Bruker Corp: Form 10-Q for the period ended Sep 30, 2024

The following discussion of our financial condition and results of operations should be read in conjunction with our interim unaudited condensed consolidated financial statements and the notes to those statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q, and in conjunction with the unaudited condensed consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2023.

Any statements other than statements of historical fact contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q may be deemed to be 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. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “seek,” “may,” “will,” “intend,” “estimate,” “should” and similar expressions are intended to identify forward-looking statements.

Forward-looking statements include, but are not limited to, statements regarding:

• the impact of supply chain challenges on our business and operations;
• our working capital requirements and the sufficiency of our cash, borrowings and proceeds of indebtedness to fund our operations and investment activities;
• our plans to make capital investments;
• the impact of changes to tax and accounting rules and changes in law;
• fluctuations in estimates impacting costs related to our self-funded health insurance plan;
• our expectations regarding backlog and revenue;
• our expectations and the impact of our restructuring initiatives;
• the impact of our global IT transformation activities;
• the impact of foreign currency exchange rates and changes in commodity prices; and
• any other statements that address events or developments that the Company intends or believes will or may occur in the future.

Actual results may differ from those referred to in any forward-looking statements due to a number of factors, including, but not limited to, the risks described in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and in this Quarterly Report on Form 10-Q. We expressly disclaim any intent or obligation to update these forward-looking statements other than as required by law.

Non-GAAP Financial Measures

Although our unaudited condensed consolidated financial statements have been prepared in accordance with GAAP, we believe that describing revenue and expenses, excluding the effects of foreign currency, acquisitions and divestitures, as well as certain other charges, net, provides meaningful supplemental information regarding our performance. We rely internally on certain measures that are not calculated according to GAAP. These measures include non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating income, non-GAAP operating margin, and free cash flow.

Our management believes that these financial measures provide relevant and useful information that is widely used by equity analysts, investors and competitors in our industry, as well as by our management, in assessing both consolidated and business unit performance and are useful measures to evaluate our continuing business. Additionally, management believes free cash flow is a useful measure to evaluate our business as it indicates the amount of cash generated after additions to property, plant, and equipment which is available for, among other things, investments in our business, acquisitions, share repurchases, dividends and repayment of debt.

We regularly use these non-GAAP financial measures internally to understand, manage, and evaluate our business results and make operating decisions. We also measure our employees and compensate them, in part, based on such non-GAAP measures and use this information for our planning and forecasting activities. These measures may also be useful to investors in evaluating the underlying operating performance of our business. The presentation of these non-GAAP financial measures is not intended to be a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and it may be different from non-GAAP financial measures used by other companies, and therefore, may not be comparable among companies.

We define our non-GAAP financial measures as follows:

• Non-GAAP gross profit as GAAP gross profit excluding costs related to restructuring actions, acquisition and related integration expenses, amortization of acquired intangible assets, costs associated with our global information technology transition initiatives, and other non-operational costs (“non-GAAP adjustments”).
• Non-GAAP gross profit margin as GAAP gross profit margin excluding the impact of non-GAAP adjustments.
• Non-GAAP operating income as GAAP operating income excluding non-GAAP adjustments.
• Non-GAAP operating margin as GAAP operating margin excluding the impact of non-GAAP adjustments.
• Free cash flow as GAAP net cash provided by operating activities less additions to property, plant, and equipment.

OVERVIEW

We are a developer, manufacturer and distributor of high-performance scientific instruments and analytical and diagnostic solutions that enable our customers to explore life and materials at microscopic, molecular and cellular levels. Our corporate headquarters are located in Billerica, Massachusetts. We maintain major technical and manufacturing centers in Europe, Asia and North America and we have sales offices located throughout the world. Bruker is organized into four reportable segments: the Bruker Scientific Instruments (BSI) BioSpin Segment, the BSI Chemicals, Applied Markets, Life Science, In Vitro Diagnostics, Detection (CALID) Segment, the BSI NANO Segment and the Bruker Energy & Supercon Technologies (BEST) Segment.

During the first nine months of 2024, Bruker acquired ELITech, Nanostring and Chemspeed. ELITech and Nanostring extend our capabilities in molecular diagnostics and life science analytical instruments. The Chemspeed acquisition brings to Bruker new capabilities in lab automation. The ELITech business will be integrated in the BSI CALD segment, the Nanostring acquisition will be integrated into the BSI NANO segment and the Chemspeed business will be integrated into the BSI BioSpin segment.

Revenue for the three months ended September 30, 2024, increased by $121.6 million, or 16.4%, to $864.4 million, compared to $742.8 million for the comparable period in 2023. Approximately 12.5% of the revenue growth during the three months ended September 30, 2024 was attributed to acquisitions, and another 0.7% from favorable foreign exchange rate movements. Excluding the favorable effects of foreign exchange rate movements and our recent acquisitions, our organic revenue, a non-GAAP measure, increased 3.1%. Revenue increases were driven by demand for our differentiated high-value scientific instruments and life science solutions compared to the same period in 2023.

Revenue for the nine months ended September 30, 2024, increased by $276.8 million, or 13.1%, to $2,386.8 million, compared to $2,110.0 million for the comparable period in 2023. Approximately 9.2% of the revenue growth during the nine months ended September 30, 2024, was attributed to acquisitions, and was offset by a decrease of 0.1% from unfavorable foreign exchange rate movements. Excluding the unfavorable effects of foreign exchange rate movements and our recent acquisitions, our organic revenue, a non-GAAP measure, increased 4.0%. Revenue increases were driven by demand for our differentiated high-value scientific instruments and life science solutions compared to the same period in 2023.

Our gross profit margin decreased to 48.4% during the three months ended September 30, 2024, as compared to 51.5% in the same period in 2023, as a result of product mix, acquisition related costs, increases in purchased intangible amortization related to acquisitions in the period, slightly offset by favorable foreign exchange rate movements.

Our gross profit margin decreased to 48.4% during the nine months ended September 30, 2024, as compared to 51.3% in the same period in 2023, as a result of product mix, acquisition related costs, increases in purchased intangible amortization and step up inventory costs related to acquisitions in the period, and unfavorable foreign exchange rate movements.

Our income tax provision in the three months ended September 30, 2024, and 2023 was $14.8 million and $30.8 million, respectively, representing effective tax rates of 26.8% and 25.8%, respectively. Our income tax provision in the nine months ended September 30, 2024, and 2023 was $50.7 million and $80.6 million, respectively, representing effective tax rates of 33.6% and 26.6%, respectively. The increase in the Company's effective tax rate was primarily due to changes in jurisdictional mix and net unfavorable discrete items.

Diluted earnings per share for the three months ended September 30, 2024, was $0.27, a decrease of $0.33 compared to $0.60 per share in the same period in 2023. Diluted earnings per share for the nine months ended September 30, 2024, was $0.67, a decrease of $0.83 compared to $1.50 per share in the same period in 2023. The decrease in diluted earnings per share in both the three and nine months ended September 30, 2024, was driven primarily by net income, which decreased compared to the same periods in the prior year related to mix of profitability from acquisitions and acquisition related expenses.

The following table presents a reconciliation from net cash provided by operating activities, which is the most directly comparable GAAP operating financial measure, to free cash flow, a non-GAAP measure, as used by management (in millions):

The following table presents reconciliations from gross profit and gross profit margin, which are the most directly comparable GAAP operating performance measures, to non-GAAP gross profit and non-GAAP gross profit margin as used by management (in millions):

Our non-GAAP gross profit margin decreased in the three and nine months ended September 30, 2024, as compared to the same period in 2023. The decrease in non-GAAP gross margin was primarily due to acquisitions.

The following table presents reconciliations from operating income and operating margin, which are the most directly comparable GAAP operating performance measures, to non-GAAP operating income and non-GAAP operating margin as used by management (in millions):

Our non-GAAP operating margin decreased in the three and nine months ended September 30, 2024 as compared to the same period in 2023 primarily due to acquisitions and unfavorable foreign exchange rate movements. We also increased sales and marketing activities and investments in our research and development capabilities, as compared to 2023.

We can experience quarter-to-quarter fluctuations in our operating results as a result of various factors, some of which are outside our control, such as:

• global general economic conditions including inflation and currency volatility, and geopolitical conditions, including conflicts in Russia and Ukraine, Israel, Palestine and surrounding areas, tensions between the United States and China, and tariff and trade policy changes;
• potential energy shortages in Europe where we have significant operations and overall higher energy and transportation costs;
• the time it takes between the date customer orders and deposits are received, systems are shipped and accepted by our customers and full payment is received;
• the worldwide shortage of semiconductor chips, components and raw materials, such as copper;
• the time it takes for us to receive critical materials to manufacture our products;
• costs related to and impacts from acquisitions of technology or business;
• the time it takes for customers to construct or prepare their facilities for our products;
• fluctuations in estimates impacting costs related to our self-funded health insurance plan; and
• costs related to addressing any potential cybersecurity threats.

Several of these factors have in the past affected and continue to affect the amount and timing of revenue recognized on sales of our products and receipt of related payments and will likely continue to do so in the future. Accordingly, our operating results in any particular quarter may not necessarily be an indication of any future quarter’s operating performance.

Maintaining business continuity and service levels to our customers

Ensuring our ability to supply our enabling technologies and solutions and maintaining high service levels for our customers is a top priority for Bruker. We are continuing capital investments in production facilities for efficiencies and expansion. We continue to encounter supply chain risks associated with the global economy and increasing geopolitical tensions, including inflation, banking industry volatility, the threat of recession, financial liquidity, currency volatility or devaluation, and the worldwide shortage of semiconductor chips, components, and raw materials such as copper.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

This discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to: revenue recognition; stock-based compensation expense; restructuring and other related charges; income taxes, including the recoverability of deferred tax assets; allowance for doubtful accounts; inventory reductions for excess and obsolete inventories; estimated fair values of long-lived assets used to measure the recoverability of long-lived assets; intangible assets and goodwill; expected future cash flows used to measure the recoverability of intangible assets and long-lived assets; warranty costs; derivative financial instruments; and contingent liabilities. We base our estimates and judgments on our historical experience, current market and economic conditions, industry trends, and other assumptions that we believe are reasonable and form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates and historical experience.

We believe the following critical accounting policies and estimates to be both those most important to the portrayal of our financial position and results of operations and those that require the most estimation and subjective judgment:

• Revenue recognition;
• Income taxes;
• Goodwill, other intangible assets and other long-lived assets; and
• Business combinations.

For a further discussion of our critical accounting policies, please refer to our Annual Report on Form 10-K for the year ended December 31, 2023, and Note 1, Description of Business in the Notes to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2024, compared to the Three Months Ended September 30, 2023

Consolidated Results

The following table presents our results (in millions):

Revenue

The following table presents revenue, change in revenue and revenue growth by reportable segment (in millions):

(a) Represents product and service revenue between reportable segments.

Revenue increases were driven by growing demand for our differentiated instruments and solutions. For the three months ended September 30, 2024, the BSI BioSpin Segment recorded significant revenue primarily from to the sale of two GHz-class NMR systems, and with acquisition growth from the Chemspeed acquisition. The increase in revenue in the BSI CALID Segment for the three months ended September 30, 2024, relates primarily to the ELITechGroup acquisition and modest revenue growth across industrial and applied segments. The BSI NANO Segment revenue increase for the three months ended September 30, 2024, was driven by the NanoString acquisition and strong demand in its semiconductor metrology market.

Geographically in the three months ended September 30, 2024, our North American revenue grew 14.8% from academic & government and biopharma markets, Asia Pacific revenue increased by 14.4%, and European revenue increased by 15.0% compared to the same period in 2023, which was driven by the industrial market.

Gross Profit

Gross profit increased and gross profit margin decreased in the three months ended September 30, 2024, as compared to the same period in 2023, a result of increased revenue offset by restructuring and acquisitions costs, and an increase in purchased intangible amortization.

Selling, General and Administrative

Our selling, general and administrative expenses for the three months ended September 30, 2024, increased to 26.6% of total revenue, from 23.9% of total revenue for the comparable period in 2023. The increase as a percentage of revenue was a result of planned investments in sales and marketing and operating expenses from newly acquired acquisitions compared to the same period in 2023.

Research and Development

Our research and development expenses for the three months ended September 30, 2024 increased to 11.3% of total revenue from 9.6% of total revenue for the comparable period in 2023. The increase as a percentage of revenue is a result of our increased investment in research and development capabilities from newly acquired acquisitions.

Other Charges, Net

Other charges, net for the three months ended September 30, 2024, consisted primarily of $9.0 million of professional fees incurred in connection with investigations as well as ongoing litigation related to the acquisitions of BCA and NanoString; and $6.8 million of acquisition-related charges which relate mainly to transaction costs on potential and consummated acquisitions, integration costs of newly acquired entities, and stock-based compensation expense related to the fair value changes of hybrid instruments.

Other charges, net for the three months ended September 30, 2023, consisted primarily of $3.7 million of restructuring costs for several smaller reorganizations, as well as $2.2 million of costs associated with our global information technology (“IT”) transformation activities that consist of a multi-year project aimed at updating and integrating our global enterprise resource planning and human resource information system, and $1.6 million of acquisition-related charges.

Operating Income

The following table presents operating income and operating margins on revenue by reportable segment (in millions):

(a) Represents corporate costs and eliminations not allocated to the reportable segments. Unallocated costs include general and administrative expenses not directly incurred by the segments such as professional fees incurred for the quarterly reviews and annual audit of the consolidated financial statements, personnel costs of corporate accounting, finance, legal and IT resources, and other expense items.

Our operating income and operating income margin decreased in the three months ended September 30, 2024, as compared to the same period in 2023, due to higher revenue offset by profitability decrease related to acquisitions and an increase in purchase intangible amortization across the BSI BioSpin, BSI CALID and BSI NANO segments.

Interest and Other Income (Expense), Net

The increase in interest and other income (expense), net in the three months ended September 30, 2024, as compared to the same period in 2023 was primarily due to higher interest expense of $11.6 million due to increased borrowings, and impairment of certain minority investments of $4.4 million.

Income Tax Provision

The 2024 and 2023 effective tax rates were estimated using projected annual pre-tax income on a jurisdictional basis. Expected tax benefits, including tax credits and incentives, the impact of changes to valuation allowances and the effect of jurisdictional differences in statutory tax rates were also considered in the calculation.

The effective tax rates for the three months ended September 30, 2024, and 2023 were 26.8% and 25.8%, respectively. The increase in the Company's effective tax rate was primarily due to changes in jurisdictional mix and net unfavorable discrete activities.

Equity in Income of Unconsolidated Investees, net of tax

Equity in Income of Unconsolidated Investees, net of tax represents the Company's proportional share of the earnings or losses as reported by equity-method investees.

Net Income Attributable to Noncontrolling Interests

The net income attributable to noncontrolling interests represented the minority shareholders’ proportionate share of the net income recorded by our majority-owned subsidiaries.

Consolidated Results

Nine months Ended September 30, 2024, compared to the Nine months Ended September 30, 2023

The following table presents our results (in millions):

Revenue

The following table presents revenue, change in revenue and revenue growth by reportable segment (in millions):

(a) Represents product and service revenue between reportable segments.

Revenue increases were driven by strong demand for our differentiated instruments and solutions as well as pricing improvements offset by the negative impact of foreign currency translation. The BSI BioSpin Segment revenue increase related primarily to the Chemspeed acquisition and strong demand for our instruments, especially Ghz-class systems. The BSI CALID Segment increase in revenues was driven primarily by the ELITechGroup acquisition. The BSI NANO Segment increase in revenue was driven by the BCA and NanoString and acquisition and strong demand in its industrial market. The BEST revenue increase was driven by strong revenue from Big Science projects.

Geographically in the nine months ended September 30, 2024, our North American revenue grew 19.4% related to Bruker’s Nanostring acquisition, as well as the biopharma and academic & government markets, Asia Pacific revenue increased by 2.7%, and European revenue increased by 16.3% driven by the Chemspeed and ELITechGroup acquisitions when compared to the same period in 2023.

Gross Profit

Gross profit increased and gross profit margin decreased in the nine months ended September 30, 2024, as compared to the same period in 2023, a result of increased revenue offset by restructuring and acquisitions costs, and an increase in purchased intangible amortization.

Selling, General and Administrative

Our selling, general and administrative expenses for the nine months ended September 30, 2024, increased to 27.1% of total revenue, from 24.6% of total revenue for the comparable period in 2023. The increase as a percentage of revenue was a result of increased costs from recent acquisitions compared to the same period in 2023.

Research and Development

Our research and development expenses for the nine months ended September 30, 2024, increased to 11.4% of total revenue from 10.0% of total revenue for the comparable period in 2023. The increase as a percentage of revenue is a result of our increased research and development related costs from our recent acquisitions.

Other Charges, Net

Other charges, net for the nine months ended September 30, 2024, consisted primarily of $28.4 million of acquisition-related charges, and $10.5 million of professional fees incurred in connection with investigations as well as ongoing litigation related to the acquisitions of BCA and NanoString. In addition, the Company incurred $4.9 million of costs associated with our IT transformation activities, and $7.8 million of restructuring costs principally related to the BCA acquisition as detailed in Note 15 Other Charges, net. Acquisition-related charges relate primarily to transaction costs on potential and consummated acquisitions, integration costs of newly acquired entities, and stock-based compensation expense related to the fair value changes of hybrid instruments. The IT transformation initiative is a multi-year project aimed at updating and integrating our global enterprise resource planning and human resource information systems.

Other charges, net for the nine months ended September 30, 2023, consisted primarily of $7.4 million of acquisition-related charges, $3.3 million of costs associated with our IT transformation activities, and $4.3 million of restructuring costs.

Operating Income

The following table presents operating income and operating margins on revenue by reportable segment (in millions):

(a) Represents corporate costs and eliminations not allocated to the reportable segments. Unallocated costs include general and administrative expenses not directly incurred by the segments such as professional fees incurred for the quarterly reviews and annual audit of the consolidated financial statements, personnel costs of corporate accounting, finance, legal and IT resources, and other expense items.

Our operating income and operating income margin decreased in the nine months ended September 30, 2024, as compared to the same period in 2023, due to increased revenue offset by profitability decrease related to acquisitions, and increased purchased intangible amortization and step up inventory costs related to acquisitions in the period across the BSI BioSpin, BSI CALID and BSI NANO segments as compared to the same period in the prior year.

Interest and Other Income (Expense), Net

Interest and other income (expense), net for the nine months ended September 30, 2024, remained flat compared to the same period in 2023. The higher interest expense of $32.3 million due to increased borrowings, and impairment of certain minority investments of $24.6 million, was offset by higher foreign currency exchange gains of $18.4 million which were driven primarily by a foreign exchange realized gain recognized on a forward contract taken to minimize risks from fluctuations in the Euro currency related to the closing of our acquisition of ELITechGroup, the purchase price of which was denominated in Euro.

Income Tax Provision

The 2024 and 2023 effective tax rates were estimated using projected annual pre-tax income on a jurisdictional basis. Expected tax benefits, including tax credits and incentives, the impact of changes to valuation allowances and the effect of jurisdictional differences in statutory tax rates were also considered in the calculation.

The effective tax rates for the nine months ended September 30, 2024, and 2023 were 33.6% and 26.6%, respectively. The increase in the Company's effective tax rate was primarily due to changes in jurisdictional mix and net unfavorable discrete activities.

Equity in Income of Unconsolidated Investees, net of tax

Equity in Income of Unconsolidated Investees, net of tax represents the Company's proportional share of the earnings or losses as reported by equity-method investees.

Net Income Attributable to Noncontrolling Interests

The net income attributable to noncontrolling interests represented the minority shareholders’ proportionate share of the net income recorded by our majority-owned subsidiaries.

LIQUIDITY AND CAPITAL RESOURCES

We anticipate that our existing cash and credit facilities will be sufficient to support our operating and investing needs for at least the next twelve months. Our future cash requirements could be affected by acquisitions that we may complete, purchases of our common stock or the payment of dividends in the future. Historically, we have financed our growth and liquidity needs through cash flow generation from operations and a combination of debt financings and issuances of common stock. In the future, there are no assurances that we will continue to generate cash flow from operations or that additional financing alternatives will be available to us, if required, or, if available, will be obtained on terms favorable to us.

Effective in the quarter ended June 30, 2024, the Company entered into a multi-currency notional cash pooling agreement with a financial institution to manage cash flow more efficiently and optimize liquidity. See Note 1, Description of Business in the Notes to our Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for more information on our notional cash pooling agreement.

Cash and cash equivalents at September 30, 2024 and December 31, 2023 totaled $148.1 million and $488.3 million, respectively, of which $302.6 million and $398.4 million, respectively, related to cash, cash equivalents and short-term investments held outside of the United States in our foreign subsidiaries, most significantly in the Netherlands, Switzerland, and Hong Kong. We aggregate all bank accounts that are subject to the notional pooling arrangement into a single balance on our consolidated balance sheets. As of September 30, 2024, we were not in a net overdraft position with respect to the notional cash pooling arrangement.

The following table presents our cash flows from operating activities, investing activities and financing activities for the periods presented (in millions):

Net cash provided by operating activities during the nine months ended September 30, 2024, resulted primarily from consolidated net income adjusted for non-cash items of $230.5 million, partially offset by a change in operating assets and liabilities, net of acquisitions of $169.2 million. Net cash provided by operating activities during the nine months ended September 30, 2023, resulted primarily from consolidated net income adjusted for non-cash items of $353.7 million, partially offset by a change in operating assets and liabilities, net of acquisitions and divestitures of $209.1 million. The decrease in net income adjusted for non-cash items was due to lower net income as result of increased costs from recent acquisitions, acquisition related costs, and increased purchase intangible amortization as compared to the same period in the prior year. The change in operating assets and liabilities, net of acquisitions decreased primarily due to increased inventory to handle supply chain challenges and increase in net payables, offset by a net decrease in customer advances and deferred revenue generally from a softness in biopharma demand and increase in tax payments.

Net cash used in investing activities during the nine months ended September 30, 2024, resulted primarily from cash paid for acquisitions of $1,576.7 million, purchases of property, plant and equipment of $78.6 million, and minority investments of $46.0 million, offset by $3.7 million of proceeds from cross-currency swap agreements and $0.9 million of net proceeds from sales of property, plant and equipment. Net cash used in investing activities during the nine months ended September 30, 2023 resulted primarily from acquisitions and advances of $222.3 million, purchases of property, plant and equipment of $75.4 million, and strategic investments of $19.3 million, offset by $11.8 million of proceeds from sale of strategic investment and $10.9 million of net proceeds from sales of property, plant and equipment.

Net cash provided by financing activities during the nine months ended September 30, 2024, was primarily from proceeds from long-term debt of $972.5 million, proceeds from our public offering of common stock of $403.0 million, and net proceeds from our revolving line of credit of $84.8 million, offset by the repayment of our 2012 Note Purchase Agreement of $100.0 million and the payment of dividends to common shareholders of $22.6 million. Increased borrowings were used primarily to fund our major acquisitions during the period. Net cash used in financing activities during the nine months ended September 30, 2023, was primarily from cash paid for purchases of common stock under our repurchase program of $101.9 million and $22.1 million for the payment of dividends.

Share Repurchase Program

During the three and nine months ended September 30, 2024, we did not purchase any shares under the 2023 Repurchase Program. Please read Note 13, Shareholder's Equity, in the Notes to our Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for more information on our share repurchase program.

Public Offering

In May 2024, we completed an underwritten public offering (the “Offering”) in which we issued and sold 6,000,000 shares of our common stock at a public offering price of $67.29 per share. We received net proceeds of approximately $403.0 million after deducting underwriting fees and other offering expenses.

The Offering was made pursuant to an automatically effective registration statement on Form S-3 and accompanying prospectus filed with the SEC on May 29, 2024, and a final prospectus relating to the Offering filed with the SEC on May 31, 2024.

Credit Facilities

We have a total outstanding debt of $2.3 billion as of September 30, 2024, and a revolving credit facility that provides for up to $900.0 million of backup liquidity to finance working capital needs, refinance or reduce existing indebtedness, and for general corporate use. In addition, the facility provides for an uncommitted incremental facility whereby, under certain circumstances, we may, at our option, increase the amount of the revolving facility or incur term loans in an aggregate amount not to exceed $400 million.

For a summary of the fair and carrying values of our outstanding debt as of September 30, 2024, and December 31, 2023, please read Note 8, Debt and Note 9, Fair Value of Financial Instruments to our unaudited condensed consolidated financial statements included in this report. For additional information on our outstanding debt and credit facility please read, Note 12, Debt, to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

As of September 30, 2024, we were in compliance with the financial covenants of these debt agreements.

RECENT ACCOUNTING PRONOUNCEMENTS

Information regarding recent accounting standard changes and developments is incorporated by reference from Part I, Item 1, Unaudited Condensed Consolidated Financial Statements, of this document and should be considered an integral part of this Item 2. See Note 2 in the Notes to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for recently adopted and issued accounting standards.

Information concerning market risk is contained in Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2023. As of September 30, 2024, there were no material changes in our exposure to market risk from December 31, 2023.

We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) that are designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer and principal accounting officer) by others within our organization. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2024. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2024.

Management concluded that the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q fairly state, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with GAAP.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.