QXO, Inc.

1. Description of Business

QXO, Inc. (“QXO” or the “Company”) is the largest publicly-traded distributor of roofing, waterproofing and complementary building products in North America. The Company serves customers in all 50 states throughout the United States (the “U.S.”) andseven provinces in Canada. QXO plans to become the tech-enabled leader in the $800 billion building products distribution industry and is targeting $50 billion in annual revenues within the next decade through accretive acquisitions and organic growth.

Prior to the Beacon Acquisition (as defined below), QXO was primarily a technology solutions and professional services company, providing critical software applications, consulting and other professional services.

On April 29, 2025 (the “Beacon Closing Date”), the Company completed its acquisition of Beacon Roofing Supply, Inc. (“Beacon”), pursuant to the Agreement and Plan of Merger, dated as of March 20, 2025 (the “Beacon Merger Agreement”), by and among QXO, Beacon, and Queen MergerCo, Inc., a Delaware corporation and wholly-owned subsidiary of QXO (“Beacon Merger Sub”). Pursuant to the terms of the Beacon Merger Agreement, Beacon Merger Sub merged with and into Beacon (the “Beacon Acquisition”), with Beacon surviving as a wholly-owned subsidiary of QXO and being renamed QXO Building Products, Inc. (“QXO Building Products”), and the Company completed its acquisition of Beacon for a net purchase price of $10.64 billion.

Recent Developments

Acquisition of Kodiak

On April 1, 2026 (the “Kodiak Closing Date”), pursuant to the terms of the Agreement and Plan of Merger, dated as of February 10, 2026 (the “Kodiak Merger Agreement”), by and among QXO, Kodiak Building Partners, Inc., a Delaware corporation (“Kodiak”), Juno Merger Sub, Inc., a wholly-owned subsidiary of QXO (“Kodiak Merger Sub”), and CSC Shareholder Services LLC, in its capacity as shareholder representative (“CSC”), Kodiak Merger Sub merged with and into Kodiak (the “Kodiak Acquisition”), with Kodiak surviving as an indirect, wholly-owned subsidiary of QXO. The Company completed its acquisition of Kodiak for a net purchase price of $2.22 billion.

In connection with the closing of the Kodiak Acquisition, pursuant to the terms of the Investment Agreement, dated as of January 5, 2026 (as amended, the “Series C Investment Agreement”), between QXO and with AP Quince Holdings, L.P., a fund managed by affiliates of Apollo Global Management, Inc., and the other investors party thereto (collectively, the “Series C Investors”), the Company issued 200,000 shares of Series C Preferred Stock (as defined in Note 6) to the Series C Investors for $2.0 billion in gross proceeds, which was used to fund a portion of the Kodiak Acquisition. The remaining purchase price was financed through the issuance of 13.3 million shares of QXO common stock to Kodiak equityholders.

Acquisition of TopBuild

On July 1, 2026 (the “TopBuild Closing Date”), pursuant to the terms of the Agreement and Plan of Merger, dated as of April 18, 2026 (the “TopBuild Merger Agreement”), by and among QXO, TopBuild Corp. (“TopBuild”), Titanium MergerCo, Inc., a Delaware corporation and wholly-owned subsidiary of QXO (“Titanium Merger Sub”), and Titanium MergerCo 2, LLC, a Delaware limited liability company and wholly-owned subsidiary of QXO (“Forward Merger Sub”), Titanium Merger Sub merged with and into TopBuild (the “Titanium Merger”), with TopBuild surviving the Titanium Merger as a wholly-owned subsidiary of QXO and immediately thereafter, TopBuild merged with and into Forward Merger Sub (the “Forward Merger” and, together with the Titanium Merger, the “TopBuild Acquisition”), with Forward Merger Sub surviving the Forward Merger as a wholly-owned subsidiary of QXO. The Company completed its acquisition of TopBuild for a purchase price of approximately $15 billion.

In connection with the closing of the TopBuild Acquisition, QXO issued approximately 312.0 million shares of QXO common stock to former holders of TopBuild Shares (as defined in Note 3), issued an additional 100,000 shares of Series C Preferred Stock (as defined in Note 6) to the Series C Investors for $1.0 billion in gross proceeds, incurred an incremental term loan for $3.0 billion in gross proceeds and released from escrow $3.0 billion in gross proceeds from the issuance of 6.500% Senior Notes due 2031 and 6.875% Senior Notes due 2034, all of which were used to fund the TopBuild Acquisition and pay related fees and expenses.

2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to state fairly the financial position of the Company as of June 30, 2026 and December 31, 2025, the results of operations for the three and six months ended June 30, 2026 and 2025, and cash flows for the six months ended June 30, 2026 and 2025 in accordance with accounting principles generally accepted in the U.S. (“GAAP”). These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and consequently have been condensed and do not include all required disclosures in an Annual Report on Form 10-K. The unaudited condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on February 27, 2026. All inter-company transactions and accounts have been eliminated in consolidation.

As the legacy Beacon business comprised substantially all of the Company at the time of its consummation and had significantly larger operations compared to the Company prior to the Beacon Acquisition, QXO determined that Beacon was the predecessor entity (“predecessor”) to QXO for financial reporting purposes. The Company also determined that the Beacon Acquisition represented a fundamental change in QXO’s operations.

In the second quarter of 2026, the Company changed its rounding presentation of these condensed consolidated financial statements and notes to the nearest whole million, except for share or per share data or as otherwise indicated. The change in rounding presentation has been applied to all prior-year amounts presented. In certain circumstances, this change resulted in adjustments to previously reported balances; however, such adjustments were not significant, and no other changes were made to previously reported financial information.

Use of Estimates

The preparation of unaudited financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of these unaudited condensed consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Significant items subject to such estimates include inventories, purchase price allocations, income taxes and vendor rebates receivable. Actual results could differ from those estimates.

Business Combinations

The Company records acquisitions resulting in the consolidation of a business using the acquisition method of accounting. Under this method, the Company records the assets acquired, including intangible assets that can be identified, and liabilities assumed based on their estimated fair values at the date of acquisition. Various Level 3 (as hereinafter defined) fair value assumptions are used in the determination of these estimated fair values, including items such as sales growth rates, cost synergies, customer attrition rates, discount rates, and other prospective financial information. The purchase price in excess of the fair value of the assets acquired and liabilities assumed is recorded as goodwill. Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed. While management believes these estimates are based on reasonable assumptions, they are inherently uncertain and unpredictable; therefore, actual results may differ. During the measurement period, which is up to one year from the acquisition date, the Company may adjust provisional amounts that were recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date. Transaction costs associated with acquisitions are expensed as incurred and are included as a component of selling, general and administrative expense within the condensed consolidated statements of operations.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash. Amounts included in restricted cash as of June 30, 2026 primarily represent the gross proceeds from the issuance of the 2031 Notes and 2034 Notes (as defined in Note 9) that were placed into a segregated escrow account pending the consummation of the TopBuild Acquisition. Upon the consummation of the TopBuild Acquisition on July 1, 2026, the gross proceeds were released from the segregated escrow account and were used to fund a portion of the TopBuild Acquisition and related transaction expenses.

Accounts Receivable

The following table represents the roll-forward of the allowance for credit losses for the six months ended June 30, 2026 and the year ended December 31, 2025:

Property and Equipment

The following table presents the components of property and equipment, net:

Goodwill

The following table sets forth the change in the carrying amount of goodwill during the six months ended June 30, 2026:

Intangible Assets

The Company amortizes certain identifiable intangible assets that have finite lives, currently consisting of customer relationships and trade names. The following table summarizes intangible assets by category:

The following table summarizes the estimated future amortization expense for intangible assets for each of the next five years ending December 31 and thereafter:

Accrued Expenses

The following table presents the components of accrued expenses:

Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

•Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

•Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

•Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

The Company’s current financial assets and liabilities approximate fair value due to their short-term nature and include cash and cash equivalents, accounts receivable, vendor rebates receivable, income tax receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities.

Net Sales

Net sales represent the consideration the Company expects to be entitled to in exchange for transferring products to customers and, to a lesser extent, providing installation and construction services to customers. Substantially all of the Company’s performance obligations are satisfied at a point in time, and net sales are recognized when control of the product transfers to the customer, which occurs when the customer accepts the delivery of our product or takes possession of our product with rights and rewards of ownership. For the periods presented, substantially all of the Company’s contracts have a single performance obligation—to deliver products—and are short-term in nature.

The Company does not provide extended payment terms, and payment is due shortly after control transfers. The Company generally does not require prepayments; however, to the extent customers make payments in advance of delivery, the Company records a liability. Total customer advances as of June 30, 2026 were $38 million and are expected to be recognized as revenue within the next 12 months due to the short-term nature of the contracts. Total customer advances as of December 31, 2025 were $20 million.

Net sales are presented net of variable consideration, including estimated product returns, customer sales incentives (including volume rebates), and early payment discounts taken.

The Company estimates product returns based on historical return rates and records accrued sales returns and defers the related cost of products sold. Total accrued sales returns as of June 30, 2026 and December 31, 2025 were $30 million and $27 million, respectively, and total cost of products sold deferred were $23 million and $20 million, respectively. Provisions for early payment discounts are accrued in the same period in which the sale occurs based on historical experience. Commissions paid to internal sales teams to obtain contracts are expensed as incurred because the related contracts have a duration of one year or less. Sales taxes collected from customers and remitted to governmental authorities are excluded from net sales.

The Company offers sales incentives to customers, primarily volume rebates based on achieving specified sales levels. These volume rebates are not in exchange for a distinct good or service and therefore reduce net sales when the related revenue is recognized. The Company estimates volume rebate accruals based on contract terms, historical experience and performance levels. Total customer rebates as of June 30, 2026 and December 31, 2025 were $86 million and $148 million, respectively.

Shipping and handling amounts billed to customers are included in net sales. Related shipping and handling costs are accounted for as fulfillment activities and are recognized in cost of products sold when control of the products transfers to the customer.

Customer advances, sales returns and sales incentives are included in accrued expenses, early payment discounts are included in accounts receivable, net, and cost of products sold deferred are included in prepaid and other current assets in the condensed consolidated balance sheets.

Interest (Expense) Income, Net

The following table presents the components of interest (expense) income, net:

Recent Accounting Pronouncements — Adopted

In July 2025, the FASB issued ASU 2025-05, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets”. The standard provides a practical expedient to assume that conditions as of the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Accounting Standards Codification (“ASC”) Topic 606. This standard should be applied prospectively and is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years, with early adoption permitted. The standard became effective for the Company on January 1, 2026. Upon adoption, the Company elected to apply the practical expedient on a prospective basis. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

Recent Accounting Pronouncements — Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” The standard requires disclosure of disaggregated information about certain financial statement expense line items presented on the consolidated statements of operations in the notes to the financial statements on an interim and annual basis. The standard can be applied either prospectively or retrospectively and is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-06, “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software.” The standard modernizes the recognition and disclosure framework for internal-use software costs, removing all references to software development stages and introducing a more judgment-based approach. This standard can be applied either prospectively, retrospectively, or utilizing a modified transition approach and is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements and related disclosures.

3. Acquisitions

Beacon Roofing Supply, Inc. Acquisition

On March 20, 2025, QXO entered into the Beacon Merger Agreement with Beacon and Beacon Merger Sub, pursuant to which QXO agreed to acquire Beacon for a purchase price of $124.35 per share of common stock (the “Beacon Merger Consideration”) of Beacon. On the Beacon Closing Date, pursuant to the Beacon Merger Agreement, Beacon Merger Sub merged with and into Beacon, with Beacon remaining as the surviving entity and being renamed QXO Building Products, and the Company completed its acquisition of Beacon.

The Company was determined to be the accounting acquirer in the Beacon Acquisition in accordance with ASC Topic 805 (“ASC 805”), Business Combinations, primarily due to having board and common share voting control over the combined company, and its managers, including the chief executive officer, directing the activities of the newly merged entity. Furthermore, the Beacon Acquisition was initiated by QXO, and the Company retained the QXO name subsequent to the Beacon Acquisition. The historical financial statements of QXO prior to April 29, 2025 are reflected in this Quarterly Report as QXO’s historical financial statements. Accordingly, the financial results of QXO as of and for any periods prior to April 29, 2025 do not include the financial results of Beacon and current and future results will not be comparable to historical results.

Additionally, in considering the foregoing principles of predecessor determination and in light of the Company’s specific facts and circumstances, the Company determined that Beacon was the predecessor entity to QXO at the time of the Beacon Acquisition for financial reporting purposes.

Purchase Price

The following table summarizes the components of the aggregate purchase consideration paid to acquire Beacon:

Purchase Price Allocation

The Company applied the acquisition method of accounting in accordance with ASC 805, Business Combinations, and recognized assets acquired and liabilities assumed at their fair values as of the effective date of the Beacon Acquisition, with the excess purchase consideration recorded to goodwill. Goodwill reflects the assembled workforce of Beacon as well as operating synergies that are expected to result from the Beacon Acquisition and is not deductible for tax purposes.

The Company continued to obtain information to complete its valuation of certain assets and liabilities, in addition to ensuring all other assets and liabilities and contingencies have been identified and recorded. The Company initially estimated the fair value of assets acquired and liabilities assumed based on information available and adjusted those estimates as additional information pertaining to events or circumstances present at the Beacon Closing Date became available during the measurement period. The Company reflected measurement period adjustments in the period in which the adjustments occurred.

During the three months ended June 30, 2026, the Company finalized the fair value of assets acquired and liabilities assumed in the Beacon Acquisition. The following table presents the allocation of the Beacon Acquisition’s purchase price to the assets acquired and liabilities assumed, and a reconciliation to total consideration transferred, net of cash acquired. Prior to April 29, 2026, the Company recorded certain adjustments primarily related to accounts receivable, inventories, vendor rebates receivable, property and equipment, accounts payable, accrued expenses and deferred income taxes. The Company recorded measurement period adjustments during the period of January 1, 2026 through April 28, 2026, which had a net impact of increasing goodwill by $7 million.

The following table presents a summary of intangible assets acquired and the weighted-average useful life of these assets:

The fair value estimate of the customer relationships intangible asset was determined using the multi-period excess earnings method. The excess earnings methodology is an income approach methodology that estimates the projected cash flows of the business attributable to the customer relationships intangible asset, net of charges for the use of other identifiable assets of the business including working capital, fixed assets and other intangible assets. The fair value estimate of the trade names intangible asset was determined using the relief-from-royalty method, which presumes the owner of the asset avoids hypothetical royalty payments that would need to be made for the use of the asset if the asset was not owned.

A key assumption in the fair value measurement of the customer relationships intangible asset is the customer attrition rate, which projects the percentage of customer revenue from an existing customer base that is lost over the customer relationships intangible asset’s estimated useful life. Other key inputs used in the discounted cash flow analyses and other areas of judgment include projected financial information, discount rates used to present value future cash flows, royalty rates, economic useful life of assets and tax rates, as relevant, that market participants would consider when estimating fair values.

During the year ended December 31, 2025, the Company incurred transaction costs of approximately $75 million related to the Beacon Acquisition. These costs were primarily associated with legal and professional services and were recognized in selling, general and administrative expenses on the consolidated statements of operations for the year ended December 31, 2025.

Unaudited Pro Forma Combined Financial Information

The following unaudited pro forma combined financial information presents the combined results of the Company and Beacon for the three and six months ended June 30, 2025 as if the Beacon Acquisition had been completed on January 1, 2024. The unaudited pro forma combined financial information presented below does not give effect to the May 2025 and June 2025 common and preferred (including Mandatory Convertible Preferred Stock) equity financings (as further discussed in Note 6), as these financings were not directly attributable to the Beacon Acquisition. The proceeds from equity financings completed in May 2025 were used to repay indebtedness under the Term Loan Facility (as defined in Note 9) previously incurred as part of financings that were completed to effectuate the Beacon Acquisition. As this repayment of indebtedness was not directly attributable to the Beacon Acquisition, the related reduction in interest expense is not reflected in this unaudited pro forma combined financial information. The unaudited pro forma combined financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the Beacon Acquisition had occurred on January 1, 2024, nor is it indicative of future results.

The following table presents the Company’s pro forma combined net sales and net income (loss):

The unaudited pro forma combined financial information includes, where applicable, adjustments for:

(i) Acquisition accounting in accordance with ASC 805;

(ii) Financing transactions directly attributable to the Beacon Acquisition; and

(iii) Transaction costs incurred by the Company that were directly attributable to the Beacon Acquisition.

These pro forma adjustments are based upon assumptions that the Company believes are reasonable to reflect the impact of the Beacon Acquisition on the Company’s historical financial information on a supplemental pro forma basis. Adjustments do not include costs related to integration activities, cost savings or synergies that have been or may be achieved by the combined business.

Kodiak Building Partners, Inc. Acquisition

On February 10, 2026, QXO entered into the Kodiak Merger Agreement with Kodiak, CSC, and Kodiak Merger Sub pursuant to which QXO agreed to acquire Kodiak from Court Square Capital Partners.

On the Kodiak Closing Date, pursuant to the Kodiak Merger Agreement, Kodiak Merger Sub merged with and into Kodiak, with Kodiak remaining as the surviving entity, and the Company completed the Kodiak Acquisition for a net purchase price of $2.22 billion. The purchase price comprised $2.0 billion of cash and 13.3 million shares of the Company’s common stock.

Kodiak is a U.S. distributor of lumber, trusses, windows and doors, construction supplies, waterproofing, roofing, and complementary exterior products, as well as value-added assembly, fabrication, and installation services. The integration of Kodiak’s structural and exterior construction product offerings with QXO’s existing offerings will better position the Company to grow market share and advance the Company’s plan to become the tech-enabled leader in the building products distribution industry.

Purchase Price

The following table summarizes the components of the preliminary aggregate purchase consideration paid to acquire Kodiak and is subject to adjustments:

Preliminary Purchase Price Allocation

The Company applied the acquisition method of accounting in accordance with ASC 805, Business Combinations, and recognized assets acquired and liabilities assumed at their fair values as of the effective date of the Kodiak Acquisition, with the excess purchase consideration recorded to goodwill. Goodwill reflects the assembled workforce of Kodiak as well as operating synergies that are expected to result from the Kodiak Acquisition. All preliminary goodwill is not deductible for tax purposes.

The purchase price allocation is preliminary and subject to change. The Company is continuing to obtain information to complete its valuation of certain assets and liabilities, in addition to ensuring all other assets and liabilities and contingencies have been identified and recorded. The Company has estimated the preliminary fair value of assets acquired and liabilities assumed based on information currently available and will continue to adjust those estimates as additional information pertaining to events or circumstances present at the Kodiak Closing Date becomes available during the measurement period. The Company will reflect measurement period adjustments, if any, in the period in which the adjustments occur, and the Company will finalize its accounting for the Kodiak Acquisition within one year of the Kodiak Closing Date.

The following table presents the preliminary allocation of the purchase price to the assets acquired and liabilities assumed, and a reconciliation to total consideration transferred, net of cash acquired. The allocation of the purchase price is ongoing, and the Company continues to ascertain the reasonableness of the fair value of the assets acquired and liabilities assumed.

The following table presents a summary of intangible assets acquired and the weighted-average useful life of these assets:

The preliminary fair value estimate of the customer relationships intangible asset was determined using the same valuation methodology and assumptions as those used in the Beacon Acquisition.

During the three and six months ended June 30, 2026, the Company incurred transaction costs of approximately $5 million and $15 million, respectively, related to the Kodiak Acquisition. These costs were primarily associated with legal and professional services and were recognized in selling, general and administrative expenses on the condensed consolidated statements of operations.

The following table presents Kodiak net sales and earnings as reported within the condensed consolidated statements of operations.

Unaudited Pro Forma Combined Financial Information

The following unaudited pro forma combined financial information presents the combined results of the Company and Kodiak as if the Kodiak Acquisition had been completed on January 1, 2025. The unaudited pro forma combined financial information is presented for informational purposes and is not indicative of the results of operations that would have been achieved if the Kodiak Acquisition had occurred on January 1, 2025, nor is it indicative of future results.

The following table presents the Company’s pro forma combined net sales and net income (loss):

The unaudited pro forma combined financial information includes, where applicable, adjustments for:

(i) Acquisition accounting in accordance with ASC 805;

(ii) Financing transactions directly attributable to the Kodiak Acquisition; and

(iii) Transaction costs incurred by the Company that were directly attributable to the Kodiak Acquisition.

These pro forma adjustments are based on available information as of the date hereof and upon assumptions that the Company believes are reasonable to reflect the impact of the Kodiak Acquisition on the Company’s historical financial information on a supplemental pro forma basis. Adjustments do not include costs related to integration activities, cost savings or synergies that have been or may be achieved by the combined business.

TopBuild Corp. Acquisition

On April 18, 2026, QXO entered into the TopBuild Merger Agreement with TopBuild, Titanium Merger Sub, and Forward Merger Sub, pursuant to which QXO agreed to acquire TopBuild for approximately $15 billion in a combination of cash and stock consideration.

On the TopBuild Closing Date, pursuant to the terms of the TopBuild Merger Agreement, Titanium Merger Sub merged with and into TopBuild, with TopBuild surviving the Titanium Merger as a wholly-owned subsidiary of QXO and immediately thereafter, TopBuild merged with and into Forward Merger Sub, with Forward Merger Sub surviving the Forward Merger as a wholly-owned subsidiary of QXO. At the effective time of the Titanium Merger, by virtue of the Titanium Merger and without any action on the part of any holder thereof, each share of common stock, par value $0.01 per share, of TopBuild (“TopBuild Shares”) issued and outstanding immediately prior thereto (other than certain excluded shares, cancelled shares and dissenting shares) was converted into the right to receive, at the election of the holder and subject to proration as described in the TopBuild Merger Agreement, one of the following forms of merger consideration: (i) an amount in cash equal to $505.00 per TopBuild Share (the “Cash Consideration”) or (ii)20.200 QXO shares of common stock per TopBuild Share (the “Stock Consideration”). TopBuild Shares in respect of which no cash election or stock election was validly made were treated as having elected to receive the Stock Consideration in accordance with the terms of the TopBuild Merger Agreement.

TopBuild stockholders of record of approximately 91.0% of the outstanding shares of TopBuild common stock elected to receive the Cash Consideration and, in accordance with the proration procedures in the TopBuild Merger Agreement, all of such outstanding shares of TopBuild common stock were converted into the right to receive approximately $249.67 in cash and 10.212 shares of QXO common stock per share of TopBuild common stock.

In connection with the TopBuild Acquisition, QXO issued approximately 312.0 million shares of QXO common stock to former holders of TopBuild Shares and paid aggregate cash consideration of approximately $6.4 billion.

TopBuild is the largest distributor and installer of insulation and related building products in North America, providing installation and distribution services across residential, commercial, and industrial end markets. TopBuild’s insulation capabilities expand QXO's scale and strengthen its position across the building products value chain.

Due to the limited time between the TopBuild Closing Date and the Company’s filing of this Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, initial accounting for the business combination is incomplete and the Company is not yet able to disclose the provisional amounts to be recognized as of the acquisition date for assets acquired and liabilities assumed. The Company expects to provide the preliminary purchase price allocation information in the Quarterly Report on Form 10-Q for the quarter ending September 30, 2026.

4. Restructuring

Subsequent to the Beacon Acquisition, the Company developed a restructuring plan to streamline and simplify the organization, improve efficiency and reduce costs. As a result of the restructuring plan, the Company recorded restructuring charges comprised of severance and employee-related costs associated with corporate workforce optimization, stock-based compensation charges associated with impacted employees, and lease abandonment costs. These charges are reflected in selling, general and administrative expenses on the condensed consolidated statements of operations. The severance and employee-related costs were recorded in accrued expenses as payroll and employee benefit costs, while the stock-based compensation charge was reflected as an adjustment to common stock and additional paid-in capital on the condensed consolidated balance sheets. The severance and employee-related restructuring charge liability is expected to be substantially paid by September 2026.

The following table presents severance and employee-related costs and lease abandonment costs recognized in selling, general and administrative expenses on the condensed consolidated statements of operations during the three and six months ended June 30, 2026 and 2025:

During the three and six months ended June 30, 2025, the Company recognized a $38 million stock-based compensation charge associated with employees impacted by the Company’s restructuring plan. During the six months ended June 30, 2026, the Company recognized a $1 million stock-based compensation charge associated with impacted employees. During the three months ended June 30, 2026, stock-based compensation charges associated with impacted employees were nominal.

The following table shows the change in the restructuring charge liability during the six months ended June 30, 2026:

Severance and employee-related costs consist primarily of salary continuation benefits, prorated annual incentive compensation, continuation of health care benefits, and outplacement services. Severance and employee-related benefits are determined pursuant to the Company’s written severance plans and are recognized when the benefits are determined to be probable of being paid and are reasonably estimable.

Lease abandonment costs primarily represent the write-off of the remaining carrying value of operating lease right-of-use (“ROU”) assets for branch facilities that were abandoned in connection with the Company's restructuring plan. These lease abandonment charges are recognized as of the cease-use date. Other exit-related costs, including costs to close branch facilities, are recognized as incurred.

5. Segment Reporting and Geographic Information

Segment Reporting

Operating segments are defined as components of an entity for which separate discrete financial information is available and regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM, the chief executive officer, reviews consolidated results of operations to make decisions, therefore the Company views its operations and manages its business as a single operating segment.

The Company’s revenues for its single operating segment are primarily derived from the sale of residential and non-residential roofing products, as well as complementary products, such as siding, waterproofing and lumber. The CODM evaluates performance for the Company’s single operating segment and decides how to allocate resources based on the Company’s consolidated net income that is reported in the condensed consolidated statements of operations as net (loss) income. The measure of segment assets is reported on the condensed consolidated balance sheets as total assets. These results are used to assess segment performance and determine the compensation of certain employees.

The operating segment financial information regularly reviewed by the CODM, inclusive of assets, revenue, expenses, profit or loss and noncash items are presented on a consolidated basis. Other segment items included in consolidated net income are depreciation, amortization, interest income (expense), net, other income, net, and (benefit from) provision for income taxes, which are reflected on the condensed consolidated statements of operations.

The Company is currently evaluating its internal management reporting structure as a result of the Kodiak Acquisition and TopBuild Acquisition, including the resulting impact on the identification and reporting of its operating segments. As this evaluation was not complete as of June 30, 2026 due to the timing of the Kodiak Acquisition and TopBuild Acquisition, the operating results of Kodiak from the Kodiak Closing Date through June 30, 2026 were reported within the Company’s existing operating segment. Following the establishment of the Company's new organizational structure in connection with the Kodiak Acquisition and TopBuild Acquisition, the Company plans to report financial information based on its new reportable segments in the future and recast prior-period segment information to reflect the revised reporting structure.

The following table presents information regarding the components of revenue, significant segment expenses and consolidated net loss representative of the significant categories regularly provided to the CODM when managing the Company’sone operating segment:

Geographic Information

Net sales in the U.S. accounted for approximately 97% of total net sales for the three and six months ended June 30, 2026, and approximately 96% of the Company’s long-lived assets were in the U.S. as of June 30, 2026. Net sales in the U.S. accounted for approximately 97% of total net sales for the three and six months ended June 30, 2025, and approximately 96% of the Company’s long-lived assets were in the U.S. as of December 31, 2025. The CODM does not review geographic asset information when assessing performance or allocating resources.

6. Equity and Mezzanine Equity

Equity

April 2024 Investment Agreement

On April 14, 2024, the Company entered into the Amended and Restated Investment Agreement (the “Investment Agreement”) among the Company, Jacobs Private Equity II, LLC (“JPE”) and the other investors party thereto (collectively, the “Investors”), providing for, among other things, an aggregate investment by the Investors of $1.0 billion in cash in the Company. Pursuant to the Investment Agreement, the Company issued and sold an aggregate of 1,000,000 shares of Convertible Perpetual Preferred Stock, par value $0.001 per share (the “Convertible Preferred Stock”), which are initially convertible into an aggregate of 219.0 million shares of common stock at an initial conversion price of $4.566 per share and issued and sold warrants exercisable for an aggregate of 219.0 million shares of common stock (the “Warrants”). The Investment Agreement and related transactions closed on June 6, 2024 (the “Equity Investment”) and generated gross proceeds of $1.0 billion before deducting fees and offering expenses.

Issuance of Convertible Preferred Stock

On June 6, 2024, under the terms of the Investment Agreement, the Company issued 1.0 million shares of Convertible Preferred Stock. The Convertible Preferred Stock has an initial liquidation preference of $1,000 per share, for an aggregate initial liquidation preference of $1.0 billion. The Convertible Preferred Stock is convertible at any time, in whole or in part and from time to time, at the option of the holder thereof into a number of shares of common stock equal to the then-applicable liquidation preference divided by the conversion price, which initially is $4.566 per share of common stock (subject to customary anti-dilution adjustments). Shares of Convertible Preferred Stock are initially convertible into an aggregate of 219.0 million shares of common stock (after giving effect to the Reverse Stock Split). The Convertible Preferred Stock is not redeemable or subject to any required offer to purchase.

The Convertible Preferred Stock ranks, with respect to dividend rights and distribution of assets upon liquidation, winding-up or dissolution, senior to the Company’s common stock, the Mandatory Convertible Preferred Stock (as defined below), and the Series C Preferred Stock (as defined below). Holders of Convertible Preferred Stock will vote together with the holders of the Company’s common stock on an “as-converted” basis on all matters, except as otherwise required by law. In addition, the approval of holders of at least a majority of the outstanding shares of the Convertible Preferred Stock, voting separately as a single class, will be required for certain matters set forth in the Certificate of Designation for the Convertible Preferred Stock.

Dividends on the Convertible Preferred Stock are payable quarterly, when, as and if declared by the Company’s board of directors at the rate per annum of 9% per share on the then-applicable liquidation preference (subject to certain exceptions in the event that the Company pays dividends on shares of its common stock). During the three and six months ended June 30, 2026, the Company paid $23 million and $45 million, respectively, of dividends to holders of Convertible Preferred Stock. Subsequent to the close of the quarter ended June 30, 2026, the Company paid $23 million of quarterly dividends to holders of Convertible Preferred Stock.

Warrants

The aggregate number of shares of the Company’s common stock subject to the Warrants is 219.0 million shares. The Warrants are exercisable at the option of the holder at any time until June 6, 2034. The Warrants have an exercise price of $4.566 per share of common stock with respect to 50% of the Warrants, $6.849 per share of common stock with respect to 25% of the Warrants, and $13.698 per share of common stock with respect to the remaining 25% of the Warrants.

Each Warrant may be exercised, in whole or in part, at any time or times on or after the issuance date and on or before the expiration date at the election of the holder (in such holder’s sole discretion) by means of a “cashless exercise” in which the holder will be entitled to receive a number of shares of the Company’s common stock equal to the quotient of the product of the Closing Sale Price (as defined in the Warrant Certificate) of a share of the Company’s common stock on the trading day immediately preceding the date on which the holder elects to exercise its Warrant, less the adjusted exercise price, multiplied by the number of shares of the Company’s common stock issuable upon exercise of such Warrant, divided by the aforementioned Closing Sale Price of a share of the Company’s common stock on the trading day immediately preceding the date on which the holder elects to exercise its Warrant.

Private Placements

On June 13, 2024, the Company entered into purchase agreements with certain institutional and accredited investors to issue and sell in a private placement an aggregate of 340.9 million shares of the Company’s common stock at a price of $9.14 per share, and pre-funded warrants (the “Pre-Funded Warrants”) to purchase 42.0 million shares of the Company’s common stock at a price of $9.13999 per Pre-Funded Warrant. Each Pre-Funded Warrant has an exercise price of $0.00001 per share, is exercisable immediately and until the Pre-Funded Warrant is exercised in full. The closing of the private placement was completed on July 19, 2024.

On July 22, 2024, the Company entered into purchase agreements with certain institutional and accredited investors to privately place 67.8 million shares of its common stock at a price of $9.14 per share. The closing of the private placement was completed on July 25, 2024.

On March 17, 2025, the Company entered into purchase agreements with certain institutional investors to privately place 67.5 million shares of its common stock at a price of $12.30 per share. The closing of the private placement was contingent upon the completion of the Beacon Acquisition and was completed on April 29, 2025. As a result of the closing, the Company raised $824 million in net proceeds, after deducting offering costs of $7 million, to partially fund the Beacon Acquisition and related costs.

Issuance of Mandatory Convertible Preferred Stock

On May 27, 2025, the Company completed a preferred stock offering, through which QXO issued and sold 11.5 million depositary shares (“Depositary Shares”), each representing a 1/20th interest in a share of the Company’s 5.50% Series B Mandatory Convertible Preferred Stock, liquidation preference $1,000 per share, par value $0.001 per share (the “Mandatory Convertible Preferred Stock”). The amount issued included 1.5 million Depositary Shares issued pursuant to the exercise in full of the option granted to the underwriters to purchase additional Depositary Shares. The Company received net proceeds from the offering of $558 million, after deducting underwriting discounts, commissions and offering expenses of $17 million.

The Mandatory Convertible Preferred Stock will accumulate dividends (which may be paid in cash or, subject to certain limitations, in shares of common stock or in any combination of cash and common stock) at a rate per annum equal to 5.50% on the liquidation preference of $1,000 per share, payable when, as and if declared by the Company’s board of directors (or an authorized committee thereof), on February 15, May 15, August 15 and November 15 of each year, beginning on August 15, 2025 and ending on, and including, May 15, 2028. Given the requirement to pay dividends in any settlement outcome of the Mandatory Convertible Preferred Stock, the Company accrues dividends whether or not they are formally declared by the Company’s board of directors. During the three and six months ended June 30, 2026, the Company paid $8 million and $16 million, respectively, of dividends to holders of Mandatory Convertible Preferred Stock.

Mandatory Conversion

The following table illustrates the conversion rate per share of the Mandatory Convertible Preferred Stock, subject to certain anti-dilution adjustments, based on the applicable market value of the common stock:

The following table illustrates the conversion rate per Depositary Share, subject to certain anti-dilution adjustments, based on the applicable market value of the common stock:

Optional Conversion

Other than the occurrence of a fundamental change (as defined in the Company’s Certificate of Designations relating to the Mandatory Convertible Preferred Stock) at any time prior to May 15, 2028, a holder of Mandatory Convertible Preferred Stock may elect to convert such holder’s shares of Mandatory Convertible Preferred Stock, in whole or in part, at the minimum conversion rate of 49.4740 shares of common stock per share of Mandatory Convertible Preferred Stock (equivalent to 2.4737 shares of common stock per Depositary Share), subject to certain anti-dilution and other adjustments. Because each Depositary Share represents a 1/20th fractional interest in a share of Mandatory Convertible Preferred Stock, a holder of Depositary Shares may convert its Depositary Shares only in lots of 20 Depositary Shares.

Fundamental Change Conversion

If a fundamental change occurs on or prior to May 15, 2028, holders of the Mandatory Convertible Preferred Stock will have the right to convert their shares of Mandatory Convertible Preferred Stock, in whole or in part, into shares of common stock at the fundamental change conversion rate during the period beginning on, and including, the effective date of such fundamental change and ending on, and including, the earlier of (a) the date that is 20 calendar days after such effective date (or, if later, the date that is 20 calendar days after holders receive notice of such fundamental change) and (b) May 15, 2028. For the avoidance of doubt, the period described in the immediately preceding sentence may not end on a date that is later than May 15, 2028.

Ranking

The Mandatory Convertible Preferred Stock ranks, with respect to dividend rights and distribution of assets upon liquidation, winding-up or dissolution, (i) senior to the Company’s common stock and each other class or series of capital stock, whether outstanding or established after the date of issuance of the Mandatory Convertible Preferred Stock, the terms of which do not expressly provide that it ranks senior to or on a parity with the Mandatory Convertible Preferred Stock as to payment of dividends and distribution of assets upon liquidation, winding-up or dissolution, and (ii) junior to the Convertible Preferred Stock. The Mandatory Convertible Preferred Stock ranks on a parity with or junior to each class or series of capital stock, the terms of which expressly provide for a pari passu or senior ranking, respectively, relative to the Mandatory Convertible Preferred Stock.

Holders of Mandatory Convertible Preferred Stock will not have voting rights, except with respect to issuances of securities senior to the Mandatory Convertible Preferred Stock, amendments to the Company’s Fifth Amended and Restated Certificate of Incorporation that would materially and adversely affect the rights of the holders of Mandatory Convertible Preferred Stock, or in the event of a merger, consolidation, exchange or reclassification involving the Mandatory Convertible Preferred Stock, or non-payment of dividends for six consecutive quarters.

Registered Equity Offerings

In April 2025, the Company sold 37.7 million shares of the Company’s common stock in an underwritten public offering at a price of $13.25 per share. The closing of the equity offering was completed on April 21, 2025 and the Company raised $488 million in net proceeds from the equity offering, after deducting offering costs of $12 million. The Company also granted the underwriters in the public offering a 30-day option to purchase up to an additional 5.7 million shares of the Company’s common stock at a price of $13.25 per share less underwriting discounts and commissions. On May 5, 2025, the option was partially exercised with respect to 4.0 million shares resulting in an additional $52 million of net proceeds. The remaining option to purchase additional shares expired unexercised at the end of the 30-day period.

In May 2025, the Company sold 48.5 million shares of the Company’s common stock in an underwritten public offering at a price of $16.50 per share. The Company also granted the underwriters in the public offering a 30-day option to purchase up to an additional 7.3 million shares of the Company’s common stock at a price of $16.50 per share less underwriting discounts and commissions. On May 21, 2025, the option was exercised in full. The closing of the equity offering was completed on May 23, 2025 and the Company raised $892 million in net proceeds from the equity offering, after deducting offering costs of $28 million.

In June 2025, the Company sold 89.9 million shares of the Company’s common stock in an underwritten public offering at a price of $22.25 per share. The closing of the equity offering was completed on June 26, 2025 and the Company raised $1.96 billion in net proceeds from the equity offering, after deducting offering costs of $38 million. The Company also granted the underwriters in the public offering a 30-day option to purchase up to an additional 13.5 million shares of the Company’s common stock at a price of $22.25 per share less underwriting discounts and commissions. On July 24, 2025, the option was partially exercised with respect to 1.7 million shares resulting in additional net proceeds of $38 million. The remaining option to purchase additional shares expired unexercised at the end of the 30-day period.

In January 2026, the Company sold 31.6 million shares of the Company’s common stock in an underwritten public offering at a price of $23.80 per share. The closing of the equity offering was completed on January 20, 2026 and the Company raised $748 million in net proceeds from the equity offering, after deducting offering costs of $5 million. The Company also granted the underwriters in the public offering a 30-day option to purchase up to an additional 4.7 million shares of the Company’s common stock at a price of $23.80 per share less underwriting discounts and commissions. The option to purchase additional shares expired unexercised at the end of the 30-day period.

Mezzanine Equity

Series C Investment Agreement

In January 2026, the Company entered into the Series C Investment Agreement with the Series C Investors. Pursuant to the Series C Investment Agreement, the Series C Investors committed until July 15, 2026 to purchase up to 300,000 shares of a new series of Series C Convertible Perpetual Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”), for an aggregate purchase price of $3.0 billion to fund one or more acquisitions of assets, equity or businesses (or portions thereof) for a purchase price in excess of $1.5 billion or as otherwise determined by the Company.

Issuance of Series C Preferred Stock

On April 1, 2026, the Company issued 200,000 shares of the Company’s Series C Preferred Stock to fund a portion of the Kodiak Acquisition. The Series C Preferred Stock has an initial liquidation preference of $10,000 per share (the “Stated Value”). The Company received gross proceeds from the issuance of approximately $2.0 billion. Subsequently, on July 1, 2026, the Company issued the remaining 100,000 shares of Series C Preferred Stock and received gross proceeds of approximately $1.0 billion to fund a portion of the TopBuild Acquisition.

The Series C Preferred Stock is classified as mezzanine equity on the condensed consolidated balance sheets because the shares are redeemable at the option of the Series C Investors upon the occurrence of a fundamental change of the Company, and the events that could trigger a fundamental change are not solely within the Company’s control.

The Series C Preferred Stock was initially recognized at the proceeds received, net of issuance costs. If redemption becomes probable, the Company will either remeasure the Series C Preferred Stock to the greater of its carrying value or redemption value at each reporting period or accrete its carrying value to redemption value over the period from the date redemption becomes probable to the earliest redemption date. Any resulting adjustments to the carrying value of the Series C Preferred Stock will be recognized in equity. In addition, as shares of Series C Preferred Stock are issued, a proportionate amount of the costs incurred to obtain the Series C Preferred Stock commitment are reclassified from equity to mezzanine equity as an issuance cost of the Series C Preferred Stock.

During the three months ended March 31, 2026, the Company incurred costs of $47 million to obtain the Series C Preferred Stock commitment and recognized these costs as a reduction to additional paid-in capital in permanent equity. In connection with the issuance of 200,000 shares of the Company’s Series C Preferred Stock on April 1, 2026, the Company reclassified $32 million of the $47 million of commitment costs from equity to mezzanine equity as an issuance cost of the Series C Preferred Stock. As the Company issued the remaining 100,000 shares of Series C Preferred Stock on July 1, 2026 in connection with the TopBuild Acquisition, the remaining $15 million of commitment costs will be reclassified from equity to mezzanine equity during the third quarter of 2026.

The holders of the Series C Preferred Stock (each, a “Holder” and collectively, the “Holders”) will be entitled to dividends on the Series C Preferred Stock at a rate of 4.75% per annum. The Holders will be entitled to participate in dividends declared or paid in cash on the common stock on an as-converted basis; provided that any such dividends on the common stock on an as-converted basis received by Holders will reduce, on a dollar-for-dollar basis, the dividends such Holders are entitled to receive on the Series C Preferred Stock. Dividends on the Series C Preferred Stock will be payable on a quarterly basis in cash and/or by delivery of shares of registered (or freely tradeable) common stock, in each case at the sole discretion of the Company. Any dividends not declared and paid in cash or shares of common stock on any dividend payment date will accrue and be compounded quarterly in arrears on the then Stated Value of such shares of Series C Preferred Stock on such dividend payment date. During the three and six months ended June 30, 2026, the Company paid $23 million of dividends to holders of Series C Preferred Stock.

Conversion and Redemption

The Series C Preferred Stock are, at the option of the holders thereof at any time and from time to time, convertible into common stock at an initial conversion price of $23.25 per share of common stock, subject to customary anti-dilution protections (the “Conversion Price”).

At any time after the second anniversary of the initial issuance of the Series C Preferred Stock (the “Initial Issue Date”), the Company will have the option to require that all or any portion of the then-outstanding shares of Series C Preferred Stock be converted into common stock at the then applicable Conversion Price if the closing price per share of common stock exceeds (i) from and after the second anniversary and prior to the third anniversary of the Initial Issue Date,175% of the Conversion Price and (ii) from and after the third anniversary of the Initial Issue Date,150% of the Conversion Price, in each case, then in effect for at least 20 trading days in any period of 30 consecutive trading days immediately prior to the Holders’ receipt of the conversion notice.

At any time on or following the seventh anniversary of the Initial Issue Date, the Company may redeem all or any portion of the outstanding Series C Preferred Stock at the applicable redemption price (the “Optional Redemption Price”) plus accrued and unpaid dividends thereon. The Optional Redemption Price will be an amount in cash equal to the greater of (a) (i)107% of the Stated Value, with respect to a redemption date on or following the seventh anniversary of the Initial Issue Date but prior to the eighth anniversary of the Initial Issue Date, (ii)104% of the Stated Value, with respect to a redemption date on or following the eighth anniversary of the Initial Issue Date but prior to the ninth anniversary of the Initial Issue Date and (iii)100% of the Stated Value, with respect to a redemption date on or following the ninth anniversary of the Initial Issue Date and (b) the as-converted value.

Fundamental Change Conversion and Redemption

Upon the occurrence of a fundamental change of the Company (i) in certain circumstances, the Company will be obligated to pay a customary fundamental change make-whole premium on the Series C Preferred Stock converted in connection with such fundamental change by increasing the conversion rate on such Series C Preferred Stock and (ii) the Company will be obligated to offer to redeem all of the Series C Preferred Stock for a price in cash equal to the greater of (a) the Stated Value, plus accrued and unpaid dividends thereon and (b) the as-converted value.

Ranking

The Series C Preferred Stock ranks junior to the Company’s Convertible Preferred Stock, pari passu with the Company’s Mandatory Convertible Preferred Stock and senior to the Company’s common stock, with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.

The Series C Investors, as Holders, will be entitled to vote with the holders of the common stock on an as-converted basis, voting together as a single class, on all matters presented to the holders of common stock, except as required by Delaware law, subject to certain requirements as described in the Series C Investment Agreement.

7. Earnings (Loss) Per Common Share

Basic earnings (loss) per common share is computed using the two-class method, which is an earnings allocation method that determines earnings (loss) per share for common shares and participating securities. Basic earnings (loss) per share is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common share equivalents or the conversion of the Company’s Convertible Preferred Stock, Mandatory Convertible Preferred Stock and Series C Preferred Stock. The weighted-average number of common shares outstanding used in the basic and diluted net loss per share calculation include the Pre-Funded Warrants as the Pre-Funded Warrants are exercisable at any time for nominal consideration. Common share equivalents consist of the incremental common shares issuable upon the exercise of stock options and vesting of restricted stock unit awards.

Diluted net income (loss) per common share is calculated by utilizing the most dilutive result of the if-converted and two-class methods. In both methods, net income (loss) attributable to common stockholders and the weighted-average common shares outstanding are adjusted to account for the impact of the assumed issuance of potential common shares that are dilutive, subject to dilution sequencing rules.

The following table presents the components and calculations of basic and diluted net income (loss) per common share attributable to common stockholders:

The following table includes the number of shares that may be dilutive common shares in the future. These shares were not included in the computation of diluted net income (loss) per common share because the effect was either anti-dilutive or the requisite performance conditions were not met:

Subsequent to the quarter ended June 30, 2026, in connection with the closing of the TopBuild Acquisition, QXO issued approximately 312.0 million shares of QXO common stock to former holders of TopBuild Shares and issued an additional 100,000 shares of Series C Preferred Stock to the Series C Investors. The conversion of the Series C Preferred Stock may result in dilutive common shares in the future. The Series C Preferred Stock is, at the option of the holders, convertible into the Company’s common stock at an initial conversion price of $23.25 per share based on the then-applicable Stated Value plus accrued and unpaid dividends.

8. Stock-based Compensation

At the special meeting of the Company’s stockholders on May 30, 2024, the stockholders approved the QXO, Inc. 2024 Omnibus Incentive Plan (the “2024 Plan”). The 2024 Plan provides for the grant of options intended to qualify as incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted share awards, RSUs, performance-based restricted stock units (“PRSUs”), cash incentive awards, deferred share units and other equity-based and equity-related awards, as well as cash-based awards.

Subject to adjustment for changes in capitalization, the maximum aggregate number of shares of common stock that may be delivered pursuant to awards granted under the 2024 Plan shall be equal to 30,000,000 (the “Plan Share Limit”), of which 30,000,000 shares of common stock may be delivered pursuant to ISOs granted under the 2024 Plan (such amount, the “Plan ISO Limit”). The 2024 Plan provides that the Plan Share Limit shall automatically increase on January 1 of each calendar year commencing on January 1, 2025 and ending on January 1, 2034 in an amount equal to three percent (3%) of the sum of: i) the number of shares of common stock outstanding as of December 31 of the preceding calendar year, and ii) the number of shares of common stock into which the Convertible Preferred Stock outstanding on December 31 of the preceding calendar year are convertible. The Company may act prior to the first day of any calendar year to provide that there shall be no increase in the Plan Share Limit for such calendar year or that the increase in the Plan Share Limit for such calendar year shall be a lesser number of shares than would otherwise occur. The Compensation and Talent Committee took no action to alter the automatic increase effective January 1, 2026 in the Plan Share Limit under the 2024 Plan. The automatic renewal increased the Plan Share Limit to 62.0 million shares, including shares available for issuance as a result of the Converted Beacon Stock Plan (as defined below), for the calendar year commencing on January 1, 2026.

As part of the Beacon Acquisition, the Company assumed the remaining shares authorized and available for future issuance under the Beacon Roofing Supply, Inc. 2024 Stock Plan into the 2024 Plan as of the Beacon Closing Date (the “Converted Beacon Stock Plan”), which was adjusted based on the equity award exchange ratio discussed below and subject to certain regulatory limits. As a result,21.5 million additional shares were added to the 2024 Plan’s Plan Share Limit as of the Beacon Closing Date and may only be used to grant equity awards to employees that were former Beacon employees on the Beacon Closing Date or QXO employees hired after the Beacon Closing Date. A portion of the additional shares were used to grant the Converted RSUs and Converted NSOs (as defined and further discussed below).

As of June 30, 2026, there were 59.0 million additional shares of the Company’s common stock reserved for future issuance under the 2024 Plan.

Beacon Equity Awards

On the Beacon Closing Date, the Company converted outstanding Beacon stock-based incentive awards issued to Beacon employees under the Beacon Roofing Supply, Inc. 2024 Stock Plan at a 9.8380 equity award exchange ratio. In accordance with the terms of the Beacon Merger Agreement, the equity award exchange ratio was determined as the Beacon Merger Consideration divided by the volume-weighted average closing sale price ofone share of QXO’s common stock for thefive consecutive trading days ended April 28, 2025 of $12.64 per share.

Employee-held outstanding Beacon RSUs were converted into corresponding QXO RSUs, subject to the same service-based vesting terms as immediately prior to the Beacon Acquisition. All RSUs held by a non-employee member of the board of directors of Beacon, whether vested or unvested, were accelerated in full and cancelled in exchange for a cash payment equal to the product of (i) the Beacon Merger Consideration and (ii) the number of Beacon shares underlying such RSUs. Each outstanding Beacon PRSU was also converted into QXO RSUs, with the performance-based vesting condition deemed satisfied at target and the resulting award subject solely to time-based vesting (collectively, the “Converted RSUs”). All outstanding stock option awards were converted into corresponding QXO NSOs (the “Converted NSOs”). The exercise price of Converted NSOs was adjusted using the equity award exchange ratio such that the award holders maintained the same economic benefit as of the Beacon Closing Date.

The total fair value of the Converted RSUs and Converted NSOs was $177 million as of the Beacon Closing Date, of which $88 million was related to pre-combination expense and was included as a component of purchase price. The remaining fair value of $89 million relates to post-combination expense. As of June 30, 2026, the future unrecognized stock-based compensation expense related to the outstanding Converted RSUs was $14 million, which will be recognized over a weighted-average remaining service period of 1.2 years. As of June 30, 2026, the future unrecognized stock-based compensation expense related to the outstanding Converted NSOs wasnominal and will be recognized over a weighted-average remaining service period of 0.7 years.

Converted NSOs

Converted NSOs generally expire 10 years after the grant date and, except under certain conditions, the options are subject to continued employment and vest inthree annual installments over thethree-year period following the grant date. In connection with the Beacon Acquisition, the Company issued 5.1 million of Converted NSOs with a weighted-average exercise price of $5.04. There were 1.3 million Converted NSOs outstanding at the beginning of the period, and 0.4 million were exercised during the period at a weighted-average exercise price of $4.51. There was no other activity related to NSOs during the three and six months ended June 30, 2026.

RSUs

The Company grants RSUs which vest subject to the employee’s continued employment with the Company through the applicable vesting date.

The following table summarizes the activity related to the Company’s RSUs for the six months ended June 30, 2026:

The following table summarizes additional information regarding RSUs:

As of June 30, 2026, total unrecognized stock-based compensation expense related to unvested RSUs was $171 million and is expected to be recognized over a weighted-average period of 2.5 years.

PRSUs

The Company grants PRSUs which include a service-based vesting condition and a market condition or performance condition for exercisability. The service condition is subject to the employee’s continued employment with the Company through the applicable vesting date. The vesting of certain PRSUs is also subject to achievement of performance goals relating to the Company’s total stock return compared to the total stock return ranking of each company that is in the S&P 500 index. The performance goals for a portion of the PRSUs will be measured over a cumulative performance period ending on December 31, 2028, and the performance goals for the remainder of the PRSUs will be measured based on designated performance periods that occur within such cumulative period.

The following table summarizes the market-based conditions:

The following table summarizes the activity related to the Company’s PRSUs for the six months ended June 30, 2026:

The following table summarizes additional information regarding PRSUs:

As of June 30, 2026, total unrecognized stock-based compensation expense related to unvested PRSUs was $84 million and is expected to be recognized over a weighted-average period of 2.5 years.

The fair value of PRSUs with a market condition is determined on the date of grant using a Monte Carlo model to simulate total stockholder return for the Company and peer companies. There wereno PRSUs with a market condition granted during the six months ended June 30, 2026. The following weighted-average assumptions were used in the Monte Carlo model in determining the fair value of PRSUs granted during the six months ended June 30, 2025:

The risk-free interest rate is based on the U.S. Treasury yield curve with a term equal to the expected term of the PRSU in effect at the time of grant. Expected volatility is based on historical volatility of the stock of the Company’s peer industry group.

The RSUs and PRSUs may vest in whole or in part before the applicable vesting date if the grantee’s employment is terminated by the Company without cause or by the grantee with good reason (as defined in the grant agreement), upon death or disability of the grantee or in the event of a change in control of the Company. Upon vesting, the RSUs and PRSUs result in the issuance of shares of the Company’s common stock. The holders of the RSUs and PRSUs do not have the rights of a stockholder and do not have voting rights until shares are issued and delivered in settlement of the awards.

Stock-Based Compensation Expense

Stock-based compensation expense is included within selling, general and administrative expenses in the condensed consolidated statements of operations. The Company recognized stock-based compensation expense as follows:

TopBuild Equity Awards

On the TopBuild Closing Date, the Company converted outstanding TopBuild stock-based incentive awards issued to TopBuild employees under the TopBuild Corp. Amended and Restated 2015 Long Term Stock Incentive Plan, as amended April 28, 2025, at an exchange ratio of 20.200 in accordance with the terms of the TopBuild Merger Agreement. As a result, the Company issued 2.3 million time-based RSUs in connection with the closing of the TopBuild Acquisition.

9. Debt

The following table summarizes all outstanding debt:

As of June 30, 2026, all outstanding debt was classified as Level 2 in the fair value hierarchy. The fair values of QXO Building Products’ 2031 Notes, 2032 Notes, 2034 Notes, and Term Loan Facility were based upon recent trading prices. The fair value of QXO Building Products’ ABL Facility approximated its carrying value and is primarily based upon observable market data, such as market interest rates, for similar debt.

Senior Secured Notes

2032 Notes

On April 29, 2025, Beacon Merger Sub (the “Issuer”) completed the issuance and sale of $2.25 billion in aggregate principal amount of 6.75% Senior Secured Notes due 2032 (the “2032 Notes”). The 2032 Notes were issued pursuant to an Indenture, dated as of April 29, 2025 (as supplemented, the “2032 Indenture”), and, upon consummation of the Beacon Acquisition, QXO Building Products assumed the obligations under the 2032 Notes and the 2032 Indenture and certain of QXO Building Products’ subsidiaries guaranteed QXO Building Products’ obligations under the 2032 Notes and the 2032 Indenture. The 2032 Notes are secured by first-priority liens on substantially all assets of the Issuer and the subsidiary guarantors, other than the ABL Priority Collateral (as defined below) (the “2032 Notes Priority Collateral”) and by second-priority liens on substantially all of the Issuer’s and the subsidiary guarantors’ inventory, receivables and related assets (the “ABL Priority Collateral”), in each case, subject to certain exceptions and permitted liens. The 2032 Notes will mature on April 30, 2032. Interest on the 2032 Notes accrues at 6.75% per annum and will be paid semi-annually, in arrears, on April 30 and October 30 of each year, beginning October 30, 2025. Proceeds from the 2032 Notes were used to partially fund the Beacon Acquisition and related transaction expenses.

On or after April 30, 2028, the Issuer may redeem the 2032 Notes at its option, in whole at any time or in part from time to time, at the redemption prices set forth in the 2032 Indenture. In addition, prior to April 30, 2028, the Issuer may redeem the 2032 Notes at its option, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the 2032 Notes redeemed, plus a “make-whole” premium and accrued and unpaid interest, if any. Notwithstanding the foregoing, at any time prior to April 30, 2028, the Issuer may also redeem up to 50% of the aggregate principal amount of the 2032 Notes with funds in an aggregate amount not to exceed the net cash proceeds from certain equity offerings at a redemption price equal to 106.75% of the principal amount of the 2032 Notes to be redeemed, plus accrued and unpaid interest, if any, so long as at least 50% of the original aggregate principal amount of the 2032 Notes remains outstanding after each such redemption. In addition, prior to April 30, 2028, the Issuer may redeem during each twelve-month period up to 10% of the original aggregate principal amount of the 2032 Notes at a redemption price equal to 103%, plus accrued and unpaid interest, if any.

The 2032 Indenture includes customary affirmative and negative covenants with respect to the Issuer and its restricted subsidiaries. These covenants are subject to a number of important qualifications and exceptions. Additionally, upon the occurrence of specified change of control events, the Issuer must offer to repurchase the 2032 Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the purchase date. The 2032 Indenture also provides for customary events of default. As of June 30, 2026, the Issuer and its restricted subsidiaries were in compliance with these covenants.

Debt issuance costs of $22 million related to the 2032 Notes were capitalized and are being amortized over the term of the financing arrangement. As of June 30, 2026, there were $18 million of unamortized debt issuance costs related to the 2032 Notes.

Senior Notes

2031 Notes and 2034 Notes

On June 17, 2026, the Issuer completed the issuance and sale of $1.5 billion in aggregate principal amount of 6.500% Senior Notes due 2031 (the “2031 Notes”) and $1.5 billion in aggregate principal amount of 6.875% Senior Notes due 2034 (the “2034 Notes” and, together with the 2031 Notes, the “Notes”). The Notes were issued pursuant to an Indenture, dated as of June 17, 2026 (the “Indenture”), among the Issuer, the subsidiary guarantors party thereto from time to time and Wilmington Trust, National Association, as trustee. At the closing of the offering, the gross proceeds were placed into a segregated escrow account (the “Escrow Account”) and released in connection with the consummation of the TopBuild Acquisition. The Notes were secured by a first-priority lien on the escrowed property and the Escrow Account pending the consummation of the TopBuild Acquisition. Upon consummation of the TopBuild Acquisition on July 1, 2026 (the “Escrow Release Date”), the Notes are fully and unconditionally guaranteed by each of the Issuer’s wholly-owned domestic restricted subsidiaries that guarantees the Term Loan Facility (as defined below) and 2032 Notes, and from and after the Escrow Release Date, the Notes and related guarantees are unsecured obligations of the Issuer and the subsidiary guarantors. The 2031 Notes will mature on July 15, 2031 and the 2034 Notes will mature on July 15, 2034. Interest on the 2031 Notes accrues at 6.500% per annum and interest on the 2034 Notes accrues at 6.875% per annum, in each case payable semi-annually, in arrears, on January 15 and July 15 of each year, beginning January 15, 2027. Proceeds from the Notes were used to fund a portion of the TopBuild Acquisition and related transaction expenses.

On or after July 15, 2028 and July 15, 2029 with respect to the 2031 Notes and the 2034 Notes, respectively, the Issuer may redeem the applicable series of Notes at its option, in whole at any time or in part from time to time, at the redemption prices set forth in the Indenture. In addition, prior to such dates, the Issuer may redeem the applicable series of Notes at its option, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus a “make-whole” premium and accrued and unpaid interest, if any. Notwithstanding the foregoing, at any time prior to July 15, 2028 and July 15, 2029 with respect to the 2031 Notes and the 2034 Notes, respectively, the Issuer may also redeem in the aggregate up to 50% of the original aggregate principal amount of the applicable series of Notes with funds in an aggregate amount not to exceed the net cash proceeds from one or more equity offerings at a redemption price equal to 106.500% and 106.875% of the principal amount of the 2031 Notes and 2034 Notes, respectively, to be redeemed, plus accrued and unpaid interest, if any, so long as at least 50% of the original aggregate principal amount of the applicable series of Notes remains outstanding after each such redemption.

The Indenture includes customary affirmative and negative covenants with respect to the Issuer and its restricted subsidiaries. These covenants are subject to a number of important qualifications and exceptions. Additionally, upon the occurrence of specified change of control and ratings events, the Issuer must offer to repurchase the Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the purchase date. The Indenture also provides for customary events of default. As of June 30, 2026, the Issuer and its restricted subsidiaries were in compliance with these covenants.

Debt issuance costs of $32 million related to the Notes were capitalized and are being amortized over the term of the respective financing arrangements. As of June 30, 2026, there were $16 million of unamortized debt issuance costs related to the 2031 Notes and $16 million of unamortized debt issuance costs related to the 2034 Notes.

Term Loan Facility

On April 29, 2025, Beacon Merger Sub, as initial borrower, entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) with Queen HoldCo, LLC (“Holdings”), the lenders party thereto and Goldman Sachs Bank USA, as administrative agent, which provides for senior secured financing consisting of a term loan facility (the “Term Loan Facility”) in an aggregate principal amount of $2.25 billion. Upon the consummation of the Beacon Acquisition, QXO Building Products entered into a joinder to the Term Loan Credit Agreement as the surviving borrower (the “Borrower”). The Term Loan Facility matures on April 30, 2032. Proceeds from the Term Loan Facility were used to partially fund the Beacon Acquisition and related transaction expenses.

Borrowings under the Term Loan Facility bear interest at variable rates based on Term SOFR or a base rate, in each case plus an applicable margin. The Term Loan Facility requires scheduled quarterly amortization payments in an annual amount equal to 1.0% of the original principal amount of borrowings under the Term Loan Facility, with the remaining balance due at maturity. The Term Loan Facility also requires the Borrower to make certain mandatory prepayments. The Borrower can make voluntary prepayments at any time without penalty, except in connection with a repricing event in respect of the Term Loan Facility, subject to customary breakage costs.

The Term Loan Facility is unconditionally guaranteed by Holdings on a limited‑recourse basisand secured by a first-priority lien on the equity interests of the Borrower held by Holdings. The Term Loan Facility is also guaranteed by each subsidiary guarantor and secured by a first-priority lien with respect to the 2032 Notes Priority Collateral and a second-priority lien with respect to the ABL Priority Collateral. The Term Loan Facility is secured on a ratable basis with the 2032 Notes with respect to the 2032 Notes Priority Collateral and the ABL Priority Collateral.

The Term Loan Credit Agreement includes customary affirmative and negative covenants with respect to the Borrower and its restricted subsidiaries. These covenants are subject to a number of important qualifications and exceptions. The Term Loan Credit Agreement contains certain customary events of default, including relating to a change of control. As of June 30, 2026, the Borrower and its restricted subsidiaries were in compliance with these covenants.

The principal amount of borrowing under the Term Loan Facility was reduced by an original issue discount (“OID”) of 1%. OID costs of $22 million and debt issuance costs of $51 million related to the Term Loan Facility were capitalized and are being amortized over the term of the financing arrangement.

On May 29, 2025, the Borrower made a voluntary principal prepayment of $1.40 billion under the Term Loan Facility. As a result, the Borrower was relieved of its obligation to make quarterly amortization payments in an annual amount equal to 1.0% of the original principal amount of borrowings under the Term Loan Facility. Additionally, as a result of the principal prepayment, the Borrower recognized a loss on debt extinguishment of $46 million during the three months ended June 30, 2025, which is comprised of $14 million of unamortized OID costs and $32 million of unamortized debt issuance costs related to the Term Loan Facility.

On November 5, 2025, the Borrower amended the Term Loan Credit Agreement in order to refinance the Term Loan Facility. The amendment reduced the applicable margin for borrowings under the Term Loan Facility from 3.00% to 2.00% for Term SOFR borrowings and from 2.00% to 1.00% for base rate borrowings (the “Term Loan Refinancing”). As a result of the Term Loan Refinancing, the Borrower recognized a loss on debt extinguishment of $4 million during the three months ended September 30, 2025, which is comprised of $1 million of unamortized OID costs, $2 million of unamortized debt issuance costs, and $1 million of third-party fees associated with the modification of the Term Loan Facility. Additionally, new debt issuance costs of a de minimis amount were capitalized and are being amortized over the term of the financing arrangement.

The loss on debt extinguishment resulting from the principal prepayment and the subsequent Term Loan Refinancing was separately recognized on the consolidated statements of operations for the year ended December 31, 2025.

As of June 30, 2026, there were $7 million of unamortized OID costs related to the Term Loan Facility and $14 million of unamortized debt issuance costs related to the Term Loan Facility.

On July 1, 2026, in connection with the closing of the TopBuild Acquisition, the Borrower incurred an incremental term loan facility (the “Incremental Term Loan Facility”) under the Term Loan Credit Agreement in an aggregate principal amount of $3.0 billion. The Incremental Term Loan Facility will mature on July 1, 2033. Borrowings under the Incremental Term Loan Facility bear interest at variable rates based on Term SOFR or a base rate, in each case plus an applicable margin. The Incremental Term Loan Facility requires scheduled quarterly amortization payments in an annual amount equal to 1.0% of the original principal amount of the term loans borrowed on the effective time of the TopBuild Acquisition, with the balance to be paid at maturity. The Borrower can make voluntary prepayments at any time without penalty, except in connection with a repricing event in respect of the Incremental Term Loan Facility, subject to customary breakage costs. Any refinancing through the issuance of certain debt or any repricing amendment, in either case, that constitutes a “repricing event” applicable to the term loans issued under the Incremental Term Loan Facility resulting in a lower yield occurring at any time during the first six months after the closing date of the Incremental Term Loan Facility will be accompanied by a 1.00% prepayment premium or fee, as applicable.

ABL Credit Agreement

On April 29, 2025, Beacon Merger Sub, as initial borrower, entered into the Asset-Based Revolving Credit Agreement (the “ABL Credit Agreement”), with Holdings, the lenders party thereto and Citibank, N.A., as administrative agent and collateral agent, which provides for an asset-based revolving credit facility (the “ABL Facility”), with an aggregate borrowing availability equal to the lesser of $2.0 billion, and the borrowing base. Upon the consummation of the Beacon Acquisition, the Borrower entered into a joinder to the ABL Credit Agreement as the surviving borrower. The ABL Facility matures on April 29, 2030. Based on the Borrower’s borrowing base as of June 30, 2026, the Borrower had $1.93 billion borrowing capacity under the ABL Facility.

Borrowings under the ABL Facility bear interest at a rate equal to, at the Borrower’s option, either (a) (x) Term SOFR determined by reference to the secured overnight financing rate published by the Federal Reserve Bank of New York, which rate shall be no less than zero or (y) a base rate determined by reference to the highest of (i) the federal funds rate plus 0.50% per annum, (ii) the prime rate quoted by the Wall Street Journal as the “Prime Rate” and (iii) the sum of one-month adjusted Term SOFR plus 1.00% per annum, which base rate shall be no less than 1.00%, or (b) (x) with respect to borrowings of Canadian dollars, Term CORRA determined by reference to the interbank offered rate administered by the CORRA Administrator, which rate shall be no less than zero or (y) a base rate determined by reference to the highest of (i) zero (0%), (ii) the one-month Term CORRA plus 1.00% per annum or (iii) the prime rate reported by Reuters, in each case plus an applicable margin based on excess availability set forth in the ABL Credit Agreement. The Borrower is also required to pay a commitment fee equal to 0.20% per annum (depending on the average utilization of the commitments) to the lenders under the ABL Facility in respect of the unutilized commitments thereunder. The Borrower can make voluntary prepayments at any time without penalty, subject to customary breakage costs.

The ABL Facility (and at the Borrower’s option certain hedging, cash management and bank product obligations secured under the ABL Facility) is unconditionally guaranteed by Holdings on a limited‑recourse basis and secured by a second-priority lien on the equity interests of the Borrower held by Holdings. The ABL Facility is also guaranteed by each subsidiary guarantor and secured by a second-priority lien with respect to the 2032 Notes Priority Collateral and a first-priority lien with respect to the ABL Priority Collateral.

The ABL Credit Agreement includes customary affirmative and negative covenants with respect to the Borrower and its restricted subsidiaries. These covenants are subject to a number of important qualifications and exceptions. The ABL Credit Agreement contains certain customary events of default, including relating to a change of control.

The ABL Facility requires that the Borrower, commencing on or after the last day of the first full fiscal quarter ending after the closing date of the ABL Facility, maintain a minimum fixed charge coverage ratio of 1.0 to 1.0 at any time that availability is less than the greater of (x) $120 million and (y)10% of the lesser of (i) the borrowing base at such time and (ii) the aggregate amount of ABL Facility commitments at such time. As of June 30, 2026, the Borrower and its restricted subsidiaries were in compliance with these covenants.

Debt issuance costs of $19 million related to the ABL Facility were capitalized and are being amortized ratably over the term of the financing arrangement. The debt issuance costs related to the ABL Facility are presented as an asset, included in other assets, net on the condensed consolidated balance sheets. As of June 30, 2026, there were $14 million of unamortized debt issuance costs related to the ABL Facility.

As of June 30, 2026, the Borrower and its restricted subsidiaries had $62 million in outstanding standby letters of credit issued under the ABL Facility.

Other Information

Payments on outstanding borrowings under the ABL Facility are due on April 29, 2030. All other required principal payments on outstanding debt are due after December 31, 2030.

Under the terms of the ABL Facility, Term Loan Facility, 2031 Notes, 2032 Notes, and 2034 Notes, QXO Building Products is limited in making certain restricted payments, including dividends on its common stock. Based on the provisions in the respective debt agreements and given the Company’s intention to not pay common stock dividends in the foreseeable future, the Company does not believe that the restrictions are significant.

10. Leases

The Company primarily operates in leased branch facilities and corporate offices, which are accounted for as operating leases. The real estate leases expire between 2026 and 2040. The Company also leases equipment, such as trucks and forklifts. Equipment leases are accounted for as either operating or finance leases. The equipment leases expire between 2026 and 2033.

The following table presents components of lease costs recognized in the condensed consolidated statements of operations:

The following table presents supplemental cash flow information related to the Company’s leases:

As of June 30, 2026, the Company’s operating leases had a weighted-average remaining lease term of 6.4 years and a weighted-average discount rate of 6.51%, and the Company’s finance leases had a weighted-average remaining lease term of 3.9 years and a weighted-average discount rate of 6.52%.

The following table summarizes future lease payments for each of the next five years ending December 31 and thereafter:

11. Commitments and Contingencies

Various legal claims arise from time to time in the normal course of business. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

The Company believes that it has adequately accrued for the potential impact of loss contingencies that are probable and reasonably estimable, and does not believe that the ultimate resolution of any matters to which it is presently a party will have a material adverse effect on the Company’s results of operations, financial condition or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

12. Income Taxes

The Company’s interim provision for income taxes is determined based on its annual estimated effective tax rate, applied to the actual year-to-date income, and adjusted for the tax effects of any discrete items. The Company’s effective tax rates for the three and six months ended June 30, 2026, excluding discrete items, were 29.1% and 19.6%, respectively. The Company’s effective tax rates for the three and six months ended June 30, 2025, excluding discrete items, were 72.7% and 74.5%, respectively. The Company’s effective tax rates for the three and six months ended June 30, 2026 and 2025 were based on the U.S. federal statutory tax rate of 21% and state jurisdictional income tax rates, adjusted for permanent items including compensation above $1 million, inclusive of equity awards, paid to covered employees under Internal Revenue Code Section 162(m), coupled with the pre-tax loss during the three and six months ended June 30, 2026 and 2025.

As a result of the Kodiak Acquisition, the Company recorded net deferred tax liabilities of $160 million, consisting of $166 million of intangible assets and $39 million of fixed assets, partially offset by $45 million of net operating losses, 163(j) carryforwards, and other deferred tax assets.