Quanex Building Products CORP: Form 10-Q for the period ended Jan 31, 2025

The following discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes as of January 31, 2025, and for the three months ended January 31, 2025 and 2024, included elsewhere herein. For additional information pertaining to our business, including risk factors which should be considered before investing in our common stock, refer to our Annual Report on Form 10-K for the fiscal year ended October 31, 2024.

Our Business

We are a leading manufacturer and component supplier to original equipment manufacturers (OEMs) in various industries, including window, door, solar, refrigeration, custom mixing, building access, and cabinetry markets. The majority of these components can be categorized as window and door (fenestration) components and kitchen and bath cabinet components. Examples of fenestration components include energy-efficient flexible insulating glass spacers, extruded vinyl profiles, window and door screens, precision-formed metal and wood products, window and door seals, and window and door hardware. In addition, we provide certain other non-fenestration components and products, which include solar panel sealants, trim moldings, vinyl decking, water retention barriers, conservatory roof components, and building access solutions. For additional discussion of our reportable business segments, see Note 14, “Segment Information.” We leverage efficient production and distribution processes and engineering expertise to provide our customers with specialized products for their specific hardware, extrusion, and custom applications. We believe these capabilities enhance our ability to provide value to our customers. We serve a primary customer base in North America and the United Kingdom (U.K.), and also serve customers in international markets through our operating locations in the U.K., Germany, Mexico, Canada and Italy, as well as through sales and marketing efforts in other countries.

We continue to invest in organic growth initiatives and we intend to continue evaluating business acquisitions that allow us to expand our manufacturing and distribution footprint, enhance our product offerings, provide new complementary technology, enhance our leadership position within the markets we serve and expand into new markets or service lines. We have disposed of non-core businesses in the past, and continue to evaluate our business portfolio to ensure that we are investing in markets where we believe there is potential future growth.

We currently have four reportable business segments: (1) North American Fenestration segment (“NA Fenestration”), comprising four operating segments, consisting of vinyl profiles, IG spacers, screens, custom compound mixing and other fenestration components; (2) European Fenestration segment (“EU Fenestration”), comprising our U.K.-based vinyl extrusion business, manufacturing vinyl profiles and conservatories, and the European insulating glass business manufacturing IG spacers; (3) North American Cabinet Components segment (“NA Cabinet Components”), comprising our North American cabinet door and components business and two wood-manufacturing plants, and (4) Tyman, which was acquired on August 1, 2024, comprising a leading international supplier of engineered fenestration components and access solutions to the construction industry. We maintain a grouping called Unallocated Corporate & Other, which includes transaction expenses, stock-based compensation, long-term incentive awards based on the performance of our common stock and other factors, certain severance and legal costs not deemed to be allocable to all segments, depreciation of corporate assets, interest expense, other, net, income taxes and inter-segment eliminations, and executive incentive compensation and medical expense fluctuations relative to planned costs as determined during the annual planning process. Other general and administrative costs associated with the corporate office are allocated to the reportable segments, based upon a relative measure of profitability in order to more accurately reflect each reportable business segment's administrative costs.

Recent Transactions and Events

We are monitoring the rapidly evolving tariff and global trade policies and we are working with our suppliers to mitigate potential impacts on our business. The extent and duration of the tariffs and the resulting impact on general economic conditions on our business are uncertain and depend on various factors, such as negotiations between the U.S. and affected countries, the responses of other countries or regions, exemptions that may be granted, availability and cost of alternative sources of supply and demand for our products in affected markets.

On August 1, 2024, we completed the acquisition of Tyman plc, a company incorporated in England and Wales (the “Tyman Acquisition”). The aggregate consideration due pursuant to the Tyman Acquisition at closing comprised of 14,139,477 New Quanex Shares and cash consideration of approximately $504.1 million (being the Pound Sterling amount of cash consideration of £392.2 million in respect of all of the Tyman Shares converted to U.S. Dollars at an exchange rate of 1.2855). New Quanex Shares issued in connection with the Tyman Acquisition on the New York Stock Exchange took effect on August 2, 2024 and Tyman’s shares on the London Stock Exchange were canceled.

U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the military conflicts currently ongoing in Ukraine and Gaza. Although the length and impact of these ongoing military conflicts are highly unpredictable, the conflicts could lead to market or operational disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. Russia, Europe’s largest provider of natural gas, has significantly reduced the export of natural gas compared to the beginning of the conflict resulting in the increase in natural gas prices and the potential for natural gas shortages. In addition, one of the suppliers of a vapor barrier used in the production of our insulating glass spacers is located in Israel and may experience a disruption as a result of the ongoing conflict in Gaza. If these trends continues, this would not only negatively impact our European manufacturing facilities, this may also impact our customers and their demand for our products. We continue to monitor these situations and their impact on our business.

The conflicts in Ukraine and Gaza and their impacts on the global economy, including inflation and the price of raw materials, supply chain disruptions, and the volatility in interest rates including home mortgage rates, are unpredictable and there may be developments outside our control requiring us to adjust our operating plan.

Market Overview and Outlook

We believe the primary drivers of our operating results continue to be North American residential remodeling and replacement (R&R) and new home construction activity. We believe that housing starts and window shipments are indicators of activity levels in the homebuilding and window industries, and we use this data, as published by or derived from third-party sources, to evaluate the market. We have historically evaluated the market using data from the National Association of Homebuilders (NAHB) with regard to housing starts and R&R activity, and published reports by Ducker Worldwide, LLC (Ducker), a consulting and research firm, with regard to window shipments in the U.S.

In February 2025, the NAHB forecasted calendar-year housing starts to be approximately 1.3 million and 1.4 million in the 2025 and 2026 calendar-years, respectively. In February 2025, the Ducker forecast indicated that total window shipments are expected to decrease 2.5% in calendar-year 2025.

Several commodities in our business are subject to pricing fluctuations, including polyvinyl resin (PVC), titanium dioxide (TiO2), petroleum products, stainless steel, zinc, aluminum and wood. For the majority of our customers and critical suppliers, we have price adjusters in place which effectively share the base pass-through price changes for our primary commodities with our customers commensurate with the market at large. Our long-term exposure to these price fluctuations is somewhat mitigated due to the contractual component of the adjuster program. However, these adjusters are not in place with all customers and for all commodities, and there is a level of exposure to such volatility due to the lag associated with the timing of price updates in accordance with our customer agreements, particularly with regard to hardwoods. In addition, some of these commodities are in high demand, particularly in Europe, which can affect the cost of the raw materials, a portion of which we may not be able to fully recover.

The global economy remains uncertain due to currency devaluations, political unrest, terror threats, global pandemics, and even the political landscape in the U.S. These and other macro-economic factors have impacted the global financial markets, which may have contributed to significant changes in foreign currencies. We continue to monitor our exposure to changes in exchange rates.

Results of Operations

Three Months Ended January 31, 2025 Compared to Three Months Ended January 31, 2024

(Dollars in thousands)

Our period-over-period results by reportable segment follow.

Changes Related to Operating Income by Reportable Segment:

NA Fenestration

(Dollars in thousands)

Net Sales. Net sales decreased $13.7 million, or 9%, for the three months ended January 31, 2025 compared to the same period in 2024, which was primarily driven by a $15.3 million decrease in volumes mainly due to softer market demand driven by weaker consumer confidence partially offset by a $1.6 million increase in price and raw material indexes.

Cost of Sales. The cost of sales decreased $11.8 million, or 10%, for the three months ended January 31, 2025 as compared to the same period in 2024. Cost of sales, including labor, decreased primarily due to a decrease in volumes partially offset by inflation of raw materials during the period.

Selling, General and Administrative. Selling, general and administrative expenses increased $0.2 million, or 1%, for the three months ended January 31, 2025 as compared to the same period in 2024. The increase is primarily due to increases in labor costs partially offset by a decrease in professional fees year-over-year.

EU Fenestration

(Dollars in thousands)

Net Sales. Net sales decreased $1.0 million, or 2%, comparing the three months ended January 31, 2025 to the same period in 2024, which was primarily driven by a $0.5 million decrease in volumes largely due to softer market demand driven by weaker consumer confidence and $0.9 million of negative foreign currency rate change, partially offset by $0.4 million of base price increases.

Cost of Sales. The cost of sales decreased $1.1 million, or 3%, for the three months ended January 31, 2025 compared to the same period in 2024. Cost of sales decreased primarily due to a decrease in volumes and foreign currency impacts, partially offset by inflation in the price of raw materials.

Selling, General and Administrative. Selling, general and administrative expense increased $0.2 million, or 2%, for the three months ended January 31, 2025 compared to the same period in 2024. The increase is primarily an increases in labor costs year-over-year.

NA Cabinet Components

(Dollars in thousands)

Net Sales. Net sales increased $0.7 million, or 2%, for the three months ended January 31, 2025 compared to the same period in 2024, which was driven by a $2.1 million increase in raw material surcharges partially offset by a $1.4 million decrease in volumes due to softer market demand driven by weaker consumer confidence.

Cost of Sales. Cost of sales increased $0.7 million, or 2%, for the three months ended January 31, 2025 compared with the same period in 2024. Cost of sales increased primarily as a result of inflation of raw materials partially offset by lower volumes year-over-year.

Selling, General and Administrative. Selling, general and administrative expense increased $0.1 million, or 3%, for the three months ended January 31, 2025 compared to the same period in 2024. This increase is primarily due to a decrease in labor costs and professional fees year-over-year.

Tyman

The Tyman reportable segment is comprised solely of the business acquired on August 1, 2024. For additional discussion of our acquisition of Tyman, see Note 2, “Acquisition.” The results for the three months ended January 31, 2025 are summarized in the following table (including the effect of the amortization of the step-up of inventory of approximately $9.0 million and $7.9 million of reorganization charges incurred to support the acquisition during the three months ended January 31, 2025):

(Dollars in thousands)

Unallocated Corporate & Other

(Dollars in thousands)

Net Sales. Net sales for Unallocated Corporate & Other represents the elimination of inter-segment sales for the three months ended January 31, 2025 and 2024.

Cost of Sales. Cost of sales for Unallocated Corporate & Other consists of the elimination of inter-segment sales, profit in inventory, and other costs.

Selling, General and Administrative. Selling, general and administrative expenses decreased $0.6 million, or 18%, for the three months ended January 31, 2025 compared to the same period in 2024. This decrease is primarily attributable to a lower compensation expense including the valuations of our stock-based compensation awards partially offset by reorganization costs during the three months ended January 31, 2025 as compared to the prior year period.

Changes related to Non-Operating Items:

Interest Expense. Interest expense increased $13.1 million for the three months ended January 31, 2025 compared to the same period in 2024 primarily as a result of higher borrowings outstanding during the three months ended January 31, 2025 as compared to the prior year period.

Income Taxes. We recorded income tax benefit of $5.1 million on pre-tax loss of $19.9 million for the three months ended January 31, 2025, an effective rate of 25.3%, and income tax expense of $1.6 million on a pre-tax income of $7.9 million for the three months ended January 31, 2024, an effective rate of 20.8%. The increase in the effective tax rate year-over-year was primarily driven by a reduction in tax credits and tax deductions.

Liquidity and Capital Resources

Overview

Historically, our principal sources of funds have been cash on hand, cash flow from operations, and borrowings under our credit facilities.

On June 12, 2024, in connection with the Tyman Acquisition, the Company, Wells Fargo Bank, National Association (“Wells Fargo Bank”, acting as agent, swingline lender and issuing lender, the “Agent”), the other entities therein specified in the capacities therein specified, and the lenders parties thereto, entered into an amendment to the Second Amended and Restated Credit Agreement, dated as of July 6, 2022 (the “Existing Credit Agreement”, and the Existing Credit Agreement as so amended, the “Amended Credit Agreement”). The Amended Credit Agreement became effective on August 1, 2024 upon the completion of the Tyman Acquisition.

The Amended Credit Agreement (i) increased the senior secured revolving credit facility to an aggregate principal amount of $475 million (the “Revolving Credit Facility”) and (ii) provides for a senior secured term loan A facility in an aggregate principal amount of $500 million (the “Term A Facility” and together with the Revolving Credit Facility, the “Facilities”). The Revolving Credit Facility includes alternative currency, letter of credit, and swing-line sub-facilities of $100 million, $30 million, and $15 million, respectively. We capitalized $13.8 million of deferred financing fees related to the Amended Credit Agreement. The maturity date of the Facilities will be five years after the acquisition effective date, maturing on August 1, 2029.

The Term A Facility amortizes on a quarterly basis at 5% per annum of the original principal amount of the Term A Facility, with the remainder due at maturity. The Term A Facility must be prepaid with 100% of the net cash proceeds of the issuance or incurrence of debt and 100% of the net cash proceeds of all asset sales, insurance and condemnation recoveries, and other asset dispositions.

Borrowings under the Facilities bear interest, at our option, at (1) the Base Rate plus an applicable margin or (2) Adjusted Term SOFR plus an applicable margin. The applicable margin will range from 1.0% to 1.75% for Base Rate loans and 2.0 to 2.75% for Adjusted Term SOFR loans. In addition, we are subject to commitment fees for the unused portion of the Revolving Credit Facility.

As of January 31, 2025, we had $50.0 million of cash and equivalents, $705.0 million outstanding under the Facilities $6.0 million of outstanding letters of credit and $59.3 million outstanding under finance leases and other debt. Of the $59.3 million outstanding under finance leases and other debt, $55.1 million relates to real estate leases. We had $251.5 million available for use under the Revolving Credit Agreement at January 31, 2025.

During December 2021, our Board of Directors approved a stock repurchase program that authorized the repurchase of up to $75.0 million worth of shares of our common stock. Repurchases under the program will be made in open market transactions or privately negotiated transactions, subject to market conditions, applicable legal requirements and other relevant factors. During the three months ended January 31, 2025, we purchased 150,000 shares under this program and as of January 31, 2025 we have a maximum of $59.1 million available to purchase shares under this program. The program does not have an expiration date or a limit on the number of shares that may be purchased.

We repatriated $11.5 million and $3.6 million of foreign cash during the three months ended January 31, 2025 and 2024, respectively. We expect to repatriate excess cash moving forward and use the funds to retire debt or meet current working capital needs. In the U.K., we insure against a portion of our credit losses. We believe our business model, our current cash reserves and our strong balance sheet leave us well-positioned to manage our business and remain in compliance with our debt covenants.

Analysis of Cash Flow

The following table summarizes our cash flow results for the three months ended January 31, 2025 and 2024:

(Dollars in thousands)

Operating Activities. Cash provided by operating activities decreased $16.4 million for the three months ended January 31, 2025 compared to the same period in 2024. The decrease in operating cash flow is primarily due to a decrease in net income as a result of restructuring charges and amortization of inventory step-up charges related to the acquisition of Tyman, as well as year-over-year and unfavorable changes to net working capital.

Investing Activities. Cash used for investing activities increased $1.9 million for the three months ended January 31, 2025 compared to the same period in 2024, primarily as a result of an increase in capital expenditures during the three months ended January 31, 2025 compared to the prior year period.

Financing Activities. Cash used for financing activities increased $12.9 million for the three months ended January 31, 2025 compared to the same period in 2024. The change in investing cash flows is primarily as a result of an increase in the repayment of long-term debt and the purchase of treasury shares.

Liquidity Requirements

Historically, our strategy for deploying cash has been to invest in organic growth opportunities, develop our infrastructure, and explore strategic acquisitions. Other uses of cash include paying cash dividends to our shareholders and repurchasing our common stock. During the three months ended January 31, 2025 and 2024, we repatriated $11.5 million and $3.6 million, respectively, of foreign earnings from our foreign locations. We maintain cash balances in foreign countries which total $37.3 million as of January 31, 2025.

Critical Accounting Policies and Estimates

The preparation of our financial statements in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP) requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. Estimates and assumptions about future events and their effects cannot be perceived with certainty. Estimates may change as new events occur, as more experience is acquired, as additional information becomes available and as our operating environment changes. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, and that we believe provide a basis for making judgments about the carrying value of assets and liabilities that are not readily available through open market quotes. We must use our judgment with regard to uncertainties in order to make these estimates. Actual results could differ from these estimates.

For a description of our critical accounting policies and estimates, see our Annual Report on Form 10-K for the fiscal year ended October 31, 2024. Our critical accounting policies and estimates have not changed materially during the three months ended January 31, 2025.

New Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standards setting bodies that we adopt as of the specified effective date. We did not adopt any new accounting pronouncements during the three months ended January 31, 2025.

Accounting Standards Not Yet Adopted

In November 2024, the FASB issued “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which requires expanded disclosures of expense information, including the amounts of inventory purchases, employee compensation, depreciation and amortization within commonly presented expense captions during the period. The amendments are effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The amendments should be applied either (1) prospectively to financial statements issued for reporting periods after the effective date or (2) retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which includes updates to the income tax disclosures related to the rate reconciliation and disaggregation of income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024 with early adoption permitted. The amendments should be applied prospectively, however retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

In November 2023, the FASB issued “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 with early adoption is permitted. The guidance is to be applied retrospectively to all prior periods presented in the financial statements. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

The following discussion of our exposure to various market risks contains “forward looking statements” regarding our estimates, assumptions and beliefs concerning our exposure. Although we believe these estimates and assumptions are reasonable in light of information currently available to us, we cannot provide assurance that these estimates will not materially differ from actual results due to the inherent unpredictability of interest rates, foreign currency rates and commodity prices as well as other factors. We do not use derivative financial instruments for speculative or trading purposes.

Interest Rate Risk

Our debt bears interest at variable rates and accordingly is sensitive to changes in interest rates. Based upon the balances of the variable rate debt at January 31, 2025, a hypothetical 1.0% increase or decrease in interest rates could result in approximately $7.1 million of additional pretax charges or credit to our net income per year. This sensitivity is impacted by the amount of borrowings under our credit facilities, and amounts outstanding under finance leases.

Foreign Currency Rate Risk

Our international operations have exposure to foreign currency rate risks, primarily due to fluctuations in the Euro, the British Pound Sterling, and the Mexican Peso. From time to time, we enter into foreign exchange contracts associated with our operations to manage a portion of the foreign currency rate risk. As of January 31, 2025, we have outstanding forward foreign exchange contracts to hedge our foreign currency exposures against the USD to GBP, with a notional principal amount of $8.3 million, and foreign currency exposures against the MXN to USD, with a notional principal amount of $18.0 million. Hedge accounting is not applied to our foreign exchange contracts. During the three months ended January 31, 2025 and 2024, we recognized a net gain of $0.1 million and zero, respectively, related to our forward foreign exchange contracts. The value of our forward foreign exchange contracts fluctuates based on exchange rate fluctuations against the USD to GBP, and the MXN to USD.

Commodity Price Risk

We purchase PVC as the significant raw material consumed in the manufacture of vinyl extrusions. We have resin adjusters in place with a majority of our customers and our resin supplier that is adjusted based upon published indices for lagging resin prices. These adjusters effectively share the base pass-through price changes of PVC with our customers commensurate with the market at large. Our long-term exposure to changes in PVC prices is somewhat mitigated due to the contractual component of the resin adjuster program. However, there is a level of exposure to short-term volatility due to timing lags.

We adjust the pricing of petroleum-based raw materials for the majority of our customers who purchase products using these materials. This is intended to offset the fluctuating cost of products which are highly correlated to the price of oil including butyl and other oil-based raw materials. This program is adjusted monthly based upon the 90-day average published price for Brent crude. The oil-based raw materials that we purchase are subject to similar pricing schemes. As such, our long-term exposure to increases in oil-based raw material prices is significantly reduced under this program.

Similarly, we include a price index provision to insulate against significant fluctuations in the price for various hardwood products used as the primary raw material for kitchen and bathroom cabinet doors. Like our vinyl extrusion business, we are exposed to short-term volatility in wood prices due to a lag in the timing of price updates which generally could extend for up to three months.

In the Tyman business, contractual price adjustment mechanisms in place for key commodities including stainless steel and zinc for many large customers in the U.S. For those customers not covered by these contractual mechanisms, we have successfully implemented surcharges and general price increases to share the impact of price changes with our customers. Like our other commodities, there is exposure to short-term volatility due to a lag in the timing of implementing price increases.

We have begun implementing additional programs for other raw materials to facilitate more accurate pricing and reduce our exposure to changing material costs when necessary; however, these are also subject to timing lags. While we maintain surcharges and other adjusters to manage our exposure to changes in the prices of our critical raw materials, we use several commodities in our business that are not covered by contractual surcharges or adjusters for which pricing can fluctuate, including PVC compound micro ingredients, silicone and other inputs. Further discussion of our industry risks are included within our Annual Report on Form 10-K for the fiscal year ended October 31, 2024.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (1934 Act) as of January 31, 2025.

As previously disclosed in our Annual Report on Form 10-K for the year ended October 31, 2024, we identified a material weakness in our internal control over financial reporting in the design and operation of the controls over the preparation and review of the statement of cash flows. Due to this material weakness, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of January 31, 2025.

As permitted under the SEC rules, we have elected to exclude Tyman plc from management’s assessment of effectiveness of internal controls over financial reporting as of January 31, 2025. Prior to acquisition by us on August 1, 2024, Tyman plc was listed publicly on the London Stock Exchange, reported financial results pursuant to International Financial Reporting Standards and, therefore, had no requirement to comply with the Sarbanes-Oxley Act of 2002.

We are actively engaged in remediation efforts to address the identified material weakness related to the statement of cash flows. These efforts include:

• Implementing enhanced review procedures over the preparation and validation of the statement of cash flows.
• Developing and integrating a structured non-cash transaction checklist to improve accuracy in cash flow classification.
• Enhancing our quarterly and annual close procedures to include additional review controls.
• Providing targeted training to finance personnel involved in the financial close and reporting process.

Notwithstanding the identified material weakness, our management has concluded that the financial statements included in this Form 10-Q fairly present in all material respects the financial position, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended January 31, 2025, we implemented additional review procedures and developed a structured non-cash transaction checklist for the cash flow statement as part of our remediation efforts. While we believe the identified material weakness will be fully remediated by our efforts, our remediation efforts are on-going and require additional time for us to conclude the material weakness has been remediated.

Additionally, as of January 31, 2025, integration of internal controls at our recently acquired Tyman business is in progress. Consistent with SEC guidance, management has excluded Tyman from its assessment of internal control over financial reporting for the January 31, 2025 reporting period. We expect to complete the integration of Tyman’s financial reporting systems and internal control framework during fiscal 2025.

Other than the ongoing remediation efforts and the exclusion of Tyman, there have been no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the 1934 Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024 (Part I, Item 1A).