# Sally Beauty Holdings, Inc.: Form 10-Q for the period ended Dec 31, 2022

- Company: [Sally Beauty Holdings, Inc.](/companies/sbh.md) (CIK 1368458)
- Form: 10-Q
- Filed: 2023-02-02
- Accepted by EDGAR: Feb 2, 2023, 21:39 ET
- Period: 2022-12-31
- Accession: 0001564590-23-001405
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1368458/000156459023001405/sbh-10q_20221231.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1368458/000156459023001405/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-10-01 to 2022-12-31 | $957.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-10-01 to 2022-12-31 | $468.5m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2022-10-01 to 2022-12-31 | $488.6m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2022-10-01 to 2022-12-31 | $391.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-10-01 to 2022-12-31 | $86.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-10-01 to 2022-12-31 | $17.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-10-01 to 2022-12-31 | $18.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-10-01 to 2022-12-31 | $50.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-10-01 to 2022-12-31 | $0.46 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2022-10-01 to 2022-12-31 | $0.47 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2022-10-01 to 2022-12-31 | 109,460,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2022-10-01 to 2022-12-31 | $55.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-10-01 to 2022-12-31 | $25.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-12-31 | $99.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-12-31 | $1.22bn | us-gaap:AssetsCurrent |
| Total assets | at 2022-12-31 | $2.67bn | us-gaap:Assets |
| Current liabilities | at 2022-12-31 | $677.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-12-31 | $2.30bn | us-gaap:Liabilities |
| Long-term debt | at 2022-12-31 | $1.09bn | us-gaap:LongTermDebt |
| Shareholders' equity | at 2022-12-31 | $373.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 22,527 characters.

This section discusses management’s view of the financial condition, results of operations and cash flows of Sally Beauty. This section should be read in conjunction with the information contained in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, including the Risk Factors sections therein, and information contained elsewhere in this Quarterly Report, including the condensed consolidated interim financial statements and notes to those financial statements.

### Executive Overview

For fiscal 2023, we are focusing on three key strategic initiatives to drive growth and profitability:

- Enhancing our customer centricity;
- Growing high margin owned brands at Sally Beauty and amplifying innovation; and
- Increasing the efficiency of our operations and optimizing our capabilities.

We believe focusing in these areas will position our company for future growth and further enhance our ability to meet our customers where they are.

### Enhancing our customer centricity

During the quarter, BSG launched a new strategic partnership with Salon HQ. Salon HQ is a customizable digital storefront platform that gives stylists the ability to curate a product selection from thousands of BSG merchandise choices and enables their clients to purchase directly from their shops without the stylists having to finance and carry inventory. In addition, SBS has identified the locations for its initial Studio by Sally pilot stores that we expect to open this fiscal year. The Studio by Sally pilot store program will have a digital-first focus, from digital check-in to digital education throughout the store and beyond, including personalized appointments at our in-store salons with licensed stylists who will train and educate consumers on how to color their own hair and achieve their desired results. We believe that we will be able to expand the Studio by Sally concept to 100 locations throughout the U.S. over the next three to four fiscal years if successful.

### Growing high margin owned brands at Sally Beauty and amplifying innovation

We believe growing our SBS owned-brands, through innovation and marketing, will provide improved margins, strengthen our long-term relationships with existing customers and help attract new customers. During the quarter, we invested more into marketing of our owned-brands and launched the first phase of our new owned-branded hair repair product line – bondbar. These initiatives delivered an increase in our owned-brands sales penetration, resulting in increased SBS profit margins.

Furthermore, we look forward to providing salons and stylists with new innovations from our BSG vendors as they are launched over the next two fiscal quarters.

### Increasing the efficiency of our operations and optimizing our capabilities

In the fourth quarter of fiscal year 2022, we announced our plan to close 330 SBS stores, 35 BSG stores and two BSG distribution centers. Based on our strategic evaluation, we believe that we will able to recapture demand of closed stores in other nearby store locations and improve overall profitability. During the quarter, we completed the closure of our two BSG distributions centers and the majority of our planned store closures. Additionally, we re-optimized our store supply chain network based on our new store fleet. As of December 31, 2022, we have closed 327 SBS stores and 14 BSG stores as part of the Plan and are currently meeting our sales recapture expectations.

See Note 11, *Restructuring*, in Item 1 of this quarterly report for more information on the Plan.

### Financial Summary for the Three Months Ended December 31, 2022

- Consolidated net sales for the three months ended December 31, 2022, decreased $23.2 million, or 2.4%, to $957.1 million, compared to the three months ended December 31, 2021. Consolidated net sales included a negative impact from changes in foreign currency exchange rates of $14.4 million;
- Consolidated comparable sales increased 1.1% for the three months ended December 31, 2022, compared to the three months ended December 31, 2021;
- Consolidated gross profit for the three months ended December 31, 2022, decreased $11.6 million, or 2.3%, to $488.6 million, compared to the three months ended December 31, 2021. Gross margin was unchanged at 51.0% for the three months ended December 31, 2022, compared to the three months ended December 31, 2021;
- Consolidated operating earnings for the three months ended December 31, 2022, decreased $26.2 million, or 23.2%, to $86.6 million, compared to the three months ended December 31, 2021. Operating margin decreased 250 bps to 9.0% for the three months ended December 31, 2022, compared to the three months ended December 31, 2021;
- For the three months ended December 31, 2022, our consolidated net earnings decreased $18.5 million, or 26.9%, to $50.3 million, compared to the three months ended December 31, 2021;
- For the three months ended December 31, 2022, our diluted earnings per share was $0.46 compared to $0.60 for the three months ended December 31, 2021; and
- Cash provided by operations was $55.0 million for the three months ended December 31, 2022, compared to cash used by operations of $5.7 million for the three months ended December 31, 2021.

### Trends Impacting Our Business

Global inflationary pressures continue to influence consumer and stylist behavior along with the cost for products and services. In the U.S. and Canada, we are seeing our SBS customers color their hair less frequently and reduce the size of their basket when they shop with us, while at BSG we are seeing stylists purchasing closer to the time they use products. Additionally, inflationary pressures have impacted wages, especially among retail and hourly employees, as we have experienced an increase in our labor costs in order to attract and retain associates. During the current quarter, these headwinds have resulted in lower traffic and conversion in our business and increases in certain operating costs. We continue to monitor these challenges and implement measures to help mitigate their impacts, including managing our inventory levels to reduce out-of-stock items, adjusting our promotional activities, optimizing our store base and expanding our partnerships with delivery service providers. Although these initiatives have helped mitigate ongoing macro-headwinds, we cannot reasonably predict the long-term effects of inflation.

Furthermore, in a measure to curb inflation, the U.S. Federal Reserve has increased the federal funds effective rate. In turn, these increases have raised the cost of debt borrowings. We currently have $471.1 million in variable rate debt outstanding, of which $406.1 million is hedged with interest rate caps to help mitigate the impact of raising rates. Future increases in the federal funds effective rate could have a material adverse impact to our cost of borrowing, including any future changes in our debt structure.

### Impact of COVID-19 on Our Business

While we have seen signs of stabilization from the impacts of the COVID-19 virus, we cannot reasonably predict the effects of new variants or expect improving trends to continue. Therefore, our future performance may partially depend on impacts of COVID-19, such as decreased customer in-store traffic, temporary store closures, and labor and supply chain disruptions.

Refer to Item 1A. “Risk Factors” in our Form 10-K for the fiscal year ended September 30, 2022, for further discussion on the risks and uncertainties created by COVID-19.

### Comparable Sales

We believe that comparable sales is an appropriate performance indicator to measure our sales growth compared to the prior period. Our comparable sales include sales from stores that have been operating for 14 months or longer as of the last day of a month and e-commerce revenue. Additionally, comparable sales include sales to franchisees and full service sales. Our comparable sales excludes the effect of changes in foreign exchange rates and sales from stores relocated until 14 months after the relocation. Revenue from acquisitions are excluded from our comparable sales calculation until 14 months after the acquisition. Our calculation of comparable sales might not be the same as other retailers as the calculation varies across the retail industry.

### Overview

### Key Operating Metrics

The following table sets forth, for the periods indicated, information concerning key measures we rely on to evaluate our operating performance (dollars in thousands):

| Net sales: | Three Months Ended December 31, 2022 | 2021 | Increase (Decrease) |  |
| --- | ---: | ---: | ---: | ---: |
| SBS | $549,472 | $561,530 | $(12,058) | (2.1)% |
| BSG | 407,583 | 418,721 | (11,138) | (2.7)% |
| Consolidated | $957,055 | $980,251 | $(23,196) | (2.4)% |
| Gross profit: |  |  |  |  |
| SBS | $323,475 | $328,172 | $(4,697) | (1.4)% |
| BSG | 165,099 | 171,957 | (6,858) | (4.0)% |
| Consolidated | $488,574 | $500,129 | $(11,555) | (2.3)% |
| Segment gross margin: |  |  |  |  |
| SBS | 58.9% | 58.4% | 50 | bps |
| BSG | 40.5% | 41.1% | (60) | bps |
| Consolidated | 51.0% | 51.0% | — | bps |
| Net earnings: |  |  |  |  |
| Segment operating earnings: |  |  |  |  |
| SBS | $99,174 | $100,623 | $(1,449) | (1.4)% |
| BSG | 49,647 | 58,546 | (8,899) | (15.2)% |
| Segment operating earnings | 148,821 | 159,169 | (10,348) | (6.5)% |
| Unallocated expenses and restructuring (a) | 62,233 | 46,389 | 15,844 | 34.2% |
| Consolidated operating earnings | 86,588 | 112,780 | (26,192) | (23.2)% |
| Interest expense | 17,923 | 20,241 | (2,318) | (11.5)% |
| Earnings before provision for income taxes | 68,665 | 92,539 | (23,874) | (25.8)% |
| Provision for income taxes | 18,328 | 23,701 | (5,373) | (22.7)% |
| Net earnings | $50,337 | $68,838 | $(18,501) | (26.9)% |
|  | . |  |  |  |
| Number of stores at end-of-period (including franchises) (b): |  |  |  |  |
| SBS | 3,146 | 3,529 | (383) |  |
| BSG | 1,352 | 1,364 | (12) |  |
| Consolidated | 4,498 | 4,893 | (395) |  |
| Comparable sales growth (decline): |  |  |  |  |
| SBS | 3.0% | 4.4% | (140) | bps |
| BSG | (1.5)% | 8.6% | (1,010) | bps |
| Consolidated | 1.1% | 6.1% | (500) | bps |

(a) Unallocated expenses consist of corporate and shared costs and are included in selling, general and administrative expenses in our condensed consolidated statements of earnings.

(b) Our December 31, 2022 store count was impacted by the closure of 327 SBS store and 14 BSG store from the Plan. See Note 11, *Restructuring*, in Item 1 of this quarterly report for more information on the Plan.

### Results of Operations

### The Three Months Ended December 31, 2022, compared to the Three Months Ended December 31, 2021

### Net Sales

*SBS.* The decrease in net sales for SBS was primarily driven by the following (in thousands):

|  |  |
| --- | ---: |
| Comparable sales | $15,954 |
| Sales outside comparable sales (a) | (16,220) |
| Foreign currency exchange | (11,792) |
| Total | $(12,058) |

(a) Includes stores opened for less than 14 months, net of stores closures, including stores closed under the Plan

The decrease in SBS’s net sales was driven by the negative impact from foreign exchange rates and the impact of store closures in the prior twelve months, including stores closed under the Plan, partially offset by an increase in our comparable sales. SBS’s comparable sales increase was driven by a growth in average ticket, primarily from inflationary impacts and pricing leverage, and partially offset by fewer transactions.

*BSG.* The decrease in net sales for BSG was primarily driven by the following (in thousands):

|  |  |
| --- | ---: |
| Comparable sales | $(6,109) |
| Sales outside comparable sales (a) | (2,396) |
| Foreign currency exchange | (2,633) |
| Total | $(11,138) |

(a) Includes stores opened for less than 14 months, net of stores closures, including from the Plan

The decrease in BSG’s net sales was primarily due to lower comparable sales, the impact of closed stores and the negative impact from the Canadian foreign exchange rate. BSG’s comparable sales faced headwinds from elevated demand in the prior year from the easing of COVID-19 restrictions and the impacts of the current economic environment which resulted in fewer transactions, but was partially offset by growth in average ticket.

### Gross Profit

*SBS.* SBS’s gross profit decreased for the three months ended December 31, 2022, as a result of lower net sales, partially offset by a higher gross margin. SBS’s gross margin grew as a result of pricing leverage and increased penetration of our owned-brand products.

*BSG.* BSG’s gross profit decreased for the three months ended December 31, 2022, as a result of lower net sales and a lower gross margin. BSG’s gross margin decline was driven by lower product margin resulting from an unfavorable sales channel mix between stores and lower-margin Regis e-commerce sales, partially offset by adjustments to our expected obsolescence reserve related to the Plan.

### Selling, General and Administrative Expenses

*SBS.* SBS’s selling, general and administrative expenses decreased $3.2 million, or 1.4%, for the three months ended December 31, 2022 and included a favorable impact from foreign exchange rates of $4.6 million. As a percentage of SBS net sales, SG&A for the three months ended December 31, 2022 was 40.8% compared to 40.5% for the three months ended December 31, 2021. The increase as a percentage of sales was driven by deleveraging as a result of lower net sales.

*BSG.* BSG’s selling, general and administrative expenses increased $2.0 million, or 1.8%, for the three months ended December 31, 2022. As a percentage of BSG net sales, SG&A for the three months ended December 31, 2022 was 28.3% compared to 27.1% for the three months ended December 31, 2021. The increase as a percentage of sales was driven primarily by deleveraging as a result of lower net sales as well as increases in labor and personnel costs and depreciation expenses.

*Unallocated.* Unallocated selling, general and administrative expenses, which represent certain corporate costs that have not been charged to our reporting segments, increased $6.5 million, or 14.4%, for the three months ended December 31, 2022, primarily due to increased labor and personnel costs of $4.6 million and information technology expense of $2.9 million.

### Restructuring

For the three months ended December 31, 2022, we incurred $10.4 million in restructuring charges related to our Distribution Center Consolidation and Store Optimization Plan. For the three months ended December 31, 2021, restructuring charges in connection with our previously communicated Transformation Plan were immaterial. See Note 11, *Restructuring*, in Item 1 of this quarterly report for more information on the Plan.

### Interest Expense

The decrease in interest expense is due to the interest savings from the repayment of our 8.75% Senior Notes due 2025 during fiscal year 2022, partially offset by higher interest expense on our variable rate debt resulting from the increase in borrowing rates and outstanding amounts under our ABL facility. See Note 9, *Derivatives*, in Item 1 of this quarterly report for more information on our interest rate caps used to help mitigate raising interest rates.

### Provision for Income Taxes

The effective tax rates were 26.7% and 25.6%, for the three months ended December 31, 2022, and 2021, respectively. The increase in the effective tax rate was primarily due to the tax impact of share-based compensation which was detrimental in the current year quarter, but beneficial in the prior year quarter.

### Liquidity and Capital Resources

### Overview

Our principal sources of liquidity are from cash and cash equivalents, cash from operations and our ABL facility. A substantial portion of our liquidity needs arise from funding the costs of our operations, working capital, capital expenditures, debt interest and principal payment. Additionally, under our share repurchase program, see below for more details, we will repurchase shares of our common stock on the open market to return value to our shareholders. At December 31, 2022, we had $440.8 million in our liquidity pool, which includes $417.7 million available for borrowings under our ABL facility and cash and cash equivalents of $99.1 million.

Working capital (current assets less current liabilities) increased $77.4 million, to $541.9 million at December 31, 2022, compared to $464.5 million at September 30, 2022. This increase was driven by higher inventory balances, resulting from inflationary cost increases and the impact of foreign exchange rates of $12.7 million, and an increase in cash and cash equivalents.

We anticipate that existing cash balances (excluding certain amounts permanently invested in connection with foreign operations), cash expected to be generated by operations, and funds available under our ABL facility will be sufficient to fund our working capital and capital expenditure requirements over the next twelve months.

### Cash Flows

*(in thousands)*

|  | Three Months Ended December 31, 2022 | 2021 |
| --- | ---: | ---: |
| Net cash provided (used) by operating activities | 54,951 | (5,685) |
| Net cash used by investing activities | (25,007) | (26,709) |
| Net cash used by financing activities | (5,992) | (70,185) |

#### Net Cash Provided (Used) by Operating Activities

The change in net cash provided by operating activities for the three months ended December 31, 2022, compared to the net cash used by operating activities three months ended December 31, 2021, was driven by the timing of inventory purchases, primarily from the impact of global supply chain issues in the prior year. Additionally, it was driven by the timing of income taxes and a decrease in net sales.

#### Net Cash Used by Investing Activities

The decrease in net cash used by investing activities for the three months ended December 31, 2022, compared to the three months ended December 31, 2021, was driven by fewer capital expenditures related to store improvements and information technology.

#### Net Cash Used by Financing Activities

The decrease in net cash used by financing activities for the three months ended December 31, 2022, compared to the three months ended December 31, 2021, was a result of share repurchases in the prior year and lower cash proceeds from employees exercising equity awards.

### Debt and Guarantor Financial Information

At December 31, 2022, we had $1,151.1 million in debt, not including capital leases, unamortized debt issuance costs and debt discounts, in the aggregate, of $3.7 million. Our debt consists of $680.0 million in 5.625% Senior Notes due 2025 (“2025 Senior Notes”) outstanding, $406.1 million remaining on our term loan and $65.0 million in outstanding borrowings under our ABL facility.

We utilize our ABL facility for the issuance of letters of credit, certain working capital and liquidity needs, and to manage normal fluctuations in our operational cash flow. In that regard, we may from time to time draw funds under the ABL facility for general corporate purposes including funding of capital expenditures, acquisitions, paying down other debt and share repurchases. Amounts drawn on our ABL facility are generally paid down with cash provided by our operating activities. During the three months ended December 31, 2022, the weighted average interest rate on our borrowings under the ABL facility was 5.2%.

We are currently in compliance with the agreements and instruments governing our debt, including our financial covenants.

#### Guarantor Financial Information

Our 2025 Senior Notes were issued by our wholly-owned subsidiaries, Sally Holdings LLC and Sally Capital Inc. (the “Issuers”). The notes are unsecured debt instruments guaranteed by us and certain of our wholly-owned domestic subsidiaries (together, the “Guarantors”) and have certain restrictions on the ability to pay restrictive payments to Sally Beauty. The guarantees are joint and several, and full and unconditional. Certain other subsidiaries, including our foreign subsidiaries, do not serve as guarantors.

The following summarized consolidating financial information represents financial information for the Issuers and the Guarantors on a combined basis. All transactions and intercompany balances between these combined entities has been eliminated.

The following table presents the summarized balance sheets information for the Issuers and the Guarantors as of December 31, 2022, and September 30, 2022:

*(in thousands)*

|  | December 31, 2022 | September 30, 2022 |
| --- | ---: | ---: |
| Inventory | $742,642 | $714,477 |
| Intercompany receivable | $394 | $— |
| Current assets | $882,858 | $827,155 |
| Total assets | $2,032,279 | $1,982,982 |
| Current liabilities | $550,883 | $549,415 |
| Intercompany payable | $— | $4,431 |
| Total liabilities | $2,084,606 | $2,085,169 |

The following table presents the summarized statement of earnings information for the Issuers and the Guarantors for three months ended December 31, 2022 (in thousands):

|  |  |
| --- | ---: |
| Net sales | $775,768 |
| Gross profit | $399,794 |
| Earnings before provision for income taxes | $52,383 |
| Net Earnings | $38,413 |

### Share Repurchase Programs

Under our current share repurchase program, we may from time-to-time repurchase our common stock on the open market. During the three months ended December 31, 2022, no shares were repurchased in connection with our share repurchase program. During three months ended December 31, 2021, we repurchased 3.7 million shares of our common stock for $75.0 million under our share repurchase program. See Note 5, *Stockholders’ Equity*, for more information about our share repurchase program.

### Contractual Obligations

There have been no material changes outside the ordinary course of our business in any of our contractual obligations since September 30, 2022.

### Off-Balance Sheet Financing Arrangements

At December 31, 2022 and September 30, 2022, we had no off-balance sheet financing arrangements other than outstanding letters of credit related to inventory purchases and self-insurance programs.

### Critical Accounting Estimates

There have been no material changes to our critical accounting estimates or assumptions since September 30, 2022.

### Recent Accounting Pronouncements

There have been no recent accounting pronouncements issued that will have a material impact to our business.

## Market risk

As filed, 444 characters.

As a multinational corporation, we are subject to certain market risks including foreign currency fluctuations, interest rates and government actions. There have been no material changes to our market risks from September 30, 2022. See our disclosures about market risks contained in Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” in Part II of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

## Controls and procedures

As filed, 4,091 characters.

*Controls Evaluation and Related CEO and CFO Certifications.* Our management, with the participation of our principal executive officer (“CEO”) and principal financial officer (“CFO”), conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2022. The controls evaluation was conducted by our Disclosure Committee, comprised of senior representatives from our finance, accounting, internal audit, and legal departments under the supervision of our CEO and CFO.

Certifications of our CEO and our CFO, which are required in accordance with Rule 13a-14 of the Exchange Act, are attached as exhibits to this Quarterly Report. This “Controls and Procedures” section includes the information concerning the controls evaluation referred to in the certifications and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.

*Limitations on the Effectiveness of Controls.* We do not expect that our disclosure controls and procedures will prevent all errors and all fraud. A system of controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the system are met. Because of the limitations in all such systems, no evaluation can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Furthermore, the design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how unlikely. Because of these inherent limitations in a cost-effective system of controls and procedures, misstatements or omissions due to error or fraud may occur and not be detected.

*Scope of the Controls Evaluation.* The evaluation of our disclosure controls and procedures included a review of their objectives and design, our implementation of the controls and procedures and the effect of the controls and procedures on the information generated for use in this Quarterly Report. In the course of the evaluation, we sought to identify whether we had any data errors, control problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, was being undertaken if needed. This type of evaluation is performed on a quarterly basis so that conclusions concerning the effectiveness of our disclosure controls and procedures can be reported in our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K. Many of the components of our disclosure controls and procedures are also evaluated by our internal audit department, by our legal department and by personnel in our finance organization. The overall goals of these various evaluation activities are to monitor our disclosure controls and procedures on an ongoing basis and to maintain them as dynamic systems that change as conditions warrant.

*Conclusions regarding Disclosure Controls.* Based on the required evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that, as of December 31, 2022, we maintain disclosure controls and procedures that are effective in providing reasonable assurance that information required to be disclosed by us in the reports that 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 our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

*Changes in Internal Control over Financial Reporting.* During our most recent fiscal quarter, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 511 characters.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors contained in Item 1A. “Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended September 30, 2022, which could materially affect our business, financial condition or future results. There have been no material changes from the risk factors disclosed in such Annual Report. The risks described in such Annual Report and herein are not the only risks facing our company.

Filed Feb 2, 2023.
Source: SEC EDGAR, the filing index for accession 0001564590-23-001405. Last ingested by Listed: Oct 24, 2026, 15:12 ET. No prices; not investment advice.