Mesa Laboratories Inc: Form 10-Q for the period ended Jun 30, 2023

(Dollars in thousands, except per share amounts)

Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements in this Quarterly Report on Form 10-Q do not constitute guarantees of future performance. Investors are cautioned that statements in this Quarterly Report on Form 10-Q which are not strictly historical statements, including, without limitation, express or implied statements or guidance regarding current or future financial performance and position; results of acquisitions; management’s strategy, plans and objectives for future operations or acquisitions, product development and sales; product research and development; and adequacy of capital resources and financing plans constitute forward-looking statements. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates, and management’s beliefs and assumptions. In addition, other written and oral statements that constitute forward-looking statements may be made by the Company or on the Company’s behalf. Words such as “seek,” “believe,” “may,” “intend,” “could,” “expect,” “anticipate,” “plan,” “target,” “estimate,” “project,” or variations of such words and similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated, including risks associated with: our ability to successfully grow our business, including as a result of acquisitions; the effect that acquisitions have on our operations; our ability to consummate acquisitions at our historical rate and at appropriate prices, and our ability to effectively integrate acquired businesses and achieve desired results; the market acceptance of our products; technological or market viability of our products; reduced demand for our products, including as a result of competitive factors; conditions in the global economy and the particular markets we serve; significant developments or uncertainties stemming from governmental actions, including changes in trade policies and medical device regulations; the timely development and commercialization, and customer acceptance, of enhanced and new products and services; retirement of old products and customer migration to new products; projections of revenues, growth, operating results, profit margins, earnings, expenses, margins, tax rates, tax provisions, liquidity, cash flows, demand, and competition; the effects of additional actions taken to become more efficient or lower costs; supply chain challenges; cost pressures and the overall effects of the current high inflation environment on customers’ purchasing patterns; laws regulating fraud and abuse in the health care industry and the privacy and security of health and personal information; product liability; information security; outstanding claims, legal and regulatory proceedings; international business challenges including anti-corruption and sanctions laws and political developments; tax audits and assessments and other contingent liabilities; foreign currency exchange rates and fluctuations in those rates; general economic, industry, and capital markets conditions, including rising interest rates and potential recessionary conditions; the timing of any of the foregoing; and assumptions underlying any of the foregoing. Such risks and uncertainties also include those listed in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended March 31, 2023 and in this report. The foregoing list sets forth many, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements. We disclaim any obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

Overview

We are a multinational manufacturer, developer, and seller of life science tools and quality control products and services, many of which are sold into niche markets driven by regulatory requirements. We have manufacturing operations in the United States and Europe, and our products are marketed by our sales personnel in North America, Europe, and Asia Pacific, as well as by independent distributors in these areas and throughout the rest of the world. We prefer markets in which we can establish a strong presence and achieve high gross profit margins.

As of June 30, 2023, we managed our operations in four reportable segments, or divisions: Sterilization and Disinfection Control, Clinical Genomics, Biopharmaceutical Development, and Calibration Solutions. Each of our divisions is described further in "Results of Operations" below. Unallocated corporate expenses and other business activities are reported within Corporate and Other.

Corporate Strategy

We strive to create shareholder value and further our purpose of Protecting the Vulnerable® by growing our business both organically and through acquisitions, by improving our operating efficiency, and by continuing to hire, develop and retain top talent. As a business, we commit to our purpose of Protecting the Vulnerable® every day by taking a customer-focused approach to developing, building, and delivering our products. We serve a broad set of industries, in particular the pharmaceutical, healthcare services, and medical device verticals, in which the safety, quality, and efficacy of products is critical. By delivering the highest quality products possible, we are committed to protecting the communities we serve.

Organic Revenues Growth

Organic revenues growth is driven by the expansion of our customer base, increases in sales volumes, new product offerings, and price increases, and may be affected positively or negatively by changes in foreign currency rates. Our ability to increase organic revenues is affected by general economic conditions, both domestic and international, customer capital spending trends, competition, and the introduction of new products. Our policy is to price our products competitively and, where possible, we pass along cost increases to our customers in order to maintain our margins. We typically evaluate costs and pricing annually with price increases effective January 1.

Inorganic Growth - Acquisitions

Over the past decade, we have consummated a number of acquisitions as part of our growth strategy. These acquisitions have allowed us to expand our product offerings, globalize our company, and increase the scale at which we operate, which in turn affords us the ability to improve our operating efficiency, extend our customer base, and further the pursuit of our purpose: Protecting the Vulnerable®.

Improving Our Operating Efficiency

We maximize value in both our existing businesses and those we acquire by implementing efficiencies in our manufacturing, commercial, engineering, and administrative operations. We achieve efficiencies using the four pillars that make up the Mesa Way, which is our customer-centric, lean-based system for continuously improving and operating a set of high-margin, niche businesses. The Mesa Way is focused on: Measuring What Matters using our customers' perspective and setting high standards for performance; Empowering Teams to improve operationally and exceed customer expectations; Sustainably Improving using lean-based tools designed to help us identify the root cause of opportunities and prioritize the biggest opportunities; and Always Learning so that performance continuously improves.

Gross profit is affected by many factors including our product mix, manufacturing efficiencies, costs of products and labor, foreign currency rates, and price competition. Historically, as we have integrated our acquisitions and taken advantage of manufacturing efficiencies, our gross profit percentages for some products have improved. There are, however, differences in gross profit percentages between product lines, and ultimately the mix of sales will continue to impact our overall gross profit.

Hire, Develop, and Retain Top Talent

At the center of our organization are talented people who are capable of taking on new challenges using a team approach. It is our exceptionally talented workforce that works together and uses our lean-based tool set to find ways to continuously and sustainably improve our products, our services, and ourselves, resulting in long-term value creation for our stakeholders.

General Trends

We are a global company, with multinational operations. During the three months ended June 30, 2023, approximately 48% of our revenues were derived from revenues earned outside of the United States. Since Mesa serves a number of industries across a variety of global markets, we may be affected by world-wide, regional, or industry-specific economic or political factors. However, our diversity in industry, geography, and product and service offerings may limit the impact of changes in specific industry trends or local economic changes in our consolidated operating results. We actively monitor trends affecting industries we operate in, including monitoring key competitors and customers, as well as staying abreast of changes to local economies and how they may affect our divisions.

Several challenging macroeconomic factors persisted during the first quarter of fiscal 2024, including high interest rates, high inflation rates, and softening demand for discretionary capital asset purchases across the life sciences tools market. On the other hand, supply chain disruptions, labor shortages and resulting manufacturing difficulties that impacted business operations in fiscal year 2023 largely abated during the three months ended June 30, 2023. Following the loss of Sema4, a significant customer in our Clinical Genomics division, in the third quarter of fiscal year 2023, we took strategic steps to contain costs and preserve our operating model. Gross profit as a percentage of revenues in the Clinical Genomics division for the three months ended June 30, 2023 was modestly lower than the prior year period; however, our operating expenses decreased, demonstrating that adjustments to the operating model allowed us to largely preserve our financial model despite the customer loss. Our cost containment actions and the resulting significant reductions in our operating expenses during the three months ended June 30, 2023 ultimately allowed us to produce higher earnings before taxes for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.

A weakening or strengthening of foreign currencies against the United States dollar ("USD") increases or decreases our reported revenues, gross profit margins, and operating expenses, and impacts the comparability of our results between periods. Generally, the USD strengthening against major currencies adversely impacts our reported revenues, but to a lesser extent, positively impacts our reported expenses; conversely, the weakening of the U.S. dollar against major currencies positively impacts our reported revenues but negatively impacts our reported expenses. The ultimate impact to gross profit as a percentage of revenue depends on the magnitude of changes in foreign currencies. Overall, the strengthening of the U.S. dollar against the euro during the three months ended June 30, 2023 had less of an impact on our reported revenues than the weakening of the U.S. dollar against the euro during the three months ended June 30, 2022.

Results of Operations

Our results of operations and period-over-period changes are discussed in the following section. The tables and discussion below should be read in conjunction with the accompanying Unaudited Condensed Consolidated Financial Statements and the notes thereto appearing in Item 1. Financial Statements (in thousands, except percent data).

Revenues from our reportable segments and gross profit as a percentage of revenues remained largely consistent for the three months ended June 30, 2023, compared to the same period in the prior year.

Results by reportable segment are as follows:

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Our unaudited condensed consolidated results of operations are as follows:

Reportable Segments

Sterilization and Disinfection Control

The Sterilization and Disinfection Control Division manufactures and sells biological, cleaning, and chemical indicators used to assess the effectiveness of sterilization and disinfection processes in the pharmaceutical, medical device, hospital, and dental industries. The division also provides testing and laboratory services, mainly to the dental industry. Sterilization and disinfection control products are disposable and are used on a routine basis.

Sterilization and Disinfection Control revenues increased 8% for the three months ended June 30, 2023 compared to the prior year period, primarily due to unusually low revenues during the three months ended June 30, 2022 attributable to labor shortages that delayed production and order fulfillment, which abated in the second half of fiscal year 2023. The division also benefited from price increases during the three months ended June 30, 2023.

Sterilization and Disinfection Control's gross profit percentage was flat for the quarters ended June 30, 2023 and 2022.

Clinical Genomics

The Clinical Genomics division develops, manufactures and sells highly sensitive, low-cost, high-throughput genetic analysis tools and related consumables and services that enable clinical labs to perform genomic testing for a broad range of diagnostic and research applications in several therapeutic areas, such as screenings for hereditary diseases, pharmacogenetics, and oncology related applications.

Clinical Genomics revenues decreased 8% for the three months ended June 30, 2023 compared to the prior year period, primarily as a result of the loss of revenues from Sema4 and unfavorable changes to foreign currency exchange rates, partially offset by higher revenues in China, particularly hardware revenues.

Gross profit percentage for the Clinical Genomics division decreased four percentage points for the three months ended June 30, 2023 compared to the prior year period, primarily due to lower revenues on a partially fixed cost base and to a lesser extent, unfavorable product mix.

Biopharmaceutical Development

Our Biopharmaceutical Development division develops, manufactures, and sells automated systems for protein analysis (immunoassays) and peptide synthesis solutions. Immunoassays and peptide synthesis solutions accelerate the discovery, development, and manufacture of biotherapeutic therapies, among other applications.

Biopharmaceutical Development revenues decreased 10% for the three months ended June 30, 2023 compared to the prior year period, primarily due to softening demand for capital equipment and to a lesser extent, unfavorable changes in foreign currency, partially offset by an increase in revenues from consumables. Given the current economic landscape related to softening demand for capital equipment, revenues for this segment are unlikely to grow at historical levels in fiscal year 2024.

While Biopharmaceutical Development's revenues decreased 10% for the three months ended June 30, 2023 compared to the prior year period, gross profit percentage remained flat, primarily due to a significant increase in consumables revenues, which have a higher gross margin as a percentage of revenues, and to a lesser extent price increases.

Calibration Solutions

The Calibration Solutions division develops, manufactures and sells quality control products using principles of advanced metrology to measure or calibrate critical chemical or physical parameters in various dialysis, process monitoring, instrument monitoring, environmental monitoring, gas flow, environmental air quality, and torque applications, primarily in medical device manufacturing, pharmaceutical manufacturing, laboratory, and hospital environments.

Calibration Solutions revenues increased 12% for the three months ended June 30, 2023 compared to the prior year period, primarily due to the abatement of production difficulties and supply constraints that had limited our ability to manufacture ordered quantities of certain products during the three months ended June 30, 2022.

Calibration Solutions' gross profit percentage increased 1% for the three months ended June 30, 2023 compared to the prior year period, primarily due to increased revenues on a partially fixed cost base, partially offset by increased costs for third-party contractors.

Operating Expenses

Operating expenses decreased 11% for the three months ended June 30, 2023 compared to the prior year period, primarily as a result of lower personnel costs related to strategic cost containment activities undertaken following the loss of Sema4.

Selling

Selling expense is driven primarily by labor costs, including salaries and commissions; accordingly, it may vary with sales levels.

Selling expense for the three months ended June 30, 2023 decreased 10% compared to the prior year period, primarily as a result of lower personnel costs, in particular the realized benefits of the proactive cost savings efforts we initiated after the loss of Sema4.

General and Administrative

Labor costs, including non-cash stock-based compensation and amortization of intangible assets, drive the substantial majority of our general and administrative expense.

General and administrative expenses decreased 11% for the three months ended June 30, 2023 compared to the prior year period, primarily as a result of reduced personnel costs largely attributable to strategic cost savings activities following the loss of Sema4 and lower stock-based compensation expense as the performance-based restricted stock units associated with the fiscal 2022 acquisition of Agena Bioscience, Inc. were no longer amortizing during the first quarter of fiscal year 2024. Additionally, we incurred lower professional services costs during the three months ended June 30, 2023 compared to the prior year period.

Research and Development

Research and development expense is predominantly comprised of labor costs and costs of third-party consultants.

Research and development expenses decreased 16% for the three months ended June 30, 2023 compared to the prior year period, primarily due the prior period purchase of in-process research and development technology used to enhance an existing Sterilization and Disinfection Control division product offering and cost containment actions.

Nonoperating Expense, Net

Nonoperating expense, net for the three months ended June 30, 2023 is composed primarily of interest expense and amortization of the debt discount associated with the Notes and the Credit Facility as well as gains and losses on foreign currency transactions. During the three months ended June 30, 2023, these expenses were partially offset by a payment received from a former customer outside the normal course of business reimbursing us for costs incurred in previous periods. The reimbursement agreement was not included in the original sales contract with the customer.

Income Taxes

Our effective income tax rate was 41.4% for the three months ended June 30, 2023 and 73.4% for the three months ended June 30, 2022. The effective tax rate for the three months ended June 30, 2023 differed from the statutory federal rate of 21% primarily due to the share-based payment awards for employees and the effect of income generated in foreign jurisdictions. The change in our effective tax rate for the three months ended June 30, 2023 is primarily due to lower windfall benefits on stock option exercises and the effect of income in foreign jurisdictions.

Our future effective income tax rate depends on various factors, such as changes in tax laws, regulations, accounting principles, or interpretations thereof, and the geographic composition of our pre-tax income. We carefully monitor these factors and adjust our effective income tax rate accordingly.

Net (Loss)

Net (loss) varies with changes in revenues, gross profit, and operating expenses (and included $7,220 and $2,968 of non-cash amortization of intangible assets acquired in business combinations and stock-based compensation expense, respectively, for the three months ended June 30, 2023).

Market-Based Awards

The performance-based restricted stock awards granted during the three months ended June 30, 2023 included a market-based component.

Liquidity and Capital Resources

Our sources of liquidity include cash generated from operations, cash and cash equivalents on hand, cash available from our Credit Facility and Open Market Sale AgreementSM, working capital, and potential additional equity and debt offerings. We believe that cash flows from operating activities and potential cash provided by borrowings from our Credit Facility or funds from our Open Market Sale AgreementSM, when necessary, will be sufficient to meet our ongoing operating requirements, scheduled interest payments on debt, dividend payments, and anticipated capital expenditures. At our option, we may settle the Notes in shares of our common stock or in cash, or we may re-finance our debt, depending on conditions in the market and the share price of our common stock.

Our more significant uses of resources have historically included acquisitions, payments of debt and interest obligations, long-term capital expenditures, and quarterly dividends to shareholders. Working capital is the amount by which current assets exceed current liabilities. We had working capital of $75,682 and $75,616 as of June 30, 2023 and March 31, 2023, respectively. As of June 30, 2023, and March 31, 2023, we had $32,376 and $32,910, respectively, of cash and cash equivalents.

As of June 30, 2023, $172,500 in aggregate principal Notes were outstanding and $5,000 was outstanding under the Credit Facility. In July 2023, we paid an additional $3,500 on our Credit Facility.

In April 2022, we entered into an Open Market Sale AgreementSM pursuant to which we may issue and sell, from time to time, shares of our common stock with an aggregate value of up to $150,000. We have not sold any shares under this agreement.

We routinely evaluate opportunities for strategic acquisitions. Future material acquisitions may require that we obtain additional capital, assume additional third-party debt or incur other long-term obligations. We believe that we have the ability to issue more equity or debt in the future in order to finance our acquisition and investment activities; however, additional equity or debt financing, or other transactions, may not be available on acceptable terms, if at all.

We may from time to time repurchase or take other steps to reduce our debt. These actions may include retirements or refinancing of outstanding debt, pursuing privately negotiated transactions, or otherwise. The amount of debt that may be retired, if any, could be material. Retirement would be decided at the sole discretion of our Board of Directors and would depend on market conditions, our cash position, and other considerations.

Dividends

We have paid regular quarterly dividends since 2003. We declared and paid dividends of $0.16 per share during the three months ended June 30, 2023, as well as each quarter of fiscal year 2023.

In July 2023, we announced that our Board of Directors declared a quarterly cash dividend of $0.16 per share of common stock, payable on September 15, 2023, to shareholders of record at the close of business on August 31, 2023.

Cash Flows

Our cash flows from operating, investing, and financing activities were as follows (in thousands):

Cash flows from operating activities for the three months ended June 30, 2023 provided $9,939. Net loss and non-cash adjustments totaled $11,066 for the three months ended June 30, 2023 compared to $7,682 for the three months ended June 30, 2022. We generated $9,366 more cash from working capital in the three months ended June 30, 2023 compared to the three months ended June 30, 2022, primarily due to higher collections on trade receivables and lower bonus payments to employees. Cash used in investing activities for the three months ended June 30, 2023 approximated cash used in investing activities during the three months ended June 30, 2022, as we purchased similar values of capital equipment in both periods. Cash used by financing activities primarily resulted from $8,000 repaid on our Credit Facility during the three months ended June 30, 2023 compared to $2,000 for the three months ended June 30, 2022.

Contractual Obligations and Other Commercial Commitments

We are party to many contractual obligations that involve commitments to make payments to third parties in the ordinary course of business. For a description of our contractual obligations and other commercial commitments as of March 31, 2023, see our Annual Report on Form 10-K for the fiscal year ended March 31, 2023, filed with the Securities and Exchange Commission on May 30, 2023.

On a consolidated basis, as of June 30, 2023, we had contractual obligations for open purchase orders of approximately $17,347 for routine purchases of supplies and inventory, which are payable in less than one year.

As part of the Belyntic acquisition, we agreed to pay $1,500 to the sellers if contractually specified patents related to the technology purchased are issued. We believe it is probable that the patents will be issued and that we will pay the sellers in full within 36 months following the acquisition date.

Critical Accounting Policies and Estimates

Critical accounting estimates are those that we believe are both significant and require us to make difficult, subjective, or complex judgments, often because we need to estimate the effect of inherently uncertain matters. These estimates are based on historical experience and various other factors that we believe to be appropriate under the circumstances. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position are discussed in our Annual Report on Form 10-K for the year ended March 31, 2023, in the Critical Accounting Policies and Estimates section of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Although we believe that our estimates, assumptions, and judgements are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments, or conditions.

Foreign Currency Exchange Rates

We face exchange rate risk from transactions with customers in countries outside the United States and from intercompany transactions between affiliates. Transactional exchange rate risk arises from the purchase and sale of goods and services in currencies other than the functional currency of the applicable subsidiary. We also face translational exchange rate risk related to the translation of financial statements of our foreign operations into U.S. dollars, our functional currency. Costs incurred and sales recorded by subsidiaries operating outside of the United States are translated into U.S. dollars using average exchange rates effective during the respective period. As a result, we are exposed to movements in the exchange rates of various currencies against the U.S. dollar. Our Biopharmaceutical Development division is particularly susceptible to currency exposures since it incurs a substantial portion of its expenses in Swedish Krona, while most of the division's revenue contracts are in U.S. dollars and euros. Therefore, when the Swedish Krona strengthens or weakens against the U.S. dollar, operating profits are increased or decreased, respectively. The effect of a change in currency exchange rates on our international subsidiaries' assets and liabilities is reflected in the accumulated other comprehensive income component of stockholders’ equity.

Interest Rates

Our Credit Facility bears interest at either a base rate or a SOFR rate, plus an applicable spread. Based on our interest rate and the balance outstanding as of June 30, 2023, we estimate that if interest rates increased 1 percentage point, we would incur approximately $50 of additional interest expense per year.

Inflation Risk

Inflation generally impacts us by increasing our costs of labor, materials, and freight. The rates of inflation experienced in recent years have not had a significant impact on our financial statements as inflationary cost increases have been offset by annual price increases. However, any price increases imposed may lead to declines in sales volume if competitors do not similarly adjust prices. We cannot reasonably estimate our ability to successfully recover any impact of inflation cost increases into the future.

Other

We have no derivative instruments. We have minimal exposure to commodity market risks.

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

As of June 30, 2023, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report, due to a material weakness identified in the fourth quarter of fiscal year 2023 that has not yet been remediated. The material weakness is described further below.

Nevertheless, based on the performance of additional procedures by management designed to ensure reliability of financial reporting, our management has concluded that, notwithstanding the material weaknesses described below, the consolidated financial statements, included in this Report on Form 10-Q, fairly present, in all material respects, our financial position, results of operations, and cash flows as of and for each of the periods presented, in conformity with U.S. GAAP.

Prior Year Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. As disclosed in Part II Item 9A. "Controls and Procedures" in our annual report on Form 10-K for the year ended March 31, 2023, during fiscal year 2023 we identified two material weaknesses in internal controls:

• Fair Value Calculations - Management's review controls over fair value calculations including Management's preliminary valuation of the Belyntic Acquisition were insufficient. Specifically, Management failed to utilize resources with an appropriate level of knowledge and expertise in performing and reviewing the fair value calculations including the preliminary Belyntic valuation.
• Goodwill Impairment Assessment - Management's review controls over the qualitative assessment of goodwill impairment were insufficient to identify potential impairment triggers.

Remediation Status for Material Weaknesses in Internal Control Over Financial Reporting

Beginning during the three months ended June 30, 2023 we implemented our previously-disclosed remediation plans:

• Fair Value Calculations - We obtained the services of a knowledgeable third-party valuation specialist to perform the fair value calculations for the Belyntic acquisition.
• Goodwill Impairment Assessment - Members of Management with requisite knowledge formally performed and reviewed a quarterly analysis over potential impairment triggers.

As a result of our control activities, we have concluded that the material weakness regarding fair value calculations has been remediated as of June 30, 2023. An insufficient number of quarters has elapsed to affirm remediation of the material weakness regarding goodwill impairment assessments; we will continue to perform formal quarterly impairment trigger analyses in future periods. We will likewise continue to utilize a valuation specialist with the requisite knowledge to perform valuations for all future acquisitions of businesses, as such acquisitions occur.

Changes in Internal Control Over Financial Reporting

Other than the remediation measures discussed above, during the three months ended June 30, 2023 there were no changes to our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

During the three months ended June 30, 2023, there were no material changes from the risk factors described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended March 31, 2023.