMENTS) This note details Adobe's use of derivative instruments to manage foreign currency and interest rate risks, explicitly stating they are not used for trading. It covers cash flow hedges (foreign exchange contracts), fair value hedges (interest rate swaps converting fixed to floating rates on senior notes), and non-designated hedges (foreign currency forward contracts) - **Adobe uses derivatives to offset foreign currency and interest rate risk, not for trading purposes**[77](index=77&type=chunk) - **Gross notional amounts of outstanding cash flow hedges were $5.48 billion as of August 29, 2025, primarily hedging Euros, Japanese Yen, and British Pounds**[79](index=79&type=chunk) - **Interest rate swaps, designated as fair value hedges, convert fixed interest rates on $2.70 billion notional amount of senior notes to floating rates based on SOFR OIS**[81](index=81&type=chunk) Fair Value of Derivative Instruments (August 29, 2025) | (in millions) | Fair Value Asset Derivatives | Fair Value Liability Derivatives | | :---------------------------------------- | :--------------------------- | :----------------------------- | | Derivatives designated as hedging instruments: | | | | Foreign exchange contracts | $20 | $181 | | Interest rate swaps | 97 | 19 | | Derivatives not designated as hedging instruments: | | | | Foreign exchange contracts | — | 1 | | **Total derivatives** | **$117** | **$201** | [NOTE 6. GOODWILL AND OTHER INTANGIBLES](index=17&type=section&id=NOTE%206.%20GOODWILL%20AND%20OTHER%20INTANGIBLES) This note provides details on goodwill and other intangible assets. Goodwill was $12.86 billion as of August 29, 2025, with no impairment identified during the annual test. Other intangible assets, primarily customer contracts and relationships, purchased technology, and trademarks, totaled $555 million net, with estimated future amortization expense provided - **Goodwill was $12.86 billion as of August 29, 2025, and no impairment was found during the annual test in Q2 fiscal 2025**[88](index=88&type=chunk) Other Intangibles, Net (August 29, 2025) | (in millions) | Gross Carrying Amount | Accumulated Amortization | Net | | :------------------------------ | :-------------------- | :----------------------- | :---- | | Customer contracts and relationships | $1,208 | $(832) | $376 | | Purchased technology | 881 | (830) | 51 | | Trademarks | 372 | (290) | 82 | | Other | 59 | (13) | 46 | | **Other intangibles, net** | **$2,520** | **$(1,965)** | **$555** | - **Amortization expense for other intangibles was $81 million for the three months and $248 million for the nine months ended August 29, 2025**[88](index=88&type=chunk) Estimated Aggregate Amortization Expense (August 29, 2025) | Fiscal Year | Other Intangibles (in millions) | | :---------- | :------------------------------ | | Remainder of 2025 | $62 | | 2026 | 160 | | 2027 | 118 | | 2028 | 73 | | 2029 | 69 | | Thereafter | 73 | | **Total expected amortization expense** | **$555** | [NOTE 7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES](index=18&type=section&id=NOTE%207.%20ACCURRED%20EXPENSES%20AND%20OTHER%20CURRENT%20LIABILITIES) This note itemizes the components of accrued expenses and other current liabilities, which totaled $2.29 billion as of August 29, 2025. Key components include accrued compensation costs, accrued corporate marketing, refund liabilities, and the fair value of derivative liabilities Accrued Expenses and Other Current Liabilities (August 29, 2025) | (in millions) | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Accrued compensation costs | $1,074 | $1,221 | | Accrued corporate marketing | 191 | 176 | | Refund liabilities | 124 | 141 | | Sales and use taxes | 123 | 121 | | Fair value of derivative liabilities | 170 | 9 | | Derivative collateral liability | 88 | 168 | | Other | 519 | 500 | | **Accrued expenses and other current liabilities** | **$2,289** | **$2,336** | [NOTE 8. STOCK-BASED COMPENSATION](index=18&type=section&id=NOTE%208.%20STOCK-BASED%20COMPENSATION) This note details stock-based compensation activities, including restricted stock units (RSUs), performance shares, and employee stock purchase plan (ESPP) shares. It provides data on awards, releases, forfeitures, and the total unrecognized compensation cost, along with the breakdown of stock-based compensation expenses across cost of revenue and operating expenses Restricted Stock Unit Activity (Nine Months Ended August 29, 2025) | | Number of Shares (in millions) | Weighted Average Grant Date Fair Value | | :-------------------------- | :----------------------------- | :----------------------------------- | | Beginning outstanding balance | 7.0 | $473.28 | | Awarded | 4.2 | $423.98 | | Released | (2.7) | $462.83 | | Forfeited | (0.5) | $465.06 | | **Ending outstanding balance** | **8.0** | **$451.36** | - **Total unrecognized compensation cost related to stock-based awards was $3.47 billion as of August 29, 2025, to be recognized over a weighted average period of 2.27 years**[100](index=100&type=chunk) Total Stock-Based Compensation Costs (Nine Months Ended) | (in millions) | August 29, 2025 | August 30, 2024 | | :-------------------------- | :---------------- | :---------------- | | Cost of revenue | $93 | $90 | | Research and development | 748 | 704 | | Sales and marketing | 423 | 403 | | General and administrative | 189 | 195 | | **Total** | **$1,453** | **$1,392** | [NOTE 9. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)](index=20&type=section&id=NOTE%209.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME%20(LOSS)) This note details the components and changes in accumulated other comprehensive income (loss), which totaled $(341) million as of August 29, 2025. The primary components include net unrealized gains/losses on derivative instruments designated as hedging instruments and cumulative foreign currency translation adjustments Components of Accumulated Other Comprehensive Income (Loss) (August 29, 2025) | (in millions) | November 29, 2024 | Increase / Decrease | Reclassification Adjustments | August 29, 2025 | | :---------------------------------------------------------------- | :------------------ | :------------------ | :--------------------------- | :---------------- | | Net unrealized gains / losses on available-for-sale securities | $(1) | $1 | $— | $— | | Net unrealized gains / losses on derivative instruments designated as hedging instruments | 80 | (231) | (8) | (159) | | Cumulative foreign currency translation adjustments | (280) | 98 | — | (182) | | **Total accumulated other comprehensive income (loss), net of taxes** | **$(201)** | **$(132)** | **$(8)** | **$(341)** | - **Taxes related to each component of other comprehensive income (loss) were immaterial for the reported periods**[104](index=104&type=chunk) [NOTE 10. STOCK REPURCHASE PROGRAM](index=20&type=section&id=NOTE%2010.%20STOCK%20REPURCHASE%20PROGRAM) This note outlines Adobe's stock repurchase program, authorized by the Board of Directors for up to $25 billion through March 2028. During the nine months ended August 29, 2025, the company repurchased $8.81 billion in common stock, primarily through accelerated share repurchase agreements and open market repurchases, leaving $8.40 billion remaining under the current authority - **Board of Directors authorized a $25 billion stock repurchase program through March 14, 2028**[105](index=105&type=chunk) Share Repurchase Activity (Nine Months Ended August 29, 2025) | (in millions) | Number of Shares Delivered | Amount Paid | | :------------------------------ | :------------------------- | :---------- | | Accelerated share repurchase agreements | 16.8 | $6,250 | | Open market repurchases | 6.8 | 2,556 | | **Total** | **23.6** | **$8,806** | - **$8.40 billion remains under the March 2024 stock repurchase authority as of August 29, 2025**[105](index=105&type=chunk) [NOTE 11. NET INCOME PER SHARE](index=21&type=section&id=NOTE%2011.%20NET%20INCOME%20PER%20SHARE) This note provides the computation of basic and diluted net income per share, detailing the shares used in each calculation. It also lists anti-dilutive potential common shares that were excluded from the diluted EPS calculation Net Income Per Share Computation (Nine Months Ended) | (in millions, except per share data) | August 29, 2025 | August 30, 2024 | | :----------------------------------- | :---------------- | :---------------- | | Net income | $5,274 | $3,877 | | Shares used to compute basic net income per share | 429.3 | 449.1 | | Dilutive potential common shares from stock plans and programs | 0.9 | 2.7 | | Shares used to compute diluted net income per share | 430.2 | 451.8 | | Basic net income per share | $12.28 | $8.63 | | Diluted net income per share | $4.18 | $3.76 | | Anti-dilutive potential common shares | 5.0 | 1.8 | [NOTE 12. COMMITMENTS AND CONTINGENCIES](index=21&type=section&id=NOTE%2012.%20COMMITMENTS%20AND%20CONTINGENCIES) This note addresses Adobe's commitments and contingencies, including indemnifications for intellectual property infringement and officer/director liability. It details ongoing legal proceedings, such as the FTC investigation into subscription practices, a securities class action related to Figma competition, and several shareholder derivative actions, noting the company's intent to vigorously defend itself and the inability to estimate potential financial losses at this stage - **Adobe provides indemnifications for intellectual property infringement and officer/director liability, with estimated fair value of officer/director indemnification in excess of insurance coverage being minimal**[112](index=112&type=chunk)[113](index=113&type=chunk) - **The FTC filed a civil complaint in June 2024 alleging violations of ROSCA and the FTC Act regarding disclosure and subscription cancellation practices; Adobe's motion to dismiss was denied in May 2025, and the discovery phase is ongoing**[119](index=119&type=chunk) - **A securities class action (In Re Adobe Inc. Securities Litigation) alleging misleading statements about Figma competition was dismissed in March 2025, with the plaintiff seeking to amend the complaint**[120](index=120&type=chunk) - **Multiple shareholder derivative actions (Consolidated Derivative Action, Roy Action, Daniel Action) based on similar allegations as the Securities Action are presently stayed**[121](index=121&type=chunk)[124](index=124&type=chunk) - **Adobe disputes all allegations of wrongdoing and is unable to estimate a reasonably possible financial loss for the ongoing litigation**[125](index=125&type=chunk) [NOTE 13. DEBT](index=24&type=section&id=NOTE%2013.%20DEBT) This note details Adobe's debt structure, primarily consisting of senior notes totaling $6.15 billion outstanding as of August 29, 2025. It covers new issuances, repayments, and the use of interest rate swaps to convert fixed rates to floating rates. The note also mentions the $1.5 billion revolving credit agreement and $3 billion commercial paper program, both of which had no outstanding borrowings Debt Outstanding (August 29, 2025) | (dollars in millions) | Due Date | Effective Interest Rate | 2025 Carrying Value | | :-------------------- | :--------- | :---------------------- | :------------------ | | 2.15% 2027 Notes | February 2027 | 2.26% | $850 | | 4.85% 2027 Notes | April 2027 | 5.03% | 500 | | 4.75% 2028 Notes | January 2028 | 4.93% | 800 | | 4.80% 2029 Notes | April 2029 | 4.93% | 750 | | 4.95% 2030 Notes | January 2030 | 5.09% | 700 | | 2.30% 2030 Notes | February 2030 | 2.69% | 1,300 | | 4.95% 2034 Notes | April 2034 | 5.03% | 750 | | 5.30% 2035 Notes | January 2035 | 5.40% | 500 | | **Total debt outstanding, at par** | | | **$6,150** | | Fair value of interest rate swaps | | | 78 | | Unamortized discount and debt issuance costs | | | (28) | | **Carrying value of long-term debt** | | | **$6,200** | - **In January 2025, Adobe issued $2.0 billion in new senior notes and repaid $1.5 billion of senior notes that became due in February 2025**[130](index=130&type=chunk) - **Interest rate swaps were entered into during the nine months ended August 29, 2025, converting fixed interest rates on certain senior notes to floating rates based on SOFR OIS**[132](index=132&type=chunk) - **Adobe has a $1.5 billion revolving credit facility and a $3 billion commercial paper program, both with no outstanding borrowings as of August 29, 2025**[137](index=137&type=chunk)[138](index=138&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a comprehensive discussion and analysis of Adobe's financial condition and results of operations, including an overview of its business, operational highlights, critical accounting policies, detailed financial performance by segment and geography, and an assessment of liquidity and capital resources. It emphasizes strong demand in Digital Media and Digital Experience, driven by AI-powered innovations, and details revenue growth, expense changes, and cash flow activities [BUSINESS OVERVIEW](index=26&type=section&id=BUSINESS%20OVERVIEW) Adobe is a global technology company focused on personalized digital experiences, leveraging AI to empower creators and accelerate document productivity. Its products and services span creative content, document management, and digital experience orchestration, serving a diverse global user base across the Americas, EMEA, and APAC - **Adobe's mission is to change the world through personalized digital experiences, with innovations transforming engagement across media**[142](index=142&type=chunk) - **The company empowers creators by integrating AI, focusing on responsible development, to unleash creativity, accelerate document productivity, and power businesses**[142](index=142&type=chunk) - **Adobe serves a diverse user base including consumers, creative professionals, developers, students, and businesses across Americas, EMEA, and APAC**[142](index=142&type=chunk) [OPERATIONS OVERVIEW](index=26&type=section&id=OPERATIONS%20OVERVIEW) Adobe experienced strong demand in its Digital Media and Digital Experience segments in Q3 fiscal 2025, driven by AI-powered product innovation. Digital Media ARR grew 11.7% year-over-year to $18.59 billion, with segment revenue up 12% to $4.46 billion. Digital Experience revenue increased 9% to $1.48 billion. The company's customer-focused strategy, emphasizing AI capabilities and integrated workflows, aims to increase revenue and customer retention, while continuously monitoring macroeconomic conditions - **Strong demand across Digital Media and Digital Experience offerings in Q3 fiscal 2025, driven by transformative and customer-focused product innovation**[144](index=144&type=chunk) - Digital Media Annualized Recurring Revenue (ARR) grew to **$18.59 billion**, representing **11.7%** year-over-year growth[148](index=148&type=chunk) Segment Revenue Growth (Q3 Fiscal 2025 vs. Q3 Fiscal 2024) | Segment | Q3 FY25 Revenue (in billions) | Q3 FY24 Revenue (in billions) | YoY Growth | | :----------------- | :---------------------------- | :---------------------------- | :--------- | | Digital Media | $4.46 | $4.00 | 12% | | Digital Experience | $1.48 | $1.35 | 9% | - **Customer-focused strategy includes audience-specific product innovation and go-to-market for Creative and Marketing Professionals (e.g., Firefly, GenStudio) and Business Professionals and Consumers (e.g., Acrobat, Express), with generative AI capabilities**[152](index=152&type=chunk)[154](index=154&type=chunk) - **The company monitors macroeconomic conditions, including inflation, interest rates, foreign currency fluctuations, and geopolitical pressures, which could impact business and financial results**[155](index=155&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=28&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) Adobe's critical accounting policies and estimates, primarily revenue recognition and income taxes, involve significant assumptions and judgments that could materially affect financial statements. The company regularly evaluates these estimates and discusses them with the Audit Committee, noting no significant changes during the nine months ended August 29, 2025 - **Critical accounting policies and estimates, including revenue recognition and income taxes, have the greatest potential impact on condensed consolidated financial statements**[159](index=159&type=chunk) - **No significant changes in critical accounting policies and estimates occurred during the nine months ended August 29, 2025**[160](index=160&type=chunk) [RESULTS OF OPERATIONS](index=29&type=section&id=RESULTS%20OF%20OPERATIONS) Adobe reported an 11% increase in total revenue for both the three and nine months ended August 29, 2025, driven primarily by subscription revenue growth in Digital Media and Digital Experience. Operating expenses increased due to higher compensation and advertising costs, while net income rose 5% for the three months and 36% for the nine months, significantly impacted by the prior year's Figma termination fee. The effective tax rate decreased for the nine-month period due to the Figma fee and foreign tax assets Financial Performance Summary (Three and Nine Months Ended August 29, 2025) | Metric | Three Months Ended Aug 29, 2025 | YoY Change | Nine Months Ended Aug 29, 2025 | YoY Change | | :-------------------------------- | :------------------------------ | :--------- | :----------------------------- | :--------- | | Total Revenue | $5,988 million | 11% | $17,575 million | 11% | | Subscription Revenue | $5,791 million | 12% | $16,915 million | 12% | | Digital Media Revenue | $4,459 million | 12% | $13,031 million | 11% | | Digital Experience Revenue | $1,476 million | 9% | $4,347 million | 9% | | Cost of Revenue | $642 million | 16% | $1,902 million | 9% | | Operating Expenses | $3,173 million | 11% | $9,228 million | (2)% | | Net Income | $1,772 million | 5% | $5,274 million | 36% | | Cash flows from operations (9 months) | N/A | N/A | $6,871 million | 34% | | Remaining performance obligations | N/A | N/A | $20,440 million | 13% | - **Subscription revenue growth in Digital Media was driven by Creative Cloud flagship apps and Acrobat, while Digital Experience growth came from Adobe Experience Platform and Experience Manager**[171](index=171&type=chunk) - **Operating expenses increased primarily due to higher compensation costs (R&D, G&A) and advertising expenses (Sales & Marketing)**[183](index=183&type=chunk)[186](index=186&type=chunk)[188](index=188&type=chunk) - **The nine-month effective tax rate decreased by four percentage points, primarily due to the non-deductible Figma acquisition termination fee in the prior year and an anticipated benefit from a foreign tax asset in the current year**[196](index=196&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=35&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Adobe's liquidity is primarily driven by revenue receipts and supplemented by investments and debt issuances. Cash and cash equivalents decreased to $4.98 billion as of August 29, 2025, from $7.61 billion at November 29, 2024, largely due to significant cash used for common stock repurchases ($8.81 billion) and debt repayment ($1.5 billion), partially offset by proceeds from new senior notes ($1.99 billion). The company believes existing cash, anticipated operating cash flows, and available credit facilities are sufficient for future needs - **Primary cash sources are revenue receipts, maturities/sales of short-term investments, and debt issuance**[211](index=211&type=chunk) Cash and Working Capital (in millions) | Metric | August 29, 2025 | November 29, 2024 | | :-------------------- | :---------------- | :------------------ | | Cash and cash equivalents | $4,982 | $7,613 | | Short-term investments | $958 | $273 | | Working capital | $173 | $711 | Net Cash Flows (Nine Months Ended) | (in millions) | August 29, 2025 | August 30, 2024 | | :---------------------------------------- | :---------------- | :---------------- | | Net cash provided by operating activities | $6,871 | $5,135 | | Net cash provided by (used for) investing activities | $(1,041) | $130 | | Net cash used for financing activities | $(8,505) | $(5,223) | - **Net cash used for financing activities was $8.51 billion, primarily due to $8.81 billion in common stock repurchases and $1.5 billion in debt repayment, partially offset by $1.99 billion from new senior notes**[216](index=216&type=chunk) - **Adobe believes its existing cash, anticipated operating cash flows, and available $1.5 billion revolving credit facility are sufficient to meet working capital, operating, and capital expenditure requirements for the foreseeable future**[218](index=218&type=chunk)[221](index=221&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses Adobe's market risk exposures, specifically focusing on interest rate risk related to its senior notes. Through interest rate swaps, $2.70 billion of fixed-rate debt has been converted to floating rates. The company assesses that a hypothetical 50 basis point change in market interest rates would not significantly impact its results of operations, and no other material changes in market risk exposures were noted - **Adobe uses interest rate swaps to convert $2.70 billion of fixed-rate senior notes to floating interest rates based on SOFR OIS, managing interest rate risk**[229](index=229&type=chunk) - **A hypothetical 50 basis point increase or decrease in market interest rates would not have a significant impact on results of operations as of August 29, 2025**[229](index=229&type=chunk) - **No other material changes in market risk exposures were identified for the nine months ended August 29, 2025**[230](index=230&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Adobe's CEO and CFO concluded that disclosure controls and procedures were effective at a reasonable assurance level as of August 29, 2025. No material changes in internal control over financial reporting occurred during the quarter. Management acknowledges that control systems provide reasonable, not absolute, assurance against all errors and fraud - **Disclosure controls and procedures were effective at the reasonable assurance level as of August 29, 2025**[231](index=231&type=chunk) - **No material changes in internal control over financial reporting occurred during the quarter ended August 29, 2025**[232](index=232&type=chunk) - **Management emphasizes that control systems provide reasonable, not absolute, assurance against all errors and fraud due to inherent limitations**[233](index=233&type=chunk) PART II—OTHER INFORMATION This part addresses legal proceedings, risk factors, equity security sales, and other required disclosures for the company [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 12 of the condensed consolidated financial statements for detailed information regarding Adobe's legal proceedings, claims, and investigations - **Details on legal proceedings are provided in Note 12 of the condensed consolidated financial statements**[235](index=235&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks that could materially and adversely affect Adobe's operations and financial condition. Key risks include the inability to innovate and adapt to rapid technological changes (especially AI), intense market competition, potential reputational damage, challenges in integrating acquisitions, operational risks like service interruptions and cybersecurity incidents, reliance on third-party relationships, global economic and geopolitical uncertainties, extended sales cycles for enterprise offerings, and difficulties in recruiting and retaining key personnel. Financial risks include fluctuations in foreign currency, goodwill impairment, and debt obligations. General risks cover catastrophic events and stock price volatility - **Failure to innovate and adapt to rapid technological changes, particularly in AI, could harm operating results and business**[237](index=237&type=chunk) - **Social, ethical, and operational issues related to AI use in offerings may result in reputational harm, liability, and increased costs**[238](index=238&type=chunk)[241](index=241&type=chunk) - **Intense competition in rapidly evolving markets, including from AI-integrated offerings, could adversely affect sales and financial results**[242](index=242&type=chunk) - **Service interruptions, cybersecurity incidents, or improper access to customer data could damage reputation, expose to liability, and harm financial results**[248](index=248&type=chunk)[250](index=250&type=chunk) - **Operating as a multinational corporation exposes Adobe to global adverse economic conditions, geopolitical risks, and foreign currency fluctuations**[261](index=261&type=chunk)[262](index=262&type=chunk)[288](index=288&type=chunk) - **Extended and complex sales cycles for enterprise offerings can increase costs and unpredictability**[265](index=265&type=chunk)[268](index=268&type=chunk) - **Inability to recruit and retain key personnel, especially with AI and cybersecurity backgrounds, or challenges from the hybrid work model, could harm the business**[269](index=269&type=chunk) - **Subject to litigation, regulatory inquiries (e.g., antitrust, data privacy, consumer protection), and compliance risks with global laws and regulations, which could result in significant costs, fines, or business disruption**[271](index=271&type=chunk)[276](index=276&type=chunk)[278](index=278&type=chunk) - **Changes in tax rules, regulations, or interpretations globally may adversely affect effective tax rates and profitability**[282](index=282&type=chunk)[283](index=283&type=chunk) - **Existing and future debt obligations may adversely affect financial condition and future financial results by dedicating cash flows to debt service and increasing vulnerability to adverse conditions**[293](index=293&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section summarizes Adobe's common stock repurchases for the three months ended August 29, 2025. The company repurchased 8.0 million shares, with $8.84 billion remaining under the March 2024 stock repurchase authority. This includes shares acquired through accelerated share repurchase agreements and other open market repurchases Stock Repurchases (Three Months Ended August 29, 2025) | Period | Total Number of Shares Repurchased (in millions) | Average Price Paid Per Share | Approximate Dollar Value that May Yet be Purchased Under the Plans (in millions) | | :-------------------- | :--------------------------------------------- | :--------------------------- | :---------------------------------------------------------------------------- | | Beginning repurchase authority | N/A | N/A | $10,900 | | May 31—June 27, 2025 | 3.1 | $382.56 (for other shares) | $(282) | | June 28—July 25, 2025 | 2.0 | $373.60 | $(766) | | July 26—August 29, 2025 | 2.9 | $353.26 | $(1,008) | | **Total** | **8.0** | N/A | **$8,844** | - **In March 2024, the Board authorized up to $25 billion in common stock repurchases through March 14, 2028**[304](index=304&type=chunk) - **An accelerated share repurchase agreement (ASR) initiated in March 2025 for $3.50 billion was settled in June 2025, resulting in the repurchase of 9.1 million shares at an average price of $383.14**[304](index=304&type=chunk) [Item 5. Other Information](index=50&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Form 10-Q, including corporate governance documents, certifications from the CEO and CFO, and Inline XBRL taxonomy files - **Exhibits include Restated Certificate of Incorporation, Amended and Restated Bylaws, and certifications from the CEO and CFO (Rule 13a-14(a) and 13a-14(b))**[308](index=308&type=chunk) - **Inline XBRL documents (Instance, Schema, Calculation, Labels, Presentation, Definition) are also filed as exhibits**[308](index=308&type=chunk) [Signature](index=52&type=section&id=Signature) This section contains the signature of Daniel Durn, Chief Financial Officer and Executive Vice President, Finance, Technology, Security and Operations, certifying the filing of the report on behalf of Adobe Inc. on September 24, 2025 - **The report is signed by Daniel Durn, Chief Financial Officer and Executive Vice President, Finance, Technology, Security and Operations, on September 24, 2025**[312](index=312&type=chunk) [Summary of Trademarks](index=53&type=section&id=Summary%20of%20Trademarks) This section lists key trademarks of Adobe Inc. or its subsidiaries referenced in the Form 10-Q, such as Acrobat, Adobe Analytics, Creative Cloud, Photoshop, and Firefly, noting that all other trademarks belong to their respective owners - **Key trademarks referenced in the Form 10-Q include Acrobat, Adobe Analytics, Adobe Express, Adobe Firefly, Creative Cloud, Photoshop, and Illustrator**[314](index=314&type=chunk)

[Executive Summary & Financial Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Financial%20Highlights) Cintas Corporation reported strong financial results for the first quarter of fiscal 2026, with significant increases across revenue, gross margin, operating income, net income, and diluted EPS. The company also continued its share buyback program and increased quarterly dividends Fiscal 2026 First Quarter Financial Performance (YoY) | Metric | Q1 FY2026 | Q1 FY2025 | % Change | | :-------------------------------- | :---------- | :---------- | :------- | | Revenue | $2.72 billion | $2.50 billion | 8.7% | | Organic Revenue Growth Rate | - | - | 7.8% | | Gross Margin | $1.37 billion | $1.25 billion | 9.1% | | Gross Margin as % of Revenue | 50.3% | 50.1% | +20 bps | | Operating Income | $617.9 million | $561.0 million | 10.1% | | Operating Income as % of Revenue | 22.7% | 22.4% | +30 bps | | Net Income | $491.1 million | $452.0 million | 8.7% | | Diluted Earnings Per Share (EPS) | $1.20 | $1.10 | 9.1% | Shareholder Returns (Q1 FY2026) | Activity | Amount | | :------------------ | :------------- | | Share Buybacks | $347.4 million | | Quarterly Dividend Paid | $182.3 million | | Dividend Increase (YoY) | 15.4% | [Management Commentary and Outlook](index=1&type=section&id=Management%20Commentary%20and%20Outlook) CEO Todd M. Schneider highlighted strong Q1 performance driven by disciplined execution and strategic investments. The company is focused on operational excellence, investing in people and platforms for sustainable growth, and maintaining balanced capital allocation. Cintas has also raised its full fiscal year 2026 financial guidance for both revenue and diluted EPS - Cintas' President and CEO, Todd M. Schneider, attributed **strong Q1 revenue growth and margin expansion** to disciplined execution, ongoing investment in technology and talent, and employee-partner commitment, reflecting the strength of their value proposition[7](index=7&type=chunk) - The company is focused on **operational excellence**, investing in people and platforms to position Cintas for **sustainable growth** and **long-term value creation**, supported by **robust cash flow generation** and **balanced capital allocation**[8](index=8&type=chunk) Updated Fiscal Year 2026 Financial Guidance | Metric | Previous Guidance | Updated Guidance | | :---------------- | :---------------------- | :--------------------- | | Annual Revenue | $11.00 billion to $11.15 billion | $11.06 billion to $11.18 billion | | Diluted EPS | $4.71 to $4.85 | $4.74 to $4.86 | - The total revenue guidance assumes the same number of workdays as fiscal year 2025, no future acquisitions, and a constant foreign currency exchange rate[8](index=8&type=chunk) [Company Profile and Webcast Information](index=2&type=section&id=Company%20Profile%20and%20Webcast%20Information) Cintas Corporation, a Fortune 500 company, provides a wide range of products and services to over one million businesses, helping them maintain clean, safe, and professional facilities and employees. The company also announced details for its fiscal 2026 first quarter results webcast - Cintas Corporation helps over **one million businesses** by providing products and services including uniforms, mats, mops, restroom supplies, workplace water services, first aid and safety products, safety training, and fire protection services[9](index=9&type=chunk) - Cintas is headquartered in Cincinnati, a publicly held **Fortune 500 company** traded on the Nasdaq Global Select Market under the symbol **CTAS**, and is a component of both the **S&P 500** and **Nasdaq-100 Indices**[9](index=9&type=chunk) - A live webcast to review the fiscal 2026 first quarter results was scheduled for **September 24, 2025, at 10:00 a.m. Eastern Time**, available on Cintas' website, with a replay available for two weeks[9](index=9&type=chunk) [Caution Concerning Forward-Looking Statements](index=2&type=section&id=CAUTION%20CONCERNING%20FORWARD-LOOKING%20STATEMENTS) This section serves as a cautionary statement regarding forward-looking statements made in the press release, emphasizing that such statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations - The press release contains forward-looking statements, including fiscal 2026 full-year guidance, protected by the **Private Securities Litigation Reform Act of 1995**[10](index=10&type=chunk) - Forward-looking statements are based on current expectations and are subject to various risks, uncertainties, and assumptions that could cause actual results to differ[10](index=10&type=chunk) - Factors that might cause differences include operating costs, sales volumes, customer loss, acquisition integration, supply chain constraints, macroeconomic conditions, changes in trade policies, material and labor costs, regulatory compliance, exchange rate fluctuations, environmental liabilities, cybersecurity threats, and litigation[10](index=10&type=chunk) [Additional Financial Guidance Details](index=2&type=section&id=Additional%20Financial%20Guidance%20Details) This section provides specific assumptions and expectations for Cintas' fiscal year 2026 financial guidance, particularly concerning net interest, effective tax rate, and the factors not included in the diluted EPS guidance - Fiscal year 2026 interest, net is expected to be approximately **$97.0 million**, an increase from **$95.0 million** in fiscal year 2025, primarily due to refinancing senior notes at a higher interest rate, partially offset by lower variable rate interest[11](index=11&type=chunk) - The expected interest, net may change based on future share buybacks or acquisition activity[11](index=11&type=chunk) - The fiscal year 2026 effective tax rate is expected to remain at **20.0%**, consistent with fiscal year 2025[11](index=11&type=chunk) - The diluted EPS guidance does not include any future share buybacks or significant economic disruptions or downturns[11](index=11&type=chunk) [Consolidated Condensed Statements of Income](index=3&type=section&id=Consolidated%20Condensed%20Statements%20of%20Income) This section presents the unaudited consolidated condensed statements of income for Cintas Corporation for the three months ended August 31, 2025, and August 31, 2024, detailing revenue, costs, operating income, and net income Consolidated Condensed Statements of Income (Unaudited, In thousands except per share data) | | Three Months Ended | | | | :-------------------------------------- | :---------------- | :---------------- | :------- | | | August 31, 2025 | August 31, 2024 | % Change | | **Revenue:** | | | | | Uniform rental and facility services | $ 2,091,066 | $ 1,933,839 | 8.1% | | Other | 627,056 | 567,748 | 10.4% | | **Total revenue** | **2,718,122** | **2,501,587** | **8.7%** | | **Costs and expenses:** | | | | | Cost of uniform rental and facility services | 1,052,553 | 981,163 | 7.3% | | Cost of other | 299,008 | 268,293 | 11.4% | | Selling and administrative expenses | 748,702 | 691,100 | 8.3% | | **Operating income** | **617,859** | **561,031** | **10.1%** | | Interest income | (2,209) | (1,250) | 76.7% | | Interest expense | 24,161 | 25,619 | (5.7)% | | **Income before income taxes** | **595,907** | **536,662** | **11.0%** | | Income taxes | 104,767 | 84,629 | 23.8% | | **Net income** | **$ 491,140** | **$ 452,033** | **8.7%** | | Basic earnings per share | $ 1.21 | $ 1.12 | 8.0% | | Diluted earnings per share | $ 1.20 | $ 1.10 | 9.1% | | Basic weighted average common shares outstanding | 403,292 | 403,382 | | | Diluted weighted average common shares outstanding | 409,294 | 410,496 | | [Supplemental Financial Data](index=4&type=section&id=Supplemental%20Financial%20Data) This section provides additional financial details, including a breakdown of gross margins by service type, a reconciliation of non-GAAP free cash flow, and a detailed segment-level performance analysis for the first quarter of fiscal 2026 and 2025 [Gross Margin and Net Income Margin Results](index=4&type=section&id=Gross%20Margin%20and%20Net%20Income%20Margin%20Results) Analysis of gross margin performance for uniform rental and facility services, other services, and total gross margin, alongside the net income margin for the first quarter of fiscal 2026 compared to the prior year Gross Margin and Net Income Margin Results | | Three Months Ended | | :------------------------------------ | :---------- | :---------------- | | | August 31, 2025 | August 31, 2024 | | Uniform rental and facility services gross margin | 49.7% | 49.3% | | Other gross margin | 52.3% | 52.7% | | Total gross margin | 50.3% | 50.1% | | Net income margin | 18.1% | 18.1% | [Non-GAAP Financial Measures: Free Cash Flow](index=4&type=section&id=Reconciliation%20of%20Non-GAAP%20Financial%20Measures) This section reconciles net cash provided by operations (GAAP) to free cash flow (non-GAAP), which management uses to evaluate the company's financial performance and its ability to fund ongoing business operations and growth Computation of Free Cash Flow (In thousands) | | Three Months Ended | | :-------------------------- | :---------------- | :---------------- | | | August 31, 2025 | August 31, 2024 | | Net cash provided by operations | $ 414,481 | $ 460,357 | | Capital expenditures | (101,957) | (92,921) | | Free cash flow | $ 312,524 | $ 367,436 | - Management uses **free cash flow** to assess the Company's **financial performance**, believing it is useful to investors as it relates **operating cash flow** to capital spent for continuing, improving, and growing business operations[19](index=19&type=chunk) [Supplemental Segment Data](index=5&type=section&id=SUPPLEMENTAL%20SEGMENT%20DATA) Detailed financial data is provided for Cintas' key segments: Uniform Rental and Facility Services, First Aid and Safety Services, and All Other, showing revenue, cost of sales, gross margin, selling and administrative expenses, and operating income for the first quarter of fiscal 2026 and 2025 Supplemental Segment Data (In thousands) | | Uniform Rental and Facility Services | First Aid and Safety Services | All Other | Total | | :------------------------------------ | :-------------------------------- | :---------------------------- | :---------- | :---------- | | **For the three months ended August 31, 2025** | | | | | | Revenue | $ 2,091,066 | $ 334,657 | $ 292,399 | $ 2,718,122 | | Cost of sales | 1,052,553 | 144,489 | 154,519 | 1,351,561 | | Gross margin | 1,038,513 | 190,168 | 137,880 | 1,366,561 | | Selling and administrative expenses | 538,576 | 109,841 | 100,285 | 748,702 | | Operating income | $ 499,937 | $ 80,327 | $ 37,595 | $ 617,859 | | **For the three months ended August 31, 2024** | | | | | | Revenue | $ 1,933,839 | $ 292,567 | $ 275,181 | $ 2,501,587 | | Cost of sales | 981,163 | 123,764 | 144,529 | 1,249,456 | | Gross margin | 952,676 | 168,803 | 130,652 | 1,252,131 | | Selling and administrative expenses | 506,238 | 97,515 | 87,347 | 691,100 | | Operating income | $ 446,438 | $ 71,288 | $ 43,305 | $ 561,031 | [Consolidated Condensed Balance Sheets](index=6&type=section&id=Consolidated%20Condensed%20Balance%20Sheets) This section presents the unaudited consolidated condensed balance sheets for Cintas Corporation as of August 31, 2025, and May 31, 2025, detailing assets, liabilities, and shareholders' equity Consolidated Condensed Balance Sheets (In thousands) | | August 31, 2025 | May 31, 2025 | | :------------------------------------------ | :---------------- | :---------------- | | **ASSETS** | | | | Current assets: | | | | Cash and cash equivalents | $ 138,143 | $ 263,973 | | Accounts receivable, net | 1,421,047 | 1,417,381 | | Inventories, net | 449,739 | 447,408 | | Uniforms and other rental items in service | 1,172,321 | 1,137,361 | | Prepaid expenses and other current assets | 194,676 | 170,046 | | Total current assets | 3,375,926 | 3,436,169 | | Property and equipment, net | 1,677,021 | 1,652,474 | | Investments | 369,503 | 339,518 | | Goodwill | 3,410,729 | 3,400,227 | | Service contracts, net | 298,025 | 309,828 | | Operating lease right-of-use assets, net | 244,067 | 224,383 | | Other assets, net | 462,419 | 462,642 | | **Total Assets** | **$ 9,837,690** | **$ 9,825,241** | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | Current liabilities: | | | | Accounts payable | $ 462,315 | $ 485,109 | | Accrued compensation and related liabilities | 135,185 | 229,538 | | Accrued liabilities | 779,672 | 875,077 | | Income taxes, current | 78,956 | 4,034 | | Operating lease liabilities, current | 51,691 | 50,744 | | Total current liabilities | 1,507,819 | 1,644,502 | | Long-term liabilities: | | | | Debt due after one year | 2,425,757 | 2,424,999 | | Deferred income taxes | 484,443 | 471,740 | | Operating lease liabilities | 197,818 | 178,738 | | Accrued liabilities | 466,153 | 420,781 | | Total long-term liabilities | 3,574,171 | 3,496,258 | | Shareholders' equity: | | | | Common stock, no par value, and paid-in capital | 2,694,077 | 2,593,479 | | Retained earnings | 12,107,250 | 11,798,451 | | Treasury stock | (10,125,516) | (9,791,838) | | Accumulated other comprehensive income | 79,889 | 84,389 | | Total shareholders' equity | 4,755,700 | 4,684,481 | | **Total Liabilities and Shareholders' Equity** | **$ 9,837,690** | **$ 9,825,241** | [Consolidated Condensed Statements of Cash Flows](index=7&type=section&id=Consolidated%20Condensed%20Statements%20of%20Cash%20Flows) This section presents the unaudited consolidated condensed statements of cash flows for Cintas Corporation for the three months ended August 31, 2025, and August 31, 2024, detailing cash flows from operating, investing, and financing activities Consolidated Condensed Statements of Cash Flows (Unaudited, In thousands) | | Three Months Ended | | :---------------------------------------------------------- | :---------------- | :---------------- | | | August 31, 2025 | August 31, 2024 | | **Cash flows from operating activities:** | | | | Net income | $ 491,140 | $ 452,033 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | Depreciation | 77,589 | 73,838 | | Amortization of intangible assets and capitalized contract costs | 48,348 | 46,554 | | Stock-based compensation | 30,348 | 33,367 | | Deferred income taxes | 13,496 | 1,887 | | Change in current assets and liabilities, net of acquisitions of businesses: | | | | Accounts receivable, net | (3,635) | (49,129) | | Inventories, net | (2,398) | 11,318 | | Uniforms and other rental items in service | (34,760) | (20,144) | | Prepaid expenses and other current assets and capitalized contract costs | (62,382) | (80,282) | | Accounts payable | (22,501) | 56,698 | | Accrued compensation and related liabilities | (94,275) | (86,965) | | Accrued liabilities and other | (101,114) | (44,268) | | Income taxes, current | 74,625 | 65,450 | | **Net cash provided by operating activities** | **414,481** | **460,357** | | **Cash flows from investing activities:** | | | | Capital expenditures | (101,957) | (92,921) | | Purchases of investments | (6,538) | (7,124) | | Acquisitions of businesses, net of cash acquired | (7,602) | (9,436) | | Other, net | (130) | 1 | | **Net cash used in investing activities** | **(116,227)** | **(109,480)** | | **Cash flows from financing activities:** | | | | Issuance of commercial paper, net | — | 166,000 | | Proceeds from exercise of stock-based compensation awards | 2,669 | 231 | | Dividends paid | (157,766) | (138,237) | | Repurchase of common stock | (266,097) | (614,802) | | Other, net | (2,807) | (4,461) | | **Net cash used in financing activities** | **(424,001)** | **(591,269)** | | Effect of exchange rate changes on cash and cash equivalents | (83) | (250) | | Net decrease in cash and cash equivalents | (125,830) | (240,642) | | Cash and cash equivalents at beginning of period | 263,973 | 342,015 | | **Cash and cash equivalents at end of period** | **$ 138,143** | **$ 101,373** |

PART I [Business Overview](index=3&type=section&id=ITEM%201.%20BUSINESS) THOR Industries, established in 1980, is the world's largest recreational vehicle (RV) manufacturer, dominating North American and European markets through decentralized operations - THOR Industries is the world's largest recreational vehicle (RV) manufacturer, dominating both North American and European markets[10](index=10&type=chunk) - The company manufactures towable and motorized RVs in North America through subsidiaries like Airstream, Jayco, and Keystone, and various RV types in Europe via Erwin Hymer Group (EHG)[11](index=11&type=chunk)[12](index=12&type=chunk) - Subsidiaries like Airxcel and Postle provide RV-related components and aluminum extrusions, supporting RV manufacturers and the aftermarket[22](index=22&type=chunk)[23](index=23&type=chunk) General - THOR Industries, founded in 1980, is the world's largest recreational vehicle (RV) manufacturer and a leading producer in both North America and Europe[10](index=10&type=chunk) - The company manufactures various RVs, related components, and accessories in the U.S. and Europe, primarily selling to independent dealers in the U.S., Canada, and Europe[10](index=10&type=chunk) North American Recreational Vehicles - THOR is the largest RV manufacturer in North America by both volume and revenue, maintaining a leading position through fiscal years 2025, 2024, and 2023[13](index=13&type=chunk) - Key North American operating subsidiaries include Airstream (premium towable and motorized RVs), Jayco (towable, fifth-wheel, and motorized RVs), Keystone, KZ, Thor Motor Coach, and Tiffin Group[11](index=11&type=chunk)[13](index=13&type=chunk)[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) - Heartland's operations (conventional travel trailers and fifth-wheel RVs) will be reported under Jayco starting in fiscal year 2026[14](index=14&type=chunk) European Recreational Vehicles - THOR is a leading recreational vehicle manufacturer in Europe through its Erwin Hymer Group (EHG) subsidiary[20](index=20&type=chunk) - EHG produces multiple brands, including Buccaneer, Buerstner, Carado, Dethleffs, and Hymer, across nine primary European production facilities, covering both motorized and towable RVs[21](index=21&type=chunk) Other Businesses - Airxcel, Inc. produces a comprehensive range of high-quality RV-related products through its operating divisions and subsidiaries, primarily for RV OEMs and aftermarket sales via dealers and retailers[22](index=22&type=chunk) - Postle Operating, LLC manufactures and sells aluminum extrusions and specialty component products to RV and other manufacturers[23](index=23&type=chunk) Product Line Sales and Segment Information - The company operates with three reportable segments: North American Towable Recreational Vehicles, North American Motorized Recreational Vehicles, and European Recreational Vehicles[24](index=24&type=chunk) - Airxcel and Postle subsidiaries' operations are categorized under "Other," primarily involving sales of aluminum extrusions and specialty RV components[25](index=25&type=chunk) Contribution to Net Sales by Reportable Segment (Fiscal Years 2023-2025) | | 2025 | | | 2024 | | | | 2023 | | |---|---|---|---|---|---|---|---|---|---| | | Amount | % | Amount | % | Amount | % | | Recreational vehicles: | | | | | | | | North American Towable | $3,784,666 | 39.5 | $3,679,671 | 36.6 | $4,202,628 | 37.8 | | North American Motorized | 2,175,604 | 22.7 | 2,445,850 | 24.4 | 3,314,170 | 29.8 | | European | 3,023,961 | 31.6 | 3,364,980 | 33.5 | 3,037,147 | 27.3 | | Total recreational vehicles | 8,984,231 | 93.8 | 9,490,501 | 94.5 | 10,553,945 | 94.9 | | Other | 859,609 | 9.0 | 781,927 | 7.8 | 777,639 | 7.0 | | Intercompany eliminations | (264,350) | (2.8) | (229,020) | (2.3) | (209,979) | (1.9) | | Total | $9,579,490 | 100.0 | $10,043,408 | 100.0 | $11,121,605 | 100.0 | Recreational Vehicle Product Classification - North American RVs primarily include towable RVs (such as conventional travel trailers and fifth-wheel travel trailers) and motorized RVs (Class A, C, and B)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) - European RVs include towable caravans, motorcaravans, campervans, and urban vehicles, with European products emphasizing lightweight and compact designs[28](index=28&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) Production - RVs are typically produced based on dealer orders to minimize inventory; North American capacity adjustments are relatively quick and low-cost, while European adjustments are longer and more expensive[39](index=39&type=chunk) - The company relies on a limited number of chassis suppliers, and chassis supply constraints have previously caused production disruptions and may recur[40](index=40&type=chunk)[41](index=41&type=chunk) - Europe continues to face increased costs, intermittent shortages, and delivery delays for non-chassis raw material components in the current fiscal year, impacting production efficiency[43](index=43&type=chunk) Seasonality - RV sales are seasonal, typically lower in winter months (second fiscal quarter) and higher in spring and summer, though strong consumer demand or macro/social disruptions may alter these patterns[46](index=46&type=chunk) Marketing and Distribution - The company primarily sells RVs through independent, non-franchised dealers in the U.S., Canada, and Europe, with approximately **2,400 dealers in North America** and **1,100 in Europe** as of July 31, 2025[47](index=47&type=chunk) - FreedomRoads, LLC accounted for approximately **14.0% of the company's consolidated net sales in fiscal 2025**, and **14.0% and 13.0% in fiscal 2024 and 2023**, respectively[52](index=52&type=chunk) - The company generally does not directly finance dealer purchases but enters into repurchase agreements with lenders upon request, committing to repurchase vehicles if a dealer defaults[53](index=53&type=chunk) Backlog - The increase in North American motorized RV backlog is primarily due to lower retail sales as of July 31, 2024, and dealer and consumer concerns regarding higher interest rates and carrying costs[54](index=54&type=chunk) - The decrease in European recreational vehicle backlog is primarily due to improved chassis supply and normalized dealer inventory levels as of July 31, 2025[56](index=56&type=chunk) Recreational Vehicle Backlog (as of July 31) | | July 31, 2025 | | July 31, 2024 | | Change | % | |---|---|---|---|---|---|---| | Recreational vehicles | | | | | | | | North American Towable | $525,014 | $552,379 | $(27,365) | (5.0) | | North American Motorized | 1,004,620 | 776,903 | 227,717 | 29.3 | | Total North America | 1,529,634 | 1,329,282 | 200,352 | 15.1 | | European | 1,525,592 | 1,950,793 | (425,201) | (21.8) | | Total | $3,055,226 | $3,280,075 | $(224,849) | (6.9) | Product Warranties - North American RV retail purchasers typically receive a **one-to-two-year limited warranty** for defects in materials and workmanship, with longer terms for certain structural components[58](index=58&type=chunk) - European RVs generally offer a **two-year limited warranty** on structural components and up to a **12-year warranty** against water ingress[58](index=58&type=chunk) Regulation - The company complies with vehicle safety and compliance standards from the U.S. RVIA, NHTSA, and those in Canada and Europe[59](index=59&type=chunk) - Operations are subject to environmental control standards for air, water, and noise pollution, as well as workplace health and safety standards[60](index=60&type=chunk)[61](index=61&type=chunk) - The company believes its products and facilities comply in all material respects with applicable regulations and anticipates no significant impact on capital expenditures, earnings, or competitive position from ongoing compliance in the foreseeable future[62](index=62&type=chunk) Competition - The RV industry is highly competitive with low barriers to entry, featuring approximately **80 North American** and **30 European manufacturers**[63](index=63&type=chunk) - As of June 30, 2025, THOR's retail market share in the U.S. and Canada was approximately **39.1% for towable and fifth-wheel RVs** and **48.3% for motorized RVs**[64](index=64&type=chunk) - EHG's retail market share in Europe was approximately **26.1% for motorized RVs and campervans** and **17.3% for caravans**[65](index=65&type=chunk) Trademarks and Patents - The company holds registered trademarks and patents in the U.S., Canada, Germany, and other international markets, and does not rely on third-party patents or technology licenses[66](index=66&type=chunk) Human Capital Resources - As of July 31, 2025, the company employed approximately **20,900 full-time team members globally**, with **13,200 in the U.S.** and **7,700 in Europe**[68](index=68&type=chunk) - The company is committed to a "people-first" culture, offering competitive compensation and benefits, and prioritizing team member safety and well-being[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - The company provides annual training on its Business Ethics Policy to certain employees and offers an anonymous reporting channel to ensure ethical conduct[74](index=74&type=chunk) Forward-Looking Statements - This annual report contains forward-looking statements, and actual results may differ materially from expectations[76](index=76&type=chunk) - Risk factors include inflation, raw material and chassis supply constraints, geopolitical events, interest rate fluctuations, warranty and recall claims, dealer financial health, regulatory changes, and competition[76](index=76&type=chunk)[79](index=79&type=chunk) Available Information - The company's annual reports (10-K), quarterly reports (10-Q), current reports (8-K), and proxy statements are available free of charge on its website and the SEC's website[78](index=78&type=chunk) [Risk Factors](index=14&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces risks from macroeconomic volatility, intense competition, supply chain dependency, product liabilities, dealer concentration, international operations, and regulatory compliance - RV industry sales are highly volatile, influenced by macroeconomic conditions (such as inflation and interest rates) and consumer sentiment, exhibiting cyclical and seasonal patterns[82](index=82&type=chunk)[83](index=83&type=chunk) - The company heavily relies on suppliers for timely raw materials and components, especially chassis, where shortages or price fluctuations can disrupt production and increase costs[94](index=94&type=chunk)[97](index=97&type=chunk)[100](index=100&type=chunk) - Product recalls, customer satisfaction initiatives, and product liability claims could materially and adversely affect the company's financial condition and reputation[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - Reliance on key independent dealers (e.g., FreedomRoads, LLC) and dealer consolidation trends could negatively impact business[109](index=109&type=chunk)[110](index=110&type=chunk) - International operations face risks from exchange rate fluctuations, tariffs, regulatory differences, and geopolitical events[111](index=111&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - Increasingly stringent climate-related regulations, ESG matters, data privacy, and AI regulations may lead to additional costs, restrict product use, or harm the company's reputation[133](index=133&type=chunk)[136](index=136&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) Macroeconomic, Market, and Strategic Risks - RV industry sales are highly volatile, influenced by macroeconomic conditions (such as inflation and interest rates) and consumer sentiment, exhibiting cyclical and seasonal patterns[82](index=82&type=chunk)[83](index=83&type=chunk) - The company's stock price may fluctuate significantly due to various factors, including competitor new products, government regulatory changes, global economic conditions, interest rate changes, and investor sentiment[85](index=85&type=chunk)[86](index=86&type=chunk) - The RV industry is highly competitive with low barriers to entry, featuring competition from existing manufacturers, new entrants, the used RV market, and other leisure spending options[88](index=88&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) - The company's long-term success depends on its ability to innovate, including developing and marketing new products (e.g., electric and hybrid RVs) that meet consumer demand, but these investments are costly and uncertain[92](index=92&type=chunk)[93](index=93&type=chunk) Operational Risks - The company heavily relies on suppliers for timely raw materials and components, especially chassis, where shortages, production issues, or transportation delays can disrupt operations and increase manufacturing costs[94](index=94&type=chunk)[97](index=97&type=chunk)[101](index=101&type=chunk) - Fluctuations in raw material and component prices, along with changes in tariff policies, could increase costs and impact profit margins if not passed on to dealers[100](index=100&type=chunk) - Product recalls, customer satisfaction initiatives, and product liability claims could materially and adversely affect the company's financial condition and reputation[105](index=105&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - Reliance on key independent dealers (e.g., FreedomRoads, LLC) and dealer consolidation trends could negatively impact business and increase concentration risk for repurchase obligations[109](index=109&type=chunk)[110](index=110&type=chunk) - International sales (accounting for **36.1% of consolidated sales in fiscal 2025**) expose the company to risks from exchange rate fluctuations, tariffs, international legal compliance, supply chain disruptions, and economic/social instability[111](index=111&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - Attracting and retaining experienced skilled labor, managing rising labor costs and employee benefits, and potential unionization efforts are critical for the company's long-term success and competitiveness[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) Legal and Regulatory Risks - Climate-related regulations (e.g., emissions standards, zero-emission vehicle mandates) and increasing ESG focus may lead to additional compliance costs, restrict product use, or harm the company's reputation and stock price[133](index=133&type=chunk)[134](index=134&type=chunk)[136](index=136&type=chunk)[138](index=138&type=chunk) - Stricter privacy, data use, data protection, and artificial intelligence laws and regulations could result in increased compliance costs, fines, litigation, or reputational damage[139](index=139&type=chunk) - The company's operations are subject to numerous national, regional, federal, state, and local regulations, and any non-compliance or product recalls could materially and adversely affect operating results and reputation[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - Anti-takeover provisions in the company's organizational documents may delay or prevent a change in control, thereby limiting shareholders' ability to receive a premium[143](index=143&type=chunk)[144](index=144&type=chunk) Financial Risks - Changes in tax rates, tax laws, or tariffs could negatively impact the company's operating results, cash flows, financial condition, dividend payments, or strategic plans[145](index=145&type=chunk)[147](index=147&type=chunk) - The company's repurchase agreements with lenders financing dealer inventory, totaling **$3.484 billion in commercial commitments** as of July 31, 2025, could lead to increased future costs[149](index=149&type=chunk)[150](index=150&type=chunk)[457](index=457&type=chunk) - The company holds significant goodwill, intangible assets, equity investments, and other long-term assets, which may incur impairment charges due to changes in business conditions, poor operating performance, or adjustments to valuation assumptions[151](index=151&type=chunk)[283](index=283&type=chunk)[284](index=284&type=chunk) - The availability and terms of financing for dealers and retail purchasers, particularly interest rates and credit availability, significantly impact product demand and company performance[152](index=152&type=chunk)[153](index=153&type=chunk) - The company's debt arrangements (totaling **$933.8 million** as of July 31, 2025) make it more sensitive to economic downturns and may limit future financing capacity and debt costs[155](index=155&type=chunk)[158](index=158&type=chunk) [Unresolved Staff Comments](index=26&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) There are no unresolved staff comments in this report - There are no unresolved staff comments in this report[160](index=160&type=chunk) [Cybersecurity Risk Management, Strategy, and Governance](index=26&type=section&id=ITEM%201C.%20CYBERSECURITY%20RISK%20MANAGEMENT,%20STRATEGY%20AND%20GOVERNANCE) The company dedicates significant resources to its cybersecurity program, integrating it into the overall risk management system to identify, assess, and mitigate cyber threats, with board oversight - The company dedicates significant resources to its cybersecurity program, integrating it into the overall risk management system to identify, assess, and mitigate cyber threats[160](index=160&type=chunk) - Cybersecurity measures include penetration testing, internal testing, phishing simulations, and employee training, with cybersecurity insurance purchased to cover potential information security breach costs[161](index=161&type=chunk)[162](index=162&type=chunk) - The Board's Audit Committee oversees cybersecurity threat risks, with the Data Protection Officer (possessing nearly **25 years of cybersecurity experience**) regularly reporting to the Audit Committee and the Board[164](index=164&type=chunk)[165](index=165&type=chunk) - No cybersecurity threats with a material impact on the company's business strategy, operating results, or financial condition were identified in fiscal year 2025[163](index=163&type=chunk) Risk Management and Strategy - The company integrates cybersecurity risk management processes into its overall risk management system, regularly identifying and assessing threats, and developing mitigation strategies[160](index=160&type=chunk) - Internal measures include penetration testing, internal testing/code reviews, phishing simulations, and employee cybersecurity training[161](index=161&type=chunk) - The company maintains cybersecurity insurance to cover potential information security breach costs, and no material cybersecurity threats were identified in fiscal year 2025[162](index=162&type=chunk)[163](index=163&type=chunk) Governance - The company's Board of Directors' Audit Committee is responsible for overseeing cybersecurity threat risks[164](index=164&type=chunk) - The Data Protection Officer, reporting directly to the General Counsel, is responsible for the overall cybersecurity risk management program and regularly provides cybersecurity risk reports to the Audit Committee and the Board[164](index=164&type=chunk)[165](index=165&type=chunk) [Properties](index=27&type=section&id=ITEM%202.%20PROPERTIES) As of July 31, 2025, THOR Industries owns or leases approximately 24.136 million square feet of manufacturing and office space globally, primarily in Indiana and Germany, which are well-maintained and sufficient for intended use - As of July 31, 2025, the company owns or leases approximately **24,136,000 square feet** of manufacturing and office space globally[166](index=166&type=chunk)[167](index=167&type=chunk) - Primary properties are concentrated in Indiana, U.S. (**12,612,000 square feet**), and Germany, Europe (**4,065,000 square feet**)[167](index=167&type=chunk) - The company believes its existing facilities are well-maintained, in good condition, and sufficient for their intended purposes[166](index=166&type=chunk) [Legal Proceedings](index=28&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is involved in routine litigation, including 'lemon law' and warranty claims, but management believes these will not materially impact its financial position, with past product recalls and investigations resolved - The company is involved in routine litigation, primarily based on state "lemon laws," warranty claims, and vehicle accidents, and maintains insurance coverage exceeding its self-insured retention for these matters[168](index=168&type=chunk) - Management believes the ultimate disposition of any current legal proceedings or claims will not have a material adverse effect on the company's financial condition, results of operations, or cash flows[168](index=168&type=chunk) - A product recall at the end of fiscal 2021 and a German vehicle weight disclosure investigation in fiscal 2022 have been resolved, with no material impact on the company's operating results in fiscal 2025[169](index=169&type=chunk)[170](index=170&type=chunk)[463](index=463&type=chunk) [Mine Safety Disclosures](index=28&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable - This item is not applicable[171](index=171&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=29&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT'S%20COMMON%20EQUITY,%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on the NYSE, with 131 registered shareholders as of September 16, 2025; the Board plans to continue quarterly cash dividends, and the company repurchased **$52.647 million** of common stock in fiscal 2025, with a new **$400 million** authorization approved - The company's common stock (par value **$0.10 per share**) trades on the New York Stock Exchange (NYSE) under the ticker symbol 'THO'[173](index=173&type=chunk) - As of September 16, 2025, there were **131 registered holders** of the company's common stock[173](index=173&type=chunk) - The Board plans to continue regular quarterly cash dividends in the future, subject to earnings, cash flow, and existing financing agreement conditions[175](index=175&type=chunk) - In fiscal 2025, the company repurchased **586,558 shares of common stock** totaling **$52.647 million**; as of July 31, 2025, **$379.3 million remained** under a new **$400 million stock repurchase authorization** (approved June 18, 2025, expiring July 31, 2027)[178](index=178&type=chunk)[977](index=977&type=chunk)[978](index=978&type=chunk) Market Information - The company's common stock (par value **$0.10 per share**) trades on the New York Stock Exchange (NYSE) under the ticker symbol 'THO'[173](index=173&type=chunk) Holders - As of September 16, 2025, there were **131 registered holders** of the company's common stock[173](index=173&type=chunk) Dividends - The company's Board of Directors currently plans to continue regular quarterly cash dividends in the future[175](index=175&type=chunk) - Dividend payments are subject to specific payment conditions in existing credit agreements, including minimum adjusted excess cash availability and fixed charge coverage tests[175](index=175&type=chunk) Quarterly Dividend Payments | Fiscal Year | Quarterly Dividend Per Share | | :--- | :----------- | | 2025 | $0.50 | | 2024 | $0.48 | Unregistered Sales of Equity Securities and Use of Proceeds - In fiscal 2025, the company repurchased **586,558 shares of common stock** at a weighted-average price of **$89.76**, totaling **$52.647 million**[178](index=178&type=chunk)[977](index=977&type=chunk) - On June 18, 2025, the Board approved a new **$400 million stock repurchase authorization**, effective until July 31, 2027, with **$379.3 million remaining** under the authorization as of July 31, 2025[178](index=178&type=chunk)[975](index=975&type=chunk)[978](index=978&type=chunk) Stock Repurchase Summary (Three Months Ended July 31, 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 | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs | | :--------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------------- | :------------------------------------------------------------------------------------- | | 5/1/25 – 5/31/25 | — | — | — | $421,095 | | 6/1/25 – 6/30/25 | 453,116 | $88.98 | 453,116 | $389,903 | | 7/1/25 – 7/31/25 | 117,242 | $90.44 | 117,242 | $379,300 | | | 570,358 | $89.28 | 570,358 | | [ (Reserved)](index=31&type=section&id=ITEM%206.%20(RESERVED)) This item is reserved - This item is reserved[8](index=8&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=ITEM%207.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) In fiscal 2025, consolidated net sales decreased **4.6% to $9.579 billion**, gross margin fell **0.5 percentage points to 14.0%**, and income before taxes dropped **15.1% to $296 million**, driven by demand shifts and macroeconomic factors - Consolidated net sales for fiscal 2025 decreased by **4.6%**, primarily due to lower demand in the North American motorized and European segments, partially offset by sales growth in the North American towable segment[227](index=227&type=chunk) - Income before income taxes for fiscal 2025 decreased by **15.1%**, primarily impacted by lower consolidated net sales and increased selling, general, and administrative expenses[231](index=231&type=chunk) - The company prioritizes using cash flow to reduce debt, maintain and grow dividend payments, fund organic growth, and pursue opportunistic acquisitions[266](index=266&type=chunk) Consolidated Financial Performance Summary (Fiscal Years 2025 vs. 2024) | Metric | Fiscal 2025 (Amount) | Fiscal 2024 (Amount) | Change (Amount) | Change (%) | | :------------------------------------ | :------------------- | :------------------- | :---------------- | :--------- | | Net Sales | $9,579,490 | $10,043,408 | $(463,918) | (4.6) | | Gross Profit | $1,340,641 | $1,451,962 | $(111,321) | (7.7) | | Gross Profit % of Net Sales | 14.0% | 14.5% | (0.5) pp | | | Selling, General & Administrative Expenses | $922,554 | $895,531 | $27,023 | 3.0 | | SG&A % of Net Sales | 9.6% | 8.9% | 0.7 pp | | | Income Before Income Taxes | $296,191 | $348,844 | $(52,653) | (15.1) | | Effective Income Tax Rate | 13.4% | 23.9% | (10.5) pp | | Executive Summary - THOR is the world's largest RV manufacturer, dominating both North American and European markets with a business model that includes decentralized operating units[183](index=183&type=chunk)[184](index=184&type=chunk) - In fiscal 2025, consumer confidence, inflation, and high interest rates negatively impacted RV wholesale and retail demand in North America and Europe[186](index=186&type=chunk) Significant Fiscal 2025 Events - The Omnibus Beautiful Bill (OBBB) was signed into law on July 4, 2025, with the most relevant impact for fiscal 2025 being **100% bonus depreciation** for qualified assets[187](index=187&type=chunk) - Other relevant OBBB provisions will impact the company in fiscal years 2026 and 2027, including the expensing of U.S. R&D costs and changes to international tax provisions[187](index=187&type=chunk) Significant Fiscal 2024 Events - On November 15, 2023, the company amended its term loan and ABL agreements, extending maturity dates and reducing applicable interest rates for U.S. dollar-denominated loans[188](index=188&type=chunk) - On July 1, 2024, the company further amended its term loan, reducing applicable interest rates for both U.S. dollar and Euro-denominated loans[189](index=189&type=chunk) - These amendments resulted in total charges of **$14.741 million** recognized in fiscal 2024, primarily comprising debt extinguishment costs and third-party expenses[188](index=188&type=chunk)[429](index=429&type=chunk) North American RV Industry - As of July 31, 2025, North American RV independent dealer inventory decreased by **2.3% to approximately 73,300 units**[191](index=191&type=chunk) - As of July 31, 2025, THOR's total North American RV backlog increased by **15.1% to $1.5296 billion**, primarily driven by an increase in North American motorized RV backlog[193](index=193&type=chunk) - RVIA forecasts North American wholesale unit shipments to increase by **1.0% to approximately 337,000 units in calendar year 2025**, and by **3.6% to approximately 349,300 units in calendar year 2026**[195](index=195&type=chunk)[196](index=196&type=chunk) - Despite recent challenges, the company remains optimistic about the long-term outlook for North American retail sales, believing consumer interest in the RV lifestyle remains strong[202](index=202&type=chunk)[203](index=203&type=chunk) North American RV Industry Wholesale Unit Shipments (Six Months Ended June 30) | | U.S. and Canada Wholesale Unit Shipments | | | | |---|---|---|---|---| | | Six Months Ended June 30, | | Increase | % | | | 2025 | 2024 | (Decrease) | Change | | North American Towable units | 172,041 | 159,407 | 12,634 | 7.9 | | North American Motorized units | 18,664 | 19,189 | (525) | (2.7) | | Total | 190,705 | 178,596 | 12,109 | 6.8 | North American RV Industry Retail Unit Registrations (Six Months Ended June 30) | | U.S. and Canada Retail Unit Registrations | | | | |---|---|---|---|---| | | Six Months Ended June 30, | | Increase | % | | | 2025 | 2024 | (Decrease) | Change | | North American Towable units | 166,013 | 169,013 | (3,000) | (1.8) | | North American Motorized units | 19,665 | 21,697 | (2,032) | (9.4) | | Total | 185,678 | 190,710 | (5,032) | (2.6) | European RV Industry - As of July 31, 2025, European RV independent dealer inventory was approximately **22,200 units**, down from **26,200 units** as of July 31, 2024[210](index=210&type=chunk) - As of July 31, 2025, European recreational vehicle backlog decreased by **21.8% to $1.5256 billion**, primarily due to improved chassis supply and normalized dealer inventory levels[211](index=211&type=chunk) - Despite short-term macroeconomic impacts, the company remains positive about the long-term growth prospects for European RV retail sales, driven by favorable demographic trends and increasing popularity of the RV lifestyle[216](index=216&type=chunk) European RV Industry Retail Unit Registrations (Six Months Ended June 30) | | European Unit Registrations | | | | | | |---|---|---|---|---|---|---| | | (2) Motorcaravan and Campervan | | | Caravan | | | | | Six Months Ended June 30, | | % | Six Months Ended June 30, | | % | | | 2025 | 2024 | Change | 2025 | 2024 | Change | | (1) OEM Reporting Countries | 82,524 | 82,909 | (0.5) | 24,869 | 26,898 | (7.5) | | (1) Non-OEM Reporting Countries | 12,139 | 11,901 | 2.0 | 6,393 | 7,776 | (17.8) | | Total | 94,663 | 94,810 | (0.2) | 31,262 | 34,674 | (9.8) | Results of Operations Consolidated Financial Performance - Consolidated net sales for fiscal 2025 decreased by **4.6% year-over-year to $9.579 billion**, primarily due to lower demand in the North American motorized and European segments[227](index=227&type=chunk) - Consolidated gross profit for fiscal 2025 decreased by **7.7% year-over-year to $1.341 billion**, with gross margin declining from **14.5% to 14.0%**, primarily due to lower sales and increased sales discounts[228](index=228&type=chunk) - Income before income taxes for fiscal 2025 decreased by **15.1% year-over-year to $296 million**, primarily impacted by lower consolidated net sales and increased selling, general, and administrative expenses[231](index=231&type=chunk) - The effective income tax rate for fiscal 2025 decreased from **23.9% to 13.4%**, primarily benefiting from foreign tax law changes (revaluation of deferred tax liabilities due to lower German corporate income tax rates) and a favorable mix of profitable jurisdictions[232](index=232&type=chunk)[445](index=445&type=chunk) Consolidated Operating Results (Fiscal Years 2025 vs. 2024) | | | FISCAL 2025 | FISCAL 2024 | | Change | % | |---|---|---|---|---|---|---| | NET SALES: | | | | | | | | Recreational vehicles | | | | | | | | North American Towable | $3,784,666 | $3,679,671 | $104,995 | 2.9 | | North American Motorized | 2,175,604 | 2,445,850 | (270,246) | (11.0) | | Total North America | 5,960,270 | 6,125,521 | (165,251) | (2.7) | | European | 3,023,961 | 3,364,980 | (341,019) | (10.1) | | Total recreational vehicles | 8,984,231 | 9,490,501 | (506,270) | (5.3) | | Other | 859,609 | 781,927 | 77,682 | 9.9 | | Intercompany eliminations | (264,350) | (229,020) | (35,330) | (15.4) | | Total | $9,579,490 | $10,043,408 | $(463,918) | (4.6) | Consolidated Gross Profit (Fiscal Years 2025 vs. 2024) | | | % of | | | % of | | | | |---|---|---|---|---|---|---|---|---| | | FISCAL 2025 | Segment | FISCAL 2024 | Segment | | Change | % | | | | Net Sales | | Net Sales | Amount | Change | | GROSS PROFIT: | | | | | | | | | Recreational vehicles | | | | | | | | | North American Towable | $496,976 | 13.1 | $427,386 | 11.6 | $69,590 | 16.3 | | North American Motorized | 210,634 | 9.7 | 277,840 | 11.4 | (67,206) | (24.2) | | Total North America | 707,610 | 11.9 | 705,226 | 11.5 | 2,384 | 0.3 | | European | 460,319 | 15.2 | 581,211 | 17.3 | (120,892) | (20.8) | | Total recreational vehicles | 1,167,929 | 13.0 | 1,286,437 | 13.6 | (118,508) | (9.2) | | Other, net | 172,712 | 20.1 | 165,525 | 21.2 | 7,187 | 4.3 | | Total | $1,340,641 | 14.0 | $1,451,962 | 14.5 | $(111,321) | (7.7) | Consolidated Income Before Income Taxes (Fiscal Years 2025 vs. 2024) | | | | % of | | % of | | Change | % | |---|---|---|---|---|---|---|---|---| | | | FISCAL 2025 | Segment | FISCAL 2024 | Segment | Amount | Change | | | | | Net Sales | | Net Sales | | | | INCOME (LOSS) BEFORE INCOME | | | | | | | | | TAXES: | | | | | | | | | Recreational vehicles | | | | | | | | | North American Towable | $247,012 | 6.5 | $169,232 | 4.6 | $77,780 | 46.0 | | North American Motorized | 85,343 | 3.9 | 126,496 | 5.2 | (41,153) | (32.5) | | Total North America | 332,355 | 5.6 | 295,728 | 4.8 | 36,627 | 12.4 | | European | 101,634 | 3.4 | 231,377 | 6.9 | (129,743) | (56.1) | | Total recreational vehicles | 433,989 | 4.8 | 527,105 | 5.6 | (93,116) | (17.7) | | Other, net | 53,740 | 6.3 | 45,299 | 5.8 | 8,441 | 18.6 | | Corporate | (191,538) | — | (223,560) | — | 32,022 | 14.3 | | Total | $296,191 | 3.1 | $348,844 | 3.5 | $(52,653) | (15.1) | Segment Reporting North American Towable Recreational Vehicles - Net sales increased by **2.9%**, primarily driven by a **6.2% increase in unit shipments**, despite a **3.3% decrease in net price per unit** due to a product mix shift towards mid-priced units[237](index=237&type=chunk)[238](index=238&type=chunk) - Gross profit increased by **16.3%**, with gross margin improving from **11.6% to 13.1%**, primarily due to a lower percentage of cost of products sold, including reduced sales discounts and improved warranty costs[239](index=239&type=chunk)[241](index=241&type=chunk) North American Towable Recreational Vehicles Segment Performance (Fiscal Years 2025 vs. 2024) | Metric | Fiscal 2025 (Amount) | Fiscal 2024 (Amount) | Change (Amount) | Change (%) | | :------------------------------------ | :------------------- | :------------------- | :---------------- | :--------- | | Net Sales | $3,784,666 | $3,679,671 | $104,995 | 2.9 | | Unit Shipments | 119,790 | 112,830 | 6,960 | 6.2 | | Gross Profit | $496,976 | $427,386 | $69,590 | 16.3 | | Gross Profit % of Net Sales | 13.1% | 11.6% | 1.5 pp | | | Income Before Income Taxes | $247,012 | $169,232 | $77,780 | 46.0 | North American Motorized Recreational Vehicles - Net sales decreased by **11.0%**, primarily due to an **8.6% decrease in unit shipments** and a **2.4% decrease in net price per unit**, the latter influenced by increased sales discounts and a product mix shift towards mid-priced gasoline models[245](index=245&type=chunk)[246](index=246&type=chunk) - Gross profit decreased by **24.2%**, with gross margin declining from **11.4% to 9.7%**, primarily due to lower sales and an increased percentage of cost of products sold, driven by higher sales discounts and product mix changes[247](index=247&type=chunk)[249](index=249&type=chunk) North American Motorized Recreational Vehicles Segment Performance (Fiscal Years 2025 vs. 2024) | Metric | Fiscal 2025 (Amount) | Fiscal 2024 (Amount) | Change (Amount) | Change (%) | | :------------------------------------ | :------------------- | :------------------- | :---------------- | :--------- | | Net Sales | $2,175,604 | $2,445,850 | $(270,246) | (11.0) | | Unit Shipments | 17,153 | 18,761 | (1,608) | (8.6) | | Gross Profit | $210,634 | $277,840 | $(67,206) | (24.2) | | Gross Profit % of Net Sales | 9.7% | 11.4% | (1.7) pp | | | Income Before Income Taxes | $85,343 | $126,496 | $(41,153) | (32.5) | European Recreational Vehicles - Net sales decreased by **10.1%**, primarily due to a **19.7% decrease in unit shipments**, partially offset by a **9.6% increase in net price per unit**, influenced by foreign currency exchange rate changes and a product mix shift towards motorized RVs[254](index=254&type=chunk)[255](index=255&type=chunk) - Gross profit decreased by **20.8%**, with gross margin declining from **17.3% to 15.2%**, primarily due to lower sales and an increased percentage of material and manufacturing costs[258](index=258&type=chunk)[259](index=259&type=chunk)[260](index=260&type=chunk) European Recreational Vehicles Segment Performance (Fiscal Years 2025 vs. 2024) | Metric | Fiscal 2025 (Amount) | Fiscal 2024 (Amount) | Change (Amount) | Change (%) | | :------------------------------------ | :------------------- | :------------------- | :---------------- | :--------- | | Net Sales | $3,023,961 | $3,364,980 | $(341,019) | (10.1) | | Unit Shipments | 44,445 | 55,317 | (10,872) | (19.7) | | Gross Profit | $460,319 | $581,211 | $(120,892) | (20.8) | | Gross Profit % of Net Sales | 15.2% | 17.3% | (2.1) pp | | | Income Before Income Taxes | $101,634 | $231,377 | $(129,743) | (56.1) | Liquidity and Capital Resources - As of July 31, 2025, cash and cash equivalents increased by **$85.28 million to $586.6 million**, with **$412.1 million held in the U.S.** and **$174.5 million in Europe**[263](index=263&type=chunk) - As of July 31, 2025, net working capital was **$1.193 billion**, up from **$1.083 billion** as of July 31, 2024[264](index=264&type=chunk) - The company expects its cash and cash equivalents on hand, funds generated from operations, and available funds under its revolving asset-based credit facility (approximately **$840 million** as of July 31, 2025) to be sufficient for foreseeable operating needs[265](index=265&type=chunk) - The company prioritizes using cash flow to reduce debt, maintain and grow dividend payments, fund organic growth, and pursue opportunistic acquisitions and stock repurchases[266](index=266&type=chunk) Operating Activities - Net cash provided by operating activities for fiscal 2025 was **$577.9 million**, primarily from net income adjusted for non-cash items (**$512 million**) and an increase in accounts payable[270](index=270&type=chunk) Net Cash Provided by Operating Activities | Fiscal Year | Amount | | :--- | :------- | | 2025 | $577,923 | | 2024 | $545,548 | Investing Activities - Net cash used in investing activities for fiscal 2025 was **$64.465 million**, primarily for capital expenditures (**$122.9 million**), partially offset by proceeds from the disposal of property, plant, and equipment (**$63.305 million**)[272](index=272&type=chunk) Net Cash Used in Investing Activities | Fiscal Year | Amount | | :--- | :--------- | | 2025 | $(64,465) | | 2024 | $(146,812) | Financing Activities - Net cash used in financing activities for fiscal 2025 was **$426.3 million**, primarily for term loan repayments (**$205 million**), quarterly dividend payments (**$106.1 million**), and treasury stock repurchases (**$52.647 million**)[274](index=274&type=chunk) - The company increased its quarterly dividend from **$0.48 to $0.50 per share** in October 2024[276](index=276&type=chunk) Net Cash Used in Financing Activities | Fiscal Year | Amount | | :--- | :--------- | | 2025 | $(426,306) | | 2024 | $(337,677) | Principal Contractual Obligations and Commercial Commitments - As of July 31, 2025, the company's total commercial commitments under dealer inventory financing repurchase obligations amounted to **$3.484 billion**[280](index=280&type=chunk)[457](index=457&type=chunk) Principal Contractual Cash Obligations (as of July 31, 2025) | Contractual Obligations | Total | Fiscal 2026 | Fiscal 2027-2028 | Fiscal 2029-2030 | After 5 Years | | :---------------------- | :------ | :---------- | :--------------- | :--------------- | :------------ | | Debt principal payments | $933,812 | $3,367 | $11,331 | $505,608 | $413,506 | | Finance leases | $2,062 | $1,107 | $955 | — | — | | Operating leases | $57,348 | $17,476 | $20,181 | $6,902 | $12,789 | | Purchase obligations | $201,391 | $201,391 | — | — | — | | **Total** | **$1,194,613** | **$223,341** | **$32,467** | **$512,510** | **$426,295** | Other Commercial Commitments (as of July 31, 2025) | Commercial Commitments | Total Committed | Less Than One Year | 1-3 Years | 4-5 Years | Over 5 Years | | :----------------------- | :-------------- | :----------------- | :---------- | :---------- | :----------- | | Standby repurchase obligations | $3,484,235 | $2,130,127 | $1,354,108 | — | — | Application of Critical Accounting Estimates - Critical accounting estimates include the valuation of goodwill, intangible assets, and long-lived assets, as well as product warranty reserves[282](index=282&type=chunk) - Goodwill (**$1.841 billion** as of July 31, 2025) is tested annually for impairment, with its fair value determined using a discounted cash flow model involving significant management judgments such as sales growth rates, gross margin patterns, and discount rates[283](index=283&type=chunk)[284](index=284&type=chunk) - Product warranty liabilities (**$291.1 million** as of July 31, 2025) are estimated based on retail sales history, dealer inventory, average costs, and the distribution of warranty expenditures[288](index=288&type=chunk)[425](index=425&type=chunk) Accounting Pronouncements - The company adopted ASU 2023-07, 'Segment Reporting: Improvements to Reportable Segment Disclosures,' as of July 31, 2025[380](index=380&type=chunk) - The company is evaluating ASU 2023-09, 'Income Taxes: Improvements to Income Tax Disclosures' (effective fiscal 2026), and ASU 2024-03, 'Income Statement—Reporting Comprehensive Income—Disaggregation of Expenses Disclosures' (effective fiscal 2028)[381](index=381&type=chunk)[382](index=382&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company faces market risks from foreign currency exchange rates, interest rates, and commodity prices, managing these through forward contracts, economic hedges, and supplier negotiations - The company primarily faces foreign currency exchange rate risk from the Euro and British Pound, which it manages using forward foreign exchange contracts[292](index=292&type=chunk) - As of July 31, 2025, the company held **$373.8 million** in Euro-denominated debt, serving as an economic hedge against foreign currency exchange rate risk for its Euro-denominated subsidiary investments[293](index=293&type=chunk)[398](index=398&type=chunk) - Regarding interest rate risk, assuming constant floating-rate debt levels, a **one percentage point increase in interest rates** is projected to reduce income before income taxes by **$4.138 million annually**[294](index=294&type=chunk) - The company faces commodity price risk from fluctuations in raw material prices, such as steel and aluminum, and manages these risks through negotiations with suppliers[295](index=295&type=chunk) Currency Exchange Risk - The company primarily faces currency exchange rate risk from the Euro and British Pound, and uses forward foreign exchange contracts to manage risks associated with anticipated sales transactions[292](index=292&type=chunk) - As of July 31, 2025, the company held **$373.8 million** in Euro-denominated debt, and a hypothetical **10% change in the Euro/U.S. dollar exchange rate** would alter the debt balance by approximately **$37.381 million**[293](index=293&type=chunk) Interest Rate Risk - The company faces market risk from changes in interest rates, which could impact operating results and financial condition[294](index=294&type=chunk) - Based on the company's assumed level of floating-rate debt for the next 12 months, a **one percentage point increase in interest rates** is projected to reduce income before income taxes by **$4.138 million annually**[294](index=294&type=chunk) Commodity Price Risk - The company faces market risk from price fluctuations in purchased raw materials like steel and aluminum, which are integrated into its products and components[295](index=295&type=chunk) - The company manages the timing and magnitude of commodity price increases through negotiations with suppliers[295](index=295&type=chunk) [Financial Statements and Supplementary Data – See Item 15](index=53&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA%20%E2%80%93%20SEE%20ITEM%2015) This item references the financial statements and supplementary data at the end of the report, including unaudited quarterly financial data for fiscal years 2025 and 2024 - This item references the financial statements and supplementary data found on pages F-1 through F-35 at the end of the report[297](index=297&type=chunk) Quarterly Financial Data (Unaudited) Quarterly Financial Data (Unaudited) - Fiscal Year 2025 | | | | | | Quarter Ended | | | | |---|---|---|---|---|---|---|---|---| | Fiscal 2025 | | October 31 | | January 31 | | April 30 | | July 31 | | Net sales | $2,142,784 | $2,018,107 | $2,894,816 | $2,523,783 | | Gross profit | 281,442 | 245,197 | 443,119 | 370,883 | | Net income (loss) attributable to THOR Industries, Inc. | (1,832) | (551) | 135,185 | 125,757 | | (1) Earnings (loss) per common share: | | | | | | | Basic | $ (0.03) | $ (0.01) | $ 2.54 | $ 2.37 | | Diluted | $ (0.03) | $ (0.01) | $ 2.53 | $ 2.36 | | Dividends paid per common share | $ 0.50 | $ 0.50 | $ 0.50 | $ 0.50 | | Market prices per common share | | | | | | | High | $ 115.86 | $ 118.85 | $ 105.75 | $ 97.32 | | Low | $ 93.86 | $ 92.45 | $ 63.16 | $ 72.07 | Quarterly Financial Data (Unaudited) - Fiscal Year 2024 | | | | | | Quarter Ended | | | | |---|---|---|---|---|---|---|---|---| | Fiscal 2024 | | October 31 | | January 31 | | April 30 | | July 31 | | Net sales | $2,500,759 | $2,207,369 | $2,801,113 | $2,534,167 | | Gross profit | 357,932 | 270,847 | 421,852 | 401,331 | | Net income attributable to THOR Industries, Inc. | 53,565 | 7,217 | 114,511 | 90,015 | | (1) Earnings per common share: | | | | | | | Basic | $ 1.01 | $ 0.14 | $ 2.15 | $ 1.70 | | Diluted | $ 0.99 | $ 0.13 | $ 2.13 | $ 1.68 | | Dividends paid per common share | $ 0.48 | $ 0.48 | $ 0.48 | $ 0.48 | | Market prices per common share | | | | | | | High | $ 116.31 | $ 122.00 | $ 129.31 | $ 110.32 | | Low | $ 84.55 | $ 87.52 | $ 96.99 | $ 88.37 | [Changes In and Disagreements With Accountants on Accounting and Financial Disclosure](index=56&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) There are no changes in or disagreements with accountants on accounting and financial disclosure in this report - There are no changes in or disagreements with accountants on accounting and financial disclosure in this report[300](index=300&type=chunk) [Controls and Procedures](index=54&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, affirmed the effectiveness of disclosure controls and internal controls over financial reporting as of July 31, 2025, with no significant changes in Q4 FY2025, and Deloitte issued an unqualified opinion on internal controls - The company's management assessed and confirmed that its disclosure controls and procedures were effective as of July 31, 2025[300](index=300&type=chunk) - Management, based on the COSO framework, assessed and concluded that the company's internal control over financial reporting was effective as of July 31, 2025[303](index=303&type=chunk) - No significant changes in internal control over financial reporting occurred during the fourth fiscal quarter of 2025[305](index=305&type=chunk) - Deloitte & Touche LLP, the independent registered public accounting firm, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[307](index=307&type=chunk)[308](index=308&type=chunk) Part A – Disclosure Controls and Procedures - The company's management, including the Chief Executive Officer and Chief Financial Officer, assessed and confirmed that its disclosure controls and procedures were effective as of July 31, 2025[300](index=300&type=chunk) - These controls are designed to ensure that required information is recorded, processed, summarized, and reported within SEC-prescribed timeframes, and communicated to management for disclosure decisions[300](index=300&type=chunk) Part B – Management's Annual Report on Internal Control Over Financial Reporting - Management is responsible for establishing and maintaining effective internal control over financial reporting and assessed its effectiveness based on the COSO framework (2013)[301](index=301&type=chunk)[303](index=303&type=chunk) - Management concluded that, as of July 31, 2025, the company's internal control over financial reporting was effective[303](index=303&type=chunk) Part C – Changes in Internal Control Over Financial Reporting - No changes in internal control over financial reporting occurred during the fourth fiscal quarter of 2025 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[305](index=305&type=chunk) Part D – Attestation Report of Independent Registered Public Accounting Firm - Deloitte & Touche LLP issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of July 31, 2025[307](index=307&type=chunk) - Deloitte & Touche LLP also audited the company's consolidated financial statements for the year ended July 31, 2025, and issued an unqualified opinion[308](index=308&type=chunk) [Other Information](index=58&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) The company permits directors and officers to trade company stock under Rule 10b5-1 plans, subject to insider trading policies and ownership requirements, with no new plans adopted or terminated in the three months ended July 31, 2025 - The company's insider trading policy permits directors and officers to trade company stock under Rule 10b5-1 trading arrangements, subject to applicable regulations, company insider trading policies, and stock ownership requirements[313](index=313&type=chunk) - No Rule 10b5-1 trading arrangements or "non-Rule 10b5-1 trading arrangements" were adopted or terminated by any director or officer during the three months ended July 31, 2025[314](index=314&type=chunk) Rule 10b5-1 Trading Arrangements - The company's insider trading policy permits directors and officers to enter into Rule 10b5-1 trading arrangements during open trading windows and when not in possession of material non-public information[313](index=313&type=chunk) - The company generally requires Rule 10b5-1 trading arrangements adopted by directors or officers not to expire within one year of implementation and to comply with mandatory cooling-off period requirements[313](index=313&type=chunk) - No Rule 10b5-1 trading arrangements were adopted or terminated by any director or officer during the three months ended July 31, 2025[314](index=314&type=chunk) [Disclosure Regarding Foreign Jurisdictions That Prevent Inspection](index=58&type=section&id=ITEM%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTION) This item is not applicable - This item is not applicable[315](index=315&type=chunk) PART III [Directors, Executive Officers, and Corporate Governance](index=59&type=section&id=ITEM%2010.%20DIRECTORS,%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) The company has adopted a Business Ethics Policy applicable to all directors, officers, and employees, with additional governance information incorporated by reference from its 2025 proxy statement - The company has adopted the "THOR Industries, Inc. Business Ethics Policy," applicable to all directors, officers, and employees, available on its website[318](index=318&type=chunk) - Additional information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2025 Annual Meeting of Shareholders proxy statement[319](index=319&type=chunk) [Executive Compensation](index=59&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information regarding executive compensation is incorporated by reference from the company's proxy statement - Information regarding executive compensation is incorporated by reference from the company's proxy statement[320](index=320&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=59&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) As of July 31, 2025, **703,062 outstanding options, warrants, and rights** were issuable under the 2016 Equity and Incentive Plan, with **652,508 shares available for future issuance** - The **703,062 securities** in column (a) represent restricted stock units and performance stock units granted under the 2016 Plan, which do not have an exercise price[322](index=322&type=chunk)[323](index=323&type=chunk) - Additional information regarding security ownership of certain beneficial owners and management is incorporated by reference from the company's proxy statement[323](index=323&type=chunk) Equity Compensation Plan Information - The **703,062 securities** in column (a) represent restricted stock units and performance stock units granted under the 2016 Plan, which do not have an exercise price[322](index=322&type=chunk)[323](index=323&type=chunk) Equity Compensation Plan Information (as of July 31, 2025) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :------------------------------------------ | :-------------------------------------------------------------------------- | :-------------------------------------------------------------------------- | :------------------------------------------------------------------------------------------------------------------------------------------------ | | Equity compensation plans approved by security holders | 703,062 | $— | 652,508 | | Equity compensation plans not approved by security holders | — | — | — | | **Total** | **703,062** | **$—** | **652,508** | [Certain Relationships and Related Transactions and Director Independence](index=60&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%20AND%20DIRECTOR%20INDEPENDENCE) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's proxy statement - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's proxy statement[324](index=324&type=chunk) [Principal Accounting Fees and Services](index=60&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Information regarding principal accounting fees and services is incorporated by reference from the company's proxy statement - Information regarding principal accounting fees and services is incorporated by reference from the company's proxy statement[325](index=325&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=59&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This item lists the financial statements and exhibits included in the annual report, with all financial statement schedules omitted as the information is inapplicable, immaterial, or already presented in the consolidated financial statements and notes - The financial statements on pages F-1 through F-35 at the end of this report are incorporated by reference into this item[327](index=327&type=chunk) - All financial statement schedules have been omitted because the required information is inapplicable, immaterial, or presented in the consolidated financial statements and their notes[328](index=328&type=chunk) - The exhibit list includes the company's articles of incorporation, debt agreements (e.g., term loan agreement, ABL credit agreement), equity and incentive plans, and various certification documents[329](index=329&type=chunk)[330](index=330&type=chunk) Financial Statements - Financial statements include the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Income and Comprehensive Income, Consolidated Statements of Stockholders' Equity, and Consolidated Statements of Cash Flows, along with Notes to Consolidated Financial Statements[327](index=327&type=chunk) Financial Statement Schedules - All financial statement schedules have been omitted because the required information is inapplicable, immaterial, or presented in the consolidated financial statements and their notes[328](index=328&type=chunk) Exhibits - The exhibit list includes the company's articles of incorporation, debt agreements (e.g., term loan agreement, ABL credit agreement), equity and incentive plans, and various certification documents[329](index=329&type=chunk)[330](index=330&type=chunk) [Signatures](index=64&type=section&id=SIGNATURES) This report was signed by Robert W. Martin (Director, President, and CEO) and Colleen Zuhl (SVP and CFO) on September 24, 2025, with Deloitte issuing an unqualified opinion on financial statements and internal controls, highlighting Airxcel's goodwill valuation as a critical audit matter - This report was signed by Robert W. Martin, Director, President, and Chief Executive Officer, and Colleen Zuhl, Senior Vice President and Chief Financial Officer of THOR Industries, Inc. on September 24, 2025[334](index=334&type=chunk)[335](index=335&type=chunk)[336](index=336&type=chunk) - Deloitte & Touche LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control as of July 31, 2025[338](index=338&type=chunk)[339](index=339&type=chunk) - The valuation of goodwill for the Airxcel reporting unit was identified as a critical audit matter due to significant management judgments in estimating fair value, particularly regarding sales growth rates and discount rates[342](index=342&type=chunk)[343](index=343&type=chunk) Report of Independent Registered Public Accounting Firm - Deloitte & Touche LLP issued an unqualified opinion on the consolidated balance sheets of THOR Industries, Inc. and subsidiaries as of July 31, 2025 and 2024, and the related consolidated statements of income and comprehensive income, stockholders' equity, and cash flows for each of the three years ended July 31, 2025[338](index=338&type=chunk) - Deloitte & Touche LLP also issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of July 31, 2025[339](index=339&type=chunk) Opinion on the Financial Statements - Deloitte & Touche LLP believes the company's financial statements fairly present, in all material respects, the financial position as of July 31, 2025 and 2024, and the results of operations and cash flows for each of the three years ended July 31, 2025, in conformity with U.S. generally accepted accounting principles[338](index=338&type=chunk) Critical Audit Matter - The valuation of goodwill for the Airxcel reporting unit was identified as a critical audit matter due to significant management judgments in estimating fair value, particularly regarding sales growth rates and discount rates[342](index=342&type=chunk)[343](index=343&type=chunk) - As of July 31, 2025, the goodwill balance was **$1.841 billion**, with **$392 million allocated to the Airxcel reporting unit**, whose fair value exceeded its carrying value, with no impairment identified[342](index=342&type=chunk) - Audit procedures included testing management's controls over determining the reporting unit's fair value, evaluating the reasonableness of sales growth rates, and utilizing a fair value specialist to assess the reasonableness of discount rates[344](index=344&type=chunk)[345](index=345&type=chunk)