BIO-TECHNE Corp: Form 10-Q for the period ended Mar 31, 2025

CONDITION AND RESULTS OF OPERATIONS

The following management discussion and analysis (“MD&A”) provides information that we believe is useful in understanding our operating results, cash flows and financial condition. We provide quantitative information about the material sales drivers including the effect of acquisitions and changes in foreign currency at the corporate and segment level. We also provide quantitative information about discrete tax items and other significant factors we believe are useful for understanding our results. The MD&A should be read in conjunction with both the unaudited condensed consolidated financial information and related notes included in this Form 10-Q, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended June 30, 2024. This discussion contains various “Non-GAAP Financial Measures” and also contains various “Forward-Looking Statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We refer readers to the statements entitled “Non-GAAP Financial Measures” and “Forward-Looking Information and Cautionary Statements” located at the end of Item 2 of this report.

OVERVIEW

Bio-Techne and its subsidiaries, collectively doing business as Bio-Techne Corporation (Bio-Techne, we, our, us or the Company) develop, manufacture and sell biotechnology reagents, instruments and services for the research and clinical diagnostic markets worldwide. We use our deep product portfolio and application expertise to develop and sell integral components of scientific investigations into biological processes and molecular diagnostics, revealing the nature, diagnosis, etiology and progression of specific diseases. Our products aid in drug discovery efforts and provide the means for accurate clinical tests and diagnoses.

We are committed to providing the life sciences community with innovative, high-quality scientific tools that allow our customers to make extraordinary discoveries and treat and diagnose diseases. We intend to build on Bio-Techne’s past accomplishments, high product quality reputation and sound financial position by executing strategies that position us to serve as the standard for biological content in the research market, and to leverage that leadership position to enter the diagnostics and other adjacent markets. The Company’s strategic pillars for long-term growth and profitability are to grow and leverage the core, capitalize on high potential markets, market expansion through innovation and acquisition, deliver best-in-class customer experience, and develop people through a transformative culture.

The Company manages its business under two operating segments, Protein Sciences and Diagnostics and Spatial Biology (formerly Diagnostics and Genomics). The name change is intended to better reflect the focus and scope of our offerings. The manner in which we operate our business and review discrete financial information did not change. Segment information presented herein reflects the updated name of the operating segment. The operating segments the Company operated under were consistent with the Company's operating segments disclosed in the Company's Annual Report on Form 10-K for fiscal 2024.

Our Protein Sciences segment is a leading developer and manufacturer of high-quality purified proteins and reagent solutions, most notably cytokines and growth factors, antibodies, immunoassays, biologically active small molecule compounds, tissue culture reagents and T-Cell activation technologies. This segment also includes protein analysis solutions that offer researchers efficient and streamlined options for automated western blot and multiplexed ELISA workflow. Our Diagnostics and Spatial Biology segment develops and manufactures diagnostic products, including FDA-regulated controls, calibrators, blood gas and clinical chemistry controls and other reagents for OEM and clinical customers, as well as a portfolio of clinical molecular diagnostic oncology assays, including the ExoDx®Prostate (IntelliScore) test (EPI) for prostate cancer diagnosis. This segment also manufactures and sells advanced tissue-based in-situ hybridization assays (ISH) for research and clinical use.

RECENT ACQUISITIONS

A key component of the Company's strategy is to augment internal growth at existing businesses with complementary acquisitions. The Company did not make any acquisitions in the first nine months of fiscal 2025.

RESULTS OF OPERATIONS

Operational Update

Consolidated net sales increased 4% and 6% for the quarter and nine months ended March 31, 2025, respectively, compared to the same prior year periods. Organic revenue for the quarter ended March 31, 2025 increased 6% compared to the prior year. Foreign currency exchange and a business held-for-sale each had unfavorable impacts of 1%. Organic revenue for the nine months ended March 31, 2025 increased 6% compared to the same prior year period. Foreign currency exchange and a business held-for-sale did not have a material impact.

Consolidated net earnings decreased to $22.6 million for the quarter ended March 31, 2025 as compared to $49.1 million for the quarter ended March 31, 2024. The decrease in net earnings is primarily due to a non-recurring arbitration award. Consolidated net earnings decreased to $91.1 million for the nine months ended March 31, 2025 as compared to $127.5 million for the nine months ended March 31, 2024. The decrease in net earnings is primarily due to a non-recurring arbitration award and restructuring and restructuring-related costs.

Net Sales

Consolidated net sales for the quarter ended March 31, 2025 increased 4% to $316.2 million compared to the same prior year period. Consolidated net sales for the nine months ended March 31, 2025 were $902.7 million, an increase of 6% from the same prior year period. Organic revenue for the quarter ended March 31, 2025 increased 6% compared to the prior year. Foreign currency exchange and a business held-for-sale each had an unfavorable impact of 1%. Organic revenue for the nine months ended March 31, 2025 increased 6% compared to the prior year same period. Foreign currency exchange and a business held-for-sale did not have a material impact. Organic revenue for the quarter ended March 31, 2025 improved primarily due to improving pharma end markets driving volume growth in our Protein Sciences segment. Orgranic revenue for the nine months ended March 31, 2025 was driven by broad based performance of our Diagnostics and Spatial Biology portfolio, continued uptake of our cell and gene therapy workflow solutions, and improving pharma end market conditions for our Protein Sciences segment.

Gross Margins

Consolidated gross margins for the quarter and nine months ended March 31, 2025 were 67.9% and 65.5%, respectively, compared to 67.4% and 66.4% for the same prior year periods. Under purchase accounting, inventory is valued at fair value less expected selling and marketing costs, resulting in reduced margins in future periods as the inventory is sold. Excluding the impact of costs recognized upon the sale of acquired inventory, amortization of intangibles, stock-based compensation expense, restructuring and restructuring-related expenses, and the impact of a business held-for-sale, adjusted gross margins for the quarter and nine months ended March 31, 2025 were 71.6% and 70.6%, respectively, compared to 71.9% and 71.0% for the quarter and nine months ended March 31, 2024, respectively. Fluctuations in consolidated gross margin and adjusted gross margin, as a percentage of sales, have primarily resulted from changes in product mix. We expect that, in the future, gross margins will continue to be impacted by the mix of our portfolio growing at different rates as well as future acquisitions.

A reconciliation of the reported consolidated gross margin percentages, adjusted for acquired inventory sold, intangible amortization, stock compensation expense, restructuring and restructuring-related charges, and the impact of a business held-for-sale included in cost of sales, is as follows (in thousands):

1) Since December 31, 2023, the Company has a business that has met the held-for-sale criteria.

2) Adjusted gross margin percentage excludes revenue of $4,152 for the nine months ended March 31, 2025, and revenue of $2,093 for the quarter and nine months ended March 31, 2024. Adjusted gross margin percentage also excludes gross margin of $ (147) for the nine months ended March 31, 2025, and gross margin of $272 for the quarter and nine months ended March 31, 2024, for a business that has met the held-for-sale criteria.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased 35% to $151.3 million and increased 18% to $391.9 million for the quarter and nine months ended March 31, 2025, respectively, from the same prior year periods. The increase in expense for the quarter and nine months ended March 31, 2025 was primarily due to a non-recurring arbitration award, restructuring and restructuring-related charges, and the re-instatement of incentive compensation accruals, partially offset by cost management initiatives.

Research and Development Expenses

Research and development expenses decreased 5% to $24.6 million and increased 1% to $73.5 million for the quarter and nine months ended March 31, 2025, respectively, from the same prior year periods. We continue to make strategic growth investments in research and development as we also employ our cost management initiatives.

Segment Results

Protein Sciences

Protein Sciences’ net sales for the quarter and nine months ended March 31, 2025 were $227.7 million and $643.8 million, respectively, with results increasing 6% and 4%, respectively, compared to the same respective prior year periods. As of December 31, 2023, a business within the Protein Sciences Segment met the criteria as held-for-sale; this held-for-sale business has been excluded from the segment’s fiscal 2025 and third quarter fiscal 2024 operating results. The exclusion of fiscal 2025 sales related to this business held-for-sale reduced sales by 1% for the nine months ended March 31, 2025. The exclusion of third quarter fiscal 2024 sales related to the business held-for-sale reduced sales by 1% and had an immaterial impact for the nine months ended March 31, 2024. Organic revenue for the segment increased 7% and foreign currency exchange had an unfavorable impact of 1% for the quarter ended March 31, 2025. Organic growth for the segment increased 5% for the nine months ended March 31, 2025 with foreign currency exchange not having a material impact.

The operating margin was 45.6% and 42.2% for the quarter and nine months ended March 31, 2025, respectively, compared to 44.2% and 42.6% in both comparative prior year periods. The segment’s operating margin was impacted by volume leverage partially offset by re-instatement of incentive compensation accruals.

Diagnostics and Spatial Biology (formerly Diagnostics and Genomics)

Diagnostics and Spatial Biology’s net sales for the quarter and nine months ended March 31, 2025 were $89.2 million and $256.6 million, respectively, with increased net sales of 2% and 9% compared to the same respective prior year periods. Organic growth for the segment for the quarter ended March 31, 2025 was 2% from the prior year, with foreign currency exchange not having a material impact. Organic revenue growth for the nine months ended March 31, 2025 was 9% compared to the prior year, with foreign currency exchange not having a material impact.

The operating margin for the segment was 9.4% and 6.2% for the quarter and nine months ended March 31, 2025, respectively, compared to 9.3% and 5.6% in both comparative prior year periods. The segment’s operating margin was favorably impacted by volume leverage mostly offset by re-instatement of incentive compensation accruals and product mix.

Income Taxes

Income taxes were at an effective rate of 41.0% and 24.9% of consolidated earnings for the quarter and nine months ended March 31, 2025, respectively, compared to 19.7% and 11.5% for the same respective prior year periods. The change in the Company’s tax rate for the quarter and nine months ended March 31, 2025 was driven by the composition and amount of net income across periods and the impact of discrete tax expenses of $7.5 million and $2.3 million, respectively, compared to prior year discrete tax benefits of $1.8 million and $16.6 million as further discussed in Note 12.

The forecasted tax rate as of the third fiscal quarter of 2025 before discrete items is 23.1% compared to the prior year forecasted tax rate before discrete items of 23.0%. Excluding the impact of discrete items, the Company expects the consolidated income tax rate for the remainder of fiscal 2025 to range from 23% to 27%.

Net Earnings

Non-GAAP adjusted consolidated net earnings are as follows (in thousands):

(1) Since December 31, 2023, the Company has a business that has met the held-for-sale criteria.

Depending on the nature of discrete tax items, our reported tax rate may not be consistent on a period-to-period basis. The Company independently calculates a non-GAAP adjusted tax rate considering the impact of discrete items and jurisdictional mix of the identified non-GAAP adjustments. The following table summarizes the reported GAAP tax rate and the effective non-GAAP adjusted tax rate for the quarter and nine months ended March 31, 2025 and 2024.

The difference between the reported GAAP tax rate and non-GAAP tax rate applied to the identified non-GAAP adjustments for the quarter ended March 31, 2025 is primarily a result of discrete tax items, including the tax benefit of stock option exercises.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents and available-for-sale investments were $140.7 million as of March 31, 2025, compared to $152.9 million as of June 30, 2024. Included in the available-for-sale-investments as of June 30, 2024 were certificates of deposit that have maturity dates within one year of $1.1 million. During the first fiscal quarter of 2025, the certificates of deposit reached maturity. The Company had no available-for-sale investments as of March 31, 2025.

The Company has a line-of-credit governed by a Credit Agreement dated August 31, 2022 that will mature on August 31, 2027. As of March 31, 2025, there is $670 million available on the line-of-credit. See Note 6 to the Condensed Consolidated Financial Statements for a description of the Credit Agreement.

During fiscal year 2022, the Company paid $25 million to enter into a two-part forward contract which requires the Company to purchase the full equity interest in Wilson Wolf if certain annual revenue or EBITDA thresholds are met. During fiscal year 2023, Wilson Wolf met the EBITDA target and the Company paid an additional $232 million to acquire 19.9% of Wilson Wolf. Since the first part of the forward contract has been triggered, the second part of the forward contract will automatically trigger, which requires the Company to acquire the remaining 80.1% of Wilson Wolf on December 31, 2027. The second part of the contract would be accelerated in advance of December 31, 2027 if Wilson Wolf meets certain financial milestones. As of March 31, 2025, the second milestones have not been met. The second option payment of up to $1 billion plus potential contingent consideration is forecasted to occur between fiscal 2026 and fiscal 2028.

Management of the Company expects to be able to meet its cash and working capital requirements for operations, facility expansion, capital additions, and cash dividends for the foreseeable future, and at least the next 12 months, through currently available cash, cash generated from operations, and remaining credit available on its existing revolving line of credit.

Cash Flows From Operating Activities

The Company generated cash of $189.4 million from operating activities in the nine months ended March 31, 2025 compared to $223.5 million in the nine months ended March 31, 2024. The decrease from the prior year was primarily due to decreased net earnings for the year.

Cash Flows From Investing Activities

We continue to make investments in our business, including capital expenditures.

Capital expenditures for fixed assets for the nine months ended March 31, 2025 and 2024 were $26.1 million and $44.9 million, respectively. Capital expenditures for the remainder of fiscal 2025 are expected to be approximately $12 million. Capital expenditures are expected to be financed through currently available funds and cash generated from operating activities. Expected additions in fiscal 2025 are related to increasing capacity to meet expected sales growth across the Company.

During the nine months ended March 31, 2025, the Company invested $15.0 million into Spear Bio. There was no comparable activity in fiscal 2024.

During fiscal 2025, certificates of deposit reached maturity for $1.1 million. In fiscal 2024, the Company sold its exchange traded investment grade bond funds for $23.8 million.

The Company received tax distributions of $2.7 million and $2.1 million from its equity method investee during the nine months ended March 31, 2025 and 2024, respectively.

During the nine months ended March 31, 2025, the Company received $1.8 million from the sale of assets held-for-sale. As part of the asset sale, the Company entered into a promissory note whereby the remainder of the funds will be received from the buyer in quarterly installments through fiscal 2027. There was no comparable activity in fiscal 2024.

During the nine months ended March 31, 2024, the Company paid $169.7 million to acquire Lunaphore Technologies SA. There was no comparable activity in fiscal 2025.

During the nine months ended March 31, 2024, there was a purchase of available-for-sale investments for $5.5 million. There was no comparable activity in fiscal 2025.

Cash Flows From Financing Activities

During the nine months ended March 31, 2025 and 2024, the Company paid cash dividends of $38.0 million and $37.8 million, respectively, to all common shareholders. On May 7, 2025, the Company announced the payment of an $0.08 per share cash dividend, or approximately $12.5 million, will be payable May 30, 2025, to all common shareholders of record on May 19, 2025.

Cash of $45.5 million and $38.0 million was received during the nine months ended March 31, 2025 and 2024, respectively, from the exercise of stock options.

During the nine months ended March 31, 2025 and 2024, the Company made repayments of $27.0 million and $186.0 million, respectively, on its long-term debt balance. The Company drew $38.0 million and $225.0 million under its revolving line-of-credit facility during the nine months ended March 31, 2025 and 2024.

There were $175.7 million and $80.0 million of share repurchases during the nine months ended March 31, 2025 and 2024, respectively.

During the nine months ended March 31, 2025 and 2024, the Company paid $6.3 million and $21.5 million related to taxes on restricted stock units and stock options exercised through net share settlements classified as financing activities.

CRITICAL ACCOUNTING POLICIES

The Company's significant accounting policies are discussed in the Company's Annual Report on Form 10-K for fiscal 2024 and are incorporated herein by reference. The application of certain of these policies requires judgments and estimates that can affect the results of operations and financial position of the Company. Judgments and estimates are used for, but not limited to, valuation of available-for-sale investments, inventory valuation and allowances, valuation of intangible assets and goodwill and valuation of investments in unconsolidated entities. There have been no significant changes in estimates in the quarter or nine months ended March 31, 2025 that would require disclosure nor have there been any changes to the Company's policies.

NON-GAAP FINANCIAL MEASURES

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in Item 2, contains financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (GAAP). These non-GAAP measures include:

• Organic revenue
• Adjusted gross margin
• Adjusted operating margin
• Adjusted net earnings and diluted earnings per share
• Adjusted effective tax rate

We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results.

Our non-GAAP financial measure of organic revenue represents revenue growth excluding revenue from acquisitions within the preceding 12 months, the impact of foreign currency, the impact of businesses held-for-sale, as well as the impact of partially-owned consolidated subsidiaries. Excluding these measures provides more useful period-to-period comparison of revenue results as it excludes the impact of foreign currency exchange rates, which can vary significantly from period to period, and revenue from acquisitions that would not be included in the comparable prior period. Revenues from businesses held-for-sale are excluded from our organic revenue calculation starting on the date they become held-for-sale as those revenues will not be comparative in future periods. Revenues from partially-owned subsidiaries consolidated in our financial statements are also excluded from our organic revenue calculation, as those revenues are not fully attributable to the Company. There was no revenue from partially-owned consolidated subsidiaries in fiscal year 2024 or fiscal year 2025.

Our non-GAAP financial measures for adjusted gross margin, adjusted operating margin, and adjusted net earnings, in total and on a per share basis, exclude stock-based compensation, which is inclusive of the employer portion of payroll taxes on those stock awards, the costs recognized upon the sale of acquired inventory, amortization of acquisition intangibles, restructuring and restructuring-related costs. Stock-based compensation is excluded from non-GAAP adjusted net earnings because of the nature of this charge, specifically the varying available valuation methodologies, subjection assumptions, variety of award types, and unpredictability of amount and timing of employer related tax obligations. The Company excludes amortization of purchased intangible assets, purchase accounting adjustments, including costs recognized upon the sale of acquired inventory and other non-recurring items including gains or losses on goodwill and long-lived asset impairment charges, and one-time assessments from this measure because they occur as a result of specific events, and are not reflective of our internal investments, the costs of developing, producing, supporting and selling our products, and the other ongoing costs to support our operating structure. Costs related to restructuring and restructuring-related activities, including reducing overhead and consolidating facilities, are excluded because we believe they are not indicative of our normal operating costs. Additionally, these amounts can vary significantly from period to period based on current activity. The Company also excludes revenue and expense attributable to partially-owned consolidated subsidiaries as well as revenue and expense attributable to businesses held-for-sale in the calculation of our non-GAAP financial measures.

The Company’s non-GAAP adjusted operating margin and adjusted net earnings, in total and on a per share basis, also excludes acquisition related expenses inclusive of the changes in fair value of contingent consideration, and other non-recurring items including certain costs related to the transition to a new CEO, goodwill and long-lived asset impairments, and gains. We also exclude certain litigation charges which are facts and circumstances specific including costs to resolve litigation and legal settlement (gains and losses). In some cases, these costs may be a result of litigation matters at acquired companies that were not probable, inestimable, or unresolved at the time of acquisition.

The Company’s non-GAAP adjusted net earnings, in total and on a per share basis, also excludes gain and losses from investments, as they are not part of our day-to-day operating decisions (excluding our equity method investment in Wilson Wolf as it is certain to be acquired in the future) and certain adjustments to income tax expense. Additionally, gains and losses from investments that are either isolated or cannot be expected to occur again with any predictability are excluded. The Company independently calculates a non-GAAP adjusted tax rate to be applied to the identified non-GAAP adjustments considering the impact of discrete items on these adjustments and the jurisdictional mix of the adjustments. In addition, the tax impact of other discrete and non-recurring charges which impact our reported GAAP tax rate are adjusted from net earnings. We believe these tax items can significantly affect the period-over-period assessment of operating results and not necessarily reflect costs and/or income associated with historical trends and future results.

The Company periodically reassesses the components of our non-GAAP adjustments for changes in how we evaluate our performance, changes in how we make financial and operational decisions, and considers the use of these measures by our competitors and peers to ensure the adjustments are still relevant and meaningful.

Readers are encouraged to review the reconciliations of the adjusted financial measures used in management's discussion and analysis of the financial condition of the Company to their most directly comparable GAAP financial measures provided within the Company's consolidated financial statements.

FORWARD LOOKING INFORMATION AND CAUTIONARY STATEMENTS

This quarterly report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include those regarding the Company's expectations as to the effect of changes to accounting policies, the amount of capital expenditures for the remainder of the fiscal year, the source of funding for capital expenditure requirements, the sufficiency of currently available funds for meeting the Company's needs, the impact of fluctuations in foreign currency exchange rates, and expectations regarding gross margin fluctuations, increasing research and development expenses, increasing selling, general and administrative expenses and income tax rates. These statements involve risks and uncertainties that may affect the actual results of operations. The following important factors, among others, have affected and, in the future, could affect the Company's actual results: integration of newly acquired businesses, the introduction and acceptance of new products, general national and international economic, political, regulatory, and other conditions, increased competition, the reliance on internal manufacturing and related operations, supply chain challenges, the impact of currency exchange rate fluctuations, the recruitment and retention of qualified personnel, the impact of governmental regulation, maintenance of intellectual property rights, credit risk and fluctuation in the market value of the Company's investment portfolio, and unseen delays and expenses related to facility construction and improvements. For additional information concerning such factors, see the Company's Annual Report on Form 10-K for fiscal 2024 as filed with the Securities and Exchange Commission and Part II. Item 1A below.

The Company’s exposure to market risk from changes in interest rates and currency exchange rates has not changed materially from its exposure discussed in the Company’s Annual Report on Form 10-K for the year ended June 30, 2024.

(a) Evaluation of disclosure controls and procedures.

The Company maintains disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). The Company's management has evaluated, with the participation of its Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered in this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2025, our disclosure controls and procedures were effective.

(b) Changes in internal controls over financial reporting.

There were no changes in the Company's internal control over financial reporting during the third quarter of fiscal 2025 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

During the quarter and nine months ended March 31, 2025, there have been no material changes from the risk factors found in Part I, Item 1A, "Risk Factors," of the Company's Annual Report on Form 10-K for the year ended June 30, 2024 except as noted below.

Changing conditions and uncertainty in global markets including the impact of tariffs, sanctions, quotas, import restrictions, and other trade actions may adversely affect our operations and financial results.

Developments or changes in national laws or policies to protect or promote domestic interests and/or address foreign competition can have an adverse effect on our business and financial statements. Developments or changes in national laws or policies to protect or promote domestic interests and/or address foreign competition, including laws and policies in areas such as trade, manufacturing, government purchasing, healthcare, intellectual property, regulatory enforcement and investment/development, can adversely affect our business and financial statements. The U.S. has announced and/or implemented new tariffs on imports from a wide range of countries, which has prompted retaliatory tariffs, or changes to existing tariffs, by a number of countries. In early April 2025, the U.S. and certain other countries delayed the effective date of certain tariffs, and subsequently the U.S. and certain other countries implemented a number of exclusions applicable to certain types of products and/or industries. As of the date of this report a number of the recently-imposed tariffs remain in effect, including significant tariffs between the U.S. and China. Collectively, these tariffs have increased and will continue to increase the cost to us of supplies and components we import, as well as our cost to serve certain markets, which in turn will require us to bear significant increased costs to do business, and/or implement surcharges, and/or increase the price of certain of our products. As a result of any surcharge or price increase, there may be an adverse impact on the demand for our products, as well as an adverse impact as to our ability to serve the market in certain countries. The increased cost of importing raw materials and components from certain countries may disrupt our supply chains, with related impacts to our operations. In addition, whenever we are unable to fully recover higher costs, or whenever there is a time delay between the increase in costs and our ability to recover these costs, our margins and profitability can decline. The U.S. and/or other countries may implement additional tariffs and/or other responsive or retaliatory measures, and which would exacerbate the risks and adverse effects noted above. Though the risks identified above in certain cases have already adversely impacted part of our business, the full impact of these tariffs and other actions on the Company and on our business partners remains highly uncertain and subject to rapid change.