Solo Brands, Inc.

Previous wording

In the following discussion, references to “we,” “us,” “our,” the “Company,” and similar references mean Solo Brands, Inc. and its consolidated subsidiaries, unless the context otherwise requires. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report, as well as our audited consolidated financial statements included in our 2025 Form 10-K. Some of the numbers included herein have been rounded for the convenience of the presentation. In addition to historical consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under Item I, Part 1A, “Risk Factors” of our 2025 Form 10-K and elsewhere in this Quarterly Report. See further our “Forward-Looking Statements” in this Quarterly Report.

Current wording

In the following discussion, references to “we,” “us,” “our,” the “Company,” and similar references mean Solo Brands, Inc. and its consolidated subsidiaries, unless the context otherwise requires. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes to those statements included elsewhere in this Quarterly Report, as well as our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the “2025 Form 10-K”). Some of the numbers included herein have been rounded for the convenience of the presentation. In addition to historical consolidated financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under Part I, Item 1A, “Risk Factors” of our 2025 Form 10-K, Part II, Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2026, and elsewhere in this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2026 (“Quarterly Report”). See further our “Forward-Looking Statements” in this Quarterly Report.

Previous wording

Solo Brands operates four premium outdoor brands: Solo Stove, Chubbies, Oru Kayak (“Oru”) and International Surf Ventures (“ISLE”), with Oru and ISLE regarded in aggregate as Watersports. Our brands develop innovative products and market them directly to customers primarily through our direct-to-consumer (“DTC”) channel, which includes e-commerce and owned retail stores, as well as partnerships with key retailers. We aim to help our customers enjoy meaningful moments that create lasting memories. We consistently deliver innovative, high-quality products that are loved by our customers and revolutionize the outdoor experience, build community and help everyday people reconnect with what matters most. We operate as two reportable segments: Solo Stove, which includes the Solo Stove and TerraFlame brands and primarily offers indoor and outdoor fire pits, stoves, and accessories, and Chubbies, which offers premium casual apparel and activewear. The remaining operating segments are included within the Corporate and All Other category. In 2025, the Company completed the disposition of the manufacturing operations for the TerraFlame brand. However, we continue to own the intellectual property of TerraFlame, as well as sole distribution rights of TerraFlame branded products. The CODM makes operating decisions, assesses financial performance, and allocates resources based upon discrete financial information at the reportable segment level.

Current wording

IcyBreeze, which was wound down during the fourth quarter of 2024 and whose brand name has been discontinued, did not meet the criteria necessary to be considered a reportable segment. IcyBreeze’s trailing results are included within our consolidated results for the three and six months ended June 30, 2025. In 2025, the Company completed the disposition of the manufacturing operations for the TerraFlame brand. However, we continue to own the intellectual property of TerraFlame, as well as sole distribution rights of TerraFlame branded products.

Previous wording

For the three months ended March 31, 2026, we experienced a decrease in our net sales from $77.3 million for the three months ended March 31, 2025 to $62.9 million. The decline in net sales was primarily driven by the decline in DTC and retail channel net sales within the Solo Stove segment and, to a lesser extent, the Chubbies segment. While net sales for three months ended March 31, 2026 declined when compared to the three months ended March 31, 2025, loss from operations decreased from $10.6 million to $4.7 million. This decrease was primarily driven by effective management of operating expenses to align with the decline in net sales, particularly advertising and marketing costs but also includes payroll and distribution costs rightsizing, and a reduction in restructuring, contract termination and impairment charges.

Current wording

While net sales declined for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025, income from operations was $3.5 million for the three months ended June 30, 2026 compared to a loss from operations of $9.8 million for the three months ended June 30, 2025, and loss from operations decreased to $1.2 million from $20.5 million for the six months ended June 30, 2026 and 2025, respectively. These changes were primarily driven by effective management of operating expenses to align with the decline in net sales, particularly advertising and marketing costs, but also including payroll and distribution costs rightsizing, a reduction in restructuring, contract termination and impairment charges, and the benefit recognized from prior period IEEPA tariff refunds received during the current period.

Previous wording

On February 20, 2026, the U.S. Supreme Court held in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act (“IEEPA”) does not authorize a U.S. President to impose tariffs during peacetime national emergencies and that the challenge to the legality of the incremental tariffs was within the exclusive jurisdiction of the U.S. Court of International Trade (“CIT”), thus affirming a prior decision of the CIT that the U.S. President lacked authority to impose incremental tariffs. As a result, on February 20, 2026, the U.S. President issued an executive order stating that the incremental tariffs were no longer in effect and ending the collection of the incremental tariffs. However, the U.S. President then issued an additional executive order imposing tariffs pursuant to Section 122 of the Trade Act of 1974 for 150 days, effective February 24, 2026. We continue to monitor the changing tariff and trade restrictions and are evaluating the potential impacts of these decisions for 2026 and any potential impacts on consumer demand and pricing expectations. We filed a lawsuit in the CIT challenging the legality of incremental tariffs and are seeking to recover the approximately $10 million in incremental tariffs that we paid in 2025 and 2026.

Current wording

On February 20, 2026, the U.S. Supreme Court held in Learning Resources, Inc. v. Trump that the International Emergency Economic Powers Act (“IEEPA”) does not authorize a U.S. President to impose tariffs during peacetime national emergencies and that the challenge to the legality of the incremental tariffs was within the exclusive jurisdiction of the U.S. Court of International Trade (“CIT”), thus affirming a prior decision of the CIT that the U.S. President lacked authority to impose incremental tariffs. We filed a lawsuit in the CIT challenging the legality of incremental tariffs and sought to recover the incremental tariffs paid in 2025 and 2026.

Previous wording

Current macroeconomic factors, including overall economic and political uncertainty and unrest, financial and capital markets instability, new or increasing tariffs, high interest rates and high inflation, remain very dynamic and highly uncertain. The effects of the macroeconomic environment could further reduce our net sales and negatively impact our gross margin, net income (loss) and cash flows.

Current wording

Current macroeconomic factors, including overall economic and political uncertainty and unrest, financial and capital markets instability, new or increasing tariffs, high interest rates and high inflation, remain very dynamic and highly uncertain. The effects of the macroeconomic environment could further reduce our net sales or negatively impact our gross profit margin, net income (loss) or cash flows.

Previous wording

In the first quarter of 2026, some seasonal demand within our retail channel shifted to the second quarter with the timing of a number of large retail orders scheduled for the second quarter of 2026. Historically, our net sales have been highest in our second and fourth quarters. In 2025, however, we experienced a shift in the seasonal demand within our retail channel with the first quarter of 2025 far exceeding the third quarter of 2025. We do not view the first quarter of 2025’s performance as indicative that the trends experienced in 2025 are likely to result in long-term changes in our seasonality.

Current wording

In the first quarter of 2026, some seasonal demand within our retail channel shifted to the second quarter with the timing of a number of large retail orders that occurred in the second quarter of 2026. Historically, our net sales have been highest in our second and fourth quarters. In 2025, however, we experienced a shift in the seasonal demand within our retail channel with the first quarter of 2025 far exceeding the third quarter of 2025. We do not view the first quarter of 2025’s performance as indicative that the trends experienced in 2025 are likely to result in long-term changes in our seasonality.

Previous wording

The cost saving initiatives identified and executed in the three months ended March 31, 2025 were designed to reduce operational expenditures over the long-term. The key cost saving initiatives and operational planning activities undertaken during the three months ended March 31, 2025 were as follows:

Current wording

The cost saving initiatives identified and executed upon during the six months ended June 30, 2026 were designed to reduce operational expenditures over the long-term. The key cost saving initiatives and operational planning activities undertaken during the six months ended June 30, 2026 were as follows:

Previous wording

During the three months ended March 31, 2026, the Company executed areduction in force (“RIF”) of management and non-management personnel in an effort to align headcount with the operational needs of the business, resulting in a moderate decline in related expenses in the short term, with the significance of the savings anticipated to be recognized in future periods.

Current wording

•reduction in force (“RIF”) of management and non-management personnel in an effort to align headcount with the operational needs of the business resulting in a moderate decline in related expenses in the short term, with the significance of the savings anticipated to be recognized in future periods.

Previous wording

•RIF of management and non-management personnel in an effort to align headcount with the operational needs of the business resulted in a moderate decline in related expenses in the short term, with the significance of the savings anticipated to be recognized in future periods;

Current wording

•RIF of management and non-management personnel in an effort to align headcount with the operational needs of the business resulting in a moderate decline in related expenses in the short term, with the significance of the savings anticipated to be recognized in future periods; and

Previous wording

•closure of two distribution centers to reduce fixed costs in the short term and in future periods, as well as eliminate unnecessary capacity; and

Current wording

•closure of two distribution centers to reduce fixed costs in the short term and in future periods, as well as eliminate unnecessary capacity.

Previous wording

While these activities were intended to provide future benefit to the Company, most of these activities required up-front cash outlays. In order to fund these cash outlays, the Company used cash from operations and borrowings under the prior revolving credit facility. The following table outlines the cash outlays and the period in which they occurred.

Current wording

While these activities were intended to provide future benefit to us, most of these activities required up-front cash outlays. In order to fund these cash outlays, we used cash from operations and borrowings under the prior revolving credit facility. The following table outlines the cash outlays and the period in which they occurred (in thousands):

Previous wording

The decrease in net sales for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily driven by a decline in net sales within the Solo Stove and Chubbies segments, due to declines across both DTC and retail channels at each segment.

Current wording

The decreases in net sales for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was primarily driven by a decline in net sales within the Solo Stove and Chubbies segments, mainly attributable to declines across the DTC channel at each segment. These decreases were offset by increases in net sales within the retail channel of the Watersports segment for the three and six months ended June 30, 2026.

Previous wording

Consolidated Gross Profit and Gross Margin

Current wording

Consolidated Gross Profit and Gross Profit Margin

Previous wording

Gross profit decreased for the three months ended March 31, 2026 compared to the prior year period, largely as a result of the decrease in cost of sales in connection with the decline in net sales and the decline in gross profit margin, which was driven by the impact of tariffs in the current year period, and to a lesser degree, the channel mix shifting to more retail in the current year period compared to the prior year period, which generates lower gross margin.

Current wording

Gross profit decreased for the three and six months ended June 30, 2026 compared to the prior year period, largely as a result of the decrease in net sales and, to a lesser degree, the decline in gross profit margin. The decline in gross profit margin was driven by the change in channel mix and a raw material inventory write-off related to the closure of Oru’s manufacturing facility, partially offset by the benefit recognized from prior period IEEPA tariff refunds received during the current period.

Previous wording

Operating expenses consist of (1) selling, general & administrative (“SG&A”) expenses, (2) restructuring, contract termination and impairment charges, (3) depreciation and amortization expenses and (4) other operating expenses, as defined below.

Current wording

Operating expenses consist of (1) selling, general & administrative (“SG&A”) expenses, (2) depreciation and amortization expenses, (3) restructuring, contract termination and impairment charges, and (4) other operating expenses, as defined below.

Previous wording

•Selling, General & Administrative (“SG&A”) Expenses - SG&A expenses consist primarily of marketing costs, wages, equity-based compensation expense, benefits costs, costs of our warehousing and logistics operations, costs of operating on third-party DTC marketplaces, professional fees and services, costs of shipping product to our customers and general corporate expenses.

Current wording

•SG&A Expenses - SG&A expenses consist primarily of marketing costs, wages, equity-based compensation expense, benefits costs, costs of our warehousing and logistics operations, costs of operating on third-party DTC marketplaces, professional fees and services, costs of shipping product to our customers and general corporate expenses.

Previous wording

Additionally, depreciation and amortization expenses decreased for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 primarily due to the impairment of intangible assets during the prior year. A decrease was also realized in other operating expenses, as a result of strategic consulting engagements in the prior year period.

Current wording

Additionally, depreciation and amortization expenses decreased for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 primarily due to the impairment of intangible assets during the prior year. A decrease was also realized in other operating expenses, as a result of increased strategic consulting engagements in the prior year period, and the loss recognized from the disposition of the TerraFlame manufacturing operations in the second quarter of 2025.

Previous wording

Interest expense, net consists primarily of interest on our revolving credit facilities and term loans.

Current wording

Interest expense, net consists primarily of interest expense on our revolving credit facilities and term loans.

Previous wording

The change in the income tax benefit for the three months ended March 31, 2026 compared to the income tax expense for three months ended March 31, 2025 was primarily driven by the valuation release due to the Corporate Simplification when comparing the current period to the prior year period.

Current wording

The change in the income tax expense (benefit) for the three and six months ended June 30, 2026 compared to the income tax expense for three and six months ended June 30, 2025 was primarily driven by the effects of the Corporate Simplification and related valuation release.

Previous wording

Solo Stove Segment Results for the Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025

Current wording

Solo Stove Segment Results for the Three or Six Months Ended June 30, 2026 Compared to the Three or Six Months Ended June 30, 2025

Previous wording

The decrease in net sales for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 reflected lower unit volumes driven by our continued focus on pricing and promotional discipline within the DTC channel, as well as softness in the retail channel as partners work through elevated legacy inventory levels ahead of new product introductions.

Current wording

The decreases in net sales for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 reflected lower unit volumes driven by our continued focus on pricing and promotional discipline within the DTC channel, as well as softness in the retail channel as we rebuild our retail partnerships.

Previous wording

The decrease in cost of goods sold for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily in line with the decrease in net sales.

Current wording

The decreases in cost of goods sold for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was primarily in line with the decreases in net sales. The decrease in cost of goods sold for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 benefited from prior period IEEPA tariff refunds received during the current period and the impact of the incremental IEEPA tariffs that were repealed in February 2026 in the prior year period, partially offset by product mix.

Previous wording

Segment operating expenses consist of (1) marketing expenses, (2) employee-related expenses, such as wages and benefits, and (3) other operating expenses, which primarily consist of shipping and fulfillment-related expenses.

Current wording

Segment operating expenses consist of (1) marketing expenses, (2) employee-related compensation, such as wages and benefits, and (3) other segment operating expenses, which primarily consist of shipping and fulfillment-related expenses.

Previous wording

Operating expenses decreased for the three months ended March 31, 2026 compared to the three months ended March 31, 2025, the result of a decrease in brand level marketing expenses, a decrease in other segment operating expenses driven by a decrease in seller fees and shipping expenses, each stemming from the decline in DTC channel net sales, coupled with a decrease in employee-related compensation as we streamline operations to be more in line with reduced sales.

Current wording

The decreases in operating expenses for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was the result of a decrease in other segment operating expenses driven by a decrease in seller fees and shipping expenses, each stemming from the decline in DTC channel net sales, coupled with a decrease in brand-level marketing expenses and employee-related compensation as we streamline operations to be more in line with reduced sales.

Previous wording

Chubbies Segment Results for the Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025

Current wording

Chubbies Segment Results for the Three or Six Months Ended June 30, 2026 Compared to the Three or Six Months Ended June 30, 2025

Previous wording

The decrease in net sales for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 reflected variability in customer demand within the DTC channel, and retail net sales declined primarily due to the timing of retail shipments.

Current wording

The decreases in net sales for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 reflected variability in customer demand within both the DTC and retail channels.

Previous wording

The decrease in cost of goods sold for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily the result of the decrease in net sales.

Current wording

The increases in cost of goods sold for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025 was primarily the result of the increases in net sales and channel mix.

Previous wording

Our cash requirements are for working capital, payment of restructuring and other fees, and repayment of our current and long-term debt obligations. We expect these and other cash needs to continue as we seek to improve, develop and transform our business. We fund our working capital, which is primarily comprised of inventory and accounts payable, and other cash requirements from cash flows from operating activities, cash on hand, and borrowings under our 2025 Revolving Credit Facility. Our cash flows from operating activities and borrowings under the 2025 Revolving Credit Facility are our principal sources of liquidity. Cash flows from operating activities result primarily from the sales of our portfolio of products. Our future product sales and our cash flows are difficult to predict, and actual sales may not be in line with our forecasts.

Current wording

Our cash requirements are primarily for working capital, payment of restructuring and other fees, and repayment of our current and long-term debt obligations. We expect these and other cash needs to continue as we seek to improve, develop and transform our business. We fund our working capital, which is primarily comprised of inventory and accounts payable, and other cash requirements from cash flows from operating activities, cash on hand, and borrowings under our 2025 Revolving Credit Facility. Our cash flows from operating activities and borrowings under the 2025 Revolving Credit Facility are our principal sources of liquidity. Cash flows from operating activities result primarily from the sales of our portfolio of products. Our future product sales and our cash flows are difficult to predict, and actual sales may not be in line with our forecasts.

Previous wording

The Corporate Simplification discussed within the Overview section was intended to limit material liability for cash payments that might otherwise be due in 2026 and beyond, under the terms of the Tax Receivable Agreement, as well as future distributions to redeemable noncontrolling interests. For more information on the Corporate Simplification, see the Overview section above.

Current wording

The Corporate Simplification discussed within the Overview section was intended to limit material liability for cash payments that might otherwise be due in 2026 and beyond, under the terms of the Tax Receivable Agreement, as well as future distributions. For more information on the Corporate Simplification, see the Overview section above.

Previous wording

The Company must comply with financial covenants under the 2025 Credit Agreement (as defined below), including a minimum fixed charge coverage ratio, a maximum leverage ratio and a minimum liquidity amount, with the first full measurement period for such financial covenants to occur in the third quarter of 2026, as well as other non-financial covenants as described in further detail below and in Note 10, Debt, Net, As of March 31, 2026, we expect to be in compliance with such covenants applicable as of such date under the 2025 Credit Agreement.

Current wording

We must comply with financial covenants under the 2025 Credit Agreement (as defined below), including a minimum fixed charge coverage ratio, a maximum leverage ratio and a minimum liquidity amount, with the first full measurement period for such financial covenants to occur in the third quarter of 2026, as well as other non-financial covenants as described in further detail below and in Note 10, Debt, Net. As of June 30, 2026, we were in compliance with such covenants applicable as of such date under the 2025 Credit Agreement.

Previous wording

In evaluating our ability to continue as a going concern for the twelve months following the issuance of the unaudited consolidated financial statements, contained in this Form 10-Q, management projects compliance with our financial covenants. Variability in operating results that could affect future covenant compliance raises substantial doubt about our ability to continue as a going concern.

Current wording

In evaluating our ability to continue as a going concern for the twelve months following the issuance of the unaudited consolidated financial statements, contained in this Form 10-Q, management projects compliance with our financial covenants. However, the risks associated with variability in the Company’s operating performance that could affect future covenant compliance raises substantial doubt about our ability to continue as a going concern.

Previous wording

Management is executing cost reduction and operational initiatives and based on current projections, expects to remain in compliance with the covenants under the 2025 Credit Agreement. Accordingly, management believes these plans alleviate the substantial doubt about the Company’s ability to continue as a going concern for at least the twelve months following the issuance of these financial statements. Furthermore, as disclosed within Tariffs above, all but a minor number of the Company’s IEEPA claims for refunds have been accepted by U.S. Customs and Border Protection, which, upon realization, are expected to provide additional financial flexibility which will further support the Company's ability to continue as a going concern.

Current wording

Management is executing cost reduction and operational initiatives and, based on current projections, expects to remain in compliance with the covenants under the 2025 Credit Agreement. Accordingly, management believes our plans alleviate the substantial doubt about our ability to continue as a going concern for at least the twelve months following the issuance of these financial statements. Furthermore, as disclosed within Tariffs above, we began receiving IEEPA tariff refunds during the second quarter of 2026 which has provided additional financial flexibility in support of the Company’s ability to continue as a going concern.

Previous wording

On June 13, 2025, we entered into Amendment No. 4 to Credit Agreement and Limited Waiver and Amendment No. 1 to Security Agreement (the “2025 Credit Agreement”) with JPMorgan Chase Bank, N.A., the Lenders and L/C Issuers party thereto (each as defined therein) and the other parties thereto. The 2025 Credit Agreement consists of the following: (i) revolving commitments under the Revolving Credit Facility in an aggregate amount equal to $90 million (the “2025 Revolving Credit Facility”), subject to availability under the borrowing base set forth in the 2025 Credit Agreement; and (ii) refinancing term loans, including the 2021 Term Loan (the “2025 Term Loan”) in an aggregate principal amount equal to $240 million. The 2025 Revolving Credit Facility also includes the ability to issue up to $20 million in letters of credit, with $3.7 million of letters of credit issued and outstanding as of March 31, 2026. While our issuance of letters of credit does not increase our borrowings outstanding under the 2025 Revolving Credit Facility, it does reduce the amounts available under the 2025 Revolving Credit Facility.

Current wording

On June 13, 2025, we entered into Amendment No. 4 to Credit Agreement and Limited Waiver and Amendment No. 1 to Security Agreement (the “2025 Credit Agreement”) with JPMorgan Chase Bank, N.A., the Lenders and L/C Issuers party thereto (each as defined therein) and the other parties thereto. The 2025 Credit Agreement consists of the following: (i) revolving commitments under the Revolving Credit Facility in an aggregate amount equal to $90 million (the “2025 Revolving Credit Facility”), subject to availability under the borrowing base set forth in the 2025 Credit Agreement; and (ii) refinancing term loans, including the 2021 Term Loan (the “2025 Term Loan”) in an aggregate principal amount equal to $240 million. The 2025 Revolving Credit Facility also includes the ability to issue up to $20 million in letters of credit, with $5.8 million of letters of credit issued and outstanding as of June 30, 2026. While our issuance of letters of credit does not increase our borrowings outstanding under the 2025 Revolving Credit Facility, it does reduce the amounts available under the 2025 Revolving Credit Facility.

Previous wording

Each of the 2025 Revolving Credit Facility and the 2025 Term Loan bear interest at (depending on our election from time to time) either an adjusted term rate defined in the agreement based on SOFR or the base rate defined in the 2025 Credit Agreement, each plus an applicable margin. The interest is payable in kind, and thus capitalized thereon and increasing the principal balance thereof, (i) on a quarterly basis through March 31, 2026, and (ii) for the period beginning on April 1, 2026 and ending on March 31, 2027 upon our election, and (iii) after March 31, 2027, it is only payable in cash. The unfunded portion of the commitments under the 2025 Revolving Credit Facility will accrue an annual commitment fee.

Current wording

Each of the 2025 Revolving Credit Facility and the 2025 Term Loan bears interest at (depending on our election from time to time) either an adjusted term rate defined in the agreement based on SOFR or the base rate defined in the 2025 Credit Agreement, each plus an applicable margin. The interest is payable in kind (“PIK”), and thus capitalized thereon and increasing the principal balance thereof, (i) on a quarterly basis through March 31, 2026, and (ii) for the period beginning on April 1, 2026 and ending on March 31, 2027 upon our election, and (iii) after March 31, 2027, it is only payable in cash. The unfunded portion of the commitments under the 2025 Revolving Credit Facility will accrue an annual commitment fee. We elected not to pay in PIK interest for the period beginning April 1, 2026 through June 30, 2026.

Previous wording

The 2025 Credit Agreement also requires the Company to comply with additional reporting requirements, including, among others, (i) delivering on the date that is twenty (20) days after the end of the previous calendar month (a) a borrowing base certificate calculating the borrowing base and availability under the 2025 Revolving Credit Facility, (b) a 13-week cash flow forecast for the Company and its subsidiaries, (c) a liquidity report, and (d) an accounts and inventory report; and (ii) delivering no later than thirty (30) days after the end of the previous calendar month, a key performance indicator report and certain additional reports on the Company’s operating plan and other measures, such as Credit Agreement Adjusted EBITDA. In addition, the 2025 Credit Agreement extends the delivery dates for quarterly financial statement deliverables to sixty (60) days after the end of the applicable fiscal quarter.

Current wording

The 2025 Credit Agreement also requires us to comply with additional reporting requirements, including, among others, (i) delivering on the date that is twenty (20) days after the end of the previous calendar month (a) a borrowing base certificate calculating the borrowing base and availability under the 2025 Revolving Credit Facility, (b) a 13-week cash flow forecast for us and our subsidiaries, (c) a liquidity report, and (d) an accounts and inventory report; and (ii) delivering no later than thirty (30) days after the end of the previous calendar month, a key performance indicator report and certain additional reports on our operating plan and other measures, such as Credit Agreement Adjusted EBITDA. In addition, the 2025 Credit Agreement extends the delivery dates for quarterly financial statement deliverables to sixty (60) days after the end of the applicable fiscal quarter.

Previous wording

The $59.1 million decrease in cash used in operating activities period over period, was due to a $45.1 million decline in cash usage from changes in operating assets and liabilities (“working capital”), which was mostly related to accounts payable reductions in the current quarter. The decrease in changes in working capital was coupled with a decrease in cash usage of $14.0 million from changes in net income (loss) after non-cash adjustments, driven by a reduction in net loss, plus interest expense payable in kind recognized in the first quarter of 2026.

Current wording

The $84.3 million increase in cash provided by operating activities period over period, was due to a $54.4 million decline in cash usage from changes in operating assets and liabilities (“working capital”), which was mostly related to accounts payable reductions in the prior year period. The decrease in changes in working capital was coupled with a decrease in cash usage of $29.9 million from changes in net income (loss) after non-cash adjustments, primarily driven by a reduction in net loss.

Previous wording

The $0.9 million decrease in cash used in investing activities in the current period when compared to the prior period was due to a decrease in capital expenditures.

Current wording

The $2.8 million decrease in cash used in investing activities in the current period when compared to the prior period was due to a decrease in capital expenditures.

Previous wording

The $257.9 million decrease in cash provided by financing activities in the current period when compared to the prior year period was primarily driven by a $258.0 million decrease in cash provided by net debt activity, inclusive of borrowings, repayments and debt issuance costs in relation to the 2025 Credit Agreement in the prior year quarter.

Current wording

The $77.3 million increase in cash used in financing activities in the current period when compared to the prior year period was primarily driven by a $80.1 million decrease in cash provided by net debt activity, inclusive of borrowings, repayments and debt issuance costs in relation to the 2025 Credit Agreement in the prior year period.

Previous wording

For information regarding our contractual obligations, see above under “Revolving Credit Facilities and Term Loans,” Note 1, Significant Accounting Policies, Note 10, Debt, Net and Note 15, Variable Interest Entities in this Quarterly Report and Note 15, Leases and Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2025 Form 10-K.

Current wording

For information regarding our contractual obligations, see above under “Revolving Credit Facilities and Term Loans,” Note 1, Organization and Basis of Presentation, Note 10, Debt, Net and Note 15, Variable Interest Entities in this Quarterly Report and Note 15, Leases and Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2025 Form 10-K.

Previous wording

See Note 2 - Significant Accounting Policies, to the audited consolidated financial statements included in our 2025 Form 10-K for more information about our significant accounting policies, including our critical accounting policies. The critical accounting estimates that reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements are described in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2025 Form 10-K. During the three months ended March 31, 2026, there were no material changes to our critical accounting policies and estimates from those discussed in our 2025 Form 10-K. Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.

Current wording

See Note 2, Significant Accounting Policies, to the audited consolidated financial statements included in our 2025 Form 10-K for more information about our significant accounting policies, including our critical accounting policies. The critical accounting estimates that reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements are described in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2025 Form 10-K. During the six months ended June 30, 2026, there were no material changes to our critical accounting policies and estimates from those discussed in our 2025 Form 10-K. Within the context of these critical accounting estimates, we are not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported.