LEE ENTERPRISES, Inc 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion includes comments and analysis relating to our results of operations and financial condition as of and for the three and six months ended March 29, 2026. This discussion should be read in conjunction with the Consolidated Financial Statements and related Notes thereto, included herein, and our 2025 Annual Report on Form 10-K. Share and dollar amounts are presented on an actual basis unless otherwise noted. EXECUTIVE OVERVIEW QUARTERLY RESULTS OF OPERATIONS For the three months ended March 29, 2026, our total operating revenue was $122.0 million, down 11.2% from the three months ended March 30, 2025. Total Digital Revenue was $67.8 million and represented 55.6% of our total operating revenue. Total Print Revenue was $54.2 million, a 16.4% decrease to the three months ended March 30, 2025. Our digital-only subscription business totaled $22.3 million in the quarter. The year-over-year revenue decline of 6.3% is driven by lasting impact from last year's Cyber Incident and accelerated churn following inflationary surcharges implemented in the prior fiscal year. Another key piece of our digital business, Amplified Digital® agency revenue totaled $22.8 million in the quarter. Total operating expenses were $114.4 million, a 20.0% decrease in the three months ended March 29, 2026, compared to the three months ended March 30, 2025. The decrease reflects continued disciplined cost management, the absence of prior-year Cyber Incident response costs, and $3.8 million of business interruption insurance recoveries recognized in the current quarter. See Note 11. Cash Costs of $112.0 million, a non-GAAP financial measure used to summarize certain operating expenses (see reconciliation of non-GAAP financial measures below), were down 14.6% in the three months ended March 29, 2026, reflecting continued disciplined cost management. Net loss totaled $1.7 million, an 85.8% improvement compared to a net loss of $12.0 million in the prior-year period. Adjusted EBITDA (a non-GAAP financial measure) totaled $15.1 million, a 94.7% increase over the prior-year period. The improvements reflect the cost actions and business interruption insurance recoveries described above and the non-recurrence of prior-year Cyber Incident costs. Cash on the balance sheet totaled $53.3 million including the net proceeds from the February 5, 2026 Private Placement. Debt, net of cash on the balance sheet, totaled $402.2 million. As discussed above, with the execution of the Private Placement, the applicable margin on our 25-year term loan was reduced from 9.00% to 5.00% for a period of five years. Together, the Private Placement proceeds, the reduction in our applicable interest rate margin, and continued cost discipline have strengthened our liquidity and financial flexibility as we execute our digital-first growth strategy. RECENT DEVELOPMENTS PRIVATE PLACEMENT FINANCING AND RELATED AGREEMENTS Private Placement Agreement During the three months ended March 29, 2026, we issued an aggregate of 16,000,000 shares of Common Stock, consisting of 15,384,615 shares of Common Stock to certain investors and 615,385 shares of Common Stock to service providers as reimbursement for certain expenses incurred by certain investors, at a price of $3.25 per share through the Private Placement. The aggregate gross proceeds from the Private Placement were $50.0 million, before deducting offering expenses. Further, in connection with the closing, we amended our Certificate of Incorporation, increasing the number of authorized shares from 12,000,000 to 40,000,000. Registration Rights Agreement and Amendment At the closing of the Private Placement on February 5, 2026, we entered into a registration rights agreement pursuant to which we will agree to provide certain customary registration rights, including the registration of the Shares for resale. We filed a registration statement on Form S-3 with the Securities and Exchange Commission covering the resale by the investors of their shares on March 6, 2026. 18 Table of Contents On February 4, 2026, in connection with the closing of the Private Placement, the Board of Directors amended the termination date of the Rights Agreement to February 4, 2026, causing each Right to expire and to be extinguished and for the Rights Agreement to be terminated. See Note 2 of the unaudited condensed consolidated financial statements for additional discussion. Credit Agreement Amendment Concurrently with the execution of the Private Placement agreement, we entered into the Second Amendment to Credit Agreement. The amendments became operative concurrently with the closing. The amendments include among other things, a reduction of the applicable margin on our 25-year term loan from 9.00% to 5.00% for a period of five years following the closing and amending the definition of “Excess Cash Flow” such that any cash-on-hand balance above $64.0 million held by us would be deemed Excess Cash Flow for a period of five years. These amendments were treated as modifications to the existing Credit Agreement. PRESIDENT AND CHIEF EXECUTIVE OFFICER TRANSITION Also, concurrently with the closing of the Private Placement on February 5, 2026, Kevin Mowbray, our previous President and Chief Executive Officer, entered into an agreement to voluntarily retire from his positions at the Company and its subsidiaries and affiliates. Nathan Bekke, our previous Chief Operating Officer, assumed the role of President and Interim Chief Executive Officer. On April 23, 2026, the Board of Directors appointed Mr. Bekke as President and Chief Executive Officer of the Company. VICE PRESIDENT, CHIEF FINANCIAL OFFICER TRANSITION On November 17, 2025, Timothy R. Millage resigned from his position as Vice President, Chief Financial Officer, effective February 3, 2026. Josh Rinehults was appointed Vice President, Interim Chief Financial Officer and Treasurer, effective February 3, 2026. On April 23, 2026, the Board appointed Mr. Rinehults as Vice President, Chief Financial Officer and Treasurer. STRATEGY We are a leading digital-first subscription and marketing services company committed to delivering high-quality, trusted, and deeply local news and information. Our mission is to strengthen and enrich the communities we serve by providing compelling local content, superior subscriber experiences, and innovative, data-driven advertising and marketing solutions. Through a premium, high-margin portfolio of digital products and marketing services — including owned-and-operated platforms, branded content, over-the-top advertising, AI-powered solutions, and targeted print — we enable more than 15,000 local advertisers to meaningfully engage customers, strengthen their brands, and accelerate growth. Our core strategy is to expand audiences and deepen engagement by delivering robust, hyper-local content that informs and connects our communities. We are committed to creating, collecting, and distributing trusted local news and information across platforms designed to meet audiences wherever they are — print, web, mobile, social, and emerging channels. At the same time, we are investing in world-class digital products that elevate the subscriber experience through personalization, seamless access, and continuous innovation. 19 Table of Contents RESULTS OF OPERATIONS Three Months Ended Operating results are summarized below. (Thousands of Dollars, Except Per Common Share Data) March 29, 2026 March 30, 2025 Percent Change Operating revenue: Print advertising revenue 14,274 16,532 (13.7) % Digital advertising revenue 40,693 43,941 (7.4) % Advertising and marketing services revenue 54,967 60,473 (9.1) % Print subscription revenue 32,902 41,079 (19.9) % Digital subscription revenue 22,279 23,789 (6.3) % Subscription revenue 55,181 64,868 (14.9) % Print other revenue 7,032 7,213 (2.5) % Digital other revenue 4,784 4,826 (0.9) % Other revenue 11,816 12,039 (1.9) % Total operating revenue 121,964 137,380 (11.2) % Operating expenses: Compensation 46,745 56,659 (17.5) % Newsprint and ink 2,520 3,111 (19.0) % Other operating expenses 62,750 71,455 (12.2) % Insurance proceeds (3,840) — 100.0 % Depreciation and amortization 3,515 5,171 (32.0) % (Gain) loss on asset sales, impairments and other, net (900) 126 *** Restructuring costs and other 3,640 6,516 (44.1) % Total operating expenses 114,430 143,038 (20.0) % Equity in earnings of associated companies 1,008 1,155 (12.7) % Operating income (loss) 8,542 (4,503) *** Non-operating income (expense): Interest expense (7,629) (9,950) (23.3) % Pension and other post employment benefits ("OPEB") related and other, net 826 658 25.5 % Total non-operating expense, net (6,803) (9,292) (26.8) % Income (loss) before income taxes 1,739 (13,795) *** Income tax expense (benefit) 3,448 (1,780) *** Net loss (1,709) (12,015) (85.8) % Loss per common share: Basic (0.16) (2.07) (92.5) % Diluted (0.16) (2.07) (92.5) % *** Indicates an absolute value percentage change greater than 100. 20 Table of Contents Quarterly Results of Operations Operating Revenue Total operating revenue was $122.0 million in the three months ended March 29, 2026, down $15.4 million, or 11.2%, compared to the three months ended March 30, 2025. Advertising and marketing services revenue totaled $55.0 million, down 9.1% in the three months ended March 29, 2026, compared to the prior-year period. Print advertising revenues were $14.3 million, down 13.7% in the three months ended March 29, 2026 compared to the prior-year period related to continued secular declines in demand for print advertising related to the decline in print subscribers by 21.7% compared to the prior-year period. Digital advertising and marketing services revenue totaled $40.7 million, down 7.4% in the three months ended March 29, 2026 compared to the prior-year period. Digital advertising and marketing services represented 74.0% of the three months ended March 29, 2026 total advertising and marketing services revenue, compared to 72.7% in the prior-year period. Subscription revenue totaled $55.2 million, down 14.9% in the three months ended March 29, 2026 compared to the prior-year period. Declines in volumes, consistent with historical and industry trends, were partially offset by strategic rate increases. Digital-only subscribers decreased 18.8% to 591,000 at March 29, 2026 compared to 728,000 at March 30, 2025. Digital-only subscription revenue declined 6.3% compared to the prior-year period. Other revenue, which primarily consists of digital services from BLOX Digital of $4.8 million, commercial printing revenue of $3.7 million and third party delivery of $1.4 million, decreased $0.2 million, or 1.9%, in the three months ended March 29, 2026 compared to the prior-year period. Digital services revenue decreased 0.9% in the three months ended March 29, 2026 compared to the prior-year period. Commercial printing revenue decreased 2.4% in the three months ended March 29, 2026 compared to the prior-year period, primarily driven by lower print volumes from our partners. Total digital revenue including digital advertising revenue, digital subscription revenue and digital services revenue totaled $67.8 million, a decrease of 6.6%, in the three months ended March 29, 2026 compared to the prior-year period, and represented 55.6% of our total operating revenue in the three months ended March 29, 2026. Operating Expenses Total operating expenses were $114.4 million, a 20.0% decrease in the three months ended March 29, 2026, compared to the three months ended March 30, 2025. The decrease reflects continued disciplined cost management, the absence of prior-year Cyber Incident response costs, and $3.8 million of business interruption insurance recoveries recognized in the current quarter. See Note 11. Cash Costs of $112.0 million, a non-GAAP financial measure used to summarize certain operating expenses (see reconciliation of non-GAAP financial measures below), were down 14.6% in the three months ended March 29, 2026, reflecting continued disciplined cost management. Compensation expense decreased $9.9 million, or 17.5%, in the three months ended March 29, 2026 compared to the prior-year period. The decrease reflects continued headcount reductions as we execute our digital transformation strategy. Newsprint and ink costs decreased $0.6 million, or 19.0%, in the three months ended March 29, 2026 compared to the prior-year period. The decrease is attributable to lower print volumes, consistent with continued secular declines in demand for print. Other operating expenses decreased $8.7 million, or 12.2%, in the three months ended March 29, 2026 compared to the prior-year period. Other operating expenses include all operating costs not considered to be compensation, newsprint, insurance proceeds, depreciation and amortization, or restructuring costs and assets loss on sales, impairments, and other, net. The largest components are costs associated with printing and distribution of our printed products, digital cost of goods sold and facility expenses. 21 Table of Contents Insurance proceeds were a net gain of $3.8 million in the three months ended March 29, 2026 which represent business interruption insurance recoveries recognized in the current quarter related to the prior-year Cyber Incident. See Note 11. Restructuring costs and other decreased $2.9 million, or 44.1% in the three months ended March 29, 2026, compared to the prior-year period due primarily to $1.9 million of expenses related to the Cyber incident included in the prior year and current year reimbursements of $0.8 million. Depreciation and amortization expense decreased $1.7 million, or 32.0%, in the three months ended March 29, 2026. This decrease is attributable to assets being fully depreciated or amortized. (Gain) loss on asset sales, impairments and other, net, was a net gain of $0.9 million in the three months ended March 29, 2026 compared to a net loss of $0.1 million in the prior-year period. The gain in 2026 was primarily related to the sale of two properties. Operating income of $8.5 million, increased $13.0 million in the three months ended March 29, 2026 compared to an operating loss of $4.5 million in the prior-year period. This increase is related to decreases in compensation expense and other operating expenses which includes $3.8 million in business interruption reimbursements in the current year period. Non-operating Income and Expense Non-operating income and expense decreased by $2.5 million, or 26.8% in the three months ended March 29, 2026 compared to the prior-year period. The decrease is primarily driven by a decrease in interest expense related to the rate reduction on our debt described in Note 7. Our weighted average cost of debt was 8.0% and 9.0% as of the three months ended March 29, 2026 and the three months ended March 30, 2025. Income Tax Expense/Benefit We recorded an income tax expense of $3.4 million in the three months ended March 29, 2026 compared to an income tax benefit of $1.8 million in the prior-year period. The increase in income tax expense for the current period is mainly due to a higher valuation allowance related to additional interest expense carryforwards that are not expected to be fully realized. Net loss and Loss Per Share Net loss was $1.7 million and diluted loss per share was $0.16 for the three months ended March 29, 2026 compared to net loss of $12.0 million and diluted losses per share of $2.07 for the prior-year period. The improvement reflects the cost reduction actions, the non-recurrence of prior-year Cyber Incident costs, and business interruption insurance recoveries discussed above. 22 Table of Contents Six Months Ended Operating results are summarized below. (Thousands of Dollars, Except Per Common Share Data) March 29, 2026 March 30, 2025 Percent Change Operating revenue: Print advertising revenue 31,465 36,393 (13.5) % Digital advertising revenue 83,488 90,670 (7.9) % Advertising and marketing services revenue 114,953 127,063 (9.5) % Print subscription revenue 67,898 84,511 (19.7) % Digital subscription revenue 44,985 45,354 (0.8) % Subscription revenue 112,883 129,865 (13.1) % Print other revenue 14,578 15,101 (3.5) % Digital other revenue 9,612 9,913 (3.0) % Other revenue 24,190 25,014 (3.3) % Total operating revenue 252,026 281,942 (10.6) % Operating expenses: Compensation 96,178 116,913 (17.7) % Newsprint and ink 5,483 6,727 (18.5) % Other operating expenses 131,564 146,135 (10.0) % Insurance proceeds (5,840) — 100.0 % Depreciation and amortization 7,094 11,436 (38.0) % Gain on asset sales, impairments and other, net (903) (803) 12.5 % Restructuring costs and other 6,788 11,666 (41.8) % Total operating expenses 240,364 292,074 (17.7) % Equity in earnings of associated companies 2,088 2,277 (8.3) % Operating (loss) income 13,750 (7,855) *** Non-operating income (expense): Interest expense (17,877) (20,232) (11.6) % Pension and other post employment benefits ("OPEB") related and other, net 1,671 1,311 27.5 % Total non-operating expense, net (16,206) (18,921) (14.3) % Loss before income taxes (2,456) (26,776) (90.8) % Income tax expense 4,379 1,463 *** Net loss (6,835) (28,239) (75.8) % Loss per common share: Basic (0.78) (4.87) (83.9) % Diluted (0.78) (4.87) (83.9) % *** Indicates an absolute value percentage change greater than 100. Operating Revenue Total operating revenue was $252.0 million, down $29.9 million, or 10.6% in the six months ended March 29, 2026 compared to the six months ended March 30, 2025. 23 Table of Contents Advertising and marketing services revenue totaled $115.0 million, down 9.5% in the six months ended March 29, 2026 compared to the prior-year period. Print advertising revenues were $31.5 million, down 13.5% in the six months ended March 29, 2026 compared to the prior-year period driven by continued secular declines and elimination of unprofitable print products. Digital advertising and marketing services totaled $83.5 million, down 7.9% in the six months ended March 29, 2026 compared to the prior-year period. Digital advertising and marketing services represented 72.6% of the six months ended March 29, 2026 total advertising and marketing services revenue, compared to 71.4% in the prior-year period. Subscription revenue totaled $112.9 million, down 13.1% in the six months ended March 29, 2026 compared to the prior-year period. Declines in volumes, consistent with historical and industry trends, were partially offset by strategic rate increases. Digital-only subscribers decreased 18.8% to 591,000 as March 29, 2026. Digital-only subscription revenue declined 0.8% compared to the prior-year period. Other revenue, which primarily consists of digital services from BLOX Digital of $9.6 million, commercial printing revenue of $7.6 million and third party delivery of $3.1 million, decreased $0.8 million, or 3.3%, in the six months ended March 29, 2026 compared to the prior-year period. Digital services revenue decreased by 3.0% in the six months ended March 29, 2026 compared to the prior-year period. Commercial printing revenue decreased 4.1% in the six months ended March 29, 2026 compared to the prior-year period, primarily driven by lower print volumes from our partners. Total digital revenue including digital advertising revenue, digital subscription revenue and digital services revenue totaled $138.1 million, a decrease of 5.4% in the six months ended March 29, 2026 over the prior-year period, and represented 54.8% of our total operating revenue in the six months ended March 29, 2026 Operating Expenses Total operating expenses were $240.4 million, a 17.7% decrease in the six months ended March 29, 2026, compared to the six months ended March 30, 2025. The decrease reflects continued disciplined cost management, the absence of prior-year Cyber Incident response costs, and $5.8 million of business interruption insurance recoveries recognized in the current period. See Note 11. Cash Costs of $233.2 million, a non-GAAP financial measure used to summarize certain operating expenses (see reconciliation of non-GAAP financial measures below), were down 13.5% in the six months ended March 29, 2026, reflecting continued disciplined cost management. Compensation expense decreased $20.7 million, or 17.7% in the six months ended March 29, 2026 compared to the prior-year period from reductions in full time employees due to continued business transformation efforts. Newsprint and ink costs decreased $1.2 million, or 18.5% in the six months ended March 29, 2026, compared to the prior-year period. The decrease is attributable to declines in newsprint volumes. Other operating expenses decreased $14.6 million, or 10.0%, in the six months ended March 29, 2026 compared to the prior-year period. Other operating expenses include all operating costs not considered to be compensation, newsprint, insurance proceeds, depreciation and amortization, or restructuring costs and assets loss on sales, impairments, and other, net. The largest components are costs associated with printing and distribution of our printed products, digital cost of goods sold and facility expenses. Insurance proceeds were a net gain of $5.8 million in the six months ended March 29, 2026 which represent business interruption insurance recoveries related to the prior-year Cyber Incident. See Note 11. Restructuring costs and other decreased $4.9 million, or 41.8% in the six months ended March 29, 2026, compared to the six months ended March 30, 2025. The prior year period included $1.9 million of expenses related to the Cyber Incident and costs associated with the shutdown of one of our production facilities. Depreciation and amortization expense decreased $4.3 million, or 38.0%, in the six months ended March 29, 2026 compared to the prior-year period. The decrease in both is attributable to assets being fully depreciated or amortized. (Gain) loss on asset sales, impairments and other, net, was $0.9 million in the six months ended March 29, 2026 compared to a net gain of $0.8 million in the prior-year period. Current year gains on sales was related to the sale of two properties. 24 Table of Contents The factors noted above resulted in an operating income of $13.8 million in the six months ended March 29, 2026 compared to an operating loss of $7.9 million in the prior-year period primarily due to decreases in compensation expense and other operating expenses which includes $5.8 million in business interruption reimbursements. Non-operating Income and Expense Non-operating income and expense decreased by $2.7 million, or 14.3% compared to the six months ended March 30, 2025. The decrease is primarily driven by decrease in interest expense related to the rate reduction on our debt described in Note 7. Our weighted average cost of debt was 8.0% and 9.0% at the end of the six months ended March 29, 2026 and the prior-year period. Income Tax Expense We recorded an income tax expense of $4.4 million in the six months ended March 29, 2026 compared to $1.5 million in the six months ended March 30, 2025. The increase in income tax expense for the current period is mainly due to a higher valuation allowance related to additional interest expense carryforwards that are not expected to be fully realized. Net loss and Loss Per Share Net loss was $6.8 million and diluted loss per share was $0.78 for the six months ended March 29, 2026 compared to net loss of $28.2 million and diluted losses per share of $4.87 for the prior-year period. The change reflects the various items discussed above. NON-GAAP FINANCIAL MEASURES We use non-GAAP financial performance measures to supplement the financial information presented on a GAAP basis. These non-GAAP financial measures should not be considered in isolation or as a substitute for the relevant GAAP measures and should be read in conjunction with information presented on a GAAP basis. In this report, we present Adjusted EBITDA and Cash Costs which are non-GAAP financial performance measures that exclude from our reported GAAP results the impact of certain items consisting primarily of restructuring charges and non-cash charges. We believe such expenses, charges and gains are not indicative of normal, on-going operations, and their inclusion in results makes for more difficult comparisons between years and with peer group companies. In the future, however, we are likely to incur expenses, charges and gains similar to the items for which the applicable GAAP financial measures have been adjusted and to report non-GAAP financial measures excluding such items. Accordingly, exclusion of those or similar items in our non-GAAP presentations should not be interpreted as implying the items are non-recurring, infrequent, or unusual. We define our non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, as follows: Adjusted EBITDA is a non-GAAP financial performance measure that enhances financial statement users' overall understanding of our operating performance. The measure isolates unusual, infrequent, or non-cash transactions from the operating performance of the business. This allows users to easily compare operating performance among various fiscal periods and how management measures the performance of the business. This measure also provides users with a benchmark that can be used when forecasting our future operating performance that excludes unusual, nonrecurring or one-time transactions. Adjusted EBITDA is also a component of the calculation used by stockholders and analysts to determine the value of our business when using the market approach, which applies a market multiple to financial metrics. It is also a measure used to calculate our leverage ratio, which is a key financial ratio monitored and used by us and our investors. Adjusted EBITDA is defined as net income (loss), plus non-operating expenses, net, income tax expense (benefit), depreciation and amortization, assets loss (gain) on sales, impairments and other, restructuring costs and other, stock compensation and our 50% share of EBITDA from TNI and MNI, minus equity in earnings of TNI and MNI. Cash Costs represent a non-GAAP financial performance measure of operating expenses which are measured on an accrual basis and settled in cash. This measure is useful to investors in understanding the components of 25 Table of Contents our cash-settled operating costs. Generally, we provide forward-looking guidance of Cash Costs, which can be used by financial statement users to assess our ability to manage and control its operating cost structure. Cash Costs are defined as compensation, newsprint and ink and other operating expenses and exclude restructuring costs and other, which are typically settled in cash. Adjusted EBITDA and Cash Costs are reconciled to net loss and operating expenses, below, the closest comparable numbers under GAAP. RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (UNAUDITED) The table below reconciles the non-GAAP financial performance measure of Adjusted EBITDA to net loss, the most directly comparable GAAP measure: Three months ended Six months ended (Thousands of Dollars) March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 Net loss (1,709) (12,015) (6,835) (28,239) Adjusted to exclude Income tax expense (benefit) 3,448 (1,780) 4,379 1,463 Non-operating expenses, net 6,803 9,292 16,206 18,921 Equity in earnings of TNI and MNI (1,008) (1,155) (2,088) (2,277) Depreciation and amortization 3,515 5,171 7,094 11,436 Restructuring costs and other 3,640 6,516 6,788 11,666 (Gain) loss on asset sales, impairments and other, net (900) 126 (903) (803) Stock compensation 213 358 541 788 Add: Ownership share of TNI and MNI EBITDA (50%) 1,123 1,255 2,224 2,422 Adjusted EBITDA 15,125 7,768 27,406 15,377 The table below reconciles the non-GAAP financial performance measure of Cash Costs to Operating expenses, the most directly comparable GAAP measure: Three months ended Six months ended (Thousands of Dollars) March 29, 2026 March 30, 2025 March 29, 2026 March 30, 2025 Operating expenses 114,430 143,038 240,364 292,074 Adjustments Depreciation and amortization 3,515 5,171 7,094 11,436 (Gain) loss on asset sales, impairments and other, net (900) 126 (903) (803) Restructuring costs and other 3,640 6,516 6,788 11,666 Insurance proceeds (3,840) — (5,840) — Cash Costs 112,015 131,225 233,225 269,775 LIQUIDITY AND CAPITAL RESOURCES A summary of our cash flows is included in the narrative below. 26 Table of Contents Operating Activities Cash used in operating activities totaled $1.8 million in the six months ended March 29, 2026 down $6.4 million compared to cash used in operating activities of $8.1 million in the six months ended March 30, 2025. The improvement was primarily driven by an increase in operating results of $7.8 million (defined as net loss adjusted for non-working capital items) offset primarily by a decrease in working capital of $1.5 million. The decrease in working capital is primarily related to higher payments related to the Private Placement expenses offset by improved accounts receivable driven by lower revenue in the period. Investing Activities Cash used in investing activities totaled $0.3 million in the six months ended March 29, 2026 compared to cash provided by investing activities of $3.2 million in the six months ended March 30, 2025. The six months ended March 30, 2025 included $6.1 million in proceeds from the sale of assets as we divested non-core real estate compared to only $1.1 million in asset sale proceeds in the current period. Financing Activities Cash provided by financing activities was $45.3 million for the six months ended March 29, 2026 from net Private Placement proceeds described in Note 2. Additional Information on Liquidity PRIVATE PLACEMENT FINANCING AND RELATED AGREEMENTS As discussed in Note 2, we issued an aggregate of 16,000,000 shares of our Common Stock in a Private Placement at a price of $3.25 per share, consisting of 15,384,615 shares issued to certain investors and 615,385 shares issued to service providers as reimbursement for certain expenses incurred by such investors. The aggregate gross proceeds from the Private Placement were $50.0 million, before deducting offering expenses. Additionally, concurrently with the execution of the Private Placement, we entered into the Second Amendment to Credit Agreement. The amendments include, among other items, a reduction of the applicable margin on our 25-year term loan from 9.00% to 5.00% for a period of five years following the closing and amending the definition of “Excess Cash Flow” such that any cash on hand balance held by us above $64.0 million will be deemed Excess Cash Flow for a five year period following the closing. As of March 29, 2026, our liquidity, consisting of cash on hand, was $53.3 million. For the six months ended March 29, 2026, net cash used in operating activities was $1.8 million, down from $8.1 million used in the six months ended March 30, 2025. This increase is primarily attributable to the improved operating results and working capital management compared to the prior-year period. The current operating environment, expenditures related to our business transformation initiatives, and the impacts of the Cyber Incident have adversely affected our net cash flows and placed pressure on our liquidity. However, we believe that cash generated from operating activities, along with the proceeds from the Private Placement financing will be sufficient to fund our operations and meet our obligations for at least the next 12 months from the date of this filing. CHANGES IN LAWS AND REGULATIONS Wage Laws The United States and various state and local governments are considering increasing their respective minimum wage rates. Most of our employees are paid more than the current United States or state minimum wage rates. However, until changes to such rates are enacted, the impact of the changes cannot be determined. Item 3. Controls and Procedures EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Under the supervision and with the participation of our senior management, including our President and Chief Executive Officer and Vice President, Chief Financial Officer and Treasurer, we conducted an evaluation of the 27 Table of Contents effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). Based on this evaluation, our President and Chief Executive Officer and Vice President, Chief Financial Officer and Treasurer concluded that as of the Evaluation Date, our disclosure controls and procedures were effective. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There have been no changes in our internal control over financial reporting that occurred during the three months ended March 29, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. PART II OTHER INFORMATION