Azenta, Inc.: Form 10-Q for the period ended Dec 31, 2024

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related notes contained in the “2024 Annual Report on Form 10-K”. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below and in the forward-looking statements. Factors that could cause or contribute to these differences include, without limitation, those discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations or “MD&A”, as well as those described in the 2024 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q under “Information Related to Forward-Looking Statements”, Part I, Item 1A “Risk Factors” in the 2024 Annual Report on Form 10-K and Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q. All dollar amounts in the below MD&A are presented in U.S. dollars, unless otherwise noted or the context otherwise provides.

Our MD&A is organized as follows:

• Overview. This section provides a general description of our business and operating segments as well as a brief discussion and overall analysis of our business and financial performance, including key developments affecting us during the three months ended December 31, 2024 and 2023.
• Critical Accounting Policies and Estimates. This section discusses accounting policies and estimates that require us to exercise subjective or complex judgments in their application. We believe these accounting policies and estimates are important to understanding the assumptions and judgments incorporated in our reported financial results.
• Results of Operations. This section provides an analysis of our financial results for the three months ended December 31, 2024 compared to the three months ended December 31, 2023.
• Liquidity and Capital Resources. This section provides an analysis of our liquidity and changes in cash flows as well as a discussion of contractual commitments.

Plan to Sell B Medical Systems Business

During the first quarter of fiscal year 2025, the Company announced that it is pursuing a sale of its B Medical Systems business, a manufacturer and global distributor of medical refrigeration devices based in Luxembourg. This strategic action is intended to simplify the Company’s portfolio and allow management to focus on driving revenue growth and profitability in its core Sample Management Solutions and Multiomics segments. The B Medical Systems segment has been classified as held-for-sale and a discontinued operation under generally accepted accounting principles in the United States, or GAAP. Unless otherwise noted, this MD&A relates solely to our continuing operations and excludes the operations of our B Medical Systems business.

OVERVIEW

We are a leading global provider of biological and chemical compound sample exploration and management solutions for the life sciences industry. We entered the life sciences market in 2011, leveraging our in-house precision automation and cryogenics capabilities that we were then applying in the semiconductor manufacturing market. This led us to develop solutions for automated ultra-cold storage. Since then, we have expanded our life sciences offerings through internal investments and through a series of acquisitions. We support our customers from research and clinical development to commercialization with our sample management and automated storage, as well as genomic services expertise to help our customers bring impactful therapies to market faster. We understand the importance of sample integrity and offer a broad portfolio of products and services supporting customers at every stage of the life cycle of samples including procurement, automated storage systems, genomic services and a multitude of sample consumables, informatics and data software, along with sample repository services. Our expertise, global footprint and leadership positions enable us to be a trusted global partner to pharmaceutical, biotechnology and life sciences research institutions. In total, we employ approximately 3,000 full-time employees, part-time employees and contingent workers worldwide as of December 31, 2024 and have sales in approximately 80 countries. We are headquartered in Burlington, Massachusetts and have operations in North America, Asia, and Europe.

Our portfolio includes product and service offerings developed by us internally, as well as acquired through acquisitions, designed to provide comprehensive capabilities to our customers, addressing their needs in sample exploration and management, automated storage and multiomics. We continue to develop new product and service offerings and enhance existing and acquired offerings through the expertise of our research and development resources. We believe our acquisition, investment and integration approach has allowed us to accelerate internal development and significantly accelerate time to market for our life sciences solutions.

Segments

Within our Sample Management Solutions segment, we operate as a single business unit offering end-to-end sample management products and services, including: Sample Repository Services and Core Products (Automated Stores, Cryogenic Systems, Automated Sample Tube, Consumables and Instruments and Controlled Rate Thawing Devices). This portfolio provides customers with a high level of sample quality, security, availability, intelligence and integrity throughout the lifecycle of samples, providing customers with complete end-to-end “cold chain of custody” capabilities. We also offer expert-level consultation services to our clients throughout their experimental design and implementation processes.

Within our Multiomics segment, our genomic services business advances research and development activities by providing gene sequencing, synthesis, editing and related services. We offer a comprehensive, global portfolio that we believe has both broad appeal in the life sciences industry and enables customers to select the best solution for their research and development challenges. This portfolio also offers unique solutions for key markets such as cell and gene therapy, antibody development and biomarker discovery by addressing genomic complexity and throughput challenges.

Business and Financial Performance

Basis of Presentation

Our condensed consolidated financial statements are prepared in accordance with GAAP.

Financial Performance

Our performance for the three months ended December 31, 2024 and 2023 is as follows:

In thousands

Three months ended December 31, 2024 compared to three months ended December 31, 2023

Revenue increased 4% for the three months ended December 31, 2024 compared to the corresponding period in the prior fiscal year, driven by revenue growth in both our Multiomics and Sample Management Solutions segments. In Multiomics, revenue increased in Next Generation Sequencing and Gene Synthesis services, partially offset by a decline in Sanger sequencing. In Sample Management Solutions, revenue increased in Sample Repository Solutions and Core Products, particularly in Consumables and Instruments and Clinical and Cryogenic Stores Systems. Gross margin was 47% for the three months ended December 31, 2024 compared to 44% for the corresponding period in the prior fiscal year, driven by higher revenues and margin expansion across the business, particularly in our Sample Management Solutions segment, mostly driven by operational efficiencies, sales mix, and the impact of certain non-recurring items recorded in the corresponding period in the prior fiscal year. Operating expenses increased during the three months ended December 31, 2024 compared to the corresponding period in the prior fiscal year driven by higher selling, general and administrative expenses, partially offset by lower research and development expense and lower restructuring charges. We generated a loss from continuing operations of $9.4 million for the three months ended December 31, 2024 compared to loss from continuing operations of $7.2 million for the corresponding period in the prior fiscal year, primarily driven by lower interest income and higher income tax expense, partially offset by higher revenue and operational efficiencies. We generated a net loss of $13.3 million for the three months ended December 31, 2024 compared to a net loss of $15.7 million for the three months ended December 31, 2023, primarily due to decreased loss from discontinued operations offsetting the increased loss from continuing operations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the interim condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on historical experience and consider various other assumptions that are believed to be reasonable under the circumstances. We evaluate current and anticipated worldwide economic conditions, both in general and specifically in relation to the life sciences industry, that serve as a basis for making judgments about the carrying values of assets and liabilities that are not readily determinable based on information from other sources. Actual results may differ from these estimates under different assumptions or conditions that could have a material impact on our financial condition and results of operations.

The critical accounting estimates that we believe affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements presented in this Quarterly Report on Form 10-Q are described under Critical Accounting Policies Estimates included in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the 2024 Annual Report on Form 10-K. There have been no material changes to our critical accounting policies or estimates from those set forth in our Annual Report on Form 10-K.

RESULTS OF OPERATIONS

Please refer to the commentary provided below for further discussion and analysis of the factors contributing to our results from operations for the three months ended December 31, 2024 compared to the three months ended December 31, 2023.

Non-GAAP Financial Measures

Non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with GAAP and should not be relied upon to the exclusion of GAAP financial measures. Management adjusts the GAAP results for the impact of amortization of intangible assets, transformation costs, restructuring charges, governance-related matters, merger and acquisition costs and costs related to share repurchase, and other unallocated corporate expenses to provide investors better perspective on the results of operations which the Company believes is more comparable to the similar analysis provided by its peers. Management also excludes special charges and gains, such as gains and losses from the sale of assets, certain tax benefits and charges, as well as other gains and charges that are not representative of the normal operations of the business. Management strongly encourages investors to review our financial statements and publicly filed reports in their entirety and not rely on any single measure. A reconciliation of non-GAAP measures to the most nearly comparable GAAP measures is included under “Operating Income (Loss)” and “Gross Margin” below.

Revenue

Our revenue performance for the three months ended December 31, 2024 and 2023 is as follows:

In thousands, except percentages

Three months ended December 31, 2024 compared to three months ended December 31, 2023

Our Multiomics segment revenue for the three months ended December 31, 2024 increased 6% compared to the corresponding prior fiscal year period driven by revenue growth in Next Generation Sequencing and Gene Synthesis services, partially offset by a decline in Sanger sequencing services.

Our Sample Management Solutions segment revenue for the three months ended December 31, 2024 increased 3% compared to the corresponding prior fiscal year period driven by revenue growth in both Sample Repository Services and Core Products businesses, particularly in Consumables and Instruments and Clinical and Cryogenic Stores Systems.

Revenue generated outside the United States was $54.0 million, or 37% of total revenue, for the three months ended December 31, 2024 compared to $51.6 million, or 36% of total revenue, for the corresponding period in the prior fiscal year.

Operating Income (Loss)

Our operating income (loss) performance for the three months ended December 31, 2024 and 2023 is as follows (in thousands, except percentages):

(1) Transformation costs represent non-recurring expenses for strategic projects with anticipated long-term benefits to the Company focused on cost reduction and productivity improvement that do not meet the definition of restructuring charges. These costs are directed at simplifying, standardizing, streamlining, and optimizing the Company’s operations, processes and systems to permanently alter the Company’s operations for the long term. For a project to be considered transformational, successful completion of the project must be expected to bring long-term material benefits to the organization and involve significant changes to process and/or underlying technology. Transformation costs in the period result from actions taken as part of the Company’s 2024 transformation plan and primarily relate to one time asset write downs associated with changes in technology, one time inventory write downs relating to restructuring actions taken in the period, and third-party consulting costs associated with process and systems re-design.

(2) Includes expenses related to governance-related matters.

Three months ended December 31, 2024 compared to three months ended December 31, 2023

Operating income for the Sample Management Solutions segment was $1.6 million for the three months ended December 31, 2024 compared to an operating loss of $1.5 million in the corresponding period in the prior fiscal year. The Sample Management Solutions segment operating margin was 1.9%, an increase of 380 basis points for the three months ended December 31, 2024 compared to the corresponding period in the prior fiscal year. The increase in operating income and operating margin were primarily driven by higher revenue and margin expansion, partially offset by increased operating expenses. Adjusted operating income was $2.3 million for the three months ended December 31, 2024 compared to adjusted operating loss of $0.6 million in the corresponding period in the prior fiscal year. Adjusted operating margin was 2.9%, an increase of 363 basis points for the three months ended December 31, 2024 compared to the corresponding period in the prior fiscal year. Adjusted operating income and margin exclude the impact of amortization of intangible assets of $0.7 million and $0.9 million for the three months ended December 31, 2024 and 2023, respectively, and transformation costs of $0.1 million for the three months ended December 31, 2024.

Operating loss for the Multiomics segment was $3.4 million for the three months ended December 31, 2024 compared to an operating loss of $4.3 million in the corresponding period in the prior fiscal year. The Multiomics segment operating margin was (5.1)%, an increase of 175 basis points for the three months ended December 31, 2024 compared to the corresponding period in the prior fiscal year. The decrease in operating loss and increase in operating margin were primarily driven by higher revenue and gross profit, supported by operational efficiency. Adjusted operating loss was $2.5 million for the three months ended December 31, 2024 compared to adjusted operating loss of $3.3 million in the corresponding period of the prior fiscal year. Adjusted operating margin was (3.8)%, an increase of 143 basis points for the three months ended December 31, 2024 compared to the corresponding period in the prior fiscal year. Adjusted operating loss and margin exclude the impact of amortization related to completed technology of $0.9 million and $1.0 million for the three months ended December 31, 2024 and 2023, respectively.

Gross Margin

Our gross margin performance for the three months ended December 31, 2024 and 2023 is as follows (in thousands, except percentages):

(1) Transformation costs represent non-recurring expenses for strategic projects with anticipated long-term benefits to the Company focused on cost reduction and productivity improvement that do not meet the definition of restructuring charges. These costs are directed at simplifying, standardizing, streamlining, and optimizing the Company’s operations, processes and systems to permanently alter the Company’s operations for the long term. For a project to be considered transformational, successful completion of the project must be expected to bring long-term material benefits to the organization and involve significant changes to process and/or underlying technology. Transformation costs in the period result from actions taken as part of the Company’s 2024 transformation plan and primarily relate to one time asset write downs associated with changes in technology, one time inventory write downs relating to restructuring actions taken in the period, and third-party consulting costs associated with process and systems re-design.

Three months ended December 31, 2024 compared to three months ended December 31, 2023

The Sample Management Solutions segment gross margin was 46.9% for the three months ended December 31, 2024, an increase of 482 basis points compared to the corresponding period in the prior fiscal year. Adjusted gross margin was 47.8% for the three months ended December 31, 2024, an increase of 464 basis points compared to the corresponding period in the prior fiscal year, driven by higher gross margin for both Core Products and Sample Repository Services. The increase in gross margin was mostly driven by improved operational efficiencies, sales mix, and the impact of certain non-recurring items recorded in the same period last year. Adjusted gross margin excludes the impact of amortization related to completed technology of $0.6 million and $0.8 million for the three months ended December 31, 2024 and 2023, respectively, and transformation costs of $0.1 million for the three months ended December 31, 2024.

The Multiomics segment gross margin was 46.1% for the three months ended December 31, 2024, an increase of 70 basis points compared to the corresponding period in the prior fiscal year. Adjusted gross margin was 47.4% for the three months ended December 31, 2024, an increase of 34 basis points compared to the corresponding period in the prior fiscal year, driven by higher gross margin for the Next Generation Sequencing and Gene Synthesis services, partially offset by lower gross margin for Sanger sequencing. The increase in gross margin for Next Generation Sequencing and Gene Synthesis was driven by higher revenues and operational efficiencies; the margin pressure in Sanger sequencing was primarily driven by lower revenues. Adjusted gross margin excludes the impact of amortization related to completed technology of $0.9 million and $1.0 million for the three months ended December 31, 2024 and 2023, respectively.

Research and Development Expenses

Our research and development expenses for the three months ended December 31, 2024 and 2023 are as follows:

In thousands

In thousands

Total research and development expenses decreased $0.9 million for the three months ended December 31, 2024 compared to the corresponding period in the prior fiscal year, driven by cost reduction initiatives across the business, primarily decreased compensation and benefits expense.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses for the three months ended December 31, 2024 and 2023 are as follows:

In thousands

In thousands

Total selling, general and administrative expenses increased $3.3 million for the three months ended December 31, 2024 compared to the corresponding period in the prior fiscal year, primarily driven by higher stock-based compensation expense and one-time costs related to the Company's leadership changes.

Restructuring Charges

Restructuring charges were $0.4 million for the three months ended December 31, 2024, a decrease of $0.4 million compared to the three months ended December 31, 2023 driven by decreased activity on the cost saving initiatives launched in fiscal year 2024. See Note 7, Restructuring in the notes to the unaudited condensed consolidated financial statements included in the section titled “Financial Statements” in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Non-Operating Income

Interest income, net – We recorded interest income of $4.3 million for the three months ended December 31, 2024, compared to $10.0 million recorded for the three months ended December 31, 2023. The decrease in interest income is due to decreased investments in marketable securities during the three months ended December 31, 2024 compared to the corresponding period in the prior fiscal year. Please refer to Note 4, Marketable Securities and Note 5, Derivative Instruments in the notes to the unaudited condensed consolidated financial statements included in the section titled “Financial Statements” in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Other income (expense), net – We recorded other income of $1.2 million for the three months ended December 31, 2024, compared to other income of $0.5 million for the three months ended December 31, 2023, which primarily relates to foreign exchange gains and losses resulting from foreign currency denominated transactions and the revaluation of foreign currency denominated assets and liabilities.

Income Tax Benefit

We recorded income tax expense of $3.6 million for the three months ended December 31, 2024, which was primarily driven by the profits in our foreign jurisdictions and current state income taxes in jurisdictions where we do not have a net operating loss carryover. Additionally, tax expense is generated on a global loss because the U.S. tax loss is not being benefited due to a valuation allowance against U.S. deferred tax assets.

We recorded income tax expense of $1.4 million during the three months ended December 31, 2023. The tax expense for the three months ended December 31, 2023 was primarily driven by the pre-tax income from foreign operations during the period, a $0.5 million stock compensation shortfall expense for tax deductions that are lower than the associated book compensation expense and a $0.6 million expense related to a valuation allowance on beginning of year U.S. state deferred tax assets.

Discontinued Operations

During the first quarter of fiscal year 2025, following approval by our Board of Directors, we publicly announced our plan to sell the B Medical Systems business. Results related to the B Medical Systems segment are included within discontinued operations for the three months ended December 31, 2024 and 2023. Revenue from discontinued operations was $17.6 million and $12.6 million, respectively, for the three months ended December 31, 2024 and 2023. Loss from discontinued operations, net of tax, was $3.9 million and $8.5 million, respectively, for the three months ended December 31, 2024 and 2023. The loss from discontinued operations includes only direct operating expenses incurred that (1) are clearly identifiable as costs being disposed of upon completion of the sale and (2) will not be continued by the Company on an ongoing basis. Indirect expenses which supported the B Medical Systems segment and remain part of continuing operations, are not reflected in loss from discontinued operations. Please refer to Note 3, Discontinued Operations, in the notes to the unaudited condensed consolidated financial statements included in the section titled “Financial Statements” in Part I, Item 1 of this Quarterly Report on Form 10-Q.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2024, we had cash and cash equivalents, restricted cash, and marketable securities of $503.4 million and stockholders’ equity of $1.7 billion. We believe that our current cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements for at least one year from the date of this Quarterly Report on Form 10-Q and for the foreseeable future thereafter. The current global economic environment makes it difficult for us to predict longer-term liquidity requirements with sufficient certainty. We may be unable to obtain financing that may be required on terms favorable to us, if at all. If adequate funds are not available to us on acceptable terms or otherwise, we may be unable to successfully develop or enhance products and services, respond to competitive pressures, or take advantage of acquisition opportunities, any of which could have a material adverse effect on our business, financial condition and operating results.

Cash Flows and Liquidity

Our cash and cash equivalents, restricted cash and marketable securities for our continuing operations as of December 31, 2024 and September 30, 2024 are as follows:

In thousands

As of December 31, 2024, we had$124.6 million of cash, cash equivalents and restricted cash held outside of the United States, which are not currently needed for U.S. operations. Our marketable securities are generally readily convertible to cash without a material adverse impact.

Our cash flows on a total company consolidated basis for the three months ended December 31, 2024 and 2023 were as follows:

In thousands

Cash inflows from operating activities for the three months ended December 31, 2024 were $30.6 million, primarily due to increased revenue and collections and a U.S. federal tax refund of $11.5 million received in the three months ended December 31, 2024. Investing activities for the three months ended December 31, 2024 include $40.8 million of purchases of marketable securities, offset by $125.6 million for sales and maturities of marketable securities. Financing activities for the three months ended December 31, 2024 include $4.9 million of excise tax payments related to our share repurchases settled in fiscal year 2024.

As of December 31, 2024, we had no outstanding debt on our balance sheet.

Capital Resources

Contractual Obligations and Requirements

As of December 31, 2024, we had non-cancellable commitments of $50.1 million, comprised of purchase orders for inventory of $36.0 million and other operating expense commitments of $14.1 million.

We are exposed to a variety of market risks, including changes in interest rates affecting the return on our cash and cash equivalents, restricted cash and short-term and long-term investments and fluctuations in foreign currency exchange rates.

Interest Rate Exposure

Our cash and cash equivalents and restricted cash consist principally of money market securities which are short-term in nature. At December 31, 2024, our aggregate short-term and long-term investments were $113.4 million, consisting mostly of highly rated corporate debt securities and U.S. government backed securities. At December 31, 2024, the net unrealized loss position on marketable securities was $0.2 million which is included in “Accumulated other comprehensive loss” in the Condensed Consolidated Balance Sheets. A hypothetical 100 basis point change in interest rates would result in a $1.3 million and $2.7 million change in interest income earned during the three months ended December 31, 2024 and 2023, respectively.

Currency Rate Exposure

We have transactions and balances denominated in currencies other than the functional currency of the transacting entity. Most of these transactions carrying foreign exchange risk are in Germany, the United Kingdom, and China. Sales in currencies other than the U.S. dollar were approximately 37% and 27% of our total sales, respectively, during the three months ended December 31, 2024 and 2023. These sales were made primarily by our foreign subsidiaries, which have cost structures that substantially align with the currency of sale.

In the normal course of our business, we have liquid assets denominated in non-functional currencies which include cash, short-term advances between our legal entities and accounts receivable which are subject to foreign currency exposure. Such balances were $38.8 million and $63.9 million, respectively, at December 31, 2024 and September 30, 2024, and primarily relate to the Euro, British Pound, and the Chinese Yuan. We mitigate the impact of potential currency translation losses on these short-term intercompany advances by the timely settlement of each transaction, generally within 30 days. We also utilize forward contracts to mitigate our exposures to currency movement. We incurred foreign currency gains of $0.5 million and losses of $0.5 million during the three months ended December 31, 2024 and 2023, respectively, which related to the currency fluctuation on these balances between the time the transaction occurred and the ultimate settlement of the transaction. A hypothetical 10% change in foreign exchange rates as of December 31, 2024 would result in an approximate change of $0.2 million in our net income during the three months ended December 31, 2024.

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act. Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file or submit 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 the chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon this evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2024 due to the material weakness described below. Notwithstanding the material weakness, our chief executive officer and our chief financial officer have concluded that the Company’s unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with U.S. generally accepted accounting principles for each of the periods presented.

Material Weakness in Internal Control over Financial Reporting. As previously disclosed in the 2024 Annual Report on Form 10-K, we identified a material weakness in our internal control over financial reporting as we did not design and maintain effective controls related to the review of the cash flow statement that continues to exist as of December 31, 2024. The material weakness resulted in immaterial misstatements in our Consolidated Statements of Cash Flows for the Q2 and Q3 interim periods during fiscal year 2023, for the year ended September 30, 2023, as well as the Q1, Q2, and Q3 interim periods during fiscal year 2024 and in our supplemental cash flow disclosures for the year ended September 30, 2022, each interim and annual period during fiscal year 2023 and the Q1, Q2 and Q3 interim periods during fiscal year 2024. Additionally, the material weakness could result in material misstatements of our interim or annual consolidated statement of cash flows or supplemental cash flow disclosures that would not be prevented or detected on a timely basis.

Remediation Plan. During the three months ended December 31, 2024, we have taken steps to remediate the material weakness described above, including implementing a new cash flow reporting tool which automates the calculation of the effect of exchange rate changes on cash and cash equivalents, and we have implemented and documented new processes and controls over the review of our consolidated statement of cash flows. While the new and enhanced controls have been designed and implemented, they have not operated for a sufficient period of time as of December 31, 2024 to assert the material weakness has been remediated. Once the controls operate for a sufficient period of time and management has concluded, through testing, that the controls are operating effectively, the material weakness will be considered remediated. We are committed to continuing to improve our internal control over financial reporting, and as we continue to evaluate and work to improve our internal control over financial reporting, we may take additional measures to address control deficiencies, or we may modify certain remediation measures.

Changes in Internal Control over Financial Reporting. As described under the Remediation Plan section above, there were changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

You should carefully review and consider the information regarding certain factors that could materially affect our business, consolidated financial condition or results of operations set forth under the section titled “Risk Factors” in Part I, Item 1A of the 2024 Annual Report on Form 10-K. There have been no material changes from the risk factors disclosed in the 2024 Annual Report on Form 10-K. We may disclose changes to risk factors or additional factors from time to time in our future filings with the SEC.