PRESSRELEASEAbbVieReportsThird-Quarter2025FinancialResultsReportsThird-QuarterDilutedEPSof$0.10onaGA.
2025-11-03
13页
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,D.C.20549 Form 10-Q (Mark One)QUARTERLY.
2025-11-02
218页
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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549Form 10-Q QUARTERLY REPORT PURSU.
2025-11-02
104页
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q QUARTERLY REPORT PURSUA.
2025-11-02
47页
5星级
1 FOR IMMEDIATE RELEASE INVESTOR CONTACT:MEDIA CONTACT:Frank Morgan Harlow Sumerford 615-344-2688 6.
2025-11-02
12页
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Advance Auto Parts Reports Third Quarter 2025 Results 3.0%comparable store sales growth and 4.4justed operating income margin Reaffirms midpoint of full year comparable sales growth and adjusted operating margin guidance Ended the quarter with a strong liquidity position;Over$3 billion of cash on the balance sheet RALEIGH,N.C.,October 30,2025-Advance Auto Parts,Inc.(NYSE:AAP),a leading automotive aftermarket parts provider in North America that serves both professional installer and do-it-yourself customers,announced its financial results for the third quarter ended October 4,2025.We delivered our strongest quarterly performance in over two years,thanks to the teams determination,commitment to our turnaround objectives,and their dedication to serving our customers,said Shane OKelly,president and chief executive officer.Our comparable sales performance was led by growth in the Pro channel.The DIY channel also delivered positive comparable sales growth in the quarter.We continue to make progress on our strategic priorities,and based on our updated guidance we are on track to deliver approximately 200-basis points of annual margin expansion in the first year of our turnaround.Our initiatives are geared toward delivering sustained,profitable growth and we remain committed to advancing our strategic priorities to create shareholder value over the long-term.Third Quarter 2025 Results(1,2)Third quarter 2025 net sales totaled$2.0 billion,compared with$2.1 billion in the third quarter of the prior year.Comparable store sales for the third quarter 2025 increased 3.0%.The Companys third quarter 2025 gross profit was$0.9 billion,or 43.3%of net sales compared with$0.9 billion,or 42.3%in the third quarter of the prior year.Adjusted gross profit was$0.9 billion,or 44.8%of net sales compared with$0.9 billion,or 42.3%in the third quarter of the prior year.The margin expansion was driven by savings associated with the footprint optimization activity completed in March and reduction in product costs driven by strategic sourcing initiatives.The Companys third quarter 2025 selling,general and administrative(SG&A)expenses were$0.9 billion,or 42.2%of net sales compared with$0.9 billion,or 42.3%in the third quarter of the prior year.Adjusted SG&A expenses were$0.8 billion,or 40.4%of net sales in the third quarter of 2025 compared with$0.9 billion,or 41.5%in the third quarter of 2024.The reduction in SG&A expenses was primarily related to operation of fewer stores compared to last year.(1)All comparisons are based on continuing operations for the same time period in the prior year.The Company calculates comparable store sales based on the change in store sales starting once a location has been open for approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations.The Company includes sales from relocated stores in comparable store sales from the original date of opening.Comparable store sales is intended only as supplemental information and is not a substitute for Net sales presented in accordance with accounting principles generally accepted in the United States of America(GAAP).(2)Comparative financial information related to results from continuing operations has been recast to reflect the presentation of our former Worldpac,Inc.business(“Worldpac”)as discontinued operations.Refer to the Companys Annual Report on Form 10-K for 2024,filed with the Securities and Exchange Commission(“SEC”)on February 26,2025.The Companys third quarter 2025 operating income was$22 million,or 1.1%of net sales,compared with break-even operating income,or 0.0%in the third quarter of the prior year.Adjusted operating income was$90 million,or 4.4%of net sales,compared with adjusted operating income of$16 million,or 0.7%in the third quarter of 2024.The Companys diluted earnings(loss)per share for the quarter was$(0.02),compared with$(0.42)in the third quarter of 2024.The Companys adjusted diluted earnings(loss)per share was$0.92 compared with adjusted diluted earnings per share of$(0.05)in the third quarter of 2024.Net cash used in operating activities was$118 million through the third quarter of 2025 versus$81 million of cash provided by operating activities in the same period of the prior year.Free cash flow through the third quarter of 2025 was an outflow of$277 million compared with an outflow of$49 million in the same period of the prior year.Free cash flow through the third quarter of 2025 includes approximately$130 million of cash charges related to restructuring and other related expenses.Capital Allocation On October 27,2025,the Company declared a regular cash dividend of$0.25 per share to be paid on January 23,2026,to all common stockholders of record as of January 9,2026.Full Year 2025 Guidance(53 weeks)The Company has updated full year guidance to reflect operating assumptions for the fourth quarter of 2025 along with reaffirming the midpoint of its prior full year comparable store sales and adjusted operating income margin expectations.Full year 2025 guidance assumes current tariffs remain in place for the remainder of 2025.As of October 30,2025 Prior Guidance($in millions,except per share data)Low High Low High Net sales from continuing operations(1)$8,550$8,600$8,400$8,600 Comparable store sales(52 weeks)(2)0.7%1.3%0.5%1.5justed operating income margin from continuing operations(3)2.4%2.6%2.0%3.0justed diluted EPS from continuing operations(3)$1.75$1.85$1.20$2.20 Capital expenditures Approx.$250 Approx.$300 Free cash flow(3)($90)-($80)($85)-($25)New store growth Store openings 30 new stores 30 new stores Market hub openings 14 new market hubs 10 new market hubs(1)Includes approximately$100 to$120 million of net sales in the 53rd week.(2)The Company calculates comparable store sales based on the change in store sales starting once a location has been open for approximately one year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations.The Company includes sales from relocated stores in comparable store sales from the original date of opening.(3)Adjusted operating income margin from continuing operations,Adjusted diluted EPS from continuing operations and Free cash flow are non-GAAP measures.For a better understanding of the Companys non-GAAP adjustments,refer to the reconciliation of non-GAAP financial measures in the accompanying financial tables.The Company is not able to provide a reconciliation of these forward-looking non-GAAP measures because it is unable to predict with reasonable accuracy the value of certain adjustments and as a result,the comparable GAAP measures are unavailable without unreasonable efforts.Investor Conference Call The Company will detail its results for the third quarter ended October 4,2025,via a webcast scheduled to begin at 8 a.m.Eastern Time on Thursday,October 30,2025.The webcast will be accessible via the Investor Relations page of the Companys website(ir.AdvanceAutoP).To join by phone,please pre-register online for dial-in and passcode information.Upon registering,participants will receive a confirmation with call details and a registrant ID.While registration is open through the live call,the Company suggests registering a day in advance or at minimum 10 minutes before the start of the call.A replay of the conference call will be available on the Companys Investor Relations website for one year.About Advance Auto Parts Advance Auto Parts,Inc.is a leading automotive aftermarket parts provider that serves both professional installers and do-it-yourself customers.As of October 4,2025,Advance operated 4,297 stores primarily within the United States,with additional locations in Canada,Puerto Rico and the U.S.Virgin Islands.The Company also served 814 independently owned Carquest branded stores across these locations in addition to Mexico and various Caribbean islands.Additional information about Advance,including employment opportunities,customer services and online shopping for parts,accessories and other offerings can be found at www.AdvanceAutoP.Investor Relations Contact:Media Contact:Lavesh Hemnani Nicole Ducouer T:(919)227-5466 T:(984)389-7207 E:invrelationsadvance- E:AAPcommunicationsadvance- Forward-Looking Statements Certain statements herein are“forward-looking statements”within the meaning of the Private Securities Litigation Reform Act of 1995.Forward-looking statements are usually identifiable by words such as“anticipate,”“believe,”“could,”“estimate,”“expect,”“forecast,“guidance,”“intend,”“likely,”“may,”“plan,”“position,”“possible,”“potential,”“probable,”“project,”“should,”“strategy,”“target,”“will,”or similar language.All statements other than statements of historical fact are forward-looking statements,including,but not limited to,statements about the Companys strategic initiatives,restructuring and asset optimization plans,financial objectives,including with respect to the Companys reorganized debt capital structure,operational plans and objectives,statements about the benefits of the Companys Worldpac sale and use of proceeds therefrom,statements regarding expectations for economic conditions,future business and financial performance,including with respect to tariffs,as well as statements regarding underlying assumptions related thereto.Forward-looking statements reflect the Companys views based on historical results,current information and assumptions related to future developments.Except as may be required by law,the Company undertakes no obligation to update any forward-looking statements made herein.Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.They include,among others,the Companys ability to hire,train and retain qualified employees,the timing and implementation of strategic initiatives,risks associated with the Companys restructuring and asset optimization plans,risks relating to incurrence of indebtedness and increased leverage,risks relating to the Companys credit ratings or perceived creditworthiness,deterioration of general macroeconomic conditions,geopolitical factors including increased tariffs and trade restrictions,the highly competitive nature of the industry,demand for the Companys products and services,risks relating to the impairment of assets,including intangible assets such as goodwill,access to financing on favorable terms,complexities in the Companys inventory and supply chain and challenges with transforming and growing its business.Please refer to“Item 1A.Risk Factors”of the Companys most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission(“SEC”),as updated by the Companys subsequent filings with the SEC,for a description of these and other risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.Advance Auto Parts,Inc.and Subsidiaries Condensed Consolidated Balance Sheets(In millions)(unaudited)Assets October 4,2025(1)December 28,2024(1)Current assets:Cash and cash equivalents$3,174$1,869 Receivables,net 483 544 Inventories,net 3,694 3,612 Other current assets 167 118 Total current assets 7,518 6,143 Property and equipment,net 1,269 1,334 Operating lease right-of-use assets 2,184 2,243 Goodwill 599 598 Other intangible assets,net 401 406 Other assets 88 74 Total assets$12,059$10,798 Liabilities and Stockholders Equity Current liabilities:Accounts payable 3,177 3,408 Accrued expenses 761 784 Other current liabilities 411 473 Total current liabilities 4,349 4,665 Long-term debt 3,411 1,789 Operating lease liabilities 1,850 1,897 Deferred income taxes 166 193 Other long-term liabilities 88 84 Total liabilities 9,864 8,628 Total stockholders equity 2,195 2,170 Total liabilities and stockholders equity$12,059$10,798 (1)This condensed consolidated balance sheet has been prepared on a basis consistent with the Companys previously prepared balance sheets filed with the Securities and Exchange Commission(SEC),but does not include the footnotes required by accounting principles generally accepted in the United States of America(“GAAP”).Advance Auto Parts,Inc.and Subsidiaries Condensed Consolidated Statements of Operations(In millions,except per share data)(unaudited)Twelve Weeks Ended Forty Weeks Ended October 4,2025(1)October 5,2024(1)October 4,2025(1)October 5,2024(1)Net sales$2,036$2,148$6,628$7,098 Cost of sales 1,155 1,240 3,764 4,037 Gross profit 881 908 2,864 3,061 Selling,general and administrative expenses,exclusive of restructuring and related expenses 826 895 2,771 2,933 Restructuring and related expenses 33 13 180 21 Selling,general and administrative expenses 859 908 2,951 2,954 Operating(loss)income 22 (87)107 Other,net:Interest expense (40)(19)(86)(62)Other income,net 16 2 61 12 Total other,net (24)(17)(25)(50)(Loss)income before income taxes (2)(17)(112)57 Income tax(benefit)expense (1)8 (150)34 Net income(loss)from continuing operations (1)(25)38 23 Net income from discontinued operations 19 56 Net income(loss)$(1)$(6)$38$79 Basic earnings(loss)per common share from continuing operations$(0.02)$(0.42)$0.63$0.38 Basic earnings per common share from discontinued operations 0.32 0.95 Basic earnings(loss)per common share$(0.02)$(0.10)$0.63$1.33 Basic weighted-average common shares outstanding 60.0 59.7 59.9 59.6 Diluted earnings(loss)per common share from continuing operations$(0.02)$(0.42)$0.63$0.38 Diluted earnings per common share from discontinued operations 0.32 0.94 Diluted earnings(loss)per common share$(0.02)$(0.10)$0.63$1.32 Diluted weighted-average common shares outstanding 60.0 59.9 60.5 59.9 (1)These preliminary condensed consolidated statements of operations have been prepared on a basis consistent with the Companys previously prepared statements of operations filed with the SEC,but do not include the footnotes required by GAAP.Advance Auto Parts,Inc.and Subsidiaries Condensed Consolidated Statements of Cash Flows(In millions)(unaudited)Forty Weeks Ended October 4,2025(1)October 5,2024(1)Cash flows from operating activities:Net income$38$79 Net income from discontinued operations 56 Net income from continuing operations 38 23 Adjustments to reconcile net income to net cash used in operating activities:Depreciation and amortization 214 217 Share-based compensation 29 34 Loss(gain)on sale and impairment of long-lived assets,net 23 (14)Expected future credit losses,net 50 23 Provision for deferred income taxes (27)24 Other,net 14 3 Net change in:Receivables,net 46 (84)Inventories,net (75)(152)Operating lease right of use assets 41 (43)Other assets (57)(3)Accounts payable (270)(25)Accrued expenses (37)31 Operating lease liabilities (108)47 Other liabilities 1 Net cash(used in)provided by operating activities of continuing operations (118)81 Net cash provided by operating activities of discontinued operations 77 Net cash(used in)provided by operating activities (118)158 Cash flows from investing activities:Purchases of property and equipment (159)(130)Proceeds from sales of property and equipment 22 14 Net cash used in investing activities of continuing operations (137)(116)Net cash used in investing activities of discontinued operations (8)Net cash used in investing activities (137)(124)Cash flows from financing activities:Proceeds from issuance of long-term debt 1,950 Repayment of long-term debt (300)Debt issuance costs (42)Dividends paid (45)(45)Forty Weeks Ended October 4,2025(1)October 5,2024(1)Proceeds from the issuance of common stock 3 3 Repurchases of common stock (4)(6)Other,net (3)(10)Net cash provided by(used in)financing activities 1,559 (58)Effect of exchange rate changes on cash 1 12 Net increase(decrease)in cash and cash equivalents 1,305 (12)Cash and cash equivalents,beginning of period 1,869 503 Cash and cash equivalents,end of period$3,174$491 Non-cash transactions of continuing operations:Accrued purchases of property and equipment$23$9 Transfers of property and equipment from(to)assets related to discontinued operations to(from)continuing operations 7 Accrued debt issuance costs 4 Summary of cash and cash equivalents:Cash and cash equivalents of continuing operations,end of period$3,174$464 Cash and cash equivalents of discontinued operations,end of period 27 Cash and cash equivalents,end of period$3,174$491 (1)This condensed consolidated statement of cash flows has been prepared on a basis consistent with the Companys previously prepared statements of operations filed with the SEC,but does not include the footnotes required by GAAP.Reconciliation of Non-GAAP Financial Measures The Company uses certain non-GAAP financial measures described below to supplement the Companys unaudited condensed consolidated financial statements prepared and presented in accordance with GAAP and to understand and evaluate the Companys core operating performance.These non-GAAP financial measures,which may be different than similarly titled measures used by other companies,are presented as the Company believes that such non-GAAP financial measures provide useful information about our financial performance,enhance the overall understanding of our past performance and future prospects,and allow for greater transparency with respect to important metrics used by management for financial and operational decision-making.The Company is presenting these non-GAAP metrics to provide investors insight to the information used by our management to evaluate our business and financial performance.The Company believes that these measures provide investors increased comparability of our core financial performance over multiple periods with other companies in our industry.The Companys Non-GAAP financial measures reflect results from continuing operations,including Adjusted Net(loss)Income,Adjusted Diluted(loss)Earnings Per Share(“Adjusted Diluted EPS”),Adjusted Gross Profit,Adjusted Gross Profit Margin,Adjusted Selling,General and Administrative expense(“Adjusted SG&A”),Adjusted SG&A Margin,Adjusted Operating(loss)Income,Adjusted Operating(loss)Income Margin,Free Cash Flow and Adjusted Net Debt to Adjusted EBITDAR,and should not be used as a substitute for GAAP financial measures,or considered in isolation,for the purpose of analyzing operating performance,financial position or cash flows.The Company has presented these non-GAAP financial measures as the Company believes that the presentation of the financial results that exclude(1)transformation expenses under the Companys turnaround plan,inclusive of the Worldpac divestiture and(2)other significant expenses,are useful and indicative of the Companys base operations because the expenses vary from period to period in terms of size,nature and significance.The income tax impact of these non-GAAP adjustments is also adjusted for using the estimated tax rate in effect for the respective non-GAAP adjustments.These measures assist in comparing the Companys current operating results with past periods and with the operational performance of other companies in the industry.The disclosure of these measures allows investors to evaluate the Companys performance using the same measures management uses in developing internal budgets and forecasts and in evaluating managements compensation.Included below is a description of the expenses the Company has determined are not normal,recurring cash operating expenses necessary to operate the Companys business and the rationale for why providing these measures is useful to investors as a supplement to the GAAP measures.Transformation Expenses Expenses incurred in connection with the Companys turnaround plan and specific transformative activities related to asset optimization that the Company does not view to be normal cash operating expenses.These expenses primarily include:Restructuring and other related expenses:Expenses relating to strategic initiatives,including severance expense,retention bonuses offered to store-level employees to help facilitate the closing of stores,incremental reserves related to the collectibility of receivables resulting from contract terminations with certain independents associated with the 2024 Restructuring Plan and third-party professionals assisting in the development and execution of the strategic initiatives.Impairment and write-down of long-lived assets:Expenses relating to the impairment of operating lease ROU assets and property and equipment,incremental depreciation as a result of accelerating long-lived assets over a shorter useful life,depreciation of long-lived assets and ROU asset amortization after store closure,and incremental lease abandonment expenses as a result of accelerating ROU asset amortization for leases the Company expects to exit before the end of the contractual term,net of gains on lease terminations,in connection with the 2024 Restructuring Plan and Other Restructuring Plan.Distribution network optimization:Expenses primarily relating to the conversion of the stores and distribution centers to market hubs,including,realized losses on liquidated inventory,temporary labor,nonrecurring professional service fees and team member severance.Other Expenses Expenses incurred by the Company that are not viewed as normal cash operating expenses and vary from period to period in terms of size,nature,and significance.These expenses primarily include:Other professional service fees:Expenses relating to nonrecurring services rendered by third-party vendors engaged to perform a strategic business review,including the Companys transformation initiatives.Worldpac post transaction-related expenses:Expenses primarily relating to non-recurring separation activities provided by third-party professionals subsequent to the sale of Worldpac.Executive turnover:Expenses associated with executive level reorganization,including expenses for executive severance,the hiring search for leadership positions and certain compensation benefits.Material weakness remediation:Incremental expenses associated with the remediation of the Companys previously disclosed material weaknesses in internal control over financial reporting.Cybersecurity incident:Expenses related to the response and remediation of a cybersecurity incident.Other:Includes a non-cash charge related to expected future credit losses on vendor receivables due from a vendor that filed voluntary petitions for Chapter 11 bankruptcy protection.Other tax adjustments:Certain tax items that are unrelated to the fiscal year in which they are recorded are excluded in order to provide a clearer understanding of the Companys ongoing Non-GAAP tax rate and after-tax earnings.Reconciliation of Diluted Earnings(loss)Per Share(GAAP)and Adjusted Diluted(Loss)Earnings Per Share(Non-GAAP)Twelve Weeks Ended Forty Weeks Ended(in millions,except per share data)Classification October 4,2025 October 5,2024 October 4,2025 October 5,2024 Net income(loss)from continuing operations(GAAP)$(1)$(25)$38$23 Cost of sales adjustments:Transformation expenses:Distribution network optimization Restructuring 4 9 Expected future credit loss related to vendor receivables(1)Non-restructuring 28 28 Selling,general and administrative adjustments:Transformation expenses:Restructuring and other related expenses(2)Restructuring 7 4 78 5 Impairment and write-down of long-lived assets(3)Restructuring 18 76 Distribution network optimization Restructuring 6 9 15 14 Other expenses:Other professional service fees Non-restructuring(6)3 12 Worldpac post transaction-related expenses Restructuring 2 7 Executive turnover Restructuring 4 2 Material weakness remediation Non-restructuring 1 1 4 Cybersecurity incident Non-restructuring 2 3 Other income adjustments:TSA services (1)(8)Losses on extinguishment of debts 9 9 Provision for income taxes on adjustments(4)(19)(4)(58)(7)Other tax(benefit)expense adjustments(5)10 (126)10 Adjusted net income(loss)(Non-GAAP)$56$(3)$85$54 Diluted earnings(loss)per share from continuing operations(GAAP)$(0.02)$(0.42)$0.63$0.38 Adjustments,net of tax 0.94 0.37 0.77 0.52 Adjusted diluted earnings(loss)per share(Non-GAAP)(7)$0.92$(0.05)$1.40$0.90 (1)Reflects a charge for expected future credit losses related to vendor receivables due from a vendor that filed petitions for Chapter 11 bankruptcy protection on September 28,2025.(2)Restructuring and other related expenses for the twelve weeks ended October 4,2025 includes$2 million of nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan and$5 million of other related expenses associated with location closures,including the transfer of assets.Restructuring and other related expenses for the forty weeks ended October 4,2025 includes$37 million of nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan,$15 million of severance and other labor related costs,$7 million for reserves on independent loans and$19 million of other related expenses associated with location closures,including the transfer of assets.(3)The Company recorded incremental accelerated depreciation and amortization for property and equipment and ROU assets of$7 million and impairment charges for ROU assets and property and equipment of$11 million net of gains on sales,for the twelve weeks ended October 4,2025.The Company recorded incremental accelerated depreciation and amortization for property and equipment and ROU assets of$55 million and impairment charges for ROU assets and property and equipment of$21 million,net of gains on sale,for the forty weeks ended October 4,2025.(4)The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate in effect for the respective non-GAAP adjustments.(5)Income tax(benefit)expenses included a discrete non-recurring tax benefit associated with capital loss deductions effectuated in the first quarter of fiscal 2025.The benefit has been excluded from Non-GAAP results in order to provide a clearer understanding of ongoing Non-GAAP tax rate and after-tax earnings.(6)Other professional service fees in fiscal 2024 were classified as restructuring and related expenses based on the underlying activity to which they related.(7)Refer to the reconciliation of diluted weighted-average common shares outstanding(GAAP)to adjusted diluted weighted-average common shares outstanding(Non-GAAP)which is the denominator utilized to calculate adjusted diluted earnings(loss)per share(Non-GAAP).Adjusted diluted weighted-average common shares outstanding(Non-GAAP)includes the dilutive impact of share-based awards as such shares are considered dilutive in consideration of the Companys Non-GAAP earnings for the period.Reconciliation of Adjusted Diluted Weighted-Average Common Shares Outstanding Twelve Weeks Ended Forty Weeks Ended(shares in millions)October 4,2025 October 5,2024 October 4,2025 October 5,2024 Diluted Weighted-Average Common Shares Outstanding(GAAP)60.0 59.9 60.5 59.9 Dilutive impact of share-based awards 0.9 Adjusted Diluted Weighted-Average Common Shares Outstanding(Non-GAAP)60.9 59.9 60.5 59.9 Reconciliation of Adjusted Gross Profit Twelve Weeks Ended Forty Weeks Ended(in millions)October 4,2025 October 5,2024 October 4,2025 October 5,2024 Gross Profit(GAAP)$881$908$2,864$3,061 Gross Profit adjustments 32 37 Adjusted Gross Profit(Non-GAAP)$913$908$2,901$3,061 Gross Profit Margin(GAAP)(1)43.3B.3C.2C.1justed Gross Profit Margin(Non-GAAP)(1)44.8B.3C.8C.1%(1)These GAAP and Non-GAAP measures are calculated as a percentage of Net sales.Reconciliation of Adjusted Selling,General and Administrative Expenses Twelve Weeks Ended Forty Weeks Ended(in millions)October 4,2025 October 5,2024 October 4,2025 October 5,2024 Selling,general and administrative(SG&A)expenses(GAAP)$859$908$2,951$2,954 SG&A adjustments (36)(16)(193)(28)Adjusted SG&A(Non-GAAP)$823$892$2,758$2,926 SG&A Margin(GAAP)(1)42.2B.3D.5A.6justed SG&A Margin(Non-GAAP)(1)40.4A.5A.6A.2%(1)These GAAP and Non-GAAP measures are calculated as a percentage of Net sales.Reconciliation of Adjusted Operating Income Twelve Weeks Ended Forty Weeks Ended(in millions)October 4,2025 October 5,2024 October 4,2025 October 5,2024 Operating(Loss)Income(GAAP)$22$(87)$107 Gross Profit adjustments 32 37 SG&A adjustments 36 16 193 28 Adjusted Operating Income(Non-GAAP)$90$16$143$135 Operating(Loss)Income Margin(GAAP)(1)1.1%(1.3)%1.5justed Operating Income Margin(Non-GAAP)(1)4.4%0.7%2.2%1.9%(1)These GAAP and Non-GAAP measures are calculated as a percentage of Net sales.Reconciliation of Free Cash Flow Forty Weeks Ended(in millions)October 4,2025 October 5,2024 Cash flows(used in)provided by operating activities of continuing operations(1)$(118)$81 Purchases of property and equipment (159)(130)Free cash flow$(277)$(49)(1)Includes approximately$130 million of cash charges related to restructuring and other related expenses.Reconciliation of Adjusted Net Debt to Adjusted EBITDAR(1)Four Quarters Ended(In millions,except adjusted debt to adjusted EBITDAR ratio)October 4,2025 Total Debt(GAAP)$3,411 Add:Operating lease liabilities 2,252 Less:Cash&cash equivalents (3,174)Adjusted Net Debt(Non-GAAP)$2,489 Net loss from continuing operations(GAAP)$(571)Depreciation and amortization 289 Interest expense 105 Other income,net (74)Income tax benefit (366)Rent expense 597 Share-based compensation 40 Transformation and other charges(2)928 Adjusted EBITDAR(Non-GAAP)$948 Debt to Net Loss from continuing operations(GAAP)(6.0)Adjusted Net Debt to Adjusted EBITDAR(Non-GAAP)2.6 (1)Management believes its Adjusted Net Debt to Adjusted EBITDAR ratio(“net leverage ratio”)is a key financial metric for debt securities,as reviewed by rating agencies,and believes its debt levels are best analyzed using this measure.The Companys goal is to maintain an investment grade rating.The Companys credit rating could impact the Companys ability to obtain additional funding.A negative change in the Companys investment rating,could negatively impact future performance and limit growth opportunities.The net leverage ratio calculated by the Company is a Non-GAAP measure and should not be considered a substitute for debt to net income,as determined in accordance with GAAP.The Company adjusts the calculation to remove rent expense,deduct available cash&cash equivalents and to add back the Companys existing operating lease liabilities related to their right-of-use assets to provide a more meaningful comparison with the Companys peers and to account for differences in debt structures and leasing arrangements.The Companys calculation of its net leverage ratio may not be calculated in the same manner as other companies,and thus may not be comparable to similarly titled measures used by other companies.(2)The adjustments to the four quarters ended October 4,2025,include expenses associated with our transformation and restructuring and related activities,in addition to other items,including a charge for expected future credit losses related to vendor receivables due from a vendor that filed petitions for Chapter 11 bankruptcy protection on September 28,2025,the Companys material weakness remediation efforts,professional fees and executive turnover.Store Information During the forty weeks ended October 4,2025,26 stores were opened and 517 were closed,resulting in a total of 4,297 stores as of October 4,2025,compared with a total of 4,788 stores as of December 28,2024.The below table summarizes the changes in the number of company-operated stores during the twelve and forty weeks ended October 4,2025:Twelve Weeks Ended AAP CARQUEST Total July 12,2025 4,055 237 4,292 New 8 8 Closed (3)(3)Converted 1 (1)Relocated October 4,2025 4,061 236 4,297 Forty Weeks Ended AAP CARQUEST Total December 28,2024 4,507 281 4,788 New 22 4 26 Closed (470)(47)(517)Converted 1 (1)Relocated 1 (1)October 4,2025 4,061 236 4,297
2025-10-31
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Q3 2025 RESULTSOCTOBER 30|2025Forward Looking Statements and Non-GAAP Certain statements herein are“.
2025-10-31
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Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549_FORM 10-Q_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended October 4,2025 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _ to _.Commission file number 001-16797_ADVANCE AUTO PARTS,INC.(Exact name of registrant as specified in its charter)_Delaware54-2049910(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)4200 Six Forks Road,Raleigh,North Carolina 27609(Address of principal executive offices)(Zip Code)(540)362-4911(Registrants telephone number,including area code)Securities Registered Pursuant to Section 12(b)of the Act:Title of each classTrading symbolName of each exchange on which registeredCommon Stock,$0.0001 par valueAAPNew York Stock ExchangeNot Applicable(Former name,former address and former fiscal year,if changed since last report).Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Registration S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company or an emerging growthcompany.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No As of October 27,2025,the number of shares of the registrants common stock outstanding was 60,022,245 shares.Table of ContentsTABLE OF CONTENTS PageNOTE REGARDING FORWARD LOOKING STATEMENTS1PART I.FINANCIAL INFORMATION Item 1.Condensed Consolidated Financial Statements of Advance Auto Parts,Inc.and Subsidiaries(unaudited)2 Condensed Consolidated Balance Sheets2 Condensed Consolidated Statements of Operations3Condensed Consolidated Statements of Comprehensive Income4Condensed Consolidated Statements of Changes in Stockholders Equity5 Condensed Consolidated Statements of Cash Flows7 Notes to the Condensed Consolidated Financial Statements 9 Item 2.Managements Discussion and Analysis of Financial Condition and Results of Operations22 Item 3.Quantitative and Qualitative Disclosures About Market Risk34 Item 4.Controls and Procedures 34PART II.OTHER INFORMATION Item 1.Legal Proceedings34Item 1A.Risk Factors34 Item 2.Unregistered Sales of Equity Securities and Use of Proceeds 35Item 5.Other Information36 Item 6.Exhibits 37SIGNATURE38Table of ContentsFORWARD-LOOKING STATEMENTSCertain statements herein are“forward-looking statements”within the meaning of the Private Securities Litigation Reform Act of 1995.Forward-looking statements are usually identifiable by words such as“anticipate,”“believe,”“could,”“estimate,”“expect,”“forecast,“guidance,”“intend,”“likely,”“may,”“plan,”“position,”“possible,”“potential,”“probable,”“project,”“should,”“strategy,”“target,”“will,”or similar language.All statements other thanstatements of historical fact are forward-looking statements,including,but not limited to,statements about the Companys strategic initiatives,restructuringand asset optimization plans,financial objectives,including with respect to the Companys reorganized debt capital structure,operational plans and objectives,statements about the benefits of the Companys Worldpac sale and use of proceeds therefrom,statements regarding expectations for economic conditions,future business and financial performance,including with respect to tariffs,as well as statements regarding underlying assumptions related thereto.Forward-looking statements reflect the Companys views based on historical results,current information and assumptions related to future developments.Except as maybe required by law,the Company undertakes no obligation to update any forward-looking statements made herein.Forward-looking statements are subject to anumber of risks and uncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.Theyinclude,among others,the Companys ability to hire,train and retain qualified employees,the timing and implementation of strategic initiatives,risksassociated with the Companys restructuring and asset optimization plans,risks relating to incurrence of indebtedness and increased leverage,risks relating tothe Companys credit ratings or perceived creditworthiness,deterioration of general macroeconomic conditions,geopolitical factors including increased tariffsand trade restrictions,the highly competitive nature of the industry,demand for the Companys products and services,risks relating to the impairment of assets,including intangible assets such as goodwill,access to financing on favorable terms,complexities in the Companys inventory and supply chain and challengeswith transforming and growing its business.Please refer to“Item 1A.Risk Factors”of the Companys most recent Annual Report on Form 10-K filed with theSecurities and Exchange Commission(“SEC”),as updated by the Companys subsequent filings with the SEC,for a description of these and other risks anduncertainties that could cause actual results to differ materially from those projected or implied by the forward-looking statements.1Table of ContentsPART I.FINANCIAL INFORMATIONITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTSAdvance Auto Parts,Inc.and SubsidiariesCondensed Consolidated Balance Sheets(in millions,except par value amounts)(Unaudited)AssetsOctober 4,2025December 28,2024Current assets:Cash and cash equivalents$3,174$1,869 Receivables,net483 544 Inventories,net3,694 3,612 Other current assets167 118 Total current assets7,518 6,143 Property and equipment,net1,269 1,334 Operating lease right-of-use assets2,184 2,243 Goodwill599 598 Other intangible assets,net401 406 Other assets88 74 Total assets$12,059$10,798 Liabilities and Stockholders Equity Current liabilities:Accounts payable3,177 3,408 Accrued expenses761 784 Other current liabilities411 473 Total current liabilities4,349 4,665 Long-term debt3,411 1,789 Operating lease liabilities1,850 1,897 Deferred income taxes166 193 Other long-term liabilities88 84 Total liabilities9,864 8,628 Commitments and contingencies(Note 10)Stockholders equity:Preferred stock,nonvoting,$0.0001 par value,10 million shares authorized;no shares issued or outstanding Common stock,voting,and additional paid-in capital,$0.0001 par value,200 million shares authorized;78 million shares issued and 60 million outstanding at October 4,2025 and 78 million shares issued and 60 million outstanding at December 28,20241,026 994 Treasury stock,at cost(2,944)(2,940)Accumulated other comprehensive loss(42)(47)Retained earnings4,155 4,163 Total stockholders equity2,195 2,170 Total liabilities and stockholders equity$12,059$10,798 The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.2Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesCondensed Consolidated Statements of Operations(in millions,except per share data)(Unaudited)Twelve Weeks EndedForty Weeks EndedOctober 4,2025October 5,2024October 4,2025October 5,2024Net sales$2,036$2,148$6,628$7,098 Cost of sales1,155 1,240 3,764 4,037 Gross profit881 908 2,864 3,061 Selling,general and administrative expenses,exclusive ofrestructuring and related expenses826 895 2,771 2,933 Restructuring and related expenses33 13 180 21 Selling,general and administrative expenses859 908 2,951 2,954 Operating(loss)income22 (87)107 Other,net:Interest expense(40)(19)(86)(62)Other income,net16 2 61 12 Total other,net(24)(17)(25)(50)(Loss)income before income taxes(2)(17)(112)57 Income tax(benefit)expense(1)8(150)34 Net income(loss)from continuing operations(1)(25)38 23 Net income from discontinued operations 19 56 Net income(loss)$(1)$(6)$38$79 Basic earnings(loss)per common share from continuing operations$(0.02)$(0.42)$0.63$0.38 Basic earnings per common share from discontinued operations 0.32 0.95 Basic earnings(loss)per common share$(0.02)$(0.10)$0.63$1.33 Basic weighted-average common shares outstanding60.0 59.7 59.9 59.6 Diluted earnings(loss)per common share from continuingoperations$(0.02)$(0.42)$0.63$0.38 Diluted earnings per common share from discontinued operations 0.32 0.94 Diluted earnings(loss)per common share$(0.02)$(0.10)$0.63$1.32 Diluted weighted-average common shares outstanding60.0 59.9 60.5 59.9 The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.3Table of ContentsCondensed Consolidated Statements of Comprehensive Income(in millions)(Unaudited)Twelve Weeks EndedForty Weeks EndedOctober 4,2025October 5,2024October 4,2025October 5,2024Net income(loss)$(1)$(6)$38$79 Other comprehensive income(loss):Currency translation adjustments(1)1 5 9 Total other comprehensive income(loss)(1)1 5 9 Comprehensive income(loss)$(2)$(5)$43$88 The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.4Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesCondensed Consolidated Statements of Changes in Stockholders Equity(in millions,except per share data)(Unaudited)Twelve Weeks Ended October 4,2025Common Stock andAdditional Paid-In-CapitalTreasuryStock,at CostAccumulated OtherComprehensiveLossRetainedEarningsTotalStockholdersEquitySharesAmountBalance at July 12,202560$1,016$(2,943)$(41)$4,171$2,203 Net loss (1)(1)Total other comprehensive loss (1)(1)Share-based compensation 9 9 Common stock issued under employee benefit plans1 1 Repurchases of common stock (1)(1)Dividends declared($0.25 per common share)(15)(15)Balance at October 4,202560$1,026$(2,944)$(42)$4,155$2,195 Twelve Weeks Ended October 5,2024Common Stock andAdditional Paid-In-CapitalTreasuryStock,at CostAccumulated OtherComprehensiveLossRetainedEarningsTotalStockholdersEquitySharesAmountBalance at July 13,202460$976$(2,938)$(44)$4,613$2,607 Net loss (6)(6)Total other comprehensive income 1 1 Share-based compensation 11 11 Common stock issued under employee benefit plans 1 1 Repurchases of common stock (1)(1)Dividends declared($0.25 per common share)(15)(15)Balance at October 5,202460$988$(2,939)$(43)$4,592$2,598 The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.5Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesCondensed Consolidated Statements of Changes in Stockholders Equity(in millions,except per share data)(Unaudited)Forty Weeks Ended October 4,2025Common Stock andAdditional Paid-InCapitalTreasuryStock,at CostAccumulated OtherComprehensiveLossRetainedEarningsTotalStockholdersEquitySharesAmountBalance at December 28,202460$994$(2,940)$(47)$4,163$2,170 Net income 38 38 Total other comprehensive income 5 5 Share-based compensation 29 29 Common stock issued under employee benefit plans 3 3 Repurchases of common stock (4)(4)Dividends declared($0.75 per common share)(46)(46)Balance at October 4,202560$1,026$(2,944)$(42)$4,155$2,195 Forty Weeks Ended October 5,2024Common Stock andAdditional Paid-InCapitalTreasuryStock,at CostAccumulated OtherComprehensiveLossRetainedEarningsTotalStockholdersEquitySharesAmountBalance at December 30,202360$946$(2,933)$(52)$4,559$2,520 Net income 79 79 Total other comprehensive income 9 9 Share-based compensation 39 39 Common stock issued under employee benefit plans 3 3 Repurchases of common stock (6)(6)Dividends declared($0.75 per common share)(46)(46)Balance at October 5,202460$988$(2,939)$(43)$4,592$2,598 The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.6Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesCondensed Consolidated Statements of Cash Flows(in millions)(Unaudited)Forty Weeks EndedOctober 4,2025October 5,2024Cash flows from operating activities:Net income$38$79 Net income from discontinued operations 56 Net income from continuing operations38 23 Adjustments to reconcile net income to net cash used in operating activities:Depreciation and amortization214 217 Share-based compensation29 34 Loss(gain)on sale and impairment of long-lived assets,net23(14)Expected future credit losses,net50 23 Provision for deferred income taxes(27)24 Other,net14 3 Net change in:Receivables,net46(84)Inventories,net(75)(152)Operating lease right of use assets41(43)Other assets(57)(3)Accounts payable(270)(25)Accrued expenses(37)31 Operating lease liabilities(108)47 Other liabilities1 Net cash(used in)provided by operating activities of continuing operations(118)81 Net cash provided by operating activities of discontinued operations 77 Net cash(used in)provided by operating activities(118)158 Cash flows from investing activities:Purchases of property and equipment(159)(130)Proceeds from sales of property and equipment22 14 Net cash used in investing activities of continuing operations(137)(116)Net cash used in investing activities of discontinued operations(8)Net cash used in investing activities(137)(124)Cash flows from financing activities:Proceeds from issuance of long-term debt1,950 Repayment of long-term debt(300)Debt issuance costs(42)Dividends paid(45)(45)Proceeds from the issuance of common stock3 3 Repurchases of common stock(4)(6)Other,net(3)(10)Net cash provided by(used in)financing activities1,559(58)Effect of exchange rate changes on cash1 12 7Table of Contents Forty Weeks EndedOctober 4,2025October 5,2024Net increase(decrease)in cash and cash equivalents1,305(12)Cash and cash equivalents,beginning of period1,869 503 Cash and cash equivalents,end of period$3,174$491 Non-cash transactions of continuing operations:Accrued purchases of property and equipment$23$9 Transfers of property and equipment from(to)assets related to discontinued operations to(from)continuingoperations 7 Accrued debt issuance costs4 Summary of cash and cash equivalents:Cash and cash equivalents of continuing operations,end of period3,174 464 Cash and cash equivalents of discontinued operations,end of period 27 Cash and cash equivalents,end of period$3,174$491 The accompanying notes to the condensed consolidated financial statements are an integral part of these statements.8Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)1.Nature of Operations and Basis of PresentationDescription of BusinessAdvance Auto Parts,Inc.and subsidiaries is a leading automotive aftermarket parts provider in North America,serving both professional installers(“professional”)and“do-it-yourself”(“DIY”)customers.The accompanying unaudited condensed consolidated financial statements include the accounts ofAdvance Auto Parts,Inc.,its wholly owned subsidiaries,Advance Stores Company,Incorporated(“Advance Stores”)and Neuse River Insurance Company,Inc.,and their subsidiaries(collectively referred to as“the Company”).As of October 4,2025,the Company operated a total of 4,297 stores primarily within the United States,with additional locations in Canada,PuertoRico and the U.S.Virgin Islands.In addition,as of October 4,2025,the Company served 814 independently owned Carquest branded stores across the samegeographic locations served by the Companys stores,in addition to Mexico and various Caribbean islands.The Companys stores operate primarily under thetrade names“Advance Auto Parts”and“Carquest”.The Company has one reportable segment.As of December 28,2024,the Company had two operating segments,which were aggregated as a singlereportable segment;however,following the stabilization of the Companys new organizational structure in the first quarter of fiscal 2025,due to significantrestructuring activities,the Company now operates under the single operating segment of“Advance Auto Parts/Carquest”.See Note 11.Segment Reporting andNote 3.Restructuring,of the notes to the condensed consolidated financial statements included herein for additional information on the Companys segmentsand restructuring activities.Basis of PresentationThe accompanying unaudited condensed consolidated financial statements and unaudited notes to the condensed consolidated financial statements arepresented in accordance with the rules and regulations of the United States Securities and Exchange Commission(“SEC”).Certain information and footnotedisclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America(“GAAP”),have been condensed or omitted based upon the SEC interim reporting principles.The accompanying condensed consolidated financial statements,in the opinion of management,reflect all normal recurring adjustments that arenecessary to present fairly the results for the interim periods presented.The accounting policies followed in the presentation of these condensed consolidatedfinancial statements are consistent with those followed on an annual basis.These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in theCompanys Annual Report on Form 10-K for fiscal year 2024(“2024 Form 10-K”)as filed with the SEC on February 26,2025.The results of operations forthe interim periods are not necessarily indicative of the operating results to be expected for the full year.Consistent with prior years,the Companys firstquarter of the year contained sixteen weeks.The Companys remaining quarters each consist of twelve weeks,with the exception of the fourth quarter of fiscal2025 which consists of thirteen weeks.Change in PresentationPrior to fiscal 2025,the Company presented its condensed consolidated financial statements and notes to the condensed consolidated financialstatements in thousands.Effective in fiscal 2025,such amounts are presented in millions,except par value share amounts and per share data,unless otherwisestated.Certain prior year amounts have been reclassified to conform to the current year presentation,including the separate disclosure of the non-cash expensefor expected future credit losses.operating lease right of use assets,other assets,operating lease liabilities and other liabilities,on the condensed consolidatedstatements of cash flows.This change in presentation does not have a material impact on the condensed consolidated financial statements.9Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)Further,consistent with the presentation in the Companys 2024 Form 10-K,the Company has presented the sale of the Worldpac,Inc.business(“Worldpac”)as discontinued operations in its condensed consolidated financial statements.Comparative interim period amounts have been updated to reflectthis presentation.Recently Issued Accounting Pronouncements-Not Yet AdoptedIncome Tax Disclosure ImprovementsIn December 2023,the Financial Accounting Standards Board(“FASB”)issued Accounting Standards Update(“ASU”)2023-09,Income Taxes(“ASU 2023-09”),which requires a company to enhance its income tax disclosures.In each annual reporting period,the company should disclose the specificcategories used in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold,including disaggregation of taxespaid by jurisdiction.The related disclosures are effective for the fiscal year beginning after December 15,2024.The Company is currently evaluating theimpact of adopting ASU 2023-09 on the Companys consolidated financial statements and related disclosures and believes that the adoption will result inadditional disclosures,but will not have any other impact on its consolidated financial statements.Disaggregation of Income Statement ExpensesIn November 2024,the FASB issued ASU 2024-03,Income Statement-Reporting Comprehensive Income-Expense Disaggregation(“ASU 2024-03”),which requires public entities to disclose more detailed information about certain costs and expenses presented in the income statement,including(among otheritems)the amount of inventory purchases,employee compensation,selling expenses and depreciation and amortization of intangible assets.ASU 2024-03 iseffective for fiscal years beginning after December 15,2026,and for interim periods beginning after December 15,2027,with early adoption permitted.TheCompany is currently evaluating the impact of adopting ASU 2024-03 on the consolidated financial statements and related disclosures.Measurement of Credit Losses for Accounts Receivable and Contract AssetsIn July 2025,the FASB issued ASU 2025-05,Financial Instruments-Credit Losses(Topic 326):Measurement of Credit Losses for AccountsReceivable and Contract Assets(“ASU 2025-05”),which provides a practical expedient permitting an entity to assume that conditions at the balance sheet dateremain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets.ASU 2025-05 iseffective for annual reporting periods beginning after December 15,2025,and for interim periods within those annual reporting periods,with early adoptionpermitted.The amendments in ASU 2025-05 should be applied prospectively.The Company is currently evaluating the impact of adopting ASU 2025-05 andbelieves that the adoption will not have a material impact on the consolidated financial statements and related disclosures.Targeted Improvements to the Accounting for Internal-Use SoftwareIn September 2025,the FASB issued ASU 2025-06,Intangibles-Goodwill and Other-Internal-Use Software:Targeted Improvements to theAccounting for Internal-Use Software(“ASU 2025-06”),which makes targeted improvements to the accounting for internal-use software by removingreferences to“development stages”.The update also clarifies the criteria for capitalization,which begins when both of the following occur:(1)managementhas authorized and committed to funding the software project and(2)it is probable that the project will be completed and the software will be used to performthe function intended.ASU 2025-06 is effective for annual reporting periods beginning after December 15,2027,and for interim periods within those annualreporting periods,with early adoption permitted.The amendment in ASU 2025-06 can be applied prospectively,retrospectively,or via a modified prospectivetransition method.The Company is currently evaluating the impact of adopting ASU 2025-06 on the consolidated financial statements and related disclosures.10Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)2.RevenuesThe following table summarizes disaggregated revenue from contracts with customers by product group from continuing operations:Twelve Weeks EndedForty Weeks EndedOctober 4,2025October 5,2024October 4,2025October 5,2024Percentage of Net Sales:Parts and Batteries65dcccessories and Chemicals20 21 22 22 Engine Maintenance14 14 14 14 Other1 1 1 1 Total100000%There were no major customers individually accounting for 10%or more of consolidated net revenues.3.Restructuring2024 Restructuring PlanOn November 13,2024,the Companys Board of Directors approved a restructuring and asset optimization plan(“2024 Restructuring Plan”)designedto improve the Companys profitability and growth potential and streamline its operations.This plan contemplated the closure of approximately 500 stores,approximately 200 independent locations and four distribution centers by mid-2025,as well as headcount reductions.The Company completed the closure ofall of these locations during the first quarter of 2025.Expenses associated with the 2024 Restructuring Plan included:1)noncash asset impairment and accelerated amortization and depreciation ofoperating lease Right-of-Use(“ROU”)assets and property and equipment,2)personnel expenses related to severance and transition expenses,which wereoffered to certain employees who would provide services through key dates to ensure completion of closure activities and 3)other location closure-relatedactivity,including nonrecurring services rendered by third-party vendors assisting with the turnaround initiatives and other related expenses,includingincremental revisions to receivable collectability due to termination of contracts with independents associated with the 2024 Restructuring Plan.Other Restructuring InitiativesIn November 2023,the Company announced a strategic and operational plan with anticipated savings of$150 million of which$50 million would bereinvested into frontline team members.In addition to a reduction in workforce,this plan streamlines the Companys supply chain by configuring a multi-echelon supply chain by leveraging current assets and operating fewer,more productive distribution centers that focus on replenishment and move more partscloser to the customer.In achieving this plan,the Company is in process of converting certain distribution centers and stores into market hubs.In addition toproviding replenishment to near-by stores,market hubs support retail operations.In addition to the distribution network optimization costs,other restructuringexpenses included certain other items as further detailed in the table below.The Company has recorded all restructuring and related expenses as a component of selling,general and administrative expenses in the condensedconsolidated statement of operations,with the exception of inventory related expenses that are recorded as a component of cost of sales on the condensedconsolidated statement of operations.11Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)Twelve Weeks EndedForty Weeks Ended2024 Restructuring Plan Expenses:October 4,2025October 5,2024October 4,2025October 5,2024Selling,general and administrative expenses:Impairment and write-down of long-lived assets$15$67$Severance and other personnel expenses 15 Other location closure related expenses7 63 2024 Restructuring Plan Expenses$22$145$Other Restructuring Plan Expenses:Cost of sales:Distribution network optimization$4$9$Selling,general and administrative expenses:Distribution network optimization6 9 15 14 Impairment and write-down of long-lived assets3 9 Worldpac post transaction-related expenses2 7 Other restructuring expenses 4 4 7 Other Restructuring Plan Expenses$15$13$44$21 Other location closure related activity for the twelve weeks ended October 4,2025 includes$2 million of nonrecurring services rendered by third-party vendors assisting with the 2024Restructuring Plan and$5 million of other related expenses associated with location closures,including the transfer of assets.Other location closure related activity for the forty weeks endedOctober 4,2025 includes$37 million of nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan,$7 million for reserves on independent loans and$19million of other related expenses associated with location closures,including the transfer of assets.Other restructuring expenses primarily consists of severance and other personnel expenses.The following table shows the change in the restructuring liability in the period,which excludes operating lease liabilities and associated expenses.The restructuring liabilities are classified within accounts payable,accrued liabilities and other current liabilities in the condensed consolidated balance sheets.Professional servicefeesSeverance and otherpersonnel expensesBalance at December 28,2024$23$14 Restructuring expenses during the period45 30 Cash payments(66)(40)Balance at October 4,2025$2$4 As of October 4,2025,the cumulative amount incurred to date for active restructuring plans totaled$930 million,consisting of write-down ofinventory to net realizable value in the fourth quarter of fiscal 2024,lease termination impacts,other exit-related expenses related to ceased use buildings andcertain employee termination benefits.The Company estimates that it will incur additional expenses of approximately$20 million to$30 million under theactive restructuring plans.These expenses primarily relate to lease terminations,professional services,and other exit costs,substantially all of which theCompany expects to be incurred by the end of fiscal year 2025,with certain expenses,primarily related to closed store and distribution center leases,expectedto continue into fiscal year 2026.(1)(2)(1)(2)12Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)4.Inventories,netThe Company used the last in,first out(“LIFO”)method of accounting for approximately 92%of inventories as of October 4,2025 and December 28,2024,respectively.An actual valuation of inventory under the LIFO method is performed at the end of each fiscal year based on inventory levels and carryingcosts at that time.Accordingly,interim LIFO calculations are based on the Companys estimates of expected inventory levels and costs at the end of the year.The Companys LIFO debit/(credit)reserve balance was$(48)million and$(11)million as of October 4,2025 and December 28,2024,respectively,to stateinventories at LIFO.Increases to the Companys LIFO credit reserve balance are recorded as a noncash charge to cost of sales and decreases are recorded as anon-cash benefit to cost of sales.The non-cash(benefit)expense recorded to cost of sales related to the change in the LIFO credit reserve for the periodspresented was as follows:Twelve Weeks EndedForty Weeks EndedOctober 4,2025October 5,2024October 4,2025October 5,2024LIFO credit reserve(benefit)expense$33$(35)$37$(69)The effect of LIFO liquidations for the forty weeks ended October 4,2025 was a decrease to cost of sales of$4 million and an increase to net earningsof$3 million,or($0.05)per diluted share.There was no impact from LIFO liquidations for the twelve weeks ended ended October 4,2025 and for the twelveand forty weeks ended October 5,2024.Purchasing and warehousing costs included in inventories as of October 4,2025 and December 28,2024 were$400 million and$368 million,respectively.5.Receivables,netReceivables,net,consisted of the following:October 4,2025December 28,2024Trade$428$417 Vendor133 157 Other11 28 Total receivables572 602 Less:allowance for credit losses(89)(58)Receivables,net$483$544 The Company regularly reviews accounts receivable,vendor and other balances and maintains allowances for credit losses estimated whenever eventsor circumstances indicate the carrying value may not be recoverable and updates its estimate of credit losses each reporting period based on new informationthat becomes available.The Company considers the following factors when determining if collection is reasonably assured:customer creditworthiness,pasttransaction history with the customer,current economic and industry trends and changes in customer payment terms.The Company controls credit risk throughcredit approvals,credit limits and accounts receivable and credit monitoring procedures.13Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)In the third quarter of fiscal 2025,one of the Companys vendors,a leading auto parts supplier for the automotive aftermarket industry,filed voluntarypetitions for Chapter 11 bankruptcy protection with the U.S.Bankruptcy Court for the Southern District of Texas.The vendor has secured short-term financingthrough a debtor-in-possession(“DIP”)loan,however,Chapter 11 proceedings carry inherent risks with respect to a companys ability to continue operationsand maintain adequate liquidity to satisfy current and future obligations.As a result of these events,the Company recorded a non-cash charge of$28 million tocost of sales in the third quarter of fiscal 2025,within the condensed consolidated statement of operations,reflecting estimated future credit losses on certainvendor receivables due from the vendor.The estimate was developed utilizing a probability weighted cash-flow model adjusted for risks associated with creditrisk deterioration for companies that enter Chapter 11 bankruptcy proceedings.6.Long-term Debt and Fair Value of Financial InstrumentsLong-term debt,net of unamortized discount and debt issuance costs,consisted of the following:October 4,2025December 28,20245.90%Senior Unsecured Notes due March 9,2026$300 1.75%Senior Unsecured Notes due October 1,2027350 350 5.95%Senior Unsecured Notes due March 9,2028300 300 3.90%Senior Unsecured Notes due April 15,2030500 500 7.00%Senior Unsecured Notes due August 1,2030975 3.50%Senior Unsecured Notes due March 15,2032350 350 7.375%Senior Unsecured Notes due August 1,2033975 Total principal of long-term debt and current maturities of long-term debt3,450 1,800 Less:Unamortized discounts and debt issuance costs(39)(11)Total debt,net3,411 1,789 Less:Current portion of long-term debt Long-term debt,excluding the current portion$3,411$1,789 Fair Value of Financial Assets and LiabilitiesAs of October 4,2025 and December 28,2024,the fair value of the Companys long-term debt,which includes the current portion of long-term debt,was approximately$3.4 billion and$1.6 billion,respectively.The fair value of the Companys long-term debt was determined using Level 2 inputs based onquoted market prices.The carrying amounts of the Companys cash and cash equivalents,receivables,net,accounts payable and accrued expenses approximatetheir fair values due to the relatively short-term nature of these instruments.Long-term debtOn August 4,2025,the Company issued(i)$975 million in aggregate principal amount of 7.000%Senior Notes due 2030(the“2030 Notes”)and(ii)$975 million in aggregate principal amount of 7.375%Senior Notes due 2033(collectively,the“Senior Unsecured Notes”)in a private transaction exemptfrom the registration requirements of the Securities Act of 1933,as amended(the“Act”).Interest on the Senior Unsecured Notes is payable in cash on February1 and August 1 of each year,commencing on February 1,2026.The 2030 Notes will mature on August 1,2030,and the 2033 Notes will mature on August 1,2033.Net proceeds from the issuance of the Senior Unsecured Noted were$1.9 billion,net of direct transaction and closing costs.The Senior Unsecured Notesare guaranteed by each of the Companys wholly-owned domestic subsidiaries that also guarantee the Companys new asset-based loan revolving credit facility(the“ABL Facility”)as further discussed below.In accordance with the terms of the Indenture governing the Senior Unsecured Notes,the Company may,at its option and on any one or moreoccasions,redeem some or all of the Senior Unsecured Notes at the redemption prices described in the14Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)Indenture.In addition,in the event of a Change of Control Triggering Event(as defined in the Indenture),the Company will be required to offer to repurchasethe Senior Unsecured Notes at a price equal to 101%of the principal amount thereof,plus accrued and unpaid interest,if any,to,but excluding,the repurchasedate.The Indenture also contains customary provisions for events of default and certain covenants limiting the ability of the Company and its subsidiaries toincur debt secured by liens and to enter into certain sale and lease-back transactions.Following the closing of the issuance of the Senior Unsecured Notes,the Company utilized a portion of the net proceeds to redeem in full itsoutstanding$300 million in aggregate principal amount of 5.90%senior unsecured notes due 2026 and the Company recorded a loss of$3 million onredemption in the third quarter of fiscal 2025 associated with this extinguishment.The remaining proceeds from the issuance are available for general corporatepurposes,and,as further discussed under“Credit Facilities”below,certain of our cash and cash equivalents,are designated as qualified cash and are subject tocustomary“springing”control agreements,as defined in the ABL Facility Agreement.Future PaymentsAs of October 4,2025,the aggregate future annual maturities of long-term debt instruments were as follows:YearAmount2026$2027350 2028300 2029 20301,475 Thereafter1,325$3,450 Credit FacilitiesOn August 12,2025,the Companys$1 billion revolving credit facility(the“2021 Credit Agreement”)was terminated and replaced by the ABLFacility.The Company recorded a$6 million loss on extinguishment of the 2021 Credit Agreement during the third quarter of fiscal 2025.The ABL Facilityprovides for a five-year senior secured first lien asset-based revolving credit facility of up to$1 billion with an uncommitted accordion feature that provides foradditional credit extensions up to$500 million.Our ability to draw upon the ABL Facility is subject to the available borrowing base.Outstanding amountsunder the ABL Facility will accrue interest at a floating rate,which,at the Companys election,can be either(i)SOFR plus an applicable margin or(ii)analternative base rate plus an applicable margin.The applicable rate varies based on Average Historical Excess Availability(as defined in the ABL FacilityAgreement)from(i)with respect to base rate loans,0.25%to 0.75%and(b)with respect to SOFR loans,1.25%to 1.75%and resets quarterly on a prospectivebasis and is,in part,derived based-upon the utilization of the facility.Interest is payable on a quarterly basis.Unused commitments under the ABL Facility willaccrue an unused commitment fee of either 0.30%or 0.25%per annum,depending on average utilization.As of October 4,2025 and December 28,2024,theCompany had no outstanding borrowings under its ABL Facility and 2021 Credit Agreements,respectively.As of October 4,2025 the Company had$741million of borrowing availability and$259 million letters of credit outstanding under the ABL Facility.As of December 28,2024,the Company had$1 billionof borrowing availability and no letters of credit outstanding under the 2021 Credit Agreement.The ABL Facility has first lien on substantially all of the accounts receivable,inventory,cash and related assets of the Company and its subsidiaryguarantors thereunder.Advance Auto Parts,Inc.is the ABL Facility borrower and the guarantors are(i)each of our subsidiaries that guarantee our recentlyissued Senior Unsecured Notes and(ii)certain of our Canadian subsidiaries.Availability under the ABL Facility is limited to the lesser of(i)the borrowingbase,equal to the sum of 90%of eligible credit card receivables,85%of eligible trade accounts receivable,85%of the net orderly liquidation value of eligibleinventory and 100%of qualified cash(up to certain limits for the purpose of determining borrowing capacity),subject,in each case,to customary reservesestablished by the collateral agent under the ABL Facility from time to time,including reserves related to outstanding obligations to our suppliers that arepayable to the paying agents,as a result of such suppliers electing,at their option,to utilize third-party financing,commonly referred to as supply chainfinancing,and debt maturity reserves,and(ii)the aggregate revolving credit commitments.The ABL Facility contains customary representations andwarranties,events of15Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)default and financial,affirmative and negative covenants for facilities of this type,including but not limited to a springing financial covenant relating to a fixedcharge coverage ratio,defined in the ABL Facility as the ratio of Consolidated Adjusted EBITDA minus Consolidated Capital Expenditures minus Taxes toFixed Charges,each as defined in the ABL Facility,on a four quarter trailing basis,which requires a minimum 1:1 coverage ratio to be maintained,andrestrictions on certain indebtedness,liens,investments and acquisitions,asset dispositions,restricted payments,prepayment of certain indebtedness andtransactions with affiliates,subject to various thresholds and caps.In accordance with the ABL Facility,the Company is required to hold cash and cash equivalents in designated accounts with lenders,referred to asQualified Cash Accounts as defined in the ABL Facility.As of October 4,2025,$2.3 billion was designated as Qualified Cash.These amounts are unrestrictedand the Company is able to direct,and have sole control over,the manner of disposition of funds in such accounts,subject to:1)maintaining a minimumavailability under the ABL facility of at least the greater of(i)12.5%of the Line Cap and(ii)$125 million;and 2)maintaining excess availability under theABL Facility of at least$400 million.The Qualified Cash Accounts are subject to springing control agreements pursuant to which the cash deposited thereinwill become restricted in the event of default or a breach of such covenants.The Company was in compliance with its covenants related to the ABL Facility asof October 4,2025.As of October 4,2025 and December 28,2024,the Company had$89 million and$91 million,respectively,of bilateral letters of credit issuedseparately from the ABL Facility and 2021 Credit Agreement,respectively,none of which were drawn upon.These bilateral letters of credit generally have aterm of one year or less and primarily serve as collateral for the Companys self-insurance policies.Debt GuaranteesThe Company is a guarantor of loans made by banks to various independently-owned Carquest-branded stores that are or,prior to the 2024Restructuring Plan,were customers of the Company totaling$76 million and$98 million as of October 4,2025 and December 28,2024,respectively.Theseloans are collateralized by security agreements on merchandise inventory and other assets of the borrowers.The approximate value of the inventorycollateralized by these agreements was$157 million and$181 million as of October 4,2025 and December 28,2024,respectively.The Company continuouslyassesses the likelihood of performance under these guarantees and believes that performance is remote as of October 4,2025.16Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)7.LeasesSubstantially all of the Companys leases are for facilities,vehicles,and equipment.The initial term for facilities is typically five to ten years,withrenewal options typically at five-year intervals,with the exercise of lease renewal options at the Companys sole discretion.The Companys vehicle andequipment lease terms are typically three to six years.The Companys lease agreements do not contain any material residual value guarantees or materialrestrictive covenants.Total lease cost is included in cost of sales and total selling,general and administrative expenses in the accompanying condensed consolidatedstatements of operations and is recorded net of immaterial sublease income.Total lease costs are comprised of the following:Twelve Weeks EndedForty Weeks EndedOctober 4,2025October 5,2024October 4,2025October 5,2024Operating lease cost$107$121$391$396 Variable lease cost34 34 123 120 Total lease cost$141$155$514$516 During the twelve and forty weeks ended October 4,2025,the Company recorded$12 million and$52 million,respectively,primarily related toaccelerated amortization on leases the Company expects to exit before the end of the contractual term,and non-cash asset impairment,net of gains on leasemodifications and terminations.These amounts are recorded in restructuring and related expenses within the accompanying condensed consolidated statementsof operations.See Note 3.Restructuring,of the notes to the condensed consolidated financial statements included herein.Other information relating to the Companys lease liabilities was as follows:Forty Weeks EndedOctober 4,2025October 5,2024Cash paid for amounts included in the measurement of lease liabilities:Operating cash flows from operating leases$458$401 Right-of-use assets obtained in exchange for lease obligations:Operating leases$284$387 During the first quarter of 2024,the Company entered into a sale-leaseback transaction where the Company sold a building and land and entered into athree-year lease of the property upon the sale.This transaction resulted in a gain of$22 million and is included in selling,general and administrative expenseson the condensed consolidated statement of operations for the forty weeks ended October 5,2024.17Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)8.Earnings(loss)per ShareThe computations of basic and diluted earnings per share were as follows:Twelve Weeks EndedForty Weeks EndedOctober 4,2025October 5,2024October 4,2025October 5,2024NumeratorIncome(loss)from continuing operations$(1)$(25)$38$23 Income from discontinued operations 19 56 Net income(loss)applicable to common shares$(1)$(6)$38$79 DenominatorBasic weighted-average common shares60.0 59.7 59.9 59.6 Dilutive impact of share-based awards 0.2 0.6 0.3 Diluted weighted-average common shares60.0 59.9 60.5 59.9 Basic earnings(loss)per common share from continuingoperations$(0.02)$(0.42)$0.63$0.38 Basic earnings per common share from discontinuedoperations 0.32 0.95 Basic earnings(loss)per common share$(0.02)$(0.10)$0.63$1.33 Diluted earnings(loss)per common share from continuingoperations$(0.02)$(0.42)$0.63$0.38 Diluted earnings per common share from discontinuedoperations 0.32 0.94 Diluted earnings(loss)per common share$(0.02)$(0.10)$0.63$1.32 For the twelve weeks ended October 4,2025,the number of shares utilized in the computation of diluted weighted earnings per share from continuing operations is equal to the basic weighted-average common shares as the effect of incremental dilutive shares would be anti-dilutive as a result of incurring a net loss.For the twelve weeks ended October 4,2025 and October 5,2024,1.4million and 0.6 million,respectively,of restricted stock units(“RSUs”)were excluded from the diluted weighted-average common share count calculation as their inclusion would have been anti-dilutive.For the forty weeks ended October 4,2025 and October 5,2024,0.8 million and 0.5 million,respectively,of RSUs were excluded from the diluted calculation as their inclusion would havebeen anti-dilutive.(1)(1)18Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)9.Supplier Finance ProgramsCertain of the Companys suppliers enter into agreements with third-party financial institutions to obtain enhanced receivables options.Thesearrangements are commonly referred to and known in the industry as supply chain financing programs.Through these agreements,the Companys suppliers,attheir sole discretion,may elect to sell their receivables due from the Company to the third-party financial institution at terms negotiated between the supplierand the third-party financial institution.The Company does not provide any guarantees to any third-party in connection with these financing arrangements.TheCompanys obligations to suppliers,including amounts due and scheduled payment terms,are not impacted,and no assets are pledged under the agreements.All outstanding amounts due to third-party financial institutions related to suppliers participating in such financing arrangements are recorded within accountspayable and represent obligations outstanding under these supplier finance programs for invoices that were confirmed as valid and owed to the third-partyfinancial institutions in the Companys condensed consolidated balance sheets.As of October 4,2025,and December 28,2024,the confirmed obligationsoutstanding under these supplier finance programs to third-party financial institutions were$2.7 billion and$3.2 billion,respectively.As of October 4,2025,and December 28,2024,$16 million and$0.4 billion,respectively,is excluded from the Companys accounts payable balance on the Companys condensedconsolidated balance sheets,as such amounts represent liabilities of Worldpac transferred with the sale of the business in fiscal 2024.Under the provisions ofthe sale,the Company will provide certain letters of credit to the buyer to support supply chain financing for the buyer.See Note 12.Discontinued Operations,of the notes to the condensed consolidated financial statements included herein.10.Commitments and ContingenciesOn October 9,2023,and October 27,2023,two putative class actions on behalf of purchasers of the Companys securities who purchased or otherwiseacquired their securities between November 16,2022,and May 30,2023,inclusive(the“Class Period”),were commenced against the Company and certain ofthe Companys former officers in the United States District Court for the Eastern District of North Carolina.The plaintiffs allege that the defendants madecertain false and materially misleading statements during the alleged Class Period in violation of Section 10(b)of the Securities Exchange Act of 1934 andRule 10b-5 promulgated thereunder.These cases were consolidated on February 9,2024,and the court-appointed lead plaintiff filed a consolidated andamended complaint on April 22,2024.The consolidated and amended complaint proposes a Class Period of November 16,2022 to November 15,2023,andalleges that defendants made false and misleading statements in connection with(a)the Companys 2023 guidance and(b)certain accounting issues previouslydisclosed by the Company.On June 21,2024,defendants filed a motion to dismiss the consolidated and amended complaint.On January 23,2025,the motionto dismiss was granted by the United States District Court for the Eastern District of North Carolina.On February 21,2025,plaintiffs filed an appeal to the 4thCircuit Court of Appeals.The Company strongly disputes the allegations and intends to defend the case vigorously.On January 17,2024,February 20,2024,and February 26,2024,derivative shareholder complaints were commenced against the Companys directorsand certain former officers alleging derivative liability for the allegations made in the securities class action complaints noted above.On April 9,2024,thecourt consolidated these actions and appointed co-lead counsel.On June 10,2024,the court issued a stay order on the consolidated derivative complaintpending resolution of the motion to dismiss for the underlying securities class action complaint.19Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)11.Segment ReportingThe Company has one operating segment and one reportable segment,effective during the first quarter of fiscal year 2025,resulting from thestabilization of the Companys new organizational structure due to the significant restructuring activities announced in fiscal year 2024 as further described inNote 3.Restructuring,of the notes to the condensed consolidated financial statements included herein.Following this restructuring,the Company no longer hastwo operating segments,which were previously aggregated into a single reportable segment.The Company conducts its operations principally in thegeographical areas of the U.S.and Canada through its Advance Auto Parts and Carquest trade brands.The products sold by the Company,across all geographicareas,have similar economic characteristics,are sourced from the Companys suppliers in a similar manner,and are available for sale to all of the Companyscustomers through the Companys stores and self-service e-commerce sites.All of the Companys stores have similar characteristics,including the nature of theproducts and services,the type and class of customers,and the methods used to distribute products and provide service to its customers.Due to these reasons,the Company has one operating segment,referred to as Advance Auto Parts/Carquest.As geographic information is not a key component of how the chiefoperating decision maker(“CODM”)reviews performance and allocates resources,such entity-wide information is not disclosed on a quarterly basis.The Companys CODM is the Chief Executive Officer,who regularly reviews financial information presented on a consolidated basis for purposes ofallocating resources and evaluating financial performance for the Companys single reportable segment.Discrete information is not regularly provided toand/or reviewed by the Companys CODM at a lower level than the consolidated level,inclusive of segment asset level detail.The CODM primarily focuses onnet income to evaluate its reportable segment.The CODM also uses net income for evaluating pricing strategy and to assess the performance for determiningthe compensation of certain employees.Significant segment expenses regularly provided to the CODM,which represent the difference between segmentrevenue and segment net income,consisted of the following:Twelve Weeks EndedForty Weeks EndedOctober 4,2025October 5,2024October 4,2025October 5,2024Net sales$2,036$2,148$6,628$7,098 Less:Cost of sales$1,155$1,240$3,764$4,037 Selling,general and administrative expenses 774 843 2,616 2,764 Restructuring and related expenses33 13 180 21 Depreciation and amortization expense 52 52 155 169 Interest expense40 19 86 62 Other segment items(16)(2)(61)(12)Income tax(benefit)expense(1)8(150)34 Net income from continuing operations$(1)$(25)$38$23 Selling,general and administrative expenses,excludes restructuring and related expenses and depreciation and amortization.The twelve weeks ended October 4,2025 excluded$11 million and$5 million of depreciation and amortization expense included within cost of sales andrestructuring,respectively,and$12 million and$2 million,respectively,for the twelve weeks ended October 5,2024.The forty weeks ended October 4,2025excluded$38 million and$21 million of depreciation and amortization expense included within cost of sales and restructuring,respectively,and$44 millionand$4 million,respectively,for the forty weeks ended October 5,2024.Other segment items relates to interest income,loss on extinguishment of debt,and income recognized from the transition services(“TSA Services”)agreement with Worldpac that commenced in the fourth quarter of fiscal 2024,included in total other,net,in the accompanying condensed consolidatedstatements of operations.(1)(2)(3)(1)(2)(3)20Table of ContentsAdvance Auto Parts,Inc.and SubsidiariesNotes to the Condensed Consolidated Financial Statements(Amounts presented in millions,except per share data,unless otherwise stated)(Unaudited)12.Discontinued OperationsIn fiscal 2024,the Company completed the sale of Worldpac for$1.5 billion,with customary purchase price adjustments for working capital and otheritems as well as the provision of letters of credit in an aggregate amount of up to$200 million for up to 12 months following the closing of the transaction,which letter of credit exposure will reduce to zero no later than 24 months after the closing,to support supply chain financing for the buyer.The transactionclosed on November 1,2024.Net proceeds from the transaction after paying expenses and excluding the impact of taxes were approximately$1.47 billion.TheCompanys sale of Worldpac was progress towards changing the landscape of the business with increased focus on the Advance blended-box model.As aresult,the Company classified the results of operations and cash flows of Worldpac as discontinued operations in its condensed consolidated statements ofoperations and condensed consolidated statements of cash flows for prior periods presented.There has been no activity,to-date,related to discontinuedoperations in fiscal 2025.The following table presents the major components of discontinued operations in the Companys condensed consolidated statements of operations:Twelve Weeks EndedForty Weeks EndedOctober 5,2024October 5,2024Major classes of line items constituting income of discontinued operations before provision for incometaxes:Net Sales$497$1,636 Cost of sales,including purchasing and warehousing costs330 1,079 Gross profit167 557 Selling,general and administrative expenses138 476 Operating income29 81 Other,net:Other income(expense),net(3)Total other,net(3)Income from discontinued operations related to major classes before provision for income taxes29 78 Income tax expense10 22 Net income from discontinued operations$19$56 13.Income TaxesThe Companys effective tax rate benefit for the forty weeks ended October 4,2025 was higher than the estimated annual effective tax rate benefit,primarily due to a net discrete tax benefit of$126 million realized in the first quarter of fiscal 2025 related to certain tax benefits associated with capital lossdeductions.On July 4,2025,President Trump signed into law the One Big Beautiful Bill Act(“OBBBA”).The OBBBA makes key elements of the Tax Cuts andJobs Act permanent,including 100%bonus depreciation and the business interest expense limitation,among others.The Company has determined the OBBBAhas an immaterial impact to the Companys provision for income taxes and deferred tax balances.ASC 740,“Income Taxes”,requires the effects of changes intax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted,which occurred during the Companys secondquarter of fiscal 2025.Therefore,the Company has reflected the effect of the OBBBA within the provision for income taxes for the twelve and forty weeksended October 4,2025 and deferred tax balances as of October 4,2025.21Table of ContentsITEM 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of financial condition and results of operations should be read in conjunction with the audited consolidatedfinancial statements and notes included in the Companys Annual Report on Form 10-K for the year ended December 28,2024(filed with the SEC onFebruary 26,2025)which the Company refers to as the“2024 Form 10-K”),and the Companys unaudited condensed consolidated financial statements andthe notes to those statements that appear elsewhere in this report.The results of operations for the interim periods are not necessarily indicative of theoperating results to be expected for the full year.Consistent with the previous fiscal year,the Companys first quarter of the year contained sixteen weeks.TheCompanys remaining quarters each consist of twelve weeks,with the exception of the fourth quarter of fiscal 2025 which consists of thirteen weeks.Third Quarter Fiscal 2025 Management OverviewThe Companys financial results from continuing operations for the third quarter of 2025 includes:Net sales during the third quarter of fiscal 2025 were$2.0 billion,a decrease of 5.2%compared with the third quarter of fiscal 2024.Comparablestore sales increased by 3.0%.Gross profit margin for the third quarter of 2025 was 43.3%of net sales,an increase of 100 basis points compared with the third quarter of fiscal2024.Gross profit margin for the third quarter of 2025 was unfavorably impacted by a non-cash charge of$28 million reflecting expected futurecredit losses on vendor receivables due from a vendor that filed for Chapter 11 bankruptcy protection in the third quarter of 2025.Selling,general and administrative expenses,exclusive of restructuring and related expenses for the third quarter of fiscal 2025 were 40.6%of netsales,a decrease of(110)basis points compared with the third quarter of fiscal 2024.The Company generated a diluted loss per share of$0.02 during the third quarter of fiscal 2025,compared with a diluted loss per share of$0.42for the comparable period of 2024.Business and Risks UpdateThe Company continues to make progress on the various elements of its business plan,which is focused on improving the customer experience,margin expansion,and driving consistent execution for both professional and DIY customers.In the first quarter of fiscal 2025,the Company completed allstore location closures under the 2024 Restructuring Plan designed to improve the Companys profitability and growth potential,and streamline its operations.For further information related to restructuring and related activities,see Note 3.Restructuring of the Notes to Condensed Consolidated Financial Statementsincluded in Part I,Item 1.In the third quarter of fiscal 2025,one of the Companys vendors,a leading auto parts supplier for the automotive aftermarket industry,filed voluntarypetitions for Chapter 11 bankruptcy protection with the U.S.Bankruptcy Court for the Southern District of Texas.The vendor has secured short-term financingthrough a debtor-in-possession(“DIP”)loan,however,Chapter 11 proceedings carry inherent risks with respect to a companys ability to continue operationsand maintain adequate liquidity to satisfy current and future obligations.As a result of these events,the Company recorded a non-cash charge of$28 million tocost of sales in the third quarter of fiscal 2025,within the condensed consolidated statement of operations,reflecting estimated future credit losses on certainvendor receivables due from the vendor.The estimate was developed utilizing a probability weighted cash-flow model adjusted for risks associated with creditrisk deterioration for companies that enter Chapter 11 bankruptcy proceedings.The Company currently continues to source products from the vendor,but is nota material supplier of the Company.In August 2025,the Company completed various financing-related transactions,including the issuance of$1.95 billion in Senior Unsecured Noteswith net proceeds of$1.6 billion,after giving effect to the redemption of the Companys 5.90%Senior Notes due March 9,2026 with the proceeds and directtransaction and closing costs.The Company also terminated its existing 2021 Credit Agreement which has been replaced by a new asset-based loan revolvingcredit facility(the“ABL Facility”).For further information related to these financing-related transactions,see Note 6.Long-term Debt and Fair Value ofFinancial Instruments of the Notes to Condensed Consolidated Financial Statements included in Part I,Item 1 and Part I,Item 2,“Liquidity and CapitalResources”of this Quarterly Report.22Table of ContentsDuring fiscal 2025,new global trade tariffs were announced on imports to the U.S.,including additional tariffs on various countries from which theCompany directly or indirectly imports and/or sources merchandise,including Canada,China and Mexico,among others.Since the initial announcement in thefirst quarter of fiscal 2025,various modifications and delays to the U.S.tariffs have been announced and further changes are expected to be made in the future,which may include additional sector-based tariffs or other measures.In response to the tariffs,certain of our suppliers have increased prices.However,theimpact of such increases to-date has not been material to the Companys business,financial condition and results of operations.The ultimate impact of tariffson the Companys business remains uncertain.See Part II,Item 1A,“Risk Factors”of this Quarterly Report.Industry UpdateOperating within the automotive aftermarket industry,the Company is influenced by a number of general macroeconomic factors,many of which aresimilar to those affecting the overall retail industry.In addition to the“Business and Risk Update”section included within this Managements Discussion andAnalysis of Financial Condition and Results of Operations,these factors include,but are not limited to:Significant changes in U.S trade policies,including the recently enacted and/or proposed new global trade tariffsInflationary pressures,including logistics and laborGlobal supply chain disruptionsCost of fuelChanges in the number of miles drivenUnemployment ratesInterest ratesConsumer confidence and purchasing powerCompetitionChanges in new car salesEconomic and geopolitical uncertaintyForeign currency exchange volatilityWhile these factors tend to fluctuate,the Company remains confident in the long-term growth prospects for the automotive parts industry.StoresThe key factors used in selecting sites and market locations in which the Company operates include population,demographics,traffic count,vehicleprofile,number and strength of competitors stores and the cost of real estate.During the forty weeks ended October 4,2025,26 stores were opened and 517were closed,resulting in a total of 4,297 stores as of the end of the third fiscal quarter compared with a total of 4,788 stores as of December 28,2024.Thesignificant reduction in stores during fiscal 2025 relates to actions taken under the Companys restructuring and related activities.See Note 3.Restructuring,ofthe Notes to Condensed Consolidated Financial Statements included in Part I,Item 1.23Table of ContentsResults of OperationsTwelve Weeks EndedChangeBasis Points($in millions)October 4,2025October 5,2024Net sales$2,036 100.0%$2,148 100.0%$(112)Cost of sales1,155 56.7 1,240 57.7 85(100)Gross profit881 43.3 908 42.3(27)100 Selling,general and administrative expenses,exclusive ofrestructuring and related expenses826 40.6 895 41.7 69(110)Restructuring and related expenses33 1.6 13 0.6(20)102 Selling,general and administrative expenses859 42.2 908 42.3 49(8)Operating income22 1.1 22 108 Interest expense(40)(2.0)(19)(0.9)(21)(108)Other income,net16 0.8 2 0.1 14 69 Income tax(benefit)expense(1)8 0.4 9(42)Net loss$(1)%$(25)(1.2)%$24 111 Forty Weeks EndedChangeBasis Points($in millions)October 4,2025October 5,2024Net sales$6,628 100.0%$7,098 100.0%$(470)Cost of sales3,764 56.8 4,037 56.9 273(9)Gross profit2,864 43.2 3,061 43.1(197)9 Selling,general and administrative expenses,exclusive ofrestructuring and related expenses2,771 41.8 2,933 41.3 162 49 Restructuring and related expenses180 2.7 21 0.3(159)242 Selling,general and administrative expenses2,951 44.5 2,954 41.6 3 291 Operating(loss)income(87)(1.3)1071.5(194)(282)Interest expense(86)(1.3)(62)(0.9)(24)(42)Other income,net61 0.9 12 0.2 49 75 Income tax(benefit)expense(150)(2.3)34 0.5 184(274)Net income$38 0.6%$23 0.3%$15 25(1)Represents favorable(unfavorable)year over year changeNote:Sums may not equal totals due to rounding.Net SalesFor the twelve weeks ended October 4,2025,net sales decreased 5.2%and comparable store sales increased 3.0%compared with the twelve weeksended October 5,2024.For the forty weeks ended October 4,2025,net sales declined 6.6%and comparable store sales increased 0.7%compared with thesame period in 2024.The decline in net sales for both the twelve and forty weeks ended October 4,2025 as compared to the prior periods,was due to lowersales as a result of store closures executed under the 2024 Restructuring Plan.The Company calculates comparable store sales based on the change in store or branch sales starting once a location has been open for approximatelyone year and by including e-commerce sales and excluding sales fulfilled by distribution centers to independently owned Carquest locations.The Companyincludes sales from relocated stores in comparable store sales from the original date of opening.Comparable store sales is intended only as supplementalinformation and is not a substitute for Net sales presented in accordance with accounting principles generally accepted in the United States of America(“GAAP”).(1)(1)24Table of ContentsGross ProfitFor the twelve weeks ended October 4,2025,gross profit was$881 million,or 43.3%of net sales,compared with$908 million,or 42.3%of net sales,for the twelve weeks ended October 5,2024.For the forty weeks ended October 4,2025 and October 5,2024,gross profit was$2,864 million,or 43.2%of netsales,and$3,061 million,or 43.1%of net sales,respectively.The increase in gross profit as a percentage of net sales compared to both the twelve week andforty week prior comparative periods was due to more favorable product margins,driven by strategic sourcing initiatives and pricing and lower supply chainand other related costs,offset by the$28 million non-cash charge for expected future credit losses related to vendor receivables due from a vendor that filedpetitions for Chapter 11 bankruptcy protection on September 28,2025.Gross profit as a percentage of net sales for the forty weeks ended October 4,2025 wasalso adversely impacted by lower-margin liquidation sales associated with the 2024 Restructuring Plan.Total gross profit dollars decreased as a result of lowernet sales stemming from store closures executed under the 2024 Restructuring Plan.Selling,General and Administrative Expenses,Exclusive of Restructuring and Related ExpensesFor the twelve weeks ended October 4,2025,selling,general and administrative(SG&A)expenses,exclusive of restructuring and related expenses,were$826 million,or 40.6%of net sales,compared with$895 million,or 41.7%of net sales,for the twelve weeks ended October 5,2024.For the forty weeksended October 4,2025,SG&A expenses,exclusive of restructuring and related expenses,were$2,771 million,or 41.8%of net sales,compared with$2,933million,or 41.3%of net sales,for the forty weeks ended October 5,2024.Overall SG&A expenses decreased in both the twelve week and forty weeks endedOctober 4,2025,as compared to prior comparative periods,as a result of store closures executed under the 2024 Restructuring Plan reducing overhead andoperating costs.SG&A expenses as a percentage of net sales for the forty weeks ended October 5,2024,benefited from a net gain on asset sales,see Note 7.Leases,of the Notes to the Condensed Consolidated Financial Statements included in Part I,Item1.25Table of ContentsRestructuring and Related ExpensesFor the twelve weeks ended October 4,2025,restructuring and related expenses were$33 million,or 1.6%of net sales,compared to$13 million,or0.6%of net sales,in the prior year comparable period.For the forty weeks ended October 4,2025,restructuring and related expenses were$180 million,or2.7%of net sales,compared to$21 million,or 0.3%of net sales,in the prior year comparable period.The increase in expenses as compared to the same periodin fiscal 2024,relates to the Companys 2024 Restructuring Plan which was announced during the fourth quarter of fiscal 2024.The Company estimates that itwill incur additional expenses of approximately$20 million to$30 million through the remainder of fiscal 2025 related to the active restructuring plans.Theexpenses for both the twelve and forty weeks ended October 4,2025,relate to lease terminations,professional services,severance and termination costs andother exit costs.We expect that the Companys 2024 Restructuring Plan will be substantially completed by the end of fiscal 2025 with certain expenses,primarily related to closed store and distribution center leases,expected to continue into fiscal year 2026.See Note 3.Restructuring,of the Notes to theCondensed Consolidated Financial Statements included in Part I,Item 1.Interest ExpenseFor the twelve weeks and the forty weeks ended October 4,2025,interest expense increased as compared to the same periods in fiscal 2024,due to anincrease in the principal amount of interest bearing long-term debt in the third quarter of fiscal 2025.For further information see Note 6.Long-term Debt andFair Value of Financial Instruments of the Notes to Condensed Consolidated Financial Statements included in Part I,Item 1 and Part I,Item 2,“Liquidity andCapital Resources”of this Quarterly Report.Other Income,NetFor the twelve weeks and the forty weeks ended October 4,2025,other income,net increased as compared to the same periods in fiscal 2024,due tohigher interest income earned from higher cash and cash equivalent balances held,driven by the proceeds received from the sale of the Worldpac business inthe fourth quarter of fiscal 2024 and the issuance of$1.95 billion in Senior Unsecured Notes with net proceeds of$1.6 billion,after the redemption of theCompanys 5.90%Senior Notes due March 2026 with the proceeds and direct transaction and closing costs in the third quarter of fiscal 2025.Other income,net also includes income recognized from the transition services(“TSA Services”)agreement with Worldpac that commenced in the fourth quarter of fiscal2024.Income Tax(Benefit)ExpenseFor the twelve weeks ended October 4,2025 the Companys provision for income taxes was negligible.The Companys provision for income taxes forthe twelve weeks ended October 5,2024 was an expense of$8 million,largely attributable to a$10 million tax expense related to a book to tax difference inthe stock basis of Worldpac Canada as a result of the sale of Worldpac.The Companys provision for income taxes for the forty weeks ended October 4,2025,was a benefit of$150 million compared with an expense of$34 million for the same period in 2024.The decrease in tax expense for the forty weeks endedOctober 4,2025 was a result of a net discrete tax benefit in the first quarter of fiscal 2025 of$126 million related to certain tax benefits associated with capitalloss deductions and lower income before taxes.On July 4,2025,President Trump signed into law the One Big Beautiful Bill Act(“OBBBA”).The Company has determined the OBBBA has animmaterial impact to the Companys provision for income taxes and deferred tax balances.Non-GAAP Financial MeasuresThe Company uses certain non-GAAP financial measures described below to supplement the Companys unaudited condensed consolidated financialstatements prepared and presented in accordance with GAAP and to understand and evaluate the Companys core operating performance.These non-GAAPfinancial measures,which may be different than similarly titled measures used by other companies,are presented as the Company believes that such non-GAAP financial measures provide useful information about the Companys financial performance,enhance the overall understanding of the Companys pastperformance and future prospects,and allow for greater transparency with respect to important metrics used by the Companys management for financial andoperational decision-making.The Company is presenting these non-GAAP metrics to provide investors insight to the information used by the Companysmanagement to evaluate its business and financial performance.The Company believes that these measures provide investors increased comparability of theCompanys core financial performance over multiple periods and with other companies in the same industry.The Company may make reference to certainfinancial measures not derived in accordance with GAAP within Item 2.Managements Discussion and Analysis of Financial Condition26Table of Contentsand Results of Operations of this Quarterly Report.The Companys Non-GAAP financial measures reflect results from continuing operations,includingAdjusted Net Income(loss),Adjusted Diluted Earnings(loss)Per Share(“Adjusted Diluted EPS”),Adjusted Gross Profit,Adjusted Gross Profit Margin,Adjusted Sales,General and Administrative expense(“Adjusted SG&A”),Adjusted SG&A Margin,Adjusted Operating Income(loss)and Adjusted OperatingIncome(loss)Margin,and should not be used as a substitute for GAAP financial measures,or considered in isolation,for the purpose of analyzing theCompanys operating performance,financial position or cash flows.The Company has presented these non-GAAP financial measures as the company believes that the presentation of the financial results that exclude(1)transformation expenses under the Companys turnaround plan,inclusive of the Worldpac divestiture and(2)other significant expenses,are useful andindicative of the Companys base operations because the expenses vary from period to period in terms of size,nature and significance.The income tax impactof these non-GAAP adjustments is also adjusted for using the estimated tax rate in effect for the respective non-GAAP adjustments.These measures assist incomparing the Companys current operating results with past periods and with the operational performance of other companies in the industry.The disclosureof these measures allows investors to evaluate the Companys performance using the same measures management uses in developing internal budgets andforecasts and in evaluating managements compensation.Included below is a description of the expenses the Company has determined are not normal,recurring cash operating expenses necessary to operate the Companys business and the rationale for why providing these measures is useful to investors as asupplement to the GAAP measures.Transformation ExpensesExpenses incurred in connection with the Companys turnaround plan and specific transformative activities related to asset optimization that theCompany does not view to be normal cash operating expenses.These expenses primarily include:Restructuring and other related expenses:Expenses relating to strategic initiatives,including severance expense,retention bonuses offered tostore-level employees to help facilitate the closing of stores,incremental reserves related to the collectibility of receivables resulting from contractterminations with certain independents associated with the 2024 Restructuring Plan and third-party professionals assisting in the development andexecution of the strategic initiatives.Impairment and write-down of long-lived assets:Expenses relating to the impairment of operating lease ROU assets and property and equipment,incremental depreciation as a result of accelerating long-lived assets over a shorter useful life,depreciation of long-lived assets and ROU assetamortization after store closure,and incremental lease abandonment expenses as a result of accelerating ROU asset amortization for leases theCompany expects to exit before the end of the contractual term,net of gains on lease terminations,in connection with the 2024 Restructuring Planand Other Restructuring Plan.Distribution network optimization:Expenses primarily relating to the conversion of the stores and distribution centers to market hubs,includingrealized losses on liquidated inventory,temporary labor,nonrecurring professional service fees and team member severance.Other ExpensesExpenses incurred by the Company that are not viewed as normal cash operating expenses and vary from period to period in terms of size,nature,andsignificance.These expenses primarily include:Other professional service fees:Expenses relating to nonrecurring services rendered by third-party vendors engaged to perform a strategicbusiness review,including the Companys transformation initiatives.Worldpac post transaction-related expenses:Expenses primarily relating to non-recurring separation activities provided by third-partyprofessionals subsequent to the sale of Worldpac.Executive turnover:Expenses associated with executive level reorganization,including expenses for executive severance,the hiring search forleadership positions and certain compensation benefits.Material weakness remediation:Incremental expenses associated with the remediation of the Companys previously disclosed materialweaknesses in internal control over financial reporting.Cybersecurity incident:Expenses related to the response and remediation of a cybersecurity incident.Other:Includes a non-cash charge related to expected future credit losses on vendor receivables due from a vendor that filed voluntary petitionsfor Chapter 11 bankruptcy protection.27Table of ContentsOther tax adjustments:Certain tax items that are unrelated to the fiscal year in which they are recorded are excluded in order to provide a clearerunderstanding of the Companys ongoing Non-GAAP tax rate and after-tax earnings.The following table includes a reconciliation of this information to the most comparable GAAP measures(in millions):Twelve Weeks EndedForty Weeks EndedClassificationOctober 4,2025October 5,2024October 4,2025October 5,2024Net income(loss)from continuing operations(GAAP)$(1)$(25)$38$23 Cost of sales adjustments:Transformation expenses:Distribution network optimizationRestructuring4 9 Expected future credit loss related tovendor receivablesNon-restructuring28 28 Selling,general and administrativeadjustments:Transformation expenses:Restructuring and other related expensesRestructuring7 4 78 5 Impairment and write-down of long-livedassets Restructuring18 76 Distribution network optimizationRestructuring6 9 15 14 Other expenses:Other professional service feesNon-restructuring 3 12 Worldpac post transaction-relatedexpensesRestructuring2 7 Executive turnoverRestructuring 4 2 Material weakness remediationNon-restructuring 1 1 4 Cybersecurity incidentNon-restructuring 2 3 Other income adjustments:TSA services(1)(8)Losses on extinguishment of debt9 9 Provision for income taxes on adjustments(19)(4)(58)(7)Other tax(benefit)expense adjustments 10(126)10 Adjusted net income(loss)(Non-GAAP)$56$(3)$85$54 Diluted earnings(loss)per share fromcontinuing operations(GAAP)$(0.02)$(0.42)$0.63$0.38 Adjustments,net of tax0.94 0.37 0.77 0.52 Adjusted diluted earnings(loss)per share(Non-GAAP)$0.92$(0.05)$1.40$0.90(1)Reflects a charge for expected future credit losses related to vendor receivables due from a vendor that filed petitions for Chapter 11 bankruptcy protection on September 28,2025.(1)(2)(3)(6)(4)(5)(7)28Table of Contents(2)Restructuring and other related expenses for the twelve weeks ended October 4,2025 includes$2 million of nonrecurring services rendered by third-party vendors assisting with the 2024Restructuring Plan and$5 million of other related expenses associated with location closures,including the transfer of assets.Restructuring and other related expenses for the forty weeks endedOctober 4,2025 includes$37 million of nonrecurring services rendered by third-party vendors assisting with the 2024 Restructuring Plan,$15 million of severance and other labor related costs,$7million for reserves on independent loans and$19 million of other related expenses associated with location closures,including the transfer of assets.(3)The Company recorded incremental accelerated depreciation and amortization for property and equipment and ROU assets of$7 million and impairment charges for ROU assets and property andequipment of$11 million,net of gains on sales,for the twelve weeks ended October 4,2025.The Company recorded incremental accelerated depreciation and amortization for property andequipment and ROU assets of$55 million and impairment charges for ROU assets and property and equipment of$21 million,net of gains on sale,for the forty weeks ended October 4,2025.(4)The income tax impact of non-GAAP adjustments is calculated using the estimated tax rate in effect for the respective non-GAAP adjustments.(5)Income tax(benefit)expenses included a discrete non-recurring tax benefit associated with capital loss deductions effectuated in the first quarter of fiscal 2025.The benefit has been excluded fromNon-GAAP results in order to provide a clearer understanding of ongoing Non-GAAP tax rate and after-tax earnings.(6)Other professional service fees in fiscal 2024 were classified as restructuring and related expenses based on the underlying activity to which they related.(7)Refer to the reconciliation of diluted weighted-average common shares outstanding(GAAP)to adjusted diluted weighted-average common shares outstanding(Non-GAAP)which is thedenominator utilized to calculate adjusted diluted earnings(loss)per share(Non-GAAP).Adjusted diluted weighted-average common shares outstanding(Non-GAAP)includes the dilutive impact ofshare-based awards as such shares are considered dilutive in consideration of the Companys Non-GAAP earnings for the period.29Table of ContentsReconciliation of Adjusted Diluted Weighted-Average Common Shares OutstandingTwelve Weeks EndedForty Weeks Ended(shares in millions)October 4,2025October 5,2024October 4,2025October 5,2024Diluted Weighted-Average Common Shares Outstanding(GAAP)60.0 59.9 60.5 59.9 Dilutive impact of share-based awards0.9 Adjusted Diluted Weighted-Average Common SharesOutstanding(Non-GAAP)60.9 59.9 60.5 59.9 For the twelve weeks ended October 4,2025,0.5 million shares of restricted stock units(“RSUs”)were excluded from the diluted weighted-average common share count calculation as theirinclusion would have been anti-dilutive.Liquidity and Capital ResourcesOverviewThe Companys principal sources of liquidity are cash and cash equivalents and borrowing availability under a revolving credit facility.TheCompanys primary cash requirements necessary to maintain the Companys current operations include payroll and benefits,inventory purchases,contractualobligations,capital expenditures,payment of income taxes,funding of initiatives and other operational priorities,such as restructuring and asset optimizationplans.In addition,cash is required to pay the Companys dividend and to pay interest and principle on the Companys long-term debt when due.The followingtables present selected financial information related to the Companys liquidity(in millions):October 4,2025December 28,2024ChangeCash and cash equivalents$3,174$1,869$1,305 The increase in cash and cash equivalents was primarily due to the issuance of$1.95 billion in Senior Unsecured Notes with net proceeds of$1.6billion,after giving effect to the redemption of the Companys 5.90%Senior Notes due 2026 with the proceeds and direct transaction and closing costs in thethird quarter of fiscal 2025,offset by net cash used in operating activities of$118 million,primarily as a result of changes in net working capital,inclusive ofcash payments made in the period related to the Companys 2024 Restructuring Plan,$137 million used for purchases of property and equipment,net ofproceeds from sales,and the payment of$45 million in dividends.In addition to cash and cash equivalents presented above,as of October 4,2025,the Company also maintained access to$741 million in undrawncapacity through the Companys$1.0 billion asset-based revolving credit facility(the“ABL Facility”).As of October 4,2025 approximately$2.3 billion wasdesignated as Qualified Cash as defined in the ABL Facility.The Company believes that its cash and cash equivalents and sources of liquidity will satisfy its working and other capital requirements for at least thenext 12 months and thereafter for the foreseeable future.(1)(1)30Table of ContentsAnalysis of Cash FlowsIn the fourth quarter of fiscal 2024,the Company completed the sale of Worldpac.As a result,the Company classified the results of operations andcash flows of Worldpac as discontinued operations in its condensed consolidated statements of operations and condensed consolidated statements of cash flowsfor prior periods presented.The Companys cash flows from operating,investing and financing activities were as follows(in millions):Forty Weeks Ended(in millions)October 4,2025October 5,2024Net cash(used in)provided by operating activities of continuing operations$(118)$81 Net cash provided by operating activities of discontinued operations 77 Net cash used in investing activities of continuing operations(137)(116)Net cash used in investing activities of discontinued operations(8)Net cash provided by(used in)financing activities1,559(58)Effect of exchange rate changes on cash1 12 Net increase(decrease)in cash and cash equivalents$1,305$(12)Operating ActivitiesFor the forty weeks ended October 4,2025,cash used in operating activities changed unfavorably by$199 million compared with the same period ofprior year.The decrease as compared to the comparative period was due to changes in net working capital,inclusive of cash payments made in the periodrelated to the Companys 2024 Restructuring Plan.Investing ActivitiesFor the forty weeks ended October 4,2025,cash flows used in investing activities increased by$21 million compared with the forty weeks endedOctober 5,2024,with higher spend on property and equipment in the current period,partially offset by higher proceeds from the sale of property andequipment.Financing ActivitiesFor the forty weeks ended October 4,2025,cash flows provided by financing activities was$1,559 million,an increase of$1,617 million as comparedwith the forty weeks ended October 5,2024.The increase in cash generated from financing activities was due to the issuance of$1.95 billion in SeniorUnsecured Notes with net proceeds of$1.6 billion,after giving effect to the redemption of the Companys 5.90%Senior Notes due 2026 with the proceeds anddirect transaction and closing costs.The Companys Board of Directors has declared a cash dividend every quarter since 2006.Any payments of dividends in the future will be at thediscretion of the Companys Board of Directors and will depend upon the Companys results of operations,cash flows,capital requirements and other factorsdeemed relevant by the Board of Directors.Similar to the 2021 Credit Agreement,the Companys new ABL Facility,as detailed further below,has certainrestrictions that may limit the Companys ability to increase the amount of the Companys cash dividends above its current levels.31Table of ContentsRestructuring ActivitiesOn November 13,2024,the Companys Board of Directors approved the 2024 Restructuring Plan,which was designed to improve the Companysprofitability and growth potential and streamline its operations.In fiscal 2023,the Company also announced a strategic and operational plan to streamline theCompanys supply chain by configuring a multi-echelon supply chain by leveraging current asset and operating fewer,more productive distribution centers thatfocus on replenishment and move more parts closer to the customer.The Company estimates that it will incur additional expenses of approximately$20 millionto$30 million through the remainder of fiscal 2025,of which approximately$10 million to$20 million is expected to be cash expenses,primarily composed oflease terminations and other exit expenses and professional services,by the end of fiscal year 2025 with certain expenses,primarily related to closed store anddistribution center leases,expected to continue into fiscal year 2026.For further information,see Note 3.Restructuring,of the Notes to CondensedConsolidated Financial Statements included in Part I,Item 1.Long-Term DebtAs of October 4,2025 and December 28,2024,the Company had outstanding long-term debt totaling$3.4 billion and$1.8 billion,respectively.On August 4,2025,the Company issued(i)$975 million in aggregate principal amount of 7.000%Senior Notes due 2030(the“2030 Notes”)and(ii)$975 million in aggregate principal amount of 7.375%Senior Notes due 2033(collectively,the“Senior Unsecured Notes”)in a private transaction exemptfrom the registration requirements of the Securities Act of 1933,as amended(the“Act”).Interest on the Senior Unsecured Notes is payable in cash on February1 and August 1 of each year,commencing on February 1,2026.The 2030 Notes will mature on August 1,2030,and the 2033 Notes will mature on August 1,2033.Net proceeds from the issuance of the Senior Unsecured Noted were approximately$1.9 billion,net of direct transaction and closing costs.The SeniorUnsecured Notes are guaranteed by each of the Companys wholly-owned domestic subsidiaries that also guarantee the ABL Facility.In accordance with the terms of the Indenture governing the Senior Unsecured Notes,the Company may,at its option and on any one or moreoccasions,redeem some or all of the Senior Unsecured Notes at the redemption prices described in the Indenture.In addition,in the event of a Change ofControl Triggering Event(as defined in the Indenture),the Company will be required to offer to repurchase the Senior Unsecured Notes at a price equal to101%of the principal amount thereof,plus accrued and unpaid interest,if any,to,but excluding,the repurchase date.The Indenture also contains customaryprovisions for events of default and certain covenants limiting the ability of the Company and its subsidiaries to incur debt secured by liens and to enter intocertain sale and lease-back transactions.Following the closing of the issuance of the Senior Unsecured Notes,the Company utilized a portion of the net proceeds to redeem in full itsoutstanding$300 million in aggregate principal amount of 5.90%Senior Notes due 2026 and recorded a loss of$3 million on redemption in the third quarter offiscal 2025 associated with this extinguishment.The remaining proceeds from the issuance are available for general corporate purposes,and,as of October 4,2025,approximately$2.3 billion of cash and cash equivalents,was designated as qualified cash and are subject to customary“springing”control agreements,as described in the ABL Facility Agreement.For further details,see Note 6.Long-term Debt and Fair Value of Financial Instruments of the Notes to Condensed Consolidated Financial Statementsincluded in Part I,Item 1.Credit FacilitiesOn August 12,2025,the Companys$1 billion revolving credit facility(the“2021 Credit Agreement”)was terminated and replaced by the ABLFacility.The Company recorded a$6 million loss on extinguishment of the 2021 Credit Agreement during the third quarter of fiscal 2025.The ABL Facilityprovides for a five-year senior secured first lien asset-based revolving credit facility of up to$1 billion with an uncommitted accordion feature that provides foradditional credit extensions up to$500 million.Our ability to draw upon the ABL Facility is subject to the available borrowing base.Outstanding amountsunder the ABL Facility will accrue interest at a floating rate,which,at the Companys election,can be either(i)SOFR plus an applicable margin or(ii)analternative base rate plus an applicable margin.The applicable rate varies based on Average Historical Excess Availability(as defined in the ABL FacilityAgreement)from(i)with respect to base rate loans,0.25%to 0.75%and(b)with respect to SOFR loans,1.25%to 1.75%and resets quarterly on a prospectivebasis and is,in part,derived based-upon the utilization of the facility.Interest is payable on a quarterly basis.Unused commitments under the ABL Facility willaccrue an unused commitment fee of either 0.30%or 0.25%per annum,depending on average utilization.32Table of ContentsThe ABL Facility has first lien on substantially all of the accounts receivable,inventory,cash and related assets of the Company and its subsidiaryguarantors thereunder.Advance Auto Parts,Inc.is the ABL Facility borrower and the guarantors are(i)each of our subsidiaries that guarantee our recentlyissued Senior Unsecured Notes and(ii)certain of our Canadian subsidiaries.Availability under the ABL Facility is limited to the lesser of(i)the borrowingbase,equal to the sum of 90%of eligible credit card receivables,85%of eligible trade accounts receivable,85%of the net orderly liquidation value of eligibleinventory and 100%of qualified cash(up to certain limits for the purpose of determining borrowing capacity),subject,in each case,to customary reservesestablished by the collateral agent under the ABL Facility from time to time,including reserves related to outstanding obligations to our suppliers that arepayable to the paying agents,as a result of such suppliers electing,at their option,to utilize third-party financing,commonly referred to as supply chainfinancing,and debt maturity reserves,and(ii)the aggregate revolving credit commitments.The ABL Facility contains customary representations andwarranties,events of default and financial,affirmative and negative covenants for facilities of this type,including but not limited to a springing financialcovenant relating to a fixed charge coverage ratio,defined in the ABL Facility as the ratio of Consolidated Adjusted EBITDA minus Consolidated CapitalExpenditures minus Taxes to Fixed Charges,each as defined in the ABL Facility,on a four quarter trailing basis,which requires a minimum 1:1 coverage ratioto be maintained,and restrictions on certain indebtedness,liens,investments and acquisitions,asset dispositions,restricted payments,prepayment of certainindebtedness and transactions with affiliates,subject to various thresholds and caps.In accordance with the ABL Facility,the Company is required to hold cash and cash equivalents in designated accounts with lenders,referred to asQualified Cash Accounts as defined in ABL Facility.These amounts are unrestricted and the Company is able to direct,and have sole control over,the mannerof disposition of funds in such accounts,subject to:1)maintaining a minimum availability under the ABL facility of at least the greater of(i)12.5%of the LineCap and(ii)$125 million;and 2)maintaining excess availability under the ABL Facility of at least$400 million.The Qualified Cash Accounts are subject tospringing control agreements pursuant to which the cash deposited therein will become restricted in the event of default or a breach of such covenants.As of October 4,2025,the Company had no outstanding borrowings,$741 million of borrowing availability and$259 million letters of creditoutstanding under the ABL Facility.As of December 28,2024,the Company had no outstanding borrowings,$1 billion of borrowing availability and no lettersof credit outstanding under the 2021 Credit Agreement.The Company was in compliance with its covenants related to the ABL Facility as of October 4,2025.As of October 4,2025 and December 28,2024,the Company also had$89 million and$91 million,respectively,of bilateral letters of credit issuedseparately from the ABL Facility and 2021 Credit Agreement,respectively,none of which were drawn upon.These bilateral letters of credit generally have aterm of one year or less and primarily serve as collateral for the Companys self-insurance policies.For further details,see Note 6.Long-term Debt and Fair Value of Financial Instruments of the Notes to Condensed Consolidated Financial Statementsincluded in Part I,Item 1.,respectively.Additional Capital RequirementsExpected working and other capital requirements,including Contractual and Off-Balance Sheet Obligations are described in the Companys 2024Annual Report on Form 10-K in“Part II,Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations.”As of October 4,2025,other than for the changes disclosed in the“Notes to Condensed Consolidated Financial Statements”,and“Liquidity and Capital Resources”in thisQuarterly Report
2025-10-31
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPO.
2025-10-31
46页
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549Form 10-QQuarterly Report Pursuant to Section 13 or 15(d)of theSecurities Exchange Act of 1934For the quarterly period ended September 30,2025COMMISSION FILE NUMBER 001-6351ELI LILLY AND COMPANY(Exact name of Registrant as specified in its charter)Indiana 35-0470950(State or other jurisdiction of(I.R.S.Employerincorporation or organization)Identification No.)Lilly Corporate Center,Indianapolis,Indiana 46285(Address and zip code of principal executive offices)Registrants telephone number,including area code(317)276-2000Securities registered pursuant to Section 12(b)of the Exchange Act:Title of Each ClassTrading SymbolsName of Each Exchange On Which RegisteredCommon Stock(no par value)LLYNew York Stock Exchange1.625%Notes due 2026LLY26New York Stock Exchange2.125%Notes due 2030LLY30New York Stock Exchange0.625%Notes due 2031LLY31New York Stock Exchange0.500%Notes due 2033LLY33New York Stock Exchange6.77%Notes due 2036LLY36New York Stock Exchange1.625%Notes due 2043LLY43New York Stock Exchange1.700%Notes due 2049LLY49ANew York Stock Exchange1.125%Notes due 2051LLY51New York Stock Exchange1.375%Notes due 2061LLY61New York Stock ExchangeIndicate by check mark whether the Registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12months(or for such shorter period that the Registrant was required to file such reports)and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the Registrant was required to submit such files).Yes No Indicate by check mark whether the Registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growthcompany.See the definitions of large accelerated filer,accelerated filer,smaller reporting company,and emerging growth company in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filerNon-accelerated filer Smaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the Registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No The number of shares of common stock outstanding as of October 27,2025:Class Number of Shares OutstandingCommon 945,383,757 Eli Lilly and CompanyForm 10-QFor the Quarter Ended September 30,2025Table of ContentsPagePART I.Financial Information5Item 1.Financial Statements5Consolidated Condensed Statements of Operations5Consolidated Condensed Statements of Comprehensive Income6Consolidated Condensed Balance Sheets7Consolidated Condensed Statements of Shareholders Equity8Consolidated Condensed Statements of Cash Flows10Notes to Consolidated Condensed Financial Statements11Item 2.Managements Discussion and Analysis of Results of Operations and Financial Condition34Executive Overview34Results of Operations38Financial Condition and Liquidity41Critical Accounting Estimates42Available Information on our Website42Item 3.Quantitative and Qualitative Disclosures About Market Risk43Item 4.Controls and Procedures43PART II.Other Information44Item 1.Legal Proceedings44Item 1A.Risk Factors44Item 2.Unregistered Sales of Equity Securities and Use of Proceeds44Item 5.Other Information44Item 6.Exhibits45Signatures452Forward-Looking StatementsThis Quarterly Report on Form 10-Q and our other publicly available documents include forward-looking statements within the meaning ofSection 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934(Exchange Act),and are subject to thesafe harbor created thereby under the Private Securities Litigation Reform Act of 1995.Forward-looking statements include all statementsthat do not relate solely to historical or current facts,and generally can be identified by the use of words such as may,could,aim,seek,believe,will,expect,project,estimate,intend,target,anticipate,plan,continue,or similar expressions or future or conditionalverbs.Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ from those expressed inforward-looking statements.Forward-looking statements are based on managements current plans and expectations,expressed in goodfaith and believed to have a reasonable basis.However,we can give no assurance that any expectation or belief will result or will beachieved or accomplished.Investors therefore should not place undue reliance on forward-looking statements.The following include somebut not all of the factors that could cause actual results or events to differ from those anticipated:the significant costs and uncertainties in the pharmaceutical research and development process,including with respect to the timing andprocess of obtaining regulatory approvals;the impact and uncertain outcome of acquisitions and business development transactions and related costs;intense competition affecting our products,pipeline,or industry;market uptake of launched products and indications;continued pricing pressures and the impact of actions of governmental and private actors affecting pricing of,reimbursement for,andpatient access to pharmaceuticals,or reporting obligations related thereto;safety or efficacy concerns associated with our or competitive products;dependence on relatively few products or product classes for a significant percentage of our total revenue and a consolidated supplychain;the expiration of intellectual property protection for certain of our products and competition from generic and biosimilar products;our ability to protect and enforce patents and other intellectual property and changes in patent law or regulations related to data packageexclusivity;information technology system inadequacies,inadequate controls or procedures,security breaches,or operating failures;unauthorized access,disclosure,misappropriation,or compromise of confidential information or other data stored in our informationtechnology systems,networks,and facilities,or those of third parties with whom we share our data and violations of data protection lawsor regulations;issues with product supply and regulatory approvals stemming from manufacturing difficulties,disruptions,or shortages,including as aresult of unpredictability and variability in demand,labor shortages,third-party performance,quality,cyber-attacks,or regulatory actionsrelated to our and third-party facilities;reliance on third-party relationships and outsourcing arrangements;the use of artificial intelligence or other emerging technologies in various facets of our operations,which may exacerbate competitive,regulatory,litigation,cybersecurity,and other risks;the impact of global macroeconomic conditions,including uneven economic growth or downturns or uncertainty,trade and other globaldisputes and interruptions,including related to tariffs,trade protection measures,and similar restrictions,international tension,conflicts,regional dependencies,or other costs,uncertainties,and risks related to engaging in business globally;fluctuations in foreign currency exchange rates,changes in interest rates,and inflation or deflation;significant and sudden declines or volatility in the trading price of our common stock and market capitalization;litigation,investigations,or other similar proceedings involving past,current,or future products or activities;changes in tax law and regulation,tax rates,or events that differ from our assumptions related to tax positions;regulatory changes,developments,and uncertainty;regulatory oversight and actions regarding our operations and products;regulatory compliance problems or government investigations;risks from the proliferation of counterfeit,misbranded,adulterated,or illegally compounded products;3actual or perceived deviation from environmental-,social-,or governance-related requirements or expectations;asset impairments and restructuring charges;andchanges in accounting and reporting standards.More information on factors that could cause our actual results to differ from those expressed in forward-looking statements is included fromtime to time in our reports filed with the Securities and Exchange Commission,including in our Annual Report on Form 10-K for the year endedDecember 31,2024,particularly under Part I,Item 1A,Risk Factors.Investors should understand that it is not possible to predict or identifyall such factors and should not consider the risks described above and under Part I,Item 1A,Risk Factors of our Annual Report on Form 10-K to be a complete statement of all potential risks and uncertainties.All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are expressly qualified in their entirety bythe cautionary statements included in or incorporated by reference into this Quarterly Report on Form 10-Q.Except as is required by law,weexpressly disclaim any obligation to publicly release any revisions to forward-looking statements to reflect events after the date of thisQuarterly Report on Form 10-Q.Trademarks and Trade NamesAll trademarks or trade names referred to in this Quarterly Report on Form 10-Q are the property of the company,or,to the extenttrademarks or trade names belonging to other companies are referenced in this Quarterly Report on Form 10-Q,the property of theirrespective owners.Solely for convenience,the trademarks and trade names in this Quarterly Report on Form 10-Q are referred to withoutthe and symbols,but such references should not be construed as any indicator that the company or,to the extent applicable,theirrespective owners will not assert,to the fullest extent under applicable law,the companys or their rights thereto.We do not intend the use ordisplay of other companies trademarks and trade names to imply a relationship with,or endorsement or sponsorship of us by,any othercompanies.4PART I.Financial InformationItem 1.Financial StatementsConsolidated Condensed Statements of Operations(Unaudited)ELI LILLY AND COMPANY(Dollars and shares in millions,except per-share data)Three Months Ended September 30,Nine Months Ended September 30,2025202420252024Revenue(Note 2)$17,600.8$11,439.1$45,887.0$31,509.9 Costs,expenses,and other:Cost of sales3,008.3 2,170.8 7,680.3 6,014.5 Research and development3,465.7 2,734.1 9,535.5 7,968.1 Marketing,selling,and administrative2,740.7 2,099.8 7,962.6 6,169.3 Acquired in-process research and development(Note 3)655.7 2,826.4 2,381.2 3,091.2 Asset impairment,restructuring,and other special charges(Note 5)364.9 81.6 399.9 516.6 Othernet,(income)expense(Note 12)133.1(62.0)462.7 108.5 10,368.4 9,850.7 28,422.2 23,868.2 Income before income taxes7,232.4 1,588.4 17,464.8 7,641.7 Income taxes(Note 8)1,649.9 618.1 3,462.5 1,461.5 Net income$5,582.5$970.3$14,002.3$6,180.2 Earnings per share:Basic$6.22$1.08$15.60$6.86 Diluted$6.21$1.07$15.56$6.83 Shares used in calculation of earnings per share:Basic896.9901.0897.8900.9Diluted898.8905.0899.7904.4See notes to consolidated condensed financial statements.5Consolidated Condensed Statements of Comprehensive Income(Unaudited)ELI LILLY AND COMPANY(Dollars in millions)Three Months Ended September 30,Nine Months Ended September 30,2025202420252024Net income$5,582.5$970.3$14,002.3$6,180.2 Other comprehensive income,net of tax(Note 11)509.7 103.7 1,115.6 52.2 Comprehensive income$6,092.2$1,074.0$15,117.9$6,232.4 See notes to consolidated condensed financial statements.6Consolidated Condensed Balance SheetsELI LILLY AND COMPANY(Dollars in millions)September 30,2025December 31,2024Assets(Unaudited)Current AssetsCash and cash equivalents(Note 7)$9,791.9$3,268.4 Short-term investments(Note 7)121.6 154.8 Accounts receivable,net of allowances of$21.7(2025)and$14.9(2024)16,107.4 11,005.7 Other receivables3,349.8 2,269.7 Inventories(Note 6)12,180.4 7,589.2 Prepaid expenses(Note 8)20,248.7 8,340.5 Other current assets271.5 111.4 Total current assets62,071.3 32,739.7 Investments(Note 7)2,808.3 3,215.9 Goodwill5,898.0 5,770.3 Other intangibles,net6,446.7 6,166.3 Deferred tax assets8,962.7 8,000.6 Property and equipment,net of accumulated depreciation of$12,410.9(2025)and$11,789.0(2024)22,316.0 17,102.4 Other noncurrent assets6,432.4 5,719.7 Total assets$114,935.4$78,714.9 Liabilities and EquityCurrent LiabilitiesShort-term borrowings and current maturities of long-term debt$1,633.0$5,117.1 Accounts payable4,262.2 3,228.6 Employee compensation1,965.7 2,093.9 Sales rebates and discounts17,620.2 11,539.3 Short-term income taxes payable9,444.4 1,116.4 Other current liabilities5,215.4 5,281.3 Total current liabilities40,140.9 28,376.6 Noncurrent LiabilitiesLong-term debt40,873.6 28,527.1 Long-term income taxes payable6,293.6 4,060.9 Other noncurrent liabilities3,776.5 3,478.7 Total noncurrent liabilities50,943.7 36,066.7 Commitments and Contingencies(Note 10)Eli Lilly and Company Shareholders EquityCommon stock591.4 592.4 Additional paid-in capital7,231.9 7,439.3 Retained earnings22,252.0 13,545.0 Employee benefit trust(3,013.2)(3,013.2)Accumulated other comprehensive loss(Note 11)(3,206.3)(4,321.9)Cost of common stock in treasury(62.5)(49.5)Total Eli Lilly and Company shareholders equity23,793.3 14,192.1 Noncontrolling interests57.5 79.5 Total equity23,850.8 14,271.6 Total liabilities and equity$114,935.4$78,714.9 See notes to consolidated condensed financial statements.7Consolidated Condensed Statements of Shareholders Equity(Unaudited)ELI LILLY AND COMPANYEquity of Eli Lilly and Company Shareholders(Dollars in millions,except per-share data,andshares in thousands)Common StockAdditionalPaid-inCapitalRetainedEarningsEmployeeBenefit TrustAccumulated OtherComprehensiveLossCommon Stock in TreasuryNoncontrollingInterestsSharesAmountSharesAmountBalance at July 1,2024950,781$594.2$7,214.2$13,178.0$(3,013.2)$(4,378.5)365$(32.7)$73.5 Net income970.3 11.8 Other comprehensive income,net of tax103.7 Retirement of treasury shares(582)(0.3)(520.8)(582)521.1 Purchase of treasury shares582(521.1)Issuance of stock under employee stock plans,net16 (7.8)Stock-based compensation133.2 Other(0.3)(4.6)Balance at September 30,2024950,215$593.9$7,339.6$13,627.2$(3,013.2)$(4,274.8)365$(32.7)$80.7 Balance at July 1,2025947,198$592.0$7,089.3$17,376.2$(3,013.2)$(3,716.0)365$(55.4)$76.2 Net income5,582.5 3.0 Other comprehensive income,net of tax509.7 Retirement of treasury shares(1,011)(0.6)(707.5)(1,011)708.1 Purchase of treasury shares1,011(708.1)Issuance of stock under employee stock plans,net19 (8.5)Stock-based compensation151.1 Other0.8(7.1)(21.7)Balance at September 30,2025946,206$591.4$7,231.9$22,252.0$(3,013.2)$(3,206.3)365$(62.5)$57.5 As of September 30,2025,there was$12.40 billion remaining under our$15.00 billion share repurchase program authorized in December 2024.See notes to consolidated condensed financial statements.(1)(1)8Equity of Eli Lilly and Company Shareholders(Dollars in millions,except per-share data,andshares in thousands)Common StockAdditional Paid-in CapitalRetained EarningsEmployeeBenefit TrustAccumulated OtherComprehensiveLossCommon Stock in TreasuryNoncontrollingInterestsSharesAmountSharesAmountBalance at January 1,2024949,781$593.6$7,250.4$10,312.3$(3,013.2)$(4,327.0)402$(44.2)$91.8 Net income(loss)6,180.2(3.2)Other comprehensive income,net of tax52.2 Cash dividends declared per share:$2.60(2,342.9)Retirement of treasury shares(582)(0.3)(520.8)(582)521.1 Purchase of treasury shares582(521.1)Issuance of stock under employee stock plans,net1,016 0.6(414.5)(37)11.5 Stock-based compensation503.7 Other(1.6)(7.9)Balance at September 30,2024950,215$593.9$7,339.6$13,627.2$(3,013.2)$(4,274.8)365$(32.7)$80.7 Balance at January 1,2025947,903$592.4$7,439.3$13,545.0$(3,013.2)$(4,321.9)365$(49.5)$79.5 Net income14,002.3 28.7 Other comprehensive income,net of tax1,115.6 Cash dividends declared per share:$3.00(2,692.2)Retirement of treasury shares(3,279)(2.0)(2,598.3)(3,279)2,600.3 Purchase of treasury shares3,279(2,600.3)Issuance of stock under employee stock plans,net1,582 1.0(697.3)Stock-based compensation489.9 Other(4.8)(13.0)(50.7)Balance at September 30,2025946,206$591.4$7,231.9$22,252.0$(3,013.2)$(3,206.3)365$(62.5)$57.5 As of September 30,2025,there was$12.40 billion remaining under our$15.00 billion share repurchase program authorized in December 2024.See notes to consolidated condensed financial statements.(1)(1)9Consolidated Condensed Statements of Cash Flows(Unaudited)ELI LILLY AND COMPANY(Dollars in millions)Nine Months Ended September 30,20252024Cash Flows from Operating ActivitiesNet income$14,002.3$6,180.2 Adjustments to Reconcile Net Income to Cash Flows from Operating Activities:Depreciation and amortization1,411.3 1,281.8 Change in deferred income taxes(958.9)(1,716.4)Stock-based compensation expense489.9 503.7 Acquired in-process research and development2,381.2 3,091.2 Other changes in operating assets and liabilities,net of acquisitions(4,418.9)(3,160.1)Other operating activities,net681.5 163.7 Net Cash Provided by Operating Activities13,588.4 6,344.1 Cash Flows from Investing ActivitiesPurchases of property and equipment(5,294.3)(3,561.8)Proceeds from sales of and distributions from noncurrent investments832.0 318.0 Purchases of noncurrent investments(518.0)(525.1)Cash paid for acquisitions,net of cash acquired(549.4)(947.7)Purchases of in-process research and development(2,584.3)(3,094.6)Other investing activities,net(55.8)430.2 Net Cash Used for Investing Activities(8,169.8)(7,381.0)Cash Flows from Financing ActivitiesDividends paid(4,038.5)(3,512.1)Net change in short-term borrowings(4,337.6)(4,894.1)Proceeds from issuance of long-term debt13,167.2 11,417.1 Repayments of long-term debt(778.1)(664.2)Purchases of common stock(2,600.3)(446.1)Other financing activities,net(746.9)(445.1)Net Cash Provided by Financing Activities665.8 1,455.5 Effect of exchange rate changes on cash and cash equivalents439.1 131.8 Net increase in cash and cash equivalents6,523.5 550.4 Cash and cash equivalents at January 13,268.4 2,818.6 Cash and Cash Equivalents at September 30$9,791.9$3,369.0 See notes to consolidated condensed financial statements.10Notes to Consolidated Condensed Financial Statements(Tables present dollars in millions,except per-share data,and numbers may not add due to rounding)Note 1:Basis of Presentation and Implementation of New Financial Accounting StandardsWe have prepared the accompanying unaudited consolidated condensed financial statements in accordance with the requirements of Form10-Q and,therefore,they do not include all information and footnotes necessary for a fair presentation of financial position,results ofoperations,and cash flows in conformity with accounting principles generally accepted in the United States(GAAP).In our opinion,theconsolidated condensed financial statements reflect all adjustments(including those that are normal and recurring)that are necessary for afair presentation of the results of operations for the periods shown.In preparing financial statements in conformity with GAAP,we must makeestimates and assumptions that affect the reported amounts of assets,liabilities,revenue,expenses,and related disclosures at the date ofthe financial statements and during the reporting period.Actual results could differ from those estimates.The information included in this Quarterly Report on Form 10-Q should be read in conjunction with our consolidated financial statements andaccompanying notes included in our Annual Report on Form 10-K for the year ended December 31,2024.We issued our financialstatements by filing them with the Securities and Exchange Commission and have evaluated subsequent events up to the time of the filing ofthis Quarterly Report on Form 10-Q.All per-share amounts,unless otherwise noted in the footnotes,are presented on a diluted basis;that is,based on the weighted-averagenumber of common shares outstanding plus the effect of incremental shares from our stock-based compensation programs,if dilutive.We operate as a single operating segment engaged in the discovery,development,manufacturing,marketing,and sales of pharmaceuticalproducts worldwide.A global research and development organization and a supply chain organization are responsible for the discovery,development,manufacturing,and supply of our products.Our commercial organizations market,distribute,and sell the products.Thebusiness is also supported by global corporate staff functions.See Note 13 for additional information.Implementation of New Financial Accounting StandardsAccounting Standards Update(ASU)2023-09,Income Taxes(Topic 740):Improvements to Income Tax Disclosures,establishes incrementaldisaggregation of income tax disclosures pertaining to the effective tax rate reconciliation and income taxes paid.This standard is effectivefor fiscal years beginning after December 15,2024,and requires prospective application with the option to apply it retrospectively.We intendto adopt this standard in our Annual Report on Form 10-K for the year ending December 31,2025.We are currently evaluating the potentialimpact of adopting this standard on our disclosures.ASU 2024-03,Income StatementReporting Comprehensive IncomeExpense Disaggregation Disclosures(Subtopic 220-40):Disaggregation of Income Statement Expenses,requires disaggregation of specific expense categories in the notes to the financialstatements and a qualitative description of the remaining expense amounts not separately disaggregated.This standard is effective forannual reporting periods beginning after December 15,2026,and requires prospective application with the option to apply it retrospectively.We intend to adopt this standard in our Annual Report on Form 10-K for the year ending December 31,2027.We are currently evaluating thepotential impact of adopting this standard on our disclosures.11Note 2:RevenueThe following table summarizes our revenue recognized in our consolidated condensed statements of operations:Three Months Ended September 30,Nine Months Ended September 30,2025202420252024Net product revenue$16,330.5$10,571.6$42,657.7$28,723.0 Collaboration and other revenue1,270.3 867.5 3,229.3 2,786.9 Revenue$17,600.8$11,439.1$45,887.0$31,509.9 We recognize revenue primarily from two different types of contracts,product sales to customers(net product revenue)and collaborationsand other arrangements.Revenue recognized from collaborations and other arrangements includes our share of profits from thecollaborations,as well as royalties,upfront,and milestone payments we receive under these types of contracts.See Note 4 for additionalinformation related to our collaborations and other arrangements.Collaboration and other revenue disclosed above includes the revenueresulting from our collaboration with Boehringer Ingelheim discussed in Note 4,as well as the sale of product rights.Substantially all of theremainder of collaboration and other revenue is related to contracts accounted for as contracts with customers.Adjustments to RevenueAdjustments to revenue recognized as a result of changes in estimates for our most significant United States(U.S.)sales returns,rebates,and discounts liability balances for products shipped in previous periods were less than 1 percent of U.S.revenue during the three and ninemonths ended September 30,2025,and 6 percent and 4 percent of U.S.revenue during the three and nine months ended September 30,2024,respectively.12Disaggregation of RevenueThe following table summarizes revenue,including net product revenue and collaboration and other revenue,by product for the three monthsended September 30,2025 and 2024:Three Months Ended September 30,20252024U.S.Outside U.S.TotalU.S.Outside U.S.TotalCardiometabolic Health:Mounjaro$3,550.1$2,965.0$6,515.1$2,384.7$728.0$3,112.7 Zepbound3,568.3 19.8 3,588.1 1,257.8 1,257.8 Trulicity706.9 345.0 1,051.8 935.3 366.0 1,301.4 Jardiance424.2 534.8 959.0 335.9 350.5 686.4 Other cardiometabolic health617.7 446.1 1,063.9 603.3 445.5 1,048.7 Total cardiometabolic health8,867.2 4,310.7 13,177.9 5,517.0 1,890.0 7,407.0 Oncology:Verzenio880.3 589.8 1,470.2 878.8 490.4 1,369.3 Other oncology494.7 442.8 937.4 415.5 447.1 862.5 Total oncology1,375.0 1,032.6 2,407.6 1,294.3 937.5 2,231.8 Immunology:Taltz583.4 318.1 901.5 600.3 279.3 879.6 Other immunology190.0 270.9 460.9 93.8 212.3 306.1 Total immunology773.4 589.0 1,362.4 694.1 491.6 1,185.7 Neuroscience239.6 76.1 315.7 201.3 150.5 351.8 Other44.8 292.4 337.2 107.0 155.8 262.8 Revenue$11,300.0$6,300.8$17,600.8$7,813.6$3,625.5$11,439.1 Jardiance revenue includes Glyxambi,Synjardy,and Trijardy XR.(1)(1)13The following table summarizes revenue,including net product revenue and collaboration and other revenue,by product for the nine monthsended September 30,2025 and 2024:Nine Months Ended September 30,20252024U.S.Outside U.S.TotalU.S.Outside U.S.TotalCardiometabolic Health:Mounjaro$9,507.8$6,048.0$15,555.8$6,318.7$1,691.3$8,010.0 Zepbound9,253.6 27.7 9,281.3 3,018.4 3,018.4 Trulicity2,221.2 1,018.0 3,239.2 2,894.0 1,109.3 4,003.3 Jardiance1,116.2 1,547.2 2,663.4 1,133.1 1,009.4 2,142.5 Other cardiometabolic health1,708.5 1,280.6 2,989.2 1,958.8 1,281.6 3,240.4 Total cardiometabolic health23,807.3 9,921.5 33,728.9 15,323.0 5,091.6 20,414.6 Oncology:Verzenio2,467.0 1,651.4 4,118.3 2,378.4 1,373.1 3,751.5 Other oncology1,373.1 1,277.2 2,650.4 1,189.5 1,259.5 2,449.0 Total oncology3,840.1 2,928.6 6,768.7 3,567.9 2,632.6 6,200.5 Immunology:Taltz1,608.7 902.2 2,511.0 1,486.7 821.7 2,308.4 Other immunology443.7 751.4 1,195.0 204.3 589.3 793.6 Total immunology2,052.4 1,653.6 3,706.0 1,691.0 1,411.0 3,102.0 Neuroscience676.8 255.0 931.8 556.4 524.0 1,080.4 Other227.0 524.6 751.6 205.0 507.4 712.4 Revenue$30,603.6$15,283.4$45,887.0$21,343.2$10,166.7$31,509.9 Jardiance revenue includes Glyxambi,Synjardy,and Trijardy XR.The following table summarizes revenue by geographical area:Three Months Ended September 30,Nine Months Ended September 30,2025202420252024Revenue:U.S.$11,300.0$7,813.6$30,603.6$21,343.2 Europe3,498.1 1,628.3 8,461.2 4,472.7 Japan554.7 429.1 1,477.8 1,255.7 China560.4 459.9 1,477.2 1,231.2 Rest of world1,687.7 1,108.2 3,867.2 3,207.1 Revenue$17,600.8$11,439.1$45,887.0$31,509.9 Revenue is attributed to the countries based on the location of the customer or other party.(1)(1)(1)(1)14Note 3:AcquisitionsWe engage in various forms of business development activities to enhance or refine our product pipeline,including acquisitions,collaborations,investments,and licensing arrangements.In connection with these arrangements,our partners may be entitled to futureroyalties and/or commercial milestones based on sales if the products are approved for commercialization and/or milestones based on thesuccessful progress of compounds through the development process.We account for each arrangement as either a business combination oran asset acquisition in accordance with GAAP.Business CombinationsWhen an acquisition met the definition of a business under GAAP,the assets acquired and liabilities assumed were recorded at theirrespective fair values as of the acquisition date in our consolidated condensed financial statements.The determination of estimated fair valuerequired management to make significant estimates and assumptions.The excess of the purchase price over the fair value of the acquirednet assets was recorded as goodwill.The results of operations of the acquisition are included in our consolidated condensed financialstatements from the date of acquisition.Verve AcquisitionOverview of TransactionIn July 2025,we acquired all shares of Verve Therapeutics,Inc.(Verve)for a purchase price of$10.50 per share in cash(or an aggregate ofapproximately$549.4 million,net of cash acquired),plus one non-tradeable contingent value right(CVR)per share that entitles the holder toreceive up to an additional$3.00 per share(or an aggregate of up to approximately$300 million)payable,subject to certain terms andconditions,upon the achievement of a certain specified milestone.Verve is developing genetic medicines for cardiovascular disease,including VERVE-102,a gene editing medicine targeting PCSK9,a gene linked to cholesterol levels and cardiovascular health.VERVE-102is being evaluated in a Phase 1b clinical trial study and has been granted Fast Track designation by the U.S.Food and Drug Administration.Assets Acquired and Liabilities AssumedOur access to information was limited prior to this acquisition.As a consequence,we are in the process of determining fair values and taxbases of the assets acquired and liabilities assumed,including the identification and valuation of intangible assets and tax exposures.Thefinal determination of these amounts will be completed as soon as possible but no later than one year from the acquisition date.The finaldetermination may result in asset and liability fair values and tax bases that differ from the preliminary estimates and require changes to thepreliminary amounts recognized.The following table summarizes the preliminary amounts recognized for assets acquired and liabilities assumed as of the acquisition date:Estimated Fair Value at July 25,2025Cash$388.7 Acquired in-process research and development(IPR&D)608.0Goodwill127.3Other assets and liabilities,net38.9 Acquisition date fair value of consideration transferred1,162.9 Less:Cash acquired(388.7)Fair value of CVR liability(177.0)Fair value of equity interest in Verve held before the business combination(47.8)Cash paid,net of cash acquired$549.4 Acquired IPR&D intangibles primarily relate to VERVE-102.The goodwill recognized from this acquisition is primarily attributable to future unidentified projects and products and the assembled workforce for Verve,which is notdeductible for tax purposes.See Note 7 for a discussion on the estimation of the CVR liability.(1)(2)(3)(1)(2)(3)15The results of operations attributable to this acquisition for the three and nine months ended September 30,2025 were not material.Pro forma information has not been included as this acquisition did not have a material impact on our consolidated condensed statements ofoperations for the three and nine months ended September 30,2025.Manufacturing Facility AcquisitionOverview of TransactionIn May 2024,we acquired NexPharm Parent HoldCo,LLC and Isopro Holdings,LLC,which together own the assets of a manufacturing sitein Wisconsin,for a purchase price of$924.7 million,net of cash acquired.The facility expands our global parenteral(injectable)productmanufacturing network.Assets Acquired and Liabilities AssumedThe following table summarizes the amounts recognized for assets acquired and liabilities assumed as of the acquisition date:Estimated Fair Value at May 23,2024Cash$2.3 Goodwill816.5Property and equipment108.5Other assets and liabilities,net(0.3)Acquisition date fair value of consideration transferred927.0 Less:Cash acquired(2.3)Cash paid,net of cash acquired$924.7 The goodwill recognized from this acquisition is primarily attributable to the synergies between the manufacturing capabilities of the site and our products as well as theassembled workforce of the site,which is deductible for tax purposes.We are unable to provide the results of operations for the three and nine months ended September 30,2025 attributable to this acquisition asthe operations were substantially integrated into our legacy business.Pro forma information has not been included as this acquisition did not have a material impact on our consolidated condensed statements ofoperations for the three and nine months ended September 30,2024.Asset AcquisitionsUpon each asset acquisition,the cost allocated to acquired IPR&D was immediately expensed as acquired IPR&D if the compound had noalternative future use.Milestone payment obligations incurred prior to regulatory approval of the compound were expensed as acquiredIPR&D when the event triggering an obligation to pay the milestone occurred.We recognized acquired IPR&D charges of$655.7 million and$2.38 billion for the three and nine months ended September 30,2025,respectively,and$2.83 billion and$3.09 billion for the three and ninemonths ended September 30,2024,respectively.The following table summarizes our significant acquired IPR&D charges during the threeand nine months ended September 30,2025 and 2024:CounterpartyCompound(s),Therapy or AssetAcquisition MonthPhase ofDevelopmentAcquired IPR&DChargeSiteOne Therapeutics,Inc.(SiteOne)STC-004,Nav1.8 inhibitor for thetreatment of painJuly 2025Phase 1$494.2 Scorpion Therapeutics,Inc.(Scorpion)STX-478,PI3K inhibitor for thetreatment of breast cancer and otheradvanced solid tumorsMarch 2025Phase 11,412.0 Morphic Holding,Inc.(Morphic)MORF-057,inhibitor of 47 integrinfor the treatment of inflammatory boweldiseaseAugust 2024Phase 22,548.5 The phase of development presented is as of the date of the arrangement and represents the phase of development of the most advanced asset acquired,where applicable.(1)(1)(1)(1)16Note 4:Collaborations and Other ArrangementsWe often enter into collaborative and other arrangements to develop and commercialize drug candidates or to sell the rights of a product.See Note 2 for a discussion of our recognition of revenue from our collaborations and other arrangements.Collaborative activities may include research and development,marketing and selling,manufacturing,and distribution for which we mayreceive from or pay to the collaboration partner expense reimbursements.Operating expenses for costs incurred pursuant to thesearrangements are reported in their respective expense line item,net of any payments due to or reimbursements due from our collaborationpartners,with such reimbursements being recognized at the time the party becomes obligated to pay.Each arrangement is unique in nature,and our more significant arrangements are discussed below.Boehringer Ingelheim CollaborationWe and Boehringer Ingelheim have a global agreement to jointly develop and commercialize a portfolio of compounds.BoehringerIngelheims Jardiance product family,that includes Glyxambi,Synjardy,and Trijardy XR,is the significant product family included in thecollaboration.For the Jardiance product family,we and Boehringer Ingelheim generally share equally in certain significant ongoing development andcommercialization costs,and we record our portion of the development and commercialization costs as research and development expenseand marketing,selling,and administrative expense,respectively.We receive a royalty on net sales of the Jardiance product family in themost significant markets and recognize the royalty as collaboration and other revenue.Boehringer Ingelheim is entitled to potentialperformance payments depending on the net sales of the Jardiance product family;therefore,our reported revenue for Jardiance may bereduced by any potential performance payments we make related to this product family.The royalty received by us related to the Jardianceproduct family may also be increased or decreased depending on whether net sales for this product family exceed or fall below certainthresholds.The following table summarizes our revenue recognized:Three Months Ended September 30,Nine Months Ended September 30,2025202420252024Jardiance$959.0$686.4$2,663.4$2,142.5 In the first quarter of 2025,we and Boehringer Ingelheim amended our collaboration to adjust commercialization responsibilities for theJardiance product family in certain markets,resulting in our recognition of a one-time benefit of$370.0 million as Jardiance revenue duringthe nine months ended September 30,2025.During the three and nine months ended September 30,2025,we recognized a$200.0 million sales-based milestone for Jardiance.As ofSeptember 30,2025,we have the right to receive up to$410.0 million in potential sales-based milestones related to the Jardiance productfamily in certain markets in 2026.EbglyssWe have a license agreement with F.Hoffmann-La Roche Ltd and Genentech,Inc.(collectively,Roche),which provides us the worldwidedevelopment and commercialization rights to lebrikizumab,which is branded and trademarked as Ebglyss.Roche receives tiered royaltypayments on worldwide net sales ranging in percentages from high single digits to high teens,which we recognize as cost of sales.As ofSeptember 30,2025,Roche is eligible to receive additional payments from us,including up to$975.0 million in potential sales-basedmilestones.During the three and nine months ended September 30,2025 and 2024,milestone payments to Roche were not material.We have a license agreement with Almirall,S.A.(Almirall),under which Almirall licensed the rights to develop and commercialize Ebglyss,forthe treatment or prevention of dermatology indications,including,but not limited to,atopic dermatitis in Europe.We receive tiered royaltypayments on net sales in Europe ranging in percentages from low double digits to low twenties,which we recognize as collaboration andother revenue.During the three and nine months ended September 30,2025 and 2024,collaboration and other revenue recognized underthis license agreement was not material.As of September 30,2025,we are eligible to receive additional payments up to$1.25 billion in aseries of sales-based milestones.17OrforglipronWe have a license agreement with Chugai Pharmaceutical Co.,Ltd(Chugai),which provides us with the worldwide development andcommercialization rights to orforglipron.Chugai has the right to receive tiered royalty payments on future worldwide net sales from mid-singledigits to low teens if the product is successfully commercialized.As of September 30,2025,Chugai is eligible to receive up to$140.0 millioncontingent upon the achievement of success-based regulatory milestones and up to$250.0 million in a series of sales-based milestones,contingent upon the commercial success of orforglipron.During the three and nine months ended September 30,2025 and 2024,milestonepayments to Chugai were not material.Note 5:Asset Impairment,Restructuring,and Other Special ChargesAsset impairment,restructuring,and other special charges recognized during the three and nine months ended September 30,2025 were$364.9 million and$399.9 million,respectively,which primarily related to a litigation charge,as well as acquisition and integration costsassociated with the closing of our acquisition of Verve.Asset impairment,restructuring,and other special charges recognized during the three months ended September 30,2024 were$81.6million,which primarily related to impairment of an intangible asset in development driven by expected commercial projections.Assetimpairment,restructuring,and other special charges recognized during the nine months ended September 30,2024 were$516.6 million,which primarily related to a litigation charge and the previously mentioned impairment.See Note 10 for additional information related to litigation charges.Note 6:InventoriesThe following table summarizes components of inventories:September 30,2025December 31,2024Finished products$1,547.2$1,220.8 Work in process7,274.5 3,979.5 Raw materials and supplies3,397.1 2,326.0 Total(approximates replacement cost)12,218.8 7,526.3(Decrease)increase to last-in,first-out(LIFO)cost(38.4)62.9 Inventories$12,180.4$7,589.2 When we believe that future commercialization is probable and the future economic benefit is expected to be realized,we capitalize pre-launch inventory prior to regulatory approval.A number of factors are considered,including the current status in the regulatory approvalprocess,potential impediments to the approval process such as safety or efficacy,viability of commercialization,and marketplace trends.Pre-launch inventories capitalized as of September 30,2025 were$952.3 million,primarily related to orforglipron.Note 7:Financial InstrumentsInvestments in Equity and Debt SecuritiesOur equity investments are accounted for using three different methods depending on the type of equity investment:Investments in companies over which we have significant influence but not a controlling interest are accounted for using the equitymethod,with our share of earnings or losses reported in other-net,(income)expense.For equity investments that do not have readily determinable fair values,we measure these investments at cost,less anyimpairment,plus or minus changes resulting from observable price changes in orderly transactions for the identical or similarinvestment of the same issuer.Any change in recorded value is recorded in other-net,(income)expense.Our public equity investments are measured and carried at fair value.Any change in fair value is recognized in other-net,(income)expense.18We adjust our equity investments without readily determinable fair values based upon changes in the equity instruments values resultingfrom observable price changes in orderly transactions for an identical or similar investment of the same issuer.Downward adjustmentsresulting from an impairment are recorded based upon impairment considerations,including the financial condition and near-term prospectsof the issuer,general market conditions,and industry specific factors.Adjustments recorded for the three and nine months endedSeptember 30,2025 and 2024 were not material.The net gains(losses)recognized in our consolidated condensed statements of operations for equity securities were$46.9 million and$14.1million for the three and nine months ended September 30,2025,respectively,and$112.4 million and$(29.5)million for the three and ninemonths ended September 30,2024,respectively.The net gains(losses)recognized for the three and nine months ended September 30,2025 and 2024 on equity securities sold during the respective periods were not material.As of September 30,2025,we had approximately$878 million of unfunded commitments to invest in venture capital funds,which weanticipate will be paid over a period of up to 10 years.We record our available-for-sale debt securities at fair value,with changes in fair value reported as a component of accumulated othercomprehensive income(loss).We periodically assess our investment in available-for-sale securities for impairment losses and credit losses.The amount of credit losses is determined by comparing the difference between the present value of future cash flows expected to becollected on these securities and the amortized cost.Factors considered in assessing credit losses include the position in the capitalstructure,vintage and amount of collateral,delinquency rates,current credit support,and geographic concentration.Impairment and creditlosses related to available-for-sale securities were not material for the three and nine months ended September 30,2025 and 2024.The table below summarizes the contractual maturities of our investments in debt securities measured at fair value as of September 30,2025:Maturities by PeriodTotalLess Than1 Year1-5Years6-10YearsMore Than10 YearsFair value of debt securities$356.0$12.7$119.4$63.8$160.1 A summary of the amount of unrealized gains and losses in accumulated other comprehensive loss and the fair value of available-for-salesecurities in an unrealized gain or loss position is as follows:September 30,2025December 31,2024Unrealized gross gains$3.3$1.6 Unrealized gross losses11.1 43.2 Fair value of securities in an unrealized gain position177.6 142.6 Fair value of securities in an unrealized loss position177.2 491.2 As of September 30,2025,the available-for-sale securities in an unrealized loss position include primarily fixed-rate debt securities of varyingmaturities,which are sensitive to changes in the yield curve and other market conditions.Substantially all of the fixed-rate debt securities in aloss position are investment-grade debt securities.As of September 30,2025,we do not intend to sell,and it is not more likely than not thatwe will be required to sell,the securities in a loss position before the market values recover or the underlying cash flows have been received,and there is no indication of a material default on interest or principal payments for our debt securities.Realized gains and losses on sales of available-for-sale investments are computed based upon specific identification of the initial costadjusted for any other-than-temporary declines in fair value that were recorded in earnings and were not material for the three and ninemonths ended September 30,2025 and 2024.Proceeds from sales of available-for-sale investments were$381.5 million and$470.3 millionfor the three and nine months ended September 30,2025,respectively,and$23.2 million and$68.6 million for the three and nine monthsended September 30,2024,respectively.19Fair Value of InvestmentsThe following table summarizes certain fair value information at September 30,2025 and December 31,2024 for investment assetsmeasured at fair value on a recurring basis,as well as the carrying amount and amortized cost of certain other investments:Fair Value Measurements Using CarryingAmountCostQuoted Pricesin ActiveMarkets forIdenticalAssets(Level 1)SignificantOther ObservableInputs(Level 2)SignificantUnobservable Inputs(Level 3)FairValueSeptember 30,2025Cash equivalents$7,400.1$7,400.1$7,400.1$7,400.1 Short-term investments:U.S.government and agency securities$7.8$7.9$7.8$7.8 Corporate debt securities4.9 4.9 4.9 4.9 Other securities108.9 108.9 11.4 97.5 108.9 Short-term investments$121.6 Noncurrent investments:U.S.government and agency securities$70.1$73.9$70.1$70.1 Corporate debt securities119.3 120.3 119.3 119.3 Mortgage-backed securities127.2 130.8 127.2 127.2 Asset-backed securities26.7 26.6 26.7 26.7 Other securities101.2 57.1 6.4 94.8 101.2 Marketable equity securities319.7 324.9 319.7 319.7 Equity investments without readily determinablefair values821.9 Equity method investments1,222.2 Noncurrent investments$2,808.3 December 31,2024Cash equivalents$1,506.9$1,506.9$1,494.1$12.8$1,506.9 Short-term investments:U.S.government and agency securities$29.2$29.3$29.2$29.2 Corporate debt securities65.3 65.4 65.3 65.3 Asset-backed securities0.6 0.7 0.6 0.6 Other securities59.7 59.7 16.7 43.0 59.7 Short-term investments$154.8 Noncurrent investments:U.S.government and agency securities$140.2$156.4$140.2$140.2 Corporate debt securities211.4 225.0 211.4 211.4 Mortgage-backed securities165.3 177.2 165.3 165.3 Asset-backed securities56.7 57.5 56.7 56.7 Other securities150.3 102.6 6.3 144.0 150.3 Marketable equity securities485.5 494.6 485.5 485.5 Equity investments without readily determinablefair values863.8 Equity method investments1,142.7 Noncurrent investments$3,215.9 For available-for-sale debt securities,amounts disclosed represent the securities amortized cost.We consider all highly liquid investments with a maturity of three months or less from the date of purchase to be cash equivalents.The cost of these investmentsapproximates fair value.Fair value disclosures are not applicable for equity method investments and investments accounted for under the measurement alternative for equity investments.(1)(2)(3)(3)(2)(3)(3)(1)(2)(3)20We determine our Level 1 and Level 2 fair value measurements based on a market approach using quoted market values,significant otherobservable inputs for identical or comparable assets or liabilities,or discounted cash flow analyses.Level 3 fair value measurements forother investment securities are determined using unobservable inputs,including the investments cost adjusted for impairments and pricechanges from orderly transactions.Fair values are not readily available for certain equity investments measured under the measurementalternative.DebtIn August 2025,we issued$750.0 million of floating-rate notes due in 2028,$1.00 billion of 4.000 percent fixed-rate notes due in 2028,$750.0 million of 4.250 percent fixed-rate notes due in 2031,$1.00 billion of 4.550 percent fixed-rate notes due in 2032,$1.25 billion of 4.900percent fixed-rate notes due in 2035,$1.00 billion of 5.550 percent fixed-rate notes due in 2055,and$1.00 billion of 5.650 percent fixed-ratenotes due in 2065.Interest on the fixed-rate notes is to be paid semi-annually.Interest on the floating-rate notes is calculated using theSecured Overnight Financing Rate(SOFR)plus a.530 percent spread,reset quarterly,and is to be paid quarterly.We have used,or expectto use,the net cash proceeds from this offering for general business purposes,including the repayment of commercial paper.In February 2025,we issued$1.00 billion of 4.550 percent fixed-rate notes due in 2028,$1.25 billion of 4.750 percent fixed-rate notes due in2030,$1.00 billion of 4.900 percent fixed-rate notes due in 2032,$1.25 billion of 5.100 percent fixed-rate notes due in 2035,$1.25 billion of5.500 percent fixed-rate notes due in 2055,and$750.0 million of 5.600 percent fixed-rate notes due in 2065,all with interest to be paid semi-annually.We used the net cash proceeds from this offering to fund the acquisition of Scorpions PI3K inhibitor program STX-478 and relatedfees and expenses and for general business purposes,including the repayment of commercial paper.In August 2024,we issued$5.00 billion aggregate principal amount of notes.We used a portion of the net cash proceeds to fund theacquisition of Morphic and related fees and expenses,with remaining funds used for general business purposes,including the repayment ofoutstanding commercial paper.In February 2024,we issued$6.50 billion aggregate principal amount of notes.We used the net cash proceeds from this offering for generalbusiness purposes,including the repayment of commercial paper,and the repayment of then-current maturities of long-term debt.In August 2025,we renewed our 364-day credit facility and increased capacity to$6.00 billion,which is available to support our commercialpaper program.We have not drawn against the 364-day facility as of September 30,2025.In August 2025,we extended our multi-year credit facility and increased capacity to$4.00 billion,which will now expire in December 2029and is available to support our commercial paper program.We have not drawn against the multi-year facility as of September 30,2025.Fair Value of DebtThe following table summarizes certain fair value information for our short-term and long-term debt:Fair Value Measurements Using CarryingAmountQuoted Prices inActive Marketsfor IdenticalAssets(Level 1)SignificantOther ObservableInputs(Level 2)SignificantUnobservable Inputs(Level 3)FairValueShort-term commercial paper borrowingsSeptember 30,2025$December 31,20244,337.6 4,319.4 4,319.4 Long-term debt,including current portionSeptember 30,202542,506.6 39,991.3 39,991.3 December 31,202429,306.7 26,249.0 26,249.0 21Risk Management and Related Financial InstrumentsFinancial instruments that potentially subject us to credit risk consist principally of trade receivables and interest-bearing investments.Wholesale distributors of our products account for a substantial portion of our trade receivables;collateral is generally not required.We seekto mitigate the risk associated with this concentration through our ongoing credit-review procedures and insurance.The majority of our cashis held by a few major financial institutions that have been identified as Global Systemically Important Banks(G-SIBs)by the FinancialStability Board.G-SIBs are subject to rigorous regulatory testing and oversight and must meet certain capital requirements.We monitor ourexposures with these institutions and do not expect any of these institutions to fail to meet their obligations.In accordance with documentedcorporate risk-management policies,we monitor the amount of credit exposure to any one financial institution or corporate issuer based onthe credit rating of our counterparty.We are exposed to credit-related losses in the event of nonperformance by counterparties to risk-management instruments but do not expect significant counterparties to fail to meet their obligations given their investment grade creditratings.We have entered into accounts receivable factoring agreements with financial institutions to sell certain of our non-U.S.accounts receivable.These transactions are accounted for as sales and result in a reduction in accounts receivable because the agreements transfer effectivecontrol over,and risk related to,the receivables to the buyers.We derecognized$440.4 million and$421.6 million of accounts receivable asof September 30,2025 and December 31,2024,respectively,under these factoring arrangements.The costs of factoring such accountsreceivable as well as estimated credit losses were not material for the three and nine months ended September 30,2025 and 2024.Our derivative activities are initiated within the guidelines of documented corporate risk-management policies and are intended to offsetlosses and gains on the assets,liabilities,and transactions being hedged.Management reviews the correlation and effectiveness of ourderivatives on a quarterly basis.For derivative instruments that are designated and qualify as fair value hedges,the derivative instrument is marked to market,with gains andlosses recognized currently in income to offset the respective losses and gains recognized on the underlying exposure.For derivativeinstruments that are designated and qualify as cash flow hedges,gains and losses are reported as a component of accumulated othercomprehensive income(loss)(see Note 11)and reclassified into earnings in the same period the hedged transaction affects earnings.Forderivative and non-derivative instruments that are designated and qualify as net investment hedges,the foreign currency translation gains orlosses due to spot rate fluctuations are reported as a component of accumulated other comprehensive income(loss)(see Note 11).Derivative contracts that are not designated as hedging instruments are recorded at fair value with the gain or loss recognized in earningsduring the period of change.We manage foreign currency exchange risk through the use of foreign currency debt,cross-currency interest rate swaps,and foreigncurrency forward contracts.Our foreign currency-denominated notes had carrying amounts of$6.79 billion and$6.03 billion as ofSeptember 30,2025 and December 31,2024,respectively,of which$6.02 billion and$5.34 billion have been designated as,and areeffective as,hedges of net investments in certain of our foreign operations as of September 30,2025 and December 31,2024,respectively.At September 30,2025,we had outstanding cross-currency interest rate swaps with notional amounts of 402.0 million Swiss francs swappingSwiss francs to U.S.dollars,with settlement dates ranging through 2028.Our cross-currency interest rate swaps have been designated as,and are effective as,cash flow hedges.At September 30,2025,we had outstanding foreign currency forward contracts to sell 34.98 billioneuro and to sell 4.95 billion Chinese yuan with settlement dates ranging through 2026,which have been designated as,and are effective as,hedges of net investments.22We may also enter into foreign currency forward or option contracts as economic hedges to manage exposures arising from subsidiary tradeand loan payables and receivables denominated in foreign currencies(primarily the euro,Japanese yen,Chinese yuan,and British poundsterling).Foreign currency derivatives used for hedging are put in place using the same or like currencies and duration as the underlyingexposures.These contracts are recorded at fair value with the gain or loss recognized in othernet,(income)expense.Forward contractsgenerally have maturities not exceeding 12 months.At September 30,2025,our significant outstanding foreign currency forwardcommitments were as follows,all of which have settlement dates within 180 days:September 30,2025PurchaseSellCurrencyAmount(in millions)CurrencyAmount(in millions)Euro40,432.1U.S.dollars47,801.5U.S.dollars3,275.1Euro2,776.8U.S.dollars1,434.5Chinese yuan10,167.2In the normal course of business,our operations are exposed to fluctuations in interest rates which can vary the costs of financing,investing,and operating.We seek to address a portion of these risks through a controlled program of risk management that includes the use ofderivative financial instruments.The objective of controlling these risks is to limit the impact of fluctuations in interest rates on earnings.Ourprimary interest rate risk exposure results from changes in short-term U.S.dollar interest rates.In an effort to manage interest rateexposures,we strive to achieve an acceptable balance between fixed-and floating-rate debt and investment positions and may enter intointerest rate swaps or collars to help maintain that balance.Interest rate swaps or collars that convert our fixed-rate debt to a floating rate are designated as fair value hedges of the underlyinginstruments.Interest rate swaps or collars that convert floating-rate debt to a fixed rate are designated as cash flow hedges.Interest expenseon the debt is adjusted to include the payments made or received under the swap agreements.Cash proceeds from or payments tocounterparties resulting from the termination of interest rate swaps are classified as operating activities in our consolidated condensedstatements of cash flows.At September 30,2025,substantially all of our total long-term debt is at a fixed rate.We have convertedapproximately 4 percent of our long-term fixed-rate notes to floating rates through the use of interest rate swaps.We also may enter into forward-starting interest rate swaps and treasury locks,which we designate as cash flow hedges,as part of anyanticipated future debt issuances in order to reduce the risk of cash flow volatility from future changes in interest rates.The change in fairvalue of these instruments is recorded as part of other comprehensive income(loss)(see Note 11)and,upon completion of a debt issuanceand termination of the instrument,is amortized to interest expense over the life of the underlying debt.Cash proceeds or payments from thetermination of these instruments are classified as operating activities in our consolidated condensed statements of cash flows.23The Effect of Risk-Management Instruments on the Consolidated Condensed Statements of OperationsThe following effects of risk-management instruments were recognized in othernet,(income)expense:Three Months Ended September 30,Nine Months Ended September 30,2025202420252024Fair value hedges:Effect from hedged fixed-rate debt$8.7$48.0$64.1$29.0 Effect from interest rate contracts(8.7)(48.0)(64.1)(29.0)Cash flow hedges:Effective portion of losses on interest rate contractsreclassified from accumulated other comprehensive loss0.2 1.4 3.0 5.8 Cross-currency interest rate swaps(0.2)(28.8)(60.8)58.5 Net(gains)losses on foreign currency exchange contractsnot designated as hedging instruments170.3(0.2)(468.4)33.8 Total$170.3$(27.6)$(526.2)$98.1 During the three and nine months ended September 30,2025 and 2024,the amortization of losses related to the portion of our riskmanagement hedging instruments,fair value hedges,and cash flow hedges that was excluded from the assessment of effectiveness was notmaterial.The Effect of Risk-Management Instruments on Other Comprehensive Income(Loss)The effective portion of risk-management instruments that was recognized in other comprehensive income(loss)is as follows:Three Months Ended September 30,Nine Months Ended September 30,2025202420252024Net investment hedges:Foreign currency-denominated notes$5.5$(250.2)$(682.7)$(76.3)Cross-currency interest rate swaps(26.0)(10.5)(6.8)Foreign currency forward contracts0.6(304.1)(1,292.1)(172.3)Cash flow hedges:Forward-starting interest rate swaps14.3(23.6)(10.4)53.8 Cross-currency interest rate swaps(2.8)(7.9)(6.9)7.7 During the three and nine months ended September 30,2025 and 2024,the amounts excluded from the assessment of hedge effectivenessrecognized in other comprehensive income(loss)were not material.As of September 30,2025,the amount of pre-tax gains or losses oncash flow hedges expected to be reclassified from accumulated other comprehensive income(loss)to othernet,(income)expense duringthe next 12 months is not material.24Fair Value of Risk-Management InstrumentsThe following table summarizes certain fair value information at September 30,2025 and December 31,2024 for risk management assetsand liabilities measured at fair value on a recurring basis:Fair Value Measurements Using CarryingAmountQuoted Prices inActive Markets forIdentical Assets(Level 1)SignificantOther ObservableInputs(Level 2)SignificantUnobservable Inputs(Level 3)FairValueSeptember 30,2025Risk-management instruments:Interest rate contracts designated as fair value hedges:Other noncurrent assets$15.9$15.9$15.9 Other current liabilities(1.3)(1.3)(1.3)Other noncurrent liabilities(69.7)(69.7)(69.7)Cross-currency interest rate contracts designated ascash flow hedges:Other noncurrent assets103.9 103.9 103.9 Foreign exchange contracts designated as netinvestment hedges:Other receivables306.0 306.0 306.0 Other current liabilities(702.2)(702.2)(702.2)Foreign exchange contracts not designated as hedginginstruments:Other receivables19.9 19.9 19.9 Other current liabilities(238.0)(238.0)(238.0)Contingent consideration liabilities:Other noncurrent liabilities(226.9)(226.9)(226.9)December 31,2024Risk-management instruments:Interest rate contracts designated as fair value hedges:Other current liabilities$(2.0)$(2.0)$(2.0)Other noncurrent liabilities(117.8)(117.8)(117.8)Cross-currency interest rate contracts designated asnet investment hedges:Other receivables10.3 10.3 10.3 Cross-currency interest rate contracts designated ascash flow hedges:Other noncurrent assets50.7 50.7 50.7 Foreign exchange contracts designated as hedginginstruments:Other receivables297.0 297.0 297.0 Foreign exchange contracts not designated as hedginginstruments:Other receivables39.5 39.5 39.5 Other current liabilities(93.4)(93.4)(93.4)Contingent consideration liabilities:Other noncurrent liabilities(32.3)(32.3)(32.3)25Risk-management instruments above are disclosed on a gross basis.There are various rights of setoff associated with certain of the risk-management instruments above that are subject to enforceable master netting arrangements or similar agreements.Although various rightsof setoff and master netting arrangements or similar agreements may exist with the individual counterparties to the risk-managementinstruments above,individually,these financial rights are not material.Contingent consideration liabilities relate to our liabilities arising in connection with the CVRs issued as a result of acquisitions of businesses.The fair values of the CVR liabilities were estimated using a discounted cash flow analysis and Level 3 inputs,including projectionsrepresentative of a market participants view of the expected cash payments associated with the agreed upon regulatory milestones basedon probabilities of technical success,timing of the potential milestone events for the compounds,and estimated discount rates.Note 8:Income TaxesIn July 2025,the One Big Beautiful Bill Act(OBBBA),which implemented certain U.S.tax law changes,was enacted into law.The OBBBAmodified and made permanent several provisions of the Tax Cuts and Jobs Act,including reductions in scheduled increases for the rate oftaxation of foreign income,immediate deductibility of U.S.research and development expenses,and reinstatement of 100%bonusdepreciation for capital assets.For the three months ended September 30,2025,we recorded income tax expense of$350.3 million relatedto adjusting our income tax provision for prior periods of 2025 and remeasuring our deferred tax assets and liabilities in connection with theenactment of OBBBA.The effective tax rates were 22.8 percent and 19.8 percent for the three and nine months ended September 30,2025,respectively,comparedto 38.9 percent and 19.1 percent for the three and nine months ended September 30,2024,respectively,primarily driven by unfavorable taximpacts of non-deductible acquired IPR&D charges,with a larger impact occurring in 2024.As a result of the OBBBA,the effective tax ratesfor the three and nine months ended September 30,2025 were unfavorably impacted by incremental tax expense recognized in theseperiods.At September 30,2025 and December 31,2024,prepaid expenses included prepaid taxes of$18.69 billion and$7.13 billion,respectively.The U.S.examination of tax years 2019-2021 remains ongoing.For tax years 2016-2018,we are pursuing competent authority assistancethrough the Mutual Agreement Procedure process for the pricing of certain intercompany transactions.The resolution of both audit periodswill likely extend beyond the next 12 months.26Note 9:Retirement BenefitsNet pension and retiree health(benefit)cost included the following components:Defined Benefit Pension PlansThree Months Ended September 30,Nine Months Ended September 30,2025202420252024Components of net periodic(benefit)cost:Service cost$76.7$84.9$242.9$254.3 Interest cost175.3 165.9 523.1 496.6 Expected return on plan assets(272.7)(278.8)(813.9)(834.3)Amortization of prior service cost0.6 0.6 1.6 1.6 Recognized actuarial loss14.1 31.4 56.9 93.8 Net periodic(benefit)cost$(6.0)$4.0$10.6$12.0 Retiree Health Benefit PlansThree Months Ended September 30,Nine Months Ended September 30,2025202420252024Components of net periodic benefit:Service cost$8.3$8.9$24.7$26.6 Interest cost16.0 15.5 48.0 46.6 Expected return on plan assets(46.3)(48.0)(138.7)(144.1)Amortization of prior service benefit(0.1)(1.4)(0.3)(4.2)Recognized actuarial gain(0.9)(0.6)(2.8)(1.9)Net periodic benefit$(23.0)$(25.6)$(69.1)$(77.0)Note 10:ContingenciesWe are and may become involved in various lawsuits,claims,government investigations and other legal proceedings that arise from time totime in the course of our business,including patent,environmental,commercial,contractual,licensing,employment,health and safety,consumer fraud,pricing,access,consumer,sales and marketing,product liability,insurance,antitrust,securities,and regulatory compliancematters,among others.Such matters may involve inquiries from or disputes with various types of parties,including governments,regulatoryagencies,competitors,customers,suppliers,service providers,licensees,employees,or shareholders,among others.We cannot predict thefinal outcome of these proceedings,and while we intend to vigorously prosecute or defend our position as appropriate,there can be noassurance that we will be successful or obtain any requested relief.Matters often develop over a long period of time and expectations canchange as a result of new findings,rulings,appeals,settlements,legal or regulatory changes,or other factors.From time to time we maydiscontinue or settle and compromise matters as appropriate in our best interest.Legal proceedings that we believe are significant or could become significant or material are described below.For proceedings in which weare named as defendants,unless otherwise noted,we cannot reasonably estimate the maximum potential exposure or the range of possibleloss in excess of amounts accrued;however,we believe that the resolution of all such matters will not have a material adverse effect on ourconsolidated financial position or liquidity,but could possibly be material to our consolidated results of operations in any one accountingperiod.Litigation accruals and environmental liabilities and any related estimated insurance recoverables are reflected on a gross basis as liabilitiesand assets,respectively,on our consolidated balance sheets.We accrue for estimated exposures to the extent they are both probable andreasonably estimable based on the then available information.We accrue for certain unfiled product liability claims to the extent we canformulate a reasonable estimate of their exposure.We estimate these exposures based primarily on historical claims experience and dataregarding product usage.Legal defense costs expected to be incurred in connection with significant liability loss contingencies are accruedwhen both probable and reasonably estimable.Because of the nature of pharmaceutical products,it is possible that we could become subject to large numbers of additional product liabilityand related claims in the future.Due to a very restrictive market for litigation liability insurance,we are self-insured for litigation liability lossesfor all our currently and previously marketed products.27Patent MattersIn the course of our business,we are subject to actions and proceedings by third parties that seek to challenge,invalidate,or circumvent ourpatents and patent applications relating to our products,product candidates,and technologies,including the matter described below.Emgality Patent LitigationIn September 2018,Teva Pharmaceuticals International GmbH and Teva Pharmaceuticals USA,Inc.(collectively,Teva)filed a complaint inthe U.S.District Court for the District of Massachusetts alleging that Lillys launch and continued sales of Emgality infringed various claims inthree Teva patents.In November 2022,following a trial,a jury returned a verdict in favor of Teva.In September 2023,the trial court overruledthe jury verdict,found all asserted claims invalid,and entered judgment in Lillys favor.In October 2023,Teva appealed to the U.S.Court ofAppeals for the Federal Circuit.The appeal is pending.Environmental MattersSuperfund MattersUnder the Comprehensive Environmental Response,Compensation,and Liability Act,commonly known as Superfund,we have beendesignated as one of several potentially responsible parties with respect to the cleanup of fewer than 10 sites.Under Superfund,eachresponsible party may be jointly and severally liable for the entire amount of the cleanup.Brazil Litigation Cosmopolis FacilityLabor Attorney LitigationIn March 2008,the state Labor Public Attorney(LPA)filed a public civil action against Eli Lilly do Brasil Limitada(Lilly Brasil)in the LaborCourt of Paulinia,State of Sao Paulo,alleging harm to employees and former employees from alleged exposure to soil and groundwatercontaminants at a former manufacturing facility in Cosmopolis,operated by the company between 1977 and 2003.In May 2014,the trialcourt ruled against Lilly Brasil,ordering it to undertake several remedial and compensatory actions,including health coverage for a class ofindividuals and certain of their children.The trial courts ruling included a liquidated award of 300 million Brazilian reais,which,when adjustedfor inflation,is approximately 1.54 billion Brazilian reais(approximately$290 million as of September 30,2025).In July 2018,the appealscourt generally affirmed the trial courts ruling.Lilly Brasil has appealed to the superior labor court(TST)and the TST heard oral argument onthe appeal in October 2025.In July 2019,at the LPAs request,the trial court ordered a freeze of Lilly Brasils immovable property in the amount of 500 million Brazilianreais,which was reduced on Lillys appeal and,when adjusted for inflation,is approximately 160.2 million Brazilian reais(approximately$30 million as of September 30,2025).Both parties have appealed this order to the TST.The trial court is currently assessing the status of Lilly Brasils compliance with the obligations as to the land,and an inspection in theindustrial plant occurred in October 2023.Former Employee LitigationVarious former employees have filed related claims against Lilly Brasil in the trial court.These lawsuits are at various stages in the litigationprocess.Pricing Matters340B Litigation and InvestigationsIn January 2021,we filed a lawsuit in the U.S.District Court for the Southern District of Indiana against the U.S.Department of Health andHuman Services(HHS),the Secretary of HHS,the Health Resources and Services Administration(HRSA),and the Administrator of HRSA.The lawsuit challenges HHSs December 2020 advisory opinion that the 340B program requires drug manufacturers to deliver discounts to allcontract pharmacies,as well as HHSs December 2020 administrative dispute resolution(ADR)regulations.It seeks a declaratory judgmentthat the defendants violated the Administrative Procedure Act(APA)and the U.S.Constitution,a preliminary injunction enjoiningimplementation of the ADR process and application of the advisory opinion,and other related relief.In March 2021,the court preliminarilyenjoined the governments use of the ADR process as to us.In May 2021,we amended the complaint to add claims related to a May 2021letter from HRSA asserting that Lillys contract pharmacy policy violated the 340B statute.In October 2021,the court granted in part anddenied in part the parties cross-motions for summary judgment.Both parties appealed to the U.S.Court of Appeals for the Seventh Circuit.The appeal remains pending.28We received a civil investigative subpoena in February 2021 from the Office of the Attorney General for the State of Vermont relating to thesale of pharmaceutical products to Vermont covered entities under the 340B program.We are cooperating with the subpoena.We have been named in various ADR petitions,filed in 2021,2023,and 2024,seeking declaratory,injunctive,and/or monetary relief relatedto the 340B program.In light of the preliminary injunction order described above,these petitions are being held in abeyance as to us.In July 2021,Mosaic Health,Inc.filed a putative class action lawsuit in the U.S.District Court for the Western District of New York against us,Sanofi-Aventis U.S.,LLC(Sanofi),Novo Nordisk Inc.(Novo Nordisk),and AstraZeneca Pharmaceuticals LP(AstraZeneca),alleging antitrustand unjust enrichment claims related to the defendants 340B programs.In October 2021,an amended complaint added Central VirginiaHealth Services,Inc.as a plaintiff.In September 2022,the court dismissed the amended complaint for failure to state a claim but allowed theplaintiffs to move for leave to file a second amended complaint.In January 2024,the court denied the plaintiffs motion for leave to amendand dismissed the case.In August 2025,the U.S.Court of Appeals for the Second Circuit reversed the district courts decision and remandedthe case for further proceedings.In September 2025,we filed a petition for panel rehearing and rehearing en banc.In October 2025,theSecond Circuit denied our petition for panel rehearing and issued an amended opinion reaching the same result.Our petition for rehearingen banc remains pending.We have multiple other challenges against HHS and related parties related to interpretations and actions under the 340B program.Insulin Pricing LitigationSince 2017,various plaintiffs,including consumers,states and state attorneys general,counties,municipalities,Native American tribes,school districts,wholesalers,third-party payers,and others,have filed lawsuits,including putative class actions,against us,othermanufacturers,pharmacy benefit managers,and others,relating to the pricing of insulin medications,and in some cases other diabetesmedications,and rebates paid by manufacturers to pharmacy benefit managers.The complaints in the various lawsuits assert a variety ofclaims,including among others consumer protection,unfair or deceptive trade practices,fraud,false advertising,unjust enrichment,civilconspiracy,racketeering,antitrust,and unfair competition claims.Most cases have been coordinated or consolidated for pretrial proceedingsin a multidistrict litigation(MDL)pending in the U.S.District Court for the District of New Jersey.The lawsuits are at various stages in thelitigation process.In the first-filed case,a putative consumer class action,we and the plaintiffs reached a proposed settlement in May 2023.In January 2024,the court denied the plaintiffs motion for class certification.We and the plaintiffs subsequently terminated our proposed settlement andstipulated that the courts ruling denying class certification applied to Lilly.The MDL court has issued various case management and other orders,including but not limited to orders establishing separate tracks forstate attorney general claims(State AG Track),putative class actions(Class Action Track),and non-class suits by self-funded payers(Self-Funded Payer Track);orders dismissing certain claims;and an order setting a constructive notice date of January 14,2021 for statute oflimitations purposes.In January 2022,the Michigan attorney general filed a petition in Michigan state court seeking authorization to investigate Lilly for potentialviolations of the Michigan Consumer Protection Act(MCPA),along with a complaint seeking a declaratory judgment that the state hasauthority to investigate Lillys sale of insulin under the MCPA.The court authorized the proposed investigation and the issuance of civilinvestigative subpoenas.In April 2022,however,the parties entered into a stipulation providing that the state will not issue any civilinvestigative subpoena to us under the MCPA until the declaratory judgment action is resolved,and in July 2022,the court dismissed thecase in its entirety.In June 2023,the Michigan Court of Appeals affirmed the judgment in our favor.In April 2025,the Michigan SupremeCourt granted the states application for leave to appeal and ordered oral argument.Lilly has entered into settlement agreements with two states to resolve allegations relating to insulin pricing.In particular,in February 2024,after discovery,Lilly entered into a non-monetary settlement with the Minnesota attorney generals office that resolved a lawsuit filed byMinnesota in 2018;and Lilly entered into a similar non-monetary settlement with the New York attorney generals office in May 2023.Theseagreements involved no monetary payments and no admission of wrongdoing or liability.29Insulin and Other Pricing InvestigationsWe have been subject to various investigations and received subpoenas,civil investigative demands,information requests,interrogatories,and other inquiries from various governmental entities related to pricing issues,including the pricing and sale of insulin medications,and insome instances certain other diabetes medications,and/or calculations of average manufacturer price and best price.These includesubpoenas and civil investigative demands from the U.S.Department of Justice,the U.S.Federal Trade Commission,and the Colorado,Indiana,Louisiana,Oregon,Texas,Vermont and Washington attorney general offices,as well as information requests from the California,Florida,Hawaii,Mississippi,New Mexico,Nevada,and Washington D.C.attorney general offices.To the extent the foregoing governmental entities have not filed lawsuits,we are cooperating with the various investigations,subpoenas,andinquiries.Average Manufacturer Price LitigationIn November 2014,a relator filed a qui tam action in the U.S.District Court for the Northern District of Illinois against us and TakedaPharmaceuticals America,Inc.The relators complaint alleges that the defendants should have treated certain credits from distributors asretroactive price increases and included such increases in calculating average manufacturer prices.In August 2022,following a trial,the juryreturned a verdict in favor of the relator.In September 2025,the U.S.Court of Appeals for the Seventh Circuit affirmed and we recognized acharge related to the matter.In October 2025,we filed a petition for rehearing en banc.Other MattersActos LitigationWe,along with Takeda Chemical Industries,Ltd.and Takeda affiliates(collectively,Takeda),are named in a third-party payer class action inthe U.S.District Court for the Central District of California.The plaintiffs allege that bladder cancer risk was concealed from them and claimthat as a result they and a proposed class of third-party payers are entitled to recover money paid for Actos prescriptions.Our agreementwith Takeda calls for Takeda to defend and indemnify us against losses and expenses with respect to U.S.litigation arising out of themanufacture,use,or sale of Actos and other related expenses in accordance with the terms of the agreement.In May 2023,the district courtgranted class certification.In June 2025,the U.S.Court of Appeals for the Ninth Circuit denied our appeal of the class certification order,andin August 2025 it denied our petition for rehearing en banc.Mounjaro,Trulicity,and Zepbound Product Liability LitigationSince August 2023,various plaintiffs have filed lawsuits against us,Novo Nordisk A/S(Novo),and other related Novo entities,alleginginjuries following purported use of incretin medicines,including Mounjaro,Trulicity,and Zepbound.The complaints assert a variety of claimsand generally seek damages,and/or other relief.Most of these lawsuits have been coordinated or consolidated for pretrial proceedings in afederal MDL pending in the U.S.District Court for the Eastern District of Pennsylvania.There are also cases pending in various other federaland state courts.In addition to the cases in the United States,there are two class action petitions in Israel.Branchburg Manufacturing FacilityIn May 2021,we received a subpoena from the U.S.Department of Justice requesting the production of certain documents relating to ourmanufacturing site in Branchburg,New Jersey.We have cooperated with the subpoena.Health Choice AllianceIn October 2019,a relator filed a qui tam lawsuit against us in Texas state court asserting claims under the Texas Medicaid Fraud PreventionAct(TMFPA)based on allegations about certain patient support programs related to three of our products.The relator sought to recover thevalue of payments by the Texas Medicaid Program for these products,as well as civil penalties and other relief.In August 2025,the relatorpurported to dismiss the first lawsuit and filed a second lawsuit in a different Texas state court.We are opposing the relators purporteddismissal of the first lawsuit.The second lawsuit purports to add the State of Texas as a party and asserts claims under the TMFPA based onallegations about patient support programs related to fifteen of our products.30Research Corporation Technologies,Inc.In April 2016,Research Corporation Technologies,Inc.(RCT)filed a lawsuit against us in the U.S.District Court for the District of Arizonaasserting damages claims for breach of contract,unjust enrichment,and conversion related to processes used to manufacture certainproducts,including Humalog and Humulin.In October 2021,the court issued a summary judgment decision in favor of RCT on certainissues,including with respect to a disputed royalty.In July 2024,we reached a confidential agreement with RCT that requires differentpayments based on various litigation outcomes as determined on appeal.The settlement agreement is not an admission of liability or faultand is subject to conditions.Pursuant to the agreement,the court entered final judgment,Lilly filed a notice of appeal to the U.S.Court ofAppeals for the Ninth Circuit,and Lilly made an initial payment under the agreement.Lillys appeal remains pending.The remaining amountpayable under the agreement,if any,should not have a material impact on our financial position,liquidity or results of operations.Note 11:Other Comprehensive Income(Loss)The following tables summarize the activity related to each component of other comprehensive income(loss)during the three months endedSeptember 30,2025 and 2024:(Amounts presented net of taxes)Foreign CurrencyTranslationGains(Losses)Net UnrealizedGains(Losses)onAvailable-For-Sale SecuritiesRetirement BenefitPlansNet UnrealizedGains(Losses)onCash Flow HedgesAccumulated OtherComprehensive LossBalance at July 1,2025$(1,757.8)$(21.3)$(2,193.4)$256.5$(3,716.0)Other comprehensive income(loss)beforereclassifications466.0 4.1 9.6 8.5 488.2 Net amount reclassified from accumulated othercomprehensive loss 11.1 10.8(0.4)21.5 Net other comprehensive income(loss)466.0 15.2 20.4 8.1 509.7 Balance at September 30,2025$(1,291.8)$(6.1)$(2,173.0)$264.6$(3,206.3)(Amounts presented net of taxes)Foreign CurrencyTranslationGains(Losses)Net UnrealizedGains(Losses)onAvailable-For-Sale SecuritiesRetirement BenefitPlansNet UnrealizedGains(Losses)onCash Flow HedgesAccumulated OtherComprehensive LossBalance at July 1,2024$(2,001.6)$(32.6)$(2,633.6)$289.3$(4,378.5)Other comprehensive income(loss)beforereclassifications117.9 15.9(28.9)(25.0)79.9 Net amount reclassified from accumulated othercomprehensive loss 23.7 0.1 23.8 Net other comprehensive income(loss)117.9 15.9(5.2)(24.9)103.7 Balance at September 30,2024$(1,883.7)$(16.7)$(2,638.8)$264.4$(4,274.8)31The following tables summarize the activity related to each component of other comprehensive income(loss)during the nine months endedSeptember 30,2025 and 2024:(Amounts presented net of taxes)Foreign CurrencyTranslationGains(Losses)Net UnrealizedGains(Losses)onAvailable-For-Sale SecuritiesRetirement BenefitPlansNet UnrealizedGains(Losses)onCash Flow HedgesAccumulated OtherComprehensive LossBalance at January 1,2025$(2,389.6)$(31.7)$(2,178.7)$278.1$(4,321.9)Other comprehensive income(loss)beforereclassifications1,062.3 13.9(38.0)(14.2)1,024.0 Net amount reclassified from accumulated othercomprehensive loss35.5 11.7 43.7 0.7 91.6 Net other comprehensive income(loss)1,097.8 25.6 5.7(13.5)1,115.6 Balance at September 30,2025$(1,291.8)$(6.1)$(2,173.0)$264.6$(3,206.3)(Amounts presented net of taxes)Foreign CurrencyTranslationGains(Losses)Net UnrealizedGains(Losses)onAvailable-For-Sale SecuritiesRetirement BenefitPlansNet UnrealizedGains(Losses)onCash Flow HedgesAccumulated OtherComprehensive LossBalance at January 1,2024$(1,819.0)$(26.2)$(2,697.3)$215.5$(4,327.0)Other comprehensive income(loss)beforereclassifications(74.9)9.3(12.1)48.5(29.2)Net amount reclassified from accumulated othercomprehensive loss10.2 0.2 70.6 0.4 81.4 Net other comprehensive income(loss)(64.7)9.5 58.5 48.9 52.2 Balance at September 30,2024$(1,883.7)$(16.7)$(2,638.8)$264.4$(4,274.8)Note 12:OtherNet,(Income)ExpenseOthernet,(income)expense consisted of the following:Three Months Ended September 30,Nine Months Ended September 30,2025202420252024Interest expense$179.6$192.7$672.4$555.9 Interest income(65.0)(47.8)(153.3)(130.9)Net investment(gains)losses on equity securities(Note 7)(46.9)(112.4)(14.1)29.5 Retirement benefit plans(114.0)(115.4)(326.1)(345.9)Other(income)expense179.4 20.9 283.8(0.1)Othernet,(income)expense$133.1$(62.0)$462.7$108.5 32Note 13:Segment InformationWe operate as a single reportable segment engaged in the discovery,development,manufacturing,marketing,and sales of pharmaceuticalproducts worldwide.A global research and development organization and a supply chain organization are responsible for the discovery,development,manufacturing,and supply of our products.Our commercial organizations market,distribute,and sell the products.Thebusiness is also supported by global corporate staff functions.Our determination that we operate as a single segment is consistent with thenature of our operations and the financial information regularly reviewed by the chief executive officer,in his capacity as the chief operatingdecision maker(CODM),for the purposes of evaluating performance,allocating resources,setting incentive compensation targets,andplanning and forecasting for future periods.Our purpose is to unite caring with discovery to create medicines that make life better for people around the world.Our long-term success issignificantly dependent on our ability to research and develop innovative medicines.The CODM uses consolidated net income to assessperformance of our company,ensuring that we are investing in future research and development while efficiently delivering products topatients.The CODM allocates research and development resources based upon several factors,including the likelihood of technicalsuccess,unmet medical needs,and the viability of commercial success.A significant component of the CODMs decision-making process isto ensure a balanced investment in our research and development portfolio to drive near-term success and sustain for the long-term.The following table summarizes our segment revenue,significant segment expenses,and segment profit:Three Months Ended September 30,Nine Months Ended September 30,2025202420252024Revenue$17,600.8$11,439.1$45,887.0$31,509.9 Less:Cost of sales3,008.3 2,170.8 7,680.3 6,014.5 Early-stage research and development1,249.6 995.3 3,395.6 2,872.6 Late-stage research and development2,216.1 1,738.8 6,139.9 5,095.5 Marketing,selling,and administrative2,740.7 2,099.8 7,962.6 6,169.3 Acquired in-process research and development655.7 2,826.4 2,381.2 3,091.2 Other segment items2,147.9 637.7 4,325.1 2,086.6 Net income$5,582.5$970.3$14,002.3$6,180.2 Early-stage research and development primarily includes costs incurred from discovery through Phase 2 clinical trials.Late-stage research and development primarilyincludes costs incurred from Phase 3 clinical trials.Other segment items primarily include income taxes and asset impairment,restructuring,and other special charges.The following tables summarize additional segment information:Three Months Ended September 30,Nine Months Ended September 30,2025202420252024Interest expense$179.6$192.7$672.4$555.9 Interest income65.0 47.8 153.3 130.9 Depreciation and amortization470.0 466.8 1,411.3 1,281.8 Asset impairment,restructuring,and other special charges364.9 81.6 399.9 516.6 Earnings(loss)in equity method investments45.4 26.0(29.4)65.6 Income taxes1,649.9 618.1 3,462.5 1,461.5 Expenditures for long-lived assets2,319.7 1,465.6 5,821.4 3,926.5 Includes expenditures for property and equipment and computer software costs.September 30,2025December 31,2024Total assets$114,935.4$78,714.9 Equity method investments1,222.2 1,142.7(1)(1)(2)(1)(2)(1)(1)33Item 2.Managements Discussion and Analysis of Results of Operations and Financial Condition(Tables present dollars in millions,except per-share data,and numbers may not add due to rounding)GeneralManagements discussion and analysis of results of operations and financial condition is intended to assist the reader in understanding andassessing significant changes and trends related to our results of operations and financial position.This discussion and analysis should beread in conjunction with the consolidated condensed financial statements and accompanying footnotes in Part I,Item 1 of this QuarterlyReport on Form 10-Q.Certain statements in this Part I,Item 2 of this Quarterly Report on Form 10-Q constitute forward-looking statements.Various risks and uncertainties,including those discussed in Forward-Looking Statements in this Quarterly Report on Form 10-Q and RiskFactors in Part I,Item 1A of our Annual Report on Form 10-K for the year ended December 31,2024,may cause our actual results,financialposition,and cash generated from operations to differ from these forward-looking statements.EXECUTIVE OVERVIEWThis section provides an overview of our financial results,updates to our clinical development pipeline,and other matters affecting ourcompany and industry.Financial ResultsThe following table summarizes certain financial information:Three Months Ended September 30,PercentChangeNine Months Ended September 30,PercentChange2025202420252024Revenue$17,600.8$11,439.1 54$45,887.0$31,509.9 46Net income5,582.5 970.3 NM14,002.3 6,180.2 127Earnings per share-diluted6.21 1.07 NM15.56 6.83 128NM-not meaningfulRevenue increased for the three and nine months ended September 30,2025,driven by increased volume,partially offset by lower realizedprices.The increased volume and lower realized prices during the three and nine months ended September 30,2025 were primarily drivenby Mounjaro and Zepbound.Net income and earnings per share for the three and nine months ended September 30,2025 increased primarily due to higher grossmargin,partially offset by increased marketing,selling,and administrative expenses and research and development expenses.See Results of Operations for additional information.34Clinical Development Pipeline UpdatesOur long-term success depends on our ability to continually discover or acquire,develop,and commercialize innovative new medicines.See“Managements Discussion and Analysis of Results of Operations and Financial ConditionExecutive OverviewClinical DevelopmentPipeline”in Part II,Item 7 of our Annual Report on Form 10-K for the year ended December 31,2024 for select new molecular entities(NMEs)and new indication line extension(NILEX)products in Phase 2 or Phase 3 clinical trials or that were submitted for regulatory reviewor received regulatory approval in the U.S.,European Union(EU),or Japan.The following reflects certain developments since our AnnualReport on Form 10-K for the year ended December 31,2024:CompoundDevelopmentTirzepatideSubmitted our application for tirzepatide for pediatric and adolescent type 2 diabetes to the U.S.Food and DrugAdministration(FDA)and European Commission(EC)for approval.Announced that a Phase 3 trial for tirzepatide for cardiovascular outcomes in type 2 diabetes met the primaryendpoint.A Phase 3 trial was initiated for tirzepatide for type 1 diabetes.Withdrew our U.S.application for tirzepatide for heart failure with preserved ejection fraction.Insulin Efsitora AlfaSubmitted our application for insulin efsitora alfa for type 2 diabetes to the FDA and EC for approval.MuvalaplinA Phase 3 trial was initiated for muvalaplin for atherosclerotic cardiovascular disease.OrforglipronAnnounced that Phase 3 trials for orforglipron for obesity met their primary and all key secondary endpoints.Announced that Phase 3 trials for orforglipron for type 2 diabetes met their primary and all key secondaryendpoints.A Phase 3 trial was initiated for orforglipron for hypertension and overweight or obesity.A Phase 3 trial was initiated for orforglipron for osteoarthritis pain of the knee and overweight or obesity.A Phase 3 trial was initiated for orforglipron for stress urinary incontinence and overweight or obesity.RetatrutideA Phase 3 trial was initiated for retatrutide for chronic low back pain and overweight or obesity.Mirikizumab(Omvoh)Japans Ministry of Health,Labour and Welfare approved mirikizumab for treatment of Crohns disease.Donanemab(Kisunla)The EC approved donanemab for the treatment of early symptomatic Alzheimers disease.Imlunestrant(Inluriyo)The FDA approved imlunestrant for treatment of ER ,HER2-,ESR1-mutated advanced or metastatic breastcancer.Pirtobrutinib(Jaypirca)The EC approved pirtobrutinib for treatment of chronic lymphocytic leukemia.Announced that Phase 3 trials for pirtobrutinib for chronic lymphocytic leukemia or small lymphocytic leukemiamet their primary endpoints.OlomorasibA Phase 3 trial was initiated for olomorasib for resected adjuvant non-small cell lung cancer.A Phase 3 trial was initiated for olomorasib for unresected adjuvant non-small cell lung cancer.The FDA granted Breakthrough Therapy designation for the treatment of certain newly diagnosed metastatic KRAS G12C-mutant lung cancers.Breakthrough Therapydesignation is designed to expedite the development and review of potential medicines that are intended to treat a serious condition when preliminary clinical evidence indicatesthat the treatment may demonstrate substantial improvement on a clinically significant endpoint(s)over already available therapies.(1)(1)35Other MattersTrends Affecting Pharmaceutical Pricing,Reimbursement,and Access and Certain Other Regulatory DevelopmentsGlobal concern over access to,and affordability of,pharmaceutical products continues to drive debate and action,as well as costcontainment efforts by governmental authorities and scrutiny of pricing and access disparities.Cost containment measures include the use ofmandated discounts,price reporting requirements,mandated reference prices,restrictive formularies,changes to available intellectualproperty protections,as well as other efforts.Reforms,initiatives,and other actions,including those that may stem from political initiatives,periods of uneven economic growth ordownturns,or as a result of inflation or deflation,trade and other global disputes and interruptions including related to tariffs,trade protectionmeasures,and similar restrictions,the emergence or escalation of,and responses to,international tension and conflicts,or governmentbudgeting priorities,are expected to continue to result in added pressure on cost,pricing,reimbursement,and access for our products.For example,in May 2025,the U.S.presidential administration issued an executive order intended,in part,to encourage or impose the useof most-favored-nation pricing to tie U.S.prescription drug prices with prices in selected comparably developed nations.In July 2025,we andother pharmaceutical companies received letters from the U.S.presidential administration reiterating certain drug pricing objectives.We andother pharmaceutical manufacturers face uncertainty on the implementation of these objectives,which could result in reduced prices andreimbursement for certain of our or competing products and may significantly impact our business and results of operations.Additionally,inJuly 2025,the OBBBA was enacted into law.In addition to tax impacts,the OBBBA implements spending cuts to certain federal healthcareprograms,including Medicaid and the Affordable Care Act.The Inflation Reduction Act of 2022(IRA)requires HHS to effectively set prices for certain single-source drugs and biologics reimbursedunder Medicare Part B and Part D.Currently,these government prices generally apply beginning at nine years(for medicines approvedunder a New Drug Application)or thirteen years(for medicines approved under a Biologics License Application)following FDA approval orlicensure for the molecule.In August 2023,HHS selected Jardiance,which is part of our collaboration with Boehringer Ingelheim,as one ofthe first ten medicines subject to government-set prices effective in 2026 and we expect additional of our significant products will be selectedin future years.The IRA has,and will continue to,meaningfully influence our business strategies and those of our competitors and couldsignificantly impact our business and consolidated results of operations.Other policies,regulations,legislation,or enforcement,including those proposed or pursued by lawmakers,regulators,and other authoritiesin the U.S.and worldwide,have and may continue to adversely impact our business and consolidated results of operations.For example,theU.S.and other countries have recently imposed or reached alignment on new tariffs.In some cases,imposed tariffs have been paused butmay come into effect quickly and unpredictably.While pharmaceuticals are exempt from certain of these tariffs,such exemptions may beterminated or may not apply to any future tariffs.The precise impact of tariffs,trade protection measures,and other restrictions depend ontheir ultimate scope,timing,and other factors.If enacted,additional restrictions could result in supply disruptions or delays,further increasecosts,or otherwise have a negative impact on our business.Given the nature of pharmaceutical regulation and commercialization,we maynot be able to share the burden of increased costs from tariffs and related impacts to any meaningful degree.Private payers and pharmacy benefit managers in the U.S.continue to significantly impact the market for pharmaceuticals throughnegotiation of access,manufacturer price or rebate concessions and pharmacy reimbursement rates.Restrictive or unfavorable pricing,coverage,or reimbursement determinations for our medicines or product candidates by governments,regulatory agencies,courts,or privateactors have and may continue to adversely impact our business and consolidated results of operations.In addition,we are engaged inlitigati
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COMCAST REPORTS 3rd QUARTER 2025 RESULTSPHILADELPHIA-October30,2025 Comcast Corporation(NASDAQ:CMCSA)today reported results for the quarter ended September30,2025.“Were making steady progress as we reposition the company for long-term,sustained growth,said Brian L.Roberts,Chairman and Chief Executive Officer of Comcast Corporation.In Connectivity,were taking deliberate steps to strengthen our broadband foundation and accelerate wireless as a meaningful growth engine,adding a record 414,000 wireless lines this quarter clear evidence of the value of our converged offerings.In addition,Business Services delivered another solid performance,with mid-single digit revenue and Adjusted EBITDA growth.In Content&Experiences,were building momentum across NBC and Peacock as we head into one of the most exciting stretches of live sports in our history,including robust NBA coverage which just began last week.The early success of Epic Universe contributed to 19%revenue growth at our Theme Parks,reflecting the strength of our newest attractions and the enduring appeal of the Universal brand.We generated$4.9 billion of free cash flow this quarter and$14.9 billion year-to-date despite significant investment were making in repositioning our company,a testament to both the durability and resilience of our underlying business.($in millions,except per share data)3rd QuarterConsolidated Results20252024ChangeRevenue$31,198$32,070 (2.7%)Net Income Attributable to Comcast$3,332$3,629 (8.2%)Adjusted Net Income1$4,125$4,337 (4.9%)Adjusted EBITDA2$9,669$9,735 (0.7%)Earnings per Share3$0.90$0.94 (3.4%)Adjusted Earnings per Share1$1.12$1.12%Net Cash Provided by Operating Activities$8,693$7,021 23.8%Free Cash Flow4$4,945$3,406 45.2%For additional detail on segment revenue and expenses,customer metrics,capital expenditures,and free cash flow,please refer to the trending schedule on Comcasts Investor Relations website at .3rd Quarter 2025 Highlights:Generated Consolidated Adjusted EBITDA of$9.7 Billion,Adjusted EPS of$1.12,and Free Cash Flow of$4.9 BillionReturned$2.8 Billion to Shareholders Through a Combination of$1.2 Billion in Dividend Payments and$1.5 Billion in Share Repurchases,Reducing Shares Outstanding by 5%Compared to the Prior Year PeriodAt Connectivity&Platforms,Connectivity Revenue Increased 4.2%to$11.5 Billion,Primarily Reflecting Growth in Domestic Wireless,International Connectivity and Business Services ConnectivityContinued to Invest in Our New Go-to-Market Strategy and Tactics,Including National Internet Plans with Everyday Pricing and Everything Included;a 5-Year Internet Price Guarantee;a Free Xfinity Unlimited Mobile Line Included for 1-Year;and a Premium Unlimited Wireless Plan That Delivers Gigabit Speeds,Upgraded Features,and Significant SavingsDomestic Wireless Customer Line Net Additions Were 414,000,the Best Quarterly Result on Record;Surpassed 14%Penetration of Our Domestic Residential Broadband Customers with a Total of 8.9 Million LinesBusiness Services Connectivity Revenue Increased 6.2%to$2.6 Billion,EBITDA Increased 4.5%to$1.5 Billion and EBITDA Margin Was 56.4%Media EBITDA Increased 28.0%to$832 Million,Driven by Peacock.Peacock EBITDA Losses of$217 Million Improved by$219 Million Compared to the Prior Year PeriodJurassic World Rebirth Premiered in July and Grossed Nearly$900 Million in Worldwide Box Office Year-to-Date,Pushing the Jurassic Franchises Cumulative Total to$7 Billion PRESS RELEASE1Theme Parks EBITDA Increased 13.1%to$958 Million;Fueled by the Opening of Epic Universe in Orlando in May3rd Quarter Consolidated Financial ResultsRevenue decreased 2.7%reflecting an unfavorable comparison to the prior year period,which included incremental revenue from the Paris Olympics.Net Income Attributable to Comcast decreased 8.2%.Adjusted Net Income decreased 4.9%.Adjusted EBITDA was consistent with the prior year period.Earnings per Share(EPS)decreased to 3.4%to$0.90.Adjusted EPS of$1.12 was consistent with the prior year period.Capital Expenditures increased 5.4%to$3.1 billion.Connectivity&Platforms capital expenditures increased 19.5%to$2.3 billion,primarily reflecting higher spending on scalable infrastructure and customer premise equipment.Content&Experiences capital expenditures decreased 19.9%to$714 million,reflecting the opening of Epic Universe in May 2025.Net Cash Provided by Operating Activities was$8.7 billion.Free Cash Flow was$4.9 billion.Dividends and Share Repurchases.Comcast paid dividends totaling$1.2 billion and repurchased 46.0 million of its shares for$1.5 billion,resulting in a total return of capital to shareholders of$2.8 billion.Connectivity&Platforms($in millions)Constant Currency Change53rd Quarter20252024ChangeConnectivity&Platforms RevenueResidential Connectivity&Platforms$17,601$17,866(1.5%)(2.4%)Business Services Connectivity2,5762,425 6.2%6.2%Total Connectivity&Platforms Revenue$20,176$20,291(0.6%)(1.4%)Connectivity&Platforms Adjusted EBITDAResidential Connectivity&Platforms$6,554$6,904(5.1%)(5.4%)Business Services Connectivity1,4541,391 4.5%4.5%Total Connectivity&Platforms Adjusted EBITDA$8,008$8,295(3.5%)(3.7%)Connectivity&Platforms Adjusted EBITDA MarginResidential Connectivity&Platforms 37.28.6%(140)bps(120)bpsBusiness Services Connectivity 56.4W.4%(100)bps(90)bpsTotal Connectivity&Platforms Adjusted EBITDA Margin 39.7.9%(120)bps(100)bpsChange percentages represent year/year growth rates.The changes in Adjusted EBITDA margins are presented as year/year basis point changes in the rounded Adjusted EBITDA margins.Revenue for Connectivity&Platforms was consistent with the prior year but decreased when excluding the impact of foreign currency.Adjusted EBITDA decreased due to declines in Residential Connectivity&Platforms Adjusted EBITDA,partially offset by growth in Business Services Adjusted EBITDA.Residential Connectivity&Platforms revenue and Adjusted EBITDA reflect the investment in our new go-to-market strategy.Adjusted EBITDA margin was 39.7%.2(in thousands)Net Additions/(Losses)3rd Quarter3Q253Q2420252024Customer RelationshipsDomestic Residential Connectivity&Platforms Customer Relationships30,64231,324 (103)(103)International Residential Connectivity&Platforms Customer Relationships17,60317,716 (95)78 Business Services Connectivity Customer Relationships2,7022,627 (11)(4)Total Connectivity&Platforms Customer Relationships50,94751,667 (210)(29)Domestic BroadbandResidential Customers28,89729,504 (91)(79)Business Customers2,5382,477 (13)(8)Total Domestic Broadband Customers31,43631,981 (104)(87)Total Domestic Wireless Lines8,9417,519 414 319 Total Domestic Video Customers11,51512,834 (257)(365)Total Customer Relationships for Connectivity&Platforms decreased by 210,000 to 50.9 million,primarily reflecting decreases in Residential Connectivity&Platforms customer relationships.Total domestic broadband customer net losses were 104,000,total domestic wireless line net additions were 414,000 and total domestic video customer net losses were 257,000.Residential Connectivity&Platforms($in millions)Constant Currency Change53rd Quarter20252024ChangeRevenueDomestic Broadband$6,433$6,400 0.5%0.5%Domestic Wireless1,2461,093 14.0.0%International Connectivity1,2751,150 10.8%6.7%Total Residential Connectivity8,9548,644 3.6%3.1%Video6,5916,938(5.0%)(6.3%)Advertising864987(12.5%)(13.6%)Other 1,1921,298(8.2%)(9.1%)Total Revenue$17,601$17,866(1.5%)(2.4%)Operating ExpensesProgramming$3,952$4,102(3.7%)(4.9%)Non-Programming7,0956,860 3.4%2.1%Total Operating Expenses$11,047$10,962 0.8%(0.5%)Adjusted EBITDA$6,554$6,904(5.1%)(5.4%)Adjusted EBITDA Margin 37.28.6%(140)bps(120)bpsChange percentages represent year/year growth rates.The changes in Adjusted EBITDA margins are presented as year/year basis point changes in the rounded Adjusted EBITDA margins.Beginning in the first quarter of 2025,commission revenue from the sale of certain direct to consumer(“DTC”)streaming services and revenue related to certain equipment are presented in video revenue.Previously,these amounts were presented in domestic broadband and international connectivity.Prior periods have been reclassified to reflect the current year presentation.Revenue for Residential Connectivity&Platforms decreased compared to the prior year period,primarily reflecting decreases in video,advertising and other revenue,partially offset by increases in domestic wireless and international connectivity revenue.Domestic broadband revenue was consistent due to higher average rates,offset by a decline in the number of domestic broadband customers.Domestic wireless revenue increased due to an increase in the number of customer lines and device sales.International connectivity revenue increased due to increases in broadband revenue from higher average rates and in wireless revenue,reflecting higher sales of wireless services,which includes the positive impact of foreign currency.Video revenue decreased due to a decline in the number of video customers,partially offset by an overall increase in average rates and the positive impact of foreign currency.3Advertising revenue decreased primarily due to lower domestic political and nonpolitical advertising.Other revenue decreased primarily due to lower residential wireline voice revenue,driven by a decline in the number of customers.Adjusted EBITDA for Residential Connectivity&Platforms decreased due to lower revenue and consistent operating expenses.Programming expenses decreased primarily due to a decline in the number of domestic video customers,partially offset by rate increases under our domestic programming contracts,an increase in programming expenses for our international sports networks and the impact of foreign currency.Non-programming expenses increased primarily due to an increase in direct product costs mainly due to higher mobile device sales,the impact of foreign currency and higher marketing and promotion costs driven by our new broadband and mobile offers introduced in April 2025,partially offset by lower fees paid to third-party channels relating to advertising sales.Adjusted EBITDA margin was 37.2%.Business Services Connectivity($in millions)Constant Currency Change53rd Quarter20252024ChangeRevenue$2,576$2,425 6.2%6.2%Operating Expenses1,1221,034 8.5%8.4justed EBITDA$1,454$1,391 4.5%4.5justed EBITDA Margin 56.4W.4%(100)bps(90)bpsChange percentages represent year/year growth rates.The changes in Adjusted EBITDA margins are presented as year/year basis point changes in the rounded Adjusted EBITDA margins.Revenue for Business Services Connectivity increased primarily due to an increase in revenue from enterprise solutions offerings,including the results from a recent acquisition.Adjusted EBITDA for Business Services Connectivity increased due to higher revenue,partially offset by higher operating expenses.The increase in operating expenses was primarily due to increases in direct product costs,which include the results from a recent acquisition.Adjusted EBITDA margin was 56.4%.4Content&Experiences($in millions)3rd Quarter20252024ChangeContent&Experiences RevenueMedia$6,589$8,231(19.9%)Excluding Olympics7 6,589 6,325 4.2%Studios 3,000 2,826 6.1%Theme Parks 2,717 2,289 18.7%Headquarters&Other 15 11 40.9%Eliminations(580)(758)23.4%Total Content&Experiences Revenue$11,742$12,599 (6.8%)Content&Experiences Adjusted EBITDAMedia$832$650 28.0%Studios 365 468 (21.9%)Theme Parks 958 847 13.1%Headquarters&Other(271)(200)(35.5%)Eliminations 69 38 81.8%Total Content&Experiences Adjusted EBITDA$1,953$1,802 8.4%Revenue for Content&Experiences decreased due to an unfavorable comparison to the prior year period,which included$1.9 billion of incremental revenue from the Paris Olympics included in the Media segment.Adjusted EBITDA for Content&Experiences increased primarily due to growth in Media and Theme Parks,partially offset by a decline in Studios.Media($in millions)3rd Quarter20252024ChangeRevenueDomestic Advertising$1,964$3,347(41.3%)Excluding Olympics7 1,964 1,915 2.6%Domestic Distribution 2,841 3,272 (13.1%)Excluding Olympics7 2,841 2,798 1.5%International Networks 1,252 1,070 17.0%Other 532 542 (1.8%)Total Revenue$6,589$8,231 (19.9%)Excluding Olympics7 6,589 6,325 4.2%Operating Expenses 5,758 7,581 (24.1%)Adjusted EBITDA$832$650 28.0%Revenue for Media decreased primarily due to lower domestic advertising and domestic distribution revenue,reflecting the comparison to the Paris Olympics in the prior year period.Excluding$1.9 billion of incremental revenue from this event,Media revenue increased 4.2%.Domestic advertising revenue decreased primarily reflecting the Paris Olympics in the prior year period.Excluding the incremental revenue from this event,domestic advertising revenue increased 2.6%,primarily due to an increase in revenue at Peacock.Domestic distribution revenue decreased primarily reflecting the Paris Olympics in the prior year period.Excluding the incremental revenue from this event,domestic distribution revenue increased 1.5%,primarily due to higher revenue at Peacock,partially offset by lower revenue at our linear television networks.International networks revenue increased primarily due to an increase in revenue associated with the distribution of sports networks and the positive impact of foreign currency.5Adjusted EBITDA for Media increased due to lower operating expenses,which more than offset lower revenue.The decrease in operating expenses was primarily due to lower sports programming costs associated with the Paris Olympics in the prior year period and a decrease in other sports programming costs for our domestic television networks,mainly reflecting lower sports volumes compared to the prior year period,partially offset by an increase in sports costs for our international networks.Media results include$1.4 billion of revenue and an Adjusted EBITDA6 loss of$217 million related to Peacock,compared to$1.5 billion of revenue and an Adjusted EBITDA6 loss of$436 million in the prior year period,which included amounts attributable to the Paris Olympics.Studios($in millions)3rd Quarter20252024ChangeRevenueContent Licensing$2,035$1,865 9.1%Theatrical 639 611 4.6%Other 326 350 (6.9%)Total Revenue$3,000$2,826 6.1%Operating Expenses 2,635 2,359 11.7justed EBITDA$365$468 (21.9%)Revenue for Studios increased primarily due to higher content licensing revenue.Content licensing revenue increased primarily due to the timing of when content was made available by our television studios,partially offset by the timing of when content was made available by our film studios.Theatrical revenue increased primarily due to higher revenue from an increased number of releases in the current quarter,including the successful release of Jurassic World Rebirth.Adjusted EBITDA for Studios decreased due to higher operating expenses,which more than offset higher revenue.The increase in operating expenses was primarily driven by higher programming and production expenses,mainly due to higher costs associated with content licensing sales,and higher marketing and promotion expenses due to increased spending on recent and upcoming theatrical film releases.Theme Parks($in millions)3rd Quarter20252024ChangeRevenue$2,717$2,289 18.7%Operating Expenses 1,759 1,442 22.0justed EBITDA$958$847 13.1%Revenue for Theme Parks increased primarily due to higher revenue at domestic theme parks,driven by the successful opening of Epic Universe in May 2025.Adjusted EBITDA for Theme Parks increased,reflecting higher revenue,which more than offset higher operating expenses.The increase in operating expenses was primarily due to operating costs associated with Epic Universe.Headquarters&OtherContent&Experiences Headquarters&Other includes overhead,personnel costs and costs associated with corporate initiatives.Headquarters&Other Adjusted EBITDA loss in the third quarter was$271 million,compared to a loss of$200 million in the prior year period.EliminationsAmounts represent eliminations of transactions between our Content&Experiences segments,the most significant being content licensing between the Studios and Media segments,which are affected by the timing of recognition of content licenses.Revenue eliminations were$580 million,compared to$758 6million in the prior year period,and Adjusted EBITDA eliminations were a benefit of$69 million,compared to a benefit of$38 million in the prior year period.Corporate,Other and Eliminations($in millions)3rd Quarter20252024ChangeCorporate&OtherRevenue$736$675 9.0%Operating Expenses 1,009 978 3.2justed EBITDA($273)($302)9.8%EliminationsRevenue($1,456)($1,495)(2.6%)Operating Expenses(1,437)(1,436)justed EBITDA($19)($59)(67.3%)Corporate&OtherCorporate&Other primarily includes overhead and personnel costs;our Sky-branded video services and television networks in Germany;Comcast Spectacor,which owns the Philadelphia Flyers and the Xfinity Mobile Arena in Philadelphia,Pennsylvania;and Xumo.Corporate&Other Adjusted EBITDA increased primarily due to decreased marketing associated with the Paris Olympics in the prior year period.EliminationsAmounts represent eliminations of transactions between Connectivity&Platforms,Content&Experiences and other businesses,the most significant being distribution of television network programming between the Media and Residential Connectivity&Platforms segments.Revenue eliminations were$1.5 billion,consistent with the prior year period,and Adjusted EBITDA eliminations were a loss of$19 million compared to a loss of$59 million in the prior year period.Prior year amounts reflect an increase in eliminations associated with the Paris Olympics.7Notes:1 We define Adjusted Net Income and Adjusted EPS as net income attributable to Comcast Corporation and diluted earnings per common share attributable to Comcast Corporation shareholders,respectively,adjusted to exclude the effects of the amortization of acquisition-related intangible assets,investments that investors may want to evaluate separately(such as based on fair value)and the impact of certain events,gains,losses or other charges that affect period-over-period comparisons.See Table 5 for reconciliations of non-GAAP financial measures.2 We define Adjusted EBITDA as net income attributable to Comcast Corporation before net income(loss)attributable to noncontrolling interests,income tax expense,investment and other income(loss),net,interest expense,depreciation and amortization expense,and other operating gains and losses(such as impairment charges related to fixed and intangible assets and gains or losses on the sale of long-lived assets),if any.From time to time,we may exclude from Adjusted EBITDA the impact of certain events,gains,losses or other charges(such as significant legal settlements)that affect the period-to-period comparability of our operating performance.See Table 4 for reconciliation of non-GAAP financial measure.3 All earnings per share amounts are presented on a diluted basis.4 We define Free Cash Flow as net cash provided by operating activities(as stated in our Consolidated Statement of Cash Flows)reduced by capital expenditures and cash paid for intangible assets.From time to time,we may exclude from Free Cash Flow the impact of certain cash receipts or payments(such as significant legal settlements)that affect period-to-period comparability.Cash payments related to certain capital or intangible assets,such as the construction of Universal Beijing Resort,are presented separately in our Consolidated Statement of Cash Flows and are therefore excluded from capital expenditures and cash paid for intangible assets for Free Cash Flow.See Table 4 for reconciliation of non-GAAP financial measure.5 Constant currency growth rates are calculated by comparing the results for each comparable prior year period adjusted to reflect the average exchange rates from each current year period presented rather than the actual exchange rates that were in effect during the respective periods.See Table 6 for reconciliations of non-GAAP financial measures.6 Adjusted EBITDA is the measure of profit or loss for our segments.From time to time,we may present Adjusted EBITDA for components of our reportable segments,such as Peacock.We believe these measures are useful to evaluate our financial results and provide a basis of comparison to others,although our definition of Adjusted EBITDA may not be directly comparable to similar measures used by other companies.Adjusted EBITDA for components are presented on a consistent basis with the respective segments and disaggregated in accordance with GAAP.7 From time to time,we may present adjusted information(e.g.,Adjusted Revenues)to exclude the impact of certain events,gains,losses or other charges affecting period-to-period comparability of our operating performance.See Table 7 for reconciliations of non-GAAP financial measures.Numerical information is presented on a rounded basis using actual amounts,unless otherwise noted.The change in Peacock paid subscribers is calculated using rounded paid subscriber amounts.Minor differences in totals and percentage calculations may exist due to rounding.8Conference Call and Other InformationComcast Corporation will host a conference call with the financial community today,October30,2025,at 8:30 a.m.Eastern Time(ET).The conference call and related materials will be broadcast live and posted on our Investor Relations website at .A replay of the call will be available today,October30,2025,starting at 11:30 a.m.ET on the Investor Relations website.From time to time,we post information that may be of interest to investors on our website at and on our corporate website,.To automatically receive Comcast financial news by email,please visit and subscribe to email alerts.#Investor Contacts:Press Contacts:Marci Ryvicker(215)286-4781Jennifer Khoury(215)286-7408Jane Kearns(215)286-4794John Demming(215)286-8011#Caution Concerning Forward-Looking StatementsThis press release includes statements that may constitute forward-looking statements.In evaluating these statements,readers should consider various factors,including the risks and uncertainties we describe in the“Risk Factors”sections of our most recent Annual Report on Form 10-K,our most recent Quarterly Report on Form 10-Q and other reports filed with the Securities and Exchange Commission(SEC).Factors that could cause our actual results to differ materially from these forward-looking statements include changes in and/or risks associated with:the competitive environment;consumer behavior;the advertising market;consumer acceptance of our content;programming costs;key distribution and/or licensing agreements;use and protection of our intellectual property;our reliance on third-party hardware,software and operational support;keeping pace with technological developments;cyber attacks,security breaches or technology disruptions;weak economic conditions;acquisitions and strategic initiatives;operating businesses internationally;natural disasters,severe weather-related and other uncontrollable events;loss of key personnel;labor disputes;laws and regulations;adverse decisions in litigation or governmental investigations;and other risks described from time to time in reports and other documents we file with the SEC.Readers are cautioned not to place undue reliance on forward-looking statements,which speak only as of the date they are made,and involve risks and uncertainties that could cause actual events or our actual results to differ materially from those expressed in any such forward-looking statements.We undertake no obligation to update or revise publicly any forward-looking statements,whether because of new information,future events or otherwise.The amount and timing of any dividends and share repurchases are subject to business,economic and other relevant factors.#Non-GAAP Financial MeasuresIn this discussion,we sometimes refer to financial measures that are not presented according to generally accepted accounting principles in the U.S.(GAAP).Certain of these measures are considered“non-GAAP financial measures”under the SEC regulations;those rules require the supplemental explanations and reconciliations that are in Comcasts Form 8-K(Quarterly Earnings Release)furnished to the SEC.#About Comcast CorporationComcast Corporation(Nasdaq:CMCSA)is a global media and technology company.From the connectivity and platforms we provide,to the content and experiences we create,our businesses reach hundreds of millions of customers,viewers,and guests worldwide.We deliver world-class broadband,wireless,and video through Xfinity,Comcast Business,and Sky;produce,distribute,and stream leading entertainment,sports,and news through brands including NBC,Telemundo,Universal,Peacock,and Sky;and bring incredible theme parks and attractions to life through Universal Destinations&Experiences.Visit for more information.9
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October 30,2025For release:ImmediatelyRefer to:Ashley Hennessey;gentry_ashley_;(317)416-4363(Media)Mike Czapar;czapar_michael_;(317)617-0983(Investors)Lilly reports third-quarter 2025 financial results,highlights R&D pipeline momentum and raises 2025 guidance Revenue in Q3 2025 increased 54%to$17.60 billion driven by volume growth from Mounjaro and Zepbound.Q3 2025 EPS increased by$5.14 to$6.21 on a reported basis and increased by$5.84 to$7.02 on a non-GAAP basis.Increased our 2025 full-year revenue guidance to be in the range of$63.0 billion to$63.5 billion;reported EPS guidance raised to be in the range of$21.80 to$22.50 and non-GAAP EPS guidance raised to be in the range of$23.00 to$23.70.Pipeline progress included positive results in four Phase 3 trials of orforglipron,across type 2 diabetes and obesity,with plans to submit to global regulatory authorities by the end of the year for the treatment of obesity.Regulatory progress included U.S.FDA approval of Inluriyo(imlunestrant)for certain adults with advanced or metastatic breast cancer.Manufacturing progress included announcements of two new facilities in Virginia and Texas,and the expansion of Lillys existing Puerto Rico site.INDIANAPOLIS,October 30,2025-Eli Lilly and Company(NYSE:LLY)today announced its financial results for the third-quarter of 2025.“Lilly delivered another strong quarter,with 54%revenue growth year-over-year driven by continued demand for our incretin portfolio,”said David A.Ricks,Lilly chair and CEO.“We advanced orforglipron through four additional Phase 3 trials,enabling global obesity submissions by year-end,and we achieved U.S.FDA approval of Inluriyo(imlunestrant)marking key progress across our pipeline.We continue to increase manufacturing capacity,announcing new facilities in Virginia and Texas and an expansion of our site in Puerto Rico.”Eli Lilly and Company|Lilly Corporate Center|Indianapolis,Indiana 46285|U.S.A.Financial Results$in millions,except per share dataThird-Quarter20252024%ChangeRevenue$17,600.8$11,439.1 54%Net income Reported 5,582.5 970.3 NMEarnings per share Reported 6.21 1.07 NMNet income Non-GAAP 6,311.9 1,064.5 NMEarnings per share Non-GAAP 7.02 1.18 NMA discussion of the non-GAAP financial measures is included below under Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information(Unaudited).Third-Quarter Reported ResultsIn Q3 2025,worldwide revenue was$17.60 billion,an increase of 54%compared with Q3 2024,driven by a 62%increase in volume,partially offset by a 10crease due to lower realized prices.Key Products1 revenue grew to$11.98 billion in Q3 2025,led by Mounjaro and Zepbound.Revenue in the U.S.increased 45%to$11.30 billion,driven by a 60%increase in volume,partially offset by a 15crease due to lower realized prices.Price was negatively impacted by a favorable one-time adjustment to estimates for rebates and discounts in Q3 2024.Excluding this base period effect,U.S.price declined by high single digits.Revenue outside the U.S.increased 74%to$6.30 billion,driven by a 66%increase in volume and to a lesser extent a 6vorable impact on foreign exchange rates.The volume increase outside the U.S.was driven primarily by Mounjaro.Revenue included a$200.0 million sales-based milestone payment for Jardiance and$180.0 million of revenue associated with the divestiture of the rights to Cialis in select markets outside of the U.S.21 The Company defines Key Products as Ebglyss,Jaypirca,Kisunla,Mounjaro,Omvoh,Verzenio,and Zepbound.Gross margin increased 57%to$14.59 billion in Q3 2025.Gross margin as a percent of revenue was 82.9%,an increase of 1.9 percentage points.The increase in gross margin percent was primarily driven by favorable product mix,partially offset by lower realized prices.In Q3 2025,research and development expenses increased 27%to$3.47 billion,or 19.7%of revenue,driven by continued investments in the companys early and late-stage portfolio.Marketing,selling and administrative expenses increased 31%to$2.74 billion in Q3 2025,primarily driven by promotional efforts supporting ongoing and future launches.In Q3 2025,the company recognized acquired in-process research and development(IPR&D)charges of$655.7 million compared with$2.83 billion in Q3 2024.The Q3 2025 charges primarily related to the acquisition of SiteOne Therapeutics,Inc.The Q3 2024 charges were primarily related to the acquisition of Morphic Holding,Inc.Asset impairment,restructuring and other special charges of$364.9 million in Q3 2025 were primarily related to a litigation charge,as well as acquisition and integration costs associated with the closing of our acquisition of Verve Therapeutics,Inc.In Q3 2024,there was a charge of$81.6 million,that primarily related to impairment of an intangible asset associated with a molecule in development.The effective tax rate was 22.8%in Q3 2025 compared with 38.9%in Q3 2024.The effective tax rates for Q3 2025 and Q3 2024 were both unfavorably impacted by non-deductible acquired IPR&D charges,with a larger impact occurring in Q3 2024.Additionally,the effective tax rate for Q3 2025 was unfavorably impacted by U.S.tax law changes enacted during the quarter.In Q3 2025,net income and earnings per share(EPS)were$5.58 billion and$6.21,respectively,compared with net income of$970.3 million and EPS of$1.07 in Q3 2024.EPS in Q3 2025 and Q3 2024 included acquired IPR&D charges of$0.71 and$3.08,respectively.Third-Quarter Non-GAAP MeasuresOn a non-GAAP basis,Q3 2025 gross margin increased 56%to$14.71 billion.Gross margin as a percent of revenue was 83.6%,an increase of 1.4 percentage points.The increase in gross margin percent was primarily driven by favorable product mix,partially offset by lower realized prices.3The non-GAAP effective tax rate was 17.7%in Q3 2025 compared with 37.6%in Q3 2024.The effective tax rates for Q3 2025 and Q3 2024 were both unfavorably impacted by non-deductible acquired IPR&D charges,with a larger impact occurring in Q3 2024.On a non-GAAP basis,Q3 2025 net income and EPS were$6.31 billion and$7.02,respectively,compared with net income of$1.06 billion and EPS of$1.18 in Q3 2024.Non-GAAP EPS in Q3 2025 and Q3 2024 included acquired IPR&D charges of$0.71 and$3.08,respectively.For further detail on non-GAAP measures,see the reconciliation below as well as the Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information(Unaudited)table later in this press release.Third-Quarter20252024%ChangeEarnings per share(reported)$6.21$1.07 NMAmortization of intangible assets.11 .12 Asset impairment,restructuring and other special charges.36 .07 Net losses(gains)on investments in equity securities(.04)(.09)U.S.Tax Law Change .39 Earnings per share(non-GAAP)$7.02$1.18 NMAcquired IPR&D.71 3.08(77)%Numbers may not add due to rounding4Selected Revenue Highlights(Dollars in millions)Third-QuarterYear-to-DateSelected Products20252024%Change20252024%ChangeMounjaro$6,515.1$3,112.7 109%$15,555.8$8,010.0 94%Zepbound 3,588.1 1,257.8 185%9,281.3 3,018.4 NMVerzenio 1,470.2 1,369.3 7%4,118.3 3,751.5 10%Total Revenue 17,600.8 11,439.1 54E,887.0 31,509.9 46%NM not meaningfulMounjaroFor Q3 2025,worldwide Mounjaro revenue increased 109%to$6.52 billion.U.S.revenue was$3.55 billion,an increase of 49%,reflecting strong demand,partially offset by lower realized prices.Revenue outside the U.S.increased to$2.97 billion compared with$728.0 million in Q3 2024,primarily driven by volume growth.ZepboundFor Q3 2025,U.S.Zepbound revenue increased 184%to$3.57 billion,compared with$1.26 billion in Q3 2024,primarily driven by increased demand,partially offset by lower realized prices.VerzenioFor Q3 2025,worldwide Verzenio revenue increased 7%to$1.47 billion.U.S.revenue was$880.3 million,compared with$878.8 million in Q3 2024,reflecting an increase in volume which was offset by lower realized prices.Revenue outside the U.S.was$589.8 million,an increase of 20%,primarily driven by volume growth and,to a lesser extent,favorable impact on foreign exchange rates.5Lilly shared numerous updates recently on key regulatory,clinical,business development and other events,including:RegulatoryLillys Omvoh(mirikizumab-mrkz)approved by U.S.FDA as a single-injection maintenance regimen in adults with ulcerative colitis(announcement)Lillys Kisunla(donanemab)receives marketing authorization by European Commission for the treatment of early symptomatic Alzheimers disease(announcement)U.S.FDA approves Inluriyo(imlunestrant)for adults with ER ,HER2-,ESR1-mutated advanced or metastatic breast cancer(announcement)Lillys olomorasib receives U.S.FDAs Breakthrough Therapy designation for the treatment of certain newly diagnosed metastatic KRAS G12C-mutant lung cancers(announcement)ClinicalLillys Omvoh(mirikizumab-mrkz)demonstrated early and sustained improvement in bowel urgency outcomes for patients with ulcerative colitis(announcement)Lillys EBGLYSS(lebrikizumab-lbkz)delivered durable disease control when administered once every eight weeks in patients with moderate-to-severe atopic dermatitis(announcement)Lillys baricitinib delivered near-complete scalp hair regrowth at one year for adolescents with severe alopecia areata in Phase 3 BRAVE-AA-PEDS trial(announcement)Lillys Verzenio(abemaciclib)prolonged survival in HR ,HER2-,high-risk early breast cancer with two years of treatment(announcement)Lillys oral GLP-1,orforglipron,demonstrated superior glycemic control in two successful Phase 3 trials,reconfirming its potential as a foundational treatment in type 2 diabetes(announcement)Lillys Omvoh(mirikizumab-mrkz)is the first and only IL-23p19 antagonist to show four years of sustained,corticosteroid-free comprehensive patient outcomes in ulcerative colitis(announcement)Lillys Mounjaro(tirzepatide),a GIP/GLP-1 dual receptor agonist,reduced A1C by an average of 2.2%in a Phase 3 trial of children and adolescents with type 2 diabetes(announcement)Lillys oral GLP-1,orforglipron,superior to oral semaglutide in head-to-head trial(announcement)Lillys oral GLP-1,orforglipron,demonstrated meaningful weight loss and cardiometabolic improvements in complete ATTAIN-1 results published in The New England Journal of Medicine(announcement)Lillys Jaypirca(pirtobrutinib),the first and only approved non-covalent(reversible)BTK inhibitor,significantly improved progression-free survival in patients with treatment-nave CLL/SLL(announcement)Lillys Verzenio(abemaciclib)increases overall survival in HR ,HER2-,high-risk early breast cancer with two years of therapy(announcement)Lillys oral GLP-1,orforglipron,is successful in third Phase 3 trial,triggering global regulatory submissions this year for the treatment of obesity(announcement)6OtherLilly announces more than$1.2 billion investment in Puerto Rico facility to boost oral medicine manufacturing capacity in the United States(announcement)LillyDirect and Walmart Pharmacy launch first retail pick-up option with direct-to-consumer pricing for Zepbound(announcement)Lilly partners with NVIDIA to build the industrys most powerful AI supercomputer,supercharging medicine discovery and delivery for patients(announcement)Lilly announces roster of Team USA athletes for the Olympic and Paralympic Games Milano Cortina 2026,pledges to translate U.S.Olympic and Paralympic milestones into meaningful community impact(announcement)Lilly to Acquire Adverum Biotechnologies(announcement)Lilly opens newest Gateway Labs site in San Diego to boost local biotechnology ecosystem(announcement)Lilly plans to build a new$6.5 billion facility to manufacture active pharmaceutical ingredients in Texas(announcement)Lilly announces plans to build$5 billion manufacturing facility in Virginia(announcement)Lilly launches TuneLab platform to give biotechnology companies access to AI-enabled drug discovery models built through over$1 billion in research investment(announcement)Anne White to Retire as Executive Vice President and President,Lilly Neuroscience(announcement)For information on important public announcements,visit the news section of Lillys website.72025 Financial GuidanceThe company has increased full-year revenue guidance to be in the range of$63.0 billion to$63.5 billion,primarily driven by strong underlying business performance across the portfolio and foreign exchange rates.The performance margin2 is now expected to be in the range of 43.5%and 44.5%on a reported basis and 45.0%and 46.0%on a non-GAAP basis.Both ratios reflect the increase in revenue guidance.Other income(expense)on a reported basis is now expected to be expense in the range of$700 million to$600 million due to a decrease in net losses on investments in equity securities and is still expected to be expense in the range of$700 million to$600 million on a non-GAAP basis.The 2025 estimated effective tax rate on a reported basis and a non-GAAP basis remain unchanged at approximately 19%and 17%,respectively.Based on these changes,EPS guidance has been increased to be in the range of$21.80 to$22.50 on a reported basis and$23.00 to$23.70 on a non-GAAP basis.The companys updated 2025 financial guidance reflects adjustments shown in the reconciliation table below.2025GuidanceEarnings per share(reported)$21.80 to$22.50U.S.tax legislation.39Amortization of intangible assets.43Asset impairment,restructuring,and other special charges.39Net losses on investments in equity securitiesEarnings per share(non-GAAP)$23.00 to$23.70Numbers may not add due to rounding82 The Company defines performance margin as gross margin less R&D,Marketing,Selling,and Administrative and Asset Impairment,Restructuring and Other Charges divided by Revenue.The following table summarizes the companys updated 2025 financial guidance:PriorUpdated(1)(2)(3)Revenue$60.0 to$62.0 billion$63.0 to$63.5 billionPerformance Margin(4)(reported)42.0%to 43.5C.5%to 44.5%(non-GAAP)43.0%to 44.5E.0%to 46.0%Other Income/(Expense)(reported)($750)to($650)million($700)to($600)millionOther Income/(Expense)(non-GAAP)($700)to($600)million UnchangedTax Rate(reported)Approx.19%UnchangedTax Rate(non-GAAP)Approx.17%UnchangedEarnings per Share(reported)$20.85 to$22.10$21.80 to$22.50Earnings per Share(non-GAAP)$21.75 to$23.00$23.00 to$23.70(1)Non-GAAP guidance reflects adjustments presented in the earnings per share reconciliation table above.(2)Guidance includes acquired IPR&D charges through Q3 2025 of$2.38 billion or$2.57 on a per share basis.Guidance does not include acquired IPR&D either incurred,or expected to be incurred,after Q3 2025.(3)This guidance is based on the existing tariff and trade environment as of October 30,2025,and does not reflect any policy shifts,including pharmaceutical sector tariffs,that could impact business.(4)The Company defines performance margin as gross margin less R&D,Marketing,Selling,and Administrative,and Asset Impairment,Restructuring and Other Charges divided by Revenue.9Webcast of Conference CallAs previously announced,investors and the general public can access a live webcast of the Q3 2025 financial results conference call through a link on Lillys website at conference call will begin at 10 a.m.Eastern time today and will be available for replay via the website.Non-GAAP Financial MeasuresCertain financial information is presented on both a reported and a non-GAAP basis.Some numbers in this press release may not add due to rounding.Reported results were prepared in accordance with U.S.generally accepted accounting principles(GAAP)and include all revenue and expenses recognized during the periods.Non-GAAP measures reflect adjustments for the items described in the reconciliation tables later in the release.Related materials provide certain GAAP and non-GAAP figures excluding the impact of foreign exchange rates.Lilly recalculates current period figures on a constant currency basis by keeping constant the exchange rates from the base period.The companys 2025 financial guidance is provided on both a reported and a non-GAAP basis.The non-GAAP measures are presented to provide additional insights into the underlying trends in the companys business.About LillyLilly is a medicine company turning science into healing to make life better for people around the world.Weve been pioneering life-changing discoveries for nearly 150 years,and today our medicines help tens of millions of people across the globe.Harnessing the power of biotechnology,chemistry and genetic medicine,our scientists are urgently advancing new discoveries to solve some of the worlds most significant health challenges:redefining diabetes care;treating obesity and curtailing its most devastating long-term effects;advancing the fight against Alzheimers disease;providing solutions to some of the most debilitating immune system disorders;and transforming the most difficult-to-treat cancers into manageable diseases.With each step toward a healthier world,were motivated by one thing:making life better for millions more people.That includes delivering innovative clinical trials that reflect the diversity of our world and working to ensure our medicines are accessible and affordable.To learn more,visit L and L Statement Regarding Forward-Looking StatementsThis press release and the related attachments contain managements intentions and expectations for the future,all of which are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.The words estimate,project,intend,expect,believe,target,plan,anticipate,may,could,aim,seek,will,continue,and similar expressions are intended to identify forward-looking statements.Actual results may differ materially due to various factors.The following include some but not all of the factors that could cause actual results or events to differ from those anticipated,including the significant costs and uncertainties in the pharmaceutical research and development process,including with respect to the timing and process of obtaining regulatory approvals;the impact and uncertain outcome of acquisitions and business development transactions and related costs;intense competition affecting the companys products,pipeline,or industry;market uptake of launched products and indications;continued pricing pressures and the impact of actions of governmental and private actors affecting pricing of,reimbursement for,and patient access to pharmaceuticals,or reporting obligations related thereto;safety or efficacy concerns associated with the companys or competitive products;dependence on relatively few products or product classes for a significant percentage of the companys total revenue and a consolidated supply chain;the expiration of intellectual property protection for certain of the companys products and competition from generic and biosimilar products;the companys ability to protect and enforce patents and other intellectual property and changes in patent law or regulations related to data package exclusivity;information technology system inadequacies,inadequate controls or procedures,security breaches,or operating failures;unauthorized access,disclosure,misappropriation,or compromise of confidential information or other data stored in the companys information technology systems,networks,and facilities,or those of third parties with whom the company shares its data and violations of data protection laws or regulations;issues with product supply and regulatory approvals stemming from manufacturing difficulties,disruptions,or shortages,including as a result of unpredictability and variability in demand,labor shortages,third-party performance,quality,cyber-attacks,or regulatory actions related to the companys and third-party facilities;reliance on third-party relationships and outsourcing arrangements;the use of artificial intelligence or other emerging technologies in various facets of the companys operations,which may exacerbate competitive,regulatory,litigation,cybersecurity,and other risks;the impact of global macroeconomic conditions,including uneven economic growth or downturns or uncertainty,trade and other global disputes and interruptions,including related to tariffs,trade protection measures,and similar restrictions,international tension,conflicts,regional dependencies,or other costs,uncertainties,and risks related to engaging in business globally;fluctuations in foreign currency exchange rates,changes in interest rates and inflation or deflation;significant and sudden declines or volatility in the trading price of the companys common stock and market capitalization;litigation,investigations,or other similar proceedings involving past,current,or future products or activities;changes in tax law and regulations,tax rates,or events that differ from our assumptions related to tax positions;regulatory changes,developments,and uncertainty;regulatory oversight and actions regarding the companys operations and products;regulatory compliance problems or government investigations;risks from the proliferation of counterfeit,misbranded,adulterated or illegally compounded products;actual or perceived deviation from environmental-,social-,or governance-related requirements or expectations;asset impairments and restructuring charges;and changes in accounting and reporting standards.For additional information about the factors that could cause actual results or events to differ materially from forward-looking statements,please see the companys latest Form 10-K and subsequent Forms 8-K and 10-Q filed with the Securities and Exchange Commission.You should not place undue reliance on forward-looking statements contained in this press release and the related attachments,which,except as otherwise noted,speak only as of the date of this release.Except as is required by law,the company expressly disclaims any obligation to publicly release any revisions to forward-looking statements contained in this press release and the related attachments to reflect events or circumstances after the date of this release.#Website InformationThe information contained on,or that may be accessed through,our website or any third-party website is not incorporated by reference into,and is not a part of,this earnings release.Trademarks and Trade NamesAll trademarks or trade names referred to in this press release are the property of the company,or,to the extent trademarks or trade names belonging to other companies are references in this press release,the property of their respective owners.Solely for convenience,the trademarks and trade names in this press release are referred to without the and symbols,but such references should not be construed as any indicator that the company or,to the extent applicable,their respective owners will not assert,to the fullest extent under applicable law,the companys or their rights thereto.We do not intend the use or display of other companies trademarks and trade names to imply a relationship with,or endorsement or sponsorship of us by,any other companies11Eli Lilly and CompanyOperating Results(Unaudited)REPORTED(Dollars in millions,except per share data and numbers may not add due to rounding)Three Months EndedNine Months EndedSeptember 30,September 30,20252024%Chg.20252024%Chg.Revenue$17,600.8$11,439.1 54%$45,887.0$31,509.9 46%Cost of sales 3,008.3 2,170.8 39%7,680.3 6,014.5 28%Research and development 3,465.7 2,734.1 27%9,535.5 7,968.1 20%Marketing,selling and administrative 2,740.7 2,099.8 31%7,962.6 6,169.3 29quired IPR&D 655.7 2,826.4(77)%2,381.2 3,091.2(23)%Asset impairment,restructuring and other special charges 364.9 81.6 NM 399.9 516.6(23)%Operating income 7,365.4 1,526.4 NM 17,927.5 7,750.2 131%Net interest income(expense)(114.7)(144.9)(519.1)(425.0)Net other income(expense)(18.4)206.9 56.4 316.5 Other income(expense)(133.1)62.0 NM(462.7)(108.5)NMIncome before income taxes 7,232.3 1,588.4 NM 17,464.8 7,641.7 129%Income tax expense 1,649.9 618.1 167%3,462.5 1,461.5 137%Net income$5,582.5$970.3 NM$14,002.3$6,180.2 127rnings per share-diluted$6.21$1.07 NM$15.56$6.83 128%Dividends paid per share$1.50$1.30 15%$4.50$3.90 15%Weighted-average shares outstanding(thousands)-diluted 898,804 905,027 899,734 904,359 NM not meaningful12Eli Lilly and CompanyReconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information(Unaudited)(Dollars in millions,except per share data and numbers may not add due to rounding)Three Months Ended September 30,Nine Months Ended September 30,2025202420252024Gross Margin-As Reported$14,592.5$9,268.3$38,206.7$25,495.4 Increase for excluded items:Amortization of intangible assets(Cost of sales)(1)119.2 139.4 364.0 417.6 Gross Margin-Non-GAAP$14,711.7$9,407.7$38,570.7$25,913.0 Gross Margin as a percent of revenue-As Reported 82.9.0.3.9%Gross Margin as a percent of revenue-Non-GAAP(2)83.6.2.1.2%1.Excludes amortization of intangibles primarily associated with costs of marketed products acquired or licensed from third parties.2.Non-GAAP gross margin as a percent of revenue reflects the gross margin effects of the adjustments presented above.13Reconciliation of GAAP Reported to Selected Non-GAAP Adjusted Information(Unaudited)(Dollars in millions,except per share data and numbers may not add due to rounding)Three Months Ended September 30,Nine Months Ended September 30,2025202420252024Net income-Reported$5,582.5$970.3$14,002.3$6,180.2 Increase(decrease)for excluded items:Amortization of intangible assets(Cost of sales)(1)119.2 139.4 364.0 417.6 Asset impairment,restructuring and other special charges(2)364.9 81.6 399.9 516.6 Net(gains)losses on investments in equity securities(Other income/expense)(48.0)(103.0)5.6 21.3 U.S.Tax Law Change(3)350.3 350.3 Corresponding tax effects(Income taxes)(56.9)(23.8)(126.5)(194.7)Net income-Non-GAAP$6,311.9$1,064.5$14,995.6$6,941.0 Effective tax rate-Reported 22.88.9.8.1fective tax rate-Non-GAAP(4)17.77.6.8.3rnings per share(diluted)-Reported$6.21$1.07$15.56$6.83 Earnings per share(diluted)-Non-GAAP$7.02$1.18$16.67$7.68 1.Excludes amortization of intangibles primarily associated with costs of marketed products acquired or licensed from third parties.2.For the three and nine months ended September 30,2025,excludes litigation charges,as well as acquisition and integration costs associated with the closing of our acquisition of Verve Therapeutics,Inc.For the nine months ended September 30,2024,excluded charges related to litigation and impairment of an intangible asset associated with a molecule in development.3.Relates to adjusting our income tax provision for prior periods and remeasuring our deferred tax assets and liabilities.4.Non-GAAP tax rate reflects the tax effects of the adjustments presented above.14
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Q3 2025 EARNINGS CALLELI LILLY AND COMPANY2025 Q3 EARNINGSIntroduction and Key EventsDave Ricks,Chai.
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPO.
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Confidential-Do not distributeConfidential-Do not distributeQ3 2025 Earnings PresentationOctober 28,.
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Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 FORM 10-Q(Mark.
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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)QUARTERLY REP.
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Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark o.
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Investor Presentation Q3 2025 Forward-Looking Statements This presentation may include“forward-look.
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