Azenta, Inc.: Form 10-Q for the period ended Jun 30, 2025

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 our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 filed with the SEC on May 9, 2025 and 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 and nine months ended June 30, 2025 and 2024.
• 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 and nine months ended June 30, 2025 compared to the three and nine months ended June 30, 2024.
• 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, we announced that we are pursuing a sale of our B Medical Systems business, a manufacturer and global distributor of medical refrigeration devices based in Luxembourg. This strategic action is intended to simplify our portfolio and allow management to focus on driving revenue growth and profitability in our core Sample Management Solutions and Multiomics segments. The B Medical Systems business 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 June 30, 2025 and have sales in approximately 92 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 and nine months ended June 30, 2025 and 2024 is as follows:

In thousands

36

Revenue was flat for the three months ended June 30, 2025 compared to the corresponding period in the prior fiscal year driven by revenue growth in Multiomics segment offset by lower revenue in Sample Management Solutions segment. Revenue increased 3% for the nine months ended June 30, 2025 compared to the corresponding period in the prior fiscal year driven by revenue growth in both our Sample Management Solutions and Multiomics segments. The revenue growth in our Sample Management Solutions segment for the nine months ended June 30, 2025 compared to the corresponding period in the prior fiscal year was primarily driven by strong performance in Sample Repository Solutions. The revenue growth in our Multiomics segment for the three and nine months ended June 30, 2025 compared to the corresponding periods in the prior fiscal year was primarily driven by Next Generation Sequencing services, partially offset by declines in Sanger sequencing and Gene Synthesis services. Gross margin was 47% for both the three and nine months ended June 30, 2025 compared to 45% and 44%, respectively, for the three and nine months ended June 30, 2024. The gross margin increase for the three months ended June 30, 2025 compared to the corresponding period in the prior fiscal year was mostly driven by operational efficiencies. The gross margin increase for the nine months ended June 30, 2025 compared to the corresponding period in the prior fiscal year was primarily driven by higher revenue, operational efficiencies, and favorable sales mix. Operating expenses for the three and nine months ended June 30, 2025 decreased $4.1 million and $4.9 million, respectively, compared to the corresponding periods in the prior fiscal year, primarily driven by lower research and development expense, partially offset by higher transformation costs. The non-recurring impairment of intangible assets recorded in the three months ended March 31, 2024 also contributed to the decrease in the nine months ended June 30, 2025 compared to the corresponding period in the prior fiscal year. We generated a net income from continuing operations of $0.7 million and a net loss from continuing operations of $26.9 million, respectively, for the three and nine months ended June 30, 2025 compared to net loss from continuing operations of $0.2 million and $23.6 million, respectively, for the corresponding periods in the prior fiscal year, primarily driven by higher profit margin and operational efficiencies, partially offset by lower interest income and higher income tax expense. We generated net loss from discontinued operations, net of tax, of $51.9 million and $78.1 million, respectively, for the three and nine months ended June 30, 2025 compared to net loss from discontinued operations, net of tax, of $6.4 million and $135.6 million, respectively, for the corresponding periods in the prior fiscal year, primarily driven by the loss on assets held for sale recorded in the three and nine months ended June 30, 2025 and the impairment of goodwill recorded in the nine months ended June 30, 2024.

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 of operations for the three and nine months ended June 30, 2025 compared to the three and nine months ended June 30, 2024.

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 and impairment 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 we believe is more comparable to the similar analysis provided by our 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 and nine months ended June 30, 2025 and 2024 is as follows:

In thousands, except percentages

Our Sample Management Solutions segment revenue for the three months ended June 30, 2025 decreased 4% compared to the corresponding prior fiscal year period driven by lower revenue in Core Products, particularly in Automated Stores and Cryogenic Systems, partially offset by higher revenue in Sample Storage. Our Sample Management Solutions segment revenue for the nine months ended June 30, 2025 increased 2% compared to the corresponding prior fiscal year period driven by revenue growth in Sample Repository Services.

Our Multiomics segment revenue for the three and nine months ended June 30, 2025 increased approximately 4% in each period compared to the corresponding prior fiscal year periods driven by revenue growth in Next Generation Sequencing services, partially offset by declines in Gene Synthesis and Sanger sequencing services.

Revenue generated outside the United States was 39.0% and 37.6% of total revenue, respectively, for the three and nine months ended June 30, 2025 compared to 34.1% and 35.4% of total revenue, respectively, for the corresponding prior fiscal year periods.

Operating Income (Loss)

Our operating income (loss) performance for the three and nine months ended June 30, 2025 and 2024 is as follows (in thousands, except percentages):

38

39

(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.

Operating income for the Sample Management Solutions segment was $9.8 million and $12.0 million, respectively, for the three and nine months ended June 30, 2025 compared to operating income of $2.6 million and operating loss of $1.7 million, respectively, for the corresponding periods in the prior fiscal year. The Sample Management Solutions segment operating margin increased 937 basis points and 575 basis points, respectively, for the three and nine months ended June 30, 2025 compared to the corresponding periods in the prior fiscal year. The increases in operating income and operating margin were primarily driven by gross margin expansion, partially offset by increased transformation costs. Adjusted operating income was $11.2 million and $18.2 million, respectively, for the three and nine months ended June 30, 2025 compared to adjusted operating income of $3.6 million and $1.5 million, respectively, for the corresponding periods in the prior fiscal year. Adjusted operating margin increased 1,003 basis points and 697 basis points, respectively, for the three and nine months ended June 30, 2025 compared to the corresponding periods in the prior fiscal year. Adjusted operating income and margin exclude the impact of amortization of intangible assets, transformation costs and other adjustments.

Operating loss for the Multiomics segment was $4.2 million and $13.7 million, respectively, for the three and nine months ended June 30, 2025 compared to an operating loss of $1.6 million and $9.9 million, respectively, for the corresponding periods in the prior fiscal year. The Multiomics segment operating margin decreased 377 basis points and 177 basis points, respectively, for the three and nine months ended June 30, 2025 compared to the corresponding periods in the prior fiscal year. The increase in operating loss and decrease in operating margin were primarily driven by lower revenue for Gene Synthesis and Sanger sequencing services, partially offset by higher revenue for Next Generation Sequencing services. Adjusted operating loss was $3.3 million and $11.1 million, respectively, for the three and nine months ended June 30, 2025 compared to adjusted operating loss of $0.6 million and $6.7 million, respectively, for the corresponding periods in the prior fiscal year. Adjusted operating margin decreased 410 basis points and 210 basis points, respectively, for the three and nine months ended June 30, 2025 compared to the corresponding periods in the prior fiscal year. Adjusted operating loss and margin exclude the impact of amortization related to completed technology, restructuring charges and other adjustments.

Gross Margin

Our gross margin performance for the three and nine months ended June 30, 2025 and 2024 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.

The Sample Management Solutions segment gross margin increased 707 basis points and 507 basis points, respectively, for the three and nine months ended June 30, 2025 compared to the corresponding periods in the prior fiscal year. Adjusted gross margin increased 756 basis points and 517 basis points, respectively, for the three and nine months ended June 30, 2025, compared to the corresponding periods in the prior fiscal year. The increases in gross margin and adjusted gross margin were primarily driven by operational efficiencies and favorable sales mix.

The Multiomics segment gross margin decreased 465 basis points and 167 basis points, respectively, for the three and nine months ended June 30, 2025 compared to the corresponding periods in the prior fiscal year. Adjusted gross margin decreased 498 basis points and 201 basis points, respectively, for the three and nine months ended June 30, 2025 compared to the corresponding periods in the prior fiscal year. The decreases in gross margin and adjusted gross margin were primarily driven by lower revenue for Gene Synthesis and Sanger sequencing services, partially offset by higher revenue for Next Generation Sequencing services.

Research and Development Expenses

Our research and development expenses for the three and nine months ended June 30, 2025 and 2024 are as follows:

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Total research and development expenses decreased $0.2 million and $2.0 million, respectively, for the three and nine months ended June 30, 2025 compared to the corresponding periods 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 and nine months ended June 30, 2025 and 2024 are as follows:

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Total selling, general and administrative expenses decreased $2.9 million for the three months ended June 30, 2025 compared to the corresponding period in the prior fiscal year, primarily due to decreased compensation and benefits expense. Total selling, general and administrative expenses increased $2.9 million for the nine months ended June 30, 2025 compared to the corresponding period in the prior fiscal year, primarily due to higher stock-based compensation expense and one-time costs related to the Company's leadership changes, partially offset by decreased compensation and benefits expense.

Restructuring Charges

Restructuring charges were $0.8 million for the three months ended June 30, 2025, a decrease of $0.9 million compared to the corresponding period in the prior fiscal year. Restructuring charges were $4.8 million for the nine months ended June 30, 2025, a decrease of $1.2 million compared to the corresponding period in the prior fiscal year. Please refer to 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 $5.0 million and $13.8 million for the three and nine months ended June 30, 2025, respectively, compared to $7.9 million and $27.4 million recorded for the three and nine months ended June 30, 2024, respectively. The decrease in interest income year over year is due to decreased investments in marketable securities. 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 for additional information.

Other income (expense), net – We recorded other expense of $0.8 million for the three months ended June 30, 2025 compared to $0.4 million in the corresponding period in the prior fiscal year. We recorded other income of $1.5 million for the nine months ended June 30, 2025, an increase of $1.7 million compared to the corresponding period in the prior fiscal year. Other income (expense) primarily relates to foreign exchange gains and losses resulting from foreign currency denominated transactions and the revaluation of foreign currency denominated assets and liabilities. The increase in the nine months ended June 30, 2025 was also attributable to a $2.1 million gain from cash proceeds received from a cost method investment which had no cost basis.

Income Tax Expense

We recorded income tax expense of $2.8 million and $14.0 million during the three and nine months ended June 30, 2025, respectively. The tax expense for the three and nine months ended June 30, 2025 was primarily driven by a $6.5 million tax expense related to a change in the indefinite reinvestment assertion and the expectation to repatriate cash to the United States from a China subsidiary. The tax expense is also driven by profits in 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 we do not benefit from the U.S. tax loss due to a valuation allowance against U.S. deferred tax assets.

We recorded income tax expense of $0.6 million and $3.2 million during the three and nine months ended June 30, 2024, respectively. The tax expense was primarily driven by a $1.7 million charge related to a valuation allowance recorded against deferred tax assets in a foreign subsidiary during the three months ended March 31, 2024. Tax expense also includes $0.5 million of stock compensation shortfall expense for tax deductions that were lower than the associated book compensation expense during the three and nine months ended June 30, 2024 and $0.7 million of expenses related to a valuation allowance on beginning of year U.S. state deferred tax assets.

On July 4, 2025, the "One Big Beautiful Bill Act" was signed into US tax law, extending many international tax provisions of the 2017 Tax Cuts and Jobs Act and providing additional favorable incentives. We will continually monitor the financial impact of these changes. In the near term, we do not expect these changes to have a significant effect on our effective tax rate or cash flows.

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 business are included within discontinued operations for the three and nine months ended June 30, 2025 and 2024. Revenue from discontinued operations was $16.3 million and $28.5 million for the three months ended June 30, 2025 and 2024, respectively. Revenue from discontinued operations was $51.1 million and $63.9 million for the nine months ended June 30, 2025 and 2024, respectively. Loss from discontinued operations, net of tax, was $53.5 million and $79.7 million for the three and nine months ended June 30, 2025, respectively, primarily driven by the loss on assets held for sale recorded in the three and nine months ended June 30, 2025. Loss from discontinued operations was $6.4 million and $135.6 million for the three and nine months ended June 30, 2024, respectively, primarily driven by the impairment of goodwill recorded in the nine months ended June 30, 2024. 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 business 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 for additional information.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2025, we had cash and cash equivalents, restricted cash, and marketable securities of $549.8 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 June 30, 2025 and September 30, 2024 are as follows:

In thousands

As of June 30, 2025, we had $121.9 million of cash, cash equivalents and restricted cash held outside of the United States which are not currently needed for U.S. operations. We had approximately $23 million of cash in China as of June 30, 2025. We began repatriating the cash to the United States from China during the third quarter of the fiscal year 2025 and have provided for $6.5 million of income taxes related to the repatriation plan as of June 30, 2025. 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 nine months ended June 30, 2025 and 2024 were as follows:

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Cash inflows from operating activities for the nine months ended June 30, 2025 were $70.0 million, primarily due to increased revenue and collections and a U.S. federal tax refund of $11.5 million received in the nine months ended June 30, 2025. Investing activities for the nine months ended June 30, 2025 include $313.0 million in purchases of marketable securities, partially offset by $242.5 million in sales and maturities of marketable securities. Financing activities for the nine months ended June 30, 2025 include $11.4 million of excise tax payments related to our share repurchases settled in fiscal year 2024.

As of June 30, 2025, we had no outstanding debt on our balance sheet.

Capital Resources

Contractual Obligations and Requirements

As of June 30, 2025, we had non-cancellable commitments of $48.7 million comprised of purchase orders for inventory of $37.3 million and other operating expense commitments of $11.4 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 June 30, 2025, our aggregate short-term and long-term investments were $271.0 million, consisting mostly of highly rated corporate debt securities and U.S. government backed securities. At June 30, 2025, there was a net unrealized loss position of $0.1 million on marketable securities 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 $2.7 million and $6.1 million change in interest income earned during the nine months ended June 30, 2025 and 2024, 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 34% and 29% of our total sales, respectively, during the nine months ended June 30, 2025 and 2024. 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 $50.7 million and $63.9 million, respectively, at June 30, 2025 and September 30, 2024, and primarily relate to the Euro and British Pound. 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 losses of $1.3 million and $1.5 million during the nine months ended June 30, 2025 and 2024, 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 June 30, 2025 would result in an approximate change of $0.4 million in our net loss during the nine months ended June 30, 2025.

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 June 30, 2025 due to the material weaknesses described below. Notwithstanding the material weaknesses, our chief executive officer and our chief financial officer have concluded that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with GAAP for each of the periods presented.

Material Weaknesses 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. This material weakness, which continues to exist as of June 30, 2025, resulted in immaterial misstatements in our Consolidated Statements of Cash Flows for the Q2 and Q3 interim periods during fiscal year 2023, the year ended September 30, 2023, the Q1, Q2, and Q3 interim periods during fiscal year 2024, the Q1 interim period during fiscal year 2025, 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.

During the second quarter of fiscal year 2025, we identified an additional material weakness in our internal control over financial reporting, as we did not design and maintain effective controls related to the preparation and review of account reconciliations. This material weakness, which continues to exist as of June 30, 2025, resulted in immaterial misstatements in our Consolidated Financial Statements for the Q1 and Q2 interim periods during fiscal year 2025.

Additionally, the material weaknesses could result in misstatements of substantially all account balances and disclosures that would result in a material misstatement to our interim or annual consolidated financial statements that would not be prevented or detected on a timely basis.

Remediation Plans

Statements of Cash Flows - During the three months ended December 31, 2024, we took 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 implemented and documented new processes and controls over the review of our consolidated statement of cash flows. We continued to monitor and evaluate the effectiveness of these changes to our controls during the quarter ended June 30, 2025. While the new and enhanced controls have been designed and implemented, they have not operated for a sufficient period as of June 30, 2025 to assert the material weakness has been remediated.

Account Reconciliations – Our management is in the process of implementing a plan to remediate the material weakness related to the preparation and review of account reconciliations described above. We intend to take the necessary steps to address this material weakness by designing and implementing controls to resolve the underlying cause of this material weakness. Our planned remediation actions currently include, but are not limited to, the following:

• design and implementation of enhanced controls, operating at the level necessary to prevent and detect potential material misstatements and to aid in the detection of potential deviations in balance sheet accounts;
• redesign and implementation of the balance sheet account reconciliation policy and approval process, incorporating enhanced training and establishing additional controls or control activities, with appropriate levels of evidence regarding aging, thresholds and supporting documentation; and
• engagement with outside consultants to assist in certain aspects of the remediation plan.

These material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period for management to conclude, through testing, that such controls are operating effectively. 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. Other than the remediation plans described above, there were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2025 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 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 filed with the SEC on May 9, 2025. There have been no material changes from the risk factors disclosed in the 2024 Annual Report on Form 10-K and such Quarterly Report on Form 10-Q. We may disclose additional changes to risk factors or additional factors from time to time in our future filings with the SEC.