[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) This section outlines the filing details for the Quarterly Report on Form 10-Q, including the reporting period and outstanding shares - The report is a Quarterly Report on Form 10-Q for the period ended **June 30, 2025**[2](index=2&type=chunk) - Ligand Pharmaceuticals Incorporated (LGND) is an **accelerated filer** and is not a shell company[4](index=4&type=chunk)[6](index=6&type=chunk) - As of **August 5, 2025**, the registrant had **19,596,560 shares** of common stock outstanding[6](index=6&type=chunk) [Glossary of Terms and Abbreviations](index=4&type=section&id=GLOSSARY%20OF%20TERMS%20AND%20ABBREVIATIONS) This section defines key terms and abbreviations used throughout the report for clarity and consistent understanding - The glossary defines key terms and abbreviations used throughout the report, such as 'Company' (Ligand Pharmaceuticals Incorporated, including subsidiaries), 'Q2 2025' (fiscal quarter ended **June 30, 2025**), and 'GAAP' (Generally accepted accounting principles in the United States)[10](index=10&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section warns that forward-looking statements are subject to risks and uncertainties, and actual results may differ materially - The report contains forward-looking statements subject to risks and uncertainties, and actual results may differ materially from those discussed, cautioning readers not to place undue reliance on these statements[12](index=12&type=chunk)[14](index=14&type=chunk) - Forward-looking statements are identifiable by terms such as 'believes,' 'expects,' 'may,' 'will,' 'plan,' 'intends,' 'estimates,' 'would,' 'continue,' 'seeks,' 'pro forma,' or 'anticipates,' and pertain to future results, royalties, Captisol sales, product development, and regulatory approvals[13](index=13&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [ITEM 1. Condensed Consolidated Financial Statements (unaudited)](index=5&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements for Ligand Pharmaceuticals, including the balance sheets, statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, providing a snapshot of the company's financial position and performance for the periods ended June 30, 2025, and December 31, 2024 (balance sheet), and June 30, 2025 and 2024 (income, comprehensive income, equity, cash flows) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and equity for June 30, 2025, and December 31, 2024 Metric | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total assets | $948,604 | $941,774 | | Total current assets | $352,945 | $331,559 | | Cash and cash equivalents | $67,669 | $72,307 | | Short-term investments | $177,351 | $183,858 | | Total liabilities | $120,075 | $111,335 | | Total current liabilities | $64,734 | $37,112 | | Total stockholders' equity | $828,529 | $830,439 | - **Total assets** increased by **$6.830 million** from **December 31, 2024**, to **June 30, 2025**, driven by an increase in current assets, particularly assets held for sale[17](index=17&type=chunk) - **Total liabilities** increased by **$8.740 million**, primarily due to a significant increase in current liabilities, including liabilities related to assets held for sale[17](index=17&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the company's financial performance, detailing revenues, operating costs, and net income (loss) for the periods Metric | 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) | | :------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Total revenues and other income | $47,627 | $41,531 | $92,960 | $72,509 | | Total operating costs and expenses | $39,183 | $60,631 | $120,732 | $88,621 | | Operating income (loss) | $8,444 | $(19,100) | $(27,772) | $(16,112) | | Net income (loss) | $4,847 | $(51,911) | $(37,604) | $34,228 | | Basic net income (loss) per share | $0.25 | $(2.88) | $(1.95) | $1.91 | | Diluted net income (loss) per share | $0.24 | $(2.88) | $(1.95) | $1.87 | - **Net income** for **Q2 2025** was **$4.847 million**, a significant improvement from a **net loss** of **$(51.911) million** in **Q2 2024**[19](index=19&type=chunk) - For the six months ended **June 30, 2025**, the company reported a **net loss** of **$(37.604) million**, compared to a **net income** of **$34.228 million** in the prior year period[19](index=19&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section details the company's comprehensive income (loss), including net income (loss) and other comprehensive income components Metric | 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 (loss) | $4,847 | $(51,911) | $(37,604) | $34,228 | | Unrealized net loss on available-for-sale securities, net of tax | $(49) | $(25) | $(71) | $(118) | | Foreign currency translation adjustment, net of tax | $10,106 | — | $14,507 | — | | Comprehensive income (loss) | $14,904 | $(51,936) | $(23,168) | $34,110 | - **Comprehensive income** for **Q2 2025** was **$14.904 million**, a significant improvement from a **comprehensive loss** of **$(51.936) million** in **Q2 2024**, primarily due to **foreign currency translation adjustments**[22](index=22&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in stockholders' equity, including capital, retained earnings, and comprehensive income (loss) Metric | Metric | December 31, 2024 (in thousands) | June 30, 2025 (in thousands) | | :-------------------------------- | :------------------------------- | :----------------------------- | | Total stockholders' equity | $830,439 | $828,529 | | Additional paid-in capital | $337,377 | $358,635 | | Retained earnings | $498,984 | $461,380 | | Accumulated other comprehensive income (loss) | $(5,942) | $8,494 | - **Total stockholders' equity** slightly decreased from **$830.439 million** at **December 31, 2024**, to **$828.529 million** at **June 30, 2025**[24](index=24&type=chunk) - **Additional paid-in capital** increased by **$21.258 million**, while **retained earnings** decreased by **$37.604 million**, reflecting the **net loss** for the six months ended **June 30, 2025**[24](index=24&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Cash Flow Activity | Cash Flow Activity | Six months ended June 30, 2025 (in thousands) | Six months ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net cash (used in) provided by operating activities | $(9,646) | $32,046 | | Net cash used in investing activities | $(5,773) | $(58,534) | | Net cash provided by financing activities | $10,248 | $21,673 | | Net decrease in cash and cash equivalents | $(4,638) | $(4,815) | | Cash and cash equivalents at end of period | $67,669 | $18,139 | - **Net cash used in operating activities** was **$(9.646) million** for the six months ended **June 30, 2025**, a decrease from **$32.046 million** provided in the prior year, primarily due to the **Castle Creek transaction**[26](index=26&type=chunk)[216](index=216&type=chunk) - **Net cash used in investing activities** significantly decreased to **$(5.773) million** in **YTD 2025** from **$(58.534) million** in **YTD 2024**, mainly due to lower purchases of short-term investments and the absence of large transactions like the **Agenus Transaction** seen in **2024**[26](index=26&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [1. Basis of Presentation and Summary of Significant Accounting Policies](index=11&type=section&id=1.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This section describes the company's business, revenue recognition policies, and the basis for financial statement presentation - Ligand Pharmaceuticals Incorporated operates as a biopharmaceutical company focused on enabling scientific advancement through financing and licensing technologies, with a single operating and reportable segment: development and licensing of biopharmaceutical assets[30](index=30&type=chunk)[32](index=32&type=chunk) - Revenue is primarily generated from **royalties** on partner product sales, Captisol material sales, income from **financial royalty assets**, and contract revenue for license fees and milestone payments[41](index=41&type=chunk) - The company applies a five-step model (ASC 606) for revenue recognition and recognizes **royalties** on intangible royalty assets when the underlying product sale occurs, typically with a one-quarter lag[42](index=42&type=chunk)[43](index=43&type=chunk) Disaggregation of Revenue (in thousands) | Revenue Type | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------- | :------ | :------ | :------- | :------- | | Revenue from intangible royalty assets | $30,084 | $22,603 | $51,671 | $40,960 | | Income from financial royalty assets | $6,313 | $559 | $12,215 | $1,297 | | Captisol | $8,287 | $7,500 | $21,747 | $16,712 | | Contract revenue and other income | $2,943 | $10,869 | $7,327 | $13,540 | | **Total** | **$47,627** | **$41,531** | **$92,960** | **$72,509** | [2. Assets Held for Sale](index=21&type=section&id=2.%20Assets%20Held%20for%20Sale) This section details the classification of Pelthos Therapeutics Inc. and LNHC, Inc. as assets held for sale - Ligand classified its wholly-owned subsidiaries, **Pelthos Therapeutics Inc.** and LNHC, Inc. (collectively 'Pelthos'), as held for sale as of **June 30, 2025**, following a definitive merger agreement with Channel Therapeutics Corporation[96](index=96&type=chunk) Pelthos Assets and Liabilities Held for Sale (June 30, 2025, in thousands) | Category | Amount | | :-------------------------------- | :----- | | Total assets held for sale | $35,228 | | Total liabilities related to assets held for sale | $35,692 | - The merger closed in **July 2025**, and the disposal group did not meet the requirements for presentation as discontinued operations[96](index=96&type=chunk)[99](index=99&type=chunk) [3. Castle Creek and Agenus Transactions](index=22&type=section&id=3.%20Castle%20Creek%20and%20Agenus%20Transactions) This section describes significant investment and acquisition activities, including Castle Creek and Agenus agreements - In **February 2025**, Ligand invested **$50.000 million** in Castle Creek Biosciences for high single-digit **royalties** on worldwide sales of **D-Fi** and a warrant to purchase Series D-1 Preferred Stock[101](index=101&type=chunk) - The **Castle Creek Investment transaction** included **$44.300 million** allocated to **D-Fi royalty rights**, recognized as R&D expense, and **$5.800 million** to the **Castle Creek Warrant**, accounted for as a derivative asset[103](index=103&type=chunk)[104](index=104&type=chunk) - In **May 2024**, Ligand closed a **$75.000 million** agreement with Agenus, acquiring **18.75%** of licensed **royalties** and **31.875%** of future milestones on six partnered oncology programs, and a synthetic **2.625%** royalty on **BOT/BAL program sales**[105](index=105&type=chunk) - **Agenus Partnered Programs**, **Agenus Warrant**, and Upsize Option were accounted for as derivative assets, with the **BOT/BAL rights** classified as a **financial royalty asset** under the non-accrual method[107](index=107&type=chunk)[111](index=111&type=chunk) [4. Apeiron Acquisition](index=23&type=section&id=4.%20Apeiron%20Acquisition) This section outlines the acquisition of Apeiron Biologics AG, including royalty rights to Qarziba® and related investments - On **July 15, 2024**, Ligand acquired Apeiron Biologics AG for **$100.500 million**, including royalty rights to **Qarziba®** (dinutuximab beta) for high-risk neuroblastoma[112](index=112&type=chunk) - The acquisition was treated as an asset acquisition, with **$106.156 million** allocated to contract assets (**financial royalty assets**) and **$18.109 million** in deferred tax liabilities recorded[114](index=114&type=chunk)[115](index=115&type=chunk)[117](index=117&type=chunk) - Ligand also invested **$4.200 million** in **InvIOs Holding AG**, a spin-off of Apeiron, for common shares, accounted for at cost less impairment[119](index=119&type=chunk)[120](index=120&type=chunk) [5. Financial Royalty Assets, net](index=24&type=section&id=5.%20Financial%20Royalty%20Assets,%20net) This section provides a breakdown of the company's financial royalty assets, net, and discusses changes and impairment losses Financial Royalty Assets, Net (in thousands) | Asset | June 30, 2025 Net Carrying Value | December 31, 2024 Net Carrying Value | | :-------------------------------- | :--------------------------------- | :----------------------------------- | | Qarziba | $113,508 | $104,845 | | Agenus Bot/Bal | $40,407 | $40,407 | | Tolerance Therapeutics (Tzield®) | $25,362 | $25,512 | | Ohtuvayre inventors | $16,481 | $15,812 | | Elutia (CorMatrix) | $6,600 | $7,150 | | InvIOs | $1,326 | $1,176 | | Selexis | $148 | $147 | | **Total financial royalty assets, net** | **$203,832** | **$195,049** | - **Total financial royalty assets, net**, increased from **$195.049 million** at **December 31, 2024**, to **$203.832 million** at **June 30, 2025**[121](index=121&type=chunk) - No **impairment loss** was recorded for **financial royalty assets** for the three and six months ended **June 30, 2025**, compared to a **$26.200 million** impairment for Ovid (Soticlestat) and **$0.300 million** for Selexis in the prior year period[124](index=124&type=chunk) - The **Soticlestat financial royalty asset** was fully impaired in **Q4 2024** after Takeda discontinued the program in **January 2025**[131](index=131&type=chunk) [6. Fair Value Measurements](index=26&type=section&id=6.%20Fair%20Value%20Measurements) This section details the fair value hierarchy for assets and liabilities, including investments, derivative assets, and contingent liabilities Fair Value Hierarchy of Assets and Liabilities (June 30, 2025, in thousands) | Category | Level 1 | Level 2 | Level 3 | Total | | :-------------------------------- | :------ | :------ | :------ | :------ | | Short-term investments (excluding Viking) | $72,560 | $78,291 | — | $150,851 | | Investment in Viking common stock | $26,500 | — | — | $26,500 | | Derivative assets | — | — | $17,958 | $17,958 | | **Total assets** | **$99,060** | **$78,291** | **$17,958** | **$195,309** | | Contingent liabilities - CyDex | — | — | $351 | $351 | | Contingent liabilities - Metabasis | — | $5,211 | — | $5,211 | | **Total liabilities** | **—** | **$5,211** | **$351** | **$5,562** | - Derivative assets, including **Agenus Partnered Programs**, Primrose mRNA, Castle Creek Milestone, **Agenus Warrant**, and **Castle Creek Warrant**, are classified as **Level 3** and measured at fair value using discounted cash flow or Black-Scholes models[133](index=133&type=chunk) - Contingent liabilities related to the Metabasis acquisition are classified as **Level 2**, with fair value determined using quoted prices in inactive markets for the underlying CVRs[134](index=134&type=chunk) [7. Debt](index=27&type=section&id=7.%20Debt) This section describes the company's debt arrangements, including its revolving credit facility and associated terms - Ligand has a **$75.000 million revolving credit facility** with Citibank, N.A., which was amended on **July 8, 2024**, to increase the aggregate amount to **$125.000 million**[141](index=141&type=chunk)[143](index=143&type=chunk) - As of **June 30, 2025**, **$124.400 million** was available under the **Revolving Credit Facility**, with **$0.600 million** utilized for a letter of credit, and the facility matures on **October 12, 2026**[144](index=144&type=chunk) - Borrowings accrue interest at **Term SOFR** or a **base rate** plus an applicable margin (**1.75%-2.50%** for **Term SOFR**, **0.75%-1.50%** for **base rate**) and are secured by certain company collateral[141](index=141&type=chunk)[142](index=142&type=chunk) [8. Income Tax](index=28&type=section&id=8.%20Income%20Tax) This section presents the company's effective tax rates and discusses factors influencing variances from the statutory rate Effective Tax Rate | Period | Effective Tax Rate | | :-------------------------------- | :----------------- | | Three months ended June 30, 2025 | 56.8% | | Three months ended June 30, 2024 | 20.6% | | Six months ended June 30, 2025 | 3.5% | | Six months ended June 30, 2024 | 28.8% | - The variance from the U.S. federal statutory tax rate of **21%** for **Q2** and **YTD 2025** was primarily due to **Section 162(m) limitation** on officer compensation deduction, other non-deductible items, and foreign operations income, partially offset by foreign derived intangible income deduction[145](index=145&type=chunk) - The **One Big Beautiful Bill Act (OBBBA)**, enacted **July 4, 2025**, includes significant tax provisions with multiple effective dates, and the company is currently assessing its impact on consolidated financial statements[146](index=146&type=chunk) [9. Stockholders' Equity](index=28&type=section&id=9.%20Stockholders'%20Equity) This section details changes in stockholders' equity, including stock option and restricted stock activity and equity programs Stock Option and Restricted Stock Activity (June 30, 2025) | Metric | Stock Options (Shares) | Restricted Stock Awards (Shares) | | :-------------------------------- | :--------------------- | :------------------------------- | | Balance as of December 31, 2024 | 2,226,273 | 437,872 | | Granted | 457,376 | 231,761 | | Exercised/Vested | (176,281) | (200,866) | | Forfeited | (57,913) | (5,933) | | Balance as of June 30, 2025 | 2,449,455 | 462,834 | - As of **June 30, 2025**, **1.3 million** outstanding options were exercisable with a weighted average exercise price of **$73.19**[147](index=147&type=chunk) - The company has an **At-The-Market Equity Offering Program** for up to **$100.000 million**, but no shares were issued under it during **Q2** or **YTD 2025** and **2024**[150](index=150&type=chunk) - A **stock repurchase program** authorizing up to **$50.000 million** through **April 2026** was approved in **April 2023**, but no shares were repurchased during **Q2** or **YTD 2025** and **2024**[151](index=151&type=chunk)[152](index=152&type=chunk) [10. Commitment and Contingencies](index=29&type=section&id=10.%20Commitment%20and%20Contingencies) This section outlines the company's legal proceedings, including civil complaints and breach of contract claims, and lease liabilities - Ligand is involved in legal proceedings, including civil complaints related to the **National Prescription Opiate Litigation** and a **breach of contract claim** by CyDex Pharmaceuticals, Inc. against Bexson Biomedical, Inc[154](index=154&type=chunk)[155](index=155&type=chunk) - The company believes that none of the pending claims are likely to have a **material adverse effect** on its business, financial condition, or results of operations[156](index=156&type=chunk) - **Operating lease liabilities** increased by **$2.300 million** due to the extension and expansion of the Boston office lease agreement in **March and May 2025**[157](index=157&type=chunk) [11. Subsequent Events](index=30&type=section&id=11.%20Subsequent%20Events) This section reports significant events after the reporting period, including the Pelthos merger and a new Orchestra BioMed investment - On **July 1, 2025**, Ligand's subsidiary LNHC, Inc. was disposed of and merged into **Pelthos Therapeutics Inc.**, with Ligand investing an additional **$18.000 million** and becoming entitled to a **13%** royalty on worldwide net sales of **ZELSUVMI**[158](index=158&type=chunk) - On **August 4, 2025**, Ligand invested **$25.000 million** in **Orchestra BioMed's** late-stage cardiology programs, with an additional **$15.000 million** contingent on certain conditions, in exchange for low double-digit **royalties** on initial commercial revenues and mid-single-digit **royalties** on revenues exceeding **$100.000 million**[159](index=159&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on Ligand's financial condition and results of operations, highlighting revenue drivers and liquidity [Overview](index=31&type=section&id=Overview) This section provides an overview of Ligand's business model, focusing on generating diversified biopharmaceutical product revenue streams - Ligand is a biopharmaceutical company that supports clinical development of high-value medicines through financing, licensing technologies, or both, aiming to generate a diversified portfolio of biopharmaceutical product revenue streams with an efficient cost structure[164](index=164&type=chunk) - The business model focuses on funding mid- to late-stage drug development for economic rights, purchasing royalty rights, and licensing its Captisol and NITRICIL platform technologies[164](index=164&type=chunk) - Revenue is primarily derived from **royalties** on partner product sales, Captisol material sales, and contract revenue from license fees and milestone payments[165](index=165&type=chunk) [Business Updates](index=31&type=section&id=Business%20Updates) This section details recent corporate developments, including the Pelthos Therapeutics merger, Zelsuvmi launch, and Orchestra BioMed investment - The merger of Ligand's subsidiary LNHC, Inc. with Channel Therapeutics Corporation was completed on **July 2, 2025**, forming **Pelthos Therapeutics Inc.**, which trades on NYSE American under 'PTHS'[166](index=166&type=chunk) - **Pelthos** raised **$50.100 million** in equity capital, with Ligand investing **$18.000 million**, and commercially launched **Zelsuvmi (berdazimer) topical gel 10.3%** on **July 10, 2025**, for which Ligand earned a **$5.000 million** milestone payment and is entitled to a **13%** royalty on worldwide sales (excluding Japan)[167](index=167&type=chunk)[169](index=169&type=chunk) - On **August 4, 2025**, Ligand invested **$25.000 million** in **Orchestra BioMed's** cardiology programs, securing low double-digit **royalties** on initial commercial revenues and mid-single-digit **royalties** on revenues exceeding **$100.000 million** for AVIM therapy and Virtue SAB programs[170](index=170&type=chunk) [Portfolio Updates](index=32&type=section&id=Portfolio%20Updates) This section provides updates on key product programs and partnerships, including developments related to Ohtuvayre, BOT/BAL, Qtorin, and Filspari - Merck announced an agreement to acquire Verona for approximately **$10.000 billion**, which includes **Ohtuvayre**, a product for which Ligand receives a **3%** royalty on sales[171](index=171&type=chunk) - Agenus' **BOT/BAL combination** achieved a two-year survival rate of **42%** in metastatic colorectal cancer patients and reached an agreement with the FDA on the Phase 3 trial design[172](index=172&type=chunk) - Palvella Therapeutics fully enrolled its Phase 3 SELVA trial for **Qtorin 3.9% rapamycin anhydrous gel**, with top-line results expected in **Q1 2026** and NDA submission planned for **H2 2026**[173](index=173&type=chunk) - Travere's sNDA for traditional approval of **Filspari** for focal segmental glomerulosclerosis (FSGS) was accepted by the FDA, with a PDUFA target action date of **January 13, 2026**[177](index=177&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing changes in revenue, operating costs, non-operating items, and income tax [Revenue and Other Income](index=33&type=section&id=Revenue%20and%20Other%20Income) This section analyzes the company's total revenue and other income, breaking down contributions from royalties, Captisol sales, and contract revenue Total Revenue and Other Income (in thousands) | Period | Q2 2025 | Q2 2024 | Change (QoQ) | % Change (QoQ) | YTD 2025 | YTD 2024 | Change (YoY) | % Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | :------------- | :------- | :------- | :----------- | :------------- | | Total revenue and other income | $47,627 | $41,531 | $6,096 | 15% | $92,960 | $72,509 | $20,451 | 28% | | Royalties | $36,397 | $23,162 | $13,235 | 57% | $63,886 | $42,257 | $21,629 | 51% | | Captisol sales | $8,287 | $7,500 | $787 | 10% | $21,747 | $16,712 | $5,035 | 30% | | Contract revenue and other income | $2,943 | $10,869 | $(7,926) | (73)% | $7,327 | $13,540 | $(6,213) | (46)% | - **Total revenue and other income** increased by **15%** in **Q2 2025** and **28%** in **YTD 2025**, primarily driven by a **57%** increase in **royalties** in **Q2 2025** and **51%** in **YTD 2025**, largely due to Qarziba **financial royalty asset** income and increased **Filspari** sales[179](index=179&type=chunk)[180](index=180&type=chunk) - **Contract revenue and other income** decreased by **73%** in **Q2 2025** and **46%** in **YTD 2025** due to the timing of partner milestone events[179](index=179&type=chunk)[180](index=180&type=chunk) Revenue from Intangible Royalty Assets by Program (Q2 2025 vs Q2 2024, in millions) | Program | Q2 2025 Royalty Revenue | Q2 2024 Royalty Revenue | | :-------------------- | :---------------------- | :---------------------- | | Kyprolis | $8.8 | $9.0 | | Evomela | $1.5 | $2.7 | | Teriparatide injection | $2.3 | $2.1 | | Rylaze | $2.9 | $3.2 | | Filspari | $6.6 | $2.4 | | Vaxneuvance | $2.6 | $1.1 | | Other | $5.4 | $2.1 | | **Total** | **$30.1** | **$22.6** | [Operating Costs and Expenses](index=34&type=section&id=Operating%20Costs%20and%20Expenses) This section details the company's operating costs and expenses, including research and development, general and administrative, and impairment Total Operating Costs and Expenses (in thousands) | Expense Category | Q2 2025 | Q2 2024 | Change (QoQ) | % Change (QoQ) | YTD 2025 | YTD 2024 | Change (YoY) | % Change (YoY) | | :--------------------------------------- | :------ | :------ | :----------- | :------------- | :------- | :------- | :----------- | :------------- | | Total operating costs and expenses | $39,183 | $60,631 | $(21,448) | (35)% | $120,732 | $88,621 | $32,111 | 36% | | Research and development | $6,567 | $5,354 | $1,213 | 23% | $56,652 | $11,325 | $45,327 | 400% | | General and administrative | $20,175 | $17,623 | $2,552 | 14% | $38,976 | $28,574 | $10,402 | 36% | | Financial royalty assets impairment | — | $26,491 | $(26,491) | (100)% | — | $26,491 | $(26,491) | (100)% | | Fair value adjustments to partner program derivatives | $1,276 | — | $1,276 | N/A | $833 | — | $833 | N/A | - **Total operating costs and expenses** decreased by **35%** in **Q2 2025** due to the absence of **financial royalty asset impairment**, but increased by **36%** in **YTD 2025**, primarily driven by a **$44.300 million** R&D funding arrangement for **D-Fi royalty rights**[187](index=187&type=chunk)[192](index=192&type=chunk) - **Research and development** expenses increased in **Q2 2025** due to Pelthos' **ZELSUVMI** launch preparations and significantly in **YTD 2025** due to the **Castle Creek Investment transaction**[188](index=188&type=chunk)[192](index=192&type=chunk) - **General and administrative** expenses increased in both **Q2** and **YTD 2025** due to employee-related costs and Pelthos business incubation[189](index=189&type=chunk)[193](index=193&type=chunk) [Non-operating Income and Expenses](index=35&type=section&id=Non-operating%20Income%20and%20Expenses) This section analyzes the company's non-operating income and expenses, including gains or losses from short-term investments and interest income Total Non-operating Income (Expenses), Net (in thousands) | Category | Q2 2025 | Q2 2024 | Change (QoQ) | % Change (QoQ) | YTD 2025 | YTD 2024 | Change (YoY) | % Change (YoY) | | :--------------------------------------- | :------ | :------ | :----------- | :------------- | :-------- | :-------- | :----------- | :------------- | | Total non-operating income (expenses), net | $2,779 | $(46,290) | $49,069 | (106)% | $(11,185) | $64,169 | $(75,354) | (117)% | | Gain (loss) from short-term investments | $939 | $(14,256) | $15,195 | (107)% | $(11,428) | $96,516 | $(107,944) | (112)% | | Interest income | $1,621 | $2,757 | $(1,136) | (41)% | $3,392 | $4,777 | $(1,385) | (29)% | | Other non-operating expense, net | $1,372 | $(33,523) | $34,895 | (104)% | $(1,129) | $(35,713) | $34,584 | (97)% | - **Non-operating income (expenses), net**, significantly improved in **Q2 2025** to a gain of **$2.779 million** from a loss of **$(46.290) million** in **Q2 2024**, primarily due to a **$15.200 million** gain on **Viking Share Collar fair value adjustment** in **Q2 2024** and reduced revaluation losses on **Primrose Bio investments**[196](index=196&type=chunk)[198](index=198&type=chunk) - **YTD 2025** saw a **net loss from short-term investments** of **$(11.400) million**, a significant decline from a **$96.500 million** gain in **YTD 2024**, which included a **$60.000 million** realized gain from Viking common stock sales[199](index=199&type=chunk) [Income Tax Expense](index=35&type=section&id=Income%20Tax%20Expense) This section presents the company's income tax expense and effective tax rates, explaining factors influencing tax variances Income Tax Expense (in thousands) | Metric | Q2 2025 | Q2 2024 | Change (QoQ) | YTD 2025 | YTD 2024 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | :------- | :------- | :----------- | | Income tax benefit (expense) | $(6,376) | $13,479 | $(19,855) | $1,353 | $(13,829) | $15,182 | | Effective tax rate | 56.8% | 20.6% | | 3.5% | 28.8% | | - The **effective tax rate** for **Q2 2025** was **56.8%** compared to **20.6%** in **Q2 2024**, and for **YTD 2025** was **3.5%** compared to **28.8%** in **YTD 2024**[203](index=203&type=chunk) - Variances from the **21%** U.S. federal statutory tax rate were primarily due to **Section 162(m) limitations**, non-deductible items, and foreign operations income, partially offset by foreign derived intangible income deduction[203](index=203&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financial liquidity, including cash, investments, and credit facilities, and funding adequacy - As of **June 30, 2025**, **cash, cash equivalents, and short-term investments** totaled **$245.000 million**, a decrease of **$11.100 million** from year-end **2024**, mainly due to the **Castle Creek transaction**[205](index=205&type=chunk) - The company's primary liquidity sources are cash from operations and holdings of **cash, cash equivalents, and short-term investments**, supplemented by debt and equity securities issuance[205](index=205&type=chunk)[206](index=206&type=chunk) - Ligand has **$124.400 million** available under its **$125.000 million revolving credit facility** (amended **July 8, 2024**), maturing **October 12, 2026**[211](index=211&type=chunk)[213](index=213&type=chunk) - Management believes existing funds, cash from operations, and financing access are adequate to fund working capital, capital expenditures, the **Pelthos Therapeutics transaction**, debt service, R&D, potential **stock repurchases**, and strategic initiatives[214](index=214&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights significant accounting policies and estimates that require management judgment in financial statement preparation - The preparation of financial statements requires management judgment, estimates, and assumptions that affect reported amounts, which are based on historical experience and other relevant factors[218](index=218&type=chunk) - There have been no material changes in critical accounting policies and estimates compared to those described in the **2024 Annual Report**[218](index=218&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=37&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that there have been no material changes to the company's market risks for the six months ended June 30, 2025, compared to the disclosures in its 2024 Annual Report - No material changes to market risks were identified for the six months ended **June 30, 2025**, compared to the disclosures in the **2024 Annual Report**[219](index=219&type=chunk) [ITEM 4. Controls and Procedures](index=37&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter - The **Chief Executive Officer** and **Chief Financial Officer** concluded that **disclosure controls and procedures** were effective as of **June 30, 2025**[220](index=220&type=chunk)[221](index=221&type=chunk) - No changes in **internal control over financial reporting** occurred during the quarter ended **June 30, 2025**, that materially affected or are reasonably likely to materially affect **internal control over financial reporting**[222](index=222&type=chunk) [PART II. OTHER INFORMATION](index=38&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes additional information not covered in the financial statements, such as legal proceedings, risk factors, equity sales, and exhibits [ITEM 1. Legal Proceedings](index=38&type=section&id=ITEM%201.%20Legal%20Proceedings) This section details ongoing legal proceedings, including civil complaints and breach of contract claims, which are not expected to have a material adverse effect - Ligand is a defendant in three civil complaints filed in the U.S. District Court for the Northern District of Ohio as part of the Multi-District Litigation (MDL) In Re: **National Prescription Opiate Litigation**[223](index=223&type=chunk) - CyDex Pharmaceuticals, Inc. filed a Verified Complaint against Bexson Biomedical, Inc. in **August 2024**, alleging **breach of a Captisol In Vivo Agreement**, misuse of confidential information, and failure to return materials[224](index=224&type=chunk) - Management believes that none of the pending claims or actions are likely to have a **material adverse effect** on the company's business, financial condition, or results of operations[225](index=225&type=chunk) [ITEM 1A. Risk Factors](index=38&type=section&id=ITEM%201A.%20Risk%20Factors) This section states no material changes to the risk factors previously disclosed in Part I, Item 1A of the company's 2024 Annual Report - No material changes to the risk factors disclosed in the **2024 Annual Report** were identified[226](index=226&type=chunk) - The company acknowledges that other unknown or currently immaterial factors, including general economic and political conditions, could also adversely affect its business[226](index=226&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section indicates no unregistered sales of equity securities or use of proceeds occurred during the reporting period - No unregistered sales of equity securities or use of proceeds occurred during the reporting period[227](index=227&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=38&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This section confirms no defaults upon senior securities occurred during the reporting period - No defaults upon senior securities occurred during the reporting period[227](index=227&type=chunk) [ITEM 4. Mine Safety Disclosures](index=38&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable to Ligand Pharmaceuticals Incorporated[228](index=228&type=chunk) [ITEM 5. Other Information](index=38&type=section&id=ITEM%205.%20Other%20Information) This section provides information regarding Rule 10b5-1 trading arrangements, with no material modifications during Q2 2025 - During **Q2 2025**, none of the company's directors or officers adopted, terminated, or materially modified a **Rule 10b5-1** or non-**Rule 10b5-1** trading arrangement[231](index=231&type=chunk) [ITEM 6. Exhibits](index=40&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including agreements, certifications, and iXBRL financial information - Exhibit 2.1† includes the **Purchase and Sale Agreement** entered on **February 24, 2025**, among Ligand Pharmaceuticals Incorporated, Castle Creek Biosciences, Inc., and a syndicate of co-investors[233](index=233&type=chunk) - Exhibits 31.1 and 31.2 are certifications by the **Principal Executive Officer** and **Principal Financial Officer**, respectively, pursuant to Section 302 of the **Sarbanes-Oxley Act of 2002**[233](index=233&type=chunk) - Exhibit 101 contains the financial information from the Quarterly Report on Form 10-Q for the quarter ended **June 30, 2025**, formatted in **iXBRL**[233](index=233&type=chunk) [SIGNATURE](index=41&type=section&id=SIGNATURE) This section contains the official signature and date of filing for the Quarterly Report on Form 10-Q - The report was signed on **August 8, 2025**, by Octavio Espinoza, **Chief Financial Officer** and Duly Authorized Officer and **Principal Financial Officer**[237](index=237&type=chunk)

[Company Overview and Q2 2025 Highlights](index=1&type=section&id=Company%20Overview%20and%20Q2%202025%20Highlights) [Company Profile and Strategic Focus](index=1&type=section&id=Company%20Profile%20and%20Strategic%20Focus) Surrozen is a biotechnology company focused on tissue repair and regeneration through selective Wnt pathway modulation, currently concentrating on severe ophthalmic diseases and leveraging its Wnt biology expertise and antibody technology to develop novel therapies - Surrozen is a biotechnology company dedicated to tissue repair and regeneration by selectively modulating the Wnt pathway, primarily focusing on severe ophthalmic diseases[1](index=1&type=chunk)[16](index=16&type=chunk) - The company leverages its Wnt biology expertise and antibody technology to develop novel therapies for severe ophthalmic diseases[2](index=2&type=chunk) [Second Quarter 2025 Business Highlights](index=1&type=section&id=Second%20Quarter%202025%20Business%20Highlights) Surrozen achieved significant business progress in Q2 2025, including advancing its ophthalmic pipeline (SZN-8141 and SZN-8143), securing a key patent for SWAP™ technology, and strengthening its leadership team and expert guidance through a VP appointment and clinical advisory board formation - Ophthalmic pipeline progress: SZN-8141 and SZN-8143 continue to advance, with the IND application for SZN-8141 expected in **2026**[3](index=3&type=chunk) - Patent approval: In May 2025, the company was granted U.S. Patent No. 12,297,278, covering its SWAP™ technology for creating multi-specific Wnt mimetic molecules, enhancing intellectual property support for SZN-8141 and SZN-8143[3](index=3&type=chunk) - Key leadership appointment: In July 2025, Dr. Daniel Chao was appointed Vice President and Head of Clinical Development, bringing over **15 years** of ophthalmic research and drug development experience to the company[3](index=3&type=chunk) - Clinical Advisory Board formed: Composed of leading ophthalmologists and retina specialists, aiming to guide the clinical development of the ophthalmic pipeline[8](index=8&type=chunk) - Scientific presentations: Preclinical data for SZN-8141 and SZN-8143 were presented at the 2025 ARVO Annual Meeting and Clinical Trials at the Summit, highlighting their ability to stimulate Wnt signaling to promote normal retinal vascular regeneration and inhibit pathological angiogenesis[8](index=8&type=chunk) [Second Quarter 2025 Financial Highlights](index=2&type=section&id=Second%20Quarter%202025%20Financial%20Highlights) Surrozen achieved **$39.7 million** in net income in Q2 2025, a significant improvement from a net loss in Q2 2024, primarily due to gains from fair value changes in tranche liability and increased other income, with cash and cash equivalents at **$90.4 million** as of June 30, 2025 Key Financial Highlights for Q2 2025 | Metric | Q2 2025 | Q1 2025 (Cash) | Q2 2024 | YoY Change (Q2) | | :-------------------------------- | :---------- | :--------------- | :---------- | :---------------- | | Cash and Cash Equivalents | $90.4 million | $101.6 million | N/A | QoQ decrease of **$11.2 million** | | Related Party Research Services Revenue | $1.0 million | N/A | $0 | YoY increase of **$1.0 million** | | Net Income (Loss) | $39.7 million | N/A | ($25.3 million) | YoY increase of **$65.0 million** | | Net Income (Loss) Per Share | $2.55 | N/A | ($7.99) | YoY increase of **$10.54** | [Ophthalmology Pipeline and Strategic Developments](index=1&type=section&id=Ophthalmology%20Pipeline%20and%20Strategic%20Developments) [Ophthalmology Portfolio Overview](index=3&type=section&id=Ophthalmology%20Portfolio%20Overview) Surrozen's ophthalmic portfolio includes SZN-8141, SZN-8143, and SZN-413, all designed to modulate the Wnt pathway for retinal diseases, aiming to offer differentiated benefits over existing anti-VEGF monotherapies by promoting normal vascular regeneration and inhibiting pathological angiogenesis - The product portfolio includes SZN-8141, SZN-8143, and SZN-413, all targeting retinal diseases by modulating the Wnt pathway[11](index=11&type=chunk)[14](index=14&type=chunk)[15](index=15&type=chunk) - Aims to provide differentiated benefits over existing anti-VEGF monotherapies by promoting normal vascular regeneration and inhibiting pathological angiogenesis[11](index=11&type=chunk)[14](index=14&type=chunk) [About SZN-8141 for Retinal Diseases](index=3&type=section&id=About%20SZN-8141%20for%20Retinal%20Diseases) SZN-8141 is a dual-action candidate combining Frizzled 4 (Fzd4) agonism and vascular endothelial growth factor (VEGF) antagonism, designed to treat diabetic macular edema (DME) and neovascular age-related macular degeneration (wet AMD), with preclinical data showing it stimulates Wnt signaling, induces normal retinal vascular regeneration, and inhibits pathological angiogenesis - SZN-8141 combines Fzd4 agonism and VEGF antagonism, potentially offering benefits superior to monotherapy for DME and wet AMD[11](index=11&type=chunk) - Preclinical data indicate SZN-8141 stimulates Wnt signaling, induces normal retinal vascular regeneration, and inhibits pathological angiogenesis[13](index=13&type=chunk) [About SZN-8143 for Retinal Diseases](index=4&type=section&id=About%20SZN-8143%20for%20Retinal%20Diseases) SZN-8143 is a triple-action candidate combining Fzd4 agonism, VEGF antagonism, and interleukin-6 (IL-6) antagonism, potentially beneficial for DME, wet AMD, and uveitic macular edema (UME), with preclinical studies showing it stimulates Wnt signaling, promotes normal retinal vascular regeneration, and inhibits pathological angiogenesis - SZN-8143 combines Fzd4 agonism, VEGF antagonism, and IL-6 antagonism, potentially benefiting the treatment of DME, wet AMD, and UME[14](index=14&type=chunk) - Preclinical data indicate SZN-8143 stimulates Wnt signaling, induces normal retinal vascular regeneration, and inhibits pathological angiogenesis[14](index=14&type=chunk) [About SZN-413 for Retinal Diseases](index=4&type=section&id=About%20SZN-413%20for%20Retinal%20Diseases) SZN-413 is a bispecific antibody designed using Surrozen's SWAP™ technology, targeting Fzd4-mediated Wnt signaling for retinal vascular diseases, with preclinical data showing it effectively stimulates ocular Wnt signaling, induces normal retinal vascular regeneration, inhibits pathological angiogenesis, and reduces vascular leakage, potentially leading to healthy ocular tissue regeneration and disease reversal - SZN-413 is a bispecific antibody designed using SWAP™ technology, targeting Fzd4-mediated Wnt signaling for retinal vascular diseases[15](index=15&type=chunk) - Preclinical data show SZN-413 effectively stimulates Wnt signaling, induces normal retinal vascular regeneration, inhibits pathological angiogenesis, and reduces vascular leakage[15](index=15&type=chunk) - This novel approach may enable healthy ocular tissue regeneration, not only halting retinal pathology but potentially fully reversing patients' diseases[15](index=15&type=chunk) [Strategic Business Developments](index=1&type=section&id=Strategic%20Business%20Developments) Surrozen solidified its strategic position by securing key patents, appointing crucial leadership, forming a clinical advisory board, and presenting preclinical data at major scientific conferences, accelerating the clinical development of its ophthalmic pipeline [Patent Issuance](index=1&type=section&id=Patent%20Issuance) In May 2025, Surrozen was granted U.S. Patent No. 12,297,278, covering its SWAP™ technology for creating multi-specific Wnt mimetic molecules, thereby strengthening intellectual property support for SZN-8141 and SZN-8143 - In May 2025, the company was granted U.S. Patent No. 12,297,278, covering its SWAP™ technology[3](index=3&type=chunk) - This patent is for creating multi-specific Wnt mimetic molecules and strengthens intellectual property support for SZN-8141 and SZN-8143[3](index=3&type=chunk) [Key Leadership Appointment](index=1&type=section&id=Key%20Leadership%20Appointment) In July 2025, Dr. Daniel Chao was appointed Vice President and Head of Clinical Development; he is an experienced retina specialist and physician-scientist with over **15 years** of ophthalmic research and drug development experience, having previously served at ADARx Pharmaceuticals and Johnson and Johnson - Dr. Daniel Chao was appointed Vice President and Head of Clinical Development in **July 2025**[3](index=3&type=chunk) - He is an experienced retina specialist and physician-scientist with over **15 years** of ophthalmic research and drug development experience[3](index=3&type=chunk) - Previously held leadership roles at ADARx Pharmaceuticals and Johnson and Johnson[3](index=3&type=chunk) [Clinical Advisory Board Formation](index=2&type=section&id=Clinical%20Advisory%20Board%20Formation) Surrozen established a Clinical Advisory Board comprising leading ophthalmologists and retina specialists, including Dr. Jeffrey Heier, Dr. Arshad Khanani, Dr. Carl Regillo, and Dr. Charles Wykoff, to provide expert guidance for the clinical development of the company's ophthalmic pipeline - The company formed a Clinical Advisory Board consisting of leading ophthalmologists and retina specialists[8](index=8&type=chunk) - Board members include Dr. Jeffrey Heier, Dr. Arshad Khanani, Dr. Carl Regillo, and Dr. Charles Wykoff[8](index=8&type=chunk) - The board's expertise is expected to accelerate the progression of Surrozen's drug candidates into clinical trials[8](index=8&type=chunk) [Scientific Presentations](index=2&type=section&id=Scientific%20Presentations) Surrozen presented preclinical data for SZN-8141 and SZN-8143 at the 2025 ARVO Annual Meeting and Clinical Trials at the Summit, highlighting these candidates' ability to promote normal retinal vascular regeneration and inhibit pathological angiogenesis through Wnt signaling stimulation - Preclinical data for SZN-8141 and SZN-8143 were presented at the **2025 ARVO Annual Meeting** and Clinical Trials at the Summit[8](index=8&type=chunk) - The presentations highlighted the candidates' ability to promote normal retinal vascular regeneration and inhibit pathological angiogenesis through Wnt signaling stimulation[8](index=8&type=chunk) [Detailed Financial Performance](index=6&type=section&id=Detailed%20Financial%20Performance) [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) In Q2 2025, Surrozen achieved **$39.7 million** in net income, a significant improvement from a **$25.3 million** net loss in Q2 2024, primarily driven by a **$31.5 million** gain from fair value changes in tranche liability and increased other income; R&D and G&A expenses both grew, while related party research services revenue increased from zero to **$0.983 million** Condensed Consolidated Statements of Operations (Three Months Ended June 30) | Metric (thousand USD) | Q2 2025 | Q2 2024 | Year-over-Year Change | | :------------------------------------------------ | :------ | :------ | :--------- | | Related Party Research Services Revenue | $983 | $0 | +$983 | | Research and Development Expenses | $6,042 | $5,335 | +$707 | | General and Administrative Expenses | $3,958 | $3,714 | +$244 | | Total Operating Expenses | $10,000 | $9,049 | +$951 | | Operating Loss | ($9,017) | ($9,049) | +$32 | | Interest Income | $1,025 | $490 | +$535 | | Loss on Issuance of 2024 PIPE Common Stock, Prepaid Warrants and Warrants | $0 | ($20,397) | +$20,397 | | Gain from Fair Value Change of Tranche Liability | $31,520 | $0 | +$31,520 | | Other Income, Net | $16,218 | $3,695 | +$12,523 | | Net Income (Loss) | $39,746 | ($25,261) | +$65,007 | | Net Income (Loss) Per Share | $2.55 | ($7.99) | +$10.54 | | Weighted Average Shares Outstanding | 8,541 | 3,162 | +5,379 | Condensed Consolidated Statements of Operations (Six Months Ended June 30) | Metric (thousand USD) | H1 2025 | H1 2024 | Year-over-Year Change | | :------------------------------------------------ | :------ | :------ | :--------- | | Related Party Research Services Revenue | $1,966 | $0 | +$1,966 | | Research and Development Expenses | $12,600 | $10,582 | +$2,018 | | General and Administrative Expenses | $7,934 | $7,597 | +$337 | | Total Operating Expenses | $20,534 | $18,179 | +$2,355 | | Operating Loss | ($18,568) | ($18,179) | -$389 | | Interest Income | $1,321 | $875 | +$446 | | Loss on Issuance of 2024 PIPE Common Stock, Prepaid Warrants and Warrants | $0 | ($20,397) | +$20,397 | | Loss on 2025 PIPE Execution | ($71,084) | $0 | -$71,084 | | Gain from Fair Value Change of Tranche Liability | $47,860 | $0 | +$47,860 | | Other Income, Net | $54,203 | $3,610 | +$50,593 | | Net Income (Loss) | $12,776 | ($34,091) | +$46,867 | | Net Income (Loss) Per Share | $0.85 | ($13.00) | +$13.85 | | Weighted Average Shares Outstanding | 6,098 | 2,622 | +3,476 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Surrozen's total assets significantly increased to **$102.7 million** from **$48.5 million** on December 31, 2024, primarily due to cash and cash equivalents rising to **$90.4 million**; total liabilities decreased to **$55.6 million**, while stockholders' equity shifted from a **$21.4 million** deficit to a positive **$47.1 million** Condensed Consolidated Balance Sheets (As of June 30, 2025 vs. December 31, 2024) | Metric (thousand USD) | June 30, 2025 | December 31, 2024 | Change | | :-------------------------------- | :------------ | :---------------- | :------- | | Cash and Cash Equivalents | $90,390 | $34,565 | +$55,825 | | Total Current Assets | $94,235 | $38,932 | +$55,303 | | Total Assets | $102,696 | $48,467 | +$54,229 | | Total Current Liabilities | $5,743 | $7,315 | -$1,572 | | Tranche Liability | $10,903 | $0 | +$10,903 | | Warrant Liability | $32,620 | $55,892 | -$23,272 | | Total Liabilities | $55,582 | $69,847 | -$14,265 | | Total Stockholders' Equity (Deficit) | $47,114 | ($21,380) | +$68,494 | [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines the uncertainties and risks inherent in Surrozen's forward-looking statements, which cover product candidate plans, clinical development timelines, and potential market benefits; actual results may differ significantly due to factors like R&D costs, financing capabilities, regulatory conditions, and risks detailed in SEC filings, and Surrozen undertakes no obligation to update these statements unless legally required - Forward-looking statements cover Surrozen's discovery and R&D activities, particularly its product candidate development plans, including anticipated clinical development plans and timelines, data availability, the potential of such product candidates to treat human diseases or address unmet needs in severe ophthalmic conditions, and their potential benefits and differentiation from existing therapies[17](index=17&type=chunk) - These statements are based on various assumptions and management's current expectations, are not predictions of actual performance, and should not be considered guarantees or definitive statements of fact[18](index=18&type=chunk) - Forward-looking statements are subject to various risks and uncertainties, including the initiation, cost, timing, progress, and results of R&D activities, and the company's ability to fund clinical trials and development efforts[18](index=18&type=chunk) - Unless required by law, Surrozen expressly disclaims any obligation to update these forward-looking statements in the future[18](index=18&type=chunk) [Investor/Media Contact](index=5&type=section&id=Investor%2FMedia%20Contact) This section provides contact information for investor and media inquiries, directing to the company's dedicated email address - Investor/Media Contact Email: **Investorinfo@surrozen.com**[19](index=19&type=chunk)

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for The Manitowoc Company, Inc., including statements of operations, comprehensive income, balance sheets, cash flows, and equity for the periods ended June 30, 2025 and 2024, along with detailed notes explaining the company's accounting policies, recent changes, and specific financial line items [Condensed Consolidated Statements of Operations](index=2&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details the company's financial performance, including net sales, gross profit, operating income, and net income for the specified periods Consolidated Statements of Operations (Three Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | Change (%) | | :--------------- | :-------------- | :-------------- | :--------- | | Net sales | $539.5 | $562.1 | -4.0% | | Gross profit | $99.0 | $99.7 | -0.7% | | Operating income | $9.8 | $12.9 | -24.0% | | Net income (loss)| $1.5 | $1.6 | -6.3% | | Basic EPS | $0.04 | $0.05 | -20.0% | | Diluted EPS | $0.04 | $0.04 | 0.0% | Consolidated Statements of Operations (Six Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | Change (%) | | :--------------- | :-------------- | :-------------- | :--------- | | Net sales | $1,010.4 | $1,057.2 | -4.4% | | Gross profit | $188.8 | $192.2 | -1.8% | | Operating income | $15.1 | $28.1 | -46.2% | | Net income (loss)| $(4.8) | $6.1 | -178.7% | | Basic EPS | $(0.14) | $0.17 | -182.4% | | Diluted EPS | $(0.14) | $0.17 | -182.4% | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This statement presents net income and other comprehensive income components, leading to total comprehensive income or loss for the periods Consolidated Statements of Comprehensive Income (Loss) (Three Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | | :-------------------------------------- | :-------------- | :-------------- | | Net income (loss) | $1.5 | $1.6 | | Total other comprehensive income (loss) | $25.7 | $(1.6) | | Comprehensive income (loss) | $27.2 | $— | Consolidated Statements of Comprehensive Income (Loss) (Six Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | | :-------------------------------------- | :-------------- | :-------------- | | Net income (loss) | $(4.8) | $6.1 | | Total other comprehensive income (loss) | $43.6 | $(14.1) | | Comprehensive income (loss) | $38.8 | $(8.0) | [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific reporting dates Consolidated Balance Sheets (As of June 30, 2025 and December 31, 2024) | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :--------------------------- | :----------------------- | :--------------------------- | | Cash and cash equivalents | $32.9 | $48.0 | | Accounts receivable, net | $289.6 | $260.3 | | Inventories - net | $782.5 | $609.4 | | Total current assets | $1,162.7 | $958.9 | | Total assets | $1,883.8 | $1,660.0 | | Accounts payable and accrued expenses | $469.2 | $389.4 | | Total current liabilities | $560.4 | $474.3 | | Long-term debt | $459.8 | $377.1 | | Total liabilities | $1,202.5 | $1,019.9 | | Total stockholders' equity | $681.3 | $640.1 | [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities for the specified periods Consolidated Statements of Cash Flows (Six Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | Change (Millions) | | :-------------------------------------- | :-------------- | :-------------- | :---------------- | | Net cash used for operating activities | $(54.8) | $(19.6) | $(35.2) | | Net cash used for investing activities | $(29.5) | $(21.6) | $(7.9) | | Net cash provided by financing activities | $67.0 | $45.7 | $21.3 | | Net (decrease) increase in cash and cash equivalents | $(15.1) | $3.7 | $(18.8) | | Cash and cash equivalents at end of period | $32.9 | $38.1 | $(5.2) | [Condensed Consolidated Statements of Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) This statement outlines the changes in total stockholders' equity over the reporting periods Consolidated Statements of Equity (As of June 30) | Metric | 2025 (Millions) | 2024 (Millions) | | :------------------------- | :-------------- | :-------------- | | Total stockholders' equity | $681.3 | $592.3 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [1. Company and Basis of Presentation](index=7&type=section&id=1.%20Company%20and%20Basis%20of%20Presentation) This note describes the company's business, operational segments, and the basis for financial statement presentation - The Manitowoc Company, Inc. is a leading provider of engineered lifting products and services, founded in 1902 and headquartered in Milwaukee, Wisconsin, designing, manufacturing, marketing, distributing, and supporting product lines including mobile hydraulic cranes, lattice-boom crawler cranes, boom trucks, and tower cranes under various brand names[19](index=19&type=chunk) - The Company operates through three reportable segments: Americas (North and South America), Europe and Africa (EURAF, excluding the Middle East), and Middle East and Asia Pacific (MEAP, including Asia, Australia, and the Middle East)[20](index=20&type=chunk) [2. Recent Accounting Changes and Pronouncements](index=7&type=section&id=2.%20Recent%20Accounting%20Changes%20and%20Pronouncements) This note outlines recent accounting standard updates and their anticipated impact on the company's financial reporting - The FASB issued ASU No. 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' effective for annual periods beginning after December 15, 2024, with no material impact expected on consolidated financial statements[23](index=23&type=chunk) - The FASB issued ASU No. 2024-03, 'Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 224-40): Disaggregation of Income Statement Expense,' effective for annual periods beginning after December 15, 2026, with the Company currently evaluating its impact[24](index=24&type=chunk) [3. Acquisition of Assets](index=8&type=section&id=3.%20Acquisition%20of%20Assets) This note provides details on the company's recent acquisition of assets, including the purchase price allocation - Effective February 4, 2025, the Company acquired certain assets and distribution rights in Georgia, North Carolina, and South Carolina from Ring Power Corporation for **$12.9 million in cash**[25](index=25&type=chunk) Purchase Price Allocation for Asset Acquisition | Asset Acquired | Amount (Millions) | | :------------------------ | :---------------- | | Inventory | $7.2 | | Intangible assets | $2.0 | | Property, plant, and equipment | $3.7 | | **Total Consideration** | **$12.9** | [4. Net Sales](index=8&type=section&id=4.%20Net%20Sales) This note provides details on customer advances and contract assets related to the company's net sales recognition Customer Advances Balance (Six Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | | :----------------------------------------- | :-------------- | :-------------- | | Balance at beginning of period | $18.0 | $19.2 | | Cash received in advance | $65.4 | $63.5 | | Revenue recognized | $(61.1) | $(64.4) | | Currency translation | $1.4 | $(0.5) | | Balance at end of period | $23.7 | $17.8 | - Contract assets, representing unbilled service work, increased to **$11.1 million** as of June 30, 2025, from $8.8 million as of December 31, 2024[29](index=29&type=chunk) [5. Fair Value of Financial Instruments](index=8&type=section&id=5.%20Fair%20Value%20of%20Financial%20Instruments) This note discloses the fair value measurements of various financial instruments, categorized by valuation input levels Fair Value of Financial Instruments (As of June 30, 2025) | Instrument | Level 1 (Millions) | Level 2 (Millions) | Level 3 (Millions) | Total (Millions) | Recognized Location | | :----------------------- | :----------------- | :----------------- | :----------------- | :--------------- | :------------------------ | | FX Forward Contracts (Assets) | $— | $4.5 | $— | $4.5 | Other current assets | | Deferred Compensation Plan (Assets) | $8.8 | $— | $— | $8.8 | Other non-current assets | | FX Forward Contracts (Liabilities) | $— | $0.1 | $— | $0.1 | Accounts payable and accrued expenses | - The fair value of the **$300.0 million** senior secured second lien notes due October 1, 2031 (9.25% coupon) was approximately **$317.3 million** as of June 30, 2025, classified as Level 1[32](index=32&type=chunk)[33](index=33&type=chunk) [6. Derivative Financial Instruments](index=9&type=section&id=6.%20Derivative%20Financial%20Instruments) This note explains the company's use of derivative financial instruments, primarily FX forward contracts, for risk management - The Company uses FX Forward Contracts to manage exposure to non-functional currency transactions and transaction gains/losses, with aggregate notional amounts of **$69.6 million** as of June 30, 2025, down from $129.7 million as of December 31, 2024[37](index=37&type=chunk)[38](index=38&type=chunk) - Net unrealized gains (losses) on FX Forward Contracts recorded in AOCI, net of income tax, were **$3.1 million** as of June 30, 2025, compared to $(1.7) million as of December 31, 2024[38](index=38&type=chunk) Net Gains (Losses) from FX Forward Contracts in P&L (Three Months Ended June 30) | Category | Recognized Location | 2025 (Millions) | 2024 (Millions) | | :------------ | :------------------ | :-------------- | :-------------- | | Designated | Cost of sales | $1.5 | $(0.4) | | Non-Designated| Other income (expense) - net | $(1.8) | $0.9 | [7. Inventories](index=10&type=section&id=7.%20Inventories) This note provides a breakdown of the company's inventory components, including raw materials, work-in-process, and finished goods Inventory Components (As of June 30, 2025 and December 31, 2024) | Component | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :-------------- | :----------------------- | :--------------------------- | | Raw materials | $186.9 | $121.4 | | Work-in-process | $174.9 | $114.8 | | Finished goods | $420.7 | $373.2 | | **Total inventories** | **$782.5** | **$609.4** | [8. Property, Plant, and Equipment](index=10&type=section&id=8.%20Property,%20Plant,%20and%20Equipment) This note presents the net book value of property, plant, and equipment, including total cost and accumulated depreciation Property, Plant, and Equipment (As of June 30, 2025 and December 31, 2024) | Component | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :-------------------------- | :----------------------- | :--------------------------- | | Total cost | $926.9 | $871.4 | | Less accumulated depreciation | $(573.8) | $(525.2) | | **Property, plant, and equipment — net** | **$353.1** | **$346.2** | [9. Goodwill and Other Intangible Assets](index=10&type=section&id=9.%20Goodwill%20and%20Other%20Intangible%20Assets) This note provides information on goodwill and other intangible assets, including carrying amounts and impairment testing Goodwill Carrying Amount (Six Months Ended June 30, 2025) | Segment | Balance as of Dec 31, 2024 (Millions) | Foreign Currency Impact (Millions) | Balance as of June 30, 2025 (Millions) | | :----------- | :------------------------------------ | :--------------------------------- | :------------------------------------- | | Americas | $14.4 | $— | $14.4 | | MEAP | $63.4 | $1.2 | $64.6 | | **Consolidated** | **$77.8** | **$1.2** | **$79.0** | Other Intangible Assets (As of June 30, 2025 and December 31, 2024) | Type of Intangible Asset | June 30, 2025 Net Book Value (Millions) | December 31, 2024 Net Book Value (Millions) | | :----------------------- | :-------------------------------------- | :------------------------------------------ | | Definite lived intangible assets | $16.2 | $15.7 | | Indefinite-lived intangible assets | $110.9 | $102.8 | | **Total other intangible assets** | **$127.1** | **$118.5** | - The Company performs annual impairment tests for goodwill and indefinite-lived intangible assets in the fourth quarter and determined no triggering event occurred during the three and six months ended June 30, 2025[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) [10. Accounts Payable and Accrued Expenses](index=11&type=section&id=10.%20Accounts%20Payable%20and%20Accrued%20Expenses) This note itemizes the components of accounts payable and accrued expenses, including trade payables and employee-related costs Accounts Payable and Accrued Expenses (As of June 30, 2025 and December 31, 2024) | Component | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :---------------------------- | :----------------------- | :--------------------------- | | Trade accounts payable | $314.0 | $205.5 | | Employee-related expenses | $49.6 | $43.2 | | Accrued vacation | $29.1 | $23.3 | | Miscellaneous accrued expenses | $76.5 | $117.4 | | **Total accounts payable and accrued expenses** | **$469.2** | **$389.4** | [11. Debt](index=13&type=section&id=11.%20Debt) This note provides a comprehensive overview of the company's outstanding debt, including credit facilities and notes Outstanding Debt (As of June 30, 2025 and December 31, 2024) | Debt Type | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :---------------------------------------- | :----------------------- | :--------------------------- | | Borrowings under senior secured asset based revolving credit facility | $156.9 | $79.0 | | Senior secured second lien notes due 2031 | $300.0 | $300.0 | | Other debt | $18.4 | $16.4 | | Deferred financing costs | $(4.8) | $(5.2) | | **Total debt** | **$470.5** | **$390.2** | | Short-term borrowings and current portion of long-term debt | $(10.7) | $(13.1) | | **Long-term debt** | **$459.8** | **$377.1** | - The ABL Revolving Credit Facility was amended on September 18, 2024, increasing the aggregate commitment by **$50.0 million** to **$325.0 million** and extending the maturity date to September 18, 2029[52](index=52&type=chunk) - As of June 30, 2025, the Company was in compliance with all affirmative and negative covenants in its debt instruments, including the ABL Revolving Credit Facility and the 2031 Notes[58](index=58&type=chunk) [12. Accounts Receivable Factoring](index=14&type=section&id=12.%20Accounts%20Receivable%20Factoring) This note details the company's accounts receivable factoring activities and the cash proceeds generated from these sales - Cash proceeds from the factoring of accounts receivable qualifying as sales were **$119.4 million** for the six months ended June 30, 2025, an increase from $87.7 million for the same period in 2024[60](index=60&type=chunk) [13. Income Taxes](index=14&type=section&id=13.%20Income%20Taxes) This note outlines the provision or benefit for income taxes and discusses unrecognized tax benefits and recent tax legislation Provision (Benefit) for Income Taxes | Period | 2025 (Millions) | 2024 (Millions) | | :---------------------- | :-------------- | :-------------- | | Three months ended June 30 | $(0.2) | $1.6 | | Six months ended June 30 | $(2.7) | $3.5 | - Unrecognized tax benefits, excluding interest and penalties, increased to **$14.9 million** as of June 30, 2025, from $13.9 million as of December 31, 2024[64](index=64&type=chunk) - The Company is assessing the impact of the One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, which includes significant tax-related provisions with earliest effective dates in 2025[65](index=65&type=chunk) [14. Net Income (Loss) Per Common Share](index=15&type=section&id=14.%20Net%20Income%20(Loss)%20Per%20Common%20Share) This note explains the calculation of basic and diluted net income (loss) per common share, including share counts Weighted Average Shares Outstanding (Six Months Ended June 30) | Share Type | 2025 | 2024 | | :--------------------------------------- | :----------- | :----------- | | Basic weighted average common shares outstanding | 35,363,682 | 35,316,971 | | Diluted weighted average common shares outstanding | 35,363,682 | 35,899,481 | - Due to a net loss incurred during the six months ended June 30, 2025, all equity instruments were anti-dilutive and excluded from diluted EPS calculations for that period[66](index=66&type=chunk) [15. Equity](index=15&type=section&id=15.%20Equity) This note provides information on stockholders' equity, including stock repurchase authorizations and accumulated other comprehensive loss - As of June 30, 2025, the Company had **$29.3 million** remaining under a Board authorization to purchase up to $35.0 million of common stock[68](index=68&type=chunk) Accumulated Other Comprehensive Loss (AOCI) (As of June 30) | Component | 2025 (Millions) | 2024 (Millions) | | :---------------------------- | :-------------- | :-------------- | | Balance at end of period | $(64.0) | $(100.5) | [16. Stock-Based Compensation](index=17&type=section&id=16.%20Stock-Based%20Compensation) This note describes the company's stock-based compensation plans, related expenses, and awards granted - The 2025 Omnibus Incentive Plan, approved on May 6, 2025, made **1.8 million shares** available for stock-based awards[73](index=73&type=chunk) - Stock-based compensation expense was **$6.0 million** for the six months ended June 30, 2025, up from $5.6 million in the prior year[78](index=78&type=chunk) - During the six months ended June 30, 2025, the Company granted **628,499 restricted stock units** and **437,969 performance shares** to employees[80](index=80&type=chunk)[81](index=81&type=chunk) [17. Segments](index=18&type=section&id=17.%20Segments) This note presents financial information by reportable segment, including net sales and operating income performance - The Company's three reportable segments are Americas, EURAF, and MEAP, with performance evaluated based on net sales and operating income[85](index=85&type=chunk)[86](index=86&type=chunk) Segment Net Sales (Three Months Ended June 30) | Segment | 2025 (Millions) | 2024 (Millions) | Change (%) | | :------ | :-------------- | :-------------- | :--------- | | Americas| $323.2 | $296.7 | 8.9% | | EURAF | $152.5 | $176.2 | -13.5% | | MEAP | $63.8 | $89.2 | -28.5% | | **Total** | **$539.5** | **$562.1** | **-4.0%** | Segment Operating Income (Loss) (Six Months Ended June 30) | Segment | 2025 (Millions) | 2024 (Millions) | Change (Millions) | | :------ | :-------------- | :-------------- | :---------------- | | Americas| $43.8 | $53.4 | $(9.6) | | EURAF | $(25.9) | $(18.6) | $(7.3) | | MEAP | $21.2 | $17.5 | $3.7 | Net Sales by Product Type (Six Months Ended June 30) | Product Type | 2025 (Millions) | 2024 (Millions) | Change (%) | | :---------------- | :-------------- | :-------------- | :--------- | | New machine sales | $688.2 | $764.7 | -10.0% | | Non-new machine sales | $322.2 | $292.5 | 10.2% | | **Total net sales** | **$1,010.4** | **$1,057.2** | **-4.4%** | [18. Commitments and Contingencies](index=20&type=section&id=18.%20Commitments%20and%20Contingencies) This note discloses the company's commitments and contingencies, including product liability reserves and legal settlements - Current and long-term product liability reserves increased to **$2.1 million** and **$6.5 million**, respectively, as of June 30, 2025, from $1.4 million and $5.0 million as of December 31, 2024[95](index=95&type=chunk) - On March 28, 2025, the Company paid a civil penalty of **$42.6 million** (plus $0.6 million interest) and is implementing an emissions mitigation project as part of a Consent Decree with the U.S. regarding alleged Clean Air Act violations[97](index=97&type=chunk) [19. Guarantees](index=20&type=section&id=19.%20Guarantees) This note provides information on the company's guarantees, including buyback commitments and warranty reserves - Total buyback commitments outstanding increased to **$31.6 million** as of June 30, 2025, from $29.9 million as of December 31, 2024[99](index=99&type=chunk) - Warranty and other warranty related work reserves increased to **$47.6 million** as of June 30, 2025, from $45.3 million as of December 31, 2024[101](index=101&type=chunk) Warranty and Other Warranty Related Work (Six Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | | :-------------------------------------- | :-------------- | :-------------- | | Balance at beginning of period | $45.3 | $56.8 | | Adjustments to accruals for warranties | $20.2 | $9.1 | | Settlements made | $(20.4) | $(16.9) | | Currency translation | $2.5 | $(0.8) | | **Balance at end of period** | **$47.6** | **$48.2** | [20. Employee Benefit Plans](index=21&type=section&id=20.%20Employee%20Benefit%20Plans) This note outlines the net periodic benefit cost for the company's U.S. and non-U.S. pension and postretirement plans Net Periodic Benefit Cost (Income) (Six Months Ended June 30, 2025) | Component | U.S. Pension Plans (Millions) | Non-U.S. Pension Plans (Millions) | Postretirement Health and Other Plans (Millions) | | :-------------------------------------- | :---------------------------- | :-------------------------------- | :----------------------------------------------- | | Service cost | $— | $0.6 | $— | | Interest cost | $2.5 | $1.2 | $0.1 | | Expected return on plan assets | $(2.2) | $(0.9) | $— | | Amortization of actuarial net (gain) loss | $0.6 | $0.2 | $(0.8) | | **Net periodic benefit cost (income)** | **$0.9** | **$1.1** | **$(0.7)** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance, condition, and results of operations for the three and six months ended June 30, 2025, compared to the prior year. It covers key financial metrics, segment performance, liquidity, and non-GAAP measures, alongside cautionary statements regarding forward-looking information and current events impacting the business [Cautionary Statements Regarding Forward-Looking Information](index=23&type=section&id=Cautionary%20Statements%20Regarding%20Forward-Looking%20Information) This section highlights the inherent risks and uncertainties that could cause actual results to differ from forward-looking statements - Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially, including macroeconomic conditions (inflation, interest rates, tariffs), competitor actions, changes in economic/industry conditions, geopolitical events, customer demand, backlog conversion, adverse trade policy, and high debt leverage[111](index=111&type=chunk)[114](index=114&type=chunk) [Current Events](index=24&type=section&id=Current%20Events) This section discusses recent events, including U.S. government tariffs and their potential impact on the company's operations - Starting in early 2025, the U.S. government announced reciprocal tariffs, followed by a 90-day suspension and implementation of a **10% tariff** on most imports (higher for China), with non-binding trade deals announced with countries like the EU, Japan, and the UK[115](index=115&type=chunk) - Approximately **50% of the Company's net sales** are generated in the United States, and tariffs may affect demand, raise product costs, or disrupt the supply chain, with the Company assessing the impact and mitigation measures[116](index=116&type=chunk) [Orders and Backlog](index=25&type=section&id=Orders%20and%20Backlog) This section provides an overview of the company's order intake and total backlog, including changes and influencing factors Orders and Backlog Performance | Metric | Three Months Ended June 30, 2025 (Millions) | Three Months Ended June 30, 2024 (Millions) | Change (%) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | Orders | $453.9 | $428.4 | 6.0% | | | | | | | Metric | Six Months Ended June 30, 2025 (Millions) | Six Months Ended June 30, 2024 (Millions) | Change (%) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | Orders | $1,064.2 | $982.5 | 8.3% | | | | | | | Metric | As of June 30, 2025 (Millions) | As of December 31, 2024 (Millions) | Change (%) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | :--------- | | Total backlog | $729.3 | $650.2 | 12.2% | - The increase in orders was primarily driven by higher demand in the Americas segment and for tower product offerings in the EURAF segment, favorably impacted by foreign currency exchange rates by **$8.6 million** (3 months) and **$2.7 million** (6 months)[118](index=118&type=chunk)[119](index=119&type=chunk) - Total backlog as of June 30, 2025, increased **12.2%** from December 31, 2024, but decreased **12.8%** from June 30, 2024, with foreign currency exchange rates favorably impacting backlog by **$26.6 million** (vs. Dec 31, 2024) and **$20.8 million** (vs. June 30, 2024)[120](index=120&type=chunk) [Results of Operations For The Three and Six Months Ended June 30, 2025 and 2024](index=25&type=section&id=Results%20of%20Operations%20For%20The%20Three%20and%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This section analyzes the company's financial performance for the three and six months ended June 30, 2025 and 2024 [Net Sales](index=25&type=section&id=Net%20Sales) This section analyzes the drivers behind changes in consolidated net sales for the reported periods - Consolidated net sales decreased **4.0%** to **$539.5 million** for the three months ended June 30, 2025, primarily due to lower new machine sales in EURAF (mobile product line) and MEAP, partially offset by higher new machine sales in Americas and higher non-new machine sales[123](index=123&type=chunk) - Consolidated net sales decreased **4.4%** to **$1,010.4 million** for the six months ended June 30, 2025, driven by lower new machine sales in EURAF (mobile), MEAP, and Americas, partially offset by higher tower crane sales in EURAF and higher non-new machine sales[124](index=124&type=chunk)[125](index=125&type=chunk) [Gross Profit](index=27&type=section&id=Gross%20Profit) This section examines the company's gross profit and gross profit percentage, highlighting factors influencing changes - Gross profit for the three months ended June 30, 2025, remained flat at **$99.0 million**, with the gross profit percentage increasing to **18.4%** from 17.7% in 2024, primarily due to favorable product mix offsetting lower sales and absorbed costs[126](index=126&type=chunk)[127](index=127&type=chunk) - Gross profit for the six months ended June 30, 2025, decreased **1.8%** to **$188.8 million**, while the gross profit percentage increased to **18.7%** from 18.2% in 2024, driven by similar factors as the three-month period[128](index=128&type=chunk)[129](index=129&type=chunk) [Engineering, Selling, and Administrative Expenses](index=27&type=section&id=Engineering,%20Selling,%20and%20Administrative%20Expenses) This section details the changes in engineering, selling, and administrative expenses and their primary causes - Engineering, selling, and administrative expenses increased **4.4%** to **$87.4 million** for the three months ended June 30, 2025, and **6.6%** to **$170.3 million** for the six months, primarily due to costs for the triennial bauma trade show, higher employee-related costs, and new product development costs, partially offset by a prior-year EPA legal charge[130](index=130&type=chunk)[131](index=131&type=chunk) [Interest Expense](index=27&type=section&id=Interest%20Expense) This section analyzes the company's interest expense, noting the impact of interest rates on borrowings - Interest expense decreased to **$9.2 million** for the three months ended June 30, 2025 (from $9.6 million), and to **$17.9 million** for the six months (from $18.8 million), primarily due to lower interest rates on ABL revolving credit facility borrowings[132](index=132&type=chunk)[133](index=133&type=chunk) [Other Income (Expense) - Net](index=27&type=section&id=Other%20Income%20(Expense)%20-%20Net) This section reviews the components of other income (expense) - net, including currency gains/losses and pension costs - Other income was **$1.0 million** for the three months ended June 30, 2025 (vs. $0.3 million in 2024), driven by currency gains, partially offset by pension costs and EPA settlement interest[134](index=134&type=chunk) - Other income (expense) - net was **$(4.0) million** for the six months ended June 30, 2025 (vs. $1.0 million income in 2024), primarily due to currency loss, pension costs, and EPA settlement interest[135](index=135&type=chunk) [Provision (Benefit) for Income Taxes](index=29&type=section&id=Provision%20(Benefit)%20for%20Income%20Taxes) This section explains the provision or benefit for income taxes, considering jurisdictional mix and pre-tax income/loss - The Company recorded an income tax benefit of **$0.2 million** for the three months and **$2.7 million** for the six months ended June 30, 2025, compared to provisions of $1.6 million and $3.5 million, respectively, in 2024, due to changes in jurisdictional mix and a year-to-date loss before income taxes[136](index=136&type=chunk) [Segment Operating Performance](index=29&type=section&id=Segment%20Operating%20Performance) This section provides a detailed analysis of net sales and operating income for each reportable segment Segment Net Sales and Operating Income (Three Months Ended June 30) | Segment | Net Sales 2025 (Millions) | Net Sales 2024 (Millions) | Net Sales Change (%) | Operating Income (Loss) 2025 (Millions) | Operating Income (Loss) 2024 (Millions) | Operating Income (Loss) Change (%) | | :------- | :------------------------ | :------------------------ | :------------------- | :-------------------------------------- | :-------------------------------------- | :--------------------------------- | | Americas | $323.2 | $296.7 | 8.9% | $26.1 | $23.9 | 9.2% | | EURAF | $152.5 | $176.2 | (13.5)% | $(14.6) | $(6.8) | * | | MEAP | $63.8 | $89.2 | (28.5)% | $9.8 | $9.3 | 5.4% | Segment Net Sales and Operating Income (Six Months Ended June 30) | Segment | Net Sales 2025 (Millions) | Net Sales 2024 (Millions) | Net Sales Change (%) | Operating Income (Loss) 2025 (Millions) | Operating Income (Loss) 2024 (Millions) | Operating Income (Loss) Change (%) | | :------- | :------------------------ | :------------------------ | :------------------- | :-------------------------------------- | :-------------------------------------- | :--------------------------------- | | Americas | $582.5 | $579.9 | 0.4% | $43.8 | $53.4 | (18.0)% | | EURAF | $298.1 | $319.2 | (6.6)% | $(25.9) | $(18.6) | * | | MEAP | $129.8 | $158.1 | (17.9)% | $21.2 | $17.5 | 21.1% | - Americas net sales increased **8.9%** for Q2 2025 due to higher new machine sales (favorable product mix) and non-new machine sales (used cranes), with operating income increasing **9.2%** due to higher sales and favorable product mix, despite lower absorbed costs[139](index=139&type=chunk)[140](index=140&type=chunk) - EURAF net sales decreased **13.5%** for Q2 2025 due to lower mobile crane sales, partially offset by higher tower crane and non-new machine sales, resulting in an operating loss increase of **$7.8 million** due to lower net sales and higher engineering, selling, and administrative expenses[143](index=143&type=chunk)[144](index=144&type=chunk) - MEAP net sales decreased **28.5%** for Q2 2025 due to lower new machine sales (unfavorable product mix) and non-new machine sales, with operating income remaining flat due to product mix[147](index=147&type=chunk)[148](index=148&type=chunk) [Financial Condition](index=30&type=section&id=Financial%20Condition) This section assesses the company's financial position, including cash flows, liquidity, capital resources, and debt structure [Cash Flows](index=30&type=section&id=Cash%20Flows) This section analyzes the company's cash flows from operating, investing, and financing activities Summary of Cash Flows (Six Months Ended June 30) | Cash Flow Activity | 2025 (Millions) | 2024 (Millions) | Dollar Change (Millions) | | :---------------------------------- | :-------------- | :-------------- | :----------------------- | | Net cash used for operating activities | $(54.8) | $(19.6) | $(35.2) | | Net cash used for investing activities | $(29.5) | $(21.6) | $(7.9) | | Net cash provided by financing activities | $67.0 | $45.7 | $21.3 | | Cash and cash equivalents | $32.9 | $38.1 | $(5.2) | - Net cash used for operating activities increased by **$35.2 million**, primarily due to lower net income (adjusted for non-cash items) and **$24.5 million** higher cash outflows related to net working capital, driven by increases in accounts receivable, other assets, and inventory[151](index=151&type=chunk) - Net cash used for investing activities increased by **$7.9 million**, mainly due to **$12.9 million** for asset acquisition from Ring Power Corporation and lower proceeds from asset sales, partially offset by lower capital expenditures[152](index=152&type=chunk)[153](index=153&type=chunk) - Net cash provided by financing activities increased by **$21.3 million**, primarily due to **$24.5 million** of additional net borrowings under the revolving credit facility[154](index=154&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) This section evaluates the company's liquidity position and its ability to meet short-term and long-term financial obligations Liquidity Position (As of June 30, 2025 and December 31, 2024) | Metric | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :-------------------------- | :----------------------- | :--------------------------- | | Cash and cash equivalents | $32.9 | $48.0 | | Revolver borrowing capacity | $325.0 | $325.0 | | Other debt availability | $47.8 | $42.4 | | Less: Borrowings on revolver | $(156.9) | $(79.0) | | Less: Borrowings on other debt | $(7.8) | $(12.1) | | Less: Outstanding letters of credit | $(3.4) | $(3.4) | | **Total liquidity** | **$237.6** | **$320.9** | - The Company believes its liquidity and expected cash flows from operations are sufficient to meet operational needs for the next twelve months[155](index=155&type=chunk) - The ABL Revolving Credit Facility has a maximum availability of **$325.0 million**, with **$100.0 million** available to the German subsidiary, and matures on September 18, 2029[157](index=157&type=chunk) [Debt](index=33&type=section&id=Debt) This section provides an overview of the company's outstanding debt and compliance with debt covenants Outstanding Debt (As of June 30, 2025 and December 31, 2024) | Debt Type | June 30, 2025 (Millions) | December 31, 2024 (Millions) | | :---------------------------------------- | :----------------------- | :--------------------------- | | Borrowings under senior secured asset based revolving credit facility | $156.9 | $79.0 | | Senior secured second lien notes due 2031 | $300.0 | $300.0 | | Other debt | $18.4 | $16.4 | | Deferred financing costs | $(4.8) | $(5.2) | | **Total debt** | **$470.5** | **$390.2** | | Short-term borrowings and current portion of long-term debt | $(10.7) | $(13.1) | | **Long-term debt** | **$459.8** | **$377.1** | - As of June 30, 2025, the Company was in compliance with all debt covenants and expects to remain compliant for the subsequent twelve months[160](index=160&type=chunk) [Non-GAAP Measures](index=33&type=section&id=Non-GAAP%20Measures) This section presents and reconciles non-GAAP financial measures, including Adjusted ROIC, EBITDA, and Free Cash Flows [Adjusted ROIC](index=34&type=section&id=Adjusted%20ROIC) This section defines and calculates Adjusted Return on Invested Capital (ROIC), a key non-GAAP performance metric - Adjusted ROIC, a non-GAAP measure, was **4.2%** as of June 30, 2025, calculated by dividing Adjusted NOPAT for the trailing twelve months by the five-quarter average of invested capital[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) Adjusted NOPAT (Trailing Twelve Months Ended June 30, 2025) | Metric | Amount (Millions) | | :-------------------------- | :---------------- | | Operating income | $38.8 | | Amortization of intangible assets | $3.0 | | Restructuring expense | $3.5 | | Other non-recurring items - net | $3.6 | | Adjusted operating income | $48.9 | | Provision for income taxes | $(7.3) | | **Adjusted NOPAT** | **$41.6** | Invested Capital (5-Quarter Average Ended June 30, 2025) | Metric | Amount (Millions) | | :-------------------------- | :---------------- | | Net total assets | $634.6 | | Cash and cash equivalents | $(36.7) | | Short-term borrowings and current portion of long-term debt | $20.7 | | Long-term debt | $410.3 | | Income tax assets - net | $(43.8) | | **Invested capital** | **$985.1** | [EBITDA and Adjusted EBITDA](index=34&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) This section defines and reconciles EBITDA and Adjusted EBITDA, providing insights into operational profitability - EBITDA is defined as net income (loss) before interest, taxes, depreciation, and amortization, with Adjusted EBITDA further adjusting for restructuring expense, other income (expense) - net, and certain other non-recurring items[167](index=167&type=chunk) EBITDA and Adjusted EBITDA (Six Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | | :-------------------------- | :-------------- | :-------------- | | Net income (loss) | $(4.8) | $6.1 | | Interest expense and amortization of deferred financing fees | $18.6 | $19.5 | | Provision (benefit) for income taxes | $(2.7) | $3.5 | | Depreciation expense | $29.5 | $29.3 | | Amortization of intangible assets | $1.6 | $1.5 | | **EBITDA** | **$42.2** | **$59.9** | | Restructuring expense | $1.8 | $2.9 | | Other non-recurring items - net | $— | $5.5 | | Other (income) expense - net | $4.0 | $(1.0) | | **Adjusted EBITDA** | **$48.0** | **$67.3** | | Adjusted EBITDA margin percentage | 4.8% | 6.4% | [Free Cash Flows](index=35&type=section&id=Free%20Cash%20Flows) This section defines and calculates free cash flows, indicating the cash available after capital expenditures - Free cash flows are defined as net cash used for operating activities less cash outflow from capital expenditures[170](index=170&type=chunk) Free Cash Flows (Six Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | | :-------------------------------- | :-------------- | :-------------- | | Net cash used for operating activities | $(54.8) | $(19.6) | | Capital expenditures | $(16.8) | $(25.1) | | **Free cash flows** | **$(71.6)** | **$(44.7)** | [Critical Accounting Policies](index=35&type=section&id=Critical%20Accounting%20Policies) This section confirms that there have been no material changes to the company's critical accounting policies - The Company's critical accounting policies have not materially changed since the 2024 Annual Report on Form 10-K[172](index=172&type=chunk) [Item 3. Quantitative and Qualitative Disclosure about Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) This section states that there have been no material changes to the Company's market risk disclosures since its 2024 Annual Report on Form 10-K - The Company's market risk disclosures have not materially changed since the 2024 Annual Report on Form 10-K[173](index=173&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures and states that there have been no material changes to its internal control over financial reporting - The Company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025[174](index=174&type=chunk) - No changes have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during the period covered by this report[175](index=175&type=chunk) PART II. OTHER INFORMATION This section includes updates on risk factors, other relevant information, and a comprehensive list of exhibits filed with the report [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in Part I, Item 1A, 'Risk Factors,' in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[178](index=178&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) This section reports on Rule 10b5-1 trading arrangements by directors and Section 16 officers - No director or Section 16 officer adopted a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended June 30, 2025[179](index=179&type=chunk) [Item 6. Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed or furnished with the Quarterly Report on Form 10-Q List of Exhibits | Exhibit No. | Description | Filed/Furnished Herewith | | :---------- | :------------------------------------------------------------------------------------------------------ | :----------------------- | | 31 | Rule 13a - 14(a)/15d - 14(a) Certifications | X | | 32.1 | Certification of CEO pursuant to 18 U.S.C. Section 1350 | X | | 32.2 | Certification of CFO pursuant to 18 U.S.C. Section 1350 | X | | 101.INS | Inline XBRL Instance Document | X | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document | X | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | X | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | X | | 101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document | X | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | X | | 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | X |

PART I - FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS.) The unaudited statements show decreased net sales, a shift to a gross loss, and a significantly wider net loss year-over-year Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $149,725 | $153,118 | | **Total Assets** | $393,065 | $401,438 | | **Total Current Liabilities** | $42,513 | $57,804 | | **Long-term debt, net** | $118,323 | $92,904 | | **Total Liabilities** | $185,220 | $176,375 | | **Total Stockholders' Equity** | $207,845 | $225,063 | Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $218,436 | $236,468 | $444,976 | $477,097 | | **Gross profit (loss)** | $(1,937) | $7,553 | $(3,744) | $5,153 | | **Loss from operations** | $(8,108) | $(1,408) | $(17,105) | $(11,740) | | **Net loss** | $(10,997) | $(3,106) | $(22,676) | $(14,831) | | **Net loss per share** | $(0.15) | $(0.05) | $(0.31) | $(0.21) | Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(19,079) | $(12,299) | | **Net cash used in investing activities** | $(10,534) | $(12,097) | | **Net cash provided by financing activities** | $23,893 | $7,327 | | **Net change in cash** | $(5,720) | $(17,069) | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail the $7.6 million Kodiak Carbonic acquisition, segment performance shifts, increased debt, and commodity hedging activities - On January 1, 2025, the company acquired Kodiak Carbonic, LLC, a beverage-grade liquid CO2 processor, for **$7.6 million in cash** to achieve further vertical integration[27](index=27&type=chunk)[38](index=38&type=chunk) - Long-term debt increased to **$118.3 million** as of June 30, 2025, from $92.9 million at December 31, 2024, primarily due to increased borrowings on the Kinergy line of credit[55](index=55&type=chunk) - The company recognized net gains of **$4.4 million** and **$11.6 million** from non-designated commodity hedging contracts for the six months ended June 30, 2025 and 2024, respectively[51](index=51&type=chunk)[179](index=179&type=chunk) Gross Profit (Loss) by Segment (in thousands) | Segment | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | **Pekin Campus production** | $(5,845) | $10,144 | $(8,920) | $14,410 | | **Marketing and distribution** | $4,002 | $3,172 | $7,916 | $6,702 | | **Western production** | $1,858 | $(3,761) | $601 | $(12,347) | [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=21&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS.) Adjusted EBITDA improved by nearly $6.0 million YoY in Q2 2025 due to cost savings and operational enhancements [Financial Review, Current Initiatives and Outlook](index=24&type=section&id=Financial%20Review%2C%20Current%20Initiatives%20and%20Outlook) Adjusted EBITDA improved by nearly $6.0 million YoY despite a net loss, with a focus on high-return projects and Section 45Z tax credits - **Adjusted EBITDA improved by nearly $6.0 million** in Q2 2025 compared to Q2 2024, driven by rightsizing corporate overhead and other efficiency initiatives[94](index=94&type=chunk) - The Western assets segment became profitable, with **gross profit improving by $5.6 million** year-over-year, due to the CO2 facility acquisition and the decision to cold-idle the Magic Valley facility[96](index=96&type=chunk) - The company expects to benefit from the Section 45Z tax credits, estimating up to **$4.0 million in 2025** and **$8.0 million in 2026** for its Colombia plant, with plans to increase credits across all eligible facilities[103](index=103&type=chunk) - A new Illinois law (Senate Bill 1723) **prohibits CO2 sequestration through the Mahomet aquifer**, impacting the company's current carbon capture and storage (CCS) project plans[101](index=101&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) Q2 2025 saw a 7.6% YoY decrease in net sales and a wider net loss, driven by lower prices and operational issues - The decline in Q2 gross profit was primarily due to a net unfavorable change of **$5.6 million in derivatives**, **$5.5 million from lower market crush margins**, and a **$2.7 million adverse impact** from a loading dock outage[129](index=129&type=chunk)[130](index=130&type=chunk)[132](index=132&type=chunk) - The Pekin Campus segment's gross profit **declined by $16.0 million YoY** in Q2, while the Western Production segment's gross profit **improved by $5.3 million**[133](index=133&type=chunk)[136](index=136&type=chunk) Q2 2025 vs Q2 2024 Performance (in thousands) | Metric | Q2 2025 | Q2 2024 | Variance ($) | Variance (%) | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $218,436 | $236,468 | $(18,032) | (7.6)% | | **Gross profit (loss)** | $(1,937) | $7,553 | $(9,490) | NM | | **SG&A expenses** | $6,171 | $8,961 | $(2,790) | (31.1)% | [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains sufficient liquidity for the next twelve months with $30.5 million in cash and available credit - The company believes it has **sufficient liquidity** to meet its needs for at least the next twelve months, with $4.8 million available under its line of credit and $65.0 million potentially available for capital projects[155](index=155&type=chunk) - For the six months ended June 30, 2025, cash used in operations was **$19.1 million**, cash used in investing was **$10.5 million**, and cash provided by financing was **$23.9 million**[161](index=161&type=chunk) Liquidity Position (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Cash, cash equivalents and restricted cash** | $30,491 | $36,211 | | **Working capital** | $107,212 | $95,314 | | **Long-term debt, noncurrent portion** | $118,323 | $92,904 | [Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK.) The company faces significant commodity price risk, with a 10% adverse change potentially impacting pre-tax income by over $12 million - The company's business is sensitive to price changes in ethanol and corn, and it uses derivative instruments to manage this risk[174](index=174&type=chunk)[178](index=178&type=chunk) Market Risk Sensitivity Analysis (Pre-Tax Income Impact) | Commodity | Hypothetical Adverse Change | Approximate Impact (in millions) | | :--- | :--- | :--- | | **Ethanol** | 10% | $(13.5) | | **Corn** | 10% | $(12.9) | [Controls and Procedures](index=41&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES.) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of June 30, 2025[181](index=181&type=chunk) - **No changes in internal control over financial reporting** occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[182](index=182&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=42&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS.) Ordinary course legal proceedings are not expected to have a material adverse effect on the company's financials - The company is subject to ordinary course legal proceedings but **does not expect them to have a material adverse impact** on its financial condition or operations[186](index=186&type=chunk) [Risk Factors](index=42&type=section&id=ITEM%201A.%20RISK%20FACTORS.) The company faces significant business, financial, and regulatory risks, including commodity volatility and CCS project hurdles [Risks Related to our Business](index=42&type=section&id=Risks%20Related%20to%20our%20Business) Profitability is highly dependent on volatile commodity spreads, and the business is exposed to operational disruption risks - The company's results are **highly dependent on its ability to manage volatile commodity prices** for inputs like corn and natural gas against the prices of its alcohol and essential ingredient products[189](index=189&type=chunk) - Disruptions in production or distribution, such as the damage to the Pekin Campus loadout dock in April 2025, can **negatively impact logistics and increase costs**[199](index=199&type=chunk) - The company may suffer losses from hedging activities, which are used to mitigate price volatility but also **expose the company to counterparty and market risks**[196](index=196&type=chunk)[197](index=197&type=chunk) [Risks Related to our Finances](index=47&type=section&id=Risks%20Related%20to%20our%20Finances) A history of net losses, substantial indebtedness, and significant execution risks for capital projects threaten financial stability - The company has a history of significant losses, including a **consolidated net loss of $23.3 million** for the first six months of 2025[211](index=211&type=chunk) - The Carbon Capture and Storage (CCS) project is subject to significant risks, including regulatory hurdles and new Illinois legislation (Senate Bill 1723) that **prohibits sequestration through the Mahomet aquifer**, impacting current plans[212](index=212&type=chunk)[213](index=213&type=chunk) - The ability to qualify for and receive anticipated **Section 45Z tax credits is uncertain** and depends on producing low carbon fuel at specific volumes and carbon intensities[218](index=218&type=chunk) [Risks Related to Legal and Regulatory Matters](index=49&type=section&id=Risks%20Related%20to%20Legal%20and%20Regulatory%20Matters) Dependence on renewable fuel mandates and new state laws impacting the CCS project pose significant regulatory risks - The domestic market for fuel-grade ethanol is **significantly impacted by federal mandates**, and any changes to these regulations could materially harm results[233](index=233&type=chunk) - The company's CCS project may be adversely affected by the SAFE CCS Act and Illinois Senate Bill 1723, which impose new safety requirements, a **moratorium on pipeline construction**, and prohibit sequestration in a key aquifer[227](index=227&type=chunk)[228](index=228&type=chunk) - The recent Supreme Court decision overturning the Chevron doctrine may result in **less favorable agency interpretations of laws and regulations**, potentially affecting the Renewable Fuel Standard and tax credits[240](index=240&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS.) The company reported no unregistered sales, withheld shares for tax obligations, and does not plan to pay dividends - **No unregistered sales of equity securities** occurred during the period[257](index=257&type=chunk) - The company **does not intend to pay cash dividends** on its common stock in the foreseeable future[263](index=263&type=chunk) Repurchases of Equity Securities (Q2 2025) | Month | Number of Shares Withheld | Deemed Purchase Price Per Share | Aggregate Purchase Price | | :--- | :--- | :--- | :--- | | **April** | 340,886 | $1.12 | $381,792 | | **May** | — | $— | $— | | **June** | — | $— | $— | [Defaults Upon Senior Securities](index=56&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES.) The company reports no defaults upon senior securities during the period - There were **no defaults upon senior securities**[265](index=265&type=chunk) [Mine Safety Disclosures](index=56&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES.) The company has no mine safety disclosures to report for the period - There are **no mine safety disclosures**[266](index=266&type=chunk) [Other Information](index=56&type=section&id=ITEM%205.%20OTHER%20INFORMATION.) No directors or officers reported the adoption or termination of Rule 10b5-1 trading arrangements during the quarter - **No directors or officers reported** the adoption or termination of a Rule 10b5-1 trading arrangement during the quarter[267](index=267&type=chunk) [Exhibits](index=57&type=section&id=ITEM%206.%20EXHIBITS.) The filing includes required CEO/CFO certifications and Inline XBRL data files as exhibits - The report includes required certifications from the CEO and CFO (Exhibits 31.1, 31.2, 32.1) and XBRL data files[268](index=268&type=chunk)

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) This section covers the unaudited financial statements, management's analysis, market risk, and internal controls of Bank of Marin Bancorp [Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including statements of condition, income, equity, and cash flows, with detailed notes [Consolidated Statements of Condition](index=3&type=section&id=Consolidated%20Statements%20of%20Condition) Total assets slightly increased to **$3.73 billion** at June 30, 2025, driven by higher cash and lower investments, with deposits and equity also rising Consolidated Balance Sheet Highlights (in thousands USD) | Account | June 30, 2025 (USD) | December 31, 2024 (USD) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $228,863 | $137,304 | | Total investment securities | $1,215,299 | $1,266,733 | | Loans, net | $2,043,784 | $2,052,600 | | **Total assets** | **$3,726,193** | **$3,701,335** | | **Liabilities & Equity** | | | | Total deposits | $3,245,048 | $3,220,015 | | Total liabilities | $3,287,655 | $3,265,928 | | Total stockholders' equity | $438,538 | $435,407 | | **Total liabilities and stockholders' equity** | **$3,726,193** | **$3,701,335** | [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The company reported a **net loss of $8.5 million** in Q2 2025, primarily due to an **$18.7 million loss** on securities sales, resulting in **($0.53) diluted EPS** Key Income Statement Data (in thousands USD) | Metric | Q2 2025 (USD) | Q1 2025 (USD) | Six Months 2025 (USD) | Six Months 2024 (USD) | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $25,912 | $24,946 | $50,858 | $45,161 | | Provision for credit losses | $0 | $75 | $75 | $5,550 | | Non-interest income (loss) | ($15,621) | $2,874 | ($12,747) | ($27,001) | | Losses on sale of investment securities | ($18,736) | $0 | ($18,736) | ($32,542) | | **Net (loss) income** | **($8,536)** | **$4,876** | **($3,660)** | **($18,980)** | | **Diluted EPS** | **($0.53)** | **$0.30** | **($0.23)** | **($1.18)** | [Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity increased to **$438.5 million** by June 30, 2025, driven by **$15.7 million** in other comprehensive income, offsetting net loss and dividends - For the six months ended June 30, 2025, total stockholders' equity increased from **$435.4 million** to **$438.5 million**[13](index=13&type=chunk) - Key activities impacting equity in the first six months of 2025 included a **net loss of $3.7 million**, **other comprehensive income of $15.7 million**, **cash dividends of $8.1 million** (**$0.50 per share**), and **stock repurchases of $2.2 million**[13](index=13&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents increased by **$91.6 million** for the six months ended June 30, 2025, with positive contributions from operating, investing, and financing activities Cash Flow Summary (Six Months Ended June 30, in thousands USD) | Cash Flow Activity | 2025 (USD) | 2024 (USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | $12,976 | $7,775 | | Net cash provided by investing activities | $63,968 | $303,703 | | Net cash provided by (used in) financing activities | $14,615 | ($110,523) | | **Net increase in cash and cash equivalents** | **$91,559** | **$200,955** | [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on accounting policies, fair value measurements, investment and loan portfolios, borrowings, equity, and commitments - The company operates in a single reportable segment: community banking. Wealth management services do not meet the quantitative threshold for separate reporting[19](index=19&type=chunk) - Due to the net loss position for the three and six months ended June 30, 2025 and 2024, diluted loss per share is the same as basic loss per share as potential common shares would be anti-dilutive[21](index=21&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the financial performance, highlighting a strategic securities repositioning, its impact on net interest margin, credit quality, and capital adequacy [Executive Summary](index=34&type=section&id=Executive%20Summary) Q2 2025 saw a **net loss of $8.5 million** due to a strategic **$18.7 million** securities sale, expected to improve future net interest margin and EPS - The bank sold **$185.8 million** of available-for-sale (AFS) securities, resulting in a **pre-tax loss of $18.7 million**. This repositioning is expected to have an approximate four-year earn back period[142](index=142&type=chunk) GAAP vs. Non-GAAP Performance (Q2 2025) | Metric | GAAP (USD) | Non-GAAP (Comparable) (USD) | | :--- | :--- | :--- | | Net (Loss) Income | ($8.5M) | $4.7M | | Diluted EPS | ($0.53) | $0.29 | | Return on Average Assets | (0.92)% | 0.50% | | Return on Average Equity | (7.80)% | 4.26% | - Net available contingent funding sources stood at **$1.863 billion**, representing **57% of total deposits** and **200% of estimated uninsured/uncollateralized deposits** as of June 30, 2025[144](index=144&type=chunk) - The company repurchased **100,000 shares** for **$2.2 million** in Q2 2025, contributing to an increase in tangible book value per share to **$22.55**[145](index=145&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Net interest income increased to **$25.9 million** in Q2 2025, with tax-equivalent net interest margin expanding to **2.93%**, while non-interest income was negative due to securities sales - Net interest income increased by **$966 thousand** in Q2 2025 compared to Q1 2025, driven by higher loan interest income from portfolio replenishment at higher rates[154](index=154&type=chunk) - The tax-equivalent net interest margin rose to **2.93%** in Q2 2025 from **2.86%** in Q1 2025, with higher-rate loan originations being a key contributor[155](index=155&type=chunk) - No provision for credit losses was recorded in Q2 2025, compared to a **$75 thousand** provision in Q1 2025[164](index=164&type=chunk) - Non-interest expense was stable at **$21.5 million** in Q2 2025, a slight increase of **$226 thousand** from the prior quarter[174](index=174&type=chunk) [Financial Condition Summary](index=45&type=section&id=Financial%20Condition%20Summary) The company's financial condition remained stable, with cash increasing, investment portfolio decreasing, and deposits rising to **$3.245 billion** - Cash and equivalents increased by **$91.6 million** in the first half of 2025 to **$228.9 million**, largely due to proceeds from securities sales[183](index=183&type=chunk) - The loan portfolio decreased by **$9.6 million** in the first six months of 2025 to **$2.074 billion**. Loan originations were **$132.8 million**, while payoffs were **$62.0 million**[189](index=189&type=chunk) - Non-accrual loans decreased by **$1.4 million** to **$32.5 million** (**1.57% of total loans**) at June 30, 2025[190](index=190&type=chunk) - Total deposits increased by **$25.0 million** in the first half of 2025 to **$3.245 billion**. Non-interest bearing deposits constituted **42.5% of total deposits**[195](index=195&type=chunk)[196](index=196&type=chunk) [Capital Adequacy](index=47&type=section&id=Capital%20Adequacy) Both the company and the Bank remained well-capitalized as of June 30, 2025, with Bancorp's total risk-based capital ratio at **16.25%** Bancorp Capital Ratios (June 30, 2025) | Ratio | Actual | Well Capitalized Threshold | | :--- | :--- | :--- | | Total Capital (to risk-weighted assets) | 16.25% | 10.00% | | Tier 1 Capital (to risk-weighted assets) | 15.03% | 8.00% | | Common Equity Tier 1 | 15.03% | 6.50% | | Tier 1 Leverage Capital | 10.22% | 5.00% | - Bancorp's tangible common equity to tangible assets (TCE) ratio was **9.95%** at June 30, 2025. The non-GAAP TCE ratio, net of after-tax unrealized losses on held-to-maturity securities, was **8.26%**[202](index=202&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position with **$1.863 billion** in net available contingent funding sources, representing **57% of total deposits** Contingent Liquidity Sources (June 30, 2025, in thousands USD) | Source | Net Availability (thousands USD) | | :--- | :--- | | Unrestricted cash | $201,162 | | Unencumbered securities | $270,966 | | FHLB line of credit | $945,977 | | FRB line of credit | $319,843 | | Correspondent bank lines | $125,000 | | **Total Liquidity** | **$1,862,948** | - Total available liquidity of **$1.863 billion** represents **200% of estimated uninsured and/or uncollateralized deposits**[206](index=206&type=chunk) - The holding company (Bancorp) held **$31.1 million** in cash at June 30, 2025, with its primary source of liquidity being dividends from the Bank[217](index=217&type=chunk) [Quantitative and Qualitative Disclosure about Market Risk](index=51&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosure%20about%20Market%20Risk) The company manages interest rate risk, with simulation models indicating that a **+100 basis point** rate shock would decrease year one net interest income by **0.5%** Estimated Change in Net Interest Income (NII) from a Static Balance Sheet | Immediate Rate Change (bps) | Estimated Change in NII (Year 1) | Estimated Change in NII (Year 2) | | :--- | :--- | :--- | | +200 | (1.5)% | 4.8% | | +100 | (0.5)% | 2.8% | | -100 | 0.3% | (0.6)% | | -200 | 0.8% | (1.0)% | - The interest rate sensitivity models use deposit betas of up to **70%** (averaging **45%**) in rising rate scenarios and up to **60%** (averaging **38%**) in falling rate scenarios[227](index=227&type=chunk) [Controls and Procedures](index=52&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no significant changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[229](index=229&type=chunk) - No significant changes were made during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to affect, the company's internal control over financial reporting[230](index=230&type=chunk) [PART II OTHER INFORMATION](index=53&type=section&id=PART%20II%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, and exhibits [Legal Proceedings](index=53&type=section&id=ITEM%201.%20Legal%20Proceedings) This section refers to disclosures in the 2024 Form 10-K and Note 8 for details on ongoing legal proceedings and potential liabilities - The company refers to Note 8 for details on legal proceedings, which discusses potential liabilities from Visa anti-trust litigation and a recent settlement of a wage and hour lawsuit[231](index=231&type=chunk)[117](index=117&type=chunk) [Risk Factors](index=53&type=section&id=ITEM%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's 2024 Form 10-K - No material changes have occurred to the risk factors disclosed in the 2024 Form 10-K[232](index=232&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered equity sales but repurchased **100,000 shares** for **$2.2 million** and authorized a new **$25.0 million** repurchase program - During the second quarter of 2025, Bancorp repurchased **100,000 shares** at an average price of **$21.72 per share**, for a total of **$2.2 million**[234](index=234&type=chunk)[235](index=235&type=chunk) - A new share repurchase program authorizing up to **$25.0 million** was approved, effective from July 24, 2025, to July 31, 2027[234](index=234&type=chunk) [Defaults Upon Senior Securities](index=55&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - None[236](index=236&type=chunk) [Mine Safety Disclosures](index=55&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[237](index=237&type=chunk) [Other Information](index=55&type=section&id=ITEM%205.%20Other%20Information) This item is not applicable to the company - Not applicable[238](index=238&type=chunk) [Exhibits](index=56&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the report, including certifications by the Principal Executive Officer and Principal Financial Officer, and XBRL data - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, as well as Inline XBRL documents[241](index=241&type=chunk)

Research and Development (R&D) Expense: Research and development expenses were $0.9 million for the quarter ended June 30, 2025, as compared to $0 for the quarter ended June 30, 2024. The increase in R&D expense of $0.9 million for the three months ended June 30, 2025 was due to incurring research and development expenses in 2025 after the acquisition of GPCR Therapeutics USA Inc. ("GPCR USA"), which is conducting research. Immediately prior to closing the acquisition of GPCR USA, the Company recorded no re ...

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) The unaudited condensed consolidated financial statements present Twilio's financial position as of June 30, 2025, and its results of operations and cash flows for the three and six months ended June 30, 2025 and 2024 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, Twilio's total assets were **$9.85 billion**, a slight decrease from **$9.87 billion** at the end of 2024, driven by a decrease in short-term marketable securities offset by an increase in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $969,229 | $421,297 | | Short-term marketable securities | $1,573,371 | $1,963,102 | | Total current assets | $3,531,637 | $3,447,299 | | Goodwill | $5,243,266 | $5,243,266 | | **Total assets** | **$9,848,292** | **$9,865,472** | | **Liabilities & Equity** | | | | Total current liabilities | $720,059 | $820,220 | | Long-term debt, net | $991,429 | $990,587 | | **Total liabilities** | **$1,804,370** | **$1,912,506** | | **Total stockholders' equity** | **$8,043,922** | **$7,952,966** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, Twilio reported **$1.23 billion** revenue, a **13.5%** increase year-over-year, achieving a net income of **$22.4 million** compared to a **$31.9 million** net loss in Q2 2024 Q2 2025 vs Q2 2024 Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $1,228,425 | $1,082,502 | 13.5% | | Gross Profit | $602,740 | $555,845 | 8.4% | | Income (Loss) from Operations | $36,989 | $(19,037) | N/A | | Net Income (Loss) | $22,423 | $(31,858) | N/A | | Diluted EPS | $0.14 | $(0.19) | N/A | Six Months Ended June 30 Performance (in thousands, except per share data) | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $2,400,888 | $2,129,552 | 12.7% | | Gross Profit | $1,184,307 | $1,099,886 | 7.7% | | Income (Loss) from Operations | $60,071 | $(62,541) | N/A | | Net Income (Loss) | $42,440 | $(87,207) | N/A | | Diluted EPS | $0.26 | $(0.50) | N/A | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash provided by operating activities was **$468.1 million**, with cash, cash equivalents, and restricted cash increasing by **$549.3 million** Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $468,126 | $403,466 | | Net cash provided by investing activities | $382,879 | $974,384 | | Net cash used in financing activities | $(301,708) | $(1,261,022) | | **Net increase in cash, cash equivalents and restricted cash** | **$549,297** | **$116,828** | - Share repurchases were a primary use of cash in financing activities, totaling **$323.2 million** in the first six months of 2025, compared to **$1.27 billion** in the same period of 2024[30](index=30&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed disclosure on accounting policies, segment reporting, financial instruments, and other key areas, including a **$1.7 billion** remaining share repurchase authorization - The company has two reportable segments: Twilio Communications and Twilio Segment. Communications generates the vast majority of revenue[56](index=56&type=chunk)[57](index=57&type=chunk) Segment Revenue (Q2 2025 vs Q2 2024, in thousands) | Segment | Q2 2025 Revenue | Q2 2024 Revenue | Change (%) | | :--- | :--- | :--- | :--- | | Twilio Communications | $1,152,955 | $1,007,302 | 14.5% | | Twilio Segment | $75,470 | $75,200 | 0.4% | Segment Non-GAAP Income from Operations (Q2 2025 vs Q2 2024, in thousands) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Twilio Communications | $280,613 | $249,930 | | Twilio Segment | $6,009 | $(15,815) | - In January 2025, the board authorized a new share repurchase program for up to **$2.0 billion**. As of June 30, 2025, approximately **$1.7 billion** remained available for future repurchases[85](index=85&type=chunk)[86](index=86&type=chunk) Revenue by Geographic Area (in thousands) | Region | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | United States | $786,974 (64%) | $706,451 (65%) | | International | $441,451 (36%) | $376,051 (35%) | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **13%** year-over-year revenue growth in Q2 2025 primarily to increased usage from existing customers in the Communications segment, achieving profitability with a net income of **$22.4 million** [Key Business Metrics](index=28&type=section&id=Key%20Business%20Metrics) Twilio's key business metrics showed positive momentum in Q2 2025, with Active Customer Accounts increasing to **349,000** and the Dollar-Based Net Expansion Rate improving to **108%** Key Business Metrics Comparison | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Active Customer Accounts | 349,000 | 316,000 | | Dollar-Based Net Expansion Rate | 108% | 102% | - Management believes the Active Customer Accounts metric is becoming less informative as an indicator of business growth due to a large number of accounts with low individual spend[120](index=120&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) For Q2 2025, consolidated revenue grew **13%** YoY to **$1.23 billion**, driven by a **14%** increase in the Communications segment, leading to an operating income of **$37.0 million** Revenue by Segment - Q2 Comparison (in thousands) | Segment | Q2 2025 | Q2 2024 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Twilio Communications | $1,152,955 | $1,007,302 | $145,653 | 14% | | Twilio Segment | $75,470 | $75,200 | $270 | 0% | | **Total Revenue** | **$1,228,425** | **$1,082,502** | **$145,923** | **13%** | - The Communications segment's revenue growth was driven by a **109%** Dollar-Based Net Expansion Rate and **$55.2 million** in revenue from new customers[152](index=152&type=chunk) - The Segment segment's flat revenue was due to new customer revenue being offset by churn and contraction from existing customers, reflected in a **95%** Dollar-Based Net Expansion Rate[153](index=153&type=chunk) - Cost of revenue increased **19%** in Q2 2025, primarily due to a **$94.5 million** increase in network service provider costs[155](index=155&type=chunk) - General and administrative expenses decreased by **11%** in Q2 2025, mainly due to a **$13.1 million** decrease in charitable contributions[159](index=159&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2025, Twilio had a strong liquidity position with **$969.2 million** in cash and cash equivalents and **$1.6 billion** in short-term marketable securities, with **$306.9 million** used for share repurchases - The company holds **$969.2 million** in cash and cash equivalents and **$1.6 billion** in short-term marketable securities as of June 30, 2025[173](index=173&type=chunk) - A share repurchase program authorized in January 2025 allows for up to **$2.0 billion** in repurchases. In the first six months of 2025, **$306.9 million** was used to repurchase **3.0 million** shares[178](index=178&type=chunk)[179](index=179&type=chunk)[186](index=186&type=chunk) - Net cash from operating activities for the first six months of 2025 was **$468.1 million**, an increase from **$403.5 million** in the prior year period[181](index=181&type=chunk)[182](index=182&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Twilio is exposed to market risks, primarily interest rate risk and currency exchange risk, which are managed through hedging programs and not considered material - The company's primary market risks are interest rate risk and foreign currency exchange risk[193](index=193&type=chunk) - Interest rate risk is considered immaterial due to the short-term nature of investments and fixed-rate debt[193](index=193&type=chunk) - Foreign currency risk is managed through hedging programs, and a hypothetical **10%** change in exchange rates is not expected to have a material impact[196](index=196&type=chunk)[197](index=197&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[199](index=199&type=chunk) - No material changes to internal control over financial reporting occurred during the second quarter of 2025[200](index=200&type=chunk) [PART II - OTHER INFORMATION](index=43&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal actions and investigations in the ordinary course of business, which management believes will not have a material adverse effect - The company is subject to legal proceedings arising in the ordinary course of business but does not currently expect them to have a material adverse effect[73](index=73&type=chunk)[203](index=203&type=chunk) [Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) The company identifies numerous risks that could adversely affect its business, including global economic conditions, intense competition, reliance on third-party providers, and cybersecurity threats [Risks Related to Business and Industry](index=45&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) Key business and industry risks include the adverse impact of global economic conditions on usage-based revenue, intense competition, and reliance on network service providers and AWS for core infrastructure - Global economic uncertainties can severely impact the business, as a majority of revenue is usage-based and sensitive to consumer spending[211](index=211&type=chunk) - The market is intensely competitive, with competitors that are larger, have greater resources, and may offer lower prices[234](index=234&type=chunk)[235](index=235&type=chunk) - The company relies heavily on network service providers for connectivity and on AWS for a substantial majority of its cloud infrastructure, making it vulnerable to service interruptions, fee increases, and policy changes from these third parties[246](index=246&type=chunk)[289](index=289&type=chunk) [Risks Related to Cybersecurity, Data Privacy and Intellectual Property](index=55&type=section&id=Risks%20Related%20to%20Cybersecurity%2C%20Data%20Privacy%20and%20Intellectual%20Property) The company faces significant risks from cybersecurity threats, complex and costly compliance with global data privacy laws, and new challenges introduced by the use of AI - The company is subject to evolving cybersecurity threats and has experienced incidents in the past, such as the social engineering attacks in 2022 that resulted in unauthorized access to some customer data[262](index=262&type=chunk)[265](index=265&type=chunk) - Compliance with numerous and stringent data privacy laws like GDPR and CCPA is a significant challenge, with risks of large fines and business restrictions for non-compliance, particularly regarding international data transfers[269](index=269&type=chunk)[271](index=271&type=chunk)[277](index=277&type=chunk) - The use of AI in products and business operations presents new risks, including potential for inaccurate or biased outputs, infringement of third-party rights, and navigating a rapidly evolving regulatory landscape[291](index=291&type=chunk)[292](index=292&type=chunk) [Risks Related to Legal and Regulatory Matters](index=61&type=section&id=Risks%20Related%20to%20Legal%20and%20Regulatory%20Matters) Twilio's products are subject to extensive and evolving telecommunications regulations in the U.S. and internationally, with risks of liability from platform misuse and challenges in obtaining numbering resources - The company is subject to significant telecommunications regulations from the FCC and international bodies, covering areas like robocall mitigation (TRACED Act), consumer protection (TCPA), and privacy[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk) - There is a risk of liability and reputational damage from customers misusing the platform for illegal activities such as spam, phishing, and TCPA violations, despite company policies[309](index=309&type=chunk)[311](index=311&type=chunk) - Obtaining and retaining numbering resources (phone numbers, short codes) is critical but subject to complex and changing regulations in over **180** countries, which can lead to compliance challenges and service disruptions[303](index=303&type=chunk)[304](index=304&type=chunk) [Risks Related to Financial and Accounting Matters](index=67&type=section&id=Risks%20Related%20to%20Financial%20and%20Accounting%20Matters) Financial risks include exposure to foreign currency fluctuations, constraints from **$1.0 billion** in outstanding debt, potential impairment of **$5.4 billion** in goodwill, and complex international tax liabilities - The company has **$1.0 billion** in outstanding debt, which may limit business flexibility and require significant cash flow for debt service[332](index=332&type=chunk) - As of June 30, 2025, the company carried **$5.4 billion** of goodwill and intangible assets, which are subject to impairment risk if market conditions or business performance decline[340](index=340&type=chunk) - The company faces potential additional tax liabilities from complex international operations, transfer pricing, and evolving tax laws like the OECD's Pillar Two framework[347](index=347&type=chunk)[353](index=353&type=chunk)[356](index=356&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=76&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q2 2025, Twilio issued **22,102** shares of Class A common stock for philanthropic goals and repurchased **1.81 million** shares for approximately **$97.62** per share - Issued **22,102** shares of Class A common stock valued at **$2.2 million** to a donor-advised fund for philanthropic purposes[380](index=380&type=chunk) Share Repurchase Activity for Q2 2025 | Period | Total Shares Purchased (thousands) | Average Price Paid Per Share ($) | Approx. Value Remaining ($ millions) | | :--- | :--- | :--- | :--- | | April 2025 | 1,089 | $87.99 | $1,774 | | May 2025 | 469 | $108.66 | $1,723 | | June 2025 | 252 | $118.96 | $1,693 | | **Total** | **1,810** | **-** | **$1,693** | [Other Information](index=76&type=section&id=Item%205.%20Other%20Information) On June 6, 2025, CFO Aidan Viggiano adopted a Rule 10b5-1 trading plan for the sale of shares tied to current and future RSU vestings - CFO Aidan Viggiano adopted a Rule 10b5-1 trading plan on June 6, 2025, for the sale of shares tied to current and future RSU vestings, effective until July 2026[382](index=382&type=chunk) [Exhibits](index=77&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including the Amended and Restated Certificate of Incorporation and CEO/CFO certifications - Filed exhibits include the company's certificate of incorporation, CEO/CFO certifications (SOX 302 & 906), and XBRL data files[386](index=386&type=chunk)

[Part I – Financial Information](index=3&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) This section presents the company's unaudited consolidated financial statements and management's analysis [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including balance sheets, statements of comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with their condensed notes, providing a detailed financial overview for the reported periods [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section details the company's financial position, including assets, liabilities, and equity **Consolidated Balance Sheet Highlights (in thousands):** | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Total Assets | $312,040 | $296,185 | | Total Liabilities | $112,549 | $122,325 | | Total Stockholders' Equity | $199,491 | $173,860 | | Cash and cash equivalents | $103,685 | $113,795 | [Consolidated Statements of Comprehensive Loss](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Loss) This section outlines the company's financial performance, detailing net loss and total revenue **Net Loss and Revenue (Three Months Ended June 30, in thousands):** | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------- | :----- | :----- | :--------- | :--------- | | Net Loss | $(4,152) | $(5,590) | $1,438 | 25.7% | | Total Revenue | $92,277 | $88,765 | $3,512 | 4.0% | **Net Loss and Revenue (Six Months Ended June 30, in thousands):** | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------- | :------ | :------ | :--------- | :--------- | | Net Loss | $(10,326) | $(20,168) | $9,842 | 48.8% | | Total Revenue | $174,557 | $166,790 | $7,767 | 4.7% | | Comprehensive Loss | $(5,938) | $(21,531) | $15,593 | 72.4% | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in the company's equity, including stock issuance and compensation **Total Stockholders' Equity (in thousands):** | Date | Amount | | :---------------- | :----- | | June 30, 2025 | $199,491 | | June 30, 2024 | $187,595 | | December 31, 2024 | $173,860 | - Proceeds from issuance of common stock from securities purchase agreement totaled **$27,210 thousand** for the six months ended June 30, 2025[14](index=14&type=chunk) - Stock-based compensation expense for the six months ended June 30, 2025, was **$4,440 thousand**, up from **$4,230 thousand** in 2024[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes cash flows from operating, investing, and financing activities **Summary of Consolidated Cash Flows (Six Months Ended June 30, in thousands):** | Activity | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :----------- | | Net cash provided by (used in) operating activities | $(12,440) | $1,940 | $(14,380) | -741.2% | | Net cash used in investing activities | $(24,611) | $(25,820) | $1,209 | 4.7% | | Net cash provided by financing activities | $23,951 | $84 | $23,867 | 28413.1% | | Net decrease in cash and cash equivalents | $(12,458) | $(24,013) | $11,555 | -48.1% | - Cash, cash equivalents and restricted cash at the end of the period was **$104,957 thousand** as of June 30, 2025, compared to **$101,479 thousand** as of June 30, 2024[21](index=21&type=chunk) [Condensed Notes to the Consolidated Financial Statements](index=9&type=section&id=Condensed%20Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures for the consolidated financial statements, covering business operations, accounting policies, fair value measurements, balance sheet components, leases, loss per share, income taxes, stockholders' equity, commitments, contingencies, foreign currency hedging, and segment reporting [1. Business overview](index=9&type=section&id=1.%20Business%20overview) This note describes the company's core business, recent acquisitions, and strategic collaborations - Inogen, Inc. is a medical technology company focused on respiratory health, developing, manufacturing, and marketing portable oxygen concentrators (POCs) and the Simeox® product for airway clearance treatment[24](index=24&type=chunk) - The company completed the acquisition of Physio-Assist SAS on September 14, 2023[26](index=26&type=chunk) - On January 25, 2025, Inogen entered into a Strategic Collaboration Agreement with Jiangsu Yuyue Medical Equipment & Supply Co., Ltd. (Yuwell) to broaden its product portfolio, enhance innovation, and accelerate entry into the Chinese market[27](index=27&type=chunk) [2. Basis of presentation and summary of significant accounting policies](index=9&type=section&id=2.%20Basis%20of%20presentation%20and%20summary%20of%20significant%20accounting%20policies) This note outlines accounting principles, U.S. GAAP compliance, and key management estimates - The consolidated financial statements are prepared in accordance with U.S. GAAP and include Inogen, Inc. and its wholly-owned subsidiaries, with all intercompany balances and transactions eliminated[28](index=28&type=chunk)[30](index=30&type=chunk) - Significant areas requiring management estimates include revenue recognition, warranty reserves, rental asset valuations, accounts receivable allowances, goodwill impairment, stock-based compensation, income taxes, and fair value of acquired intangibles[31](index=31&type=chunk) [3. Fair value measurements](index=10&type=section&id=3.%20Fair%20value%20measurements) This note details the fair value of financial instruments, including cash, investments, and earnout liabilities **Fair Value Measurements (as of June 30, 2025, in thousands):** | Asset Category | Fair Value | | :-------------------------------- | :--------- | | Cash | $23,699 | | Money market accounts | $55,564 | | Corporate bonds | $8,741 | | U.S. Treasury securities | $10,004 | | Institutional Insured Liquidity Deposit Savings | $25,694 | | **Total** | **$123,702** | - The company had a derivative instrument related payable of **$2,820 thousand** as of June 30, 2025, for hedging activities[33](index=33&type=chunk) - The earnout liability of **$13,000 thousand** related to the Physio-Assist acquisition as of December 31, 2024, was fully paid during the first quarter of 2025, resulting in a zero balance as of June 30, 2025[35](index=35&type=chunk) [4. Balance sheet components](index=11&type=section&id=4.%20Balance%20sheet%20components) This note provides a breakdown of key balance sheet items: cash, accounts receivable, goodwill, and intangibles **Cash, Cash Equivalents and Restricted Cash (in thousands):** | Date | Amount | | :---------------- | :------- | | June 30, 2025 | $104,957 | | December 31, 2024 | $117,415 | **Net Accounts Receivable (in thousands):** | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Rental | $5,462 | $4,863 | | Business-to-business and other receivables | $33,130 | $24,700 | | **Total net accounts receivable** | **$38,592** | **$29,563** | - Goodwill increased to **$10,700 thousand** as of June 30, 2025, from **$9,465 thousand** as of December 31, 2024, primarily due to translation adjustment[49](index=49&type=chunk) **Net Intangible Assets (in thousands):** | Date | Amount | | :---------------- | :------- | | June 30, 2025 | $33,359 | | December 31, 2024 | $30,493 | [5. Leases](index=16&type=section&id=5.%20Leases) This note details the company's operating lease arrangements, including cash payments and total lease liabilities - The Company has operating leases primarily for commercial buildings with terms ranging from three to 11 years[52](index=52&type=chunk) **Cash Paid for Operating Lease Liabilities (Six Months Ended June 30, in thousands):** | Year | Amount | | :--- | :----- | | 2025 | $1,902 | | 2024 | $2,290 | **Total Lease Liabilities (as of June 30, 2025, in thousands):** | Category | Amount | | :-------------------------- | :------- | | Operating lease liability - current | $3,082 | | Operating lease liability - noncurrent | $15,955 | | **Total lease liabilities** | **$19,037** | [6. Loss per share](index=17&type=section&id=6.%20Loss%20per%20share) This note presents basic and diluted net loss per share for the reported periods, explaining dilution factors **Net Loss Per Share (Three Months Ended June 30):** | Metric | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Basic net loss per share | $(0.15) | $(0.24) | | Diluted net loss per share | $(0.15) | $(0.24) | **Net Loss Per Share (Six Months Ended June 30):** | Metric | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Basic net loss per share | $(0.40) | $(0.86) | | Diluted net loss per share | $(0.40) | $(0.86) | - Due to net losses, diluted loss per share is the same as basic loss per share for both the three and six months ended June 30, 2025 and 2024[60](index=60&type=chunk) [7. Income taxes](index=18&type=section&id=7.%20Income%20taxes) This note discusses the company's income tax position, including valuation allowances and effective rates - The Company maintains a full valuation allowance against its domestic and certain foreign deferred tax assets as of June 30, 2025, and December 31, 2024[61](index=61&type=chunk) - Income tax benefit increased by **$0.1 million** (**2,085.7%**) for the three months ended June 30, 2025, compared to 2024, primarily due to lower foreign and state taxes[120](index=120&type=chunk) - The effective income tax rate for the three months ended June 30, 2025, was **3.6%**, up from **0.1%** in 2024, due to a lower net loss and foreign/state taxes[121](index=121&type=chunk) [8. Stockholders' equity](index=18&type=section&id=8.%20Stockholders'%20equity) This note details changes in stockholders' equity, including common stock issuance and stock-based compensation - On January 25, 2025, the Company entered into a Securities Purchase Agreement with Yuwell (Hong Kong) Holdings Limited, resulting in the sale of **2,626,425 shares** of common stock for approximately **$27,210 thousand**[68](index=68&type=chunk) - Unrecognized compensation cost related to unvested employee restricted stock units was **$13,299 thousand** as of June 30, 2025, expected to be recognized over a weighted average period of **2.1 years**[72](index=72&type=chunk) **Total Stock-Based Compensation Expense (in thousands):** | Period | 2025 | 2024 | | :-------------------------- | :----- | :----- | | Three months ended June 30 | $2,293 | $1,814 | | Six months ended June 30 | $4,440 | $4,230 | [9. Commitments and contingencies](index=20&type=section&id=9.%20Commitments%20and%20contingencies) This note outlines outstanding purchase orders, product warranty liabilities, deferred revenue, and legal proceedings - Outstanding purchase orders due within one year totaled approximately **$60,900 thousand** as of June 30, 2025[77](index=77&type=chunk) **Product Warranty Liability (in thousands):** | Date | Amount | | :---------------- | :------- | | June 30, 2025 | $26,724 | | December 31, 2024 | $26,086 | - Deferred revenue related to lifetime warranties decreased to **$8,388 thousand** as of June 30, 2025, from **$9,922 thousand** at December 31, 2024, primarily due to revenue recognition[79](index=79&type=chunk) - The Company is party to various legal proceedings but does not anticipate a material adverse effect on its business[81](index=81&type=chunk) [10. Foreign currency exchange contracts and hedging](index=21&type=section&id=10.%20Foreign%20currency%20exchange%20contracts%20and%20hedging) This note describes the company's use of derivative instruments to hedge foreign currency exchange risk and their impact **Total Notional Amounts of Derivative Contracts (in thousands):** | Date | Amount | | :---------------- | :------- | | June 30, 2025 | $18,266 | | June 30, 2024 | $38,804 | - These contracts resulted in an unrealized loss of **$1,435 thousand** (net of tax) for the six months ended June 30, 2025[82](index=82&type=chunk) - The Company uses foreign exchange forward contracts as cash flow hedges to mitigate foreign currency exchange risk, particularly for European sales denominated in Euros[165](index=165&type=chunk) [11. Segments](index=21&type=section&id=11.%20Segments) This note clarifies the company operates as a single reportable segment, with consolidated results reviewed by CODM - The Company operates and reports in only one operating and reportable segment, based on the similar nature of its products and services in the oxygen therapy and respiratory care markets[84](index=84&type=chunk) - The executive leadership team (ELT) acts as the Chief Operating Decision Maker (CODM) and reviews consolidated results to allocate resources and assess performance[84](index=84&type=chunk) [12. Subsequent events](index=21&type=section&id=12.%20Subsequent%20events) This note discloses significant events occurring after the reporting period, such as new tax laws - On July 4, 2025, the One Big Beautiful Bill Act ('OBBBA') was enacted, providing significant U.S. tax law changes. The Company is evaluating its potential effects but expects no material impact on financial statements as of June 30, 2025[85](index=85&type=chunk)[139](index=139&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&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 operational results, highlighting key performance drivers, macroeconomic impacts, and future outlook. It details revenue and expense trends for the three and six months ended June 30, 2025, compared to 2024, and discusses liquidity and capital resources [Forward-Looking Statements](index=22&type=section&id=Forward-Looking%20Statements) This section cautions that statements about future performance are based on assumptions and involve material risks - The discussion contains forward-looking statements based on management's beliefs and assumptions, covering future cash flows, revenue, expenses, product development, regulatory approvals, market share, and financing plans[86](index=86&type=chunk) - These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially, as detailed in the 'Risk Factors' section of the 10-Q and Annual Report on Form 10-K[88](index=88&type=chunk) - The company assumes no obligation to update these forward-looking statements unless required by law[89](index=89&type=chunk) [Critical accounting policies and estimates](index=24&type=section&id=Critical%20accounting%20policies%20and%20estimates) This section identifies key accounting policies and estimates requiring significant management judgment - Critical accounting policies and estimates include revenue recognition and acquisitions/related acquired intangible assets and goodwill, which require significant management judgment[96](index=96&type=chunk) - There have been no material changes in critical accounting policies and estimates during the three and six months ended June 30, 2025, compared to the Annual Report on Form 10-K for 2024[96](index=96&type=chunk) [Recent accounting pronouncements](index=26&type=section&id=Recent%20accounting%20pronouncements) This section refers to Note 2 for details on recently adopted and proposed accounting pronouncements - Information about recently adopted and proposed accounting pronouncements is included in Note 2 to the consolidated financial statements[97](index=97&type=chunk) [Macroeconomic environment](index=26&type=section&id=Macroeconomic%20environment) This section discusses the impact of global supply chain issues, inflation, interest rates, and geopolitical dynamics - The company faces ongoing global supply chain challenges, including increased costs and limited availability of raw materials and components, as well as rising wage and distribution costs[98](index=98&type=chunk) - Uncertainty from inflationary pressures, interest rates, monetary policy, and geopolitical dynamics could negatively impact business operations and financial results, including foreign currency fluctuations[98](index=98&type=chunk) - Current U.S. government tariffs are not expected to have a material impact on the business[99](index=99&type=chunk) [Overview](index=26&type=section&id=Overview) This section describes Inogen's medical technology business, strategic goals, and recent product collaborations - Inogen is a medical technology company specializing in innovative respiratory products, including portable oxygen concentrators (POCs) and the Simeox product for airway clearance[101](index=101&type=chunk) - The company aims to expand its domestic HME provider and reseller network, increase international business-to-business adoption (especially in Europe and Asia-Pacific), and broaden its product offerings and indications for use[103](index=103&type=chunk)[104](index=104&type=chunk) - In January 2025, a collaboration with Yuwell was initiated to distribute respiratory products in the U.S. and China, including the launch of the Voxi™ 5 stationary oxygen concentrator in the U.S. in June 2025[105](index=105&type=chunk) [Results of operations](index=27&type=section&id=Results%20of%20operations) This section provides a detailed comparison of the company's financial performance for the three and six months ended June 30, 2025, versus the corresponding periods in 2024, analyzing revenue, cost of revenue, gross profit, and operating expenses [Comparison of three months ended June 30, 2025 and 2024](index=27&type=section&id=Comparison%20of%20three%20months%20ended%20June%2030%2C%202025%20and%202024) For the three months ended June 30, 2025, total revenue increased by 4.0% driven by higher business-to-business sales, while direct-to-consumer sales and rental revenue decreased. Net loss improved by 25.7% due to increased sales revenue and lower operating expenses **Revenue by Type (Three Months Ended June 30, in thousands):** | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------- | :----- | :----- | :--------- | :--------- | | Sales revenue | $79,172 | $74,425 | $4,747 | 6.4% | | Rental revenue | $13,105 | $14,340 | $(1,235) | -8.6% | | **Total revenue** | **$92,277** | **$88,765** | **$3,512** | **4.0%** | **Revenue by Region and Category (Three Months Ended June 30, in thousands):** | Category | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Business-to-business domestic sales | $25,406 | $21,287 | $4,119 | 19.3% | | Business-to-business international sales | $35,923 | $30,531 | $5,392 | 17.7% | | Direct-to-consumer domestic sales | $17,843 | $22,607 | $(4,764) | -21.1% | | Direct-to-consumer domestic rentals | $13,105 | $14,340 | $(1,235) | -8.6% | **Gross Profit and Margin (Three Months Ended June 30, in thousands):** | Metric | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :----- | :----- | :--------- | :--------- | | Total gross profit | $41,341 | $42,737 | $(1,396) | -3.3% | | Total gross margin percentage | 44.8% | 48.1% | -3.3% | | | Sales revenue gross margin | 45.1% | 48.5% | -3.4% | | | Rental revenue gross margin | 43.0% | 46.2% | -3.2% | | **Operating Expenses (Three Months Ended June 30, in thousands):** | Expense Category | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :----- | :----- | :--------- | :--------- | | Research and development | $5,209 | $5,616 | $(407) | -7.2% | | Sales and marketing | $25,390 | $25,617 | $(227) | -0.9% | | General and administrative | $16,871 | $18,568 | $(1,697) | -9.1% | - Net loss decreased by **$1.4 million**, or **25.7%**, to **$(4,152) thousand** for the three months ended June 30, 2025, compared to **$(5,590) thousand** in the prior year, driven by increased sales revenue and lower operating expenses[122](index=122&type=chunk) [Comparison of six months ended June 30, 2025 and 2024](index=31&type=section&id=Comparison%20of%20six%20months%20ended%20June%2030%2C%202025%20and%202024) For the six months ended June 30, 2025, total revenue increased by 4.7%, primarily from strong business-to-business sales, while direct-to-consumer sales and rental revenue declined. Net loss significantly decreased by 48.8% due to higher sales revenue and reduced operating expenses **Revenue by Type (Six Months Ended June 30, in thousands):** | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------- | :------- | :------- | :--------- | :--------- | | Sales revenue | $147,642 | $137,520 | $10,122 | 7.4% | | Rental revenue | $26,915 | $29,270 | $(2,355) | -8.0% | | **Total revenue** | **$174,557** | **$166,790** | **$7,767** | **4.7%** | **Revenue by Region and Category (Six Months Ended June 30, in thousands):** | Category | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Business-to-business domestic sales | $46,860 | $37,806 | $9,054 | 23.9% | | Business-to-business international sales | $67,908 | $56,566 | $11,342 | 20.1% | | Direct-to-consumer domestic sales | $32,874 | $43,148 | $(10,274) | -23.8% | | Direct-to-consumer domestic rentals | $26,915 | $29,270 | $(2,355) | -8.0% | **Gross Profit and Margin (Six Months Ended June 30, in thousands):** | Metric | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :------- | :------- | :--------- | :--------- | | Total gross profit | $77,713 | $77,108 | $605 | 0.8% | | Total gross margin percentage | 44.5% | 46.2% | -1.7% | | | Sales revenue gross margin | 44.8% | 46.5% | -1.7% | | | Rental revenue gross margin | 43.2% | 44.9% | -1.7% | | **Operating Expenses (Six Months Ended June 30, in thousands):** | Expense Category | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------- | :------- | :------- | :--------- | :--------- | | Research and development | $9,243 | $12,194 | $(2,951) | -24.2% | | Sales and marketing | $49,147 | $52,553 | $(3,406) | -6.5% | | General and administrative | $33,108 | $35,699 | $(2,591) | -7.3% | - Net loss decreased by **$9.8 million**, or **48.8%**, to **$(10,326) thousand** for the six months ended June 30, 2025, compared to **$(20,168) thousand** in the prior year, driven by increased sales revenue and lower operating expenses[140](index=140&type=chunk) [Liquidity and capital resources](index=33&type=section&id=Liquidity%20and%20capital%20resources) This section assesses the company's ability to meet financial obligations, detailing cash, financing, and future funding - Cash and cash equivalents were **$103.7 million** as of June 30, 2025[141](index=141&type=chunk) - The company received **$27.2 million** from the issuance of common stock pursuant to a securities purchase agreement and paid **$13.0 million** for an earnout liability during the six months ended June 30, 2025[141](index=141&type=chunk)[153](index=153&type=chunk) **Net Cash Flows by Activity (Six Months Ended June 30, in thousands):** | Activity | 2025 | 2024 | | :-------------------------------- | :------- | :------- | | Net cash used in operating activities | $(12,440) | $1,940 | | Net cash used in investing activities | $(24,611) | $(25,820) | | Net cash provided by financing activities | $23,951 | $84 | - The company believes its current cash, cash equivalents, marketable securities, and expected sales/rentals will be sufficient to meet operating and investing requirements for at least the next 12 months, but future funding may be required[143](index=143&type=chunk) [Non-GAAP financial measures](index=36&type=section&id=Non-GAAP%20financial%20measures) This section provides reconciliations and definitions for non-GAAP financial measures like EBITDA and Adjusted EBITDA **EBITDA and Adjusted EBITDA Reconciliation (Six Months Ended June 30, in thousands):** | Metric | 2025 | 2024 | | :-------------------------- | :------- | :------- | | Net loss (GAAP) | $(10,326) | $(20,168) | | EBITDA (non-GAAP) | $(2,323) | $(12,451) | | Adjusted EBITDA (non-GAAP) | $2,117 | $(6,384) | - EBITDA is defined as net loss excluding interest income, interest expense, taxes, and depreciation and amortization. Adjusted EBITDA further excludes stock-based compensation, change in fair value of earnout liability, acquisition-related expenses, and restructuring-related charges[158](index=158&type=chunk) - These non-GAAP measures are used by management for assessing operating performance, business planning, incentivizing personnel, and evaluating acquisitions, but have limitations as analytical tools[159](index=159&type=chunk)[160](index=160&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the company's exposure to market risks, primarily foreign currency exchange risk and interest rate fluctuation risk, and the strategies employed to mitigate these risks - The principal market risk is foreign currency exchange risk, as a majority of European sales are denominated in Euros, leading to fluctuations in results of operations and cash flows[164](index=164&type=chunk) - The company uses foreign exchange forward contracts as cash flow hedges to protect against adverse changes in foreign currency exchange rates, reducing but not entirely eliminating the impact[165](index=165&type=chunk) - A hypothetical **10%** adverse change in exchange rates on foreign denominated sales would have resulted in a **$5.3 million** decline in revenue for the six months ended June 30, 2025, prior to hedging[165](index=165&type=chunk) - The company has limited exposure to interest rate fluctuation risk due to the short-term nature of its cash, cash equivalents, and marketable securities[166](index=166&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal control over financial reporting - Management, with the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025[167](index=167&type=chunk) - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[168](index=168&type=chunk) - Controls and procedures, due to inherent limitations and resource constraints, can only provide reasonable assurance of achieving control objectives[169](index=169&type=chunk) [Part II – Other Information](index=41&type=section&id=Part%20II%20%E2%80%93%20Other%20Information) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the company is involved in various legal proceedings in the normal course of business but does not anticipate a material adverse effect - The company is party to various legal proceedings and investigations arising in the normal course of business[171](index=171&type=chunk) - No material adverse effect on the business is anticipated from these proceedings, though litigation can have an adverse impact due to defense and settlement costs, and diversion of management resources[171](index=171&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the significant risk factors detailed in the company's Annual Report on Form 10-K, noting no material changes since that filing - Significant factors that could materially adversely affect the business are described in the 'Risk Factors' section of the Annual Report on Form 10-K for the year ended December 31, 2024[172](index=172&type=chunk) - As of the date of this Quarterly Report on Form 10-Q, there have been no material changes from the previously disclosed risk factors[172](index=172&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports that there were no unregistered sales of equity securities and no share repurchases during the three months ended June 30, 2025 - No unregistered sales of equity securities occurred[173](index=173&type=chunk) - The company did not repurchase any shares of common stock during the three months ended June 30, 2025[174](index=174&type=chunk) [Item 3. Defaults Upon Senior Securities](index=41&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities - No defaults upon senior securities were reported[175](index=175&type=chunk) [Item 4. Mine Safety Disclosures](index=41&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that Mine Safety Disclosures are not applicable to the company - Mine Safety Disclosures are not applicable to the company[176](index=176&type=chunk) [Item 5. Other Information](index=41&type=section&id=Item%205.%20Other%20Information) This section reports that no directors or Section 16 reporting officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or Section 16 reporting officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[177](index=177&type=chunk) [Item 6. Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including equity incentive plans, employment agreements, certifications, and XBRL documents - Exhibits include Amended and Restated 2023 Equity Incentive Plan, various stock option and restricted stock unit agreements, employment and change of control agreements, and certifications (31.1, 31.2, 32.1, 32.2)[182](index=182&type=chunk) - Certifications under 18 U.S.C. Section 1350 (Exhibits 32.1 and 32.2) are not deemed filed with the SEC[181](index=181&type=chunk) [SIGNATURES](index=43&type=section&id=SIGNATURES) This section contains the official signatures of the company's Chief Executive Officer and Chief Financial Officer, certifying the submission of the Quarterly Report on Form 10-Q - The report was signed on August 8, 2025, by Kevin R.M. Smith, Chief Executive Officer and President, and Michael Bourque, Executive Vice President and Chief Financial Officer[186](index=186&type=chunk)

[Executive Summary](index=1&type=section&id=Executive%20Summary) Femasys Inc. is a biomedical innovator in fertility and non-surgical birth control, achieving significant Q2 2025 milestones including regulatory approvals and commercial orders [Company Overview](index=1&type=section&id=Company%20Overview) Femasys Inc. is a leading biomedical innovator focused on making fertility and non-surgical permanent birth control solutions more accessible and cost-effective for women globally - Femasys Inc. is a leading biomedical innovator in fertility and non-surgical permanent birth control solutions[1](index=1&type=chunk) [Key Corporate Highlights (2Q 2025)](index=1&type=section&id=Corporate%20Highlights%20from%202Q%202025%20to%20date) Femasys achieved significant milestones in Q2 2025, including key regulatory approvals for FemBloc in Europe and FemaSeed/FemVue in Australia and New Zealand, securing initial commercial orders, and expanding partnerships to drive global commercialization - European Union Medical Device Regulation approval for FemBloc®, the first global regulatory endorsement for their non-surgical permanent birth control solution[3](index=3&type=chunk)[5](index=5&type=chunk) - Secured first European order for FemBloc from Spain distribution partners for approximately **$400,000**[5](index=5&type=chunk) - Announced Australian and New Zealand regulatory approvals for FemaSeed® and FemVue®, a cost-effective first step in fertility[4](index=4&type=chunk)[5](index=5&type=chunk) - Announced partnership with Carolinas Fertility Institute to offer FemaSeed in its eight locations and appointed a new Chief Commercial Officer to drive global growth[4](index=4&type=chunk)[5](index=5&type=chunk) - Completed a public offering and concurrent private placement with gross proceeds of **$4.5 million**[5](index=5&type=chunk) [Financial Performance Summary](index=2&type=section&id=Financial%20Results%20Summary) Femasys reported significant sales growth in Q2 2025, driven by FemaSeed and FemVue, alongside changes in R&D expenses and net loss for both quarterly and half-yearly periods [Financial Results (Q2 2025)](index=2&type=section&id=Financial%20Results%20for%20Quarter%20Ended%20June%2030%2C%202025) For the second quarter of 2025, Femasys reported significant sales growth driven by FemaSeed and FemVue, a decrease in R&D expenses, and a reduced net loss compared to the prior year period Key Financials (Three Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | | Sales | $409,268 | $221,484 | 84.8% | | Research and development expenses | $1,414,429 | $1,975,875 | -28.4% | | Net loss | ($4,585,922) | ($4,684,574) | -2.1% | | Net loss per share (basic & diluted) | ($0.16) | ($0.21) | -23.8% | - Sales increase was primarily due to sales of FemaSeed and FemVue[9](index=9&type=chunk) - R&D expense decrease was primarily due to commercialization of development products into inventory and reduced clinical costs, partially offset by increased compensation costs[9](index=9&type=chunk) - Cash and cash equivalents as of June 30, 2025, was approximately **$3.2 million**, with an accumulated deficit of approximately **$137.7 million**; current cash is expected to fund operations into early Q4 2025[9](index=9&type=chunk) [Financial Results (Six Months Ended June 30)](index=2&type=section&id=Financial%20Results%20for%20Six%20Months%20Ended%20June%2030%2C%202025) For the first half of 2025, Femasys experienced substantial sales growth, an increase in R&D expenses, and a higher net loss compared to the same period in the prior year Key Financials (Six Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :--------- | | Sales | $750,532 | $492,624 | 52.4% | | Research and development expenses | $4,382,901 | $3,746,606 | 17.0% | | Net loss | ($10,482,761) | ($8,284,084) | 26.5% | | Net loss per share (basic & diluted) | ($0.39) | ($0.38) | 2.6% | - Sales increase was primarily due to sales of FemaSeed and FemVue[9](index=9&type=chunk) - R&D expense increase was primarily due to increased compensation and regulatory costs, partially offset by reduced material and development costs and clinical costs[9](index=9&type=chunk) [Condensed Financial Statements](index=3&type=section&id=Condensed%20Financial%20Statements) Femasys's condensed financial statements for Q2 2025 show increased total assets and liabilities, driven by inventory and convertible notes, alongside detailed comprehensive loss figures [Condensed Balance Sheets](index=3&type=section&id=FEMASYS%20INC.%20Condensed%20Balance%20Sheets) As of June 30, 2025, Femasys reported an increase in total assets, primarily driven by inventory, and a significant increase in total liabilities, mainly due to accounts payable and convertible notes payable, while stockholders' equity decreased Condensed Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 ($) | December 31, 2024 ($) | Change ($) | | :-------------------------------- | :-------------- | :---------------- | :----- | | Cash and cash equivalents | $3,218,067 | $3,451,761 | ($233,694) | | Inventory | $5,232,738 | $3,046,323 | $2,186,415 | | Total current assets | $9,750,980 | $8,022,450 | $1,728,530 | | Total assets | $13,780,409 | $12,445,002 | $1,335,407 | | Accounts payable | $3,263,584 | $1,419,044 | $1,844,540 | | Convertible notes payable, net | $6,080,813 | $5,406,228 | $674,585 | | Total current liabilities | $10,963,607 | $8,582,869 | $2,380,738 | | Total liabilities | $12,272,974 | $10,140,580 | $2,132,394 | | Total stockholders' equity | $1,507,435 | $2,304,422 | ($796,987) | [Condensed Statements of Comprehensive Loss](index=5&type=section&id=FEMASYS%20INC.%20Condensed%20Statements%20of%20Comprehensive%20Loss) The condensed statements of comprehensive loss show increased sales and cost of sales for both the three and six-month periods ended June 30, 2025; operating expenses also increased for the six-month period, leading to higher net losses Condensed Statements of Comprehensive Loss (Three Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | | :-------------------------------- | :----------- | :----------- | | Sales | $409,268 | $221,484 | | Cost of sales | $158,171 | $73,125 | | Research and development | $1,414,429 | $1,975,875 | | Sales and marketing | $984,977 | $975,190 | | General and administrative | $1,616,972 | $1,611,817 | | Loss from operations | ($3,851,566) | ($4,482,151) | | Net loss | ($4,585,922) | ($4,684,574) | Condensed Statements of Comprehensive Loss (Six Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | | :-------------------------------- | :----------- | :----------- | | Sales | $750,532 | $492,624 | | Cost of sales | $275,437 | $161,657 | | Research and development | $4,382,901 | $3,746,606 | | Sales and marketing | $1,893,544 | $1,275,677 | | General and administrative | $3,339,685 | $3,114,621 | | Loss from operations | ($9,312,173) | ($7,944,793) | | Net loss | ($10,482,761) | ($8,284,084) | [Company Information](index=5&type=section&id=Company%20Information) Femasys is a biomedical innovator offering patent-protected fertility and non-surgical birth control solutions, with ongoing commercialization and clinical trials, while also outlining forward-looking statement risks [About Femasys](index=5&type=section&id=About%20Femasys) Femasys is a biomedical innovator providing patent-protected, in-office therapeutic and diagnostic products for fertility and non-surgical permanent birth control, actively commercializing its innovations globally and in the U.S. - Femasys offers a broad, patent-protected portfolio of novel, in-office therapeutic and diagnostic products for fertility and non-surgical permanent birth control[16](index=16&type=chunk) - Key fertility products include FemaSeed® Intratubal Insemination (over **twice as effective** as traditional IUI) and FemVue® for fallopian tube assessment[16](index=16&type=chunk) - FemBloc® is the first and only non-surgical, in-office alternative to surgical sterilization, with full European regulatory approval in June 2025, complemented by FemChec® diagnostic product[16](index=16&type=chunk) - Enrollment in the FINALE pivotal trial (NCT05977751) is ongoing for U.S. FDA approval of FemBloc[16](index=16&type=chunk) [Forward-Looking Statements](index=6&type=section&id=Forward-Looking%20Statements) This section contains forward-looking statements subject to substantial risks and uncertainties, cautioning that actual results may differ materially from expectations due to various factors, including regulatory approvals, clinical trial success, market estimates, and commercialization efforts - Forward-looking statements are subject to inherent uncertainties, risks, and assumptions, many beyond control, which could cause actual results to differ materially from expectations[20](index=20&type=chunk) - Key risk factors include the ability to obtain regulatory approvals for FemBloc, successfully complete clinical trials, demonstrate product safety and effectiveness, commercialize products, and grow sales and revenues[20](index=20&type=chunk)

[PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited condensed financial information for FIGX Capital Acquisition Corp., including financial statements, management's discussion, market risk disclosures, and controls and procedures [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed financial statements of FIGX Capital Acquisition Corp. for the period ended June 30, 2025, along with detailed notes explaining organization, accounting policies, and specific financial transactions [Unaudited Condensed Balance Sheet](index=7&type=section&id=Unaudited%20Condensed%20Balance%20Sheet) This statement provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2025 | Assets/Liabilities/Equity | Amount ($) | | :------------------------ | :--------- | | **Assets:** | | | Due from Sponsor | 1,754,055 | | Cash held in Trust Account| 150,650,000| | Total Assets | 152,404,055| | **Liabilities:** | | | Accrued expenses | 60,365 | | Accrued offering costs | 340,802 | | Promissory note – related party | 164,210 | | Deferred underwriting fee payable | 6,419,000 | | Total Liabilities | 6,984,377 | | **Equity:** | | | Class A ordinary shares subject to possible redemption | 150,650,000| | Total Shareholders' Deficit | (5,230,322)| | Total Liabilities, Class A Ordinary Shares Subject to Possible Redemption and Shareholders' Deficit | 152,404,055| [Unaudited Condensed Statements of Operations](index=8&type=section&id=Unaudited%20Condensed%20Statements%20of%20Operations) This statement outlines the company's financial performance, reporting net loss for the three months and period from inception through June 30, 2025 | Item | Three Months Ended June 30, 2025 ($) | Period from Feb 20, 2025 (Inception) Through June 30, 2025 ($) | | :------------------------ | :----------------------------------- | :------------------------------------------------------------- | | Formation and general and administrative costs | 84,359 | 114,657 | | Loss from Operations | (84,359) | (114,657) | | Share-based compensation expense | (164,499) | (164,499) | | Total other expenses | (164,499) | (164,499) | | Net loss | (248,858) | (279,156) | | Basic and diluted net loss per Class A and Class B ordinary non-redeemable share | (0.07) | (0.09) | [Unaudited Condensed Statements of Changes in Shareholders' Deficit](index=9&type=section&id=Unaudited%20Condensed%20Statements%20of%20Changes%20in%20Shareholders'%20Deficit) This statement tracks the changes in the company's shareholders' deficit from inception through June 30, 2025, reflecting share issuances, net losses, and other equity adjustments | Item | Class A Ordinary Shares (Amount) | Class B Ordinary Shares (Amount) | Additional Paid-in Capital ($) | Accumulated Deficit ($) | Total Shareholders' Deficit ($) | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :---------------------- | :------------------------------ | | Balance as of Feb 20, 2025 (inception) | — | — | — | — | — | | Class B ordinary shares issued to Sponsor | — | 388 | 24,612 | — | 25,000 | | Net loss (Feb 20 - Mar 31, 2025) | — | — | — | (30,298) | (30,298) | | Balance at March 31, 2025 | — | 388 | 24,612 | (30,298) | (5,298) | | Sale of Private Placement Units | 44 | — | 4,434,656 | — | 4,434,700 | | Fair value of Public Warrants at issuance | — | — | 1,438,708 | — | 1,438,708 | | Allocated value of transaction costs to Class A ordinary redeemable shares | — | — | (106,636) | — | (106,636) | | Share-based compensation | — | — | 164,499 | — | 164,499 | | Accretion for common stock to redemption amount | — | — | (5,955,839) | (4,951,598) | (10,907,437) | | Net loss (Apr 1 - Jun 30, 2025) | — | — | — | (248,858) | (248,858) | | Balance at June 30, 2025 | 44 | 388 | — | (5,230,754) | (5,230,322) | [Unaudited Condensed Statement of Cash Flows](index=10&type=section&id=Unaudited%20Condensed%20Statement%20of%20Cash%20Flows) This statement details the cash inflows and outflows from operating, investing, and financing activities for the period from inception through June 30, 2025 | Cash Flow Activity | Period from Feb 20, 2025 (Inception) Through June 30, 2025 ($) | | :------------------------ | :------------------------------------------------------------- | | **Operating Activities:** | | | Net loss | (279,156) | | Adjustments: | | | Payment of formation and general and administrative costs through promissory note – related party | 54,292 | | Share-based compensation expense | 164,499 | | Changes in operating assets and liabilities: Accrued expenses | 60,365 | | Net cash used in operating activities | — | | **Investing Activities:** | | | Investment of cash into Trust Account | (150,650,000) | | Net cash used in by investing activities | (150,650,000) | | **Financing Activities:** | | | Proceeds from sale of Units, net of underwriting discounts paid | 148,030,000 | | Proceeds from sale of Private Placement Units | 4,434,700 | | Due from Sponsor | (1,754,055) | | Payment of offering costs | (60,645) | | Net cash provided by financing activities | 150,650,000 | | Net Change in Cash | — | | Cash – End of period | — | | **Noncash Activities:** | | | Offering costs included in accrued offering costs | 340,802 | | Offering costs paid by Sponsor in exchange for issuance of Class B ordinary shares | 25,000 | | Offering costs paid through promissory note – related party | 109,918 | [Notes to Unaudited Condensed Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed financial statements, covering accounting policies, related party transactions, and commitments [NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS](index=11&type=section&id=NOTE%201.%20DESCRIPTION%20OF%20ORGANIZATION%20AND%20BUSINESS%20OPERATIONS) FIGX Capital Acquisition Corp. is a blank check company incorporated on February 20, 2025, aiming to complete a Business Combination, primarily in the financial and business services industry - The Company was incorporated on **February 20, 2025**, as a **blank check company** to effect a **Business Combination**, focusing on the financial and business services industry[23](index=23&type=chunk) - On **June 30, 2025**, the Company consummated its **Initial Public Offering** of **15,065,000 units** at **$10.00 per unit**, generating **gross proceeds** of **$150,650,000**, including the full exercise of the **over-allotment option**[26](index=26&type=chunk) - Simultaneously, **443,470 Private Placement Units** were sold to the **Sponsor** and **Cantor** at **$10.00 per unit**, generating **gross proceeds** of **$4,434,700**[26](index=26&type=chunk) - **Transaction costs** totaled **$9,575,365**, comprising a **$2,620,000** cash underwriting fee, **$6,419,000 deferred underwriting fee**, and **$536,365** in other offering costs[27](index=27&type=chunk) - A total of **$150,650,000** from the **net proceeds** of the **IPO** and **Private Placement Units** is held in a **Trust Account**, to be released upon completion of a **Business Combination** or redemption of public shares[31](index=31&type=chunk) [NOTE 2. SIGNIFICANT ACCOUNTING POLICIES](index=14&type=section&id=NOTE%202.%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section details the significant accounting policies adopted by FIGX Capital Acquisition Corp., including its basis of presentation under GAAP for interim financial information and specific policies for estimates, cash in trust, and share-based compensation - The financial statements are prepared in accordance with **GAAP** for interim financial information and **SEC regulations**, with certain disclosures condensed or omitted[41](index=41&type=chunk) - The Company is an '**emerging growth company**' and has elected to use the extended transition period for complying with new or revised financial accounting standards[44](index=44&