PART I FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements and notes for the periods ended June 30, 2025, and December 31, 2024 [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets, liabilities, and stockholders' equity decreased, driven by reduced mortgage-backed securities and repurchase agreements Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | Change | Change (%) | | :----------------------------------- | :------------ | :---------------- | :----- | :--------- | | Total assets | $5,400,370 | $5,688,034 | $(287,664) | -5.06% | | Mortgage-backed securities, at fair value | $5,185,559 | $5,445,508 | $(259,949) | -4.77% | | Repurchase agreements | $4,635,881 | $4,893,958 | $(258,077) | -5.27% | | Total liabilities | $4,690,994 | $4,957,305 | $(266,311) | -5.37% | | Total stockholders' equity | $709,376 | $730,729 | $(21,353) | -2.92% | [Unaudited Condensed Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net loss for both periods, primarily due to significant losses on derivative instruments, despite increased net interest income Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Interest income | $70,624 | $68,028 | $144,470 | $136,611 | | Interest expense | $52,895 | $59,393 | $107,920 | $120,973 | | Net interest income | $17,729 | $8,635 | $36,550 | $15,638 | | Gain (loss) on investments, net | $(5,268) | $(45,212) | $76,890 | $(111,365) | | Gain (loss) on derivative instruments, net | $(30,916) | $28,262 | $(107,595) | $121,423 | | Total other income (loss) | $(36,184) | $(17,213) | $(30,705) | $9,563 | | Total expenses | $4,872 | $4,888 | $9,531 | $9,545 | | Net income (loss) | $(23,327) | $(13,466) | $(3,686) | $15,656 | | Net income (loss) attributable to common stockholders | $(26,567) | $(18,766) | $(10,278) | $4,964 | | Basic EPS | $(0.40) | $(0.38) | $(0.16) | $0.10 | | Diluted EPS | $(0.40) | $(0.38) | $(0.16) | $0.10 | [Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) The company reported a comprehensive loss for both periods, worsening year-over-year due to net loss and other comprehensive losses on MBS Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(23,327) | $(13,466) | $(3,686) | $15,656 | | Total other comprehensive income (loss) | $(789) | $113 | $(173) | $(50) | | Comprehensive income (loss) | $(24,116) | $(13,353) | $(3,859) | $15,606 | | Comprehensive income (loss) attributable to common stockholders | $(27,356) | $(18,653) | $(10,451) | $4,914 | [Unaudited Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased due to net losses and dividends, partially offset by common stock issuance proceeds - Total stockholders' equity decreased from **$730,729 thousand** as of December 31, 2024, to **$709,376 thousand** as of June 30, 2025, a decline of **$21,353 thousand**[17](index=17&type=chunk) - The company issued 4,212,057 common shares in Q1 2025 and 282,750 in Q2 2025, generating **$35,956 thousand** and **$2,279 thousand** in proceeds, respectively[17](index=17&type=chunk) - Repurchased and retired 90,146 Series C Preferred Stock shares in Q1 2025 and 96,803 shares in Q2 2025[17](index=17&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow decreased, investing cash flow increased from MBS sales, and financing activities used more cash for debt and dividends Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by (used in) operating activities | $59,980 | $90,476 | | Net cash provided by (used in) investing activities | $191,514 | $133,048 | | Net cash provided by (used in) financing activities | $(271,833) | $(238,719) | | Net change in cash, cash equivalents and restricted cash | $(20,339) | $(15,195) | | Cash, cash equivalents and restricted cash, end of period | $190,542 | $183,442 | - Purchases of mortgage-backed securities increased to **$1,073,240 thousand** in 2025 from **$624,425 thousand** in 2024[21](index=21&type=chunk) - Proceeds from sale of mortgage-backed securities significantly increased to **$1,179,303 thousand** in 2025 from **$568,331 thousand** in 2024[21](index=21&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential context and detailed breakdowns for the financial statements, covering business, accounting policies, financial instruments, related party transactions, equity, and subsequent events [Note 1 – Organization and Business Operations](index=9&type=section&id=Note%201%20%E2%80%93%20Organization%20and%20Business%20Operations) Invesco Mortgage Capital Inc. invests in and manages MBS, primarily Agency RMBS and CMBS, operates as a REIT, and is externally managed - The Company primarily invests in Agency RMBS and Agency CMBS[24](index=24&type=chunk)[33](index=33&type=chunk) - The Company is externally managed and advised by Invesco Advisers, Inc[26](index=26&type=chunk) - The Company elected to be taxed as a REIT, requiring distribution of at least **90%** of REIT taxable income annually[27](index=27&type=chunk) [Note 2 – Summary of Significant Accounting Policies](index=9&type=section&id=Note%202%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements are prepared under U.S. GAAP, consolidating subsidiaries, with management estimates for fair values and credit losses, and no significant policy changes - Condensed consolidated financial statements are prepared in accordance with U.S. GAAP and consolidate the Company and its controlled subsidiaries[29](index=29&type=chunk) - Management's estimates include fair values of financial instruments, interest income on MBS, and allowances for credit losses[31](index=31&type=chunk) - There have been no changes to the Company's accounting policies since December 31, 2024[32](index=32&type=chunk) [Note 3 – Mortgage-Backed Securities](index=10&type=section&id=Note%203%20%E2%80%93%20Mortgage-Backed%20Securities) The MBS portfolio, primarily Agency RMBS and CMBS, is accounted for at fair value, showing decreased fair value and net unrealized gains in 2025, with non-Agency securities sold - All MBS held as of June 30, 2025, are accounted for under the fair value option[41](index=41&type=chunk) MBS Portfolio Fair Value (in thousands) | Asset Type | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Agency RMBS | $4,222,203 | $4,541,525 | | Agency-CMO | $71,835 | $70,776 | | Agency CMBS | $891,521 | $816,147 | | Non-Agency CMBS | — | $9,836 | | Non-Agency RMBS | — | $7,224 | | Total | $5,185,559 | $5,445,508 | Total Gain (Loss) on Investments, Net (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net unrealized gains (losses) on MBS (fair value option) | $(7,095) | $(38,683) | $80,529 | $(101,156) | | Total gain (loss) on investments, net | $(5,268) | $(45,212) | $76,890 | $(111,365) | - The company sold its remaining available-for-sale MBS during the three and six months ended June 30, 2025, recognizing net gains of **$518 thousand** and **$402 thousand**, respectively[50](index=50&type=chunk) [Note 4 – Borrowings](index=14&type=section&id=Note%204%20%E2%80%93%20Borrowings) The company primarily finances its portfolio through secured repurchase agreements, with total borrowings and weighted average interest rates decreasing - The majority of the investment portfolio is financed through repurchase agreements, which are accounted for as secured borrowings[58](index=58&type=chunk) Repurchase Agreements Characteristics (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Amount Outstanding | $4,635,881 | $4,893,958 | | Weighted Average Interest Rate | 4.48% | 4.80% | | Weighted Average Remaining Maturity (days) | 24 | 29 | [Note 5 – Collateral Positions](index=15&type=section&id=Note%205%20%E2%80%93%20Collateral%20Positions) MBS and cash are pledged as collateral for repurchase agreements and derivatives, maintaining a 105% collateral-to-outstanding repurchase agreement ratio Total Collateral Pledged (in thousands) | Collateral Type | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Mortgage-backed securities | $4,882,659 | $5,129,486 | | Cash | — | $580 | | Restricted cash | $131,146 | $137,478 | | Total Collateral Pledged | $5,013,805 | $5,267,544 | - The ratio of total repurchase agreements collateral pledged to total repurchase agreements outstanding was **105%** as of June 30, 2025, and December 31, 2024[65](index=65&type=chunk) [Note 6 – Derivatives and Hedging Activities](index=16&type=section&id=Note%206%20%E2%80%93%20Derivatives%20and%20Hedging%20Activities) The company uses interest rate swaps, futures, and TBAs to manage interest rate risk, with swaps increasing and futures/TBAs decreasing or eliminated - The company uses interest rate swaps and futures contracts to manage interest rate risk and add stability to interest expense[72](index=72&type=chunk) Changes in Notional Amount of Derivative Instruments (in thousands) | Instrument | Notional Amount as of Dec 31, 2024 | Additions | Settlement, Termination, or Exercise | Notional Amount as of Jun 30, 2025 | | :-------------------- | :--------------------------------- | :-------- | :----------------------------------- | :--------------------------------- | | Interest Rate Swaps | $3,265,000 | $725,000 | $(485,000) | $3,505,000 | | Futures Contracts | $1,402,000 | $2,927,000 | $(3,499,000) | $830,000 | | TBA Purchase Contracts | $100,000 | $2,556,700 | $(2,656,700) | — | | TBA Sale Contracts | $(100,000) | $(2,556,700) | $2,656,700 | — | | Total | $4,667,000 | $3,652,000 | $(3,984,000) | $4,335,000 | - The company had no TBAs outstanding as of June 30, 2025[79](index=79&type=chunk) [Note 7 – Offsetting Assets and Liabilities](index=19&type=section&id=Note%207%20%E2%80%93%20Offsetting%20Assets%20and%20Liabilities) Repurchase agreements and derivatives are subject to master netting, but assets and liabilities are presented gross on the balance sheets - Repurchase agreements and derivative transactions are governed by master netting arrangements, but assets and liabilities are presented gross on the condensed consolidated balance sheets[85](index=85&type=chunk) - Centrally cleared interest rate swaps and futures contracts are excluded from offsetting tables due to daily variation margin being characterized as settlement rather than collateral[86](index=86&type=chunk) [Note 8 – Fair Value of Financial Instruments](index=20&type=section&id=Note%208%20%E2%80%93%20Fair%20Value%20of%20Financial%20Instruments) Fair value measurements are categorized into a three-level hierarchy, with all MBS and derivative liabilities measured at fair value, primarily using Level 2 inputs - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[95](index=95&type=chunk) Fair Value Measurements (in thousands) | Instrument | Level 1 (June 30, 2025) | Level 2 (June 30, 2025) | Level 3 (June 30, 2025) | Total at Fair Value (June 30, 2025) | | :-------------------------- | :---------------------- | :---------------------- | :---------------------- | :---------------------------------- | | Mortgage-backed securities | — | $5,185,559 | — | $5,185,559 | | Derivative liabilities | $4,381 | $6,394 | — | $10,775 | - The estimated fair value of repurchase agreements is a Level 3 fair value measurement[94](index=94&type=chunk) [Note 9 – Related Party Transactions](index=21&type=section&id=Note%209%20%E2%80%93%20Related%20Party%20Transactions) The company is externally managed by Invesco Advisers, Inc., paying a management fee and reimbursing operating expenses, with reimbursed costs decreasing in 2025 - The Company pays its Manager a fee equal to **1.50%** of its stockholders' equity per annum[98](index=98&type=chunk) - The Company reimburses its Manager for operating expenses, including directors and officers insurance, accounting, auditing, tax, and legal services[100](index=100&type=chunk) Costs Incurred by Manager (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 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Management fee – related party | $2,831 | $2,945 | $5,827 | $5,806 | | Total incurred costs, originally paid by our Manager | $1,051 | $1,409 | $2,691 | $2,888 | [Note 10 – Stockholders' Equity](index=21&type=section&id=Note%2010%20%E2%80%93%20Stockholders'%20Equity) The company repurchased Series C Preferred Stock, redeemed Series B Preferred Stock, sold common stock, and declared dividends for both preferred and common stock - During the three and six months ended June 30, 2025, the company repurchased and retired 96,803 and 186,949 shares of Series C Preferred Stock, respectively[102](index=102&type=chunk) - All outstanding shares of Series B Preferred Stock were redeemed in December 2024[102](index=102&type=chunk) Common Stock Sales under Equity Distribution Agreements (in thousands, except shares) | 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 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Shares sold | 282,750 | 1,761,155 | 4,494,807 | 2,126,993 | | Cash proceeds, net of fees | $2,163 | $16,059 | $38,231 | $19,378 | Dividends Declared (in thousands, except per share amounts) | Stock Type | Per Share (2025) | In Aggregate (2025) | Per Share (2024) | In Aggregate (2024) | | :------------------- | :--------------- | :------------------ | :--------------- | :------------------ | | Series C Preferred | $0.46875 | $3,297 (May), $3,341 (Feb) | $0.46875 | $3,450 (May), $3,499 (Feb) | | Common Stock | $0.34 | $22,545 (June), $22,420 (March) | $0.40 | $20,255 (June), $19,530 (March) | [Note 11 – Earnings (Loss) per Common Share](index=23&type=section&id=Note%2011%20%E2%80%93%20Earnings%20(Loss)%20per%20Common%20Share) Basic and diluted EPS show a net loss for common stockholders for both periods, with an increase in weighted average shares outstanding Earnings (Loss) per Share (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) available to common stockholders | $(26,567) | $(18,766) | $(10,278) | $4,964 | | Basic EPS | $(0.40) | $(0.38) | $(0.16) | $0.10 | | Diluted EPS | $(0.40) | $(0.38) | $(0.16) | $0.10 | | Basic weighted average shares | 66,006 | 49,365 | 64,434 | 48,949 | [Note 12 – Commitments and Contingencies](index=23&type=section&id=Note%2012%20%E2%80%93%20Commitments%20and%20Contingencies) As of June 30, 2025, the company was not aware of any reported or unreported commitments or contingencies - As of June 30, 2025, the company was not aware of any reported or unreported contingencies[112](index=112&type=chunk) [Note 13 – Subsequent Events](index=23&type=section&id=Note%2013%20%E2%80%93%20Subsequent%20Events) On August 7, 2025, a Series C Preferred Stock dividend of $0.46875 per share was declared, payable on September 29, 2025 - On August 7, 2025, a Series C Preferred Stock dividend of **$0.46875** per share was declared, payable on September 29, 2025[113](index=113&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition, operations, market outlook, investment strategies, financing, hedging, capital, and non-GAAP reconciliations [Executive Summary](index=25&type=section&id=Executive%20Summary) The company aims for attractive risk-adjusted returns through Agency RMBS and CMBS investments, operating as a REIT and externally managed - The company's objective is to provide attractive risk-adjusted returns to stockholders, primarily through dividends and secondarily through capital appreciation[117](index=117&type=chunk) - Investments primarily include Agency RMBS and Agency CMBS, with continuous evaluation of new opportunities[117](index=117&type=chunk)[120](index=120&type=chunk) - The company maintains REIT qualification, requiring distribution of at least **90%** of REIT taxable income annually, and is externally managed by Invesco Advisers, Inc[118](index=118&type=chunk)[119](index=119&type=chunk) [Market Conditions and Impacts](index=26&type=section&id=Market%20Conditions%20and%20Impacts) Q2 2025 saw volatile financial conditions, inflation above target, stable employment, and mixed Treasury yield curve movements impacting Agency RMBS and CMBS - Financial conditions were volatile in Q2 2025, tightening sharply in early April before ending modestly accommodative[122](index=122&type=chunk) - Headline CPI rose to **2.7%** (from **2.4%**) and Core CPI to **2.9%** (from **2.8%**) year-over-year, exceeding the Federal Reserve's **2%** target[122](index=122&type=chunk) Key Interest Rate Changes (Basis Points) | Metric | June 30, 2025 | March 31, 2025 | One Quarter Change (bps) | | :------------------ | :------------ | :------------- | :----------------------- | | 2 Year Treasury | 3.72% | 3.91% | (19) | | 5 Year Treasury | 3.79% | 3.98% | (19) | | 10 Year Treasury | 4.23% | 4.24% | (1) | | 30 Year Treasury | 4.77% | 4.61% | 16 | - Agency RMBS underperformed Treasuries in early April due to interest rate volatility but benefited from a 90-day pause in tariff implementation[124](index=124&type=chunk) [Outlook](index=27&type=section&id=Outlook) The company holds a cautious near-term but favorable long-term outlook for Agency RMBS, while Agency CMBS outlook remains positive due to limited issuance and strong fundamentals - Cautious near-term outlook for Agency RMBS due to elevated uncertainty regarding trade, fiscal, and monetary policy[128](index=128&type=chunk) - Favorable long-term outlook for Agency RMBS, expecting improved demand in higher coupons, stabilization in interest rate volatility, and a steeper yield curve[128](index=128&type=chunk) - Positive outlook for Agency CMBS, supported by limited issuance, strong fundamental performance, and stable cash flow profiles[128](index=128&type=chunk) [Investment Activities](index=28&type=section&id=Investment%20Activities) The investment portfolio's fair value decreased, with 30-year fixed-rate Agency RMBS as the largest component, and non-Agency securities were sold in 2025 Investment Portfolio Composition (in thousands) | Asset Type | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :---------------- | :------------ | | 30 year fixed-rate pass-through Agency RMBS | $4,222,203 | $4,541,525 | $4,359,796 | | Agency CMBS | $891,521 | $816,147 | $384,593 | | Total investment portfolio | $5,185,559 | $5,445,508 | $5,035,247 | - 30-year fixed-rate Agency RMBS represented approximately **81%** of the total investment portfolio as of June 30, 2025, down from **83%** at December 31, 2024[131](index=131&type=chunk) - The company sold its remaining non-Agency securities during 2025[135](index=135&type=chunk) [Financing and Other Liabilities](index=29&type=section&id=Financing%20and%20Other%20Liabilities) The company primarily uses short-term repurchase agreements for financing, with collateralized borrowings decreasing to $4.6 billion as of June 30, 2025 - The majority of the investment portfolio is financed through repurchase agreements, typically with maturities ranging from one to six months[136](index=136&type=chunk) Collateralized Borrowings Under Repurchase Agreements (in thousands) | Quarter Ended | Quarter-end balance | | :------------------ | :------------------ | | December 31, 2024 | $4,893,958 | | March 31, 2025 | $5,354,561 | | June 30, 2025 | $4,635,881 | [Hedging Instruments](index=29&type=section&id=Hedging%20Instruments) The company uses interest rate swaps and futures to mitigate interest rate risk, with swaps increasing and futures experiencing significant additions and terminations - Interest rate swap agreements are used to mitigate the effects of interest rate changes and generally involve paying fixed rates and receiving floating rates indexed to SOFR[140](index=140&type=chunk) - During the six months ended June 30, 2025, the company entered into **$725.0 million** in new interest rate swaps and terminated **$485.0 million**[141](index=141&type=chunk) - Futures contracts are also used to mitigate interest rate impact, with **$2.9 billion** in additions and **$3.5 billion** in terminations during the six months ended June 30, 2025[142](index=142&type=chunk) [Capital Activities](index=30&type=section&id=Capital%20Activities) The company sold common stock, repurchased Series C Preferred Stock, and redeemed all Series B Preferred Stock in December 2024 Common Stock Sales (in thousands, except shares) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :----------------------------- | :----------------------------- | | Shares sold | 4,494,807 | 2,126,993 | | Cash proceeds, net of fees | $38,231 | $19,378 | - During the six months ended June 30, 2025, the company repurchased and retired 186,949 shares of Series C Preferred Stock[147](index=147&type=chunk) - The company redeemed all outstanding shares of Series B Preferred Stock in December 2024[147](index=147&type=chunk) [Book Value per Common Share](index=30&type=section&id=Book%20Value%20per%20Common%20Share) Book value per common share decreased by 9.8% due to derivative losses, dividends, and expenses, partially offset by net interest income and investment gains Book Value per Common Share | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Total equity (in thousands) | $709,376 | $730,729 | | Common stock outstanding (in thousands) | 66,307 | 61,730 | | Book value per common share | $8.05 | $8.92 | - Book value per common share decreased **9.8%** from December 31, 2024, to June 30, 2025[149](index=149&type=chunk) - The decrease was primarily due to losses on derivative instruments, dividends declared, and expenses, partially offset by net interest income and gains on investments[149](index=149&type=chunk) [Critical Accounting Policies and Estimates](index=31&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No significant changes occurred in critical accounting policies and estimates since the most recent Form 10-K - No significant changes to critical accounting policies and estimates since the Annual Report on Form 10-K for the year ended December 31, 2024[150](index=150&type=chunk) [Recent Accounting Standards](index=31&type=section&id=Recent%20Accounting%20Standards) No recent accounting standards require reporting - No recent accounting standards to report[151](index=151&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) The company experienced a net loss for both periods, primarily due to significant derivative losses, despite increased net interest income - Net interest income increased significantly for both the three and six months ended June 30, 2025, compared to the same periods in 2024[153](index=153&type=chunk) - Significant losses on derivative instruments were recorded for the three and six months ended June 30, 2025, contrasting with gains in the prior year[153](index=153&type=chunk) Net Income (Loss) Summary (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $(23,327) | $(13,466) | $(3,686) | $15,656 | | Net income (loss) attributable to common stockholders | $(26,567) | $(18,766) | $(10,278) | $4,964 | [Interest Income and Average Earning Asset Yields](index=32&type=section&id=Interest%20Income%20and%20Average%20Earning%20Asset%20Yields) Total average earning assets and interest income increased, but average earning asset yields slightly decreased due to investment composition and prepayment rates Interest Income and Average Earning Asset Yields (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 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Average earning assets | $5,078,921 | $4,847,125 | $5,249,787 | $4,909,684 | | Average earning asset yields | 5.56% | 5.61% | 5.50% | 5.56% | | Total interest income | $70,624 | $68,028 | $144,470 | $136,611 | - Average earning asset yields decreased by **5 basis points** for the three months and **6 basis points** for the six months ended June 30, 2025, compared to the same periods in 2024[156](index=156&type=chunk) [Prepayment Speeds](index=32&type=section&id=Prepayment%20Speeds) Net premium amortization was recognized in 2025, contrasting with prior year discount accretion, due to repositioning into higher coupon securities - Net premium amortization was **$356 thousand** for the three months ended June 30, 2025, compared to net discount accretion of **$1.8 million** for the same period in 2024[160](index=160&type=chunk) - The change is primarily a result of repositioning the investment portfolio into higher coupon securities that have higher amortized costs relative to principal value[160](index=160&type=chunk) [Interest Expense and Cost of Funds](index=33&type=section&id=Interest%20Expense%20and%20Cost%20of%20Funds) Total average borrowings increased, but the average cost of funds and total interest expense decreased significantly due to a lower Federal Funds target rate Borrowings and Cost of Funds (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 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total average borrowings | $4,577,566 | $4,251,953 | $4,752,927 | $4,335,855 | | Cost of funds | 4.62% | 5.59% | 4.54% | 5.58% | | Total interest expense | $52,895 | $59,393 | $107,920 | $120,973 | - Average cost of funds decreased by **97 basis points** for the three months and **104 basis points** for the six months ended June 30, 2025, primarily due to a lower Federal Funds target rate[165](index=165&type=chunk) [Net Interest Income](index=34&type=section&id=Net%20Interest%20Income) Net interest income and net interest rate margin increased for both periods, primarily driven by a lower cost of funds Net Interest Income (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net interest income | $17,729 | $8,635 | $36,550 | $15,638 | | Net interest rate margin | 0.94% | 0.02% | 0.96% | (0.02)% | - The increase in net interest income and net interest rate margin was due to a lower cost of funds, which is more sensitive to interest rate changes than the yield on the investment portfolio[168](index=168&type=chunk) [Gain (Loss) on Investments, net](index=34&type=section&id=Gain%20(Loss)%20on%20Investments,%20net) The company recorded net unrealized losses on MBS for three months but gains for six months, reflecting market volatility, with net realized gains in Q2 2025 Gain (Loss) on Investments, Net (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net realized gains (losses) on sale of MBS | $1,827 | $(6,529) | $(3,639) | $(9,751) | | Net unrealized gains (losses) on MBS (fair value option) | $(7,095) | $(38,683) | $80,529 | $(101,156) | | Total gain (loss) on investments, net | $(5,268) | $(45,212) | $76,890 | $(111,365) | - Net realized gains in Q2 2025 reflect sales of Agency RMBS during heightened market volatility, while six-month net losses reflect sales of lower coupon Agency RMBS in Q1[170](index=170&type=chunk) - Net unrealized gains for the six months ended June 30, 2025, were primarily due to a sharp decline in interest rates during Q1, increasing valuations on fixed-rate securities[172](index=172&type=chunk) [(Increase) Decrease in Provision for Credit Losses](index=34&type=section&id=(Increase)%20Decrease%20in%20Provision%20for%20Credit%20Losses) No provision for credit losses was recorded in 2025 due to the sale of available-for-sale securities, contrasting with prior year increases - No provision for credit losses was recorded for the three and six months ended June 30, 2025, as the company sold its remaining available-for-sale MBS[175](index=175&type=chunk) - In contrast, the company recorded increases of **$263 thousand** and **$302 thousand** in the provision for credit losses for the three and six months ended June 30, 2024, respectively[174](index=174&type=chunk) [Equity in Earnings (Losses) of Unconsolidated Ventures](index=35&type=section&id=Equity%20in%20Earnings%20(Losses)%20of%20Unconsolidated%20Ventures) No equity in earnings or losses from unconsolidated ventures was recorded, as the sole remaining venture was dissolved in April 2024 - No equity in earnings (losses) of unconsolidated ventures was recorded for the three and six months ended June 30, 2025[13](index=13&type=chunk) - The sole remaining unconsolidated venture was dissolved in April 2024, after a final distribution in Q1 2024[176](index=176&type=chunk) [Gain (Loss) on Derivative Instruments, net](index=35&type=section&id=Gain%20(Loss)%20on%20Derivative%20Instruments,%20net) Significant net losses on derivative instruments were recognized due to tighter swap spreads and declining interest rates, contrasting with prior year gains Gain (Loss) on Derivative Instruments, Net (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 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gain (loss) on derivative instruments, net | $(30,916) | $28,262 | $(107,595) | $121,423 | | Net losses on interest rate swaps | $(16,170) | $29,260 | $(63,808) | $122,421 | | Net losses on futures contracts | $(13,506) | — | $(46,360) | — | - Net losses on interest rate swaps in 2025 were due to notably tighter swap spreads and a sharp decline in interest rates[181](index=181&type=chunk) - Net losses on futures contracts in 2025 were due to changes in interest rate expectations[183](index=183&type=chunk) [Expenses](index=36&type=section&id=Expenses) Management fees slightly decreased for three months but remained stable for six months, with consistent general and administrative expenses Expenses (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 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Management fee – related party | $2,831 | $2,945 | $5,827 | $5,806 | | General and administrative | $2,041 | $1,943 | $3,704 | $3,739 | | Total expenses | $4,872 | $4,888 | $9,531 | $9,545 | - Management fees are determined by the company's average stockholders' equity[185](index=185&type=chunk) [Gain (Loss) on Repurchase and Retirement of Preferred Stock](index=36&type=section&id=Gain%20(Loss)%20on%20Repurchase%20and%20Retirement%20of%20Preferred%20Stock) The company recognized a gain on Series C Preferred Stock repurchase and retirement for both periods, following prior year repurchases of Series B and C Gain (Loss) on Repurchase and Retirement of Preferred Stock (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 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Gain (loss) on repurchase and retirement of preferred stock | $57 | $208 | $46 | $401 | - During the three and six months ended June 30, 2025, the company repurchased and retired 96,803 and 186,949 shares of Series C Preferred Stock, respectively[187](index=187&type=chunk) [Net Income (Loss) Attributable to Common Stockholders](index=37&type=section&id=Net%20Income%20(Loss)%20Attributable%20to%20Common%20Stockholders) Net loss attributable to common stockholders increased for three months and shifted to loss for six months, driven by derivative losses, partially offset by investment performance and net interest income Net Income (Loss) Attributable to Common Stockholders (in thousands, except per share) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to common stockholders | $(26,567) | $(18,766) | $(10,278) | $4,964 | | Basic EPS | $(0.40) | $(0.38) | $(0.16) | $0.10 | - The change in net loss for the three months was primarily due to net losses on derivative instruments (**$30.9 million** vs **$28.3 million** gain in 2024) and a **$9.1 million** increase in net interest income, partially offset by improved investment performance[189](index=189&type=chunk) - For the six months, the shift to net loss was driven by net losses on derivative instruments (**$107.6 million** vs **$121.4 million** gain in 2024), offset by net gains on investments (**$76.9 million** vs **$111.4 million** loss in 2024) and a **$20.9 million** increase in net interest income[190](index=190&type=chunk) [Non-GAAP Financial Measures](index=37&type=section&id=Non-GAAP%20Financial%20Measures) This section presents non-GAAP financial measures, including Earnings Available for Distribution and various effective interest metrics, used by management to analyze operating results and assess performance - Non-GAAP measures are used to analyze operating results and assess performance, providing additional detail of the investment portfolio's earnings capacity[192](index=192&type=chunk)[195](index=195&type=chunk) - These measures should be analyzed in conjunction with U.S. GAAP financial measures and are not substitutes[193](index=193&type=chunk) [Earnings Available for Distribution](index=37&type=section&id=Earnings%20Available%20for%20Distribution) Earnings available for distribution decreased for both periods, primarily due to lower effective net interest income, partially offset by reduced preferred dividends - Earnings available for distribution is calculated as U.S. GAAP net income (loss) attributable to common stockholders adjusted for certain gains and losses on investments and derivatives, TBA dollar roll income, and preferred stock repurchase gains/losses[194](index=194&type=chunk) Earnings Available for Distribution (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to common stockholders | $(26,567) | $(18,766) | $(10,278) | $4,964 | | Earnings available for distribution | $38,191 | $42,325 | $78,238 | $84,141 | | Earnings available for distribution per common share | $0.58 | $0.86 | $1.21 | $1.72 | - The decrease in earnings available for distribution was due to lower effective net interest income, partially offset by lower preferred dividends[204](index=204&type=chunk) [Effective Interest Expense / Effective Cost of Funds / Effective Net Interest Income / Effective Interest Rate Margin](index=40&type=section&id=Effective%20Interest%20Expense%20%2F%20Effective%20Cost%20of%20Funds%20%2F%20Effective%20Net%20Interest%20Income%20%2F%20Effective%20Interest%20Rate%20Margin) Effective interest expense and cost of funds increased due to decreased contractual net interest income on interest rate swaps, leading to decreased effective net interest income and margin - Effective interest expense and cost of funds adjust U.S. GAAP total interest expense for contractual net interest income (expense) on interest rate swaps, which are viewed as economic hedges[205](index=205&type=chunk) Effective Interest Expense and Cost of Funds (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 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total interest expense | $52,895 | $59,393 | $107,920 | $120,973 | | Effective interest expense | $24,264 | $16,122 | $51,210 | $32,415 | | Effective cost of funds | 2.12% | 1.52% | 2.15% | 1.50% | Effective Net Interest Income and Margin (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net interest income | $17,729 | $8,635 | $36,550 | $15,638 | | Effective net interest income | $46,360 | $51,906 | $93,260 | $104,196 | | Effective interest rate margin | 3.44% | 4.09% | 3.35% | 4.06% | [Economic Debt-to-Equity Ratio](index=41&type=section&id=Economic%20Debt-to-Equity%20Ratio) The economic debt-to-equity ratio, including off-balance sheet TBA financing, remained consistent with GAAP at 6.5x, reflecting no TBAs at implied cost basis - The economic debt-to-equity ratio is a non-GAAP measure that includes the impact of off-balance sheet financing of TBAs accounted for as derivative instruments[214](index=214&type=chunk) Debt-to-Equity Ratios | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Debt-to-equity ratio | 6.5 | 6.7 | | Economic debt-to-equity ratio | 6.5 | 6.7 | - As of June 30, 2025, there were no TBAs at implied cost basis, making the economic debt-to-equity ratio equal to the GAAP debt-to-equity ratio[216](index=216&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity and capital from equity offerings, operating cash flows, and repurchase agreements to meet obligations and fund investments - Primary sources of funds include net cash proceeds from common equity offerings, net cash from operating activities, and proceeds from repurchase agreements[217](index=217&type=chunk) - Cash, cash equivalents, and restricted cash totaled **$190.5 million** as of June 30, 2025, up from **$183.4 million** at June 30, 2024[219](index=219&type=chunk) - Operating activities provided **$60.0 million** in net cash for the six months ended June 30, 2025, a decrease from **$90.5 million** in the prior year[219](index=219&type=chunk) [Effects of Margin Requirements, Leverage and Spreads](index=42&type=section&id=Effects%20of%20Margin%20Requirements,%20Leverage%20and%20Spreads) The company manages liquidity to meet margin calls, triggered by collateral value declines, with average margin requirements of 4.5% for Agency RMBS and 4.9% for Agency CMBS - Declines in the value of securities pledged as collateral can trigger margin calls, requiring additional cash or collateral[223](index=223&type=chunk) - The average margin requirement (haircut) under repurchase agreements was **4.5%** for Agency RMBS and **4.9%** for Agency CMBS as of June 30, 2025[222](index=222&type=chunk) - The company maintains a level of liquidity (cash and unpledged securities) to meet reasonably anticipated margin calls and increased collateral requirements[224](index=224&type=chunk)[226](index=226&type=chunk) [Forward-Looking Statements Regarding Liquidity](index=43&type=section&id=Forward-Looking%20Statements%20Regarding%20Liquidity) The company anticipates sufficient short-term liquidity from operations and borrowing capacity, with long-term liquidity dependent on debt financing and potential equity/debt issuances - Cash flow from operations and available borrowing capacity are expected to be sufficient for anticipated short-term liquidity requirements[229](index=229&type=chunk) - Long-term liquidity and capital resource requirements are subject to obtaining ongoing debt financing and potential public or private offerings of equity or debt securities[230](index=230&type=chunk) [Exposure to Financial Counterparties](index=43&type=section&id=Exposure%20to%20Financial%20Counterparties) The company faces counterparty default risk from repurchase agreements, with one counterparty holding collateral exceeding borrowed amounts by over 5% of stockholders' equity - The company is exposed to potential losses if a counterparty defaults on repurchase agreements, to the extent collateral pledged exceeds the amount loaned[231](index=231&type=chunk) - As of June 30, 2025, one counterparty held collateral that exceeded the amounts borrowed under related repurchase agreements by more than **5%** of the company's stockholders' equity[231](index=231&type=chunk) Exposure to Counterparties by Geographic Concentration (in thousands) | Geographic Concentration | Number of Counterparties | Repurchase Agreement Financing | Exposure | | :------------------------------- | :----------------------- | :----------------------------- | :------- | | North America | 14 | $2,890,203 | $(151,644) | | Asia | 3 | $623,472 | $(33,673) | | Europe (excluding United Kingdom) | 2 | $675,757 | $(33,805) | | United Kingdom | 1 | $446,449 | $(18,465) | | Total | 20 | $4,635,881 | $(237,587) | [Dividends](index=44&type=section&id=Dividends) To maintain REIT qualification, the company must distribute at least 90% of REIT taxable income, with differences from GAAP net income impacting distribution requirements - To maintain REIT qualification, the company is generally required to distribute at least **90%** of its REIT taxable income annually[234](index=234&type=chunk) - Key differences between REIT taxable income and U.S. GAAP net income include unrealized gains/losses on investments and derivatives, and temporary differences related to amortization of premiums and discounts[235](index=235&type=chunk) [Unrelated Business Taxable Income](index=44&type=section&id=Unrelated%20Business%20Taxable%20Income) The company has not engaged in transactions resulting in unrelated business taxable income - The company has not engaged in transactions that would result in a portion of its income being treated as unrelated business taxable income[236](index=236&type=chunk) [Other Matters](index=44&type=section&id=Other%20Matters) The company believes it satisfied REIT asset tests and intends to maintain REIT qualification while avoiding 1940 Act investment company registration - The company believes it satisfied REIT asset tests for the period ended June 30, 2025, and expects to satisfy all REIT requirements for the taxable year ending December 31, 2025[237](index=237&type=chunk) - The company intends to conduct its business to avoid registration as an investment company under the 1940 Act, relying on exclusions like Section 3(c)(5)(C)[238](index=238&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks, including interest rate, prepayment, and market value risks, and outlines management strategies using derivatives and active portfolio management [Interest Rate Risk](index=45&type=section&id=Interest%20Rate%20Risk) The company is highly sensitive to interest rate risk, which is primarily mitigated through derivative contracts like interest rate swaps and futures - Interest rate risk is highly sensitive to governmental, monetary, and tax policies, and other macroeconomic factors[241](index=241&type=chunk) - The company mitigates interest rate risk primarily by utilizing derivative contracts, such as interest rate swap agreements and futures contracts[241](index=241&type=chunk) [Interest Rate Effect on Net Interest Income](index=45&type=section&id=Interest%20Rate%20Effect%20on%20Net%20Interest%20Income) Operating results are affected by the spread between investment yields and borrowing costs, with rising rates potentially narrowing the spread and impacting hedging effectiveness - Operating results depend on the difference between yields earned on investments and the cost of borrowing and hedging activities[242](index=242&type=chunk) - Rising interest rates can increase borrowing costs, narrowing the net interest spread and potentially leading to losses[242](index=242&type=chunk) - Inaccurate prepayment assumptions for RMBS can reduce the effectiveness of hedging strategies and cause losses[243](index=243&type=chunk) [Interest Rate Effects on Fair Value](index=45&type=section&id=Interest%20Rate%20Effects%20on%20Fair%20Value) Changes in interest rates directly impact the fair value of assets and liabilities, with risk assessed by duration, and volatility increasing with material rate changes - Changes in interest rates affect the market value of acquired assets, with the risk that asset and liability values change at different rates[244](index=244&type=chunk) - Interest rate risk is assessed by estimating the duration of assets and liabilities, which measures market price volatility[245](index=245&type=chunk) - Volatility in fair value can increase significantly with material changes in interest rates, impacting operating results[246](index=246&type=chunk) [Spread Risk](index=45&type=section&id=Spread%20Risk) Spread risk, the difference between investment and risk-free rates, is managed through asset selection, allocation, value-at-risk, and liquidity, with changes impacting book value and strategy - Spread risk is the difference between interest rates on investments and risk-free instruments[247](index=247&type=chunk) - Management techniques include careful asset selection, sector allocation, regulating portfolio value-at-risk, and maintaining adequate liquidity[247](index=247&type=chunk) - Changes in spreads impact book value and liquidity, potentially forcing asset sales or changes in investment strategy[247](index=247&type=chunk) [Prepayment Risk](index=46&type=section&id=Prepayment%20Risk) Prepayment risk affects premium amortization and discount accretion, with increased rates accelerating both, and predicting levels is challenging due to inflation and interest rate volatility - An increase in prepayment rates accelerates the amortization of purchase premiums, reducing interest income[248](index=248&type=chunk) - An increase in prepayment rates accelerates the accretion of purchase discounts, increasing interest income[248](index=248&type=chunk) - Uncertainty regarding inflation, fiscal/monetary policy, and interest rate volatility makes predicting prepayment levels difficult[249](index=249&type=chunk) [Extension Risk](index=46&type=section&id=Extension%20Risk) Extension risk occurs if decreasing prepayment rates in a rising interest rate environment extend fixed-rate asset lives beyond hedging terms, negatively impacting operating results and potentially forcing asset sales - If prepayment rates decrease in a rising interest rate environment, the life of fixed-rate assets can extend beyond the term of hedging instruments[251](index=251&type=chunk) - This situation can negatively impact operating results as borrowing costs become unfixed while asset income remains fixed[251](index=251&type=chunk) - In extreme situations, the company may be forced to sell assets to maintain liquidity, incurring losses[251](index=251&type=chunk) [Market Value Risk](index=46&type=section&id=Market%20Value%20Risk) The fair value of securities fluctuates with interest rates and market factors, with crises causing volatility and margin call risk, and a sensitivity analysis showing yield curve shift impacts - The estimated fair value of securities fluctuates primarily due to changes in interest rates and other factors[252](index=252&type=chunk) - Pandemics and widespread crises can cause extreme volatility and illiquidity in fixed income markets, elevating margin call risk[253](index=253&type=chunk) Interest Rate Sensitivity Analysis (June 30, 2025) | Change in Interest Rates | Percentage Change in Projected Net Interest Income | Percentage Change in Projected Portfolio Value | | :----------------------- | :----------------------------------------------- | :--------------------------------------------- | | +1.00% | (3.72)% | (0.60)% | | +0.50% | (1.55)% | (0.16)% | | -0.50% | 1.02% | (0.19)% | | -1.00% | 1.87% | (0.88)% | [Other Risks](index=47&type=section&id=Other%20Risks) This section introduces additional risks related to credit investments in commercial and residential real estate markets, including real estate and credit risk [Real Estate Risk](index=47&type=section&id=Real%20Estate%20Risk) Residential and commercial property values are volatile, affected by economic and local factors, with decreases reducing collateral value and repayment capacity, potentially leading to losses - Property values are subject to volatility due to national, regional, and local economic conditions, local real estate conditions, and demographic factors[259](index=259&type=chunk) - Decreases in property values reduce collateral value and potential proceeds for loan repayment, which could cause losses[259](index=259&type=chunk) [Credit Risk](index=47&type=section&id=Credit%20Risk) The company retains credit loss risk on mortgage investments, managed through due diligence and re-evaluation, with deteriorating fundamentals potentially leading to delinquencies and defaults - The company retains the risk of potential credit losses on all commercial and residential mortgage investments[260](index=260&type=chunk) - Credit risk is managed through pre-acquisition due diligence and regular re-evaluation of fundamental factors like GDP, unemployment, and interest rates[260](index=260&type=chunk) - Deteriorating fundamentals and tightening lending conditions can lead to increasing delinquency levels and eventual defaults, impacting MBS performance[261](index=261&type=chunk) [Risk Management](index=47&type=section&id=Risk%20Management) The company manages interest rate risk by monitoring reset indices, structuring diverse financing, exploring non-marked-to-market financing, and using hedging instruments - Risk management strategies include monitoring and adjusting reset indices and interest rates for assets and financings[264](index=264&type=chunk) - The company attempts to structure financing agreements with a range of different maturities, terms, amortizations, and interest rate adjustment periods[264](index=264&type=chunk) - Hedging instruments, primarily interest rate swap agreements and financial futures, are used to adjust the interest rate sensitivity of target assets and borrowings[264](index=264&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025, providing reasonable assurance for timely and accurate reporting[263](index=263&type=chunk)[265](index=265&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[267](index=267&type=chunk) PART II OTHER INFORMATION [Item 1. Legal Proceedings](index=50&type=section&id=Item%201.%20Legal%20Proceedings) As of June 30, 2025, the company was not involved in any legal proceedings - As of June 30, 2025, the company was not involved in any legal proceedings[270](index=270&type=chunk) [Item 1A. Risk Factors](index=50&type=section&id=Item%201A.%20Risk%20Factors) No material changes occurred to risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[271](index=271&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) The company repurchased and retired 96,803 shares of Series C Preferred Stock during Q2 2025 under its existing share repurchase program Series C Preferred Stock Repurchases (Three Months Ended June 30, 2025) | Month | Total Number of Shares Purchased | Average Price Paid Per Share | | :-------------------------------- | :------------------------------- | :--------------------------- | | April 1, 2025 to April 30, 2025 | 47,232 | $22.98 | | May 1, 2025 to May 31, 2025 | 29,557 | $24.51 | | June 1, 2025 to June 30, 2025 | 20,014 | $23.63 | | Total | 96,803 | $23.59 | - As of June 30, 2025, 519,710 additional shares of Series C Preferred Stock remained authorized for repurchase under the program[273](index=273&type=chunk) [Item 3. Defaults Upon Senior Securities](index=50&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported during the period - No defaults upon senior securities were reported[274](index=274&type=chunk) [Item 4. Mine Safety Disclosures](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[275](index=275&type=chunk) [Item 5. Other Information](index=50&type=section&id=Item%205.%20Other%20Information) This section includes information on Rule 10b5-1 trading plans and subsequent Series C Preferred Stock dividend declarations [Rule 10b5-1 Trading Plans](index=50&type=section&id=Rule%2010b5-1%20Trading%20Plans) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - No directors or officers adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter ended June 30, 2025[276](index=276&type=chunk) [Series C Preferred Stock Dividends](index=50&type=section&id=Series%20C%20Preferred%20Stock%20Dividends) A Series C Preferred Stock dividend of $0.46875 per share was declared on August 7, 2025, payable on September 29, 2025 - A Series C Preferred Stock dividend of **$0.46875** per share was declared on August 7, 2025, payable on September 29, 2025[277](index=277&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including articles, bylaws, certifications, and XBRL data files - The exhibit index includes Articles of Amendment and Restatement, Articles Supplementary for Preferred Stock, Amended and Restated Bylaws, Certifications (31.1, 31.2, 32.1, 32.2), and XBRL Interactive Data Files[284](index=284&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited consolidated financial statements for Q2 2025 show a net loss and a decrease in total assets to $9.3 billion [Consolidated Balance Sheets](index=3&type=section&id=UNAUDITED%20CONSOLIDATED%20BALANCE%20SHEETS) Total assets decreased to $9.31 billion by June 30, 2025, primarily due to reduced VIE assets, while liabilities also declined Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$9,308,797** | **$10,141,921** | | Cash and cash equivalents | $162,935 | $143,803 | | Loans, net | $5,066,694 | $3,378,149 | | Assets of consolidated VIEs | $2,395,398 | $5,175,295 | | **Total Liabilities** | **$7,374,774** | **$8,197,818** | | Secured borrowings | $3,506,670 | $2,035,176 | | Securitized debt obligations of consolidated VIEs, net | $1,513,297 | $3,580,513 | | **Total Stockholders' Equity** | **$1,925,662** | **$1,935,742** | [Consolidated Statements of Operations](index=3&type=section&id=UNAUDITED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) The company reported a Q2 2025 net loss of $53.7 million, but a six-month net income of $28.3 million due to loan loss recovery Key Operating Results (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $16,898 | $50,952 | $31,399 | $99,501 | | (Provision for) recovery of loan losses | ($8,640) | $18,871 | $100,928 | $45,415 | | Net income (loss) from continuing operations | ($48,751) | ($31,427) | $33,659 | ($107,009) | | **Net income (loss)** | **($53,677)** | **($34,201)** | **$28,288** | **($108,368)** | | **Total earnings per common share - diluted** | **($0.34)** | **($0.23)** | **$0.12** | **($0.68)** | | Dividends declared per share of common stock | $0.125 | $0.30 | $0.25 | $0.60 | [Consolidated Statements of Cash Flows](index=6&type=section&id=UNAUDITED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Net cash provided by operating activities was $8.2 million for the six months ended June 30, 2025, with a net increase in cash of $9.9 million Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $8,202 | $24,507 | | Net cash provided by investing activities | $789,020 | $624,996 | | Net cash used for financing activities | ($787,307) | ($626,874) | | **Net increase in cash, cash equivalents, and restricted cash** | **$9,915** | **$22,629** | [Notes to the Consolidated Financial Statements](index=7&type=section&id=NOTES%20TO%20THE%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) The notes detail the company's organization, accounting policies, recent acquisitions, loan portfolio performance, and discontinued operations - The company is a **multi-strategy real estate finance company** focused on originating, acquiring, financing, and servicing **lower-to-middle-market (LMM) commercial real estate loans, SBA loans**, and other related investments, externally managed by **Waterfall Asset Management, LLC**[23](index=23&type=chunk)[24](index=24&type=chunk) - On March 13, 2025, the company **acquired United Development Funding IV (UDF IV)**, a real estate investment trust, resulting in an updated bargain purchase gain of **$88.1 million**[26](index=26&type=chunk)[27](index=27&type=chunk)[132](index=132&type=chunk) - The company completed the **disposition of its Residential Mortgage Banking segment** effective June 30, 2025, with its results now presented as **discontinued operations** for all periods[221](index=221&type=chunk) Loan Portfolio Carrying Value (in thousands) | Loan Type | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Loans, net** | **$5,066,694** | **$3,378,149** | | Bridge | $2,769,324 | $1,246,725 | | SBA - 7(a) | $1,073,576 | $1,043,120 | | Construction | $885,016 | $733,276 | | **Loans, held for sale** | **$632,784** | **$241,626** | Loan Delinquency Status (Carrying Value, in thousands) | Delinquency Status | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current | $6,111,778 | $7,787,647 | | 30 - 59 days past due | $292,232 | $131,288 | | 60+ days past due | $780,902 | $389,275 | | **Total Loans, net** | **$7,184,912** | **$8,308,210** | | Non-Accrual Loans | $824,915 | $526,761 | Allowance for Loan Losses Activity (in thousands) | Period | Beginning Balance | Provision for (Recoveries of) Loan Losses | Charge-offs and Sales | Ending Balance | | :--- | :--- | :--- | :--- | :--- | | **Six Months Ended June 30, 2025** | **$339,939** | **($105,648)** | **($11,510)** | **$232,579** | | Six Months Ended June 30, 2024 | $101,605 | ($45,278) | ($11,699) | $44,832 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=48&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses business strategy, recent acquisitions, and the Q2 2025 distributable loss of $19.8 million, noting macroeconomic impacts - The company's core focus is on **LMM commercial real estate lending** and **small business loans**, operating through two segments: **LMM Commercial Real Estate** and **Small Business Lending**[389](index=389&type=chunk) - **Macroeconomic concerns**, including global market volatility, **inflation**, and **elevated interest rates**, persist and may adversely impact financial condition and results[401](index=401&type=chunk) Key Financial Metrics | ($ in thousands, except per share data) | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income (loss) from continuing operations | $(48,751) | $(31,427) | $33,659 | $(107,009) | | Distributable earnings | $(19,792) | $16,631 | $(31,176) | $70,607 | | Distributable earnings per common share - diluted | $(0.14) | $0.07 | $(0.23) | $0.37 | | Dividends declared per common share | $0.125 | $0.30 | $0.25 | $0.60 | | Book value per common share | $10.44 | $12.97 | $10.44 | $12.97 | Loan Originations (in thousands) | Loan Type | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | LMM loans | $173,356 | $256,485 | $252,013 | $516,161 | | SBL loans | $358,751 | $217,258 | $746,139 | $414,417 | | **Total loan investment activity** | **$532,107** | **$473,743** | **$998,152** | **$930,578** | - As of June 30, 2025, the company had a **total leverage ratio of 3.5x** and a **recourse leverage ratio of 1.5x**[447](index=447&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=64&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market, credit, interest rate, liquidity, and counterparty risks, with a 100 basis point rate increase potentially boosting net interest income by $7.5 million - The company is exposed to **market, credit, interest rate, liquidity, prepayment, real estate, fair value, and counterparty risks**, which are **heightened by current economic conditions**[503](index=503&type=chunk)[504](index=504&type=chunk)[505](index=505&type=chunk) 12-Month Pretax Net Interest Income Sensitivity to Interest Rate Changes (in thousands) | Instantaneous Change in Rates | Total Net Impact to Net Interest Income | | :--- | :--- | | +100 basis points | $7,457 | | +50 basis points | $3,567 | | -50 basis points | ($2,544) | | -100 basis points | ($3,440) | - The company has **significant counterparty risk** with **JPMorgan Chase Bank, N.A.**, representing an exposure of **$1.1 billion**, or **56.8% of stockholders' equity**, as of June 30, 2025[521](index=521&type=chunk) [Controls and Procedures](index=66&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of June 30, 2025[524](index=524&type=chunk) - **No material changes** were made to the company's internal control over financial reporting during the quarter ended June 30, 2025[525](index=525&type=chunk) [PART II. OTHER INFORMATION](index=66&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=66&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in multiple legal proceedings, including class action lawsuits related to mergers and securities disclosures - The company is subject to **class action lawsuits** related to its **mergers with Broadmark and UDF IV**, alleging **breaches of fiduciary duty** by the former boards of those companies[528](index=528&type=chunk)[530](index=530&type=chunk) - The company and certain executives are defendants in putative **stockholder class action and derivative lawsuits** alleging **violations of the Exchange Act** related to disclosures about its commercial real estate loan portfolio[531](index=531&type=chunk)[532](index=532&type=chunk) - As a result of the UDF IV Merger, the company **assumed outstanding litigation against UDF IV**, including the "Megatel Action" which alleges **RICO violations and fraud**[538](index=538&type=chunk)[539](index=539&type=chunk) [Risk Factors](index=68&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported for the period, referencing prior disclosures in the Form 10-K - **No material changes** to risk factors were reported for the period, referencing the disclosures in the company's Form 10-K[542](index=542&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has a $150.0 million share repurchase program, with 8.5 million shares repurchased in Q2 2025 and $95.2 million remaining - On January 16, 2025, the Board approved a new share repurchase program authorizing up to **$150.0 million** of common stock[543](index=543&type=chunk) Share Repurchases for Q2 2025 | Month | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April | 2,000,000 | $4.65 | | May | 6,515,274 | $4.33 | | June | 3,190 | $4.41 | | **Total** | **8,518,464** | **$4.41** | - As of the end of Q2 2025, approximately **$95.2 million** remained available for purchase under the share repurchase program[545](index=545&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) JFrog Ltd.'s unaudited financial statements detail its financial position, performance, and cash flows for the three and six months ended June 30, 2025 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) JFrog Ltd.'s balance sheets reflect growth in total assets, liabilities, and shareholders' equity as of June 30, 2025 Condensed Consolidated Balance Sheet Highlights (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total assets | $1,208,185 | $1,129,906 | | Total liabilities | $381,731 | $356,380 | | Total shareholders' equity | $826,454 | $773,526 | | Cash and cash equivalents | $51,277 | $49,869 | | Short-term investments | $560,423 | $472,138 | | Deferred revenue (current) | $260,066 | $247,187 | - Total assets increased by **$78,300 thousand**, or **6.9%**, from December 31, 2024, to June 30, 2025, primarily due to growth in short-term investments[18](index=18&type=chunk) - Total shareholders' equity increased by **$52,900 thousand**, or **6.8%**, from December 31, 2024, to June 30, 2025[18](index=18&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) JFrog Ltd. reported increased subscription revenue but a wider net loss for the three and six months ended June 30, 2025 Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total subscription revenue | $127,220 | $103,043 | $249,627 | $203,354 | | Gross profit | $97,018 | $81,150 | $189,244 | $160,857 | | Operating loss | $(25,971) | $(19,127) | $(48,941) | $(35,763) | | Net loss | $(21,675) | $(14,303) | $(40,178) | $(23,093) | | Net loss per share, basic and diluted | $(0.19) | $(0.13) | $(0.35) | $(0.21) | - Total subscription revenue increased by **23%** for both the three and six months ended June 30, 2025, compared to the corresponding periods in 2024[20](index=20&type=chunk) - Net loss increased by **51.5%** for the three months ended June 30, 2025, and by **74.0%** for the six months ended June 30, 2025, year-over-year[20](index=20&type=chunk) [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Comprehensive loss improved for the three months ended June 30, 2025, driven by positive changes in derivative instruments Condensed Consolidated Statements of Comprehensive Loss Highlights (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(21,675) | $(14,303) | $(40,178) | $(23,093) | | Other comprehensive income (loss), net of tax | $6,962 | $(1,583) | $5,084 | $(2,740) | | Comprehensive loss | $(14,713) | $(15,886) | $(35,094) | $(25,833) | - Other comprehensive income (loss) improved significantly, primarily driven by a net change in derivative instruments, which moved from a loss of **$1,400 thousand** in Q2 2024 to a gain of **$7,000 thousand** in Q2 2025[22](index=22&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) Shareholders' equity grew to $826,500 thousand by June 30, 2025, primarily from share-based compensation and comprehensive income Condensed Consolidated Statements of Shareholders' Equity Highlights (in thousands) | Item | Balance as of December 31, 2024 | Six Months Ended June 30, 2025 Changes | Balance as of June 30, 2025 | | :----------------------------------- | :------------------------------ | :------------------------------------ | :-------------------------- | | Ordinary Shares Amount | $315 | $11 | $326 | | Additional Paid-in Capital | $1,132,224 | $88,011 | $1,220,235 | | Accumulated Other Comprehensive Income | $655 | $5,084 | $5,739 | | Accumulated Deficit | $(359,668) | $(40,178) | $(399,846) | | Total Shareholders' Equity | $773,526 | $52,928 | $826,454 | - Share-based compensation expense contributed **$74,900 thousand** to additional paid-in capital for the six months ended June 30, 2025[26](index=26&type=chunk) - Issuance of ordinary shares from share options, restricted share units, and employee share purchase plan contributed to the increase in ordinary shares and additional paid-in capital[26](index=26&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly increased for the six months ended June 30, 2025, with investing activities shifting to a net outflow Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $64,877 | $34,166 | | Net cash provided by (used in) investing activities | $(85,330) | $88,267 | | Net cash provided by financing activities | $21,097 | $11,922 | | Net increase in cash, cash equivalents, and restricted cash | $1,408 | $133,538 | | Cash, cash equivalents, and restricted cash—end of period | $52,035 | $218,315 | - Net cash provided by operating activities increased by **89.9%** year-over-year for the six months ended June 30, 2025[29](index=29&type=chunk) - Investing activities shifted from a net inflow of **$88,300 thousand** in 2024 to a net outflow of **$85,300 thousand** in 2025, primarily due to increased purchases of short-term investments[29](index=29&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes cover JFrog's accounting policies, revenue, investments, and share-based compensation, highlighting SaaS growth - JFrog provides a hybrid, universal, end-to-end software supply chain platform for delivering trusted, secure software updates, aiming to be the single source of truth for an organization's software footprint[31](index=31&type=chunk) Revenue Disaggregation by Category (in thousands, except percentages) | Category | Three Months Ended June 30, 2025 (Amount / % of Revenue) | Three Months Ended June 30, 2024 (Amount / % of Revenue) | | :-------------------------- | :------------------------------------------------ | :------------------------------------------------ | | Self-managed subscription | $70,118 / 55% | $63,765 / 62% | | SaaS | $57,102 / 45% | $39,278 / 38% | | Total subscription revenue | $127,220 / 100% | $103,043 / 100% | - Remaining performance obligations totaled **$476,700 thousand** as of June 30, 2025, with **67%** expected to be recognized as revenue over the next **12** months[44](index=44&type=chunk) - Amortization of deferred contract acquisition costs increased by **42.4%** to **$4,700 thousand** for the three months ended June 30, 2025, from **$3,300 thousand** in the prior year[45](index=45&type=chunk) - Marketable securities increased to **$427,400 thousand** as of June 30, 2025, from **$366,600 thousand** at December 31, 2024[47](index=47&type=chunk) - Total share-based compensation expense increased by **33%** to **$38,000 thousand** for the three months ended June 30, 2025, and by **34%** to **$74,900 thousand** for the six months ended June 30, 2025, primarily due to grants to new and existing employees[73](index=73&type=chunk) - Unrecognized share-based compensation cost related to unvested awards was **$287,100 thousand** as of June 30, 2025, expected to be recognized over a weighted-average period of **2.5** years[73](index=73&type=chunk) - JFrog operates in one operating and reportable segment. Long-lived assets are primarily located in Israel (**$9,000 thousand**) and the United States (**$4,700 thousand**) as of June 30, 2025[84](index=84&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses JFrog's 23% revenue growth, increased net loss from investments, and substantial free cash flow growth for H1 2025 - JFrog's total revenue grew by **23%** for both the three and six months ended June 30, 2025, compared to the corresponding periods in 2024[90](index=90&type=chunk) - Revenue from SaaS subscriptions increased its contribution to total revenue, reaching **45%** for the three months and **44%** for the six months ended June 30, 2025, up from **38%** and **37%** respectively in 2024[87](index=87&type=chunk) - The company's net dollar retention rate was **118%** as of June 30, 2025 and 2024, indicating strong expansion within existing customers[97](index=97&type=chunk) Customer Growth with Annual Recurring Revenue (ARR) (in thousands) | Customer Segment | As of June 30, 2025 | As of December 31, 2024 | | :-------------------------------- | :------------------ | :---------------------- | | Customers with ARR of $100,000 or more | 1,076 | 1,018 | | Customers with ARR of $1.0 million or more | 61 | 52 | Free Cash Flow (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by operating activities | $64,877 | $34,166 | | Less: purchases of property and equipment | $(1,274) | $(1,573) | | Free cash flow | $63,603 | $32,593 | - Free cash flow increased by **95.1%** for the six months ended June 30, 2025, compared to the same period in 2024[104](index=104&type=chunk) - Gross margin decreased from **79%** in Q2 2024 to **76%** in Q2 2025, primarily due to the shift in revenue mix towards SaaS subscriptions, which incur higher hosting costs, and increased intangible amortization[120](index=120&type=chunk)[129](index=129&type=chunk) - Operating expenses, including Research and Development, Sales and Marketing, and General and Administrative, increased across the board, driven by increased headcount and share-based compensation expenses[121](index=121&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk) - As of June 30, 2025, JFrog had **$611,700 thousand** in cash, cash equivalents, and short-term investments, which management believes will be sufficient to meet liquidity needs for the next **12** months and long-term[137](index=137&type=chunk) Contractual Obligations as of June 30, 2025 (in thousands) | Obligation Type | Total | 2025 (Remainder) | 2026 and Thereafter | | :------------------------ | :------ | :--------------- | :------------------ | | Operating lease obligations | $14,865 | $4,369 | $10,496 | | Purchase obligations | $80,148 | $12,327 | $67,821 | | Total | $95,013 | $16,696 | $78,317 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) JFrog faces foreign currency and interest rate risks, partially mitigated by hedging, with inflation not yet material - JFrog's primary foreign currency exposure is to the exchange rate movements of the U.S. dollar against the New Israeli Shekel (NIS), as a significant portion of operating costs in Israel are NIS-denominated[150](index=150&type=chunk) - The company utilizes foreign currency forward and option contracts to hedge against foreign exchange risks, with a hypothetical **10%** change in exchange rates not materially impacting results for the reported periods after considering hedging programs[151](index=151&type=chunk) - As of June 30, 2025, cash, cash equivalents, and short-term investments totaled **$611,700 thousand**, primarily denominated in U.S. dollars, and a hypothetical **1%** increase in interest rates would not materially affect their fair value[154](index=154&type=chunk) - Inflation has not had a material effect on the business, but sustained inflationary pressures on costs could harm financial condition if not offset by price increases[155](index=155&type=chunk) [Item 4. Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded JFrog's disclosure controls were effective as of June 30, 2025, with no material changes in internal control - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[157](index=157&type=chunk) - No changes in internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the period[158](index=158&type=chunk) - The effectiveness of any internal control system is subject to inherent limitations, providing reasonable, not absolute, assurance[159](index=159&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) JFrog is unaware of any legal proceedings that would materially adversely affect its business or financial position - JFrog is not currently aware of any legal proceedings that would have a material adverse effect on its business, financial position, results of operations, or cash flows[66](index=66&type=chunk)[161](index=161&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) JFrog faces risks from growth, competition, customer/personnel reliance, product defects, geopolitical tensions, and AI regulations - JFrog has experienced significant growth, with total revenues growing **23%** for both the three and six months ended June 30, 2025, and employee headcount increasing from approximately **1,400** to **1,600** employees from December 31, 2023, to December 31, 2024[165](index=165&type=chunk) - The company has a history of losses, with net losses of **$69,200 thousand**, **$61,300 thousand**, and **$90,200 thousand** in 2024, 2023, and 2022, respectively, and may not achieve consistent profitability due to substantial increases in operating expenses[174](index=174&type=chunk) - JFrog faces intense competition in a highly fragmented and rapidly evolving market, with competitors often possessing greater financial and technical resources[179](index=179&type=chunk)[182](index=182&type=chunk) - The business is highly dependent on customer renewals and the ability to expand sales to existing customers, which can fluctuate due to various factors including satisfaction, pricing, and economic conditions[185](index=185&type=chunk)[188](index=188&type=chunk) - Reliance on key executive officers and highly skilled employees, particularly in engineering and sales, poses a risk due to intense competition for talent and high attrition rates[191](index=191&type=chunk)[193](index=193&type=chunk) - The company depends on strategic relationships with third parties, including public cloud providers (AWS, Microsoft Azure, Google Cloud) and channel partners, and any failure to maintain or expand these relationships could harm results[196](index=196&type=chunk)[200](index=200&type=chunk) - A limited-functionality version of JFrog Artifactory is available under an open source license (AGPL), which could negatively affect monetization and intellectual property protection[202](index=202&type=chunk)[204](index=204&type=chunk) - Products are complex and may contain defects or security vulnerabilities, leading to potential liability, revenue loss, and reputational damage, especially as use expands to more sensitive applications[209](index=209&type=chunk) - Unfavorable economic conditions, such as inflation and recession, may adversely affect business by reducing enterprise IT spending and demand for products[229](index=229&type=chunk)[230](index=230&type=chunk) - Issues in the development and use of AI technologies, combined with an uncertain regulatory environment (e.g., EU AI Act), may result in reputational harm, liability, or increased operating costs[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk) - Failure to protect proprietary technology and intellectual property rights, including challenges from open source software use and potential litigation, could substantially harm the business[247](index=247&type=chunk)[253](index=253&type=chunk)[259](index=259&type=chunk) - The company is subject to stringent and changing laws and regulations related to privacy, data protection, and cybersecurity, with actual or perceived failures to comply potentially leading to significant liabilities and reputational harm[269](index=269&type=chunk)[271](index=271&type=chunk) - International operations and expansion expose JFrog to risks including managing a distributed workforce, differing labor regulations, and compliance with various global laws, particularly in Israel, the EU, India, and China[278](index=278&type=chunk)[283](index=283&type=chunk) - Geopolitical tensions, including the conflicts in the Middle East (Israel, Hamas, Hezbollah, Iran) and the Russia-Ukraine war, pose risks to operations, economic stability, and employee availability, particularly given JFrog's significant R&D presence in Israel[317](index=317&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk)[320](index=320&type=chunk)[321](index=321&type=chunk) - The market price of JFrog's ordinary shares may be volatile due to various factors, including operating performance, competition, and geopolitical events, and the concentration of insider ownership (**21%** as of June 30, 2025) may limit other shareholders' influence[302](index=302&type=chunk)[304](index=304&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=95&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities or use of proceeds were reported for the period[343](index=343&type=chunk) [Item 3. Default Upon Senior Securities](index=95&type=section&id=Item%203.%20Default%20Upon%20Senior%20Securities) This item is not applicable for the reporting period, indicating no defaults upon senior securities - This item is not applicable[344](index=344&type=chunk) [Item 4. Mine Safety Disclosures](index=95&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable for the reporting period, indicating no mine safety disclosures - This item is not applicable[345](index=345&type=chunk) [Item 5. Other Information](index=95&type=section&id=Item%205.%20Other%20Information) CFO and a board member adopted Rule 10b5-1 trading arrangements for ordinary share sales during Q2 2025 - On May 16, 2025, CFO Eduard Grabscheid adopted a Rule 10b5-1 trading arrangement for the sale of up to **98,842** ordinary shares, terminating by June 30, 2026[346](index=346&type=chunk) - On May 29, 2025, board member Yvonne Wassenaar adopted a Rule 10b5-1 trading arrangement for the sale of up to **10,172** ordinary shares, terminating by June 5, 2026[347](index=347&type=chunk) - No other officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[348](index=348&type=chunk) [Item 6. Exhibits](index=96&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including officer certifications and XBRL documents - Includes certifications of the Principal Executive Officer (Exhibit **31.1**, **32.1**) and Principal Financial Officer (Exhibit **31.2**, **32.2**) as required by the Securities Exchange Act and Sarbanes-Oxley Act[352](index=352&type=chunk)[353](index=353&type=chunk) - Contains Inline XBRL Instance Document, Taxonomy Extension Schema Document, and Cover Page Interactive Data File[352](index=352&type=chunk) [Signatures](index=97&type=section&id=Signatures) The report was duly signed on August 8, 2025, by the Chief Executive Officer and Chief Financial Officer - The report was signed by Shlomi Ben Haim, Chief Executive Officer, on August 8, 2025[357](index=357&type=chunk) - The report was signed by Eduard Grabscheid, Chief Financial Officer, on August 8, 2025[357](index=357&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-13695 (Exact name of registrant as specified in its charter) | Delaware | 16-1213679 | | --- | --- | | (State or other ju ...

```markdown [Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents Yelp's unaudited condensed consolidated financial statements and detailed notes for Q2 and H1 2025 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Total assets | $980,175 | $983,567 | | Total liabilities | $233,771 | $239,598 | | Total stockholders' equity | $746,404 | $743,969 | - Total assets slightly decreased from **$983.6 million** at December 31, 2024, to **$980.2 million** at June 30, 2025. Total liabilities also decreased from **$239.6 million** to **$233.8 million**, while total stockholders' equity saw a slight increase from **$744.0 million** to **$746.4 million**[26](index=26&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net revenue | $370,394 | $357,016 | $728,928 | $689,768 | | Total costs and expenses | $317,104 | $317,269 | $646,178 | $638,804 | | Income from operations | $53,290 | $39,747 | $82,750 | $50,964 | | Net income attributable to common stockholders | $44,089 | $38,036 | $68,480 | $52,190 | | Basic EPS | $0.69 | $0.56 | $1.06 | $0.77 | | Diluted EPS | $0.67 | $0.54 | $1.03 | $0.73 | - Net revenue increased by **4% YoY** for the three months ended June 30, 2025, and by **6% YoY** for the six months ended June 30, 2025. Net income attributable to common stockholders increased by **16% YoY** for the quarter and **31% YoY** for the six-month period[28](index=28&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net income attributable to common stockholders | $44,089 | $38,036 | $68,480 | $52,190 | | Other comprehensive income (loss) | $5,725 | $(184) | $8,292 | $(1,932) | | Comprehensive income | $49,814 | $37,852 | $76,772 | $50,258 | - Comprehensive income significantly increased, driven by positive foreign currency translation adjustments in 2025, contrasting with losses in the prior year[31](index=31&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) | Metric | Balance as of December 31, 2024 (in thousands) | Balance as of June 30, 2025 (in thousands) | | :----------------------------------- | :------------------------------------------- | :----------------------------------------- | | Additional paid-in capital | $1,903,598 | $1,958,370 | | Treasury stock | $(3,909) | $(1,044) | | Accumulated other comprehensive loss | $(15,431) | $(7,139) | | Accumulated deficit | $(1,140,289) | $(1,203,783) | | Total stockholders' equity | $743,969 | $746,404 | - Stockholders' equity increased slightly, primarily due to net income and stock-based compensation, partially offset by common stock repurchases and an increase in accumulated deficit[34](index=34&type=chunk)[36](index=36&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash provided by operating activities | $156,029 | $112,544 | | Net cash used in investing activities | $(26,620) | $(23,046) | | Net cash used in financing activities | $(151,582) | $(150,411) | | Change in cash, cash equivalents and restricted cash | $(19,522) | $(61,208) | - Net cash provided by operating activities increased significantly by **$43.5 million** YoY, primarily due to increased cash collection from customers and the non-recurrence of a **$15.0 million** CIPA Action settlement payment from the prior year. Net cash used in investing activities increased due to higher capitalized software development costs, while net cash used in financing activities increased due to higher stock repurchases[38](index=38&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Description of Business and Basis for Presentation](index=11&type=section&id=1.%20DESCRIPTION%20OF%20BUSINESS%20AND%20BASIS%20FOR%20PRESENTATION) - Yelp Inc. operates as a trusted local resource for consumers and a partner for businesses, generating revenue primarily from performance-based advertising. The company has operations in the United States, United Kingdom, Canada, Ireland, and Germany[41](index=41&type=chunk) - The interim financial statements are unaudited and prepared in accordance with GAAP and SEC regulations, with certain disclosures condensed or omitted[42](index=42&type=chunk) - The company adopted ASU 2023-07 retrospectively in 2024, expanding segment disclosure requirements. It is currently evaluating the impact of ASU 2023-09 (Income Tax Disclosures), ASU 2024-03 (Expense Disaggregation), and ASU 2025-05 (Credit Losses for Accounts Receivable) for future periods[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) [2. Cash, Cash Equivalents and Restricted Cash](index=12&type=section&id=2.%20CASH,%20CASH%20EQUIVALENTS%20AND%20RESTRICTED%20CASH) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Cash | $85,785 | $87,056 | | Cash equivalents | $111,902 | $130,269 | | Total cash and cash equivalents | $197,687 | $217,325 | | Restricted cash | $473 | $357 | | Total cash, cash equivalents and restricted cash | $198,160 | $217,682 | - Total cash, cash equivalents, and restricted cash decreased by **$19.5 million** from December 31, 2024, to June 30, 2025[52](index=52&type=chunk) [3. Marketable Securities](index=13&type=section&id=3.%20MARKETABLE%20SECURITIES) | Security Type | Amortized Cost (June 30, 2025, in thousands) | Fair Value (June 30, 2025, in thousands) | Amortized Cost (December 31, 2024, in thousands) | Fair Value (December 31, 2024, in thousands) | | :-------------- | :------------------------------------------- | :--------------------------------------- | :----------------------------------------------- | :--------------------------------------------- | | Certificates of deposit | $2,983 | $2,983 | $1,282 | $1,282 | | Commercial paper | $882 | $882 | $8,867 | $8,867 | | Corporate bonds | $41,110 | $41,193 | $38,505 | $38,483 | | Agency bonds | $932 | $932 | $1,237 | $1,238 | | U.S. government securities | $57,378 | $57,446 | $50,554 | $50,711 | | Total short-term marketable securities | $103,285 | $103,436 | $100,445 | $100,581 | - The fair value of short-term marketable securities increased from **$100.6 million** at December 31, 2024, to **$103.4 million** at June 30, 2025. The company did not recognize any credit loss related to available-for-sale marketable securities for the six months ended June 30, 2025 and 2024[54](index=54&type=chunk) [4. Fair Value Measurements](index=14&type=section&id=4.%20FAIR%20VALUE%20MEASUREMENTS) | Instrument Type | Level 1 (June 30, 2025, in thousands) | Level 2 (June 30, 2025, in thousands) | Total (June 30, 2025, in thousands) | | :---------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | | Money market funds | $83,818 | $— | $83,818 | | Marketable securities | $— | $103,436 | $103,436 | | Other investments (CDs) | $— | $10,000 | $10,000 | | Total | $83,818 | $113,436 | $197,254 | - The company's financial instruments are primarily classified within Level 1 (money market funds) and Level 2 (debt securities) of the fair value hierarchy, indicating valuation based on observable market data[57](index=57&type=chunk)[58](index=58&type=chunk) [5. Prepaid Expenses and Other Current Assets](index=15&type=section&id=5.%20PREPAID%20EXPENSES%20AND%20OTHER%20CURRENT%20ASSETS) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Prepaid expenses | $20,822 | $18,615 | | Certificates of deposit | $10,000 | $10,000 | | Other current assets | $21,470 | $15,033 | | Total prepaid expenses and other current assets | $52,292 | $43,648 | - Total prepaid expenses and other current assets increased by **$8.6 million**, primarily driven by an increase in 'Other current assets,' which mainly consisted of income taxes receivable as of June 30, 2025[59](index=59&type=chunk) [6. Property, Equipment and Software, Net](index=15&type=section&id=6.%20PROPERTY,%20EQUIPMENT%20AND%20SOFTWARE,%20NET) | Asset Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Capitalized website and internal-use software development costs | $324,900 | $299,177 | | Leasehold improvements | $37,242 | $55,875 | | Computer equipment | $28,611 | $27,272 | | Total Property, equipment and software, net | $84,234 | $75,669 | - Net property, equipment, and software increased by **$8.6 million**, primarily due to an increase in capitalized website and internal-use software development costs, partially offset by a decrease in leasehold improvements[60](index=60&type=chunk) [7. Acquisition](index=15&type=section&id=7.%20ACQUISITION) - On November 26, 2024, Yelp acquired RepairPal, an auto services platform, for a total preliminary purchase consideration of **$80.0 million**, aiming to expand its offerings in the auto services advertising vertical[61](index=61&type=chunk)[62](index=62&type=chunk) | Intangible Asset Type | Amount Assigned (in thousands) | Useful Life | | :-------------------- | :----------------------------- | :---------- | | Business relationships | $36,000 | 8.8 years | | Developed technology | $14,600 | 4.5 years | | Trademarks | $3,000 | 11.0 years | - The acquisition resulted in **$29.7 million** in goodwill, reflecting expected synergies. Measurement period adjustments during the six months ended June 30, 2025, led to a net decrease in goodwill of **$0.1 million**[64](index=64&type=chunk)[65](index=65&type=chunk) [8. Goodwill and Intangible Assets](index=17&type=section&id=8.%20GOODWILL%20AND%20INTANGIBLE%20ASSETS) | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | | :----------------------------------- | :----------------------------- | :--------------------------- | | Goodwill | $130,980 | $136,525 | | Net Carrying Amount of Intangibles | $58,787 | $53,944 | - Goodwill increased by **$5.5 million**, primarily due to the effect of currency translation, while net intangible assets decreased due to amortization. Amortization expense for intangible assets significantly increased to **$4.9 million** for the six months ended June 30, 2025, from **$0.7 million** in the prior-year period, mainly due to the RepairPal acquisition[68](index=68&type=chunk)[70](index=70&type=chunk) [9. Leases](index=18&type=section&id=9.%20LEASES) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total lease cost, net | $(799) | $3,077 | | Operating cash flows from operating leases | $16,314 | $21,460 | - Total lease cost, net, decreased significantly, turning negative due to a **$1.2 million** rent abatement received in Q2 2025. Operating cash flows from operating leases also decreased[72](index=72&type=chunk)[73](index=73&type=chunk) - As of June 30, 2025, the weighted-average remaining lease term for operating leases was **3.9 years**, with a weighted-average discount rate of **4.8%**[74](index=74&type=chunk) [10. Other Non-Current Assets](index=19&type=section&id=10.%20OTHER%20NON-CURRENT%20ASSETS) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Deferred tax assets | $142,675 | $139,588 | | Deferred contract costs | $23,870 | $24,156 | | Other non-current assets | $9,651 | $13,396 | | Total other non-current assets | $176,196 | $177,140 | - Total other non-current assets slightly decreased, with deferred tax assets increasing and other non-current assets decreasing[75](index=75&type=chunk) [11. Contract Balances](index=19&type=section&id=11.%20CONTRACT%20BALANCES) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Provision for credit losses | $22,562 | $23,957 | | Write-offs, net of recoveries | $(23,485) | $(21,601) | | Allowance for credit losses, end of period | $14,378 | $16,124 | - The provision for credit losses decreased due to lower customer delinquencies, while write-offs, net of recoveries, increased in the ordinary course of business, reflecting increased net revenue[76](index=76&type=chunk) - Short-term deferred revenue increased to **$3.865 million** as of June 30, 2025, with the majority expected to be recognized in the subsequent three-month period[77](index=77&type=chunk) [12. Accounts Payable and Accrued Liabilities](index=20&type=section&id=12.%20ACCOUNTS%20PAYABLE%20AND%20ACCRUED%20LIABILITIES) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Accounts payable | $11,881 | $11,904 | | Employee-related liabilities | $90,309 | $85,396 | | Taxes payable | $2,491 | $9,528 | | Accrued cost of revenue | $8,956 | $8,559 | | Other accrued liabilities | $28,399 | $15,935 | | Total accounts payable and accrued liabilities | $142,036 | $131,322 | - Total accounts payable and accrued liabilities increased by **$10.7 million**, primarily driven by increases in employee-related liabilities and other accrued liabilities, which include current holdback consideration from the RepairPal acquisition[79](index=79&type=chunk) [13. Commitments and Contingencies](index=20&type=section&id=13.%20COMMITMENTS%20AND%20CONTINGENCIES) - The CIPA Action, a class action lawsuit, was settled for **$15.0 million**, with the accrual released in Q2 2024 upon payment. The company does not expect other ongoing legal proceedings to materially affect its financial position[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) - Yelp has a **$125.0 million** senior secured revolving credit facility, with **$12.3 million** in letters of credit outstanding and **$112.7 million** available as of June 30, 2025. The company was in compliance with all covenants[86](index=86&type=chunk)[89](index=89&type=chunk) [14. Stockholders' Equity](index=21&type=section&id=14.%20STOCKHOLDERS'%20EQUITY) - As of June 30, 2025, **63,841 thousand** shares of common stock were issued and outstanding, down from **65,792 thousand** at December 31, 2024[90](index=90&type=chunk) - The company repurchased **3,542,330** shares for **$128.4 million** during the six months ended June 30, 2025, with **$202.3 million** remaining available under the **$1.95 billion** stock repurchase program as of June 30, 2025[91](index=91&type=chunk)[92](index=92&type=chunk) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Stock-based compensation expense | $72,244 | $83,924 | - Unrecognized stock-based compensation expense related to RSUs and PRSUs was approximately **$226.1 million** as of June 30, 2025, expected to be recognized over a weighted-average vesting period of **2.1 years**[96](index=96&type=chunk) [15. Other Income, Net](index=23&type=section&id=15.%20OTHER%20INCOME,%20NET) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Interest income, net | $3,451 | $5,424 | $6,963 | $11,088 | | Release of nonrecurring tax reserve | $— | $3,102 | $— | $3,102 | | Other income, net | $5,695 | $10,322 | $11,466 | $18,046 | - Other income, net, decreased significantly due to the non-recurrence of a **$3.1 million** payroll tax credit release from the prior year and lower interest income resulting from reduced cash balances and federal interest rates[99](index=99&type=chunk)[156](index=156&type=chunk) [16. Income Taxes](index=24&type=section&id=16.%20INCOME%20TAXES) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Provision for income taxes | $25,736 | $16,820 | - The provision for income taxes increased due to higher profit before tax and increased discrete tax expense related to stock-based compensation and uncertain tax positions[100](index=100&type=chunk)[158](index=158&type=chunk) - As of June 30, 2025, the company had **$47.4 million** in unrecognized tax benefits and estimated **$50.7 million** in accumulated undistributed foreign earnings, which it intends to indefinitely reinvest[102](index=102&type=chunk)[103](index=103&type=chunk) [17. Net Income Per Share Attributable to Common Stockholders](index=24&type=section&id=17.%20NET%20INCOME%20PER%20SHARE%20ATTRIBUTABLE%20TO%20COMMON%20STOCKHOLDERS) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic net income per share | $0.69 | $0.56 | $1.06 | $0.77 | | Diluted net income per share | $0.67 | $0.54 | $1.03 | $0.73 | | Weighted-average common shares outstanding (basic, in thousands) | 64,145 | 67,815 | 64,700 | 68,187 | | Number of shares used in diluted calculation (in thousands) | 65,683 | 70,444 | 66,610 | 71,574 | - Both basic and diluted EPS increased significantly year-over-year for both the three and six-month periods, reflecting higher net income and a reduction in weighted-average shares outstanding[106](index=106&type=chunk)[107](index=107&type=chunk) [18. Information About Segment, Revenue and Geographic Areas](index=25&type=section&id=18.%20INFORMATION%20ABOUT%20SEGMENT,%20REVENUE%20AND%20GEOGRAPHIC%20AREAS) - Yelp operates as a single operating and reporting segment, generating substantially all revenue from performance-based advertising products[108](index=108&type=chunk) | Revenue Category | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Services | $240,802 | $222,955 | $472,378 | $426,243 | | Restaurants, Retail & Other | $112,895 | $118,383 | $223,320 | $232,733 | | Total Advertising Revenue | $353,697 | $341,338 | $695,698 | $658,976 | | Other | $16,697 | $15,678 | $33,230 | $30,792 | | Total Net Revenue | $370,394 | $357,016 | $728,928 | $689,768 | - Services advertising revenue increased by **8%** and **11% YoY** for the three and six months, respectively, driven by Home and Auto Services (including RepairPal). Restaurants, Retail & Other (RR&O) advertising revenue decreased by **5%** and **4% YoY**, respectively[111](index=111&type=chunk) - The United States accounted for the vast majority of net revenue (**$367.9 million** for Q2 2025) and long-lived assets (**$80.6 million** as of June 30, 2025)[112](index=112&type=chunk)[113](index=113&type=chunk) [19. Subsequent Events](index=27&type=section&id=19.%20SUBSEQUENT%20EVENTS) - In July 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, which is expected to reduce the company's cash tax payments for the remainder of 2025 by approximately **$25 million** to **$35 million**, primarily by restoring full expensing of domestic R&D expenses[114](index=114&type=chunk)[161](index=161&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Analyzes Yelp's financial condition, operations, key metrics, liquidity, and accounting policies, highlighting revenue growth [Overview](index=28&type=section&id=Overview) - Yelp is a trusted local resource connecting consumers with businesses through ratings and reviews, generating most revenue from performance-based advertising[116](index=116&type=chunk)[117](index=117&type=chunk) | Metric | Three Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2025 (in millions) | | :----------------------------------- | :------------------------------------------- | :------------------------------------------- | | Net revenue | $370.4 | $728.9 | | Net income | $44.1 | $68.5 | | Adjusted EBITDA | $100.5 | $185.4 | - Strategic investments in product and marketing drove revenue growth, particularly in Services categories (up **8% YoY** in Q2), while Restaurants, Retail & Other (RR&O) faced challenges. Yelp Assistant project submissions increased by over **400% YoY**[118](index=118&type=chunk)[119](index=119&type=chunk) - The company anticipates flat net revenue and a sequential decrease in adjusted EBITDA for Q3 due to persistent macroeconomic uncertainties and increased expenses in H2 2025[118](index=118&type=chunk) [Key Metrics](index=29&type=section&id=Key%20Metrics) | 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 | | :------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Ad Clicks (YoY % Change) | (7)% | 9% | (5)% | 9% | | Average CPC (YoY % Change) | 11% | (1)% | 10% | (1)% | - Ad clicks decreased by **(7)% YoY** for the quarter and **(5)% YoY** for the six months, primarily due to macroeconomic and competitive pressures in RR&O categories and reduced paid search spend for Services projects. Average CPC increased by **11%** and **10% YoY**, respectively, reflecting strong advertiser demand in Services categories and a focus on higher-quality ad clicks[126](index=126&type=chunk) | Category | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Services Paying Advertising Locations | 260 | 254 | 260 | 253 | | RR&O Paying Advertising Locations | 255 | 277 | 256 | 277 | | Total Paying Advertising Locations | 515 | 531 | 516 | 530 | - Total paying advertising locations decreased by **3% YoY** for both periods, as growth in Services paying advertising locations (**2-3% YoY**, partly due to RepairPal) was offset by an **8% YoY** decrease in RR&O locations due to challenging operating environments and competition[131](index=131&type=chunk)[133](index=133&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net revenue | $370,394 | $357,016 | $728,928 | $689,768 | | Cost of revenue | $35,447 (16% YoY) | $30,677 | $70,275 (21% YoY) | $58,032 | | Sales and marketing | $144,612 (-4% YoY) | $150,293 | $290,896 (-2% YoY) | $298,084 | | Product development | $78,362 (-5% YoY) | $82,080 | $162,267 (-6% YoY) | $173,307 | | General and administrative | $46,318 (4% YoY) | $44,634 | $98,025 (9% YoY) | $89,866 | | Depreciation and amortization | $12,365 (29% YoY) | $9,585 | $24,715 (27% YoY) | $19,515 | | Income from operations | $53,290 (34% YoY) | $39,747 | $82,750 (62% YoY) | $50,964 | - Net revenue growth was driven by Services businesses, with RepairPal contributing approximately two percentage points to total advertising revenue growth. Other revenue increased due to Yelp Guest Manager, Yelp Fusion Insights, and Yelp Fusion programs[137](index=137&type=chunk)[139](index=139&type=chunk) - Cost of revenue increased due to website infrastructure, RepairPal revenue share payments, credit card processing fees, and advertising fulfillment costs. Sales and marketing expenses decreased due to reduced marketing spend on paid search and lower workplace operating costs, partially offset by higher employee-related costs. Product development expenses decreased due to lower headcount and increased capitalization of employee-related costs. General and administrative expenses increased due to higher employee-related costs and RepairPal indemnification obligations, partially offset by lower credit loss provision. Depreciation and amortization increased significantly due to intangible assets from the RepairPal acquisition[142](index=142&type=chunk)[144](index=144&type=chunk)[147](index=147&type=chunk)[149](index=149&type=chunk)[152](index=152&type=chunk)[154](index=154&type=chunk) [Non-GAAP Financial Measures](index=34&type=section&id=Non-GAAP%20Financial%20Measures) - Yelp uses non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA margin, and Free Cash Flow, to evaluate business performance, noting their limitations as analytical tools[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Adjusted EBITDA | $100,485 | $91,115 | $185,429 | $155,571 | | Adjusted EBITDA margin | 27% | 26% | 25% | 23% | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Free cash flow | $132,474 | $95,970 | - Adjusted EBITDA increased by **10% YoY** for the quarter and **19% YoY** for the six months, with Adjusted EBITDA margin improving to **27%** and **25%**, respectively. Free cash flow increased by **38% YoY** for the six months, driven by higher operating cash flows[168](index=168&type=chunk)[169](index=169&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) | Metric | June 30, 2025 (in millions) | | :----------------------------------- | :-------------------------- | | Cash and cash equivalents | $197.7 | | Marketable securities | $103.4 | | Available under credit facility | $112.7 | - The company believes its existing cash, cash equivalents, marketable securities, and cash from operations will be sufficient to meet material cash requirements for the next 12 months and beyond, including working capital, stock repurchases, and lease obligations[175](index=175&type=chunk) - Future cash requirements include **$33.4 million** for operating lease agreements (**$11.0 million** within 12 months) and approximately **$151.9 million** for purchase obligations (**$62.4 million** within 12 months), primarily for website hosting services[176](index=176&type=chunk)[177](index=177&type=chunk) - The stock repurchase program had **$176.2 million** remaining available as of August 1, 2025, with **$128.4 million** repurchased during the six months ended June 30, 2025[183](index=183&type=chunk)[185](index=185&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - The company's critical accounting policies and estimates, which have not materially changed from the Annual Report, include revenue recognition, website and internal-use software development costs, business combinations, and income taxes. These areas require significant judgment and are subject to variability due to macroeconomic conditions[186](index=186&type=chunk)[187](index=187&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) Yelp's market risks (interest rate, foreign exchange, inflation) remain consistent with the prior fiscal year - The company's primary market risks are interest rate, foreign exchange, and inflation, which have remained consistent with the risks disclosed in the Annual Report for the year ended December 31, 2024[188](index=188&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed effective disclosure controls and no material changes in internal control as of June 30, 2025 - As of June 30, 2025, Yelp's disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level by management, including the CEO and CFO[190](index=190&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[191](index=191&type=chunk) - Management acknowledges the inherent limitations of control systems, which can only provide reasonable, not absolute, assurance against errors and fraud[192](index=192&type=chunk) [Part II. Other Information](index=39&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) Refers to legal proceedings in Note 13, with no anticipated material adverse effects from ongoing litigation - The company does not believe that the final outcome of its legal proceedings, including those arising in the ordinary course of business, will have a material effect on its business, financial position, results of operations, or cash flows[194](index=194&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for 2024 - No material changes have occurred to the risk factors outlined in the Annual Report on Form 10-K for the year ended December 31, 2024[195](index=195&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details stock repurchase activity for Q2 2025 and remaining authorization under the repurchase program | Period | Total Number of Shares Purchased (in thousands) | Average Price Paid per Share | | :----------------------- | :-------------------------------------------- | :--------------------------- | | April 1 - April 30, 2025 | 812 | $34.38 | | May 1 - May 31, 2025 | 301 | $37.78 | | June 1 - June 30, 2025 | 740 | $36.00 | - As of August 1, 2025, **$176.2 million** remained available under the **$1.95 billion** stock repurchase program[196](index=196&type=chunk) [Item 3. Defaults Upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - There were no defaults upon senior securities[197](index=197&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This disclosure item is not applicable to the company[198](index=198&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) Discloses Rule 10b5-1 trading plans by CPO and CEO in May 2025 for common stock sales - Craig Saldanha, Chief Product Officer, entered a 10b5-1 trading plan on May 14, 2025, for the sale of up to approximately **10,800** shares of common stock[199](index=199&type=chunk) - Jeremy Stoppelman, Chief Executive Officer, entered a 10b5-1 trading plan on May 19, 2025, for the sale of up to **726,200** shares of common stock held by his revocable trust[200](index=200&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including certifications, articles, bylaws, and XBRL documents - The report includes certifications pursuant to Rule 13a-14(a)/15d-14(a) (Exhibits 31.1, 31.2, 32.1†) and Inline XBRL documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[202](index=202&type=chunk) ```

[Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section highlights that the quarterly report contains forward-looking statements regarding operations, taxes, earnings, financial performance, and dividends, cautioning that these are not guarantees of future performance and are subject to known and unknown risks, assumptions, and uncertainties, advising readers not to place undue reliance on them - The report contains forward-looking statements about operations, taxes, earnings, financial performance, and dividends, which are **not guarantees of future performance**[9](index=9&type=chunk) - Readers are cautioned that **actual results may differ materially** from expectations due to difficult-to-predict risks, assumptions, and uncertainties[9](index=9&type=chunk) - The company **does not plan to publicly update or revise** any forward-looking statements unless required by applicable law[11](index=11&type=chunk) [Certain Definitions](index=3&type=section&id=CERTAIN%20DEFINITIONS) This section provides definitions for key terms used throughout the quarterly report, including 'assets under management' (AUM), 'fee-earning AUM', and specific entity names, as well as details regarding the 'Merger Agreement' with Apollo Global Management, Inc - **Assets Under Management (AUM)** includes the fair value of managed funds/vehicles, uncalled capital commitments, and fair value of managed REITs, not reduced by indebtedness[14](index=14&type=chunk) - **Fee-earning AUM** refers to assets from which the company earns management fee or other revenue[15](index=15&type=chunk) - The **Merger Agreement**, dated February 23, 2025, outlines the acquisition of the Company by Apollo Global Management, Inc. in an **all-stock transaction valued at approximately $1.5 billion**, expected to close in **Q3 2025**[15](index=15&type=chunk)[16](index=16&type=chunk)[48](index=48&type=chunk) [Part I. Financial Information](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis, and disclosures on market risk and controls [Item 1. Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements for Bridge Investment Group Holdings Inc. for the periods ended June 30, 2025, and December 31, 2024, including balance sheets, statements of operations, comprehensive income (loss), changes in equity, and cash flows, along with detailed accompanying notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The condensed consolidated balance sheets provide a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets Summary | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $72,819 | $90,599 | $(17,780) | -19.6% | | Total assets | $1,177,964 | $1,247,382 | $(69,418) | -5.6% | | Total liabilities | $723,658 | $741,482 | $(17,824) | -2.4% | | Total equity | $454,306 | $505,900 | $(51,594) | -10.2% | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The condensed consolidated statements of operations present the company's revenues, investment income (loss), expenses, and net income (loss) for the three and six months ended June 30, 2025, and 2024, highlighting a significant decrease in net income and a net loss for the six-month period in 2025 Condensed Consolidated Statements of Operations Summary | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total revenues | $96,539 | $104,760 | $192,844 | $207,549 | | Total investment income (loss) | $6,338 | $25,596 | $(1,360) | $(23,106) | | Total expenses | $96,759 | $87,098 | $212,475 | $184,027 | | Net income (loss) | $2,792 | $27,494 | $(34,810) | $(9,305) | | Net (loss) income attributable to Bridge Investment Group Holdings Inc. | $(482) | $(2,431) | $(12,657) | $7,387 | | Basic EPS | $(0.01) | $(0.11) | $(0.38) | $0.18 | | Diluted EPS | $(0.01) | $(0.11) | $(0.38) | $0.07 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) The condensed consolidated statements of comprehensive income (loss) detail the net income (loss) and other comprehensive income (loss) components, primarily foreign currency translation adjustments, for the three and six months ended June 30, 2025, and 2024 Condensed Consolidated Statements of Comprehensive Income (Loss) Summary | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------------------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net income (loss) | $2,792 | $27,494 | $(34,810) | $(9,305) | | Other comprehensive (loss) income—foreign currency translation adjustments, net of tax | $(129) | $78 | $(141) | $27 | | Total comprehensive income (loss) | $2,663 | $27,572 | $(34,951) | $(9,278) | | Comprehensive (loss) income attributable to Bridge Investment Group Holdings Inc. | $(611) | $(2,353) | $(12,798) | $7,414 | [Condensed Consolidated Statements of Changes in Equity](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) This section outlines the changes in shareholders' equity for the three and six months ended June 30, 2025, and 2024, reflecting net income/loss, exchanges of Class A Units for Class A common stock, capital contributions, share-based compensation, and distributions Condensed Consolidated Statements of Changes in Equity Summary | Metric | Balance as of December 31, 2024 (in thousands) | Net loss (in thousands) | Exchange of Class A Units for Class A common stock (in thousands) | Share-based compensation, net of forfeitures (in thousands) | Distributions (in thousands) | Dividends on Class A Common Stock/Units (in thousands) | Balance as of June 30, 2025 (in thousands) | | :------------------------------------------------- | :------------------------------------------- | :---------------------- | :------------------------------------------------ | :------------------------------------------------ | :--------------------------- | :------------------------------------------------ | :------------------------------------------- | | Class A Common Stock | $417 | — | $24 | $25 | — | — | $466 | | Class B Common Stock | $793 | — | $(20) | — | — | — | $773 | | Additional Paid-In Capital | $104,397 | — | $(4,558) | $9,643 | — | — | $113,471 | | Accumulated Deficit | $(22,449) | $(12,657) | — | — | — | $(4,889) | $(39,818) | | Accumulated Other Comprehensive Income (Loss) | $265 | — | — | — | — | — | $124 | | Non-controlling interests in Bridge Investment Group Holdings LLC | $248,365 | $(11,243) | — | $190 | $(8,283) | — | $229,361 | | Non-controlling interests in Bridge Investment Group Holdings Inc. | $174,112 | $(10,910) | — | $11,397 | $(20,263) | — | $149,929 | | **Total Equity** | **$505,900** | **$(34,810)** | **$(4,554)** | **$21,255** | **$(28,546)** | **$(4,889)** | **$454,306** | [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows provide a summary of cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024, showing a net decrease in cash for the current period Condensed Consolidated Statements of Cash Flows Summary | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | $18,058 | $68,043 | | Net cash (used in) provided by investing activities | $(2,956) | $11,469 | | Net cash used in financing activities | $(33,480) | $(61,866) | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(18,378) | $17,646 | | Cash, cash equivalents and restricted cash - end of period | $84,053 | $84,906 | [Notes to Condensed Consolidated Financial Statements](index=14&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures that are an integral part of the condensed consolidated financial statements, covering the company's organization, significant accounting policies, revenue breakdown, investment details, debt obligations, equity changes, and other financial commitments and contingencies [Note 1. Organization](index=14&type=section&id=Note%201.%20Organization) This note describes Bridge Investment Group Holdings Inc. as a leading alternative investment manager, its organizational structure, the impact of its IPO, and the details of the pending merger with Apollo Global Management, Inc., which was approved by stockholders on June 17, 2025 - Bridge Investment Group Holdings Inc. is a leading alternative investment manager diversified across specialized asset classes, with a nationwide operating platform[37](index=37&type=chunk) - The Company's principal asset is a **controlling financial interest** in Bridge Investment Group Holdings LLC (the 'Operating Company'), holding **approximately 33% economic interest** as of June 30, 2025[38](index=38&type=chunk) - On February 23, 2025, the Company entered into a **Merger Agreement** with Apollo Global Management, Inc., valued at **approximately $1.5 billion**, which was **approved by stockholders on June 17, 2025**, and is **expected to close in Q3 2025**[48](index=48&type=chunk)[56](index=56&type=chunk) [Note 2. Significant Accounting Policies](index=18&type=section&id=Note%202.%20Significant%20Accounting%20Policies) This note outlines the significant accounting policies used in preparing the condensed consolidated financial statements, including the basis of presentation, principles of consolidation for VIEs and voting interest entities, fair value measurements, revenue recognition methods for various fee types, and the impact of recently issued accounting standards - Financial statements are prepared in accordance with **GAAP for interim information**, consolidating entities where the Company has a controlling financial interest (VIEs or voting interest entities)[57](index=57&type=chunk)[59](index=59&type=chunk)[61](index=61&type=chunk) - Fair value measurements are categorized into a **three-level hierarchy (Level 1, 2, 3)** based on market price observability, with the **fair value option elected for General Partner Notes Payable**[69](index=69&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) - **Revenue is recognized when performance obligations are satisfied**, with detailed policies for fund management fees, property management, construction, development, transaction, fund administration fees, insurance premiums, and performance allocations[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[101](index=101&type=chunk) - The Company **adopted ASU 2023-07 (Segment Reporting) retrospectively as of December 31, 2024**, and is **evaluating ASU 2023-09 (Income Tax Disclosures) and ASU 2024-01 (Profits Interest)**[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) [Note 3. Revenue](index=28&type=section&id=Note%203.%20Revenue) This note disaggregates the company's revenues by significant product offerings for the three and six months ended June 30, 2025, and 2024, and discusses deferred revenues and credit losses, particularly those related to the commercial office sector Revenue Breakdown | Revenue Type | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Fund management fees | $58,465 | $61,453 | $117,773 | $122,558 | | Property management and leasing fees | $16,693 | $17,763 | $33,686 | $37,700 | | Construction management fees | $1,705 | $1,814 | $2,994 | $3,511 | | Development fees | $1,038 | $828 | $2,084 | $1,659 | | Transaction fees | $4,816 | $6,404 | $8,009 | $13,204 | | Fund administration fees | $4,845 | $4,579 | $9,705 | $9,636 | | Insurance premiums | $5,811 | $6,405 | $11,597 | $11,102 | | Other asset management and property income | $3,166 | $5,514 | $6,996 | $8,179 | | **Total revenues** | **$96,539** | **$104,760** | **$192,844** | **$207,549** | - **Deferred revenues were $11.5 million as of June 30, 2025, down from $17.3 million as of December 31, 2024**, with $15.7 million recognized as revenue during the six months ended June 30, 2025[128](index=128&type=chunk) - **Credit losses of $1.9 million were recognized for the six months ended June 30, 2025**, **primarily related to Bridge Office Fund LP (BOF I) and Bridge Office Fund II LP (BOF II)**, due to unfavorable market conditions in the commercial office sector[129](index=129&type=chunk) [Note 4. Marketable Securities](index=29&type=section&id=Note%204.%20Marketable%20Securities) This note summarizes the company's marketable securities, which primarily consist of investments in exchange-traded funds and mutual funds held by BIGRM, reported at fair value Marketable Securities Summary | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Common shares in publicly traded company | $51 | $73 | | Exchange traded funds | $1,440 | $3,157 | | Mutual funds | $13,187 | $17,889 | | **Total marketable securities** | **$14,678** | **$21,119** | [Note 5. Investments](index=29&type=section&id=Note%205.%20Investments) This note details the company's investments, including accrued performance allocations and partnership interests in company-sponsored and third-party funds, which are generally valued using the Net Asset Value (NAV) of the respective vehicles Investments Summary | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :----------------------------- | :------------------------------- | | Accrued performance allocations | $328,616 | $339,560 | | Partnership interests in Company-sponsored funds | $145,222 | $153,181 | | Investments in third-party partnerships | $16,132 | $15,364 | | Other | $13,403 | $12,615 | | **Total other investments** | **$174,757** | **$181,160** | - The Company recognized **income of $4.5 million and losses of $10.7 million** related to accrued performance allocations and other investments for the three and six months ended June 30, 2025, respectively[133](index=133&type=chunk) - Accrued performance allocations and partnership interests are **generally valued using the NAV of the respective vehicle**, with **managed funds reported on a three-month lag**[132](index=132&type=chunk)[135](index=135&type=chunk) [Note 6. Notes Receivable from Affiliates](index=30&type=section&id=Note%206.%20Notes%20Receivable%20from%20Affiliates) This note provides details on the company's notes receivable from affiliated funds and employees, including outstanding balances, weighted-average interest rates, and the recognition of credit loss expenses related to certain office funds Notes Receivable from Affiliates Summary | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Bridge Office Fund II | $18,375 | $15,800 | | Bridge Office Holdings LLC | $12,254 | $15,000 | | Bridge Single-Family Rental Fund IV | $8,454 | $4,924 | | Bridge Workforce and Affordable Housing Fund III LP | $0 | $200 | | **Total notes receivable from affiliates** | **$39,083** | **$35,924** | | Notes receivable from employees | $4,326 | $5,954 | | **Total notes receivable from affiliates (overall)** | **$43,409** | **$41,878** | - A **credit loss expense of $2.7 million (principal) and $0.7 million (interest and fees)** was recognized during the three and six months ended June 30, 2025, related to the Bridge Office Holdings LLC notes receivable[139](index=139&type=chunk) - Interest on notes receivable from affiliates accrued at a **weighted-average fixed rate of 5.39%** as of June 30, 2025[138](index=138&type=chunk) [Note 7. Fair Value Measurements](index=31&type=section&id=Note%207.%20Fair%20Value%20Measurements) This note details the company's fair value measurements, classifying assets and liabilities into a three-level hierarchy based on market price observability and explaining the valuation methods used for various financial instruments, including the use of NAV as a practical expedient for certain investments Fair Value Measurements Summary | Category | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Measured at NAV (in thousands) | Total (in thousands) | | :--------------------------------- | :--------------------- | :--------------------- | :--------------------- | :----------------------------- | :------------------- | | **June 30, 2025 Assets:** | | | | | | | Common shares in publicly traded company | $51 | — | — | — | $51 | | Exchange traded funds | $1,440 | — | — | — | $1,440 | | Mutual funds | $13,187 | — | — | — | $13,187 | | Accrued performance allocations | — | — | — | $328,616 | $328,616 | | Partnership interests | — | — | — | $161,354 | $161,354 | | Other investments | — | — | $13,403 | — | $13,403 | | **Total assets at fair value** | **$14,678** | **—** | **$13,403** | **$489,970** | **$518,051** | | **June 30, 2025 Liabilities:** | | | | | | | General Partner Notes Payable | — | — | — | $2,222 | $2,222 | - Accrued performance allocations and partnership interests are generally valued using the **NAV per share equivalent as a practical expedient**[147](index=147&type=chunk) - Fair values of private notes are estimated by discounting expected future cash outlays at **interest rates between 6.02% and 7.91%** as of June 30, 2025[153](index=153&type=chunk) [Note 8. Insurance Loss Reserves and Loss and Loss Adjustment Expenses](index=34&type=section&id=Note%208.%20Insurance%20Loss%20Reserves%20and%20Loss%20and%20Loss%20Adjustment%20Expenses) This note describes the insurance policies provided by BIGRM, a wholly-owned captive insurance subsidiary, and details the company's insurance loss reserves for property and casualty claims and self-insurance reserves for employee health benefits - BIGRM provides insurance policies for multifamily and commercial properties, covering risks like lease security deposit fulfillment, lessor legal liability, workers' compensation, property, and general liability deductibles[154](index=154&type=chunk)[158](index=158&type=chunk) - **Insurance loss reserves were $25.3 million as of June 30, 2025, and $21.3 million as of December 31, 2024**, based on estimated costs for reported and unreported claims[156](index=156&type=chunk) - **Medical self-insurance reserves for employee health benefits were $1.9 million as of June 30, 2025, and $2.8 million as of December 31, 2024**, with **stop-loss coverage for individual claims over $225,000**[157](index=157&type=chunk) [Note 9. General Partner Notes Payable](index=35&type=section&id=Note%209.%20General%20Partner%20Notes%20Payable) This note details the General Partner Notes Payable, which satisfy General Partner commitments to specific funds (BSH I GP and BMF III GP) and are measured at fair value, reflecting the related GP Lender's net asset value in the fund General Partner Notes Payable Summary | Fund | Commitment (in thousands) | Fair Value June 30, 2025 (in thousands) | Fair Value December 31, 2024 (in thousands) | | :-------------------------- | :------------------------ | :--------------------------------------- | :--------------------------------------- | | Bridge Seniors Housing Fund I | $4,775 | $2,125 | $2,681 | | Bridge Multifamily Fund III | $9,300 | $97 | $101 | | **Total** | **$14,075** | **$2,222** | **$2,782** | - The Company **elected the fair value option for General Partner Notes Payable**, with changes in value recorded in unrealized gains (losses)[159](index=159&type=chunk) [Note 10. Line of Credit](index=35&type=section&id=Note%2010.%20Line%20of%20Credit) This note provides information on the Operating Company's Credit Facility, including its $150.0 million revolving commitments, variable interest rates, financial covenants, and the fact that there was no outstanding balance as of June 30, 2025 - The Operating Company has a Credit Facility with **$150.0 million in revolving commitments**, **maturing on June 3, 2026**[162](index=162&type=chunk) - Borrowings bear interest based on a pricing grid over Term SOFR (**approximately 6.69% as of June 30, 2025**) and are subject to a quarterly unused commitment fee[163](index=163&type=chunk)[166](index=166&type=chunk) - As of June 30, 2025, there was **no outstanding balance on the Credit Facility**, and the Company was **in full compliance with all debt covenants**[166](index=166&type=chunk)[168](index=168&type=chunk) [Note 11. Notes Payable](index=36&type=section&id=Note%2011.%20Notes%20Payable) This note describes the company's Private Placement Notes, consisting of three tranches issued in 2020, 2022, and 2023, totaling $450.0 million, with various maturity dates and financial covenants - The Operating Company has **$450.0 million in Private Placement Notes**, issued in three tranches (2020, 2022, 2023), with **maturities ranging from July 2025 to March 2033**[169](index=169&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[174](index=174&type=chunk) Private Placement Notes Maturity Schedule | Year | Amount (in thousands) | | :--- | :-------------------- | | 2025 | $75,000 | | 2026 | — | | 2027 | $75,000 | | Thereafter | $300,000 | | **Total** | **$450,000** | - The Private Placement Notes contain financial covenants requiring maintenance of a **debt to EBITDA ratio, minimum liquidity, and minimum quarterly/trailing four fiscal quarters EBITDA**[172](index=172&type=chunk) [Note 12. Realized and Unrealized Gains (Losses)](index=37&type=section&id=Note%2012.%20Realized%20and%20Unrealized%20Gains%20(Losses)) This note summarizes the net realized and unrealized gains and losses on investments and other financial instruments for the three and six months ended June 30, 2025, and 2024, including those from General Partner Notes Payable Net Realized and Unrealized Gains (Losses) Summary (3 Months) | Category | 3 Months Ended June 30, 2025 (Net Realized) | 3 Months Ended June 30, 2025 (Net Unrealized) | 3 Months Ended June 30, 2024 (Net Realized) | 3 Months Ended June 30, 2024 (Net Unrealized) | | :-------------------------------- | :------------------------------------------ | :-------------------------------------------- | :------------------------------------------ | :-------------------------------------------- | | Investment in Company sponsored funds | $149 | $(2,484) | $962 | $(1,358) | | Investment in third-party partnerships | $(119) | $218 | $(117) | $(2,857) | | Other investments | $0 | $14 | $0 | $0 | | General Partner Notes Payable | $0 | $405 | $0 | $98 | | **Total realized and unrealized gains (losses), net** | **$30** | **$(1,847)** | **$845** | **$(4,117)** | Net Realized and Unrealized Gains (Losses) Summary (6 Months) | Category | 6 Months Ended June 30, 2025 (Net Realized) | 6 Months Ended June 30, 2025 (Net Unrealized) | 6 Months Ended June 30, 2024 (Net Realized) | 6 Months Ended June 30, 2024 (Net Unrealized) | | :-------------------------------- | :------------------------------------------ | :-------------------------------------------- | :------------------------------------------ | :-------------------------------------------- | | Investment in Company sponsored funds | $6 | $(9,637) | $(850) | $(8,688) | | Investment in third-party partnerships | $(194) | $82 | $(262) | $208 | | Other investments | $0 | $14 | $0 | $1,785 | | General Partner Notes Payable | $0 | $403 | $0 | $0 | | **Total realized and unrealized losses, net** | **$(188)** | **$(9,138)** | **$(1,112)** | **$(6,695)** | [Note 13. Income Taxes](index=37&type=section&id=Note%2013.%20Income%20Taxes) This note explains the company's income tax accounting, including its status as a corporation for U.S. federal income tax purposes, the deferred tax asset and liability related to the Tax Receivable Agreement (TRA), and the use of the discrete effective tax rate method for interim reporting - The Company is **taxed as a corporation for U.S. federal and state income tax purposes**, while the Operating Company and most subsidiaries are treated as partnerships[178](index=178&type=chunk)[179](index=179&type=chunk) - The **deferred income tax asset related to the TRA was $76.8 million and the corresponding TRA liability was $78.2 million** as of June 30, 2025, an increase from December 31, 2024[180](index=180&type=chunk) - The Company utilized the **discrete effective tax rate method** for the three and six months ended June 30, 2025, due to uncertainty in estimating the annual effective tax rate[182](index=182&type=chunk) [Note 14. Shareholders' Equity](index=38&type=section&id=Note%2014.%20Shareholders'%20Equity) This note details the changes in shareholders' equity, including the impact of the IPO, redemptions of non-controlling interests, activity in Class A and Class B common stock, and dividend declarations for Class A common stockholders - As of June 30, 2025, **46,570,329 shares of Class A common stock and 77,322,973 shares of Class B common stock were outstanding**[190](index=190&type=chunk) - During the six months ended June 30, 2025, **2,483,658 Class A Units were redeemed for Class A common stock on a one-for-one basis**[188](index=188&type=chunk) Dividends on Class A Common Stock/Units | Dividend Record Date | Dividend Payment Date | Dividend per Share of Common Stock | Dividend to Common Stockholders (in thousands) | | :------------------- | :-------------------- | :--------------------------------- | :------------------------------------------- | | March 14, 2025 | March 28, 2025 | $0.11 | $4,889 | | **Total (H1 2025)** | | **$0.11** | **$4,889** | | March 8, 2024 | March 22, 2024 | $0.07 | $2,582 | | May 31, 2024 | June 14, 2024 | $0.12 | $4,972 | | **Total (H1 2024)** | | **$0.19** | **$7,554** | [Note 15. Commitments and Contingencies](index=41&type=section&id=Note%2015.%20Commitments%20and%20Contingencies) This note discloses the company's operating lease liabilities, potential clawback obligations for performance income, ongoing legal matters, standby letters of credit, and various indemnification and other guarantees Operating Lease Liabilities | Year | Amount (in thousands) | | :--- | :-------------------- | | 2025 (excluding the six months ended June 30, 2025) | $2,538 | | 2026 | $4,662 | | 2027 | $4,000 | | 2028 | $1,430 | | 2029 | $1,308 | | Thereafter | $4,275 | | **Total lease liabilities** | **$18,213** | | Less: Imputed interest | $(2,630) | | **Total operating lease liabilities** | **$15,583** | - If all existing investments were worthless, the **performance income subject to potential repayment by Bridge GPs, net of tax distributions, would be approximately $203.2 million** as of June 30, 2025, with **$159.5 million reimbursable by certain professionals**[201](index=201&type=chunk) - The Company is party to certain legal claims and has **guaranteed standby letters of credit totaling $10.1 million** for its self-insurance program and $0.4 million for an operating lease[202](index=202&type=chunk)[203](index=203&type=chunk) [Note 16. Variable Interest Entities](index=43&type=section&id=Note%2016.%20Variable%20Interest%20Entities) This note explains the company's involvement with Variable Interest Entities (VIEs), its consolidation policies, and the maximum exposure to loss from unconsolidated sponsored private funds - The Company sponsors private funds as general partner, which are considered VIEs due to limited partners lacking substantive liquidation or kick-out rights[207](index=207&type=chunk) - The Company does not consolidate sponsored private funds where it has insignificant direct equity interests, accounting for them under the equity method[208](index=208&type=chunk) - The **maximum exposure to loss from unconsolidated private funds was $161.4 million** as of June 30, 2025[208](index=208&type=chunk) [Note 17. Related Party Transactions](index=43&type=section&id=Note%2017.%20Related%20Party%20Transactions) This note details the company's related party transactions, including receivables from affiliates for various fees and reimbursements, notes receivable from affiliates and employees, and payables due to affiliates in connection with the Tax Receivable Agreement (TRA) Receivables from Affiliates | Category | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------------------- | :----------------------------- | :------------------------------- | | Fees receivable from non-consolidated funds | $12,716 | $35,246 | | Payments made on behalf of and amounts due from non-consolidated entities | $22,999 | $19,066 | | **Total receivables from affiliates** | **$35,715** | **$54,312** | - **Total notes receivable from affiliates were $43.4 million** as of June 30, 2025[215](index=215&type=chunk) - **Accrued due to affiliates was $78.2 million** as of June 30, 2025, primarily in connection with the Tax Receivable Agreement (TRA)[216](index=216&type=chunk) [Note 18. Share-Based Compensation and Profits Interests](index=44&type=section&id=Note%2018.%20Share-Based%20Compensation%20and%20Profits%20Interests) This note describes the company's share-based compensation plans, including Restricted Stock, Restricted Stock Units (RSUs), and profits interests awards, detailing their vesting schedules, valuation methods, and the associated compensation expense - The **2021 Incentive Award Plan reserved 6,600,000 shares of Class A common stock, increasing to 16,918,559 shares as of January 1, 2025, with 5,700,455 shares remaining available for future grants**[218](index=218&type=chunk) Share-Based Compensation Expense | Category | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Profits interests award shares | $2,305 | $2,721 | $4,638 | $5,879 | | Restricted Stock and RSUs | $7,700 | $10,011 | $16,617 | $18,663 | | **Total share-based compensation** | **$10,005** | **$12,732** | **$21,255** | **$24,542** | - As of June 30, 2025, the aggregate **unrecognized compensation cost for all unvested Restricted Stock, RSU, and profits interests awards was $57.6 million**, expected to be recognized over a **weighted-average period of 1.8 to 2.0 years**[223](index=223&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk) [Note 19. (Loss) Earnings Per Share](index=47&type=section&id=Note%2019.%20(Loss)%20Earnings%20Per%20Share) This note presents the calculation of basic and diluted earnings (loss) per share for Class A common stock, considering net income (loss) attributable to Bridge Investment Group Holdings Inc. and the impact of participating securities Earnings Per Share Summary | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net (loss) income attributable to Bridge Investment Group Holdings Inc. | $(482) | $(2,431) | $(12,657) | $7,387 | | Basic EPS | $(0.01) | $(0.11) | $(0.38) | $0.18 | | Diluted EPS | $(0.01) | $(0.11) | $(0.38) | $0.07 | | Weighted-average shares of Class A common stock outstanding (Basic) | 35,889,995 | 32,461,347 | 35,602,217 | 31,902,163 | | Weighted-average shares of Class A common stock outstanding (Diluted) | 35,889,995 | 32,461,347 | 35,602,217 | 128,679,597 | - **Basic and diluted EPS for Class A common stock were $(0.01) for the three months ended June 30, 2025, and $(0.38) for the six months ended June 30, 2025**[228](index=228&type=chunk) [Note 20. Segment Reporting](index=48&type=section&id=Note%2020.%20Segment%20Reporting) This note states that Bridge operates as a single reportable and operating segment, an alternative investment manager, and provides a breakdown of consolidated expenses reviewed by the chief operating decision maker - The Company operates as **one reportable and operating segment: an alternative investment manager**[231](index=231&type=chunk) - The **chief operating decision maker (executive chairman) uses a consolidated approach** to assess financial performance and allocate resources[231](index=231&type=chunk) [Note 21. Subsequent Events](index=48&type=section&id=Note%2021.%20Subsequent%20Events) This note discloses significant events occurring after June 30, 2025, including the repayment of $75.0 million on 2020 Private Placement Notes, a change in management fee basis for Bridge Multifamily Fund V, the signing of the One Big Beautiful Bill Act (OBBBA), and the granting of RSUs to management - On July 22, 2025, **$75.0 million of principal on the 2020 Private Placement Notes was repaid** using proceeds from the Credit Facility[234](index=234&type=chunk) - Bridge Multifamily Fund V's management fee basis converted from committed to invested capital in July 2025, expected to reduce quarterly fund management fees by **approximately $2.0 million**[234](index=234&type=chunk) - On August 5, 2025, **2,575,429 RSUs were granted to certain management members, vesting over four years post-merger closing**[236](index=236&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, including an overview of the business, recent events, trends affecting the business, key financial measures, operating metrics, and a detailed comparative analysis of financial performance for the three and six months ended June 30, 2025, and 2024 [Overview](index=49&type=section&id=Overview) The overview introduces Bridge Investment Group as a leading alternative investment manager with approximately $50.2 billion in AUM as of June 30, 2025, diversified across specialized asset classes, and highlights its vertically integrated structure and growth driven by strong investment returns - Bridge Investment Group is a leading alternative investment manager with **approximately $50.2 billion of AUM** as of June 30, 2025[238](index=238&type=chunk) - The company is diversified across specialized asset classes including real estate, credit, renewable energy, and secondaries strategies, utilizing a nationwide operating platform[238](index=238&type=chunk) [Business Segment](index=49&type=section&id=Business%20Segment) This section reiterates that the company operates as a single, fully integrated alternative investment manager, with the executive chairman serving as the chief operating decision maker who uses a consolidated approach to assess financial performance - The Company operates as **one business segment**, a fully integrated alternative investment manager[239](index=239&type=chunk) [Recent Events](index=49&type=section&id=Recent%20Events) This section highlights the significant recent event of the Merger Agreement with Apollo Global Management, Inc., which was approved by stockholders on June 17, 2025, and is expected to close in the third quarter of 2025 - On February 23, 2025, the Company entered into a Merger Agreement with Apollo Global Management, Inc. for an **all-stock transaction valued at approximately $1.5 billion**[240](index=240&type=chunk) - **Stockholders approved the Merger Proposal on June 17, 2025**, and the Mergers are **expected to close in the third quarter of 2025**[240](index=240&type=chunk)[241](index=241&type=chunk) [Trends Affecting Our Business](index=50&type=section&id=Trends%20Affecting%20Our%20Business) This section discusses various factors affecting the company's business, including global economic conditions, financial markets, and regulatory policies, emphasizing the importance of attracting new capital, generating strong returns, sourcing attractive investments, and maintaining a data advantage - Business performance is affected by financial markets, economic, and political conditions, with future performance dependent on attracting new capital, generating strong returns, sourcing attractive investments, and offering appealing products[244](index=244&type=chunk)[245](index=245&type=chunk)[249](index=249&type=chunk) - Ongoing economic headwinds, particularly in the **commercial office sector (2% of AUM)**, have led to the **cessation of fund management fees for Bridge Office Fund LP (BOF I) and reserving fees for Bridge Office Fund II LP (BOF II)**[245](index=245&type=chunk) - The company recognized a **credit loss expense of $2.7 million (principal) and $0.7 million (interest and fees) during Q2 2025** related to an unsecured loan to a subsidiary of BOF I[245](index=245&type=chunk) [Key Financial Measures](index=51&type=section&id=Key%20Financial%20Measures) This section defines and explains the company's key financial and operating measures, including various revenue streams (fund management, property management, construction, development, transaction, fund administration, insurance premiums, other asset management, performance fees) and expense categories (employee compensation, performance allocations compensation, loss and loss adjustment, third-party operating, general and administrative, depreciation and amortization, other income/expense, interest income/expense, income tax expense, net income attributable to non-controlling interests) - Fund management fees are generally based on a defined percentage of total commitments, invested capital, or NAV, with a **weighted-average management fee of 1.34%** as of June 30, 2025[250](index=250&type=chunk) - Performance fees include incentive fees and performance allocations (carried interest), with **approximately $18.0 billion of carry-eligible fee-earning AUM across 58 funds** as of June 30, 2025[257](index=257&type=chunk) - Employee compensation and benefits include salaries, bonuses, share-based compensation (Restricted Stock, RSUs, profits interests), and related benefits[262](index=262&type=chunk)[263](index=263&type=chunk) - General and administrative expenses cover professional services, occupancy, travel, communication, information services, and transaction costs[267](index=267&type=chunk) [Operating Metrics](index=55&type=section&id=Operating%20Metrics) This section presents key operating metrics, including Assets Under Management (AUM), Fee-Earning AUM, and Undeployed Capital, along with a summary of historical investment performance for closed-end funds by platform Assets Under Management (AUM) Evolution | Metric | 3 Months Ended June 30, 2025 (in millions) | 3 Months Ended June 30, 2024 (in millions) | 6 Months Ended June 30, 2025 (in millions) | 6 Months Ended June 30, 2024 (in millions) | | :-------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | AUM as of beginning of period | $49,350 | $48,029 | $49,845 | $47,702 | | New capital / commitments raised | $471 | $302 | $687 | $455 | | Distributions / return of capital | $(600) | $(431) | $(1,131) | $(770) | | Change in fair value and acquisitions | $1,010 | $1,025 | $830 | $1,538 | | **AUM as of end of period** | **$50,231** | **$48,925** | **$50,231** | **$48,925** | | Increase % | 1.8% | 1.9% | 0.8% | 2.6% | Fee-Earning AUM Evolution | Metric | 3 Months Ended June 30, 2025 (in millions) | 3 Months Ended June 30, 2024 (in millions) | 6 Months Ended June 30, 2025 (in millions) | 6 Months Ended June 30, 2024 (in millions) | | :-------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Fee-earning AUM as of beginning of period | $21,982 | $21,953 | $22,306 | $21,703 | | Increases (capital raised/deployment) | $209 | $127 | $606 | $502 | | Changes in fair market value | $5 | $10 | $11 | $33 | | Decreases (liquidations/other) | $(292) | $(605) | $(1,019) | $(753) | | **Fee-earning AUM as of end of period** | **$21,904** | **$21,485** | **$21,904** | **$21,485** | | Decrease % | (0.4)% | (2.1)% | (1.8)% | (1.0)% | - As of June 30, 2025, the company had **$3.2 billion of undeployed capital**, with **$1.5 billion currently fee-earning** and **$1.7 billion becoming fee-earning upon deployment**[286](index=286&type=chunk) [Results of Operations](index=62&type=section&id=Results%20of%20Operations) This section provides a detailed comparative analysis of the company's financial performance, including revenues, investment income (loss), expenses, and other income (expense), for the three and six months ended June 30, 2025, versus the corresponding periods in 2024 [Three Months Ended June 30, 2025 Compared to the Three Months Ended June 30, 2024](index=62&type=section&id=Three%20Months%20Ended%20June%2030,%202025%20Compared%20to%20the%20Three%20Months%20Ended%20June%2030,%202024) For the three months ended June 30, 2025, total revenues decreased by 8% to $96.5 million, total investment income decreased by 75% to $6.3 million, and total expenses increased by 11% to $96.8 million, resulting in a net income of $2.8 million, down from $27.5 million in the prior year - **Total revenues decreased by $8.2 million (8%) to $96.5 million for Q2 2025**, primarily due to decreases in fund management fees, property management and leasing fees, transaction fees, and other asset management income[294](index=294&type=chunk) - **Total investment income decreased by $19.3 million (75%) to $6.3 million**, driven by a **$17.1 million decrease in unrealized performance allocations**, reflecting underlying market fundamentals[301](index=301&type=chunk)[303](index=303&type=chunk) - **Total expenses increased by $9.7 million (11%) to $96.8 million**, largely due to an **$8.8 million (94%) increase in general and administrative expenses**, including **$4.7 million in merger-related transaction costs and a $3.5 million credit loss write-off**[304](index=304&type=chunk)[308](index=308&type=chunk) [Six Months Ended June 30, 2025 Compared to the Six Months Ended June 30, 2024](index=66&type=section&id=Six%20Months%20Ended%20June%2030,%202025%20Compared%20to%20the%20Six%20Months%20Ended%20June%2030,%202024) For the six months ended June 30, 2025, total revenues decreased by 7% to $192.8 million, total investment loss improved significantly from $(23.1) million to $(1.4) million, and total expenses increased by 15% to $212.5 million, resulting in a net loss of $(34.8) million, compared to a net loss of $(9.3) million in the prior year - **Total revenues decreased by $14.7 million (7%) to $192.8 million for H1 2025**, primarily due to decreases in fund management fees, property management and leasing fees, and transaction fees[314](index=314&type=chunk) - **Total investment loss improved by $21.7 million (94%) to $(1.4) million**, driven by a **$32.2 million increase in unrealized performance allocations**, reflecting underlying market fundamentals[321](index=321&type=chunk)[323](index=323&type=chunk) - **Total expenses increased by $28.4 million (15%) to $212.5 million**, largely due to a **$25.6 million (123%) increase in general and administrative expenses**, including **$22.8 million in merger-related transaction costs and a $3.5 million credit loss write-off**[324](index=324&type=chunk)[328](index=328&type=chunk) [Non-GAAP Financial Measures](index=70&type=section&id=Non-GAAP%20financial%20measures) This section explains the company's use of non-GAAP financial measures, including Distributable Earnings, Fee Related Earnings, Fee Related Revenues, and Fee Related Expenses, providing their definitions and reconciliations to the most directly comparable GAAP financial measures - **Distributable Earnings is a key performance measure** used by management, excluding depreciation, amortization, unrealized performance allocations, share-based compensation, and non-recurring items from GAAP net income before taxes[337](index=337&type=chunk)[338](index=338&type=chunk) - **Fee Related Earnings (FRE) assesses profitability from recurring fee-based revenues**, adjusting Distributable Earnings to exclude realized performance allocations, net insurance income, investment earnings, and net interest[339](index=339&type=chunk) Non-GAAP Financial Measures Summary | Metric | 3 Months Ended June 30, 2025 (in thousands) | 3 Months Ended June 30, 2024 (in thousands) | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Total Fee Related Earnings attributable to the Operating Company | $27,970 | $35,883 | $52,538 | $69,827 | | Distributable Earnings attributable to the Operating Company | $25,725 | $35,487 | $42,704 | $67,660 | [Liquidity and Capital Resources](index=76&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity needs, sources of cash, and capital structure, including a summary of cash flows from operating, investing, and financing activities, and details regarding its corporate credit facilities and private placement notes [Summary of Cash Flows](index=77&type=section&id=Summary%20of%20Cash%20Flows) This sub-section provides a summary table of the company's net cash flows from operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 Summary of Cash Flows | Metric | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | | :-------------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | $18,058 | $68,043 | | Net cash (used in) provided by investing activities | $(2,956) | $11,469 | | Net cash used in financing activities | $(33,480) | $(61,866) | | **Net (decrease) increase in cash, cash equivalents, and restricted cash** | **$(18,378)** | **$17,646** | [Operating Activities](index=77&type=section&id=Operating%20Activities) Cash provided by operating activities was $18.1 million for the six months ended June 30, 2025, primarily driven by adjustments for non-cash items, offset by a net loss and cash used for operating assets and liabilities - **Net cash provided by operating activities was $18.1 million for H1 2025, a decrease from $68.0 million in H1 2024**[358](index=358&type=chunk)[360](index=360&type=chunk) - H1 2025 operating cash flow was driven by **$60.2 million in non-cash adjustments** (including share-based compensation, unrealized performance allocations reversal, equity in income of investments, depreciation, and credit losses) offset by a **$34.8 million net loss**[360](index=360&type=chunk) [Investing Activities](index=77&type=section&id=Investing%20Activities) Net cash used in investing activities was $3.0 million for the six months ended June 30, 2025, primarily due to issuances of notes receivable and purchases of investments, partially offset by collections on notes and marketable securities sales - **Net cash used in investing activities was $3.0 million for H1 2025, compared to $11.5 million provided by investing activities in H1 2024**[358](index=358&type=chunk)[363](index=363&type=chunk) - H1 2025 investing activities included **$17.3 million in notes receivable issuances and $9.0 million in investment purchases**, partially offset by **$11.3 million from notes receivable collections and $10.8 million from marketable securities sales**[363](index=363&type=chunk) [Financing Activities](index=77&type=section&id=Financing%20Activities) Net cash used in financing activities was $33.5 million for the six months ended June 30, 2025, primarily due to distributions to non-controlling interests and dividends paid on Class A common stock - **Net cash used in financing activities was $33.5 million for H1 2025, compared to $61.9 million used in H1 2024**[358](index=358&type=chunk)[366](index=366&type=chunk) - H1 2025 financing outflows included **$28.5 million in distributions to non-controlling interests and $4.9 million in dividends paid on Class A common stock**[366](index=366&type=chunk) [Corporate Credit Facilities](index=78&type=section&id=Corporate%20Credit%20Facilities) This sub-section details the Operating Company's Credit Facility, including its $150.0 million revolving commitments, variable interest rates, and financial covenants, noting full availability as of June 30, 2025, and a subsequent $75.0 million draw for debt repayment - The Operating Company has a Credit Facility with **$150.0 million in revolving commitments**, bearing interest based on Term SOFR (**approx. 6.69% as of June 30, 2025**)[370](index=370&type=chunk)[371](index=371&type=chunk)[373](index=373&type=chunk) - As of June 30, 2025, the Company had **full availability on the Credit Facility** and was **in full compliance with all debt covenants**[373](index=373&type=chunk)[378](index=378&type=chunk) - On July 21, 2025, the Company **drew $75.0 million from the Credit Facility to repay principal on the 2020 Private Placement Notes**[373](index=373&type=chunk) [Private Placement Notes](index=78&type=section&id=Private%20Placement%20Notes) This sub-section describes the Operating Company's $450.0 million in Private Placement Notes, issued in three tranches with varying interest rates and maturity dates, and outlines the associated financial covenants - The Operating Company has **$450.0 million in Private Placement Notes**, issued in 2020, 2022, and 2023, with maturities ranging from July 2025 to March 2033[374](index=374&type=chunk)[375](index=375&type=chunk)[376](index=376&type=chunk) - The notes carry **fixed interest rates between 3.90% and 6.10%** and are subject to covenants limiting indebtedness, liens, mergers, and requiring maintenance of specific debt to EBITDA and liquidity ratios[374](index=374&type=chunk)[376](index=376&type=chunk)[377](index=377&type=chunk) [Debt Covenants](index=79&type=section&id=Debt%20Covenants) This section confirms that the company was in full compliance with all debt covenants for both its Credit Facility and Private Placement Notes as of June 30, 2025, and December 31, 2024 - The Company was **in full compliance with all debt covenants as of June 30, 2025, and December 31, 2024**[378](index=378&type=chunk) [Critical Accounting Estimates](index=79&type=section&id=Critical%20Accounting%20Estimates) This section states that there have been no significant changes in the company's critical accounting estimates during the quarter ended June 30, 2025 - **No significant changes in critical accounting estimates occurred during the quarter ended June 30, 2025**[380](index=380&type=chunk) [Recent Accounting Pronouncements](index=79&type=section&id=Recent%20Accounting%20Pronouncements) This section refers readers to Note 2, 'Significant Accounting Policies,' for a discussion of new accounting pronouncements that have been recently adopted or are not yet adopted by the company - For a discussion of new accounting pronouncements, refer to Note 2, 'Significant Accounting Policies,' in the condensed consolidated financial statements[381](index=381&type=chunk) [JOBS Act](index=79&type=section&id=JOBS%20Act) This section explains the company's status as an emerging growth company under the JOBS Act, which allows it to take advantage of an extended transition period for complying with new or revised accounting standards and other exemptions - The Company is an emerging growth company under the JOBS Act, allowing it to use an extended transition period for new or revised accounting standards[382](index=382&type=chunk) - The Company intends to rely on exemptions provided by the JOBS Act, including not complying with auditor attestation requirements of Section 404(b) of Sarbanes-Oxley[382](index=382&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=80&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to various financial market risks, including market risk, interest rate risk, credit and counterparty risk, liquidity risk, and foreign exchange rate risk, and how these risks are managed or mitigated - The company is exposed to market risk primarily through its role as general partner or investment manager for specialized funds, affecting equity in income of affiliates[385](index=385&type=chunk) - Interest rate risk is limited, with most cash in interest-bearing accounts and the Credit Facility bearing variable interest over Term SOFR; no derivative financial instruments are used for interest rate risk management[386](index=386&type=chunk) - Credit and counterparty risk is managed by **limiting financial transactions to reputable financial institutions**[387](index=387&type=chunk) - Foreign exchange rate risk is **not expected to materially impact financial statements** due to **insignificant foreign assets or transactions in non-U.S. dollar currencies**[388](index=388&type=chunk) [Item 4. Controls and Procedures](index=80&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures, concluding they were effective at a reasonable assurance level as of June 30, 2025, and states that there have been no material changes in internal control over financial reporting - Management, with the participation of the principal executive and financial officers, concluded that **disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025**[390](index=390&type=chunk) - There have been **no material changes in internal control over financial reporting** during the three months ended June 30, 2025[391](index=391&type=chunk) [Part II. Other Information](index=82&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and a list of exhibits [Item 1. Legal Proceedings](index=82&type=section&id=Item%201.%20Legal%20Proceedings) This section discloses that the company is involved in various legal claims and proceedings in the ordinary course of business, including two lawsuits and eleven stockholder demands related to alleged omissions in the merger proxy statement, which the company addressed by filing supplemental information - The company is party to various claims and legal actions in the ordinary course of business, **not expected to have a material adverse effect**[394](index=394&type=chunk) - **Two lawsuits and eleven stockholder demands were filed alleging material omissions or misstatements in the merger proxy statement**, which the company addressed by **filed supplemental information on June 11, 2025**[395](index=395&type=chunk) [Item 1A. Risk Factors](index=82&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes from the risk factors previously disclosed in the company's annual report on Form 10-K for the fiscal year ended December 31, 2024 - **No material changes from the risk factors previously disclosed** in the annual report on Form 10-K for the fiscal year ended December 31, 2024[396](index=396&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=82&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports that there were no unregistered equity securities sold from April 1, 2025, to June 30, 2025, other than those previously disclosed in current reports on Form 8-K - **No unregistered equity securities were sold** from April 1, 2025, to June 30, 2025, beyond what was previously disclosed[397](index=397&type=chunk) [Item 3. Defaults Upon Senior Securities](index=82&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reporting period - **There were no defaults upon senior securities**[398](index=398&type=chunk) [Item 4. Mine Safety Disclosures](index=82&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that the disclosure requirements for mine safety are not applicable to the company [Item 5. Other Information](index=82&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report under this item [Item 6. Exhibits](index=83&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including the Agreement and Plan of Merger, Amended and Restated Certificate of Incorporation and Bylaws, Second Amended and Restated Tax Receivable Agreement, and various certifications - Key exhibits include the **Agreement and Plan of Merger (2.1), Amended and Restated Certificate of Incorporation (3.1) and Bylaws (3.2), Second Amended and Restated Tax Receivable Agreement (10.1), and CEO/CFO certifications (31.1, 31.2, 32.1, 32.2)**[401](index=401&type=chunk) [Signatures](index=84&type=section&id=SIGNATURES) This section contains the required signatures of the Chief Executive Officer and Chief Financial Officer, certifying the Form 10-Q report as of August 8, 2025 - The report is signed by **Jonathan Slager, Chief Executive Officer, and Katherine Elsnab, Chief Financial Officer, on August 8, 2025**[407](index=407&type=chunk)

PART I: FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents The Wendy's Company's unaudited condensed consolidated financial statements for the quarterly period ended June 29, 2025, including Balance Sheets, Statements of Operations, Comprehensive Income, Stockholders' Equity, and Cash Flows, along with detailed notes explaining the basis of presentation and key accounting policies [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 29, 2025, total assets decreased to **$4.89 billion** from **$5.03 billion** at year-end 2024, primarily due to a reduction in cash and cash equivalents, while total liabilities remained relatively stable at **$4.78 billion**, and total stockholders' equity decreased significantly from **$259.4 million** to **$112.9 million**, driven by treasury stock repurchases Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$4,894,148** | **$5,034,843** | | Cash and cash equivalents | $281,226 | $450,512 | | **Total Liabilities** | **$4,781,260** | **$4,775,491** | | Long-term debt | $2,650,907 | $2,662,130 | | **Total Stockholders' Equity** | **$112,888** | **$259,352** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the second quarter of 2025, total revenues slightly decreased to **$560.9 million** compared to **$570.7 million** in Q2 2024, yet operating profit increased to **$104.3 million** from **$99.5 million**, and net income was stable at **$55.1 million**, with diluted EPS rising to **$0.29** from **$0.27** year-over-year Q2 and H1 2025 vs 2024 Performance (in thousands, except EPS) | Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $560,929 | $570,727 | $1,084,401 | $1,105,480 | | Operating Profit | $104,260 | $99,507 | $187,386 | $180,663 | | Net Income | $55,110 | $54,643 | $94,342 | $96,636 | | Diluted EPS | $0.29 | $0.27 | $0.48 | $0.47 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 29, 2025, net cash from operating activities was stable at **$146.0 million**, cash used in investing activities increased to **$52.3 million**, and cash used in financing activities significantly increased to **$272.7 million**, primarily due to a large increase in common stock repurchases (**$186.5 million** in 2025 vs. **$34.2 million** in 2024), resulting in a net decrease in cash of **$173.5 million** Six Months Ended Cash Flow Summary (in thousands) | Cash Flow Activity | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $146,008 | $145,463 | | Net cash used in investing activities | ($52,264) | ($43,958) | | Net cash used in financing activities | ($272,687) | ($162,382) | | Net decrease in cash | ($173,506) | ($64,175) | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on key financial statement components, outlining the basis of presentation, disaggregating revenue by segment, detailing lease accounting, long-term debt structure, stockholder equity activities including dividends and repurchases, and providing segment-level financial performance - The company's business is managed and reported in three segments: Wendy's U.S., Wendy's International, and Global Real Estate & Development[25](index=25&type=chunk) Total Revenues by Segment - Q2 2025 (in thousands) | Segment | Q2 2025 Revenue | | :--- | :--- | | Wendy's U.S. | $461,142 | | Wendy's International | $38,850 | | Global Real Estate & Development | $60,937 | | **Total** | **$560,929** | - During Q1 and Q2 2025, the company paid dividends of **$0.25** and **$0.14 per share**, respectively[66](index=66&type=chunk) - In the first six months of 2025, the company repurchased **12,957 thousand shares** for an aggregate price of **$186.0 million** under its January 2023 authorization, leaving **$49.0 million** available[67](index=67&type=chunk) [Management's Discussion and Analysis (MD&A)](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for the second quarter and first half of 2025, covering a slight decrease in global systemwide sales and revenues, segment performance, revenue and expense fluctuations, and an overview of liquidity, capital resources, and cash flows [Executive Overview and Key Business Measures](index=28&type=section&id=Executive%20Overview%20and%20Key%20Business%20Measures) As of June 29, 2025, the Wendy's system comprised **7,334 restaurants**, with approximately **5%** being company-operated, and management tracks performance using key metrics such as Same-Restaurant Sales, Company-Operated Restaurant Margin, and Systemwide Sales - As of June 29, 2025, the Wendy's system had **7,334 restaurants**, with **5,967** in the U.S. and **1,367** internationally[119](index=119&type=chunk) - Key business measures used by management include **Same-Restaurant Sales**, **Company-Operated Restaurant Margin**, and **Systemwide Sales**[123](index=123&type=chunk)[124](index=124&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) In Q2 2025, revenues decreased **1.7%** to **$560.9 million**, and global same-restaurant sales fell **2.9%**, driven by a **3.6%** decline in the U.S. despite a **1.8%** increase internationally, primarily due to lower traffic partially offset by a higher average check Same-Restaurant Sales Growth - Q2 2025 vs Q2 2024 | Region/Type | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | U.S. Systemwide | (3.6)% | 0.6% | | International | 1.8% | 2.5% | | **Global Systemwide** | **(2.9)%** | **0.8%** | - The decrease in sales for company-operated restaurants was primarily due to a decrease in traffic, partially offset by a higher average check[140](index=140&type=chunk) - Cost of sales as a percentage of sales increased in Q2 2025, driven by higher commodity costs and restaurant labor rates, which was partially offset by labor efficiencies and higher average check[146](index=146&type=chunk) [Segment Information](index=37&type=section&id=Segment%20Information) In Q2 2025, Wendy's U.S. segment revenues declined to **$461.1 million** but profit slightly increased to **$137.2 million**, while Wendy's International segment saw revenue growth to **$38.9 million** and profit increase to **$13.2 million**, and Global Real Estate & Development segment's revenue and profit both slightly decreased Segment Profit (Adjusted EBITDA) - Q2 2025 vs Q2 2024 (in millions) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Wendy's U.S. | $137.2 | $136.7 | | Wendy's International | $13.2 | $10.7 | | Global Real Estate & Development | $27.3 | $28.2 | [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 29, 2025, the company held **$330.1 million** in cash, cash equivalents, and restricted cash, with management believing current cash and operating cash flows are sufficient for the next 12 months, despite significant cash used in financing activities due to **$186.0 million** in stock repurchases and **$76.2 million** in dividends - The company repurchased **13.0 million shares** for **$186.0 million** in the first six months of 2025[170](index=170&type=chunk) - Dividends paid in the first half of 2025 totaled **$76.2 million**[171](index=171&type=chunk) - The significant increase in cash used in financing activities was primarily due to a **$152.3 million** increase in common stock repurchases compared to the prior year[177](index=177&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports that as of June 29, 2025, there have been no material changes to the market risk information previously disclosed in its Annual Report on Form 10-K for the fiscal year ended December 29, 2024 - There were no material changes from the market risk information contained in the Company's Form 10-K for the fiscal year ended December 29, 2024[180](index=180&type=chunk) [Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the Interim CEO and CFO, concluded the company's disclosure controls and procedures were effective as of June 29, 2025, with no material changes in internal control over financial reporting during the second quarter of 2025 - Based on evaluations, the Interim CEO and CFO concluded that as of June 29, 2025, the company's disclosure controls and procedures were effective at a reasonable assurance level[181](index=181&type=chunk) - No changes in internal control over financial reporting occurred during the second quarter of 2025 that materially affected, or are reasonably likely to materially affect, its internal control[182](index=182&type=chunk) PART II: OTHER INFORMATION [Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various litigation and claims incidental to its business, for which management believes it has established adequate accruals, though an aggregate possible range of loss cannot be estimated due to the preliminary stage of many proceedings - The Company believes it has adequate accruals for all of its legal and environmental matters but cannot estimate the aggregate possible range of loss for existing litigation and claims[186](index=186&type=chunk) [Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) The company states that there have been no material changes from the risk factors that were previously disclosed in its Annual Report on Form 10-K - There have been no material changes from the risk factors previously disclosed in the Company's Form 10-K[187](index=187&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchases during the second quarter of 2025, with **4.78 million shares** repurchased at an average price of **$12.97 per share**, leaving **$49.0 million** available under the existing plan Share Repurchases in Q2 2025 | Period | Total Shares Purchased | Average Price Paid per Share | Value Remaining Under Plan | | :--- | :--- | :--- | :--- | | **Total Q2 2025** | **4,777,483** | **$12.97** | **$49,037,650** | - The Board of Directors authorized a **$500.0 million** repurchase program in January 2023, effective through February 28, 2027[192](index=192&type=chunk) [Exhibits](index=44&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including a marketing consulting agreement and certifications from the Interim CEO and CFO as required by the Sarbanes-Oxley Act - Exhibits filed include a Marketing Consulting Agreement, CEO/CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and financial data in Inline XBRL format[193](index=193&type=chunk)

[Part I - Financial Information](index=5&type=section&id=Part%20I%20-%20Financial%20Information) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) The unaudited financial statements show a significant cash increase post-IPO, strong revenue growth, and a narrowing net loss, reflecting the conversion of preferred stock [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet reflects a substantial increase in assets and a shift to positive stockholders' equity, driven by IPO proceeds Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $223,146 | $76,392 | | Total current assets | $271,105 | $113,059 | | Total assets | $302,971 | $150,892 | | Total current liabilities | $57,988 | $53,953 | | Total liabilities | $88,757 | $86,261 | | Total stockholders' equity (deficit) | $214,214 | $(384,403) | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company achieved strong revenue growth and a significantly narrowed net loss in Q2 2025, demonstrating improved operational efficiency Statement of Operations Summary (in thousands, except per-share data) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $61,371 | $41,212 | +49% | $116,334 | $76,307 | +52% | | Gross Profit | $40,306 | $24,834 | +62% | $72,206 | $42,182 | +71% | | Operating Loss | $(4,344) | $(10,037) | +57% | $(12,740) | $(28,030) | +55% | | Net Loss | $(5,311) | $(10,692) | +50% | $(14,759) | $(29,661) | +50% | | Net Loss Per Share | $(0.24) | $(1.40) | +83% | $(0.98) | $(3.92) | +75% | [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Redeemable%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity%20(Deficit)) Stockholders' equity became positive due to the IPO proceeds and the conversion of all redeemable convertible preferred stock - The company received net proceeds of **$151.6 million** from its Initial Public Offering (IPO) in Q2 2025[30](index=30&type=chunk) - In connection with the IPO, all outstanding redeemable convertible preferred stock, valued at **$452.1 million**, was converted into common stock[30](index=30&type=chunk)[84](index=84&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flow from operations improved, and financing activities, driven by IPO proceeds, substantially increased total cash reserves Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(13,260) | $(28,748) | | Net cash used in investing activities | $(2,499) | $(1,826) | | Net cash provided by (used in) financing activities | $162,513 | $(898) | | **Net increase (decrease) in cash** | **$146,754** | **$(31,472)** | - The company received **$160.5 million** in proceeds from its IPO, net of underwriting discounts and commissions, during the first six months of 2025[33](index=33&type=chunk)[209](index=209&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail key events including the IPO, a reverse stock split, significant customer concentration, and a subsequent debt repayment - The company completed its IPO on June 9, 2025, raising net proceeds of **$151.6 million** after deducting underwriting discounts and offering expenses[44](index=44&type=chunk) - A **one-for-three reverse stock split** of the company's common stock was effected on May 27, 2025[43](index=43&type=chunk) - Two significant channel partners, both affiliates of The Cigna Group, accounted for **32% and 33% of revenue**, respectively, for the three months ended June 30, 2025[49](index=49&type=chunk) - As a subsequent event, on July 31, 2025, the company fully repaid its outstanding MidCap Term Facility and MidCap Revolving Facility debt, with principal and accrued interest balances of **$31.0 million** and **$0.4 million**, respectively[107](index=107&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong revenue and member growth, improved gross margins from efficiency initiatives, and a strengthened liquidity position following the IPO and subsequent debt repayment [Overview and Business Model](index=30&type=section&id=Overview%20and%20Business%20Model) Omada provides virtual care programs for chronic conditions via a B2B2C model, serving over 752,000 members as of June 30, 2025 - Omada offers virtual care programs for cardiometabolic conditions, musculoskeletal (MSK) conditions, and provides support for members taking GLP-1 agonists[110](index=110&type=chunk)[113](index=113&type=chunk) - The company operates on a B2B2C model, selling primarily to employers, health plans, and PBMs[112](index=112&type=chunk)[121](index=121&type=chunk) - Total members enrolled reached over **752,000** as of June 30, 2025[114](index=114&type=chunk) [Key Factors Affecting Performance](index=33&type=section&id=Key%20Factors%20Affecting%20Our%20Performance) Performance hinges on acquiring and retaining customers, expanding program adoption, and driving member enrollment and engagement - Key growth strategies include acquiring new customers and channel partners, retaining existing relationships, and expanding the number of programs used by each customer[126](index=126&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) - Member enrollment and engagement are crucial for revenue, as most customer fees are based on these metrics, and some contracts include performance guarantees tied to clinical outcomes or cost savings[130](index=130&type=chunk)[131](index=131&type=chunk) [Key Metric](index=34&type=section&id=Key%20Metric) The primary performance metric, Total Members, grew 52% year-over-year to 752,000 as of June 30, 2025 Total Members Growth | As of | Total Members | | :--- | :--- | | June 30, 2024 | 496,000 | | March 31, 2025 | 679,000 | | June 30, 2025 | 752,000 | [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Q2 2025 revenue grew 49% YoY to $61.4 million, with gross margin improving to 65.7% due to operational efficiencies Revenue Comparison (in thousands) | Period | 2025 | 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Three Months Ended June 30** | $61,371 | $41,212 | $20,159 | 49% | | **Six Months Ended June 30** | $116,334 | $76,307 | $40,027 | 52% | Gross Profit and Gross Margin Comparison | Period | 2025 | 2024 | | :--- | :--- | :--- | | **Three Months Ended June 30** | | | | Gross Profit (in thousands) | $40,306 | $24,834 | | Gross Margin | 65.7% | 60.3% | | **Six Months Ended June 30** | | | | Gross Profit (in thousands) | $72,206 | $42,182 | | Gross Margin | 62.1% | 55.3% | - Gross margin expansion was primarily driven by lower personnel costs per member due to strategic efficiency initiatives and the use of supporting technologies for the Care Team[171](index=171&type=chunk)[172](index=172&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity was significantly enhanced by $151.6 million in net IPO proceeds, enabling the full repayment of its $31.0 million debt facility post-quarter - As of June 30, 2025, the company's principal sources of liquidity were cash and cash equivalents of **$223.1 million**[197](index=197&type=chunk) - The company completed its IPO on June 9, 2025, receiving net proceeds of **$151.6 million**[202](index=202&type=chunk) - On July 31, 2025, the company fully repaid its outstanding debt under the MidCap Term Facility and MidCap Revolving Facility, totaling **$31.0 million** in principal[203](index=203&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are identified as interest rate fluctuations affecting its cash and debt, and inflation impacting operating costs - **Interest Rate Risk:** The company is exposed to interest rate risk from its cash equivalents and its variable-rate financing arrangements, though a hypothetical 10% change was not expected to have a material impact[221](index=221&type=chunk) - **Inflation Risk:** The company believes that inflation is impacting customer spending decisions and could increase its own costs for labor, sales, marketing, and cloud hosting, potentially harming results if not offset by price increases[222](index=222&type=chunk) [Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were not effective due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Management concluded that disclosure controls and procedures were **not effective** as of June 30, 2025, due to ongoing material weaknesses in internal control over financial reporting[223](index=223&type=chunk) - The material weaknesses relate to: (i) inadequate segregation of duties, (ii) insufficient personnel with appropriate technical accounting knowledge, and (iii) inadequate formalized financial close and reporting processes[225](index=225&type=chunk) - A remediation plan is underway, which includes hiring additional resources, implementing new controls, and formalizing business processes[226](index=226&type=chunk)[231](index=231&type=chunk) [Part II - Other Information](index=53&type=section&id=Part%20II%20-%20Other%20Information) [Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - The company is not currently party to any **material legal proceedings**[233](index=233&type=chunk) [Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from its history of net losses, customer concentration, competition, regulations, and internal control weaknesses - **Financial and Operational Risks:** The company has a history of net losses and may not achieve or maintain profitability, with growth dependent on managing expansion effectively and retaining customers[238](index=238&type=chunk)[240](index=240&type=chunk) - **Customer Concentration Risk:** A substantial portion of sales comes from or through a limited number of customers and channel partners, with affiliates of **The Cigna Group** being particularly significant[260](index=260&type=chunk) - **Regulatory and Compliance Risks:** The business is subject to extensive healthcare regulations, including HIPAA, state privacy laws, consumer protection laws, and state laws prohibiting the corporate practice of physical therapy[345](index=345&type=chunk)[347](index=347&type=chunk)[361](index=361&type=chunk) - **Internal Control Risk:** The company has identified and is remediating **material weaknesses** in its internal control over financial reporting related to segregation of duties, technical expertise, and formalized processes[237](index=237&type=chunk)[405](index=405&type=chunk)[406](index=406&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=107&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company details the use of its $151.6 million in net IPO proceeds, a portion of which was used to repay outstanding debt - The company completed its IPO on June 9, 2025, receiving net proceeds of approximately **$151.6 million** after deducting underwriting discounts and offering expenses[440](index=440&type=chunk) - A portion of the net proceeds from the IPO was used to repay outstanding borrowings under the MidCap Credit Agreement[442](index=442&type=chunk) [Defaults Upon Senior Securities](index=108&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - Not Applicable[444](index=444&type=chunk) [Mine Safety Disclosures](index=108&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not Applicable[445](index=445&type=chunk) [Other Information](index=108&type=section&id=Item%205.%20Other%20Information) No director or officer trading plans were adopted, modified, or terminated during the quarter - No director or officer trading plans under Rule 10b5-1 were adopted, modified, or terminated during the quarter[446](index=446&type=chunk) [Exhibits](index=109&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the report, including governance documents and required officer certifications - The report includes an index of all exhibits filed, such as corporate governance documents, material agreements, and required CEO/CFO certifications[448](index=448&type=chunk)[449](index=449&type=chunk)[450](index=450&type=chunk)

PART I FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements, management's discussion, market risks, and controls and procedures [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements of Pangaea Logistics Solutions Ltd. for the periods ended June 30, 2025, and December 31, 2024, highlighting key financial changes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section presents the consolidated balance sheets, highlighting changes in cash, assets, liabilities, and equity between June 30, 2025, and December 31, 2024 Consolidated Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 | December 31, 2024 | Change | % Change | | :----------------------------------- | :------------ | :---------------- | :----- | :------- | | Cash and cash equivalents | $59,252,910 | $86,805,470 | $(27,552,560) | -31.74% | | Total current assets | $184,008,795 | $191,993,893 | $(7,985,098) | -4.16% | | Total assets | $915,995,446 | $936,457,081 | $(20,461,635) | -2.18% | | Total current liabilities | $126,009,715 | $109,108,111 | $16,901,604 | 15.49% | | Total stockholders' equity | $459,130,313 | $474,664,335 | $(15,534,022) | -3.27% | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This section details the consolidated statements of operations, showing revenue, expenses, and net income/loss for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Operations Highlights (Three Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :------------------------------------------ | :----------- | :----------- | :------- | :------- | | Total revenue | $156,689,442 | $131,497,852 | $25,191,590 | 19.16% | | Total expenses | $153,035,850 | $123,883,626 | $29,152,224 | 23.53% | | Income from operations | $3,653,592 | $7,614,226 | $(3,960,634) | -52.02% | | Net (loss) income attributable to Pangaea Logistics Solutions Ltd. | $(2,742,116) | $3,682,775 | $(6,424,891) | -174.45% | | Basic (loss) earnings per common share | $(0.04) | $0.08 | $(0.12) | -150.00% | | Diluted (loss) earnings per common share | $(0.04) | $0.08 | $(0.12) | -150.00% | Consolidated Statements of Operations Highlights (Six Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :------------------------------------------ | :----------- | :----------- | :------- | :------- | | Total revenue | $279,491,328 | $236,246,405 | $43,244,923 | 18.31% | | Total expenses | $272,911,290 | $217,604,060 | $55,307,230 | 25.42% | | Income from operations | $6,580,038 | $18,642,345 | $(12,062,307) | -64.70% | | Net (loss) income attributable to Pangaea Logistics Solutions Ltd. | $(4,722,993) | $15,356,951 | $(20,079,944) | -130.75% | | Basic (loss) earnings per common share | $(0.07) | $0.34 | $(0.41) | -120.59% | | Diluted (loss) earnings per common share | $(0.07) | $0.33 | $(0.40) | -121.21% | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section outlines changes in stockholders' equity, including share-based compensation, distributions, repurchases, dividends, and net loss for the six months ended June 30, 2025 Stockholders' Equity Changes (Six Months Ended June 30, 2025) | Item | Amount | | :------------------------------------------ | :------------- | | Balance at December 31, 2024 | $474,664,335 | | Share-based compensation | $2,080,781 | | Distribution to Non-Controlling Interests | $(1,941,667) | | Share repurchases | $(1,007,102) | | Common Stock Dividend | $(9,845,199) | | Net Loss | $(5,098,740) | | Balance at June 30, 2025 | $459,130,313 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the consolidated statements of cash flows, detailing cash movements from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Activity | 2025 | 2024 | Change | % Change | | :-------------------------------- | :----------- | :----------- | :------- | :------- | | Net cash provided by operating activities | $10,039,158 | $17,955,519 | $(7,916,361) | -44.09% | | Net cash used in investing activities | $(2,411,298) | $(9,139,000) | $6,727,702 | -73.61% | | Net cash used in financing activities | $(35,180,420) | $(29,907,430) | $(5,272,990) | 17.63% | | Net change in cash and cash equivalents | $(27,552,560) | $(21,090,911) | $(6,461,649) | 30.64% | | Cash and cash equivalents, end of period | $59,252,910 | $77,946,955 | $(18,694,045) | -24.00% | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes supporting the consolidated financial statements, covering general information, accounting policies, and specific financial accounts [Note 1 - General Information and Recent Events](index=8&type=section&id=Note%201%20-%20General%20Information%20and%20Recent%20Events) This note provides an overview of Pangaea Logistics Solutions Ltd.'s business, fleet composition, and recent corporate actions - Pangaea Logistics Solutions Ltd. is a Bermuda-incorporated holding company engaged in worldwide drybulk cargo ocean transportation through vessel ownership, chartering, and operation[18](index=18&type=chunk) - As of June 30, 2025, the Company owned **41 drybulk vessels**, including three Panamax, two Ultramax Ice Class 1C, two Ultramax, nine Supramax, four Post-Panamax Ice Class 1A, and fifteen Handysize vessels (acquired via merger with Strategic Shipping Inc. on December 30, 2024)[19](index=19&type=chunk)[20](index=20&type=chunk) - On July 31, 2025, the Company acquired the remaining **49% equity interest** in Seamar Management for **$2.7 million**, making it a wholly-owned subsidiary[20](index=20&type=chunk) [Note 2 - Basis of Presentation and Significant Accounting Policies](index=9&type=section&id=Note%202%20-%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) This note describes the basis of financial statement presentation, significant accounting policies, key estimates, and recent accounting pronouncements - The unaudited consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions, reflecting all normal recurring adjustments[22](index=22&type=chunk) - Significant estimates include voyage completion percentage, allowance for credit losses, vessel depreciation salvage value, and long-lived asset impairment evaluation[23](index=23&type=chunk) - One significant customer accounted for **31% of accounts receivable** as of June 30, 2025, indicating a concentration of credit risk[24](index=24&type=chunk) Advance Hire, Prepaid Expenses and Other Current Assets | Item | June 30, 2025 | December 31, 2024 | | :---------------------------------- | :------------ | :---------------- | | Advance hire | $1,758,980 | $3,348,104 | | Prepaid expenses | $7,109,756 | $9,517,482 | | Accrued receivables | $13,359,656 | $7,352,376 | | Cash margin on deposit | $1,752,935 | $3,268,455 | | Derivative assets | $1,023,259 | $2,047,196 | | Other current assets | $4,296,067 | $4,435,739 | | **Total** | **$29,300,653** | **$29,969,352** | - The Company adopted ASU 2023-09 (Income Taxes) in Q1 2025 with no material impact and is assessing ASU 2024-03 (Expense Disaggregation), ASU 2025-03 (Business Combinations), and ASU 2025-04 (Share-Based Payments) for future impact[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) [Note 3 - Cash and Cash Equivalents](index=13&type=section&id=Note%203%20-%20Cash%20and%20Cash%20Equivalents) This note details the composition and changes in cash and cash equivalents, highlighting a significant decrease from the prior year-end Cash and Cash Equivalents (June 30, 2025 vs. December 31, 2024) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Money market accounts | $22,632,333 | $33,239,201 | | Time deposit accounts | — | $10,204,382 | | Cash | $36,620,577 | $43,361,887 | | **Total cash and cash equivalents** | **$59,252,910** | **$86,805,470** | - Cash and cash equivalents decreased by **31.74%** from **$86.8 million** at December 31, 2024, to **$59.3 million** at June 30, 2025[45](index=45&type=chunk) [Note 4 - Fixed Assets](index=14&type=section&id=Note%204%20-%20Fixed%20Assets) This note provides information on the Company's owned dry bulk vessels and barge, including carrying amounts and asset reclassifications - As of June 30, 2025, the Company owned **41 dry bulk vessels** and one barge, with a total net carrying amount of **$694.4 million**, down from **$707.8 million** at December 31, 2024[46](index=46&type=chunk)[47](index=47&type=chunk) - On June 12, 2025, the M/V Strategic Endeavor was reclassified as held for sale at **$7.7 million** and was delivered to the buyer on July 21, 2025[48](index=48&type=chunk)[93](index=93&type=chunk) - No triggering event for long-lived asset impairment testing occurred during the first half of 2025 or 2024[49](index=49&type=chunk)[141](index=141&type=chunk) [Note 5 - Debt](index=16&type=section&id=Note%205%20-%20Debt) This note details the Company's outstanding long-term debt and financing obligations, confirming compliance with financial covenants Outstanding Long-Term Debt (June 30, 2025 vs. December 31, 2024) | Item | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Total secured long-term debt | $123,049,844 | $131,319,017 | | Less: unamortized issuance costs | $(1,681,148) | $(2,022,277) | | Less: current portion | $(16,656,227) | $(16,576,195) | | **Secured long-term debt, net** | **$104,712,469** | **$112,720,545** | - The Company was in compliance with all financial covenants, including minimum liquidity and collateral maintenance ratios, as of June 30, 2025, and December 31, 2024[53](index=53&type=chunk) Financing Obligations from Failed Sale Leaseback Transactions (June 30, 2025 vs. December 31, 2024) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total financing obligations | $244,686,536 | $257,183,904 | | Less: unamortized issuance costs, net | $(2,137,159) | $(2,387,007) | | Less: current portion | $(25,438,710) | $(25,267,105) | | **Financing Obligations, net** | **$217,110,667** | **$229,529,792** | [Note 6 - Finance Leases](index=19&type=section&id=Note%206%20-%20Finance%20Leases) This note describes the Company's finance lease arrangements for vessels, including outstanding balances and interest rate cap details - The Company's fleet includes two vessels, Bulk Xaymaca and Bulk Destiny, financed through sale and leaseback arrangements accounted for as finance leases[58](index=58&type=chunk) Finance Leases (June 30, 2025 vs. December 31, 2024) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total finance leases | $11,947,395 | $13,369,270 | | Less: unamortized issuance costs, net | $(71,363) | $(91,222) | | Less: current portion | $(2,843,750) | $(2,843,750) | | **Long-term lease liabilities, net** | **$9,032,282** | **$10,434,298** | - An interest rate cap is effective from Q2 2026 through Q4 2026, capping SOFR at **3.51%** for certain finance leases[60](index=60&type=chunk) [Note 7 - Derivative Instruments and Fair Value Measurements](index=21&type=section&id=Note%207%20-%20Derivative%20Instruments%20and%20Fair%20Value%20Measurements) This note explains the Company's use of derivative instruments to manage market risks and their impact on financial results - The Company uses forward freight agreements (FFAs), fuel swap contracts, and interest rate caps to manage exposure to fluctuating freight rates, bunker prices, and interest rate movements[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) - These economic hedges generally do not qualify for hedge accounting, leading to potential fluctuations in reported operating results[63](index=63&type=chunk)[64](index=64&type=chunk) Effect of Derivative Financial Instruments on Consolidated Statements of Operations (Six Months Ended June 30) | Derivative Instrument | 2025 (Unrealized Loss) | 2024 (Unrealized Gain) | | :-------------------- | :--------------------- | :--------------------- | | Forward freight agreements | $(238,660) | $1,808,866 | | Fuel Swap Contracts | $(505,883) | $2,111,232 | | Interest rate cap | $(850,169) | $236,738 | | **Total (loss) gain** | **$(1,117,392)** | **$4,156,836** | [Note 8 - Related Party Transactions](index=23&type=section&id=Note%208%20-%20Related%20Party%20Transactions) This note discloses transactions with related parties, including technical management fees and intercompany eliminations - The Company incurred technical management fees of approximately **$562,500** for the three months ended June 30, 2025, and **$1,125,000** for the six months ended June 30, 2025, under an agreement with MTM Ship Management[74](index=74&type=chunk) - Upon consolidation of Seamar Management in Q2 2025, the intercompany payable balance was eliminated[72](index=72&type=chunk) [Note 9 - Commitments and Contingencies](index=23&type=section&id=Note%209%20-%20Commitments%20and%20Contingencies) This note outlines the Company's non-cancelable office leases and management's assessment of potential legal claims - The Company has non-cancelable office leases in Copenhagen (expires Dec 2025, then month-to-month with 6-month non-cancelable period) and Singapore (renewed for **15 months** in June 2025)[75](index=75&type=chunk)[76](index=76&type=chunk) - Lease expenses for office leases were approximately **$50,000** for the three months ended June 30, 2025, and **$100,000** for the six months ended June 30, 2025[76](index=76&type=chunk)[77](index=77&type=chunk) - Management believes that the financial impact of asserted claims arising in the ordinary course of business will not be material to the Company's consolidated financial position, results of operations, or cash flows[78](index=78&type=chunk) [Note 10 – Stockholders' Equity](index=24&type=section&id=Note%2010%20%E2%80%93%20Stockholders%27%20Equity) This note details changes in stockholders' equity, including share repurchase programs, dividends, and common stock outstanding - On May 8, 2025, the Board authorized a **$15.0 million** share repurchase program, representing approximately **5.6%** of market capitalization[79](index=79&type=chunk) - During the six months ended June 30, 2025, the Company repurchased and retired **202,882 shares** at an average price of **$4.96 per share**, totaling approximately **$1.01 million**[80](index=80&type=chunk) - As of June 30, 2025, approximately **$14.0 million** remained available under the repurchase program[81](index=81&type=chunk) - Total cash dividends paid were approximately **$9.9 million** for the six months ended June 30, 2025[82](index=82&type=chunk) Changes in Common Stock Outstanding (Six Months Ended June 30, 2025) | Description | Number of Shares | | :-------------------------------- | :--------------- | | Shares outstanding at December 31, 2024 | 64,961,433 | | Shares issued (e.g., equity grants) | 661,504 | | Share forfeitures | (42,918) | | Shares repurchased and retired | (202,882) | | **Shares outstanding at June 30, 2025** | **65,377,137** | [Note 11 - Net Income per Common Share](index=24&type=section&id=Note%2011%20-%20Net%20Income%20per%20Common%20Share) This note presents the basic and diluted net income per common share calculations for the reporting periods Basic and Diluted Net Income per Share (Three Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Net (loss) income | $(2,742,116) | $3,682,775 | | Weighted Average Shares - Basic | 64,042,209 | 45,276,791 | | Weighted Average Shares - Diluted | 64,042,209 | 46,028,902 | | Basic net (loss) income per share | $(0.04) | $0.08 | | Diluted net (loss) income per share | $(0.04) | $0.08 | Basic and Diluted Net Income per Share (Six Months Ended June 30) | Metric | 2025 | 2024 | | :------------------------------------------ | :----- | :----- | | Net (loss) income | $(4,722,993) | $15,356,951 | | Weighted Average Shares - Basic | 63,988,996 | 45,245,655 | | Weighted Average Shares - Diluted | 63,988,996 | 45,922,272 | | Basic net (loss) income per share | $(0.07) | $0.34 | | Diluted net (loss) income per share | $(0.07) | $0.33 | - Restricted stock awards of approximately **380,000 shares** (three months) and **406,000 shares** (six months) were excluded from diluted EPS calculation for 2025 as their effect would have been anti-dilutive due to the net loss[85](index=85&type=chunk) [Note 12. Employee Benefit Plans](index=25&type=section&id=Note%2012.%20Employee%20Benefit%20Plans) This note describes the Company's 401(k) retirement savings plan and associated matching contributions expense - The Company sponsors a 401(k) retirement savings plan, providing a **100% match** on the first **4%** of eligible employee contributions, which vest immediately[87](index=87&type=chunk)[88](index=88&type=chunk) - Matching contributions expense was approximately **$55,000** for the three months ended June 30, 2025, and **$233,000** for the six months ended June 30, 2025[88](index=88&type=chunk) [Note 13 – Segment Information and Geographic Data](index=25&type=section&id=Note%2013%20%E2%80%93%20Segment%20Information%20and%20Geographic%20Data) This note provides information on the Company's single reportable shipping segment and revenue breakdown by geographic area - The Company operates a single reportable segment: shipping, focused on seaborne dry bulk logistics and transportation services globally[89](index=89&type=chunk) - The CEO, as CODM, assesses profitability and asset performance using Time Charter Equivalent (TCE) rates, with voyage expenses as the primary expense analyzed[90](index=90&type=chunk) Shipping Segment Total Revenue (Three Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----------- | :----------- | :------- | :------- | | Shipping segment total revenue | $153,103,042 | $127,942,525 | $25,160,517 | 19.67% | | Total consolidated revenue | $156,689,442 | $131,497,852 | $25,191,590 | 19.16% | Shipping Segment Total Revenue (Six Months Ended June 30) | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----------- | :----------- | :------- | :------- | | Shipping segment total revenue | $272,688,080 | $230,161,097 | $42,526,983 | 18.48% | | Total consolidated revenue | $279,491,328 | $236,246,405 | $43,244,923 | 18.31% | Revenue by Geographic Area (Six Months Ended June 30) | Region | 2025 | 2024 | Change | % Change | | :------------- | :----------- | :----------- | :------- | :------- | | United States | $81,468,643 | $83,063,706 | $(1,595,063) | -1.92% | | Singapore | $30,998,149 | $17,597,973 | $13,400,176 | 76.15% | | Germany | $29,992,228 | $20,866,516 | $9,125,712 | 43.74% | | Other | $137,032,308 | $114,718,210 | $22,314,100 | 19.45% | | **Total** | **$279,491,328** | **$236,246,405** | **$43,244,923** | **18.31%** | [Note 14 - Subsequent Events](index=26&type=section&id=Note%2014%20-%20Subsequent%20Events) This note discloses significant events occurring after the balance sheet date, including asset sales and acquisitions - The M/V Strategic Endeavor was sold for **$7.7 million** and delivered to the buyer on July 21, 2025[93](index=93&type=chunk) - On July 31, 2025, the Company acquired the remaining **49% equity interest** in Seamar Management for **$2.7 million**, making it a wholly-owned subsidiary[94](index=94&type=chunk) - On August 6, 2025, the Board declared a quarterly cash dividend of **$0.05 per common share**, payable September 15, 2025[95](index=95&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the Company's financial condition, operational results, liquidity, and capital resources, including industry context [Important Financial and Operational Terms and Concepts](index=27&type=section&id=Important%20Financial%20and%20Operational%20Terms%20and%20Concepts) This section defines key financial and operational terms used in the drybulk shipping industry, such as voyage revenue, charter revenue, and TCE rates - Voyage Revenue: Derived from voyage charters where the Company retains control over vessel operations, recognized straight-line over voyage days[98](index=98&type=chunk)[36](index=36&type=chunk) - Charter Revenue: Earned from time charters where the charterer directs vessel use, recognized straight-line over the charter term, and identified as operating leases under ASC 842[99](index=99&type=chunk)[37](index=37&type=chunk) - Voyage Expenses: Include bunkers, port charges, canal tolls, brokerage commissions, and cargo handling, expensed as incurred[100](index=100&type=chunk) - Time Charter Equivalent (TCE) rates: Total revenues less voyage expenses divided by voyage length, a key industry performance measure[107](index=107&type=chunk)[108](index=108&type=chunk) [Selected Financial Information](index=29&type=section&id=Selected%20Financial%20Information) This section presents selected financial data, including revenue, gross profit, net income, and Adjusted EBITDA, for the reported periods Selected Financial Data (Three Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Total revenue | $156,689 | $131,498 | $25,191 | 19.16% | | Gross Profit | $10,865 | $12,671 | $(1,806) | -14.25% | | Income from operations | $3,654 | $7,614 | $(3,960) | -52.01% | | Net (loss) income attributable to Pangaea Logistics Solutions Ltd. | $(2,742) | $3,683 | $(6,425) | -174.45% | | Basic net (loss) income per share | $(0.04) | $0.08 | $(0.12) | -150.00% | | Adjusted EBITDA | $15,284 | $15,931 | $(647) | -4.06% | | TCE Rates ($/day) | $12,108 | $16,223 | $(4,115) | -25.37% | Selected Financial Data (Six Months Ended June 30) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :------------------ | :------------------ | :-------------------- | :------- | | Total revenue | $279,491 | $236,246 | $43,245 | 18.31% | | Gross Profit | $21,093 | $31,005 | $(9,912) | -31.97% | | Income from operations | $6,580 | $18,642 | $(12,062) | -64.70% | | Net (loss) income attributable to Pangaea Logistics Solutions Ltd. | $(4,723) | $15,357 | $(20,080) | -130.75% | | Basic net (loss) income per share | $(0.07) | $0.34 | $(0.41) | -120.59% | | Adjusted EBITDA | $30,059 | $35,878 | $(5,819) | -16.22% | | TCE Rates ($/day) | $11,781 | $16,919 | $(5,138) | -30.37% | Selected Balance Sheet Data (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :--------------------------- | :----------------------------- | | Cash and cash equivalents | $59,253 | $86,805 | | Total assets | $915,995 | $936,457 | | Total secured debt, including leases liabilities | $375,794 | $397,372 | | Total shareholders' equity | $459,130 | $474,664 | [Industry Overview](index=32&type=section&id=Industry%20Overview) This section provides an overview of the drybulk shipping industry, highlighting market cyclicality, BDI trends, and fleet expansion impacts - The drybulk shipping industry is cyclical and subject to macroeconomic shifts, geopolitical volatility, and fluctuations in vessel supply/demand and drybulk commodity demand[113](index=113&type=chunk) - The Baltic Dry Index (BDI) averaged **1,467** for Q2 2025, a **21% decrease** from **1,853** in Q2 2024, reflecting weakened market rates[114](index=114&type=chunk) - Average market rates for Panamax, Supramax, and Handysize vessels decreased by approximately **31%** from **$15,104** in Q2 2024 to **$10,347** in Q2 2025[114](index=114&type=chunk) - Fleet expansion from the December 2024 acquisition of **15 vessels** (**58% increase** in total vessel count) led to a **1,365-day increase** in available owned shipping days in Q2 2025[115](index=115&type=chunk) [Quarterly TCE Performance](index=32&type=section&id=Quarterly%20TCE%20Performance) This section analyzes the Company's Time Charter Equivalent (TCE) rates, comparing performance against market indexes for the quarter - For Q2 2025, TCE rates decreased by **25%** to **$12,108** from **$16,223** in Q2 2024, due to overall dry bulk market weakening[117](index=117&type=chunk) - Despite the market decline, Pangaea's TCE rates outperformed the average Baltic panamax, supramax, and handysize market indexes by approximately **17%** due to long-term contracts, specialized fleet, and cargo-focused strategy[117](index=117&type=chunk) [Second Quarter Highlights](index=32&type=section&id=Second%20Quarter%20Highlights) This section summarizes key financial results for the second quarter, including net loss, diluted EPS, Adjusted EBITDA, and cash position - Net loss attributable to Pangaea Logistics Solutions Ltd. was approximately **$2.7 million** for Q2 2025, compared to net income of **$3.7 million** for Q2 2024[120](index=120&type=chunk) - Diluted net loss per share was **$0.04** for Q2 2025, compared to diluted net income per share of **$0.08** for Q2 2024[120](index=120&type=chunk) - Adjusted EBITDA was **$15.3 million** for Q2 2025, a decrease from **$15.9 million** for Q2 2024[120](index=120&type=chunk) - Cash and cash equivalents stood at **$59.3 million** at the end of Q2 2025[120](index=120&type=chunk) [Revenues (Three Months Ended June 30, 2025 vs. 2024)](index=32&type=section&id=Revenues%20(Three%20Months%20Ended%20June%2030%2C%202025%20vs.%202024)) This section analyzes revenue changes for the three months ended June 30, 2025, driven by shipping days and market rates - Total revenue increased by **19%** to **$156.7 million** for Q2 2025, primarily due to a **51% rise** in total shipping days (**6,222 days**), partially offset by decreased market rates[119](index=119&type=chunk) - Voyage revenues increased by **18%** to **$146.3 million**, driven by a **43% increase** in voyage days (**5,575 days**) due to fleet expansion, despite declining market freight rates[121](index=121&type=chunk) - Charter revenues increased by **78%** (**$3.1 million**) to **$6.9 million**, mainly due to a **213% increase** in time charter days (**647 days**), partially offset by a **31% decline** in average market charter rates[122](index=122&type=chunk) - Terminal & Stevedore revenues remained stable at **$3.6 million**[123](index=123&type=chunk) [Operating and Business Expenses (Three Months Ended June 30, 2025 vs. 2024)](index=33&type=section&id=Operating%20and%20Business%20Expenses%20(Three%20Months%20Ended%20June%2030%2C%202025%20vs.%202024)) This section details changes in operating and business expenses for the three months ended June 30, 2025, influenced by fleet expansion and market rates - Voyage expenses increased by **27%** to **$77.8 million**, driven by a **43% increase** in voyage days, leading to higher bunker consumption and port expenses due to fleet expansion[125](index=125&type=chunk) - Charter hire expenses decreased by **4%** to **$31.4 million**, primarily due to a **31% decrease** in market rates for charter-in vessels, despite a **35% increase** in chartered-in days (**2,660 days**)[126](index=126&type=chunk) - Vessel operating expenses increased by **59%** to **$23.4 million**, mainly due to a **66% increase** in ownership days (**3,822 days**) from prior year vessel acquisitions[127](index=127&type=chunk) - General and administrative expenses increased by **43%** to **$7.2 million**, primarily due to the consolidation of Seamar in Q2 2025, which reclassified **$1.8 million** of expenses[129](index=129&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=34&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) This section provides a comparative analysis of financial performance for the six months ended June 30, 2025, versus the prior year [Revenues (Six Months Ended June 30, 2025 vs. 2024)](index=34&type=section&id=Revenues%20(Six%20Months%20Ended%20June%2030%2C%202025%20vs.%202024)) This section analyzes revenue changes for the six months ended June 30, 2025, highlighting impacts from fleet expansion and market rates - Total revenue increased by **18%** to **$279.5 million**, driven by a **46.5% increase** in total shipping days (**11,432 days**) due to fleet expansion, partially offset by declining market charter rates[130](index=130&type=chunk) - Voyage revenues increased by **21%** to **$255.9 million**, primarily due to a **45% increase** in voyage days (**9,771 days**) from SSI vessel acquisition, despite a **30% decline** in the Baltic Dry Index (BDI)[131](index=131&type=chunk) - Charter revenues decreased by **11%** to **$16.8 million**, mainly due to lower time charter revenue per day (**$10,140** in 2025 vs. **$17,776** in 2024), despite a **56% increase** in time charter days (**1,661 days**)[132](index=132&type=chunk) - Terminal & Stevedore revenues increased by **12%** to **$6.7 million**[133](index=133&type=chunk) [Operating and Business Expenses (Six Months Ended June 30, 2025 vs. 2024)](index=34&type=section&id=Operating%20and%20Business%20Expenses%20(Six%20Months%20Ended%20June%2030%2C%202025%20vs.%202024)) This section details changes in operating and business expenses for the six months ended June 30, 2025, influenced by fleet expansion and market rates - Voyage expenses increased by **41%** to **$138.1 million**, primarily due to higher bunker costs, port costs, and canal fees, corresponding to a **45% increase** in voyage days[134](index=134&type=chunk) - Charter hire expenses decreased by **18%** to **$49.1 million**, mainly due to a **34% decrease** in average market rates for charter-in vessels, despite a **25.6% increase** in chartered-in days (**4,405 days**)[135](index=135&type=chunk) - Vessel operating expenses increased by **66%** to **$45.6 million**, driven by the expansion of the owned fleet[136](index=136&type=chunk) - General and administrative expenses increased to **$14.4 million**, primarily due to the consolidation of Seamar Management[138](index=138&type=chunk) [Significant accounting estimates](index=35&type=section&id=Significant%20accounting%20estimates) This section identifies key accounting estimates that require management judgment and can significantly impact financial reporting - Key accounting estimates include voyage completion percentage, allowance for credit losses, vessel salvage value for depreciation, and long-lived asset impairment evaluation[139](index=139&type=chunk) [Long-lived Assets Impairment Considerations](index=35&type=section&id=Long-lived%20Assets%20Impairment%20Considerations) This section outlines the Company's policy for evaluating long-lived assets for impairment and confirms no triggering events occurred - The Company evaluates fixed assets for impairment when indicators are present and undiscounted cash flows are less than carrying amounts, assessing at the asset group level (vessel size/trade)[140](index=140&type=chunk) - No triggering event for impairment testing occurred during the first half of 2025 or 2024[141](index=141&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's sources of liquidity, working capital, and cash flow from operating, investing, and financing activities - The Company finances capital needs through cash flow from operations, common stock issuance, non-controlling interest contributions, and long-term debt and finance leases[142](index=142&type=chunk) - Working capital was **$58.0 million** as of June 30, 2025, down from **$82.9 million** at December 31, 2024[143](index=143&type=chunk) - Net cash provided by operating activities decreased by **$7.9 million** to **$10.0 million** for the six months ended June 30, 2025, primarily due to a net loss[146](index=146&type=chunk) - Net cash used in investing activities decreased by **$6.73 million** to **$2.4 million** for the six months ended June 30, 2025, mainly due to a prior year advance for vessel purchase[147](index=147&type=chunk) - Net cash used in financing activities decreased by **$5.3 million** to **$29.9 million** for the six months ended June 30, 2025, due to lower debt payments and absence of long-term debt proceeds[148](index=148&type=chunk)[149](index=149&type=chunk) [Capital Expenditures](index=37&type=section&id=Capital%20Expenditures) This section details the Company's capital expenditures related to vessel purchases, improvements, and drydocking costs - Capital expenditures relate to vessel purchases, capital improvements, and port & terminal operations, with funding from cash from operations[150](index=150&type=chunk)[151](index=151&type=chunk) - Drydocking costs capitalized totaled approximately **$11.9 million** for the six months ended June 30, 2025, significantly higher than **$3.2 million** in the prior year[151](index=151&type=chunk) [Off-Balance Sheet Arrangements](index=37&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet arrangements as of the reporting dates - The Company had no off-balance sheet arrangements as of June 30, 2025, or December 31, 2024[152](index=152&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risks](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risks) This section states no significant changes to the Company's market risk profile since December 31, 2024, referring to the Annual Report for detailed discussion - No significant changes to market risk occurred since December 31, 2024[154](index=154&type=chunk) - Refer to the Annual Report on Form 10-K for the year ended December 31, 2024, for a discussion of market risks[154](index=154&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the Company's disclosure controls and procedures were not effective due to a material weakness in revenue recognition controls, with remediation efforts underway - Disclosure controls and procedures were not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting[155](index=155&type=chunk) - The material weakness relates to the design and documentation of controls over the review and application of the revenue recognition policy under ASC 606[155](index=155&type=chunk) - Remediation actions include enhancing review/approval procedures for revenue recognition, strengthening supervisory review for ASC 606, and aligning general ledger account mapping[156](index=156&type=chunk) - The material weakness will be remediated only after controls are tested and proven effective over a sustained period[156](index=156&type=chunk) PART II OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety disclosures, other information, and exhibits [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The Company is involved in various ordinary course legal disputes and claims, primarily cargo claims, with no material financial impact expected - The Company is involved in ordinary course legal disputes and litigation, mainly cargo claims[158](index=158&type=chunk) - Management believes the financial impact of these matters will not be material to the Company's financial position, results of operations, or cash flows[158](index=158&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) This section directs readers to consider risk factors from the Annual Report on Form 10-K and any new risks in this report that could materially affect the Company - Readers should consider risk factors from the Annual Report on Form 10-K for December 31, 2024, and any new risks in this report[159](index=159&type=chunk) - These risk factors could materially affect the Company's business, financial condition, or future results[159](index=159&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company's Board authorized a **$15 million** share repurchase program, with approximately **$1.01 million** in shares repurchased during the period - On May 8, 2025, the Board authorized a **$15 million** share repurchase program for common stock[160](index=160&type=chunk) - During the six months ended June 30, 2025, **202,882 shares** were repurchased and retired at an average price of **$4.96 per share**, totaling approximately **$1.01 million**[161](index=161&type=chunk) - As of June 30, 2025, approximately **$14 million** remained available for future repurchases[161](index=161&type=chunk) [Item 3. Defaults upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) The Company reported no defaults upon senior securities - There were no defaults upon senior securities[162](index=162&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The Company reported no mine safety disclosures - There were no mine safety disclosures[164](index=164&type=chunk) [Item 5. Other Information](index=40&type=section&id=Item%205.%20Other%20Information) The Company reported no other information - There was no other information to report[165](index=165&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL documents - Exhibits include CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act) and XBRL instance and taxonomy documents[166](index=166&type=chunk) [Signatures](index=42&type=section&id=Signatures) The report is duly signed on behalf of Pangaea Logistics Solutions Ltd. by its Chief Executive Officer and Chief Financial Officer - The report was signed by Mark L. Filanowski (CEO) and Gianni Del Signore (CFO) on August 8, 2025[168](index=168&type=chunk)[171](index=171&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to | | | Name of each exchange | | --- | --- | --- | | Title of each class | Trading Symbol(s) | on which registered | | Units, each consisting of one Class A | LWACU | T ...