Vita Coco Company, Inc.

Previous wording

Our branded portfolio is led by our Vita Coco brand, which is the leader in the coconut water category in the U.S., and also includes coconut oil, juice, and milk offerings. Our other brands include Ever & Ever, a sustainably packaged water, and PWR LIFT, a protein-infused fitness drink. We also previously offered Runa, a plant-based energy drink inspired by the guayusa plant native to Ecuador, which we ceased selling in December 2023. We supply private label products to key retailers in both the coconut water and coconut oil categories. Additionally, we generate revenue from bulk product sales to beverage and food companies.

Current wording

Our branded portfolio is led by our Vita Coco brand, which is the leader in the coconut water category in the U.S., and also includes coconut oil, juice, and milk offerings. Our portfolio also includes PWR LIFT, a protein-infused fitness drink. We also previously offered Runa, a plant-based energy drink inspired by the guayusa plant native to Ecuador, which we ceased selling in December 2023 and impaired all remaining assets in September 2025. Additionally, we supply Private Label products to key retailers in both the coconut water and coconut oil categories and generate revenue from bulk product sales to beverage and food companies.

Previous wording

We source our coconut water from a diversified global network of 17 factories across seven countries supported by thousands of coconut farmers. As we do not own any of these factories, our supply chain is a fixed asset-lite model designed to better react to changes in the market or consumer preferences. We also work with co-packers across four countries to support local packaging and repacking of our products and to better service our customers’ needs.

Current wording

We source our coconut water from a diversified global network of approximately 16 factories across six countries supported by thousands of coconut farmers. As we do not own any of these factories, our supply chain is a fixed asset-lite model designed to better react to changes in the market or consumer preferences. We also work with co-packers to support local packaging and repacking of our products and to better service our customers’ needs.

Previous wording

Vita Coco is available in over 35 countries, with our primary markets in North America, the U.K., and Germany. Our primary markets for private label are North America and Europe. Our products are distributed primarily through club, food, drug, mass, convenience, e-commerce, and foodservice channels. Our products are also available in a variety of on-premise locations such as corporate offices, fitness clubs, airports, and educational institutions.

Current wording

Vita Coco is available in over 35 countries, with our primary markets in North America, the United Kingdom, and Germany. Our primary markets for Private Label are North America and Europe. Our products are distributed primarily through club, food, drug, mass, convenience, e-commerce, and food service channels. Our products are also available in a variety of on-premise locations such as corporate offices, fitness clubs, airports, and educational institutions.

Previous wording

We experienced significant inflation and instability on transportation costs over the past three years, which affected our costs and margins significantly. Although we saw these transportation costs return to near pre-pandemic levels in the middle of 2023, in 2024, we saw significant cost increases and supply constraints caused by recent geopolitical disruption. We expect instability in pricing to continue caused by recent geopolitical disruption of shipping lanes due to ocean carriers avoiding the Gulf of Aden and Red Sea regions due primarily to concerns that Houthi forces, based in Yemen, may attack freighters. We experienced spot cost increases for ocean freight routes from Asia, and then more significant cost increases when carriers began to route away from the Suez Canal. As a result, beginning in the late spring of 2024 and for most of the summer, we were challenged to secure the ocean container capacity that we needed. In early October 2024, the east coast ports of the U.S. experienced a labor strike that temporarily shut those ports, resulting in some delays even after the ports reopened. While a deal has been announced to enter into a new labor agreement, and no port disruption is expected, it is unclear if a final agreement has been ratified, so some disruption risk remains. When disruptions like port strikes are anticipated, the ocean freight carriers may issue notices of impending surcharges to be applied if the disruption occurs, which creates uncertainty as to our actual expected costs. The changes in shipping container prices and service levels and cost increases in shipping and port congestion related costs have materially impacted our financial results in recent years. Due to the price sensitivity of our products, we may not be able to pass such increases on to our customers without impacting our volume, revenue, margins, and operating results and we have no certainty when these pressures may lessen. The Company is continuing to monitor the situation carefully to understand any future potential impact on its people and business.

Current wording

We also experienced significant inflation and instability on transportation costs over the past four years, which affected our costs and margins significantly. Although we saw these transportation costs return to near pre-pandemic levels in the middle of 2023, in 2024, we saw significant cost increases and supply constraints caused by geopolitical disruption. We experienced instability in pricing and increased transit times, due to ocean carriers avoiding the Gulf of Aden and Red Sea regions due primarily to concerns that Houthi forces, based in Yemen, may attack freighters. Beginning in the late spring of 2024 and for most of that summer, we were challenged to secure the ocean container capacity that we needed. During 2025, we saw periodic cost surges on ocean freight costs that were unexpected, although generally through the year saw a decline in rates ending the year closer to pre-pandemic levels. The changes in shipping container prices and service levels and cost increases in shipping and port congestion related costs have materially impacted our financial results in recent years and may do so in the future. Due to the price sensitivity of our products, we may not be able to pass such increases on to our customers without impacting our volume, revenue, margins, and operating results and we have no certainty when these pressures may lessen. The Company is continuing to monitor the situation carefully to understand any future potential impact on its people and business.

Previous wording

Coconut water accounted for 96% of our revenue for the year ended December 31, 2024 and we believe that sales of coconut water will continue to be a significant portion of our business in the foreseeable future. The coconut water category has been growing steadily in recent years and our Vita Coco brand has successfully retained over 40% market share in the U.S. and over 82% market share in the U.K. in this category. We are also a significant supplier of private label coconut water and coconut oil products in the U.S. and Europe. Any material negative change to consumer demand for our products or coconut water generally, failure to grow the coconut water category, or loss of significant private label demand, could adversely affect our business. Consumer demand between branded products and private label may vary over time. In order to meet this consumer demand for our products, we also are subject to the risk of overly relying upon our largest customers for both our branded and private label business. For example, in 2023, we started the discontinuation of the private label coconut water and coconut oil supply relationship with one of our significant customers as the terms required to retain the business were contrary to our long term margin targets. While we continued the supply relationship for a significant portion of their private label coconut water needs in 2024 at the customer's request, we are expecting the loss of further regions that we serviced for this customer during 2024. We will continue to service their needs if we are asked and it aligns with our long-term margin targets. Any loss of business or changes in our relationships with our key customers can impact our operating results in future periods, as may changes in consumer demand for private label versus branded products.

Current wording

Coconut water accounted for 96% of our revenue for the year ended December 31, 2025 and we believe that sales of coconut water will continue to be a significant portion of our business in the foreseeable future. The coconut water category has been growing steadily in recent years and our Vita Coco brand has successfully retained over 40% market share in the U.S. and over 80% market share in the U.K. in this category. We are also a significant supplier of Private Label coconut water and coconut oil products in the U.S. and Europe. Any material negative change to consumer demand for our products or coconut water generally, failure to grow the coconut water category, or loss of significant Private Label demand, could adversely affect our business. Consumer demand between branded products and Private Label may vary over time. In order to meet this consumer demand for our products, we also are subject to the risk of overly relying upon our largest customers for both our branded and Private Label business. One of our significant customers discontinued the Private Label coconut oil supply relationship in early 2024, and we also experienced an impact in Private Label coconut water net sales in 2025 with this customer due to the loss of some regions that we previously serviced for this customer. However, this customer has requested to restart supply in early 2026 for one of those lost regions. We will continue to service their needs if we are asked and it aligns with our long-term margin targets. Any loss of business or changes in our relationships with our key customers can impact our operating results in future periods, as may changes in consumer demand for Private Label versus branded products.

Previous wording

The beverage industry is subject to shifting consumer preferences which present opportunities for new beverage occasions, tastes and functional benefits. Our future success is therefore partially dependent on our ability to identify these trends and develop products and brands that effectively meet those needs. We also invest in sales and marketing and execute our sales strategy to develop and deepen consumers’ connection to our brand and new products and to create category growth and increase our branded share. Our innovation efforts focus on developing and marketing product extensions, improving upon the quality and taste profiles of existing products, and introducing new products or brands to meet evolving consumer needs. For example, in 2024 we introduced Vita Coco Treats, a refreshingly sweet, flavorful coconutmilk-based drink for consumers looking for an indulgent treat. In 2025, we intend to expand distribution of Vita Coco Treats to select retailers nationwide.

Current wording

The beverage industry is subject to shifting consumer preferences which present opportunities for new beverage occasions, tastes and functional benefits. Our future success is therefore partially dependent on our ability to identify these trends and develop products and brands that effectively meet those needs. We also invest in sales and marketing and execute our sales strategy to develop and deepen consumers’ connection to our brand and new products and to create category growth and increase our branded share. Our innovation efforts focus on developing and marketing product extensions, improving upon the quality and taste profiles of existing products, and introducing new products or brands to meet evolving consumer needs. For example, in 2024 we introduced Vita Coco Treats, a refreshingly sweet, flavorful coconut milk-based drink for consumers looking for an indulgent treat. In 2025, we expanded distribution of Vita Coco Treats to retailers nationwide.

Previous wording

To aid the growth of our business, we intend to continue improving our operational efficiency and leverage our brand position across channels, and therefore have a balanced approach to investment and development of capabilities in retail and e-commerce execution. Our DSD network is an important asset in executing physical retail programs and ensuring product availability and visibility in the U.S. In 2024, we offered more multi-packs in coconut water in U.S. retail to increase consumption with core consumers, and increased distribution of our other product offerings. Managing our DSD network requires relationship building and communication as to plans, and alignment of goals and interests, and we are not always a top priority for our DSD network. We also continue to expand our business in e-commerce, including our DTC business, and look to adapt our approaches as consumer and retail behavior changes to ensure we remain competitive and visible regardless of channel.

Current wording

To aid the growth of our business, we intend to continue improving our operational efficiency and leverage our brand position across channels, and therefore have a balanced approach to investment and development of capabilities in retail and e-commerce execution. Our DSD network is an important asset in executing physical retail programs and ensuring product availability and visibility in the U.S. In 2025, we continued to prioritize multi-packs in coconut water in U.S. retail to increase consumption with core consumers, and increased distribution of our other product offerings. Managing our DSD network requires relationship building and communication as to plans, and alignment of goals and interests, and we are not always a top priority for our DSD network. We also continue to expand our business in e-commerce, including our DTC business, and look to adapt our approaches as consumer and retail behavior changes to ensure we remain competitive and visible regardless of channel.

Previous wording

Cost of goods sold includes the costs of the products sold to customers, inbound and outbound shipping and handling costs, freight and duties, shipping and packaging supplies, and warehouse fulfillment costs.

Current wording

Cost of goods sold includes the costs of the products sold to customers, inbound and outbound shipping and handling costs, freight and duties (including tariffs), shipping and packaging supplies, and warehouse fulfillment costs.

Previous wording

•International—The International segment is comprised of our operations primarily in Europe, the Middle East, and the Asia Pacific regions.

Current wording

•International—The International segment is comprised of our operations primarily in Europe, the Middle East, and the Asia Pacific regions, which includes our sourcing entity.

Previous wording

•Other—This product category consists of all other products, which included Runa(until we ceased selling it in December 2023), and includes Ever & Everand PWR LIFT product offerings, Vita Coco product extensions beyond coconut water, coconut milk products, and other revenue transactions (e.g., bulk product sales). For these products, control is transferred upon customer receipt, at which point the Company recognizes the transaction price for the product as revenue.

Current wording

•Other—This product category includes Vita Coco product extensions beyond coconut water, such as coconut milk products, including Vita Coco Treats; PWR LIFT; Ever & Ever; Runa (until the Company ceased selling in December 2023); Vita Coco coconut oil sold internationally; and other revenue transactions (e.g., bulk product sales). For these products, control is transferred upon customer receipt, at which point we recognize the transaction price for the product as revenue.

Previous wording

The increase in net sales was driven by higher coconut water CE volumes across both the Americas and International segments, including Vita Coco Coconut Water volume growth of 5.8% and improved Vita Coco Coconut Water pricing due to reduced retailer promotional activity, partially offset by the transition of private label oil business.

Current wording

The increase in net sales was driven by higher coconut water CE volumes across both the Americas and International segments, including Vita Coco Coconut Water volume growth of 21.3% and increased Vita Coco Coconut Water pricing, partially offset by reduced Private Label water volume due to lost regions with key retailers.

Previous wording

Americas net sales increased by $12.1 million, or 2.8%, to $442.3 million for the year ended December 31, 2024, from $430.2 million for the year ended December 31, 2023, primarily driven by CE volume growth of 2.7% with additional benefit from branded pricing. These increases were partially offset by a decline in private label volume due to the transition out of private label oil at a key customer, and supply constraints impacting private label coconut water.

Current wording

Americas net sales increased $66.4 million, or 15.0%, primarily driven by CE volume growth of 11.2% with additional benefit from branded pricing. These increases were partially offset by a decline in Private Label sales in certain regions of key retailers.

Previous wording

Vita Coco Coconut Water net sales increased by $26.1 million, or 8.2%, to $343.3 million for the year ended December 31, 2024, from $317.2 million for the year ended December 31, 2023. The increase was primarily driven by a combination of increased CE volume growth and benefits from pricing actions.

Current wording

Vita Coco Coconut Water net sales increased $81.0 million, or 23.6%, reflecting a combination of increased CE volume growth and benefits from net pricing actions.

Previous wording

During the year ended December 31, 2024, we recorded an unrealized loss of $8.2 million for the mark-to-market changes in the fair value on the outstanding derivative instruments for forward foreign currency exchange contracts, with the largest loss for the year ended December 31, 2024 related to the contracts hedging the Brazilian real, offset by gains in British Pound, Euro, and Canadian dollar. During the year ended December 31, 2023, we recorded an unrealized loss of $0.9 million relating to outstanding derivative instruments for forward foreign currency exchange contracts. All forward foreign currency exchange contracts were entered to hedge some of our exposures to the British pound, Canadian dollar, Brazilian real, Malaysian ringgit, Euro, and Thai baht.

Current wording

For the year ended December 31, 2025, we recorded an unrealized gain of $4.7 million related to mark-to-market changes on outstanding forward foreign currency exchange contracts, with the gains related to contracts hedging the Brazilian real and Thai baht, partially offset by losses on the British Pound, Euro, and Canadian dollar. During the year ended December 31, 2024, we recorded an unrealized loss of $8.2 million, primarily related to outstanding forward foreign currency exchange contracts hedging the Brazilian real, partially offset by gains on the British Pound, Euro, and Canadian dollar. All forward foreign currency exchange contracts were entered into to hedge exposures to the British pound, Canadian dollar, Brazilian real, Malaysian ringgit, Euro, and Thai baht.

Previous wording

Foreign currency loss was $1.6 million for the year ended December 31, 2024, as compared to a $0.3 million loss for the year ended December 31, 2023. The change in both years was a result of movements in various foreign currency exchange rates related to transactions denominated in currencies other than the functional currency.

Current wording

Foreign currency loss was $1.0 million, compared to a $1.6 million loss for the prior year driven by movements in various foreign currency exchange rates on transactions denominated in currencies other than the functional currency.

Previous wording

Income tax expense was $14.8 million for the year ended December 31, 2024, as compared to $11.3 million for the year ended December 31, 2023. The effective combined federal, state and foreign tax rate increased to 21.0% from 19.5% for the years ended December 31, 2024 and 2023, respectively.

Current wording

Income tax expense was $21.7 million in the year ended December 31, 2025 compared to $14.8 million in the prior year. The effective combined federal, state, and foreign tax rate increased to 23.3% from 21.0% for the years ended December 31, 2025 and 2024, respectively.

Previous wording

(c)Reflects other non-recurring expenses related to costs associated with two secondary offerings in which Verlinvest Beverages SA sold shares of the Company. The shares were sold in an underwritten public offering, which closed on May 26, 2023 and a block trade that was executed on November 9, 2023. The Company did not receive any proceeds from the sale of the shares.

Current wording

(c)Reflects an expense waiver of certain costs associated with a secondary offering in which Verlinvest Beverages SA sold shares of the Company. The shares were sold in a block trade that was executed on November 9, 2023. The Company did not receive any proceeds from the sale of the shares.

Previous wording

(d)For the year ended December 31, 2024, the amount reflects the write-off of prepayments made to a supplier for inventory orders. In November 2024, we learned that the supplier failed to produce the orders placed and paused operations. Further, the supplier did not provide a refund for such orders. For the year ended December 31, 2023, the amount relates to the impairment loss of assets held for sale.

Current wording

(d)For the year ended December 31, 2025, the amount reflects $2.4 million related to a one-time 2023 incentive program that is measured based on full-year 2025 performance relative to 2022 structured differently from our other ongoing employee incentive programs, $1.2 million of overlapping rent expense related to our New York City office, $0.2 million of impairment loss related to Runa, and a gain of $0.2 million from a sale of intellectual property. For the year ended December 31, 2024, the amount reflects the write-off of prepayments made to a supplier for inventory orders. In November 2024, we learned that the supplier failed to produce the orders placed and paused operations. Further, the supplier did not provide a refund for such orders.

Previous wording

Since our inception, we have financed our operations primarily through cash generated from our business operations and proceeds on borrowings through our credit facilities and term loans. We had $164.7 million and $132.5 million of cash and cash equivalents as of December 31, 2024 and 2023, respectively.

Current wording

Since our inception, we have financed our operations primarily through cash generated from our business operations and proceeds on borrowings through our credit facilities and term loans. We had $196.9 million and $164.7 million of cash and cash equivalents as of December 31, 2025 and 2024, respectively.

Previous wording

Considering recent market conditions and our business assumptions, we have reevaluated our operating cash flows and cash requirements and believe that current cash, cash equivalents, future cash flows from operating activities and cash available under our 2020 Credit Facility will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the condensed consolidated financial statements included herein and the foreseeable future.

Current wording

Considering recent market conditions and our business assumptions, we have reevaluated our operating cash flows and cash requirements and believe that current cash, cash equivalents, future cash flows from operating activities and cash available under our Credit Facility will be sufficient to meet our anticipated cash needs, including working capital needs, capital expenditures and contractual obligations for at least 12 months from the issuance date of the consolidated financial statements included herein and the foreseeable future.

Previous wording

During the year ended December 31, 2024 as compared to the year ended December 31, 2023, cash used in investing activities increased $0.4 million due to equipment purchases and technology related capital expenditures.

Current wording

During the year ended December 31, 2025 as compared to the year ended December 31, 2024, cash used in investing activities increased $7.3 million. The increase was primarily due to leasehold improvements related to the new New York, London, and Singapore offices.

Previous wording

During the year ended December 31, 2024 compared to the year ended December 31, 2023, net cash used by financing activities increased $14.6 million, primarily driven by share repurchases that occurred in 2024 and lower proceeds from stock award exercises. See Note 14, Stockholders' Equity, for further discussion on share repurchases.

Current wording

During the year ended December 31, 2025 compared to the year ended December 31, 2024, net cash used by financing activities decreased $0.8 million, primarily driven by fewer share repurchases that occurred in 2025 compared to 2024. See Note 14, Stockholders' Equity, for further discussion on share repurchases.

Previous wording

In May 2020, the Company entered into the 2020 Credit Facility with Wells Fargo Bank, National Association consisting of a revolving line of credit, which currently provides for committed borrowings of $60 million. On February 14, 2024, the 2020 Credit Facility was amended and extended for five years, with an amended maturity date of February 13, 2030.

Current wording

In May 2020, the Company entered into the Credit Facility with Wells Fargo Bank, National Association consisting of a revolving line of credit, which currently provides for committed borrowings of $60 million. On February 14, 2025, the Credit Facility was amended, extending the maturity five years to February 13, 2030.

Previous wording

Starting in December 2022, borrowings on the 2020 Credit Facility bear interest at rates based on either: 1) a fluctuating rate per annum determined to be the sum of Daily Simple Secured Overnight Financing Rate ("SOFR") plus a spread defined in the credit agreement (the "Spread"); or 2) a fixed rate per annum determined to be the sum of the Term SOFR plus the Spread. The Spread ranges from 1.00% to 1.75%, which is based on the Company’s leverage ratio (as defined in the credit agreement) for the immediately preceding fiscal quarter as defined in the credit agreement. In addition, the Company was subject to an unused commitment fee ranging from 0.10% and 0.20% on the unused amount of the line of credit in the year ended December 31, 2024, with the rate based on the Company’s leverage ratio (as defined in the credit agreement). Beginning on February 14, 2025, the unused commitment fees will range from 0.125% to 0.225%.

Current wording

Starting in December 2022, borrowings on the Credit Facility bear interest at rates based on either: 1) a fluctuating rate per annum determined to be the sum of Daily Simple Secured Overnight Financing Rate ("SOFR") plus a spread defined in the credit agreement (the "Spread"); or 2) a fixed rate per annum determined to be the sum of the Term SOFR plus the Spread. The Spread ranges from 1.00% to 1.75%, which is based on the Company’s leverage ratio (as defined in the credit agreement) for the immediately preceding fiscal quarter as defined in the credit agreement. In addition, through February 13, 2025, the Company was subject to an unused commitment fee ranging from 0.10% and 0.20% on the unused amount of the line of credit, with the rate based on the Company’s leverage ratio (as defined in the credit agreement). Starting February 14, 2025, the unused commitment fees ranged from 0.13% and 0.23% on the unused amount of the line of credit, with the rate being based on the Company’s leverage ratio (as defined in the credit agreement).

Previous wording

There were no amounts drawn on the Revolving Facility as of December 31, 2024 and December 31, 2023, respectively. As of December 31, 2024, we were compliant with all financial covenants.

Current wording

There were no amounts drawn on the Credit Facility as of December 31, 2025 and December 31, 2024, respectively. As of December 31, 2025, we were compliant with all financial covenants.

Previous wording

We periodically enter into vehicle loans. Interest rate on these vehicle loans range from 4.56% to 5.68%. The outstanding balance on the vehicle loans as of December 31, 2024 was less than $0.1 million.

Current wording

We periodically enter into vehicle loans. Interest rate on these vehicle loans range from 4.56% to 5.68%. The outstanding balance on the vehicle loans as of December 31, 2025 was immaterial.

Previous wording

We have contractual obligations to repay indebtedness and required interest payments and unused commitment fees under our Revolving Facility and vehicle loans. As of December 31, 2024, we had no outstanding balance on the Revolving Facility. Any future outstanding balances on the Revolving Facility will be required to be repaid by February 2030.

Current wording

We have contractual obligations to repay indebtedness and required interest payments and unused commitment fees under our Credit Facility and vehicle loans. As of December 31, 2025, we had no outstanding balance on the Credit Facility. Any future outstanding balances on the Credit Facility will be required to be repaid by February 2030.

Previous wording

We lease certain assets under noncancelable operating leases, which expire through 2025. The leases relate primarily to office space in addition to machinery and equipment. Future minimum commitments under these leases are $0.4 million as of December 31, 2024.

Current wording

We lease certain assets under noncancelable operating leases, which expire through 2034 relating to our office spaces. Future minimum commitments under these leases are 18.6 million as of December 31, 2025.

Previous wording

The Company provides trade promotions and sales discounts to its customers and distributors. Since these sales promotions and sales discounts do not meet the criteria for a distinct good or service, they are primarily accounted for as a reduction of revenue and include payments to customers and distributors for performing activities on our behalf, such as payments for in-store displays, payments to gain distribution of new products, payments for shelf space and discounts to promote lower retail prices. These consolidated financial statements include accruals for these promotion and discounts. The accruals are made for invoices that have not yet been received as of year-end and are recorded as a reduction of sales, and are based on contract terms and our historical experience with similar programs and require management judgement with respect to estimating customer and consumer participation and performance levels.

Current wording

The Company provides trade promotions and sales discounts to its customers and distributors. Since these sales promotions and sales discounts do not meet the criteria for a distinct good or service, they are primarily accounted for as a reduction of revenue and include payments to customers and distributors for performing activities on our behalf, such as payments for in-store displays, payments to gain distribution of new products, payments for shelf space and discounts to promote lower retail prices. These consolidated financial statements include accruals for these promotions and discounts. The accruals are made for invoices that have not yet been received as of year-end and are recorded as a reduction of sales, and are based on contract terms and our historical experience with similar programs and require management judgment with respect to estimating customer and consumer participation and performance levels.

Previous wording

The Company has determined that there are three reporting units for purposes of testing goodwill for impairment. The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value. In performing the qualitative assessment, the Company reviews factors both specific to the reporting units and to the Company as a whole, such as financial performance, macroeconomic conditions, industry and market considerations, and the fair value of each reporting unit at the last valuation date. If the Company elects this option and believes, as a result of the qualitative assessment, that it is more likely than not that the carrying value of each of the reporting units exceeds their fair value, the quantitative impairment test is required; otherwise, no further testing is required.

Current wording

We have determined that there are three reporting units for purposes of testing goodwill for impairment. The Company first assesses qualitative factors to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value. In performing the qualitative assessment, the Company reviews factors both specific to the reporting units and to the Company as a whole, such as financial performance, macroeconomic conditions, industry and market considerations, and the fair value of each reporting unit at the last valuation date. If the Company elects this option and believes, as a result of the qualitative assessment, that it is more likely than not that the carrying value of each of the reporting units exceeds their fair value, the quantitative impairment test is required; otherwise, no further testing is required.

Previous wording

Alternatively, the Company may elect to bypass the qualitative assessment and perform the quantitative impairment test instead, or if the Company reasonably determines that it is more-likely-than-not that the fair value is less than the carrying value, the Company performs its annual, or interim, goodwill impairment test by comparing the fair value of each of the reporting units with their carrying amount. The fair value of each of the reporting units is estimated by blending the results from the income approach and the market multiples approach. These valuation approaches consider a number of factors that include, but are not limited to, expected future cash flows, growth rates, discount rates, and comparable multiples from publicly-traded companies in our industry, and require us to make certain assumptions and estimates regarding industry economic factors and future profitability of our business. It is our policy to conduct impairment testing based on our most current business plans, projected future revenues and cash flows, which reflect changes we anticipate in the economy and the industry. The cash flows are based on five-year financial forecasts developed internally by management and are discounted to a present value using discount rates that properly account for the risk and nature of the respective reporting unit’s cash flows and the rates of return market participants would require to invest their capital in our reporting unit. The Company will recognize an impairment for the amount by which the carrying amount exceeds a reporting unit’s fair value. For the years ended December 31, 2024 and 2023, there were no impairments recorded.

Current wording

Alternatively, we may elect to bypass the qualitative assessment and perform the quantitative impairment test instead, or if we reasonably determine that it is more-likely-than-not that the fair value is less than the carrying value, we perform its annual, or interim, goodwill impairment test by comparing the fair value of each of the reporting units with their carrying amount. The fair value of each of the reporting units is estimated by blending the results from the income approach and the market multiples approach. These valuation approaches consider a number of factors that include, but are not limited to, expected future cash flows, growth rates, discount rates, and comparable multiples from publicly-traded companies in our industry, and require us to make certain assumptions and estimates regarding industry economic factors and future profitability of our business. It is our policy to conduct impairment testing based on our most current business plans, projected future revenues and cash flows, which reflect changes we anticipate in the economy and the industry. The cash flows are based on five-year financial forecasts developed internally by management and are discounted to a present value using discount rates that properly account for the risk and nature of the respective reporting unit’s cash flows and the rates of return market participants would require to invest their capital in our reporting unit. We will recognize an impairment for the amount by which the carrying amount exceeds a reporting unit’s fair value. For the years ended December 31, 2025 and 2024, there were no impairments recorded.