Steven Madden, LTD.: Form 10-Q for the period ended Mar 31, 2024

The following discussion of our financial condition and results of operations for the three months ended March 31, 2024 should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.

All references in this Quarterly Report to “we,” “our,” “us,” and the “Company” refer to Steven Madden, Ltd. and its subsidiaries unless the context indicates otherwise.

This Quarterly Report contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements include, among others, statements regarding revenue and earnings guidance, plans, strategies, objectives, expectations, and intentions. Forward-looking statements can be identified by words such as: “may,” “will,” “expect,” “believe,” “should,” “anticipate,” “project,” “predict,” “plan,” “intend,” or “estimate,” or "confident," and similar expressions, or the negative of these expressions. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they represent our current beliefs, expectations, and assumptions regarding anticipated events and trends affecting our business and industry based on information available as of the time such statements are made. Investors are cautioned that such forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy, and some of which may be outside of our control. Our actual results and financial condition may differ materially from those indicated in these forward-looking statements. As such, investors should not rely upon them. Important risk factors include:

• geopolitical tensions in the regions in which we operate and any related challenging macroeconomic conditions globally that may materially and adversely affect our customers, vendors, and partners, and the duration and extent to which these factors may impact our future business and operations, results of operations, and financial condition;
• our ability to navigate shifting macro-economic environments including but not limited to inflation and the potential for recessionary conditions;
• our ability to accurately anticipate fashion trends and promptly respond to consumer demand;
• our ability to compete effectively in a highly competitive market;
• our ability to adapt our business model to rapid changes in the retail industry;
• supply chain disruptions to product delivery systems and logistics, and our ability to properly manage inventory;
• our reliance on independent manufacturers to produce and deliver products in a timely manner, especially when faced with adversities such as work stoppages, transportation delays, public health emergencies, social unrest, changes in local economic conditions, and political upheavals as well as their ability to meet our quality standards;
• our dependence on the retention and hiring of key personnel;
• our ability to successfully implement growth strategies and integrate acquired businesses;
• changes in trade policies and tariffs imposed by the United States government and the governments of other nations in which we manufacture and sell products;
• our ability to adequately protect our trademarks and other intellectual property rights;
• our ability to maintain adequate liquidity when negatively impacted by unforeseen events such as an epidemic or a pandemic, which may cause disruption to our business operations for an indeterminable period of time;
• legal, regulatory, political, and economic risks that may affect our sales in international markets;
• changes in U.S. and foreign tax laws that could have an adverse effect on our financial results;
• additional tax liabilities resulting from audits by various taxing authorities;
• cybersecurity risks and costs of defending against, mitigating, and responding to data security threats and breaches impacting the Company;
• our ability to achieve operating results that are consistent with prior financial guidance; and
• other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.

These risks and uncertainties, along with the risk factors discussed under Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q and, in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2023, should be considered in evaluating any forward-looking statements contained in this report. We do not undertake, and disclaim, any obligation to publicly update any forward-looking statement, including without limitation, any guidance regarding revenue or earnings, whether as a result of new information, future developments, or otherwise.

Overview:

($ in thousands, except for retail store count, earnings per share, and per share data)

Steven Madden, Ltd. and its subsidiaries design, source, and market fashion-forward branded and private label footwear, accessories, and apparel. We distribute our products in the wholesale channel through department stores, mass merchants, off-price retailers, shoe chains, online retailers, national chains, specialty retailers, independent stores, and clubs throughout the United States, Canada, Mexico, and Europe, and other international markets through our joint ventures in Israel, South Africa, China, Taiwan, Malaysia, and the Middle East along with special distribution arrangements in certain European countries, North Africa, South and Central America, Australia, and various countries in Asia. In addition, our products are distributed through our direct-to-consumer channel within the United States, Canada, Mexico, and Europe, and our joint ventures in Israel, South Africa, China, Taiwan, and the Middle East.

Our product lines include a broad range of contemporary styles designed to establish or capitalize on market trends, complemented by core product offerings. We have established a reputation for design creativity and our ability to offer quality, trend-right products at accessible price points, delivered in an efficient manner and time frame.

We manage our operations through our operating divisions, which are presented as the following reportable segments: Wholesale Footwear, Wholesale Accessories/Apparel, Direct-to-Consumer, and Licensing. Our Wholesale Footwear segment designs, sources, and markets our brands, and sells our products to department stores, mass merchants, off-price retailers, shoe chains, online retailers, national chains, specialty retailers, independent stores, and clubs throughout the United States, Canada, Mexico, and Europe, and through our joint ventures, and international distributor network. Our Wholesale Accessories/Apparel segment designs, sources, and markets our brands, and sells our products to department stores, mass merchants, off-price retailers, online retailers, specialty retailers, independent stores, and clubs throughout the United States, Canada, Mexico, and Europe, and through our joint ventures, and international distributor network. Our Direct-to-Consumer segment consists of Steve Madden® and Dolce Vita® full-price retail stores, Steve Madden® outlet stores, Steve Madden® concessions in international markets, and our directly-operated digital e-commerce websites. We operate retail locations in regional malls and shopping centers, as well as high streets in major cities across the United States, Canada, Mexico, Europe, Israel, South Africa, Taiwan, China, and the Middle East. Our Licensing segment is engaged in the licensing of the Steve Madden® and Betsey Johnson® trademarks for use in the sale of select apparel, accessory, and home categories as well as various other non-core products. Corporate does not constitute a reportable segment and includes costs not directly attributable to the segments. These costs are primarily related to expenses associated with corporate executives, corporate finance, corporate social responsibility, legal, human resources, information technology, cyber security, and other shared services.

Executive Summary

Key Highlights

Total revenue for the quarter ended March 31, 2024 increased 19.1% to $552,381 compared to $463,834 in the same period of last year. Net income attributable to Steven Madden, Ltd. was $43,934 in the first quarter of 2024 compared to $36,730 in the same period of last year. Our effective tax rate for the first quarter of 2024 decreased to 23.6% compared to 24.2% in the first quarter of last year. Diluted earnings per share was $0.60 per share on 72,865 diluted weighted average shares outstanding compared to diluted earnings per share of $0.48 per share on 75,855 diluted weighted average shares outstanding in the first quarter of last year.

Our inventory turnover (calculated on a trailing four quarter average) for the quarter ended March 31, 2024 was 5.7 compared to 4.9 times at March 31, 2023. Our total Company accounts receivable average collection days increased to 68 days in the first quarter of 2024 compared to 64 days in the first quarter of 2023. As of March 31, 2024, we had $143,057 in cash, cash equivalents, and short-term investments, no debt, and total stockholders’ equity of $843,607. Working capital was $474,782 as of March 31, 2024, compared to $510,791 as of March 31, 2023.

The following tables set forth information on operations for the periods indicated:

Selected Financial Information

(in thousands, except for number of stores)

25

RESULTS OF OPERATIONS

($ in thousands, except for number of stores)

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Consolidated:

Total revenue for the three months ended March 31, 2024 increased 19.1% to $552,381 compared to $463,834 in the same period of the prior year, due to increases in the Wholesale Accessories/Apparel, Wholesale Footwear, and Direct-to-Consumer segments. Gross profit was $224,815, or 40.7% of total revenue, as compared to $195,092, or 42.1% of total revenue, in the prior-year period. The decrease in gross profit as a percentage of total revenue was primarily driven by a decrease in gross margin in the Wholesale Accessories/Apparel and Wholesale Footwear segments, partially offset by higher gross margin in the Direct-to-Consumer segment. Operating expenses in the first quarter of 2024 were $166,369, or 30.1% of total revenue, as compared to $148,581, or 32.0% of total revenue, in the first quarter of the prior year. The decrease in operating expenses as a percentage of total revenue was primarily attributable to expense leverage on a higher revenue base. The first quarter 2024 operating expenses included an expense of $1,650, due to the change in valuation of contingent consideration. In the 2024 period, we also recorded a charge of $1,700 related to the impairment of an intangible. The 2023 operating expenses included $1,181 of expense related to certain severances, termination benefits, and a corporate office relocation. Income from operations for the three months ended March 31, 2024 increased to $56,746, or 10.3% of total revenue, as compared to $46,511, or 10.0% of total revenue, in the prior-year period. The effective tax rate in the first quarter of 2024 was 23.6% compared to 24.2% in the first quarter of last year. Net income attributable to Steven Madden, Ltd. for the first quarter of 2024 was $43,934 compared to $36,730 in the first quarter of 2023.

Wholesale Footwear Segment:

Revenue from the Wholesale Footwear segment in the first quarter of 2024 accounted for $295,660, or 53.5% of total revenue, as compared to $282,321, or 60.9% of total revenue, in the first quarter of 2023. Wholesale Footwear revenue increased 4.7% compared to the same quarter of 2023 driven by sales growth in our private label business. Gross profit was $108,297, or 36.6% of Wholesale Footwear revenue, in the first quarter of 2024 as compared to $107,522, or 38.1% of Wholesale Footwear revenue, in the first quarter of 2023. The decrease in gross profit as a percentage of revenue was primarily due to a higher penetration of our private label business. Operating expenses in the first quarter of 2024 were $45,182, or 15.3% of Wholesale Footwear revenue, as compared to $45,466, or 16.1% of Wholesale Footwear revenue, in the first quarter of the prior year. The decrease in operating expenses as a percentage of Wholesale Footwear revenue was primarily attributable to expense leverage on a higher revenue base. Income from operations increased to $63,115, or 21.3% of Wholesale Footwear revenue, in the first quarter of 2024 as compared to $62,056, or 22.0% of Wholesale Footwear revenue in the first quarter of the prior year.

Wholesale Accessories/Apparel Segment:

Revenue from the Wholesale Accessories/Apparel segment in the first quarter of 2024 accounted for $142,576, or 25.8% of total revenue, as compared to $79,816, or 17.2% of total revenue, in the first quarter of 2023. Wholesale Accessories/Apparel revenue increased 78.6% compared to the same quarter of 2023 driven by the incremental revenue from the acquisition of Almost Famous, as well as the strength in Steve Madden handbags. Gross profit was $45,150, or 31.7% of Wholesale Accessories/Apparel revenue, in the first quarter of 2024 as compared to $26,514, or 33.2% of Wholesale Accessories/Apparel revenue, in the first quarter of the prior year. The decrease in gross profit as a percentage of revenue was due to the impact of the Almost Famous acquisition partially offset by gross margin expansion in our organic business. Operating expenses in the first quarter of 2024 were $26,979, or 18.9% of Wholesale Accessories/Apparel revenue, as compared to $17,076, or 21.4% of Wholesale Accessories/Apparel revenue, in the first quarter of the prior year. The decrease in operating expenses as a percentage of Wholesale Accessories/Apparel revenue was primarily attributable to expense leverage on a higher revenue base. The first quarter 2024 operating expenses included an expense of $1,650, due to the change in valuation of contingent consideration. Income from operations increased to $18,171, or 12.7% of Wholesale Accessories/Apparel revenue, in the first quarter of 2024, as compared to $9,438, or 11.8% of Wholesale Accessories/Apparel revenue in the first quarter of the prior year.

Direct-to-Consumer Segment:

In the first quarter of 2024, revenue from the Direct-to-Consumer segment accounted for $112,331, or 20.3% of total revenue, as compared to $99,600, or 21.5% of total revenue, in the first quarter of 2023. Revenue increased 12.8% compared to the prior year period, driven by increases in both our brick-and-mortar and e-commerce businesses. As of March 31, 2024, we operated 253 brick-and-mortar stores, five e-commerce websites, and 25 concessions in international markets compared to 235 brick-and-mortar stores, five e-commerce websites, and 21 concessions in international markets as of March 31, 2023. Gross profit in the first quarter of 2024 was $69,554, or 61.9% of Direct-to-Consumer revenue, compared to $58,959, or 59.2% of Direct-to-Consumer revenue, in the first quarter of 2023. The increase in gross profit as a percentage of revenue was primarily due to a reduction in promotional activity. Operating expenses in the first quarter of 2024 were $70,079, or 62.4% of Direct-to-Consumer revenue, as compared to $63,206, or 63.5% of Direct-to-Consumer revenue, in the first quarter of 2023. The decrease in operating expenses as a percentage of revenue was primarily attributable to expense leverage on a higher revenue base. In the first quarter of 2024, we also recorded a charge of $1,700 related to an impairment of an intangible. In the first quarter of 2024, loss from operations for the Direct-to-Consumer segment was $2,225, or (2.0%) of Direct-to-Consumer revenue, as compared to loss from operations of $4,247, or (4.3%) of Direct-to-Consumer revenue, in the first quarter of the prior year.

Licensing Segment:

Royalty income generated by the Licensing segment accounted for $1,814, or 0.3% of total revenue, in the first quarter of 2024 compared to $2,097, or 0.5% of total revenue, in the first quarter of 2023. Operating expenses were $500 in the current period compared to $279 in the same period of the prior year. In the first quarter of 2024, income from operations for the Licensing segment was $1,314 as compared to $1,818 in the same period last year.

Corporate:

Corporate does not constitute a reportable segment and includes costs not directly attributable to the segments. These costs are primarily related to expenses associated with corporate executives, corporate finance, corporate social responsibility, legal, human resources, information technology, cyber security, and other shared services. Corporate operating expenses were $23,629, or 4.3% of total revenue, in the first quarter of 2024 as compared to $22,554, or 4.9% of total revenue, in the first quarter of 2023.

Liquidity and Capital Resources

Our primary sources of liquidity are cash flows from operations, cash, cash equivalents and short-term investments. Cash, cash equivalents, and short-term investments totaled $143,057 and $219,813 at March 31, 2024 and December 31, 2023, respectively. Of the total cash, cash equivalents, and short-term investments as of March 31, 2024, $114,754, or approximately 80%, was held in our foreign subsidiaries, and of the total cash, cash equivalents, and short-term investments on December 31, 2023, $134,745, or approximately 61%, was held in our foreign subsidiaries.

On July 22, 2020, we entered into a $150,000, five-year, asset-based revolving credit facility with various lenders and Citizens Bank, N.A (the “Credit Agreement”). On March 25, 2022, we entered into an amendment to the Credit Agreement, which replaced the London Interbank Offering Rate (“LIBOR”) with the Bloomberg Short-Term Bank Yield Index (“BSBY”) as the interest rate benchmark, among other changes. On April 3, 2023, we entered into a second amendment to the Credit Agreement, which reflects CIT Group/Commercial Services, Inc. (“CIT”) as an additional receivables collection agent for us and certain guarantors. Further, on October 23, 2023, we entered into a third amendment to the Credit Agreement in order to accommodate certain changes made to our existing factoring arrangement with CIT.

As of March 31, 2024, we had working capital of $474,782, cash and cash equivalents of $131,501, short-term investments of $11,556, no cash borrowing, and $505 in letters of credit outstanding unrelated to the Credit Agreement.

We believe that based on our current financial position and available cash, cash equivalents, and short-term investments, we will meet all our financial commitments and operating needs for at least the next twelve months. In addition, our $150,000 asset-based revolving credit facility provides us with additional liquidity and flexibility on a long-term basis.

Cash Flows

A summary of our cash provided by and used in operating, investing, and financing activities was as follows:

Operating Activities

Cash used in operations was $15,705 for the three months ended March 31, 2024, compared to $13,275 in the same period of the prior year. The increase in cash used in operations was primarily driven by unfavorable changes in receivables and inventories partially offset by favorable changes in net income and accounts payable.

Investing Activities

Cash used in investing activities was $4,618 for the three months ended March 31, 2024, which primarily consisted of the acquisition of a hosiery business for $4,259, purchases of $790 in short-term investments offset by cash received of $4,084 from the maturities and sales of short-term investments. We also made capital expenditures of $3,979, principally for leasehold improvements, new stores, and systems enhancements.

Financing Activities

During the three months ended March 31, 2024, net cash used in financing activities was $52,531, which primarily consisted of share repurchases and net settlements of stock awards of $37,337, as well as cash dividends paid of $15,416.

Contractual Obligations

Our contractual obligations as of March 31, 2024 were as follows:

(1) Refer to Note F – Leases to the Condensed Consolidated Financial Statements included in this Quarterly Report for further information.

(2) Refer to Note M – Commitments, Contingencies and Other to the Condensed Consolidated Financial Statements included in this Quarterly Report for further information.

Substantially all our products are produced by independent manufacturers at overseas locations, the majority of which are located in China, with a growing percentage located in Cambodia, Mexico, Vietnam, India, Italy, Brazil, Tunisia, and some other European and Asian countries. We have not entered into any long-term manufacturing or supply contracts with any of these foreign manufacturers. We believe that a sufficient number of alternative sources exist outside of the United States for the manufacture of our products. Purchases are made primarily in United States dollars.

As of the date of this report, we have employment agreements with our Founder and Creative and Design Chief, Steven Madden, and certain executive officers, which provide for the payment of compensation aggregating to approximately $8,016 in the remainder of 2024, $10,368 in 2025, $9,396 in 2026, $8,589 in 2027, $8,549 in 2028, $7,942 in 2029, and $7,746 in each of the years 2030 and 2031. In addition, some of these employment agreements provide for incentive compensation based on various performance criteria and some provide for discretionary bonuses as well as other benefits, including stock-based compensation.

Transition tax of $4,884 was the result of the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). Excluded from the contractual obligations table above are long-term taxes payable of $238 as of March 31, 2024 primarily related to uncertain tax positions, for which we are unable to make a reasonably reliable estimate of the timing of payments in individual years beyond one year due to uncertainties in the timing of tax audit outcomes.

Dividends

On April 30, 2024, our Board of Directors approved a quarterly cash dividend. The quarterly dividend of $0.21 per share is payable on June 21, 2024 to stockholders of record as of the close of business on June 10, 2024.

Future quarterly cash dividend payments are subject to the discretion of our Board of Directors and contingent upon future earnings, our financial condition, capital requirements, general business conditions, and other factors. Therefore, we can give no assurance that dividends will be paid to holders of our common stock in the future.

Inflation

Actual results could be negatively and materially impacted due to risks and uncertainties, including the impacts of inflationary pressures globally and the war in Ukraine, the war in the Middle East, and the related broader macroeconomic implications. Consumer spending has been and may continue to be negatively impacted by inflationary pressures, and other macroeconomic and geopolitical factors. All these factors have negatively impacted, and might continue to negatively impact, our direct sales to end consumers and our sales to our wholesale customers. Historically, we have minimized the impact of product, wages, and logistic cost increases by raising prices, renegotiating costs, changing suppliers, and improving operating efficiencies. However, no assurance can be given that we will be able to offset such inflationary cost increases in the future.

Off-Balance Sheet Arrangements

In addition to the commitments included in the Contractual Obligations table above, we have outstanding letters of credit of $505 outstanding as of March 31, 2024 related to the purchase of inventory. These letters of credit expire at various dates through 2030.

We do not maintain any other off-balance sheet arrangements, transactions, obligations, or other relationships with unconsolidated entities that would be expected to have a material current or future effect on our consolidated financial statements. Refer to Note M – Commitments, Contingencies and Other to the Condensed Consolidated Financial Statements included in this Quarterly Report for further information.

Critical Accounting Policies and the Use of Estimates

There have been no material changes to our critical accounting policies and the use of estimates from the disclosures reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission on March 4, 2024.

($ in thousands)

Interest Rate Risk

We do not engage in the trading of market risk sensitive instruments in the normal course of business. Our financing arrangements are subject to variable interest rates, primarily based on the prime rate and the BSBY. The terms of our $150,000 asset-based revolving credit agreement (the “Credit Facility”) and our collection agency agreements with Rosenthal & Rosenthal, Inc. and CIT Group/Commercial Services, Inc. can be found in the Liquidity and Capital Resources section of Item 2 and in Note O – Credit Agreement and Note P – Factoring Agreements, respectively, to the Condensed Consolidated Financial Statements included in this Quarterly Report. Because we had no cash borrowings under the Credit Facility as of March 31, 2024, a 10% change in interest rates, with all other variables held constant, would have an immaterial effect on our reported interest expense.

As of March 31, 2024, we held short-term investments valued at $11,556, which consist of certificates of deposit. We have the ability to hold these investments until maturity.

Foreign Currency Exchange Rate Risk

We face market risk to the extent that our U.S. or foreign operations involve the transaction of business in foreign currencies. In addition, our inventory purchases are primarily done in foreign jurisdictions and inventory purchases may be impacted by fluctuations in the exchange rates between the U.S. dollar and the local currencies of our contract manufacturers, which could have the effect of increasing the cost of goods sold in the future. We manage these risks primarily by denominating these purchases in U.S. dollars. To mitigate the risk of purchases, that are denominated in foreign currencies, we may enter into forward foreign exchange contracts for terms of no more than two years. A description of our accounting policies for derivative financial instruments is included in Note L – Derivative Instruments to the condensed consolidated financial statements.

As of March 31, 2024, we had entered into forward foreign exchange contracts with notional amounts totaling $78,464. We performed a sensitivity analysis based on a model that measures the impact of a hypothetical change in foreign currency exchange rates to determine the effects that market risk exposures may have on the fair values of our forward foreign exchange contracts that were outstanding as of March 31, 2024. As of March 31, 2024, a 10% increase or decrease of the U.S. dollar against the exchange rates for foreign currencies under forward foreign exchange contracts, with all other variables held constant, would result in a net increase or decrease in the fair value of our derivatives portfolio of approximately $45, which is immaterial to the condensed consolidated financial statements.

In addition, we are exposed to translation risk in connection with our foreign operations in Canada, Mexico, Europe, South Africa, China, Taiwan, Israel, Malaysia, and the Middle East because our subsidiaries and joint ventures in these countries utilize the local currency as their functional currency, and those financial results are translated into U.S. dollars. As currency exchange rates fluctuate, foreign currency exchange rate translation adjustments reflected in our financial statements with respect to our foreign operations affects the comparability of financial results between years.

Inflation Risk

Inflationary factors generally affect us by reducing consumer spending, increasing our labor and overhead costs, and negatively impacting our direct sales to end consumers and our sales to our wholesale customers, which may adversely affect our results of operations, and financial position. We have historically been able to minimize the impacts of inflation by raising prices, renegotiating costs, changing suppliers, and improving operating efficiencies. However, no assurance can be given that we will be able to offset such inflationary impacts in the future.

Disclosure Controls and Procedures

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter covered by this Quarterly Report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were, as of the end of the fiscal quarter covered by this Quarterly Report, effective to ensure that information required to be disclosed by us in 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 is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

As required by Rule 13a-15(d) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated our internal controls over financial reporting to determine whether any changes occurred during the quarter covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In accordance with SEC guidance, our management's assessment of the effectiveness of internal control over financial reporting did not include the internal controls of Almost Famous, which we acquired in October 2023 and is included in the March 31, 2024 consolidated financial statements. The acquired business constituted 8.4% of consolidated total assets as of March 31, 2024 and 7.4% of consolidated total revenue for the quarter ended March 31, 2024.

Otherwise, there were no changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

You are encouraged to review the discussion of Forward-Looking Statements and Risk Factors appearing in this report at Part I, “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 4, 2024 (the “2023 Form 10-K”) which could materially affect our business, financial condition, operating results, earnings, or stock price, in various ways. The risks described in the 2023 Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or operating results.

During the three months ended March 31, 2024, there have been no material changes from the risk factors previously disclosed under Part I, Item 1A, “Risk Factors” in the 2023 Form 10-K.