What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-06-07 compared with 2024-03-08 · 100 added, 51 removed, 143 unchanged (51% of the section changed)

8 unchanged sentences

Our computer control systems and software products are primarily sold as integral components of our computerized machine tool products.

We also provide machine tool components, automation integration equipment and solutions for job shops, software options, control upgrades, accessories, and replacement parts for our products, as well as customer service and training and applications support.

The following overview is intended to provide a brief explanation of the principal factors that have contributed to our recent financial performance.

2 unchanged sentences

We have both significant foreign sales and significant foreign manufacturing operations.

During the first three months of fiscal 2024, approximately 50% of our revenues were attributable to customers in Europe, where we typically sell more of our higher-performance, higher-priced VMX series machines.

During the first six months of fiscal 2024, approximately 51% of our revenues were attributable to customers in Europe, where we typically sell more of our higher-performance, higher-priced VMX series machines.

Additionally, approximately 12% of our revenues were attributable to customers in the Asia Pacific region, where we encounter greater pricing pressures.

We operate in a cyclical industry where sales and order trends often change periodically and can vary from region to region.

Sales and service fees in the first quarter of fiscal 2024 decreased by 18% compared to the first quarter of fiscal 2023.

This reduction in sales occurred primarily in the Americas and the Europe regions and was partially offset by an increase in sales in the Asia Pacific region.

Sales and service fees in the first quarter sales in fiscal 2023 benefitted from a particularly strong fiscal 2022 year-end backlog.

Orders in the first quarter of fiscal 2024 decreased by 6% from the same period in fiscal 2023, reflecting a decrease in orders in Europe, partially offset by increases in orders in the Americas and the Asia Pacific regions.

During a year of global uncertainty and lower sales volumes, we turn our attention to adjusting overhead expenses and operating expenses to minimize the impact of the lower volumes of sales on operating income.

Additionally, we adjust and manage inventories (excluding the impact of foreign currency) and use that cashflow to manage our capital allocation strategies to continue investing in new technologies, product development and necessary capital expenditures to maximize cashflows without incurring any significant indebtedness as we continue to seek new acquisitions and other growth opportunities.

The cyclicality of our business requires that we exercise discipline in managing through unexpected changes in the markets and industries in which we operate.

Our long history of profitability and the strength of our balance sheet provide us with stability to manage through these business cycles and rely on our experience to make measured decisions for the long-term success of our business.

We have three brands of CNC machine tools in our product portfolio:

28 unchanged sentences

RESULTS OF OPERATIONS

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

Three Months Ended April 30, 2024 Compared to Three Months Ended April 30, 2023

Sales and Service Fees.

Sales and service fees for the first quarter of fiscal year 2024 were $45.1 million, a decrease of $9.6 million, or 18%, compared to the corresponding prior year period, and included a favorable currency impact of $0.8 million, or 1%, when translating foreign sales to U.S.

Sales and service fees for the second quarter of fiscal year 2024 were $45.2 million, a decrease of $8.6 million, or 16%, compared to the corresponding prior year period, and included a favorable currency impact of $0.1 million, or less than 1%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

Sales and Service Fees by Geographic Region

The following table sets forth sales and service fees by geographic region for the first fiscal quarter ended January 31, 2024 and 2023 (dollars in thousands):

The following table sets forth sales and service fees by geographic region for the second fiscal quarter ended April 30, 2024 and 2023 (dollars in thousands):

Three Months Ended

Sales in the Americas for the first quarter of fiscal year 2024 decreased by 24%, compared to the corresponding period in fiscal year 2023, primarily due to a decreased volume of shipments of Hurco, Milltronics, and Takumi machines.

The decrease in sales was mostly attributable to decreased shipments of VM and toolroom machines, as well as lathes.

European sales for the first quarter of fiscal year 2024 decreased by 20%, compared to the corresponding period in fiscal year 2023, and included a favorable currency impact of 3%, when translating foreign sales to U.S.

Sales in the Americas for the second quarter of fiscal year 2024 decreased by 8%, compared to the corresponding period in fiscal year 2023, primarily due to decreased shipments of Hurco machines.

The decrease in sales of Hurco machines was primarily attributable to decreased shipments of VM machines, partially offset by increased sales of higher-performing VMX and 5-axis machines.

European sales for the second quarter of fiscal year 2024 decreased by 24%, compared to the corresponding period in fiscal year 2023, and included a favorable currency impact of less than 1%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

The decrease in European sales for the first quarter of fiscal year 2024 was primarily attributable to a decreased volume of shipments of higher performance Hurco VMX machines and lathes in Germany, Italy, and the United Kingdom, a decreased volume of shipments of Milltronics machines in the European region, as well as a lower volume of sales of accessories manufactured by our wholly owned subsidiary LCM.

Asian Pacific sales for the first quarter of fiscal year 2024 increased by 39%, compared to the corresponding period in fiscal year 2023, and included an unfavorable currency impact of 2%, when translating foreign sales to U.S.

The year-over-year decrease in European sales was primarily attributable to a decreased volume of shipments of Hurco and Takumi machines in Germany, the United Kingdom, and Italy, as well as a decreased volume of shipments of electro-mechanical components and accessories manufactured by our wholly-owned subsidiary, LCM, partially offset by an increased volume of shipments of Hurco machines in France.

Asian Pacific sales for the second quarter of fiscal year 2024 were relatively unchanged compared to the corresponding prior year period, and included an unfavorable currency impact of 3%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

The increase in Asian Pacific sales primarily resulted from a higher volume of shipments of Hurco and Takumi machines in China, India, and Taiwan.

The second quarter of fiscal year 2024 increased sales of higher-performance VMX and 5-axis Hurco and Takumi machines in India, almost fully offset by reductions in shipment of Hurco and Takumi machines in China and Southeast Asia.

Sales and Service Fees by Product Category

The following table sets forth sales and service fees by product group and services for the first fiscal quarter ended January 31, 2024 and 2023 (dollars in thousands):

The following table sets forth sales and service fees by product group and services for the second fiscal quarter ended April 30, 2024 and 2023 (dollars in thousands):

Three Months Ended

3 unchanged sentences

† Amounts shown do not include computer control systems and software sold as an integrated component of computerized machine tools.

Sales of computerized machine tools for the first quarter of fiscal year 2024 decreased by 21%, compared to the corresponding prior year period, primarily due to a decreased volume of shipments of Hurco, Milltronics and Takumi machines in the Americas, Germany, Italy and the United Kingdom, and included a favorable currency impact of 1% when translating foreign sales to U.S.

Sales of computerized machine tools for the second quarter of fiscal year 2024 decreased by 20%, compared to the corresponding prior year period, primarily due to a decreased volume of shipments of Hurco and Takumi machines in Germany, the United Kingdom, the Americas, China, and Italy, and included a favorable currency impact of less than 1% when translating foreign sales to U.S.

dollars for financial reporting purposes.

Sales of computer control systems and software for the first quarter of fiscal year 2024 increased by 11%, compared to the corresponding prior year period, due mainly to increased aftermarket software sales in the Americas and France, and included a favorable currency impact of 1% when translating foreign sales to U.S.

Sales of computer control systems and software for the second quarter of fiscal year 2024 decreased by 5%, compared to the corresponding prior year period, due mainly to decreased aftermarket control systems and software sales in the United Kingdom.

Service fees for the second quarter of fiscal year 2024 increased by 6%, compared to the corresponding prior year period, primarily due to increased aftermarket services performed in the United Kingdom and France.

Orders for the second quarter of fiscal year 2024 were $44.2 million, a decrease of $16.0 million, or 27%, compared to the corresponding period in fiscal year 2023, and included a favorable currency impact of $0.1 million, or less than 1%, when translating foreign orders to U.S.

The following table sets forth new orders booked by geographic region for the second fiscal quarter ended April 30, 2024 and 2023 (dollars in thousands):

Three Months Ended

Orders in the Americas for the second quarter of fiscal year 2024 decreased by 23%, compared to the corresponding period in fiscal year 2023.

The decrease in orders was primarily due to decreased customer demand for Hurco VM machines, partially offset by increased orders of higher-performing VMX and 5-axis machines.

European orders for the second quarter of fiscal year 2024 decreased by 28%, compared to the corresponding prior year period, and included a favorable currency impact of less than 1%, when translating foreign orders to U.S.

The decrease in orders was driven primarily by decreased customer demand for Hurco and Takumi machines in Germany, the United Kingdom, and Italy, as well as decreased demand for electro-mechanical components and accessories manufactured by LCM, partially offset by increased customer demand for Hurco machines in France.

Asian Pacific orders for the second quarter of fiscal year 2024 decreased by 35%, compared to the corresponding prior year period, and included an unfavorable currency impact of 2%, when translating foreign orders to U.S.

The decrease in Asian Pacific orders was driven primarily by decreased customer demand for Hurco and Takumi machines in China, India, and Southeast Asia.

Gross Profit .

Gross profit for the second quarter of fiscal year 2024 was $8.0 million, or 18% of sales, compared to $12.6 million, or 23% of sales, for the corresponding prior year period.

The year-over-year decrease in gross profit as a percentage of sales was primarily due to the lower volume of sales of higher-performance vertical milling machines in the Americas and Europe.

Additionally, the second quarter of fiscal 2024 included decreases in average net selling prices for certain machines, designed to penetrate key markets and reduce inventories.

The decreases in both sales volume and pricing unfavorably impacted gross profit in dollars and as a percentage of sales, reducing our leverage of fixed costs, in comparison to the same period in the prior year.

Operating Expenses .

Selling, general, and administrative expenses for the second quarter of fiscal year 2024 were $11.5 million, or 25% of sales, compared to $11.6 million, or 22% of sales, in the corresponding fiscal year 2023 period, and included an unfavorable currency impact of less than $0.1 million, when translating foreign expenses to U.S.

dollars for financial reporting purposes.

Sales of service parts for the first quarter of fiscal year 2024 decreased by 1%, compared to the corresponding prior year period, primarily due to decreases in service parts sales in the Americas and the United Kingdom, partially offset by an increase in service parts sales in Germany, and included a favorable currency impact of 1% when translating foreign sales to U.S.

Selling, general, and administrative expenses as a percentage of sales increased due to the lower volume of sales year-over-year.

Operating Income/Loss .

Operating loss for the second quarter of fiscal year 2024 was $3.4 million, compared to operating income of $1.0 million for the corresponding period in fiscal year 2023.

The change was primarily due to a lower volume of sales of vertical milling machines and the negative impact of fixed costs on lower sales and production volumes.

Other (Expense) Income, Net .

Other expense, net for the second quarter of fiscal year 2024 was $0.5 million compared to $0.4 million for the corresponding period in fiscal year 2023, due mainly to a reduction in equity in income of affiliates in the second quarter of fiscal year 2024 compared to the same period in fiscal year 2023.

Income Taxes .

The effective tax rate for the second quarter of fiscal year 2024 was (1)%, compared to 44% for the corresponding prior year period.

The year-over-year decrease in the effective tax rate was primarily due to changes in geographic mix of income and loss that includes jurisdictions with differing tax rates, a discrete item related to stock compensation and the impact of valuation allowances on an overall lower level of income before taxes.

Six Months Ended April 30, 2024 Compared to Six Months Ended April 30, 2023

Sales and Service Fees.

Sales and service fees for the first six months of fiscal year 2024 were $90.2 million, a decrease of $18.3 million, or 17%, compared to the corresponding prior year period, and included a favorable currency impact of $0.8 million, or less than 1%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

Services fees for the first quarter of fiscal year 2024 increased by 1%, compared to the corresponding prior year period, primarily due to the favorable currency impact when translating foreign sales to U.S.

Sales and Service Fees by Geographic Region

The following table sets forth sales and service fees by geographic region for the six months ended April 30, 2024 and 2023 (dollars in thousands):

Six Months Ended

Sales in the Americas for the first six months of fiscal year 2024 decreased by 17%, compared to the corresponding period in fiscal year 2023, primarily due to decreased shipments of Hurco machines.

The decrease in sales of Hurco machines was primarily attributable to decreased shipments of VM machines, partially offset by increased sales of higher-performing VMX and 5-axis machines.

European sales for the first six months of fiscal year 2024 decreased by 22%, compared to the corresponding period in fiscal year 2023, and included a favorable currency impact of 2%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

Orders for the first quarter of fiscal year 2024 were $50.2 million, a decrease of $3.0 million, or 6%, compared to the corresponding period in fiscal year 2023, and included a favorable currency impact of $0.8 million, or 1%, when translating foreign orders to U.S.

The following table sets forth new orders booked by geographic region for the first fiscal quarter quarter ended January 31, 2024 and 2023 (dollars in thousands):

Three Months Ended

Orders in the Americas for the first quarter of fiscal year 2024 increased by 6%, compared to the corresponding period in fiscal year 2023, primarily due to increased customer demand for Hurco and Milltronics machines, particularly higher-performance VMX machines.

European orders for the first quarter of fiscal year 2024 decreased by 21%, compared to the corresponding prior year period, and included a favorable currency impact of 3%, when translating foreign orders to U.S.

The decrease in orders was driven primarily by decreased customer demand for Hurco and Takumi machines in Germany, Italy, and the United Kingdom.

The decreased Hurco demand was primarily attributable to reduced orders of VM machines, higher-performance VMX machines, and lathes.

Asian Pacific orders for the first quarter of fiscal year 2024 increased by 61%, compared to the corresponding prior year period, and included an unfavorable currency impact of 3%, when translating foreign orders to U.S.

The increase in Asian Pacific orders was driven primarily by an increase in customer demand for Hurco and Takumi machines in China, India, and Taiwan.

The year-over-year decrease in European sales was primarily attributable to a decreased volume of shipments of Hurco and Takumi machines in Germany, the United Kingdom, and Italy, as well as decreased volume of shipments of electro-mechanical components and accessories manufactured by our wholly-owned subsidiary, LCM, partially offset by an increased volume of shipments of Hurco machines in France.

Asian Pacific sales for the first six months of fiscal year 2024 increased by 17%, compared to the corresponding prior year period, and included an unfavorable currency impact of 2%, when translating foreign sales to U.S.

dollars for financial reporting purposes.

The year-over-year increase in Asian Pacific sales was primarily attributable to increased sales of higher-performance VMX and 5-axis Hurco and Takumi machines in India, partially offset by reductions in shipments of Hurco and Takumi machines in China and Southeast Asia.

Sales and Service Fees by Product Category

The following table sets forth sales and service fees by product group and services for the six months ended April 30, 2024 and 2023 (dollars in thousands):

Six Months Ended

Computerized Machine Tools

Computer Control Systems and Software †

Service Parts

† Amounts shown do not include computer control systems and software sold as an integrated component of computerized machine tools.

Sales of computerized machine tools for the first six months of fiscal year 2024 decreased by 21%, compared to the corresponding prior year period, primarily due to a decreased volume of shipments of Hurco and Takumi machines in Germany, the Americas, Italy, and the United Kingdom, and included a favorable currency impact of less than 1% when translating foreign sales to U.S.

dollars for financial reporting purposes.

Sales of computer control systems and software for the first six months of fiscal year 2024 increased by 3%, compared to the corresponding prior year period, due mainly to increased aftermarket software sales in France.

Service fees for the first six months of fiscal year 2024 increased by 3%, compared to the corresponding prior year period, primarily due to increased aftermarket services performed in the United Kingdom and France.

Orders for the first six months of fiscal year 2024 were $94.4 million, a decrease of $19.0 million, or 17%, compared to the corresponding period in fiscal year 2023, and included a favorable currency impact of $0.9 million, or less than 1%, when translating foreign orders to U.S.

The following table sets forth new orders booked by geographic region for the six months ended April 30, 2024 and 2023 (dollars in thousands):

Six Months Ended

Orders in the Americas for the first six months of fiscal year 2024 decreased by 10%, compared to the corresponding period in fiscal year 2023.

The decrease in orders was primarily due to decreased customer demand for Hurco Hurco VM machines, partially offset by increased orders of higher-performing VMX and 5-axis machines.

European orders for the first six months of fiscal year 2024 decreased by 25%, compared to the corresponding prior year period, and included a favorable currency impact of 2%, when translating foreign orders to U.S.

The year-over-year decrease was mainly due to decreased customer demand for Hurco machines across the European region where our customers are located and for electro-mechanical components and accessories manufactured by LCM.

Asian Pacific orders for the first six months of fiscal year 2024 increased by 6%, compared to the corresponding prior year period, and included an unfavorable currency impact of 2%, when translating foreign orders to U.S.

The year-over-year increase in Asian Pacific orders was driven primarily by increased customer demand for Hurco machines in China and India, partially offset by decreased demand for Takumi machines in China.

Gross Profit .

Gross profit for the first quarter of fiscal year 2024 was $9.7 million, or 22% of sales, compared to $12.7 million, or 23% of sales, for the corresponding prior year period.

The year-over-year decrease in gross profit as a percentage of sales was primarily due to the lower volume of sales of vertical milling machines in the Americas and Europe where we typically sell more of our higher-performance VMX series machines and lathes.

Additionally, gross profit was negatively impacted by the allocation of fixed costs over lower sales and production volumes.

Gross profit for the first six months of fiscal year 2024 was $17.7 million, or 20% of sales, compared to $25.3 million, or 23% of sales, for the corresponding prior year period.

The year-over-year decrease in gross profit as a percentage of sales was primarily due to the lower volume of sales of higher-performance vertical milling machines in the Americas and Europe.

Additionally, the second quarter of fiscal 2024 included changes in average net selling prices for certain machines to penetrate key markets and reduce inventories.

Both the change in sales volume and pricing unfavorably impacted gross profit in dollars and as a percentage of sales, reducing our leverage of fixed costs, in comparison to the same period in prior year.

Operating Expenses .

Selling, general, and administrative expenses for the first quarter of fiscal year 2024 were $11.5 million, or 26% of sales, compared to $11.5 million, or 21% of sales, in the corresponding fiscal year 2023 period, and included an unfavorable currency impact of $0.2 million, when translating foreign expenses to U.S.

Selling, general, and administrative expenses for the first six months of fiscal year 2024 were $23.0 million, or 25% of sales, compared to $23.1 million, or 21% of sales, in the corresponding fiscal year 2023 period, and included an unfavorable currency impact of $0.2 million, when translating foreign expenses to U.S.

dollars for financial reporting purposes.

Selling, general, and administrative expenses as a percentage of sales increased in the first quarter of fiscal year 2024 compared to the first quarter of fiscal year 2023 due to the lower volume of sales year-over-year.

Selling, general, and administrative expenses as a percentage of sales increased due to the lower volume of sales year-over-year.

Operating Income/Loss .

Operating loss for the first quarter of fiscal year 2024 was $1.8 million, compared to operating income of $1.2 million for the corresponding period in fiscal year 2023.

The change was primarily due to lower volume of sales of vertical milling machines and the negative impact of fixed costs on lower sales and production volumes.

Operating loss for the first six months of fiscal year 2024 was $5.3 million, compared to operating income of $2.2 million for the corresponding period in fiscal year 2023.

The change was primarily due to a lower volume of sales of vertical milling machines and the negative impact of fixed costs on lower sales and production volumes.

Other (Expense) Income, Net .

Other expense, net for the first quarter of fiscal year 2024 was $0.5 million compared to other income, net of $0.6 million for the corresponding period in fiscal year 2023, due mainly to an increase in foreign currency exchange loss in the first quarter of fiscal year 2024 compared to the same period in fiscal year 2023.

Other expense, net for the first six months of fiscal year 2024 was $1.0 million compared to other income, net of $0.3 million for the corresponding period in fiscal year 2023, due mainly to an increase in foreign currency exchange loss in the first six months of fiscal year 2024 compared to the same period in fiscal year 2023.

Income Taxes .

The effective tax rate for the first quarter of fiscal year 2024 was 27%, compared to 31% in the corresponding prior year period.

The year-over-year decrease in the effective tax rate was primarily due to changes in geographic mix of income and loss that includes jurisdictions with differing tax rates and a discrete item related to stock compensation.

The effective tax rate for the first six months of fiscal year 2024 was 9%, compared to 35% for the corresponding prior year period.

The year-over-year decrease in the effective tax rates was primarily due to changes in geographic mix of income and loss that includes jurisdictions with differing tax rates, a discrete item related to stock compensation and the impact of valuation allowances on an overall lower level of income before taxes.

LIQUIDITY AND CAPITAL RESOURCES

At January 31, 2024, we had cash and cash equivalents of $37.9 million, compared to $41.8 million at October 31, 2023.

At April 30, 2024, we had cash and cash equivalents of $37.5 million, compared to $41.8 million at October 31, 2023.

Approximately 19% of the $37.5 million of cash and cash equivalents was denominated in U.S.

1 unchanged sentence

We do not believe that the indefinite reinvestment of these funds offshore impairs our ability to meet our domestic working capital needs.

Working capital was $196.3 million at January 31, 2024, compared to $193.3 million at October 31, 2023.

The increase in working capital was primarily driven by increases in inventories, net and prepaid and other assets and decreases in accrued payroll and employee benefits and accounts payable, partially offset by decreases in cash and cash equivalents and accounts receivable, net.

Capital expenditures of $0.8 million during the first three months of fiscal year 2024 were primarily for capital improvements in existing facilities and software development costs.

Working capital was $187.6 million at April 30, 2024, compared to $193.3 million at October 31, 2023.

The decrease in working capital was primarily driven by decreases in accounts receivable, net and cash and cash equivalents, partially offset by increases in inventories, net and prepaid and other assets and decreases in accounts payable and accrued payroll and employee benefits.

Capital expenditures of $1.3 million during the first six months of fiscal year 2024 were primarily for capital improvements in existing facilities and software development costs.

We funded these expenditures with cash on hand.

2 unchanged sentences

The program may be amended, suspended, or discontinued at any time and does not commit us to repurchase any shares of our common stock.

During the first three months of fiscal year 2024, no shares were repurchased under that program, and $23.2 million was remaining available under the program as of January 31, 2024.

During the three months ended January 31, 2024, we paid cash dividends to our shareholders of $1.0 million.

During the first six months of fiscal year 2024, no shares were repurchased under that program, and $23.2 million remained available under the program as of April 30, 2024.

During the six months ended April 30, 2024, we paid cash dividends to our shareholders of $2.1 million.

Future dividends are subject to approval of our Board of Directors and will depend upon many factors, including our results of operations, financial condition, capital requirements, regulatory and contractual restrictions, our business strategy and other factors deemed relevant by our Board of Directors from time to time.

17 unchanged sentences

In February and December 2023, NHML and HML, respectively, renewed the above-referenced credit facilities on substantially similar terms and identical maximum aggregate limits.

As of January 31, 2024, our existing credit facilities consisted of a €1.5 million revolving credit facility in Germany, the 150 million New Taiwan Dollars Taiwan credit facility, the 32.5 million Chinese Yuan China credit facility and the $40.0 million revolving credit facility under the 2018 Credit Agreement.

We had no debt or borrowings under any of our credit facilities at January 31, 2024.

At January 31, 2024, we had an aggregate of approximately $51.0 million available for borrowing under our credit facilities and were in compliance with all covenants relating thereto.

As of April 30, 2024, our existing credit facilities consisted of a €1.5 million revolving credit facility in Germany, the 150 million New Taiwan Dollars Taiwan credit facility, the 32.5 million Chinese Yuan China credit facility and the $40.0 million revolving credit facility under the 2018 Credit Agreement.

We had no debt or borrowings under any of our credit facilities at April 30, 2024.

At April 30, 2024, we had an aggregate of approximately $50.7 million available for borrowing under our credit facilities and were in compliance with all covenants relating thereto.

We have an international cash pooling strategy that generally provides access to available cash deposits and credit facilities when needed in the U.S., Europe or Asia Pacific.

We believe our access to cash pooling and our borrowing capacity under our credit facilities provide adequate liquidity to fund our global operations over the next twelve months and beyond, and allow us to remain committed to our strategic plan of product innovation, acquisitions, targeted penetration of developing markets, payment of dividends and our stock repurchase program.

We continue to receive and review information on businesses and assets for potential acquisition, including intellectual property assets that are available for purchase.

6 unchanged sentences

Our critical accounting estimates, which are described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023, are frequently evaluated as our judgment and estimates are based upon historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

During the first three months of fiscal year 2024, there were no material changes to our critical accounting estimates as described in the MD&A included in our Annual Report on Form 10-K for the year ended October 31, 2023.

During the first six months of fiscal year 2024, there were no material changes to our critical accounting estimates as described in the MD&A included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2023.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

3 unchanged sentences

We follow FASB guidance for accounting for guarantees (codified in ASC 460).

As of January 31, 2024, we had nine outstanding third party payment guarantees totaling approximately $1.0 million.

As of April 30, 2024, we had nine outstanding third party payment guarantees totaling approximately $0.9 million.

The terms of these guarantees are consistent with the underlying customer financing terms.

34 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis