What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-10-27 compared with 2023-04-28 · 83 added, 126 removed, 109 unchanged (66% of the section changed)

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together with our wholly-owned subsidiaries.

This management’s discussion and analysis of financial condition as of March 31, 2023 and results of operations for the three and nine months ended March 31, 2023 should be read in conjunction with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022 filed with the SEC.

This management’s discussion and analysis of financial condition as of September 30, 2023 and results of operations for the three months ended September 30, 2023 should be read in conjunction with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 filed with the SEC.

Forward-Looking Statements

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Words such as “project,” “believe,” “anticipate,” “plan,” “expect,” “intend,” “may,” “should,” “will,” “would,” and similar words and expressions are intended to identify forward-looking statements.

Forward-looking statements include, without limitation, information provided regarding impact of the COVID-19 pandemic and the Russia-Ukraine conflict.

Forward-looking statements are not guarantees of future performance and involve uncertainties, risks, assumptions and contingencies, many of which are outside our control.

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delays in revenue recognition related to the timing of customer acceptance;

the impact of potential information technology, cybersecurity or data security breaches;

changes in domestic and foreign government spending, budgetary, procurement and trade policies adverse to our businesses;

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global economic uncertainty;

impacts on our business related to or resulting from the COVID-19 pandemic such as material delays and cancellations of orders or deliveries thereon, supply chain disruptions, plant closures, or other adverse impacts on our ability to execute business plans ;

material delays and cancellations of orders or deliveries thereon, supply chain disruptions, plant closures, or other adverse impacts on our ability to execute business plans;

unfavorable currency exchange rate fluctuations;

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market acceptance of our new and existing technologies, products and services;

our ability to win new business and convert any orders received to sales within the same fiscal year;

our ability to win new business and convert any orders received to sales within the fiscal year;

contract and regulatory compliance matters, and actions, which if brought, could result in judgments, settlements, fines, injunctions, debarment or penalties;

and other risks and uncertainties, including but not limited to those detailed herein and from time to time in our other SEC filings, which could have a material and adverse impact on our business, financial condition and results of operation.

as well as other risks and uncertainties, including but not limited to those factors described in our other SEC filings, which could have a material and adverse impact on our business, financial condition and results of operation.

All forward-looking statements contained in this report are qualified in their entirety by this Section.

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Through our Security division, we provide security screening products and services globally, as well as turnkey security screening solutions.

These products and services are used to inspect baggage, parcels, cargo, people, vehicles and other objects for weapons, explosives, drugs, radioactive and nuclear materials and other contraband.

Revenues from our Security division accounted for 54% and 57% of our total consolidated revenues for the nine months ended March 31, 2022 and 2023, respectively.

These products and services are used to inspect baggage, parcels, cargo, people, vehicles and other objects

for weapons, explosives, drugs, radioactive and nuclear materials and other contraband.

Revenues from our Security division accounted for 54% and 59% of our total consolidated revenues for the three months ended September 30, 2022 and 2023, respectively.

Optoelectronics and Manufacturing Division .

Through our Optoelectronics and Manufacturing division, we design, manufacture and market optoelectronic devices and flex circuits and provide electronics manufacturing services globally for use in a broad range of applications, including aerospace and defense electronics, security and inspection systems, medical imaging and diagnostics, telecommunications, office automation, computer peripherals, industrial automation and consumer products.

We also provide our optoelectronic devices and electronics manufacturing services to OEM customers and to our own Security and Healthcare divisions.

Revenues from external customers in our Optoelectronics and Manufacturing division accounted for 30% and 28% of our total consolidated revenues for the three months ended September 30, 2022 and 2023, respectively.

Healthcare Division .

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Our products monitor patients in critical, emergency and perioperative care areas of the hospital and provide information, through wired and wireless networks, to physicians and nurses who may be at the patient’s bedside, in another area of the hospital or even outside the hospital.

Revenues from our Healthcare division accounted for 18% and 15% of our total consolidated revenues for the nine months ended March 31, 2022 and 2023, respectively.

Optoelectronics and Manufacturing Division .

We provide our optoelectronic devices and electronics manufacturing services to OEM customers and to our own Security and Healthcare divisions.

Revenues from external customers in our Optoelectronics and Manufacturing division accounted for 28% of our total consolidated revenues for each of the nine months ended March 31, 2022 and 2023, respectively.

Revenues from our Healthcare division accounted for 16% and 13% of our total consolidated revenues for the three months ended September 30, 2022 and 2023, respectively.

Trends and Uncertainties

The following is a discussion of certain trends and uncertainties that we believe have influenced, and may continue to influence, our results of operations.

Coronavirus Pandemic.

The coronavirus disease 2019 (“COVID-19”) pandemic has dramatically impacted the global health and economic environment, with millions of confirmed cases, business slowdowns and shutdowns, and market volatility.

The COVID-19 pandemic has caused, and may continue to cause, significant economic disruptions and has impacted, and may continue to impact, our operations and the operations of our suppliers, logistics providers and customers as a result of supply chain disruptions and delays, as well as labor challenges.

During the early stages of the pandemic, our Healthcare division experienced increased demand for certain products as a result of COVID-19.

However in our Security division, throughout and primarily as a result of the pandemic, receipt of certain orders was delayed, most notably with respect to our aviation and cargo products, and our revenues were adversely impacted.

If customers of our Security division continue to be impacted by the pandemic, we could receive further requests to delay deliveries of equipment and modify service arrangements or the scheduling of factory or site acceptance tests, which could further impact timing of revenue recognition.

While we have been able to broadly maintain our operations, we experienced some disruption in our supply chain in certain markets due primarily to materials shortages, longer lead times on deliveries and transportation constraints.

If these business interruptions resulting from COVID-19 were to be prolonged or expanded in scope, our business, financial condition, results of operations and cash flows would be materially and adversely impacted.

We intend to continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in our best interests and the best interests of our employees, suppliers and customers.

The ultimate impact of COVID-19 on our operations and financial performance in future periods remains uncertain and will depend on future pandemic-related developments, including the duration of the pandemic, potential subsequent waves of COVID-19 infection or potential new variants, the effectiveness and adoption of COVID-19 vaccines and therapeutics, impacts on suppliers and related government actions to prevent and manage disease spread such as the implementation of any federal, state, local or foreign vaccine mandates.

The long-term impacts of COVID-19 on government budgets and other funding priorities, including international priorities, that impact demand for our products and services are also difficult to predict, but could negatively affect our future results and performance.

Global Economic Considerations.

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and globally characterized by the supply chain environment, inflationary pressure, rising interest rates, and labor shortages.

In addition to the COVID-19 pandemic, these other global macroeconomic factors, coupled with the U.S.

These global macroeconomic factors, coupled with the volatile U.S.

political climate and political unrest internationally, have created uncertainty and impacted demand for certain of our products and services.

In October 2023, the war between Israel and Hamas in Gaza has created political and potential economic uncertainty in the Middle East.

Also, the continued conflict between Russia and Ukraine and the sanctions imposed in response to this conflict have increased global economic and political uncertainty.

While the impact of these factors remains uncertain, we will continue to evaluate the extent to which these factors will impact our business,

financial condition or results of operations.

While the impact of these factors remains uncertain, we will continue to evaluate the extent to which these factors will impact our business, financial condition or results of operations.

We do not know how long this uncertainty will continue.

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Global Trade.

In addition to the COVID-19 pandemic, the current domestic and international political environment, including in relation to recent and further potential changes by the U.S.

The current domestic and international political environment, including in relation to recent and further potential changes by the U.S.

and other countries in policies on global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy and global trade.

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Healthcare Considerations.

As described above, our Healthcare division experienced some increased demand for its patient monitoring products as a result of the COVID-19 pandemic during the earlier stages of the pandemic.

Increased healthcare capital purchases made in prior periods may result in fewer capital purchases in subsequent periods.

European Union Threat Detection Standards.

The EU has implemented regulations for all airports within the EU that use explosive detection systems to have hold baggage screening systems that are compliant with the European Civil Aviation Conference (ECAC) Standard 3.

The deadline for compliance with this mandate was initially set for September 2020.

The EU revised the regulations, and the date by which airports using explosive detection systems for hold baggage screening must meet Standard 3 has been changed to March 2024, with certain larger airports required to meet earlier installation dates.

Our Security division’s real time tomography (RTT) product has passed the ECAC explosive detection system Standard 3 threat detection requirement.

As described below, our Healthcare division experienced some increased demand for its patient monitoring products as a result of the COVID-19 pandemic during the earlier stages of the pandemic.

Certain hospitals are facing significant financial pressure as supply chain constraints and inflation drive up operating costs, higher interest rates make access to credit more expensive, and fiscal stimulus programs enacted during the COVID-19 pandemic wind down.

To the extent macroeconomic conditions remain challenging, it is likely that hospitals’ spend on capital equipment will be adversely impacted.

Government Policies.

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or foreign government legislative, regulatory or enforcement policies.

Budget Environment.

government spending levels and timely funding thereof can affect our financial performance.

The House and Senate continue the legislative process on the FY 2024 budget.

The President signed a continuing resolution to fund the U.S government at FY 2023 levels through the earlier of November 17, 2023 or until FY 2024 appropriations bills are enacted.

During periods covered by continuing resolutions, we may experience delays in new awards of our products and services, and those delays may adversely affect our results of operations.

If Congress fails to enact FY 2024 appropriations bills or extend the continuing resolution on

a timely basis, the U.S.

government will undergo a complete or partial shutdown.

The impact of any government shutdown is uncertain.

If a government shutdown were to occur and were to continue for an extended period, we could be at risk of program cancellations, schedule delays, and other disruptions and nonpayment regarding products and services, which could adversely affect our results of operations.

Changes in Costs and Supply Chain Disruptions.

Our costs are subject to fluctuations, particularly due to changes in raw material, component, and logistics costs.

Our manufacturing and supply chain operations, including freight and shipping activities, have been and may continue to be impacted by increased vendor and labor costs as well as current global supply chain challenges.

Our manufacturing and supply chain operations, including freight and shipping activities, have been and may continue to be impacted by increased vendor costs as well as the current global supply chain challenges.

Specifically, we are impacted by the global shortage of electronic components and other materials needed for production and freight availability.

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Currency Exchange Rates.

On a year-over-year basis, currency exchange rates negatively impacted reported sales by approximately 1.5% for the nine months ended March 31, 2023 compared to the nine months ended March 31, 2022, primarily due to the strengthening of the U.S.

On a year-over-year basis, currency exchange rates negatively impacted reported sales by approximately 1.9% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, primarily due to the strengthening of the U.S.

dollar against other foreign currencies in 2023.

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dollar against foreign currencies would positively impact our sales for the remainder of the year.

Results of Operations for the Three Months Ended March 31, 2022 (Q3 Fiscal 2022) Compared to the Three Months Ended March 31, 2023 (Q3 Fiscal 2023) (amounts in millions)

Coronavirus Pandemic.

The coronavirus disease 2019 (“COVID-19”) pandemic dramatically impacted the global health and economic environment, with millions of confirmed cases, business slowdowns and shutdowns, and market volatility.

The COVID-19 pandemic caused, and may continue to cause, significant economic disruptions and impacted, and may continue to impact, our operations and the operations of our suppliers, logistics providers and customers as a result of supply chain disruptions and delays, as well as labor challenges.

During the early stages of the pandemic, our Healthcare division experienced increased demand for certain products as a result of COVID-19.

In our Security division, throughout the pandemic, receipt of certain orders was delayed, most notably with respect to our aviation and cargo products, and our revenues were adversely impacted as a result of the pandemic.

Significant International Security Contracts.

During fiscal year 2023, our Security division was awarded two significant international contracts valued in aggregate greater than $700 million with expected revenues to be recognized over multiple years.

Results of Operations for the Three Months Ended September 30, 2022 (Q1 Fiscal 2023) Compared to the Three Months Ended September 30, 2023 (Q1 Fiscal 2024) (amounts in millions)

The table below and the discussion that follows are based upon the way in which we analyze our business.

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Total net revenues

Revenues for the Security division during the three months ended March 31, 2023 increased year-over-year due to increases in product and service revenues of approximately $10.7 million and $9.4 million, respectively.

The increase in both product and service revenue was primarily driven by increased sales of cargo and vehicle inspection systems.

Revenues for the Healthcare division during the three months ended March 31, 2023 decreased year-over-year due to a reduction in patient monitoring sales of $8.4 million and a decrease in cardiology sales of $1.2 million, which was partially offset by an increase in service revenue of $1.3 million.

Revenues for the Optoelectronics and Manufacturing division during the three months ended March 31, 2023 were similar to revenues in the same prior-year period.

Revenues for the Security division during Q1 fiscal 2024 increased year-over-year due to increases in product and service revenues of approximately $12.3 million and $7.3 million, respectively.

The increase in product revenue was primarily driven by delivery of systems for our new contracts in Mexico.

The increase in service revenue was due primarily to the increase in the installed base of products.

Revenues for the Optoelectronics and Manufacturing division during Q1 fiscal 2024 decreased year-over year as a result of a decrease in revenue in our optoelectronics business of approximately $4.5 million, offset by an increase in revenue of approximately $1.8 million in our contract manufacturing business.

Revenues for the Healthcare division during Q1 fiscal 2024 decreased year-over-year due to a reduction in patient monitoring sales of $6.2 million offset by an increase in cardiology sales of $0.6 million.

Gross profit is impacted by sales volume, productivity, and changes in overall manufacturing-related costs, such as raw materials and component costs, warranty expense, provision for inventory, freight, and logistics.

Our cost of goods sold increased year-over-year primarily as a result of the increase in revenues and higher raw material costs.

Gross profit as a percentage of net revenues during the quarter ended March 31, 2023 decreased on a year-over-year basis due to a reduction in the Security division gross margins due to a decrease in margin from product sales driven by a less favorable product mix and increased component costs and a reduction in sales in the Healthcare division, which carries the highest gross margin of our three divisions.

Our cost of goods sold increased year-over-year primarily as a result of the increase in net revenues described above which was driven by our Security division.

Gross profit as a percentage of net revenues during the quarter ended September 30, 2023 increased on a year-over-year basis due to an increase in the Security division gross margins due to a more favorable sales mix partially offset by a reduction in the sales in the Healthcare division, which carries the highest gross margin of our three divisions.

Operating Expenses

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Selling, general and administrative .

Our significant selling, general and administrative (SG&A) expenses include employee compensation, sales commissions, travel, professional services, marketing expenses, and depreciation and amortization expense.

SG&A expense for the three months ended March 31, 2023 was $4.1 million lower than such expenses in the same prior-year period primarily due to bad debt recoveries in the third quarter of fiscal 2023 compared to a provision for bad debts in the comparable quarter of the prior year, a reduction in marketing expense, a change in fair value of certain liabilities, and more favorable foreign exchange rates, partially offset by increased compensation and travel expenses.

Our significant selling, general and administrative (“SG&A”) expenses include employee compensation, sales commissions, travel, professional services, marketing expenses, foreign currency translation, changes in fair value of contingent earnout liabilities and depreciation and amortization expense.

SG&A expense for Q1 fiscal 2024 was $6.4 million higher than in the same prior-year period primarily due to a benefit recognized in the prior year attributable to favorable foreign exchange rates and lower recovery of losses on accounts receivable in Q1 fiscal 2024 compared to the same prior-year period.

Research and development .

Research and development (“R&D”) expenses include research related to new product development and product enhancements.

R&D expense during the three months ended March 31, 2023 was relatively comparable to the prior year comparable period.

R&D expense during Q1 fiscal 2024 was $1.4 million higher than the same prior-year period with investments to support new product development initiatives primarily in our Security and Healthcare divisions.

Impairment, restructuring and other charges.

Impairment, restructuring and other charges generally consist of charges relating to reductions in our workforce, facilities consolidation, impairment of assets, costs related to acquisition activity, legal charges and other non-recurring charges.

During the three months ended March 31, 2023, impairment, restructuring and other charges primarily consisted of $0.5 million for employee terminations, $0.3 million in legal charges primarily related to government investigations and $0.1 million in acquisition-related costs and facility closure costs.

During the three months ended March 31, 2022, impairment, restructuring and other charges primarily consisted of $0.8 million for legal charges, $0.4 million in charges for employee terminations, and $0.3 million in acquisition related costs.

During Q1 fiscal 2024, impairment, restructuring and other charges consisted of $0.2 million for acquisition activity and $0.3 million in charges for employee terminations, legal charges and other costs.

During Q1 fiscal 2023, impairment, restructuring and other charges consisted of $0.9 million for legal charges and $0.3 million in charges for employee terminations from operational efficiency activities.

Interest and Other Expense, Net

For the three months ended March 31, 2023, interest and other expense, net was $5.7 million as compared to $2.3 million in the same prior-year period.

This increase was driven by higher average interest rates and higher average levels of borrowing under our credit facility during the three months ended March 31, 2023 in comparison with the levels of borrowing during the same period in the prior year.

The 1.25% convertible notes that were previously outstanding during the three month period ended March 31, 2022 were retired in September 2022 using borrowings from our credit facility which carries a higher interest rate.

Income taxes .

The effective tax rate for a particular period varies depending on a number of factors, including (i) the mix of income earned in various tax jurisdictions, each of which applies a unique range of income tax rates and income tax credits, (ii) changes in previously established valuation allowances for deferred tax assets (changes are based upon our current analysis of the likelihood that these deferred tax assets will be realized), (iii) the level of non-deductible expenses, (iv) certain tax elections, (v) tax holidays granted to certain of our international subsidiaries and (vi) discrete tax items.

For the three months ended March 31, 2023, we recognized a provision for income taxes of $6.8 million compared to $10.8 million for the comparable prior-year period.

The effective tax rates for the three months ended March 31, 2022 and 2023 were 20.1% and 23.8%, respectively.

During the three months ended March 31, 2023, we recognized a net discrete tax expense of $0.2 million related to equity-based compensation under ASU 2016-09 and changes in prior year estimates.

During the three-month periods ended March 31, 2022, we recognized a net discrete tax benefit of $0.2 million related to equity-based compensation under ASU 2016-09 and changes in prior year tax estimates.

Results of Operations for the Nine Months Ended March 31, 2022 (YTD Q3 Fiscal 2022) Compared to the Nine Months Ended March 31, 2023 (YTD Q3 Fiscal 2023) (amounts in millions)

The table below and the discussion that follows are based upon the way in which we analyze our business.

See Note 12 to the condensed consolidated financial statements for additional information about our business segments.

Optoelectronics and Manufacturing

Total net revenues

Revenues for the Security division during the nine months ended March 31, 2023 increased year-over-year due to an increase in product and service revenues of approximately $21.8 million and $15.3 million, respectively.

The increase in both product and service revenue was primarily driven by increased sales of cargo and vehicle inspection systems.

Revenues for the Healthcare division during the nine months ended March 31, 2023 decreased year-over-year due to a reduction in patient monitoring sales of $22.3 million and a decrease in cardiology sales of $3.2 million, partially offset by an increase in service revenues of $1.3 million.

Revenues for the Optoelectronics and Manufacturing division during the nine months ended March 31, 2023 increased year-over year as a result of an increase in revenue in our optoelectronics business of approximately $8.1 million, partially offset by a reduction in revenue in our contract manufacturing business of approximately $0.8 million.

Our cost of goods sold increased year-over-year primarily as a result of the increase in revenues and higher raw material costs.

Gross profit as a percentage of net revenues during the nine months ended March 31, 2023 decreased on a year-over-year basis due to (i) a reduction in the Security division gross margins due to a decrease in margin from product sales driven by a less favorable product mix and increased component costs, (ii) a reduction in sales in the Healthcare division, which carries the highest gross margin of our three divisions, and (iii) an increase in sales in the Optoelectronics and Manufacturing division, which carries the lowest gross margin of our three divisions .

Operating Expenses

Selling, general and administrative

Research and development

Impairment, restructuring and other charges, net

Total operating expenses

Selling, general and administrative .

SG&A expense for the nine months ended March 31, 2023 was $8.9 million lower than such expenses in the same prior-year period primarily due primarily to a reduction in compensation, professional fees, a change in fair value of certain liabilities, favorable foreign exchange rates, and higher bad debt recoveries than in the prior period which were partially offset by increased travel expenses.

Research and development .

R&D expense during the nine months ended March 31, 2023 decreased as compared to the same prior-year period primarily due to a decrease in outside services partially offset by increases in compensation and travel expenses in our Security and Healthcare divisions.

Impairment, restructuring and other charges.

During the nine months ended March 31, 2023, impairment, restructuring and other charges primarily consisted of $3.2 million in legal charges primarily related to class action litigation and government investigations, $1.0 million for employee terminations, and $0.2 million in acquisition-related costs and facility closure costs.

During the nine months ended March 31, 2022, impairment, restructuring and other charges consisted of $3.5 million for legal charges, $1.0 million in charges for employee terminations, and $0.3 million in acquisition related costs.

Interest and other expense, net

For the nine months ended March 31, 2023, interest and other expense, net was $14.3 million as compared to $6.5 million in the same prior-year period.

This increase was driven by higher average interest rates and higher average levels of borrowing under our credit facility during the nine months ended March 31, 2023 in comparison with the levels of borrowing during the same period in the prior year.

The 1.25% convertible notes that were previously outstanding during the nine-month period ended March 31, 2022 were retired in September 2022 using borrowings from our credit facility which carries a higher interest rate.

Interest and other expense, net .

For Q1 fiscal 2024, interest and other expense, net was $5.7 million as compared to $3.4 million in the same prior-year period.

This increase was driven by higher average interest rates and higher average levels of borrowing under our credit facility during Q1 fiscal 2024 in comparison with the levels of borrowing during the same period in the prior year.

The 1.25% convertible notes were outstanding for the first two months of the quarter ended September 30, 2022 and were retired on September 1, 2022 using borrowings from our credit facility.

Interest expense for Q1 fiscal 2024 and 2023 included a benefit of $0.9 million and an expense of $0.1 million, respectively, from the interest rate swap.

Income taxes .

For the nine months ended March 31, 2023, we recognized a provision for income taxes of $14.4 million compared to $21.4 million for the comparable prior-year period.

The effective tax rates for the nine months ended March 31, 2022 and 2023 was 20.8% and 22.6%, respectively.

During the nine months ended March 31, 2023, we recognized discrete tax benefit of $0.6 million related to equity-based compensation under ASU 2016-09 and changes in prior year estimates.

During the nine months ended March 31, 2022, we recognized a net discrete tax benefit of $2.0 million related to equity-based compensation under ASU 2016-09.

The effective tax rate for a particular period varies depending on a number of factors, including (i) the mix of income earned in various tax jurisdictions, each of which applies a unique range of income tax rates and income tax credits, (ii) changes in previously established valuation allowances for deferred tax assets (changes are based upon our current analysis of the likelihood that these deferred tax assets will be realized), (iii) the level of non-deductible expenses, (iv) certain tax elections (v) tax holidays granted to certain of our international subsidiaries and (vi) discrete tax items.

For Q1 fiscal 2024 and 2023, we recognized a provision for income taxes of $3.9 million and $3.6 million, respectively.

The effective tax rates for Q1 fiscal 2024 and 2023 were 23.4% and 24.4%, respectively.

During the Q1 fiscal 2024 and 2023, we recognized a net discrete tax benefit of $0.4 million and $0.1 million, respectively, related to equity-based compensation under ASU 2016-09.

Liquidity and Capital Resources

Our principal sources of liquidity are our cash and cash equivalents, cash generated from operations and our credit facilities.

Cash and cash equivalents totaled $65.6 million at March 31, 2023, an increase of $1.4 million, or 2.2%, from $64.2 million at June 30, 2022.

We currently anticipate that our available funds, credit facilities and cash flow from operations will be sufficient to meet our operational cash needs for the next 12 months and the foreseeable future.

Cash and cash equivalents totaled $82.6 million at September 30, 2023, an increase of $5.8 million, or 7.6%, from $76.8 million at June 30, 2023.

In addition, we anticipate that cash generated from operations, without repatriating earnings from our non-U.S.

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We have a $750 million credit facility that is comprised of a $600 million revolving credit facility, which includes a $300 million sub-facility for letters of credit, and a $150 million term loan.

As of March 31, 2023, there was $215 million outstanding under our revolving credit facility, $145 million outstanding under the term loan and $61.3 million of outstanding letters of credit.

As of March 31, 2023, the total amount available under these credit facilities was $323.7 million.

The term loan was available to us to draw through December 2026.

As of September 30, 2023, there was $235.0 million outstanding under our revolving credit facility, $37.7 million of outstanding letters of credit, and $141.3 million outstanding under the term loan.

Cash Provided by Operating Activities.

Cash flows from operating activities can fluctuate significantly from period to period, as net income, adjusted for non-cash items, and working capital fluctuations impact cash flows.

During the nine months ended March 31, 2023, we generated cash from operations of $72.7 million compared to $41.8 million in the same prior-year period.

The increase was driven primarily by the positive impact of working capital changes.

During Q1 fiscal 2024, we generated cash from operations of $17.1 million which was consistent with the prior period.

The increase in net income in Q1 fiscal 2024 compared to the same period last year was offset by changes in net working capital.

Cash Used in Investing Activities .

Net cash used in investing activities was $30.4 million for the nine months ended March 31, 2023 as compared to $6.6 million in the same prior-year period.

Cash used to acquire businesses was $4.6 million during the nine-month period ended March 31, 2023 compared to $14.1 million in the prior year.

Capital expenditures in the nine-month period ended March 31, 2023 were $12.7 million compared to $10.3 million in the same prior-year period.

Expenditures for intangible and other assets were $12.3 million in each of the nine-month periods ended March 31, 2023 and 2022.

In fiscal year 2022, the sale of certain corporate owned real estate in a sale and leaseback transaction generated $32.3 million in proceeds.

Net cash used in investing activities was $9.6 million for Q1 fiscal 2024 as compared to $9.1 million in the same prior-year period.

Cash used to acquire businesses was nil during the three-month period ended September 30, 2023 compared to $1.9 in the prior year.

Capital expenditures in the three-month period ended September 30, 2023 were $5.2 million compared to $3.3 million in the same prior-year period.

Expenditures for intangible and other assets in the three-month period ended September 30, 2023 were $4.2 million compared to $3.9 million in the same prior-year period.

Cash Used in Financing Activities .

Net cash used in financing activities was $37.1 million during the nine months ended March 31, 2023 compared to $30.9 million during the same prior-year period.

The $6.2 million increase in cash used in financing activities during the nine months ended March 31, 2023 as compared to the comparable prior year period was due primarily to a reduction in net borrowings of $74.6 million, which was partially offset by a reduction in repurchases of common stock and taxes paid related to net settlement of equity awards of $69.6 million.

See Note 8 to the condensed consolidated financial statements for a detailed discussion regarding our credit facility and our Notes.

Net cash used in financing activities was $1.9 million during Q1 fiscal 2024, compared to $13.9 million during the same prior-year period.

The decrease in cash used in financing activities was due to (1) no repurchases of common stock during Q1 fiscal 2024 compared to $17.3 million in the same prior-year period and (2) higher net borrowings in Q1 fiscal 2024 compared to the same prior-year period, which were partially offset by higher taxes paid related to settlement of equity awards of $22.2 million during Q1 fiscal 2024 compared to $11.1 million in the same prior-year period.

See Note 8 to the condensed consolidated financial statements for a detailed discussion regarding our revolving credit facility and other borrowings.

Cash Held by Foreign Subsidiaries

Our cash and cash equivalents totaled $65.6 million at March 31, 2023.

Our cash and cash equivalents totaled $82.6 million at September 30, 2023.

Of this amount, approximately 91% was held by our foreign subsidiaries and subject to repatriation tax considerations.

These foreign funds were held primarily by our subsidiaries in the United Kingdom, India, Singapore, Malaysia and Canada and, to a lesser extent, in Mexico, Indonesia, Albania and Australia.

These foreign funds were held primarily by our subsidiaries in the United Kingdom, Qatar, Singapore, India, Malaysia and Canada, and to a lesser extent in Indonesia, Australia, Germany, Mexico and Egypt among other countries.

We intend to permanently reinvest certain earnings from foreign operations, and we currently do not anticipate that we will need this cash in foreign countries to fund our U.S.

In the event we change our intention regarding the reinvestment of those earnings and we repatriate cash to the U.S.

from certain foreign operations, we would provide at the time for withholding taxes to the extent not previously withheld on such earnings.

In the event we repatriate cash from certain foreign operations and if taxes have not previously been withheld on the related earnings, we would provide for withholding taxes at the time we change our intention with regard to the reinvestment of those earnings.

Issuer Purchases of Equity Securities

The following table contains information about the shares of common stock we purchased during the quarter ended March 31, 2023:

Maximum number (or

approximate dollar

Total number of

shares (or units)

Total number of

Average price

part of publicly

yet be purchased

shares (or units)

paid per share (or

announced plans or

under the plans or

January 1 to January 31, 2023

February 1 to February 28, 2023

March 1 to March 31, 2023

(1) In September 2022, when there were 1,131,301 shares remaining authorized to repurchase under the then-existing share repurchase program, the Board of Directors renewed the authorization and revised the maximum number of shares to 2,000,000 shares authorized under the stock repurchase program.

Upon repurchase, the shares are restored to the status of authorized but unissued shares, and we record them as a reduction in the number of shares of common stock issued and outstanding in our consolidated financial statements.

We did not repurchase any shares of Common Stock during the first quarter of fiscal year 2024.

Contractual Obligations

During the nine months ended March 31, 2023, there were no material changes outside the ordinary course of business to the information regarding specified contractual obligations contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022.

During the first quarter of fiscal year 2024, there were no material changes outside the ordinary course of business to the information regarding specified contractual obligations contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.

See Notes 1, 6, 8 and 10 to the condensed consolidated financial statements for additional information regarding our contractual obligations.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements and the potential impact of those pronouncements on our condensed consolidated financial statements, see Note 1 to the condensed consolidated financial statements.

From time to time, new accounting pronouncements are issued by the FASB and other regulatory bodies that are adopted as of the specified effective dates.

Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on our Consolidated Financial Statements upon adoption.

There were no new pronouncements adopted in the first quarter of fiscal year 2024.

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