Lindsay Corp: Form 10-Q for the period ended May 31, 2024

Concerning Forward‑Looking Statements

This Quarterly Report on Form 10-Q contains not only historical information, but also forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not historical are forward-looking and reflect information concerning possible or assumed future results of operations and planned financing of the Company. In addition, forward-looking statements may be made orally or in press releases, conferences, reports, on the Company's web site, or otherwise, in the future by or on behalf of the Company. When used by or on behalf of the Company, the words “expect,” “anticipate,” “estimate,” “believe,” “intend,” “will,” “plan,” “predict,” “project,” “outlook,” “could,” “may,” “should” or similar expressions generally identify forward-looking statements. The entire section entitled “Executive Overview and Outlook” should be considered forward-looking statements. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve a number of risks and uncertainties, including but not limited to those discussed in the “Risk Factors” section in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2023. Readers should not place undue reliance on any forward-looking statement and should recognize that the statements are predictions of future results or conditions, which may not occur as anticipated. Actual results or conditions could differ materially from those anticipated in the forward-looking statements and from historical results, due to the risks and uncertainties described herein and in the Company’s other public filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended August 31, 2023, as well as other risks and uncertainties not now anticipated. The risks and uncertainties described herein and in the Company’s other public filings are not exclusive and further information concerning the Company and its businesses, including factors that potentially could materially affect the Company's financial results, may emerge from time to time. Except as required by law, the Company assumes no obligation to update forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

Accounting Policies

In preparing the Company’s condensed consolidated financial statements in conformity with U.S. GAAP, management must make a variety of decisions which impact the reported amounts and the related disclosures. These decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. In making these decisions, management applies its judgment based on its understanding and analysis of the relevant circumstances and the Company’s historical experience.

The Company’s accounting policies that are most important to the presentation of its results of operations and financial condition, and which require the greatest use of judgments and estimates by management, are designated as its critical accounting policies. See discussion of the Company’s critical accounting policies under Item 7 in the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended August 31, 2023. Management periodically re-evaluates and adjusts its critical accounting policies as circumstances change. There were no significant changes in the Company’s critical accounting policies during the nine months ended May 31, 2024.

Recent Accounting Guidance

See Note 1 – Basis of Presentation and the disclosure therein of recently adopted accounting guidance to the condensed consolidated financial statements set forth in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Executive Overview and Outlook

Operating revenues for the three months ended May 31, 2024 were $139.2 million, a decrease of 15 percent compared to $164.6 million for the three months ended May 31, 2023. Irrigation segment revenues for the three months ended May 31, 2024 decreased 19 percent to $114.8 million from the same prior year period, while infrastructure segment revenues increased 11 percent to $24.4 million. Net earnings for the three months ended May 31, 2024 were $20.4 million, or $1.85 per diluted share, compared to net earnings of $16.9 million, or $1.53 per diluted share, for the three months ended May 31, 2023.

The primary drivers for the Company’s irrigation segment are the need for irrigated agricultural crop production, which is tied to population growth and the attendant need for expanded food production, and the need to use water resources efficiently. These drivers are affected by a number of factors, including the following:

• Agricultural commodity prices – As of May 2024, U.S. corn prices have decreased approximately 24 percent and U.S. soybean prices have decreased approximately 7 percent from price levels prevailing in May 2023. The reduction in commodity prices is due primarily to higher production levels in calendar 2023 that resulted in increased supply and higher inventory levels at the end of the year. Agriculture commodity prices fluctuate based on supply factors, such as global production and inventory levels and the ongoing conflict between Ukraine and Russia, and demand factors such as food and feed consumption, biofuel production and the level of China's demand for agricultural imports.
• Net farm income – As of February 2024, the U.S. Department of Agriculture (the “USDA”) estimated 2024 U.S. net farm income to be $116.1 billion, a decrease of 26 percent from forecasted 2023 U.S. net farm income of $155.9 billion. The majority of this projected decrease is expected to come from a reduction in government support payments while cash receipts for crops is projected to decrease by 6 percent and cash expenses are projected to increase by 4 percent.
• Weather conditions – Demand for irrigation equipment is often positively affected by storm damage and prolonged periods of drought conditions as producers look for ways to reduce the risk of low crop production and crop failures. Conversely, demand for irrigation equipment can be negatively affected during periods of more predictable or abundant natural precipitation.
• Governmental policies – A number of governmental laws and regulations can affect the Company’s business, including:
• The Agriculture Improvement Act of 2018 (the “Farm Bill”) was signed into law in December 2018 and provides a degree of certainty to growers, including funding for the Environmental Quality Incentives Program, which provides financial assistance to farmers to implement conservation practices, and is frequently used to assist in the purchase of center pivot irrigation systems. In November 2023, Congress voted to extend the Farm Bill, which is now set to expire at the end of September 2024.
• Changes to U.S. income tax laws enacted in December 2017 increased the benefit of certain tax incentives, such as the Section 179 income tax deduction and Section 168 bonus depreciation, which are intended to encourage equipment purchases by allowing 100 percent of the cost of equipment to be treated as an expense in the year of purchase rather than amortized over its useful life. This benefit is being phased out by 20 percent per year over a five-year period, beginning in 2023. For calendar 2023, the allowable deduction is 80 percent of the cost of equipment and in calendar 2024 the allowable deduction drops to 60 percent.
• Biofuel production continues to be a major demand driver for irrigated corn, sugar cane and soybeans as these crops are used in high volumes to produce ethanol and biodiesel. On June 21, 2023, the U.S. Environmental Protection Agency (“EPA”) announced a final rule setting biofuel volume requirements for the Renewable Fuels Standard (RFS) program for 2023, 2024, and 2025. The final volume requirements reflect an increase in total gallons of renewable fuel of approximately 3 to 4 percent in each successive year.
• Many international markets are affected by government policies such as subsidies and other agriculturally related incentives. While these policies can have a significant effect on individual markets, they typically do not have a material effect on the consolidated results of the Company.
• Currency – The value of the U.S. dollar fluctuates in relation to the value of currencies in a number of countries to which the Company exports products and in which the Company maintains local operations. The strengthening of the dollar increases the cost in the local currency of the products exported from the U.S. into these countries and, therefore, could negatively affect the Company’s international sales and margins. In addition, the U.S. dollar value of sales made in any affected foreign currencies will decline as the value of the dollar rises in relation to these other currencies.

U.S. net farm income levels in calendar 2023, although lower than historically high 2022 levels, supported farmer profitability and demand for investment in the first half of fiscal 2024. However, the forecasted decline in estimated 2024 net farm income has led to tempered demand for irrigation equipment during the third quarter of fiscal 2024, which is expected to continue until the outlook for net farm income improves. The Company has been able to maintain its pricing for irrigation equipment while inflationary pressure on steel and other raw material costs, as well as freight and logistics costs, have moderated compared to the same prior year period.

The most significant opportunities for growth in irrigation sales over the next several years continue to be in international markets where irrigation use is less developed and demand is driven not only by commodity prices and net farm income, but also by food security, water scarcity and population growth. While international irrigation markets remain active with opportunities for further development and expansion, regional political and economic factors, including armed conflict, currency conditions and other factors can create a challenging environment. The Company continues to monitor the Ukraine and Russia conflict for both short and long-term implications and has suspended new business activity in Russia and Belarus since February 2022. Sales with Russian, Ukrainian and Belarusian customers historically have represented less than 5 percent of consolidated revenues. Additionally, international results are heavily dependent upon project sales which tend to fluctuate and can be difficult to forecast accurately. In May 2024, the Company announced a multi-year supply agreement to provide irrigation systems and remote management and scheduling technology for a large project in the Middle East and North Africa (MENA) region. The project is valued at more than $100 million in revenue, and is expected to be recognized over the period beginning in the fourth quarter of fiscal 2024 and continuing through the first quarter of fiscal 2026.

The infrastructure business continues to be driven by the Company's transportation safety products, the demand for which largely depends on government spending for road construction and improvements. The enactment of the Infrastructure Investment and Jobs Act in November 2021 marked the largest infusion of federal investment into infrastructure projects in more than a decade. This legislation introduced $110 billion in incremental federal funding, planned for roads, bridges, and other transportation projects. The Company expects this additional funding to support higher demand in the U.S. for its transportation safety products.

The backlog of unshipped orders at May 31, 2024 was $246.9 million compared with $94.5 million at May 31, 2023. Included in these backlogs are amounts of $62.0 million and $5.2 million, respectively, for orders that are not expected to be fulfilled within the subsequent twelve months. The backlog in both segments was higher compared to the prior year, with the increase in irrigation backlog resulting from the addition of the large project in the MENA region. The Company’s backlog can fluctuate from period to period due to the seasonality, cyclicality, timing and execution of contracts. Backlog typically represents long-term projects as well as short lead-time orders, and therefore is generally not a good indication of the next fiscal quarter’s revenues.

Results of Operations

For the Three Months ended May 31, 2024 compared to the Three Months ended May 31, 2023

The following section presents an analysis of the Company’s operating results displayed in the condensed consolidated statements of earnings for the three months ended May 31, 2024 and 2023. It should be read together with the industry segment information in Note 14 to the condensed consolidated financial statements:

($ in thousands)

(1) Includes $5.9 million and $7.3 million of corporate operating expenses for the three months ended May 31, 2024 and May 31, 2023, respectively.

Revenues

Operating revenues for the three months ended May 31, 2024 decreased 15 percent to $139.2 million from $164.6 million for the three months ended May 31, 2023, as irrigation revenues decreased $27.7 million and infrastructure revenues increased $2.4 million compared to the prior year period. The irrigation segment provided 83 percent of the Company’s revenue during the three months ended May 31, 2024 as compared to 87 percent for the three months ended May 31, 2023.

North America irrigation revenues for the three months ended May 31, 2024 of $68.2 million decreased $6.8 million, or 9 percent, from $75.0 million for the three months ended May 31, 2023. Lower commodity prices, a projected decline in U.S. net farm income, and wet field conditions in the midwest that delayed deliveries and irrigation start up all contributed to lower unit sales volume for irrigation equipment and sales of replacement parts for the current year period. Revenues were also impacted by slightly lower average selling prices compared to the same prior year period.

International irrigation revenues for the three months ended May 31, 2024 of $46.6 million decreased $20.9 million, or 31 percent, from $67.5 million for the three months ended May 31, 2023. The decrease resulted primarily from lower sales volumes in Brazil and other Latin America markets compared to the same prior year period. In Brazil, order activity remains constrained due to the impact lower commodity prices have on grower profitability and available liquidity, which is reducing growers' ability to invest in irrigation equipment in the near term. The decrease in revenues was partially offset by the favorable effects of foreign currency translation of approximately $0.7 million compared to the same prior year period.

Infrastructure segment revenues were $24.4 million for the three months ended May 31, 2024 compared to $22.0 million for the three months ended May 31, 2023. The increase resulted primarily from an increase in both Road Zipper System sales and lease revenue as compared to the same prior year period. The impact of higher sales of road safety products in the U.S. was offset by lower sales in international markets.

Gross Profit

Gross profit for the three months ended May 31, 2024 of $46.5 million decreased 13 percent from $53.2 million for the three months ended May 31, 2023. The decrease in gross profit resulted primarily from lower irrigation revenues. Gross margin was 33.4 percent of sales for the three months ended May 31, 2024 compared with 32.3 percent of sales for the three months ended May 31, 2023. Increased gross margin in infrastructure resulted primarily from a more favorable margin mix of revenues with higher Road Zipper System sales and lease revenues. This favorable impact was partially offset by lower irrigation gross margin resulting from a decrease in revenues without a corresponding reduction in fixed costs.

Operating Expenses

Operating expenses of $26.6 million for the three months ended May 31, 2024 increased $0.3 million, or 1 percent, compared with $26.3 million for the three months ended May 31, 2023. Increased selling expense was partially offset by cost reductions in other areas.

Other Income (Expense), net

The Company recorded other income of $0.2 million for the three months ended May 31, 2024 compared to other expense of $1.2 million for the three months ended May 31, 2023. The change resulted primarily from foreign currency transaction losses of $0.1 million in the current year compared to foreign currency transaction losses of $0.9 million in the same prior year period, along with a $0.3 million increase in interest income.

Income Taxes

The Company recorded an income tax benefit of $0.2 million and income tax expense of $8.9 million for the three months ended May 31, 2024 and 2023, respectively. The effective income tax rate was -1.0 percent and 34.4 percent for the three months ended May 31, 2024 and 2023, respectively. The lower effective tax rate in the current year period resulted from a discrete tax benefit of $4.8 million related to the recognition of an income tax credit in Brazil. This discrete benefit is not expected to repeat in future periods. The impact of discrete items in the same prior year period was not significant.

For the Nine Months ended May 31, 2024 compared to the Nine Months ended May 31, 2023

The following section presents an analysis of the Company’s operating results displayed in the condensed consolidated statements of earnings for the nine months ended May 31, 2024 and 2023. It should be read together with the industry segment information in Note 14 to the condensed consolidated financial statements:

($ in thousands)

(1) Includes $20.8 million and $22.3 million of corporate operating expenses for the nine months ended May 31, 2024 and May 31, 2023, respectively.

Revenues

Operating revenues for the nine months ended May 31, 2024 decreased 11 percent to $452.1 million from $507.0 million for the nine months ended May 31, 2023, as irrigation revenues decreased $54.4 million and infrastructure revenues decreased $0.5 million. The irrigation segment provided 86 percent of the Company’s revenue during the nine months ended May 31, 2024 as compared to 87 percent for the nine months ended May 31, 2023.

North America irrigation revenues for the nine months ended May 31, 2024 of $240.4 million decreased $8.9 million, or 4 percent, from $249.3 million for the nine months ended May 31, 2023. Slightly higher unit sales volume in the current year period was more than offset by lower sales of replacement parts, the impact of a less favorable mix of shorter machines, and slightly lower average selling prices compared to the same prior year period.

International irrigation revenues for the nine months ended May 31, 2024 of $147.6 million decreased $45.6 million, or 24 percent, from $193.1 million for the nine months ended May 31, 2023. The decrease resulted primarily from lower sales volumes in Brazil and other Latin America markets compared to the same prior year period. In Brazil, market demand has declined due to a significant drop in local commodity prices that has had a negative impact on farmer profitability and liquidity. This decrease was partially offset by the favorable effects of foreign currency translation of approximately $3.9 million compared to the same prior year period.

Infrastructure segment revenues for the nine months ended May 31, 2024 of $64.1 million decreased $0.5 million, or 1 percent, from $64.6 million for the nine months ended May 31, 2023. The decrease resulted from lower sales of road safety products compared to the same prior year period. In addition, the decrease was partially attributable to lower Road Zipper System which more than offset higher lease revenue compared to the same prior year period. The prior year included a project that did not repeat in the current year.

Gross Profit

Gross profit for the nine months ended May 31, 2024 of $145.4 million decreased 9 percent from $160.5 million for the nine months ended May 31, 2023. The decrease in gross profit resulted primarily from lower revenues in irrigation. Gross margin was 32.2 percent of sales for the nine months ended May 31, 2024 compared with 31.7 percent of sales for the nine months ended May 31, 2023. Increased gross margin in infrastructure resulted primarily from a more favorable margin mix of revenues with higher Road Zipper System lease revenues. This favorable impact was offset by lower irrigation gross margin resulting from a decrease in revenues without a corresponding reduction in fixed costs.

Operating Expenses

Operating expenses of $82.2 million for the nine months ended May 31, 2024 increased $0.6 million compared with $81.7 million for the nine months ended May 31, 2023. Increased selling expense was partially offset by cost reductions in other areas.

Other Income (Expense), net

The Company recorded other income for the nine months ended May 31, 2024 of $0.8 million compared to other expense of $3.4 million for the nine months ended May 31, 2023. The current year period includes $0.3 million of foreign currency transaction losses compared to losses of $2.0 million in the same prior year period and $3.3 million of interest income compared to $1.6 million in the same prior year period.

Income Taxes

The Company recorded income tax expense of $10.3 million and $22.3 million for the nine months ended May 31, 2024 and 2023, respectively. The effective income tax rate was 16.2 percent and 29.6 percent for the nine months ended May 31, 2024 and May 31, 2023, respectively. The lower effective tax rate in the current year period reflects a decreased proportion of earnings in higher rate foreign jurisdictions, along with the impact of discrete benefits totaling $6.1 million compared to discrete benefits totaling $0.8 million in the same prior year period.

Liquidity and Capital Resources

The Company's cash, cash equivalents, and marketable securities totaled $152.7 million at May 31, 2024 compared with $144.4 million at May 31, 2023 and $166.3 million at August 31, 2023. The Company requires cash for financing its receivables and inventories, paying operating expenses and capital expenditures, and for dividends and share repurchases. The Company meets its liquidity needs and finances its capital expenditures from its available cash and funds provided by operations along with borrowings under its credit arrangements described below. The Company’s investments in marketable securities are primarily comprised of United States government securities and investment grade corporate securities. The Company believes its current cash resources, investments in marketable securities, projected operating cash flow, and remaining capacity under its continuing bank lines of credit are sufficient to cover all its expected working capital needs, planned capital expenditures and dividends. The Company may require additional borrowings to fund potential acquisitions in the future.

The Company’s total cash and cash equivalents held by foreign subsidiaries were approximately $62.9 million, $54.6 million, and $64.6 million as of May 31, 2024, May 31, 2023, and August 31, 2023, respectively. The Company considers earnings in foreign subsidiaries to be indefinitely reinvested and would need to accrue and pay incremental state, local, and foreign taxes if such earnings were repatriated to the United States. The Company does not intend to repatriate the funds and does not expect these funds to have a significant impact on the Company’s overall liquidity.

Net working capital was $365.0 million at May 31, 2024, as compared with $358.3 million at May 31, 2023 and $351.4 million at August 31, 2023. Cash provided by operating activities totaled $42.7 million during the nine months ended May 31, 2024, compared to cash provided by operating activities of $59.2 million during the nine months ended May 31, 2023. The decrease resulted primarily from an increase in inventories that was partially offset by a decrease in receivables compared to the same prior year period.

Cash flows used in investing activities totaled $32.4 million during the nine months ended May 31, 2024 compared to $18.9 million during the nine months ended May 31, 2023. Purchases of marketable securities amounted to $15.0 million in the current year compared to $4.9 million in the same prior year period. Purchases of property, plant, and equipment were $23.5 million, compared to $13.3 million in the same prior year period.

Cash flows used in financing activities totaled $30.2 million during the nine months ended May 31, 2024 compared to cash flows used in financing activities of $13.5 million during the nine months ended May 31, 2023. During the current year period, the Company repurchased $17.9 million of common stock.

Capital Allocation Plan

The Company’s capital allocation plan is to continue investing in revenue and earnings growth, combined with a defined process for enhancing returns to stockholders. Under the Company’s capital allocation plan, the priorities for uses of cash include:

• Investment in organic growth including capital expenditures and expansion of international markets,
• Dividends to stockholders, along with expectations to increase dividends over time,
• Synergistic acquisitions that provide attractive returns to stockholders, and
• Opportunistic share repurchases taking into account cyclical and seasonal fluctuations.

Capital Expenditures

Capital expenditures for fiscal 2024 are expected to be approximately $30.0 million, including equipment replacement, productivity improvements, new product development and commercial growth investments. The increase over recent levels of capital expenditures is primarily related to modernization and productivity improvements planned at certain manufacturing facilities. The Company’s management does maintain flexibility to modify the amount and timing of some of the planned expenditures in response to economic conditions.

Dividends

In the third quarter of fiscal 2024, the Company paid a quarterly cash dividend to stockholders of $0.35 per common share, or $3.8 million, compared to a quarterly cash dividend of $0.34 per common share, or $3.7 million, in the third quarter of fiscal 2023.

Share Repurchases

The Company’s Board of Directors authorized a share repurchase program of up to $250.0 million of common stock with no expiration date. Under the program, shares may be repurchased in privately negotiated and/or open market transactions as well as under formalized trading plans in accordance with the guidelines specified under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

During the three and nine months ended May 31, 2024, the Company repurchased 154 thousand shares of its common stock under the program in open market transactions for $17.9 million, including excise taxes of $0.2 million. There were no shares repurchased during the three or nine months ended May 31, 2023. As of May 31, 2024, the repurchased shares were held as treasury stock and $46.0 million of the authorization remained available for future share repurchases.

Long-Term Borrowing Facilities

Senior Notes. The Company has outstanding $115.0 million in aggregate principal amount of Senior Notes, Series A (the “Senior Notes”). The entire principal of the Senior Notes is due and payable on February 19, 2030. Interest on the Senior Notes is payable semi-annually at a fixed annual rate of 3.82 percent. Borrowings under the Senior Notes are unsecured. The Company used the proceeds of the sale of the Senior Notes for general corporate purposes, including acquisitions and dividends.

Revolving Credit Facility. The Company has outstanding a $50.0 million unsecured Amended and Restated Revolving Credit Facility (the “Revolving Credit Facility”) with Wells Fargo Bank, National Association (“Wells Fargo”) expiring August 26, 2026. The Company intends to use borrowings under the Revolving Credit Facility for working capital purposes and to fund acquisitions. At May 31, 2024 and 2023, the Company had no outstanding borrowings under the Revolving Credit Facility. The amount of borrowings available at any time under the Revolving Credit Facility is reduced by the amount of standby letters of credit issued by Wells Fargo then outstanding. At May 31, 2024, the Company had the ability to borrow up to $50.0 million under the Revolving Credit Facility. The Revolving Credit Facility may be increased by up to an additional $50.0 million at any time, subject to additional commitment approval. Borrowings under the Revolving Credit Facility bear interest at a variable rate equal to the Secured Overnight Financing Rate ("SOFR") plus a margin of between 100 and 210 basis points depending on the Company’s leverage ratio then in effect (which resulted in a variable rate of 6.69 percent at May 31, 2024), subject to adjustment as set forth in the loan documents for the Revolving Credit Facility. Interest is paid on a monthly to quarterly basis depending on loan type. The Company currently pays an annual commitment fee on the unused portion of the Revolving Credit Facility. The fee is between 0.125 percent and 0.2 percent on the unused balance depending on the Company’s leverage ratio then in effect (which resulted in a fee of 0.125 percent at May 31, 2024).

Borrowings under the Revolving Credit Facility have equal priority with borrowings under the Company’s Senior Notes. Each of the credit arrangements described above include certain covenants relating primarily to the Company’s financial condition. These financial covenants include a funded debt to EBITDA leverage ratio and an interest coverage ratio. In the event that the loan documents for the Revolving Credit Facility were to require the Company to comply with any financial covenant that is not already included or is more restrictive than what is already included in the arrangement governing the Senior Notes, then such covenant shall be deemed incorporated by reference for the benefit of holders of the Senior Notes. Upon the occurrence of any event of default of these covenants, including a change in control of the Company, all amounts outstanding thereunder may be declared to be immediately due and payable. At May 31, 2024 and 2023, the Company was in compliance with all financial loan covenants contained in its credit arrangements in place as of each of those dates.

Contractual Obligations and Commercial Commitments

There have been no material changes in the Company’s contractual obligations and commercial commitments as described in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2023.

There have been no material changes from the Company’s quantitative and qualitative disclosures about market risk previously disclosed in the Company’s most recent Annual Report on Form 10-K. See discussion of the Company’s quantitative and qualitative disclosures about market risk under Part II, Item 7A in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2023.

Disclosure Controls and Procedures

The Company carried out an evaluation under the supervision and the participation of the Company’s management, including the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of May 31, 2024.

Changes in Internal Control over Financial Reporting

The CEO and CFO determined that there has not been any significant change to the Company’s internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

There have been no material changes from risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K. See the discussions of the Company’s risk factors under Part I, Item 1A in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2023.