Concrete Pumping Holdings, Inc.: Form 10-Q for the period ended Jan 31, 2024

You should read the following management’s discussion and analysis together with Concrete Pumping Holdings, Inc.’s (the “Company”, “we”, “us” or “our”) condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report. All references to "Notes" in this Item 2 of Part I refer to the notes to condensed consolidated financial statements included in Item 1 of Part I of this report. All references to “Annual Report” refers to our Form 10-K for the year ended October 31, 2023 filed with the SEC on January 16, 2024.

Cautionary Statement Concerning Forward-Looking Statements and Risk Factors Summary

Certain statements in this Quarterly Report on Form 10-Q ("Report") constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, among other things, statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects, and the potential impact of the COVID-19 pandemic on our business. These forward-looking statements may be identified by terminology such as “likely,” “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or "views" or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this Report are reasonable, we cannot guarantee future results.

The forward-looking statements contained in this Report are based on our current expectations and beliefs concerning future developments and their potential effects. These statements involve known and unknown risks, uncertainties (some of which are beyond our control) and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the items in the following:

• the adverse impact of recent inflationary pressures, including significant increases in fuel costs, global economic conditions and events related to these conditions
• general economic and business conditions, which may affect demand for commercial, infrastructure, and residential construction and adverse effects of major endemics or pandemics on our business;
• our ability to successfully implement our operating strategy;
• our ability to successfully identify, manage and integrate acquisitions;
• our ability to maintain effective internal controls necessary to provide reliable financial reports;
• governmental requirements and initiatives, including those related to mortgage lending, financing or deductions, funding for public or infrastructure construction, land usage, and environmental, health, and safety matters;
• seasonal and inclement weather conditions, which impede the installation of ready-mixed concrete;
• the cyclical nature of, and changes in, the real estate and construction markets, including pricing changes by our competitors;
• our ability to maintain favorable relationships with third parties who supply us with equipment and essential supplies;
• our ability to retain key personnel and maintain satisfactory labor relations;
• disruptions, uncertainties or volatility in the credit markets that may limit our, our suppliers’ and our customers’ access to capital;
• personal injury, property damage, results of litigation and other claims and insurance coverage issues;
• our substantial indebtedness and the restrictions imposed on us by the terms of our indebtedness;
• the effects of currency fluctuations on our results of operations and financial condition; and
• other factors as described in the section entitled “Risk Factors” in our Annual Report.

Our forward-looking statements speak only as of the date of this report or as of the date they are made, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be considered.

Business Overview

The Company is a Delaware corporation headquartered in Thornton, Colorado. The unaudited condensed consolidated financial statements included herein include the accounts of Concrete Pumping Holdings, Inc. and its wholly owned subsidiaries including Brundage-Bone Concrete Pumping, Inc. (“Brundage-Bone”), Camfaud Group Limited (“Camfaud”) and Eco-Pan, Inc. (“Eco-Pan”).

As part of the Company’s business growth and capital allocation strategy, the Company views strategic acquisitions as opportunities to enhance our value proposition through differentiation and competitiveness. Depending on the deal size and characteristics of the M&A opportunities available, we expect to allocate capital for opportunistic M&A utilizing cash on the balance sheet and the Company's revolving line of credit. In recent years, we have successfully executed on this strategy.

U.S. Concrete Pumping

All branches operating within our U.S. Concrete Pumping segment are concrete pumping service providers in the United States ("U.S."). Our U.S. Concrete Pumping core business is the provision of concrete pumping services to general contractors and concrete finishing companies in the commercial, infrastructure and residential sectors. Equipment generally returns to a “home base” nightly and these branches do not contract to purchase, mix, or deliver concrete. This segment collectively has approximately 100 branch locations across approximately 21 states with their corporate headquarters in Thornton, Colorado.

U.S. Concrete Waste Management Services

Our U.S. Concrete Waste Management Services segment consists of our U.S. based Eco-Pan business. Eco-Pan provides industrial cleanup and containment services, primarily to customers in the construction industry. Eco-Pan uses containment pans specifically designed to hold waste products from concrete and other industrial cleanup operations. Eco-Pan has 20 operating locations across the U.S. with its corporate headquarters in Thornton, Colorado.

U.K. Operations

Our U.K. Operations segment consists of our Camfaud, Premier and U.K. based Eco-Pan businesses. Camfaud is a concrete pumping service provider in the U.K. Our U.K. core business is primarily the provision of concrete pumping services to general contractors and concrete finishing companies in the commercial, infrastructure and residential sectors. Equipment generally returns to a “home base” nightly and does not contract to purchase, mix, or deliver concrete. Camfaud has approximately 30 branch locations throughout the U.K., with its corporate headquarters in Epping (near London), England. In addition, we have concrete waste management operations under our Eco-Pan brand name in the U.K. and currently operate from a shared Camfaud location.

Results of Operations

During the first quarter of fiscal 2024, the Company’s operations in the U.S. were negatively impacted by severe winter weather, including heavy rainfall, snow and freezing temperatures in the month of January that stalled many customer projects and resulted in a revenue decline in the U.S. Concrete Pumping segment. This was coupled with an increase in expenses during the first quarter primarily due to (1) a non-recurring charge of $3.5 million as a result of a recent adverse court ruling related to sales tax, and (2) higher labor, health insurance and rent costs. These factors are reflected in the description of our results of operations below.

Three Months Ended January 31, 2024 Compared to the Three Months Ended January 31, 2023

The tables included in the period-to-period comparisons below provide summaries of our revenue, gross profit and net income for our business segments for the three months ended January 31, 2024 and 2023.

Revenue

(in thousands)

Total revenue. Total revenues were $97.7 million for the three months ended January 31, 2024 compared to $93.6 million for the three months ended January 31, 2023. Revenue by segment is further discussed below.

U.S. Concrete Pumping. Revenue for our U.S. Concrete Pumping segment decreased by 0.8%, or $0.5 million, from $67.2 million in the first quarter of fiscal 2023 to $66.7 million for the first quarter of fiscal 2024 primarily attributable to a decrease in volume driven by severe winter weather in the 2024 first quarter, specifically heavy rainfall and freezing temperatures in the month of January.

U.K. Operations. Revenue for our U.K. Operations segment increased by 21.2%, or $2.7 million, from $12.7 million in the first quarter of fiscal 2023 to $15.4 million for the first quarter of fiscal 2024. Excluding the impact from foreign currency translation, revenue was up 16% year-over-year. The increase in revenue was primarily attributable to pricing improvements.

U.S. Concrete Waste Management Services. Third party revenue for the U.S. Concrete Waste Management Services segment improved by 14.2%, or $1.9 million, from $13.7 million in the first quarter of fiscal 2023 to $15.6 million for the first quarter of fiscal 2024. The increase in revenue was driven by robust organic growth and pricing improvements against a backdrop of adverse winter weather.

Gross Profit and Gross Margin

(in thousands, unless otherwise stated)

Gross margin. Our gross margin for the first quarter of fiscal 2024 was 34.1% compared to 39.0% in the first quarter of fiscal 2023. The decrease in our gross margin was primarily related to lower revenue volumes and labor utilization driven by the adverse impact severe of winter weather conditions, coupled with inflationary increases in insurance costs.

General and administrative expenses

General and administrative expenses ("G&A"). G&A expenses for the first quarter of fiscal 2024 were $31.9 million, an increase of $4.9 million from $27.0 million in the first quarter of fiscal 2023. G&A expenses as a percent of revenue were 32.7% for the first quarter of fiscal 2024 compared to 28.9% for the same period a year ago. The dollar increase in G&A expenses was largely due to (1) a non-recurring charge of $3.5 million related to sales tax litigation, as further described in Note 13 in Part I, Item 1 of this report for more information, (2) higher labor and health insurance costs of approximately $2.5 million as a result of additional headcount in our U.S. Concrete Waste Management Services segment to support growth initiatives and wage inflation, and (3) higher rent of $0.5 million. These increases were partially offset by non-cash decreases in amortization expense of $0.9 million and $0.6 million in lower stock-based compensation expense.

Excluding amortization of intangible assets of $3.9 million, depreciation expense of $0.6 million, stock-based compensation expense of $0.5 million and the non-recurring $3.5 million sales tax litigation-related charge, G&A expenses were $23.4 million for the first quarter of fiscal 2024 (23.9% of revenue), up $6.4 million from $20.5 million for the first quarter of fiscal 2023 (21.9% of revenue). The increase was primarily due to the Washington charge and higher labor as discussed above.

Total other income (expense)

Interest expense and amortization of deferred financing costs. Interest expense and amortization of deferred financing costs for the first quarter of fiscal 2024 was $6.5 million, down $0.4 million from $6.9 million in the first quarter of fiscal 2023. The decrease was primarily attributable to a lower average ABL revolver draw during the fiscal 2024 first quarter as compared to the same quarter a year ago.

Change in fair value of warrant liabilities. During the first quarter of fiscal 2024 the Company recognized a $0.1 million gain on the fair value remeasurement of our liability-classified warrants. During the first quarter of fiscal 2023 the Company recognized a $4.6 million gain on the fair value measurement of our liability-classified warrants. The decline in the fair value remeasurement of the public warrants for the first quarter of fiscal 2023 is due to the Company's share price trading below the exercise price as the warrants were closer to expiring in December 2023. On December 6, 2023, we announced the expiration of the Company's 13,017,677 warrants to acquire shares of its common stock, as such they are no longer recognized as a liability on the balance sheet as of January 31, 2024.

Income tax expense

Income tax expense (benefit). For the first fiscal quarter ended January 31, 2024 the Company recorded income tax benefit of $1.0 million on pretax loss of $4.8 million. For the same quarter a year ago, the Company recorded an income tax expense of $0.6 million on a pretax income of $7.1 million. The comparability of effective tax rates between both periods was primarily impacted by the warrants fair value activity in the three months ended January 31, 2023, as it is not recognized for tax purposes.

Adjusted EBITDA and Net Income/(Loss)

During the first quarter of fiscal year 2024, the Company moved certain assets and associated revenues and expenses, which was previously categorized in the Company's Other activities, into the U.S. Concrete Pumping segment in order to better align its placement with the manner in which the Company now allocates resources and measures performance. As a result, segment results for prior periods have been reclassified to conform to the current period presentation. For further discussion, see Note 18 in Part I, Item 1 of this report for more information. In addition, in order to appropriately distribute the use of corporate resources and better align measures with segment performance, beginning in the first quarter of fiscal year 2024, the Company is no longer adding back intercompany allocations to segment Adjusted EBITDA. The Company recast segment results for the quarter ended January 31, 2023 are below:

(in thousands)

(in thousands, except percentages)

24

U.S. Concrete Pumping. Net loss for our U.S. Concrete Pumping segment was $6.8 million for the first quarter of fiscal 2024, versus a net loss of $0.8 million for the first quarter of fiscal 2023. Adjusted EBITDA for our U.S. Concrete Pumping segment was $10.7 million for the first quarter of fiscal 2024, down 36.4% from $16.8 million for the same period in fiscal 2023. The decreases in net income and Adjusted EBITDA were primarily attributable to lower revenue volume and labor utilization due to the adverse impact from severe winter weather in the first quarter, coupled with increased costs related to insurance.

U.K. Operations. Net income for our U.K. Operations segment was $0.5 million for the first quarter of fiscal 2024, versus a net loss of $0.1 million for the first quarter of fiscal 2023. Adjusted EBITDA for our U.K. Operations segment was $3.2 million for the first quarter of fiscal 2024, up 32.8% from $2.4 million from the same period in fiscal 2023. The increases were primarily attributable to the year-over-year improvement in revenue and reductions in fuel, labor and repair costs.

U.S. Concrete Waste Management Services. Net income for our U.S. Concrete Waste Management Services segment was $2.4 million for the first quarter of fiscal 2024, versus net income of $2.8 million for the first quarter of fiscal 2023. Adjusted EBITDA for our U.S. Concrete Waste Management Services segment was $5.4 million for the first quarter of fiscal 2024, down 7.5% from $5.8 million from the same period in fiscal 2023. The decreases were primarily attributable to the adverse weather impact in the first quarter on revenue volumes and labor utilization, coupled with insurance cost inflation.

Other. Net income for Other activities was $0.1 million for the first quarter of fiscal 2024, compared to a net income of $4.6 million for the first quarter of fiscal 2023. The change in net income is primarily related to the change in warrant liability, as discussed above. There was no change in Adjusted EBITDA for our Other activities for the periods provided.

Liquidity and Capital Resources

Overview

Our capital structure is primarily a combination of (1) permanent financing, represented by stockholders’ equity; (2) zero-dividend convertible perpetual preferred stock; (3) long-term financing represented by our Senior Notes and (4) short-term financing under our ABL Facility. Our primary sources of liquidity are cash generated from operations, available cash and cash equivalents and access to our revolving credit facility under our ABL Facility, which provides for aggregate borrowings of up to $225.0 million, subject to a borrowing base limitation. We use our liquidity and capital resources to: (1) finance working capital requirements; (2) service our indebtedness; (3) purchase property, plant and equipment; and (4) finance strategic acquisitions. As of January 31, 2024, we had $14.7 million of cash and cash equivalents and $202.3 million of available borrowing capacity under the ABL Facility, providing total available liquidity of $217.0 million.

We may from time to time seek to retire or pay down borrowings on the outstanding balance of our ABL Facility or Senior Notes using cash on hand. Such repayments, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

We believe our existing cash and cash equivalent balances, cash flow from operations and borrowing capacity under our ABL Facility will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, potential acquisitions and overall economic conditions. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity could result in dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations.

Material Cash Requirements

Our principal uses of cash historically have been to fund operating activities and working capital, purchases of property and equipment, strategic acquisitions, fund payments due under facility operating and finance leases, share repurchases and to meet debt service requirements.

Our working capital surplus as of January 31, 2024 was $7.3 million. We believe we have adequate coverage of our debt covenants.

The amount of our future capital expenditures will depend on a number of factors including general economic conditions and growth prospects. In response to changing economic conditions, we believe we have the flexibility to modify our capital expenditures by adjusting them (either up or down) to match our actual performance. Our capital expenditures for the three months ended January 31, 2024 and 2023 were approximately $17.8 million and $17.1 million, respectively.

To service our debt, we require a significant amount of cash. Our ability to pay interest and principal on our indebtedness will depend upon our future operating performance and the availability of borrowings under the ABL Facility and/or other debt and equity financing alternatives available to us, which will be affected by prevailing economic conditions and conditions in the global credit and capital markets, as well as financial, business and other factors, some of which are beyond our control. Based on our current level of operations and given the current state of the capital markets, we believe our cash flow from operations, available cash and available borrowings under the ABL Facility will be adequate to service our debt and meet our future liquidity needs for the foreseeable future. See “Senior Notes and ABL Facility” discussion below for more information.

Future Contractual Obligations

For information regarding our future contractual obligations, see the MD&A discussion included in Item 7 of Part II of our Annual Report.

Senior Notes and ABL Facility

The table below is a summary of the composition of the Company’s debt balances as of January 31, 2024 and October 31, 2023:

(in thousands)

On June 1, 2023, the ABL Facility was amended to, among other changes, (1) increase the maximum revolver borrowings available to be drawn thereunder to $225.0 million, (2) increase the letter of credit sublimit to $22.5 million and (3) extend the maturity of the ABL Facility to the earlier of (a) June 1, 2028 or (b) the date that is 180 days prior to (i) the final stated maturity date of the Senior Notes or (ii) the date the Senior Notes become due and payable. The ABL Facility also provides for an uncommitted accordion feature under which the borrowers under the ABL Facility can, subject to specified conditions, increase the ABL Facility by up to an additional $75.0 million. The amended ABL Facility was treated as a debt modification. The Company capitalized an additional $0.5 million of debt issuance costs related to the June 1, 2023, ABL Facility amendment. The preexisting unamortized deferred costs of $1.4 million and the additional costs of $0.5 million will be amortized from June 1, 2023 through June 1, 2028.

The outstanding balance under the ABL Facility as of January 31, 2024 was $13.0 million and as of that date, the Company was in compliance with all debt covenants. In addition, as of January 31, 2024, the Company had $1.1 million in credit line reserves and a letter of credit balance of $8.5 million. As of January 31, 2024, we had $202.3 million of available borrowing capacity under the ABL Facility. Debt issuance costs related to revolving credit facilities are capitalized and reflected as an asset in deferred financing costs in the accompanying condensed balance sheets. The Company had debt issuance costs related to the revolving credit facilities of $1.7 million as of January 31, 2024. See Note 8 for more information on the Senior Notes and ABL Facility.

Cash Flows

Cash generated from operating activities typically reflects net income, as adjusted for non-cash expense items such as depreciation, amortization and stock-based compensation, and changes in our operating assets and liabilities. Generally, we believe our business requires a relatively low level of working capital investment due to low inventory requirements and timely customer payments due to daily billings for most of our services.

Cash flow provided by operating activities. Net cash provided by operating activities generally reflects the cash effects of transactions and other events used in the determination of net income or loss.

Net cash provided by operating activities during the three months ended January 31, 2024 was $20.3 million. The Company had a net loss of $3.8 million, which included non-cash expense items of $13.4 million. In addition, we had cash outflows related to an increase to our working capital of $10.7 million. Working capital changes primarily include a decrease in receivables of $13.9 million, a decrease in inventory of $0.6 million, a decrease of $3.9 million in accounts payable, an increase in other operating assets of $0.6 million and a decrease in other operating liabilities of $0.6 million. The decrease in receivables is due to seasonal collection of receivables during the first quarter of fiscal year 2024. The decrease in accounts payable is driven by the timing of vendor payments. The increase in other assets is primarily due to the increase in sales tax receivable.

Net cash provided by operating activities during the three months ended January 31, 2023 was $17.9 million. The Company had net income of $6.5 million, which included non-cash expense items of $11.4 million. In addition, we had cash outflows related to a decrease to our working capital of $0.1 million. Working capital changes primarily include an increase to other operating assets of $7.3 million and a decrease of $4.0 million to accounts payable, offset by a decrease in receivables of $10.4 million, an increase in other operating liabilities of $1.9 million, and an increase in inventory of $1.0 million. The increase to prepaid expenses and other current assets is primarily due to timing of prepaid insurance, which is generally prepaid during the first quarter of fiscal year 2023. The decrease in accounts payable is driven by timing. The decrease in receivables is due to seasonal collection of receivables during the first quarter of fiscal year 2023, while the increase in other operating liabilities is primarily related to an increase in accrued interest and partially offset by lease payments of $1.4 million. The Company makes semiannual interest payments in February and August each year.

Cash flow used in investing activities. Net cash used in operating activities generally reflects the cash outflows for property, plant and equipment.

We used $16.5 million to fund investing activities during the three months ended January 31, 2024. The Company used $17.8 million for the purchase of property, plant and equipment, which was partially offset by $1.3 million in proceeds from the sale of property, plant and equipment.

We used $14.8 million to fund investing activities during the three months ended January 31, 2023. The Company used $17.1 million for the purchase of property, plant and equipment, which was partially offset by $2.3 million in proceeds from the sale of property, plant and equipment.

Cash flow provided by (used in) financing activities.

Net cash used in financing activities was $5.6 million for the three months ended January 31, 2024. Cash used in financing activities included $5.9 million in net payments under the Company's ABL Facility and $1.1 million in purchase of treasury stock, which included $0.2 million purchased under the share repurchase program and $0.9 million in outflows from the purchase of shares into treasury stock in order to fund the employee tax obligations for certain vested stock awards.

Net cash provided by financing activities was $6.7 million for the three months ended January 31, 2023. Financing activities during this period primarily included $5.5 million in purchase of treasury stock, which included $4.9 million purchased under the share repurchase program and $0.6 million in outflows from the purchase of shares into treasury stock in order to fund the employee tax obligations for certain vested stock awards. In addition, cash used in financing activities included $1.2 million in net proceeds under the Company's ABL Facility

Accounting and Other Reporting Matters

Non-GAAP Measures (EBITDA and Adjusted EBITDA)

We calculate EBITDA by taking GAAP net income and adding back interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is calculated by taking EBITDA and adding back transaction expenses, loss on debt extinguishment, stock-based compensation, changes in the fair value of warrant liabilities, other income, net, goodwill and intangibles impairment and other adjustments. Transaction expenses represent expenses for legal, accounting, and other professionals that were engaged in the completion of various acquisitions. Transaction expenses can be volatile as they are primarily driven by the size of a specific acquisition. As such, we exclude these amounts from Adjusted EBITDA for comparability across periods. Other adjustments include non-recurring expenses and non-cash currency gains/losses.

During the first quarter of fiscal year 2024, the Company moved certain assets and associated revenues and expenses that was previously categorized in the Company's Other activities, into the U.S. Concrete Pumping segment in order to better align its placement with the manner in which the Company now allocates resources and measures performance. As a result, segment results for prior periods have been reclassified to conform to the current period presentation. For further discussion, see Note 18 in Part I, Item 1 of this report for more information. In addition, in order to appropriately distribute the use of corporate resources and better align measures with segment performance, beginning in the first quarter of fiscal year 2024, the Company is no longer adding back intercompany allocations to segment Adjusted EBITDA. As a result, segment results for prior periods have been reclassified to conform to our current period presentation. See the section “Adjusted EBITDA and Net Income/(Loss)” above for more information.

We believe these non-GAAP measures of financial results provide useful supplemental information to management and investors regarding certain financial and business trends related to our financial condition and results of operations, and as a supplemental tool for investors to use in evaluating our ongoing operating results and trends and in comparing our financial measures with competitors who also present similar non-GAAP financial measures. In addition, these measures (1) are used in quarterly and annual financial reports and presentations prepared for management, our board of directors and investors, and (2) help management to determine incentive compensation. EBITDA and Adjusted EBITDA have limitations and should not be considered in isolation or as a substitute for performance measures calculated under GAAP. These non-GAAP measures exclude certain cash expenses that we are obligated to make. In addition, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently or may not calculate it at all, which limits the usefulness of EBITDA and Adjusted EBITDA as comparative measures.

(in thousands)

28

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are disclosed in the “Critical Accounting Policies and Estimates” section of our Annual Report. No modifications have been made during the three months ended January 31, 2024 to these policies or estimates except for those noted in Note 2 to the condensed consolidated financial statements included within Item 1 of this report.

New Accounting Pronouncements

For information regarding recent accounting pronouncements, see Note 2 to the condensed consolidated financial statements included within Item 1 of this report for more information.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of January 31, 2024 (as such term is defined in Rule 13a-15(e) under the Exchange Act). Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Based upon this evaluation, our Chief Executive Office and Chief Financial Officer concluded that, as of January 31, 2024, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended January 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes to the Risk Factors previously disclosed in our Annual Report. For a detailed discussion of the risks that affect our business, please refer to the section entitled “Risk Factors” in the Annual Report.